November 15, 2017

A Perpetual Seller’s Market Can’t Last Forever

A report from the Washington Post. “For the past few years, sellers have had all the power in the local real estate market. Today’s buyers and sellers are accustomed to a market marked by rapidly increasing prices, low inventory, fast offers and bidding wars. But real estate is cyclical and a perpetual seller’s market can’t last forever. We are sensing a subtle shift. Pickier buyers with less urgency are meeting sellers with unrealistic expectations that we’re still in the hot spring market. This dynamic is reflected in the slower rate of price growth across the region and the notable price decline in Washington. Shifts in the real estate market don’t happen overnight, but buyers may be regaining a bit more of the bargaining power.”

From CNBC on New York. “New York’s 1,000-foot-tall symbol of luxury is becoming a monument to the condo slowdown. Last week, Unit 79 of the condo tower called One57 became the biggest foreclosure sale ever in New York. It went at auction for $36 million — marking a 30 percent decline from its purchase price of $51 million in 2014. An analysis of recent resales at One57 shows that every apartment that has traded since it opened in 2014 or 2015 has declined in value — all by double digits.”

“Unit One 62A was purchased for $31.6 million in April 2014. In October 2016 it sold for $23.5 million, a 26 percent decline. Unit 65A originally sold for $29.3 million in 2014, but was sold in April 2017 for $22.5 million. And some of the declines were even faster. Unit 51C sold for $20.4 million in April 2015. It sold eight months later for $17.7 million.”

“‘It’s clear that 2014 was the peak,’ said Jonathan Miller of Miller Samuel. ‘It was a perfect storm. You had capital pouring into the real estate development market from overseas. And we had just come off the financial crisis and you had this new product coming on, with the feeling that everything was skewing toward the wealthy. Everyone thought this was some sort of new world that would go on forever. But it was not sustainable.’”

The Casper Star Tribune in Wyoming. “A real estate tax proposed by a Jackson lawmaker could allow voters to levy a fee on the sale of expensive property in Teton County. Rep. Andy Schwartz, a Democrat, said the tax has long been discussed and highlights the need for local governments to be able to raise money independently. ‘The state can’t support them,’ Schwartz said. ‘We need, as the Legislature, to take responsibility for giving them opportunities to take new revenue streams.’”

“Wyoming Realtors president Devon Viehman, herself a Jackson real estate agent, said that while she was not familiar with the details of the bill, the Realtors organization opposed taxing property sales regardless of whether the tax applied to all homes or was tiered. ‘You can’t target Teton County just because of the wealthy second-, third-, fourth-, fifth-home owners we have here,’ Viehman said. ‘Anything they do to make it more expensive to buy and sell is going to be detrimental to our locals.’”

The Palm Beach Post in Florida. “A tax bill making its way through the U.S. House of Representatives could slash Florida home values by 13 percent, Realtors said Monday. Realtors harbor ‘grave concerns’ about a Republican proposal to reduce the tax deduction for mortgage interest, end write-offs for property taxes and boost capital-gains taxes on home sales, said Maria Wells, president of Florida Realtors. ‘That would affect the economy in all sorts of ways,’ Wells said. ‘We know that housing is the canary in the coal mine.’”

“Proponents of the bill argue that less generous tax breaks for homeowners would be offset by a near doubling of the standard tax deduction, to $24,400 for married couples in 2018. Realtors and many Democrats aren’t buying that argument. They say less generous tax incentives for homeownership could make homeownership less attractive both to first-time buyers and to second-home buyers. ‘Most likely we are going to see a significant drop in the value of people’s homes,’ said U.S. Rep. Lois Frankel, D-West Palm Beach. ‘Why? Because the demand for housing will go down.’”

From Your Central Valley in California. “On Tuesday, real estate and building industry advocates urged GOP delegates to vote no on the new GOP tax plan. ‘It removes the incentives for home ownership that we’ve enjoyed for 100 years, over 100 years in the tax code. This would be devastating for the California housing market,’ said Steve White, California Association of Realtors.”

“Gary Carter a broker with Movoto Real Estate in Fresno says the plan could change how many people are buying and how long they wait to do so. ‘Some of the individuals who need the incentives. They won’t be able to qualify cause it will be gone. They won’t be able to buy their first home,’ said Carter.”

The Orange County Register in California. “The California Association of Realtors is fighting back against GOP tax reform plans, taking out full-page ads in seven California newspapers calling on state Republicans to oppose provisions curtailing tax benefits of homeownership. Measures seeking to curb mortgage interest deductions, property tax deductions and capital gains exemptions will dampen homebuying while ‘punishing’ millions of other California homeowners, the ads say.”

“Half of all existing California houses sold in September cost $555,410 or more, according to CAR data. Half of all condos or townhomes cost $450,000. In Orange County, almost 63 percent of all homes sold this year so far — houses, townhomes and condos — cost $600,000 or more, and 48 percent cost $700,000 or more, figures from CoreLogic show. California homes selling for more than $1 million also would be affected by the House proposal to limit property tax deductions to $10,000. The Senate version of the tax bill retains the $1 million mortgage interest deduction limit but eliminates all property tax deductions.”

“‘The average California house costs two-and-a-half times the national average,’ the ad states. ‘Only 32 percent of California families are able to purchase a median-priced home. With homeownership already a stretch, or out of reach altogether for so many Californians, now is not the time to make owning a home more difficult.’”

“The GOP tax plans have put Republican members of the California congressional delegation on the spot, with a half-dozen saying they oppose it, are undecided or have yet to express an opinion because they’re facing tough re-election fights, the San Francisco Chronicle reported Tuesday. U.S. House Majority Leader Kevin McCarthy, a Republican from Bakersfield, issued a statement this week defending the tax plan, saying it amounts to a tax cut when all provisions are taken into account. McCarthy blames California Democrats for the state’s tax burden, citing the recent 12 cents per gallon tax increase. Democrats ‘newfound concern for the high tax burden is laughable,’ McCarthy said.”