December 16, 2017

The Atmosphere Is Getting Very Thin

A report from CBS San Francisco in California. “The housing crunch in pricey Silicon Valley is not only hitting those who are barely scraping by. Even millionaires are not making money fast enough to keep up with the surging real estate market. In some cities, even having two or three million won’t be enough to get you in the door. Earlier this week, we reported that in Santa Clara and San Mateo counties, about one out of four people is at risk for hunger because many are spending almost all of their income on rent. ‘People are skipping meals, cutting back on meals or having to make less healthy choices, like having cereal for dinner,’ said Leslie Bacho with the Second Harvest Food Bank.”

From Bisnow on Massachusetts. “Boston’s housing shortage is perpetually painted as what makes the city so unaffordable. Many say that is simply because there are not enough homes to accommodate the city’s explosive growth. But in an era where even smaller micro-units, built as more affordable housing for millennials, fetch between $2K and $2,500/month in the Seaport, some say the response is not enough. Cost-effective solutions could mean Boston’s next wave of multifamily housing comes outside the Seaport.”

“‘The atmosphere is getting very thin,’ Mount Vernon Co. Chairman Bruce Percelay said. ‘There is a real question as to the direction of rents. We believe the luxury downtown Seaport product is, if not already overbuilt, on the verge of overbuilding. We would not touch high-end, super-luxury rentals.’”

The Real Deal on Florida. “Amid a continuing oversupply of inventory and shrinking buyer pool, Miami’s luxury home sellers are issuing increasingly substantial price reductions to move their properties, The Real Deal’s research shows. The increasing glut of luxury inventory isn’t helping sellers get their hoped-for sale prices. There was a staggering 53-month supply of luxury condos on the market in the third quarter, according to the latest Douglas Elliman report on the Miami coastal mainland. That’s up from a nearly 40-month supply at the same time last year.”

“And yet there’s even more inventory to come. Peter Zalewski, founder of, has started offering what he calls ‘condo correction tours,’ during which he takes prospective buyers through downtown Miami, pointing out all of the inventory that hasn’t yet hit the market. Zalewski said that as the Miami condo market continues to soften, investors are signing up for his tours with the eventual goal of buying as prices continue to drop. ”

“‘We’ve had almost 150 buildings delivered in coastal area, and we have another 100 buildings under construction,’ said Zalewski. ‘So really, what you are seeing is all of the early effort of the beginning of this cycle from 2011 starting to come to fruition, while at the same time you are seeing sellers start to realize the jig is up.’”

From Quartzy on New York. “If you’re in the market for a piece of ultra-luxury Big Apple real estate—you’re totally in luck. An unprecedented wave of deep discounts across the New York City region means that the city’s priciest pads are now available at lower—though not exactly low—prices. The market for deeply-discounted penthouses wasn’t always so robust. Nearly half-a-decade ago, there was a scarcity of new-build, ultra-luxury, super-premium condos in New York—particularly along what’s become known as ‘billionaires’ row,’ a broad swath of Midtown just below Central Park.”

“But the arrival of One57 to the area in 2014 super-charged the top end of NYC’s real estate market and spurred a bit of a pricing war. One57 offered penthouses close to the $100 million range—and suddenly, penthouses with eight—and even nine—digit price tags became the norm. The problem was, that many didn’t sell—causing owners and developers to begin seriously slashing prices. Indeed, a firestorm of cuts has emerged over the past year in both New York and nationwide—none more spectacular than a unit at One57 itself.”

“Industry insiders attribute much of this overpricing to one key transaction— the sale of an $88 million condo by former Citigroup chairman Sandy Weill to the 22-year-old daughter of a Russian Oligarch at 15 Central Park West in 2011.The sale was far above its asking price and sent shockwaves through the real estate industry.”

“But the sale was also highly unique. 15 Central Park West was in an established building that had already seen record prices; plus the buyer, it seems, may have used the purchase to try and hide assets from his estranged wife rather than actually secure a solid home at a solid price. Whatever the motivations, this single sale had very little to do with the true value of the overall market.”

“Nonetheless, other luxury sellers, seeing Weill’s success, began inflating prices to what Jonathan Miller, of real estate appraisal group Miller Samuel calls ‘aspirational prices.’ Sellers across the US were throwing $100 million price tags on $15 million properties, more or less to see what happens.”

“From 2013 going into 2016, record prices were seen across the country. This high powered buying period might have led to solid actual sales numbers if the homes and been truly priced to sell. But many weren’t—and many remain on the market to this day. Need proof? How about billionaire Jeff Greene’s palatial Palazzo di Amore in Beverly Hills, which was bought for $35,000,000 in 2007, and reintroduced to the market for $195,000,000 in 2014, since dropping down to $129,000,000.”

“If you’ve dreamed of scoring a luxury property, you’re in luck: despite the cuts, developers continue to build pricer pads than ever. Which means, most likely, even deeper discounts to come.”