December 22, 2017

The Decisions Made Sense At The Time

It’s Friday desk clearing time for this blogger. “It was what one expert called ‘the mother of all booms.’ Just over a decade ago, Arizona’s construction industry was leading the country in residential and commercial building. People were waiting up to a year for a house, even as builders were throwing new homes up on spec for the residents who were flocking to the state. And then it was over. The industry is not yet back to where it was, but it’s better off. Now experts wonder where the ceiling will be this time. ‘The new normal is the big question,’ said Greg Burger, president of RL Brown Housing Reports, which specializes in residential market research.”

“Elliott Pollack, an economist and real estate consultant, said the decisions builders were making before the recession hit made sense at the time. ‘If you just looked at the numbers and you didn’t anticipate the type of recession that occurred – and very few people did – you were able to justify the new construction,’ Pollack said. ‘People were building in anticipation of rooftops that never got built. The problem was that nobody anticipated the depth of the recession. Therefore, you had all this stuff that was in the building stages when the recession hit, and it took a while to turn that off. And then, of course, you can’t close down a half-done building. You have to finish it.’”

“Welcome to Palm Beach County’s newest city: Westlake (pop. 5). Only a handful of people live in this hamle. But when developer John Carter surveys the still mostly barren landscape, he sees South Florida’s next bustling and vibrant community. The population will start climbing by the end of the year and could eventually reach 15,000 as the development’s 4,500 homes are built over the next decade. Homes start at $276,000, but that’s lower than the county’s median sales price of $325,000. Top-end homes will approach $500,000.”

“Developers are offering down-payment assistance — up to 3 percent of the purchase price in the form of an interest-free loan — along with discounts for government and civil service employees.”

“Though job growth is slowing in the Bay Area, giving rise to worries about a downturn in home values, experts are predicting a slowdown at worst for the real estate market — and no changes at best. Christopher Thornberg of Beacon Economics maintained, ‘Profits for tech are still good. Exports are picking up, venture capital has just started to pick up in the Bay Area and there are no underlying issues to suggest that the tech industry is heading for some dramatic drop or pullback. Rather, it has reached a sustainable plane.’”

“Robert Edelstein, co-director of the Fisher Center for Real Estate at UC Berkeley’s Haas School of Business, isn’t quite as positive. ‘A slowing of employment here can be enough to make the housing market not so robust,’ Edelstein said. While Facebook is on top now, it could go the way of similar platforms such as Friendster and LiveJournal, he said. ‘If the U.S. economy and the world economy slow down, people aren’t going to be buying the $1,000 Apple X. If they don’t do so, Apple may need to slow their growth, and the Bay Area will suffer and so will the real estate market,’ Edelstein said.”

“The days when multimillion dollar teardowns in Metro Vancouver triggered bidding wars pushing the offers above the asking price seem to be over. Three in four detached houses in Canada’s once hottest housing market sold below asking in November, according to home sales data sent to ThinkPol by a real estate industry whistleblower. The industry insider claimed that they’re releasing the data told address what they see as unethical and deceptive practices of the industry. The asking prices ThinkPol looked at were the final list price, which were often much lower than the original list price. ThinkPol also found that many properties had been delisted and relisted at a lower price, thereby hiding the price drop and days on the market.”

“‘Just the other day, my colleague bragged about how she got her client to come ten percent over asking by blatantly lying to them ‘you have to make that offer or you’ll regret it if you get outbid’ knowing that property had just been delisted and relisted to reset the days on the market,’ the insider told ThinkPol. ‘This is the way the industry has been, bending and twisting the numbers, trying to show that there is no slowdown in the market whatsoever, and real estate prices will continue to grow as before, and toying with people’s emotions to get them to overleverage themselves.’”

“Singapore’s authorities are concerned the island-state’s property market could be setting itself up for a fall. There should be vigilance about risks ‘including the impact of rising interest rates, geopolitical developments, and excessive exuberance in the property market,’ said Ong Chong Tee, a deputy managing director of the central bank, the Monetary Authority of Singapore.”

“Persuading people to be more cautious could be a tough sell. Others, like IT sector employee Bernard Ng, are being driven into the market because of the fear of missing out on a good deal. ‘If you don’t buy now, it will be even more expensive next time,’ said Ng.”

“A widening chasm between housing prices and rental cost could be a sign that a correction is right around the corner. The biggest chasm can now be found in Norway. That’s the finding of a study of 20 advanced economies by Moody’s Investors Service. And now the market is showing signs of cooling, sparking concern of a possible economic downturn. Rapidly falling prices this year have wiped out annual price gains amid a surge in housing supply and as buyers have rushed to sell.”

“The central bank is playing cool for now. Norwegian central bank Governor Oystein Olsen, who last week signaled he’s preparing to raise interest rates as soon as next year, says he expects a ’soft landing.’”

“Buying off-the-plan has long been a popular option for Aussie homebuyers — but what happens when things don’t go to plan? Telopea neighbour Carmel Bennett is dissatisfied with her kitchen, and was told that the floorplans she’d seen before buying were actually only for marketing purposes and not a true reflection of the new home. ‘There’s nothing I can do about it now, I’m stuck with it — unless I want to rip the kitchen out and put a whole new kitchen in,’ she said.”

“‘Most investors buy-off-the plan because they’re convinced they will save on stamp duty and tax relief, but a poor performing property with a tax benefit or stamp duty savings is still ultimately a poor performing property, and you’ll lose money in the long run,’ said Property Mavens founder Miriam Sandkuhler.”

“Ten years ago this month was the start of a vicious recession, and some scars remain even if the economy has healed. The Great Recession destroyed more than 248,000 jobs in metro Atlanta – about one of every 10 – and led to a quarter-million foreclosures. To Annie Manning, that past is not so past. She had lived in her Stone Mountain home for 15 years when a ‘friend’ persuaded her to refinance, getting her a low mortgage rate and soft-pedaling the extent that her rates would rise two years down the line.”

“When the rate reset in 2007, her monthly payments went from $572 to $874. As a healthcare worker making less than $25,000 a year, she knew she was in trouble. Manning says she would have liked to have stayed in that Stone Mountain home a few more years. But she is not complaining. She lives now in a federally subsidized apartment complex in Atlanta. She thinks the house was worth about $120,000 when she left. If she had stayed and sold it, she would have walked away with some cash.”

“She tries to look back with a sense of peace, she said. ‘It was a blessing. I couldn’t see it in the beginning. At the time, I was depressed. I felt embarrassed…’ Recalling, she tears up and has to stop for a moment. ‘It has been so long,’ she said. ‘My God, I thought I was over it.’”