January 8, 2018

The Math Is Not Advantageous

A report from the Associated Press on Washington. “A lawsuit filed in Seattle contends that a local developer and prominent real estate agency conspired to prey on Chinese nationals and inflate luxury home prices. The Seattle Times reported that two plaintiffs who bought adjacent newly built homes in Kirkland allege that their broker at Realogics Sotheby’s International Realty was actually working on behalf of the builder selling the homes. Jie ‘Gabby’ Jiao and couple Maoqi Zhang and Wei Fan hired Realogics Sotheby’s broker Connie Blumenthal to buy their first homes in the United States in spring 2015.”

“The suit says the buyers were told multiple offers had been made for the houses and were told to bid over $2 million each. The lawsuit claims Jiao was so dissatisfied with the home’s condition that she sold it for a loss. The other buyer’s home is assessed at about $745,000 less than they paid.”

The Dallas Morning News on Texas. “If one thing is clear on the start of the new year, it’s this: Texas, which has burned bright since the beginning of the century, is cooling off. One forecast, by research economist Luis Torres with Texas A&M’s Real Estate Center, points the finger at the oil sector. But in purely economic terms, you really only need to know one number to begin to understand the demographic change now unfolding: the cost of living.”

“In 2007 U.S. News & World Report ranked Texas the fourth-most affordable place to live. Ten years later, the magazine reported Texas ranks 21st in affordability in the country and it is the 24th most expensive place to buy or rent a home. Add to that a lower average income, and the result is that Texas becomes a less attractive place to move to than it was a decade ago.”

The Laguna Beach Indy in California. “The cost of homes in Laguna Beach remains at a record median price of $1.8 million, the same mark as a year ago, and significantly above the last peak price point in 2006, real estate experts said. Conversations with agents reveal a range of influences drawing buyers into town and a similar range of forces leading people to uproot, but some consensus that price appreciation may have hit its limit.”

“Agents believe the town’s high home prices should serve to insulate Laguna from investors speculating on short-term lodging opportunities, even after the city’s regulatory ban was overturned. ‘The math is not advantageous,’ said Compass agent Michael Johnson, explaining that market rents fall short of covering costs for new investors. ‘Only long-term owners can afford to charge lower rents,’ he said, because of their lower initial purchase price.’”

“Agents have mixed views over the impact of the recently passed tax-reform overhaul, which places a cap of $10,000 on property tax deductions and mortgage interest on homes over $750,000. Under the new tax rules, a buyer of a median priced $1.8 million Laguna home will lose deductions of about $9,800 on property tax and $30,000 on interest. For the still-working professional, that’s a big figure to walk away from and likely will lead to a softening of home prices in that segment, Johnson said.”

The Arizona Republic. “Music superstar Alicia Keys has taken her Phoenix Camelback Mountain house off the market. Key listed the 7,881-square-foot house with panoramic views of the Valley for $3.85 million in early 2016. The asking price was later dropped to $3.2 million. She paid $3.9 million for the house in 2008, according to public real-estate records.”

From Mansion Global on Florida. “After a slow year in the South Florida property market, dominated by an oversupply of luxury inventory and the retreat of Latin American buyers due to the strong dollar, 2018 represents the perfect time for interested parties to buy a luxury condo in Miami or Fort Lauderdale, experts say. That’s because of what Jay Parker, CEO of Douglas Elliman’s Florida brokerage, called a ‘perfect storm’: softened prices, and developers and sellers willing to offer 10% to 20% price reductions.”

“Ryan Shear, principal for Property Markets Group’s South Florida market, noted that he turned down buyers who wanted a 10% discount not so long ago, but today, he’d take that deal ‘all day long.’ While he hasn’t seen anything close to the 35% discounts of 2009, he said he has regularly seen 20% discounts and other incentives on the table to make a deal.”

“While many buyers are eyeing new developments in South Florida, there are also significant deals to be had when purchasing resale units, where there’s a lot of downward pressure on price, or single-family homes, experts say. For all of these property types, experts note that the best values today can likely be found where there’s the most significant oversupply of inventory to absorb, in places like Sunny Isles Beach and Miami’s downtown Brickell area.