March 16, 2018

Why Does Everyone Become Greedy At The Same Time?

It’s Friday desk clearing time for this blogger. “U.S. new-home construction cooled by more than expected in February on a reversal in the volatile multifamily category, while building remained on pace to contribute to economic growth this quarter, government figures showed. The report indicated a tight supply of homes is getting an influx: The number of housing units completed rose to a 1.32 million annualized rate, the highest in 10 years. Single-family home starts rose to a 902,000 rate, highest in three months, from 877,000.”

“Home sellers across the US find themselves fraught with anxiety, with their expectations unmet, according to data on the seller experience compiled by Zillow. The findings run contrary to the many stories about bidding wars in larger metropolitan areas which have resulted in the impression that sellers simply list their homes and receive stacks of offers above the asking price.”

“Almost a third of sellers said they were unsatisfied with the selling process. Among those who were selling a home for the first time, about 30% said they were unprepared for how long it took to sell their homes. Those respondents also said that they wished they had started with the selling process earlier. Additionally, the analysis found that 76% of sellers found themselves making at least one concession to close a sale. The most common compromise was lowering the price. Meanwhile, 36% of the respondents found difficulty in selling their homes within their expected price range or time frame.”

“‘Despite low inventory in many parts of the country, sellers still encounter massive pain points when trying to sell their homes,’ Zillow Group Chief Marketing Officer Jeremy Wacksman said.”

“From a penthouse apartment in the Hub, a new 610-foot rental tower in Downtown Brooklyn that is — for now — the borough’s tallest, its developer groused about timing. ‘Not early enough,’ said Doug Steiner on a recent tour, lamenting his firm’s belated decision to add a rooftop lounge that is still under construction.”

“Uncertainty hangs over the roughly 28,400 rental units expected to be built in Brooklyn over the next several years — about a thousand more than all the units built in the past decade, according to Nancy Packes Data Services, a real estate consultancy. Faced with falling prices, developers are offering concessions like a month or more of free rent, discounted broker fees and even free parking for a record share of apartments.”

“‘Developers want to maintain their listing prices, and then futz with the numbers behind the scenes,’ said Paul Johansen, an associate broker with CORE Real Estate. ‘A couple years ago, there were no concessions whatsoever.’ That hasn’t deterred builders from moving forward with thousands of new units, most of them geared toward the luxury market.”

“London house prices are falling at the fastest pace since the depths of the recession almost a decade ago, with the capital’s most expensive areas seeing the biggest declines. Offers for homes are often more than 10 per cent below asking prices, James Gubbins, a partner at Dauntons in Pimlico, said in the poll. London’s highest-priced boroughs were the biggest losers over the past year, while the largest single drop was recorded in Wandsworth, down almost 15 per cent. The borough has seen a sharp surge in the number of expensive apartments being built there that Londoners don’t want or can’t afford.”

“Media coverage of the slowdown, including headlines about falling house prices, is making consumers nervous and holding back demand. New buyers registering with real estate agents fell for an 11th month in February, RICS said.”

“Sweden’s government wants to add supply to a housing market that’s just gone through its biggest price slump in a decade. Swedish housing prices have slumped almost 10 per cent from their peak in the summer, and international investors are starting to wonder whether the market can avoid a hard landing. The correction followed tougher mortgage rules and a decline in household sentiment, which coincided with a sudden surge in construction. Housing starts reached about 65,000 last year, more than three times the annual average since the mid-1990s, according to the Swedish central bank.”

“Four months after rejecting a broker’s advice to slash his rent demands on a new Spanish-style villa in Dubai, the homeowner was ready to accept a 20 percent cut on the still vacant property. The broker, Akbar Ladak, wasn’t surprised. More landlords are accepting that they have to lower their sights. Optimism about a recovery in 2017 has given way to quiet resignation that the slump may persist. And then there is the constantly growing supply in a city that can keep expanding into the desert. Despite attempts by developers to delay the completion of properties, the pipeline of sold apartments and villas outpaces current demand.”

“‘After a bad 2016, the hope was that the economic situation would get better,’ said Sanyalak Manibhandu, an Abu Dhabi-based equities analyst. Earnings for the city’s developers reflected the challenges and ‘they all missed estimates,’ said Manibhandu. ‘That’s because analysts were too optimistic or because the situation got worse in the latter part of the year.’”

“Al-Emran Real Estate CEO Sulaiman Al-Emran said prices of real estate started to decline when the Ministry of Housing announced several housing projects in various parts of the country. ‘The prices of land fell while the cost of owning houses rose. Investors saw that the ministry was extending assistance to Saudis to own houses, so they decided to invest in houses instead of land, thus creating an oversupply. The demand for land decreased sharply as did the demand for rental residential units,’ Al-Emran told Makkah newspaper.”

“‘A lot of investors in apartment buildings have lost money as there has been a higher demand on houses,’ Al-Khayalah Real Estate Office owner Thamer Al-Qurashi said.”

“From Utako to Jabi districts of Abuja, and Ikoyi, Lekki –Epe axis of Lagos State, abandoned real estate projects dot the landscape. Justifying reasons for abandonment of projects, First Vice President, Nigerian Institute of Building, Mr. Kunle Awobodu said: ‘It is a country of cash and carry; you don’t get mortgage support to have access to housing. You need cash to do your own project and many individuals’ projects have been suspended. People are out of jobs, many are yet to secure new employments, some companies are closed to business and there is low demand for building products.’”

“A mass apartment fire sale could be set to swamp Brisbane in the next 12 months. The inner city housing market is in the grip of an apartment glut thanks to a ‘record boom’ in high-density dwelling construction, according to economic forecaster BIS Oxford Economics. Some developers have already slashed the prices of apartments in their projects to attract buyers and get rid of remaining stock. Last year, some units in the The Hudson on the former Albion Flour Mill site were discounted by up to 25 per cent.”

“Managing director Robert Mellor said developers had since reported a notable drop-off in demand from local and foreign investors, with Queensland ‘taking a bit hit.’”

“Reed Property Group is offering the 20 remaining apartments in its Belise project in Brisbane’s Bowen Hills on a deferred settlement basis to help investors trying to navigate the difficult financial environment, according to Richard Ash, non-executive director for Reed Property Group. Regulator-mandated credit curbs for investors, and an oversupply of new units in the Brisbane CBD and inner suburbs, have softened prices and sent vacancy rates soaring.”

“‘The world has changed. There is no doubt the availability of debt for home owner-occupiers and investors has changed,’ Ash said.”

“Property demand and prices in London are languishing. The great rebalancing of our nation is taking effect. But the problem is that house prices are dangerous by nature. A drop in London values could trigger a crash nationally. Thanks to the vast amount of leverage you need to buy a home, falling house prices represent a huge amount of risk for the banking sector too.”

“But the real risk is in house price expectations. If everyone expects house prices to rise, that changes the calculations for affordability. For the buyer and the lender. When house prices rise, the borrower who can’t afford their mortgage can simply sell their home. The profit makes them wealthier. It feels risk free to own property. You just need to get on that ladder somehow. It’s more of an escalator to wealth.”

“But all this can change. What happens when people stop believing house prices inherently go up? They don’t even have to go down, just stop going up. Suddenly, the entire premise of borrowing, owning property, and lending falls apart. Borrowers no longer demand unaffordable debt because it no longer enriches them. And lenders’ collateral values no longer inherently safeguard a loan. Suddenly, the lending decision is about default risk instead of collateral risk. Far fewer people can borrow in that environment.”

“Under those circumstances, the lending business becomes a matter of risk management instead of simple lending volume. Banks stop fighting for market share and start panicking over their default rates. Without the presumption of rising house prices, the demand and supply of mortgages are not artificially influenced in a way that justifies widespread lending and buying. The incentives to buy property and lend against it disappear.”

“The demand for property and supply of credit contract. Meanwhile, people who do own property want out. You get a crash that puts the rest of the economy and the banking sector at risk.”

“Some would argue it’s all about animal spirits and bubble psychology. But that’s inadequate. There must be a reason for an asset bubble like a housing bubble to form and continue in the first place. Something must change for animal spirits to suddenly take hold in the direction of greed over fear. And then continue on beyond the market factors that would reign it in. Why does everyone suddenly become more greedy at the same time? Given the nature of the mortgage industry, a culprit is not hard to find.”

“In economics, if a price is set above or below the equilibrium of supply and demand by a government agency, you get a surplus or shortage of that good. If the central bank sets interest rates below the market equilibrium interest rate set by savings and borrowings, it creates artificial demand for debt. In this way, the central bank triggers and finances a mortgage borrowing bubble and thereby housing bubble. It increases demand by lowering the price and then increases supply by injecting loanable funds to meet that demand.”

“This artificial support to demand for property is what begins a bubble. And the bubble usually forms in property because this is the most interest rate sensitive asset. Animal spirits may indeed kick in. But in a free market the demand for more funds would increase their price — interest rates — and this would prick the bubble. But in a market run by a central bank, the price does not fluctuate according to supply and demand. They are set by the central bank.”

“But what happens to the belief that house prices could fall? Usually greed is kept in check by fear. Central bankers have this covered too. Former Federal Reserve chairman Ben Bernanke was famously asked in 2005 what would happen if house prices across the US fall. He refused to answer the question: ‘Well, I guess I don’t buy your premise.’ It had never happened before, Bernanke told lawmakers, so it would never happen.”

March 15, 2018

What Were Assets Are Turning Into Liabilities

A report from KDKA on Pennsylvania. “High-end, luxury apartments in Pittsburgh, which typically command top dollar prices, are now going for a fraction of the cost. It’s been a building boom that’s changed the face of neighborhoods. Now, that boom is petering with oversupply – too many units for too few prospective tenants. ‘I think there’s a temporary glut of rental units. It’s definitely a renters market,’ said Todd Reidbord, of Walnut Capital.”

“It was bound to happen. Answering the demand for upscale living, developers built an astounding 4,590 luxury apartment units in the city in just the last five years. Now, vacancy rates are climbing while demand is dwindling. ‘Now, they go from building to building and play one against the other to see how they can come out ahead,’ said Reidbord.”

From Bisnow. “As a deluge of new apartments hits Philadelphia, the multifamily market has seen signs of softening — and the most expensive units have been hit the hardest. At the end of last year, apartments costing more than $3.50/SF were only 60% occupied, compared to 80% for apartments between $3 and $3.50/SF, and 90% for units between $2 and $3/SF. ‘I think [the multifamily market] is definitely slowing down,’ Korman Communities CEO Brad Korman said.”

“‘The problem about any noise with oversupply is that people are building generic buildings at high price points that aren’t differentiated,’ Post Brothers President Matt Pestronk said. ‘People are relying on what third-property property managers are saying and hearing that some are offering concessions, so they offer concessions and it becomes a self-fulfilling prophecy.’”

“But multifamily developers are confident that the right offering would still be positioned for success. Korman claims the softening is unwarranted due to Philly still having substantially fewer apartments per capita than comparable cities like Washington, D.C.”

From the Washington Post. “If it seems as if a new apartment is under construction every month in the Washington area, you’re almost right. Analysts at, owned by CoStar, say the city is among the top three markets in the country for apartment construction, right behind New York City and Dallas-Fort Worth. Approximately 60,000 new apartment units are under construction in New York City, while 38,000 are being built in Dallas-Fort Worth, according to Julian Spiker, a market analyst with CoStar Group in Washington.”

“The D.C. area has 29,000 units under construction on top of the 13,000 units added to the housing stock over the past year. Some suburban areas have an oversupply of apartments. For example, Omeed Naderi, a market analyst with CoStar Group points to Reston, Va., where landlords are offering incentives such as four months of free rent to attract renters.”

The Times-Picayune in Louisiana. “There’s the two-bedroom condo with ‘beautiful floors’ renting for $2,000 a month. Next door, there’s the ‘perfect in-town home or gated getaway’ selling for $400,000. And just a few doors down, there’s a ‘one of a kind French Quarter apartment’ renting for $1,950 a month. And that’s just on one side of the 1000 block of St. Peter Street in the French Quarter. Across the street, a ‘luxury two-bedroom’ apartment is renting for $1,950, and there’s a ‘fantastic rehab opportunity’ for sale for $649,000.”

“It seems nearly every block in the French Quarter has a ‘for sale’ or a ‘for rent’ sign hanging out front, and some of them, like the 1000 block of St. Peter St., have multiple listings. Nearly one year after New Orleans city officials began enforcing a ban on short-term rentals in the French Quarter, the inventory of available real estate is at the highest levels that real estate agent Robert Ripley has seen since the months after Hurricane Katrina.”

“John Ferrara, a longtime French Quarter landlord and a former resident, said it’s as challenging to find long-term renters as ever. ‘People who had condos and second homes in the Quarter, they used them periodically and then they rented them out the rest of the time. Now they can’t do that,’ Ferrara said. ‘You can’t rent — I have vacancies for over a year now. What were assets are turning into liabilities now,’ Ferrara said. ‘My present rentals, it takes four months to pay just the property taxes. I’m blessed — I don’t owe any money on them. But these poor people paying notes on these properties that depended on the money from short-term rentals can’t depend on them anymore. It’s horrible.’”

From WDRB in Kentucky. “A New Jersey developer plans to build a 10-story student housing building off S. 4th Street near the University of Louisville. There have been at least six other privately financed student housing complexes built on or near U of L’s Belknap campus in the last decade. The developers are Brian Rosen and Jared Hutter of Aptitude Development LLC. Hutter said the rash of student housing development reflects how U of L — once thought of as a commuter school — is catching up to other colleges in campus living space. ‘The glut of student housing that was built, it because there was nothing around there,’ he said.”

From the Charlotte Observer in North Carolina. “Uptown Charlotte’s rental housing market looks like a paradox: It’s got the highest number of vacancies, but it’s also where developers are building the most new apartments. That contradiction means that developers will be building more high-priced, luxury buildings inside the Interstate 277 loop even as they offer discounts and breaks on the rent to lure tenants to units that are already there. But developers say they’re not concerned – yet.”

“Figures released this week by Charlotte-based Real Data show the apartment vacancy rate uptown is 21.8 percent. That’s the highest in the city by a wide margin, and more than three times the Charlotte market’s average. More than 1,100 uptown apartments are vacant. And developers are planning more. Just last week, Dominion Realty Partners said it would build 215 luxury apartments in a high-rise shared with bank offices. The number of uptown apartments has more than doubled since 2015. But with almost 1,700 new apartments on the drawing board, developers are set to increase the size of uptown’s market by more than one-third.”

“‘I wouldn’t say there’s a red flag,’ said Charles Dalton, principal at Real Data. He said the high vacancy rate is due to several new apartment buildings with hundreds of units all opening in a few months. ‘That vacancy is all in the new communities.’”

“Kelly Dunbar, manager of developer Childress Klein’s multifamily division, said just under 60 percent of the 394 apartments are pre-leased and the building is about half occupied. He said the rent giveaways are eroding apartment owners’ income, at least in the short-term. ‘With the two months free rent, nobody likes that,’ he said.”

From Mansion Global on New York. “Oversupply of luxury rental apartments in Manhattan continued to put downward pressure on pricing last month. The average price of these so-called super-luxury rentals fell 22% from $20,108 to $15,659, while the segment’s median rent also declined 11% year-over-year to $12,925 per month. ‘This market is still oversaturated with new developments, mostly skewed toward the high-end market, coming onto the market,’ said Jonathan Miller, chief executive of Miller Samuel and author of the Douglas Elliman report.”

The Real Deal on New York. “Rental concessions may be keeping vacancy rates low in Manhattan, but they aren’t preventing prices from slipping, according to a new report. ‘Normally the idea of a concession is to protect face rents,’ said Jonathan Miller. ‘You’re still seeing face rents decline.’”

“Pricing is skewed by the high volume of new development, which also tends to be larger than existing product, Miller said. For instance, the average size for a new rental was 1,202 square feet in 2017, compared to 900 square feet in an existing rental. ‘There doesn’t seem to be a change looming in this market,’ Miller said. ‘In many ways, the rental market, as you skew higher, is still under cover of a wet blanket. There’s a weight on the market that is pulling prices down gradually.’”

March 14, 2018

Sold At A Discount

A report from the Orlando Sentinel in Florida. “Increased numbers of homeowners in Orlando — and most of Florida — fell behind on mortgage payments late last year, bucking national trends, according to CoreLogic. Metro Orlando’s rate of homeowners falling at least a month behind tripled in December from a year earlier. Orlando homeowners were almost twice as likely to be late on mortgage payments as homeowners nationally, according to the real estate data group. Metro Orlando’s spike in late payments was evident with a delinquency rate of 3 percent in December 2016 — rising to 9.5 percent a year later.”

“Polk County led the state with an 11.7 percent rate of delinquencies, far exceeding the national rate of 5.3 percent. The only other Florida metro areas with a worse record than Metro Orlando’s were Miami and Fort Myers.”

From Construction Dive. “Florida Developer 550 Seabreeze Development has filed for Chapter 11 bankruptcy protection amid lender claims that it has defaulted on a $36.9 million mortgage loan on the now-stalled Las Olas Ocean Resort in Fort Lauderdale, Florida, according to The Real Deal. The bankruptcy filing stopped foreclosure proceedings on the Las Olas property, where contractors have filed liens for nonpayment. Work had already stopped on the 12-story, 136-room resort.”

“Chinese nationals have invested in the Las Olas project through the U.S. Citizenship and Immigration Services’ (USCIS) EB-5 visa program, and their eligibility for permanent residency in this country could be at risk if it does not complete the project, sell it or give it up to foreclosure.”

From The Real Deal. “Fresh from undergoing a multi-year renovation, a 27-unit apartment building in Miami Beach’s South-of-Fifth neighborhood just sold for $14.6 million, property records show. The developer, TwoFifty Collins LLC, managed by Alessandro Renzetti, listed the property at 250 Collins Avenue for $22 million in 2016 – meaning the building sold at about a 33 percent discount off its original asking price.”

“Last May, Renzetti’s request to change the property’s designation to allow for both condominiums and short-term rental hotel use was approved by the Miami Beach Historic Preservation Board.”

From The Daily Business Review. “A law school graduate was sentenced in Miami to 22 years in prison for carrying out a multimillion-dollar fraud, federal prosecutors said Tuesday. Gerti Muho, a 2012 graduate of the University of California at Berkeley School of Law, nabbed more than $2.5 million in a scheme that involved bank, real estate, auto loan, student loan and credit card fraud, prosecutors said. He was convicted in July after a trial before U.S. District Judge Beth Bloom.”

“‘Muho is a talented, industrious and motivated individual,’ Robert Lasky, special agent in charge of the FBI’s Miami office, said in a statement. ‘Unfortunately, he chose to use these skills to illegally satisfy his greed.’”

“Muho’s fraud started after he was fired in 2013 from a Wall Street hedge fund job with Fletcher Asset Management. Prosecutors said he stole information from the company’s server and tried to siphon millions of dollars from hedge fund accounts before fleeing to South Florida. He defrauded a Monaco bank into wiring him $2 million and lied to obtain a $500,000 business loan, according to the evidence at trial. Muho spent the money on a Maserati, a Jaguar and a unit at the Marquis condo tower in downtown Miami, among other things, and evaded a court judgment by creating fake identities using Fletcher’s employee information.”

March 13, 2018

More Are Looking At An Asset That Won’t Gain In Value

An opinion piece by Alex Pollock in The Hill. “After the peak of the housing bubble in 2006, U.S. home prices fell for six years, until 2012. Are these memories getting a little hazy? The Federal Reserve, through forcing years of negative real short-term interest rates, suppressing long-term rates, and financing Fannie Mae and Freddie Mac to the tune of $1.8 trillion on its own vastly expanded balance sheet, set out to make home prices go back up. It succeeded. Indeed, it has overachieved. Average home prices are now significantly higher than they were at the top of the bubble, as shown by the S&P Case-Shiller national home price index.”

“After 2000, in real terms the housing bubble expanded and contracted quite symmetrically, bottoming out in 2012 just about on its trend line. But it did not resume its trend behavior. The Fed was on the case, and up real home prices went rapidly again, rising over 5 percent a year on average from 2012 to 2017. Their current real level is equal to that of mid-2004, when the bubble was already well inflated, and it is far over — 28 percent over — their trend line as extended from 2000.”

“What can the Fed do about this? Nearly a decade after the 2008 crisis, it needs to withdraw its radical interest rate and investment interventions. I am certain that the Fed does not want to find out what would happen in the market if it actually put its mortgage-backed securities and long-term Treasuries out for bids from Wall Street. So about all, it can continue with the gradualist program, keep up its rhetoric about how very gradual everything is, and hope home prices have a soft landing. It is said that ‘hope is not a strategy.’ But that’s the best the Fed has at this point.”

From The Mercury News in California. “When Nicole Nuss saw the little yellow house in Vallejo, with its white picket fence and huge yard for her beloved dog, she knew she wanted to live there more than she’d ever wanted anything. But in a real estate market where homes fly off the shelf in days and buyers compete with cash offers that are tens of thousands of dollars over asking price, the 38-year-old owner of Cinnaholic bakery in Berkeley worried she didn’t stand a chance.”

“So at the suggestion of her real estate agent, Nuss did something that, at the time, she thought was a bit weird: She wrote the seller a ‘love letter.’ The time-honored practice, in which prospective buyers pour their hearts out while simultaneously trying to flatter the sellers, has become an unofficial requirement of Bay Area real estate transactions.”

“‘You have to write,’ said Oakland and Berkeley-based real estate agent Debra Alber. ‘If you don’t write them, it kind of shows the sellers that you don’t care.’”

From NBC DFW in Texas. “A labor shortage in McKinney is shining the light on a bigger problem in North Texas: Business owners have been posting ads for months, hoping to fill vacant positions. ‘This problem has been going on for a few years, but it’s getting worse because housing prices continue to rise,’ McKinney Mayor George Fuller explained. ‘You can get a job, but you can’t afford housing. The average price for a home in McKinney is $340,000. Just think about the salary it takes to afford a house like that, and then to maintain it. You just can’t do it.’”

The Post and Courier in South Carolina. “Low inventory and escalating prices haven’t depressed home sales in the Charleston area — until now. While still healthy, residential real estate transactions slid 12 percent in February from the same period in 2017, according to preliminary data from the Charleston Trident Association of Realtors. ‘The ongoing low inventory and ever-climbing higher prices are making it more and more unaffordable for many people,’ said Kimberly Lease, president of the association. ‘Those things coupled with rising rates are further pricing people out of homes.’”

From KTVN in Nevada. “The City of Fallon has launched a campaign called ‘Closer Than You Think.’ Fallon is located an hour from Reno and 40 minutes from the growing Tahoe-Reno Industrial Center. While it’s no secret that home and rent prices in the Reno-Sparks area have skyrocketed in recent years, this campaign aims to show both developers and aspiring homeowners alike, that Fallon is full of opportunities, including an incentive program.”

“Mayor Ken Tedford explains, ‘You don’t have to pay your building permit fees up front, when you get done building your house and you close–then you can pay your building fees and loan when you’re done.’ Tedford adds that this applies to developers, too. They do not have to pay building permit fees up front, only when the house has been sold.”

“Tedford says there are currently 300 vacant lots in Fallon, ready for future development, just waiting for developers to build upon them. In the more rural areas of Churchill County, the mayor says Housing Development Authority can give aspiring homeowners grants of up to 5 percent for their down payment.”

From Greenwich Time in Connecticut. “Not long ago, the home rental market in Greenwich rose and fell in contrast to the wider housing market. Pre-recession, about 30 percent of single-family home transactions in town were rentals. By 2009, after the housing collapse, that number jumped to 60 percent before settling back to 36 percent in 2013. Lately, though, the trends have started to diverge — the housing market is relatively healthy, but the number of rentals is still rising. No one is quite sure why, but it’s clear the phenomenon goes far beyond Greenwich.”

“‘To me, renters are on the sidelines. We’re talking about four out of 10 buyers last year who jumped on the sidelines,’ said Kevin Sneddon of Private Client Realty. ‘Half of them are uncertain if they want to live in Greenwich and the other half don’t know where the market is going; they view renting as a protection strategy. … They see real estate as more of an expense than investment.’”

“For now, his examples are mostly anecdotal. Sneddon said one of his clients chose to pay $600,000 in rent over two years because ‘he didn’t want to buy a big-ticket house until he’s certain where he wants to be.’ In his client’s view, Sneddon said, it’s less risky to pay more than a half-million dollars in rent than purchase a home. ‘To me, the most alarming part of this for Greenwich is that it basically speaks to the fact that would-be buyers are renters because they’re unsure about values,’ he said.”

“Of particular concern are situations where homeowners have sold their home for less than they bought it. There are people waiting out the market for one reason or another. Some in those category are like Sneddon’s client who are suspicious of home values; others can’t afford to buy right now. ‘A house that would have been $500,000 20 years ago is now $2 million and salaries haven’t kept up with that,’ said Jane Brash of Coldwell Banker’s Old Greenwich office.”

“On the landlord side of renting, there are several categories: institutions, such as Elk Homes, that have built up portfolios of rentals; individual investors; and homeowners Sneddon says are ’stuck.’ Those are people who ‘can’t sell so they’ll rent because they just need to get out,’ he said. For some home renters, avoiding that scenario is why they haven’t become owners, Sneddon said. ‘There’s a lot of those stories out there, and people want to have less cash tied up in an asset that’s not going up in value. More people are just looking at real estate as an asset that won’t gain in value.’”

From the Greenfield Recorder in Massachusetts. “The story of Bob McCollum and the foreclosure of his Bernardston home is far from a rare case, regional housing experts say. In 2017, there were 103 auctions for properties facing foreclosure in Franklin County, according to data from a western Mass. grassroots advocacy group, ‘Springfield No One Leaves!’ ‘It’s more common than people think,’ said Rose Webber-Smith, lead organizer for the group that tries to prevent evictions in parts of western Mass.”

“As it turns out, McCollum, who is facing a possible eviction from his home after the bank bought it back last Tuesday, is not alone in Bernardston. In 2017, five homes in Bernardston went to auction. And as one might expect in bigger towns, there were more foreclosure proceedings. In Greenfield, there were 22 auctions and in Orange, there were 31.”

“Executive Director of the Franklin County Regional Housing and Redevelopment Authority Frances Pheeny concurred with Webber-Smith, saying her government-funded organization has seen an ‘uptick’ in people they’ve worked with over foreclosures in recent months. ‘For some folks, it’s a misconception that the foreclosure issue is done with,’ Pheeny said, 10 years after the housing bubble burst. ‘but I don’t think it is.’”

“Pheeny said the housing and redevelopment authority hasn’t seen the issue limited to foreclosures from the housing bubble. Instead, it’s ‘generally situations where individuals had some major life change, whether its a loss of a job or a medical issue or a divorce.’”

“In McCollum’s case, he took out a $153,000 loan on an adjustable interest rate in 2003 and later fell ill with cancer, forcing him to stop working and fall behind on his payments. When it’s older people, it’s more likely to be as a result of the housing bubble, Webber-Smith, while with younger people the loans tended to be taken out more recently. ‘When you have a mortgage and one significant life event that can set you back,’ Webber-Smith said.”

March 12, 2018

What Did I Buy During The Binge?

A report from the Alabama Newscenter. “The multifamily market is hot. Rents continue to rise, occupancies remain strong and the development pipeline seems to be all but slowing down. In Huntsville, nine of the 13 multifamily developments in the pipeline — planned, prospective or under construction — are luxury, A-class projects totaling 4,133 units. Can the multifamily market continue to command premium prices?”

“‘Nearby markets like Nashville are flooding their metros with these A-class products and have started to experience a steady decline in occupancy over the course of 2017; however, Huntsville discretionary assets have managed to maintain a 95 percent occupancy over the last 12 months. With the arrival of so many new science and technology companies, we will see a surge in the young professional population, the primary renters of luxury, multifamily units in the Rocket City. This population will continue to drive rental rates and fill the downtown dwellings,’ said veteran multifamily specialist Andrew Agee.”

From RE Business Online on Tennessee. “Nashville has set several notable records in recent years for job growth, rent growth, population growth, tourism and tax revenue, among others. But for the multifamily industry, the most notable benchmarks lately have been related to the amount of inventory that has been delivered. The big question on everyone’s mind is the impact of new supply. In short, yes, there are pockets of oversupply, with approximately 8,500 units delivered in 2017 compared with net renter demand of roughly 6,300.”

“Given the steady levels of new inventory delivered to the market, the pace of rent growth has slowed, especially at the top end of the market, where most of the new projects are competing. Increased concessions in urban Nashville caused effective rents to back up 3.3 percent. Urban Nashville currently shows the lowest average occupancy for 2017 at 93.2 percent.”

From Urban Milwaukee in Wisconsin. “Wangard Partners went before the City of Milwaukee Board of Zoning Appeals Thursday seeking changes to a long-planned project for the city’s greater downtown area. Wangard initially planned apartments there, but now has plans for condominiums. Michael Cockroft, a project manager for Wangard, said the firm re-evaluated their plans in light of changing markets for housing downtown. Apparently the market for high-end apartments downtown is starting to look saturated as vacancy rates rise. And Cockroft said those looking downtown are increasingly interested in owning a home downtown, thus, the condos.”

“Is this the end of the apartment boom downtown? Wangard appears to be signaling that. Apartment developments are still occurring Downtown, and in big ways. But if a major developer like Wangard is already hesitant about the apartment market, what does that mean for those projects that have yet to cut a ribbon? That could be worrisome… except that other apartment projects are still going strong.”

The Greenville Reflector in North Carolina. “A new housing complex is being planned for Charles Boulevard. It has generated some controversy because it applied for a special-use permit to include dormitory-style apartments. Since a recent study noted that Greenville’s student housing market is already oversaturated, adding more bedrooms for the younger set seems just plain silly. So I am working up a proposal for Landmark Developers, the company that is planning the complex.”

“Landmark wants to call the dormitory portion of its project The Retreat. Instead, why not go for the middle-aged crowd with The Repeat? Repeat is a great name for housing targeting middle-aged people. I am constantly asking people to repeat things, either because I did not hear them or because I have forgotten what they told me. It has a built-in joke factor too if people ask us where we live, we can just shout ‘Repeat! Repeat!’ then laugh wildly when they ask the question again and again.”

From the National Real Estate Investor. “It’s no secret that seniors housing is in high demand, with the independent and assisted living subsets the most desirable. But there are also currently major supply issues in the sector, as some markets are beginning to see a lot of new product and, as a result, stagnating occupancy rates. In the fourth quarter of 2017, the national occupancy rate—based on aggregated data from 31 markets—averaged 88.8 percent, down 70 basis points year-over-year, according to the National Investment Center for Seniors Housing & Care.”

“Many industry insiders may be quick to say that seniors housing is overdeveloped in most markets, but that is an issue in many asset classes, particularly in places with lower barriers to entry—for example, Dallas, Houston, Atlanta, San Antonio and Denver, says Aron Will, vice chairman of debt and structured finance, seniors housing, at real estate services firm CBRE. ‘Those are the markets where supply-demand is at an imbalance,’ Will says.”

From Senior Housing News. “Pricing senior housing properties is more of an art than a science—and today’s prospective buyers weigh different components in wide variety of ways. As senior housing buyers, real estate investment trusts (REITs) are nowhere near as active as they once were, panelists agreed. Currently, they’re acting more as sellers than buyers.”

“That’s because, for a few years, REITs were ‘hungry, hungry hippos,’ Ross Sanders, senior director within HFF’s national seniors housing group, expressed during the panel. To put it plainly, REITs went on a buying spree, picking up a variety of assets that they then held on to for a while. ‘Then last year and this year, they’re trying to figure out, ‘What did I buy during the binge?’ Ross said.”

The Norman Transcript in Oklahoma. “A local buyer recently purchased Summerfield Village Apartments on Lindsey Street in Norman. The buying entity is controlled by David H. Kinnard who owns the adjacent Springfield Village Apartments. Kinnard said over investment by out of state interests and the university’s decision to build residential housing collided and created the current soft market. ‘The student market is well over-served,’ Kinnard said. ‘There’s an imbalance in the market that needs to be righted.’”

“Mike Buhl of Commercial Realty Resources Co. handled the sale. He said investors and owners may have to adjust their expectations while Norman is in a soft rental market.”

From the Bend Bulletin in Oregon. “A mother-daughter property development team from Chicago is bullish on the Central Oregon rental market, despite hundreds of new units in the works for Bend and reports from property managers that rents have flattened. The Kapps are looking for more places they can build projects like The 27 Elm, which will be 36 townhouse units. ‘Where we came from in Chicago, they’re overbuilt again,’ said Jeanmarie Kapp of the multifamily rental market. ‘Here, people are still looking for rental options.’”

“Plus Property Management lists a three-bedroom townhouse with a garage on NW 25th Street in Redmond for $1,295 per month. That rent is the same as a year ago, property manager Mike Hoff said. Hoff said his company, which is based in Bend, noticed fewer applications last year for properties in all Central Oregon cities. Other property managers in Bend have cited the opening of new, large apartment complexes in Bend as creating more competition for renters. ‘There was a definite slowdown in the market,’ he said. ‘You don’t want to raise rents.’”

March 11, 2018

It Is Still Very Easy To Borrow Money

A weeked topic starting with two reports from the Greenfield Recorder in Masschusetts. “Standing at the intersection of bad luck and what a seniors advocated says is a public policy failure, an elderly man who has been called a ‘Robin Hood of builders’ will face foreclosure Tuesday and an inevitable eviction. Bob McCollum, 73, first faced this fate in late July, when his Shaw Road log cabin and mortgage were in the hands of big banks in New York. Following public pressure, including an article in the Greenfield Recorder, the foreclosure was canceled.”

“‘He’s managed to stay living with his dog and cat for seven months because of the action we took back in August,’ lifelong friend and elder care advocate Al Norman said, ahead of the March 6 foreclosure date. But since then, Norman and McCollum could not find a way to finance the longtime carpenter’s way out of a mortgage gone wrong.”

“Living off Social Security and with no local family to assist him, McCollum is back at the mercy of the banks, between debt collector Shellpoint and Bank of New York Mellon — as they get ready to take his home from him because of a failure to pay off a $153,000 loan he had taken out at an adjustable interest rate in 2003. McCollum’s luck started to go south when he was no longer able to do his lifelong work as a handyman around Franklin County; he battled a few bouts of cancer, lymphoma and lung, and later on spinal stenosis.”

“‘What’s happened to Bob McCollum is a public policy failure,’ Norman said. ‘If we had better public policy in place, he wouldn’t have gotten into this deep hole and the bank wouldn’t be breathing down his neck.’”

“Norman said state Rep. Paul Mark, D-Peru, could be a good person to sponsor a bill that would call for mandatory counseling for elderly people who seek to borrow and take out a large loan like this. A Springfield mortgage counseling group did try to provide McCollum with assistance, but the counseling came too late in the game. ‘When these things become out-of-control, they become unsolvable,’ Norman said.”

“There are regrets over taking that adjustable loan in 2003, when McCollum was in his early 60s and still lively in his career. That loan set him down a path to a point where he will likely face eviction and the risk of being homeless, Norman says. ‘This is the fate that happens to people when they fall behind on their payments,’ Norman said. ‘I think we’ve delayed this as long as we possibly can.’”

“It’s almost Dickensian in its pathos: Senior citizen borrows against his home, gets sick and cannot work, falls behind on loan payments, loses home to out-of-town bank. That is the tragedy of 73-year-old Bob McCollum of Bernardston, a self-employed carpenter. As the auction gavel fell on his long-time home, now owned by the Bank of New York Mellon, McCollum said to the Greenfield Recorder from his hospital bed at Baystate Franklin Medical Center on Tuesday, ‘I feel embarrassed and ashamed. This is the worst tragedy of my life.’”

“The reality is that it is (still) very easy to borrow money, especially when home equity exists to back the loan up, and often times not nearly as easy to pay it back. In the best of all possible worlds, the borrower will make money, get a raise, receive an inheritance or sell the home at a profit and pay back the loan. When, conversely, the stars don’t align, the borrower gets sick, has to turn down jobs, loses his business or job and goes into default, triggering a long, sad process of foreclosure and eventual eviction.”

From Brink Wire on Australia. “The pace of construction is evident in Mitchell Creek Green, where developed houses stand next to vacant land earmarked for sale and streets are lined with construction sites. To Linda Hyland, buying into the estate seemed like a good investment. She made a plan to make back some of the money she would spend on the land and building costs by renting out a spare room. The new development, in the Palmerston suburb of Zuccoli, was sold as an affordable suburban housing option connected to nearby conservation corridors and the surrounding natural environment.”

“‘I’m not snobbish or anything but it was advertised as being prestigious, with lovely lakes and parks,’ Ms Hyland said. ‘When I asked about the park when I purchased the land originally in June or July last year … they said, ‘Oh, it’s happening, it’s happening in August’.”

“Ms Hyland paid more for the parkside land and moved in about three months ago, only to find the view from the spare room was different to what she was sold. The Perth-based contractor appointed to carry out civil infrastructure work in the estate, Brierty, went into voluntary administration in September and was liquidated last month.”

“‘When I look out all I can see is wire fences, bricks and things that have been dumped by builders and residents. I can’t get anybody who is willing to move into the front building because this beautiful view is now of junk,’ Ms Hyland said. ‘Then I also couldn’t get some answers about other things when I rang council or I rang somewhere else, and then I started reading and hearing from other people about a few comments. That’s when I started to think: What have I done?’”

“A homeowner who wished only to be known as Matt said a Facebook page setup for people who bought into the community was full of concerns. The tone of the page, he said, was ‘very, very negative,’ with residents claiming they’d been sold a lie, until he noticed critical posts were being deleted. His family lives on the other side of the park and paid more for land sharing a perimeter with the space. Matt said it was difficult to get information about the future of the site and was concerned the value of the land he’d paid a premium for had started to drop.”

“According to Matt, it soon appeared that that land was being sold to new buyers at discounted rates. ‘One of my mates was trying to buy a block of land in the new estate and it was about $50,000, $60,000, $70,000 cheaper than what we paid,’ he said.”

“The estate’s residents learned Brierty was the parent company of Bellamack, which was still solvent, but that it was relying on land sales made through Bellamack to stay afloat. ‘It’s not disputed that the Bellamack project was a profitable project for Brierty, and indeed when sales of those lots were sold, the money was distributed up by way of loan account to the parent,’ KPMG administrator Matthew Woods said. Unfortunately, those lot sales stalled in the first half of the last calendar year and that certainly impacted the liquidity of Brierty.’”

“To make up for the slump in the property market, the NT Department of Infrastructure, Planning and Logistics (DIPL) agreed to let Bellamack discount land by 9 per cent to remain competitive. Then, after the administrators were appointed, a further 9 per cent discount was agreed to. Mr Williams said he was unsure what would happen if no-one bought the development.”

“It couldn’t come soon enough for Ms Hyland, who said the ordeal had caused her mental health issues to resurface and significant financial stress. ‘I think for me this has affected my health,’ she said. ‘I’m living on my own, now with a dog, and I don’t really have a lot of people to talk to about it. I try and put things in perspective, but I’ve had time off work and now I can only work part-time which means I’m not sure what my future holds financially, living here.’”

March 10, 2018

The Fastest Market To Reach Oversupply

A report from the Coloradoan. “With 1,100 market-rate units coming online and more than 2,000 in the pipeline, some experts wonder if Fort Collins is in danger of a bubble, where oversupply pushes up vacancy rates, depresses rents and leaves hundreds of units wanting for tenants. It’s making some developers and market watchers a little nervous, particularly as thousands of additional student-oriented apartments flood the market. ‘The fastest market to reach oversupply is typically apartments,’ said Brandon Wells, president of The Group Real Estate. Wells is not predicting a bubble quite yet, ‘but we are reaching some numbers that give me reason for a yellow light of caution whether it’s sustainable,’ he said.”

“Vacancy rates don’t tell the full story. Vibe, Bucking Horse and Cycle — with more than 1,000 combined units — are still under construction and not included in the December survey. The survey also does not include roughly 1,160 student-oriented apartments in the pipeline that could house more than 3,660 residents and pull students out of market-rate apartments. The construction defects laws and lack of condo opportunity will continue to fuel apartment development and growth, Wells said. And that has resulted in a plethora of apartments for renters looking for high-end finishes that replicate a ‘for sale’ product and amenities that create a certain vibe.”

“The number of units coming online ‘is spooky,’ said Gino Campana, developer of the Bucking Horse Apartments. ‘There is only a limited number of people.” And there is a limited segment of the population that can afford the higher rents.’”

From the Philadelphia Inquirer in Pennsylvania. “Spring and summer are traditionally the busiest times in real estate, for both homes and apartments. But a landlord’s asking price is never final — especially in today’s market. Philadelphia, in particular, has experienced an unprecedented housing boom in recent years — 6,500 new apartment units and condos are expected to be built in Greater Center City between just 2016 and 2018 — meaning there’s more supply than ever for renters to choose from.”

“Much of that inventory, including in the suburbs, has been high-end apartments, the kind that demand prices greater than $3 a square foot. And while such inventory has forced prices to jump, many buildings are providing ‘concessions’ — a month of free rent, for example — to lure tenants. Accordingly, the actual price of renting is often cheaper than advertised.”

“According to real estate data company REIS, the vacancy rate in ‘Center City’ was 7.6 percent in 2017’s fourth quarter, up from 5.2 percent two years prior. Meanwhile, rent growth has dipped, while competition is up. ‘In the business of renting apartments, it’s very costly to turn over tenants,’ said Allan Domb, a member of Philadelphia City Council and a real estate broker.”

From WACH in South Carolina. “A student housing complex set to be built in downtown Columbia has been met with mixed opinions by local residents. Residents living in nearby neighborhoods are wary about what the student housing could mean for the area. Jonathan Comish, president of Arsenal Hill’s Neighborhood Association, says he’s been meeting with the Vista Guild to discuss the concerns of his residents. ‘If the student housing bubble ever bursts, then that’s just going to be 700 empty beds in the middle of what we sort of think is the crown jewel of Columbia, Arsenal Hill and the Vista,’ said Comish.”

From KBTX in Texas. “According to a recent Bloomberg study, College Station ranks as the number one least affordable place to live based on the percentage of household income going to monthly rent costs. But local experts are skeptical of these numbers. Both Jim Gaines, Chief Economist at the Real Estate Center at Texas A&M University and local realtor Cherry Ruffino believe there are too many housing and apartment rentals in College Station for the demand. Some even theorize that the open rentals could lead to decreasing costs.”

“However, Gaines and Ruffino aren’t as optimistic. ‘Does this mean our rental rates will go down? I don’t think so,’ says Ruffino. ‘I don’t think so at all, but we may level off.’ ‘Sometimes the landlords are a little slow in lowering the rent,’ says Gaines. ‘What they would rather do is give something in concessions like free rent for a month.’”

From Reuters on New York. “Apartment sales in Manhattan fell to the lowest monthly rate in January since February 2012 as a declining trend in city-wide sales both by price and volume emerged, listings and data website CityRealty said. Sales prices fell 15.5 percent to an average $1.86 million in January from an average $2.2 million a year earlier, while the average price in December fell 14.3 percent, from $2.17 million. ‘I’m a little startled, it’s quite a blip,’ Gabby Warshawer, director of research at CityRealty, said of the drop.”

“Data for January showed the lowest number of units sold since February 2012, when 799 sales were recorded at an average price of $1.50 million. Volume peaked in July 2013, when 1,721 units were sold.”

From the Union Tribune in California. “From the saltwater pool on the 18th floor of East Village’s Alexan ALX, the latest luxury apartment to open downtown, it seems like all of San Diego is at your feet. Alexan is just one of the more than 2,000 new apartments opening this year in San Diego County, most of which are high-end and downtown. Trends follow past years as luxury complexes cater to pets, install high-tech gyms and zero-edge pools typically found at resorts in an effort to outdo each other.”

“Russ Valone, CEO of MarketPointe Realty Advisors, said the market has proven it can handle high rents but it’s unclear for how long. What is unique this year is not that most new construction is high-end, but that there are so many luxury projects. ‘You can continue to ask’ for high rents, he said. ‘Will we get them? I don’t know.’”

From City Watch LA on California. “The massive multi-billion-dollar fraud behind Los Angeles’ homeless crisis has taken a gigantic leap forward with the LA Times’ multi-part editorial which has one basic solution: give billions more dollars to real estate developers. In March 2012, I noted, ‘With the hubris for which the Los Angeles City Council is becoming renown, Garcetti, LaBonge and their gaggle of developer good old boys continued to loot the city treasury. After the years of fraud had been uncovered from the gargantuan financial losses like the $454 million debacle at Hollywood-Highland to the small $1.4 million appraisal fraud for CRA 1601 N. Vine Project, one would think that when billions of dollars will rest on the accuracy of the Hollywood Community Plan, the city would come clean and tell the truth.’ Oh, how naive we were.”

“Since his election in 2001, current LA Mayor Eric Garcetti has been promoting his campaign to destroy as many rent-controlled units as possible. The rate is up to 7 RSO units per day making a total of over 24,000 apartments destroyed. If we assume only 2.5 persons per unit, that is 60,000 poor people whose homes have been destroyed. Yet, the LA Times does not think that destroying the homes of the poorest among us contributed to the increase in homelessness.”

“As Adam Fowler of Beacon Economics explained it, the City needs more market rate and luxury housing so that the homeless will have a place to live. (Huh ??) Speaking on Channel 4’s News Conference, a perennial fountain of disinformation, Mr. Fowler explained that wealthy people are living in older apartments. As soon as the city builds new luxury apartments, the wealthy will move into the new places which will free up the older units for the poor. This is ultra-right-wing Trickle Down economics: tear down the homes of the poor and build luxury units for the wealthy.”

March 9, 2018

Trying To Minimise Their Losses In The Present Glut

It’s Friday desk clearing time for this blogger. “Increasing danger lurks in the mortgage market, and economists say it could put the financial system at ‘even greater risk’ when the next recession strikes or too many borrowers fall behind on their mortgage payments. A growing segment of the mortgage market is being financed by so-called non-bank lenders. Borrowers with poor credit have increasingly turned to these alternative lenders instead of traditional banks. The alternative lenders are subject to far less regulation and have fewer safeguards when borrower defaults start to pile up. ‘A collapse of the non-bank mortgage sector has the potential to result in substantial costs and harm to consumers and the US government,’ economists at the Federal Reserve and the University of California, Berkeley, write in a paper.”

“As of 2016, non-bank financial institutions originated close to half of all mortgages. They originated three-quarters of mortgages with explicit government backing, underscoring the risk to taxpayers. The danger is that non-banks may have fewer resources to weather economic shocks to the mortgage market, like a rise in interest rates or a decline in house prices.”

“‘What happens if interest rates rise and non-bank revenue drops? What happens if commercial banks or other financial institutions lose their taste for extending credit to non-banks? What happens if delinquency rates rise and servicers have to advance payments to investors?’ the authors write. ‘We cannot provide reassuring answers to any of these questions.’”

“Property investors were bullish on the U.S. housing market in 2017, flipping more homes than in any year since 2006, when the real estate bubble that helped upend the global economy was still inflating. ‘The long up-cycle that we’re in is giving more and more people confidence to try their hand at home-flipping,’ said Daren Blomquist, senior vice president at Attom. Rising home prices are ‘pulling more people onto the bandwagon.’”

“Still, red flags show up in local markets. Flippers in Austin, Texas; Santa Barbara, California; and Boulder, Colorado, earned gross returns of less than 25 percent (which don’t include the cost of renovating the homes), suggesting that investors in some markets are depending on slim margins. Flips represented almost 13 percent of home sales in Memphis, Tennessee, in 2017, more than twice the national average, a sign that some flippers are becoming overconfident, Blomquist said.”

“More than 10 years after a former Denver man was charged with securities fraud for his role in an $8.3 million real estate scam, he continues to make monthly restitution payments to his victims. But Jason Sharkey’s criminal background hasn’t stopped him from becoming a key player in an $80 million to $100 million riverfront redevelopment project in Wausau, Wis., that’s funded in part by city money, according to records from the U.S. and Canada.”

“‘That’s insane. That’s just crazy, that’s what that is,’ said Broomfield resident Thomas Severino Jr., one of many investors lured into the Colorado scam by Sharkey. He and his wife invested $40,000 with Sharkey, who still sends them about $15 per month in restitution.”

“As the Bay Area exodus continues, U-Haul is watching its trucks drive out of the region and not return — leaving the company with a shortage in the area, Mark Perry, a finance and economics professor at the University of Michigan wrote in a blog post. So the company is raising and lowering its prices accordingly. ‘They’re almost paying people to get the trucks back into San Jose,’ he said. That suggests ‘there’s a huge outflow, and a lot of outbound moves leaving the area, and very few moves coming in.’”

“A marble-filled duplex apartment in Midtown Manhattan’s Olympic Tower returned to the market Tuesday with a new reduced $25 million price tag after spending more than a year in hiatus. The ask is $8 million less than the $33 million that the home was asking when it was last on the market in November 2016, listing records show. ‘Today they are realistic sellers and they are basing the price on market conditions,’ said listing broker Leonard Steinberg of the discount. ‘At a little bit over $3,000 per square foot, it is a remarkably good buy.’”

“The unit isn’t the only big-ticket Manhattan property to get a fresh price tag this week. On Monday, a co-op on Gracie Square received a discount of $7 million to $11.5 million, also presumably a response to difficult market conditions at the highest end of the market.”

“While housing prices in Okotoks fell slightly last year, local realtors say the outlook for 2018 is a more steady market. The current inventory in Okotoks of more than 200 active listings is more than average, said Jacky van der Ven of CIR Realty Okotoks. ‘It’s more inventory than we should have,’ she said.”

“Zurich’s housing market boom is starting to fizzle out. Home values in the canton fell in the fourth quarter, the first decline in almost two years, according to Zuercher Kantonalbank. Demand is unlikely to pick up in 2018, the Swiss lender says, in part because fewer people are moving to the country’s largest city. The decline comes after a decade in which home values jumped more than 50 percent to an average of about 1.3 million Swiss francs ($1.4 million), helped by years of negative interest rates.”

“After seemingly unstoppable growth, Kenya’s real-estate sector is showing signs of oversaturation, while affordable housing remains in woefully short supply. But now, questions are being asked about whether it’s all been too much, too quickly. Empty housing blocks and office spaces are a common sight. According to property services company Broll Kenya, there are occupancy rates as low as 60% in some buildings in Upper Hill and Westlands.”

“David Nahinga, CEO of housing company Ujenzibora, tells The Africa Report: ‘Our market activity is too little, and there is no single player shouldering widespread risk.’ Nahinga says it is the banks who are likely to be the most exposed: ‘The only player in the sector who should talk about a bubble should be the financier or the bank,’ he says. ‘But even for them, funding the built environment can crank up the loan book through revaluation to show the property is worth more than the liability.’”

“Chie Nozawa, a professor of the Faculty of Science and Engineering at Toyo University, spoke with The Yomiuri Shimbun. What problems have there been with Japan’s housing policies? Chie Nozawa: Japan already has more homes [buildings] than households [people to live in them], yet more and more new housing continues to be built, leading to a ’society with excessive residential supply.’ At this rate, future generations will be saddled with the burden of worthless inheritances. We need to find solutions soon.”

“Some major developers have started selling land in non-prime locations over past few months, while some are exiting local markets amidst Malaysia’s soft property sector and the uncertainty caused by the upcoming general election this year, reported The Malaysian Reserve. The central region is also suffering from an oversupply of properties, and it’s uncertain if the existing un-occupied units can be absorbed by the market.”

“Property consultancy MacReal International’s Principal Partner Michael Kong noted that it’s a strategy of developers to focus their resources on sought-after locations at the expense of far-flung areas. Developers are now trying to minimise their losses after ‘getting hints from the media and statistics announced by Bank Negara Malaysia (BNM) and the National Property Information Centre (NAPIC) on the present glut,’ he explained.”

March 8, 2018

Prices Can And Do Fall, Hard

A report from the Toronto Star in Canada. “Re-sale home prices in the Toronto region dropped 12.4 per cent, or about $110,000, year over year in February. The average price fell to $767,818, from $875,983 for all housing categories, including detached, semi-detached, town homes and condos. The number of sales also plunged nearly 35 per cent last month compared to Feburary 2017 — to 5,175 transactions from last year’s record 7,955, according to the latest statistics from the Toronto Real Estate Board. The sluggish start to 2018 is what the real estate board says it predicted after the extraordinary Toronto-area market peak in the first four months of 2017. Last April, prices topped out at an average $920,791 — 24.5 per cent above the previous year.”

“Sales have since been declining because that month the Ontario government took cooling action by introducing its Fair Housing Policy, including a foreign buyers tax, said Jason Mercer, TREB director of market analysis. In Newmarket and Aurora, sellers are still lagging buyers in their expectations of what homes will fetch, said Richard Gibb of Century 21 Heritage Group. ‘You still are seeing those housing prices based on last year’s sales. There definitely is a large number of listings that are way over-priced,’ he said. ‘There are a lot of homes that would probably sell, but (buyers) know the house is overpriced so they’re going to wait,’ he said.”

From Curbed. “Canada escaped the global financial crisis in 2008 unscathed relative to much of the developed world, but after 15 years of virtually uninterrupted home price appreciation, America’s neighbor to the north might be cooking up a financial crisis of its own. Loose lending has helped create a housing bubble to rival that of the U.S. in 2006, and with household debt in Canada being among the highest in the world, Canadians have little room in their budgets to absorb rising housing costs.”

“The next year will be telling because unlike in the U.S., the interest rates on most mortgages in Canada reset to the current rate every five years, and 47 percent of Canadian mortgages will ‘reset’ within the next year. ‘We’re basically in a correction now, which most people believe will be a soft landing,’ said Hilliard MacBeth, author of When the Bubble Bursts: Surviving the Canadian Real Estate Crash. ‘I’m pretty sure it’s not going to be a soft landing. It’s going to be a crash.’”

From Macleans. “Real estate agent Paula Minuti knew the housing market had reached a turning point. The problem was her clients refused to accept it. In May 2017, Minuti listed her clients’ home in York Region, a collection of suburbs just north of Toronto. Just a few months earlier, homes in the area were selling in a couple of days for tens of thousands of dollars—or more—over the asking price. But this house had sat on the market for eight whole days without any offers. Now a bid had finally arrived, just shy of the listing price.”

“Minuti urged her clients to accept it, pointing out that negotiating power in the market was shifting to the buyers. Her clients refused, sending it back with a request for an additional $45,000. Minuti walked the counter-offer to the buyer’s agent, who was waiting outside while his clients sat in their car. The agent did a double take and went to the car to inform his clients. They started the engine and sped away in a fury, leaving their agent dumbfounded at the curb. ‘They were pissed,’ Minuti says. No amount of pleading over the next few days could bring them back. The house sat on the market for two more weeks before another offer came in. It was $15,000 less than the previous one. This time, Minuti’s clients took it.”

“This is the new reality in many parts of Ontario. After years of booming prices and a few months of complete insanity, the housing market in many cities is falling back to earth. The average home price in Aurora, Markham and Vaughan has plummeted more than 30 per cent since last April, whereas sales fell more than 60 per cent. Prices in Richmond Hill, meanwhile, have dropped a whopping 43 per cent from the peak. The experience of York is a microcosm of what a wider housing crash in Canada might look like. It illustrates an obvious truth that many Canadians have either forgotten or never had to consider: home prices can and do fall, hard.”

“‘For five years, they were basically our bread and butter,’ says Sylvia Morris, a real estate agent who specializes in Unionville, an area of Markham. Foreign buyers, typically from China, would purchase four or five houses at a time. ‘This time last year, I’d put a property on the market and within two or three days, I’d have 10 offers on it,’ she says. Morris often participated in transactions where buyers never even visited the property; their agents sent video footage instead. Minuti saw countless local clients repeatedly shut out of bidding wars. ‘The offers I would get would just blow everybody out of the water,’ she says. ‘I’m talking $150,000 or more over asking.’”

“Domestic investors and speculators could be just as aggressive, though. ‘It was just off the charts how many people were buying investment properties,’ says Realosophy president John Pasalis.”

“Getting caught in the frenzy caused problems for aspiring landlords, Pasalis notes, as prices escalated and rental income no longer covered the carrying costs. Last year, 95 per cent of all investment properties purchased in 2016 were losing money each month, Realosophy estimated. ‘When you see people buying investment properties where they’re losing $2,500 a month, it tells you people have this belief that prices will just keep going up forever,’ Pasalis says.”

“The notion the market could only move in one direction was dispelled by the Ontario government’s Fair Housing Plan in April 2017, which imposed a 15 per cent non-resident tax on homes sold across the Greater Golden Horseshoe. More than anything else, the plan changed the psychology of the real estate market, cutting through the speculative mentality that was causing prices to rise more than 30 per cent each month. ‘John, who asked that his real name not be used, purchased a home in the GTA for $1.3 million in June. An appraisal was conducted soon after. ‘It came back short. Very short,’ he says. ‘I had a small heart attack.’”

“He borrowed $300,000 from a private lender at nine per cent interest under a one-year term, and found tenants rather than flip the property. The rent doesn’t cover the carrying costs, so he’s losing money every month. ‘I probably got ahead of myself on this one,’ John concedes. He hopes to refinance later this summer with an alternative lender at a more bearable interest rate.”

From the Vancouver Sun. “The speculation tax, calculated at two per cent on assessed value, would levy $20,000 on a $1-million recreational property. But a British Columbian with an income of $100,000 a year would only get back the $7,000 or so that he or she would be paying in provincial income taxes. When I raised that likelihood in a column last week, I heard from numerous British Columbians concerned that they might be facing a big bite from a tax that was supposedly crafted to target foreign and out-of-province speculators.”

“From a Vancouver Island resident with a condo in Vancouver: ‘If the proposed speculation tax proceeds as you describe, the two-per-cent tax will far exceed the B.C. income tax that we normally pay. We will have no choice but to sell our Vancouver condo. We’re not speculators. We simply wanted to enjoy a few days a month in the city we used to live in, in the comfort of our own condo.’”

“On the problem for seniors with recreational properties that have been in the family for years: ‘If they pay zero income tax because their annual income is low enough to warrant no tax — i.e. married couple making around $25,000 or so — they’d never recover the amount.’”

“From someone with a place on Bowen: ‘Kelowna, the Gulf Islands and Bowen Island have many vacation or second-home properties and this sudden change may have a sharp negative impact on property values as families scramble to part with a property they can no longer pay the annual taxes on. In the small island vacation home areas, often the most expensive homes such as waterfront are second homes.’”

March 7, 2018

They’re Kind Of Taking A Hit

A report from the Seattle Times in Washington. “Seattle’s record construction boom may have peaked: Development activity across the central part of the city is declining at the fastest rate in at least 12 years. At the end of this past year, there were 57 active projects underway in the area that stretches from South Lake Union to Sodo, according to a report released Monday by the Downtown Seattle Association. That’s down from a record high of 74 projects six months prior. The 23 percent decline amounts to the biggest six-month drop since the downtown association began its twice-a-year construction counts in 2005. It comes after a recent survey found Seattle’s crane count had dipped for the first time in years.”

“Rents downtown have begun dropping for the first time since last decade amid the construction boom, as some of the new luxury apartments opening in the city’s hottest neighborhoods have sat empty. Altogether, the area has added more than 20,000 new housing units in the past decade. There are up to 30,000 apartments still left in the pipeline, though developers recently have reported a pullback in new apartment plans now that rents are no longer keeping up with rising construction costs.”

The Des Moines Register in Iowa. “Des Moines-area renters should see a relief in rising rents this year as landlords look to fill an unprecedented wave of new apartments. Vacancies are at their highest level since 2010 and, as a result, rental rate increases have slowed, according to an annual survey released by CBRE/Hubbell Commercial. That slowdown will likely continue as more apartments open, said Linda Gibbs, senior vice president of investment properties at CBRE/Hubbell Commercial. ‘We won’t see the same kind of rent growth we’ve seen in the past few years,’ she said.”

“The metro’s apartment building boom is expected to continue this year. An estimated 3,230 apartments opened here last year, compared to 1,966 in 2016, according to the CBRE report. Another 3,061 apartments are planned this year. The number of vacant apartment units has reached a level not seen since 2010, when the United States was in the middle of a recession. Vacancies metro-wide are at 8.2 percent. The largest number of vacancies is downtown, 18.5 percent, and in the western suburbs, 7.7 percent.”

“With so many units coming online in a single year, developers and property managers have offered incentives, including free parking, gift cards worth up to $1,500, free TVs and iPads, and even three months free rent to entice would-be renters to sign leases. Those incentives will attract tenants to move away from older apartments, said Timothy Sharpe, senior vice president of investment properties at CBRE/Hubbell Commercial. Those Class B and C units — built before 1980 — often have fewer amenities and outdated finishings. The renter exodus will result in reduced rents and higher vacancies in older units over the next few years.”

“‘They’re kind of taking a hit,’ Sharpe said.”

The Houston Chronicle in Texas. “Some Houstonians displaced by Hurricane Harvey have started moving out of short-term rentals and back into their newly renovated homes or ones they’ve purchased since the flood. Occupancy across the Houston area is at 89.5 percent, up from just over 88 percent a year ago, according to a March report from ApartmentData. The urban core, however, which had a glut of units for lease pre-Harvey, still has a fair amount of vacancy. Aris Market Square is advertising three months free rent with a 13-month lease. Catalyst, near Minute Maid Park, is offering up to two months free. Alexan Downtown and Block 334 is giving two months free prorated throughout the term of a lease.”

“Landlords should find some solace in the fact that only about 7,500 new units will open this year, compared with 21,000 for each of the last two, said apartment analyst Bruce McClenny. And next year, no more than 6,000 should open.”

From the New York Real Estate Journal. “The New York Real Estate Journal recently sat down with Shimon Shkury, founder and president of Ariel Property Advisors, a New York City investment real estate services and advisory company. Q: How did the multifamily market perform in 2017?”

“A: While pricing was a notable bright spot, particularly in Queens, the Bronx and Northern Manhattan, volume in the New York City multifamily market slumped to levels not seen since the beginning of the decade, due largely to a dramatic pullback in institutional-level transactions. Dollar volume reached a six-year low amid the fewest number of transactions since 2010.”

“When compared to 2016, dollar and transaction volume declined 48% and 28%, respectively, while property volume slid 29%. Institutional investors were largely absent in 2017. New York City recorded only five sales at or above $100 million, down sharply from 26 sales the previous year. The largest sale of the year clocked in at $135 million, a level that was surpassed seven times in 2016 and four in 2015, when the largest sale in those years were $620 million and $5.5 billion, respectively. On a local level, the rental market faced well-publicized struggles last year, with median rents in Manhattan and Queens falling.”

“Q: How did the submarkets perform last year? A: On a sub-market level, Manhattan struggled in 2017, with volume metrics decreasing substantially from the previous year’s levels. The borough’s dollar volume, at $2.32 billion, was the lowest since 2010, and its 57% drop from 2016 was the sharpest decline of any sub-market. Brooklyn’s multifamily market softened, with volume metrics notching double-digit declines. Dollar volume slumped 48% to $1.48 billion, transaction volume slid 35% to 119, and building volume sunk 21% to 227. ”

“Queens activity was extremely lackluster in 2017, with transaction volume skidding 40% to 43%, the steepest year-over-year decline of any sub-market. At the same time, dollar volume dropped 47% to $849 million.”

The Union Tribune in California. “Usually, U-Haul truck rentals are advertised at an affordable sticker price, comfortably in the three-digit range. But a trend out of northern California is pushing that sticker price as high as $2,000, and moving Californians to disbelief. The cost to rent a 26-foot U-Haul truck — big enough to move a three- to four-bedroom home — out of San Francisco headed to Las Vegas reached as high as $2,085 for four days. To rent the same truck going in the opposite direction is only a fraction of that cost — $132.”

“We were curious about what it cost to rent a U-Haul truck for one-way trips to and from San Diego, so we checked and found that it was more expensive to rent a U-Haul truck traveling from San Diego to another city than the other way around. That said, prices were not as high as the ones involving San Francisco. Last month, California’s Legislative Analyst’s Office reported that the state is has experienced a net loss of about 1 million residents from 2007 to 2016.”

“An analysis from the real estate website Redfin published last month offers more evidence of this trend — San Francisco was the top city with the highest loss of residents, a net loss of 15,489 in the last four months of 2017, compared to New York City’s net loss of 12,532 residents.”

March 6, 2018

A State Of Fool’s Gold

A report from the Tahoe Daily Tribune. “The Incline Village real estate market is off to a very healthy start in 2018. As properties in good locations hit the market we are witnessing a tremendous amount of showing activity and more multiple offer situations. Since the economy in California continues to produce tremendous wealth, we anticipate a steady stream of buyers to all areas of Lake Tahoe. While the past several years have resulted in many California tax refugees moving to Nevada, that is only part of the equation. Housing prices in the Bay Area have appreciated to the point where properties in Incline Village actually appear relatively inexpensive. So, there is no sticker shock and if anything buyers are surprisingly pleased at how much bang they can get for their buck compared to many Bay Area communities.”

“Longtime observers of the real estate market will naturally start to question whether we are in or near a housing bubble like we saw in the first decade of this century. While there are some statistical indicators that might lead us in that direction, there are notable differences between the current state of the market versus the debacle a decade ago.”

“The vast majority of purchases at Lake Tahoe are discretionary. So, buyers carefully evaluate their financial situation before taking the plunge. We are not seeing the rampant speculation of 2004 to 2007 where buyers were making a purchase and planning to flip the property at a profit in 12 to 24 months. So, the big question is how much more room do we have to run?”

The Orange County Register. “By one widely-watched home-price benchmark, the strongest appreciation nationwide this century was in Los Angeles and Orange counties. When I tossed S&P/Case-Shiller data into my trusty spreadsheet I learned prices in L.A.-O.C. have surged to a nation’s best 171 percent since January 2000. (Ahem, that includes the housing bubble bursting!) And these 21st-century gains easily topped a 105 percent gain for S&P/Case-Shiller’s composite index that tracks all 20 cities.”

“S&P/Case-Shiller shows folks are paying up for housing — even after the painful losses of the last decade — all over the nation. It’s just a bigger bite in L.A.-O.C.”

From the Observer. “Garry Tan, a famed venture capitalist in Silicon Valley, noticed a disheartening pattern in his community lately: people in their mid-30s with children, both working in tech and non-tech industries, are leaving the San Francisco Bay Area due to the area’s uncontrollable housing frenzy. On real estate listing site Redfin, a 848-square-foot, two-bedroom house in Sunnyvale, Calif. was sold for $2 million in February. The price for this house had doubled since 2014. ‘This is what an absurd California housing crisis looks like,’ Tan commented on the listing.”

“Looking at the larger picture, house prices in San Francisco have risen by 76 percent over the past five years, according to Trulia. Since 2007, San Francisco has built over 100 percent more luxury homes, while less than 20 percent of housing for middle-class and low-income residents, according to San Francisco Planning Department data.

From the Daily Californian. “Berkeley’s rent prices continue to climb while apartment rates decrease nationally, according to a report from ABODO. Berkeley saw the fifth-highest increase in the nation in median rents for two-bedroom apartments in March, while Oakland experienced the tenth-highest decrease. Apartment development across the nation is growing, said ABODO spokesperson Sam Radbil, with construction at its highest levels since the 1980s. This is increasing the supply of apartments and driving down prices.”

“Among Berkeley’s new apartments, more expensive units outnumber less-expensive, below-market-rate units by a ratio of nearly 10-to-1, said Berkeley Zoning Adjustments Board chair Igor Tregub. This is far below the regional goal for below-market-rate units, according to Tregub. ‘This is a pattern we’re seeing all over the Bay Area,’ Tregub said.”

From Multi-Housing News. “Jeffery Hayward, head of Fannie Mae’s multifamily mortgage business, sat down with MHN to provide an industry-wide outlook and discuss the GSE’s new initiatives for 2018. What’s your 2018 outlook?”

“Hayward: We expect to do about as much business as in 2017 (more than $67 billion) because we think the size of the market is approximately the same as it was last year. The amount of equity that’s available to invest in the market has increased, and that’s not by accident. The demographics are such that the number of people who want to rent apartments is so large, while the availability of apartments is very low. Equity capital chases opportunity, and since there aren’t enough apartments, rents are increasing, along with investment. I don’t think that dynamic is going to change.”

“Which markets are feeling the greatest impacts of multifamily supply growth? Hayward: The most supply-impacted areas all have strong job markets, so the units will get absorbed. On the other hand, there are other markets that are starved for affordable housing, such as Berkeley, Calif., Oakland, Calif., or San Francisco, where the oversupply is among high-end apartment units. Generally speaking, the oversupply issue pertains to high-end new construction.”

From City Watch LA. “Maybe the business journals are right, and maybe they’re wrong, but if California does have the worst quality of life in the 50 US states, then we can either stop digging the hole we’ve dug ourselves into, or double down and dig ever faster. Metrics are everything, and the metrics saying we’re going down (who cares if we’re 50, or 48, or whatever–we’re not the Land of Opportunity as we once were) includes air quality, pollution, community engagement, and voter participation.”

“Locally, in Los Angeles, we’re emblematic of the same denial and hypocrisy that has long ago converted the Golden State to a State of Fool’s Gold–with self-respecting Angelenos and other Californians bailing to Utah, Texas, Idaho, Arizona, Nevada, etc. ”

“Here are five ways that our ‘leadership’ is diverting and/or ignoring the problems in plain sight (and the voters are letting them, by the way, and/or have concluded that their vote makes no difference): 1) Presume the high cost of housing is the result a natural supply/demand economics.”

“The actual housing vacancy is not known, and nor will our government/utility workers provide that information, but it may be much, MUCH higher than we know. And so long as we avoid the approach to create moderate densification that PRESERVES neighborhoods, and not TRANSFORM them, we will have the YIMBY/NIMBY fight. Who wants to move into a neighborhood that is becoming DIFFERENT than the one we wanted to move into.”

“Much has recently been made of the WIMBY (Wall Street In My Back Yard) of corporate interests mucking up proper development or redevelopment, and precious little has been discussed of foreign, particularly Chinese, investors gobbling up our real estate and leaving a boatload of vacant or inaccessible homes and condos and apartments that could otherwise be used for affordable housing.”

“The shift has hit the fad, and the shifting and fads suggest that Downtown and local/state government has our money … and will do whatever it wants to feed the winners at the expense of the losing majority. And for those of you ‘winners’… congrats on your entitled success. And for those of you ‘losers’… if the game isn’t working your way, play a different game and do what it takes (including moving) to feed your families, your dreams, and the future of your children.”

March 5, 2018

People Are Having Trouble Getting The Finance

A report from Global News in Canada. “The Real Estate Board of Greater Vancouver says that home buyers weren’t very active in February as sales dipped below the long-term average. It says last there were 2,207 sales in February, a 9 per cent dip compared to last year, and more than 14 per cent below the 10 year monthly average. By property type, the board says detached properties were down more than 39 per cent. President Jill Oudil said that rising interest rates and stricter mortgage requirements have reduced purchasing power for home buyers, especially for those just entering the market. ‘We have also seen the detached category, it’s moving into… more heading towards the buyers territory as far as a buyers market there.’”

From Buy Association on the UK. “A new crackdown on UK property being bought using ‘murky’ money from overseas has seen the first ever instance of the National Crime Agency issuing two unexplained wealth orders (UWOs) on £22m worth of London and south-east property. A ‘politically exposed person,’ said by the Financial Times to be a central Asian politician, who owns a range of homes and offices in London and the south-east, is the first person to be investigated using a UWO by the National Crime Agency (NCA) – a measure which first came into effect on 31 January.”

“Donald Toon, NCA’s director of economic crime, said: ‘Unexplained wealth orders have the potential to significantly reduce the appeal of the UK as a destination for illicit income. They enable the UK to more effectively target the problem of money laundering through prime real estate in London and elsewhere.’ He added: ‘We are determined to use all of the powers available to us to combat the flow of illicit monies into, or through, the UK.’”

“According to anti-corruption campaigners, more than £122bn worth of property in the UK is owned by overseas firms, and it is vital that any of these properties where the owner cannot prove the origins of their funding should be investigated.”

From the Business Standard on India. “As many as 440,000 housing units were unsold in seven major cities at the end of 2017 with Delhi-NCR contributing maximum at over 150,000 property consultant JLL India said. JLL said, ‘as many as 440,000 residential units remain unsold across key cities of India at the end of 2017.’ Mumbai, Delhi–NCR, Chennai, Hyderabad, Pune, Bengaluru, Kolkata are seven cities covered in this survey.”

“Out of the total unsold housing stock, the consultant said, 34,700 units are ready-to-move-in flats. Delhi–NCR has the highest volume at around 1,50,654 units which remained unsold in 2017, while Chennai has the highest percentage of completed unsold inventory at close to 20 per cent. Upon analysis, Noida and Greater Noida together contributed to nearly 60 per cent of the total unsold inventory, mostly in under–construction projects. ‘Noida and Greater Noida have had a tumultuous past because of which, end users are circumspect in making their purchases,’ JLL said.”

From the New Zealand Herald. “Auckland’s average house sale price dropped by just over $15,000 in the last month while the city’s median fell $10,000, according to new data out this morning from Barfoot & Thompson. The agency, with more than 40 per cent of the city’s house sales market, today announced January’s $934,753 average sale price fell to $919,454 last month while January’s $830,000 median dropped to $820,000.”

“The number of Barfoot listings is up. Inventory jumped from 4320 available listings at the end of January to 4648 listings at the end of February. New listings rose from 1200 in January to 1747 last month. ‘Sales numbers for the month at 665 were up 12.1 percent on those for January, and were up 19.6 percent on those for the previous February. The average sales price at $919,454 was down 1.6 percent on that for January, and down 1.1 percent on the average price for the previous three months. A feature of February’s trading was the relatively high number of sales of properties valued at under $500,000,’ said Peter Thompson, Barfoot managing director.”

From The Australian. “Chinese buyers are returning home empty-handed as Chinese New Year, the 10-day holiday characterised in recent years by buying an offshore trophy home, draws to a close. This year, hopeful buyers have been caught by restrictions on transferring funds out of China and reluctant local banks asking for evidence of income earned in Australia rather than overseas.”

“The slower sales come amid a broader cooling with prices falling 1.2 per cent across the capital cities over the past three months and Sydney posting its first annual price drop since 2012. Treasurer Scott Morrison said in April that foreign investment applications for residential housing had fallen to an expected 15,000 last year from 40,000 the year before. ‘We’ve been very busy showing the properties but as far as transactions go, they’re down on last year, mainly because people are having trouble getting the finance,’ ­Sydney Sotheby’s International Realty managing director Michael Pallier said.

“Non-resident buyers can buy only new property, not an established home, under Australian regulations. Monika Tu, founder and director of Black Diamondz Property Concierge, had more than a dozen clients — including Kathy Zhou and Nicole Shi — flying into Sydney for the holiday, with her buyers recently receiving permanent residency and now looking for somewhere to live.”

“Credit Suisse research in October found that foreign buyers, mostly from China, were buying about one in four new homes sold in NSW, 17 per cent in Victoria and 8 per cent in Queensland.”

The Vancouver Courier in Canada. “My take on the NDP affordable housing strategy: they wimped out. So I find it amusing to watch while people set their hair on fire over the provincial government’s modest attempts to cool down the real estate market. The influx of Chinese — excuse me — foreign capital has been at the heart of escalating real estate values here and many places around the globe.”

“Anne McMullin, the CEO of the Urban Development Institute, was left to sing that same old song: we need more supply to increase affordability. She also predicted that adding or increasing taxes such as the foreign buyers’ tax will only drive prices up.”

“But the simple fact is, as a number of academics have concluded, and the Globe and Mail’s Kerry Gold has reported, the problem is not supply — it is a matter of the right kind of supply. We produce more new units of housing per person coming into Metro Vancouver than Toronto or Calgary. But it is the kind of supply that appeals to wealthy foreign and domestic speculators not your average working stiff. If, as Simon Fraser University’s Andy Yan points out, you can only afford a Honda and all the cars in the show room are Lamborghinis, well, welcome to Vancouver.”

“Of course, Metro Vancouver isn’t the only place plagued by housing affordability. That why the NDP’s proposed changes extend beyond here and will include Victoria, Nanaimo and bits of the Okanagan. This has caused the mayor of Kelowna, Colin Basran, to have a severe case of the vapors. ‘There may be some dire unintended consequences,’ he gasped to the CBC. He predicted that taxes like the empty home tax ‘is potentially going to stop people from investing in our economy.’”

“Exactly. Because that is part of the problem: Housing is treated as a commodity, like a stock share to make a profit off of and not a place to live.”

“Barrie McKenna, writing in the Globe and Mail. is even more alarmist. He says if B.C.’s Minister of Finance Carol James ‘gets her hoped for real estate correction, it could push many home owners into default, depress retirement savings and even trigger a recession.’ Wow. Of course it is not declining house prices that would stretch people. Assuming they could handle their mortgage payments when they bought their house, it would be raising interest rates that may cause them grief.”

“He also argues parents will have less money to pass on to their kids if prices drop. Well, if prices drop, the kids will need less money to buy their little piece of heaven. Of course, he may want to talk with Anne McMullin (see above) about her prediction that prices will actually go up as a result if the NPD’s measures. In fact, if I have any criticism of the plan introduced in the NDP’s budget last month, it is this: It simply did not go far enough. At the very least they should have banned foreign ownership of residential property in this province.”

“Last month Premier John Horgan headed out on a trip to Asia as generations of Canadian premiers and prime ministers have done before him, searching for foreign business and foreign capital to be invested here. Before he left he had this to say about banning foreign ownership of residential property as is done in New Zealand: ‘British Columbia is the gateway to Canada and I don’t believe we should be curbing people from coming here. I’m the child of an immigrant. Virtually everyone I see here is the child of an immigrant.’”

“Nobody asked about immigrants. But his answer reminds us that one major reason for the housing affordability problem is that governments of every stripe crave real estate-generated foreign capital filling their treasury to the point they are willing to be duplicitous.”