March 27, 2018

You Can’t Build Affordable Until The Next Downturn

A report from Community Impact in Texas. “Under the pressures of the city’s affordability crisis, Austin’s working families are moving out to suburbs such as Pflugerville, Round Rock and Manor, where housing prices are cheaper but work commutes are longer. The market challenges are acutely felt in Central Austin, where neighborhoods once characterized by single-story bungalow starter homes now boast median home prices near $1 million, according to recent housing data. Rising property values place financial burden on existing homeowners who have watched their home values—and property taxes—double in the last decade.”

“The average two-person Austin household, earning the area’s median income of $65,100, falls well short of what is needed to afford the median home price in Central Austin, according to mortgage calculations. David Whitworth, owner of Whitworth Homes said he prefers to build smaller, less expensive homes as they sell quickly, while $1 million homes often sit on the market for a year.”

“Jeff Jack, president of the Austin Neighborhoods Council, a group that strongly opposes added density in Central Austin neighborhoods, said allowing more housing types in the neighborhoods would only create more housing opportunities for the wealthy and continue to push existing homeowners out. Jack said because Central Austin real estate is so desirable, market demand and competition between buyers will continue to bid up the prices, especially as Austin continues to attract a wealthy economy. ‘[Dense housing] will still be unaffordable for moderate- or low-income people,’ Jack said. ‘You can’t build an affordable home in the Zilker Neighborhood … not until we have the next economic downturn.’”

From the Merced Sun Star in California. “All-cash buyers have grabbed up a higher percentage of homes in the past 12 years in Merced County than in much of the rest of the state. More than 40 percent of the homes sold in Merced from 2005 to 2017 were purchased by all-cash buyers, according to ATTOM Data Solutions. The numbers are higher in Planada (42 percent) and Le Grand (44 percent). The California Association of Realtors estimates international buyers are more than twice as likely to pay in cash as domestic buyers.”

“The California Association of Realtors estimates that 3 percent of last year’s purchases went to international buyers. Their data relies on a survey of realtors, and could be inaccurate. ‘For one thing, the survey is conducted in English,’ said Oscar Wei, senior economist for the California Association of Realtors. ‘So if you have Chinese buyers and Chinese agents, they may not necessarily want to participate in a survey written in English.’”

From Bloomberg. “CEFC China Energy Co., the sprawling conglomerate that’s come under increasing government scrutiny, plans to sell its entire global property portfolio with a book value of more than 20 billion yuan ($3.2 billion), according to people with knowledge of the matter. Almost 100 properties are up for sale, including its headquarters in an upscale Shanghai neighborhood, four floors of the Hong Kong Convention & Exhibition Centre and a condominium at the Trump World Tower in Manhattan, as well as hotels, residential apartments and industrial facilities, said the people, asking not to be identified because the deliberations haven’t been publicly disclosed.”

“Signs have emerged recently that it’s unable to repay some debts and is seeking to sell at least one unit. The company’s creditors, led by China Development Bank, have formed a committee to review asset disposals, people familiar with the matter said this week, adding that the Shanghai government has taken control of the firm. Chairman Ye Jianming, who started the company in 2002, was said earlier this month to have been investigated by authorities and will step down from management.”

From the Palm Beach Daily News in Florida. “An investment group that includes an owner of the still-unfinished Palm House hotel-condominium on Royal Palm Way is preparing to make an offer soon to buy the beleaguered development, an attorney has told the Daily News. Word about the impending offer came as the project’s primary developer, Robert V. Matthews, 60, of Palm Beach sat in federal custody after being arrested on money-laundering and fraud charges. One of Matthews’ attorneys, Palm Beach real estate lawyer Leslie R. Evans, 70, was arrested the same day, after a grand jury in Connecticut issued a multi-count indictment against the two men for financial improprieties related to the Palm House.”

“On Thursday, a circuit court judge in West Palm Beach agreed to delay for 90 days a foreclosure trial involving the Palm House property. The renovation project at the Palm House stopped abruptly in October 2014, and the doors have remained padlocked since. The property has racked up about $2.5 million in town fines, the majority related to construction delays.”

“Matthews and Evans, along with ‘their co-conspirators, agents and others,’ illegally used money from foreign investors, administered through the federal EB-5 program, ‘for the personal gain’ of Matthews and others, according to the indictment. A group of more than 50 EB-5 investors, mostly from China and Iran, filed in 2016 a lawsuit in federal court in West Palm Beach against Palm House developers, alleging they were defrauded out of more than $50 million.”

From Nebraska TV. “Cabela’s shareholders approved the company’s sale to Bass Pro last July. Since then, they have laid–off groups of workers by the dozens, leaving many in Sidney in search of a new job. Some found work in nearby towns while others uprooted their lives to move as far as Pennsylvania for work. Brian Fort worked with Cabela’s for 10 years before he was laid off just over a year ago. He says he was lucky enough to find a job just days after being let go. Fort’s wife, however, also worked for Cabela’s. She was laid off just a few weeks ago.”

“Fort said their goal is to stay in Sidney, even though, he says over 100 homes are being foreclosed on as we speak. ‘It’s gonna take a while to off–set the number of people leaving and the amount of homes empty. So it’s a great buyers’ market, so people from Denver, people from other areas looking to retire, play some golf, you can get an awesome price on a home here,’ said Fort.”

From The Real Deal on New York. “Manhattan’s luxury residential market recorded 24 contracts at $4 million and above last week, according to Olshan Realty’s weekly market report. The first quarter of 2018 notched only 282 contracts, a 15 percent decline from the same time last year. What’s more, luxury homes spent an average of 469 days on the market, a 20 percent increase over the average of 390 days in 2017. That’s the longest it’s taken to sell a home since Olshan began tracking the statistic in 2011. And pricey homes had an average discount of 10 percent from the original ask to when properties went into contract.”

“‘Actor Mike Myers’ penthouse at 72 Mercer Street in Soho took the week’s No. 1 spot, going into contract with an asking price of $13.95 million. The actor originally listed the duplex condo in 2015 and then took it off the market with an asking price of $16.95 million. He put it back on the market in November with a price chop of $3 million. Myers last year sold his 443 Greenwich condo last year for $14 million – $675,000 less than he paid for the apartment just months earlier.”