The Housing Bubble

It’s Friday desk clearing time for this blogger. “The Reno-Sparks Association of Realtors says a rise in cost of 2 ½ to 5 percent would be comfortable for the market. From last year to now, the median home price is up four times that, rising 20 percent. Median home prices have hit the $400,000 mark in Reno for the first time ever. That’s up $70,000 from this time a year ago Which begs the question, are signs pointing to a housing bubble? These experts say it’s not a concern, as long as our job market stays strong. Some people are settling on location. ‘How far do I have to drive to get a house that I can afford, as an example, Fernley is still $100,000 less expensive for a home,’ said John Graham, former president with the Reno/Sparks Association of REALTORS.”

“A major Petaluma housing project is in limbo after a developer decided to sell the venture. It is the largest housing project in Petaluma currently under development. But construction of the first phase is on hold as builder Comstock Homes and its investment partner, Real Capital Solutions, are seeking to sell the project to ‘a national home builder,’ according to Troy Busse, director of purchasing for El Segundo-based Comstock Homes. ‘It’s not good news. The investment group decided to sell,’ he said. ‘They didn’t think it would bring in the returns they were hoping.’”

“A discussion originally scheduled for development standards turned into another debate about a controversial property when the Encinitas City Council voted April 18 in favor of removing the site from a housing proposal already sent to the Department of Housing and Community Development. Richard Boger, who is spearheading the neighborhood petition, said residents are concerned because of an oversaturation of affordable housing in the Quail Gardens Drive neighborhood. ‘We’re not trying to defeat the affordable housing,’ Boger said. ‘We’re just trying to have fairness. … It’s just way too much.’”

“‘Removing the property keeps the faith with the community character,’ said Council member Tony Kranz. ‘The idea that this property that we own has to be in the mix is just crazy.’”

“More than half of Dallas-area neighborhoods saw a decline in home purchases in early 2018 after years of rising sales. The largest decreases in sales came in high-priced neighborhoods in Colleyville (-30 percent), the Park Cities (-28 percent), Fairview (-26 percent) and Northeast Dallas including Lake Highlands (-20 percent). ‘We are definitely seeing a slowdown in appreciation at the higher end,’ said housing analyst Paige Shipp with Metrostudy Inc. “As mortgage rates are increasing they can’t buy quite as much home as they could before.’”

“In March there were about 1,400 more preowned houses on the market in North Texas than a year before. Some of the biggest year-over-year increases in the number of homes listed for sale in the first quarter were in Richardson (up 60 percent), McKinney (up 35 percent) and Wylie (up 28 percent). Jim Fite, president of Dallas’ Century 21 Judge Fite Co. Realtors, said competition from home investors is keeping the supply of affordable houses tight in many Dallas-area neighborhoods. ‘I get probably three to five calls or letters from investors every day,’ he said. ‘I think they are paying stupid prices that drives up the market.’”

“Developer CMC Group reports that 75% of Brickell Flatiron’s 549 units have been sold or are currently under hard contract. But for every story there is about a Brickell Flatiron there is also one about about a Boulevard 57—the canceled condo project in Miami’s MiMo/Upper East Side neighborhood that was eventually sold to 13th Floor Investments and Tricera Capital. This February the partners received permission from the city of Miami to develop a mixed-use, 448,000-square foot apartment building with retail.”

“‘There are buildings full of empty condos in Miami,’ Aaron Singer, CEO of Bulldog Adjusters, tells GlobeSt.com. ‘Contractors see the opportunity to build buildings, but the influx of new buildings is creating a surplus.’”

“The financial travails of the giant Chinese conglomerate HNA Group Co., which is currently trying to unload its overseas holdings, are casting a spotlight on a vast portfolio of luxury homes owned by executives of HNA and a U.S. company run by the brother of its chairman. HNA has racked up significant debt from a long international acquisition spree. While the company has been moving to sell a large chunk of commercial assets, executives at HNA and the U.S. company are sitting on nearly $200 million in luxury homes throughout the New York metro area, according to a review of property records by The Wall Street Journal.”

“Now isn’t the best time to be listing luxury real estate in Manhattan, New York-based agents say. If Chen Guoqing, Pacific American or Mr. Tan were to list their residential units, particularly at One57, they might have to be willing to sell at a loss. Units at the building have been trading at a significant discount to their original sales prices in recent months, according to property records, due in part to a glut of luxury inventory on the market in Manhattan. ‘If they’re priced right they’ll go, but it’s always better if you’re the only person swimming in the pool,’ said Donna Olshan, a luxury Manhattan broker. ‘It’s certainly not a scenario for pushing the prices up.’”

“A homeowner in a housing complex in London with Grenfell-type cladding has been told the value of her £475,000 home has collapsed and is now just £50,000. Galliard Homes, the developer of the 11-block complex in New Capital Quay in south-east London, is facing a £30m-£40m bill to replace the cladding and is locked in a legal dispute over who should pay. The dispute, which could take years to resolve, has left Cecile Langevin, 32, and potentially thousands of others up and down the country, with an unsellable flat.”

“‘It is like someone has taken away our life choices, our freedom,’ she said. ‘And nobody is doing anything about it,’ she added, in tears.”

“Apartments prices in Sweden dropped by 7% in the January-March period compared to the same period of the previous year, according to data from the Association of Swedish Real Estate Agents. In March, Swedish home prices fell by 4.5% on an annual basis. The apartment prices fell by 8.% year-on year, while single-family home prices were down 1.8%. Property prices have risen much more than wages over the last couple of decades and Swedish households are among the most indebted in Europe.”

“Sweden’s financial regulator has introduced a number of measures in recent years to cool the lean housing market, including mortgage-backed rules for large borrowers.”

“Throughout 2017, many Dubai tenants had been looking for cheaper places, and several were getting them at a high discount. This is a fact that applies to Abu Dhabi as well. The reason is that ‘There’s a lot of empty properties, in the UAE capital,’ said John Stevens, Managing Director of Asteco’s Abu Dhabi first quarter Real Estate Report 2018.”

“Cape Town’s Atlantic Seaboard is now in a buyers’ market phase, according to Seeff’s agents in the area. The latest Propstats data shows that the sectional title sector of the market is down year-on-year by about 34% in value, and 41% in volume terms up to April. A quick glance at Private Property shows that there are well over 1,200 sectional title property listings on the Atlantic seaboard while only 88 sales were recorded on Propstats for this year to early April. According to luxury sectional title specialists at Seeff, stock has increased notably, but sellers are still not motivated enough to drop their prices sufficiently to encourage buyers to put pen to paper.”

“The massive supply of new apartments in and around Seoul is pulling down ‘jeonse’ prices, adding to the concerns of housing investors who use deposits from tenants as leverage. Market watchers warn such leveraged investments will inevitably lead to financial losses for owners. According to real estate agents in Songpa-gu in southern Seoul, jeonse prices of Jamsil LLLs and Jamsil Recenz, which are among the most popular apartment complexes in the district, are falling steeply.”

“‘If the housing prices begin to fall, investors who leveraged on jeonse will face losses. They may put their homes up for sale at cheaper prices, further pulling down housing prices,” said Lee Mi-yun, an analyst at Real Estate 114. ‘Investors should be cautious about leveraged investments since there are negative factors such as the increasing supply of new housing, stricter regulation on mortgages and a property tax hike, which may snowball their losses.’”

“According to the Korea Housing Institute, 24.4 percent of new apartments recently built around the country are vacant. Forty-two percent of the owners of these vacant apartments said they failed to find tenants, while 23.2 percent said they can’t move into new housing as their old homes are not selling.”

“The area of new homes sold, excluding government-subsidized affordable housing, jumped 24.2 percent to about 84,000 square meters during the seven-day period ending on Sunday, Shanghai Centaline Property Consultants Co said in a report. But the average price of the new homes fell 6.3 percent week on week to 47,255 yuan (US$7,512) per square meter.”

“Lakeville, a development of Shui On Land, released 118 apartments last week at an average price of between 120,000 yuan and 190,000 yuan per square meter, according to Centaline data. The price range is almost equivalent to that of an earlier batch released in November 2015. The total new supply released to the market surged 50.7 percent week on week to 98,000 square meters last week. For the second half of this month, at least 11 projects with around 4,900 units will be launched for sale citywide, a separate report by Shanghai Homelink Real Estate Co said. These units will lift April’s total new home supply to over 6,500 units — the highest since 2017.”

“The most expensive homes in the country are becoming harder to sell as deep-pocketed buyers shy away from buying blue-chip properties in Australia. Sydney’s high-end property market bore the worst of the damage, with the value of blue-chip properties falling an eye-raising 5.7 percent over the last 12 months. To give that context, if Sydney’s most expensive home – the $70 million Point Piper Elaine Estate once owned by the Fairfax family – were to drop 5.7 percent, it would record a fall of almost $4 million.”

“It’s been one year since the Ontario Fair Housing Plan changed the rules of the real estate game in the Toronto region, and it’s a dramatically different market 12 months later. Some 40 per cent fewer homes are changing hands year-over-year, according to the Toronto Real Estate Board. And the average Greater Toronto Area home price has slumped 15 per cent from frenzied peak of April 2017. While the year-over-year figure is alarming, the price correction was actually quite swift. Average prices plunged 20 per cent from April to August of last year, from roughly $920,791 to $732,292.”

“LOSERS: ‘The roughly 37 per cent of people who already own a single-family home are watching their equity vaporize. That loss is particularly insidious for fixed-income retirees who depend on their equity for survival,’ said Rob McLister, founder, RateSpy.com. ‘The nearly 1,000 people (and possibly more) who had to back out of their transactions last year because of the rapid 20 per cent decline in house prices in just four months. Many of these buyers who bought at the peak and backed out of their purchases are getting sued by sellers for the decline in the sale price of their home,’ said John Pasalis, president of Realosphy.”

“Was Ontario’s Fair Housing Plan a case of too much government meddling in the housing market? ‘Definitely not… Buyers and sellers overreacted to the provincial foreign buyer tax. The biggest effect the Fair Housing Plan had over the past year was psychological. It caused sellers and buyers to question whether prices can go up forever,’ said Pasalis.”