The Housing Bubble

It’s Friday desk clearing time for this blogger. “22-year-old Sarah Villamore and her husband have given up on finding what she and her husband can afford in the Williston market. It just doesn’t exist yet. ‘It’s difficult if you are a millenial trying to buy a home,’ Villamore said. ‘You don’t want to buy the cheap, crappy ones because then you are just throwing all your money away.’”

“Mayor Howard Klug noted that he’d seen a number of homes for sale on the way to the Williams County Commission meeting room, and said he was perplexed by that. ‘You’re telling me there is no inventory out there, but on the way here I counted five or six houses for sale, so I really don’t understand what is going on in the market here in Williston,’ he said.”

“Consumer outlook on home buying is not about the economy or the appreciation in housing prices, but the shortage of inventory, Lawrence Yun, chief economist for the the National Realtor Association, told real estate professionals from Bradenton-Sarasota. A big concern to renters looking to buy a home is rising prices. From 2011-17, income has risen 15 percent, while home prices have risen 48 percent, Yun said.”

“‘Beth Barnett, a real estate sales associate for Coldwell Banker based at Lakewood Ranch, said she doesn’t relate to Yun’s comments about an inventory shortage because of all the new home construction in Manatee County. ‘Where we have a shortage of homes for sale is in the price range under $400,000,’ she said. ‘We are having more problems selling resales because we are competing with new construction.’”

“Teton County, Idaho is being plagued by zombies…lots that is. These are undeveloped subdivisions left abandoned by developers due to the recession. There are around 7,000 of these empty and abandoned lots in Teton County. Some have been sitting there for over a decade. They might finally be getting turned around. ‘There are so many subdivisions in the county and so many of them have one or no homes,’ said Anna Trentadue, program director for Valley Advocates for Responsible Development.”

“The bank now owns many of these after the developers went bankrupt and lost their financing. ‘Property values were skyrocketing,’ said Gary Armstrong, planning administrator for Teton County. ‘A lot was done on speculation that things would work out really well and then the housing bubble burst everywhere.’”

“When a co-op on the 34th floor of a ritzy Upper East Side building sold last year, the price was recorded as $3 million. But it actually cost closer to $2.7 million. At closing, the buyer of the three-bedroom co-op at 425 East 58th Street received a credit of $225,000. The buyer and seller, at the behest of the co-op board, cut a deal to keep the technical sale price in line with the expected value of similar units in the building. Though the contract detailed this arrangement, public records only reflect the higher price.”

“This trick is particularly rampant in the new development sphere — where buyers have their pick of price cuts and concessions. Attorney Adam Leitman Bailey said his firm has represented lenders on two of these cases recently. ‘In my humble opinion, this fraud is disgusting and should be illegal,’ he said. ‘It artificially is making consumers believe that housing prices are higher than the market actually indicates.’ He added that banks should stick to the terms laid out in sale contracts, without getting ‘involved in any chicanery or fake pricing.’”

“High-profile real estate developers, marketing executives and real estate agents are bracing for a sustained downturn in the housing market after sales in April – usually one of the most active months of the year – plunged by double-digits across Metro Vancouver. Vancouver lawyer Richard Bell told a real estate seminar that the Vancouver new home market has seen an ‘incredible run over the past 10 to 15 years.’ But, he added, ‘We all knew it would come to an end and the end is nigh.’”

“‘I have been seeing more and more price reductions in the detached housing market,’ said Michelle Yu, a top-producing Vancouver agent. Yu, known for her eight-figure land assemblies, said investors should not expect a quick return on investment if they had bought recently. ‘All you can expect is capital gain. However, as long as the NDP is in power, I strongly believe the double-digits gain honeymoon is over. On top of that, there are many different new taxes, stricter rental rules.’”

“The year so far has seen no recovery in the already stagnant property market in Putney. Demand for new build properties appears to have almost completely ground to a halt. With a large number of units in the pipeline and many of these in developments without riverside views, but are built along the busy Upper Richmond Road which are more difficult to shift, there is a danger of a serious overhang of unsold inventory.”

“Local agent Allan Fuller commented: ‘There is no doubt that sales are slower that 2014, however that year, particularly in the period up to August. We experienced a buying flurry of activity that year, often having an open house on a Saturday with 20 or more people viewing each property, then several offers on the Monday. It seemed that people saw others keen to buy and almost fever like followed suit.’”

“‘Its all about the price, vendors and agents who overprice property are left stranded, time and again we are proving that sensible pricing get real interest and sales result,’ Allan continued. ‘As for new properties the recent developed large blocks in Putney are long sold out, so naturally not in the statistics newer ones are getting activity but are too far off completing to be seriously marketed yet. So in the famous words of Corporal Jones, ‘Don’t panic’”

“As Melbourne races toward a population of more than eight million within just two decades, experts have warned that much of the new property construction will not meet the needs of its residents. The city’s construction boom has increasingly been concentrated on apartment towers, but new data shows just 7 per cent of those sales are for family-sized apartments. ‘While it’s clear that the property sector has a love affair with building apartments, the odds of a perfect match with the public is as scientific as pairing up on The Bachelor,’ Propertyology head of market research Simon Pressley said. ‘“It doesn’t work like: ‘we’ll build it, they’ll come’.”

“University of Melbourne planning researcher Kate Raynor said it was clear the mix of recently built apartments was geared toward investors. ‘There’s been an influx in one bedroom apartments and that is going to cause problems,’ she said. ‘An investor is concerned with different things an owner-occupier is looking at, namely rental returns. We’re living in the five year hangover of that situation.’”

“Auckland’s housing market is starting to slow as it heads towards winter, with Barfoot & Thompson’s sales taking a seasonal dip and prices easing back as well, with the median dropping from $860,000 in March to $830,000 in April, which was also below the April 2017 median of $850,000 and significantly below the record high of $900,000 set in March last year.”

“Inventory was the highest it has been for the month of April since 2011, suggesting buyers still have plenty of choice, and with prices being flat at best, vendors will need to be realistic in their price expectations to achieve a sale as we head towards winter. ‘While there is no suggestion that prices are poised to start their upward climb, with prices no longer declining in comparison to 2017, the point has been reached where a further decline is the least likely future outcome,’ Barfoot & Thompson Managing Director Peter Thompson said.”

“After a decade of soaring real estate prices that have turned ordinary homeowners into paper millionaires and added billions to the provincial GDP, the B.C. economy finds itself in a dangerous position, says an SFU professor. ‘We have an economy that’s been made dependent on this through a faulty policy framework and this is a bad long-term model,’ said Josh Gordon, an assistant professor in the school of public policy at Simon Fraser University.”

“The province relies so heavily on the real estate industry that a crash would have major impacts on both the economy and the everyday British Columbian, according to academics and former finance ministers who spoke with CBC News. ‘This is why you shouldn’t design your economy around real estate and real estate price appreciation,’ Gordon said. ‘There’s a range of dynamics that happen in housing bubbles and booms, which is that people take on a lot of debt. So when that process stops or reverses, there’s a lot less discretionary spending that happens, so you would see an impact in the retail sector and so on,’ he said.”

“For Vladimir Dvoracek, real estate’s supremacy isn’t just an economic problem. It’s also sociological. ‘What does life consist of? The important things are … having kids, playing with them in the park, holding hands with your spouse and going for dinner,’ said Dvoracek, an associate vice president of institutional research at the University of the Fraser Valley. ‘Speculation in real estate, sure it happens, but it’s almost become a mania in Vancouver. It’s almost all people think about, and that’s not real life.’”