August 31, 2018

Mortgage Prisoners Trapped In A Financial Squeeze

It’s Friday desk clearing time for this blogger. “The Las Vegas real estate market is as hot as the desert heat. ‘There’s a lot of investors buying these properties, so the competition is becoming fiercer and more difficult for the average home buyer,’ said Avi Dan-Goor a real estate agent in the region. ‘I’m not concerned about a bubble, not concerned about a burst, I think a correction will come, and I think it’s already slowly starting. The median home price right now is about $290,000, so it went up for a long time, it continued to go up. I think last month was the first time that it dropped, around $5,000. I don’t think that’s indicative of anything bigger coming.’”

“After a long run of positive numbers, home sales in the St. Louis area have declined slightly through the first 7 1/2 months of the year. Coldwell Banker Gundaker President Jim Dohr says demand is there, but many homeowners, especially those who bought or refinanced when interest rates were especially low, don’t want to sell and buy a new home at a higher rate.”

“‘That’s a big difference is somebody goes out and finds a home and gives up an interests rate below 3 percent and then acquires a new mortgage at over 4 percent, so a lot of people are just sitting still, staying put, if you will,’ he says. Dohr says the lowest inventory is for homes under a half-million dollars, while there are plenty of homes on the market for over a million.”

“Austin, it looks looks like we might have a foreclosure problem. This summer, the Austin area posted alarming year-over-year jumps in the number of homes starting to go through foreclosure, according to ATTOM Data Solutions. The Austin area saw a 65 percent increase in what’s known as foreclosure starts in May 2018 compared with May 2017; that was followed by year-over-year increases of 44 percent and 29 percent in June 2018 and July 2018, respectively.”

“‘The widespread upward trend in foreclosure starts across a geographically diverse set of markets this summer indicates there is more to this trend than just natural disasters driving increased distress,’ said Daren Blomquist, senior vice president of ATTOM. In total, 96 of the 219 metro areas analyzed in the ATTOM report, or 44 percent, posted year-over-year hikes in foreclosure starts in July. Twenty-one states saw increases, including Texas (7 percent).”

“Houston was the only other Texas market listed in the report as having notched three months in a row of significant year-over-year increases in foreclosure starts. The Houston area saw a 76 percent spike July compared with last July, the ATTOM report says. This followed two months of double-digit increases in the Houston area compared with last year: 62 percent in June and 153 percent in May.”

“Curious about what seemed to be a trend of vacant properties for sale, Realosophy president John Pasalis ran the numbers and discovered that 28 per cent of properties listed for sale in the Greater Toronto Area are advertised as being vacant, up 17 per cent year-over-year. ‘I’m finding that there are a fair number of stubborn sellers holding out for an unrealistic price for their home, though they’ve already moved on to another home or downsized (which reflects some financial security/stability because most people can’t afford to have a house sitting on the market empty for 6-12 months),’ he writes, in a recent report.”

“According to Pasalis, the regions showing the largest increase in vacant home listings also experienced the biggest price decline in the spring of 2017. And there are also newly built properties to take into account, which he says may explain some of the increase. ‘For many of these home ‘flippers’, selling at today’s prices would mean incurring a significant financial loss after factoring in their construction costs and the peak price they paid for the houses when they purchased them in late 2016 or early 2017,’ he writes.”

“Battered hard during the eight-year debt crisis, Greece’s construction and real estate face a long way to revival in the post-bailout era, according to official figures and experts. Greece has one of the highest home ownership rates in Europe at more than 80 percent and purchase of a home was regarded as a good investment. In 2016, investments in the housing market was just 0.7 percent of GDP and had cumulatively declined by over 23 billion euros (26.6 billion U.S. dollars) in nine years.”

“‘Real estate properties in Greece were not opportunities anymore. To a large extent they were overpriced and in addition one had to pay significant sums in taxes,’ explained Lefteris Potamianos, President of the Real Estate Association of Athens — Attica. Within less than a decade, according to the official figures, private building activity dropped by 90 percent, and the number of employees in the sector by 83 percent. Residential property prices also took a dive by more than 40 percent nationwide.”

“Over a nine year span, the cost per square metre of apartments in central Beirut rose from $1,200 in 2004 to up to $4,700 in 2013, a 400% increase based on research by Global Property Guide, owing partly to an influx of investors from the GCC post 2008. Real estate prices average $3,693 per square metre. It takes an average of 22 years of rental income to make up for the cost of investing an apartment.”

‘Meanwhile, construction activity since the period has been weak and prices have since stagnated, even declining marginally. There also remains a large pool of unsold property. Research by real estate consultancy RAMCO indicates that there were roughly 3,600 unsold apartments in Beirut as of November 2017, outnumbering buyers and forcing developers to offer significant discounts to facilitate sales.”

“A recent survey revealed that the value of the new home launches in northern Taiwan has exceeded NT$750 billion in the first eight months this year, sending a disquieting signal to experts that the housing market would crash in a near future. The total value of newly-built and pre-selling residences has reached NT$752.3 billion in Jan.-Aug., 2018, and is set to reach NT$1.15 trillion the whole year, up 34 percent from last year’s NT$837.3 billion, according to a report released by My Housing.”

“While the supply surged in the first half of the year, the new home sales remained weak; if the property oversupply couldn’t be digested, the housing market would resemble a fast moving train about to derail, said My Housing Market Research Manager Ho Shih-chan.”

“Malaysian Prime Minister Mahathir Mohamad on Monday declared that foreigners will not be granted visas to live in the giant Forest City real estate project on the country’s southern tip, a major threat to the marketing strategy for the development. It is not his first broadside against the plan by Chinese developer Country Garden Holdings Co to create a new city that was envisaged to eventually house 700,000 people on reclaimed land near Singapore, but it could be his most damaging.”

“The once sleepy town of Gelang Patah known for its mangroves and fishing villages now has a skyline of skyscrapers. Work to build more high rise residential towers, town houses and commercial buildings is continuing full steam, with dozens of heavy duty trucks carrying sand and materials while cranes dot a skyline that is growing taller and denser as high-rise apartments rapidly approach completion. Forest City is barely inhabited, with only a handful of staff living at its service apartments and guests at its hotel.”

“It’s being described as a ‘mortgage mirage.’ It’s an offer from the bank that looks too good to be true and, as it turns out, for many it is. ‘About 40 per cent of people who tried to refinance were unable to do so,’ Digital Finance Analytics principal Martin North said. ‘If you go back a year it was 5 per cent.’”

“‘When people took out the loans there was a lot of widespread fudging of the numbers,’ chief investment officer with funds management firm, Forager Funds, Steve Johnson said. ‘People were getting loans on the basis of a four person family having $30,000 a year of living costs living in Sydney. And it’s quite clearly impossible to live in Sydney on that much money a year. The biggest issue is that people have borrowed too much money relative to their income and that is a very difficult problem to unwind.’”

“But, Mr Johnson said, it is not just the banks that have messed up. ‘I think the banks have done a lot of unconscionable things, and I think credit has been far too easy to come by, but there is also an element of personal responsibility here in terms of people saying, ‘well, the bank offered to lend me $1.5 million but I don’t really think that is a sensible amount of money for me to borrow.’”

“Mr North has calculated there are now close to 1 million Australians on the edge of mortgage stress — defined by Digital Finance Analytics as borrowers who are going further into debt or eating into savings because their expenses are greater than their income. Given that, it’s understandable that when the big four banks advertise discounted mortgage rates, financially stressed-out households flock to the banks to bag a better deal.”

“‘And then they’re stuck, because suddenly they find that that wonderfully alluring low rate that’s being hung out to them is inaccessible,’ Mr North said. He calls these borrowers ‘mortgage prisoners’ because they go home empty-handed, trapped in a financial squeeze.”

Where Have All The Buyers Gone?

A report from Curbed Los Angeles in California. “For the first time since January, home prices in Los Angeles County fell month-to-month in July, according to CoreLogic. The median sale price for the month was $607,500, down 1.2 percent since June, when home prices soared to a record-high $615,000. LA’s all-time price record had been shattered in each month leading up to July. But real estate experts have predicted that Southern California’s hot real estate market could be cooling off. A recent analysis from Zillow found that the number of homes on the market with price cuts is up since the beginning of the year, suggesting that buyer interest may be waning.”

“Rising mortgage interest rates are making even small jumps in sale prices significantly more difficult for buyers to cover. Factoring in interest rate growth, median mortgage payments were around 13 percent higher in July than a year ago, according to CoreLogic analyst Andrew LePage. That may also be contributing to an drop in the overall number of home sales. In LA County, 6,971 homes sold in July—down from 7,607 a month earlier. LePage says declining sales can’t be explained by the number of houses on the market.”

“‘The overall trend in recent months, has been toward more listings,’ he says. Instead, it’s possible that many home shoppers are simply ‘unable or unwilling to buy.’”

The Orange County Register. “Todd and Jennifer Martindale wanted to sell their starter home in Whittier and buy a home with a bigger kitchen closer to family and their son’s school in Placentia. After eight months, they abandoned their search. Rising prices and higher interest rates made it impossible to afford a new home in that area — even with the added cash they’d get from the sale of their old house.”

“‘Our mortgage payments would go up $400 or $500 a month, which we just couldn’t swing,’ said Todd Martindale, 43, a software developer. ‘We saw the grass was not greener on the other side.’”

“Discouraged home buyers may be behind the current market slowdown that’s transforming Southern California from a clear seller’s market into one where homes sit longer and owners are dropping their asking prices, market watchers said. After three years of smoking-hot sales and soaring home prices, Southern California has seen year-over-year sales drops in eight of the past 12 months, according to CoreLogic. The California Association of Realtors, which tracks sales of single-family homes, reported year-over-year declines in 10 of the past 12 months.”

“As a result, the number of homes on the market mushroomed. Southern California listings increased to nearly 46,000 homes by Aug. 23, up by nearly 7,100 — or 18 percent — from the same period last year, according to Steve Thomas’ Reports On Housing. ‘For years, sellers have been in control of the housing market. Multiple offers were generated almost instantaneously after hammering in the for sale sign,’ Thomas said in his latest report. Today’s market, Thomas wrote, ‘does not favor sellers or buyers.’”

“So, where have all the buyers gone? Market analysts say many are being priced out. ‘High home prices and rising interest rates combined to crimp housing affordability, which in turn is subduing home sales,’ California Realtor President Steve White said. ‘Some of the reluctance by buyers appears to be driven by fears that the market may be peaking.’”

The Prices Were Fantasies

A report from CNBC. “The most expensive real-estate in America just became a little less expensive — with $1 billion in price cuts among America’s top listings over the past few months, according to a CNBC analysis. The high-end real-estate market has seen steep price cuts in recent months as foreign buyers dry up, new tax laws bite the wealthiest states and sellers realize the market peak of 2014-2015 isn’t coming back anytime soon, luxury brokers say.”

“According to RedFin, the real-estate brokerage and research firm, fully 12 percent of homes listed for $10 million or more saw a price drop in 2018 — double the levels of 2016 and 2015. Just over 500 listings in the U.S. had a combined price cut of $1 billion in the second quarter, according to RedFin.”

“Some of the price cuts have reached tens of millions of dollars, according to the listing. The Ziff family estate in Manalapan Florida cut its price in May by $27 million, from $165 million to $138 million. That follows a previous price cut, from $195 million last year — so it’s price has dropped by $57 million over the past year.”

“A 10-bedroom mansion on Miami Beach’s posh Star Island cut its price by $17 million in May, from $65 million to $48 million. A giant apartment at New York’s Sherry Netherland had its price cut by $18 million, falling from $86 million to $68 million.”

The cuts follow a spate of even bigger cuts earlier this year. The $250 million mansion in Bel Air California known as ‘The Billionaire’ became America’s most expensive listing when it came onto the market for $250 million in 2017. In April, the price was cut by a massive $62 million, to $188 million. A spec home in Beverly Hills, called Opus, was listed in August of 2017 for $100 million, but the price was cut to $85 million a month later. The late Johnny Carson’s estate in Malibu, Ca. saw its price drop by $16 million, to $65 million from $81 million.”

“Even homes that see big price cuts are selling for less than their discounted prices. A 20,000 square-foot mansion in the Hamptons, once owned by fashion mogul Vince Camuto, was first listed in 2008 for $100 million. Its price got chopped to $72 million, and it sold this spring for around $50 million – half of its original listing price.”

“The reasons for the price drops are many. In some cases, the prices for the homes were fantasies. Sellers had irrational expectations or they were using the sky-high prices to attract attention to their properties. The luxury real-estate market has fallen since its peak in 2014 and 2015, and many sellers are finally adjusting to a different market.”

“Supply of homes at the high end is also high, especially for newer condos and spec homes in New York, Los Angeles and major metro areas. ‘There could be an over-supply of these high-end homes,’ said Taylor Marr, a senior economist at RedFin.”

August 30, 2018

The Craze Has Calmed Down

A report from the Ventura County Star in California. “Home sales and median housing prices slightly declined throughout Ventura County and the rest of Southern California last month. Ventura County sold 947 homes at a median sale price of $595,000 last month, according to CoreLogic. The county’s home sales and median housing prices slightly declined from June to July. Ventura County saw a 0.5 percent drop in home sales during that period, though the difference was only five home sales, while the median home sale price decreased by 3.3 percent from June’s $615,000.”

“The same holds true for the rest of Southern California, which also saw slight declines in median housing prices and number of homes sold. Southern California’s median housing price was $530,000 last month, a 1.3 percent decrease from June’s $537,000 median housing price. There were 21,277 sold in Southern California last month, a 6.6 percent decline from June’s 22,786 homes sold.”

“Buyers may be hesitant to buy into Southern California’s pricey housing market, which could be responsible for the middling year-to-year sales growth, said Andrew LePage, a CoreLogic research analyst. ‘While low inventory is still constraining sales in some areas, the overall trend in recent months has been toward more listings, suggesting that sales also remain weak relative to current housing demand because more and more would-be buyers are unable or unwilling to buy,’ LePage said.”

The Los Angeles Times. “The Southern California median home price slipped in July from June’s record high, but it was still up 5.8% from July 2017, according to CoreLogic. The report showed that last month’s median price — the point at which half the homes sold for more and half for less — clocked in at $530,000 in the six-county region. That’s down $7,000 from June’s all-time high. Some agents say the market is slowing as families increasingly find it difficult to afford a home.”

“‘The craze has calmed down,’ said San Fernando Valley real estate agent Matt Epstein. Epstein said more homes are coming up for sale in the southeastern area of the San Fernando Valley he specializes in. As a result, buyers are being more selective, causing some properties with ‘unrealistic’ asking prices to sit. ‘I have seen a more patient-level buyer instead of that feeding-frenzy buyer,’ Epstein said.”

“Unless there is a recession, economists generally expect prices to continue rising. Gains may slow as more people become priced out. The economy is too healthy and the shortage of homes for sale is too severe to expect a drop, they say. ‘I definitely don’t foresee a dip,’ said Selma Hepp, chief economist with California brokerage Pacific Union International. ‘It goes back to the inventory question — there continues to be a lack of inventory.’”

From the Orange County Register. “Another curious puzzle in the purportedly supply-short Southern California housing market has popped up: Why are sales sluggish and inventories rising as local builders construct homes at their fastest pace in a decade? According to data from MetroStudy, builders completed 3,336 homes for sale in Los Angeles, Orange, Riverside and San Bernardino in the second quarter. That’s up 19 percent in a year and the highest standing inventory since the early days of the economic recovery in 2012’s second quarter.”

“But the added inventory comes amid an unusual year for existing homes coming to market and depressed overall sales activity. Inventories for existing homes actually rose during the prime homebuying season. ReportsOnHousing found an average 29,684 existing homes listed for sale in the four counties in the second quarter, as inventory rose by 1,922 homes since the start of the year. In the previous five years, the traditional springtime homebuying rush lowered supply by an average 1,739 homes through June.”

“A key reason for bloated supply? Buyers balked. CoreLogic reports sales of all residences — new and existing — in the four counties in the April-to-June period were down 4.8 percent vs. the previous year.”

“But developers aren’t blameless in their current supply dilemma. In their return to serious homebuilding, they may have misread the market’s thirst for higher-end new homes. Note: The median price of a newly constructed Southern California home sold in June: $581,000 vs. $537,000 for the overall market.”

“This all translates to builders now controlling a swollen share of homes for sale. Across the four counties, newly constructed residences made up 10.1 percent of all homes — new and existing — available to buy as of June. Two years ago, builders controlled just 6.8 percent of regional supply.”

“Orange County has seen the biggest swing. Builders had 1,022 homes for sale as of June, up 340 homes or 50 percent in a year. That meant new builds made up 15.7 percent of the options for house hunters. Two years ago? Just 6.5 percent. The growing inventory of unsold homes might create painful flashbacks of the real estate bubble that burst a decade ago.”

The Half Moon Bay Review. “Let’s face it, everybody wants a deal. It’s human nature. The Bay Area and particularly the Peninsula has been hot for years. So, are there any deals out there in real estate today? I’d focus on homes that have had price reductions and have been on the market for more than 30 days.”

“As I write this, there are 66 available homes and 96 homes in total on the coast. Inventory levels have been low for a few years now. In fact, today’s levels have been relatively the same for the past 3 years. Of the total inventory, 28 percent have had price reductions and 52 percent have been on the market over 30 days.”

“Not surprisingly, the market gets softer as the price gets higher. More than one-fourth of all the price reductions have taken place in homes prices over $2 million, another 30 percent have taken place between $1.5 million and $2 million, 37 percent between $1 million and $1.5 million and only 7 percent are under $1 million.”

“The same thing can be said for homes sitting on the market more than 30 days. The market gets softer as the price gets higher. The difference between the percentages of homes having price reductions and lengthy days on market has to do sometimes with seller reluctance to making adjustments based on lack of activity over time. While there can be many reasons why homes sit on the market such as style, condition, location but it usually boils down to one thing: price. Everything will sell at a price.”

“If you look for homes that have been on the market longer I think you will find less competition or possibly be the only bidder. The seller may be starting to realize that the asking price isn’t going to happen or it would have already sold. And best of all, instead of paying over asking price with little to no contingencies, you can buy it for below asking price on your terms. Isn’t that a nice change?”


A report from Bloomberg on New York. “When a three-bedroom condo in Tribeca got its fourth price cut in a year, the sales broker, Steve Snider, didn’t leave it at that. He also spiced up the listing to make sure potential buyers didn’t miss the news. ‘New price. Motivated seller. Bring offers!’ reads the pitch for the 2,287-square-foot (212-square-meter) apartment at 71 Laight St., revised last month. The current asking price, $5.795 million, is less than what the seller paid three years ago.”

“The days when Manhattan homes practically sold themselves are over. Now, buyers fearful of overpaying are on the sidelines, and sellers and their brokers are looking for ways to coax them off. Agents are reworking their listing texts to signal that their clients’ attitudes have shifted after years of clinging to lofty price goals — that they are, in no uncertain terms, willing to make a deal.”

“Phrases like ‘Price improvement!’ and ‘Bring all offers!’ — even the promise of free cupcakes — are being deployed to lure shoppers to lingering properties. ‘PRICED TO SELL RIGHT NOW! $200,000 MASSIVE PRICE CUT! OWNER SAYS TODAY!’ reads a listing by Corcoran Group’s Laurie Lewis for a Chelsea condo that’s been for sale since the end of 2017. The actual price cuts — two since it was first offered at $3.195 million — generated much more response than anything in the descriptive text, Lewis said in an interview. But every bit of cheerleading helps at a time when buyers won’t bite unless they feel they’re getting value, or a steal.”

“Especially with properties that have been on the market for a while, ‘buyers are coming in and doing tremendous lowballing — and I don’t mean 10 percent,’ Lewis said. ‘Even when the asking price can clearly be recognized and comped out as a real value, buyers are still insisting they get more for their money.’”

“That’s what prompted Kimberly Jay of Douglas Elliman Real Estate to tout a Greenwich Village townhome, now listed for $4.99 million, as a bargain. ‘Over $1 Million Dollar Price Drop! Originally $6.1 Million. Rare opportunity!’ the broker wrote after a July reduction for the four-floor property on West 11th Street.”

“Expect the come-ons to keep on coming. A surge of inventory is predicted for September, when listings that were pulled from the market make their eventual return, said Grant Long, senior economist at StreetEasy. Ultimately, the words mean nothing if the price isn’t attractive enough to back them up, Snider of Core said. ‘You’ll see a listing that says ‘Best Value in Tribeca,’ and it’s been on the market for 158 days,’ Snider said. ‘You’d think you might want to update your text, dude.’”

Prices Are Falling Even In Longtime Hot Spots

A report from the Downey Patriot in California. “Financial Partners Credit Union hosted its second annual Gateway Cities Economic Forum last Thursday at the Rio Hondo Event Center, featuring economist Christopher Thornberg as its keynote speaker. Thornberg noted the slowdown in the rate of job growth within the region, and the related factors contributing it. ‘The slowing we’re seeing boils down to a lack of bodies…if you don’t have a person, you can’t hire them, and we hit that wall,’ said Thornberg. ‘Labor force is basically growing at a fairly slow basis.’”

“Some of this issue boils down to homes, or as Thornberg alluded to, a lack thereof. ‘Everybody talks about housing, and you should. But how we talk about it is fairly important,’ said Thornberg. ‘It’s not a bubble; bubbles are over-building or over-borrowing; nothing like that is occurring. We need more housing, and we’re just not building it.’”

The Orange County Register. “Orange County homebuilders are trying to sell their largest supply of completed new homes in 12 years. According to Metrostudy, local builders had 1,022 newly constructed residential units ready for immediate sale in the second quarter, up 340, or 50 percent, in a year. That’s the highest level since the end of 2006. For those who get antsy about overbuilding, builder inventories averaged 458 in the previous boom years of 2004-2007.”

“Metrostudy found 2,780 residential units under construction, off from the recent peak of 3,087 in last year’s third quarter — the fastest development pace since 2006. Note: Construction averaged 3,012 units in 2004-2007. And builders have amped up their inventories of ready-to-build lots. The 6,208 available in the second quarter was down 841 (12 percent) in a year but lots counts averaged 2,385 in 2004-2007.”

“Builders aren’t the only home sellers facing rising inventories. ReportsOnHousing says there were 7,001 existing homes and condos listed for sale as of Aug. 23, the largest supply of resale housing on the market since September 2016.”

From NBC Bay Area. “The government says pending home sales in the United States are down for the seventh straight month. In the Bay Area, that translates to more time on the market and fewer bidding wars. For Robert Hernandez, a longtime renter in the Bay Area who works in tech, the drop in bidding wars gives him hope he now has a chance to purchase a home.”

“‘That is amazing news for us,’ Hernandez said. ‘But it’s great to hear that there’s not so many bids going in per house anymore.’”

“Realtor Mike Gaines said prices on large properties are falling too, even in longtime hot spots. He called the housing shift a correction in the market.”

August 29, 2018

Is This The Beginning Of The End?

A report from the Boston Globe in Masschusetts. “Anyone who’s bought a home in Greater Boston during the last few years might describe the experience as brutal. Unrelenting demand and a tight supply have made buying options scarce and competition ruthless, driving prices into record-high territory. But as the summer housing market starts to give way to fall, there are signs that the pressure might be easing — if ever so slightly.”

“The number of homes newly listed for sale has climbed four months in a row, suggesting that homeowners are more willing to test the market and give would-be buyers something to look at. Meanwhile, some of those prospective buyers are heading for the sidelines — perhaps because they can no longer afford to stay in the hunt — which means less competition for those still looking for a home.”

“Demand has dipped ever so slightly, said Eamon Kearney, a Redfin agent on the South Shore, in part because some buyers are worried about buying at the market’s peak. ‘There’s some fear that we might have hit a ceiling,’ he said. ‘We have customers looking at stories coming out of California and Seattle and [they’re] worried it might come here next. That’s probably part of it.’”

“Other scorching-hot markets like Seattle and Denver — regions similar in size to Boston — have also seen a surge in tech jobs and a relatively tight housing stock. But in those cities, there have been signs lately that a top has been reached. Price growth has slowed, and inventory is starting to pile up as buyers simply can’t, or won’t, pay what sellers are asking.”

“‘Is this the beginning of the end? I don’t think so,’ said Dana Bull, an agent with Sagan Harborside Sotheby’s International Realty in Marblehead. ‘Barring some catastrophe, I don’t see us heading toward a crash. I think it’ll be more like a plateau.’”

Cash Out Before The Bubble Bursts - Los Angeles, California

The Rapid Rise Seems To Have Come To A Screeching Halt

A report from MarketWatch. “Pending-home sales declined 0.7% in July, the National Association of Realtors said Wednesday. It was the seventh-straight month in which the index was lower on an annual basis — by 2.3% in July. Housing has stalled out. In July, total home sales — existing and new — sank below a key psychological benchmark to the lowest in two years. What had been a seller’s market across most of the U.S. hit a tipping point this year, as buyers decided the slim pickings on the market weren’t worth it. The group forecasts a full-year decline for existing-home sales in 2018, and only a 2% increase in 2019.”

“‘It appears sales activity crested in late 2017,’ said Freddie Mac Chief Economist Sam Khater earlier in August. ‘It is clear affordability constraints have cooled the housing market, especially in expensive coastal markets. Many metro areas desperately need more new and existing affordable inventory to break out of this slump.’”

From Mortgage News Daily. “Expectations weren’t particularly high for a solid July report on home purchase contracts, but today’s report from the National Association of Realtors® (NAR) didn’t meet even those. Lawrence Yun, NAR chief economist, says the housing market’s summer slowdown continued in July. ‘Contract signings inched backward once again last month, as declines in the South and West weighed down on overall activity,’ he said. ‘It’s evident in recent months that many of the most overheated real estate markets - especially those out West - are starting to see a slight decline in home sales and slower price growth.’”

“There has been some increase in listings of available homes in some large metro areas, especially those in the West and Yun said this may help cool price growth and make homes more affordable going forward. Listings were up in several areas which have been especially ‘hot’ including Denver, Nashville, Portland Oregon, and the California metro areas of Santa Rosa and San Jose.”

From Northern Public Radio. “In tony Montclair, New Jersey, agent Diane Russell with Stanton Company Realtors has noticed a change. Last year a house in the low $600,000 range might have received 12 offers, she said. This year, she’s seeing more like four or five. ‘Now, they’re still really good offers — well over ask — but it’s not the craziness that we were seeing last year,’ she said.”

“Less ‘crazy’ is far from a downturn, but rising interest rates may be taking some of the air out of the market, said Craig Lazzara, a managing director at S&P Dow Jones Indices. ‘As rates go up, obviously housing becomes less affordable, and that will cause demand to increase at a less robust rate,’ he said.”

“Some sellers are getting the message. Zillow said more owners lowered their asking prices in June. A few months’ data do not a trend make, cautioned Christopher Thornberg with the research and consulting firm Beacon Economics. ‘Realistically, inventories are still very, very tight,’ he said. ‘That, again, suggests that what we’re seeing, these kind of wiggles in the market, are nothing more than that. They’re just wiggles in the market.’”

From PR Newswire. “® today announced the findings of its August housing trend report which revealed a surge in price cuts and the second largest drop in the U.S. median list price in three years. ‘Buyers, exhausted by bidding wars and little choice in inventory, could finally catch a break,’ said Danielle Hale, chief economist for®. ‘An increase in price cuts suggests that sellers are starting to become more flexible, especially in pricey markets. However, affordability is a concern in most areas which continue to be sellers’ markets. Fierce competition and low inventory continue to push up prices. While buyers are gaining leverage in some markets, we are still far from a true ‘buyer’s market.’”

“The median listing price in the U.S. decreased by $4,000 in August, dropping to $295,000 from a record-high of $299,000 in July. This is the second largest monthly list price drop since August 2015. Price cuts are on the rise, especially in pricey markets where inventory is rising. The proportion of listings that feature price cuts rose 1.5 percentage points in the last year to 19.1 percent in August.”

“The share of price cuts among listings is now 1.5 times more prevalent than in August 2012 when 13 percent of listings featured price discounts. This upward movement was more pronounced in major metropolitan areas in the last year including: Seattle with an 8 percent increase in cuts; San Jose with a 7 percent increase; and a 5 percent increase in San Diego, Riverside, Indianapolis and Los Angeles. In fact, 39 of the 45 largest markets saw an increase in the share of price cuts over last year.”

“The last week of August saw the first year-over-year increase in inventory in four years. Approximately 488,000 new listings entered the market during August. San Jose, Seattle and San Diego were the three markets with the biggest inventory jumps over last year, all posting increases of 28 percent or more.”

From Property Showrooms. “There are signs that after years of soaring house prices the US housing market is set for the worst slump in as many years because house buyers can no longer afford to buy. Properties that only a year ago would have been sold in days are now sitting awaiting buyers for many weeks. Asking prices are also coming down sharply. Where a three-bedroomed property might have been listed for US$ 600,000, it is now on the market for just US$550,000 in Seattle’s northern districts.”

“The US housing market was a hotbed in cities like Seattle and Austin, Texas, as well as in Silicon Valley, but now there are signs that the boom is over. Rising mortgage rates and accelerated house prices are pricing buyers out of the market.”

From Community Advocate in Massachusetts. “It was nice while it lasted, but the rapid rise in home values over the past four years seems to have come to a screeching halt. According to a recent article on CNBC, author Diana Olick states ‘Southern California home sales hit the brakes in June, falling to the lowest reading for the month in four years.’ ‘This could be the very beginning of a turning point,’ said Robert Shiller, a Nobel Prize-winning economist who is famed for warning of the dot-com and housing bubbles.”

“Locally, would-be first-time homebuyers are opting to renew lease agreements after losing out on bidding wars and watching mortgage rates creep up. ‘I had been looking for a home since February,’ said Northborough renter John Sullivan. ‘I was bidding high…in many cases overbidding…and still losing out. What I could afford then, even if I was successful in winning a bid, is no longer affordable. I just couldn’t take it anymore so I renewed my lease for another year.’”

“While industry experts are not predicting a housing bubble, they are discouraging homeowners from waiting much longer to cash in on their equity. ‘If you don’t sell now, you may have to wait another 10 years to get that money back,’ warned Shiller.”

August 28, 2018

The Most Expensive Markets Seen Serious Jumps In Inventory

A report from CNN. “If you’re a real estate agent, odds are you haven’t been closing as many deals lately. ‘We’re hearing things from our real estate agents that we haven’t heard in three years about homebuyers stepping back from high prices,’ said Redfin CEO Glenn Kelman on the real estate firm’s second quarter earnings call.”

“Foreclosures plagued the housing market during the financial crisis as borrowers struggled with loans they couldn’t afford and homes prices plunged. These days, borrowers are in much better shape, but there are signs that foreclosures are on the rise again. The housing analytics firm Attom Data Solutions found that foreclosure starts are increasing again for the first time since 2015. The trend is particularly visible in hurricane-hit cities like Houston, but also increasingly expensive places like Los Angeles.”

“The loans having the most trouble are those that the Federal Housing Administration-insured in 2014, when the agency was backing off on the very tight standards it had imposed during the great recession. ‘We’re seeing enough in these bellwether markets that I think it’s an inflection point,’ says Daren Blomquist, senior vice president for communications at Attom.”

The Boca Raton Observer in Florida. “Risky Business? Distressed sales, foreclosures and short sales in Miami are down, with the Miami Herald reporting that ‘only 9.9 percent of the sales in January involved properties in trouble, including bank-owned and short sale properties. Those kinds of properties accounted for 12.7 percent of the sales last year.’”

“But they’re baaack! Borrowers and investors are hot on the trail of so-called ‘nonprime’ mortgages, according to CNBC. These are basically the same subprime mortgages, only supposedly better underwritten, for people with poor credit scores, the self-employed and others who are unlikely to qualify for a prime mortgage.”

From The Mortgage Report. “According to a new analysis from, some of the nation’s most expensive markets have seen serious jumps in housing inventory. The biggest increase? That was in San Jose, California, where listings rose 44 percent over the year. Seattle — another pricey Western housing market — took second, with a 29 percent spike in listings year over year.”

“Other areas that also saw big jumps in housing inventory include Providence, Rhode Island; Portland, Oregon; San Diego, Sacramento, Riverside and San Francisco, California; Dallas; and Jacksonville, Florida. ‘July inventory growth is in high-priced, competitive markets, and often at the pricier end of these markets,’ according to Danielle Hale,’s chief economist. ‘It’s not just California markets that have seen an increase in inventory, markets on both coasts and in the South reported inventory increases in July.’”

From Geek Wire on Washington. “Seattle’s 21-month run as the nation’s hottest housing market is over. Las Vegas topped the Case Shiller U.S. National Home Price Index this month. Buyers in cities dealing with the positives and negatives of tech booms, such as Seattle and San Francisco, are sitting out, said Glenn Kelman, CEO of Redfin.”

“‘In Seattle, Portland and San Jose where prices have increased the most, the percentage of homes selling in the first two weeks on the market declined in June from 61 percent to 52 percent,’ Kelman said. ‘As U.S. home prices have increased faster than wages for 70 straight months, buyers in markets like these have finally had enough, at least for now.’”

“The purported slowdown, as well as Seattle abdication of the title of the nation’s hottest housing market comes as the city’s biggest employer has somewhat slowed its dizzying pace of growth. Amazon reported its first decline in headcount in nine years during the first quarter of this year, when its overall figure dropped by 2,900 employees.”

From NBC Bay Area in California. “A recent report from the San Francisco Chronicle revealed a hair-raising fact: thousands of homes that got a green light to be built are idling on untouched land. Experts NBC Bay Area talked to said it cannot all be explained by higher costs and a lack of labor. A look at the sun-kissed skyscrapers in San Francisco’s South of Market area and you may think new housing projects are popping up all over the city. Don’t be fooled.”

“‘Why are we only seeing ultra-luxury projects get built? Because those are the only things that developers currently can make any money on,’ said Todd David, executive director for the San Francisco Housing Action Coalition.”

They Are Whispering: ‘Just Give Me An Offer’

A report from the Colorado Real Estate Journal. “Interest rates that continue to creep up have not had a major impact on Front Range lending activity. With an unprecedented amount of money on the sidelines, there remains too much money chasing too few deals. Nowhere is this more evident than in the disparity between interest rates and cap rates. To the casual observer, they appear disconnected, if not unhinged. Factoring in too much money chasing too few deals handily reconciles the difference.”

“The loosening of these lending standards may not bode well for multifamily landlords in softer markets. A slowdown in construction for pricey, Class A multifamily products may prevent this problem from spiraling out of control in some submarkets, particularly ones that already are saturated with elite housing options where affordability is experiencing various forms of obsolescence from rent concessions to outright vacancy.”

“While multifamily remains popular, the ratio of income to housing costs creates an intuitive nervousness: How long residents can spend more than 50 percent of their income on rent or mortgages? Traditionally, rents could not exceed 30 percent of a tenant’s income. Now it is closer to 50 percent. None of this is lost on bank regulators, some of whom are privately expressing concerns about today’s renter being no different than the overleveraged 2006 sub-prime homeowner.”

From KGTV in California. “A new study from the Public Religion Research Institute paints a grim picture of people struggling to make ends meet in San Diego. It says 45% of San Diegans fall into an auspicious category: people who work full time and still struggle with poverty. On the low end, the Bay Area had just 27% of people in that category. Los Angeles was at 49%. The San Joaquin Valley had the highest percent at 68%.”

The Des Moines Register in Iowa. “Des Moines has many complexes that have fallen into deep disrepair, local property managers say. ‘It’s pretty simple. Slum landlords exist throughout the U.S. because it’s a very profitable business to be into,’ said Jim Conlin, who has owned and managed properties in Des Moines for 50 years.”

“‘There’s been so much money chasing the acquisition of these kinds of apartments. People buy something that is not well maintained and then try to flip it for $10,000 a unit,’ he said. ‘When the music stops playing … there’s going to be an adjustment. And those with deteriorated properties, unqualified tenants and negative cash flow aren’t going to be standing when that adjustment is over.’”

“A mix of research shows Des Moines residents enjoy a high standard of living and a glut of higher-income rentals downtown, but the housing crisis afflicting lower-income families and minimum-wage workers is growing worse.”

The St. Louis Business Journal on Missouri. “Commercial lending in St. Louis isn’t keeping pace with other markets, and apartment construction may be reaching the saturation point, according to local banking professionals. ‘We talked with our Atlanta Fed colleagues who did a proprietary study that looks at all lenders — banks, insurance companies, REITs, pension funds,’ said Julie Stackhouse, executive vice president of the Federal Reserve Bank of St. Louis. ‘What it showed is exactly what the bankers are saying: CRE lending has flattened in St. Louis. Commercial multi-family lending grew solidly in 2016 and 2017. Thus far in 2018, it is slightly down. Is St. Louis overbuilt? We’re somewhere in that vicinity.’”

The Daily Texan. “West Campus is notorious for ever-expanding growth, and the past year was no exception. Four new student housing projects were completed in 2018 and have recently opened for students. There are 10 more slated for completion in 2019. The abundance of new units for rent does not necessarily correlate to lower prices, said Laura Cochrane, an Austin-based realtor with REspace Realty.”

‘Cochrane, who has worked with students in West Campus for 25 years, said newer developments would rather have vacancies than drop their rental rates. Instead, Cochrane said students should stay away from high rises and look for older, individually owned condos and houses. ‘Even though they’re older, they’re almost as nice as the newer stuff,’ Cochrane said. ‘They might not have all of the amenities, but (they are) a quarter of the price marked down. These developments are just shooting themselves in the foot.’”

From Bisnow on New York. “Two years after the luxury market began to slow down, some New York City developers are finding the only way to get a pricey condominium sale done is to offer a compromise. ‘There’s only one tool in the toolbox — it’s called the price,’ said Olshan Realty President Donna Olshan, whose firm tracks contracts signed on units priced at or above $4M. ‘2013, 2014 and 2015 were the golden years of new development in New York. We are past that … Rarely have I seen buyers be so aggressive and make such low offers.’”

“In 2015, the uber-luxury craze had developers rushing to build ritzy towers to capitalize on the hot demand. Flash-forward three years, and the city is awash with new development options, and buyers are nervous about paying too much. The last week saw 24 contracts close on all types of Manhattan units over $4M, a stellar number for late August, according to Olshan’s report. But her figures indicate that units at that price point are sitting on the market for an average of 439 days, the highest rate in 12 years.”

“Meanwhile, prices are being cut by an average of 9% before going into contract, she said, which means the units are selling for at least a 15% discount. It is a challenging set of realities for those selling new units. ‘[Sponsors] are discounting. They are whispering in the brokers’ ears: ‘Just give me an offer.’”

“Sources told Bisnow that while some developers may have patient equity partners that are able to let them hold out for a certain price, many are under pressure to get product sold. Complicating matters is that, with interest rates rising, political uncertainty and fears that tax law changes will squeeze some of New York City’s wealthiest residents, a sense of insecurity is spreading among high-end buyers.”

“‘There’s oversupply, there’s just way too many choices. People are wondering what’s going to happen and they pause,’ said Corcoran Group broker Vickey Barron, who is marketing a condo at Magnum Real Estate’s 100 Barclay St. for $59M.”

“In the first half of the year, there were 303 sales of condominiums priced at $5M and above, a 39% fall from the year before, according to the half yearly report from Stribling private brokerage. ‘These first-half numbers were really shocking,’ Stribling Vice Chairman Kirk Henckels said. He believes the improved co-ops numbers are the result of sellers in that sector seeing the writing on the wall and cutting asking prices. ‘It’s really the consumer saying ‘this is enough,’ he said. ‘New developments showed a huge decline, falling 54% while resale condos only fell 25%.’”

“Already steep competition could be set to steepen. Manhattan’s new condo inventory is projected to hit 7,900 next year, The Real Deal reported earlier this summer, citing data from appraisal firm Miller Samuel. That is a significant increase on the average from the last few years — which has sat between 3,000 and 4,000 units — and means it would take about four-and-a-half years to sell all the units.”

“‘There is lot of inventory but it’s not meeting the buyers’ need,’ Compass President Leonard Steinberg said. He said the right product at the right price will still attract plenty of interest. He noted that many of the steep discounts are the result of overpricing when the listings first came to market. ‘After excess there is pullback,’ he said.”

The Years Of Rapid Price Appreciation Are Now Behind Us

A report from the Washington Post. “Last summer, the Washington area real estate market was as competitive as ever, but the pace of the market has slowed considerably this year. In July, the typical home in the Washington metro area was on the market for 39 days before finding a buyer. That’s 19 days longer than last July, according to Redfin. Of the Washington area homes that sold in July, 21 percent of them were off the market in two weeks or less, down from 43 percent during the same period last year. What is causing this slowdown?”

“The number of homes for sale is on the rise. After declining nearly every month in 2016 and 2017, the Washington metro area has seen year-over-year gains in the number of homes for sale every month this year. If you stepped away from the market out of frustration over the lack of homes to buy, consider taking another look. Added inventory has created more opportunities, and buyers have a bit more leverage this year than they did in 2017.”

“Don’t expect to buy a property and be able to sell it within a year or two for a profit. The years of rapid price appreciation are now behind us, so buy the home that you want to be in for the long term.”

“Advice for sellers: Adjust your expectations and price conservatively. While conditions are still competitive, the market has slowed and your home may take longer to sell than it might have a few years ago. Pricing conservatively is the best way to drive interest and offers in your home. We’ve noticed buyers are becoming a bit more demanding and particular when it comes to inspection items and repairs.”

From Hartford Business in Connecticut. “Home builders Eric and Kevin Santini are plenty busy these days finishing a fresh batch of rental townhouses in their Deer Valley North development in Ellington. But for the first time in a decade-and-a-half, the Santinis have no new single-family houses on their building schedule — and don’t foresee building any in the near term.”

“Santini Homes, experts say, is far from the only Connecticut home builder sweating out a housing slump that, coupled with rising tariff-related costs for imported lumber and other building materials, higher municipal permit-inspection fees, plus a labor shortage among certain trade skills, has drastically cut new housing starts.”

“‘It’s the Connecticut economy,’ said Eric Santini Jr., a principal in the family’s decades-old homebuilding enterprise based in Ellington and president of the Home Builders & Remodelers Association of Central Connecticut. ‘If you don’t have strong job creation, you’re not going to have housing starts.’”

From CBS 5 in California. “Construction costs for new housing are going through the roof in San Francisco and developers are feeling the pinch. They are having trouble getting their projects finished, or even started. But a closer look shows many big developments are hitting a financial wall that is quickly becoming the new barrier to more badly-needed affordable housing.”

“According to a survey by the San Francisco Chronicle there are currently 6,750 units of housing under construction in the city. That’s about 1,000 more than a year ago, and there are another 15,000 approved for building. It’s a gold mine for the construction business, but financial quicksand for housing developers who have to cover the increases. ‘This is a normal curve,’ said Eric Tao, president of AGI Capital. ‘The construction costs started going higher and faster than values were going up – so projects get stalled.’”

The Herald Tribune in Florida. “Is the country on the verge of a residential real estate market correction? The National Association of Realtors states that home prices are at or approaching record highs in many markets. But association chief economist Lawrence Yun says concerns about whether the housing market has peaked and is headed for another significant slowdown are unfounded.”

“That view is not held universally, however. A Sarasota resident fellow of the American Enterprise Institute and co-director of its Center on Housing Markets and Finance co-wrote a commentary published in The Hill last month. Under the headline, ‘Booming housing market today presents serious risk for future,’ Ed Pinto and two institute colleagues wrote, ‘If the past is prologue, prices will correct when demand flattens as the economy cools or credit conditions tighten.’”

“‘When demand temporarily exceeds supply, prices rise,’ they wrote. ‘Whether or not the price increase is sustainable depends primarily on whether the strength in demand is sustainable.’”

“The article concludes with a suggestion. ‘The housing market today has too much highly leveraged demand from investors and buyers chasing available supply. As a result, real home prices have increased 25 percent since the early 2012 low, a pattern mirroring the early years of the last price boom. So long as this price boom continues, the risk of a serious correction increases. Tightening government housing agency underwriting policies today is the best way to reduce the potential for large home-price declines in the future.’”

“Frank Nothaft, chief economist for CoreLogic, sees forces at work to lower prices. ‘Further increases in home prices and mortgage rates over the next year will likely dampen sales and home-price growth,’ he wrote in the August MarketPulse report. One thing’s for sure. Home prices cannot continue to rise at ‘overvalued’ rates.”

From Curbed Seattle in Washington. “It’s increasingly common for Seattle-area home listings to slash their asking prices, according to Zillow. While lowering an asking price isn’t totally uncommon, the percentage of listings cutting their prices has nearly doubled since last year in the Seattle metro area, which includes Tacoma, Everett, and Bellevue, rising from 6.9 percent in June 2017 to 12 percent in June 2018.”

“The difference is even more dramatic in Seattle proper, with more than double the listings asking less than when they were first listed, jumping from 4.3 percent to 10.7 percent over the same time period. Inventory has also only gone up, giving buyers more homes to choose from. Back in June, Seattle saw more than a month of inventory—a figure based on number of homes for sale and typical sales time—for the first time since September 2016, and it’s gone up since then.”

The Bellingham Business Journal in Washington. “As anyone who’s read the headlines knows, the real estate market in our area has been on a boom. The Seattle Times recently reported that the greater Seattle area has led the nation in home prices for 20 months in a row, tied for the second-longest streak. The last time we saw record-breaking prices like this was in the mid-2000s, and home buyers are understandably nervous. The real estate market in Whatcom County takes some of its cues from Seattle. Here are a few things I think you should consider given current market conditions.”

“The most important piece of advice I can give is to not panic. I strongly believe that unless we see a dramatic wage increase in the community to support the bulk of the market, real estate prices simply can’t continue the way they are. The real estate market in Whatcom County is already showing signs of slowing down. We’re beginning to see reduced prices and inventory sitting longer, which indicates we’ve likely seen the top of the curve. In the next year or two we should expect to see more affordable housing that is line with Whatcom County wages.”