August 5, 2018

Dramatic Price Reductions Every Single Day — Every Hour

A report from The Real Deal on New York. “Westchester residents, many trying to avoid the hefty tax bill that 2018 promises, are finding themselves in an unforgiving buyers’ market. Prices in the county fell 18 percent in the second quarter of 2018, with homes asking between $1.5 million to $3 million faring the worst, according to Bloomberg. In Scarsdale alone, prices dipped 5 percent in the first six months of 2018, while Mamaroneck saw a 13 percent drop.”

“As a result, the number of homes for sale in Westchester has been increasing: in late June, inventory was up 5 percent compared to last year and, for homes priced between $2-2.5 million, listings were up 26 percent.”

“Buyers are feeling no sympathy for homeowners who bet on turning a neat profit when they decided to sell off their prestige address. Compass broker Angela Retelny says her clients tell her ‘Look, I’m not going to spend more than $35,000 in taxes.’ … Houses are just being dismissed, even though they’re superior homes, and they have to be reduced — because their taxes are just way too high for the price range.’”

“With buyers taking a hard line, sellers are being forced to bend, according to her. There are ‘dramatic price reductions every single day — every hour, pretty much,’ she told Bloomberg.”

Local Market Observations

What do you see in your housing market? Stalled construction? “The Alexandria Redevelopment and Housing Authority announced late Friday afternoon that the planned redevelopment of Andrew Adkins, a group of 90 homes built in 1969 located near the Braddock Road Metro, is off the table. ARHA owns and manages Andrew Adkins and had planned to partner with Alexandria Opportunity Housing LLC – a subsidiary of Clark Realty, or CRC Partners LLC – to redevelop it into a 476-unit community. ARHA now says that plan is no longer financially feasible. ARHA Board Chairman Daniel Bauman said the project, as it was planned, was a victim of changing economics.”

“‘We were hopeful that we could get to a place that we needed to be from a variety of aspects, from being able to service our residents to the economic outcome – because the economic outcome is what perpetuates our sustainability. Our goal is to build on a model that’s sustainable,’ Bauman said. ‘… The economics under which we were contemplating moving forward were somewhat different than anticipated.’”

“Slow go on two housing developments. Construction plans are in limbo for two housing developments approved by the City Council last fall. The Pacific Arroyo Community and Spring Road Townhomes are still in the initial design phase, according to city staff and the projects’ developers. In December, the City Council approved Spring Road LLC’s request to rezone the two lots, totaling 8.3 acres, from commercial space to residential. But in an email to the Acorn on July 12, the developer said it is evaluating its options before it builds the community.”

“‘At this time there is not much to report,’ Rob Duncan, a partner with the project’s developer Spring Road LLC, wrote in the email.”

Local broker opinions? “We have all seen the news media articles over the past few weeks reporting that there has been an over 70% increase in our current market inventory, that the market is slowing down or that there is another recession coming, and so on. If you are a seller, let’s not panic or get into modes of desperation just yet.”

“We are seeing, what I would call, a shift in the mindset of buyers. There are less multiple offer scenarios on both condos and single family homes as well as a lot of buyers doing more of a wait see approach to the offer review dates. This is quite opposite of what we were seeing earlier in the spring, which was a very aggressive approach of doing pre-inspections, waiving all contingencies, and being willing escalate well above list price. Also, there is a significant increase in the inventory. Homes and condos are still selling, but they are going into contract slower than they were in the spring. We are also seeing the percentage over list price not being as aggressive. This will apply to most neighborhoods of Seattle, and appears to happening in most price segments as well.”

“Now, does this change how I, as a broker, might approach the market? Yes, of course, our strategies must change with adjustments in market conditions. Sadly, we are also seeing a lot of homes that just aren’t presented well, such as not being in the best of condition, poor quality flips, or disadvantaged locations, etc. These condos and houses might be too aggressively priced by sellers and agents that are just too optimistic that the hot market will have buyers buying anything they can.”

“The buyer fatigue is stalling sales on homes that simply aren’t properly prepped and priced for the summer market conditions. I do think that these factors are causing some lethargic market conditions right now that are affecting even those homes and condos that are spruced up and ready to sell as the mere fear of a slowing market will cause more slowing in the market.”

Or survey results? “When asked if they believe Metro Vancouver is in the middle of a housing crisis, the survey found that ‘90 per cent decisively agree, including 64 per cent who say they strongly agree with that.’ But while that number doesn’t shock him, Mossop said in a release that ‘what is surprising… are the misconceptions that exist with respect to the culprits and causes of this crisis. As the housing situation reaches crisis proportions, there are no shortage of scapegoats to blame, despite studies that show foreign buyers and money laundering are minor factors in the equation.’”

How about statistics? “Sydney has a tad too many properties for sale as we head into spring, the likely busiest listing time of year. There are 26,000 houses and apartments currently listed across Sydney, with some 5,775 of these being freshly listed during July, according to CoreLogic. Having missed the peak, many prospective vendors now won’t step forward. But there are vendors who simply need to move this spring.”

“Singles who’ve got married and want to start their life together. There’s expectant growing families who’ve had it living with too few bedrooms. Retirees with too many bedrooms will sell and seek to inject some funds tax free into their superannuation savings. There are those homeowners who took the foolish step of buying several years ago with an interest only loan that is now converting to principle and interest, in a considerable jump in their budget. Others face mortgage stress after that second or third job has seen their hours cut back.”

Or a prediction? “CoreLogic’s senior analyst Cameron Kusher said past downturns in Sydney prices suggested prices would fall in ‘real’ terms for many years, even if they didn’t fall in nominal or dollar terms. ‘This was a pattern that played out the last time Sydney had a major correction in housing prices, Mr Kusher said. In previous downturns … real value declines have been large and they have taken a long time to eclipse their previous peaks,’ Mr Kusher said. ‘After real dwelling values peaked in Sydney in December 2003 they fell by 18.4 per cent to December 2008.’”

“Current falls in Sydney prices also needed to be considered within the context of the spike in prices that occurred over 2014-2017, Mr Kusher added. This upward movement in prices over a short period of time meant today’s property prices were still 47.1 per cent higher than they were in 2008. ‘It could be many years before we see real dwelling values returning to their previous peak,’ Mr Kusher said. ‘Especially when other external factors are considered such as tightened credit accessibility, potentially higher mortgage rates and historic low rental returns.’”

‘Mr Kusher said he expected values to continue falling over at least the coming 12 months.”

They Bought Right As The Softening Commenced

A report from the Press Democrat in California. “Laura and Anthony Salvato wanted to buy a home in Santa Rosa before their 4-year-old daughter started kindergarten. However, the couple didn’t know what they could afford during a time of rising interest rates and home prices. The jump in prices was linked to a housing shortage exacerbated by last fall’s devastating North Bay wildfires. However, less than two months after finding a real estate agent and a lender, the couple completed the purchase of a house in Rincon Valley. The Salvatos, who are in their early 30s, moved in with their two young daughters in late June.”

“The three-bedroom, two-bath home comes with a $3,900 monthly payment, including almost $400 for mortgage insurance, a requirement with FHA loans. The payment is substantial, Laura Salvato acknowledged, but rents for similar houses also have grown costly in Sonoma County. Buying the home allowed the couple to fix their housing costs and provide a way for 4-year-old Grace and 22-month-old Emma to eventually ‘grow up in one school.’ ‘I just wanted to get in while we could afford it,’ their mother said.”

“But real estate agents and lenders maintain that in the past few months the market has shifted, with more homes available for sale and more sellers forced to cut prices to attract buyers. Frank Nothaft, chief economist for CoreLogic, estimated that prices for entry-level houses in California have risen about 10 percent over the past year. When factoring in the increase in mortgage rates, he said, the monthly loan payment for buying the same home in theory would have jumped about 20 percent in 12 months. And mortgage rates are expected to slowly keep rising.”

“Others also spoke of changed conditions. ‘I’m telling people now that there is absolutely a softening in the market,’ said Scott Sheldon, branch manager with New American Funding, in Santa Rosa. For those with the means, ‘it’s getting easier to buy a house today.’ Sheldon was the Salvatos’ lender, and he points to the couple’s home-buying experience as evidence of his belief. The Salvatos looked at only about five homes, and the first offer for their Estes Drive house was quickly accepted by the owner, Laura Salvato said.”

“The couple’s early success stands in stark contrast to the hordes of first-time buyers who over the past eight years regularly found themselves outbid by wealthier buyers. Sometimes the winning buyers offered more money. But they also won bids simply by paying cash or making larger down payments with proceeds from the sales of other properties.”

“Sheldon acknowledged the Salvatos’ experience was unusual for first-time buyers. Part of the reason could be when they began house hunting. ‘They hit it at the most opportune time,’ he said. ‘They bought right as the softening commenced.’”

From the Idaho Press. “Boise’s hot real estate market is an inescapable topic these days. No matter if you are looking to purchase your first home, searching for an affordable apartment or just looking at your property tax bill, skyrocketing real estate prices have likely made an impact on your bottom line. At a Citizens Planning Academy discussion hosted by the nonprofit Idaho Smart Growth, more than a dozen attendees bandied about topics related to rising rent and home prices.”

“Capital City Development Corporation Real Estate Development Manager Shellan Rodriguez said Boise’s real estate market is currently squeezed by an influx of people and not enough housing for everyone, which has created rising prices across the spectrum.”

“Erik Kingston, housing resources coordinator for the Idaho Housing and Finance Association, said the nationwide market is being affected by a huge influx of investment from overseas, largely from China. That means investors are buying up real estate in historic quantities and renovating it to be at higher price points, owning it just for storage purposes and money laundering or using it as short-term rental units instead of for residents to live in.”

“He echoed Rodriguez and called for the construction of more housing units, especially for the middle class, to increase market supply and bring prices down for everyone.”