August 8, 2018

Buyers Want What They Want For A Steal

A report from the Wall Street Journal. “Western states experienced the sharpest decline for existing-home sales in the second quarter, a sign that rising prices, higher mortgage rates and, to a limited extent, the new tax law are weighing on pricier markets. Existing-home sales in the western region, including California, Washington and Arizona, declined 4.1% in the second quarter compared with the first quarter, according to the National Association of Realtors. The West, which has seen a particularly sharp run-up in prices in this six-year housing rebound, is bearing the brunt of the slowdown. ‘The West region has the fastest job-growing regions in the country, yet sales are coming down’ because prices have risen so much, said Lawrence Yun, chief economist at the NAR.”

The Sonoma Index Tribune in California. “Sonoma Valley home prices soared 24 percent this spring, an impressive jump fueled by a scarcity of houses on the market, agents said. Agents in the Valley attributed the double-digit increase to factors including a cluster of high-end sales and a dearth of homes for sale. Agent David Kerr said, ‘The east side of Sonoma is where a lot of the sales took place. We had a couple of sales in the $3 million range,’ driving up the average.”

“While agents said they weren’t concerned about a bubble, they conceded that the area is in a bit of a slowdown. ‘The market is good, but I wouldn’t say homes are selling like hotcakes,’ said agent Duane Margreiter. ‘We have seen price reductions on some properties – though some of that is a reflection of people shooting to get to the top of the market’ and listing homes at too-high prices, he said.”

“Agent Tracy Reynes said, ‘There are more price reductions across all price ranges in the Valley. This tells me price fatigue is starting to set in,’ referring to the near-constant escalation of prices for the last five or more years. ‘There are many more price reductions than I’m accustomed to seeing. That will help to dampen that extreme rise in prices moving forward,’ Reynes added.

“‘We are seeing a slowdown,’ Kerr acknowledged. ‘We are seeing buyers sit on the sidelines now. We are not seeing the same levels of activity we saw at the beginning of the year.’”

“Agent Carol Sebastiani summed up, ‘At some point, the market inevitably will correct, we just don’t know when. You can’t sustain the kind of momentum we have indefinitely.’ She added, ‘You have to be prepared for that inevitability at all times.’”

From Loudoun Now in Virginia. “The tug-of-war between supply and demand in Loudoun County’s hot housing market is getting even more heated. Husband-and-wife team Ryan and Megan Clegg, with Atoka Properties, said the market has created a stalemate between buyers and sellers. ‘In a lot of cases, sellers can get unrealistic about the value of their houses and buyers want what they want for a steal,’ Ryan Clegg said. ‘There are tons of buyers right now, but they’re not going to buy unless they feel like they’re getting value.’”

“The Cleggs have seen a few sellers reluctant to lower their price because they want a return on any upgrades they made to the home over the years. ‘We remind sellers that the market dictates your value. So you can have an appraisal that might help you set the price, but if you don’t get an offer you’re probably not at the right price,’ Megan Clegg said. ‘The line we get a bunch is ‘but we’re in the wealthiest county, surely they can pay this,’ Ryan Clegg said. ‘But buyers still want value.’”

“The prices now peaked at an all-time high have some in the industry having flashbacks to the market’s crash in 2008. But Jay Thomas, a Realtor with Keller Williams, describes the uptick in home prices—increasing between 4 and 6 percent annually—as pretty healthy. ‘There’s a lot of factors in play,’ Thomas said. ‘I just hope we stay healthy and not revert back to the bubble and burst again.’”

From Mansion Global on Florida. “Fueled by a surging condo market, Miami luxury home sales jumped in the second quarter, according to a report released Wednesday. Sellers of very fine luxury homes have adjusted prices ‘with a reduction ranging from 5% to 25%. That has stimulated pent-up demand,’ said Christopher Zoller of EWM Realty International.”

Why Are Rents Falling If We’ve Got A Shortage?

A report from the Globe and Mail in Canada. “A leading indicator of future construction activity is the level of activity at sales centres where developers presell new house and condo projects that are not built yet. According to data published by BILD – an industry association for the building sector in the GTA – a total of 11,942 new homes were sold by developers in the first half of 2018, a drop of almost 60 per cent from 28,942 sales in the first half of 2017. That decline came on the heels of a 36-per-cent drop in sales in the second half of 2017 as the GTA housing market was cooling.”

“Chris Slightham, president of Toronto-based Royal LePage Signature Realty, said reduced commissions will cause broader impacts as agents spend less on business marketing and promotion, while also reducing personal spending as their incomes drop. ‘The 20-plus-per-cent decline by unit volume in the GTA – just in the trading volume – means one-fifth of last year’s business doesn’t exist this year,’ he said. The drop came on top of a decline in sales in 2017, he said, which means agents have faced more than a year of declining incomes.”

From Better Dwelling in Canada. “Vancouver real estate had the worst July in 18 years, and the detached market was a big contributor. Real Estate Board of Greater Vancouver numbers show detached sales had a big decline in July. The decline, combined with a surge in inventory, printed a new record for the region though. Greater Vancouver detached prices had the first broad market decline in nearly 5 years.”

From Hurriyet Daily News in Turkey. “Ali Ağaoğlu, the billionaire chairman of the Ağaoğlu Group construction corporation in Turkey, has denied rumors that his company has gone bankrupt. The businessman admitted that the depreciation of the lira has brought an additional ‘20-25 percent burden’ on the construction sector, but claimed that Turkey ‘would come out of this process stronger.’ ‘I don’t believe that there is a housing bubble in Turkey. The C segment continues needing housing. We need to produce houses for this segment,’ he said.”

From Neoskomos. “Greece, being a popular destination for Chinese tourists and investors for years, established strong relations with the Red Dragon with consecutive Prime Ministers offering special business deals in hope of rescuing the crisis-stricken country from debt. According to data from Chinese online news agency Sina Weibo, Greece is the sixth most popular destination in the world for Chinese real estate investors.”

“Even though the Golden Visa program is seen as a positive boost to the economy by the government, Greek citizens are alarmed as the influx of Chinese buyers is pushing real-estate prices to new unaffordable heights for the median-income earner.”

From East Asia Forum. “In January 2018, Chinese Premier Li Keqiang visited Cambodia and oversaw the signing of 19 new development deals. The deals were announced just a few weeks after Chinese firms pledged to invest an additional US$7 billion in Cambodia. The cityscapes of Cambodia’s urban centres, most notably Phnom Penh, Battambang and Sihanoukville, are beginning to show tangible signs of Chinese foreign investment. In Phnom Penh, 3488 high-end residential units such as luxury apartments and condominiums were added to the housing market in 2017. The construction of another 15,688 luxury units is forecast to be complete in 2018.”

“Chinese investment is welcomed by Cambodian authorities to help to alleviate the country’s growing urbanisation and housing concerns. But questions are being raised about the long-term sustainability and economic effectiveness of Chinese real estate projects in Phnom Penh, which are criticised for mostly benefitting the nation’s affluent.”

“The ‘privatisation of urbanisation’ in Phnom Penh, supported by Chinese foreign direct investment, is almost exclusively aimed at the Cambodian upper class and at Chinese tourists and businessmen. While few of the large real estate projects in Phnom Penh provide exact figures on the nationality of their tenants, it is estimated that about 90 per cent of units are sold to Chinese citizens. This drives the city’s housing prices up to the point where the units are unaffordable for most Cambodians.”

“Another concern is the true intentions behind Chinese real estate investments in Cambodia. Observers note that more than half of the luxury apartments and condominiums in Phnom Penh bought by Chinese nationals are paid for in cash. This could suggest that the acquisition of such properties is a front for money laundering by wealthy Chinese citizens who are worried about their home country’s mounting debts and unpredictable authorities.”

From ABC News. “China is also dealing with a “mountain of debt” racked up at a massive pace over the past decade, as it raced to catch up with the ‘rich world.’ ‘Since 2008 China has been on this massive debt-fuelled binge,’ says Dinny McMahon, who spent a decade covering China for the Wall Street Journal.”

“A lot of the money China borrowed from state banks was invested in infrastructure. Some of the construction was useful, but the non-stop building boom also created ‘ghost cities’. They were essentially built from scratch to accommodate people moving from the countryside into the cities in the future — but that was ‘nothing more than a fig leaf at the end of the day.’ Hardly anyone actually turned up to live in them. ‘They do have people living in them but it’s almost a skeleton population relative to what they were built for,’ McMahon says.”

The Sydney Morning Herald in Australia. “It’s striking how quickly widely held assumptions about the housing market can be turned on their heads, thanks to changes in sentiment and market conditions. This is clearest in Sydney and Melbourne, where it wasn’t that long ago that FOMO or the ‘fear of missing out’ appeared to be driving prices ever higher. Now, some say that if things were to worsen a lot more, we may have to get our heads around a new acronym: FONGO, or ‘fear of not getting out,’ as more people try to sell before prices fall further.”

“To be sure, we’re not at that point yet. But the fact it’s being talked about is a stark illustration of how much things have changed. It wasn’t too long ago that it was commonly said both of these two cities had a severe housing shortage - thanks to strong demand for properties, and insufficient supply. This mismatch bid up prices. Why are rents falling if we’ve got a housing shortage?”

“Well, after all the frantic buying by property investors in recent years, there’s now a lot more rental stock on the market.”

From Domain News in Australia. “Australia’s prestige property market has continued to slide down international growth rankings as domestic and international pressures take hold. The top 5 per cent of the property market in Australia’s major cities has lost steam over the past year, according to Knight Frank’s Prime Global Cities Index,which recorded a fall of as much as three percentage points in some state capitals over the past quarter.”

“LJ Hooker Double Bay director Bill Malouf said it was no surprise the rate of growth had slowed in the bustling eastern cities. ‘Has there been a softening, yes there has – across the board,’ he said. ‘There’s the regulations, the resistance from the banks.’”

“Head of NGU Real Estate Emil Juresic said Brisbane was more consistent than the volatile southern capitals. ‘One thing is the market right now is solid. We aren’t seeing the growth we’ve been seeing in the past five years,’ he said. ‘It’s not going down, but it’s not going up either.’ Mr Juresic said high net-worth individuals and foreign investors were leaving the apartment rental game due to an oversupply, and concentrating their wealth in prestige property.

“‘We’re not in another boom, we’re in controlled market which is the best market to be in,’ he said.”

There’s Just Not A Lot There To Panic About

A report from the LeMars Daily Sentinel in Iowa. “In an effort to get in front of the housing crisis that often plagues small towns, City of Remsen officials decided to expand city infrastructure west of town. ‘Like so many areas in northwest Iowa, there’s a housing shortage,’ said City Engineer Josh Pope.”

From Forbes on Ohio. “Most of the fastest growing cities in America are in the Sun Belt or the Pacific Northwest, but one city in ‘fly-over’ country is keeping pace—Columbus, Ohio. recently ranked Columbus as America’s fourth-hottest housing market. Columbus Realtor Jim Ross, a friend of mine, has experienced this strong housing market first hand. He notes that ‘In multiple offer situations, I’ve seen numerous cases where buyers are willing to pay well above asking price, purchase as-is (they’ll inspect the property but won’t ask for repairs), and even agree to pay thousands of dollars above the appraised value.’”

From National Public Radio. “Builders can’t finish homes fast enough to keep up with demand. All of this means prices for existing homes on the market are going only one direction — up, sometimes stranding people in their current homes even if they desperately want to move.”

“In Beaverton, Ore., Manish Gooneratne feels stuck in his home. ‘We bought in May 2017 when home prices in our area had reached levels compared to 2007,’ he said. ‘As of one year ago, our home is estimated to have appreciated in value by $10,000 to $12,000. This is great, but since we barely squeezed back into the market, we doubt we’d be able to get back in even if we sold with a profit.’”

The Union Tribune in California. “San Diego home sales recently dropped to their lowest level in years, likely much more to do with affordability constraints than the economy, but it might be a sign of things to come. In June there were 3,927 home sales in the county, CoreLogic said, which is the lowest in four years. The phenomenon is nationwide, largely led by a shortage of homes for sale, said Alan Gin, economist at University of San Diego.”

“Jason Cassity, a real estate agent who primarily focuses on downtown, said he has seen some properties sit longer on the market than last year and predicts a tough go for some real estate agents. He said top agents can wait for three months for a deal to close, and that will be very tough for struggling agents who won’t be able to go as long without getting paid.”

“‘For the last five years, it’s been really easy to be a real estate agent,’ Cassity said. ‘Now, I think you’re going to start to see maybe lower-end to middle-of-the-pack agents finding it tougher to wait 60, 90, 120 days to get a check.’”

“Matthew Shaver, a San Diego senior mortgage consultant with Finance of America, said he also predicts a drop off in workers for his profession. He said demand for refinance loans has dropped since interest rates rose. Nationwide loan applications in early July to refinance mortgages hit their lowest point in more than 17 years, said the Mortgage Bankers Association. At the same time, Shaver said many buyers are hitting an affordability wall, so there is not as much loan processing happening.”

“Shaver said potential buyers are having more trouble than last year qualifying for loans because prices have risen so much and, even if they do qualify, mortgage rates are high enough for them to want to avoid the payments. ‘There’s only so much new business to go around,’ he said.”

“Software engineer John Dorman, 31, of Mission Valley, started looking for a place to buy around June 2017 because of a desire to have more space and control of his own property. He got prequalified for a loan and began viewing properties, including condos in downtown, East Village, Mission Valley and College Area for $450,000 to $600,000. He also looked at a few run-down single-family homes for around $650,000 but wasn’t sold on them.”

“Dorman said he just didn’t see enough value for what he would have to pay and decided this May he wanted to use his money for other investments. ‘I think the market out here is reaching its peak and it is a terrible time to buy,’ he said. ‘I decided to keep my savings liquid, as opposed to tied up in a house.’”

“Chris Thornberg, economist and founding partner of Beacon Economics, said looking too much at the recent slowdown in sales is not the smartest idea. He said the economy is still strong and looking at sales numbers alone doesn’t tell the whole story. ‘There’s just not a lot there to panic about,’ he said. ‘It’s just a really tight market out there. There’s just not much to sell.’”

“There is no doubt that the desire for homeownership in San Diego County is strong, said Evan Morris, real estate agent based in Golden Hill. However, he has had potential buyers start to draw the line with rising prices. ‘People don’t want to pay $350,000 for a one bedroom, one bathroom (condo),’ he said.”

“However, Morris said there is opportunity for buyers if homes stay on the market longer, especially with many homes for sale that are priced much higher than what other homes in a neighborhood are going for. He said he recently was able to get $60,000 off the asking price for his clients purchasing a home in Bay Ho.”

From KIRO 7 in Washington. “After a red-hot housing market for the last three years, the Seattle area is showing signs of cooling as more homes sit on the market. The Northwest Multiple Listing Service said the number of active listings in King County in July was up nearly 48 percent from July 2017. Paul Endzell, of Dream Home Real Estate, has held five open houses at a 1941 home in Renton he listed for $525,000. If the same house were in Seattle, it might sell for $900,000. Endzell expected a lot of interest in the home.”

“‘I’m wondering where everybody is,’ he said.”