August 17, 2018

People Have Been Asking For Silly Money

It’s Friday desk clearing time for this blogger. “It’s happening in larger, pricier housing markets: Buyers are starting to get fatigued, indicated by modest drops in existing home sales, mostly in competitive Western states like California and Washington. From Seattle to the Silicon Valley to Austin, Texas, headlines point to a cooling as housing inventory creeps up and prices continue to outpace wage growth, squeezing out fed-up buyers. Is this trend about to hit the Lehigh Valley housing market? It’s a necessary part of the cycle. Other short-term predictions are part of it, too: The region may see more new listings and a smaller jump in sales price, said Sean LaSalle, president of the Realtors group, but this is what usually happens in August and September. ‘We need this,’ LaSalle said. ‘If we see something alarming, everyone will know about it.’”

“The Washington-area housing market is showing signs of slowing down, and buyers may be starting to balk at rising prices. Mary Bazargan, a Redfin agent in Washington, says well-priced homes in sought-after locations continue to get interest, but buyers seem more hesitant to write offers. ‘I recently listed a gorgeous D.C. home at a price we thought would attract multiple offers the first week, but despite a lot of tours, it took three weeks to receive an offer,’ she said. ‘That kind of buyer reluctance is becoming more common.’”

“A separate report from Zillow showed another sign of an early shift in the nation’s sellers’ market. The share of sellers reducing their original list price rose from 11.7 percent a year ago to 14 percent in June. The percentage of sellers in the Washington area that reduced their original list price in June was higher than the national average, at 15.4 percent, and little changed from last June.”

“Los Angeles home prices may level off in coming months, new reports suggest. Zillow shows sellers slashed prices on 14.1 percent of homes in Los Angeles and Orange counties in June, up from 11.1 percent in January. The median value of those reductions was 2.6 percent of the original listing price. Eric Sussman, adjunct professor of accounting and real estate at UCLA, agrees. ‘I don’t think there’s any question that the housing market is slowing,’ he says, adding that he ‘wouldn’t be surprised’ if prices in LA start dropping ‘in the next few months.’”

“Sussman suggests that home prices could drop between 5 and 10 percent during a recession. That would be a silver lining for prospective buyers—but not much of one. ‘That’s really not going to move the needle for most people,’ he says.”

“A penthouse in Tribeca is finally off the market — but sold for half its original asking price. The unit at VE Equities’ 11 North Moore Street sold for $20 million, according to New York City Department of Finance records. The 7,000-square-foot pad hit the market in 2014, asking $40 million. The penthouse purchase comes as luxury units have been lingering on the market amid a glut of inventory. In the last week of July, luxury properties that went into contract were sitting on the market for an average of 536 days, according to Olshan’s market report. That’s prompted developers to cut prices.”

“Prince Albert’s housing construction scene may be in the doldrums, but the city is not alone as latest figures show the severe decline is widespread across the province and in other parts of the nation. Statistics released this week by the Canada Mortgage and Housing Corporation showed Saskatchewan had the nation’s second-largest decline in housing starts in July compared to last year. Only Prince Edward Island was worse. Saskatchewan saw a 46 per cent slump in the construction of single- and multi-family dwellings. Prince Albert best typifies the slump in the single detached market, with just one unit underway last month.”

“The conversion of a failed condominium complex into a hotel will create at least 80 jobs, the Senate heard yesterday. The comment came during debate on the Bermuda Housing Amendment Act 2018. Justin Mathias, an OBA senator, called the Grand Atlantic a ’stain on the last PLP administration.’ Ms Mathias said the condo units had failed to sell because of an ‘oversaturation’ in the housing market, as well as their price.”

“Fears are growing that Britain’s property bubble is about to burst. A string of indicators last night triggered concerns that the market is running out of steam – and could be heading for a correction or even a crash. Prices in London are falling at the fastest pace since the financial crisis – but the declines are not limited to the capital. The number of property sales has also tumbled, by as much as 65 per cent in some areas, as buyers worried about rising interest rates baulk at the ’silly money’ demanded by sellers.”

“Lee Pendleton, founder director of independent estate agents James Pendleton, said: ‘People have been asking for silly money. But the market has changed. Sellers need to be realistic about the market. If a house is not selling, it is usually down to price. In South West London, where we operate, house prices rose 180 per cent in ten years – it’s insane. Some areas are still over-inflated and some people are still asking for inflated prices. But these houses are not selling.’”

“Some buyers are so edgy about the Hong Kong property market that they are pulling out of deals, despite losing big deposits. A buyer who agreed to buy a unit at Sun Hung Kai Properties’ St Martin II two weeks ago cancelled the purchase on Thursday. The U-turn on the HK$7.25 million studio unit in Tai Po in the New Territories meant the buyer had to forfeit the 5 per cent deposit – about HK$362,700 (US$46,200).”

“That followed five instances on Wednesday at Sun Hung Kai’s Park Yoho Milano in the northern Yuen Long district. A total of nearly HK$2 million will be charged for the sales terminations. The project debuted last month and was seen as the cheapest residential project this year. Such soured interest has spread to lived-in home sales. Agents confirmed that last week the transaction of a 589 sq ft flat at Harbour Place in Kowloon’s Hung Hom was terminated and at least 3 per cent of the home price, or nearly HK$400,000, will be charged for the withdrawal.”

“House hunters are picking up properties for hundreds of thousands of dollars less than their neighbours paid just months earlier. In Kogarah in Sydney’s south, a three-bedroom red brick house on a 489sqm block on Annette Ave sold a week ago for $1.16 million — an eye-watering $210,000 below the $1.37 million paid just two months ago in June, for a three-bedroom red brick house on 462sqm on the same street just a ­couple of doors down. And the deals are dispersed across the city, even to the north where prices were still booming six months ago.”

“Buyer’s agent John Carew of Mayfield Property Buyers said house hunters were stunned by the turnaround. ‘There are bargains everywhere in this market if you are prepared to be decisive,’ Mr Carew said. ‘The problem with most buyers is … they don’t know what to do, so they’re not doing anything. This has opened the market up for those who are ready to buy.’ He said the heavy discounting did not mean the market was crashing, just stabilising after the long boom. ‘Even if you think a property is out of your budget, there is no harm in putting in an offer. We’re finding those low offers are actually getting accepted,’ Mr Carew said.”

“It is not a question of whether Auckland’s house prices will fall but by how much, a financial services company says. Australasian Trading Management warned investors home values had ‘already pulled back significantly’ in Australia’s hot Sydney and Melbourne markets and the ‘price correction’ was spreading to Auckland. It pointed to figures by Auckland agents Barfoot & Thompson, showing the city’s median home value hit $810,000 last month - a 10 per cent fall from the market peak price of $900,000 in March last year.”

“Australasian Trading Management said it was ‘clear that the Australian and NZ property markets are now in a period of price correction. But the key question is how deep the price drop will be?’ the analysts said.”

More Sellers Have Been Lowering Their Prices

A report from ABC 7 News in California. “The Bay Area remains a difficult place where few can afford to buy a house. And that may be one of the reasons why existing home sales are starting to fall by double-digit percentage points in one location — the South Bay. The latest numbers from the Santa Clara County Association of Realtors indicates the number of homes on the market is rising. But the number of sales is on the decline. Rick Smtih is past president of the Association of Realtors.”

“‘We’re in the teens in terms of percentage of population that could actually afford to buy a property today at the median price, so affordability is very, very low,’ Smith says. Existing home sales fell 14.6 percent in one month’s time — from June to July this year. And down an even steeper 16.7 percent from July of last year to July of this year.”

“One year ago, in places such as Mountain View, home to Google, homes were selling for 22 percent over the asking price. The market has cooled a bit. ‘They’re still selling for over the asking price but only 11 percent more,’ said Smith. ‘It doesn’t sound like a lot, but on a $2 million average property, that’s a lot of money. In addition, the days on market, that’s actually more than doubled to about 18.’”

“‘I don’t expect a major correction in home prices and hopefully this slower price growth will actually give both incomes a bit of a chance to catch up so that we can repair some of this eroded affordability we’ve seen during the cycle,’ said Jordan Levine, senior economist at the California Association of Realtors.”

The Mercury News. “Could the South Bay’s super-heated real estate market finally be showing signs of cooling? More sellers in San Jose have been lowering their prices on Zillow recently, and rising interest rates have economists looking for a slow-down. Zillow found that prices in the San Jose region were cut on 9.5 percent of listings in June, up from just 7.2 percent a year ago. Sellers in the San Francisco and Oakland market cut prices at the same rate as last year.”

“Redfin CEO Glenn Kelman told investors last week that homes are staying on the market longer in hot cities such as San Jose, Portland and Seattle. Buyers ‘have finally had enough, at least for now,’ he said.”

From LA Downtown News. “One of Downtown’s largest developments has hit another milestone. Metropolis Tower II, a 40-story building with 514 condominiums, opened for residents on July 28. Construction wrapped earlier this year, according to developer Greenland USA, which is the U.S. branch of the Chinese firm Greenland. Prices go from $600,000 for a studio to $1,200,000 for a two-bedroom condo.”

“The first tower in the $1 billion mega-project, a 308-unit, 38-story building, opened in 2017. The development’s Hotel Indigo opened last year as well, but was put up for sale in January. Earlier this year, Greenland USA put the last tower, a 56-story skyscraper that will have 736 condos (it is still in construction), on the market.”

The Camarillo Acorn. “On a parcel of land off Ponderosa Drive, just north of the 101 Freeway, a parade of work trucks rumble by. The farmland between Las Posas Road and Central Avenue sits at the epicenter of a construction boom the likes of which the city hasn’t seen for over a decade. It’s home to four of the city’s seven housing developments now underway.”

“The five companies overseeing this wave of construction will bring 1,364 new houses, townhomes and apartments to Camarillo city limits by 2020. The city averages about 2.7 people per housing unit, so that’s nearly 3,700 residents, or a population increase of about 5 percent, who could be calling Camarillo home by the time the last of these projects is completed. ‘This is the busiest we’ve been with housing construction since the Great Recession,” said Joe Vacca, Camarillo’s director of community development.”

“Many of these homes are presold, largely to people who already live in Ventura County, often in Camarillo, according to some sales managers for the developments. But those who move from one part of Camarillo to another still leave open housing, which will allow the city to grow and could potentially strain roads, parks, schools and other infrastructure. Officials say they’ve expected this growth and have planned accordingly.”

“More construction could be coming as well. Some developments, like Walnut-based Shea Homes’ project at St. John’s Seminary, have approval but haven’t started building yet. Others, like ParkWest Townhomes near Pleasant Valley and Lewis roads, will begin construction in the coming weeks.”

“The city recently bought the former Stock lumberyard, which could provide up to 75 new affordable housing units, Moe said, but that won’t be enough to meet state requirements. Private developers would have to be willing to agree to build low-, very-low- and moderate-income units in exchange for concessions, or breaks on city requirements, such as the number of parking spots for recreational vehicles.”

“No developer has yet come forward to build a project where a majority of the units are designated as affordable housing, and David Moe, the city’s assistant director of community development said it’s unlikely one will because of the requirements surrounding the number of affordable units, current zoning and prevailing wage. But if someone does, space won’t be an issue, Vacca said: The city has room to grow for the next 10 to 15 years.”

People Lose Their Shirts

A report from First Coast Connect in Florida. “Real estate broker Gabriel Miranda thought it could take a while to sell unit 905. The vacant condo is in Echo Brickell, a recently-built, sleek residential tower that overlooks Biscayne Bay and Key Biscayne. The building has elevators for cars, an enormous aquarium in the main lobby and a $42 million penthouse. But unit 905 has been on the market since February. And although its price has dropped more than 10 percent, making it the lowest-priced two-bedroom condo at Echo Brickell, Miranda is still waiting for a good enough offer.”

“Buyers from Latin America have fueled much of the boom, Miranda and other real estate analysts say. They have bought many of the new condominiums as investments in hopes of flipping and selling them for profits. But a lot of the units are vacant, and demand for them is lagging behind supply. The resulting glut is causing a decline in prices across greater Downtown, says Christopher Zoller, a realtor with EWM Realty International.”

“‘When you’ve got too many loaves of bread on the shelf, the next day you’re going to see day-old bread sold at half price,’ Zoller says, using a metaphor to describe the Downtown market.”

“In the greater Downtown area, there is a 32-month backlog of condos, says Peter Zalewski, a real estate consultant who runs the website Online listings show thousands of units for sale at luxury condo towers including Rise, SLS Brickell, the Bond and 50 Biscayne. Some of the condos are listed for more than $6 million, and others have been on sale for longer than a year. Values for several units have dropped more than 20 percent.”

“Many of the luxury condos for sale in Downtown are sitting unused. Zalewski walks around the area several nights each week and monitors the number of lights on to estimate how vacant the buildings are. There are obviously other reasons for the dark windows—snowbirds and people on vacation or just out for dinner. But Zalewski says the buildings, or ‘ghost towers,’ are unlit regardless of the day and time.”

“Zoller says the oversupply is forcing some people to sell their units for less than what they bought them for. And, on average, condos are staying on the market longer, making them less attractive to buyers who are turned off by units that have been on sale for a while. Zoller’s warning to clients: ‘If you don’t have to sell now, don’t sell now.’”

“But some people do not have that choice. And the glut is even affecting people who do live in their condos, like Deborah Shelton-Tynes. Shelton-Tynes owns two units at the Marquis across from Museum Park. She previously listed her units for about a combined $3.5 million in 2015 before deciding not to sell them. She’s now listing them for less than $2.3 million. ‘There’s just too much competition out there,’ she says. ‘By 2016, everything started to go down. I started watching properties going down.’”

“Shelton-Tynes, who plans on moving to Key West, says she will not drop her price because she can afford to wait for a buyer who is willing to pay more. But several other Marquis residents have already sold their units for losses, she says. People ‘lose their shirts.’”

“Seth Denison, a principal with the real estate firm Brickell Ventures, says prices will continue to decline as more units go on the market. Condo owners are now renting out their units until they are sold. And developers are even shelving projects until values rebound. “