August 20, 2018

The Great American Price Boom Losing Its Oomph

A report from the Wall Street Journal on New York. “Sales of the most expensive New York apartments fell sharply in the first half of the year, but many sellers have adjusted by cutting asking prices to make deals, brokers said. Overall sales of apartments priced at $5 million or more fell by 31% during the first half of the year, compared with the same period in 2017, according to a luxury market report by Stribling. But the slide in sales was concentrated entirely in condominiums, including newer such buildings, where the supply of expensive apartments has surged, the report found.”

“Brokers said the modest rebound in sales reflected sellers’ willingness to abandon their dreams of outsize profits in the face of buyer resistance. ‘The contracts that are getting done in the luxury end of the market are the result of sellers capitulating to reality,’ said Donna Olshan, a broker who monitors contract activity for high-end apartments.”

“Luxury apartment prices rose sharply in 2014 and 2015, but have since stagnated at lower levels. Examples of steep discounts abound in the rarefied luxury market. A five-bedroom penthouse with a terrace and soaring ceiling sold in August in a new building at 11 North Moore Street in Tribeca. It was first listed in January 2014, for $40 million, but the price was cut three times since, for a final listing price of $22.5 million. A deed filed on Thursday listed a $20 million sale price.”

The Chicago Tribune in Illinois. If you’re considering purchasing a home in the coming months, you should be aware of an important shift emerging in the market: List prices on growing numbers of houses are being cut, even in places where previous appreciation has been strong and sales at record levels. The great American post-recession housing-price boom appears to be losing at least a little of its oomph, opening opportunities for alert buyers.”

“The rate of reductions was higher than it’s been in some markets for years. In Seattle, which has been scorching hot — with multiple offers and double-digit appreciation routine — 12 percent of listings got a price reduction in June, the highest percentage since 2014. The median cut was 3.1 percent.”

“Some of the largest cities and their suburbs are also seeing growing numbers of price adjustments: Nearly 1 of every 5 listings in Chicago saw a price cut averaging 2.7 percent in the survey. In the Washington, D.C., metro area, 15.4 percent of all listings had price reductions that averaged 2.5 percent. In Miami-Ft. Lauderdale, the average decrease was 2.9 percent; metropolitan New York, 3.6 percent; Boston, 3 percent; San Francisco, 4.2 percent; San Diego, 2.3 percent; Charlotte, N.C., 2.4 percent; and Columbus, Ohio, 2.7 percent.”

“In San Diego, 1 of every 5 listings got pared back in June, a significantly higher figure than the year before, when 1 of every 8 listings (12 percent) were reduced in price. Zillow’s study dovetailed with new research by realty brokerage Redfin, which found slowdowns and price softness in the upper-end, luxury segments — the top 5 percent most expensive homes — of some cities and suburbs. In Boston, luxury sales prices slumped by 16.7 percent year-over-year in the second quarter, compared with a 9.7 percent average increase in the nonluxury segment.”

“Here’s what could be another emerging trend, which turned up in the Redfin luxury sales study: Small but noticeable numbers of homeowners who live in high-cost, high-tax states such as New York and California appear to be fleeing to lower-tax markets. You might think local taxes are no big deal for well-off owners, but consider this: One house listed for $12 million in Massachusetts came with a $101,346 local real-estate tax bill. Ouch!”

From Wisconsin Public Radio. “For the second straight month the number of homes for sale has risen in Wisconsin. Two straight months of increases, after more than a year of declining inventory, could mean the state’s issues with housing supply may be easing, says David Clark of Marquette University. ‘These are peak months for closing on homes,’ Clark said. ‘To see some improvement in inventories, even in those high-volume months, is a suggestion that maybe we have turned the corner a little bit.’”

The Herald Palladium in Michigan. “Alan Jeffries is always watching the housing market. As association director of the Southwestern Michigan Association of Realtors, Jeffries grew up in Marcellus, Mich., and worked out of Kalamazoo before taking his current position. Having taken over as association director more than a year ago, Jeffries sat down with Herald-Palladium Staff Writer Tony Wittkowski.”

“Q: It seems we have a really in demand housing market. Anything that stands out to you lately? A: The biggest surprise is how fast the sales prices have risen. I think we’ve almost increased the values too fast to sustain this. I think we’ll see a slow down pretty soon. Not so much as a crash, but inventory will level off and prices will go down.”

“Q: You say that, but the prices have continued to rise. A: They are, but it’s just not sustainable. What goes up must come down.”

There’s A Normalization Occurring

A report from CBS News. “Home prices have enjoyed explosive growth in recent years, but that run-up may be nearing an end. Combined with several years of dramatic price increases, limited inventory and slow wage growth, that is pushing some buyers out of the market. Less demand means sellers can’t ask as much for their homes.”

“‘Demand was so high for so long, and the inventory was so low, that sellers raised prices because they could,’ said Nikolas Scoolis, an analyst with Meyers Research, a housing consultancy. ‘We may have reached an inflection point. Buyers may now be thinking this price feels expensive for what I’m getting, and sellers may have to reset their expectations.’”

“That’s begun to show up in listing prices, according to a survey by Zillow. The biggest changes occurred on the West Coast, including in Sacramento and Seattle. About 20 percent of listings in San Diego cut prices in June, up from 12 percent a year ago, the survey found. Higher-priced listings are cutting prices more often than lower-priced listings.”

The Colorado Springs Gazette. “A pilot’s dream. That’s the pitch for a new home for sale at Meadow Lake Airport in Falcon, east of Colorado Springs. The 3,600-square-foot ranch home is ‘handcrafted top to bottom,’ with three bedrooms (each with their private bathroom), a professional-grade kitchen, a finished oversized six-car garage — and an attached 3,200-square-foot hangar. The price? $1.2 million — down from an original asking price of $1.4 million. It’s the first million- dollar home among the 30 or so homes at the airport — and a rarity for the plains east of Colorado Springs.”

“In the past three years, there has been only one property in the area that sold for over a million dollars, and that included a lot of land — nearly 150 acres — says Bill Kemp, the Colorado Springs listing agent. Dave Elliott sold the lots to Payne and acknowledges he was surprised when Payne told him his plans. ‘I thought that was a little overpriced for our community, but I’m glad to see it,’ Elliott says.”

From Denverite in Colorado. “Right now a home in Denver only sits on the market for 22 days. There is hope, however, for those looking to get into this red-hot market as there have been some price reductions and some slight increases in the days of over market in the last year or so, according to Kerron Stokes, a real estate agent with Re/Max. ‘Markets always cycle, so how long that cycle’s going to last is hard to predict. If you look at the past couple of quarters, because of the rapid increase of home prices and as well as the first time interest rates going up, there’s a normalization occurring,’ said Stokes.”

From Staten Island Advance in New York. “While home sales are down across the city during the second quarter of 2018, Staten Island is bucking this trend with an uptick in both sales and prices, according to Real Estate Board of New York’s (REBNY) Residential Sales Report. This was the fourth consecutive quarter of year-over-year declines in New York City’s total residential sales and transactions, according to REBNY. In fact, the market has not experienced four quarters of consecutive year-over-year decreases since the third quarter of 2009 said REBNY.”

“Real estate professionals say the decrease in price in other boroughs is also due to prices in those markets reaching their peak. ‘We have watched housing costs in Manhattan, Brooklyn and Queens soar out of control over the past few years,’ said Connie Profaci, broker/owner of her self-titled New Dorp real estate agency. ‘The slowdown in the other boroughs indicates to me that those markets have reached their peak.’”

“Said Julie Porowski, a licensed salesperson with Salmon Real Estate in Castleton Corners: ‘Although sales may have slowed down for the other boroughs, Staten Island market it still very busy, as the statitics show. I think part of that can be attributed to other boroughs reaching a ‘tipping point’ with regards to affordability for desirable neighborhoods.’”

“Staten Island real estate professionals say they expect to see more rising sale prices throughout the end of the year. ‘I do not think in any way are we heading for a recession or bubble bursting,’ said Traci Cangiano, broker/owner of the Great Kills-based Cangiano Estates, Ltd.”

The Sun Sentinel in Florida. “Construction has begun of a single-family home subdivision in Lake Worth — something the city hasn’t seen since the 1990s. Developer Meritage Homes is creating the Lake Cove on 19th Avenue North, generally west of North A Street and north of 19th Avenue North. The subdivision will have 59, two-story homes ranging in size from 1,708 to 2,819 square feet, with prices starting in the mid-$300,000s.”

“Mark E. Stivers, Lake Worth’s deputy director for community sustainability, said the city has been aggressively working to ‘get rid of the vacant lots’ and see a revitalization, adding that it is ‘trying to improve the image so people see it as a place to invest.’”