August 27, 2018

The Market Is Saturated And They’ll Sit Empty Awhile

The Baton Rouge Business Report in Louisiana. “While the Baton Rouge area saw home sales rise 3.5% last month, inventory is growing and the pace of slowing, according to the Greater Baton Rouge Association of Realtors. The 4,198 homes on the market last month represented a 16.8% increase over the same month last year, while the average days on market increased 26% from last June to 63 days. Meanwhile, the month’s supply of inventory—or the amount of time it would take to sell all of the homes on the market at the current sales pace—increased 21.1% to 4.6 months, up from 3.8 last July.”

“‘Housing price bubble chatter has increased this summer, as market observers attempt to predict the next residential real estate shift,’ reads the July housing report. ‘It is too early to predict a change from higher prices and lower inventory, but the common markers that caused the last housing cooldown are present.’”

The Victoria Advocate in Texas. “Homes priced around $200,000 and under are selling quickly in Victoria, while more expensive homes sit empty, housing experts said. Sales for existing homes are 4 percent higher than this time last year, while sales on new single-family homes are down 56 percent compared to last year in Victoria County, said Jim Gaines, chief economist of the Real Estate Center at Texas A&M University.”

“‘Houses $300,000 and higher — the market is saturated with those, and sometimes they’ll sit empty awhile because there’s so many of them,’ he said. ‘That’s kind of what’s happening in Victoria at the local level. We’re hearing that same story all over the state.’”

“Most of the homes selling are priced from $150,000 to $220,000, said homebuilder David Hurst. A few years before the hurricane, Hurst sold plenty of new-build homes priced more than $400,000, he said. ‘There’s not a whole lot we can do right now because there’s so many houses out there vacant that have been for sale for a year — that’s in the higher-priced houses, $400,000 and up,’ he said.”

The San Francisco Chronicle in California. “While the next crop of luxury condo towers like 160 Folsom, which developer Tishman Speyer has branded as Mira, continue to rise in the fast-growing eastern end of South of Market, other approved housing projects across the city, like 2675 Folsom St., are stalled and on the market because of soaring construction costs and fees, developers and other industry sources say.”

“The growing number of developers seeking to cash out rather than risk losing money on building is fueling concerns that residential production will start to decline even as the Bay Area’s housing crisis worsens. ‘Most entitled projects in the city are for sale right now — either publicly or privately,’ said Bill Witte, president of developer Related California, which has 1,300 units under construction in the city. ‘We’re at that point in the cycle.’”

“There are 6,750 units under construction in the city, about 1,000 units more than a year ago. While that is well above the historic average, there are another 15,000 units that have been approved by planning officials but have not started construction. Projects containing 6,690 of those units have secured all the permits needed to start construction but have not broken ground, Planning Department documents show.”

“Chris Foley, a real estate investor and partner in brokerage firm Polaris Pacific, said that in the current construction environment a condominium developer needs to sell units for at least $1,400 a square foot for a wood-frame building and $1,800 a square for a taller, steel-frame midrise or high-rise. Even in a city where more than 80 percent of the population is priced out of the market, those numbers are a stretch, Foley said.”

“‘The demand for condos is there, but construction costs are killing the industry,’ he said. ‘Above $1,400 a square foot is a tough sell unless it’s an unusually good location.’”

“That’s the case with three buildings rising near the new Transbay Transit Center: Mira, the Avery at 400 Folsom St., and One Steuart Lane, which overlooks the Embarcadero at the foot of Howard Street. Unless there is a remarkable drop in the market, units in all three of those buildings will probably have an average sales price of more than $2,000 a square foot and penthouses could fetch $3,000 or even $4,000 a square foot. A 3,326-square-foot penthouse at 181 Fremont St., which opened last spring, recently sold for $15 million, or $4,500 a square foot.”

Sellers Have Been Too Big For Their Britches

A report from the Providence Journal on Rhode Island. “While median sales prices for single-family houses climbed 3.5 percent in July compared to the same month a year earlier, the Rhode Island Association of Realtors cautioned that the market may be cooling as the number of houses for sale increased from July last year to this year, the association said. Also, for the fifth straight month, the number of houses sold was down compared to the same month a year earlier.”

“‘All indications are that the market may have reached the tipping point at which supply and demand begin to become more balanced,’ the association stated in its release. Association president Joe Luca said that, while an increased number of houses available for sale should ease pressure on prices to go up, he doesn’t expect to see them fall like they did a decade ago. ‘We’re still firmly in a seller’s market but the tide might be beginning to turn,’ he said.”

From the Tennessean. “Apartment rents in the Nashville area dropped in July after nearly seven years of continuous upward growth, and the for-sale housing market’s sizzling post-recession prosperity chilled. The slowdown is a welcome relief to renters and buyers weary of the seemingly boundless boom that has outpaced wages and rapidly inflated home prices to nearly double their 2012 values. ‘I’m happy to see that the buyer market is getting a little bit of leverage,’ said Jeff Checko, a Realtor with RE/MAX Advantage. ‘Sellers have been too big for their britches. The market is pushing back a little on that.’”

“The downtrend is likely a market correction mirrored in cities across the nation, rather than the beginning of an economic slump. ‘We’re seeing the same pattern in Nashville in markets like Denver, Seattle and Los Angeles,’ said Aaron Terrazas, senior economist at Zillow. ‘It’s slowing down. But it’s still, in many cases, above the historic pace.’”

“In the greater Nashville market, homes listed for less than $300,000 in Rutherford County increased in value while higher-ticket options in Williamson County saw price declines this year, Checko said. ‘It’s difficult to pinpoint the exact cause but certainly the recipe would include a climate of rising interest rates, overzealous sellers, and more inventory,’ he said.”

“There are 31.3 percent more homes for sale in this quarter than during the same period last year, according to a Zillow analysis of the Nashville market. The downturn comes after seven years of significant consecutive rent hikes and feverish construction of thousands of new units. Five new apartment complexes delivered 1,200 rental units and condos to the urban core this year, loosening the tight supply and decreasing demand, according to Nashville Downtown Partnership. Seven new apartment buildings are now in the works with 1,864 units expected to open incrementally through 2020.”

The Dallas Morning News in Texas. “Is the housing boom running out of gas? During the last few years, the home market has been on a tear in North Texas and in other parts of the country, with prices soaring and buyers lining up as soon as a sign hits the front yard. But there are growing signs that the fast-paced housing market is shifting gears. In North Texas, year-over-year preowned home sales have fallen in many neighborhoods, and for the entire region, year-to-date sales were up a measly 2 percent as of July.”

“At the same time, the double-digit percentage home price gains of the last few years have faded in Dallas-Fort Worth. At midyear, the number of prospective U.S. homebuyers who said they planned to make a purchase in the next 12 months fell to just 14 percent — down from 24 percent in fourth quarter of 2017, according to the National Association of Home Builders. That’s still another sign that the home market — while not in a traditional bubble — may be headed for slower sales in the year ahead.”

“‘It’s clear that the winds that have boosted sellers over the past few years are ever-so-slightly starting to shift,’ said Zillow senior economist Aaron Terrazas.”