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.”