August 5, 2018

Local Market Observations

What do you see in your housing market? Stalled construction? “The Alexandria Redevelopment and Housing Authority announced late Friday afternoon that the planned redevelopment of Andrew Adkins, a group of 90 homes built in 1969 located near the Braddock Road Metro, is off the table. ARHA owns and manages Andrew Adkins and had planned to partner with Alexandria Opportunity Housing LLC – a subsidiary of Clark Realty, or CRC Partners LLC – to redevelop it into a 476-unit community. ARHA now says that plan is no longer financially feasible. ARHA Board Chairman Daniel Bauman said the project, as it was planned, was a victim of changing economics.”

“‘We were hopeful that we could get to a place that we needed to be from a variety of aspects, from being able to service our residents to the economic outcome – because the economic outcome is what perpetuates our sustainability. Our goal is to build on a model that’s sustainable,’ Bauman said. ‘… The economics under which we were contemplating moving forward were somewhat different than anticipated.’”

“Slow go on two housing developments. Construction plans are in limbo for two housing developments approved by the City Council last fall. The Pacific Arroyo Community and Spring Road Townhomes are still in the initial design phase, according to city staff and the projects’ developers. In December, the City Council approved Spring Road LLC’s request to rezone the two lots, totaling 8.3 acres, from commercial space to residential. But in an email to the Acorn on July 12, the developer said it is evaluating its options before it builds the community.”

“‘At this time there is not much to report,’ Rob Duncan, a partner with the project’s developer Spring Road LLC, wrote in the email.”

Local broker opinions? “We have all seen the news media articles over the past few weeks reporting that there has been an over 70% increase in our current market inventory, that the market is slowing down or that there is another recession coming, and so on. If you are a seller, let’s not panic or get into modes of desperation just yet.”

“We are seeing, what I would call, a shift in the mindset of buyers. There are less multiple offer scenarios on both condos and single family homes as well as a lot of buyers doing more of a wait see approach to the offer review dates. This is quite opposite of what we were seeing earlier in the spring, which was a very aggressive approach of doing pre-inspections, waiving all contingencies, and being willing escalate well above list price. Also, there is a significant increase in the inventory. Homes and condos are still selling, but they are going into contract slower than they were in the spring. We are also seeing the percentage over list price not being as aggressive. This will apply to most neighborhoods of Seattle, and appears to happening in most price segments as well.”

“Now, does this change how I, as a broker, might approach the market? Yes, of course, our strategies must change with adjustments in market conditions. Sadly, we are also seeing a lot of homes that just aren’t presented well, such as not being in the best of condition, poor quality flips, or disadvantaged locations, etc. These condos and houses might be too aggressively priced by sellers and agents that are just too optimistic that the hot market will have buyers buying anything they can.”

“The buyer fatigue is stalling sales on homes that simply aren’t properly prepped and priced for the summer market conditions. I do think that these factors are causing some lethargic market conditions right now that are affecting even those homes and condos that are spruced up and ready to sell as the mere fear of a slowing market will cause more slowing in the market.”

Or survey results? “When asked if they believe Metro Vancouver is in the middle of a housing crisis, the survey found that ‘90 per cent decisively agree, including 64 per cent who say they strongly agree with that.’ But while that number doesn’t shock him, Mossop said in a release that ‘what is surprising… are the misconceptions that exist with respect to the culprits and causes of this crisis. As the housing situation reaches crisis proportions, there are no shortage of scapegoats to blame, despite studies that show foreign buyers and money laundering are minor factors in the equation.’”

How about statistics? “Sydney has a tad too many properties for sale as we head into spring, the likely busiest listing time of year. There are 26,000 houses and apartments currently listed across Sydney, with some 5,775 of these being freshly listed during July, according to CoreLogic. Having missed the peak, many prospective vendors now won’t step forward. But there are vendors who simply need to move this spring.”

“Singles who’ve got married and want to start their life together. There’s expectant growing families who’ve had it living with too few bedrooms. Retirees with too many bedrooms will sell and seek to inject some funds tax free into their superannuation savings. There are those homeowners who took the foolish step of buying several years ago with an interest only loan that is now converting to principle and interest, in a considerable jump in their budget. Others face mortgage stress after that second or third job has seen their hours cut back.”

Or a prediction? “CoreLogic’s senior analyst Cameron Kusher said past downturns in Sydney prices suggested prices would fall in ‘real’ terms for many years, even if they didn’t fall in nominal or dollar terms. ‘This was a pattern that played out the last time Sydney had a major correction in housing prices, Mr Kusher said. In previous downturns … real value declines have been large and they have taken a long time to eclipse their previous peaks,’ Mr Kusher said. ‘After real dwelling values peaked in Sydney in December 2003 they fell by 18.4 per cent to December 2008.’”

“Current falls in Sydney prices also needed to be considered within the context of the spike in prices that occurred over 2014-2017, Mr Kusher added. This upward movement in prices over a short period of time meant today’s property prices were still 47.1 per cent higher than they were in 2008. ‘It could be many years before we see real dwelling values returning to their previous peak,’ Mr Kusher said. ‘Especially when other external factors are considered such as tightened credit accessibility, potentially higher mortgage rates and historic low rental returns.’”

‘Mr Kusher said he expected values to continue falling over at least the coming 12 months.”

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Comment by Mortgage Watch
2018-08-04 03:12:13

Little Torch Key, FL Housing Prices Crater 16% YOY As Global Housing Bust Expands

Comment by Mafia Blocks
2018-08-04 04:12:09

“Our goal is to build on a model that’s sustainable,’ Bauman said.”

Paying multiples over construction cost for a 20 year old house isn’t sustainable either…. nor is paying 3x rental rates for any house…. which explains the mushrooming inventory hitting the market. Paying triple the going rents for 2 or 3 years for a house is about it. A 15 or 30 year mortgage? Forget it. Walk.

Empty houses on every street. Dark condos in every city.

Comment by aNYCdj
2018-08-04 05:21:54

and NIMBY for a failed nursery

“We chose to give up town amenities of water, town septic service, and proximity to shops and restaurants in order to live in a quiet, more rural setting,”

Comment by OneAgainstMany
2018-08-04 09:11:36

Save the heirloom tomatoes!

Comment by Taxpayers
2018-08-04 05:44:54

22151 in
N VA. Inventory has gone up ,but so far could be the spring ,summer seasonal build.
Feds are spending big here.
The rest of u r looked.
Peak 5/2018 ,called it first

Comment by Taxpayers
Comment by Professor 🐻
2018-08-04 05:51:20

Here are my local observations:
1. For Lease signs seem very prevalent in local office complexes, much as they were in the 2007-2009 episode.
2. Wait times at local restaurants that cater to middle class families (eg California Pizza Kitchen) are way down, especially on weekends when you faced big crowds a couple of years ago.
3. Traffic on my daily commute route is lightening up; I made it home last night around 6pm with remarkably light traffic, which wouldn’t have happened a year ago.
4. Movie attendance is not robust. Saw Mission Impossible: Fallout last night in a mostly empty theater.
5. I’ve seen some ginormous homes under renovation in La Jolla over recent years. I guess the flippers are trying to time completion of these boondoggles to hit the market at the onset of the next real estate bust.

Comment by Professor 🐻
2018-08-04 05:57:10

6. Recently I dined out with my cousin who is talking about moving to a downtown San Diego condo. When he pointed out the building he is checking out, I couldn’t resist asking him why most units were dark at a time in the early evening on a weeknight before people generally go to bed.

Comment by azdude
2018-08-04 06:02:58

i off loaded some stock to bagholders last week.

Comment by Boo Randy
2018-08-04 07:51:43

I picked up some beaten-down gold & silver mining stocks from some weak hands last week.

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Comment by Professor 🐻
2018-08-04 16:17:06

7. A drive this morning through Del Mar and Rancho Santa Fe yielded surprising evidence of a rapid inventory buildup in progress, as in some cases I saw numerous yard signs on the same street. Uncle Warren seems to be selling out entire neighborhoods! This is high-end stuff… north of $1 million per property (some much more).

8. My son, who is training for cross country this fall season, took his early morning run through a nearby business Park. Later he asked me what a For Lease sign means. I explained that it’s like a For Rent sign on an empty house, but for a business to rent and occupy instead of a household. He said the For Lease signs were in front of virtually every driveway he passed. I told him it was just like this during the 2007-2009 financial crisis.

Comment by OneAgainstMany
2018-08-04 16:33:00

Hope your son has a good cross country season. I joined cross country in high school on a whim and somewhat as an accident, but it was one of the best accidents I made in my life. I frequently run through a new city I’m visiting just to get the feel of it. I’ve found that running is a really interesting way to see aspects of an area that you might never see if you are a tourist or just take a car everywhere. The same can be said about biking.

It’s amazing how much you can learn from the vibrancy of a city, or the lack thereof, when you are getting your long 20-mile runs in running through urban areas. Of course, I also run in nature to mix it up, but running through new areas gives me a feel of who’s up and who’s down. In my city, and the surrounding ones, I know just about every house that is for sale and which neighborhoods are thriving and which are suffering.

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Comment by Professor 🐻
2018-08-04 17:31:22

Not to stereotype, but Mormons seem to have some kind of comparitive advantage for distance running (albeit not like Kenyans). A disproportionate number of our local high school distance runners are LDS kids, and I recently heard that BYU has a top cross country team. My son is a decendent of the Utah pioneers, and us built well for running.

Comment by OneAgainstMany
2018-08-04 22:31:28

I think you are on to something. Although lately it seems that the Ethiopians are in the drivers seat when it comes to big races. And don’t overlook the Japanese, they are incredibly fast as a population. US distance running has been thrilling in the past few years with Gaylen Rupp and Shalane Flanagan. There are American runners who can hang with and beat east Africans, which is inspiring XC runners all across the country.

Right now the talent pipeline in Utah is American Fork high school. They are basically funneling their stars to BYU. Utah XC is a big deal. Back in my day it was Provo and Mountain View who were the powerhouses, but now American Fork runs the tables.

XC is a big deal in Utah. I was in Utah County and the posters are of track stars and distance runners that are plastered on the shopping mall signage, not football players.

Comment by Professor 🐻
2018-08-05 18:17:07

My wife (and kids) have ancestors from nearby American Fork (Pleasant Grove). And I’ve long suspected that surviving the trek across the Great Plains and the Rocky and Wasatch Mountains created favorable selection for distance running skills.

Comment by Professor 🐻
2018-08-04 17:41:03

9. At Yanni’s on a Saturday night, a wannabe upscale middle class priced restaurant. Wife was worried about having to wait for a long time. Worry was not justified…it’s 2/3 empty.

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Comment by Professor 🐻
2018-08-04 19:17:04

“…it’s 2/3 empty.”

Aka ‘negative wait time’ (zero wait time for customers; restaurant staff have positive wait time for someone to serve)

Comment by JAMESJIM
2018-08-06 08:48:54

OK, you got my attention. Wife and I are looking at moving to SoCal, but with the market starting to turn, what was once a 2019 move, could be pushed to 2020 or 2021 with what im seeing/hearing. We like Dana Point, Laguna Niguel, and im getting lots of zillow price reduction notices, and more homes hitting the market. All of your observations are a telltail sight that its starting, Housing Correction. Appreciate the news/observations, please keep emcoming.

Comment by Ol'Bubba
2018-08-04 07:24:15

Regarding your daily commute - I find that my commute is much easier when the schools are out for the summer. Do you find the same effect in your neck of the woods?

Comment by Professor 🐻
2018-08-04 15:47:15

Same here… although that doesn’t explain light traffic at 6pm on a Friday night.

Comment by Ben Jones
2018-08-04 05:57:37

Entities affiliated with Canuso Homes file Chapter 11 bankruptcy
Philadelphia Business Journal-17 hours ago
Two real estate entities affiliated with Canuso Homes, a South Jersey home builder that has been in business for 50 years, have filed for Chapter 11 bankruptcy …

Comment by azdude
2018-08-04 06:39:17

business is great for dollar stores, walmart and mcdonalds.

Comment by Albuquerquedan
2018-08-05 06:07:03

Meth sales are doing great with the help of the dreamers, we should really worry about family separation in this case:

Comment by Boo Randy
2018-08-04 06:48:57

If you are a seller, let’s not panic or get into modes of desperation just yet.”

He who panics first, panics best.

Comment by Ol'Bubba
2018-08-04 07:10:04

This weekend I’m going to look over my asset allocations.
Not panicking, but definitely looking to lessen up my risk asset holdings.

Comment by azdude
2018-08-04 07:13:39

sell the ranch this bull is tired. hogs get slaughtered.

everyone has been holding out. As soon as the selling starts it will lead to cascading losses. dont be a greedy fool like most.

Comment by Professor 🐻
2018-08-04 15:48:51

He who cashes out first, gets the most cash.

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Comment by Boo Randy
2018-08-04 06:51:12

“The buyer fatigue is stalling sales on homes that simply aren’t properly prepped and priced for the summer market conditions.

It isn’t “summer market conditions,” broker boy. It’s the incipient phase of Housing Bubble 2.0 bursting just like its predecessor did, only this time it’s going to be exponentially worse since the Fed has already blown its wad.

Comment by foobarbaz
2018-08-04 07:34:01

>the Fed has already blown its wad
Not likely. They can always go full on NIRP.

Comment by Mafia Blocks
2018-08-04 08:20:38

Prices are falling regardless what the Fed does.

Comment by foobarbaz
2018-08-04 09:05:04

Besides a couple of outliers prices have not been falling. If you think the central planners are going to give in that easy you haven’t been paying attention.

Comment by Mafia Blocks
2018-08-04 10:13:48

Very well my friend.

Atlantic Beach, FL Housing Prices Crater 12% YOY As China Economy Staggers

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Comment by Ben Jones
2018-08-04 10:32:32

‘If you think the central planners are going to…’

Barry plays the Juice Harp

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Comment by Professor 🐻
2018-08-04 15:53:14
Comment by Mr. Banker
2018-08-04 07:15:10

FWIW, here’s a 10 year chart that shows lumber prices, you know, the stuff houses are made of?

Pay attention to what’s been going on lately …

Comment by Ol'Bubba
2018-08-04 07:52:29
Comment by Albuquerquedan
2018-08-04 14:03:11

Benny Hill and Monty Python, very different British humor but both funny as hell.

Comment by Albuquerquedan
2018-08-04 14:08:57

The dollar is very strong lately and it has been hitting all commodities. It is interesting since it does not seem to reflect the present demand, for example copper stock piles are falling and are at a very low level but copper is weak. Hard to say if it just the dollar strength or the traders are anticipating lower demand in the future. However, it does not seem to reflect the current supply demand balance.

Comment by Professor 🐻
2018-08-04 16:03:18
Comment by Professor 🐻
Comment by Anonymous
2018-08-05 18:32:54

Interesting! Thanks. :D

Comment by Mortgage Watch
2018-08-04 08:25:44

Littleton, CO Housing Prices Crater 11% YOY As Housing Correction Slices And Dices Denver Area

Comment by b
2018-08-05 15:22:35

Toronto area observations ( i am visiting my parents in a western suburb — Oakville) for a few days.

1. Their neighbour just sold his house for $1.2M. He bought it for $340k - albeit 28 years ago. But here is the crux - since he bought it, he ——– put in a new roof, new AC/Heating units, renovated the kitchen twice, redid all 3 bathrooms, replace all floors, driveway, the basements etc. At least he got back all his spending and property taxes - but he has not won the amazing deal he thinks he did.

2. We took my parents to look at condos (we want them to move from a 4 bdrm house) to something more straight forward. The rents (4 blocks away from their current location for a 1100 sqft very nice building) were $3500. It is realistically more cost effective to pay for a house cleaner, gardener, snow service, handy man etc., instead of selling their house. Scary

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