The Housing Bubble

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.”