March 8, 2016

The Volatile Nature Of Boom And Bust

The Stockton Record reports from California. “San Joaquin County is among the nation’s most active housing markets for home flipping in 2015, RealtyTrac reported. Irvine-based RealtyTrac tallied nearly 700 home flips in San Joaquin County last year, accounting for 8.6 percent of all single-family and condo sales. It defines a home flip as a property that is sold for the second time within a 12-month period. That ranked the county — known demographically as the Stockton-Lodi metropolitan area — eighth among the 110 most-active home flipping markets. But the Stockton area was a standout for another reason — here, home flipping activity declined 11 percent from 2014. In each of the other 10 most-active house flipping markets, activity rose from year to year.”

“In San Joaquin County, RealtyTrac reported the median purchase price of a flipped home was $175,000, more than 17 percent below estimated market value, and were sold at a median $245,000, a 7 percent premium over market.”

The Daily Business Review in Florida. “Verzasca Group LLC believes now is the time to delve into the rental business. The Bay Harbor Islands-based developer has focused on condominium projects since its inception in August 2014. But it’s time for change, said Tim Lobanov, the firm’s managing director. His decision comes amid a slowdown in Miami luxury condo sales. Existing condo sales declined 10 percent in January compared to a year before, according to the Miami Association of Realtors. And developers continue pumping out supply. There are 78 towers with 1,769 floors and 11,201 units under construction in Miami-Dade County east of Interstate 95.”

“Why is Verzasca Group choosing the rental market as opposed to office or retail, and why now? ‘I’m sure it’s not a surprise that the condo market is slowing down a little bit. So we thought it would be the right time for us to diversify our business and start looking for rental opportunities.’”

The Coloradoan. “New home construction in Fort Collins is off to a slow start in the first two months of 2016. Builders pulled just 63 permits for single-family homes and nine multifamily units in January and February, the lowest two-month total to start a year since 2012. National firms are building new Fort Collins home in the $400,000 to $500,000 price range and may be sitting on a number of homes that haven’t sold yet, said Eric Holsapple of Loveland Commercial Real Estate, which is developing the Storybook subdivision in Fort Collins. ‘We’re definitely back to a drive ’till you qualify market,’ he said.”

“Despite the slowdown in permits, ‘the market is still really strong,’ particularly in the under $300,000 price range, Holsapple said. ‘I would expect the volume to slow down just because we’ve had more than 10 percent price increases for four straight years.’”

The Houston Chronicle in Texas. “The buyer who plunks down $3.9 million for the new five-bedroom house on Wink Road in Memorial’s Bunker Hill Village will walk on marble floors, cook with Sub-Zero appliances and swim in a custom-built pool. If that person steps up in March or April, the luxurious estate also will come with a $90,000 Tesla. The agent listing the property convinced the builder to pony up for the premium electric car in hope it would help snag a buyer. The property has been on the market since September and Houstonians aren’t purchasing as many luxury homes as they were when oil prices were rocketing past $100 a barrel.”

“In a city where fortunes are made and lost on the price of oil, some sellers of high-end houses are lowering their asking prices or resorting to unconventional tactics, some exotic but others more typical of the mass-market trade. ‘There are still buyers out there, but they really seem to have less of a sense of urgency,’ said real estate agent Diane Kingshill, who is listing the Bunker Hill house. ‘… Their hesitation is caused by their wondering what’s going to happen in the future. Will prices go lower?’”

“In further testament to the market’s fragility, Al Ross, the builder selling new homes in River Oaks, just called off his latest project, a six-story condominium building. Ross announced the project about a year ago and was planning to break ground on it last fall. The units were to start at $1.3 million. John Daugherty, Realtors had been listing units in the proposed building. ‘We withdrew the listing because it wasn’t the time to be marketing something like that,’ said John Daugherty Jr.”

“Kingshill said some of her listings are owned by Houstonians who wouldn’t be selling were it not for the struggling oil market. ‘I have more than one that are CEOs of their own energy companies that are hoping for equity out of their house to help their business,’ she said. To help promote her Bunker Hill listing and the Tesla giveaway, the homebuilder, Kickerillo Cos., is planning a March 30 event at the house for real estate brokers and the public. ‘We’re trying to do something creative to get attention to the property,’ Kingshill said. And if house doesn’t sell, ‘we’ll probably adjust the price and move on.’”

The Sierra Sun in Nevada. “Are we heading for another housing bubble? This is the question that continues to come up as residents read about rising home prices. To them, it feels like 2006. In the fourth quarter of 2015, 52.9 percent of homebuyers in the Reno MSA (Metropolitan Statistical Area) could afford a median value home, as opposed to 55.8 percent in the last quarter of 2014.”

“As challenging as the $300,000-$600,000 price range is, homes that are priced above this are not experiencing the lack of demand and have a different metric of absorption depending on the price: $601,000-$900,000 represented 3.5 percent of all sales in 2015 with a 5 month absorption rate; $901,000-$1,500,000 represented 1.3 percent of all sales with 9.8 month supply and homes above $1,500,000 represented .4 percent and have 27.3 months supply. All in all, we are experiencing a slow recovery but we need to have more affordable houses being built in order to grow effectively.”

The Deseret News in Utah. “A global market flooded with an oversupply of oil has led to plummeting prices and an exodus of workers from eastern Utah as companies declare bankruptcy, tighten their bottom line and cease exploration waiting for the cost of a barrel of oil to rise. Residents of the Uinta Basin are feeling it keenly, with businesses closing down week by week and others struggling to survive. Families are figuring out which bills to pay, the ones they can let go, and seeing their homes in foreclosure.”

“Kathy Deets sees the panic and fear on fresh faces in her office each week as the newly unemployed line up to apply for benefits, scour the computers for jobs and learn the ins and outs of federal assistance. ‘I tell them when they get to the end of their rope to tie a knot,’ she said. ‘That knot may get really big, but they’re still hanging onto that rope.’”

“‘Every business is seeing a great decrease in their sales,’ said Barton Jones, who owns a Duchesne ammunition and gun store that also sells a variety of other items. ‘Even if they come in, they look around and leave, because they just don’t have the money to spend.’”

“‘Our area is hit extremely hard,’ said Duchesne County Commissioner Greg Todd. Todd spent 40 years in the industry, so he knows its volatile nature of boom and bust, the frenetic ascent of a community bursting with job openings, struggling to find people to put to work, hotels and rental homes filled to overflowing and the money pouring in, only to have it tumble over the cliff. ‘There are for sale signs and for rent signs,’ he said. ‘Eighteen months ago, that would have been unheard of.’”

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Comment by Mugsy
2016-03-08 05:00:48

‘I have more than one that are CEOs of their own energy companies that are hoping for equity out of their house to help their business,’ she said.

No chance of default on a mortgage there. No siree Bob!

Comment by Ben Jones
2016-03-08 06:14:39

The Houston article has a photo of a couple who got all dressed up to stand in front of the house they listed for $16 million and got $6 million for it.

Comment by Mafia Blocks
2016-03-08 06:39:17

lol. The Dipschitz Family have no shame.

Comment by rms
2016-03-08 19:11:29

“The Houston article has a photo of…”

The only thing that guy with that Open House sign is missing is a cheap gold chain with big links.

Comment by Goon
2016-03-08 05:23:12

a drive ’till you qualify market

Which in the Front Range of Colorado means driving east. Denver and the Front Range is not some verdant alpine forest ecosystem. It is the high desert. Trees don’t grow outside of river bottoms unless someone plants them. Tumbleweeds, prairie dogs, and wind are your companions there. And watch out for the coyotes, they’ve been getting more aggressive toward humanoids lately…

Comment by In Colorado
2016-03-08 09:15:04

National firms are building new Fort Collins home in the $400,000 to $500,000 price range and may be sitting on a number of homes that haven’t sold yet

Other than California equity locusts transplants, I don’t know many people in Fort Collins who can afford a 500K house.

‘the market is still really strong,’ particularly in the under $300,000 price range

Even around 300K it starts to soften in Loveland. There does seem to be more demand in Fort Collins.

Comment by snake charmer
2016-03-08 12:05:25

Reminds me of Taos. Close to water there is a small area of cottonwoods and pine trees, and some ground cover. But beyond that, tumbleweeds and prickly pears.

I remember the first time I was in a plane that landed at DIA. I thought “where are the mountains?”

Comment by In Colorado
2016-03-08 14:51:33

I remember the first time I was in a plane that landed at DIA. I thought “where are the mountains?”

DIA is practically in Kansas ;-)

Comment by Senior Housing Analyst
2016-03-08 05:37:16

Bend, OR Housing Market Implodes; Prices Crater 16% As Housing Demand Plummets To 20 Year Low

Comment by Senior Housing Analyst
2016-03-08 05:42:48

Robert Shiller: “Houses Depreciate”

Comment by Ben Jones
2016-03-08 05:49:52

‘Angelenos and San Franciscans know their housing is insanely expensive, but California on the whole has some of the most expensive housing in the US, and that’s driving many poor and middle-class Californians out, says a new report from Beacon Economics. In the years between 2007 and 2014, “625,000 more people moved out of California to other states than moved into California from other states.”

Comment by Ben Jones
2016-03-08 05:56:47

“California has an employment boom with a housing problem,” said Christopher Thornberg, a founding partner with Beacon. “The state continues to offer great employment opportunities for all kinds of workers, but housing affordability and supply represent a significant problem.”

‘Those high home prices have caused homeownership rates to trend much lower in California than in other states. And they’re still declining, according to one of the reports. In 2014, California ranked 49th in homeownership, with only 53.8 percent of homes being owner-occupied. California’s average homeowners spent 25.4 percent of their household income on housing costs — more than homeowners in any other state.’

Oh Chris, pretty soon you’ll have supply coming out of your ears like New York City, London and Sydney. And I bet you won’t take it near as well as these people in Utah.

It’s always the same:

We’re having a boom. It will never end.

Oh crap, it ended, whaaa!

Comment by snake charmer
2016-03-08 12:06:47

The referenced report could have been recycled from 10 years ago. And it probably was.

Comment by Mafia Blocks
2016-03-08 06:04:49

“About 5 million Californians left between 2004 and 2013. Roughly 3.9 million people came here from other states during that period, for a net population loss of more than 1 million people.”

Crushing poverty, a seized up economy, rampant deviant sexual crimes, a fraud driven housing market…..

It should be no mystery why CA sustains a net population loss year after year.

Comment by redmondjp
2016-03-08 14:18:53

That number is meaningless, as nobody knows how many illegal aliens are coming into CA every year.

Comment by Mafia Blocks
2016-03-08 15:18:31

A falling statewide population isn’t meaningless no matter how much you would like it to be.

(Comments wont nest below this level)
Comment by In Colorado
2016-03-08 09:23:09

According to zillow, the Orange County house my parents sold in 1971 for $25K is zestimated at $700K.

IIRC, it fell to about 400K during the 2008 crash

Comment by Lurker
2016-03-08 12:00:41

Could it be that people are leaving CA because in some neighborhoods prices literally tripled in 6 years? My favorite price history of the rebubble so far:

Sold in 2010 for $650k. Sold in 2011 for $720k. Sold in 2013 for $830k. On the market today, 2016, for $1.45mil.

Yep, no bubble here.

Comment by Mafia Blocks
2016-03-08 12:49:18


“Yep, no bubble fraud here.”

Comment by Mugsy
2016-03-09 00:53:25

I believe I’ve read this story several hundred times before.

Comment by Senior Housing Analyst
2016-03-08 06:08:50

Davis, CA Housing Market Caves; Prices Implode 8% YoY As CA Economy Flounders

Comment by Ben Jones
2016-03-08 06:19:27

History repeats:

‘Coming soon to Miami: A condo for your exotic cars’

‘The car condos are priced from $500,000 to $2M for six to 20 car storage spaces’

‘Vedrani told The Real Deal that Gables Auto Vault will have car condos, as well as ground floor retail. He said the original plan included an auto dealership, but that has since been scrapped. “We knew there was a demand for secure [luxury] car storage,” Vedrani said.’

‘The project is 50 percent sold to local buyers, he said. Prices range from $500,000 to about $2 million, with spaces that hold anywhere from six to 20 cars. Units will include security, air conditioning and high-end finishes. Owners will be able to drive their cars onto large freight elevators that open into a common area and into units with accordion-style doors.’

‘The construction financing covers an assemblage of about 50,441 square feet. The LLC bought the six parcels out of foreclosure in 2014, according to property records.’

‘Over in Sunny Isles Beach, developer Gil Dezer has also tapped the car enthusiast demographic: Porsche Design Tower will include a Dezervator, a car elevator that delivers vehicles to a resident’s “sky garage.”

Comment by alphonso bedoya
2016-03-08 09:09:25

You have a gun for every car.

Comment by snake charmer
2016-03-08 12:15:13

“The car enthusiast demographic.” LOL. And of course there’s ground floor retail, why, that’s just what we need. What an incredible waste of space, time and money.

Are Leno and Seinfeld going to move their car collections to Miami? Not likely. I’ve heard a rumor that one of those guys employs someone whose only job is to start the cars periodically.

Comment by Mugsy
2016-03-09 01:38:48

It’s official: The top is in in Miami!

Comment by Ben Jones
2016-03-08 06:24:06

‘After a shaky start to the year, investors are not cutting senior housing real estate investment trusts (REITs) any slack. In a market where many senior housing businesses and REITs have seen their stock prices hammered, companies are going to get less of a break from investors, says Dan Bernstein, vice president at Capital One.’

“When an operator reports lease coverages or weak growth or an operator puts out a more tepid outlook for 2016, those items are going to get heavily scrutinized and heavily penalized in this market,” Bernstein tells Senior Housing News. “Depending on what it was, it may have been given a pass three months ago or four months ago. They’re not going to get a pass on that today.”

“They’re all getting creamed on the equity side,” Brad Thomas, editor of the monthly subscription-based newsletter Forbes Real Estate Investor, tells SHN.’

‘One example of this is HCP Inc. (NYSE: HCP), which saw its end-of-year earnings report dampened by the performance of its SNF portfolio—specifically, its tenant HCR ManorCare. The REIT is underway with the process of selling 50 HCR ManorCare assets, but the results were unpleasant to the ears of investors, and its stock price fell to a 52-week low a few days after the earnings report late last month.’

“All of those concerns and risks get simply heightened when the market is volatile,” Bernstein says. “When things are good, investors sometimes look past those weaknesses and risk. In this market, they won’t.”

When things are good, when things are volatile. It’s almost like a pattern or something.

Comment by Ben Jones
2016-03-08 06:31:11

‘Overbuilding Casts Shadow on Seniors Housing Outlook’

‘Professionals in the sector expect a slowdown.’

‘Life companies tend to be more selective in the seniors housing financing space, while banks and agencies such as HUD, Fannie Mae and Freddie Mac are more active. The agencies tend to be the most reliable sources of financing in this space, and banks have cut back a bit on their construction lending activity recently. According to Christopher Honn, Chicago-based senior managing director with Berkadia Commercial Mortgage’s seniors housing and healthcare team, “Some lenders have cut back because the competition for business is so keen now that they have decided that the compensation they get for that type of loan is just getting too thin.”

‘Berkadia’s Honn said, “The acquisition pace will likely slow down this year versus the last couple of years, which has just been at breathtaking, record-breaking levels. Our team thinks we have hit an inflection point in values in the industry and that values have stabilized. We are starting to see some transactions being sold at more conservative cap rates than we’ve seen in the last couple of years.”

‘which has just been at breathtaking, record-breaking levels’

And there is Mel Watts: ‘while banks and agencies such as HUD, Fannie Mae and Freddie Mac are more active’

Breathtaking and professionals don’t belong in the same report.

Comment by scdave
2016-03-08 07:25:49

‘Overbuilding Casts Shadow on Seniors Housing Outlook’ ??

Yep…The Elephants have been dancing around here for some time paying incredible amounts for the dirt ($100.+ a foot) and building at densities of 50+ per acre…

Comment by Professor Bear
2016-03-08 19:28:56

Senior housing is destined for a long-term downtrend concurrent with and after Baby-Boomer dieoff.

Comment by Ben Jones
2016-03-08 06:35:51

‘Report: Lenders tightening purse strings on multifamily construction loans’

‘Multifamily construction lenders haven’t cut off funding, but National Real Estate Investor reported that they are becoming much more cautious when evaluating potential deals. Part of the reason for this wariness is due to concerns over the many new apartments now under construction, new bank regulations and new cautions from bank regulators.’

‘According to Dave Borsos — vice president of capital markets for the National Multifamily Housing Council — the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation sent a joint letter to lenders suggesting they use caution in making construction loans, even in the face of a seemingly strong market.’

“Banks are beginning to feel the squeeze,” Robert Hodge, senior director with real estate services firm Marcus & Millichap Capital Corp., told NREI. “But compared to a couple years ago there are still a lot of options.”

‘Although Borsos said he hasn’t seen a reduction in available financing, NREI noted that some small banks have stopped making construction loans for seniors housing.’

‘Banks might also be hesitant to loan to multifamily developers because of concerns that they will build too many apartments, resulting in increased vacancies — even in an environment of strong demand. Residential experts have predicted a slowdown in the multifamily sector for months, as many expect this year will be the first since the housing crash that single-family starts will outpace multifamily.’

‘even in the face of a seemingly strong market’ = oh sh&t, we over did it - AGAIN!

Comment by scdave
2016-03-08 07:31:40

‘even in the face of a seemingly strong market’ = oh sh&t, we over did it - AGAIN! ??

Thats what I suspect given the amount of development completed and on going…When you look around all you see is cranes and your common sense tells you this cannot be sustained…Question is when will the slow down begin and how fast will it come…Over did it again ?? The big elephants are in a race to beat the other elephant to the finish line…

Comment by Mafia Blocks
2016-03-08 07:39:53

The reduction in production rate doesn’t much matter considering the excess capacity threshold was traversed years ago. Look at the reality.

-Massively inflated prices(the cause)

-Massive excess housing capacity(the outcome)

-Collapsing organic housing demand(the outcome)

The cure?

Falling housing prices to dramatically lower and more affordable levels accelerating the economy like nothing else can.

Comment by Senior Housing Analyst
2016-03-08 06:36:27

Miami Beach, FL Housing Market Implodes; Prices Crater 9% YoY As Housing Bubble Begins Deflating

Comment by Professor Bear
2016-03-08 07:06:42

“In San Joaquin County, RealtyTrac reported the median purchase price of a flipped home was $175,000, more than 17 percent below estimated market value, and were sold at a median $245,000, a 7 percent premium over market.”

Someone is making bank on the slow burning of the Echo Bubble!

Comment by BigSky
2016-03-08 09:07:06

At the end of the article in the WSJ today entitled:

Foreign Buyers Are Pulling Back, Realtors Say

Lawrence Yun, NAR’s chief economist, said it is unclear whether Chinese demand for U.S. homes will fall as much as demand from other countries. Chinese economic growth may have slowed, but the country is still reporting growth of more than 6%. And while many Chinese residents have lost money in the stock market, giving them less to spend, that could also prompt them to try to diversify their investments.

Foreign demand is difficult to quantify. NAR does so through a survey of real-estate agents it conducts annually, looking at the period from April through March. The results of this year’s survey are expected to be released in the early summer. Mr. Yun said he expects to see a decline in demand.

Foreign buyers remain a small sliver of the U.S. housing market. But any pullback could have a disproportionate effect on demand for high-end condos in places like Miami and Manhattan and luxury homes in Southern California.

There could be a silver lining, however: Falling foreign demand could help make homes more affordable for U.S. buyers.

“Given that the U.S. currently has a housing shortage, any demand pullback helps,” Mr. Yun said.

Comment by Mafia Blocks
2016-03-08 09:27:28

There goes Larry Yun talking out his a$$ again.

with 25 million excess, empty and defaulted houses in the US, there is no “housing shortage”.

Comment by Ben Jones
2016-03-08 10:12:17

Shake Shack Inc. (SHAK) -NYSE
37.30 Down 4.93(11.67%) 12:10PM EST

52wk Range: 30.00 - 96.75

EPS (ttm): -0.76

Comment by Mafia Blocks
2016-03-08 10:45:00

“Oil Fundamentals Could Cause Oil Prices To Fall, Fast!”

“fundamentals do not support the present price.”

All stating the obvious but worth nothing anyways.

Comment by Professor Bear
2016-03-08 20:07:43

With so many greater fools on the loose, you have to hit them over the head repeatedly to get through to them.

Comment by Senior Housing Analyst
2016-03-08 19:31:22

Bend, OR Housing Market Caves; Prices Crater 16% YoY As Joblessness Swells

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