July 16, 2018

Overly Optimistic Sellers And Buyer Fatigue Have Converged

A report from USA Today. “The housing market may be starting to benefit from the one thing that can loosen a long-running squeeze that has crimped sales and driven up prices: more homes. The nation’s housing inventory increased 12.2 percent in the second quarter, the biggest gain since early 2015, according to Trulia. The Nashville, Tennessee, area led the nation in the second quarter with a 52 percent jump in homes on the market compared with a year earlier, Trulia figures show.”

“‘There has been some more inventory,’ says John McClanahan, a broker for Village Real Estate in Nashville. As a result, he says: “Prices have been really stable the last few months. Things are a little slower. You’re not seeing as many multiple offers. There’s not as much of a frenzy.’”

“Other top metro areas with big inventory gains the past year include Salt Lake City (48.6 percent), Dallas (32.4 percent), Washington, D.C. (21.9 percent), and Little Rock, Arkansas (13.4 percent), according to the Trulia data. Inventory increased 1.1 percent in New York City, 2.9 percent in Los Angeles, 3.1 percent in Miami and 22.1 percent in San Diego.”

From Deseret News in Utah. “A recent survey of Utah business leaders reveals a healthy level of confidence in the current economy, but less bullishness when it comes to the near future. Wages are not keeping up with the cost of living, particularly when it comes to housing. Since 1991, housing prices have risen faster than household income by a factor of 10.”

The Sacramento Bee in California. “Sacramento’s home sales market has slowed, offering a touch of good news this summer for buyers. With few homes on the market, sellers still have the upper hand, but the tide is turning, new data suggest. The median price of existing Sacramento County home sales in June leveled off at $375,000, the same as the median in May. For the first time since early this year, less than half of sellers got multiple offers. More sellers have had to lower their asking price to make a sale.”

“There were 1,767 home-sale escrow closures in the county in June, two percent more than May, according to the Realtors association. But homes with pending sales in June were down 17.5 percent from May, suggesting the summer cooling season had begun. More homes were on the market, though, in June, at 2,660 than were in May, when 2,509 were up for sale. The average price per square foot of homes sold in the county in June was $240, down two dollars from May.”

The Mercer Island Repoerter in Washington. “What a difference a couple of months can make in the housing market. In May, inventory levels were still at record lows and many homes were getting multiple offers.With the median house price at $812,500 in Seattle and $978,000 on the Eastside, we are at a tipping point where record-high home prices, overly optimistic sellers and buyer fatigue have converged. The total inventory of homes listed for sale has now grown for three straight months on a year-over-year basis, suggesting a new trend. Redfin data showed 32 percent of homes across the region had price drops last month, up from 27 percent a year ago and the highest for any June since the company started tracking in 2012.”

“What does this mean for sellers and buyers? Sellers need to be more realistic about the value of their home and shouldn’t expect to get multiple offers or offers with Escalation Clauses significantly over the asking price. Buyers will likely have more homes to look at in their preferred price range and area and may encounter less competitive multiple-offer situations.”

From The Real Deal on Florida. “A proposal to build 360 affordable and workforce housing apartments in Overtown near Miami Worldcenter and Brightline’s MiamiCentral development is gaining traction. Miami-Dade commissioners unanimously approved negotiating a deal with Atlantic Pacific Communities to develop a $172.8 million mixed-use project with a total of 600 residential units. In the company’s application, Atlantic Pacific COO Kenneth Naylor boasted Block 45 would help level the disparity in Miami’s downtown, which is oversaturated with condos and apartments that a majority of city residents cannot afford.”

“‘Thousands of expensive luxury units have been and will continue to be, delivered into this marketplace, forcing much of our workforce out of this community,’ Naylor wrote.”

From The Real Deal on New York. “Prices keep sliding in the Manhattan rental market as concessions remain rampant. The net effective median rental price of $3,314 in June was down 2.8 percent year-over-year, according to Douglas Elliman’s latest market report. That’s the sixth year-over-year decline in seven months. Median face rents also fell 2.9 percent over last year to $3,400.”

“‘It’s definitely been consistent over the past couple of months,’ said Hal Gavzie, executive manager of leasing at Elliman. ‘It’s all tied to just all the supply. There’s just a lot of product out there.’”

The Morning Call in Pennsylvania. “There is no denying that downtown Allentown today is in better shape than it has been for many years. One of the most intractable issues facing the neighborhoods is their high percentage of older rental properties. More than 86 percent of the houses in the neighborhood are now rental properties, up from about 83 percent four years ago. That’s far more than the 55 percent citywide. Vacant and decaying properties also remain an issue. Nearly 20 percent of dwellings in the neighborhood were vacant, according to the 2016 data, about the same as it was four years earlier. Again, the problem is much less of an issue across the city as a whole, where the 2016 vacancy rate was 9.5 percent.”

“Mark Zartler, a landlord of nearly three decades downtown, said the main problem he saw four years ago and again these days is out-of-town landlords who don’t keep their properties presentable. ‘One of the biggest gripes I have is people don’t take care of the outside of their buildings,’ Zartler said. ‘I mean, I am constantly calling the city about trash.’”

From New Jersey 101.5. “As we move further away from last decade’s housing crisis, its lingering impacts on the real estate market are dwindling. But the Garden State still can’t escape its role as the No. 1 state in the nation for the percentage of properties in the foreclosure process. The foreclosure rate was higher in New Jersey than in any other state in the first half of 2018, the second quarter of 2018, and the month of June, according to Attom Data Solutions.”

“Through the first six months of the year, foreclosure filings hit 26,667 New Jersey properties — one out of every 125. Forty-seven percent of New Jersey’s foreclosures are linked to loans that originated between 2004 and 2008, the data show. ‘I do think that it can’t be blamed anymore on just the legacy foreclosures,’ said Daren Blomquist, senior vice president for Attom Data Solutions.”

“In the Atlantic City region, the foreclosure rate was a whopping 8.6 percent on FHA loans that originated in 2014.”

July 15, 2018

Everyone Is Really Good At Speculating

A weekend topic on reporting the housing bubble starting with WKBW in New York. “Across Western New York, buyers are struggling to find the homes of their dreams. Inventory is low and prices are jacking up. It’s not uncommon for a house to reach over 10 offers and John Heffron, realtor at Gurney Becker & Bourne said Buffalo has been undervalued for a long time and this market is here to stay. ‘I don’t see a gallon of milk going back to 79 cents, so I don’t see a house going back to what it was worth 10 years ago,’ Heffron said. ‘I don’t even call it a bubble, I don’t even think it’s a bubble.’ Heffron later joked that people are literally signing contracts on the hoods of cars.”

From Fox 2 Detroit in Michigan. “Realtor Paul Wolfert is used to showing off the latest homes popping up for sale. It’s hard to keep up. ‘It’s wild. Appraisers are saying they have never seen anything like it,’ he says. The housing market is hopping. People are willing to do anything to get the house of their dreams. ‘Highly, highly approved buyers, they have the extra money and they say, ‘I don’t care. The inventory is so low out there right now, I don’t care. Whatever I have to do, if the house is ($200,000) and if I have to pay $30,000 cash above what I’m already doing I will do it,’ he adds.”

“But what to make of a strong market like this — will the bubble burst anytime soon? Wolfert and Tim Smith, senior mortgage lender with Chemical Bank say no. ‘These are being purchased by people who can afford to do that. They’re putting $20K, $30K, $50K — some are cash. We have $400,000 houses that are selling for cash,’ Wolfert says.”

From KETV in Nebraska. “The Omaha housing market in a word? ‘Insane,’ Melissa Yardley says. She and husband Kevin moved to Omaha from Cedar Rapids. As Kevin worked his job at a local credit union, Melissa — remotely — took on a full-time job of her own. ‘I was looking at listings nonstop, almost 24/7,’ she said. Real estate agents now have a saying for clients who aren’t quick to act in this market. ‘If you have to sleep on it, you won’t sleep in it,’ said Jenna Jacupke, who’s sold homes for about nine years.”

“Buyers are employing a new tool in negotiations: escalation clauses. Essentially, it’s contractual language that raises what you’re willing to pay for a house to fight off competitors. ‘We had never used an escalation clause,’ Kevin explained, ‘and we’ve bought five homes.’ The Yardleys used an escalation clause on a house and lost it. Days later, they spotted a new home that just went on the market. They made an offer in hours.”

“‘Because we had just gone through the experience of losing the other house the second day it was on the market,’ Kevin said.”

From The Daily Item in Pennsylvania. “With fewer homes on the market, more prospective buyers are competing for fewer houses, Valley Realtors say. People determined to find the home of their dreams are offering more than the asking price on houses they love, offering to pay for home inspections, even writing letters to the seller to get the edge over other bidders. Todd Umbenhauer, Pennsylvania Association of Realtors president, said it’s the same story for the most part across the country. Low inventory creates a sellers market, which leads to higher home prices and more offers on a home. ‘When five people want to buy a house, it means four people are disappointed,’ Umbenhauer said.”

“Barbara Hamilton, Central Susquehanna Valley Board of Realtors association executive, couldn’t say for sure why there are so fewer listings. ‘Everyone is really good at speculating,’ Hamilton said.”

The Press of Atlantic City in New Jersey. “The Atlantic County housing market is beginning to rebound, according to ATTOM Data Solution. The amount of available, salable, well-maintained housing has been drying up for the past year, said Carlo Losco, owner of Balsley Losco Realty in Northfield. ‘So what are we going to have? We are going to have basically a food fight. We already have bidding wars. It’s going to intensify,’ Losco said.”

“During the past 10 years, for the most part, new homes stopped being built because the banks were not lending, Losco said. Last year, Atlantic County was still a national leader in foreclosure, average prices were down 8 percent month-over-month and 2 percent year-over-year in June, according to the South Jersey Shore Regional Multiple Listing Service. If some of the bank-owned properties can come on the market faster, hopefully, home sale prices will stabilize, Losco said. ‘If it doesn’t, then, the ready-made houses will continue to reap the benefits. They are going to sell fast and furious,’ Losco said.”

From US News & World Report on Illinois. “In 2011, Chicago officials created the Micro Market Recovery Program (MMRP) to jump start individual blocks that had a high rate of vacant buildings due to foreclosures. MMRP sought to transform those abandoned, dilapidated buildings into affordable homes for renters or first-time homebuyers. Chicago had already spent about $169.2 million from the Housing and Urban Development’s Neighborhood Stabilization Program (NSP) for areas hit hardest by foreclosures.”

“Besides Chicago, NSP has distributed roughly $6.8 billion nationwide over the last 10 years to cities hit hardest by foreclosures, says Brian Sullivan, HUD spokesman in Washington, D.C. ‘It’s hard to say if the foreclosure crisis is over,’ Sullivan says. ‘They say all housing is local and the foreclosure crisis ended sooner in some areas rather than others. But who says it’s really over?’”

From Fox 4 Kansas City in Missouri. “If you are looking to buy a home but are afraid you might not be able to afford it, a Kansas City Congressman wants to offer you a financial boost. Rep. Emanuel Cleaver, a Democrat in Missouri’s Fifth District, and Kansas City Mayor Sly James will announce the return of a popular homebuying program Monday. It’s called NeighborhoodLIFT, and it’s financed by Wells Fargo. The bank is providing $5.7 million in down payment assistance to boost home ownership in Kansas City. If you live in Jackson, Cass or Clay County and qualify for this program, you can receive up to $15,000 from Wells Fargo to be used on your down payment.”

“Jackson County officials say there are more than 15,000 vacant homes in the Kansas City area. According to the Census Bureau, 53.7 percent of Kansas Citians own a home. The average monthly mortgage payment is $1305 while the average rent payment is $826 a month. It’s cheaper to rent. By offering $15,000 grants, city officials hope it will encourage more people to take the risk and buy a house.”

July 14, 2018

The Question Isn’t If Or Even When: It’s Starting Now

A Saturday desk clearing post on nations outside the US. “Toronto real estate sales sometimes fall through, it’s a reality of any market. It’s often not until a few months later that we find out how many sales actually closed. Toronto Real Estate Board (TREB) data shows sales fell through at a higher rate than usual last year. In a small window where price growth reached peak, the rate of cancelled sales doubled. Why most of these buyers walked away from their sales will forever be a mystery. Some have popped up in the court system, sometimes with huge consequences. One buyer that backed out without sufficient reason was ordered to pay $470,000 to the seller.”

“On that note, we’ll leave you with the wisdom of Justice Edwards: ‘When the residential real estate market is a rising market, most people – perhaps with the exception of first time buyers, are happy homeowners and investors. When the market turns and drops, it is not for the faint of heart.’”

“Homeowners are slashing prices after a surge in the number of properties on the market last month. The number of homes with a reduced asking price is now at its highest level since October 2012, analysis has found, with reductions totalling £1.6billion. The first regional supply surge occurred in Greater London, where the total stock for sale has now climbed to the ‘glut level’ last seen in October 2010.”

“The Guardian investigation reveals that there is currently a property overhang in the market, with high number of unsold units and vacancy rates in major cities in the country. The scenario is not a surprise to property watchers as Nigerians have long been complaining about the skyrocketing property prices over the past few years. The increase in property prices is due to speculative investing as well as the surge in number of developers jumping on the bandwagon for the past few years, whereby government and bankers’ responsibility cannot be absolved.”

“The phenomenon of property glut prevalent today did not get better despite many developers’ efforts in pushing sales which include rebates and lowered down payment. In most Nigerian cities, like Lagos, Abuja, Kaduna, and Port Harcourt, the story is not different, existing vacancy rate in residential and commercial market have continued to double.”

“The glut in the property market is getting worse with banks, pension fund administrators and politicians offloading their assets into the market. Some of the property has remained in the market for several months without any buyer. As the elections draw near, experts believe that market will be saturated with many more property. Lagos NIESV Vice Chairman, Dotun Bamignola disclosed that, ‘there is clear caution in purchasing property. Property prices have not really moved northward as usually anticipated by speculators. Most of them are still locked down into their expectations,’ he said.”

“On Thursday, Annahar hosted a discussion between two experts from opposite sides of the spectrum, Daniel Azzi, former CEO of Standard Chartered Lebanon, and Abdallah Hayek, CEO of Hayek Engineering and Construction Group. The discussion revolved around the factors behind the stagnation, the fiscal and monetary measures targeting the real estate sector, and the current state of the market.”

“The surplus in the market was further aggravated by ‘non-professional developers who entered the market’ during the peak years of 2010, Abdallah says. ‘We are faced with a correction, the professionals will survive and the intruders have to figure out a way out with minimum losses.’ Both experts agreed on this notion as well, with Azzi alluding to these ‘amateur professionals who entered the market at the peak of the bubble’ with no prior experience in the real estate sector.”

“‘There is excess supply competing with Mr. Abdallah’s excess supply,’ he says, adding that ‘the problem can only be solved with major price reductions.’”

“The exodus of expatriate workers from Saudi Arabia has negatively affected the country’s real estate sector with a considerable fall in rent prices. Many property owners were forced to reduce their rents to attract clients and ensure liquidity. Market analysts expect further falls in prices in the coming months. Khaled Barasheed, former chairman of the real estate committee at Asharqia Chamber, said the fall in real estate prices in remote areas reached 25 percent while in cities the percentage was a little less. ‘People have postponed their plans to purchase houses and other properties expecting the prices to fall further,’ said Barasheed.”

“Ali Al-Jibali, former vice chairman of the real estate committee at Asharqia Chamber, said the depression in the property market was not limited to the Eastern Province alone but covered all regions of the country. He attributed the fall to a global economic downturn.”

“Tianducheng—also known as ‘Sky City’—opened its doors to the public as a luxury housing estate in 2007 with capacity to accommodate more than 10,000 residents. But it remained largely unoccupied as Chinese citizens’ rejected its bizarre theme and undesirable location. In 2013, a video surfaced showing the town’s long-empty boulevards and Eiffel Tower overgrown with weeds. The footage led to several reports deeming the design a failure and the city a ‘post-apocalyptic ghost town.’”

“Starting in the early 2000s, ‘fake’ cities and knockoff global cultural landmarks have sprung up in all corners of the country. Thames Town in the Songjiang District looks like a caricature of London’s boroughs. Anthony MacKay, the masterplanner and architect of Thames Town, told Newsweek that he was disappointed with the finished product, calling the entire village ‘comical.’”

“‘It’s not how I intended Thames Town to be. It’s doesn’t look right. I’m angry about it,’ he said. ‘They came [to England], took photographs of lots of buildings, went back and copied them… It’s like a collection of facades, there’s no depth to the buildings.’”

“The average asking price of all properties from throughout the country that were newly listed last month was $645,133, compared to $658,170 in May and $661,129 in April. The national average asking price is now down 4.2% compared to its February peak of $673,659. Average asking prices in June were down compared to May in most parts of the country. In Auckland the average asking price declined for the fourth consecutive month to $912,071 and has now lost more than $82,000 (-8.3%) since it peaked at $994,873 in February. It is now the lowest it has been since July last year.”

“In the Bay of Plenty the average asking price declined for the second month in a row to $624,207, down by $55,152 (-8.3%) compared to its April peak of $664,652. It is now at its lowest point since September last year. In the Wellington region the average asking price dropped to $593,686, the first time it has been below $600,000 this year and and down by $39,212 (-6.2%) from its March peak of $632,898.”

“Analysis by RiskWise Property Research shows unit over-supply in inner-city Brisbane has created weakness in the market leading to a high level of risk for investors and therefore lower valuations and rising defaults on settlements. It comes as Lendlease asserts the over-supply of units in the Brisbane market will peak this year. The developer is bracing for rising defaults on settlements in the short-term as buyers fail to complete purchases, according to an article in the Australian Financial Review.”

“‘The issue of oversupply is not a new problem and has been there for a few years and the continuous weakness of the unit market in inner-city Brisbane should have raised red flags for developers and lenders,’ said RiskWise CEO Doron Peleg. ‘What we are seeing now is the realisation of the risk that should have been identified at least a couple of years ago. Defaults have been rising and will continue to do so.’”

“One of the key factors was developers’ lack of foresight regarding unit oversupply as well as the impact of lending restrictions introduced in 2014. It seems there was no methodological and structured risk-management approach including identification, assessment and mitigating action plans to address those risks. Overall, it seems they were too optimistic about the projected market value, and it is highly likely that the price they paid for the land was also too high,’ he said.”

“Mr Peleg said it must also be remembered the value of off-the-plan property could decrease between the original contract date and settlement resulting in capital loss, as the equity in the home could be reduced, and this was well known in inner-city Brisbane. ‘The current valuations made by valuers are simply a reflection of the realisation of the risks and changes to unit prices, and represent the fair market values of the properties at the time. The point is that if developers and lenders put more proper risk-management practices in place, this could all be avoided,’ he said.”

“What happens to the economy of B.C., and of Metro Vancouver in particular, when the housing bubble bursts? That’s something I worry about quite a bit, of late. The air is leaking out of the housing bubble. Detached house prices are finally sinking, sales are crashing, and oversupply seems certain. So the question isn’t if or even when (it’s starting now) but how bad will it be. I’m hoping the answer is not too bad, but I very much fear the opposite will prove true.”

“The construction industry is currently the third largest employer in the province, with more than 233,000 jobs involved directly or indirectly. Real estate, rentals, and leasing made up more than 18 per cent of B.C.’s GDP last year – a larger percentage than oil and gas represents in Alberta. We’re seeing the first, earliest stages now, as it takes a bit longer every month to sell a home in Metro Vancouver. The next stages are stagnation, layoffs in construction and real estate, and an exodus of some of the younger people who had come to B.C. to work.”

“With home sales grinding to a halt, some speculators will hold on to their assets and refuse to sell – leaving homes either empty, or hopefully, available for rent. (Which should make renting more affordable for a few years, at least.) Others will be forced to sell at a loss, further driving down prices. The provincial government will take a hit to its pocketbook. Victoria has been getting a lot of money out of the property transfer tax. Prepare for deficit spending, new taxes, service cuts, or all three.”

“Municipalities will take a lesser hit, but will be left to deal with vacant lots in the middle of patchy developments, and possibly with an increase in vacant homes. We still don’t know how extreme this will be, or how long it will last. I think we’ll be lucky if B.C. gets through it without going into a recession. Frankly, I’d be very happy to be proved wrong on all of this.”

July 13, 2018

A Sight Reminiscent Of Years Past Is Once Again Popping Up

It’s Friday desk clearing time for this blogger. “ATTOM Data Solutions, on Thursday reported foreclosure filings for the first half of 2018. Counter to the national trend, 26 of the 219 metropolitan statistical areas analyzed in the report posted a year-over-year increase in foreclosure activity in the first six months of 2018, including Houston, Texas (up 10%); Dallas-Fort Worth, Texas (up 11%); Cleveland, Ohio (up 4%); Phoenix, Arizona (up 5%). ‘Localized foreclosure flare-ups in the first half of 2018 can no longer be blamed on legacy distress left over from the last housing bubble given that nearly half of all active foreclosures are now tied to loans originated in 2009 or later and given that the average time to foreclose plummeted in the first two quarters of the year,’ said Daren Blomquist, senior vice president with ATTOM Data Solutions. ‘Instead these local foreclosure increases are typically the result of more recent distress triggers in those markets.’”

“‘We’re also seeing early evidence of gradually loosening lending standards starting in 2014, specifically for FHA-backed loans,’ Blomquist added. ‘The foreclosure rate on FHA loans originated in 2014 and 2015 has now jumped above the average FHA foreclosure rate for all loan vintages — the only two post-recession vintages with foreclosure rates above that overall average.’”

“Counter to the national trend, foreclosures were on the rise in the Phoenix area in the first half of the year. But it’s no reason to worry. There were more than 5,000 foreclosure filings — default notices, scheduled auctions or bank repossessions — in the Valley through June, a 5 percent increase from a year ago, according to ATTOM Data Solutions. The good news? That’s just a fraction of the 74,000 foreclosures in the area during the worst times of the housing crisis a decade ago.”

“A decade ago, you’d see foreclosure signs across most Southwest Florida, which became the sign of a troubled economy and housing market. And now, despite a building boom across our area and a robust jobs market, we’re once again starting to see the number of foreclosures climb. A sight reminiscent of years past is once again popping up in Cape Coral and across the rest of SWFL. Cape Coral homeowner Jacob Rico says he notices fewer people in his neighborhood, ‘I see many houses like this – empty. Over there a couple houses is empty.’”

“More homeowners in Southwest Florida are struggling to pay their mortgages on time, an apparent lingering effect from Hurricane Irma. In the Sarasota-Manatee region, 4.4 percent of mortgages were at least 30 days overdue in May, up from 3 percent one year earlier, CoreLogic said. Charlotte County also posted a 4.4 percent mortgage delinquency rate, higher than the 3.5 percent last year. In Florida, the 30-day delinquency rate averaged 6.7 percent, ahead of the year-ago 5.5 percent. The rates of homes already in the foreclosure process are holding below year-ago levels, a sign that lenders may be postponing taking struggling homeowners to court.”

“‘The percent of loans 90 days or more delinquent or in foreclosure are more than double what they were before last autumn’s hurricanes in Houston, Texas, and Naples, Florida,’ said Frank Martell, CEO at CoreLogic.”

“Connecticut entered July with the fifth-highest rate of residential mortgages under foreclosure in the nation, according to a study of more than 360,000 foreclosures nationally over the first six months of the year. As of the most recent records posted by the Connecticut state courts, Bridgeport had the largest number of pending foreclosure sales in the coming month at 30 properties, followed by the cities of Stamford, New Haven and Hartford with 18 each. But affluent towns are seeing activity, as well, with a half-dozen foreclosure sales under way in Westport, five in Ridgefield and a pair of properties in Greenwich.”

“According to PropertyShark, Queens had 881 properties go into new foreclosure proceedings in this year’s second quarter, running from April to June. Queens — particularly the Southeast section of the borough — continues to be ground zero in terms of an ongoing mortgage crisis. Those numbers did not likely take leaders at Community Board 12 by surprise. ‘District 12 is still a hotbed for foreclosures,’ said CB 12 District Manager Yvonne Reddick.”

“Reddick’s oft-repeated advice is that dealing with the problem early in the process is far preferable to what can result if people as a matter of pride or other reasons choose to ignore notices and the ability to reach out for help. ‘When the marshal shows up to evict you, people are going to know,’ Reddick said.”

“President Donald Trump’s new tax cut plan may have created a shift in the Westchester housing market. According to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate, home sales in Westchester plunged 18 percent in the second quarter from a year earlier. That is the highest amount since 2011. ‘When they look at a property, they are concerned about the amount of taxes they’ll have to pay,’ says Michele Silverman Bedell, broker/owner of Silverson’s Realty. ‘The taxes could be $20,000 $30,000, $40,000 on a house.’”

“Bedell says this could discourage buyers and convince potential sellers to downsize. It could also flood the market with inventory and force price reductions.”

“Both startling and subtle evidence is emerging that our housing market is changing course. Let me count the ways: 1) California notice of default filings (step one of the foreclosure process) were up a staggering 24 percent (4,144) in June compared with one year ago. And, the state has experienced three straight months (April, May and June) of increased foreclosure activity according, to Daren Blomquist, Attom Data Solutions senior vice president.”

“Twenty-two states posted year-over-year increases in foreclosure starts for the first half of 2018. Normally solid metro areas like Las Vegas, Dallas-Fort Worth and Minneapolis-St. Paul experienced increases, also according to Blomquist. Thirteen percent of Orange County home sellers reduced their asking prices in recent weeks, according to Steve Thomas of Reports On Housing. Orange County’s home-listing inventory hit 5,983 this time last year, Thomas reported. This week, there were 6,501 homes listed for sale, a 9 percent increase over this time last year.”

“Sellers would be best served by prudence. ‘We’ve hit the top of the market. Anybody new to the market better price their property at market rate or below,’ said Dan Keller of EXP Realty in San Clemente. In this current market, I see many buyers playing a fools game by way overbidding based upon actual closed comparable sales. You’ve got to get rid of that ‘got to have it no matter what’ mentality.”

“June’s home sales numbers for North Texas made me do a double take. Preowned home sales in the area were down by the biggest year-over-year percentage in four years. Okay, it wasn’t down by much — just a 3 percent drop from June 2017’s record high preowned home buys. But for the last few years, the only direction Dallas-Fort Worth’s housing market has known is ‘up.’”

“All good things must come to an end. And there are more signs that our runaway housing market is hitting a ceiling. ‘Maybe we are seeing the beginning of the slowdown of the hyper growth Dallas has had for the last six or seven years,’ said Dr. James Gaines, chief economist at the Real Estate Center at Texas A&M University. ‘We’ve been kind of expecting it for almost a year now. It’s going to slow down eventually,’ he said. ‘The eventually may be getting here.’”

“Another telling sign of where the D-FW home market is headed this year is the rise in homes on the market. The almost 25,000 houses with ‘for sale’ signs in the front yard is the largest local inventory since 2012. ‘It’s not necessarily that the market is gong to go bad,’ Gaines said. ‘But the almost double digit price increases and increases in sales volume are going to slow down we think. You are going to start seeing some small negatives on a year-over-year basis.’”

“One subdivision won’t end the Rogue Valley’s housing shortage. In a real estate market where a dearth of housing inventory is decried at the turn of every calendar page, however, a Mahar Homes subdivision is poised to provide more options for 55-and-older buyers. Prices haven’t been fixed on the 28-acre development that will eventually have 44 single-family residences overlooking orchards and vineyards, but Mahar Homes General Manager Randy Jones indicated price tags will range above the $400,000 mark.”

“The number of houses on the market grew 16.2 percent to 1,117 from 961 and topped 1,000 for the first time since last September. ‘We’re seeing more people jumping in,’ said Colin Mullane, spokesman for the Rogue Valley Association of Realtors. ‘We’re reaching peak prices of 2005 and 2006 after a much steadier build. We’ve been hoping for this for quite some time.’”

“The first wave of modern high-end homes is about to hit Akron. Private developers are busily buying up 35 acres of city-owned land to build 349 homes in four developments, some so dense that 15 houses will fit on an acre. The first of the homes will be on the market later this year or early next, carrying price tags of up to $280,000. It’s all single-family housing.”

“More cautious residents worry that developers are overestimating the market. That’s what happened on Hickory Street when two homes went up, the bottom fell out on the housing market and no more units have been built since. ‘That’s my biggest concern is that you’ll have 51 homes at $200,000 and nobody to buy them,’ said Jamie Brown, who lives beside the future site. Some neighbors also question the prices. How, in a city with a median household income of $35,240, can anyone afford a $200,000 home?”

“‘There are a lot of [used] homes here that are selling for half that. So why would someone spend that much?’ asked the Rev. Scott Campbell, whose Shoreline Church sits across the street from the barren Guinther Park. ‘Are they going to sit empty if no one buys them and eventually become Section 8?’”

“Prices for purchasing a house in Sidney are on the downward trend, but asking prices still remain pretty steep in the area. Leif Anderson, owner of Beagle Properties in Sidney, says that single family homes are selling fairly well. ‘But the other segments, commercial lots and multi-family homes, aren’t going very well,’ Anderson said.”

“He explained that homes have experienced a fairly significant correction or decline in prices. But are prices back to where they were prior to the pre-Bakken days? ‘Not even close, actually,’ Anderson said. He said people might think that way until they look back at the much lower prices from years such as 2005 and 2006. ‘You forget where our numbers were. Compare to that, the numbers are still pretty big.’”

“He is worried that the prices may even dip lower. ‘We felt because there’s more [oil] activity, it would strengthen the real estate market. So far, it hasn’t happened yet.’ Factors why the housing market hasn’t improved in eastern Montana include that most of the oil activity has been being conducted in North Dakota and that Williston and Watford City now has plenty of housing available. ‘We won’t have an overflow,’ Anderson said.”

July 12, 2018

Hey, I Gotta Drop My Prices!

A report from Bisnow. “The multifamily market is in the late stages of a prolonged expansion, and capital sources continue to put money into the sector although industry experts say internal rates of return are declining. ‘Capital, especially debt, is extremely available — so is equity, and that raises prices and compresses returns,’ Southlake-based Trinity Private Equity Group principal Doug Gunn said at Bisnow’s Multifamily Annual Conference South. To be sure, plenty of equity is looking for yields and a place to land, Walker & Dunlop Managing Director Stuart Wernick said. He and others spoke on the state of multifamily financing during the conference. ‘There is not only capital here in the U.S. but all over the world,’ Wernick said.”

“Allied Orion Group CEO Ricardo Rivas said the company recently took a Houston property off the market after its best offer fell $1M short of its minimum asking price. ‘What made that decision easier was the availability of debt,’ Rivas said. Because cap rates have been compressed, investors have started to lean toward bridge loans to finance acquisitions and renovations. However, with the slowdown in rent increases, developers will need to be careful as they look at positioning their assets for a future sale as IRRs are coming down as rent growth slows. ‘We can’t pencil in anything over 17 [IRR],’ Rivas said. ‘Unless we are drinking a lot of Kool-Aid, then it’s a 25.’”

From Mansion Global on California. “San Francisco real estate markets are continuing their blistering streak through the second half of 2018, according to Paragon Real Estate Group. Some of the heat is coming from renewed interest in luxury condos flooding the market. Even while many luxury projects don’t list their offerings publicly, the sheer number of construction projects in the pipeline—68,000, by Paragon’s count, are among the evidence of an uptick in demand over the last six to nine months, said Patrick Carlisle, chief market analyst for Paragon. ‘There’s an immense amount of money sloshing around the Bay Area, for that matter, around the country,’ he told Mansion Global.”

From CBS 4 Denver in Colorado. “Denver city leaders launched a new program they say is unlike any other in the country to try and help families find affordable options for housing in the competitive renter market. The program uses vouchers supported in part by employers and apartment complexes. Councilman Kevin Flynn was the only ‘No’ vote. He says he supports programs that help families pay for the cost of rent, but wonders if this is the right approach. ‘If apartment units are vacant and new, in this hot market, that means the rents are too high,’ said Flynn.”

From Reuters on Florida. “Elene Errazuriz had spent nearly three months trying to sell her four-bedroom-house on Key Biscayne. She was surprised at the small number of visitors and the low offers. Some viewers even implied that the house had little value as its elevation is among the lowest in all of Miami-Dade county: just one meter (3.2 feet) above sea level, Errazuriz said. ‘I was afraid I’d have to sell for just the land value,’ she said.

“In mid-June, Errazuriz received an offer on her home, and was hoping to close the sale in a few weeks. But from the original asking price of $1.8 million, the house was contracted for $1.5 million - about 15 percent less. Property appraiser Pedro Garcia said his office could not conclude that lower values were related to fears about sea-level rise, and suggested the cause was likely a boom in apartment complexes being built in luxury neighborhoods.”

The Arizona Daily Star. “Let me paint a totally hypothetical scenario for you, dear reader. A midsize city with a modest architectural history finds itself at a crossroads. One of its few local landmarks — beloved by the entire community — comes up for redevelopment. The city doesn’t seem to be capable of spurring small business development beyond the vape pen economy of cannabis dispensaries, fast food joints and tattoo parlors. They lost interest long ago — assuming they had it in the first place. Let me also warn you, there is a student housing bubble and it’s coming fast. Just look at the flattening number of college aged consumers coming in the next 10-15 years.”

From The Advocate in Louisiana. “Disparate groups across the short-term rental (STR) debate are urging city officials to require people who put their homes on platforms like Airbnb to also live at the property. The city has issued more than 5,000 STR licenses over the last year, and nearly three-quarters of all STRs are for whole homes or apartments. ‘I’m afraid we’ve seen the unintended consequences of short-term rentals run amok,’ said Pat Galloway, adding that her block is empty most weeks unless STRs are booked. ‘What’s a neighborhood without any neighbors?’ she said.”

“Ben Harwood — a developer with more than a dozen STRs in Treme — said he now has vacant properties and projects-in-statis with the recent moratorium and has ‘no idea what’s going to happen.’ ‘It makes me want to sell my properties and move to another city,’ he told the CPC. One group at the meeting shouted, ‘Please do!’”

From the Times Colonist. “With Greater Victoria and Metro Vancouver creaking under the strain of sub-1 per cent apartment vacancy rates and among Canada’s highest rents, it’s eye-opening to look just south of the border at what’s happening in Seattle. The Emerald City – once itself struggling with low vacancies – is now awash with available apartments. Which means rents are falling.”

“In downtown Seattle, the vacancy rate is a whopping 25.7 per cent, according to the Seattle Times. And in newly completed downtown apartment buildings, around 40 per cent of units are currently empty. Seattle has completely flooded the market with new-build apartments in a very short space of time. In the 2015-2019 period, the city has opened or is opening more new apartments than in the previous 50 years combined. But unless we see the kind of supply flood that Seattle has seen – which still seems highly unlikely – it may not be enough to significantly move the dial on vacancy rates and rents in the long term.”

From CBC News in Canada. “First it was real estate sales numbers dropping. Then it was the prices. Now signs are emerging that Vancouver’s sky-high rents could be trending downward, according one local data analyst. Since 2016, UBC-trained data scientist Louie Dinh has been somewhat obsessively tracking the rents for Vancouver homes in his spare time and posting the findings on his blog. Now, for the first time since he started, ‘it does seem like the rents are coming down a little bit,’ he says cautiously.”

“Last year there were about 4,500 units listed each month, but that’s risen to over 5,500 units lately, his figures show. ‘Now we are starting to see landlords are pulling back a little bit and saying, ‘Hey, I gotta drop my prices so I can move my unit,’ he says. He’s willing to suggest that declining property sales could be leading many real estate speculators to rent their properties out rather than put them up for sale. ‘Last month, condo sales dropped 30 per cent to match 2012 lows, and detached homes haven’t seen this sort of sales drought since 1991,’ he writes. ‘Recent buyers will likely sit back and rent for the next few years of zero per cent growth rather than sell at a loss.’”

From Domain News in Australia. “Renting a house in some of Sydney’s most expensive neighbourhoods has become cheaper over the year as they compete with newly built apartments on the rental market. The median house rent in Sydney’s inner city dropped 5.5 per cent year on year to $1,040, according to the latest Domain Rental Report. On the lower north shore it dropped 4.5 per cent – or $50 – to $1050. Asking prices for apartments on the lower north shore also fell by 3.2 per cent to $600.”

“‘It’s the first negative year on year movement for houses in the city and east since [the beginning of the data set in] 2014′ said Domain Group data scientist Nicola Powell. ‘The supply is out-growing demand in that particular market. The pace is changing for the rental market, particularly as a cooling sales market in Sydney is giving landlords less reason to increase their rents,’ Powell said.”

“‘It’s definitely a renter’s market,’ said LJ Hooker Lane Cove business development manager Yvette Cherry. She said an influx of units in the Lane Cove area had put downward pressure on asking rents. Figures from the Department of Planning and Environment show multi-unit completions for the year to April were up more than 200 per cent annually. ‘There are two-bedroom units everywhere, there were over 150 just in Lane Cove alone when I last checked,’ she said. ‘For a lot of properties getting re-let, [landlords] have even had to offer price deductions.’”

“An influx of Sydney rental listings over the June quarter was a key factor for easing prices, with the number of houses for rent up 6.9 per cent from the previous year, and units up 16.4 per cent – their biggest annual increase since 2012. ‘We’re seeing building completions peak and seeing a lot of off-the-plan properties sold to investors [in previous years] coming onto the rental market,’ Dr Powell said.”

“Economist Stephen Koukoulas noted falling property prices meant investors who had relied on strong capital growth to get ‘bang for their buck,’ might increasingly be deterred by Sydney’s ‘relatively low rental yield’ and look elsewhere. Domain Group data showed Sydney’s rental yields had remained relatively flat year on year at 3.15 per cent for houses and 3.85 per cent for apartments. Any shortage in rental stock was a long way off, with Mr Koukoulas saying there was still a lot of supply in the construction pipeline. ‘My hunch is that….we could see more of a deterioration in [rental] prices.’”

July 11, 2018

It’s Back To Reality

A report from CBC News in Canada. “House prices declined in much of the Greater Toronto Area in the second quarter of this year, particularly in Richmond Hill, Markham and Vaughan, according to Royal LePage. The aggregate house price in Richmond Hill fell 12.4 per cent in Richmond Hill year-over-year to $1,132,722, while the aggregate house price dropped 8.8 per cent in Markham year-over-year to $1,004,095 and dropped 6 per cent in Vaughan year-over-year to $1,011,913. CEO Phil Soper blamed the sluggish market in much of the GTA on the federal mortgage stress test imposed in January 2018, which he said has reduced the borrowing power of buyers and forced them to lower their expectations. The rules have slowed the market particularly in suburban Toronto, with prices he described as ‘very soft.’”

From Bloomberg. “Canada set out to cool a hot housing market, and did it ever. Sales of homes above C$1 million (S$1.03 million) fell 46 per cent in Toronto and 19 per cent in Vancouver from a year earlier, while the number of homes sold above C$4 million dropped 51 per cent in Toronto and 47 per cent in Vancouver. In Toronto, on the other hand, sales of condos above C$1 million dropped 13 per cent to 658 units. Sales of condos over C$4 million slumped even more, down 40 per cent.”

The Edmonton Journal. “Edmonton’s housing market inventory has reached a 10-year high, according to Royal LePage. This kind of a surplus hasn’t been seen since the 2008 global financial crisis, the company said. Royal LePage Noralta Real Estate broker Tom Shearer said that while Edmonton’s current buyers’ market is a ’sign of the times,’ sellers shouldn’t despair. ‘Sellers just have to be super competitive in pricing their homes. There’s no room for error in overpricing a home,’ he said.”

From CBC News. “Sales of Calgary homes listed for more than $1 million have dropped sharply in the first half of this year compared with last year, says a Sotheby’s International Realty. The report also notes that mounting supply and slumping demand have put downward pressure on prices for higher-end single, attached and condo homes in Calgary. Brad Henderson, with Sotheby’s International Realty Canada, says that with an increased supply of homes in Calgary priced over $1 million, it’s a buyer’s market right now.”

“‘I think there was premature optimism in the market and people were thinking that things were getting better and that gave them confidence to go out and buy properties, but what we’ve seen as of late is that the properties are staying on the market a little longer,’ he said. ‘People are taking them off the market as they are not getting the price they want, so the activity level has subsided relative to last year.’”

The Regina Leader Post. “It’s the so-called perfect storm for the Calgary housing market, with the city still climbing out of the recession, high unemployment rates, sagging confidence and government regulatory intervention holding the market at levels not seen since the 2008 financial crisis. But, we’re not alone – the Calgary Real Estate Board (CREB) says many other Canadian energy-related municipalities in Alberta and Saskatchewan have had struggling housing markets over the past few years, resulting in price declines.”

“‘While our economy is no longer in a recession, persistently high unemployment rates, concerns over long-term growth, rising lending costs and stricter qualifications are all weighing on the housing demand,’ says CREB chief economist Ann-Marie Lurie. ‘Growth in new listings is starting to ease for some property types, but it is not enough to prevent continued supply growth and, ultimately, an oversupplied housing market.’”

The Goldstream Gazette. “A Langford development and property management company is cautiously proceeding as the speculation tax looms. Mayor Stew Young said he will continue to fight for Langford’s exclusion. He has received letters from U.S. residents informing him they are writing to their respective governors to push a 20 per cent tax on Canadians that have vacation homes in the U.S.”

“Some of that can be seen in the softening of the housing market at Bear Mountain, Young noted, as Albertans sell their second homes. Plans for new projects on the West Shore are also starting to slow as the market softens. ‘It’s just starting to happen now, I lived through the downturn in ‘08, and it’s happening,”’ Young said.”

“Blake MacKenzie, vice president of NorthWest Vacation Rental Professionals, said his business took a hit when the empty homes tax took effect in Vancouver 2017. ‘A lot of these [secondary] homes aren’t affordable, they are above that, so it’s not impacting affordability because a $3 million home on the water is not for somebody who can’t find a place to live,’ he said.”

The Star Vancouver. “In the past six months, realtors working across Metro Vancouver say they’ve seen market conditions go from highly competitive multiple offers and condo pre-sale lineups, to falling prices and developers offering up to $100,000 ‘bonuses’ in an attempt to lure buyers. The correction is taking some time to work through the market, but the realtors pinpoint April as the month when conditions began to change. ‘My advice to sellers is, it’s not 2017 anymore,’ said Ian Watt, a realtor with Sothebys. ‘It’s back to reality.’”

“Steve Saretsky, a realtor with Sutton Group West Coast, estimates Vancouver condo prices have declined four to five per cent since the peak of the market in January 2018. But as inventory continues to build because of the dramatic drop in sales, a much bigger price correction could be on the way, Saretsky warned. ‘Prices are always sticky on the way down,’ he said. ‘Fifty per cent of listings today are recycled,’ meaning that the property has been listed, removed, and re-listed, usually with a change in price. ‘It’s almost like price discovery: what is my home worth.’”

The Huffington Post. “You’ve likely heard about the slowdown in the once-hot housing markets in Toronto and Vancouver, but what you may not know is that — unlike with many other aspects of the economy — virtually all the data about housing comes from the industry itself. In the face of a slowdown that’s hitting realtors right in the pocketbook, we have word that maybe some of the data these realtors are providing may not be all that reliable.”

“A recent article in the Globe and Mail (behind a subscriber paywall) flags a disturbing trend: Realtors in the struggling detached home market in Vancouver are ‘recycling’ listings — pulling homes that aren’t selling off the market, then bringing them back as supposedly ‘new’ listings at a lower price: ‘[A] newly built house at 296 N. Gamma Ave. in Burnaby’s Capitol Hill was first listed on Oct. 13, 2016, at $2.599-million. The listing expired seven times and reappeared at a lower price until it sold this past January for $1,999,888. The listing agent boasted on his website that the house only took 89 days to sell at the asking price of $1,999,888. He made no mention on his website that the house had been listed and relisted several times, for more than a year, and had come down in price by $600,000.’”

“Vancouver realtor Aaron Best justified the lack of information in the Globe article like this: If a house sits on the market for long, ‘there tends to be a certain type of buyer who starts sniffing around, so they think maybe your client is desperate now or maybe there’s something wrong with the property.’”

“In other words, you get offers from people trying to get a better deal on their home! How shocking! How outrageous! How DARE they?”

From Global News. “Laura Gillanders would like to meet the neighbours a few doors away from her Richmond rental home but in six years she’s only seen one sign of life. ‘About three years ago, I did see somebody here in the summer and I saw them leaving with a suitcase,’ she told Global News. ‘I was like, ‘Oh, do you live here?’ And they just said they are going to the airport and didn’t talk so that was the only time I’ve ever seen anybody here. It’s just a shame to leave a house sitting empty for six years, it should be rented out.’”

“Longtime city councillor Harold Steves estimates Richmond has some 500 vacant homes, including two in his own Steveston neighbourhood. ‘It is a provincewide problem all the way through all of Metro Vancouver and it should be solved as a provincial problem, rather than a local one,’ said Steves, who wants to see an expanded empty homes’ tax.”

From Castanet. “For more than a decade, the B.C. Liberal government chose to ignore a cycle of money laundering linked to organized crime, the overdose crisis, the red-hot real estate market and skyrocketing housing costs. Attorney General David Eby released an anti-money laundering report, commissioned by our government and authored by former RCMP Deputy Commissioner Peter German.”

“That independent review details large-scale, trans-national money laundering that has been happening at an alarming rate in B.C. casinos. British Columbians saw disturbing footage of bags of money being dropped off at casinos with the express purpose of being cleaned up. Despite being warned multiple times about these activities, the former B.C. Liberal government didn’t care.”

“It could have been a scene from a mobster movie, but it was real life. B.C. casinos have unwittingly become laundromats for an infusion of dirty money into the province. Organized crime used something often called the ‘Vancouver model’ to take advantage of Lower Mainland casinos and other sectors of the B.C. economy – including real estate – to launder money. German describes the money-laundering situation in B.C. as a ‘collective system failure.’ The situation worsened year over year.”

“Instead of accepting responsibility for this failure, the B.C. Liberals have blamed everyone but themselves. And when they were criticized for their 2009 decision to shut down the integrated police task force responsible for casinos, the B.C. Liberals even tried to blame the police.”

From News 1130. “The hits keep coming for the former BC Liberal government in the wake of last month’s scathing report on money laundering. The latest report by Auditor General Carol Bellringer shows several Crown-owned properties were sold off for only two-thirds what they were worth to help balance the budget between 2013 and 2015. Current Citizen Services Minister Jinny Sims is calling out her predecessors for failing to properly assess values.”

“‘You’ve got an offer that comes in from one buyer that’s at only 66 per cent of the assessed value and you don’t even wait for other offers? I look at a city like Surrey, very fast-growing, where we have [more than] seven thousand students sitting in portables because the Liberal government –they kept selling the land that we could build schools and hospitals on.’”

July 10, 2018

We’re Going To Come Back To Reality

A report from the News Tribune in Washington. “If you want to buy a median-priced home in Pierce County with average wages, get ready for sticker shock. A new analysis shows a single-income family earning the average wage of $49,556 a year will pay more than half of that on housing if they expect to buy. Young or first-time home buyers also tend to take advantage of federally backed loans. VA and FHA loans are most prevalent in Lakewood, Parkland, Spanaway, South and East Tacoma, representing nearly 50 percent of all sales in in these areas, said Dick Beeson, principal managing broker with Re/Max Professionals.”

“Buyers in some areas of Pierce County are getting help from sellers contributing money to the buyer’s closing costs. ‘Pierce County buyers often need help with the cost of acquiring a loan to purchase,’ said Dick Beeson, principal managing broker with Re/Max Professionals. Sellers still might be in control, but Beeson noted ‘on average, nearly 40 percent of FHA and VA sales have seller’s concessions (the paying of buyer’s closing costs) and on average nearly 30 percent of all conventional sales do as well.’ The scenario is the same for Thurston County buyers, Beeson said. ‘Nearly half of all Thurston County sales include an FHA or VA loan. Sellers are expected to assist buyers with their closing costs similar to what’s occurred in Pierce County.’”

“That’s an increase since the first part of 2017, when about 40 percent of buyers used FHA or VA financing to buy a home, according to data from the Northwest Multiple Listing Service.”

The Kitsap Sun in Washington. “After months of high demand and diminished supply, the housing market in Kitsap County is finally starting to stabilize with a bump in the number of newly listed homes on the market and the lowest median home price increase seen in months, according to recently released statistics from the Northwest Multiple Listing Service.

“‘We’ve seen a reduction in the frenzy,’ said Kitsap County Association of Realtors CEO Mike Eliason. At the same time, King County saw almost a 50 percent increase in the number of active listings on the market year over year, up to 4,503 homes from 3,055 homes in June 2017. The addition of so many new homes on the market in King County might provide some much-needed relief for Kitsap’s housing market, Eliason said. ‘I think because of the increase in inventory in King County during the prior month, and that lack of supply has been fueling the Kitsap marketplace, with the increase in King, it should be helpful to reduce the demand in Kitsap,’ Eliason said.”

The Press Democrat in California. “For at least a decade the tract housing subdivision sat uncompleted in west Santa Rosa — a repossessed field with a looped, asphalt road and most of the sidewalks installed. But this spring foundations and framed walls arose from the ground along Sebastopol Road near the Courtside Village neighborhood. Plans there call for the construction of 51 single-family homes and 16 attached units. ‘We plan to build all 67 just as fast as we can,’ said Richard Lafferty,CEO of Lafferty Communities. The project is one of the few remaining that sat for years after the original developers gave properties back to banks in the midst of a historic housing market crash.”

“This year builders have broken ground for new subdivisions from Rohnert Park to Windsor for the first of hundreds of homes that are expected to be built in the next five years. But in a sign that the rush since has somewhat subsided, City Ventures in recent months has increased its referral fee to 3 percent of each sale for outside agents who bring in clients to buy homes at the subdivision. In the wider market, several brokers this summer are reporting a bump in buyer resistance to listed home prices and an increase in price reductions.”

“What lies ahead remains a matter of debate. Some think prices simply may stay flat for a time before resuming their upward march. But Randy Waller, broker/owner of W Real Estate in Santa Rosa, is less optimistic. He argued the housing market already has given up much of the roughly 10 percent jump in prices due to the fires. ‘We’re going to come back to reality,’ said Waller, who for years has specialized in both new subdivisions and home resales.”

The Victorville Daily Press on California. “The Great Recession was punctuated nearly 10 years ago when media outlets from across the nation focused their attention on the demolition of over a dozen new homes in a bankrupt housing development in the High Desert Today, in that ‘very same spot site’ near Bear Valley Road and Highway 395 in Victorville, the once doomed property is seeing a resurrection of sorts as a new developer is building a 105-lot housing tract, according to city spokeswoman Sue Jones.”

“The Silverstone tract includes two communities, Agave Pointe and Juniper, which include single-story and two-story homes ranging from 1,740 to 2,709 square feet and starting at over $280,000. On Tuesday, balloons and large banners welcomed potential homebuyers to Silverstone as completed and landscaped homes in one portion of the tract waited for buyers or their current owners. On another side of the tract, construction crews worked on several phases of home construction. Lawn signs that read ‘Sorry … Too Late Sold’ were posted in front of the majority of the completed homes. Several contractors, who wished to remain anonymous, told the Daily Press ‘a sold sign’ is being posted even before a house is completed.”

“In 2009, 16 homes built by developer Matthews Homes were in various stages of completeness when they were destroyed, Jones reported. The housing collapse led to the homes being razed by a heavy equipment operator, an action caught on video, which drew the attention of the Daily Press, Wall Street Journal, Los Angeles Times and several other news agencies. The homes, which were abandoned for nearly 18 months and unsecured, were eventually vandalized and experienced ongoing compliance issues with the city’s code. The bank finally opted to destroy the homes due to safety concerns, Jones said.”

“Four of the homes in the financially doomed tract were complete, four were models, and the remaining homes were in the framing stage. The financial institution that took over the foreclosed development confirmed the bank approved demolishing the homes on the property, the Daily Press previously reported. A bank official said in 2009 that it would cost more than $1 million to bring the property up to code. The financial institution also faced daily fines from the city if the improvements were not made.”

The Dallas Morning News in Texas. “Observers of North Texas real estate may have noticed something unusual about Frisco’s $2 billion Wade Park development. Namely, that it is still a very large hole in the ground and not the 175 acres of apartments, offices and high-end retail space promised by Atlanta-based Thomas Land & Development back in 2014. The project has been in a kind of suspended animation since site excavation stopped about a year ago, and lenders started threatening to foreclose on the property.”

“Thomas Land defaulted on more than $130 million in debts and contractors who did work on the site — concrete makers, construction companies and plumbers — started seeking millions in unpaid bills. In February, the two lenders declared the project in default and said they planned to foreclose on the property. But instead of doing so, the lenders have posted the property for foreclosure for five months in a row without going through with the sale.”

“Experts have predicted that the end of the nation’s economic expansion could be coming in 2020. Meanwhile, D-FW’s housing and office markets have softened considerably. Joseph Cahoon, director of Southern Methodist University’s Folsom Institute for Real Estate, said that in recent years, developers were building office space even before they had tenants signed up. But no more. ‘At this stage in the market, no lender would move forward with a construction loan on a truly speculative office building,’ he said. ‘Particularly of [Wade Park’s] size and scale.’”

“Back in 2014, Cahoon said, companies were announcing lots of big expansions and headquarters relocations, especially in non-coastal markets, which meant that the other developments were able to capitalize on the trend. But those moves have slowed. ‘That whole corridor … they’re all competing for the same corporate users,’ he said. ‘Invariably somebody’s going to lose.’”

The Palm Beach Post. “A couple in their early 30s — a writer engaged to a federal employee — spent months preparing to buy their first jointly owned property. They both clocked hours at second jobs to help build a substantial down payment. They perfected their credit scores and then met with a lender to gain mortgage preapproval.”

“Just hours after they left their lender’s office, they immediately happened upon a house they loved from the moment they stepped inside. It was a brick colonial with gleaming hardwood floors, an updated kitchen and an artfully landscaped patio. Excitedly, they made a nearly full price offer for the place, which pushed them to the top of their price range.”

“But will the couple in this true story later suffer buyers’ remorse? Despite their love-at-first-sight feel about the property, should they have done more comparison shopping before bidding on the first house they’d toured with their real estate agent? Should they have thought through the pros and cons of the neighborhood? Longtime real estate pros say only time will tell.”

“‘When I hear buyers have fallen in love with the first house they visited, I cringe. That’s like marrying the first person you’ve ever dated. That person could be absolutely wonderful. But have you had enough experience to know for sure?’ says Merrill Ottwein, who heads his family’s real estate brokerage.”

“Obviously, those seeking to buy for appreciation potential should avoid neighborhoods where many homes languish unsold for a lengthy time. Indeed, evidence that available properties are snapped up quickly is a strong sign of the desirability of a community. ‘You’re unlikely to experience eroding values in any area where homes are flying off the market,’ Ottwein says.”

July 8, 2018

Lenders Were Excited To Loan As Much Cash As Possible

A weekend topic starting with Realty Biz News. “The apartment sector of the residential housing market has begun showing indications that it is becoming saturated. Construction of high-rise apartment buildings in metro areas typically takes a year or longer to complete. The result is that many projects started during the middle and towards the end of the boom are only now coming online. In the hottest growth areas like Seattle, property managers are beginning to offer discounts and incentives to fill these new and expensive buildings. Yet, foreign investment into apartment buildings has been increasing rather than decreasing. The last quarter of 2017 and first quarter of 2018 saw higher foreign investment amounts than when the boom was in full swing during late 2016 and most of 2017. We’re talking about $10s of billions flowing in every 3 months for at least the past 3 quarters.”

“According to Real Capital Analytic, this increase is at least partially due to new foreign investors entering the market. You might think that most of this money keeps coming from China but even China almost always comes in second to Canada, which is historically the largest foreign investor in US real estate. In fact, 10 of the top 15 foreign buyers of apartment properties in the U.S. were Canadian during the 12 months that ended in the first quarter of 2018. What’s of interest is that Singapore has recently passed China to become the second most active foreign investor. Two Singapore investment funds alone invested about $6 billion in U.S. apartments over the past 12 months.”

“The same two biggest foreign investment countries, Canada and Singapore, are also investing heavily in college student housing. Overall, foreign investment in student housing is estimated to account for 36% of all transactions in 2017 and 42% so far this year. Both of these numbers are up significantly from 21% in 2016.”

From Multi-Housing News. “Jason Shepherd, co-founder of Atlas Real Estate Group, a Denver-based full-service realty firm, talks here about what he’s seeing in 2018. Q: With the first half of 2018 now behind us, what are the trends you’ve seen in Denver’s multifamily market? Shepherd: In Denver, we have been flooded with new multifamily construction over the last few years. Developers have overbuilt the multifamily asset class in Denver and I’m keeping my eye on this over the next couple years. I’m patiently waiting to see what happens to these units as 10 years of apartment supply (using our average absorption rate for this asset class) enters our market.”

“Q: What’s your biggest piece of advice with today’s current market? Shepherd: Be patient; post-housing crash we saw a flood of multifamily tenants. First, because a lot of people lost their homes or credit and also a large group of people that observed the fallout and preferred the ‘less stress’ rental option. Couple that with lenders that were excited to loan as much cash as possible after of a few years of very controlled lending practices and you have a frothy multifamily construction market.”

The Charlotte Observer in North Carolina. “Charlotte’s high-flying apartment market can’t ignore the rules of supply and demand, according to a new report that warns developers might be building too many high-end units in the city. The wave of construction probably won’t stop anytime soon, according to an analysis by apartment-tracking firm Yardi Matrix, even as the supply of new units outstrips demand from renters. ‘In the near term, markets at risk of oversupply include Denver, Seattle, Charlotte, Dallas, Phoenix and Miami, where deliveries are expected to outpace demand,’ the company wrote in its report.”

“Figures from Charlotte-based Real Data show the apartment vacancy rate uptown is 21.8 percent. That’s the highest in the city by a wide margin, and more than three times the Charlotte market’s average. More than 1,100 uptown apartments are vacant. For now, however, the boom is still on, with about 27,000 apartments planned or underway. And developers are optimistic, forging ahead with plans that incorporate ever-more-luxurious amenities like private wine bars, golf simulators, massage rooms and complimentary dog grooming in dedicated pet spas.”

From Bisnow on Texas. “Is too many amenities a bad thing? The Houston apartment industry oversupplies facilities with services and features, including ones renters don’t want, according to Apartment List. ‘Houston falls into the category of what we are calling too-many-amenities metros,’ Apartment List Housing Economist Chris Salviati said. ‘If you are paying for amenities that you don’t necessarily need that could be a downside for a renter.’”

“The supply of new rental inventory in Houston is driving the overabundance of amenities — newer properties are more likely to be equipped with the modern amenities. Houston is oversupplied in nine of the 10 amenities profiled, including air conditioning, hardwood floors, dishwasher, parking, gym, balcony, pool and being cat- and dog-friendly. For example, only 7% of users desire cat-friendly housing yet 78% of housing offered it. The report also showed 40% of users wanted a pool yet 80% of the properties provided one.”

From KBTX in Texas. “A housing trend is troubling local landlords and property owners. They tell us the Bryan-College Station market has become over-saturated with rental properties. The Texas A&M Real Estate Center says the vacancy rate for apartments alone is nearly 18.9 percent, one of the highest in the state. Area landlords told KBTX the abundance of properties are hurting their bottom line. ‘I own five houses in the Southside Historic Area that, in the past, I’ve had people waiting in line to rent them. We’re struggling to rent some of those houses,’ said Robert Averyt, a College Station landlord.”

“Averyt has owned rental property for years, but he’s finding it harder to lease them as inventory in town grows. ‘I just signed a lease… for $1,250 for what I used to get $1,600 for. That seems like we’re very overbuilt,’ he said.”

The Argus Leader in South Dakota. “It’s a good time to be a renter in Sioux Falls. A rush of large-scale apartment buildings going up in the last couple of years caused average rent in Sioux Falls to drop. There were more than 4,000 empty apartments in Minnehaha and Lincoln counties in January, according to federal housing data. Sioux Falls is celebrating five straight years of record-breaking in construction. Much of the activity both last year and the year before included sizable apartment complexes trying to hook families with lots of amenities and luxury offerings.”

“Massive campuses such as Graystone Heights in southeastern Sioux Falls and University Hills across town added to the city’s pool of rental units, and are still opening new apartments.”

The Daily Record in Maryland. “Baltimore joins metro areas, such as Portland, Oregon, Seattle, and Washington on the list of metro areas with slow rent growth, according to RealPage. The firm attributes slow rent growth to a glut of luxury units on the market in many major metro areas. Concessions, such as month of free rent, are now common in many of the trendiest neighborhoods in these areas. Apartment List found that rents in Baltimore were .6 percent lower year-over-year in the second quarter. Rents in Towson dropped the most declining 4.2 percent.”

The Seattle Times in Washington. “Inventory doubled from a year ago in Ballard/Green Lake/Greenwood, Renton-Benson Hill and Sodo/Beacon Hill. The number of homes on the market surged more than 75 percent in Lake Forest Park/Kenmore, Skyway and Renton-Highlands. In downtown Seattle, a condo-only market, inventory nearly tripled.”

July 7, 2018

The Folly Of Endless Speculation

A Saturday desk clearing post on nations outside the US. “Vancouver’s housing market showed continued signs of weakness in June, as affordability worries curb demand from buyers. Sales were down 14 per cent compared with May, the first monthly decline since January when tougher federal mortgage rules took effect, according to a report Wednesday by the Real Estate Board of Greater Vancouver. The number of transactions was 29 per cent below the 10-year average for the month of June. The number of properties for sale is the highest in three years, and is up 40 per cent from a year ago, the board said.”

“Phil Moore, REBGV president, said. ‘With reduced demand, detached homes are entering a buyers’ market. This is allowing the supply of homes for sale to accumulate to levels we haven’t seen in the last few years. Rising interest rates, high prices and more restrictive mortgage requirements are among the factors dampening home buyer activity today.’”

“Homeowners in the U.K who leave their properties empty should pay 500% in local council taxes, the leader of the British Liberal Democrats proposed. Party leader Sir Vince Cable called for a combination of government-led schemes to boost construction to around 300,000 new homes per year and punitive measures on speculative home ownership. In February, the party released the findings of a housing market study, which found that there are more than 11,000 houses and flats in the U.K that have been empty for more than 10 years. Many of these empty homes, high-end apartments or luxury mansions in and around London belong to foreigners and wealthy Brits as second homes, pied-a-terres or capital gains investments.”

“‘When we have people homeless and even more people struggling with the high cost of housing, it is a scandal that so many homes are sitting empty,’ said Will Forster, mayor of Woking, a town on the southwestern edge of London, where there are about 700 empty homes.”

“Savills, the real estate consulting company, has conducted a study, examining a hundred of the most expensive apartments in the Russian capital city, and has found out that their prices are falling. the average price for a square meter in such apartments has dropped by 7% in the second quarter, down to $32,300. At the beginning of July, one square meter in the most expensive apartment in Moscow was estimated at $51,000, and that in the least expensive apartments of the segment in question cost $22,000, which is five thousand less than the March figure.”

“Greentown China, which nearly became a casualty of the mainland’s previous housing slowdown in 2014, has raised concern among investors this week after the Hangzhou-based developer issued a notice urging staff to urgently improve the company’s cashflow. The memo’s appearance amidst tightening credit conditions and a slowing property market is bringing back recollections of the developer’s 2014 crisis. For his part, Greentown Chairman Song Weiping blamed Greentown’s troubles on ’stupid’ government policy makers.”

“A think tank today advised the government against relaxing housing loan requirements, saying this is not the best way to ensure that low- and middle-income earners are able to own houses. The Institute for Democracy and Economic Affairs (IDEAS) said such a move might even backfire on the economy. Senior fellow Carmelo Ferlito said while it was good that the housing ministry and BNM were working together to tackle housing problems due to a higher number of unsold properties in the property market, ‘relaxed’ housing loans ‘may not be a move in the right direction.’”

“‘Tackling this problem from the demand side by promoting credit policy is not viable and may worsen the problem. Every sector in the economy will experience business cycles and the property market in Malaysia right now is at the stage of contraction. While the market is contracting, encouraging households to borrow more will not solve the problem in the property market; rather it will prolong the property bubble.’”

“The housing market is cooling with average asking prices and the number of new listings on Realestate.co.nz taking a tumble in June. The average asking price of all properties from throughout the country that were newly listed on the property website last month was $645,133, compared to $658,170 in May and $661,129 in April. The national average asking price is now down 4.2% compared to its February peak of $673,659. Average asking prices in June were down compared to May in most parts of the country. In Auckland the average asking price declined for the fourth consecutive month to $912,071 and has now lost more than $82,000 (-8.3%) since it peaked at $994,873 in February.”

“Home hunters have a window of opportunity to nab a bargain in some of Brisbane’s best suburbs before an influx of interstate migrants swallow up stock and push prices up, experts say. New figures reveal the number of properties listed for sale in some parts of the city have climbed by more than 40 per cent in the past year — putting pressure on sellers to set more realistic price expectations. Vendors in some parts of the city have dropped their asking prices for units by five to 15 per cent and 10 to 20 per cent for houses in the past 12 months, according to SQM Research.”

“Some suburbs have seen significant drops in asking prices in the past 12 months though, with prices for units in Virginia and Keperra falling 19 and 18 per cent respectively, while asking prices for houses in Chandler, 14km southwest of the CBD, are down 14 per cent.”

“Good news for Sydney-home buyers as a new study reveals housing prices have dropped by 7.4 per cent. The median house price in Sydney is now $815,000 thanks to a 22 per cent slump in housing demand, according to new findings by realestate.com. Housing experts are also predicting that prices will only continue to plummet in the coming months, 9 News reports.”

“Meanwhile in the inner city suburb of Newtown, housing prices have dropped in recent months by more than seven per cent. It comes after a derelict terrace in Newtown with caution signs, cracked walls and broken floorboards recently sold for $1.05 million on Saturday. Yet the real estate agent told 9 News that the same property would’ve easily gone under the hammer for $1.11 million just one month ago.”

“Properties are languishing on the market for an average of more than 500 days in some suburbs of Sydney amid an increasingly sluggish housing market. ‘I think just mainly lending conditions,’ said Blacktown real estate agent Andrew Chrysanthou. ‘People just can’t seem to get the funds to put offers in.’”

“Sydney property prices are forecast to keep falling for the rest of the year thanks to a steep drop in demand. Buyer’s agent Peter Kelaher said the discrepancy between east and west was due to overbuilding in western areas such as The Hills and Parramatta, which gave home seekers more housing options. Buyers could seize on the changed market by making ‘ridiculous offers,’ he added.”

“‘There has never been a better time to make a low ball offer. We’re finding many will boomerang right back and get accepted,’ Mr Kelaher said. ‘If you’re buying a $1.1 million house in The Hills, for example, expect to get it for about $100,000 less than a year ago … even $180,000 less.’”

“We all know somebody who has made a mini fortune by investing in a flat or residential plot at the right time. Despite the usual ups and downs, there exists a deep-rooted sense among Indian investors that residential property is a sure-fire investment which delivers excellent returns. Yet, unless you’ve been living under a rock, it’s evident that residential real estate has been down in the dumps. We hear numerous stories of investors in distress with their money stuck in delayed projects. There are also stories of many brokers, in fact the entire realty ecosystem, struggling to cope with this slowdown.”

“The reason low returns are expected from real estate is that there has been an irrational increase in property prices in the past. Moreover, even after prices have remained largely stagnant for few years now, in many locations property is overpriced. Many investors who bought property 3-4 years ago are finding it difficult to get a buyer even after reducing the price lower than the purchase value. Clearly, greed, over-ambition and financial indiscipline of developers are the main reasons investors are shying away from realty.”

“According to 360realtors.com, a real estate portal, there are about 340,000 residential units running behind schedule of construction in Mumbai. The situation is similar in many other cities. There are many homeowners and investors who are stuck in real estate projects, with their finances in a mess. They are paying rents and paying off their loans, but possession is a distant dream.”

“Despite having paid Rs70 lakh for his three-bedroom apartment in 2010, there is no assurance that 32-year Itender Singh and around 500 other homebuyers in the project would get their houses any time soon. It is estimated that across Gurugram, flats of over 1 lakh buyers are delayed, by three to five years. ‘I have lost hope of getting the apartment despite pursuing the matter with authorities, police and in the court. There is no solution as the developer admittedly has no money,’ said Singh.”

“‘I paid Rs 35 lakh in 2013-14 to buy an apartment in a project launched by Adel in Sector 103 but no work has taken place. The company forced us to pay money and several people paid with their retirement benefits and savings, money for their daughter’s wedding and to educate their kids. I don’t think I will be alive to see the delivery of my flat,’ said 70-year-old Vedpal Bakshi.”

“‘What about the units that were to be delivered in 2018? The entire industry has been caught in a web of its own making. Buyers have been duped, investors stuck and there is no escape route,’ said Sanjay Sharma, a real estate consultant.”

“Another major folly during boom years was that real estate projects were marketed as financial products with the promise of endless speculation and quarter on quarter growth, say experts. ‘There is no liquidity in the market; new projects are not selling and there is no exit option for buyers and investors,’ said Pankaj Tomar, a property dealer.”

July 6, 2018

Sellers Seemed Almost As Anxious As Buyers

It’s Friday desk clearing time for this blogger. “Despite a drop in housing prices, supply and demand continue to make Fall Church the most expensive location in the region in multiple metrics. According to May 2018 data provided by ShowingTime based on listing activity, the median City of Falls Church sales prices was $619,000 for this May, a drop of $210,000 when compared to May 2017, and a decline of almost $100,000 in the median price year-to-date change from $747,500 to $649,700. The Falls Church housing inventory rose by almost 26 percent from last May to this May. Louise Molton is the principal broker at Re/Max in Falls Church and she thinks prices do not discourage buyers as much as multiple offers on the properties they want do. ‘There is only one winner, no one gets a trophy if they come in second,’ she wrote in an email.”

“‘On the market today, and gone tomorrow’: that was the overall housing market trend across North Texas. Last year, listing prices continued to skyrocket and sellers in Collin County were making a killing. A new report revealed, in some cities, home prices may have flat lined.”

“‘This is especially true if a city has experienced fast and extreme growth, like Frisco. Home listing prices have plateaued for homes $400,000 and above. These homes are sitting on the market a little bit longer, and I’m even seeing some sellers negotiating closing cost for the first time in a long time,’ said said Rodney Anderson with Supreme Lending. ‘Some sellers are getting a little bit anxious, but no one is losing. I think that people will finally get an idea that some deals are being made for the first time in a long time.’”

“For the first time in a decade, the number of homes for sale in the Seattle area is finally starting to rise — and in a big way — as the rapid-fire market that has led to extreme bidding wars and lighting-fast sales slows a bit. The total number of single-family homes on the market jumped an eye-popping 43 percent in June from a year ago across King County, the biggest increase since the housing bubble and burst a decade ago. Condo inventory rocketed up 73 percent.”

“Interestingly, the reason is that homes already on the market are sitting unsold for longer, as opposed to a flood of brand-new listings, according to the Northwest Multiple Listing Service. This is supposed to be the hottest time of year for the market — it’s the first time prices cooled from May to June since before the recession. ‘Now there are homes that are available that they don’t have to get into a bidding war to get,’ said Sabrina Booth, a Windermere broker in Seattle.”

“When the owner of Richard Nixon’s former beachfront estate in San Clemente, California, listed the 15,000-square-foot home three years ago for $75 million, you may have been tempted. Now, with the historic property back on the market for $63.5 million, you can hardly say no. Yet that’s just what buyers are saying to extravagant real estate listings from the sunny sands out west, where a residence owned by Warren Buffett has been on sale for more than a year, to the austere brownstones of Manhattan and the opulent hedges of Greenwich, Connecticut.”

“In Orange County, homes listed for more than $1.25 million account for about a third of all inventory but only 14 percent of demand, according to market-data provider Reports on Housing. Many properties are expected to sit for months — in some cases, for more than a year — before going into escrow for a sale. Deepening the doldrums of the region’s luxury sector are recent increases in interest rates and fears about further tightening by the Federal Reserve, said Bill Cote, a Newport Beach agent with Coldwell Banker. ‘All that’s going to do is stymie the market a little bit more,’ he said. ‘For the last few years, it’s all been milk and honey.’”

“As the traditionally busy spring shopping season drew to a close, a decided market shift was underway: Sellers seemed almost as anxious as buyers. As of June 28, homeowners in the four-county region covered by the Southern California News Group added 9,334 homes to the market so far this year vs. 2017’s 2,939 – a huge 218 percent jump. Yes, the rate of listing homes for sale has tripled! Steve Thomas of ReportsOnHousing writes, ‘Article after article details the continued lack of supply, hot demand, and years of nonstop appreciation. How in the world can any local market be a buyer’s market? Technically, luxury housing favors buyers and it is anything but hot.’”

“In Chicago and the suburbs, spring and summer is prime time for real estate, with the first half of the year the busiest season for homes sales. Here in the near west suburbs, inventory is up and sale prices are down. For John Lawrence, owner of Weichert Realtors Nickels Group, the typically hot spring and early summer selling season had a different feel this year. ‘In the spring when $300,000 to $500,000 homes in Oak Park are flying off the shelves with multiple offers, we feel like the market is good. That didn’t happen this year,’ Lawrence said. ‘The market has a very uneasy feel, and a lot of people were saying the market was way down, but the data doesn’t back it up.’”

“‘Anecdotally, there is the tax situation,’ Lawrence said. ‘We’ve always said, ‘What is the tipping point?’ I think we’ve reached it.’ Steve Scheuring of Baird and Warner agrees. ‘We used to have buyers who would come and look at a $500,000 house with $8,000 to $10,000 in taxes,’ Scheuring said. ‘The taxes were high, but considering Chicago Public Schools and private school tuition, they were cool with that. Now, with that same house having taxes of $15,000-$16,000, the buyer is no longer cool with that. We’ve reached a saturation point.’”

“Those individuals in the market for a new or existing home in Mississippi’s fastest-growing county have a wide inventory from which to choose, according to Tracy Kirkley, broker with Crye-Leike Realtors in Olive Branch. The latest information from the Northwest Mississippi Association of Realtors shows that in Olive Branch, there is a 17.6 month supply for homes costing $400,000 and up. The inventory for the DeSoto County seat of Hernando is similar, according to Kirkley. Homes priced at $400,000 and up enjoy a 38-month supply and those homes on the upper price range of $300,000 to $400,000 have a 9.9 month supply.”

“Chief executive officer Lesley Nalley updated the Hot Springs Village Property Owners’ Association board of directors on the Comprehensive Master Plan phase 1 implementation plan at the board’s June meeting. Nalley said 80 percent of the Village is platted for single-family homes, although that segment currently represents only 30 percent of market demand. ‘Targeting key areas for suspension reduces the massive oversupply of those lots,’ she said.”

“The most expensive home in Cincinnati has been sold for $5 million – a whopping 38 percent discount from its listing price of $8 million just two years ago. The 27,000-square-foot French chateau on more than five acres of land at 9005 Camargo Road in Indian Hill had been reduced to $7.5 million at the beginning of the year. But as the Enquirer reported in April, the market for Cincinnati homes listed for $1 million and up is soft.”

“‘There just aren’t a whole lot of buyers capable of buying those homes,’ Mark McGrath, a Realtor with Home Information Network in Silverton, said at the time. ‘It is somewhat of a buyers’ market right now.”’

“Real estate broker Luis Eduardo Rodriguez is accused of funneling drug money through the Las Vegas real estate market and dummy corporations on behalf of an international narcotics and money laundering ring. Rodriguez faces charges for his role in laundering hundreds of thousands of dollars in drug money through Las Vegas real estate and multiple Nevada shell corporations with the intent on sending the profits to drug traffickers and money launderers in Mexico.”

“A woman accused of running a real estate fraud scheme is in custody after leaving South Carolina while her federal case is pending, according to court documents. Dana Roush was arrested Monday. She and Michael Roush are charged with fraud conspiracy and failing to maintain payments on a federally insured mortgage through their Greenville-based investment company. They are accused of operating the now-defunct Kingdom Connected Investments LLC to defraud dozens of home buyers and sellers. Part of the scheme involved falsely leading homebuyers into fake rent-to-own agreements in areas throughout the Carolinas.”

“Homebuyer remorse is on the rise, according to the latest ValueInsured Modern Homebuyer Survey. In a market driven by low inventory and heavy competition that has steadily escalated home prices for a few years now, buyers are increasingly regretting how much they’ve paid for their new homes. ‘Home payments in some areas are swallowing up 45 percent of local median income,’ ValueInsured wrote. In these areas, ‘expectation of buyer’s remorse is high.’”

“According to the findings, two-thirds of homebuyers and almost 70 percent of homeowners expect to have buyer’s remorse within a year. A quarter of those said they expect to have the same level of remorse reported by buyers just prior to the crash in 2008. Between 55 and 60 percent of buyers and owners said people who buy in their neighborhood now are overpaying; even more said that if they were to buy a home now, they would be buying high.”

“Homeowners in California and Texas–’two of the most overheated housing states’–are the most pessimistic about the sustainability of home prices, according to ValueInsured. Eighty percent of owners in these two states (vs. 71 percent nationally) believe a housing correction will happen within two years. Among potential buyers, the sentiment is only slightly less pessimistic. Sixty-five percent of buyers said a housing correction will happen within the next two years. (71 percent homeowners vs. 65 percent non-homeowners).”

“‘In Texas, 44 percent of all existing homeowners believe a housing correction is already underway in their area,’ ValueInsured said. This, the report stated, ‘reaffirms the astute sensibility of homeowners who seem to have foreshadowed the latest Case-Shiller Home Price Index report released this week showing Dallas-area home prices growing at the slowest pace in five years.’”

July 5, 2018

Sit And Watch The Glut Grow

A report from National Mortgage News on New York. “At a new luxury-condo building in Brooklyn, one buyer told broker Ryan Serhant that she’d like three apartments — one for herself to live in, and two as investments to rent out. She wasn’t the only one. The tower, 550 Vanderbilt, had more buyers become landlords in 2017 than any other condo project in the city, according to data from listings website StreetEasy. For New York as a whole, a record 10.7 percent of all condos that sold last year were listed by their owners as rentals within months. Investors, undeterred by the city’s flagging rents, are adding residential real estate to their portfolios on a bet that the properties’ underlying value has nowhere to go but up.”

“And it’s an opportune time to jump in, with developers cutting prices to move units before another competitor’s project opens. All told, there were 1,313 condos purchased in New York last year as investments rather than residences, also a record in StreetEasy data going back to 2006. ‘When was the last time in New York history that you could buy one of the first new condos in a new neighborhood?’ said Serhant, the sales agent for 550 Vanderbilt, a 278-unit project that includes communal gardens and a pet-grooming station. ‘You want to buy real estate the same way you buy into IPOs. Then you sit and watch it grow.’”

The New York Times. “Springtime in Manhattan was far from sunny for home sellers, as inventory increased, prices continued to decline and sales volume dropped to its lowest level in nine years, according to new market reports. Real estate agents pointed to rising mortgage interest rates and uncertainty surrounding the federal tax overhaul that went into effect late last year. The result was a widening gap between buyers and sellers, who often hit an impasse on price.”

“There were 2,629 closed sales in the second quarter - a nearly 17 per cent drop from the same period last year, according to a new Douglas Elliman report. That is the lowest number of spring sales since 2009, when the market was stifled by the recession, said Jonathan Miller, the real estate appraiser who prepared the report. Overall, the median Manhattan sales price in the quarter fell to US$1.1 million, down 7.5 per cent from the same quarter last year. Part of that decline reflected a shift away from pricier new-development sales.”

“And that does not account for sluggishness in the resale market, in which sales fell 12 per cent compared to a year ago, Mr Miller said. ‘This is an affordability issue,’ said Richard Grossman, president of Halstead Real Estate. Resale apartments spent an average of 103 days on the market, or 7 per cent longer than the same period last year, he said, and that was due, in part, to listing prices that did not reflect the higher mortgage interest costs for buyers.”

“The surfeit of inventory is dulling buyers’ sense of urgency, Mr Miller said, noting that there were 6,985 units for sale in the quarter, an increase of almost 11 per cent over last year - the largest supply in the second quarter since 2011. That oversupply has also meant fewer bidding wars this quarter.”

“The New York Real Estate Journal recently sat down with Greg Kalikow of Kalikow Group & Kaled Management for a question and answer session. Q: What’s it like being the next generation of leadership in a real estate business - especially one based in New York? A: I think that individually and together, we’re facing a new set of challenges, some of which have yet to reveal themselves.”

“Q: What are some of those challenges? A: Just check the skyline–we have a glut of residential units set to come online from mega projects in Hudson Yards and Long Island City. We’re one of many investors who have decided to wait and see how the new inventory is absorbed before we look to acquire multifamily units – and that might not be until 2019. Manhattan investment sales are down 60% year over year from 2016 to 2017 and that effect is rippling out across Brooklyn and Queens as well.”

From Globest. “Halstead Property’s Q2 2018 Manhattan apartment report is out. It shows the median Manhattan apartment price of $1.1 million decreased from $1.2 million from the same quarter last year. There were also 12% fewer closings compared to this same period year-over-year. Median prices fell for the fourth straight quarter with resale apartments selling with their highest discounts off asking price in more than five years.”

“Halstead president Richard Grossman says this reflects the issue of affordability for the buyer, and people saw this trend coming. ‘We know there are two things that are affecting prices right now: the higher interest rates and the loss for certain buyers of some of the tax benefits of buying.’”

From Mansion Global. “The weather might be heating up in Manhattan, but the borough’s apartment sales market cooled during this year’s second quarter, according to reports from four of New York City’s major brokerage firms. The overwhelming consensus from Tuesday’s batch of reports from Corcoran, Douglas Elliman, Halstead and Stribling & Associates is that Manhattan was a buyers’ market in the second quarter. An overall oversupply of inventory, paired with a lack of new development closings, led to lower sales numbers and prices.”

“The median sales price for apartments in Manhattan dropped 3% to $1.14 million in the second quarter, according to Corcoran, as the market shifted to favor lower-priced transactions and new development closings fell. Closed sales dropped 14% compared to the same time last year to nearly 3,200 transactions, as the ‘effects of the new tax law, high real estate taxes and volatility in the financial markets all contributed to a dampening of buyers’ purchase intent’ in the second quarter, Corcoran’s report said.”

“And as Manhattan buyers declined, inventory rose 17% to 7,491 units, the 10th consecutive quarter of year-over-year inventory increases. Co-op inventory rose the most, up 26% year over year, resale condos increased by 11% and new development inventory increased by just 4%, the report said. The past three months logged the highest second-quarter inventory in seven years and lowest second-quarter sales in nine years, according to Douglas Elliman.”

“The median sales price for apartments declined 7.5% from the same time last year to $1.1 million, and the number of sales declined 16.6% to 2,629, according to the brokerage’s data. Across the same time frame, listing inventory rose 10.7% to 6,985. The median Manhattan apartment price fell for the fourth straight quarter, according to Halstead. The brokerage also logged the median price at $1.1 million, down 9% from the same time a year ago, as higher inventory pushed prices lower for many apartments, the firm’s report said.”

“The sluggish new development market, which saw 30% fewer closings than a year ago, is also responsible for putting downward pressure on prices. ‘Currently, the average new apartment sells for more than double that of a resale one, so a sharp decline in these sales has a substantial impact on the overall average apartment price,’ the report said.”

From The Real Deal. “As luxury buyers take refuge in the rental market, sales brokers are being forced to adapt. In the midst of a sluggish sales market, would-be buyers are turning to the high-end rental market to wait out the uncertainty. As a result, sales brokers have found themselves working with a shifting group of clientele and increasingly negotiating pricey rental deals.”

“Clients in the market for an apartment have been spotting sales listings that haven’t budged — and are looking to rent them instead, brokers said. This would have been a nonstarter not long ago, said CORE’s Elizabeth Kee, but more owners are now at least willing to have the conversation. Kee is currently listing a Chelsea apartment for $5.2 million, but the same three-bedroom unit, which spans 3,000 square feet, is also available to rent for $25,000 a month. The rental listing notes it has a variable lease term.”

“It’s a negotiation tactic that highlights how brokers’ roles are changing. Concessions, for example, have been a fixture of the rental market. May marked the 36th consecutive month of a year-on-year rise in concession market share in Manhattan. During the month, nearly 38 percent of new leases included landlord concessions. And the high end isn’t immune, given how much inventory is on the market.”

“On the other side of the deal, owners are also becoming more open to renting their apartments. The number of new leases in May for units with three or more bedrooms surged 20 percent since the same time last year, according to the Elliman report. Corcoran’s Malessa Rambarran and Candace Milano pointed to the example of a client who was unsure about what he wanted to buy and looked instead several rentals in Soho around the $15,000 price point.”

“‘We’re definitely seeing an increase of clients being more cautious,’ Milano said. ‘Buyers are more sensitive to changes in the market.’”

From MarketWatch. “Since moving to New York City in 2014 I have lived in four apartments with eight different roommates. But lately I have started to wonder if I’m paying too much. My two-bedroom, two-bathroom apartment costs $2,300 per month. My roommate, whose room is slightly larger than mine, pays $1,200 and I pay $1,100. I happened to come across a listing for another two-bedroom two-bathroom unit in my building advertised at $2,100 and decided to ask my apartment management company if they could lower my rent. They did, and under the new agreement, I will pay $1,000 and my roommate will pay $1,100. The new $2,100 rent will save us each $1,200 per year, or $2,400.”

“Rent reductions, even in pricey cities like New York, are actually more common than you may think. As of May 2018, 1 in 6 rental units in Manhattan offered a discount to the advertised rent (16% of rentals on the market) according to StreetEasy.”

From City and State New York. “Scan the windows of a luxury apartment tower in midtown Manhattan some evening and you might notice it: The lights are out. In some buildings, signs of life are so scarce that the few inhabited apartments stand out like lanterns against a sea of dark glass. New York has always had its share of part-time residents. Increasingly, however, the city’s housing stock is attracting the international elite, drawn by the promise of a second home (or third, or fourth) in the playground of Manhattan and a way to invest, or launder, cash.”

“Were New York not in the middle of a severe housing crisis, these pieds-à-terre might be of only passing concern. But as the cost of housing in New York continues to climb faster than incomes, the city can hardly afford to have so much of its housing stock underused, constricting supply and raising prices for New Yorkers.”

“Part-time residents do not pay local income taxes. They don’t pay sales taxes when they aren’t in town. Many of the new buildings benefit from huge tax abatements and ultra-luxury condos and co-ops are vastly under-assessed by the city’s byzantine property tax system. CityLab summarized the situation accurately in 2015, when it wrote, ‘The values of these new condos are being assessed at just a fraction of what they’re worth. And buyers are paying only a fraction of that fraction in property taxes.’”

“So these super-rich property owners contribute vastly less than their fair share to the cost of government services, like the parks, mass transit, sanitation and public safety that make New York a desirable place to live – and that are essential to the escalating value of their investments.”

“Some might be inclined to dismiss pieds-à-terre as too small a phenomenon to distort New York City’s housing market. However, the number of pieds-à-terre is growing rapidly. According to city estimates, in 2017 some 75,000 apartments were used for ‘occasional, seasonal, or recreational use’ rather than as a primary residence – an increase of 20,000 units since just 2014. Over that same period of time, the total number of housing units grew by just 69,000 – meaning new part-time use erased almost 30 percent of the growth in overall supply. While some units were removed from the market by other forces, like Airbnb, the role of pieds-à-terre in siphoning off supply, especially in the luxury market, is real.”

July 4, 2018

Mid-Year Housing Bubble Predictions

The year is half gone and it’s time for your predictions. Six months ago: “Canadian Real Estate tanking. There is no reason your real estate should be worth twice mine when we are just across the border. It’s not like you have much better jobs and lower taxes.”

A reply, “You are absolutely right. And I think its tanking all across Canada, certainly in Toronto and Vancouver. Reason? I am not hearing of a single Chinese buyer at the new housing developments. New sales look like they have hit a wall. Across the border from me the prices have always seemed to be less in the States, but again I agree with you. Our jobs are no better and our homes are comparable. No reason for the difference.”

Another said, “I predict that cybercurrencies in general and bitcoin in particular will end up destroying thousands of people’s financial lives.”

One year ago. “I predict the Fed will walk back rate hike plans and the GSEs will continue to loosen lending standards in order to perpetuate Housing Bubble 2.0 as long as possible. These efforts will come to naught, as Housing Bubble 2.0 dies in 2018 of complications due to morbid obesity.’

And finally, “I always talk about consumption demand versus speculative demand, so I’ll post my opinion within that context: 1) Consumption demand should remain stable. I think it typically is, except when there are population shifts.”

“2) Speculative demand (includes pure speculative plus hybrid consumption-speculative demand): Locally I saw a price surge after the election, from November to say March or April. Like 100-150K surges. I attribute that to expectations after the election that the economy would improve and stocks and real estate would be favored. Also, the GSEs raised conforming loan limits back in late November as well.”

“BUT - there’s the one interesting thing, increasingly hawkish talk from the US and European central bank. Could it be a change in thinking or just a desire to get interest rates up so they have room to drop them in a future recession? Is it just talk?”

“On another note, I’m sure the populist/anti-establishment wave has caught their attention. All the central banks are capable of doing is redistributing wealth by their expert hand, perhaps they feel they’ve gone as far as they can go. Perhaps.”

“My suspicion is prices will plateau during the 2nd half the year, having surged already.”