October 16, 2017

Asking For Trouble

A report from the New York Post. “A pair of top Obama-appointed bank regulators still serving in the Trump administration could spark another mortgage meltdown by lowering credit standards and encouraging risky lending practices. Democrat Mel Watt, who is serving a special five-year term as head of the Federal Housing Finance Agency, is pushing the mortgage-lending giants he regulates — Fannie Mae and Freddie Mac — to offer home loans to deadbeat borrowers with shaky credit, setting up conditions for another housing-market crash, industry officials warn.”

“Meanwhile, the other Obama holdover — liberal Democrat Richard Cordray, who continues to head the Consumer Financial Protection Bureau through 2018 — has launched an unprecedented crackdown on credit reporting bureaus for allegedly widespread errors and bias, leading the industry to strip some negative information from credit reports used by home lenders, which analysts fear could blind them to default risks. ‘We are dumbing down the requirements all over again,’ warned former chief Fannie credit officer Ed Pinto. ‘It’s the definition of insanity’”

From the Daily Camera in Colorado. “When it comes to a helping hand on housing, Boulder County’s well-to-do are getting a bigger boost from the feds than less well-off residents, according to a new report from online rental marketplace Apartment List.

High-income households received triple the federal dollars that low-income households did in 2015, according to the study, and nine times more funds than those of middle incomes. It’s a pattern being repeated all across the country, Apartment List found. Nationally, the total dollars spent on MID for high-income households ($60.6 billion) in 2015 was double that spent on Section 8 ($29.9 billion).”

“‘When you look at where the benefits are going,’ said Apartment List Housing Economist Chris Salviati, ‘it is a pretty striking figure.’”

From Reuters. “Global central banks, which fret about high asset prices, could take a page from the Bank of Canada which is helping cool an overheated housing market by raising interest rates even as inflation undershoots its 2 percent target. Like Canada, major central banks such as the U.S. Federal Reserve, European Central Bank and Bank of Japan set monetary policy based on an inflation target.”

“But too rigid a focus on inflation can lead to bubbles in financial and housing markets, jeopardizing hard-won recovery in countries where central banks have kept interest rates at historically low levels. ‘That is an important example of a responsible central bank acting on concerns of financial stability,’ said Stephen Roach, a senior fellow at Yale University’s Jackson Institute of Global Affairs and Morgan Stanley’s former chief economist. ‘Central banks that keep policy at crisis settings just because inflation remains below target are asking for trouble.’”

From CBC News in Canada. “CBC News has uncovered some revealing trends in Ontario government revenues that provide significant insights into the provincial economy. The fiscal-year-end numbers are contained in an annual document called the Public Accounts of Ontario. The 2016-17 version tells a story of an overall economic boom, but with some uncertainty about how widely it’s being felt.”

“For the first time since the recession in 2009, the province’s revenue from personal income tax actually went down. ‘This is highly unusual,’ said Sheila Block, senior economist with the Canadian Centre for Policy Alternatives, a left-leaning think tank. ‘We don’t see a drop in personal income tax revenues generally at any point except when we’re in a recession.’”

“The crazy rise in house prices across southern Ontario in 2016-17 was a big money maker for the government. The Public Accounts show the province earned $2.73 billion in land transfer tax, a 29 per cent jump from the previous year. ‘The government cannot rely on this type of increase; it’s not sustainable,’ said Robert Hogue, senior economist at RBC. ‘We’ve seen a significant correction in the housing market.’”

From Domain News in Australia. “Auction selling conditions in popular near-city areas were generally upbeat at the weekend but real estate agents say house prices in Sydney’s struggling outer western suburbs are starting to pull back. Sydney’s outer western suburbs are recording the lowest clearance rates of all the suburban regions – and it showed at the Professionals’ auction of a three-bedroom house at 35 Paxton Street, Belmore. Agency principal Michael Sabongi said the listing attracted no bidding and was now likely to sell privately at a price below the vendor’s expectations.”

“He said prospective buyers in the west had been ‘very, very nervous’ at weekend auctions after widespread media reporting of new data showing declines in the rate of Sydney house price growth. ‘Buyers are not able to borrow as much and it is affecting the market,’ Mr Sabongi said. ‘If the vendors want to sell, they have to meet the market or they have to take their property off the market. It is one of two things.’”

“He said the average house price in Belmore had been sitting at $1.15 million to $1.2 million: ‘We are now going to pull back to $1 million to $1.1 million or to $1.15 million. You will be able to get a house for that money, whereas you could not get one before.’”

“Buyer’s agent Paul Osborne, the founder of Melbourne-based Secret Agent, said the Sydney and Melbourne residential property markets shared similarities with large Canadian cities. ‘The Vancouver and Toronto property markets have been impacted as interest rates have headed up,’ he said. ‘Prices have started to fall quite noticeably in Vancouver and Toronto. It is hard to know whether that is where we are heading or whether we are just going to track sideways for a period of time.’”

“Mr Osborne suspects that prices for some B and C-grade properties in the inner suburbs of Sydney and Melbourne could pull back by more than 10 per cent in the coming months: ‘Confidence is a little more fickle than it has been in the past, so you start to see a bit more failure at auction. Then the buyers are looking at these failed auctions and are thinking: ‘Well maybe we need to revisit what we are prepared to pay for a property.’ It is a vicious circle.’”

The Sacramento Bee in California. “The summer’s overheated housing market in the Sacramento region has given way to a slightly cooler and saner experience for buyers this fall. The time that houses spend on the market has lengthened, prices have softened, and the inventory of homes for sale has grown. ‘Now is a great time to be a buyer, mostly because the summer bump is over and homes are sitting longer and prices are more negotiable,’ said Barbara LeBrecht, a broker with Weichert Realtors’ Galster Group in Fair Oaks.”

“During the peak buying season this year, homes were selling at a record pace. Many houses spent just days on the market before getting snapped up. Well-priced listings saw multiple offers, and would-be buyers found themselves on the losing end of bidding wars.”

“Another telling statistic is the high number of price reductions in the market these days, LeBrecht said. In one 24-hour period this week, she said, 287 new homes were listed for sale and sellers dropped their asking prices on 199 homes. Ryan Lundquist observed a similar set of changes across the four-county region that includes Placer, Yolo and El Dorado counties. He, too, said it was a sign of predictable seasonal decline.”

“‘Overall the market has a slower feel compared to a few months ago (and) values have begun to soften in many areas,’ Lundquist wrote. In many neighborhoods, he said, ‘homes are tending to have less offers, less traffic, and even sell for slightly less than the highest prices from a few months back.’ ‘News like this sometimes freaks people out because they think the market is tanking,’ the appraiser wrote, ‘but like clockwork the market almost always softens during the fall.’”

October 14, 2017

It’s Inevitable That The Bubble Is Going To Burst

A report from LA Weekly in California. “City Hall is well on its way to requiring developers to help pay for affordable apartments, the governor recently signed legislation that could lead to $4 billion in new housing funds, and a slew of new units downtown has goosed the vacancy rate and slowed rent increases. ‘One thing about global cities is they’re all expensive,’ says Richard K. Green, chair of USC’s Lusk Center for Real Estate. ‘New York, London, Sydney — you’ll never build enough to meet the demand of a successful city.’”

From the Los Angeles Times in California. “So far this year, rent growth has actually slowed in both Los Angeles and Orange counties. Richard Green, director of the USC Lusk Center for Real Estate, said that slowdown probably reflects a flood of new apartment buildings that have opened. But he doesn’t expect the trend to continue. ‘We think incomes are going to keep rising and we are not going to build enough,’ he said.”

From Downtown LA News in California. “The Downtown Los Angeles construction boom has produced a glut of new apartments, and despite a steady influx of residents, the community has seen its vacancy rate soar to levels not seen in decades. ‘Cuts in Class B units suggest competition at the top end of the market is trickling into middle-market product,’ RealPage analyst Bill Kitchens wrote last month. ‘Annual rent cuts are likely to persist through most of 2018 as operators continue to focus on filling units over pricing.’”

The San Francisco Chronicle in California. “We all know the San Francisco rental market is tough. In recent years, it has presented challengers for renters, but now it seems to be getting tougher for landlords. If the number of ‘move in specials’ is anything to go by, filling vacant units this fall isn’t as easy as it usually is. The National Real Estate Investor reported in July that ‘It’s probably impossible to overbuild San Francisco at large…..But it is quite possible to overbuild the high-end of the market, and weak rents and rising concessions suggest that developers may have succeeded.’”

The Wall Street Journal on Colorado. “A booming tech industry and strong job market have fueled an apartment-building frenzy in the midsize, mile-high city of Denver. Now, some local real-estate experts say the balance is shifting, with the supply of new housing matching or even exceeding demand. ‘They have totally overbuilt the luxury apartment buildings,’ says Christina Freyer Walker, the president of Colorado & Co. Real Estate.”

The Real Deal on New York. “Rental incentives — which landlords have been using all year to fend off increasing vacancy rates and dipping rents — are no longer working as they once were. In Brooklyn, the net effective median rent fell by 6 percent to hit $2,757 in September. That decline is largest drop since March 2015, according to the from Douglas Elliman report. As is the case in Manhattan, concessions are no longer keeping sliding rents at bay. ‘The market is drifting lower, and the next tool for landlords is going to be cutting prices,’ said Jonathan Miller, the CEO of appraisal firm Miller Samuel and author of the report. ‘We’ve reached the point where we are going to see more aggressive declines in face rents, just to get it in sync with the large amount of supply,’ Miller said.”

From Bisnow on DC. “With developers in D.C. planning and delivering multifamily projects faster than ever, its apartment rents continued to drop during the third quarter, although not in the neighborhoods experts predicted. After D.C. experienced a rare drop in rents during the second quarter — the first quarterly decline in two years and just the third since 2010 — that trend continued in Q3. The Columbia Heights/Shaw submarket, an established multifamily area, experienced a 4.1% decline in Class-A rents. Its vacancy rate now sits at 6%, the highest of any submarket in the District. The second-largest rent drop occurred in Central D.C., a submarket that includes Dupont Circle, Logan Circle and Mount Vernon Triangle, with prices falling by 2.4%. These submarkets still had the city’s highest average Class-A rents.”

The Baton Rouge Business Report in Louisiana. “Nearly four years after Shreveport-based Vintage Realty acquired a 20-acre tract adjacent to Perkins Rowe with plans to develop a multifamily complex, the Park Rowe Apartments, as the project will be called, is beginning to take shape. Developer David Alexander says he plans to start preleasing units by the end of the year. The Baton Rouge market for multifamily complexes has changed considerably since Vintage Realty acquired the tract in November 2013 for $6.5 million. Some 50 new apartment complexes have been completed since then, adding thousands of units to the market.”

“Nearly 3,000 additional new units in the ‘upscale/luxury’ category alone are currently under construction or have recently been completed. Acknowledging the competitive pressures, Alexander says he doesn’t believe the multifamily sector is overbuilt—at least not along the bustling Bluebonnet Boulevard commercial corridor. ‘I know there is concern about the student housing market being overbuilt,’ he says. ‘But we feel confident that being in Perkins Rowe with the amenities, restaurants and medical facilities; that’s a good source for our residents and we’re delivering a good product.’”

“Wesley Moore, an appraiser with Cook Moore & Associates, is more cautious in his assessment. ‘To me, it’s inevitable that the bubble is going to burst,’ he says. ‘That said, I can’t tell you I have seen any evidence of it yet.’”

The Dallas Morning News in Texas. “A third quarter scorecard for Dallas-Fort Worth’s real estate market shows some winners and losers. At the end of the third quarter, about 48,000 apartments were under construction in the D-FW area — down from almost 53,000 units at the recent peak of the market. In the third quarter net apartment leasing in the area added up to only about 400 apartments.”

“Through the first nine months of the year, net apartment leasing in D-FW is running almost 30 percent behind where it was in the same period of 2016. With more than 20,000 new apartments opening their doors in 2017, that’s not what D-FW landlords want to hear.”

From The Motley Fool. “Not long ago, I was talking on the phone with a well-known bank investor based in Dallas. Somewhere in the conversation, he told me he asks every banker he meets what he or she thinks about the state of the lending market. Are things getting frothy? Are banks lowering credit standards and making loans they shouldn’t? I had this discussion recently with a commercial real estate banker at the Minneapolis airport. Given how much time I’ve spent digging into Bank of the Ozarks over the past couple months, and the fact that it’s a major commercial real estate lender, I figured he may have run into it in the marketplace.”

“‘Have you ever heard of Bank of the Ozarks?’ I asked. ‘Yeah,’ he told me. ‘We can’t compete with them. ‘Why?’ I asked. ‘Because they make loans that we can’t,’ he answered.”

“‘Sometimes it seems like Bank of the Ozarks is the only show left in town, lending hundreds of millions to developers across the city amid a condo financing drought,’ wrote Katherine Clarke in April for The Real Deal, which covers real estate news in New York City. ‘Its aggressive approach has led some industry insiders to question whether the Arkansas-based lender is becoming overexposed to a downturn in the New York City condo market.’”

“‘Despite living 350 miles west of Nashville in Little Rock, Ark., [Chairman and CEO George] Gleason and his … Bank of the Ozarks have funneled more money into Nashville’s construction boom than any lender around in recent years,’ wrote Meg Garner for the Nashville Business Journal in April. Even ‘those in the development community warn that the city has too many apartments on the market.’”

“And in Miami the bank is developing a reputation as ‘one of the most aggressive in issuing construction loans to Miami condo developers.’ Now, again, it’s possible that nothing is amiss at Bank of the Ozarks, and that it hasn’t dropped its underwriting standards at all. Yet it seems unusual that so many sources from so many different places would all say the same thing: that Bank of the Ozarks is writing loans that are too risky for other banks. The implication is that it could run into problems if the commercial real estate market continues on its current course.”

October 13, 2017

The Glory Days Could Soon Become A Nightmare

It’s Friday desk clearing time for this blogger. “The appraisal profession has been changing over the last ten years as the economy, real estate market, demographics and laws have changed. Recently both Fannie Mae and Freddie Mac introduced lending programs that waive all appraisal requirements for certain purchase money mortgages. The agencies are competing with each other to increase market share and it is highly probable the use of appraisal waivers will grow, much to the risk of harm to consumers and the financial markets. Appraisers are the only ones involved in real estate transactions who are independent and unbiased. Everyone else has something to gain if the transaction closes. It makes no sense to remove the one independent voice and replace it with a data tool that can include flawed data, and is can be manipulated by those who will gain if the ‘number’ is hit.”

“Nashville is on pace for a record year for home sales, but there’s debate over whether growth is slowing across the region. The median price of a single-family home sold last month was $280,000, up 9 percent from a year ago. But on a month-over-month basis, that was down for the third straight month. Reflecting a potential slowdown in the market, appraiser Richard Exton said his analysis shows longer marketing times for homes with price drops through a series of listings and relistings. ‘This is something that wasn’t happening earlier this year,’ he said.”

“In case you missed it, the North Texas housing market has turned a corner. Things have definitely cooled a bit from the last few years. There are fewer bidding wars for properties and buyers are more likely to turn their noses up at an overpriced address. And the number of houses with ‘for sale’ signs in the front yard was higher in all but a handful of local residential districts. Real estate agents say that sales of D-FW houses priced above $500,000 are definitely slower than last year, as consumers digest several years of mark ups.”

“The moderation in our residential markets is good news for most analysts, who’ve been worried that North Texas’ residential sector is overheated.”

“After five years of recovery, prices are getting too high for some buyers, while the number of homes to choose from remains too low, said California Association of Realtors Chief Economist Leslie Appleton-Young. ‘I don’t see prices declining in the midterm. But we’re seeing prices moderate,’ Appleton-Young said.”

“The Kitsap County housing market continued to cool in September with home prices, pending sales and the number of new listings down from earlier this year, according to statistics from the Northwest Multiple Listing Service. ‘The market was on fire earlier this year, into the spring and summer months, but once August hit, we started to slow down,’ said Sandi Nelson, designated broker and owner of Poulsbo-based Mike and Sandi Nelson Real Estate. ‘We usually see a pick up in September, but we didn’t see that this year.’”

“The long-feared cool down of the Charleston region’s hot housing market may have set in. For the second month in a row, home sales skidded — and by a dramatic amount in September. ‘While the beginning of fall typically marks a slower pace of market activity, we may also be seeing the initial shift of the market,’ said Dave Sansom, president of the local Realtors group. Sansom said the past two years brought ‘monumental growth’ to the housing market through rapid increases in population and jobs. ‘We knew that wouldn’t continue forever and that at some point the market would begin to level out,’ he said.”

“Falling home prices in Toronto in September dragged down the Teranet — National Bank national composite house price index as it posted its first monthly decline since January 2016. David Madani, senior Canada economist at Capital Economics, said a sharper slowdown in price inflation in the coming months is unavoidable. ‘And with interest rates on the rise and mortgage financing rules likely to be tightened significantly later this year, the worst is still to come,’ said Madani, who has been longtime bear on the housing market.”

“There’s no shortage of warning signs that Sweden’s housing market could be going from red-hot to icy cool. At the most basic level, it’s all about supply and demand. The number of apartments up for sale just hit a nine-year high, but the flood hasn’t been followed by a gain in purchases. There’s also a massive increase in construction. Real estate agents are having problems unloading properties. Fewer people are showing up at viewings and sales are dragging on as buyers and sellers drift apart on price.”

“‘We have a gap between the sell and the buy side, in terms of how they value homes,’ said Henrik Rundgren, the deputy chief executive officer of real estate agent Notar.”

“Australia’s housing market sits atop a pile of increasingly vulnerable debt, according to Citi researchers, who on Friday outlined how the glory days for multiple property investors and interest-only borrowers could soon become a nightmare. Highly leveraged multiple-property investors are at the centre of the report, with 12 per cent of Australian real estate investors said to own six or more properties, according to new data cited by Citi analysts – a ’surprisingly high level of speculation.’”

“‘Tighter lending criteria and rising house prices has meant investors increasingly face net negative cash flows,’ analysts led by Craig Williams said. Additionally some suburbs, such as Sydney’s Bankstown, have seen investors create extreme, Hong Kong-level house price to income dynamics, reducing the pool of available buyers in these suburbs.’”

“A glut of properties could come onto the market. ‘Historically investors ‘sit tight’, but this has become increasingly less viable,’ Citi said, adding investors face a growing household ‘cashflow gap’ and reducing capital gains expectations. ‘Tighter application of responsible lending laws means that investors must now have a clear debt repayment plan, although for many prevailing interest-only borrowers this does not exist. The large levels of debt outstanding by borrowers aged in their 50s and 60s means many investors will need to sell property to discharge their debts.’”

“A push by the Chinese government to ease local housing gluts and fill empty apartments is creating a different headache by driving indebted cities deeper into the red. Under Beijing’s direction, more than 200 cities across China for the last three years have been buying surplus apartments from property developers and moving in families from condemned city blocks and nearby villages. The strategy, supported by central-government bank lending, has rescued housing developers and lifted the property market, which accounts for a third of China’s economic growth according to Moody’s Investors Service.”

“Underpinning the strategy is a cycle of debt. Cities borrow from state banks for purchases and subsidies, then sell more land to developers to repay the loans. As developers build more housing, they, too, accrue more debt, setting up the state to bail them out again. The burden on the state rises, as does the risk of collapse.”

“The government has tried other ways of filling apartments, such as offering cash subsidies to encourage rural migrants to buy in urban areas, but the program is the first large-scale case of the government becoming a home buyer itself. Bengbu officials are wary about publicizing its hand in the market for fear of driving up prices and speculative buying. ‘We don’t mention it as much now as in the past two years,’ the city official in charge of the program said. ‘Prices have been fluctuating a lot, and it’s a little bit out of control.’”

“One new resident, a 26-year-old auto factory worker, said he moved into Oriental Metropolis four months ago after his home was torn down by the government. He used part of his government compensation of 810,000 yuan ($122,000) to buy an apartment for 430,000 yuan. ‘The apartment is not as good as our village home,’ he said. ‘It’s much smaller.’ He said he plans to use the rest of the money to buy another home.”

October 12, 2017

It’s The Ending Of The Boom

A report from Nine News in Australia. “The Reserve Bank, regulators and the government have got their wish. Property prices in the white-hot Sydney property market are starting to recede. The problem now for those regulators - and for first home buyers and others who are keen to get into the market - is how much further the market has to fall, before it settles. Like a puddle, if you don’t know how deep it is, you don’t want to jump in. What Australia does not want, does not need, is a housing price collapse. That would trigger unemployment and possibly the first recession in more than 26 years. What Australia needs is for the regulators to be right in their judgment: that they can quietly take the steam out of the market, without triggering a bust.”

From Domain News. “John Okgrolic, a train guard who lives in the western suburbs, is one Sydney property investor who has already anticipated a shift in the market. Worried about future price falls, he is now planning to sell his investment property in Cronulla, which he has held for 15 years. ‘We’re at the top of the market … I’m jumping ship before it hits the iceberg and sinks,’ Mr Okgrolic said. ‘When house prices have grown so fast compared to wages growth, you know something is wrong. You’d have to be blind and drunk to not see a fall in prices coming.’”

“Domain Group chief economist Andrew Wilson said the quarterly fall in prices were unsurprising, pointing to lacklustre auction clearance rates and a crackdown on investors from the banking regulator, the Australian Prudential Regulation Authority. ‘The market has flattened. It’s the ending of the boom,’ Dr Wilson said.”

From News.com.au. “New housing figures showed median unit prices have been dipping in areas such as the inner west and Sydney’s south over recent months following a mass exodus of investors from the market. Price falls were the largest for apartments in the council area of Leichhardt and the Botany area in Sydney’s south. Unit prices in Leichhardt suburb Lilyfield dropped 25 per cent over the three months, while in neighbouring suburbs Rozelle and Annandale the falls were 8-10 per cent.”

“All these areas are nearby a number of major unit developments, which have increased the selection of homes available to buyers. Real Estate Institute of NSW president John Cunningham said the changed conditions were allowing buyers to be pickier. ‘If they don’t’ see value, they don’t buy,’ he said. ‘That’s a very different situation from last year when people were concerned they’d miss out unless they bought something quickly.’”

From The New Daily. “Last Saturday I oversaw the auction of my grandmother’s house in a south-western suburb of Sydney. And it was not the exuberant fireworks display I was hoping for. The word ‘fizzer’ comes closer to the mark. At first, things looked promising. A healthy troupe of (what looked like) bidders turned up and poked about the place – measuring doorways, peering into cupboards, making sure the toilets flushed – before congregating in the backyard.”

“At the advertised time, the auctioneer strutted onto the lawn and delivered his spiel. After puffing the old place up until you wondered why the Queen herself hadn’t snapped it up pre-auction, he asked for an opening bid. Silence. ‘Did I mention how quiet the neighbourhood is?’ he cracked.”

“A lacklustre titter or two, then more silence. Finally, after an excruciating lull, a furtive voice piped up with an opening offer. It was well below the reserve, but it was a start. Peaking out from behind the dining room curtains, I rubbed my mitts together and waited for the bidding war to begin. Nothing. One bid was all we got. One bid! So much for the exuberant Sydney property market.”

“House price growth in Sydney has been astronomical, and wildly out of step with the rest of the economy. This growth has made a lot of people wealthy. But it has burdened others with absurd levels of debts, and shut yet more out of the housing market altogether. So, while it may be a bit disappointing for homeowners who are coming to the market just as the party is ending, the fact is this is a cooling that absolutely had to happen. As long as it is a gentle cooling (which so far it has been) and not a crash, it should be welcomed.”

“As for my grandmother’s house: eventually the auctioneer and her real estate agent managed, in private, to talk that one furtive bidder up to the reserve price. A bit disappointing perhaps; but, still, it was a much better price than you’d get for the same property anywhere else in Australia – not to mention a 7000 per cent return on what my grandparents paid for the place 50 years ago.”

October 11, 2017

Used To Be Hot, But Is Now Slowing Down

A report from the Washington Post. “Buyers in the Northern Virginia suburbs, like buyers in other areas, are slowing down a little this fall and opting to wait for the right place at the right price in some neighborhoods. In the most popular locations, though, the sales pace is still fast. ‘Buyers in the DMV [District, Maryland and Virginia] are really savvy and ready to buy,’ says Nela Richardson, chief economist of Redfin brokerage in Washington. ‘There’s no learning curve required. But, especially in the fall, they’ve got plenty of time to wait for the right house.’”

From CBS 46 in Georgia. “It’s hard not to drive down a metro Atlanta street without seeing a ‘for sale’ sign. However, some of these homes are getting more expensive and the salaries among people who want to buy the homes aren’t going up as much as the prices. But realtor Jill Huitron says not all parts of metro Atlanta are seeing homes sell quickly. ‘Sandy Springs — that used to be hot, [but] is now slowing down. So it’s more of a buyers market than a sellers market.’”

“Also a buyers market? Buckhead. The type of market is based on housing supply — Buckhead has nine months housing supply. Huitron says while the market does adjust itself every six to eight years, she doesn’t see a crash as bad as the one that happened in 2008.”

From CBS Minnesota. “The season isn’t the only thing changing in the Twin Cities metro. New numbers suggest the housing market is transitioning, too. Over the summer, homes in the metro were selling before they were even officially listed often at full price or above. New numbers suggest that trend is leveling off. Noelle Nielsen is with RE/MAX Advantage Plus Bright Birch Group. She spent Sunday at an open house in Burnsville. Renovation-ready, it’s listed at $485,000, a reduced price. ‘We have seen a drop in buyers coming out in September. So since then, we have had to do a price drop in this particular house,’ Nielsen said.”

“And Nielsen is far from alone. Data from Zillow from late August shows nearly 20 percent of metro listings were slashed in price.”

The Daily Comet in Louisiana. “A report released by Nationwide Insurance states that the Houma-Thibodaux housing market remains weak, but has gone from the sixth worst market in the United States to the eighth worst. Based on the second quarter of 2017, Houma-Thibodaux is just behind the New Orleans-Metairie market on its ‘Bottom 10′ list. It also found that the majority of the bottom 10 housing markets were in ‘energy-intensive states’ such as Louisiana, North Dakota, Texas and Alaska.”

“Local real estate agents have been seeing problems in the local housing market for a while. Mike LaRussa, with Coldwell Banker LaRussa Real Estate in Houma, said the area has become a buyer’s market because of the downturn in the oil industry. ‘We still have a lot of inventory on the market. There’s no denying it. It has slowed down a little bit. It’s a buyer’s market right now, but it all goes back to the oil. Oil is the heartbeat of our economy,’ LaRussa said.”

The Albuquerque Journal in New Mexico. “Nine years ago, New Mexico had so much cash that it gave some of the money back. Booming oil prices and the housing bubble helped push the state’s operating budget to $6.8 billion – in inflation-adjusted terms – and the Roundhouse was filled with talk of issuing big rebate checks to taxpayers. But the good times didn’t last. All told, every category of state spending has fallen over the past two years, once inflation is factored in.”‘

“‘It’s no big secret that we’ve been struggling,’ said Sen. John Arthur Smith, a Deming Democrat and chairman of the influential Senate Finance Committee.”

The Real Deal on New York. “What does it take to sell a luxury condominium these days? At 432 Park Avenue, a generous return policy. Developers CIM Group and Macklowe Properties have taken the unusual step of buying back an apartment at their supertall tower — thereby freeing up the seller to purchase something even bigger. Though unusual, this type of deal is not unheard of, said attorney Terrence Oved of Oved & Oved. He said it amounts to a ‘put option,’ and makes sense given the slowdown in luxury sales. ‘The market for super-luxury is stagnating,’ he said.”

“Overall, prices in the luxury market slipped 4.8 percent during the third quarter to $6.4 million, according to appraisal firm Miller Samuel. The median price on new development units fell 23 percent year-over-year to $2.79 million.”

From the Observer on Florida. “Sofia Vergara is very close to parting ways with her longtime Miami apartment. The actress purchased the studio, with just one bathroom, at 300 74th Street back in 2007. Vergara apparently lived in this 468-square-foot apartment for quite some time in the mid-1990s, renting it before she decided to eventually pay $165,000 for the rather modest abode.”

“The apartment is in the North Beach area of Miami, located on the second floor of an unassuming, two-story 1950s stucco building. Sadly, there aren’t any interior photos included in the listing, which is located just a few short blocks from the beach. The condo is currently pending sale and Vergara is prepared to take a loss on the apartment, as she listed it for a mere $150,000 in March—about $25,000 less than she paid for it a decade ago.”

October 10, 2017

The Market Is Not What It Was Six Months Ago

A report from CBC News in Canada. “New buyers can expect home ownership to become even less affordable next year as mortgage costs rise, while current owners will be largely insulated from higher rates. That’s one of the main takeaways of a new outlook from Scotiabank, which forecasts mortgage carrying costs to increase by about eight per cent next year because of rate increases and tougher mortgage rules. That’s almost three times more than the 2.5 per cent the bank expects household incomes to rise. Rival Royal Bank recently forecast in its own report that affordability has worsened for eight quarters in a row, and across the country is now at its lowest level since 1990. ‘The days of ultra low interest rates in Canada are over,’ Royal Bank said. ‘These increases are just the beginning of a hiking campaign.’”

From The Guardian in the UK. “Rents in Britain dropped in the final summer months for the first time in at least five years, according to Rightmove. It was the first fall at this time of year since Rightmove started tracking rents in late 2011. The decline comes as landlords flood the south-east of England with newly available rental properties, distorting the national picture, as they turn away from a stuttering London property market.”

From Thompson Reuters on Dubai. “Rents in some of Dubai’s busiest residential clusters are under intense pressure, with some landlords willing to cut their demand by 5-7 per cent. For tenants, the best way to access lower rents is seek out locations that have seen more new supply getting delivered or buildings with higher than average vacancy levels. ‘Anecdotal evidence suggests that numerous residential buildings - even within the prime areas such as Downtown and Marina - are seeing increased vacancies, and as such, tenants have been able to renegotiate their rents downwards,’ states the latest Dubai real estate update from JLL.”

“Up to 80,000 units could be delivered before the end of 2019, going by all the timelines set by ongoing projects and those launched recently. ‘This renewed sentiment does however raise the prospect of a potential over supply on the back of sales achieved through more attractive payment terms,’ said Craig Plumb, Head of Research - MENA at JLL.”

From Business Today in India. “The recent slump in the real estate industry means several major builders are unable to complete their housing projects and hand over possession to their customers, leaving them in the lurch. As is the usual practice, many of these customers have taken home loans, and they have to continue paying EMIs on their loans with no delivery date in sight. It has caused a lot of confusion and put many of them in dire straits financially.”

“For thousands of distressed homebuyers, the government is the last line of hope for some compensation. In the case of Amrapali, Uttar Pradesh Urban Housing Minister Suresh Khanna said, ‘There are nearly 40,000 homebuyers whose investments are stuck in various Amrapali housing projects. We have decided to give them relief. They will pay the remaining amount only when the builder readies the project for possession.’”

From Domain News in Australia. “Three out of 10 auction properties in Sydney failed to find a buyer at the weekend as real estate agents neglected to report the results of almost one-third of 679 scheduled auctions. The under-reporting of sales results is a tell-tale sign of a levelling market. Real Estate Institute of NSW president John Cunningham said unreasonably high asking prices were dampening activity.”

“‘The market has been changing all year,’ he said. ‘We are not getting the cream on the top of all those record prices that were occurring. If vendors are basing their price expectations on what happened six months ago, they are going to be disappointed. The market is not what it was six months ago.’”

“According to data from Domain Group, stock levels in Sydney at the moment are up 30 per cent on last year’s listings. ‘This is all part of the normal post-boom cycle,’ Mr Cunningham noted. ‘One of the reasons that you have a boom is because supply is extremely low and demand is high. You have a low interest rate environment which fuels that, but when the market goes through its transition period, changing from those boom conditions to what we call a normal market, there is actually more stock available.’”

The New Zealand Herald. “Reigning in bank borrowing, rather than building more homes, may be the answer to Auckland’s housing crisis, an Auckland property expert believes. Dr Michael Rehm, a senior lecturer in property at the University of Auckland Business School says lowering lending to more manageable debt-to-income ratios is likely to lead to a drop in house prices ‘overnight.’”

“‘But if this happens, it would mean up to 60 per cent of sales couldn’t happen,’ he says. ‘Many mortgages are astronomical; they are ‘off the wall’ and there is going to be a massive amount of pain to get to where we need to be. But if something doesn’t happen it is only going to end in tears.’”

“Rehm says debt-to-income ratios in New Zealand are in the stratosphere. A recent KPMG Financial Institutions Performance Survey (FIP) suggested most mortgages are sitting between nine and 12 times borrower income (this equates to a household with an income of $70,000 taking on a mortgage between $630,000 and $840,000). ‘This should be much lower - somewhere between three and five times income,’ he says.”

“Rehm says building more houses is not necessarily a silver bullet and may even drive prices up. ‘In Dublin, a city about the same size as Auckland, between 2002 and 2007 almost 100,000 new dwellings were built; but this only succeeded in fueling a speculative housing bubble and driving prices up by 85 per cent,’ he says.”

“Rehm lays the blame on ‘unbridled’ bank lending. ‘All roads eventually lead back to the banks,’ he says. ‘It is scary so many young people cannot afford housing. I believe the fastest way to turn it around is by restricting lending and if they pull back on credit, that alone I think will help draw prices back. Banks are looking to maximise their profits and compete against each other; to do this they need to grow their mortgage portfolios.’”

“Rehm says in 2016, 52 per cent of bank lending went on housing compared to just 14 per cent in 1984. ‘The tragedy is the debt saddled on Kiwi homeowners generates interest, a large chunk of which goes to shareholders off-shore,’ he says. ‘Anyone taking out high debt is taking real risk and if prices start dropping they are sitting ducks.’”

From the Otago Daily Times in New Zealand. “The slowdown in the housing market is causing sellers to take bigger losses on house sales. The quarterly Pain and Gain report from CoreLogic showed that while the number of people taking a loss is trending down, the amount they lose has increased. The median loss in Tauranga was the most pronounced, with people who sold at a loss losing a median of $55,000, up from $25,000 in the previous quarter. Dunedin also showed a sharp increase in loss up to $19,000 from $3000 in the previous quarter.”

“Christchurch was the worst affected city centre with the 7.9% of people who took a hit losing a median of $36,500. The 1.8% of Auckland sellers who took a loss were out-of-pocket by a median of $26,000. Nationwide, the median loss per loss-making sale is around $20,000. Investors were worse off than owner occupiers, losing $44,500 per sale.”

“Another trend revealed in the report was that the median hold period for loss-making properties had decreased from eight years in the previous quarter to just under seven. The hold period in Auckland dropped to just one year in the June quarter, down from 2.3 years in the previous quarter. ‘This means half of all Auckland properties selling at a loss were owned for less than a year,’ CoreLogic head of research Nick Goodall said.”

October 9, 2017

A Race For The Bottom

A report from NBC Montana. “The city of Missoula has issued more than 1,100 building permits so far this year and residents hope it will even out rent prices. New Missoula residents Carly and Greg Hill moved to the Garden City for law school with the hope of finding affordable housing. The Hill family found many vacant places to rent but struggled to find a place with adequate space and an affordable base rent. Greg Hill said they eventually decided to buy a place instead. Now, they look at their new home as an investment. ‘Even though we are only going to be here a few years we can sell this place and kind of get our money back but rent will be cheaper,’ Greg Hill said.”

“As for others moving to Missoula in the near future, Greg and Carly Hill recommend looking at as many places as possible, because there are a lot of options.”

From The Tennessean. “On July 24, the Gallatin Municipal-Regional Planning Commission did not recommend approval of a resolution to approve an amendment to the plan, and on Aug. 15, the council requested additional discussion on the amendment for Hunter Pointe which includes Hunter Pointe Apartments. After a public hearing was held, the council voted to approve the amendment on first reading, and on Sept. 19, voted to approve the second reading, 6-1. Gallatin Mayor Paige Brown expressed concern about the ‘overall swell of apartments coming in here.’”

“Although growth is inevitable, Brown expressed concern about the possibility of an over-saturated market down the road. Overbuilding could eventually lead to lower rents and less maintenance on those properties, she explained. ‘Right now these are nice expensive apartments, but that could decline over time,’ she said.”

From Business Den in Colorado. “The standard one bedroom at Archer Tower Apartments in Capitol Hill rents for $1,440 a month, unless tenants plan on listing their unit on Airbnb. Then they get a discount, and get to run a little side-hustle with their landlord’s blessing. The 300-unit building has been telling prospective tenants on Craigslist to ‘reduce your rent with Airbnb!!!’ Commit to listing your one bedroom on Airbnb for 10 days a year, the ad says, and your monthly rent becomes $1,380. Commit to 60 days, and rent drops to $1,075, a 25 percent cut. A similar ad can be found for studios.”

“Most other Craigslist rental ads that mention Airbnb say it’s prohibited. The San Francisco-based online marketplace has had a testy relationship with landlords, who tend to be suspicious of the service, which brings people they don’t know into their units for short-term stays. Earlier this year, Denver-based Apartment Investment and Management Co., one of the country’s largest owners and operators of apartments, sued Airbnb, saying the company helped its tenants violate their leases.”

From Banker and Tradesman in Massachusetts. “Yes, Boston has seen a surge in luxury condo and apartment development over the past few years. But more luxury units are not the reason middle-class families are moving out of the city. Rather, the culprit is a long-term shortage of housing that built up over the ’70s, ’80s and ’90s, when few new apartment and condo developments were built in Boston. The new construction that has taken shape over the last two decades has helped satisfy some of that pent-up demand, and there’s some evidence that it is moderating or even bringing down rents in older units in other parts of the city.”

From the Real Estate Journal. “Rents have risen at differing rates from September to October across the country. In Lincoln, Nebraska, median rents dropped 4.7 percent from September to October, the fourth biggest drop in the country. In fifth place came Lexington, Kentucky, where median rents fell 4.3 percent, just ahead of sixth-place finisher St. Paul, Minnesota, where the median monthly rent of a one-bedroom apartment fell 3.6 percent. St. Louis also appeared on the list of biggest percentage rent drops. The median one-bedroom rent here fell 2.8 percent from September to October, the ninth biggest drop in the country.”

From Crain’s New York. “A group of developers has secured a $215 million loan to finance construction of a 27-story condo tower at 537 Greenwich St. A partnership between Strategic Capital, Forum Absolute and Cape Advisors received the debt from Bank of the Ozarks to help fund the 170-unit tower. Construction loans for high-end residential condo development have been more difficult to secure as concerns have lingered about an oversupply of units. Residential market data for the third quarter depict a buyer’s market in which sellers in Manhattan have had to discount asking prices by an average of 6%. One in three sellers cut their asking price to sell their apartment or townhouse.”

“Bank of the Ozarks has been one of the busiest construction lenders in the city in recent years, pouring hundreds of millions of dollars into development deals as other major lenders have pulled back. In July, however, Dan Thomas, head of the bank’s real estate lending group, suddenly resigned, plunging the company’s stock by almost 12% and stoking questions about whether there are problems in the bank’s portfolio of loans and if it might pull back on lending in the city.”

From The Real Deal on Florida. “Condo developers have been markedly quieter these days, holding off on any new launches as the supply of preconstruction condos slowly gets absorbed in South Florida. Gil Dezer of Dezer Development, for example, hasn’t made moves on his next luxury condo tower in Sunny Isles, which he previously planned to launch earlier this year. He completed Porsche Design Tower last year, where a number of buyers are now looking to flip their units.”

“Behind closed doors, developers and agents are negotiating pricing on a case-by-case basis, insiders tell TRD. And across the region, sellers are finally adjusting their prices, leading to more transactions. In some areas, like Brickell and the barrier islands, the industry is bracing for a flood of new construction to hit the market as projects get completed. Together, Bal Harbour, Surfside and Bay Harbor Islands are already facing more than three years of luxury condo inventory, and that excludes preconstruction units, according to a recent report from Condo Vultures Realty.”

“In South Florida, nearly 48,000 condos have been proposed, planned, delivered or are under construction since the start of this cycle.”

The Dallas Morning News in Texas. “A big chunk of North Texas’ building boom is apartments. For the last few years, the Dallas-Fort Worth area has led the nation in new apartments. More than 100,000 new units have opened their doors in the last four years. And average rents in the area have jumped by almost 30 percent since 2012. While there are still almost 48,000 rental units under construction in the D-FW area, a slowdown in rent growth and soaring building costs are likely to tamp down the hot apartment building market in the coming year.”

But don’t expect a crash in the rental market. ‘We’ve got the jobs that keep churning in this town, and we continue to be underserved in apartments,’ said Bradley Miller, president of builder Encore Multi-Family LLC. ‘Yes, there is a boatload of high-end apartment product coming through the development pipeline. It will be interesting to see what happens with that.’”

“With only 5 percent of the D-FW apartment market vacant, it’s hard to get too worked up about a slowdown. ‘Vacancy rates are still low,’ said Jay Denton with RealPage. ‘Apartment demand is pulling back a little bit because job growth is not quite what it was.’”

The Bisnow on Texas. “Checking off apartment properties as profitable does have its challenges in San Antonio, said Angelique Goodnough, an executive vice president at Roscoe Properties. The challenge for Roscoe, with 13 apartment complexes in the San Antonio area, is twofold: strong candidates for professional management jobs and residents that can easily afford the housing shadow market.”

“Goodnough said 97 multifamily properties have been proposed over the next two years in San Antonio. Several thousand apartment units will be coming online in the next 24 to 36 months. But they will face stiff competition for occupants from the single-family market. The median price of a house in San Antonio is $170K. The median price in Austin is $376K. San Antonio families want larger units in the suburbs, Goodnough said. ‘If you can get a three-bedroom house for $1,500 a month, that puts a cap on what you can get for a three-bedroom that’s well amenitized,’ Goodnough said.”

“Traditional strategies to draw prospects, such as concessions, do not work in a market where the profit margin is as thin as San Antonio, Goodnough said. ‘When you have properties performing with concessions between 8 and 16%, that’s just a race for the bottom,’ she said.”

October 8, 2017

Luxury Apartments For Folks Worried About The Apocalypse

A weekend topic starting with The Real Deal. “In March 2013, financier Martin Zweig’s widow Barbara put her penthouse at the Pierre Hotel on the market for $125 million. This August, four years, several brokers and several price cuts later, it finally sold — for $44 million- one of the biggest discounts the market has ever seen. Finding the right asking price in Manhattan real estate can feel like a game of pinata, and every miss is costly. If Zweig had listed her pad for $44 million four years ago, sold it right away (assuming the demand was there) and put the money in an S&P 500 ticker fund, she would be sitting on around $70 million today.”

“Distinguishing a $50 wine from a $500 wine may be tricky, but telling a a $5 million pad from a $50 million one is something most buyers can do. And even if they can’t, they usually hire brokers who can. ‘I don’t think overpricing is effective in any price range,’ said Elizabeth Sample, a top luxury broker at Sotheby’s International Realty. ‘We all lost listings recently that we just couldn’t take and we’re just walking away from,’ Jade Mills, one of the top agents in Los Angeles, recently said.”

“In a 2001 study, economists Paul Anglin, Ronald Rutherford and Thomas Springer found that a 1-percent increase in a property’s price increases its time on the market, on average, by 1.3 percent. Time on the market costs money. It can also create luxury real estate’s version of a deflationary spiral: if an apartment gets price chop after price chop buyers may be more inclined to wait and see if it gets another.”

“‘It’s a Zillow world and the price history of a property is akin to getting a tattoo,’ said Chad Roffers, chair of luxury real estate auction house Concierge Auctions.”

“We take it for granted that homes are sold through the song-and-dance of ask and offer, while auctions are for bankruptcy. That wasn’t always so. As TRD’s Adam Pincus pointed out, in the 1880s, a lot of New York properties were sold via auction at the Real Estate Exchange and Auction at 26 Liberty Street. Brokers and asking prices didn’t really take over until the turn of the century.”

From The Healdsburg Tribune in California. “Some in Healdsburg would like to tax the owners of homes that sit vacant most of the time, but California voters have made that a difficult task. At Monday’s Healdsburg City Council meeting, a discussion on whether to levy a tax or assessment on ’second homes’ began with a primer on property tax law from the city attorney. Councilmember David Hagele noted that when he campaigned for a city council seat last year, ‘if you knocked on a door on Tucker Street, you knew that the next voter would be six doors down.’”

“‘This issue has a tangible effect on the quality of life in our community,’ said councilmember Joe Naujokas, adding that ‘we need more data,’ about how many vacant homes are in the community, especially after members of the public have cited figures ranging from 10 percent to more than half of the community being vacant homes.”

The Vancouver Sun in Canada. “The author of Millionaire Migrants was one the first to provide evidence that the foreign real-estate dreams of China’s wealthy have arguably had more impact than anything on Metro Vancouver’s housing unaffordability. UBC geographer David Ley, along with SFU’s Wu Qiyan, told me early this year the city’s real-estate bubble would be punctured when leaders of the People’s Republic of China further restrict money leaving their country.”

“Now strong signs are appearing that Metro Vancouver’s real-estate balloon has indeed been pricked by China’s heightened capital controls. Demand for multi-million dollar dwellings in Metro Vancouver is falling. ‘All the high-end stuff is sluggish,’ says Vancouver realtor-analyst Steve Saretsky.”

“Real Estate Association of Greater Vancouver figures show the median price of a detached home is down more than $500,000 since February, to $1.7 million. Veteran Canadian real-estate data analyst Stephen Punwasi also has little doubt ‘Chinese capital is having a tougher time getting out of China’ since leaders introduced tighter controls in January. ‘Vancouver locals selling $3 million bungalows are going to have trouble finding an alternative to foreign urban land buyers, so prices need to be slashed,’ Punwasi said.”

“Even though Canadians can be forgiven for being uninterested in the macro-economics of China, it’s worth knowing its authoritarian leaders motives. They want to keep more capital in China to bolster monetary reserves and secure the country’s extraordinarily high volume of loans. As Saretsky says, China is trying ‘avoid a run on its banks.’”

From The Florida Times-Union. “The sky is falling. The sky is falling … or probably will any day now the way things are going. Cat. 5 hurricanes, 7.1 and 8.1 magnitude earthquakes, a total solar eclipse, terrorist attacks and threats of nuclear war with North Korea have me shaking in my flip flops.”

“I’m not the only one worried about the apocalypse. Doomsday writer David Meade predicted the world would end Sept. 23, but later backtracked that claim, saying astronomy and the biblical Book of Revelation predict Oct. 17 will start a seven-year cycle that will bring about the end of the world. He cited hurricanes Irma and Harvey as omens of things to come. ‘The world is not ending, but the world as we know it is ending. A major part of the world will not be the same the beginning of October,’ he told the Washington Post. No kidding!”

“On Jan. 1, followers of the Sword of God Brotherhood prepared for Armageddon by climbing a mountain in Bugarach, southwest France, where they believed aliens hidden inside the rock would save them. Larry Hall had a better idea. In 2008 he bought a retired vertical, underground missile silo and converted it into luxury apartments for folks who are worried about the apocalypse. His survival condo project can withstand catastrophic events, can house a dozen families, and has food, fisheries, gardens and a pool. A second silo is due to be finished fall 2018 — sounds like a hotel chain time-share to me.”

“Nevertheless, as author Stephen King said, ‘There’s no harm in hoping for the best as long as you’re prepared for the worst.’”

“I better get busy working on my bucket list — write a best-seller; fill my sharks teeth jar to the top; clean the house — nah; research the family tree; shred 40 years of tax records in case a post-cataclysm extraterrestrial or zombie tries to steal my identity, and shed a few pounds, because if I go, I want to go lookin’ good.”

“On the other hand, as Erma Bombeck said: ‘Seize the moment. Remember all those women on the Titanic who waved off the dessert cart.’”

October 6, 2017

There Aren’t Enough Buyers Paying Ridiculous Prices

It’s Friday desk clearing time for this blogger. “A new twist on Bravo’s successful ‘Million Dollar Listing’ franchise, ‘Real Estate Wars’ ratchets up the heat on professional rivalries. The show capitalizes on the real-life bad blood between two aggressive agents, John McMonigle and Jojo Romeo, who once worked together. Jojo Romeo, with three ex-husbands and five children, wears tight dresses and belies her 49 years. McMonigle’s storyline, along with his history of over-the-top properties, could eat up a whole episode.”

“He filed for Chapter 7 bankruptcy in 2011 as part of a series of setbacks that began when a lender cut off funds for a mansion he was involved in developing. Known at the time as Villa del Lago, it was once priced by McMonigle as high as $87 million. After price cuts, and under the auspices of another agent, it sold, unfinished, for $18.5 million. Since the housing downturn, McMonigle, 52, has risen from the ruins. He’s represented a Coto de Caza estate with a private lake and a pirate ship in the swimming pool. He keeps as a pocket listing a Pelican Crest mansion with a stripper pole on a stage in the home theater. And he’s newly married to a younger agent, Hannah McMonigle.”

“In one scene, he takes his bride-to-be to see a waterfront fixer-upper on Lido Isle that he’d like to buy. It’s priced at just under $5 million. She looks reluctant, but he persuades her it’s the right move for them and she appears to come around. ‘In real estate, it’s all about the spin,’ John McMonigle says into the camera. ‘You want to help your clients fall in love with the property, even if it’s not ideal.’”

“Local real estate agents talk about houses selling so quickly they do not appear on the Multiple Listing Service, and some who have worked in Waco for decades say they’ve never seen demand quite so high. Trammell Kelly, a residential sales specialist with Kelly Realtors, said the appreciation of home values locally is unprecedented. ‘Is the market cooling at all? If you had asked me that a month ago, I would have said it is cooling a bit. But then in the last couple of weeks, it has not. I put properties up for sale that sold within 24 to 48 hours. I’m seeing a lot of homes priced at $200,000 to $400,000 move very quickly.’”

“There was good news and more good news for home buyers for the Southwest Michigan housing market in August. The region produced its most homes sold so far in 2017, while the average price dropped significantly – compared to July. ‘After four months of selling prices holding fairly steady, the average and median selling prices dropped,’ said Alan Jeffries, association executive of the Southwestern Michigan Association of Realtors. ‘The average selling price in August fell 12 percent from July and the median selling price slipped 3 percent.’”

“The Pinellas County Commission is trying to convince voters to renew the 1-cent Penny for Pinellas sales tax for another decade. So this news comes at an inconvenient time: The commission recently decided to sell off a piece of land at a loss of $1.7 million — money that was raised by the penny sales tax. The commission voted 6-1 on Sept. 26 to sell land in Indian Rocks Beach on Gulf Boulevard for $1.1 million. But it paid $2.8 million for the parcel in 2006, at the height of the real estate boom.”

“With just one bidder, Commissioner John Morroni said the county should sell the property to recoup whatever it can and stop paying $3,800 a year to maintain the land. ‘I would not take a chance on waiting,’ he said before the vote.”

“The number of first-time foreclosures in the five boroughs reached 859 during the third quarter of the year, part of a dramatic increase to levels last seen at the start of the Great Recession, according to a report from PropertyShark. The third-quarter foreclosure count was 79% higher than the same period last year, though certain areas of the city saw even more dramatic increases. In the Bronx, first-time foreclosures were up 145% compared to the year prior. In Brooklyn, they rose 112%.”

“The overall numbers bottomed out in 2013, they have since begun to rise—a trajectory last seen in 2006. Foreclosures tend to peak earlier in the year, and the second quarter this year was one instance shy of matching the previous peak in 2009, when there were 912 foreclosures in April, May and June.”

“How quickly things change for Toronto’s housing market. At the start of the year, prices were rising by more than 30 percent annually. But as was seen in Vancouver, eventually the market wobbles under its own weight. It gets to a point where there aren’t enough buyers capable of paying ridiculous prices. Bloomberg’s Nanos Canadian Confidence Index fell to the lowest level since mid-July. Optimism about home prices rising is becoming harder to find.”

“‘I’m not a pure optimist, but by the same token I’m not an alarmist because people have been calling the end of this market for the last three years,’ said Brad Henderson, president and CEO of Sotheby’s International Realty Canada. ‘It really comes down to the psychology of the market and the comfort that people have in the future.’”

“Israel’s economy is strong enough to weather a steep drop in housing prices, according to the prime minister’s top economic adviser, a view at odds with central bank warnings. With a decade-old housing boom appearing to wind down, Avi Simhon, who heads the National Economic Council, said banks can withstand a 25 percent decline in home prices without any major problems. He added that because the typical value of a loan is low relative to property prices, even a 50 percent plunge, a level typically seen as catastrophic for an economy, wouldn’t destabilize the banking system.”

“‘Unlike in the USA, you can’t just tell a bank to take your house,’ Simhon said. ‘So it’s hard to see a housing slump leading to major problems for banks.’ If a major recession does come, he added, ‘then we’d have problems regardless of what happens with the housing industry.’”

“Despite the economic growth, Malaysia’s commercial and housing property market continues to face a glut, said Second Finance Minister Datuk Seri Johari Abdul Ghani. Johari said the increase in housing prices in the country has overtaken the rise in income, since 2012. ‘In the first quarter of 2017 about 130,000 unsold units of high-end properties are actually above RM250,000. These high-end units are considered to be affordable only to 58 per cent of households in Malaysia,’ he said.”

“He added that the oversupply of higher-end properties are the main reason the country is seeing a significant portion of properties remaining unsold. Compared to the first quarter in 2012, he said, only 54,000 units were unsold and from the number 19,500 higher-end properties were affected. ‘As you see today, 108,000 of 130,000 high-end properties are unsold. This is an alarming situation. It is because four to five years ago, before we implemented policies, many high-end projects were taking place.’”

“Blaine Callard, CEO of Harvey Norman Ireland, recently made headlines when his Brisbane CBD sub penthouse sold for $400,000 less than he paid for it eight years ago. Callard had been asking for offers over $2m for the 216 square metre sub penthouse apartment in the upmarket Admiralty Towers, but only managed to fetch $1.85m. Records show he’d paid $2.25m for the investment property in 2009.”

“Callard’s investment isn’t the only example of a Brisbane apartment that was resold at a loss. Official property searches indicate that many off-the-plan apartment high-rises completed at the start of the boom have since been resold at considerable losses – as high as 35% in densely built areas such as Newstead, Bowen Hills, and Hamilton. Nearly a quarter of Brisbane apartments lost money in the first three months of the year, up from approximately 18% of sales making a loss in mid-2016.”

“Angie Zigomanis, senior manager at BIS Oxford Economics, said newer Brisbane units were expected to lose value in the short term. ‘Anyone who has bought off-the-plan now is unlikely to see a gain at all in the three years,’ he told The Australian. ‘Those losses are bigger when you take into account the stamp duty on the purchases as well. For a lot of purchasers it means their equity has dissipated.’”

October 5, 2017

It’s Easier To Find A House Than It Was During The Boom

A report from the Nashville Post in Tennessee. “On the surface, it’s been a stellar 2017 for the Nashville real estate market. In fact, the city’s real estate sector could easily be placed in the national ’supernova’ category. Despite the positive press, there are complications hidden ever-so-slightly beneath the surface. ‘We are already seeing an absorption rate that just doesn’t work. There are parts of East Nashville where no one should be building new houses. They have plenty of inventory,’ says John Brittle, who has been active in Nashville’s residential real estate sector for 30 years. ‘There are people buying lots where they think they can put two houses but they can only put one. There’s a lot more being built than they think because they don’t study the whole market. The competition is getting really tight, and the developers are willing to go ahead and build and make less per house. That’s going to give us an inventory glut in certain places.’”

“‘By the end of this year, I believe we’ll see investors losing money on real estate deals in certain areas,’ Brittle predicts. ‘[They will have] paid too much for a lot because construction costs went up too high and because of added costs related to regulations such as Nashville’s new sidewalk bill.’”

The Denver Channel in Colorado. “Home prices in the Denver metro area dropped slightly again in September, signaling that the typical seasonal slowdown is underway. The biggest change in September was the number of sold homes. While it’s typical to see a decrease of about 10 percent this time of year, last month saw more than 21 percent fewer homes sold. The double-digit decreases were consistent across single-family and condo properties.”

“According to DMAR, agents have reported that home showings are starting to slow down and some buyers are lowering prices to entice more buyers. Agents also are seeing an increase in homes falling out of contract and going back on the market. ‘We’re starting to see a slowdown in overall housing market traffic even in the lower price ranges,’ said Steve Danyliw, chairman of the DMAR Market Trends Committee.”

The Hartford Courant in Connecticut. “Home sales in greater Hartford perked up in August, but prices paid dipped the most for any month so far this year, a new report shows, as potential buyers remained cautious about making purchases. Carl Lantz, the association’s president and a real estate agent at Re/Max Premier in West Hartford, said houses that have the latest updates in kitchens and bathrooms and are in desirable locations are selling well, often with multiple offers.”

“The trouble is the ’shadow inventory’ of dated homes where sellers are often forced to reduce asking prices to lure in a buyer, Lantz said. ‘There’s insecurity in the economy as a whole in Connecticut where buyers chose to buy homes that are renovated and homes that are not renovated suffer in price,’ Lantz said.”

The Naples Daily News in Florida. “Naples area Realtors had a great summer, until Hurricane Irma came around to spoil it at the end. There was virtually no activity going on in the MLS for almost two weeks after the hurricane, said Wes Kunkle, president and managing broker at Kunkle International Realty in Naples. ‘Next month’s numbers may show kind of a downturn,’ he said. ‘But I think it’s going to be kind of a false downturn hopefully.’”

The Stockton Record in California. “Christina Fugazi was among the supporters nearly two years ago when the council approved a temporary but significant reduction in the fees housing developers must pay before they can build in Stockton. The goal was to quicken the pace of single-family and multi-unit residential construction in the city, but so far the results have been lackluster, Fugazi acknowledged. ‘Building is taking place everywhere around Stockton, but not here,’ said Fugazi, whose council district includes downtown.”

“‘It’s still really challenging,’ Community Development Director David Kwong said of Stockton’s housing conditions. ‘If the market is not there to construct those units … then people won’t build them.’”

From KFYR TV in Montana. “It’s a lot easier to find a house for sale in Sidney, Mont., than it was during the oil boom. ‘There’s like to me houses here it’s hard for people to buy because they can’t afford to buy it because it’s out of their price range,’ said Kim Hall, Sidney resident.”

“During this slowdown stage that’s lasted for at least a year, 130 homes are on the market. ‘This is actually the highest inventory I’ve seen. We are definitely looking at the most options families had to look for homes in a long time,’ said Amanda Seigfreid, Missouri River realtor. Seigfreid says sellers shouldn’t think all hope is lost. Interest rates are still low, so buyers have plenty of options. ‘When there was more people looking, than there was homes available, there was less to choose from prices went up. Right now there’s so much to choose from, the prices have come down,’ said Seigfreid.”

“Sidney resident Tammy Pederson says this is her first time selling her home, and says she’ll just have to be patient. ‘The process it’s slow, but it’s definitely a house worth being seen so we will wait for the right buyer and hopefully it will get sold,’ said Pedersen.”

From Crain’s New York. “It’s a buyer’s market in Manhattan, where more homes traded hands during the third quarter of the year than at any time since 2015. And because house-hunters refused to budge on offers, sellers had to adjust and include discounts averaging 6%, according to a report. ‘Buyers are just sitting there, waiting for the sellers to get in sync with what is happening now, and not what was happening two or three years ago,’ said Jonathan Miller, head of appraisal firm Miller Samuel, which prepared the report.”

“New developments appeared to have a record-setting quarter, but Warburg Realty noted that these figures are actually indicative of when the contracts were signed, and are not a good barometer for what is happening now. ‘Most of those records … pertained to deals signed several years earlier for buildings then under construction,’ Warburg head Frederick Peters wrote in his market report. ‘For those buyers who have wanted to flip their units after closing on them, the resale market has been less kind.’”

October 4, 2017

The Red-Hot Market Has Become More Rational

A report from Better Dwelling in Canada. “Toronto real estate is about to be hit with a flood of supply, while prices are in a precarious situation. A metric s**t ton of condos will be up for sale over the next two months. Almost 17,000 condo pre-construction units will go on sale according to condos.ca. The press release said they have ‘never seen this many projects launching in such a short span of time.’ They believe the number of units about to hit the market is because the ‘condo market is killing it.’”

“Left your Realtor to english dictionary at home? That means developers are scrambling to realize gains on high property values. When they all scramble at the same time, you should start wondering what’s the rush? This many developers competing against each other is… strange. Unless they all decided land is reaching peak values for the near term.”

From News and Views from Norway. “New figures released by Norway’s national real estate brokers’ association on Wednesday show prices declining and even diving in some areas. Average prices in Oslo, for example, fell for the fifth month in a row and are now 8.4 percent lower than in April. ‘We have to go back to the finance crisis (in 2008-2009) to find such a major decline in price growth over a 12-month period, and it’s especially strong in Oslo,’ Christian Dreyer, chief executive of the brokers’ association Eiendom Norge, said at a presentation.”

“It all suggests that the boom is over, the red-hot real estate market has cooled off and become more rational. Uncertainty, meanwhile, is higher than it’s been for a long time. Dreyer noted that population growth has declined in Norway following the downturn in the oil industry that once attracted lots of job seekers from abroad. ‘There’s a lot of uncertainty tied to whether the downward trend in population growth that we’ve seen so far in 2017 will continue,’ he said.”

From Mansion Global on the UK. “For those in the market for a large or high-end rental in prime central London, there are more than a few options, according to a report from Rokstone, a London-based real estate agency. One of the reasons there are so many larger and luxury properties on the rental market now is because owners have not been able to sell, according to Rokstone. Owners of flats renting for more than £10,000 per week (US$13,300) are choosing to rent them out rather than let the apartment stay empty.”

“‘Currently around six out of 10 inquiries I am getting from my property developer clients is asking us to provide them with bespoke lettings services for luxury property they are holding on their balance sheets,’ said Becky Fatemi, managing director of Rokstone.”

From Morocco World News. “Vacant housing units in Morocco numbered over 1 million in 2014, said the High Commission for Planning (HCP). A recent report by the HCP drew attention in particular to the ‘great disparity’ in vacant housing between urban and rural areas.Cities are the site of 90.7 percent of vacant housing in the country, compared to only 9.3 percent in the countryside.”

“The rate of vacant housing reached 24.1 percent in Casablanca-Settat region, 15.9 percent in the Tangier-Tetouan-Al Hoceima region,followed by 12.7 percent in Rabat-Salé-Kénitra, 12 percent in Fez-Meknes, 9.8 percent in Marrakesh-Safi, 8 percent in Souss-Massa, and 7.5 percent in the Oriental region.”

From Egypt Independent. “Census official data revealed that the total number of vacant housing units in Egypt is 12.8 million units, 4.6 million of which are fully constructed, 4.3 million units need to be finished, and 2.8 million units are closed due to the existence of another dwelling for the family. The governorate of Matruh had the highest percentage of vacant apartments with 46.9 percent out of the total Matruh housing units, followed by the Red Sea with 39.3 percent, and South Sinai with 34.1 percent. Cairo governorate had 22.7 percent of its 4.7 million units vacant, and Port Said had 10.4 percent of its housing units vacant.”

From Fairfax Media in New Zealand. “People holding back from listing their properties may be protecting New Zealand from a significant fall in house prices, QV says. Spokesman David Nagel said a drop in value growth had spread from the main centres to almost all urban areas. QV senior consultant James Steele said sales volumes were at very low levels because it was hard for purchasers to get finance. ‘Prices for new dwellings in large subdivisions have eased back, especially where speculation was a large part of the market, and builders have also noted a slowdown of work in these areas.’”

The Sydney Morning Herald in Australia. “Sydneysiders will feel an uncharacteristically cool spring chill from Monday’s news that house prices have begun their descent in September - an outcome that, while widely anticipated, has been a long time coming. The single biggest factor in Sydney’s housing value fall relative to other capital cities appears to be the volume of new stock coming into the market - an increase of 15 per cent over the same period last year.”

“It looks like Sydney sellers have finally called the top of the market and are rushing to get stock onto the market. Additionally Sydney has traditionally had a larger portion of investors in its market - the segment regulators are trying to rein in because they are seen as primarily responsible for pushing values into the stratosphere.”

From Bloomberg on Australia. “The global crown for the longest stretch of uninterrupted economic growth is within sight for Australia. But it’s limping to the line as policy paralysis weighs on the nation’s prospects. The reliance on rapid immigration is straining infrastructure, while mining profits fuel riches for stakeholders but do little for the vast majority of Australians living in major cities. Meantime, wages are barely growing, households carry some of the world’s heaviest debt loads, and productivity gains from the economic reforms of the 1980s and early 1990s have petered out.”

“And home ownership among young Australians is the lowest on record as successive governments have failed to tackle generous tax breaks that have helped turn housing into a speculative financial asset. ‘The inter-generational shift in wealth in Australia is really penalizing the young,’ said Patricia Apps, professor of public economics at the University of Sydney. ‘Providing tax breaks for housing investors and then arguing that the property bubble it generates represents increased wealth makes no sense at all.’”

October 3, 2017

Worries About Overbuilding And Overpaying

A report from National Real Estate Investor. “Investors continue to buy fewer apartment properties than they did last year. Yet prices continue to rise. So far in 2017, the usual declines have been steeper than normal. Experts say fewer properties are available for sale, especially compared to the peak year of 2015. ‘The volume of property sales was so big… you can’t do that kind of deal volume every year,’ says James Costello, senior vice president for Real Capital Analytics.”

“Buyers are still very interested in apartment properties, keeping prices high and cap rates low. But that interest is not always enough to overcome worries about overbuilding and overpaying for assets. It seems less and less likely that prices will rise as quickly in the future as they have in the recent past. ‘Buyers won’t have cap rate compression to paper over any mistakes they make in underwriting,’ says Costello.”

The Orange County Register in California. “This commercial real estate market reminds me of an open bag of potato chips — with 98.5 percent of them eaten. The full chips are consumed — functional buildings with good owner motivation, priced aggressively but still within reason. What remains are the remnants of the whole crunch — dysfunctional, overpriced locations with zero owner motivation to meet the market and make a deal! A normal ebb and flow of availabilities and interested buyers have been usurped with feeding frenzies and bidding wars.”

“Sellers are enjoying these times. Many of us are warning a correction is near, but we also struggle to pinpoint the trigger. Remember that call you received from a broker claiming to have a buyer interested in your building? You blew him off but he was persistent. A multitude of calls morphed into a tour and subsequently an unsolicited offer. The price caused you to do a doubletake. Well, if he’s willing to pay this today, what will the building be worth next year? You don’t want to be that guy at the cocktail party talking about the deal you should’ve done.”

“If a deal seems obscene, it is. Last week we toured a project which is light years from the freeway. Mismanaged was the theme: low rents, high expenses, ownership squabble, vacant space, sky-high asking price. Yep, you guessed it. Three full-ask offers. My buyer and I shook our heads in disbelief and consoled each other. The deal wasn’t for us!”

The Columbus Dispatch in Ohio. “In an era of increasingly luxurious Columbus apartments, Hubbard Park Place raises the bar even higher. The project will include 101 apartments and 12,000 square feet of offices in a seven-story building that looks more like two buildings when it’s finished in a few months. It will have prices to match, starting at $1,700 a month and topping $4,000 for a handful of penthouse units. ‘The project will push the market,’ said Mark Wood, president of the Wood Companies, which is developing the building with Schiff Capital Group.”

“The Hubbard may raise the bar a bit, but it’s far from alone. Together with other high-end projects in and around Downtown, it represents not just a new building but a new way of living in central Ohio.”

From The Advocate in Louisiana. “Most LSU freshmen will be required to live on campus starting in the fall of 2018, the school announced Friday. Craig Davenport, an appraiser who tracks the Baton Rouge apartment market, said the move will obviously have a significant impact on the LSU-area housing market. The student housing market has been softening because of decreasing enrollment and uncertainty over the TOPS program.”

“LSU had 30,099 students at the start of the fall semester, a 2.6 percent drop from the year before. If enrollment continues to drop, coupled with the new housing requirements, it could lead to ‘lower rents, more concessions and lower occupancy’ at the complexes that target students, Davenport said.”

“Over the past few years, there has been a building boom around LSU as luxury complexes came on line, featuring amenities such as rooftop pools, study spaces that look like upscale coffee shops, lazy rivers and common areas with giant HDTV sets. From the fall of 2010 to fall 2016, Davenport said private developers and the university added a net total of 6,352 beds to the student housing mix. That number has grown further; the Park Place complex that opened this semester at 222 East Boyd added 280 units.”

The Boulder Daily Camera in Colorado. “Baby boomers have inspired a building boom across Boulder County as developers rush to construct senior housing for a local population that, by 2030, will make up a fifth of the county’s residents. A dozen developments have been constructed since 2012, with three more under construction or in planning. All told, they will add nearly 1,000 units to the county’s stock of senior housing. But as the silver tsunami sweeps the local housing market, some areas are feeling flooded. Lafayette, home to more than a third of new senior housing since 2012, is contemplating a temporary halt to boomer-focused building that, it says, is overwhelming the city’s emergency services.”

“The glut of senior construction has not been restricted to Boulder County. Apartments and assisted living facilities are going up all along the Front Range. Elizabeth Borden said that, at any given time, she is tracking 30 properties under construction for her senior housing market analysis company, The Highland Group in Boulder.”

“Market-rate assisted living units average $4,000 per month on the low end, Borden said. Memory care dwellings begin at $5,000 per month. Only a handful of properties — four or five, according to Borden — in the county accept Medicaid. ‘If you’ve got enough money to pay for it, you can find the housing you need,’ said Borden. ‘If you can’t afford those market rents, you’re down to some very limited choices.’”

From Bisnow on Texas. “New data from Abodo Apartments puts Dallas at the eighth-highest decrease in multifamily rent growth nationwide going into October. According to the report, Dallas-Fort Worth rents have fallen by 2.82%. The biggest decrease was in Newark, New Jersey, at 6%. ‘With construction at its highest level since the 1980s, we believe that a steady decline in rent prices in rapidly growing, major metro areas like Dallas may be on the way,’ Abodo Apartments’ Senior Communications Manager Sam Radbil said. ‘Developers delivered 250,000 new rentals in 2015, and almost 285,000 more units were finished in 2016. As we have seen in the past, as more rental units become available, prices should continue to decrease.’”

“The trend is not unique to Dallas, as other supply-heavy multifamily markets around the nation experienced downturns in rent growth. ‘We anticipate that the rent growth might begin to slow in very large cities like Dallas, Houston, Chicago, San Francisco and New York because of the huge boom in multifamily construction and luxury developments coming to market,’ Radbil said.”