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We’re Past The Peak, And That’s Good

A report from the Philadelphia Inquirer in Pennsylvania. “Last year alone, 2,810 new housing units were completed in the area known as Greater Center City — the largest number since 2002, according to a report. The CCD report showed that the market might be slowing. This isn’t necessarily a problem, said Kevin Gillen, senior research fellow at the Lindy Institute for Urban Innovation at Drexel University.”

“‘We’re past the peak, and that’s good,’ he added. ‘You want to take a breather.’ Currently, new construction is outpacing population, and no one wants to see apartments sitting vacant, Gillen said, stressing that this slow-down is ‘a normal cyclical fluctuation, not another housing bubble bursting like 10 years ago.'”

“Contrasting various Metropolitan Statistical Areas, Gillen found that the San Francisco area registered four times the rate of post-recession housing construction as Philadelphia; both Dallas and New York nearly tripled Philadelphia’s rate. What keeps the city from soaring, construction-wise? ‘Poverty,’ Gillen said.”

From SocketSite on California. “Muted by the holiday weekend, the net number of homes on the market in San Francisco (615) was relatively unchanged over the past week but remains 28 percent higher than at the same time last year, 76 percent higher than at the same time in 2015 (350) and a 7-year seasonal high.”

“At the same time, the percentage of listings in San Francisco which have undergone at least one price reduction has ticked up to 16 percent versus 13 percent at the same time last year. And the number of homes in contract to be sold is currently down 17 percent on a year-over-year basis while the average list price per square foot of the homes in contract is running around $930, down 1 percent versus the same time last year.”

From the Tennessee Ledger. “It was a rough start for home sales in Williamson County with a decline in home sales prices and the number of units sold. The were 350 home sales recorded for the month averaging $520,523 compared to 387 sales last January averaging $540,640 resulting in a 10 percent decrease in units sold and a 4 percent decrease in average price.”

“Home sales over $1 million were down 39 percent in January with 17 recorded for the month compared to 28 recorded in January 2018.”

From 6sqft on New York. “The partners behind the Jean Nouvel-designed tower at 53 West 53rd Street (also known as the MoMA Tower) will be serving even more price chops to the ultra-luxury project in the midst of lackluster sales, though they disagree on how much that should be. As Crain’s reported, Hines, Goldman Sachs, and Singapore’s Pontiac Land Group recently underwent an arbitration process to settle the matter, with Hines seeking aggressive discounts.”

“The 1,050-foot condo building has already received $167 million in price cuts since hitting the market almost four years ago with a projection of $2.14 billion in sales. About 15 percent of the 145 units at 53W53 are under contract currently, with closings set to begin in the spring, a spokeswoman for the project said.”

“The poor sales in an oversaturated market reflect CityRealty’s 2018 year-end market report, which revealed a notable drop in transaction volume and a decline in condo sale prices throughout Manhattan’s real estate market. There are now so many competing high-end projects—520 Park Avenue, Central Park Tower, and One57 among them—that buyers don’t feel a sense of urgency.”

“Some have also cited specific issues with 53W53’s design which might be contributing to stalled sales. The structural diagrid on the facade cuts through windows and interferes with the sweeping Manhattan views. As 6sqft previously reported, this also poses a host of pragmatic issues since the windows are rendered inoperable, requiring a special ventilation system and custom window shades.”

“‘In a market where views and light are highly rewarded, you don’t want to interrupt sight lines for any reason,’ Donna Olshan, president of the residential brokerage firm Olshan Realty, said to Crain’s. ‘I commend the developer for wanting to build something so artistic, but I’m not so sure of its market viability.'”

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  2. April 19, 2018

    From Philly Mag in Pennsylvania. “Are you still stunned over Monday evening’s announcement that Dranoff Properties will sell all of its apartment buildings in the Philadelphia area to the Apartment Management and Investment Company of Denver for $445 million? Deep down inside, Carl Dranoff himself might be too, for he wasn’t looking to sell the properties even though the glut of apartments both he and your section editor saw coming last year has indeed come to pass.”

    “‘I’m an outlier,’ Dranoff said. ‘I’m not like most developers who build a building, then turn it over to someone else to run. I’m a long-term steward of my properties, and I had no intent of selling them.’ But AIMCO was intent on expanding its presence in the Philadelphia market.”

    http://thehousingbubbleblog.com/?p=10407

    1. I wouldn’t be stunned. Dranoff is/was getting long in the tooth. And if he sold last year, he did the smart thing to sell at almost peak. Let the outfit from Denver take the hit.

      Greater Center City is downtown in Philly, near the convention center and the Liberty Bell etc. Those 2810 new units are cubic luxury, I’ll wager. Meanwhile, there are some gorgeous brick/stone semi-Tudor homes, ~2000 sq ft, on Drexel Hill (inner suburbs) for under $250K. They would cost 2.5x that in the DC area. I’d rather buy one of them than a $250K apt in the “vibrant” downtown.

      1. For shats and giggles, I checked the Zillow for East Passyunk, the residential area south of Center City. Block upon block of tiny 2-bed rowhouses.

        For Sale: 27
        Pre-foreclosure: 237

    1. (snip)

      “One of the top 10 lies that real estate agents tell home sellers relates to price. Some real estate agents will tell a seller their home is worth more than it really is.”

      Say it ain’t so …

      “They do this in order to secure the listing with the hopes they can either get price reductions in the future or at the very least, pick up some buyers from the listing. This is commonly referred to as ‘buying a listing’ in real estate.”

      Bahahahaha … this lie is so often told they even have a name for it.

      “Hiring a real estate agent who is buying a listing is one of the biggest real estate pricing mistakes that home sellers make.”

      Hey, they use what works. Realtors who use what works get to make money, realtors who use what doesn’t work get to starve.

  5. From 2014 …

    A central banker’s ‘license to lie’
    http://blogs.reuters.com/anatole-kaletsky/2014/01/30/a-central-bankers-license-to-lie/

    (snip)

    “To mislead investors is actually a key skill required by a central banker’s job description. Revealing the true state of national finances at a time when a devaluation or comparable financial crisis is looming might be to guarantee the loss of the central bank’s entire reserves.”

    (another snip)

    “Yet despite this historic record of broken promises and unfulfilled commitments, central bankers enjoy more respect and trust than any other public official. They are particularly trusted by the people they most frequently deceive — financial market investors.”

    Again, dumb ’em down, and profit.

  6. Some London RE trivia …

    London Housing Meltdown Spreads as Pre-Brexit Angst Batters Market Sentiment | Wolf Street
    https://wolfstreet.com/2019/02/19/uk-housing-downturn-spreads-as-pre-brexit-angst-batters-market-sentiment/

    (snip)

    “In a survey by LonRes, 63% of the agents said they had seen prices in their market plummet by 10% or more from peak levels as sales ground to a standstill. In London transactions slumped by 9% between 2017-2018 for properties under 1 million, by 25% for properties between £1 million and £2 million and by 12% for properties between £2 million and £5 million.”

    1. In order to “save the market” and thus preserve (choke) “wealth” the PTB in England have come up with this …

      “Lloyds Bank Resurrects 0%-Down Adjustable-Rate Mortgages for First-Time Buyers to Prop Up UK’s Housing Market”

      Even a body of water as large as the Atlantic Ocean cannot prevent the spread of global ignorance and stupidity from one country’s shores to another.

      https://wolfstreet.com/2019/01/30/lloyds-bank-resurrects-0-down-adjustable-rate-mortgages-for-first-time-buyers-to-prop-up-uks-deflating-housing-market/

      (snip)

      “As house prices in the UK continue to slip-slide downwards, compounding fears that the multi-year housing boom has run out of gas, the country’s largest mortgage lender, Lloyds Bank, has unveiled a new mortgage scheme called ‘Lend a Hand’ to help first-time buyers with little or no personal savings inject fresh blood into the souring market. It is an adjustable-rate mortgage with no down-payment and with a teaser-interest rate for the first three years of just 2.99%. It allows buyers in England and Wales to borrow the entire amount of the purchase price of up to £500,000 ($653,000).”

      1. BTW, an excellent way to create a debt slave is by offering up:

        1. An adjustable-rate mortgage.

        2. With no down-payment.

        3. With a teaser-interest rate for the first three years of just 2.99%.

        Which allows totally dumbed-down ignorant buyers to borrow the entire amount of the purchase price of up to £500,000 ($653,000).

        Reply

        1. It has been much more likely in the past 35 years that rates will be lower 5 years in the future. ARM’s have historically been the best mortgages to take out. 30 year fixed rates are for suckers because you’ll have to pay thousands to refinance as rates will inevitably drop and reset your amort schedule back to square one.

          At this point, I don’t recommend buying unless prices drop 20%. However, if you have to buy, take out an ARM because I can guarantee that rates will be lower in 5 years than they are today.

          1. because I can guarantee that rates will be lower

            Only if you can guarantee that what is coming is much much worse than the Great Depression.

          2. “30 year fixed rates are for suckers…”

            I bought my 3/2 spec with a thirty year fixed conforming mortgage at 5.50% in early 2003, and paid in full within nine years. My thought was that the payment was low enough to make it through a possible rough spot of unemployment, but it never happened.

        2. Which allows totally dumbed-down ignorant buyers to borrow the entire amount of the purchase price of up to £500,000 ($653,000).

          Thereby guaranteeing that no house will sell for less than that and there will always be a “shortage” of houses in that price range.

      2. “… unveiled a new mortgage scheme called ‘Lend a Hand’ to help first-time buyers with little or no personal savings inject fresh blood into the souring market.”

        “… inject fresh blood into the souring market.”

        Bahahahahaha … and body parts are destined to follow.

  8. Another house listing just disappeared in my NoVa hood. That’s the forth one in two months that gets put on the market, sits for two/three weeks and then disappears without being sold. I’d have to think these folks are testing the market to get some crazy offer, and it ain’t happening.

      1. Jeff Bezos walks into a bar, now the average net worth in that bar is 1 billion. Still it might not be a good place to try to sell Rolls Royces.

      2. “That can’t be real.”

        My bet would be they are real, just not hooked up to anything. It’s pretty easy to put a clawfoot bathtub and a toilet in a kitchen and take a picture for shock value.

          1. “But there’s that shower curtain and the toilet paper roll.”

            Easy enough to stage. Don’t get me wrong, it was worth posting for a laugh and it could be functional but I would still bet on staged.

  13. ‘You want to take a breather.’

    Oh, I see. All along it was accepted REIC science that a pull back in prices was not only needed, but wanted, eh?

    So, we let it dip, say, what, 5% and then off the the races? GTFOH.

  16. Why would anyone loan money at negative interest rates, given the stellar stock market gains available in the everything-is-awesome economy?

    1. The Wall Street Journal
      Credit Markets
      Negative Yields Mount Along With Europe’s Problems
      The proliferation of negative-yielding government bonds underscores the uncertainty over the growth prospects in much of the developed world
      Why Investors Are Obsessed With the Inverted Yield Curve
      Why Investors Are Obsessed With the Inverted Yield Curve
      Amid a shaky marketplace, investors are eyeing the yield curve for signs of economic stability. History shows that when the yield curve inverts, a recession may soon follow. Photo Composite: Stephanie Swart for The Wall Street Journal.
      By Daniel Kruger
      Feb. 18, 2019 7:00 a.m. ET

      Investors around the globe are effectively paying governments to hold more than $11 trillion of their bonds, a fresh sign of ebbing economic confidence in Europe and Japan.

      Negative-yielding government bonds outstanding through mid-January have risen 21% since October, reversing a steady decline that took place over the course of 2017 and…
      To Read the Full Story
      Subscribe

    2. This dude does not seem to realize that Treasury yield movements are contained.

      U.S. Bond Yields Could Crater
      9 hours ago
      Focus: BONDS
      Fawad Razaqzada
      Technical Analyst, FOREX.com

      The pressure is growing on yields to potentially break lower as investors price out the odds of interest rate increases, writes Fawad Razaqzada, Market Analyst, Forex.com.

      Earlier today, we noted that sentiment so far this year has been dominated by US-China trade talks and dovish central banks. Obviously there has been a lot more to it than just that: Ongoing Brexit uncertainty, the U.S. Government shutdown and slowdown in global data immediately comes to mind. But regardless of the source of concern, it more or less boils down to what it all means to interest rates.

      Indeed, it is changes in interest rate expectations that move the markets over the medium term. A slowdown in data would require expansionary monetary policy response, while a U.S.-China trade resolution, for example, would offset some of that requirement from central banks. Perhaps that’s why we haven’t seen any meaningful moves in U.S. bond yields over the past several weeks, as negative global data has been offset by positive news headlines regarding the US-China trade dispute. Still, with the Fed dropping its hawkish bias, and with recent U.S. data deteriorating slightly, bond prices should remain supported and yields undermined going forward.

      It is worth mentioning that there are a number of Federal Reserve officials speaking later this week and if there is a growing consensus that interest rates should remain low for longer, then that could be the trigger behind another potential drop in yields. That, in turn, could weigh on the U.S. dollar and supported dollar-denominated precious metals even further.

      In fact, the breakdown in yields could resume again soon anyway. As can be seen from the long-term weekly chart, below, the 10-year U.S. note yields have held below the broken trend line and resistance around 2.80% for a number of weeks without a meaningful rebound. Thus, the pressure is growing on yields to potentially break lower as investors continue to price out the odds of interest rate increases. So, a potential breakdown towards the next support around 2.50% could be in the cards for the 10-year yield. If that level also breaks, then yields could drop to the subsequent support levels around 2.20% and possibly 1.88% next.
      …

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