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Heavy Supply Or Falling Prices, And In Some Cases Both

A report from the Real Deal. “Big real estate lenders often find themselves allaying investor concerns about a faltering market. But perhaps no one’s ever done it quite like Johnny Allison. ‘The reality was [as] if Peter Pan can no longer fly, Minnie Mouse left Mickey for Goofy, … with Frankenstein piloting to take over the banking industry,’ Allison, the chairman of Home BancShares, said on the firm’s most recent earnings call in January. ‘Nevertheless, we sent Batman, Superman and Nancy Pelosi to save the day, and they built a wall around the airport and saved us all.'”

“Somewhere in that rant was a message: Despite the doomsdayers, Home BancShares, a lender with significant exposure to South Florida’s real estate market, is in good shape. With just $15 billion in assets, it has become one of the top 20 real estate lenders in the region, with more than $219 million in local commercial real estate loans in 2018, according to an analysis by The Real Deal.”

“Centennial’s increased activity while other lenders retreat draws natural comparisons to another Arkansas institution, Bank OZK (formerly Bank of the Ozarks), the most active condo-construction lender of this cycle.”

“But according to regulators, the bank might be a bit too zealous.
Its commercial real estate lending relative to its capital levels — a widely used barometer for risk — was 370 percent in 2018. Regulators warn against exceeding 300 percent.”

“The bank’s riskiest move, however, came in 2015, when it made its foray into what is largely regarded as the most competitive real estate market in the country: New York City. Late last year, Centennial provided a non-recourse loan to the Jay Group for a mixed-use project in Harlem, according to the Commercial Observer. Non-recourse loans are generally viewed as riskier since a lender cannot go after the collateral of the borrower if there is a default. And the bank has begun ramping up in Los Angeles and Dallas.”

“‘When you see loan production offices in areas outside of banks core competencies and headquarters, those tend to be pretty risky, those tend to be the ones that result in a bank going down,’ said Bill Cormany, a federal bank regulator with the FDIC, speaking generally and not specifically about Centennial.”

“Investors are increasingly skittish about community banks’ real estate exposure, as many signs point to a slowdown in prime markets, particularly in the luxury condo sector. There’s also increasing talk of a broader economic downturn. ‘Nobody wants to talk about the recession, but it’s going to happen,’ said Kenneth Thomas, a Miami-based banking analyst. ‘A recession’s greatest impact is going to be on CRE, and the banks that don’t have the strongest underwriting [on CRE]. You can’t be a master of all markets. You got a bank that is so spread out — that becomes a red flag.'”

From Mansion Global. “For luxury homebuyers, the coming season is a treasure trove of opportunity in top markets around the world, which are in many cases seeing either heavy supply or falling prices. And in some cases both.”

There are a lot of unknowns in the New York City real estate market currently. On the one hand it is a buyer’s market, but on the other, buyers have been more hesitant to buy recently. Even though more homes were available—and with lower prices—in the 4th quarter of 2018, buyers have been hesitating, according to a quarterly report by Corcoran.

“The Miami-South Florida real estate market is still awash in luxury inventory from the last round of new developments. ‘We’ve had an enormous supply of luxury in the last three years in Miami/Dade County,’ said Ron Shuffield, president of the Miami-based EWM Realty International. ‘We currently have 5,000 units on the market priced over $2 million.’ Of those, 1,900 are single-family homes and the remaining 3,100 are condos.”

“After several very strong years, the Los Angeles market continues to show signs that it is slowing down. The number of homes sold in Los Angeles has continuously declined since mid-2018, said Selma Hepp, chief economist at Compass. In January, the ‘year-over-year decrease in home sales continued at double-digit percentage rates,’ with the three-month average decline at 18%.”

This Post Has 36 Comments
  1. ‘The reality was [as] if Peter Pan can no longer fly, Minnie Mouse left Mickey for Goofy, … with Frankenstein piloting to take over the banking industry…Nevertheless, we sent Batman, Superman and Nancy Pelosi to save the day, and they built a wall around the airport and saved us all’

    This guy might need one of those padded rooms.

  2. ‘The Miami-South Florida real estate market is still awash in luxury inventory from the last round of new developments. ‘We’ve had an enormous supply of luxury in the last three years in Miami/Dade County,’ said Ron Shuffield, president of the Miami-based EWM Realty International. ‘We currently have 5,000 units on the market priced over $2 million’

    As you can see in just these two links, there’s no supply/demand function here. Rather it’s available Yellen bucks looking for a place to die. None of these big markets needs more luxury airboxes. They’ve been overbuilt for years, but they keep on building.

      1. What will it take for the media, the liberal media I might add, to start pointing out the social ills of the Fed’s no banker left behind monetary policy, and subsequent asset price bubbles?

      2. Someone posted an article about all the van and car dwellers in San Diego. The ones with the million-dollar views from the beach parking lots. They may be out of luck soon.

        1. The restrooms on the beach at Ocean City, MD are locked between midnight and 6 am. This must be why…

    1. I would expect prices to really crater now that the libtards will be moving en masse to NZ or some other utopia since their messiah Mueller could not find collusion.

      1. The real questions:

        How is Trump going to hit back now that this attempted coup is over?

        How much more wacko are democrats going to get before 2020?

      2. ‘their messiah Mueller’

        https://taibbi.substack.com/p/russiagate-is-wmd-times-a-million

        It’s official: Russiagate is this generation’s WMD
        The Iraq war faceplant damaged the reputation of the press. Russiagate just destroyed it

        ‘The Special Prosecutor literally became a religious figure during the last few years, with votive candles sold in his image and Saturday Night Live cast members singing “All I Want for Christmas is You” to him featuring the rhymey line: “Mueller please come through, because the only option is a coup.”

        Here’s the candles photo:

        https://www.google.com/imgres?imgurl=https://media.boingboing.net/wp-content/uploads/2018/12/Mueller-Devotional-Candle-1.jpg&imgrefurl=https://boingboing.net/2018/12/10/robert-mueller-devotional-cand.html&docid=nxkCQRhjqmsuUM&tbnid=jtWSfqNaM6uNWM:&vet=1&w=2989&h=2990&source=sh/x/im

        1. “Examining the home price boom and its effect on owner$, lender$, regulator$+, realtor$ and the economy as a whole.” I

          ???

          ‘their me$$iah Mueller”

          Was that a reply or Author Intru$ion?

  3. “There are a lot of unknowns in the New York City real estate market currently. On the one hand it is a buyer’s market, but on the other, buyers have been more hesitant to buy recently. ”

    Funny how that works? From FOMO to fear of getting schloooonnnngggeeed. Thats what a Bubble and a BUST can do to yall

    1. Lyft founders Logan Green and John Zimmer are hoping to capture some of those rapidly disappearing Yellen bux with their IPO while they still can. IPO = insiders’ private opportunity

  4. 1233 N Doheny Dr
    Los Angeles, CA 90069

    $9,987,000
    Price cut: -$913,000 (3/22)

    Date Event Price
    3/22/2019 Price change $9,987,000 -8.4%
    1/25/2019 Listed for sale $10,900,000 —
    12/18/2018 Listing removed $10,900,000 —
    11/6/2018 Listed for sale $10,900,000 +42.5%
    9/30/2016 Sold $7,650,000 -9.9%
    9/27/2016 Listing removed $8,495,000 —
    8/1/2016 Pending sale $8,495,000 —
    4/9/2016 Listed for sale $8,495,000 +806.6%
    7/19/1994 Sold $937,000 +58.4%
    5/25/1994 Sold $591,500 —

    https://www.zillow.com/homedetails/1233-N-Doheny-Dr-Los-Angeles-CA-90069/20534859_zpid/

    1. In 2016 it sold for close to $1M under asking as well.
      Nice ROI for the sellers who bought in 1994.

    2. Interesting.

      The LA county assessors office logged $11 million in “improvements” for that place in 2014-2015.

      Another degenerate gambler lost his a$$.

  5. Why are we adding to the debt in good times? $1 trill a year sure seems like a lot when the sun is shining as they say.

    1. “Why are we adding to the debt in good times? $1 trill a year sure seems like a lot when the sun is shining as they say.”

      1. A borrowed dollar spends just as well as a dollar that is earned.

      2. A borrowed dollar is easier to get than a dollar that is earned.

      As long as these two factors remain operational then the economy will continue to hum. Or, another way of looking at it, the economy will continue to hum for as long as these two factors remain operational.

    2. “Why are we adding to the debt in good times? $1 trill a year sure seems like a lot when the sun is shining as they say.”

      I ponder this frequently. And wonder how this will all turn out.

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