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In Some Investors’ Opinions It Was A Doomsday Scenario

A report from the Boston Globe in Massachusetts. “The number of houses and condos sold in the region in March was essentially flat, according to the Greater Boston Association of Realtors. Prices climbed, but not at the torrid pace of the last two years. And the number of homes listed for sale — especially condos — is rapidly growing. With active listings up nearly one-fifth from last year, would-be buyers are in relatively good shape, said GBAR president Jim Major.”

From The Real Deal on New York. “The number of Hamptons homes that sold during the first three months in 2019 fell nearly 20 percent when compared to the same time in 2018, the lowest mark in seven years, according to first quarter data released by Douglas Elliman.”

“The past few months saw inventory spike 87.8 percent, to 2,407, compared with the same time a year ago. The median sales price dropped 5.5 percent year-over-year, to $850,000, but nearly 15 percent from the $995,00 it hit during the fourth quarter of 2018. The average sales price dipped a little more than 3 percent, to almost $1.63 million, from the same time in 2018.”

“In the luxury market, the median sales price rose 18.2 percent year-over-year, to $6.56 million, a metric that was still 16.4 percent lower than the end of 2018. Luxury inventory also swelled to 869, a 77.7 percent increase from the fourth quarter of 2018 and a whopping 191.6 percent rise from the first quarter of last year.”

From Mansion Global on California. “The broad slowdown in U.S. luxury home sales has finally caught up with Los Angeles, a megamansion epicenter where prices have doubled in the past six years.”

“The median price across the city’s downtown and westside—a swath of high-end neighborhoods from the Sunset Strip to Malibu—fell 4.5% year-over-year to $1.455 million, according to the report from brokerage Douglas Elliman. It’s only the second time annual price growth turned negative in the city since 2011, said Jonathan Miller, chief executive of appraisal firm Miller Samuel.”

“Thanks to a thriving economy and tight inventory, Los Angeles had experienced robust sales and price growth before this year, bucking a broad slowdown in luxury sales that began in 2018 and even earlier in places like New York City. But it appears price growth in La La Land had to come back to earth at some point.”

“‘The new federal tax law combined with a chronic lack of inventory for the past four, five years have pressed affordability lower,’ Mr. Miller said. Now buyers are taking a breather, he said.”

“Sales dropped by 26% in the first three months of this year compared to a year ago. At the luxury end, the top 10% of the market, house sales fell by roughly one-third in the first quarter compared to a year ago, according to the report. Even in perennially popular Malibu, house and condo sales were half of what they were a year ago.”

From Patch Beverly Hills on California. “This gorgeous Beverly Hills home just got a whopping $10 million price reduction. The modern 7-bedroom, 11-bathroom home sits on more than an acre of land north of Sunset Boulevard, according to the listing. Price: $29,950,000.”

From Pamplin Media on Oregon. “Portland’s residential real estate market has cooled a bit from the last few years. Sean Z. Becker, owner of Sean Z. Becker Real Estate, does the majority of his condo sales in the South Waterfront and Pearl District. He saw the condo market slow down last year, particularly in the fourth quarter.”

“Becker said the Pearl District has seen an increase in inventory and The Vista is about 60 percent sold. However, the market has now shifted to a resale market for condos and more apartments are being built than condos. ‘I don’t think there is anything systematically wrong. The brokers, the buyers and the market have to adjust their expectations a little bit,’ he said, adding the high pricing of the last few years has peaked.”

“‘In the condo market buyers are becoming more discerning and they are taking their time,’ Becker said. ‘They are comparing prices and looking more at amenities, so things are sitting longer.'”

“Mark Washington, senior vice president with JLL, said this time last year the market was waiting to see how multifamily would perform given the expected large delivery of anticipated supply. ‘In some investors’ opinions it was a doomsday scenario that could have put the market in a position to retract some of the positive momentum achieved in recent years, producing scenarios where rent growth could be negative and large buildings would take significantly longer periods to lease up,’ he said.”

“Instead, the outcome showed promise and exemplified the strength of the fundamentals within the Portland market due to net migration and continued strong job growth, Washington said. ‘This doesn’t mean that all things were roses and sunshine for the market,’ he added. ‘Most buildings are becoming creative in how they attract tenants, concessions within the market have remained at an elevated level, and rent growth in a lot of pockets around the city has tapered off.'”

“‘Given the performance of last year we are seeing a number of owners become confident enough to re-enter the market, but a cloud a caution does loom above the city for a number of reasons,’ Washington said. Those factors include another potential peak year of new construction deliveries as well as investors digesting the political environment within the city and state, including the recent passage of legislation regarding rent control, inclusionary housing and green roofs.”

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This Post Has 48 Comments

  1. ‘a cloud a caution does loom above the city for a number of reasons,’ Washington said. Those factors include another potential peak year of new construction deliveries’

    Another peak of deliveries. This is because you guys get high on your own supply. Portland hasn’t needed any more airboxes for at least two years, but build baby build!

  3. ‘In the luxury market, the median sales price rose 18.2 percent year-over-year, to $6.56 million, a metric that was still 16.4 percent lower than the end of 2018. Luxury inventory also swelled to 869, a 77.7 percent increase from the fourth quarter of 2018 and a whopping 191.6 percent rise from the first quarter of last year’

    Notice they don’t mention years of inventory anymore. The Hamptons and all the unpronounceable little burgs around there have been in the crapper since 2016! And it gets worser and worser.

    2. Wouldn’t it be ironic if at some point they start tearing these white elephants down and building row houses or apartments?

  4. ‘Prices climbed, but not at the torrid pace of the last two years. And the number of homes listed for sale — especially condos — is rapidly growing. With active listings up nearly one-fifth from last year, would-be buyers are in relatively good shape’

    The Globe couldn’t bring themselves to mention condo prices are down. Downtown lux condos are off double digits. Another day of REIC horse-hockey.

    1. This is the same (failing) Boston Globe that two years ago was hucking stories about how the Boston market would only fall 2% even in the worst-case scenario because “ZOMG BOSTON IS DIFFERENT”. In the last round of ebola, Boston declined in line with national averages.

  8. This site is owned by the WSJ, reports on the earthquake occurring.

    https://www.marketwatch.com/story/mortgage-rates-climb-for-fourth-straight-week-as-easy-money-crackdown-begins-2019-04-25?mod=real-estate-personal-finance

    Mortgage rates climb for fourth straight week as easy money crackdown begins
    Apr 25, 2019

    ‘… lending standards are going to get a bit more strict. Last month, the Federal Housing Administration said it would start to require manual underwriting for mortgages that may be more risky. The agency, which guaranteed about 23% of new mortgages in 2018, is concerned about borrowers who have lower credit scores in addition to higher debt-to-income ratios.’

    ‘So-called “risk layering” was commonplace, even encouraged, during the housing bubble of a decade ago. In the squeaky-clean lending environment that emerged after the financial crisis, lenders have been more cautious. But lean supply has driven home prices so high, even as stagnant wages and higher student debt have both made homeownership more challenging for many Americans, especially younger ones.’

    ‘The industry has responded by slowly, incrementally, “opening the credit box,” to use mortgage market jargon, to try to allow more consumers to access home loans. The chart above illustrates how the average FICO score has declined among Ginnie Mae’s mortgage portfolio, which includes loans made through FHA, VA, and a few other smaller programs.’

    FHA has been risk-layering for years. Squeaky clean? Do they know defaults for 2014 and after loans are now the majority? There’s no end to the REIC BS these days.

      1. Really interesting. The skew on the credit rating distribution is exactly the opposite of what I always thought it was. The tail is on the low end and the hump is on the right.

        I remember when it was really rare to find someone with an 800+ score. Now 21% of people have it?

        1. I have an 800+ credit ranking, but I guess I’m not a special snowflake after all. Sad.

          1. I’m not a special snowflake after all

            Oh sure you are.

            I think it just means you have been a good debt donkey, and had a mortgage or car loan that you kept up with.

          2. I think it just means you have been a good debt donkey, and had a mortgage or car loan that you kept up with.

            Yeah, with no car payment or mortgage, I bounce just above and below 800. I guess to get the “high” score you need long-term debt.

          3. drumminj,

            From all I’ve been able to determine over the years, owning a home and a mortgage is good for another 20-40 points — assuming your payment history is good.

          4. I think it just means you have been a good debt donkey, and had a mortgage or car loan that you kept up with.

            Except I’ve never been in debt. No mortgage debt, no car debt, no student loan debt.

          6. Except I’ve never been in debt

            No credit history. Isn’t that like getting the medal without playing the game?

          7. I suppose I have good credit because I have credit cards that I use to get cash back, but which are always paid off in full every month.

          8. “I suppose I have good credit because I have credit cards that I use to get cash back, but which are always paid off in full every month.“

            That’s exactly why. I have 3 that I use for all my purchases that get me either miles (Hawaiian air), cash back (Costco), or hotel (Hyatt). Long as I don’t go to close to the limits and I pay them off in full each month, I maintain a great credit score. I use credit karma to monitor that.

        2. Credit score is a stupid metric as it doesn’t measure ability to pay. Somebody could have an 800+ FICO while earning $25,000 per year, while somebody else could have 600 FICO while earning $250,000.

          I’d rather loan money to a person with a lower FICO and more money than somebody with a high FICO with barely a few nickels to rub together.

          1. Have you noticed there are about 100 different variations on your credit scrore, and every lender/creditor seems to use a different one than any of the ones you can access, or your credit car or bank shows you as a “service”

            Generally, they are similar, but it makes it impossible to pin down your score(s) in advance.

          2. Someone with an 800 score could drink the kookaide and take out a mortgage with debt at ten times income and zerodown payment, only to soon find themselves facing an underwater loan that they would rather not repay, especially if they were out of work.

            I wonder how many 800 FICO score people found themselves in similar circumstances and decided to just walk away in the post-2009 era?

      2. They’ve also rebaptized “subprime lenders” as “nonbank lenders.” Pretty clever sleight of hand!

    2. “But lean supply has driven home prices so high, even as stagnant wages and higher student debt have both made homeownership more challenging for many Americans, especially younger ones.’”

      But since buyers seldom do all cash offers, how did prices ever get so high if all lending is squeaky clean and above board? Don’t you need money to bid up prices? Or can I just “demand” something in the 21st century and prices are made up from there?

  9. “Sales dropped by 26% in the first three months of this year compared to a year ago. At the luxury end, the top 10% of the market, house sales fell by roughly one-third in the first quarter compared to a year ago, according to the report. Even in perennially popular Malibu, house and condo sales were half of what they were a year ago.”

    A lot of realtors are starving right now. Remember 2018 sale numbers were lower than 2017 due to the housing “shortage”.

    1. I don’t see it mentioned often in the media as a generation issue, but talking to people when out and about it comes up again and again.. usually some variation of “Well, we managed/own/whatever this level of housing, but I don’t know how in the heck our kids (k-12 or college aged ) will be able to achieve the same amount of housing at the same age as we did. Just don’t see how…” followed half the time by “We’re bracing for the kids to boomerang back home”

  12. Ahem…

    U.S. Broadcaster Under Scrutiny for Disseminating Autocratic Propaganda

    ‘Federal officials are scrutinizing the U.S. government’s Radio Free Europe / Radio Liberty news service, established to promote democratic values abroad, after complaints it has distributed foreign propaganda favorable to authoritarian regimes in Central Asia, according to the network, its employees and an internal State Department memo.’

    https://www.wsj.com/articles/u-s-broadcaster-under-scrutiny-for-disseminating-propaganda-11556184602

    1. What? Don’t tell me the US is meddling in foreign politics and potentially influencing the result of elections! Now *there’s* something the Democrats can charge Trump with (since he’s the current fall guy incumbent)

      2. Austin, and most Texas metro areas have fairly high property taxes. Only much lower valuations compared to places like NY, NJ etc are the saving grace for people living there.

        1. Which is meaningless when the overall cost to own is double or triple local rental rates.

    1. What’s wrong with the Southeastern US or heartland? Tons of rivers east of the Mississippi. Also East Texas.

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