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There Is Over Building, And There Is Too Much Supply

A report from the Wall Street Journal on New York. “Luxury condos at the Waldorf Astoria hotel are expected to go on sale in the fall, as the historic property’s Chinese owner advances its redevelopment plans despite a market glut and political tensions with the U.S. Beijing-based Anbang Insurance Group Co. bought the Waldorf for $1.95 billion in 2015, a record price for a U.S. hotel. In 2017, it shut down the property to renovate and convert hundreds of the more than 1,400 guest rooms into private residences.”

“Chinese officials took control of Anbang in 2018 after saying they suspected illegal activity by the insurer. Now, Anbang has hired Douglas Elliman Real Estate to sell 375 apartments at the Waldorf, according to the firm.”

“The Waldorf condos will hit the market as the supply of new luxury apartments is expected to be at a peak. ‘There is over building, and there is too much supply,’ said Donna Olshan, head of Olshan Realty Inc., a New York brokerage firm that tracks luxury real- estate sales.”

“At the same time, demand for luxury condos has been falling. Wealthy Chinese buyers have pulled back under pressure from the Chinese government to keep capital in the country. Other international buyers have retreated during periods of uncertain politics at home. Owners have had to discount prices to sell their luxury condos.”

From Realtor.com on California. “It looks as if the owners of Barry Manilow‘s former beach house are ready to take a chance again. The sumptuously renovated beachfront contemporary in Malibu has been relisted for $10,995,000, a $5,755,000 discount off its previous asking price.”

“In 2016, after a complete remodel, the 4,320-square-foot home was listed for $16,750,000. The current owners paid $5,450,000 for it in 2012, and poured time and money into the place to elevate it to its current pristine condition.”

“‘The market in Malibu has definitely changed in the last 24 months. Although there have been a handful of record-breaking sales, the general market has cooled slightly,’ says David Solomon, who is co-listing the home. ‘Our seller took a big jump to really try and get in front of it at this competitive price point.'”

From Fauquier Now in Virginia. “A 128-acre horse farm near The Plains sold last week for $7.35 million. The property went on the market in March 2016 at $11.75 million, according to Realtor.com. The asking price dropped to $8.9 million last November.”

From Richmond Biz in Virginia. “Five years after it first hit the market, a residential listing that long held the title of the priciest in metro Richmond appears to have finally landed a buyer. The 60-acre estate overlooking the James River in Goochland County most recently was priced at $3 million, the latest reduction from its original price tag of $7.9 million in 2014.”

“Joyner agent Richard Bower had the listing originally, pricing it at $7.9 million in October 2014 before reducing it several times through the years. The asking price was $4.9 million when the Masseys switched to The Steele Group, which relisted it with the same price tag before ultimately reducing it to $3 million last month.”

“Bo Steele said River Run Manor was close to a deal earlier on, and for a higher price. While he said more than price goes into getting a deal done, he said the contract offer came down to finding a good fit between a receptive buyer and a motivated seller. ‘Part of it is price, but I think it was also just getting the right scenario together for the house, because we had some interest early on, and at higher numbers, and yet just could not get the contract done,’ he said.”

From Rapp News in Virginia. “The 2019 First Quarter Report on the Rappahannock Housing Market is out, at least as seen through the opaque lens of the regional Multiple Listing System (MLS). The Greater Piedmont Region (GPR) of Rappahannock, Fauquier, Madison and Culpeper continued to show signs of softening demand in the first quarter. Sales activity region-wide declined for the fourth time in a row compared to last year. It’s not Washington folks, it’s Little Washington.”

“The MLS recorded a staggering 18 home sales (I actually counted 19, but who’s counting) in Rappahannock County in the 1st quarter of 2019. The county has had more sales than the prior year in only two out of the last seven quarters, indicating a downward trend in activity.”

“At $384,000, the first quarter median sales price in the county is up $82,000 from a year ago, a whopping 27 percent gain. Rappahannock County had the highest median sales price in the GPR footprint during the 1st quarter. However, with only 18 sales as a statistical body, one large farm can skew the median, so don’t get too excited and call the mortgage broker to refinance.”

“In Rappahannock no two homes are alike, nor any two views, streams, meadows or mountains. It’s the reason we love it, protect it, and hold it close to our hearts. It’s why there are fewer sales and why people want to remain once they truly and fully discover it. Thankfully, we are still a bit too far for commuters, but we welcome farmers!”

This Post Has 63 Comments
  1. ‘The market in Malibu has definitely changed in the last 24 months. Although there have been a handful of record-breaking sales, the general market has cooled slightly’

    Wa happened Malibu? Yeah David, whacking a third off is slightly cooling.

    1. looking at the last couple of photos of the former Barry Manilow beach house — 11 million buys you what…? 6, maybe 8 feet of separation from the houses on either side of it?

  2. ‘Beijing-based Anbang Insurance Group Co. bought the Waldorf for $1.95 billion in 2015, a record price for a U.S. hotel’

    And boy were they proud at the time! Behold, as billions of phony Yellen bucks fly off to money heaven.

    February 8, 2017

    “New York City is still the No. 1 destination for foreign capital in the world, according to this year’s AFIRE rankings, but it is no longer an environment in which foreign money — particularly from China — will buy anything in the market at any price. This year, China has clamped down on outbound foreign investment, and firms caught flouting the new laws will be punished harshly, China First Capital CEO Peter Fuhrman said. While most New Yorkers in commercial real estate are aware of the capital slowdown, Fuhrman said they are probably not taking it seriously enough.”

    “‘I have the perception that the full weight and severity of these capital controls hadn’t been fully felt here,’ Fuhrman said. ‘It’d be fair to say that the Chinese central government dropped a financial bomb on its businesses.’”

    “One of the Chinese government’s chief concerns when instituting the investment restrictions, Fuhrman said, is over outbound investors getting fleeced while paying record-breaking prices. ‘A concern of Chinese regulators is their investors have been really bad buyers,’ Fuhrman said. ‘This can sadly be seen more and more in the larger real estate deals they have done. What they are extremely concerned about is just about every acquisition the Chinese have made, is they have overpaid severely and foolishly, and that has spurred a loss of a lot of Chinese sovereign wealth.’”

    http://thehousingbubbleblog.com/?p=9989

    1. We have a cousin in her mid-40s – who does consulting gigs for $s editing technical documents for the larger banks.

      She house sits a nice condo in NYC but in an 90’s building – living in the 4th bedroom, the living room and the kitchen.

      When the Texas based family comes to NYC – either the dad (more often for biz) or the entire family (about 4 times a year), she clears out a day or 2 earlier for the maid. She stays with friends or stays with her mom in PA.

      So there is potentially a new way to share empty condos

  3. Fox Business News Headline:

    Why Americans should get into the housing market now
    June 10, 2019

    No substance to the article other than maybe this quote:

    “Digital Risk co-founder Jeff Taylor told FOX Business’ Neil Cavuto that now is the time for new homebuyers to take advantage of the bigger inventory on the market.”

    “If you’re looking to get into the housing market, i.e., you don’t have a house right now, this is literally the perfect time,” he during an interview on Monday. “Interest rates are about a one percentage point less than it was this time last year … that’s a 10 percent savings on a 30-year mortgage a month.”

    1. “Please buy our overpriced shack so we can lock in this unearned equity and fund the rest of our retirement and medical bills. We’ll be over here on the pickleball courts. “- Boomers to Millennials, probably

      1. Luckily it seems that the news articles are about boomers vs. millenials generational war.

        In 15-20 years, it’s probable that the Millenials are going to go looking for assets to redistribute, and not just from billionaires. What’s a GenX with a Roth and retirement to do? Buy gold? Land? Mattresses?

    2. From the article:

      “People are feeling better about their jobs right now and they’ve been saving”

      They have? Even though something like 60 percent of adult Americans can’t come up with $1,000 for an emergency? It’s amazing how detached from reality these ‘experts’ can be.

      1. Even though something like 60 percent of adult Americans can’t come up with $1,000 for an emergency?

        They’re only talking about the other 40%. “Those” people have been written off as hopeless. And the plan is to avert our eyes until the funerals are over.

          1. “…And soon that 40% will be 20% …”

            If you bumped that $1K to some slightly higher threshold (say $5K) it probably already is.

    3. CNBC headline:

      The majority of consumers are wildly wrong about what it takes to get a mortgage
      June 11, 2019

      “Consumers also overestimated the required down payment on a mortgage. Most didn’t know how much was needed, 13% thought the minimum was 20% and one in five thought they needed 6-10%. In reality, the FHA backs loans with a minimum down payment of 3.5%, and there are other programs through the U.S. Department of Agriculture as well as the U.S. Department of Veterans Affairs that offer zero down payment options.”

      “As for debt levels, consumers can qualify for a mortgage with as much as 50% of their income going toward total debt payments, but 61% of respondents said they didn’t know what the level was and most others said the limit was 40%.”

      The REIC is now scraping the bottom of the barrel looking for new FBs. Fog mirror, get mortgage.

      1. 3.5% mortgages (the very definition of subprime) have been ubiquitous since 2009. The majority of mortgages made since then are in fact 3.5% downpayment mortgages.

  4. Why should foreign investors drive up prices for end users in the USA, especially when they are dumb ass buyers. Should have a foreign investment tax charged.

    Who ever thought Globalism was a system that would produce the best use of funds. Casino Nation where the actual needs of the worker bee end users aren’t relevant. Americans drive up prices in foreign countries also making it impossible for the locals to afford their local real estate.

    Now the Governor of California wants to bring on a health care mandate against citizens so illegal immigrants can be provided health insurance. It’s bat shit nuts.

    1. Californicators are getting exactly what they voted for. Feces-covered sidewalks and cities full of El Salvadorians. Perfect.

  5. Mafia Blocks – if the median list price is lower because more smaller houses are being sold, that is not “cratering”

      1. Don’t waste your time Hard Money, Mafia is impervious to facts and reason. His own data shows condo prices increasing substantially over the same time period, assuming you ignore unit size. In Tustin, the location of the available units is a major factor. There is the Santa Ana-ish Tustin and the Irvine-ish Tustin.

      2. Tustin. Pay Irvine prices without the Irvine schools. BTW, my co-worker is moving to Irvine from San Jose. I just checked the schools and the ratings have dropped from several years ago.

      1. Other than larger houses that they can’t honestly afford all Joe Sixpack’s family wants to hear is “free” and “all you can eat.”

    1. The interest rate should have no bearing on where the affordability threshold sits. Either a household can afford the burden without being in financial stress or it can’t.

      That said, I noticed the linked article that the ‘Estimated number of years it takes to save for a down payment’ is basically an entire lifetime for the more expensive cities…

      1. That said, I noticed the linked article that the ‘Estimated number of years it takes to save for a down payment’ is basically an entire lifetime for the more expensive cities…

        Me too. Worst case that should be the amount of time to save up to pay cash for the whole house. Not just the down payment.

        1. upward faster

          I’ve been pushing my cost of living down faster than those guys have jacked it up for some time. Not a wage earner now. It might be a question of how long they will let me survive at this point.

          Hey all you debt donkeys, stop borrowing money for stuff. I can’t afford it!

      1. If the mortgage interest rate can be forced low enough then that’s an inevitable next step on the way to “affordable” infinity mortgages.

        1. Just sayin’…if/when I can get a 0% mortgage direct from the Fed I’m going to make it as long as possible as long as I can pay it off early if I want.

      2. 50 Year Mortgages: Low Payments at a Price
        By Justin Pritchard
        Updated February 12, 2019

        50-year mortgages are loans scheduled to be paid off over 50 years. Because the loan term is so long, monthly payments are very low relative to other loans. 50-year mortgages are just used as a cash flow tool and are almost never paid off over 50 years. Let’s get into detail about how 50-year mortgages work and whether or not they’re right for you.

        1. I agree loosening credit standards increases risk, but thus far, it has not led to a major default problem. And I’m not aware of any significant foreclosure moratoriums (moratoria?) in effect–Mafia cites no source for the claim.

          1. Lower standards results in more defaults, like turning a faucet. And defaults are what matters. Over 90% of defaults last decade were prime loans. The only characteristic they shared was when they were made. Meaning around the peak. When prices fall, which they are now, people walk away regardless of loan type.

            As for foreclosures: what happens if you stop paying your mortgage? It’s highly likely you get a new loan! That’s how they run this low foreclosure scam. If you understand that every loan modification is a default, there’s a buncha defaults going on now and never stopped. And when prices fall, people are going to reject the loan modifications as well. The only people who get foreclosed now are either dead, or just don’t want the modification. There’s thousands of those at any time in Arizona ongoing. Pretty much any state I have data on.

            Have you ever noticed the loan mod commercials never went away?

          2. Not sure I get your point. A loan modification is a prior default. If they fail to pay per the modification they may again default and would show up in these statistics. You seem to be saying if prices fall, these modifications are more likely to go into default. I’m not sure that’s true if they have been making payments for four or five years. I assume the advertising for modifications is still there because the laws allowing for the modifications still exist and there will always be some people defaulting no matter how well the market is doing. In any event, there is obviously no sign of any significant current defaults as of yet so I think you are getting ahead of yourself.

          3. No I’m just ahead of you. Have you ever seen how little principle gets paid in 4 years? With the 3% down or less, most buyers have no real skin in the game. I track defaults. I go to the auctions. What almost everybody has forgotten, and what the REIC wants you to forget, is that when FBs are underwater, they will live there are long as possible making no payments and not opening envelopes, then skate and take the dishwasher with them.

          4. “…then skate and take the dishwasher with them.”

            The former girlfriend I mentioned told me that her mom would wake her in the middle of the night. They’d place all their linen, towels, etc., spread on the living room floor, set the dishes and other breakables on the center, fold the linen over and drop them in boxes. The last stage was quietly putting the boxes into the car before skipping town. Not your Brady Bunch.

      1. With foreclosure moratoriums in effect in all 50 states, of course they go unreported.

        Irvine housing prices cratered 12% and falling fast.

    1. For comparison, Trump Tower in Manhattan is valued at ~$370 million (fluctuates depending on rental income). And than includes the Trump penthouse, 263 condos, and 40+ retail stores. That ranch in Colorado is a ripoff.

    2. Remember not to get too concerned about extreme outliers.

      That property is about 11 square miles of land. While yes, the asking price is bonkers and unlikely to produce a sale, there number of similar properties, even nationally has to be absurdly low.

      I mean what I am getting at is that for a property this is so unusual and outside the normal sphere of interest of even multi-millionaires, to say nothing of us ‘common folk’ (and it’s even outside most of the top end of Beverly Hills mega mansion owners), that while it makes for fun reading and gawking, we can safely ignore it in terms of what it tells us about the global RE market, or it’s potential impact on it.

  6. “While he said more than price goes into getting a deal done, he said the contract offer came down to finding a good fit between a receptive buyer and a motivated seller. ‘Part of it is price, but I think it was also just getting the right scenario together for the house, because we had some interest early on, and at higher numbers, and yet just could not get the contract done”

    Realtors are liars.

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