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It’s The Nail In The Coffin

A report from the Wall Street Journal. “New York’s high-rise developers may soon lose a popular source of cheap funding. U.S. immigration authorities published on Wednesday a new rule that will make it tougher for real-estate developers to fund their projects through a program known as EB-5. ‘It’s the nail in the coffin,’ said Nicholas Mastroianni II, the chief executive of the EB-5 regional center U.S. Immigration Fund.”

“Gary Friedland, a scholar-in-residence at New York University Stern School of Business who has studied the EB-5 program, said he was surprised that an administration with ties to the real-estate industry is changing the program. ‘Since Trump took office, we’ve been predicting that the regulations would be buried in regulatory purgatory, never completed,’ he said.”

The New York Times. “The relentless march of tall buildings that has spread across New York has overtaken Yorkville, as the Second Avenue subway, the city’s newest transit line, attracts new settlers and makes the neighborhood particularly enticing to developers. A dozen glass towers with prices or rents as lavish as their amenities have opened in the past five years or are nearing completion. Another dozen building projects have started construction or are on the drawing boards.”

“‘Everyone in the city who cares about the cultural identity of their neighborhood should be watching Yorkville as a warning sign,’ said City Councilman Ben Kallos, a grandson of Jewish Hungarian immigrants whose district includes Yorkville. ‘The last thing a residential neighborhood needs is more glass towers for billionaires.'”

“The ever-taller architecture is certainly transforming the neighborhood’s look. ‘The sky is disappearing,’ said Irene Merbo, a retired nursing administrator who was born in the neighborhood in 1933.”

From on Massachusetts. “US home purchases by foreign buyers dropped a staggering 36 percent between April 2018 and March, from $121 billion to $77.9 billion, according to a new report from the National Association of Realtors. The slowdown included home purchases made by both nonresident foreigners and recent immigrants or visa holders, and was evident across the board: US real estate purchases by citizens of Canada, China, Mexico, India, and Britain were all down from a year ago.”

“But the drop in Chinese buyers was the most dramatic, plunging 56 percent: from $30.4 billion in 2018 (and $31.7 billion the year prior) to $13.4 billion. ‘Chinese buyers have dramatically reduced their real estate investments and purchases in Boston,’ said Patty Chen, president of PattyC Property Group in Wellesley, a full-service brokerage that helps Asian entrepreneurs invest in US real estate. ‘While there are many who are still interested in looking at properties, there are fewer people closing deals since 2017.'”

“Tom Truong, president of the Asian Real Estate Association of America , said local members haven’t seen much of a change this year, noting that a slowdown in Chinese investment was already underway. ‘The effect started about two to three years ago when the Chinese government really clamped down on money coming out of China to the US,’ Truong said.”

“Pamela Cushing, of Douglas Elliman’s Live in Luxury team, has witnessed the same phenomenon at downtown luxury developments like Millennium Tower. However, while larger units are still selling to full-time residents, she’s noticed one-bedrooms lingering on the market for longer than usual this year. ‘Usually those would be scooped up by an international buyer, either an investor or someone whose son or daughter is coming to school here,’ she said. This year, she added, those students are more likely to be seeking a rental unit in the building.”

Marie Presti, owner/broker at The Presti Group in Newton, added that she’s typically helped at least one and often up to three foreign buyers each year, mostly through referrals from other international clients. ‘And this year I haven’t had any,’ she said. ‘I don’t know if that means anything; it’s very anecdotal.'”

The Miami Herald in Florida. “At last — Miami-Dade’s spiraling housing costs may be on the verge of cooling down a bit. Those are among the key findings of the 2019 Miami Herald Real Residential Real Estate Survey, which is now in its fifth year. One hundred of Miami-Dade’s top brokers, agents, analysts and experts from all price points were interviewed in English and Spanish to gain their insights into the current housing market. The interviews were anonymous, so respondents could speak freely and candidly.”

“On the downside, when it comes to buying, Brickell was the neighborhood most respondents said they’d avoid altogether. Brickell also placed second on the list of most overvalued neighborhoods, with a median per square foot price of $491 — higher than the Miami median of $417, according to Zillow. Miami Beach was named most overvalued neighborhood for the third year in a row, with a median per square foot price of $502.”

“‘From an investor perspective, Brickell is a no-go zone, simply because of the amount of oversupply that exists,’ said Peter Zalewski, a principal with ‘The cost of a condo there is so rich that landlords are having to subsidize their tenants, because the rents won’t cover the monthly costs. Before there was no alternative if you wanted to live in downtown. Suddenly there are a lot of alternatives and they are more competitive, too. The days of the Brickell landlords ruling over all are gone, just like the Spanish conquistadors.'”

“‘For the three months ending June 2019, the average closed sale price for a single-family home priced above $1 million was 81 percent of its original asking price, compared to 87 percent for the same period one year earlier,’ said Ron Shuffield, CEO of Berkshire Hathaway HomeServices EWM Realty. ‘The average price reduction of a luxury condo, from its original list price to its final sale price, registered a decrease of 6 percent, to 82 percent for the three months ending June 30, 2019.'”

This Post Has 68 Comments
  1. ‘And this year I haven’t had any,’ she said. ‘I don’t know if that means anything’

    Yip yip yip yip yip yip yip yip
    Sha na na na, sha na na na na
    Sha na na na, sha na na na na
    Sha na na na, sha na na na na
    Sha na na na, sha na na na na
    Yip yip yip yip yip yip yip yip
    Mum mum mum mum mum mum
    Get a job, sha na na na, sha na na na na

    Ev’ry morning about this time
    She get me out of my bed
    A-crying, get a job
    After breakfast ev’ry nay
    She throws the want ads right my way
    And never fails to say
    Get a job, sha na na na, sha na na na na

  2. ‘Tom Truong, president of the Asian Real Estate Association of America , said local members haven’t seen much of a change this year, noting that a slowdown in Chinese investment was already underway. ‘The effect started about two to three years ago when the Chinese government really clamped down on money coming out of China to the US’

    Readers here knew that Tom. But isn’t it interesting the REIC kept that myth going for three years? I wonder why they would want to exaggerate the foreign buyer thing?

  3. ‘The cost of a condo there is so rich that landlords are having to subsidize their tenants, because the rents won’t cover the monthly costs’

    This is pretty much the entire US rental market going back 4 or 5 years. Something’s go to give and I know what it is!

    1. It only “pencils out” for lux/high rents. Builders foolishly overbuilt, not knowing or caring about actual TAM for that (small) market segment that’s not supported by the gig economy and stagnant wages. Driven by $ signs in their eyes. Massive Fed-driven credit bubble. Bernanke-Yellen bucks + low rates = malinvestment and predictable over supply. Not gonna pencil out w/o exorbitant rents. Next step = BK. Another asset bubble from your “friends” at the Fed.

        1. Yes, just like SFH. Starts at the top. “A fish rots from the head.” Where are all of those buyers from China willing to overpay?

          1. Where are the Chinese buyers?
            Many are probably involuntarily donating their organs. There were two ways China could have gone. One was more like Taiwan and HK. However as the people who reside in HK are realizing what Xi wants is HK and Taiwan to become more communist. This second way is apparent as China swings back to communism just like the Soviet Union did almost a century ago after using a mixed economy to recover from a civil war.

      1. “Another a$$et bubble from your “friend$” at the Fed.”

        Here’s the current Cheerleader$/bullie$:

        dtRumpsis, Kudlow, Ha$$ett, Navarro, Mnuchin, $helton, Ro$$ + Yellen!: “Lower the damn FedFund$ rates$ to ZERO! Now!

        Former Fed Chair Janet Yellen says she’s in favor of an interest rate cut
        PUBLISHED SUN| JUL 28 2019 | Saheli Roy Choudhury | CNBC

        Yellen led the Fed for a four-year term that ended February 3, 2018. Under her tenure, the Fed raised rates in December 2015 for the first time in nearly a decade. It was the start of an effort to hike rates back to a point where policymakers could have some leeway to reduce them again in the face of any future downturn.

        1. Why does Yellen the Felon feel a need to open her pie hole on what the Fed should or shouldn’t do?

          1. It almost seems like she is trolling Trump, who wants lower interest rates and could have continued her appointment.

          2. “One wonders if that is one of the drivers of gold’$ recent run?”

            Bugs: “eh, could bee Doc, here’s what Elmer Fudd is tracking”:

            Ru$$ian & Chine$e footprint$ … everywhere$

            Opinion: Watch out, America: China and Russia are stockpiling gold

            “The explanation? Some of America’s biggest geopolitical rivals were stockpiling gold. Especially China and Russia.

            And they still are. The People’s Bank of China recently revealed hiking its gold reserves by 74 tons in the six months through May. The Russian central bank has bought about 96 tons in the first half of the year.”


      1. When Soros dies I want at least 13 nails in that coffin and a stake through the heart. The man even looks like a sith Lord. Probably not a vampire because he is seen in the light but why take chances?

  4. ‘The cost of a condo there is so rich that landlords are having to subsidize their tenants, because the rents won’t cover the monthly costs. Before there was no alternative if you wanted to live in downtown. Suddenly there are a lot of alternatives and they are more competitive, too. The days of the Brickell landlords ruling over all are gone, just like the Spanish conquistadors.’

    Rent is like throwing money away….why pay someone else mortgages?

    1. It’s ground-hog day at the Miami Herald – again. Prices there have been sinking like a turd in a well since 2015.

  5. Economy
    Financial Crisis Yields a Generation of Renters
    Many young adults are priced out of the housing market. That could reshape their finances—and the economy—for years to come.
    By Christina Rexrode
    July 27, 2019 8:00 am ET

    Alex Ruiz, 29 years old, and his wife, Stephanie Johnson, have steady jobs, are setting aside money for retirement and are slowly paying down their student debt.

    Yet buying a house seems out of reach for at least another decade. Home values in Asheville, N.C., where they live, are up some 70% over the past seven years. Their student-loan payments and rising rent have made it difficult to save for a down payment, and the houses that go on the market get snapped up right away.

    To Read the Full Story

    1. The way the false RE markets are affecting young people is really sad. The shelter market has been hijacked by the casino/speculation gig.

      It’s just something that can’t be denied that the youth are being cheated by faulty lending and speculation creating unaffordable housing . Just no wonder they are open to socialism.

      Look how much the young adults are charged for health care. They should have really cheap medical costs because they are low risk of making a expensive medical claim. Come on, the medical insurance companies were making plenty enough money mixing the high risk with the more volumous low risk.

      The government took over the super high risk 65 and older with Medicare, so I don’t know what the insurance companies were bitching about, other that greed for higher profits. For instance, would you want to be charged for your car insurance based on your income verses your car and driving record, and you have to make up for some jerk that’s a bad driver that can’t afford his stupid car insurance? Obamacare was nothing more than a Commie plan in which the medical industry came out keeping price fixing monopoly prices, while having a Commie plan to tax based on income rather than medical risk.

      Look , the medical industry just wants to get close to 11 thousand per year per head in the USA. Nice for a industry to think they can get government to aid them in assuring gouging profit margins.

      The Politicans faulty answers to almost anything is heading us into dangerous territory.

      1. But young adults voted for it. The policies promoted by the left are really hurting young people. So sometimes I feel very bad for them. Then I look at how they vote. I lose all sympathy. If you are going to vote for people promising MMT policies then the fact you are going to be left paying for the policies.

        1. Yes, this younger sector seems to be brainwashed. Interesting how they vote against their own interest.

          But, sometimes there isn’t the luxury to make critical political voting mistakes. I think they think that trying on socialism is like trying on a new coat. The dire consequences of going down that road eludes them.

          1. I have reviewed dozens of tapes on how professors are selling socialism. They are pretty slick in their methods.

          2. We already have Socialism — it’s for the rich, corporations, illegal immigrants, the very poor, and the old.

            Young people looking at the looting and favoritism are simply asking for a little bit of action themselves.

          3. “But, sometimes there isn’t the luxury to make critical political voting mistakes.”

            Little wonder that the young are pressed into military service by their well-off elders.

    2. “The crux of the problem: Home prices have outpaced wage gains. From roughly the end of 2000 to the end of 2017, median home prices rose 21% after adjusting for inflation, while median household income rose 2%, according to federal and industry data analyzed by Freddie Mac.”

      Workers currently in their 40s and 50s shouldn’t bank on the younger generations to fund their pension fund’s promises.

      1. Oh yes, lack of wage gain is a big factor. When shelter prices use to track with wages the world was so much better looking back on it.i just hope something happens that makes it possible for people to buy shelter that’s affordable, like the people from my era got.
        It really bothers me a lot.

  6. Poor Alabaman’$ Pensioner$, just thee 1$t of many to start the “Luxury!” $helter.$hack anecdotal evidence$ of coming default$!

    Luxury cinema chain iPic Entertainment’s $tock tank$ on bankruptcy fears

    MarketWatch | Ciara Linnane| Published: July 29, 2019

    The company was hoping a luxury cinema experience would help lure cinemagoers out of their houses and the comfort of their Netflix subscriptions, although some observers said luxury is risky and mostly a niche market.

    “They’ll work in larger cities and will do well in an economy like this. But when the economy goes down, they’ll be the first to get hurt,” Haragopal Parsa, a professor at the Daniels College of Business at the University of Denver, who studies restaurant and food trends, told MarketWatch last year.

    The stock has fallen 60% in 2019, while the S&P 500 SPX, -0.20% has gained 20%.

    The company, which operates casual restaurants, farm-to-glass full-service bars, and theater auditoriums with in-theater dining at 123 screens in nine states, said in a regulatory filing that it failed to make a $10 million interest payment due July 1 to the Teachers’ Retirement System of Alabama (R$A), the pen$ion fund for teachers in that $tate.

    iPic now has $204 million of debt under a credit facility extended by the pension fund, with which it is in talks. It had hoped to draw on that facility to make the July interest payment, but RSA has not made the funds available. The pension fund has also not declared an event of default—for now. The company has just $2.2 million of cash on hand.

    1. So due to government making promises which it cannot keep the teacher’s pension fund, went for the highest return without considering risk. You see it in every state government pension funds under funded and making bad investments to catch up. Even liberal Democrats used to realize that government unions means the workers are essentially negotiating with themselves thus they sign contracts that are unaffordable.

      1. Unions are up against the wall in most states, so they are going to have to cut payments or give IOUs or get really really tough on employees make it easy to fire because thousands. tens of thousand are on waiting lists to be hired , and you know they will do their best to keep their jobs.

      2. When state and city pensions go belly up it’s probably going to be politically impossible for the federal government not to bail them out. The most irresponsible states then wind up living beyond their means with many government services and then getting transfer payments from the tax payers when the pensions fail.Talk about “moral hazard “.

      3. Fed engineered rock bottom interest rates force pension plans to choose between high risk gambles or unsustainably high contribution rates.

  7. Best thing that could have happen, dummy buyers own a 10 million dollar apt. and the guests ask what is the view, you tell them the next tall building?

    1. It then flows up the coast of California. While the main flow is down from Alaska other currents will often bring it all the way to Coronado. One of the reasons any swimming south of Coronado is probably not advised. Do not expect the Realtors to tell you that.

  8. I live about twenty miles from Raleigh, NC. The housing market has been crazy here. We’ve been looking to move a few towns over to cut down on commuting, and nearly every house that might meet our criteria is listed as pending within ten days. I’d say half are listed as pending within five days.

    Last weekend on Saturday I saw a new listing. It was supposed to have an open house on Sunday. By Saturday night, when the house had been listed for about ten hours, the description had been changed to state they had already received multiple offers and all offers were due that night at 9pm.

    I have several friends that have moved or are looking to move to cut down on driving. The friend that moved a few months ago put down a $10,000 due diligence fee with the offer. If the house failed inspection, they’d get the money back, but if they backed out because they decided not to buy, they’d be out the money. They did buy, and it all worked out, but that seems to be a high amount, especially considering houses are selling so fast that I suspect people put in an offer after just seeing it once.

  9. I’d like to add that someone commenting on this blog about two weeks ago linked to some chart on Zillow that supposedly showed Raleigh prices are crashing. I was a little skeptical of that claim, and I went and looked at the chart. While it did show that zip code’s (27606) median listing price had decreased, the median sale price is still increasing. I’d say the actual median sale prices are a better metric than the median list prices.

    1. someone commenting on this blog

      Probably Mortgage Watch, our resident real estate doomsdayer. It’s suspected that he/she also posts on ZeroHedge as Big Fat Bastard. Data is data. Ignore the headlines.

      1. I’m pretty sure I’ve see Housing Analyst/Mortgage Watch on the Marketwatch comments too.

    1. “…the Wall $treet-Federal Re$erve Looting $yndicate”

      Lowering the Fed Fund$ rate$ to ZERO % = Death.$piral for HB.B ll $helter.$hack Debacle$ & all a$$ociated bidne$$es

        1. “make it taste like celery.” ( might be a way to make a good winter stew with less ingredients!

    1. “Just three applicants, two from California and one from Texas, applied and already two of those have withdrawn since the job was advertised June 24.”

      Something smells and it’s not the bodies.

  10. I had a boss, a VP of a publicly-traded company, “unexpectedly retire.” I’m not buying what Lyft’s selling.

    Cracks in the ride-sharing business model???

  11. ‘I don’t know if that means anything; it’s very anecdotal.’

    So is the incipient price collapse in markets previously heavily penetrated by foreign investors.

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