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Do Not Let The Investment Mirage Misguide You

A report from Bloomberg. “New York City’s struggling luxury condo market is providing a prominent developer with an opportunity to expand the lending unit it launched last year. Silverstein Properties Inc., looking to double its lending business to more than $1 billion in 2020, is eyeing so-called inventory loans in Manhattan neighborhoods like Gramercy, Tribeca and Midtown East, according to Michael May, president of Silverstein Capital Partners. ‘You’re seeing some projects that are completed that have just had very, very slow sales,’ May said.”

“New York’s luxury developers, who financed projects during a more optimistic era for high-end condos, are bumping up against rosy loan repayment projections in a slowing market. ‘We think that there’s still demand for units that are priced well, but in many cases, the owners of these projects have not adjusted their expectations to where the price would sell in the market yet,’ May said. It recently signed its first West Coast deal in Los Angeles and has plans to expand to markets including San Francisco and Seattle.”

From Boston.com in Massachusetts. “In Greater Boston, the single-family and condo markets ‘struggled,’ according to the Greater Boston Association of Realtors. The single-family home market saw its lowest October sales total in more than 20 years, according to the report, and the condo market was met with a 31 percent decline. ‘The days of steady appreciation in home values are nearly over. At both ends of the market, and in most communities, selling prices have either peaked or plateaued,’ said Jim Major, association president. ‘For those homeowners who are thinking about listing their home for sale, now would be a good time to do so, before rising mortgage rates and inventory levels potentially cut into equity gains.'”

“Central Middlesex County: Acton, Bedford, Boxborough, Concord, Hudson, Lexington, Lincoln, Maynard, Stow, Sudbury, Wayland, and Weston. These communities saw a sharp drop (16 percent) in the median single-family selling price, from $815,000 in October 2018 to $685,000 in October 2019.”

From The Real Deal on Florida. “English singer-songwriter Craig David may be singing the blues now that he sold his Miami Beach condo. David sold the 1,895-square-foot tower suite 5 at the Mondrian South Beach for $4.3 million, or $2,269 per square foot, said Alexander Goldstein of Miles Goldstein Real Estate. Goldstein and Adi Amuial of the same firm represented the seller. Property records show the unit last sold in 2009 for $4.68 million, which means David sold it at a loss. The two-bedroom unit hit the market in July for $5.75 million, and sold for 25 percent off that asking price.”

The Orange County Register in California. “This year’s cheaper mortgage rates are finally boosting local homebuying. Deals for 20,761 residences — new and existing — were closed in October in six Southern California counties, up 8.2% in a year. Still, SoCal’s latest sales count is 9% off the October average of 22,912 since 1988.”

“Newly built: Local builders sold 1,841 new homes, up 12% in a year. Median: $561,250 — a 10.2% decrease over 12 months. Builder share: 8.9% of SoCal sales vs. 8.6% a year earlier. Between 1998 and 2018, new homes have accounted for 13.4% of all homes purchased.”

The Associated Press on California. “With the recent purchase of actor/neighbor/friend, Jeff Bridges’ house, Oprah Winfrey now owns three homes in the Montecito neighborhood, which lies on the western tip of Santa Barbara. Oprah waited to buy the property until the price dropped from the original $7.495 million asking price, to $6.85 million, which is the exact same price Bridges and his wife paid for it five years ago.”

The Classic Car Journal. “If you do nothing but crunch the numbers, they’ll scrunch your car-collecting spirit: Sales at major collector car auctions down 23 percent. Average sales price per car down 17 percent. Number of cars sold for $1 million or more down 29 percent. Cars offered at auction down 3 percent. Cars sold at auction down 6 percent. Sell-through rate down 3 percent.”

“After five consecutive years of major global auction sales of more than $1 billion, the Classic Car Auction Yearbook reports that sales plummeted to $931 million for the 2018-2019 buying and selling season that concludes with the annual Monterey Car Week. But as you know, there’s more to this hobby than collector cars as investments. ‘We have clearly witnessed an adjustment in the market and we are now firmly in a buyers’ market,’ Philip Kantor, head of Bonhams Motor Cars Europe, writes.”

“‘To sum up the situation, ‘sanity’ returned to the market last year,’ he noted, adding that such ‘stabilization is truly good news not only for real enthusiasts but also the market in the long term.’ The market, he adds, ‘does seem to be trending away from purely financial interest, which over the long term can only be good.'”

“Another big change during the past year involved cars offered at no reserve. In other words, the cars sold to the highest bidder regardless of what the consignors thought they were worth. No-reserve cars — a record 1,623 of them — represented 30 percent of auction dockets. The number of cars offered at no reserve in the last 3 years has increased by 55 percent, the authors add. Among the no-reserve cars in 2018-19 were 5 of the top-10-priced vehicles sold at auction in 2018-19.”

“And what advice do the authors share? ‘Buy the car you like, which is the achievement of a dream or reminds you of happy moments, drive it and do not let the investment mirage misguide you. By doing so, you may or may not earn a financial return, but we guarantee you that you will enjoy it and it will improve the quality of your life.'”

This Post Has 79 Comments
      1. The biggest changes are in neighborhoods with the lowest number of sales, so even one house can skew the prices. Also, these wealthy DC neighborhoods are *not* the cookie-cutter burbs. Houses are so different that houses on the same block could be hundreds of thousands of dollars apart in value. So the average sale price could be skewed depending on whether the sale was for a palace or a dump.

          1. In this instance Oxide is right. “Neighborhoods” in DC are very small — like 10 square blocks. One outlier, such as a deadbeat landlord selling a tear-down project, can really skew the statistics. I can’t decipher any meaningful info out of the table.

        1. It’s the same for my neighborhood too, except the houses are tens of thousands of dollars apart. Even if the houses started off as cookie-cutter ranches, there have been so many additions, basement renos, added garages, added second floors, etc, that values can differ greatly.

    1. The entire situation is untenable. Everything has become much too expensive, whether it’s real estate prices, rent, autos, healthcare, fuel, food or otherwise, and we need a massive reset in prices – or some magical wage inflation which just is not happening.

        1. The people aren’t buying what these clowns are selling – unless you want to talk about all the easy credit they’re dispensing. In that case, the people are eating it up. In fact, the sheep are so dumbed down that they are paying record high credit card interest in a time of record low interest rates.

          1. “sheep are so dumbed down that they are paying record high credit card interest in a time of record low interest rates”

            Sounds similar to that failed subprime thingy that they aren’t doing since the last cr8r. Instead of QE, we now have “not QE” or MMT which is essentially qe on steriods, no cap to the printing of fake money, happy thanksgiving!

      1. “…we need a massive reset in prices- ”

        A reset in prices would be great because the prices are fake or rigged, whatever you want to call them.

        The rigged prices takes all power away from the consumer and puts it in the hands of the monopolies.

        The Globalist/Wall Street/Industry want to price fix rather than free market capitalism. Average wages are no longer relevant to these greed heads and they don’t care how much debt the people take out.

    1. Is Diana Olick, Baghdad Bob after transgender surgery, I have never seen them together? Obama and W brought in a lot of Iraqi refugees.

  1. Was browsing some shacks for sale and using the mortgage calculator on the site. With 20% down, which nobody even has, they are still cash flow negative based upon local rents, and that doesn’t even take into consideration taxes, insurance, maintenance, repair and vacancy.

  2. Four Toronto properties that have been left abandoned for over a decade will be sold to the highest bidder this afternoon.

    The City of Toronto began the selling process on the four properties, known as a sale of land by public tender, earlier this month. The city said this is the final step in the collection of overdue or unpaid property taxes.

    https://toronto.ctvnews.ca/four-abandoned-toronto-properties-will-be-sold-to-the-highest-bidder-today-1.4706561

    1. Hmm…

      In the Google Street View they show for one of those houses, there appears to be a car parked in the driveway. The other house pictured definitely looks abandoned.

      “…he city said once a property accumulates taxes for two years or more, a Tax Arrears Certificate is registered against the title of the property. This allows the property to be put up for sale by the city…” 2 years? Then why were these properties allowed to sit for 10 years before auction?

      “People want to know how many bathrooms or bedrooms these homes have but those are things we don’t even know” No level of government there maintains records including that information?

    1. Actually, yes, that is one way that prices could nominally not fall (or at least go sideways). If realtor commissions go from 6 to 1.5 or something like that, it would be an effective price decrease, but it wouldn’t feel like a price decrease for the owner of the asset.

    2. Real estate is not, and should not be, as fungible as stocks. I’m all for increased transparency and reduced transactions costs, but this seems to perpetuate the real estate casino mentality.

      1. The best way to slash realtor commissions is for house prices to collapse to lower and more affordable levels.

  3. Eeee-bola Boston. Guess it doesn’t go up in a straight line and it’s not the next SV, huh Lamacchia/Boston Globe.

    Nothing accelerates the economy and creates jobs like rapidly falling asset prices to dramatically lower and more affordable levels. Nothing.

  4. ‘The days of steady appreciation in home values are nearly over. At both ends of the market, and in most communities, selling prices have either peaked or plateaued,’

    We could use some Beantown real estate eee-bola out here in San Diego to affordably realign housing prices with incomes.

    Any thoughts on when this will play out?

  5. “Oprah waited to buy the property until the price dropped from the original $7.495 million asking price, to $6.85 million, which is the exact same price Bridges and his wife paid for it five years ago.”

    Go Oprah! Only time will tell whether she’s a shrewd real estate investor or a falling knife catcher.

    1. Please use the sharing tools found via the share button at the top or side of articles. Copying articles to share with others is a breach of FT.com T&Cs and Copyright Policy. Email licensing@ft.com to buy additional rights. Subscribers may share up to 10 or 20 articles per month using the gift article service. More information can be found at https://www.ft.com/tour.
      https://www.ft.com/content/f715e496-1102-11ea-a7e6-62bf4f9e548a
      The Financial Times
      Corporate bonds
      US distressed debt flashes warning sign for investors
      More than 200 bonds in junk-rated index are trading at levels implying severe strain
      Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, Feb. 5, 2018. U.S. stocks plunged, sending the Dow Jones Industrial Average down almost 1,600 points, as major averages erased gains for the year. Photographer: Michael Nagle/Bloomberg
      Analysts are saying that appetite for credit risk is waning © Bloomberg
      Joe Rennison in London yesterday

      Investors are pulling back from the riskiest parts of the US corporate bond market, fearing that a brightening domestic economy may not be enough to save hundreds of companies struggling under heavy debt burdens.

      Corporate bond markets have enjoyed a big rally this year, buoyed by a trio of interest rate cuts from the Federal Reserve and by signs that the world’s largest economy is on a solid footing. An index of junk-rated debt run by Ice Data Services has returned almost 12 per cent this year, as bullish fund managers look lower down the credit spectrum in pursuit of income.

      But in those furthest reaches there are signs of strain. More than 200 of the bonds in the Ice index are trading with yields more than 10 percentage points above equivalent government bonds — a commonly used definition of distress. That share now stands at 11.6 per cent of the index, the highest proportion since 2016.

      “Beneath the surface of what looks like . . . an enthusiasm for taking credit risk, there is a consciousness that all is not rosy,” said Marty Fridson, chief investment officer of Lehmann Livian Fridson Advisors in New York.

    1. It’s a very good development, even if it jeopardizes a trade deal. Who needs the cheap crap we import from China, anyway?

    2. You mean we’re not going to throw them under the bus (or perhaps I should say tank?) like the Tiananmen Square protestors back in the day?

      1. America used to stand for something, when it was a republic instead of a plutocracy. Even with the globalists and collectivists trying to snuff out the last sparks of liberty, there are still those who are carrying the fire.

        1. America used to stand for something, when it was a republic instead of a plutocracy

          I’ve been watching ‘Designated Survivor’ recently on Netflix, and one thing that strikes (and frustrates) me is all the talk of “restoring our democracy” and such. I think it wasn’t until episode 12 or so that someone mentions the word “republic”.

          1. George Soros was a leading shareholder until recently. Susan Rice is on the Board of Directors. Obamas got a roughly $50M deal. Questionable content: child pornography, pedophilia, Satanism. Sold all my shares last year.

      2. It’s still early. We’ll see what happens when there actually is a tank.

        I think the only possible good income for HK involves politics. As soon as there are tanks nobody can stop it. They are too close to the mainland to avoid the boot.

    1. Ditto. I am thankful for Ben and his tireless effort aggregating content relating to the housing bubble and for the insights he adds. I am also thankful for many other posters here and the valuable insights they bring.

  6. Yes, happy to visit with a large family gathering. Over.Fed @ this moment.

    (Thanks.fer.asking!)

    Happy Thanksgiving!

  7. Today is Buy Nothing Day. This event/campaign was started by Adbusters Magazine two decades ago. Please join me in observance by not buying anything. If you *need* to buy something, do it tomorrow for Small Business Saturday.

    I have zero debt, and I am more free than almost anyone I know…

    1. I dunno, brah…I may need to replace the AR-15 I lost in that tragic boating accident. Lots of most excellent Black Friday sales on stuff guaranteed to send Beto and his Bolshevik comrades into a foaming rage. With the people they intend to target for their “redistribution of the wealth” gunning up like they did under King Obama, things could get spicy for any collectivist goons intent on disarming the kulaks.

      1. I agree but I’m not putting my name on their “list” buy legally buying an AR-15 in Colorado.

        Sorry about the tragic boating accident 🙁

        “What they do?
        Gonna ban the AK?
        My sh*t wasn’t registered
        Any f*cking way” — Ice Cube

        1. Gun seller that bet big on Hillary Clinton getting elected goes bankrupt
          Bloomberg
          June 10, 2019

          “Firearms distributor United Sporting Cos. loaded up on guns ahead of the 2016 U.S. presidential election, expecting a surge in sales that would likely follow the election of a Democrat. Then Hillary Clinton lost.”

          “The miscalculation sparked a multi-year decline that has reached the courthouse steps in Delaware, where United filed for Chapter 11 bankruptcy on Monday.”

          “When Republican Donald Trump emerged victorious in the election, United posted lower-than-expected sales as well as high inventory carrying costs, Chief Executive Bradley P. Johnson said in a court declaration.”

    2. ———————-
      “Malls are dying. The thriving ones are spending millions to reinvent themselves.”

      “One in four U.S. malls is expected to close by 2022, according to a 2017 report by Credit Suisse. Those that are thriving are spending millions reinventing themselves as integrated lifestyle hubs — adding yoga studios, medical clinics and microbreweries — populated with more upscale shops. But such targeted investments are often coming at the expense of mall operators’ lower-tier properties — and analysts say the divide between rich malls and poor malls is widening.”
      ————–

      I keep hearing that Amazon killed the malls. I don’t believe it was Amazon. I believe it was Wal-Mart and Target. Wal-Mart and Target now carry almost everything that an entire mall used to carry, plus food. There’s no reason to go to the mall.

        1. If you think the retail apocalypse is bad for malls now, wait until cloud kitchen/ghost kitchens take off. Soon there will be tons of food establishments and retail space that will be vacant as food establishments disintermediate the buildings.

          1. I had to look up cloud kitchen. It’s not a new concept. In the Middle Ages, the village baker was a cloud kitchen, so to speak. When he was finished baking his bread for sale for the day, peasants would bring their own unbaked loaves to take advantage of the still-hot oven.

      1. “I keep hearing that Amazon killed the malls.”

        When my wife and daughter get together they like to go shopping, have lunch at a nice place, etc., experiences that Amazon shopping doesn’t offer. IMHO, the malls are dying because their middle-class customers are dying. People like to buy stuff even if they don’t need it. It’s part of what defines modern 1st world status.

      2. There’s no reason to go to the mall.

        I think that there still is, at least once in a great while, depending on what you’re shopping for, and if physically contacting the merchandise before buying matters — it’s just that there were far too many of them in an overcrowding retail environment, especially around these parts.

        And what isn’t being discussed is how many shoppers have been driven away from some malls by folks who aren’t there to do any shopping. And then the stores start closing due to the decreased traffic caused by that, and the downward spiral towards eventual closure continues from there.

        This one seems to be thriving quite nicely, though — complete with a, ahem, car showroom:

        https://www.thesomersetcollection.com/

      3. “Malls are dying. The thriving ones…”

        The Westfield-Oakridge mall on Blossom Hill Rd in San Jose, CA seems to be doing well. Fresh season themed decor, clean and well lit, ample eye candy, few if any loitering punks, etc., so they’re working to keep it alive.

        1. Malls that are making it are bringing in experiences. There are dental shops, indoor skiing, escape rooms, compelling kid play areas, Soul cycle/boot camp, theaters, Whole Foods. The malls that are thriving in my area are building housing on site or near by and are doing nice office complexes.

          https://www.universityplaceorem.com/

          “Shop, dine, events, live, work, etc.”

  8. >> (silverstein) is eyeing so-called inventory loans in Manhattan neighborhoods like Gramercy, Tribeca and Midtown East,

    Translation: Silverstein is planning to engage in some predatory lending, wait for defaults to occur, chew through whatever equity exists by means of penalties, and then foreclose and profit.

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