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There Are Definitely People Who Bought To Resell

A report from Forbes. “In mid-2015, New York City made headlines for hosting two condominium developments offering, in addition to a variety of ultra-luxurious amenities, the extremely rare bonus feature of on-site parking. The price tag attached to what DNAinfo referred to at the time as the new ‘ultimate status symbol’ was a cool $1 million. One building offered three of these spaces as add-ons in conjunction with a penthouse purchase, while the other had a handful available on a first-come, first-served basis. It was just one more piece of evidence to the collective population that you really cannot go wrong with New York City real estate.”

“Except, oddly enough, the way the headlines read these days, it appears that you can. Every news outlet that covers housing is carrying headlines about New York City and its alleged housing bubble. In fact, I’ve seen search engines pushing old content about New York and a housing bubble to the top of the results.”

“Nearly regardless of the actual content of the research cited in these articles, much of which is sound, the headlines scream, ‘Watch Out for These 20 Bubble Housing Markets,’ ‘U.S. Housing Bubble Crash Begins in New York’ and ‘NYC Market Saturated.’ These headlines started in 2016, and they’ve done nothing but build momentum since the Big Apple market has, indeed, begun to level off.”

“Historically, real estate investors considered real estate and real-estate-related assets somewhat insulated from the swings of consumer sentiment. Sure, the stock market could swing from the skies to the depths and back again because Wall Street investors were ‘nervous’ about something that hadn’t even happened yet, but real estate was different. It was ‘real,’ and that meant it did not fluctuate based on fear factors and consumer confidence to the same degree that other investment vehicles might.”

“Now, however, our real estate market is different. According to the National Association of Realtors, the vast majority of homeowners (84% in 2017) considered homeownership to be a sound investment. Reasons for this included general consensus that money spent on housing built the homeowner’s wealth and that owning a home at the point of retirement was extremely important. Most also stated they believed homeownership to be ‘a good investment opportunity to build long-term wealth and increase net worth.'”

“These are all good ways to look at homeownership and to look at real estate investing, but when homeowners begin to view their family’s household shelter as an investment, it changes everything because it vastly expands the ‘investing’ population and changes how those homeowners make housing decisions.”

“For example, they may choose to sell sooner, list lower or higher, or hold longer for reasons outside of household preference. Suddenly, there are many, many more players in this game, and not all are immune to the tempting and dangerous allure, the fear factor of consumer sentiment, confidence indices and, of course, high-speed asset liquidation when things look stormy. That, my friends, changes the face of our industry.”

“Thanks to technology, digital connections and more information than most of us know what to do with on nearly every topic and perspective imaginable, real estate is no longer immune to the sentimental swings that the industry’s reputation for relative illiquidity initially bought it.”

‘If you are a real estate investor whose livelihood relies on market savvy, on accurate forecasting, on being ahead of the crowd, then you can no longer afford to look away from the headlines. If there are enough of them, they will very well play a role in shaping your returns.”

The Tampa Bay Times in Florida. “Less than a month ago, an investor paid $511,200 for a unit in Tampa Bay’s newest condo tower, ONE St. Petersburg. This week, she sold it — for $702,000.”

“Though the 41-story tower in downtown St. Petersburg is not yet finished, several buyers already have moved in while others hope to quickly flip their units — at hefty profits — as the bay area’s luxury condo boom continues unabated.”

“‘There are definitely people who bought to resell,’ said Peggy Naruns, a Realtor who has a listing in ONE. ‘We expect that between 15 and 30 units will (soon) be available, with price increases of around 40 percent.'”

“Among the units that have changed hands is one bought for $657,400 and sold for nearly $900,000. Under contract is a 12th-floor condo that originally sold for $922,500 and is now listed at $1.2 million.”

“New condo projects in Tampa have generated similar enthusiasm. Two months after sales began last year at Virage on Bayshore Boulevard, more than half of the 71 units were under contract. All 32 units have been spoken for at Aquatica, also under construction on Bayshore. And reservations for condos in downtown’s Riverwalk Place have been so brisk that developers decided to make the 50-plus story tower all residential instead of mixed use as originally planned.”

“Naruns said the price increases aren’t out of line, given the demand for high-end condos and especially for newer ones. The only other condo tower built close to Beach Drive within the last two years is Bliss, on Fourth Avenue N. There, a couple paid $1.6 million in August for a unit that had sold a year earlier for $979,900.”

“‘That’s an amazing markup,’ Naruns said.”

This Post Has 22 Comments
  1. ‘These headlines started in 2016, and they’ve done nothing but build momentum since the Big Apple market has, indeed, begun to level off’

    Then he goes on to quote:

    ‘Frederick Peters, the company’s CEO, observed boldly in the opening sentence of that report, “The third quarter demonstrated beyond any doubt that we have moved into a buyer’s market. As the media began to focus on the increase in unsold inventory not just in the new development market, but also in resales, buyers became emboldened. Offers 20% and 25% below asking prices began to flow in, a phenomenon last seen in 2009.”

    Maybe it would be best if we just pretended we never heard that?

    1. ‘In fact, I’ve seen search engines pushing old content about New York and a housing bubble to the top of the results’

      There’s a filter for that Grandpa…

    2. 25% off is no bargain when prices are 10x income. Even 50% off doesn’t get you back to anywhere near affordable.

  2. ‘Less than a month ago, an investor paid $511,200 for a unit in Tampa Bay’s newest condo tower, ONE St. Petersburg. This week, she sold it — for $702,000…Though the 41-story tower in downtown St. Petersburg is not yet finished, several buyers already have moved in while others hope to quickly flip their units — at hefty profits — as the bay area’s luxury condo boom continues unabated’

    Maybe we should pretend this isn’t happening and that a bunch of people got their asses kicked before?

    I’ve got 5 bucks that says these things were financed. Ah the power of leverage. Put down a few thousand, sit back and when it finished, bam, a couple hundred thousands for doing nothing. If so, who appraised an unfinished airbox? What lender was in on the scam? How is it possible for a condo to jump $200k in a month?

    1. Probably trying to push valuations of other condos higher and create a narrative, so I’m guessing this was arranged for that purpose. The time just to close that deal would take almost 60 days.

  3. a) Know the “news” source, and whether or not there’s any ax to grind or other conflict of interest:
    “Post written by Eddie Wilson, CEO of Affinity Worldwide, overseeing our 80+ companies that span the Real Estate Investment Industry.”

    b) No mention of the Fed and easy money policy, or other gov’t. manipulations, which are the primary force behind HB 1.0, 2.0., and other recent 21st century bubbles. While the MSM is certainly a factor in swaying markets and opinions, it’s not the driver, and for the astute, can be largely ignored as only a source of propaganda vs. useful info.
    “How The Headlines Could Cause A Housing Market Crash”

    c) While the internet has certainly made information more widely available and at a faster rate, it’s not the root cause of the last three asset bubbles: 1) tech./dot com (2000), 2) HB 1.0 (2008), 3) everything (now).
    “Thanks to technology, digital connections and more information than most of us know what to do with on nearly every topic and perspective imaginable, real estate is no longer immune to the sentimental swings that the industry’s reputation for relative illiquidity initially bought it.”

    d) The current HB 2.0, like all asset bubbles before it, will run it’s course from boom to bust, because human nature is a constant throughout history. Crypto currencies are ahead of the curve here, but a good example of manias and bubble behavior. Housing has been commoditized by the financial “wizards” on Wall St. and the Fed, and it’s not different from pork bellies or bit coins anymore. What was once shelter is now part of our “bubble-nomics” economy.

    Not much in the way of useful info. from this article, IMHO.

    1. It’s kind of a re-write of history. I do this every day and I haven’t seen articles mentioning NYC and bubble until recently. That bubble popped 2 and half years ago. There weren’t any head lines that caused it. Maybe it was the stupid idea of “safe deposit boxes in the sky”? $30 million luxury condos that no one would ever live in? I’d like to point out that these two concepts may sound ridiculous now, but they were repeatedly reported as the new big thing when the “frenzy” was at its peak.

      The New Normal: It’s a Buyer’s Market
      New York Times-5 hours ago
      With the luxury real estate market in a funk and the rest of the market weakening, what works now? Price cuts, sweeteners and pop-up yoga classes.

      1. Thanks again Ben for your blog and for helping to inform and document the financial craziness of HB 1.0, 2.0! I can see this as being required reading for future business and economic majors as examples of pathological case studies (or how not to run an economy or make investments). End the Fed.

        1. And for parents to teach their kids about basic economics and how not to bet screwed by RE Vampires always out for blood…well at least screwed less.

    1. I saw that article. I’m glad they did it but it’s old news to anyone who follows the AEI housing loan reports. What you’ll find is that FHA is risk layering for first time buyers – higher debt to income combined with lower credit scores. These are the people in the riskiest position (in a variety of ways) and have been largely buying at the peak.

      What’s really crazy is FHA is supposed to be a counter cyclical lender, meaning they ramp up when the market is down. But inexplicably they joined the pro-cyclical camp (Fannie and Freddie) in late 2014.

  4. I am consistently amazed by the notion that people have that somehow lending money to someone who can’t possibly repay it is doing them a “favor”.

    1. doing them a “favor”.

      What ever gave you that idea?!? Is it just because that’s what they say? Lenders are smart enough to know that they are ruining people. They are doing it for some other reason.

      1. They are doing it for some other reason.

        Because in this Fed-cycle game of musical chairs everybody thinks they are going to get rich before the music stops. And to help other people get rich is doing them a favor. And when the music inevitably stops then nobody could have seen it coming.

        1. In the meantime homeowners have never been poorer than they are right now.

          Thank you lying realtors.

  5. There is no way that Tampa incomes can support these condo prices. This is all happening because the Treasury dept cracked down on cash purchases via LLCs in Miami, so they just moved up the peninsula to Tampa.

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