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The Term Glut Is A Very Powerful Word With Negative Connotations

A report from Mansion Global on New York. “Manhattan’s luxury housing market weathered another frigid week, with only 12 contracts signed for homes priced at $4 million or more in the seven days through Sunday. It was the lowest activity during the third week of January since 2012, when the city’s real estate market was still in a post-recession slump, according to Olshan Realty.”

“While the start of the year is usually a little slow, the dozen deals made over the past week are ‘a depressing total even for this time of year,’ wrote Donna Olshan, president of Olshan Realty and author of the report. And there’s more bad news. The average seller last week waited more than two years for a buyer to come along, slashing an average of 14% off their listing price along the way, according to Olshan’s analysis.”

From GlobeSt on Florida. “It’s described as another ultra-luxury condo hotel development. But a new name here: Waldorf Astoria. But what some may wonder more about is the feasibility of financing another luxury condo in a city widely predicted to have a surplus, as one way of putting it, or a glut, as others say.”

“BridgeInvest announcing their funding of a $33 million pre-development loan for the planned 98-story building. The non-recourse land financing loan was structured based on the underlying collateral value and development potential, despite no existing cash-flow or final approvals, the announcement said.”

“BridgeInvest founder Alex Horn admits the term ‘glut’ is a very powerful word with negative connotations. ‘But when you look at South Florida development over the years, there’s been predictions of 10 to 15 years inventories that ended up being assimilated in two to three years,’ he says.”

From Tucson News Now in Arizona. “This time of year is usually pretty good for real estate agents. ‘After the holidays are past, we usually see a bit of an increase in sales and traffic,’ said Cathy Chavez, a 25 year veteran of the Tucson real estate market. ‘I haven’t seen that so much this year.'”

“Chavez is showing a three bedroom with a den on the Northwest side which sells for $230,000. It has been on the market for 72 days, which she says is a surprise to her. ‘We’ve reduced the price on this house hoping to bring in more buyers,’ she said. ‘We’ve had a little bit more traffic but not like we expected.'”

The Los Angeles Times. “The oceanfront estate of late actor Jim Nabors, known for his role as television character Gomer Pyle, has sold in Hawaii for $12 million, or $2.888 million less than the asking price.”

“An extravagant Bel-Air mega-mansion doubling as a monument to opulence just got a whole lot cheaper. The spec house, which listed for a quarter of a billion in 2017, is back on the market for $150 million. Once the nation’s priciest listing, the estate’s towering price tag has now been shaved twice. Developer Bruce Makowsky trimmed it last year to $188 million. With the latest price cut of $38 million, he’s just trying to be realistic.”

“Dubbed Billionaire, the home has just about everything but a buyer. ‘I don’t think anybody’s ready to spend $250 million on a house,’ Makowsky said. ‘At $150 million, it gets opened up to a much wider audience.'”

From The Real Deal on Illinois. “National experts predict Chicago will have the worst housing market in the country in 2019. But some local experts and industry observers say the situation is much more complicated than that. Chicago is not the only housing market that will experience pains this year. Nationally, home prices are expected to grow modestly, but sales figures will fall, said Danielle Hale, economist with Realtor.com.”

“‘It’s going to be good but not great,’ Hale said. ‘We had a record year in 2017, a bit of a slowdown in 2018 and we expect to see some further softening in 2019.'”

“‘It’s not as dramatic here as its is on the coasts, but the market is slow,’ said Steve Baird, president of Baird & Warner. ‘But everyone looks at what it was the year before, and it’s off a little bit.'”

“After a number of strong years following the market crash, a downturn in the market was not a matter of ‘if,’ Baird said. ‘We’re now 10 years into a cycle, he said. ‘There’s going to be a downturn, the only question is when.'”

“In Chicago, much of the new supply is concentrated in Downtown-area condo projects, many of which are loaded with luxury units. The new inventory will be a good thing for buyers, who for years put up with bidding wars and homes flying off the market.”

“Matt Laricy, one of the city’s top producing agents and a partner at Americorp Real Estate, said a return to a more even market could be a gift in disguise for the industry, especially after crash and post-crash years saw the market bounce from horrible to great.”

“‘We’re going to cool off, but it’s not the end of the world,’ said Laricy. ‘We just need to get to a normal market. I don’t think that buyers will feel that 24-hour gun-to-the-head’ pressure, Laricy said. ‘Buyers will be pickier. They’ll have more options.'”

This Post Has 74 Comments
  1. ‘what some may wonder more about is the feasibility of financing another luxury condo in a city widely predicted to have a surplus, as one way of putting it, or a glut, as others say’

    ‘BridgeInvest announcing their funding of a $33 million pre-development loan for the planned 98-story building. The non-recourse land financing loan was structured based on the underlying collateral value and development potential, despite no existing cash-flow or final approvals, the announcement said’

    Hear ye, hear ye, observe Yellen bucks marching off to money heaven! If you’ve ever asked, how could somebody be so stupid to add to a historic glut, listen up:

    ‘BridgeInvest founder Alex Horn admits the term ‘glut’ is a very powerful word with negative connotations. ‘But when you look at South Florida development over the years, there’s been predictions of 10 to 15 years inventories that ended up being assimilated in two to three years’

    No it didn’t Alex. The 20 years of supply at $3 million and up is still there. Not predictions, but the actual uptake of existing and in the pipeline airboxes. But by all means, jump off that bridge!

    1. “BridgeInvest announcing their funding of a $33 million pre-development loan for the planned 98-story building. The non-recourse land financing loan was structured based on the underlying collateral value and development potential, despite no existing cash-flow or final approvals, the announcement said.”

      Interesting. A non-recourse loan. Sorta risky. Perhaps we should look into Bridgeinvest to see what they are all about.

      Oh, lookie here …

      “We Represent Private Equity Funds, Hard Money Funds, Private Money Lenders. Simple, Flexible Underwriting For Fast Funding”

      Aha! They REPRESENT funds, they don’t use their own money, they use money that belongs to somebody else.

      If the deals that they finance goes south then so sorry, but hey, it is not their money.

      https://crefundinggroup.com/lp/?st-t=adwords&vt-k=commercial%20bridge%20loans&gclid=Cj0KCQiAm5viBRD4ARIsADGUT27Boy9pRGQyUg5DZMp72L1B4cQb5Ooh7o8PRbfs3h_yV0sSbeeRyAoaArSeEALw_wcB

      1. If a prudent puke with a lot of money to invest was offered some of the deals that these Bridgeinvest guys willingly dive into he, being a prudent puke, would most likely balk and just say no.

        But he may not balk if a silver-tongued Bridgeinvest guy can convince the puke that Bridgeinvest is loaded up with lots of expertise and they have an excellent track record and bla bla bla and thus the prudent puke could be convinced to turn his money over to Bridgeinvest who would then plunk it down into one of these deals that the prudent puke would otherwise say no to.

        Which means he gets to experience the same risk going with Bridgeinvest that he would refuse to take on directly and he pays a hefty fee to Bridgeinvest for the privilege of doing so.

      2. “…“We Represent Private Equity Funds, Hard Money Funds, Private Money Lenders. Simple, Flexible Underwriting For Fast Funding”…”

        I can’t imagine anyone with even basic financial acumen [let alone street smarts] getting involved with such a cast of characters.

        The only thing I can think of is that these guys are a front for syndicates who want to launder money. If someone else happens along and steps into the tar pit, so much the better, as it adds to the air of legitimacy.

    2. Speaking of Yellen bucks on death watch…

      How a corporate debt pileup could intensify the global economic slowdown
      By Sunny Oh
      Published: Jan 22, 2019 12:15 p.m. ET
      Overhang of excessive corporate debt may weigh on global economic growth: Oxford Economics
      Getty Images
      The IMF cut its forecasts for global economic growth

      As worries rise over the outlook for global growth, excessive debt levels are drawing the eyes of nervous investors worried that more countries will struggle to shoulder their debts.

      Adam Slater, lead economist for Oxford Economics, says the risks from the growing buildup of credit across the globe is worse than in previous years, with the dangers chiefly emanating from corporations that took advantage of low interest rates to borrow heavily.

    3. 98 stories in Miami! I had to look that up to make sure it wasn’t a typo. Sure enough:

      “By 2020 there will be 10 more buildings in Miami with more than 65 stories each.”

      1. How would one build a 98-story building to withstand hurricane-force winds? I spent Tropical Storm Isabelle on the 11th floor of a high rise and that was bad enough. Imagine being on the 90th floor during an Andrew-like storm. Could such a building be knocked over entirely? (then again, those towers in Windy-City Chicago seem to do ok)

        1. a 98-story building

          I expect you wouldn’t want to be up there when the windows get tested, and definitely not for a few days of power outage.

        2. I have a natural fear of heights. I do not even like being in tall buildings. Just the elevator ride up leaves me anxious. Looking out the windows makes it even worse. I cannot even imagine how I’d feel in a storm like that with the building swaying.

  2. ‘After the holidays are past, we usually see a bit of an increase in sales and traffic,’ said Cathy Chavez, a 25 year veteran of the Tucson real estate market. ‘I haven’t seen that so much this year.’

    ‘Chavez is showing a three bedroom with a den on the Northwest side which sells for $230,000. It has been on the market for 72 days, which she says is a surprise to her. ‘We’ve reduced the price on this house hoping to bring in more buyers,’ she said. ‘We’ve had a little bit more traffic but not like we expected.’

    Eeee-bola Tucson!

    1. ‘We’ve reduced the price on this house hoping to bring in more buyers,’ she said. ‘We’ve had a little bit more traffic but not like we expected.’

      But…but…I thought these Used House Salespeople were always the experts on the local market, cause they do research n’ stuff. Did they not realize there’s no demand for overpriced shacks?

  3. “BridgeInvest founder Alex Horn admits the term ‘glut’ is a very powerful word with negative connotations.

    Au contraire, Alex. A glut is a beautiful thing to behold for us popcorn-munching renters. It means the sawin’ and slashin’ is about to get serious.

    1. Stop spreading fake news on the internet. Any suggestion that California home prices are crashing is categorically false.

      1. Oh don’t worry I’m doing fine. Feds need to arrange their finances to anticipate getting paid every 2 months instead of every two weeks. I realize that the lower-pay Feds can’t do this. And I do feel for the contractors. They don’t get back pay, for them it’s a real lay-off. I think they can file for unemployment. It is, however, starting to get ridiculous. Trump is punishing the wrong set of people.

        1. Trump is punishing the wrong set of people

          Yeah, I read a heartbreaking story about a contractor who tends an old apple orchard in a National Park. Nothing says non-essential like that.

          It looks to my casual eye that Pelosi could easily reach some sort of compromise but is sticking with the not-1-dollar routine. Ironic that in the last shutdown it was Congress that got the blame. Now RESIST is unreproachable. What a circus.

          1. “There was a similar shutdown in 2013 and I don’t recall all these sob stories back then.”

            Two reasons off the top of my head:

            1. That shutdown only lasted 16 or 17 days.

            2. The Prez in office at the time was a media darling, so there was no effort to go find sob stories to bash him.

      1. Hi hon

        Seriously go check out the “cantilevered” pool. It hangs out over a cliff. Oh and the digital rendering of the $150M house shows a garage full of classic/expensive cars… UNDER the pool.

        Living on the wild side, I guess. Gimme boring.

  4. I begin to doubt the equivocation of the fiend that lies like truth.

    The Financial Times
    Global Market Overview Markets
    US stocks slide as IMF cuts global growth forecast
    Sterling reclaims $1.29 after reassuring UK jobs data

    Michael Hunter in London and Alice Woodhouse in Hong Kong an hour ago

    Tuesday 15.35 GMT
    What you need to know
    – S&P 500 down 0.8%; Stoxx 600 Europe 0.6% lower
    – European metals and mining stocks underperform
    – China equities hit as hopes for improved trade relations with US falter
    – Huawei extradition request and remarks by China’s president reverberate
    – Oil prices sink

    Hot topic

    Wall Street’s S&P 500 retreated in line with losses for European stocks after wider falls in Asia followed reduced world growth forecasts from the IMF.

    The benchmark US equity index was 0.8 per cent lower at 2,648 as the New York market returned from a long weekend.

    It came after the IMF cut its world growth forecasts for 2019, citing risk factors including the slowing Chinese economy and fears over Brexit, leaving major stock indices shy of the month-highs touched last week.

    Losses in Asia steepened on concern that hopes for improved trade relations between the US and China were fading and in the wake of remarks by China’s president, Xi Jinping, on a series of domestic political risks.

    1. Did you dump your risk asset HODLings soon enough to avoid THE BIG ONE?!

      Investing
      Mutual funds, ETFs see largest monthly outflow since 2008 in December
      By Rob Kozlowski · January 17, 2019 4:03 pm · Updated 4:07 pm
      Getty Images/iStockphoto

      U.S. mutual fund and exchange-traded funds had an estimated $83 billion in net outflows in December, the largest monthly number since the financial crisis, Morningstar said in an asset flows commentary.

      That month of record outflows — $103 billion — took place in October 2008, the commentary said, noting that last month’s net outflows were much less egregious since they accounted for far smaller percentage of total assets: 0.46% vs. 1.43% in October 2008.

      Net outflows in December spanned most asset classes, with taxable bonds faring the worst with $43 billion in estimated net outflows, followed by sector equities with $17.9 billion, allocation funds at $16.5 billion, international equities at $13.1 billion and alternatives, $7.7 billion.

      1. “…last month’s net outflows were much less egregious since they accounted for far smaller percentage of total assets: 0.46% vs. 1.43% in October 2008.”

        Nice try to look past the ginormous bubble in risk assets the cental banking cartel blew in the post-2008 period.

  5. “….Developer Bruce Makowsky trimmed it last year to $188 million. With the latest price cut of $38 million, he’s just trying to be realistic….”

    Trying to be realistic?

    I am sure the pool of potential buyers for this monster is gigantic.

    Just the Property tax will be north of $2mm.

    Betcha’ the gardener isn’t going to charge $10 to mow the lawn either.

    Add up insurance, maintenance, utilities and payroll for staff and what do you have?

    1. “People are spending $70 million on a private jet or $250 million on a yacht like it’s nothing,” Makowsky said. “Those aren’t their primary homes.”

      For reference, $250 million is more than Harrison Ford’s total net worth ($230M). Who are these “people”?

    1. Just wait until the new director of FHFA is confirmed/sworn in, and there’s a sudden end to the crazy mortgage schemes.

    2. “…Yun argues that affordability is better now…”

      The Academy Award(R) nominations were announced this morning.

      If the Academy was ever to add a category for “bull-sh*t-artistry” this guy would be nominated [and win] hands down.

  6. Realtors scratching their heads on the drop in home sales:
    https://www.cnbc.com/2019/01/22/the-unusually-large-drop-in-home-sales-has-real-estate-agents-baffled.html
    “That underperformance cannot be blamed on the government shutdown, as most of these deals would have been signed in October, well before even the threat of that. It also can not be blamed on stock market volatility, as that didn’t really kick into high gear until mid-November.”
    So, add on the government shutdown and the stock market volatility and you have an idea of what is coming in the next few months.

  7. “Affordability has been blamed for slower sales over the past six months, but sales in December matched the same pace as in the year 2000, and Yun argues that affordability is better now.”

    Getting back to normal…

  8. “Today it is actually more affordable compared to year 2000, yet we have about 20 million more jobs, so for home sales to be roughly equivalent means that in 2018 there is an underperformance of the overall housing sector.“

    “That underperformance cannot be blamed on the government shutdown, as most of these deals would have been signed in October, well before even the threat of that. It also can not be blamed on stock market volatility, as that didn’t really kick into high gear until mid-November.”

    Hmmmm that looks like a BUBBLE BURSTING to me

  9. “If anything, the drop may be due to the fact that home prices are actually falling in some areas, especially in the west, and in the rest of the nation the gains are shrinking. That makes it easier to afford a home, but less desirable if potential buyers are concerned that their new home’s value will immediately depreciate. No one wants to catch a falling knife.”

    Can’t hide this fact no longer HAHAHAHAHAHAHA

    Tell me why should demand fall off the cliff as prices are dropping? Doesnt this contradict econ 101??? Unless we are describing the initial stage of a speculative bubble popping…

    1. “That makes it easier to afford a home, but less desirable if potential buyers are concerned that their new home’s value will immediately depreciate. No one wants to catch a falling knife.”

      Try not to get stucco.

  10. I loaded up on stocks last week as I was told the PPT was fully operational, the Fed is becoming more dovish, and the recession is over. Should I double-down today?

    1. Plunge Protection Team intervention is easy enough to understand…just check out the stock market trajectory since the Munchkin Christmas eve 2018 call.

      What is harder to grasp is how and why plunge protection efforts fail. What happened to the U.S. stock market between September 2008 and March 2009, for example, or to the Chinese stock market in 2018? Perhaps fundamentals actually do matter at some point, though the timing is very unpredictable.

      1. I always figured that when it got to a certain point that it made more sense for the PPT to act as a damper and contain the losses to 500pts/day until the Fed decides to open the spigots rather than try to keep Wile E. Coyote levitating in the air forever.

        1. Yes. And it would be very hard for them to open the spigots at this point, which would be a tacit admission that they are stuck in a stimulus trap of their own making.

          1. There doesn’t seem to be any shame in admitting anything anymore. What the little people think doesn’t really matter now. Until it does.

          2. Nobody put a gun to anyone’s head and forced them to buy stocks…unless you count the Fed’s yield suppression policy.

            By the way, I highly recommend the brilliant and prescient article posted below. The only thing his prediction missed was the PPT intervention after Christmas, which nobody could have seen coming.

            Dec 4, 2018,10:25 am
            The Yield Curve Just Inverted–Sort Of–And That Is A Sell Signal For Stocks
            Jim Collins, Contributor
            Markets

            The recent flattening of the yield curve has been caused by a normal expansion of yields on Treasuries in the 3-month to 2-year range, the expected impact from the series of six Fed Rate hikes that we have had since December 2015. I pointed out in this Forbes article that the recent Fed tightening has encompassed the same number of rate hikes in the same time period as those that preceded the Tech Crash in 2000-2001. This is not mere numerology, it is an absolute warning to lighten up on equity exposure here.

            The real problem is that long-term yields stubbornly refuse to rise, or “back up” in bond trader parlance. Observers, especially the bullish ones, will throw out a million different reasons why this happening, but they almost always miss the big one: the Fed.

            According to its website the New York Fed owned a staggering $2.1 trillion of Treasury notes as of last Wednesday in its System Open Market Account (SOMA). Treasuries compose the largest portion of the NY Fed’s $3.9 trillion holding of long-term securities, which also includes $1.7 trillion in agency mortgage-backed securities. The SOMA account balance is below its peak levels of about $4.5 trillion as the Fed has stopped using new money to buy Treasuries. That said, as shown in this statement, the Fed continues to use rollover process of maturing bonds over a certain threshold of proceeds ($30 billion for Treasuries and $20 billion for MBS) to re-invest in other Treasury note series. The Fed has curtailed its buying but has not yet sold a single dollar’s worth of the SOMA holdings it acquired in its quantitative easing (QE, QE2, etc.) operations.

            So, there are more than $2 trillion of U.S. Treasury notes that are not circulating and are held by an entity that has a policy of not selling them. That’s a huge externality in the market and is a major factor keeping long-term interest rates lower, as the Fed has a bias toward holding longer-dated bonds.

            The Fed is artificially suppressing long term interest rates at the same time that short-term interest rates are being raised by, yes, you guessed it, The Fed.

  11. “‘I don’t think anybody’s ready to spend $250 million on a house,’ Makowsky said. ‘At $150 million, it gets opened up to a much wider audience.’”

    Just imagine the size of the audience at $10 million!! Why, you’ll have people fighting over it ..

  12. A rather attractive RE office 2 miles away closed it doors yesterday. They are in a high end area and a look at MLS showed listings active for many, many months and years in some case with little pending offers?

  13. Interesting how many monogamous gay couples avoided the aids mess..

    He married his partner of 38 years, Stan Cadwallader, in Washington in 2013 a month after gay marriage became legal in that state.

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