That Building Bonanza Helped Bring Costs Back Down To Earth

A report from Fox 13 Tampa Bay. “Lawmakers came together Saturday to find solutions to Florida’s home insurance crisis and discuss the impact climate change has had on the problem. During big storms like Idalia and Tropical Storm Eta as well as Debby the Shore Acres neighborhood in St. Pete saw significant flooding. During Idalia, at least 1,200 of the roughly 2,600 homes flooded. Meghan Martin saw up to 18 inches of water in her home. ‘We’ve lived here for eight years and the first four or five were amazing. Unfortunately, we’ve flooded twice now in the last three years,’ Martin said. Martin said her home insurance has more than tripled over the last few years.”

The Globe and Mail. “As snowbirds prepare for their annual pilgrimages to Florida, local lawmakers are scrambling to address a crisis that has become one more blemish on the Sunshine State’s changing complexion from an affordable tropical getaway to an expensive nightmare for condominium owners. Estimates by local real estate associations suggest the problem has driven down values in the statewide condo market by more than 13 per cent this year. It is a Gordian knot that has become particularly tight for Canadians who own condominium properties in Florida. For years Canadians have been the largest block of foreign owners of Florida property, with much of that investment in condos.”

“When coupled with soaring home insurance rates, the rising ownership costs for condos represent a one-two punch that has quickly turned Florida from a relatively value-priced refuge from northern winters into an expensive proposition. For condo owners who need to dump their units because of rising fees, buyers are scarce and prices are depressed.Now, everyone is expected to pay the piper, but few can. The aggressive timetable and higher-than-expected costs related to bringing so many buildings up to snuff so quickly has exposed the flawed reality facing the new laws: There simply isn’t enough money among condominium unit owners to cover the past sins of the developers who built the buildings and the associations accountable for maintaining them.”

KXAN in Texas. “Median home prices in the Austin-Round Rock-San Marcos metropolitan statistical area (metro) continued to fall in August compared to a year prior, but are still out of reach for most prospective homebuyers, according to the Austin Board of Realtors (ABoR). ‘We’re looking at home prices that are relatively flat on a year-over-year basis. It’s not likely that buyer demand is really going to move until home prices come down more meaningfully,’ ABOR housing economist Clare Knapp said. ‘Prices do need to come down somewhat to be more aligned with what buyers can reasonably afford. Buyers just don’t have the same amount of cash lying around that they did a couple of years ago.'”

KUT in Texas. “During the pandemic, Austin came to exemplify the story of housing across the country: Prices went through the roof. In 2021, the average monthly rent in the region rose 25%. But that narrative has flipped. As tens of thousands of new apartments have opened in Austin and the rate of people moving to the city has slowed, rent prices have been falling. For more than a year. According to new numbers from Zillow, Austin is now leading the country in declining rents. But this time few other large U.S. cities are following. ‘A lot of builders … they look at the demographics and they look at the job growth and they look at projections and they say, ‘You know what, this is going to be a good place for me to build,’ Kim Betancourt, vice president of multifamily research at mortgage-backer Fannie Mae, said. ‘This is what happened with Austin.'”

“Because construction takes several years, apartments permitted years ago are now opening. At the same time, the population surge that defined Austin in 2020 and 2021 has slowed. More homes, fewer new people. Thus, rent prices began to fall last summer. ‘It’s that building bonanza that helped to bring costs back down to earth,’ Orphe Divounguy, a senior economist at Zillow, said.”

The Review Journal in Nevada. “Crystal Chen, an associate director of communications for Zumper, said Las Vegas rent is approximately $300 dollars more affordable than the national median. ‘It’s notable that Las Vegas rent is down annually since we are in the hot moving season right now, which is typically when demand is at its highest throughout the year. This likely reflects the fact that there is a generous amount of new supply hitting the Las Vegas market and that is putting downward pressure on rent prices,’ she said. ‘Las Vegas has nearly six thousand units being delivered in the next six months and new buildings are offering concessions like waived fees, gift cards and even up to six weeks of free rent to get people in the door.'”

The News Tribune in Washington. “A Tacoma apartment site completed in 2022 by a local developer who later went bankrupt is now in the hands of the developer’s lender. It’s one of several Tacoma commercial properties that hit hard times in the past year over financing. Sound Capital NW Holdings LLC, affiliated with Sound Capital Loans of Bellevue, took possession of the property in a $5 million credit bid Aug. 21. Harbor Custom Development, founded in Gig Harbor in 2014 as Harbor Custom Homes, sought Chapter 11 bankruptcy protection last December. In February, Harbor Custom announced it had ‘found no viable plan’ to continue and would sell four apartment properties in the area along with assets in three other states as part of its wind-down process.”

“Shelly Crocker, the chief restructuring officer for Harbor Custom Development, wrote in a declaration filed June 13 with the U.S. Bankruptcy Court for the Western District of Washington that the value of Pacific Ridge in the Fern Hill area was well below what was owed on it. Pacific Ridge is tied to one of four of Harbor Custom-affiliated LLCs that the developer hopes to close out from bankruptcy court later this month, according to recent filings. The other three LLCs represent properties in Port Orchard as well as Whatcom County and Punta Gorda, Florida. Harbor’s bankruptcy case involves properties in four states with total debt listed in its initial filing last year totaling $172.5 million with $224 million in assets.”

The Real Deal on Pennsylvania. “Alleged voter fraud and double voting. Crumbling buildings. Slumlord accusations. And now, Philadelphia landlord Philip Pulley is facing down a $60 million lawsuit filed by Fannie Mae. The government-controlled mortgage financier sued several real estate companies tied to Pulley in federal court, the Philadelphia Inquirer reported. Fannie Mae alleges the Pulley affiliates defaulted on seven mortgages between Philadelphia and Delaware County. The affiliates owe $59 million on the defaulted loans, ranging from $6 million to $14 million each, according to the lawsuit. The companies also allegedly owe $1.2 million in interest, a total growing each day.”

“Pulley is the guarantor of the loans. The business entities he used to obtain the mortgages are eye-popping, including fiendish names such as DeVil Management Corp., Satan Management Corp., and Lucifer Management Corp. Pulley did not comment on the lawsuit, but it’s par for the course for the embattled landlord, who is facing pressure from numerous directions. The Pennsylvania Attorney’s General Office filed a consumer-protection complaint against Pulley and his entities, alleging ‘deplorable conduct’ at his properties and tenant retaliation. Tenants held a rally outside of City Hall in the spring to bring attention to his alleged misconduct, calling him a ‘slumlord bully.’ Federal prosecutors recently charged Pulley with election fraud, double voting and falsely registering to vote, allegedly voting more than once in multiple elections by using a fake Social Security number. He’s facing similar charges at the state level.”

The Baltimore Sun in Maryland. “Kevin Spacey’s objections to the foreclosure sale of his luxury Inner Harbor home are invalid, the investor who bought the property at a July auction said in a filing late Wednesday that asks the court to deny the actor’s request to disqualify the buyer. Potomac real estate investor Sam Asgari argued in a court filing that Spacey has no legal basis to seek to revoke the July sale and disqualify a buyer he accused of harassment. Spacey also is accusing trustees of mishandling the July auction in a way that fetched a too-low price of $3.24 million. In a response in Baltimore City Circuit Court, Asgari accused Spacey of trying to delay the sale’s ratification so he can stay in the harborfront home in Baltimore’s Federal Hill as long as possible without making payments.”

“Spacey is principal of Clear Toaster LLC, listed in state property records as the home’s owner. ‘Clear Toaster is attempting delay for the pure sake of delay so that [Spacey] can stay in a multimillion-dollar luxury condominium rent-free, tax-free, loan-free, and maintain a proverbial (and very costly) free ride at Mr. Asgari’s cost and expense,’ Wednesday’s filing said. Asgari, who has paid $324,000 toward the home, is asking the court to ratify the sale.”

The Los Angeles Times in California. “Andrew Wolff stood in darkness, looking down Alvarado Street and conducting a visual inventory of broken streetlights on the eastern border of MacArthur Park. ‘There are no lights all the way up to that corner,’ Wolff said, pointing to Wilshire Boulevard and beyond. ‘Zero lights on both sides, down to Langer’s.’ That’s no small consideration, given the long history of criminal activity in the area and the number of drug-impaired people who wander in and out of the park, an epicenter of the raging fentanyl epidemic. ‘I was driving yesterday and almost hit somebody. You can’t see, it’s so dark,’ said Wolff, adding that the lights have been out for at least a year. ‘It’s been reported to everyone we know, and it’s not getting any responses.'”

“It’s been longer than that, said Eduardo Aguirre. ‘It’s been maybe two to three years,’ he told me. And unlike streetlights across the city that have been stripped of copper wiring and other materials by thieves, Aguirre said, these just needed basic maintenance, but nobody was expecting a fix anytime soon. Wolff, Aguirre and Elaine Alaniz, all of whom serve on area Neighborhood Councils, were giving me a tour of their home turf, where lighting is just one of many issues. They said local merchants were reeling from thefts and gang threats, a new playground in the park had been damaged by fire, and the drug trade was brazenly visible day and night. ‘I’ve worked with a lot of children, and I don’t think it’s OK for them to see this,’ Alaniz said as we walked through a thicket of people who appeared to be either using drugs or recovering from the last hit.”

KRON in California. “A San Francisco market is closing its doors after 35 years of service. The owner is citing crime and the rising cost of business for his decision. Bayside Market will be laying off six employees when it closes on Friday. About eight others are being transferred to another location. The owner says crime has become so bad that he feels staying open would put him and his staff in danger. ‘It’s not about the dollar, it’s about my safety and my staff safety. It’s just too dangerous,’ said owner David Pesusic. ‘All my managers have had knives pulled on them. This is the last two years since COVID… I’ve had a knife pulled on me at least 6-8 times.'”

The San Francisco Chronicle in California. “City Attorney David Chiu has sued the owner of a stalled San Francisco housing development site, charging that the abandoned property has become a blighted water-filled hole in the heart of the South of Market area marred by ‘graffiti, garbage, mosquito infestations, and standing water.’ The lawsuit claims that a subsidiary of Leap Development, the owner of the site at 360 5th St., owes more than $1 million in fines related to the property. Leap Development excavated the 26,000 square foot parcel in 2019 for a 127-unit condo project at a time when development in South of Market, or SoMa, was considered a sure bet at the heart of the city’s tech boom. The builder abruptly stopped construction about six months into the pandemic.”

“Since then the developer has ‘maintained the property in a substandard condition, subjecting neighbors to a blighted parcel of land filled with large ponds of standing water, mosquitos, overgrown vegetation, and piles of trash, as well as abandoned construction equipment that blocks the sidewalk,’ the lawsuit states. The swimming pool-sized cavity on Fifth Street between Folsom and Harrison streets is one of more than a dozen major development sites scattered across the city that have been on hold as the city struggles to bounce back from the pandemic. Neighbor Brian Wallace, who has lived on nearby Tehama Street for 42 years, called the blighted property an ‘eyesore’ that attracts taggers, including some who have graffitied the wooden apartments overlooking the excavated site. ‘At least if it’s going to be vacant, have a better fence,’ Wallace said. ‘This is not a warehouse on the outskirts of town. These are people’s houses.'”

From CBC News. “The role of large real estate investment corporations is coming under scrutiny as Torontonians face major rent hikes at their aging apartment buildings. A CBC News investigation published Monday focused on the rise of the ‘financialized’ landlord, whose business model allows outside investors to share in the profit of rental housing. But an industry representative argues Canada’s real estate market couldn’t survive without these big firms.Michael Brooks is CEO of Real Property Association of Canada (REALPAC), an association that represents many of the country’s biggest landlords. He spoke to Metro Morning host David Common on Tuesday about the role of real estate investment firms.”

“DC: Can you walk me through how the business model works — when you take a building that may be affordable housing, or at least lower-rent housing, and turn it into a profitable enterprise? MB: Well, it’s hopefully profitable when you buy it. A return on your investment when you buy an apartment building is probably in the three to four per cent range, at least historically it has been. Hopefully, you’re able to manage your costs going forward and your rental revenue so that there’s a profit for you in there somewhere. DC: What if it’s not profitable or you want that margin to be bigger? MB: There’s always some pressure to keep up with your expenses on the cost side. So you’ve got mortgages that have gone from 1.6 to 3.6 per cent in the past two-and-a-half years. If you’ve got a mortgage coming up for renewal, you might be underwater.”

The Daily Hive in Canada. “Vancouver mansions don’t seem to be selling as easily these days. Another example is 1433 Angus Drive, a property in the mansion-laden neighbourhood of Shaughnessy, which has been listed since 2021. According to Zealty, it has experienced several price drops since then and has not found a buyer. 1433 Angus Drive is assessed at $10,491,000 and is listed slightly above that for $10,800,000. The 41-year-old property was last sold in 2018 for $13,200,000.”

“In April 2021, it was listed for the same price, $13,200,000. No one bit at that price, so it was dropped to $12,700,000 before that listing expired. It was re-listed for $12,700,000 in May 2022, but again, no buyer came forward. It was listed for the same price in May 2023 but still couldn’t attract a buyer. Earlier this year, it received another price drop, listed for $11,200,000. That listing expired this September before it was re-listed earlier this week for $10,800,000.Some real estate commentators on social media are celebrating this trend in the luxury market. ‘The number of ‘millionaires’ who are going to lose money on their $5, $8, $20 million dollar mansions is truly glorious.'”

The Observer in Uganda. “After running several businesses in Kampala and now enjoying retirement, 69-year-old Charles Sabune decided to invest part of his savings in a two-bedroom condominium unit at Waves Modern Homes and Apartments, located in Kungu, a suburb of Kampala. The unit was priced at Shs 115 million, with an initial payment of 30 per cent and monthly installments ranging from Shs 3 million to Shs 5 million until the total amount is paid off. Sabune explained that he opted for the condominium housing arrangement due to the shared amenities, which reduce the cost of maintaining individual properties.”

“However, since moving in in 2020, Sabune has noticed several defects in the condominium complex, including water leakage through the roof whenever it rains, along with substandard plumbing and sewerage systems installed by the developer. ‘When it rains, water goes through the roof onto the stairs, damaging our walls. The roof was not constructed well, and residents in the top units report that rainwater seeps through it,’ he said. He added that, initially, the soak pit for the complex building was small, which affected the sewerage system. As a result, the unit owners had to contribute Shs 500,000 each to enlarge it and redo all the sewerage piping.”

“Another Ugandan in the diaspora, who spoke to The Observer anonymously, purchased a three-bedroom unit for Shs 220 million at one of the condominium buildings in Naalya. However, she expressed disappointment with the quality of the house she received. ‘When they finally handed me my unit earlier this year, you would expect that after taking an extra year to complete the work, they would deliver a high-quality product. But the apartment I received was very poor. There was no kitchen, the toilets were unfinished, tiles were coming loose, the doors were poorly installed, and the plumbing system was leaking, causing the walls to remain wet,’ she said. To date, I am still renovating and have spent over Shs 50 million to try and make the house livable. It is supposed to be a three-bedroom condominium, but the rooms and bathrooms are very small, not in line with the sizes indicated in the original plans we were shown before purchasing.’ During the process of redoing the floor, the workers discovered that the developer had used sand instead of adhesive to secure the tiles, which explained why they were coming loose.'”

Geelong Advertiser in Australia. “Geelong’s off-the-plan suburbs are offering the best chance for people to shop for a new home, according to data that reveals the best buyers’ markets. The SuburbData figures revealed the suburbs where an the biggest supply of homes for sale tips the scales – and prices – in favour of buyers. Armstrong Creek is Geelong’s biggest market with more than 250 homes selling in the past year. But the median house price had slipped 3.4 per cent in that time. The supply of existing, near-new houses for sale adds to new house and land packages, and new residential blocks where developers are offering thousands of dollars in rebates and incentives.”

“Geelong buyer’s advocate Tony Slack said most hopeful purchasers didn’t need help finding a home in Armstrong Creek, given the choice. ‘It’s a predictable market with not a lot of variables,’ he said. ‘And if you miss one, just like the sun’s going to come up tomorrow, more often than not, there’ll be something else for you to buy.’ Just as an oversupply helps people when they buy, it can also hurt when they sell, SuburbData analyst Jeremy Sheppard said. Historical data indicated most markets had an even balance between supply and demand when about 1 per cent of the total housing in the suburb was available for sale.”

“Mr Sheppard said suburbs oversupplied with housing could be a trap for new buyers because it would take many years until home values rose. ‘Ideally, when it’s your first home you still want a bit of equity locked in soon after your purchase. Without that equity you have fewer options as an owner if things ever go wrong.'”