Now That There’s Not A Ton Of Bookings, They’re Like Well, Wait, I Don’t Want To Pay That

A report from Realtor.com. “Many popular hot spots during COVID-19 are now experiencing an exodus of residents. Among the cities that residents are now looking to leave include Austin, TX, West Palm Beach, FL, and San Diego, according to home services company Thumbtack. Real estate investor Grant Cardone has some ideas about why people might be getting out of Austin, despite an influx during the pandemic. ‘One, the cost of housing is $100,000 above the national average,’ he says. ‘Two, traffic. The city simply grew too fast, with an increase in population of 700,000 people from 2010. Three, tech companies are starting to reduce payroll.’ ‘Palm Beach is ground zero for a perfect storm of housing issues that is causing its residents to flee,’ says real estate investor Tyler Drew, of Anubis Properties. ‘The worry of every condo owner up and down the coast is whether licensed engineers will red-tag their building, requiring millions in repairs.'”

“‘San Diego is dense as a city and crowded,’ offers Cara Ameer, a California real estate agent. ‘It offers a beautiful lifestyle in terms of weather, but it is pricey, has a slowing job market, high taxes, and cumbersome regulations and policies, and is not perceived as business-friendly.’ Experts point to three culprits when it comes to why people are exiting the San Francisco Bay Area: cost, crime, and quality of life. ‘Many areas of San Francisco seemed to have taken a nosedive concerning public safety, fueled by drug abuse and a homeless crisis,’ says Sam Fitz-Simon, a longtime Realtor® in the East Bay. ‘I’ve had so many clients flee the city looking for safer areas to raise their families. One of my clients told me that his family’s last straw was finding a needle in a play structure in their neighborhood, Pacific Heights. Other clients have left due to the mass exodus of retail in a place that once thrived.'”

The Los Angeles Times in California. “If there’s anything Mayor London Breed has learned in office, it’s that compassion has its limits. So when she talks about her steady tack right in recent years on issues such as retail crime and homelessness, she’s direct and unapologetic. ‘We’ve gone too far in just letting people get away with things,’ Breed said. ‘And as a result, people have been getting away with things.’ She’s now fighting to keep her seat in November against four other high-profile Democrats, three of them wealthy white men. This time, her greatest political threat isn’t coming from the left. Instead, the challengers with the most traction are two fellow moderates who’ve criticized Breed for not doing enough to rid the city of the tent encampments and open drug dealing pervasive in certain neighborhoods or to speed its recovery from the economic malaise still lingering from pandemic-related shutdowns.”

“She was celebrated, initially, for her decisive response when she became the nation’s first big city mayor to declare a coronavirus state of emergency, followed soon after by a citywide lockdown. But a year later, she was on the defensive. Sprawling homeless encampments took root in portions of the city once lively with workers and tourists, spilling trash and needles onto the sidewalks. People overdosed in the streets, unattended. Videos of smash-and-grab retail crimes and auto theft went viral. ‘People were at home. They couldn’t travel. They couldn’t go on vacation. Their kids were with them all the time. The issues around government and government functioning, that was a real pain point,’ said Nancy Tung, chair of the San Francisco Democratic Party. ‘Things were broken, and you knew it.'”

From Deseret News. “It was a Tuesday evening in April during one of the first warm weeks of spring, but the air still had enough of a bite that Amelia Richmond wore a blue puffy jacket to stay warm while she walked door to door. She was one of 85 volunteers canvassing South Lake Tahoe to get a new tax measure on the ballot. She explained that, in this lakeside California community, 44% of the housing units are vacant more than six months out of the year. That adds up to more than 7,000 homes. The petition proposes a tax on those properties — $3,000 the first year and $6,000 every subsequent year they remain unoccupied.”

“With a $655,950 median sales price for single-family homes, locals can’t compete with out-of-town buyers looking for second homes. So, like many mountain resort communities where housing and wages are grossly mismatched, South Lake Tahoe is losing its full-time residents. In Park City, Utah, 66% of the homes are empty six months out of the year or more, according to the Census Bureau’s American Community Survey data in 2022. In Aspen, Colorado, 38% of homes are empty half of the year or more. It’s about the same ratio in Gunnison County, home to Crested Butte, while to the north, in Sun Valley, Idaho, almost 75% of residences are vacant, likely second homes used once or twice a year. That’s comparable to the north shore of Lake Tahoe, about an hour’s drive away from South Lake Tahoe, where about 68% of the housing stock are second homes.”

“‘You can’t find a ski town in which this hasn’t been the case, because the incentives are there,’ Richmond says. ‘If you have the capital to come in, buy a property, use it when you want, and ride the property value up, it’s a good deal.'”

Maui Now in Hawaii. “Hundreds of property owners who have failed to pay Maui County the 3% transient accommodations tax for visitor lodgings have been receiving letters saying they need to pay up, and fast. If the taxes aren’t paid, the county may ask the court for an injunction that would keep owners from operating a vacation rental. Tom Croly, who runs a bed and breakfast on his property in South Maui, avidly tracks county legislation related to vacation rentals and is up to date on his transient accommodation tax payments. But he says some people may not have known about this tax because it took effect just one month after it passed on Oct. 1, 2021. Normally at this time of year, his bookings would be 70% full for the winter and early spring; now, he’s at 20%. While a big part of the fallout is from the decline in tourism since last year’s wildfires, he adds that the new tax hasn’t helped, bumping the taxes on his bookings to nearly 20% for guests.”

“Kari Alexander, an accountant with Sullivan Properties in Kahana, said 13 of her clients received letters seeking overdue transient accommodations taxes owed for bookings in November and December 2021, the first months that the tax applied. Some were told they owed thousands in taxes — as much $7,000 for one client and $10,000 for another, an indication of just how strong business was in late 2021 after the shutdowns of the first year of the COVID-19 pandemic. Alexander said owners are feeling the pinch more because bookings have declined since the fires, and some have switched their condos from short-term to long-term rentals for survivors whose homes burned down. Visitor arrivals to Maui are also well below what they were prior to the fire. ‘Owners aren’t questioning it (the taxes) when there’s a ton of bookings,’ Alexander said. ‘But now that there’s not a ton of bookings, now they’re like well, wait, I don’t want that 3%. I don’t want to pay that.'”

Asheville Citizen Times in North Carolina. “Gerry Mahon has owned the Mellow Mushroom in downtown Asheville for over 20 years. He’s weathered a lot of storms, but nothing like Tropical Storm Helene. So now, he’s thinking about the future. Not just the quotidian concerns of getting his 60-person staff back to work, sourcing potable water from trucked-in totes or finding customers with tourism blunted by Helene. He’s also thinking about the future. Mahon’s talking about a potential ‘mass exodus’ of people who make their living in Asheville’s food industry but may have no means, or will, to stay here. ‘If we look up and find that Asheville has irreparably changed and it doesn’t behave in the same way, then we find people don’t want to move here and don’t want to be part of the culture and that creates for a whole other different set of circumstances,’ he says. ‘I think it’s going to be a problem.'”

“It’s well-known here that the Asheville area has a higher cost of living than most every where else in the state. Combine that with lower than average wages and a housing market that dwindled after Helene, and there’s a problem. ‘That’s been an ongoing issue for at least the last two to five years,’ Jay Monaghan, operations manager of Wedge Brewing Co., says of the unaffordability of Asheville. ‘Our hospitality workers have been pushed out farther and farther. There’s all different kinds of reasons for that, whether there’s too many Airbnbs in town or developments and rental prices, it’s a conglomeration of all that stuff. I’m not concerned this particular disaster is going to exacerbate it,’ Monaghan adds, ‘because it was so exacerbated in the first place.'”

From Bisnow. “The global co-head of Pimco’s commercial real estate private lending is leaving at the end of the year, less than a year after being promoted to the role, PERE reports. Some of Pimco’s vast real estate holdings have run into difficult waters in recent years. The company acquired office REIT Columbia Property Trust in a $3.9B deal in 2021 and wound up with a portfolio of distressed assets shortly thereafter. As a Pimco subsidiary, Columbia Property defaulted in February 2023 on a $1.7B loan tied to seven office buildings in four cities spanning 5.5M SF. The firm recently obtained an extension on the loan, pushing maturity out to July 2025 with a six-month extension option. The deal came with a new appraisal, which wiped $700M from the properties’ values.”

The Globe and Mail in Canada. “New condo sales in the Toronto region have hit a near-30-year low as investors have turned away from the market and buyers can find more affordable resale options. Only 567 new condos were sold in the third quarter this year, marking an 81-per-cent drop compared with the same period last year, according to a new report by Urbanation Inc. That figure is 87 per cent below the average for the past decade and the lowest since the first quarter of 1995. For the first nine months of the year, 3,641 condos were sold in the Greater Toronto and Hamilton area (GTHA), which is a 63-per-cent decrease from last year and 84 per cent lower than in 2021. The trend suggests 2024 will be the slowest year for condo sales since 1996, Urbanation said.”

“There are currently 88,967 condos being built, the lowest level in more than three years, according to the report. Competition from the resale market is also contributing to the decline in condo sales. Resale condos are priced between $900 to $1,100 a square foot, while preconstruction and new condos cost between $1,300 to $1,600 a square foot. ‘It begs the question, why would you go and spend that much more money when you could just buy something in the resale condo market, see what you’re getting and own it,’ said Davelle Morrison, a broker at Bosley Real Estate Ltd.”

CTV News in Canada. “Opposition is growing over Quebec’s new flood maps, with the province’s professional association of real estate brokers warning they could disrupt the housing market and directly impact homeowners. Rene Leblanc, who has invested in his home on des Macons Street in Pierrefonds for 40 years, said the new maps put his future in jeopardy. ‘I always thought that one day the value of that home would supply me with the necessary funds to go into that last chapter of my life. And now I find that may not happen,’ Leblanc said in a recent interview.”

“Macons Street flooded only once, in 2017, but it’s considered high risk according to flood maps from Montreal’s metropolitan community. ‘The new proposed flood map caught us by surprise. Actually, surprise doesn’t do it justice. We were shocked by it,’ Leblanc added. Nathalie Bégin, the president of Quebec’s professional association of real estate brokers noted revised flood maps will lead to a significant decline in the value of even more properties. The proposed maps put around 77,000 properties in flood zones compared to around 22,000 before meaning that many more homeowners will have difficulties selling. ‘Even if the property doesn’t have a recurrence flood risk, just being marked on the map will cause problems,’ Bégin said.”

Wales Online in the UK. “The visuals from the Grenfell Tower Fire are etched into many eyes. The sight of a 24-storey building, engulfed in flames surrounded by emergency services has been hard to forget. Seven years later, as most people try to put the fire behind them, residents in a Swansea high rise are living every day fearing they might be next. Property owners say that the Altamar building located on King’s Road in Swansea has been plagued with fire safety issues that were brought to light by surveys done after the Grenfell fire.”

“Savyasaachi Jain, a property owner in the building, said: ‘The first thing is the feeling of being cheated, because one expects that the building has been sold as fit for use. That it will have been based on regulation, but it hasn’t been. And it turns out that there are lots and lots of defects in the building. And every time we do a survey more and more problems crop up. So there is that feeling of, you know, that something has happened there which is not right.'”

“Property owners claim that this has also let to a immense financial strain as they have to conduct some repair works themselves, and because they cannot sell the properties and move on. Geoff Spight, 80, who moved to the building in 2019 after retiring as a construction engineer, said that he found out the building had several fire safety issues as soon as he moved in. Geoff said: ‘So I’d like to sell it and most of my associates would like to sell it but the mortgage companies won’t lend money because they know these problems. And on top of that, our insurance premium has gone up just this last week, gone up by a huge amount of money. It is 80 odd thousand pounds to insure this building now and it used to be £54,000. So for the first seven years, I haven’t been able to move. There’s only been 3 or 4 sales of properties in this building since Grenfell and they were all cash buys. I was one of them because I downsized from a big property, so I had the cash to buy.'”

South China Morning Post. “Judging by the robust post-stimulus home sales in Hong Kong over the weekend, analysts agree higher loan financing and cheaper borrowing costs have helped lift buying sentiment. Banks in Hong Kong cut their prime lending rate by a quarter point last month, following the first easing move by the Federal Reserve in this policy cycle. The government has also eased mortgage rules to pre-2009 levels, delivering a stronger pill to stop a three-year rot in the local property market. Total transactions this year will improve on the unwanted records set in the past two years. Sales of new flats totalled 10,650 in 2023 and 10,243 units in 2022, the worst years since the government collected data in 1997. Home prices fell 26.6 per cent from their peak in 2021, while offices, factories and retail premises slumped by 11.8 per cent to 17.5 per cent. ‘We are seeing signs of a bottoming out in the Hong Kong property sector,’ said Kenny Ho, managing partner at wealth manager Carret Private Capital.”

Korea Joongang Daily on China. “I spotted a large apartment complex in Langfang City, Hebei Province, about 100 kilometers (62 miles) from downtown Beijing. I was driving back to Beijing and was on a freeway. Nine 15-story apartment buildings stood tall over the empty field. At the top, I could see bent steel bars. The buildings had only gray skeletal structures and stopped going up. The 400,000 square meter (99 acres) complex was full of weeds. It seemed that it was left untouched for a while, with the iron main gate shut with a rusty lock.”

“It is one of the ‘lan wei lou,’ or unfinished buildings. ‘Lan wei’ means ‘bad ending,’ and ‘lou’ means buildings. About 10 minutes’ drive from the complex stands another lan wei lou. The three-story structure was supposed to be a luxury villa, but it was filled with construction material. The site was covered with a screen, and construction waste was piled up in front of it. A local resident said that there are several unfinished buildings in the area which have been abandoned for years.”

“The bubble in the Chinese real estate market grew for 40 years and started to burst in 2021, when China’s biggest real estate developer, Evergrande, defaulted. The driving force of China’s growth became an obstacle to its economy that was losing power. In major cities like Beijing, it’s not hard to find unfinished high-rises. As you get farther away from the economic center, more lan wei lou buildings are left abandoned. According to the Wall Street Journal, there are more than 90 million vacant houses in China. Real estate market revival will surely boost the sluggish Chinese economy. But I am reminded of the neighbor of the lan wei lou. ‘They all belong to out-of-towners, and I have nothing to do with the completion of the apartment,’ he said.”