Category Archives: Housing Market

The Manhattan Housing Market Is On Its Worst Cold Streak In 30 Years

A confluence of factors ranging from stubborn sellers refusing to budge on their asks, the Trump tax plan’s SALT cap, and a glut of luxury apartments prompted sales of Manhattan real estate to drop again in the fourth quarter, according to reports published by a trio of residential brokers. By one broker’s count, Q1 marked the sixth straight quarterly drop in sales volume, the worst streak in at least 30 years.

Per the FT, sales tumbled by 11%, according to broker Stribling & Associates, by 5%, according to Corcoran, and by 2.7% for co-ops and condominium apartments, according to Douglas Elliman and real estate appraisal firm Miller Samuel.

https://www.zerohedge.com/s3/files/inline-images/Screen%20Shot%202019-04-03%20at%204.48.05%20PM.png?itok=PevIY0Zp

While the average sales price for new developments climbed a staggering 89.4% to $7.6 million, that figure was exaggerated by a single purchase: Ken Griffin’s purchase of a $240 million penthouse at 220 Central Park South, which, according to some, was the most expensive home ever sold in America. But depending on the report, the median sales price ranged from 2% lower to 3.2% higher. And although the entry level market in Manhattan – that is, apartments priced at $1 million and below – had held up for most of the past year, it has recently started to suffer.

“It’s like a layer cake,” Jonathan Miller, CEO of Miller Samuel, told CNBC. “When you have softening at the top, it starts to melt into the next layer and the next layer after that, because those buyers further down have to compete on price.”

According to one broker, sellers with unrealistic expectations are the biggest barrier to sales, because they’re refusing to adjust for the fact that listings have been piling up and sitting on the market for longer periods, giving buyers more room to negotiate, and more options. Inventory has climbed 9% over the past nine months, and there’s a glut in new developments that’s only going to get worse.

https://www.zerohedge.com/s3/files/inline-images/Screen%20Shot%202019-04-03%20at%204.47.37%20PM.png?itok=bxNvq8i5

And of course, New York City isn’t helping the market by passing an a one-time “mansion tax” on all apartments selling for $1 million or more – which is a large chunk of apartments sold in the borough. But it could have been worse: As one broker put it, the pied-e-terre tax that was briefly considered would have been a “market stopper.”

“The pied-à-terre tax would have been a market stopper, [the mansion tax] is a market dampener,” said Ms Liebman. “I don’t think New York City is acting very friendly right now to the wealthy buyers,” she said, adding that many are opting to buy in Florida and other states with lower taxes than New York.

But although higher taxes are expected to drive more would-be buyers toward rentals, the number of new leases in Manhattan was also down 3% in Q1. Meanwhile, leases climbed a staggering 38% year-over-year in Brooklyn.

As brokers in New York City and other high end markets like Greenwich, Conn. struggle with slowing sales, we imagine brokers in mid-tier markets are watching with a wary eye to see if the weakness spreads.

Source: ZeroHedge

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‘Too Big To Sell’ – Boomers Trapped In McMansions As Retirement Looms

More wealthy baby boomers are finding themselves trapped in homes that are too big to sell. They want to downsize but can’t get what they paid.

This was guaranteed to happen, and did. Baby boomers and retirees built large, elaborate dream homes only to find that few people want to buy them.

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Please consider a Growing Problem in Real Estate: Too Many Too Big Houses.

Large, high-end homes across the Sunbelt are sitting on the market, enduring deep price cuts to sell.

That is a far different picture than 15 years ago, when retirees were rushing to build elaborate, five or six-bedroom houses in warm climates, fueled in part by the easy credit of the real estate boom. Many baby boomers poured millions into these spacious homes, planning to live out their golden years in houses with all the bells and whistles.

Now, many boomers are discovering that these large, high-maintenance houses no longer fit their needs as they grow older, but younger people aren’t buying them.

Tastes—and access to credit—have shifted dramatically since the early 2000s. These days, buyers of all ages eschew the large, ornate houses built in those years in favor of smaller, more-modern looking alternatives, and prefer walkable areas to living miles from retail.

The problem is especially acute in areas with large clusters of retirees. In North Carolina’s Buncombe County, which draws retirees with its mild climate and Blue Ridge Mountain scenery, there are 34 homes priced over $2 million on the market, but only 16 sold in that price range in the past year, said Marilyn Wright, an agent at Premier Sotheby’s International Realty in Asheville.

The area around Scottsdale, Ariz., also popular with wealthy retirees, had 349 homes on the market at or above $3 million as of February 1—an all-time high, according to a Walt Danley Realty report. Homes built before 2012 are selling at steep discounts—sometimes almost 50%, and many owners end up selling for less than they paid to build their homes, said Walt Danley’s Dub Dellis.

Kiawah Island, a South Carolina beach community, currently has around 225 houses for sale, which amounts to a three- or four-year supply. Of those, the larger and more expensive homes are the hardest to sell, especially if they haven’t been renovated recently, according to local real-estate agent Pam Harrington.

The problem is expected to worsen in the 2020s, as more baby boomers across the country advance into their 70s and 80s, the age group where people typically exit homeownership due to poor health or death, said Dowell Myers, co-author of a 2018 Fannie Mae report, “The Coming Exodus of Older Homeowners.” Boomers currently own 32 million homes and account for two out of five homeowners in the country.

Not Just the South

It’s not just big houses across the Sunbelt. It’s big houses everywhere. If anything, I suspect it’s worse in the north. There is an exodus of people in high tax states like Illinois who want the hell out.

Already big homes were hard to sell. Now these progressive states are raising taxes.

Triple Whammy

  1. Millennials trapped in debt and cannot afford them
  2. Millennials wouldn’t buy them anyway because tastes have changed.
  3. Taxes are driving people away from states like Illinois

Good luck with that.

For the plight of Illinoisans, please consider Illinois’ Demographic Collapse: Get Out As Soon As You Can.

Authored by Mike Shedlock via MishTalk,
Source: ZeroHedge

The U.S. Economy Is In Big Trouble

Summary

  • Economic data is showing further negative divergence from the rally in the stock market.

  • The Census Bureau finally released January new home sales, which showed a 6.9% drop from December.

  • E-commerce sales for Q4 reported last week showed a 2% annualized growth rate, down from 2.6% in Q3.

  • The economy is over-leveraged with debt at every level to an extreme, and the Fed knows it.

  • I would say the odds that the Fed starts printing money again before the end of 2019 are better than 50/50 now.

“You’ve really seen the limits of monetary and fiscal policy in its ability to extend out a long boom period.” – Josh Friedman, Co-Chairman of Canyon Partners (a “deep value,” credit-driven hedge fund)

(Dave Kranzler) The Fed’s abrupt policy reversal says it all. No more rate hikes (yes, one is “scheduled” for 2020, but that’s fake news), and the balance sheet run-off is being “tapered,” but will stop in September. Do not be surprised if it ends sooner. Listening to Powell explain the decision or reading the statement released is a waste of time. The truth is reflected in the deed. The motive is an attempt to prevent the onset economic and financial chaos. It’s really as simple as that. See Occam’s Razor if you need an explanation.

As the market began to sell off in March, the Fed’s FOMC foot soldiers began to discuss further easing of monetary policy and hinted at the possibility, if necessary, of introducing “radical” monetary policies. This references Bernanke’s speech ahead of the roll-out of QE1. Before QE1 was implemented, Bernanke said that it was meant to be a temporary solution to an extreme crisis. Eight-and-a-half years and $4.5 trillion later, the Fed is going to end its balance sheet reduction program after little more than a 10% reversal of QE and it’s hinting at restarting QE. Make no mistake, the 60 Minutes propaganda hit-job was a thinly veiled effort to prop up the stock market and instill confidence in the Fed’s policies.

Economic data is showing further negative divergence from the rally in the stock market. The Census Bureau finally released January new home sales, which showed a 6.9% drop from December. Remember, the data behind the report is seasonally adjusted and converted to an annualized rate. This theoretically removes the seasonal effects of lower home sales in December and January. The Census Bureau (questionably) revised December’s sales up to 652k SAAR from 621k SAAR. But January’s SAAR was still 2.3% below the original number reported. New home sales are tanking despite the fact that median sales price was 3.7% below January 2018 and inventory soared 18%.

LGI Homes (NASDAQ:LGIH) reported that in January it deliveries declined year-over-year (and sequentially), and Toll Brothers (NYSE:TOL) reported a shocking 24% in new orders. None of the homebuilders are willing to give forward guidance. LGI’s average sale price is well below $200k, so “affordability” and “supply” are not the problem (it’s the economy, stupid).

The upward revision to December’s new home sales report is questionable because it does not fit the mortgage purchase application data as reported in December. New homes sales are recorded when a contract is signed. 90% of all new construction homes are purchased with a mortgage. If purchase applications are dropping, it is 99% certain that new home sales are dropping. With the November number revised down 599k, and mortgage purchase applications falling almost every week in December, it’s 99% likely that new home sales at best were flat from November to December. In other words, the original Census Bureau guesstimate was probably closer to the truth.

The chart to the right shows the year-over-year change in the number of new homes (yr/yr change in the number

https://static.seekingalpha.com/uploads/2019/3/22/saupload_Untitled-10.png

of units as estimated by the Census Bureau) sold for each month. I added the downward sloping trend channel to help illustrate the general decline in new home sales. As you can see, the trend began declining in early 2015.

Recall that it was in January 2015 that Fannie Mae and Freddie Mac began reducing the qualification requirements for government-backed “conforming” mortgages, starting with reducing the down payment requirement from 5% to 3%. For the next three years, the government continued to lower this bar to expand the pool of potential homebuyers and reduce the monthly payment burden. This was on top of the Fed artificially taking interest rates down to all-time lows. In other words, the powers that be connected to the housing market and the policymakers at the Fed and the government knew that the housing market was growing weak and have gone to great lengths in an attempt to defer a housing market disaster. Short of making 0% down payments a standard feature of government-guaranteed mortgage programs, I’m not sure what else can be done help put homebuyers into homes they can’t afford.

I do expect, at the very least, that we might see a “statistical” bounce in the numbers to show up over the couple of existing and new home sale reports (starting with February’s numbers). Both the NAR and the government will likely “stretch” seasonal adjustments imposed on the data to squeeze out reports which show gains, plus it looks like purchase mortgage applications may have bounced a bit in February and March, though the data was “choppy” (i.e., positive one week and negative the next).

E-commerce sales for Q4 reported last week showed a 2% annualized growth rate, down from 2.6% in Q3. Q3 was revised lower from the 3.1% originally reported. This partially explains why South Korea’s exports were down 19.1% last month, German industrial production was down 3.3%, China auto sales tanked 15% and Japan’s tool orders plummeted 29.3%. The global economy is at its weakest since the financial crisis.

It would be a mistake to believe that the U.S. is not contributing to this. The Empire State manufacturing survey index fell to 3.7 in March from 8.8 in February. Wall Street’s finest were looking for an index reading of 10. New orders are their weakest since May 2017. Like the Philly Fed survey index, this index has been in general downtrend since mid-2017. The downward slope of the trendline steepened starting around June 2018. Industrial production for February was said to have nudged up 0.1% from January. But this was attributable to a weather-related boost for utilities. The manufacturing index fell 0.4%. Wall Street was thinking both indices would rise 0.4%. Oops.

The economy is over-leveraged with debt at every level to an extreme and the Fed knows it. Economic activity is beginning to head off of a cliff. The Fed knows that too. The Fed has access to much more in-depth, thorough and accurate data than is made available to the public. While it’s not obvious from its public posture, the Fed knows the system is in trouble. The Fed’s abrupt policy reversal is an act of admission. I would say the odds that the Fed starts printing money again before the end of 2019 are better than 50/50 now. The “smartest” money is moving quickly into cash. Corporate insiders are unloading shares at a record pace. It’s better to look stupid now than to be one a bagholder later.

Source: by Dave Kranzler | Seeking Alpha

US Housing Hits A Brick Wall: “The House Price Deceleration Is Staggering”

(by Mark Hanson) RedFin puts out a monthly home sales report, which contains a lot of great data. The chart below shows Feb 2018 year-over-year price growth, which was off the charts, compared to Feb 2019 year-over-year growth, which was very weak.

This y/y growth deceleration is staggering, especially in the high-flying regions.

Very few regions escaped a significant deceleration with some prominent regions like San Jose and San Francisco even getting crushed on a year-over-year absolute basis.

The only thing that even comes close to this sharp of deceleration was circa-2007.

It was data like these I have been tracking that led to my call last year that there was no way the Fed could continue to hike in 2019.

For certain housing and related names, this is a killer unless prices re-accelerate quickly.

https://www.zerohedge.com/s3/files/inline-images/House-Price-Deceleration-Feb-2018.jpg?itok=IGorIP80

Source: ZeroHedge

New Home Sales Slump In January, Despite Drop In Prices

Following a rebound in November and December, January’s (delayed due to the govt shutdown) new home sales plunged 6.9% MoM despite a jump in homebuilder sentiment.

https://www.zerohedge.com/s3/files/inline-images/2019-03-14_7-05-01.png?itok=z81jYHNO

This pushes year-over-year growth in new home sales back into decline.

https://www.zerohedge.com/s3/files/inline-images/2019-03-14_7-06-40.png?itok=iI2VJQa9

Sales of new U.S. homes in January fell to the weakest pace since October, driven by a decline in the Midwest as still-elevated prices keep buyers on the sidelines.

https://www.zerohedge.com/s3/files/inline-images/2019-03-14_7-01-56.png?itok=8wOcford

The number of properties sold for which construction hadn’t yet started declined to 183,000, the lowest in three months, showing a weaker pipeline of building for the coming months.

The sales drop occurred despite a drop in the median sales price, down 3.8% from a year earlier to $317,200.

https://www.zerohedge.com/s3/files/inline-images/2019-03-14_7-12-07.png?itok=8Te0gwF0

As a reminder, new-home purchases are seen as a timelier barometer of the market, as they’re calculated when contracts are signed rather than when they close, like the previously-owned homes data.

Source: ZeroHedge

US Residential Construction Spending Slumps For 6th Straight Month As US Banks Report $251 Billion of “Unrealized Losses” On Securities Investments in 2018

Today is a double whammy for bad news for the US economy.

First, The Census Bureau monthly construction spending report reveals that highway and street spending rose 11.7% in January. The biggest decline was communication spending.

https://confoundedinterestnet.files.wordpress.com/2019/03/constspending.png?w=624&h=449

BUT, US residential construction spending slumped for the 6th straight month. It is beginning to resemble “The Matterhorn” plunge of the 2000s.

https://confoundedinterestnet.files.wordpress.com/2019/03/usconsrtuspen.png?w=624&h=449

The second whammy is the FDIC report  revealing that US banks reported $251 billion of “unrealized losses” on securities investments in 2018, the most since 2008.

https://confoundedinterestnet.files.wordpress.com/2019/03/us-fdic-banks-unrealized-losses-2018-q4.png?w=623&h=464

For a less grim chart from The Federal Reserve (and a different metric), here is US Commercial Bank Liabilities Net Unrealized Gains (Losses) Available for Sale.

https://confoundedinterestnet.files.wordpress.com/2019/03/unrelvvl.png?w=624&h=449

Source: Confounded Interest

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Residential Spending Slumps For 6th Straight Month As Infrastructure Spending Soars Most Since 2003

https://www.zerohedge.com/s3/files/inline-images/2019-03-13_7-19-16.png?itok=o5Y2plu8

…government spending rescued the headline as public construction rose 4.9% in Jan… thanks to a massive surge in infrastructure spending on Highway and Street improvements…

Homeowners With Negative Equity Increased First Time Since 2015

  • The quarterly increase in negative equity was the first increase in 12 quarters
  • The number of owners with negative equity has decreased during the last four quarters by 350,000, or 14 percent
  • The average homeowner gained $9,700 in home equity over the last four quarters

CoreLogic® (NYSE: CLGX), a leading global property information, analytics and data-enabled solutions provider, today released the Home Equity Report for the fourth quarter of 2018. The report shows that U.S. homeowners with mortgages (which account for roughly 63 percent of all properties) have seen their equity increase by 8.1 percent year over year, representing a gain of nearly $678.4 billion since the fourth quarter of 2017.

https://www.corelogic.com/images/corelogic_her-report_q418_figure2_650-(2).jpg

Additionally, the average homeowner gained $9,700 in home equity between the fourth quarter of 2017 and the fourth quarter of 2018. While home equity grew in almost every state in the nation, western states experienced the most significant annual increases. Nevada homeowners gained an average of approximately $29,400 in home equity, while Hawaii homeowners gained an average of approximately $26,900 and Idaho homeowners gained an average of $24,700. California homeowners experienced the fourth-highest growth with an average increase of approximately $19,600 in home equity (Figure 1).

https://www.corelogic.com/images/corelogic_her-report_q418_figure2_650-(1).jpg

From the third quarter of 2018 to the fourth quarter of 2018, the total number of mortgaged homes in negative equity increased 1.6 percent to 2.2 million homes or 4.2 percent of all mortgaged properties. This was the first quarterly increase since the fourth quarter of 2015. Despite that quarter-over-quarter increase, on a year-over-year basis, the number of mortgaged properties in negative equity fell 14 percent, or by 351,000, from 2.6 million homes – or 4.9 percent of all mortgaged properties – in the fourth quarter of 2018.

“Our forecast for the CoreLogic Home Price Index predicts there will be a 4.5 percent increase in our national index from December 2018 to the end of 2019,” said Dr. Frank Nothaft, chief economist for CoreLogic. “If all homes experience this gain, this would lift about 350,000 homeowners from being underwater and restore positive equity.”

Negative equity, often referred to as being underwater or upside down, applies to borrowers who owe more on their mortgages than their homes are worth. Negative equity can occur because of a decline in a home’s value, an increase in mortgage debt or both. Negative equity peaked at 26 percent of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis, which began in the third quarter of 2009.

https://www.corelogic.com/images/corelogic_her-report_q418_cbsa-table3_650.jpg

The national aggregate value of negative equity was approximately $300.3 billion at the end of the fourth quarter of 2018. This is up approximately $17.4 billion from $282.9 billion in the third quarter of 2018 and up year over year by approximately $14.4 billion from $285.9 billion in the fourth quarter of 2017.

“As home prices rise, significantly more people are choosing to remodel, repair or upgrade their existing homes. The increase in home equity over the past several years provides homeowners with the means to finance home remodels and repairs,” said Frank Martell, president and CEO of CoreLogic. “With rates still ultra-low by historical standards, home-equity loans provide a low-cost method to finance home-improvement spending. These expenditures are expected to rise 5 percent in 2019.”

Source: CoreLogic