Category Archives: Real Estate

Large Swaths Of California Now Too Wildfire Prone To Insure

AP Photo / Marcio Jose Sanchez, File

(Nathanael Johnson) California is facing yet another real estate-related crisis, but we’re not talking about its sky-high home prices. According to newly released data, it’s simply become too risky to insure houses in big swaths of the wildfire-prone state.

Last winter when we wrote about home insurance rates possibly going up in the wake of California’s massive, deadly fires, the insurance industry representatives we interviewed were skeptical. They noted that the stories circulating in the media about people in forested areas losing their homeowners’ insurance was based on anecdotes, not data. But now, the data is in and it’s really happening: Insurance companies aren’t renewing policies areas climate scientists say are likely to burn in giant wildfires in coming years.

If governments don’t step in, that kills mortgages, so what comes next? Only all cash buys? Seller financing? And if property values in these areas decline, as they ought to, bye bye local government budgets.

Insurance companies dropped more than 340,000 homeowners from wildfire areas in just four years. Between 2015 and 2018, the 10 California counties with the most homes in flammable forests saw a 177 percent increase in homeowners turning to an expensive state-backed insurance program because they could not find private insurance.

In some ways, this news is not surprising. According to a recent survey of insurance actuaries (the people who calculate insurance risks and premiums based on available data), the industry ranked climate change as the top risk for 2019, beating out concerns over cyber damages, financial instability, and terrorism. While having insurance companies on board with climate science is a good thing for, say, requiring cities to invest in more sustainable infrastructure, it’s bad news for homeowners who can’t simply pick up their lodgings and move elsewhere.

“We are seeing an increasing trend across California where people at risk of wildfires are being non-renewed by their insurer,” said California Insurance Commissioner Ricardo Lara in a statement. “This data should be a wake-up call for state and local policymakers that without action to reduce the risk from extreme wildfires and preserve the insurance market we could see communities unraveling.”

A similar dynamic is likely unfolding across many other Western states, according to reporting from the New York Times.

To understand the data coming out of California we can use my own family as an example: A few months after Grist published a story about how my parent’s neighborhood is trying to fortify itself against future forest fires, my mom’s insurer informed her and my stepfather that they’d need to get home insurance elsewhere. For two months they called one insurer after another, but no company would take their premiums. So they turned to the state program as the insurer of last resort — which costs about three times more than they’d been spending under their previous, private insurer.

My folks have spent a lot of money clearing trees and brush from around their house. They’ve covered the walls in hard-to-burn cement panels, and the roof with metal. But insurance risk maps don’t adjust for these improvements. Instead, insurance companies seem to have made the call that the changing climate, along with years of fire suppression, have made houses in the midst of California’s dry forests a bad bet, and therefore uninsurable.

“For us, because we’ve done good financial planning and our house is paid off, it’s just an extra expense,” said my mom, Gail Johnson Vaughan. “But we have friends who have no choice but to leave.”

Source: by  Nathanael Johnson | Grist

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The Global Mansion Bust Has Begun

Global real estate consultancy firm Knight Frank LLP has warned that the global synchronized decline in growth coupled with an escalating trade war has heavily weighed on luxury home prices in London, New York, and Hong Kong.

According to Knight Frank’s quarterly index of luxury homes across 46 major cities, prices expanded at an anemic 1.4% in 2Q19 YoY, could see further stagnation through 2H19.

Wealthy buyers pulled back on home buying in the quarter thanks to a global slowdown, trade war anxieties, higher taxes by governments, and restrictions on foreign purchases.

Mansion Global said Vancouver was the hottest real estate market on Knight Frank’s list when luxury home prices surged 30% in 2016, has since crashed to the bottom of the list amid increased taxes on foreign buyers. Vancouver luxury home prices plunged 13.6% in 2Q19 YoY.

Financial hubs like Manhattan and London fell last quarter to the bottom of the list as luxury home prices slid 3.7% and 4.9%, respectively.

Hong Kong recorded zero growth in the quarter thanks to a manufacturing slowdown in China, an escalating trade war, and protests across the city since late March.

However, European cities bucked the trend, recorded solid price growth in 2Q19 YoY, though the growth was muted when compared to 2017-18.

Berlin and Frankfurt were the only two cities out of the 46 to record double-digit price growth for luxury homes. Both cities benefited from a so-called catch-up trade because prices are lower compared to other European cities. Moscow is No. 3 on the list, saw luxury home prices jump 9.5% in 2Q19 YoY.

The downturn in luxury real estate worldwide comes as central banks are frantically dropping interest rates. The Federal Reserve cut rates 25bps for the first time since 2008 last month, along with Central banks in New Zealand, India and Thailand have all recently reduced rates.

The main takeaway from central banks easing points to a global downturn in growth, and resorting to sharp monetary policy action is the attempt to thwart a global recession that would ultimately correct luxury home prices.

“Sluggish economic growth explains the wave of interest rate cuts evident in the last three months as policymakers try to stimulate growth,” wrote Knight Frank in the report.

* * *

As for a composite of all global house prices, Refinitiv Datastream shows price trends started to weaken in 2018, and in some cases, completely reversed like in Australia.

House price growth for OECD countries shows the slowdown started in 2016, a similar move to the 2005 decline.

If it’s luxury real estate or less expensive homes, the trend in price has peaked and could reverse hard into the early 2020s.

Central banks are desperately lowering interest rates as the global economy turns down. Likely, the top is in, prepare for a bust cycle.

Source: ZeroHedge

Mansion Crisis: Hamptons Housing Market Had Its Worst Spring Quarter In 8 Years

Hamptons, the beachfront playground for New York City’s financial elite, just recorded the worst second quarter for sales in eight years, according to a report from Douglas Elliman and Miller Samuel, and first reported by CNBC.

Real estates sales and prices in the Hamptons extended lower through 2Q19, indicating the luxury home market continues to stagnate for the last six quarters, the report said.

The weakness in the Hamptons was confusing for CNBC, considering they said real estate in the region should have been positive because the stock market is higher. But as Zerohedge readers know, the stock market has remained extremely disconnected from fundamentals this year, if not the last decade.

The Hamptons is experiencing the same pressures as many luxury markets across the country: an oversupply of mansions, dwindling demand from foreign buyers, changes to SALT deductions, and sellers who have become delusional that real estate prices can still hold 2014 values.

With no end in sight, the bust of the Hamptons real estate market could become more severe through 2020.

Miller Samuel said the number of homes listed in the region doubled in 2Q19, to 2,500. This is the highest level the research firm has recorded since it started gathering data in 2006.

According to the report, there is a 5-month supply of listings, with more than a three-year supply of luxury properties.

“I think it’s premature to talk about a turnaround until the inventory growth slows down,” said Jonathan Miller, CEO of Miller Samuel, the appraisal firm.

“There is just not a sense of urgency. The buyers are just waiting it out.”

Brokers told CNBC that demand is showing up for more affordable homes but not for +$5 million.

“You might look at Zillow and see nine properties on the oceanfront in Southampton, which looks like a lot,” said Cody Vichinsky of Bespoke Real Estate in the Hamptons.

“But then you dig into it, and you see that six of them are in places where you’d never want to live, with constant helicopter noise or a triple dune or encumbrances. And then the others, the price is ridiculous. When a property is priced decently, it goes.”

Glancing at Zillow Hamptons, hundreds of homes are for sale ranging from $625k to $60 million.

In a recent listing, the family of James Evans, the former chairman of the Union Pacific railroad empire, put their waterfront estate in East Hampton on the market for $60 million. The 5,500-square-foot home sits on 5.4 oceanfront acres, has an estimated mortgage payment of $362k per month.

A $49 million mansion on 4.5 acres with 430 feet of direct oceanfront has been on the market for 850 days.

The pullback in Hamptons real estate is a sobering reminder that inventory is building to levels that are making sellers uncomfortable, could unleash panic selling and metastasize into a full-blown market rout with implications beyond New York City.

Source: ZeroHedge

Exodus: Foreigners Stop Buying South Florida Homes, Sales Crash 50%

A massive pullback in international buyers purchasing US real estate has been seen in the last few years, resulting in the softening of housing markets across South Florida, reported The Palm Beach Post.

Foreign buyers purchased $153 billion in US homes from April 2016 to March 2017, total sales of homes to international buyers dropped to $121 billion for the year ending in March 2018, then plunged to $77.9 billion for the year ending on March 2019, the National Association of Realtors (NAR) said in its latest report.

Florida transactions involving foreign buyers fell to 36,000 in the year ending in March 2019, down from 50,000 the previous year, and 60,000 in the year ending March 2017.

“The magnitude of the decline is quite striking, implying less confidence in owning a property in the US,” NAR Chief Economist Lawrence Yun said in a statement.

South Florida is a top destination for foreign buyers, accounting for 20% of the 183,100 international transactions nationwide over the past year.

Capital flight from Latin America over the past decade has driven at least a quarter of Florida’s real estate market, but new trends today suggest foreigners are abandoning US markets with home prices in bubble territory.

“It takes a lot more pounds to buy an American property than it did a few years ago,” said John Mike, an agent at RE/MAX Prestige Realty in Royal Palm Beach.

Mike said a stronger dollar that stated to rise in 2014 had deterred many buyers from Britain and Europe who are now increasingly buying vacation homes in Spain and the Bahamas rather than Florida.

Mike said President Trump’s crackdown on immigration and a dangerous trade war with China had hampered demand. He added that international buyers “don’t feel welcome” in America anymore because of President Trump’s policies – so they are going elsewhere.

The exodus of foreign buyers and crashing sales explains why homes in South Florida are experiencing the most significant percentage of price cuts in some time, that has led to properties staying on the market for longer, and has tipped the overall market to buyers. All of this suggests that a top could be near.

Source: ZeroHedge

Amazon Plows Into Real Estate Market With Realogy Pact To Transform Homebuying Process

Unhappy with its market share in the US real estate market, the largest online retailer in the world and global commercial monopolist, Amazon, announced a deal on Tuesday morning with the largest US residential real estate brokerage company, Realogy, in a strategy designed to boost sales for both.

As CNBC reports, Realogy – whose stock soared 25% on the news – and Amazon will now offer TurnKey, a horizontally and vertically integrated program meant to streamline and optimize the home- and furniture-buying process, by taking potential homebuyers through the Amazon portal and connects them to a Realogy agent. Once they purchase a home, they then get complimentary Amazon Home Services and products worth up to $5,000.

Realogy, which is the largest real estate broker in the US and which owns such brands as Coldwell Banker, Century 21, Sotheby’s International Realty, Corcoran, ERA and Better Homes and Gardens Real Estate, has been facing stiff online competition from newcomers like Compass and Redfin, which rely heavily on high-tech, online platforms. As CNBC’s Diana Olick writes, “partnering with Amazon gives Realogy a platform unlike any other, not to mention access to more buyer data.”

“We’re the market leaders in this industry and we like that position, but you always have to be innovating to stay ahead, you’ve got to be willing to cannibalize yourself, you’ve got to do all the things that a big successful company needs to do to stay on the forefront,” said Realogy CEO Ryan Schneider.

“In a world that is awash with low quality lead generation out there, where you can get real estate leads from millions of online websites, giving an agent and franchisees high-quality leads from a source like Amazon and Realogy together is a real differentiator that’s going to be very powerful for the group.”

The group’s simple strategy for success: Always Be Closing... and then get the buyer to purchase a whole lot of additional stuff as well.

Here’s how it will work: a potential buyer will go to the TurnKey portal on Amazon and put in information on the type of home they’d like to purchase, the location and price. Amazon then matches them with a Realogy agent. Once the buyer closes on the home, Amazon connects them with services and experts in the area. The buyer not only gets a selection of Amazon Home Services, like painting or hanging a large TV, but they also gain access to smart home products, like a Ring doorbell, to be installed by Amazon professionals. The value of the free products and services can range from $1,000 to $5,000 depending on the purchase price of the home.

“Customers can be overwhelmed when moving, and we’re excited to be working with Realogy to offer homebuyers a simplified way to settle into a new home,” said Pat Bigatel, director of Amazon Home Services. “The Amazon Move-In Benefit will enable homebuyers to adapt the offering to their needs — from help assembling furniture, to assisting with smart home device set up, to a deep clean, and more.”

As CNBC notes, one of the nation’s largest homebuilders, Lennar, previously partnered with Amazon in 2018, introducing smart-home “experience showrooms.” Amazon outfitted Lennar model homes with smart-home technology available for purchase on its site. In something of a show-and-sell strategy, Lennar then offered 90 days of free Amazon home services with the purchase of a home.

Amazon, Google, Apple, most of the technology-centric companies are starting to think about the home as a centerpiece for the way they think about the future of how their products work and how they interact with them, ” said Stuart Miller, executive chairman of Lennar, in an interview in May 2018. “Home automation is a point of attraction. It’s a proxy for a lot of other things.”

The new TurnKey service will first launch in 15 major metropolitan housing markets, including Seattle, San Francisco, Los Angeles, Atlanta, Dallas, Chicago and Washington, D.C., and will then expand into more markets. However Realogy CEO Ryan Schneider did not suggest that this is a stepping stone to putting Realogy brokerages’ listings on Amazon.

“We’ve never had that conversation with Amazon,” he said.

Of course, when Amazon decides to simply eliminate the middleman, it will do so without holding such a conversation in advance. For now, however, Realogy shares are enjoying the added exposure and the stock has soared over 25% this morning on the Amazon news.

Source: ZeroHedge

Fed Up Homeowner Sticks It To His HOA And Gets The Most Epic Revenge

Have you ever had a problem with a Homeowners Association? After having enough of his HOA, this homeowner took matters into his own hands.

It may come as no surprise, but Homeowners Associations have a bit of a bad reputation. While there are good HOAs out in the wild, you typically only read about the worst offenders, and it’s usually for a good reason.

Just ask Alec, whose friend, Hal, inherited his grandparents’ house in a neighborhood with a tenacious HOA helmed by a group of power hungry, greedy busy bodies who made it their mission in life to get the entire neighborhood under their control.

When Hal first moved into the house his late grandparents’ built and lived in for decades, the HOA assumed they could take advantage of a seemingly young and inexperienced first-time homeowner.

But the group would soon find out that not only did Hal not have any intention of joining their association, he also wasn’t going to go down without a fight.

So buckle up and prepare for one wild ride…

There Was The First Encounter

It didn’t take long for the HOA board members to show up and start pestering Hal with lists of demands, rules, and random searches.

Shortly after he moved in, Hal received a knock at the door, and when he opened it, he was greeted by a group of the HOA members shoving papers in his face, demanding he sign them right away.

If that wasn’t bad enough, one of the board members demanded that he be allowed entry into Hal’s garage to see “if everything there is in order.”

This essentially meant that the HOA had the “right to do this bi-weekly,” and denying any of the members access would result in a fine.

Hall was appalled by the “audacity” of the HOA for thinking that they had any right forcefully entering people’s homes to randomly dig through their property.

Having enough of the HOA, Hal promptly kicked them out of his garage and off his property, refusing to sign the membership papers in the process.

It seemed like the HOA was banking on the idea that since Hal was young and naive, he would probably back down.

Little did they know, Hal’s grandfather had written his grandson a letter detailing the years of abuse by the HOA, preparing him for the fight that would be coming his way.

“It turns out they were wrong on both accounts, since his grandpa left him a letter pointing out what his rights exactly were, what they would possibly try, what else they might try, how hard it is to fight what, when he needs to react and how, so he prepared him really well for this,” Alec wrote.

Then Came The List Of Demands

With the HOA gone, Hal looked through the HOAs list of guidelines, which sounded more like a list of demands from an occupying force than a neighborhood association.

“They had, for example, a right to visit your home bi-weekly to check things like that you do not use the garage for storage or don’t have gasoline in containers in your garage,” Alec wrote.

“You had to mow your lawn every week, snow had to be shoveled every two hours when it snowed (starting at 5 o’clock in the morning).

You could not park more than one car on your grounds (except inside the garage).”

Three days went by and Hal still hadn’t signed the contract, so the group came back by like some geriatric mafia trying to get him to comply with their rules.

When the group said they wanted to check Hal’s garage again, he said no and kicked them off his property.

“To them, that meant war,” Alec wrote.

Within a week of the confrontation, Hal received received fines upwards of $1,000 for simply not allowing them to enter his home.

Hal was neither impressed nor intimidated and used the “stupid letters to help fire his grill.”

But this only fanned the flames of discontent…

But Then It Went Too Far

Hal went on with his life, but would you be shocked to hear that the HOA board wasn’t so willing to forgive and forget?

Because they did neither.

One day, Hal came home to find one of the HOA members had broken into his his garage, writing down things on a notepad.

It didn’t take long for Hal to realize the zealous HOA board was willing to take any step necessary to keep tabs on him, even if that meant using bolt cutters to bust up a lock on the garage door.

Hal quickly called out the intruder, but he soon realized that the intrusion was just part of the HOA’s plan.

As he was trying to figure out what the man was doing breaking into his home and prying through his personal belongings, he heard what sounded like demolition of some sort coming from his front yard.

In front of his house stood two oak trees that his grandparent’s planted with seeds from their home country when they first built the home all those years ago, and now a tree removal company was in the process of tearing them down.

Those trees had stood there for decades, serving as a reminder of where they had come from, a reminder of their heritage, and a reminder of their love.

Hal stood there in disbelief as something that had meant so much to his family was being ripped away.

“They had called a professional crew for this,” Alec wrote.

“One was already so damaged (basically all twigs were already down, it was just a stump that was left).

The other one they had just started with.”

It only got worse when Hal was informed that the HOA told the crew that Alec had given them permission to cut down the trees because they were in violation of HOA rules.

But what kind of rule would give an HOA member the right to walk onto someone’s property and cut down decades-old trees?

It All Came Crashing Down

Hal would find out that there was a rule (which he didn’t sign off on) where if a garden produces more than a 40-liter sack of leaves within two weeks, the garden owner needs to take down the “offending trees” within two weeks of the violation.

Having had enough of the HOA, its members, and its rules, Hal decided it was time to get back at the people who had made his first weeks of being a homeowner a living nightmare.

He struck up a deal with the tree crew where he would overlook the trespassing if they would agree to be witnesses if he filed charges against the HOA.

Having the crew’s word that they would back him up, Hal did what he had to do.

“Then he called the cops on the board members for trespassing, breaking and entering (they actually had used a bolt cutter to get into the garage; he had it always closed with a big bike lock after they had tried to get in it twice before),” Alec wrote.

And believe it or not, this thing actually went to trial…

That’s When This Thing Went To Court And Got A Lot More Real

Alec didn’t provide details on the ins and outs of the criminal trial, but he said it must have been “glorious,” because not only did the HOA have to repay Hal for the broken lock and damage to the trees (which ended up being close to $50,000), they also fought the charges which cost them another $15,000 in legal fees.

“All in all, this trial must have cost them over $120,000,” Alec recalled.

But it didn’t end there. Not having enough of his revenge, Hal decided to take the HOA and its members to civil court where he sued them for “emotional damage.”

You might be asking, “but what’s this business about ’emotional damage?'”

Well, Hal laid it on as thick as he could when he was pleading his case.

“He told them how much these trees meant to him, since his grandparents had planted them, with seeds from the home country,” Alec wrote.

“Plus, he felt threatened by the HOA, and can hardly sleep because he always fears they try to get into his house.”

Neither of which were lies, and so the court bought Hal’s story and ordered the HOA to pay $500,000 plus the cost of a state of the art home alarm system so he could “feel safe again in his own home.”

But that wasn’t all…

What It Cost

The HOA’s actions ended up costing the board around $750,000 before everything was said and done, but it would only get worse for some of the board members.

“They had to file for bankruptcy and get a person to check the books so my friend would get his money,” Alec wrote.

“But the best for last… The mediator found out that these three pricks had been defrauding the HOA for well over 10 years and were giving out as many fines as they possibly could so they could use it to bolster their income.”

Through their research, the mediator discovered that the HOA methodically tried to get rid of the people that they did not want there, and then they would buy their houses on the cheap.

The HOA would use the fines from their ridiculous rules to create enough money for the down payment on these homes.

With that being said, everyone wanted a piece of these crooks.

And that’s not even the best part…

Now That They’re Gone…

Due to the astronomical settlement, the three board members who had been waging a private war on Hal were left with no choice but to sell their homes in order to pay Hal’s settlement.

And with the three leaders of the HOA out of the neighborhood, Hal became somewhat of a local hero after freeing his neighbors from the abuse and extortion of the HOA board members.

“You see, most people never wanted the HOA in the first place, but the board member practically forced them to sign the contract, claiming it would not be optional, and if they did not sign before moving in it would be a $500 fine,” Alec recalled.

“Only six of the 50 members actually wanted this HOA (and people think they did get part of the action, as reward for spying on their neighbors to find violations).”

With his newfound fame, Hal found himself constantly being invited over to his neighbors’ for parties and BBQ’s while the former HOA board became nothing but a distant memory.

A Lesson To Be Learned

And so that concludes our story about the young homeowner who had enough of a tyrannical HOA and its board members and decided to get his own form of revenge.

It wasn’t pretty and it wasn’t sweet, but Hal did what had to be done. He couldn’t stand on the sidelines and watch as the group of extortionists and petty crooks continued to reign over a neighborhood who wanted no part in being subjected to the rules of a neighborhood association.

Hal did what so many before him had failed to do…

he stood up, he made a stand, and he got his voice heard.

While the HOA’s former leaders are selling their homes, draining their bank accounts, and looking for any possible way to pay back one of their victims, Hal and the rest of his neighbors are enjoying the sweet taste of freedom and some of that BBQ his new friends keep offering him.

Source: by Philip Sledge | OOLA

Young Real Estate Flippers Get Their First Taste of Losing

After piling in when the market was hot, investors are facing losses from homes that take too long to sell.

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(Bloomberg / Businessweek) Sean Pan wanted to be rich, and his day job as an aeronautical engineer wasn’t cutting it. So at 27 he started a side gig flipping houses in the booming San Francisco Bay Area. He was hooked after making $300,000 on his first deal. That was two years ago. Now home sales are plunging. One property in Sunnyvale, near Apple Inc.s headquarters, left Pan and his partners with a $400,000 loss. “I ate it so hard,” he says.

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