Displaying items by tag: property

(New York)

Another month, anther patch of really rough data on the US real estate market. New data from December has just been released, and shows a clearly negative trend for the market. Housing starts dropped 11.2% in the month, and overall, the market saw the worst price growth (4.7% in major metropolitan areas) since 2014. Stock market turbulence and higher rates plagued the market at the end of 2018.

FINSUM: We have seen many months of deteriorating real estate performance. The big question now is whether the market can rebound in time for the peak spring selling season.

(New York)

If one thing is really clear in the economy, it is that the housing sector’s momentum is clearly negative. Home sales slumped badly in November and then worse in December. Further, home buying traffic plunged too. This is not necessarily a surprise when you consider how much mortgage rates have risen, but contrasted with how well the labor market is doing, it is quite eye-opening.

FINSUM: We are going to come in with a contrarian viewpoint here. Consider these stats, all reported by Barron’s: “The median home value in December was $223,900, up 7.6% over the past year, according to real-estate listing service Zillow. That is up from about $150,000 in late 2011. Properties are sitting on the market an average of 78 days, down from 114 days in 2016. The mortgage delinquency rate is a low 1.1%, and just 8.2% of houses had negative equity—well below levels of a few years ago. The foreclosure rate has plunged to 1.2%, down from 6.3% in 2009”. That shows a very different picture!

(New York)

If you have been paying attention to the mortgage market, you will see that some of the most worrying lending activities from the pre-Crisis era are returning. For instance, there has been a sharp recent rise in loans to non-traditional borrowers, or those who have trouble proving their income. The amount of such loans looks to have almost quadrupled in 2018 versus the year before. So far these loans look to be healthy, but there are concerns that in a downturn such mortgages could deteriorate quickly.

FINSUM: These loans are subject to more stringent regulatory standards than back before the Crisis, but this is certainly something to keep an eye on.

(New York)

If you think the real estate market is bad now, just wait. That is the argument from James Stack of InvesTech Research. Stack accurately called the last housing crisis and also forecast the slowdown in 2018. Now he is saying that 2019 is going to be the worst year for a long time. “Expect home sales to continue on a downward trend in the next 12-plus months. And there’s a significant downside risk to housing prices if a recession takes hold”, says Stack. He does admit that it is too hard to say if housing is currently in a bubble, but that prices are very likely to fall.

FINSUM: Mortgage rates have risen sharply and prices are quite elevated, so it is no wonder prices have fallen. However, real estate hasn’t seen the exuberance it did pre-Crisis, so we do not think this will be a meltdown by any means.

(New York)

The Wall Street Journal says that wealthy New Yorkers are having a hard time believing that real estate prices are falling. After a decade long boom, they have difficulty believing home prices are actually dropping. Nonetheless, they are. Anecdotes abound, especially at the high end of the market, of residents losing millions even after ten-year holding periods. The big question home owners need to be asking themselves is whether New York is a bellwether of what is coming in US real estate, or whether it is just suffering from its own idiosyncratic problems.

FINSUM: In our view, this is mostly a unique-to-NYC problem. It is a combination of oversupply (from new builds), higher tax rates, lower demand from foreign buyers, and rising interest rates.