Epic Assemblage

Posted on October 19, 2023 by grim

From the NY Post:

Ken Griffin plans to build the most expensive home on Earth — a $1B mega-estate

Palm Beach, Florida, a playground for the rich and famous, is no stranger to opulence. 

But it seems that billionaire hedge-fund manager Ken Griffin is taking luxury living to a whole new level. 

Griffin, already a prominent figure in the seaside town and a Florida native, is turning heads with his ambitious plans to create the most expensive home not just in America — but on the planet.

The enigmatic financier, known for his vast wealth and astute investments as founder and CEO of the once Chicago-based Citadel, now Miami, has made headlines by acquiring more than 20 acres of prime Palm Beach real estate. 

What’s even more astounding is that Griffin, 55, has obliterated the existing homes on this sprawling property, with intentions to spend between a staggering $150 to $400 million on constructing a mega-estate that will be worth an estimated $1 billion upon completion.
…
Over the years, he has already assembled approximately 27 acres of beachfront real estate, which includes a couple of parcels on the Intracoastal Waterway. 

This colossal property is situated just a quarter mile south of former President Donald Trump’s Mar-a-Lago, a stretch of South Ocean Boulevard renowned among locals as “Billionaires’ Row.”
…
As one industry insider pointed out, “If he spent nearly half a billion to buy up acres of land in Palm Beach over the last decade and is expected to spend $150 million more to build an entirely new home, that piece of property is worth at least $1 billion now.”

Posted in Comp Killer, Housing Bubble, National Real Estate, New Development | 72 Comments

Stick it to ’em

Posted on October 18, 2023 by grim

From the New York Post:

Broker commission system that charges up to 6% could face antitrust probe

The moneymaking real estate-commission system where brokers pocket as much as 6% of a sale — and critics charge inflates home prices — could face a federal antitrust probe after a years-long investigation, people familiar with the matter told Bloomberg.

The reported scrutiny by the Justice Department comes amid two private class-action lawsuits that look to loosen the stranglehold the powerful National Association of Realtors has over the residential housing market.

The NAR — the trade and lobbying group which most real estate brokerages are required to join — controls many of the country’s multiple listings services, an essential industry tool that aggregates properties available for sale in a given region.

The Justice Department has turned its focus to the real estate commission-sharing system that bakes in a 5% to 6% cut of the sale, which is split between the seller’s and buyer’s agents, according to Bloomberg.

The system, which is largely unique to the US, pushes up the overall price of homes, critics contend.

The difference in commission prices costs a US seller listing their home for $416,100 house — the median price of a house in the US, according to Federal Reserve data — about $14,000 more than it does in the other countries.

The Justice Department “is concerned about policies, practices, and rules in the residential real estate industry that may increase broker commissions,” the agency said in a recent court filing asking a federal judge in Boston to delay her decision two months on a potential settlement in a separate antitrust suit challenging commission rules.

Posted in Economics, National Real Estate, Unrest | 66 Comments

Sorry stagers, physical home staging is dead

Posted on October 17, 2023 by grim

Hard to believe these staging companies ever really existed. Warehouses full of furniture? Using humans to temporarily move in and out furniture, just to get photographs of a home?

It’s gotten a whole lot cheaper to put lipstick on the pig. Outside of very high-end luxury properties, I don’t see how any of these staging businesses stay in business for much longer.

From RIS:

WHY VIRTUAL STAGING AI IS TRANSFORMING THE HOME-STAGING INDUSTRY

The real estate industry is one of continuous evolution. From online listings to virtual tours, technological advancements have significantly impacted how homes are bought and sold. One innovation that’s been steadily gaining traction is virtual staging. Virtual staging is the art of digitally furnishing an empty home to give buyers a better sense of what the space could look like. It’s an essential tool for agents, especially in today’s digital-first world. In a development that’s far from surprising, Artificial Intelligence (AI) is making significant waves in the virtual staging sector, much like how ChatGPT has revolutionized communication in the real estate space.

Traditionally, virtual staging has been a manual process requiring designers to meticulously place furniture, decor, and other elements into photographs of empty rooms. This process can take a day or two, sometimes more. However, AI-powered services like Virtual Staging AI have revolutionized this aspect by offering a turnaround time of just 10 seconds. All a user has to do is upload a photo, select the room type and furniture style, and voilà! A fully staged room is ready, saving valuable time for real estate professionals.
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When it comes to virtual staging, not all AI platforms are created equal. The technology varies significantly in its application and suitability for real estate professionals. Services like Virtual Staging AI and VirtualStaging.Cloud focus on delivering technology that’s specifically tailored for the real estate industry. They adhere to Multiple Listing Service (MLS) compliance standards by maintaining the structural integrity of the rooms. Virtual Staging AI, for example, offers a variety of features but ensures that the original room layout remains unchanged. 
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On the other hand, some AI services are better suited for homeowners seeking design inspiration rather than for realtors aiming to sell properties. For instance, InteriorAI or Midjourney create captivating designs but take the liberty to alter structural elements like walls, windows, or doors. While the end result may be visually stunning, it’s important to understand that these types of transformations are not MLS-compliant. This limits the service’s utility for real estate agents, who require a more factual representation of the property to show to potential buyers. 

Posted in National Real Estate, Where's the Beef? | 137 Comments

Does the sales dip precede the price decline?

Posted on October 16, 2023 by grim

From the WSJ:

Home Sales on Track for Slowest Year Since Housing Bust

Posted in General | 26 Comments

Going where the cheaper homes are

Posted on October 15, 2023 by grim

From Insider:

Locals are being priced out of Texas and Florida. Here’s where they’re looking for affordable homes instead. 

As people across the US relocate to Florida and Texas, locals are feeling squeezed — and searching elsewhere for affordable homes.

The typical cost of a home in Texas has spiked 30% since 2019, according to Realtor.com, and 42% in Florida during the same time period.

These residents are increasingly searching on Realtor.com for homes outside of their state, suggesting they’re willing to chase affordability across the country.

For Texans, “the Midwest has emerged as popular recently because it is just by and large the most affordable region,” Hannah Jones, Realtor.com’s economic research analyst, told Insider. “We’re seeing this trend of buyers looking for affordability really explode.”

Texas has long been the go-to migration spot for Americans seeking reasonably priced housing and a low cost of living. But as 884,000 people moved to the state between April 2020 and July 2022, according to Census data, the cost of housing soared.

Many of these newcomers were out-of-staters who could afford to pay more for houses, pushing up prices for everyone, the Wall Street Journal reported.

Using the number of listings viewed within-state versus in other states, Realtor.com found that Texans are looking at properties for sale within their own state less than this time last year.

Wisconsin and Minnesota experienced the largest uptick in search volume from Texas year-over-year last quarter, Realtor.com data shows. Tennessee, Colorado, and Missouri followed.

Posted in Crisis, Demographics, Economics, Housing Bubble, National Real Estate | 23 Comments

Which breaks first, rates or inventory?

Posted on October 13, 2023 by grim

From MarketWatch:

Mortgage rates hit 23-year high and home prices show few signs of cooling. But Redfin says ‘all hope is not lost.’ Why?

The U.S. housing market has become unaffordable for many aspiring homeowners, priced out by either high home prices or high mortgage rates.

With mortgage rates at a 23-year high and home prices not falling substantially, affordability hit a 38-year low in September.

Yet with this backdrop, “all hope is not lost for people who want to buy a home soon,” Redfin said in a recent report.

The real-estate brokerage said two key elements of the housing market could offer an opportunity — rising inventory and volatility in mortgage rates.

New listings rose 2% since the start of September, the company said, offering a glimmer of hope that more homeowners are putting their properties on the market, Redfin said.

Even though the uptick is small, it’s still a positive sign, Chen Zhao, economic research lead at Redfin, told MarketWatch. “Inventory is certainly not getting worse and there are some signs that maybe it could even get a little bit better,” she said. “And over time, people get more used to these high rates.”

Even a “slow trickle of supply” is helpful for buyers, he added.

Rates are also taking big swings as the market tries to digest information on whether the U.S. Federal Reserve will hike interest rates at its next policy meeting, which will be held from Oct. 31 to Nov. 1.

“Even just this past week we saw kind of a big pullback and mortgage rates where they came down about 20 basis points or so,” Zhao said, reacting to speeches by Fed officials, and geopolitical conflict between Israel and Gaza. 

The 30-year mortgage reached 7.81% on Oct. 6, but has since fallen to 7.6% as of Oct. 11, according to Mortgage News Daily. “For buyers, if you’re really paying attention, sometimes you do get these small amounts of volatility, and that might give you enough of an opening to jump in,” Zhao added.

Posted in Economics | 115 Comments

Please don’t raise rates

Posted on October 12, 2023 by grim

From CNBC:

Housing industry urges Powell to stop raising interest rates or risk an economic hard landing

Top real estate and banking officials are calling on the Federal Reserve to stop raising interest rates as the industry suffers through surging housing costs and a “historic shortage” of available homes for sale.

In a letter Monday addressed to the Fed Board of Governors and Chair Jerome Powell, the officials voiced their worries about the direction of monetary policy and the impact it is having on the beleaguered real estate market.

The National Association of Home Builders, the Mortgage Bankers Association and the National Association of Realtors said they wrote the letter “to convey profound concern shared
among our collective memberships that ongoing market uncertainty about the Fed’s rate path is contributing to recent interest rate hikes and volatility.”

The groups ask the Fed not to “contemplate further rate hikes” and not to actively sell its holdings of mortgage securities at least until the housing market has stabilized.

“We urge the Fed to take these simple steps to ensure that this sector does not precipitate the hard landing the Fed has tried so hard to avoid,” the group said.

The letter comes as the Fed is weighing how it should proceed with monetary policy after raising its key borrowing rate 11 times since March 2022.

Posted in Economics, Mortgages, Politics | 114 Comments

No cheaper over there

Posted on October 11, 2023 by grim

From the Long Island Business News:

LI home prices hit new highs amid scant supply 

Long Island home prices hit record highs again last month as limited inventory and higher mortgage rates slowed sales. 

The median price of closed home sales in Nassau County climbed to $733,550 in September and the median price of closed sales in Suffolk County reached $590,950, according to preliminary numbers from OneKey MLS. Home prices have now set new high-water marks for each of the last three months. 

Real estate brokers say those all-time high prices can be directly attributed to the limited number of homes on the market, as listing inventory remains at historically low levels. 

There were 5,095 Long Island homes listed for sale with OneKey MLS as of Tuesday, down 24.7 percent from the 6,760 homes listed for sale at the end of Sept. 2022 and 28 percent fewer than the 7,075 homes listed for sale in Sept. 2021. 

There were 1,941 homes contracted for sale last month in Nassau and Suffolk counties, that’s down 11.1 percent from the 2,183 homes contracted for sale in Sept. 2022 and 33.7 percent fewer than the 2,929 Long Island homes contracted for sale in Sept. 2021, according to OneKey MLS. 

In the first nine months of the year, there were 19,156 Long Island homes contracted for sale, a drop of 15.2 percent from the 22,597 pending home sales in the first nine months of 2022, and 31.2 percent fewer than the 27,874 pending sales from January through September of 2021. 

Posted in General | 81 Comments

Who wants mortgages?

Posted on October 9, 2023 by grim

From HousingWire:

Fannie Mae’s chief economist: ‘We don’t expect spreads to come down anytime soon’

When mortgage rates blew past the 7% level earlier this year, the securitization market “froze up temporarily,” according to Doug Duncan, senior vice president and chief economist at the government-sponsored enterprise Fannie Mae. 

“Investors who would buy a mortgage-backed security [MBS], which is backed by mortgages that have a 7% coupon, believe that when the Fed eases interest rates, the people with those 7% mortgages will refi,” Duncan said on Friday during the AIME Fuse 2023, the Association of Independent Mortgage Experts’ conference held in Las Vegas. 

Duncan added: “So what you also almost immediately saw was buydowns of interest rates. The market responded within two weeks. The market set the problem and responded with a solution to keep consumers in the game.”

Until it happened again. Duncan said that now the rates have shot up to the 7.5% to 8% range, the same thing is true. 

“The question is: Is there a way to encourage investors to continue to buy mortgage-backed securities, which is a major funding mechanism for home purchases and refinancings, with the knowledge that it’s likely that when the Fed gets inflation back, interest rates going to fall, those mortgages will refinance and those mortgage-backed securities will disappear?” Duncan added. 

One caveat: “If you’re saying even more extended buydowns, [even] for those [lenders] who have had strong profit margins, the profits at some point are going to be exhausted.”  

With fewer buyers in the MBS market, the average coupon yield on 30-year agency MBS was at around 6.4% at the end of September, The Wall Street Journal reported. That was a 1.8 percentage point premium to the 10-year Treasury yield versus a 21st-century average of around one point.

When you add mortgage originators’ profits, the 30-year fixed rate averaged 7.49% as of Oct. 5th, up 28 basis points from 7.31% in the previous week. At HousingWire’s Mortgage Rates Center, rates were 7.6% on Friday. 

According to Duncan, the Federal Reserve (Fed) is still the single biggest holder of MBSs worldwide, with about 21%. Banks and credit unions together own about 29% as a group.

“But the Fed no longer wants to hold them, so they are not buying; they are actually letting them run off,” Duncan said.  

Posted in Economics, Mortgages, National Real Estate | 100 Comments

Welcome to Eight

Posted on October 7, 2023 by grim

From Mortgage News Daily:

Rates Surge Toward 8% After Jobs Data; Can “Spreads” Help?

Rates were already high coming into this week. As of last Friday, that meant an average 30yr fixed rate just under 7.5%. As of this Friday, we’re closer to 8%.

Certain lenders may be quoting lower rates, but that often involves the presence of discount points.  The Freddie Mac survey (orange line above) doesn’t account for discount points.  It’s also a weekly average and has not yet counted the rates seen on Thursday or Friday.

Friday brought a sharp rise to the highest levels in 23 years.  The most obvious culprit was the big monthly jobs report which showed job creation (nonfarm payrolls) increasing far faster than economists predicted. It was one of only a handful of months in the past few years that came in higher than the 12 month trailing average.

Posted in General | 86 Comments

What breaks first?

Posted on October 6, 2023 by grim

From the NYT:

Rates Are Jumping on Wall Street. What Will It Do to Housing and the Economy?

Heather Mahmood-Corley, a real estate agent, was seeing decent demand for houses in the Phoenix area just a few weeks ago, with interested shoppers and multiple offers. But as mortgage rates pick up again, she is already watching would-be home buyers retrench.

“You’ve got a lot of people on edge,” said Ms. Mahmood-Corley, a Redfin agent who has been selling houses for more than eight years, including more than five in the area.

It’s an early sign of the economic fallout from a sharp rise in interest rates that has taken place in markets since the middle of the summer, when many home buyers and Wall Street traders thought that borrowing costs, which had risen rapidly, might be at or near their peak.

Rates on longer-term government Treasury bonds have been climbing sharply, partly because investors are coming around to the belief that the Federal Reserve may keep its policy rate higher for longer. That adjustment is playing out in sophisticated financial markets, but the fallout could also spread throughout the economy.

Higher interest rates make it more expensive to finance a car purchase, expand a business or borrow for a home. They have already prompted pain in the heavily indebted technology industry, and have sent jitters through commercial real estate markets.
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Policymakers have continued to watch banks for signs of stress, especially tied to the commercial real estate market. Many regional lenders have exposure to offices, hotels and other commercial borrowers, and as rates rise, so do the costs to finance and maintain the properties and, in turn, how much they must earn to turn a profit. Higher rates make such properties less valuable.

“It does add to concerns around commercial real estate as the 10-year Treasury yield rises,” said Jill Cetina, an associate managing director at Moody’s Investors Service.

Posted in Economics, Housing Bubble, Mortgages, National Real Estate | 122 Comments

Still comfortable at the top

Posted on October 4, 2023 by grim

From Mansion Global:

Manhattan’s Median Home Price Rose 2% Despite Market Turbulence

Manhattan’s home prices held steady in the third quarter, despite a gamut of challenges hitting the real estate market across the nation, according to a variety of market reports released by New York City brokerages on Tuesday. 

Elevated mortgage rates—currently at a more than 20-year high—low inventory and a decline in signed contracts were all at play during the third quarter.

“It’s an unusual market we are experiencing,” said Coury Napier, director of research at Serhant. “Despite sales and pending activity falling, prices are stubbornly high.” 

The median overall price for a Manhattan home stood at $1.175 million, a rise of 2% annually and a fall of 2% compared to the previous quarter, skewed by a fall in transactions under $1 million, according to data from Corcoran. 

At the very top 10% of the market, meanwhile, the median luxury home price in Manhattan was $6 million, according to data from Douglas Elliman. The total is a 10.5% decline compared to the second quarter, but has ticked up 4.3% from last year, when the metric stood at $5.75 million.

The number of contracts signed across all segments of the market totaled 2,266 in the third quarter, according to Corcoran. That’s a 27% drop from the second quarter and down 15% from the same time last year. But the slump in activity is easing. Over the last three months, the year-over-year decline in new signed contracts was the smallest since the second quarter of 2022, the firm said. 
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“While [deals in] every price bracket declined, the homes sold between $5 million [and] $20 million retreated the least,” Serhant’s Napier said. “Homes that are more sensitive to volatile markets and higher rates were hit the hardest. There was a 27% drop off for sales at $1 million and below.” 
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“We don’t anticipate significant changes,” Peters said in the firm’s report. “Buyers, hemmed in by high interest rates and inventory shortages, anxious about the state of the world and the country, will step up only when they find the right thing at the right price. For some, that can take a year or even more. But as more and more people come back into their offices, the utility of having a home in the city continues to rebound.”

Posted in Demographics, Economics, Housing Bubble, Mortgages, NYC | 155 Comments

Nothing to see here

Posted on October 3, 2023 by grim

From the NY Post:

US office real estate prices headed for ‘severe crash,’ investors say

The commercial real estate market is headed for a severe collapse due in large part to sky-high interest rates and declining property values, according to a survey of investors.

Around two-thirds of those who responded to a Bloomberg News survey said they believe that the commercial real estate market will recover only after a crash.

When asked when they believe the price of office properties will hit bottom, 44% said they expect that to happen in the second half of next year while 22% said it will be in the first six months of 2024, according to Bloomberg News.

Just 6% of the 919 respondents said that prices would bottom out this year while 29% predicted that it would happen in 2025 or beyond.

The Fed has raised interest rates aggressively, which is increasing the cost of financing commercial properties at a time when there is also reduced need for them, which has hit rent levels.

Investors are bracing for a possible crisis triggered by default on $1.5 trillion in debt that is coming due by the end of 2025,.

Some $270 billion in commercial real estate loans held by banks are set to mature in 2023, according to Trepp.

Over the next four years, commercial real estate properties must pay off debt maturities that will peak at $550 billion in 2027, according to analysts at Morgan Stanley.

Earlier this month, a study released by economists from NYU Stern Business School, Columbia Business School and the National Bureau of Economic Research showed that vacancy rates are at 30-year highs in many American cities.

In New York City, the vacancy rate was 22.2% in Q1 of 2023.

Posted in Crisis, Demographics, Economics, National Real Estate, New Development | 104 Comments

Do mortgage rates even matter anymore?

Posted on October 2, 2023 by grim

From the APP:

Mortgage rates double. Here is why that hasn’t killed Jersey Shore home bidding wars

With mortgage rates rising to 22-year highs, the prospects for the sale of the house at 321 14th Ave. in Belmar could have dimmed. But within a week of going on the market, its owners had shown the home to nearly 60 prospective buyers and were left to decide among 10 written offers.

By the end of the process, the listing’s agent, Eric Bosniak with Coldwell Banker Realty in Rumson, said the big surprise wasn’t that the home sold above its asking price of $899,000, but that it didn’t receive even more offers given the interest.

“I feel that, yes, mortgage rates are ticking higher, but there’s still significant buyer demand with still limited inventory,” Bosniak said. “And here’s the kicker: limited good inventory.”

The conflicting data has puzzled real estate veterans, who can’t remember a set of conditions like this. It was only two years ago that home buyers and owners took advantage of record-low mortgage rates. Now, they seem frozen in place, leaving real estate agents and mortgage brokers to wait for rates to begin to decline and for the market the thaw.

Less clear is how long the head-scratching environment will last. And they wonder: If homes are getting above asking price despite high interest rates, what will happen to prices when rates fall?

“All of a sudden, rates go down to, say, the mid-5’s, well, then are you going to be bidding against 20 other people?” asked Kenneth Gunther, senior loan officer for NJ Lenders Corp., a mortgage banker in Shrewsbury. “So that’s the unknown question that I think about at night. … What is the market going to look like down the road?”

Posted in Demographics, Economics, Housing Bubble, Mortgages, New Jersey Real Estate, Shore Real Estate | 44 Comments

The new New York City

Posted on September 30, 2023 by grim

From Business Insider:

NYC and its suburbs won’t build new housing, so New Yorkers are flooding into Jersey City and driving up prices

New Yorkers have been taking notice of Jersey City real estate for years, and its popularity as an alternative to the ever-less-affordable housing market in the city is growing. These days, fans call it the sixth borough, largely thanks to Jersey City’s efforts to build a ton of new housing — and at a much faster rate than the actual five boroughs.

Between 2010 and 2018, Hudson County, which includes Jersey City, built housing at more than twice the rate that New York City did. Jersey City’s population grew by nearly 60% from 2010 to 2020. Many of the old rail yards and factories on the city’s waterfront have been replaced with luxury high-rises.

But amid the city’s home-construction boom — a “renaissance,” as the city’s mayor, Steven Fulop, previously described it to Insider — rents are rising fast. The rental platform Zumper lists Jersey City as the second-most-expensive US city to rent an apartment, and rents for a two-bedroom apartment are up 25% year over year.

Typically, a big increase in housing supply would be expected to push prices down, but the sheer magnitude of the New York metro area’s housing deficit has kept Jersey City from experiencing that. As the region suffers a severe housing-affordability crisis, North New Jersey is “carrying the entire tristate area’s housing-supply burden,” said Alex Armlovich, the senior housing-policy analyst at the Niskanen Center, a nonpartisan think tank.

“Jersey City is unique. It’s one of the YIMBY-ist cities in the country in terms of actual building permits per person,” Armlovich told Insider. “They’re one of the only reasons that New York, generally as a region, is not more unaffordable than it is.”

Posted in Crisis, Demographics, Economics, Gold Coast, New Development, New Jersey Real Estate, NYC | 56 Comments