December 3, 2016

The Housing Bubble Playing Out

A report from Bloomberg on Canada. “Vancouver home sales plunged 37 percent in November from a year earlier, extending the slowdown in Canada’s most expensive property market for the fifth straight month. Sales have been falling year-on-year since July, with buyers sitting out as the price of a typical home skyrocketed to more than 12 times the median household income of residents in Vancouver. It topped a list of global cities identified by UBS Group AG as most at risk of a housing bubble. Further policy measures aimed at cooling the market contributed to the slowdown, including a 15 percent tax on foreign buyers imposed by British Columbia’s provincial government in August, tighter federal mortgage insurance eligibility requirements in October, and plans by the city to start taxing vacant homes next year.”

The Vancouver Sun. “Following a year of double-digit increases, the B.C. Real Estate Association is predicting average home sales prices will drop by as much as 8.7 per cent next year in the Vancouver area and across B.C. ‘We have to consider the source,’ said Andrey Pavlov, a professor of finance at the Simon Fraser University’s Beedie School of Business. ‘This is basically an industry group, and they have incentives to paint the real estate market in the best terms possible. With this in mind, if they’re forecasting a decline, then in my view things are probably pretty bad.’”

The Richmond News. “Realtor Steve Saretsky’s observed a lot of changes in Richmond when he comes back to visit the few friends and family members who remain. Among the many observations Saretsky has made, one in particular warranted further investigation using his professional acumen — that of seemingly empty condos and houses. Driving into Richmond, it appeared to Saretsky as though many of the units in the new 12-or-so-storey apartment towers were unoccupied.”

“Between January and October of this year he found that 46 per cent of condo sales were sold as vacant. ‘Many times it can make a sale easier. But still, 46 per cent?’ exclaimed Saretsky, who has dubbed Richmond the ‘Ghost City.’”

“Saretsky considers the prevalence of foreign investors and speculators in Richmond is likely the key contributor to the empty-home phenomenon — one that has taken hold in numerous ‘global’ cities around the world, as well as China itself as investors pump trillions of dollars into real estate to shelter their money. ‘Never has there been more evidence stacking up and showing the impacts of foreign capital coming in and distorting the real estate market. Richmond is the prime example,’ noted Saretsky.”

From Better Dwelling. “Vancouver real estate is a unique market. Where else in the world would you find smurfing, money laundering, abandoned mansions, and now the arson of vacant multi-million dollar homes. Since the announcement of the vacant home tax, officials suspect more than $60 million in property has been set ablaze in what authorities are calling ’suspicious.’ Year to date, we’ve identified 29 fires at vacant homes, a 480% increase from the year before. The total value of the places in question have an assessment value of over $100 million, and almost all were scheduled for redevelopment or have been vacant for years.”

“One person has been arrested in connection with the fire of a $20 million place on Drummond Ave. Details of the arrest sound like they knew what they were doing, intentionally placing holes in the walls so fire would consume the home faster. Police say at this time, they have no evidence that the person is connected to any other fire.”

The Globe and Mail. “Part-time work is fuelling Canada’s job growth this year, a discouraging trend for a country still desperately trying to recover from the oil slump. Alberta has been responsible for most of the full-time job losses. In the 12 months to November, the province eliminated a staggering 74,000 full-time positions. ‘We are going to find out how much of what was going on in B.C. was really just linked to what was going on in the housing market,’ said David Watt, chief economist with HSBC Bank Canada. ‘If the housing market comes off the boil and it looks like it has, the job market is going to come off the boil. We will see if there was underlying economic vigour or just the housing bubble playing out.’”

The Estevan Mercury. “Not long ago, Estevan was home to one of the hottest rental property markets in the country. The rental vacancy rate often hovered at or around zero, and the cost for rent each month was among the highest in Canada. But that trend has reversed in recent years, thanks to new rental properties that were constructed in 2013 and 2014, an influx of condominium properties for purchase in the city, and the economic slowdown that stemmed from a lower price of oil. The Canada Mortgage and Housing Corporation showed that Estevan’s vacancy rate was at 27.6 per cent in October, up from 20.8 per cent a year earlier. It was the highest vacancy rate in the province among 10 cities ranked by CMHC.”

“Lloydminster (25.4 per cent) and Weyburn (20.2 per cent) were second and third, respectively. ‘The economic base for all three centres relies on the energy sector,’ CMHC stated in its report. ‘With energy prices remaining supressed, economic activity has been curtailed sharply, leading to a significant reduction in rental demand.’”

The Calgary Herald. “Local home sales slipped in November following two months of improved year-over-year activity, the Calgary Real Estate Board reported. Detached home prices dropped to $498,300, the first time since early 2014 that it’s been below $500,000. ‘These monthly figures aren’t a big surprise given the dynamics of our market right now,’ said CREB president Cliff Stevenson. ‘We’ve seen pockets of sales activity in certain areas, but also lots of months where the expectations between buyers and sellers just aren’t matching up. November was one of those months.’”

The Real Estate News EXchange. “While David Campbell has worked in Calgary commercial real estate for more than 25 years, the broker/owner of D.C. & Associates Realty became involved with a new specialization in 2010: judicial sales. ‘The judicial sale process is set up to allow lenders to get paid on debt that has fallen into arrears,’ said Campbell. ‘It provides protection to the property owner insofar as the property is not owned by the bank like a foreclosure. The property is placed on the open market at a price that is set by the court.’”

“It’s not surprising that there’s been an increase in judicial sales in Calgary and Alberta over the past two years as a result of the province’s slowing economy due to a drop in oil and gas prices. Campbell is somewhat worried that there will be a rise in residential judicial sales, as people who’ve been laid off from the oil patch begin to run out of their savings. ‘The best advice I can offer those sellers would be that they should be realistic about the value of their home. An overpriced property with an owner who has unrealistic expectations causes more problems to the seller than they often think.’”

December 2, 2016

People Who Invested Have Been Left High And Dry

It’s Friday desk clearing time for this blogger. “The Woodlands mansion with the ‘biggest closet in the U.S.’ is just not selling. The home is back on the market. This time for much cheaper. Originally, homeowner Theresa Roemer listed the residence at $12.9 million. It’s now on the market for $7.95 million. That includes the house’s 3,000-square-foot, three-story closet that cost $500,000 to build. While the opulent closet, and the home attached, might seem like a project Roemer completed to live in for good, she says that it was never meant to be a forever-home. ‘This house was never meant to be a house that we would live in together. It was always meant to be a house to flip,’ Roemer previously told the Houston Chronicle. ‘I want to build another one and build a bigger closet.’”

“Vacation rentals are becoming a big problem in beach neighborhoods across Pinellas County. People are renting out their homes and sometimes the renters are throwing rowdy parties in quiet neighborhoods. Terry Hamilton-Wollin lives two doors down from a house that often rents to big crowds. ‘They’re partying all night long and my next door neighbors have a newborn baby. One night a group of renters even put a port-a-potty in the front lawn. This is a nice, waterfront, quiet community. It’s a disgrace. We fought like cats and dogs to keep our island small and peaceful and now that’s irrelevant.’”

“Yet, homeowners who rent their properties have the right to do so under state law. Mary Wilkerson, who owns several licensed vacation rentals but also rents out her Indian Rocks home says while she agrees with the need for screening renters and making sure you are courteous to the neighborhood, ‘people need a way to continue to pay their mortgage and insurance.’”

“Palm Springs approved a sweeping new set of rules regulating the vacation rentals industry that will limit the number of times a home can be rented in a year, impose increased fines for violations, and beef up enforcement. Residents like Ed Todeschini bought a home in Palm Springs, and told his real estate agent he didn’t want a home with vacation rentals around him. However, over time, that changed. ‘Now, out of eight houses that touch our property line, seven are vacation rentals,’ said Todeschini, who stressed he likes all of his neighbors. ‘But the system as it is, isn’t working.’”

“‘Please do not enact measures which would force a financial hardship on so many of us who are good, responsible owners contributing to the local economy in so many ways,’ wrote Susan Berger in a letter to the editor at The Desert Sun. Berger owns a home in Palm Springs which she rents out as a part-time vacation rental.”

“The oversupply of apartments in the Brisbane and Melbourne CBD is forcing property investors to resort to Airbnb as an alternative to longer term tenants. Gold Coast-based property investors Jason Agnew and his wife Louise have taken that course for a 59-square-metre one-bedroom unit in the heart of Brisbane CBD. The couple, who run their own wealth advisory company Lyfe Property, turned to Airbnb because they were worried about not being able to find a long-term tenant quickly enough. ‘We’ve looked into it seriously through two different agencies. It’s quite unreliable because of oversupply of units up here, so we thought we would give Airbnb a shot,’ Agnew told AFR Weekend.”

“Managing director Oliver Lee of Sydney-based Hostmybnb said three out of four inquiries were now from Brisbane investors who can’t find long-term tenants. Lee said one potential client had to lower rent from $480 to $350 for a two-bedroom apartment in Brisbane’s South Bank. He said investment apartments often sit empty for two or three months. ‘We actually didn’t want to go to Brisbane to tell you the truth, but we started getting hammered with inquiries from investors,’ Lee said. ‘It’s a uniquely Brisbane problem because there is an oversupply of apartments. And the reason why they contact us is because they can’t find any tenants.’”

“Knight Frank is the latest agency to cut staff on the prime London sales side because of the downturn. In an announcement yesterday afternoon the agency announced that two senior staff would ’seek new challenges within the wider residential property market.’ Meanwhile some at the firm said, off the record, that the two departures were part of a larger cut in central London negotiators and senior management because of the sales slump. ‘There are quite a few but we don’t know how many - it was coming and we know other agencies are doing the same,’ one prime central London Knight Frank senior figure told Estate Agent Today.”

“While the government may be hopeful of reviving the economy by lowering the lending cost, the middle class, majority of whom already bought a house, may not be happy with the idea of the property prices coming down in the wake of demonetisation. People, who have invested in property, have been left high and dry with the housing prices falling up to 30 per cent. Realty experts expect a further fall in property prices in the secondary market.”

“It’s a catch 22 situation for one Amit Verma you booked a house in Greater Noida four years ago and is yet to get a delivery. ‘Now I can’t sell it for the lack of buyers. But how long will I continue to pay EMIs for something whose market value has fallen,’ says Amit, a media professional.”

“As the Calgary real estate market continues to struggle through tough economic times, one segment that’s improving is the high-end market – homes valued at $1 million or more. The Calgary Real Estate Board says there has been a marginal improvement in sales so far this year, compared to the first 10 months of 2015. And a big reason for that, according to the Calgary Real Estate Board’s Anne-Marie Lurie, is a sharper drop in prices. ‘We’ve seen there’s been much more price adjustments occurring in that higher-price segment and that’s likely encouraged some of this improvement in sales activity,’ Lurie said.”

“Lurie said high-end homes are down, on average, six to eight per cent – meaning there are some deals for luxury homes out there. But savvy buyers can do even better, according to Curtis Atkinson, a realtor with ReMax. ‘Some areas in Calgary, for the luxury market, are down up to 25 per cent,’ Atkinson said.”

“During an interview on the FOX Business Network, John Allison, former CEO of BB&T, said he would like to ‘get rid of the Fed,’ and blamed the central banking system for playing a ‘major role’ in the housing crisis of the mid to late 2000s. ‘They created negative real interest rates for years that incented the housing bubble, along with the government agencies Freddie Mac and Fannie Mae. So they started a fire; you can debate whether they put it out or not,’ Allison said.”

“‘I think the simple thing to do is go to some kind of rule like the Taylor rule, where they can’t just arbitrarily create money that creates bubbles and then try to fix it by holding rates too low. Yes, free markets are going to have ups and downs, but nothing like what I think monetary policy creates through the Fed,’ he said.”

December 1, 2016

Buyers Are Waiting For The Market To Further Decline

A report from the Wall Street Journal on Massachusetts. “Even as U.S. home prices hit a high in September, the building bonanza of luxury apartments in Boston, one of the nation’s hottest rental markets, may be peaking, according to a report. The number of permits issued for new housing units across Greater Boston is expected to fall sharply, by 18%, this year, the first drop since 2011, according to a report by the Boston Foundation, a nonprofit philanthropic organization that conducts civic research. The decline is concentrated in multiunit buildings, the study said.”

“A similar trend is unfolding nationally, where construction of new apartment buildings is generally slowing as developers who targeted the upper end of the market essentially realize there is a limited supply of high-end renters, said Walter Page, the director of U.S. research for CoStar Group, a real-estate data firm that wasn’t involved in the study. ‘Only so many people can afford $4,000 a month in rent,’ he said.”

The Record Journal in Connecticut. “Residential property values in Meriden dropped an average of 7 percent in the latest revaluation, with condominiums seeing the most dramatic decrease, depreciating by 20 percent. ‘The market in Meriden is down about seven percent from what it was five years ago for your standard residential property,’ said Richard Nagle, the Northeast Revaluation Group’s president. ‘It’s a reflection of the current market.’”

“City Finance Director Michael Lupkas said a decrease in residential property values was anticipated, noting that ‘there’s not a market out there for condos.’ ‘Sale prices on condominiums are still relatively low,’ Lupkas said. ‘It’s a good buyers market.’”

The Real Deal on Florida. “Two weeks after the glitzy opening for his company’s latest high-end project, the SLS Brickell Hotel & Residences, Miami condo king Jorge Perez signaled a shift away from building luxury towers locally during a high-powered real estate panel. ‘I think there will be a slowdown,’ Perez said. ‘International demand [for Miami condos] is still there, but there is a lot of product to choose from.’”

“Perez also said construction financing will also be harder to come by for some builders. ‘We are seeing second tier developers having a difficult time getting financing,’ said Perez, who also noted some of these smaller builders have approached Related about providing them with construction loans.”

The Hamptons Online in New York. “As we move towards the end of the year, I sat down with Laura Miele Wynne and her real estate partner, Elliott R. Epstein, agents with Brown Harris Stevens in Southampton, to gain their insights into the Hamptons real estate market. Both of you have been in the real estate business prior and after the market crash, how do you view the current market and where do you see it going in the foreseeable future?”

“LMW: The market is very slow, but I see this as a good opportunity for buyers to take advantage of the excess inventory resulting in price reductions. Unfortunately, buyers are withholding making offers waiting for the market to further decline.”

“What do you see as some of the reasons for the decline? EE: For one thing, there are way too many expensive houses being built in ‘B’ locations. I have seen many times where these homes sell and are back on the market within a year because the owners can’t stand the traffic morning, noon, and night. The tradesmen know all the back roads.”

“Are builders pricing the homes consistent with market value? EE: No, they are overpricing the homes but not selling at those prices.”

“Usually builders are very knowledgeable about the market and build to suit market conditions, so how do you reconcile overpricing with that?

EE: Because today, everyone is a builder. They are less sophisticated in building to the market than some who have been doing it a while. It amazes me when I see the construction that is taking place despite the backlog of inventory. I see buyers still wanting large homes with all sorts of amenities, but the unemployment and lower bonuses on Wall Street together with the overpricing of homes are the biggest causes for the downturn in the market. We’re in a real estate market where sellers don’t need to sell and buyers don’t need to buy.’”

“Where is the biggest demand price wise? EE: Under $2 million. There is a big excess of inventory in the $4 million and above price range, which in my estimation, based upon statistical data, will take years to move.”

November 30, 2016

Not Long Ago, Things Were Different

A report from Q13 Fox in Washington. “Seattle is the hottest housing market in the country according to new numbers released by the Case-Shiller Indices. Home prices across Snohomish, Pierce and King Counties are up and Seattle prices are rising twice as fast as the rest of the country. Derek Parkhurst purchased a home in Kitsap County, learning to get used to the longer commute. ‘We couldn’t afford Seattle,’ Parkhurst said. The influx of buyers going further out of Seattle is also driving prices up outside King County. Zillow says Pierce County’s median home price is $281,000, up 10 percent. Snohomish County is $377,200 - up 11.2 percent - while King County’s median price is $518,000. ‘That’s crazy, but look at all the cranes - you know it’s exploding here,’ Parkhurst said.”

“‘It seems like Seattle’s great renaissance,’ said Joe Paganelli, who recently moved to Seattle from L.A. Paganelli said Seattle has yet to reach the height of the market, so he believes buying in now will still be a good investment. ‘We better get buying right away,’ Paganelli said.”

From CBS Sacramento in California. “Housing prices across the country and in Sacramento County are back to where they were when the market peaked nearly 10 years ago. Today’s buyers and sellers haven’t forgotten about the housing meltdown and some are worried we’re on the brink of another bubble. ‘Are you kidding? I’m not going anywhere,’ said Ty Smith, who bought his home back in 2008, just as home prices across the country hit rock bottom. Less than a decade later, he thinks history is coming full circle. ‘The bubble is close, if it’s not here already,’ he added.”

“Sacramento State Finance Professor Sanjay Varshney doesn’t think we’re there just yet. ‘If history repeats itself, the best real estate market and the worst real estate market of our lifetime is behind us,’ he said. ‘If you’re still sitting on the fence, thinking that ‘I’m going to wait a little bit more because chances are the market might crash like it did in 2008,’ you might be waiting forever because it may never happen.’”

The Mercury News in California. “Repeat, repeat, repeat: The Bay Area housing market is showing definite signs of cooling. That message — heard again and again in recent weeks — is amplified once more by a report from the California Association of Realtors, showing pending sales across the region down 11.6 percent in October on a year-over-year basis. The report shows pending sales for October were down year-over-year in San Francisco by 21.2 percent, in Santa Clara County by 12.5 percent, and in San Mateo County by 5.0 percent.”

“‘Prices have risen to a point where they’re starting to eat into demand,’ said Jordan Levine, an economist for C.A.R. Given the dramatic size of the regional decline, Levine said, ‘You can extrapolate that this is something we’re seeing in the East Bay, as well. It’s not just a San Francisco and Santa Clara phenomenon.’”

“Levine emphasized that buyers are suffering from sticker shock and therefore feeling less competitive. ‘It’s a question of finding the funds you need for a down payment,’ he said. ‘When prices get to the levels that we’re seeing, you’re still having to come up with a pretty decent down payment — even if you’re a first-time home buyer getting an FHA loan for 3.5 percent down.’”

“Levine did some quick math: In Alameda County, where the median price of a single-family home is $780,000, that FHA loan would translate to ‘more than $27,000 cash you’ve got to put down, not counting other closing costs …’ he said. ‘I just think that affordability is becoming an issue on the demand side.’”

From Bloomberg on New York. “Some Manhattan apartment owners trying to sell their homes have big dreams these days: They’re seeking about 40 percent more than they paid for the properties, even if they were bought within the past five years.”

“This year through September, sellers listing apartments priced at $3 million or less that were bought in 2010 sought a median of 47 percent more than their purchase price, data compiled by StreetEasy show. Owners who bought in 2011 have returned homes to the market for a median 42 percent markup, and buyers from 2012 listed for 35 percent more, according to the real estate website.”

“‘That detachment from the market, from what the value actually is, is a big part of why sales are down,’ said Jonathan Miller, president of appraiser Miller Samuel Inc. ‘In my experience, it takes sellers a good one to two and a half years to believe in the new market. The buyers are with the program immediately.’”

“Not long ago, things were different. Apartments for less than $3 million were scarce, the result of a post-recession development boom that focused on ultra-luxury condos aimed at investors. Resales in general were also in short supply, as owners refrained from listing their units because they couldn’t trade up. Sellers who did put their homes on the market were reaping large returns from buyers fighting each other for what little was out there.”

“In Manhattan as a whole buyers aren’t feeling the urgency they once did. Of the apartments listed for $3 million or less at the end of September, 58 percent had gotten price cuts at some point while on the market, according to a StreetEasy analysis. The median decrease was about $46,000. People interested in bidding on homes may still hesitate to make an offer for fear coming in too far below what an owner might agree to, said Scott Harris, a broker with Brown Harris Stevens. But that’s starting to change.”

“‘Buyers are getting more confident in making lower offers,’ he said. ‘I don’t know that sellers are happy to accept it yet.’”

November 29, 2016

The End Of A Decade-Long Boom Sounded Alarm Bells

A report from in Australia. “Last year their house prices were skyrocketing — now they’ve come back down to earth. Growth in property prices across a range of once booming Sydney suburbs has recently ground to a halt after hitting an affordability ceiling. The slowdown was most evident in Parramatta, where the median house price fell 14 per cent over the last three months after having nearly doubled between 2011 and 2015. Adjacent suburb Rosehill, where the average price of a house went from $470,000 in 2011 to $1 million in early 2016, recorded a 7 per cent drop in median price, Core Logic data showed.”

“Other suburbs in the region, including Granville and Harris Park had median price falls of over 4 per cent, reversing growth of about 60 per cent over the five years prior. Drops in prices were not restricted just to Sydney’s west. Inner west suburb Dulwich Hill’s median house price fell 8 per cent, while neighbour Summer Hill had a 5 per cent drop. St George suburb Kogarah’s went back 4 per cent. Median prices had grown more than 50 per cent in these areas over the last five years.”

“Starr Partners CEO Douglas Driscoll said slowdowns in price growth were inevitable in some areas because the supply of housing was slowly returning to normal. ‘Prices had been growing aggressively, especially last year, because there wasn’t much housing going around,’ Mr Driscoll said. ‘Supply and demand has become a lot more even since then.’”

News Corp Australia. “Latest Real Estate Institute of Queensland rental vacancy rates reveal the inner-city ring has remained relatively consistent – moving from 3.4 per cent to 3.7 per cent from the June to September quarters. REIQ CEO Antonia Mercorella said inner-city landlords, who were particularly sensitive to the current question of oversupply, had been extremely competitive with rents to lure tenants from middle-ring suburbs.”

“Place Projects business development manager Sophie Smith said that in addition to price cutting, landlords were offering incentives such as two week’s free rent to secure a tenant. Some were also cutting rents to keep tenants from moving out at the end of a lease.”

From ABC News. “WA Housing Minister Brendon Grylls says policies requiring prospective homebuyers to cough up deposits of 30 per cent in mining towns across Australia are a ‘hangover’ from the mining boom. The end of a decade-long investment boom sounded alarm bells for banks, with ANZ Banking Group the first of Australia’s traditional big four banks to enforce the policy in June last year. More than 40 postcodes across Australia are affected by ANZ’s policy, including Western Australia’s iron ore hub of Port Hedland, where potential buyers would require $135,000 for a deposit on an average-priced house. ”

“The ABC has spoken with community leaders in Kambalda who say times are tough but there has not been a mass exodus from the town. The average house price in Kambalda East has fallen from $100,000 to $55,000 in a year, while there has been a similar fall in Kambalda West, where the median price has tumbled from $140,000 to $95,000.”

“Ray White Kambalda principal Cheryl Davis, the town’s only real estate agent, told the ABC that times were tough, but there had not been a mass exodus from the town. ‘The Commonwealth Bank has been our saviour, they’re about the only bank that will deal out here,’ she said.”

Your Investment Property Magazine. “The demand for housing in Australia’s mining areas has declined significantly due to sinking commodity prices and dwindling mining investments. Median prices in Port Hedland peaked at $925,000 in June 2013 and sales volumes peaked at 402 in July 2006. Current median prices have fallen to $390,000 (-58% lower than peak), and current sales are 128 (-68% below peak).”

“Median prices in Karratha peaked at $815,000 in October 2010 and sales volumes peaked at 511 in March 2005. Current median prices have fallen drastically to $362,980 (-55% lower than peak), and current sales are 235 (-54% below peak). Median prices in Mackay peaked at $435,000 in June 2013 and sales volumes peaked at 3,264 in April 2004. Current median prices have fallen to $345,000 (-21% lower than peak) and current sales are 1,045 (-68% below peak).”

The Chinchilla News. “If those unacquainted with history are doomed to repeat it, then communities unacquainted to oil or gas booms are inevitably doomed to similar fates. Hoping to save towns from being swept up in the frenzy which accompanies sudden booms, researchers from the University of Queensland’s Centre for Social Responsibility in Mining (CSRM) have been analysing statistical evidence and interviews from ‘boom towns’ to try and assist communities to plan ahead and get locals ‘on the same page.’”

“Dr Kathy Witt explained ordinarily occurring patterns were ’sped up’ in boom-times, such as the sudden, dramatic, spike in the Chinchilla housing market prompting a lot of people to sell at the same time. ‘You can argue that one day Chinchilla may have got a KFC or Woolworths anyway, it just got sped up. So we can say it acted as a catalyst for change.. that’s brought on diversity that wasn’t there before. But there is a new normal, so it certainly has changed some of the (town’s) core characteristics,’ she said.”

“Local grazier, Joe Hill said the trend which had been apparent in the Chinchilla housing market was reflected outside town on the properties too, but while houses had been filling up again in more recent months, farm houses remained empty. ‘Around where I am, within a 50km radius, there’s roughly 12 homes that are not being lived in,’ Mr Hill said. ‘Families have moved out after the gas companies have bought them out and the local community is just disintegrating.’”

Overpriced Homes With Inflexible Sellers Will Sit

A report from the Boston Globe in Massachusetts. “The epic building boom that has added thousands of luxury housing units in the Boston area may have peaked, as a report to be released Tuesday by an influential foundation suggests the region has run out of customers willing to shell out huge sums in monthly rents. The Boston Foundation says the number of permits for new housing units issued in Eastern Massachusetts is expected to fall by nearly 20 percent this year, the first decline since the most recent surge of construction began in 2011. Housing specialists attribute the drop-off to the higher end of the housing market, where units can rent for $3,000 a month or more in and around Boston.”

“‘We’ve satisfied very-high-end demand, and so the number of luxury buildings is slowing down,’ said Barry Bluestone, a housing economist at Northeastern University and author of the Boston Foundation report. ‘We haven’t seen much [building for] the middle and lower ends of the market.’”

The Madison Park Times in Washington. “The year 2016 is one for the record books. Home values saw double-digit appreciation in 2016, with the median home price in King County up 14.6 percent, according to the Northwest Multiple Listing Service. It’s not just Seattle that’s experiencing soaring home prices. All across Washington, home prices are rising faster than in any state in the country. Amidst all the record-setting positive news, there is reason for caution on horizon. The latest jobs estimates suggest the economy may be slowing down.”

“‘What concerns us is the fact that three of the five key industries appear to be applying the brakes,’ according to ‘Aerospace and information (including software) contributed 2,000 jobs during the three-month period, but construction, wholesale and retail trade, as well as professional and business services, which have a combined workforce of 689,800, added nothing.’”

“Metrostudy’s second quarter 2016 survey of the Seattle housing market shows that the first signs of the slowdown have begun to show up: slowing job growth along with a dramatic change in migration numbers. ‘The state’s in-migration has hit negative numbers for the first time in over four years,’ said Todd Britsch, Regional Director of Metrostudy’s Seattle region. Anecdotally, I’m seeing fewer bidding wars. More surprising, I’m noting a number of price reductions on listed homes.”

The North Bay Business Journal in California. “The residential real estate market in Marin, Napa and Sonoma counties is decelerating and showing signs of fatigue after five consecutive years of growth, according to a new survey of market data. Single-family home and condominium sales in the three North Bay counties seem to have plateaued, and the forecast for 2017 is for home and condo sales to remain flat with a chance to actually decline in some micromarkets, according to Terra Firma Global Partners, a residential real estate services firm with nine North Bay offices.”

“During the first nine months of this year, 15 percent fewer homes and condos traded ownership in Marin County, 5.3 percent fewer in Sonoma and 9.6 percent fewer sales occurred in Napa, compared with the first nine months of last year. 2017 could be a good year to start ‘taking some chips off the table,’ particularly if the goal is to downsize in the next couple of years, according to Terra Firma Global Partners senior associates Jaime Pera in Marin. ‘Homes that are overpriced with inflexible sellers will sit and likely end up selling for less than if they had been priced correctly in the first place,’ Pera wrote.”

The Real Deal on New York. “This week, the biggest price reduction on a luxury property was at the 740 Park Avenue duplex where a young Jacqueline Bouvier lived with her parents in the 1930s. Last week, the Rosario Candela-designed duplex was slashed from $32.5 million to $29.5 million, a reduction of 9 percent. In total, four properties in the over-$10 million market were discounted by more than 5 percent in the period from Nov. 11 through Nov. 21, according to data provided by StreetEasy.”

“740 Park Avenue, 6/7A: The owner of this palatial duplex, Hedge fund manager David Ganek, had high hopes that this property would fetch top dollar. In 2014, not long after Ganek dropped $28 million on a condominium in Soho, the financier and his novelist wife Danielle listed the duplex for $44 million. But apparently buyers weren’t moved by the co-op’s links to Jackie O, at least not enough to shell out $44 million. In April, the price was dropped to $32.5 million. It was reduced again last week, and is now asking $29.5 million.”

“20 West 53rd Street, Apartment 47: This four-bedroom pad was listed in December 2014 for $27 million. In August, the listing was taken from Corcoran and given to Douglas Elliman, and the asking price was slashed to $23.8 million. Last week, the property was discounted again, this time by 8 percent. The apartment, which spans 4,557 square feet, is now asking $22 million.”

“980 Fifth Avenue, apartment 18A: First listed back in April for $12.9 million, the property has already received two price reductions. The current asking price is $11.2 million, a 6 percent reduction from its previous asking price of $11.9 million. Property records shows Romain Hatchuel to be the current owner. Hatchuel, a native of France, paid $7.5 million for the apartment in 2011.”

November 28, 2016

When Selling Isn’t Really An Option

A report from the Montreal Gazette in Canada. “It seems like a person can’t throw a rock in downtown Montreal without hitting a new condo project promising state-of-the-art facilities, a rooftop pool, breathtaking views and a communal lounge. It begs the question: Are there too many condos in Montreal? Anecdotally, the answer is yes. ‘There are definitely too many condos,” says Doug Hollingworth, a homeowner who recently swapped his Mile End condo for a semi-detached in N.D.G. ‘I know more people who are leaving (Montreal) than moving here.’”

The Edmonton Journal. “Renters continue to have the upper hand on landlords in Edmonton. Data compiled by an Alberta property management firm, Hope Street Real Estate, shows that the number of rental homes currently on the market has risen to 5,211, up from 3,820 at this time last year. Company president Shamon Kureshi said this is great news for renters with more options and lower rents, but bad news for landlords. And Kureshi doesn’t see that improving any time soon.”

“‘We did this report mainly just to have something on paper to show our clients when they called to say ‘What the hell is going on here?’ Kureshi said. ‘It’s probably a little alarming for many landlords. There are a lot of factors at play, but the cost of a barrel of oil is the main one,’ he said. ‘There are also a lot of condo developers who can’t sell their units and who are now putting them into the rental pool, creating a tidal wave of inventory. Two years ago that could have been a profitable venture for them, but what we have concluded is that selling isn’t really an option.’”

The Calgary Herald. “Rapid construction of new apartments at a time of high unemployment in Calgary has left a raft of rental housing empty, spiking the apartment vacancy rate to levels not seen in a generation, a new report says. More than 2,500 apartment units were empty in October, up by more than a third over last year’s volumes, pushing the vacancy rate to seven per cent, according to the Canadian Mortgage and Housing Corp. It’s now the highest it has been in 25 years, the national housing agency said in its annual rental market report.”

“Calgary was home to 36,500 apartments last month, up by 1,300 units or nearly four per cent over year-ago levels. It was the biggest annual gain in 22 years and the third straight year of expansion in the rental market. ‘The vacancy rate has moved well above historical averages largely due to a rise in supply,’ Richard Cho, analyst with the housing agency, said in a statement. ‘Job losses have spread beyond the energy sector and into other areas of the economy.’”

The Saskatoon Star Phoenix. “Saskatoon’s apartment vacancy rate climbed from 6.5 per cent to 10.3 per cent over the last 12 months, while the average rental rate for an apartment in the city remained steady at about $1,000, the CMHC reported Monday. About 1,391 of the 13,507 apartments in Saskatoon were sitting empty last month. That represents an increase of 522 vacant units from the 869 that were sitting empty in October 2015. ‘Weak economic and labour market conditions have held back rental demand, while increasing supply in both the primary and secondary rental markets has resulted in a significant jump in apartment vacancies this year,’ CMCH analyst Goodson Mwale said.”

The Moose Jaw Times Herald. “On Monday, the CMHC released data about vacancy rates for apartments within Moose Jaw and around the province. It showed that the vacancy rate for Moose Jaw for Oct. 2016 was 3.3 per cent, down from 3.4 per cent in Oct. 2015. The provincial average was 9.4 per cent. Weyburn, Lloydminster, and Estevan all had vacancy rates above 20 per cent, ranging from 20.2 per cent to 27.6 per cent for Estevan.”

The Dawson Creek Mirror. “Apartment vacancy rates in Dawson Creek and Fort St. John are once again the highest in British Columbia according to new data from Canada’s housing agency, but local real estate professionals are divided on whether the numbers accurately reflect the market. Dawson Creek recorded an overall rental vacancy rate of 19.1 per cent in October, 4.5 points higher than the same time last year. Fort St. John, meanwhile, saw its vacancy rates surge from 12.1 per cent to 30.7 per cent. At 34.8 per cent, the town’s vacancy rate for one-bedroom apartments was the highest single rate in the province.”

“Lita Powell of Fort St. John’s Li-car Management Group said the numbers were ‘bang on.’ In fact, the CMHC might be underestimating Fort St. John’s vacancy rates, she said. ‘The real vacancy in Fort St. John is much closer to 35 per cent,’ she said. ‘The CMHC vacancy rate misses a substantial number of units,’ including any buildings smaller than eight units. ‘When you consider the number of duplex units built in the past four years in Fort St. John, I suspect they make up a substantial number of the vacancies,’ she said.”

From CBC News. “One of Nelson Sturge’s tenants recently came into his office to drop off their keys. But there was still six months left on the commercial lease. ‘One of the comments by them was, ‘We can’t even make payroll,’ Sturge said. CBC News spoke with Sturge and other Fort McMurray commercial landlords who have all said they’ve reduced their asking prices by about half.”

“Some of Sturge’s properties sit on one of Fort McMurray’s industrial parks. It’s not hard to spot ‘For sale’ signs hanging along its streets. Property owners like him, who bought or built warehouses and storage buildings during the height of Fort McMurray’s boom, are now stuck paying high mortgages and collecting low rents. ‘It puts us in a bit of a bind right now, especially with the market that’s out there,’ Sturge said. ‘It’s a tenant’s market right now.’”

The Forces Of Markets Have Kicked In On Their Own

A report from KPCC in California. “The five year run-up in Southern California housing prices could be coming to an end and homeowners thinking about selling may want to act sooner rather than later, according to economists and a leading real estate broker in Orange County. Even before the election, there had been signs the market was slowing down. But immediately after Trump’s surprise victory, there was a significant development: Mortgage rates rose to their highest levels since the summer of 2015 and appear to be headed farther up as investors flee from bonds to stocks.”

“‘I’ve heard from sellers – some of whom even voted for Trump – who are a little bit nervous because they’ve realized values now exceed 2007, which was the ultimate height,’ said Steven Thomas, realtor and author of the monthly Orange County Housing Report. ‘It feels like values are topping out.’”

The Miami Herald in Florida. “For the past eight months, Miami Beach has waged a war against short-term rentals. Its weapon of choice: $20,000 fines. One property on Meridian Avenue has been walloped three times, totaling $60,000 in fines. The high fines against short-term rentals may lead property owners to rent long-term instead, depreciating the value of the properties because they generate less income from renting, said real-estate broker Ross Milroy.”

“‘This is diluting the rental pool. With more properties available, people have more choices,’ Milroy said. ‘It’s starting to bring down rents. Once rental prices come down, prices will follow. It’s decreasing the value.’”

The New York Post. “Holiday specials aren’t limited to flat-screen TVs. The overpriced Manhattan real-estate scene has left some homes lingering on the market for more than four years, prompting huge price cuts that make them ripe for the picking, according to experts and stats compiled for The Post. ‘Historically, we are now in the midst of the fastest market adjustment ever,’ said Leonard Steinberg, president of the city real-estate giant Compass.”

“The prices of some high-end homes have been slashed nearly in half since hitting the market. A penthouse duplex at 165 Perry St. in the West Village has taken the biggest hit, with its asking price dropping 49.8 percent, from $39.8 million more than a year and a half ago to its current $19.8 million. ‘The natural forces of markets have kicked in on their own,’ Steinberg said.”

“There also have been extreme price drops in the much more affordable range, according to statistics compiled for The Post by real-estate Web site StreetEasy. A one-bedroom, one-bath, 700-square-foot unit at The Beekman, a prewar co-op at 575 Park Ave., has been on and off the market since 2013 and was listed for $500,000 last year. This month, it was slashed by 40 percent, to $300,000.”

“When a property stays on the market for a while, sellers just want to ‘cash out,’ leading to the sudden price drops, experts said. An apartment at the Village’s 150 Charles St. has been on the market the longest — 1,355 days, according to Streeteasy. Its original $8.99 million asking price is now down to $7.95 million. ‘Someone’s loss is another’s gain,’ said Paula Del Nunzio, a top luxury broker with Brown Harris Stevens.”

November 27, 2016

I Can’t Carry This Anymore. Should I Sell?

A report from MENAFN-AFP on China. “Chinese household debt has risen at an ‘alarming’ pace as property values have soared, analysts say, raising the risk that a real estate downturn could send shockwaves through the world’s second largest economy. Loose credit and changing habits have rapidly transformed the country’s famously loan-averse consumers into enthusiastic borrowers. the debt owed by households in the world’s second largest economy has surged from 28 percent of GDP to more than 40 percent in the past five years. The share of household loans to overall lending hit 67.5 percent in the third quarter of 2016, more than twice the share of the year before. ‘The notion that Chinese people do not like to borrow is clearly outdated,’ said Chen Long of Gavekal Dragonomics.”

“But this surge has raised fears that a sharp drop in property prices would cause many new loans to go bad, causing a domino effect on interest rates, exchange rates and commodity prices that ‘could turn out to be a global macro event,’ ANZ analysts said in a recent note. Banks are also driving the phenomenon, Andrew Polk of Medley Global Advisors told AFP. ‘Banks have been pushing people to buy houses because they need to make loans,’ he said, as corporate borrowing has dried up.”

From Bloomberg on the UK. “U.K. real estate prices may be dropping at a much faster pace than official reports indicate, according to the Irish agency that manages property loans acquired from bailed-out banks. Earlier this month, Stephen Vernon, chairman of Dublin-based Green Property, said London’s real estate market is ‘tanking by the day.’”

The Review Online on South Africa. “While the importance of pricing a property correctly in order to sell it within a reasonable amount of time has been stressed countless times, the current buyer’s market coupled with a sluggish economy has made correctly pricing a property paramount to the sale happening at all, never mind within a reasonable amount of time, according to Debbie Justus-Ferns, divisional manager of Renprop Residential Sales.”

“‘Testing the market in order to ascertain what buyers would potentially be prepared to pay is not advisable for any seller right now,’ she says. ‘This strategy will often put any prospective buyers off as they have other properties to choose from. As a result, an overpriced property will just end up promoting the purchase of a comparative or similar property that is priced correctly.’”

From The Australian. “Brisbane’s apartment construction boom has spurred a ‘flight to quality’ as renters move from old suburban flats into new apartments, in a phenomenon set to be watched by the Reserve Bank. Brisbane renters are exploiting the more than 5200 new apartments built in the first nine months of the year to vacate suburbs between 5km and 15km from the central business district. The rollout of an expected 13,000 more apartments over the next 18 months in inner-city Brisbane, along with 16,000 more in Melbourne’s inner suburbs in two years, is being monitored by the Reserve Bank as the key areas for potential future oversupply.”

“In order to keep up sales and rents, developers are offering a range of incentives to get people into their apartments. Increasingly, short-term rental guarantees of up to 5 per cent gross are being advertised, while others will throw in furniture packages, pay body corporate rates or shell out for furnishings. A completed four-townhouse development in Morningside offered a Kia Picanto car to the first buyer to go unconditional. Ray White Bulimba agent Jared Candlin said the bonus car promotion was ‘a way to get people’s attention’ in the crowded marketplace. ‘But with what is going on with the amount (of units) available, people might just miss them because they are looking at so many.’”

The Calgary Sun in Canada. “Close to 40% of Calgary’s available rental listings are unoccupied, according to a local property management company which says the weak market has become a major source of financial stress for small, private landlords. ‘I have never seen it this grim before,’ said Shamon Kureshi, CEO of Hope Street Real Estate Corporation. ‘I have never seen this level of difficulty for landlords trying to find a tenant.’”

“Kureshi said big companies are far better positioned to manage the declining market conditions than ‘mom and pop’ landlords. ‘We’re talking about the people who are renting out their basement suite to make ends meet or the family who’s maybe invested in a second house that they’re renting out for the purpose of retirement savings,’ he said. ‘I’m probably getting two, three, sometimes five calls a day from these people saying, ‘I can’t carry this anymore. Should I sell?’”

“Rebecca Yarmoloy — who together with her husband bought her first rental suite in 2013 and now owns a total of four properties in Calgary — said the past year has been challenging, with each of the suites vacant at times, occasionally for up to three months in a row. She said they now allow pets in their suites, something they never would have considered before but have been doing to make their properties more appealing to renters.”

“‘When we first bought we were getting top dollar for all of our suites,’ Yarmoloy said. ‘We’ve definitely taken a big pay cut on all of them, as well as struggled to find tenants. We’ve had to reduce all of our rents substantially, and we’ve also just had trouble finding good people.’”

The Uncertainty Hasn’t Gone Away

A report from the New York Times. “When Jared Rutledge called his mortgage broker one morning last week after putting in an offer on a home in Glendale, Ariz., just west of Phoenix, he discovered that the 3.8 percent rate he had been quoted a couple of months ago had already gone up to 4.125 percent. That afternoon, it had inched up to 4.25, and by evening, when he finally called back to finalize the deal, it was 4.375 percent. ‘I was kind of frustrated,’ Mr. Rutledge said. But with a third child on the way, and a buyer for their current home, he and his wife felt they had little choice. ‘Instead of holding out and waiting, we locked it in,’ he said.”

“Since the election, mortgage rates have climbed roughly half a percentage point to a 16-month high, adding hundreds, sometimes thousands, of dollars to a home buyer’s yearly payments. The speed and size of the increase took many lenders and borrowers by surprise — and the increase is expected to reverberate across the housing industry, particularly if rates continue to rise next year.”

“Higher rates are often followed by a burst of activity from consumers worried about further increases. But Ian Shepherdson, chief economist at Pantheon Macroeconomics, said he had not seen evidence of pent-up demand. He thinks housing activity is heading for a fall. Even before this latest bump in rates, he was concerned about a drop in mortgage applications. Mortgage standards have tightened this year, he said, making it more difficult for buyers to qualify despite the steady uptick in wages.”

“‘Even if applications don’t go down further,’ Mr. Shepherdson said, ‘we are looking at a significant drop in home sales in the first quarter of next year.’”

From Cronkite News in Arizona. “In September, Angel Diaz bought a house. As he signed the home-purchase documents, he remembered emerging from the hot desert as an 8-year-old unauthorized Mexican immigrant, barely able to hold his own water bottle after three days of walking the migrant trails. Diaz is now 22 and a pre-law student at Paradise Valley Community College who works fulltime at an insurance agency. He obtained temporary relief from deportation under a 2012 Obama administration directive known as Deferred Action for Childhood Arrivals, or DACA.”

“He’d missed meals to save $6,000 as a down payment to buy the $153,000 home in northwest Phoenix, and now he has a home he, his mother and two sisters could call their own. Now, all that could change. ‘At this point, even, I don’t know what’s going to happen,’ Diaz said.”

“President-elect Donald Trump had vowed on the campaign trail to revoke DACA, adding DREAMers like Diaz to a group of about 11 million undocumented immigrants Trump said he’d deport. And while experts say deporting the nation’s undocumented would create administrative backlogs and massive legal hurdles, mass deportations could impact the nation’s housing market. About 3.4 million unauthorized immigrants may own homes, the Migration Policy Institute, a nonpartisan immigration-issue think tank, reports. In Arizona alone, about 89,000 undocumented immigrants may own homes, the insitute reports. The institute doesn’t break down numbers for DREAMer homeowners, like Diaz.”

“‘I rarely cry,’ Diaz said. But he did after the election. He felt a flood of emotions including frustration, disappointment, uncertainty and helplessness. The uncertainty hasn’t gone away. But, he said, he has chosen to ‘hope for the best.’”

From Star-Ledger in New Jersey. “Lacey is a large municipality in Ocean County, one of the reddest regions of New Jersey. And in this election, Lacey was the second reddest of the red. In New Jersey towns with more than 10,000 people, only nearby Lakewood had a greater percentage of voters (74.4) who pulled the lever for president-elect Donald Trump. This was not surprising. Seventy-two percent of Lakewood, with its high population of very conservative Hasidic Jews, voted for Mitt Romney in the last election.”

“But while Lacey voters also went overwhelmingly for Trump (70.1 percent) they are not quite as historically red as Lakewood. In the last election, 59.1 percent voted for Romney. In the 99-square-mile township of just fewer than 30,000 residents, there are yacht clubs and marinas along Barnegat Bay, surrounded by modern homes that sell north of $750,000. But interspersed within these lagoons and boating developments are square, tiny bungalows — old beach houses now converted to year-rounders that can be bought for about $100,000 or less.”

“In those neighborhoods, the residual impact of Hurricane Sandy can still be seen. There are homes that are still vacant, under construction or in foreclosure. One of those homes belonged to Nancy Wirtz, who voted for Trump because of the bureaucratic mess encountered with FEMA and state government after her house was damaged by the storm. She got an insufficient insurance payout, then had a state-approved contractor disappear with her money. Foreclosure followed.”

“‘It is absolutely why (she voted for Trump),’ she said. ‘I lost my home, I was foreclosed on, because I got screwed at every turn. We need some change.’”

November 26, 2016

Repealing The Rule Of Law For White-Collar Criminals

A report from Salon by Paul Rosenberg. “With Donald Trump representing a frightening unknown future, more akin to foreign authoritarian leaders like Vladimir Putin, Recep Tayyip Ergodan of Turkey and Abdel Fattah el-Sis of Egypt than anything in American history, Barack Obama looks better all the time — a fact reflected in his approval ratings. But there’s a good argument to be made that a more forceful, more boldly progressive Obama could prevented this outcome. Not a radically different person, just one more comfortable with the sort of direct confrontation that was central to the teachings of Saul Alinsky, whom he was tarred with anyway.”

“One trope that’s emerged after Trump’s election, is that leftist attitudes are somehow responsible. A recent Politico article is typical of pieces with this argument that liberal smugness was to blame for Trump. This argument overlooks two things: first, the worldwide rise of authoritarianism over the past two decades, intensified both by the fight against al-Qaida and then ISIS and then by the worldwide Great Recession; and second, the failure to indict high-level officials of former president George W. Bush’s administration for actual crimes.”

“Not every Republican is a criminal, of course. But with crimes unpunished and democratic norms eroding, those students are expressing a moral censure that the nation’s institutions and political leadership ought to have provided on their own. This was primarily President Obama’s responsibility — one he ducked in the name of ‘looking forward, not backward,’ a progressive, no-nonsense way of framing letting war criminals go scot-free — and financial criminals as well, the ones who crashed the whole world economy. There were reasons offered for those decisions at the time, but by now the failure of that approach should be obvious.”

“Just from January 2007 to December 2011, there were more than 4 million completed foreclosures and more than 8.2 million foreclosure starts, of which only a small fraction received effective help from Obama’s Home Affordability Modification Program, which provided government payments to mortgage servicers and investors in exchange for lowering a mortgage’s interest rate and occasionally reducing the principal. This was a clearly ill-conceived plan that relied on the same people who had caused the problem in the first place.”

“The flip side to Obama’s foreclosure failure was his unwillingness or inability to hold any insiders criminally responsible for the greatest financial crime spree in American history. In March 2009 economist and former regulator William K. Black provided a road map for understanding the crimes involved.”

“‘The FBI has been warning of an ‘epidemic’ of mortgage fraud since September 2004,’ Black wrote. ‘It also reports that lenders initiated 80 [percent] of these frauds,’ which qualifies it as ‘control fraud,’ he explained. ‘The FBI correctly identified the epidemic of mortgage control fraud at such an early point that the financial crisis could have been averted had the Bush administration acted with even minimal competence.’ Obviously, it did not. But Obama, unaccountably, refused to hold anyone criminally responsible.”

“In 2013, the Frontline documentary, ‘The Untouchables,’ looked back at what had happened. ‘Even during the bubble years, the Department of Justice had arrested and prosecuted many small mortgage brokers, loan appraisers and even home buyers,’ but no bankers had gone to jail. Only the little fish got caught.”

“‘We have known for decades that repealing the rule of law for elite white-collar criminals and relying on corporate fines always produces abject failure and massive corporate fraud,’ Black wrote in 2015. But that was precisely what Obama chose to do.”

Prices From Years Past Aren’t The World We Live In Now

A report from “The value of agricultural land, especially in the Midwest, is likely to continue falling in 2017, two experts told lenders attending the National Agricultural Bankers Conference in Indianapolis. ‘2017 is going to look a lot like 2016,’ said Jason Henderson, director of Purdue University’s Extension and former head of the Omaha branch of the Kansas City Federal Reserve Bank. Henderson looks for continued decline in land values of 5% to 10% next year, he said.”

“Rex Schrader, president of Schrader Real Estate and Auction Company in Columbia City, Indiana didn’t disagree, although he said some land sales this fall have brought more than expected. He agreed that land prices have been declining for the past two years, falling 10% to 15% in Indiana. While economists are comparing the current financial situation in agriculture to some aspects of the 1980s or 1970s, Schrader sees an important difference. During the 1970s, land prices were rising while farm income was falling, he said. Unlike the inflation-driven land bubble of that earlier era, the run-up in prices earlier in the current decade was tied to strong farm income.”

“‘I think there was sound fundamentals for why land values got so high a couple years ago’, he said. ‘I’m not smart enough to know how it all ends.’”

From AgriNews Publications. “Farmland values went down about 5.8 percent from 2015-2016 in Indiana, according to analysts at Farm Credit Mid-America. ‘Compared to other states in our region, Indiana farmers are going to have more pressure — given their heavier reliance on the corn and grain industries,’ said Dennis Badger, vice president of collateral risk management for Farm Credit Mid-America.”

“In spite of the decrease, Badger expects prices won’t fall dramatically. ‘We expect land values to decrease slightly over the next year since interest rates are expected to decrease,’ he said. ‘Now is the time to negotiate or renegotiate cash rents. For landowners, they should keep in mind that variable leases could serve as a win-win for both parties. It might call for a slight discount in rental rates today, but once commodity prices increase it would give them greater upside potential, as well.’”

From “For Indiana corn-and-soybean producer Jason Wykoff, determining how to handle landlords who aren’t interested in long-term relationships has become easier over 22 years of farming. Just this past year, he says, he walked away from 1,200 acres because a landlord had asked too much for rent when it came time for renewal. That’s a growing trend among farmers, according to Pro Farmer’s annual LandOwner Survey.”

“‘We find 44% of our members and subscribers are willing to walk away from a cash lease if that lease is not lowered going into 2017,’ says Mike Walsten, editor of LandOwner, part of the Farm Journal Media family. The percentage of producers who ‘absolutely will’ walk away if there’s not a significant cut in cash rents is up 2 points from a year ago.”

“Cash-rent rates are declining, which is good news for farmers. In Wykoff’s home state of Indiana, rates have been on a steady decline since peaking in 2014, according to a Purdue survey conducted in July. ‘I don’t think that’s reflective of people walking away from leases,’ says James Mintert, director of Purdue University’s Center for Commercial Agriculture and a professor of agricultural economics, ‘but more reflective of farmers having conversations with their landlords that prices from years past aren’t the world we live in now.’”

The Echo Press. “A weak ag economy in the coming year may be hard on farmers and landowners who rent out their acres. Pauline Van Nurden, University of Minnesota Extension educator out of the Willmar office, gave presentations in Alexandria last week on factors that landlords and renters will need to consider when negotiating contracts. A big one will be what kind of profit margins farmers can expect from corn and soybean crops. ‘It looks like it will be another tough year for producers coming up,’ Van Nurden said.”

“While yields have been strong in Douglas County the last couple of years, prices are down significantly from a few years ago. Tillable land in Douglas County rented for an average price of $85 an acre in 2011, then jumped up to an average of $112 an acre from 2012 to 2014. It dipped back down to $102 an acre in 2015. A 10-year average of gross income on corn land in Douglas County showed gross income of $722 an acre, with total expenses of $264 an acre, leaving $264 that could cover rent and provide a profit.”

“But projections for 2017 show $558 in gross income per acre, with expenses up to $480, leaving $78 for rent and profit. If rent is more than $100 an acre, there is no profit.”

From NBC Nebraska. “Harvest is all but over for farmers in Nebraska, and 2016 will be remembered as a down year, reaching crop values not seen since the 1980s. So, I wanted to know what it was like to be a farmer in this declining market, and I went to Nance County to find out. ‘We’re the only industry in that we’re told what we’re going to pay for our product, we’re told what we’re going to receive for our product and everything in between,’ farmer and rancher Ryan Sonderup said. ‘We have no control of what we get or what we do.’”

“2016 hasn’t been the best year for farmers and ranchers of Nebraska. ‘A lot of it is praying,’ said Ryan’s father Mark. ‘To know when to walk and when to run.’”

“Crop values are down - at times matching the lows seen back in the 1980s, but what has made this year’s harvest particularly troubling is it’s not just crop values. ‘It’s very unusual that the cattle market - or livestock in general, cattle and hogs - and the crops are at low prices at the same time,’ Mark said. ‘I’ve been through a cycle like this already,’ Ryan added. ‘The younger guys that are coming back from four or five, six, eight years even - they’ve never seen a year where they haven’t made money.’”

“While this year’s harvest has come and passed for most farmers, both Mark and Ryan agree the pencil pushing and penny-saving is far from over. ‘Taxes have gone up, rent has gone up,’ Mark said. ‘There’s probably going to be another low coming. Probably lower than what we’ve seen this year, but there will be a sales opportunity in between time.’”

“‘We all have to work together to come through something like this,’ Ryan said. ‘Plain and simple, you can’t afford to pay those high-dollar rents when commodity prices are so low.’”