Real estate thread

[Roosh]

It looks like coronavirus is going to put the big hurt on both home sale prices and rents.

The number of empty properties in the CBDs of Australia’s three biggest cities has blown out, with new figures recording the largest monthly increase of the national vacancy rate in more than a decade.

Australia’s rental market has been flooded with vacant properties as part of the COVID-19 pandemic, with new data from SQM Research revealing more than 88,000 homes were left empty last month.

“It’s an outright tenants’ market,” said SQM Research managing director Louis Christopher. “Rents have been falling and they’re likely to continue to fall for the foreseeable future. It is happy days for tenants and a bit of disastrous scenario for landlords.”

Rental vacancy rates record highest monthly jump in over a decade: SQM

Australia's rental market has been flooded with vacant properties as part of the COVID-19 pandemic, with new figures revealing more than 88,000 homes were without tenants last month.

www.domain.com.au

Here's a good blog that is sharing a lot of stories on the issue:

http://housingbubble.blog/

 

[bucky]

According to Zillow my house lost over 20k in value since the virus started. Then just this morning, it had jumped up in value over 10k, recoveringabout half of what it supposedly lost. Go figure.

 

[911]

There are two sources for the decline, first, the collapse of tourism, S/T furnished rentals/Airbnb stock will get converted to long term rental and result in lower rents esp in cities like SF, NYC, Paris.

Second of course, the general economic downturn will depress prices as people can't make their mortgages have to sell their property, same dynamics as in 2008.

Furthermore, the movement towards city living away from the suburbs will reverse as Boomers now view living in places like Manhattan or Santa Monica as dangerous, and urban activities like going to the theater, crowded restaurants etc as no longer attractive. Exurbs that are rural with acreage and lower densities will get a boost.

 

[!!!???!!!]

I live on the outskirts of Toronto, and along with Vancouver, it's one of the most inflated real estate markets in Canada (I think the world as well)
So many of these 500/600/700/800K condos are bought as investment properties and rented out, AirBnB'd or simply left empty for speculatory purposes.

I think there will be a bigger crash in commercial than there will be in residential. Brick and mortar stores were already closing (Sears closed. Can you believe it?) due to the proliferation of online shopping. The coronavirus shutdowns will only end up speeding up the process.

I think Canada is expected to do worse in this regard than the USA. We never had a correction in 08 like the Americans, so our bubble is even more inflated.

I'm not sure if there will be a swing back to the suburbs as opposed to the city. I think a lot of 5 bedroom/4bathroom boomer McMansions will sit empty. As a millennial I don't need a house that big and I don't want to pay gobs of property tax.

 

[Laner]

My condo in downtown Vancouver seems to be holding steady, with a small 6% rise in value over this time last year. I just went over Aprils numbers today. Sales are down, but so are listings. If this trend continues we will be in a buyers market by June.

Suburban real estate is down the most, as is typical. Lots of interest in outer acreage - bare land or with a home.

Personally I don't want to sell my downtown condo as I have lots of equity and the rental market is still pretty tight. Lots of tech companies are moving into my shitty hood and they staff their companies with foreigners who need a place to live. Lots in my building are priced for tech workers and the rents are good.

Boomers are still moving into convenient spots. Their suburban mcmansions are too much work, and yes, property taxes can be pretty painful when on fixed income. Even factoring in strata (HOA) fees, condos are pretty cheap to maintain. Not to mention things like shoveling snow, trimming trees or cleaning gutters. Boomers want convenience, access to good food, entertainment, friends and transport. No other place in Canada is as convenient for these things as is downtown Vancouver.

 

[911]

Boomers want convenience, access to good food, entertainment, friends and transport.

Transport: half of them are too scared to get inside a taxi, let alone go into a crowded bus or subway. Many will be paranoid about getting into a condo elevator...
Entertainment: forget about theaters, art galleries, sports arenas, concerts, crowded festivals or cozy sushi bars.
Friends: they will host their families and close friends, and avoid crowded vernissages and exhibits. So in a way their McMansions are now made more useful, as social circles become smaller and tighter, shifting to the private sphere. And when the weather is nice, there will be a premium now on yards, pools, BBQs and garden fun.

In crowded cities like NYC or Paris, people live in small expensive places and spend a lot of time outside in cafes, eating out and shopping because their places are small, often without lots of daylight and no yards. With that outside life curtailed, those living spaces become even more claustrophobic.

In the burbs there already are lots of people who mow their lawns, trim their hedges, clean their gutters, chimneys, clear the snow, deliver firewood etc. My uncle's condo fees are over $1,000/mo, and the property taxes are the same as %. You get a lot more real estate for your money in the outer burbs vs. the city in places like Toronto, Vancouver, NYC, DC, Boston, Montreal, where condos run between $500 to $1,500 per sqft, which is between 2x and 5x what they can get per sqft for an outer suburb home. If you sell your million dollar 1,000 sqft 2bdr Toronto condo, you can build a nice custom 2,500 sqft 4bdr home for half that price in an exurb.

I think younger people, singles and immigrants who are less scared of pandemics will move into smaller places downtown while boomers will start leaving them.

 

[lunchmoney]

According to Zillow my house lost over 20k in value since the virus started. Then just this morning, it had jumped up in value over 10k, recoveringabout half of what it supposedly lost. Go figure.

It never lost or gained anything. Zillow values hold as much value as me, and I am no expert.

 

[Arado]

Cross posting from an older thread on real estate:

Some interesting quotes in the latest letter from Fundrise (crowd funding real estate company) to investors. Seems reasonable and they've been pretty defensive the last few years in anticipation of a recession. Only question now is what types of commercial and residential real estate are viable for a long term investment in a post-COVID world? Will people still live in apartments and cities in numbers great enough to generate a good return? Will malls and shopping centers be a viable business model in an e-commerce dominated world? Will the market drop quickly enough to justify remaining in low yielding cash and debt, with the risk of currency debasement ever present due to the ongoing printing press ? Is it a viable strategy to just wait until the relief money and forbearances run out and insolvent businesses are forced to go bankrupt?

The negative impacts of such a downward spiral are numerous and while the current disruption in the market will inevitably lead to new investment opportunities, we feel that we are still early in this process and now is a time for caution.

Real estate markets move slowly (typically lagging the public stock market), so we believe that it will take several months for the downstream effects of the pandemic and subsequent response to fully work their way into our corner of the economy. The Great Recession, for example, lasted 18 months, and many of the best buying opportunities in the real estate market didn’t open up until 12 to 24 months after it began. Meanwhile, it’s barely been 60 days since the current downturn started.

At this point, we feel the smartest thing we can do for our investors is to begin putting ourselves in the position to act on these opportunities once they do start to arise. This means both continuing to build up a larger cash reserve across the portfolio (which today totals nearly $200 million in cash across all active funds) and establishing ourselves as a ready and willing buyer within the channels of brokers and agents that act as a conduit to future deal flow.

• Generally, we expect there to be three broad phases of our investment strategy over the next 12 to 18 months.

1 - Although spreads have begun to normalize as liquidity returns, we believe there is an interim opportunity to deploy a portion of our existing cash reserves from now near-zero yielding money markets into specific, more liquid securities such as REIT bonds (i.e., loans to public real estate companies), where we have a deep understanding of the underlying assets securing the debt due to managing and operating very similar properties ourselves.
….
2 - The combined impact of the shutdown of non-essential businesses with the rapid change in the commercial lending environment is likely to produce a cohort of projects that are behind schedule and in need of additional funds to reach completion.
In certain cases, these projects may not have inherent flaws or weaknesses, but are simply the victims of poor timing and circumstances changing beneath them…In these instances, the combination of substantial cash reserves, along with our experience as an operator and investor in similar projects, should put us in a compelling position to recapitalize select projects that we believe have the strongest fundamentals.
….
3 - Capitalizing on opportunities for the direct acquisition of assets whose prices have come down substantially below where they were trading previously will have the longest lead time. This is primarily due to the fact that in most instances, unless an existing owner is in a truly distressed situation, they are unlikely to sell an asset for substantially less than what they had expected to receive before the downturn. In other words, external events must force a sale. Even for assets such as failing retail shopping centers that are likely to experience the most immediate and substantial negative impact, it would take 12 months or more before an asset actually changes hands at a distressed price.

 

[bucky]

It never lost or gained anything. Zillow values hold as much value as me, and I am no expert.

Yeah, they definitely seem to be all over the place. I've always kind of wondered how they're calculated.

 

[SlickyBoy]

Zillow is crap - I wouldn't put a lot of faith into something that can't even see obvious termite damage. Have they ever published verifiable results from their predictions versus sale prices? If they ever did, expect them to snake out of the truth by statistical enhancement.

Whether real estate as a category is declining is a loaded question - too much variance nationally to create an easy, one size fits all prediction. Even in the 2008 drop NYC was not nearly as dire as south FL condos. But I think it's fair to say commercial real estate in many major cities is in serious trouble for a lot of reasons. Would not want to be a WeWork employee right now.

 

[Laner]

Transport: half of them are too scared to get inside a taxi, let alone go into a crowded bus or subway. Many will be paranoid about getting into a condo elevator...
Entertainment: forget about theaters, art galleries, sports arenas, concerts, crowded festivals or cozy sushi bars.
Friends: they will host their families and close friends, and avoid crowded vernissages and exhibits. So in a way their McMansions are now made more useful, as social circles become smaller and tighter, shifting to the private sphere. And when the weather is nice, there will be a premium now on yards, pools, BBQs and garden fun.

In crowded cities like NYC or Paris, people live in small expensive places and spend a lot of time outside in cafes, eating out and shopping because their places are small, often without lots of daylight and no yards. With that outside life curtailed, those living spaces become even more claustrophobic.

In the burbs there already are lots of people who mow their lawns, trim their hedges, clean their gutters, chimneys, clear the snow, deliver firewood etc. My uncle's condo fees are over $1,000/mo, and the property taxes are the same as %. You get a lot more real estate for your money in the outer burbs vs. the city in places like Toronto, Vancouver, NYC, DC, Boston, Montreal, where condos run between $500 to $1,500 per sqft, which is between 2x and 5x what they can get per sqft for an outer suburb home. If you sell your million dollar 1,000 sqft 2bdr Toronto condo, you can build a nice custom 2,500 sqft 4bdr home for half that price in an exurb.

I think younger people, singles and immigrants who are less scared of pandemics will move into smaller places downtown while boomers will start leaving them.

I agree with all of that. I guess the next few months we will start to be able to see the trends more clearly.

But for now, the Boomers are still buying condos. In Vancouver, the Boomers and teenagers are the ones getting into trouble for not "social distancing". I watched two guys shake hands today, and I wanted to hug them for fuck sake. They have an attitude of optimism that I wish would rub off on millennials, who seem to be the ones still freaking out about maybe having to go back to work. The attitude seems that since they can't afford a home here, then hopefully the market crashes so at least they don't feel so left out.

For now, real estate seems to be holding on. Boomers love real estate more than any other asset, almost to the point of religion. I know plenty who still take Sunday drives through areas just to check out houses. Many take trips to places and stay in AirBnB's that are architectural homes. The Boomer dream job is an architect with a wife for an interior designer.

The next 20 years will be interesting. Boomers will be gone, and whats left of their wealth will - hopefully - be transferred onto their kids. Millennials and to some degree Gen X will get to decide where the real estate growth is. Right now, a lot of young families my age like quiet inner city neighborhoods and leafy inner city suburbs. Some are starting to cash out and look toward smaller rural towns with access to medium sized cities. Heritage Canadians seem to be avoiding the suburbs where ethnic immigrants take over whole swaths. The Boomers are often the ones selling out as Indo Canadians or Chinese Canadians move in by the thousands. Those Boomers often become my neighbors downtown.

 

[!!!???!!!]

No lie, I am one of those millenials that hopes the market crashes, but I hope it crashes so I can someday own a home. I would be a liar if I told you I felt some sort of guilt about it. I am sick and tired of renting. I hate the fact that foreign millionaires are allowed to buy property in such a fashion that pushes regular people out. I hate the fact foreign millionaires overbid on homes, for whatever reason, and it's impossible for me to find non-gig work due to the globalization that created those foreign millionaires in the first place.

I'm not too certain boomers will transfer tremendous amounts of wealth to their children. Medical costs will eat up tons of it, so will rising cost of living. I'm also suspect of the idea that Canada will continue having high levels of Chinese and Indian immigration. There's definitely a shift away and growing anger, a populist candidate could run well (if the CBC doesn't character assasinate them)

I think real estate doesn't respond quite as quickly to market downturns, it's less liquid, and its one of those investments that people really, really hate to let go of. Especially if its a primary residence. But I'm just speculating, the next 6 months will be illuminating.

 

[NoMoreTO]

I just did a reno on a 3 bedroom unit in a university town. Put a lot of money into it. Started it before the virus came and finished it end of April. The rental market is really soft I am finding so far. I've had to basically bump my price down to what I used to get before new floors, kitchen upgrade, and all new paint. I've got a couple showings this weekend. My theory is that students aren't signing up for leases because they don't plan on being actually in the university town in the fall, they'll hang back at their parents. Not totally sure, but even though I don't target students, it softens the whole market.

 

[kel]

In my neighborhood I'm seeing more "sold" signs than usual (or so it feels). My landlord wants to sell my apartment and wants to kick me out, but I was hoping to get one more year here, so I'm hoping this coronavirus situation helps me out, but the "sold" signs aren't leaving me optimistic.

 

[yeppels]

Here's a good article about commercial real estate (though the title is a bit misleading) https://marker.medium.com/the-office-is-dead-16be89f25d01

Commercial real estate is probably going to experience a downturn, but due to generally long lease terms from 6 months to even 5-10 years, we may not see the effects for a while. Companies may adapt by repurposing larger spaces instead of space efficient open offices to maintain social distancing at the workplace.

Some companies (like Twitter, Nationwide) are pulling the plug on offices and converting their workforce to work from home, so we'll see if more companies follow suit and what repercussions that will have.

 

[lunchmoney]

In my neighborhood I'm seeing more "sold" signs than usual (or so it feels). My landlord wants to sell my apartment and wants to kick me out, but I was hoping to get one more year here, so I'm hoping this coronavirus situation helps me out, but the "sold" signs aren't leaving me optimistic.

I am seeing the opposite. Many homes sitting on the market longer than this time last Spring.

 

[Roosh]

Sign of a bubble: many properties are priced to only be suitable as Airbnb rentals, which is now going away.

Jennings is also a short-term rental owner in Panama City Beach. One question often asked is why short-term rental owners affected by the short-term rental ban don’t change their operations to accommodate long-term residents.

“Most of these beachfront condos have huge mortgage payments and in addition to that, there’s a lot of added costs with that,” Jennings said. “Most of these building don’t include electric in their HOA fees and then they’re HOA fee is anywhere between $400 to $100 a month so it wouldn’t really be affordable for a beachfront condo owner to rent on a long term and it wouldn’t be affordable housing because when you add all those costs together it would be $2000 or $3000 a month, easily.”

Jennings owns a studio unit in the Fontainebleau, which he recently renovated for about $20,000. Although it is on the smaller side, he said, “I wouldn’t be interested in renting a place like this for less than $1,800 to $2,000.”

Bay County real estate still in recovery from Hurricane Michael

PANAMA CITY, Fla. (WMBB) — In 2018, Hurricane Michael destroyed 60,000 home and displaced between 10,000 and 20,000 people. A little more than a year and a half later, people are still waiting to g…

www.mypanhandle.com

 

[Laner]

Vancouver's numbers are showing properties selling about 10% faster than last year. Except for the very high end of the market, which is still having issues. But that segment has been fucked for a long time as Chinese gamblers flip and scam each other on $30m mansions.

AirBnB will certainly have an effect on the market. Vancouver, as a hot tourist and resort city, put stops into place two years ago that helped slow down the AirBnB boom. In hindsight, it has probably helped a certain segment of the market from bursting, namely good quality - amenities, location - condos.

 

[!!!???!!!]

I just don't see how there won't be a real estate crash when you consider how many people are now out of work, when you consider how many small and medium sized businesses are going bankrupt and when you consider the average millennial was impoverished by 1st world standards before this crash happens. Who will buy these pricey properties? Foreign millionaires? Maybe....

 

[Roosh]

Toronto condo prices are falling.

According to Zoocasa, for the City of Toronto as a whole, the median condo apartment price declined $65,000 (-10%) between February and April to reach $574,000.

There were two neighbourhoods that saw median prices drop more than $100,000, with Mount Pleasant East experiencing the largest decline, with prices falling $131,500 (-18%) to settle at $617,500. In the area that borders Regent Park, St. James Town, and Corktown, the median price fell -14% ($103,400) to $611,600.

These Toronto Neighbourhoods Saw Condo Prices Impacted the Most During COVID

Zoocasa used data from the Toronto Regional Real Estate Board to compare how median prices in Toronto changed over the course of the pandemic.

torontostoreys.com

Australian bank warns prices could fall up to 30%.

One in 10 rental apartments is sitting empty in Melbourne’s Docklands and Sydney’s city centre as the country's biggest bank warns house prices could collapse by as much as 32 per cent over three years if Australia experiences a severe economic slump.

House prices could fall between 11 and 32 per cent by the end of 2022 depending on the growth of unemployment during the coronavirus downturn, according to Commonwealth Bank modelling released on Wednesday. The Sydney-based bank holds more mortgages than any other financial institution in Australia.

Banks warn house prices could fall up to 30 per cent as rental vacancies surge

Major banks say house prices could collapse by up to 30 per cent in the next three years in a prolonged economic slump as CBD rentals are drained of tenants.

www.smh.com.au