When we abandon traditional underwriting standards

"The regulators believe that lower loan underwriting standards promote homeownership and make mortgages and homes more affordable. The facts, however, show that the opposite is true. ...

After the financial crisis, Representative Barney Frank — the Massachusetts Democrat who led the House Financial Services Committee during the crisis, and a champion of credit programs for low-income buyers — admitted, “It was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.” Policy makers who support homeownership would be wise to consider who is hurt and who is helped when we abandon traditional underwriting standards."

See:  Underwriting the Next Housing Crisis

My view is that government policy that encourages people to buy rather than rent often leads to poor results.

Australians Investing in Brooklyn

I recently came across an article from the NY Times from November 2013, discussing how Australians are investing in residential real estate in Brooklyn, NY.  It is titled G'Day from Bushwick.  It is worth reading.

Not out of the woods yet

I was speaking with a U.S. homeowner recently who handed her keys back to the bank.  She bought a house in NY State about 5 years ago, substantially renovated her house, but it was still way underwater today.  From what she told me, there are many other homeowners who are still in negative equity in the U.S.  And there are a large number of homes still going through the foreclosure process in some states.

One company that has been buying up U.S. homes is Waypoint.  Have a look at the Waypoint website  to see their rental homes.  They list and manage directly, without agents.  An interesting story about Waypoint is here.  There is consolidation occurring in the buy-to-rent market in the U.S.

A soaring apartment market in Toronto ignites fears of a crash

An interesting recent article in the NY Times about apartments in Toronto: A Dizzying Condo Market in Toronto.  How similar is this to Brisbane?  An extract:

"Median condo prices have risen 25 percent since 2009. Two-bedroom condos of about 850 to 900 square feet in Liberty Village sell for about $500,000.  For Toronto, this is crazy.

“There is no question that the housing market in Canada is overshooting,” said Benjamin Tal, deputy chief economist of CIBC World Markets. “Now the cocktail party conversation in Canada is: ‘Will this lead to a U.S. style crash?"

Risks of Buying Off The Plan: NY Advice

The Take-It-on-Faith Condo

 Rising demand and a scarcity of new apartments are creating something of a rush on new luxury condominiums, with buyers increasingly signing contracts for spaces even before they are built.

 This article includes advice about buying off-the-plan in New York.

 http://nyti.ms/U4mQnI

Shrinking Apartment Sizes

In Brisbane, apartment sizes are shrinking.  Newer apartments are smaller than older apartments.  Many two bedroom apartments are now less than 85 sqm in total size (including balcony), compared with about 100 sqm five years ago, or 120 sqm ten years ago.

For example, DoubleOne3, a Devine project, has two bedroom, two bathroom apartments that have a total size of 74 sqm including balcony.  The "Superior" two bedrooms, on the corners of the building are 105 sqm in total size.

As another example, the size of two bedroom apartments in Mirvac's Park development at Newstead range from 96sqm to 112 sqm.  Mirvac builds larger than most developers, to a higher quality.  But compare Mirvac's Quay West development in Brisbane from more than 10 years ago.  There, the two bedroom apartments were 126 sqm.  In Mirvac's Arbour on Grey, from about ten years ago, most of the the two bedrooms were around 109 sqm.

In NYC, the size of new rental apartments is also decreasing, but the size of owner-occupied condos is increasing.  See NY Times.  I think that a similar distinction will arise in Brisbane, where two bedroom apartments less than 95 sqm in total size will be relegated as investor only product.  Moreover, care should be taken when comparing apartments.  Often the smaller newer apartments are more expensive than the older, larger apartments.

Byron Bay to New York City

A nice story in the New York Times on Sunday about the founder of PlatinumHD.tv, which is used by some real estate agents to promote property.   He has moved from Byron Bay to New York, and just rented a new apartment. The story of his search is here: http://www.nytimes.com/2012/06/17/realestate/roominess-takes-on-new-significance.html

At Vacant Homes, Foraging for Fruit

Things in the USA don't look so good. People are harvesting the gardens of vacant homes. See NYTimes.

Once Again, Floor Plans are Making Sales - in NYC

See NY Times article

"In recent months, though, several new developments around the city have once again sold apartments off floor plans. The practice is not widespread, and the examples tend to be in neighborhoods where there is very little new inventory. But at least one high-profile building that is under construction plans to sell off floor plans: the Extell Development Company’s 90-story hotel/condominium tower across from Carnegie Hall — One 57, at 157 West 57th Street."

How Low Can the US Market Go?

For real estate, some economists say, an end to the seemingly endless decline in housing values might be in sight.

Not immediately. At the moment, prices are still dropping. In 20 large cities, prices fell 0.8 percent in March from the previous month, according to the Standard & Poor’s Case-Shiller Home Price Index released Tuesday. That pushed the closely watched index below its level of two years ago to a new post-bubble low, and put it 33.1 percent under its July 2006 peak.

Few analysts expect housing prices to rebound anytime soon. But quite a few are predicting that the market is close to the moment when things will stop getting worse, which will be a major improvement all by itself.

“By far the bulk of the downturn of housing prices is beyond us,” said Paul Dales of Capital Economics. He expects the market to slip 5 percent further, slightly more than he was expecting a few months ago.

“There are some amazingly favorable signs. Housing is the most undervalued it’s been in 35 years,” Mr. Dales said. “At some point, it’s going to do very well.”

See NYT

Two Bedrooms Are Back in NY

As the real estate market in New York City shuffles toward recovery, two-bedroom apartments have been the last to rejoin the party.

Sales of studios and one-bedrooms rebounded first after the market crashed in late 2008, followed by three-bedrooms, but it wasn’t until mid-2010 that the two-bedroom market started its comeback. Now, brokers say that the demand for smaller apartments has ebbed and that two-bedroom apartments are all the rage, especially those priced at the lower end of the market.

Alan Nickman, an executive vice president of Bellmarc Realty, says that more buyers have recently come to him looking for apartments between $750,000 and $1.2 million. “That’s basically your starter two-bedrooms,” Mr. Nickman said, adding that the pool of potential buyers included “first-time buyers who are going straight into a two-bedroom,” bypassing smaller units.

See NYT

NY Short Term Rentals Law

Oaks Group should be happy that they don't do business in NY. A recently enacted law prevents short term rentals of apartments. That seems like a good idea to me. Apart from fire and safety issues, if you buy to live in an apartment building, it is not much fun having people stay next door thinking it is a hotel.

See NY Times story, A Place for Short-Timers to Park.

From the USA

"Developers say that renters do not make the same price-per-square-foot calculation as buyers, and that smaller apartments — with some studios less than 500 square feet and larger one-bedrooms barely topping 1,000 square feet — will not discourage the target audience. "

See "Why Buy? You can spend tons renting"

Note that 1000 square feet is 92 sqm. You can't find many one bedrooms in Brisbane at 92 sqm. Brisbane apartments are small, and overpriced.

So buy in Florida

US News

"LOOKING for a deal in a down market? As winter sets in, the fruits of desperation — foreclosure sales, short sales, auction sales and deep discounts — are appearing in bountiful number, if anyone out there is hungry for a bargain."

NYTimes

TWO-BEDROOM apartments have long been the workhorse of the New York City real estate market, accounting year after year for the largest percentage of apartments sold.

When the recession hit, buyers fled the market and prices fell across the board. After things stabilized in late 2009, the market share for two-bedrooms had dropped from a typical 40 percent to as low as 25 percent, because more people had found that they could afford three-bedrooms, which took sales away from two-bedrooms.

Now, after a lull that has lasted for more than a year, two-bedrooms are back.

NYTimes

Real Estate Investors Look to the Future, and See Signs to Buy Apartment Towers

NYTimes

FOR some New Yorkers on the hunt for an apartment, the must-have item in the search is nothing as prosaic as a walk-in closet or a second bathroom. It is a number — a lucky number.

NYTimes

Buy in the Bust?

"Mr. Sternlicht hopes to foreclose on many of Corus’s errant borrowers, restyle their buildings and sell units for a significant profit once the real estate market recovers. He says he and his investors can afford to wait until then because the F.D.I.C. has provided them with $1.4 billion in zero-coupon financing and an additional $1 billion in low-cost loans that can be used to complete unfinished projects."

See full article in NY Times: "Barry Sternlicht, the Real Estate Bargain Hunter"

Better buying a recent apartment, than off-plan?

"“There are so many disasters out there,” said Lawrence Rich, a vice president of Prudential Douglas Elliman. “Every day you hear of another new building that’s in trouble, and people don’t want a building where there might be problems and they won’t enjoy living there while it all gets worked out.”"

Full Article

Slumburbia in the USA

"After several days in foreclosure alley, this broad swath of the Central Valley that has been rated by some economists as the most stressed region during the Great Recession, I can’t see such apocalyptic forecasts coming true. Yes, huge developments are empty, with rising crime at the edges, and thousands of homes owned by banks that can’t unload them even at fire-sale prices. But through it all, the country churns and expands, unlike most other Western democracies. That great American natural resource — tomorrow — will have to save the suburban slums."

NYTimes

Jingle Mail in the USA

"It was April 2006, a moment when the perpetual rise of real estate was considered practically a law of physics. Mr. Koellmann was 23, a management consultant new to Miami. Financially cautious by nature, he bought a small, plain one-bedroom apartment for $215,000, much less than his agent told him he could afford. He put down 20 percent and received a fixed-rate loan from Countrywide Financial.

Not quite four years later, apartments in the building are selling in foreclosure for $90,000.

“There is no financial sense in staying,” Mr. Koellmann said. With the $1,500 he is paying each month for his mortgage, taxes and insurance, he could rent a nicer place on the beach, one with a gym, security and valet parking."

Source: NYTimes

Mortages and United States Residential Property

"MUCH has been said about the high rate of home foreclosures, but the most interesting question may be this: Why is the mortgage default rate so low?

Enlarge This Image

David G. Klein

Related

Weekend Business: Richard Thaler on strategic defaults and home foreclosures.

After all, millions of American homeowners are “underwater,” meaning that they owe more on their mortgages than their homes are worth. In Nevada, nearly two-thirds of homeowners are in this category. Yet most of them are dutifully continuing to pay their mortgages, despite substantial financial incentives for walking away from them."

Full story

Brisbane Featured in New York Times

Once Just a Stopover, an Australian City Grows Up

By JULIE EARLE-LEVINE

Published: November 4, 2007

ONCE just a stopover for tourists en route to either the Great Barrier Reef or the beaches on the Sunshine and Gold Coasts, the eastern Australian city of Brisbane has emerged as an alluring destination in its own right.

....

WHERE TO STAY

The Emporium Hotel (61-73-253-6999; 1000 Ann Street, Fortitude Valley, www.emporiumhotel.com.au) has doubles from 295 Australian dollars.

The recently opened Saville South Bank hotel (61-73-305-2500, 161 Grey Street, South Bank; www.savillehotelgroup.com) is a short walk to the Queensland Performing Arts Complex, the State Art Gallery and museums. Studio apartments with kitchenettes from 398 Australian dollars.

http://travel.nytimes.com/2007/11/04/travel/4next.html
or
http://travel.nytimes.com/travel/guides/australia-and-pacific/australia/brisbane/overview.html