What happens when mortgage forbearance ends? On today’s State of the Market podcast, Auction.com’s Daren Blomquist joins us to discuss the possibility of a massive wave of foreclosures hitting the market. We talk about current property prices, dive into detailed foreclosure stats, and more. Tune in and get information on everything you need to know as a Realtor, investor, or prospective homebuyer.
Listen to today’s show and learn:
The shadow inventory of foreclosures [4:41]
Daren’s thoughts on what will happen to properties in forbearance [8:21]
The average equity loss for properties in forbearance [11:23]
Foreclosures in Texas [14:37]
Bubble or boom? Daren’s thoughts on housing prices [19:48]
Why the first-time-homebuyer tax credit is the wrong solution [24:29]
The eviction moratorium’s impact on landlords [26:37]
Daren’s foreclosure stats [34:22]
The average price of foreclosure sales compared to total debt [40:47]
Where to find more of Daren’s foreclosure research [42:16]
Daren Blomquist is Auction.com’s new Vice President, Market Economist. Recently, Daren served as Vice President at Attom Data Solutions where he was widely recognized as an authority in the housing and mortgage industries. In his new role, Daren focuses on analyzing and forecasting complex macro and microeconomic data trends within the marketplace and greater industry.
Daren mines real estate data for key insights and trends to help businesses and consumers make better decisions. Prior to Auction.com, Blomquist directed ATTOM Media, a division of ATTOM Data Solutions, which publishes original real estate reports and analysis.
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It’s no news that New York City’s luxury real estate wasn’t skyrocketing in 2018. In fact, 2018 was not all that kind to any sector of the residential market; condo sales plummeted and home transaction values were sliding, registering a steady decline in prices not seen since 2009.
But the slowdown was a normal turn for the market, industry experts say. After years of unparalleled growth, the market is “normalizing” or, as REBNY president John Banks said, it’s going into “a natural cooling off interval after a very hot stretch.”
To put things into context, New York brokerage PropertyClub looked at the past 15 years of sales in the $1 million+ category, to signal out trends in terms of both closed transaction and sales volume, and give us a comprehensive view of how the market performed compared to the years that came before it:
Looking at the sales trend for the past 15 years confirms what REBNY president John Banks was saying; New York City’s real estate market saw a meteoric rise in the past years — with prices and sales of properties seeming unstoppable after the 2008 financial crisis.
A closer look at the market’s performance shows that, in the early 2000s, $1 million+ property sales were fairly rare, with only 1,753 sales being recorded in 2003 across New York City. By 2017 that number rose to 6,881.
In terms of sales volume, while early 2000s saw less than $3.7 billion generated by transactions in the $1 million+ segment, 2017 shattered all previous records with slightly over $20 billion in transactions.
But 2018 stepped in to break the pattern of uninterrupted growth, and ushered in the first slowdown in luxury sales since the 2008 financial crisis. Overall sales volumes for this segment dropped by approximately 12.5% to $17.8 billion.
What does this mean for New York City’s luxury home market?
That it’s time to take a breath.
According to Jonathan J. Miller, who runs the Miller Samuel appraisal firm in Manhattan, “The past year was more of a ‘normalization of the market’, after record activity in recent years.”
In a year-end report by the New York Times, referencing home sales across the city, Mr. Miller said that, comparatively speaking, “sales are not low — they are just not unusually high. It’s like we came off the autobahn: It feels very slow relative to the last three to four years, but historically it’s not.”
Pamela Liebman, chief executive of the Corcoran Group, shared the sentiment: “Since 2009, the market has gone on a very aggressive ride, and I think it’s normal that we see a bit of a slowdown.”
More NYC real estate news:
$238 Million Sale of NYC Penthouse Shatters All Previous Records, Becomes the Most Expensive Sale in U.S. History Massive Home in the Sky Above MoMa Asks $46.7 MillionLuxurious Greenwich Lane Condo Hits the Market, Seeks $18 Million Here’s How Many People Became Millionaires by Selling their Homes in the Hottest Real Estate Markets
Starting from the premise that the words used in home listings can have a significant impact on how much the home sells for — and how fast it sells — Zillow took a closer look at exact keywords used in listing descriptions across the country, and correlated the findings with actual sales.
They took 4.6 million listing descriptions of homes sold throughout the country in both 2017 and 2018 to identify useful patterns and insight we can use to better market our homes.
What they found was quite surprising: while having professional appliances is still in the top 3 most sought-after features, people nowadays seem to really have a thing for steam ovens, pizza ovens, and wine cellars.
If you want to learn more about the findings but this article is too damn long and boring, check out Zillow’s fun quiz here.
Keywords that sell a home for more $$$
Surprisingly, listings mentioning ‘steam ovens’ saw the highest sale premium of all the keywords Zillow looked at, selling for 34% more than expected, with ‘professional appliances’ coming in on second place, selling for 32% more, and ‘wine cellars’ landing the third spot, selling for 31% more.
“Having a steam oven, a heated floor or other luxury features in the home is a signal that there are more than the home’s basic features at play. These homes are special. They likely come with an elevated design sense and the extra touches valued by home shoppers who are willing to pay,” says Skylar Olsen, director of economic research at Zillow. “If you have these features, flaunt them.”
Now, if you find it extra surprising that ‘steam ovens’ are the listing feature that sell homes for more, there’s a decent explanation for that. Zillow also took into account the metro area where that feature was most often mentioned in listing descriptions; and the metro area where prices were higher for ‘steam oven’ homes was Los Angeles, California, where it’s not at all surprising that people would much rather use steam to cook rather than turn on their ovens.
For starter homes (bought primarily by first-time homebuyers), listings mentioning ‘free-standing tub,’ ‘pizza oven’ or ‘wine cellar’ stood out, having sold for more than expected.
A fun finding of the study was that homes featuring ‘steam ovens’ were also the slowest to sell, staying on the market 22 days longer than other similar homes in the same metro and price tier. So then which listing features speed up the sale of a home?
Keywords that sell a home faster
In Zillow’s analysis, fast sales were often associated with trendy design features made popular by home improvement TV shows, such as ‘open shelving’ (homes with this feature sold 11 days faster than expected) and ‘subway tile’ (10 days faster).
Are there any home features that seem to be selling homes both faster and for more money? Apparently, there might be a few:
homes with a mention of a ‘shed/garage studio’ (26% more than expected, 8 days faster than expected)
homes with mentions of ‘exposed brick’ (22% more, 9 days faster)
homes featuring a ‘mid-century’ design style (17% more, 11 days faster.)
But that doesn’t mean you should start revamping your home to fit a more billable profile. In fact, here’s what Zillow Design Expert and founder of Kerrie Kelly Design Lab, Kerrie Kelly, pointed out when the study was released:
“While it’s important to understand what’s popular with buyers, ultimately your home is a reflection of your personal style and how you want to live,” Kerrie Kelly said, adding that “You should design a home that makes you happy every day with features you love, knowing that future buyers may want to adapt it to create their own dream home.”
Now, if you’re wondering what to do if you house doesn’t come with a wine cellar, here’s a handy article by one of our contributors on how to increase the value of your home. Maybe we should also add buying a steam oven to that one.
The Silicon Valley boom paved the way for unprecedented returns for scores of high-tech companies, resulting in a mass influx of highly-skilled professionals to the San Francisco Bay Area.
A surge in job creation invariably boosted housing demand across the region. With a limited supply at hand, the prices quickly spiraled out of control, appreciating at an extraordinary clip.
The effect of rising demand and limited supply quickly resulted in an over-inflated property market which out-priced nearly everyone in the Bay Area counties. Year-on-year growth rates show that the median house price in San Francisco has increased by 1.3%, – to $1.6 million. While substantial, this is the smallest gain since 2012. More significantly, housing prices across Santa Clara County dropped by 6%, averaging out at $1.26 million.
Analysts agree that the explosive growth in the property market are due in large part to the runaway success of technology companies in the region. 2019 ranked among the most active years for IPO listings, leading to an influx of billions of dollars in venture capital, and various rounds of financing activity. This has led to a cooling of expectations as various tech companies such as Slack, Uber, and Lyft, failed to hit their price targets.
Interestingly enough, the steep prices in San Francisco and its surroundings have many homebuyers shift interest to other areas, like Oakland and Berkeley. Home prices in these areas have risen by approximately 4%, reflecting a median house price of $860,000.
Where to next for the Bay Area housing market?
Dozens of economists were recently surveyed regarding pricing in the Bay Area market. The consensus among them was that San Francisco will lose traction as other housing markets like Austin, Texas gain momentum. Apparently, the worst performing real estate market in 2020 is expected to be the Bay Area.
Of the 100 economists that were polled in the survey, 64 of them believe that San Francisco’s housing market will underperform this year, followed by 61 experts who believe that San Jose will underperform. If these predictions hold true, home values across the Bay Area will start to decline. Obviously, residents of the Bay Area have mixed feelings about their home value decline, but those looking to rent and buy properties will be heartened by this news.
The uninterrupted growth in property prices has everyone overly concerned. The majority of real estate developers have been focusing on the high-end market when developing new housing facilities. This has neglected the low and middle-income earners who were simply priced out of the market.
One of the most expensive cities of America
Of course, notable exceptions exist such as Danny Haber of oWOW, a California-based real estate development company which focuses on low-cost, luxury accommodations for the market, in and around the Oakland region. Owing to general trends in the Bay Area, most people do not consider home ownership, let alone rentals. While high home prices affect buyers and sellers, they also have an impact on renters by raising the costs. Unfortunately, the rise in rental prices has outstripped the growth in real earnings by a wide margin.
According to SF Gate, the one third rule is not applicable to the Bay Area property market. Typically, renters spend approximately 33% of their gross income on housing, but in the Bay Area, this is a pipe dream.
Rental prices for a single bedroom apartment in San Francisco can average $2,900 per month, which requires earnings of $105,000 a year. Most wage earners come nowhere near close to that figure. In fact, experts found that San Francisco rentals, including San Mateo and Marin counties, eat up to 50% of gross income. This being said, the costs of living here become more affordable in households with multiple wage earners.
Housing alternative for the Bay Area
Construction costs in the Bay Area rose by 6.7% during 2018, making San Francisco the most expensive real estate market to build in. Typically, increases in demand are met with increases in supply to reduce pricing, but in San Francisco’s housing market this is not the case.
Of course, the tech sector is likely to rebound and this will add further pressure onto housing prices. In the absence of accelerated construction, other viable solutions need to be found.
One possible solution to the housing crisis in the Bay Area is MacroUnits, the system provided by oWOW. These modular-style housing units are built offsite and shipped to their destination.
This alternative reduces the costs of remodeling existing apartments, shortening the time to market and reducing overall costs for customers. A flexible walls system known as Magic Walls is used to maximize the living space and create luxurious accommodations by transforming single bedroom units into multi-bedroom units with additional facilities, all within the same square footage.
By entering the market with lower prices, Danny Haber’s company is rapidly expanding its tenant base, by offering upgraded housing at an affordable price. If this system is implemented at scale, it could become part of a comprehensive solution to the housing dilemma.
More market reports & studies
Here’s How Many People Became Millionaires by Selling their Homes in the Hottest Real Estate Markets Sizing Up the Texas Market: How’s the Lone Star State Fairing and Should You Buy a House Here in 2019? Features that Sell: Here are the Listing Keywords Likely to Get Your Home Sold for More Million Dollar Homes in NYC Aren’t Selling Like They Used To