Miami's hot condo market just got very complicated

MIAMI – The tragic collapse of a residential tower spooked South Florida homebuyers and real estate investors alike into reassessing the risk of buying in the Miami-area condo market.

The market had been booming before Covid. Then it soared even higher as the work-from-anywhere culture took hold. But then in late June, scores of people were crushed to death in the Champlain Towers South collapse in Surfside.

Now, the market is focused on engineering inspection reports from older towers, which are required by the state to get recertified every 40 years. Insurers are also under scrutiny, as they hold the keys to new purchases in the market.

“No one in their right mind is going to buy a condo built before 2000 unless they have a safety certificate for the structure of the building, and it doesn’t exist today,” said Peter Zalewski, a South Florida condominium expert, consultant and analyst.

The Miami area has long been a tale of two condominium markets: those built before and after the year 2000, when strict new building codes born of damage from Hurricane Andrew went into effect. Now, after the tower disaster, the divide is suddenly even wider.

“Zoning was upgraded to the point where Miami Dade County zoning is probably some of the toughest in the state or the country, and as a result of that we were able to build again,” said Zalewski. “The thing is people weren’t aware of it prior to Champlain. Now, everybody knows about it, so there’ll be a great divide.”

While condo boards are rushing to send letters of assurance to owners, Zalewski said potential buyers cannot see inspection reports.

“No condo I’ve ever seen, and I’ve been here since 1993, has ever openly shared that information. There is a lack of transparency in the condo market here, by design, it is a sell-side market,” he said. “The condo association might put out the information right now. How did they find these engineers and why haven’t they shared them previously?”

Read the rest here.

I don't think this should be looked at as a purely Florida situation. Anyone looking at buying a condo, anywhere, should exercise their due diligence. Three things to look at for older buildings are the most recent structural integrity survey and how old it is, the current level of cash reserves held by the HOA to cover not just routine but also major repair expenses, and the annual HOA fees. In particular if the seller is unable or unwilling to provide the actual structural inspection report, or if there has not been one within a reasonable period of time, then I'd walk away. In Florida condo associations are not typically required to provide that to prospective buyers and in the past have rarely done so. I don't think that is going to fly anymore. 

Big companies are taking big hits in San Francisco real estate

Cloudera exited its downtown San Francisco office early last year with plans to sublease the space and move its employees south to the software company’s Silicon Valley headquarters.

But the pandemic left the company with nobody to take over the office, forcing it to take a substantial real estate write-down.

At DoorDash’s nearby former headquarters, a tenant defaulted on rent a month into lockdown, resulting in lost income for the food delivery company, which was doubling as a landlord.

Airbnb said in its earnings report on Thursday that it took a $113 million impairment in the first quarter “related to office space in San Francisco that we deemed no longer necessary.”

Combined, those three companies have recorded nearly $200 million in real estate impairments in the past year after Covid-19 turned the Bay Area office market into a dead zone. That dollar figure swells to almost $1 billion when adding in lease-related write-downs from large tech employers Salesforce, Dropbox, Uber, PayPal and Zendesk.

While software and internet companies continued their stratospheric ascent in 2020, the plush offices they call home sat dormant, leaving San Francisco’s commercial real estate market with an unfamiliar supply glut. Much of the financial fallout was borne by the very tech companies that led a decade-plus bull market and expansion spree, snapping up massive amounts of space at record prices and often subleasing out full floors to start-ups and out-of-town businesses that were seeking a Bay Area outpost.

Read the rest here.

FOR SALE

A beautiful church temple with an interesting history.

Details.

New York City Real Estate in 2020

A very good and detailed analysis of the NYC real estate market over the last year can be found here. The executive summary is that with a few exceptions, it was ugly. Manhattan was the worst hit with the rental market seeing average rent drops by percentages rivaling those of the Great Depression. 

Manhattan real estate gets hammered

• The number of signed contracts for co-ops and condos in Manhattan dropped 57% in July compared with a year ago, according to a report from Miller Samuel and Douglas Elliman.
• The high-end of the market is getting especially hard hit, with co-ops priced at $4 million to $10 million down over 75%.
• The number of unsold apartments is now at the highest level in almost a decade, according to Jonathan Miller, CEO of Miller Samuel.

Read the rest here.

L.A. Wants To Seize Private Apartment Building to Prevent Rent Increases

Los Angeles politicians will make housing affordable, by force if necessary.

On Friday, City Councilmember Gil Cedillo introduced a motion that asks city staff to draft plans for using eminent domain to seize Hillside Villa Apartments, a 124-unit, privately-owned development in the city's Chinatown neighborhood to avoid rent increases at the property.

The property is currently under an affordability covenant that requires its owner to rent out a number of its units at below-market rates. That covenant is set to expire soon, meaning rents on some 59 units will increase to market rates—which means rent hikes of up to $1,000 per unit.

"We think it is important enough that we need to take action to preserve those units. We don't want to generate more homeless people," Conrado Terrazas Cross, Cedillo's communications director, tells Reason, saying that many tenants would not be able to afford the coming rent increases.

"I think it's a brilliant idea but I need to know: Are we in Cuba or Venezuela?" says Tom Botz, the L.A.-area developer who owns the building, about the proposal to seize his property.

Botz tells Reason he purchased the development company that built Hillside Villa roughly 20 years ago. The building's construction had been financed by a number of government grants and loans, including a $5.4 million loan from Los Angeles' since-abolished Community Redevelopment Agency in 1986.

A condition of that loan was that the developer rent out units in the building at below-market rates for 30 years. Other government grants and loans that helped finance the building came with their own specific affordability requirements.

The affordability requirements from the redevelopment loan were supposed to expire in June 2019. Beginning in May 2018, tenants in Hillside Villa started to receive notices that their below-market rents would be increasing in a year's time. In March 2019, tenants were given the option of signing new leases at the increased rates or face eviction.

Read the rest here.

The California Dream: A second bedroom

IRVINE, Calif. — This was the state that embodied the middle-class American dream: Move west, acquire a small slice of property, perhaps with a palm tree or two.

For decades, comfortable suburbs like this one just south of Los Angeles boomed with new housing tracts designed to attract the latest arrivals. When space started to come at a premium, developers moved inland, building more homes for people who could not afford the more expensive coastal areas.

But now, cities across the state are grappling with a dwindling stock of housing that can be considered affordable for anyone but the wealthiest. In much of the state, a two-bedroom apartment or home is virtually impossible to acquire with anything less than a six-figure salary.

“It’s hard to imagine how all of California doesn’t become like New York City and San Francisco, where you have very rich people and poor people but nothing in between,” said Richard K. Green, an economist and director of the Lusk Center for Real Estate at the University of Southern California. “That’s socially unhealthy and unsustainable, but it’s where we are going right now — affordability is its worst ever, and we’re seeing a hollowing-out of the middle class here.”

Read the rest here.

Americans still overrate homeownership

Some people never learn: Polls show that Americans still view their homes as the best and safest place to invest their hard-earned cash.

Gallup asked Americans this month to choose the best “long-term investment.” Real estate was the most common pick, ahead of mutual funds, bonds and other options. Similarly, Fannie Mae’s National Housing Survey asked Americans to assess whether various kinds of assets amounted to a “safe investment with a lot of potential.” As has been the case since before the financial crisis, “buying a home” beat out all the alternatives.

The fact that Americans still financially fetishize homeownership baffles me. Never mind that so many people lost their shirts (among other possessions) in the recent housing bust. Over an even longer horizon, owning a home has not proved to be a terribly lucrative investment either. Don’t take my word for it; ask Robert Shiller, winner of the 2013 Nobel Prize in economics who previously became a household name for identifying the housing bubble.

Read the rest here.

Honor and Money or When a Deal Isn't Necessarily a Deal

It’s a deal. Or is it?

After apartment-hunting in Williamsburg, Brooklyn, for months this spring, Dr. Ronald Nath finally lucked out with a two-bedroom duplex at the top of a condominium, listed at $800,000.

A day after a crowded open house, Dr. Nath, a Massachusetts surgeon, offered $803,000 for the unit, which was to be a home for his son David, a television news producer. But because of its location and the outdoor spaces on both floors, the unit attracted more than a dozen offers, which prompted the seller to request higher bids.

For his “best and final” offer, which usually signals the end of the haggling process, Dr. Nath promised $912,000, which seemed to do the trick. The seller congratulated Dr. Nath and told him the unit was his; a contract was drawn up.

Not so fast. A few days later, like a kite in a gust of wind, the price soared again, to $995,000. Insulted by what he described as being “played,” Dr. Nath refused to raise his offer and ultimately lost the unit to a buyer who plunked down $1.1 million. “I was absolutely outraged,” he said. “When you give your word that a deal is done, you’re supposed to fulfill your agreement.”

A real estate deal, like any other business transaction, isn’t ironclad until signatures wind up on a contract, said Tom Le of the Corcoran Group, the seller’s broker, who defended his clients’ right to get the highest possible price for their unit, even if it left some raw feelings.

Read the rest here.

Unfortunately I have had some experiences of a similar nature. It's a long story but the executive summary is that back when I was on the parish council of the church that I was received into Orthodoxy through, money was tight. We were experiencing some real financial hardships and the decision was taken, albeit reluctantly to part with some land we had hoped to build a permanent church on.

Twice we entered negotiations with a certain individual, and twice that individual stiffed us and reneged on his word trying to drive the price down Of course he knew our backs were against the wall. In the latter case he did so after contracts had actually been signed. Because of the way real estate law works in California, and the fact that he had "accidentally forgot" to deposit the security deposit check into escrow we were left with no practical recourse other than to just accept the fact that we had been cheated.

It happens. Sadly not everyone in the world is on the up and up and some people are highly unethical.

FWIW here is my take on the ethics (which is not the law) on real estate and business negotiations in general.

An asking price is just that. Nothing is firm. Offers and asking prices can go up or down UNTIL everyone says "we have a deal" and shakes hands. After that, it is grossly unethical and dishonorable for either the buyer or seller to withdraw from that deal for anything other than the most extraordinary reasons. And in the case where one or another party does break their word without good cause, the other party should immediately withdraw their offer or consent to any deal and have no further dealings with them. By continuing to deal with someone who has demonstrated an  unscrupulous character you are enabling this sort of knavery.

I may be the last man on Earth who still holds to the view that a man's word is his bond, but that's my take on things. If I can't trust your word and a handshake then your signature isn't worth the paper it's written on. How can you trust anything they say about anything? A man who negotiates in bad faith is a liar. He can, and will, lie about any number of other things.

Such persons should be shunned both personally and professionally.

For Sale

Sometimes I think the internet is one giant garage sale. But the prices can be a little steep. A random look at things for sale found two of possible interest to reactionaries like me...

One 1929 Cadillac Fleetwood Transformable Limousine, possibly the last of its design. Asking price $250,000. Oh yeah it was also the official limo and parade car for President Herbert Hoover.
See here for the listing and more photos. Home Jeeves!

One 12th century Bavarian castle complete with moat. It's been renovated to make it quite liveable while retaining much of its medieval and military ambiance. Asking price $7.4 million. See here for details and more photos.

Britain: Homeowners downsizing to cut bills

A third of home owners who plan to downsize in the near future are doing so in order to cut their household bills, a study has found.

Just over half of home owners surveyed who are planning to move house in the next three years said they plan to downsize, compared with just over a fifth (22pc) who are looking to trade up to somewhere bigger, Lloyds TSB found.

But "empty nesters" who no longer need the space are not the only ones looking to trade down, and while 63pc of those looking to do so are aged over 55, more than a quarter are aged between 46 and 55 and around 5pc are aged between 36 and 45, the study found.

Money worries have strongly influenced people's plans to downsize, with 33pc of potential downsizers saying they need to move to reduce their household bills and 37pc saying they would like to free up some equity. Three in 10 of those planning to trade down said they were doing so to boost their retirement income.

Read the rest here.

For Sale: A house with a record

It was 1928, the year before the stock market crash, when the 29 year old businessman bought the 30,000 sq ft waterfront residence on Miami's Palm Island from Clarence Busch of the Anheuser-Busch family for $40,000. He quickly made some additions; a wall, a new pool that was one of the largest in the state and a cabana for his guests. The house rapidly gained a reputation as the site of wild parties. There are no records of the neighbors complaining about the noise though. Nor were the parties diminished by the depression that soon seized the country. The owner was in a depression proof business. He loved the house and spent a great deal of time there as a getaway from the stresses of his work and is reputed to have also plotted the hostile takeover of some of his business rivals while vacationing there.

His name was Al Capone and his Miami getaway house is for sale.

A House For The Big Guy

$13.5 million will buy you the house built for Jesus Christ in 1928.

HT: Archer in the Forest

Inside the foreclosure factory; they are still playing by their own rules

In a quiet office in downtown Charlotte, N.C., dozens of Wells Fargo’s foreclosure foot soldiers sit in cubicles cranking out documents the bank relies on to seize its share of the thousands of homes lost to foreclosure every week.

They stare at computer screens and prepare sworn affidavits that are used by lenders in courts across the country to seize homes. Paid $30,700 to start, these legal process specialists, the title that goes with the job, swear an oath under penalty of perjury that they're corporate vice presidents. They're peppered with e-mails from managers to meet daily quotas of at least 10 or 11 files day. 

If they fall short, they face a verbal warning. Then written. Two written warnings could cost them the paycheck that supports a family. As more than one source for this story told msnbc.com, "I can't afford to lose this job."

Read the rest here.

Banks are the enemy.

A million-dollar mortgage goes unpaid for years while couple fights foreclosure

The eviction from their million-dollar home could come at any moment. Keith and Janet Ritter have been bracing for it — and battling against it — almost from the moment they moved into the five-bedroom, 4,900-square-foot manse along the Potomac River in Fort Washington.

In five years, they have never made a mortgage payment, a fact that amazes even the most seasoned veterans of the foreclosure crisis.

The Ritters have kept the sheriff at bay by repeatedly filing for bankruptcy and by exploiting changes in Maryland’s laws designed to help delinquent homeowners avoid foreclosure.

Those efforts to protect homeowners have transformed Maryland’s foreclosure process from one of the country’s shortest to one of the longest. It now takes on average 634 days to complete a foreclosure in Maryland, compared with 132 days in Virginia.

Read the rest here.

SF audit finds foreclosures riddled with errors

An audit by San Francisco county officials of about 400 recent foreclosures there determined that almost all involved either legal violations or suspicious documentation, according to a report released Wednesday.

Anecdotal evidence indicating foreclosure abuse has been plentiful since the mortgage boom turned to bust in 2008. But the detailed and comprehensive nature of the San Francisco findings suggest how pervasive foreclosure irregularities may be across the nation.

The improprieties range from the basic — a failure to warn borrowers that they were in default on their loans as required by law — to the arcane. For example, transfers of many loans in the foreclosure files were made by entities that had no right to assign them and institutions took back properties in auctions even though they had not proved ownership.

Read the rest here.

America is becoming a nation of renters

There was fresh data from the government Tuesday showing that the American dream of owning a home is fading fast.

The share of all U.S. privately-owned houses that stood empty fell in the fourth quarter to its lowest since 2006 as the number of houses occupied by renters rose faster than the pace of new vacancies created by homeowners moved out, according to the Commerce Department. There number of housing units occupied by renters rose by 749,000 in the fourth quarter compared to a year earlier; some 91,000 fewer homes were occupied by owners, the data show.

With the fast pace of foreclosures showing no sign of letting up, the U.S. homeownership rate continues to fall. Just 66.0 percent of U.S. homes were occupied by their owners in the fourth quarter of last year – half-a-percentage-point lower than a year earlier. That’s the lowest level of homeownership since the second quarter 1998.

Read the rest here.

New York City: Socialism for the lucky few

Janio Marrero is a very lucky man. As facilities manager and technical director at the Cherry Lane Theater, Mr. Marrero can rent a lovely apartment above the theater at a discount — a serious discount. For the West Village one-bedroom with exposed brick and wide-beam floors, he pays $750 a month

Yes, it is the stuff that dreams, and apartments on the television show “Friends,” are made of. But compared with what his neighbors pay? Meh.

Just across the hall, a tenant named Arnold Warwick, who has had the same address for a half-century, pays $331.76 a month.

“I don’t plan on dying because I don’t want to give up a rent-controlled apartment,” said Mr. Warwick, who is 80. “I pay so little I’m almost embarrassed.”

In New York City, there is no shame in forking over thousands of dollars a month to live in somebody’s basement or crawl space. This unfortunate hiccup in the magic of the city makes the 16,000 remaining rent-controlled units in Manhattan mouthwatering in almost any context.

Cheaper apartments than the ones above the Cherry Lane do exist in the five boroughs, and a few of them even rent for less than three figures. But Mr. Warwick’s apartment, which has four small bedrooms built up around a wide-open living room, isn’t just cheap. It is also a fabulous apartment.

With 11-foot ceilings, exposed brick walls, piles of hardcover books, and views of chimneys and water towers, it is a 1,200-square-foot monument to the Greenwich Village of our fantasies.

His home is nestled on Commerce Street, a windy little road that stood in for Paris on the series finale of “Sex and the City.” A two-bedroom apartment in that area rents for an average of $4,745 per month, according to the brokerage Citi Habitats. And just down the block at 17 Commerce Street, a 2,200-square-foot federal style town house is currently for sale for $4.975 million.

Read the rest here.

This makes me ill. It is so grossly unfair that it beggars belief anyone could seriously support this.

60 Minutes reports on massive mortgage fraud by... you guessed it...banks

This is unbelievable.  Words fail me.