Day: January 23, 2018

What’s Coming To High End Real Estate Wealth – Hint: Bargain Basement Prices

When it comes to anecdotal evidence I always strive, or at least prefer, to use as first examples, references that I have seen with my own eyes, or have directly encountered in one manner or another. Today is one of those days. What you infer from the following is up to you to decide, which is, as it always should be.

However, with that said, let me make clear that the examples I’ll post below may, or may not, be entirely accurate. Yet, with that said, what it may pertain going forward for a lot of areas in the coming months or years may be, let’s just say: jaw-dropping.

I have expressed many times over the years certain instances where I believed, or at least felt, that I had a better grasp of what was percolating within certain sectors than most of the so-called “analysts” or “fund managers” paraded across the media.

Far too many times I would hear one of these “experts” talk about how well, or how bad, such and such a place within the U.S. might be doing because of their recent flight into ______(fill in the blank) as to attend some convention, or “show” where they were speaking as to hawk their own wares, shares, or services. i.e., “I just got back from Silicon Valley and home prices there look to be continuing to rise, therefore real estate everywhere should also be a great investment for the ongoing future.” Blah, blah, blah.

This has pretty much been the gist of most “expert analysis” I’ve seen over the years. e.g., Absolute crap. So now with the above for context, let me add some of my own that I’ve been watching first hand as of late. So here we go…

Long time readers know I recently moved just outside of Columbus Ohio a few years back, To keep it, “general” as the say, let’s just say my neighborhood is in the northeast suburb known as New Albany. This area is a far different area than anyone’s first mental image when thinking about a suburb on the skirts of Columbus. i.e., This ain’t no cow town. As a matter of fact, the people who now live here probably have never seen anything resembling a cow except on the menu of our local Smith & Wollensky’s™.

Again, in this quadrant of what is generally known as the N.E. portion, high-end everything is here. Homes, shopping, cars, planes, you name it. Again – this ain’t your grandmother’s cow-town area any more. e.g., New Albany was voted “America’s Best Suburb” by Business Insider™ in 2015.

As I’ve opined previously, one can easily bounce into one’s Bentley®, travel about 5 miles to the exclusive shopping domain of the “need to be seen” known as Easton, order a Tesla™, grab a steak, and top the evening off at Tiffany’s for a memento to remember the evening. All while walking, in heels.

When I jog it’s very common, almost routine for me to see not one, but multiple high-end sports cars. e.g., Lamborghini®, Ferrari®, Rolls Royce®, et cetera. Actually, much like when I lived in KY., I would occasionally almost get hit while trying to cross some intersection and shout, “Hey! W -T – …Oh hey nice car”, for it was many times something along the lines of a super car, or other exotic. (For those wondering “Kentucky?” the answer is yes, I used to live within running distance of the Ruler of Dubai’s thoroughbred farm. And when it was “auction season” the amount of middle east wealth that flew into Lexington was extraordinary. It’s not called “The sport of King’s” for nothing. But I digress.

The above is for context, nothing more, but it’s important because of what I’ll now add to it. And that is this: the housing or homes in this area itself.

I personally keep tabs of the homes here, because it’s my neighborhood. And what happens here not only gives me some form of hands-on insights, but also, because I live here, and like it more than I had ever thought originally, it is via this guise that allows me to look at things through a lens that’s not distorted, and try to make sense of what may truly be going on, and the underlying reasons that go along with it. In other words: I have a true vested interest in it. So I’ll tend not to kid myself. At least, that’s the hope.

So here’s what I’m witnessing…

Right before the tax reform bill was passed, late last year there was a sudden rise in “for sale” signs and what I’ll deem as an all but momentous fall in asking prices of homes.

I began noticing during my run a plethora of signs that appeared seemingly overnight, if not literally. These aren’t your garden variety type “for sale” sign. They are all custom-made, standardized, and quite actually esthetically pleasing for what one deems as a “for sale” notice. Or said differently, they’re made to be seen, yet at the same time blend in as to be inconspicuous if not really looking. Yet, that’s exactly what they are, and so I began following the market carefully ever since.

What I’ve watched over the past months has been utterly jaw dropping. No hyperbole intended.

When I use the term “million dollar homes” depending on where one lives the term means little. Yet, what these homes represent are a “value” as compared to most like it. (Think: Palo Alto CA, where a $Million gets you a garage, literally.)

If you were to live in the N.E., say Boston proper, these homes would range somewhere around $10Million+. New York, probably $15+. Yet, what they do have very much in common, as far as pricing, is their local real estate taxes.

And that is where one can see, since the passage of the tax reform bill, and its reduction for allowing local taxes (aka SALT) to be capped at $10K, and new mortgages of only $750K that things are going to get real turbulent when it comes to high-end housing.

Whether one is buying, selling, or just trying to keep up their appearances of wealth, many today are going to find major adjustments to their entire net worth, because many are predicated on their house value.

And if what I’m seeing holds and is key to what’s coming? For many – it’s going to suddenly become a very different world.

Below are just three examples I’ve pulled from Realtor™ dot-com website. I use these for the following reason:

They’re emblematic of what I’ve been watching, not outliers.

I’ve taken a few screen shots of the main page that shows the house so you can get an idea of what the representative examples I’m talking to actually are, along with a snapshot of their rolling listing prices and taxes paid. (Again: All from the Realtor web site, and all publicly viewable pages)

So why are these of any relevance one might be asking? The reason is this: Some of these listings are at half, yes half of their original selling or listing prices. I have watched one property drop their price a half million dollars in one fell swoop the day after the tax bill was passed. That drop represented 1/3 of the entire listing price and was over $1,000,000.00 lower than its original paid price prior. Think about that, for that’s not “chickenfeed” no matter where one lives, or income status.

This is just the last 60 days. And then there were others that had done similar, and just pulled their listings off the market entirely when the tax billed passed. If they were still currently listed it is my estimation that there would be twice as many listings as there are currently. Again, no hyperbole intended. As I iterated prior -“It’s been jaw dropping” too say the least.

Below are just a few examples. All are non-working screen shots. To wit:

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To give you an idea of the area and current pricing…

Just to make the point using the top image posted. That home was finally listed at the price of $799,000, but that’s because of the list it was thought to sell for at – auction. I am under the assumption that it went for even less, which would be less than 1/2 of the asking price just a year or so prior.

I personally watched a home in the same neighborhood that sold prior at near $2Million not that long ago listed at $800K with special instructions to “Bring Offers!” Owner is highly motivated! The listing has since been removed, I believe in hopes that “spring” might bring better market conditions. I’ll jst make the observation of – If what I’m observing currently holds? Spring may not spring eternal like most realtors or home owners pray for.

I can’t make this point strongly enough: If this is happening here? (whether it’s good or bad is not the point) I can only wonder what is currently going through the minds of people in similar areas. But what’s far more important is this…

What does this do to the brand new tax base and economy that grew up and out of it?

That’s the real question to be on the lookout for further clues.

© 2018 Mark St.Cyr