Palm Beach Developer Tries To Flip Island Mansion For $120 Million, 41% More Than It Sold For In July

From ZeroHedge:

The South Florida housing market is sizzling with hot money from the North East, pushing up homes values sky high over the last year. One example of the mania is in Palm Beach, where a private island was bought in July and was relisted months later for a whopping 41% premium, according to WSJ.

One of Miami’s top real estate developers, Todd Michael Glaser, is taking advantage of the bubble, fueled by Wall Street bankers and other elites who have the economic mobility to leave the Northeast for the Sunshine State.

Glaser purchased 10 Tarpon Way, also known as 10 Tarpon Isle, for approximately $85 million in July and has since relisted the tiny 2.5-acre island for $120 million, or $35 million more than he paid a few months ago. The island was created by dredging crews in the 1930s and is only accessible by bridge. Glaser bought the island from private investor William M. Toll and his wife, Eileen, who paid $7.6 million for the property in 1998.

Tarpon Island

The real estate developer said potential buyers have two options: pay the $120 million now or wait ten months for a new renovation for $200 million.

Concept Drawing Of New Renovation

He said with all the hot money flowing into the Palm Beach area, “a $100 million house isn’t that crazy anymore, believe it or not,” adding that in the last 18 months, eight $100 million homes have been sold.

If a potential buyer wants to wait ten months and pay an additional $80 million. The developer will completely redesign the mansion by doubling it to 25,000 sqft, with 14 bedrooms, in addition to a hair salon, gym, and spa. A new pool, octagonal tennis pavilion, and a golf practice area will be installed on the outside.

Some ask how long will this speculation fever last as the Federal Reserve could embark on tapering its extensive bond-buying program later this year or early 2022.

One real estate expert believes the peak of the South Florida housing market could be nearing:

Dr. Ken Johnson, a real estate economist with Florida Atlantic University’s College of Business, told local news WPLG that a peak in the housing cycle could have already arrived, but he believes a crash is not in the mix because demand still outpaces supply.

It remains to be seen if some greater fool will pay the $120 million for the island mansion or $200 million tens months later after renovations.

Time for The Fed to start tapering the punchbowl?

Greater fools?

Homebuying Startup Orchard Reaches $1 Billion Unicorn Valuation (But What Is House Price Growth Slows … Or Falls??)

Let’s get ready to tumble! New homebuying startup emerges as US house prices begin slowing.

(Bloomberg) — Orchard, which offers cash to homebuyers upfront so they can purchase a new residence before selling their old one, raised $100 million to fuel growth in an ultra-competitive housing market that’s pushing shoppers to find new ways to stand out.

The fundraising round values the startup at more than $1 billion, making it the latest unicorn company to tackle the challenge of simplifying the process of buying or selling a home. Boston-based Accomplice led the round, with existing investors FirstMark, Revolution, First American and Juxtapose also participating.

“We can say we’re a unicorn, which feels good for about five seconds, and then it’s back to the real world of building a business,” Chief Executive Officer Court Cunningham said in an interview. “We’re trying to create a modern way to buy and sell homes, and that’s capital intensive.”

Cunningham, previously CEO of online marketing company Yodle, started Orchard in 2017 to take on what he viewed as a ripe opportunity: Consumers were frustrated with the traditional way of buying and selling homes, and the $1.7 trillion U.S. housing market was big enough to make tackling the problem worthwhile.

Orchard focuses on people who are trying to buy their next home while selling an existing one, a nerve-wracking process that can cause a transaction to collapse or result in households carrying two mortgages.
In addition to offering cash to help clients buy their next home, the New York-based company provides funds to make light repairs before listing the existing home on the market. Orchard seeks to profit by operating as a brokerage and earning commissions.

There have always been services that purchase homes from you. Typically, there firms simply pay off your mortgage, so if you have a higher mortgage balance relative to you home value, you may not like what you are offered. But Orchard is not that model.

If you “List with Orchard,” and your home doesn’t end up selling on the open market, Orchard will buy your home. Sellers in some markets also have the option to sell immediately to the company. Orchard wants you to list for 30 days before selling to them for their backup cash offer price. If you sell directly to Orchard, you’ll also pay an additional 1% convenience fee on top of the 6% you’re already paying commission.

When home prices have been rising at a 17-18% YoY pace, this seems like a good model. But what if The Federal Reserve removes it massive monetary stimulus and/or The Federal Government slows down it fiscal stimulus? Then Orchard, if they purchase your home, will likely lose considerable amounts. Being aware of this possibility, Orchard is likely to buy homes at a considerable discount.

But there is still worries about inflation. Here is the Citi Inflation Surprise index.

Orchard has a northern Virginia site.

Publicly traded companies known as iBuyers are pioneering a high-tech approach to home-flipping intended to make selling properties easier. Those firms include Opendoor Technologies Inc., Redfin Corp., and Offerpad Solutions Inc. A fourth, Zillow Group Inc., recently raised $450 million by issuing bonds, backed by the homes it buys and sells.

Whoomp, there it is.

Slowdown! U.S. Annual Home Prices Gain a Record 18% in July (But Forecast To Slow Considerably By July 2022)

Slowdown! Forecast home price growth for July 2022, that is.

(Bloomberg) — U.S. home prices increased 18% in July compared to a year earlier, according to a CoreLogic Inc. report released Tuesday.

The jump is the largest 12-month gain in the index since the series began 45 years ago. On a month-over-month basis, home prices increased by 1.8% in July from June.

“Home price appreciation continues to escalate as millennials entering their prime home buying years, renters looking to escape skyrocketing rents and deep pocketed investors drive demand,” said Frank Martell, president and CEO of CoreLogic, a global property-information firm.

The rush of home buyers — amid extremely low mortgage rates — has caused a lack of supply, which is unlikely to be resolved over the next five to 10 years “without more aggressive incentives for builders to add new units,” he said in a statement.

But it is the forecast for July 2022 that is interesting. A slowdown in home price growth across the board.

Lets see what happens to wage growth are three out of four Americans lose their Covid benefits as of today.

US Q2 GDP Prices Rise 6.10% Compared To Home Prices Rising At 16.61% YoY While Avg Hourly Earnings Rising At 4.70% YoY (UGLY Chart Warning!!)

For your viewing pleasure.

Looks an awful lot like 2005 before the housing price crash, financial crisis and Great Recession. US home prices, HOUSING inflation, is growing at 16.61% YoY, GDP Price index QoQ (annualized) is growing at 6.10%, and average hourly earnings is growing at 4.20% YoY.

Let’s see what happens in Jackson Hole this weekend!

US Mortgage Purchase Applications Rise 1% From Previous Week, But 16% Lower Than 1 Year Ago

Mortgage applications increased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 20, 2021.

The Refinance Index increased 1 percent from the previous week and was 3 percent higher than the same week one year ago. You can clearly see the Refi Wave associated with the Covid outbreak and sudden Fed monetary stimulus resulting in a lowering of 30-year mortgage rates.

The seasonally adjusted Purchase Index increased 3 percent from one week earlier. Notice the general slowdown in purchase applications with soaring home prices.

The unadjusted Purchase Index increased 1 percent compared with the previous week and was 16 percent lower than the same week one year ago.

Rolling, rolling, rolling, keep those mortgages moving.

US New Home Sales Rise To 708K Units SAAR In July (+1% From June) While Median Price Soars To $390K

The good news! US new home sales rose 1% in July to 708k units SAAR.

The bad news? The median price of new home sales is $390k.

More bad news for the midwest and northeast. New home sales dropped. Most of the growth in new home sales occurred in The West.

Hot, hot, hot! But not in the northeast and midwest. There it is not, not, not.

US Existing Home Sales Median Price Slows To 17.8% YoY In July On Continued Low Inventory For Sale (EHS Increased To 5.99M SAAR)

Feeling hot, hot, hot. Housing, that is!

US existing home sales in July rose to 5.99 million SAAR, beating expectations. But the inventory of home available for sale remains low by historic standards.

The median price of existing homes declined to 17.8% YoY with The Federal Reserve pumping money into the system like there is no tomorrow.

Bloomberg had the following headline: “Sales of Existing Homes in U.S. Rise as Inventory Picks Up.” While that is a true statement, existing home sales inventory is still down 12% YoY.

I wonder if the attendees at the Jackson Hole Fed conference will be discussing the gut-wrenching home price growth? Rumor has it that Fed Chair Powell will use J-Hole as a platform to suggest paring back on the monetary stimulus.

US Homebuilder Confidence Drops To 13-Month Low As Building Material Prices Increase 19.4% Over Past Year

The NAHB Homebuilder confidence index dropped to a 13 month low as building materials rise by 19.4% YoY.

Of course, then we have the University of Michigan conditions for buying a home crashing as well.

Rising home prices and rising construction material costs? Yikes.

Of course, the NAHB had this to say:

“Our expectation is that production bottlenecks should ease over the coming months and the market should return to more normal conditions,” NAHB Chief Economist Robert Dietz said in a statement.

Perhaps, but The Fed needs to slow down its money printing as well.

The most powerful economists in the world?

More Housing Inventory is Coming! 850,000 Borrowers Will Exit Forbearance Between August and October (Will The Fed And Biden/HUD/Congress Take Action?)

The ball is in the court of The Fed, the Biden administration (HUD) and Congress. Will they take action?

There will be more housing inventory hitting the market soon. As home prices are up and most are no longer in negative equity situations, some will decide to sell into this hot market. Obviously not paying your mortgage for 12, 14, 16, or even 18 months is a nice bonus that party is coming to an end.

Zillow’s research found that most are not going to bring their mortgage current. Assume someone took a forbearance and their monthly mortgage cost was $2,000 per month, some may be behind by up to $36,000 when the forbearance period ends. Okay, well what if you can’t make it current? You can defer the payments to the end of the mortgage but you still owe that and many got used to not even paying the regular monthly payment. So a sizable portion will be selling

Here is Black Knight’s Scheduled Forebearance Plan expirations.

Could this be the end of the 16.6% YoY growth rate in home prices? Or will Congress and/or The Biden Administration extend the forbearance? Or will The Fed expand their balance sheet even further??

Will the Biden Administration come to the rescue?