The Chill in US Real Estate

You know things are starting to get dicey out there when even a multimillion-dollar penthouse in Manhattan can’t sell.

It seems a developer in SoHo, having just recently finished primary construction for his high-rise condo tower, realized the project’s focal point – a $45 million, 8,400-square-foot penthouse – was just a bit too much.

“The air is very thin up there in that buyer pool,” was the way the builder, Kevin Maloney, put it to Bloomberg.

You’ll love the Solomon-esque solution Maloney came up with.

The penthouse has a wonderfully grandiose name: the Summit of SoHo.

Sure, it has its own indoor pool. And yes, it has 23-foot living room ceilings. Plus, it has not one but two private elevators. One goes to the lobby; the other is so you don’t have to take the stairs to the penthouse’s upper levels (for entertaining, a spa and a rooftop kitchen and grill).

But the stock market cracked hard at the start of the year, with the S&P 500 down 11% at its lowest point in 2016, while Hong Kong’s Hang Seng dropped roughly 17%. In recent months, Chinese real estate buyers pulled a disappearing act from realtor offices all around the U.S. And after years of ultra low interest rates and easy lending policies, there’s now an excess of iconic luxury living quarters on the island of Manhattan.

The developer’s solution? Chop his project’s expansive space into two smaller penthouses – an $11 million, 3,000-square-foot unit (though at that size, it hardly seems big enough for one’s collection of bespoke suits), and a second, 5,400-square-foot unit for a comparatively cheap $29.5 million.

I’ll keep an eye on it and let you know if either gets a sale or not.

Red Hot Real Estate No More

These days, even the bond rating agencies, ever late to calling the turns in any market, are jumping on board…

Fitch Ratings noted last month that home prices in San Francisco have “risen to a level unsupportable by area income.” According to Fitch, that makes the local market overvalued by around 16% – which probably means that you’d need to double that figure to estimate a true “fair value” for this once white-hot luxury market.

Just in the last few days, the National Association of Realtors noted weakening demand among foreign buyers, blaming a strong dollar and rising U.S. home prices for pushing U.S. real estate beyond the bounds of affordability even for rich foreigners.

The crash of China’s Shanghai Composite stock index (down nearly 22% just since the start of 2016 with nary a bounce) forced many of the country’s wealthy elites to pull back on their property purchases. You can see the impact in regional news headlines around the country:

In San Francisco: “At High End, SF’s Housing Market Finally Cooling Off.”

From The Boston Globe: “High-end housing market cooling off.”

In Fort Lauderdale: “South Florida condo market cooling off.”

Will it get worse for premium real estate? I think we’re still in the early innings.

Uncle Sam’s War on Cash (Property Buyers)

The story didn’t get much media play back in January, but that’s when the U.S. Treasury Department and its Financial Crimes Enforcement Network (FinCEN) announced the issuance of “Geographic Targeting Orders” for New York City and Miami.

The “GTOs,” according to FinCEN’s press release, require “certain U.S. title insurance companies to identify the natural persons behind companies used to pay ‘all cash’ for high-end residential real estate.”

Basically, the folks at the Treasury are worried whether corrupt foreign officials or “transnational criminals” might be laundering piles of dirty money through these multimillion-dollar property purchases.

Or is Uncle Sam just worried about the flood of Chinese cash into the American real estate market? “All cash” is practically a synonym for rich Chinese property buyers.

At least, that used to be the case. As we’ve seen in the “cooling off” headlines around the country, the absence of this class of real estate purchaser is starting to be felt in markets around the country.

An article in The New York Times late last year really brings the impact of Chinese property buyers into focus. When it comes to purchasing a home in America, they pay an average price of $831,000 – nearly double what international buyers from India ($460,000), Britain ($455,000) and Canada ($380,000) pay for their homes in the U.S.

In coming quarters, I believe the FinCEN “targeting orders” will likely spell the end of the property-speculation craze among Chinese buyers. The government action may only be limited to New York City and Miami, but it will have a deep chilling effect everywhere. After all, it only takes another press release from FinCEN to announce an expansion into other American cities of its inquiry into the identities of those big-money, anonymous all-cash property buyers.

The trend will take time, with the data trickling onto economists’ spreadsheets. But as Chinese elites continue to pull back from American real estate, well, get ready for a “Wile E. Coyote” moment in high-end luxury home prices – and more pressure on the Federal Reserve to reverse its stance on interest rates.

How to Value a Freehold Property

There are no yardsticks to measure the value of a freehold property. This is because evaluating a freehold is not an accurate science. However, you can follow certain guidelines on what you need to take into consideration when valuing a freehold, which is produced by the advisory services that give free advice to leaseholders. You must also take these three factors into consideration:

1. The current value of the property

2. The annual ground rent

3. The number of years currently left on the lease

Also, evaluate the expected percentage increase in property value that results from extending the leases of different lengths, along with forecasted long term interest rates and inflation rates.

Take help from an expert valuer rather than trying to work out a figure all by yourself, to present before the freeholder. An expert valuer will be able to give you the best advice, which will enable you to make a practical offer.

You will find expert valuers online. They will help you with the entire process of negotiation and buying the freehold.

For the benefit of the freehold, most surveyors add a little extra to a property’s value. This is done after comparing it with similar property with the same number of years on the lease but no freehold.

First, approach your freeholder informally, before you serve him with a first notice. This document should include your preliminary offer for the freehold, which starts off the legal process of buying it.

A word of caution. Never produce an initial notice without obtaining an expert valuation. If you make the wrong evaluation in the initial notice you won’t be able to take back the offer. After the initial notice, wait for the freeholder to reply to it with a counter notice by a date that you have given. The freeholder must be sanctioned at least two months from the date the initial notice is served.

If the freeholder is not sending his counter notice within this period, the leaseholders can take matters into their hands. They can apply for a vesting order at a court. It is now up to the court to move the freehold to the leaseholders. So freeholder’s should respond on time to the initial notice for their own benefit.

Buying a share of freehold will make little profit if you already have had a decent length lease. You would still have to give the same authorized costs as someone with a short hire, but would lead to a drop in the value of the property.

Lakeview in New Orleans: The Comeback

Hurricane Katrina and the levee breaches that followed absolutely decimated Lakeview in New Orleans. However, Lakeview, perhaps more than any other neighborhood in the New Orleans, put forth an extremely robust rebuilding effort. This neighborhood has made a most incredible recovery since the storm. Lakeview always was a very family oriented neighborhood. Young professionals have flocked to the area to rear their children. The safety of the neighborhood coupled with the fact that it is in New Orleans make it one of the more thriving neighborhoods in the city.

Lakeview and Hurricane Katrina

Lakeview was one of the most spoken about areas of New Orleans during the massive press coverage provided from the hurricane. With a multitude of photos showing the devastation of the area, Lakeview became a household name and the keynote neighborhood referenced when the press referenced New Orleans homes affected by the massive storm. Because the Lakeview subdivision is located so close to the levee breach, it represented the defining point between the areas affected and not affected by the breach of the levee.

Since many of the homes in Lakeview were owned outright and were not required to have flood insurance by a lender, many Lakeview properties didn’t have flood insurance when tragedy struck. This had many homeowners in the area looking for other forms of financial assistance to assist in rebuilding. Once again, this put Lakeview in the forefront of conversations of “how to rebuild New Orleans”.

Lakeview Demographics

Lakeview in New Orleans is surrounded by bodies of water on three sides. On the northern boundary lies Lake Pontchartrain. The Orleans Avenue Canal is to the north and the 17th street canal is to the West. This is another draw to the neighborhood. Daily residents can be found boating on the lake, fishing right off the bank, or simply people watching on the concrete steps of Lake Pontchartrain. If it’s seafood you crave you can catch it yourself. Pull out your crab traps and shrimp nets and enjoy the bounty the water surrounding you has to offer.

Statistics from tell us that the majority of the people living in Lakeview are white collar professionals. More than 22 percent of male residents are employed in a management role. Almost another 20 percent are employed in sales or office occupations. Other business and financial occupations make up roughly 10 percent of the jobs males in the area hold. Women living in Lakeview are similar in the occupations they hold. Over 25 percent are employed in an office or sales capacity. Another 14 percent are employed in technical or healthcare occupations and another 10 percent make their living in some educational field.

How Katrina Affected Lakeview Real Estate

Hurricane Katrina changed Lakeview forever. Prior to the hurricane, Lakeview was a desirable area but many of the homes had not been updated in years. Because Lakeview was focused on by the media as the epicenter of the housing crises from the hurricane, real estate investors from all over the country flocked in to purchase the “flooded and gutted” homes in Lakeview. As a result, property values of Lakeview homes for sale shot up. In many instances, unlivable homes without walls were selling for more than they were in full living condition prior to the storm. Since many of the homes in Lakeview were quickly rebuilt by investors for a quick sale, Lakeview became one of the few areas that residents could move back to and real estate values increased substantially. With freshly redone homes on the market, Lakeview homes became a hot commodity. Today, real estate searches for “Lakeview Real Estate” rank among the top real estate searches in the country according to

New Orleans Amenities

Orleans Parish also enjoys one of the largest areas of green space in the country. Established in 1854 New Orleans City Park is yet another beautiful draw to the Lakeview neighborhood. It is one of the oldest urban parks in the country. After the Great Depression, President Roosevelt’s Works Progress Administration was at the heart of City Park’s growth and development. Close to 20,000 out of work residents were given jobs to put up the roads and fountains, and Tad Gormley stadium. The many art pieces of City Park came from this era as well. City Park occupies 1300 acres, making it the 6th largest park in the country and almost twice the size of Central Park in New York. Some of the beautiful Live Oaks that are scattered throughout the park are estimated to be over 600 years old with one being almost 800 years old. Hurricane Katrina had a devastating effect killing off roughly 2000 of these majestic trees, but at least 5000 have been planted since then to take their place.

City Park in New Orleans is home to the famed Dueling Oak. This was the hotspot for gentleman to settle their scores via duels using pistols. It is located on Dueling Oaks Drive; and is situated between the Besthoff Sculpture Garden and the New Orleans Museum of Art. The brother in law of Governor William C.C. Claiborne, Micajah Green Lewis was killed here after being shot by former president of the state senate Bernard de Marigny. Dueling was banned in 1890; but while there may not be any more duels, City Park still remains a great source of inspiration and beauty for the residents of Lakeview and the many visitors that come to New Orleans each year.

Another New Orleans institution that had added flavor to the Lakeview area in recent years is Morning Call. In 2012 the New Orleans beignet machine opened a location inside the Casino building on Dreyfous Avenue. Originally established in 1870, Morning Call is also known for its rich café au lait, blended with chicory coffee. Cash is the only form of payment accepted. Of course, the residents of Lakeview are well aware so they will always have the cash on hand.

Lakeview Today

Lakeview in New Orleans is one of the finest neighborhoods New Orleans has to offer. Whether it is a young family looking to purchase a home in the city without being “in” the city, or you’re a college student looking for a rental; Lakeview has you covered. It is not known for its diversity, but it more than makes up for that with its roots and the determination of its residents to continue making it one of the safest, most family oriented of neighborhoods in the city of New Orleans.