May 27, 2015

This Run-Up Has Been Historically Exceptional

A report from McClatchy DC. “Two new measures released Tuesday show home prices continued their upward climb earlier this year, even as sales remain lukewarm. U.S. house prices rose 1.3 percent from January through March, according to the Federal Housing Finance Agency House Price Index. It marked the 15th straight quarter in which prices rose on the index, compiled from information about mortgages sold to or guaranteed by Fannie Mae and Freddie Mac.”

“‘Home prices are now, on average, roughly 20 percent above where they were three years ago,’ said Andrew Leventis, the principal economist for FHFA. ‘This run-up has been historically exceptional and is particularly notable in light of the limited household income growth and modest rate of inflation observed during that same period.’”

“Translation: People aren’t earning much more, yet home prices are rising faster than the rate of inflation in much of the country. San Francisco and Denver saw the biggest jump in home prices on the Case-Shiller index, jumping by 10.3 percent and 10 percent respectively. Dallas prices rose 9.3 percent over March 2014. A McClatchy article earlier this month raised concerns that some parts of the nation might be seeing housing bubbles, a concern both recognized and dismissed by David Blitzer, chairman of the Index Committee for S&P Dow Jones Indices.”

“‘The only way you can be sure of a bubble is looking back after it’s over. The average 12 month rise in inflation adjusted home prices since 1975 is about 1.0 percent per year compared to the current 4.1 percent pace, arguing for a bubble,’ he acknowledged in Tuesday’s report. ‘Home prices are currently rising more quickly than either per capita personal income (3.1 percent) or wages (2.2 percent), narrowing the pool of future home-buyers. All of this suggests that some future moderation in home prices gains is likely.’”

The Wall Street Journal. “The S&P/Case-Shiller Home Price Index released on Tuesday was the latest report to show a relentless rise in housing prices, causing some economists to ask: Is another bubble forming? ‘There is no bubble to be anxious about,’ said David Blitzer, managing director and chairman of the Index Committee for S&P Dow Jones Indices. Price growth in most markets is ‘a lot softer’ than it was a year ago, he noted.”

“To be sure, some markets, such as San Francisco and Denver have seen staggering gains. Denver has surpassed its peak home prices in 2006 by nearly 17%. Lawrence Yun, chief economist for the National Association of Realtors, has been among the loudest sounding the alarm that prices are too high. But he said that he isn’t worried about a bubble, just that the lack of affordability may cause demand to evaporate. ‘In a sense it is demoralizing for people who want to save up for a down payment,’ he said.”

“Another concern is a possible jump in interest rates. John Burns, chief executive of John Burns Real Estate Consulting Inc., said that would put homes out-of-reach for many at current price levels in many major cities. If rates rose to 6%, homes in more than half of those markets, including Los Angeles, San Francisco, Miami, and Denver, would be overvalued. ‘We are in a pretty precarious environment,’ Mr. Burns said.”

“Economists also aren’t concerned about a price bubble because far fewer new homes are being built than a decade ago so there is little concern about oversupply.”

From Bloomberg “Purchases of new homes in the U.S. rose more than projected in April, a sign this part of the market is picking up steam during the busiest selling period of the year. Housing starts soared in April to a 1.14 million annualized rate, the most since November 2007, Commerce Department figures showed last week. More permits, a proxy for future construction, were issued than at any time since June 2008.”

“The median sales price increased 8.3 percent from April 2014 to $297,300, the report showed. Purchases rose in two of four U.S. regions, led by a 36.8 percent surge in the Midwest, the biggest jump since October 2012. Buyers are getting help from low borrowing costs during the housing market’s busiest time of the year. The average 30-year, fixed-rate mortgage fell to 3.84 percent in the week ended May 21, close to the level at the start of 2015 and well below last year’s high of 4.53 percent in early January 2014.”

The Press Enterprise in California. “Home sales picked up in April as builders sold 517,000 new single-family houses across America at a pace that is up 26 percent from April 2014, according to a new Census Bureau report. Builders in the West bested that home building rate with a 39.8 percent year-over-year gain. The report released Tuesday, May 26, 2015, put new single-family home sales at a seasonally adjusted annual rate of 130,000 in the West, nearly one-fourth of all homes sold in April. It was the fifth consecutive month showing sales of 130,000 or more.”

“At some point, said Dennis Handler, director of Metrostudy’s Southern California region, new home sales will rise. He’s pinning it on the moment resale home inventory wanes and a fresh supply of new homes come into the Inland market at the lower end of the price spectrum. Still, the Metrostudy report noted a $135,000 difference between new and resale median prices of Inland homes, with less than 30 percent of Inland homebuyers currently able to afford a new home. The median sales price of new houses sold in April in the U.S. was $297,300; the average sales price was $341,500. In the Inland area, Handler said most new home starts, 37 percent, were in the $300,000 to $400,000 price segments. Twenty-eight percent were $400,000 to $500,000 range.”

The Bay State Banner in Massachusetts. “Jill Edwards likes her three-bedroom apartment on Munroe Street well enough. But with real estate prices inching up in the Roxbury neighborhood she’s called home most of her life, she’s looking for something more permanent. She was among dozens of prospective buyers perusing condominiums in Roxbury and Dorchester, looking for the right mix of affordability and space. Priced at $293,500, the condo is one of several listed in Roxbury priced below $300,000. ‘I want to get in the market before it gets crazy,’ she says.”

WIVB in New York. “It is an eyesore in this neighborhood of well-maintained Colonial-style homes. The two-story house on Goundry Street in North Tonawanda has been vacant for years, and the owner, Donna Neal has even tried give it back to the bank for a dollar. ‘Hasn’t been my house, I haven’t lived in it. I haven’t wanted it, tried to give it to them,’ said Neal.”

“The owner can’t give the property away because the bank says more is owed on the mortgage–than the property is worth. Neighbors, like Stan Fularz are getting frustrated because the house is like a sore thumb. Fularz offered to buy the house, but Donna says the bank would not allow it, since Stan’s offer wasn’t enough to pay off the mortgage. ‘Yes, I wanted to tear it down, open up the yard, double the size of my lot.’”

“In the meantime, the bank is paying the taxes, the insurance, sewer and water, and the upkeep of the property, which is puzzling to Fularz who suspects the house is costing the bank–and the Federal Housing Administration which guaranteed the loan–more than the loss if they had accepted his original offer.”

“Donna has also learned there are liens on the property that have to be paid before the deed can change hands, and seems to be how Goundry St. ends up with this zombie property: Stan can’t buy it, Donna can’t give it away, and the bank won’t take the title. ‘They put a new roof on it. They cleaned out the backyard, and emptied out the house,’ Donna Neal asks herself, ‘who’s decision is it for the bank to keep losing money by the day? Bank statements indicated more than $50,000 is owed on a mortgage that started out at about $40,000. Shouldn’t the bank be looking to cut its losses?’”




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May 26, 2015

Because It Has Been Good, It Must Be Good Forever

The Torstar News Service reports from Canada. “A group of midtown Toronto residents has banded together to fight what it’s dubbed ‘density creep,’ amid a push for midrise development citywide that shows no signs of abating. The group of about 50 neighbours claims the project will ruin their stretch of million-dollar homes set on deep, private lots. ‘I’m really concerned about my property value going down,’ says Lisa Goodwin, 49, a stay-at-home mother of two who has lived in a four-bedroom dwelling for 19 years. ‘Right now all the houses are $1.1 to, say, $2.2 (million) but they’re looking at putting in places that are only $500,000.’”

The Guardian on New Zealand. “Economists in New Zealand have expressed alarm at a housing market boom which could soon see average prices of property in the country’s largest city pass the $1m mark. In Auckland, the cost of an average domestic property has risen from $550,000 during the last property boom in 2007 to nearly $810,000 now. Some houses are increasing in value by $1,000 every day while 36 suburbs in the city now have an average house value of $1m or more. And at current rates the whole city’s average will be $1m within a year-and-a-half.”

“Small, one–bedroom apartments are selling for $800,000 and delapidated wrecks in barely desirable suburbs are fetching more than $1m. ‘The narrative goes because it has been good in the last 10 or 15 years, it must be good forever,’ said Shamubeel Eaqub, principal economist at the Institute of Economic Research. But it is impossible for this to continue, he says. ‘Auckland is in a massive bubble.’”

From Arabian Business. “With rents now back soaring and tenants having to compete once again for units, we were surprised to find an interesting report that claims that as much as a fifth of Dubai’s prime properties lie empty for most of the year. This might sound high but it is actually in line with international statistics, which claim that one in four apartments in major cities across the world lie empty. ‘There are no recorded statistics for absentee owners, but in my opinion, I would safely say it is currently in the region of 20 percent of properties, of which buyers mainly come from Europe, Russia, the GCC and to a lesser degree the Indian sub-continent,’ Andrew Cleator, luxury sales director, LuxHabitat, told the Khaleej Times newspaper.”

“Is it time for Dubai to follow suit and implement some form of penalty, such as a tax, on absentee landlords and reduce the number of units lying empty across the city? ‘No we don’t need a tax on undeveloped property as that would most likely lead to an oversupply of property across the market. The ecosystem’s success is the result of a mixture of foreigners permitted to own property, commercial enterprise, the tax status and the overall lifestyle. As a result, Dubai has a huge amount of property under development (visible all around the emirate), and rather than the market at risk of not keeping pace with demand, there is more likely a risk of oversupply,’ said Ryan Mahoney, CEO, Better Homes Real Estate.”

Invest Asian on Singapore. “Real estate prices in Singapore have plummeted since the beginning of 2015, and analysts are worried that the city-states’ property bubble could burst soon. The government of Singapore has tried to cool its property market since 2009. The implementation of the Additional Buyer’s Stamp Duty in late 2011 imposed an additional 10% tax on foreigners buying property, and was then increased to 15% in 2013 resulting in a reduced transaction volume. Since then, prices have suffered a massive decline and many real estate developers are saying the measures have gone too far, destroying Singapore’s luxury property market.”

“‘Average residential rents across all market segments, particularly the high-end, are on the decline, coupled with a weak secondary market,’ warned Kwek Leng Beng, executive chairman of City Developments Ltd. ‘If this trend continues, with prices dipping more, some mortgage borrowers affected by lower rentals may have difficulty servicing their loans, possibly leading to forced fire sales,’ said Kwek.”

The Hindustan Times in India. “If you own a house and it is unoccupied, you may soon have to pay a new tax—the vacant apartment tax— which will be double the amount levied on the property at present. This move will open up approximately 4.79 lakh houses in Mumbai in the rental market. The draft document states, ‘In order that the vacant flats and plots are put to use, there should be double taxation… This will deter the tendency to maintain the plot and the flat vacant for speculative gains.’”

“Real estate experts welcomed the move. ‘We talk of housing shortage, but the number of vacant houses are increasing by the day. The move is necessary,’ said Pankaj Kapoor, CEO, Liases Foras, a real estate research firm. ‘With an increase in number of houses in the market, the high rentals will be moderated.’ Yeshwant Dalal, president, Estate Agents Association of India, said, ‘Most of the vacant houses are owned by investors who have purchased for speculative gains.’”

Bloomberg on China. “China’s Ordos city, where towers that sprang from Inner Mongolian farmland now sit empty, is showing the hangover has just begun from a decade-long building boom. The city whose fortunes reversed as a coal boom turned to bust is grappling with China’s slumping property market that researcher SouFun Holdings Ltd. said led to more than 10 ‘ghost towns.’”

“Five years after the first building was finished in the eastern city of Tianjin’s replica of Manhattan, the district remains almost deserted. Locals in the city of Handan, where a burst property bubble left half-constructed high-rises, have blocked streets to protest soured investments. ‘Many small-city developers are running into financial trouble,’ said Liu Yuan, a Shanghai-based research director for Centaline Group, China’s biggest property agency. ‘It’s the problem Ordos faces after its property bubble burst.’”




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May 25, 2015

Buying At The Top Of What They Can Afford

The Mercury News reports from California. “How high does this ladder stretch? With spring buyers vying for a limited number of properties, the median price for Santa Clara County homes reached yet another all-time high in April. Sticker shock spread throughout the region, with prices for single-family homes jumping from a year ago in all nine counties, according to CoreLogic. ‘Prices are jumping,’ said Kristine Kim-Suh, a Palo Alto-based agen. ‘Some properties are selling for $30,000, $40,000 or $50,000 beyond last month’s comparables, and it’s making buyers that much more aggressive. For example, they know that the comparable is $825,000 and they’re bidding $885,000, they’re so anxious. It’s even surprising the listing agents.’”

“On the Peninsula, ‘nothing has slowed down,’ said Alain Pinel agent Nick Granoski, who recently worked with first-time homebuyers Becky and Brandon Stroy, who had been outbid and worn out since their house-hunting began in December. But by throwing an extra $400,000 on top of the $1,350,000 list price on a Mountain View ranch-style home in the Varsity Park neighborhood, the Stroys were finally winners. ‘There were 17 other offers and ours was sort of just barely high enough to win,’ said Brandon, an attorney. He received news of the successful bid while on his way to work, taking it in with ‘a mixture of joy and relief and surprise — and then terror, I guess.’”

The Denver Post in Colorado. “Southwest Denver has long served as a refuge for those seeking urban affordability. But one of Denver’s last remaining low-cost havens isn’t escaping the huge jump in rents and home values seen across the metro area. In Valverde, the prices of homes sold have gone up from $111,221 to $195,858 the past two years, a 76.1 percent increase. In Ruby Hill, sales prices have gone from an average of $136,036 to $216,112, a 58.9 percent jump. Juanita Chacon, an associate broker with Re/Max Alliance in Denver, describes selling a 3,125-square-foot lot at 31st and Wyandot Street for $400,000 — sight unseen.”

“Heather Heuer, a managing broker with PorchLight Real Estate Group in Denver, raises a concern. Investors were previously the most active buyers in southwest Denver, fixing up distressed bargains and putting them back on the market, until owner-occupants started outbidding them. Essentially, they are buying the flip without the fix, bypassing an important step in the life cycle of neighborhood revitalization. ‘Most people are buying at the top of the value of what they can afford,’ Heuer said. ‘People are paying more for a lesser product.’”

BostInno reports from Massachusetts. “Though Boston is currently in the midst of a development boom, its luxury housing market is beginning to wane. A substantial amount of the cranes dotting the skyline are erecting high-end residential complexes, but if the rate for which these homes are purchased continues on its current pace, they may end up vacant. New data compiled by RedFin indicates Boston has the highest year-over-year decrease in luxury home buying out of 600 cities analyzed.”

“To determine this, RedFin examined the most expensive 5 percent of homes sold in each city and compared them to the bottom 95 percent of homes in those market. Cities with 25 or more luxury home sales in the quarter are the only metro areas included in the report. For Boston, the average luxury home sale was for $3,590,000, constituting a decrease of 18.7 percent. Alexandria, VA, with $1,512,000 and -12.4 percent respectively, was the only other city to have a double-digit decrease.”

“Still, that’s not to say the luxury market in Boston is truly suffering or will continue to do so. ‘While there have been fewer sales at the ultra high end of $5 million plus, the $1 million to $2 million range is as strong as ever,’ said RedFin Boston agent Peter Phinney.”

Bloomberg on New York. “Here is good news for the plutocrat who wants to try out Manhattan’s ritziest neighborhoods before taking the multimillion-dollar plunge. The market for super-high-end rentals is booming, with plenty of enticing options for tenants of every taste. The financial considerations are different at the upper end of the rental market. A two-bedroom apartment at One57, the posh tower south of Central Park, that’s listed for $13.5 million is also available for rent at $32,500 a month. With a 20 percent down payment and a 30-year mortgage at prevailing rates, the monthly carrying costs for a purchase come in at more than $50,000.”

“Renting, meanwhile, frees up the down payment for investing, an option that’s particularly enticing if you think condo prices have gotten too high to keep climbing. ‘If you feel like things have gotten frothy, you might decide to rent now and buy when the market takes a dip,’ says Thorne Perkin, president of Papamarkou Wellner Asset Management, which manages money for about 150 family offices.”

From Delaware Public Media. “Home sales are leaping with spring energy, although prices still have a long way to go to reach the levels before the housing downturn. The typical home in the region has recouped only 5 percent of the 23 percent it lost in value during the housing bust in 2007, according to a Berkshire survey by Kevin Gillen, chief economist of Meyers Research. While more homes are changing hands, prices are still getting dinged in foreclosure hot spots such as Middletown. In the first quarter of 2015, sales of properties in the 19709 zip code increased a robust 44 percent. But prices declined 10.7 percent year over year.”

“After years of sitting on the sidelines, more prospective buyers are feeling confident about making a move, says Andrew Bryan, who leads a statewide REMAX agency based in Dover. ‘Activity is brisk, a lot of properties are moving, although prices aren’t going up at the same rate,’ he says. That is especially true in New Castle and Kent counties, where short sales and bank-owned properties continue to impact prices. ‘When you are looking at price reductions of tens of thousands of dollars, it is very difficult to complete with those houses,’ he says.”

The News Tribune in Washington. “Next door to my home there’s a big, vacant house. The doors and windows have been boarded up with plywood since October 2013. By the city’s standards, the house is derelict. And it’s one of roughly 300 properties just like it across Tacoma. Walk down just about any block in my neighborhood and you’ll find one in a similar state of despair and disrepair. The same goes for most neighborhoods, or at least the poorer ones. According to city of Tacoma code inspection supervisor Dan McConaughy, the inspectors he oversees board up two or three houses a week.”

“These days, however, McConaughy is more frustrated than usual. And it’s the banks that raise his ire. He describes an all-too-common scenario in which homeowners get a foreclosure notice and leave, thinking they’re relinquishing the property back to the bank. But the bank, for financial reasons, drags its feet on finalizing the foreclosure, presumably waiting for just the right time unload the property, when a buyer will materialize and there’s not a risk of it becoming a ‘real-estate-owned property’ that they’ll be financially on the hook for.”

“What McConaughy says is different now is the length of time homes stew in what he calls the ‘black hole’ of foreclosure. Of the 300 or so derelict properties in Tacoma, he estimates that about 60 percent are wallowing there. A house we visit on East G Street has been sitting empty since December 2011; not far from it, on McKinley Avenue, another has been boarded up since August 2012. ‘We’re dealing with, like three or four major banks,’ he says. As we pull up to the next empty house on his list, McConaughy says, ‘I can almost assure you that some of those people behind those big desks aren’t living next to something like this.’”




Bits Bucket for May 25, 2015

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May 24, 2015

Buyers Acknowledge They’re Overpaying

A weekend topic on bubbly media reports. The Tyler Morning Telegraph in Texas. “It’s a seller’s market, as homes in Tyler and Smith County are being snapped up quickly and builders work hard to meet growing demand. It’s not Dallas yet — where demand has artificially increased asking prices — but East Texas is well out of the Great Recession, according to a new report from the Smith County Appraisal District. ‘It’s getting crazy now,’ Realtor Amy Montanye, of the Montanye Team, said.”

“‘I have a family I’m working with now, who are from California,’ she said. ‘They see our home prices and to them, those are cheap. So they’re excited. But it’s also frustrating, because the houses are going off the market so fast — as soon as I send them an email with some listings, asking which homes they want to look at, the home is off the market. It’s got an offer before my buyer even has a chance to look.’”

“But that’s just where a seller wants to be. ‘We have a listing in Flint, for example, that would normally sell for $95, $96 per square foot,’ Ms. Montanye said. ‘But the seller used to be in real estate, and she knows what the market is doing. And she knows her home is mint. So she’s asking more. And she’ll get it.’”

CNBC on Colorado. “When Christopher Simmons began shopping for a home in Denver six months ago, he had no idea the risk and the frustration it would take to get one. The 27-year-old had good credit and cash to put down, but that was not enough in this red-hot market. Finally, Simmons went under contract on a small home in a transitional neighborhood, but only after beating out five other bidders. He wrote a letter to the owners, describing how he had grown up in the neighborhood, and then he added a risky tactic.”

“‘I waived the inspection and the appraisal contingencies on all of the offers I made and on this one as well,’ said Simmons.”

“‘Prices are going crazy. Multiple offers, love letters, videos, all kinds of things to appeal to a seller in order to make yours stand above all the others,’ said Denver real estate agent Jill Schafer.”

From Dow Jones Newswire. “Buyers who are eager to purchase a home are also waiving rights that are standard in sales contracts, experts say. In addition to promising to plow ahead even if an appraisal values the house below the purchase price, buyers are agreeing to forego the option of dropping out if an inspection shows the need for costly repairs or if they are unable to get a mortgage. ‘We’re seeing strategies and situations that have never been experienced here, and I’ve been in the real-estate business since 1987,’ says Tim Davis, managing broker at Weichert Realtors Professionals in Denver.”

“If, for example, a buyer agrees to pay $400,000 for a house, but the appraised value is $380,000, the buyer could have to pay the seller an additional $20,000 out of pocket. In such situations, buyers essentially acknowledge that they’re overpaying. They believe ‘the house will increase in value so much that even if something is wrong with it [they] will still be fine,’ says Doug Miller, a real-estate attorney and executive director of Consumer Advocates in American Real Estate.”

“According to Metrostudy. housing starts of single-family detached homes were up about 15% in Denver and Atlanta in the first quarter, compared with the same period last year, for example. In Las Vegas, they are up more than 36%, says Metrostudy. If new homes are going up, patience could pay off. Chris Langan and his partner put their five-month house search in Atlanta on hold in April after the couple grew tired of looking at houses that cost more than they wanted to spend and more than they thought the homes were worth, he says.”

“‘When I see a lot of people going toward one thing–this mass frenzy–I like to step back and evaluate it,’ says Mr. Langan, 31, a sales consultant for a food distributor. He says they plan to rent for two years, by which point he expects the market to be calmer.”

The Tampa Bay Times in Florida. “Ask Realtors about Tampa Bay’s housing market these days and you’re apt to hear words like fantastic and tremendous. What you probably won’t hear, except in a whispered voice, is: bubble. Yet one research and consulting firm says a data-based analysis it conducted of the Tampa Bay metro area shows another bubble could be forming. ‘You’ve got to be very cautious,” says Hogan E. Copeland III, chairman of Smithfield & Wainwright in Ponta Vedra Beach. ‘You’ve got a lot of speculation in the market right now, a lot of flipping of homes.’”

“According to reports released Thursday, year-over-year sales of single family homes in Tampa Bay shot up 21.6 percent in April with average prices increasing 13.3 percent. That continued a months’ long streak of rising prices that has brought joy to Realtors and sellers.”

“A Tampa appraiser who works all over Florida’s West Coast sees cause for concern. ‘The sharp price rises in some areas is a little scary,’ says Joani Herndon, former chair of the Florida Real Estate Appraisal Board. Herndon says downtown St. Petersburg’s condo market is ‘on fire’ — five condos sold for more than $1 million in April alone — and that demand is hot, too, for newer homes near Tampa’s downtown.”

“‘In South Tampa, builders can’t find enough (vacant) lots so they’re sending people door-to-door to try to get folks who’ve lived in those homes for years to sell,’ Herndon said. ‘A perfect example — I grew up in Sunset Park and never, ever thought that lots not on the water would sell for tear-downs. Now they’re doing it all day long.”’

“In March, a builder paid $475,00 for Herndon’s childhome home and knocked it down. Now a 5,300 square foot house is rising on the lot at a price of $1.599 million. ‘It’s like what’s going on on Snell Isle,’ Herndon says of the upscale area near downtown St. Petersburg where five small homes on one street alone were torn down to make way for million dollar mansions.”

“Founded in 2007, Smithfield & Wainright bases its system on inflation-adjusted sales and rental data from the federal government and on replacement cost data from a private company, Marshall and Swift, that works closely with the construction industry. By focusing solely on rising prices during the boom, banks and investors ‘largely failed to question the intrinsic value of the real estate-linked assets in which they had a massive investment,’ the study said. ‘Perpetually increasing and non-sustainable real estate prices ultimately imploded, contributing to the near-collapse of the nation’s financial system in 2008.’”




Bits Bucket for May 24, 2015

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May 23, 2015

Bits Bucket for May 23, 2015

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May 22, 2015

Nobody Wants To Buy At The Top

It’s Friday desk clearing time for this blogger. “A casualty of Denver’s hot real estate market is the once-lucrative practice of ‘fixing and flipping’ distressed homes. Soaring housing values and a dearth of foreclosures leave investors with a shortage of properties suitable for buying on the cheap and reselling at big profits. Glen Weinberg, owner and chief operating officer of Evergreen-based Fairview Commercial Lending, said that despite rapid price increases along Colorado’s Front Range, residential real estate investors often have unrealistic expectations of property values. Earlier this week, he had a client seeking a $460,000 loan for a Parker home that appraised at $350,000.”

“‘What people think the market is and what the reality is are two different things,’ he said. ‘I joke that if I don’t make a person cry at least once a day, I’m not doing my job.’”

“Prices for the most expensive U.S. homes grew at the slowest pace in three years as wealthy buyers became worried about overpaying following a surge in values, Redfin Corp. said. ‘Rich people have a lot of money, but nobody wants to be the guy or gal that buys at the top of the market,’ said Redfin Chief Economist Nela Richardson. ‘With all the price appreciation, there’s widespread concern that the market may be topping out.’”

“The markets with the biggest price drops for trophy homes were Boston, where values slumped 18.7 percent in the first quarter; Alexandria, Virginia, with a 12.4 percent decline; and Hollywood, Florida, where prices were down 6.9 percent.”

“In Whatcom County, the foreclosure activity has increased significantly in the first four months of 2015. This indicates that banks are now releasing shadow inventory because overall home prices have risen to a point that they can recoup some of the losses, said Peter Roberts of John L. Scott Real Estate’s Bellingham office. ‘This is part of the cleaning-up process,’ Roberts said, adding that he expects banks to work through most of this shadow inventory by the end of 2015.”

“This increase in bank repossession in April in the Inland area and the nation was foreshadowed by a 23-month high in scheduled foreclosure auctions in October 2014, RealtyTrac VP Daren Blomquist. Ray Wright, a Realtor in Riverside, said a few more homes are coming on the market. ‘I’ve been making offers with buyers on more foreclosures than I have in the whole year,’ he said. ‘It might be indicative of something that’s happening naturally as the pre-foreclosures are moving through the system.’”

“Just as the Orlando-area housing market has tightened with a slim inventory of home listings, banks have started selling more foreclosed houses, a new report shows. For the second month in a row, the four-county Metro Orlando area experienced an increase in foreclosure sales. The increase of foreclosure sales comes as Central Florida’s supply of listings is so thin that it is almost half of what is considered a healthy market. And for sellers, median prices in the core market of Orange and Seminole counties are up about 85 percent from a trough of less than $95,000 in January 2011.”

“‘Some people believe that maybe the banks have held back and are intentionally selling now. I’m not sure about that, but it is a very opportune time for banks to liquidate this inventory because of market conditions,’ said Daren Blomquist, VP of RealtyTrac.”

“A real estate agent in Western Australia’s Pilbara says there has been a significant rise in the number of vacant homes in Newman for the first time in years. Kathy Stevens said about 30 per cent of private rentals in Newman were sitting empty. Ms Stevens said it was a far cry from two years ago when there was a long list of people waiting to secure accommodation in Newman. ‘Two years Newman had a waiting list for people wanting accommodation because every available accommodation, caravan park, motel, camp was booked out,’ she said. ‘This is what lead the demand to build. Unfortunately the demand and the finished product didn’t come to the market together.’”

“If you travel through the suburbs of the Indian capital, Delhi, you will see miles and miles of built homes with nobody living in them. In fact, Anshuman Magazine, chairman and managing director of property consultancy firm CBRE South Asia, said in a recent article that ‘around 12 million completed houses’ were ‘lying vacant across urban India.’ And despite this, there is a huge shortage of housing in urban India. Many of these homes have been bought as investments by people who have ‘extra’ money to invest.”

“A substantial portion - no one knows how much - of this is black money on which taxes haven’t been paid. Hence, homes have been bought but nobody is living in them. Further, most builders like catering only to the affluent population in India and home prices have gone beyond the reach of many of them too. Hence, it is not surprising that as per the 2011 Census, 13.7 million households in Indian cities live in slums. The number of people living in these slums is around 65 million and forms around 17.4% of the urban population. Other estimates put the slum population living in Indian cities at a much higher level.”

“A 2012 report quotes S Parasuraman, director of the Tata Institute of Social Sciences in Mumbai, as saying: ‘Nearly 60% of Mumbai’s slum population lives in 8% of land.’”

“As the wind whistles through half-finished skyscrapers and over empty boulevards, a development billed as China’s answer to Manhattan at times bears out the ‘ghost town’ label some have given it. Chinese officials hope the towers of the Yujiapu Financial District will one day house a trading center to rival New York’s Wall Street or London’s Canary Wharf. But more than three years after construction began, all but one of the buildings planned for the development in the northern Chinese port city of Tianjin appear unfinished, alongside vacant spaces where others should stand.”

“As China’s economic growth slows after a decades-long boom, these buildings — many of which still lack exterior walls — some 150 kilometers from Beijing raise questions about the viability of the scheme, which state media say will cost a total of 200 billion yuan ($32 billion).”

“On the side of one of Yujiapu’s unfinished tower blocks, a huge banner listed a phone number, seemingly inviting inquiries for office space. When reporters called it turned out to be a real estate agency — but the woman who answered said she had not heard of the project.”

“The ’spectre of deflation‘ is spurring the world’s major central banks into a dangerous struggle for stronger domestic growth that imperils financial markets and ignores the needs of developing nations, Reserve Bank of India Governor Raghuram Rajan said. ‘I fear that in a world with weak aggregate demand, we may be engaged in a risky competition for a greater share of it. We are thereby also creating financial sector risks for when unconventional policies end,’ Rajan told an audience of economists and investors in New York.”

“Million dollar homes always grab headlines when they sell in Manatee and Sarasota counties. But away from the glitz of high-priced properties, there are thousands of home buyers out in our communities who just want to find single-family homes they can actually afford. Generally priced under $225,000, these homes are becoming more rare on the real estate market, according to a recent statistical study. The reason for this isn’t that homes in this price range are off the market. What’s actually happening is prices are rising on these homes, taking them out of range for people with modest incomes.”

“I saw this myself last year when my wife and I closed on one of the last homes that could be had for under $200,000 in the small Palm Aire neighborhood we live in. Since then, we’ve watched with morbid interest as our neighbors have put their homes on the market for $300,000 or even $400,000. Median home prices are up over 17 percent in the past year in Manatee County, well beyond the approximately 2-percent national growth in incomes over the same period.”

“There are a few affordable existing homes on the market, but they might not be selling as homes to working people. Leah Secondo, a real estate agent in Bradenton, has sold six in the above-mentioned price range this year. All but two went for cash. Talk to any agent in town and they’ll label that buying profile with one of two words: ‘Investor’ or ’snowbird.’”

“What’s the future for the housing market? We’re already seeing it. The local real estate industry is seeing sales growth in the higher-priced homes categories, particularly those priced over $1 million. At the same time, apartments are going up as quickly as developers can build them as many people choose renting over buying. After the recession and the housing market crash, the hope among putative home sellers and real estate professionals was that prices would build back slowly so as not to outstrip buyers’ ability to afford them. So much for that.”

“With any luck, the price boosts will slow soon. But if not, there’s always the next crash.”




Bits Bucket for May 22, 2015

Post off-topic ideas, links, and Craigslist finds here.




May 21, 2015

A Lot Of Speculation In The Marketplace

A report from the Virginian Pilot. “A national research and consulting company says the Hampton Roads real estate market may be approaching another housing bubble. Hampton Roads ‘is starting to show some signs of a bubble,’ said David Macpherson, chief economist for Smithfield & Wainwright. ‘It hasn’t risen up enough to get into the bubble stage, but if it keeps going, then it will be.’”

“According to Smithfield & Wainwright’s report, sales prices in the Virginia Beach metropolitan area for the fourth quarter of 2014 were 14.4 percent higher than what it would cost to rebuild if the homes were destroyed. Regions with ratios higher than 10 percent are considered at risk of forming real estate bubbles, said Hogan Copeland II, chairman of Smithfield & Wainwright. Until 1997, appraisals had to take the cost of rebuilding into account, Copeland said, but laws changed the requirements. ‘There’s no check and balance in there,’ he said.”

“Apparently, we haven’t learned our lesson from the collapse, according to Copeland. ‘I see a lot of speculation in the marketplace,’ he said. ‘Since inventory in certain areas is low, people are starting to bid up on properties again.’”

The Star Telegram in Texas. “New home building permits for Tarrant County rose in April to the second highest number since August of 2014, according to numbers from the Real Estate Center at Texas A&M University. Like many metro areas nationwide, the Tarrant area is showing pent up demand for new homes as well as the need for a larger inventory. Pam Yoakum, a real estate agent in Southlake, said she listed a home two weeks ago for $315,000 and had three offers within six hours. One of the offers was $7,500 higher than the asking price. ‘When properties are priced right, there will be multiple offers,’ Yoakum said, adding however that ‘appraisers are still playing a huge role in getting to closing. More and more, homes are appraising for the sales price.’”

The Aspen Daily News in Colorado. “In the forum broadcast on Aspen Public Radio, city council candidates Mick Ireland and Bert Myrin agreed that the town is in the middle of an affordable housing crisis. Myrin blamed a council decision in 2012 that allowed expanded short-term vacation rentals. Ireland said the problem has less to do with Airbnb-type rentals, and more with global forces of wealth inequality turning properties that once housed locals into second homes. ‘A town without babies, no matter how beautiful or famous or wealthy, has no claim to vitality,’ said Ireland.”

Twin Cities Business in Minnesota. “Downtown Minneapolis has been ground zero for developers of new apartments in recent years. But by the end of March, there were 695 vacant apartment units sitting empty there – enough to fill two larger apartment towers. Minneapolis-based Marquette Advisors reports a vacancy rate of 8.8 percent for downtown Minneapolis at the end of the first quarter in its latest report. That’s up from a vacancy rate of 5 percent during the same time in 2014.”

“Meanwhile, there are several additional apartment buildings still in the development pipeline for downtown. The Marquette Advisors report notes that another 866 new units are expected to open yet this year. For the full year, Marquette Advisors is forecasting that about 3,100 new apartments will open across the Twin Cities. By the end of 2015, that means that more than 10,000 new apartment units will have been completed between 2013 and 2015 across the metro.”

The Real Deal on Florida. “While Palm Beach County’s residential condominium market has rebounded from the worst days of the 2007-09 recession, it has barely treaded water over the past year, data shows. The 12 months ended April 30 saw 11,292 non-foreclosure condo sales, down 3.4 percent from 11,691 in the year-earlier period, according to CoreLogic data compiled by Metrostudy. The average price for new condos plunged 28 percent to $556,818 in the latest period from $769,482 a year ago.”

“‘We’re in the final phase of shaking out inventory from the last cycle,’ said David Cobb, regional director of Metrostudy South Florida. ‘While new construction is pretty muted, the inventory of the last cycle is being absorbed. A lot of re-sales are available.’”

“On the new construction front, Cobb said he knows of only one sizable project currently being built in the county. But plenty more may be on the way. Projects for about 4,000 new condos are underway or in the approval process, according to Jack McCabe, CEO of McCabe Research & Consulting in Deerfield Beach. That pales in comparison to 8,000 in Broward County and 22,000 in Miami-Dade.”

The Daily Pilot in California. “A former co-owner of surf- and skate-wear brand RVCA pleaded not guilty to charges that he bilked his mortgage lender out of more than a half-million dollars when he lied about not being able to repay the loan. In 2010, Conan Hayes persuaded Bank of America to let him sell his Costa Mesa home at a loss, in what’s known as a short sale, even though he had recently sold his stake in RVCA for millions of dollars, according to the Orange County district attorney’s office.”

“According to the district attorney’s office, the short sale of Hayes’ home cost Bank of America $586,245. That was the amount remaining on Hayes’ loan after the sale, but the debt was settled based on the belief that Hayes could not pay, according to prosecutors. Prosecutors say Hayes applied to short-sell the house in 2010 and later told his lender that he was unemployed. He neglected to disclose that he had sold his share of RVCA three months earlier for more than $7.5 million, prosecutors allege. Hayes, 40, could face up to five years in jail if convicted of one felony count of grand theft with a sentencing enhancement for a loss of more than $200,000.”