June 25, 2006

‘Sellers Overestimating Appreciation’ In Washington

The Bellingham Herald has this update from Washington. “It appears the Whatcom County real estate market is continuing a transition from a seller’s market to one that is more balanced between buyer and seller. Inventory and days on the market continue to rise. Sellers sometimes must mark down original prices but are still getting offers slightly higher than last year, said associate broker Jim Pope.”

“‘It’s not because home prices are going down, but because sellers are overestimating the amount of appreciation,’ Pope said.”

“With more homes on the market, last year’s frenzy of multiple bids on just about any house up for sale hasn’t been repeated, some local agents said. That was a relief for Susan Burke. She is in the final closing process and plans on moving in later this summer.”

“‘When I saw how much homes were going for in Bellingham, I was concerned that we would be dealing with multiple bids,’ said Burke, who is an economist moving here with her family from Davis, Calif. ‘As far as I know, there were no other offers on the house we found. We spent more than we thought, but we are very happy to be moving to Bellingham.’”

“Although real estate agent Mike Kent believes Bellingham homes are overvalued, he doesn’t see prices going down. ‘There was a study to suggest Bellingham home prices will rise around 10 percent this year, and I think it’s right,’ Kent said. ‘We’re in for a more normal year in real estate. If buyers are waiting for the prices to go down, that would be a big mistake.’”

“Other factors involved continue to affect the market. The biggest, in Kent’s mind, is outside influences. ‘There continues to be a significant amount of people transferring equity into this market from places such as California,’ Kent said. ‘What makes Whatcom County different from other overvalued markets is that we don’t see as many homes being purchased and being flipped.’”

“Through April 30, 2,252 properties sold in Whatcom County. Of those, at least 341 were purchased by people outside of Washington state, according to statistics gathered by a real estate publication.”

“The number could be higher because it can be difficult to pinpoint where people are coming from, said publisher Bridget Witschger. Also, some people list the house they are buying as their address, rather than where they are moving from. Topping the list of out-of-state home buyers are people from California, followed by British Columbia.”

“With many new homes becoming available because of last year’s construction boom, supply has increased, creating a more balanced market, said Peter Roberts, president of the Whatcom County Association of Realtors. ‘Buyers believe it’s more a balanced market, while there are many sellers who believe it’s a seller’s market, so they are insisting on putting out higher asking prices, and those homes are sitting on the market longer,’ Roberts said.”

“‘I don’t believe there is a real-estate bubble here,’ said Roberts. ‘The only thing that is happening now is we’re getting back to a more normal year. We won’t see homes appreciate like they have the past few years, but they will still go up a little, but certainly not go down.’”

“‘If interest rates rise, I would be concerned about a bubble or a bunch of foreclosures if we lived in a community where we had a significant number of people leaving the area or there was a rash of flipping the home, but I don’t think we’ll see that,’ Kent said.”




Phoenix Speculators ‘Move-On’

The Arizona Republic reports that speculation is down in Phoenix. “Almost 17 percent of all the people who bought homes in metropolitan Phoenix last month were from out of state. Sounds high, but actually it’s a figure that’s shrinking. A year ago, 26 percent of all the Valley’s home buyers listed their main address on property records as somewhere outside of Arizona.”

“In May, 7.7 percent of all Valley home sales had California buyers. A year ago, the figure was double that. Most speculators have moved on to other housing markets like Boise, Idaho, and Albuquerque. Or they’ve just left the housing market altogether and put their money in the stock market.”

“The potential ‘home flippers’ are buying more existing homes than new ones. People, who acknowledged they were investors on property records bought 13 percent of all the used homes to change hands last month. These buyers, some of whom can be hazardous to the housing market if they dump properties, purchased about 7.3 percent of the new homes that sold in May.”

“A rising number of homes for sale and flat or even declining prices has housing-market watchers concerned that another more lecherous wave of investors or vulture home buyers could be headed for the Valley. These ‘bottom feeders’ snatched up homes..for bargain prices in 1990 and 1991 when the Valley’s housing market crashed.”

An editorial from the East Valley Tribune. “There are some unsettling signs in the housing market. There seems to be a glut of for-sale signs. Houses are staying on the market longer. Affordability is an issue. Until recently, the Valley always has been relatively cheap compared with other home markets.”

“It’s still lower than Southern California. There’s a big gap in the median home price between the Watts section of Los Angeles ($375,000) and Gilbert ($327,450).” “But our home appreciation has far outstripped the Midwest’s home appreciation. Take for example, Minneapolis-St. Paul. In 2003, the Valley’s median home price was more than $45,000 below their median price. In the first quarter of this year, our median was about $34,000 higher than their median price.”

“It’s much the same for markets such as Milwaukee, Omaha, Neb., and Columbus, Ohio. That means anyone who moves here from those miserable climates is going to have a tough time getting as big or nice a house as they had back home.”

“At the same time, they keep coming. And they’re going to have to find somewhere to live. Of course, they can rent. But rents are going up, too. That may save a lot of investors who bought homes on the spec and thought they’d be able to flip them by now.”




Year-Over-Year Negative Numbers In Second Quarter?

Several readers suggested a topic on what the second and third quarter will bring. “In looking at some of the Florida numbers, I expect 2nd quarter we will start seeing some negative yoy numbers in some cities. I expect Sarasota/Bradenton to be down 5-10% yoy (even if April median stays where it is).”

“For a topic, how about discussing how the Realtors are going to deal with these negative yoy numbers. How will they be able to spin this? They have been able to tout positive yoy numbers even though the market shifted quickly.”

“I just got an email from a desperate Realtor telling me how the area is still up 10% from last year. What she failed to mentioned was that the median is down 15% from January ‘06!! My guess is there will be some new calculation where the result is multiplied by a (-1).”

One reader thinks it will take longer. “If things continue to unfold the way they have been, the 3rd quarter of 2006 is when (assuming they play it straight) the NAR will be reporting significant quarterly declines in existing home prices in metro areas throughout the U.S.”

“Assuming the typical data lag release, that information will hit the press, in mid-to-late November. Just before the Christmas shopping season. Time for the woman’s magazines to break out those ‘joy of a simple holiday’ articles again.”

One reader replied, “Tend to think we won’t get anywhere near that til Xmas ‘07, ‘08 though, no matter WHAT happens to RE this summer/fall. Gotta leave a little room for the ‘We’re in a dazed/shocked phase’ to pass. Americans have goten so far away from even realizing family/friends/community are there, it’ll take them a while to start noticing other people again.”

Another sees a quicker reaction. “I don’t think we’ll have to wait until Nov for Joe Sixpack to have gotten the memo about the economy/housing. We’re seeing articles on housing daily. We see all markets declining daily, interest rates rising steadily, ARMs resetting.”

“So the economy is rapidy declining right before mid-term elections. All I gotta say is Jul, Nov ‘06 is going to probably be a doozy!”

To which another replied, “The info is printed but is it being absorbed? I still see too many people around me planning big purchases and denying the stock market and housing slowdown is anything but the usual cyclical blip.”

And one reader had this reminder, “May New Home Sales: Monday June 26, 10 AM EST. May Existing Home Sales: Tuesday June 27, 10 AM EST.”




What’s Going On In Your ‘Parade Of Homes?’

What do you see in your housing market this weekend? How about homebuilder incentives, “Shopping for a new home? There’s never been a better time to buy a new, ready-to-move-in home than now. June 23rd-25th is your chance to get the beautiful, brand new home you’ve always dreamed of, at the lowest interest rate we’ve ever offered.”

Did you know, ‘Great friends Make Great Neighbors?’

“As home builders nationwide hustle to sell houses in the slowing real estate market, one Central Florida-based company is trying something different: To sell 96 homes within 96 hours. The Mercedes Homes sales event kicks off today with reduced prices on existing inventory in select markets in Florida, Texas, North Carolina and South Carolina.”

The Palm Beach Post, “As the local real estate market enters what the Florida Association of Realtors calls a ‘correction,’ folks have been forced to come up with creative ways to sell homes. So how do you get buyers to look at your property when the list of homes for sale grows longer every day? ‘We’re having artists display their works in our open houses,’ said Realtor Stefanni Gius.”

“‘We’ve also banded together with other Realtors, and the entire community has a Parade of Homes; showings of all the homes for sale,’ Gius said. ‘We all support each other’s open houses.’”

Here’s one from a reader. “Just got back from the Jersey shore (Long Beach Island). I’ve been vacationing there all my life. I have NEVER seen so many For Sale and For Rent signs as I did this past week.”

“The For Sale signs I get, but why so many For Rent? Down there for rent means seasonal rental (i.e. by the week, month, or summer). So my question is this; does anyone else see signs of people cutting back on vacations this summer? And why is this? High gas prices? Can’t afford it with all the high mortgages, car payments at home? It was curious, for sure.”

Another reader sees a sign on the internet. “I’d like to see some statistics showing some sort of correlation between sales slowdown month-to-month and the number of ALL CAPS POSTINGS ON CRAIGSLIST.”




‘Going Through The Refinancing Game’ In California

The Daily News has this update on debt levels in California. “Many families set off on a borrowing binge in recent years as low interest rates allowed lenders to loosen standards. Mortgage payments as a percentage of disposable income topped 11 percent at the end of last year, a historic high.”

“The debt buildup can be blamed largely on the availability of home loans, and on homeowners spending in many cases under the assumption that rates would stay low until they could pay them off. Now that they are rising again, consumers who took out variable-rate loans are getting hit.”

“‘I think they’re going to be shocked, particularly in the the area of mortgages,’ said Phillip Shrotman, a financial planner in Long Beach. ‘If they bought on an adjustable-rate mortgage, they’ve already seen at least a 100 percent increase.’”

“Philip Board, a financial adviser in Upland, said he’s hearing the same concerns. ‘I had a gentleman call me yesterday to ask if he should cash out his retirement to pay off his home equity line,’ he said. ‘He’s been going through the refinancing game and he’s been having fun and now he can’t sell his house for what he wants. He makes a fair amount of money but he spends, too, and now he’s living paycheck to paycheck.’”

“Advisers urge clients to convert variable home loans to fixed, if at all possible.”




Weekend Bits Bucket & Craigslist Finds

Post off-topic ideas and Craigslist finds here. This thread will be forwarded through the weekend. Also, don’t forget to send your housing bubble pictures to:

photos@thehousingbubbleblog.com




Condos ‘Poised To Take A Hit’ In Philadelphia

Some condo bubble reports from the Philadelphia Inquirer. “When it comes to price, Philadelphia was the biggest winner. The city’s median represented a 32 percent increase over the 2004 median. The address for much of the region’s home-price success? Downtown Philadelphia and surrounding neighborhoods, where loft conversions and new construction on long-vacant former industrial and government-owned property moved speedily from conception to reality.”

“‘You can’t stand too long on any corner, or they will turn you into a condo,’ said Bari Shor, an agent in Center City.”

“Can Philadelphia have too many million-dollar high-rise condos? As the city’s real estate market slows along with those of the region’s and the nation’s, some local observers say that high-end housing seems poised to take the biggest hit.”

“It’s my gold-faucet condo theory,” said Fred Glick, president of US Loans Mortgage L.L.C. in Old City. ‘Ten separate developers hire consultants who tell them to build high-end, high-rise condo buildings, and 10 different shovels go into the ground. When you look closer at the market, there are only enough buyers for five of them.”

“Real estate agents say they are seeing a summer slowdown in sales in all price ranges for the first time in two years. As a result of the current slowdown, city listings are climbing into the thousands of units. And, with interest rates heading upward, buyers have been losing that sense of urgency that they need to buy a particular house now.”

“‘For the first time in years, buyers are low-balling offers and then moving on to the next house when the seller won’t budge,’ agent Mark Wade said.”

“Although investors have played a major role in pushing up prices in many neighborhoods in the Northeast, (broker) Chris Artur said, higher prices have cut the number of them by about 50 percent and sent them down to the Kensington area.”

“‘We are now about one-third investors and two-thirds first-time buyers, but a lot of those buyers come with credit problems that need to be addressed, even though lenders will still give you 100 percent if all you have is a pulse,’ he said. ‘It’s taking a while to get these sellers to look at reality,’ Artur said.”

“The long term for the Philadelphia market still looks good, even if, as Center City Realtor Allan Domb insisted, ‘half of the projects planned likely will never be built.’”