The Housing Bubble

A report from Wilmington, North Carolina. “Driving into North Topsail Beach, it is hard not to notice ‘For Sale’ signs sprinkled through front yards. The red hot real estate market in the area had driven up property values in Onslow County dramatically, which drove property taxes up as well. In the past year, property taxes had increased by 400 percent.”

“Many residents, especially elderly on fixed incomes, are trying to sell their houses. ‘It’s a big increase and so sudden that they cannoy afford their taxes,’ said (realtor) Dutch Bageant, ’so they decide to sell and it’s tough for them.’”

“Even tougher is that the house prices are beginning to fall, as the housing market seems to be cooling off. Bageant said there are enough houses for sale in the Topsail Beach area to sustain buyers for the next five years. Some realtors said that it was a clear indication that the houses were overpriced.”

“Chris Rackley, head of the Topsail Island Realtors Association said that only twelve houses were sold in North Topsail Beach last month. For now, realtors say that sellers will have to wait.”

From the Journal Now. “In the Triad, Prudential Carolinas Realty experienced some slowing of sales in the upper-tier price range, $450,000-plus, during the first six months of the year, said Tommy Camp, the company’s president. ‘We were going through a period of adjustment or cooling down somewhat from significant rapid appreciation in recent years,’ he said.”

“There are pockets where sales have slowed as interest rates have risen, said local industry experts. To attract buyers, some builders are offering more incentives and some sellers are reducing prices on homes.”

“E.J. Hanes Construction Inc., a Winston-Salem-based homebuilder, has experienced a slight slowdown. ‘We’re doing discounts to make up for it,’ said E.J. Hanes, the company’s president. ‘We find that that’s a necessity to be competitive,’ he said.”

“Three agents told Beverly Godfrey that they are inundated with people moving to the Triad from up north to escape the cold and from people moving here from Florida to escape the hurricanes. ‘Most of these people are coming from higher-priced markets,’ Godfrey said.”

“Some experts said that the Triad is becoming a buyer’s market, which can become a challenge for some sellers. Builders and real-estate agents are optimistic about the local real-estate market and said there’s no risk of a bubble or sharp slowdown in the Triad.”

From the Ledger in Florida. “Home prices in Polk, like in other parts of the country, have risen rapidly, fueled by population growth and investors looking to capitalize on the growth.”

“Current salary levels for firsttime buyers aren’t often in line with the asking prices of many homes. ‘There aren’t a whole lot of young, single people buying properties,’ said Mark Piburn, for Wells Fargo Home Mortgage in Lakeland.”

“But there is hope prices might come down or at least level off. Existing home sales and building permits for new home construction have declined significantly in recent months, indicating a slowing market. Local home sales dipped 24 percent in July, falling to 462 homes from 609 the year before.”

“July also was the fifth month in 2006 where home sales had dropped from the year before. The month also had the largest decline of building permits, down 56 percent from a year before, in county history, according to Ledger records.”

“‘It is a buyer’s market,’ said Jan Bellamy, a Realtor in Lakeland. ‘People can’t ask outrageous prices anymore. That’s what we try to tell our clients.’”

The housing starts numbers are out. “The pace of U.S. home building fell more sharply than expected in August as builders broke ground on new homes at the slowest rate since April 2003, a government report showed on Tuesday. The Commerce Department said U.S. housing starts fell 6.0 percent n August to an annual pace of 1.665 million units, compared to a downwardly revised 1.772 million in July.”

“Compared to a year earlier, August housing starts were down 19.8 percent from the August 2005 pace of 2.075 million units. Permits for future groundbreaking, an indicator of builder confidence, fell 2.3 percent to a 1.722 million-unit annual pace, the lowest in four years.”

“The report came a day after an industry survey showed that home builder optimism sank for the eighth straight month in September to the lowest level in more than 15 years.”

The Times Union from New York. “The housing boom ended more than a year ago, but sellers are having a tough time accepting that fact, says David Lereah, chief economist at the National Association of Realtors. The result has been tumbling sales as buyers stay on the sidelines.”

“The expansion that began in November 1991, when mortgage rates fell into single digits, became a boom following the 9/11 terrorist attacks, when trillions of dollars left the stock market looking for a safe haven in real estate, Lereah said.”

“This correction is different from any others because it wasn’t triggered by a recession, high financing costs or job losses. With unemployment below 5 percent, mortgage rates still below 7 percent and a growing economy, ‘all you need is a price correction, a price adjustment, to bring the market back,’ Lereah told the crowd.”

“The transition to lower prices is already under way nationwide, Lereah said, and will result in a more balanced market than the one that has been dominated by sellers. He said the Capital Region experienced ‘a moderate boom’ without the extreme price run-ups or overbuilding seen in parts of California and Florida. As a result, ‘you don’t need as much of a price correction,’ he said.”

“Lereah predicted prices will drop nationally over the next six months, and that each percentage point drop ‘will bring thousands and thousands of buyers back into the marketplace.’”

“The downturn in the nation’s housing market, including the Albany, N.Y, region, was necessary and will be temporary for the most part, according to Lereah.”

“He predicted a rebound in the next three to six months in most parts of the country, provided the Federal Reserve doesn’t start raising interest rates again. Some areas in the South and West will take longer to recover because the boom of the past five years was much sharper than in New York and other states, he said.”

“The median price for a single-family house in San Francisco, for instance, is $740,000. ‘Who can afford that?’ said Lereah.”

“J. Gregory Connors, president of the Greater Capital Association of Realtors, said agents have to educate sellers about the dynamics of the market and make sure they don’t expect their houses will sell for as much, or as quickly, as they did 18 months ago. Doug Engels, president-elect of GCAR, said, ‘This isn’t a new market,’ Engels said. ‘It’s a regular market that we haven’t seen in a few years.’”

“Lereah said conditions were ripe for a market correction in August 2005 because interest rates had gone up by a full percentage point in the previous year, speculative investors began pulling back and many first-time home buyers were priced out of the market. ‘This isn’t a party with no hangover,’ he said. ‘This is not a prolonged, deep recession.’”

Please post off-topic ideas, links and Craigslist finds here!