Paying More Is Par For The Course
It’s Friday desk clearing time for this blogger. “To stand out from the pack, an increasing number of buyers are penning a love letter to sellers telling them what they adore about the house and why they are the best suitor to end up with it. Anna and Buzz Hays recently wrote a letter to shore up their bid on a midcentury home in a coveted Glendale, Calif., neighborhood. She described what she liked about the home. She also included a few lines highlighting her and her husband’s résumés. The strategy worked. Hays and her husband beat out the other three offers.”
“‘I thought about it and said, ‘I might not have all cash to pay for the house, but I do have writing ability and I can use that,’ says Anna Hays.”
“Tim Ryan parked his car in front of the Riverstone community at 9:30 p.m. He wanted to get a choice lot for his client when sales first began the next morning. Angie Curkovic, Tim’s colleague at Amerivest Realty, beat him to it. She began camping out shortly after at 8 p.m. By the time the sales center opened in the morning about three dozen Realtors were found waking up in their cars. ‘I was ninth in line. In this market sales are getting busier every year. In Naples we don’t have much more land left,’ Ryan said.”
“G.L. Homes sales associate Kim Kissel said the price is also a big reason why people are camping out to get a spot. When complete, Riverstone will have 800 single-family homes that range in price from $336,900 to $575,000. ‘It was crazy,’ she said. ‘Even when our second phase opened up, we had people sleeping in their cars again.’”
“Five months after buying one of Toronto’s new luxury hotel condominiums, Oliver Baumeister is girding for a glut of suites like his to hit the market as the biggest names in the hotel business open hundreds of units in Canada’s largest city. Baumeister, himself a real estate agent, is in no rush to sell. When Toronto’s untested market for five-star condo living absorbs the surplus - say by 2016 - he intends to offload his sky-high unit for a tidy 20 percent profit, and look for his next Canadian real estate investment.”
“‘A bunch of it will sit for a while and it will take time to sell,’ said Baumeister, who has been buying Toronto condominiums for the past four years. ‘But we bought it with the belief that the Toronto hotel condo market definitely has a future. When we sell, hopefully … we’ll see about a 20 percent profit.’”
“‘There has to be a correction - but hopefully not within a year …. it is scary,’ said a Toronto banker who bought one of the Shangri-La luxury units in 2007 and hopes to resell at a 15 percent profit as soon as he can. ‘Obviously there is going to be a spiral-down effect (when all the units hit the market) but that is to be expected,’ said the banker. ‘At worst we’ll break even.’”
“In Toronto, prices increased 10 percent in March alone. At 44, Jeff Douglas says he knows there are ‘more responsible’ things to do than take on a mortgage he’ll be paying until he turns 70. But he and his wife did it anyway, when they bought a 1,300-square-foot duplex in Toronto’s West End last month. The house is pretty basic. Douglas paid $632,000 — that’s $76,000 more than the owner was asking for it. But in Toronto’s hot real estate market, paying more than the asking price is par for the course. Douglas thinks he got a bargain. ‘It was kind of one of the last houses I think we would have had a shot at,’ he says, ‘because the price of the housing goes up every week, as the spring goes on. So we thought this might be our last chance.’”
“Real estate agent Melanie Piche says record-low interest rates are fueling the insanity. To keep the economy going, the Bank of Canada has held its prime lending rate at 1 percent. This winter, banks were offering mortgages for less than 3 percent, making house prices more affordable for many buyers.”
“‘For every extra $50,000, they’re only looking at an extra $200 a month, or $210 or $220 at the current rates. And those numbers are manageable for a lot of people,’ Piche says. ‘So, suddenly you can get the house that you want for an extra $220 a month — go for it. And you’ve just paid $50,000 more than what you were planning on paying.’”
“Money from China is beginning to pour into U.S. real estate markets, including San Diego County. Next week, in a short sale, a one-bedroom condo in La Jolla’s Villa Vicenza will close escrow with a $150,000 price tag. The new owner is a Chinese investor. Realtor Scott Cheng represents the buyer. ‘It’s been quite a surge actually,’ said Cheng.”
“Realtors estimate about 40 percent of Chinese buyers want property solely as investments. ‘Their bubble has popped,’ said Cheng. ‘Now they’re looking to diversify their portfolio… They think the housing market in San Diego is at its bottom.’”
“With a coastline blocked by high-rise buildings, formerly lush mountains scarred by construction and a blue sea tainted by sewage, Boao, a town on China’s southernmost island province of Hainan, is feeling the harsh realities of a building boom. Developers and home buyers are driving the property boom. According to statistics from the Boao government, housing prices have quadrupled in seven years.”
“Further detracting from the ‘Paradise Town’ tag, sewage pipelines can be both seen and smelled from the beach. Tourists have to cover their noses while walking past the pipelines. ‘I came to relax and enjoy beautiful scenery, only to find densely packed concrete buildings that don’t suit a place nicknamed ‘Paradise Town,’said tourist Cheng Fe.”
“In real estate parlance Michael Smolders is living with a ‘borrowed view.’ Over the next few years the sweeping outlook across Port Phillip Bay from his 27th-floor apartment in Southbank will change for the worse - and there’s nothing he can do about it. Planning Minister Matthew Guy has approved a 71-storey platinum glass tower that will be only 10 metres from his living room couch.”
“He says nearly half of the $274 million Queensbridge tower’s 592 luxury units will look into his lounge room and bedroom, or into the living spaces of his 250 neighbours in his building, Freshwater Place. ‘Who would want to be staring at a neighbour 10 metres away and not have another room to go to, to look out at something else?’ the marketing executive says. ‘You can’t guarantee property prices or views but … depriving people of their basic right to sunlight and amenity is just outrageous. Why would anyone in their right mind want to buy an apartment that’s facing me in Freshwater Place? I don’t get it.’”
“A similar story to that of Freshwater Place is unfolding across the Yarra River, in another of Melbourne’s development-intensive locations. Michelle Ong will not only lose ‘borrowed’ views, but light and air too. She and other residents were shocked by the eventual proposal: a 32-storey apartment tower just centimetres from the side of their own 25-storey building that would enclose all their balconies inside a 20-storey-deep shaft that they would have to rely on for all their natural light and ventilation.”
“‘Inevitably we’re going to find as Melbourne builds up and we have these high-rise areas that people are going to be very disappointed to find their apartment now looks inside somebody’s bedroom,’ says Michael Buxton, a planning expert at RMIT University.”
“Almost 7.5 percent of mortgage loans on one- to four-unit residential properties in Illinois were in foreclosure at the end of March, compared with a national average of 4.39 percent, according to data released by the Mortgage Bankers Association. ‘Illinois and New Jersey trail only Florida as being the worst in the country, and they’re getting worse,’ said Jay Brinkmann, the association’s chief economist. ‘The rate in Illinois is more than twice that of California. In the judicial states, the problem continues to get worse in terms of the backlog of loans in the foreclosure process.’”
“Illinois is not alone. In judicial states, the percentage of loans in the foreclosure process reached an all-time high of 6.9 during the first quarter. That compares with a rate of 2.8 percent in nonjudicial states. Of all loans in foreclosure nationally, 52.4 percent are in five states: Illinois, Florida, California, New York and New Jersey.”
“In Ohio, one in every 525 housing units had a foreclosure filing in March, the ninth-highest rate in the country. The filings in Lucas County reflect the willingness of banks to put foreclosed homes back on the market rather than that more homes are being foreclosed upon, local real-estate agents said. Some of the homes have been in limbo for years and are just now becoming available, they said. ‘A lot of the banks have held back from proceeding with the foreclosure process due to the robo signing and other things going on,’ said Jeff Bockrath, an agent for RE/MAX Preferred Associates in Toledo. ‘Now they’ve come out and said they are going to release those foreclosures.’”
“‘The market still isn’t getting any better,’ said Victoria Luhring, a sales agent with Danberry Realtors in Maumee. ‘It’s from the slump of where they were — they were so far behind before. Now we’re getting the ones that should have been foreclosed a long time ago. It’s really just a reflection of the fact that there were so many in limbo.’”
“The Federal Housing Administration and President Barack Obama’s plan to jump-start the housing market has led to historically low interest rates of 3.75 percent on 30-year mortgages, but critics of the policy warn that the FHA’s easy lending may lead to a second housing-bubble, the Fiscal Times reported. Banks such as Merrill Lynch/Bank of America are concerned that the FHA is merely recreating conditions that led to the housing crisis by offering loans to under-qualified applicants.”
“BofA points to a report released recently by the Treasury Department showing that almost half of the FHA’s modified loans defaulted within a year versus 27 percent of Fannie Mae and Freddie Mac loans. Furthermore, FHA loans ask for down payments as low as 3.5 percent of the poperty’s value, making it easy for borrowers to walk away from houses under economic distress.”
“Fannie and Freddie have cost U.S. taxpayers over $170 billion to date. As Congress struggles with the decision to perpetuate them in some form or pull the plug on them, losses will continue to mount. As we move through the process, it is important to remember the U.S. housing market was not the only one to have housing bubbles that burst, and Fannie and Freddie are not solely to blame. Spain, Portugal, France, Denmark, Greece, and other European nations had housing bubbles as well (and their housing prices continue to deflate). Japan has had a housing bubble that has been deflating for years. China has experienced a ‘double bubble’ like Australia. Even Canada experienced a housing bubble.”
“Serious doubts have been raised about Fannie Mae and Freddie Mac’s privatized gains and socialized losses model. When you look at how much the U.S. subsidizes housing, you can see that housing has mutated into a form of entitlement. Not only does the government guarantee low-down payment loans, and provide the well-known mortgage-interest deduction for federal taxation, the mortgage government-sponsored enterprises (Fannie Mae, Freddie Mac, Federal Housing Administration) have captured more than 90 percent of the residential mortgage market.”
“Regardless of what happens to Fannie Mae and Freddie Mac, we have to come to the realization that housing is heavily subsidized in the United States and that was the ultimate cause of our housing woes. If housing and mortgage subsidies remain the same, someone will offer them to households even if Fannie and Freddie go away. The future of the housing finance industry must include a discussion of how much we want to subsidize housing (and housing finance) and then we can decide how to deliver it.”
