A Bubble Occurs When People Forget
The Cronkite News Service reports on Arizona. “According to a report by Arizona State University’s W.P. Carey School of Business, 1,021 new single-family homes were sold in the Phoenix area during October, an 85 percent increase from the same month last year. According to the U.S. Census Bureau, 10,357 single-family building permits had been issued in Maricopa and Pinal counties this year through October. For all of 2011, the number was 7,297. Mike Orr, author of the ASU report said the strong growth will not lead to another real estate bubble.”
“‘A bubble occurs when people forget that bubbles are possible,’ he said. ‘Right now everybody is very very aware that we went through a bubble, so the chances of another bubble in the next 10 years is almost zero.’”
“Nate Nathan, president of the land brokerage firm Nathan and Associates, said his company has done 131 transactions in the last five months in the Phoenix area, up from 80 in all of last year. ‘It’s an absolute frenzy to buy finished lots or platted lots, the busiest my company’s ever been,’ Nathan said.”
Inside Tucson Business in Arizona. “New home permits and overall selling prices have surpassed all benchmarks set last year. Year-to-date, 1,748 new home permits have been issued across the region. Year-to-date closings stand at 1,235. ‘It is probable a greater percentage of these permits represent speculative permitting as builders respond to overflow demand from the tight resale market,’ said housing analyst Ginger Kneup, owner of Bright Future Real Estate Research. ‘The inventory of homes has not yet notably increased, however a reporting lag is expected since many builders do not advertise their spec homes until they are two to three months from completion rather than as soon as a permit is issued.’”
“Although foreclosures continue to decline, ‘traditional’ home sellers have not yet seen enough appreciation in value to put their homes on the market.”
The Arizona Republic. “Metro Phoenix housing analyst Mike Orr participated in a live chat this week about the state of the residential market. Here are some excerpts from his online conversation with readers: Kari: Mike, we bought our house in 2005 at the worst possible time. Are people still underwater for houses bought then? We are in ZIP code 85203. Orr: Unfortunately, the answer is yes. We are nowhere near back to 2005 home-value levels. I am not sure how long it will take to get back to those levels. Some people say five more years, but I am not so sure. If employment growth continues, we could see home prices climb faster.”
“Selina: I have heard rumors that the housing market may dip again when banks clear out all of the foreclosures that are just sitting there. Orr: I don’t think its very likely Phoenix’s housing market would dip for that reason. There’s no huge collection of homes banks are holding onto in Arizona and waiting to dump on the market. … We have a speedy foreclosure process in Arizona, and we have a shortage of homes for sale here. Shadow inventory is an urban myth in Arizona.”
The Yuma Sun in Arizona. “The boom days may be back for Arizona home prices, but in Yuma County, prices are still lagging. But there are indications that the Yuma housing industry is turning around, however slow it might be, according to County Assessor Joe Wehrle. Yuma’s average home price in the last quarter declined 1.1 percent over last year and 35.1 percent over five years ago. ‘What we’re seeing right now is that home prices seem to be on the rise. We did see a slight rise in the last year,’ Wehrle said.”
“The reason for the turnaround, he noted, is that the market has gotten rid of the repossessions that glutted it. ‘We still have a lot of repos the banks are holding on to. They’re smart enough to not flood the market. They’re releasing them slowly so we don’t have another downturn. That’s what would happen if supply exceeded the demand,’ Wehrle explained.”
The Las Vegas Sun in Nevada. “Foreclosures in Nevada could spike next year if lawmakers and banks roll back a bill passed in 2011 that played a large role in stymieing banks’ attempts to retake homes from Nevadans, according to the state’s banking association president and housing analysts. At issue is Assembly Bill 284, a measure passed by the Nevada Legislature in 2011 and signed by Gov. Brian Sandoval that forces banks to prove they have the legal right to foreclose on a particular home before they take action. Most important, the law requires bank workers to sign an affidavit that they have personal knowledge of a property’s document history, or they will face criminal or civil penalties.”
“But after the law took effect in late 2011, foreclosures in Nevada — which previously led the nation in foreclosures — ground to a halt. In August 2011, banks issued 5,350 foreclosure notices in the state, according to the Nevada Foreclosure Mediation Program. In September, there were 4,684 ‘notices of default.’ In October 2011, when the law went into effect, the number dropped to 80. Since then, the foreclosure filings per month have crept upward, reaching 1,417 in November.”
“This shadow inventory — of homes headed for almost certain foreclosure — has loomed over the seemingly positive news of slightly increasing home values and the rise of new housing construction. Sen. Tick Segerblom, D-Las Vegas, chairman of the Senate Judiciary Committee, said, ‘I’m extremely reluctant to change anything that everyone agrees has raised property values in the state of Nevada.’”
The Las Vegas Business Press in Nevada. “Bart Powell, a recreational vehicle dealer from Calgary, Alberta, bought a 2,400-square-foot home in Henderson for $275,000 three years ago. It’s worth about what he paid for it, maybe a little more, Kimball said. ‘Prices have fallen a lot, which is attractive for Canadians,’ Powell said from Calgary. ‘Your houses are probably half the prices up here in Calgary.’”
“Prudential Americana Realtor Tim Kimball said Web inquires from Canadians have nearly doubled from 1,100 last year to more than 2,000 this year. Most Canadians are buying for the long term, not looking to flip for a quick profit, Kimball said. They recognize that their dollar has gained about 20 percent in value compared with the U.S. dollar, and that Las Vegas home values will probably appreciate over the next five years.”
From KTVN in Nevada. “In Northern Nevada, buyers are having to hustle to find something to buy. ‘One of my agents was telling me last week that he has submitted 20 offers on homes and got beaten out on every single one,’ said Kevin Sigstad with ReMax Premier Properties. So where are some of these new buyers coming from? ‘The population continued to age, so you’ve got all these kids that were in college that are now coming out of college, all these kids that were in high school coming out of high school, and they’re in the market,’ explains Sigstad.”
Fox Reno in Nevada. “Sales of upscale homes in the Reno area are on the rise. There are dozens of multi-Million dollar homes currently for sale around Reno, and in the last 2 years, more than 55 of them have sold, says David Morris of the David-Morris-Group. Morris tells us that many high value buyers come from the bay area. Take Bruce Asch for example: he moved here seven years ago and recently relocated to a million dollar home closer to downtown. ‘I come from the bay area, so what I paid here, versus what I would have to pay for the like property is 25 percent,’ says Asch.”
“Marcy Barba is selling her multi-million dollar Spanish colonial style home after building it seven years ago, though she plans on staying in the area. ‘The quality of life that’s in Reno I think surpasses anything that I’ve experienced in California,’ says Barba.”
“Morris says today there is a different buyer formula in the housing market. ‘People with 6 and 7-thousand square-foot houses are much harder to sell today. People want a home that’s a home, they want a property they can live in, and they want a heating bill that they don’t gag when the bill comes in,’ says Morris.”
“If you are looking for a million dollar home, there are plenty of homes to choose from. Morris says of the more than 80 on the market in our area, 7 have sales pending.”
The Reno Gazette Journal in Nevada. “Nearly a billion dollars have been spent stabilizing the Reno and Sparks housing market since 2009. Through President Barack Obama’s Neighborhood Stabilization Program, Hardest Hit Fund programs and the national mortgage settlement, more than $900 million has been distributed to Nevada homeowners, administration officials said Friday.”
“‘The continuing signs of stability that the national data show for the broader housing market are starting to show progress in Reno,’ said Erika Poethig, acting assistant secretary for policy development and research for the U.S. Department of Housing and Urban Development.”
The Santa Fe New Mexican. “The short-term goal of a monthly housing payment is to keep a roof over your head for the next 30 days. It’s the same whether that payment is for rent or a mortgage. It might surprise many people to know that in today’s topsy-turvy real estate world, buying a house can be the better value in terms of your monthly out-of-pocket, as well as for your long-term financial security.”
“For example, falling home prices have caused many homeowners who would like to sell their properties to stay put instead. This has caused an undersupply of affordable houses on the market in many parts of the nation. Landlords have acted in accordance with the economic law of supply and demand, raising rents as more people have sought to take apartments rather than buy homes of their own.”
“An analysis by Homewise Inc. looked at a three-bedroom, two-bath home in Tierra Contenta selling for $203,500. At recent mortgage rates, you could buy that home for $1,131 a month, but the asking rent was $1,350. That’s likely because the current owner had paid more for the home than it is currently worth, and is stuck with an upside-down mortgage carrying a higher interest rate than today’s loans, which is often under 4 percent.”
“The result is some pretty favorable math for the prospective homebuyer, though not for the unfortunate owner/investor.”
“The homebuyer, too, is continually acquiring something the renter will never have: equity in a valuable asset. Assuming that someday the housing market gets back to normal, the house will have appreciated in value over the years, becoming an even more valuable asset that can help fund retirement, the kids’ college expenses, or a legacy for the next generation.”
“And what does the renter have after making 30 years of escalating payments? Just as the old cliche goes, a shoebox full of rent receipts — and another bill due and payable by the 10th of the month.”
