April 10, 2013

Raising ‘B-Word’ Questions Again

The Herald Tribune reports from Florida. “The boomlet in Southwest Florida’s housing market over the past year has been so vast that it is raising ‘B-word’ questions again — as in ‘bubble.’ Though opinions vary widely, even those who dismiss the notion that another housing bubble is in the works say they are concerned about rising home values and the proliferation of bidding wars that are reminiscent of the mid-2000s. Jack McCabe, a Deerfield Beach real estate consultant who accurately predicted the rise and fall of the last market, represents one of the most ardent doomsayers.”

“‘These investors are paying ridiculous amounts of money for property that just does not justify it,’ McCabe said. ‘If we get to the point where these homes are no longer affordable to the general public, we are in for our next bust.’”

“An influx of investors led by Blackstone, among the nation’s largest private real estate owners, have flooded into Southwest Florida to buy up distressed properties for use as rentals. In many cases, the cash-powered institutions have bullied traditional home buyers and smaller investors out of foreclosure-buying opportunities by routinely paying well above the bank’s asking price — sometimes even when no other parties are bidding, data from researcher RealtyTrac Inc. and a Herald-Tribune analysis of property transactions show.”

“So far, these groups have paid, on average, 45 percent more for the homes in Manatee and Sarasota counties than the properties’ value, RealtyTrac’s analysis shows. Prices were bolstered further by bulk foreclosure buyers, who paid an average of $127,146 for homes in Sarasota County last year. Those same properties were valued at only an average $93,479, RealtyTrac’s analysis showed. In Manatee County, many of the same buyers shelled out an average of $136,624 for properties with an estimated worth of $94,208 on average, the research shows.”

“New York-based Fundamental REO is one such buyer. Since Thanksgiving, the firm has bought 14 homes in Manatee and Sarasota at a significant mark-up from the prices paid just a short time earlier. Fundamental paid $139,000 for a 1,431-square-foot house in Parrish, for instance, just two months after the previous owner paid $89,300, records show.”

“RealtyTrac estimates that smaller investment companies following the same buy-and-hold model snapped up 388 properties in Southwest Florida last year and 5,289 across Florida. Many of those homes are acquired at auctions, or from bulk portfolio sales lenders hold. In those cases, prices are often evaluated based on replacement costs and projected income streams and not on relative values.”

“Fueled solely by speculation that the market will continue rising, those are the type of short-term price spikes that could ultimately harm the housing recovery, said Shannon Moore, broker and owner of Green Lion Realty in North Port and Port Charlotte. ‘They’re paying way too much at auction,’ said. ‘I just don’t see how they can get rents to cover what they paid. The numbers just don’t make sense.’”

The Miami Herald. “Rents on single-family homes in the greater Miami area rose 2.8 percent in March from a year earlier, far below the 12.1 percent spike in the asking prices for houses over the same period, according to Trulia. In the Fort Lauderdale area, rents for single-family homes fell 1.2 percent year over year, even as the asking prices for homes increased 10.7 percent.”

The Sun Sentinel. “Single-family rents in Broward County dipped 1.2 percent in the past year, while prices countywide rose 10.7 percent over the same period, Trulia said. In Palm Beach County, single-family rents inched up 3.8 percent, but that’s still far below the percentage increase for prices (14.1).”

“‘Investors bought up cheap houses in hard-hit markets and rented them out to people who lost their homes to foreclosure or delayed first-time homeownership,’ Jed Kolko, Trulia’s chief economist, said in a statement. ‘With four million more rental homes now than during the bubble, supply has expanded to meet demand, and rents are flat or falling in markets where investors are most active.’”

“As a result, some investors will decide to sell homes they’ve been renting, helping to boost depleted for-sale inventories, Kolko said.”

The Palm Beach Post. “Despite the sunny names in a neighborhood where residents also live on Faith and Pot o’ Gold, two homes sit vacant, burned out, boarded up and part of a growing shadow inventory of foreclosed homes in Florida. Palm Beach County’s shadow inventory increased 78 percent from the first quarter of 2012 to a current measure of 25,702 homes, according to RealtyTrac. Statewide, the increase was even higher, leaping 82 percent from 175,707 to 319,147. Nationwide, shadow inventory increased 12 percent from the beginning of 2012 to today.”

“The pileup in the shadow inventory is a case of banks not wanting to take a hit on distressed properties, said Ken Thomas, a Miami-based banking consultant and economist. Lenders don’t want to reduce a home’s value by 40 percent on their books and pay thousands of dollars to rehab it for sale, he said. ‘They basically just get up every morning and pray the market is better that day,’ Thomas said. ‘In the meantime, these homes just sit and accumulate.’”

“More than 111,000 homes in South Florida — Palm Beach, Broward and Miami-Dade counties — are counted as shadow Inventory in RealtyTrac’s report. Realtor Shannon Brink of RE/MAX Prestige Realty in West Palm Beach said there is so much pent-up demand for homes, he’s more concerned about another real estate bubble than worried that the shadow inventory will weaken sale prices.”

“‘If we don’t see more inventory, and buyers outpace sellers, it may increase prices too much in too short of a time period,’ Brink said. ‘We are going from one extreme of too much inventory to too little.’”

The News Press. “The number of foreclosures backlogged in the Lee County court system drifted up in 2012 after three years of sharp decline — but now the numbers are trending down again. Faster and easier short sales by lenders are responsible for the recent improvement, said Jeff Tumbarello, director of the Southwest Florida Real Estate Investors Association, which generated the statistics.”

“Kara Jursinski, a Fort Myers-based attorney who represents people being foreclosed on, said the backlog’s rise in 2012 could be due to the use by more lenders’ attorneys of a form of foreclosure that pushes the case through quickly: in no more than 60 days the borrower has to come up with a credible defense or the lender gets a judgment allowing the sale at public auction of the house to meet the mortgage debt.”

“The problem, Jursinski said, is that while the lender’s attorney is pushing through the foreclosure, the borrower may be working with another bank official on a short sale. In that case, sometimes the lender ‘wanted to afford buyers time to do modifications or short sales’ but the fast-tracked foreclosure threatens to preclude those solutions.”

“As a result, she said, ‘Sometimes they get a final judgment and keep canceling the sale’ in hopes that the short sale can be accomplished. Jursinski said she’s handled cases in which the bank cancels the sale date as many as four times. ‘It’s just a waste of time for the courts and the attorneys’ and slows down the whole process.”

“The traditional spring selling season has arrived, but what it lacks this year are sellers. Housing inventories are hovering near their lowest levels in more than a decade, creating a free-for-all mentality among investors and other buyers competing for a limited supply of homes.”

“To shake listings loose, agents are knocking on doors, sending out postcards and checking back with clients who previously took their homes off the market. Other agents are even calling for-sale-by-owners, hoping to persuade them to change their minds and list their homes.”

“When prices plunged, millions of homeowners lost equity, putting them ‘underwater’ on their mortgages. Even though values are rebounding, many homeowners still can’t sell without bringing thousands of dollars to the closing table. Meanwhile, a large contingent of homeowners who have equity are keeping their properties off the market, figuring they have weathered the downturn and now want to see prices keep rising before they consider selling.”

“Every few weeks, real estate agent Roger Palmieri goes on a little neighborhood stroll. If people are out pulling weeds or getting the mail, Palmieri strikes up a conversation, asking if they realize how hot the housing market is and whether they’d like to sell their homes. He ran into Richard and Doris Yates lounging on their front porch. The Yateses politely listened to Palmieri’s spiel but said they aren’t yet ready to list their 1,800-square-foot home, in part because they need prices to keep rising.”

“The couple bought for $118,000 in 1999, records show. The value escalated to as high as $350,000 during the boom, according to Richard Yates. Palm Beach County appraised the home last year for about $150,000. ‘If somebody would come and give us $300,000, I’d take it, but now we’d be lucky to get $220,000,’ he said. ‘We waited too long.’”

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