April 21, 2013

Hitting The Market With Unrealistic Expectations

Readers suggested a post on the housing bubble. “How many houses in your area are hitting the market with ‘unrealistic expectations’? Here in Maryland I’ve seen quite a few houses hitting the market (shooting down the tight inventory theory). One house, which I do like, has overshot my estimate by about 20 percent. It’s on a main road, set back with a nice 1 acre square lot (tree lined, ability to build on it). The price has almost tripled from 12 years ago. In the notes it clearly says ‘As is’, and looking at the pictures it needs a lot of work and updates.”

“So how can the average American afford this place? How can I buy a house in 2013 dollars when I currently (after two paycuts) make 1999 dollars?”

A reply, “The average American CAN’T afford it. Lying Realtors, lenders, etc have conditioned people to believe that unaffordable real estate is normal, that paying a large percentage of their income to a bank as mortgage interest is a good thing.”

One said, “Since we are apparently in the beginning phase of another bubble, we can probably expect prices to go up by some insane amount over the next couple years. I doubt that this bubble will be much different from the last. I think it will probably just be shorter, since it is driven more by speculators with cash, and less by speculators with no-pay mortgages.”

A reply, “How can we be ‘in the beginning phase of another bubble’ when prices haven’t stopped falling from the previous bubble?”

One said, “There is no way the bounce will last as long as the original bubble. It can last longer than expected (see stocks) but I think it’s nuts to say ‘the last one lasted X years, so that means we’re XX% of the way into this one.’”

And another, “I really depends on lenders. If lenders get stupid again, prices could go up really high, really fast, in which case we could rebubble really fast. If lenders don’t get as stupid as fast, we should see a slowdown in the pace of price growth as new housing developments get closer to historical averages, in which case, we might have a long climb, like what was seen coming out of the early 90’s recession.”

A reply, “I don’t believe it because that was a real recession that was allowed to run its course, and then a real recovery that you get after such an event. None of the ingredients are in place (yet) for a real recovery.”

And this, “Here in Phoenix the prices have gone up as much as 20% depending on where it is. The really cheap stuff is gone but the prices are still much better than at the peak.”

And finally, “This is pretty funny. One of my kids walked away from a house in Phoenix 5 years ago and the bank still hasn’t foreclosed. Five years of squatters and/or just falling apart. Sure, houses are moving like hotcakes.”

From UPI. “Properties repossessed by lenders in the first quarter took an average of 477 days to complete the foreclosure process, up from 414 days in the previous quarter and up from 370 days in the first quarter of 2012. It was the highest average number of days to foreclose going back to the first quarter of 2007, a record high since RealtyTrac began tracking this metric in the first quarter of 2007.”

“The average time to complete a foreclosure increased from the previous quarter in 39 states, led by Oregon (up 61 percent), Arkansas (up 42 percent), Texas (up 40 percent), Tennessee (up 37 percent), and Michigan (up 22 percent) — all non-judicial foreclosure states. New York continued to register the longest state foreclosure timeline at 1,049 days from foreclosure start to bank repossession (REO). New Jersey came in second highest at 1,002 days followed by Florida at 893 days, Hawaii at 824 days, and Illinois at 720 days.”

From USA Today. “In 21 of 24 major metropolitan markets tracked by residential brokerage ZipRealty, new listings outnumbered new sales contracts for the 30 days ended March 15. Home sellers in Los Angeles, for instance, put 16,170 homes on the market from mid-February to mid-March. At the same time, only 9,533 homes entered sales contracts. Other cities seeing the same situation included Phoenix — where January home prices were up 23% year-over-year, Standard & Poor’s Case-Shiller data shows — the San Francisco Bay Area, Denver and Houston.”

“In Orange County, the inventory of single-family homes and condominiums listed for sale has risen 10% since April 1, says Steven Thomas, of trade publication Reports on Housing. That’s the biggest expansion in about two years. Some homeowners are ‘testing the waters and attempting to fetch prices that are just way too off the mark,’ he says. He expects inventories to keep growing as those homes sit longer.”

The Arizona Republic. “Rising home prices in the Southwest Valley and throughout metro Phoenix have prompted investors to go elsewhere for a good deal, Avondale real-estate agent Joe Bourland said. In 2012 the percentage of Maricopa County homes bought by investors fell from 37 percent in February 2012 to 30 percent in February 2013. ‘When investors could buy a house for $70,000 and rent it for $1,000, the return was really good. Now that same house is selling for $115,000 and rents have dropped because there are many homes for rent,’ Bourland said.”

“The Southwest Valley is the second-hottest new-home market in the Valley right now, next to the Mesa-Gilbert region. Over the past 12 months, 23 percent of all permits to build in the Valley were issued in the Southwest Valley. In December, the purchase of these properties, which are called developed lots, peaked when developers bought 2,272 lots in Maricopa County. The new homes for sale that result from these lot purchases will hit the market in late 2013 and will continue into 2014, housing-market analyst Jim Belfiore predicted.”

Bits Bucket for April 21, 2013

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