The Kind Of Insanity You Live For
The Republican reports from Massachusetts. “The word ‘bubble’ appeared last week in a story about the housing market in The New York Times. On the same day, Wednesday, the same word appeared in a housing story in The Wall Street Journal. The mere fact that someone thought to wonder, that the possibility was considered and then rejected – that ought to be cause to break out the bubbly, to strike up the band. Happy days aren’t exactly here again, but they might be warming up, readying their act. We’ll likely never again see a time like the one that ended in such disaster. Thank goodness. No one wants a repeat of that sad story.”
“The ideal, of course, the goal, is consistent, more-or-less predictable growth, steadily increasing house prices without the fervor, without the ridiculousness that was visited upon us routinely just a decade back. For years now, such a scenario has been merely a dream. Now, though, one can actually imagine it without completely straining credulity.”
The Patriot Ledger in Massachusetts. “Massachusetts home prices rose for the seventh consecutive month in April despite a slight downward tick in single-family home sales, according to the Warren Group. ‘The housing market continues to improve but could be hindered if rising prices cause an affordability issue,’ said Warren Group CEO Timothy M. Warren Jr. ‘Three consecutive months of double-digit price increases is slightly concerning.’”
The Providence Journal. “The Massachusetts Association of Realtors reported that the number of single-family house sales was down by 1.2 percent from the same time last year. The decline was blamed on ‘the lack of homes for sale over the past several months.’ However, the association said that new listings were up by nearly 13 percent (year-to-year) in April, ‘and up 44 percent from the 6,468 listings in March.’”
From WKBW in New York. “Partly due to low interest rates, homes all over the region are selling in a matter of days and sometimes, hours. Many sellers are even getting more than the asking price. While homes in suburban areas like Williamsville, Amherst, and East Aurora continue to be in high demand, realtors say there has been a resurgence in the housing market in South Buffalo. ‘Most of the time if the house is priced right we’ll get multiple offers, sometimes two, three, four offers at a time,’ said said Jim Roberts, of WNY Metro Roberts Realty.”
The New York Times. “The rules of engagement for buying an apartment in the city have changed. Negotiation, brokers say, is no longer part of the equation. Open houses are packed to capacity, bidding wars and all-cash offers have almost become the norm, and some listing prices actually rise, not drop, after a home is listed. ‘It’s the kind of insanity you live for in this business,’ said Mickey Conlon, a broker with CORE, recalling a two-bedroom two-bath condominium in the Flatiron neighborhood that he listed with his business partner, Tom Postilio, for $1.89 million in early January.”
“‘At the moment, that was considered aggressive pricing,’ Mr. Conlon said. Yet within 24 hours, the brokers had received a flurry of requests to see the place, which prompted them to be bold. The next day they raised the price by $100,000, to $1.99 million. Though some potential buyers grumbled about the change, about 100 people came to the first open house. Soon, there were multiple offers above the asking price. By the end of January, there was a signed contract for $2.16 million — all cash. The sale closed in April.”
“The foreigners streaming into New York to buy housing often pay in cash, but with interest rates low, more have been seeking to finance their purchases. HSBC, the multinational bank based in London, reports that its volume of home loans extended to foreign borrowers in the United States has tripled since 2010. ‘They are usually coming and looking for all-cash deals. Then they find out they can borrow, and so they take advantage of it,’ said Joe D’Alessio, an HSBC mortgage consultant who works with, who has worked with clients from Britain, Hong Kong, Turkey, Japan and Brazil.”
“Borrowing also gives foreigners more buying power. Some choose to ‘buy a larger property that might have a higher rate of return in the next few years,’ he said.”
The National Journal. “Home ownership is good for the American soul, but is it good for its wallet? One of the leading advocates for caution in light of the recent good news has been Robert Shiller, a Yale University economist and co-creator of the Case-Shiller home-price index, which identified the record gain. In op-eds and T.V. appearances, Shiller has repeatedly warned against viewing homes as an investment.”
“Strong gains from March of last year to March of this year—released in the Tuesday report—may be the result of fewer foreclosure sales, which generally go at discounted rates, he told CNN on Tuesday. Shiller, who predicted the 2006 housing bubble, argues that over time home values barely appreciate. According to his research, home prices rose just 0.2 percent a year on average from 1890 to 1990. In nominal terms, prices skyrocketed, but when adjusted for inflation they were pretty stagnant. And the Federal Reserve’s current policy of promoting inflation may exacerbate that effect. ‘[B]ecause people often forget to correct for inflation, they may have the illusion that the market is improving,’ Shiller warned in a New York Times article last month.”
“Though some disagree with his finding, others have confirmed similar results, albeit in slightly different markets. In a 2009 paper, a group of MIT economists found that commercial property values in Manhattan actually dropped 30 percent in real terms from 1899 to 1999. ‘[I]n the last century New York real estate has not outpaced inflation in terms of appreciation,’ they concluded.”
Crain’s New York Business. “Here we go again. Home prices across the country rose sharply in the first quarter, according to the latest Case-Shiller index, with a surprising 10.3% gain over the last year. In New York, The Wall Street Journal reported, suburban home sales are ’swelling’ as ‘prices increase in areas around New York City’ and that buyers feel ‘urgency’ to complete deals. That’s not really true.”
“The Case-Shiller Index shows that for the first quarter, the New York region reported the lowest increase of any major market: just 2.6%. Nationally, prices have returned to their levels of late 2003, but in New York, we are actually a little lower with prices the same as early 2003.”
“What’s going on here? The Journal story was based on first-quarter snapshots of individual suburban markets compared with a year ago. Case-Shiller tracks the entire market. The Journal then claims a second-quarter surge because real estate brokers say it is true. Brokers always say the market is getting better; that’s how they stoke it. There is no way to tell for sure if they are exaggerating this time, but they usually are.”
“Housing is an important economic indicator, and it needs to be watched closely, especially in comparison to what is happening in the rest of the country. But beware the people who want to convince people prices are rising.”
