June 12, 2013

Cheap Money Is Still In Play

The Tampa Bay Times reports from Florida. “Is this a new bubble, or what? It’s easy to see how today’s housing market could trigger flashbacks to the frothy mid 2000s boom. Bidding wars are rampant, deals are quick, and investors and flippers abound. But economists say there are plenty of reasons to be skeptical that the market is blowing bubbles. ‘It’s all part of this metamorphosis from the downtrodden housing market to something that resembles normalcy again,’ University of Central Florida economist Sean Snaith said. ‘It looks like, as we’re coming out of the depths, that there’s a bubble forming, when really we’re still trying to get back to the surface.’”

“April was Tampa Bay’s busiest sales month in seven years. More than 1,500 sales so far this year sprang from contracts signed within three days or less. And buyers aren’t hesitating to pay full price. ‘It’s like the O.K. Corral. It’s like ‘06 and ‘07 all over again,’ Keller Williams agent Scott Samuels said. ‘People are just paying crazy money.’”

“‘Prices seem to be being driven by something other than the fundamentals,’ like more jobs or higher wages, that traditionally steer a healthy market, senior economist Mark Vitner said. ‘I just don’t think that’s sustainable, or the kind of housing recovery we want to see.’”

“‘We’re emerging from a historical period that was rife with outliers in terms of behavior and how things were functioning,’ Snaith said, ‘and now we’re trying to transition back into something that’s closer to normal — whatever that normal might be.’”

The Tampa Tribune. “One of South Tampa’s prime corners at Bayshore and Bay to Bay boulevards, will house a luxury condominium tower if a developer’s plans come together. Bill Robinson of Citivest Construction tried to develop the tower in 2008 but shelved the project amid the real estate crash. Now, he’s once again marketing a 15-story tower with high-end real estate broker Toni Everett and expects to begin recruiting buyers for presales shortly, Robinson said.”

“Everett said the proposed tower will have 32 units, floor plans from 2,600 to 3,500 square feet and floor-to-ceiling glass offering views of downtown and Tampa Bay. Prices will be ‘north of a half-million, easily,’ Robinson said.”

The Sun Sentinel. “The housing market has soared past recovery and is bearing down on chaos. Buyers in control during the bust now are on the defensive, racing from home to home and making offers on the spot before somebody else swoops in with a better deal. The insanity has even created a new sales category of sorts: Flash sales. It’s a home that gets listed in the morning, and is under contract by nightfall. ‘We’re literally running to houses and as soon as you get there, there are three other people,’ said Terry Story of Coldwell Banker in Boca Raton. ‘Buyers are very anxious to get something quickly.’”

“In the past week, rates have inched up to over 4 percent, which will cause even more people to jump into the market, said Jim Heidisch, broker at Campbell & Rosemurgy in Deerfield Beach. ‘There’s a sense of urgency,’ he said. ‘I always tell people, ‘You’re not buying a house, you’re buying money, and you want to get the cheapest rate you can.’”

“Pembroke Pines resident Angela Medina and her husband were driving north to look at two homes in Palm Beach County when her smartphone buzzed with a text alert about a three-bedroom home that had just been listed in Palm Beach Gardens. The couple toured it, made an offer and signed the contract, all within 24 hours. The sale of the Medina’s own four-bedroom Pines property went the same way. It was listed and under contract in one day. Both deals are scheduled to close July 1. ‘From the time it hit my phone to the time we saw it, maybe an hour passed,’ said Medina. ‘You’ve got to be proactive.’”

The Miami Herald. “Property values in Miami-Dade County rose for the second year in a row – welcome news for South Florida municipalities, which derive much of their revenue from property taxes. ‘It’s a good thing for anybody in government,’ Miami City Manager Johnny Martinez said.”

“Jack McCabe, a housing analyst in Deerfield Beach, said he saw property values rise across the board, partly because hedge funds were eager to invest in real estate. ‘While the rate of appreciation is coming to a more historical norm, the forces driving it are entirely different,’ McCabe said. ‘It’s not individual owner-occupiers buying homes to live in. It’s corporations buying homes to rent out to people.’”

“‘The big question is, how long is it going to last?’ said McCabe. ‘There are some people who believe that we may see these price increases for the next three to five years – and then interest rates are going to sky rocket, the hedge funds will start selling off their acquisitions, and we may have something similar to last decades. This could be the start of another bubble.’”

The News Press. “Southwest Florida housing markets may be in danger of going through another boom-and-bust cycle because of the Federal Reserve’s loose money policy and overly lax bank capitalization rules, according to the former Federal Deposit Insurance Corp. chairman. ‘South Florida’s starting to look a little frothy’ as low interest rates tempt investors to overvalue assets such as real estate, Sheila Bair warned in the keynote address to the Urban Land Institute Florida Forum in Naples.”

“Bill Valenti, executive VP for IberiaBank’s Lee County operations, said he agrees that in Southwest Florida, ‘Cheap money is still in play. I think people think prices are right, but they’re going to go up. People are in a rush to invest.’”

CBS Miami. “Checks for thousands of Florida foreclosure victims will finally be going out next week, with hundreds of millions of dollars more earmarked for new housing programs statewide. But there’s a growing debate on where most of the money’s going and if foreclosure victims are really getting their fair share. Some of the money was used by the banks themselves to lower their customers’ monthly payments.”

“Weston foreclosure defense attorney Roy Oppenheim said millions will be going to the courts, and will actually help speed up future foreclosures statewide. ‘A lot of money’s going to the court administrative process to speed the foreclosure process even more, to fund the rocket dockets. It’s a complete and utter joke,’ said Oppenheim.”

The Herald Tribune. “The American dream of owning a home is slowly fading across the country, as a growing demographic of young families opts to rent either out of necessity or by choice to avoid the headache of a mortgage. The generation grew up seeing parents fight over a suffocating home loan, with hopes the equity would one day finance a retirement, and seeing the disappointment as those hopes never panned out. They have seen real estate values climb to historic heights in 2006, and then swiftly crumble two years later, sending shock waves through the economy.”

“‘The real estate industry wants us to think the American dream starts with homeownership, and the baby boomers bought into that,’ said Patrick Bet-David, a real estate author and CEO of the financial services firm PHP Agency. ‘But the reality is that owning a home is not the American dream. It is just $400,000 worth of debt. Now we’re seeing the repercussions from it.’”

“The rate of homeownership among Americans has slowly declined since the onset of the Great Recession, slipping to 65 percent in the first quarter — the lowest ratio since 1995, according to recent data from the U.S. Census Bureau. Recent troubles in the real estate market, and new increases in home prices that stir fears of another bubble, have fewer potential buyers willing to take on the risk.”

“The slide has been especially prevalent among young families and consumers aged 35 to 44 — a group that has seen a homeownership rate decline of 8.2 percentage points since 2007. That is the sharpest fall of any demographic, Census figures show. ‘I constantly see young families who used to own homes and now they’re choosing to rent,’ said Laurie Rastovski, a rental agent with Michael Saunders & Co. ‘For a lot of them, it’s because they just can’t afford to own.’”

“Since last fall, the foreclosure market has been dominated by institutional investors — such as Wall Street’s Blackstone Group and Colony Financial — which have been buying up distressed homes on the auction block for use as rentals. That trend, too, has made homeownership less obtainable for the average Floridian by taking inventory off the market and pushing prices higher, said Jack McCabe, a real consultant in Deerfield Beach.”

“‘There’s a paradigm shift in the market right now, where homeownership is shrinking and rental activity is on the rise,’ McCabe said. ‘The number of full-time owner-occupiers buying homes is actually going down. Many young families have seen their parents and grandparents lose their retirement or inheritance from a house, and they don’t want to deal with that.’”

“Bill Kamka retired to Sarasota in April with his wife, Mary. The 69-year-old entrepreneur from a suburb of Chicago was not so sure about the housing market. Kamka sold his house in Illinois for $100,000 less than what it was worth just a couple years earlier. He shopped around Lakewood Ranch for a retirement home, but with that loss still fresh on his mind, he opted to rent in Palm-Aire instead of purchasing quite yet. But he does not rule out the idea of becoming a future homeowner.”

“‘Why rush?’ Kamka said. ‘We love the home we’re in.’”

Bits Bucket for June 12, 2013

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