August 31, 2013

Bits Bucket for August 31, 2013

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August 30, 2013

Less Expensive Houses Are Not A Bad Thing

It’s Friday desk clearing time for this blogger. “Five years after a huge property crash devastated the Irish economy, a booming urban market where supply is scarce and competition fierce is raising concerns about a new bubble in the capital. ‘There’s an element of craziness creeping back into it where people are getting frantic,’ said Scott, a 37-year-old father of two young children, after wading through the crowds to view a four-bedroom, semi-detached house in leafy south county Dublin. ‘Friends of mine have bought and gotten into bidding wars. It feels like the olden days; it’s kind of wrong.’”

“While the metro Kansas City apartment market is hot, and prices, sales and construction of single-family homes have warmed to pre-recession levels, condominiums are still out in the cold when it comes to the recovery. And the condo market may get even chillier. No new projects are in the works, and Realtors and owners are struggling to sell existing condos. ‘It’s pretty simple,’ said Dan Farmer, a mortgage banker at Peoples Bank. ‘In 2008, when we went into the housing crisis it was the highest level of foreclosures in our history. A lot of the foreclosures were condos because people were speculating in condos. That enormous amount of defaults in condos all over the country, especially in Florida, Arizona and California, led to tighter guidelines by Freddie and Fannie.’”

“The value of the state’s property fell by 0.8%, or $3.6 billion, last year, continuing an unprecedented downward slide that has washed away tens of billions of dollars in Wisconsinites’ net worth over the past five years. The report by the Wisconsin Taxpayers Alliance shows that after years of increases, the value of Wisconsin’s homes, businesses, farmland and forests peaked at $514.4 billion in 2008 and then has fallen every year since, dropping by $47 billion in all.”

“When Rob and Anita Bolton decided to move from Roscoe to Arizona this past winter, they hoped reports of an improving housing market would keep them from having to take a major financial hit. It did. Sort of. The couple bought their house in 2007, right before the real estate bubble burst, bringing on the Great Recession and sending values plummeting. ‘Our Realtor told us we were looking at a considerable loss,’ Rob said. ‘It was good enough, but we still ended up having to write an $11,000 check.’”

“An increase in new home listings and housing inventory kept momentum moving forward in the Florence and Greater Pee Dee real estate markets in July despite falling median prices. Joey McMillan Jr. at Coldwell Banker Segars McMillan and Associates said the lower median sales price represents a supply that is at a price point that’s palatable for first-time homebuyers. ‘More, less expensive houses are not a bad thing, but the houses are less expensive and we’re seeing a lot of first-time homebuyers,’ McMillan said. ‘And seeing a lot of foreclosures come to market, selling at lower prices to fix up to sell or to live in, then six to 12 months later should sell for more so that will correct itself.’”

“A new report says housing sales in Corner Brook are down by 28 per cent this year compared to 2012. Canada Mortgage and Housing Corporation doesn’t usually give out statistics for that region. However, when Corner Brook-based real estate agent Ken Brown requested the data, it delivered. Brown said he sees many for-sale signs in the city — many of which bear stickers indicating a reduced price. ‘It shows that the market in past years have been inflated, certainly it does reflect what’s happening here economically, in the economy itself,’ Brown said.”

“Official mortgage lending data doesn’t capture the entire debt picture for China’s new homeowners. Excessively high housing prices are making it hard for most to cough up the required 30-40% down payment. As a result, banks becoming ‘very creative in helping consumers’ make mortgage down payments, says Junheng Li, head of research at JL Warren Capital. One increasingly common scheme involves an informal version of ‘reverse mortgages,’ which aren’t legal in China. When a prospective buyer can’t pay the down payment, banks allow the buyer’s parents to take out a loan using their home as collateral in order to generate the cash.”

“This has been going on for a while, she says, particularly in big cities. In other words, banks are exposing themselves to more risk than their balance sheets reflect. In using improvised reverse mortgages, banks are lending to a set of people deemed too risky by Chinese regulators. That’s pretty much the definition of ’sub-prime lending.’”

“The eight per cent rise in average Dublin house prices over the past 12 months revealed by the CSO last week needs to be taken with a very large pinch of salt. With the banks cutting back on mortgage lending yet again and only tiny numbers of properties changing hands, any sustained recovery in the housing market is still a long way off. Cash transactions now account for just under half of all purchases. These cash transactions are not being captured by the CSO figures. However, going on the evidence of auctions of repossessed properties where the majority of deals are for cash, it would appear that prices are down by 60 per cent or more rather than the 50 per cent indicated by the CSO data.”

“Doubts about the reliability of the CSO figures are only part of the problem. Even if every house was being purchased with the aid of a mortgage, a far bigger obstacle to gauging the true state of the housing market is the fact that transaction volumes, either with or without a mortgage, have virtually dried up. So no credit and tiny transaction volumes on the one hand, but an apparent price recovery, at least in the better Dublin suburbs, on the other.”

“Looking at the current situation, it’s hard not to be reminded of 18th Century Russian statesman Prince Grigory Potemkin, chief minister and sometime lover of Empress Catherine the Great. Whenever the Empress got it into her head to journey through her vast territories, Prince Potemkin would travel a few days ahead of her constructing ‘villages’ that were in reality no more than facades, populated by suspiciously well-dressed and fed ‘villagers’, thus ensuring Her Majesty a rapturous reception wherever she went.”

“While the Russians may have had Potemkin villages with an attractive facade concealing the poverty that lay behind, we in Ireland have a Potemkin property market.”

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Bits Bucket for August 30, 2013

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August 29, 2013

Bits Bucket for August 29, 2013

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August 28, 2013

The Return Of Flipping Is A Return Toward Normal

The Times Tribune reports from Pennsylvania. “House-flipping activity in the Scranton/Wilkes-Barre metro area more than doubled in the first half, compared to the same 2012 period, according to RealtyTrac. ‘The return of flipping is a signal of a return toward a normal housing market,’ said Austin Jaffe, Ph.D., chairman of the insurance and real estate department at Penn State University. ‘When housing prices stabilized in recent days, downsize risk is limited for investors who wish to flip. The average gross profit on first-half flips was 43 percent in the metro area and 31 percent statewide, according to RealtyTrac. The national average was 9 percent. The averages exclude investments made between the purchase and resale. ‘The prospects of significant appreciation will fuel a new flipping boom, if one exists,’ Dr. Jaffe said.”

“Mike Stuenzi’s return to house flipping builds on earlier experience. ‘I’m very cautious about how I’m getting back into it,’ Mr. Stuenzi, of Dalton. ‘When things were good, we were turning them around in three months. In 2010, it got real bad. I carried a couple houses for a long time.’”

“Mr. Stuenzi concentrates now on modest properties. An investor in his company provides financing for acquisitions and Mr. Stuenzi does the labor. He has an agreement to buy a two-bedroom South Abington house in the mid-$60,000 range. He plans to invest about $30,000 over two months to install a new kitchen and first-floor bathroom, renovate ceilings and the second-floor restroom, landscape and sell the property for about $105,000. It would leave his company with a profit of about $10,000. ‘It’s not an ideal margin,’ he admitted. ‘It’s still very difficult.’”

The Patriot News in Pennsylvania. “The central Pennsylvania housing market is back. But it’s not all the way back. Homeowners who bought at the tippy-top of the market’s peak in the halcyon housing years of 2006-07 often come up short when they decide to sell. That is, these owners still can’t reap a price equal to what they paid. This doesn’t mean that they are underwater. Often, these prospective sellers have equity in their homes.”

“Instead, it’s more of a psychological barrier, real estate agents say. These owners want to feel like their home purchase was a good investment. But if they can’t sell for at least what they paid, many are left with negative feelings.”

“‘That continues to be an issue,’ lamented Bernie Campanella, an agent with Fine Line Realty, Harrisburg, of homeowners who purchased at the peak. ‘Overall, have we totally recovered in terms of price? Not really. There have been pleasant increases in selling prices as buyers come out and drive demand. It remains a buyer’s market in the new home market.’”

“When the homeowners sells for less in a still-recovering market, he or she often buys a replacement home for less, too. This is the philosophy that agents try to instill in reluctant sellers unwilling to take a loss. ‘A seller has to understand that even though he is selling for less than he believes his property to be worth, he can realize that the home he intends to purchase, be it an existing home or a new build, will be available for less than he would had paid at the height of the housing boom before 2008,’ Campanella points out. ‘In the total equation, he will buy for less after selling for less.’”

“Greg Rothman, partner with RSR Realtors in Lemoyne, told of one recent deal where a seller’s losses on his first house were more than made up by the value gains on his second. Consider the case of the seller’s 2,500-square-foot home in Fairview Twp. He had purchased it in 2006 for $300,000. Now, seven years later, it was worth only $265,000 — a hard-to-swallow loss, to be sure.”

“But the bitter aftertaste lifted when that same seller became a buyer, purchasing a 3,500-square-foot home in East Pennsboro Twp. with river views for $600,000. That same home had sold for $800,000 during the boom. All in all, the seller made out. Unfortunately, many sellers just don’t see it this way. ‘People feel better when they are selling over market value,’ Greg Rothman says. ‘But they are also buying a house for lower than expected. What we explain is, if they are selling they are also buying. Real estate is a portfolio. Who cares?’”

The Week on New Jersey. “In 2008, MaKenna Grae and her husband prequalified for a $2 million mortgage. The couple was stunned. They had never expected to buy a home with a seven-figure price tag. So, rather than heed the bank’s advice, the Graes sat down and figured out how much they could comfortably pay every month. Before they looked at their first house, they had settled on a budget that had nothing to do with the bank’s recommendation. Instead of shopping for $2 million sprawling mansions, the couple set out to find a home for about $500,000 in northern New Jersey.”

“‘I cannot imagine what our stress level would be or how crazy our lives would be if we had listened to the banks about what we were approved for and bought a $2 million home,’ says Grae, who ultimately bought a four-bedroom house for about $425,000 in Elmwood Park, New Jersey.”

“For buyers who were shut out of the mortgage business for the past five years, the ability to buy is suddenly real again. But just because a bank thinks you can afford a multimillion-dollar house doesn’t mean it’s a wise financial choice. ‘Remember, the bank is in the business of making loans, and they want you to borrow as much as they are comfortable risking on you — and not a penny less,’ says Ellen Derrick, a certified financial planner with LearnVest Planning Services.”

“The general rule of thumb: Mortgage payments should not exceed 28 percent of your monthly take-home pay, says Derrick. So, if you take home $9,000 a month, your mortgage payments should be no more than $2,520. Another way to look at it: The house shouldn’t cost more than two and a half times your annual salary. So, someone earning $100,000 a year should be looking at houses that cost no more than $250,000. You should also have enough money set aside in a rainy-day fund to cover six months of household expenses so you can keep making those payments.”

“With interest rates creeping up and housing prices skyrocketing in some markets, many buyers, fearing they’ve missed the bottom of the market, are eager to buy a home now. Buyers are putting down less cash, making it easier in the short term to buy a more expensive home. The average down payment on homes with a 30-year fixed-rate mortgage dropped to 16.1 percent in May, down from 17.6 percent in 2011, according to a LendingTree report.”

“‘When I hear people say, ‘Yeah, I know I’d have a hard time making the payment, but I just feel like I need to buy something while rates are low,’ I just cringe,’ says Derrick. ‘Just because interest rates are low does not mean you should buy a house.’”

The Daily Journal in New Jersey. “At 768 square feet and two bedrooms, Marc and Bethany Olmeda knew the Ocean County house they bought in spring 2009 wasn’t large enough to accommodate the couple and their three sons. But the housing bubble finally was deflating, interest rates were relatively low and the federal government was offering $8,000 to first-time home buyers. They decided they could always renovate the house. So they made the leap. Whoops.”

“The Olmedas had been renting for many years before they bought their home for $230,000 at an interest rate of 5.5 percent. It had only two bedrooms, which meant their three boys would need to share one room. It seemed like a good deal. By the time they purchased their home, the housing bubble that inflated during the decade had begun to collapse. But they thought the housing market would bottom out and they still could build up equity that they could use to remodel, giving their sons rooms of their own. ‘It obviously didn’t work out that way,’ Bethany Olmeda said.”

“In rosier times, home-equity loans and lines of credit were the way many consumers chose to go, and for good reason. Consumers could use them to borrow money at a lower interest rate than a credit card. They could tap into the funds for 10 years. They could repay the money on a flexible time frame, for as long as 30 years. And, depending on their income, they could deduct the borrowing from their taxes, said Kelly Kockos, a home-equity product manager for Wells Fargo. ‘If you have equity, it’s a good option, as long as you’re going to use it responsibly, because you are leveraging your home,’ Kockos said.”

“With home prices soaring in the 2000s, home-equity loans followed suit. They rose from $242 billion in the first quarter of 2003 to a peak of $714 billion in the first quarter of 2009, or 195 percent, according to the Federal Reserve Bank of New York. It helped consumers upgrade their homes, pay their bills in case they lost their job and buy luxury items — essentially maintain their standard of living in an era when their wages were stagnant.”

“It didn’t last. Many homeowners took on more debt than they could repay. When they began to default, it touched off a global recession. Home values fell by nearly a quarter. And trillions of dollars in home equity was erased. ‘It’s always a bad bet to have declining asset values securing increasing debt,’ said Patrick J. O’Keefe, director of economic research for CohnReznick, a New York-based accounting firm.”

“Home values have begun to recover nationwide, according to a recent report by the National Association of Realtors trade group. But home-equity loans have only continued their slide; in the second quarter, consumers had $540 billion in home-equity loans outstanding, down 24 percent from their peak and back to 2005 levels, according to the Fed.”

“Running out of patience, the Olmedas signed up for a renovation loan. Backed by the federal government, the so-called 203(k) loan allows homeowners to borrow money not based on the home’s current value, but its future value after the renovation is completed. It comes with fees for consultants and appraisals. And homeowners need to make a down payment of 3.5 percent of the loan amount. But once approved, borrowers can’t fritter the money away on frivolous items; it has to be spent on home improvements.”

“The Olmedas considered their options. They could move, but they likely would have had to sell their home for less than they paid. They could rent, but they would need to find a tenant who would pay enough to cover their mortgage payments — these days, more than the market rate. Or they could choose the renovation loan. The loan increased their monthly mortgage payment by about $200. But they added 495 square feet to their home. They increased the home’s value. And during a recent visit, their sons were stretched out — in their own rooms, in their own beds.”

Bits Bucket for August 28, 2013

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August 27, 2013

Bits Bucket for August 27, 2013

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August 26, 2013

Call It Anything You Like, Just Don’t Call It A Bubble

Some housing bubble news from Washington and the world. The Herald Sun, Australia, “Boom, price surge, recovery, strong market, call it anything you like, just don’t call it a housing bubble - not yet, anyway. Yes, residential property prices are rising. Yes, households are willing to carry high debt levels and, yes, property prices are historically expensive. But that’s where the similarity between a bubble and the current market increases end. According to the experts, most property markets are just in a typical bull-market phase, before an expected return to more modest price growth.”

“‘Talk of a bubble pre-election is rubbish. Everyone is clearly cooling their jets at the moment. There are no runaway results or evidence of a bubble,’ says David Morrell, director of buyers advocacy firm Morrell and Koren. ‘Obviously, if you’re buying as an investor out of a super fund then you’ve got a bit more fire power than a young couple gearing themselves up. But anyone talking of a bubble now is talking rubbish, they’re delusional.’”

“Cameron Kusher, a senior analyst at research house RP Data, questions if Australia has ever had a real property bubble. ‘You can’t say we are entering a housing bubble when home values are still below their previous peak,’ Mr Kusher says. ‘I would describe a bubble as a ‘phenomenon’ in which home values become overvalued and ultimately burst. Outside of select coastal markets, it is difficult to say this has really occurred elsewhere in Australia over the recent past.’”

“Stockbroker Bell Potter Wholesale managing director Charlie Aitken says there is a fair degree of ‘fear of missing out’ going on around the nation. ‘There is no country in the world where the man in the street gets greater FOMO (fear of missing out) than Australia,’ Mr Aitken says.”

The Irish Independent. “Let the latest property price figures from the Central Statistics Office serve as a cautionary tale for anyone looking to dip their toe in the property market, particularly in the capital. It seems the Irish are still obsessed with the concept of home ownership, despite the bust. I know – I was there. Right at the height of the boom, I bought my two-bed townhouse in Finglas and I have the negative-equity scars to prove it.”

“The urge to own my own home was stronger than the many warning signs that I, and many others, chose to ignore. But I was driven by a fear that I wouldn’t get a mortgage – that I would be priced out of the market. At the time, the lending market was already showing signs of drying up and I didn’t want to be left behind. But looking back, I had no excuse really.”

“Prices in Dublin and its suburbs shot up by 8pc in the year to July. In the month of July alone prices jumped by 3.3pc – the highest rise in eight years. And apartment prices rose by even greater amounts as buyers competed for a limited number of properties. And property experts are reporting that up to 100 people are showing up for each viewing in South Dublin, while some people with mortgage approvals are finding that Dublin prices are moving beyond the amounts banks were prepared to lend them.”

“But a sustained recovery in the housing market will be driven only by better employment prospects and disposable incomes. Now that the budgetary and pay cuts have kicked in and nearly all the treats have dried up, I can’t help sometimes feeling a little resentful towards the house – at the risk of sounding ridiculous.”

From Lew Rockwell. “The President has been talking a lot of late about the bubble economy. Obama has talked bubbles four times in five days. Recently Obama said, ‘When wealth concentrates at the very top, it can inflate unstable bubbles that threaten the economy.’ The newspaper account in which I read of the president’s radio remarks about ‘bubbles and busts’ filled out the story with reference to the likely replacements for bubbling Ben Bernanke at the Fed: Janet Yellen and Larry Summers.”

“For a comment on these two peas in the short-list pod it turned to – of all people – a former Fed official! And he offered that ‘both candidates can claim bubble-battling expertise.’ How is it that we’ve had more bubbles than Lawrence Welk and his Champagne Music Makers, what with the president and all these bubble-battlers bustling about?”

The Foreign Policy Journal. “In his latest column, Paul Krugman asks, ‘Why have we been having so many bubbles?’ His answer is instructive. ‘One popular answer’ to his question ‘involves blaming the Federal Reserve—the loose-money policies of Ben Bernanke and, before him, Alan Greenspan.’”

“Krugman’s argument, however, simply is not honest. His claim that interest rates were ‘within historic norms’ during the housing bubble, for example, is what one might call a ‘lie.’ Krugman asserted that since interest rates weren’t low by historical standards, therefore low rates couldn’t have caused the housing bubble. Yet we see that rates were low by historical standards, and thus, his conclusion that the Fed was not the culprit is false.”

“Moreover, the real question isn’t whether interest rates were lower than they had historically been in the past, but whether they were lower than they would otherwise have been if determined by the free market rather than efforts to centrally plan the economy. And the answer to this question is self-evidently in the affirmative, since it has been one of the central purposes of the Fed’s intervention in the market to push rates down below where they otherwise would be.”

“And we don’t need data and charts to illustrate how Krugman is being dishonest with his readers. One may simply examine what economists were saying at the time about the influence of the Fed’s low interest rates on the housing market:

“Millions of Americans have decided that low interest rates offer a good opportunity to refinance their homes or buy new ones.” – May 2, 2001

“To reflate the economy, the Fed doesn’t have to restore business investment; any kind of increase in demand will do…. [H]ousing, which is highly sensitive to interest rates, could help lead a recovery.” – August 14, 2001

“Low interest rates, which promote spending on housing and other durable goods, are the main answer.” – October 7, 2001

“[T]he Fed’s dramatic interest rate cuts helped keep housing strong” – December 28, 2001

“To fight this recession the Fed … needs soaring household spending to offset moribund business investment. And to do that … Alan Greenspan needs to create a housing bubble to replace the NASDAQ bubble.” – August 2, 2002

“[T]hose 11 interest rate cuts in 2001 fueled a boom both in housing purchases and in mortgage refinancing….” – October 1, 2002

“Mortgage rates did indeed fall briefly to historic lows, extending the home-buying and refinancing boom that has helped keep the economy’s head above water.” – July 25, 2003

“Low interest rates … have been crucial to America’s housing boom.” – May 20, 2005

“Now the question is what can replace the housing bubble…. But the Fed does seem to be running out of bubbles.” – May 27, 2005

“[T]he Federal Reserve successfully replaced the technology bubble with a housing bubble. But where will the Fed find another bubble?” – August 7, 2006

“Back in 2002 and 2003, low interest rates made buying a house look like a very good deal. As people piled into housing, however, prices rose—and people began assuming that they would keep on rising.” – July 27, 2007

“Which economists said those things? All of the above quotes are from Paul Krugman, whose record on the housing bubble I documented in my book Ron Paul vs. Paul Krugman: Austrian vs. Keynesian economics in the financial crisis.”

From Bloomberg. “Politicians have been promising more than they can deliver since the dawn of democracy. So it’s no surprise that President Barack Obama wants to make housing more affordable, ensure that home prices keep going up, reduce taxpayer support for the mortgage-finance system and prevent future crises — simultaneously. But some of the items on his wish list, as outlined in a speech in Phoenix, are contradictory.”

“It’s all well and good to say that the government should ‘cut red tape’ and ’simplify overlapping regulations’ so that ‘responsible families’ have an easier time buying homes. But what does this mean in practice? Should income and down-payment requirements be eased? Lest we forget, lowering lending standards was precisely what got us into the housing mess in the previous decade.”

“As things stand, the federal government is on the hook for all of the losses on nearly every mortgage issued since 2009.”

“Economists have shown that, during the recent housing bubble, prices rose as down payments fell. This empowered buyers who had been shut out of the market, which pushed up prices and temporarily increased the homeownership rate — until it came crashing down. To keep this from happening again, Obama, regulators and lawmakers must avoid the siren song of homeownership for everyone.”

The Washington Post. “It haunts me when I think of some of the mortgage loans I’ve seen and still see. Too many people, who certainly should have known better, agreed to buy homes when their monthly mortgage payments were 50 percent to upward of 70 percent of their net pay. That’s just too much.”

“President Obama has laid out plans to rebuild the housing market. The plans focus on Fannie Mae and Freddie Mac. Now, Obama says it’s time to phase out the two agencies. Obama also said something that shouldn’t be overlooked. ‘In the run-up to the crisis, banks and governments too often made everybody feel like they had to own a home, even if they weren’t ready and didn’t have the payments. That’s a mistake we should not repeat.’”

“When mortgage rates and home prices hit historical lows, people would ask me if they should buy a house. ‘Are you ready?’ I asked back. Blank stares often greeted my question. Even if you could get a zero-percent home loan for 30 years, if it eats up more than half your net pay, you probably can’t afford it. Notice I focus on net, not gross, income.”

“As we reinvent the housing finance model, we also have to throw out old advice and lending models. Start with the way we look down on renting. When you rent, you are not a financial failure. You are getting something for your money — a roof over your head. You also maintain flexibility when you rent, allowing you to move easily if you need to find a better-paying job in a different location.”

“Consumer advocates want to make sure any changes the government makes don’t prevent creditworthy individuals from owning homes and improving their economic status. I support that mission. But I also want a more realistic approach to mortgage lending so we don’t repeat past mistakes.”

Bits Bucket for August 26, 2013

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August 25, 2013

When Is A Housing Bubble Not A Housing Bubble?

Readers suggested a topic on the housing bubble hustle. “Just heard an ad on the radio for a national mortgage lender. The fellow said something to the effect of ‘as prices go up, interest rates are sure to follow!’ Imagine if someone made a similarly deceptive statement about a nutritional supplement. Or about any other product. Street corner hustlers run the shell game and dice and card games. None of these are government backed. But once the hustle becomes big enough, it becomes useful for politicians to protect and advance it.”

A reply, “Also, once a hustle becomes IMPORTANT enough, it becomes useful for politicians to protect and advance it. Lenders have a stake in keeping RE prices up so the value of their mortgages will be kept up. Homeowners and home buyers (who, together, make up the majority of voters) also have a stake in keeping RE prices up since this is where most of them have their money ‘invested’.”

“So many have an interest in High RE prices and few have an interest in lower RE prices so high RE prices is what we end up with.”

“There is no balance here, the other side of the argument (the lower-RE-price-just-might-be-a-good-thing argument) is never presented because it has been declared to be in the National Interest that RE prices be supported. This means hustlers have an unspoken license to hustle as long as their hustle acts to support RE prices. (A blatant example, IMHO, is the behavior of RE ‘investors’ who use huge pools of OPM to pump up RE prices in targeted areas so as to extract hefty fees for themselves in the form of capital gains and while doing so enjoy no opposition and no oversight whatsoever as to what they are up to.)”

The News Journal in Florida. “Andrew Hardesty has gotten used to country living. In 2008, he and his wife purchased a home near Flagler Beach that sits between a lake and what looks like a country field. Here’s the catch: Hardesty’s home is in the middle of an unfinished subdivision called Eagle Lakes. Today, more than 60 similar developments sit mostly vacant in Volusia and Flagler counties.”

“Of the subdivisions started in 2007, records show that 2,257 out of 2,554 lots have no homes on them — an 88 percent vacancy rate. A total of 19 subdivisions were created a year later. Today, 56 percent of those lots are vacant. John Adams, general manager of Adams Cameron & Co. Realtors, said new homes haven’t been needed recently as the number of existing homes soared to about 10,000. Now that number is down to 3,500.”

“‘We don’t have homes to replace’ existing ones that come off the market, he said, ‘and I think the builders understand that.’”

The Star Tribune in Minnesota. “Despite a barrage of new apartment buildings in the Twin Cities metro area, demand for rentals continues to outstrip supply. The average vacancy rate in the seven-county area dipped to 2.3 percent at the end of June, causing the average metro rent price to increase 3 percent to $979, according to a second-quarter survey by Marquette Advisors. Much of the demand is being fueled by young professionals and empty nesters who don’t want to make a long-term commitment to homeownership and are interested in the perks of urban living.”

“But with thousands of apartments on the drawing board, the metro market is expected to soften in the coming months, leading some to believe that a construction bubble is on the horizon. Despite lower rents in some suburbs, affordability continues to be a serious problem metrowide, particularly because most of the apartments being planned and built are upscale. A report by the Minnesota Housing Partnership (MHP) shows that since 2000, rents have risen by 6 percent while incomes for renters have fallen by 17 percent.”

“The study showed that low-wage workers in common occupations like food preparation and retail sales can’t afford to rent a two-bedroom apartment in any Minnesota county, and that statewide, there are only 38 units of rental housing available for every 100 extremely low-income renters. ‘When rental housing becomes too costly, all renters suffer, but the impact is especially severe for children,’ says the MHP’s executive director, Chip Halbach.”

“Marquette Advisors vice president, Brent Wittenberg said that for now, there’s no shortage of people — namely young professionals and empty nesters — willing to pay for luxury digs. ‘These are people who can afford to buy who are making the conscious decision to rent,’ he said.”

Global News in Canada. “Buying your first home may seem like a pricey move, especially for younger people and amidst growing concern Canada’s housing market could crash. The Canadian Home Builders Association – Lethbridge Region is going on the defensive, saying there’s no danger of that in Lethbridge, adding that the market is strengthened by younger buyers and a diverse southern Alberta economy.”

“One Lethbirdge home builder is selling condos in the $170,000 range and throwing in a semester of tuition, worth $4,000. The target market? Students. The CHBA believes the investment is more than financial. ‘It’s giving their children the opportunity to learn what it’s like to be a homeowner, so when they’re ready, they’re knowledgable,’ said CHBA’s Angie Zuba.”

The Independent in the UK. “When is a housing bubble not a housing bubble? When both the Chancellor of the Exchequer and the Governor of the Bank of England tell you it isn’t, of course. So, naturally, it would be wise to ignore the latest data from the Royal Institution of Chartered Surveyors (Rics) and the Government’s own Office for National Statistics (ONS). And within the details, both surveys suggest that while London – with its strange fascination for overseas buyers and investors – remains the powerhouse for the market, house prices and, more importantly, sales, are starting to move in most other parts of the country. Indeed Rics highlighted the point that two of the worst performers in recent years, the West Midlands and North-east, are now trending at 14-year highs.”

“Even now, the equivalent of Corporal Jones from Dad’s Army is running down the corridors of Whitehall and along the pavement of Threadneedle Street shouting: ‘Don’t panic. Don’t panic.’ Well, just ignore him.”

“The fact is that not only is the housing market taking off at a rate most economists find at least surprising, if not yet worrying, but the Government has already primed it to shoot ahead even more. The first phase of the Help to Buy scheme, which came in April and covered only new-build homes, has clearly stimulated the market. But there is every chance that when it moves into its next phase, covering older properties and including a government guarantee on part of the mortgage, the market could well become over-stimulated.”

“The Shore Capital economist Gerard Lane fears he may be a little cynical in his views on this subject. He suggests that the politicians (I assume he means the Tories) would not be particularly unhappy if there were something of a housing boom in the run-up to the May 2015 General Election. He even dares to imply that a housing boom, feeding through into the domestic economy during a period of cheap money, would make it easier for the Treasury to sell its stakes in Royal Bank of Scotland and Lloyds Banking Group. Come, Mr Lane, you are not being cynical enough.”

Bits Bucket for August 25, 2013

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