December 11, 2013

A False Recovery In Housing

Bloomberg reports on California. “Jumbo loans, both adjustable and fixed-rate, increased by 34 percent to $216 billion in the first nine months of this year, with ARMs comprising the majority of the gain, said Guy Cecala, publisher of Inside Mortgage Finance. In early December, Jim Pietrocini refinanced his 4,600-square-foot Carlsbad, California, home. Pietrocini couldn’t resist the deal on the jumbo, a loan exceeding the limit the government will buy. His $744,000 mortgage at 3.5 percent, which adjusts annually after seven years, will save him almost $8,000 a year compared with a fixed rate loan at 5 percent.”

“‘I have two kids who are teenagers who probably will be gone in seven years,’ said Pietrocin. ‘My wife and I don’t need all this space for ourselves, so we’re probably going to downsize before the loan adjusts.’”

“A decade ago, jumbo ARMs helped fuel the housing bubble by letting buyers qualify for homes they only could afford at the low rates before they reset. When home prices stopped climbing in mid-2006, both jumbo and conventional ARM borrowers began defaulting in higher numbers. ‘People have decided that whatever happened in 2008 is not going to happen again,’ said Richard Lepre, a San Francisco- based loan officer. ‘There is not much concern about home values falling again.’”

The Sacramento Bee. “In the city of Sacramento, permits for residential remodels and additions in excess of $50,000 increased from 97 in 2012 to 113 so far this year, said Ryan DeVore, the city’s chief building officer. Susan Zdarko said she refinanced in preparation for adding a second story to her Land Park cottage. ‘Interest rates are historically the lowest they’ve been in my lifetime,’ Zdarko said. ‘It was the perfect opportunity.’”

“Rochelle Kaye said the sense that values were ticking up helped assure her and her husband that now was a good time to add a covered backyard patio with a fireplace to their Land Park house. ‘For us, at this point in our lives, we might as well do it now and enjoy it when the kids are here,’ Kaye said. ‘We know we’re not going to lose money.’”

The LA Times. “Changing cultural attitudes and skyrocketing home prices have boosted demand for condominiums this year, experts say. Tunisha Collure recently debated leaving her downtown L.A. apartment for a single-family house when she looked to become a homeowner. But the 31-year-old banker couldn’t part with the city center. She scooped up a South Park condo last month for $575,000. ‘To be able to get out of a condo and walk one step and there is wine bar, or walk two steps, a Starbucks, and three more steps, you are at Staples Center — I think that’s why I didn’t purchase a single-family home,’ she said.”

“There’s simply little space left for row upon row of single-family houses — especially in the coastal counties. ‘It’s almost an iron law,’ Gerd-Ulf Krueger, chief economist with KruegerEconomics, said of the coming denser development. ‘It’s set in stone.’”

The San Gabriel Valley Tribune. “A report from the Los Angeles County Economic Development Corp. that will be included in Thursday’s summit predicts that L.A. County will experience ‘lackluster’ growth through 2014. Residential construction continues to struggle. ‘I think part of the challenge in trying sort all of this out is that, in many ways, we’re seeing a kind of false recovery in housing,’ said Tom Adams, owner of Century 21 Adams & Barnes in Monrovia. ‘A lot of offshore money has been coming in — particularly in the San Gabriel Valley — and that is not the norm. I’m fearful that if that money goes away it will create a new vacuum in our market, and we won’t need any houses for a while.’”

“Southern California’s housing market has posted double-digit prices increases and Adams said that’s been fueled by the influx of foreign money, tight inventories and the housing market’s ongoing recovery. In the thick of the recession and its aftermath, foreclosures and short sales dominated the market. But Adams said they are virtually nonexistent now. ‘Banks are not foreclosing for political reasons and increasing home values have created equity so homeowners can either sell or keep their homes,’ he said.”

The Fresno Bee. “In a back alley near downtown Fresno, about 40 people gathered Thursday for a candlelight vigil beside several vacant, boarded-up homes — a blight they consider one of the city’s biggest problems. The vigil, spearheaded by Faith in Community, asked for a meeting with Fresno Mayor Ashley Swearengin and city officials to help draft an ordinance that would prevent ’slumlords’ from purchasing new properties.”

“While walking in Brookhaven in southwest Fresno, Bryson White, a minister for Saint Rest Baptist Church, said group members spotted 22 abandoned homes owned by JD Home Rentals. ‘The number of vacant homes managed by the company at any one time is a function of the economy,’ Bryce Hovannisian with JD Home Rentals said in a written statement. ‘In our experience, during slower economic times it can take longer to rent homes, so sometimes there may be more vacancies. At all times, JD Homes works to comply with the city of Fresno’s rules that require vacant homes to be boarded-up, because we understand that it is an important public safety issue, and we share the community’s concerns about keeping neighborhoods safe.’”

The San Francisco Examiner. “In a Google bus blockade in The City’s Mission district Monday morning, about two dozen protesters dubbing themselves the San Francisco Displacement and Neighborhood Impact Agency and a Google employee imposter underscored yet again what they consider an eviction crisis linked to the tech industry.”

“Yellow-vested protesters held a ‘Warning: Illegal Use of Public Infrastructure’ sign, highlighting the problems they see with Google’s commuter shuttles picking up workers at Muni stops. Two activists boarded the Google bus passed out eviction surveys with the likeness of a civic seal. A man pretending to be a Google worker got off the bus and shouted at protesters, ‘This is a city for the right people who can afford it! If you can’t afford it, it’s time for you to leave!’”

“The hoaxer, who later revealed he is Max Bell Alper, called his impassioned tirade ‘a piece of improv political theater’ to demonstrate his worry that housing and transportation in The City are becoming less and less affordable. ‘It’s completely absurd that anybody would want to live in a city that only rich people can afford,’ he said.”

Bits Bucket for December 11, 2013

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