February 13, 2014

The Urgency To Buy Has Evaporated

The Los Angeles Times reports from California. “Southern California home buyers continue to turn their backs on an expensive market with few houses for sale. Home prices fell 3.8% in January compared with December, though the median price remained up sharply compared with January of last year, DataQuick reported. The price decline, coupled with falling sales, revealed a market that has lost momentum after an explosive price run-up in the first half of 2013. ‘Buyers are not overpaying,’ said Broker Derek Oie, owner of Century 21 the Oie Group in the Inland Empire. ‘They know the market has changed.’”

“January’s median home price, $380,000, is the lowest since May. ‘The pause is related to a deterioration in affordability,’ said Stuart Gabriel, director of UCLA’s Ziman Center for Real Estate. ‘The urgency to buy has essentially evaporated.’”

The Press Enterprise. “DataQuick reported that San Bernardino County lost even more ground in January with its 1,910 home sales falling 10.9 percent from the 2,137 sales in January 2013. Riverside County saw a 9.9 percent loss with 2,576 home sales in January, down from 2,858 the year earlier. Faring the worst in January on home sales was San Diego County, which had been pepper-hot while Inland regions sputtered toward recovery. There, sales fell 13.9 percent.”

“Inland economist John Husing said sales are down, and not only because of tight inventory. That’s been the case for some time. Sales are down because the pool of buyers and sellers shrank, Husing said. ‘On the buyers’ side one year ago, the market was being driven by investors,’ he explained. ‘If price is up, they don’t see the capital gains possibilities they did before. They’re backing off. And, the gap is not being filled by families looking for homes.’”

“On the supply side, Husing said homeowners have been recovering value in their homes, but equity has not appreciated enough to give them a lot of incentive to sell. ‘Another reason homes are not selling is the caution that people are taking.’ They are unwilling to move around, he said, commenting: ‘The economy still has them generally spooked.’”

From Globest. “Despite the recent slowdown in housing prices and sales volume, as well as the looming specter of higher mortgages, panelists at Arixa Capital Advisors’ recent first investment roundtable in Orange County were surprisingly sanguine about the future prospects for the single-family market. John McMonigle, principal and founder of the McMonigle Team, added that the Pacific Rim buyer, often from China, has been a positive factor in supporting home prices. He added that these buyers are interested in a particular product with new construction in master-planned communities, rather than eclectic older homes.”

“Emile Haddad, CEO of FivePoint Communities supported McMonigle’s statement by saying said that 70% of the 280 homes he has sold in the Great Park Neighborhoods master-planned community since October 2013 have been to Pacific Rim buyers. He added that concerned regime members and business owners in China will continue to move their money out of the country in anticipation of a slowing Chinese economy, which may lead to political instability in the future.”

Capital Public Radio. “Daren Blomquist with research firm RealtyTrac says January foreclosure starts in California were up 12% from December and nearly 60% from a year ago. ‘That was following 17 consecutive months where the California foreclosure start numbers had been decreasing on an annual basis,’ he said. Blomquist points out those annual decreases were triggered by California’s ‘Homeowner Bill of Rights’ which took effect last year, requiring more paperwork from lenders.”

“‘And now we’re seeing the lenders finally adjust to that legislation and start to push through foreclosures that may have been delayed because they were trying to figure out what they need to do to make sure that they’re foreclosing properly,’ Blomquist said.”

The Sacramento Business Journal. “Housing sales picked up slightly but continued to show a moderating trend in January, according to figures from Lyon Real Estate and the Sacramento Association of Realtors. The Sacramento Association of Realtors figures showed 1,940 active listings in January in Sacramento County and West Sacramento, up from 1,836 last month. Though the January number was nearly twice as many as in January 2012, when there were only 984, the median sales prices was only $8,000 less than a year earlier, at $242,000.”

From Reuters. “The view of the Pacific Ocean from the San Joaquin Hills in Newport Coast, California is extraordinary. So, when Mohammad Taghavian started looking for a new home four years ago, he knew exactly where he wanted to be. The housing market, however, wasn’t so cooperative. Taghavian, a 47-year-old engineer, jumped at any property that came on the market, only to find that whatever he bid, he was ‘edged out by a cash offer,’ he says.”

“He did what a keen home buyer would do. Taghavian kept raising his offer, from $600,000 to over a million. That placed him in jumbo mortgage territory. His real estate agent, Michael Salas of Coldwell Banker, honed in on one development and went on a letter-writing spree to about 60 homeowners with ocean views. When a $1.4 million townhouse finally came on the market last year, Taghavian snagged it. He moved into his dream home just before the new year.”

“Another clause that aided Taghavian was a ‘departing residence’ exclusion, which meant he was able to rent his existing home and count 70 percent of that income toward his bottom line. Otherwise, he would have had to sell the property, bought at the peak of the housing market, a time-consuming effort that wouldn’t have netted him the profit he was after.”

“‘I really wanted that particular area, and it pushed me to get a jumbo loan,’ Taghavian says. ‘But you have to calculate the risk, because everything is not just about what you desire. At the end of the day, you have to make the payments.’”

Sellers Are Dealing With A Glut Of New Properties

The Denver Business Journal reports from Colorado. “As with many homebuilders around metro Denver, KB Home Colorado Inc. had a busy 2013 and seems primed to be even busier in 2014. The evidence comes by way of the company’s recent single-family home land grab in metro Denver. ‘We’ve just had so much activity by way of acquisitions we’ve closed down in the past few months,’ said Matt Mandino, president of KB Home’s Colorado division. Mandino said the homebuilder is not finished with land purchases. ‘We think it’s relatively early in this housing cycle,’ Mandino said. ‘Our assessment of metro Denver is very favorable, which is why we’ve been so aggressive on the acquisition front. And we’ll be increasing our community count as we go forward.’”

The Denver Post in Colorado. “Metro Denver’s housing market got off to a respectable start in January, with prices steady despite a rising number of homes sold and a tight inventory, according to Metrolist, which runs the metro area’s multiple listing service. The average price for new and existing homes in January, both attached and detached, was $302,251, down 3 percent from December. The number of active listings increased 5 percent from December and was up 7 percent from January 2013.”

“‘We are optimistic about the 2014 real estate landscape,’ said Kirby Slunaker, CEO of Metrolist, in a statement. ‘We’d advise any consumers who are planning on entering the market for a new home later this year to start looking early.’”

The Albuquerque Journal in New Mexico. “The flood of foreclosures began to recede in the Albuquerque metro area during 2013, dropping to the lowest level in four years. Although the pace of new foreclosures was down by half in 2013 compared to the peak, reminders of the crisis still dot neighborhoods across the metro. ‘Over the last several years, in my talks with (state) legislators in both the House and Senate, most were appalled at the number of vacant homes in their districts that were either in the foreclosure process or had been foreclosed upon,’ said Bill Elliott, president of the mortgage lenders group.”

“‘The average time from start to finish on a foreclosure in New Mexico is well over 450 days, according to the Federal Housing Finance Administration,’ he said. ‘I know of one case that has lasted well over five years and still has not been resolved.’”

The Phoenix Business Journal in Arizona. “Meritage Homes Corp. capped off 2013 with strong home closing revenue and profit, but like its peers nationwide saw a slowdown in orders that has stretched into 2014. ‘We invested approximately $565 million during the year in land and development, and contracted for approximately 11,200 new lots in great locations at attractive prices, ending the year with about 25,700 total lots under control,’ Steve Hilton, Meritage’s CEO, said during a conference.”

“Hilton did, however, note that things slowed down during the second half of the year, and has remained so into 2014. ‘I think people are taking a little bit longer to pull the trigger on the home-buying decision than they were a year ago,’ Hilton said. ‘There was much more urgency in the market a year ago as prices were rising a lot quicker. Prices are now rising more modestly and that’s slowing the buying process.’”

“‘I think sales per community for the first quarter will probably be off from the first quarter of last year, but you have to remember we raised sales prices extensively over the last 12 months, so to some extent that’s purposely done,’ said Larry Seay, Meritage’s chief financial officer. ‘On the other hand, obviously we’d like to see increases in sales per community.’”

“Meritage doesn’t plan to budge on those prices either. ‘Even at lower volume levels, at these price levels we can be more profitable than decreasing prices and increasing volume,’ Hilton said.”

Fox 5 in Nevada. “Home sellers hoping to recoup value lost during the recession are dealing with a glut of new properties on the market. Economic recovery has spurred a building spree, and new homes are selling, despite the fact that many have above-market prices. ‘I would say we are out of intensive care but we’re not ready to go home, so to speak,’ said Noah Herrera, president-elect of the Greater Las Vegas Association of Realtors, of the housing market. ‘Our inventory has gone up quite a bit, and there are a lot more properties on the market now,’ Herrera said.”

“Herrera and UNLV economist Stephen Brown are optimistic the market is heading in the right direction and will continue to do so as long as there is economic growth. Many of the new homes are prices well above $200,000, considerably higher than the median. ‘We are looking for 2014 to be stronger, but if something were to happen and we were to go into another spell of weak economic activity, I think that would be a drain on the economy and a drain on the housing market,’ Brown said.”

The Globe and Mail on Nevada. “The majority of Canadians buy winter homes in Florida, Arizona and California, but Las Vegas is gaining attention. Greater Las Vegas Association of Realtors president Heidi Kasama says there are still buying opportunities for Canadians, even with the Canadian dollar down to 90 cents (U.S.). ‘Perhaps the purchasing power [for Canadians] has diminished, but the potential for continued appreciation in our market is certainly there,’ she says. ‘But aside from all that, this is a great place for a second home.’”

“‘We come to relax for a week,’ says Langley, B.C., resident Peter Saris who, with his wife Grace, purchased a three-bedroom town home in an upscale Las Vegas suburb for $300,000 in 2009. In 2009, the couple purchased a townhouse in Summerlin, a 9,100 hectare master-plan community. On paper, the Saris house dropped in price 50 per cent after the couple made their purchase but has since regained much of its value. ‘We don’t look at that because we are not looking to sell,’ says Mr. Saris, who tries to head south with his wife for a week every three months.”

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