June 30, 2014

Some People May Be In For A Shock

The Santa Cruz Sentinel reports from California. “For the first time in 39 months, listings of single-family homes rose compared to a year ago, increasing from 633 to 662, up 4.6 percent, according to Gary Gangnes of Real Options Realty, who tracks the numbers. The median price, the midpoint of what sold, was $675,000. The May median was the highest since February 2008, the year of the crash. Sales were slower compared to a year ago. ‘If it’s a good property, people should come in and make offer immediately or it’s gone,’ said Jerry Smeltzer of American Dream Realty, an agent with 37 years in the business.”

“A three-bedroom, two-bath home in Capitola was snapped up in nine days, sold for the asking price. ‘They wrote a letter that was heartwarming,’ said Don O’Regan, an agent with Thunderbird Real Estate representing the sellers, who ‘liked the idea of a young family moving in and building their own memories.’”

The Signal. “The typical house in Santa Clarita changed hands for $485,000 in May – even with April, and higher than any month since February 2008 when the price was $490,000. The all-time high came in April 2006 when the average house sold for $645,000. There were 663 active listings on Southland Regional Association of Realtors’s MLS at the end of May, up 74.0 percent over a year ago, the association reported. It was the highest inventory since April 2012 and has been slowly climbing from a recession-low of 312. ‘Even inventory is slowly growing, which expands options for buyers and reflects renewed optimism in the housing market,’ said Jim Link, SRAR CEO.”

The Glendale News Press. “The number of single-family homes and condominiums for sale grew last month, though these hikes were larger than in the past. There were 116 homes on the market last month, up almost 40% from 83 in May 2013, according to statistics compiled by Realtor Keith Sorem with Keller Williams in Glendale. For condos, there were 62 for sale last month, up a whopping 72% from 36 the same time a year ago. Realtor Ira Bland in La Crescenta said he is seeing some more housing inventory coming online, but there are a lot of potential sellers who are sitting on the sidelines. ‘There still are people who are underwater, so it’s difficult for them to do anything right now,’ he said.”

“Bland said one potential factor that could impact the housing market in the future is the number of homeowners who took out home-equity lines of credit before the housing-market bust. Some of those homeowners opted for a payment structure where they paid only on the interest for 10 years. They may be reaching the point where they’ll have to pay on the interest and principal soon, Bland said. ‘Some of those people may be in for a shock,’ he added.”

Capital Public Radio. “RealtyTrac’s home sales report for May show a 15 percent drop in California sales compared to a year ago. RealtyTrac’s Daren Blomquist says sales of bank-owned properties however were up a bit. Blomquist says banks are finally pushing through properties that have been lingering in the foreclosure process. He says there’s still a lot of foreclosures in limbo. ‘Properties that have started the process maybe two or three years ago that the banks are finally pushing through,’ says Blomquist.”

The New York Times. “A year ago, buying foreclosed homes to rent out was the sure-thing trade for investment firms, but some early investors are looking to cash out a bit by flipping homes to competitors. The Waypoint Real Estate Group, one of the first companies to raise money from private investors to buy foreclosed homes, is quietly shopping as many as 2,000 houses in California that it acquired in the last few years in several private investment funds, said three people who had been briefed on the matter.”

“The companies are finding that the most challenging part of the rental business is expanding their property management operations to deal with leaky toilets, damaged roofs and tenants who do not pay rent on time. ‘Most of these companies have 18-month track records as property managers, so they are still working out the operational details,’ said Michael Gutierrez, managing director of operational risk assessments at Morningstar Credit Ratings. ‘There have been growing pains.’”

The Desert Sun. “A growing number of price reductions are entering the Coachella Valley housing market, in part a result of sellers who were too optimistic last fall. Lowering prices is a common tool to attract buyers during the slower summer season.”

“‘I’ve seen a lot of reductions across the board in the last month, in all cities and price ranges,’ said Beverly Bell, a longtime HK Lane luxury real estate agent based in Palm Desert. ‘It’s not an uncommon thing to do. I also think that last fall, everybody was a little more optimistic thinking what season would be. It didn’t turn out to be quite what they thought it would be. Prices were a little bit too high because of that forecast. In all price ranges, when we do see the sale, they’ve had maybe one or two price reductions. Unless it’s a motivated seller, price reductions are from the lower end to all the way up into $2 million-plus.’”

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June 29, 2014

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June 28, 2014

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June 27, 2014

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June 26, 2014

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June 25, 2014

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June 24, 2014

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June 23, 2014

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June 22, 2014

Did Housing ‘Recover’ Too Much?

Readers suggested topic on where we are. “When will this echo-bubble hit its peak, or has it already done so? Someone this past week posted a comment of ‘I’m calling top.’ But it made me wonder: are we really close to the top? Past the top? Still years from the top?”

A reply, “We should include a discussion on how people are faring with higher food prices, high gas prices and high utilities. The CNY area is approximately 427K and approximately 25 percent of the population is having a tough time paying their utility bills. Yes I personally know guys in their fifties retiring from this company with over a million dollar retirement package. In Syracuse people working for this utility have a saying which goes something like ‘there are two kinds of people ones who work for National Grid and the others who want to work for national Grid.’ So our house prices are high, food prices are high, gas is high, utilities are high. But the new LYING Fed doesn’t see inflation.”

“Our property taxes are astronomically HIGH. A house now selling for 400K will cost you 24K and yes 24K in taxes. This is not a typo.”

I suggested this link, saying, ‘Wiped itself out, huh? It recovered too much?’ “The two-year-old U.S. housing recovery is faltering. Bullish forecasts in early 2014 from MBA, Fannie Mae and Freddie Mac have been sideswiped by rising home prices and an economy that isn’t producing higher paying jobs. The share of Americans who said they planned to buy a home in the next six months plunged to 4.9 percent last month from 7.4 percent at the end of 2013, the highest in records going back to 1964, according to the Conference Board, a research firm in New York.”

“‘The big housing rally wiped itself out because prices increased too quickly for buyers to keep up,” said Richard Hastings, a consumer strategist at Global Hunter Securities LLC, who predicted the slowdown eight months ago. ‘The pool of eligible new buyers is collapsing’ because of stagnant incomes and lack of credit, he said.”

From The Paper. “When it comes to buying real estate in The Woodlands, your money is getting eaten up by location, location, location. Real estate inventories in The Woodlands are at historic lows—with less than the months of inventory for houses priced at $600,000 or below, according to the Houston Association of Realtors. In the past three years, median home prices in The Woodlands have gone up $100,000. This environment is anticipated to stay sizzling through 2017, which merits caution for all but long-term investors.”

“‘Long story short, if you buy at the top of a market like this, it’s going to be an expensive mortgage for a long time,’ says Paul Carroll of Efficient Wealth Management in The Woodlands, Tex. ‘This is a very interesting bubble, which is a function of the good fortunes of the energy industry. With inflation running at just 1.5 percent, the true cost of that money over the lifetime of home ownership will be higher than expected.’”

“Carroll cautions that unless a buyer is sure they will own their house at least 7 to 10 years, renting may be a better option than home ownership. ‘Usually you think of renting as throwing away money, but if a rental costs $2,000 a month vs. $2,400 a month plus the full cost of home ownership, it may be a better investment,’ Carroll says. Once you factor in repairs, home insurance, flood insurance and more, renting may be the safer bet.”

“Americans think of real estate as a life-long investment in which housing values faithfully march up over time. Keep in mind, however, that appreciation is not guaranteed to continue the steep incline of the past several years. ‘Real estate is a devilish investment in a low-inflation environment,’ Carroll says.”

From Bloomberg. “Vera Johnson from Seattle is barely making do, let alone saving for retirement. The 45-year-old almost lost her home to foreclosure in 2010 after the housing-market collapse in the worst recession since World War II. She embodies the financial challenges facing America’s Generation X, those born between the mid-1960s and 1980, which lags behind other generations in building assets.”

“Good timing is not the age group’s forte. Many took out mortgages just before prices plunged, making them the most disadvantaged by the housing crisis, while the 2008 stock-market slump dealt them a further setback. Only one-third of Generation X households had more wealth than their parents held at the same age, even though most earn more, The Pew Charitable Trusts found.”

“‘I try to remain in the present moment and not live in fear of the future,’ said Johnson, who has neither retirement savings nor a college fund for her two children. ‘My property is underwater, the properties around me are underwater, I’m not building equity in my home.’”

“For Johnson, a mother of a 17-year-old daughter and a 12-year-old son, she’s more concerned about day-to-day living than about preparing for retirement. Her home-loan modification ‘is a Band-Aid for a hemorrhage’ as her business continues to struggle, she said. ‘It’ll seem like it’s getting better, and then it gets worse.’”

The Guardian. “Americans are experiencing one kind of economy – high unemployment, expensive housing, rocketing food prices and costly medical care – but the US Federal Reserve is seeing another kind of economy: the one in which you shouldn’t believe your own eyes.”

“It all comes down to inflation: the measure of rising prices that we all experience in our daily lives. And inflation is rising – fast, much faster than the Fed anticipates. Meat prices are rocketing at plus-7.7% in 2014, and dairy is up 4.2%, a considerable hit to family shopping budgets. Shelter – either mortgages or rent costs – are rising at about 3%, while car insurance is up 5%, and tuition costs and public transportation are both up more than 3%.”

“This means consumers are surrounded by rising prices on all sides – paying higher bills, paying more money at the market, paying more just to get to work. At the same time we’re shelling out more for these necessities, our incomes are stagnant. No more money is coming in. Yet the Fed, which just wrapped a two-day meeting to diagnose the economy, is dismissing these real-world costs as a trick of the charts – a mere math problem rather than a real snapshot of the challenges facing Americans. And its new leader, Janet Yellen, has now officially risked her reputation on a potential misreading of the concerns of regular people.”

“Take this exchange: A reporter asked Federal Reserve chair Janet Yellen on Wednesday whether the central bank is taking an overly rosy view and is ‘behind the curve’ on inflation. Yellen denied that the patterns in higher prices actually exist: ‘The data we’re seeing is noisy … inflation is rising in line with committee’s expectations.’”

“Translation: Nothing to see here, folks. Move along. This blinkered view is alarming. The Fed’s chirpy insistence that ‘economic conditions are improving’ fails to reflect the experience of Americans who are finding less money in their already-squeezed budgets.”

“Even Yellen seemed slightly unconvinced by the Fed’s insistence that the economy is improving. She rattled off a list of reasons why the economy should be growing instead of shrinking (which is what it’s doing): it’s allegedly easier to get loans, and households “are becoming more comfortable with their debt levels” – and with their rising home prices, rising stock prices and an improving global economy.”

“The important common bond among all those factors: the represent the Fed of magical thinking. They’re all dependent on people believing that things really aren’t so bad. Six years into a weak recovery that’s turning darker, that’s not enough.”

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June 21, 2014

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