July 17, 2014

Investors Keep Backing Out

KTAR reports from Arizona. “The Valley housing market is hitting a point of stagnation because of a lack of demand, an Arizona State University professor said. W.P. Carey School of Business professor Michael Orr said weak demand is causing potential sellers to cancel their listings. ‘We’ve really got low demand from people who would normally be buying their first home.’”

“Demand is down 20 percent from a year ago, while single-family new home construction and sales are 65 percent below normal in the Phoenix area. Sales of townhomes are down 20 percent from May 2013. Sellers also appear to be waiting to list their homes until buyers have a greater sense of urgency. Despite the lack of demand, the median single-family home sale price is up to $205,000, an ASU housing report said. ‘Exactly a year ago, it was $185,000, so it’s actually gone up 11 percent since then but that’s actually falling quite fast,’ said Orr, who expects the tide to start turning in the spring.”

In Maricopa from Arizona. “New-home construction is down compared to last year, reflecting a trend occurring across the Valley. The city of Maricopa issued 54 single family home permits in April of 2013 compared to 36 this April, according to the Home Builders Association of Central Arizona. ‘We’re hoping home construction will pick up, but we’re not seeing it this year as compared to last,’ said Robert Mathias, development manager for the city of Maricopa.”

“Derek Anglin, designated broker for Elliott Homes, said his company does not expect to sell as many homes this year as it had projected. ‘Our aspirations were greater for this year — we’re probably hitting 60 percent of what we expected,’ Anglin said ‘Employment numbers have not improved enough for people to feel comfortable.’”

“Vito Simplicio, sales manager for LGI Homes at Glennwilde, said his company markets to buyers coming out of the rental market. ‘Honestly, we have to see a lot of people to get to qualified people,’ Simplicio said, citing potential buyers’ low income and credit scores. ‘There is a lot of poverty in Phoenix,’ he said.”

The Clovis News Journal in New Mexico. “Uncertainty has potential Clovis home buyers rethinking their options and looking into alternatives, according to industry officials. Curry County housing sales for May were down 25.6 percent compared to May 2012 and 37 percent compared to May 2013, according to data from the Realtors Association of New Mexico. Carolyn Spence, a broker with Weichart Realtors, attributed the dip in housing sales to tougher loan requirements, military assignment policies, and overall uncertainty. ‘Every where is unsettled and it is making people uneasy about buying,’ Spence said.”

“Gayla Brumfield with Coldwell Banker Colonial Real Estate said a rise in mortgage rates and less demand have resulted in less real estate closings. ‘Nationally the housing market is down,’ said Brumfield. According to Brumfield, there has been more supply than demand in Curry County, resulting in less real estate sold.”

KTVN in Nevada. “It wasn’t that long ago, the Reno-Sparks real estate market was populated by hundreds of lifeless empty houses abandoned by owners, foreclosed and waiting for offers that were slow to come. For real estate agent Megan Lowe, it really was the Night of the Living Dead. The house she was showing us in Somersett was one of them. The builder bailed out during the dark years. Lowe said, ‘It went into foreclosure and the bank took it back and the bank sold it.’”

“After its second owners, it’s on the market again as a winner. Bought in 2010 for $808,000, today it’s priced at $1.5 million…almost double what it sold for 4 years ago. As Lowe explains, ‘The market, it’s crazy, its coming back strong right now. People are realizing the potential up here at Somersett.’”

“In Reno-Sparks, the recovery is dramatic. Today, foreclosures and short sales make up only one third of the home sales they did 2 and a half years ago…from 59% of homes in 2011 to just 19% of homes sold so far this year. Short sales are becoming more rare…banks see the increasing values too. As Lowe said, ‘They aren’t willing to take less anymore, and it’s more and more difficult to get those short sales approved.’”

“And fewer distressed homes have done a number on the Reno-Sparks median sold price…a big number. Look at what’s happened in just a few years: from a $154,000 median in 2011, to $305,677 today. Yes prices have gone up…but enough buyers today see homes like these, as still a good deal.”

Vegas Inc. in Nevada. “Las Vegas home prices continue to rise as investors, lured here by the recession’s bargains, keep backing out. Locally, buyers paid cash for 34.7 percent of the used homes that sold last month. That’s down from a peak of almost 60 percent in February 2013 and the lowest share in almost five years, indicating a drop in investor spending. ‘While real estate investors have played a key role in helping our housing market recover in recent years, it’s also good to see more traditional buyers entering the market,’ GLVAR President Heidi Kasama said.”

“Meanwhile, the market still has plenty of weak spots. The pace of used-home sales is down 13 percent year-over-year, even though the number of single-family homes listed for sale without offers has almost doubled from a year earlier, to about 7,100 by the end of June, according to the GLVAR.”

8 News NOW in Nevada. “Overall foreclosures in Nevada last month hit their lowest point since August 2006 but default notices increased in the Las Vegas metropolitan area from a year ago following seven months of decreases, RealtyTrac reported. The mixed findings from the real estate analytics company mean that the ‘foreclosure crisis’ is still not over for Las Vegas, RealtyTrac spokeswoman Jennifer von Pohlmann wrote in an email to 8 News NOW.”

“‘Foreclosure starts in Las Vegas increased 56 percent from a year ago following seven consecutive months of decreases, indicating that unfortunately the never-ending saga of the foreclosure crisis is still not over for the city,’ she wrote. ‘Ever-changing state legislation in the state is causing confusion for the foreclosure industry, resulting in a backlog of delayed foreclosures that will eventually push through the pipeline. Evidence of that backlog is the increasing average time it takes to foreclose in Nevada, at 494 days, up from 420 days a year ago and up from about 140 days before the housing crisis.’”

“Nevada was one of 10 states that saw total foreclosure activity fall in June to its lowest point since the housing market bubble burst. The state had 1,349 filings last month, including default notices, notices of pending trustee sales and repossessions by lenders. There were 8,504 Nevada properties that had foreclosure filings in the first half of the year, 48 percent less than the same period a year ago. But Nevada still finished the first half of 2014 with one foreclosure filing for every 138 housing units, the nation’s fifth highest rate.”

Begging For Inventory, Perplexed By Zombie Foreclosures

The Register Guard reports from Oregon. “June was a month of mixed signals for Lane County’s housing market. The 389 closed sales was the highest figure for June since 2007. Homes sold more quickly than any time in recent months, while the housing inventory dropped, figures released Monday by the Regional MLS show. But 85 fewer homes actually sold in the first half of the year compared with 2013. June’s average and median sales prices were down a bit from the same time last year. Those findings are in line with what some analysts have pointed to as a market cool-down in 2014.”

“However, some real estate agents have noted a strong increase in activity among local buyers, even verging on a return to bidding wars for homes listed at $300,000 and less. ‘We had one turn in six hours last week,’ said Karen Church, principal broker at RE/Max Integrity, referring to a Eugene home priced in the mid-$200,000 range. ‘We listed it in the morning and by 4 p.m. there was an offer in hand, two actually.’”

The Oregonian. “In the first half of 2013, Portland-area home sales were booming. So far, 2014 has been at best an echo, and at worst a stall. It’s a brisk, animated market. But it’s still not a healthy, sustainable one. Prices are rising at rates untethered to inflation and gains in income. And construction of new homes hasn’t ramped up to meet new demand. ‘We’re not seeing normal levels of housing activity,’ said Josh Lehner, a senior economist with the Oregon Office of Economic Analysis. ‘We’re going in this direction where there’s a supply response coming, but it hasn’t come as strong as we would’ve thought maybe a year and a half ago.’”

“It’s clear the housing rebound has lost some momentum. The number of sales is essentially flat from a year ago. Prices are still rising, but the increases have slowed from the the double-digit percentages seen in 2013. Still, tell that to the close-in neighborhoods of eastside Portland, where houses can sell in a matter of days — or hours — rather than weeks, and often at thousands of dollars above asking price. ‘That’s going to be a good thing for affordability,’ said Lehner. ‘Things can’t go up at 10 percent a year forever.’”

The Portland Tribune. “While the economy is better off than any time since the Great Recession, it’s not performing as well as it did in earlier economic expansions — especially the 1990s, a long period of solid economic growth in the state, said economist Tim Duy, author of the University of Oregon Index of Economic Indicators. Construction of single-family houses has yet to take off for a variety of reasons, Duy said.”

“‘On the demand side we’re likely looking at some dearth of buyers — particularly in the first-time homeowners,’ he said. ‘Until recently, job recovery was relatively slow and wage growth has been relatively slow and (mortgage) underwriting conditions are somewhat higher and I think that has constrained the first-time home buyer market.’”

“‘For a number of years developers weren’t focusing on new land because the housing market was so bad. Why would you bother? So I think there has been some lack of sufficient supply in the buildable lots. If you have a lack of sufficient supply, the lots will go to more expensive housing rather than less expensive housing,’ he said. ‘It’s not clear that banks are as willing to lend into the speculative single-family market as they are lending into the speculative multifamily housing.’”

The Mail Tribune. “Gary Poulos planned to spend this summer packing his bags, selling his house and moving on from his west Medford home. Instead, the retired systems engineer is compiling a dossier on his next-door neighbor, whom he caustically calls Mr. Chase M. Bank. As neighbors go, ‘Mr. Bank’ isn’t a good one, failing to maintain his yard, ignoring a mangled garage door and allowing junk to pile up outside his house. When he does answer the phone, he’s none too talkative.”

“Over the past 12 months, Poulos has painstakingly compiled documents and telephoned a litany of loan and property servicers, as well as the police, and finally City Hall. Poulos has delayed selling his home because he fears the eyesore next door will scare potential buyers away. Poulos isn’t alone in his frustration with an abandoned house. Across Jackson County, vacant houses sit empty as lenders fail to complete the foreclosure process.”

“Real estate agents are begging for more inventory and neighbors are concerned about diminished property values, yet government officials remain perplexed by the ‘zombie foreclosures,’ easily identified by the multiple notices stapled to their front doors and taped to windows. The narrative changes from address to address, but the general pattern is consistent, said John Helmick, president of Gorilla Capital, a Eugene-based company that buys fixer-uppers and resells them. The owner is notified of pending foreclosure and moves out. A lengthy foreclosure process ensues, the home foreclosure stalls, and years later, the property remains unsold.”

“Often, the lender is collecting mortgage insurance payments even as the house falls into disrepair. ‘The owner of the property has no incentive to maintain the property in terms of neighborhood standards,’ said Poulos. ‘And the banks won’t, because they don’t have to.’”

“Ron Galbreath, an agent in Medford, said he began running into dead ends with such properties in about 2008 when Bank of America purchased failing Countrywide Financial, which had originated 20 percent of mortgages during the height of Jackson County’s real estate boom in 2006. During the downward spiral, Galbreath watched as an east Medford house that had previously sold for a million dollars eventually sold for $540,000. The owner stopped making $5,000 monthly payments, yet it took four-and-a-half years until a short sale began to close. He discovered the lender had been collecting mortgage insurance payments during the interim.”

“‘The bank was collecting monthly and was in a position where they didn’t have to write off a bad loan until the end of the policy,’ Galbreath said.”

HBB Podcast

I’ll be doing a podcast soon with Jack McCabe, CEO of McCabe Research & Consulting in Florida. What questions would you like to ask Mr. McCabe?

Bits Bucket for July 17, 2014

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