The Housing Bubble

The Denver Business Journal reports from Colorado. “Home values in the Denver metro area have gone above and beyond their highest pre-recession levels, and are predicted to keep rising, according to Zillow. In addition to exceeding their previous peak, home values are expected to continue their upward trend. Meanwhile, 18.8 percent of the country remained in negative equity, according to Zillow, compared with 10.8 percent in the Denver area.”

“‘In dozens of markets, homeowners that bought at the peak of the market in 2006 or 2007 will have to wait until 2017 or later to get back to the breakeven point on their home, a lost decade in which they will have built up no home equity,’ said Zillow Chief Economist Stan Humphries. ‘This is reflected in stubbornly high negative equity and effective negative equity rates, with more than a third of Americans with a mortgage lacking enough equity to realistically list their home for sale and buy another.’”

The Post Independent in Colorado. “Last week a client in the under $150,000 range in Fruita said he is giving up on looking, that there is just ‘nothing’ for sale that excites or even satisfies him. In our market, there are only a small fraction of bank-owned (REO) and government-owned (HUD) properties for sale compared to last year. And among private owners, they are hoping for price increases; our market has simply not seen significant appreciation in home values over the past year. So, if they do not need to sell right now, many owners are opting to wait for what they hope will be improved prices in the future.”

“Our local job market is likely impacting home sales, too. Since we are not seeing wage increases and in some cases even seeing a decline in wage-earning jobs in Mesa County, many people cannot afford to move up; so, they are not in a position to sell their current home. My advice: If you need to buy, pick a home that is not at the top of the price range in a neighborhood you like; then take the plunge. If you need to buy, as Nike says, ‘just do it.’”

The Taos News in New Mexico. “When compared with wages, Taos County has the largest gap between weekly wages and median home price of any county in the state. The data from the BLS shows the average worker in Taos County made $586 per week. According to Census Reporter, which used data from 2012, the median home price in Taos County was $208,900. This means a home with a median value in Taos County costs a worker earning an average wage in Taos County 356 weeks’ wages.”

“Taos could see its average weekly wages decline now that Chevron’s Questa Mine is set to close next month. James Howard with the Bureau of Labor Statistics told The Taos News that Taos County’s jobs were concentrated in the natural resources and mining sector at twice the national average at the end of 2013. The vast majority of those jobs were no doubt at the Questa Mine.”

“Howard said Taos County’s jobs were concentrated in the leisure and hospitality sector at 2.5 times the national average, and those jobs tend to pay less than those in the professional business and services industry, for example. Furthermore, jobs in the professional and business services industry, which includes architecture, management, engineering and consulting, have significantly declined in Taos County recently, Howard said.”

The Credit Union Times on Nevada. “Credit union executives in Las Vegas, the site of NAFCU’s annual conference this week, said while the local economy is gradually improving, credit unions in the area still face challenges. ‘We’re certainly on the upswing in Las Vegas but we’re not where any of us want to be,’ Rick Schmidt, president/CEO of the $138.6 million WestStar Credit Union said. ‘The housing market is rebounding. In 2010, seven out of 10 homes were upside down – had negative equity – and now seven out of 10 homes are either at or below 100% LTV. But that still leaves a huge number of homes that have negative equity and folks struggling to make payments.’”

“Bradley Beal, president/CEO of the $719.7 million One Nevada Credit Union, pointed out that as of January, 38% of Nevada homeowners still owed more on their home than the value of the property. He called this estimate an improvement over the two-thirds figure Nevada saw a few years ago. ‘We’re gradually working our way out of it,’ Beal said.”

“The peak unemployment rate in Nevada was 13.9% in 2010, according to Dwight Johnston, chief economist at the California and Nevada Credit Union Leagues. ‘Nevada lost roughly 200,000 jobs in the recession and has recovered more than half of those lost jobs. The sector that created the deepest hole in the job market is also the slowest to recover. Total nonfarm payrolls in Nevada are still roughly 85,000 short of pre-recession levels. Of that total, the construction sector is short 83,000,’ he said.”

CBS on Arizona. “Phoenix is a lesson in housing abuse. From boom to bust, to recovery to relapse, Phoenix housing is forever rising and falling, and now it is falling again. The rest of the nation should take notice. Home prices fell 56 percent from their peak in the summer of 2006, bottoming out in 2011, according to the S&P/Case-Shiller Home Price Index. Foreclosures skyrocketed, and a new set of investors moved in to take advantage of the distress. They bought not to flip, but to rent, and they drove prices back up 45 percent from the bottom.”

“The trouble now is they priced themselves out of the market and left Phoenix housing to regular, mortgage-dependent buyers. These buyers are faced with tighter credit standards and a still recovering economy. Julia and Mike Lersch put their north Phoenix home on the market, listing it at $300,000. ‘Our real estate agent said it’s like fishing. You throw it in, and it’s like how deep do you need to get before it hits the fish?’ said Julia.”

“After 107 days and several price drops, they still had no bites, so they pulled it off the market. ‘We thought, ‘well I don’t want to sell it for a song,’ said Julia.”

“Affordability may be better than it was during the height of the housing boom, but the buyer mindset has clearly changed. ‘They’re still looking at it from a distressed property mindset, that they should be getting this great deal, whereas a lot of the folks like us that have been maintaining our properties well, we’re not just willing to give them away,’ said Mike Lersch.”

“‘The Phoenix market has been cold for a long time,’ said John Burns of John Burns Real Estate Consulting. ‘Fifty percent of builders last month dropped prices, including incentives. Demand is weak and weakening. Supply and affordability though is fine.’”

“Meanwhile builders are slowly coming back into play in Phoenix. The new homes are getting more attention than even recent builds, at least according to the Lersch’s. ‘We have a lot of new builds finally going in,’ said Mike Lersch. ‘So we’re really getting competition.’ His wife, Julia is concerned that there is not enough demand to support these new homes, as well as existing homes like hers that are slowly coming on to the market. There is also concern that investors in single-family rentals will begin to sell their properties, now that prices are higher.”

‘”I feel like Groundhog Day. We were overbuilding. Now I feel like they are overexpanding for what there is out there,’ worried Julia.”

The Baltimore Sun reports from Maryland. “Despite signs and talk nationally of a slow recovery in housing construction, Harford County is experiencing one of its slowest years since the nationwide slump began six years ago. ‘I would say just from my perspective the residential housing market – from the perspective of custom building – is still nothing at all like what we are accustomed to,’ said Bill Minton is president of Jarrettsville Builders. ‘There is no question it is just a different place and time that I believe is the new norm and not a transition back to something that once was.’”

The Connection in Virginia. “The June market in Northern Virginia continues the trend of sales numbers coming in just under those from one year ago at this time, but the signs of a stable market have led to an increase in sellers planting signs on their lawns. Active listings continued to show an increase this month compared with 2013. Listings were up 47 percent over last year, with 4,777 active listings in June, compared with 3,247 homes available in June 2013.”

“The housing affordability may continue to be a challenge in the region, said Mary Bayat, 2014 chair elect of the Northern Virginia Association of Realtors. ‘While the slightly rising home prices indicate an improving market, people are just not making quick decisions to buy,’ she said. ‘It is all about managing expectations,’ said Lorraine Arora, Managing Broker at Long & Foster Real Estate in Springfield. ‘Some buyers are nervous. When houses are priced correctly, homes will sell.’”

The Daily Press in Virginia. “Homes sales are rebounding, and residential home inventory is approaching healthy levels, signaling a recovering housing market across Hampton Roads, according to Real Estate Information Network Inc. New residential construction sales fell by 17.33 percent, from 300 new home units recorded in June 2013 to 248 units in June 2014. The region’s median sales price is currently $217,500, down 3.33 percent from June 2013, the report said. Inventory supplies for residential home sales is currently 6.98 months, up 7.88 percent from June 2013’s 6.47 months, according to the report, meaning the market may be transitioning from a buyers to seller’s market.”

“Chantel Ray, owner and broker-in-charge of Virginia Beach-based Chantel Ray Real Estate, said that as more homes come on the market, more potential buyers will be looking at new residences in the region. ‘It’s become a buyer’s market and a seller’s market all at the same time,’ Ray said of the region’s realty market. ‘A lot of buyers are out, and inventory is slightly down.’”

“The total number of June active residential listings was 12,336 residences in all seven of the region’s cities, including Newport News and Hampton. That’s up 12.04 percent from 11,010 active listings recorded in June 2013.”

Richmond Biz Sense in Virginia. “A local homebuilder stands to lose 32 residential lots spread across nine area subdivisions to foreclosure in the coming weeks. Jonathan Hauser, an attorney with Troutman Sanders in Virginia Beach, said his client Union First Market Bank is foreclosing on the properties that are owned by local builder Hallmark Home Builders Inc. The telephone number listed for Hallmark on its website is no longer accurate. Attempts to track down a representative of the company were unsuccessful.”

“‘We’ve had two or three years of really, really low interest rates,’ said Hauser. ‘At this point in the business cycle, this is unusual.’”

The Citizen Times in North Carolina. “Buncombe County is down to 248 foreclosure filings so far this year, from the peak of 1,376 in 2010. But Tom Luzon, who heads the Mortgage Protection Program for Western North Carolina, is still worried. A shrinking but still sizable shadow inventory of homes that are headed toward foreclosure haunts the improving real estate market. He still sees a steady stream of clients coming into the offices applying for the Mortgage Protection Program assistance in last-ditch efforts to keep from losing their homes.”

“The Federal Reserve Bank of New York has estimated that 55 percent of all active foreclosures are now more than two years delinquent. But faced with losing money on a foreclosure, banks may delay that process for a number of reasons. ‘When unfortunate circumstances hit a family and they want to stay in their home, we’ll work with them until they can catch up. We may even do a modification to the mortgage as far as the term or the interest rate,’ said Dana Stonestreet, CEO of HomeTrust Bank, the area’s largest community bank with the highest share of mortgages. ‘In that case, we don’t move fast.’”

“While the worst of the recession and its aftermath may be receding, more homeowners are only a paycheck or two away from financial difficulty, even disaster. Luzon points to the recent shutdown at Stanley Furniture, Graham County’s largest employer, with 400 workers out of a paycheck. Some of those furniture workers may fall behind on mortgages and run the risk of foreclosure. ‘Where’s the end?’ Luzon said. ‘Nobody has a crystal ball, but we’re likely to see problems until the average wage earner can afford an average priced home.’”

The Fayetteville Observer in North Carolina. “It’s a renter’s market in Fayetteville. With languishing home sales in recent years, frustrated property owners have increasingly put their homes up for rent, flooding the housing market with new rentals. ‘Our vacancy rate has gone up over the past two years,’ said Chet Oehme, whose company manages more than 1,200 homes and a 72-unit apartment complex. ‘With so many rentals on the market, we’ve had to lower the rent in many subdivisions,’ Oehme said.”

“Alex Townsend, the broker in charge of Townsend Real Estate’s rental department, said his company also has had to drop some of the rental prices and often suggests property owners avoid increasing rents on lease renewals. ‘After 12 months, they want to raise the rent,’ Townsend said. ‘Usually that runs people off because there are a lot of other options out there.’”

“Renter-occupied homes increased over the following two years, making up nearly 52 percent of units, according to 2012 Census estimates. Statewide, the rental rate grew to 34.6 percent. The vacancy rate grew as well, to 13.6 percent of the Fayetteville’s estimated 89,642 homes and 14.7 percent statewide. All this means that consumers can be choosier about where they live. ‘Before, tenants would look at maybe three houses,’ Oehme said. ‘Now they look at maybe five or six.’”

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