July 31, 2014

A Big Rebound That Seems To Be Backfiring

The Denver Post reports from Colorado. “Richmond American Homes is breaking new ground in its Peoria Place community — but not in a way that some real estate agents and buyers like. The new development’s homeowners association limits rentals to 15 percent of homes in the community. Homes rented out must be on two-year leases and the HOA board must approve any tenants. ‘I am in the information-technology industry, and at any time, the job market could change,’ said Scott Stevens, who signed on the dotted line to buy a home at Peoria Place in March. If he relocated for work, Stevens said he would want to return to metro Denver at some point, which renting out his home would allow him to do.”

“During the housing downturn, many “accidental landlords” chose to rent their homes rather than sell a depreciated property at a loss. Renting bought time until the rebound came and avoided having to bring cash they didn’t have to a closing or ruin their credit scores in a short sale. Greenwood Village resident Richard Dhang said the restriction leaves him perplexed, given the drop that home prices suffered not that long ago. ‘What if a downturn happens and the housing market crashes? You can’t rent in that situation, and you can’t sell to investors,’ he said.”

The Salt Lake Tribune in Utah. “Home sales continued to slow along much of the Wasatch Front as rising prices, tighter lending and a lack of housing inventory pushed many would-be buyers to the sidelines. The latest report from the Salt Lake Board of Realtors marks the third consecutive quarter of home-sale declines for Utah’s most populous county — a slowdown that has persisted since the sizzling housing market in the summer of 2013 began to cool off.”

“The numbers led board officials to highlight what they called ‘affordability concerns’ in residential markets as prices inched upward in many locales. ‘Less inventory and rising home prices have caused some homebuyers to pull back or not qualify for a mortgage,’ said Angie Domichel Nelden, board president.”

Willcox Range News in Arizona. “Even though Arizona’s economy hit bottom four years ago, we’re still at least two years away from a full recovery, according to experts from the W. P. Carey School of Business at Arizona State University. Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School, talked about the housing market. While we’ve seen a good housing recovery in the Phoenix area since mid-2011, Orr said demand has really slowed down lately. Home-sales activity recently hit its second lowest level since1999, and prices have mostly flattened out, after rising 84 percent from the bottom median single-family-home sales price in May 2011.”

“‘Institutional investors have largely moved on to other housing markets in the country with more foreclosures and bigger bargains,’ Orr said. ‘Other buyers aren’t rushing in to fill the void.’”

CNBC on Nevada. “The Las Vegas housing market is in transition, from a situation where investors were swooping up distressed properties to a market of more traditional, owner-occupant sales. Prices in ‘Sin City’ bottomed in January 2012 at a median of $118,000 before rising at a record rate for 19 straight months until September 2013, when prices began to level off again, according to the Greater Las Vegas Association of Realtors.”

“Cash buyers made up 34.7 percent of sales in June, down from a peak of nearly 60 percent in February 2013. Cynthia Silver, a Las Vegas Realtor with Century 21 Martinez & Associates, said sales have slowed, putting buyers in a better position. ‘We have more inventory and we have fewer cash buyers here that are outbidding them and paying retail, so buyers are in a position to find a property they really want,as opposed to just buying what they can afford or what they can win a bid on,’ she said.”

“Fifty-seven percent of homes sold in Vegas are vacant, and nearly 30 percent of homeowners are still in a negative equity position.”

Vegas Inc in Nevada. “New home sales have plunged this year in Las Vegas as would-be buyers, saddled with credit woes, flat wages and sticker shock, can’t pay the high listing prices. The slowdown is denting Las Vegas’ fragile recovery and marks a sharp reversal from last year, when new-home sales and prices skyrocketed — a big rebound that now seems to be backfiring.”

“Builders were so confident that the market had healed that they’ve tried selling for big prices with little to no incentives, said Luxe International Realty owner Melissa Zimbelman. Now, at least some developers are slashing prices and offering buyers more perks, such as free upgrades. ‘Prices were going up by the week,’ Zimbelman said. ‘Builders had to back off.’”

“To boost sales, builders also are making more project pitches to real estate agents — hoping they steer clients to construction sites — and pumping up agents’ sales commissions from 2 to 3 percent of the purchase price to 5 to 8 percent, RE/MAX Extreme agent Tim Kiernan said. ‘They’re hurting right now,’ he said.”

“Even if they qualify for a loan, affording the down payment is sometimes impossible. Some 56 percent of households statewide are in a ‘persistent state of financial insecurity’ with little or no savings, the nonprofit Corporation for Enterprise Development has reported. What’s more, federal housing officials in January reduced the pool of potential buyers by drastically lowering the limit on mortgages they’d guarantee in Las Vegas, to $287,500 from $400,000 for the purchase of a single-family house. ‘That took a big chunk of folks out of the market,’ said Jeremy Parness, Las Vegas division president for Lennar Corp.”

Expecting To Make Money On The Sale

CBS DFW reports from Texas. “Despite a nationwide decline of new homes sales, North Texas is once again serving as an exception to the trend. Tony Caballero, of Net Worth Realty, says people are outbidding one another to get into these houses. Caballero said, ‘Most people are paying 18 to 20 percent above market value just because there is no supply out there, and they want to buy a house and they can afford it.’”

“He went on to say if there is a new home market problem in DFW, it is that there aren’t enough of them. Caballero added, ‘The labor can’t keep up with the demand. I mean they just can’t build them fast enough.’”

The Dallas Business Journal. “Land investment firm Encore Land LLC, a division of Dallas-based Encore Enterprises Inc., plans to develop 3,100 home lots throughout North Texas in the next year. ‘We estimate that there are currently only 3,000 finished vacant homes available in the DFW market,’ said Encore Enterprises Chairman Bharat Sangani.”

From WFAA.com. “The remodeling business in North Texas is going ‘through the roof’ says Sandy Tabacinic, owner of Homecorp. ‘It’s absolutely insane. It is the highest amount of projects I have had in years,’ she said. ‘In the nine years I have been doing this, never this much.’”

“Mindy Albert said her family shopped around for another house and found properties priced at ‘upwards of $500,000 for a comparable house to what we have now.’ And what she (and many North Texas homeowners) have now is a home that’s worth more. That’s allowing many people to afford a home equity loan to improve their living space. ‘It seems like everyone around us is renovating, also,’ she said. ‘It’s definitely the buzz of the neighborhood and a lot of it is going on.’”

The Austin Business Journal. “The short term prognosis for new housing in Austin is all systems go. The long term situation could be greatly tempered, however, by escalating material costs, labor shortages and fewer attractive land options. Last fall the Austin Business Journal reported that the median annual income of $56,076 in Austin only typically qualifies for a loan of $195,756. Yet Solimine said the average target price of a Standard Pacific Home in the Austin market currently is $460,000.”

“‘We haven’t hit the pricing tipping point yet. People are still moving here and buying homes,’ said April Solimine, VP of sales and marketing for Standard Pacific Homes in Austin. ‘I don’t necessarily see it slowing down but how deep can you go at that price point?’”

The Midland Reporter Telegram. “Midlander Chelsea Dey and her roommate last month closed on a three-bedroom house, allowing them to finally achieve the American dream of owning a home. But that same dream for many other millennials is increasingly inching out of reach as home values around the Tall City continue to climb. Dey, 26, works for a local nonprofit organization. Troubled by how expensive homes have become in recent years, she said she never would have been able to afford a house if her parents hadn’t loaned her the money for a down payment. ‘Working in a nonprofit, I would say it’s pretty close to impossible to save up a down payment,’ Dey said.”

“The median price of a Midland home grew more than 23 percent year-over-year in June, pushing the value up to $283,100, according to the most recent data from the Real Estate Center at Texas A&M University. A national real estate data firm released statistics indicating that Midlanders who’ve already purchased a house are also struggling to cope with the rising cost. The percentage of loans that were more than 90 days delinquent in May increased year-over-year for the first time in nearly four years, according to CoreLogic.”

“The U.S. Department of Housing and Urban Development announced in December the new loan limits for 2014. The limit was unchanged for Midland, staying at a $271,050 maximum. Midland’s FHA loan limit is now less than the most recent median home price, meaning borrowers are more likely to turn to the less-forgiving underwriting standards of conventional or jumbo loans that typically require stronger credit scores and higher down payments.”

“Brian Sales, Permian Basin Board of Realtors president, said the community is likely growing faster than governmental agencies, such as HUD, can keep up with — meaning Midland’s loan limits may not be as high as they should be. ‘We’re probably approaching a point where a review may be necessary,’ Sales said.”

From El Paso Inc.. “Shavana Turay, an Army captain who’s been at Fort Bliss for four years, recently got orders for Hawaii. But she and her husband, Foday, won’t bother trying to sell their home. Because they know they can’t. ‘We’re getting ready to move, but we know we won’t be able to sell it, so we’re going to rent it out,’ she said, referring to a three-bedroom house they bought just last year outside the city limits.”

“Their plan is to wait five years or so until no more new homes are being built in their subdivision, Americas Estate One, and, they hope, the market has improved. Her former neighbor had to do the same thing and was lucky to find a good renter quickly. That, says real estate agent Patrick Tuttle, is typical of what is happening to Fort Bliss soldiers these days and to the El Paso housing market as well. ‘It’s tough,’ Tuttle said. ‘As of July 2, we had an 8½-month supply of homes on the market.’”

“He explained that when the number of troops at Fort Bliss was growing a few years ago, many bought homes, expecting to be in El Paso long enough to make money on the sale when they left. For the most part, they were buying homes in the $150,000 to $175,000 range and builders were able to shave points off the closing costs, as were mortgage companies. ‘Then, in two or three years, when they get transferred out or leave the service, they’ll put it on the market,’ he said. ‘But they have zero appreciation on the value, and they’re competing against the same builder who sold them the house. They can’t compete.’”

“That’s because prospective buyers may have enough cash for a down payment, but not for the closing costs. The sellers can’t help them with that, but the builder can and happily will, so they buy from the builder, and the would-be sellers are left to try the rental market, Tuttle said. ‘We have a lot of soldiers’ homes that are on the market waiting to be rented, and there’s still construction going on Fort Bliss for soldier housing,’ he said. ‘So, we have a glut of resale of used homes, new homes and of rental homes in our market.’”

Bits Bucket for July 31, 2014

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