August 6, 2014

Investors Are Selling Like Crazy

A report from the Colorado Springs Gazette. “The pace of homebuilding tumbled last month in the Colorado Springs area, continuing this year’s downward trend in residential construction, according to the Pikes Peak Regional Building Department. Permit totals have declined in all but one month in 2014 on a year-over-year basis. The pent-up demand among homebuyers after the recession, which helped drive last year’s homebuilding surge, has dissipated somewhat, said CreekStone Homes owner Rhonda McDonald.”

“Likewise, permit numbers might be down because builders are constructing fewer speculative homes - those without committed buyers. ‘I’m not worried that, as a builder, I won’t have any houses to build,’ McDonald said. ‘I wish our market was the Denver market, but it isn’t. It is what it is, and we respond accordingly.’”

The Denver Post in Colorado. “Metro Denver’s constricted housing market, which has squeezed buyers since early 2013, has begun to wrap its coils more tightly around renters. Higher home prices and quicker sales times have resulted in a larger number of landlords cashing out, leaving fewer homes for lease and pushing up rents. Real Property Management Colorado started the year with about 1,600 homes in its portfolio and is now down to 1,300, co-owner Jeff Bacheller said.”

“‘Investors are selling like crazy,’ he said. Many of those selling are ‘accidental landlords,’ homeowners trapped by the housing downturn who decided to rent rather than sell at a loss.”

The Santa Fe New Mexican. “Today marks the end for Questa’s molybdenum mine that has employed about 300 people. The future is less certain for Questa, a town of about 1,700 people that has been entwined with the mining industry since 1916. For New Mexico, the only state in the region that has not recovered from the national recession, what is happening in Questa is part of a long slide. In June, the same month the Questa mine closure was announced, New Mexico lost 4,700 jobs, the U.S. Bureau of Labor Statistics reported.”

“Jacob Montoya, 38, had just refinanced his house, from a 30-year to a 20-year mortgage, thinking he could handle the higher payments. He said Chevron had assured workers that the mine would last for generations. ‘Our kids’ kids were going to be there, they told us,’ Montoya said.”

KLAS-TV in Nevada. “Some people living in the northwest part of the Las Vegas valley are fed up with the recurring flooding in their neighborhoods. Many are concerned about the new housing construction near flooded areas. Homeowners along Grand Teton say another frustration is not having a way in or out of their housing complex once it floods. ‘There’s only one road into the complex, where was that builder’s head?’ said Jeanette Shoemaker.”

‘Shoemaker’s son’s house is currently up for sale, along with other homes around the Grand Teton area. What is shocking to Shoemaker is how many homes are still being built in areas that are prone to flooding. ‘Several thousand more homes further northwest of us, have they planned for the flooding? I feel bad for people attempting to buy a home there and the next monsoon it will be flooded again,’ Shoemaker said.”

The East Valley Tribune in Arizona. “Rick Metcalf, founder of CANAM Realty Group, specializes in selling local real estate to Canadian buyers. He said when the market here crashed, Canadians came out of the woodwork — not just vacation buyers but investors as well. He estimates that 90 percent of Canadian owners he manages property for are investors. ‘I guess we should be thankful to them for keeping the market going,’ said Michael Orr of the W.P. Carey School of Business at Arizona State University.”

“The rate of Canadian homebuyers in Maricopa County fell from a whopping 6 percent of houses purchased in the county in April 2011 to 1.5 percent in May 2014. ‘They’re pretty price-sensitive,’ said Orr. ‘What they are looking for is not necessarily the same as what local residents would be looking for.’”

The Arizona Republic. “Only one other metro area in the nation had worse annual job losses in construction than Phoenix did in June, employment data shows. Compared to June 2013, the Phoenix area had 2,900 fewer people in construction this year, a 3 percent decline topped only by the 4,000 jobs lost in the Bethesda, Md., area in suburban Washington, D.C., according to the Associated General Contractors of America. On a separate AGC ranking of locales according to the percentage of construction jobs lost, Phoenix ranked 279th among the nation’s 339 metro areas, the AGC review found. The Tucson area, which lost 700 workers, ranked 294th.”

“The poor showing isn’t surprising given the weakness in construction statewide since the housing crash began. Over the past year, Arizona as a whole has seen construction employment fall 3.2 percent. Aruna Murthy, director of economic analysis for the Arizona Office of Employment and Population Statistics, blamed the poor numbers on the rapid slowdown in construction of buildings. Nationally, such projects have increased 5.6 percent over the past year. In Arizona, they were down 14 percent, she said recently.”

The Phoenix Business Journal in Arizona. “Real-estate guru Michael Orr finally has confirmed what I’ve been experiencing all spring and summer: the Phoenix housing market is in a slump. That’s what Orr lays out in his latest monthly report that shows the housing markets in Maricopa and Pinal counties have slowed dramatically in the past year. Sales activity has been trending downward since the spring, which is when my wife and I first put our home on the market. In other words: The Gallens couldn’t have picked a worse time to try to sell.”

“‘We’re in an 11-month slump in demand,’ said Orr, the director of the Center for Real Estate Theory and Practice at the W.P. Carey School of Business at ASU.”

“Any help on pricing is unlikely until next year. ‘There is always a long delay – typically nine to 15 months — between any change in the market and the resulting change in pricing,’ said Orr. ‘Meantime, we may see a little downward correction, not a bubble bursting, as some have predicted.’”

“One potentially good sign for people who want to buy a home to, well, actually live in it, is that investors seem to be leaving Phoenix, according to the report. The percentage of Phoenix-area residential properties purchased by investors fell from a peak of nearly 40 percent in July 2012 to 14.4 percent this June.”

Bits Bucket for August 6, 2014

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