November 20, 2014

The Dreaded Talk About Price Drops

The South Florida Daily Business Review. “The deeds only tell half the story—if that—when it comes to showing who’s behind some of South Florida’s biggest real estate deals. Analysts says institutional investors are the dynamos fueling most of the region’s big-money transactions. ‘In the markets where these entities are buying, it’s not uncommon to see them purchase hundreds of properties over a given quarter,’ said Daren Blomquist, VP of RealtyTrac. ‘In the markets where we see these institutional investors heavily involved, we typically see acceleration in home-price appreciation. On the flip side, when they start slowing down their purchases, home-price appreciation also slows. That’s the concern on the residential side—that they’re driving up prices beyond what your typical home buyer can afford.’”

“Analysts say institutional buyers also are bullishly snapping up residential product, including even small assets like three-bedroom starter homes priced around $150,000 and built after 1990. Their aggressive acquisitions come as discounted foreclosures dwindle and entry-level buyers face an inventory crunch. ‘Hedge fund owners are parking money in residential real estate,’ said Attorney Joe Hernandez, a partner at Weiss Serota Helfman Cole Bierman & Popok and chair of the firm’s real estate practice. ‘It’s great that people are spending a lot of money down here, but does that improve the fundamentals.’”

The Washington Post. “Double-digit gains in home prices prevalent in 2013 have slowed to single-digit appreciation, benefiting buyers who were losing homes to higher bidders. All these factors point to what should be a strong housing market in the Washington area. So, why are so many real estate agents here bellyaching that the market has come to a screeching halt? ‘All the marketing in the world is not getting us offers,’ said Valerie Blake, an associate broker with Keller Williams Capital Properties.”

“The tide has turned and agents are frantically devising new game plans, for their clients and themselves. We have had the dreaded talk about price drops and incurring costs on improvements that would increase the appeal of the home. We have re-examined our own budgets and our ability to launch new marketing strategies. We are desperately trying to dissect the new mindset of the market and craft new marketing strategies for these changing times.”

The State in South Carolina. “Home sales took a nosedive in October, dropping 42 percent in Columbia from the same month a year ago. The question now for Columbia is whether the October slowdown was just a blip, or an indication of new troubles ahead for the local market. ‘I’m a little taken aback by the 42 percent,’ said Doug Bridges, a longtime real estate agent in Columbia. ‘That’s pretty severe.’”

From Chicago Business in Illinois. “After flying high in the first half of the year, the downtown apartment market has lost some altitude in the second. All the exuberance has fueled a development boom that will test the market over the next few years. Appraisal Research projects that developers will complete 3,119 apartments downtown in 2015 and 6,400 in 2016, both records for downtown Chicago. ‘The question is what’s going to happen in 2016,’ said Appraisal Research Vice President Ron DeVries. ‘Clearly, there’s going to be an imbalance there.’”

The Phoenix Business Journal in Arizona. “Phoenix area housing starts were down by more than one-third in October compared to a year earlier. RL Brown Housing Reports also found that year-to-date housing permits are down 17 percent compared to the first 10 months of 2013. There are also still plenty of existing homes for sale — and rent — in the aftermath of the slowdown and post-recession investors buys. ‘Everyone involved in new housing here in Phoenix is well aware of the dramatic price gap between the median new home price and the median resale price in the marketplace,’ RL Brown researchers write in their monthly newsletter.”

The McClatchy Washington Bureau. “The new head of the Federal Housing Finance Agency has failed to help homeowners who owe more than their house is worth to get partial loan forgiveness, Sen. Elizabeth Warren charged Wednesday. ‘You’ve been in office for nearly a year now, and you haven’t helped a single family, not even one’ through principal reduction, Warren told a surprised Mel Watt at a hearing before the Senate Banking Committee.”

“Republicans peppered Watt with a number of regulatory concerns, and worries about a forthcoming plan that will make it easier to get a government-backed loan with a down payment of just 3 percent. ‘I’m troubled that you would reduce borrowing equity after the problems we’ve seen’ in the run-up to the housing crisis, said Idaho Sen. Mike Crapo, the committee’s top Republican.”

“Congress is divided over the future of housing finance. Asked about whether he’ll offer a way forward, Watt said it is up to his former colleagues in Congress to make that call. ‘I’ve left that role behind,’ he said. ‘I don’t have an independent opinion now, because anytime I express myself now people take it as the FHFA opinion.’ The problem must be dealt with, he offered, noting there’s ‘$5 trillion of outstanding obligations that somebody has to deal with, and that is the current (sum) of housing finance business, not in the future.’”

The Columbian in Washington. “David Capolarello bought his home in 2008 for $290,000. At the time, housing prices were near their peak following a stratospheric climb that was fueled by easy money and low or no-down payment deals. Homeownership was on the rise, and some thought the good days would keep on rolling. Since then, the assessed value has plummeted tens of thousands of dollars, and despite some recent gains, today it’s still about $50,000 short of what Capolarello paid.”

“Capolarello’s story is the story of Clark County’s housing market over the past decade. The Columbian found in its analysis median sales prices are still 10 percent to 43 percent lower than pre-recession levels. ‘I would’ve liked the choice of the opportunity to sell,’ he said. ‘The main impact for me is it’s solidified the fact that I’m not going to sell. If it had risen quite steeply after I bought it, I might have been tempted to sell it, because I could make a profit.’”

Bits Bucket for November 20, 2014

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