A Dramatic Decline Which Nobody Predicted
The Lowell Sun reports from Massachusetts. “In some respects, it can be argued the housing bust still hasn’t ended. October marked the eighth consecutive month that petitions to foreclose a home in Massachusetts rose when compared to the same month a year ago, according to The Warren Group. Timothy Warren Jr., CEO of The Warren Group, said in a statement that lenders are continuing to work through a ‘backlog of long-delinquent mortgages and push the legal work through a pipeline that was clogged for all of 2013.’ Richard Howe Jr., register of deeds for the Middlesex North Registry of Deeds, called the current environment ‘the residue of the housing bubble.’ Howe wrote in a blog post that 60 of the 72 foreclosures completed in Lowell this year (through Nov. 30) involved a mortgage that was originated in 2007 or earlier.”
“‘Those foreclosures that occurred right after the bust, those were people who put nothing down,’ he told The Sun of Lowell. ‘Now we’re seeing it happen to people who were able to stick it out a little longer, before perhaps something traumatic occurred in their lives.’”
The Houston Chronicle in Texas. “The collapse of crude oil prices is stirring fears that several oil companies could tumble into bankruptcy, possibly triggering broader economic pain, if they default on risky debt fueling the shale energy boom. Because the energy sector makes up the biggest portion of the high-yield debt market, a surge of defaults could resemble earlier telecommunications and real estate busts that infected banks and hit other quarters of the U.S. economy, said Oleg Melentyev, head of U.S. credit strategy at Deutsche Bank in New York.”
“A rout in the oil industry could cause energy bond prices to fall, prompting nervous investors to cause collateral damage in other sectors, ‘but my guess is you probably won’t have too much,’ said Larry Whistler, president and chief investment officer at Nottingham Advisors. ‘I don’t see systemic risk like you had with the mortgage market.’”
The World Property Journal. “A million dollars will still buy what’s considered a luxury home in most parts of the country, but there are of course places where this price point will buy nothing more than the average home. ‘Houston was a clear standout, with a 42 percent increase in sales of homes costing $1 million or more since last year; the average increase for the 385 cities that had million-dollar-home sales in the third quarter was 17 percent. ‘The luxury home market in Houston is thriving in large part because of the strong and diverse job market,’ said Redfin agent Tara Waggoner. ‘Energy and technology companies like Exxon Mobil are hiring employees away from the coasts. Those people are shocked at how much home they can get for $1 million in Houston.’”
“We took a look at seven markets that have heavy international buyer activity: Los Angeles, Orange County and Riverside-San Bernardino in California; Miami, Orlando and Fort Lauderdale in Florida; and Las Vegas. Though home sales for $1 million and more in these markets remain strong, year-over-year growth has plummeted in the past year, going from 46 percent to just 5 percent. There has also been a precipitous drop in all-cash buyers: About half of all transactions in the seven markets with heavy international investor interest were cash at the start of the year, but that fell to 22 percent by the third quarter.”
The Palm Beach Post in Florida. “It’s been a good year for the sale of homes priced at $1 million or more, but the increase in volume may be waning. According to Redfin, Florida’s third quarter sales of high-end homes measured 1,004, up 6 percent from 2013 and 115 percent from the same time in 2011. But that’s a decrease in momentum from 2013, which saw a 34 percent hike in million-dollar homes compared to the previous year.”
“‘That’s no surprise, given that the luxury housing market was the first to recover after the crisis and has been going strong ever since, benefitting from a booming stock market, low interest rates and overseas investment,’ Redfin said in a press release. ‘But that overseas investment is beginning to wane, and markets that are most dependent on international demand are seeing a steady and dramatic decline in sales of million-dollar-plus homes.’”
The Desert Sun in California. “Bob and Dolores Hope’s Palm Springs estate took another hit to the asking price — dropping about $9 million to just shy of $25 million. The approximately 23,000-square-foot home had the asking price cut to $34 million in January, after originally being put on the market privately for $50 million. The Hope estate went on sale in March 2013. The family’s primary home at Toluca Lake in Los Angeles went on sale for $27.5 million in September 2013. The asking price dropped to $21.8 million in June and had the listing removed in October.”
The Arizona Republic. “Homebuilders are offering bigger deals to try to sell metro Phoenix houses before the end of the year. During December, Shea Homes is selling houses already constructed, featuring stainless-steel appliances, granite countertops and wood floors, for 10 percent to 20 percent off. Ripson Homes won’t charge buyers for 12 months if they purchase a house on an acre lot in Surprise before 2015. Builders began offering deals last summer as new-home sales began to fall below last year’s sluggish pace. In August, most homebuilders were offering at least $5,000 off upgrades and other options for homes, or a similar discount on closing costs.”
“The latest round of incentives from Shea and Ripson comes after homebuilding plunged 33 percent in October compared with the same month in 2013, according to RL Brown Housing Reports.”
From Cronkite News in Arizona. “Phoenix-area home builders are heading for a disappointing end to the year, according to a third-quarter report released by Metrostudy. Rachel Cantor, regional director of Metrostudy, said many factors may have contributed to the decline, which departed from the 30 percent growth her organization has predicted for the year. Michael Orr, director of Arizona State University’s Center for Real Estate Theory and Practice, said the survey’s results aren’t dramatic but are a little surprising. ‘It looks like we’ll actually sell fewer new homes this year than last year, which nobody predicted,’ he said. ‘And I was probably the least optimistic, but even I thought there would be a slight increase.’”
“Cantor said that these numbers are expected to carry through to the end of the year, and she said builders should set their expectations accordingly into 2015. ‘Be more realistic, set some expectations for yourself, don’t expect 15 to 20 percent growth,’ she said. ‘If you’re going to grow, you’re going to have to figure out how to take market share from other builders versus the market actually growing.’”
