December 29, 2014

Now All Assumptions Are In Question

The Forum News Service on North Dakota. “If 2011 was the year of the oil boom, 2014 could arguably be considered the year of Dickinson’s building boom. Months of pent-up demand for development – and for housing, in particular, as rent prices continue to rival those in much larger metropolitan areas – are expected to finally ease next year, as more private projects take off, said Community Development Director Ed Courton. The sudden drop in oil prices, which have fallen 40 percent since June, has shaken many investors and leaders in the Bakken. But Cooper Whitman, executive director of the Dickinson Chamber of Commerce, like Courton, said the slowdown likely won’t affect development in Dickinson in the long term.”

“Businesses aren’t looking to pull away from Dickinson, he said, because they understand that the oil slowdown is just temporary. ‘They’re not coming for the peak of an oil boom,’ he said. ‘They’re coming for the sustainable community that we’re building.’”

The Houston Chronicle in Texas. “The collapse of oil prices in 2014 has made it difficult for economists, both public and private, who until recently assumed oil would only drop to around $85 a barrel based on greater supply and less demand. Almost none expected prices to touch $54 a barrel, as they did this month, and now all assumptions are in question. The effect on the Texas and Houston economies is a matter of intense debate, but under no scenario will it be positive. The oil and gas industry is responsible for between 11.7 percent and 13.5 percent of the economic activity in Texas last year, depending on the analyst.”

“Barclays warned that the Texas housing market correlates with oil prices and therefore could take a major hit if oil prices stabilize at current levels. Offshore driller Transocean has announced the shutdown or sale of 10 rigs, and Houston-area companies that build well equipment are bracing for order cancellations. Halliburton CEO Dave Lesar has announced more layoffs are coming next year. ‘We will not be immune to market conditions, and right now it looks like 2015 is going to be a tough year,’ Lesar said in an email to employees. Quite a few roughnecks and field engineers will soon be out of work and packing their pickups to return to Houston. For them, 2015 could be very hard.”

The Arizona Republic “Floyd Scott, president of Century 21 Arizona Foothills, which has two of its seven Valley offices on the west side, offered a bright outlook based on low interest rates.The $150,000 to $225,000 market is hot as jobs continue to expand, and retired and second-home buyers are back in the market, he said. ‘The only negative might be the Canadian buyer, as oil prices and currency valuations might slow them down this year,’ Scott said.”

“David Friedman, branch manage for the West Valley office of Russ Lyon Sotheby’s International Realty in Peoria, said, ‘I expect a strong 2015 where buyers and sellers will get back to being on more equal footing.’ In Glendale, at the end of 2013, he said only a $6 per-square-foot difference existed between asking and sales prices. In the second quarter of 2014, Glendale seller confidence exceeded the market. Asking prices were at $143 per square foot; sales prices were only $103 –– a $40 per-square-foot difference. ‘Luckily for them, Glendale sellers are now looking more realistic, at $120 asked against $106 per square foot sold,’ he said.”

“The new-home market is also improving and should continue upward in 2015, barring the traumatic, said Jennifer Moore, an agent with West USA Realty in Peoria. ‘With 20 builders and more than 37 new subdivisions in progress, and more expected to open in 2015 just within the 85383 zip code in Peoria alone, the housing industry in 2015 for the West Valley should prove to be extremely successful,’ Moore said.”

The Miami Herald in Florida. “Sales of existing condos in Miami-Dade County plunged 15.5 percent in November from a year earlier to 1,077 units, according to the Miami Association of Realtors. Miami-Dade existing condo sales in November were down 28.6 percent from October, which tallied 1,508 closings, and single-family home sales were off 19.3 percent from the prior month, when 1,204 sales were completed, the Miami Realtors said. The inventory of existing condos soared to 11,515 units in November, up 16.9 percent from a year earlier. Existing condos listed for sale are facing rising competition from the various pre-construction projects around Miami.”

“The condo inventory amounted to 8.4 months of supply, the highest level since the housing recovery took hold. Buyers negotiated slightly more price discounts in November, according to the statistics. Single-family homes sold at an average of 93.5 percent of original list price, compared with 95.3 percent a year earlier. Condos fetched on average 91.9 percent of original list price, down from 94.4 percent in November 2013. ‘Considering the steady rise of closed sales in the past several months, statistics like this are bound to happen,’ said Marnie E. Allen, president of Greater Fort Lauderdale Realtors.”

The Colorado Springs Gazette. “The Colorado Springs area’s unemployment rate declined by nearly a third, from 7.8 percent in October 2013 to 5.4 percent in October of this year. But dig a little deeper, and a bleaker picture emerges. Nearly half of the drop in the jobless rate resulted from more than 3,500 area residents leaving the local labor force. Fred Crowley, a local economic consultant, concluded that more than 4,700 residents in their prime working years - ages 35 to 54 - had exited the local job market during the same period.”

“The reason, he believes: Wages in the Colorado Springs area have declined since 2000 as the local economy has traded high-paying jobs in manufacturing, information technology and construction for low-wage jobs in the hotel, restaurant and call center industries. The average pay of jobs that were lost is nearly three times higher than the jobs that replaced them, resulting in a decline in the area’s wages of more than $150 million between 2010 and 2013.”

“‘This is scary. We need to grow technology and manufacturing,’ Crowley said. ‘Most of the people who have dropped out of our labor force probably have left the area. The inference is that they lost good opportunity and there are no longer good opportunities here. Without high-wage jobs, average incomes will continue to decline, residential housing prices could soften and consumer purchasing may decline,’ Crowley warned. ‘Unless corrected, we face a dark economic future in El Paso County.’”

The Star Tribune in Minnesota. “Free residential lots in Claremont, Minnesota! Sound like a scam? Officials in this southeast town of 548 people think that may explain why the offer has no takers. Not now. Not for years. A developer bought the land for a subdivision but stopped after building one house when the housing market crashed in 2006. That left the town with $450,000 in bond payments and 14 empty lots. At first Claremont tried to sell the lots, worth $28,637 apiece. No one came calling, so the town made the lots free.”

“‘I think it was just one of those things that people thought was too good to be true.’ said City Clerk Liz Sorg. ‘We’re trying to advertise them a bit more and get the word out that it is a for-real deal,’ Sorg said. ‘It is a free lot we’re willing to give you.’”

“There’s also the added pressure of needing people to move into the lots to generate revenues for the bonds on the failed development. ‘We’ve tried about everything possible to try to get somebody to build on these lots,’ said Ginny Busch, Claremont’s former mayor. ‘We have to keep paying — the bonds don’t go away. The road is in. It’s all paved. There’s water. There’s sewer. There is electrical. There’s curbs.’ But, she lamented: ‘No houses.’”

Bits Bucket for December 29, 2014

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