January 4, 2015

The Unreal Real Estate Reality

It’s Friday desk clearing time for this blogger. “Residential properties – both single-family homes and condominiums – are staying on the sale market longer, according to the Miami Association of Realtors. The numbers reflect a shift from a seller’s market to a buyer’s market. ‘If properties are priced close to fair market value and are shown in clean, somewhat groomed and updated condition, we still are selling quickly,’ said Jeannett Slesnick, broker with Slesnick and Jochem LLP in Coral Gables. ‘Our condos are the same way, despite the huge amount of new construction.’”

“The pace of home price appreciation declined to a more than two-year low in San Diego County in October, continuing the slowdown that began last year. ‘The market’s coming in for a soft landing,’ said Mark Goldman, a loan officer and real-estate lecturer at San Diego State University. ‘We had been seeing double digits rates of increase a couple years ago and that’s not sustainable. That could not continue, people would be hurt because values can’t keep going up that fast. The metrics that push values up would not support that rate of appreciation.’”

“Robert Shiller said in an interview on CNBC that there could be signs of a bubble in the City by the Bay. Goldman said he appreciated Shiller’s concern, and noted that people are willing to pay a large premium for urban living, especially in San Francisco, where cost of commuting is high.”

“Special education teacher Edward Singleton said he spent nearly a decade saving for the $20,000 deposit he put down on a home he contracted to buy in Loudoun County, Virginia. But he broke down in tears when he explained how he’s spent the past four years fighting to get his life savings back after he lost both the $20,000 deposit and the home. Real estate agent and grandmother Tarshia Brown lost $52,000 when she put the money down to buy a house in Prince George’s County, Maryland. ‘That $52,000 could have put my daughter through college. It could have put my son through college,’ she said.”

“But after signing contracts, Brown and Singleton were told they no longer qualified for their original financing offer. Instead, they said Toll Brothers offered them loans they couldn’t afford or no loan at all, meaning they lost their dream home and their down payment. ‘I was told that my debt-to-income ratio was too high,’ Singleton said. ‘After I signed the check.’”

“New foreclosure activity soared 203 percent in Worcester County during November as lenders filed 115 petitions to take back homes. Worcester County again led all other Massachusetts counties in new foreclosure activity and accounted for 18 percent of all petitions filed statewide, according to the Warren Group. ‘The large gains seen in November in all three stages of foreclosure activity are expected given the backlog of delinquent mortgages in the system,’ Timothy M. Warren Jr., Warren Group chief executive, said in a news release. Worcester County has been a hotbed of foreclosure activity for months, partly because of subprime mortgages written during the nation’s pre-recession housing bubble.”

“In February 2014, I rang up Bob Hoye, a financial forecaster in Vancouver well known for his bearish outlook, to talk about where oil prices might be headed. Here’s an excerpt: ‘Somewhere in the next couple of months, the price advance in crude will probably have maxed out for this business cycle,’ he says. ‘It’s easy to say that crude oil could fall to 25 per cent of its recent high. It will change things enormously.’”

“You can imagine what my inbox looked like in the following weeks. Messages and comments flooded in, mostly anonymous, dismissing Hoye’s forecasting record and pointing to Maclean’s dour covers about the housing market. (For the record, I stand by everything we’ve written about Canada’s housing bubble, now more than ever). But one Alberta reader was particularly incensed and aimed to set me straight. Here are parts of the email. ‘I wonder what will happen first? Maclean’s long-standing claim of a housing market crash in Canada or oil returning to $25 a barrel?’”

“There is growing concern Australia is in the grip of a rural financial crisis as banks foreclose on hundreds of properties and force farmers off the land. Rural lender Landmark, once owned by the Australian Wheat Board, held the long-term mortgages of hundreds of Australian farmers but at the height of the global financial crisis sold its loan book to big four bank ANZ. With slumped property prices, some rural families also faced a situation where their debt was higher than the value of their farms.”

“Like hundreds of other farmers, Rodney Culleton did not choose to be an ANZ customer but faced the bank’s new loan agreements and demands for fresh guarantees after Landmark offloaded his loan. ‘We didn’t want to go with ANZ. We wanted to exit. So we didn’t make an application,’ he said. ‘They did come with an offer and basically said ’sign this or we’ll default you’. Well, we didn’t sign it. We didn’t sign it and so what they did is default us.’”

“Apartment rents have dropped in the Phoenix metro area even as more new units are entering the market. Three-bedroom apartments rented on average for $1,338 per month in Phoenix during this fiscal year, according to RealtyTrac and the U.S. Department of Housing and Urban Development. That is down 5 percent from $1,410 last year. Rents also declined in Dallas, Las Vegas, Houston, Tucson and Los Angeles. Texas and Southern California — like Phoenix — have seen plenty of new apartment developments. There are more units in the construction pipeline and planning stages and numerous sales this year of older complexes.”

“An urban rental boom wasn’t enough to offset a decline in suburban new home sales in the Twin Cities this year, causing a modest correction in the construction recovery. Throughout the 13-county region, builders were issued 4,914 permits to build 10,093 units, according to a year-end report from the Builders Association of the Twin Cities. That was a 1 percent decline in new units compared with 2013, which was the best year for new homes since the housing collapse in 2008. ‘We expected 2014 to show an increase, but it didn’t,’ said David Siegel, executive director of the Builders Association of the Twin Cities.”

“By now the people who argue about and propose public policy really should have learned that nothing exists in a vacuum. It’s simply not possible to just tweak one part and then see all the rest stay the same. Obviously, this is akin to Hayek’s concept of the planner’s conceit: that someone can be so august and knowledgeable that they can plan how the rest of us should live our lives. An obvious little example of this is playing out now in the housing market. As a result of the housing crash, and certain less than completely and wholly legal activities after it, for a mortgage holder to be able to foreclose on a housing loan in default is rather more difficult than it used to be. There are, not surprisingly, therefore fewer mortgages being offered to people. This is causing some to hyperventilate.”

“And what are those mortgage offerrors doing that is so heinous? They’re refusing to offer mortgages at all in many cases. Instead they will only offer a deed of trust. This is largely the same except at that point of foreclosure, if that should ever happen. For under a deed of trust there’s no need to go to court to gain repossession of the property. This obviously makes it easier to repossess, faster, and cheaper.”

“It seems that tightening up the rules of how you may foreclose on a mortgage is having the effect of making the mortgage itself extinct, to be replaced by those deeds of trust. If you make it more difficult for people to gain the security against which they’ve lent then they won’t lend against that security.”

“Hucksters, self-promoters and cattle call bus tours are back. Déjà vu 2005 all over again may best describe at least some of Florida’s real estate markets in 2015. The unreal real estate reality show stars are back, giving lessons on how to become rich using other people’s money. Realtors and cocktail party experts are again hyping the market (although many hyped the market all through the bust). In some areas of the state, bus tours of foreclosed properties have given way to bus tours of new condominium projects, single-family-home neighborhoods and retail centers.”

“The grandiose sales parties, celebrities and real estate magnate wannabes are back, too. So are the developers that cut the financial legs out from under buyers in the last boom by slashing prices on their unsold units. More than ever, buyer beware!”

Bits Bucket for January 4, 2015

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