February 4, 2015

The Last Moments Of Trendsetting Hurrahs

A housing bubble report from Bloomberg. “A slew of investment firms are targeting riskier mortgages in a bid to earn higher returns in a world in which home lenders are more cautious and central banks are suppressing yields on more traditional debt. Citadel Servicing Corp. tripled its originations last year to about $150 million, is targeting $400 million to $500 million this year, Chief Executive Officer Daniel Perl said. While the mortgages it makes may be riskier in some ways, Perl said that the company saw just four of its loans default last year, representing less than 0.4 percent of the debt it oversees. Three of those paid off without a loss and it anticipates that will also happen with the other one, he said. ‘The reason for that is quite simple: the people had equity in their properties,’ he said.”

The Associated Press on California. “December’s rains enabled Californians to finally meet Gov. Jerry Brown’s call for a 20 percent reduction in monthly water consumption, but more restrictions loom as the state adapts to long-term drought conditions. A state drought-busting campaign declaring ‘Brown is the New Green’ encourages people to let their lawns die. ‘Homeowners should do their part, but the focus has been way too much on residents,’ said Maria Gutzeit, a member of a water district board in the Santa Clarita area. ‘You ask anyone here how they are going to sell a house with dead grass and dead bushes, and you’ll bankrupt people for something that doesn’t even significantly help the statewide water portfolio.’”

The Austin American Statesman in Texas. “After several years of swiftly rising rents, Austin-area apartment dwellers are about to get some relief this year, as thousands of new units enter the market and ease the metro area’s demand crunch. More than 10,000 apartment units opened in the metro area last year, and another 8,000 or more units are expected to enter the market this year, according Charles Heimsath, president of Capitol Market Research. Apartment rents are stabilizing after rising rapidly from 2010 through 2013. ‘You can clearly see that the rapid pace of increase has slowed to almost nothing,’ Heimsath said. ‘I don’t see citywide growth in rents at all in 2015.’”

“Robin Davis, manager of Austin Investor Interests, which researches the local apartment market, said it has been one of the strongest nationwide ‘for a full five years, reaching historical heights in rent, occupancy and overall growth.’ However, she noted a shift could be in store. ‘These are likely the last moments of trendsetting hurrahs until the market absorbs the upcoming development that, at present, will bring over 12,000 conventional units and almost 1,800 affordable/student housing units over the next 12 months,’ Davis said.”

The Star Tribune in Minnesota. “After a rip-roaring January last year, housing construction in the Twin Cities metro this month is off to a slow start. Throughout the Twin Cities metro builders were issued 308 permits to build 529 units during four comparable weeks in the month of January 2015, according to the Builders Association of the Twin Cities. That was a 13-percent decline in permits, but a 50-percent decrease in number of units, mainly because there were fewer apartment buildings.”

“Most forecasts call for a modest increase in new home sales during 2015. So far that’s not been the case. Permits to build single-family houses were down 16 percent this month. ‘After a tough 2014 for single-family construction, we had hoped to see a much stronger start to this year,’ said Chris Contreras, 2015 president of the Builders Association of the Twin Cities.”

From WUIS.org in Illinois. “In 1974, Jorge Chapa became familiar with the meatpacking industry and its bloody and backbreaking disassembly line. He revisited meatpacking 30 years later, as a sociologist. This time he analyzed it for a study showing how the once high-paying job had slid from providing a middle-class living into one paying minimum wage. When Chapa, a University of Illinois Urbana-Champaign professor, was first exposed to meatpackers, he says, they earned good benefits and $17 an hour. ‘They went home to a nice house, two cars and could afford to send their kids to college.’ In 2004 terms, when Chapa did his study, that translated to about $65-$70 an hour, about 10 times what they actually earned in 2004.”

“In 2014, Pew Research Center crunched data from the Federal Reserve’s Survey of Consumer Finances from 2007 to 2010. Pew found the median net worth of American families decreased by 39.4 percent, from $135,700 to $82,300. And the median wealth of upper-class families outpaced that of middle-class families by seven times and the lower-class by nearly 70 times.”

“‘One of the very biggest wealth generators historically has been homeownership, and that promise of homeownership, helping people to obtain the American dream, was really kind of ripped to shreds a bit during the Great Recession,’ says Amy Terpstra, director of research for the Chicago-based Heartland Alliance’s Social IMPACT Research Center. ‘I think there are things that can be done to restore the promise of homeownership with a particular lens to making sure that’s available equally because we know that minorities do have much lower rates of home ownership, and when they do own homes, they tend to not accrue value as quickly as it does for nonminorities.’”

From Cleveland.com in Ohio. “Home values have plummeted in Parma since the housing bubble began to deflate, dropping by more than 20 percent between 2007 and 2013 — the biggest drop among Ohio’s 10 largest cities. The economy’s downward turn in 2008 hit working-class residents of Parma hard, said real estate agent Chris DePiero. ‘There’s a lot of banked-owned houses,’ said DePiero. ‘A lot of the good people of Parma, blue-collar workers, lost their jobs unfortunately, and I think it’s a type of situation where a lot of people had to give their house to the bank, and there’s tons of bank-owned houses consequently.’”

“Prior to the foreclosure crisis, in 2007, a Parma house sold for about $120,000. ‘Properties were really inflated, so when that bubble burst in 2008, mortgage lenders tightened down and wouldn’t loan to anybody unless they gave their first-born child,’ said Parma Economic Development and Community Services Director Erik Tollerup. ‘That really killed the housing market for a good couple of years.’”

“Now, that price ranges from about $85,000 to $92,000, said DePiero, whose been in the real estate business for 30 years. ‘It’s really sad if you think about it,’ he said. In 2011 and 2012, when the regional market ‘hit rock bottom,’ home values were fell to $80,000.”

Bits Bucket for February 4, 2015

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