March 2, 2015

The Bubble Can’t Help But Burst

Tulsa World reports from Oklahoma. “Tulsa-area home sales rose only slightly in January compared to the same time last year, but they were at the highest January levels since before the housing bust. Tulsa’s average sale price also shot up significantly, as the reported $170,690 was 10.8 percent ahead of January 2014. Mike Craddock, 2015 president of GTAR, said that’s the result of the tightening inventory — there’s now a 5.94 month supply of homes on the market, down 15.7 percent from last year.”

“Craddock said the low interest rates, strong economy and significant commercial development all point to a year for further growth in home sales. ‘I think 2015 will be another strong year, barring something crazy happening,’ he said.”

The Odessa American in Texas. “Signs mount that at least some rent relief is on its way. To be sure, Odessa and Midland have among the most expensive apartment rents in the state. But no apartment complex has a wait list anymore, according to the Permian Basin Apartment Association, which counts about 26,000 units among its Permian Basin-wide membership. Some apartments are starting to advertise move-in specials. It is also a reality of the apartment market that rent reductions require vacancies, insiders say, and often the vacancies come from people who are laid off and move away from the area.”

“That is not an idea lost on renters who want relief, especially the long-time residents like Deidre Orcutt, a married mother of four who pays about $1,400 in monthly rent. Orcutt isn’t in an apartment — like many Odessa renters, she is in a home belonging to a private landlord — but she said she has still seen her rent double in the seven years she has lived there. ‘Not everyone works in the oilfield,’ Orcutt said. “And I’ve actually talked to oilfield families who are struggling too but they can’t afford the prices here. But you don’t have any option, because you can’t find anything cheaper.’”

“Her plan is to buy a home. She said she got a good price from the developer Betenbough, on a four-bedroom house for a down payment of about $6,000 and a monthly payment of about $1,600, including insurance and bills. ‘We are trying to wait now,’ she said. ‘And we are hoping that by some miracle everything decides to go down.’”

The Denver Post in Colorado. “Colorado is on a shortlist of states facing a more elevated risk of home price declines, a sharp contrast to the recent trend of home price gains. ‘While no one knows if current oil price levels will be sustained long-term, we view the dramatic decline in the price of oil as having a real and meaningful impact on the potential for home price declines in these regions,’ Ralph DeFranco, Arch Mortgage Insurance Co.’s senior director of risk analytics and pricing, said in a report.”

“Colorado now ties with Wyoming for the seventh-highest risk score among states. North Dakota and Louisiana are the states most at risk, with the odds of a price drop at 37 percent and 35 percent, respectively. Texas, Oklahoma, Alaska and New Mexico are other states with the highest odds of home price declines in the months ahead. As recently as November, Arch MI had none of those states in the top 10 for home price declines.”

The Winnipeg Free Press in Canada. “Canada’s farm-equipment industry is suffering through sagging sales and job losses as low grain prices and dwindling exports take a chunk out of the farming trade. Manitoba’s largest players aren’t immune, either, with companies such as Macdon Industries and Buhler Industries laying people off and reducing work weeks. The big international brands such as John Deere and Case New Holland have been cutting back for some time.”

“Ron Koslowsky, the Manitoba head of Canadian Manufacturers and Exporters, said it has some similar dynamics to housing markets that heat up into a frenzy where the bubble can’t help but burst. ‘Over a period of a few years, the end users — the farmers — see low interest rates, good times with prices high and good crops and there is a steady demand and things really ramp up,’ he said. ‘But inevitably… you can’t always keep buying.’”

The Courier Mail in Australia. “Locals say the main street of Dalby resembles a ghost town these days. Things have taken a turn for the worse since the glory days of the mining construction boom, with companies responding to falling commodity prices by pulling the plug on new projects and laying off workers across the Surat Basin. The increasing exodus of workers, investment and money from the mining towns has left houses empty and businesses struggling, with many of those left behind wondering what to do next.”

“Retail assistant Tina Henderson, who followed the mining construction boom to Dalby with her family three years ago. She said successive rounds of redundancies had left her worried about her husband’s mining job and her older children were struggling to get full time work. ‘It is much quieter now,’ she said. ‘I actually walked out of the shop last Saturday, looked up and down the street and thought: ‘Where is everyone?’”

“Further west in Chinchilla, the effects of the mining construction boom have mainly been felt in the real estate sector, where rents and house prices doubled from cashed-up workers arriving in the town. Long-term residents said many pensioners had been forced to leave because of high housing prices and now that prices had fallen some weren’t coming back. One real estate agent said ‘a hell of a lot’ of property was on the market – about 400 houses were for rent or sale and buyers were scarce.”

The Business Times in Singapore. “Cooling measures by the government, if left unchecked, could lead to an unintended downward spiralling of property prices, warned Augustine Tan, president of the Real Estate Developers’ Association of Singapore. Already, private housing completions from the last few years of ramp-up in government land sales are presenting ‘a worrying oversupply scenario’ that could bring vacancy rate to a new high, he said.”

“‘Analysts estimate that over 75,000 new private residential units will be completed from 2015 to 2019,’ Mr Tan said. ‘This will cause a further slip in home rentals and downward spiralling of property prices. For homeowners, their investments will be severely impacted… Some may be forced to sell their properties.’”

“‘There are those whose properties’ capital values are waning,’ said Tan Tee Khoon, executive director of residential services at Knight Frank. ‘As far as we are concerned, the rice bowls of property salespersons are severely impacted. With a 51 per cent drop in new home sales last year, the prospect of higher vacancy rates and impending rise of interest rates, we can expect tougher days ahead.’”

Bits Bucket for March 2, 2015

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