April 2, 2015

They Gambled And Lost

KUNC reports on Colorado. “Northern Colorado is the fastest growing part of a fast-growing state. While growth is often seen as good for the economy, the speed of the change is creating a housing crunch. From Denver to Fort Collins, renters and buyers are being squeezed. If wages don’t start to catch up with home prices, said economist Richard Wobbekind, of the University of Colorado’s Leeds School of Business, that might be a cause for concern. Wages have not increased significantly over the past five years, but housing prices for both renting and buying have been going up for several years.”

“‘You have people saying $400,000 for a home is a reasonable entry level. That is a lot of money even with great mortgage rates. It’s a scary picture,’ he said.”

Bloomberg on New York. “Newly constructed luxury condominiums are proliferating in Manhattan, creating an excess of high-priced homes for sale at a time of limited supply for buyers seeking more affordable options. Listings for at least $10 million jumped 41 percent in the first quarter from a year earlier. The number of apartments on the market for $5 million to $10 million rose 31 percent to 915. With high-end apartments being added to the market faster than they’re selling, the stage is set for some of Manhattan’s priciest projects to take years to sell out, said Jonathan Miller, president of Miller Samuel.”

“‘The sense of urgency is not there because there’s a lot more competition to consider,’ he said. ‘This product will have a much longer absorption period than was originally penciled in.’”

The Sidney Herald in Montana. “The recent drop in oil prices has caused a tremendous shift in the oil industry in eastern Montana. The rest of the economy has yet to feel the impacts of this downturn, although skyrocketing prices in other markets have leveled off. ‘(Real estate) is a pretty good barometer of the overall economy,’ Beagle Properties’ owner Leif Anderson said. ‘We’ve seen no evidence yet that (real estate) prices have gone down any, but they definitely have leveled out. They are not going straight up like they have been for quite a while now.’”

The Midland Reporter Telegram in Texas. “Only 86 Midland homes were sold in February, the fewest homes sold during a month since January 2010, according to data from the Real Estate Center at Texas A&M. Real estate inventory grew to 866 listings, a number last reached in February 1994. Jim Gaines with the Real Estate Center, said the economic impact of the drop in the price of oil is starting to be reflected in the local real estate market. ‘That tells me that there is nervousness in the market on the part of sellers, that if I got a house or I just bought it a couple of years ago … I may be looking at a down market here in terms of demand for the next several years,’ he said. ‘If I want to sell or if I think I need to sell or if I think I’m in danger of losing my job, then I better sell my house before I have real problems.’”

“When referring to the data from February, Gaines said ‘the dominos are falling, and maybe this month was the first month of seeing that in the actual data.’”

The Globe and Mail in Canada. “In the spring of 2013, the pair settled on a 1954-era house in St. Andrew’s Heights in the inner-city northwest. They plunked down $950,000 for the house and the lot – opting to tear down and re-build a 3,200 square foot modern home. Upward markets bolstered the couple’s confidence their suburban residence would sell within a year. The following month it sold for $1.3-million. Only now they were stuck; their dream house wouldn’t be ready for two years.”

“Mrs. Onslow`s employer had just built an upscale 2,000 square foot, two-storey, three-bedroom, duplex in Killarney, close to downtown, in the city’s southwest, which she designed. The listing price was $900,000. The couple got a deal for $150,000 less than asking. Things were looking rosy. Selling in suburbia had been a breeze so, naturally, they thought, this too would be a cinch. The couple would certainly recoup the house’s original $900,000 value.”

“When oil took a nosedive, toward the end of last year, the Onslows were gobsmacked. In every market downturn there are people who get caught in the undertow. By January the neighbours sold their adjacent duplex for $840,000. The Onslows dropped their price to $829,000, and then further to $795,000 four weeks ago when a conditional offer finally came through. The couple know they gambled and lost. They could have sold last year and rented a place to live in while their new home was built. ‘The whole situation irks me with what has happened to the value of the homes in Calgary,’ Ms. Onslow says. ‘I know the value of this home. I designed it. … We didn’t get as much for it as we could have or should have.”

From CNBC. “More home buyers enter the market this spring, but big banks are continuing their retreat from mortgage lending. That is opening the door ever wider for independent, nonbank lenders. Nonbank lending rose to 37.5 percent of the market during 2014, up from 14 percent in 2011, according to publication Inside Mortgage Finance. ‘That was attributable to a combination of nonbanks being more aggressive, both in terms of rates and underwriting, and large banks pulling back slightly in the conforming markets,’ Editor Guy Cecala said.”

“The leaders in nonbank growth were names like Quicken and Penny Mac as well as other smaller nonbanks, like Charlotte, North Carolina-based Movement Mortgage. Nonbank lenders still sell the vast majority of their loans to Fannie Mae and Freddie Mac, so they must comply with their underwriting and capital standards. ‘We don’t want to go back to the subprime days, when we were extending credit to the wrong folks, but we do want to make sure we’re extending credit to those borrowers who do have the ability and capacity to repay the loans but may just not have traditionally documentable income,’ said Casey Crawford, CEO of Movement Mortgage.”

Bits Bucket for April 2, 2015

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