April 8, 2015

Pent-Up Seller Readiness To Turn A Quick Profit

A report from Colorado Public Radio. “Despite huge increases in the metro population, the number of homes under construction here is still about half normal levels. In 2003, contractors started construction on about 16,000 homes. More than a decade later, in 2014, there were only about 8,000 home starts. Banks and builders are hesitant, because of an unexpected paradox. The Denver area is one of the fastest-growing regions in the country, adding more than 50,000 people between 2013 and 2014, but demand for new homes is actually softening. The reason goes back to the shortage of labor and land. And those two things have translated into sticker shock for potential buyers.”

“According to Metrostudy, the average price of a new single family home has risen to about $450,000. ‘We’re now in this environment of sort of drive until you qualify,’ says John Covert, who runs Metrostudy. New home buyer Justin Knoll sees first hand, in his real estate practice, the pain that price jumps cause buyers. ‘You drive by a development and you see, ‘Oh, starting in the low $200’s.’ Well, that doesn’t exist. Add $100,000 to every sign that you see, is kind of the reality.’”

Dow Jones Business News. “Given the hot market, it may be no surprise that some buyers may be hoping to turn a quick profit. The National Association of Realtors says that 28% of the people who bought a vacation home in 2014 plan to sell it in two years or less, based on survey data. Buyers who are considering a similar strategy should have a backup plan in case prices stagnate or fall. The risk could be particularly high in vacation destinations that are seeing a surge in construction, which could point to a glut of units down the road, says Jack McCabe, an independent housing analyst in Deerfield Beach, Fla. Luxury-condominium construction in Miami has taken off over the past year and is expected to increase the number of high-cost units for sale, which could hurt prices, he says.”

“Other factors also could undercut prices. In Incline Village, Nev., on the north shore of Lake Tahoe, a buying frenzy has slowed, says Linda Granger, broker-associate for California and Nevada at Alain Pinel Realtors, based in Tahoe City, Calif. Drought has limited the amount of snow in many ski areas, she says. ‘The people who are all excited to buy ski homes’ aren’t coming to ski, so they aren’t looking to buy, she says. In the first quarter of 2015, the average selling price for homes around the lake in the $500,000 to $1 million range fell 6.5%, to $677,000, Ms. Granger says.”

Crain’s New York. “Manhattan condo and co-op sale prices leveled off during the first quarter of 2015 after a many-months boom that saw pent up demand push apartment prices into the stratosphere, according to a report by brokerage Douglas Elliman and appraisal firm Miller Samuel Inc. The number of condo and co-op sales fell 19.5% to 2,661—the third consecutive quarter of double-digit declines.”

“For newly built condos and co-ops, most of which are being targeted toward wealthy buyers, inventory increased by 22% compared with last year, and units sat on the market for much longer—though still shorter than historical averages. In addition, the median sales price dipped by more than 6% to $1.6 million. With thousands more units set to come up on the market in the next two years, the price decreases could become more pronounced and apartments could sit on the market for longer.”

The Star Tribune in Minnesota. “There was not much to see at a modest home near Bohanon Park on Minneapolis’ North Side one recent morning. But that was precisely the point. Leaders of Hennepin County’s housing team watched as a contractor installed vinyl sheets resembling windows, camouflaging the plywood that has dotted the vacant house since 2012. It is part of a new pilot project examining whether disguising vacant homes reduces vandalism and improves nearby property values.”

“The foreclosure crisis that rocked north Minneapolis has largely subsided, but the area still features more than 300 of the city’s 550 vacant properties. Some have sat empty for years. ‘As a homeowner, I know that my property values are instantly lowered because of it,’ said Ann Moe, chairwoman of the Lind-Bohanon Neighborhood Association, of boarded homes. ‘The more that I see on a block, the more my value goes down.’”

The New Jersey Herald. “Faced with a foreclosure rate among the highest in the country, Sussex County officials took the first steps in a program designed to bring help to homeowners before the bank calls about late payments. Sheriff Mike Strada, whose office handles auctions of foreclosed properties, the final step in a lengthy foreclosure proceeding, said currently 450 foreclosures are in the department’s system, meaning a court has issued a writ of foreclosure and the property can now be sold. By the time his department gets a court writ to sell at auction, ‘it’s taken two to five years to get through the system,’ and, he said, ’something like 99 percent are going back to the bank (at auction) because there isn’t a bid.’”

“Freeholder Rich Vohden, who has been following demographic trends in Sussex County since late 2013, uses the number of lis pendens, the formal notice from the lender that the borrower has fallen two payments behind, as his gauge. Vohden said as of March 31, there were 9,131 lis pendens in Sussex County, an increase of 132 over the first of the month. ‘I’m not being negative, I’m just reciting the facts,’ he said. He said the number of foreclosure proceedings ‘ties into all the other issues, such as the drop in home values, the drop in property valuation, even the loss of population.’”

Lehigh Valley Business. “Warren County, NJ realized a 16.7 percent spike in February sales over February 2014 as well as a 22.9 percent jump in pending sales. ‘We are busier than we have probably ever been,’ said Jeffrey Fiedler, broker with Fiedler Real Estate, Hackettstown. ‘I see twice the listing volume that we normally have, but I can’t say that I see a lot of contracts getting written that are really going through, other than the stuff that is bank-owned right now.’”

“Fiedler sees that activity much more with bank-owned properties and much less with the traditional resale market. ‘We are not seeing the same amount of activity as we are on the bank-owned homes because the banks have finally started to let go some of the shadow inventory,’ he said. ‘We are seeing good homes that have come to market, and the buyers are snapping them up like crazy.’”

8 News Now in Nevada. “A bill that would allow banks to give more loans and release restrictions on foreclosures is being discussed in the state assembly. Supporters of the bill say it could facilitate the sale many abandoned homes across the valley. ‘Approximately 40,000 houses in Clark County have water meters set but are disengaged,’ said realtor Mark Rollie.”

The Davis Enterprise in California. “Prospective home buyers in Davis will witness something later this year that they haven’t seen in almost 15 years: a significant number of newly constructed homes, being built in several parts of town. This pending increase residential construction is also occurring at a time when Davis home prices, as measured by the price per square foot, have pretty much caught up with the previous peak of the real estate cycle.”

“This trend appears to be prompting some potential sellers who have been waiting for prices to rebound to consider listing this spring, which could create a larger inventory of existing homes for sale than Davis has seen in recent years. Kim Eichorn of Lyon Real Estate sees prices rising again this year. And she thinks more existing homes will be coming on the market. ‘There is a lot of pent-up seller readiness,’ she said. ‘There are people who were ready to sell, but did not, because they lost equity (during the recession). But now they have largely recovered.’”

Bits Bucket for April 8, 2015

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