May 7, 2015

Overvalued From Over-Exuberant Growth

KATU reports from Oregon. “Real estate agents are seeing buyers offering $100,000 over the asking price for house in hot neighborhoods in Portland. Erin Rothrock, with the Hasson Company, said she recently worked on a house in the Alameda neighborhood that received six bids. ‘Five of the six were a hundred thousand-plus over full price,’ said Rothrock.”

“Agents said most of their buyers are from out of town, from California to the East Coast to Asia. Real estate agent Susan Reinhart is showing a 100-year-old house in Irvington, a place many buyers want to live. The house sold for $320,000 in 2004, city records show. Now, the asking price is $700,000. ‘They do whatever they can to buy in a neighborhood like this,’ said Reinhart. ‘I think the surprise for me is, there is more and more inventory, so you would think the frenzy would slow down, but the inventory is being sucked up as fast as it comes on the market.’”

Bloomberg on New York. “For all the attention Manhattan’s ultra-luxury condominium towers have captured, New York City’s largest residential construction boom is in the farther reaches of the outer boroughs. There are 37,243 residential units planned for outer sections of Brooklyn. An additional 17,352 units are slated for the farther reaches of Queens. In Flushing, demand from Chinese buyers is spurring a housing boom near the Roosevelt Avenue shopping hub. Onex Corp. plans 795 condos across three towers. Half of the not-yet-built apartments went into contract within six hours on a single day in January, said Michael Dana, the president of Onex Real Estate Partners. Ninety-five percent of the buyers are Chinese, he said.”

“For the choicest commercial properties in Manhattan’s most desirable locations, the average capitalization rate — a measure of investment yield that falls as prices rise — dropped to a record 3.2 percent in the first quarter, according to research firm Real Capital Analytics Inc. ‘Where you are in this cycle, you have two options,’ said Robert Freedman, chairman of the tri-state division of Colliers International. ‘You can keep chasing compressed cap rates in Manhattan and, at a certain point, it gets silly. Or you can try to create value elsewhere.’”

The Denver Post in Colorado. “Sellers listed a lot more homes in metro Denver last month, but not enough to prevent the average sales price for a single-family home from reaching a new high, according to REcolorado, the region’s multiple listing service. The average price for a single-family detached home sold in metro Denver went above $400,000 for the first time ever in April, reaching $402,302. That was up 11 percent from last year and 3 percent higher than in March.”

“Last month, 7,566 new listings came on the market, a 21 percent increase over March and 8 percent more than hit the market in April 2014. There were 4,416 homes sold, a 7 percent increase from March. That gap between new listings and sales pushed active listings at the end of April to 6,149, 19 percent more than available in March. ‘Improved inventory expanded choices for consumers in April, bringing more buyers to the market and contributing to positive sales,’ REcolorado CEO Kirby Slunaker said in a statement.”

The Dallas Morning News in Texas. “Home prices in Texas are 11 percent overvalued according to the new study by Fitch Ratings. Fitch says that home prices are overheated by almost 20 percent in both Houston and Austin. In the Dallas-area residential prices are 11 percent overvalued and values are 9 percent too high in Fort Worth. ‘Although Fitch identifies many of these cities as overvalued, this is from over-exuberant growth, rather than a lack of strong fundamentals,’ Fitch said in its latest report. ‘The San Francisco Bay Area cities (in the midst of the Dotcom 2.0 expansion) and the Texas oil-patch cities are representative of this group.’”

“The Dallas area is now leading the country in home price gains – up almost 10 percent year-over-year in March, according to CoreLogic. North Texas home prices are currently growing at about twice their long-term average rate due to a dramatic undersupply of houses on the market and strong economic growth. Home prices in the state are also increasing at a much higher rate than median incomes.”

The Worcester Business Journal in Massachusetts. “Foreclosure petitions in Massachusetts continued to climb in March, posting a 68 percent increase compared with March 2014, according to The Warren Group. It was the 13th straight month of year-over-year increases in petition filings. Petitions mark the first step in the foreclosure process. March also marked the highest number of petitions filed since October 2012. Also, The Warren Group said the first quarter of this year posted a 77.3 percent increase from the first quarter of last year.”

“‘We continue to see rises in every facet of the foreclosure process,’ Timothy M. Warren Jr., CEO of The Warren Group, said in a statement. ‘It is frustrating to see the increases month after month. However, it continues to be the result of a large volume of backlog on the part of lenders who continue to track down delinquent mortgages.’”

WAMU on DC. “In December 2013, Patricia Simon and her husband Timothy Snowhite bought one of two condo units in a Columbia Heights rowhouse developer Insun Hofgard had originally purchased for $525,000 in May 2012. The couple paid $764,980 for the 1,280-square-foot, three-bedroom, three-bathroom unit that had been fully renovated. (The second unit was sold in February 2014 for $670,000.)

“But the quality of the work didn’t extend past the aesthetics. Though neither Simon nor Snowhite wanted to comment for this story, their lawyer, Mark Moskowitz, says that the couple suffered at the hands of Hofgard. ‘My clients sought to buy a home where they could have a place to live in the city, have all the amenities and conveniences of living in what was advertised as new construction. And unfortunately, they bought a nightmare,’ he says.”

“Ethan Landis, a builder with 25 years of experience in the region, was brought in to review the work and assess what it would take to correct it. He identified dozens of violations that he estimated would cost more than $200,000 to correct. Beyond that, Hofgard had not obtained the certificate of occupancy required before such projects can be completed and sold.”

Bits Bucket for May 7, 2015

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