May 22, 2015

Nobody Wants To Buy At The Top

It’s Friday desk clearing time for this blogger. “A casualty of Denver’s hot real estate market is the once-lucrative practice of ‘fixing and flipping’ distressed homes. Soaring housing values and a dearth of foreclosures leave investors with a shortage of properties suitable for buying on the cheap and reselling at big profits. Glen Weinberg, owner and chief operating officer of Evergreen-based Fairview Commercial Lending, said that despite rapid price increases along Colorado’s Front Range, residential real estate investors often have unrealistic expectations of property values. Earlier this week, he had a client seeking a $460,000 loan for a Parker home that appraised at $350,000.”

“‘What people think the market is and what the reality is are two different things,’ he said. ‘I joke that if I don’t make a person cry at least once a day, I’m not doing my job.’”

“Prices for the most expensive U.S. homes grew at the slowest pace in three years as wealthy buyers became worried about overpaying following a surge in values, Redfin Corp. said. ‘Rich people have a lot of money, but nobody wants to be the guy or gal that buys at the top of the market,’ said Redfin Chief Economist Nela Richardson. ‘With all the price appreciation, there’s widespread concern that the market may be topping out.’”

“The markets with the biggest price drops for trophy homes were Boston, where values slumped 18.7 percent in the first quarter; Alexandria, Virginia, with a 12.4 percent decline; and Hollywood, Florida, where prices were down 6.9 percent.”

“In Whatcom County, the foreclosure activity has increased significantly in the first four months of 2015. This indicates that banks are now releasing shadow inventory because overall home prices have risen to a point that they can recoup some of the losses, said Peter Roberts of John L. Scott Real Estate’s Bellingham office. ‘This is part of the cleaning-up process,’ Roberts said, adding that he expects banks to work through most of this shadow inventory by the end of 2015.”

“This increase in bank repossession in April in the Inland area and the nation was foreshadowed by a 23-month high in scheduled foreclosure auctions in October 2014, RealtyTrac VP Daren Blomquist. Ray Wright, a Realtor in Riverside, said a few more homes are coming on the market. ‘I’ve been making offers with buyers on more foreclosures than I have in the whole year,’ he said. ‘It might be indicative of something that’s happening naturally as the pre-foreclosures are moving through the system.’”

“Just as the Orlando-area housing market has tightened with a slim inventory of home listings, banks have started selling more foreclosed houses, a new report shows. For the second month in a row, the four-county Metro Orlando area experienced an increase in foreclosure sales. The increase of foreclosure sales comes as Central Florida’s supply of listings is so thin that it is almost half of what is considered a healthy market. And for sellers, median prices in the core market of Orange and Seminole counties are up about 85 percent from a trough of less than $95,000 in January 2011.”

“‘Some people believe that maybe the banks have held back and are intentionally selling now. I’m not sure about that, but it is a very opportune time for banks to liquidate this inventory because of market conditions,’ said Daren Blomquist, VP of RealtyTrac.”

“A real estate agent in Western Australia’s Pilbara says there has been a significant rise in the number of vacant homes in Newman for the first time in years. Kathy Stevens said about 30 per cent of private rentals in Newman were sitting empty. Ms Stevens said it was a far cry from two years ago when there was a long list of people waiting to secure accommodation in Newman. ‘Two years Newman had a waiting list for people wanting accommodation because every available accommodation, caravan park, motel, camp was booked out,’ she said. ‘This is what lead the demand to build. Unfortunately the demand and the finished product didn’t come to the market together.’”

“If you travel through the suburbs of the Indian capital, Delhi, you will see miles and miles of built homes with nobody living in them. In fact, Anshuman Magazine, chairman and managing director of property consultancy firm CBRE South Asia, said in a recent article that ‘around 12 million completed houses’ were ‘lying vacant across urban India.’ And despite this, there is a huge shortage of housing in urban India. Many of these homes have been bought as investments by people who have ‘extra’ money to invest.”

“A substantial portion - no one knows how much - of this is black money on which taxes haven’t been paid. Hence, homes have been bought but nobody is living in them. Further, most builders like catering only to the affluent population in India and home prices have gone beyond the reach of many of them too. Hence, it is not surprising that as per the 2011 Census, 13.7 million households in Indian cities live in slums. The number of people living in these slums is around 65 million and forms around 17.4% of the urban population. Other estimates put the slum population living in Indian cities at a much higher level.”

“A 2012 report quotes S Parasuraman, director of the Tata Institute of Social Sciences in Mumbai, as saying: ‘Nearly 60% of Mumbai’s slum population lives in 8% of land.’”

“As the wind whistles through half-finished skyscrapers and over empty boulevards, a development billed as China’s answer to Manhattan at times bears out the ‘ghost town’ label some have given it. Chinese officials hope the towers of the Yujiapu Financial District will one day house a trading center to rival New York’s Wall Street or London’s Canary Wharf. But more than three years after construction began, all but one of the buildings planned for the development in the northern Chinese port city of Tianjin appear unfinished, alongside vacant spaces where others should stand.”

“As China’s economic growth slows after a decades-long boom, these buildings — many of which still lack exterior walls — some 150 kilometers from Beijing raise questions about the viability of the scheme, which state media say will cost a total of 200 billion yuan ($32 billion).”

“On the side of one of Yujiapu’s unfinished tower blocks, a huge banner listed a phone number, seemingly inviting inquiries for office space. When reporters called it turned out to be a real estate agency — but the woman who answered said she had not heard of the project.”

“The ’spectre of deflation‘ is spurring the world’s major central banks into a dangerous struggle for stronger domestic growth that imperils financial markets and ignores the needs of developing nations, Reserve Bank of India Governor Raghuram Rajan said. ‘I fear that in a world with weak aggregate demand, we may be engaged in a risky competition for a greater share of it. We are thereby also creating financial sector risks for when unconventional policies end,’ Rajan told an audience of economists and investors in New York.”

“Million dollar homes always grab headlines when they sell in Manatee and Sarasota counties. But away from the glitz of high-priced properties, there are thousands of home buyers out in our communities who just want to find single-family homes they can actually afford. Generally priced under $225,000, these homes are becoming more rare on the real estate market, according to a recent statistical study. The reason for this isn’t that homes in this price range are off the market. What’s actually happening is prices are rising on these homes, taking them out of range for people with modest incomes.”

“I saw this myself last year when my wife and I closed on one of the last homes that could be had for under $200,000 in the small Palm Aire neighborhood we live in. Since then, we’ve watched with morbid interest as our neighbors have put their homes on the market for $300,000 or even $400,000. Median home prices are up over 17 percent in the past year in Manatee County, well beyond the approximately 2-percent national growth in incomes over the same period.”

“There are a few affordable existing homes on the market, but they might not be selling as homes to working people. Leah Secondo, a real estate agent in Bradenton, has sold six in the above-mentioned price range this year. All but two went for cash. Talk to any agent in town and they’ll label that buying profile with one of two words: ‘Investor’ or ’snowbird.’”

“What’s the future for the housing market? We’re already seeing it. The local real estate industry is seeing sales growth in the higher-priced homes categories, particularly those priced over $1 million. At the same time, apartments are going up as quickly as developers can build them as many people choose renting over buying. After the recession and the housing market crash, the hope among putative home sellers and real estate professionals was that prices would build back slowly so as not to outstrip buyers’ ability to afford them. So much for that.”

“With any luck, the price boosts will slow soon. But if not, there’s always the next crash.”

Bits Bucket for May 22, 2015

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