May 25, 2015

Buying At The Top Of What They Can Afford

The Mercury News reports from California. “How high does this ladder stretch? With spring buyers vying for a limited number of properties, the median price for Santa Clara County homes reached yet another all-time high in April. Sticker shock spread throughout the region, with prices for single-family homes jumping from a year ago in all nine counties, according to CoreLogic. ‘Prices are jumping,’ said Kristine Kim-Suh, a Palo Alto-based agen. ‘Some properties are selling for $30,000, $40,000 or $50,000 beyond last month’s comparables, and it’s making buyers that much more aggressive. For example, they know that the comparable is $825,000 and they’re bidding $885,000, they’re so anxious. It’s even surprising the listing agents.’”

“On the Peninsula, ‘nothing has slowed down,’ said Alain Pinel agent Nick Granoski, who recently worked with first-time homebuyers Becky and Brandon Stroy, who had been outbid and worn out since their house-hunting began in December. But by throwing an extra $400,000 on top of the $1,350,000 list price on a Mountain View ranch-style home in the Varsity Park neighborhood, the Stroys were finally winners. ‘There were 17 other offers and ours was sort of just barely high enough to win,’ said Brandon, an attorney. He received news of the successful bid while on his way to work, taking it in with ‘a mixture of joy and relief and surprise — and then terror, I guess.’”

The Denver Post in Colorado. “Southwest Denver has long served as a refuge for those seeking urban affordability. But one of Denver’s last remaining low-cost havens isn’t escaping the huge jump in rents and home values seen across the metro area. In Valverde, the prices of homes sold have gone up from $111,221 to $195,858 the past two years, a 76.1 percent increase. In Ruby Hill, sales prices have gone from an average of $136,036 to $216,112, a 58.9 percent jump. Juanita Chacon, an associate broker with Re/Max Alliance in Denver, describes selling a 3,125-square-foot lot at 31st and Wyandot Street for $400,000 — sight unseen.”

“Heather Heuer, a managing broker with PorchLight Real Estate Group in Denver, raises a concern. Investors were previously the most active buyers in southwest Denver, fixing up distressed bargains and putting them back on the market, until owner-occupants started outbidding them. Essentially, they are buying the flip without the fix, bypassing an important step in the life cycle of neighborhood revitalization. ‘Most people are buying at the top of the value of what they can afford,’ Heuer said. ‘People are paying more for a lesser product.’”

BostInno reports from Massachusetts. “Though Boston is currently in the midst of a development boom, its luxury housing market is beginning to wane. A substantial amount of the cranes dotting the skyline are erecting high-end residential complexes, but if the rate for which these homes are purchased continues on its current pace, they may end up vacant. New data compiled by RedFin indicates Boston has the highest year-over-year decrease in luxury home buying out of 600 cities analyzed.”

“To determine this, RedFin examined the most expensive 5 percent of homes sold in each city and compared them to the bottom 95 percent of homes in those market. Cities with 25 or more luxury home sales in the quarter are the only metro areas included in the report. For Boston, the average luxury home sale was for $3,590,000, constituting a decrease of 18.7 percent. Alexandria, VA, with $1,512,000 and -12.4 percent respectively, was the only other city to have a double-digit decrease.”

“Still, that’s not to say the luxury market in Boston is truly suffering or will continue to do so. ‘While there have been fewer sales at the ultra high end of $5 million plus, the $1 million to $2 million range is as strong as ever,’ said RedFin Boston agent Peter Phinney.”

Bloomberg on New York. “Here is good news for the plutocrat who wants to try out Manhattan’s ritziest neighborhoods before taking the multimillion-dollar plunge. The market for super-high-end rentals is booming, with plenty of enticing options for tenants of every taste. The financial considerations are different at the upper end of the rental market. A two-bedroom apartment at One57, the posh tower south of Central Park, that’s listed for $13.5 million is also available for rent at $32,500 a month. With a 20 percent down payment and a 30-year mortgage at prevailing rates, the monthly carrying costs for a purchase come in at more than $50,000.”

“Renting, meanwhile, frees up the down payment for investing, an option that’s particularly enticing if you think condo prices have gotten too high to keep climbing. ‘If you feel like things have gotten frothy, you might decide to rent now and buy when the market takes a dip,’ says Thorne Perkin, president of Papamarkou Wellner Asset Management, which manages money for about 150 family offices.”

From Delaware Public Media. “Home sales are leaping with spring energy, although prices still have a long way to go to reach the levels before the housing downturn. The typical home in the region has recouped only 5 percent of the 23 percent it lost in value during the housing bust in 2007, according to a Berkshire survey by Kevin Gillen, chief economist of Meyers Research. While more homes are changing hands, prices are still getting dinged in foreclosure hot spots such as Middletown. In the first quarter of 2015, sales of properties in the 19709 zip code increased a robust 44 percent. But prices declined 10.7 percent year over year.”

“After years of sitting on the sidelines, more prospective buyers are feeling confident about making a move, says Andrew Bryan, who leads a statewide REMAX agency based in Dover. ‘Activity is brisk, a lot of properties are moving, although prices aren’t going up at the same rate,’ he says. That is especially true in New Castle and Kent counties, where short sales and bank-owned properties continue to impact prices. ‘When you are looking at price reductions of tens of thousands of dollars, it is very difficult to complete with those houses,’ he says.”

The News Tribune in Washington. “Next door to my home there’s a big, vacant house. The doors and windows have been boarded up with plywood since October 2013. By the city’s standards, the house is derelict. And it’s one of roughly 300 properties just like it across Tacoma. Walk down just about any block in my neighborhood and you’ll find one in a similar state of despair and disrepair. The same goes for most neighborhoods, or at least the poorer ones. According to city of Tacoma code inspection supervisor Dan McConaughy, the inspectors he oversees board up two or three houses a week.”

“These days, however, McConaughy is more frustrated than usual. And it’s the banks that raise his ire. He describes an all-too-common scenario in which homeowners get a foreclosure notice and leave, thinking they’re relinquishing the property back to the bank. But the bank, for financial reasons, drags its feet on finalizing the foreclosure, presumably waiting for just the right time unload the property, when a buyer will materialize and there’s not a risk of it becoming a ‘real-estate-owned property’ that they’ll be financially on the hook for.”

“What McConaughy says is different now is the length of time homes stew in what he calls the ‘black hole’ of foreclosure. Of the 300 or so derelict properties in Tacoma, he estimates that about 60 percent are wallowing there. A house we visit on East G Street has been sitting empty since December 2011; not far from it, on McKinley Avenue, another has been boarded up since August 2012. ‘We’re dealing with, like three or four major banks,’ he says. As we pull up to the next empty house on his list, McConaughy says, ‘I can almost assure you that some of those people behind those big desks aren’t living next to something like this.’”

Bits Bucket for May 25, 2015

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