An Artificial Price Pressure
A report from the Wall Street Journal. “It has always taken some financial wherewithal to purchase a newly built home. But never like now. The Commerce Department reported that the pace of new home sales in April reached an annualized 517,000, adjusting for seasonal swings. Still, while April counted as one of the strongest new-home sales reports since 2008, taking a longer view it was still very weak. Price has a lot to do that. Over the past year, the median price for a new home has averaged $289,750. That is 37% more than the $211,300 price tag an existing home has carried. While the two measures aren’t completely comparable, in 1999 the difference was half that.”
“What’s more, the median price for a new home in 2013 reached 4.2 times the median family’s income, equaling where it was during the peak of the bubble. Given that new home prices have risen more than income since then, that mark has probably been eclipsed.”
From Bloomberg. “Merion Homes bought two dozen rambler-style houses in Northern Virginia’s Pimmit Hills community for about $450,000 each, just to knock them down. Now it’s selling customized residences three times larger at prices topping $1 million. Knockdowns across the country are increasing, said Robert Dietz, an economist with the National Association of Home Builders. The trade group estimates that builders tore down and reconstructed about 32,000 homes last year, representing 5 percent of all single-family housing starts. Beyond the nation’s capital, the trend can be found in suburbs of cities from Boston to Minneapolis and Los Angeles.”
“Ning Yim, an accountant who lives in Pimmit Hills, said new construction is changing the dynamics of the neighborhood, established in the early 1950s for returning veterans of World War II. ‘We like it when we see more new houses,’ said Quy Phung, Yim’s husband. ‘It brings up the property values.’”
The Dallas Morning News in Texas. “Dallas-area home prices are at a record high and about 15 percent ahead of where they were at the peak of the market before the recession, Case-Shiller says. Home prices are expected to rise at close to a 10 percent annual rate through the rest of this year and into 2016 in the Dallas-Fort Worth area. ‘The industry is concerned that incomes aren’t rising as fast as home prices,’ said David Brown of housing analyst Metrostudy Inc. ‘Right now, builders are more about getting houses started and completed,’ Brown said. ‘But everybody is wondering what happens when interest rates go to 6 percent.’”
“Unlike in some markets where speculation drove home prices higher than many consumers can afford, the rise in values in North Texas is driven by economic growth. ‘Demand simply exceeds supply,’ said Randall S. Guttery, real estate programs director at University of Texas at Dallas. ‘To me, a bubble is an artificial price pressure on housing,’ he said. ‘I see nothing artificial about our market locally.’”
The Sun Sentinel in Florida. “Last week, Realtor boards in Palm Beach and Broward counties released April figures showing steady price increases amid a busy spring selling season. The median price for existing homes in Palm Beach County was $300,000, 10 percent higher than a year ago. Broward’s median was $287,500, up 5 percent.”
‘Sellers are seeing good returns, but there is a limit, said Cathy Prenner, a real estate agent for Campbell & Rosemurgy in Broward and Palm Beach counties. ‘Right now, family houses are selling well,’ she said. ‘Homes will sell very quickly if there’s good value. But if sellers keep going up and up on the price, it doesn’t work.’”
CNN on Colorado. “The living quarters are also getting tight for Brandon Hess, his wife and 9-month old son in their studio loft in downtown Denver. The first-time buyers started searching for a bigger home before Christmas last year. The couple originally wanted to stay near downtown, but quickly realized that wasn’t in the budget and expanded their search. They toured more than 30 houses, but found list prices can be deceiving and bidding wars are common. ‘It’s sort of a demoralizing process, you would see a house you think is in your range, but the new tactic is to list at $270,000, but they really want $380,000.’”
“Rapidly rising home prices have made it hard for the family to save. ‘We aren’t putting any money away. We are breaking even right now.’ They’ve tabled their plans to become homeowners for now, and at this point, Hess is worried they may get priced out of the rental market. ‘We are starting to feel like we can’t afford Denver anymore.’”
CBS San Francisco in California. “After years of techies and start ups flocking to Silicon Valley, now they are flocking away, for better pay and more affordable places to live. According to a study at Redfin, the exodus from Silicon Valley is real. The real estate brokerage analyzed searches on its database and found a dramatic increase in the number of Bay Area people searching for homes in Seattle, Portland, Boston, Austin, and Chicago.”
“Doug Wilson works in tech. He said he loves the Bay Area and is sticking around, but has colleagues who have taken the leap. ‘They realized they’re being priced out of the housing market. Other places such as Texas provide opportunities to make six figures and the money goes a lot further.’ Wilson confirms companies are leaving, too. He knows of two that are in the process of moving, right now. ‘They’ve just had it with California,’ he said.”
NBC News on New York. “A sum of $21.5 million might seem like a lot of money but, in the outrageous world of New York real estate, you might be surprised by how little it will actually buy. This 12,000-square-foot townhouse is now back on the market reduced from its original $27 million 2011 listing. Ukrainian-born billionaire Alexander Rovt bought the townhouse in 2008 for $6.96 million and began a five-year gut renovation that cost a whopping $18 million. Shockingly though, he has never spent a night there. In fact, no one has. The townhouse has not been lived in since Rovt purchased it. There is a full-time housekeeper who cleans the massive space daily, but she doesn’t reside there.”
“Of all the shocking features this residence has, perhaps the most startling is that the property’s broker calls it a bargain at $21.5 million. Warburg Realty’s Jason Haber insists: ‘This is the best townhouse on the market right now. Asking less than $1,800 a square foot quite frankly makes this house a steal.’”
