June 3, 2015

The Only Thing We Have To Watch For Is Greed

A report from the Colorado Springs Gazette. “The Colorado Springs-area housing market went through the roof last month. The median price for single-family homes that sold in May increased to $243,000, a 12.4 percent jump when compared with the same month last year, according to a Realtors Association report. It’s the highest median price on record, based on Realtors Association reports and data compiled by The Gazette. Home sales, meanwhile, totaled 1,397 in May, a 24.3 percent year-over-year increase and also a record high.”

“In the Colorado Springs area, about 85 percent of the homes that sold in May went for less than $500,000, and the majority of those sales were $300,000 or less, said Cherri Fischer, board chairwoman of the Pikes Peak Association of Realtors. Becky Gloriod, an agent with Berkshire Hathaway HomeServices who specializes in high-end properties, said there’s a little more activity in the upscale market compared with last year. ‘What we are seeing is a few more sales, but the pricing hasn’t appreciated,’ Gloriod said.”

“Colorado Springs doesn’t have enough high-paying jobs to support the purchase of homes priced in the upper six figures and beyond, Fischer said. ‘Without the jobs to support a million-dollar home purchase,’ she said, ‘they’re going to languish.’”

The International Business Times. “Ever since subprime mortgages helped torpedo the American financial system, a quiet revolution has taken place in the home loan industry. for the first time, shadow banks capture the lion’s share of new government-backed mortgage origination. In April, lenders like loanDepot.com and mortgage stalwart Quicken Loans issued 53 percent of new home loans, edging out traditional banks and credit unions. The share of government-insured mortgages coming from these companies has more than tripled since 2010, according to data from the conservative American Enterprise Institute.”

“That new reality has experts warning of an unprecedented new era in the mortgage industry, in which the majority of home loans come from institutions with no deposits on their books — a massive transfer of systemic risk from closely scrutinized depository banks to lightly regulated shadow banks. ‘This is a whole new era,’ says Marshall Lux, co-author of a new study from the Harvard Kennedy School on the rise in nonbank mortgages. ‘The only thing we have to watch for is that greed doesn’t come back in.’”

The Star Democrat in Maryland. “After a few cold years during and after the Great Recession, the Mid-Shore housing market is warming up. Despite an increase in homes sold, prices dropped slightly on average in the first three months of 2015 vs. the same time in 2014. The average price from January through March of this year was $224,988 vs. $241,308 in 2014 — a decrease of 6.8 percent. The biggest difference came in February with the average in 2015 at $186,964 vs. $226,691 or a decrease of 17.5 percent.”

“Blaine Williamson, MSBR president, said he is not discouraged by the downward price trend. ‘The first-time homebuyer market is on fire right now and that’s what’s bringing that number down,’ Williamson said of average Mid-Shore home prices. He said six of his recent clients are first-time homebuyers, and they all have been involved in ‘multiple offer situations.’ ‘There’s a lot more homes being sold at the lower end values of the market which is bringing down that number even though people are starting to fight over them and the values are starting to go back up,’ Williamson said. ‘Things are really starting to move. We’re going to see some price appreciation. We’re heading in the right direction. We really are.’”

Multi-Housing News on Florida. “Just six years after hitting rock bottom, and we are looking at over 20,000 condo units on the boards in Miami. Yet questionable site selection, rising construction costs and global currency dynamics have experts expecting the first shelved Miami condo project within the next six months. If developers are gorging on anything this time around it’s speculative land buys. Tony Graziano, principal of Integra Realty Resources found construction costs have increased 25 percent over the course of the cycle as of March 2015. ‘Basically, the contractors are seeing guys making money, and they are raising costs,’ Graziano said.”

“‘Foreign currencies are weakening, and this is really the time for many developers who have been on the fence to decide how they are going to go forward,’ said Peter Zalewski, a principal with the Miami real estate consultancy Condo Vultures. ‘You will start to hear in June, July and August that some projects aren’t going forward. Some might be reworked. This is really the summer of shakeouts.’”

The Philadelphia Inquirer on New Jersey. “The Bella, a product of a more optimistic time in Atlantic City, is one of the city’s only truly luxury condo high-rise buildings. Units used to sell for close to $500K back in the heady years of, say, 2008. Lately, as Atlantic City’s economy tanked, nearby Revel and Showboat closed, and the neighborhood stagnated, prices have dropped precipitously, with some unit asking prices sinking (way) below $200,000.”

“Now, Credit Suisse Bank, which owns 40 of the units, most on upper floors with ocean views, is getting out, says Bob Dann, of Max Spann Real Estate & Auction Co., and is offering the units at absolute auction. ‘They’ll probably sell for significantly discounted price,’ Dann said. ‘With evidence of strong recoveries in other real estate markets such as Philadelphia and Miami, now is the time for buyers to take this once-in-a-lifetime opportunity to get in Atlantic City on the bottom floor.’”

The Associated Press. “Of all the financial threats facing Americans of retirement age, housing isn’t supposed to be one. But after a home-price collapse, the worst recession since the 1930s and some calamitous decisions to turn homes into cash machines, millions of them are straining to make house payments. Jim, 67, and LaRue Carnes, 63, moved to Sacramento, California, in 1978 and bought a house for $54,000. They refinanced their mortgage several times and pulled money out of the house and took on higher mortgage payments. ‘Foolishly, like so many Americans, we used the house as a bank,’ LaRue says.”

“In 2011, Jim was laid off, and the couple fell behind on mortgage payments. Three times, they dipped into retirement savings to fend off foreclosure. Eventually, with a $25,000 grant from a state program, Keep Your Home California, they negotiated a new mortgage they could afford. Still, they’re still struggling. Once a month, they eat free breakfast at a church, bringing home bagels and fruit. They ‘never thought we would be partaking of such,’ LaRue says.”

Bits Bucket for June 3, 2015

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