July 1, 2015

An Unhealthy And Unsustainable Pace

A report from Realtors.com. “For the fifth consecutive month, the number of houses under contract are up—and it’s the most activity we’ve seen since the height of the housing boom, the National Association of Realtors® reported. NAR’s Pending Home Sales Index for May increased 0.9% over April to 112.6. That’s 10% higher than last year, and the highest level of activity since April 2006, when the index was 113.7. And it’s not just volume that’s up: Sale prices increased, too. ‘That is an enormous increase in activity year over year,’ says Jonathan Smoke, our chief economist, adding that May’s index ‘puts an exclamation point on all home sales data points for the month.’ ‘This spring is the healthiest and best overall spring since the peak of the housing boom,’ adds Smoke.”

From The Hill. “‘The steady pace of solid job creation seen now for over a year has given the housing market a boost this spring,’ said Lawrence Yun, the NAR’s chief economist. Yun said that the lack of inventory is causing home prices to rise at ‘an unhealthy and unsustainable pace.’ ‘Housing affordability remains a pressing issue with home-price growth increasing around four-times the pace of wages,’ Yun said.”

From D Magazine in Texas. “In the first quarter of this year, many North Texas neighborhoods saw double-digit price gains. At the same time, fewer houses were on the market than at any time in the past three decades. For the first time that most real estate agents here can remember, bidding wars have become commonplace. ‘I’m writing cover letters with my offers, telling the stories of my buyers, hoping to appeal to the sellers’ emotions,’ says Wendy Hulkowich, lead agent at the Hulkowich Group, in Plano. ‘I just wrote one that said, ‘Look at this family. They are first-time homebuyers with a newborn, and they want your house.’ We included a picture of them in the hospital with the new baby. We’ve never had to do things like this in Dallas before. This market is unique.’”

The Star Tribune in Minnesota. “For much of the year, Mark Harrington’s ski retreat in Big Sky, Mont., sits empty with no one to appreciate the sweeping views of Lone Peak and the pine-studded mountainside. So Harrington, of Orono, enrolled the property in an upscale travel club, called 3rd Home, that’s like Airbnb on steroids. ‘You’re still paying your bills even if you’re not using it,’ he said. ‘And after a while you get tired of going to the same place.”

“Every time a 3rd Home club member stays at his getaway, he gets ‘keys’ that can be redeemed for a stay at second homes owned by other members. There are now more than 3,600 luxury home options for members to choose. With the appetite for getaway homes becoming ­insatiable, especially among baby boomers, the 3rd Home concept fulfills a unique niche in a rapidly expanding vacation home market. Last year, there were an estimated 1.13 million vacation home sales, nearly 60 percent more than the year before and the highest since the National Association of Realtors (NAR) began conducting the survey in 2003.”

“Though wage growth has been stagnant and nearly 1 in 10 Americans still owes more than their house is worth, Lawrence Yun, NAR’s chief economist, surmises that the steady rise in home prices is giving people the assurance that real estate is a solid long-term investment. ‘Affluent households have greatly benefited from strong growth in the stock market in recent years,’ he said. ‘Furthermore, last year’s impressive increase also reflects long-term growth in the numbers of baby boomers moving closer to retirement and buying second homes to convert into their primary home in a few years.’”

National Real Estate Investor. “Condo developers will launch sales for more than 12,000 new development condominium units in 2015 and 2016—just in the borough of Manhattan in New York City—more than the twice the number of new condos that started selling in 2013 and 2014, according to the Corcoran Group. In San Francisco, there’s a ‘recent construction boom of high-rise, ultra-luxury condo buildings south of Market Street,’ according to Paragon Real Estate Group. Developers in San Francisco opened 2,707 new condominiums in 2014 and 2,955. That’s up from a low 1,271 in 2010.”

“In towns like Washington, D.C., some 2007 condominium developers that converted to rental properties when the condominium units failed to sell are now converting back to condominiums. Condominiums prices have also revived in a few secondary markets, like Austin, Texas, where job growth has been strong and incomes are high. ‘The condo prices that we track have been moving up pretty consistently,’ says Danielle Hale, director of housing statistics for the National Association of Realtors. ‘You are seeing more new construction.’”

The South Florida Business Journal. “R. Donahue Peebles, CEO of the Peebles Corp. said the 50 percent deposit requirement for new condos in Miami is a ‘horrible model’ for buyers because you put your money at risk with a developer. People in Latin America are willing to do it because they have flight capital and that is what they are used to in their home countries, but Latin American buying of new condos in Miami has slowed because of problems in their economies, Peebles said.”

“‘This market is in for a leveling off and it will get quieter,’ Peebles said. ‘The projects under construction will be finished and others will not get built.’”

“Part of the problem is that the local market in Miami can’t afford to buy many of these high-end condos, Peebles said. ‘It is important to have the contracting opportunities be reflective of the demographic of your city so you avoid putting different groups into a permanent underclass,’ Peebles said. ‘The income and wealth disparity that has taken place in this country today is not sustainable.’”

The Signal in California. “The median price of homes sold in the Santa Clarita Valley in May reached its highest level since October 2007. The median price of a single-family home was $530,000 in May, up 6 percent from April and 9.3 percent from May 2014, according to the Southland Regional Association of Realtors news release. The price marks the third consecutive month the median price was higher than $500,000. In addition, 109 condominium units were sold in May at a median price of $315,000, which was the highest reported since December 2007.”

“The total number of homes sold dropped, however. The organization attributes the sales decline in part to the lack of qualified buyers. ‘After seeing too many months of double-digit price increases, it makes sense that we’re into single-digit gains,’ said Bob Khalsa, president of the Santa Clarita Division of the Southland Regional Association of Realtors. ‘When the market is working properly, as it is now, buyers simply refuse to pay or simply cannot pay ever-increasing price.’”

The Southern Illinoisan. “It is still a good time to buy a house in Southern Illinois, according to real estate agents in the region. Ted Popov, Carbondale RE/MAX branch owner, said houses in the region are staying on the market for about five months between owners. The reason for that is because sellers are hoping to get the same amount of money for a home they would have gotten before the market severely dipped in the late 2000s. Sellers aren’t getting those prices, he said.”

“Another factor is sellers are believing their home is worth a certain price because of an appraisal they had done a year or two ago. ‘Appraisals can be misleading; they are dated for a reason,’ Popov said. ‘They have a six-month lifespan.’”

“The amount of homes on the market right now are more than can be reasonably absorbed by the buyer pool, he said. ‘I think we are at the point where the competition is now seller versus seller, than seller versus the bank,’ Popov said.”

“He said sellers are meeting the buyers’ demands in every fashion to keep a deal together. Details that sellers normally wouldn’t worry about if a buyer complained because of multiple interested parties, are keeping them involved in the process in order to sell the home. ‘I have had cooperation from sellers that I have never seen before,’ Popov said.”

Bits Bucket for July 1, 2015

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