Getting The Last Juice Out Of The Orange
A weekend topic on what one poster called the Milli Vanilli nature of the global housing bubble. From CNBC. “Ask anyone trying to buy a home today, and the vast majority will launch into a story about a bidding war. Demand for housing has returned, but housing supply has not, and the numbers are only getting worse. ‘Finding a house is the last hurdle for many buyers who have saved a down payment and gotten pre-approved for a mortgage, but low inventory levels like those we’re seeing across the country can bring the homebuying process to a screeching halt,’ said Stan Humphries, chief economist at Zillow. ‘Sellers tend to want to hang in and get the last juice out of the orange. If you think you might see 10 percent appreciation over the next year, is it rational to move where you might squeeze more out of the market? No.’”
“That seller psychology is only feeding the problem in some of the hottest markets. Low inventory only pushes prices higher, and makes more sellers want to wait. That in turn pushes supply lower, as housing demand rises. In addition, higher rents are keeping more first-time buyers from saving for a down payment. ‘If we can get additional increase in supply, then price increases will begin to flatten out, which will be good for the economy, good for many first time buyers, but as long as we have limited supply, and that’s what we have today, then prices inevitably will continue to rise,’ said Lawrence Yun, chief economist for the National Association of Realtors.”
Palm Springs Life in California. “The median Coachella Valley price per square foot rose $3 in April to $183.39. This represents a 4.1 percent gain over the price one year ago of $176.06. However, three major cities now have negative gains year over year — La Quinta, Indio, and Palm Desert — with Palm Desert just barely so at minus .8 percent. Overall, this deceleration in gains after three years of rapid price increases was expected; that pace could not continue. Many people still expected an increase in sales due to easier credit and a drop in unemployment. However, this has not yet happened; sales are still running 30 percent below pre-bubble norms.”
“Valley inventory, at 4,948 units, is still near the off-season high of 5,116 units that was set two months ago. This is 900 units, or 22 percent, larger than it was last year at this time. The best measure of the inventory size is a ratio called ‘months of sales,’ which is calculated by dividing inventory by the average monthly sales rate. It is currently at 7.2 months, which is a little high even when allowing for seasonality. Last year at this time, it was 5.6 months and the year before that, 4.4 months.”
“This ratio indicates how many months it would take to sell the entire inventory at the current sales rate. If it gets much over six months, it can put pressure on homeowners to reduce their asking price. It is already putting some upward pressure on how long it takes to sell the median home, called ‘days on the market.’ While still at an acceptable 90 days, it took only 74 days one year ago.”
KBTV in Texas. “Beaumont home sales soared 34 percent in June 2015 while home prices also posted strong double-digit gains, according to the June 2015 Beaumont housing market report. One strong indicator is that average selling price in June was $155,000, up 24 percent (459 listings) from last year, which itself was a strong year. Beaumont’s monthly housing inventory was 5.5 months in June 2015, 2.6 months less than the year prior.”
“President of the Beaumont Board of REALTORS®, Vivian Todd said she had never seen the Beaumont market as busy as it is. ‘I am personally seeing multiple contract offers on a house and houses selling in one or two days.’”
D Magazine in Texas. “Home prices have spiked as demand far outweighs supply. While sellers sift through dozens of offers, buyers stalk moving vans and estate sales. The North Texas real estate market has turned into a seller’s bonanza, but buyers have become frantic and frustrated. Real estate brokers are working overtime to accommodate them, but selling fewer houses because there aren’t enough to go around. Some sellers are cashing in. Others are holding onto their homes because they’ve got nowhere to go.”
“‘This is unprecedented,’ says Mark Dotzour, chief economist at the Real Estate Center at Texas A&M University. ‘I have never seen anything like this in the four decades I’ve been studying the markets.’”
“‘Nine times out of 10, if you’re not there in the first five hours, it’s just gone,’ East Dallas agent Britt Lopez says. Many buyers don’t believe it at first. Then they lose out on a house or three. Finally, they turn into buying commandos. They cruise neighborhoods looking for moving vans and estate sales. They check and recheck their iPhones for new listings. ‘I am on the MLS app like it’s Candy Crush,’ says Michelle Chism, as she searched for homes in Plano.”
“Brokers are showing more houses and writing more contracts than ever before—but selling fewer homes. Lopez generally sells more than 40 houses a year in East Dallas, but last year sold only 33. ‘And it was a fight to sell that many,’ Lopez says. ‘I’m working three times as hard as I normally do, for two-thirds of the income.’”
“Just before her house went live on the real estate market this spring, Emily Morris ran the vacuum one last time and prepared to leave town for the weekend. As she stepped outside, Morris was surprised to see that a line had already formed along the sidewalk. Cars clogged the small subdivision in Allen. In the next two days, 149 real estate agents made appointments to show the 1,400-square-foot house, shuffling buyers through in 10-minute increments. By Sunday night, Morris had 70 offers. All but four said they would pay more than the list price of $150,000, by as much as $20,000.”
“That evening, real estate agent Kim McCarty sat at her kitchen table, entering the details of each contract into a spreadsheet. Offer amounts, closing dates, earnest money, loan guarantees. And then there were personal letters, a stack of them—from a soldier, a pregnant woman, a working mom—each one straining for the right tone, the right mix of humor, sentimentality, and obsequiousness. Prospective buyers sent pictures of themselves. Pictures of their pets. (One dog, Dr Pepper, looked plaintively at the camera, a bandanna around his neck.)”
“Many agents are trying to dial down the frenzy. Buyers are having to move so quickly to get houses that, once gotten, they often have second thoughts. That’s what happened to real estate agent Kim McCarty’s listing in Allen. After topping the list of 70 offers—by paying $20,000 more than list, picking up the title policy, and allowing the young couple to stay in the home rent-free until their new house was ready—the first prospective buyers ended up backing out.”
“‘Buyer’s remorse sets in,’ McCarty says. ‘They start to wonder: ‘Have I overpaid? Did I agree to too many things?’ But another buyer stepped in, offering nearly the same terms. And the process continued.”
