The Housing Bubble

KPCC reports from California. “Los Angeles officials will hold citywide meetings on short-term rentals in the coming weeks as they move toward regulating the rapidly-growing industry. Sebastien De Kleer was among the handful of professional short-term rental operators who spoke. De Kleer noted his 80 LA properties have generated more than half a million dollars in lodging taxes in the city in recent years. That’s ‘money that I love to spend, money the city and residents desperately need,’ DeKleer said.”

“Dozens of Airbnb hosts showed up to defend the site and their right to home-share. Many said that income generated from renting out a room has allowed them to do things such as pay the mortgage and send their children to college. Councilmember Mike Bonin, who authored a motion for regulations with Council President Herb Wesson, said he didn’t have a problem with home-sharing. His motion aims to allow people to rent out part of their primary residence. But he said the ‘bad’ kind of short-term rental is proliferating throughout his district, which includes tourist magnet Venice.”

“‘Real estate speculators are coming in and buying up entire apartment buildings and using them as rogue defacto hotels in our neighborhoods,’ Bonin said.”

From Seattle Weekly in Washington. “Alice doesn’t have a job—not in the traditional sense, anyway. She’s self-employed. Instead of working nine to five, Alice is a host for Airbnb. Alice (who asked to be identified by a pseudonym) operates two apartments as full-time Airbnbs. ‘I started to realize that there was a huge number of people coming into Seattle, and realized I could pay off my student debts a lot faster if I could host more than just a couple times a month,’ Alice explains. ‘And now I have two [apartments] in the city that I do full-time for Airbnb.’”

“Alice rents a third apartment for herself, and works as housekeeper, booker, and concierge for the Airbnb units. ‘I rarely meet my guests,’ Alice says. ‘Getting into the building is pretty automated. Everyone just kind of helps themselves.’”

The Citizen Times in North Carolina. “In Asheville, short-term rentals mean homes rented out for less than 30 days - typically to tourists - when the owner or a main resident isn’t present. Council members voting for the high fine spoke in unusually impassioned language about why they were against short-term rentals despite pleas from some residents. They said there was a very real possibility that businesses would buy up chunks of neighborhoods, turning once residential areas into defacto hotel districts.”

“Vice Mayor Marc Hunt and council member Gordon Smith said ‘organized money’ was already appearing on the scene. Despite a local housing crisis, long-term rentals that had housed locals were being turned into more lucrative short-term rentals for tourists, they said. ‘What I don’t want is for predatory investors to come in and gobble up our neighborhoods and housing stock,’ Smith said. ‘That is exactly what is happening in other cities around the world. So let’s not pretend it can’t happen here.’”

The Boston Globe in Massachusetts. “The vast majority of people who advertise Boston homes on the online rental website Airbnb list just a single property — presumably to occasionally rent out their home or an extra room. But 15 percent have posted multiple listings, according to a Globe review. Airbnb acknowledges that some people are not renting out their own homes. A survey of its Boston users released by the company last year found that while 82 percent of users were renting a primary residence, 8 percent were renting an investment property, 6 percent were renting a secondary residence, and 4 percent were renting an in-law unit attached to the primary residence.”

“One Everett landlord said that he and his business partner recently converted 13 of the 100 apartments they own across Boston, Everett, and Chelsea from standard yearlong rentals into short-term rentals, and then listed them on Airbnb. ‘It’s more profitable for us . . . and we don’t have to deal with the hassle of a regular tenant,’ said Jose, 25, who asked that his full name not be published because he fears that officials would try to shut his operation down. ‘You can easily triple the income going through Airbnb, compared to a regular rental.’”

The Arizona Daily Star. “Hundreds of Tucson-area homeowners were surprised to learn this year that their properties had been reclassified as commercial. The move by the Pima County assessor targeted people who rent their houses, guesthouses or condos as short-term or vacation rental properties for profit. For some people who own vacation and short-term rentals, the move feels like a government money grab.”

“‘What they did was slam us with twice the property tax,’ said Chris McGuire. He and his wife, Shana McGuire, at one point owned two vacation rentals in Oro Valley but decided to sell them after the assessor notified them of the changes. The reclassification changed their property tax payment ratio from 10 percent for residential to 18 percent for commercial. ‘I’m trying to make a little bit of money and trying to make the mortgage,’ Chris McGuire said. ‘It just wasn’t worthwhile.’”

The Real Deal reports from New York. “With the stock market sliding, sales of luxury Manhattan real estate dipped last week, according to Olshan Realty’s latest report. Buyers signed just 21 contracts at $4 million and up last week, and the average number of days on the market was 345, up from 264 at this time last year.”

The Denver Post in Colorado. “Metro Denver home prices jumped 10.2 percent in June from a year earlier, double the pace seen nationally, according to the Standard & Poor’s/Case-Shiller 20-city home price index. But the June report might already be outdated. Local real estate agents say a chill set in on the market in July and August that will make it harder to maintain that strong rate of appreciation. ‘Prices are beginning to level off, and in some cases, we’re seeing price reductions come back into the marketplace,’ said Anthony Rael, who tracks housing market trends for the Denver Metro Association of Realtors.”

“Rael said that cooling trend is continuing into August, although it isn’t certain whether home prices set a near-term peak in June or whether the usual seasonal slowdown started earlier than normal this year. ‘It feels like the market is at a standstill,’ said Redfin agent Michelle Ackerman. ‘Showings have dropped off significantly.’”

The Houston Chronicle in Texas. “Houston’s real estate market hasn’t avoided the slowdown triggered by collapsing oil prices, but a more diverse economy will help offset weakness in housing and vacancies in area office towers, industry experts said Tuesday. Ricardo Rivas of Allied Orion Group, a multifamily firm, said west Houston’s apartment market has been relatively stable, but there are 3,000 units under construction with more proposed. Overall, the multifamily market has peaked, Rivas said, and over the next few years ‘will be going back to normal.’”

“Mollie Carmichael, principal of John Burns Real Estate Consulting, said there could be a slight oversupply of homes on the market in certain pockets and sales and prices will soften, particularly in the higher end of the market where much of the recent growth came from. ‘We’re producing a few more homes than we are jobs,’ she said.”

The Capital Gazette in Maryland. “Currently, there are around 350 detached waterfront properties listed for sale in Anne Arundel County, and the range of pricing is dramatic. More recently, there seems to be a resistance with respect to what people are willing to pay for these homes. During the 12 month period ending July 31, 2015, the average list price had fallen to $933,734, and the average sales price was only $868,568, a decline of over 25% from the peak.”

“Although the housing market in general seems to be strengthening, we’ve been feeling some softness in demand for waterfronts. This weakness might be traced to an oversupply of waterfront homes, given the current level of demand. As we said, there are about 350 waterfront homes available for sale in Anne Arundel County. Unfortunately, only 39 such homes sold last month, meaning that we have about a 9 month supply of inventory. In a healthy housing market, where you have a good balance of buyers and sellers, there should be a 5 month supply of inventory. For waterfronts, it’s almost twice that.”

“When you look at waterfront homes priced over $1 million, the situation becomes even worse. In that price range, there are currently 140 homes on the market, yet only eight $1 million plus waterfront homes sold during the last month, giving us a whopping 18 month of supply for this group. So, what’s wrong with waterfronts? Well, it could be traced to a number of factors. Most likely, the culprit is a weak economy.”

“Additionally, because waterfront homes are expensive, they’re often owned by people reaching retirement age, and because of the high tax rates in Maryland, many are opting for retirement on the Gulf Coast, rather than the banks of the Chesapeake Bay. As a result, they seem to have been willing to let the waterfront house up here go for a low price, just so they can get on with retirement down there. Nevertheless, we expect that if the economy improves, and we work our way through the current glut of waterfront homes available for sale, we’ll once again see strong growth for these properties.”

The Dayton Daily News in Ohio. “Foreclosures increased in 44 states last month, including Ohio, where the number of properties repossessed by lenders rose 69 percent from a year ago, according to RealtyTrac. The trend was even more pronounced in the Dayton area, where the number of bank-owned properties climbed to 352 from 46 over the same period — a whopping 665 percent increase, the analytics firm reported.”

“Ralph Mantica, president of the Dayton Area Board of Realtors, said the surge in bank repossessions likely reflects the culmination of the foreclosure process for many homeowners whose foreclosures were originated months, even years ago. ‘It takes a long time to get a lot of these houses to go through the foreclosure process,’ Mantica said. ‘Once the process starts, people can literally live in a house for more than a year before the bank actually takes possession of it.’”

The Winston-Salem Journal in North Carolina. “The Winston-Salem metropolitan statistical area experienced another sharp year-over-year increase in foreclosure filings in July, according to RealtyTrac. Daren Blomquist, vice president at RealtyTrac, said properties foreclosed in the second quarter had been in the foreclosure process an average of 629 days — ‘the longest in any quarter since we began tracking in the first quarter of 2007.’ ‘It’s also evident that the recent surge in real-estate owned properties is in fact clearing out more of the bad bubble-era loans from the so-called shadow inventory,’ he said.”

“RealtyTrac data shows 61 percent of loans still in the foreclosure process were originated during the housing bubble years of 2004 to 2008, down from 68 percent last year and 75 percent two years ago.”

From Michigan Radio. “Bank repossessions of Michigan homes in foreclosure were 137% higher in July than the same month a year ago. ‘It’s a much better time from the bank’s perspective to foreclose on these homes,’ says Daren Blomquist of RealtyTrac, ‘and then put them on the market, because they can sell them for a much higher price point than even just a few years ago.’”

“And while public outcry a few years ago criticized banks for foreclosing on people too fast, the opposite is now happening. With so many homes in poor condition dotting neighborhoods, ‘the banks are getting criticized for almost taking too long to foreclose now.’”

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