September 23, 2015

Hitting The Brakes

A report from Bloomberg. “While Federal Reserve Chair Janet Yellen heaped praise on the U.S. labor market in her press conference on Thursday, the housing market got little love. Residential real estate ‘remains very depressed,’ she told reporters after announcing at the end of a two-day meeting that policy makers had decided against raising the benchmark interest rate. So what counts as a ‘very depressed’ level of housing? Yellen cited housing starts that are ‘below levels that seem consistent with underlying demographics, especially in an economy that’s creating jobs.’”

“The Fed chief noted that while it’s ‘a very small sector of the economy,’ housing ‘plays a supporting role’ to bigger drivers such as consumer and business spending. One data point that might keep Fed officials buoyant on housing: Building permits for single-family homes, the biggest and most important part of the market, climbed in August to their best level since January 2008.”

The Arizona Republic. “The West Valley is swinging hammers again –– or nail guns: Choose your housing recovery tool. These include Vistancia and Trilogy in north Peoria, the newer Sun City communities in Surprise and Verrado in Buckeye, a DMB Associates development that will contain 14,000-plus homes at build-out.”

“New construction and renovation loan applications are strong. ‘Our branch has seen a significant increase in new construction and renovation loan applications over the past six months,’ said Steve Howard, branch manager of HomeStreet Home Loans, Phoenix. ‘With a lack of quality resale inventory available new construction becomes more attractive. Underwriting guideline changes have allowed more potential borrowers to consider building a new production-style or custom home than in previous years.’”

The Dallas Morning News in Texas. “In the Dallas-Fort Worth area prices jumped by 13.8 percent compared with August of 2014, according to Zillow Inc. Only Denver – up 16.3 percent – had a higher year-over-year home price gain, according to the Internet real estate marketing firm. Prices were up 8.1 percent in Houston and they rose by 8.6 percent in Austin. While North Texas home prices are still soaring, ‘the national growth rate has leveled off over the past five months, suggesting the housing recovery is ending and the market is returning to normal,’ Zillow said in the report.”

“‘We’re not going in reverse, but we are hitting the brakes a bit in some markets,’ said Zillow Chief Economist Dr. Svenja Gudell. Zillow estimates that more than a quarter of homes across the country have lost value in the last year.”

The Press of Atlantic City in New Jersey. “John Walton is a busy guy these days, because he sells real estate in a busy market. ‘In late July, we started seeing a half-dozen bids on some properties, multiple bids,’ said Walton. Within South Jersey, sales figures were widely mixed — or as Walton put it in Ocean City, ‘Go across the bridge, get into Atlantic County, and it it cools off.’”

“Single-family sales dropped 12 percent in Atlantic County, according to New Jersey Realtors. Atlantic County’s median single-family price was $172,000, a 14 percent drop from August 2014. ‘Let’s say it’s a buyers’ market,’ said Jeannine Wescoat, the president of the Atlantic City & County Board of Realtors. ‘And it’s been a buyers’ market and there are great opportunities for buyers right now.’ She added that the number of short sales and foreclosures ‘definitely carry weight on the market.’”

The Telegram in Massachusetts. “Homes left abandoned become eyesores, or worse. If they are truly abandoned, back taxes owed can let the community take the property, work with it and eventually sell it. But a new type of abandonment has been more difficult to work with, when banks continue to pay taxes, but ignore the property. That leaves the town out of the game in crafting a solution and letters to owners, or banks, often go unanswered.”

“When a house is abandoned, but taxes are still being paid, it is usually because a bank holding the mortgage does not want to lose the property. As long as taxes are paid, there is little the town can do, even though the bank is not maintaining the property. There are numerous houses abandoned by their owners that banks do not want to just give up, a problem in Clinton as well as other communities.”

“Board of Health Chairman Stephen Lipka said there is no problem with local banks and credit unions; those institutions take care of any houses they are involved in. The bigger banks, national institutions with hundreds of thousands of loans, are not so neighborhood-friendly. They can pay the taxes, but not institute the foreclosure process, which leaves the house in limbo. ‘The banks legally don’t own it,’ Lipka said, so they just pay taxes though the property remains empty. ‘The attorney general forces their hand.’”

The Philadelphia Inquirer. “Many parts of the Philadelphia region continue to struggle with distressed-home inventory. South Jersey, especially, is mired in short sales and foreclosures - the product of a logjam of several years in the legal system. From what I have seen in my own neighborhood, lenders continue to drag their feet getting these houses from foreclosure to the resale market, often with devastating results.”

“No one seems able to get the lenders to move off the dime to make some money, which shocks me. The numbers of short sales and so-called REOs - real estate owned by lenders through repossession after foreclosure - concerns many observers. ‘Nationwide, quarterly distressed saturation - or the percentage of REOs and short sales to all sales - increased . . . in August 2015, from 15.4 percent to 16.1 percent,’ said Alex Villacorta, vice president of research and analytics at Clear Capital, a provider of data and solutions for real estate asset valuation and collateral risk assessment.”

“What concerns Villacorta is the coming of winter, and he’s not referring to the dire predictions of the Old Farmer’s Almanac. ‘While we are closer to historic, pre-2008 rates of distressed saturation, which hovered around 4 percent of all sales, increases in distressed activity leading into winter could shift momentum toward peak distressed saturation levels of 40 percent,’ Villacorta said.”

“‘In Act One, at the start of the downturn, distressed properties were an albatross around housing’s neck,’ Villacorta said. ‘In Act Two, between 2011 and 2013, investors stepped in, buying, rehabbing and selling or renting distressed properties,’ lifting demand and prices. One thing is clear: When it comes to housing, REOs and short sales are not a passing fad,’ he said, noting that the recent stock market uncertainty ‘leaves the economy and housing tenuous, at best.’”

“‘The last third of the year will reveal whether the housing recovery can withstand broader global volatility,’ Villacorta said. ‘If investors pull out, oversupply of distressed inventory could bring us back to Act One.’”

Bits Bucket for September 23, 2015

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