April 21, 2016

People Bought Houses With No Equity In Them

A report from CNBC. “Home construction weakened in March, and homebuilder sentiment hasn’t budged in three months — all this in the heart of the historically strong spring housing market. The common complaint from builders is that they are hamstrung by a lack of skilled labor, which is keeping production levels low. That may have been a factor for the past several years, but today it is less and less a plausible excuse. ‘Economics 101 would suggest that, if labor shortages did in fact exist, upward pressure on wages would be more pronounced and payroll growth would be anemic,’ Goldman Sachs analysts wrote in a report. ‘Therefore, the evidence from the industry-level employment and wage data does not support the existence of labor shortages in the construction sector.’”

“‘Right now I’m not having a labor problem,’ said Stephen Paul, executive vice president of homebuilding operations at Maryland-based Mid-Atlantic Builders. ‘And we’re having our best year in 10 years. I’m busy, but I don’t want to hire because I’m afraid. We don’t know if the market is sustainable. It’s been 10 years and we’re still looking for a serious recovery.’”

From Oregon Public Broadcasting. “Central Oregon’s tight housing rental market may soon see hundreds of new units on the market. Bend and Central Oregon have seen some of the lowest rental vacancy rates in the state for about two years. At times, there have been fewer than 20 rental units available in the entire city of Bend. But a number of new apartment complexes are slated to come online this summer and later this year. There are 8,647 multifamily housing units in Bend, according to the city. The new development will add at least 1,000 new apartment homes to that tally, in nearly every quadrant of the city. Many of those apartments are higher-end, higher rent units.”

“‘Single-family housing costs are beyond reach for a lot of first-time home buyers,’ said Aaron Henson, senior planner with the city of Bend. ‘Younger people are are willing to pay decent rents for a nice, new apartments. So these projects are starting to pencil, and we’re staring to see high-quality high amenity multi-family and nice new apartments.’”

“In addition to the 1,000 units currently under construction, another 800 units are in the planning stages in Bend.”

Fortune on California. “According to online real estate brokerage Redfin, the median sales price of a house in San Francisco fell between March 2015 and March 2016. That was the first year-over-year drop since 2012. The number of homes sold dropped by 22.1%, showing that fewer people bought homes this March than in the same period in 2015, suggesting that demand is slowing. Redfin isn’t the only one to see a big shift in the Bay Area. Zillow’s figures show a February year-over-year drop of 7.4% in the median sale price of a house. Just between January 2016 and February 2016 the median sales price went from $1.14 million to $991,000, a 13% decline.”

“According to Redfin Chief Economist Nela Richardson, as quoted on the company’s site, 77% of housing offers in San Francisco faced competing bids in March 2016. The previous year the number was 94%. ‘This suggests that the price drop is not about inventory, it’s about buyers fed up with high Bay Area prices and crazy competition,’ Richardson said.”

The Naples Herald in Florida. “New data from the Naples Area Board of Realtors shows that more homes are popping back onto the market over the first part of 2016, giving buyers more options to choose from. NABOR’s report for the first quarter of 2016 increased by 33 percent from the same period in 2015. The most new inventory arrived in North Naples, nearly doubling during that span of time. Condos are also a large portion of the new entries onto the market, as units under $300,000 jumped by a third. ‘The report indicated that we had 7.2 months of inventory in March,’ said Cindy Carroll, an appraiser with Carroll & Carroll.”

“Sales are slightly down from last year, closed sales down five percent, partially owning to a very active year in real estate in 2015, says NABOR president Rick Fioretti. ‘A five percent decrease in overall sales isn’t bad considering 2015 was a phenomenal year,’ Fioretti said.”

The Dallas Morning News in Texas. “The invisible hand will guide Dallas’ affordable housing policies if one City Council member’s idea becomes reality. Council member Lee Kleinman, a businessman who represents North Dallas, said his proposed strategy, which still faces a plethora of obstacles, would help solve the city’s middle-class housing woes. He said it would provide incentives to housing developers with a carrot-and-stick approach.”

“Under Kleinman’s plan, the city would require housing developers to obtain a certain number of certificates if they want to create homes. The number of certificates needed would be determined by square footage and other factors. Council member Philip Kingston lauded Kleinman’s creativity. But he questioned whether the incentives could lead to more affordable housing in areas already saturated with low-income housing. In recent years, city leaders have also been grappling with a housing market that has a glut of high-income and low-income housing.”

The Daily Mail in New York. “The high number of home foreclosures across New York state is a problem for local governments, according to recent reports from the New York State Comptroller’s Office. In those reports, Greene and Columbia counties are both cited as areas of ‘greatest concern,’ because of their high foreclosure rates and increasing caseloads. According to a map in the report, both Columbia and Greene counties are included in the downstate group of counties whose tax base fell between 6.4 percent and 22.9 percent from 2008 to 2013, after rising 60 percent or more in the previous five years.”

“Greene County Treasurer Peter Markou confirmed that. As of March, he said, the county has collected $684,192 in taxes, compared to $869,751 at the same time last year. ‘We’re seeing a decrease in collections,’ he said. ‘We have a lot of properties, especially in the resort communities, that have been abandoned for years.’”

“Columbia County Board of Supervisors Majority Leader Pat Grattan, R-Kinderhook, said he believes a lot of the foreclosures come from big banks like Countrywide and Wachovia. ‘They were very loose; they didn’t verify people,’ he said. ‘A lot of people bought houses with no equity in them. Then the value went down. The value goes down when there’s a buyer’s market. We’ve gone from 2004-2005, when there was a seller’s market, then in 2008, it started to slow down. I think home ownership is tremendous; it’s the largest financial transaction most people enter into. Unfortunately, there were a lot of loose loan practices, and people couldn’t pay up.’”