The Housing Bubble

The Omaha World Herald reports from Nebraska. “In red-hot housing market, some Omaha homes are selling above asking price — in 24 hours or less. Scott Lawrence of NP Dodge said he has brokered numerous homes this year that sold above asking price. ‘I’ve written at least 20 offers this year for full price or better that didn’t go due to multiple offers. And it’s happening in every price range,’ Lawrence said.”

“‘People are scrambling to get the house right when they come on the market because there’s not enough of them,’ said Andy Alloway, head of the Realtors board. In the words of buyer Caitlin Exum, who was sold on the Aristy split-entry home in less than 15 minutes: ‘I didn’t play any games. When I knew, I knew. There was no waiting.’”

WTOP in Washington, DC. “The nation’s capital became slightly less expensive for renters in June, but D.C. easily remained among the country’s top 10 priciest markets, according to real estate analysts. A report from Zumper, a website that tracks rental prices, shows D.C. rents dropped from fifth most expensive in the nation to sixth, now behind Oakland, California. ‘Big cities are seeing some plateauing,’ said Zumper analyst Tanguy Le Louarn. ‘This is a very common phenomenon. We’ve seen it in San Francisco, and D.C. seems to be affected in a similar fashion,’ he said.”

The Dallas Observer in Texas. “Dallas, as anyone with eyeballs has no doubt noticed, is in the middle of an apartment boom. Currently, the Dallas-Fort Worth metropolitan area has 50,000 apartment units under construction, which, to put things in historical perspective, is a crapload. If the Dallas area is currently possessed by an ’80s-like apartment boom, is it also headed for an ’80s-like apartment bust?”

“All those luxury apartments going up in and around downtown? Those might be harder to fill. ‘The likelihood of oversupply is much higher in the highest-end one bedrooms in the urban core,’ says Mike Puls, a Dallas-based apartment analyst. He referenced one new development near Victory Park that was recently offering potential tenants three months of free rent – which suggests that at least some developers of downtown-area apartments are struggling to fill their units.”

Bloomberg on New York. “Residents who aren’t necessarily millionaires are having an easier time finding an apartment to buy in Manhattan. Rising inventory is helping to level the playing field for buyers and sellers after years of bidding wars fueled by historically low supply, especially for homes of less than $1 million. Owners of such properties had long held off listing their units, realizing trading up would be difficult in a market with ever-rising prices. In the second quarter, the replenished resale supply approached the 10-year average for the period as sales cooled, said Jonathan Miller, president of Miller Samuel.”

“‘We’ve had a long run in terms of activity,’ Miller said in an interview. ‘The last four, five years have been about heavy volume of sales and price growth, and part of this might be sellers finally looking to cash out.’ The increased inventory ‘takes the edge off many sellers’ plans,’ he said. ‘It’s no longer an exclusive sellers’ market.’”

From Inman News. “Housing prices are steadily increasing again due to a shortage of new and existing homes for sale. And in some regions of the United States, home prices are seriously overvalued, especially in coastal communities such as San Francisco, New York and Miami. The question many experts are asking is no longer if, but rather when and how far, home prices will fall in the coming housing crash. For years, it looked like San Francisco real estate boom would never end, but the tech go-go days might be slowing down, as home prices in the Bay Area have fallen for the first time in five years.”

“Manhattan’s real estate market has been sizzling several years. But now cracks are starting to show in the once red-hot real estate landscape. Price growth is starting to slow amid concerns of a supply glut, particularly in $5 million and above luxury market. Inventory is rising and the global economy is starting to show signs of strain.”

“In Miami, the Brazilians, Canadians and Russians have disappeared just as a new crop of high rise condo towers are hitting the market. Miami condo developers are starting to cancel projects, slash prices and offer incentives to spur sales, according to Jack McCabe, a real estate analyst with McCabe Research and Consulting in Deerfield, Florida. McCabe, who called the last housing crash a decade ago, believes the luxury condo market is in a bubble. He said the South Florida housing scene looks eerily similar to the 2008 housing bust, and the inventory of unsold luxury condos is ballooning.”

“‘In the upper-end condo market, we are in the ninth inning,’ said McCabe, using a baseball analogy to describe the slowing Miami luxury condo market. ‘Sales numbers are dropping, prices are flattening, and we are starting to see the return of concessions by developers in the market such as private jet services to spur sales. South Florida is in a big bubble for high-end condos. We are at the end of the expansion phase and entering the hyper-supply phase, especially in condos.’”

From NPR Weekend Edition. “Double-digit price rises, easy credit and no money down — these all led to a housing bubble a decade ago. NPR’s Rachel Martin asks UCLA economist Stephen Oliner if we are headed for disaster. Stephen Oliner used to be with the Federal Reserve Board. Now he’s at UCLA, where he analyzes real estate markets,”

“Oliner: So there are really two types of indicators. The first concerns the risk that’s in the mortgage loans that are being made today. So at the American Enterprise Institute, where I have a position as well as at UCLA, we analyze about 80 percent of the individual home mortgage loans made every month to purchase homes. And many of these loans are very risky, subprime-style loans that are now being made with government guarantees rather than being held by private investors. But nonetheless, they’re quite risky.”

“The element of fraud that was rampant during the financial crisis in the lead-up to the bubble, that’s basically gone. But there still are other ways for loans to be risky in many dimensions, and that is still happening. So let me give you just a couple of specifics. Now, we normally think that people in a prudent lending situation will put down 10 or 20 percent. That’s so old-school. That’s not happening now. The median down payment for a first-time buyer in the United States is 3 and a half percent.”

“If they were to turn around and need to sell the house, they wouldn’t get enough money to repay the mortgage. So they’re actually underwater on day one of the mortgage. There are other ways in which the mortgages are risky. One is that people are still stretching to buy bigger houses with larger monthly payments than is really safe given their incomes, and that is completely allowable under our current mortgage regulations.”

“Martin: Which is good and bad, right? After the housing crisis, people were so scared that nobody wanted to buy anything. And now you’re saying we’ve overcompensated and people are living beyond their means again.”

“Oliner: Yes, that is what I’m saying. And we tend to think that a very strict, regulatory framework was put in place that would prevent this from happening again. And the problem is the following - 80 percent or so of the loans that are being made in the United States today are loans that have a government guarantee of some kind, federal government guarantee, and those loans are exempt from the regulations.”