The Housing Bubble

KARE 11 reports from Minnesota. “When real estate agent JJ Korman showed homes a few years ago, he knew it might take several visits before he got an offer. But this year, buyers are nearly knocking down his door. ‘Back then maybe we’d get a 15 to 20 showing amount in the first month,’ said Korman, owner of Korman Realty. ‘Here, we have that in the first weekend.’”

“Homes now sell both faster and higher. Twin Cities median sale prices are at a record $242,000, often driven up as buyers scramble to outbid. Dave Hackenmueller, a local real estate agent for 40 years, calls the last few months ‘insane.’ ‘You are going to have multiple offers,’ said Hackenmueller. ‘That’s just a given.’”

“But if this all sounds a lot like the bubble of 2006, experts say, it’s not. A new study from the University of St. Thomas found the bad loans and excessive flipping of ten years ago are gone, saying sales are now thanks to a healthy economy and cheap loans. ‘There’s a direct relationship between interest rates and values,’ Hackenmueller said, ‘And when rates are 3.5 percent, people are willing to spend more.’”

The Denver Post in Colorado. “Homebuyer demand suffered a big drop in Denver in June, despite a surge in listings that came onto the market last month, according to an index from Redfin. Redfin tracks the home tours its clients take and the subsequent offers they make, using that sample to get a pulse on demand in the larger market. A score of 100 on the index matches the three-year average of activity from 2013 to 2015. Scores below that reflect weakening buyer interest.”

“The Denver demand index came in at 36 in June, down from an index score of 129 a year earlier and the lowest monthly score captured since the index started in 2013. The 54.7 percent drop in June was the most severe among the 15 major metros that Redfin tracks.”

“Denver has faced a shortage of listings for three years now. But the June home sales report from the Denver Metro Association of Realtors showed a 24.4 percent surge in listings in June vs. May, nearly six times the average increase between those two months.”

“Despite that surge in supply, unlike any seen in months, Denver buyers cut way back. Karla Kirkpatrick Adams, a Redfin agent in Denver, said overall homes are taking longer to sell. Some buyers panic after their homes spend more than a month on the market, even though historically speaking that isn’t a long time. ‘The market is not as crazy as it has been,’ said Adams. ‘Prices have increased to a point where it is pricing people out of the market.’”

The Alaska Dispatch News. “In Anchorage, selling more expensive homes is getting harder. More listings, slower sales and flat prices in Alaska’s largest city are apparent across the housing market this summer, but it’s the upper reaches of the market, above the $750,000 mark, that are most sluggish. That’s in part because oil companies are transferring some high-earning employees out of state, said Niel Thomas, associate broker at Coldwell Banker Best Properties. Sellers in that price range also include doctors, attorneys, architects and financial and other business executives, municipal property records show.”

“Thomas sees a wide-open window for those with above-average financial means who are on the hunt for a more expansive layout. There are ‘good opportunities for local residents to upgrade if they are in stable economic circumstances,’ he said.”

“The expansion of choices at better prices is the silver lining to a market that is reverting to what realtors are describing as more balanced. The number of active single-family home listings in Anchorage as of June stood at 1,026, up 38 percent from June 2015, according to data provided by Thomas from the Multiple Listing Service. The tail end of the last recession, in October 2011, was the last time home listings broke the 1,000 mark.”

“Closings recorded by MLS totaled 1,268 for the first six months of 2016, a 7 percent drop from the first half of 2015. The year-to-date average sales price of $365,811 for a single-family home, while just barely lower than last year, is nonetheless significant for breaking a four-year trend during which the average sales price increased by 3.3 percent each year.”

“While buyers hold the advantage at the upper end, the market favors neither buyers nor sellers at the lower to upper-middle price ranges, below $500,000, as an inventory shortage has eased, according to Naomi Louvier, owner and chief executive officer of Jack White Real Estate. ‘Compared with last year, we’re not seeing as many bidding wars,’ she said. ‘To compete against the other listings, you have to do more preparation. You might have to stage your home.’”

The Boston Globe reports from Massachusetts. “A powerful combination of low mortgage rates, high demand, and few choices have pushed home prices in Greater Boston and across the state to record highs. The median sale price of a single-family home in the metro region was $585,000 in June, and for condominiums it was $505,000 — both records for the month, the Greater Boston Association of Realtors said Tuesday. But even at these levels, according to Warren Group’s chief executive, Timothy M. Warren Jr., the housing market is not in a bubble. Rather, Warren said, prices are reflecting strong demand and a very limited supply.”

“‘Median prices are rising slowly. We’re not in a situation where prices are skyrocketing — at least not statewide,’ he said.”

“James Gulden, a Redfin real estate agent in Boston, said he expect prices to continue rising steadily. ‘I haven’t made a bid in the past year that has sold for what it previously sold for,’ Gulden said. ‘Every time it’s for a next higher price than what the previous buyer bought it for.’”

The Providence Journal in Rhode Island. “Though the number of houses sold in Rhode Island in June went up by 2.6 percent, and the median sales price rose 3.6 percent, to $245,000, a dwindling supply of homes for sale may put the brakes on the real-estate market, according to the Rhode Island Association of Realtors. Rita Danielle Steele, broker/owner of Steele Realty Consultants International, in Providence, said investors from Boston have been winning bidding wars for multifamily investment properties on the West Side of Providence, often making cash offers on the spot.”

“As for the single-family housing market, she said, limited inventory has been pushing the spring market into summer, as many buyers, through they started a search in the spring, ‘are still looking.’ ‘When things do come on the market that are suitable, buyers need to be aggressive,’ Steele said. ‘Buyers have really needed to adjust their expectations this year.’”

“The association said condo sales were strong in June, with sales up 22 percent, though the median sales price fell 5 percent, to $207,900. The association said easier financing guidelines for condos has helped sales. About 10 percent of the house sales in June were distressed, meaning they were either foreclosed properties or short sales, and this level is nearly unchanged from a year ago.”

The Real Deal on New York. “With temperatures hitting Mars levels, Manhattan’s luxury market slid further during the third week of July with just 15 contracts signed on properties $4 million and up, according to Olshan Realty. For the week of July 18-24, the total weekly asking price sales volume was $104.5 million with an average asking price of $6.9 million and a median asking price of $5.6 million. The average discount was 6 percent, and the average number of days on market was 333.”

From The Record in New Jersey. “On Wilson Avenue in Wayne, a shady street of well-kept homes, the wood contemporary at No. 96 stands out. It’s been empty for years, thick moss grows on the roof and, neighbors say, water from a broken pipe flooded the interior and poured down the street several years ago. On Berdan Avenue in Fair Lawn, a piece of black tarp hangs off the roof of a brick Cape Cod, and two dead evergreens stand sentinel at the front steps. Get close to the house and you’ll catch a whiff of mold.”

“On Cumberland Avenue in Teaneck, weeds grow through the patio behind a vacant brick ranch; inside, paint is peeling off the walls in sheets. Neighbors call these homes eyesores. Real estate experts have another name: ‘Zombie’ houses — homes in foreclosure that stay empty and neglected for years.”

“Nancy Dyrsten lives across the street from the home at 4-03 Berdan Ave. in Fair Lawn, which was repossessed by the lender earlier this year after sitting empty for years. The landscaping is overgrown and a lamppost tilts at an angle. The roof appears to be damaged, and inside, large pieces of Sheetrock are missing from the walls and ceilings.”

“‘I’m sure the whole house is just destroyed from water damage,’ Dyrsten said. ‘It’s a very upsetting situation. It’s sad and it’s not good for our property values. There is something wrong when a house is allowed to sit like that.’”

“The house on Wilson Avenue in Wayne has been vacant for years. According to property records, it sold for more than $800,000 in 2005, as the housing bubble inflated. The home was repossessed by the lender in a Passaic County sheriff’s auction last October. It was recently for sale for $500,000, before being taken off the market last month.”

“The home, in an upscale neighborhood just blocks from a country club, has five bedrooms and 4,000 square feet, plus an indoor pool, on a lot of nearly half an acre. According to neighbors, the former homeowners left late at night, hastily packing their belongings into their vehicle. After they departed, neighbors say, a pipe inside the house broke, sending water cascading down the street. They assume the interior has water damage.”

A report from Bloomberg. “It turns out that even the well-off need help in a housing market as crazy as the one in the San Francisco Bay area, and lenders are elbowing each other in a rush to provide it. They’re courting Silicon Valley workers with tailored loans, guaranteed 24-hour approval and financial-planning services. Social Finance Inc. has deals with Google and other top technology companies that allow it to market to new hires. First Republic Bank — which gave Facebook Inc. billionaire Mark Zuckerberg a 1.05 percent interest-rate mortgage — has opened branches in Facebook and Twitter Inc. headquarters. San Francisco Federal Credit Union will finance 100 percent of houses costing up to $2 million.”

“For many, it’s not home values that keep them in rentals but alarming down payments, which can be more than the cost of the average U.S. house: $187,000. That’s where San Francisco Federal Credit Union comes in. It started offering zero-down loans in December to people who work in San Francisco or San Mateo County. The credit union has more than $100 million pre-approved for 30-year adjustable-rate mortgages in what’s called the Proud Ownership Purchase Program for You.”

“As the tech boom starts to show signs of cracks, there’s some concern that high loan-to-value mortgages are dangerous. Silicon Valley venture-capital funding fell 20 percent in the second quarter from a year earlier, according to a report by PricewaterhouseCoopers and the National Venture Capital Association. New companies are staying private longer, leaving fewer options for shareholders to cash out.”

“The median San Francisco condo price rose less than 1 percent in the second quarter after an 18 percent increase a year earlier, data from Paragon Real Estate Group show. Inventories of condos listed at $2 million or more jumped 44 percent — but the number sold fell 30 percent.”

“‘Lenders get so caught up trying to stay competitive and finding a market edge, they basically allow greed to overcome common sense,’ says Terry Wakefield, a mortgage consultant who co-founded one of the first online direct lenders in 1998. ‘Easy money does fuel and accelerate the inevitable bubble.’”

“And the notion of 100-percent financing makes some in the industry nervous. ‘Given what we went through in 2008, zero-down financing is suicidal for our country,’ says Chuck Green, CEO of Bay Area Captial Funding Inc., a mortgage brokerage that offers loans from about 40 different companies. ‘We have to learn from our mistakes.’”