A Price That Is At Once Unbelievable And Plausible
A report from the Sierra Sun in California. “While the recent regional housing study shows that more than half of Truckee-Tahoe’s workforce commutes to the region from other locations, real estate sales in the area are on the rise. ‘The majority of the buyers in our area are second homeowners, vacation homeowners, investment buyers,’ Ellen Grace, president of the Tahoe Sierra Board of Realtors and a Realtor with Coldwell Banker in Truckee, said.”
“Grace said that locally, the median home price across all three categories (entry level, midrange and luxury) within the Tahoe Sierra market footprint is $565,000 — an 8 percent increase from last year. The median income for a four-person household this year in Nevada County is $73,500, and in Placer County, it is $76,100, according to the California Department of Housing and Community Development. The Regional Housing Study also reports that roughly 65 percent of homes in the North Tahoe-Truckee are vacant most of the year, primarily used for vacation homes.”
“Nick Pullen, owner of Truckee-based Pullen Realty Group, told the Sierra Sun that although his business does mostly vacation property management for second homeowners in the Tahoe area, he thinks more can be done to accommodate the housing needs of locals. ‘I would characterize the Truckee-Tahoe economy as a ‘Master and Servant’ economy, where second homeowners are the masters, and most people in Truckee make their living servicing them,’ said Pullen. ‘Our economy is heavily dependent on all things real estate, where people finance it, appraise it, sell it, design it, engineer it, approve it, build it, rent it, clean it, maintain it.’”
“Pullen said that almost every person he knows is involved in one of these businesses that can be tied to real estate. Still, the real money lies in owning real estate. ‘Without attracting higher-paying jobs and capitalizing new businesses that are outside of the real estate and tourism industries, local incomes will continue to stagnate,’ he said.”
From Chicago Now in Illinois. “I was tempted to say that there is no chance of the Chicago area currently being in a bubble but the fact is that just about anything is possible so I settled for ’slim chance.’ As Robert Shiller (of Case Shiller Home Price Index fame) said in a recent interview ‘There’s always reason to worry [about a coming collapse].’ However, he goes on to say that the difference between now and 2006 is that back then people had crazy expectations of where home prices were going and they don’t feel that way now. As for the Chicago real estate market all the data points to us remaining comfortably out of bubble territory despite all the hand wringing out there.”
“The first piece of evidence is that the Case Shiller home price index for the Chicago area is still showing single family home prices 18.4% below the bubble peak. Condo prices are a bit closer to the peak but still fall short by 12.3%. What kind of bubble would it be if prices hadn’t even reached the level of the last bubble?”
“In addition, according to the 2nd Quarter CoreLogic Equity Report the Chicago area is one of the top 5 metro areas in terms of homes with negative equity. 13.4% of our homes are in a negative equity position with another 4.9% of the homes near negative equity. Again, that is a function of not having fully recovered from the last bubble.”
“UBS also recently published their Global Real Estate Bubble Index of the major financial centers, one of which is Chicago. In the ranking below you can see that not only is Chicago ranked last but they also have it as being a depressed market. Their methodology apparently looks at home prices relative to incomes and rents and indications of excessive lending and construction activity - although I have to say that it sure does look like we have a ton of construction going on here.”
The Coloradoan. “This past spring, I received a marketing postcard from my former real estate agent in Denver. My family and I were still living in Richmond, Virginia. But we were preparing to move back to Colorado and trying to figure out where we were going to live. The difference between the two state capitals is one largely of timing and scale: the Western city offers its Eastern kin a glimpse of a future in which opportunity beckons. But not for all. And always at a price. Nine hundred thousand dollars, in this case.”
“That’s what the postcard says — $900,000 for the 2,000-square-foot brick bungalow on a corner lot on Newton Street around 37th Avenue. It is a price that is at once unbelievable and plausible because every once in a while after we moved, I would go online to check the estimated value of our old house in the same Northside neighborhood. We lived in a 1920s, two-bedroom, one-bath, galley-kitchen red brick bungalow with a little more than 900 square feet upstairs and a smaller basement that was inhabitable if you weren’t picky. When the estimated market value surpassed $440,000 — $440,000! –– almost 40 percent more than our sales price, I stopped looking.”
“I consider myself part of the middle-class, shrinking as it may be, and it’s a jolt to realize that I can no longer afford the neighborhood I left only a few years earlier.”
“In the Resurgence of the City, real estate speculators saw, just as city leaders did, what was coming to these neighborhoods so conveniently close to downtown. But where the public sector plods, the private sprints. Developers, bankers, investors vault the very same walls that they once helped create. And Denver, the study points out, now ranks seventh of the 50 largest U.S. cities in terms of the extent of gentrification.”
“We have decided to live in Fort Collins. It wasn’t much of decision, actually. Denver is too expensive and my husband is joining the faculty at CSU. Someone tells him that if everyone in the country wants to live in Denver, then everyone in Denver wants to live in Fort Collins. Perhaps that it is true because the house hunt is brutal. As in Denver, homes for sale are getting multiple bids. Multiple as in 8, 9, 10. Would-be buyers are waiving inspections and appraisals. They are paying cash.’
“I joke that I am moving through the stages of house-hunting grief: Disbelief, disappointment, anger, resentment. Full of indignation, we say screw it, and decide to wait for the cooler seasonal markets of late summer and fall. We manage to find an overpriced three-bedroom apartment a mile from the kids’ school.”
“Perhaps this is the predictable lament of one generation watching the reshaping of its legacy by another. Perhaps Denver is being remade in some way that fundamentally alters its identity. The summer housing market cools from a boil to a simmer and we resume our search, finally finding a patio home at a price we can afford. It’s smaller than our home in Richmond with an unfinished basement. But it is lovely, and in the same school zone as our apartment. The mortgage is $500 less a month that what we are paying in rent. We await the bank’s appraisal and count ourselves lucky.”
