The Housing Bubble

A report from the Orange County Register in California. “You are on notice that there are inflection points in the housing market that may cause a downturn. The Mortgage Bankers Association recently announced for the fourth quarter of 2016 California’s mortgage delinquency rate weighed in at 3.2 percent. The national rate was worse at 4.8 percent. And, the national delinquency rate was up 28 basis points from the previous quarter. Yikes! According to the Mortgage Bankers Association, the loan origination market index (purchase and origination applications) is down 28.8 percent year over year. The refinance index is down by a staggering 45.9 percent year over year.”

“My lender friends are nervous right now with this tremendous slowdown in both purchase and refinance volume. My mortgage brokerage shop was busy for five straight years. Since the first of this year, our loan volume is down dramatically. Last Sunday, one of my neighbors stopped me to comment on my last column on the return of loans for riskier borrowers. ‘So, subprime is back,’ my neighbor said. ‘Pretty much,’ I answered.”

“I remember widely originated subprime loans being the topper inflection point of the last mortgage meltdown. Haunting.”

The Philadelphia Inquirer in Pennsylvania. “It’s a good-news-bad-news situation for local real estate markets, according to research released last week by Zillow. That is, good news for buyers and less exciting news for sellers. The determination comes from an assessment of Philly listings by price cuts and days on the market. Locally, more than 13 percent of listings. Those listings are typically on Zillow for about 101 days. Baltimore tops the same list.”

“Within the region, Zillow counts Pennsauken, Waterford, Pennsville Township, West Deptford Township and Deptford Township as the five best buyers’ markets. There, listings range from 131-173 days on the market and between 17.5 and 22 percent include price cuts.”

The News Press in Florida. “Uncertainty was the word of the day as three real estate experts, backed by facts, shared their reflections and predictions on the market at The News-Press Market Watch. ‘We can’t always see what’s going on,’ said Denny Grimes, president, Denny Grimes & Company as he took the stage. The number of homes sold in 2016 was down in Lee and Collier counties: ‘Notice the color (red). Sales are down 7 percent.’”

“Sales were down in each part of each county (other than Lehigh, up just slightly), with luxury sales and condo sales also down: ‘You getting the trend here?’ he said. ‘I’m calling 2015 a peak year, because we are seeing sales drop.’”

From Metro US on New York. “What goes up, must come down — and in New York City that has led to a decline in the luxury market and higher prices in less expensive areas. Those areas were the only ones to show ‘pockets of rent growth,’ in the January 2017 StreetEasy Market Reports. All others experienced month-over-month declines, with only Upper Manhattan, South Brooklyn and East Brooklyn median rents continuing to rise. The report also showed both Manhattan and Brooklyn starting the year off with declining monthly median rent for the first time since 2010, according to StreetEasy data.”

“‘Manhattan and Brooklyn renters could finally be catching a break in 2017,’ said StreetEasy economist Krishna Rao. ‘Over almost a decade, rents in both boroughs have had strong growth and consistently hit new highs time and time again. Over the last few months the landscape has shifted. The luxury decline seems to be affecting the market in a big way, as the most expensive areas see the greatest rent declines.’”

From Arizona Public Media. “Data from the U.S. Census Bureau show Tucson has the 10th highest year-round vacancy rate of the country’s 75 largest metropolitan areas. It estimates 12.5 percent of the homes in Tucson had no resident for the entire year. One explanation may be that the empty homes sat vacant through the worst days of the housing bubble burst, and during that time they deteriorated.”

“‘I suspect many of these are in such disrepair, it’s just not economical for an investor to take them over and put the money in it they need to make it livable and make a profit,’ said Michael Bond, who teaches real estate finance at the University of Arizona’s Eller College of Management.”

“Tucson’s vacancy rate has stayed at 12.5 percent or higher since 2009 with one exception. It dipped to 8.4 percent in 2015.”