March 1, 2017

The Money Spigot Is Open All The Way

A report from the San Francisco Chronicle in California. “The median price paid for new and existing Bay Area homes and condos that sold in January was $630,000, down 5.3 percent from December and up 1.6 percent from January of last year, according to CoreLogic data. In San Francisco alone, the median price paid in January was $1,067,500, down 5.1 percent from December and down 9.2 percent from January of last year. A big reason for the drop is that only 58 new homes sold this January compared with 159 last year, and new homes tend to be pricier than existing ones, said Andrew LePage, CoreLogic research analyst.”

“Sales typically fall between December and January, and this year’s decline was slightly above the long-run average of 29 percent. January sales were 17.5 percent below the long-run average for the first month of the year.”

From CBS News in South Carolina. “Looking to rent a place in the sun with good golf courses nearby? Your best bet might be the coastal South Carolina town of Myrtle Beach, a once hot tourist destination for golfers that has now become overbuilt, according to RentRange. The average vacancy rate, which demonstrates the percentage of all available units in a rental property that are vacant or unoccupied at a particular time, showed that the highest rates are in the Southeast, where vacancy rates range from 10.5 percent in Charleston to 20.4 percent in Myrtle Beach.”

“‘In these areas, builders and investors may need to compete for a limited number of renters,’ said RentRange, pointing to the oversupply of new properties that’s driving up vacancies and pushing rental rates down. ‘This is happening in Myrtle Beach, where more than 3,100 new homes were built in 2015, a 94 percent increase compared to two years earlier.’”

From Philadelphia Magazine in Pennsylvania. “‘Those who succeed over the years can steer their way through choppy waters, and that includes things you can’t control.’ Carl Dranoff, the man who said that, should know. The CEO of Dranoff Properties rode historic preservation to national prominence before a change in the law brought his business to its knees. The lessons he learned from that career setback have informed the rise of his business and his development strategy since then.”

“With two exceptions — One Theater Place in Newark, N.J. and One Ardmore Place, work on which will get underway this spring — all of Dranoff’s current and planned projects are condos, a shift he made when he saw a coming oversupply of rental apartments. ‘The statistics were available as early as 2012,’ he said. ‘The money spigot is open all the way, and anyone can get financing for a new project.’”

The Longview News-Journal in Texas. “Construction of high-end apartment complexes in North Longview apparently caused fair market rents to increase 23 percent over the past two years, housing experts said. ‘It is based on what everybody is charging in the area,’ said Karen Holt, housing navigator with Community Healthcore. “We have had a huge increase in high-end conventional properties,’ those that receive no rent subsidies.”

“Meanwhile, apartment complexes that are 20 years old or older are ’struggling to keep up. We are oversaturated with high-end properties.’”

The Chicago Reader in Illinois. “When Carolyn Smith saw a for sale sign go up on her block one evening in the fall of 2011, it felt serendipitous. The now 68-year-old was anxiously looking for a new place to live. But due to a past bankruptcy, Smith thought she would never be able to get a mortgage. So when she saw a house on her street for sale with a sign that said “owner financing,” she was excited. The next morning, she called the number listed and learned that the down payment was just $900—a sum she could fathom paying. ‘I figured I was blessed,’ she says.”

“But within a year, Smith discovered that the house was in even worse shape than she’d realized. Had Smith approached a bank for a mortgage, she likely would’ve received a Federal Housing Administration-issued form advising her to get a home inspection before buying. But as far as she recalls, no one she spoke to ever suggested one, and in her rush to get out of her old apartment, she didn’t think to insist.”

“The documents Smith signed with Harbour and National Asset Advisors required her to bring the property into habitable condition within four months, and with all the unexpected expenses, she soon fell behind on her monthly payments of $545. What felt like a private nightmare for Smith has been playing out nationwide in the wake of the housing market crash, as investment firms step in to fill a void left by banks, now focused on lending to wealthier borrowers with spotless credit histories. In a tight credit market, companies like Harbour, which has purchased roughly 7,000 homes nationwide since 2010, including at least 42 in Cook County, purport to offer another shot at home ownership for those who can’t get mortgages.”

“Smith had a heart-stopping realization: She hadn’t actually purchased her home at all. The document she had signed wasn’t a traditional mortgage, as she had believed, but a ‘contract for deed’—a type of seller-financed transaction under which buyers lack any equity in the property until they’ve paid for it in full. ‘I know people always say ‘buyer beware’, she acknowledges. ‘But I’d never had a mortgage before, and I feel like they took advantage of that.’”

Driving Up Prices Because They Expect Prices To Increase

A topic starting with the first of two emails I’ve received recently. “Me and my wife have been thinking about investing in a home of our own. Unfortunately we live in the most expensive neighborhood in USA, Bay Area California. The prices for housing is too high. Investing in a home here will need all our savings. I have been following the housing boom and am not sure if there will be a correction coming soon. What would your advice be in this case, any help is much appreciated.”

The second. “We are looking to buy our first home in San Francisco suburbs. I have been searching a lot on internet about housing predictions for 2017 but almost everyone is saying market is good, prices are going to increase. And if you could suggest what shall we do…wait or buy?”

The US News and World Report. “Home prices rose again last year, and the housing market is starting off 2017 at a brisk clip. According to S&P CoreLogic Case-Shiller data, which includes the 20 largest U.S. cities, home prices regained their 2007 peak late last year and increased 5.6 percent from November 2015 to November 2016 — the latest figure available. Zillow’s Home Value Index, which measures median home value nationwide, predicts its index will reach the 2007 level this spring.”

“Zillow found that home values rose 6.8 percent last year and predicts a 3.5 percent uptick this year. But could these impressive numbers actually be the precursor to a housing bubble?”

“‘We are absolutely not in a bubble,’ says Ralph McLaughlin, chief economist for the real estate portal Trulia. ‘The economic definition of a bubble is when people are driving up prices only because they expect prices to increase.’”

From Las Vegas Now in Nevada. “Valley home prices are on the rise. Zillow reports the median house price is at around $216,000. However, the Greater Las Vegas Association of Realtors reports a median home price is closer to $238,000. Both prices are increases. Local realtors say houses between $200,000 and $300,000 are in hot demand. So, considering everything that happened when the housing bubble burst, one can’t help but ask, ‘are prices climbing too fast?’”

“Home prices are on the rise about 9 percent from a year ago, according to the Greater Las Vegas Association of Realtors. ‘It’s stable. Stable is the new sexy,’ said Dave Tina, president of the Greater Las Vegas Association of Realtors. ‘We’ve been having about an 8-10 percent growth year over year.’”

From Florida Today. “The Brevard County real estate market didn’t tap the brakes in January. It showed some acceleration instead. Sales of single-family homes on the Space Coast rose nearly 3 percent over the year, while the median sale price — the point at which half the homes sell for less, half for more — jumped to $195,000, up more than 18 percent from a year earlier.”

“‘We’re on a positive trend,” said Julia Dreyer, broker/owner of the Indian Harbour Beach-based Dreyer & Associates Real Estate Group. ‘I don’t think it’s a screaming, rocket trend, which is not what anybody wants. Really, 18 percent, year over year, is a good number. It’s a sustainable number.’”

The Boulder Daily Camera in Colorado. “The rapidly rising price tags on Longmont homes are certainly no secret. Median house prices increased 15.5 percent in the last year alone. But perhaps the best measure of the post-recession recovery is this: The average cost of a single-family home in the city has roughly doubled in less than a decade, from $205,454 in the depths of the recession — November 2008 — to $406,762 last month.”

“That’s a 98 percent increase in just over 8 years, roughly 12 percent appreciation per year. The same gains would take 28 years to achieve at more historic levels of appreciation of 3.4 percent, according to the Case-Shiller index.”

“Nationally, the low point for U.S. home prices was $166,200 in 2011, according to data from the National Association of Realtors. Today, it’s around $235,000 — a 41.3 percent increase. ‘During the housing boom (of the early 2000s), there was price growth that reached close to or above doubling,’ said Adam DeSanctis, economic issues media manager with NAR. ‘Now you’re starting to see price growth accelerating or reaching that point again.’”

“But, DeSanctis cautioned, that isn’t because we’re in a bubble. The recent run-up in prices is being driven almost entirely by low supply, which makes it different from the frenzy that created the housing bubble, and the recession, in the first place.”

“‘Back then, people were buying homes faster then they could earn money,’ said Kyle Snyder of Longmont’s Land Title Guarantee. ‘This market is built on wealth and not credit.’”

“Longmont is in high demand as first-time buyers flock to the only sub-$400,000 market in Boulder County. But those days as an affordable haven might be over. Longmont first crossed the $400,000 average threshold in September, and will likely continue to do so throughout 2017, Snyder said. ‘There’s nothing out there that changes the direction of this market. Interest rates are not going to go up significantly; inventory’s going to remain fairly tight. It’s just going to be an expensive world from now on.’”