The Housing Bubble

A report from USA Today. “Riskier borrowers are making up a growing share of new mortgages, pushing up delinquencies modestly and raising concerns about an eventual spike in defaults that could slow or derail the housing recovery. The trend is centered around home loans guaranteed by the Federal Housing Administration that typically require down payments of just 3% to 5% and are often snapped up by first-time buyers. The FHA-backed loans are increasingly being offered by non-bank lenders with more lenient credit standards than banks.”

“Quicken Loans, one of the largest FHA lenders, dismisses the concerns as overwrought. Still, for some analysts, the latest development is at least faintly reminiscent of the run-up to that crisis. Non-banks, including Quicken Loans and Freedom Mortgage, comprised 93% of FHA loan volume last year, up from 40% in 2009, according to Inside Mortgage Finance. Meanwhile, the average credit score of an FHA borrower fell to 678 in the fourth quarter from 693 in 2013, according to FHA, below the 747 average for non-FHA borrowers.”

“‘We have a situation where home prices are high relative to average hourly earnings and we’re pushing 5%-down mortgages, and that’s a bad idea,’ says Hans Nordby, chief economist of real estate research firm CoStar.”

The Richmond Times Dispatch in Virginia. “A total of 1,114 houses were flipped in the Richmond area in 2016, hitting a 10-year high, according to Attom Data Solution. Flippers also benefit from the availability of more financing options in the past couple of years. ‘Hopefully, there will be restraint,’ said Daren Blomquist, senior vice president of Attom Data Solutions, referring to years of out-of-control spending that contributed to the housing bubble.”

The Washington Post. “If you’re among the many people who watch television programs such as ‘Flip or Flop’ or ‘Flipping the Block’ and think you can become a master flipper yourself, you’re not alone. The frenzy for flipping — which refers to homes that have been purchased and sold within one year — echoes the height of the housing bubble before it burst.”

“‘The housing market is in full-boom mode, with prices up and homes selling quickly and consistently, which gives flippers more confidence to jump into the market,’ says Daren Blomquist, senior vice president of Attom Data Solutions. ‘At the same time, they don’t have to compete against a flood of new construction like they did during the last spike in flipping in 2005-2006, when homebuilders were building like crazy.’”

From KDVR in Colorado. “Developers have unveiled their plans to build a new community in Aurora that could eventually provide homes for 60,000 people. The proposed development is called the Aurora Highlands and would be built on 5,000 acres south of Denver International Airport. According to the Aurora Sentinel, attached homes will start at about $200,000 and single family detached houses will start at $1 million. The development is estimated to house 23,000 families, or about 60,000 people, the paper reported.”

The Orlando Sentinel in Florida. “New-home construction in Metro Orlando spiked 25 percent from a year earlier with the biggest boost in The Villages and communities near theme parks, a new report shows. Affordability seemed to fall off the menu of new residential offerings in Central Florida, with declines in the number of homes priced under $200,000. Meanwhile, new residences in the $300,000 to $350,000 range grew by 37 percent during the fourth quarter from a year earlier, according the MetroStudy.”

“‘Resale housing activity is increasing slightly, with less inventory available for sale and increasing pricing,’ said Anthony Crocco, who oversees Central and North Florida for MetroStudy. ‘This is helping the new-home market as the gap in pricing between resale and new home pricing is closing a bit.’”

The Mail Tribune in Oregon. “There is no escaping the role of investors in Jackson County, where the inventory of homes for sale is the lowest on record and rental vacancy is hugging 1 percent. More than a third of residences, or 38 percent, are renter-occupied. In Medford, that number jumps to nearly half — 49.7 percent of all residences are occupied by renters, according to the U.S. Census Bureau 2015 American Community Survey.”

“The historical flow of Californians retiring to the Rogue Valley has resumed as well. When Californians sell tract homes for three or four times what a similar residence in Southern Oregon would command, it adds pressure on local prices. ‘It’s very typical for people selling a home for $2 million when they owe maybe $300,000, or refinance,’ says Patrick Rogers, an investor who also operates Asurent Property Management. ‘They come up here and pick up two houses to rent and buy another and turn it over to property management until they are ready to move up here.’”

The Orange County Register in California. “Longtime Irvine resident Helen Tornquist is calling Big D home now after volunteering for a transfer to north Texas. Last year, she sold her four-bedroom home of 13 years and moved to the Dallas area, where she manages a customer call center. Tornquist is one of thousands of Southern California residents who each year is throwing in the towel and moving out of state.”

“During the first 10 months of 2016, 5,706 residents of Orange, Los Angeles, Riverside and San Bernardino counties took out loans to buy a primary residence out of state, a CoreLogic analysis of mortgage applications shows. That’s not counting the number of people who paid cash for a home or who, like Tornquist, are renting.”

“Housing costs clearly are the chief factor. Southern California’s housing market is one of the most expensive in the nation, with the median house price averaging $473,000 in 2016, double the U.S. average. And the costs are even higher in Orange and Los Angeles counties, which accounted for most of the region’s out-migration. The CoreLogic study showed one out of every four Los Angeles-Orange County homebuyers moved out of their county.”

“About 8.3 percent moved to the Inland Empire, while 8.2 percent left the state altogether. ‘Generally, what you’re seeing is people in high housing cost areas are moving to lower-cost areas,’ said Archana Pradhan, a CoreLogic economist and the study’s author.”