May 6, 2017

Current Homeowners Could See Their Value Plummet

A weekend topic starting with Global News in Canada. “It sounds like an unorthodox concept: Meeting complete strangers to see if you’re compatible to buy a house together. But as bizarre as it might sound, that’s exactly what happened on the third floor of the Toronto bar the Pilot in Yorkville on Thursday night. Lesli Gaynor, the organizer of C-Harmony: Creating Co-operative Connections said the idea came to her when she watched her sons using dating apps.”

“‘I have three young men and I was thinking about their reality and thinking about all of the apps they engage with on a daily basis and one of them has … used a dating site,’ Gaynor said. ‘It literally occurred to me that why can’t we take that kind of app or that style of meeting people and apply it to different things. It works for romance, so I think it could work for a mortgage.’”

The Philadelphia Inquirer. “The text I received last month from a friend back home in North Carolina caught me off guard. ‘I’m looking to buy a townhome,’ wrote my 25-year-old friend, unexpectedly mulling a decision to make the leap from renting a two-bedroom apartment in Charlotte. ‘Is now a good time to buy?’”

“It’s almost indisputable that, in the nation and region, the housing market at the moment is experiencing one of its best periods in recent history. In a conversation not long ago, local Realtor Mike McCann, of Berkshire Hathaway HomeServices Fox & Roach, told me the market is the strongest he’s seen in his more than 30 years of work. Home prices are reaching nearly the same heights they did before the housing bubble burst. This time, however, it’s happening much more naturally.”

“Yet just because home prices are rising today doesn’t mean they will be rising next month, next year, or two years from now. Online and in classrooms, questions over the future of the market abound: Are we in the midst of a housing bubble? And could that ultimately lead to another real estate recession?”

“National and local experts have begun predicting that this price acceleration can’t sustain itself. ‘Home prices,’ S&P CoreLogic Case-Shiller National Home Price Index chairman David Blitzer said last year, ‘cannot rise faster than income and inflation indefinitely.’”

From KVAL in Oregon. “Rents and median home prices in Springfield are rising about twice as fast as incomes have gone up, according to a city planning report. Median incomes went up 20 percent for Springfield residents between 2000 and 2013. At the same time, rents climbed 39 percent. Median house prices went up 43 percent. ‘People are squeezed. People are squeezed because their incomes have not increased as fast as the cost of housing has increased,’ said Tom Mulhern, executive director at Catholic Community Services.”

The Mercury News in California. “Major reforms are needed to lower tax rates and simplify the tax code, but that shouldn’t come at the expense of current and prospective homeowners, according to realtors. In a statement released soon after President Trump’s tax proposal was announced late last month, the National Association of Realtors said while the president’s tax proposal is well-intentioned, ‘it is a non-starter for homeowners and real estate professionals who see the benefits of housing and real estate investment at work every day.’”

“‘The mortgage interest deduction and the state and local tax deduction make home ownership more affordable, while 1031 like-kind exchanges help investors keep inventory on the market and money flowing to local communities,’ said William Brown, president of the national realtor group. ‘Those tax incentives are at risk in the tax plan released today. Current homeowners could very well see their home’s value plummet and their equity evaporate if tax reform nullifies or eliminates the tax incentives they depend upon, while prospective home-buyers will see that dream pushed further out of reach.’”

The Real Deal on New York. “After years of unloading massive amounts of cash in NYC, Chinese investors are now pulling back amid new capital controls out of Beijing. Residential brokers interviewed by The Real Deal said that in the last few months, some Chinese buyers have been unable to access their own cash — making it difficult for them to close deals. Meanwhile, commercial executives in New York said they’ve seen fewer Chinese institutions bid for trophy properties, while fund managers told TRD they’ve had difficulties raising money in major Chinese cities such as Shanghai and Beijing.”

“For New York, all of this amounts to some very unpleasant withdrawal symptoms. Not only has the industry become heavily dependent on Chinese investment, but the real estate market here is at a less than optimal point. Projects throughout the city are already feeling the squeeze, and both the residential and commercial sectors are softening.”

“Wendy Cai-Lee, a former executive at East West Bank who recently left to start her own debt and equity fund Oenus Capital, said the impact that the latest capital controls have had on cash flow to real estate deals in the U.S. is ‘very real.’ ‘There are larger deals that were effectively halted and a few deals that got killed,’ she said.”

“Scott Latham, a senior investment-sales broker at Colliers International, said that the cyclical slowdown in New York’s market did more to curtail Chinese investment than regulations. It started in mid-2016 ‘with uncertainty because of the election and Brexit, and then [capital controls] started to pile on,’ he noted. ‘It’s not as simple as just singling out the Chinese.’”

From The Guardian on Australia. “The burden of housing costs is biting even in Australia’s wealthiest suburbs as an unprecedented one in four households nationally face mortgage stress, according to the latest in a 15-year series of analyses. Households in Toorak and Bondi, prestigious pockets of affluence in Australia’s biggest cities, have made the list of those struggling to meet repayments amid rising costs and stagnating wages, research firm Digital Finance Analytics has found.”

“ last week found 57% of mortgagees could not handle a rise of $100 or more in monthly repayments. ‘The surprising thing is that people in Bondi in NSW, for example, or even young affluents who have bought down in Toorak in Victoria are actually on the list [of mortgage stressed],’ said the firm’s principal, Martin North. ‘The reason is they’ve bought significantly large mortgages to buy a unit, modified or brand new. They’ve got bigger incomes than average but essentially they are highly leveraged so they have little wiggle room and of course any incremental rate rise, because they’ve got such big mortgages, slugs them pretty heavily.’”

“Semi-retirees who moved to central coast NSW but are still exposed to large mortgages while their incomes were falling away were another atypical snapshot of those in financial distress, North said. ‘And the people at the top, the most affluent households, the ones who’ve got really big properties, have the lifestyles to match. So again, their spare cash is not huge. And that point – it isn’t just the mortgage belt, it isn’t just the typical battlers who are actually exposed here – shows is a much broader, more significant problem.’”

From Massachusetts Live. “Marjorie Evans was nearly in tears as she watched repo men, police officers and locksmiths converge on her Worcester home Thursday morning. Constables from housing court arrived at her 158 Orient St. home to evict her. The bank has allegedly tried to remove Evans from the property 10 times in the past two years. Evans has a ‘manageable disability’ that has been exacerbated by the court process. She had hired a lawyer to represent her in housing court, but the attorney suffered a fatal heart attack a month before her hearing.”

“She was forced to represent herself and revealed her disability to the court. She was allegedly questioned for 20 minutes about her condition. ‘I stood in court and told them, ‘There’s no way that Freddie Mac bought this property, there’s no way Freddie Mac filed those documents, those are all lies.’ And yet, the housing court is willing to accept Freddie Mac’s word and allow them to destroy me,’ Evans said.”