July 15, 2017

The Market Has Moderated From Unsustainable Increases

A weekend topic on where we are starting with the Press Telegram in California. “For 62 straight months, Southern California home prices have gone in one direction. Up. Five years ago, you could snatch up a median-priced condo in Orange and Los Angeles counties for about $280,000, 76 percent less than today’s prices. A median-priced house cost $323,000 in L.A. County five years ago and $495,000 in O.C., about $260,000 less than today’s prices in both counties. Are we at the peak? Not one of the economists we interviewed thinks we are, at least not for entry-level homes. Luxury homes, priced at $2 million and up, may have reached a price peak and are facing an oversupply of listings, analysts said.”

“How much longer prices rise depends on what happens to the overall economy. ‘At some point, there’s going to be a correction, but I don’t see it on the horizon,’ said Pat Veling, president of Brea-based Real Data Strategies. ‘Sellers want more than sellers got six months ago.’”

“Oscar Wei, a senior economist for the California Association of Realtors, predicted mortgage rates will go up half a percentage point this year and half a percentage point next year. ‘You’re most likely seeing an increase of 10 percent or 12 percent in your mortgage payment’ if you wait, Wei said. Southern California home prices for deals signed in December averaged 3 percent less than deals signed the preceding spring, CoreLogic figures show. In Orange County, prices averaged 2.5 percent less. ‘If you see something you are interested in and you can afford it — maybe not a single-family home, but a condo or a town home — (buy it) and start building equity,’ Wei said. ‘I wouldn’t wait.’”

From The Oregonian. “More houses came into the Portland-area market in June. The month’ saw more newly listed houses than any June since 2008, according to the Regional Multiple Listing Service. Buyers are getting choosier, said Brian Houston, principal managing broker at Coldwell Banker Bain in Portland. As a result, some overpriced homes are sitting on the market. ‘The sellers that have recently come on the market are overpricing because they’ve been able to get away with it up to this point,’ Houston said. ‘I think buyers are saying, ‘I’m a little tired of this.’”

“It’s not clear what might come next. The cooling off, combined with an expected increase in mortgage rates, could help slow growth in home prices to a more sustainable level. But even the recent uptick in new listings doesn’t suggest a road to a totally balanced market. ‘We don’t see enough inventory coming on to think that we’re going to do a pendulum swing to the other side,’ said Israel Hill, a managing broker with John L. Scott Real Estate in Northeast Portland. ‘We’re still going to go into next spring with a shortage of inventory.’”

From Maui News in Hawaii. “Median single-family home prices in Maui County hit $700,000 or more for the third time this year in June when the midpoint price at which homes sold was $740,000, according to the Realtors Association of Maui. Median home prices topped $700,000 only one month last year (in December, when the price was $700,500). And, before that, Maui County median home prices had not gone north of $700,000 since September 2006, the association’s historic data show.”

“‘There is strong demand for homebuying, emphasized by higher prices and multiple offers on homes for sale in many submarkets,’ the association’s commentary on June statistics says. ‘As has been the case for month after month — and now year after year — low inventory is the primary culprit for any sales malaise, rather than lack of offers.’”

“Of the 1,089 homes sold in the immediate past 12 months, 9.7 percent were short sales or foreclosures; and of the 1,377 condos sold, 5.6 percent were similarly distressed.”

From CBC News in Canada. “Whether you are buying or selling a home in the Greater Toronto Area, you might be saying the same thing: what a difference a year makes. Accordng to Phil Soper, president and CEO of Royal LePage, since April the GTA housing market has moderated from unsustainable increases in prices from the first quarter. ‘It has and will continue to be for the rest of the year, a much much better market for buyers,’ said Soper. ‘It’s not that homes have suddenly gone on sale, that’s a misconception. Home prices continue to rise.’ But Soper says there’s ‘no longer a lineup of 15 or 10 people all bidding on the same property.’”

“Cindy Sampson. 39, and her husband had been looking for a house for more than a year and were about to throw in the towel. Then, last week they found a place that was within their reach, made an offer and found themselves on their way to home ownership. ‘The overbidding wasn’t crazy and out of control. We jumped,’ she said.”

“Those selling their homes have noticed a big difference too. Sampson says she can see it because she has friends who are trying to sell right now. ‘They put their house on the market and haven’t had an offer,’ she said.”

From Radio New Zealand. “Gareth Kiernan, chief forecaster of the economic consultancy Infometrics, is cautioning political parties about the economic cost of a sharp reduction in immigration. He said the economy has needed and been able to absorb the more than 70,000 immigrants who had settled here in the past 12 months to fill skills shortages. Mr Kiernan accepted that the high numbers of immigrants had put pressure on housing and infrastructure, and could have been better managed, but said without them the economy would face some big negatives such as rising labour costs and inflation, which would trigger higher interest rates.”

“‘Given the slowdown already occurring in sales activity and house price growth, this potential cocktail of rising interest rates mixed with a government clampdown on migration would be lethal,’ said Mr Kiernan. ‘Faster lifts in mortgage rates and debt-servicing costs would threaten a jump in forced house sales, hastening a correction in the housing market and hammering consumer confidence.’”

From Fairfax Media in New Zealand. “More houses have resold at a loss in Christchurch than other centres in the aftermath of the region’s building boom, while rents are reducing. Data released from property analytics company CoreLogic said 7.9 per cent of sellers in Canterbury sold for less than they bought in the first three months of the year. That was a slight increase from 6.9 per cent in the previous quarter. Dunedin had the second highest proportion of resale losses (2.7 per cent), while in Auckland and Wellington it was 1.3 per cent.”

“Housing affordability commentator Hugh Pavletich said Christchurch’s slowing market was likely to be followed by Auckland where the housing bubble was shutting more people out of the market. Christchurch’s market was cooling, but it still required nearly six times annual household income to buy a property while in Auckland it was 10 times, Pavletich said. ‘It will affect other centres. The longer the bubble goes on, the worse it is when it deflates,’ Pavletich said.”

“Canterbury president of the Property Investors Federation, Stephen East, said he was unaware of a surge in loss-making house sales by investors and he questioned the size of the CoreLogic survey sample. ‘But there’s a housing over supply. Look at all the building to the west and north of Christchurch. Who is going to buy and live in them? It’s flowing through to falling rents,’ East said.”

“CoreLogic head of research Nick Goodall said the picture was uneven at a regional level. ‘Some regions as well as apartment owners and property investors are more likely to face a loss,’ Goodall said.”