The Housing Bubble

A report from Realtor.com. “Maybe you’re addicted to those home-flipping shows on HGTV where glam couples buy grim shacks, spend 22 minutes smashing down walls and adding funky kitchen backsplashes, and then make tens of thousands selling the refurbished places on the open market. Or perhaps you’re jonesing for a steady stream of extra income and feel certain you’ve got what it takes to be a landlord. Or just maybe you’re on the prowl for a hands-off way to make serious real estate money with financial investments that don’t require laying down new flooring or screening prospective tenants.”

“Whichever option floats your boat, you’ve got plenty of company. After the epic boom-and-bust of the speculative home-flipping market in the aughts, everyone again seems to be looking to make a quick buck by becoming a real estate investor. But, of course, there’s no guarantee. And that’s why the thrill-a-minute world of real estate investing isn’t for everyone—especially when life savings are involved. ‘Real estate is very unpredictable,’ says certified financial planner Jenna Rogers of Mission Wealth in Santa Barbara, CA. ‘A lot of people feel like you can’t lose money in homes, but that’s not really the case. If there’s any kind of turmoil in the market, real estate usually gets hit really hard.’”

“OK, now that we’ve gotten that out of the way, let’s go shopping.”

From the National Association of Realtors. “Pending home sales sank in August for the fifth time in six months, and slower activity in the areas hit hard by Hurricanes Harvey and Irma will likely pull existing sales for the year below the pace set in 2016, according to the National Association of Realtors®. Lawrence Yun, NAR chief economist, says this summer’s terribly low supply levels have officially drained all of the housing market’s momentum over the past year. ‘August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,’ he said. ‘Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.’”

“With little relief expected from the housing shortages that continue to plague several areas, Yun believes the housing market has essentially stalled.”

From CNBC. “There is so much demand for housing and so few homes for sale that prices have nowhere to go but up — unless of course they get so high that potential buyers have no choice but to back away. That may be what is happening now. After hitting a peak in March of this year, price gains month to month have been coming down. In Southern California, prices are still up considerably from a year ago but seem to have stalled, according to CoreLogic. In Washington, D.C., where prices have been hitting new peaks recently, the median home price in August fell more than 5 percent annually, according to the Greater Capital Area Association of Realtors.”

The Mercury News in California. “We asked CEO of the Sereno Group, Chris Trapani to make sense of the real estate market in the heart of Silicon Valley: the notoriously tight supply of available homes and the persistent demand that keeps driving prices up. How do buyers manage to keep outbidding one another in a county where the median price of a single-family home is $1.1 million. Q: What have you uncovered? What are your theories?”

“A: The obvious thing is that the NASDAQ has been over 6,000 for a while; that’s a lot of equity that people have that they’re able to translate into housing. That’s the no-brainer. Another appreciation driver is the increasing use of Restricted Stock Units — known as RSUs — in loan qualifying.”

“Q: Does this create any longer-term risk? Is it a risky loan practice for the market? A: I think there’s more risk than if I’m qualifying from a base salary alone …”

The Ahwatukee Foothill News in Arizona. “The distribution of millennial buyers is not equal across the East Valley. While Chandler and Gilbert are attracting millennials, Ahwatukee is not a primary market to those buyers because of a higher barrier to entry. The one market that is seeing a glut of inventory in Ahwatukee is luxury homes. While the market has improved in the past few months, there is still a lot of inventory sitting because there are fewer buyers interested in homes above $750,000, said Realty Executives’ Patrick Lewis.”

The Wicked Local Georgetown in Massachusetts. “This year, especially in eastern Massachusetts, has seen a spike in housing prices and competition of offers unlike anything in recent memory. Currently, Newburyport has 67 homes for sale, with a wide price range from $379,000 to $4.1 million. Some of those listings have been on the market for well over a year, said Lisa Sevajian, realtor with Bentley’s Real Estate Group, so first-time buyers may find luck in Newburyport.”

“‘You’re not moving to Newburyport for no reason,’ Savajian continued. ‘You’re coming here because you like the lifestyle. It’s not like we have tech, for example. There’s a very specific buyer. So we have a lot of inventory, and prices are definitely attractive to buyers, and there’s a lot of price reduction this time of year.’”

“In nearby Topsfield, which has just 21 homes for sale, it’s a different story. The lowest list price in Topsfield is $472,000, and the highest is $5 million. ‘It’s a really good time to be a luxury buyer, because there’s a ton of luxury houses on the market - 831 days on market, 103 days on market, 351 days on market - and the summer may be over in Newburyport as a whole, but the luxury buyer should be out in full force,’ Sevajian said. ‘I’m encouraging my people who are looking in the higher price points to get out and get serious now, because people are going to be more willing to negotiate as we’re heading into the winter than they are coming out of the winter.’”

“There’s hope for those looking in Newburyport, which Sevajian says is a ‘cold market.’ ‘What that basically means is the summer market is long over - There are good houses, there are good values, there are good bargains and there are a lot of price changes,’ Sevajian said. ‘And what happens this time of year is that the people who are serious about selling stay on the market, and the people who are only looking to sell because it was a hot market pretty much take their house off the market.’”

“Even closer to Boston, Medford is still in a hot market - a really hot market, up 10 percent over this time last year - but foreclosures in that city may offer buyers hope. ‘Houses there still go quickly, but there’s a lot of foreclosures in Medford - There are about 5 times the amount of foreclosures that there are on the national average. So you’re going to have some distressed sales and some short sales that give buyers an opportunity to get into a hot market like that,’ Sevajian said.”

From Mansion Global on New York. “Last week was the worst week of the year for Manhattan’s luxury real estate market, according to the latest Olshan Realty report. The results were not simply lower than anticipated, but both the number of contracts signed and the total volume were the lowest of the year. Just 11 contracts were signed at $4 million or over—Olshan’s definition of luxury —for a total dollar volume of $61,047,990.”

“For a moment, it had appeared that the dreaded summer slump was over. During the week ending Sept. 17, and for the first time in 11 weeks, more than 20 luxury contracts were signed, signaling the market was on the up, but the surge didn’t last. The second most expensive was a three-bedroom condo at Tribeca’s ‘Jenga’ building, 56 Leonard. It was asking $6.975 million, reduced from $7.45 million when it went on the market in August 2016. Of the 11 contracts signed eight were condos, two were co-ops and one townhouse sold; no luxury condops sold last week.”