October 13, 2017

The Glory Days Could Soon Become A Nightmare

It’s Friday desk clearing time for this blogger. “The appraisal profession has been changing over the last ten years as the economy, real estate market, demographics and laws have changed. Recently both Fannie Mae and Freddie Mac introduced lending programs that waive all appraisal requirements for certain purchase money mortgages. The agencies are competing with each other to increase market share and it is highly probable the use of appraisal waivers will grow, much to the risk of harm to consumers and the financial markets. Appraisers are the only ones involved in real estate transactions who are independent and unbiased. Everyone else has something to gain if the transaction closes. It makes no sense to remove the one independent voice and replace it with a data tool that can include flawed data, and is can be manipulated by those who will gain if the ‘number’ is hit.”

“Nashville is on pace for a record year for home sales, but there’s debate over whether growth is slowing across the region. The median price of a single-family home sold last month was $280,000, up 9 percent from a year ago. But on a month-over-month basis, that was down for the third straight month. Reflecting a potential slowdown in the market, appraiser Richard Exton said his analysis shows longer marketing times for homes with price drops through a series of listings and relistings. ‘This is something that wasn’t happening earlier this year,’ he said.”

“In case you missed it, the North Texas housing market has turned a corner. Things have definitely cooled a bit from the last few years. There are fewer bidding wars for properties and buyers are more likely to turn their noses up at an overpriced address. And the number of houses with ‘for sale’ signs in the front yard was higher in all but a handful of local residential districts. Real estate agents say that sales of D-FW houses priced above $500,000 are definitely slower than last year, as consumers digest several years of mark ups.”

“The moderation in our residential markets is good news for most analysts, who’ve been worried that North Texas’ residential sector is overheated.”

“After five years of recovery, prices are getting too high for some buyers, while the number of homes to choose from remains too low, said California Association of Realtors Chief Economist Leslie Appleton-Young. ‘I don’t see prices declining in the midterm. But we’re seeing prices moderate,’ Appleton-Young said.”

“The Kitsap County housing market continued to cool in September with home prices, pending sales and the number of new listings down from earlier this year, according to statistics from the Northwest Multiple Listing Service. ‘The market was on fire earlier this year, into the spring and summer months, but once August hit, we started to slow down,’ said Sandi Nelson, designated broker and owner of Poulsbo-based Mike and Sandi Nelson Real Estate. ‘We usually see a pick up in September, but we didn’t see that this year.’”

“The long-feared cool down of the Charleston region’s hot housing market may have set in. For the second month in a row, home sales skidded — and by a dramatic amount in September. ‘While the beginning of fall typically marks a slower pace of market activity, we may also be seeing the initial shift of the market,’ said Dave Sansom, president of the local Realtors group. Sansom said the past two years brought ‘monumental growth’ to the housing market through rapid increases in population and jobs. ‘We knew that wouldn’t continue forever and that at some point the market would begin to level out,’ he said.”

“Falling home prices in Toronto in September dragged down the Teranet — National Bank national composite house price index as it posted its first monthly decline since January 2016. David Madani, senior Canada economist at Capital Economics, said a sharper slowdown in price inflation in the coming months is unavoidable. ‘And with interest rates on the rise and mortgage financing rules likely to be tightened significantly later this year, the worst is still to come,’ said Madani, who has been longtime bear on the housing market.”

“There’s no shortage of warning signs that Sweden’s housing market could be going from red-hot to icy cool. At the most basic level, it’s all about supply and demand. The number of apartments up for sale just hit a nine-year high, but the flood hasn’t been followed by a gain in purchases. There’s also a massive increase in construction. Real estate agents are having problems unloading properties. Fewer people are showing up at viewings and sales are dragging on as buyers and sellers drift apart on price.”

“‘We have a gap between the sell and the buy side, in terms of how they value homes,’ said Henrik Rundgren, the deputy chief executive officer of real estate agent Notar.”

“Australia’s housing market sits atop a pile of increasingly vulnerable debt, according to Citi researchers, who on Friday outlined how the glory days for multiple property investors and interest-only borrowers could soon become a nightmare. Highly leveraged multiple-property investors are at the centre of the report, with 12 per cent of Australian real estate investors said to own six or more properties, according to new data cited by Citi analysts – a ’surprisingly high level of speculation.’”

“‘Tighter lending criteria and rising house prices has meant investors increasingly face net negative cash flows,’ analysts led by Craig Williams said. Additionally some suburbs, such as Sydney’s Bankstown, have seen investors create extreme, Hong Kong-level house price to income dynamics, reducing the pool of available buyers in these suburbs.’”

“A glut of properties could come onto the market. ‘Historically investors ‘sit tight’, but this has become increasingly less viable,’ Citi said, adding investors face a growing household ‘cashflow gap’ and reducing capital gains expectations. ‘Tighter application of responsible lending laws means that investors must now have a clear debt repayment plan, although for many prevailing interest-only borrowers this does not exist. The large levels of debt outstanding by borrowers aged in their 50s and 60s means many investors will need to sell property to discharge their debts.’”

“A push by the Chinese government to ease local housing gluts and fill empty apartments is creating a different headache by driving indebted cities deeper into the red. Under Beijing’s direction, more than 200 cities across China for the last three years have been buying surplus apartments from property developers and moving in families from condemned city blocks and nearby villages. The strategy, supported by central-government bank lending, has rescued housing developers and lifted the property market, which accounts for a third of China’s economic growth according to Moody’s Investors Service.”

“Underpinning the strategy is a cycle of debt. Cities borrow from state banks for purchases and subsidies, then sell more land to developers to repay the loans. As developers build more housing, they, too, accrue more debt, setting up the state to bail them out again. The burden on the state rises, as does the risk of collapse.”

“The government has tried other ways of filling apartments, such as offering cash subsidies to encourage rural migrants to buy in urban areas, but the program is the first large-scale case of the government becoming a home buyer itself. Bengbu officials are wary about publicizing its hand in the market for fear of driving up prices and speculative buying. ‘We don’t mention it as much now as in the past two years,’ the city official in charge of the program said. ‘Prices have been fluctuating a lot, and it’s a little bit out of control.’”

“One new resident, a 26-year-old auto factory worker, said he moved into Oriental Metropolis four months ago after his home was torn down by the government. He used part of his government compensation of 810,000 yuan ($122,000) to buy an apartment for 430,000 yuan. ‘The apartment is not as good as our village home,’ he said. ‘It’s much smaller.’ He said he plans to use the rest of the money to buy another home.”