October 30, 2017

The Same Tides That Rise May Also Fall

A report from the Portland Tribune in Oregon. “A national expert says Portland faces many of the same problems as other cities with availability and affordability of housing. But Christopher Herbert said a couple of factors — rising prices and rents, and gentrification of neighborhoods — put Portland’s problems ‘a bit on steroids’ and make it ‘ground zero’ for a rapidly changing urban area. Herbert said it’s difficult to turn around a market with increasing costs and limited supply in an era when growth of household incomes has failed to keep pace. ‘In order to solve it, we need to work on both,’ Herbert said at the City Club of Portland. ‘We need to work on how to get incomes up — and for those who can’t get their incomes up, we need to work on subsidies — and on the price side, we need to get the cost of housing down.’”

“In Portland, Herbert said, the median home price is now five times the median household income — the point at which half are above and half below — compared with a national average of three times. That ratio is equal to Boston’s. During the housing bubble before the 2008 recession, Herbert said, Portland’s ratio was 4.5 to 1. According to the center’s 2017 report, home prices in Portland and other major West Coast cities rose 40 percent or more in inflation-adjusted dollars between 2000 and 2016 — increases comparable to parts of the Northeast.”

“Supply has not kept pace with demand — and Herbert said about 11 million people say they pay 50 percent or more of their incomes for housing, well above the 30-percent mark defined by federal guidelines as ‘affordable.’ ‘It does not leave much left over to pay for food, health care, transportation and other necessities of life,’ he said. There is construction, he added, ‘but only at the high end’ for 1.6 million renters with household incomes topping $100,000. ‘We are building for them. That market is getting saturated,’ Herbert said. ‘We haven’t been building for the rest.’”

From KJZZ in Arizona. “If you drive around the Arcadia neighborhood in east Phoenix, you’ll be hard pressed to find a house that hasn’t been renovated recently. Austin King is a local developer and lives in this neighborhood. ‘The amount of construction, the fences around houses, I mean just, it’s everywhere,’ King said.”

“According to Trulia, home prices in Maricopa County have increased by 83 percent, on average, since 2011. For perspective, King hits the rewind button. ‘It was shooting fish in a barrel. Literally, if you tried you could buy two or three homes in one day,’ he said, adding the fallout made for some crazy times in home buying if you had the money to invest. Those conditions were created, in part, because there was a giant glut of homes here in the valley. ‘By some estimates we overbuilt by 100,000 housing units,’ said Mark Stapp, the director of the Center for Real Estate Theory at Arizona State University.”

“To get a better idea of just how much things have changed across the valley KJZZ and our partners at the Arizona Center for Investigative Reporting ran the numbers. ‘We saw a couple of census tracts where the price per square foot increased sometimes two or three times,’ said Evan Wyloge, a reporter with AZCIR. He said trends like this popped up all over the valley. Take Mesa for example. Home values there are up more than 160 percent since 2011.”

The Phoenix New Times in Arizona. “Metro Phoenix is one of the lowest-ranked areas for residents spending within their means, according to a new study. The report from LendingTree combined anonymous data from the company’s users with average household income numbers from the U.S. Census Bureau. Phoenix nearly bottomed out the list of the top 50 metropolitan areas, placing 48th. The report surmised that the housing bubble of the last decade hit Phoenix especially hard, with a large number of residents whose mortgages take up a large portion of their income. Other cities in the Southwest and California are also struggling under housing debt.”

“‘Like Las Vegas, Phoenix is still recovering from the housing bust of the late 2000s, and residents are stretched,’ the report says.”

“Yet unlike cities with higher average incomes, such as San Francisco, with residents who can support such mortgages, Phoenix has a lower-than-average household income among the 50 metro areas LendingTree examined. ‘The challenge in Phoenix, I would say, is mostly on the housing side,’ report author Brian Karimzad told Phoenix New Times. ‘Phoenix residents have housing debt balances, mortgage balances, that are 23 percent higher than the national average, but their incomes are lower than the national average,’ he said.”

The Charlotte Observer in North Carolina. “Home values in Charlotte rose at the fourth-highest rate among U.S. cities last month, according to Zillow. Zillow Chief Economist Svenja Gudell said limited supply and high demand is impacting markets nationwide. Gudell said that despite the rapidly increasing prices, another housing bubble isn’t being inflated. ‘It might be easy to assume another bubble is emerging, with home values growing 10 or 12 percent per year, but don’t worry,’ Guddell said, in a statement. ‘The market is reacting to basic economic laws, and is behaving exactly the way we would expect it to given good overall growth, limited supply of homes for sale and decent housing affordability thanks to low mortgage interest rates.’”

“Only three cities saw their home values rise faster than Charlotte: Las Vegas (up 10.2 percent), San Jose, Calif. (up 10.3 percent) and Seattle, home of both Amazon and skyrocketing home prices (up 12.4 percent).”

The Los Angeles Times in California. “A trio of experts gave a largely positive outlook on the state of the economy during a Newport Beach Chamber of Commerce forum. The event at the Balboa Bay Resort featured UCLA’s Jerry Nickelsburg, an adjunct professor of economics and director of the UCLA Anderson Forecast; Christopher Schwarz, an associate professor of finance at UC Irvine and faculty director of the school’s Center for Investment and Wealth Management; and Jonathan Lansner, a business columnist with the Orange County Register.”

“Nickelsburg noted how home prices in San Diego, Los Angeles and San Francisco have not only rebounded from the recession, but have surpassed their 2007 housing bubble highs. Schwarz said most areas of the economy, such as bonds and real estate, have been faring well. He said there’s always the fear, though, that the same economic tides that rise may also fall. Lansner, who’s been covering business for the Register since 1986, said it’s practically impossible to tell if another housing bubble is en route.”

The Sacramento Bee in California. “Sacramento County’s real estate market saw its lowest September sales total in three years, the result of low inventory and relatively high prices that have priced some buyers out of the market, according to one housing analyst. As for the three-year low in September sales, CoreLogic analyst Andrew LePage said there just aren’t many homes on the market, and more buyers may be unwilling to pay high prices. The area is coming off a hot summer season, when more homes were sold across the four-county Sacramento region than in any similar period since the peak of the housing bubble in 2005.”

From Builder Online. “An infill development in Sacramento is seeking to lure first-time home buyers with offerings in the $300,000 range and mortgages requiring no down payment. The Sacramento Bee reports: ‘The Mill at Broadway, central Sacramento’s largest infill housing development, has begun offering mortgage loans with no down payments, hoping to entice more young first-time buyers who don’t want to pay high rents, but don’t have cash for upfront payments on a house, its developer said.’”

“The densely packed project is expected to eventually have 800 to 1,000 homes. Since it opened 20 months ago, The Mill has sold 175 units, mainly to young singles, said developer Kevin Smith of Ranch Capital, a Southern California-based investment company.”

From KOLO 8 in Nevada. “The luxury housing market in Northern Nevada has grown substantially over the past year. ‘What we’re seeing with affluent consumers today is that we know they’re very globally-minded, that they love real estate, and that they’re looking for a lifestyle,’ said Stephanie Anton of Luxury Portfolio International. ‘Its not just about a home and it’s not just about a shelter decision. They want to live in places where they can bring their families and have wonderful experiences, so a place like Reno, like Lake Tahoe makes a lot of sense for the affluent consumer today.’”

“‘We look at luxury as a million dollars or more; that sort of defines who that client is,’ said Nancy Fennell, President of Dickson Realty. ‘But I think luxury is a very local term; what is luxury in our market is certainly very different from what it is in San Francisco. I think that is what has doubled that market this year from last year; what people can get for their money here.’”

“And while these days it’s a little easier for buyers who can compete in the higher-end markets, times are always changing. ‘It’s the yin and yang of real estate,’ Fennell said. ‘We will have too much inventory and prices will go down and when that is absorbed, then we will have too little and we’re just in that too little in the under $500,000 range right now.’”