The Housing Bubble

A report from the Denver Post in Colorado. “Metro Denver’s real estate boom may still have room to run, but developers behind several high-profile projects in the region said they are turning cautious. ‘People can’t make the deals pencil out,’ said Matt Joblon, CEO of BMC Investments. More are biding their time, but some developers are turning to riskier lending sources or accepting returns so low they have no margin of error if anything goes wrong. ‘We are being patient and waiting. There will be a comeuppance,’ predicts Andy Klein, founder of Westside Investment Partners in Denver.”

“Developers this decade have heavily focused on luxury apartment projects in Denver’s urban core. But even there, so much new supply is hitting the market that landlords have become more lax in qualifying tenants, which Joblon warned could lead to a steep jump in move-outs and tenants who leave without notice.”

From the Santa Cruz Sentinel in California. “Despite concerns about tax reform hurting California homeowners, Santa Cruz County buyers showed up, pushing the median price to a new record, $880,000, up from $787,500 a year ago, and boosting sales to 175, up from 136 sales a year ago, according to Gary Gangnes of Real Options Realty. Listings rose, breaking the shrinking inventory trend that has dominated for five years, but mostly higher-end properties are for sale. Of the 340 active listings the first week of November, half were priced at $1 million or higher.”

“Roger Berke, owner of Thunderbird Real Estate since 1989, said he worries the current market could fall ‘like a house of cards.’ He said he sees home buyers borrowing against stock options, taking advantage of the market boom and a record Dow Jones Industrial Average under President Trump, when the formerly aggressive federal consumer protection agency is being weakened. ‘It just doesn’t feel right,’ Berke said, noting proposals in Washington to cap the tax writeoff on mortgage interest for newly purchased homes and to cap deductions of state and local property taxes.”

“Dennis Norton did the redesign of a Depot Hill home, purchased by the seller in 2013 for $1.3 million. He stayed within the existing 1,800-square-foot footprint. Home values on historic Depot Hill have jumped $1 million, he said, estimating that two-thirds are empty, owned by buyers who live there part-time, and hope to retire there someday. But with so many second homes, few full-time residents are around to keep an eye on the neighborhood.”

The Herald Tribune in Florida. “Bucking the national trend, the number of Southwest Florida homeowners who were late on their mortgage payments unexpectedly shot up over the year. But analysts say it’s not a sign of new housing woes, but instead the temporary impact of Hurricane Irma. In the Sarasota-Manatee region, 4.9 percent of mortgages were at least 30 days overdue in September, up from 3.4 percent in August and from 4.2 percent one year earlier, CoreLogic reported.”

“Charlotte County also reported a 4.9 percent mortgage delinquency rate, also up from 3.4 percent the prior month and from 4.0 percent last year. Throughout Florida, the 30-day delinquent rate jumped from 6.3 percent to 7.5 percent in September. Nationally, the early stage delinquency rate — defined as 30 to 59 days late — rose by 0.3 percent, the largest gain since June 2009. ‘This does not reflect a deterioration in credit, but rather the impact of the hurricanes in Texas, Florida and Puerto Rico,’ said Frank Nothaft, chief economist at CoreLogic. ‘September’s early stage delinquency transition rate rose to 2.6 percent in Texas and it rose to 3.2 percent in Florida, which is higher than the 1 percent that’s typical for both states.’”

The Houston Chronicle in Texas. “More than three months after Hurricane Harvey,Houstonians eager to return home are stuck navigating an unfamiliar world of flood insurance policies, mortgage company procedures and contractor bills. Many face precarious financial futures as grace periods and forbearance programs come to an end, leaving borrowers with bills three times their monthly mortgage payments.”

“‘I’m seeing people cutting bait, saying, ‘I’m done,’ said Kevin Riles, a longtime Houston real estate broker. ‘They’re just trying to sell for what they owe or look at short sales.’”

“As financial pressure mount, foreclosures are looming. Foreclosure Information & Listing Service, a local foreclosure reporting firm founded in 1963, predicts the number of properties posted for foreclosure will reach as high as 2,000 by the end of 2018. That’s more than double what they were running earlier this year.”

“After Hurricane Katrina, nearly 55 percent of mortgage properties had a delinquency. ‘There are 1.18 million mortgaged properties in Harvey-related disaster areas, more than twice as many as were hit by Hurricane Katrina, with nearly four times the unpaid principal balance,’ said Ben Graboske, executive vice president of Black Knight Data & Analytics.”

“John Campbell was already behind on his mortgage when Harvey hit. His house wasn’t damaged by the storm, but his job was affected. Campbell is a mental health counselor and his wife also works in health care. They are both independent contractors and, like many others, were unable to work the week of the storm. In the following months, Campbell said, not as many people sought out counseling because of their own storm-related financial woes.”

“Campbell said he called his mortgage company and was told he could defer three months worth of mortgage payments until a later date. He figured he and his wife could get caught up on the two months that were past due and then resume normal payments. At the end of November, they called to make their past-due payment and were told they owed a whole lot more. ‘They told my wife, ‘No, you owe us five months,’ Campbell said. If the couple doesn’t make two mortgage payments each month through February their lender will foreclose. ‘I’m scared and I’m angry because we’ve got three kids and a 2-month-old baby,’ Campbell said.”

The Cohasset Mariner in Massachusetts. “After analyzing the most recent housing data for Norfolk County, Register of Deeds William P. O’Donnell expressed some concerns with regards to real estate sales and lending activity for the month of November 2017. ‘The average sale price of residential and commercial property for the month was $638,120, a 12 percent reduction year over year,’ said O’Donnell. ‘Also, total sales volume, again for both residential and commercial, was $619 million, a 9 percent decrease from November 2016. Clearly, the limited amount of available real estate inventory is having a drag on the real estate market in Norfolk County.’”

“The story gets more sobering when looking at the lending market numbers in Norfolk County. ‘As we have seen for the last few months, the number of mortgages recorded during the month of November decreased by a significant 28 percent,’ said O’Donnell. ‘Also, the total volume of mortgage financing, for both residential and commercial properties, came in at $1.1 billion, a 35 percent decrease year over year. There is no question consumers are being cautious when considering big ticket expenses. Furthermore, interest rates have crept up slightly, which have proven disconcerting to many homeowners interested in purchasing a home.’”

“A total of 125 Notice to Foreclose Mortgage documents, the first step in the foreclosure process, were recorded versus only 52 in November 2016. ‘Frankly, the Notice to Foreclose Mortgage numbers were disappointing,’ said O’Donnell. ‘We must continue to bear in mind that foreclosure activity has a human face, even during these seemingly decent economic times.’”