The Housing Bubble

A report from Reuters. “Janet Yellen used her last press conference as Fed Chair to muse that a flat yield curve should not be interpreted as a sign that the economy is heading for a slowdown. In other words, ‘This time it’s different.’ Seasoned Fed-watchers will be forgiven for feeling a sense of deja vu: Her predecessors Alan Greenspan and Ben Bernanke spun exactly the same line before the last U.S. recession began. In July 2005, then Fed chairman Alan Greenspan told the Senate Banking Committee there was a ‘misconception’ of the importance of the yield curve. The supposedly unusual behaviour of long-term yields, where they fell even though interest rates were rising - a phenomenon Greenspan dubbed a ‘conundrum’ - first became apparent in 2004.”

“The Fed started a tightening cycle in May that year with the fed funds rate at a half-century low of 1 percent which would end two years later with borrowing costs at 5.25 percent. In March 2006, barely a month after succeeding ‘the Maestro’ as Fed chair, Ben Bernanke echoed Greenspan’s skepticism that the yield curve was a harbinger of darker economic times ahead. ‘I would not interpret the currently very flat yield curve as indicating a significant economic slowdown to come, for several reasons,’ he told the Economic Club of New York on March 20.”

From the Preston Citizen in Idaho. “The Daytona Dairy in Dayton has passed into the history books as load after load of semi-haulers moved 2,900 cows to their new homes last week. The decision to sell was a difficult one for owner John Gomez, said his manager, Miguel Serna. But a lack of demand for the milk and falling milk prices is behind the move he said. ‘There are 20,000 too many cows in Idaho, Mexico has increased its dairies by 120 percent, and Canada is no longer taking our milk,’ he said.”

“The number of cows in the state have increased annually by about 20,000 animals to it current level of 600,000, said Idaho extension agent Ben Eborn. ‘That’s unreal,’ he said. Idaho is currently the fourth highest dairy producing state in the nation. Locally, before the sale of Daytona’s dairy cattle, Franklin County dairy cattle numbered 14,500. Ten years ago, it was 11,500, according to the USDA.”

“But at the same time, Canada raised is own quota and Europe has lifted its quotas, making it possible for their own dairymen to produce more of their own needs, and lessening their need for U.S. dairy products, said Serna. ‘It’s true, there is a glut of dairy products around the world,’ said Eborn.”

From Quartz Media. “The stress had been building on American retailers for some time, but in 2017, it simply became too much to bear. Before the year was half finished, it was on track for more store closures in the US than the great recession in 2008. Richard Hayne, CEO of Urban Outfitters, went so far as to liken the situation to the pop of the housing bubble that started the recession. The research firm Fung Global Retail & Technology predicts there will be more than 9,400 stores shuttered by the time this year is done.”

“Main streets and all but the high-end malls are looking dismal in what many have dubbed the ‘retail apocalypse.’ Undeniably there was a culling among long-withering department stores, and any number of struggling brands with bloated store spaces and store counts across the country.”

The Grand Forks Herald in North Dakota. “Some say Grand Forks has a healthy vacancy rate for rental units. But others believe the city may have too many apartments. ‘We’re overbuilt, absolutely overbuilt,’ said Kevin Ritterman, owner of real estate developer Dakota Commercial. ‘North Dakota as a whole is overbuilt.’”

“Demand and easier access to capital may have caused overbuilding, Ritterman said.”

The Orlando Sentinel in Florida. “Economists predicted slower price growth in Orlando, about 3 percent — down from double-digit increases in recent years. Getting back to 2006 price levels is key for homeowners who purchased at that time and also for those trying to gain a bigger ownership stake in their homes. One concern: Price increases could stall if investors dump the distress sales they purchased and transformed into rentals. Orlando is seeing near-record levels of single-family homes used as rentals, according to Zillow.”

“Seminole County schoolteacher Catherine Jollie, 26, said she looked at more than 20 houses when she was shopping earlier this year. Most of the houses were investor owned, empty and in need of work. Even though prices seemed high for the fixer uppers, they sold fast. Houses went under contract so quickly that her uncle, Winter Park real estate agent David Welch, quickly crossed them off the list because they were snapped up. ‘It was so frustrating to go in and know I couldn’t beat the offers from other investors,’ she said.”

“Welch said a wave of investment groups selling off properties could swell supply and depress listings. ‘I have definitely run into investors starting to divest themselves and I’m wondering what impact that will have,’ he said, adding that investor sales of starter homes fail to deliver the move-up buyers that benefit a market. ‘The investors are starting to say: ‘This may have played itself out.’”

The Philadelphia Inquirer in Pennsylvania. “If you’re tired of paying increasing rents, the good news is that it’s a buyer’s market in Philadelphia. The bad news, of course, is that if you’re trying to sell a home, it might take awhile. A new report by brokerage firm Owners.com lists Philadelphia as the third-best buyers’ market in the nation. The buyer’s markets in the top 10 — New York, Chicago and Boston among them — had an average listing price of $297,794. The report says that is $35,330 below the national average. In the end, homes in those markets sold for an average of $16,375 less than their listing prices, researchers found. The homes tended to be active for two weeks longer than properties elsewhere.”

“Number-crunchers also identified markets they called ‘overheated.’ They include locations where residents are spending more than 33 percent of their household income toward their mortgages. Almost all of them are in California, but Oregon and Hawaii squeak in there, too.”