The Housing Bubble

A report from the Star Telegram in Texas. “Patti Sue Kirkey makes decent money with periodic raises, as a project manager for a mortgage company. Kirkey’s experience illustrates an unfortunate reality in North Texas. By and large, wages are not increasing fast enough for residents to keep pace with the cost of housing. Her experience in Fairmount didn’t end well. She had hoped to buy the home she rented for two years. But during that time her landlord, who was apparently eager to capitalize on fast-rising home prices in much of Fort Worth, raised the asking price beyond Kirkey’s budget.”

“‘The last house I was in for two years, I wanted to buy it, but the price went up $75,000 for no reason,’ Kirkey said. ‘There were no improvements.’”

“Thao Truong said her family is interested in selling their six-bedroom home In North Richland Hills and downsizing. Truong said one of her neighbors bought a home for $215,000 about four years ago and recently sold it for more than $300,000, and her family wishes to make a similar sale and use the proceeds for a smaller, higher-quality home. ‘The prices are going to keep going up, so my advice is to buy now. Buy while you can,’ she said.”

“The situation is probably temporary, said Lawrence Yun, chief economist for the National Association of Realtors. Builders are moving quickly to build new homes to meet that demand. ‘I don’t anticipate such a misalignment trend can continue for the next five years. It’s just not possible,’ Yun said. ‘There needs to be … a situation of home prices tamping to let wages have a chance to catch up.’”

From KTVZ in Oregon. “It’s not cheap to buy a home in Bend, and those high home prices are continuing to rise. In January, the median price for a single-family home in Bend was $410,000. That’s up $15,000 from December. The cost of homes in housing developments is typically determined by the builders, and a big part of that comes from the cost of land, Bend Premier Real Estate Principal Broker Lynnea Miller explained.”

“‘I’ve lived in Bend since 1985, and I can recall, you could pick up a lot a really nice lot for $5,000 back in those days,’ Miller said. ‘Now that same lot, shrink it down to make it about 4,000 square feet, and the going rate for that is $85,000 to $95,000 for a developed lot. When you have to spend that kind of money for land, the home you build on it has to be at least $400,000.’”

“Miller also said most buyers are coming from out of town. ‘Bend has been found by an awful lot of West Coast people relocating from the Bay Area or Seattle, and compared to those markets, Bend is still very cheap,’ she said. ‘The thing I’m concerned about: We don’t want to become an Aspen, where the only people who can live here are the wealthy. Where do people with regular jobs live?’”

From The Stranger in Washington. “The owner of several Seattle condos appears to be learning for the first time that she owns the condos but not the air outside them. Londi Lindell owns several units in a five-unit, three-story condo building in Westlake with views of Lake Union. Now, a developer wants to build a six-story building nearby. Lindell appealed, asking the city council to consider additional evidence: a Redfin ad from when she bought the building advertising ‘THE VIEWS ARE INSANE.’”

“In her appeal, Lindell wrote that she ‘purchased the Marcus Condominimums in September 2017 principally due to the spectacular views of Lake Union from each of the condominium units.’ (The council declined to consider the Redfin ad.) Emily Badger wrote about this phenomenon in the New York Times last month. When homes are just another commodity, those who own them (whether a single family house or a building of condos) naturally see an investment to protect. ‘Zoning effectively invited homeowners to look beyond their properties in ways they hadn’t,’ Bagdger wrote. ‘And it helped create the expectation that communities would change little over time — or that homeowners would have a say if they did.’”

From The Real Deal on New York. “Manhattan’s luxury market had its most-active week in nine months, with 37 contracts signed at $4 million and above, according to Olshan Realty’s weekly market report. The week’s No. 1 contract went to late philanthropist David Rockefeller’s Upper East Side townhouse, which had an asking price of $27 million. That’s a 17 percent reduction from the $32.5 million it had been asking when it hit the market in June.”

“The 40-foot-wide home at 146 East 65th Street spans nearly 10,000 square feet and has eight bedrooms, eight full bathrooms, a library and 8 fireplaces. It needs a gut renovation.”

“The week’s asking price sales volume totaled $296.25 million, with a median asking price of $6.1 million. Luxury homes spent an average of 477 days on the market, and had an average discount of 8 percent from the original asking price to the final one.”

From MyPanhandle in Florida. “Bay County is in the midst of another construction boom. However, it’s not as big as the one back in the early 2000’s. In fact, you don’t have to look very far to find remnants of some of the projects developers started, but never completed when the bubble burst in 2008. The 60-acre Morningside housing development off U.S. Highway 231 long ago became a pipe farm.”

“‘There are subdivisions all over this county. Which most of them now are called pipe farms because they hadn’t been developed. There’s pipes out of the ground,’ said President/CEO, ERA Neubauer Real Estate, Inc., Tom Neubauer. Neubauer says the project was one of many that began in the early 2000’s, and ended shortly after the market crash in 2008.”

“‘It was really just a product of the recession,’ said Callaway Mayor, Pamn Henderson. Callaway has it’s share of disappointment with abandoned developments. The city actually extended water and sewer lines to accommodate several hundred houses planned in the Eastbay development. Then the housing market took a nose-dive. Without the new houses, there wasn’t enough sewage to pump through the lift station near Callaway City Hall. That was partially responsible for a potentially deadly methane gas dispute between that county and the city, that is just now being resolved.”

“City officials may have a reason as to why someone isn’t fishing for those projects with sewage and roads already in place. ‘It may be a funding issue. In some cases I think they just felt like the market’s not there anymore. So, why put anymore money into it to have units that are going to sit vacant,’ said Henderson.”

The Union Leader in New Hampshire. “Before Bear Stearns and Lehman Brothers, before Countrywide, before Fannie and Freddie, some in New Hampshire were seeing troubling signs. The real estate market here and nationwide was hot and credit was easy. Nobody wanted to miss out on home ownership - and lenders were all too happy to help, writing mortgage loans with no down payments, adjustable interest rates and no income verification. But what if the bubble burst?”

“It’s been 10 years since the 2008 crash. Unemployment is near record lows and the stock market is at an all-time high. Home prices in New Hampshire are back to where they were before the recession. We asked folks who weathered the crisis here to look back - and whether they thought it could happen again.”

“Consumers, with lenders’ encouragement, were buying bigger and better homes than they could afford, said Barbara Cunningham was the mortgage origination manager at St. Mary’s Bank in Manchester. ‘The consumers that got into these loans, for the most part, I think were banking on a huge and quick increase in equity.’ The housing market was so hot that everyone assumed they could sell their homes at a profit if something went wrong. And go wrong it did: house values started dropping, and once they started they didn’t stop. ‘That’s when the whole thing started to unravel,’ Cunningham said. ‘All it takes is a couple decades go by and people forget. Regulations get changed, get removed. And anything that’s happened once can happen again.’”

“Shannon Miller says she’s the first to admit she was naive 10 years ago when she took a home loan with a local mortgage company. ‘I trusted them,’ she said. She lost her house and her inheritance, and filed for personal bankruptcy. A decade later, she said, ‘I’m still angry.’”

“‘A substantial percentage involved people who had been in a home and were basically taking equity out, and frankly, the market was encouraging people to do that,’ said Dean Christon, CEO of New Hampshire Housing Finance Authority, And Christon said, ‘The reality is a lot of that could happen again.’ He agreed there are new regulations put in place to ensure that lenders verify that borrowers can afford their loans. But, he said, ‘As prices go up and as inventory tightens, there is always pressure from lots of actors to loosen up those kinds of rules,’ he said.”