The Housing Bubble

A report from the Bloomberg. “The Federal Reserve is steadily hiking rates, most recently on March 21 when the federal funds rate rose a quarter point to a target range of 1.5 percent to 1.75 percent. Libor, a benchmark rate the world’s biggest banks charge each other, is also on the rise. Adjustable-rate mortgages, or ARMs, are often tied to Libor, typically resetting once a year. ARMs proved to be a big problem during the housing bust, when it became clear that many Americans were using them to buy houses that they otherwise couldn’t afford.”

“‘People aren’t using them as the crutch of affordability like they did before the housing crisis,’ said Greg McBride, chief financial analyst at Bankrate. Thanks to tighter lending standards, homeowners with ARMs now tend to be affluent, he said. ‘They either plan to sell the home before the first adjustment comes, or it’s a product that works with their cash flow.’”

From National Mortgage Professional. “Here is a data survey that hasn’t been tapped recently: An analysis of housing markets based on cash-out refinancing activity. According to LendingTree, Albany, N.Y., leads the nation’s major metro markets with the greatest share of refinance mortgages funded with cash-out portion: 73 percent, with an average loan amount of $166,504. Portland placed second with a 72 percent share and an average loan amount of $266,152, followed by Cape Coral, Fla., with a 72 percent share and an average loan amount of $162,975. Rounding out the top five are Boise City, Idaho, with a 72 percent share and an average loan amount of $209,033, and Scranton, Pa., with a 71 percent share and a $142,666 average loan amount.”

“As for the cities with the highest loan amounts for refinance cash-outs, the national leader was a city that rarely shows up at the top of housing data charts: Bridgeport, Conn., where the average loan amount is $453,307. Second and third places were taken up by a pair of Bay Area metros: San Jose, with an average loan amount of $451,777, and San Francisco, with an average loan amount of $442,099. Honolulu placed fourth with an average loan amount of $415,224 and San Diego came in fifth with an average loan amount of $373,039.”

“‘Cash-out refinance loans have risen to 62 percent of all refinances in first quarter of 2018, up from 54 percent in the first quarter of 2017,’ said LendingTree Chief Economist Tendayi Kapfidze.”

From the Washington Post. “Something a little unusual is happening in the nation’s capital. Instead of following the typical rules of supply and demand, which indicate that prices rise when demand is high and supply is short, home values in the city are staying relatively flat. The spring market, which essentially starts in early February, says Timur Loynab, principal of Condo Nest with McWilliams Ballard in Washington, has been robust but also a bit strange.”

“‘For several years, the D.C. market has favored sellers because of demand and the lack of inventory, but this spring we’re finally seeing buyers pushing back,’ Loynab said. ‘Buyers are turned off by aggressive pricing, and we’re seeing properties that are priced too high languish on the market.’”

From the Jacksonville Daily News in North Carolina. “Ten years after the housing market collapse Eastern North Carolina seems to be healing, but it appears the military hasn’t fully recovered. According to Onslow County GIS mapping, 27 properties underwent foreclosure in the first two months of 2018. While only one of those properties was taken over by Veteran’s Affairs, which indicates it was military-related, the peak time for PCS moves is May 1 to Aug. 31, said Maj. Lori Miller, Camp Lejeune Public Affairs Officer.”

“Selling a home can be difficult when the family is uprooted on PCS orders and only has a few weeks to relocate, said Gary Long, real estate agent for Military Relocator. ‘The issue for this market is if you’re in the military, you buy a house and all a sudden you get orders — it’s not like you can you’re a normal seller and take your time,’ Long said.”

“Tonia Vary, real estate agent with Keller Real Estate, Team Vary, said the housing market crash of 2008 has been a factor in foreclosures. ‘People go into foreclosure, often in the military market, in particular because they finance the funding fee on top of their loan, often with the VA loan,’ Vary said. In general, though, paying more than the minimum, even if it’s just a $10 difference, can help, Vary said. ‘My advice would be if you have to quit going out once a week to pay your mortgage, then that’s what you have to do,’ Vary said.”

From the New York Post. “Apartment sales prices are plunging as new luxury construction floods the market, according to a new report. The median sales price for a New York apartment for the first quarter of 2018 was $1.0 million, down 1.3 percent from the first quarter of 2017. The average sales price was $2.02 million, down from $2.21 million, according to a report by Stribling & Associates. That’s an 8.3 percent drop from the same time last year.”

“The average sales price for a Manhattan apartment per square foot was also down 6 percent, from $1,585 per square foot during the first quarter of 2017 to $1,490 per square foot during the first quarter of 2018. ‘Buyers currently have many options to choose from, especially when looking at properties priced above $3 million. More than one third of all inventory — 32 percent — is priced above $3 million. In many cases, developers are offering additional incentives to lure would-be buyers to their projects,’ said Garrett Derderian, Stribling’s director of data and reporting.”

“‘This is the best buyers’ market ever,’ said Leonard Steinberg, the president of Compass Real Estate. ‘Asking prices have come down remarkably, far more than during the economic crisis. People who buy now will be laughing in a few years.’”

“But even attractive incentives aren’t always enough. ‘We are now seeing sellers reduce their resale listing prices, often more than once, to compete with the amount of product on the market,’ Derderian said. The Financial District and Battery Park City were the biggest losers. The median price plunged 20 percent to $1.2 million, and the average price sunk 19 percent to $1.47 million.”