April 21, 2018

We’re Taking A Risk, But We’re Really Buying An Asset

A report from The Spectrum in Utah. “St. George-area housing prices keep climbing, interest rates are expected to jump again, and first-time homebuyers Giovanni and Jennifer Trumbo are feeling the pressure to buy while they can still afford it. The Trumbos, who are in their early 30s, are approaching their 10th wedding anniversary. Their second child just turned 7 months old. They’re currently renting a house where the rent has gone up $300 a month since they moved in. They’ve been dipping their toes in the murky real-estate market waters for months, but the longer they’ve waited, the more interest rates have ticked up and the more buying power they’ve lost, Giovanni Trumbo said. The couple recently decided to start putting in offers and jump into a mortgage.”

“‘We’re taking a risk, we know that. But we’re really buying a house,’ he said. ‘It’s ours. It’s an asset.’”

“The house they’re buying is a Bloomington Hills two-story with spectacular views of the city and its rugged desert surroundings. It was priced at $349,000. The mortgage payments will likely be higher than what they’ve been paying to rent their current home, but not by much, Giovanni Trumbo said. A midlevel manager at Wilson Electronics in St. George, Trumbo said he subsidizes his salary by operating his own business online. Jennifer Trumbo works from home as well. Combine those incomes, and it’s enough for the house, although Giovanni Trumbo said he didn’t think it would be possible on his regular salary alone.”

“Through the end of March, the median sale price for a single-family home was $296,520, up more than 16 percent from last year, according to multiple listing service data kept by the Washington County Board of Realtors. That’s an increase of more than $110,000 since March 2013. The average price tag for homes currently on the market is $512,629. In a county where the average weekly wage is less than $700, according to the Bureau of Labor Statistics, the problem is clear, say those in the industry.”

“It’s a trend that has been going for years, but it has escalated quickly over the past 12 months, said John Hook, an agent with Red Rock Real Estate who was helping the Trumbos with their housing search. A native Californian, he said he sees some similarities between the St. George region and famously high-priced real estate markets like San Diego and San Francisco, where the area’s attractiveness creates a demand for housing that prices out the typical working person.”

“‘I’ve seen it happen,’ he said. ‘If you look out there right now, it seems obvious.’”

From the Associated Press. “Higher mortgage rates are making the already challenging task of buying an affordable home even tougher for many Americans this spring. In metro areas, such as Denver, buyers are rushing to close a deal before mortgage rates get too high. In Dallas, some are embracing longer commutes to find homes they can afford. And in places such as Los Angeles, where the number of homes for sale is down sharply from a year ago, sellers routinely receive multiple offers.”

“A mere extra half percentage point or so can boost monthly payments and add tens of thousands of dollars extra in interest over the life of the typical 30-year loan. At a time when home prices are rising faster than incomes in many parts of the country, that could be enough to shut out some would-be buyers who make the median income in cities such as Seattle and Los Angeles.”

“Chad Zolman got a taste of that while looking for a home in Denver. The account manager made 11 offers since his search began in September, but lost out to rivals offering more money. As mortgage rates started rising, so did Zolman’s anxiety about being able to afford to buy. ‘The rates kept going up, and the more the rates kept going up, the less house you can buy,’ said Zolman, 41. ‘And the less house you can buy in this market, that’s not good. You have to be able to pony up the cash.’”

“Zolman eventually bought a newly built, three-bedroom townhome for $370,000. He got approved for a 30-year fixed-rate loan just under 4.7 percent. He’s not in the clear yet, however. He can’t lock in his rate until mid-May, within the 120-day window before construction on the house is completed. And if rates go higher by then? ‘It is what it is,’ Zolman said. ‘You just have to pay it.’”

From the Idaho Statesman. “So you think you want to buy a house in Boise? Where the region’s median home prices are at record highs, construction is still below precrash levels and West Coast ex-pats are flocking in, flush with cash and amazed at all the real estate ‘bargains’? Buckle your seat belt. And take a little hard-earned advice from Mike Daniels. He is 47, a blue-collar worker and Chicago native who fell in love with Boise, wanted to buy a house on a tree-lined street in the City of Trees and grow old here with his wife, Dee.”

“In June 2017, the middle of the Daniels’ home search, 35 percent of the houses sold in Ada County went for more than their list price. One in five was sold for cash. Houses were spending less time on the market than they had since 2006, the climax of the last housing boom. In Ada County, the median home price in March was $308,950, up more than $11,000 since February and 24 percent higher than the previous March. Only four houses countywide, all used, sold for less than $160,000 that month.”

“Daniels’ hard won advice for buying that dream house: ‘If you know that it’s in a neighborhood where there’s going to be full-price offers and it’s going to go to bidding, you’ve got to come in strong right off the bat. In today’s market, if you’re confident, and it’s what you want, spend the extra 10 percent.’”

“About six weeks after the Danielses lost out, they got a text and an email from their real estate agent. Another agent in her office was listing a house later that afternoon for $264,888, she told them at 10:02 a.m. on July 18. But they were back home in Chicago and couldn’t check it out. So she went on their behalf. At 12:47 p.m. she arrived at the modest bungalow. ‘There’s a line of people out here,’ she texted. ‘If you think it’s worth it, let’s offer an even 300k and we won’t ask for them to pay closing costs,’ Daniels responded. ‘That is a 13.25% offer over asking price.’”

“By 3:03 p.m., Daniels had sent earnest money to the agent. His wife had not yet seen the video. After two days of gyrations, Daniels received a congratulatory text. ‘Schedule the moving truck!’ the agent wrote. ‘You just bought a house :) congrats!!’”

“Realtor Tamara Rowe has more than a few million-dollar stories. There’s the 50-something client who sold her Colorado home for slightly over a seven figures, bought a brand new house in North Boise for $325,000 and plans to live comfortably on what’s left. ‘I just closed on a home Friday, all cash,’ said Rowe, an agent with Silvercreek Realty Group in Boise. ‘The couple is going to buy another house here for their son with the proceeds from their California sale. They’ll be able to purchase two homes for what they had in California.’”

From the Real Deal on California. “When Compass broker Stephen Kaseno was listing a home in Chatsworth a year ago, he got an enticing offer from a prospective buyer. The proposal was for an all-cash purchase on the $2 million property. But tempting as it was, something ‘didn’t feel right,’ Kaseno said. While examining the ‘Proof of Funds’ document from the buyer, he noticed the margins weren’t aligned and although it was typed, something was off. The document had been forged by the buyer to make it seem his funds were available and ready to go, when in fact, he did not. Instead, the buyer was hoping to secure a loan on the property once the home was already in escrow and the seller was at ease.”

“In an effort to compete in Los Angeles’ hot seller’s market, buyers are dangling all-cash offers before pulling back once the sale closes. While not illegal — excluding the forgery — industry pros say the practice could complicate the transaction should the loan get delayed or denied.”

“The phenomenon of the all-cash offer is a cyclical one, Hilton & Hyland’s Zach Goldsmith said. The most recent incarnation involves homes selling for under $3 million, where supply continues to outpace demand. But even as the all-cash deal helps some lucky homebuyers land their dream home, it could be contributing to a ‘false bottom of the market,’ Goldsmith said. ‘It’s over-inflating the market right now,’ he added. ‘If this trend continues, people are not going to be able to keep up so the market will fall a little bit.’”

From the Orange County Register in California. “Californians could be spending at least $50 billion more than they do dining out, going to the movies or shopping. But high housing costs are ‘crowding out’ personal consumption, with more cash going to landlords and lenders instead. If their housing costs weren’t so high, Californians would have enough dollars to buy 15 billion more Happy Meals than it does. They would have enough cash to buy 1.5 billion more Major League Baseball game tickets or 455 million tickets to Universal Studios Hollywood. And every man, woman and child in the state could buy tickets to see ‘Hamilton’ — six times.”

“That’s just one finding presented at a conference at Chapman University in Orange on how to fix California’s housing crisis. More than a dozen speakers from state and local government, think tanks, academia and housing advocacy groups examined the cause of the crisis and possible solutions. Their conclusions? Home building hasn’t been able to keep up with growth, and that’s costing us — big time.”

“‘We have just been fundamentally under-producing housing in California,’ said Mark Stivers, a state affordable housing official. ‘It’s gotten so bad that people making … (up to) $80,000 a year are having a hard time finding housing that they can afford.’”