April 29, 2018

Sounds Familiar Moments

A weekend topic starting with Housing Wire. “It’s been more than three years since Freddie Mac rolled out a conventional mortgage that only required a 3% down payment for certain borrowers. The program, which is designed for qualified low-and moderate-income borrowers, saw reasonable progress over the last few years, with Federal Housing Finance Agency Director Mel Watt telling Congress last year that Freddie’s 3% down program (along with a similar one from Fannie Mae) was continuing to grow. But now, Freddie Mac is about to supercharge its 3% down program and launch a widespread expansion of the offering.”

“Freddie Mac announced Thursday that it is rolling out a new conventional 3% down payment option for qualified first-time homebuyers. What makes this program different is that there are no geographic or income restrictions. The new program, which is called HomeOne, puts Freddie Mac in direct competition for mortgage business with the Federal Housing Administration, which also only requires 3% down on some mortgages.”

From the Mercury News in California. “Bay Area home sales go only one direction — up. Forget crypto-currency, AI or blockchain companies in your investment portfolio. Homes are still the hottest commodity in the Bay Area. Median home prices in the region continued an unprecedented six-year run, with resale homes gaining double-digit value in the last year. Prices in the nine-county region bolted up 14 percent from March 2017, led by soaring deals in Santa Clara and San Mateo counties, according to CoreLogic.”

“The median resale price for a Bay Area home last month was a record $850,000. ‘It’s a feeding frenzy fueled by a factor of fear,’ said Kevin Cole, Alain Pinel president of the Santa Clara County Association of Realtors. Buyers are motivated after bidding high and still failing to close a deal, he said. ‘They’re not just disappointed once,’ Cole said. ‘They’re disappointed two, three, four or five times.’”

“The data shows that buyers are still stretching to become homeowners. Jumbo mortgages — loans generally over $680,000 in most of the Bay Area — financed 4 in 10 sales, up from previous months. Higher prices have even led investors to cool on the area. Absentee buyers purchased about 19 percent of homes, down from a peak of 28 percent in February 2013, according to CoreLogic.”

From the Spokesman Review in Washington. “The Spokane-area market is in its seventh year of recovery since the national housing market crash, which sent sales and prices plunging. In 2008, local home sales went into a sharp decline. By the time the market bottomed out in 2011, the number of sales had dropped by more than half from their 2005 peak. ‘It was unprecedented, what happened,’ said Rob Higgins, executive vice president of the Spokane Association of Realtors. But now, ‘we’ve basically gained everything back. Prices are accelerating.’”

“Rising prices are stretching first-time buyers. But sellers are benefiting from the rapid appreciation, and so are homeowners who plan to keep their property for a while. ‘For most middle-income Americans, real estate is where their wealth is generated,’ Higgins said. ‘When you sit back in your rocking chair someday, you can say, ‘Yeah, I’m glad I bought this house.’”

From CBC News in Canada. “Houses in Ottawa’s hottest neighbourhoods are selling at record prices as buyers compete in a market plagued by a shortage of resale homes. That shortage, combined with growing demand and a shift among realtors toward a more aggressive sales strategy, is creating ideal conditions for bidding wars the likes of which the capital has never seen. Realtors who specialize in urban neighbourhoods such as Westboro say they’ve seen sale prices skyrocket by more than 50 per cent.”

“Three families made offers to Joan Anne Thraves, the owner who has lived in the home for 35 years. Two local buyers appealed to the 75-year old owner’s emotions by sending her personal letters and their wedding photos. In the end, Thraves went with the highest bid, which was $35,000 over her asking price. The winning bid was submitted by a Toronto couple with young children, and came with no conditions. They purchased the home without even setting foot in it.”

From Brinkwire on Australia. “Lending institutions have been using a tool to measure expenditure which some lenders say is underestimating their monthly outgoings. It has led to a culture where borrowers were being given loans they never had a hope of repaying. ASHLYNNE MCGHEE, REPORTER: This is Jason Hannagan’s life, running his own delivery business. But despite his long hours, he is stuck in a financial nightmare. His troubles began back in 2012, when the Hannagans took out a $600,000 loan from a lender called Pepper Money. He estimates their monthly income was about $9,500. Their mortgage broker recorded their expenses at just $1,300 a month.”

“JASON HANNAGAN: That’s for five people. It’s an imaginary figure. Our living expenses were, like, $4,000 and then our mortgage was, like, $3,000. So that’s $7,000. The broker just told us to sign the page. And we faxed it back to her and she said she’ll fill out the rest.”

“ASHLYNNE MCGHEE: Jason Hannagan regrets it now. He says they could never afford the loan. Months later, they had to offload their investment property in Sydney and, three years on, they were forced to sell their family home in Brisbane.”

From Toronto Storeys in Canada. “While writing a script for CTV a few years ago, I spent a lot of time reading the numerous newspapers and writings of late 1890s Toronto. The folks of that day seemed very much aware and concerned with the issues we worry about today — jobs, crime, taxes, politics, having a good time … and, yes, even real estate. ‘When the real estate boom was in its zenith, property changed hands at prices that were an unmitigated gratification to those who sold them,’ writes C.S. Clark in his 1898 social study ‘Toronto The Good.’”

“‘Living in the city is very expensive, the poor are obliged to live in the shaky, tumble-down houses of Centre, Elizabeth, South Jarvis and Lombard and Bathurst … while the middle classes and those of only modest means live in the suburbs.’ Ring a few bells? Clark’s very detailed book — which has been reprinted many times over the years — is full of ’sounds familiar’ moments like that.”

“Author Clark at times sounds a lot like a bitter would-be home buyer of 2017, unable to cope with out-of-control housing prices. At one point he suffers Victorian sticker shock while checking out a house on Charles Street. ‘Price $3,000. By the fairest calculation in mathematics, it will be seen that to pay 6%, $180 are required, taxes $48 at least, and then your chances at profit are only contained in the remote contingency of the property increasing in value.’”

“Much like today, turn-of-the-19th-century Toronto was going through some difficult growing pains. A land boom had recently doubled the size of Toronto, but also added to the city’s debts and left many new landowners bankrupt when the real estate bubble burst. ‘A considerable number of people own their own houses, though this circumstance may be of questionable advantage.’”