May 7, 2018

Inflated Prices That No Longer Have Any Basis In Reality

A report from MarketWatch. “House prices are soaring and, despite warnings from some analysts, most Americans believe they will continue to soar. A majority of U.S. adults (64%) continue to believe home prices in their local area will increase over the next year, a survey by Gallup concluded. That’s up nine percentage points over the past two years and is the highest percentage since before the housing market crash and Great Recession in the mid-2000s. The level of optimism is edging closer to the 70% of adults in 2005 who said prices would continue rising. That, of course, was less than one year before the peak of the housing market bubble in early 2006, which was largely fueled by a wave of subprime lending.”

From the Tampa Bay Times in Florida. “During the worst days of the housing crash, 43 percent of Tampa Bay homes were ’seriously underwater’ — their owners owed at least 25 percent more than the home’s value. Figures released today show that just 9.4 percent of homes with mortgages now fit that category, according to ATTOM Data Solutions. The Times spoke with Daren Blomquist, the company’s senior vice president, about the huge decline and some other trends both positive and worrisome.”

“Q. Why aren’t the equity rich numbers growing faster? A. That’s a testament to an increasing number of folks who do have equity starting to tap into it a little more so they are not necessarily staying in that equity rich category. Q. I’ve heard that some lenders are loosening up? Is that true? A. It’s nowhere near the level of looseness we saw a decade ago during the last housing boom. But one evidence anecdotally is the return of subprime mortgages, which they are now calling ‘non-prime’ mortgages, and I think more companies are doing them.”

“Q. Any other evidence that lenders have loosened up? A. We’re seeing in our own data a somewhat surprising increase in foreclosure starts in the first quarter. A lot of that increase is due to FHA loans originated in 2014, so as early as 2014 we were starting to see some loosening especially for FHA borrowers, which tend to be lower- credit borrowers. (The increase in foreclosure starts) showed up in some places we’d expect, like Rust Belt cities, but then we also saw it in places like Austin, with a 30 percent increase; Dallas, Reno, Las Vegas, Charlotte. All of those are poster-child markets of this housing boom. They’ve done very well, but there have been some increases in foreclosure starts.”

“Q. Anything else to keep an eye on? A. On the grapevine, we’re hearing a little more about people interested in mortgage-backed securities. That’s one of the hallmarks that helped inflate the housing bubble last time around.”

From NBC DFW in Texas. “While they aren’t saying Dallas-Fort Worth’s red hot housing market has slowed, real estate experts say home prices that have grown by leaps and bounds for several years have finally leveled off. ‘We’re definitely still seeing buyers and sellers with lots of new listings on the market and lots of homes going under contract, but the prices are definitely holding more steady then they have been,’ said Melissa Hailey, President of the Collin County Realtor’s Association.”

“Hailey says appreciation is no longer increasing at the rate it has been for the last several years. In Collin County, Hailey says first time buyer’s will get the most bang for their buck to the north in Prosper and Celina or to the east in Princeton and Farmersville.”

From the Laguna Beach Indy in California. “We live in a zip code where it is easy for marketing experts to mistake most of us for the rich people we aren’t. Cadillac and Maserati are always sending offers for free test-drive events held at fancy country club locations. Not so long ago a glossy magazine came in the mail selling expensive housing in New York City, the salsa capital of the world. One ad summed up the housing situation in Laguna Beach to a ‘T’.”

“‘Original Greenwich Village artist loft for sale: 20-foot ceilings, north facing windows with a large entertainment area. $5,295,000.’ Just like the situation in Laguna; there aren’t a lot of artist’s left, only expensive artistic housing selling at inflated prices based on a branding concept that no longer has any basis in reality.”

“We’re all sitting here marveling at how our ever-increasing home values are making our heirs rich. Half the homes up on the hill are multi-million dollar homes paid for with cash and occupied part time, if at all. Laguna morphed from a safe small town community to a home for absentee owners looking for a safe place to house their money. Most of us are tempted to sell if only we knew what to do about the tax bill and could find a place to move to that we love as much as Laguna.”

From Westfair Online. “In many ways, celebrity-owned real estate is the proverbial double-edged sword for real estate agents. But what happens when the celebrity has lost the respect of the public, or worse? In Fairfield County, disgraced movie mogul Harvey Weinstein hurriedly sold off his three Westport properties after his career was derailed by multiple allegations of sexual misconduct. But buyers were not exactly clamoring for Weinstein’s residences: one was sold at a reduced price and the other two were adjacent properties acquired by a real estate investor who owned four other homes on the same street.”

“Another local celebrity home that sold after a lengthy period on the market and a not-small price reduction was Cyndi Lauper’s Stamford estate, which sold in January after being listed for nine months for $804,625 — a drop from the original $1.25 million price. Real estate experts did not see that as an indictment of Lauper’s diminished popularity, but as a reflection of luxury housing values. ‘Being reduced just means re-evaluating market value,’ said Linda Skolnick, a Westport Realtor with Coldwell Banker. ‘Whether you are a celebrity or a regular citizen, figuring out the market value and price is often difficult.’”

“And Joshua Shuart, chairman of the marketing and sports management department at Sacred Heart University’s Jack Welch College of Business, noted that being owned by a celebrity is no guarantee that a property will be snatched up at the asking price, let alone inspire a bidding war. ‘In Connecticut, celebrity homes sit on the market a lot longer than the average home,’ he said. ‘That is partly due to the price. But it doesn’t help if it’s taken on and off the market or if the price shifts around dramatically.’”

From The Real Deal on New York. “Though New York’s most expensive apartment listing of $85 million has languished for five years and counting, owner Daniel Neiditch’s got a new strategy he thinks will clinch the sale: space travel. He’s still offering three luxury cars, a $1 million yacht (plus five years of docking fees) but now two seats on a Virgin Galactic space flight have been added to the mix, according to the New York Post — and all that comes in addition to more giveaways, including a year’s worth of free dinners at Daniel Boulud’s flagship restaurant, Brooklyn Nets season tickets, a live-in butler and private chef, and a free summer in the Hamptons.”

“Onlookers are skeptical the space trip and other perks will lure a buyer at Neiditch’s famously fixed price of $85 million. ‘People only pile up giveaways when they won’t reduce the price. It has never made a lot of sense to me,’ an unnamed Manhattan broker said to the Post.”

From WBRC in Tennessee. “It’s no secret, blight is a big problem in the Bluff City. Now, a new list shows the top 10 property owners with the most code violations. Memphis attorney Steve Barlow has spent over a decade on the front lines battling the blight. He leads Neighborhood Preservation Inc., a non-profit that works to remove barriers to fix blighted properties. ‘We have a lot of challenges with abandonment and vacant, unutilized real estate. We have somewhere in the neighborhood of 15,000 abandoned city houses and several thousand abandoned multi-family units,’ he said.”

“Records show nearly all the properties on the list are owned by corporations. We have reached out to Cerberus Capital Management–which manages properties with the most code violations on the list—and they sent us this statement. ‘FirstKey Homes is committed to the Memphis area and our portfolio of high quality single-family rental properties are not part of the ‘blight’ that this civic group is fighting to eliminate. To the contrary, these homes are well-maintained properties for growing families and are helping to provide affordable housing options in Memphis.’”