Prices Go Up Just To See Where That Ceiling Is
A report from Builder Online. “The Realtors, in Washington this week for the annual 2018 REALTORS® Legislative Meetings & Trade Expo, got an earful Friday. The message was for home builders, and it was ‘Build more.’ The session focused on rapidly rising home prices, tight home inventories and whether or not the country is in the middle of a bubble. All three of the panelists agreed that more new home construction is necessary to meet rising demand from increasing household formation and curtail the affordability crisis. However, the panelists were quick to point out that just because we are not currently in a bubble does not mean we won’t enter one. If supply and demand continues to become more and more out of balance, it could trigger a fast price growth said NAR Chief Economist Lawrence Yun.”
“‘A best-case scenario is largely dependent on new home construction. An increase in inventory will provide some much-needed release,’ he said.”
From Growella. “Mortgage guidelines are loosening, lenders tell us. But, consumers haven’t seen the memo. According to the Federal Reserve’s Senior Loan Officer Survey on Bank Lending Practices, a quarterly questionnaire sent to the Fed’s member banks, lenders are reducing their hurdles for mortgage loan qualification. As compared to last quarter: Conforming loans: 98% loosened or made no change to guidelines. FHA and VA loans: 100% loosened or made no change to guidelines. Jumbo loans: 100% loosened or made no change to guidelines.”
“In aggregate, fewer than 1 percent of mortgage lenders are working with tighter mortgage guidelines as compared to the start of year and that’s excellent news for today’s buyers of homes. Buyers aren’t getting the message, though. In Fannie Mae’s monthly National Housing Survey, a survey of 1,000 consumers nationwide and their feelings toward housing and home loans, the number of respondents who said ‘it would be difficult to get a mortgage today’ spiked, adding six percentage points from the month prior. There’s a disconnect somewhere.”
From Port City Daily in North Carolina. “It’s slim pickings for the locals and a steal for out-of-towners. The Cape Fear region’s real estate is moving off the shelves faster than its inventory can be restocked. ‘It’s like a frenzy market,’ said Patrick LaJeunesse, who dissects real estate numbers every day at Cape Fear REALTORS. Last month, the median days on the market was 37. The last time houses were moving that quickly was in Jan. 2007.”
“‘We’re consistently eating up more and more inventory,’ LaJenusse said. ‘The appetite seems to be getting stronger.’ The biggest difference? ‘We’re not going to dive down,’ LaJenusse said.”
“According to Tim Milam, the president of Coldwell Banker Sea Coast Advantage, lending requirements have tightened up, buyers have grown more conscious of their susceptibility to bad loans and the market–for the most part–has stabilized. Still, appreciating costs can elicit déja vu. ‘We have a lot of people asking, are we at the top of the market again?’ Milam said. ‘Are we there?’”
“Particularly in the upper-tiers of the housing market, LaJeunesse said out-of-towners are getting a deal. ‘These aren’t local people buying these properties,’ LaJeunesse said. From New Jersey to New York to California, LaJeunesse said people are flocking to the southern coast and away from higher property taxes. ‘They’re selling their properties at discount price and coming down here,’ LaJeunesse said. ‘It’s almost like buying at a discount rack price. The question is on more of affordability issues and greed. You’re going to start seeing people and prices go up just to see where that ceiling is.’”
The Chicago Sun Times in Illinois. “A week or so ago, retired Chicago Public Schools teacher Josephine Sennet received a letter from the Cook County assessor’s office, and what she read floored her. In the space of a year, the estimated market value of her home in the Lakewood Balmoral neighborhood had shot up about 51 percent, likely meaning a huge increase in future property taxes. Reactions have been similar across this North Side enclave of handsome, historic homes.”
“‘I haven’t added on anything,’ said Sennet, 78, who has lived in her home since 1972. ‘I don’t have a grand, glorious kitchen. All the bathroom fixtures are what came with the house.’”
“But several real estate agents the Chicago Sun-Times spoke to agreed the reassessments seem unusually high, even with an improving economy. One veteran agent who specializes in North Side properties said home prices actually appear to be falling. ‘What’s happening, unfortunately, over the last year — and at a rapidly accelerating pace — is people not having confidence in the real estate market, and we’re noticing a big slowdown in sales,’ said Realtor India Tougne. ‘Although the inventory is low, the prices are not going up in a corresponding fashion.’”
“One client, Tougne said, had an offer of about $1,325,000 for a home back in 2016 in Lakewood Balmoral but hesitated long enough for the buyer to back out. The owner then made some improvements and put the home back on the market last year. ‘We just finally sold it after almost a whole year for $1,000,050,’ Tougne said. ‘Boy, was she kicking herself.’”
From the Houston Business Times in Texas. “The price has been lowered again at a well-known mansion in The Woodlands. The listing price is now $7 million, down from $7.95 million in December 2016, according to Nan & Co. Properties’ website, which has the listing. The Carlton Woods home belongs to Houston socialite Theresa Roemer and Lamar Roemer, who first listed the home in 2015 for $12.9 million before lowering the price to $9 million in July 2016.”
“Platinum Luxury Auctions was planning to auction off the 17,300-square-foot home located on a 2-acre estate in the summer of 2016. But the auction was delayed due to a softening in the luxury housing market.”
The News Tribune in Washington. “I am a small property developer. For the past many years, I have purchased homes and rehabilitated them with the intent to re-sell them. In 2010, I purchased two houses in Tacoma. One was on the Hilltop, the other close to Point Defiance. Both were in deplorable condition, but I gutted them and completely rebuilt them. When they were complete, market conditions made them impossible to sell at a profit, so I put them in the rental market.”
“This spring I decided that the market had improved, and I decided to sell them. The Hilltop house was the smaller of the two, about 1,100 square feet with no garage or fenced yard. After considerable research and rumination, I elected to price it at $194,000. The larger house, which measures a little over 1,800 square feet, I priced at $370,000. These prices are very comparable to the similar houses in the respective neighborhoods.”
“The larger house has been on the market for over a month. I have received no offers. The smaller house I placed on the market last Friday evening. By Monday, I had 11 signed offers ranging between $200,000 and $243,000. With the offers, I received several touching letters from prospective buyers telling me that they were offering everything they had, and to please consider them because they were desperate to buy a house for their family to live in.”
“Every one of the buyers was prequalified, and every one of them was employed. All had good credit. They were all offering the maximum amount they could qualify for, based on their income. I realized that I was looking at a sample of middle America and the housing dilemma it’s facing. Most middle-class Americans simply cannot afford a house that costs in excess of $250,000.”
“So, what’s a person to do? My advice for all those people trying to buy a single-family home at below $250,000 is to bide your time and save all you can. I know it’s hard, but the key to buying something during the next recession will be cash. Now is the time to prepare for the next downturn. It’s coming in the next few years. Save as though your life depends on it, and a house you can afford will be your reward.”
