July 21, 2018

A Collective ‘Who Could Have Known?’ Amnesty

A weekend topic starting with the WJCT in Florida. “A Tallahassee real estate expert is predicting some big changes on the way to the local home buying market. That assessment comes as the community sees an explosion in high-end rental construction. The local expert is Joe Manausa. He has more than a quarter-century of experience in the business so many people love to hate. He says Tallahassee is far removed from the real estate collapse of 2008 when no one was buying homes. ‘We’re in an opposite market right now. For many areas and a lot of price ranges, there’s not enough supply of homes. There are literally more buyers than sellers out there.’”

“The exception, he remarked, are high-end houses $300,000 and up, of which there are a bunch for sale right now. Certainly new home construction will eventually meet the demand for more down-market properties. However, Manausa saw another potential source of inventory for home buyers. ‘We absolutely pay attention to the rental market because it will have an impact on the for-sale market. When a landlord can’t rent his place out because they built 4,800 new units down Tennessee and Gaines streets, then they absolutely put those units on the market for sale. That becomes new supply that wasn’t in the for-sale market, but it was in the for-rent market.’”

“Put all of these factors together, and Joe Manausa had one bit of advice for those wondering whether or not this is a good time to buy a house anywhere near Tallahassee. ‘If you’ve been thinking about moving up, do it now. If you’ve been thinking about selling your house, buying a Winnebago and traveling the country, wait!’”

“Because he believed a major windfall is on the way for Capital City homeowners. ‘The supply is so limited, the demand is so high, barring something like the new governor saying we’re moving the state capital to Orlando, anything major like that, we’re going to see anywhere from 6 to 10 percent appreciation rates each year.’”

From Orlando Weekly in Florida. “A week after it was announced that Florida’s Gross Domestic Product is worth $1 trillion, which would make it the 17th largest economy in the world if it were a country, a new study from the United Way shows that the majority of us wouldn’t be able to tell. A study by United Way, titled the ALICE Project, showed that while Florida’s employment rate has improved from 2012 t0 2015, 47 percent of Florida’s households still cannot afford basic needs.”

“Nearly half of Florida is considered “working poor” and they make up most of the labor force (bartenders, construction workers, office clerks, and the like). ALICE workers are considered by United Way as our state’s most ‘valuable and vulnerable economic driver.’ From 2007 t0 2015, the basic cost of living in Florida rose 19 percent – with wages staying nearly stagnant.”

“As Orlando knows, families who also work in the service sector are stressed with other factors besides low wages, like irregular income, inconsistent scheduling and lack of benefits. Not to mention that these jobs are often located in areas with high housing costs, meaning you either have to spend long commutes to get to your job, or pay out of your budget to put a roof over your head.”

“None of this is anything new. Thursday report falls in line with just about every other major study released in the last five years. Last March, a study from the National Low Income Housing Coalition found that the Orlando area ties for second worst in the nation for available affordable housing, while a recent Census survey also stated that the City Beautiful had the third lowest average lowest median household incomes in the country, at $52,385.”

From Community Impact in Texas. “Industry experts say the real estate market remains healthy in the New Braunfels area, and that goes for buyers and sellers. According to Lynda Escalante, a Realtor at the Real Estate Haus in New Braunfels, the current state of the New Braunfels market is often driven by the price point. ‘I sell a lot in [the River Chase subdivision]and in the Hill Country, so the price point I sell is in $400,000-500,000. There’s more inventory in that price point than I’ve seen in the past,’ Escalante said, noting that she has seen people reducing their home price more this year than in 2017.”

“‘I think we’re going to shift to more of a buyer’s market,’ Escalante said. Laurie Jarrett, a local Realtor, shared similar sentiments. ‘I believe we’ll continue to appreciate because we have so many people moving into the two counties, but I will say that it’s going to shift to more of a balanced market, and there’s going to be more inventory and longer days on the market,’ Jarrett said.”

From The Wilton Bulletin in Connecticut. “Of 93 of the homes sold in Wilton in the first six months of this year, most were sold for more than originally bought. As might be expected, those purchased during the real estate bubble years from 2004 to 2010 did not fare as well. Twelve of the properties were condos, the rest were single-family homes. Eight of the homes were affected by foreclosure proceedings.”

“A home purchased in 1999 for $413,000 sold for $750,000 this year, an increase of 182%. On the flip side, a home purchased for $646,000 in 2000 was foreclosed on for $449,375. The other home sold at a loss was purchased for $450,000 in 1998 and sold for $395,000 this year, 88% of its purchase price. The next group of properties was purchased eight to 13 years ago and is a mixed bag, but with most on the losing side of the financial equation. This time period reflects the housing bubble of the early 2000s when real estate prices shot up rapidly and the ensuing recession when that bubble burst.”

“So far this year, 20 homes have reached the $1-million sales plateau and the year could finish with about 50 homes reaching that mark, according to John DiCenzo, executive director of sales for Westport and Wilton at Halstead Properties. The home that performed the best in this bracket was a condo purchased in 2010 for $450,000 and sold this year for $524,000. Three of the other 23 properties in this bracket also sold for more than they were purchased for.”

“At the other end of the spectrum, a home that was purchased in 2006 for $2,720,000, just before the recession hit, was sold this year for $1,447,500, just 53% of its purchase price. Next was a house at the other end of the price spectrum, purchased in 2007 for $612,500 and sold for $368,000 this year, 60% of its purchase price.”

“The greatest number of homes sold this year — 26 — were also those owned for the least amount of time, one to seven years. This was also a mixed bag, with 15 selling for more than their purchase price, two selling for the same price, and nine selling for less than they were purchased for.”

“The house that performed the best was purchased in 2012 for $215,000 and sold this year for $488,000, an increase of 227%. Also with a high return was a home purchased in 2012 for $385,000 and sold this year for $740,000, an increase of 192%.

The home with the lowest return was a foreclosure, which a bank purchased for $14 million and then sold for $7,600,000. Next was another high-priced home, purchased in 2014 for $1,965,000 and sold this year for $1,499,000, 76% of what the seller paid for it. When asked if there was any rule of thumb for how long it should take a homeowner to profit from their investment, DiCenzo said that is all based on market dynamics.”

“‘Anyone who bought prior to 2002 is holding equity,’ he said. The market has been correcting back to 2003-04, he added, and for people who bought high, waiting for prices to catch up can be frustrating. ‘If value is present and it’s been updated, a house will move,’ he said. A factor to keep in mind, he said, is that since 1997 buyers in Connecticut have been represented by agents who coach their clients on home values, run analyses, and offer price opinions. With a plentiful supply of homes on the market — about 250 — buyers can take their time and be choosy.”

“In the early 2000s, DiCenzo said, sellers behaved accordingly, turning down bids when a better offer came along the next day. What lies around the corner? No one knows. ‘The biggest factor is jobs,’ DiCenzo said.”

From Dean Baker. “Carlos Lozada, the nonfiction book critic for the Washington Post, promised ‘an honest investigation’ of whether truth can survive the Trump administration in the lead article in the paper’s Sunday Outlook section. He delivered considerably less. Most importantly and incredibly, Lozada never considers the possibility that respect for traditional purveyors of ‘truth’ has been badly weakened by the fact that they have failed to do so in many important ways in recent years. Furthermore, they have used their elite status (prized university positions and access to major media outlets) to deride those who challenged them as being unthinking illiterates.”

“This dynamic is most clear in the trade policy pursued by the United States over the last four decades. This policy had the predicted and actual effect of eliminating the jobs of millions of manufacturing workers and reducing the pay of tens of millions of workers with less than a college education. The people who suffered the negative effects of these policies were treated as stupid know-nothings, and wrongly told that their suffering was due to automation or was an inevitable product of globalization.”

“These claims are what those of us still living in the world of truth know as ‘lies,’ but you will never see anyone allowed to make these points in the Washington Post. After all, its readers can’t be allowed to see such thoughts.”

“This was far from the only major failure of the purveyors of truth. The economic crisis caused by the collapse of the housing bubble cost millions of workers their jobs and/or houses. While this collapse was 100 percent predictable for anyone with a basic knowledge of economics, with almost no exceptions, our elite economists failed to see it coming, and ridiculed those who warned of the catastrophe.”

“Incredibly, there were no career consequences for this momentous failure. No one lost their job and probably few even missed a scheduled promotion. Everyone was given a collective ‘who could have known?’ amnesty. This leaves us with the absurd situation where a dishwasher who breaks the dishes get fired, a custodian that doesn’t clean the toilet gets fired, but an elite economist who completely misses the worst economic disaster in 70 years gets promoted to yet another six-figure salary position.”

“When we have a world in which the so-called experts are not held accountable for their failures, even when they are massive, and they consistently look down on the people who question their expertise, it undermines belief in truth. It would have been nice if Lozada had explored this aspect of the issue, but, hey, it’s the Washington Post.”