August 22, 2018

The Ones Holding The Bag Will Be Investors

A report from NBC 2 in Florida. “For the first time in years, information from ATTOM Data Solutions said there is a nationwide increase in foreclosures. ATTOM said our area has seen an 11 percent increase in foreclosures from April to May, a 64 percent increase from May to June, and a 59 percent increase from June to July. The housing crisis hit Cape Coral as hard as anywhere. During the recession, half the homes Sam Yaffey sold were foreclosures. ‘There also has been some loosening of credit standards which is good for buyers. Before that you needed excellent credit and substantial down payment,’ said Yaffey.”

From CBS 4 Miami. “Last year rents dropped in Downtown Miami for the first time in years. Now the same thing may soon be happening, if not already, for home prices. One of the leading indicators of trouble is brewing is foreclosures. A new report out this week shows they are rising. More foreclosures and distressed properties often mean more pressure on prices.”

“In March of 2017, we met Jill Hornik, a renter, who noticed her rent was declining. ‘To live in Brickell, I think, it’s better to be a renter at this point. It’s my belief,’ Hornik told CBS4. Now, more than a year later, she continues to be right. Rents continue to drop.”

“Real estate broker Peter Zalewski predicted first it would be the rents. Now he’s calling for falling condo prices. Simply put there is excess supply and not enough demand. ‘What has happened is a competition. A race to the bottom by landlords who need to fill up their space and hopefully cover their expense. As this occurs some people no longer have the opportunity to rent it, because the rent will not cover the monthly expense, so what do they do? They list the property for sale,’ Zalewski said.”

“ATTOM put out a graphic of the United States. You can see summer has not been kind to the South, where foreclosure activity has been increasing the most. A closer look shows massive spikes in foreclosures compared to a year ago in Indianapolis, Houston, and Detroit. But perhaps the most alarming news is that several cities in Florida are seeing increases.”

“For the month of July, four cities saw significant upticks in new foreclosure filings. Jacksonville at 81%. Cape Coral at 59%. Orlando at 41%. South Florida at 29%.”

“Zalewski says he expects this trend to continue. The first victims are likely speculators. As the prices drop homeowners who bought more home than they could afford would be next. In other words, change is coming. ‘If you are a buyer, sit tight and get ready to pull the trigger. And take advantage. If you are a seller, better figure out what you are going to do. You either sell now or get a renter and you act very nicely to that renter. Make sure they stay in place and don’t try to raise the rent because chances are you are not going to get it,’ Zalewski said.”

“He does not believe this housing correction will be as significant as we saw roughly a decade ago. Zalewski believes the ones holding the bag, taking significant losses, will be investors and not banks. What remains to be seen is how far the correction will go. As condo developers stop building, everyone in and around the buildings can be affected. Zalewski points out it is less work for construction workers, furniture stores, installers, delivery drivers and on and on. Without work, the decline in an urban core can quickly move outward, as homeowners struggle to cover mortgages or rents.”

Another Sign Of A Noteworthy Slowdown

A report from MarketWatch. “Existing-home sales ran at a 5.34 million seasonally-adjusted annual rate in July, down 0.7% versus June, the National Association of Realtors said Wednesday. That was the lowest pace since February 2016. July’s selling pace was 1.5% lower than a year ago, and at the current sales rate, it would take 4.3 months to exhaust available supply, the same as in June, and well below long-time historical averages.”

“For years, the Realtors have been warning that many would-be buyers, particularly at the lower end of the market, are being priced out. Now they’re also acknowledging that many others are just deciding to sit it out until market conditions change. First-timers made up 32% of all buyers in July, a tick higher than in June but still well below long-time averages, and making no real progress.”

“‘There are no tears left to cry with yet another disappointing housing report,’ said BMO Capital Market’s Jennifer Lee, invoking teen idol Ariana Grande.”

The Orange County Register in California. “Another sign of a noteworthy slowdown in the Southern California housing market: Existing homes are taking three more weeks to sell vs. a year ago, by one industry metric. ReportsOnHousing market time stats say it’s taking 21 more days to get a home from listing to escrow than a year ago — 84 days vs. 63 a year ago. It’s the longest selling time in early August, by this math, since 2014.”

“The slowdown is somewhat surprising considering house hunters have 4,165 more listings to consider vs. a year ago — an increase of 13 percent. The supply boost comes as homeowners have put 8,604 more homes put on the market so far this year vs. 2017 — a 258 percent jump. But the added choices aren’t enticing buying, as the four-county region covered by the Southern California News Group has seen a 15 percent decrease in sales contracts signed vs. a year ago.”

From The Tribune in California. “Boosted by soaring home prices, California homeowners are now sitting on the richest vein of home equity in the nation, hundreds of thousands of dollars per home in most cases, according to data from an analysis by Attom Data Solutions. The message is twofold: California real estate has pulled well beyond the carnage of the 2007 to 2011 housing collapse. And it has done it in a big way compared to the rest of the United States, to the point of being slightly worrisome, some real estate watchers say.”

“‘That’s is great news for homeowners who are becoming equity rich, but it is a sign of that excess we tend to see in the California market,’ said Daren Blomquist, a vice president with Attom Data Solutions.”

“Dean Wehrli, a Sacramento real estate analyst with John Burns Real Estate Consulting, said he expects more Californians to tap that equity in the coming years, and he sees some of that happening already in Northern California.”

“Koji Fujimoto, a Sacramento software company manager, and his wife bought their first home in 2011 in the Vineyard subdivision just when prices had hit bottom. The couple paid $186,000 for a newly constructed home that is now worth $350,000, an 88 percent value increase in seven years. They took advantage of a down payment assistance program and builder credits, and put down a minimal amount.”

“But California appears to have hit a ‘where to now?’ moment that has homeowners like Fujimoto concerned. After seven years of huge value increases, the state’s real estate market has slowed in recent months. Median sale prices plateaued statewide in June. In Sacramento, those medians dropped slightly in July.”

“Fujimoto is among those taking advantage of his home’s equity to move up to a more expensive home in Elk Grove near his and his wife’s families. But it’s giving him the jitters. He no longer will have the comfort of feeling equity rich. He wonders if his new home will increase in value like his first one did, or whether its value might drop. ‘Is this the right time to sell, and right time to buy?’ he asks. ‘They are like opposing forces. I felt trepidation, pulled in two directions. This isn’t our first rodeo, but it feels like it is.’”

The Brooklyn Bridge News in New York. “The developers of the vexed Pacific Park Brooklyn development (formerly Atlantic Yards) have quietly acknowledged–in a non-publicized document–that the full 22-acre project, with 11 more towers planned beyond the four already open, likely won’t be finished until 2035.”

“That’s ten years later than the previous estimate of 2025, which remains the deadline for the 2,250 required units of affordable housing, of which 1,468 remain to be built. (The plan also calls for 3,720 market-rate units to be built; only 460 have been constructed so far.) Over the past three years, though, Pacific Park has faced headwinds: a change in state tax policy, a glut in market-rate units nearby, and rising construction costs.”

“Greenland USA’s long-term involvement is not set in stone; while it has bought nearly all of Forest City’s remaining share–the cost remains undisclosed–the company has pulled back from two proposed projects in California, and is seeking to sell part of its other major project, Metropolis, in Los Angeles.”

The Ruidoso News in New Mexico. “While the housing market in Lincoln County slowed in July, sales in New Mexico as a whole continue to post record numbers this summer. A breakdown from the association showed 29 sales occurred in Ruidoso, a 13 percent decrease; nine in the Alto Lakes-Outlaw-Kokopelli area, a 44 percent decrease; five in Alto to Bonito River for a 20 percent decrease; and nine in the rest of the county for an 11 percent decrease.”

“Average prices in Ruidoso hit $227,879, a 20 percent decrease; $316,556 in Alto Lakes-Outlaw-Kokopelli for a 125 percent decrease; and $165,056 in the rest of the county for a 17 percent decrease However, the median price for Ruidoso was $176,500, a 15 percent increase, with the other areas seeing decreases.”

A Stealthier Storm Has Already Hit Florida

A report from the Miami Herald in Florida. “Hurricanes have given Florida a break thus far this summer. But a stealthier kind of storm has already hit the state. A new study by Attom Data Solutions shows Florida had one of the highest rates of foreclosure starts in the U.S. in July, compared to the same period last year. The report, which tracked foreclosure filings issued by county governments on single-family homes and condos, shows one in every 1,180 housing units in Florida was subjected to a ‘list pending’ — a filing by a bank warning of pending foreclosure activity due to late payment.”

“Dr. Ned Murray, associate director of the Florida International University Metropolitan Center, said that although exact figures aren’t yet available, his research confirms the foreclosure-start activity in South Florida has increased significantly. The neighborhoods primarily affected are Homestead, Opa Locka, City of Miami, Hollywood and Pompano Beach — all working-class areas.”

“‘It’s a disturbing trend, especially when you see the biggest impact is in less affluent communities,’ he said. ‘This is the older, less valued housing stock.’”

“Ironically, Murray said one possible cause of foreclosure starts in more modest neighborhoods could be growing real estate values. ‘Because values have increased steadily over the last five to six years, some homeowners took out second mortgages and equity loans,’ Murray said. ‘But wages have remained flat and housing costs such as insurance keep going up.’”

“Analysts warn this new wave of foreclosure starts could even impact higher-priced homes, such as the oversupply of expensive condos in the downtown Miami area. ‘The condo situation is starting to mirror the way it looked pre-recession in terms of price drops in Miami,’ said Michael Sichenzia, president of the Deerfield Beach-based consulting firm Global Advisors. ‘Prices have dropped considerably while supply keeps increasing, and there’s still a ton of product that has yet to come to market. I think that the next two years do not bode well for prices in general in Miami. The market is overheated again and you’re seeing the beginning of that cool-down now.’”

The Miami New Times. “By nearly every metric, Miami’s housing and rental markets are Kafkaesque nightmares. Few people can afford their homes here because they are expensive, while median incomes are embarrassingly low. It’s a dangerous predicament — one natural disaster could throw tons of cash-strapped homeowners spiraling into bankruptcy.”

“Well, according to a new report from Attom Data Solutions, the Magic City is now dealing with the fallout from one of those disasters: Foreclosures in Miami spiked 29 percent from July 2017 to July 2018, and Hurricane Irma is partly to blame.”

“The city saw 1,119 new foreclosures in the past month alone. Though some of that spike can be attributed to damage from Hurricane Irma in September 2017, Attom’s analysts warn the foreclosure spike could be a sign of greater trouble on the horizon. Statewide, Florida saw 35 percent more foreclosure filings this month than in July 2017 — the largest single-state spike in America.”

“‘The increase in foreclosure starts is not just a one-month anomaly in many local markets given that July represented the third consecutive month with a year-over-year increase in 33 metro areas, including Los Angeles, Miami, Houston, Detroit, San Diego, and Austin,’ Attom Senior Vice President Daren Blomquist said. ‘Gradually loosening lending standards over the past few years have introduced a modicum of risk back into the housing market, and that additional risk is resulting in rising foreclosure starts in a diverse set of markets.’”

“The Miami Herald reported in January that Irma-related damage was forcing money-stretched homeowners into foreclosure — but thanks to the city’s absurd housing market, where locals have no money but outside investors continue to inflate real-estate prices, it appears homeowners are still struggling nearly a year after the storm.”