August 23, 2018

The Days Of Overpaying Are Over

A report from the Orange County Register in California. “What’s up with mortgage rates? Jeff Lazerson of Mortgage Grader in Laguna Niguel gives us his take. Last weekend, I spent four hours sitting an open house with a Realtor on a cute entry-level condo in La Habra selling for $400,000. About 15 groups came through. Six months earlier, there were 50 groups coming through. One of my mortgage loan originators sat a similarly priced property in beachy Oceanside and had a similarly sparse attendance.”

“Are we seeing an emerging buyers’ market? If so, how should buyers and sellers react? Here are some signs of a slowdown and even rising mortgage defaults. According to Steven Thomas of Reports on Housing, every week somewhere between 11 and 15 percent of Orange County homes in the multiple listing service reduced their asking prices. That compares to about 7 percent last year.”

“Average days on market in 2018 is 43 compared to 33 last year. Listing cancellations are 13 percent higher this year than last year. Earlier this week, the National Association of Realtors announced U.S. home sales subsided for four straight months and are at their slowest pace in two years. A report out earlier this week from Irvine-based Attom Data Solutions indicated notices of default jumped 20 percent from last year in July in the Los Angeles-Orange County metro area as well as in San Diego County.”

“Cowering homebuyers should recover their backbone. In other words, stand your ground. Do not chase overpriced properties. Walk away from unreasonable sellers who won’t fix the more expensive property repair items. Sellers, decide just how badly you want to sell your palace. If you are not serious, don’t list. Other than the Brady Bunch house, the days of overpaying are over.”

The Sacramento Bee in California. “Wells Fargo Bank announced Thursday that 190 employees have been cut from its Rancho Cordova mortgage loan division as part of a nationwide staff reduction. The local cutbacks were just a portion of the 683 mortgage lending employees who were laid off nationally. All of those employees received 60-day notices on Thursday, Wells Fargo spokeswoman Yahaira Garcia-Perea said, adding that some may be offered other positions within Wells Fargo Home Mortgage.”

“The layoffs coincide with a nationwide slowdown in housing sales, a drop in the number of people who can afford a median-priced home in California and rising interest rates on mortgages.”

The Colorado Springs Gazette. “Wells Fargo & Co. is laying off 55 employees from its home mortgage call center in the Briargate area as part of nationwide cutback that is eliminating 683 jobs, the company said Thursday. In an email statement from Denver- based spokeswoman Nicole Schwab, the San Francisco-based financial giant attributed the cutbacks to ‘continuing market changes’ that have resulted in ’several team member staff reductions in various markets since the beginning of 2018. We continue to adjust capacity within our lines of business to meet customer needs — and to ensure we’re operating as efficiently and effectively as possible.’”

“Schwab declined further comment on the layoff, but said the move came after ‘carefully evaluating market conditions and consumer needs.’ Wells Fargo’s center in the Springs focused mostly on home-equity lending, employing underwriters, processors and others to help borrowers tap the equity in their homes.”

“The Orlando Sentinel reported Thursday that 137 of the layoffs are planned at the company’s call center in Orlando, Fla. Wells Fargo told the paper it was providing 60 days of notice and was working with employees for other opportunities in the company.”

Residential Real Estate Just Hit A Wall

A report from CNBC. “A slew of negative housing numbers for July are piling up on top of a slew of negative housing numbers from the last several months. Sales of new and existing homes are falling, construction of single-family homes is basically flat for the year, mortgage rates are rising and affordability is weakening. It certainly feels like the housing recovery that really took off in the last four years has come to a grinding halt, but it hasn’t.”

“Is the ultra-hot and competitive housing market cooling off? Absolutely. Home prices rose too far, too fast, and the market is now hitting a price wall. We know that because the price gains are finally starting to shrink, according to a report this week from the National Association of Realtors. Anecdotally, real estate agents across the country are saying that their sellers are beginning to come back down to earth.”

“Foreclosure starts hit a 17-year low in June, according to Black Knight Inc., and mortgage delinquencies are at their lowest level in more than a decade. That includes a slight bump in troubled loans from states hit hard by last year’s hurricanes.”

The Houston Chronicle in Texas. “One year after Hurricane Harvey indiscriminately hit Houston’s wealthy and working-class neighborhoods, life is returning to normal for many residents, though to varying degrees. Property values, said real estate agent Craig Kooken, have come down enough to where young families who may have been priced out before the storm can now afford to buy in the area, known for its good schools and friendly neighbors. He recently sold a lot for $340,000 to a young couple who plan to tear down the flooded house on the property and build a new one.”

“‘It’s a good time to buy in here — if you’re not scared,’ Kooken said.”

“Flooded homes that were purchased by investors who renovated them and put them back the market have been slower to move. Four houses in Ashford Forest have been on the market more than 90 days and none has sold, Kooken said. Property values have plummeted in communities that flooded multiple times in recent years. Parts of Meyerland, Braes Heights and Bellaire, along with parts of west Houston that flooded from the Addicks and Barker reservoir releases, are now a jumble of overgrown lots and empty homes.”

“Those who can afford it are paying six figures to elevate their houses. Builders are starting from scratch on lots they purchased at big discounts. Many didn’t have a choice but to sell. Some homeowners have been unable to keep up with the mounting bills and are falling behind on their mortgages. The grace periods that banks offered immediately following the storm have expired.”

“In Harris County, 267 properties were sold at the foreclosure auction in July, more than double the number that sold in January, according to local data firm Foreclosure Information & Listing Service.”

“One thing most Harvey neighborhoods have in common is an abundance of for-sale signs. In Meyerland, home sales were up 30 percent during the second quarter of the year, compared with the same pre-Harvey period last year, according to data from Martha Turner Sotheby’s International Realty. The median sales price, however, was down 11 percent to $350,000. Bellaire saw 12 percent and 7 percent declines in sales and prices, respectively.”

“TaMeca Smith bought her house for $98,000 three years ago. Now it’s valued at $61,289, according to the Harris County Appraisal District. Aside from lower values, her neighborhood near Tidwell and Wayside, south of Halls Bayou, has changed in other ways. Most of her neighbors are back in their homes, but the atmosphere is different. A lot of the houses now have security cameras because of some break-ins that happened after the storm.”

From the Sacramento Bee in California. “After six years of price increases, Sacramento residential real estate just hit a wall. Is it the summer doldrums? Or are home prices in for a fall? Real estate experts and economists are of mixed minds. No one, however, is predicting a catastrophe like the one that happened here and everywhere in the mid-2000s, when home values in Sacramento plummeted 60 percent, tens of thousands of over-leveraged owners lost their properties and new home construction went into deep hibernation.”

“Christopher Thornburg of Beacon Economics was known as Dr. Doom for his predictions in the mid-2000s that California real estate was about to crash. His answer to the bubble-bursting question today is emphatic: ‘No, no, no,’ he said, ‘and, by the way, no!’”

“Most real estate watchers agree, however, that red warning flags have popped up in the last few months both in Sacramento and California. Home sales in Sacramento County and statewide have slipped, and some homes are spending more time on the market. Sacramento real estate analyst Ryan Lundquist conducted a twitter poll last week among followers that showed most of them suspect the market is in some sort of a bubble. Lundquist preaches calm. ‘We have to be cautious about saying the market is crashing just because (sales numbers) soften.’”

“But the California Association of Realtors has noted the market appears to have hit a ‘what now?’ moment. CAR President Steve White introduced the idea of ‘buyer fatigue’ in July, saying a ‘lackluster spring home buying season could be a sign of waning buyer interest as endlessly rising home prices and buyer fatigue adversely affected pent-up demand.’”

“Jordan Levine, an economist with the association, pointed last week to early signs of a slowdown in particular at the lower end of the housing market: Sales of starter homes, the least expensive homes on the market, have dipped in recent months. Levine said the shift in the lower-end housing market is so recent that it’s unclear whether it will even become a trend. ‘There’s not enough data yet.’”

“He said he’s among those who believe we are seeing the market shifting to a lower gear, with lower price increases. ‘You want to give incomes a chance to catch up,’ he said.”

The Price Cuts Are Due To Sellers Getting Too Confident

A report from the Charlotte Observer in North Carolina. “More Charlotte home listings saw price cuts in June than a year earlier, indicating that Charlotte’s housing market is shifting ‘ever-so-slightly in favor of buyers,’ a Zillow report says. Sellers cut home prices 15.4 percent in the Charlotte metro region, according to Zillow. That’s up from 11.2 percent a year earlier. Price cuts in Charlotte averaged 2.4 percent. The numbers are similar nationwide: In June, about 14 percent of U.S. home listings decreased prices, up from 11.7 percent in 2016, according to Zillow. But one month of price decreases may not mean the market is tilting to favor buyers, a Charlotte Realtor warns.”

“The price cuts are ‘due to sellers getting too confident in a seller’s market,’ said Jason Gentry, president of the Charlotte Regional Realtor Association. ‘And then they’re having to do price corrections.’”

“The number of houses for sale in Charlotte in July decreased 16 percent from last year. Inventory is down even more dramatically from July 2012, when there were more than 18,000 houses available. Now, there’s barely half of that amount.”

“Gentry said Charlotte buyers shouldn’t be too optimistic. Buyers hoping for the market to shift toward them should look for signs like more inventory and houses spending a longer amount of time on the market, Gentry said. Neither has happened. ‘We’re not headed toward a buyer’s market yet.’”

From Seattle PI in Washington. “I’m going to explain why the market has been shifting towards buyers and secondly, I’m going to show you an example of a Seattle condo my client bought where we reduced the price and he ended up with an incredible 39th floor view unit. The number of homes for sale reflect a 37% annual increase in condos for sale in the downtown core. The months supply of inventory has moved up 67%.”

“For the last 6 years sellers have been be able to get 100% or more of their asking price. In fact, just 4 months ago, Downtown Seattle sellers were getting close to 5% more than their initial asking price. Recently, buying has cooled a bit (buyer fatigue) and the inventory of available homes have risen.”

“What this does is present an opportunity for prospective buyers to step in an negotiate their terms. For example, if you find a condo that has been on the market for 30 days or more, you might be able to negotiate a price reduction and even a closing cost credit. This hasn’t happened for nearly 7 years.”

“You may have noticed the negative headlines in the news the last 60-90 days. To be honest, some of it is just good honest reporting, but some of it is also sensationalism. You have to be careful what you read and how you read it. Real estate is hyperlocal. So when you hear about news stories and headlines that throw Seattle, Tacoma and Lynnwood in the same sentence, take caution.”