The Housing Bubble

A report from the Daily Telegraph in Australia. “Home prices in Sydney’s up-market suburbs have gone into free fall over the past year as house hunters trade waterfront and inner city locations for cheaper homes further west. The buyer shift has turned once booming affluent areas into the city’s weakest housing markets. Sales figures showed median prices in waterfront and premium inner city suburbs sank by more than $200,000 in the year to July. This was well above the $50,000 drop in Harbour City prices as a whole.”

“The biggest decrease was in exclusive north shore suburb of Hunters Hill, where the median apartment price tumbled 22.5 per cent, according to the CoreLogic data. The fall was equivalent to $276,150 and brought the median down from last year’s $1.23 million to the current $951,850.”

“House prices in the Rocks dropped by $390,000 (19.9 per cent), while further west the drop in peninsula suburb Balmain East was $251,519 (16.2 per cent). Empower Wealth buyer’s agent Bryce Holdaway told The Daily Telegraph before the launch of Property Buyer Expo 2018 on the weekend that buyers were often reining in their budgets. ‘The banks have changed their policies so buyers need to check their pre-approval for a loan is still relevant and they can actually afford what they intend to buy,’ he said.”

The Herald Sun. “Melbourne’s market has cooled from the red-hot conditions of recent years. Advantage Property Consulting director Frank Valentic said it was more of a buyers’ market, with some houses attracting one or two bidders that would likely have had four or five a year ago. The three-bedroom house at 2 Benson St, Surrey Hills, sold to a solitary bidder for $1.6 million after interest from other groups who didn’t bid and passing in at $1.48 million.”

“‘Just showing how much the market has changed, that probably would have had about 4-5 bidders a year ago and we probably would have seen a price around that $1.7-$1.8 million mark, so it’s definitely changed to be more of a buyers’ market,’ Mr Valentic said.”

The Gladstone Observer. “Gladstone’s property market has faced challenges in the past few years. REIQ chief executive officer Antonia Mercorella said the annual median house price dropped by 6.8 per cent, to $275,000 and unit prices fell by 33.3 per cent, to $170,000. ‘It is possible that high numbers of mortgagee-in-possession sales are keeping prices low,’ she said.”

“Ms Mercorella said the REIQ had lobbied the Government for the first-home buyers grant to be broadened to existing properties in regional Queensland, which she thought would definitely give those markets a much needed boost, but there had been no success to date. ‘It’s outrageous that the Government is funding additional housing supply in areas of the state that are already oversupplied, through this grant,’ she said.”

The Sydney Morning Herald. “Australian households and the financial system are over exposed to an economic shock with the country’s debt levels rocketing to the top of global standings, the Reserve Bank has warned. The central bank has told markets that it was ‘closely’ monitoring Australia’s elevated debt levels.”

“‘The Australian banking system is potentially very exposed to a decline in credit quality of outstanding mortgages,’ said RBA assistant governor Michelle Bullock. ‘And since all of the banks have very similar balance sheet structures, a problem for one is likely a problem for all.’”

“New figures show that Australia’s debt-to-income ratio more than doubled to 160 per cent from the 1990s to the mid-2000s. Since 2013, that spiked to 190 per cent, taking the economy from a debt ratio lower than two-thirds of advanced economies to the top quarter. The spiral has been fuelled by a galloping property market driven by Australia’s obsession with home ownership and property investment, which has only started cooling in the past year.”

“‘Australians borrow not only to finance their own homes but also to invest in housing as an asset, this is different to many other countries where a significant proportion of the rental stock is owned by corporations or cooperatives,’ Ms Bullock told an Ai Group lunch in Albury.”

“The RBA warned an economic shock could leave households struggling to meet repayments. ‘If they have little savings, they might need to reduce consumption in order to meet loan repayments or, more extreme, sell their houses or default on their loans,’ said Ms Bullock. ‘This could have adverse effects on the real economy in the form of lower economic growth, higher unemployment and falling house prices, which could, in turn, amplify the negative shock.’”

A report from the Dallas Morning News in Texas. “The Dallas-Fort Worth home market retreated in August, with preowned home purchases down from a year ago and prices growing at a slower rate. In June, July and August — traditionally the hottest month for home sales — real estate agents sold slightly fewer houses than they did in the summer of 2017, according to the Real Estate Center at Texas A&M University and the North Texas Real Estate Information Systems.”

“‘I think in general there’s a slowdown, yes, but again not a collapse by any stretch,’ said Dr. James Gaines, chief economist with the Real Estate Center.”

“The number of houses listed for sale with real estate agents in the area was up 15 percent from August 2017 and is now at the highest volume in six years. Most of the increase in homes on the market has come in the higher price ranges. ‘The amount of total inventory has climbed slightly over the past year, but much of this inventory has been in the $300,000 to $500,000 category,’ said Ted Wilson with Dallas housing analyst Residential Strategies.”

“The slowdown in home sales growth this year comes after a long period of record sales and huge home price increases in North Texas. Median home resale prices in the area have risen almost 50 percent in the last five years. ‘I believe this month’s MLS data is an indication of D-FW’s residential real estate market stabilizing,’ said Paige Shipp with housing analyst Metrostudy Inc. ‘The root cause of the stabilization is price. As home prices appreciate, fewer and fewer buyers can afford them,’ she said.”

From Red River Radio. “Steven Powell is an agent for JP & Associates Realtors in Frisco says the region’s housing values traditionally have gone up 2 to 3 percent a year until recently. The last few years North Texas prices HAD been rising around 10 percent a year. But that’s cooling. ‘I think what we’re starting to see right now is the market slow down. It’s getting a little bit more difficult for people to afford the kind of houses they could a couple years ago because houses are starting to sit on the market a little bit longer.’”

“According to Powell, this dynamic isn’t a sign of imminent housing market collapse, but rather that the Northeast Texas real estate market is stabilizing itself.”

A report from Seattle PI on Washington. “It’s a buyer’s bonanza! Well, not quite yet but it we’re rolling briskly in that direction. For now, Seattle’s condo market is a bit of a contradiction, at least in August with skyrocketing inventory along with rising values. Inventory rose an incredible 161% over the same period last year, reflecting 470 Seattle condo listings for sale last month. That was also 16.6% more than in July. Historically, we’d normally see inventory taper off by now.”

“With the spike in listings and tempered sales, the inventory supply rate increased to 2.2-months of supply. That’s significant for two reasons. First, it is the first time in five years that the supply rate surpassed 2 months of supply. Second, the supply rate is an indicator of market condition with a sellers market having 3 months of supply or less and a normal/balanced market between 4 to 6 months of supply. Last month, we were half way towards a balanced housing market.”

‘That’s based on MLS listed properties. In reality, it’s a little higher as there are non-listed new construction units for sale that’s not accounted for in the officially published NWMLS statistics. There were 210 pending sales transactions (listings with accepted offers), reflecting a one-year decline of 34.6% and a one-month drop of 11%. As with pending transactions, the number of closed condo sales also declined, reducing 14% year-over-year and 9.4% from July.”

From Globest on Texas. “Construction in the Dallas-Fort Worth TX metropolitan area retreated 23% during the first half of 2018 from a year ago, as a 7% increase for multifamily housing was outweighed by a 36% drop for commercial building, according to Dodge Data & Analytics. For the full year 2017, commercial and multifamily construction starts had fallen 12%, which followed very strong increases in 2015 (up 60%) and 2016 (up 28%).”

“‘Commercial construction may have seen a decrease in the DFW area, but we have only seen continued growth in the multifamily sector, specifically in the size of the projects that we’re seeing,’ Brian Webster, KWA Construction president, tells GlobeSt.com. ‘2017 was KWA’s best year on record, and with numerous high level projects in the pipeline, we are already on track to surpass that this year.’”

“The commercial building total during the first half of 2018 recorded a substantial decline for new office starts, down 52%, as well as weaker activity for hotels (down 56%), commercial garages (down 55%) and retail (down 14%).”

“‘After the huge mega-projects we just finished such as the Toyota and CityLine projects, which led to inflated activity, we needed a little breathing room,’ Dana Walters, vice president of business development, MYCON Construction, tells GlobeSt.com. ‘That’s natural. This is an untested cycle where everyone is trying to predict what will happen. There are thousands of jobs coming in every month, stretching us out to the suburbs. Tertiary markets are becoming primary markets.’”

“Metropolitan areas showing decreased activity for commercial and multifamily construction starts during the first half of 2018 in addition to Dallas-Fort Worth ($3.4 billion), were Los Angeles ($2.9 billion), down 38%; San Francisco ($2.8 billion), down 38%; Chicago ($2.7 billion), down 37% and Atlanta ($2 billion), down 43%.”

“‘Multifamily housing has proven to be surprisingly resilient so far during 2018, following its 8% decline in dollar terms at the US level that was reported for the full year 2017,’ says Robert Murray, chief economist for Dodge Data & Analytics. ‘With apartment vacancy rates beginning to edge upward on a year-over-year basis, banks had been taking a more cautious stance towards lending for multifamily projects.’”

From The Oregonian. “Price drops on gilded 1882 Italianate mansion. The gilded Italianate mansion has captured attention since the day it was built in 1882 for a wealthy Portland shoe merchant. Original owner Morris Marks lived under gold-leaf ceilings and frescoes. The property is for sale at $1,995,000, a drop for the original asking price of $2.75 million.”