The Housing Bubble

A report from the Post Independent in Colorado. “CoreLogic reports that ‘over half [of the 52] major U.S. housing markets are overvalued.’ And Denver’s one of them. This situation probably extends to the entire front range metroplex. So does it mean that we’re on the edge of 2008 all over again? Probably not. The present state of affairs is a classic manifestation of the Law of Supply and Demand. When a desirable commodity is in short supply, demand always drives up cost beyond its intrinsic value, generally not too long before a compensating downward adjustment. So maybe it’s time to sell, not buy.”

“There will be price adjustments in markets like Denver. Some residential homeowners’ equity will shrink, maybe even evaporate if they have a high-ratio loan, but there’s little reason to expect a crash and resulting endemic recession. Capital sources, from Fannie Mae and Freddie Mac, to Bank of America, to the Second National Bank of Downriver Montana, have kept the brakes on by carefully underwriting loans to assure that borrowers can pay them back. The American Dream of home ownership is alive and well. You just have to have more money if you’re a serious dreamer.”

From The M Report. “The risk of fraud in mortgage application increased at the end of the second quarter, according to the latest quarterly Mortgage Fraud Risk Index released by CoreLogic. CoreLogic said that the index rose to 149 for the second quarter, trending up 12 percent from the same period last year and rising 3 percent from the previous quarter. The report said that Q2 2018 was the seventh consecutive quarterly increase in mortgage fraud risk. The Mortgage Fraud Risk Index is calculated from the aggregation of individual loan application fraud risk scores during the previous quarter.”

“‘There is an increase in borrowers applying for loans on multiple properties,’ the report said. ‘While the tight housing inventory and competitive market likely play a role, data also shows investors purchasing multiple properties concurrently and at times dividing loan applications across lenders.’”

“The index also found an increase in identity discrepancies. It also noted red flags on income reasonability during the quarter. Regionally, Florida led the states with the most number of metros with the highest fraud risk. In fact, the Lakeland-Winter Haven metro area had the most significant increase in the fraud risk index at 20 percent. According to the report, the increase was due to high-risk flags in this region that included investors rapidly acquiring multiple rental properties, and the potential use of owner-occupant financing to obtain these properties.”

“Other Florida regions on the list included Miami-Fort Lauderdale-West Palm Beach; Tampa-St. Petersburg-Clearwater; Deltona-Daytona Beach-Ormond Beach; and Orlando-Kissimmee-Sanford.”

The Modesto Bee in California. “Home prices have risen about 50 percent in Modesto in the last four years. The median price for an existing single family home in January through May of this year was $310,100 in Turlock, $349,500 in Oakdale and $461,500 in Ripon. Prospective Bay Area buyers experience reverse sticker shock when coming out to the valley, like Jennifer and Frank Xu of south San Jose. ‘These homes are a fraction of what you’d pay in the Bay Area. This home would sell for $1.5 million there,’ said Frank Xu. The new three-to-four bedroom homes in Cypress Grove sell for between $374,900 to $460,000.”

“Many of the major developers like Century Communities and Florsheim Homes didn’t start building again in earnest until last year. Aaron Lewis — president of Realty One Group Gold and who is in his 15th year selling homes in the Modesto area — said institutional buyers and investors who bought homes as rental properties are taking their profits and getting out of the market.”

The Arizona Daily Sun. “Freshly constructed roads, foundations and home structures cut through scrub brush that covers a corner of land at the edge of Doney Park. The new rural subdivision, called The Hills at Slayton Ranch, is one of several projects that have been working their way through the pipeline at Coconino County’s community development department in recent years. Together, the housing projects have claimed some of the last large, developable and ’subdividable’ county land around Flagstaff, said Jay Christelman, director of the community development department. ‘We’re running out,’ Christelman said.”

“Building activity in general has ticked upward as well, with permit activity in 2018 already on track to be 30 percent higher than last year, Christelman said. As for the subdivision projects that are in progress, most are ones that have been revived after coming to a standstill during the recession. Construction in the 126-lot Slayton Ranch subdivision began in 2004. The first and second phases of the project were completed by 2006, but progress stalled during the Great Recession and the housing market bust, said Tim Shinkle, a realtor who is the local marketing representative for the subdivision and is developing some homes there. ”

“Most buyers of the 2.5-acre lots are custom building their homes, Shinkle said. He is building two spec homes in the subdivision that he said will sell for between $600,000 and $620,000 for about 2,500 square feet.”

The Minot Daily News in North Dakota. “The number of properties receiving notices of foreclosure in Ward County spiked to more than a thousand this year. That’s not quite doubled from last year, but it reflects an increasing number of incidents in which property owners are letting taxes fall into arrears. Some development properties have faced foreclosure because the market for housing changed in recent years. A proposed housing development near Berthold is one that never quite took off.”

“‘At this time, we are not encouraging that development. We have a fair amount of homes for sale in the city,’ Berthold Mayor Steve Ibach said.”

From Crain’s New York Business. “It’s not just luxury-home listings that are piling up in New York City. Even units for less than $1 million are hurting for buyers. In Manhattan, the inventory of sub-$1 million apartments surged 27 percent in June from a year earlier to 3,087, the most for the month since 2013, according to StreetEasy. Such listings jumped 17 percent to 2,738 in Brooklyn, and climbed 6 percent to 2,314 in Queens.”

“When combined with listings over $1 million, Brooklyn and Queens both had the largest number of available homes for June since 2008, according to StreetEasy. Total inventory in Manhattan hasn’t been this high for month since 2011. ‘There are a lot of options out there, so be picky,’ said Grant Long, senior economist for the listings website. ‘The power is in your hands to negotiate.’”

“Another surge of listings is expected in September, a time when many homeowners try to recapture buyer attention after a summer break, according to Long. If purchases don’t clear some of the supply before then, ‘what’s added in the fall will push us undoubtedly to the highest inventory levels that the city has ever seen,’ he said.”

The York Daily Record in Pennsylvania. “Realtor and developer Steve Chronister is saddled with millions of dollars of debt and lost his own home to foreclosure in 2017. According to documents filed in the York County Judicial Center, Chronister has almost $2.7 million in judgments against him. The biggest single debt — $919,923.88 — is to a Glen Rock company that Chronister contracted — but allegedly did not pay — to install sewers, water lines and streets for property development by Chronister’s limited partnership — Hallam Properties LLC — in Paradise Township. Chronister had plans to build a housing development on Beaver Creek Road.”

“Paradise Village was to be a 48-unit neighborhood of ranch-style duplexes with a list price of $219,900 each. The contractor was to be paid from proceeds from the sales of the first 11 homes sold. As it is, one home has been built. It is still for sale, on a short, dead-end street off of Beaver Creek Road. At the end of the street are a couple of backhoes surrounded by tall weeds.”

“Last year, Steve Chronister and another limited partnership — Equine Meadows Associates — were subject of a revival of a lawsuit in which a judge determined he owed at least $420,897 to the Equine Meadows Condominium Association. In the original complaint, the association alleged that the developers and marketers of the condominium complex ‘gave buyers misleading and inaccurate information in the disclosure documents required to be provided to buyers of condominium units, failed to remedy various defects in construction and failed to complete improvements to be incorporated in the Condominium property, and mismanaged the Condominium while it was under (their) control.’ Chronister could not be reached for comment.”

From New Jersey Advanced Media. “When the housing bubble burst, every town in New Jersey suffered. Most places in the nation did. Much of the state has recovered considerably in recent years, but not everyone. There are actually only two towns in New Jersey with higher median home values than at the peak of the market: Hoboken and Weehawken. Outside of that, every other community remains down at least 4 percent. An analysis of real estate data from Zillow shows a handful of towns have a median home value of less than half of what it was 12 years ago, when the market peaked.”