The Housing Bubble

It’s Friday desk clearing time for this blogger. “The number of Metro Orlando homes entering the foreclosure process last month was up more than 10 percent from the month before. May was the fifth consecutive month in which increasing numbers of homeowners in the four-county metro area encountered the initial stages of foreclosure, according to RealtyTrac. An increase of the number of houses entering foreclosure does not necessarily mean more distressed properties will soon be dumped on the market, said broker Stephen Baker. During a recent National Association of Realtors conference that he attended in Washington, D.C., the country’s three top lenders told the crowd not to expect a big release of foreclosed properties, he said.”

“‘They told us that they wouldn’t want to do that, because it would hurt them by driving down prices’ and they would not be able to process that many sales effectively, Baker said.”

“To the snowbirds of Canada, the sunseekers of Europe and flight capitalists of Latin America, Florida sends you all a great big Thanks! for buying homes here in such abundance. ‘Florida has been the fastest-growing destination of choice,’ states the Profile of International Home Buying Activity 2012. California was second with 11 percent, while Texas and Arizona each had 7 percent, followed by Georgia and New York.”

“It’s getting more difficult to pay the costs associated with home ownership in the Vancouver area and the tab is likely to rise more as interest rates rise, the Royal Bank said. The RBC figures assume an owner would need $155,900 of qualifying annual income to make mortgage payments on a bungalow priced at $832,600. Based on those figures, the owners would have to direct $8.89 of every $10 of median income earned each year toward mortgage payments, utility costs and property taxes, the RBC Housing Trends and Affordability report found.”

“For a two-storey home, the figures are even more dramatic: an owner would need to spend $9.30 of every $10 of median income earned toward their home and would require a qualifying annual income of $163,100 to borrow to buy a home valued at $865,500.”

“Ventura County’s housing market continues to show signs of vast improvement, with home sales last month reaching a level not seen since 2007. Realtor Judy Seeger has seen more foreign investors buying rental properties in the Conejo Valley. ‘We have a ton of Asian clients coming from Malaysia, China and Japan,’ she said.”

“Despite recent interest rate cuts by the Reserve Bank of Australia, the housing market has not responded to these cuts. Local buyers may also start to boost the market , online poll by mortgage provider Loan Market found 51 per cent of respondents were planning to invest over the next 12 months, while a further 37 per cent were keen but want to be sure their jobs were secure.”

“Only five per cent of the 786 people surveyed had no plans to buy property.”

“University of Western Sydney economics and finance professor Steve Keen has warned the Hunter Region against relying on the coal boom as a marker for future prosperity. ‘What if the coal boom doesn’t continue?’ Professor Keen said. ‘I’d be dubious about expecting coal to rescue you, if anything goes wrong with China.’”

“Among Beijing’s 13.2 million homes, 3.81 million are currently vacant, according to the Beijing Municipal Public Security Bureau. Although the fact that nearly 29 percent of the homes in China’s capital, where demand for housing is enormous, are unoccupied has raised red flags for authorities, even more alarming is the fact that the vast majority of these units are being hoarded by developers and investors for speculative reasons.”

“Yet, Beijing is not the only city plagued by a high home vacancy rate. In Sanya, a popular tourist destination in Hainan Province, nearly 80 percent of residential properties are unoccupied, a local government official revealed at a press conference recently.”

“On a recent morning, a single coach pulled out of Wenzhou’s main long-haul bus station into an almost empty street. A few years ago, the road was a permanent traffic jam, clogged with buses and migrant workers arriving from other provinces, according to Liu, a taxi driver who like many people in China declined to give his full name. Liu came to Wenzhou more than 10 years ago, said he’s taking his family of four back to Anhui province next week. Even working more than 12 hours a day, his income has dropped to a monthly 3,000 yuan, from 5,000 yuan a year ago.”

“Property in Wenzhou remains out of reach for thousands like Liu even after home prices slumped 12.3% in April, the fastest drop in the country. Apartments still cost an average 30,000 yuan per square meter — the equivalent of the city’s annual per capita disposable income in 2010, according to the local government website.”

“‘This is no longer the city I had dreamed of,’ Liu said. ‘No matter how hard I work, I can’t save enough to buy an apartment here. I’m not coming back.’”

“Bosa Development will break ground next week on the first phase of a project in Seattle’s Denny Triangle that was approved in 2007 but went into hibernation when the real-estate crisis hit. As for the doubters, Nat Bosa said, they’re looking back rather than forward. ‘I have a philosophy: You plan to buy your summer hat in the winter. And then you sell it in the heat of summer.’”

“And if he’s wrong about the condo market, Bosa said, he can always rent the units as apartments until it does bounce back. But that, too, could be problematic, said Glenn Crellin, associate director of the University of Washington’s Runstad Center for Real Estate Studies: Thousands of new apartments are expected to come on the market by 2014.”

“Even as buyer confidence climbs, the local housing market still faces a tough reality: Appraisals are falling short of what many buyers are willing to pay. It’s a problem that is weighing down home prices and stalling a more robust recovery, Twin Cities agents say. And they find that surprising in a market where inventory is scant and multiple bids on homes are becoming more common.”

“‘People don’t realize that it’s getting better and don’t realize that what we have could be even better,’ said Marti Estey, a sales agent with Re/Max Results, who has had several deals nearly fall through.”

“Jonathan Smoke, executive director of Hanley Wood Market Intelligence said the effects of the housing bust are driving much of the caution. ‘Since the downturn, I think appraisers have been acting conservatively at the behest of lenders and the government,’ he said, noting that mortgage underwriters won’t forget the billions of dollars that were lost in the housing collapse.”

“There’s something unusual happening in Boise. While national figures show that the housing recovery is slow, at best, Boise is one of a few U.S. cities that have seen a fast run-up in demand, and prices. Investors and homebuyers are in stiff competition, and both say there aren’t enough homes to go around. A year ago, Idaho had one of the highest foreclosure rates in the nation. Prices hadn’t touched bottom. By early this year, it was a different story. Chad Boucher says the quick shift was hard to take.”

“‘Everything we put bids in on, it eventually went way above our price range that we were thinking for that house,’ he says. ‘We were just like, ‘Man, we’re going to be outbid by everybody.’”

“The market’s turnaround has left people scratching their heads, including Marc Lebowitz, head of the Ada County Association of Realtors. He says one measure of a real estate market is the number of homes available, and how well that number matches demand. The number of homes now for sale would only satisfy three months’ worth of demand. That shortage has kicked the market into high gear. Lebowitz will admit that gives him pause. ‘I’m solidly convinced that we’re in a strong recovery,’ he says. ‘I’m not sure about the pace of it right now.’”

“In other words, he’s not sure the pace is sustainable. To explain, Lebowitz tells a story about a modest home that recently sold for 20 percent above list price. Immediately, the prices for nearby homes jumped. That’s notable because escalating prices can make for risky decisions. Risky decisions can make for bad investments. And the recession was a lesson in where bad investments can lead.’