Speculators Overdoing A Spending Spree
The Los Angeles Times reports from California. “The California housing recovery boomed forward in November, with home prices reaching levels high enough to trigger questions about whether speculators are overdoing a spending spree. The run-up in prices caught the attention of Dean Baker, co-director of the Center for Economic Policy and Research in Washington, who regarded the trend as ’serious grounds for concern that these markets are being driven by speculation. While some speculators buying up homes at a bottom can be positive, the sort of price rises that you are seeing there may be excessive,’ Baker said in an email to The Times. ‘The speculators likely have pushed prices above where the market would put them in some markets,’ he said.”
“Ed Leamer, director of the UCLA Anderson Forecast of the economy, had a more sanguine take on the trend than Baker. ‘I am inclined to think that what he calls speculators know more about the market than he does,’ Leamer said. ‘It’s a good thing for professionals to be putting a floor under home prices.’”
The Ventura County Star. “One of the world’s largest private-equity firms is making a $34 million bet on residential real estate in Ventura County, buying up homes at a pace of nearly one a day for the past three months. Ventura County is one of 10 markets nationwide in which Invitation Homes, an arm of the New York-based Blackstone Group. Invitation Homes, through a corporation called THR California, has purchased 101 homes in the county since Aug. 3, with the frequency picking up in September and peaking with 26 transactions in the first 17 days of December.”
“The homes it has targeted in Ventura County are all modestly sized, post-foreclosure properties. County records show it has paid an average of price of $336,670. THR pays cash for the homes, and company officials say it typically pays a 10 percent to 15 premium to acquire targeted properties. Because investors are purchasing many distressed properties before they come to market, said Thousand Oaks agent Brian Graver, those properties are not being factored into sales prices considered by real estate appraisers. As a result, ‘houses are being appraised at higher levels.’”
“For those who maintain the traditional American dream of homeownership, however, institutional investors such as Invitation Homes are making that dream very difficult to realize, said Graver, the Thousand Oaks realty agent. ‘For homes under $500,000, it’s incredible how many buyers there are,’ he said.”
“Representing a seller, B.J. Ward, a Ventura County Realtor, recently closed a sale with THR after the company made a cash offer on an Oxnard home $11,000 higher than the asking price. There were about 12 offers on the home — half were investors, the other half were families or couples hoping to move into the house, Ward said. ‘They’re sending in offers that no one else can compete with,’ Ward said.”
“Brandie Gaines and her husband, Fred competed directly against THR on the sixth house they put a bid on in Oxnard. The bids were the same — $385,000 — but THR offered cash. After months without success, the Gaineses took Ward’s advice and started increasing their starting bids over the listed price to make their offers more competitive. The couple’s luck finally turned with the eighth house they had bid on since August. After making an initial offer slightly higher than the list price, Gaines and her husband increased their offer by $17,000 over the asking price.”
“‘It wasn’t my No. 1 location, but it had some other things that made it worth it,’ Gaines said. ‘It didn’t matter where it was; we were ready to go to battle for it.’”
The Orange County Register. “In Orange County and Southern California, Chinese and other Asian buyers – many paying all cash – have snatched up properties as investments, as vacation or retirement homes or as a residence for children studying at local schools or universities, local agents say. Local agents specialized in working with foreign buyers say they see strong interest among affluent shoppers in China, Taiwan, India and other Asian countries.”
“‘I think they’ll keep coming as long as the Chinese government allows them to wire the money out because people there have so much money,’ said Cayenne Kuang, broker and owner of Spectrum Realty in Irvine.”
“About 20 percent of the buyers at Irvine’s Lambert Ranch development – which caters to Asian buyers – are from abroad, said Joan Marcus-Colvin, senior VP at the New Home Co. Luxury home agent Rex McKown said foreign shoppers account for 80 percent of the viewings, up from 20 percent eight months ago. Jacqueline Thompson, also of Surterre, says Chinese make up about half of the buyers at home showings. ‘I think the Chinese realized the urgency to buy up homes in the U.S. because they see that prices will increase,’ Thompson said.”
“A Tustin couple says their house was foreclosed last month and sold to an investor while the pair was in the process of seeking a loan modification – just one month after major U.S. banks were to stop the practice known as ‘dual tracking.’ Wells Fargo foreclosed on the home owned by Keith and Susan Robishaw on Nov. 28. The couple are still living in the house and fighting to rescind the foreclosure, though they have received an eviction notice.”
“The Robishaws have lived in their Tustin home for 15 years. The couple took out several loans since they purchased the home in 1997 for $255,000 and got a mortgage for $242,250. Public records show that between 2003 and 2005, they refinanced their mortgage twice – once for $356,250 and the second time for $434,000 – and took out two home equity lines of credit. The Robishaws said they used the money to buy cars, make repairs and pay taxes, as well as remodel the house.”
“Then the recession hit. Keith Robishaw was laid off in April 2009 and remained out of work for 21/2 years. The couple made their final monthly payment of $2,992 in March 2010. ‘This is the only home we’ve ever bought,’ said Susan Robishaw, while sitting at her kitchen table beside a stack of paperwork documenting her efforts to keep the four-bedroom house. ‘We planned on living here for the rest of our lives.’”
The Glendale News Press. “The number of foreclosed homes that sold in the Glendale region plummeted in November to only a handful, according to the latest real estate figures. Four bank-owned properties sold last month, a dramatic decline from 23 in November 2011, according to statistics compiled by Realtor Keith Sorem with Keller Williams in Glendale. In the La Crescenta-Montrose area, only one bank-owned property sold in November, compared to six the same month last year.”
“Broker Hamlet Nersesian, who owns Armex Realty in Glendale, said the drop in bank-owned properties for sale is a mystery. ‘I don’t know why the banks aren’t putting those properties on the open market to sell,’ said Nersesian, a board member for the Glendale Assn. of Realtors.”
The North County Times. “The San Diego Association of Realtors pinpointed one of the factors in the market upswing — falling inventory of homes for sale. San Diego State University economist Michael Lea said the decline of distressed property as a market factor bodes well for other housing to be bought and sold. ‘All signals are pretty favorable for next year to continue the recent pace,’ Lea said.”
“Richard Wyllie, a Chula Vista real estate agent, said there are only 1.3 months of inventory available in the East Lake area, partly because bank-foreclosed properties have declined. But conventional listings of nondistressed properties are rising. He said of the 29 properties for sale, about 19 are standard homes that did not go through foreclosure. ‘I just don’t know why all of sudden,’ he said. ‘The market hasn’t gone up that much, but it’s enough for some people to see a little bit of profit in the sale.’”
The Friday Flyer. “Well, the train has left the station. The longer you wait now, the further away that train will get and the harder it will be to catch. That was the prevailing sentiment expressed by many at the National Association of Realtors’ recently concluded annual fall meetings in Orlando. Housing affordability is at an all-time high while interest rates and inventory are at an all-time low. That train is picking up speed and people who don’t catch it today will have an increasingly difficult time in future years as both prices and interest rates inevitably tick up.”
“A shortage of homes for sale will continue across the country, California in particular. Rising prices means fewer homeowners underwater and fewer distressed sales, but prices will not rise fast enough to incent many homeowners with equity positions to sell immediately as they wait for increased profit margins. Builders are also stepping up but in a limited way.”
“Lawrence Yun , chief economist of the National Association of Realtors® said that four years from now there will be an even greater disparity in wealth distribution. ‘People who purchased homes at low prices in the past couple years, including many investors, can expect healthy growth in home equity over the next four years, while renters who were unable to get into the market will be in a weaker position because they are unable to accumulate wealth,’ he said. ‘Not only will renters miss out on the price gains, but they’ll also face rents rising at faster rates.’”
From CBS Los Angeles. “California has one of the highest foreclosure rates in the nation but overall filings in November reached a low not seen in six years, according to Realty Trac. However, short sales reportedly increased 31 percent in the Inland Empire in the third quarter of the year. Darren Bloomquist, of Reality Trac said that having short sales on the rise while foreclosures are down indicates the real estate market is still distressed.”
“Bank of America has reduced its foreclosure filings by 59 percent, said Bloomquist, adding that the Inland Empire has the third highest foreclosure rate in the country, only lower than two areas in Florida. Dan Tovar, a long-time Riverside realtor and Bloomquist agree there’s pressure on banks to prevent foreclosures.”
“‘For us realtors, we’re super excited,’ said Tovar. ‘The sales price goes up, guess what, our commission goes up, too.’”
It is quite clear that at this point in time, CA will sustain the largest price collapse in history. Talk about an unmitigated disaster forming before our very eyes.
What’s the time frame?
Get a grip Slop.
I’m trying to. That’s why I need to know the time frame.
Based on the Japanese experience, I’d guess about two decades.
Of course, this is just a wild guess…it could happen a lot sooner depending on how soon extend-and-pretend policies either fail or end.
Financial experts agree that Blackstone, by jumping into the market just after it appears home prices have bottomed out, could reap significant returns from a robust rental market and also enjoy the benefits of price appreciation on its assets.
George Leis, head of Union Bank’s Central Coast region and former CEO of the bank’s recently acquired Santa Barbara Bank and Trust, said Blackstone appears to have developed a winning strategy.
“For them, it’s brilliant,” he said. “They get to enjoy the stream of rental income, and as the housing market rebounds, they will do pretty well if they decide to exit that strategy and sell the homes.”
The housing rental market is strong and has remained so throughout the economic slowdown.
“Rents have been climbing,” said Gudell, the Zillow economist. “You had all those families who had been foreclosed upon, creating a whole lot of demand that was soaking up available units.”
She noted that rents in Ventura County are up 1.6 percent from this time last year.”
Pottersville USA
Rents have been climbing,”
Not really. Not at all but don’t let the truth get in the way of an outlandish lie from the Housing Crime Syndicate.
Buyers never learn. What will the realtors be saying a year from now!
“What will the realtors be saying a year from now!”
Now is a great time to buy with interest rates so low!!
Well the exodus of the middle class from California continues. Over 225,000 people per year moved out of California in the last ten years. They grew the economies $4 billion each in Nevada, Arizona, and Texas, and since the Brown rot tax hikes took effect (retroactively to January 1 2012) by the votes in November, the exodus will accelerate.
http://www.breitbart.com/Big-Government/2012/03/13/exodus-california-tax-revenue-plunges-by-22
The prices of homes will plunge in California, as the only ones remaining are the 1% rich and the soon-to-be 99% very poor - while the middle class went poof!
‘Just more than 6,700 Orange County homes were in some stage of foreclosure in October, figures from CoreLogic and the U.S. Census Bureau show. While that’s down 42 percent from a high of 11,500 homes in the foreclosure pipeline in November 2009, the number of distressed homes still is 20 times greater than before the housing slump hit in 2005.’
‘As of September, more than 19,000 Orange County homes – 4.3 percent of local mortgages – were 90 days or more behind on payments, CoreLogic’s latest figures show.’
http://lansner.ocregister.com/2012/12/17/168312/168312/
‘The Inland region had a total of 2,813 filings in San Bernardino County and 3,226 filings in Riverside County in November. Collectively, that level of activity in the region represented 15 percent fewer foreclosure filings in October and 48.5 percent fewer filings from November 2011. For the third quarter, short sales are up 31 percent from the year earlier. “This tells me banks are pre-emptively agreeing to do short sales before they file that notice of default.”
‘Even so, the region has yet to shake its No. 3 rank among metropolitan regions for foreclosure activity. One out every 248 housing units had a foreclosure filing in November.’
‘Lenders may be preparing for the California Homeowner’s Bill of Rights, which mandates such things as a single point of contact and required courses of action to prevent dual-track foreclosure activity, Blomquist said. “Typically, when a law like this passes we see, in the short-term, a slowdown followed by a spike in activity,” he said. “It could be the case here, and lenders are already pulling back while they figure out what they need to do to follow the guidelines.”
http://www.pe.com/business/business-headlines/20121213-real-estate-inland-foreclosure-filings-fall-50.ece
“…the number of distressed homes still is 20 times greater than before the housing slump hit in 2005.’”
Good find! Given the MSM’s pro-real-estate bias, statistics like this are few-and-far-between these days.
“One out every 248 housing units had a foreclosure filing in November.”
It’s amazing to see a current statistic like this five years after the onset of the housing bust. Even more interesting might be to consider what this rate of foreclosure filings looks like on an annualized basis. Assuming that a home doesn’t receive two foreclosure filings in the same year, one can compute the annual rate of foreclosures per household as
“One out of every 1/(1-(share of homes not foreclosed in one month)^12)”
1/(1-(247/248)^12) = 21 (rounded).
Is an annualized rate of one out of 21 homes receiving a foreclosure filing plausible? Or is my math wrong?
I think my elementary math calculation is right, but I hope one of the resident academics will try his best to show otherwise. Alpha-sloth, are you up for it?
Alpha-sloth, are you up for it?
I would never challenge a math tutor on a math question. That’s where black-and-white thinking is king.
Cop out.
Cop out.
You’re challenging me to dispute something that I don’t dispute?
Gosh, you must really be sore about me pointing out that contrarians are not always right, the consensus is not always wrong. Sorry to pop your bubble, I just wanted to save you from your black-and-white thinking.
Well, there is this: I’m going to receive a bunch of presents today (say about 20). At an annualized rate, I’ll be receiving so many presents this year (7,300!), I’ll never have to work again.
Whoopee! Merry Christmas!
Or is my math wrong?
With such a high rate of California homes going into foreclosure, I am stumped by the “consensus view” that the inventory shortage will continue indefinitely.
At some point, the market’s constipation will give way to a very messy bowel movement…
“At some point, the market’s constipation will give way to a very messy bowel movement…”
And it’s going to be an ugly enema. Especially for those who bought a house 1999-2012.(And all of them overpaid by 80% or more)
In my readings there seem to be 3 notices( can´t remember them all) before a house is actually sold by foreclosure, so three pot-sittings if some other obstacle doesn´t continue the constipation; and therefore it would be 21/3 equals 7 foreclosure sales per year?
Well, which is it?
Did you plan to live in your house the rest of you lives? After being there for 15 years it could have BEEN PAID OFF BY NOW.
Or did you plan to use it as an ATM for as long as you could? Expecting ever rising housing prices to save you for the rest of your lives?
Or did you just plan to stop paying the mortgage and fight foreclosure and eviction for the rest of your lives? Hey, some woman in FL has been doing just that for 15 years!
Tough decision for the free sh*t army to make…
————————
“The Robishaws have lived in their Tustin home for 15 years. The couple took out several loans since they purchased the home in 1997 for $255,000 and got a mortgage for $242,250. Public records show that between 2003 and 2005, they refinanced their mortgage twice – once for $356,250 and the second time for $434,000 – and took out two home equity lines of credit. The Robishaws said they used the money to buy cars, make repairs and pay taxes, as well as remodel the house.”
“Then the recession hit. Keith Robishaw was laid off in April 2009 and remained out of work for 21/2 years. The couple made their final monthly payment of $2,992 in March 2010. ‘This is the only home we’ve ever bought,’ said Susan Robishaw, while sitting at her kitchen table beside a stack of paperwork documenting her efforts to keep the four-bedroom house. ‘We planned on living here for the rest of our lives.’”
“while sitting at her kitchen table beside a stack of paperwork documenting her efforts to keep the four-bedroom house.”
Exactly. All they needed was one piece of paper and a calculator and yes, the house could have been paid off or largely paid off, by now.
And I love how there is never any follow up question by the reporter…the couple drained their equity dry and that’s the end of the story. Did they consider paying down the loan instead of serial refinancing? Were the cars and home improvements worth it?
Excellent point.
A better question for the reporter to ask:
“Would it have been better to have a paid off house now or were the cars and home improvements worth it?”
They bought a house for $242k and took out $200k….now they are walking away from it… seems like it was worth it.
‘now they are walking away from it’
Not really, they’ve received an eviction notice and ain’t packing yet. This is what they really want; to keep the money and the house.
They want to keep the money and the house, and for people to feel sorry for them through the entire process. Our society is sick.
“They want to keep the money and the house, and for people to feel sorry for them through the entire process.”
I personally have no problem with this, provided the laws are changed to give renters the same privileges. Why shouldn’t renters be able to stop paying their rents and keep the house, if deadbeat borrowers can do so?
Given how many U.S. houses are now owned by foreign investors, wouldn’t it be politically feasible to at least allow U.S. renters with foreign landlords to stop paying their rent without eviction? We should take measures to outsource our economic pain rather than eat it here at home.
I personally have no problem with this, provided the laws are changed to give renters the same privileges. Why shouldn’t renters be able to stop paying their rents and keep the house, if deadbeat borrowers can do so?”
Blackrock is buying up all the homes what new laws do you think they will allow renters ?
“Blackrock is buying up all the homes what new laws do you think they will allow renters ?”
A Federal Reserve proxy is bought 25 MILLION excess empty houses?
Why don’t you tell us where you’re getting your “information”from…. Until then, your post are suspect and you’ll be called out on every one of them.
We’ll give you say…..24 hours. Now get to work.
“Blackrock is buying up all the homes what new laws do you think they will allow renters ?”
I’d love to see hedge funds like Blackrock take a bath. What better way to tax the 1% without explicitly telling them about it than for Uncle Sam to unload overvalued real estate assets on them, then pull the subsidy rug out from under them?
Must have been nice cars!
at least they checked out the public record.
“And I love how there is never any follow up question by the reporter”
Well, at least this time the reporter bothered fo find out what they did to get in trouble. Usually they leave that part out.
“…and pay taxes…”
+1 That’s what I want, a home that pays its own taxes.
‘Ed Leamer, director of the UCLA Anderson Forecast of the economy, had a more sanguine take on the trend than Baker. ‘I am inclined to think that what he calls speculators know more about the market than he does,’ Leamer said. ‘It’s a good thing for professionals to be putting a floor under home prices.’
From 2006:
‘In its fourth quarterly report of 2006, the UCLA Anderson Forecast refuses to join the growing chorus of experts predicting a recession. The Forecast notes in particular that, “manufacturing is not poised to contribute much to job loss,” and, “real interest rates are very low and there is no evident credit crunch, not on the horizon.”…In short, the decline in the housing sector will be isolated and, while a drag on the national economy, is not enough to cause a recession during the forecast period. The forecast for California is much the same with a declining housing market slowing the economy but, without a secondary source of economic distress, it’s not enough to cause a recession.’
‘In his national report, UCLA Forecast director Edward Leamer states that a recession is not on the immediate horizon for the U.S. economy…The report, titled “Models or Minds,” makes the following argument: A recession is a period of declining jobs and the job losses during such times occur in the manufacturing and construction sectors. Today, the decline in the housing sector is contributing to job loss in the construction sector, but there are no significant losses to be found on the manufacturing horizon. Without the accompanying decline in manufacturing jobs, the losses in construction will not be enough to cause a recession. “If you are a builder or a broker, it will feel like a deep depression,” Leamer writes. “But the rest of us will hardly notice.”
http://www.uclaforecast.com/contents/archive/media_12_06_1.asp
You know Ed, (can I call you Ed?), if people want to spend their own money on houses, that’s their call. But saying what’s ‘good’ in this situation? We don’t have a normal market for borrowing money or houses right now:
‘I don’t know why the banks aren’t putting those properties on the open market to sell,’ said Nersesian’
‘Dan Tovar, a long-time Riverside realtor and Bloomquist agree there’s pressure on banks to prevent foreclosures’
Whoa, Nellie, that’s conspiracy talk! Just who’s doing the ‘pressuring’? And Ed, just how ‘professional’ are house flipping hedge funds? Cuz even the ones renting houses plan to sell in just a few years. Oh, and read the VC articles; Blackstone is leveraging these houses with big investment bank loans from Europe. That sounds familiar. Is this ‘trend’ a good thing for these people?
‘Gaines and her husband increased their offer by $17,000 over the asking price. ‘It wasn’t my No. 1 location, but it had some other things that made it worth it,’ Gaines said. ‘It didn’t matter where it was; we were ready to go to battle for it.’
‘Gaines and her husband increased their offer by $17,000 over the asking price. ‘It wasn’t my No. 1 location, but it had some other things that made it worth it,’ Gaines said. ‘It didn’t matter where it was; we were ready to go to battle for it.’
Wow. It’s 2005 all over again. People learned nothing.
Mass stupidity is the future.
I see the stupid ones like “Gaines and her husband” bought into their socialist utopia of California. Maybe the capitalists who lost the election (well Ron Paul got 2% and Gary Johnson got 1%) should see the revenge in this as the stupid ones burn their money in the cess pool that is getting bigger and bigger with brown rot.
“‘Gaines and her husband increased their offer by $17,000 over the asking price.’”
This action should be encouraged.
“It didn’t matter where it was; we were ready to to battle for it.”
No dollar shall be allowed to escape.
As a resident of California - and thus a California TAX PAYER - I welcome such attitude and behavior by others. The higher the price they pay the greater the lift they give to the value of what they are buying and the greater the lift they give to the value of the comps and thus the greater the lift they give to the property tax base.
Love the NAR: Support the NAR. California needs the money.
Credit is king.
One person’s borrowing becomes another person’s cash.
“One person’s borrowing becomes another person’s cash.”
+1 How’s Darrell [sp?] doing? Merry Christmas!
Tried a couple of times to send him an email at the address he provided here. No response…
Blackstone is leveraging these houses with big investment bank loans from Europe ??
Remember what they are at their core….Vultures…My suspicion is that they are betting on higher interest rates in the reasonably near future…Their models are always about Internal Rates of Return..If and when interest rates go up, watch these houses slowly leak back into the market at 25% higher price or more…I think they will offer the homes with financing…Financing that will be better than you can find anywhere else…I have seen K&B do this in the past in a high interest rate or difficult market environment…They can also set their own qualifying standards again more lenient than whats available elsewhere..In a high interest rate environment it is a strong marketing tool…
Interesting thought, I hadn’t considered that selling them with “special” financing in a high interest rate environment could be the game plan. Seems like even with that going on it would be hard to keep prices from crashing.
Verrrry interesting. And it makes sense. I was thinking (like PW) that they’d get hammered when interest rates go up - but if they owner finance at a slightly lower rate that might give them a competitive edge.
But still - how can they sell at these prices to the howmuchamoth crowd at anything close to a reality based interest rate? What is the median household income in Oxnard?
The problem with their model is they are assuming they can sell the house for more than they paid. Higher interest rates will quickly destroy that plan.
“Higher interest rates will quickly destroy that plan.”
In ways that cannot be described here.
Just wait until these fly-by-night investors all try to cash in on their government-subsidized investment gains at roughly the same time. I’ll bet Ed Leamer will either say nothing, or say ‘nobody could have seen it coming.’
Sounds like something that might require a bailout.
This bailout will help the needy like me
By Stephen Schwarzman
Have you ever heard the expression ‘Don’t look a gift horse in the mouth?’ Well, my friends, this big financial meltdown and subsequent government bailout are the best thing to happen to the Blackstone Group since private equity captured the imaginations of thousands and the pension assets of millions.
Only Blackstone Group has the right combination of audacity and expertise to oversee a giant bailout of the financial markets. Has any other firm out there proven itself worthy of getting a check for $700 billion? No way. Only Blackstone, under my cool leadership, can rightfully handle that much money without letting it go to our heads.
First thing we’re going to do is use that money to start a new fund, called Blackstone Bailout I. The fund will have a management fee of 20% and a 40% carried interest. That’s a good deal when you consider the big profits we can make. Up to $100 billion will be put towards a $150 billion supplementary co-investment fund, with the other $50 billion being provided by Blackstone executives, family and friends. Another $100 billion will be used as a modest finder’s fee and some will most likely be invested in Blackstone VI.
We’re joining the big bailout bonanza in every way that we can. We’re already ahead of the game with our contract to advise AIG. They’re a great example of what happens when you don’t invest enough in Blackstone. We are the way, people.
If everyone had followed my advice and put their money in Blackstone stock instead of mumbo-jumbo securitized mortgage products, we wouldn’t be in this mess to begin with. You owe us, America. Make the $700 billion check out to The Blackstone Group. We’ll take care of the rest.
…
No bailout from me. I buy gold and I build up cash. I bury my gold. It’s guarded with a gun.
No it’s not. Everyone knows you hide your gold in the pantry behind the oatmeal.
I bury my gold. It’s guarded with a gun.
It’s nice to see your money brings you so much happiness. Merry Christmas, Ebenezer.
fly-by-night investors
I thought Blackstone was one of those investors.
And your point is…?
‘In its fourth quarterly report of 2006, the UCLA Anderson Forecast refuses to join the growing chorus of experts predicting a recession.’
Here is an example of a contrarian opinion gone wrong…and also of how funding sources can heavily influence predictions.
and also of how funding sources can heavily influence predictions.
Probably largely to blame for the economics profession’s bad track record of recognizing and deflating bubbles. The Kochtopus/Faux News has a stable full of bought-and-paid-for ‘experts’ on such things. As do the lobbyists. All ready to stymie any actions that might benefit the public but hurt their paymasters.
‘The report, titled “Models or Minds,”…’
These guys really suck.
Ya gotta love it when an economist repackages the obvious as deep insight.
Since real estate developer Doug Manchester now owns both the North County Times and UT-San Diego, his San Diego County readership gets to enjoy his pro-real estate editorials in duplicate.
Am I the only observer who suspects the 13.7 percent gain in San Diego home prices this year is unsustainable and portends another near-term crash?
The North County Times
At last, housing market healing
December 22, 2012 4:40 pm • U-T San Diego Editorial Board
Evidence is accumulating that a lasting recovery is taking hold in the regional housing market. Nurturing these green shoots is vital to the entire economic ecosystem of San Diego and Riverside counties.
The U-T reported this week that housing prices shot up 13.7 percent over the past year in San Diego County. Sales rose a staggering 22.4 percent, their best performance in seven years.
In Southwest Riverside County, where the Great Recession has been deeper and longer, prices were up 10.5 percent, while sales jumped 12.7 percent.
Throughout Southern California, foreclosures are falling, inventories are shrinking, and buyers are facing bidding wars in some categories, pushing up prices in a cycle that prompts more owners to consider selling and moving up to bigger or better-situated homes.
There are good reasons that economists pay close attention to the housing sector, particularly in California, where growth has been the major industry since the Spanish arrived.
Every home sale sets off a cascade of economic activity, sending revenue to inspectors, loan brokers, real estate agents and other service providers. Buyers tend to renovate, or at least buy new furniture and appliances, boosting retail activity, sales taxes and jobs for skilled workers.
Home construction kicks such activity into overdrive, requiring an army of professionals, from lawyers to engineers to architects. If the project is big enough, developers build malls, offices, schools and fire stations, creating jobs for chefs, clerks, teachers and firefighters.
Construction is typically the first sector to get sick and the last to recover in a recession. Indeed, every U.S. recession since World War II has been preceded by weakness in home construction, with the exception of the brief recession in 2000 after the tech-stock crash.
This “leading indicator” status prompts economists to pore over housing data. And these days they like what they see.
Significant construction activity is under way in Lake Elsinore, Murrieta and Temecula, San Marcos, Carmel Valley and Chula Vista. Builders are surging back into Menifee, committing to build 450 homes in the near future in the Audie Murphy development.
In western Riverside County, builders had sold 11 percent more homes by Sept. 30 this year than in all of 2011. The increase was nearly 5 percent in San Diego County, according to MarketPointe Realty Advisors.
…
“U-T San Diego Editorial Board”
Question: From where, ultimately, does this U-T Editorial Board get its money? From advertisers, perhaps? Maybe from RE advertisers? Lots of them?
Is the customer always right? If you want to keep the customer then perhaps this is a good way to think, no?
I totally get the reasons, but that does not mitigate my disgust one iota.
Since there was a piece on Glendale, CA…
Yesterday I was checking out rentals on Craigslist and was amazed by how many single family homes were up for rent in Glendale. Not something I’ve seen for the past 5 years or so since I’ve been following this market.
Glendale has an abundant number of apartment rentals so you usually don’t see homes competing for the rental dollar. Most of the homes were on par or a little above large apartment rentals while others were on the “you must be kidding” stratospheric asking prices level.
Ummm… more competition for the rental dollar? Probably means no increase in my rent for the 4th year in a row.
Yep. Massive rental supply and shrinking rental demand. In CA in particular.
Don’t those displaced by foreclosure still need to rent a place?
“Yep. Massive rental supply and shrinking rental demand. In CA in particular”
You’re full of it. Both CA and AZ currently suffer a shortage of good rental properties. In fact builders are rushing to build new apartment complexes.
You have absolutely NO IDEA what you’re talking about. You are blithering idiot. There is a veritable sea of houses for rent in both markets.
Our rent remained steady into 2013, too. So far, despite the Realiars’™ dire predictions, our rent increases have averaged less than 1.8% annually since we started renting here…
“About 20 percent of the buyers at Irvine’s Lambert Ranch development – which caters to Asian buyers – are from abroad, said Joan Marcus-Colvin, senior VP at the New Home Co. Luxury home agent Rex McKown said foreign shoppers account for 80 percent of the viewings, up from 20 percent eight months ago. Jacqueline Thompson, also of Surterre, says Chinese make up about half of the buyers at home showings. ‘I think the Chinese realized the urgency to buy up homes in the U.S. because they see that prices will increase,’ Thompson said.”
Can anyone who thinks they understand why Uncle Sam is funneling subsidies to foreign real estate investors, kindly explain?
“Can anyone who thinks they understand why Uncle Sam is funneling subsidies to foreign real estate investors, kindly explain”
If the foreigners are paying cash - where is the subsidy?
It’s just our money that we spent for Chinese goods coming back to us.
It’s just our money that we spent for Chinese goods coming back to us.
Exactly. We buy their crap, made cheaply because they have no environmental regulations, no worker rights, and no social safety net. They then take those profits and move here with them, because we do have all those things. Which makes our country a nicer place to live (for all, which I guess makes such things ’socialist’).
A real-world lesson for those who think we should do away with such things.
“…where is the subsidy?”
1. Federally guaranteed low-downpayment FHA loans.
2. Fed-sponsored ultra-low mortgage lending rates.
3. Mortgage interest deduction.
I’m sure there are others I am neglecting to mention…
And before you go there, yes these subsidies benefit fly-by-night investors, by driving a rate of price appreciation which would not occur without the subsidized lending…
Will Blackrock eventually sell it’s RE holdings to the Chinese ? When the Chinese become the landlords of half of CA how do you think that will change things?
What happened to Chinese owned liquor stores during the LA riots?
Merry Christmas
“When the Chinese become the landlords of half of CA how do you think that will change things?”
When a critical mass of U.S. residential real estate is foreign-investor owned, it should become quite politically defensible to pull the rug out from under asset price support measures.
Why should our Fed prop up asset prices for foreign real estate investors? Is it part of the Fed’s self-assigned mandate?
“‘People who purchased homes at low prices in the past couple years, including many investors, can expect healthy growth in home equity over the next four years, while renters who were unable to get into the market will be in a weaker position because they are unable to accumulate wealth,’ he said. ‘Not only will renters miss out on the price gains, but they’ll also face rents rising at faster rates.’”
Another consensus view here, promulgated by the chief economist of the NAR…
Has anyone asked him why he was saying this in 2005?
That was his predecessor, David Lereah.
‘For homes under $500,000, it’s incredible how many buyers there are,’
Suppose so-called end users collectively went on a buyer’s strike, and let all home purchases for a few years be conducted by hedge funds, all-cash foreign investors and other speculators, rather than mom-and-pop long-term buy-and-hold buyers.
Is it fair to say that the end users could collectively enjoy affordable rent for years to come, thanks to so many investors soon turned accidental landlord?
The Baltic Dry Index offers a perfect example of how a drop in an index may portend further drops, rather than a bottoming out soon to be followed by recovery. Even after hitting a lofty peak of 11,793 on May 20, 2008, the dry bulk shipping price index subsequently crashed to a trough of 666 on December 4, 2008. After that, it appeared to stage a recovery.
So isn’t it interesting that despite the apparent recovery, we see BDIA down by 60% just this year? I can’t wait for the latest crop of greater fool investors in U.S. residential real estate to enjoy a similar realization to that experienced by this year’s crop of BDIY investors.
More on BDIYInteractive Chart for Baltic Dry Index (BDIY)
Snapshot for Baltic Dry Index (BDIY)
High: 699.00 Low: 699.00
Day Range: 699.00 - 699.00
52-Week Range: 647.00 - 1,738.00
Year To Date: -59.72% 1-Year: -59.78%
Will BDIY bottom out in 2013?
Wow, they are inflating the bubble again (for now). Boy, did we get in at the right time. This So Ca housing market is FUBAR for my lifetime. Period. We were just sayin today, our home pre-remodel was woth $275K tops. We paid lots more, but the area is demanding over $500K+ right now. Insane!
We’re unloading aquired stuff and downizing our belongings seriously. Women’s
shoes excluded. LOL
Merry Christmas all HBBers. Love, Music, Lights and Festivities. Presents, no big deal.
The stuff I checked out in Fullerton, when compared to North Scottsdale, looks sad. Fullerton is 30 miles in from the beach and its quality is nowhere as good as North Scottsdale. But prices are about the same, $500,000 on up.
Zillow has added information on foreclosure status to its home database……
You can now look over a neighborhood and see “blue house” icons indicating some level of foreclosure activity.
How about this house a little north of Burbank?
http://www.zillow.com/homedetails/10538-Ormond-St-Sunland-CA-91040/20090050_zpid/
Owner paid $268K in 1987. IIUC he’d paid off the mortgage by 2007.
BUT he then took out a $715K mortgage in May of 2007, spending the proceeds on highly-leveraged minimal down payments on 5 (FIVE) pieces of commercial real estate in the LA area.
Zillow washes his dirty laundry in public.
“How about this house a little north of Burbank?”
Are those Idaho winters wearing you down?
Boise is nice…the winters are mostly mild. I went out top down in the Miata for a long drive yesterday.
I know the owner of that house. He’s a real greedy guy.