The Housing Bubble

It’s Friday desk clearing time for this blogger. “A scarcity of homes for sale and record-low mortgage rates are setting up for a bullish real estate market, Zelman & Associates CEO Ivy Zelman said on CNBC. ‘I think we’re in nirvana for housing,’ she said. ‘I’m probably the most bullish I’ve ever been fundamentally. On ‘Fast Money,’ Zelman likened consumer sentiment to a battleship pointing down for the past several years. ‘And then the inventory cleared, the blight goes away, consumers feel better and now it’s really this urgency to go find a house,’ she said. ‘I’ll tell you, there are Realtors blanketing neighborhoods, asking people to sell their homes.’”

“Consumers buying a foreclosed home in the Winston-Salem area got on average a 30.4 percent price discount in 2012, according to a RealtyTrac report. Many large and community banks serving the Triad said in recent earnings reports they pushed more unsalvageable foreclosures and nonperforming assets through their loan portfolios in 2012. Their goal: bolstering their chances at profitability in 2013 since their loan-loss provision directly affects their bottom lines.”

“‘We’re still seeing banks dribbling out their foreclosed properties,’ said Rick Epperson, president of Weichert Realtors-Triad Associates in Winston-Salem. ‘If the economy cooperates, I expect they will ease out as many homes each quarter as they feel the housing market can absorb.’”

“Phil Harlan, practicing broker at Keller Williams Olympia, said agents throughout the South Sound are aware of the shadow inventory and will continue to watch the situation. He agrees if the banks dumped their entire inventory, it would depress the market. He believes, however, that the evidence says they won’t be doing so. Harlan used Thurston County as an example. The county has 278 bank-owned properties, only 66 of which are on the market. ‘They are recognizing the foundation, at least in this area, is firming up and they can put a few more on without hurting the market,’ he said.”

“Sharon Wilson, a broker with ReMax Professionals Tacoma, doesn’t believe the banks are keeping their housing inventory off the market to benefit the public. ‘Whatever they do will be very good for them,’ she said.”

“Florida’s court system is looking for more money to pay for judges to help reduce the foreclosure backlog. Court administrator Lisa Goodner said foreclosure filings aren’t projected to come down to normal levels until the 2016-2017 fiscal year. She pointed to stalling lenders unmotivated to move cases along and hefty paperwork as the main reasons for delays.”

“‘Two major issues that the circuits report to us that continue to cause delay in these cases – one is that the plaintiffs in these cases do not have any sense of urgency to move the cases forward,’ Goodner said. ‘The other challenge that we still face is paperwork problems.’”

“Bank of Ireland reported a loss of €2.16bn in 2012 following a ‘challenging’ year for the bank which saw mortgage arrears rise. The latest loss was up from €190m a year earlier. The bank said mortgage arrears continued to increase in 2012 but the pace slowed. The figures remain stark, however. The bank said that 9.9pc of home loans for owner- occupiers are in arrears, compared to 23.4pc of buy-to-let mortgages.”

“The bank expects to carry out more repossessions of buy-to-let properties once the Government acts on a promise to update legislation to give banks more freedom to seize houses over unpaid debts. Bank of Ireland hopes to avoid, as far as possible, repossession of family homes, chief executive Richie Boucher said. The fall in house prices is estimated to be 55pc since the boom, he said.”

“Immigrant buying patterns are driving the luxury market, said Dan Scarrow, VP at Macdonald Realty. Scarrow works with realtors and individuals from mainland China who are looking for homes and may need help communicating. ‘For the past few years, we’ve seen lots of new investor-class immigrants coming into the market,’ Scarrow said. ‘… They’re not just buying a house for themselves, but also three or four residential investment properties as well.’”

“This ‘exuberance’ among immigrant buyers has slowed, Scarrow said, as the economy slowed in China and prices rose rapidly in Vancouver. ‘In 2011 the perception among investors — a lot of whom are from Mainland China, where the economic system was going crazy for the last 10 years — (was) extremely (positive). They brought that sentiment here when they immigrated here and it resulted in this big uptick in the real estate market here. But in the last two years, housing prices here have gone up a lot, so a lot of investors see that there is not that much more room in the short term for it to go much higher.’”

“Dubai’s Emaar Properties on Saturday sold units in The Address Residence Sky View project at an average price of Dh2,600 per square feet, investors, who purchased units in the tower, said. ‘We bought properties in the project for Dh2,600 per square foot,’ an investor, who bought properties, said on conditions of anonymity. He added: ‘We were told that all the units in the project released in Dubai had been sold out.’”

“Last week, the developer said it had closed on-line registration for the project in less than one hour following ‘phenomenal’ investor interest for the residences and serviced apartments in the project. Emaar.com had recorded visitor traffic from more than 75 countries.”

“Nairobi’s skyline is changing, propelled by multinationals setting up regional offices and a growing demand for high-end housing. Ravi Vasta, managing director of Mark Properties, told How we made it in Africa’s Dinfin Mulupi how an influx of expatriates and diplomats is spurring demand for unique real estate projects in Nairobi and his ambition to develop the tallest building in East Africa. Q:Describe the market response since the launch of Le’ Mac. A: We have placed six floors of one to three bedroom residential [apartments] on the market, the majority of which is sold out.”

Q: What kind of buyers are you targeting? A: About 90% of the people who have bought the residential spaces are doing so for investment purposes. They don’t want to live there themselves. The majority of the buyers are local investors and the diaspora. They would like to own property, but the price of land in preferred locations for these kind of investments is too expensive. For instance, in [Nairobi’s] Westlands [area], you would need nearly 100 million shillings ($1.15 million) to purchase a quarter an acre of land.”

“Q: You focus on luxury properties while research is showing saturation in this market. Your thoughts on this? A: There is still demand for luxury projects especially as an investment proposal.”

“The first name in luxury crystal now wants to be the ritziest name in city real estate. Baccarat, which has been making its namesake glass since the days of Louis XV, is launching a hotel and condo complex in a sleek 50-story tower on W. 53rd St. Homes range in price from $3.5 million for a one-bedroom to $60 million for a duplex penthouse atop the tower. Baccarat Hotel & Residence is being built on the site of the former Mid-Manhattan branch of the New York Public Library.”

“‘People will come from all over the world to see this hotel and building,’ said Barry Sternlicht, whose Starwood Capital Group owns Baccarat, mentioning that some are already in contract. ‘This whole project oozes sex and money,’ said a broker associated with the building.”

“Nevada has spent only 11 percent of the money it received through the Obama administration’s Hardest Hit Fund, according to the analysis of U.S. Treasury reports from the third quarter of 2012, the most recent available. Sharon Logue discovered the Hardest Hit Fund in August. In January, she was approved to receive $50,000 in principal reductions, but she has run into the same PMI roadblock as she did when she tried to refinance. All the bank representatives were willing to tell her is that she is blocked from any action because of who the PMI is with or the type of PMI. ‘I’m at a block,’ she said. ‘ … Something needs to happen or else I’ll be stuck.’”

“She bought her Carson City apartment at the peak of the market almost six years ago. It was all she could afford at the time with the skyrocketing home prices at the time. Six years later, her home is worth 30 percent of what she originally bought it for. After a job change last year and decrease in salary, her mortgage payments make up nearly half of her paychecks. ‘I thought I was doing great, but then things just went downhill,’ she said.”

“Victor Joecks, with the Nevada Policy Research Institute think tank, said the only people who benefit from the program are the politicians who use it to generate publicity. The institute is against the Hardest Hit Fund program because it believes it is unjust, he said. ‘It’s a perfect case study of how the government promises something, and it doesn’t end up being delivered as promised,’ Joecks said. ‘The Hardest Hit Fund rewards those who make poor financial decisions at the expense of those who make good ones.’”

“I own a 1890 Victorian wood home in Cleveland’s Detroit Shoreway neighborhood–considered up-and-coming, in the Cleveland way. Even though my house is newly renovated, it was recently appraised for $60,000. That seems sorta great. But owning a home worth $60,000 puts a person in a tough spot, even if they owe less than that, as I do. Here’s why: the parts that go into building–and, crucially, maintaining–a house in any market cost more than $60,000.”

“People who own $50,000 homes in Cleveland might not be able to borrow the money to fix their roof if something goes wrong, even if they make a fair amount of money. Banks just don’t see these properties as a good bet. I know this for a fact because I can’t get a bank to loan me a dime. Even though my credit score is considered good. Even though my annual salary is close to the remaining balance on my home. It’s not a matter of credit or income: it’s simply the appraisal, they tell me.”

“The upshot is, banks or real estate agencies aren’t going to help you out if you want to buy a low-cost fixer upper in Cleveland. These two industries teamed up over the last few decades to produce our fundamentally broken housing market and they aren’t giving up now. They want to put you in the most expensive house you can possibly afford. A ‘new build’ if possible–all the better for folks trying to make a quick buck–on a former farm field, far away from every conceivable amenity, save a television set, a Walmart, and an interchange.”

“It’s sad, because the lesson of this housing bust, in my opinion, was BUY A CHEAPER HOUSE THAN YOU CAN AFFORD, FOR THE LOVE OF GOD. But if you want to do so, you’d better have cash.”