As Summer Began, The Carousel Stopped
The Union Tribune reports from California. “Q: What do you think the San Diego County median home price, now standing at $415,000 (via DataQuick), will be at the end of 2014? Linda Lee, president of the Greater San Diego Association of Realtors: ‘While it’s difficult for any expert to predict market prices, I believe the median price will be higher at the end of 2014 than it currently is now. I estimate the median home price in San Diego County will be approximately 21 percent higher at the end of 2014.’”
From ABC News 10. “Homebuyers Jeffrey and Amy’s dream home includes a spacious kitchen and bright rooms – something a Rancho Penasquitos home has but again, it comes down to the price. A 4-bedroom home in that area is going for $649,000, a drop in price since it was listed in September. ‘Prices have stabilized and because of that, it will be less competitive,’ said Angela Ordway, who is with the Greater San Diego Association of Realtors. ‘We won’t see a lot of multiple offers, so there will be good chances that the first-time home buyers can get those key properties.’”
“‘As newlyweds, we were saving for a down payment and no matter how much we save, we can’t keep up with investors,’ said Amy. ‘The prices are definitely intimidating,’ said Jeffrey. ‘I’m thinking about a few years later down, is it going to drop in price if we’re putting down that much money?’”
The Sacramento Bee. “The housing market roared back to life – for a while, anyway. During the first half of 2013, the market pulled out of its five-year tailspin faster than anyone predicted. At midyear, prices were up nearly 30 percent compared with 2012 – and about 50 percent from the trough two years ago. And then, as summer began, the carousel stopped. Higher prices shooed away many of the investors. Almost out of nowhere, the inventory of homes for sale doubled. Experts called it a breather, not the end of the comeback. Pat Shea, president of Lyon Real Estate in Sacramento, predicted a ‘more stable appreciation’ in prices in 2014 – something in the 5 percent to 10 percent range.”
The Desert Sun. “In November, there were 745 homes and condos sold across the desert, a 7.7 percent drop from the year before, according to DataQuick. Existing single-family home sales fell 18.8 percent from November 2012. Declining sales were due to a short supply of homes across the desert, agents said. But new construction homes have bumped up some inventory, and agents expect more homeowners will put their houses on the market after the holidays. John Burge, president of the Palm Springs Regional Association of Realtors, expects the high end of the market to pick up in January.”
“‘The homes priced a million-plus have taken a price dip,’ said Burge. ‘We’ll see that disappear in the middle of January. More of our buyers will be back on the market looking.’”
“During the summer, the desert hovered around three months of inventory. In November, the inventory increased to about five and a half months, according to the California Desert Association of Realtors. Jon Caruana, an HK Lane agent based in La Quinta, said he had 15 listings at his lowest point. Now, he has about 40 listings, he said. Caruana said investors who snapped up short sales mainly cared about price. Now, with more equity sales, buyers are looking for the bigger package: upgrades, location and appearance. ‘We’re getting back to a market where your house really has to look good,’ Caruana said.”
The Santa Cruz Sentinel. “The recovery has yet to reach the high end. For homes selling for more than $1 million, the median price rose less than 1 percent. ‘Only two sales have been above $3 million this year,’ said longtime agent Tom Breszny. ‘We had more sales over $2.5 million and $3 million in 2008 (the crash year) than what we had this year.’”
From CBS Local. “With soaring real estate prices, and little supply of homes to occupy, East Palo Alto may allow homeowners to let people live in their garages and storage buildings. ‘The housing crunch does not get any easier, it doesn’t get any less expensive. And we don’t want to end up with people going homeless,’ East Palo Alto Councilmember Ruben Abrica told KPIX 5.”
The San Francisco Chronicle. “Art Concordia, a teacher with the district since 1998 and at Balboa High School since 2002, recently moved to his in-laws’ house in Pleasant Hill. His wife is pregnant with twins, and they also have a 13-month-old and an 11-year-old son from a previous marriage who lives with them half-time. He said it would break his heart to leave Balboa, but many nights, he and his son don’t get home until after 8 p.m.”
“‘When I have my son with me, that’s just brutal. By the time I get home, the 1-year-old is usually asleep,’ he said. ‘I get paid well - there’s no way I am saying I don’t make good money. It’s just the cost of living is so high.’”
The Los Altos Town Crier. “The California Association of Realtors recently reported that housing affordability in the third quarter of 2013 fell for the sixth consecutive quarter. California housing affordability hit a record high of 56 percent in the first quarter of 2012. The third-quarter 2013 figure fell below 35 percent for the first time since the third quarter of 2008.”
“Homebuyers needed to earn a minimum annual income of $89,170 to qualify for the purchase of a $433,940 statewide median-priced existing single-family home in the third quarter of 2013. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $2,230, assuming a 20 percent down payment and an effective composite interest rate of 4.36 percent.”
“The composite interest rate was 3.72 percent in the third quarter of 2012. The median home price was $339,930 in the third quarter of 2012, and an annual income of $65,828 was needed to purchase a home at that price. The California Association of Realtors reported that nearly every county experienced a double-digit decline in affordability when compared to last year.”
“In Santa Clara County, only 21 percent of homebuyers could afford to purchase a median-priced single-family home in the third quarter of 2013, down from 32 percent in the third quarter of 2012. Buyers needed to earn a minimum annual income of $165,420 to qualify for the purchase of an $805,000 median-priced single-family home. The monthly payment, including taxes and insurance on a 30-year fixed-rate loan, would be $4,140.”
Reading the above clippings, it appears a new shiny silver bowl of ice Kool - aid is on the nearby table.
Clueless Californicators….. empty pockets and tire kickers who don’t know the value of a dollar.
This is what California is: a land of bi-polarish, get-rich-quick gambling.
It’s in the blood. Has been since 1848.
True dat. And the other part of the equation is that the first-movers make out like bandits, while the followers get creamed. It happened during the Gold Rush Era and its happening again in the Housing Bubble Era.
There are plenty of gold rush fever prospectors panning and sluicing for gold right now.
Every one of these articles confirm what we’re seeing everywhere. Collapsing Housing Demand.
Collapsing demand is an interesting phenomenon. Clearly demographics is driving it and it’s exacerbated by massively inflated prices as a result of all the fraud going on.
You can put a $50k price tag on your 15 year old Honda Civic but there are no buyers.
Are we in 2013/14 or 2006? Even I can’t believe we’re back here again…already.
Oh well, I guess I’ll just put all my $ in stocks…I can’t lose there.
“Even I can’t believe we’re back here again.. already.”
It’s absolutely wonderful isn’t it?
People are smart.
But Mr. Banker,
Your real cha-ching comes in 2007-2009…. It’s right around the corner.
Dear Markab and HBBers, I think you forget that there is a real change in U.S. economy last 2-3 year, from oil exporter we became oil importer… and gas prices came down in California almost 15%. I think stocks shut up 30% for the same reason…
Sorry guys, it should be opposite above, “importer to exporter… ” I guess I had more “champagin” because of this years market…
” At midyear, prices were up nearly 30 percent compared with 2012 – and about 50 percent from the trough two years ago.”
I don’t know where things are going from here, but I can absolutely guarantee this will not continue in 2014. Anyone in the real estate biz should be looking at those increases as frightening because they will always lead to a crash.
I know it may be wishful thinking on my part, but I am calling it:
2014, The Year of the Crash.
Pending Home Sales Plunge At Fastest Pace Since April 2011
For the 5th month in a row, pending home sales missed expectations (though a silver lining is a positive print MoM - breaking a 5-month streak). Year-over-year, home sales collapsed at 4% - its worst drop since April 2011, and that even after prior data was revised lower. Still, despite this ongoing plunge, there is always hope - as engendered by NAR’s chief economist who states (somewhat unconfidently), “we may have reached a cyclical low.” Cylical low indeed - just don’t look at the chart.
http://www.zerohedge.com/news/2013-12-30/pending-home-sales-plunge-fastest-pace-april-2011
New construction is still way too low, mortgage financing is still too boring (no Option ARMs, etc.), and inland markets are still way too far below the peak for a crash to come in 2014.
Unless there is a change in mortgage markets, increases will be tempered in 2014. If there is to be a crash or correction, it will be later than 2014.
‘no Option ARMs, etc’
It’s actually much worse than subprime:
‘In the FHFA’s Refinance Report published May 7, California HARP borrowers used 14,204 HARP loans for the most recent month on record, February of 2013. This was up 27 loans from January’s total of 14,177, and up a whopping 2,990 loans from 11,214 in the last month of 2012—all signs that there is only increasing demand for a program that had as many loans in 2012 nationwide (1.1 million) as it did in its first three years prior to that combined. A reason for this increase is undoubtedly the revisions to HARP in late 2011 that made the program more accessible to deeply underwater borrowers, not to mention the recent housing rebound.’
“One could argue that HARP loans are more useful than ever before to California borrowers trying to avoid a foreclosure or short sale,” says Alameda, California Mortgage Expert Garrick Werdmuller at First Priority Financial. “Sure, $4,300 a year is a nice chunk of change, but that number could actually pale in comparison to the return borrowers who use HARP to stick with their mortgage could reap several years from now if the housing market continues to gain value at this rate.”
‘Your HARP 2.0 limit is usually determined by your city’s limit for a Jumbo Mortgage, which is typically $417,000. HARP 2.0 closing costs are significantly lower than the first Home Affordable Refinance Program, but they will vary based on your current financial situation, the market, and which state your loan is in. There is also no appraisal fee with refinancing with HARP 2.0, which could save you as much as $500.’
‘Of course it’s possible to do a HARP refinance without an appraisal. There are only rare circumstances when an appraisal is required. In any case, even if an appraisal was required, it doesn’t matter what the value is. This is the purpose of the HARP program - to assist homeowners who owe more than their home is worth.’
These borrowers re-default at an astonishing rate within 2 years. I wonder why? And how many are out there hiding behind the homeowner bill of rights, waiting to liberate some hoped-for equity?
‘Unless there is a change in mortgage markets’
Ah yes, all will be well unless something that is already happening, happens.
“Ah yes, all will be well unless something that is already happening, happens.”
I wouldn’t hold my breath waiting for a propagandist like Rental Watch to acknowledge your point.
P.S. I’ve often pointed out here and still maintain that the most accurate predictions are those which predict what is already occurring though not yet widely recognized.
Sorry I was so late in responding…I was down in Monterey today with my kids at the aquarium (great place).
I’ve provided three responses (including a link to the most recent FHFA report), which I hope you read.
HARP loans are refinance loans for people who are underwater, BUT CURRENT. HARP 2.0 is NOT for people who are underwater and have defaulted. They are not people who are buying homes at today’s prices. The expansion for HARP 2.0 was to increase the LTV that was allowed, and it allowed one late payment in the prior 12 months, where the prior HARP program allowed 0 late payments in the prior 12 months.
So, HARP loans have nothing to do with people BUYING homes today at today’s prices.
I’m talking about the change in mortgage markets for purchases.
Purchasing a home in 2013/2014? You need to qualify with today’s standards, no HARP loan for you…and no Option ARMs.
Mortgages for purchases contribute to sales data that is reflected in home prices, NOT HARP 2.0 loans that are only being made to people who have not defaulted on their underwater homes.
By the way, here is a link to the most recent FHFA refinance report:
http://www.fhfa.gov/webfiles/25900/Oct2013_RefiReport.pdf
Note on page 1 the requirements to get a HARP loan.
LTV restrictions were lifted in late 2011, as was the requirement that there be 0 late payments in the prior 12 months. Now they allow one late payment over the prior 12 months.
See on page 4 the dramatic increase after those restrictions were lifted.
Also note how after the burst of activity (following the relaxation of requirements), HARP 2.0 activity has peaked, and now has fallen to about 2/3rds of peak. If October ‘13 HARP activity is indicative of the current pace, we are now at less than half of the peak level (46*3=138k quarterly rate, peak was 319k for a quarter).
See page 8: This is the delinquency rate for HARP loans…FAR less than more traditional loan modifications (which are typically for people who HAVE defaulted, unlike HARP, which is for people who are current).
See page 10: YTD, 16% of refinance loans in CA are HARP. Compared to the other states, FL (49%), NV (56%), AZ (36%), this is low.
Oh, and last point…the number of HARP refinances in CA for October was about 4,600, far less than earlier in the year…apparently demand for these kinds of loans is no longer increasing, but waning pretty considerably.
The great thing about 7 month old articles that reference Federal reports is that you can typically look up the more recent reports to see if what was happening then (when the article was written) is still happening now.
You’ve done well at diminishing any credibility you had.
Why don’t you finally seal your own fate and disclose your ulterior motive?
My prediction for 2014 is Californians will continue to be crazy and I will continue to feel sadness for friends I know who are there fighting against the nuttiness thinking they are stuck with the situation.
Pain is good if it leads to growth.
Pain can lead to patience contrary to urgency with a well informed unaltered mindset…
It makes economic sense for me to work in California instead of Phoenix now that I am doing purely commercial software and no longer defense. I do know I would be paid more at one place in Phoenix doing work for the federal government though. Even interviewed there in 2008 and accepted, then changed my mind two days later. I think the future in commercial looks great and it is just getting started. In four years I hope to have the energy to go back conslutting all along the left coast from Seattle to San Diego. Yummy! There will be a lot of money!
‘A San Jose home that was abandoned for years before being gutted in a fire has sparked a bidding war. Potential buyers told KPIX 5 that they are ready to pay more than the $399,000 asking price.’
I can’t wait to hear the tales of woe from this set of clowns like we did back in the 1990’s and after the tech bubble.
People are smart.
Ben…Depending on the severity of the damage, they may not be able to tear it down…Given its age & architecture it would be considered historical both local & under SEQA…Thats why one of the bidders suggested they would restore it…I cannot tell how big it is but its location would dictate a student rental for SJ State…I am quite sure most of the houses around it are student rentals…I suspect that houses rent for about $800.+ per bedroom…
It’s funny how the reporting goes. I don’t see much elsewhere said of some people buying a lot, or burned up house. But here we see the media, “ohh, look someone is paying a giant amount of money for a burned up house. There’s a bidding war! Hurrah!”
MSM reporting on the housing mania = insipid
Good point Ben…Why should this be “news”…..
It’s boosterism, designed to feed the frenzy. We can’t expect real reporting when it comes to real estate.
I’ve been interviewed twice by the local paper, and never a word of it was printed. The first time was in 2007, and afterward the reporter told me that if they ran a negative article about RE, a developer might come yelling into the news room, waving the offending article in the air. He explained that the real estate people made up a sizable portion of ad revenue and the editors were fearful of losing it.
Since housing has become a “get rich quick” scheme, it has become interesting to more than half the population…1st, the half that owns the home, 2nd the portion of renters who are thinking of buying.
I guess some people think that makes it newsworthy, and people will “click” the link to the article…in a crazy way, this blog that links to the article (and thus makes it more “relevant” in the world of the internet), makes it more likely that additional articles will be written about the same subject matter.
We live in a crazy, crazy world.
It’s only “news” if it fits into the profiteers’ agenda.
“He explained that the real estate people made up a sizable portion of ad revenue and the editors were fearful of losing it.”
‘In my last column I talked about the conforming loan limits staying the same in San Diego County at $546,250 for 2014. The Federal Housing Authority (FHA) recently announced that their limit is being lowered to $546,250 in San Diego County. Other counties across the United States will have different limits, including up to $625,000.’
‘$500,000…is the Veterans Administration (VA) limit for 100 percent financing. Eligible veteran or active duty military personnel can buy a home that costs much more than $500,000 by paying a relatively small down payment.’
‘Under the new Qualified Mortgage (QM) and Qualified Residential Mortgage (QRM) rules that go into effect in 2014, the answer to “What is the maximum total debt ratio that is best for everyone?” is “43.”
‘If we take a borrower’s total debts including principal, interest, taxes and insurance on their home, car payments, credit card payments, student loan payments, and divide that by their gross monthly income, the ratio cannot be more than 43.’
‘At one time, loan guidelines stated that this number should not be more than 36. Prior to the real estate crash, loans were getting approved at numbers over 100. (The borrower’s total debts exceeded their monthly income) While a 43 percent total debt ratio is a good number, there are certainly circumstances where a borrower can go higher.’
‘At one time, loan guidelines stated that this number should not be more than 36′
Isn’t it interesting that house prices (and debts) grow to meet the government loan limits, practically everywhere?
“What do you think the San Diego County median home price, now standing at $415,000 (via DataQuick),
…
The Federal Housing Authority (FHA) recently announced that their limit is being lowered to $546,250 in San Diego County.”
FHA lending is supposedly an ‘affordable lending’ program, right? I.e., it is there to help out middle-class or lower income households afford to buy homes.
If so, why do they set the limit well above the overall median San Diego home price? Are they trying to tempt middle class San Diego households into buying more house than they can afford? Or is it about getting taxpayers in Flyover Country to help millionaires buy San Diego homes for north of $500K?
I’m missing the policy rationale for where the conforming loan limits are set.
I’m missing the policy rationale for where the conforming loan limits are set.
+infinity. If it is about affordability, the limit should probably set at the median (so as to be available only to the lower half of buyers), or somewhere below it.
Crazy.
‘At one time, loan guidelines stated that this number should not be more than 36.’
We’ll get back there, once this Housing Bubble is visible through the lens of history’s rear-view mirror as a financial anomaly. For one thing, households will sober up once the Fed’s easy money ends.
Back when the number was 36% (or lower), people could rely on higher wages over time, better retirement packages, better healthcare packages, lower food costs, etc.
The number today should be **lower** than 36% to account for all of these other higher expenses and the much poorer job market today.
Isn’t it interesting that house prices (and debts) grow to meet the government loan limits, practically everywhere?
Price fixing works….. until it doesn’t.
Some of our counterparts and competitors gross margins on new SFR’s are in the 60%-80% range.
One lesson this unnatural banking experiment has taught is that if you lend money without underwriting standards, there will always be a borrower willing to accept the offer, regardless of his ability to repay the loan.
A VA loan would have been worthless in much of Calif. over the last few years, my bids on several houses were ignored with 20% cash down and a preapproved conventional loan in 2011 and 2012 as I was competing with 100% cash flippers and specuvestors…though I was able to buy a place with a 100% VA loan in a normal market in 1997…am now on the sidelines waiting for Bubble 2.0 to pop
42. It should be 42.
4 Reasons the Housing Bubble May Pop in 2014
by Rick Aristotle Munarriz
Dec 30th 2013 11:00AM
The housing rebound is on a roll. Home prices continue to inch higher, and the number of indicators showing economic improvement suggest we’ll enjoy an even rosier 2014, when the Fed won’t have to do quite as much to keep the good times going.
However, there are also more than a few hints that in the year ahead, the housing market’s rebound may take a breather — or we may experience something far worse. Let’s take a look at some of the warning signs.
1. Mortgage Rates Are Moving Higher
The economy’s gradually getting on track, and that has resulted in interest rates inching higher. Naturally, the higher the rate, the less bang potential homebuyers get for their bucks.
…
2. It’s No Longer House-Hunting Season
The National Association of Realtors has reported three consecutive months of declines in existing home sales.
…
3. The Mortgage Market is Starting to Dry Up
With homes getting more expensive and interest rates getting higher, you might expect interest in buying to dry up, and that’s exactly what’s been happening.
…
4. Home Builders Are Getting Greedy
All of these factors would seem to be warning signs for developers, but they don’t seem to be heeding the cautionary signals.
…
‘re taxes going way up
1. Govt should have no problem dropping the interest rate when needed. Every uptick now means more “ammo”, or space, for the rate to be dropped down the road. The gain from the lowering will always be more than the pain from the uptick. Ergo, we have the equivalent of a perpetual motion machine in financing.
2. It’s Winter. Wait till the Super Bowl, and then till Spring.
3. Once people realize that home prices are running away from them they will storm back to get in before it’s too late. Also, the govt still has additional tricks up its sleeve, such as a repeat of the homebuyer credit, and 40 to 50 year mortgages, which will bring down the monthly cost significantly.
4. Home builders have tons of profit margin they can reduce. They have not yet started offering price reductions, incentives, etc. All such moves will bring more buyers to the table.
‘The Palo Alto City Council voted unanimously Monday to delay enforcement of an ordinance that would make it illegal for people to live in their vehicles on public streets and parking lots.’
‘The ordinance was scheduled to take effect Jan. 6, but the council decided to hold off until the Ninth Circuit Court of Appeals rules on a similar law in Los Angeles.’
What a prosperous people! Living in cars, renting out garages, getting home from work at 8PM. Check out some of these details:
‘RECENT HOME SALES’
“Living in cars, renting out garages, getting home from work at 8PM.”
It beats living under a bridge.
Coming soon near you: Dollar Tree.
“Living on reds, vitamin C and cocaine…”
Solution: Raise the minimum wage to $1000/hr. Then everyone will be rich and will be able to buy an expensive house.
Mr Smithers
The Fed is doing everything it can to make your wish come true.
Illegal to live in an RV on land you own. Illegal to live in your car when you cannot afford anything better. Illegal to loiter in parks and public spaces. More and more public lands have use fees. Soon, it will be illegal to be poor. No money? You can’t “be” anywhere legally, so off to prison you go!
“Linda Lee, president of the Greater San Diego Association of Realtors: ‘While it’s difficult for any expert to predict market prices, I believe the median price will be higher at the end of 2014 than it currently is now. I estimate the median home price in San Diego County will be approximately 21 percent higher at the end of 2014.’”
I believe Santa Clause, the Easter Bunny and the Great Pumpkin will act together to shower my household with riches in 2014.
‘it’s difficult for any expert to predict’
If a group of used car salesmen elected me as their “president”, I suppose that would make me an expert on cars.
“‘The homes priced a million-plus have taken a price dip,’ said Burge. ‘We’ll see that disappear in the middle of January. More of our buyers will be back on the market looking.’”
If used home sellers are good at anything, it’s pulling predictions out of their arses.
Hell, it works in Washington, DC!
All that wisdom and ethics prowess…mustn’t let it go to waste.
Evidently Linda Lee is paid well to believe and communicate her own propaganda.
I predict a first qtr standoff between any off season buyers and sellers, which will start the next reversal. I’m thinking 20% minimum haircut in 2014 in So Ca (east Ventura County). My empirical evidence is pointing to it. Just last month a comparable listing to our home (cherry listing) dropped $40K in one adjustment at 45 dom. Unheard of in 2013.
“At midyear, prices were up nearly 30 percent compared with 2012 – and about 50 percent from the trough two years ago. And then, as summer began, the carousel stopped. Higher prices shooed away many of the investors. Almost out of nowhere, the inventory of homes for sale doubled.”
I keep wondering: How does this 50 percent increase in home prices from the trough two years ago compare to the increase in household incomes over the past two years? If home prices have increased much faster than incomes, what will sustain them at their reflated levels going forward?
If home prices have increased much faster than incomes, what will sustain them at their reflated levels going forward ??
Nothing other than lower borrowing and operating cost which we know will not happen…In many ways, the cost both entry & exit on housing will likely go up…Both state and local governments see it as “ripe” for taxation…Taxation in stealth ways I might add…Utility fees immediately come to mind…
If home prices have increased much faster than incomes, what will sustain them at their reflated levels going forward?
The same thing that sustained them the last go-around!
Uh…you mean when they crashed?
‘The latest report from California Association of Realtors seems to recap what a range of real estate info gatherers have reported over the past couple of months. To wit: The pending Home Sales Index based on signed contracts fell 13.9 percent in November, down from a revised 108.6 in October. The monthly decline was the first double-digit drop in nearly one year.’
‘The number is also down 9.4 percent from the 103.5 index seen in November 2012.’
‘C.A.R., this go-around, is pinning slowed sales not so much on cooled California inventory as it is on shrinking housing affordability. Median prices in some places have pushed past the buy-point for working class families. In some locales, homeowners who have been overly confident of the pricing gains– or waited a long time to see equity come back — are floating trial balloons to see what their homes will fetch.’
“In some locales, homeowners who have been overly confident of the pricing gains– or waited a long time to see equity come back — are floating trial balloons to see what their homes will fetch.”
Sell now, or get priced in forever.
“Get what you can fetch for your house today because it’s going to be less tomorrow for years to come.”
indeed.
2014 Housing Predictions
Logan Mohtashami, Benzinga Contributor
December 30, 2013 10:46 AM
A tale of 2 halves with lingering questions, characterizes what we can say was the story for housing for 2013. In the first half of the year, rates were low as the 10 year note was well under 2%. People were still refinancing, as home prices rocketed. Multiple bids were common and pundits like Ivy Zelman cheered the improving market with praise like “Housing is in Nirvana”.
Get out the pom poms? Eh, no. The higher home prices and multiple bid sales were more of a reflection of the low inventory rather than an improving market led by a natural level of mortgage buyers. A massive spike in the 10 year note from 1.60% to 3% gave the housing bulls a great dose of reality — the reality of an economic cycle where the majority of jobs gains have been going to low wage paying service jobs that are unable to support a housing boom.
These “two faces” of 2013 are what will frame the housing market in the coming year.
…
Dec. 31, 2013, 9:18 a.m. EST
Case-Shiller: Home prices up, but boom fading
By Kathleen Madigan
U.S. home prices remained on a solid upward trend in October, according to a report released Tuesday, but price gains may not be as strong in 2014.
The home-price index covering 10 major U.S. cities increased 13.6% in the year ended in October, according to the S&P/Case-Shiller home-price report. The 20-city price index also increased 13.6%, close to the 13.7% advance expected by economists.
Both increases are the best since February 2006, the report said.
On an unadjusted basis, both the 10-city and 20-city indexes increased 0.2% in October from September. Seasonally adjusted, the gain for both composites was 1.0%.
Las Vegas continues to lead price gains, with home values up 27.1% year-over-year. San Francisco has seen prices rise 24.6%.
Despite the strong increases in prices, the report is cautious about the future.
“Monthly numbers show we are living on borrowed time and the boom is fading,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices.
“The key economic question facing housing is the Fed’s future course to scale back quantitative easing and how this will affect mortgage rates. Other housing data paint a mixed picture, suggesting that we may be close to the peak gains in prices,” he said.
…
As home prices in many U.S. cities have returned to higher-than-peak-bubble levels, have local incomes gone up in rough proportion?
I thought not. Which leads to an obvious question: What supports housing at these price levels?
Dec. 30, 2013, 1:39 p.m. EST
All-time-high house prices in 10 of top 50 metro areas
By Nick Timiraos
Home prices have zipped back into record territory in a handful of American cities, a milestone that comes seven years after the housing bust ravaged the market and the broader economy.
Values are up more than 13% from their 2007 high in Oklahoma City and by more than 6% in the Denver metro area. Prices are back to all-time highs in 10 of the nation’s 50 largest metropolitan areas, according to a Wall Street Journal analysis of price data from Zillow, an online real-estate information service. Prices are within 5% of their previous peak in San Jose, Calif.; Nashville, Tenn.; and Dallas.
Prices nationally remain below the highs of the past decade, and many of the cities that have seen the biggest gains largely escaped a boom and bust.
…
Keller Williams Elite
Features of this 10-acre property in Oklahoma City, listed for $750,000, include a private pond.
‘10-acre property in Oklahoma City, listed for $750,000, include a private pond’
Nothing to see here folks. They are running out of land in Oklahoma. BTW, it’s not a private pond. It’s a stock tank.
The May 2013 twisters must have somehow missed that one.
And housing demand collapsed in all ten of those areas.
Gee wiz…. how did that happen?
I thought not. Which leads to an obvious question: What supports housing at these price levels ??
Well, I think I can speak to a few markets…
Palo Alto and close proximity….Wealth is the driver along with all the amenities that attract it…
San Francisco….Jobs, Foreign investment and its SF….
In my particular local…Right now I would point to the main factor being lack of inventory….The amount of inventory is beyond ridicules for a city of our size…You have inventory this low with a strong job market you get these spikes…Increase the inventory the price will roll over…
We are a city of 106,000 people…We have a grand total of 16 single family homes for sale at this time…A normal market would likely have 150-200…In the dot-com bust we had over 500+…
I posted this elsewhere:
http://www.paloaltoonline.com/news/2013/12/24/recent-home-sales
Interesting how many “homes” are going around to trusts and such.
Interesting how many “homes” are going around to trusts ??
Its the way you keep the state from getting their greedy hands on controlling distribution of your assets…No probate when assets are in a trust…No need for attorneys either…
We officially bought our house from a trust. The woman who lived there before held the house in her trust.
It meant nothing except for estate planning. She lived in the house just like she would have if it were in her name.
Yep…
Do you guys know what a trust is? There’s a trustee, a beneficiary. It’s a tax deferral.
Hmm. If this is so common, how come I never see it in the local foreclosure paperwork?
Remember who you’re talking to Jonesy.
Do you guys know what a trust is? There’s a trustee ??
Ben….In California, if you lack a trust your estate must be probated upon death…If its probated it will be tied up in court, the process takes minimum 6 months possibly one year including court costs and attorney fee’s which can very depending on the size of the estate but its very expensive…
If you have a trust, the “subsequent trustee” can act immediately after death or with a durable power of attorney act if you are incapacitated in accordance with what the trust says…
No attorney’s…No Courts…No delay’s…
Yes, I know what a trust is…
I might add one more thing…The trust can also have a medical directive appointing the subsequent trustee authority on medical decisions including removal of life support…Try getting that done without a medical directive in a trust…
Young girl in a coma up in Richmond is a prime example..Parents went to court…She is still on life support 3 weeks and counting…
‘No attorney’s…No Courts…No delay’s’
You’ll need someone to set up the trust. Someone to keep records, file tax returns. Trusts are just another cost and headache. One more reason to not buy property in California.
“income of $165,420 to qualify for the purchase of an $805,000 median-priced single-family home. The monthly payment… $4,140″
As if you need another reason.
You’ll need someone to set up the trust ??
$1500.
Someone to keep records ??
Same person as if you did not have a trust…Me…
file tax returns ?? Again…The same person files them if you did not have a trust…Me
Trusts are just another cost and headache ??
Other than the $1500. its no different than if you owned
without a trust…You don’t even need to put the asset in the trust name…You can have a notarized ($25.00) assignment to your trust…
One more reason to not buy property in California ??
Really ?? I am not going to buy property because of the $1525. one time cost of entry for a trust ??
Really ?? I am not going to buy property because of the $1525. one time cost of entry for a trust ??
scdave, what’s the benefit of such a trust? Do you hold other assets in it, or just RE?
Do you hold other assets in it, or just RE ??
You can hold all your assets in the trust including cash & personal property…
what’s the benefit of such a trust ??
First its about keeping the State (courts) out of your distribution affairs and allows the administration of the trust to happen in a timely manner…Even one day after your death or incapacity…
Secondly it allows for many directives that you may want enforced by the trustee…Such as, a certain asset will accrue to a mother for her lifetime and then revert back to the remaining beneficiaries…
And you don’t NEED to own your house in a trust…but if you have a trust, I understand that it is wise to hold all of your assets in that trust’s name.
scdave is correct. Many (most) people around here use trusts to hold their RE assets. We do, as well. No need to do different tax returns until your death (at which point the trustee manages it separately) as the trust is associated with your SSNs; you just do your taxes as usual.
I first learned about trusts in my late 30s when my Uncle died. His wife had “recovered” from cancer but had to be put in an assisted home due to her bipolar schizophrenia. She lived two more years and the cancer came back big time.
The trust became an irrevocable trust. A trust wrapped the will. If you have a will without a trust the state gets involved and the estate goes through probate, I learned that in my dad’s case (he was a widower the last six years of his life).
A will is easy for the person to set up and hard for the beneficiaries to get to in a timely manner. A trust is complicated to set up and costs a couple thousand bucks but is very easy for the successor trustee to access the assets as soon as it is irrevocable. I had to carry around death certificates to access accounts. And I had the family accountants do the final tax accounting for my dad’s estate and my uncle’s.
Many people are unaware but middle class Americans for years could legally move assets offshore into certain trusts and escape taxes just like the 1%ers. Of course lots of those loopholes are gone.
The one remaining is to liquidate a huge chunk of or all of your assets, realize the gains, if any, convert to bitcoin and then go overseas to Belize or Singapore, convert back from Bitcoin to the local currency, and skip the 35% departure tax from the U.S.
‘A surging tech sector economy in San Francisco is spurring a new spike in home prices and rents in and around the city. The hot rental market, in turn, has led to a surge in evictions. That “Priced Out” phenomenon has gotten to the point where activist groups have organized to demand action’
‘The leading symbol of the divide between those who fancy themselves the real residents of San Francisco (meaning: they’ve lived and worked here awhile) and recently arrived technology workers is the Google bus. The buses have appeared in increasing numbers throughout the city and East Bay, and one serious cultural critic says, “I think of them as the spaceships on which our alien overlords have landed to rule over us.”
“serious cultural critic”
Also known as the guy who gets your coffee.
‘KB Home, one of the nation’s largest and most recognized homebuilders, said it earned a net income of $28.1 million in the fourth quarter, on revenues of $618.5 million. Homes delivered decreased 4% from the fourth quarter of 2012 to 2,038 homes, reflecting a decline in deliveries from the Company’s West Coast homebuilding region.’
‘Our fourth quarter results provided a solid finish to 2013 with both revenues and profits up from the prior year,” said Jeffrey Mezger, chief executive officer. “…The catalyst for this progress has been an ongoing strategic shifting of our operations to higher-performing markets across the country. The favorable impact of this approach was most evident in California, where our average selling price for the quarter increased 29% from a year ago to $524,200.’
http://nation.time.com/2013/12/30/u-s-population-rises-slowly-to-316-million/?hpt=hp_t3
I just saw that…Slowest since the Great Depression….I wonder what the longer term impact is going to be…
This just in:
‘The housing market could be in the early stages of yet another bubble, warned Robert Shiller, co-founder of the closely-watched Case-Shiller index on home prices. “In the housing market, it has its own momentum right now as people see it coming back. We’re sort of in the beginnings of another housing bubble,” the Nobel Prize-winning economist told CNBC on Tuesday.’
Whaa?
‘29 Oct 2013: “I define a bubble as a time when people have extravagant expectations, and the expectations are driving home price increases,” said Robert Shiller, Case-Shiller index co-founder and Yale University professor of economics, in an interview with CNBC. “We don’t have the mindset of earlier this century…Affordability is still good compared to any time over the last 50 years. Mortgage rates are still around 4½ percent; that’s not high. Homes are still roughly, in real terms, where they were 25 to 50 years ago,” he said.”
‘01 Dec 2013: Nobel Prize-winning economist Robert Shiller, co-creator of the closely watched S&P Case/Shiller Home Price Index, and DoubleLine Capital CEO Jeffrey Gundlach see no bubble in the housing market even though the index has soared 13.3 percent this year through September.’
“We went through the biggest housing bubble in U.S. history in the 2000s, and there is a knee-jerk reaction among some people who think maybe we are doing that again,” Shiller told Barron’s. “But you have to consider that these are very rare phenomena, and it was such a decisive break at the end of the last housing bubble that we might not be psychologically ready for another bubble.”
I think if a year from now, we are still experiencing 10%+ year on year price growth nationwide, it can be safe to say that we are not “sort of in the beginnings of another housing bubble”, but in the midst of one.
I heard a real estate analysts speaking this morning about the real estate market in the hottest big cities…Miami, NY & SF…He was discussing how much foreign money was coming into these markets from all over the world…Used France as one example because of their recent raising the income tax to 75%
This is the quote that I found interesting…Tom Keen said they are buying these as investments ?? Miller said you can think of the purchase another way…Think of it as purchase a “safety box” where they can store there assets including personal belongings inside…
Interesting perspective…
Our admin had the house next door sold to a Chinese family. There were here for a month sightseeing, and the house has now been empty for a couple of months. Store of wealth and vacation crash pad?
Shiller was silent on the idea of a stock bubble this time, although he warned about it a month or so ago. To me, anyhow, this is where the real action is. Unlike housing, which has had a few months lately where median nationwide prices dipped, the stock market can’t have even one bad day.
Bubble!
There was a run like this under Henry Paulson’s and Ben Bernanke’s Working Group on Financial Assets watch circa 2006, just a little before the calamity of Fall 2008.
But I’m sure that with all the revamped stabilization measures subsequently put into place, it can’t happen again.
Apparently hovering close to the Mother of all Bubbles price levels is this Nobel Prize winner’s idea of a new normal. Must be insight is not a requirement.
“at the end of the last housing bubble”
Define end. Did the previous housing bubble end if the government pulls out all stops, floods the banks with cash, engineers ZIRP, abrogates historical accounting rules and standards, ignores laws to allow the perpetrators to go free, all in an effort to put a floor in to avoid the losses from the bubble being felt by banks or FBs?
He’s right that we might not be psychologically ready for another bubble, but not for the reason that is implied. We aren’t ready because the prior one did not end.
Still right smack dab in the middle of it, though the FIRE sector’s propaganda brigade persistently tries hard to convince everyone that it is over.
Very true, GSWT.