February 6, 2014

The Game Of Choice

The Gazette reports from Colorado. “Colorado Springs-area home sales fell in January for the third consecutive month, although prices continued to climb, according to a report by the Pikes Peak Association of Realtors. Bruce Betts, broker-owner of Re/Max Advantage, a Springs residential brokerage, said that January’s decline continues a trend that started late last year. A report from Pikes Peak Regional Building Department showed home construction also softening in January compared with the same month a year ago - a drop also blamed, in part, on rising mortgage rates.”

“The slowdowns might signal the local economy hasn’t rebounded quite as well as some people think, Betts said. ‘With all this talk about the economy getting better, I just don’t think it’s really true,’ he said. ‘People are still unemployed and underemployed.’”

“Colorado Springs-area foreclosure activity was unexpectedly high last month after having slowed in 2013, a report from the El Paso County Public Trustee’s Office shows. Not only did local filings reverse course in January, but they exceeded the totals in several Denver metro-area counties, said Public Trustee Tom Mowle.”

“Mowle said he doesn’t expect a dramatic worsening in local foreclosure activity. January’s figure still is far below totals recorded between 2007 and 2012. ‘It’s not like we’re back in the bad days,’ Mowle said.”

The Santa Fe New Mexican. “A year or two ago, many brokers said their clients were waiting for the market to hit the bottom, not wanting to buy if prices were going to sink more. That refrain is much less common today. ‘That’s right. Nobody’s talking about it anymore; everybody’s talking about the improvement in numbers,’ said Cate Adams in the Santa Fe office of Sotheby’s International Realty. ‘Sales are up, prices are not. Everybody’s saying that across the board. Why is Santa Fe so slow to recover? I don’t know. We were obviously very much affected by the real-estate bubble, if there was such a thing.’”

“The lookie-loo phenomenon — people going out to look at houses with no real intention of buying, basically making a hobby out of it — appears to be subsiding. ‘I do think the lookers got a little spoiled in 2009, 2010 and 2011 in that they would go out to look at houses thinking the market was still going down so they weren’t that serious. I do think we’ve reached the bottom, but some potential buyers aren’t convinced. They’re still thinking, ‘It’s overpriced. I’ll wait a while for it to come down.’ But I think those days are gone,’ said David Dougherty, Dougherty Real Estate.”

“The Globe and Mail on Arizona. “Calgary retirees Peter and Debra Jennings, in their early 60s, were familiar with a lot of warm-weather destinations in the United States but had never visited Arizona. But with so many friends headed to Arizona, a mecca for golf keeners like the Jennings, the couple paid their first visit in 2006. They fell in love with Tucson, a two-hour drive south of Phoenix and one hour north of Mexico. ‘It was the same as Calgary and had the same sort of feel, laid back and easygoing,’ Mr. Jennings, formerly in the financial services sector, says. ‘Phoenix had a rush-rush big city feel.’”

“Initially they built a 2,100-square-foot, three-bedroom ranch for $375,000 on a golf course in a gated residential community in Oro Valley in north Tucson. Then, as now, they dealt with fluctuating currency exchange. ‘When we wrote up the deal the Canadian dollar was 82 cents U.S.,’ Mr. Jennings recalls. ‘By the time we had to come up with the money, the dollar had gone up to 95 cents.’”

“Last year, the couple sold their house at a loss of $100,000 to relocate to a new upscale residential community on the edge of the posh Ritz Carleton golf course in Dove Mountain. But they gained in the end, by buying a larger home with 2,400 square feet for $348,000, well below asking prices prior to the housing meltdown.”

The Arizona Republic. “Many Arizona homeowners who were able to get federal loan modifications during the housing crash will begin to see their monthly payments rise this year. Borrowers, who had their interest rates reduced through the Home Affordable Modification Program in 2009, are hitting the five-year mark. That’s the point when their interest rates will begin to climb again, pushing up their monthly payments, according to a federal report.”

“In Arizona, about 88 percent of the 33,556 homeowners who lowered their payments through HAMP will see their interest rates begin to climb again during 2014-15. The typical borrower in the state will see their monthly payment climb by $185 a month, according to a Special Inspector Report for the Troubled Asset Relief Program. The biggest payment increase on an Arizona HAMP loan will jump by more than $1,200 a month.”

8 News Now in Nevada. “A new report by Realty Trac shows more homes were bought, fixed up, and quickly sold last year than the year before. There are people all over Las Vegas gambling in a high stakes way, but the game of choice may surprise you. John Bohnet buys foreclosed homes at auction, cleans them up, puts some paint on the walls, and sells them for a profit. ‘You’re bidding against other people, and you have to put the money up that day. There’s no going back and saying you don’t want the thing,’ said Bohnet.”

“‘It’s a little bit of fun to see what you can get it at. You think you know what you’re doing and you get tested on it every project,’ he said.”

“‘Suddenly we saw all the appreciation. You bought it undervalued and then all this appreciation happened. So there were a lot of profits to be made,’ said Fafie Moore, the owner of Realty Executives of Nevada. She says flippers can add value to the housing market. ‘That one sale will help, and will show increased value.’”

“Moore says home values have come up high enough that flippers won’t be able to buy as low in 2014 which will slow down the amount of house flipping. She says it is a sign of a stabilizing housing market.”

Fox 5 in Nevada. “Imagine being taxed on money you didn’t earn. That could be reality for Valley residents trying to short-sell their homes, because of an act Congress didn’t extend at the end of 2013. The Greater Las Vegas Association of Realtors says about 16 percent of homes in the area are currently listed as short sales. If any of these homes sell, because Congress didn’t extend the Mortgage Debt Relief Act, cancelled debt would be regarded as income on taxes.”

“Michael Allen decided to cut his losses and sold his house just in time. His house was more than $50,000 underwater. He put it up for short sale, hoping the bank would settle the difference of what his home was worth, because he didn’t want to face foreclosure. ‘I wanted to start fresh, and I tried refinancing in the past and it wasn’t working. I wasn’t allowed to do it,’ Allen said.”




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39 Comments »

Comment by Housing Analyst
2014-02-06 06:28:52

“Colorado Springs-area home sales fell in January for the third consecutive month

http://www.zillow.com/local-info/CO-Colorado-Springs-home-value/r_4172/#metric=mt%3D30%26dt%3D1%26tp%3D4%26rt%3D8%26r%3D4172%26el%3D0

Actually housing demand has been collapsing since March 2013.

I wonder if it has anything to do with the fact that housing is priced 250% higher than long term trend?

 
Comment by Housing Analyst
2014-02-06 06:33:16

“I do think we’ve reached the bottom, but some potential buyers aren’t convinced.”

You think it might have something to do with sellers slashing prices across Santa Fe?

http://www.zillow.com/local-info/NM-Santa-Fe-home-value/r_40760/#metric=mt%3D6%26dt%3D1%26tp%3D4%26rt%3D8%26r%3D40760%252C48912%26el%3D0

Ya better keep slashing because resale asking prices are 40% higher than reproduction costs(lot, labor, materials, profit).

Comment by Ben Jones
2014-02-06 08:03:46

‘We were obviously very much affected by the real-estate bubble, if there was such a thing’

Cate, please advise me on how to spend hundreds of thousands of dollars!

 
 
Comment by Housing Analyst
2014-02-06 06:34:57

“Last year, the couple sold their house at a loss of $100,000 to relocate to a new upscale residential community on the edge of the posh Ritz Carleton golf course in Dove Mountain.”

Housing is always a loss so why is this even news?

Comment by Ben Jones
2014-02-06 08:06:31

Then they run out an buy another shack for almost 400k. These Canadians are odd.

Oh well:

‘Borrowers, who had their interest rates reduced through the Home Affordable Modification Program in 2009, are hitting the five-year mark. That’s the point when their interest rates will begin to climb again, pushing up their monthly payments, according to a federal report.’

BTW, Arizona has the highest percentage of these loans in the country.

Comment by snake charmer
2014-02-06 08:19:08

Slim, how many Canadians retire to Tucson like this couple?

Comment by Ben Jones
2014-02-06 09:21:33

‘They fell in love with Tucson, a two-hour drive south of Phoenix and one hour north of Mexico. “It was the same as Calgary”

(Comments wont nest below this level)
Comment by Janet Felon
2014-02-06 14:06:21

How come nobody was falling in love with Calgary South when Canadian house prices weren’t grotesquely inflated?

 
 
 
Comment by Housing Analyst
2014-02-06 12:22:05

“Then they run out an buy another shack for almost 400k.”

Nothing like going double down on loss. Unreal.

 
 
 
Comment by Housing Analyst
2014-02-06 06:38:25

“Michael Allen decided to cut his losses and sold his house just in time. His house was more than $50,000 underwater.”

This guy finally smarten up. In the meantime, tens of millions of suckers who paid a grossly inflated prices from 1998-2014 cling to their rapidly depreciating houses while slaving away to make the payments with zero chance of recovering from the loss.

 
Comment by Combotechie
2014-02-06 06:43:02

“She said flippers can add value to the housing market.”

Lol. What flippers can add to the housing market is PRICE.

Comment by azdude02
2014-02-06 07:08:52

liquidity?

Comment by Combotechie
2014-02-06 07:32:03

That too; One acts to feed the other.

And the lack of one can act to starve the other.

IMHO it boils down to:

1. Availability of money accesessed by

2. Greater fools.

Add 1 and 2 and you get a boom. Subtract either 1 or 2 and you get a bust.

 
 
Comment by Rental Watch
2014-02-06 10:03:37

For a while you couldn’t borrow money to fix houses that were damaged by outgoing (foreclosed) residents. Flippers who were actually fixing the damage brought capital to the market to repair the properties.

However, once it went from “buy, fix, and resell” to “buy, markup, and resell”, it became yet another game of speculation, and all the flippers added was more aggressive buyers to the market.

 
 
Comment by Ben Jones
2014-02-06 07:24:31

‘The Albuquerque metro area’s single-family home market ended 2013 in pricing slump, dragged down by distressed property sales.’

 
Comment by Ben Jones
2014-02-06 07:34:46

‘More than 40 percent of Arizona households are on the brink of “financial devastation,” according to a national report that again ranked the state among the worst in terms of its residents’ financial security.’

‘The Assets and Opportunity Scorecard released Thursday graded states based on residents’ liquid assets and on policies aimed at helping struggling families, among other measures. The 2014 report by the Corporation for Enterprise Development ranked Arizona 41st overall.’

‘The report said 45.7 percent of Arizona households are in a “persistent state of financial insecurity,” essentially unchanged from last year’s 45.2 percent.’

“In a general sense, we aren’t doing very well,” said Cynthia Zwick, executive director of Arizona Community Action Association. “We were hit pretty hard by the recession, which we’re still climbing out of.”

‘Zwick said because of the recession, Arizona cut many services and resources. That left families hit by the economic downturn “literally living paycheck to paycheck” with no help from the state. She said Arizona now has the fifth-highest rate of poverty in the country, with 19 percent of its residents living below the poverty line.’

“They’re working one to two jobs and still not able to … make ends meet,” Zwick said.

‘CFED President Andrea Levere said the financially insecure residents highlighted in the report are “liquid-asset poor,” meaning they do not have savings to cover “basic expenses” at the poverty level for three months if hit by a financial emergency, such as a health expense or a car problem.’

“In the U.S., 44 percent couldn’t even live at the poverty level,” for those three months, Levere said. “And in Arizona it’s even worse, it’s at 46 percent.”

How can this be Mr Bernanke? House prices in Phoenix are up 72%.

Comment by Blue Skye
2014-02-06 08:03:02

Food and gasoline are still up 100%, that should help too.

 
Comment by Janet Felon
2014-02-06 13:54:33

“In the U.S., 44 percent couldn’t even live at the poverty level,” for those three months, Levere said. “And in Arizona it’s even worse, it’s at 46 percent.”

“How can this be Mr Bernanke? House prices in Phoenix are up 72%.”

I think we’ve passed the point of no return. It’s clearly evident that the current crop of politicians from both sides of the aisle have zero intention of addressing the real issues causing such economic devastation for so many. Not only are the bogus trade agreements which have a huge hand in this ignored, they are being expanded. The importation of cheap and illegal labor continues unabated. The welfare products which enable corporations to pay a pittance to workers continue to grow their members, and the special interest groups who bankroll the corrupt politicians have fortified their positions to the point of an absolute stranglehold on the entire establishment.

 
 
Comment by Ben Jones
2014-02-06 08:19:45

‘In analyzing existing values, all we need to do is look at the historical data, and the data never lies. The Phoenix housing and land markets bottomed out in 2011, with the land market falling to nearly 7.6% of the peak values of 2006.’

‘Raw land in the outlying areas of metropolitan Phoenix, such as Buckeye, bottomed out in 2012, reaching 11.2% of the 2005 peak values. Land in the Tonopah area located 10-15 miles west of Buckeye, bottomed out in 2012 as well, reaching 4.6% of the 2005 peak values.’

‘The year 2012 marked a dramatic turnaround for the Phoenix land market. The land in Phoenix almost doubled in 2012 from the lows of 2011 (from 7.6% to 12.8%). The land in Tonopah similarly almost doubled in 2013, from the lows of 2012 (from 4.6% to 9.2%). Outskirt areas typically lag approximately one- year behind everything else in terms of the market bottoming out.’

‘Currently the housing market in Phoenix has come back to about 77% of the peak values. This is promising news. Finished lots have come back to about 50% of their peak values. However, raw land continues to remain at low values at around 9.2% of the peak in Tonopah.’

‘According to some experts, given these facts, there is a potential upswing for raw land. Prices are still at all time lows and should continue to increase as the demand for housing increase.’

‘The table below shows the price per acre of land in Tonopah, Buckeye, and Phoenix from the peak of the market to the end of the 2013.’

Check out the chart. Basically, this scrub desert land ain’t “worth” near what we are told. It’s all just speculative markup and developer enrichment.

Comment by Blue Skye
2014-02-06 09:10:07

“Prices are still at all time lows and should continue to increase…”

Both cannot be true.

 
Comment by Housing Analyst
2014-02-06 11:55:28

WTF does “peak values” have to do with anything considering the magnitude of realtor and housing fraud?

 
Comment by Janet Felon
2014-02-06 13:56:53

A lot of this desert scrub doesn’t pencil out even if it’s free.

 
Comment by Rental Watch
2014-02-06 14:31:15

Comparing to peak is a bad idea.

We purchased one piece of land that didn’t have improvements, and paid about 5% of peak, however, the more important metric for us was what we paid relative to land values in the early 2000’s (2001-2002ish)–probably about 20-30% of those values. Our underwriting case assumes that we sell for closer to 2001-2002 values, nowhere close to peak.

I suspect if the author was honest and showed values going back to 2001-2002 in those outlying locations, today’s values might be 100% of those values already (ie. land prices are back to “normal” already). Not showing the earlier data is lying by omission.

In other words the low-hanging fruit for cheap residential land has long since been picked.

Most such investments today essentially are speculative bets on housing continuing to go up–a bet on a rebubble, and hope you can get out before a recrash. Just after the crash, you could buy land with underwriting that assumed we would get back to “normal” levels of development (pre-bubble levels of activity).

Comment by Housing Analyst
2014-02-06 16:12:00

There’s a globe full of land and 95% of it goes undeveloped.

If you paid more than $500-1000/acre, you paid too much.

 
 
Comment by Blue Skye
2014-02-06 19:40:38

One wonders how much a rancher or farmer might earn per acre off of such land. I’ve seen it. I’ve farmed really good land in PA. You can work your butt off to net an hundred or so $ per acre of good land. Free water and green stuff everywhere, that kind of land. Another NE farmer used to post here and said good farmland was worth $1000 an acre tops. I hear the farmers around here talk about land at $3000 and all they say is it only goes up in “value”. No way to make a profit otherwise at those prices.

I think the only value of that valley scrub is speculative. Nothing more. “Normal” is it’s a vast national park where people go to raise hell and shoot things up. “Normal” is when capital gets deployed to make a profit long term, not when cheap credit is deployed to chase price increases.

2000 prices, LOL!

 
 
Comment by Ben Jones
2014-02-06 09:03:52

‘Recent turmoil in emerging markets has caused several central banks — including the Reserve Bank of India, the Central Bank of the Republic of Turkey, and the South Africa Reserve Bank — to implement emergency rate hikes as their currencies tumbled.’

‘Russ Certo, head of rates at Brean Capital, passes along an interesting statistic: if you include Mexico, central banks in economies accounting for roughly 10% of global GDP are now hiking rates. “Ironically, all these moves are designed to counter the consequence and capital flow results of previous central bank policy,” says Certo. “Remarkable, that all of these banks are tightening because of weak economic growth — not robust growth. World of opposites versus years ago, when tightening and easing was to stem the tide and ebb and flow of tanker-like shifts in economic activity. Now, they are to reduce or minimize the effects of imbalances related to previous central bank trends.”

Comment by Blue Skye
2014-02-06 09:11:39

Hard to steer when the wheels fall off.

 
 
Comment by Ben Jones
2014-02-06 09:13:51

This sorta follows up the hedge fund rental thing from yesterday. It’s convoluted, so follow carefully:

‘According to real estate attorney and author Shari Olefson we may soon become a nation of renters with Wall Street playing landlord.’

‘The culprit, at least in part, is the expiration of the Mortgage Debt Forgiveness Relief Act…In short, its expiration might make it worth your while to go into foreclosure instead of short selling.’

‘Olefson says this potential surge in foreclosures would be most common in places that are still recovering from the housing bubble. “These also happen to be the states where you’ve got the big companies, the Blackstones and the big funds, investing in rentals. So a lot of these properties will end up as rentals,” she says.’

‘And there lies the rub. As Olefson points out, investing in “scattered residential rentals” is very different than buying a high rise. “It’s not like having an apartment building,” she notes…”You’re gonna see hundreds of complaints from renters in those homes finding hidden problems they weren’t aware of, or multiple calls to management and not having a response.”

“From there she worries these big companies will dump investments they aren’t pleased with, flooding the market in areas where the home recovery is tenuous at best.”

“Adding insult to injury, these investors are driving prices higher. Olefson argues, “prices of homes in an area should be based on the area’s income but investors are bidding based on the rent they think they can generate and we know rents are going up much faster than incomes. So the homes are becoming less affordable for folks who want to buy making renting just a much more viable option.”

“So where does it go from here? Olefson worries that Washington could get involved. Specifically, that lobbying efforts for renter benefits will succeed, making rentals an even better option than ownership, or in other words, making the U.S. a Renter Nation.”

So she’s “worried” about more foreclosures, Blackstone buys them, then dumps them, then prices crash. But this?

“So the homes are becoming less affordable for folks”

And all this would be prevented by not taxing forgiven debt? Who knew life problems would be so easily solved?

Comment by cactus
2014-02-06 09:47:22

Yea I read that. Blackstone is hot money and look what hot money is doing to the BRICS. This could happen a major dump of SFH in under performing markets.

“Specifically, that lobbying efforts for renter benefits will succeed,”

For some people maybe yes. Work hard? make a little money? No I don’t think you will get any government benefits. Nothing.

 
 
Comment by Ben Jones
2014-02-06 09:50:41

From San Diego:

‘Peter Martin, a Realtor at Pemberley Realty, said sellers won’t enter the market until they’re satisfied that they’ll get an acceptable offer. While Kilpatrick and others agreed that the market has seemed busy, Lunn said the numbers for January don’t reflect that frenzy. For the past decade or so, January has averaged about 2,500 homes sold, and as of Jan. 30, there were only 1,550, she said.’

“It’s off — extremely,” Lunn said. “What I think is happening is we’re going to make it up immediately — in February and March. All of this activity that isn’t going on is going to pop.”

‘Lunn said she also expects to see an immediate pop in prices’

Comment by Blue Skye
2014-02-06 11:56:48

Sure, prices always pop up immediately when sales volume tanks.

 
Comment by Housing Analyst
2014-02-06 11:57:19

Jeeeeeeziz realtors are fawkin stupid like rocks.

 
Comment by Rental Watch
2014-02-06 14:37:00

I wish someone would do a study on the buyers/sellers in some of these low volume markets.

Specifically, I’m interested in 2 categories:

1. Coming into the area/leaving the area as a buyer/seller;
2. Buying/selling, but staying in the same market/region.

I suspect that category #1 represents a larger than typical share of the market. If I were in category #2 and owned a home, with prices going up quickly, I would be very nervous about selling that home unless I could find another one to buy (if I don’t move from one to another, but rent, prices could be much higher when I finally find a home to purchase). With low inventory, are people not even bothering to try to sell their home?

 
Comment by Puggs
2014-02-06 15:23:40

“POP’ Fffffizzzzzzzle. LOL!!

 
Comment by Puggs
2014-02-06 16:58:27

Lunn is delusional.

 
 
Comment by Puggs
2014-02-06 15:19:09

“Imagine being taxed on money you didn’t earn. That could be reality for Valley residents trying to short-sell their homes, because of an act Congress didn’t extend at the end of 2013.

Imagine paying for your own mistakes. That’s how the real world worked before we coddled everyone.

 
Comment by Housing Analyst
2014-02-06 16:13:45

How overpriced is resale housing?

Comment by azdude02
2014-02-06 18:37:56

its undervalued according to experts at UCLA economics dept.

how much money have you lost waiting on the big crash? You know the game is rigged. Get on board the crazy train.

Comment by Housing Analyst
2014-02-06 18:45:40

Answer $hithousePoet Answer.

 
 
 
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