Sellers Are Dealing With A Glut Of New Properties
The Denver Business Journal reports from Colorado. “As with many homebuilders around metro Denver, KB Home Colorado Inc. had a busy 2013 and seems primed to be even busier in 2014. The evidence comes by way of the company’s recent single-family home land grab in metro Denver. ‘We’ve just had so much activity by way of acquisitions we’ve closed down in the past few months,’ said Matt Mandino, president of KB Home’s Colorado division. Mandino said the homebuilder is not finished with land purchases. ‘We think it’s relatively early in this housing cycle,’ Mandino said. ‘Our assessment of metro Denver is very favorable, which is why we’ve been so aggressive on the acquisition front. And we’ll be increasing our community count as we go forward.’”
The Denver Post in Colorado. “Metro Denver’s housing market got off to a respectable start in January, with prices steady despite a rising number of homes sold and a tight inventory, according to Metrolist, which runs the metro area’s multiple listing service. The average price for new and existing homes in January, both attached and detached, was $302,251, down 3 percent from December. The number of active listings increased 5 percent from December and was up 7 percent from January 2013.”
“‘We are optimistic about the 2014 real estate landscape,’ said Kirby Slunaker, CEO of Metrolist, in a statement. ‘We’d advise any consumers who are planning on entering the market for a new home later this year to start looking early.’”
The Albuquerque Journal in New Mexico. “The flood of foreclosures began to recede in the Albuquerque metro area during 2013, dropping to the lowest level in four years. Although the pace of new foreclosures was down by half in 2013 compared to the peak, reminders of the crisis still dot neighborhoods across the metro. ‘Over the last several years, in my talks with (state) legislators in both the House and Senate, most were appalled at the number of vacant homes in their districts that were either in the foreclosure process or had been foreclosed upon,’ said Bill Elliott, president of the mortgage lenders group.”
“‘The average time from start to finish on a foreclosure in New Mexico is well over 450 days, according to the Federal Housing Finance Administration,’ he said. ‘I know of one case that has lasted well over five years and still has not been resolved.’”
The Phoenix Business Journal in Arizona. “Meritage Homes Corp. capped off 2013 with strong home closing revenue and profit, but like its peers nationwide saw a slowdown in orders that has stretched into 2014. ‘We invested approximately $565 million during the year in land and development, and contracted for approximately 11,200 new lots in great locations at attractive prices, ending the year with about 25,700 total lots under control,’ Steve Hilton, Meritage’s CEO, said during a conference.”
“Hilton did, however, note that things slowed down during the second half of the year, and has remained so into 2014. ‘I think people are taking a little bit longer to pull the trigger on the home-buying decision than they were a year ago,’ Hilton said. ‘There was much more urgency in the market a year ago as prices were rising a lot quicker. Prices are now rising more modestly and that’s slowing the buying process.’”
“‘I think sales per community for the first quarter will probably be off from the first quarter of last year, but you have to remember we raised sales prices extensively over the last 12 months, so to some extent that’s purposely done,’ said Larry Seay, Meritage’s chief financial officer. ‘On the other hand, obviously we’d like to see increases in sales per community.’”
“Meritage doesn’t plan to budge on those prices either. ‘Even at lower volume levels, at these price levels we can be more profitable than decreasing prices and increasing volume,’ Hilton said.”
Fox 5 in Nevada. “Home sellers hoping to recoup value lost during the recession are dealing with a glut of new properties on the market. Economic recovery has spurred a building spree, and new homes are selling, despite the fact that many have above-market prices. ‘I would say we are out of intensive care but we’re not ready to go home, so to speak,’ said Noah Herrera, president-elect of the Greater Las Vegas Association of Realtors, of the housing market. ‘Our inventory has gone up quite a bit, and there are a lot more properties on the market now,’ Herrera said.”
“Herrera and UNLV economist Stephen Brown are optimistic the market is heading in the right direction and will continue to do so as long as there is economic growth. Many of the new homes are prices well above $200,000, considerably higher than the median. ‘We are looking for 2014 to be stronger, but if something were to happen and we were to go into another spell of weak economic activity, I think that would be a drain on the economy and a drain on the housing market,’ Brown said.”
The Globe and Mail on Nevada. “The majority of Canadians buy winter homes in Florida, Arizona and California, but Las Vegas is gaining attention. Greater Las Vegas Association of Realtors president Heidi Kasama says there are still buying opportunities for Canadians, even with the Canadian dollar down to 90 cents (U.S.). ‘Perhaps the purchasing power [for Canadians] has diminished, but the potential for continued appreciation in our market is certainly there,’ she says. ‘But aside from all that, this is a great place for a second home.’”
“‘We come to relax for a week,’ says Langley, B.C., resident Peter Saris who, with his wife Grace, purchased a three-bedroom town home in an upscale Las Vegas suburb for $300,000 in 2009. In 2009, the couple purchased a townhouse in Summerlin, a 9,100 hectare master-plan community. On paper, the Saris house dropped in price 50 per cent after the couple made their purchase but has since regained much of its value. ‘We don’t look at that because we are not looking to sell,’ says Mr. Saris, who tries to head south with his wife for a week every three months.”
“On paper, the Saris house dropped in price 50 per cent after the couple made their purchase but has since regained much of its value.”
Define much. $300k for a townhome in LV? Good luck finding another fool when it’s time to sell!!!
And it will drop 50% again. No big deal.
Here is the really interesting take: Peter & Grace Saris “try” to come to Las Vegas for a week every 3 months. So they visit 4 times a year for a week each time
They invested $300,000 (at risk) and even if the home holds its value, at a 5% cost of capital, that is $15,000/year. Add $6,000/year for taxes, another $3600/year for HOA dues and maintenance and the annual cost of the property is:
$24,600! That is $6,150 per week.
They would do so much better renting a place (HA never thought he would hear me say those words). Imagine the kind of accommodations and service you could get for $878/night.
No wonder the Canadian dollar is losing value…..these people spill money like its water thru a sieve.
Maintenance costs are far higher than the pittance you suggest.
A fool and his money are eternally parted.
Isn’t everyone eventually “eternally parted” from their money?
‘Home sellers hoping to recoup value lost during the recession are dealing with a glut of new properties on the market. Economic recovery has spurred a building spree, and new homes are selling’
Watch this starting at about minute 6:30 regarding these new houses:
http://www.youtube.com/watch?feature=player_detailpage&v=dX_rqTATgVI#t=10
“The new mortgage rules are causing home buying contracts to be cancelled as some people can’t meet the new requirements.”
This will cause most of the country to experience the same results. Great, every new rule that comes out of DC makes it harder and harder for businesses to grow.
The housing debacle doesn’t need to “grow”.
Amen. Every offer contract we write will have a cover letter pointing out all the downside risks, including the credit contraction noted above.
“Great, every new rule that comes out of DC makes it harder and harder for businesses to grow.”
Wait — I thought we were talking about mortgage rules that will make it harder to throw away good money down the housing investment rathole.
Won’t that have the desirable side effect of making more loanable funds for businesses that provide something of value to the American economy?
the mocha monkey never was in business.
So Lip, maybe we should offer loans where the buyers can state their income for qualifying purposes, with no verification of any job or assets…..Oh, wait, we tried that already and it didn’t work out so well.
Responsible mortgage lending is one of the most important factors in a stable housing market.
We’re a long way from a stable housing market.
Remember…. Falling housing prices to dramatically lower and affordable levels is positively bullish, good for the economy and leads to a “stable housing market”.
Jingle Mail,
You got me there.
I have a close friend that works for a title company and I was thinking about how their life gets thrown into a tizzy. Lots of people in that industry are going to loose their jobs again.
Get ready for investors to “flush the toilet”!
My understanding of the investor groups strategy is to hold for 8 years before selling. I doubt they will “flush the toilet”. Housing transaction cost (which are high) dictate a longer term investment strategy and they knew that from the start.
Oh, THOSE investors. The ones with nerves of steel. The ones that will gladly bleed out for a decade of carrying costs while the value of the asset sinks. The ones that will just cover their ears and yell lalalalalal while anyone who bought a house in the last few years is mocked as the worst investor ever. Those guys.
Maybe the Fed has got their backs, even after they are done unloading the banks of their losses.
I think that there is evidence that investor groups can turn on a dime and panic sell to cut their losses. The fact that they have stopped buying is good evidence, and that itself is turning the market.
I believe THOSE investors will be more interested in what is happening with rents and vacancy rates than with house prices. After all, why would you sell into a falling market if you’re still collecting. If vancancy rates climb and rents fall, then you’ll see a rush for the exits.
Hell… rents are falling in Manhattan and SFR vacancy rates are still near historic highs.
What if the automatic flush is triggered while they are still sitting on the toilet?
They’ll call it a bidet and raise the price?
What happened to sales in the second half of 2013? They seem to have dropped off a cliff.
Part of the sales transaction record reflects the buying spree of the investor groups in 2012 and 2013, before prices went higher (driven, ironically by the investor groups). They went away.
My point is that they added “extra” sales in 2012 and the first half of 2013 stopped. If you remove their purchases from the transaction numbers in 2012 and the first half 2103, you probably get a more normal sales pattern.
The real demand/supply curve will be established in 2014 and it will be interesting to see where it goes.
From a Las Vegas prop mgr blog:
Re new houses:
‘Compared to one year ago, GLVAR reported many more available homes listed for sale without any sort of pending or contingent offer. By the end of January, GLVAR reported 6,541 single-family homes listed without any sort of offer. That’s down 0.7 percent from 6,587 such homes listed in December, but still up 96.2 percent from one year ago. For condos and townhomes, the 1,712 properties listed without offers in January represented a 2.9 percent increase from 1,664 such properties listed in December and a 40.1 percent increase from one year ago.’
Did the music stop already? It seemed like the dance had only just begun.
“As with many homebuilders around metro Denver, KB Home Colorado Inc. had a busy 2013 and seems primed to be even busier in 2014.”
And why wouldn’t they be? With resale housing priced 200%+ higher than production costs for new housing (lot, labor, materials and profit), new housing supply will continue to accelerate until resale prices fall.
HA is correct….he learned that from 2007-2012. He just forgot it already happened.
You pretend to understand something about the imput. Yet you really don’t understand at all.
‘In Fort Collins, where the cost of building a home is even larger, the drop in dollar volume of homes sold was also greater than that seen in Loveland. About $41.6 million in homes were sold in Fort Collins in January, compared with $47.7 million in the same month in 2013. Fourteen percent fewer homes were sold, 141 in 2014 compared with 165 in 2013.’
‘Median home price in Fort Collins fell by 1.8 percent from $252,593 a year ago to $248,000.’
‘Real estate experts in Northern Colorado have predicted that the Greeley housing market could be the hottest of the three cities this year, as prices remain lower there than in Fort Collins or Loveland. Smaller surrounding towns such as Timnath, Frederick and Wellington are also seeing increased activity as developers chase more affordable lots on which to build.’
‘A housing affordability index compiled by the Colorado Association of Realtors has dropped by nearly 13 percent in the past two years in Northeastern Colorado. The index is based on data from Realtor associations in Estes Park, Fort Collins, Boulder, Greeley, Loveland/Berthoud and Longmont as well as Logan and Morgan counties.’
‘The median income and home price varies in each part of Northern Colorado, but in Fort Collins, for example, the median home price at the end of 2013 was $261,000, and the median household income in 2012 – the most recent year available – was $53,359, according to the U.S. Census Bureau.’
‘It also is important to remember that student housing alone will not ease the multi-family market, Martin said. Low vacancy rates across Northern Colorado have forced rents up, causing many to consider purchasing a home, since a mortgage payment can be comparable to median rent.’
‘Newly built homes also are becoming more expensive, according to Steve Baker, broker at Sears Real Estate in Greeley. The median home price in Greeley in 2013 was $170,000 but most of the new homes under construction there are in the $200,000 range, Baker said.’
‘While consumer may become frustrated by the lack of supply at their buying level, more expensive homes mean that the Greeley market is continuing to recover from the recession.’
‘Greeley also is attracting attention from Denver and elsewhere along the Front Range because homes there, while more expensive than a year ago, still are among the most affordable in the state.’
“It’s good to be on the uptick of pricing,” Baker said, “but bad for those customers who aren’t at a certain level of buying power.”
Things have been looking subdued in Larimer County. Ft. Collins, which puts on a Boulder like image of prosperity, actually has a dismal job market. And tech jobs pay a lot less in Fort Collins than in Denver.
Down in Denver, things are much bubblier. My coworker, the one who moved to Highlands Ranch, told me that the developer who built their new house actually has 60 buyers on a waiting list.
‘Flagstaff city services did not get a good review in the latest citizens’ survey. More than 75 percent from the 2013 survey said they were very likely or somewhat likely to stay in Flagstaff for the next five years. However, the study also found that affordable housing remained a problem — more than half of those who said they were “very” or “somewhat” likely to leave Flagstaff cited high housing costs.’
I meet a lot of people (mostly renters) who are moving from Ft. Collins to neighboring Loveland. The reason: lower rents in Loveland.
The Globe and Mail on Nevada. “The majority of Canadians buy winter homes in Florida, Arizona and California, but Las Vegas is gaining attention. Greater Las Vegas Association of Realtors president Heidi Kasama says there are still buying opportunities for Canadians, even with the Canadian dollar down to 90 cents (U.S.). ‘Perhaps the purchasing power [for Canadians] has diminished, but the potential for continued appreciation in our market is certainly there,’ she says. ‘But aside from all that, this is a great place for a second home.’”
This is truly hilarious. Think hot patato. Bag holder. The entire point of all this is finding enough suckers to pull the rug out from under it all once again. There is just too much housing inventory no matter where you look.
Phoenix housing demand has collapsed 26% and falling hard.
http://www.zillow.com/local-info/AZ-Phoenix-home-value/r_40326/#metric=mt%3D30%26dt%3D1%26tp%3D4%26rt%3D8%26r%3D40326%26el%3D0
Can’t wait to see the 2014Q1 Case-Shiller/S&P Index numbers!
Case-Shiller will show a still rising sale price. It is the number of sales that is currently in free fall.
Santa Rosa, CA Housing Prices Sinking; Fall to 2009 Levels
http://www.movoto.com/santa-rosa-ca/market-trends/
‘Banks seized a rising number of homes from delinquent Nevada borrowers last month, keeping the state’s foreclosure rate one of the worst in the country.’
‘The Silver State had 1,369 scheduled auctions in January, a 23-month high, and 543 repossessions, a 21 percent jump from December, according to RealtyTrac.’
‘Tampa Bay posted the seventh-highest foreclosure rate in the country last month, with twice as many filings — notices of default, auction or repossession — as Phoenix, Dallas or Detroit. Tampa Bay courts faced a backlog of more than 41,000 pending foreclosures by the end of 2013, down from 50,000 at the end of last summer, state court data show. But clearing the rest won’t be quick: Judges are ruling on or dismissing about 2,000 cases a month.’
‘Of Florida’s hardest-hit foreclosure metros, including Miami, Ocala and Jacksonville, only Tampa and Orlando saw foreclosure activity go down from December to January. Still, those five metros remain in the top 10 in foreclosure rates nationwide.’
Realtor Scammed $150,000 From Homebuyer
http://www.vcstar.com/news/2014/feb/06/oak-view-woman-arrested-in-connection-with-fraud/
‘Colorado’s foreclosure-filing rate in January rose 89 percent from December, but was down nearly 24 percent from January 2013. Colorado had 1,614 properties with foreclosure filings in January, or one in every 1,370 households, said RealtyTrac.’