It Feels Like Groundhog Day
The Denver Business Journal reports from Colorado. “Home values in the Denver metro area have gone above and beyond their highest pre-recession levels, and are predicted to keep rising, according to Zillow. In addition to exceeding their previous peak, home values are expected to continue their upward trend. Meanwhile, 18.8 percent of the country remained in negative equity, according to Zillow, compared with 10.8 percent in the Denver area.”
“‘In dozens of markets, homeowners that bought at the peak of the market in 2006 or 2007 will have to wait until 2017 or later to get back to the breakeven point on their home, a lost decade in which they will have built up no home equity,’ said Zillow Chief Economist Stan Humphries. ‘This is reflected in stubbornly high negative equity and effective negative equity rates, with more than a third of Americans with a mortgage lacking enough equity to realistically list their home for sale and buy another.’”
The Post Independent in Colorado. “Last week a client in the under $150,000 range in Fruita said he is giving up on looking, that there is just ‘nothing’ for sale that excites or even satisfies him. In our market, there are only a small fraction of bank-owned (REO) and government-owned (HUD) properties for sale compared to last year. And among private owners, they are hoping for price increases; our market has simply not seen significant appreciation in home values over the past year. So, if they do not need to sell right now, many owners are opting to wait for what they hope will be improved prices in the future.”
“Our local job market is likely impacting home sales, too. Since we are not seeing wage increases and in some cases even seeing a decline in wage-earning jobs in Mesa County, many people cannot afford to move up; so, they are not in a position to sell their current home. My advice: If you need to buy, pick a home that is not at the top of the price range in a neighborhood you like; then take the plunge. If you need to buy, as Nike says, ‘just do it.’”
The Taos News in New Mexico. “When compared with wages, Taos County has the largest gap between weekly wages and median home price of any county in the state. The data from the BLS shows the average worker in Taos County made $586 per week. According to Census Reporter, which used data from 2012, the median home price in Taos County was $208,900. This means a home with a median value in Taos County costs a worker earning an average wage in Taos County 356 weeks’ wages.”
“Taos could see its average weekly wages decline now that Chevron’s Questa Mine is set to close next month. James Howard with the Bureau of Labor Statistics told The Taos News that Taos County’s jobs were concentrated in the natural resources and mining sector at twice the national average at the end of 2013. The vast majority of those jobs were no doubt at the Questa Mine.”
“Howard said Taos County’s jobs were concentrated in the leisure and hospitality sector at 2.5 times the national average, and those jobs tend to pay less than those in the professional business and services industry, for example. Furthermore, jobs in the professional and business services industry, which includes architecture, management, engineering and consulting, have significantly declined in Taos County recently, Howard said.”
The Credit Union Times on Nevada. “Credit union executives in Las Vegas, the site of NAFCU’s annual conference this week, said while the local economy is gradually improving, credit unions in the area still face challenges. ‘We’re certainly on the upswing in Las Vegas but we’re not where any of us want to be,’ Rick Schmidt, president/CEO of the $138.6 million WestStar Credit Union said. ‘The housing market is rebounding. In 2010, seven out of 10 homes were upside down – had negative equity – and now seven out of 10 homes are either at or below 100% LTV. But that still leaves a huge number of homes that have negative equity and folks struggling to make payments.’”
“Bradley Beal, president/CEO of the $719.7 million One Nevada Credit Union, pointed out that as of January, 38% of Nevada homeowners still owed more on their home than the value of the property. He called this estimate an improvement over the two-thirds figure Nevada saw a few years ago. ‘We’re gradually working our way out of it,’ Beal said.”
“The peak unemployment rate in Nevada was 13.9% in 2010, according to Dwight Johnston, chief economist at the California and Nevada Credit Union Leagues. ‘Nevada lost roughly 200,000 jobs in the recession and has recovered more than half of those lost jobs. The sector that created the deepest hole in the job market is also the slowest to recover. Total nonfarm payrolls in Nevada are still roughly 85,000 short of pre-recession levels. Of that total, the construction sector is short 83,000,’ he said.”
CBS on Arizona. “Phoenix is a lesson in housing abuse. From boom to bust, to recovery to relapse, Phoenix housing is forever rising and falling, and now it is falling again. The rest of the nation should take notice. Home prices fell 56 percent from their peak in the summer of 2006, bottoming out in 2011, according to the S&P/Case-Shiller Home Price Index. Foreclosures skyrocketed, and a new set of investors moved in to take advantage of the distress. They bought not to flip, but to rent, and they drove prices back up 45 percent from the bottom.”
“The trouble now is they priced themselves out of the market and left Phoenix housing to regular, mortgage-dependent buyers. These buyers are faced with tighter credit standards and a still recovering economy. Julia and Mike Lersch put their north Phoenix home on the market, listing it at $300,000. ‘Our real estate agent said it’s like fishing. You throw it in, and it’s like how deep do you need to get before it hits the fish?’ said Julia.”
“After 107 days and several price drops, they still had no bites, so they pulled it off the market. ‘We thought, ‘well I don’t want to sell it for a song,’ said Julia.”
“Affordability may be better than it was during the height of the housing boom, but the buyer mindset has clearly changed. ‘They’re still looking at it from a distressed property mindset, that they should be getting this great deal, whereas a lot of the folks like us that have been maintaining our properties well, we’re not just willing to give them away,’ said Mike Lersch.”
“‘The Phoenix market has been cold for a long time,’ said John Burns of John Burns Real Estate Consulting. ‘Fifty percent of builders last month dropped prices, including incentives. Demand is weak and weakening. Supply and affordability though is fine.’”
“Meanwhile builders are slowly coming back into play in Phoenix. The new homes are getting more attention than even recent builds, at least according to the Lersch’s. ‘We have a lot of new builds finally going in,’ said Mike Lersch. ‘So we’re really getting competition.’ His wife, Julia is concerned that there is not enough demand to support these new homes, as well as existing homes like hers that are slowly coming on to the market. There is also concern that investors in single-family rentals will begin to sell their properties, now that prices are higher.”
‘”I feel like Groundhog Day. We were overbuilding. Now I feel like they are overexpanding for what there is out there,’ worried Julia.”
‘Rio Rancho homes sold at a higher price in June compared to a year ago, but signs of a buyer’s market remain, according to recent reports from the Greater Albuquerque Association of Realtors.’
‘The median sales price for homes in the city was $159,181 in June 2014, up 9 percent from the same time last year, and down slightly from $162,000 in May of this year.’
‘The number of new listings went up, from 250 in June of last year to 285 last month. It was down a bit from 294 in May. Pending sales dropped 12 percent, from 188 in June 2013 to 166 last month.’
Hopefully all those dealers and cocktail waitresses are getting big tips, if they hope to buy a house in Vegas!
From the CU Times article above:
‘Schmidt also said he is optimistic about the future of Las Vegas. “When Las Vegas was at its peak, it was this huge bubble in terms of construction and people moving to town. Everything seemed to be inflated to an elevated level that was not normal, so when you try to compare now versus that peak, it’s going to take a long time to get back to that peak,” Schmidt said. “What I think is really encouraging is to see the amount of construction that’s going on.”
I found this:
‘Rob Salvino, an economist at Coastal Carolina University, noted there was a gain of 6,600 jobs statewide in leisure and hospitality during the month, most of which he said were along the Grand Strand.’
‘Salvino said that stable housing prices also helped the state, and the Grand Strand, to sidestep construction job losses seen elsewhere. He said that Las Vegas, for instance, saw construction jobs drop 18 percent as house prices rose 50 percent.’
‘Pat Dalrymple is a western Colorado native and has spent almost 50 years in mortgage lending and banking in the Roaring Fork Valley.’
‘In previous columns, I’ve said that it’s easier to get a home loan today than back in the Good ‘Ol Days. Some readers find that hard to believe and have asked for some elucidation.’
‘OK, here it is: In the early 1960s, if you didn’t have 20 or 30 percent of the sales price to put down, there were only two home loan options available, FHA and VA. If you weren’t a veteran, there was only one.’
‘There were no cash out refinances. If you had equity in your home, and wanted to convert it to liquidity, you got a second mortgage from a finance company, or an industrial bank, which was a finance company that took uninsured deposits. The rates were very high.’
‘Debt to income qualifying ratios were much more stringent. The percentage of the monthly housing expense to total monthly income couldn’t exceed 20 percent, and total debt, including housing expense, to monthly income had to be 25 percent or less. Today, the PITI (principal, interest, taxes and insurance) payment can be 28 percent of income while total debt to income, the so-called “back ratio,” can be as high as 42 percent.’
“…and total debt, including housing expense, to monthly income had to be 25 percent or less.” If this standard were brought back, there would be precious few mortgages given out.
why do they need humans do do morts?
Phoenix market is certainly feeling the pinch, tighter loans and
uncertainty continue to plagued new and resale’s.
Many grossly underwater houses were snap up, several houses that
went off market last month have reappeared as lender owned.
‘Home values in the Denver metro area have gone above and beyond their highest pre-recession levels…18.8 percent of the country remained in negative equity, according to Zillow, compared with 10.8 percent in the Denver area’
How can prices be at an all time high and 10% are underwater?
‘we’re not just willing to give them away’
It is Groundhog day!
Have you ever been to Aurora, CO? It’s like the Inland Empire with prairie dogs and tumbleweeds. That’s where many of the underwater loans are.
The Highlands, Washington Park, Cherry Creek, Capitol Hill, LoDo (lower downtown) are where the bubble is inflating the most.
what was the % of negative equity households in the 50’s and 60’s
before the great society “programs” kicked in.
Been a long time since I posted. Testing
I just want to weigh in on the reference to Stan Humphries.
He took us to the play-offs after an 0-4 start, never done before or since in the NFL. He got us to the bowl. We lost, but he plyed hurt. He was a tough no nonsense great that wasn’t pretty or a media favorite, but a guy that took the hits and gave it his all.
I am just so happy for him that he has found a job working for Zillow as Chief Economist.
NFL coach, Zillow economist. Samey-same!
“After 107 days and several price drops, they still had no bites, so they pulled it off the market. ‘We thought, ‘well I don’t want to sell it for a song,’ said Julia.”
If I had a dollar for every time I read this type of statement on the HBB I would be rich, rich, rich! However nobody’s handing out dollars for stupid statements uttered by the soon to be underwater.