The Housing Bubble

The Orange County Register reports from California. “Mike Shapiro has an uneasy feeling, one that’s refreshingly surprising for a real estate brokerage owner coming off a record month. Shapiro is chairman of Hom Sotheby’s International Realty, a Newport Beach-based operation with a network of upscale-oriented brokerages stretching from Los Angeles’ Westside through Orange County’s beach towns and out to Palm Springs’ desert enclaves. In June, Hom agents sold a company-best $325 million in property. Shapiro is stunned that it looks like July’s projected closings will be roughly half that sum. One month doesn’t make a trend, he notes. But the sharp drop, paralleling other hints at economic anxiety, is, if nothing else, thought-provoking.”

“Shapiro, who in a previous career traded stocks, wonders if recent skittishness among Wall Street traders bubbled over into real estate. ‘Something is up … I don’t know what,’ the 51-year-old executive says.”

The Union Tribune. “Q: Halfway through 2014, what has surprised you so far in the housing market? Bill Davidson, president of Davidson Communities: ‘This recession has been unlike any economic downturn I’ve experienced in my career. The housing market has traditionally led the recovery. The traits and values of today’s Millennials are different from previous generations, in direct response to this disastrous recession. Not committing early to family formations, trouble finding good paying jobs, and, after witnessing what happened to their parents since December 2007, they’re skeptical of real estate. They are staying flexible, free and cautious.’”

“Kurt Wannebo, real estate broker and CEO of San Diego Real Estate and Investments: ‘The slowdown in sales and appreciation were all predicted factors, as we knew that investors would be leaving the market as foreclosures dried up, and sellers with equity who were waiting things out would start to flood the market, slowing the growing prices.’”

The Los Angeles Daily News. “It was supposed to be a breakout year for home sales. But after years of recession that bulldozed the Inland Empire housing market, there are still glitches in the road to recovery. The first quarter of the year looked promising, but it has come to full stop, said Redlands Realtor Perrie Mundy, a 30-year industry veteran, primarily because people are still worried about keeping their jobs. ‘It’s just at a standstill. We have no inventory,’ she said. ‘I think there is just so much uncertainty in our whole economic picture. Everyone wants it (the market) to be healthy and march along but there is a lot of uncertainty and people are wondering if they are going to have jobs tomorrow.’”

“Paul Herrera, government affairs director for the Riverside-based Inland Valleys Association of Realtors, believes the market is still adjusting to changes over the last year. ‘I think a year ago you had a lot of buyers who were ready and willing but were getting outbid by investors but that is no longer the case,’ he said. ‘The scenario of having a dozen or 20 or 30 offers come in on a home is gone. The price increase has stopped.’”

The Desert Sun. “Once-soaring price gains for single-family homes slumped in June across the Coachella Valley, two housing reports show. The rapid price appreciation during the first five months — jumping as high as 20 percent from the year before – ended its streak amid a tight inventory and fewer sales in June. The median price of single-family homes sold in the nine desert cities was $382,400, according to the Palm Desert-based California Desert Association of Realtors, which tracks properties through its MLS. That’s a 1.7 percent drop from the $389,000 in June 2013.”

“‘The market will correct itself, and that’s what we’ve been going through,’ said Mark Hilgenberg, a Keller Williams agent based in Rancho Mirage. ‘You will see prices rise, but not at the rate that they did.’”

From SCV News. “The median single-family home price in the Santa Clarita Valley dipped slightly in June to $481,000 from $485,000 in May, but the figure was still well ahead of last June’s $430,000. ‘I expect prices to keep moving up, but not at the double-digit pace seen last year,’ said Jim Link, CEO of the Southland Regional Association of Realtors.”

“Sales were somewhat more sluggish than Realtors tended to expect. ‘Pricing the property correctly is the key to a quick sale,’ said Nancy Starczyk, president of the Realtor group’s SCV Division. ‘Homes are taking longer to sell now, buyers are much more selective, and the pool of prospective buyers shrinks as prices move higher. The market is highly competitive.’”

“Some sellers have come out of the woodwork, though. As of June 30 there were 706 homes listed for sale on SRAR’s MLS, that’s 65 percent more than a year ago.”

The Signal. “Home sales sputtered slightly in June, although the increasing number of existing homes listed for sale are beginning to pull the Santa Clarita Valley out of the ‘inventory drought’ it had been in during the recession. Increased inventory is giving buyers slightly more leverage to negotiate. ‘Sellers have tried to continue the rise in prices from last year and there is some ‘push back’ in the market, meaning the buyers overall are not biting at the higher prices,’ said Dwight Hawkins with Realty Executives.”

“In the past seven days there were 100 new listings and 110 prices changes, and all sales prices went down except on 17 homes, Hawkins said. ‘We are seeing more inventory than has been on the market for a while in the SCV cities,’ said Connor MacIvor with Re/Max.”

“Other factors slowing home sales in June include fewer buyers qualifying as a result of stricter lending requirements, and appraisals still coming in too low to match the seller’s listing prices, said Bob Khalsa with United American Realty. The conservative appraisal is causing some blowback, Hawkins said. It causes some homes to have to go back on the market when a buyer’s lender won’t approve a loan at the agreed-upon sales price. ‘The appraisal comes in low and sometimes the seller and buyer will negotiate again,’ he said. ‘The sellers want the buyers to bring in money over the appraisal, and sometimes they can’t come to terms.’”

“One sales number did spike, however, and that was for properties listed as a short sale. Unlike a traditional home sale, in a short sales the seller owes more on the mortgage than the home is worth on today’s market. Short sales jumped to 9.1 percent of the total sales in June, up from 4.6 percent in May.”

“‘We are now seeing those who have been trying to hang on to their homes by the tips of their fingers losing their grip and finally short-selling,’ said Sam Heller with Keller Williams VIP Properties. ‘They (the sellers) tried to wait for the market to come up to cover their current mortgage amount, plus cover selling closing costs. Although the rise in prices was faster than many expected, they were not fast enough or high enough to save everyone.’”