July 31, 2014

A Big Rebound That Seems To Be Backfiring

The Denver Post reports from Colorado. “Richmond American Homes is breaking new ground in its Peoria Place community — but not in a way that some real estate agents and buyers like. The new development’s homeowners association limits rentals to 15 percent of homes in the community. Homes rented out must be on two-year leases and the HOA board must approve any tenants. ‘I am in the information-technology industry, and at any time, the job market could change,’ said Scott Stevens, who signed on the dotted line to buy a home at Peoria Place in March. If he relocated for work, Stevens said he would want to return to metro Denver at some point, which renting out his home would allow him to do.”

“During the housing downturn, many “accidental landlords” chose to rent their homes rather than sell a depreciated property at a loss. Renting bought time until the rebound came and avoided having to bring cash they didn’t have to a closing or ruin their credit scores in a short sale. Greenwood Village resident Richard Dhang said the restriction leaves him perplexed, given the drop that home prices suffered not that long ago. ‘What if a downturn happens and the housing market crashes? You can’t rent in that situation, and you can’t sell to investors,’ he said.”

The Salt Lake Tribune in Utah. “Home sales continued to slow along much of the Wasatch Front as rising prices, tighter lending and a lack of housing inventory pushed many would-be buyers to the sidelines. The latest report from the Salt Lake Board of Realtors marks the third consecutive quarter of home-sale declines for Utah’s most populous county — a slowdown that has persisted since the sizzling housing market in the summer of 2013 began to cool off.”

“The numbers led board officials to highlight what they called ‘affordability concerns’ in residential markets as prices inched upward in many locales. ‘Less inventory and rising home prices have caused some homebuyers to pull back or not qualify for a mortgage,’ said Angie Domichel Nelden, board president.”

Willcox Range News in Arizona. “Even though Arizona’s economy hit bottom four years ago, we’re still at least two years away from a full recovery, according to experts from the W. P. Carey School of Business at Arizona State University. Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School, talked about the housing market. While we’ve seen a good housing recovery in the Phoenix area since mid-2011, Orr said demand has really slowed down lately. Home-sales activity recently hit its second lowest level since1999, and prices have mostly flattened out, after rising 84 percent from the bottom median single-family-home sales price in May 2011.”

“‘Institutional investors have largely moved on to other housing markets in the country with more foreclosures and bigger bargains,’ Orr said. ‘Other buyers aren’t rushing in to fill the void.’”

CNBC on Nevada. “The Las Vegas housing market is in transition, from a situation where investors were swooping up distressed properties to a market of more traditional, owner-occupant sales. Prices in ‘Sin City’ bottomed in January 2012 at a median of $118,000 before rising at a record rate for 19 straight months until September 2013, when prices began to level off again, according to the Greater Las Vegas Association of Realtors.”

“Cash buyers made up 34.7 percent of sales in June, down from a peak of nearly 60 percent in February 2013. Cynthia Silver, a Las Vegas Realtor with Century 21 Martinez & Associates, said sales have slowed, putting buyers in a better position. ‘We have more inventory and we have fewer cash buyers here that are outbidding them and paying retail, so buyers are in a position to find a property they really want,as opposed to just buying what they can afford or what they can win a bid on,’ she said.”

“Fifty-seven percent of homes sold in Vegas are vacant, and nearly 30 percent of homeowners are still in a negative equity position.”

Vegas Inc in Nevada. “New home sales have plunged this year in Las Vegas as would-be buyers, saddled with credit woes, flat wages and sticker shock, can’t pay the high listing prices. The slowdown is denting Las Vegas’ fragile recovery and marks a sharp reversal from last year, when new-home sales and prices skyrocketed — a big rebound that now seems to be backfiring.”

“Builders were so confident that the market had healed that they’ve tried selling for big prices with little to no incentives, said Luxe International Realty owner Melissa Zimbelman. Now, at least some developers are slashing prices and offering buyers more perks, such as free upgrades. ‘Prices were going up by the week,’ Zimbelman said. ‘Builders had to back off.’”

“To boost sales, builders also are making more project pitches to real estate agents — hoping they steer clients to construction sites — and pumping up agents’ sales commissions from 2 to 3 percent of the purchase price to 5 to 8 percent, RE/MAX Extreme agent Tim Kiernan said. ‘They’re hurting right now,’ he said.”

“Even if they qualify for a loan, affording the down payment is sometimes impossible. Some 56 percent of households statewide are in a ‘persistent state of financial insecurity’ with little or no savings, the nonprofit Corporation for Enterprise Development has reported. What’s more, federal housing officials in January reduced the pool of potential buyers by drastically lowering the limit on mortgages they’d guarantee in Las Vegas, to $287,500 from $400,000 for the purchase of a single-family house. ‘That took a big chunk of folks out of the market,’ said Jeremy Parness, Las Vegas division president for Lennar Corp.”

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Comment by Ben Jones
2014-07-31 09:14:40

‘Nevada continued to lead the nation in mortgaged homes that remained seriously underwater during the second quarter of the year while Las Vegas was second among major metropolitan areas, RealtyTrac reported. RealtyTrac said 32 percent of the mortgaged homes in Nevada and 35 percent in Las Vegas had loans that were at least 25 percent higher than the estimated value of those properties.

‘The company found that 245,826 Nevada properties were seriously underwater while only 86,806 mortgaged homes had equity equal or greater than the remaining loan amount.’

‘RealtyTrac reported that 9.1 million homes remained seriously underwater nationally from April through June, representing 17 percent of all mortgaged residences.’

“Home price appreciation has slowed in the last few months in many of the markets with the most underwater homes, slowing the pace at which homeowners are recovering equity lost during the Great Recession,” RealtyTrac vice president Daren Blomquist said. “The average loan-to-value on the 9.1 million homes seriously underwater was 133 percent, and the average loan-to-value on the homes in foreclosure that are seriously underwater was 134 percent.”

Comment by Steadykat
2014-07-31 09:42:39

I stopped in Vegas this weekend for lunch after coming back from a wedding in Phoenix. The local free newspaper at the pizza place I was having lunch at was reporting that new home sales in the area 1Q 2014 vs 1Q 2013 were down 34 percent.

The bride at the Arizona wedding was a real estate agent. From what I could gather, listening to the after wedding conversations from her mostly female real estate friends, it appears that business has begun to slow considerably from last year.

The new couple have put an offer on a fairly new house in the Phoenix area and things seemed to be going well until the appraisal came in about $30k below the agreed to price. The couple told my wife and I that the house was “just too nice” to “give up” so they are going to figure out how to cover the difference.

My wife gave me the look and I took the hint and didn’t say a thing.

Comment by Housing Analyst
2014-07-31 10:19:17

“reporting that new home sales in the area 1Q 2014 vs 1Q 2013 were down 34 percent.”

This isn’t news. The data we post nearly daily has confirmed this for months now. This is about denial.

Comment by Mugsy
2014-08-01 03:36:01

The omly thing that will be “underwater” in 20 years will be the bag holders as Lake Meade may be empty:


Comment by Ben Jones
2014-07-31 09:16:01

‘Phoenix ranked fifth nationwide for foreclosures among major U.S. markets between May 2013 and May 2014, according to CoreLogic. The Valley had more than 9,700 foreclosure during the 12-month period, trailing only Atlanta, Tampa-St. Petersburg, Florida, Orlando and Chicago.’

‘Despite a falling foreclosure and delinquent mortgage rate, Phoenix still had more repossessed homes than Dallas, Los Angeles, Seattle and Washington.’

Comment by Ben Jones
2014-07-31 09:18:38

‘In Rio Rancho, 700 homes are in foreclosure or deserted, and the city’s residents are fed up. Neighbors to one of those homes said not only is it easy for kids to get inside, but the backyard is a mess.’

‘Neighbors worry these homes are turning into havens for criminals. They also fear neighborhoods will begin to resemble ghost towns. Deputy Mayor and city councilor Lonnie Clayton said a new task force is now watching out for distressed homes. He also wants to change city law and force mortgage companies to clean up homes, even if they’ve been empty for years.’

Comment by Ben Jones
2014-07-31 09:50:45

‘Nearly three years after passing an ordinance to keep foreclosed properties from becoming magnets for vandals and graffiti artists, Rio Rancho councilors say neighborhoods are still rife with neglected homes.’

‘In December 2011, councilors passed an ordinance requiring financial institutions that own foreclosed properties in Rio Rancho to register them with the city, maintain landscaping and secure the property from intruders. Violators are subject to citation into Municipal Court for a petty misdemeanor.’

‘In 2013, 645 properties were registered. To date, 284 have been registered this year, city spokesman Peter Wells said.’

Comment by Ben Jones
2014-07-31 09:23:07

‘More than 35 percent of Americans have debts and unpaid bills that have been reported to collection agencies, according to a study by the Urban Institute. Texas cities have a large share of their populations being reported to collection agencies: Dallas (44.3 percent); El Paso (44.4 percent), Houston (43.7 percent), McAllen (51.7 percent) and San Antonio (44.5 percent).’

‘Almost half of Las Vegas residents- many of whom bore the brunt of the housing bust that sparked the recession- have debt in collections. A few major factors appear to be driving the delinquencies, said Eric Salazar, the Texas and Florida manager for the credit counseling agency Greenpath.’

‘First, many of these workers have low-paying jobs in construction and services, in addition to minimal education on their finances. “There is not the income growth to save and they have to make survival decisions,” Salazar said. “You make the decision to pay for the roof over your head and to feed your family and that’s all you can afford to do.”

Comment by Ben Jones
2014-07-31 09:25:39

A letter to the editor:

‘According to the real estate section in the Sun-News, there are 1,400 houses for sale in Las Cruces. For years, houses in my neighborhood have been hard to sell and generally the sellers resort to renting them. With the glut of housing on the market why has the city rezoned the country club property for more housing?’

Comment by Ben Jones
2014-07-31 09:29:06

‘The suburbs aren’t the middle-class haven many imagine them to be as new numbers show 16.5 million suburban Americans are living beneath the poverty line.’

‘Colorado Springs is often included on lists of the best places to live in America thanks to its 250 days of sun a year, world-class ski resorts and relatively high home values. But over the last decade, its suburbs have attained a less honorable distinction: they’ve experienced some of the largest increases in suburban poverty rates.’

‘The suburbs surrounding Colorado Springs now have seven Census tracts with 20% or more residents in poverty, according to a report released by the Brookings Institution. In 2000, it had none. In those neighborhoods, 35% of residents are now considered to be below the poverty line, defined as a family of four making $23,492 or less in 2012.’

“We’ve seen this all over the state,” says Kathy Underhill of Hunger Free Colorado, a statewide anti-hunger organization, referring to the growth of suburban poverty. “But I think the American public has been slow to realize this transition from urban poverty to suburban poverty.”

Comment by AmazingRuss
2014-07-31 21:27:07

Maybe they’ll notice the transition from suburban to universal poverty.

Comment by Ben Jones
2014-07-31 09:30:55

‘Tucson’s recovery is lagging far behind the rest of the nation. A recent survey which uses several metrics, places Tucson at an unenviable 143 our of the largest 150 cities in America.’

‘It’s easy to put the blame on the housing industry and that’s likely the biggest reason. The city says in 2007 it issued about 2,400 permits for single family homes. Last year it was 350 and it’s on pace for about the same this year.’

‘There’s been no growth to fill the over capacity due to over building and high rate of foreclosures. A good, stable year is 700 to 1,000 but first the inventory must be reduced. When that will happen or even if that will happen, is only a guess.’

Comment by Mugsy
2014-08-01 03:38:52

So caring for seniors doesn’t pay enough for a federal style home in the hills? Whoda thunk it!

Comment by Ben Jones
2014-07-31 09:34:10

‘A nationwide finance-advisory firm targeting small businesses rates Glendale as among the largest U.S. cities still having the most trouble recovering from the Recession of 2008-2009 while giving Peoria a largely unfavorable evaluation as well.’

‘Several other Arizona cities were listed in the bottom 25, including Tucson at 143, Tempe at 141, Phoenix at 138 and Mesa at 135. Surprise was not listed, since its population is not among the nation’s 150 largest cities. The highest-rated Arizona city, Chandler, was ranked 91st.’

‘Glendale City Councilwoman Norma Alvarez felt her city’s ranking was justified. “The overall economic environment (here) is not good. We’ve been losing money. We all know we are low in funds and high in crime. I’m sure we would rate low,” she said.’

‘In Peoria, city spokesman Bo Larsen questioned the rankings’ accuracy.’

“We’ve had one of the best city budgets in the county. We are number one in terms of housing permits. Our real estate is booming. We came out of the recession with flying colors thanks to the mayor, (city) council and management. We’ve had a balanced budget and growth. Look at all the housing development going on, the growth in both permits and finished homes we’re seeing. The city continues to improve its streets. It’s hard to see where this survey ranks our city so low,” he said.’

Comment by Housing Analyst
2014-07-31 09:38:02

isn’t it strange how the media is always six months behind? these craters have been reforming since last fall- Everybody here knew it. We anticipate that a full blown housing recovery* will be in effect nationally by next spring.

*A “housing recovery” is falling housing prices to dramatically lower and more affordable levels by definition.

Comment by Ben Jones
2014-07-31 09:54:18

‘After a brief lull, lenders are again ramping up pressure on delinquent Las Vegas homeowners, a new report shows. The number of default notices filed in Clark County has climbed every month this year, from 194 in January to 735 in July as of Thursday, real estate tracking firm Auction Control Systems Ltd. reported today.’

‘The company expects almost 1,000 default notices to be filed this month and 2,000 notices monthly by the fourth quarter. Notices of default start the foreclosure process.’

‘In a news release, ACS chief economist Anthony Martin said the uptick indicates that lenders have adjusted to state Senate Bill 321, which took effect Oct. 1. Last year, lenders put more pressure on local homeowners before SB321 took effect, filing 3,761 notices in Clark County in September, and then backed off drastically, filing just 192 notices in October, according to Auction Control Systems.’

Comment by Ben Jones
2014-07-31 10:01:22

‘A bill to pave the way for a workforce housing project in Summit County ended its yearlong congressional journey shortly after 1 p.m. Friday, July 25, when President Barack Obama signed into law the Lake Hill Administrative Site Affordable Housing Act.’

‘The legislation, first carried by Rep. Jared Polis, D-Boulder, in the U.S. House of Representatives, and later by Sen. Mark Udall, D-Colo., in the Senate, conveys 40 acres of land from the U.S. Forest Service to Summit County.’

‘Summit County Commissioner Dan Gibbs said he’s going to try to buy the pen Obama used to sign the legislation, as well as a copy of the bill, to frame and hang in the courthouse.’

“I don’t know if that is even possible, but how cool would that be?” Gibbs said. “Man, oh man. What a great day for Summit County.”

Look at one of the photos for this. Empty forest as far as you can see. But here we have this guy, “oh thank you Mr Government, thank you for selling us our own land! Let me put up something on the wall hailing you magnificence!”

40 freaking acres? We should be forcing them to hand over millions and millions of acres.

Comment by iftheshoefits
2014-07-31 10:37:47

‘ a lack of housing inventory pushed many would-be buyers to the sidelines’

That lie is sure putting in overtime on the list of excuses this year, don’t you think?

At least I haven’t heard the weather blamed for the past 3-4 months.

Comment by Housing Analyst
2014-07-31 15:40:00

The lack of inventory lie is the most egregious lie out of all.

Comment by doom
2014-07-31 12:16:14

Sometimes people are just plain tired of buying anything including house buying, like everything in life even if you have the money you just want a break from it all, travel, have a good time, worry about it later.

Comment by rj chicago
2014-07-31 12:52:35

Greenwood Village resident Richard Dhang said the restriction leaves him perplexed, given the drop that home prices suffered not that long ago. ‘What if a downturn happens and the housing market crashes? You can’t rent in that situation, and you can’t sell to investors,’ he said.”

My comment on this: Bull pucky!!! Maybe Mr. Dhang can’t but there are many floating about. Why you ask….?
My family built a home in Greenwood - now I call it “Greed wood” Village back in yep - 1961 - dust and tumbleweeds back then - 4 houses on a well and dirt roads. Nice area of Denver. Just sold the old homestead in Jan of this year - family owned it all through the years including holding on for market recovery by renting the place for 2 years. Turned out to be a good strategy as the ‘value’ of the property - the land - (not the house on it) increased 33% in the ‘recovery’ of the last couple of years.
Given our history in the area I can say with certainty via long lived experience that the market on this place has oscillated much over that 53 year span - but NOTHING like recent years. The cost relative to value is just distorted. The thought of renting SFR in Greenwood Village was utterly unheard of 10 years ago - and now - more and more the case and even the discussion of renting as Mr. Dhang notes in the quote above would never have been published until recently. There are investors invading the Village more and more as they are looking at scrapes, subdividing the few remaining large parcels etc. to turn a profit. All one needs to do in that area is drive around and do a bit of research on houses the have been ‘turned’ several times in the last 10 years or so.
Things have changed ALOT - not for the better - We aren’t in KS anymore Toto.

Comment by Ben Jones
2014-07-31 12:55:26

In the article some of the buyers are a little mad about this rule, but are going to stay in because prices are already up 5-7%. It is bizarre that some of these people are eyeing a bust, even as they try to cash in.

Comment by rj chicago
2014-07-31 13:21:51

I am new to this particular site - been reading Ritholz for years but just discovered your site - like the posts on regions of the country alot. Mark Hanson has also been a good source and seems you guys ‘get it’ as it were.

In ref to your comment: This is part of the distortion I am referring to above in my comment. I find this whole stinking housing market just frustrating and perplexing for this very reason. Greed has just toxified people’s minds.
As for me I want to move back to the Co Spgs / Castle Rock area after being in the armpit called Chicago for near 30 years and I just don’t trust anything going on there right now. The value relative to cost is just outrageous from what I have seen and visited there in CO. I imagine this is taking place all over the country.
Thanks - keep up the good work.

Comment by Housing Analyst
2014-07-31 15:09:01

Considering you live in RealtLiarTown, do you constantly feel like taking a shower no matter how clean you are?

(Comments wont nest below this level)
Comment by azdude
2014-07-31 17:02:39


Comment by Housing Analyst
2014-07-31 17:52:20

Paso Robles, CA Housing Prices Crumble 26% YoY As Excess Empty Inventory Hits The Market


Comment by Mugsy
2014-08-01 03:31:30

Sing along with me HBB’ers. You know the melody:

I’m leaving Las Vegas
Lights so bright, palm sweat, blackjack on a Saturday night
Leaving Las Vegas
Leaving for good, for good
I’m leaving for good
I’m leaving for good

Used to be I could drive up to Barstow for the night
Find some crossroad trucker to demonstrate his might
These days it seems that nowhere is far enough away
So I’m leaving Las Vegas today

Leaving Las Vegas
Lights so bright, blackjack on a Saturday night
I’m leaving Las Vegas
I’m leaving for good, I’m leaving for good
For good

I’m standing in the middle of the desert
Waiting for my ship to come in
But now no Joker, no Jack, no King
Can take this loser hand and, and make it win

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