HBB Snapshot
I’ve been running into a problem due to my schedule and the news flow. It’s that I find many interesting housing bubble related articles, but not enough to create a typical HHB post. Then time goes on and I end up putting 40 or more links into the desk clearing post, even while I may not have weekday posts. So I’ve decided to try a snapshot of what I find most interesting on any particular day. I’ll keep it around 6 links, and call it the HBB Snapshot.
The Credit Union Times. “Investors may be pouring less cash into houses, according to RealtyTrac. Matt Kershaw, VP for sales and mortgage lending for the $531 million Clark County Credit Union, said his Las Vegas institution has booked about $15 million in purchase money loans so far in 2014 and that this is about 30% less than last year. CCCU has seen investor activity peak and then retreat, Kershaw said. ‘It was a more substantial problem during 2012 and 2013, but during 2014 the cash investor has backed out of the market,’ he said.”
“Don Genevie, SVP for real estate and business lending at the $2 billion Grow Financial Federal Credit Union, reported the Tampa, Fla., institution had seen cash investors have an impact on the home aspirations of some of its 174,000 members in 2013, but the pressure had diminished somewhat. ‘I’ve been doing this 38 years, and I have never seen a market quite like this one,’ Genevie said, noting that cash investor pressure had been felt across the state and that the credit union had adopted things like commitment-to-buy letters to help a credit union member compete in bidding battles.”
“Genevie said investors had purchased so much of the existing housing stock in Tampa, the credit union worried about what might happen if the rental market began to fail, adding that he worried about whether many of the investors might conclude they need to liquidate the investment and put all their homes on the market at once. Genevie acknowledged such mass marketing would be against the investors’ own interest by driving prices down further, but there was no way of knowing what legal or organizational structures underpinned some of the investor groups that had purchased so much housing. ‘If a partnership fails or if something else happens, they could wind up selling quickly,’ he said.”
“‘The smart thing to do would be for them to release their housing a little bit at a time,’ Genevie said. ‘If they did that and released enough to move increase our housing stock to a six months’ supply, they would still make money.’”
The Arizona Republic. “New-home prices across metro Phoenix soared too high and too fast in 2012 and 2013 for many buyers to handle, leading to a slump in sales that has builders worried. Home prices have dropped slightly this summer, and builders are trying to lure buyers by offering incentives that include lower mortgage rates and free upgrades on appliances, countertops, lighting and flooring. Norm Nicholls, president of Fulton Homes, said builders have learned a tough economic lesson over the past several months. The generous incentives are one approach to attracting buyers again.”
“‘Builders are being much more aggressive with incentives to bring in buyers who have been holding off,’ he said. ‘We brought new-home prices up so hard and fast in the Valley. The past 11 months have been pretty desperate for the area’s new-home market.’”
“‘Everyone in Valley homebuilding got excited 24 months ago when the market started to show the first signs of a recovery,’ said Matthew Cody, president of Scottsdale-based Cachet Homes. ‘Big investors bought land, and prices climbed. It was all premature.’”
The Portland Business Journal in Oregon. “Data from real estate buyer Gorilla Capital suggested that the Oregon housing market will be slower to recover due to a large number of foreclosure filings that have yet to be resolved. Changes to Oregon’s mediation law prompted a flood of requests for face-to-face meetings between lenders and homeowners with delinquent mortgages, slowing down foreclosures. ‘When you’re behind on your mortgage payments by 20 to 30 months, it’s really hard to catch up,’ said John Helmick, the CEO of Gorilla Capital. ‘I wonder if people would have been better of having the foreclosure and a fresh start.’”
“Helmick said that of the homes his company researched, 87 percent were vacant when they were foreclosed upon. In most cases, the owners had long ago moved on with their lives. ‘These zombie homes are sucking the values out of neighborhoods,’ said Helmick. ‘Having a process that takes two or three years is nuts. We need to have a fast-track system for homes that are vacant. They are a blight on neighborhoods.’”
The Herald Mail in Maryland. “More than five years since the nation’s recession ended, the number of Washington County properties being hit by some sort of new foreclosure action — mortgage default notice, scheduled auction or bank repossession — has increased again. In the Tri-State, 12 percent were in such trouble in Franklin County, Pa., and 10 percent were ’seriously underwater’ in Jefferson County, RealtyTrac said. Maryland posted the nation’s second-highest state foreclosure rate in July, for the sixth straight month, RealtyTrac said.”
“Of those homeowners who meet with counselors, there are new clients ‘and we also have repeat ones,’ said Hagerstown Home Store Director Vicki Bender. The repeats ‘may have gotten a (loan) modification three years ago and even though our counselors went over that with them and did a budget with them, (such clients) are coming back to try to go get another modification,’ she said.”
“‘Usually, they don’t get another one’ because their lender has already tried to give them a break, by lowering their mortgage’s interest rate so their monthly payments are more affordable, Bender said. It’s frustrating ‘because we really shouldn’t have any repeats,’ she said. The loan is modified and a personal budget plan is worked out so that the homeowner can keep his or her home, she said. While working with the counselors, the borrowers are saying ‘like, ‘Yeah, we’ll do that,’ Bender said. ‘Yet (when they come back as a repeat client), we go over their finances and you see they haven’t curbed any of their expenses.’”
From CNET. “As tensions in San Francisco between the tech haves and the resident have-nots erupt in public disputes, entrepreneurs are realizing a lean startup can grow anywhere. The added incentive for nabbing talent outside the main tech hubs: Companies can get top smarts on the cheap. And lower salaries mean lower overhead, which eases the pressure to raise money. For Robbie Allen, CEO of Automated Insights, a house hunt in Silicon Valley, a region between San Francisco and San Jose, changed his thinking about California.”
“‘We kept driving and driving, and the neighborhood became seedier and seedier. It was a million-dollar home and we wouldn’t get out of that car,’ he said. ‘That did it. With that kind of money in North Carolina, you can live in style.’”
“The added incentive for nabbing talent outside the main tech hubs: Companies can get top smarts on the cheap. And lower salaries mean lower overhead, which eases the pressure to raise money. ‘We can pay them half to a third as much as you have to pay in New York,’ Allen said.”
The Associated Press. “Bank of America’s record $16.65 billion settlement for its role in selling shoddy mortgage bonds — $7 billion of it geared for consumer relief — offers a glint of hope for desperate homeowners. But consumer advocates say relatively few people will be helped relative to the devastation triggered by the mortgage bonds. Only a fraction of homeowners would be eligible for refinancing under the settlement. And the process by which people would qualify and receive aid could drag on for years, with payouts set to be completed as late as 2018.”
“Monnette Holland had been anxiously waiting the settlement, wondering if it might save her four-bedroom home in Franklin, Virginia. Holland had refinanced her house in 2006 with Countrywide, a firm that was later bought by Bank of America. Holland used the proceeds from the refinancing to pay off auto loans and install a new roof and windows. But then her husband was forced into an early retirement at a paper mill. And Holland had to go on disability. The couple tried and failed several times to modify their mortgage, only to learn that its owner kept changing.”
“As an alternative to foreclosure, Holland listed her house — worth $270,000 at its peak — for less than $90,000 in a short sale. A buyer made an offer just days before the Justice Department settlement was announced Thursday. ‘It has been a nightmare,’ she said. ‘I was hoping that we could keep our home.”
This is a better flow, Ben. More threads means more discussion. And you are the arbiter of what a “typical” post is.
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he worried about whether many of the investors might conclude they need to liquidate the investment and put all their homes on the market at once. …there was no way of knowing what legal or organizational structures underpinned some of the investor groups that had purchased so much housing
For many investments, low profits trigger an automatic sell order. If that happens to these investors, no one’s going to be promising to feed any squirrels. To stave off the bottomless stockholder maw, investors would have to sell their 2009-2010 purchases first for the best profit and count on RBS for the rest. If their profit models which incorporate a 5% rental increase each year, good luck to them.
“Investors may be pouring less cash into houses, according to RealtyTrac. Matt Kershaw, VP for sales and mortgage lending for the $531 million Clark County Credit Union, said his Las Vegas institution has booked about $15 million in purchase money loans so far in 2014 and that this is about 30% less than last year. CCCU has seen investor activity peak and then retreat, Kershaw said. ‘It was a more substantial problem during 2012 and 2013, but during 2014 the cash investor has backed out of the market,’ he said.”
Cash Investor = Somebody who has access to huge piles of OPM.
A cash investor is going to treat the handling (and the spending) of other people’s money a wee bit differently than if it was his own money he was handling.
If it is his own money he is handling then he gets to benefit directly from a price gain (if any). If it is somebody else’s money the he gets to benefit directly from extracting fees - he gets to extract fees whether there is a price gain or not.
Part of the allure of enticing others to handing over their money to you for managing is the nifty track record you have established.
(Note: track record = rising prices of assets you are handling)
And this nifty track record of rising prices (and thus rising values) is something you yourself can establish if you can corner a market, and in real estate this something you can easily do because all real estate is local and all real estate is fixed to where it is located and the people who are also fixed where the real estate is located will be rooting for you.
Think about this: If you were able to raise the price of food or gasoline or just abut anything else the people who lived near you would be highly pissed. But if you were able to raise the price of real estate then the people who lived near you would be ecstatic because you would be acting in a fashion that just may save their financial a$$es. And governments too: Raise the price of real estate and you will solve a lot of revenue problems for various governments.
So you will get to enjoy a lot of support and little opposition while you are extracting some hefty fees from the OPM pile.
For a while, at least. At the end of it all you may get run out of town but in the meantime you get to take your fees and once these fees are taken they are rarely given back.
IOW, as long as the music is playing you just might as well keep dancing.
It’s like rap music.
If the market is behaving in a way that has never been seen over the previous 38 years, could this be a sign that end-user buyers are at particularly great risk of losing their shirts by competing in bidding wars with the fly-by-night all-cash investor crowd?
“‘The smart thing to do would be for them to release their housing a little bit at a time,’ Genevie said. ‘If they did that and released enough to move increase our housing stock to a six months’ supply, they would still make money.’”
Could this be done without collusion to fix prices, in stark violation of the Sherman Antitrust Act?
This is not collusion to fix prices. This is an independent decision to list or not to list depending on publicly known market conditions.
It’s a moot point anyway. Sherman Antitrust is almost never enforced and they know it.
But the decision would have to be made at the same time, in the same way, by a bunch of different companies. Can the HBB get together and sue these companies for harming our wallets?
“Helmick said that of the homes his company researched, 87 percent were vacant when they were foreclosed upon. In most cases, the owners had long ago moved on with their lives. ‘These zombie homes are sucking the values out of neighborhoods,’ said Helmick. ‘Having a process that takes two or three years is nuts. We need to have a fast-track system for homes that are vacant. They are a blight on neighborhoods.’”
This has been an ongoing issue in neighborhoods dotting the US landscape for how many years already?
‘While the economy seems to be picking up, there still are plenty of reminders about just how bad things were. One of them is next door to Roger and Pam Smith in Bethlehem.’
‘The other half of their twin home on High Street has been empty since 2009. Each winter since, the Smiths have shoveled the sidewalk. In the summer, the Smiths have trimmed the front hedges. They’ve even paid to clean the home’s clogged gutters to keep water from cascading onto their doorstep.’
‘City records show the health and inspections bureaus sent Colon seven violation notices between 2007 and 2012 regarding trash accumulation, weeds and the maintenance of the exterior of her property. Court records show the city also cited Colon 12 times from 2008 to 2010 for weeds and rubbish issues. Those citations were dismissed, though, because they languished in the court system and were inactive for two years.’
‘Palos told me getting to the bottom of whom to hold accountable for properties like this isn’t easy, with mortgages being sold repeatedly. I understand his frustration after getting passed around by the banks involved with this property.’
‘Bank of New York Mellon told me it is just the trustee for bundled mortgages sold to investors, and Bank of America is the mortgage holder. Bank of America told me the property is the responsibility of Select Portfolio Servicing, which did not return my call.’
‘Smith hadn’t gotten anywhere with the banks, either. That’s why he turned to the city and then to the Watchdog. In situations like this, it unfortunately becomes the burden of the local government to keep a vacant property from becoming a nuisance.’
‘Bethlehem is not alone in dealing with this problem. I’ve written about similar situations in South Whitehall and Lynn townships.’
“twin home” aka duplex
SFH nabes are very ghetto compared to multiple unit dwelling rentals (we call these “apartments” out west. I understand some cities on the east coast include apartments as possible places that you buy.)
whac it just surprises me how little people know about the internet. A few minutes with google would turn up bens blog.
A little reading for a week would have make it clear the bank doesn’t want your home so why leave?
There’s a home 3 blocks from me that’s been vacant for around 3 years. Earlier in the Summer a company came by and covered the roof in think, black plastic nailed down with strips of wood. It looks great.
“As an alternative to foreclosure, Holland listed her house — worth $270,000 at its peak — for less than $90,000 in a short sale. A buyer made an offer just days before the Justice Department settlement was announced Thursday. ‘It has been a nightmare,’ she said. ‘I was hoping that we could keep our home.”
It does sound nightmarish to realize that your Franklin, Virginia home has lost 2/3 of its value off peak bubble prices. Who knew that Franklin, Virginia, which is an hour’s drive from anywhere notable, was one of the Housing Bubble’s ‘ground zeros’?
I like it Ben…..
It’s going to have to be like this sometimes. For instance, I just got back from a 3 day trip, and I get an email this morning putting me in a situation where I probably have to leave for a 2 day trip tomorrow morning.
I still like the state/regional post style the best. But if I’m short on time or internet access, those are difficult to pull off. Meanwhile, I see interesting reports all the time, and end up posting them in the comments here and there. Anyhoo, we’ll see if this fits in.
Also from the Az article:
“RL Brown Housing Reports is projecting that 11,800 homes will be built in 2014, down almost 8 percent from last year. In 2006, at the peak of the housing boom, 60,000 houses were built in metro Phoenix.”
Let that sink in. Housing has not recovered.
What happened to prices in the 2 years after the last time builders saw a 5 median price drop and began tossing in all these incentives. Anyone who buys now is a moron.
‘Sales of new U.S. single-family homes fell for a second straight month in July, but a surge in the stock of properties on the market and a moderation in price increases should help to stimulate demand in the months ahead.’
‘The inventory of new houses on the market increased 4.1 percent to 205,000 units, the highest since August 2010. At July’s sales pace it would take 6.0 months to clear the supply of houses on the market. That was the highest since October 2011 and compared to 5.6 months in June.’
‘Six months’ supply is normally considered a healthy balance between supply and demand.’
‘Business continues to slump for Las Vegas homebuilders. Local developers sold 499 new homes last month, down 23 percent from July 2013, according to a report out today from Las Vegas-based Home Builders Research.’
‘The median sales price last month was $290,000, up 9 percent from a year earlier but down 3 percent from January.’
‘Despite the slowdown, builders are steadily pulling more construction permits for new homes. They pulled 791 permits last month, up 76 percent from January, Home Builders Research found.’
‘One issue crimping sales: Federal housing officials in January slashed 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. Citing a national housing rebound and uptick in private lending, they slashed the Federal Housing Administration-backed loans nationwide.’
‘That did it. With that kind of money in North Carolina, you can live in style.’”
‘We can pay them half to a third as much as you have to pay in New York,’ Allen said.”
I get it Mr. Allen….North Carolina has cheaper housing but your statements are contradictory…Those people that you are transferring there won’t have “that kind of money” anymore because they don’t work in SF or NY….So, when you pay them 1/2 as much in income they will need less expensive housing to make a go of it…
Seems to me that your company is the big winner…Employee is the one making the sacrifice you are pushing the same product out the door at 1/2 the payroll cost…
To reinterate, I do “get it”…Housing cost are incredibly expensive in the valley all the way up to SF….With that said, this guy Allan is a start up company…30 employees…IMO, he is not moving his company out of “Choice” for his company and employees, he is moving it out of necessity to be able to give his start up the best chance for success on limited funding….
The office of Automated Insights, a 30-employee startup based in North Carolina, overlooks the baseball stadium for the Durham Bulls. The company lists free Bulls games from the “porch” as a job perk when hiring, as well as free lunches and take-it-when-you-need-it vacation”
He’s acting rationally. Unlike someone who would pay a million for a house in a scary neighborhood. So why would a person buy that house? Only because they believed it could be sold for $1.5 million later.
‘Seems to me that your company is the big winner…Employee is the one making the sacrifice you are pushing the same product out the door at 1/2 the payroll cost…’
I’ve heard that the tech companies like to be near each other. The Research Triangle will keep growing. I used to live down there. Miserable humidity drove me away.
So, when you pay them 1/2 as much in income they will need less expensive housing to make a go of it…
But you can get a house in metro Raleigh for much less than half the price of a Silly Valley crap shack.
The real question is where do the young, pretty and smart things want to live. Sure, raising a family in NC is far more feasible, but is that even on their radar?
Don’t move to ILL ANNOY and if you do “Beware all ye who enter here!”
http://www.thumbtack.com/il/#/2014/1
California: D worsening since 2013.
http://www.thumbtack.com/ca/#/2014/1
‘American Honda’s top sales executive turned heads last week with a grim warning — doing “stupid things” now to juice sales could mean big trouble later. Except that John Mendel’s sense of alarm isn’t shared by some of Honda’s biggest rivals, and there are no signs they’ll back off from the kinds of actions that Mendel finds so troubling.’
‘Mendel, the dean of U.S. import executives, had harsh words for rivals that are increasingly luring customers with seven-year loans, courting riskier subprime buyers and shipping larger percentages of their vehicles to rental-car lots.’
“It’s a very, very short-term tactic,” he said, “especially in the subprime area, because you not only are pulling sales forward, you’re probably pulling people out of used cars into a new car that maybe they can’t afford.”
‘But others say they see no reason to be concerned. “There’s been a trend toward longer-term financing, but it’s been paired with low cost of credit and improving residual values,” GM spokesman Jim Cain said. “People are making very rational decisions to buy the vehicle they really want to buy and take advantage of historically low interest rates for as long as they can. We don’t see cause for alarm right now; in fact, we think the industry is very healthy.”
‘GM is offering 0 percent financing for 72 months on many 2014 Chevrolets as part of its Labor Day promotion and 0 percent for 84 months on most 2014 models in Canada. Ford, Nissan and Volkswagen also have 0-for-72 deals right now, and some dealers are using 84 months as the default term when calculating monthly payments in their advertisements.’
‘Mendel, the dean of U.S. import executives, had harsh words for rivals that are increasingly luring customers with seven-year loans, courting riskier subprime buyers and shipping larger percentages of their vehicles to rental-car lots.’
Does it matter as long as Honda’s finance arm isn’t doing the financing? It seems to me that plenty of banks are willing to make these loans.
It does if the looser terms convince the customer to buy something that’s not a Honda.
‘In dealership financing — another common type of vehicle financing — you get financing through the dealership. You and a dealer enter into a contract where you buy a vehicle and agree to pay, over a period of time, the amount financed plus a finance charge. The dealer may retain the contract, but typically sells it to a bank, finance company or credit union — called an assignee — that services the account and collects your payments.’
I don’t watch a lot of TV- primarily because most of it is abysmal, repulsive horseshit- but last night there was an advertisement for a local Ford dealership and they went out of their way to explicitly point out that Ford never took a gov’t bailout. Has this been going on for long and is it widespread?
Ford was bragging I think even before the bailout of GM. And lots of Real Murkins bought Ford precisely for that reason. Ford’s only real accomplishment was that they borrowed money for their own bailout before their finances got too bad. GM waited until it was too late.
When I worked in indirect auto finance for TARP bank, the dealerships would often ink the deal, then shop the loan to a few different banks. The loan packages usually landed on our desks 2-3 days after the sale.
The dealerships all received rate sheets from the major lenders (with various incentives/terms) and so had some wiggle room to make the sale and ink the deal before actually securing the financing. This was 8 years ago so don’t know if it’s different now.
Goon:
A year and some months ago, I drove my new Toyota home with “contigent” financing at 0% interest, having paid nothing at all. I just signed a paper promising to return the car if the deal fell through.
Eh. Bury ‘em in auto debt on top of their student debt. The poor sap realtors will never get their crack any longer. Boo hoo.
Mr Banker will do fine, just another type of gov-backed loan to him
Dang, I thought I got a good deal with 0% for 60 months on a Toyota. Of course the Chevy might not last for 72 months, but I’m just saying.
‘You Thought the Mortgage Crisis Was Over? It’s About to Flare Up Again’
“Many homeowners who fought their way through a broken system and got a modification did not get one that is satisfactory or sustainable,” said Kevin Whelan, National Campaign Director for the Home Defenders League. “One homeowner told me, ‘It’s more like I got a reprieve from a death sentence than a pardon.’”
I like the new snapshot! The region-specific old posts were great too, but maybe juxtaposing different region stories as they come in is a chance to draw new parallels.
Question, Ben: Do you remember having this news flow problem during the last bubble?
You said that lately there were “not enough [stories] to create a typical HHB post,” and I’ve noticed that a lot of journalists are writing the same story over and over, as we seem to be stuck at a temporary housing plateau. Did this also happen around 06/07, or is the reduced newsflow unique to the rebubble?
Editors don’t like to run negative real estate ads, so they clam up a bit when things turn down. But if you look at my original blog, I often would have a post with one link, if that. News was that sparse in 2005. I would usually dig around in builder financials or rating agency PDF’s back then too, looking for any clue as to what was really happening.
I send stories from here and elsewhere to a local Vegas RE radio show whose host who jokes that he should put me on the payroll for doing show prep. The guys on that show are fairly honest because they do warn people about buying and encourage owners to sell now because they probably won’t do better; the fall will bring, well, a fall. What kills me is they will read the articles and discuss the market in solemn tones and still end with “it’s a great time to buy”.
I just got back from looking at a rental. It’s $1,300 (zestymates and others value it at $165K), 2000 sq. ft., no garage, messy and needing many small repairs. The attitude of these property managers needs improvement, too. It’s still take it and leave it.
I thought it was a good sign that a few weeks ago that the Las Vegas Review Journal disappeared the “Housing” link from its position directly under “Business”. It’s still there as a category but no direct link can be found.
I was in N LV this weekend. A UHS was showing me this foreclosure, and mentioned an app they have. He opened it and it shows all the houses on the MLS right around that exact location. There were dozens, and it also showed price changes. Every single one on the screen had a price reduction.
Two houses around me both went pending ($200 and 225K), ridiculous for this ghetto-lite area. I turned down my LL’s offer of $150K in 2012. If there isn’t a downturn, it will be a terrible blow to my self esteem
At the very least, there will be a growing rental glut, “so I’ve got that goin’ for me, which is nice.”
three day trip… North LV this weekend.
If you think of North Las Vegas as a three day trip, then you probably didn’t transplant to the Vegas area. Yet you were posting like a fiend this weekend. So I can assume you weren’t driving hours upon hours. Bus or train? It’s hard to get any distance on those for a three day trip and you’re better off driving. So ISTM that you are either a relatively short drive from Vegas (Tahoe?) which would give you time to post, or you are flying around and you post in the airports. Or you chartered your own plane and chauffeur. :mrgrin: But if you’re not relocated to Vegas, then why are you looking at foreclosures there? So we’re still no closer to your new location.
Very interesting, and thanks for the response. I guess the bad news has to be so overwhelmingly noticeable that the papers can’t ignore it any longer for the number of articles to go back up.
I’ll have to peruse the archives from ‘05/’06. When I look at old posts, its usually from around ‘09 - it’s therapeutic to remember when prices were in a freefall down rather than a volumeless melt up!
We just realized that every house we’ve looked at in the past three months has sold for over $1M, regardless of neighborhood (from “don’t walk alone” to nice but not spectacular). One was a glorified shack, all needed some work, but there seemed to be no relationship between size of house, condition, or location and sales price.
We had no idea there were so many wealthy people who wanted to live here AND who would offer $100K -$500K over the asking price for homes that don’t even have views. It is the psychology (what’s a million dollars?) as much as the wealth that amazes us.
^lolz
Colleague who lives up the street from me in OC, discussed his weekend trip to the South Bay and Venice areas. He said he and his wife went into Venice for breakfast and were kind of concerned because of how run down it was. Then he said those are $million dollar house neighborhoods.
$1 million to live in a shack. But you pay $1 million to be right by the ocean where the bikini girls are.
…then he and his wife returned to their $700,000 shack up the road from where I pay $1350 per month rent
Where do you live?