Many Homeowners Expect Values To Keep Soaring
The Orlando Sentinel reports from Florida. “Orlando’s housing market ranked fifth for year-over-year improvement among top U.S. metro areas but the shorter-term picture for the region showed softening, according to a new report by Freddie Mac. ‘The Orlando housing market is weak and declining,’ stated a report on Freddie Mac’s Multi-Index Market Indicator. Orlando continues to lag far behind nationally in terms of homeowners paying their mortgage on time. Of the mortgaged homes within the Orlando area, only 30 percent had been paid on time by homeowners. Nationally, homeowners’ rate of keeping current on mortgage payment was more than double Orlando’s rate.”
The Boston Globe in Massachusetts. “The median selling price of a Massachusetts single-family home fell last month on a year-to-year comparison basis for the first time since September 2012, the Warren Group reported. ‘Massachusetts is a high cost housing market, and the trend throughout the year has been increasing prices, so seeing prices stabilize is good for the market and good for buyers,’ Massachusetts Association of Realtors president Peter Ruffini said in a statement.”
The Dallas Morning News in Texas. “Dallas-area prices are now about 30 percent ahead of where they were at the worst of the housing bust in early 2009. But the rate of increase is slowing. Dallas’ August price rise was the smallest annual gain since March 2013. ‘As long as home inventory remains tight and job growth remains strong, prices should trend higher,’ said Ted Wilson, principal at Residential Strategies. ‘However, as housing affordability becomes an increasingly significant issue for many households in the D-FW area, we are unlikely to return to the double-digit gains we were experiencing this past year. The year-over-year gains have moderated, and this is reflective of the anecdotal reports we hear from builders and Realtors who share stories of ‘buyer pushback’ and ‘lack of urgency’ on some of the higher-priced offerings.’”
The Las Vegas Sun in Nevada. “Throughout the valley, listings of previously owned homes increasingly are being ignored, sales volume is dropping and prices aren’t climbing nearly as fast as a year ago, all while the share of cash buyers has plunged. Investors still comprise a sizeable share of local buyers, but faced with rising prices they helped create, their spending has ‘fallen off a cliff,’ Universal Realty owner Scott Beaudry said.”
“Despite the slower growth, many homeowners expect values to keep soaring at an eye-popping pace, and they want to sell for much more than their homes are worth. ‘There are a lot of unrealistic sellers,’ Realty One Group agent Jim Brooks said.”
CNBC on California. “Los Angeles may be filled with stars, but right now its housing market isn’t one of them. After benefiting from robust investor interest for the past few years, home sales are beginning to deflate. It is now taking significantly longer for sellers to get a contract. ‘The real estate market in Los Angeles is going back to a time where properties sit on the market possibly for four to six months, instead of flying out the door within 10 days and being sold,’ said Greg Bender, a local Realtor with Berkshire Hathaway HomeServices. ‘Buyers don’t have the same sense of urgency as they did before. They can be a little bit more discerning.’”
The New York Times. “William Ackman is a wildly successful hedge fund manager. Mr. Ackman told The Times that he is the buyer of the 13,500-square-foot condo with an estimated price of $90 million. What is more shocking is what he plans to do with it. Apparently content living with his family on the Upper West Side, he told The Times he was purchasing one of the most expensive properties in New York because ‘I thought it would be fun’ and he and some close friends ‘bought into this idea that someday, someone will really want it and they’ll let me know.’ Bill Ackman is a condo flipper!”
“Mr. Ackman is making a bet that the high-end real estate market in New York, for whatever reason, currently misprices the penthouse, and that in a few years this mispricing will be corrected. In the meantime, a 13,500-square-foot apartment with magnificent views of Central Park and, on a clear day, the entirety of New York, will sit empty the great majority of the time waiting for that day.”
“It may be the most expensive attempted condo flip in history, but in substance it isn’t much different from the middle-class dreamers who bought a preconstruction condo in Florida in the mid-2000s in hopes of selling it a couple of years later at a great profit.”
“… Orlando continues to lag far behind nationally in terms of homeowners paying their mortgage on time. Of the mortgaged homes within the Orlando area, only 30 percent had been paid on time by homeowners. Nationally, homeowners’ rate of keeping current on mortgage payment was more than double Orlando’s rate.”
Yup. Here we are in ‘investor heaven’ with average now prices driven far beyond what is affordable (sustainable and realistic) for the average family and there are still some asshats who believe that this is a good thing? There are even bigger- more delusional and oblivious- asshats who believe that this will end well. Although it really IS “different” this time. Its worse. Much, much worse.
‘more than double Orlando’s rate’
So nationally, 60%? 70%? And this is before they realize it doesn’t go up forever.
Orlando’s always been a little Mickey Mouse….
“…only 30 percent had been paid on time by homeowners. Nationally, homeowners’ rate of keeping current on mortgage payment was more than double Orlando’s rate.”
2 X 30 = 60% of mortgage payments are current on a national level? Does that mean 40% of mortgagees on a national basis don’t keep current?
Please point out my math error if you see one…
‘many homeowners expect values to keep soaring at an eye-popping pace’
In housing, this attitude defines a bubble more than any other single issue. Why be content with two years of “soaring” price? More, more!
We are talking about freaking houses. There’s no gold or oil underground, or Picasso hidden in the walls.
BTW, the NYT articles goes on about how this rich guy isn’t “doing anything for society” and flipping this condo doesn’t benefit the rest of us. Alas, another failure of capitalism!
Speculating in houses is a by-product of too much money being created. Aided by artificially low interest rates and low lending standards. Sure, it takes a while for people to see their neighbor make a bunch of money and get greedy enough to join in. But don’t pretend these bubbles are capitalism. In capitalism, most of these wall street leeches would be serving up breakfast burritos about this time of the morning.
“We are talking about freaking houses. There’s no gold or oil underground, or Picasso hidden in the walls.”
I believe it is mostly about holding on to a plot of real estate or even a structure during a time of massive monetary intervention to reflate the Housing Bubble.
But that is ending now…or so we’ve been told.
but in substance it isn’t much different from the middle-class dreamers who bought a preconstruction condo in Florida in the mid-2000s in hopes of selling it a couple of years later at a great profit.” ?
Well there is a significant difference….When that middle-class dreamer gets their butt handed to them, they are toast…Possibly toast for the remainder of their lives depending on how burnt the toast is…
Conversely, the mega rich Ackman could lose $90,000,000. and not even know its missing….Big difference….
Ben see my post below from Hoisington.
houses sitting 4-6 months that used to sell in 10 days? And this is LA? 4-6 months is an eternity.
Not a word about dropping price though. Curiously there is a “correction” that says an earlier version of the article said prices dropped 5.9 percent YOY. This versions doesn’t mention prices. Was that wrong or was the “correction” to just delete it because someone didn’t like that information being in the article?
What kind of income does a buyer need to buy the median house in LA? 200K? How many households make that kind of dough? 10%?
The first cracking prices in CA showed up in LA.
There’s so many organizations tracking this stuff now. This is the latest from CAR:
‘The median price of an existing, single-family detached California home fell 4 percent from August’s median price of $480,280 to $460,940 in September but was up 7.6 percent from the revised $428,290 recorded in September 2013. The statewide median home price has been higher on a year-over-year basis for more than two years.’
There’s some ouchies in the region/county numbers: Monterey, Merced, Alameda, Yolo, others no one has ever heard of.
The next step is for them to spin this as ‘expected’ and ‘healthy’ and urge the gullible to leap into this as a ‘buyer’s market’. Its the same playbook and it will only achieve the same results.
The word that appears in literally every single real estate industry commentary that I’ve seen lately, from the top dogs down to the sales people on the street, is “stabilizing”. Look for it as you read any industry commentary that in some way acknowledges the current change in conditions.
The word obviously went out. That’s their story, and by golly, they’re stickin’ to it.
“stabilizing”
They keep using that word. I don’t think it means what they think it means…
Stable is a long way down.
In what universe does a massive horde of flippers morphing from all-cash buyers to fly-by-night sellers result in stability?
And it is a long way down from here. When there is this much disparity between current prices and the long term historical price (or current price versus current rental rates), duration of the correction has little do do with the discussion. Discussion of duration is a means to distract from reality.
Last 12 months up 7.6 but in the last month down 4 percent. Does it really matter if you’ve driven down to the 25 yard line in the last 10 minutes, when you’ve lost 10 yards in the last 3 plays? In RE, what matters is market conditions NOW not 6 or 9 months ago and NOW is not good.
Also happening here in Tucson. I’m seeing a lot of “just sitting there” houses that aren’t selling. Methinks that the problem is with the price.
and the anticipated future price.
Prices are dropping a little in my nabe too. Prices are either dropping from very inflated to slightly inflated, or from slightly inflated to reasonable. Without sounding too much like a donk, I’ll say that the houses differ enough that I don’t know what a fair price is. The # baths, basement, condition, plain driveway or garage make a big difference even in adjacent houses on similar-sized lots.
A house on my block just went up for sale, about $5K less than I paid for mine. My block is following a pattern:
Greatest generation “grandma finally dies” just before the bubble starts.
Relatives fix up the house.
Someone buys the house at a bubble price.
House bounces through foreclosure.
House is cosmetically flipped.
Second family moves out and house is listed.
House is bought by new family at slightly inflated price.
New family promptly rents out the basement to help pay the mortgage.
The house on my block will NOT sell for its price, for an easy reason: It has one bath and no basement. No rental potential.
No Donk… You know exactly what they’re worth. Why run from it?
What you are describing is Vancouver. The basement rentals are illegal there, but necessary. Are they also against ordinance in your area?
what happens to million dollar listing” LA tv show
the horrors !
This sort of greed is incredibly foolish when the market stalls as a small discount will often get a house sold quickly. Have been following the HBB since 2005 or so and thanks to that was (correctly) convinced that the pop was imminent in spring 2007 when I decided to sell my house. Priced it about $10-15K under the going rate and had a buyer under contract within a week and this only amounted to about 3%. Had I been greedy and priced it high it is very likely I would have chased the market down, got much less, and been out thousands in carrying costs over a period of months.
Late 2014 is looking a lot like early 2007 to me….
Way back when in the mid 90’s we used to say “you want to be the first born, second wife and third realtor.
Listings would stay on the market for years.
Why the second wife?
Realtors don’t sell houses, prices sell houses.
Pulled this report via Art Cashin at UBS - well worth 5 minutes to read -
I would suggest that those on this site who are bashing the price of housing be encouraged to continue to do so as massive monetary injection has created a very unbalanced debt to GDP ratio not only here in the US but also in the EU and Japan.
The sections at the end of the report titled Debt Research and Asset Bubbles are THE most telling.
Sadly as many here describe them - the Debt Donks are unawares of this until it is way too late. Hold cash and pray.
http://www.hoisingtonmgt.com/pdf/HIM2014Q3NP.pdf
Falling GDP momentum world wide including the USA
Falling inflation world wide
Declining money velocity world wide
If true, does not make a very strong case that the FED is going to raise rates anytime soon…In fact, since the momentum is downward, it could be all the way out into 2016 or longer…
Which simply means more collapsing demand.
Yep - that I think is the point of the report - cratering demand and I might add increasing supply as more and more disgorge ‘assets’ they may have.
“Orlando’s housing market ranked fifth for year-over-year improvement among top U.S. metro areas…”
I’m trying to imagine how the city of Orlando could have seen such a high level of recent improvement. Did they have some kind of mass renovation exercise?
‘…seeing prices stabilize is good for the market and good for buyers,’
Buh-bye all-cash specuvestors!
There’s that ’s’ word again! What did I tell ya?
http://www.hoisingtonmgt.com/pdf/HIM2014Q3NP.pdf
http://finance.yahoo.com/news/why-americans-cant-afford-live-120000051.html
On April 2, 2014, a protester in Oakland, Ca., mounted a Yahoo bus, climbed to the front of the roof, and vomited onto the top the windshield.
If not the year’s most persuasive act of dissent, it was certainly one of the most memorable demonstrations in the Bay Area, where residents have marched, blockaded, and retched in protest of San Francisco’s economic inequality and unaffordable housing.
The title:
‘Why Americans Can’t Afford to Live in Liberal Cities’
‘certainly one of the most memorable demonstrations in the Bay Area’
‘Guide Goes On Videotaped Racist, Expletive-Laced Rant To Tourists Aboard Chinatown Bus In San Francisco’
“American Realty Capital Properties (ARCP) Stock Falls on Accounting Errors”
http://www.thestreet.mobi/story/12932437/1/american-realty-capital-properties-arcp-stock-falls-on-accounting-errors.html
NEW YORK (TheStreet) — Shares of American Realty Capital Properties Inc. are tumbling, down 26.09% to $9.15, in morning trading on Wednesday after the real estate investment trust announced that CFO Brian Block and Chief Accounting Officer Lisa McAlister have resigned because of accounting mistakes that were not corrected. The biggest U.S. owner of single tenant properties said that certain amounts related to non-controlling interests were incorrectly included in adjusted funds from operations.
————————————————————
It’s breaking. Fraud. This is big.
“The biggest U.S. owner of single tenant properties…”
Schweet! May they crash and burn in this life, and keep on burning in the next…
I thought it would be fun’ and he and some close friends ‘bought into this idea that someday, someone will really want it and they’ll let me know.’ Bill Ackman is a condo flipper!”
JC Penny 2 ?
“…a 13,500-square-foot apartment with magnificent views of Central Park and, on a clear day, the entirety of New York, will sit empty the great majority of the time waiting for that day.”
Exactly how many homes worldwide are similarly held off market in shadow inventory, waiting for the day when central-bank engineered inflation turns out higher than expected, offering the property owners the chance to sell at a fat premium to their purchase prices?
Deja’ vu a’ la 2005 from my seat.
Have you bought since 2005?
Of course we have created a bubble again . Investors have driven the market along with regulators who have overpriced inventory in market’s where they know investors with their rental strategy can out bid citizens for homes that should be priced affordable. We will definitely see a pull back in pricing ,unfortunately the market will take 5 to 6 months to react. its hard to understand how the federal government doesn’t understand that a robust recovery has to include a robust housing market. i cant wait to see how many of these REIT’s will collapse because the CAP rates they bought to didn’t even come close to the appreciation in the market that they advertised to their investors. We really don’t learn from our mistakes do we?
Remember Lew…. Houses are depreciating assets that never pay you back.