Swinging Back From Extraordinarily High Gains
A report from the Washington Post. “October data on the Washington region’s housing market released by RealEstate Business Intelligence painted a picture of a market that is continuing to limp along while struggling to get out of neutral. Last month, the number of days it took before a purchaser came along rose sharply from a year ago — that’s bad news for sellers. At the same time, the number of listings is up — good news for buyers who will have a better selection. October was the 13th straight month of year-over-year improvements in housing supply. New listings rose 6.4 percent to 5,818 from 5,470. Acting listings jumped 28.8 percent to 11,919 from 9,254.”
“Corey Hart, senior product manager at RBI, who prepared the report, said that the market overall is ‘normalizing,’ swinging back from a period of extraordinarily high gains. ‘The fact that inventory steadily increased is obviously good news for buyers,’ Hart said. ‘More homes mean less competition among buyers and more houses are available.’”
From Fairfax News in Virginia. “The Northern Virginia October housing market continues to show a boost in inventory, with a 49 percent rise in the months’ supply of available homes compared to October last year. Homes that do not sell quickly but then show a price reduction do ultimately find a serious buyer, pointed out Gary Lange, Coldwell Banker Residential Realtor®.”
“The National Association of Realtors believes that ongoing tight credit is hampering a full market recovery and leaving potential buyers on the sidelines, especially first-time buyers. NAR invited the Federal Housing Finance Agency Director Melvin L. Watt to speak at its November Convention about the FHFA mission. According to Director Watt, ‘regulators are struggling to find ways to encourage lenders to expand the universe of qualified borrowers to whom they’re willing to make mortgages.’”
The Baltimore Sun in Maryland. “Sales of distressed properties in the Baltimore region continued to distort the area’s real estate market in October, inflating overall sales but acting as a drag on home prices, according to the monthly report from the regional MLS. Of all October sales in the region, 17 percent were bank-owned, the highest proportion since March 2011. In Baltimore City, the 173 sales of bank-owned properties accounted for 30 percent of all sales. The report said such sales were ‘likely the primary reason’ the city led the metro area in median price decline at 13.2 percent lower than a year ago.”
“Also losing ground in median price were Anne Arundel County at 6.8 percent lower, followed by Harford, down 2.7 percent from a year before. Baltimore County led all six jurisdictions with a median price increase of 7.6 percent, followed by Carroll County at 7.5 percent and Howard at 5.7 percent. Foreclosures that started after the federal settlement was approved in 2012 are ‘just now starting to hit the market,’ said Gina Gargeu, a Realtor for Century 21 Downtown, who specializes in bank-owned properties almost exclusively. She said the average foreclosure in Maryland now takes 575 days.”
Triad North Carolina. “North Carolina is one of 16 states with year-over-year increases in what are called ‘zombie foreclosures,’ and two metro areas are driving the climb in the Tar Heel State. Greensboro-High Point and Raleigh came in with increases of 37 and 21 percent. ‘We’ve heard over the last few years about the shadow inventory that banks had on foreclosures, and I think that’s some of it coming to mind right now,’ said Kevin Green, president-elect of Greensboro Regional Realtors Association. ‘A lot of these folks that are leaving knew far in advance, some many, many months, and some many years before this foreclosure actually took place,’ said Green. ‘So I don’t think the zombie piece of it bothers me as much as much as the foreclosure piece.’”
My Horry News in South Carolina. “Residents of Lakeside Crossing were back out with their signs Friday morning trying to convince people not to buy homes in their senior-living community. At Lakeside Crossing the residents own their homes, but they don’t own the land they’re built on. Residents pay rent on the property, or the way some look at it, they pay monthly fees for their amenities.”
“Some have seen their rates increase as much as $375 a month since they first moved into Lakeside Crossing, and even that’s okay with them. But what they don’t like is that Sobel Co, in an effort to recover some of the losses they’ve taken while the local real estate market has been struggling, is charging new residents as low as $199 a month for their amenities. Then the residents say, some of the homes that once sold for as much as $200,000 are now selling for $125,000. Add the lower house prices to the lower amenity charges and the older residents say they have little or no chances of ever selling their homes if they need to. Most of them point to one man, who became ill and needed to move closer to family. He had no choice but to sell, and his loss amounted to about $100,000, they say.”
“The residents are vowing to keep someone at each entrance to the community during all hours that the sales office is open to discourage people from buying in their community. ‘If I could step back in time five years and one day – I’m from New Jersey — I don’t think I’d be here,’ said Hartley Turner. ‘It’s a shame….’”
‘a 49 percent rise in the months’ supply of available homes compared to October last year. Homes that do not sell quickly but then show a price reduction do ultimately find a serious buyer’
Same thing is happening in Massachusetts. Funny how all that “no inventory” talk went away.
“Massachussetts Single-Family Home Prices, Sales Fall In September”
http://www.bostonglobe.com/business/2014/10/28/massachusetts-single-family-home-median-price-falls-september-warren-group-says/NBW5NUUB32b5yp0EiUnLyH/story.html
“October was the 13th straight month of year-over-year improvements in housing supply.”
Note how the definition of improvement has changed:
2013 definition: improvement = price increase
2014 definition: improvement = inventory increase
The redefinition is a huge improvement!
These stories are heartwarming to me.
Here’s the gig. Everyone of these sub stories have the same circumstances and fundamentals underneath once the boo-hooing gets peeled away.
Circumstances-
-Rental rates were a fraction of the cost of buying when they bought(still are)
-They paid 3x reproduction cost(lot labor materials and profit)
-They financed the losses
-They threw more good money after bad at a depreciating, asset post-sale
-They lost 10% off the top just going in(double that due to financing)
The boo-hooing volume gets turned up to 11 now that the reality of the circumstances are fully bearing on the suckers. There are tens of millions of these people across the country and who knows how many there are globally. You made a tragic error. You wanted to dance to music, now pay the DJ. The DJ will be paid in full.
price used to equal about 120 x rent
my hood is still at 200x
“200x”
That’s on a cash purchase basis. If you mortgage, maintain and insure, it’s 600x.
“Report: State foreclosures spike again” (Massachussetts)
http://www.bostonherald.com/business/real_estate/2014/11/report_state_foreclosures_spike_again
Colorado 3rd Quarter Foreclosures Up Nearly 40%
http://www.bizjournals.com/denver/blog/finance_etc/2014/10/colorado-q3-foreclosures-up-nearly-40-from-q2.html?page=all
No End Seen For Westchester County, NY Mortgage Crisis
http://westfaironline.com/67060/no-end-seen-near-for-westchester-mortgage-crisis/
“crisis”. lol
‘the mortgage crisis is not near an end in the county, according to professionals working with homeowners and lenders here. “It really is the same,” said Geoffrey Anderson, executive director at a nonprofit housing agency in White Plains that provides counseling and other services to potential buyers and homeowners, most of whom have household income ranging from 50 percent to 80 percent of the area’s median income. “We’re still seeing a lot of clients coming in.”
‘Anderson said the WRO office is averaging three to four calls a day from new clients calling about mortgage defaults. “One of the saddest parts of this is we’re getting calls from individuals who have court appearances within 48 hours,” he said.’
“There’s still a substantial amount of foreclosures being filed and there’s still a substantial backlog in the courts,” said Peter Spino Jr., a White Plains real estate attorney representing clients in foreclosure defense, loan modifications and short sales of properties.’
‘Although low-income and middle-class homeowners in the county have borne the brunt of the collapse of house market values and job losses since 2007, mortgage defaults “definitely run the gamut of income ranges,” Spino said. “Over the last year or so we might have seen some people at the higher end of wealth” who have tapped out assets that had staved off default on their mortgages, he said.’
‘At Keller Williams Realty in Bedford, “We’re still seeing a fair amount of luxury properties (with mortgages of more than $1 million) that are in distress,” associate broker Mark Boyland said.’
“New York got backlogged and they’re still backlogged,” he said. But banks have become more aggressive here against defaulted homeowners, some of whom have not made a mortgage payment in a few years, Boyland said. “I’d say the bulk of them are in the (foreclosure) process now.”
‘Despite federal and state programs to prevent defaulted borrowers from losing their homes, some do not qualify for modifications. At Westchester Residential Opportunities, about 30 percent of clients in default are not eligible for modifications because they lack sufficient income to repay the loans and catch up on arrears, Raphael said. “We’re still seeing homeowners that are unemployed more than a year and at a serious stage” in foreclosure, she said. Other clients in default own multifamily homes and lack adequate income because their tenants are unable to make rent payments. Others can’t pay their mortgage because they are underemployed.’
‘Spino has had clients whose mortgage payments do not exceed 31 percent of their gross income, which disqualifies them from the modification program. “I’ve had three people recently who actually made too much money to get a loan modification,” he said.’
‘At WRO, Anderson said that some loan modifications have higher adjusted interest rates that are coming due and which some homeowners cannot afford.’
‘Raphael added, “We’re seeing the loan modifications would be affordable if the (property) taxes weren’t so high” along with property insurance. “That makes it unaffordable for some homeowners.”
‘Spino is not hopeful that an end to the county’s mortgage crisis is near. “Two years ago I thought we were halfway there,” he said. “We still have years ahead of us. Obviously we’re at the back end, but it’s nowhere near over.”
Shadow inventory is a conspiracy theory. Zombie houses is a monthly statistic.
“Shadow inventory is a conspiracy theory. Zombie houses is a monthly statistic.”
And the monthly statistic is grossly understated.
It’s a fine line between sink or swim for anyone who bought a house in the last 15 years. 30 years on a treadmill with nothing to show for it at the end is a financial wasteland nobody can bring themselves to look at.
“30 years on a treadmill with nothing to show for it at the end is a financial wasteland nobody can bring themselves to look at.”
Homeowners in denial about their lifetime losses should work out very well for the bankers who rented them the money.
Fascinating. That article really runs the gamut of housing problems. At this point it makes you wonder why some people don’t just embrace foreclosure. Let’s see:
- Your property taxes are unaffordable
- Your tenants can’t pay you rent
- You’ve blown through your other assets trying to keep the property
- Your HAMP mod interest rate is about to go up
- Even the bank admits you don’t make enough money to ever repay your loan
Under these circumstances, why would anyone even WANT to keep their house?
It’s The American Dream Dammit!
‘Federal Reserve hawk Charles Plosser says he’s nervous about low interest rates — and that you should be, too. The president of the Philadelphia Fed warned yet again that the central bank is effectively playing Russian Roulette with the U.S. economy by keeping interest rates at zero for so long.’
“There are many indicators that tell us interest rates are too low,” Plosser told CNBC at a conference in London. “There is no precedent in history to have rates at zero. I think we are really behaving in a way which is outside of historical norms and that should make us nervous.”
‘Plosser has been an outspoken advocate for higher interest rates to stave off the possibility of rising inflation, an overheated economy or a dangerous asset bubble.’
It’s too late Charlie. The barn door has rusted off its wind-twisted hinges and has blow across the field.
He can spout the theory, but he can’t see the asset bubbles.
They will be obvious even to him after they have collapsed.
‘Harriet Bradley, 62, had decades of full-time work under her belt when she was laid off from her job as a customer service representative at a paper company in 2003.’
‘Bradley, who lives in Atlanta, Ga., signed up with a temp agency but had little luck finding work. When it was clear that job opportunities had dried up there, she began working part-time as a caregiver. The pay wasn’t great — at $7.25 an hour, she was earning $2 more than the state’s minimum wage — but it would be enough to cover her $600/month rent.’
‘That was nine years ago. Since Bradley took up work as a caregiver, she’s asked for and received only one raise — a $2/hour bump, which she requested to help her cover her bus fare to and from work each day.’
‘Meanwhile, like the rest of Americans, her expenses have quickly outpaced her earnings. A few years ago, her rent was raised from $600 to $660 per month. The $15 per week she spent taking the bus to and from work each day nearly doubled when fares were raised, bringing her weekly commuting cost up to $27.50. After cashing her most recent paycheck and paying her bills, Bradley had $4 left.’
“I can definitely tell the difference,” she says. “You make the same money but you pay more. Food goes up. Everything goes up. But pay doesn’t go up.”
‘Bradley’s story is echoed across the country. Despite a much improved unemployment rate (now at a 4-year low at 5.8%), lagging wage growth has left a huge chunk of American households feeling as if the economy is as stifled as ever.’
Oh Harriet, don’t you know that Janet Yellen has said prices aren’t going up enough? Now take your $4 and buy some stocks!
The key phrase here is “laid off from her job as a customer service representative at a paper company in 2003.”
How much you want to bet that her job was outsourced to a call center in Mumbai?
‘her job was outsourced to a call center in Mumbai’
And extraordinary high gains in house prices does what? Sounds like a rock and a hard place.
Her story is one in tens of millions. Prices of all necessities continue to increase while pay has steadily eroded, as well as available jobs.
All of the mega corps in the US have off-shored jobs, and they continue this practice today. There is nothing to deter them, and they pay off the politicians to make sure nothing gains traction.
I am not sure what the breaking point is, but certainly this cannot continue. Or can it?
Which means the prices of houses (and many other things) here should drop, as less income due to overseas competition means less money Americans have to spend on housing.
Only extraordinary artificial measures to prop up housing prices with toxic government-subsidized debt are keeping this from naturally occurring.
We’d rather let millions of people be homeless than let housing prices drop to a level that bears a reasonable relationship to incomes. And it doesn’t matter whether Democrats or Republicans are in charge. We have become a foolish people and we will get what we deserve.
The bank accounts of government cronies go up too.
Harriet’s story is especially interesting re the Westchester article above.
“…homeowners that are unemployed more than a year… lack adequate income because their tenants are unable to make rent payments… are underemployed… have tapped out assets.”
How many people have been just barely hanging on, for YEARS?
Obviously they can’t hang on forever, especially when prices rise and there’s a point where expenses really can’t be reduced any further (ie there’s no cheaper alternative to the bus). Eventually Harriet will get to the end of the month and instead of having $4 left, she will be $4 short. At that point, someone else, who was expecting $4 from Harriet, will also find they have less money than they expected.
Eventually, you’d think the system would collapse under its own weight - regardless of Fed intervention - simply because people’s resources become exhausted, which impacts every creditor in the chain, and suddenly the possibility that the money might not be there becomes the reality that the money ISN’T there. Cue a crisis of confidence even the Fed can’t stem…
That’s a very good point, because one person’s debt is another person’s asset.
The other angle to this story is the widening disparity in minimum wage. Georgia’s minimum wage is $5.15, so the federal $7.25 minimum applies. Doing the same work in Oregon or Washington will get $9+ indexed to inflation. Calif. is at $9, going to $10 on Jan. 1, 2016. Will there be a migration of unskilled labor from the Scrooge states to the better-paying states? Ha! the irony of it is if a migration were to occur, private business in the Scrooge states will have to raise wages anyway to attract job applicants. Congress should just save everyone the trouble and implement a federal $10.10/hr minimum.
Rephrase:
Will there be migration of unskilled labor from the low tax, low cost of living states to the high tax, high cost of living states?
Of course not.
And he’s “nervous”. This is what everyones paying for. That’s his position. Nervous. A$$hole.
he’s a gov worker and will never lose his job-nervous?
Actually he works for a private corporation that creates money, among other things.
How do I get in on this gig?
Do I get to keep my job after blowing $hit up so long as I say “I’m nervous”?
“The barn door has rusted off its wind-twisted hinges and has blown across the field.”
Yep.
The whole housing rebound nonsense was just another speculative run-up in prices. It had nothing to do with fundamentals. I just wonder if/when fundamentals will ever return. Prices look to be flat to declining now in most areas. If we start seeing large declines, I expect the Fed to go into QE 4 mode, throwing everything they have at it. Can they generate another dead cat bounce? I do not have the answers, only extreme disgust for all parties involved in the decisions.
Geez. They’re trying to fly this baby in for a soft landing.
Can you imagine how difficult this is to do?
The runway keeps moving, the plane keeps losing engines, then gaining a new one or two. But these new engines aren’t really attached to the right places. The pilots suddenly have to adjust to power at 140 degrees to the original.
And the passengers, the passengers keep hopping into the second chair and mouthing off while the pilots themselves keep changing.
It’s a mess! I think the left wing just shrank a few feet while the right added 10 inches. Quick, adjust for that!
We need to get this baby back on the ground!
There are passengers in the aisle that race forward when the plane nosedives and lurch backward when it throttles forward.
‘the Fed to go into QE 4 mode’
If you think about this a bit, some things stand out. Most of these US markets started topping out via supply and demand in the fall of 2013, when there was still QE, rates were low, and investor purchases high. Las Vegas still has a high investor percentage, and inventory is soaring. Every action has a reaction, such as building houses. Now we see builders cutting prices and throwing in incentives. It’s important to remember that a bubble relies on greater fools. When you run out, you’re out. Anything could happen, but we can figure out what is probable.
One thing I keep coming back to; how much of the worlds population is living in some stage of a real estate bubble right now? China, India, Indonesia, Malaysia, Australia, New Zealand, Canada, the UK, Sweden, lots of Africa, Arab states, Turkey, US, Columbia, Peru, central America, Singapore, and there’s more. All these countries are aiding or fighting, or both, these bubbles in various ways. Are any of these approaches creating a “soft-landing”? The bazooka was deployed after 2008; maybe $30 trillion in money creation globally. This has resulted in a much bigger bubble than prior to 2008. What happens if several or all of these bubbles collapse at around the same time?
In a way, we are lucky in the US. Because many millions of citizens said no thanks. They refused to buy into the bubble, or sold and started renting. IMO, places that got real goofy like California will pay for it. When I read posters say, “we won’t have foreclosures because…”, I remind myself that the only thing that has to happen is that a borrower quits making payments. Now, is somebody going to tell me that can’t happen?
None of that matters. Why? Because property is more expensive then here in the US in lots and lots of places and the folks in those places just keep buying and buying and nothing bad is happening to them. London, Hong Kong, Sydney, Vancouver, etc, etc, are all much more expensive then in your town and people there manage just fine. Why shouldn’t San Fran be different? Or San Diego? Prices here are going to rise to match those because it’s a world economy and our cities and our economy is just as good and many times better than theirs.
So buy RE before it’s too late and there’s none left.
London, Hong Kong, Sydney, Vancouver, etc, etc, are all much more expensive then in your town and people there manage just fine.
Just fine? That is debatable. Sure, if you bought your Vancouver, London, Sidney, etc. home before the bubble you’re doing fine, but if you bought at today’s prices and had to borrow to make that purchase, I would say that the average buyer has his back against the wall. Probably can’t afford the payments, and is “liberating” equity to keep up appearances.
We have a nephew who lives in Vancouver. He and his wife both work at non menial jobs and they can barely make the rent. Buying is utterly out of the question for them, a pipe dream. They are not managing “just fine” and I suspect that they have plenty of company,
Idk, BD may have forgot the /sarc tag; thats how I interpreted it.
While I’m here, a quick question,
Anybody got any insight about the hot mess known as Puerto Rico
I might go into a long list of it’s failings,
Anything good to say about it’s future…
Fed government rescue?
I lived there when I was in elementary school. Sources tell me that professional people are fleeing the island in a higher proportion than they typically do, due to a violent crime wave that is bad even by Puerto Rican standards. Many of them are moving to the Orlando area. As far as housing prices, I can’t tell you.
I did read earlier this year that hedge funds had taken a large position in Puerto Rico bonds. I have no idea why anyone would do that, but we live in a world that, due to central bank manipulation, can’t price anything correctly.
Some time ago I read that San Juan lost 5% of it’s pop. in three years; their other major centers almost as much. What’s left of the productive population is escaping from one of the lowest labor force participation rates in the world( maybe the lowest). Lots of crime.
Some bonds,1b, were recently floated( specifically not under puerto rican laws that had to be altered first…. but New York laws) The purchasers have first rights to next years?( spring 2015) revenues to be paid in June at about 7.5% interest( I think that should be read~7.5 % for nine months); compare to similar U.S. notes.
Some time ago I read that San Juan lost 5% of it’s pop. in three years; their other major centers almost as much. What’s left of the productive population is escaping from one of the lowest labor force participation rates in the world( maybe the lowest). Lots of crime.
Some bonds, 1b, were recently floated( specifically not under puerto rican laws that had to be altered first…. but New York laws) The purchasers have first rights to next years?( spring 2015) revenues to be paid in June at about 7.5% interest( I think that should be read~7.5 % for nine months); compare to similar U.S. notes.
so just for some perspective - I went to the CPI inflation calculator supplied by our friends at the BLS. Here’s the deal - this from personal experience.
CPI Inflation Calculator
$ 42,000 in 1960 dollars
Has the same buying power as:
$337,746.69
in 2014
Recently sold the old family home in Jan of this year in Region VIII for substantially more than this amount.
Those on this site such as HA - they aren’t blowing hot air at least in this arena when he says - houses are 4 to 5 to 6 times actual value. Cost is one thing - value - something else.
Guess I won’t be buying a cottage anytime soon eh?
They’re definitely 3x construction costs(lot labor materials and profit)
Housing today is like the marginal ball player like me. They kept saying hard work and practice will make you better, but sometimes you have to realize I won’t play in the big leagues.
Same with houses, no matter how attractive they make loans and reduce houses prices and talk up the market, folks have come to realization they still don’t make enough to buy.
Sure people will buy. But not until prices fall to longterm trend or early 1990’s levels.
More Risky Loans Allowed
The feds ease rules for mortgages but tighten them for business.
Updated Oct. 28, 2014 8:17 p.m. ET
Washington has settled on a perfect credit-allocation strategy to stunt economic growth. Step One: Hand out mortgages with little or no money down. Step Two: Discourage loans to businesses.
Last week we told you about Federal Housing Finance Agency Director Mel Watt ’s plan to bring back down payments as low as 3% to Fannie Mae and Freddie Mac , the two government mortgage monsters that helped create the last financial crisis. Along with Mr. Watt’s other initiatives to expand credit, it could lead to another boom and bust housing cycle.
Now the Federal Reserve and other banking regulators have approved new rules for private mortgage-backed securities that don’t require the underlying loans to have any down payments at all. But this latest move may be less immediately damaging than it sounds. As a general matter, the bureaucrats shouldn’t be setting the terms of private contracts. And until a new Congress enacts serious reform, the government—via Fannie, Freddie and the Federal Housing Administration—will likely continue to dominate this market anyway.
Therefore, in contrast to the fate that awaits taxpayers in the government mortgage programs, in the near term participants in the fully private market probably won’t have the chance to come to much harm—even if they’re foolish enough to follow the regulators’ advice on what constitutes a “qualified mortgage.”
…