The Dreaded Talk About Price Drops
The South Florida Daily Business Review. “The deeds only tell half the story—if that—when it comes to showing who’s behind some of South Florida’s biggest real estate deals. Analysts says institutional investors are the dynamos fueling most of the region’s big-money transactions. ‘In the markets where these entities are buying, it’s not uncommon to see them purchase hundreds of properties over a given quarter,’ said Daren Blomquist, VP of RealtyTrac. ‘In the markets where we see these institutional investors heavily involved, we typically see acceleration in home-price appreciation. On the flip side, when they start slowing down their purchases, home-price appreciation also slows. That’s the concern on the residential side—that they’re driving up prices beyond what your typical home buyer can afford.’”
“Analysts say institutional buyers also are bullishly snapping up residential product, including even small assets like three-bedroom starter homes priced around $150,000 and built after 1990. Their aggressive acquisitions come as discounted foreclosures dwindle and entry-level buyers face an inventory crunch. ‘Hedge fund owners are parking money in residential real estate,’ said Attorney Joe Hernandez, a partner at Weiss Serota Helfman Cole Bierman & Popok and chair of the firm’s real estate practice. ‘It’s great that people are spending a lot of money down here, but does that improve the fundamentals.’”
The Washington Post. “Double-digit gains in home prices prevalent in 2013 have slowed to single-digit appreciation, benefiting buyers who were losing homes to higher bidders. All these factors point to what should be a strong housing market in the Washington area. So, why are so many real estate agents here bellyaching that the market has come to a screeching halt? ‘All the marketing in the world is not getting us offers,’ said Valerie Blake, an associate broker with Keller Williams Capital Properties.”
“The tide has turned and agents are frantically devising new game plans, for their clients and themselves. We have had the dreaded talk about price drops and incurring costs on improvements that would increase the appeal of the home. We have re-examined our own budgets and our ability to launch new marketing strategies. We are desperately trying to dissect the new mindset of the market and craft new marketing strategies for these changing times.”
The State in South Carolina. “Home sales took a nosedive in October, dropping 42 percent in Columbia from the same month a year ago. The question now for Columbia is whether the October slowdown was just a blip, or an indication of new troubles ahead for the local market. ‘I’m a little taken aback by the 42 percent,’ said Doug Bridges, a longtime real estate agent in Columbia. ‘That’s pretty severe.’”
From Chicago Business in Illinois. “After flying high in the first half of the year, the downtown apartment market has lost some altitude in the second. All the exuberance has fueled a development boom that will test the market over the next few years. Appraisal Research projects that developers will complete 3,119 apartments downtown in 2015 and 6,400 in 2016, both records for downtown Chicago. ‘The question is what’s going to happen in 2016,’ said Appraisal Research Vice President Ron DeVries. ‘Clearly, there’s going to be an imbalance there.’”
The Phoenix Business Journal in Arizona. “Phoenix area housing starts were down by more than one-third in October compared to a year earlier. RL Brown Housing Reports also found that year-to-date housing permits are down 17 percent compared to the first 10 months of 2013. There are also still plenty of existing homes for sale — and rent — in the aftermath of the slowdown and post-recession investors buys. ‘Everyone involved in new housing here in Phoenix is well aware of the dramatic price gap between the median new home price and the median resale price in the marketplace,’ RL Brown researchers write in their monthly newsletter.”
The McClatchy Washington Bureau. “The new head of the Federal Housing Finance Agency has failed to help homeowners who owe more than their house is worth to get partial loan forgiveness, Sen. Elizabeth Warren charged Wednesday. ‘You’ve been in office for nearly a year now, and you haven’t helped a single family, not even one’ through principal reduction, Warren told a surprised Mel Watt at a hearing before the Senate Banking Committee.”
“Republicans peppered Watt with a number of regulatory concerns, and worries about a forthcoming plan that will make it easier to get a government-backed loan with a down payment of just 3 percent. ‘I’m troubled that you would reduce borrowing equity after the problems we’ve seen’ in the run-up to the housing crisis, said Idaho Sen. Mike Crapo, the committee’s top Republican.”
“Congress is divided over the future of housing finance. Asked about whether he’ll offer a way forward, Watt said it is up to his former colleagues in Congress to make that call. ‘I’ve left that role behind,’ he said. ‘I don’t have an independent opinion now, because anytime I express myself now people take it as the FHFA opinion.’ The problem must be dealt with, he offered, noting there’s ‘$5 trillion of outstanding obligations that somebody has to deal with, and that is the current (sum) of housing finance business, not in the future.’”
The Columbian in Washington. “David Capolarello bought his home in 2008 for $290,000. At the time, housing prices were near their peak following a stratospheric climb that was fueled by easy money and low or no-down payment deals. Homeownership was on the rise, and some thought the good days would keep on rolling. Since then, the assessed value has plummeted tens of thousands of dollars, and despite some recent gains, today it’s still about $50,000 short of what Capolarello paid.”
“Capolarello’s story is the story of Clark County’s housing market over the past decade. The Columbian found in its analysis median sales prices are still 10 percent to 43 percent lower than pre-recession levels. ‘I would’ve liked the choice of the opportunity to sell,’ he said. ‘The main impact for me is it’s solidified the fact that I’m not going to sell. If it had risen quite steeply after I bought it, I might have been tempted to sell it, because I could make a profit.’”
“In the markets where we see these institutional investors heavily involved, we typically see acceleration in home-price appreciation. On the flip side, when they start slowing down their purchases, home-price appreciation also slows. That’s the concern on the residential side—that they’re driving up prices beyond what your typical home buyer can afford.”
1. Has this ever happened before the Great Housing Bubble?
2. What will happen if the institutional investors cut and run en masse to avoid falling prices?
They already are cutting and running en masse. Stories about it will accelerate over the next 6 months.
Double digit increases don’t just slow down to small increases or flatness. Pull out that 50 percent of the market and prices, to quote the Beastie Boys, “feel the beat, nnnnnn, drop!”
This is the factor all the shills and donkeys can’t seem to fathom because it isn’t exactly precisely like how it happened last time.
He he he..lolz
‘In the markets where these entities are buying, it’s not uncommon to see them purchase hundreds of properties over a given quarter,’ said Daren Blomquist, VP of RealtyTrac. ‘In the markets where we see these institutional investors heavily involved, we typically see acceleration in home-price appreciation. On the flip side, when they start slowing down their purchases, home-price appreciation also slows. That’s the concern on the residential side—that they’re driving up prices beyond what your typical home buyer can afford.’”
Describes Region VIII?
“The tide has turned and agents are frantically devising new game plans, for their clients and themselves.”
DC-area Realtors™ suddenly sound quite desperate. Can’t the Gubmint do something to prop up DC-area housing demand?
“We have had the dreaded talk about price drops and incurring costs on improvements that would increase the appeal of the home.”
Do improvements to bump up the potential sale price of a home ever pencil out, aside from basic measures needed to meet code requirements and make it presentable?
“…measures needed to meet code requirements…”. Those dollars are never recovered. Staging works, but only because you take those invested improvements when you sell the place!
Wait…are you saying it isn’t necessary to make improvements to bring a home up to code in order to sell it? Wouldn’t a failure to meet code create a bad signal to prospective buyers that other problems might lurk?
I’m saying code based corrections are “unseen” improvements, thus hard to recoup in added sales price. Only observable changes (like staging) result in price gains from s buyer. Code corrections still need to be done. The piper still needs to be paid. It is a cost of doing business.
If the alternative to not bringing a home up to code is not selling it, then the value of the repair could arguably equal the difference between sale proceeds versus the value to the owner of never selling the home and owning it forever. This could obviously be quite a large figure, if the owner is motivated to move on.
Jingle you’re right. The entire HGTV show “Love It or List It” is based on this. The designer budgets $70+ K for a smash-bang flip reno, only to find a bad foundation, or asbestos, or rats in the electrical, or lead pipies, or some other $25K repair. The owners get all sad panda over it because they know that it’s effectively lost money.
Whac, many times the owner has already moved on. It’s the “grandma finally died” model. The systems are barely hanging on until Grandma moves into the nursing home or further on. Then it’s left to the kids to fix the place to some kind of code.
Hey Jingle_Fraud…. I’m at headquarters getting primed up for my next assignment. It’s just a hair over $9 million.
Did you get your doghouse built yet?
Oxide -
Been there with the grandma thing - long story short - a horror!!
Comment by Housing Analyst
2014-11-20 09:06:58
Hey Jingle_Fraud…. I’m at headquarters getting primed up for my next assignment. It’s just a hair over $9 million.
Don’t hate me, but I just gotta ask…
$9 million = 163,636 square feet?
No hating allowed, you’re always saying $55 sf, am I right?
There’s more to construction than slapping up low budget junk like houses. Housing is what % of total construction dollar volume in the US? Maybe 9%?
“The new head of the Federal Housing Finance Agency has failed to help homeowners who owe more than their house is worth to get partial loan forgiveness, Sen. Elizabeth Warren charged Wednesday. ‘You’ve been in office for nearly a year now, and you haven’t helped a single family, not even one’ through principal reduction, Warren told a surprised Mel Watt at a hearing before the Senate Banking Committee.”
Wouldn’t someone else need to pay in order to make underwater homeowners whole? Exactly whom is the good Senator proposing to charge for these principle reductions?
P.S. Is it safe to assume by now that cramdowns aren’t coming unless a Democrat somehow manages to get themselves elected in 2016, and maybe not even then?
Well, look who she gets to work with: “Idaho Sen. Mike Crapo, the committee’s top Republican.”
They deserve each other. We don’t deserve either one!
It’s awesome.
“The new head of the Federal Housing Finance Agency has failed to help homeowners who owe more than their house is worth to get partial loan forgiveness.”
Bahahahahaha … I suppose those who buy brand new cars should also get partial loan forgiveness since the value of the car will drop as soon as it leaves the lot.
Don’t forget the incipient student loan debt jubilee…forgivable education loans for everyone!
Not to mention the soon-to-be-announced credit card debt forgiveness policy.
Pretty soon money is going to be free for the taking, leading to a New Era of consumption-led growth in our economy.
I think you’re catching on!
Chief Liewatha v. Mo Credik Mel? Epic.
Remember this the next time someone trots out Ole Lizzy Warren as the Messiah. She’s just a typical liberal emotion driven politician playing feel good games setting up situations where she can say one thing for the TV cameras and then do nothing.
She’s a shill and a hack.
That in Warren’s world would be YOU there Whac.
Funny, isn’t it, how these politicians always tout the benefits of their policy proposals to the beneficiaries while never mentioning the losses to the non-beneficiaries.
…..‘Everyone involved in new housing here in Phoenix is well aware of the dramatic price gap between the median new home price and the median resale price in the marketplace….”
But, but, but HA says new construction is 2/5ths the cost of resale homes. This comment suggests he is full of Hot Air. HA, Ha, Hot Air!
Could the large gap between construction costs and resale prices possibly be a temporary artifact of the Housing Bubble, soon to revert to historic norms, or even overshoot to the downside of history?
Are you saying the cost of building new homes will drop to match the cost of resale foreclosures? What would cause construction costs to drop and why?
I think the more likely scenario is that new construction slows (as it is doing) until the cheap resale inventory pipeline is sold. Thus the real question is if and when will that gap close, so new product is in demand again. The Distressed Housing Gap.
“What would cause construction costs to drop and why?”
Stay tuned for the answer (to appear later today!).
China: Home Prices Fall For Second Month
Average home prices in 70 major Chinese cities down 2.6% in October.
By M Rochan
November 18, 2014 06:36 GMT
Chinese home prices fell for the second successive month in October from a year ago, official data showed, logging their steepest annual drop since records began in 2011.
Average home prices in 70 major Chinese cities dropped 2.6% year-on-year in October despite government attempts to lift the market, according to Reuters calculations from data published by China’s National Bureau of Statistics (NBS).
The October reading was double the fall anticipated by the markets, and followed a 1.3% year-on-year drop in September.
The decelerating property market, which accounts for some 15% of China’s economy, has intensified concerns that a softening housing sector will restrain growth.
…
What are the consequences of commodities price slump?
Shyamal Gupta
Producers will cut costs, while the corporate sector may consolidate
November 19, 2014
When prices of commodity rise they transfer riches from consumers to producers but when they fall consumers benefit. With so much at stake, the turning points are important. Currently we are standing at the cusp of such a turning point.
Commodity prices have fallen nearly 15 per cent since June-end, according to Bloomberg index. The Economist price index for Commodities has fallen by 16.5 per cent in terms of the dollar. Last week, the price of crude oil on NYMEX dropped to a four-year low of $74 a barrel from some $107 in June.
Prices of metals such as copper, platinum, silver and gold have also fallen sharply. Sustained low commodity prices are expected to help India in a big way, considering that it imported $178 billion worth of commodities in the last financial year. This amounts to 9.5 per cent of GDP.
Crude oil made up the largest part of imports. India will also benefit from lower prices for industrial commodities such as coal, metals, etc.
During the last quarter (June-September), the raw material cost, as a percentage of sales in corporate India, has come down, which is likely to drop further in the current quarter.
However, questions of end-users’ demand remains uncertain.
For agricultural commodities in the country, market yard prices will only start showing real downtrend when retail energy prices drop at the same pace.
The decline in the price of non-agricultural commodities can partly be explained by economic changes taking place in China. In the last two decades, China had been consuming coal, iron ore, copper, oil and other commodities with insatiable appetite.
While China’s economic transition was expected, stagnation in Japan and conditions pointing towards impending European deflation were unanticipated.
…
Let me guess: Hot Air will chime in with his $55/SF line!!
So …‘Everyone involved in new housing here in Phoenix’ ……is wrong….and Hot Air is right? HA, Ha, ha, hahaha…..very funny.
I’ve demonstrated my stock in trade in construction and contracting. Your claim to fame is your construction experience yet all you can show for it is $90k water meters and a lifetime of debt on a gaggle of depreciating underwater houses.
What’s the problem Jingle_Fraud?
It’s a Jingle Bells Debt Donkey Gap, I’m pretty sure.
Tell us more about your $90k water meters Jingle_Fraud.
“…measures needed to meet code requirements…”. Those dollars are never recovered.
You’re confusing Jingle Fail with Rental Squatch.
They aren’t pricing them that way because of what it costs them they are pricing what they think they can get for them, a premium over used crap shack because they are new. But like your equity wealth, now the price for new homes in Phx is cratering. Same with used houses.
“David Capolarello bought his home in 2008 for $290,000. At the time, housing prices were near their peak following a stratospheric climb that was fueled by easy money and low or no-down payment deals. Homeownership was on the rise, and some thought the good days would keep on rolling. Since then, the assessed value has plummeted tens of thousands of dollars, and despite some recent gains, today it’s still about $50,000 short of what Capolarello paid.”
It sounds like America has collectively learned a valuable lesson about the perils of low- or no-down payment lending. Is it safe to assume this won’t come back for at least a generation, given how many American households were financially harmed by the practice in the runup to the Housing Bubble peak?
Wonkblog
Why offering 3 percent downpayment mortgages is not a return to lax lending
By Dina ElBoghdady
November 6, 2014
The government’s latest push to jump-start the housing market involves allowing Fannie Mae and Freddie Mac to accept mortgages with down payments as low as 3 percent – versus the 5 percent minimum currently required by the two mortgage giants.
Regulators said the move would help make more mortgages available to “creditworthy but lower-wealth borrowers.” Critics called it a return to lax lending standards that would lead to more loans defaulting.
But researchers at the Urban Institute – and, more recently, the chief executive of Fannie Mae – said the latter outcome is unlikely.
…
Researchers at the Urban Institute, trying to pimp Mo Credik perhaps? None of this matters anyway, flippers and infestors are gone and with them 50 percent of the demand. That means Crater.
It’s sad to think of more low income households getting set up as cannon fodder for the next leg down in housing. Presumably the Democrats need a larger victim class to win future elections?
Yes, it is a safe assumption. The larger contributor to the bubble was poor underwriting: lending to buyers who had no ability (or desire) to repay the loan. I don’t believe you see “stated income” loans. Today, you get a thorough exam of your income and assets before you get the loan. That is a HUGE difference over 2007.
Guess again. Although the outcome of the midterm elections may prove a game changer.
It’s worse today Jingle_Fraud. Subprime lending is the norm and has been since 2009.
This is why we see skyrocketing default rates of 2009-2013 mortgages.
“Yes, it is a safe assumption”
It’s the price Jingle, not the underwriting. There is no underwriting now, only procedures to quickly offload hot potatoes to the GSEs. There is no underwriting because banks are not evaluating their risk of not being paid back, they are not lending any of their own money. Solid citizens are buying at prices that will take 20 to 30 years of their gross earnings to pay off, insure, pay taxes and interest on, and maintain.
The subprime crisis was a sliver of the problem. Prime crisis is here now.
It’s no accident that what was once clearly subprime is now considered prime. (3% downpayment)
That and prices 6, 8 or 10 times family income. How in the world is that “Prime”?
It’s all prime to the lenders, as long as it’s backed up by the taxpayers!
smelly mel watts is offering 3% down- to high risk buyers
“The tide has turned and agents are frantically devising new game plans, for their clients and themselves.”
Bahahahahaha … that’s because these real estate pukes have positioned themselves on the wrong end of the business. They get ONE-TIME income in the form of commissions for making RE sales while lenders get ALL-THE-TIME income in the form of interest from the same sales.
And who is it that does all the work in hustling up these sales? Is it the lender? NO! It is not the lender; The lender gets to sit back and relax and wait while the realtor does all the work of prepping and lubing up the homebuying schmuck who is all lathered up and ready to place - WILLINGLY PLACE - his signature on a dotted line that the lender will present to him, a signature that just may indenture the schmuck for thirty years OR MORE to sending much, MUCH, VERY MUCH of his hard earned income to the lender each and every month during these thirty years (or more).
Bahahahahaha … the realtor works and the lender reaps. And it is the same for the homebuying schmuck but in a BIG WAY, a BIGGER WAY, a WAY BIGGER WAY; The homebuying schmuck works - continuously works - for thirty years or more he works and during these thirty years or more the lender reaps and reaps and reaps.
Bahahahahahahaha … life is good and people are smart.
“lubing up” - hahahahahaha!
‘Andy Warren, president of Scottsdale-based Maracay Homes, said the real estate picture has been ebbing and flowing a lot since the recession. Lately, it’s just been ebbing with prices, demand and sales activity having slowed. After the bottom fell out of the Arizona housing market during the recession, there were some gains with investors and flippers feeding on foreclosed and distressed properties.’
‘That spurred some existing homeowners and home builders to jump back into the market. “We had a supply situation that sort of flipped around,” said Warren.’
‘But now the local housing market has slowed down and is expected to remain that way into next year, according to Warren and Arizona State University housing expert Michael Orr. Arizona and Phoenix need more population growth, which has been slow since the recession, and better high-wage job gains to spur home buying.’
‘Warren also wants to see banks ease up on very tight lending in a marketplace where many consumers still have poor credit after the slowdown and those foreclosed on have to wait seven years before again getting a home loan.’
“It feels they just want to give mortgages to no-risk couples,” he said.’
‘In October, 710 permits were issued Valleywide for new houses, according to RL Brown Housing Reports’ latest count released today. That’s down 22 percent from September and down 33 percent from October 2013.’
‘The median price of new homes sold climbed to $308,317, up $12,000 from September.’
‘Veteran Arizona housing analysts Greg Burger and RL Brown say rising new home prices, a lack of demand for new houses farther out and tepid consumer confidence all worked to slow home building and further delaying a long-awaited recover of the industry.’
‘Through October, new home permits in the Phoenix area totaled 11,179. That’s 17 percent off 2013’s pace.’
The new home builders in Phoenix are the worst kind of speculators themselves. Like sharks with no choice but to swim or die.
What’s worse, there’s a lot fewer couples looking to buy nowadays.
I talked with one of those dudes back in 2006 about the incipient crash. Seems he couldn’t see it coming. We may as well have been on different planets so far as reconciling our outlooks on the housing situation.
That’s in reference to PHX hlome builders.
The question is what’s going to happen in 2016,’
answer- plummet
chitown- either join the dnc& union or get shot
From Chicago Business in Illinois. “After flying high in the first half of the year, the downtown apartment market has lost some altitude in the second. All the exuberance has fueled a development boom that will test the market over the next few years. Appraisal Research projects that developers will complete 3,119 apartments downtown in 2015 and 6,400 in 2016, both records for downtown Chicago. ‘The question is what’s going to happen in 2016,’ said Appraisal Research Vice President Ron DeVries. ‘Clearly, there’s going to be an imbalance there.’”
Hmmm….. I see these tower cranes all over the north side of the Loop and wonder who the hell is gonna live in these things? Then it occurred to me - gee open these things up to all the young ‘uns that have a mutt and lo and behold there ya go. But the problem with the mutts is that when taken out for a walk they sh*t and piss all over the streets and sidewalks making the north side of the city like a giant dog urinal. Ah…the pleasure of living in the City of Big Shoulders.
What a ‘housing recovery’ really looks like….
http://profiles.sulekhalive.com/mstore/14421814/albums/default/thumbnailfull/home-prices.jpg
The sharp increase in home prices is seen as a strong indicator of the health of the housing market. The more Americans are willing to pay for houses, the stronger the U.S. economy is.
…. yet housing prices continue to fall.
what an Oxymoron that statement is..
Wouldn’t lower prices mean more to spend, and really help the economy?
Yep. Same goes for lower oil prices.
When both lower oil and housing prices kick in, the economy should finally be on a clear path to recovery.
Homeless children increasing in Southern California
Beau Yarbrough
Posted: 11/18/2014 12:00:20 PM | Updated: 2 days ago
The number of homeless children across the Golden State rose last year according to results of a national report released Monday, especially in hard-hit Southern California, home to the nation’s second-largest school district.
Researchers with the National Center on Family Homelessness found that nearly 2.5 million American children were homeless at some point in 2013. But the state by state report, called “America’s Youngest Outcasts,” showed that California was particularly troublesome because the state accounts for one-fifth of the homeless children.
Nationally, from 2012 to 2013, the number of children experiencing homelessness in the U.S. rose by 8 percent.
In California, which ranked 48th in child homelessness, the rise was 4 percent, increasing from 505,562 in 2012 to 526,708 in 2013.
High rents and affordable housing, as well as more federal government focus and funding, going toward housing veterans and chronically homeless men or women were among the reasons given for the state’s disparity.
…
“We have had the dreaded talk about price drops and incurring costs on improvements that would increase the appeal of the home.”
Denial isn’t working anymore!
That is progress.
The notion that one could make even a partial recovery on more good money thrown at a depreciating asset is ludicrous.
It’s like putting seat covers over torn up seats in a 10 year old car.