They Gambled And Lost
KUNC reports on Colorado. “Northern Colorado is the fastest growing part of a fast-growing state. While growth is often seen as good for the economy, the speed of the change is creating a housing crunch. From Denver to Fort Collins, renters and buyers are being squeezed. If wages don’t start to catch up with home prices, said economist Richard Wobbekind, of the University of Colorado’s Leeds School of Business, that might be a cause for concern. Wages have not increased significantly over the past five years, but housing prices for both renting and buying have been going up for several years.”
“‘You have people saying $400,000 for a home is a reasonable entry level. That is a lot of money even with great mortgage rates. It’s a scary picture,’ he said.”
Bloomberg on New York. “Newly constructed luxury condominiums are proliferating in Manhattan, creating an excess of high-priced homes for sale at a time of limited supply for buyers seeking more affordable options. Listings for at least $10 million jumped 41 percent in the first quarter from a year earlier. The number of apartments on the market for $5 million to $10 million rose 31 percent to 915. With high-end apartments being added to the market faster than they’re selling, the stage is set for some of Manhattan’s priciest projects to take years to sell out, said Jonathan Miller, president of Miller Samuel.”
“‘The sense of urgency is not there because there’s a lot more competition to consider,’ he said. ‘This product will have a much longer absorption period than was originally penciled in.’”
The Sidney Herald in Montana. “The recent drop in oil prices has caused a tremendous shift in the oil industry in eastern Montana. The rest of the economy has yet to feel the impacts of this downturn, although skyrocketing prices in other markets have leveled off. ‘(Real estate) is a pretty good barometer of the overall economy,’ Beagle Properties’ owner Leif Anderson said. ‘We’ve seen no evidence yet that (real estate) prices have gone down any, but they definitely have leveled out. They are not going straight up like they have been for quite a while now.’”
The Midland Reporter Telegram in Texas. “Only 86 Midland homes were sold in February, the fewest homes sold during a month since January 2010, according to data from the Real Estate Center at Texas A&M. Real estate inventory grew to 866 listings, a number last reached in February 1994. Jim Gaines with the Real Estate Center, said the economic impact of the drop in the price of oil is starting to be reflected in the local real estate market. ‘That tells me that there is nervousness in the market on the part of sellers, that if I got a house or I just bought it a couple of years ago … I may be looking at a down market here in terms of demand for the next several years,’ he said. ‘If I want to sell or if I think I need to sell or if I think I’m in danger of losing my job, then I better sell my house before I have real problems.’”
“When referring to the data from February, Gaines said ‘the dominos are falling, and maybe this month was the first month of seeing that in the actual data.’”
The Globe and Mail in Canada. “In the spring of 2013, the pair settled on a 1954-era house in St. Andrew’s Heights in the inner-city northwest. They plunked down $950,000 for the house and the lot – opting to tear down and re-build a 3,200 square foot modern home. Upward markets bolstered the couple’s confidence their suburban residence would sell within a year. The following month it sold for $1.3-million. Only now they were stuck; their dream house wouldn’t be ready for two years.”
“Mrs. Onslow`s employer had just built an upscale 2,000 square foot, two-storey, three-bedroom, duplex in Killarney, close to downtown, in the city’s southwest, which she designed. The listing price was $900,000. The couple got a deal for $150,000 less than asking. Things were looking rosy. Selling in suburbia had been a breeze so, naturally, they thought, this too would be a cinch. The couple would certainly recoup the house’s original $900,000 value.”
“When oil took a nosedive, toward the end of last year, the Onslows were gobsmacked. In every market downturn there are people who get caught in the undertow. By January the neighbours sold their adjacent duplex for $840,000. The Onslows dropped their price to $829,000, and then further to $795,000 four weeks ago when a conditional offer finally came through. The couple know they gambled and lost. They could have sold last year and rented a place to live in while their new home was built. ‘The whole situation irks me with what has happened to the value of the homes in Calgary,’ Ms. Onslow says. ‘I know the value of this home. I designed it. … We didn’t get as much for it as we could have or should have.”
From CNBC. “More home buyers enter the market this spring, but big banks are continuing their retreat from mortgage lending. That is opening the door ever wider for independent, nonbank lenders. Nonbank lending rose to 37.5 percent of the market during 2014, up from 14 percent in 2011, according to publication Inside Mortgage Finance. ‘That was attributable to a combination of nonbanks being more aggressive, both in terms of rates and underwriting, and large banks pulling back slightly in the conforming markets,’ Editor Guy Cecala said.”
“The leaders in nonbank growth were names like Quicken and Penny Mac as well as other smaller nonbanks, like Charlotte, North Carolina-based Movement Mortgage. Nonbank lenders still sell the vast majority of their loans to Fannie Mae and Freddie Mac, so they must comply with their underwriting and capital standards. ‘We don’t want to go back to the subprime days, when we were extending credit to the wrong folks, but we do want to make sure we’re extending credit to those borrowers who do have the ability and capacity to repay the loans but may just not have traditionally documentable income,’ said Casey Crawford, CEO of Movement Mortgage.”
Bellevue, WA List Prices Plunge 13% YoY; Inventory Skyrockets
http://www.zillow.com/bellevue-wa-98005/home-values/
‘I know the value of this home. I designed it.’
You didn’t “design” shit. You picked a floor plan, colors and asked the contractor to move a few wall partitions around.
The Onslows are definitely red meat for HBB. They are “irked” about the house prices? Awww.
She has no idea the resources that went into it. None. Sounds familiar.
“They could have sold last year and rented a place to live in while their new home was built.”
For not spending $10,000 in rent they lost $100,000 in the value of their house. But at least they didn’t throw their money away - renting bad, buying good.
Basically living in a flip. It would have paid off if oil had stayed high.
But where is the money coming from to afford million dollar homes? Are oil people really making $300-$400K in the freaking snow?
Prices would have cratered irrespective of oil. We’re already seeing it in areas without the economic boost from oil.
+1 - being an architect - these bozos who go to the tile show room at the behest of the builder class do not have a clue of the cost.
I personally still find it amazing that a new home - standard build - is well over 200 bucks a foot on a die cut lot - that just amazes me. This market is severely warped / manipulated by the builder / banker class looking to pick the pockets of the unknowing.
WronGo.
With over 17 mil vacant units? WronGo - really?
Affirming your comments that there are many vacant housing units - there is a table - table seven in the attached article - buried in the text well worth a look see - HA is correct according to the census estimates.
http://davidstockmanscontracorner.com/the-illusion-of-recovery-five-reasons-why-obama-yellen-should-stop-crowing/
Misread your post.
Layers of pickpockets and tollbooths get you to the inflated unit prices. It’s not always the result of contractors.
Zillow change predictions and ignoring oil cities,just offers “state of tx” as a result
My hood now possitive. 22151
The question becomes;
Why did you pay multiples of production cost(lot, labor, materials, profit) for a used item?
‘Real estate reports released Wednesday found that sales prices for Manhattan homes have evened out, signaling a favorable market for home buyers.’
‘Real estate group Douglas Elliman’s report for the first quarter of 2015 found the average sales price was roughly $1.733 million, a 2.3% decline from the same period in 2014 and a 0.4% drop from the fourth quarter.’
‘Diane M. Ramirez, Halstead Property’s CEO, said experts predicted prices would flatten out around this time, and that “buyers who have been waiting on the sidelines” should start looking now. “New York remains a unique marketplace: We are a global city with a booming economy, low mortgage rates and we have quality housing,” she said.’
‘Buyers have a stocked inventory to choose from as well, according to the Elliman report.’
But aren’t they running out of land in Manhattan, and it’s a shortage and there are lots of high paying jobs/everyone wants to live there?
‘What is more notable about the findings, said Miller, who compiled the data, is that there’s a year-over-year lowering values in sales for the previous 3 quarters, says New York Mag. It is a major concern because in The Real Deal article he said, that’s the “third consecutive quarter that saw a double-digit decline.”
‘Miller stated that transactions dropped by almost 20 percent from 2014 Q1’s recorded 3,307 closing transactions to 2015 Q1 data of 2,661 closing transactions. There was also a drop of sales in the the new development market, from 2014 Q1 to this year’s first quarter, showing a 16.8 percent decrease.’
‘The appraiser explains to The New York Mag the findings saying, “In 2013 and the first half of 2104, we had this excess demand that began with Lehman and ended with the fiscal cliff of the end of 2012. We had unusually heavy sales volume. And now, it seems, that surge may be over.”
‘Based on a RealtyTrac report, RISMedia notes that San Francisco had a 39 percent increase in home prices from 2012 to 2014 and belonged to the top 25 cities with highest home appreciation in the said period. It was also part of the group of housing markets with home price increase outpacing wage growth. In San Francisco’s case, wage hike was 7.1 percent,making its home price increase outpace wage hike by more than five times. San Francisco was also part of the list of 45 metros deemed unaffordable.’
‘Now, it’s time for San Francisco to celebrate, even a little. S&P/Case-Shiller Home Price Indices said San Francisco reported the biggest monthly dip of 0.86 percent of all the 20 metropolitan regions surveyed in the study for the January 2015 period.’
‘According to the National Association of Realtors®, San Francisco’s average home price in the last quarter just a year ago was $742,900. A light dip from this high price may be beneficial to make this city affordable.’
‘There were other cities which have lower home price indices such as Seattle (0.52 percent) and Washington DC (0.51 percent) from the reported data.’
It’s all just a big casino for the UHS. They say ‘celebrate’ a price drop, then throw this in at the end:
‘However, it is important to note that the dip in home price indices was just based on January 2015 released data. As spring selling season starts, home prices are expected to rise again soon. Hopefully, San Francisco would still continue to receive good news.’
spring sales suddenly perky in 22151
Zillow also changed predictions to positive from neg-
Mr Banker -can I refy my used car to go all in on GoDaddy ?
“Mr Banker -can I refy my used car to go all in on GoDaddy ?”
But of course. GoDaddy or any other venture you care to participate in.
Come visit me today and ask for “The Dotted Line Special” and I will be happy to serve to you a FREE CUP OF COFFEE!
All I need from you is the title to your car, your blood type, and verification that all your body parts are in marketable condition.
Bubble list, over-the-top AP stories on cars/condos, check.
‘The wow factor for Miami’s skyscraper condos no longer comes from a dazzling Atlantic Ocean view. It takes something more audacious to sell beachfront property these days to the global ultra-wealthy who arrive in Miami with millions to spend on second or third homes. It takes words invested with meaning in the language of the international jet set: Porsche. Giorgio Armani. Fendi.’
‘The pull is so powerful that developer Gil Dezer’s Porsche Design Tower is mostly sold-out, even though construction won’t wrap until early 2016, meaning that most buyers committed millions based on blueprints.’
‘Shaped like a piston driven into sand, the concrete-and-glass Porsche Design Tower will contain three car elevators. Each can whisk a convertible up 60 stories and then slide it into the owner’s personal steel-reinforced garage. (The owner can stay in the driver’s seat.) Inside the apartments, curved windows capture a vista of waves billowing from a midnight blue into a pale green along the shore.’
‘Their emergence has spawned thousands of skilled construction jobs. Yet it’s also produced an epic surge in home prices. And it’s walled off Miami’s coastline behind a phalanx of skyscrapers that has isolated low- and middle-income residents. Many have had to buy farther and farther inland, said Aaron Drucker, a managing agent for Redfin, the real estate brokerage.’
“Locals are not really part of the party,” Drucker said. “It’s a little bittersweet for folks who aren’t going to be able to enjoy the beauty of Miami.”
‘Demand from European and South American buyers caused prices for the top 5 percent of homes around Miami Beach to surge 66 percent in the past year to $6.3 million, according to Redfin. That compares with a 5 percent increase in luxury prices nationwide. Miami Beach’s gains dwarfed the price increases of top-tier homes in San Francisco, Los Angeles and Washington D.C.’
“The typical metrics used to measure real estate markets - such as local job growth - don’t apply here,” said Neisen Kasdin, a former Miami Beach mayor and lawyer who represents developers of the Faena District. “I’ve never seen this congregation of wealth before.”
‘Yet Dezer also pitches Miami as a bargain compared with other global cities. The average Miami Beach condo sells for roughly $760 a square foot, according to the brokerage Christie’s International. That makes it cheaper than a comparable pad in Monaco, New York City, London, Moscow, Paris and Beijing.’
‘With only so much oceanfront, the condos should become a scarce resource that appreciates over time, Dezer said. This makes these buildings a store of value, though association fees and taxes can cost $300,000 a year, according to estimates by the real estate lawyer Kasdin.’
‘In some cases, the condo has even insulated buyers from the devaluation of foreign currencies against the dollar. A Russian who bought a $1 million home in Miami last year would have spent the equivalent of 34 million rubles. Because the ruble has plunged since then, that home is worth roughly 60 million rubles. A similar trend has played out for the euro, the Brazilian real and the Colombian peso.’
“People look at these apartments as bank accounts,” Dezer said.’
About this:
‘association fees and taxes can cost $300,000 a year’
Wouldn’t these fees be priced in US dollars too?
‘With only so much oceanfront, the condos should become a scarce resource that appreciates over time,’
A strange statement when you think about it. I’ll wager there were periods when the land price plummeted to near nothing. Now it’s going to ‘appreciate’ after assembling some depreciating materials on it?
Makes no sense.
It makes at least a little sense if you catch the underlying meaning of marketing copy like
‘Shaped like a piston driven into sand, the concrete-and-glass Porsche Design Tower will contain three car elevators. Each can whisk a convertible up 60 stories and then slide it into the owner’s personal steel-reinforced garage.
I’m pretty sure that little ditty was NOT written by the reporter, and it shows us what they guys are really buying.
What’s the point of moving a car around like that? Think of the wasted energy and maintenance involved. IIRC, the last car condo in Florida never got built. There was an art condo too. I don’t think it went anywhere. I’ve often wondered if the safe deposit condos in Toronto sold out.
Ben, these folks don’t need to use car elevators. They need to SAY that they use car elevators. Same reason they bid up Monet paintings to $200M or need to make $30 million for making a movie or lobby for $99 million for a couple years of playing QB. It’s the bragging rights.
I read that in the paper this morning. There’s also a video. Is it really OK that locals are forced out of neighborhoods in favor of foreign buyers who are laundering money or hedging against currency movements? We heedlessly seem to be recreating the living arrangements of the Titanic. Yeah, I’d say that’s “a little bittersweet for folks.”
The use of a consumer brand to name the buildings really creeps me out. The former mayor has “never seen a concentration of wealth like this.” I’ve never seen excess like this.
non banks- does fme-fre still back this crap via taxpayers?
yep
‘we’re extending credit to those borrowers who do have the ability and capacity to repay the loans but may just not have traditionally documentable income’
Check.
And requiring only 3.5% down payment. But this is merely a mechanism that leads to the problem of price which is 300% higher than long term trend and 2x reproduction costs.
There is no re-do for that magnitude of a mistake. It’s over.
“It’s a scary picture,’ he said.”
And there you have the summation of the US economy and the housing market in just a few words.
‘Second-home buyers from Cape Cod and New York’s Hamptons to Miami and Lake Tahoe, California, are returning to the housing market as surging stock prices, job growth and low interest rates boost purchasing power and consumer confidence. U.S. vacation-property sales jumped 57 percent last year to an estimated 1.13 million, a record in data going back to 2003, the National Association of Realtors said in a report.’
‘The increase in sales of new and existing vacation homes coincides with a 7.4 percent drop in deals for investment properties, to 1.02 million, as rising prices cut into potential profits. Purchases of owner-occupied homes fell almost 13 percent to 3.23 million, the Realtors group said.’
‘Vacation-home buyers had a median household income of $94,380, up from $85,600 in 2013, and the typical property was 200 miles (320 kilometers) away from a buyer’s primary residence. About 40 percent of purchases were in beach areas, 19 percent were in the country and 17 percent were in the mountains.’
‘Vacation homes accounted for 21 percent of all transactions last year, the most since the National Association of Realtors survey was first conducted 12 years ago.’
“We knew the fundamentals for vacation-home sales were greatly improving in 2014,” Lawrence Yun, the group’s chief economist, said in a telephone interview. “I did not expect it would be this big of an increase. It shows the buyers perceive that economic conditions will be solid for upcoming years.”
‘the National Association of Realtors said in a report.’’
Similar to their reports that overstated housing demand every month for 4 years straight.
People with a household income of just under $100K can afford both a primary residence AND beachfront property? These people really are degenerate gamblers.
The problem is they paid a grossly inflated price for a depreciating asset, a house in this case.
‘prices have gone down any, but they definitely have leveled out. They are not going straight up like they have been for quite a while now’
First prices level out, then they get leveled…we’ve seen the movie just a few years back.
Interesting to see yet another Colorado headline on HBB. I have absolutely no idea how these people are affording these things… I look around my neighborhood in North Denver (Highlands), and wonder are there really this many people that can afford $400k houses, several $40k+ cars, kids, and going out to eat all the time?
What’s the best way to see what the true housing demand is for a local area?
They can’t afford it. That’s why they’re all strung out on debt.
Find falling housing demand here
http://www.zillow.com/research/data/
I have a friend who sees the same thing in Northern VA. All his neighbors appear to bring in ~$170K household income, but they live in a $600K house and have the same trappings of a high-maintenance lifewstyle: expensive cars, kids, trips, maids, dogwalkers, etc. He thinks that the only way they do it is to not save anything for retirement.
gov workers never get fired so they can spend every dime.
no worries
Northern VA is almost entirely defense contractors. Probably all 401K based.
The run-of-the-mill gov workers are in MD. And in case you’ve been under a rock for the past 30 years, fedgov pension maxes out at ~$30K/year. Better hope you have a paid-off house by then.
“A paid off house” at a grossly inflated price is what kind of loss?
I look around my neighborhood in North Denver (Highlands), and wonder are there really this many people that can afford $400k houses, several $40k+ cars, kids, and going out to eat all the time?
What’s the best way to see what the true housing demand is for a local area?
Serial refi’ers. It works until housing prices stop rising.
Not really.
The proposed debtor just has to be paying off the principal at a faster rate than prices are falling.
It’s like 2008 could never happen again. Debt donkey junkies just can’t stop.
‘How Bernanke Robbed Senior Citizens’
‘The Very Dangerous Logic of Ben Bernanke’
‘We don’t want to go back to the subprime days, when we were extending credit to the wrong folks, but we do want to make sure we’re extending credit to those borrowers who do have the ability and capacity to repay the loans but may just not have traditionally documentable income,’
No-doc is back!
Is it fair to say that the difference between 3.5% down and 0% down is 0? Afterall, the reappearance and impending implosion of the new economic paradigm seems to make it so.
Honestly, no. 0% down means you can bid up to inifinity. Can’t do that even if there’s a teeny bit down.
No-doc is back!
The Return of the NINJA loan. Proof of income? Not required, we’ll take your word, just sign here. If this cycle is like the previous one, the next crash shouldn’t be too far off.
History seems to be more than just rhyming this time ’round.
‘Although the number of property transaction decreased by nearly half year-on-year during the first two months of this year, a real estate agency believes sales will pick up from the second quarter’
‘The city’s real estate market remained becalmed during the first quarter of this year mirroring the slowdown of the economy and declining gaming revenues, the veteran managing director of RicaCorp (Macau) Properties Ltd., Jane Liu, said, predicting, however, that the number of property transactions may start increasing from this month.’
“With the quiet atmosphere of the real estate market, the asking prices of landlords have eased, [which has triggered] two extreme types of investors - those investing in very low quality products and very high quality properties, respectively. As such, most of the users are observing the market, hoping housing prices will drop further, which has led to the number of transactions not being high [in the first quarter],” Ms. Liu wrote summarising the real estate market for March.’
‘The much-ballyhooed “soft landing” in real estate may already be underway, Bank of Montreal says, as booming price gains in two of Canada’s three biggest housing markets are the exception rather than the rule in the rest of the country.’
‘In three-quarters of the 26 biggest metropolitan areas in Canada, average gains top out at about four per cent, and are actually contracting in many places.’
“Suffice it to say that strong Canadian home price gains are now almost purely a two-city phenomenon, and the so-called soft landing (harder in Alberta and Saskatchewan) is well underway across most of the country,” Kavcic says.’
‘Montreal, Canada’s second-largest real estate market, is one of the areas where the average house price across all categories of housing is already in decline, with the MLS HPI down 0.3 per cent in March, according to CREA. Moncton, N.B., and Regina are also in negative territory.’
‘Although it’s still in the black on an annual basis, new data out of Calgary on Thursday shows that city’s average house price has now declined for two months in a row as the impact of cheap oil filters through the broader economy.’
‘Even in Toronto and Vancouver, the price picture isn’t rosy across the board. While the much-revered single family home continues to inflate further and further out of reach for many (the average single-family home price is up 25 per cent in Toronto since 2012, condo sales make up an increasing percentage of the total housing stock, and prices aren’t rising by as much as many seem to think. A construction boom has flooded the market with new stock, and that has kept a lid on price increases.’
‘There were 57,000 condo units under construction in Toronto at the end of last year. That contrasts with just 7,200 single-family homes being built — the largest gap between those two types of housing since the 1960s, and a sign that the housing market really is different this time.’
57,000 condo units, just 7,200 single-family homes.
Man they hate landscaping. Green on the ground means no green in the pocket.
The phrase “soft landing” is one I associate with David Lereah:
“Lereah declared that the market adjustment was in fact expected, ‘with a soft landing in sight for the housing sector.’ The normalization should give investors and industry players hope, one presumes, as he added that, ‘The level of home sales activity is now at a sustainable level, and is likely to pick up a bit in the months ahead.’”
http://tinyurl.com/lmw7oby
It’s beyond embarrassing that this jargon is resurfacing. And this is from one of the “big five” Canadian banks.