More Interested In Revenue Than Affordable Housing
Bloomberg reports on Texas. “Millennials overwhelmingly prefer western cities such as Houston and Denver, according to William H. Frey. a demographer at Brookings. The New York City region lost 20,369 millennials from 2010 to 2012, Census Bureau data show. In Austin, millennials have been migrating to the East Side to escape soaring housing prices downtown, displacing black families, said Bo McCarver, board chair of the Blackland Community Development Corporation, which builds low-income housing. ‘We’re inundated with speculators,’ McCarver said. ‘A lot of the new shops aren’t affordable to low-income families.’”
The Tampa Bay Times in Florida. “Under-the-radar rentals have existed in Tampa Bay for decades, but they really started catching fire during Florida’s housing bust. That’s when the practice gained popularity as an income stream for homeowners drowning in mortgage debt. There’s also a proliferation of websites that make it easier than ever to rent out your home for cash. Most violators appearing before the code board say that they had no idea they were doing anything wrong, and that the Realtor who sold them the house told them that they could rent it out weekly. Many of these homes have gone up for sale right after officials summoned their owners to City Hall for a hearing.”
“‘We’ve got a whole lot of people who are trying to skirt the law,’ said Mike Riordon, a member of the code board. ‘The odds of finding people who will rent for a month on a regular basis is not realistic. But the pool of people looking for weekly rentals is huge.’”
The Williston Herald in North Dakota. “Williston has been the fastest growing micropolitan in the country for the past three years, driven largely by the vast reserves of oil trapped in the rocky shale of the Bakken. The slump in oil prices has the energy sector, but a drop from insane growth to only a little bit crazy is something community leaders would welcome. There are 100 new homes, for example, going up north of Williston in spite of the oil price slump, one of many projects still underway. The 100 homes are being built by Mike Dolbec, who says he still sees huge demand for single-family homes. He feels comfortable moving ahead with the investment and doesn’t believe this will be a reprise of the 80s bust.”
“‘I’ve been in North Dakota all my life, so I’ve seen the up and down cycles,’ he said. ‘I don’t think it’s anything like what we’ve faced in the past. There’s too much infrastructure. It’s not going away. Things might slow down for a short period, but I feel it’s going to be crazier than it ever was in a short amount of time.’”
The Arizona Republic. “Some of the 530 property owners in Glendale’s 85302 ZIP code who sold their houses in 2014 may have welcomed a sale price close to what their homes were worth 10 years ago. But that sale price only matches up to the 2004 value on paper. When the effects of inflation are considered, last year’s sellers actually got about 20 percent less for their home. ‘Someone who has seen their income go up 30 to 35 percent won’t find housing more expensive, but those who haven’t seen big income gains will,’ said Mike Orr, director of the Center for Real Estate Theory and Practice at Arizona State University’s W. P. Carey School of Business.”
“Inflation is ‘a factor in individual consumer decision-making. It’s a factor in forecasting. It’s a factor in business planning,’ said Dennis Hoffman, director of the L. William Seidman Research Institute at the W.P. Carey School of Business at Arizona State University. ‘If you’ve got low and falling prices, why buy today when it’s going to be the same or even cheaper next year? So why buy at all? That’s the recipe for a slow economy.’”
The News & Observer in North Carolina. “When Destinee Paez and her husband moved back to the Triangle from Seattle four months ago, they did so in part because they assumed housing would be much more affordable in the Raleigh area. ‘We thought everything would be more affordable. We thought we were going to be able to find a home in the area we really, really were searching for,’ said Paez, 24. ‘The houses here are expensive. They’re nothing compared to when we left three years ago.’”
“That affordable housing hasn’t been a top priority for city officials in recent years isn’t surprising to Lew Schulman, CEO of Builders of Hope, a Raleigh nonprofit that refurbishes homes for low-income families. He said as local governments have emerged from the recession, they have been primarily concerned with raising revenue by broadening the tax base. The federal government, which acquired huge portfolios of distressed real estate when it took over the mortgage giants Fannie Mae and Freddie Mac, has also been focused on getting back the money spent bailing out those entities.”
“‘We really lost a huge opportunity when there was a resetting of market values because the federal government was more interested in recouping revenue than essentially promoting affordable housing,’ Schulman said.”
The Columbus Dispatch in Ohio. “As Ohio spends the last of $570 million in federal money to fight foreclosures, a key question lingers: Did the program work? The program, called the Hardest Hit Fund, helped fewer than half the number the state originally projected and barely made a dent in the foreclosure numbers. ‘It hasn’t worked, and there’s a good reason,’ said Douglas Holtz-Eakin, a former director of the Congressional Budget Offic. ‘Seven billion dollars overall isn’t that much money in a housing market with trillions of dollars in losses.’”
“And, with the program winding down, its most significant potential problem might be emerging: A growing number of homeowners who benefited are slipping into foreclosure as the coverage expires, raising fears that some of the money merely delayed the inevitable.”
“Sandra Mahan, a 73-year-old retired state worker, thought the program would cover the mortgage on her East Side condominium through December of last year, when a car payment expired. Last March, the Hardest Hit Fund spent more than $15,000 to bring Mahan’s mortgage up to date but did not cover her mortgage payments thereafter. Mahan fell behind again and, in December, faced foreclosure on the condo. Although Mahan hopes to work out a settlement with her bank, for now, she said, ‘I’m back where I was.’”
“Almost all homeowners received help in two ways: by having a delinquent mortgage brought into balance and by having a mortgage paid while they searched for a job. Homeowners didn’t see any of the money; it went directly to their banks.”
Boston Metro Sale Prices Plunge 14% YoY; Price Declines Spread
http://www.zillow.com/ma/home-values/
“‘We’re inundated with speculators,’”
Specuvestor money is dumb, borrowed money.
Remember: Never pay more than reproduction costs for a depreciating asset. If you paid more than reproduction costs ($55/square foot), you got ripped off.
What if you want plumbing, a roof, doors and windows?
$55 lol!! this is not 1974 anymore. Wake up HA!
And with materials sinking, it’s even less.
sure, $55 psft for the materials.
Lot, labor, materials and profit my friend.
LOL. maybe in West Virginia, not in coastal CA. Even a POS would be >$90 pr sq ft.
Yes even in the land of fruits and nuts.
that $55 psf number you throw around every few days is simply inaccurate. It’s a sticks and bricks number in some low cost areas, but certainly does not include land, landscaping, some finishings, profit, overhead, sales and marketing or cost of funds.
LOL, got sour grapes?
‘that $55 psf number you throw around every few days is simply inaccurate’
I was able to put together a plan that came in under $50, but didn’t do it because I can buy foreclosures cheaper. I sold the lot, which a bank gave my company for taking the house next to it off their hands in the $20’s/sf. I also saw a builder in expensive Flagstaff beat $50 a couple of years ago. 3 car garage, the works. I realize it hurts to find out how much the REIC has been gouging you, but maybe you should get mad at them.
Sorry Grubber but we’re profitable and so are our competitors at $55/sq ft and have been for years.
You wouldn’t have happened to pay too much for a house did you?
The way I see it, the $55 per square foot number, with lot, is probably doable in most areas of the country outside the bubble centers. The math starts not working in NYC, SF, Seattle, etc.
Works in suburbs commutable to Manhattan.
There’s some classic crat’erin rage developin’ on this here thread.
Maybe if you build it out of recycled bottles and old tires - Taos Style Earth ships!!
I sold my OC townhouse in 2003 for $260 per!
You didn’t do shyeeeat fool.
“…my OC townhouse…”
LMFAO. “The OC.” Say no more…
I stand corrected, I didn’t overpay for a house I just developed 1000+ units of single family detached housing all over Southern California where $55 psf didn’t get you anything more than a finished box (no landscaping, no lot cost, no overhead, nor any 10% + profit, oh and don’t forget about those permit fees which are $10 to $30 psf on a 2000 sq ft house). But I am sure HA can find some Zillow link that explains it all.
You “developed” eh? Right. And what did you mention above? No “marketing”?
Like I said… you didn’t do anything.
Show a single sov… a single take off.
You didn’t build anything.
Oh you got me there. Once again the $55psf number you quote is simply sticks and bricks. I know it disrupts your thesis, but that number doesn’t account for all the other variables in a developer’s proforma. Moreover, you didn’t address the fact that in most western states, Colorado, Arizona, California and Nevada, the building permit fees cost you from $10 psf to $30 psf alone. Just the facts.
You have built shyeeet buddy. Back to $90k building permits are we?
You’re underwater.
‘The 100 homes are being built by Mike Dolbec, who says he still sees huge demand for single-family homes. He feels comfortable moving ahead with the investment and doesn’t believe this will be a reprise of the 80s bust.”
“‘I’ve been in North Dakota all my life, so I’ve seen the up and down cycles,’ he said. ‘I don’t think it’s anything like what we’ve faced in the past. There’s too much infrastructure. It’s not going away.’
Like dirt and livestock farmers, contractors are very good at what they do but are horrible businessmen.
Welcome to 2015 Mike….. Happy New Year!
Update: Crude Oil Sinks Through Support; Down 45% YoY
http://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic
Affordable =taxpayer subsidized
“Inflation is ‘a factor in individual consumer decision-making. It’s a factor in forecasting. It’s a factor in business planning,’ said Dennis Hoffman, director of the L. William Seidman Research Institute at the W.P. Carey School of Business at Arizona State University. ‘If you’ve got low and falling prices, why buy today when it’s going to be the same or even cheaper next year? So why buy at all? That’s the recipe for a slow economy.’”
If this is true then it follows that the reverse is true, that the recipe for a “fast” economy is high and rising prices.
And this is really stupid if one ever took the time to sit down and think about it but nevertheless this seems to be the thinking.
Personally it like the concept of “flation” - which is neither inflation or deflation but something that is right in the middle of the two.
If flation was the rule - the goal - then there wouldn’t be all these distortions in the economy that are driven by the anticipation of future rising or future falling prices.
But flation isn’t the goal, instead inflation is the goal. With inflation everything somehow becomes wonderful once again.
“As Ohio spends the last of $570 million in federal money to fight foreclosures, a key question lingers: Did the program work?”
It did for me.
“A growing number of homeowners who benefited are slipping into foreclosure as the coverage expires, raising fears that some of the money merely delayed the inevitable.”
Delaying the inevitable means somebody took care of the house my bank owns and treated it with tender loving care as if it was they who were the true owners.
“Almost all homeowners received help in two ways: by having a delinquent mortgage brought into balance and by having a mortgage paid while they searched for a job. Homeowners didn’t see any of the money; it went directly to their banks.”
You can’t lose with the stuff I use. In this case what I used was taxpayer’s money and also the hopes of the schmucks that took good care of a house that belongs to my bank, and if and when it suits me I will not hesitate to toss their asses out into the street.
Everytime I read the Mr. Banker posts I picture him as the villain (Professor Fate) from the movie The Great Race starring Tony Curtis . Black top hat, cape, handlebar mustache….Rubbing his hands together saying “PUSH THE BUTTON MAX “.
‘I picture him as the villain (Professor Fate) from the movie The Great Race ‘
That movie gave me nightmares as a little kid. Mr. Banker is as scary as the Chitty Chitty Bang Bang child catcher and Phil Spector.
‘A few weeks ago, a man walked into Command Center, a temporary labor and staffing service in downtown Dickinson, and said he needed a job after being laid off from a high-paying position on an oil rig.’
‘The man said he’d only work for $35 an hour, needed a minimum of 50 hours guaranteed each week, and wanted his housing paid for along with a $150 a day per diem.’
‘After realizing the man wasn’t joking, staffing specialist Rena Olheiser responded in the kindest manner she could muster. “Well, good luck with that,” she said with a smile.’
‘The days of high wages, overtime, free meals and company housing for many oil workers in the Bakken are coming to an end. At least for now. This is especially true around Dickinson, where there isn’t a drilling rig within 50 miles and likely won’t be until the price of oil climbs back to levels oil companies deem profitable.’
“I tell them here, ‘Everyone is expendable. Everyone,’” said Kristen Vesledahl, Command Center’s branch manager.’
‘A week after first coming to Command Center, the same man who walked in all but demanding another high-paying oil job came back still in need of work. That day, he took a position that paid $12.75 an hour.’
‘For some, Vesledahl said, “there’s nothing better out there.”
I see posters saying, ‘I wish this bubble would hurry up and pop.’
If the rough times are coming, they’ll get here soon enough. Are you preparing? Because for some reason, people forget what all is involved.
I think the time for preparation has long since passed.
I see posters saying, ‘I wish this bubble would hurry up and pop.’.Are you preparing ??
I remember September of 2008 vividly….The financial system went into valve lock…Big & Little projects underway came to a screeching halt…Just like the guy going to the command center for work, the weeks following the meltdown, there was no work…It was like flipping a light switch…Most everyone that I know in business were in disbelief…
If it were to happen again, many here that suggest that would be their buying opportunity are full of hot air IMO…You would be so scared about your job or income that whatever reserves you have would be in a lock-box under the bed because, those reserves could be the only thing that would save your a$$…The last thing your going to do is go buy a house with it…
Not everyone is broke, indebted and penniless Dave.
+1
Wishful thinking Realtor Dave. Very secure job. Just need prices not to be outrageous and have some tether to income. Not everyone is a realtor or in mortgage banking or home construction.
What jobs are safe in a depression?
What jobs are safe in a depression ??
+1…Exactly…Just BS…
When housing last dropped there was no depression. Just prices 30 percent plus less. No massive unemployment. Stop your scare nonsense. Lotsa fat trimmed is all.
Are we talking about a house price drop of 30%, or a wholesale liquidation of debt? Because while I agree the former is no real big deal, the latter would be literally a whole new ball game.
What jobs are safe in a wholesale liquidation of debt? I’m asking out of curiosity, not fear-mongering. Personally, I would almost like to see it, as I feel that I’ve positioned myself accordingly. But part of that position is realizing my employment would probably change in some way, if not end in its current form.
No massive unemployment. Stop your scare nonsense. Lotsa fat trimmed is all ??
Well, you were probably in Jr. High school at the time so what is there to be afraid of right;
Sep 25, 2008 - “If money isn’t loosened up, this sucker could go down,” President Bush declared Thursday as he watched the $700 billion bailout package fall
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=3&cad=rja&uact=8&ved=0CC4QFjAC&url=http%3A%2F%2Fwww.nytimes.com%2F2008%2F09%2F26%2Fbusiness%2F26bailout.html%3Fpagewanted%3Dall&ei=iJs_VZPFAqznsATnkoHgDQ&usg=AFQjCNHuFk5Y7N58PXvixawYu_21hAi94w&sig2=RwMzf6tN8lkauSKP9aqW1g&bvm=bv.91665533,d.cWc
We only have two choices, ever higher crazy housing prices or the great depression times 100. Sure.
Nonsense Dave. The job losses already occurred.
See for yourself;
Labor Force Participation Rate Plummets To 18 Year Lows
http://data.bls.gov/timeseries/LNS11300000
Just need prices not to be outrageous and have some tether to income.
Considering today’s lower rates and a standard two incomes, prices do tether to income. A 29-30 newlywed couple making $50K each can afford a $300K house, easily. That will buy an SFH in all but the hottest markets. If they give up the grand wedding, they’ll have a good down payment too. Yes, it will be a starter home,* but for them, $50K is a starter income. They can trade up later.
—————
* 1950-1980 ranches and capes, the kind that people “used to” live in before the advent of the McMansion. [News Flash -- people still live in those smaller homes.]
There goes The Donk forming her own reality again.
‘the weeks following the meltdown’
I seem to recall it being bit longer than weeks.
I was talking with someone recently that works in a “cloud” operation. Discussing it, I couldn’t understand what’s new. A building with servers and generators and batteries, leasing server space. Hasn’t that been around for over a decade or more? That’s exactly what this blog is hosted at. I was told, ‘I get paid $33 an hour and mostly I sit around watching netflix.’
OK, I hope that continues. I mentioned, the cloud space seems a little crowded.
Yesterday I saw a bio-tech stock drop 80%. It’s probably hard to turn those frowns upside-down this morning.
Easy money sloshing around feels really good at the time. It might feel so good that one could forget it can’t last.
I seem to recall it being bit longer than weeks ??
I was not suggesting it was only a few weeks Ben…It was years really…I was trying to re-visit the level of “fear” in those first few weeks…
“valve lock”
If there were to be an economic seizure and mass liquidation of the indebted, and one had more cash than they needed to maintain their already low cost lifestyle, it would be best to pick up some distressed assets that would increase in value over time or produce a steady income. What that might be I have no idea, but a house doesn’t fit the bill.
The best preparation is always not to need much, and to owe nothing.
If there were to be an economic seizure and mass liquidation of the indebted ??
There was…September of 2008 and the years following..Auctions on Yachts were everywhere…They were cheap dirt cheap…Did you buy ??
I already had a nice one, bought with a little cash in a market that credit couldn’t enter.
Would a houseboat suffice for your current lifestyle and area or do you need something more seaworthy, Blue Skye? You’re on a cabin cruiser, IIRC?
“The best preparation is always not to need much, and to owe nothing.”
That’s absolutely great advice, but it’s a tough sell to most people. It’s a principle my wife and I have always adhered to.
“The best preparation is always not to need much, and to owe nothing.” ??
Not needing much is a great virtue…To not “owe” anything is quite different…Try running a business and not owe anything…Most business have debt either by choice or necessity…
Yes I’m on a cruiser Oddfellow, it’s a compromise between having room and being able to go on big water. A houseboat can offer more living space for the same overall length, so sure. That’s fine for protected water, like a river or canal system. I wouldn’t cross Lake Ontario in something topheavy like a pontoon houseboat. In some river systems, people choose barges. Lots of room and no need for an engine if you aren’t going anywhere.
Thinking of joining the River Rats?
“Thinking of joining the River Rats?”
I kick the idea around some. Both as a retirement and a SHTF option. I like the idea of cruising the Great Lakes,and connected canals and lakes in the summer,then cruising down the Mississippi for the winter.
“down the Mississippi for the winter”
Consider 1 mpg for the average cabin cruiser, less for a houseboat.
I agree that a house wouldn’t fit the bill as a distressed asset for sale or rent. But purchasing a small homestead/Oil City house may work.
Not sure whether a houseboat would work as a SHTF option. How would you eat or bring in income, except hiding a stash of gold on the boat?
Most business have debt either by choice or necessity…
Business’ worth their salt and have been around 15 years or longer have learned to grow slow without using debt. It’s proven and can be done…fortitude and diligence.
A Wall Street collapse will not be visible from my boat.
“1 mpg for the average cabin cruiser, less for a houseboat.”
Maybe I’ll pole it down the river, like old Huck Finn.
http://www.amazon.com/All-The-Way-Water-Mississippi/dp/0615720714
I recall someone saying that if you are aren’t scared out of your wits when making investments in a downturn, then you probably aren’t really being “contrarian” enough.
At my most scared, I remember taking the most cash I could out of banks daily. But I also remember buying quite a bit of stock that has ended up being a 6x for me, and others that were merely a 4x.
Buying when sh*tting your pants was lucrative, but not fun.
As I recall, you said you paid some massively inflated price for a house.
‘if you are aren’t scared out of your wits when making investments’
You probably are gambling, not investing.
Measured confidence still applies even in a downturn. But it’s a heck of lot easier when your debt free and can pay in cash.
“You probably are gambling, not investing.”
Rental Watch is a riverboat gambler who tries to attach fundamentals to his “earnings.”
Sitting on a LOT of cash, dave. I’ll pay cash for the house, and have plenty to spare.
I am ready for the pop. Bring it.
What do you mean concerning the preparations?
House prices just need to drop 30 percent to back where they were 3 years ago. And this time there needs to be inventory that a regular buyer can get, not these specials trickled out to friends and insiders.
House prices just need to drop 30 percent to back where they were 3 years ago ??
Yeah, well then why didn’t you buy then ?? You speak to your gold plated job but you didn’t buy did you ?? Scaredy-cat…You my friend are the “Hot-Air” I speak of…
I didn’t buy because I changed cities and needed to know the area where I moved before locking in for many years. The place I moved to shot up very quickly thereafter. Double digit gains every year for 3 years, which is the definition of a bubble. It’s now dropping again albeit more slowly until TSHTF later this year, maybe.
I’ll answer that for you Dave.
Nobody bought then because housing was still overpriced 200%.
Catching on yet?
If there were to be an economic seizure and mass liquidation of the indebted ??
There was…September of 2008 and the years following..Auctions on Yachts were everywhere…They were cheap dirt cheap…Did you buy ??
++
I was thinking the same thing. I missed the deals 4 yrs ago. Could not qualify for a home loan (even with 30% down) as I own my own business and do all I can to keep my taxes low (if ya know what I mean).
There were no “deals” 4 years ago.
I tried to buy a bank owned rental in Lompoc, CA for $95k in 2011. Could not qualify, it sold again last year for $165k. Even had positive cash flow at $165k with today’s rates. Not a nice place to live though. Looks like it was a “deal” as the seller’s bank account grew. (appreciation)
People overplaying with OPM.
That’s right. Overplay and overpay. Never a positive outcome with depreciating assets like houses.
So, if the price of a house dropped to where it was 3 years ago, would you have to borrow for 30 years to buy it? Could you still afford it with a minimum wage job? Would you still be happy a few years later if another 50% rolled off house prices?
So, if ??
With “So If” we can create any scenario that we want can’t we…If one is complaining that the price needs to get back to where it was 3 years ago, and crows about his Bullet-Proof job, then I ask, why did you not buy then ?? My answer is, “Hot Air”…Scared…All talk….No action…pathological whiner…
Maybe he was between bullet-proof jobs.
Lotsa anger at people who have secure jobs.
Maybe ??
Maybe….If….If….Maybe…
There’s no such thing as a bullet-proof job. The only things you can count on are your skills, knowledge, and friends.
How about “Yeah, well then”.
” The only things you can count on are your skills, knowledge, and friends.”
That was the point I was trying to make. I can think of very few jobs that are bullet-proof, but I can think of skills and knowledge and connections that are likely to find employment even after a bust. I’ve tried to acquire a few.
In 2006-2008, people said on this board that home prices needed to fall considerably for the bubble to pop. Then prices collapsed, 50% in some places, 25-30% in others.
YET, despite the correctly predicted correction actually having occurred, people who were buying 3 years ago were still being ridiculed here, with commentary that the bubble had not yet popped.
And I’m guessing that many people on this board who were (and are) the source of the ridicule would state that people who bought at those times were “lucky”, not “wise”.
I think many folks, drunk on being right once on the housing bubble, are looking forward to being right again, yet no one is considering the very meaningful differences between today and 2006-2008.
1. Credit conditions are MUCH different;
2. New home construction is still VERY depressed.
On an inflation-adjusted basis (and even nominally), we have not come close to the bubble prices of the last peak in most markets.
The next correction will not be as extreme as the last, and will be more akin to a traditional housing correction. But it’s not going to happen in 2015, or even 2016. There is simply too little inventory.
…. and housing was still inflated by 200% or more in 2008.
Further;
1) Current resale prices are 250% higher than long term inflation adjusted trend and 2x construction costs(lot, labor, materials, profit)
2) There are 25 million excess, empty and defaulted houses out there.
3) Subprime lending is larger in scope today than it has ever been.
YET, despite the correctly predicted correction actually having occurred, people who were buying 3 years ago were still being ridiculed here, with commentary that the bubble had not yet popped.”
3 years ago and then investors poured in.
‘3 years ago were still being ridiculed here’
You guys are living in an alternative reality. Have you not read this blog or understood anything in the past few years?
Degenerate gamblers will always be ridiculed.
An arrested partial correction will not do. It is like a hangover treated with more drinking. We cannot have a recovery until the mania is brought all the way down. We’re not looking for doom and gloom, we’re looking forward to recovery.
“bullet-proof job”
If you are chem/phys certified, or even willing to try, I can put you to work for the rest of your life in a high needs school.
Muggy,
Sometimes I think I would like to be an old fashioned shop teacher, but then I realize I am becoming entirely irresponsible.
“an alternative reality”
It is amazing. Many apparently do not even read the sign over the door on their way in.
“Sometimes I think I would like to be an old fashioned shop teacher, but then I realize I am becoming entirely irresponsible.”
Part of being an old-fashioned shop teacher is being irresponsible!
Btw, I took Wood I, II, III, and IV in high school. I absolutely loved it. My brother-in-law is a luthier in NY and is a very happy guy.
When I’m not day-dreaming about being rich and not-working, I daydream about perhaps a more reasonable thing: joining a community shop and teaching my kids to make furniture.
Great conversations occur over a bad cut.
Off-topic (for woodworkers)
http://www.veilletteguitars.com/index.shtml
This guy is down the street from me and makes cool stuff (Florida Adirondack chairs) http://www.islandtimedesign.com/index.php?option=com_virtuemart&page=shop.browse&category_id=6&Itemid=26
No relation, simply sharing
Yes, I’ve heard the theory that cheap debt propped up home prices and kept them from finding their natural bottom.
However, as I’ve said (over and over again) buying homes using leverage when prices are falling is suicide, and thus people weren’t doing it. The floor in prices was formed when cash buyers came in and bought WITHOUT leverage based on rental yields.
And when you look at the long-term inflation adjusted Shiller data (see Shiller’s Yale webpage), the bottom reached was consistent with prior troughs.
In other words, commentary that low interest rates somehow kept prices from falling to their natural bottom is not supported by the Shiller data.
However, low interest rates DID cause prices to rocket back up far faster than they should have, and now we are back at prices consistent with a peak, and prices will need to correct (at some point) from here.
It is hard for me to see how the correction will occur without significantly more inventory, and that inventory isn’t being built. So, I think we are in for a couple of years of high home prices until housing development increases at least back to “normal” levels.
On a related note:
The Census released their housing inventory data again today:
Year on year, we added just under 500k housing units (133.1MM increased to 133.6MM).
Year on year, there are just under 1.5MM more occupied housing units (114.75MM increased to 116.25MM).
You neglected to mention CB data shows 18 million excess empty houses and that’s only what they’re admitting.
And no Rental_Fraud….. resale housing prices never reached their long term trend price. Even in 2009/2010 prices were still 200% higher than long term trend.
Housing prices will bottom out inevitably but they haven’t yet. This we know.
Agree, a 30% + drop locally (Calif. wine country) would get me back in the market and buying vs. renting would make sense for me again. I did spend a year trying to buy in 2011/2012 but it was virtually impossible with a preapproved conventional mortgage and 20% down, my offers were ignored in favor of 100% cash buyers several times. Gave up in disgust after a year of wasted time and disappointments. I did buy once before in a normal market in 1997 and it was relatively easy…looked at about 10 houses, made two offers, one was rejected and one was accepted…and that was with a VA/GI Bill loan.
Even with a 30% decline in CA, housing would still be massively overpriced. A 65%-75% decline is might come close to a number worthy of consideration.
I did spend a year trying to buy in 2011/2012 but it was virtually impossible with a pre-approved conventional mortgage and 20% down, my offers were ignored in favor of 100% cash buyers several times.
When my LL offered to sell to me in 2012, I couldn’t bring myself to pay 27% over market (what he owed.) Well, it’s gone up another 28% over what he wanted. I’m sure he’s no longer underwater; I guess we haven’t gotten the boot because we’re covering all his expenses (LL is not greedy - no increase in rent for four+ years; we don’t give him any trouble.) If I was wild about the place and the neighborhood, I’d feel really ill.
My own LL offered to sell to me a few year back but I’m in a duplex and no way in hell I want to be a LL myself, especially with the tenants next door…but am in the part of town I like, have a humungous garage for my toys, and have only had one 5% rent hike in 6 years so life is good. I’ll keep renting until the fundamentals make sense for buying, FWIW one I especially like is price being equal or less than 10 years rent.
good point, and we tend to think we are the only ones with cash sitting on the sidelines.
The oil industry is somewhat lucky lately, what with crude ignoring a massive glut and returning to almost $60 per barrel. $60 per barrel is A LOT, still.
$12.75 an hour wouldn’t keep me in the North Dakota oil patch very long.
‘NYSE margin debt rose to an all-time high in March, according to recently released data from the stock exchange. But far from being a warning that stocks are getting frothy, some traders are using the news as a positive indicator for the market.’
‘At the end of March, NYSE margin debt sat at $476.4 billion, up from $464.9 billion at the end of February. And the wrinkle is that margin debt rose during the month of March even as the S&P 500 dipped nearly 2 percent.’
‘Margin debt tends to be highly correlated with the level of the market. Higher prices tend to spur more buying-and similarly, more buying on margin tends to spur higher prices. That’s what makes the recent divergence between the S&P and margin debt levels notable.’
‘But rather than interpret it as a sign that market sentiment is getting frothy, Erin Gibbs, S&P Capital IQ’s equity chief investment officer, says it’s actually a good sign.’
‘Looking at a long-term chart comparing the S&P 500 and margin debt, “We definitely see that sentiment starts to turn first, and then we see the market go down,” Gibbs said. “So I’d be more worried about margin debt being lowered and seeing a downtrend than seeing new highs. New highs don’t concern me.”
‘Of course, not all traders use measures like margin debt to help them determine their next maneuver.’
“It’s one of those things, like the put/call ratio, that’s only the tip of the iceberg,” said Dennis Davitt of Harvest Volatility Advisors. “Plus, I only know what I have in my pocket. If I start trading based on what I think other people have in their pocket, then what am I really doing? I’m no longer investing, I’m speculating.”
‘NYSE margin debt rose to an all-time high in March ??
Couple that with the fact that equity flows out of stocks and flows into bonds have decoupled….Equity flows into the market have turned downward in a pretty significant manner…At the same time the bond market has gone up…Money managers are nervous…
These guys think they can’t lose. Also, given the alleged use of certain substances by individuals in that line of work, I have to ask this question: are they high? That would explain why they feel so bulletproof.
They’re not deep thinkers, a lot of them. Already reading stories of them going out and buying $60k trucks in the face of potential job loss. That’s preparation!
I think I would go work at Costco in Miami and enjoy the Latinas.
‘The man said he’d only work for $35 an hour, needed a minimum of 50 hours guaranteed each week, and wanted his housing paid for along with a $150 a day per diem.’
He doesn’t understand what kind of jobs temp labor staffing agencies offer, does he? Or that most of his oil rig skills aren’t very transferable to non oil rig jobs. I’m actually surprised he found something for $12.75/hr as opposed to minimum wage.
The funny thing is that wherever he came from even 12.75/hr would probably be a good wage. But he believed that he merited all he was asking for in a post bust economy.
I’m not sure what would be worse, living on a rig or living in a trailer in sub-zero conditions. But I wouldn’t do either one for $12.75/hr.
That guy just had the best economics lesson of his life. It reminds me of an experience I had in college, trying to re-sell a $25 science textbook once the semester had concluded. I’d purchased it new, and had highlighted it moderately. The first student bookstore offered $3. I refused. But no other bookstore would offer anything at all, so I returned to the first place. The same employee was behind the counter. He smirked, and offered me $2. I accepted.
Exactly right.
Another way to look at is;
Get what you can get for your depreciating house today because it’s going to be much less tomorrow for decades to come.
“He believes that Williston’s economy will continue to emerge despite the downturn in oil. Especially if the city builds the kind of things that create desire in people to buy homes and locate in the area.”
Surely the mild climate will attract families.
Nobody goes here anymore. It’s too crowded.
Housing to 7 Year Highs…
From our friends at Zero Hedge:
http://www.zerohedge.com/news/2015-04-28/february-home-prices-jump-7-year-highs#comments
February. It’s almost May.
‘Building more new homes would help boost supply, but home construction has been weak. Developers are focused increasingly on building more expensive homes for wealthier buyers and on apartments.’
‘Steady home price gains are likely pricing many Americans out of the market. Paychecks are rising at a much slower pace than price increases, even as employers have stepped up hiring in the past year.’
There sure is a sudden focus on prices and incomes in the media lately.
‘Distressed Sales Account for 14 Percent of U.S. Home Sales in February’
‘At its peak, distressed sales totaled 32.4 percent of all sales in January 2009, with REO sales representing 27.9 percent of that share. The ongoing shift away from REO sales is a driver of improving home prices, as bank-owned properties typically sell at a larger discount than short sales. There will always be some amount of distress in the housing market, and by comparison, the pre-crisis share of distressed sales was traditionally about 2 percent.’
And this is during the boom. It is different this time.
‘Prices of new homes have zoomed higher over the past few years. One big driver: the growing size of the American home.’
‘Economists at CoreLogic last year concluded that around half of the 18% gain in new-home prices between 2010 and 2013 stemmed from changes in the size and quality of new homes, which are laden with more amenities such as fireplaces, walk-in closets, and additional rooms.’
‘The phenomenon of more expensive—and bigger—homes isn’t brand new, of course. Before the housing bubble, home sizes grew steadily every year. Tom Lawler, an independent housing economist in Leesburg, Va., recently used the constant-quality price index to examine home prices going back to 1970.’
‘Last year, new homes sold for an average $343,000, more than double what they sold for in 1970 after adjusting for inflation. His analysis showed that if builders had sold homes with similar characteristics to those sold in 1970, average prices would have been much lower, at around $199,000. That is up just 23% from 1970 after adjusting for inflation.’
‘Mr. Lawler does wonder why average new-home sizes have swelled over a period in which the average American household has gotten smaller. Half of all homes built last year had more than 2,415 square feet, an increase of 55% from 1,560 square feet in 1974.’
‘Government housing policies may be responsible for some of this trend, he says. Beginning in the 1990s, government-supported lending programs encouraged homeownership with easier underwriting standards, including lower down payments and relaxed debt-to-income requirements. Falling interest rates, meanwhile, have helped households qualify for more debt without increasing their monthly payments.’
‘The tax code—via the mortgage-interest deduction—also rewards households that take on more debt. In 1986, Congress eliminated the ability to deduct interest on credit cards and other consumer loans but left it intact for mortgages. These policies, Mr. Lawler wrote, “helped enable those households who wanted to increase their investment in housing as an asset, rather than pay less for housing save more of their homes.”
‘The trend in larger homes over the last few years is more pronounced because builders have been building far fewer homes. One possibility is that builders have focused on larger homes because those offer better margins. A more troubling possibility is that they’ve abandoned the entry-level market because demand simply isn’t there.’
I’ve often wondered why the demand for McMansions… My wife and I would love to find a nice, modest home at 1,500 SF or less. But they are definitely hard if not impossible to find in the Denver area with new construction.
The houses being built in my neighborhood are approaching, and in some cases surpassing, the size of houses built in 2005. There’s a titanic one under construction a few streets down that looks to be at least 5,000 square feet. These monumental structures are replacing 3/2, 1,600-square foot houses.
The distortion of scale has been epic. From the contrast with the older homes, you’d think that we had become a very different people from who we were before, and you’d be right. It’s been a disappointment, to say the least, especially after 2008. I thought we were better than this, and we aren’t.
‘why the demand for McMansions’
If a $200k house will go up in price, a $500k house will go up even more. So goes the thinking.
Snake charmer, I wonder if you and I live in the same neighborhood!
I live in NW Denver, now known as “The Highlands”. There are many older, historic homes that are being converted to monster houses by knocking the top off and building vertically. Many of them are just grotesque, don’t fit into the neighborhood at all, and are insanely expensive (IMO) for a North Denver neighborhood that just a few years ago was crime ridden.
“If a $200k house will go up in price, a $500k house will go up even more. So goes the thinking.”
Exactly. And a Mcmansion let’s you ‘invest’ in real estate without having to find tenants or unclog someone else’s toilet.
Look - in major metro areas with hot housing markets, it just doesn’t pencil out to build 1500sf ramblers.
You pay $500K for a lot or teardown. You spend $250K to build the house, and then you put it on the market for $900K.
Just like the automakers have figured out, the builders have too - you can’t make any money selling economy cars or entry-level homes.
Nonsense.
Anyone can contract a 1500sq ft structure. Anyone.
“Builders”? lol
I think some of these huge homes are planning on having 3 generations of Chinese living there. In Silicon Valley and The OC anyway.
I get that a builder feels the bottom-line need to put a big, expensive house on land that was expensive to buy. But what bothers me is that these houses were sold to builders in the first place.
I hate big houses. Big cleaning, big repairs, big costs, big everything. Under 1000 sq ft suits me just fine. I like to be able to clean quickly. It’s really only a place for me to sleep.
Id rather be in an 800 sq ft beach house than a 3000 sq ft McMansion in the Valley. True, it is for sleeping when the weather is this good.
BIG house
http://www.tampabay.com/news/business/realestate/construction-on-phillies-slugger-ryan-howards-belleair-shore-home-nearing/2191704
Yeah, I’ve read about that one. The pro athlete syndrome of living like royalty. And the guy’s career, while very successful, is nearing its end, although I saw that he still has $60 million remaining on a guaranteed contract.
I’ve ridden my bicycle by Jeter’s house on Davis Island, which is the size of a Barnes & Noble. Of course the most infamous athlete property in this area is the former Matt Geiger house, which finally sold a few years ago. He had zoo animals, a lake stocked with bass, a pool with a cliff dive, a theatre, discotheque, forty televisions, everything. Twenty-eight thousand square feet.
The tax code—via the mortgage-interest deduction—also rewards households that take on more debt ??
Not for much longer IMO…Maybe couple years…Goes bye-bye in tax reform…
One possibility is that builders have focused on larger homes because those offer better margins ??
No question about it….Add more sheetrock & walls……
The MID is a tax dodge. Since when has a tax dodge ever gone away?
Interest paid on personal credit cards used to be tax deductible.
Since when has a tax dodge ever gone away ??
1986 Tax Reform Act…..CRUSHED tax dodging Limited Partnerships…
Things that go bump in the night:
http://finance.yahoo.com/echarts?s=HLSS+Interactive#
‘A new study by the California Housing Partnership found that the state’s lowest-income households spend two-thirds of their income on housing, leaving little money for food, healthcare, transportation and other needs.’
‘And 1.5 million low-income households — half of them in Los Angeles and Orange counties and the Inland Empire — do not have access to housing they can afford.’
‘The share of people living below the poverty line in California climbs to 22%, from 16.2% in federal reports. In high-cost Orange County, including housing costs nearly doubles the poverty rate, to 24.3%.’
Someone was saying being in debt is good when governments can print money:
‘The abrupt closure of for-profit Corinthian Colleges Inc. may cost U.S. taxpayers more than $200 million in canceled student loans. Katie Chambers, 28, who took night classes at Corinthian’s Everest campus in City of Industry, California, until March, learned Sunday that the program was going to close altogether. Although just six courses shy of her paralegal degree, she said she probably won’t continue and would try to get all her student loans canceled.’
“Our credits are useless,” said Chambers, who has about $20,000 in federal loans and more in private borrowing. “I don’t think any of my units are going to transfer.”
‘Chambers works as an administrative assistant at a manufacturing company that makes product displays for stores. She took courses for 15 months toward an associate’s degree and stopped attending after one of her night classes was moved to 5 p.m. and teachers and administrators stopped answering questions.’
“Before all this happened, I thought I was going to go to law school,” she said. “It’s 15 months later, nothing has changed and I’m stuck in the same spot, with loans.”
Nobody forced that young woman to go $20,000+ in debt to obtain a paralegal degree from a for-profit college, but the conclusion that this is a racket is hard to avoid. Do you even need a degree to be a paralegal?
The selling point that For profit schools use is that they will try to place you, and claim to be really good at it (no promises, though!)
crater
…. and crater to you.
I thought you had to be a Saudi and have lunch with the Bush family once in a while to be a success in Houston?
I don’t live in Houston, but is that city truly popular with millennials? I am a Gen-Xer and have been there on a couple of occasions. It wasn’t for me, at all.
Just one person’s observation, but I’ve never seen so many obese people as I did there. A fitness magazine once crowned Houston “America’s Fattest City.”
http://tinyurl.com/kmcomy9
Houston attracts people with jobs. It’s like Atlanta, I don’t think anyone moves there for pleasure or interest.
Bellevue, WA Sale Prices Crumble 10% YoY; Inventory Balloons As Sellers Slash
http://www.zillow.com/bellevue-wa-98005/home-values/
Dude,
Get over yourself. Bellevue is one of the hottest markets in the Seattle area. Very popular with Chinese buyers.
Stop posting bogus data. Pick cities with real issues, like Detroit.
And prices are falling across WA state.
Your point?
With results in from 47 percent of S&P 500 companies as of Tuesday, first-quarter earnings are expected to have risen 0.02 percent from a year ago,
WTF? rally mode
As a retired Appraiser for the State, and FHA I am unable to figure out how to appraise a home today.
It is easy to appraise homes in a rising market, static market, hard to appraise in a falling market, I know those markets
But what do you do when the demand flucuates on the basis of cost of money? There is no way to calculate the effect of interest rates on the demand part of the market. At least that I can figure out
And it is especially hard when the reproduction cost falls on the basis of interest declines, but the prices rise on the basis of increased demands based on lower costs of money, and the market prices of houses rise on the increased demand which lowers the demand, forcing buyers into rental situations, which cause the rental inome basis to rise.
All subject to governmental rules and requlations that force construction prices up or down.
What fun!
I used to tell the buyers that it does not make any difference to them as to what I value a home at, as it was their decision to buy at their contracted price.
“Appraise”?
The worth of a house doesn’t change based on a “rising” or “falling” market.
“Many of these homes have gone up for sale right after officials summoned their owners to City Hall for a hearing.”
“‘We’ve got a whole lot of people who are trying to skirt the law”
My crazy Cuban neighbor is one of these guys. He tried to sell, couldn’t, and now does short-term leases. He even concocted a BS story about being an approved provider for the State Dep., housing spies and their families. He asked us not to tell anyone. Lol…
More accidental landlords in the pipeline.