A Lot Of Speculation In The Marketplace
A report from the Virginian Pilot. “A national research and consulting company says the Hampton Roads real estate market may be approaching another housing bubble. Hampton Roads ‘is starting to show some signs of a bubble,’ said David Macpherson, chief economist for Smithfield & Wainwright. ‘It hasn’t risen up enough to get into the bubble stage, but if it keeps going, then it will be.’”
“According to Smithfield & Wainwright’s report, sales prices in the Virginia Beach metropolitan area for the fourth quarter of 2014 were 14.4 percent higher than what it would cost to rebuild if the homes were destroyed. Regions with ratios higher than 10 percent are considered at risk of forming real estate bubbles, said Hogan Copeland II, chairman of Smithfield & Wainwright. Until 1997, appraisals had to take the cost of rebuilding into account, Copeland said, but laws changed the requirements. ‘There’s no check and balance in there,’ he said.”
“Apparently, we haven’t learned our lesson from the collapse, according to Copeland. ‘I see a lot of speculation in the marketplace,’ he said. ‘Since inventory in certain areas is low, people are starting to bid up on properties again.’”
The Star Telegram in Texas. “New home building permits for Tarrant County rose in April to the second highest number since August of 2014, according to numbers from the Real Estate Center at Texas A&M University. Like many metro areas nationwide, the Tarrant area is showing pent up demand for new homes as well as the need for a larger inventory. Pam Yoakum, a real estate agent in Southlake, said she listed a home two weeks ago for $315,000 and had three offers within six hours. One of the offers was $7,500 higher than the asking price. ‘When properties are priced right, there will be multiple offers,’ Yoakum said, adding however that ‘appraisers are still playing a huge role in getting to closing. More and more, homes are appraising for the sales price.’”
The Aspen Daily News in Colorado. “In the forum broadcast on Aspen Public Radio, city council candidates Mick Ireland and Bert Myrin agreed that the town is in the middle of an affordable housing crisis. Myrin blamed a council decision in 2012 that allowed expanded short-term vacation rentals. Ireland said the problem has less to do with Airbnb-type rentals, and more with global forces of wealth inequality turning properties that once housed locals into second homes. ‘A town without babies, no matter how beautiful or famous or wealthy, has no claim to vitality,’ said Ireland.”
Twin Cities Business in Minnesota. “Downtown Minneapolis has been ground zero for developers of new apartments in recent years. But by the end of March, there were 695 vacant apartment units sitting empty there – enough to fill two larger apartment towers. Minneapolis-based Marquette Advisors reports a vacancy rate of 8.8 percent for downtown Minneapolis at the end of the first quarter in its latest report. That’s up from a vacancy rate of 5 percent during the same time in 2014.”
“Meanwhile, there are several additional apartment buildings still in the development pipeline for downtown. The Marquette Advisors report notes that another 866 new units are expected to open yet this year. For the full year, Marquette Advisors is forecasting that about 3,100 new apartments will open across the Twin Cities. By the end of 2015, that means that more than 10,000 new apartment units will have been completed between 2013 and 2015 across the metro.”
The Real Deal on Florida. “While Palm Beach County’s residential condominium market has rebounded from the worst days of the 2007-09 recession, it has barely treaded water over the past year, data shows. The 12 months ended April 30 saw 11,292 non-foreclosure condo sales, down 3.4 percent from 11,691 in the year-earlier period, according to CoreLogic data compiled by Metrostudy. The average price for new condos plunged 28 percent to $556,818 in the latest period from $769,482 a year ago.”
“‘We’re in the final phase of shaking out inventory from the last cycle,’ said David Cobb, regional director of Metrostudy South Florida. ‘While new construction is pretty muted, the inventory of the last cycle is being absorbed. A lot of re-sales are available.’”
“On the new construction front, Cobb said he knows of only one sizable project currently being built in the county. But plenty more may be on the way. Projects for about 4,000 new condos are underway or in the approval process, according to Jack McCabe, CEO of McCabe Research & Consulting in Deerfield Beach. That pales in comparison to 8,000 in Broward County and 22,000 in Miami-Dade.”
The Daily Pilot in California. “A former co-owner of surf- and skate-wear brand RVCA pleaded not guilty to charges that he bilked his mortgage lender out of more than a half-million dollars when he lied about not being able to repay the loan. In 2010, Conan Hayes persuaded Bank of America to let him sell his Costa Mesa home at a loss, in what’s known as a short sale, even though he had recently sold his stake in RVCA for millions of dollars, according to the Orange County district attorney’s office.”
“According to the district attorney’s office, the short sale of Hayes’ home cost Bank of America $586,245. That was the amount remaining on Hayes’ loan after the sale, but the debt was settled based on the belief that Hayes could not pay, according to prosecutors. Prosecutors say Hayes applied to short-sell the house in 2010 and later told his lender that he was unemployed. He neglected to disclose that he had sold his share of RVCA three months earlier for more than $7.5 million, prosecutors allege. Hayes, 40, could face up to five years in jail if convicted of one felony count of grand theft with a sentencing enhancement for a loss of more than $200,000.”
‘Single-family housing starts increased in April after a slow start to the year. The combination of an abundance of low- and no-downpayment mortgages for today’s buyers; today’s mortgage rates at ultra-low levels; and, a recent surge in buyer foot traffic has kept builder confidence near its highest point since mid-last decade.’
‘The 2015 housing market is building on last year’s positive momentum. Demand for homes continues to outpace supply. This is leading home values higher; and multiple-offer situations continue to be common nationwide.’
‘Thankfully, mortgage guidelines are loosening.’
‘Today’s home buyers have an easier time getting approved for a mortgage as compared to several years ago. Banks are reducing approval standards, lowering minimum credit score requirements, and have made it simpler to get access to low-downpayment mortgages and no-money-down loans.’
‘FHA mortgages are easier for which to qualify, for example.’
‘As compared to the last year, improving market condition have prompted many banks to lower their minimum credit score thresholds. Combined with a reduction in FHA MIP rates, this has put FHA loans within reach of more U.S. buyers; and, Fannie Mae and Freddie Mac continue to support their five percent downpayment mortgage programs.’
”VA loans and USDA loans remain popular, too. Neither requires a downpayment.’
‘VA loans are available to eligible active-duty military personnel, veterans of the armed services, members of the national guard and reserves, and surviving spouses. VA loans offer 100% financing and require no mortgage insurance. Approval standards are flexible and mortgage rates are often lower than with comparable conventional loans.’
‘USDA loans are also no money down.’
‘USDA loans are backed by the U.S. Department of Agriculture and can be used in many rural and suburban areas nationwide. USDA mortgage rates are typically the lowest of all government-backed loans, and mortgage insurance rates are minuscule compared to other low-downpayment programs.’
‘With home prices expected to rise through 2015 and into 2016, the availability of low- and no-downpayment mortgages will be a boon to U.S. buyers — especially if mortgage rates remain low.’
‘Single-family housing starts increased in April after a slow start to the year. The combination of an abundance of low- and no-downpayment mortgages for today’s buyers; today’s mortgage rates at ultra-low levels; and, a recent surge in buyer foot traffic has kept builder confidence near its highest point since mid-last decade.’
Flash backward to 2005. Subprime is back; amnesia and denial, the new black.
They’ve been doing this for months. Almost daily some standard or limit has been eased. Yesterday I read that HARP/HAMP have been extended through 2016.
‘With home prices expected to rise through 2015 and into 2016…’
“a recent surge in buyer foot traffic has kept builder confidence near its highest point since mid-last decade.”
Really??? I’m pretty sure the buyer traffic component of the NAHB sentiment survey clocked in at 39 on Monday, below last month’s 40, and well below the 50 level that demarcates positivity from negativity.
“Prosecutors say Hayes applied to short-sell the house in 2010 and later told his lender that he was unemployed. He neglected to disclose that he had sold his share of RVCA three months earlier for more than $7.5 million, prosecutors allege.”
It was probably one of those companies where they made everyone take ethics training in their off-hours as the owners and executives plundered the business into the ground.
I wouldn’t be surprised if a significant number of short sellers had assets they kept hidden from the banks, especially in California.
I guess it’s perfectly legal, so long as they don’t use the money to start a business.
“According to the district attorney’s office, the short sale of Hayes’ home cost Bank of America $586,245. That was the amount remaining on Hayes’ loan after the sale, but the debt was settled based on the belief that Hayes could not pay, according to prosecutors. Prosecutors say Hayes applied to short-sell the house in 2010 and later told his lender that he was unemployed. He neglected to disclose that he had sold his share of RVCA three months earlier for more than $7.5 million, prosecutors allege. Hayes, 40, could face up to five years in jail if convicted of one felony count of grand theft with a sentencing enhancement for a loss of more than $200,000.”
Let me get this straight:
It is perfectly legal to HELOC yourself to high Heaven, spend your home equity ATM machine money on cars, vacations and other frivolities, dump the home on the lender once the loan is hopelessly underwater, and even write off the taxes on all the home equity ATM income you blew.
Just don’t use the extracted home equity to start up a productive enterprise, as that could land you in prison.
HELOC is the road to recourse.
I think this is why he’s in trouble:
‘later told his lender that he was unemployed. He neglected to disclose that he had sold his share of RVCA three months earlier for more than $7.5 million, prosecutors allege’
Likely both fraudulent & recourse…
I’m sure there’s a fraud clause in any short sale agreement that allows the banks to go after the seller if assets are hidden. There are probably already collection agencies snooping around to see who they can nab.
there’s a fraud clause in any short sale agreement ??
There really is no agreement other than the bank acts to reconvey the note & deed of trust for something short of what they are owed…
If the short seller can be charged criminally, which this guy was, I would be very surprised if the bank couldn’t filed a civil case against him.
Yup. You can bet that every living relative is getting those creepy debt collector calls.
Now I understand. It’s OK to extract all the equity you can and spend it on consumption, only to default on the loan and even get a tax break on the home equity income you extracted.
Just don’t lie to your lender.
…and don’t refinance.
I don’t know what extracting money has to do with it as it doesn’t say he did so. He stopped paying a loan when he had the money. He then lied about his financial situation in a short sale that cost the bank 600k. (He could have walked away, but he just had to do a short sale). A bank which the government backs deposits, BTW. So he basically robbed the bank of 600k. If he had used a gun he’d be facing a lot more than a year.
I see outrageous stuff all the time that doesn’t get pursued. Completely trashing houses, and I mean really expensive damages. I don’t know if I’ve ever read of an FB getting charged with that. Fannie Mae was recently accused of letting foreclosed houses go to pot in minority neighborhoods. There’s plenty of BS going on.
I have never understood what the reason is for the FB to do a short sale, unless there is a fraud buyer.
My understanding from discussion here long ago is that a refi turns a non-recourse loan into a recourse loan. I am not sure how this works.
If he would have used a gun he wouldn’t have got 600k. Much less. But actually, he should have bought a bank. The best way to rob a bank is to own it!!!!
Here is an example of a conviction for an FB trashing a house. The guy was a cop at the time and his wife a Realtor.
http://www.utsandiego.com/news/2012/may/21/ex-cop-wife-convicted-in-house-trashing/
“I don’t know what extracting money has to do with it as it doesn’t say he did so.”
My point was that if you want to stiff your lender on a mortgage loan, you’re much more likely to get away scot free if you extract your home equity and dispose your home equity income stream on luxury consumption until you are broke than if you try to hoard wealth while feigning penury.
I don’t know if I’ve ever read of an FB getting charged with that.
I remember one other FB facing charges, Ben: the one who moved pigs into the house to totally trash it when he let. That one was a sufficiently novel mental-image to really stick in my memory!
I am calling the top of the housing market bubble 2.0, today May 21st 2015. Just like I called Housing Bubble 1.0.
Home $weet Home
Can the FED really create jobs or manage the economy? all I hear on business channels is fed chatter.
Can the FED really create jobs or manage the economy ??
The FED did what the FED is best at…Saving the patient in ICU…Physical policy revamp is whats needed now…As we can see, thats not going to happen with the group we have in Washington..To many divergent positions both physical & philosophical…
Going to take the 2016 election in the Presidential, senate & house to galvanize opinion and set a mandate on which way we are going to go….In the mean time, what you see is what you get…I think thats why the stock market is continuing to do so well…They just don’t see much change coming near term…
There seems to be a lot of confusion between inflation and growth.
What the FED really does is create inflation. It happens to be showing up in risk assets for the most part. Some people win and some people lose.
That’s not inflation Poet.
*Learn* the difference.
Crash and Burn Part II !
It’s an easier call when all the boomeranger’s are rushing back in enabled by financing more than they can afford!
These poor saps will never feel what it’s like to live debt free.
‘High rents are worth it. At least that’s the sentiment of apartment dwellers in New York, San Francisco and Washington, who say they’re more satisfied living in those cities than do renters in far more affordable areas such as Milwaukee, Albuquerque and Detroit.’
‘The finding comes from a survey released Thursday by Apartment List, a San Francisco-based company that helps renters find homes. It dovetails with other evidence that people are spending more on rent yet avoiding home ownership given the high cost of a down payment.’
‘Many renters aspire to own a home. But 70 percent of tenants who dealt with a rent hike in the past two years say they “cannot afford” to buy at this point, according to survey results released Monday by mortgage giant Freddie Mac.’
“We’ve found that rising rents do not appear to be playing a significant role in motivating renters to buy,” David Brickman, an executive vice president at Freddie Mac, said in a statement. “This contradicts what some in the housing market think as they expect more renters ought to be actively looking to purchase a home.”
The rents are driven by the salaries, which are driven by the malinvestment, which is driven by QE.
I can live in SF and make 170k, or I can live in Houston and make 100k. I end up putting about the same in savings either way, but I would be insane to give up SF for Houston.
When the funny money stops flowing, all bets are off.
‘The most current granular neighborhood-by-neighborhood data for San Francisco itself, we go to Paragon Real Estate Group’s May 2015 report, and what we find are vertigo-inducing price increases that have now beautifully spiked.’
‘During the prior nationwide housing bubble that blew up with such fanfare, helped take down the world financial system, and caused central banks and governments to instigate the largest bail-out schemes the world has ever seen – from banks to entire countries – well, during that bubble, while it was still going on, homes in San Francisco reached what afterward were called totally crazy valuations, with the median price topping out in November 2007 at a completely mind-boggling $895,000.’
‘People were shaking their heads at the time. But after the boom came the inevitable bust. By January 2012, the median home price had plunged 31% to $615,000.’
‘By then, the tsunami of money that the Fed had unleashed was already washing over San Francisco from multiple directions: a stock-market and startup boom that the city is so dependent on, a tourist boom from around the world, waves of foreign buyers too, and a veritable flood of nearly free funding. Everything came perfectly together. Over the course of three years and four months, the median home price about doubled to $1,225,000.’
‘From January to April last year, home prices surged 15%. The four-month surge in 2013 hit 20%. But look at that gorgeous 32% spike so far this year!’
‘The median home price is now 37% above the prior-bubble completely mind-boggling median price that afterwards everyone admitted had been based on totally crazy valuations.’
‘Cranes are sprouting in some neighborhoods like mushrooms. Lots that have been vacant for years or decades suddenly see construction work. This place is hopping. According to Paragon’s Housing Construction report: “99% of all new construction being built for sale consists of new and usually high-end condos.”
“New home development often goes through gigantic boom and bust cycles. What complicates the issue for SF developers is that from start to finish, from creating plans for city review to completing construction, the process can easily take 4 to 6 years. Right now, both residential and commercial developers are making enormous bets on a long, sustained, up cycle in the SF economy and real estate market.”
The construction workers are definitely doing good. Steel and glass towers rising up from two dozen places, and renovations of the old houses on almost every street. The city will definitely look nicer after all of this is done… no matter how many lose their shirts.
Starting to see some empty retail spaces in prime areas, eerily similar to when I visited in 2006. I’m guessing we have less than a year before TSHTF.
Yes, I’d be much happier here in Detroit if I was paying three times the rent I’m paying now. I’ll talk with the management company to see if they’ll take the extra money I have no use for.
‘The letter offered Tom Lowrie a $5,000 bonus for listing his Guerneville home with a booming vacation rental management company based in Oregon. Lowrie, who owns a triplex on a once-tranquil bend in the Russian River, found it an offer he could readily refuse.’
‘For one thing, his home was not already listed with another property manager, as required to claim the bonus. For another, he is fed up with the tech-fueled proliferation of vacation rentals in Sonoma County, where more than 2,000 properties that cater to visitors have generated both a tax bonanza and a headache for officials scrambling to deal with the social disruptions.’
“It’s out of control in Sonoma County,” said Lowrie.’
‘The audit also found that more than half of the Sonoma County vacation rental properties listed by Airbnb, the San Francisco-based online rental booking giant, were not registered with the county or paying taxes. Airbnb has about 1,300 listings in the county, according to a company spokeswoman.’
‘Meanwhile, Vacasa is not the only big player in the industry that has an interest in Sonoma County. HomeAway, which bills itself as the “world leader in vacation rentals” with more than 1 million listings in 190 countries, has 1,616 listings in Sonoma County, concentrated in Sonoma Valley, Guerneville and Healdsburg.’
‘Owners of the properties Heather Hanlon, co-owner of Sonoma Valley Escapes manages who live in San Francisco come up for frequent but brief stays, while owners from as far away as New York and Chicago come less often but may stay for months at a time, Hanlon said.’
These people are speculating, pure and simple.
I think most everyone is speculating in stocks and homes. Its the bubble economy. Privatize gains on the way up and then dump losses on taypayers through bailouts. Its been really going on for 15 years now.
I live in Sonoma Co. and I expect that once the county gets their cut the vacation rental business will continue unabated…the county is teetering towards bankruptcy thanks to huge pension increases granted years ago (3% of pay X years of service) but not funded so the county is seeking revenue from fees, etc. Meanwhile we have the worst roads in the greater Bay Area and next month the taxpayers are being asked for a sales tax increase to fix them via a special election…if it passes the additional revenue will go into the general fund but the supervisors assure us that it will be used for road repairs
Anyway, there is an interesting report on the Sonoma Co. financial quagmire at
http://sonomacountytaxpayers.org/pdffiles/SoCo%20Pension%20Crisis%201-27-12.pdf
and from what I’ve read many other counties have painted themselves into a similar corner.
And this is in a well-to-do area. Just imagine what things will be like when all of the bubbles deflate (what do you think - is there a winery bubble also?). This story x1000 across our once-great land.
It’s actually not all that well to do…there are plenty of wealthy people scattered about but the median household income is only about $63K, no way that can support the current median house price of $500K or so, up about 60% from 2011. I’m expecting the echo bubble to pop locally later this year.
maybe march 15 to june 1st should be declared a lemming season. It is here in 22151
as for hampton roads if you deduct one carrier = ghost town
Defective Chinese drywall found in luxury Brickell condo
Miami Herald-May 19, 2015
A luxury condo tower in Brickell has found defective Chinese drywall in 29 of its units — and will have to pay $3.3 million to have it removed and replaced.
Maybe the WTO will rule that we can’t label drywall with the country of origin.
If you bought anything built in the past ten years, people, pull those switch and outlet cover plates and check your copper wire!
Bright shiny bare copper (on switch & outlet terminals) = good.
Crusty, powdery aqua-green bare copper = bad.
The sulphur in the Chinese drywall combines with moisture in the air to form sulphuric acid which corrodes the copper.
^lol
Is there something funny about checking to see if your house is built with defective building materials?
I’m sure all of those people who had LP siding that turned into mush over the past 15-20 years are laughing too (no doubt the builders did however, all the way to the bank, after which they changed their LLC and started all over again).
he thinks he is a contractor among his many titles.
jp, I think the problems might be here;
“the past ten years”
and here;
“aqua-green”
Remember…. houses are depreciating assets that never pay you back.
Redmond, WA List Prices Plummet 14% As Housing Demand Craters To 20 Year Lows
http://www.movoto.com/redmond-wa/market-trends/
I know people who had to replace water pipes in a house built 7 years ago because of defective manufactured pipes. EXPENSIVE.
“Apparently, we haven’t learned our lesson from the collapse, according to Copeland. ‘I see a lot of speculation in the marketplace,’ he said. ‘Since inventory in certain areas is low, people are starting to bid up on properties again.’”
Not only is our country broke but apparently STUPID.
there is no ability to get the counties , or cities , to act toward making homes less expensive.
everything they do to raise the prices of the houses, or properties, gets them more tax money, more fee money, and allows them to spend more money.
they thrive on the fact that low interest, and low closing costs, allows buyers to pay more for homes, driving up the prices and demand, as they know that it will increase their tax revenues.
High prices means, to them, a better county or city, and the fact that it increases homelessness, backruptcy, and foreclosures, is of little interest to the government.
Even bad results will result in them creating more agencies to provide services to those who suffer from the high prices.
I note in paper a couple of days ago, a builder was building homes for low income buyers and they had a cost to build of $365,000 per unit, and the buyer had to take out a mortgage of $150,000 if they had an income of $40,000 per year, for a family of four!
Anticipated payment of $1,500 per month, PTIand fees.
But the project might fail and needs $25,000 more for each home to succeed.
I think I read the same story (or one very similar), also in Sonoma Co…
http://www.pressdemocrat.com/business/3930940-181/funding-for-santa-rosa-affordable
And grossly inflated prices means collapsing demand. See for yourself.
US Housing Demand Plunges To 20 Year Low
http://2.bp.blogspot.com/-fqSztKilps8/VFlPKlr52JI/AAAAAAAAhKU/v5oS41S-y0s/s1600/MBANov52014.PNG
More and more, homes are appraising for the sales price.
That was the money quote, at least IMO. Nice catch, Ben.
With appraisers once again complicit in helping fake valuations to make the loans go through, we are officially fully in the throes of Bubble 2.0.
I am calling the top of “Housing Bubble 2.0″ As I called the last one to within a month of it’s peak.