The ‘You’ve Got To Get Into The Market Now’ Feeling
A report from the Associated Press. “Real estate has gotten hot again. Home sales are on pace for their best year since 2007. First-time buyers are streaming back into the market. Prices are skyrocketing, aided by a stronger job market and tantalizingly low mortgage rates that are creating pressure for buyers to act fast. More homes are selling at a faster clip. A stunning 28 percent of homes are selling within two weeks, compared to 19 percent before the recession, according to a recent survey by the brokerage Coldwell Banker.”
“Buyers such as Amanda Fyler saw more financial benefits in owning after renting a 400 square-foot studio in Washington, D.C. The 32 year-old nonprofit analyst is in the middle of finalizing the purchase of a two-bedroom condominium. She figures that by renting the extra bedroom, her housing costs will largely stay the same as her current rent. Plus, she will be able to build equity and deduct the interest from her taxes. ‘Otherwise,’ she said, ‘it’s not affordable in this city.’”
The Wall Street Journal. “Many low-down-payment borrowers—including first-time home buyers—are returning to the market, boosting housing but raising concern among skeptics who worry about the risk of such mortgages. Joseph Rowe, 29 years old, bought his first home in Taylors, S.C., in May. Mr. Rowe said that he and his wife made a 3.5% down payment, which he said was all they could afford, and that their mortgage payment on the $163,000, three-bedroom home is only slightly higher than what they paid in rent. He said that they think home prices, which climbed 5% in the past year through April according to the South Carolina Association of Realtors, will continue to rise in their area, reducing the risk of putting so little down.”
“‘I love living in a house as opposed to an apartment. I wish I could have been able to do that earlier. We just didn’t have the money to put down,’ he said.”
“Nina Armah, a 33-year-old account manager, bought a $250,000 studio in Washington, D.C., after finding that her costs to rent a new place would be about as much as her mortgage payment. She said she didn’t have the savings to make a 20% down payment, but was able to effectively put no money down on a home by getting an FHA loan along with a subsidy from a Washington program geared to first-time home buyers. She said she isn’t worried that home prices could drop. ‘I definitely felt that property values were only ever increasing,’ said Ms. Armah. ‘I felt the impending ‘you’ve got to get into the market now’ feeling.’”
The Post and Courier in South Carolina. “Hugo Diedericks, a Realtor with Carolina One west of the Ashley, says he’s ‘relatively new’ to Charleston real estate but is familiar with properties in which local first-time homebuyers would show interest. There are rules of thumb, he says, that first-time homebuyers in the Lowcountry market — or any market, for that matter — can consider. ‘Nowhere in the world has real estate devalued over any 15-year period,’ he says. ‘The value of your home will double every 14 years, based on the last 4 and 14 year cycles.’”
“Moreover, with finance costs still low, ‘Now is a very good time to enter the real estate market. In fact it could still be the best lifetime investment for the average American — that is to purchase your primary residence,’ Diedericks says.”
WFAA in Texas. ” In the southeast corner of Denton County, around Lewisville, The Colony, and Carrollton, real estate broker Christy Thompson has, ‘A list of buyers who are just waiting, and waiting, and waiting.’ But most of the buyers Christy Thompson has dealt with aren’t going to work for any of those big businesses. Investors know the market here will likely only get hotter as workers do start to move in. ‘What I am seeing is a lot of investors,’ she said. ‘A lot of investors buying up the houses, paying cash.’”
The Coloradoan. “It is still beyond hard to find an affordable apartment in Fort Collins. Average rents in March fell to $1,174, down from $1,219 a year ago, but much of that decrease is attributed to a big decrease in northwest Fort Collins, which dropped from $1,407 to $1,017. Hundreds of new student and market-rate apartments are under construction or making their way through the city’s development process. During the early 2000s, the last rental bubble, landlords gave away washers and dryers, free cable or Internet, a free month’s rent and more to draw people to their property.”
“Fort Collins has not seen a significant impact from new construction yet, said Bev Perina of Armadillo Property Management in Fort Collins. ‘I’ve seen two times where we’ve had a huge impact from overbuilding. We’re not there yet, but I think it’s coming.’ Fort Collins is getting its share of investors snapping up rental property, Perina said. ‘Maybe we’ll be just fine and we won’t see a downturn, but it’s possible.’”
The Miami Herald in Florida. “After several years of overheated gains, South Florida real estate may be in for a slowdown. Prices have grown too high and the buyer pool is shrinking, say local brokers who are on the industry’s front lines. And it’s not just the usual summer doldrums. ‘There are too many properties out there that are over-priced,’ said Jeff Morr, an agent at Douglas Elliman and chairman of the Miami Master Brokers Forum. ‘The biggest thing that holds a property from selling is the price.’”
“‘Prices are getting too high,’ agreed Cyril Bijaoui, a broker at Westside Estate Agency, a Los Angeles firm that recently opened a Coral Gables office. ‘Sellers’ expectations about what they can get have gone way up and people smell opportunities. But it’s creating buyer frustration and a definite slowdown.’”
“Rising prices and static salaries have made South Florida one of the least affordable housing markets in the nation — and that’s putting a damper on buyers. ‘The number of showings is not what you’d expect,’ said Liza Mendez, a broker at Pedro Realty. ‘Something’s off. The market talks and we may have to readjust our prices.’”
“The market will need to correct its pricing in order to keep sales moving, said Christopher Zoller, president of the Miami realtor association. ‘Most sellers are realizing that buyers are more educated and more cautious and are shopping around a little harder,’ Zoller said. ‘We’re starting to see sellers getting more realistic on their pricing.’”
Washington DC Housing Prices Fall 6%>/b>
http://www.movoto.com/washington-dc/market-trends/
“She figures that by renting the extra bedroom, her housing costs will largely stay the same as her current rent.”
Roommates for the next 30 years!
“Plus, she will be able to build equity and deduct the interest from her taxes.”
Yes, by doubling the price of her condo by adding interest payments, she can deduct 25% of that extra cost from her taxes. And don’t forget those HA fees. Brilliant.
I hope her new roommate doesn’t murder her while she’s asleep. But still, it’s better than renting.
“build equity’ = something that may (or may not occur) due to the actions of strangers.
Problem is “equity” doesn’t materialize in amounts to offset losses to depreciation. Even under the most ideal conditions.
Senior!
Realtor logic:
“‘Nowhere in the world has real estate devalued over any 15-year period,’ he says. ‘The value of your home will double every 14 years, based on the last 4 and 14 year cycles.’”
I’m convinced. Do you want your 6% now or later?
There is a little more to it than that, if paying a mortgage makes itemizing your taxes worthwhile other things can get deducted from your income too like property taxes, charitable donations, etc….but that being said the value of the deductions is only the difference between itemizing and the standard deduction, realtors and others often talk as though it is the total of itemized deductions which is utter nonsense. When I owned a place the difference worked out to about $250/mo IIRC and covered my property tax and insurance…but interest rates were higher then (from 97-07)
…. which still doesn’t offset the losses to depreciation and paying a 250% premium for a depreciating asset.
“Senior Housing Analyst”
Can I be “Neophyte Housing Analyst”?
You are Senior Redneck Social Analyst
correction, I meant $150/mo in my post above, not $250…
The 32 year-old nonprofit analyst, basing a big purchase when you work for a company that relies on grants and not selling an actual product?
I caught that one too. And she’s counting on renting the extra bedroom. How many other people are putting their eggs in that basket?
When I was a young ‘un, I rented a room from a lady whose husband had moved out. Once I moved in, I understood why he did. That lady was NUTS!
To the point of accusing me of a whole bunch of things that had no basis in reality. Then she threw me out.
A few weeks later, after I found another room in the apartment of a sane person, my ex-landlady’s son informed me that his mom was on leave from her job because she had a nervous breakdown.
I later heard that she moved in with some guy. I have no idea what happened to the house where she was renting the spare room.
If interest on a mortgage is tax deductible, as realtors are fond of saying, then what difference does it make what the interest rate is? Yet in the next sentence, that same realtor will say that now is a great time to buy because interest rates are low. I don’t want to impugn the motives of others, but it’s almost like realtors will say anything to get someone to buy a house.
3% down = fog a mirror
If interest on a mortgage is tax deductible, as realtors are fond of saying, then what difference does it make what the interest rate is?
No one is in a 100% tax rate so it does make a difference.
So you’re saying now is a great time to buy?
Try $ per sq ft
Falling transaction prices my friend.
‘even as the market continues to improve — sales of existing homes in May increased to their highest pace in six years, the National Association of Realtors reported on Monday, and first-timers make up 32 percent of the buyers — it is leaving millions of Americans unwillingly stuck in rental housing.’
‘The nation’s homeownership rate has been falling for eight years, down to 63.7 percent in the first quarter of this year from a peak of over 69 percent in 2004, according to a new report. And while the federal government has created programs to encourage lenders to offer mortgages requiring only a small down payment, the efforts are so nascent that officials won’t say how many people have taken advantage of them.’
http://www.nytimes.com/2015/06/24/business/economy/more-americans-are-renting-and-paying-more-as-homeownership-falls.html?emc=eta1&_r=0
They won’t say? It’s a secret, double secret? Oh well, the media has a little story so off they run. Don’t forget your shoehorn!
This is one of then big lies out there in the media today, that there are all these people who are being kept from buying a home by tight lending standards. It’s just not true.
I cannot remember a time when our lives were so thoroughly dominated by lies. Our economy is sustained by lies, our politics is sustained by lies, and our entire society increasingly depends on lies. Nothing built on a lie survives.
And ironically we have the best lie detection technology and methodology ever. But you will never get around people who want to be loved to.
Lied to
” it is leaving millions of Americans unwillingly stuck in rental housing.’
Better than being stuck with a mortgage you can’t afford.
Millions!
Americans!
Unwillingly!
Stuck!
Gosh this is a threat to national security.
A lot of people’s income streams depend on keeping the home ownership fantasy alive.
ISTR learning, via this blog, that our national rate of homeownership is usually between 62% and 65%. The recent bubble years were an aberration.
w 10yrs gone
peak here was 5/2005
price recording slowed way down so they claim 06 was the peak
‘Italian prosecutors are seeking to indict over 200 people and the Bank of China in connection with a massive money-laundering investigation reported by The Associated Press earlier this month. Prosecutors said more than 4.5 billion euros ($5.1 billion) in proceeds from counterfeiting, prostitution, labor exploitation and tax evasion was sent to China in less than four years using a money-transfer service part-owned by Chinese migrants.’
‘Prosecutors said more than 4.5 billion euros ($5.1 billion) in proceeds from counterfeiting, prostitution, labor exploitation and tax evasion was sent to China in less than four years using a money-transfer service partly owned by Chinese migrants. Nearly half that money was funneled through the Bank of China, which in turn earned over 758,000 euros in commissions, according to Italian investigative documents. Prosecutors said the money had been fractioned into small sums to avoid detection and that the bank’s management and audit staff failed to report suspicious transactions, helping conceal the source and destination of the funds.’
‘In response to AP’s article, China’s state-run Global Times newspaper published a rebuttal, in Chinese, defending the Bank of China and criticizing the AP’s report as “strange.” The article, which was picked up by other Chinese media, quoted a law expert saying that the Bank of China has “no obligation to cooperate with Italian police.”
‘The Bank of China has denied wrongdoing, and lawyers for the money transfer network’s owners have said their clients are not guilty.’
‘Judicial cooperation has become crucial for Beijing, which is pressuring Western governments to help hunt corrupt officials who have fled overseas. President Xi Jinping’s far-reaching anti-graft drive is a top priority for the ruling Communist Party as it seeks to shore up its legitimacy. Beijing has already punished over 100,000 officials for corruption.’
‘In February, Italy extradited a Chinese woman accused of stealing more than 1.4 million yuan ($225,515) during her tenure at a securities company in Heibei province. It was the first time anyone had been extradited from Europe for an economic crime, according to China’s Ministry of Public Security.’
http://www.dailyherald.com/article/20150621/business/306219948
And the Italians hate these blood sucking illegals as much as we do ours!! Ask an Italian about all the foreigners living in Italy and sucking up social services and returning nothing and you will get a look that would terrify a rhino!!
And, following a long tradition, the oligarchs/robber barons/corrupt officials (and their stolen loot) will find a safe haven in the good ol’ US of A.
The way our business and government is run now, they will feel right at home.
The corporate jet OEMs have been bending over forward and backwards, busting azz/transferring jobs and intellectual property to make friends with the Chinese government, to get access to the “Giant Chinese Market”.
Twenty years now, and it’s still a work in progress. Nobody has ever asked whether the Chinese market will EVER develop. After all, the last thing the Chinese want is for the leeches to be able to GTFOOD any time they want.
‘Prices are skyrocketing, aided by a stronger job market and tantalizingly low mortgage rates that are creating pressure for buyers to act fast. More homes are selling at a faster clip. A stunning 28 percent of homes are selling within two weeks, compared to 19 percent before the recession’
And second house sales are the highest since the UHS started keeping track. The WSJ article gives us more of the drip, drip daily lowering of loan standards. Ever wonder what things were like in 2005 or 2006? Just like this. Now where are the posters telling us “there’s no subprime”? Subprime came back in 2014 and we’re half-way through 2015.
https://www.google.com/search?q=stated+income+loans&ie=utf-8&oe=utf-8
With less money down than ever before in history. What can go wrong?
Contra Corner had some interesting views on that WSJ article:
http://davidstockmanscontracorner.com/wall-street-journal-prints-housing-data-whoppers-as-the-housing-industry-pr-firm-it-is/
In summary:
“Meanwhile, the Wall Street Journal pretends to be an unbiased news organization as it continues to report NAR data while acting as a PR firm for its sister company, MOVE Inc. It’s an outrage. But other paid observers (formerly known as journalists or reporters) continue to sleepwalk through this data every month too. All of the mainstream media organizations and their employed lackeys are on the take from the housing industry. They cannot, and will not, report the data without gross bias.”
Been about 6 years since I’ve posted here… followed this blog religiously from 2005-2009 or so watching the crazy then the crash in our area from the sidelines.
I have lurked here recently over the last couple years, but not actively following.
It is amazing to me that we are going through the same exact cycle we did not just 10 years ago. Houses going in a couple days, multiple offers, over asking price, at prices that are so out of reach without “creative” financing/programs.
Seems like we are getting close to the end of this one now, but who knows how much longer it can go. Its been great reading all the comments and following your blog Ben and contributors… appreciate all the insight and comments on this blog!
Welcome back!
Yes - welcome back. I think you’re right, but I remember feeling this same way around 2002 and we still had a good 5 years to go before the “correction” (it wasn’t really a correction).
This housing market is nothing like 2006. The loan underwriting is much more tenacious and thorough. In 2004-5-6 we had stated income, fostering true fraud, fog a mirror financing. The lending I see today requires buyers to prove have the means to repay the loan.
I remember thinking 2002-3 was bubblicious, but is was nothing compared to 4, 5, & 6. I don’t know if we will digress to stated income loans in the next few years, but if you’re waiting for the bust, get some popcorn. It will be a while. We will likely hit a recession in 2016 or so, but it won’t be driven by foreclosures.
You might have a point Jingle_Fraud. Current housing market conditions are far far worse than could have been imagined in 2006.
This is not going to end well for degenerate gamblers like you.
‘2004-5-6 we had stated income’
The Return of Stated Income Loans
October 7, 2014
https://www.mortgageloan.com/return-stated-income-loans-9787
Aug 14, 2014
Stated income loans make comeback as mortgage lenders seek clients
http://www.reuters.com/article/2014/08/14/us-usa-banks-loans-analysis-idUSKBN0GE09Z20140814
“….these aren’t the same products as the so-called “liar loans” that were pervasive before the housing bust.”
The end result is the same Jingle_Fraud. The suckers paid a 250% premium for a depreciating asset.
Look in the mirror.
por que?
bonds in EU countries
why are port/Italy/Spain cheap ?
they’re as fckup as GREeeeeeeeeeeeeeks
Costa Mesa, CA Housing Prices Fall 14%
http://www.zillow.com/costa-mesa-ca-92627/home-values/
There has got to be a reason that the PTB are reigniting “House Bubble, 2.0″.
Take your pick:
- Makes the “book” value of all of those formerly underwater houses (and the attached MBSs) look better on the balance sheet.
- Cleans up the “MERS” mess, by putting those houses under new mortgages.
-By inducing a Beanie Babie-like buying frenzy, banks can offload all of those repo houses at a profit, instead of a loss.
When your choices are either keeping your high dollar income by lying your azz off, or being forced to take a $10/hour McJob like the rest of the wretched refuse…….
Some people’s egos won’t accept that they are part of the great unwashed. So they will lie/steal their azzes off, to retain their perceived upscale existence.
(Like Rachel Dolezai, the -fixr “self identifies” as Black/African-American. Because if you aren’t a 1%er, being a Black/White member of the wretched refuse is a distinction without a difference.)
I vote for number one. Not only was that the Fed’s goal, but the absolute, number-one priority of the Obama Administration was to shore up a tottering elite of financiers that could have been pushed over with a finger in 2009.
All of the above.
I posted this awhile back but it covers the motives for Bubble 2.0 very well and sadly the role of the Fed was about the same nearly a century ago…this excerpt is from “Oil!” by Upton Sinclair, a novel published in 1927 and based on the southern Calif. oil boom and the Teapot Dome scandal. (I read this recently and it no masterpiece but the similarities to today so far as corruption and market manipulation are striking)
“Bunny had a talk with Mr. Irving, who told him that it was the Federal Reserve system at work; a device of the big Wall Street banks, a supposed-to-be government board, but really just a committee of bankers, who had the power to create unlimited new paper money in times of crisis. This money was turned over to the big banks, and in turn loaned by them to the big industries whose securities they held and must protect. So, whenever a panic came, the big fellows were saved, while the little fellows went to the wall.
In this case it was the farmers who were being “deflated.” They were unorganized, and had no one to protect them; they had to dump their crops onto the market, and the prices were tumbling — literally millions of farmers would be bankrupt before this year was by. But the price of manufactured goods would not drop to the same extent, because the big trusts, having the Wall Street banks behind them, could hold onto their stocks. Bunny took this explanation to his father, who passed it on to Mr. Roscoe, who said it was exactly right, by Jees; he knew the bunch that had their fingers in the till of the Federal Reserve bank here on the coast, and they were buying up everything in sight, the blankety-blank-blanks, but they weren’t going to get the Roscoe-Ross properties.”
Another oft-missed classic is Twain’s “The Gilded Age”, with stories about land speculation (buying up land in advance of RR lines/stops) and how people tried to take advantage of gov’t for personal gain.
Nothing ever changes, really . . . especially human nature!
Chinese investors are busy in the Inland Empire.
And in the greater Seattle area as well! Deals, I tell you, deals to be had (when comparing prices to Vancouver, BC and SFO, the other two Chinese outposts on the Left Coast).
Who the h*ll wants to buy in the IE? I grew up out there (Highland)…other than a few spots, most of the area is a dump.
Napa, CA Housing Inventory Skyrockets 47%; Prices Fall
http://www.movoto.com/napa-ca/market-trends/
Man.. I usually read and I don’t post much.
I don’t see how prices would go down. The gov would do anything to stop that. They’ll just keep interest low for a very long time… and subtly reduce the qualifications to buy, lower credit scores, no-down-payment gov grants to buy, etc….
I got a decent downpayment but not going to risk my hard earn money in this inflated market.
I’ll give it one more year and if there isn’t a 20% correction…I might buy with 3.5% or 0% in California and save my savings.
31 years old
100K cash for DP
90K job
I live in California… so it’s a non-recourse state.. if never (refinance) I could walk away if there’s a 40% crash in a few years… (I know it’s wrong to do it) But if I learned anything these past decade is that the people running things are the biggest scam who will do anything to profit and screw the little people…. so f!vK it
EricP,
There is not going to be a 20% correction. Housing will go up for the next 4 years.Buy now and put 3.5% down. It’s low risk with big time equity waiting for you. Most millionaires became rich because they were in Real Estate.
“Most millionaires became rich because they were in Real Estate.”
Yes, ground floor Ponzi participants shine, until they don’t.
At 9x income, a 60% correction is baked in.
If you walk away, you may still owe taxes on the deficiency. You may end up owing tens of thousands of dollars on a house you don’t live in anymore. And the IRS has a long memory. So do collection agencies.
Great point Dman. The only reason people could walk away w/o owing phantom gain on debt forgiveness the last 6 years was due to a temporary law!
US Housing Demand Plunges To 20 Year Low
http://2.bp.blogspot.com/-fqSztKilps8/VFlPKlr52JI/AAAAAAAAhKU/v5oS41S-y0s/s1600/MBANov52014.PNG
interactive map that is interesting - notes the major metros with renters / owners who are price burdened by their crap shacks and rentals. The numbers are a bit eye popping to say the least.
http://harvard-cga.maps.arcgis.com/apps/MapSeries/index.html?appid=0ffea521479a4585b383169bf00e2aa9
I always assumed Chicago was more expensive than Detroit. I never had trouble finding decently priced apartments in the suburbs of Detroit, even in the nicer areas. Maybe it’s the money they’re spending on cars and suv’s they can’t afford that’s the real problem.
Robert Shiller: “Houses Depreciate”
http://www.pragcap.com/robert-shiller-dont-invest-in-housing
Further to the point; there is nothing that makes a person poorer than spending a lifetime of earnings on a depreciating asset like a house.
yikes
For instance, a house in Woodbury, NJ where the:
Average Residential Property Value is: $140,255
Average Net Property Taxes paid: $6,141
That’s almost what I pay in rent. I’ve heard of some McMansions where the heating bill alone was as much as my rent AND utility bills. So they shut rooms for the winter to save money. That’s what happens when you buy a glorified barn.