An Ongoing Eventuality
The Dallas Morning News reports from Texas. “North Texas’ hot summer housing market racked up more big gains in August. Real estate agents last month sold 10,223 preowned single-family homes through their multiple listing service. It was the third month in a row that resales in North Texas topped 10,000 — a new record. ‘Everything we are hearing from the Realtors and the builders is the demand remains very strong,’ said housing analyst David Brown with Metrostudy Inc. ‘A lot of times when a home is formally listed for sale it’s already under contract. One reason the resale market is staying so strong is the new home market is getting so expensive. The median price of new homes is pushing toward the $300,000 level.’”
From D Magazine. “There was an interesting article in Monday’s Dallas Morning News that seemed to unintentionally make a case against the suburbs even though it was optimistic with regards to reporting on the suburbs’ success. The story is about the little town of Prosper, just north of Frisco. Reading about Prosper, which sits almost exactly halfway between downtown Dallas and the Red River, about 42 miles from each, makes our whole style of growth sound a bit like a massive pyramid scheme. The article makes clear that entire system is contingent on road expansion that hooks cheap and available raw land up to the economic engine. But can that kind of growth go on forever?”
“Maybe the answer is actually in the article, offered by a major Collin County landowner who is bullish about new developments. [Rex] Glendenning, the Celina land broker and third-generation rancher in northern Collin County, sees almost limitless possibilities. ‘The market seems to be stable and growth and population trends are going in the right direction,’ he said. ‘I think where we are today in North Texas, especially in North Dallas, we’re going to see the same kind of growth California experienced in the ’60s, ’70s and into the ’80s.’”
The Houston Chronicle. “Like much of the rest of Houston, the Katy area has been dealing with a slowdown in home sales and new housing starts this year. As oil and gas companies announced more layoffs over the summer, the volatility has impacted the housing market in an area closely tied to the energy industry. ‘This has been an ongoing eventuality,’ said Aaron Layman, a Realtor in Katy who said he was not surprised. ‘Probably right around January or February is when we really started to see it hit,’ he said of communities around Katy and west Houston.”
“Christi Borden, a Realtor with Better Homes and Gardens Real Estate Gary Greene, said she’s seen the slowdown affect clients. ‘You’ve got buyers and sellers who just don’t know what’s going to happen tomorrow,’ she said. ‘I think a lot of them are very reticent. I just walked out of a home of clients who want to buy a larger home, and I said we may want to wait until January just to see how this plays out.’”
“‘We’re seeing a lot of new stuff coming,’ said Borden of planned developments like Cane Island, but she said builders seem to be holding off. ‘I don’t see any speculative houses,’ she said. Still, she said, ‘There’s so many choices for a buyer that they didn’t have last year in August. I would say the majority of my clients are involved in the industry. I have two sons involved in the industry. My husband works for petrochemical and speaking to a lot of folks, it’s not going to end yet,’ Borden said. ‘It’s going to be ongoing. We need to be prepared for it.’”
From 740 KTRH. “The years-long real estate boom in Houston may finally be coming to an end, according to some new figures. While earlier reports suggested Houston’s real estate market was withstanding the oil decline, the effects are now starting to show. ‘I’m seeing not only new construction not being bought up, but I’m seeing a slowdown in the resale market,’ says Michael Weaster, realtor with Xcel Properties in Houston. ‘There are more houses coming on the market, and I see prices either stabilizing or coming down…I’m having trouble getting some of my listings sold.’”
“Weaster says it was only matter of time before all of the recent layoffs in the energy industry brought on by the drop in oil prices started to trickle down to housing. ‘It’s got to mean something when Chevron announces all these layoffs, Shell announces all these layoffs in the energy business—these jobs are not replaceable.’ And with the price of oil showing no indication of a significant increase anytime soon, Weaster predicts home sales and prices will continue to decline in Houston for the near future. ‘They say Houston isn’t tied to oil as much as it was in the 80s, but that just isn’t true in my opinion,’ he says.”
From The Paper. “With property listings fluctuating as wildly as the New York Stock Exchange, the temptation for those wishing to sell their homes to act rashly might prove too strong. However, according to a real estate expert who has a talent for deciphering trends, homeowners in The Woodlands area should take note that, a new real estate crisis is on its way, common sense and prudence could save them untold grief and money. ‘It’s not like the tremendous crash that occurred in 2008,’ said area Realtor Kimberly Nicole. ‘But it’s not the time to sell. Not yet.’”
“A housing bubble, Nicole explains, is essentially supply in the real estate market outstripping demand. This has to do with fluctuations of the type that have been particularly seen in the oil industry, where builders built homes without enough people to live in them. ‘We have abundance of inventory,’ she said. ‘And due to layoffs, and the oil prices going down, there are not enough buyers.’”
“‘If homeowners don’t have to sell, don’t do it,’ she said. ‘You don’t lose money on an investment you don’t sell. It’s a buyer’s market being affected by the oil prices going down, and because it’s an election year. When that happens, interest rates increase, and now we have more inventory than buyers.’”
“You’re not going to get top dollar for your home right now. If you try to sell it at a higher price point, it’s not going to sell, and will simply add to a flooded market. But you can still come out on top. You can get more than you did six months ago, and the market’s recovering, but if you absolutely need to sell, sell it quick. Don’t go with an agent that will list the property at whatever price you say. It will flood the market. Most homes that sit on the market for a while, have already had a dramatic price reduction, and this will put the seller upside down.’”
‘I think where we are today in North Texas, especially in North Dallas, we’re going to see the same kind of growth California experienced in the ’60s, ’70s and into the ’80s.’
I was there last summer and immediately posted here that I had seen the housing bubble and it was Prosper Texas. Break-neck construction, billboards announcing $300-400-900,000 houses, zero down!
‘which sits almost exactly halfway between downtown Dallas and the Red River, about 42 miles from each, makes our whole style of growth sound a bit like a massive pyramid scheme’
This is where I grew up; the plains. Whole lotta nothing mile after mile. Sure, now it’s $500,000 quarter acre lots. We’re all going to be California rich, except they’re poor. Amazing what these people have accomplished, these bankers. When I started this blog a short term CD paid 4%. When I moved to Austin in 1998, my crazy-high rent was half of what my soon-to-be-foreclosed landlord was paying in a mortgage. “Massive pyramid scheme” doesn’t come close to describing what this thing is.
‘when you step back and look at the North Texas housing market as a whole, things are booming. In some neighborhoods, home prices are up 10 to 30 percent this year.’
‘Interview Highlights: Candace Carlisle … on the size of the price jump: “Home prices can be subjective. You’ve got different locations, what markets are hot. But I’ve heard some homes along the Dallas North Tollway are selling for as much as $100,000 more than a year and half ago. So, what a lot of people are doing are putting their homes on the market and going and buying houses a little further out.”
‘… on prices in areas outside of Dallas: “There are similar price increases, but there are pockets. It seems like if you are in certain areas such as those urban, whether it be Fort Worth or Dallas or even in the West Plano/Frisco area, there’s these pockets that you are seeing home prices escalate quite a bit. … Phillips Creek Ranch in Frisco — Republic Property Group is working on that project and I believe the last time they quoted me an average price of a home sold at Phillips Creek Ranch, it was over $500,000, upwards of $600,000 — average price.”
‘… on advice for potential homebuyers: “A lot of economists feel like for the next two years that the market is going to stay hot and heavy in North Texas. We’re going to continue to see jobs coming into the metroplex. Think a little counterintuitively. Everyone is headed up to Frisco and Plano — that’s exactly where the home prices are going to be jumping, right around those jobs. Look at some of the other markets like Anna and Princeton instead of McKinney — or just move a little further out.”
“Amazing what these people have accomplished, these bankers.”
Their modesty over this achievement is also quite impressive.
We went out for Mexican last night, 2 fer 1 fajita Wednesdays. There was an RE broker in the booth next to us who apparently does not have an inside voice. He had some out of town buyers with him who were looking at an apt complex in Frisco. I had to laugh when he told them the commute from Frisco to Dallas was 15 minutes. Maybe by helicopter.
How far is Prosper from jobs that can pay for a $400,000 shanty? 15 minutes by cannon?
BTW, those billboards with the zero down loans were builder financing, meaning wall street junk bonds. I don’t know whose 401k is in that fish-tank, but somebody isn’t gonna get their money back.
I don’t make it that way very often. A couple times a year max. There are several corp hq’s up there. A couple large law firms opened satellite offices there. Enough good jobs to fill all those houses? I doubt it but that isn’t gonna stop them from building.
There is a certain category of people who want everything to be new and shiny. Frisco and Prosper are perfect places for them.
Frisco, TX Housing Prices Crater 17% YoY; Prices Declines Spread
http://www.movoto.com/frisco-tx/market-trends/
frisco has it’s own HIVtv financial kamikaze show
‘Probably right around January or February is when we really started to see it hit’
You don’t say. Because for the last 9 months we’ve been told Houston house prices are going to the moon, Alice! I guess somebody’s a lion.
‘There’s a big reason to believe that the U.S. economy will be able to withstand the start of the Fed tightening cycle: There’s still plenty of pent up activity in the housing sector. And it’s hard to see the U.S. economy running out of steam with this much upside left in residential investment, according to some economists and analysts. ‘
‘Neil Dutta, head of U.S. economics at Renaissance Macro Research in New York, noted that the relative strength of the labor and housing market makes for quite an abnormal dynamic. “What is interesting about this is that the housing market is accelerating at a time when the labor market is near full employment,” he said.’
‘He also noted that cyclical forces, such as easing lending standards and rising homebuilder confidence, buoy the outlook for the sector. “Bad things do not happen to America when housing is moving up and to the right while Americans are finding jobs,” said Dutta.’
Interesting title to this:
‘The U.S. Economy Is Just Starting to Tap Into a Big Source of Dry Powder’
keep your powder dry
pent up demand
“…the labor market is near full employment”
That contradicts the labor participation rate being at all time lows.
“Going back to the 1940s, the U.S. central bank has never embarked upon a tightening phase with housing having so much room to run to the upside.”
Sure, we all are eager to pay a lot more for housing!
‘Texas home sales purchased by international homebuyers contributed $8.32 billion to the Texas economy between April 2014 and March 2015, according to the 2015 Texas International Homebuyers Report. For the first time in the Texas International Homebuyers Report history, homebuyers from Latin America (including Mexico) were not a clear majority of international homebuyers in Texas—comprising only 41% of international buyers.’
‘Homebuyers from Asia/Oceania (including China), conversely, doubled from 18% from April 2013-March 2014 to 31% from April 2014 to March 2015. Texas homebuying activity among European and African buyers doubled during the same time, rising from 9% to 15% and 4% to 8% from April 2014 to March 2015, respectively.’
RE: Texas sprawl. It’s both expensive and in the end self defeating.
http://www.urbanophile.com/2010/02/04/the-power-of-greenfield-economics/
In the end the state will find its existing infrastructure is deteriorating faster than it can both repair it and build new, and the pattern of development requires far more public cost per person.
They’ll pay it up front because part of it is added to the cost of the house, offset by low land costs. But paying for rebuilding is a whole different thing. Particularly as the houses are passed down to the less well off.
584 properties found Prosper, TX Real Estate and Homes for Sale
http://www.realtor.com/realestateandhomes-search/Prosper_TX/type-single-family-home,condo-townhome-row-home-co-op,multi-family-home,mfd-mobile-home
107 properties found Prosper, TX Price Reduced Homes for Sale
http://www.realtor.com/realestateandhomes-search/Prosper_TX/type-single-family-home,condo-townhome-row-home-co-op,multi-family-home,mfd-mobile-home/show-price-reduced
Take a look at these beauties. And the prices!
510 Marbella Prosper, TX 75078
0% COMMISSION!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
$454,832
‘Brand new Gehan Auburn floor plan with est November completion offers 4 beds, 3.5 baths, upstairs game & media rooms. 3rd separate oversize 1-car garage offers extra storage space or parking. Gourmet island kitchen boasts granite counters, breakfast bar & walk-in pantry. Master suite includes a garden tub & separate shower, separate vanities & walk-in closet. Located on an oversize homesite with a large covered patio- great for outdoor living!!’
Won’t be finished until November and they are already cutting the price.
Maybe it’s just me, but these are some pretty ugly monsterous houses on tiny lots. What’s with the steep pitched roofs, are they expecting heavy snow?
Reduced prices on uncompleted houses!
Circle J Drive indeed.
Arvada, CO Housing Prices Plummet 17% YoY
http://www.movoto.com/arvada-co/market-trends/
’‘You don’t lose money on an investment you don’t sell.’
It’s a home owner’s God-given right to ride his capital losses forever.
‘It’s a buyer’s market being affected by the oil prices going down, and because it’s an election year. When that happens, interest rates increase, and now we have more inventory than buyers.’
That analysis leaves me speechless.
Well, you have to admire their logic - the RE pawnbrokers don’t want too many people dumping their homes on the market, as that puts downward pressure on prices. Ah, the intersection of the supply and demand curves, it takes me right back to Econ 101 (and the ten different colors of chalk that the prof used - try to take notes on THAT with a black pen - lessee, this is a dashed line, this is a dotted line, this is a dash-dot-dash line, etc).
I don’t want to go to work tomorrow either.
Housing prices will continue falling irrespective of Lion Realtors and FraudFin’s yammering.
Sherman Oaks, CA Housing Prices Dive 5% YoY
http://www.movoto.com/sherman-oaks-ca/market-trends/
compare to last opil crash
midland /odessa tank, then houston
and finally Dallas
oil price matters
‘A pair of office towers in Tulsa, Oklahoma, is giving commercial real estate investors more reason to worry that the collapse in oil prices is starting to infect their market.’
‘The biggest tenant, oil and gas producer Samson Resources Corp., vacated one of the more than a dozen floors it occupied, according to a report from the firm that services a $45 million mortgage on the buildings known as the Williams Center Towers. Samson, which is cutting its workforce as it prepares to file for bankruptcy protection this month, has indicated it will abandon another floor next year, and its lease gives it the right to withdraw from more space after that, according to the report.’
‘Samson’s shrinking footprint is laying bare the risks faced in cities that boomed amid the U.S. shale revolution — and are now the most vulnerable to the commodities rout. That’s increasing concern in the market for commercial mortgage bonds, where yield-hungry debt investors have helped fund everything from office space for oil executives to housing for rig workers.’
“It’s going to be game over if these companies can’t get financing again,” said Danielle DiMartino Booth, chief market strategist at the research group Liscio Report, who recently left a position as adviser to former Federal Reserve Bank of Dallas President Richard Fisher. “Plenty of companies were able to buy themselves six to 12 months of time earlier this year. Unless we see a rebound, I don’t see them getting financing again.”
‘In Decatur, Texas, the owner of a Candlewood Suites frequently used by energy workers has struggled to pay a $4.9 million mortgage after cutbacks in the industry, according to a loan servicer report. In July, the mortgage was handed to a so-called special servicer. Such firms typically decide whether to modify loan terms or foreclose on the property. A message left for the property’s owner at the hotel wasn’t returned.’
‘The Texas hotel, which is among properties backing a commercial-mortgage bond created in 2013, is one of several extended-stay lodgings in oil regions that have been affected by the slowdown, according to debt strategists at Barclays Plc. At an extended-stay workers’ complex in North Dakota, some 134 units of Strata Estate Suites were originally leased to 27 corporate tenants including Halliburton Co., according to documents provided to investors. The loan was among mortgages bundled into $45 million of commercial mortgage securities in August 2013 and sold to investors such as life insurers. The mortgage has been delinquent for 20 months, Bloomberg data show.’
‘About $16 billion of real estate debt that’s now vulnerable to default because of plunging crude prices was packaged into bonds and sold to investors, according to estimates from Nomura.’
http://www.bloomberg.com/news/articles/2015-09-10/an-energy-firm-s-collapse-casts-ominous-sign-over-mortgage-bonds
They like to say Dallas isn’t vulnerable to oil. In the 80’s it wasn’t oil that crushed the economy; it was mostly commercial loans. Decatur isn’t very far from Dallas.
‘Dallas isn’t vulnerable to oil’ - it is a question of magnitude. I read recently oil and gas account for something like less than 7% of jobs in the DFW MSA. Dallas itself is likely lower than that figure. There is vulnerability sure, but not knock out punch vulnerability. There is lot more diversity in industry here than in the 80’s. 80’s was a 1 - 2 punch of oil prices and S&L collapse.
From 08 to 14 there were several vacant large building sites near my office. They’re all getting built on now, medical, apartments, row homes, senior care facilities, etc.
“There is lot more diversity in industry here than in the 80’s.”
Mr. It’sDifferentHere,
That lie is precisely what was floated back in the early 1980’s and look what happened. Its not different in Dallas, NYC, SanFran, Tokyo or Moscow.
Housing prices have a long way to fall my friend. A very long way to fall.
When I was there last summer, everything was under construction; roads, commercial and houses. If anything is going to knock out Texas, it’ll be a real estate crash. Oil just exposed it in the 80’s, real estate took out the banks.
One thing that the media mostly overlook; Texas has a huge amount of the nations house building. Houston and Dallas especially. Houston is going down right now. Now the loans for houses aren’t in Texas banks so much, unless they didn’t create them properly. There will be a hit on wall street, life insurance companies, pensions and probably the GSE’s, VA and FHA. The commercial stuff, most likely is local/regional lending. Just like Canada is finding out, it isn’t boom and then boom again. The Metroplex has been booming for years. Don’t forget that recent D Mag cover; people pushing wheelbarrows of cash from house to house. It’s all fun and big hair until someone loses an eye.
I would dearly love to see such a crash. The hubris here is insufferable.
‘In 2002 President George W. Bush proclaimed, “We want everybody in America to own their home.” That is still Washington’s creed, evidenced in our industry by Freddie and Fannie going to 3% LTV back in January. But that is not the only indication, and going back to the Democratic administration of the 1930s reveals a whole list of things our government does to support the housing industry. The FHA offers low-interest mortgages. Fannie& Freddie, by repurchasing and guaranteeing mortgages, help hold down interest rates. Homeowners receive a variety of tax breaks, including a mortgage-interest deduction and a property tax write-off, which add up to more than two hundred billion dollars a year.’
‘But does all that work? Other western countries don’t have anything like our range of pro-housing enticements, and their rates of homeownership aren’t much different than ours. Critics argue that the main impact of the mortgage interest deduction and other subsidies is not that they nudge people to buy houses. It’s that they get people to buy bigger, costlier houses than they otherwise would. The bigger your mortgage, the larger the tax deduction you get. Real estate agents know this only too well. And thus we find that nearly all the economic benefits of the mortgage deduction go to people earning more than a hundred thousand dollars a year - is that the intent?’
‘The big lenders are reluctant to do FHA deals in the 580 FICO score range. While this is opportunity for the smaller lenders, it needs to be addressed with FHA. This prompted one broker to write to me saying, “Why is FHA doing this? The only reason to accept a 580 FICO score is when the consumer has basically no credit. They pay cash, therefore have no score. This is not a bad thing since alternative credit can be used: prove the utility bills, phone, insurance, daily life expenses are paid and ongoing. There are people that have excellent payment histories, but chose not to use credit. It is called living within your means. They are typically a good credit risk. The 580 score due to collections, late payments etc. is NOT a good credit risk.”
‘Of course borrowers with a 580 FICOs see large loan level price adjustments - something near 3 points vs. 1.5 for borrowers with a 620 FICO score. Home ownership is at its lowest level since 1967 and most agree that there is a huge sector of the population that has been displaced from homeownership. And many think that lending to 580 credit score borrowers won’t help.’
‘All these tax breaks do inflate housing prices, but are expensive homes really better for society? A major reason for the low down payment program is that homes, even after the crash, are priced beyond the means of many Americans. And though certain programs may turn more low-income people into homeowners, it also means that more lower-income homeowners will default. I don’t have exact figures but my guess is that the default rate for mortgages with down payments of less than 10% are significantly higher than the default rate for mortgages with down payments above 10%.’
‘As critics point out, many of the tax breaks and incentives lead Americans to overinvest in housing and arguably underinvest in other kinds of assets. Most Americans have nearly all their wealth tied up in their homes. That is risky for them and for the economy as a whole. When the economy is doing well, people pour more and more money into housing; when the economy is doing poorly, they stop. And thus, as author James Surowiecki points out, the housing industry tends to amplify the economy’s ups and downs. “The government has been subsidizing a notoriously manic-depressive sector of the economy….A big house may be great for the people who live in it. But should taxpayers really help foot the bill for their mortgage?”
http://www.mortgagenewsdaily.com/channels/pipelinepress/09102015-justice-department.aspx
but smelly mel will make it happen
Bush-bad actually tried to reign in fre/fnm and both parties fckd him over
“That is risky for them and for the economy as a whole. When the economy is doing well, people pour more and more money into housing; when the economy is doing poorly, they stop. ”
As opposed to say, the stock market…
Probably around a year ago, I saw a stat that I shared here as a sign of future housing problems for Houston…namely that they were building more homes in the Houston MSA than in the entire state of CA.
With that burst of supply…a bad outcome was not hard to predict. The triggering event was the oil price collapse. Without that trigger, they might have merrily gone on their way building even more (before a different triggering event led to the problem).
And a bit more Houston data.
Rental vacancy rates are around 9%, homeowner vacancy rates around 1.5% vs. the national averages of 6.8% and 1.8%.
This compares to places like Portland where the vacancy rates are 3% and 1% (as noted yesterday).
Relative to overall supply/demand (as measured by vacancy rates), they aren’t building enough in Portland…and they were building plenty in Houston.
Interest rates are the same in both places, both places have had strong job growth, why the stark difference in development activity and vacancy rates?
There is no restriction on building in Houston.
There are restrictions on building in Portland.
someone told me houston was humid as hell. At least az has a dry heat.
…and a yellow sky.
Rental_Fraud,
The problem with your figures is the foreclosure moratoriums in effect in OR dramatically understate SFR vacancy rates.
Worse yet, OR has a declining population like Californica.
Moss Bay-Kirkland, WA Housing Prices Nosedive 19% YoY
http://www.zillow.com/moss-bay-kirkland-wa/home-values/
I really don’t understand your posts. When I click on the link you provide here, Zillow says values are up 12%. Where are you getting -19%?
The data is quite easy to understand. Select median sale price. Down 19%.
OK, I see it now.
I think in this case, some noisy data is generating this result. Nineteen percent would be quite a discount, and much different than anything else in the region.
Yes. Falling prices are appearing across the state.
Don’t believe the BS about the Dallas job market. It sucks. There’s all the $10/hour - no benefit - jobs you want but anything else - nope.