The Housing Bubble

The Dallas Morning News reports from Texas. “Has the North Texas housing market gone over the top? Market analysts admit being nervous about the pace of local price increases and unprecedented demand. ‘It’s getting scary,’ said Dr. James Gaines, chief economist of the Real Estate Center at Texas A&M University. Gaines was particularly shocked to hear about the dozen or so folks who spent Monday night in tents outside of a McKinney model home park, waiting to be the first in line to lock in their lot purchase. ‘Oh, good grief,’ he said. ‘When you hear that, you have to worry if things are going to go bust. If people are camping overnight to buy houses, that does not sound good.’”

“Buyers lined up starting Monday to get the best home sites in a new subdivision that First Texas Homes is building in west McKinney near U.S. Highway 380. They got first choice out of about 80 new home locations in the Prestwyck Community, which has houses priced from around $315,000. Eight months pregnant and somewhat sleep deprived, Tawana Keah began waiting Monday. A real estate agent who is renting in McKinney, Keah has lived in the area long enough to see former cornfields sprout homes for budding families.”

“‘It’s a good investment because the area is growing so much,’ said Keah. ‘Everything is moving out this way,’ she added as she packed up the overnight camping gear. ‘Because I’m in the industry, I see where the trends are going. It used to be Plano, then Frisco and now McKinney, so the values are just going to continue to increase in this area.’”

The San Gabriel Valley Tribune in California. “The city of San Gabriel last month became the latest in the region to begin to investigate solutions to the problems of mansionization in the region, and good for it. Gallatin and Community Development Director Armine Chaparyan, in a memo to City Manager Steven Preston, initially provide an analysis of who and what are the sources of the problem. First, they say, it’s ‘Move-up families seeking to upgrade their current living conditions and who are desirous of a new home.’ Next it’s local speculative builders — ’small-scale, locally based contractors/investors who are looking for undervalued R-1 properties with a large potential upside if redeveloped.’”

“But City Hall also doesn’t shy away from discussing ‘Overseas investors: This last group is one that seems to be increasing in recent years. The principal source of this foreign investment, though not the only one, appears to be mainland China. … In one case, the overseas investor will purchase a single-family home and leave it vacant, sometimes for years, hoping to cash in passively on the expected appreciation in home values over time. … this trend can lead to, at best, homes that sit silently in an otherwise lively neighborhood or, at worst, derelict properties in which maintenance becomes an ongoing code enforcement issue.’”

The Wall Street Journal on New York. “Manhattan apartment prices drifted slightly lower in the third quarter from peak levels set earlier in the year amid signs of a slowdown in deal-making over the summer. Brokers and analysts attribute the decline in part to uncertainty about the world economy, especially after a volatile August in U.S. and Chinese financial markets. ‘The leverage has shifted a few notches toward the buy side,’ said Noah Rosenblatt, a broker and chief executive of UrbanDigs.com. ‘We are in the midst of a slight adjustment down in price, but I don’t think it is anything sizable at the moment.’”

“He said he expects some international buyers—especially from China, who helped push the market upward in recent months—to pause and reassess how to ‘deploy their capital.’”

“Leonard Steinberg, president of Compass, a brokerage firm based in New York City, confirmed the slowdown in deals, but said he expects to see sales pick up later this year. He also cited worries about a slowing Chinese economy and a faltering U.S. stock market that helped slow sales. ‘When everyone in New York keeps talking about Chinese buyers, when there is volatility, there is going to be a moment when people take a pause,’ he said.”

From Vegas Inc in Nevada. “Las Vegas homebuilders are selling more houses than last year and ramping up construction plans, but a number of issues still are weighing down the valley’s economy, a new Home Builders Research report says. 25 percent of Southern Nevada homeowners are underwater, meaning their mortgage debt outweighs their home value. There also remain an untold number of residents who haven’t made a mortgage payment in years. ‘We were just told of a businessman who was bragging about not making a payment on his mortgage since 2008!’ company founder Dennis Smith wrote in his report. ‘How can this be classified as a sustained, real housing recovery?’”

The Asbury Park Press in New Jersey. “Housing prices in New Jersey have increased since 2011, a few years after the housing bubble burst, but momentum is expected to slow in the next year, said Patrick O’Keefe, director of economic research at CohnReznick. Contributing factors to the plateau of home prices include the expectation that the government will raise interest rates, and that would-be sellers are hesitant to put their homes on the market, waiting for prices to climb further, O’Keefe said.”

“‘One of the things that has bedeviled housing recovery nationally, but even more pronounced in New Jersey, is potential home sellers have been unwilling to list their homes because of the degree to which they would have to take a discounted price,’ O’Keefe said.”

Bloomberg on North Dakota. “After struggling to house thousands of migrant roughnecks during the boom, the state faces a new real-estate crisis: The frenzied drilling that made it No. 1 in personal-income growth and job creation for five consecutive years hasn’t lasted long enough to support the oil-fueled building explosion. Hundreds of dwellings approved during the heady days are rising, skeletons of wood and cement surrounded by rolling grasslands, with too few residents who can afford them.”

“‘We are overbuilt,’ said Dan Kalil, a commissioner in Williams County in the heart of the Bakken. ‘I am concerned about having hundreds of $200-a-month apartments in the future.’”

“Officials in Watford City about 45 miles away have issued 1,824 permits for apartments, duplexes and homes in the past 18 months after only three houses were built between 1980 and 2000. They are in limbo, worried about filling the units. ‘This lag time is driving me nuts,’ said Brent Sanford, Watford City’s mayor, during a recent tour of construction sites with names such as Emerald Ridge Estates and Pheasant Ridge. ‘I’m now hearing words like, ‘This isn’t sustainable.’”