October 19, 2015

Getting Ourselves In Trouble Again

The World Herald reports from Nebraska. “When Legacy Homes sank roots in Omaha nearly four years ago, its leaders talked of filling the void left by a popular volume builder that had catered to entry-level homebuyers. The business plan changed. Manager Allen Grimes said his house lot costs have nearly doubled since Legacy in 2012 bought the intellectual assets of the bankrupt HearthStone Homes. Its new Majestic Pointe subdivision in Bennington, for example, is to feature houses from $225,000 to $350,000.”

“Several other developing subdivisions that Jason Troshynski of Grace Custom Homes said he is working in are heavy on $400,000 to $800,000 homes. He said a few Grace clients built upward to $2.5 million. Said Grimes: ‘It just doesn’t make sense to build a $175,000 home on a $45,000 lot.’”

From the Oregonian. “Like the soaring peaks and shaded valleys of the nearby Cascade mountain range, Bend’s real estate market has earned a reputation for spasmodic highs and lows. In recent years, area prices jumped back on the chairlift and are heading back toward the top. Some residents are wondering if the overdevelopment, bankruptcies and foreclosures of past downturns are lurking around the corner once again. ‘I’m working with so many people from the Bay Area, it’s not even funny,’ said Danielle Snow, a broker for John L. Scott Real Estate who has sold in Bend for nine years. About 80 percent of Snow’s sales these days, she said, are all-cash offers.”

“Jim Long has tried to find homes for low-income and working-class residents for 28 years, the last 10 of them as Bend’s affordable housing manager. Long also worries that – though permitting and pricing aren’t yet at 2006 levels – the market may be drifting in the that direction again. ‘People will say the loans are safer because Dodd-Frank went in,’ Long said. ‘But Congress has been whittling away at Dodd-Frank, and I’m starting to see the risky loans coming back. … I personally think we’re going to get ourselves in trouble again.’”

The Greeley Tribune in Colorado. “Buyers, sellers and real estate agents are all reporting a looser feel in the Greeley/Evans housing market, which was extremely tight throughout the spring and summer. ‘It’s a lot less frustrating for the buyers right now because we’re not seeing so many multiple offers,’ said Derek Andersen, a broker with Sears Real Estate. At the beginning of the summer, buyers often looked at a house and put in an offer within 24 hours. Some even bought without looking first because houses were flying off the shelves, so to speak. That’s not happening anymore. Andersen said he thinks the increased market inventory is also allowing buyers to be a little more particular.”

“‘I think they’re going back to being a little more picky,’ Andersen said.”

From Candy’s Dirt in Texas. “As I mentioned in my live-blogging at MetroTex Association of Realtor’s annual ’state of the DFW Real Estate union’, Dr. James Gaines, chief economist with the Real Estate Center at Texas A&M University, told 300 plus DFW real estate agents that we might expect a slowdown in the frenetic market we are experiencing. I can see how Steve Brown wrote that ‘Dallas-Fort Worth’s runaway real estate market is likely to slow down in 2016.’ But his headline was almost a shade of 2007 Debbie Downer days: Forecast for 2016 sees slower D-FW real estate, fewer job gains.”

“Home affordability may be a bigger problem in Dallas-Fort Worth, given that home price increases have been outpacing wage gains that in the area. ‘We have smaller household income today in real terms than we had in 1999,’ Gaines said. ‘Affordable workforce housing is going to be a major issue. We are not building enough houses in the $150,000-to-$200,000 bracket.’”

“My take-away from today (and chatting with the agents): the market is already simmering down. As Dave Perry-Miller told me earlier this week, it’s still busy, just not as frenetic. I do see home prices on the upper end of the luxury market softening, or home prices that may have been over-reaching, pulling back. But beautiful, exciting product will still fly off the shelves, and the under $700K market is still extremely hot because of demand.”

The Oklahoman. “Low crude oil prices could be lubricating a turn in the Oklahoma City-area housing market from seller-friendly to buyer-friendly. The inventory of homes for sale has been under the four-month mark for months. But some smell change coming. ‘I see the market right now turning from a seller’s market to a buyer’s market,’ said Phil Boevers, a homebuilder and developer who also is a real estate agent and Realtor with Keller Williams Platinum. ‘I think the economy will slow somewhat due to oil prices — hopefully not too much.’”

“Last month saw an increase in listings priced at $500,000 and above — 109, compared to the usual 60 to 80 — but it wasn’t necessarily tied to job cuts in the energy sector, said Susanna Lorg, president of the Metro Association of Realtors. ‘It’s going to take a little bit of time for it to come around and hit us in the resale market,’ said Lorg. Homebuilders will see and feel pressure from the oil slump first, she said, ’so builders may be thinking about a slowdown.’”

The Wall Street Journal in New York. “A banker and a former politician from Kazakhstan tried to launder tens of millions of dollars of stolen money through New York real-estate holdings, a civil lawsuit alleges. The men allegedly conspired with New York developer Joseph Chetrit to hide at least $40 million by investing in a former Manhattan hotel and the Cabrini Medical Center, according to a complaint filed on Oct. 12 by Kazakhstan’s largest city, Almaty, and one of the nation’s biggest lenders, BTA Bank.”

“The Kazakh men, ex-BTA chairman Mukhtar Ablyazov and former Almaty mayor Viktor Khrapunov, are separately under investigation for criminal fraud in Kazakhstan, the complaint says. Mr. Ablyazov is alleged to have stolen billions of dollars from BTA and Mr. Khrapunov is alleged to have stolen about $300 million from Almaty, according to the complaint, filed in federal court in Manhattan. The Kazakh men parked ‘corrupt assets’ in New York City real estate to avoid the scrutiny of escalating international investigations, the complaint alleges.”

“Mr. Chetrit sold the Kazakh men, through their special purpose vehicle, stakes in two Manhattan properties now closed and being converted into condo buildings, according to the complaint. Foreign buyers in recent years have flooded into major markets like Manhattan, particularly attracted to high-end condominiums, as they seek stable, long-term investments, property analysts say. But with few disclosure requirements in the U.S. for real-estate transactions—wealthy buyers often preserve their anonymity by making purchases using limited liability companies—money-laundering experts warn the area is ripe for abuse by those looking to park ill-gotten gains.”

“Banks and brokerages are far more regulated than real estate and are required to report suspicious activity. Real estate doesn’t face such requirements, which is an ‘enormous loophole in our financial system,’ said Louise Shelley, director of the Terrorism, Transnational Crime and Corruption Center at George Mason University.”

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Comment by Goon
2015-10-19 07:13:03

The biggest problem with buying a house in Greeley is living in Greeley.

Comment by Ben Jones
2015-10-19 07:33:32

A contestant for the “WTF were they thinking” market a few years ago:

“Instead of five or 10 offers on an under-$200,000 house, you’re getting two or three,” Andersen said. The median home sales price for Greeley/Evans was at $230,000 in September, up 17.9 percent from last year’s $195,000.’

‘There were 396 active listings at the end of September, up 11.5 percent from the same time in 2014. “Again, a classic case of supply and demand. When the supply is more plentiful, the demand doesn’t seem so frenetic,” Springfield said. “I think that’s the reason it feels like it’s normalizing.”

“But the high ticket price isn’t scaring people away — it’s still the most affordable in the region. Fort Collins was at a median of $315,000 in September. Loveland/Berthoud rang in at $316,614 and Boulder was $762,500.”

And in Bend:

‘Prices in Bend and Redmond, according to Zillow, have again increased faster than in any other cities in Oregon since bottoming out in the recession. Bend values have surged by 58 percent, to a median price of $321,500. In Redmond – long Bend’s more affordable neighbor – values have skyrocketed 77 percent.’

‘One of Snow’s listings on Northwest Mount Washington Drive, a 1,455-square-foot home in the Northwest Crossing neighborhood, sold to an all-cash buyer after a week on the market. Built in 2006 at the high point of the bubble, it sold when new for $436,000, according to Zillow. The lender foreclosed on the property three years later, and eventually resold it after it lost nearly half its value. Fast forward to 2015, and the recent sale price was $440,000, reflecting Bend’s rebound.’

‘The sellers, a couple with another residence in Florida, parlayed that into a townhome on nearby Northwest Locke Court, according to Snow. That house was also on the market for a single week and sold for $375,000.’

‘Backhoes are turning dirt and houses are sprouting up all around Bend. “Residential (real estate) has been absolutely crazy,” said Virginia Dougherty, a Redmond-based Realtor with Re/Max. “In fact, we have not had enough houses to sell. … So that has driven prices up.”

Gosh, I’m out of breath. And this:

‘Mount Bachelor, Mirror Pond and the plethora of outdoor activities and brewpubs aren’t helping Bend become any more affordable.’

A mountain, a pond and some bars. But don’t worry, there’s no speculation:

“I’m working with so many people from the Bay Area, it’s not even funny”

Well, now you can all rest easy because Californian’s never, ever, over-pay for real estate. But one bit of advice; in the off chance that they do, be prepared for some whining. It’s never their fault, they’ll be victims, to be pitied, bailed out, and damn it pass some laws so they don’t suffa’.

Comment by sleepless_near_seattle
2015-10-19 08:26:46

“I’m working with so many people from the Bay Area, it’s not even funny”

Pain. I’m hoping for a lot of pain in Bend. That won’t be funny now, will it?

Go populate Redding and Eureka.

Comment by redmondjp
2015-10-19 09:35:03

That’s about as likely as them moving to northern Idaho!

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Comment by sleepless_near_seattle
2015-10-19 14:15:19

Plenty of ‘em in Coeur d’Alene and Sandpoint, despite the Mark Fuhrman vibe.

Comment by MD
2015-10-19 10:55:15

Visited Bend a few years back, I just don’t get the appeal. Seemed like a sleeper community in the middle of nowhere.

At least a small city like Eugene has more character, and is closer to major population centers like Portland.

Redding and Eureka… lol.

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Comment by sleepless_near_seattle
2015-10-19 14:13:29

CA is a big, beautiful state. Redding has Shasta Lake and tons of outdoor stuff around. Just doesn’t sound as cool to your friends back home as Bend does, I s’pose.

Social media and Outside Magazine have killed places like Bend, which was a nice backwater town in the late 90s. Should rename it Poseurville, or Trendytown.

Comment by rms
2015-10-19 17:49:33

“Visited Bend a few years back, I just don’t get the appeal. Seemed like a sleeper community in the middle of nowhere.”

Bend, OR is a nice place with decent weather, but there are too few family supporting jobs with the income needed to support the high cost of living.

Comment by In Colorado
2015-10-19 08:59:26

The biggest problem with buying a house in Greeley is living in Greeley.

I know. The whole notion of “houses flying off the shelf” in Greeley is disturbing, to say the least.

Comment by AmazingRuss
2015-10-19 11:56:32

“The biggest problem with buying a house in Greeley is living in Greeley.”

What’s that smell?

Comment by Can_Bubble
2015-10-19 08:07:16

Speaking of Kazakhs and buyers from far-off locales:

After two years of hectoring from me, last month my cousin moved into a rental and is selling her condo for 350K. It took her a month until she got an offer. The offer was slightly under asking and only 5K down. Those weren’t the main issues. The offer came on a Saturday at 4:00 PM and she was told she had until 11:00 PM to accept it. That raised a red flag. Then she google the buyer, a 30 year old from a small Balkan country that Liam Neeson’s character in Taken had issues with. His profile indicates he owned an obscure restaurant five years ago and hasn’t listed a regular job since. My cousin works in corporate security and she knows that Toronto is a magnet for Eastern European, Israeli and Asian organized crime. To the consternation of both realtors, my cousin declined the offer.

Two days later my cousin visited the empty condo and there was a bloody handprint on the wall.

Comment by Yaan
2015-10-19 09:53:11

Do you mind if I borrow that for a movie plot?

Comment by Can_Bubble
2015-10-19 10:31:00

Go ahead. :)

Comment by Ben Jones
2015-10-19 08:09:07

‘DFW’s Abnormally Hyper Current Real Estate Market Likely To Get Back to Normal Levels in ’16, ’17′

‘Houston is hurtin’, said Gaines in so many words — loss of oil jobs. Midland, too. Dallas & Fort Worth, Plano and all, not so much. The energy sector is definitely down and $80 a barrel oil is not in the wings. But — Gaines said North Texas will still see growth in high tech, healthcare (all those doc in the boxes sprouting up like banks in high net worth neighborhoods), and professional and business services.’

‘Capital: foreigners are coming in (even those Rip-off artists Chinese and Russians) and buying up real estate with CASH.’

‘Credit terms and availability — Washington is finally slackening the reins on lending.’

‘Home Affordability could be a problem: looking at Gaines charts, it appears that the median price of a home in DFW is not near $280,000. That’s a lot better than the average home price in the Bay area, or LA, or metro New York or D.C. but that’s high for us. What do people who can only afford $150k for a house live?’

‘Someone moves to Texas every five minutes.’

‘Texas is still the home-building capital of the world, with a 58% home ownership rate. We are not even back up to average for single family starts, and home construction is hampered by labor shortages and higher land costs, here and across the country. Still, we are one of the five top home-building markets, and we built more homes last year than even California did. So there.’

Comment by In Colorado
2015-10-19 09:03:14

Still, we are one of the five top home-building markets, and we built more homes last year than even California did. So there.’

Pride goes before the fall.

Comment by Rental Watch
2015-10-19 09:11:54

Houston alone was building more than CA a few years back.

Comment by Mafia Blocks
2015-10-19 09:43:48

One has to ask why given the millions of excess empty houses in both states.

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Comment by snake charmer
2015-10-19 10:10:20

I’ve seen several medical practices building their own surgery centers, because the new economic model for physicians encourages doing procedures and the doctors want to “capture” all the money involved.

Comment by Goon
2015-10-19 08:46:51

Overpriced, overcrowded, overpolluted, and it’s getting worse every day:


Region VIII

Comment by In Colorado
2015-10-19 09:04:14

Overpriced, overcrowded, overpolluted, and it’s getting worse every day

Isn’t this true of any metro area that has jobs?

Comment by Ben Jones
2015-10-19 09:28:48

When I was in Colorado recently it was obvious they are building housing like crazy. A lot of those jobs are going to go away. Same with Dallas-Fort Worth.

Comment by Goon
2015-10-19 09:47:32

The Front Range is back office flyover.

How many dual-earner Google engineer households are there to support $700,000+ starter homes in Boulder?

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Comment by In Colorado
2015-10-19 09:57:57

Curiously, Google does have an office in Boulder.

But you are quite correct. Denver isn’t Silly Valley; the number of high paying jobs is minute by comparison. And the tech firms here pay less, even if they are Silly Valley firms. I know that my Santa Clara colleagues are much better paid than we are in Broomfield.

Also heard through the grapevine that Intel shut down it’s solid state storage business in Longmont, and that there were was large layoff. Unlike in Silly Valley, you can’t walk across the street and land another job in Longmont. Those guys are gonna be hustling to find a new job and there is a very good chance the next job will pay less and they might have to commute a long way to the next job.

Comment by Goon
2015-10-19 10:34:16

I am specifically referring to Google’s office in Boulder, I know people who work there. Closer to central Denver a starter house is $500,000+. In my part of South Denver a 1,500sf 2/1 just listed for $300,000. The median household income for all of metro Denver is just above $50,000.

Dual earners making $40K each (this is realistic here, not everyone has a STEM degree) could swing that $300K house (in a school district that Zillow rates 3/10) but they are just one layoff, divorce, major medical issue, away from the math not working.

Comment by In Colorado
2015-10-19 09:48:37

It was worse during the previous bubble. That time they were building 1000 houses a year in podunky Loveland. Today they’re building 300 a year.

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Comment by Mafia Blocks
2015-10-19 09:53:22

Regardless of new inventory added, it’s added to an already large excess empty housing inventory.

Comment by Karen
2015-10-19 10:52:19

I think the jobs in DFW already are going away. I’m in Frisco, one of the “wealthy” northern suburbs. This month, for the first time ever, my apartment complex started posting on their website and emailing everyone reminders about rent being due, such as, “Today is October 1st and rent is due”, “Just a quick reminder - tomorrow is the last day to pay your rent without incurring late fees”, and then “Today the office will be open until 5pm to receive rent checks. If you need to talk to us, please stop by.”

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Comment by Ben Jones
2015-10-19 11:06:40

My UHS contact in DFW has been telling me for months that the areas north of Dallas were headed down. I posted not that long ago about an new extended stay hotel in Decatur defaulting on the loan. That would be north Texas oil field servicing jobs drying up. I know one guy in the area who was hauling oil from little sites - just got laid off.

This is the 25 mile radius, not including land mind you:

5,201 nearby properties found Prosper, TX New Homes Construction for Sale


Price reduced:

499 nearby properties found Prosper, TX New Homes Construction for Sale


That’s a bunch of new houses to have the price reduced.

Comment by In Colorado
2015-10-19 09:51:05

‘It just doesn’t make sense to build a $175,000 home on a $45,000 lot.’

How can a lot cost $45K in Nebraska? Or is every municipality in the country tacking on huge fees to subdivide?

Comment by Mafia Blocks
2015-10-19 10:01:22

Nebraska farmland bubble that went pop.

Can you imagine speculating on dirt in the middle of a crop commodities bubble? They might find a buyer at a few thousand dollars for that dirt they got sucked into back in 2011.

Comment by redmondjp
2015-10-19 11:07:25

Covering up precious, finite topsoil that we will never get back.

Just like they have built industrial parks on valley floors all around the greater Seattle area that were formerly fertile farmland. It took eons for all of that silt to build up in those areas.

Comment by oxide
2015-10-19 13:30:00

Builders do not “cover up” precious soil. They scrape it off and sell it separately, leaving the buyer of the home with fill and rock or clay.

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Comment by Rental Watch
2015-10-19 23:22:55

It costs a lot of money to move dirt. If the dirt is appropriate to build on, they’ll build on it.

Comment by Mafia Blocks
2015-10-20 04:41:55

^ :mrgreen:

It does? Alot? And I have no site work at all?

That’s a doozy right there Rental_Fraud.

Comment by Mafia Blocks
2015-10-19 14:21:34

There’s a globe full of land my friend. And 95% of it goes undeveloped.

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Comment by Ben Jones
2015-10-19 10:44:00

Doubled in 3 years. Heck of a job Janet.

Comment by rj chicago
2015-10-19 11:39:48

And the sentiment of the NAHB just went higher today - 10 points higher than this time last year. Hmmmm….pumping up the stock price?

Comment by Rental Watch
2015-10-19 17:14:31

In the West, the highest reading since late 2005…will it lead to more housing starts in the West?

Comment by Mafia Blocks
2015-10-19 18:15:45

With 25 million excess empty and defaulted houses, 4.4 million of them in CA, I doubt there is much interest in slapping together more shanties.

Comment by BigSky
2015-10-19 11:48:05

I once asked a fine public servant (not being sarcastic, this guy was professional, knowledgeable and had spent decades dealing with elected officials and the public) what the agenda was for a meeting I was interested in attending. His response was succinct and wise:

Everyone will bring their own.

U.S. Home Builder Optimism Hits 10-Year High
October’s NAHB Index points to momentum in the housing sector
A sold sign was displayed in the yard of a newly built home in Chapel Hill, N.C., on June 9. ENLARGE
A sold sign was displayed in the yard of a newly built home in Chapel Hill, N.C., on June 9. Photo: Gerry Broome/Associated Press
By Jeffrey Sparshott
Updated Oct. 19, 2015 11:51 a.m. ET

A gauge of home-builder sentiment rose to a 10-year high in October, a sign of momentum for a key sector of the economy.

The National Association of Home Builders housing market index climbed to 64 this month, the trade group said on Monday. A reading over 50 means most builders generally see conditions in the single-family housing market as positive.
U.S. Housing Market Tracker
Where various gauges of housing supply and demand stand

The index stood at 61 in both August and September. Economists surveyed by The Wall Street Journal expected a reading of 62 in October.

The latest reading “suggests robust sentiment among home builders and bodes well for our expectation of further improvement in housing activity during” the remainder of 2015, Blerina Uruci, an economist at Barclays, said in a note to clients.

The index has been positive since mid-2014 and in recent months risen to levels last seen before the housing bubble burst. In October 2005 it registered at 68 but just one year later had plummeted to 31.

“With firm job creation, economic growth and the release of pent-up demand, we expect housing to keep moving forward as we start to close out 2015,” NAHB Chief Economist David Crowe said.

Alongside rising employment, low mortgage rates have helped fuel demand.

With mixed signals from other sectors of the economy, the chances of a Federal Reserve interest-rate increase in 2015 are diminishing. That would help keep mortgage rates at historically low levels.

A 30-year fixed-rate mortgage averaged 3.82% for the week ending Thursday, according to Freddie Mac. That is the 12th straight week below 4%.

Despite a broadly upbeat report, the home builders group cautioned of potential choke points for the industry.

“Our members continue to tell us there are still pockets of softness in some markets across the nation, and that they face challenges regarding the availability of lots and labor,” said NAHB Chairman Tom Woods.

More housing data is due out later this week, including the Commerce Department’s report on housing starts on Tuesday and the National Association of Realtors’ report on existing home sales on Thursday.

“Signals have varied across the different housing indicators that we track over the past few months, but the recent upbeat news on home builder sentiment supports our generally favorable view on conditions in the housing market,” said Daniel Silver, economist at J.P. Morgan Chase.

Comment by Ben Jones
2015-10-19 12:43:16

Is tech companies laying off staff the beginning of the tech bubble bursting?


What If The Angels Go Back To Heaven?

‘Bill Gurley seems to believe that’s happening now. He tweeted, “we may be nearing the end of a cycle where growth is valued more than profitability.”


Comment by Ben Jones
2015-10-19 12:44:18

‘He tweeted’

Another nickle lost.

Comment by Floating Seahorse
Comment by Floating Seahorse
2015-10-19 15:20:05


(needs flash)

Comment by michael
2015-10-19 18:43:28

I will be happy to let you know when the tech bubble is on its way out since I drive by facebook every day. No bubble popping yet>

Comment by Mafia Blocks
2015-10-19 18:47:20

We don’t believe Lolas.

“Warning Sign: Tech Companies Of All Sizes And Ages Are Starting To Have Layoffs”


Comment by Senior Housing Analyst
2015-10-19 18:49:48

San Francisco, CA Housing Prices Fall 12% On Burgeoning Excess Housing Inventory


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