The Housing Bubble

The Detroit Free Press reports from Michigan. “One of last year’s big surprises for real estate agent Caitlin Phillips came after a client made a cash offer for $700,000 for a 1920s house in Ann Arbor Hills and they were outbid. She and the client were quickly back on the prowl for new listings and with a new sense of the strength of the real estate market. ‘Last year it just kept moving forward — we didn’t have any stop,’ said Phillips, with Keller Williams Realty in Ann Arbor.”

“An analysis by the Free Press of sales data for existing homes from 2009 through most of 2015 shows housing prices are finally back to prerecession 2007 levels across much of southeast Michigan. Higher up in the market, the inventory of metro Detroit homes priced above $400,000 has been growing and even outpacing sales, according to a recent market report by Real Estate One.”

“Lynn Caldwell of Sine & Monaghan Realtors stressed the importance of realistically pricing homes, even if the current market still appears tilted to favoring sellers. ‘The sellers who are pricing their houses right are selling them right away or they’re getting multiple bids,’ said Caldwell, who observed sale prices up 8% last year in the Grosse Pointe communities, and 10% in St. Clair Shores. ‘The people who still are not in reality and say, ‘No, I want to get top dollar,’ those houses are just sitting on the market.’”

The Star Tribune in Minnesota. “Twin Cities homebuilders gained ground in 2015, chiefly driven by demand for new apartments, according to a year-end report from the Builders Association of the Twin Cities. As it has for the past several years, Minneapolis was the most active city in the region for new housing. The city accounted for 1,470 of the new units. Edina was No. 2 with 604. The vast majority of the new housing built in both cities was upscale apartments.”

“One of the challenges in 2016 will be to attract a broader range of buyers, including first-timers and empty nesters looking for less space. So Pulte Homes is rolling out more affordable side-by-side houses at The Enclave, a new development in New Brighton. Those three-story townhouses will have at least 1,900 square feet and a three-car garage and will be priced in the $300,000s.”

From KTVA Alaska. “Imagine working a full time job but not making enough money to have a decent place to live. That’s a reality for some people in Alaska, according to speakers at Gov. Bill Walker’s Housing Summit at the University of Alaska Anchorage. Alaska Housing Finance Corporation Director Bryan Butcher said the median price for a home in Anchorage has risen to $364,000. He said a person would need to make about $80,000 a year to afford that. Average rental rates for a two bedroom in town are just below $1,200 a month. Butcher said a worker should be making more than $22 an hour to make that affordable, but many people aren’t.”

“‘Some people pay 60 percent of what they make just for their housing, so what does that mean?’ asked Butcher. ‘That’s money to pay your bills for clothes for food.’”

“Walker said one thing that could help is if the state made more of its land available for development. ‘I don’t mean give it away, I don’t mean just sign it over to somebody, but available in such a way that housing can be developed,’ the governor said.”

The Dallas Morning News in Texas. “Housing analysts expect the Dallas-Fort Worth home market to level off this year from the all-time highs reached in 2015. Worries about the Oil Patch shakeout and higher home financing costs have made analysts more measured in their expectations for this year. ‘Your housing market has just been so hot that you don’t expect it to continue forever,’ said James Gaines, chief economist with the Real Estate Center at Texas A&M University. ‘The state is just beginning to feel on the economic level the results of the oil price declines. If the state’s economy starts feeling the slowdown effect of the energy sector, it’s going to affect everybody a little bit.’”

“A cooling of double-digit home price growth would be good news in a market that was facing affordability challenges even before the Federal Reserve began hiking borrowing costs. ‘Buyers in locations are pushing back on the price, and activity is beginning to flatten,’ said David Brown of Metrostudy Inc. ‘Not everyone can afford a $350,000 or $450,000 house.’”

News OK on Oklahoma. “OGE Energy Center, once an ambitious four-tower proposal that was to be built this last year, is being put on hold as oil prices continue to plunge. On Monday, OGE Energy Corp. CEO Sean Trauschke announced the company is assuming ownership of the land, which was originally purchased by G. Rainey Williams Jr., and will beautify and maintain the property until an appropriate development can be secured. he planned to build two towers, a 14- to 16-story tower for OGE Energy Corp. and a second building, eight- to 12-stories, that would be developed separately as either housing or a hotel.”

“Oil prices were still hovering at $100 per barrel as the new renderings were revealed. Both residential towers would have consisted of 253 upscale apartments. On Monday, OGE Energy Corp. acknowledged their vision is no longer feasible and they are not interested in going back to the original, scaled down plan. ‘After consulting with developers, it is very clear that there is currently insufficient demand for additional downtown office space,’ Trauschke said.”

The Los Angeles Times on North Dakota. “Young men arrived by the thousands seeking their fortunes in the Bakken formation, an abundant source of crude oil cracked open by hydraulic fracturing and soaring oil prices. Yet while jobs were suddenly plentiful, there was almost nowhere to live. Now, after more than five flush years, oil prices are in a prolonged slump, the flow of workers has reversed. Fewer workers showed up each month. Some who did questioned why they would commit to a lease or a mortgage amid such uncertainty. ‘What happens if you move here and buy a house and then you don’t have a job?’ asked Francisco Real, an oil rig maintenance worker who commutes to Williston from the Chicago area and lives in a small camp.”

“Marcus Jundt, a developer and former mayoral candidate, predicted a ‘blood bath’ for real estate investors until oil prices rise again and workers start coming back. Williston is not like California or Arizona or even Texas, he said. ‘If you lose your job in Williston, you leave,’ he said.”

“Real estate prices have been plummeting as a result of the oil slump and the new construction. At one complex, a two-bedroom apartment that cost nearly $4,000 a month at the peak of the boom now goes for about $1,600. John Sessions, an investor in a new apartment complex, told the council that the occupancy rate there was 60%. ‘This is not what the investment community expected,’ he said.”