The Housing Bubble

The Mercury News reports from California. “This week’s new joint analysis by the Point2homes.com and PropertyShark websites points to San Francisco as the costliest housing market in the U.S. and Canada, with a median home price of $1,085,000. Manhattan captured the No. 2 position ($1,059,000), while San Jose ($700,000) took the third spot, followed by Brooklyn in fourth place, Los Angeles in fifth and Vancouver in sixth. Those are the top finishers in what’s billed as North America’s Superstar Housing Markets. Jacky Morales-Ferrand, San Jose’s housing director called the obsession with rankings ‘a sign of this recovery.’ ‘Because the latest recession was all about housing and its prices, and we now have this recovering market. But how high can it go again? When it reaches its cap, it’s going to deflate. It’s going to have to go down,’ she added.”

“More recently, the Abodo apartment search website reported that rental costs for one-bedroom units in San Jose fell 11 percent from January to February this year, said to be the biggest decline in the nation. But when Abodo tabulated the 10 largest declines from February to March, San Jose wasn’t on the list, though Sacramento ranked second (down 16 percent) and San Francisco ranked ninth (down 6 percent). Is your head spinning yet?”

KGW on Oregon. “A growing number of Portland-area home buyers are coming from the San Francisco Bay Area. The California transplants are helping to fuel Portland’s red hot housing market. Of Bay Area residents moving elsewhere in the country- 4 percent bought homes in Portland in 2014. One year later - that number jumped to 12.6 percent. ‘I’ve got two Bay Area buyers in escrow right now and it seems like more of their friends, just kind of keep talking about it,’ said Matthew Brennan of the real estate brokerage Redfin.”

The Kirkland Reporter in Washington. “The spring housing market is here. We’re calling it a Pac-Man market because homes are being gobbled up as soon as they come on the market. ‘As forecasted, we’re in for another crazy spring real estate market,” said Lennox Scott, CEO of John L. Scott Real Estate. ‘Six months ago we predicted the major decline in inventory throughout the winter months that would create a more intense market starting the first of the year. It’s like déjà vu all over again. We’ve seen this pattern for the last three years, but the lack of inventory is taking its toll on homebuyers; we are facing the most intense market yet.’”

“‘We have a real estate market that is out of balance,’ said Mona Spencer, managing broker of John L. Scott Eastside. ‘For buyers, have your agent explain how to navigate through the lack of inventory to help you win the offer. Make sure they have a list of techniques to use.’”

The Midland Reporter Telegram in Texas. “Updated labor market figures from the Texas Workforce Commission this month showed the economic pain caused by low oil prices was deeper than originally thought. ‘What had previously been reported as slight year-over-year gains in total employment in Midland-Odessa were revised downward, as expected, to indicate the loss of an estimated 14,500 jobs in 2015, a decline of about 8 percent over the year. Monthly employment estimates in the latter part of 2014 were revised slightly downward as well,’ said Karr Ingham, the Amarillo economist who prepares the Midland-Odessa Regional Economic Index.”

“Virtually every component of the index posted sharp, double-digit declines, he pointed out. Construction spending is less than half a year-ago levels, with January figures for all building permit valuations 53.4 percent below January 2015. The number of new housing permits issued by Midland and Odessa was down 21.1 percent below last January’s levels. Businesses and residents may feel like, in many ways, the bottom has fallen out, he said. But amidst the current pain, he stressed that the remarkable 70 percent surge in the area economy from 2010 through 2014 should not be forgotten. ‘This is short-term pain on the heels of extraordinary gains. That context can’t be forgotten,’ he said.”

The Banker and Tradesman on Massachusetts. “Greater Boston’s sky-high home prices may be finally peaking after an epic run-up that has seen values reach – and in some cases blow past – records set during the bubble years. Then again, maybe they are just taking a breather before rocketing to even more insane heights. The real estate market inside the 495 beltway is at a crossroads, with prices slowing and in some cases flattening out over the past few months, even as sales go bonkers.”

“There are certainly numbers to back up the slowdown view. While pending sales across Massachusetts were up in February by a whopping 75 percent compared to last year – recall last February’s Siberian interlude – median home and condo prices fell 2.3 and 2.8 percent respectively, the Massachusetts Association of Realtors reports. Home prices have hardly been on a tear over the last few months, either, given what’s happened over the last few years.”

“The median home price in Massachusetts edged down half a percent in January, to $320,000, while condo prices fell 3 percent, to $290,875, according to The Warren Group, publisher of Banker & Tradesman. Moreover, there are also signs that prices have finally hit a ceiling in some of the Boston area’s toniest suburbs. After year after year of steady, sometimes double-digit appreciation, home prices actually fell last year in blue chip towns like Weston, Lincoln, Lexington, Concord and Sherborn, as well as Cohasset on the South Shore.”

“Annie Blatz, president of the Massachusetts Association of Realtors, said she is encouraged by what she sees as a ‘moderating’ trend in home prices. It’s certainly good for business. Steady but modest increases in home prices a lot easier for homebuyers to stomach, she noted. ‘We are always happy with moderation,’ Blatz said.”

The Gainesville Sun in Florida. “Wayne Bauman bought one of the first six condos in Grand Preserve at Kanapaha in 2008 and moved in that February with his wife. They loved it at the time, he said, but it wouldn’t be long before they were sorry they ever moved into what became known during the Great Recession as a zombie development. Dozens of subdivisions developed around Alachua County during the height of the housing bubble later came to a halt — or at least a slow trickle — as the recession hit.”

“Construction activity has picked up in recent years, however, bringing new life to the once dormant developments as the housing market recovers. All told, Alachua County has 12,818 vacant lots, including 4,793 within municipalities, 1,711 in the unincorporated county and 6,314 within the urban cluster surrounding municipalities. Another 8,258 are within preliminary developments awaiting final regulatory approval for a possible total of as many as 21,076 vacant lots.”

“Grand Preserve — although currently an unplatted planned development — was an extreme example of a zombie development. Grand Preserve eventually went into foreclosure. The clubhouse is open, but Bauman said the gym equipment is broken, and pool and lawn maintenance have been intermittent. Bauman said they would have liked to sell and move out, but the property value dropped to half of their original $230,000 purchase price and they are still underwater, owing more than the condo is worth.”

“‘We can’t walk away from here with a loss because we won’t be able to buy anywhere else,’ he said. ‘You can look, but not until prices come up and until they start building here that’s not going to happen.’”