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Category Archive: ‘Market Conditions’

Boomer Liquidation Postponed

This guy saw it like I did – that there would be “the great senior sell-off”, but he had more concern that the millennials wouldn’t be there to pick up the pieces. He is back-pedaling now on when it will happen – and I think he is just guessing. It will happen when it happens, and each neighborhood will be affected differently. Hat tip daytrip!

It’s a dilemma that has preoccupied Arthur C. Nelson, a U of A professor who spoke with former CityLab staff writer Emily Badger in 2013 about what he dubbed “the great senior sell-off.” Nelson postulated that Boomers would soon be selling their homes in droves, but would be hard-pressed to find buyers—mainly because Millennials wouldn’t want to buy them.

Nelson pointed to the affordability issue as well as the fact that about a quarter of Millennials prefer urban housing, such as condos or townhouses, over the detached suburban homes that were the Boomers’ preferred habitat. Younger buyers, he said, will also be looking for starter homes—smaller than the big Colonials and split-levels that line America’s cul-de-sacs. “We can predict the next housing crash,” he said at the time. “That’ll be in about 2020.”

Four years later, Nelson tells CityLab that he believes the sell-off will still occur—but later, in the mid- to late 2020s.

This has to do with people deciding to defer selling their homes, hoping to get a better price later than settling for a lower price now. “Home values in much of the country are still less than those before the Great Recession of 2007 to 2009,” he says. Prior to the recession, the typical homeowner would sell a house about every six years. “It was like clockwork,” says Nelson. “This drove a lot of planning and development projections.”

“It’s not that Boomers are going to ‘age in place,’” says Nelson. “They’re going to be stuck in place, and they’re going to make the best of it.” Those who can afford it will remodel.

Though Jennifer Molinsky, a senior research associate at Harvard’s Joint Center for Housing Studies, agrees that exurbs and rural areas will likely be vulnerable to the Boomer/Millennial housing mismatch, she’s not as pessimistic about the sell-off as a whole.“The Baby Boomers are a large generation,” she says. “Nothing they do is going to happen en masse.” She also believes that the Boomers who don’t age in place will demand an increasing array of housing options that will help spread out sales over time, decreasing the likelihood of a sudden glut of housing.

Read full article here:

https://www.citylab.com/housing/2017/04/who-will-buy-baby-boomers-homes/522912/

Save

Posted by on Apr 16, 2017 in Boomer Liquidations, Boomers, Jim's Take on the Market, Market Conditions | 1 comment

Leaving Town

Interesting that San Diego County is mentioned as an area to which  people are moving! Hat tip to JT for sending this in:

http://www.latimes.com/business/la-fi-leaving-socal-20170414-story.html

Excerpts:

Huntington Beach residents Chris Birtwistle and Allison Naitmazi were about to get married and decided it was time to buy a home.

They wanted to stay in the area but couldn’t find a house they both liked and could reasonably afford — despite a dual income of around $150,000.

So they decided to go inland — all the way to Arizona, where they recently opened escrow on a $240,000 four-bedroom house with a pool, just outside Phoenix. Their monthly mortgage payment will be about $500 less than what they paid for a two-bedroom apartment in the Orange County beach community.

“The only hesitation was [leaving] the great weather,” the 31-year old Birtwistle said. “But we talked about what we can get here and what we can get there for the same price and that was a no brainer.”

Moves out of the area remain far below levels seen during last decade’s housing bubble, when out-migration was nearly triple what it was in 2016 — and real estate agents urged clients to “drive until you qualify.”

But after slowing down in the aftermath of the Great Recession, which devastated the housing market, out-migration is picking up as prices climb steadily higher, according to U.S. Census Bureau data.

To escape high prices, people — often younger and with lower- or middle-class incomes — are looking toward the Inland Empire and nearby states for additional square footage and a lower mortgage payment.

“[Migration] is settling back into longer-term patterns,” said Jed Kolko, chief economist with employment website Indeed.com who analyzed the data.

Others were more blunt.

“The impact is to create an auction situation between the haves and the have-nots,” Christopher Thornberg, founding partner of Beacon Economics, said of the housing shortage. “And the have-nots have to move away.”

Read full article here:

http://www.latimes.com/business/la-fi-leaving-socal-20170414-story.html

Posted by on Apr 14, 2017 in Jim's Take on the Market, Market Conditions | 4 comments

Bubble Check

From our friends at John Burns Consulting, who have been very diligent in their reporting of market conditions over the years:

Once again, we have completed our annual housing bubble check-in. Assessing the criteria that 73 industry executives identified in 2013, we found three qualitative signs of a bubble, two signs of a mini-bubble, and five signs of no bubble. Click here to see our infographic Top 10 Signs of a Market Bubble. Every month, we analyze the quantitative stats in our analysis of 70+ MSAs for our research subscription members. We have concluded that affordability in some markets is the only sign of a bubble that we can find.

Our view on the 10 qualitative stats follows:

3 Bubble Signs

 

  • Reality TV. While home builders aren’t giving away free houses every Sunday night like they were on Extreme Home Makeover (ABC) in 2005, shows like Flip or Flop (HGTV), Home Free (Fox), and Deed (CNBC) have been captivating audiences recently. House flipping has become a big business fueled by hard money loans made by non-banks, and Flip or Flop just announced its expansion to five new cities.
  • Booming real estate careers. NAR membership has rebounded strongly, pushing near-2005 levels despite far fewer transactions than in 2005. On a recent flight to the hot Portland housing market, one of our team members overheard the flight attendants discussing getting their real estate license. See the chart below.

  • Creative mortgages. Headlines around excessive mortgage documentation and fewer loans to low-credit borrowers mask what is really going on in the market. Per AEI, 56% of borrowers put down 10% or less of the purchase price, and 35% have debt service above 42% of their gross income. Lending is clearly not as aggressive as in the 2005–2007 period, which resulted in a 19% default rate. But it is far more aggressive than in the early 1990s, which would have had only a 6% default rate during the last downturn. Today’s loans would have a 12.2% default rate under the 2007 downturn scenario.

Read their full report here:
https://www.realestateconsulting.com/only-a-few-bubble-signs-brewing/

Posted by on Apr 14, 2017 in Jim's Take on the Market, Market Conditions | 0 comments

Freeze-Dried Frenzy

The market is sizzling, and it could kick up to another level if there were just more homes to sell! Here is a comparison of today’s inventory to previous years (the lower-end is selling fast!):

NSDCC Active Inventory – Second Week of April

Year
$0-$800K
$800K-$1400K
$1400-$2400K
$2400K+
Total
2014
97
233
233
349
912
2015
65
220
218
346
849
2016
37
235
260
447
979
2017
28
168
235
386
817

NSDCC Pendings Today

PEND
$0-$800K
$800K-$1.4M
$1.4M-$2.4M
$2.4M+
Total
4/10/17
38
202
126
69
427

Without more homes to sell, it’s like a freeze-dried frenzy on the lower end – very dry but it’ll keep you alive!

From cnbc.com:

Anyone eager to buy a home this spring probably has reasons to feel good. The job market is solid. Average pay is rising. And mortgage rates, even after edging up of late, are still near historic lows.

And then there’s the bad news: Just try to find a house.

The national supply of homes for sale hasn’t been this thin in nearly 20 years. And over the past year, the steepest drop in supply has occurred among homes that are typically most affordable for first-time buyers and in markets where prices have risen sharply.

In markets like San Diego, Boston and Seattle, competition for a dwindling supply has escalated along with pressure to offer more money and accept less favorable terms.

“Sellers will have the edge again this year,” said Ralph McLaughlin, chief economist for Trulia, a real estate data provider. “Homebuyers are really going to be scraping the bottom of the barrel as far as housing choice is concerned.”

The intensity of the competition this spring has surprised even sellers like Kathleen Mulcahy, a 37-year-old product manager in Seattle.

Within a week of listing her one-bedroom, one-bath condo, Mulcahy received 21 offers – all above her asking price of $398,000. Most of the offers came with built-in triggers to automatically rise in case a rival bidder sweetened a bid. In the end, she accepted an offer of $500,000 – all cash.

“A lot more than I expected,” Mulcahy said.

Yet the changed landscape cuts both ways: Facing higher prices and competition herself, Mulcahy has decided for now to put off buying another home.

“There’s very little available, and it’s just too expensive right now, so I’m going to wait,” she said. “I’ll probably rent for two or three years.”

About 1.75 million homes were for sale nationally at the end of February, according to the National Association of Realtors. That’s down 6.4 percent from a year earlier and only slightly up from January, when listings reached their lowest point since the association began tracking them in 1999. All told, the supply of homes for sale has fallen on an annual basis for the past 21 months.

Read full article here:

http://www.cnbc.com/2017/04/10/mission-nearly-impossible-this-spring-finding-a-home-to-buy.html

Posted by on Apr 10, 2017 in Actives/Pendings, Frenzy, Inventory, Jim's Take on the Market, Market Buzz, Market Conditions, North County Coastal | 0 comments

No Bubble Pop

Another entity that had to radically change their business when banks stopped foreclosing was Foreclosure Radar.  Their product line has expanded to appeal to the masses, and they’ve kept their market reports coming:

LINK

Here is an excerpt from this week’s report:

“News of soaring prices amidst weak sales is fueling speculation that the San Francisco Bay Area housing market is a housing bubble about to pop,” said Schnapp. “It’s not a housing bubble. It’s a market dislocation caused largely by government policy.”

“A housing bubble requires both an unwarranted surge in prices followed by a massive selloff,” said Schnapp. “Today’s high prices are due to a combination of factors.  Demand is being fueled by market stimulus in the form plentiful jobs and government-backed low-interest, below market rate loans that require little down.  Supply constraints are coming from burdensome regulations on new building.

A massive selloff — a housing bubble bursting — is unlikely because a regulatory change in 2009 means that even if consumers default on their loans, banks will now sit on inventory rather than foreclose and sell like they did in 2008.”

“California’s housing problem boils down to bad government policy. Local, state and federal housing regulations have made it all but impossible for builders to meet housing demand in California’s growing economy,” said Schnapp. “Conceptually the solutions to California’s affordability crisis are simple, but politically we should expect the current situation to continue for the foreseeable future.”

Posted by on Apr 7, 2017 in Jim's Take on the Market, Market Conditions, No-Foreclosure as Banking Policy | 0 comments

NSDCC Sales, March 2017

We hear about the ‘tight inventory’ across the country, but the perception is affected by how fast homes are selling – there aren’t many houses just sitting around not selling, which gives the appearance of ‘tight’.

Let’s measure it correctly by comparing the total number of houses listed for sale between La Jolla and Carlsbad:

NSDCC Total 1st Quarter Listings

1st Qtr
Total # of New Listings
Median List Price
2013
1,288
$1,175,000
2014
1,235
$1,289,950
2015
1,276
$1,302,950
2016
1,394
$1,490,000
2017
1,223
$1,495,000

The number of NSDCC houses listed for sale hasn’t dropped significantly from previous 1Qs – the 1,223 is only 4% below the average of the last five years. Does that mean the number of sales should be comparable to previous years?

Here is the first look at last month’s NSDCC detached-home sales:

NSDCC March Sales

March
Total # of Sales
Median SP
Avg. $$/sf
Avg. DOM
# Sold <800K
2013
299
$840,000
$404/sf
49
129
2014
219
$1,040,000
$518/sf
51
62
2015
294
$1,137,500
$502/sf
46
73
2016
245
$1,145,000
$524/sf
42
57
2017
229
$1,110,000
$481/sf
42
41

Sales last month were 11% below the March average of the last five years.  Double-digit changes should get our attention!  But it is very understandable, once we look deeper.

The lower-end is where the discrepancy is – the number of houses sold under $800,000 last month was 44% below the 5-year average.

The lower-end market is disappearing.

We’re already a higher-end market, and going higher.  As a result, sales could taper off as we find an equilibrium.

It’s not like there aren’t houses for sale. They’re just expensive!

Today we have 822 on the market between La Jolla and Carlsbad – with a median LP of $2,295,000!  Only 97 of those (12%) are listed under $1,000,000!

One other note. The $524/sf average last March included this house that closed for a whopping $5,869/sf.  Take that out, and the March, 2016 average is $502/sf, the same as the previous year.

Posted by on Apr 4, 2017 in Jim's Take on the Market, Market Conditions, North County Coastal, Sales and Price Check | 0 comments

Will The Real Estate Bubble Pop Again?

Our local home prices have risen so quickly that it feels like we’re in ‘bubble’ conditions again – could the bubble burst this time?

The last two times the real estate bubble has popped, it was due to banks having to offload their foreclosed properties for whatever the market will bear.  They flooded the market, and buyers – and prices – backed off.

But that has all changed now.

Look at the new devices being used to avoid a flood of desperate selling:

  1. New accounting rules.
  2. California Homeowners Bill of Rights
  3. Reverse mortgages

The accounting rules were altered so banks could hold their REO properties longer, and the California Homeowners Bill of Rights has, in effect, stopped foreclosing.  Lenders are now required to offer a loan modification to anyone in default, and only if the homeowner can’t or won’t qualify are they at risk of being foreclosed.   With today’s higher rents, there isn’t much relief for those in default to give back their house and go lease one nearby.  Besides, with our higher home values today, they can always sell before getting foreclosed.

Homeowners who need money can get a reverse mortgage too, as long as they haven’t been tapping into their equity already.

We end up with virtually no desperate sellers who need to dump on price.  Someone who wants to cash out quickly can price their home at last year’s comps and look like a deal!

The game is rigged – the Banking Cartel won’t let the bubble pop again!

For the bubble to pop, we would need a dramatic shift in the supply and demand – either a flood of homes hit the market, and/or we run out of buyers.

I thought we’d be seeing more baby boomers unloading their homes due to downsizing or sickness, and while the market consists mainly of those listings, there aren’t enough of them to call it a flood – at least not yet.  Because they are in quality locations, more kids are probably trying to buy out their siblings and take over their parents’ house, rather than sell it.  They could be moving in with the folks too, rather than sending them to assisted living.

Could we run out of buyers? You would think there would be a price point where buyers can’t or won’t go any higher, but there seems to be a steady flow of people with more horsepower.  We saw two weeks ago the prediction that the population of San Diego County is expected to grow by 700,000 people by 2050, which is over 21,000 per year – where are they going to live? Will they be rich? They will need to be!

There hasn’t been enough (has there been any?) sellers so desperate that they had to dump on price – instead, they just keep waiting.  We would need more than a few price-dumpers to start a panic, which could cause the market to flood with supply and burst the bubble.

Some air might escape occasionally, but it is doubtful that a market change could occur without the government finding a way to save the bankers.

People like this guy think the conditions are ripe for a downturn.  But if prices started falling, sellers are more likely to wait, than dump, which would cause our market to stagnate, rather than crash.

Posted by on Mar 27, 2017 in Boomer Liquidations, Boomers, CA Homeowners Bill of Rights, Foreclosures/REOs, Jim's Take on the Market, Loan Mods, Market Conditions, Mortgage News | 3 comments

Home Buyers – Prepare for Battle

An article from cbsnews.com – get good help!

http://www.cbsnews.com/news/buying-a-home-in-2017-prepare-for-battle/

An excerpt:

“Home buying is about substantive economics, but it’s also got an element of ‘animal spirits,’” said its President Steve Udelson. “In some of the hottest markets, we’ve seen a double-digit run-up in prices.”

The website surveyed 1,289 prospective buyers nationwide, and its findings suggested that most prospective homeowners already had their feet in the starting blocks for the spring selling season. More than half were willing to go beyond their budget — by an average of nearly $38,000 — to get the property they desired.

And like most competitive athletes, they were hopeful as well as scared. Not surprisingly, about 60 percent of those surveyed feared:

  • Bidding wars driving up the price of their dream home.
  • Losing the “earnest money” they put down when they signed a contract.
  • Becoming “house poor,” that is, unable to afford amenities like a meal out in order to make the mortgage payment.

Read full article here:

http://www.cbsnews.com/news/buying-a-home-in-2017-prepare-for-battle/

Posted by on Mar 26, 2017 in Frenzy, Jim's Take on the Market, Market Buzz, Market Conditions, Thinking of Buying? | 2 comments