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The Expectation That Values Will Rise Dramatically

A report from the Jax Daily Record in Florida. “‘While affordability concerns remain, there is no sign of a housing bubble,’ said Toby Hoff, regional director of the Metrostudy in presentation to the Northeast Florida Builders Association. ‘As things get more expensive, buyers are paying more and more, which means they can afford less and less, so we’re losing this very valuable $200,000 segment.'”

“That segment of home prices is ‘going to slowly disappear,’” Hoff said. ‘The new ‘under $200,000’ is the $200,000 to $250,000 (range), that’s up 24% year over year,’ he said. ‘There is going to be a limit to what people can afford. Buyers are starting to make concessions that they wouldn’t have made a few years ago. Buyers are beginning to drive farther in order to chase affordability.'”

The Falls Church News Press in Virginia. “In Falls Church, the problem is fast approaching a tipping point, and City government has been very reluctant to step up to its responsibilities because of a long history of resistance here by well-off residential property owners to anything that they (usually wrongly) perceive as negatively impacting their home values.”

“No longer is it the accepted wisdom that the development by Amazon of its HQ2 campus in Northern Virginia will barely impact the area for years to come. In fact, the impact is being solidly felt right now, taking the form of homeowners who might otherwise be selling, holding tight to their properties on the expectation that values will rise dramatically over the coming period.”

From KELO Land in South Dakota. “The Sioux Falls housing market continues to climb. If you’re looking to buy a home, the pickings are slim. If you’re trying to sell, you may get more money than you ever imagined. Anne Nelson with the Realtors Association of the Sioux Empire says we’re currently in a housing shortage. Which means homes are selling in record time.”

“‘Some of them in as much as a few hours, and there are some that will be a week or two. Every now and then someone will say to me, well what’s wrong with it? It didn’t move fast. Well, it’s not necessarily that something is wrong with it. It might just be it came on right before Memorial Day weekend and people are out of town. It might be that we got a huge rain fall for three days straight and nobody wanted to look,’ said Nelson.”

The Santa Maria Sun in California. “Lompoc City Councilmember Jim Mosby is still searching for truth but can’t seem to find it. For example, during a budget workshop on May 15, he claimed that ‘it was never really discussed with us what’s going on with revenue,’ and ‘it was never discussed why [10-year] revenue projections were $1.5 million off in 2019-20 and $2 million off in 2020-21.'”

“This, of course, was false. During a special workshop on Dec. 8, 2018, the management services director told the council that the cause of revenue projection shortfalls was partially due to a ‘housing bubble,’ meaning that when comparing 2018 to 2006, there is a remarkable decrease in housing construction.”

The Independent on California. “Senderos Canyon, a roughly 258-acre tract of land on the edge of Los Angeles’s Bel Air neighbourhood, came on the market in 2013 with an asking price of $125m. Three years later, without any takers, the owner delisted the property. On Monday, the property came back on the market with a heavily reduced $75m price tag.”

“What could cause such a singular property to depreciate so dramatically over the past six years? Scott Tamkin, who is representing the listing, says the property’s initial asking price was unrealistic. ‘At that time, the market was a little bit different, and developers and sellers were listing properties at high numbers,’ then willingly taking major price cuts, he said. ‘We’re in a market now where the reality is that prices need to be in the range that buyers want.'”

From Mortgage Professional America. “The annual sale prices for newly-built homes has dropped for the first time in seven years, according to Redfin. Demand was cooling in the second quarter of 2018 as builders began lowering prices and offering incentives to agents and interested buyers.”

“‘It might seem like the solution to the housing shortage is straightforward—just build more homes—but in many California metros construction workers aren’t paid enough to cover their own housing costs, which makes attracting construction workers to build those homes quite difficult,’ said Redfin Chief Economist Daryl Fairweather. ‘To solve the housing crisis, the government needs to step up and subsidize new construction. Some voters might find it distasteful to give wealthy developers subsidies, but those subsidies could come with strings attached like higher pay for working-class construction workers.'”

The US News and World Report. “Depending on what news bulletin you’re listening to or which economist is talking, the U.S. — and probably the rest of the world — is on the brink of recession at just about any moment. Of course, what goes up must come down, and lingering memories make many homeowners concerned.”

“Already, many markets across the U.S. have seen a slowing demand among buyers. Even for those homeowners still underwater from the last recession, Mark Fleming, chief economist for First American Financial Corporation says as long as they’re making monthly mortgage payments, they don’t need to worry. ‘The challenge is when you’re underwater on that mortgage, and then for some reason you lose the ability to make that mortgage payment,’ Fleming says.”

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This Post Has 42 Comments

  1. ‘It might seem like the solution to the housing shortage is straightforward—just build more homes—but in many California metros construction workers aren’t paid enough to cover their own housing costs, which makes attracting construction workers to build those homes quite difficult…To solve the housing crisis, the government needs to step up and subsidize new construction. Some voters might find it distasteful to give wealthy developers subsidies, but those subsidies could come with strings attached like higher pay for working-class construction workers’

    You are a ding dong Daryl.

    1. Classic example of government creating a problem and then trying to fix it with more government which will just mess things up even more.

      1. To solve the housing crisis, the government needs to step up and subsidize new construction

        Problems created by government subsidy cannot be corrected by more government subsidy.

      1. I’m always in favor of reverse subsidies, build homes for say $150k or less and receive a tax break, like no city fees, like NYC and its 421a reduced RE taxes for 15-20 years, but NYC made high priced kondozes eligible too, so we get thousands, tens of thousands of them and nothing affordable so a school teacher can buy one.

        1. I am in favor of ZERO subsidies. Get the government out of housing. No more loan guarantees, no more Section 8, NOTHING.

          1. “…Get the government out of housing…”

            Chinbabwe, could not have said it better.

            If nothing else, think of the good side effect ripples through our amazing insane Federal tax code, and (for me) even more insane California Franchise tax board code and local Orange County what have you’s.

            Another good side effect would be the probable downsizing of the REIC as a whole. Yes, those jobs would be lost, but think of all those bright people that could change careers and go into a job that actually produces something of value.

            I have often wondered if anyone/organization has complied a list of all the Federal/State/Local housing subsidies, tax breaks, what have you currently in place? Bet the final compilation would number in the hundreds!

          3. “No more loan guarantees, no more Section 8, NOTHING.”

            Our senators don’t fund this out of the goodness in their hearts…it’s all about buying votes.

        2. I agree with this approach. It is also why Richard Thaler won the Nobel prize for economics on his work of behavioral economics. Incentives matter greatly. If you want affordable housing, you need to structure the the incentives in a way such that the structure of production move in the direction you want. You cannot force it there, but you can create the conditions in which it may appear.

          1. you need to structure the the incentives

            Begs the question of how did people of modest means build simple low cost housing for themselves for thousands of years without you structuring their incentives for them.

    3. This is another made up problem that some jerk just wants to throw tax dollars at. How hard is it to buy $30,000 kit homes off the internet, that basically just need to be assembled like a piece of furniture from Ikea, and start putting those up. If it truly is “too expensive” to build a home, then why doesn’t some genius just start plopping down cheaper shacks.

      “If you build it they will come” AMiRite?

    1. Didn’t Obama sign legislation allowing the federal reserve to banish recessions to the dust-bins of history?

  4. Wake me up when construction workers can afford homes they work on.

    How about hospital workers that can’t afford to live near their work.

    Wake me up when shelter Is viewed as something other than a speculation ATM machine.

    2. “How about hospital workers that can’t afford to live near their work.”

      Already a thing. Tons of RNs fly into wealthy enclaves in CA from other lower-cost-of-living areas and punch their 3 12s then fly out. If they are smart they will stack their shifts so they work 6 12s in a row (which is nightmarish) and then they have about 7 days off, not counting travel. I know several RNs in the Salt Lake area who work in CA because wages are about 2x.

  8. “That segment of home prices is ‘going to slowly disappear,’” Hoff said. ‘The new ‘under $200,000’ is the $200,000 to $250,000 (range), that’s up 24% year over year,’ he said. ‘There is going to be a limit to what people can afford. Buyers are starting to make concessions that they wouldn’t have made a few years ago. Buyers are beginning to drive farther in order to chase affordability.’”

    You SEE, its a mix problem!

  9. “As things get more expensive, buyers are paying more and more, which means they can afford less and less, so we’re losing this very valuable $200,000 segment.”

    So, they are paying prices for things they cannot afford – got it! Sounds sustainable.

    1. “…As things get more expensive, buyers are paying more and more…”

      Remember, ‘more and more’ [sic] REIC folks were 2nd graders when ‘new math’ was introduced. Probably didn’t do to well in those English grammar classes, either.

  10. Hoff said. ‘The new ‘under $200,000’ is the $200,000 to $250,000 (range), that’s up 24% year over year,’ he said
    Make this Idiot famous !

    1. Up 24%in Jacksonville???

      I have recently seen 2 reports saying Jacksonville is / is going negative and is one of the worst performing cities as far as HOME Prices increasing.

      Something is not adding up.

    1. Chris.Thorn.in.yer.$ide.berg: “No unemployment, NO HB.B ll $helter.$hack BU$T!!!!!

      ” … While $hareholders have applauded the safeguarding of profit margin$ as inventorie$ piled up, the pre$$ure to match supply and demand has given way to three month$ – and counting – of production cut$.

      The rapid rate at which auto layoff$ are ri$ing suggest a $pillover into the broader economy. Challenger, Gray and Christmas notes that the almost 20,000 announced layoffs in the first four months of the year were up 207% over the same period of 2018. “Job cut$ in this sector are likely to continue, especially with the implementation of additional tariff$ on Chinese goods,” Andrew Challenger, the firm’s vice president, wrote in a report. “Automaker$ and $uppliers will feel the pre$$ure, which may lead to more cut$.”

    2. “The Fed Can’t Help Housing or Autos at This Point. These key sectors are already in decline, and lower interest rates won’t stop that trend.”

      Maybe. But the fed will be there to quietly purchase their lender’s non-performing lowest tranches of the securitized loans. Neither of these two industries will be allowed to collapse.

    3. The article mentions the massive demographic sell-off that I think will be the lynch pin of the unraveling of the bubble in the next 10 years:

      “Into this weakening environment, millions of baby boomers will endeavor to downsize in coming years. With luck, the additions to existing inventories will be controlled. The main determinant will be whether the stock market’s gains don’t evaporate too much. Millions of boomers don’t have the same latitude to remain in the workforce as was the case a decade ago when their retirement accounts were last stress-tested.”

  12. “Lompoc City Councilmember Jim Mosby is still searching for truth but can’t seem to find it. For example, during a budget workshop on May 15, he claimed that ‘it was never really discussed with us what’s going on with revenue,’ and ‘it was never discussed why [10-year] revenue projections were $1.5 million off in 2019-20 and $2 million off in 2020-21.’”

    Lompoc is about an hour’s drive northwest from Santa Barbara and Goleta. Many South Coast workers commute from Lompoc, where housing is far more affordable. According to the U.S. Census Bureau (2013-17), the median income in Lompoc is $49,274, while the median home value is $269,500.

    According to a 05/14/19 KEYT news report, Lompoc’s tax revenue from cannabis dispensaries has been less than originally projected (dispensaries pay a 6% gross sales tax to the city):

    “The city is desperately looking for new revenue streams and the existing shops have so far been a blessing. Three more licensed shops are working toward opening as well.”

    Cheers,
    Barb
    Santa Barbara Bubble (sbBubble.com)

    1. “Three more licen$ed shop$ are working toward opening as well.”,

      Central Coa$t $oil = excellent dude & dudettes for growin’ & baking’ wacky tabbacky filled edible$!

    2. Lots of people are sick who live in Lompoc, the pesticides and fog are to blame they say.

    3. “Lompoc’s tax revenue from cannabis dispensaries has been less than originally projected…”

      Given that such businesses operate on a cash-only basis, does anyone think they’re actually paying all the taxes they should?

    4. My ex is from Lompoc. I kind of liked the town. The commute south to Santa Barbara (while 40-50 min) is tolerable through rolling hills on 1 and great views of the coast along 101 and there was no traffic. Santa Maria is about half an hour north also. It also is close enough to the coast it still gets the coastal climate (marine layer and cooler temperatures).

      At the time (mid 2015) you could still pick up a modest ranch home in the 250-300k range.

      Still it is a bit rough around the edges and it is a solidly blue collar town (and military with Vandenberg AF Base nearby) but I kind of liked that since the people were down-to-earth and not snobish. Plus it was an experience to watch the rocket launches. First time I wasn’t expecting it and the whole house began to rumble and my eyes bugged out.

      “Oh they’re just launching another rocket,” I was told non-chalantly.

  13. “While affordability concerns remain, there is no sign of a housing bubble.”

    Realtors want everyone to buy the notion that people who aren’t buying simply can’t afford it. It’s a form of social pressure. In reality, there is a massive population of people (us included) who can most certainly “afford” to buy… meaning, we can qualify for a pretty large mortgage and get into a house. However, we simply refuse to do so because yes Mr. Realtor… we ARE in a bubble… and we’re sitting on the prick.

    1. @Mar:

      So true!

      I’m a Millennial and the social pressure to “jump in” and “get on the ladder” are incredible. I can’t go a week without some news organization telling me what I need to do… or else!

      But then again, why should I trust the same people who were adults in 2006 and failed to see the writing on the wall? Their track record makes me do the opposite.

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