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If You Look At Macro Data, You See Everything’s Red

A report from Inside Indiana Business. “After a record-setting 2018, what does 2019 hold for the Indiana housing market? F.C. Tucker Co. Chief Executive Officer Jim Litten says it can be another banner year for housing. Litten cautioned that tight inventories, which led to rising prices and bidding wars in some parts of the state in 2018, could persist this year.”

“However, he downplayed prospects for a housing bubble in Indiana that some are predicting in markets like Phoenix and Austin. Litten says unlike other hot housing market, affordability remains a plus in Indiana. ‘In some of these markets, the average sale price has gone up so much, and incomes haven’t gone up commensurate with the price of real estate,’ said Litten, who notes only about 20 percent of California residents can afford a home, while in Indiana that number is 80 percent.”

The Orange County Register in California. “Saying your product is ‘unaffordable’ is bad salesmanship for housing. We know it’s not easy to comfortably afford local housing. And, yes, compared with other parts of the nation, the bang-for-the-buck of a home purchase can seem skimpy.”

“But we’re witnessing the slowest homebuying stretch in eight years as the count soars for unsold listings and new homes. I’m wondering if some potential homebuyers have been scared off by repeated knocks about ‘unaffordable’ Southern California housing and claims that six-figure incomes are required to be successful house hunters.”

“Mortgages with small down payments are widely available. Adjustable-rate deals — with cheaper initial rates — are common. And some lenders will let a borrower into a mortgage that pushes a family’s debt payments up to roughly half of their income.”

“So, I’m puzzled as to why the real estate industry isn’t publicly pushing harder to get house hunters up to speed on what may be seen as non-traditional buying strategies. The use of adjustable-rate loans for purchases, for instance, runs well-below historical levels.”

“Certainly, making huge financial stretches is not for everyone. Or accepting a lengthy commute. But let’s politely note that creativity in Southern California homebuying has long been required. And perhaps that skill isn’t being tapped enough.”

“The barrage of reports stating local housing is in ‘shortage’ and ‘unaffordable’ — in part creating political pressure for more building — can have an unintended consequence, too. Like, perhaps, being part of why Southern California home sales took their steepest plunge in December since the Great Recession.”

From Think Realty on Texas. “Everything’s big in Texas, including the foreclosure auctions. A total of 27,324 Texas properties were scheduled for public foreclosure auction in the first 11 months of 2018, the most of any state and accounting for one in 10 scheduled foreclosure auctions nationwide, according to ATTOM Data Solutions.”

“Texas foreclosure auctions are on track to increase 12 percent in 2018 compared to 2017, the first annual increase since 2014. In November 2018, ATTOM Data Solutions reported a 42 percent year-over-year increase in foreclosure auctions in Austin, and foreclosure auctions — which start the foreclosure process in Texas — were up 31 percent through the first 11 months of the year compared to the same period in 2017.”

From Bethesda Magazine in Maryland. “County Executive Marc Elrich dropped a bomb: forecasted school impact tax revenues had dropped by $121 million, half the amount projected just a year ago. That reflects a worrisome trend in housing construction and will force some very tough choices on county-financed projects.”

“And so, the county’s housing construction slowdown is now forcing tough decisions in the capital budget. But there is a silver lining to all this. We are not in a recession. Yet.”

From Mansion Global on New York. “We caught up with Roy Stillman, president of Stillman Development International to discuss homes as a place for peace, the uncertainty in the high-end real estate market and more.”

“MG: Are you seeing any new hubs for luxury properties? RS: We’re at a place in the economy where the answer is no. We’re at a nuanced time for selecting projects. Unless, you have an exception on your hands, now is not the time to do a residential luxury project.”

“MG: What’s the biggest surprise in the luxury real estate market now? RS: Sometimes you do see these outliers. The fact that the most expensive property in the U.S. just sold in New York for $238 million at 220 Central Park South. By contrast, if you look at macro data, you see everything’s red. But here, someone went totally contrary. But as a developer or investor you shouldn’t be playing toward the surprise, you should be playing toward the rule.”

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This Post Has 70 Comments

  1. ‘In November 2018, ATTOM Data Solutions reported a 42 percent year-over-year increase in foreclosure auctions in Austin, and foreclosure auctions — which start the foreclosure process in Texas — were up 31 percent through the first 11 months of the year compared to the same period in 2017’

    Remember the old days, last fall, when Attom was reporting the skyrocketing default rates in Florida, Texas, San Diego and Nashville? I wonder why they stopped?

  2. ‘The fact that the most expensive property in the U.S. just sold in New York for $238 million at 220 Central Park South…someone went totally contrary’

    Not so much Roy. That deal was signed in 2015. And the guy still got the seller to slash almost 5% off the agreed price. Probably threatened to walk away from his deposit.

    1. And the buyer – a hedgie bailed out by Bernanke – was using taxpayer money anyway, so he didn’t even earn it. Therefore, he has no respect for it.

      1. bailed out by Bernanke

        Are you sure? Didn’t the Fed loan the money to AIG to cover its debts? Didn’t the money get paid back by AIG to the Fed??

  3. ‘So, I’m puzzled as to why the real estate industry isn’t publicly pushing harder to get house hunters up to speed on what may be seen as non-traditional buying strategies. The use of adjustable-rate loans for purchases, for instance, runs well-below historical levels’

    ‘Certainly, making huge financial stretches is not for everyone. Or accepting a lengthy commute. But let’s politely note that creativity in Southern California homebuying has long been required. And perhaps that skill isn’t being tapped enough’

    Click! – that editorial from the Orange County Register. Take one for the team folks!

    2. It’s deja vu all over again!

      The average adjustable-rate mortgage is nearly $700,000. Here’s what that tells us.
      Published: Feb 4, 2019 12:19 p.m. ET
      Is it worth even a little risk to save just 50 basis points?
      By Andrea Riquier

      The size of the average fixed-rate mortgage last week nationally was $280,900. The size of the average adjustable-rate mortgage was $688,400 – two and a half times as big.

      That data point, courtesy of the Mortgage Bankers Association, is a reminder – perhaps an uncomfortable one – that the mortgage industry must still offer products that make it artificially affordable to get people in the door, with the intention of refinancing later.
      …

      2. (snip)

        “A decade ago, speculation and greed drove up prices, whereas now, in a supply-starved market, ‘demand’ might be just as easily characterized as ‘need’ for housing, of any kind.”

        “… now, in a supply-starved market …”

        Stick around and witness for yourself what happens to supply when this interesting phenomenon of FONGO really gets going.

        Suck ’em in, shake ’em out. Price fluctuations will tend to do both.

        A price that rises “creates wealth” and since everybody wants wealth people jump in an bid up prices, magically creating wealth in the process.

        A price that declines destroys this wealth and since nobody wants to stick around and see their wealth being destroyed people enmass put their houses up for sale and will willingly (desperately?) accept low prices, destroying wealth in the process.

        Entire portions of an economy can be (and is) reliant on this stupid behavior of some very stupid people.

          1. The problem is there is only one exit door and everyone is going for it. He who panic first, panic best….the rest will be slaughtered

  6. October 22, 2016

    “It’s been almost two years since Washington got word that a $10.5-million condo had hit the market. The unprecedented price was all the more surprising because of where the building was going up—not somewhere predictably luxe like the West End or Georgetown’s waterfront, but downtown Bethesda. The listing was the ultimate symbol of a trend that real-estate watchers had been nearly uniformly predicting: Increasing numbers of wealthy baby boomers would trade their 10,000-square-foot Potomac spreads for a downsized lifestyle in walkable, urbanized (but not too urbanized) Bethesda. But making the swap for upscale condos hasn’t been so easy.”

    “‘I have a new listing coming on this week in the $2-million range, in Potomac, and that’s where the owners want to go: to a condo in Bethesda,’ says Washington Fine Properties agent Lori Leasure. The catch? ‘They tried to sell the house this spring with a different Realtor, and it didn’t work, so I’m the second one in. Potomac is just so quiet right now.’”

    “Other Montgomery County agents tell versions of the same story. ‘The whole ‘live urban’ trend means buyers for Potomac have all but disappeared, unless the deal is really, really good,’ says Coldwell Banker’s Jane Fairweather.”

    “And that’s a problem for Bethesda’s supply of new multimillion-dollar condos. The median sold price of condos in downtown Bethesda’s 20814 Zip code has dropped by more than 9 percent this year, according to RealEstate Business Intelligence, the authority on local data. Meanwhile, homes in Potomac are sitting on the market for an average of 75 days, a 19-percent increase. The most expensive tend to linger much longer—such as an $11-million, ten-acre estate listed for nine months or a 25,000-square-footer for $9.25 million, on the market nearly two years.”

    “The Darcy began selling in 2013 while the building was under construction. Agents say that two or three years ago, sellers in Potomac were more willing to risk putting contracts on condos without first offloading their houses. ‘Now they realize word is out and their home is not going to be an easy sell,’ says Compass agent Gretchen Koitz.”

    http://thehousingbubbleblog.com/?p=9846

  7. February 25, 2018

    Booms Powered By The Cheapest Credit In History

    From the San Francisco Chronicle in California. “When real estate agent Josie George arrived to show a rustic cabin in the Berkeley Hills for an open house, people were already gathered outside. For two straight hours, Ratoosh answered questions from eager prospective buyers. At first they formed a line behind her, waiting for a turn, but eventually George just stood on the deck and addressed the group as if she were giving a speech.”

    “George says more than 200 people came to look at the 640-square-foot cottage at 2794 Shasta Rd. listed for $479,000 —and this was on the same day as the Super Bowl. ‘I’ve never been at an open house that’s so busy,’ she says.”

    “In the San Francisco Bay Area where real estate has boomed for nearly 10 years, stories of mobbed open houses aren’t unusual. Well-priced properties with curb appeal or potential receive dozens of offers and go for hundreds of thousands of dollars over asking price. The University town of Berkeley draws hungry homebuyers. The median sales price in September 2012 was $648,00 and nearly six years later that figure has nearly doubled to $1.225 million, according to Trulia. Seven months ago, two-bedroom bungalow with a pretty garden was listed for $725,000 and sold for 53 percent over asking at $1.111 million.”

    “But 2794 Shasta Rd. might be a little different from the typical listing that causes a frenzy as it’s the size of a master suite in a typical new suburban home and it’s simple cabin design has never been updated.”

    From the Washington Post. “The notion of buying a home with no money down is understandably alluring. But what looks sexy in a lender’s advertisement does not always translate into what is best for your financial well-being. What is a zero-down loan? Also known as 100 percent financing, zero-down loans require no down payment to purchase a home. For those with little to no cash in savings, these loans are touted as a windfall for those who could only dream of owning a home.”

    “As a real estate agent, buyers who lost their homes during the crash have been asking me for the past eight years whether they will ever be able to purchase a home again. Today, I can finally say yes. We are at 360 degrees in the cycle. Underwriting requirements to qualify for a loan have eased. I have also recently seen an increase in advertisements from lenders pitching creative loan programs, such as zero down.”

    “Some of these creative loans include (1) zero-down payment, with extra fees for this privilege wrapped into the loan, and high interest rates; (2) piggyback loans, which consist of a first mortgage at market rate plus a second mortgage at a much higher rate (the funds provided by the second mortgage are used as the down payment); and (3) grants.”

    “‘These programs are wonderful for those who can’t afford to buy,’ said Michael Chelst, branch manager of Norcom Mortgage’s office in Greenbelt, Md. ‘More people can buy homes now.’”

    “‘I get lots of leads from buyers on Zillow and Trulia,’ said Juan Umanzor, a real estate agent based in Bethesda, with a high percentage of his clientele in Prince George’s County, which experienced a high foreclosure rate during the recession. ‘Most of them ask about zero-down financing.’ Umanzor encourages his clients to buy now. ‘Interest rates are low and values continue to go up.’”

    http://thehousingbubbleblog.com/?p=10355

    1. “the 640-square-foot cottage at 2794 Shasta Rd. listed for $479,000 ”

      And it sold in March of 2018 for $665K. Who are these insane people? Given the choice, I’d rather take the Strawberry Picker Special. At least with a McMansion you can fit in 3-4 families to pitch in for the mortgage.

      2. From Bethesda Magazine in Maryland. “County Executive Marc Elrich dropped a bomb: forecasted school impact tax revenues had dropped by $121 million, half the amount projected just a year ago.

        Oxied ,look out!

  8. “A single mega sale, a trend make does not” Yoda, 2019

    Seriously though, the purveyors who are baffled why more folks are not taking advantage of readily available “non traditional” loans such as adjustable rates and others in order to buy higher priced housing is a truly scary thought. What universe is this guy coming from? Must be Delta 2006 from the galactic bubble region.

    Get ready to repeat history.

  10. “Mortgages with small down payments are widely available. Adjustable-rate deals — with cheaper initial rates — are common. And some lenders will let a borrower into a mortgage that pushes a family’s debt payments up to roughly half of their income.”

    Senator Running Deer said this can’t happen!

  11. Orange County Register – “Shhhh….don’t use the word ‘unaffordable’ because it will hurt these houses. Also, we need to engineer more creative financing options to help people who can’t afford these houses.”

    1. Also don’t use bubble…you scare away the buyers! Use shift or slowdown instead! Knife catchers are easy to fool 😉

    1. Firefox. Under tools>add-ons, search for Joshua Tree Extension by drumminj. Makes all the difference.

  13. I just got this in an email:

    Reduced Over $200K | Stately Cape Cod Contemporary in Beverly Hills

    2572 HUTTON DR, BEVERLY HILLS, CA | $3,595,000

    I looked it up:

    https://www.zillow.com/homedetails/2572-Hutton-Dr-Beverly-Hills-CA-90210/20532092_zpid/

    For Sale
    $3,595,000
    Price cut: -$204,000 (1/31)
    Zestimate®: $3,616,750

    Date Event Price
    1/31/2019 Price change $3,595,000 -5.4%
    1/15/2019 Listed for sale $3,799,000 +76.7%
    9/9/2015 Sold $2,150,000 -6.3%
    8/28/2015 Pending sale $2,295,000 —
    6/2/2015 Price change $2,295,000 -8%
    5/8/2015 Listed for sale $2,495,000 +193.5%
    9/13/2000 Sold $850,000 —

    1. “Reduced Over $200K | Stately Cape Cod Contemporary in Beverly Hills”

      After the 5.4% reduction off the 76.7% increase from the 2015 sale?

      Of course, whoever bought in 2015 at nearly 3X the price in 2000 was the real sucker.

      What a scam…

          1. Your neighbor could dive into the pool from their patio.

            Oops. Must have been a Super Bowl Special. Off the market.

    1. Ummm, Rathrum is nowhere near Boise… but I’m sure that won’t stop you from making up more catchy titles. Carry on.

  16. I like 2% over $50 mil, 3% over $1 billion… someone has to pay for the 17 yr wars and Uncle Sam’s credit card bills! If you are not a millionaire at the least, please explain why this is not fiscally conservative. $20k per mill over $50 mill is peanuts.

    1. I think a surtax on high valued properties would accomplish much the same but with less tax evasion.

    3. “Socialism only works until you run out of other people’s money” — Prime Minister Margaret Thatcher

      1. Milton Friedman, a celebrated free-market economist, declared a tax on the unimproved value of land “the least bad tax”.

        Taxing the rich has nothing to do with class warfare hyperbole cited above, it is simply going to get revenue from those who have disproportionately benefited from the form of capitalism we are running in the US where the benefit has disproportionately accrued to the top 1% and top 0.1%.

        1. those who have disproportionately benefited

          So have we all, who have more than $1,000. So you figure it belongs to you.

          1. So have we all, who have more than $1,000. So you figure it belongs to you.

            Having $1000 and having billions is quite a different thing, don’t you think?

            The definition of disproportionately benefited means some have benefited more than others. All can benefit from capitalism, but some benefit much more than others.

            “I rob banks because that is where the money is.” – Attributed to Willie Sutton

          2. Having $1000 and having billions is quite a different thing

            Not in principle, only in scale. This is important because if you propose something unprincipled, we don’t believe the scale is any kind of boundary. It’s what boundaries are all about. People who give up their individual rights inch by inch are doomed to have no rights at all.

    4. WestWorld5’s argument assumes that this money will be re-distributed. In my opinion, our tax dollars are currently funneled via corrupt governmental agencies to preferred individuals, arguably the very people WestWorld5 proposes to tax more. As an example, I direct attention to the current media spectacle in VA and implore everyone to look beyond the MSM headlines and narrative. VA’s governor and lieutenant governor both received large sums of money from a taxpayer-funded organization, presumably to advance that donor’s agenda. The governor made a particular statement last week that brought too much attention to this donor and its agenda. Reorganization, transparency and accountability are what’s truly needed to fix our terribly broken system.

      1. I care not whether you agree with the agenda. Taxpayer-funded organizations should not be funding any political ideologies, agendas or candidates. This is but one example.

      2. Have you seen the debt? No one said redistribution. How about some new roads, airports and trains? trump is adding over $1` trill a yr.

        1. You assume that the additional tax money will be used for the collective good (e.g., roads, airports, trains); that is redistribution.

          1. Econ folks: Is the interest on the national debt essentially compounded? If so, is that interest considered part of this trillion dollars being attributed to Trump? Where might I find a balanced discussion of our debt and its drivers?

  19. “So, I’m puzzled as to why the real estate industry isn’t publicly pushing harder to get house hunters up to speed on what may be seen as non-traditional buying strategies. The use of adjustable-rate loans for purchases, for instance, runs well-below historical levels.”

    Maybe buyers are wising up to both the bursting housing bubble and the REIC con games intended to get them to overpay for a shack they can’t afford.

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