Daily Archives: March 21, 2013

Surprise U.S. Housing Demand Catches Industry Off-Guard | Bedford Hills Real Estate

“In my 27 years I’ve never seen inventories this low,” said Kurt K. Colgan, a broker with Lyon Real Estate in the Sacramento metropolitan area, where the share of homes on the market has plummeted by one of the largest amounts in the nation. “I’ve also never seen a market turn so quickly.”

The housing turnaround seems to have caught almost everyone in the business by surprise. As desirable as the long-awaited improvement may be, the unusually low level of homes for sale is creating widespread problems for buyers and sellers alike, leading to bidding wars and bubblelike price jumps in places that not long ago were suffering from major declines. In the Sacramento area, where the housing bust took an especially heavy toll, the median sales price has surged 15 percent over the last year, according to Zillow.

Nationwide, sales prices rose 7.3 percent over the course of 2012, according to the Standard & Poor’s Case-Shiller index, ranging from a slight decline in New York to a surge of 23 percent in Phoenix. Tracking more closely with the national trend were cities like Dallas, up 6.5 percent; Tampa, which rose 7.2 percent; and Denver, which gained 8.5 percent.

In many areas, builders are scrambling to ramp up production but face delays because of the difficulty of finding construction workers and in obtaining permits from suddenly overwhelmed local authorities. At the same time, homeowners — many of them lifted above water for the first time in years — often remain reluctant to sell, either because they want to wait and see how much further prices will climb or because they are afraid of being displaced in the sudden buying frenzy.

“You see a home go for sale and within a couple days there are three, four, six offers,” said Carrie Miskawi, a mother of three young children who has been looking for a new home for the last six months with Mr. Colgan’s help. She and her husband have decided not to put their current home on the market because they fear it will be snatched up before they have a chance to bid successfully on a new one.

“It’s kind of a Catch-22,” Mr. Colgan said. As long as large numbers of people are hesitant to put their own homes on the market because so few other homes are available, he said, there won’t be many homes available.

Across the country, the raw number of homes for sale is at its lowest level since 1999, according to the National Association of Realtors. In the Sacramento metro area, home listings were down 60 percent in January from a year earlier, compared with 23 percent for the country over all, according to Zillow.

Inventories have been whittled down largely because new construction ground to a standstill for several years. Investors large and small have also scooped up most of the backlog of foreclosures and short sales; about 40 percent of all homes bought in Sacramento County over the last year were purchased by owners who currently live at a different address, according to county records and title data provided by the Fidelity National Title Insurance Company.

But steady job growth has put more people back to work, and families that put off moving because they couldn’t afford it are finally ready to do so. “Distressed” sales are down and conventional sales are up.

Extraordinarily low mortgage rates don’t hurt, either.

“The recovery is real,” said John Burns, chief executive of John Burns Real Estate Consulting. “But the pace of the recovery has an artificial component to it.”

Some real estate agents in Sacramento, like Tom Phillips, have resorted to knocking on doors in desirable neighborhoods to see if the owners might, if asked nicely and promised a healthy gain, sell to one of his clients. One couple he represents, Darcey and Jason Schmelzer, just moved into a yearlong rental with their two boys because they sold before they could find a new place. They received four offers on the first day they put their home on the market, with the winning bid about $10,000 above asking price.

For the builders who survived the collapse, the tight market is a signal to get back to work.

Monthly permits for single-family homes in the Sacramento area more than doubled from January 2012 to January 2013, though they are still only a quarter of the level they reached during the bubble. Nationally, the construction industry added 48,000 jobs in February, the biggest increase since 2007.

The housing upturn looks set to continue, finally adding a crucial element of support to the slowly improving economy. The government reported Tuesday that housing permits, while far below their peak, surged in February to their highest level since June 2008, an increase of nearly 34 percent from a year earlier. But it will still be many months before new homes now going through the approval process will be ready to move in.

The New Home Company has ramped up building as fast as it can, said Kevin S. Carson, the president of the company’s Northern California division. Founded in 2009 by the veterans of a major home builder that filed for bankruptcy during the crisis, the company plans to build 120 homes in Northern California this year, in contrast to 50 homes last year.

Construction is expected to take longer than usual, though, and expenses are rising, Mr. Carson said. That is primarily because after six years of almost no local building, skilled labor is scarce.

Many workers in the immigrant-heavy industry have left the area, returning to Mexico and other points south. Others pursued work in Texas’s energy boom, where both drilling and construction jobs have become more plentiful. Those who stayed in the local area often switched to medical data entry, U.P.S. delivery services, or anything else that they could find. Or they filed for disability and dropped out the labor force altogether.

Some, like the 38-year-old electrician Gideon Jacks, are gingerly returning to construction work after taking a hiatus (in Mr. Jacks’s case, the hiatus was in several low-paying jobs at restaurants), but others remain reluctant to return to the hard physical labor and unstable job prospects.

“They say, ‘That’s the last time I’m riding that roller coaster,’ ” said Rick Wylie, president of the Beutler Corporation, a Sacramento air-conditioning and plumbing company. In 2005 he employed 2,100 workers, but by 2009 Beutler had only 270 employees. Mr. Wylie, who currently employs about 550, is now having trouble luring back many workers he let go.

“I don’t mean to complain,” he said. “This is a good problem to have, a world-class problem, to not be able to find workers to do all the work you’re getting.”

The shortages aren’t limited to the workers toiling in the hot sun, either.

“You walk into the permit office, and it’s like a ghost town in there,” said Michael Haemmig, president of Haemmig Construction in Nevada City, Calif., about an hour north of Sacramento. He says local governments were caught off-guard by the suddenly renewed interest in building and do not have enough people in place to handle the paperwork.

“This being California, we have more regulations and permits than ever, and it takes more time to get each permit approved,” he said.

For builders still hesitant to dive into the market too deeply, such delays may actually be welcome, since they help buy more time for prices to rise further.

“If we could build 500 houses right now, could we sell them?” asked Harry Elliott III, president of Elliott Homes, a century-old company that built 250 homes last year and plans 350 this year, compared with a high of 1,400 in 2006. “Possibly, but I don’t want to sell all my lots that I’ve held on to forever and have to give them away at these prices.”

“We lost money for a lot of years, and I’d like to make some money for a change,” he added. “I’m not building because I need the practice.”

Bernanke: Fed worries about tight lending standards | Pound Ridge Real Estate

The Federal Reserve worries the tightening of mortgage credit has gone too far and is now working on policies to ease lending fears, Fed Chairman Ben Bernanke said Wednesday. 

After the Federal Open Market Committee verified its continued commitment to acquiring mortgage-backed securities and Treasuries at the same pace, Bernanke told reporters the Fed is seeing “much higher credit-quality requirements” from potential borrowers.

Yet, he worries any concerns over “put-backs that banks may have — and uncertainties about regulation — have tightened the mortgage credit box more than desirable.”

Still, the Fed Chair said one of the key tools in combating tight lending is the lowering of mortgage rates by keeping the Fed’s federal funds rate near zero.

“I would say one thing is that as the housing industry has strengthened and home prices have gone up, that has brought some people into the credit box,” Bernanke said.

As people build more equity or pull themselves above water, they become more creditworthy and increase their options, Bernanke suggested.


In foreclosure, student debt? Bernanke understands … | Bedford Corners Homes

Federal Reserve Chairman Ben Bernanke may catch a lot of flack for his full-speed ahead approach to mortgage-backed securities purchases and low interest rates, but no one can accuse ‘Bernie’ of being out-of-touch with the people, according to Forbes.

A reporter asked Ben Bernanke something rather personal Wednesday. Something along the lines of when was the last time he spoke to a person who is unemployed?

If reporters were looking for Bernanke to come across as an out-of-touch elitist, they missed their chance.

When it comes to personal moments, Bernanke has shown a more humble approach. Afterall, this is a Fed chairman who boasts studying the Great Depression as his key area of economic research.

Bernanke was true to form Wednesday, telling the intrepid reporter that a relative of the chairman’s recently lost his job, and the effect of this is Bernanke’s own boyhood home landed in foreclosure, Forbes reported.

And if you have student loan debt, Bernanke understands. He admitted more than a year ago, that his own son carries about $400,000 in student loan debt from medical school.      

Note to reporters: if you want to grill Bernanke on QE3, housing, Treasury purchases go ahead. But when it comes to slamming him for being out of touch, the Fed Chairman has a penchant for conveying examples of human financial suffering.

Florida Shifts into Reverse | Armonk Real Estate

While the rest of the nation’s housing markets experience various levels of recovery, most markets in Florida seem to be relapsing to the heyday of the Foreclosure Era after a brief period of improvement.

With delinquencies and defaults ranking among the worst in the nation, Florida is also burdened with extraordinary backlogged inventories in this judicial state which is a nexus for foreclosure legal battles that have slowed processing down more than elsewhere. The result is that Florida’s beach resorts and vacation spots are easy pickings for hedge fund investors.

Jack McCabe, a pre-eminent Florida real estate economist, begins a conversation with some frightening numbers:

  • Florida is once again leading the nation in new foreclosures. In February RealtyTrac reported that Florida posted the nation’s highest state foreclosure rate for the sixth consecutive month in February, reporting one in every 282 housing units with a foreclosure filing during the month. Florida cities accounted for seven of the nation’s 10 highest metro foreclosure rates in February, led by the Miami, Orlando, Ocala, Tampa and Palm Bay metro areas in the top five spots.
  • More than 1.1 million of Florida’s 9 million residences, or roughly 11 percent, are in some stage of distress that most likely will result in sales in the next two to three years. To put that into perspective, the entire national visible inventory of foreclosures today is 1.1 million, according to CoreLogic.
  • About 550,000 mortgage holders in Florida have not made a mortgage payment in more than 90 days but have not received a notice of foreclosure. Banks shelved new foreclosure filings for much of 2012 while several lawsuits were pending and previous fraudulent foreclosure filings were adjudicated. As a result, the state’s shadow inventory has ballooned. At the end of 2012, 371,119 foreclosure cases were open in Florida.
  • The current backlog of unsold inventory is nearly half as large as all the foreclosures completed in the state over the past six years. Since 2006, 450,000 foreclosures have been completed in Florida. Banks still own 200,000 real estate owned properties, or REOs.

Florida’s foreclosure problems have blunted the positive rate of price increases achieved the so-called Florida Phenomenon two years ago and only one of the state’s markets, Tallahassee registered a negative media list price compared to last year in Realtor.com’s February report.

One of the most important outcomes of Florida’s chronic foreclosure crisis is the arrival of massively financed hedge funds ready to spend billions to buy foreclosures as cheaply as 50 cents on the dollar in some of the world’s finest resort destinations. Investors played the central role the renaissance in 2011 and now McCabe reports they are very active.

Large investors, including Waypoint Homes of California and Blackstone Group are very active in the state. Blackstone has focused on the Tampa market and erroneous report circulated earlier this year that Blackstone planned to spend a billion dollars in the Tampa market. Now it is reportedly spending a reported $100 million per week to buy single-family homes and has purchased 250 single-family homes in the Sarasota area.

One measure of the impact of hedge funds investors is bulk sales of foreclosures sold before they are marketed as REOs and listed through Realtors on multiple listing services.

“It used to be that Realtors handled 75 to 77 percent of the transactions in a normal marketplace,” said McCabe. “But now I think it’s closer to 60 percent.”

Funds planning to buy, rehab and rent foreclosures have an improving market. The loss in homeownership, damaged credit and job losses have driven rental demand to the highest level on record. In 2005, Florida had a 71 percent-29 percent split between homeowners and renters. That ratio has rapidly changed to 63 percent buyers and 37 percent renters.