Monthly Archives: June 2013

Will the housing rebound crush the job market? | Pound Ridge Real Estate

For the past few years, economists have been waiting for the housing market to rebound so the job market can finally — crash? Wait, no. It’s the opposite. Right?

On Friday, we’ll get the latest look at how the job market is doing. Hiring is improving, but the unemployment rate has stayed stubbornly high. The go-to explanation among economists has been the weak housing market. Where are all those construction workers going to find work? Nursing? (That’s actually a pretty good idea.)

Housing prices are jumping again, and some people are even saying there’s a new bubble. We’ve pointed out you shouldn’t expect the economy to come roaring back just because the housing market is. But two economists are taking an even more extreme stance: that a good real estate market, where more people buy houses instead of rent, will throw more people out of work.

The paper by David Blanchflower of Dartmouth and Andrew Oswald of the University of Warwick titled “Does High Home-ownership Impair the Labor Market?”, has been out for a month or so but was only published by the National Bureau of Economic Research on Monday. Among the findings:

States with more homeowners, fewer renters, tend to have higher unemployment rates.

It’s not the homeowners that tend to make up the majority of the unemployed.

So we really don’t know why this happens. But it does, so there.

Also, maybe homeowners are less likely to start new businesses, because property makes people lazy I guess.

That makes the study interesting for another reason. Not only are the authors saying the conventional wisdom of a weak housing market and a weak job market improving in tandem is wrong. But also the reason we say such things.

Most people believe the reason high homeownership in a housing bust creates stubbornly high unemployment is because the out of work can’t afford to sell their houses — they owe too much — and move to an area of the country where their job prospects are better.

But Blanchflower and Oswald insist it’s not the homeowners who are the unemployed, or at least the overwhelming majority of them. So the “trapped in a house” storyline doesn’t work for them. Instead, they say homeownership creates a sort of economic rigidity that hurts the job market for everyone, but they don’t say how.

Homeownership, though, was rising throughout the 2000s, and yet the unemployment rate dipped below 4% in the middle part of the decade. Would it have gone lower? It’s only recently that homeownership seems to be holding us back.

Another funny thing about the study is that one of the first economists that Blanchflower and Oswald thank in the beginning of their paper is Dean Baker, co-founder of the Center for Economic and Policy Research and a prominent liberal economist. It’s odd because Baker disagrees with Blanchflower and Oswald, which he says he told the two authors before they published the paper.

 

Will the housing rebound crush the job market? – The Term Sheet: Fortune’s deals blogTerm Sheet.

Foreclosure Fallout: The Brooklyn Real Estate Market Is Hot, But Tenants Still Suffer Housing Crash Aftershocks | Armonk Homes

These days, the housing crisis seems a distant memory in many areas of Brooklyn, as buyers arrive at overcrowded open houses in Park Slope and Cobble Hill, ready to sign a contract on the spot and sellers from Red Hook to Greenpoint vie to set new neighborhood records. But the crash and its aftereffects have not vanished from the borough, as the plight of tenants in a trio in Sunset Park buildings illustrates.

While billionaires grapple over ever-loftier trophies, tearing out onyx to install carrara or vice versa, the tenants of 545, 553 and 557 46th Street in Sunset Park are still mired in the foreclosure crisis, living in decaying buildings with 684 housing violations spread over 51 apartments, according to the department of Housing Preservation and Development.

The Sunset Park buildings, like a number of other overleveraged apartment buildings in the city, fell into disrepair when their owners realized that they would not be able to flip the buildings quickly, or at all. The tenants were trapped in a hell not of their own making. In 2011, Astoria Savings Bank foreclosed on the three buildings and sold the note to private equity company Seryl LLC.

But unlike any other distressed assets that can be bought and left to lie fallow until the time is ripe to sell, apartment buildings with tenants in place must be repaired and maintained—a responsibility that numerous politicians and tenants rights’ activists say Seryl has neglected. In January, the buildings entered the HPD’s Alternative Enforcement Program, which targets the 200 most physically distressed buildings in the city to hold the landlords accountable for their repair.

While the market turnaround might be helping homeowners in the tonier precincts of Brooklyn, its impact has yet to be felt in many of the multi-unit buildings that fell into disrepair during the recession. The all-too familiar tale of two Brooklyns? Yes, but when it comes to real estate in New York, no owners needs to be stuck with a property that they can’t afford to maintain. This isn’t Detroit, after all, or the Inland Empire, and recently, residents, tenants advocates, as well as city council speaker Christine Quinn, congresswoman Nydia M. Velázquez and council member Sara M. González rallied to ask Seryl LLC to sell the building to an owner willing or able to make repairs.

“To the landlords who refuse to respect their residents and our community I have only one message: just leave. Brooklyn has no room for delinquent property owners—we have some of the most sought after real estate in the country and it should be no problem for this company—and others like it that refuse to take care of their tenants’ needs—to find a willing and responsible buyer,” Marty Markowitz said in a release asking Seryl to fix the violations or sell.

The only question is whether Brooklyn’s new housing boom will ultimately prove a boon for such tenants or a curse—as any long-term resident of Williamsburg or the East Village can attest, having some of the most sought after real estate in the country does little to safeguard tenants’ rights. In a housing market like New York, low-income tenants suffer in both boom and bust.

 

 

Foreclosure Fallout: The Brooklyn Real Estate Market Is Hot, But Tenants Still Suffer Housing Crash Aftershocks | Observer.

Mortgage Rates Are Rising. Will the Housing Recovery Falter? | Waccabuc Real Estate

Here in the District of Columbia, where I live, housing prices have become . . . well, I believe that the technical term economists use is “totally insane”.  A house (admittedly, an unusually large one) just went for nearly a million dollars in Trinidad, a neighborhood that five years ago was being sealed off by police with roadblocks because of the gang warfare.  One block over from us, unrenovated houses with only marginally more space than ours are selling for 50% more than we paid in 2010.  People who don’t own homes yet are beginning to despair that they will ever be able to afford anything besides an attractively placed refrigerator box beneath the 14th Street Bridge.  People who own homes alternate between gleefully calculating their paper gains, and reminding each other that it can’t possibly last.  Those of us with a wonky bent are prone to say things like “When Bernanke finally raises interest rates . . . ”

This often spurs sour talk that Washington is booming thanks to Obama’s massive federal expansion, but we aren’t the only ones having these conversations. Home prices are rising by double-digit percentages across the country.  The New York Times is dispensing advice on how to win a bidding war in the brutally competitive local market. Even Las Vegas and Phoenix are having a boom.  Pick your explanation for the phenomenon: is it a bubble, or merely the inevitable recovery from the panic of 2009?  (As traders like to observe, even a dead cat will bounce if it falls from a great height.)  Or is it, as I’ve suggested, the handiwork of Helicopter Ben Bernanke, keeping interest rates low by airdropping oodles of cash into the financial markets?

Interest rates must have something to do with it . . . after all, people generally calculate how much house they can afford by looking at the potential mortgage payment.  Say you’re a two-career couple with a combined household income of $175,000 looking at a lovely formstone-covered fixer-upper in DC’s historic Eckington neighborhood, close to all major amenities such as the Big Bear Cafe, the NoMa metro stop, and the Exxon Mobil station at Florida and North Capitol Avenue.  The house is listed at $540,000.  What will you actually be willing to pay?

Assuming that this couple has no children and are sensibly putting at least 10% of their annual income into their 401(k), they should be bringing home about $9750 every month.  They probably have a student loan or two, and because we said they’re sensible, they don’t want more than a third of their income to go to housing costs.  That means a monthly mortgage payment of no more than $2850 a month, to leave room for insurance and property taxes.  (Property taxes in the District are thankfully very low).

How much they can bid for the house?  Let’s say they’re able to put $50,000 down.  At current interest rates, with 30-year mortgages on offer for an APR of about 3.75%, Bankrate tells me that they can afford a mortgage of about $615,000.  This means that they are able to offer as much as $665,000 for this historic Eckington gem.  They are not going to offer that much, we hope, because that house isn’t worth it, but they could if they wanted to.

However, what if interest rates go up to 4.75%?  Still near historic lows, but considerably more expensive than what recent buyers have paid.  Then our hypothetical couple could only afford a mortgage of about $550,000, for a total offer of $600,000.  The current owner of this formstone-clad palace will probably be getting a smaller check.

As you can see, in our thought experiment higher interest rates take a big chunk out of housing prices.  So it stands to reason that when Ben Bernanke finally turns off the tap, the housing market should soften.  Hell, mortgage rates are rising now; maybe we’re already hovering on the edge of a correction.

But not so fast!  An article in yesterday’s LA Times argues that in the short term, rising interest rates may actually increase demand for housing, which would drive prices even higher.  There are two reasons for this.  First, as interest rates rise, refinancings fall off, so mortgage lenders have more incentive to offer attractive rates to people making home purchases.  And second, people who have been maybe thinking about buying a house may decide to leap in before rates go up any further.  More buyers in a tight market means higher prices.

 

Mortgage Rates Are Rising. Will the Housing Recovery Falter? – The Daily Beast.

Behind the Rise in House Prices, Wall Street Buyers | Katonah NY Real Estate

The last time the housing market was this hot in Phoenix and Las Vegas, the buyers pushing up prices were mostly small time. Nowadays, they are big time — Wall Street big.

Large investment firms have spent billions of dollars over the last year buying homes in some of the nation’s most depressed markets. The influx has been so great, and the resulting price gains so big, that ordinary buyers are feeling squeezed out. Some are already wondering if prices will slump anew if the big money stops flowing.

“The growth is being propelled by institutional money,” said Suzanne Mistretta, an analyst at Fitch Ratings. “The question is how much the change in prices really reflects market demand, rather than one-off market shifts that may not be around in a couple years.”

Wall Street played a central role in the last housing boom by supplying easy — and, in retrospect, risky — mortgage financing. Now, investment companies like the Blackstone Group have swooped in, buying thousands of houses in the same areas where the financial crisis hit hardest.

Blackstone, which helped define a period of Wall Street hyperwealth, has bought some 26,000 homes in nine states. Colony Capital, a Los Angeles-based investment firm, is spending $250 million each month and already owns 10,000 properties. With little fanfare, these and other financial companies have become significant landlords on Main Street. Most of the firms are renting out the homes, with the possibility of unloading them at a profit when prices rise far enough.

While these investors have not touched many healthy real estate markets, they are among the biggest buyers in struggling areas of the country where housing prices have been increasing the fastest. Those gains, in turn, have been at the leading edge of rising home prices nationwide.

Some see the emergence of Wall Street buyers as a market-driven answer to the nation’s housing ills. Investment companies are buying up rundown homes at a time when ordinary people can’t or won’t.

Nationwide, 68 percent of the damaged homes sold in April went to investors, and only 19 percent to first-time home buyers, according to Campbell HousingPulse. That is helping to shore up prices and create confidence in the broader markets.

“When people write the story of this housing recovery, these investors will be seen to have helped put the floor under the housing market,” said David Bragg, an analyst at Green Street Advisors. “In some of the key markets, that contributed to the recovery.”

The story, though, often looks more complicated on the ground. Joe Cusumano, a real estate agent in Riverside County, Calif., said that in recent months 90 percent of his business had been for companies like Invitation Homes, a Blackstone subsidiary. Home values in Riverside County have risen by 15 percent in the last year, according to CoreLogic.

But Mr. Cusumano said he wondered if faraway investors would properly maintain the homes they buy. He said that Invitation Homes had been willing to put money into the properties, but he was not so sure about the other players. He also worries what will happen when these investors start selling, as they inevitably will.

 

Behind the Rise in House Prices, Wall Street Buyers – NYTimes.com.

Using home equity to fund a business? Good luck | Bedford Corners Real Estate

In recent years, it has become gradually more difficult for business owners to tap into home equity lines of credit to fund their companies.

Small Business Trends writes that 17% of businesses with less than $100,000 in sales use home equity lines of credit to keep their small firms going.

The problem is it’s getting harder to do this.

Small Business Trends added that:

These 4 million business owners have had a tough time with their financing strategy in recent years because of the declining home equity loan market. According to the Federal Reserve of New York’s Quarterly Report on Household Credit, the number of home equity lines of credit fell from 23.9 to 18.7 million between the fourth quarter of 2007 and the fourth quarter of 2012. Moreover, the amount of credit available on home equity lines of credit declined 39.3, and the balance on these loans 24.1 percent, percent in inflation adjusted terms, over the same period.

 

Using home equity to fund a business? Good luck | HousingWire.

Upbeat buyers push prices higher: Clear Capital | Chappaqua Real Estate

Spring home buying activity picked up in May with home prices growing 1.3% over the previous quarter and soaring 8.2% annually, Clear Capital said Tuesday.

The yearly and quarterly gains are the result of market momentum and a low price floor, the data firm added.

“May home price trends confirm the recovery continues to mature,” said Dr. Alex Villacorta, vice president of research and analytics at Clear Capital.

He added, “While there’s no questioning the validity of the recovery at this point, performances at the local level remained mixed when considering strength, sustainability and relative positions to 2006 prices.”

At the metropolitan level, price trends remained mixed, a reminder that the recovery is locally driven.

Las Vegas takes the lead in the home value recovery, with yearly price gains of 27%. Phoenix, on the other hand, saw gains of 25.7%, putting Vegas ahead of the Arizona metro area for the first time since April 2012.

“Las Vegas’ strong yearly gains represent a rebound from a severe correction rather than bubble-like price growth. Despite 27% yearly growth, this market remains 53% below peak levels, significantly more depressed than most markets,” Villacorta stated.

While Las Vegas yearly gains continue to pick up steam, the market has a long road ahead of it.

Upbeat buyers push prices higher: Clear Capital | HousingWire.

dotloop reinvents user experience, launches mobile iOS app | Armonk Realtor

Real estate software company dotloop released a revamped version of its innovative real estate platform while simultaneously launching a full-featured mobile iOS app this week.

The re-tweaked and re-launched dotloop is designed to improve users connections with other professionals in the space while also linking them to every document and task needed to finalize a real estate transaction. The Cincinnati-based company unveiled the revamped platform at HousingWire’s Real Estate Expo (REX) Monday.

“The new dotloop represents an entirely new way of working that puts people first, not technology — what we call ‘peoplework,'” said Austin Allison, CEO of dotloop. “It’s not about features or functions, but rather people working better together. That’s the essence of successful businesses today, in real estate and nearly every other industry. And it’s why we completely redesigned dotloop to make it easier, faster and more enjoyable to do business with others.”

So who’s empowered in the dotloop network? Everyone. The platform allows clients, lenders, housing inspectors and other real estate professionals to work together at a rapid pace using the network’s various interfaces and workflows.

The platform provides direct access to essential real estate documents. Not to mention, a series of sequenced steps are integrated into the system to help users complete a transaction, taking them all the way from the disclosure process to the end of the deal.

All documents listed in the loop are private until shared with other parties. By using permission controls, users can easily modify their preferences.

The Mobile iOS app is another addition for users on the go, giving them a chance to log on remotely from any location.

“The new dotloop is an incredibly powerful platform that consolidates everything needed to get deals done more efficiently, while delivering a great experience that my agents and, more importantly, their clients love,” said David Jones, president and COO of Coldwell Banker Howard Perry and Walston.

“As a broker, I now have deeper visibility into every deal being conducted at the offices, and my agents have the tools they need to get the entire deal done, not individual pieces of the real estate puzzle. The new dotloop is a huge step forward for our brokerage, allowing everyone to focus on our No. 1 priority: our clients.”

dotloop launched in 2009 and has since grown to a user-base of 600,000 real estate professionals.

Users tap into the company’s cloud-based platform to get deals done faster while delivering a quality experience to tech-savvy consumers.

 

dotloop reinvents user experience, launches mobile iOS app | HousingWire.

Home “flipping” trend returns, threatening higher prices | North Salem Real Estate

“This is our production board,” he said, pointing to a white board, filled with black marker. “When it fills up, it means that I’m really busy.”

Manner now has 18 homes that he’s fixing — and flipping. He pointed to one home he bought for $330,000, and plans on selling for $629,000.

The goal, he said, is to double his profit.

The current frenzy, he said, took off in January. That’s when Charlotte Dewaele began her search.

“I thought we were gonna get a home right away,” she said. She’s already bid on 15 homes.

“We’re getting beat out by people with cash, by investors, and by people putting in offers that are just so much higher,” Dewaele said.

Her expectations were also higher. Her initial hope was to have a home about 1,200 square feet.”Then that went down to a thousand, and now it’s just about anything,” she said.

Her search for anything led to a California house marketed as having “charm.”

The entire house is 672 square feet and with a list price of $268,000.

“It’s overpriced, but it’ll probably sell for a lot more than it’s priced at right now,” Dewaele said.

Dewaele’s search is getting more urgent. She’s now six months pregnant. She’s ready to buy a house and has the money, but she can’t.

“It’s very frustrating,” she said.

Laura Key, Dewaele’s realtor describes the current housing market as “a mess.” Each time they find a house, they lose out to those cashing in.

“There’s always multiple offers. Then it’s sold within 24 hours. Then, less than 30 days, back on the market,” Key said.

The flipped houses go for at least $50,000 to75,000 more than what they purchased it for.

Dewaele said she can’t bid that high without “overextending,” as so many others did before the last housing boom went bust.

And she doesn’t think she’ll find a home before her baby is born. “I’ve kind of lost hope,” she said.

 

Home “flipping” trend returns, threatening higher prices – CBS News.

Construction spending continues to seesaw | Waccabuc Real Estate

Construction spending in the U.S. continues to seesaw, keeping the market recovery on a bit of a roller coaster.

After dropping in March, construction spending rose to $860.8 billion in April. This is 0.4% above the revised March estimate of $857.7 billion, according to the U.S. Census Bureau.

Furthermore, April’s spending is 4.3% above the year-ago estimate of $239.8 billion.

Spending on private construction was 1% above the revised March estimate of $595.9 billion, rising to $602 billion in April.

Residential construction spending came in at a seasonally adjusted rate of $301.9 billion in April, down 0.1% from March’s estimate of $302.2 billion.

Additionally, nonresidential construction was at a seasonally adjusted rate of $300.1 billion in April, above 2.2% from March’s estimate of $293.7 billion.

In April, the estimated seasonally adjusted annual rate of public construction spending was $258.8 billion, up 1.2% from the revised March estimate of $261.8 billion.

 

Construction spending continues to seesaw | HousingWire.

Homebuilders are building homes Gen Y wants: NAHB | South Salem Real Estate

Since June is National Homeownership Month, the National Association of Home Builders is urging Gen Y’s to invest in a home.

More than 80% of Gen Y home buyers — people born in 1977 or later — said in NAHB’s 2012 consumer preference survey that they prefer an energy-efficient home.

“As the economy recovers and young people who had to live at home with their parents move forward with their lives and achieve their dreams of homeownership, home builders are delivering homes that cater to the floor plans, features and affordability that this generation desires,” said Rick Judson, chairman of NAHB.

 

Homebuilders are building homes Gen Y wants: NAHB | HousingWire.