Market Currents
Are you seeing this where you live? WSJ says stunned home buyers are finding that bidding wars...
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Saturday, April 28, 2012, 9:45 AM ETAre you seeing this where you live? WSJ says stunned home buyers are finding that bidding wars are back. Unlike the big demand of the bubble years, this trend typically is driven by lower inventories of homes listed for sale, but at least a few giddy sellers are pocketing nice profits. Enjoy it while you can, housing bears say, because the market is still dismal and will remain so for a generation.
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Don't believe me- take five minutes and preview the MLS for any of the larger regions/markets across the country. Try CA, FLA, AZ, NV and you will be surprised to see 50-60% or more homes that a selling short, and another 20-30% that are selling as REO, and maybe 10-20% that are conventional sales.
It's basically bottomed. Doesn't mean it's off to the races, but it should stabilize/trade at a higher level in terms of volume and perhaps even prices.
When those interest rates back up and they will and the bernank is shut down watch the F%$# out.
Incomes never grew, area is economically depressed, and demographics shifted towards the elderly.
As with any other vote buying scheme, any relief that gets implemented will be so full of red tape and bureaucratic mazes that it won't help many young adults. But it is a big issue to those that carry this student debt, so they will hand over their vote en-masse, only to feel like they were taken for fools later on.
With a $20k down-payment and a 5% mortgage rate (so higher than most), the monthly payment on a 30y fixed is $740, compared to $4,166 monthly income.
I own a rental property in suburban MD. House next door hit the market on Saturday and went under contract in the course of the week. I don't know whether there was a bidding war, but the seller sure didn't need one: just needed to sell it once and he did it in a matter of days.
The DC region has indeed held up better than puffed-up real estate in the scorching desert boonies, for obvious reasons: not only government and lobbying but also the presence of top level academic institutions, as well as that of numerous life science and high-tech companies .
My point is that the same house over the last four years would have sat on the market for weeks and most probably months. Now it went in a couple of days.
That tells something about the real estate situation.
Bears typically hibernate and easily turn into perma-bears. Even big crises at one point abate. Perma-bears miss that point.
"According to Ned Davis Research the ratio of median home prices to median household income is still about 5% above the 36-year mean."
36 year average of the 30 year mortgage rate is 8.82%...30 year
mortgage today is 3.95%
I think the Fed will risk significant inflation to see housing return to some semblance of normalcy, especially where debt ratios are concerned.
The delusional sellers have their houses listed at least 10-20% too high, and, not surprisingly, their houses have been on the market for months. The realistic sellers (or motivated ones) have their houses listed BELOW market prices. This in turn drums up plenty of interest, and creates the aforementioned bidding war in which the listing price is sure to be exceeded. This doesn't mean that prices for houses are suddenly rising, it is just a sales tactic that is gaining popularity, and it does work.
Put all of this together and you have a story that will be forgotten by winter.
Where I live there is no bottom. I have an acquaintance who just lowered his listing price 20% because there was not one serious inquiry about the house at his initial listing price for 60 days. The bottom-end houses nearby are being bought at a reasonable pace.
It's not a normal market by any means. It's a speculative market in the aftermath of a crash.
But I'm talking in general.
Palo Alto: Lots of Internet Bubble 2.0 temporary wealth
Washington D.C.: Government and lobbying is still a growth industry
Scottsdale and Southern California: Places with a realtor on every block--most of whom got their licenses so they could flip homes back in the bubble days.
In Southern California back in 2004, if you were broke, uneducated, unemployed, and lazy, you soon became a successful realtor or a mortgage broker.
"An index that measures the number of contracts signed to purchase previously owned homes rose in March to its highest level in nearly two years, up 12.8% from a year ago and 4.1% from February, the National Association of Realtors reported on Thursday."
The problem with these low rates is that it sets the stage for the next big problem.
When rates rise who is going to want to hold a 4% mortgage for 30 years if their cost of funding is 4-6%?
That is what partially doomed the S&L's. They were forced to make mortgage loans at 5% when the cost of funding was at 8%.
These bonds will get slaughtered when rates rise.
In southwest Florida where we live (Naples, Bonita Springs, Estero), the inventory of homes for sale is dramatically decreasing with each month that goes by, and the prices for homes are going up substantially with each month that goes by.
In the next few years as food , energy, insurances and healthcare costs consume greater portions of disposable income housing will feel the pressure.
The cost of maintaining these water (bay, canals) boat access houses pretty expensive. Insurance is like $4500 and taxes are like 8k. Add up the numbers just for property taxes and insurance 12,500 a year. Nothing special house. This on a house on the water asking like 400k probably worth 325k-340K.