Category Archives: Housing Market

Crisis Level: California’s Housing Affordability Plummets To 10-Year Low

California’s housing affordability crisis is progressively getting worse. It has now plummeted to its lowest level in 10-years, and less than one in five households can afford to purchase a median-priced single-family home in the Bay Area, according to new data released by the California Association of Realtors (CAR).

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CAR released its second-quarter Housing Affordability Index report (HAI), based on the percentage of all households that can afford to purchase a median-priced, single-family home in the state. CAR also reports affordability indices for regions and counties within the state. The index is regarded as the most fundamental benchmark of housing well-being for home buyers.

The percentage of home buyers who could afford to buy a median-priced, existing single-family home in the state declined from 31 percent in the first quarter to 26 in the second quarter; in the previous year, the index was at 29 percent, according to CAR’s HAI.

The second quarter marked the 21st consecutive quarter that CAR’s HAI printed below 40 percent; the index topped at 56 percent in the first quarter of 2012.

The report showed that prospective home buyers would need to have minimum annual income of $126,500 to prequalify for the purchase of a $596,730 statewide median-priced, existing single-family home in the second quarter. Assuming a 20 percent down payment and an effective composite interest rate of 4.70 percent, the monthly payments of a 30-year fixed-rate loan would be around $3,160.

The California counties that recorded 10-year lows in housing affordability were Alameda, Merced, Orange, Riverside, Sacramento, San Bernardino, San Diego, San Mateo, Santa Clara, Santa Cruz, and Sonoma.

Here are the areas where housing affordability is at crisis levels: Santa Cruz (12 percent), San Francisco, San Mateo, and Mono (all at 14 percent), and Alameda and Santa Clara (both at 16 percent).

According to CAR’s index, the most affordable counties in California during the second quarter were Lassen (64 percent), Kern (53 percent), Madera (52 percent), Tehama (51 percent) and Kings (50 percent).

Housing Affordability Peaked At 1Q 2012 

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Housing Affordability — Traditional Index 

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Affordability Peak vs. Current 

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In a separate, but relevant report from CAR, data shows California’s real estate market could have already peaked.

California Home Sales Declined for the 1 st Time in 4 Months

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Sales Lost Momentum as Mortgage Rates Continued to Climb

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California is one of the largest housing markets in the nation, as it has been a forward leading indicator for the rest of the country. Amid a housing shortage, which has blossomed into a housing affordability crisis, sales this summer have started to tumble, even as more inventory comes online. The supply of homes for sale increased annually in June for the first time in three years, according to the National Association of Realtors, which has depressed sales for the third straight month.

And now it seems, California’s real estate market could be in the beginning stages of a correction to fair value, after nearly a decade of speculation forced much of the median-priced single-family homes out of reach of the middle class – contributing to the housing affordability index at a 10-year low.

Source: ZeroHedge

 

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Homeownership Losing Edge To Renting

Owning a home is generally viewed as a better deal than renting, but in cities with exploding home prices and relatively flat rents, that may not be the case anymore.

According to Trulia, it now makes more financial sense to rent than buy in the nation’s two most expensive markets — San Jose and San Francisco. The balance is also shifting in favor of renting in a few other high-cost cities, such as Honolulu, Seattle and Portland, Oregon, according to a recent study by the San Francisco-based company.

Trulia said the overall U.S. market still solidly provides buyers with a financial benefit. But in the five years since Trulia began estimating the financial advantages of buying versus renting, this is the first time renters have come out ahead in any of the major metros it tracks.

In San Jose and San Francisco, renting was 12 percent and 6 percent cheaper, respectively, for the consumer than buying a home, Trulia said. San Francisco and San Jose are outliers, though. The National Association of Realtors, for example, has estimated that for a person earning $100,000, just 2.5 percent of the June listings in San Jose and 9 percent in San Francisco were affordable. Trulia reported that buyers still have a significant advantage over renters in places like Detroit. 

Trulia estimated that on a nationwide basis, buying a home was 26 percent cheaper for a consumer than renting as of last month. This is the narrowest gap in five years, and has come down from 41 percent in 2016, according to Trulia. The key factor in closing the gap is that house prices have increased steeply along with mortgage rates, while rents are remaining relatively stable. In San Jose, for example, home prices have jumped up 29 percent in a year, while rents were unchanged. Home values rose 14 percent in San Francisco, and rents fell by 3 percent. 

“There are a lot of factors,” Trulia’s Senior Economist Cheryl Young said during an interview on Thursday. “Obviously, mortgage rates are going up. That is going to tip the scales a little bit toward renting, but also home value appreciation is far outpacing rent growth right now. So, rents are pretty much cooling out. As they cool down and home prices track up, that margin between buying and renting starts closing.”     

 Young said the balance could tip in favor of renters in other cities as well.  

 “There are markets that are always close to that margin, and things that could tip it,” she said. “If mortgage rates were to rise and we still see rents flattening and even decreasing as they have been in some places relative to rising home prices, we may see some markets tip.” 

Trulia’s calculations include forecasts on future rent and price appreciation, and also estimates on how much a renter can potentially earn by investing in other vehicles. Trulia assumes that the buyer will stay in the home for seven years, put 20 percent down on a 30-year fixed mortgage.

Other housing analysts told Scotsman Guide News that gauging the advantages of buying versus renting can be a tricky exercise. 

“The housing market doesn’t necessarily favor either one right now, as the choice of whether to be an owner or the renter is not a purely economic decision, but often includes the lifestyle decisions of an individual,” said Mark Fleming, chief economist for First American Corp.

Fleming also noted that in some of these high-cost cities, renters are in better position now to buy than when home prices were near their low point seven years ago.

“While housing prices are on the rise across the country, by historical standards they are still within reach in many markets,” Fleming said. “In fact, when you account for the historically low interest rate environment and rising incomes, consumer house-buying power is up nearly 24 percent since 2011,” he added.

Len Kiefer, deputy chief economist for Freddie Mac, said that rising home values tend to give the buyer a financial edge over the renter, who is gaining no equity.

“Certainly if we look back historically, homeowners have done pretty well relative to renters,” Kiefer said. “It doesn’t mean that it is going to be true in the future, but if you look at where our forecast is for the overall economy, we are still forecasting home prices to continue to rise at a pretty healthy pace over the next couple of years.”

Kiefer said in a few high-cost cities with high property taxes, homeowners will be hurt by new tax changes that eliminated or reduced homeownership perks in the federal tax code. This may give renters some advantage. He said the tax changes so far don’t seem to have reduced homebuyer demand significantly, though.

“Certainly in the high-cost, high-tax markets, places like parts of California, New Jersey, Illinois,  the cost of homeownership is going to be a little bit negative,” Kiefer said. “But if we look at actual data on what has happened in those markets,  it is hard to see a discernible impact in terms of slower overall activity that you could attribute to the tax law,” he said. Kiefer said rising prices and higher rates were likely making homebuying less appealing, however.

Renters have been less sold on the financial benefits of owning a home, according to recent Fannie Mae surveys. In January 2010, for example, 76 percent of surveyed renters saw an advantage in buying. That number has fallen to 68 percent as of the end of June. 

“Renters’ view of the financial benefit of owning has come down a little bit,” said Mark Palim, deputy chief economist for Fannie Mae. “That probably reflects that home prices are up substantially.”

Palim said that renters are still expressing a strong desire in buying homes for non-financial, quality-of-life factors. He said the improved economy and a surge in household formation has kept the buyer demand up in spite of rising home prices and rates. 

“Millennials have really moved into the market in a big way, and they are closing the gap relative to other generations,” Palim said. “People have far more financial means to afford a home and go out and buy a home, and that has translated into pretty brisk demand.”

Source: Scotsman Guide

Who Does America Really Belong To?

Not to Americans…

(Paul Craig Roberts) The housing market is now apparently turning down. Consumer incomes are limited by jobs offshoring and the ability of employers to hold down wages and salaries.  The Federal Reserve seems committed to higher interest rates – in my view to protect the exchange value of the US dollar on which Washington’s power is based.  The arrogant fools in Washington, with whom I spent a quarter century, have, with their bellicosity and sanctions, encouraged nations with independent foreign and economic policies to drop the use of the dollar.  This takes some time to accomplish, but Russia, China, Iran, and India are apparently committed to dropping  or reducing the use of the US dollar.

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A drop in the world demand for dollars can be destabilizing of the dollar’s value unless the central banks of Japan, UK, and EU continue to support the dollar’s exchange value, either by purchasing dollars with their currencies or by printing offsetting amounts of their currencies to keep the dollar’s value stable.  So far they have been willing to do both.  However, Trump’s criticisms of Europe has soured Europe against Trump, with a corresponding weakening of the willingness to cover for the US.  Japan’s colonial status vis-a-vis the US since the Second World War is being stressed by the hostility that Washington is introducing into Japan’s part of the world.  The orchestrated Washington tensions with North Korea and China do not serve Japan, and those Japanese politicians who are not heavily on the US payroll are aware that Japan is being put on the line for American, not Japanese interests.

If all this leads, as is likely, to the rise of more independence among Washington’s vassals, the vassals are likely to protect themselves from the cost of their independence by removing themselves from the dollar and payments mechanisms associated with the dollar as world currency.  This means a drop in the value of the dollar that the Federal Reserve would have to prevent by raising interest rates on dollar investments in order to keep the demand for dollars up sufficiently to protect its value.

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As every realtor knows, housing prices boom when interest rates are low, because the lower the rate the higher the price of the house that the person with the mortgage can afford. But when interest rates rise, the lower the price of the house that a buyer can afford. 

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If we are going into an era of higher interest rates, home prices and sales are going to decline.

The “on the other hand” to this analysis is that if the Federal Reserve loses control of the situation and the debts associated with the current value of the US dollar become a problem that can collapse the system, the Federal Reserve is likely to pump out enough new money to preserve the debt by driving interest rates back to zero or negative. 

Would this save or revive the housing market?  Not if the debt-burdened American people have no substantial increases in their real income.  Where are these increases likely to come from? Robotics are about to take away the jobs not already lost to jobs offshoring. Indeed, despite President Trump’s emphasis on “bringing the jobs back,” Ford Motor Corp. has just announced that it is moving the production of the Ford Focus from Michigan to China.  

Apparently it never occurs to the executives running America’s off shored corporations that potential customers in America working in part time jobs stocking shelves in Walmart, Home Depot, Lowe’s, etc., will not have enough money to purchase a Ford.  Unlike Henry Ford, who had the intelligence to pay workers good wages so they could buy Fords, the executives of American companies today sacrifice their domestic market and the American economy to their short-term “performance bonuses” based on low foreign labor costs.

What is about to happen in America today is that the middle class, or rather those who were part of it as children and expected to join it, are going to be driven into manufactured “double-wide homes” or single trailers.  The MacMansions will be cut up into tenements.  Even the high-priced rentals along the Florida coast will find a drop in demand as real incomes continue to fall. The $5,000-$20,000 weekly summer rental rate along Florida’s panhandle 30A will not be sustainable.  The speculators who are in over their heads in this arena are due for a future shock.

For years I have reported on the monthly payroll jobs statistics.  The vast majority of new jobs are in lowly paid nontradable domestic services, such as waitresses and bartenders, retail clerks, and ambulatory health care services. In the payroll jobs report for June, for example, the new jobs, if they actually exist, are concentrated in these sectors: administrative and waste services, health care and social assistance, accommodation and food services, and local government.

High productivity, high value-added manufactured jobs shrink in the US as they are offshored to Asia.  High productivity, high value-added professional service jobs, such as research, design, software engineering, accounting, legal research, are being filled by offshoring or by foreigners brought into the US on work visas with the fabricated and false excuse that there are no Americans qualified for the jobs.

America is a country hollowed out by the short-term greed of the ruling class and its shills in the economics profession and in Congress.  Capitalism only works for the few. It no longer works for the many.

On national security grounds Trump should respond to Ford’s announcement of offshoring the production of Ford Focus to China by nationalizing Ford.  Michigan’s payrolls and tax base will decline and employment in China will rise. We are witnessing a major US corporation enabling China’s rise over the United States. Among the external costs of Ford’s contribution to China’s GDP is Trump’s increased US military budget to counter the rise in China’s power.

Trump should also nationalize Apple, Nike, Levi, and all the rest of the offshored US global corporations who have put the interest of a few people above the interests of the American work force and the US economy.  There is no other way to get the jobs back.  Of course, if Trump did this, he would be assassinated.

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America is ruled by a tiny percentage of people who constitute a treasonous class. These people have the money to purchase the government, the media, and the economics profession that shills for them. This greedy traitorous interest group must be dealt with or the United States of America and the entirety of its peoples are lost.

In her latest blockbuster book, Collusion, Nomi Prins documents how central banks and international monetary institutions have used the 2008 financial crisis to manipulate markets and the fiscal policies of governments to benefit the super-rich.

These manipulations are used to enable the looting of countries such as Greece and Portugal by the large German and Dutch banks and the enrichment via inflated financial asset prices of shareholders at the expense of the general population.

One would think that repeated financial crises would undermine the power of financial interests, but the facts are otherwise. As long ago as November 21, 1933, President Franklin D. Roosevelt wrote to Col. House that “the real truth of the matter is, as you and I know, that a financial element in the larger centers has owned the Government ever since the days of Andrew Jackson.”

Thomas Jefferson said that “banking institutions are more dangerous to our liberties than standing armies” and that “if the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.”

The shrinkage of the US middle class is evidence that Jefferson’s prediction is coming true.

Source: ZeroHedge

Mortgage Prison: Sydney Home Prices Suffer Largest Annual Decline Since 2008

Home prices in Sydney and Melbourne are back to 2016 levels. That is a tiny down payment as to what is coming.

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News AU reports House Prices Drop in Sydney, as Melbourne Prices Stall.

Tumbling house prices in Sydney and Melbourne are the main drivers behind the first annual drop in national property prices in six years, a new report shows. The national median house price fell 1.0 per cent over the June quarter and year, according to a report by property classifieds group Domain released on Thursday.

It is the first time values have fallen on an annual basis since June 2012.

The negative national growth rate reflects weakening house prices in Sydney and Melbourne, which together represent about two thirds of Australia’s housing market by value.

Sydney house prices fell by 4.5 per cent in the 12 months to the end of June for their largest annual drop since 2008. Sydney units also fell by 3.5 per cent over the same period.

The figures chime with those released this week by property data firm CoreLogic, which said overall Sydney prices fell 5.0 per cent in the 12 months to July 22.

“House and unit prices in Sydney are now back to values seen at the end of 2016,” Domain property analyst Nicola Powell told AAP. Tighter credit availability and a high number of units being built are key factors behind the dive, Dr Powell said.

Apartment Boom Comes to End

Next up, please consider Construction Set for Biggest Decline Since the Global Financial Crisis

Australia’s building commencements, fueled by investor apartment construction, look like heading from boom to bust, according to forecaster BIS Oxford Economics.

In a reality check for investors who bought at the top of the apartment boom, BIS is predicting the biggest correction since the global financial crisis hit in 2008, with housing starts set to fall by almost 23 per cent by 2020.

Associate director Adrian Hart told the ABC’s AM program that the slump would be led by high-density dwelling construction, which is set to halve over the next two years

A key factor in the residential slowdown has been tougher regulation by the Australian Prudential Regulation Authority (APRA) to curb investor lending, while the Foreign Investment Review Board (FIRB) and tax office has been clamping down on overseas buyers.

Mortgage Prison

Finally, and most importantly, please consider Aussie Homeowners Trapped in ‘Mortgage Prison’.

Australian homeowners are trapped in “mortgage prison” because of a rule change. And there is no easy way out.

Changes in bank rules around living expenses calculations have effectively wiped huge amounts off the maximum a bank will allow you to borrow.

Many people are now finding they originally borrowed more than a bank would lend them under current conditions, meaning they haven’t got the option of shopping around to get a better interest rate — no bank will lend them the amount they need.

Precise numbers of Australia’s mortgage prisoners are hard to come by, but Mozo investment and lending expert Steve Jovcevski told news.com.au that he expected most of them are those who have borrowed and bought in the last five years.

Oops!

Jovcevski gave an example in which a couple was able to borrow $800,000 a year ago can now only borrow $680,000 under the same rules.

They are now trapped in a mortgage with no way to refinance and no buyers because of declining prices.

Mortgage Slaves for Life

This is precisely what some us foresaw years ago. It’s finally come home to roost, and at a time China is highly unlikely to bail out these buyers.

People may be trapped for decades. So expect to see more articles like this as desperation sets in: Australia Housing Insanity: Tent Outside, Full Use of Apartment, Cheap, $90 Per Week.

That was from a year ago. Rates will drop fast. Buyers will need tenants to stay afloat.

Special Mention

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Dateline July 23, 2017

13-Year-Old Kid Buys $552,000 Home

Meet Akira Ellis a 13-year-old kid. He just bought his first piece of real estate, a $552,000 four-room one bath house in Melbourne’s Frankston.

Right at the peak of the market a 13-year-old kid (with obvious help from his parents), bought a house costing over half a million dollars.

I noted “Akira is already looking for his next property.”

I asked “What can possibly go wrong?”

Today, we found out.

Source: ZeroHedge

Existing Home Sales Suffer Worst Losing Streak Since 2014, Price Hits Record High

Following last month’s disappointing starts/permits data and home sales prints, hope was high for a June rebound but they are gravely disappointed. Existing home sales tumbled 0.6% MoM (vs expectations of a 0.2% rise) and even worse, it’s off a downwardly revised May print of 0.7% MoM, with median home price hitting a record high $276k.

This is the first 3-in-a-row decline for existing home sales since Jan 2014…

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Existing Home Sales SAAR is almost at its weakest since Jan 2016…

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Lawrence Yun, NAR chief economist, says closings inched backwards in June and fell on an annual basis for the fourth straight month.

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“There continues to be a mismatch since the spring between the growing level of homebuyer demand in most of the country in relation to the actual pace of home sales, which are declining,” he said.

“The root cause is without a doubt the severe housing shortage that is not releasing its grip on the nation’s housing market. What is for sale in most areas is going under contract very fast and in many cases, has multiple offers. This dynamic is keeping home price growth elevated, pricing out would-be buyers and ultimately slowing sales.”

The median existing-home price for all housing types in June was $276,900, surpassing last month as the new all-time high and up 5.2% from June 2017 ($263,300). June’s price increase marks the 76th straight month of year-over-year gains.

Homebuilder stocks have generally drifted lower with the dismal data but have yet to take the next leg lower…

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Source: ZeroHedge

Foreclosure Starts Rise in 43% of US Markets

Counter to the national trend, several housing markets saw foreclosure starts rise year over year last month, according to a new report from ATTOM Data Solutions, a real estate data firm.

Forty-three percent of local markets saw an annual increase in May in foreclosure starts. Foreclosure starts were most on the rise in Houston, which saw a 153 percent jump from a year ago. Hurricane Harvey struck the Houston metro area in August 2017, tying with Hurricane Katrina as the costliest tropical cyclone on record, and has contributed to many recent foreclosures in the area. Other areas that are seeing foreclosure starts rise: Dallas-Fort Worth (up 46% year over year); Los Angeles (up 14 percent); Atlanta (up 7 percent); and Miami (up 4 percent).

A total of 33,623 U.S. properties started the foreclosure process in May, which is down 6 percent from a year ago. But a number of states—23 states and the District of Columbia—posted a year-over-year increase in foreclosure starts in May.

Overall, the metro areas with the highest foreclosure rates in May were: Flint, Mich.; Atlantic City, N.J.; Trenton, N.J.; Philadelphia; and Columbia, S.C.

View the chart below to see foreclosure starts by metro area.

May 2018 Foreclosure Starts by Metro

Source: Realtor Magazine

 

California And Santa Barbara Median Home Prices Hit New High in May

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California’s median home price reached a new high in May at $600,860, surpassing its previous peak of $594,530 11 years ago.

Home sales declined by 1.8 percent from April and down 4.6 percent compared to May 2017 levels.

May marked the first year-over-year sales decline in four months and the lowest sales level in more than a year.

In Santa Barbara, median home price reached a new historic high in May at $1.2 million, while inventory continues to remain low.

“The softening in May home sales was due in part to the spike in interest rates in mid-April, when the 30-year fixed mortgage rate jumped 20 basis points in just one week to reach the highest level since 2014,” said Steve White, California Association of Realtors president.

“Homebuyers may have postponed escrow closings to wait out the effects of the rate surge,” White said.

“Additionally, the specter of rate increases earlier in the year may have pulled sales forward into the first quarter, which resulted in the subpar performance in the last couple of months,” he said.

“Looking ahead, higher mortgage rates and elevated home prices will heighten affordability constraints that will likely temper the housing market in the coming months,” he said.

Source: By Andy Alexander | Noozhawk