Wednesday, March 13, 2013
Basically, the cream of buyers (with a few lucky stragglers) rising to the top with everyone else desperately picking over the remains.
Econ 101 nicely explains the issue:
We only have Q1 of available houses due to a large number of reasons (put off household formation due to the recession and now improving economy, banks unwilling/unable to foreclose, large number of underwater homeowners unwilling to sell at a loss, new home weren't built during the bust and it takes a long time to get projects going again, etc , etc etc) so prices are rising (p1). We also have ultra low interest rates and increasing housing consumer confidence so one could say that the demand curve has shifted to the right as well.
It is hard to see where a "enough" new supply comes from anytime soon. On the flip side it is pretty easy to see where new demand will come from (pent up demand + normal demand + improving economy). It'll be tough to be a buyer for awhile.
Personally, I'm glad to be done with it but I have to admit my interest has been piqued at the clear signs of frenzy.
Tuesday, February 15, 2011
Turns out giving underqualified buyers underpriced loans isn't a great way to stay solvent.
Sunday, February 13, 2011
Unemployment Mortgage Assistance Program (UMA) – Intended to assist homeowners who have experienced involuntary job loss. UMA will provide temporary financial assistance in the form of a mortgage payment subsidy of varying size and term to unemployed homeowners who wish to remain in their homes but are in imminent danger of foreclosure due to short-term financial problems. These funds can provide up to six months of benefits with a monthly benefit of up to $3,000 or 100% of the existing total monthly mortgage, whichever is less.
Mortgage Reinstatement Assistance Program (MRAP) – Intended to assist homeowners who have fallen behind on their mortgage payments due to a temporary change in a household circumstance. MRAP will provide limited financial assistance in the form of funds to reinstate mortgage loans that are in arrears in order to prevent potential foreclosures. These funds can provide benefits of up to $15,000 per household.
Principal Reduction Program (PRP) – Intended to assist homeowners at risk of default because of an economic hardship coupled with a severe decline in the home’s value. PRP will provide capital to reduce outstanding principal balances of qualifying borrowers with negative equity. Principal balances will be reduced in an effort to prevent avoidable foreclosures and promote sustainable homeownership. The principal reduction program will most likely be a prelude to loan modification. (Servicers that contribute through matching funds increase the benefit for homeowners).
Transition Assistance Program (TAP) – Intended to promote community stabilization by providing homeowners with relocation assistance when it is determined that they can no longer afford their home. TAP will be used in conjunction with a servicer-approved short sale or deed-in-lieu of foreclosure program in order to help homeowners transition into stable and affordable housing. Homeowners will be responsible to occupy and maintain the property until the home is sold or returned to the servicer as negotiated. Funds will be available on a one-time only basis.
The market is guaranteed to be stagnant for a long time.
Thursday, January 27, 2011
As you can see with the above graph, there was a drawdown in REO inventory in Q4. The net drawdown is about ~2000 homes. Sales were ultra low but homes taken back by the bank were even lower. I am sure this is no coincidence. REO inventory sells very well and the robosigning issue slowing down trustee sales had to have an impact in Q4.
Tuesday, January 18, 2011
From Jon Lansner:
Rents in Southern California fell 0.2% for all of 2010, by math from the Bureau of Labor Statistics that is based on a survey of renters. It’s the first drop since 1995. And the previous drop was in 1941.
But renters should be aware that landlords appear to be regaining some pricing power. The local CPI shows that rents rose on a year over-year basis in the last four months of the year. December’s 1.1% jump vs. a year earlier was the largest annual rate of rent increases in 16 months.
From Calculated Risk (here and here):
When rents are falling the buying decisions becomes much less favorable. If rent vs own prices are in the ballpark and rents start increasing, obviously the purchasing decision becomes much easier. But in many areas renting vs owning is still much cheaper and so rental growth is something to watch but not something that will push you into needing to buy right away.
Rent growth is mostly from reduction in concessions. Not as much top line growth.
• Almost all areas are showing improvement.
• Walt Smith, CEO Riverstone Residential (manages 162,000 units) said it is "Pedal to the metal" on rents
The overwhelming sense from participants is "YES" the apartment recovery is real. One data point - There are a record number of attendees this year.
The expectations are for a record low supply completed this year (as Tom Lawler and I have noted before). Some pickup in completions next year (2012), and then plenty of completions in 2013. The starts will probably pickup later this year, although I'll know more at a later session. The pickup in starts will help both GDP and employment growth this year.
The expectations are for strong rent growth over the next two years (around 5% per year) for large upper tier apartments. This will keep the vacancy rate from falling too much as owners trade off rent increases for occupancy.
Monday, January 10, 2011
Tuesday, January 4, 2011
I promised myself a couple years into this (I started house hunting in late 2005) that I wouldn't try to time the ultimate bottom. I would just pick some parameters (area, age of home, square feet, etc) and when those parameters were met relative to a rent / debt service ratio and debt service amount I had selected that I would buy. Mortgage rates hitting 4% helped the debt service side of the equation and ultimately a seller accepted my offer during a slow time of year where most transactions that are being made are because of seller compromising on price.
There were personal financial factors that also led me into thinking that this wouldn't be a horrible spot to fix costs in time. Also knowing that I would be in this house for a long time helped sway the decision. I'm well aware that the mortgage interest deduction is on the firing line but I am betting that it's repeal will apply to loans above the conforming loan limit. That is if it gets passed at all. I've also planned on it being appealed completely but that would make the purchase decision less favorable over renting but not so much that I couldn't handle the difference.
My view of the economy has gotten much less bearish and in some ways bullish and that helps the purchase go/no go decision. We clearly have a lot of things to get through as a country but the fight now is really how much inflation are we going to have as opposed to an inflation/deflation argument in which taking on long term debt is a much dicier proposition. Growth is happening, and whether that growth is organic or only happening because of the Fed printing money is irrelevant. In the former scenario we are in a true recovery and in the latter scenario I don't see the Fed stopping printing if they think the recovery would falter.
I'm of course not thrilled with the price I paid for the house but the low mortgage rate takes the sting out a bit. Rates have spiked 75bps since I locked and that would mean the same house would be $200-300 more a month. That would be almost the same as getting the same house today for $50,000 cheaper (property tax drops so it isn't 100% the same).
When prices fall in the future some may ask if I am pleased or displeased with my purchase. Financially, it would come down to what is going on with rents and interest rates. There are scenarios where I would still come out ahead by buying now. The numbers were close enough that if you erred on the side of inflation it looks like all the numbers work (I'm talking 1 to 2% not any rampant inflation scenario which makes taking on long term debt a trivial proposition).
Renting during the boom turned out to be a good decision. I don't expect that the buying decision will compare as clearly favorably that renting did during the boom/bust but I don't expect it to be a huge mistake either but it could be a small/medium mistake. Only time will tell.
If you have any other questions please post in the comments.
Wednesday, December 22, 2010
Tuesday, December 7, 2010
Friday, December 3, 2010
Tuesday, November 30, 2010
Wednesday, November 17, 2010
Wednesday, November 3, 2010
Wednesday, October 27, 2010
This is a simple graph to show the accumulation (or lack thereof) of REO inventory. When the blue line is above the green line REO inventory could be accumulating. I say "could be" because the green line is merely the number of homes sold during the quarter that were foreclosed in the past 12 months, so investors trustee flips would be captured in the data as well. I think the blue line will elevate somewhat but the two lines will stay pretty close as it makes little sense to foreclose and not market the home.I am very doubtful of the tsunami theory simply because the government has said it is not what they wish to happen and they have gone to great lengths for it not to happen. What we will have instead is stagnation in the market for a very very long time.
As you can see with the above graph, there was no great accumulation of REO's during Q3 but the spread between the two lines was at its greatest point in 5 quarters. The accumulation is about ~8000 homes. If resales stay this low and foreclosures stay this high it could be a worrying trend but as prices fall sales will pick up to absorb the excess inventory. And of course the robosigning issue could put a damper on REO supply as well.
Saturday, October 23, 2010
Thursday, October 21, 2010
Tuesday, October 19, 2010
Friday, October 1, 2010
Thursday, September 30, 2010
Here is the sales breakdown for the San Fernando Valley for September 2010. The SFV has a lot more late reporters as a percentage of sales and so it is a bit tougher to discern right now just how weak sales will ultimately be for September. But, it appears that sales should be at the same levels as August perhaps slightly weaker.