Wednesday, May 31, 2006

 

Housing Update, May 2006

Over the weekend Barron's had an article about the glut of vacation homes: Flippers, Start Swimming. [Subscription required.] Newsmax had a rundown of the article.

Barron's implicates speculative investors as the main reason for the pull back in prices. It points out that six out of 10 second-home owners own two or more homes in addition to their main residences, according to a survey by the National Association of Realtors.

"The danger," says Barron's, "is that if enough of those investors decide the market has peaked, they could trigger a selling frenzy throughout the second-homes market. That, in turn, could add to the pressures in the main housing market. After all, second homes now account for a full 40% of homes sold in America."

...

The price jumps of the past decade or so have brought homes to (un)affordability levels not seen in years. Cleveland-based National City, a top banking and mortgage concern, says that homes are overvalued in Florida, California, and several other vacation-home spots.

Homes in Naples, FL, says the company, are 96 percent overvalued based on income levels, population densities, and historical prices. Port St. Lucie/Ft. Pierce, FL, homes are 75 percent overvalued, and Ft. Lauderdale homes are 54 percent overvalued.

Cities in Arizona, New Jersey, Oregon, New York, Nevada, and others are also overvalued, according to National City.

Alan Skrainka, chief market strategist at broker Edward Jones tells Barron's, "People don't believe in the laws of supply and demand anymore. We're not saying it's a bubble, but we're saying prices are overstated and will likely correct 20 to 25 percent over four or five years."

As that correction happens, says Barron's, the primary people to suffer will be the so-called "mass affluent" - people with investable assets of $100,000 to $1 million. A Chicago-based consulting firm, Spectrem Group, says that this demographic has more than one-third of its assets in real estate.

The Rude Awakening, an investment newsletter has asked readers for anecdotes relating to their local housing markets.

Miami, Florida,

The number of for sale signs that have appeared in the last
two weeks make me wonder if my deodorant is giving out or
if my neighbors have discovered a better community to live
in and forgot to tell me.

Furthermore, hurricane season is upon us and the blue tarps
cover so many roofs, it's almost out of fashion to have a
roof without one. I almost feel like placing one on my roof
just to be part of the club.

I am no Greenspan nor Buffet but something tells me that my
neighbors with the for sale signs and those with the new
Miami style blue roofs have finally realized that their
negative bank accounts, maxed out credit cards, extensive
interest only real estate portfolios, fancy new cell thin
cell phones, over sized plasma HDTV, luxury cars and $400
shades are choking them to the point where even a Heimlich
maneuver won't dislodge the large chunks of debt cutting of
the air that inflates their once puffed out chests!!!

If only I had joined the bandwagon, my hair too would be
graying and the bags under my eyes would surely give me
immediate entry into the club of the living dead.

Perhaps, I'm just a dreamer, they will never let me in, I
just broke the cardinal rule, I gave away their inner most
secrets to a bunch of strangers. Oh well, I'll just jog
passed them as I always do and smile. Not because they have
ever taken the time to smile back, but because perhaps one
day these homes may actually be occupied by someone like
me, someone not a member of the club.

...

I'd have to say downright frosty, not cooling.

My son just put his co-op on the market in Brooklyn
Heights, right across the river from Manhattan and just
steps away from the Promenade - a prime location. His small
one bedroom is listed at 799k & he has a huge
storage/workshop of 300 plus sq ft in the basement. Main
part is a totally redone 540 sq ft with fireplace etc etc.
Main lower level so few steps. In the past week he has had
two open houses and about 140 people have come through, but
no offers. I keep telling him to lower the price & get out,
but since the basement can be converted to living area as
it is right under the co-op with windows he's positive he
will get his price.

There is an old brownstone steps away from his that has
been on for 10.9 Million for eight months sitting vacant.
My daughter sold hers in Reseda, Calif last year & luckily
maxed out her profits (she listened to her MUM) & is now
renting.

Here near the so Shore of Lake Superior properties over
200k with 80 acres & a house have been on the market for
over a year, a total bargain anywhere else, but there is a
lot of supply & not any demand. The high price of gas has
turned people off from living too far away from shopping
etc.

However, our lakeshore property in Manitoulin Island Canada
has appreciated about 40% in one year. Can't wait to see
the new tax bill on that! So, an rundown on a few areas of
the country for you.

...

The housing market is currently booming in Casper Wyoming
due to the current energy boom in oil, natural gas and coal
(along with methane and alternative fuels) that the local
economy has relied upon for years. However, I have noticed
that houses (especially newer high end homes) are staying
on the market weeks longer than, say, four months ago and
even a year ago, when new houses sold within days of
completion and many before completion even.

We do have MANY new housing projects with the prices in the
mid 100s to upper 200s for three bedroom houses with
unfinished basements. This is to supply moderate priced
housing to the huge influx of workers moving here from out
of state. Condos are also catching on as THE alternate new
housing to invest in (similar to what is happening
nationally).

Casper and the surrounding communities of Rock Springs,
Green River, Riverton, Gillette and Cheyenne are
experiencing housing shortages and extreme worker
shortages. Anyone can get a job in this region in about any
field of work except high tech. The highest paying jobs are
in the energy industry which is backbreaking work with year
round exposure to the elements. Wyoming has harsh winters
and wind that never ceases blowing.

We just bought a house for 330,000 last year and could
resell it today for at least 360 to 375. We are currently
debating selling now while the housing market is still
strong here. We had originally planned to sell next summer,
but feel that the trickle down effect of the national
housing market may trickle down here sooner than that.
Maybe selling now makes better financial sense than waiting
to sell next year?

...

We recently moved here and are renting a nice apartment in
a complex. On the day we arrived to take possession of our
apartment we were informed by the nice people in the office
that the complex was going "condo". This meant that we
could buy our apartment or someone else would but they
would have to honor our lease agreement.

It's a two bedroom with a loft around 1550 sq. feet. They
want $388,000. LAST SUMMER we were told that there would be
at least three people lined up to WIN the chance to
purchase one. This summer - no one. Even Phoenix apartment
owners are having some troubles keeping them rented - much
less selling them.

The front office selling staff was let go Friday. They had
six months to sell all of the "condo's". The place is very
vacant. In our building of six apartments, there are two
occupied. Parking is great! Someone higher up needs to be
fired for not doing his homework on the current market.


A few of the "condo's" did actually sell, but the rumor now
is that a new team will be coming in and they are going to
lease the rest of them. So there will be some that are
owned and some that are rented. Those that are owned will
be paying an extra $200 home-owners association fee - for
something!!! I'd be sick if I owned an apartment amongst
leased ones - wouldn't you??


Anyway, things are pretty cool here - market wise that is.

...

Welcome to California. Renting is great selling Real Estate
is becoming a nightmare.

I sold my condo a year ago and I'm happy as a clam renting.

Here is an example of what is happening here in San Diego.
I moved into this condo complex April 1st.


http://maps.google.com/maps?oi=map&q=4009+Crown+Point+Dr,+San+Diego,+CA+92109

Click on the satellite view and you will see this is a
great location. Condo conversion done a few years ago.
Built in 1973.

The large building closest to the street has 76 units.
Range from $280k Studio / $375k 1br 1bth / $575k 2br 2 bth
/ to just North of a $million for a unit that combines a 1
br and a 2 br.

April 1st twenty units for sale =26% (counting lock boxes).

Yesterday 28 units for sale = 37%.

I rent one of the units closest to the bay just North of
the pool. 40 units $575k 2br 2 bth.


April 1st one for sale = 4%

Yesterday 4 for sale = 10%.

Hope you enjoy Laguna Beach. I always enjoyed driving
through there when I took the Coast Highway to get to
Newport Beach.

...

here in oil rich Alberta, Canada there are no signs of a
housing bust. Prices in Calgary are up about 30% over last
year and the average price of a resale home is $350,000 and
rising by about $500 per day. Bidding wars occur on a
regular basis and prognosticators are suggesting that the
average price will rise by another 25% over the next year.

People are flooding into Calgary and other Alberta cities
and towns. Just last month the president of the Calgary
Chamber of Commerce stated that we need an additional
48,000 skilled construction workers NOW just to help keep
up with demand. It is even worse in Fort McMurray which is
right on the edge of the vast tar sands. There, temporary
housing has been moved onto a city park to shelter
construction workers who are feverishly building more
homes, condos, etc. to house more employees needed for the
tar sands operations.

No sign of a downturn here for years to come.

So there you go, Alberta, Canada is booming. I know we will be packing our bags. :-P

Diego says: Someone please inform Cook County. I just got notice in the mail yesterday that for porperty taxes my assessed value went up 44%.

Bill C: I would challenge that. Maybe you can sneak into Stroger's hospital room and whisper into his ear, "Lower my assessment, lower my assessment."

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