Is housing on a 'sugar high'?
The strong home price increases of recent months are raising questions about whether a new housing bubble is on the way. But analysts still see problems ahead.
Just a few years ago, no one could have imagined that we’d be writing headlines about rising home prices. The evil "shadow inventory" loomed, and the chance that your underwater home would peek its head above the surface any time soon was slim.
But real estate is ever surprising, and just a few years after the real-estate bust and plunging values, home prices are rising again nearly everywhere in the United States. "Home prices are on a tear – thanks to the Fed," The Wall Street Journal wrote in Monday’s editions.
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The rising prices mask some of the volatility that still exists in the market. First-time homebuyers have yet to come back to the market in large numbers, partly because they can’t get a mortgage in today’s environment. Many homeowners in hard-hit areas still have homes that are double digits under water. Much of the demand for homes is coming from investors.
The WSJ noted "murmurs of concern that the Federal Reserve's campaign to reduce interest rates could be giving the housing market a sugar high."
But the Fed may not be the only culprit. These are the reasons the WSJ lists for rising prices:
- The number of homes for sale is at a 20-year low. That is partly because few new homes have been built in the past four years. Would-be sellers are still hesitant to sell at prices well below 2006 levels or fear they can’t get a mortgage to buy another home. And investors are scooping up much of what is offered for sale.
- Demand is rising. Investors are playing a major factor, but rising rents have encouraged more first-time buyers to enter the market.
- Low mortgage rates have increased purchasing power by one-third. At a 6.1% interest rate, a monthly payment of $1,000 will get you a $165,000 mortgage, The WSJ calculated. At a 3.5% rate, you can borrow $222,000 and still keep your payment around $1,000.
Are we heading for a new bubble? Experts interviewed said no. In fact, things may get worse, and the inventory of homes for sale is likely to rise soon.
"This is not a 2005 market," Rick Sharga, executive vice president of Carrington Mortgage Holdings, said at the real-estate expo in Dallas, as reported by Housing Wire. "A lot of what’s driving home-price increases is lack of available inventory. … Very few markets are anywhere near where we were at the peak."
This is BS. What I see, and I have a RE license for access to information. Banks are approving appraisals (and don't tell me they don't work for the banks) for sales/resales, but not for refinances. I have a property that's a bit difficult to appraise because there are not a lot of 'like-kind' properties. The current sales for similar ones (within the same radius as my appraisal, but not used) went for between $580K and $650K, one was 3 miles away. They appraised mine for $440K! Mines in a more desirable area than one (I know, I grew up in both places) and is almost the exact demographic for the other...in fact, mine had more square footage, much better rents (about 30% better...it's a multi-property) and more acreage. Even so, I was expecting them to low-ball me considering all their fraud and their double standard about their 'socialized capitalism' they've invented to perpetuate their fraud, but there is no way it should have come in lower than $525K. Mines a 4-unit, made as apartments. They comp'd it with 2 units and 3 units that were 1/2 the square footage (and in some case less) that were conversion (ie. some with functional obsolescence, etc. because they took a SF and converted it to make a bastardized rental).
There are 2 playing fields, one for them and one for the rest of us. It's legal for them to commit fraud, break the law, extort, etc. but if we do it, we go to prison or get fined. It's a gross injustice and a double standard.
Why aren't Americans outraged? I'm flummoxed by that for sure.
For some reason the msmbc documentary about the bubble bursting comes to mind. Former fed chair Greenspan said near the end of the show he commented to the host " because of human nature, at some point in time we will be having this disscussion again". I think he could be right..
Investors are sucking up foreclosures and selling them at three times the cost or renting to people who were evicted because of these backward mortgages they should have first shot, and short sales and foreclosed homes as investors are buying homes holding on to them and creating boarded up cities.
The market is driven by investors?
I've heard stories about banks selling entire neighborhoods to a single investor. The taxpayers again shot themselves in the foot. The investors hold their cash, the housing market crashes while people lose their jobs, and houses. Historicly low taxes facilitate a transfer of wealth that almost unprecedented. The taxpayers prop up the banks with bailouts allowing the scam of inflated real estate prices to continue, who then transfer a good part of Mr. and Mrs. America 's wealth to the investor class....... to sell back to Mr. and Mrs. America, that made it all possible to start with. I foresee the same set of circumstances being played over and over, with the investors skimming more profit each time and eventually there isn't anyone left in America who can buy a house. At that point the investors will lobby Congress for 15-20 million immigrants per year to bring money to buy a house.
A glut of inventory is coming, prices will come down. People who pay high prices are keeping the capitalist profit wheel rolling. Example: In my neighborhood somebody pays 425,000 for a house that's really only worth 225,000, because they want to buy a home, because they can get a loan with 20,000 down. Whatever ,the true value in the older neighborhood, no street lights, next to freeway, house built in 1962 with those building codes, very little or no upgrades. Hello, now that sets the average price with the banks for that area. If I wanted to buy a 200,000 fixer I cant. There will always be somebody waiting to accept the money that's being given away by a fool. Stop overpaying America!