A Great Nationwide Analysis from The Housing Bubble Blog
A report from WTSP on Florida. “If history is any indication, Joe Manausa says we are not currently in another housing bubble. The Florida-based realtor and author, with 30 years experience in the business, says rarely do we see the average housing price in the U.S. decline. In fact, he says, it’s only happened seven out of the past 80 years and five of those years were after the most recent housing bubble collapse. ‘So all these experts saying ‘oh we’re going to see another bubble,’ well the last bubble we saw before the previous one was after the Great Depression,’ he said. ‘History says there is no housing bubble.’”
“But what about a potential rush of foreclosures saturating supply once federal moratoriums are lifted? ‘Homes have been going up in value significantly over the last six to seven years, so that means is if someone is late on their mortgage and they have to go through the foreclosure process, they’ll just list their home, they’ll sell it on the open market, they’ll take all the revenue and pay off all the debts and liens, they’ll put a check in their pocket and then they’ll move on,’ he said.”
From Realtor.com. “The percentage of homeowners who are seriously behind on mortgage payments or in foreclosure was an astonishing 245% higher in February 2021 than it was in February 2020, according to Black Knight. Another looming problem: 5% of homeowners are in foreclosure or seriously delinquent, meaning that they haven’t made a mortgage payment in three months or more, according to a February report from the Urban Institute. That number includes people in forbearance.”
“‘The share of those who are significantly delinquent, so they’re more than 90 days behind on payments, is actually higher than the rate during the foreclosure crisis’ in the aughts, says Jung Hyun Choi, a senior research associate with the Urban Institute’s Housing Finance Policy Center.”
“The metros with the highest percentage of homes that are ‘seriously underwater,’ which ATTOM defines as owing at least 25% more than what the home is worth, include Baton Rouge, LA; Syracuse, NY; Youngstown, OH; Toledo, OH; Scranton, PA; Cleveland, OH; Akron; OH; New Orleans; Dayton, OH; and Virginia Beach, VA.”
“Make no mistake: Homeowners will eventually have to make payments again. ‘We can’t have indefinite forbearance, and we can’t have an indefinite foreclosure moratorium,’ says Marina Walsh, vice president of industry analysis at the Mortgage Bankers Association. ‘As things get back to some sense of normal, people have to move on.’”
From Patch New York. “Many landlords are holding out hope — and their apartments — that it won’t be for much longer. More than 50 percent of unrented apartments in Manhattan are being kept off the market, according to UrbanDigs data. The practice of holding onto unrented apartments is called ‘warehousing’ and it hit record levels during the pandemic. It’s a sign landlords are waiting for prices to go back up in their favor, said John Walkup, co-founder of UrbanDigs.”
“But it’s also a gamble for landlords that could actually drive prices down further and ultimately bottom out the market in New York City. Landlords started offering concessions — a free month of rent here, a waived parking fee there — to entice renters back, Walkup said. But with a glut of unrented apartments across the city, it was only a matter of time before rents dropped too, he said.”
“And drop they did. Asking rents dropped by 20 percent or more in Manhattan and Brooklyn, according to UrbanDigs data. The problem is landlords consider the prices unsustainable, especially if they’re locked into years-long leases, Walkup said. Off-market apartments are now just over 50 percent, UrbanDigs data shows. ‘The market was so saturated they were pulling things off basically as fast as they came back on,’ he said.”
The San Francisco Business Times in California. “‘Britannia est insula. Italia est paeninsula.’ The first two sentences of my freshman year Latin book were easy to understand: England is an island and Italy a peninsula, an almost island. After that, Latin quickly tumbled into incomprehensibility, but the thought stuck that islands are fully insulated, peninsulas a bit less so. Decades later I learned real estate’s two-word formula for monetizing insulation: supply constraint.”
“Islands — small ones anyway — are perfectly supply constrained; peninsulas can be nearly as limited. Until the virus struck a year ago, business islands like Manhattan and peninsulas like San Francisco’s were impregnable fortresses high-walled by supply constraint. Until the virus rolled up its siege wagons, smug landlords (such as ourselves) considered full occupancy a birthright and rents a stairway to heaven. In short, we had forgotten the other half of real estate’s magic formula: demand.”
“On April 7th, the San Francisco Chronicle reported that office rents in the city had dropped 14.7%. On the same day, the Wall Street Journal reported that ‘landlords are offering long-term leases at discounts up to 13% below rent rates reached in the first quarter of 2020.’”
“These numbers are so understated — so laughably wrong — that the articles should have come with Twitter warnings about their veracity. Why so off? The landlords failed to disclose how much they had to fork over to tenants to achieve even these reduced rents. Since we have no holdings in either San Francisco or Manhattan, I’ll focus on the Peninsula where we do, and where we know the real numbers first-hand.”
“Turning briefly to the Peninsula’s residential market. For-sale housing is robust and anything listed under $3 million is getting multiple offers. The apartment rental market is less cheery. Rents are off 20-25% and, for landlords unwilling or unable (because of, say, lender debt covenants or internal expectations) to lower rents down to market, vacancy rates are soaring. ‘The tide was all the way out on Dec. 15th, but it’s been creeping back ever since,’ said the manager of a sizeable apartment portfolio. ‘I’m expecting this summer to go gangbusters.’”
“Hopefully, it will. And hopefully, despite our lovely supply constraint, we won’t take demand for granted again. Islands and peninsulas may be better insulated than, say, Kansas, but they still get frostbite in a deep freeze.”
From Orillia Matters in Canada. “Senior economists with Canada’s top banks have floated several ideas to temper the market, such as the imposition of a speculation tax, banning blind bidding, a capital gains tax, and raising interest rates. There is already an initiative to bump up the stress test, first introduced in 2018, which sets out a formula attached to the affordability of a home purchase, capping the amount people can spend on a home proportionate to their income. A more stringent stress test will shrink the buyer pool which could, in turn shrink prices.”
“Chantal Godard, president of the Barrie and District Association of Realtors, points out that a home buyer with an annual income of $100,000 can now buy a $700,000 home with 20 per cent down. If implemented, that buyer under the new strategy would only be able to access $630,000 in financing through traditional institutions with 20 per cent down.”
“One scenario floated is to tax the increased value of the home. Currently, the primary residence is exempt from capital gains tax, which only applies to secondary dwellings. But Barrie-Springwater-Oro-Medonte MP Doug Shipley thinks this approach would be a mistake. ‘A lot of people work their whole lives, their home is their investment. That’s what a lot of people plan on using as their retirement fund,’ he said.”
From Domain News in Australia. “Although overall Sydney house rents held at record levels of $550 per week in the March quarter, according to the latest Domain Rent Report, in a string of postcodes from the inner west to the city and eastern suburbs, rents have posted double-digit declines in the past year. Houses in Pyrmont – a once-thriving inner-city suburb due to office workers, students and tourists – recorded the biggest drop in asking rents, falling 20.1 per cent in the 12 months to March to a median of $695 per week for a house. It was followed by Balmain East, where asking rents for houses declined 18.2 per cent in the same period to $900 a week.”
“Melissa Ryan, who rents in Balmain East, said she had noticed rents falling in her neighbourhood, which would allow her to make significant savings and give her family options to stay in their suburb of choice. ‘We are in a position we can move into something smaller … and save $400 a week,’ Ms Ryan said. ‘It takes a little bit of the stress out of the market and allows you to live where you want to live. It means that the decline in the rental market provides the opportunity for people to save.’”
From Stuff New Zealand. “People were alarmed when my wife and I decided to move into a high-rise apartment sitting more than 25 storeys up from street level in central Auckland. ‘Isn’t that a bit too high?,’ was the most common reaction. But rents in Auckland’s CBD seemed to be plummeting. One place we viewed was a two-storey apartment with an upstairs room so large it looked more like an event space than a bedroom. The closet in it probably would have been rented out separately to a Wellington University student if it had been in the capital.”
“Agents say rents are down 20 per cent overall, but for many of the apartments we were looking at, the price drops were up to 40 per cent. It’s easy to explain this phenomenon away as a result of demand being cut off because the borders are shut, but the reality is that increasingly people in Auckland just have more options because more housing is being built. This is clear as you drive into the central city from the airport. Take roads through the suburbs rather than the motorway and you’ll see townhouses or mid-rise apartment blocks going up everywhere.”
See original article here.