A weekend topic starting with Realtor.com. “In today’s wild housing market, it may seem that the only successful homebuyers are either uber-rich or now house poor after spending everything they had on an overpriced home. In the Los Angeles metropolitan area (which includes the suburbs), buyers put an additional 13.4% of their income toward mortgage payments in May compared with a year earlier. Buyers in Atlanta paid 12.4% more of their earnings, while those in Chicago forked over 11.7% more. ‘Once the interest rate increases a little bit, mortgage payments will increase a lot,’ says Realtor.com economist Jiayi Xu. ‘Buyers could be overextended even past the 2008 peak.’”
From US News and World Reports. “With the prices of some stocks, bonds and real estate listings reaching stratospheric levels, investors may fear that they’re facing an ever-expanding asset bubble. And when it comes to bubbles, the concern is what will happen when they inevitably ‘pop,’ causing demand to drop and assets to shed their value. For investors, that could mean holding an asset that is nearly worthless.”
“Are these home price increases sustainable? Or are homebuyers locking themselves into a bubble? ‘There is a point where pricing exceeds the ability to service the debt and the price, and we’re very close to that,’ says Doug Prickett, senior managing director of investments at Transwestern Investment Group, a real estate investment advisor based in Dallas. ‘It doesn’t mean it’s going to go backwards. It just means it’s going to slow down.’”
The Toronto Sun. “It’s been dubbed the ‘perfect storm’: ultra low borrowing costs, tight supply and increased demand for single-family homes have created a super-charged real estate market that’s forcing many Canadians to shift their financial planning strategies. ‘If the purpose of buying an investment property or principal residence was to sell and fund your retirement, you have to ask yourself if it’s going to get much better than this,’ says David Semerak, a senior wealth advisor at Meridian Credit Union. ‘The entry costs of homeownership are just so burdensome that on a beginner salary, almost 100 per cent of your disposable income would go to fund this mortgage.’”
Two reports from Domain News in Australia. “Property prices across Australia are now more than five times household disposable incomes and set to climb higher still, as the property market booms while wage growth remains sluggish. As it is, Sydney’s median house price of about $1.41 million is about 23 times higher than the median employee income in Greater Sydney, Domain modelling shows. The unit median is 13 times higher. Melbourne house prices are almost 18 times higher than local incomes, with house prices also at least 10 times higher than incomes in Brisbane, Adelaide, Hobart and Canberra.”
“First-home buyers are swooping on units and apartments in Melbourne’s inner suburbs being sold off by investors hoping to cash out at the top of the market. It comes as rental yields weaken across the city, pushing many investors to make the choice between selling up or holding on. First-home buyers Lizzie Wagner and Mitch op’t Hoog have just moved into a two-bedroom unit in Surrey Hills sold by an investor. Although they are thrilled with their $906,000 purchase, they know they didn’t exactly get a bargain.”
“‘With the market being so hot, we know we definitely paid top dollar,’ Lizzie said. ‘But it was worth it just to be out of the race during lockdown. It was such a stressful time, and while we would have really loved to get it for about $880,00 to $890,000, we thought we just had to do it.’”
A press release. “Unless you’ve been living under a rock, you know that Utah’s housing market has gone from mildly stressful to nearly unbearable for some would-be homeowners. With many new Woodside Homes becoming available each day, you will not be put on a waitlist unlike other housing options. Simply contact Woodside Homes, arrange your build and/or purchase process, and you’re in! No waitlist necessary. ‘My husband and I built and bought our first home through Woodside. Being a first-time homebuyer is scary and we had no idea what we were doing. But Woodside walked us through every step with a professional and amazing kindness,’ wrote one reviewer.”
The Epoch Times. “Valerie Voss, a real estate agent in the Inland Empire area of southern California, reports that the buyers she’s seeing are no longer showing up with $50,000 and $75,000 for a down payment. Indeed, she says, ‘If you’re an FHA buyer with 3.5 percent down, now is the first time in a long time you have a good change to be able to move into a home of your own.’”
From Roseville Today in California. “Local Roseville Realtor, Julie Jalone continues to hear from my buyer clients that the current Sacramento housing market is overpriced. They point out that they are seeing price reductions to prove their point. ‘Recently I read an article that 28 percent of listings in the Sacramento area have seen a price reduction. Many of these sellers are referring to their reduction as a discount. Even in an aggressive market sellers should understand a price reduction is just getting closer to where the price should have been to start.’”
The Washington Post. “After three years of searching for a home in their preferred neighborhood in Silver Spring, Md., Chris Lancette and Won-ok Kim made an offer on a house in a different neighborhood. ‘The moment we turned in the offer, as nice as the house was, I literally started sobbing,’ said Lancette, 52-year-old owner of Orion’s Attic, an estate-liquidation company. ‘Won-ok was depressed, too, but we had put our agent, the lender and the seller’s agent through all that work, and we felt it was too late to back out.’”
“Lancette and Kim were thrilled when they were outbid for that house. Their agent, Carolyn Sappenfield with Re/Max Realty Services in Bethesda, Md., told them afterward that they should never make an offer on a house they don’t love. While Lancette and Kim eventually bought their dream home, in their preferre neighborhood, many buyers in today’s crazy real estate market regret their decision.”
“A survey by Bankrate found that about a third of baby boomer buyers (ages 57 to 75) regretted their decision. According to the survey, 64 percent of millennial home buyers (ages 25 to 40) have at least some regrets about their purchase. The main reason for buyer’s remorse: money.”
The Globe and Mail. “Housing skeptics argue that Canada’s real estate frenzy is a bubble that will inevitably explode, just as the U.S. property boom did in spectacular fashion back in 2007. But what if the skeptics are reading history wrong? The U.S. experience over the past two decades has been widely misinterpreted, according to recent research from a trio of economists. In a paper entitled The 2000s Housing Cycle with 2020 Hindsight, the researchers point out that while U.S. home prices were unquestionably frothy in 2006, they weren’t entirely the speculative lunacy that is commonly perceived.”
“The strongest evidence for that viewpoint is that U.S. home prices recovered strongly after their plunge from 2007 to 2012. Looking back over the course of the entire past 20 years, the pattern ‘is not a boom-bust but rather a boom-bust-rebound,’ write Gabriel Chodorow-Reich of Harvard University, Timothy McQuade of the University of California, Berkeley, and Adam Guren of Boston University.”
“To put that another way, bubble-era speculators were undoubtedly premature, but they were not necessarily wrong. The housing crash devastated home prices for a few years, but it did not leave them in a permanent hole.”
“Fundamental factors appear to have played a larger role then previously thought, according to the researchers. They found that the cities that had the biggest booms in the bubble period between 1997 and 2006 also had the largest busts – but that was then followed by the strongest rebounds. This suggests bubble-era buyers were not, by and large, a pack of fools. These investors were correct in thinking that the long-run outlook for real estate in several cities had fundamentally improved.”
“Where these buyers went wrong was in being too optimistic about the short term and taking on too much debt as a result. This led to financial fragility and a crash that dragged home prices below their fundamental value. However, once that shock was past, strong fundamentals powered an impressive rebound.”
From Asahi on China. “In Shenzhen in the same province, where Evergrande Group’s headquarters is located, a fierce protest rally took place from Sept. 13 to Sept. 14. More than 100 people participated, repeating calls of, ‘Return to us the money that we earned with our sweat and blood.’”
“One protester, a 40-year-old company employee in Zhongshan in the same province, said the construction of an apartment she bought in Zhongshan two years ago has been suspended. The woman also bought an investment product worth 400,000 yuan or about 6.8 million yen ($62,385) from Evergrande Group as it was billed as bearing 10 percent annual interest.”
“‘I trusted Evergrande Group because it is a top player in the industry,’ she said. ‘Under the current circumstances, I may not be able to get even the principal back.’”