Watching out for the next housing bubble
Today’s CoreLogic June MarketPulse report unveiled that the home price adjustment process is moving much more quickly in the current cycle than in other historical housing cycles, and that the rebound in home prices, while rapid in some markets, is likely to be short lived.
Like many economists, CoreLogic is pondering whether or not we’re approaching the next housing bubble and while they are not the first to have used the “bubble” word, they are one of the largest to do so.
CoreLogic Chief Economist, Dr. Mark Fleming said, “The continued momentum in home price growth gives us renewed optimism that the housing recovery is becoming more durable. But double-digit gains also prompt caution, particularly among those who recall the unsustainable home price increases before the last housing downturn. Are we witnessing a new housing bubble? While our recent projected CoreLogic HPI indicates continued home price gains, bolstered by still-tight supply and strong demand, we expect recent double-digit gains to moderate as markets normalize.”
So why mention a bubble if markets are projected to normalize? The ugly truth is that the housing crash was a surprise to many, even key economists, so the industry is still a dog with its tail between its legs, set on being good, so addressing the possible hiccups keeps surprises at bay. This time.
This time is different
CoreLogic also asserts that this time is different, not because the industry was kicked in the gut in 2008, but because price recovery today is much higher than in previous cycles.
Deputy Chief Economist Sam Khater explains that the most recent cycle is different from this past cycle in magnitude and speed of the adjustment process. Real home prices increased 62 percent in the three years leading to the peak and then declined 47 percent in the three years following the peak, or by about three-quarters, which is much larger than historical declines even after adjusting for differences in the pre-peak rise in prices.
“Prior cycles had more downside stickiness and slower price appreciation over a longer period of time,” Khater reports. “After the economy and the real estate market recovered, prices remained elevated above what fundamentals otherwise dictated. Prices remained stuck above what was fundamentally supported until, over time, the fundamental price rose to meet the market price. In the current cycle, the combination of a faster adjustment process and very low rates caused a rapidd upturn in national prices in late 2011 and early 2012.”
Austin tops the list of best places to buy a home
When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?
Looking at the bigger picture
(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).
That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).
They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.
“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”
Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?
The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.
Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
2. Two major media brands emerge
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