Tag Archives: housing bubble

San Francisco’s housing market is at tipping point

Posted on April 18, 2016 | Leave a comment

San Francisco’s housing market is at a tipping point is San Diego next.

A shortage of housing inventory, with demand that has not flatlined, has jacked up home prices at a faster pace than inflation and wage growth.

Among the biggest housing markets, San Francisco was the most expensive in the fourth quarter, according to the Federal Housing Finance Agency.

But sales, and home prices, are now slowing down, according to brokerage firm Redfin.

Redfin said last week that house prices in San Francisco fell for the first time in four years in March.

Their data also showed that the month-on-month decline in home sales relative to overall inventory was the most in the city, as people had a hard time selling.

“At some point something has to give,” Redfin CEO Glenn Kelman told Business Insider.

“There’s just been a change in the market where people feel much more careful, much more sober than they did in the fall. We started to see some of that late summer, where demand started to taper off. Houses would sit on the market an extra day, only get four offers instead of fourteen.”

A few things have spurred this recent declines, including the tech sector that contributes to a swath of the demand for housing in San Francisco.

The market sell-off at the beginning of the year impacted buyer sentiment because a lot of Silicon Valley workers get compensated in stock and equity. Also, many buyers that can afford high-end homes in excess of $1 million are linked to the tech industry.

And so anything that impacts market valuations potentially affects buying, said Redfin chief economist Nela Richardson.

Richardson said San Francisco’s softening is not a sign of worse to come for the national housing market. But it is for other markets like Washington D.C. where prices are far outpacing affordability.

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Wall Street’s New Get Rich Quick Scheme with Residential Housing

Posted on December 1, 2013 | Leave a comment

Over the last year and a half, Wall Street hedge funds and private equity firms have quietly amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta, brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit by the economic meltdown.

Wall Street’s foreclosure crisis, which began in late 2007 and forced more than 10 million people from their homes, has created a paradoxical problem. Millions of evicted Americans need a safe place to live, even as millions of vacant, bank-owned houses are blighting neighborhoods and spurring a rise in crime. Lucky for us, Wall Street has devised a solution: It’s going to rent these foreclosed houses back to us. In the process, it’s devised a new form of securitization that could cause this whole plan to blow up—again.

Since the buying frenzy began, no company has picked up more houses than the Blackstone Group, the largest private equity firm in the world. Using a subsidiary company, Invitation Homes, Blackstone has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases directly from banks the same way a regular person might stock up on toilet paper from Costco.

In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That’s a spending rate of $100 million a week since October 2012. It recently announced plans to take the business international, beginning in foreclosure-ravaged Spain.

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Next Housing Bubble? – Payments on Equity Lines Soon to Rise

Posted on November 12, 2013 | Leave a comment

Might the real estate market be heading for a new — and as yet little publicized — financial storm? Maybe.

Some mortgage and credit experts worry that billions of dollars of home equity credit lines that were extended a decade ago during the housing boom could be heading for big trouble soon, creating a new wave of defaults for banks and homeowners.

That’s because these credit lines, which are second mortgages with floating rates and flexible withdrawal terms, carry mandatory “resets” requiring borrowers to begin paying both principal and interest on their balances after 10 years. During the initial 10-year draw period, only interest payments are required.

But the difference between the interest-only and reset payments on these credit lines can be substantial: $500 to $600 or more per month in some cases. If borrowers cannot afford or choose not to make the fully amortizing payments that reduce the principal debt, the bank that owns the note can demand full payment and foreclose on the house if there is sufficient equity.