Fantastic article! The local Longmont market, and all surrounding areas for that matter, are smokin’ hot right now! It reads, in part…
1. Both asking price and rents jumped 5 percent from last year
2. Mortgage rules got a renovation.
3. Delinquency & foreclosures are at record lows.
4. 93% of Millenials plan to buy.
5. Investors rush in.
Nearly 30 cities have been designated “in the clear” of the housing downtown, according to a report today by Trulia, although real estate experts in some of those markets reacted to the apparently good news with conservative-sounding forecasts for their areas – or with downright skepticism.
Amid hearty, annual asking price gains of 4 percent or more – and with relatively low foreclosure rates – Denver, San Jose, Pittsburgh, Little Rock, Austin and Colorado Springs each hammered out a “solid base for housing recovery,” said Jed Kolko, Trulia’s chief economist.
Those six cities were the only metropolitan areas specifically listed as “in the clear” by the real estate website. “We defined (‘in the clear’) as metros with positive year-on-year asking-price growth and a low or moderate share of homes in foreclosure. In all, that includes 29 metros,” Kolko added, “but we didn’t list them all out because some have only very slightly price growth. Best to focus on those six.”
The big six “in the clear markets avoided the worst of the bubble,” Kolko said. Amid the mortgage crisis, “those metros didn’t have big price declines that we saw in Miami, Phoenix and Detroit – places that still have a lot of homes left in foreclosures.”
Nationally, asking prices for homes flickered just 0.3 percent higher year-over-year in June after a flat May, Trulia reported.
Some “in the clear” cities also are enjoying robust, new-home construction, Kolko added. “But the main driver in those markets is job growth.”
At the top of Trulia’s list: Denver recorded a 7.2 percent asking-price increase year-over-year in June, according to the website’s own pricing metrics. Meanwhile, 11.9 out of every 1,000 Mile High City homes is in foreclosure, reports RealtyTrac – as compared to far steeper foreclosure rates in cities like Phoenix (25.5), Miami (33.7), Orlando (29.3) and Detroit (21.2).
While Miami (up 16.1 percent in asking price during June year-over-year), Phoenix (up 18.9 percent) and Detroit (up 5.2 percent) all won back solid ground on pricing, Trulia dubbed those metros as “at-risk” because they still have a high share of homes in foreclosure.
Kolko expects price gains in those cities to ultimately shrink or even reverse as foreclosed homes in those areas come onto the market. Ironically, seven of the 10 cities with the very highest price increases in June (also including Orlando, West Palm Beach, and Cape Coral-Fort Myers, Fla., as well as Warren-Troy-Farmington Hills, Mich.), all were deemed “at-risk” in the Trulia report.
On the sunnier side of the market, Trulia is sounding “in the clear” alerts for San Jose – with a 6.2 percent annual price spike and a foreclosure rate of 10.0 homes out of every 1,000 properties – and Pittsburgh (a 5.1 percent annual price gain and a foreclosure share of just 4.4 of every 1,000 homes).
Kolko cites the unemployment rates in Denver (8.1 percent in May, according to the federal Bureau of Labor Statistics), San Jose (8.7 percent) and Pittsburgh (6.7 percent) as critical figures in those municipal comeback equations.
The national unemployment average was 8.2 percent in May.
But given the relatively lofty unemployment rates in Denver and San Jose during May, is their job growth really good enough to attract buyers?
According to Kolko at least: yes.
“That means (those markets) are not just dependent on investors,” Kolko said. “People are moving there for jobs. Developers are betting on the future by resuming construction.”
In both Denver and San Jose, real estate brokers contacted at random by msnbc.commomentarily chuckled at the notion that their markets are “in the clear.” They then offered nuanced views of their local housing economies.
“We would be in the clear if the government got the heck out of the (real estate) business,” said Bob Stewart, the broker at Coldwell Banker, The Real Estate People, based in San Jose.
Under federal initiatives like HUD’s Neighborhood Stabilization Program – during which 400 cities and counties have received billions of dollars to slash housing blight in foreclosure-ravaged neighborhoods – “speculators” have shoved local “investors” and Realtors aside, Stewart said, gobbling up distressed San Jose properties and re-selling them on the cheap.
“Speculators went out and got their (real estate) licenses and are targeting underwater properties, getting them listed at a very low price and submitting an offer immediately to the lender. If the lender accepts it, they’ve made $300,000 to $400,000 (per house),” Stewart said. “There are enough of those here getting accepted that it’s keeping our prices” lower than they should be in San Jose.
“The powers that be in the government really don’t understand the difference between investors and speculators,” Stewart added.
In Denver, broker Heather Parness believes “we’re in the clear from the standpoint that I don’t feel we’re going to see any price declines over the next 12 to 24 months.”
Large homebuilders like Richmond and McStain have been buying up swaths of land “for the last couple of years within metro Denver,” said Parness, president and managing broker at RE/MAX of Cherry Creek. “And now that we’re seeing a shortage in existing inventory in Denver, the construction side is booming.”
“The message that we’re very careful about is: We’re not predicting any huge price increases over the next several years,” Parness added. “If we see any gains in the next 36 months, it might be a 1 to 3 percent appreciation, at most.”
Rents Keep Marching Upward
Rental demand remains strong, with rents rising 5.6% nationally year over year. One reason for this continuous climb is job growth, as the metros with the largest rent increases tend to have fast job growth, like San Francisco and San Jose. But another reason why rents keep going up is the decline in homeownership: foreclosures forced some owners to become renters, while tight credit and the weak job market put homeownership out of reach for many others. The result: rents have risen even while prices were falling, and now that prices are rising, rents are rising even faster.
Note: Rankings based on the year-over-year changes in asking rents among the largest U.S. metropolitan areas.
Not only are rising prices starting to look like a real trend: they’re also coming to a market near you — if they haven’t already. Asking prices increased year-over-year in 44 out of the 100 largest metropolitan areas, with Miami and Phoenix leading the charge.
Why these markets? One factor is job growth, which boosts housing demand. Miami, Phoenix, Warren-Troy-Farmington Hills (suburban Detroit) and Denver all saw strong employment gains in the past year. Another factor is the big price declines after the bubble, which attracted house hunters and investors searching for bargains to those markets. Most of the metros with the largest price increases in the last year had huge price declines during the bust, including Phoenix, Warren-Troy-Farmington Hills and the four Florida metros in the top ten. But among the metros with the largest price declines over the past year, only three–Sacramento, Las Vegas and Fresno–had huge overall price drops after the bubble burst.