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The in-laws
own a gas station in Miami that they've wanted to sell for years. But they
dithered when the market was hot and ended up being stuck with it when
interest evaporated in 2009.
Lately,
though, the phone has begun to ring again. It's not exactly a feeding frenzy
but real offers are coming from legitimate buyers for the first time in three
years.
That's
actually a pretty good description of real estate in general, where low
interest rates have convinced a growing number of people that it's time to buy.
See this upbeat story on the home builders:
Pulte,
Lennar jump as survey shows housing rebound
NEW YORK (MarketWatch) -- Shares of U.S. homebuilders rallied on
Wednesday after a Wells Fargo analyst's research report said data from 20
select markets nationwide are showing strength across the board.
"For the
third consecutive month, our survey points to an improvement in orders suggesting
2012 may be the long-awaited recovery year for housing," the note said.
PulteGroup PHM -1.39% added more than 8%, Lennar Corp. LEN -1.47%
gained 5%, D.R. Horton DHI -2.44% rose 4.2% and Toll Bros. TOL -0.86% gained
3.8%.
The
bellwether industry ETF, the iShares Dow Jones U.S.
Home Construction Index Fund ITB rose 3.4%.
Wells Fargo's
monthly Neighborhood Watch Survey, which tracks 150 sales managers at housing
tracts in 20 markets, showed that March results were strong across all
measured metrics. In particular, the survey noted that March's numbers
surpassed poll participants' expectations by the widest margin since the
survey started, in 2001.
Wells said
that pricing in the 20 markets also improved, both month-to-month and over
year-ago figures. Sales managers' commentary on market activity indicated
that buyer confidence seems to be improving as inventory shrinks.
"Sales
managers suggested there is a sense of urgency in the marketplace as buyers
anticipate higher home prices and/or mortgage rates," the report said.
Bidding wars
are even returning to some markets:
Market
squeezing homebuyers
Home shopper
Dian Schneider was four houses in on a whirlwind tour of local homes for sale
Friday when her real estate agent issued her a warning.
"Now if
you like this one you'll need to move today because there are already two
offers on it, and they're both above list price," said Anna Hernandez of
McKinzie Nielsen Real Estate. "They're not
crazy high, but you'll have to go in high, too, if you're serious about
it."
Schneider
nodded knowingly as she peeked inside closets, flushed toilets and opened
cabinet doors.
The
50-year-old single mom had already missed out on two homes she'd made offers
on. She was outbid on one, and pulled out of a second over concerns about its
dated electrical system.
"In
hindsight, I probably should have taken that one," Schneider said.
Almost all
the available inventory in her price range is badly in need of repairs, and
upgrading the electrical on the home she passed up wouldn't have cost as much
as she'd assumed, she later learned. But back then, she didn't fully
appreciate how lucky she'd been to find something.
The
Bakersfield area had only 583 single-family homes for sale in March, about a
third fewer than in March of last year.
Bidding war
return
The result
has been fierce bidding wars and almost immediate turnover for anything of
quality that's priced reasonably, whether it's a modest starter home or a
mansion.
"Everybody's
pretty much in the same boat right now, regardless of price," said
Robert Morris, who sells for Watson Realty ERA. "The supply keeps
dropping and dropping and there's nothing replacing it."
Broker Nancy
Harper of Nancy Harper Realty recalled listing a home the day before Easter.
By Easter Sunday, it had six offers on it, and when she called the losing
agents to tell them their offers had been rejected, two of them burst into
tears.
"They
told me they'd written something like 14 offers for clients and just couldn't
get one accepted," Harper said. "When you have agents bursting into
tears, boy, that's low inventory."
So is the
housing bubble back?
There's an
inflationary argument for this being the case. The Fed has lowered interest
rates dramatically and handed banks a ton of newly created dollars, which in
the past has produced asset inflation, as everyone decides that real things
are a better bet than a rapidly-inflating currency and begins to act on this
assumption with borrowed money.
Creating a
new generation of overleveraged "homeowners" is of course a bad
idea for society as a whole, but quite good in the short run for house
prices, economic growth, and incumbent electoral prospects.
On the other
hand, it might all be a mirage, since real estate has gotten some recent help
from a couple of unsustainable sources. First, this past winter was warmer
than usual, so presumably a lot of deals that would have been done in April
and May have already happened. Second and much more ominous, the robo-signing mess that prevented banks from foreclosing
on homes they otherwise might have (because they couldn't be sure their
paperwork would check out) is over, freeing banks to go after all the
squatters who have been living rent-free for the past few years:
Flood
of foreclosures to hit the housing market
NEW YORK (CNNMoney) -- The golden age for foreclosure squatters may
soon be coming to an end now that the $26 billion mortgage settlement has
been approved.
The settlement,
agreed to by the nation's five largest mortgage lenders, is expected to speed
up the foreclosure process by providing stricter guidelines for the banks to
follow when repossessing homes.
The banks
involved include Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM,
Fortune 500), Citibank (C, Fortune 500), Wells Fargo (WFC, Fortune 500) and
Ally Financial.
Many
foreclosures have been in limbo since fall 2010 following the so-called robo-signing scandal, when banks allowed employees to
sign off on thousands of foreclosure documents a month with little
verification.
Lenders hit
the pause button on foreclosures because they "were afraid that anything
they did would be under a microscope," said Eric Higgins, a professor of
business at Kansas State University.
As a result,
borrowers who were seriously delinquent on their loans have been able to stay
in their homes for months or even years without making a single payment.
Nationwide, the average time it takes to foreclose on a home -- from the
first missed payment to the final bank repossession -- stretched to 370 days
during the first quarter, almost twice as long as it took five years ago,
according to Daren Blomquist, the marketing
director at RealtyTrac.
Foreclosure
free ride: 3 years, no mortgage payment
In some
states, delinquent borrowers have been squatting in their homes much longer.
In Florida, the average time was 861 days, and in New York it was 1,056 days
-- close to three years.
"Perhaps
a million foreclosures could have been pursued last year but weren't,"
said Rick Sharga, executive vice president for real
estate investment company, Carrington Holdings.
But that's
all about to change, he said. "We're going to see an increase in the
speed of foreclosures and a higher number of foreclosure starts."
In fact,
there are indications that the pace of foreclosures are already starting to
pick up.
While overall
foreclosure activity was down during the first quarter, filings were up 10%
in the 26 states where foreclosures must undergo court scrutiny, according to
RealtyTrac.
In the
judicial state of Indiana, for example, foreclosure filings were up 45%
year-over year. And in Florida, they were up by almost 26%, according to RealtyTrac.
So where does
this leave housing? Perched, like the rest of the economy, between two very
powerful forces -- one inflationary, one deflationary. In housing's case,
mortgage rates are low, pent-up demand is massive and supply, at the moment,
is minimal. But there's also a tsunami of foreclosures about to hit the
market, along with the usual eurozone and Middle
East wild cards waiting to traumatize the financial markets.
So who knows?
I just hope the gas station sells soon.
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