You keep waiting for the other shoe to drop in today's news that mortgage applications swelled to record heights last week.
And you didn't have to wait long:
The...data is only for submitted applications, not closed loans, so a good amount may get rejected because qualifying standards are tighter and many applicants will probably find they do not have the equity to refinance given the decline in home prices.
Indeed. But the good news seems to be that people want to buy homes, even if they lack the financial means to do so.
From a story titled The Future For Home Prices from Tuesday's Wall Street Journal:
So, as homeowners and buyers look ahead, what factors will determine whether their homes are really likely to rise in value, rather than just in their dreams? What are some of the bullish signs -- and some of the bearish ones?
In the long term, house prices are driven by fundamentals that are hard to predict: immigration, birth rates, the size and nature of households, and incomes. The trick is to figure out where job and income growth will be strongest and where immigrants and others will want to live.
William Frey, a demographer and senior fellow at the Brookings Institution, a think tank in Washington, says young people and immigrants are likely to flow to Florida, Georgia, the Carolinas, Tennessee, Virginia, Nevada, Arizona and some of the more affordable interior parts of California.
These areas generally have lower housing costs than the Pacific Coast or Northeast and job growth from modern industries and leisure businesses, he says. Areas with little immigration and low growth or falling populations are likely to include Michigan, Ohio, the Dakotas, Iowa, western Pennsylvania and upstate New York, Mr. Frey says.
Thanks to cheap foreclosure properties, home sales may be increasing along the Tampa-Orlando axis, but we still suffer disproportionately from an excess of empty new homes. Here's the latest comment from Metrostudy, which tracks the home construction business down to the subdivision level:
The markets that have the most serious problems are Central Florida, with 8.9 months of finished, vacant home inventory, South Florida, with 8.3 months, Atlanta, with 8.1 months, and Coastal Los Angeles and Naples/Ft. Myers, each with 8 months. These readings are all far in excess of the “equilibrium” level of 1.5 to 2.5 months that is typical in a normal market.
They're still building houses in my suburban subdivision, even though a bunch of houses completed 2 years ago still sit empty. Just goes to show that if the price is right, many buyers prefer to build from scratch, even if the older places have never been occupied. While that's not doing much to reduce the housing glut, it helps keeps tradesmen employed, no small matter in the recession.
In case you missed it on Sunday, here's an excellent story about a Tampa housing fiasco by Times reporter Michael Van Sickler.
It's all about the unhappy collusion between greedy hear-no-evil-see-no-evil bankers and street criminals supposedly going legit through real estate "investing." Multipy this case study a few thousand times and you've got the mess we're experiencing now.
Interesting quote from a loan officer at a major Tampa mortgage lender:
"We had quotas we had to meet," Albury said. "We didn't have time to look at them."
After half a year of crunching numbers, it's safe to say that home sales in the Tampa Bay area have stabilized. October sales were up 11 percent year over year, from 1,814 in October 2007 to 2,021 in October 2008
That's the good news. But you already know the bad news.
About a third of the transactions involved bank-owned or other foreclosure properties. That partly explains the steep decline in the median home sale price the past year. The Tampa price fell from $205,600 to $152,300.
Let's call it "unstable stability". The phenomenon is statewide if you exclude northern Florida markets largely exempt from the early stages of the housing bust in 2005-06, but catching the worst of it now. Thirteen of 20 markets covered by the Florida Association of Realtors reported rising sales in October.
Here's a state chart from the Realtors.
The housing slump and economic downturn have taken the itch off Alico Inc.’s plans to develop much of its 136,000 rural acres in South Florida.
The citrus and cattle behemoth announced this week that it will "maintain its focus on its agriculture operations" and "delay any material effort to expand into income producing real estate."
To solidify its change of focus, Alico replaced president and chief executive Dan Gunter, a development proponent, with Steven M. Smith, Alico’s former head of agricultural operations.
Alico, with land in Collier, Glades, Hendry, Lee and Polk counties, took shape under the leadership of Florida land baron Ben Hill Griffin Jr., until his death one of the world’s richest men.
His descendents planned to cash in much of the land for development until the recent downturn forced them to defer those ambitions. (One of his Griffin's granddaughters is Katherine Harris, former Florida Secretary of State and ex-Congresswoman from Sarasota)
One of the most shocking maps I've seen in recent years was a projection of what South-Central Florida would look like in a couple of decades. Splotches of homes, tens of thousands of them, blanketed what now is orange groves, swamps and cattle pasture. It was all split by a new super highway running somewhere between Fort Myers and Lake Okeechobee.
That all might still happen, but the fast track now looks rutted enough to swallow a wagon wheel.
We're blue in the face from repeating this, but housing is one of the most incentivized industries in the country. We've got low interest rates, the mortgage interest deduction, Florida's Save Our Homes law, downpayment assistance for low income buyers, etc. It's not stopping builders from demanding more. Here's a snippet from today's Wall Street Journal Online:
A bustling stock rally ground to a halt Tuesday following new signs that the housing market remains under heavy pressure.
New data from the National Association of Home Builders were particularly worrisome. The organization said on Tuesday that its November index of new, single-family homes fell to an all-time low of 9, down from 14 in October.
"Today's report shows that we are in a crisis situation," said NAHB Chairman Sandy Dunn, a home builder from West Virginia. "If there's any hope of turning this economy around, Congress and the (Bush) Administration need to focus on stabilizing housing."
Ms. Dunn said uncertainty about the economy has driven consumers from the housing market.
"It's going to take some major incentives to bring them back," she said. She argued that Congress should pass new economic stimulus legislation that includes new home-buying incentives.