Tag Archives: housing bubble

Real Estate

Housing Bubbles?

 

Photo credit: http://www.desicolours.com/
Photo credit: http://www.desicolours.com/

DAILY REAL ESTATE NEWS | THURSDAY, SEPTEMBER 12, 2013

The National Association of REALTORS®‘ home price affordability index dropped below a long-term trend line, once again igniting fears of a housing bubble. But some experts say the worries are being blown out of proportion.

The latest reading of the index, which reflects July data, marked the lowest level of home affordability since July 2009 and the fourth month that the index has come in below trend. The index measures the household income needed to qualify for a traditional mortgage for a median-priced single-family home.

Higher mortgage rates and home prices are causing affordability to drop. Home prices have surged 13.4 percent compared to a year ago, and mortgage rates are at their highest averages since February 2012. Wages are rising — but not as fast as home prices.

The West has posted some of the biggest drops in affordability, as home prices have climbed 18.4 percent in the region in the last year.

NAR’s affordability index peaked in January at 210.7, and it has been falling ever since. It now stands at 157.8. An index reading above 100 indicates that median income is higher than needed to qualify for a mortgage. “A score of 157.8 officially indicates that a household earning the median income has 57.8 percent more income than needed to get a mortgage on a median-priced home,” CNBC reports.

But a recent paper by three economists from Robert Morris University in Pennsylvania suggests that when the index falls below trend for at least three months, it may be an indication of the beginning of a housing bubble. The economists point to the beginning of 2004, when home affordability fell below its long-term trend. Some say that marked the beginning of the last housing bubble. Housing affordability stayed below the long-term trend until December 2008, the economists note.

Housing affordability this year dropped below the long-term trend in April and has stayed there through July, CNBC reports. But even signs of a housing bubble don’t mean home prices are doomed to crash, analysts say.

NAR experts write at the Economists’ Outlook blog that housing affordability likely could strengthen in the coming months “as prices have decreased from a month ago and most likely reached their seasonal peak for the year. Even with rates increasing, certain metro areas have healthy inventory levels, and consumers can still look to purchase before those historically low rates are a thing of the past.”

Source:  “Latest Housing Affordability Data,” NAR’s Economists’ Outlook Blog (Sept. 6, 2013) and “Yep, it’s another housing bubble,” CNBC (Sept. 10, 2013)

 

 

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Real Estate

Asian Buyers Buying Homes After Avoiding Housing Bubble

A substantial number of Asians and Asian-Americans dodged the housing crunch, and now they’re taking advantage of low home prices and low mortgage rates in California, say local real estate agents and a survey from a Realtors group.

The proportion of California homebuyers who were ethnically Asian, a group whose heritage may be Asian Indian, Japanese, Chinese, Filipino, or a host of others, rose from 12 percent in 2007 to 15.8 percent in 2008 and 18.1 percent in 2009, according to the California Association of Realtors Annual Housing Market Survey.

Local real estate agents said they’ve seen the increase in Asian buyers in San Diego and Southwest Riverside counties. They said Asian buyers are typically financially conservative, and thus stayed away from the overpriced homes of the housing bubble in the mid-2000s. Now these buyers have the cash and credit to take advantage of reduced housing prices.

Leslie Appleton-Young, chief economist for the California Association of Realtors, said the change in the proportion over time was noteworthy.

“They’re buying in distressed markets and utilizing (government incentive) programs,” she said.

During the height of the boom, from 2003 through 2006, the proportion of Asian homebuyers never rose above 12 percent, according to the surveys.

Local real estate agents said many Asian buyers prefer to invest in their own small businesses, and many are uncomfortable taking on too much debt.

“Asians are very conservative when it comes to buying,” said Shonee Henry, a Realtor in Scripps Ranch and president of the San Diego chapter of the Asian Real Estate Association of America. “We don’t go out there and buy, and forget about what’s going to happen tomorrow. We tend to make sure we have enough money to support ourselves and everyday expenses.”

Henry opined that many Asian-Americans avoided buying during the peak of the boom partly also because homes were expensive.

“They might have had the down payment, but the monthly payments were too high,” she said.

Now, with the median home price down 35 percent from the 2006 peak, these buyers have cash to make purchases and put down sizable down payments.

The CAR survey said the median down payment on a house by Asian buyers was $90,000 in 2009, triple that of non-Asians. They also consistently paid 20 percent of the sales price as a down payment, whereas non-Asians put down 10 percent. Appleton-Young said Asians may be avoiding low-down-payment programs such as those offered by the Federal Housing Administration.

Source: North County Times