Is this the new, creditless home price bubble?
(Bloomberg) – Prashant Gopal – The winning bidder of a Grand Rapids, Michigan, house has been offered almost $20,000 to hand his purchase contract to another buyer. An agent in Nashville, Tennessee, got a property for his client by cold-calling local homeowners. Near Columbus, Ohio, it took a teacher five tries to secure a deal.
It’s the 2017 U.S. spring home-selling season, and listings are scarcer than they’ve ever been. Bidding wars common in perennially hot markets like the San Francisco Bay area, Denver and Boston are now also prevalent in the once slow-and-steady heartland, sending prices higher and sparking desperation among buyers across the country.
Buyers are clamoring as an improved job market and growing confidence in the economy collide with rising mortgage rates — yet there’s little new inventory for them to purchase. Housing starts remain well below levels before the last recession, and builders have focused on higher-end properties out of reach for many people. Homeowners have become even more reluctant to sell because, after all, where are they going to move?
The three months through January had the fewest homes on the market on record, according to an analysis by Trulia. Prices jumped 6.9 percent in January from a year earlier, the biggest increase for any month since May 2014, data from CoreLogic Inc. show. And homes sold faster in the first two months of 2017 — spending an average 58 days on the market — than at the start of any year since at least 2010, according to brokerage Redfin.
Low inventory of homes for sale and bidding wars for homes? Existing home sales cratered in 2012 and have remained at levels since before the financial (and housing) crisis. Yet the median price for existing home sales has skyrocketed to levels higher than the peak of the home price bubble.
But why is there so little inventory for sale? One reason is that the supply of mortgage credit to households with credit scores of less that 660 had drop precipitously by 2012.
Another reason is dreadful wage growth for the majority of the working US population.
There is a possibility of a home price bubble, but this time due to LACK OF AVAILABLE CREDIT. So, prices are being bid up but households are still not willing to put their properties up for sale.
For some buyers, patience and persistence can pay off. Jessica Streit, a 42-year-old teacher and mother of two, has been searching for months for a home in Sunbury, Ohio, north of Columbus. She lost three bidding wars and even went into contract on a home, only to back out after an inspection revealed some expensive problems. Last week, her fortunes changed — she signed a $136,000 deal for a two-bedroom condominium with a finished basement.
“We were absolutely shocked to get this one,” she said. “We had an appointment to see a rental house Saturday because we thought that would be our next direction.”
A $136,00o condo in Sunbury Ohio?????
This reminds me of Tom Haverford in Parks and Recreation expressing surprise over Jerry Gergich owning a time share condo in Muncie Indiana. “In Muncie??”