Wish we were over-heated, I’m done with the winter.

From the WSJ:

Report Says “False Equity is on the Rise” in Housing Market

Home prices in some U.S. markets are rising much faster than rental incomes or what it would cost to build new houses in those markets, according to a new study by a real estate valuation firm.

The growing gap between sales prices, on one hand, and rents and so-called “replacement cost” on the other is evidence of markets that are over-heating, said the report by Jacksonville, Fla.-based Smithfield & Wainwright. “The build-up of false equity is on the rise again,” the report states.

Using inflation-adjusted data, the firm concluded that recent sales prices of single-family homes in 13 states and the District of Columbia are 10% more on average than what the homes would have been appraised for using two other methods.

One of those appraisal methods is simply what it would cost to replace the homes. The other method values homes by applying a multiplier to what those houses would yield in rental income.

Since home prices bottomed out in the second quarter of 2011, the firm says, sales prices increased 13.2% on average through the third quarter of last year nationwide. Meanwhile, rent and reconstruction costs have increased by only 1.9% and 3.3% on average, respectively, the report said.

During the last housing boom, inflated appraisals helped contribute to the run-up in home prices. In December, The Wall Street Journal reported that appraisers are increasingly being pressured to inflate home valuations.

In the story, the Office of the Comptroller of the Currency expressed concern that some of the mortgages banks are giving out are based on inflated values. Freddie Mac said it had launched fraud investigations to determine whether lenders had approved mortgages backed by inflated home appraisals.

In its report, Smithfield & Wainwright compared home sales data from the Federal Housing Finance Agency with how much income homes can produce if rented out (based on data from the Department of Housing and Urban Development) and how much it costs to rebuild homes if they are destroyed (based on data from building-cost data provider Marshall & Swift.)

The gap between prices and the other two variables increased greatly during the last boom. Nationwide, Smithfield & Wainwright’s data show that home prices on average increased 36% between the end of 2000 and the end of 2006 after adjusting for inflation while rent and reconstruction costs increased 5% and 16%, respectively.

The 13 states Smithfield & Wainwright identified as the most over-heated currently are Arizona, Colorado, Idaho, Louisiana, Massachusetts, Montana, New Jersey, North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming as well as the District of Columbia.

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16 Responses to Wish we were over-heated, I’m done with the winter.

  1. Ben says:

    I forgot to mention that one of the major causes of the healthcare increase for the Montklair teachers is that they refuse to take generics. I heard this when listening in on one of the board meetings.

    I don’t doubt that this was said, but it is likely complete bs. I’ve been to board meetings where board members make sh1t up like this all the time. Don’t believe until you see all the teachers spouting it, which I doubt happened.

    The teachers aren’t this stupid. Maybe a single union leader is, but the teachers in district aren’t. Put it in perspective. The teachers making upwards of 80k are going to have to pay 30% of the healthcare. If a 32% increase is in the cards, that means they are likely going to be paying an additional $6k to $8k in a few years. They would effectively be negotiating a heavy 10% pay cut in take home cash.

    Furthermore, with the amount of layoffs you said that were on the table, for a good percentage of the union, demanding something stupid like a gigantic increase in health insurance at the expense of dozens of jobs is tantamount to suicide for the teachers facing the layoffs and union dues. That could be $50k of union dues down the drain each year. Union leaders won’t have that.

    I’ve never heard of people en mass demanding non-generics, especially when most of that money comes out of their own pocket now. Most of the teachers in my district were pissed when our union agreed to terms on a Cadillac health plan upgrade because it meant more money out of our pockets.

    There are people who benefit from an increase in health care costs. It’s clearly not the teachers. Those people are Horizon, and the admins. Horizon agents take the admins out on “meetings” to fancy dinners all the time and in other rare cases, they flat out bribe them suitcases of cash.

  2. dentss dunnigan says:

    Looks like Monmouth County found a way around the 2% property tax cap , drive out seniors plus low wage earners and absorb the coming towns responsibly to fund the states pensions that Christie is pushing for ….did I leave out anybody ….goodbye NJ

  3. The Great Pumpkin says:

    This list is a joke.

    ” The 13 states Smithfield & Wainwright identified as the most over-heated currently are Arizona, Colorado, Idaho, Louisiana, Massachusetts, Montana, New Jersey, North Dakota, Oregon, South Dakota, Utah, Washington, Wyoming as well as the District of Columbia.”

  4. The Great Pumpkin says:

    Follow the money.

    “There are people who benefit from an increase in health care costs. It’s clearly not the teachers. Those people are Horizon, and the admins. Horizon agents take the admins out on “meetings” to fancy dinners all the time and in other rare cases, they flat out bribe them suitcases of cash.”

  5. Libturd at home says:

    Ben,

    I wish there was a way to look up the details of their health plan and I’m not making this stuff up for effect. It was the BOE COO who claimed a lot of the health care cost increase was attributed to the non-use of generics. For the record, I don’t think I’ve ever taken a non-generic in my life. On my plan, the original drug will cost me $80, where the generic usually costs me $10. I’m just curious. What is your split? Heck, there was one drug a doctor prescribed for me year ago where a generic wasn’t available. I told the pharmacist to forget about filling it. It was steroid prescribed to help me heal from a horrible case of poison Sumac.

  6. NJGator says:

    Lib – He also mentioned that medical claims were up significantly this year. He said that they didn’t have an extraordinary amount of catastrophic claims, but more doctor visits, etc. The opt out crowd has actually been saying the likely cause for this is stress about the PARCC. I am not kidding.

  7. anon (the good one) says:

    unfoking real. teachers trying to keep themselves alive by going to the doctor.

    where the death panels at?

  8. chicagofinance says:

    another public appearance by clot:
    Man shot after chasing TSA agents with wasp spray, machete in airport

  9. Ben says:

    He also mentioned that medical claims were up significantly this year. He said that they didn’t have an extraordinary amount of catastrophic claims, but more doctor visits, etc. The opt out crowd has actually been saying the likely cause for this is stress about the PARCC. I am not kidding.

    The idea that PARCC would cause more doctor visits is laughable. I have to give the PARCC test to students in two days. Neither me or anyone else gives a crap. We are more annoyed that we are not allowed to work on anything while giving the test (to be read as….we would actually like to do our friggin jobs).

    I have no reason why claims are up in your town. I can give you a reason why they might be though. When a new admin comes in, they often will harass teachers when they take sick days for a “doctor’s note”. So, whenever a teacher calls in sick when they are perfectly fine, they end up going to the doctor a few days later to get the note and the visit is charged out in full by the doctor to their insurance. I don’t know if this is the reason but if it is, the way to stop the nonsense is to allow the teachers to have more 2 or 3 more personal days at the expense of sick days and not be petty about a day or two off.

  10. NJGator says:

    anon – No one is saying that the teachers shouldn’t go see a doctor. But the district can’t afford premiums that go up $5M+/year. This year the teachers are moving up to Tier 4 premium sharing, so that will offset about $1-1.5M in the extra costs, but those “savings” won’t be available next year. Salary and benefits are already 80% of the overall budget, which doesn’t leave much room to cut in other areas of the budget in order to pay for it. And this is a contract negotiation year for the MEA. The last contract gave the teachers an over cap raise. We’ll see what this one brings.

  11. Comrade Nom Deplume, The anon-tidote says:

    [9] chifi

    He thought the TSA people were Gooners.

  12. chicagofinance says:

    My 5 year old daughter has been watching too much MSNBC……. she said “daddy I need money, so I am going to make a stand at the end of the driveway…” I thought she would say to sell lemonade, cookies, or something….so I asked…..”what are you going to sell?” “Nothing, people are going to give me money….”

  13. Ragnar says:

    She can set up a stand saying “gender bias victim”.

  14. Juice Box says:

    Re: 13 – I have to hide my wallet from my 5yr old. He fills his piggy bank with what he can steal, and then we deposit it at TD bank. He will make a great banker or a politician.

  15. NJGator says:

    When the 13-Year-Old Picks a $14 Million Condo

    A year and a half ago, Skye van Merkensteijn was shooting hoops with a friend who lives at the Aldyn, a condominium-rental hybrid on Riverside Boulevard with its own indoor basketball court, climbing wall and bowling alley.

    Thirteen-year-old Skye was impressed — and envious. Well, his worldly pal told him, he just happened to know of an apartment for sale on the 21st floor.

    Skye went home, jumped online and called up a video of the property in question — a 12-room spread with a hot tub and private 37-by-15-foot outdoor pool.

    “When my husband, John, came home,” said Skye’s mother, Elizabeth van Merkensteijn, “Skye announced: ‘We’re moving and this is the place we’re moving to.’ ”

    Mr. van Merkensteijn, an investor, told his son he couldn’t afford a $14 million apartment. As for Mrs. van Merkensteijn, if you wanted her to leave the family’s eight-room apartment at the Beresford on Central Park West, she said, you were going to have to carry her out. In a box.

    Still, for a lark the couple strolled over to check out their son’s find, which, in addition to the pool and an expansive terrace, had bedazzling views of the Hudson and the Palisades. “We looked at each other and said, ‘This is unbelievable,’ ” Mrs. van Merkensteijn recalled. “The idea that you could own a place like this in New York City was amazing.”

    Skye came along to the closing a few months later.

    In New York, teens and preteens are becoming savvy connoisseurs of real estate.

    Perhaps it’s because they’re so utterly at home on the Internet. Perhaps it’s because they’re lured by online images of condo amenities like an indoor pool or a children’s playroom or because they’re fans of “Million Dollar Listing New York” on Bravo. Or maybe it’s because it’s become business as usual for children in certain precincts of Manhattan to participate in family decisions.

    “They choose where they and their parents are going to have dinner or where they’re going to go on vacation,” said Stuart Moss, an associate broker at Corcoran. “So why shouldn’t it extend to where they’re going to spend several million dollars for a residence?”

    http://www.nytimes.com/2015/03/22/realestate/when-new-york-kids-help-find-the-family-home.html?action=click&pgtype=Homepage&module=real-estate-left-region&region=real-estate-left-region&WT.nav=real-estate-left-region&_r=0

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