A report from Bloomberg. “Zillow’s market cap approached $US50 billion, making CEO Rich Barton’s stake worth more than $US1 billion. In late August 2021, he boasted to investors that customers’ biggest complaint with Zillow Offers was it was too good to be true. In September, the company issued $US700 million worth of home-flipping bonds, signalling a long-term commitment to the business.”
“Although he once viewed iBuyers as market makers, he came to feel as though he was borrowing huge sums to make risky bets. ‘We were doing something that was clearly a potential ‘Long-Term Capital Management’ kind of thing,’ he says, invoking the hedge fund that crashed spectacularly in 1998. ‘After the new shit came to light,’ Barton says.”
“The task of breaking the news to employees was left to Arik Prawer, the executive Zillow hired to oversee the home-flipping operation. ‘Don’t cry because it’s over,’ Prawer said, quoting a line commonly attributed to Dr Seuss. ‘Smile because it happened.’ This was, for many, tough to swallow. Barton had spent the previous three years hyping iBuying, saying his company was revolutionising a broken housing market with a service that was as appealing as ‘free beer at a college party.’ Now it was, what? Kombucha?”
From Politico. “‘It’s going to do damage to the housing market for sure,’ Mark Zandi, chief economist at Moody’s Analytics, said of rising rates. ‘There’s a lot of downside risk here; when you’re in a world of flat to falling prices, you are vulnerable and things could go off the rails. When prices start falling, things can take on a life of their own.’”
The Real Deal. “A luxury condo project overlooking the Hudson is headed to auction in the latest example of a Chinese developer facing distress in the U.S. amid tighter oversight back home. Lender Parkview Financial has initiated a UCC foreclosure sale for the equity interests in a 282-unit development in Weehawken, New Jersey, planned by the American affiliate of Beijing-based Hongkun Group.”
“But Hongkun’s plan ran into trouble around the time Chinese regulators began cracking down on excessive borrowing and poor liquidity ratios of the country’s real estate developers. Megadevelopers such as Oceanwide Holdings have been forced to sell or abandon real estate projects in the U.S. in order to comply with new debt controls. China’s property market has also weakened, harming developers’ revenues.”
The Olympian in Washington. “The number of Thurston County homes that sold in April was down 12 percent from the same month a year ago, a sign that the market is reacting to some new economic pressures. ‘The reality of it is it’s slowing down,’ said Van Dorm Realty’s Torie Robinson. ‘It’s not as chaotic as it was and inventory is growing.’”
From WNEP in Pennsylvania. “Justin Weber says he’s never seen anything like it before. Weber owns Mountain to Valley Home Inspections based in Mountain Top. The service he provides is one many homebuyers are doing without these days. ‘It’s really going to be putting people in a bad position. I think in a couple of years, when they find out, you know, what’s really in their house.”
“Weber worries we’re going to see a lot of buyers’ remorse in the coming months, even years. ‘We’re already starting to see some of that, you know, with articles that are coming out, and new stories of people that have waived the inspections that are kind of going in blind, and then they’re getting hit with these really large bills. Hopefully, it’ll break loose soon, but as for right now, that’s kind of the market that we’re in.’”
The Toronto Star in Canada. “Harry Sarvaiya knows how recent homebuyers are feeling now that prices are dropping. Tired of waiting for a break in Toronto’s hot pandemic market, the real estate broker bought a four-bedroom bungalow in March, near Martin Grove Road and Westhumber Boulevard in Rexdale for $1,285,000.”
“Now, the realtor of 12 years is looking enviously at the declining market as he approaches his June closing. Other bungalows in the area are now going for $1.1 million. ‘I still think if I waited, I would have got (a house) a little bit cheaper and I would have more choice,’ said Sarvaiya of Re/Max West Realty Inc.”
“He’s not alone. As Toronto’s scorching real estate market has finally hit s cool-down, buyers who bought at the peak are sharing their woes on social media, while real estate agents and mortgage brokers report a growing number of stories of remorse. Some who bid high in the heated market are now wondering if they jumped the gun. Others who are nearing closing day are facing mortgage shortfalls as their home values drop, leaving them scrambling to scrape together funds. “
“‘Bigger and better houses are selling in the same price where we ended up buying a townhouse and sacrificed … our dream house dreams,’ said one first-time buyer on social media. Another who bought a house for $1.3 million saw bigger homes sell in the same neighbourhood for $1.1 million. ‘I’m feeling stressed and wanted to get out of this deal though I have no option left other than forfeit my deposit,’ the buyer wrote in a post shared by a realtor.”
“‘It’s kind of scary,’ said Shay Asnani, a realtor with Right at Home Realty. ‘Some people are feeling a little remorse for buying when things were super crazy. ‘”
A press release. “A Toronto-based property management company operating across Ontario and Europe, Royal York Property Management, has announced up to a $500 per month supplement for ‘struggling landlords’. Founder Nathan Levinson stated that the offer was aimed at alleviating the stress of property investors amidst a worsening economic environment. Mr. Levinson said, ‘It has been a very difficult time for most landlords. Property owners are concerned that the interest rates will significantly increase within the next 18 months. This will cause an inevitable drop in the real estate market, with many owners unable to make their mortgage payments.’”
Domain News in Australia. “Historically, changes to the cash rate had taken multiple months to have an effect, AMP Capital chief economist Dr Shane Oliver said, but the lag has narrowed as very high prices and debt-to-income ratios made the market more sensitive to interest rate changes. ‘Traditionally, it takes a while for higher interest rates to hit because they’re usually offsetting good news with higher employment and rising wages,’ Oliver said, adding there had been an eight-month lag between the first rate hike back in 2009 and weaker prices. ‘The complication this time around is that fixed [mortgage] rates played a much bigger than normal role in driving the boom in first place.’”
“Record-low fixed mortgage rates had been a key driver of the boom, Oliver said, making up a far greater share of lending than usually seen. But they had bottomed out last year and climbed rapidly since, reducing borrowing power ahead of any official cash rate hike. ‘The key impetus behind the boom in property has now reversed,’ he said. ‘New buyers are ending up with far less capacity to pay than a year ago, and that’s even though we’ve only seen one move by the RBA. I think the impact will show up a lot faster [as a result].’”
“Sydney sales agent Matthew Hayson said buyers were looking more intently for what they perceived as value, and had become more fearful of overpaying as forecasts for rising interest rates and falling property prices made headlines. He felt expectations for multiple rate hikes were already taking a toll, and would have a material impact on the market when they eventuated. ‘That frothy 10 to 15 per cent growth that came on top of prices in the last 18 months … I think that is going to evaporate quite quickly, that it will go in the next six months.’”
From Voxy in New Zealand. “The latest QV House Price Index shows the housing market is under increasing pressure from rising interest rates. Loan affordability constraints are limiting buyers, and those who are in the market are spoilt for choice as listing levels far outstrip demand. QV General Manager David Nagel commented: ‘It’s no surprise that the largest declines are occurring in locations that experience the strongest growth over the past couple of years. These markets were the first to become overheated and that makes them more susceptible to a value correction as rising interest rates, tightening credit and affordability concerns start to kick in.’”
“‘Falling attendances at open homes and declining auction clearance rates have been well publicised, demonstrating a swing in the balance of power between vendors and purchasers. Developers are feeling the pinch, especially in Wellington and Auckland, with off-plan sales quotas not being met, compounding the impacts of materials and labour shortages,’ Mr Nagel said.”
“‘A big part of the three month value reductions occurred in late March and April so we expect to see a gradual escalation of value declines in the coming months as vendors wanting to sell their properties are forced to meet the market. This is a trend that’s likely to spread across all of New Zealand as listings continue to outstrip demand in the majority of New Zealand towns,’ he said.”
“Local QV registered valuer Hugh Robson commented: ‘With rising inflation and rising mortgage rates, the latest statistics indicate a 2-3% decline in sale prices. The volume of sales for April was also down, which is a significant indicator that buyers are no longer prepared to pay the high asking prices that were being achieved in 2021 and early 2022.The ‘fear of missing out’ (FOMO) has diminished significantly. Vendors need to accept the market has now shifted in favour of the buyer if they want to secure a sale.’”
“QV property consultant Derek Turnwald said Tauranga’s peaking property market was old news for increasing numbers of sellers. ‘There are more and more properties coming to market as owners who have held off until now realise that the market has reached its peak. Listing periods are also extending as supply increases and demand decreases,’ he said. ‘Demand for housing of all values has declined and is now generally subdued. It is a buyers’ market now, with agents also experiencing noticeably less interest from Auckland buyers.’”