A weekend topic starting with KPIX in California. “Though homes across the Bay Area continue to sell for record prices, some real estate experts say the market is beginning to level off. ‘I think we’re seeing a little bit of leveling right now in the market. There’s a little more inventory, there are some price adjustments we haven’t seen before,’ said Tim Yee, a real estate broker and the president of RE/MAX Gold Bay Area. ‘Properties are staying on the market a little longer, pricing seems to have leveled and we’re seeing some price reductions which, six months ago, we never saw.’”
“Yee doesn’t think the market leveling is indicative of a crash or a major correction. ‘I think it was unsustainable, the market, the way it was,’ he said. ‘I believe the market is going to level. I think it’ll be healthy but not crazy. A ‘normal’ market is a good thing for all of us.’”
The Martha’s Vineyard Times in Massachusetts. “Maybe, just maybe, there are signs that buyers can take a moderate sigh of relief. In the past week, there were over 20 new properties listed for sale, and now over 150 properties are on the market. Days on market have settled up to an average 144 days from a low of, well you know, one. The best news might be that the past 30 days saw a 5% decrease in median price for all sold properties month-over-month back to January.”
The Toronto Sun in Canada. “For months it has felt like the ground was shifting beneath us and now it seems even the deniers among us are finally willing to say it out loud. One need only look to the wall-to-wall press coverage — the market has shifted! The bubble has burst! The end is nigh! After two years of hot, hot, heat, declining month-over-month sales data now leaves it undeniable that our pandemic real estate boom has come to an abrupt conclusion.”
“Some of the markets that surged the fastest in the early days of the pandemic are now in free fall with market data showing prices in strong decline.There are examples all over social media of homes that have seen their values drop by hundreds of thousands of dollars in a matter of weeks leaving once-happy buyers left wondering what to do as closing approaches. A real estate lawyer friend of mine is currently trying to help clients north of the city figure out how to close on their new home next month with their current home unable to sell for even close to the price it was valued at back in March when they bought.”
“And we should unfortunately expect more stories like the ones above — there are many who are going to feel the impacts of this market shift. I don’t even want to think about the preconstruction buyers who bought at the top of the market and are now on the hook for sale prices far above anything the bank will appraise.”
The Globe and Mail. “The trendiest type of home equity line of credit is in the crosshairs of Canada’s banking regulator, which is looking to curb risky borrowing as rising interest rates put added pressure on heavily indebted homeowners. The product under scrutiny is the readvanceable mortgage – a traditional mortgage combined with a line of credit that increases in size as a customer pays down the mortgage principal.”
“That sharp increase has caught OSFI’s attention. In a January speech, Superintendent Peter Routledge said readvanceable mortgages now make up ‘a significant portion of uninsured Canadian household mortgage debt.’ And while he acknowledged they can be useful financial tools when used responsibly, Mr. Routledge said ‘they can also create vulnerabilities’ for the financial system and increase the ‘risk of loss to lenders.’”
“‘HELOCs prevent a lot more defaults than they cause. The reason is simple. When times get tough and you have no fallback liquidity, readvanceable mortgages let you continue paying your mortgage,’ said Robert McLister, mortgage broker and strategist. What worries regulators is when stopgap measures turn into permanent solutions – a cycle of borrowing that the Financial Consumer Agency of Canada has labelled a ‘home equity extraction debt spiral.’”
The Daily Mail. “The Bank of England’s first ever book which vows to make learning about the economy ‘accessible’ to the masses has been branded ‘conceited’ and ‘patronising’ by critics. For £14.99, Can’t We Just Print Money? promises to explain the subject in ’10 bamboozling questions’, because ‘many of us have no idea how the economy actually works’. Other social media users mocked the title of the book, with one tweeting: ‘Can’t we just print more money… you already did that, it’s led to 7% inflation and still growing with 10% predicted by your own governor, along with apocalyptic food prices.’”
From Bloomberg. “For global investors trying to gauge the fallout from surging interest rates and slowing economic growth, Hong Kong is quickly emerging as a must-watch market. ‘What’s difficult to predict is how bad sentiment can get globally. Things could get very volatile and systems could break before people get used to quantitative tightening. Hong Kong can’t be immune to that,’ said Rujing Meng, who lectures on finance at the University of Hong Kong.”
“The city has for more than a decade ridden a wave of cheap money inflated by central bank stimulus. The result of QE has been a property bubble, with residential prices rising 237% from 2008 through a record in August last year, Centaline data show. The abundance of money meant that even when the Fed raised borrowing costs in the 2015-2018 cycle, local rates stayed relatively low. The aggregate balance — a measure of interbank money supply in Hong Kong — is about 70 times greater than it was before the global financial crisis. Now, the flow of capital is going in the other direction.”
From ABC News. “About a year ago, Chinese billionaire Sun Hongbin was certain that his luxury real estate company Sunac China would never ‘bomb.’ Last week, his firm — China’s third-largest developer — defaulted, missing the deadline for coupon payments on a $US742 million ($1.1 billion) offshore bond.”
The Daily Telegraph on Australia. “More Sydney properties are being switched from auction to private treaty as buyer sentiment shifts from fear of missing out to fear of paying too much. ‘The mood of the buyer has changed in the sense that there is less urgency for them to act,’ auctioneer Damien Cooley said. ‘The mood of the vendor is more, ‘let’s try and get our property on the market and get it sold, because if the market does tank, we don’t want to be in a position where either we have to sell or we’ve missed the boat in terms of prices.’”
From Reuters. “Former Bank of England Governor Mervyn King said on Friday that central banks including the BoE are to blame for the current surge in inflation to its highest in 40 years, after doing too much quantitative easing during the pandemic. In more recent years he has criticized the scale of central bank asset purchases, which were funded by newly-created money. ‘When you get an intellectual mistake in policy, and you allow inflation to rise, if you’re then hit by bad luck – which is what happened in the 1970s and is happening now – it becomes a very unpleasant outcome,’ he said in remarks to Sky News.”
From NBC News. “When Floyd Mayweather started touting an obscure NFT project on Twitter this year, Tyler jumped at the investment opportunity. Tyler was also looking for investment opportunities and figured Mayweather, who often calls himself ‘Money May,’ was worth listening to. Tyler, 35, a property manager whose family runs a small Miami-based trucking company, said he put together about $12,000 with the help of his mother and bought the non-fungible tokens, or NFTs, digital tokens that convey ownership of digital images.”
“Those NFTs are now worth far less than Tyler paid. ‘This basically financially crippled me,’ said Tyler, who asked to be identified by only his first name because he fears online trolls who ridicule unsuccessful NFT investors. Now, especially with inflation, Tyler said, he is struggling to afford gas for his car and groceries to eat. He said he feels Mayweather and the other promoters ‘took their payouts and moved on while everybody who scraped by to invest in their futures got robbed.’”
The New York Post. “Melvin Capital is maybe the first — but certainly won’t be the last — hedge fund hammered out of business as markets wean themselves off the heroin of cheap money that has propelled stocks and just about everything else for the past two-plus years. Hedge-fund investors, even those who run train wrecks like Melvin, do have a way of making it through tough times. They still have their homes in the Hamptons or Miami as collateral, and often much more than a few million bucks stashed away for a rainy day.”
“So don’t cry for the big guys taking it on the chin. The question is, do the average investors who became day traders in recent years and chased the bubble in crypto, meme stocks and other inflated assets deserve our sympathy? Nope. Among the biggest absurdities arising from the Fed-induced market bubble of the past two years is how many of these novice traders thought they were smarter than the market pros. They piled into stocks during the pandemic shutdowns because there was nothing better to do. And who can blame them? The Fed was pumping astronomical amounts of liquidity into the system, making stock trading a no-lose proposition.”
“It also distorted reality. Retail, armed with Reddit message-board ‘research,’ drank the Kool-Aid. The smart move if you were one of these retail types would be to realize this was a once-in-a-lifetime event, and proceed with caution. After all, anyone can be like Warren Buffett when Jerome Powell is printing money. I’m sure some did. But many more bought the fallacy that the market could only go up.”