A weekend topic starting with Tech Crunch. “You could hardly blame people looking to sell their startup shares, or those looking to buy them, for feeling unsure about where to meet on price, and that’s exactly what’s happening right now, says secondary market experts like CEO Kelly Rodriques of Forge Global. In fact, Rodriques says, on Forge, a trading platform for private firms’ shares that went public earlier this year via a SPAC, the ‘supply of private shares right now is higher than it’s ever been in history — by a lot.’”
“Justin Fishner-Wolfson cofounded and oversees 137 Ventures , a San Francisco-based firm that offers loans to founders, executives, early employees and other large shareholders of private, high-growth tech companies in exchange for the option to convert their debt into equity, and he notes that valuations in the private markets are ‘slow to change’ because ‘people are waiting to see what things are actually worth.’”
From Bloomberg. “They are creations of easy credit, beneficiaries of central bank largesse. And now that the era of unconventional monetary policy is over, they’re facing a challenge like never before. They are America’s corporate zombies, companies that aren’t earning enough to cover their interest expenses, let alone turn a profit. From meme-stock favorite AMC Entertainment Holdings Inc. to household names such as American Airlines Group Inc. and Carnival Corp., their ranks have swelled in recent years, comprising roughly a fifth of the country’s 3,000 largest publicly-traded companies and accounting for about $900 billion of debt.”
“Now, some say, their time may be running short. ‘When interest rates are at or close to zero, it’s very easy to get credit, and under those circumstances, the difference between a good company and a bad company is narrow,’ said Komal Sri-Kumar, president of Sri-Kumar Global Strategies. ‘It’s only when the tide runs out that you figure out who is swimming naked.’”
From BoiseDev in Idaho. “Real estate assessments continue to rocket up to record levels around the Treasure Valley, but last year a group of nearly 20 of Boise’s most exclusive condominiums saw drops in assessed value — and their property tax bill along with it. Appraisal Division Manager Erin Brady said this situation demonstrates how the process to determine the value of a property isn’t an exact science.”
“‘Seven different appraisers could develop 7 different value-estimates for a single property, using the same sales information as of the same date (although you would hope their conclusions would at least be close to each other),’ she wrote to BoiseDev in an email. ‘There isn’t one mathematically correct answer to ‘what is value.’ Our goal is to just stay within what can be shown to be a range of value.’”
From KLIX in Idaho. “Housing starts in Twin Falls are down. A garage door salesman told me he does business with a lot of developers in Twin Falls and Cassia Counties. Builders are starting to see a slump in the market. It’s not to say we’ll see a sudden stop in growth, but the pace is likely to begin to ramp down, even as housing prices begin to drop. The price of lumber has been halved since March! Interest rates are climbing and discouraging some home buyers. The market was also likely in for a correction after running hot for two years.”
The Charlotte Observer in North Carolina. “The number of new listings in Charlotte was up in April, rising 14.3% from 4,666 listings in March to 5,331 in April. Charlotte’s ‘active inventory’ — the number of properties for sale — was up 43.7%, from 1,826 in March to 2,624 in April. Those figures line up with national trends, according to RE/MAX. Nationally, there was ‘an 11.5% increase in new listings from March to April, (that) resulted in a 24.0% surge in inventory month to month,’ the report said.”
“Roger Berrey of RE/MAX Executive-Charlotte said he and his colleagues are ‘starting to feel a slight shift’ in the Charlotte market, with some homes getting ‘only 2 or 3 offers after 7 to 10 days’ rather than the ’10 to 15 offers received in the first two days on the market’ they had been seeing.”
From KGVO in Montana. “KGVO News reached out to Missoula Realtor Brint Wahlberg with Windermere Realty. ‘You can sense that the winds of change are coming into this market,’ he said. ‘That means sometimes houses are having to spend a little more time on market, which wasn’t the case in the last two years; or people are having to do a small price reduction or a couple of price reductions to get the contract but they’re still doing quite well in terms of median sales price.’”
The Weekly Packet. “An increase in inventory at the national level could be a harbinger of things to come in Maine. There are already signs that the housing market in the state is cooling, including falling sales and less competition for listings. ‘The boom is over, but the market is still incredibly active,’ said Morgan Eaton, who owns The Island Agency in Stonington. Hank De Raat, who owns De Raat Realty in Castine, sees the market beginning to ebb. ‘We just crested,’ he said.”
“Additionally, COVID-19 refugees unfamiliar with Maine bought homes inland off the internet, he said. They brought new eyes to the region and were less critical than people who summered in the coastal communities, he said. ‘Someone looks at something [on the internet] with a 30-foot by 20-foot living room, fancy appliances and 20 acres, and they don’t understand they’re in the middle of nowhere, they don’t understand why 1,100 square feet in Stonington on the coast goes for the same price.’”
The Denver Post in Colorado. “Price gains flattened and the inventory of homes available for sale continued to rise in May, early signs that the gravity of higher mortgage rates might be finally starting to pull metro Denver’s housing market back to earth. The inventory of single-family homes available was 111.6% higher than a year ago, while the inventory of condos and townhomes was up 11.5%.”
“‘Buyers have become more patient in their approach as the cost of money has become more expensive,’ said Andrew Abrams, chairman of the DMAR Market Trends Committee in comments accompanying the report. ‘Likewise, sellers are having to realign their expectations to sell their properties.’ More sellers are having to drop their asking price to get a sale, according to Redfin. About 17.3% of sellers in metro Denver provided a price cut in April 2021, but 26% did this April. For anyone seriously looking to sell, now is the time to act, the Seattle-based brokerage advised.”
The Napa Valley Register in California. “Yes, some sellers are reducing their listing prices. And yes, many homes are not selling in two days. But that doesn’t mean home prices are set to decline. The demand for homes continues to be greater than the number of homes available to buy. And that means there is still competition for most homes that are listed at a reasonable price. The price of owning a home accelerated dramatically for understandable reasons. Slowing appreciation of homes now is as necessary as cooling down rampant inflation is general.”
The Ahwatukee Foothills News in Arizona. “A leading analyst of the Valley’s housing market said the latest home sale data shows the market is cooling at an ‘astonishing and widespread’ rate. The Cromford Report last week observed that ‘buyers’ disadvantage in negotiations has dropped dramatically.’ ‘This is because there is much less competition from other buyers,’ it noted. ‘Many of these have dropped out due to the eye-popping increase in mortgage rates. There are also many more homes to choose from compared with a couple of months ago.’”
“The Cromford Report said ‘cash buyers remain active, but these are a much smaller part of the total demand and cannot compensate for the loss of financed buyers.’ It also said, ‘Every leading indicator is pointing to a sharp slowdown in the Greater Phoenix housing market. Supply has increased very quickly over the last two months while demand is much weaker than it was in March.’ It also suggested it may not be long before prices begin to weaken, though it warned, ‘Prices are much slower to react to a change in the market, especially closed sale prices.’”
“‘However, prices for homes under contract react one to two months earlier than closed prices,’ it said and if that occurs sooner ‘would expect to see weakness in asking prices. This is now starting to appear as sellers gradually lose confidence.’ ‘Some sellers will be in denial for many months yet, and will risk over-pricing their home in current market conditions,’ it said. “Others will be more reactive and make sure their asking pricing is competitive.’”
“And it warned, ‘The Greater Phoenix market continues to provide plenty of reasons to be worried. Another domino is wobbling and looks like it might be getting ready to fall – the listing success rate.’ ‘At the moment we are just under 90%, a very strong number. However, if we look at the last five weeks, a clear weakening trend has started.’ It gave a chilling reminder of the pre-crash market in 2005, when ‘a similar trend developed between June and July.’ ‘By the end of 2005 we were down to just 63% – meaning that 1 in 3 homes listed failed to sell. We cannot say this will happen in 2022,’ it said.”
“‘2006 was a full-scale bubble burst,’ it said. ‘People now talk of the 2008 crash, but that was only when Wall Street woke up and entered a full-on panic. The real estate market was in dire straits as early as the middle of 2006 and 2007 was truly dreadful.’”
“‘They should be motivated to protect rather than abandon that equity,’ it continued. ‘That gives us a reason to be less worried, but extreme vigilance is the order of the day. Those who refinanced and took a little too much cash out over the last two years are more exposed than most. Our primary leading indicator is telling that us that the cooling trend is getting even more powerful. …At some point we would expect the nose-dive to decelerate and reach an equilibrium, but we seem to be a long way from that point at the moment.’”
From Global News. “New Brunswickers shouldn’t expect to see price drops similar to places like Greater Toronto despite the Bank of Canada latest interest rate hike, says economist Richard Saillant. New Brunswick’s real estate situation is unique because housing prices have been significantly less expensive than the rest of the country for quite a while, he said. ‘The Maritimes, with its low home prices, seem to be an interesting destination for the ‘southern Ontarian housing refugees’ as I call them,’ he said. ‘The last full year of data, New Brunswick has seen an explosion of population from other provinces like it’s almost never seen before.’”
“Realtor Heather FitzGerald, who has been in the business in southeastern New Brunswick for 16 years, agrees with that assessment, saying prices may plateau, but she doesn’t expect to see them come down as a result of the hikes. She has seen rate hikes discourage some buyers from entering the market as it means they may only get pre-approval for a smaller mortgage. ‘What we’re seeing is a lot of buyer fatigue,” she explained. ‘They’re in competition with 12 to 20 or plus offers and they’re getting tired of that. So they’re pulling back a little bit,’ she said, adding that even out of province buyers were also pulling back, due to some companies recalling employees to the office.”
“New home owner Christophe Goulet-LeBlanc bought his Dieppe house with his fiancée in 2021, in part, because interest rates were so low at the time. ‘Interest rates were great but the houses didn’t reflect that. So we figured we should do it now, almost like a panic-buy situation,’ he said. While he has a fixed rate mortgage that won’t be up for renewal for another four years, he said the rate hikes still cause some anxiety.”
“‘We kind of wanted to be safe but once that safety barrier is gone, are we going to be stuck with incredibly high interest rates, where it’s going to make payments no longer affordable?’ he said. ‘I have friends even in this city that are saying that they might have to sell their house,’ he added.