A report from the Patriot Ledger in Massachusetts. “‘Since the prices have gone up so quickly, there’s a lot of people that don’t qualify,’ said Iva Sandra Andrade, a Brockton-based Realtor who joined the real estate industry in 2015. ‘And now, with interest rates going up as well, it knocked out a bunch of people that could’ve qualified a couple of months ago.’”
“It’s happening all across the U.S., said Rose Quint, the National Association of Home Builders’ assistant vice president for survey research. The share of active buyers in the Northeast region fell from 72% to 50% during the last year. Ben Perrotta of Norwell-based Ben and Kate Real Estate said he recently had an entry-level buyer lose out on a house to a higher offer. When the winning couple went to the bank to secure their loan, interest rates priced them out of the home they’d agreed to buy.”
“‘Housing prices are going to stop skyrocketing, they are going to level out. They’re going to calm down and they’re going to calm down quick,’ said Quincy-based real estate agent Jeffrey Chubb. ‘But the issue is that the cost of borrowing has greatly increased. That’s what is really affecting buyers right now.’”
From Bloomberg. “Treasury traders are throwing down the gauntlet to a Federal Reserve that’s fallen further behind in its fight to cool the hottest inflation in four decades. A bruising bond selloff ensued Friday, led by policy-sensitive short-term yields, after May data dashed any idea that inflation has peaked. The rout deepened when traders boosted bets on the likelihood of the Fed raising rates by three-quarters of a percentage point in July, while economists at Barclays Plc and Jefferies LLC say this move could come as early as next week.”
“Even in a year when daily moves of 10 basis points have become commonplace, Friday’s price action stood out and harked back to levels seen in the era of the global financial crisis. The two-year yield’s 25-basis-point advance was the most since 2009, while five-year yields exceeded the 2008 levels seen in May.”
The Coeur d’Alene Press in Idaho. “According to Rocket Homes, the Kootenai County median home price plunged 31% from April to May. And yet, that still left the price at $521,000. Assuming you still need 20% down to walk through that median-type door, you need the wherewithal to write a check for $104,200. Let’s see a show of hands: How many of you could do that?”
From Main Street on Tennessee. “There are signs of some relief on the horizon for potential homebuyers in the larger Nashville area. The May Home Sales Report by Greater Nashville Realtors shows a staggering 47-percent increase in single-family inventory — a sign of a shift happening in the market with more home choices, fewer multiple offers, and terms that won’t keep you up at night.”
The Reno Gazette Journal in Nevada. The record median home price was accompanied by a significant year-over-year increase in new listings as concerns about rising interest rates pushed more sellers to put their homes on the market. Reno-Sparks reported 735 new listings, up by more than 18% over May of last year. Active inventory also doubled to 785 compared to 376 during the same period in 2021.”
“‘Higher mortgage rates are causing buyers to take a step back from trying to purchase a home,’ said RSAR President Sarah Scattini. ‘While mortgages are on the rise, we’re seeing an influx in homes being put on the market due to sellers wanting to take advantage of the red-hot housing market before a potential cool down, so inventory is growing more rapidly.’”
The Center Square. “Rising interest rates helped temper Colorado’s red-hot housing market in May, but affordability challenges remain, according to the latest market report from the Colorado Association of Realtors. Overall, Colorado saw a sharp increase in housing inventory with more than 11,000 new listings created by the end of last month, representing a greater-than 10% increase year-over-year. This increase of inventory helped usher the state’s median home price back under $600,000.”
“‘Affordability is far beyond what the local population can support,” Patrick Muldoon, a Colorado Springs-area realtor, said in a statement. ‘In the past, housing was a hedge for inflation. But this is a very different time.’ ‘Mortgage interest rate hikes and fears of continued inflation have put many buyers on pause,’ Chris Hardy, a Fort Collins-area realtor, said in a statement. ‘Buying a home at an already escalated price is just that much farther out of reach.’”
The Mountain Democrat in California. “Everyone must have known that the pandemic and the demand for homes it created was not sustainable. The deceleration process is often stressful for sellers and their agents who find themselves in an environment of fewer and more cautious buyers, declining values and lower expectations. Whenever we experience a significant event that changes our reality it initially creates denial, then anger, depression and eventually we reach acceptance.”
“We may not like the situation but we accept our fate and make decisions accordingly. Understanding the current market is the first step in accepting the pandemic housing sales boom is over. Sales are in decline. There were 270 residential sales in El Dorado County during May. A year ago, there were 332. The 13% drop was not an anomaly. It was the third straight month for year-over-year declining sales. Last year’s sales would have been higher if we had more listings. This year we have more listings but there are fewer buyers and listings are taking longer to sell.”
“Sellers are responding to decreasing buyer demand by reducing their asking price. In May 2021 not a single seller dropped their initial listing price. Last month, 202 sellers or 42% of county listings reduced their asking price. Lower price expectations will likely continue as buyers get hammered with higher mortgage rates this summer.”
“Although the number of county listings increased 23% during the first quarter of this year, sales declined. Buyers have lost that ‘Lovin Feeling.’ A recent Fannie Mae survey revealed only 19% of homebuyers believed it was a good time to buy, down from 47% a year earlier.”
The Dallas Business Journal in Texas. “Frisco has fallen 42% for the year. Celina’s slid 34%. Prosper has plunged 17%. Princeton and McKinney are down 14% and 11%, respectively.Those percentages represent the year-to-date drop in single-family home building permits compared to the same January through May period last year. While there are exceptions — like the city of Anna, where building permits are up 22% over last year through the first five months of 2022 — the double-digit percentage decreases point to an overall slump in the suburbs.”
“Nowhere is that more visible than Frisco, which racked up 1,283 single-family permits in the first five months of 2021 but issued only 745 so far this year.Celina issued 1,352 permits in Jan-May 2021, but just 887 so far this year.In Frisco, the single-family market is reaching buildout status, said Dennis Pitt, senior vice president of Gehan Homes, which has new residential communities opening this month in Prosper and Fate. ‘When you go up the Dallas North Tollway and you hit Plano and Frisco and Prosper, then Celina, what you see is so many subdivisions going on in, like, Frisco, that go back to 2014. The number of deals in Frisco was very, very high,’ he said.”
The Toronto Sun in Canada. “Over the span of 10 days, it would now appear everyone and their mother has decided that real estate Armageddon is upon us. The very same people whom, up until about seven minutes ago, were insisting that everything was fine, just fine. The signs of a market shift were obvious, dare I say expected. After all, what goes up must come down. In a market driven for the last two years by consumer exuberance and fuelled by free money, the party wasn’t going to last forever.”
“It’s not complicated — it’s interest rates. And now the party is over. It went on for far too long, if you ask me. There’s lots that can be said about it and trust me when I tell you that I could go on for days. I have spent much of the last few weeks on the phone with clients and colleagues as we attempt to collectively unpack and reconcile everything that we are hearing, reading, witnessing.”
“We have May’s market stats showing that while prices are still up year-over-year, almost every sub-market is in its third month of decline from the February peak. Outside of the city is being hammered. We have wall-to-wall media coverage telling us just how much more we should expect to pay to service our debts as interest rates rise. Articles chastising us for our collective embrace of home equity lines of credit as if they weren’t products designed and dealt by our banking system that likely carried many Canadian families through the multiple rounds of pandemic lockdown.”
“But it is Thursday’s release of the Bank of Canada’s Financial System Review that really has me fired up. It’s hard to overstate just how wholly infuriating it is to witness the same body that set the fire act like turning around and setting the fire hose on us is an act of benevolence. After all, it was just July 2020 when the Bank of Canada’s Tiff Macklem all but lit the match that sparked the pandemic real estate boom.”
“‘Our message to Canadians is that interest rates are very low and they’re going to be there for a long time,’ Macklem said. ‘If you’ve got a mortgage or if you’re considering making a major purchase, or you’re a business and you’re considering making an investment, you can be confident rates will be low for a long time.’”
“I mean, ‘a long time’ is certainly subjective but to less than two years later be talking about aggressively taking us back to rates not seen in a decade is a pretty stunning about face. To dig in and resist the inevitable for as long as they did, only to abruptly change course and go hard at rate hikes is quite a play. But with billions of freshly printed dollars having flooded the Canadian economy and inflation running out of control, what else can be done? Who cares that the most leveraged and therefore most vulnerable are the young Canadians who have been completely hung out to dry with all of zero good options.”
“But now Macklem and the Bank of Canada feel differently: ‘The economy can handle — indeed needs — higher interest rates. And given the unsustainable strength of housing activity, moderation in housing would be healthy. But high household debt and elevated house prices are vulnerabilities.’”
“Well, we are about to witness what happens when those vulnerabilities come home to roost. And while I still am not convinced we are going to broadly experience anything close to a crash, you can absolutely bet on the fact that yet again, it will be the little guy who bears the brunt of whatever lies ahead.”