A report from the San Francisco Chronicle in California. “Redfin agent Andrea Chopp said while so many buyers have been priced out of the market, she thinks it’s actually a great time to buy — if you can afford it. ‘A lot of [homes] are just sitting now. There’s no competition. Where there might have been competition a few months ago, now you have interest rates, high gas prices, inflation and people have just stopped,’ Chopp said. ‘Buyers right now have the most power they’ve had since I’ve been doing this.’”
“Chopp, an agent since 2015, said some of her sellers are considering renting their properties given how long it’s taking to get an offer. She said sellers have had to adjust their expectations and be prepared for a lower price than they were anticipating and even accept contingencies. ‘Now all of a sudden three weeks on the market and sellers are freaking out. That’s normal in the rest of the country,’ Chopp said. ‘Contingencies were impossible before.’”
“There is typically a slight summer slowdown in the housing market, but the past few weeks have been jarring. ‘It’s like it just stopped. Buyers have completely disappeared,’ Chopp said. ‘Since I’ve been doing this, it’s never been this slow.’”
“‘When you look at the typical home value in San Francisco at $1.5 million, that’s up significantly, about 30%, since before the pandemic. When you also couple the interest rate hikes with that, you’re looking at thousands of dollars more a month in a mortgage than even just a year ago,’ said Nicole Bachaud, an economist with Zillow. ‘Using that example and looking at a 3% interest rate versus a 6% interest rate, that’s more than a $2,000 difference. That’s more than most people’s mortgages across the country.’”
The Washington Post. “We asked Craigh McCullough, principal for the Catalyst Group at Compass real estate in D.C., for advice for sellers in a hurry. Q: Are sellers still getting multiple offers? Is there a strategy they’re using to encourage that? McCullough: Sellers should no longer expect multiple offers. It’s still happening, but with much less frequency. The only way to encourage this is to price low, but you also risk only one offer coming in at the low price. Right now, patience and realistic expectations are key.”
From Forbes. “For Pamela Grunstein, a real estate agent in Westchester County, New York, it felt like the housing market went from hot to cold in the span of only a week. The phone, which often had been ringing off the hook, she says, began to ring just a few times a day. Open houses had been attracting dozens of prospective buyers, and suddenly, some had zero traffic. Like Grunstein, many real estate agents across the country say they have seen housing market activity suddenly come to a halt. So, what happens next?”
“‘This is a time of nervousness,’ says Drew Coleman, owner of Opt Real Estate in Portland, Oregon.’Twists and turns are confusing.’”
From Bloomberg on New York. “Manhattan’s hot real estate market is starting to cool. After more than a year of frenzied sales that moved quickly and often above asking price, ‘there’s no more fear of missing out,’ said Kimberly Jay, an Upper East Side-based Compass Inc. agent.”
The Dallas Morning News. “Zillow Group Inc. will lay off 55 employees in Texas as continues its exit from the home-flipping business. The company began the layoffs with 33 employees in January and will continue with the remaining employees in phases lasting until August, according to a notice it filed June 17 with the Texas Workforce Commission. The notice said the layoffs are due to the elimination of its Zillow Offers business, an iBuying service through which Zillow bought, fixed and sold homes for profit in major markets such as Dallas-Fort Worth.”
From Candy’s Dirt. “On June 24, Plano lender First Guaranty Mortgage notified more than 400 of its employees during a virtual call that they no longer had jobs at the company. According to the company’s WARN Act filing with the Texas Workforce Commission, the mass layoff was the result of ‘significant operating losses and cash flow challenges due to unforeseen historical adverse market conditions for the mortgage lending industry, including unanticipated market volatility.’”
“First Guaranty isn’t the only mortgage firm that is shedding jobs as quickly rising interest rates force the real estate market to cool. According to Bloomberg, JPMorgan laid off 1,000 employees from its home-lending division. Insider reported that Wells Fargo cut hundreds of employees in April after its mortgage revenue cratered by more than a third, year over year.”
“However, the nature of the layoffs — and some candid statements from former employees — suggest that First Guaranty might have had trouble brewing of a different sort. In a report from National Mortgage Professional, PIMCO — short for Pacific Investment Management Company — bought into First Guaranty in 2015. Former First Guaranty employees cited the loss of this significant investor in March as the likely cause of the layoffs. Some employees in the Friday meeting were suspicious as they had just received pay stubs the day before with additional payouts for accrued paid time off.”
“The layoffs follow the recent launch of First Guaranty’s “Second Lien Program,” which allowed homeowners to access equity without affecting their rates. Dubbed “Explorer Equity,” the program was modeled after similar programs offered by competing firms:FGMC’s Second Lien Program, known as Explorer Equity, is currently limited to a Stand-Alone offering; however, the company plans to expand to offer a piggy-back option quickly. Also, with flexible guidelines and expanded credit parameters like a minimum credit score of 680, up to 100% combined Loan-To-Value (LTV), allowance of owner-occupied or second homes, and the ability to qualify despite past bankruptcies, this program increases loan accessibility for borrowers who may not otherwise qualify.’”
The Delta Optimist in Canada. “A wintry summer is brewing for B.C.’s real estate market with soaring interest rates drastically reducing buyer purchasing power while sellers clamber for yesterday’s prices. Sales declines were observed in most regions of the province. Specifically, the real estate boards of Chilliwack (-25 per cent) and the Fraser Valley (-20 per cent), which covers Abbotsford-Mission and eastern communities of Metro Vancouver, including Surrey, led the drop in sales while the rest of Metro Vancouver fell 18 per cent. Vancouver Island fell 18 percent.”
“Declining sales are contributing to a quick moderation in market conditions. Fewer sales and steady new listings lifted active listings in the province for a fifth straight month with inventory on the rise in most markets. Sales-to-active listings ratios remain in a range consistent with a sellers’ market, but the rapid decline suggests markets are nearly balanced, with the potential to move into a buyers’ market range.”
“At $980,324, the average price fell 4.7 per cent from April and marked the first sub-million-dollar reading since November. Consistent with sales, declines were deepest in Chilliwack (-4.3 per cent) and the Fraser Valley (-6.7 per cent), although average prices eroded in most real estate board areas.”
From Bloomberg. “Asian junk bond investors are increasingly looking to smaller pockets of the market as a debt crisis among the biggest issuers, Chinese property developers, forces old playbooks to be rewritten. Chinese real estate notes had long been one of the world’s most-profitable trades. But a record string of defaults has ruined appetite and caused the nation’s junk notes to tumble almost 27% in 2022. Meanwhile, a worldwide debt rout has created a game of losing less.”
“‘The implications of the systemic default wave out of China property are grave,’ said Dhiraj Bajaj, head of Asia fixed income at Lombard Odier in Singapore. ‘The swift changes in policy, significant amounts of hidden debt by swathes of private companies, lack of debt resolution mechanisms when defaults happen, and inherent bias toward subordinating offshore bondholders won’t go unnoticed and unforgotten for perhaps a decade or two.’”