A report from Austin Culture Map in Texas. “In June, the city’s median home price reached $615,000, a record for the month of June, but a drop from the May 2022 median of $667,000. The report highlights a 218 percent year-over-year increase in the number of active listings in the Austin-Round Rock metro area. ‘The trajectory of our market over the last two years was unsustainable and it was in no way going to last… We are now seeing a move more towards pre-pandemic sales activity and inventory,’ said Cord Shiflet, 2022 ABoR president.”
News At 10 in Florida. “Local realtors say the Tampa Bay housing market is slowing down. Local realtor, Candis Carmichael says the housing market has already adjusted to higher interest rates, meaning it’s a little more affordable to buy a home now compared to a couple months ago. ‘Adjustments of sales prices, homes that were listed 30% higher than they should have been are now listed at actual price,’ said Carmichael.”
From Deseret News. “For the first time in about two years, Utah has actually seen a small dip to its median home price. ‘Instead of a home taking a couple days to sell, it probably will take a few weeks,’ said Dejan Eskic, chief economist for the Salt Lake Board of Realtors . It’s something Eskic feels personally. He remembers the sense of urgency he felt when he bought his home in the height of the frenzy, quipping that he likely ‘spent more time deciding what running shoes to buy’ than he did considering whether to put in an offer on his home.”
“Utah home prices were already steadily rising before the COVID-19 pandemic hit. It only accelerated that to insane levels. ‘We were exploding way before the pandemic,’ Eskic said. ‘It was just more fuel on the fire.’ Now we’re coming off of that sugar high. National headlines have noted Utah has recently seen some of the largest shares of home sellers slashing their prices — but that’s because sellers have finally found homebuyers’ breaking points, and they’re adjusting their listings to reality.”
The Phoenix Business Journal in Arizona. “Homebuilders in metro Phoenix face an alarming surge in contract cancellations at a time when economists are pointing to another recession. Through the middle of July, the cancellation rate was in the 30% range, up from 8-10% in 2020 and 2021, and up from 15% in 2018 and 2019, said Steven Hensley, advisory manager for Zonda housing market research firm. Cancellations hit 48% in May for Richmond American Homes in metro Phoenix, up from 11% in January, Michael ‘Frenchy’ IlesCremieux, senior division president of Richmond American Homes, told a group of 300 homebuilders and real estate professionals in a Zoom event organized by Rose Law Group on July 28.”
“In a July 28 regulatory filing, Scottsdale-based Taylor Morrison Home Corp. reported a 10.8% cancellation rate nationwide for the three months ended June 30, up from 5.2% during the same period last year. ‘The decrease in sold homes in backlog is primarily the result of a decrease in net sales as well as an increase in cancellations,’ according to the filing. CFRA Research reiterated its hold opinion on shares of Taylor Morrison, citing the doubling of the homebuilder’s cancellation rates. ‘Rapid deterioration of demand in June and July poses more uncertainty on future orders,’ Kenneth Leon, research director at CFRA Research said in his report.”
From 10 New in Tennessee. “Sellers are searching for buyers of more homes, helping alleviate some of the pressure on Knoxville’s real estate market that pushed prices sky-high in recent years. Suzy Trotta, Knoxville real estate expert, wrote that the number of active listings is approaching 2020 levels for the first time in more than 2 years. ‘One thing we’re seeing more often, and this is a national trend, is buyers walking away from deals for legitimate reasons,’ she said. ‘I think sellers definitely are still not willing to do any kind of repairs on a house, almost. So if you’re paying top dollar with no repairs, at a higher interest rate — you might look at walking away.’”
“Trotta emphasized that although the rates are higher, they are still historically low compared to eras like the Reagan administration when they reached more than 13%. ‘There’s nothing else that you can borrow money for at that low of a rate. Not cars, not your credit card, anything. We call it free money as realtors,’ she said.”
The Real Deal on New York. “Months after Oceanwide Holdings lost control of its Financial District project, the note secured by the development site has been sold. An anonymous buyer purchased the note for $169 million, PincusCo reported. The buyer may have been formed with this purchase in mind, as the Delaware-based company was registered in late May, days after the development site fell into receivership. Oceanwide had big dreams for the site, 80 South Street, when it bought the property for $390 million in 2016. The Chinese firm invested another $20 million into it but never began construction.”
“By roof height, it would have been the tallest building in Lower Manhattan. Last year, Oceanwide started trying to sell the site again, looking for around $200 million. But potential buyers might have surmised that they could get it for less by waiting. Ownership of the property then passed to Kalo, an insolvency and restructuring firm headquartered in the Cayman Islands and the British Virgin Islands, according to the Hong Kong filing.That left Oceanwide with only one project in the United States, a 2-million-square-foot condo, hotel and apartment development in Los Angeles that remains unfinished.”
The Los Angeles Times in California. “After living in the Bay Area for nearly seven years, Hari Raghavan and his wife decided to leave for the East Coast late last year. Raghavan said that their Oakland house had been broken into four times and that prior to the pandemic, his wife called him every day during her seven-minute walk home from the BART station because she felt safer with someone on the phone. After moving to Miami, Raghavan said they accidentally left their garage door open one day and were floored when they returned home and found nothing had been stolen.”
“‘We moved to the Bay Area because we had to be there if you want to work in tech and start-ups, and now that that’s no longer a tether, we took a long hard look and said, ‘Wait, why are we here again?’ Raghavan said. ‘The Bay Area has become a land of minor inconveniences, and some are not-so-minor anymore,’ he said. ‘Housing and real estate have ripples across everything. It makes rent more expensive for restaurants, which raises food prices, and it causes people to commute over longer distances. Everything becomes a burden.’”
The San Francisco Examiner in California. “Last week Twitter announced it is letting go of a big chunk of its headquarters in SoMa — its 10th Street offices connected to its main Market Street building. Etsy also dumped office space last week, following Salesforce, Block, PayPal and others. It hurts to see them all go. It feels like a rejection. But Twitter is the one that sticks. The City threw itself at Twitter’s feet in 2011, when the fast-growing startup suggested it might move to Brisbane to escape payroll taxes and get cheaper real estate.”
“The same thing happened with the opening of Salesforce Tower at First and Mission. But I’ll let you in on a little secret: I worked in Salesforce Tower for a while, and it was never very full. If you got off the elevator on to the wrong floor, it was often so empty we used a word you hear said about vacant parts of downtown a lot these days: It was eerie. That could also be true about the Twitter Building, a 1-million-square-foot barn that literally echoes with emptiness in places. Remember, that was in the good times — when we think of all the buildings in downtown as being full.”
The Globe and Mail in Canada. “1264 Scarborough Rd., Bowen Island, B.C. Asking price: $649,000 (Feb. 14). Selling price: $585,000 (Feb. 25). The house was listed on Valentine’s Day, and the Bowen Island market was hot, buyer’s agent Mary Lynn Machado says. Most properties were selling in less than a week, and the house went without an offer for 11 days. Ms.Machado’s clients, a young couple with long-time Bowen Island connections, wrote a lowball offer. They wrote a personal letter to go with it. Another offer came in, but the seller accepted the offer from the young couple.”
“Only three homes have sold for less than $600,000 in the last two years, she says. The summer season has slowed considerably, with several price reductions on homes. ‘The market has pretty much come to a standstill. Very few properties are selling, and we have more than quadrupled the inventory of single family homes since the end of March.’”
The Daily Mail Australia. “A lively corner on one of Sydney’s busiest streets has again been packed with customers waiting to get inside a Chinese state-owned bank. Hundreds of people have queued outside the Bank of China on George Street this week in what many believe to be a response to fears the Communist nation’s economy is spiralling, which has included Xi Jinping putting a freeze on a series of banks. An accused criminal conglomerate from the country’s central province ‘manipulated’ five banks in the Henan and Anhui regions to ‘illegally absorb and occupy public funds’, which saw the state freeze $8.5billion in customer’s money.”
“One customer said they were transferring money sent from family back in China, while others alluded to a bigger issue. ‘I just want my money,’ another man said, who confirmed he wasn’t a ‘student’.”
The Taipei Times. “An even more serious problem is a real-estate crisis emerging across the country and engulfing 25 provinces. Scores of home buyers are refusing to pay mortgages on unfinished residential projects, abandoned by heavily indebted developers that have run out of credit. The situation has exposed the extent to which China’s economy is reliant on real estate to maintain growth, a market which has become a gigantic Ponzi scheme.”
“Having barreled along at breakneck speed for more than four decades, China’s economy is clearly in serious trouble. In reality, this crisis has lain dormant within China for a long time, but Beijing has repeatedly papered over the cracks with huge injections of monetary and fiscal stimulus, as well as currency manipulation, to keep the plates spinning.”
“Meanwhile, the problem of unfinished construction projects continues to smolder in the background, exacerbating the situation and guaranteeing an even greater reckoning when the bubble eventually bursts. The phenomenon of unfinished construction projects is created by the way Chinese developers pre-sell properties before the first drop of cement has even been poured.”
“Some analysts have estimated that there are as many as 20 million people who bought into unfinished residential construction projects and are living in partially completed homes, many of which have no water or electricity. Colloquially known as lanweilou (爛尾樓, ‘rotten tail buildings’), the people residing in the homes, which are likely in a wretched state, are living in substandard conditions.”
The Telegraph. “We have lived in a world of near-zero interest rates for 14 years now. We have become so used to them, we hardly even discuss them anymore. And yet, it now appears they are finally coming to an end as central banks around the world start to grapple with soaring inflation. The Bank of England is steadily raising rates and will no doubt do so again in August. Even the European Central Bank (ECB) has finally, although belatedly, joined the party. It is also possible that zero rates were always an illusion, and one that ended up doing more harm than good.”
“Free money might have helped rescue the economy in the wake of the financial crisis of 2008 and 2009. But one day interest rates will have to get back to normal – and now is the moment. ‘By any historical measure, interest rates have been exceptionally low for the last 14 years,’ says Nicholas Crafts, emeritus professor at Warwick University and an expert in British economic history. ‘Even in the 1930s they did not go below 2pc, and even that was only for a few years. And yet, over that time, growth and productivity and investment have also been very weak.’”
“From 5pc before the crisis, by March 2009 the Bank of England had taken rates all the way down to just 0.5pc, the lowest level since it was founded in 1694, in an effort to boost the economy. At the same time, it launched the first round of what was then a new-fangled strategy called “quantitative easing”, a polite term for what used to be known as printing money. It was sold as a short-term crisis measure to prevent a re-run of the Great Depression.”
“Indeed, many of the architects of the policy of near-zero rates appear to regret the monster they unleashed back in 2008 and 2009. ‘This ratcheting up of central-bank balance sheets and government balance sheets, I think, is a real problem for the future,’ said the former Bank Governor Lord Mervyn King in a lecture last year, a startling admission for a man who presided over the first dramatic cuts in rates. In its wake, ‘zombie companies’ were being supported by low borrowing costs and needed to be ‘allowed to fail’ to help a more efficient allocation of resources as the economy adapted to a post-pandemic world.”
“‘People have failed to recognise that the problem is one that can’t just be solved by even lower interest rates or even more fiscal stimulus,’ he argued. Likewise, Ben Bernanke, the Fed chairman who cut American rates to close to zero, said as early as 2015 that he never expected them to stay so low for so long.”
“Looking back on the last 14 years, this was surely an experiment that failed, not just in this country but around the world. Shutting a generation out of the property market, creating a legion of zombie companies, inflating asset bubbles, and creating a debt-fuelled economy kept afloat on a tidal wave of cheap and printed money was hardly a great achievement. Nor has it done much for growth, equality, opportunity, or investment.”