A report from Deseret News. “‘We’ve definitely slowed. Our prices are starting to come down because the interest rates are so volatile,’ said Dejan Eskic, a senior research fellow at the University of Utah. After listening to the latest Fed meeting, Eskic said he’s ‘probably not as optimistic’ because ‘it’s like they’re gunning out for housing now.’ ‘Affordability is still an issue,’ he said. ‘The only reason housing prices are coming down is because of interest rates.’”
“Rick Palacios Jr., director of research at John Burns Real Estate Consulting predicts ‘you will see — and we’re seeing it right now — home prices fall, even though supply levels are not ripping higher. And I think that’s a pretty interesting thing that’s now starting to surprise a lot of people.’ The West Coast is dotted with red, according to that analysis. San Jose and San Francisco in California, both with a -8.2% home price shift since their peak. Seattle, down 7.8%. Reno, Nevada, down 5.3%. Phoenix, Arizona, down 5%.”
“Look to Phoenix, for example — what Palacios called the ‘poster child’ for the pandemic housing boom effect. The metro saw an explosion of buyers, investors and construction from mid-2020 until higher mortgage rates dampened the party. That market — along with other ‘bubbly’ pandemic frenzied markets in the West like Boise, Idaho — have been the first to see a dramatic pullback in housing market activity and an early slump in prices. In Phoenix, new construction home prices are already down 3.5% year over year, Palacios said, which Fortune Magazine’s Lance Lambert noted wipes away all price gains dating back to last summer.”
From Fortune. “As data rolled in this summer, John Burns Real Estate Consulting provided data to Fortune showing that frothy markets like Boise and Phoenix had already gotten their home price tops blown-off. Now, it looks like that home price correction has moved beyond overheated Western housing markets. Among the 148 major regional housing markets tracked by John Burns Real Estate Consulting, 98 markets have seen home values fall from their 2022 peaks. In 11 markets, the Burns Home Value Index* has already dropped by more than 5%. Simply put: The U.S. home price correction is sharper—and more widespread—than previously thought.”
“The housing markets getting hit the hardest by the Pandemic Housing Slump fall into one of two groups. The first is high-cost tech hubs. In fact, the biggest drops in home values can be found in San Francisco (down 8.2% from its 2022 peak), San Jose (down 8.2%), and Seattle (down 7.8%). Not only are their high-end real estate markets more rate sensitive, but so are their tech sectors.”
“The second group includes frothy markets like Austin (down 3.5%), Boise (down 3.5%), Phoenix (down 5.3%), and Reno (down 5.3%). The Pandemic Housing Boom saw home prices in markets like Austin and Phoenix go far beyond what local incomes would historically support. While housing recessions are historically common, home price corrections are less common. That’s why housing bulls—just like they did in 2006—refused to acknowledge the possibility of falling home prices. But once again, they are wrong.”
The News Tribune in Washington. “Pierce County’s cooler housing market brought down the county’s median sale price from July, as both pending and closed sales showed year-over-year declines for a third straight month, according to new data. Northwest Multiple Listing Service’s latest report showed Pierce County’s median closed sale price for August was $555,000, down from $575,000 in July. Listings were up more than 100 percent compared with last year, but pending sales were down more than 21 percent from 2021 and closed sales down more than 25 percent from a year ago.”
“Pierce County wasn’t alone. Pending and closed sales year over year were down pretty much across the region. Windermere chief economist Matthew Gardner noted rising inventory was helping to bring down prices in the area month over month. ‘I predict prices will drop further as we move into the fall, but reports that we are entering a ‘bear market’ are highly exaggerated,’ he said. ‘The market is simply reverting to its long-term average as it moves away from the artificial conditions caused by the pandemic.’”
From NBC Miami in Florida. “A group of homebuyers say they have waited years to move into their dream homes. The townhomes in the heart of Coconut Grove are modern, spacious, and are still under construction. The homebuyers we spoke with say they’ve repeatedly demanded answers from the project’s developer but have only received excuses. They asked us to conceal their identities telling us they fear retaliation. A man, whom we will refer to as Lee, says he should already be living in one of the homes. The contract required a 20% deposit worth hundreds of thousands of dollars. ‘That is all of our life savings, are in that home,’ Lee said.”
“Lee is not alone. NBC 6 Responds spoke with four other families who told us they also have been waiting for years to close on their properties at the same development. ‘To be told 45 days, every 45 days, for years is mind numbing, after a while you don’t believe anything he says,’ one homebuyer told us.”
From Tech Crunch on California. “Over the past decade, startups migrated north from Silicon Valley to make San Francisco the country’s hottest tech hub. The streets of the city were bustling as throngs of — mostly tech — workers walked or caught Ubers to their next meetings. Then the COVID-19 pandemic hit, and things slid to a halt. Now, more than two years and several vaccines later, San Francisco’s office scene has still not rebounded and the city’s streets remain eerily quiet.”
“Colin Yasukochi, executive director of real estate brokerage CBRE’s Tech Insights Center, suggests some space could potentially be converted in the future, but that right now, it’s too bitter a prospect for commercial building owners. ‘We’re not anywhere close to that yet because the values of these buildings need to come down dramatically,’ Yasukochi said. ‘If you bought your building for a certain price — say $700 or $1,000 a square foot, you’re not going to want to sell for $200 or $300 a square foot to make a residential conversion feasible. It’s completely logical to put it to more productive use, but tell that to the person who paid for it — that they have to take a loss, right?’”
The New York Post. “SL Green added another trophy to its burgeoning portfolio. The city’s largest commercial landlord purchased 245 Park Avenue out of bankruptcy in a deal that closed on Friday. SL Green’s unexpected, 100% acquisition of the 48-story, 1.8 million square-foot office tower climaxed a grueling battle with the tower’s distressed former owner HNA, an affiliate of China’s PWM Property Management.”
“Chief executive Marc Holliday said that asking rents will depend ‘on the final cost of redevelopment. But our [low acquisition] cost basis allows us to price the building very competitively, far below new construction.’ In fact, ‘monstrously below,’ he chuckled — although rents will still be in triple digits.”
The Georgia Straight. “Central 1 chief economist Brian Yu has pointed to a combination of factors that are transforming the Lower Mainland housing market. Yu noted that higher interest rates, including a recent 0.75 percent hike by the Bank of Canada, have led to a ‘rapid erosion of purchasing power.’ He noted that new listings fell 15 percent from a year ago. At the same time, he maintained that ‘negotiating power has swung to buyers.’”
“‘While the 18 per cent sales-to-active listing ratio sits at a level consistent with balanced conditions, the rapid deterioration points to a buyers’ market which is curbing prices,’ Yu stated. ‘The average sales price fell to $1.12 million, marking a 1.2 per cent monthly decline and a 15 per cent decline from peak. As this reflects sold listings, it may be biased lower due to sales composition and motivated sellers (such as investors).’”
The South China Morning Post. “Two-thirds of major listed companies in closely tied sectors such as construction reported falling first-half profits, with half swinging from profit to loss. Cement manufacturers, design houses and furniture retailers also among firms taking on water. Lily Gao, a designer in an architectural firm in Shanghai, never thought that the news about defaulting property developers and mortgage boycotts would affect her life.”
“‘I thought that since I did not even buy a home or invest in any of the wealth management products, those news stories were just other people’s desperate stories,’ the 27-year-old said. ‘Apparently, I was too naive.’ Now, the distressed property market could end up costing Gao about 90,000 yuan (US$13,000). ‘We were told that our bonus this year could get delayed or cancelled if the receivables cannot be settled,’ the designer said with disappointment.”
“While Otis management cited China’s on-and-off Covid-19 lockdowns for the drop, analysts are more concerned about a lasting slowdown, because ‘housing inventory levels are alarmingly high and sales of new floor space are cratering,’ as analyst Joel Spungin of Berenberg Capital Markets put it on an earnings call recently.”
From Bloomberg. “Around the world, soaring borrowing costs are squeezing homebuyers and property owners alike. From Sydney to Stockholm to Seattle, buyers are pulling back as central banks raise interest rates at the fastest pace in decades, sending house prices falling. Meanwhile, millions of people who borrowed cheaply to purchase homes during the pandemic boom face higher payments as loans reset.”
“‘We will observe a globally synchronised housing market downturn in 2023 and 2024,’ said Hideaki Hirata of Hosei University, a former Bank of Japan economist who co-authored an International Monetary Fund paper on global house prices. He warns the full impact of this year’s aggressive rate hikes will take time to play out for households. ‘Sellers often overlook signs of shrinking demand,’ he said.”
“New Zealand, where prices rose close to 30% in 2021 alone, is something of a poster child of the pandemic housing boom — and its unraveling. The central bank has hiked interest rates seven times in the past 10 months and house prices were down 11% in July from the peak in November last year. Femke Burger, a 33-year-old insurance case manager, bought a house in the Wellington region in March 2021 for NZ$825,000 ($504,000). In the months that followed, the value of her property raced to NZ$1 million, according to house valuation websites. Those gains have evaporated. Her two-bedroom, semi-detached property is now valued at about the same amount she paid for it.”
“‘I definitely feel as though there’s been a reduction in my own personal financial wellbeing,’ said Burger, who must refinance her mortgage in the next 12 months. While she’s confident she can handle the increase in interest rates, it will still hurt.”
“In Sweden, formerly one of Europe’s hottest markets, home prices have fallen about 8% since the spring, with most economists now expecting a 15% drop. Rising rates also are pressuring property companies that borrowed heavily on the bond markets to finance their operations, leaving investors increasingly concerned about their ability to refinance that debt. Price declines also are accelerating in the UK. Home values are flat or dropping in almost half of London’s boroughs, a Bloomberg analysis shows. HSBC Holdings Plc has warned the UK is on the ‘cusp of a housing downturn’ and demand probably will plunge 20% over the following year.”
“In Australia and Canada — two of the world’s bubbliest markets — economists anticipate a notable crunch. The alarm bells are perhaps ringing the loudest in Australia, where home prices in August recorded their largest monthly decline in almost four decades. While cashed-up households have so far shown resilience to rising interest rates, a pinch point will come next year, with billions in mortgage loans fixed at record-low interest rates coming up for refinancing.”
“That stands to hurt homeowners such as Sindhuja Vetcha, a 30-year-old architect who dipped her toe into the Sydney property market last May, hoping interest rates would remain at record lows. But as the price of everything from petrol to food surged, loan repayments for her two-bedroom apartment in Sydney’s west also started going up rapidly. She’s already paying A$260 ($178) a month more just for the 40% of the loan that was on variable term, and rates are tipped to rise still further.”
“At the same time, the value of her home has taken a beating — similar properties are currently being advertised for around A$70,000 less than she paid — meaning it will be a while before she is in positive equity again. ‘It’s way beyond what the property will ever be worth any time in the near future,’ Vetcha said.”