A report from DS News. “‘Homebuilders started scores of projects during the pandemic moving frenzy and are now stuck with a bunch of new houses that are hard to sell because mortgage rates have risen to 7%,’ said Faith Floyd, a Redfin real estate agent in Houston. ‘Builders are giving away everything but the kitchen sink to attract bidders. Many are offering to buy down the buyer’s mortgage rate by 1.5 points, and I’ve seen at least one offer a $10,000 check for closing costs, a $3,000 gift card and a free fridge. This one way builders will dig themselves out of the hole they’re in.’”
“With a glut of inventory on their hands, builders will likely ease up on construction in 2023, according to Redfin Deputy Chief Economist Taylor Marr. According to Refin some 29% of U.S. single-family homes for sale in Q3 were new construction — the highest share of any Q3 on record. ‘Many builders are offering more incentives than regular sellers,’ Floyd continued. ‘A lot of individual sellers are still pricing their homes too high because they’re having a hard time accepting that the pandemic housing boom is over and they’re not going to get 30 offers like their neighbor did last year.’
The Killeen Daily Herald. “A quarterly housing report from Texas Realtors and the Texas Real Estate Research Center at Texas A&M appears to show that local home listings have nearly tripled in the third quarter of 2022 since the same time last year. As of Q3 2022, there are approximately 1,378 active home listings in the Killeen-Temple metropolitan area, the report said. Despite the apparent glut in inventory, closed sales are down nearly 14%, to 2,238 in Q3 2022.”
The San Francisco Business Times in California. “The Bay Area has just endured its lowest high season in more than a decade. Compass reveals that not only were overall Bay Area real estate sales statistics bad for October, they were actually historically bad. The 11-county greater Bay Area had the lowest number of home sales in October since 2007, Compass Chief Market Analyst Patrick Carlisle said.”
“The drop came as economic conditions continued to nosedive, marked by the increase in interest rates to a 20-year high, volatility in financial markets and layoffs beginning to spread throughout the region. Home sales fell year-over-year by 37%. Home sales of $3 million-plus in October fell even further — down 44%. Carlisle said unsold inventory is also running much higher for ultra-luxury homes — over 11 months of inventory for listings priced $10 million-plus — indicating the development of a buyers’ market in that segment.”
“In San Francisco, October saw a total sales of 425 homes, down 38% from a year ago (682 closed sales), according to the report, also representing the worst October in city sales since 2011. The median three-months rolling sales price in the city was $1.65 million, down 8% year-over-year. The general trend of cooling demand and declining sales extended across the region, Carlisle said, noting that after years of holding the balance of power, sellers have reacted to the changing circumstances with increased price reductions since spring and delisting homes from the market without selling. In San Francisco, about 12% of the city’s active listings were withdrawn from the market in October, a big increase from just 4% in the spring. Moreover, the percentage of price reductions on active listings shot up in October by more than double what it was in August.”
“‘The market is in a state of reset for a new normal. And as always, when we are not in a high market, properties with blemishes whether location, floor plan, etc., can be hard to sell — and need to be discounted below the discount for good properties,’ said Compass agent Karen Mendelsohn Gould. ‘All of these early sellers are setting the pricing. Now with pending layoffs in the tech sector coming — that could have an impact but I think it will be at least 6 months before we see it.’”
“Farther south in Santa Clara, comparing October 2022 to October 2021, the number of home sales was down about 40%. For the inner East Bay areas of Oakland and Berkeley, that figure was at 32%. ‘We do really see opportunities because we welcome a balanced market, which it wasn’t before,’ said Compass agent Jessica Grimes. ‘Our buyers are seeing possibilities when they were dismayed before, and our sellers are needing to adjust to current market demands driven by savvy investors. The market always speaks. The high end is even savvier, holding cash and waiting on the sidelines for larger opportunities.’”
The News Tribune in Washington. “In its October home sales report, the Northwest Multiple Listing Service showed that in Pierce County pending sales for existing single-family homes was down 42.87 percent, while listings were up more than 107 percent from a year ago. For the condo market, listings in Pierce County were up more than 105 percent from a year ago, but pending sales were down 55.74 percent from 2021 and closed sales were down more than 15 percent. The median price was $369,000, up 4.69 percent from a year ago but down from $410,000 in September.”
“Dick Beeson, managing broker at RE/MAX Northwest in Tacoma/Gig Harbor, described the market now in its ‘new normal.’ ‘We are now experiencing a balanced market. I said the new normal was 2-to-4 months of supply back two or three years ago. We’ve finally reached that point. This is the new normal until interest rates go down.’”
From KTVZ. “Central Oregon has seen home prices rising fast in recent years, but the latest monthly report from Redmond’s Beacon Appraisal Group is more evidence the region is not immune to the market forces, from inflation to rising interest rates, that have sent prices falling elsewhere. The October report shows Bend’s median home sale price dropped $45,000 last month, to $680,000, the lowest level since the start of 2022. The number of sales also fell some, to 160, lowest since last winter, while the days on market for sold properties rose to an average 28 days, highest since the spring of 2020, as the COVID-19 pandemic hit. Redmond, meanwhile, saw its median home sale price dropped $47,000 last month, to $478,000, the lowest price since last December.”
The Idaho Statesman. “Idaho’s largest homebuilder is laying off workers. Corey Barton, president of CBH Homes in Meridian, told the Idaho Statesman that rising interest rates have forced the company to gradually downsize over the last year. Soaring home prices and interest rate hikes have fueled the market’s downturn as fewer residents are able to afford to buy houses. He said he’s excited to see prices return to something more realistic. ‘Our goal is to make home prices more affordable,’ Barton said. ‘We’re lowering our prices.’”
Bisnow New York. “The lenders backing the shuttered Wagner Hotel in Battery Park City have sued for foreclosure after owners allegedly failed to pay off a $96M loan. The 38-story hotel’s loan has been in default since 2020. The hotel lost approximately $75M in value between 2018 and spring 2022, court filings allege, and the luxury operator’s departure also impacted the values of the 115 top-floor residential condo units, which have reportedly lost around $2M in value over the last year.”
From Market Watch. “The Sunbelt’s hottest pandemic rental markets are chilling out. Where are the biggest drops? ‘We’ve seen a dramatic pullback in terms of the demand in multifamily this year … and a lot of the fast-growing Sun Belt markets that we saw last year also are seeing really large construction pipelines that are now delivering,’ Jay Lybik, national director of multifamily analytics at CoStar Group, told MarketWatch. ‘It’s kind of a perfect storm in those markets in that demand is still positive, but it’s pretty low, and we’re delivering a lot of units. It’s really pushed down rents pretty darn quickly,’ he added.”
“Las Vegas, Nev.; Tampa, Fla.; and Phoenix have also experienced ‘rents retreating by over double digits so far this year,’ Apartments.com said in its report. Growth in rents for units in multifamily structures also declined from September to October, contributing to a three-month negative streak. ‘Additionally, none of the top 40 largest markets saw their year-over-year asking rent expand in the month of October, which further illustrates the overall disappointment in market conditions,’ the report said.”
From Infotel. “In the Central Okanagan, the benchmark (typical) selling price of single-family houses peaked in March at $1,131,800. It has now dropped to $997,000. That’s a significant (almost $135,000) decline. Canada Mortgage and Housing Corporation has a graph showing prices in the country as a whole from 2005 until this year. It shows an average price of just over $200,000 for all homes in 2005. It’s risen to about $775,000 this year. The biggest factor impacting housing sales this fall has been the steadily rising Bank of Canada key lending rate. It’s gone up to 3.75% from 0.25% at the start of the year.”
“It shows a five-year conventional mortgage in September of this year was at 5.64%. That’s only slightly higher than the 5.5% in May 1951.Mortgage rates climbed slowly but fairly steadily until 1951 until they hit double digits (10.11%) for the first time in September 1969. They peaked at 21.46% in September 1981.”
From Bloomberg. “Sweden’s beleaguered real-estate companies may have to resort to fire sales and new share issues as the sector faces risks of rising vacancies and a projected 15% slump in property valuations. The catalyst for such a scenario would be the industry’s looming ‘wall of maturities,’ according to the economists. While most companies should be able to secure financing through bond markets or banks, as much as a third of maturing bond volumes come from firms that may have to resort to asset sales to refinance. The bank estimates as much as 120 billion kronor ($11.1 billion) of bonds fall due in each of the next three years.”
“The development in the sector has raised the specter of a crisis similar to the one Sweden experienced in the 1990’s, when a property market crash reverberated throughout the Nordic nation’s financial system. The jump in borrowing costs is also pressuring the residential housing market where Swedish home prices have declined steadily since March. Handelsbanken — among the biggest mortgage lenders in Sweden — now expects the drop to continue, reaching 19% from the peak, which is a deeper slump than the 15% it had previously forecast.”
“‘We estimate that housing prices so far have dropped by about half of the forecast decline, and that they won’t stabilize until spring 2023, when inflation turns lower,’ the bank said. ‘After that, we expect very modest price increases, and with interest-rates remaining at higher levels there is no tailwind in sight for housing prices in the foreseeable future.’”
From ERR on Estonia. “Inflation and the rising cost of living are causing banks to reduce home loan sums, meaning that people who still qualified for a housing loan a year ago might not today. ‘If a customer was offered a loan of €100,000 last year, their salary, provided it has remained unchanged, would only get them a loan of €80,000 today,’ said Tanel Rebane, head of private banking at Luminor. ‘Because the cost of living has gone up, many people who still qualified for a loan last year might no longer qualify today as they have less in way of reserves. That is the main factor affecting lending,’ Rebane said.”
“‘There is more real estate on the market compared to last year, as high prices have motivated those who were holding back to sell. Soaring energy prices mean that simply holding on to real estate has become insensible as utility costs still need to be paid,’ the banker said.”
“‘I believe that no bank wants to start evicting people from their homes,’ said Sille Hallang, head of SEB’s private banking division. She said that if people find servicing loan payments has become difficult, other expenses should be revisited first and people who are experiencing problems should contact the bank immediately. ‘The sooner we learn of payment difficulties, the better,’ said Hallang, adding that a solution can be found in most cases. ‘But this requires the customer to work with us and not disappear.’”
From Reuters. “Vietnam’s second-biggest listed developer, No Va Land, is firing staff and seeking urgent asset sales, company and industry sources said, as it struggles to pay creditors in the latest sign of distress in the country’s real estate sector. The company’s signals of distress come amid wider turmoil in Vietnam’s property and credit market, which has been exacerbated by arrests of bosses of real estate companies suspected of wrongdoing and a rapid fall in the value of the country’s currency, the dong, after the central bank relaxed its peg against the dollar.”
“Two sources with direct knowledge of the matter told Reuters the company was trying to sell distressed assets, including hotels and resorts, to raise cash to pay back loans and fund its operations. No Va Land has lost nearly 40 per cent since the beginning of this year, reaching its lowest level since April 2021. ‘Debts are coming due this year-end and, with the current tightening regulations on loans given to real estate firms, it’s hard for the company to have cash,’ one of the sources said.”
“During the past month, the company has laid off about half of its workforce, and most construction has been put on halt, three sources said. No Va Land chairman Bui Xuan Huy told state-run newspaper Tuoi Tre that market developments were unfavourable, and that the company had been forced to cut staff. ‘It hurts,’ he said, adding: ‘We hope the State Bank of Vietnam will work out measures to help real estate developers and investors to have access to credit.’ A fourth source, a supplier for one of No Va Land’s projects, said his 200 billion dong (US$8 million) worth of raw materials were stuck as the project was being put on hold.”
The South China Morning Post. “Analysts said China’s US$2 trillion real estate market remains ‘in the doldrums,’ said Ben Chow, head of Asia-Pacific real assets research at MSCI. ‘[China] is one market where plenty of assets are up for grabs, but there are few takers,’ said Chow. ‘Investors from North America and Europe appear to be staying away for the time being, even as those from Singapore and Hong Kong have been … picking up choice assets amid the sell off. Only time will tell which strategy will pay off in the long run.’”