A report from Fortune. “That Pandemic Housing Boom coincided with a staggering 42% jump in U.S. home prices between March 2020 and June 2022. Of course, that demand boom hasn’t just fizzled out—it’s doing a 180: On a year-over-year basis, mortgage purchase applications are down 41%. There’s actually fewer purchase applications now than at the bottom of the 2008 crash. This swift pullback in demand also has more economists uttering the most feared word in housing: Bubble.”
“‘It was a pandemic-induced [housing] bubble, which was stoked by work-from-home migration trends: High wage workers going to lower second tier middle markets for more space,’ said Diane Swonk, chief economist at KPMG. ‘We went to an extreme on WFH [spurred housing demand], but it has pretty much abruptly ended. It is part of the reason I think you’re seeing housing prices fall as well. The local incomes don’t support a lot of these home values.’”
“‘Once you start the process of prices falling nationally, there is a self-fulfilling momentum to it because no one wants to catch a falling knife,’ Swonk says. ‘We’re easily going to see large double-digits declines. I think 15% next year is very conservative. We’re already turning.’ ‘Let’s face it, where is one of the biggest pushes on inflation right now? It’s in shelter costs. And it’s where they [the Fed] have the most power,’ Swonk says. ‘And so, yeah, it was a stunning rise in [home] prices. An unsustainable rise—some kind of correction is needed. The problem is you don’t get to choose how big that correction is.’”
The Commercial Appeal in Tennessee. “Median home sale prices in the Memphis area declined in October along with total home sales as inventory ticked up. The median home sales price in the Memphis area declined 7% from October 2021 to October 2022. In October 2021, the median home sales price was $215,000. In October 2022, that figure dropped to $200,000. There were 3,054 local active listings reported as of October 2022. That’s an increase of 119 from September’s 2,935 reported active listings. Inventory is nearly 700 homes higher compared to October 2021’s total of 2,384.”
The Atlanta Journal Constitution. “No doubt now, the brakes are engaged: the metro Atlanta housing market has continued to slow, as higher mortgage rates depress prices and sales. The median sale price in October $379,455, a slight decline from the month before, and a nearly 8% drop since June, according to the Georgia Multiple Listing Service, which tracks sales in a 12-county area centered on the city of Atlanta. ‘There have been four straight months of price declines,’ said John Ryan, the group’s chief marketing officer. ‘Historically, we usually see a seasonal decline, but the decline is accelerated from what we’ve seen in the past.’”
The Norman Transcript. “The hair-on-fire housing market may be cooling off, but don’t look for housing to crash and burn — in Norman or Oklahoma — any time soon. High mortgage rates, inflation, seasonality and uncertainty are prepped to sprinkle water on the hot market. ‘Everybody’s a little scared,’ said Norman real estate agent Tammy Waller. ‘They’re saying, ‘Oh my gosh, it’s going to be 7 percent [interest rates].’ I’m, like, ‘Oh my gosh, that’s kind of normal.’”
“The ugliest house looked gorgeous all glammed up in 2.98% mortgage rates in June 2021. Would-be buyers sometimes learned the house was already under contact before they could even walk out the door, Waller said. But, as mortgage rates doubled, ugly house warts inevitably popped out. Steven Admire, president of Tulsa-based Advantage One Mortgage said he’s noticed a recent change in attitudes coinciding with mortgage rates’ recent rock ‘n’ roll moves. ‘It’s flipped. I’ve never seen that in my entire career,’ said Admire, who’s been in the mortgage business 29 years. ‘Not that psychology. Not that mindset.’”
From Bizwest in Colorado. “Realtors tend to view a housing inventory of six to seven months’ supply as a market that’s balanced between buyers and sellers. But today’s housing market in the Boulder Valley and Northern Colorado belies that maxim. Even though inventories remain far below that six-month mark, buyers continue to gain leverage, with rising interest rates, inflation and still-high housing prices dampening demand.”
“‘I think it’s pretty clear right now that what we’re feeling out there really resembles this buyer’s market,’ said Todd Gullette, managing broker with Re/Max of Boulder. ‘The seller certainly is not experiencing the feeling, generally, that they’re in the driver’s seat. I’m a firm believer of ‘what it feels like,’ he added. ‘There are some really frustrated sellers, because some feel like they have missed the market. And now, who knows how long it will stay kind of soft?’”
“‘The market is just correcting itself. We’re not crashing,’ said Cecilia De Villiers, broker/owner of Shasta Realty Inc., a Longmont-based brokerage that focuses primarily on Boulder, Larimer and Weld counties. But the incline that prices went up was way too high, too steep. ‘I do see some properties dropping quite significantly in price now, so hopefully, [sellers are becoming] more reasonable.’”
“Greeley recorded a $414,000 median sales price in October, up just 1.5% from a year ago and down from $453,000 in September. Loveland’s median sales price in October was $510,000, up 6.3% from a year ago and down from $530,000 in September. Fort Collins’ median sales price stood at $575,000 in October, up 8.1% from a year ago and down from $592,000 in September. Broomfield’s median sales price declined to $607,200 in October, from $688,000 in September, but up 2.4% from a year ago. Longmont posted a $587,500 median sales price in October, up 6.5% from a year ago and down from $645,155 in September.”
“Brandon Wells, CEO of The Group Inc. noted that the current market has begun to take a toll on home builders. ‘They’ve certainly been impacted. They really have been faced with a lot of cancellations,’ he said. ‘And so in order to offset those cancellations, they’ve had to get creative and offer a lot of concessions as well. With the movement of rates and the continued increase in price appreciation, that’s kind of been the two-headed monster that has really impacted affordability and really curbed overall buying power and buyer demand out there.’”
Bisnow New York City. “A small, relatively unknown company has been quietly taking over struggling hotels across the country in recent months, hoping to build an empire from the rubble of the pandemic. LuxUrban Hotels Inc. has snapped up more than 1,000 rooms this year alone, signing long-term leases with hotel owners grateful for a reliable stream of income in trying times. But the Miami-based company, eager to capitalize on market distress, has serious questions of its own to address, including dozens of customers waiting months for promised refunds, employees suing for unpaid wages, a CEO who has been fined by the Securities and Exchange Commission, and an executive team with little hotel experience.”
“The company spent the first four years of its existence as short-term rental provider CorpHousing Group, changing its name to LuxUrban Hotels earlier this month. The collapse of its short-term rental business when the pandemic hit has left financial scars that still haven’t healed. But LuxUrban executives say its legal and operational troubles have been resolved and that its new business model is sound. Real estate experts likened LuxUrban’s strategy to that of WeWork, the mercurial coworking firm that signed long-term leases at office buildings around the world in a relentless search for growth, only to be nearly crushed under the weight of its obligations. WeWork has lost $12B since 2019.”
“The financial statements it released as part of the IPO reveal a company that has been functioning on a razor’s edge. It was operating at a stockholder deficit of nearly $9.5M and had just $556 in cash on hand at the end of the second quarter, according to an investor prospectus. But LuxUrban also reported a nearly $2.2M profit in the first half.”
“Multiple LuxUrban employees said the company’s phone number goes straight to a voicemail service. Team members have been instructed to respond to refund requests by assuring customers the refund was on its way, but not to provide a specific timeline. ‘It felt like our job wasn’t customer service,’ one former employee said. ‘Our job was to buy time for refunds.’”
“A current employee said LuxUrban was still experiencing cancellation problems as recently as mid-October. The company learned that a deal fell through on a hotel at 741 Eighth Ave. in Manhattan, the employee said, but LuxUrban had advertised the property via online travel agencies before the deal was complete. The property has one review on Expedia dated Oct. 17, 2022. ‘This property does not exist. I was forced to find a hotel once I arrived,’ the review reads. ‘Waiting to hear back from Expedia on a refund for this fraudulent hotel. It literally does not exist. At the location of the hotel is a buffet style restaurant. The property phone number is an international number that no one answers. THIS IS FRAUDULENT. DO NOT SELECT THIS HOTEL.’”
“Current and former full-time employees of LuxUrban told Bisnow it was hard to buy into that corporate ethos while the frequency and amount they were getting paid was inconsistent. Pay is supposed to arrive every two weeks, per their employment contracts; instead, multiple employees said they have been paid inconsistent amounts at seemingly random times, even after the IPO. ‘For a long time, I was a hostage to the debts that they had,’ one employee said. ‘There was this big connotation of, ‘If you leave, you may not get what you’re owed without having an attorney.’ One current staffer told Bisnow it felt ‘terrible’ to show up at work knowing they wouldn’t get paid. ‘And then to be running what feels like an online scam?’ they said. ‘Even worse.’”
From Global News in Canada. “When Tamara Saeed and her husband were looking for a way to save for their children’s education a few years ago, the allure of Airbnb caught their eye. The family bought a cottage near Grand Bend, Ont., in late 2019, with plans to host the property on the platform. She recently doubled down and bought a second cottage property in Selkirk, Ont. and has also put it up on short-term rental sites including Airbnb and Vrbo. But now, with bookings slowing down heading into the holidays, mortgage costs rising and a possible recession on the horizon, she’s wondering whether she might be forced to sell her rental properties.”
“‘It was a great idea and I still think it is. But the fact is things have changed,’ Saeed says. She cites new taxes from municipalities and rising interest rates from the Bank of Canada as hurting the business case and earning potential for her cottage properties. Inflation is also drawing down revenues amid higher costs for cleaners and maintenance crews who rely on the cottage industry. ‘We are worried that with the cost of everything, it might not be as feasible to hang onto these properties. We’re hoping that’s not the case,’ Saeed says.”
“Saeed says she has fixed rates on her home in Brantford, Ont. and her property near Grand Bend, but her Selkirk cottage is on a variable rate and she says payments have increased ‘exponentially’ this year. She says she’s not feeling ‘oh, poor me’ about her situation. ‘There are many people who unfortunately have it a lot worse than we are, but we do feel the pinch. We’re not multimillionaire corporations. We’re just your average mom and pop just trying to get a little ahead and leave something for their kids,’ she says.”
The Korea Times. “Many young Koreans are struggling these days to overcome stress and anxiety triggered by the abrupt end of the bullish asset market. Those in their 30s comprise the bulk of investors here who took out loans to engage in a buying frenzy of stocks and real estate during the height of the COVID-19 pandemic between 2020 and 2021, emboldened by ultra-low lending rates. Few of them would have expected the market to enter the current period of acute adjustment prompted by the U.S. Federal Reserve’s unprecedentedly hawkish monetary policy.”
“The decline in asset values was just the beginning. They now face a mounting financial burden caused by increased interest rates. ‘I took out a non-collateralized loan of 100 million won ($73,500) in 2021, and invested all of it in Korean and U.S. stocks, hoping that the market will remain bullish for more years to come,’ an office worker in his 30s said. ‘But the value of my assets ended up decreasing by half less than a year after I made the investments. I came to realize that I entered the market at the end of a bull cycle.’”
“He also expressed frustration over the growing interest burden. ‘I did not hesitate to take out the loan last year when the benchmark rate was close to zero,’ he said. ‘But my interest burden almost doubled in about a year. Falling stock values and rising interest pressure keep giving me stress every day.’ Another office worker surnamed Kim said he recently sold all of his stocks at a loss on fears of further price falls. ‘I started investing in stocks after taking out loans worth around 30 million won last year, but decided not to wait for their rebound, as the bearish market sentiment keeps disturbing me,’ he said. ‘I recently dumped all of them at a loss of around 10 million won. Even if the loss is painful, I cannot turn back the clock. I will try not to make such a mistake again.’”
“Another 30-something worker at a major conglomerate here recalled the buying spree in the local housing market in 2020 and 2021. ‘After getting married a few years ago, I purchased an apartment in Gyeonggi Province soon after the outbreak of the pandemic,’ he said. ‘Many young people must have felt a similar urge due to escalating fears that apartment prices would keep soaring at an alarming pace, which pushed most of them into engaging in a panic buying of apartments in Seoul and its surrounding cities.’”
“Most home prices in the capital area have fallen to pre-pandemic levels, so most young people who jumped on the apartment-buying bandwagon for the past two years probably feel frustrated by their decision, he said. ‘One lesson that I learned is that we should not make investments when most other people do amid bullish sentiment,’ he said. ‘One botched investment can cause a lot of damage in terms of opportunity costs. If I had not purchased the apartment back then, I could purchase a better one at a lower price now.’”
“But others said they will stay focused on the market, undeterred by the recent losses. ‘I invested in cryptocurrencies during the pandemic era, and enjoyed the inherent volatility of the crypto market,’ an office worker in his mid-30s said. ‘Many people still have a negative perception of crypto investments due to their volatility, but few of them understand the industry and market. I also wince with pain when I think about my losses from the crypto investments, but firmly believe opportunities will come again after the macroeconomic uncertainties clear away here and abroad.’”
“The office worker said he intends to hold on to his financial assets. ‘I will never sell major cryptocurrencies such as Bitcoin and Ethereum at a loss, and will keep doing my best to grab forthcoming opportunities in the market,’ he said. ‘Cryptocurrencies’ rebound will be way more powerful than any other assets.’”