A weekend topic starting with the Marin Independent in California. “The median price of a detached home in Marin County fell to $1.675 million last month, nearly wiping out the gains for the year, according to the latest county data. The price was only slightly higher than in October 2021. It also marked a 21% decline since April, when the median price broke through the $2 million threshold and reached nearly $2.12 million. One property that sold near the median price last month was a four-bedroom hillside home in Mill Valley. The owner listed for $1.8 million in early July, but by then prices had started to slide. The seller received a single offer about three months later and accepted $1.65 million.”
“Listing agent Audrey Moira Shimkas, a broker with Berkshire Hathaway, said the market erosion is clear and sellers need to adjust their hopes. ‘Right now, if I’m going in for a listing, I’m going up against sellers’ expectations, and I better have my statistics in order,’ she said. ‘Statistics don’t lie, and what they’re telling you is, it’s a correction.’”
From Hawaii Business. “The buyers who purchased condominiums in Kōʻula, the sixth tower built by The Howard Hughes Corp. in its 60-acre Ward Village in Honolulu, finally got their keys this fall, nearly four years after sales began. Dozens of those buyers immediately put their new condos back on the market. But if they were hoping to turn a profit, they may find disappointment in Hawaiʻi’s current real estate environment marked by slower sales and higher interest rates. More than 50 units are listed for sale and four are in escrow, all seeking prices higher than what the seller paid the developer. So far, one resale has closed.”
“‘It’s all about the timing and about the project,’ says May Tyrrell, broker in charge at Jack Tyrrell & Co., which has four listings for units in Kōʻula, including a three-bedroom penthouse with an asking price of $3.1 million. ‘Some people think they could be a fairy-tale story to buy and flip it right away. This is not the market at all.’”
“Some buyers run into trouble if they don’t have the money to complete the purchase of a new condo at closing – because perhaps they were counting on an immediate flip – or they don’t have the money to hold on to the unit during the time it takes to sell, which right now can be months, not days or weeks. Still, Tyrrell sees Kōʻula as a good investment to hold. She’s so bullish on the building that she and her husband, Jack Tyrrell, bought three units in Kōʻula themselves as investments.”
From Fortune. “After a pandemic-inspired move to the New Jersey suburbs, Rebecca Goldberg Brodsky was itching to get back to Brooklyn. An interior designer, she missed the vibrancy of New York City, and the connections she made while living there. Goldberg Brodsky and her husband searched Brooklyn neighborhoods for six months, but had no success with their budget of around $400,000. So they decided to ‘go all in,’ she says, moving around their assets so they could spend significantly more. Eventually, they found a three-floor apartment—it is located in what used to be a church—for $1.1 million in Park Slope and moved in in Sept. 2021.”
“Goldberg Brodsky was willing to overlook the old flooring, lead paint, and the dizzyingly-high price tag. That is, until her ‘new’ refrigerator didn’t work—and an exterminator found the apartment was infested with mice. ‘It was a lot more expensive than we expected to be,’ says Goldberg Brodsky, estimating they spent around $30,000 on the kitchen renovation. During the hot housing market of the past year, with many buyers taking whatever home they could get and price rising exponentially, spending seven figures was often just the start of the financial journey. ‘I’m okay with it mentally as long as this economy holds up, and it doesn’t turn out to be a catastrophic event,’ says Goldberg Brodsky. ‘My hope is five, 10 years from now I can say it was worth it.’”
The Craig Daily Press. “It’s a common story: Candace McNatt of Durango, in southern Colorado, kept losing bidding wars to buy a house. She finally settled on a tiny home of just 350 square feet. McNatt works as an operating room nurse and is a single mother of two teenagers, one about to go to college. Though she landed on the home ownership ladder at one of its lower rungs, she’s relieved. ‘But this is not how I saw myself approaching the age of 40,’ she muses.”
“These days, real estate prices in Durango, as in so many Western towns, have outrun most workers’ ability to buy or even rent modest digs. McNatt, for example, makes $85,000 annually, which places her at over 90% of the area median income. Adding to the housing crisis is the boom in short-term rentals, compounded by second-home owners snatching up houses once rented to students at the local Fort Lewis College.”
“McNatt tells the story of two clinical experts at the hospital, each making $160,000, who ‘have looked for a house forever. And he’s like, I refuse to pay $1 million for a house.’ In the end, ‘they paid over $1 million and are now house poor.’”
From KPHO in Arizona. “A shootout was caught on camera at the intersection of Howe and Judd Streets outside of a Tempe Airbnb early Saturday morning. Police arrested two people unrelated to the shots fired, but the shooters are still on the loose. No one was hurt by the shooting. Since that night, neighborhood groups and residents in the area are calling for increased regulation of short-term rentals. ‘We are concerned about who are these people coming in and what could happen,’ said Justin Stewart, who was awoken by the sound of gunshots. ‘I think its time to find solutions instead of pointing the blame right now.’”
“Ron Tapscott with the Tempe Neighborhoods Together not only points to noise complaints, public intoxication, and shootings, but he also said big business is ruining the fabric of Valley neighborhoods and furthering the affordable housing crisis. ‘It destabilizes communities. Let’s be clear, communities are for people associating with each other, raising their families, and when you have these kind of products come in,’ said Tapscott. ‘And you have ownership now that is corporatized and industrialized.’”
From The Hill. “This is about a $1 trillion government-sponsored enterprise built upon a myth — the myth of the American home. It is also about reform on the way. We have become familiar with the term ‘greenwashing,’ defined by Investopedia as: ‘The act of providing the public or investors with misleading or outright false information about the environmental impact of a company’s products and operations.’ ‘Homewashing’ is the same concept, except the object of the deception is housing rather than the environment.”
“The most prominent purveyor of homewashing is the massive government-sponsored enterprise known as the Federal Home Loan Banks. There are 11 regional FHLBs from Boston to San Francisco and points in between. They and their 6,500 member institutions follow a simple business model. The FHLBs borrow at a deep discount due to their government status. They then pass part of the government subsidized discount on to their members in the form of low-cost advances. As of Sept. 30, the FHLBs had over $1 trillion in taxpayer-subsidized debt outstanding. Subsidized advances to members stood at $655 billion, an 86 percent increase over year-end levels.”
“It is all based on a myth. The first part of the myth is that the subsidized advances to members are used for housing. This was the original purpose of the FHLBs when they were created by Congress in 1932. In truth, the FHLBs’ subsidized advances can be and are used for anything the members wish to use the funds for. This was confirmed by the Government Accountability Office many years ago when it found: ‘Another challenge facing the system is that there is limited empirical information on the extent to which FHLBank advances and other services benefit housing and community finance.’ Yet, the myth persists, presumably because the words ‘Home’ and ‘Loan’ are misleadingly embedded in the names of all 11 FHLBs.”
“The second part of the myth has to do with affordable housing and community development. By statute, the FHLBs are required to set aside a small portion of their earnings for this purpose. However, when one contrasts the taxpayers’ estimated $6.3 billion taxpayer subsidy of the FHLBs with their paltry contributions to affordable housing and community development.”
“What it says is that for every $20 of taxpayer support for the FHLBs, only $1 is set aside for affordable housing. The other $19 goes directly to the FHLBs and indirectly to the FHLBs’ members. It is worth noting here that each of the CEOs of the 11 FHLBs receives million-dollar pay packages. This is for distributing a government benefit to their members. This disconnect would embarrass the most egregious greenwashers in the market today.”
“But it gets worse. Banks that take advances from their FHLBs, that is most banks, do so in lieu of paying higher interest rates to their own customers. You’ve probably asked, “How can banks get away with paying on average 0.19 percent on savings accounts when the yield on 1-year treasuries is 4.75 percent?’ The answer lies largely with the FHLBs. In sum, taxpayers’ dollars support the FHLBs in exchange for which the taxpayers receive little to no benefit. Meanwhile, the FHLBs suppress the taxpayers’ returns on their bank accounts thus enhancing bank profits.”
“Bankers think this is a fine arrangement and it should be left alone. ‘Don’t mess with success,’ the American Bankers Association has warned the public.”
The Financial Post. “Canadian banks are attempting to ease the burden on homeowners who can’t keep up with the rapid rise in interest rates by extending mortgage amortizations and, in some cases, adding unpaid amounts onto the loan principal, tools that can stave off default in the short term but that may come with longer-term consequences. Federal rules stipulate that mortgages must be amortizing — meaning borrowers must be repaying principal — but lenders have three options once a trigger-rate threshold is reached: raise monthly payments, require a lump-sum pre-payment on the mortgage, or allow borrowers to slip into negative or reverse amortization for a period under rules set by banking authorities and mortgage insurers.”
“Negative or reverse amortization occurs when mortgage payments aren’t sufficient to cover interest due, and the excess amount is added to the principal owed on the loan, a procedure that could leave homeowners with a larger outstanding balance at renewal. The extent to which the triggering of larger payments becomes a problem will be determined by the actions of the Bank of Canada, said Robert McLister, a mortgage analyst and strategist.”
“If the central bank takes rates over five per cent, ‘we could have an unexpected arrears problem,’ he said. ‘In that case, I wouldn’t be shocked to see the government announce some type of measure to help distressed borrowers.’ One way they could do that is by formally allowing amortization extensions up to 40 years for borrowers with high debt ratios, something McLister says mortgage default insurers support.”
From Stuff New Zealand. “A low point in Nichole Lewis’s life was at the tail-end of the global financial crisis when, in 2010, the family home she was building on five acres of land went to mortgagee sale. Valued at roughly $1 million, it did not sell for 18 months, and then the bank stepped in, foreclosed, and sold it for about $650,000. The property investor and coach said she had learnt from her mistakes during the last housing market downturn, and this time she is in the position to capitalise on distressed sales. Next week she will be helping a client settle on a three-bedroom property in Avondale with an estimated value of $950,000, which they were getting for $600,000.”
“The downturn was likely to put a lot of inexperienced investors in financial difficulty, she said. ‘Talking to sources of mine that I’ve got at the bank, they are preparing for customers to be under hardship.’ To explain why more distressed sales may be on the horizon, Lewis talked about a central premise to her book, Property Quadrants. The central concept was that there are four types of property investments. Quadrant two were properties that investors purchased that didn’t stack up on the cash-flow front.”
“Now, interest rates were going up, taking mortgage repayments with them, rents are stalled due to frozen population numbers, and investors are facing higher tax bills. ‘They accidentally become cash-poor.’ Issues were compounded by price falls. ‘Suddenly you’ve got a negative equity, and then the bank comes knocking on the door, and you go ‘oops, oh I’m in trouble’”
“Lewis has already seen the early signs of trouble. ‘In fact the client I just got off the phone with said ‘I bought these investment properties years ago, I’ve read your book, I’ve bought in quadrant two, and I’m worried. Interest rates are going up, we can’t deduct, I feel like I’m completely stuck. Help me, what can we do?’”
The Cyprus Mail. “It is reassuring to hear a senior politician talk honestly about the irresponsible political exploitation of the foreclosures law by the political parties. In an interview published in Monday’s Politis, finance minister Constantinos Petrides slammed the latest suspension of the foreclosures law. The antics of the opposition parties, which suspended this law until the end of January, has made a joke of the law. Petrides said for the EU, another suspension was not justified as ‘we no longer have a temporary arrangement, which was initially implemented because of the pandemic, but a permanent, dangerous situation for the banking sector, as it establishes a culture of borrowers not honouring their obligations.’”
“Petrides also asked a pertinent question: ‘How many truly vulnerable people have lost their primary residence because of foreclosure?’ He also gave the answer: none. Vulnerable families had been protected and the populist suspension of foreclosures for farmland and business premises was totally unjustified. What started out as a plan to protect primary residences has been expanded to cover business premises and farmland, which in effect means it has been protecting strategic defaulters.”
From Dawn. “Former premier Imran Khan said on Tuesday that real estate is the biggest mafia in Pakistan, as it grabs government land, sells it to the general public and then transfers the proceeds abroad. ‘You can’t imagine how powerful they are,’ said Mr Khan while addressing a seminar on Tuesday via video link. Cadastral mapping, which shows land records with boundaries in digital form, ordered by the last PTI government, showed land worth Rs1.2 trillion had been encroached upon by the land mafia in Islamabad alone. ‘The situation is the same all over the country,’ he said.”