A report from The Hill. “A series of layoffs at America’s major technology companies could put pressure on local housing markets. San Jose and San Francisco are among five U.S. metros that have already experienced year-over-year price declines. Prices fell by 4.5 percent from last year in San Francisco and by 1.6 percent in San Jose. Redfin deputy chief economist Taylor Marr told The Hill that other economic factors might outweigh the real impact of tech company layoffs.”
“‘There are a lot of other factors also at play here — namely that the Nasdaq is still in a bear market 2022 and this is hurting these local economies and housing markets more — already Seattle and SF home values declined 9 percent between May and August — according to Case Shiller — and are expected to have fallen further since then,’ Marr said.”
The Philadelphia Inquirer in Pennsylvania. “‘I can tell you the phone isn’t ringing like it was,’ said Philadelphia-area agent Maria Quattrone. ‘This is the ‘have-to’ market,’ she said. ‘We have to talk to more people to find the ‘have-to’ people,’ said Quattrone, whose team of about 20 makes calls every day. ‘And less people are answering the phones,’ she said. ‘Less people want to do anything.’”
From The Tribune. “Sky-high home and rent prices continued their slow decline in October across California, reports from the California Association of Realtors and Rent.com showed. On the Central Coast, San Luis Obispo County’s median home price dropped from $875,000 in September to $815,000 in October, the CAR report said, a 6.9% decline that brought prices nearly in line with this time last year. The current median SLO County home price of $815,000 is now just 1.9% higher than October 2021’s median of $800,000. Those lower prices come as nearly 45.6% of SLO County homes were sold below listing price, Arroyo Grande Realtor Barry Brown said. ‘This is where I think that there’s some opportunity for buyers like right now,’ Brown said.”
“18% of California households were capable of purchasing a $829,760 median-priced home in the third quarter of 2022, the report said, based on an ability to meet a monthly payment of $4,820 with a 5.72% interest rate. That would require a minimum income of $192,800 to qualify for the purchase of a median-priced single-family home. ‘In the end, what really drives home sales is what someone can afford to pay each month in a housing payment,’ Brown said.”
From Bankrate. “In one common scenario, known as a 2/1 buydown, the seller pays to cut the buyer’s mortgage rate by 2 percentage points for the first year of the loan and by 1 percentage point for the second year. During the pandemic-driven housing boom, sellers hardly needed to do anything to unload their homes quickly and for a hefty premium. This year, the housing market has slowed sharply, and sellers face a new reality. ‘Buyers don’t have to go through all these crazy inspection waivers and appraisal waivers,’ says Elena Sarantidis, a mortgage broker in Wellington, Florida.”
“The most common way for sellers to close a deal with a reluctant buyer is to simply cut the price. Proponents of buydowns, however, say both sellers and buyers get more bang for their buck with a temporary rate buydown. For builders, the appeal of a rate buydown is clear: If they cut the price now, they’ll feel pressure to do so for future buyers. The temporary buydown is a way to protect their pricing while also giving the buyer something of value.”
Multi Housing News. “Lately, demand has not resulted in absorption at the levels we would have expected, said Jay Lybik, Director of Multifamily Analytics, CoStar Group. ‘We knew that demand would be lower than the record levels posted last year but absorption in the all-important second and third quarters significantly underperformed,’ he said. Year-to-date, the apartment market has absorbed only 200,000 units, with just 60,000 in the typically strong summer leasing season’s third quarter.”
“At the same time, new supply additions over the past three quarters totaled 320,000 units, highlighting the market reversal of supply outpacing demand so far in 2022. The oversupply situation has pushed the national vacancy rate up from an all-time low of 4.7% a year ago to 5.4% today. The rising national vacancy rate does not tell the whole story as four- and five-star properties have outpaced the nation in terms of increasing vacancy. Four- and five-star vacancies rose 90 basis points to 7.4% in Q3 after hitting a low of 6.5% just 12 months ago.”
The News and Observer in North Carolina. “The Triangle’s rental housing market appears to be stabilizing, according to industry experts and data from Apartment List. The reversal of widespread price hikes follows a national trend. ‘It’s kind of like the perfect storm,’ said AnnMarie Janni, a Realtor. She also runs her own property management firm based out of Apex.”
“‘In 2022’s third quarter, Raleigh absorbed just 180 units,’ said Kim O’Brien, a RealPage analyst. ‘Along with second quarter’s net move-outs for 560 units, (it) was one of the weakest showings the market has displayed since 2019. Two quarters of softness in Raleigh pulled annual demand down.’ Meanwhile, new apartment supply jumped, data showed. Raleigh saw 1,761 units completed in the third quarter, and a total of 6,126 completed this year. In contrast to demand, O’Brien said annual supply has ticked up in the past two consecutive quarters and is now ‘well ahead of five-year norms for this market.’”
Yahoo Money. “Many tenants across America are also breathing a sigh of relief as rents drop from record highs for the first time in nearly two years. ‘In 2021-2022, U.S. occupancy rates rose to record levels. The market was on fire and many renters were priced out of double-digit percentage rent increases,’ said Anthemos Georgiades, CEO of Zumper. ‘Now, as we enter the third year of the market since Covid, there’s a very different story. Occupancy rates are in freefall, vacancies are rising, the fear of recession is biting, and rents have plateaued. We’re seeing month-over-month declines in more than half of the cities on our list,’ he said, including Minneapolis; Nashville; El Paso, Texas; and Jacksonville, Tampa, and Orlando in Florida.”
“After numerous failed attempts to find new housing last year and repeatedly being told she had to be ‘mortgage-ready’ in order to even qualify for a rental, 34-year-old Nicole Thelin recently moved into a home just south of Olympia, Wash. ‘Clearly, the market has shifted,’ Thelin said. ‘Our landlord brings over flowers.’”
Bisnow Boston in Massachusetts. “From the world’s largest companies to small startups, the technology industry has been laying off employees by the thousands in recent weeks, part of cost-cutting measures that are creating uncertainty about their commercial real estate footprints. In the Boston area, where local tech companies have been laying off employees for several months, the new wave of big tech layoffs could serve as another blow to an already weakening office market. ‘A lot of these companies were too optimistic about how the path of things that was started by Covid was going to continue and now you’re seeing the recalibration,’ said Max Saia, senior director for investor research for VTS. ‘Tech demand is down. Everything is down but tech is down more than any other major industry.’”
Bisnow London. “The UK is the European real estate market that should be most appealing to investors next year, a new forecast from a major global fund manager predicts. That doesn’t mean real estate investment is now generally attractive on a risk-adjusted basis, however, AEW said, pointing to rising interest rates and yields that have not kept pace. AEW’s new base-case scenario assumes the market is past the peak of inflation across the 20 countries covered. Inflation is expected to come back down to below the 2% target adopted by central banks by early 2024.”
“A debt funding gap of €24B is estimated for the next three years in the UK, France and Germany, with refinancings of maturing loans expected to face issues from the decline in capital values and lenders’ reduced risk appetites leading to lower LTVs. Negative capital returns are expected for the next three years across all sectors, with a cumulative capital value decline of -12% in the base-case scenario.”
The Globe and Mail. “Canada’s financial system should be able to weather a period of heightened stress, but many recent home buyers could experience a ‘painful’ squeeze as interest rates continue to rise, the Bank of Canada’s second-in-command said. Senior deputy governor Carolyn Rogers said long-standing vulnerabilities in Canada’s housing market worsened through the COVID-19 pandemic as home prices soared and buyers increasingly relied on variable-rate mortgages, which are linked to the central bank’s benchmark lending rate. Now that interest rates are rising and home prices are falling, many of these home buyers are experiencing a nasty adjustment, Ms. Rogers said.”
“When the monthly payment no longer covers any principal, the borrower hits what is known as a trigger rate, and their monthly payment rises. In some cases, the lender allows the borrower to shift the interest onto the principal, which increases the size of the mortgage. Fifty per cent of these variable-rate mortgage holders have already reached their trigger rate, according to estimates from a new Bank of Canada research paper published Tuesday. That share will rise to 65 per cent by the middle of next year as the central bank continues to hike interest rates to rein in inflation.”
“The central bank is raising interest rates to slow consumer price growth. It does not specifically target home prices, but Ms. Rogers suggested the bank is quite happy to see those prices fall. Nationally, home prices are down by around 10 per cent from the peak in February. ‘We need lower house prices to restore balance to Canada’s housing market and make home ownership more affordable for more Canadians,’ Ms. Rogers said.”
The Sydney Morning Herald. “In terms of apologies, it was of the ‘I’m sorry you were offended by what I said’ variety. Reserve Bank governor Philip Lowe, making his first appearance before a Senate estimates hearing, was asked by the Greens’ Nick McKim whether he owed an apology to the hundreds of thousands of Australians who took out mortgages over the past two years on the understanding interest rates would not increase until 2024.”
“Lowe’s answer was couched as an apology. But the actual words were more apology-adjacent. ‘I’m sorry if people listened to what we’d said and acted on what we’d said and now regret what they’ve done. I’m sorry that happened,’ he said. ‘I’m sorry that people listened to what we’d said and acted on that, and now find themselves in a position they don’t want to be in. At the time, we thought it was the right thing to do.’”
“In other words, the RBA governor – whose decisions, along with the rest of the bank board, are costing mortgage holders about $1000 a month in higher repayments – told people he was sorry they had listened to him. Pressed further, Lowe conceded he should have been more careful with his language around what might lead the bank to abandon its ‘no rate rise till 2024’ position. ‘That’s a failure on our part, we didn’t communicate the caveats clearly enough. The community heard 2024, they didn’t hear the conditionality, that’s partly our fault,’ he said.”
“Again, it’s an apology in outward appearance but there’s a kicker. It was only ‘partly’ the bank’s fault that ordinary Australians, going about their business, did not drill down to the ins and outs of monetary policy jargon. So, what hope did a family living in Melbourne’s Mill Park or Sydney’s Harrington Park or Perth’s Gosnells have of understanding that rates could be increased ahead of 2024?”