A report from NBC San Diego in California. “Gone are the days of 30 bids raising a home’s prices overnight. ‘That market is done. It’s completely dead,’ declared Miguel Contreras a real estate consultant. ‘If you’re a seller, you have to get that out of your mind.’ Contreras watched the median home prices drop more than $30,000 since June and once again sees homes sitting on the market for weeks. ‘If your goal is to sell, you have to be flexible with your pricing terms,’ he warned. ‘Do that math and understand that if you’re greedy, you’re going to lose out.’”
The Dallas Business Journal in Texas. “Median home prices are down $152,000 in Frisco, $115,000 in Plano, and $110,000 in Irving from their springtime highs, according to a city-by-city analysis. Median prices for single-family houses are down $90,000 in McKinney, $72,000 in Dallas, $67,500 in Richardson, $40,000 in Fort Worth, $37,000 in Denton, and $26,000 in Arlington from their peaks earlier this year, according to AgentStory. In Dallas, the median home price stood at $399,900 in October, down from a high of $471,551 in April. In Fort Worth, the October median was $331,369, after maxing out at $371,000 in April.”
From Hawaii Real Estate Dreams. “Kona overall sales are down 33% year-to-date. In checking houses, they are down also 33%. The average price is exactly the same as October 2021 for all ranges, $1.8 million. The mean or middle was slightly higher by $100,000 this year at $1.07 million. If we cap it at a million, sales are down 43% and prices are almost the same as last year. So to recap, houses sales are down and prices are falling back to 2021. Condo sales are down and prices are still up, land sales are falling fast and most prices are the same as 2021… and this is only five months after they started raising interest rates, the catalyst for these changes… wow, that was fast!”
The Review Journal. “Las Vegas’ homebuilding market kept its foot on the brake last month. Builders logged 350 net sales — newly signed purchase contracts minus cancellations — in Southern Nevada in October, down 59 percent from the same month last year, according to Las Vegas-based Home Builders Research. Builders pulled 545 new-home permits last month, down 55 percent from October 2021, indicating a sharp drop in construction plans, and their land buying was ‘basically non-existent’ in October, wrote Andrew Smith, the research firm’s president.”
“He said builders were ‘trying to keep up with sales’ over the past two years and started homes before they signed sales contracts with buyers, figuring the properties would sell quickly. But sales have now ‘dropped pretty significantly,’ so as a result, many homes that got underway when activity was higher are now being finished without a buyer, Smith said. Last month, builders’ sales cancellation rate in Southern Nevada was 36 percent, the highest since December 2008, Smith reported.”
From Market Place. “In case there was any lingering doubt, the new data shows the housing market has definitely turned, according to Mark Zandi, chief economist at Moody’s Analytics. ‘It feels somewhat clifflike at the moment,’ he said. ‘You know, I think what this reflects is whiplash. I mean, what goes up comes down.’ And down is the direction the Federal Reserve wants to see prices go, per Craig Lazzara, managing director at S&P Dow Jones Indices — which produces the Case-Shiller index. ‘This is a feature, not a bug. This is what they want to see,’ Lazzara said. ‘If I were [Fed Chair] Jay Powell, I would like it.’”
From Bloomberg. “Starwood Capital-backed home lender Reverse Mortgage Funding LLC filed for Chapter 11 bankruptcy, the latest company to succumb amid a rapid run-up in mortgage rates. In addition to being a lender and servicer of more than 84,000 reverse mortgage borrowers, Reverse Mortgage Funding has been a frequent seller of securitized bonds backed by mortgages. That business came under strain recently as well: late last month, the company shelved a $290 million bond sale amid market volatility.”
Reverse Mortgage Daily. “Reverse Mortgage Funding, LLC , one of the nation’s largest reverse mortgage lenders, on Wednesday filed for Chapter 11 bankruptcy, just over a week after ‘pausing’ originations. While the company has not closed, nearly 500 employees were laid off this week, according to a source with direct knowledge of operations. According to the website for the Delaware district of the bankruptcy court, five total entities associated with RMF, including the company itself and its parent, Reverse Mortgage Investment Trust, Inc., have filed for Chapter 11 bankruptcy protection. RMF reportedly was forced to pause its origination activities due to a collapse of the lender’s warehouse lines, according to multiple sources.”
Multi-Housing News. “Student housing investment sales reached $18.2 billion through three quarters this year. The higher interest rates have made it tougher for investors to put deals together that make financial sense unless sellers significantly reduce prices. By and large, sellers haven’t. Unlike last year, Fannie Mae and Freddie Mac have been more active in the student housing space and are thereby capturing more market share as banks and debt funds rein in lending, said Will Baker, a senior managing director with Walker & Dunlop in Birmingham, Alabama. Borrowers have seen the amount of debt they can secure relative to value drop from 65 percent to 60 percent, or even 55 percent, Baker said. ‘With the 10-Year Treasury yield at 4 percent, it doesn’t feel that great locking in a 6 percent interest rate for 10 years,’ Baker said.”
From Farm Journal. “Zero, 16 and 52 illustrate the wild and emotional farmland market. In 2020, not a single farm sold for more than $20,000 per acre in Iowa. In 2021, 16 farms crossed that threshold. This year, as of October, more than 50 (at least one farm every month) has sold for more than $20,000 per acre. ‘Every time I think it’s a peak, we get a new record,’ says Jim Rothermich, vice president of Iowa Appraisal. ‘Those $20,000-per-acre sales used to only happen in northwest Iowa. Now they can happen anywhere.’”
“‘We’re looking at around 7% interest rates,’ Steve Bruere, president of Peoples Company says. ‘But, the cash returns on farmland, say in Iowa, are closer to 2.5%. If you’re borrowing money at 7% and getting 2.5% back, the math doesn’t work real well.’ With prices at $15,000 to more than $20,000 per acre, buyers are playing a high-stakes game, Bruere says. ‘If you’re wrong at these levels, you’re really wrong,’ he says. ‘An old boy told me, ‘The time to buy farmland is when somebody wants to sell it.’ But high prices bring more land to the market. I worry if people are making long-term decisions based on short-term information. It would be prudent to look past today’s environment.’”
The Globe and Mail. “More retirement-age Canadians are still paying off a mortgage, and financial advisers say rising interest rates will make it even more challenging for Canadians to pay off their home before they retire. The number of people older than 65 with an outstanding mortgage in their residence increased from 1.2 million to 1.5 million between 2016 and 2021 according to Statistics Canada, although the agency noted they don’t measure whether others residing in the home are contributing to mortgage payments. However, the number of seniors living alone with a mortgage also grew, from roughly 181,000 to 220,000 in the same time frame.”
“Jason Heath, managing director of Objective Financial Partners, a fee-only financial planning firm in Markham, Ont., said the trend of more retirement-age people carrying mortgages was first fuelled by years of rapidly increasing housing prices and is now being compounded by rapidly increasing interest rates.”
“‘There’s a whole cohort of people approaching their retirement or young people that have taken on big mortgages that, when I work with them to plan for retirement, it’s quite clear that they’ll never be debt-free on their current home,’ said Mr. Heath, who said that some people took on their first mortgages late in their lives, or moved into their dream home too late to be able to pay it off. ‘Some of those mortgages had 1.5 per cent or 2.5 per cent interest, and as variable rates rise or fixed rates come up for renewal in the next couple of years, it’ll definitely push up their amortization, so it’s going to be more of a phenomenon.’”
“In some cases, even homeowners who’ve already paid off their mortgage can find themselves caught off guard. Responding to a callout from The Globe and Mail’s Stress Test podcast, a 40-year-old Toronto woman said she found herself facing an outsized mortgage after having to buy out half of her home’s value following a divorce. The woman and her ex bought the house for $318,000 in 2008 and paid it off in 2020. When the couple split shortly after, the home had risen in value to $1.1-million, and she barely qualified for a variable rate mortgage to buy out the outstanding $550,000 from her partner.”
“The woman makes more than $100,000 a year, but still has to rely on financial help from a parent to pay her bills as interest rate hikes drove up her monthly payments from $1,400 to $2,100. She expects to carry the mortgage into retirement.”
Stuff New Zealand. “House prices slid just over 8% in the year to October and are down about 12% from their peak. Wellington-based investor Steve Goodey said he had changed his strategy in line with a softer housing market and rising interest rates. ‘I’ve stopped purchasing stuff to renovate and sell straight away. That strategy is a bit old and deflated. I’m buying more new build stuff at the moment, because I can.’”
“He said, in the last week, he had backed out of buying three new properties that he had signed up to. He triggered the sunset clauses in the agreements, which allow the developer or buyer to back out if the development has not progressed sufficiently, and claimed back his deposits. ‘We are past the point where we can expect new builds to go up in value between buying them and settling. Now it’s possible that in the middle of next year we could be buying better deals than we are buying now. That’s an important tipping point. That $110,000 I got back from the ones I bought last year that haven’t started yet – by the middle of next year I could use that to buy some really good bargain stuff that’s alread built as a new build. It probably won’t be cashflow positive or even neutral but it will be brand new.’”
“He said some developers who had already committed to developing sites could hit trouble next year. Sites that had been cleared and had the foundations ready were probably going to sell for about $100,000 less per property once developed than they had at the peak, he said. ‘Some of these guys still have another 100 sites that still have the original old house on it with the old lady living in it still. They’ve either settled or committed to purchase and they have to settle or lose their deposit. They can’t just hold those because they won’t cover themselves. They really have to develop them. Some of those developers are sweating a bit. The OCR went up, interest rates are now at 7%, test rates at 8.5% – if early next year the stress rate is 9.5% a lot of people who bought them last year are going to go to the bank and have them go ‘actually no we can’t lend you this money’ because they have to use the stress rate across the entire portfolio.’”
“‘Those people are going to go ‘I paid a $80,000 but it’s worth less than what I paid for it, even if I do settle I’ll lose money, stuff you guys I’m doing a runner’. At that point you might be able to buy a property that was worth $800,000 last year for $600,000 now if you’re cashed up and ready to go.’”
From The Hill. “FTX founder Samuel Bankman-Fried’s interview at a financial conference here Wednesday drew a crowd of protesters, some of whom had lost sizable portions of their life savings in the collapse of his crypto platform FTX earlier in November. ‘This guy robbed me,’ said Anthony Canelo, who stood outside the event hosted by the New York Times, where Bankman-Fried spoke via video link from the Bahamas.”
“Canelo held a sign that read ‘SBF and Gary G robbed us all,’ referring to Bankman-Fried as well as U.S. Securities and Exchange Commission Chair Gary Gensler, who has been under pressure to clamp down on the loosely regulated cryptocurrency sector. ‘I lost over $10,000. I’m 36-years-old. Do you know how much money that is for someone like myself? And this guy gets to talk? Everyone knows that he took customer funds,’ Canelo added.”
“Bankman-Fried was interviewed during the event by New York Times reporter and CNBC host Andrew Ross Sorkin, who said he’d received numerous letters from people who’d experienced financial hardship from the collapse and were angry the FTX founder was being given a high-profile platform to explain himself. ‘One of the letters I got I want to read to you, Sam, because it’s from a gentleman who said he lost his life savings,’ Sorkin said. ‘It says, ‘Andrew, can you please ask [Samuel Bankman-Fried] why he decided to steal my life savings and the $10 billion more from customers to give to his hedge fund?’”
“Bankman-Fried said he was ‘deeply sorry about what happened’ but said he ‘didn’t ever try to commit fraud on anyone.’ Bankman-Fried addressed the issue of real estate that was bought for his parents during the conference. ‘I don’t know the details of the house for my parents, but I knew it was not intended to be their long-term property. It was intended to be the company’s property.’ he said. ‘I think they stayed there while working with the company some time over the last year.’”