A report from the Herald Tribune in Florida. “‘Sellers are listening more to their agents and being more realistic with asking prices,’ noted Ellen O’Day, the managing broker for two of our Coldwell Banker Realty offices in Sarasota.”
The Los Angeles Times in California. “Just weeks after Los Angeles voters backed a new measure that puts a one-time transfer tax on property sales above $5 million to generate money for affordable housing and homelessness prevention, the city’s affluent homeowners are exploring potential ways of avoiding the tax. It’s set to take effect April 1, and it’s already causing shock waves in the L.A. housing market. Agents say homeowners and developers are already rushing to sell before the deadline. ‘For owners who were on the fence about selling, this will speed up the process,’ Compass agent Bret Parsons said.”
“He said he had one client who was planning to slowly downsize and sell sometime in the next six months, but called Parsons right after the measure passed saying he’d clean the place up immediately so they could list it in the next few weeks. The new tax would take a chunk out of his retirement fund, and he needs to sell before April.”
The Charlotte Observer. “A cool residence that’s listed for $206,000 in Long Beach, California, has people on a popular real estate page talking. Or rather asking, is this three-bedroom, two-bathroom residence really a mobile home? ‘Wait!!! Is this a trailer???’ another asked.”
The New York Post. “A Queens state senator whose home has been in foreclosure for more than a decade could see relief from his creditors if legislation he proposed is signed by Gov. Hochul. Sen. James Sanders’ Foreclosure Process Abuse Prevention Act has already been passed by both chambers of the state legislature in Albany. The bill aims to ‘thwart and eliminate abusive and unlawful litigation tactics’ used by banks. The measure would institute a six-year statute of limitations for which lenders can initiate legal action in foreclosure suits, preventing banks from indefinitely bringing foreclosure lawsuits against borrowers.”
“‘Homeowners who are in foreclosure will be the biggest winners when this significant foreclosure bill becomes law,’ he added in an August press release. Those big winners would include Sanders himself — his Far Rockaway abode has been in foreclosure since 2009. Sanders, who chairs the Senate Banking Committee, purchased the 2,352-square-foot, single family home for $588,600 in August 2006, taking out a $470,880 mortgage. By 2019 his creditor, One West Bank, was demanding $961,685. James Sanders’ home has been in foreclosure for more than a decade.”
From Fox Business. “Confidence among builders in the U.S. housing market unexpectedly fell in December to the lowest level in a decade. The National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, fell for the twelfth consecutive month to 31, marking the worst stretch for the housing market since the survey launched in 1985. Any reading above 50 is considered positive; prior to this year, the gauge has not entered negative territory since 2012, excluding a brief – but steep – drop in May 2020.”
“The index has fallen to half of what it was just six months ago, when it stood at 76. ‘In this high inflation, high mortgage rate environment, builders are struggling to keep housing affordable for home buyers,’ said NAHB Chairman Jerry Konter, a homebuilder and developer from Savannah, Georgia. ‘Our latest survey shows 62% of builders are using incentives to bolster sales, including providing mortgage rate buy-downs, paying points for buyers and offering price reductions.’”
The Financial Post in Canada. “Mortgage brokers are beginning to see more instances of default on privately financed loans and an increase in powers of sale as the central bank raises interest rates at an unprecedented clip. ‘We’re starting to see some power in sales in the marketplace in the GTA, and we are also starting to see some people defaulting on some private mortgages as well,’ said Leah Zlatkin, mortgage broker and expert at lowestrates.ca.”
“Home prices have fallen for nine consecutive months, dropping 11.5 per cent from February’s peak, the Canadian Real Estate Association reported Thursday. The benchmark price for a home in November sat at $744,000. Higher rates could bring home prices down even more, especially as speculators try to time the bottom of the market while those unable to qualify for mortgages also sit on the sidelines.”
The Canadian Press. “Mortgage stress test levels were left unchanged as the federal banking regulator and Department of Finance favoured a cautious approach over calls to relax tests to help a slowing housing market. The Office of the Superintendent of Financial Institutions (OSFI) kept the minimum qualifying rate for uninsured mortgages at the greater of the mortgage contract rate plus two percentage points, or 5.25 per cent, while the finance department followed suit with the same rate on insured mortgages.”
“The maintenance of the stress test levels, which at current interest rates force some borrowers to qualify for rates above eight per cent, comes as the Bank of Canada is widely expected to be at or near the end of its aggressive rate hike cycle. Cameron Levitt, a sales representative at the Richards Group at REMAX Hallmark, said he’s glad the stress tests were left unchanged as it’s helping protect against buyers rushing into the market as they did last year. ‘Homeowners and homebuyers forgot that risk exists, and this last year has been a big wake-up call.’”
The Dutch Review. “If you’re anything like us, your ears probably perked up at the recent news that Dutch house prices were starting to cool off. Well, actually, it’s quite promising, mortgage expert Henk Janson tells us. ‘What we’re seeing is that there are fewer people showing up for house viewings, and while there was a real bidding war in 2021, from what I have seen, overbidding is almost gone.’”
From Bloomberg. “Time is running short for Vietnam to prevent a worsening property-sector credit crunch from derailing one of the world’s fastest economic expansions. With about $4.6 billion of property developer notes tracked by Vietnam’s bond association coming due next year, the firms will struggle to meet obligations without government support, according to local real estate executives and analysts. Funding has all but dried up after an anti-graft campaign spooked investors and authorities froze new bond issuance across the industry.”
“The looming maturity wall risks triggering a wave of defaults that could turn the property woes into a wider crisis for the banking sector and the economy. Signs of stress are already spreading. A lack of cash has forced businesses to turn to shadow loans at very high interest rates and sell properties at discounts as deep as 40%.”
The South China Morning Post. “The supply of new homes on the market in Hong Kong next year could more than double compared with this year, driving developers to slash prices by 10 per cent or more in hopes of attracting buyers amid historically high interest rates, according to property agents. The potential supply of new homes in 2023, according to Centaline Property Agency, will be as high as 28,000 units. The swollen 2023 inventory will include 11,000 incomplete units already approved for sale but not yet launched, plus 17,000 units already on sale.”
“Poly Property and L’Avenue International sold just 10 out of 127 units at Chill Residence in Yau Tong on the first day of sales on December 4. The average selling price of HK$17,939 per square foot made it the cheapest project in Kowloon in the past two years, according to UOB Kay Hian. ‘There are more than 20,000 leftover completed homes and incomplete units,’ said Buggle Lau, chief analyst at Midland Realty. ‘Developers will still focus on selling leftover stock in the short term.’”
“Ricacorp Properties described 2022 as ‘the worst trough in history’ for new-home sales and ‘worse than the financial tsunami in 2008, reflecting the impact of the double whammy of the pandemic and interest-rate hikes.’”
The Daily Telegraph. “So-called ‘lifestyle’ suburbs in regional NSW that were popular during the early Covid pandemic have recorded some of the biggest property price falls this year. Over the past 18 months, house prices in regional NSW have fallen 38 per cent with the state seeing the sharpest drops across Australia. The PropTrack Regional Australia 2022 Report found that popular tree-change and sea-change markets that boomed during successive Covid lockdowns were the first to see prices fall.”
From ABC News. “The COVID-19 pandemic has had a profound impact on the Australian property market. So what was it like to work in the real estate industry during this period of unprecedented national growth? Brisbane auctioneer Justin Nickerson talked of a crazy time when selling property required ‘no real skill.’ ‘Anyone could have sold property last year,’ he said. ‘They were fun days, but we knew they were never going to last.’”
“The boom was also nationwide, which was quite an unusual occurrence. ‘Generally capital cities and regional areas are at different stages on the property cycle clock,’ Brisbane real estate agent Stuart McCrea said. ‘During the boom, the whole country was stuck at 12 — I haven’t seen that before.’ Mr McCrea clearly remembered the first open home that made him realise something was happening with the market.”
“‘It was October 2020, and there was a crowd outside the door and down the street,’ he said. ‘I had several examples of clients selling their homes and telling me they were not turning up to work on Monday. They had made so much money on the sale they could retire early. If I sold a house and settlement was 30 to 60 days, I could often get more money for the property before it even settled. I could say to the new owner, ‘Do you want to sell it again and make $150,000?’”
“‘Not only were prices escalating, but we also started to see concerning behaviour. ‘People were making unconditional offers that were well above their budget.’ There was one open home in February this year that marked the start of the market cool-down, Mr McCrea recalled. ‘As I pulled up to the home, I actually thought I had the wrong time because there weren’t any people waiting for me,’ he said. ‘There was a shift where people stopped thinking prices would just keep rising.’”
From Reuters. “The post-pandemic slump in Australian housing is set to deepen next year as hundreds of billions of dollars of mortgage debt fixed at record low rates in 2020 and 2021 mature, forcing borrowers to refinance at punishingly high interest rates. Repayments on an estimated A$370 billion ($245.79 billion) of home loans could spike by as much as two-thirds at a time when real incomes are already shrinking due to surging inflation, dealing a body blow to house prices and the economy’s main engine of growth – consumer spending.”
“Home values in Sydney have fallen 12% so far this year and Eliza Owen, head of Australian research at property consultant CoreLogic, expects further losses as more distressed properties are listed for sale. Homeowner Francesca Lemon knows the pain – repayments on her variable-rate mortgage have already risen by A$1,200 per month this year, forcing her back to work despite a long-term medical condition so that her family can keep up with debt.”
“‘It’s very frustrating and people are already struggling to survive. The cost of paying your mortgage is literally going up for everyone by thousands of dollars,’ said the 31-year-old Lemon. Leesa Gasparin, a 55-year old resident in Tasmania, now contributes a quarter of her income of about $4,000 a month to her rising mortgage. ‘I know it’s probably not a lot of money to some people, but it is to me. It’s like everything with groceries, power and all that. It is really bloody tough.’”
The Globe and Mail. “As revelations emerge about the vast scope of the FTX debacle, the inevitable comparisons are being made between its disgraced chief executive Sam Bankman-Fried and legendary Ponzi schemer Bernie Madoff. To be sure, both scoundrels were adept at parting fools and their money – lots of it. But Mr. Madoff’s victims might elicit some sympathy for being taken in by his carefully crafted façade of respectability. Mr. Bankman-Fried’s willing dupes should get no such leniency. They should have seen trouble coming.”
“Mr. Bankman-Fried’s venture had more red flags than a Beijing military parade, the biggest one being that head office in the Bahamas. There is perhaps no redder flag than a corporate headquarters in a sketchy tax haven with a long history of dirty dealing that has been called out by global watchdogs. History tells us this is nothing new for the island nation a few miles off the east coast of Florida. This is where piracy was a core business, and where Civil War smugglers and Prohibition-era bootleggers found safe haven. The Mafia laundered money through its casinos there, and drug lords followed suit.”
“This was home to the infamous Bay Street Boys, local business owners who exempted themselves from taxes, and set the stage for the evolution of shell companies with no visible commercial raison d’être but with the ability to make loans and book deductions. It is perhaps no coincidence FTX’s offices are on Bay Street in Nassau, the capital. And the allegations against Mr. Bankman-Fried align with the culture of loose regulatory control that is the Bahamian legacy.”
“The legendary showman P.T. Barnum said famously, ‘There’s a sucker born every minute.’ Investors should beware that no matter what their methods, there will be more Sam Bankman-Frieds and Bernie Madoffs eager to convince people of the healing power of their brands of snake oil.”