A report from the Union Tribune in California. “San Diego County’s home price has dropped for the sixth month and is close to erasing all yearly price gains. Jeff Grant, owner and agent with Sand & Sea Investments, has a listing in Solana Beach that recently went on sale for $1.9 million and isn’t getting much attention. His seller purchased the home in April, when home prices were peaking, for $2.45 million. For personal reasons, the buyer has to sell now and has put it on the market for a considerable discount. ‘I cannot get an offer,’ Grant said. ‘It is worth all day, $2.3 to $2.4 million, and we lowered the price, but not a single offer has come in.’”
The Dallas Morning News. “‘2023 is going to be a below-trend year for the U.S., and Texas can’t escape that,’ said William Adams, Comerica’s chief economist. Rising interest rates have slowed migration from other states, he said. ‘If a family in California can’t sell their house because it’s too expensive to afford, that makes it harder for them to move here,’ Adams said.”
The Orlando Sentinel. “In November, Central Florida home sales hit their lowest point in nearly four years, according to the association. Prices are falling, too. Orlando’s median home price, $360,000, has dropped by $27,000 since its height this summer. Tansey Soderstrom, president of the Orlando Regional Realtor Association says the people most under pressure are real estate agents. ‘You really have to work now,’ she said, contrasting the slowdown with the frenzied buying earlier this year. ‘No more selling houses with dirt on the floor for thousands over asking. Things have to be priced right, and they have to be show ready.’”
The Bozeman Daily Chronicle in Montana. “Fewer homes sold last month, homes spent a longer time on the market compared to this time in 2021, according to the Gallatin Association of Realtors. The end-of-month inventory of homes also increased substantially compared to last year. There were 323 homes for sale, compared to just 139 last year. In Bozeman, median sales prices for single family homes jumped 13% to last November, going from a median of $675,000 to $764,500. Prices fell about 9% compared to this October. ‘While we are still technically in a seller’s market, we are on the verge of moving into a neutral market,’ said Joanna Harper, GAR Board President.”
The Lehi Free Press in Utah. “The number of homes sold in Lehi during the first three quarters of 2022 was 750. A drop of 18.2% year over year. Lehi has recently seen a slight reduction in median sales price, with November’s median closing at $501,000, compared to $520,000 a year ago. A decrease of 3.7%. Most production builders now have readily available homes and are offering prospective home buyers an array of incentives, including price reductions, closing cost contributions, complimentary upgrades or lower interest rates.”
The Real Deal on Illinois. “A buyer has decided to seize an opportunity presented by the owners of a Gold Coast mansion running out of patience. The mansion in the 1400 block of historic Astor Street is finally under contract after four years of dancing between on and off the market and six price cuts from its initial listing, amounting to a 55 percent reduction. After slicing the asking price to $4 million earlier this month, the 9,300-square-foot home appears to have found a buyer. The home, which was originally listed in 2018 for nearly $9 million, is now listed as under contract on public listing sites. The final sales price isn’t yet known, yet luxury sales in the city as of late have come in well below listing prices on many of the most expensive properties.”
“The price cuts follow a similar pattern of another nearby home, which eventually sold in July for $7 million despite seeking $13.5 million when it was originally listed two years ago. That 10,000-square-foot Beaux-Arts style mansion at 15 West Burton Place was the first to sell in the Gold Coast for over $7 million since 2017.”
From Mansion Global. “Luxury home sales in the U.S. sank 38.1% annually during the three months ending Nov. 30—the biggest drop in at least 10 years, according to Redfin. The decline eclipses the 31.4% drop in sales in the mainstream market for the same time period. Though that’s also a record, according to the data, which goes back to 2012. Meanwhile, inventory for high-end homes rose 5.2% year over year during the dame time period, the largest increase since 2016, that figures showed.”
US News & World Report. “‘Pending home sales recorded the second-lowest monthly reading in 20 years as interest rates, which climbed at one of the fastest paces on record this year, drastically cut into the number of contract signings to buy a home,’ said NAR Chief Economist Lawrence Yun.”
From The Street. “The mortgage-backed securities market is facing new challenges. ‘There is a lot of uncertainty about the Fed,’ said Ethan Heisler, the strategic advisor at bond rating agency KBRA. ‘I started my career in 1981 when Chairman Volcker was in office, and rates were 20%. There was a lot of volatility surrounding Fed policy. We are back to those days. No one really knows what will happen with inflation, how high rates will have to go up before the economy starts showing signs of strain.’”
From Fortune. “For 124 consecutive months, spanning the bottom of the previous bust in February 2012 to the top of the Pandemic Housing Boom in June 2022, the seasonally adjusted Case-Shiller National Home Price Index reported positive home price growth. Now we’re in a new streak: Four consecutive months of U.S. home price declines. It’s already big enough to count as the the second-biggest home price correction of the post–World War II era. Recent research published by the Fed suggests that the Pandemic Housing Boom didn’t just help to drive up pandemic inflation—it was one of the biggest culprits.”
“‘Our results provide suggestive evidence that house price growth has been an important contributor to inflation during the pandemic … A back-of-the-envelope calculation based on our regression estimates suggests that house price growth could explain about 1/3 of the increase in the Consumer Price Index (CPI) excluding housing services between February 2020 and February 2022,’ write Federal Reserve economists in a paper published in November.”
“Simply put: Some deflation in home prices could help the Fed to rein in runaway inflation. Among the 20 major U.S. housing markets tracked by Case-Shiller, the home price decline ranges from just -0.95% in Chicago to -11.2% in San Francisco. What’s going on? The western half of the country, where affordability is a greater issue, has seen the sharpest correction. That includes major markets like Seattle (down 10.1%), San Diego (down 7.2%), Phoenix (down 5.4%), and Las Vegas (down 4.8%).”
From CTV News. “After a series of interest rate hikes throughout 2022, the average price of a home in Canada has dropped by more than $180,000 since hitting its peak in February. ‘Housing prices have been disconnected from reality for some time now,’ said Moshe Lander, an economics professor at Concordia University in Montreal told CTVNews. Sales in the Greater Toronto Area have slowed down significantly in recent months, said Nero Naveendran, a real estate agent based in Toronto. Residential sales activity over MLS systems dropped 49.6 per cent between November 2021 and November 2022 in Greater Toronto, according to data from the CREA that is not seasonally adjusted.”
“‘The homes that are not presented [or] cleaned well are sitting on the market for months, it’s not like last year where everything was selling,’ said Naveendran. ‘Now, people are looking for a home to live in, not an investment.’”
“While larger real estate markets are expected to see prices continue to drop in 2023, the more significant corrections in average home prices will be among properties in smaller markets, said Robert Hogue, assistant chief economist for RBC. This is particularly the case for markets located just outside of major urban centres, such as London and Kitchener in Ontario, or Fraser Valley in British Columbia. ‘Now that the frenzy is over, valuations are coming down to reflect the local realities,’ Hogue told CTVNews.”
From Globes. “Israel’s construction industry is in its worst situation in decades. For more than a year, sales of new homes have been falling steeply, at a rate not seen in at least 25 years, according to Central Bureau of Statistics figures. Building starts are also in sharp decline. What’s more, the decline in sales, which seemed slight and temporary, has turned into a severe crisis, making it had for developers to respond, and they are liable to get into financial difficulties.”
“It’s hard to find anything equivalent to what is now happening in the residential real estate market in the past twenty years. During the Second Lebanon War in 2006, the market fell by more than 40% within three months; at the time of the social protest of 2011, when interest rates were on the rise, purchases fell by 50% within eight months; when the Buyer Price subsidized housing program was underway, in two and a half years between 2016 and 2018 developers’ sales fell by nearly 50%. Still, none of these events comes close in its severity to what the market is currently going through.”
“It’s hard to explain why the decline in new home purchases began as early as August last year, eight months before interest rates started to rise. It may be that, while in certain cities the supply of new homes fell substantially, in other places, where there was extensive construction, demand ran out of steam.”
“The chief economist at the Ministry of Finance, Shira Greenberg, found that 70% of the homes sold on the open market were sold off the plan or at an early stage of construction. The problem is that presales oblige the developer to start work on a project, even though a large proportion of the apartments are actually unsold. Until the present crisis, this procedure paid off handsomely, and developers were able to finish selling off the remainder of the project quickly. The decline in demand, however, is slowing sales and could mean that developers will be left with large stocks of unsold apartments.”
“When receivers are appointed to these companies, things go from bad to worse, and there have been situations in which the receiver has informed homebuyers that they will have to pay over and above the price they were quoted, while the apartment they bought will not meet the specification to which the company committed. The Ministry of Finance says that it is aware of the situation, but that it does not share the pessimistic outlook. ‘The government’s aim is to bring down home prices, but to keep building starts at their currently high level,’ a Ministry of Finance source said.”
The Vietnam Express. “Khang lost his job as a real estate broker four months ago when his company laid off most of its employees. The medium-sized company, which offers brokerage services in HCMC and southern provinces, was operating perfunctorily since late last year, and the situation deteriorated further in April this year when banks announced credit tightening, he said. It had to start sacking staff by September, starting with a few dozens before laying them off by the hundreds amid reports that the market could be even worse in 2023. ‘Now I work as a collaborator with the company without a salary, but I have failed to do any transaction for the past four months,’ Khang said.”
“Khang’s plight is a common one now in the HCMC real estate market though the fourth quarter is usually the peak sales season. Pham Lam, vice chairman of the Vietnam Association of Realtors, said HCMC has more than 100,000 realtors, including 20,000-30,000 working for professional organizations. Some 50% had lost their jobs as of December, he said.”
“Hanh, who lost her job at another city-based brokerage that had a staff of over 1,000 two months ago, said it owes employees more than six months’ salaries. Expecting the difficult situation to prolong, many of her colleagues quit. Hanh and her colleagues were optimistic in the fourth quarter of last year when the Covid pandemic was brought under control and there were transactions from time to time albeit revenues were not very high. But a year later the realty market had become quiescent. Hanh said: ‘My family has four people. I had to quit my job to find a way to make ends meet.’”
From Business Today. “Douglas W. Diamond, often called the founder of modern banking theory, won the Nobel Memorial Prize in Economic Sciences in 2022 for path-breaking research aimed at enhancing the understanding of the role of banks in the economy, especially during financial crises. The 69-year-old shared the prize with economists Ben Bernanke of the Brookings Institution and Philip Dybvig of Washington University in St. Louis. Diamond shares his views on the developing economic situation around the world and its implications for India.”
“I have always thought about long periods of low interest rates in the US and other countries—as well as quantitative easing—as potentially excessive injections of liquidity, leading to expectations among financial institutions and firms that interest rates might stay close to zero forever. I thought there were some financial stability issues with that, as there was too much reliance on short-term debt. That’s the backdrop. I think that maybe they went too far in both Europe and the US by keeping interest rates where they were, and not thinking ahead enough about building up a big balance sheet and how difficult it would be to unwind that. That sets up vulnerabilities in the financial sector, including stability issues.”
“They developed this thing called the modern monetary theory that basically says that you can borrow as much as you want, and it doesn’t—as long as interest rates are zero—cause inflation. So that theory is true, as long as nobody believes it’s true. But once you start to use that [theory in practice], then it ceases to be true, because monetary and fiscal are all tied together. And they are also tied to financial stability. So, it’s a very hard time to be a central banker in the world, partly because you are into the region where financial stability is coming into question—we are not there yet—and I think central bankers understand financial stability quite well. But because the central bankers don’t control the fiscal part [that is]… too loose worldwide, it is a tough time.”