A report from Go Banking Rates. “In 2021, inflation pushed the housing market to record highs — but it wasn’t a bubble. ‘It’s not like 2008, because the growth we have seen in the past few years wasn’t based on ARM mortgages being given to people who couldn’t afford them,’ said Tomas Satas, CEO of Windy City HomeBuyer. ‘We will still see people upside-down in their mortgages and some foreclosures, but it will be a fraction of what we experienced back then. We’ve already seen the beginning of this market correction, and we know that properties are going to continue to lose value. However, this is more correction than recession.’”
From Realtor.com. “Adjustable-rate mortgages, which offer homebuyers on a budget an initially low interest rate, are making a big comeback. But as financial markets churn and the economy remains shaky, some borrowers are regretting their decision to opt for what many see as a risky gamble. About 43% of those who took out an ARM regretted it, according to a recent survey by U.S. News & World Report. The rate resets, usually annually, according to what interest rates are doing at the time. The popular 5/1 ARM, for example, will have a fixed rate for five years that then resets every year thereafter based on the market. That’s where folks can get themselves in trouble if they can’t afford their new mortgage payments when rates increase.”
From Fortune. “The Fed’s ongoing inflation fight—which saw mortgage rates spike from 3% to 6% in 2022—has set off the second biggest home price correction of the post-WWII era. Look no further than a Goldman Sachs paper put out last week with the title ‘Getting worse before getting better.’ Researchers at the investment bank argued in the paper that the national home price correction will continue through 2023. Nationally, a 10% peak-to-trough decline in U.S. home prices—which climbed 41% between March 2020 and June 2022—shouldn’t do too much financial damage, says Goldman Sachs. However, the firm says some regional markets won’t be so lucky.”
“In 2023, Goldman Sachs expects double-digit home price declines in major markets like Austin (-15.6), San Francisco (-13.7%), San Diego (-13.4%), Phoenix (-12.9%), Denver (-11.4%), Seattle (-11.2%), Tampa (-11.2%), and Las Vegas (-11.1%). Those markets are also the very places that the home price correction hit the hardest in the second half of 2022. Indeed, through November, Austin is down 10.4% from its 2022 peak home price.”
Big Island Now in Hawaii. “In mid-August, Sotherby Concierge Auction’s put up for auction an 11,000-square-foot, 5-bedroom mansion perched atop a cliff overlooking the Pacific Ocean on the Big Island’s Hamakua Coast. The rich were bidding on a 9.44-acre property in Ninole that comes with a tennis stadium for 450 spectators, basketball courts, an Olympic pool featuring a two-story waterslide, a 16-foot diving pool, a nine-hole golf course, rooftop helipad and a terrace with a lounging area. The mansion built in 2005 along Old Mamalahoa Highway has been rented for up to $10,000-a-night.”
“The property was bought for $6.8 million in December 2015. It was put on the market for $12.5 million in 2020. In February, it was listed for $9.95 million. With no takers, it was put up for auction, with a $5.75 million reserve. Recently, the property sold for $5.75 million plus a 12% buyer’s premium to buyer Eric Lochtefeld, according to Mansion Global.”
From Give Me Sport. “50 Cent has revealed he lost millions of dollars after buying a lavish 21-bedroom mansion once owned by Mike Tyson. The rapper, 47, bought the property for a reported £3.3 million in 2007. However, it wasn’t long before he began to regret that decision due to the costs of keeping the place running. ‘It had 18 bedrooms, 16 bathrooms, and it had a night club in it. I paid $4.1 million and I sold it for $3.1 million. I had it for 14 years, the upkeep was about $700,00 a year, just for that.’”
The Berkshire Eagle in Massachusetts. “Airbnb hosts in Great Barrington say a $200 yearly registration fee is yet another drain on their profits. They already have to pay state and local excise taxes, as well as other costs of renting out a home and property taxes. But town officials are looking to cover the roughly $40,000 annual cost of monitoring short-term rentals. One rental host told the board that the new $200 fee is ‘punitive,’ given the other government-imposed costs she bears – a 6 percent tax to the town, a 5.7 percent state tax and a 3 percent community impact fee. ‘It’s just, wow,’ said Maureen Meier. ‘You’ve already limited how many nights I can do, limited the overall money I can bring in and now I feel like you’re considering adding too much to that.’”
From Bakersfield.com in California. “Clearer signs of softening in Bakersfield’s rental housing market have raised doubts about how much private developers will continue to invest in building new apartments.The summary noted 554 rental units are under construction in Bakersfield, following at least 326 units completed in 2022. ASU’s multifamily real estate specialist, Marc Thurston, noted 2,634 units are planned, with 548 officially put on hold. ‘Due to the recent increases in construction interest rates and softening in the high-end rental market,’ Thurston wrote, ‘there is speculation about how many units will be built.’”
“‘If anything is going to happen, it would only be at the very best sites with … ownership that’s long term. Because I don’t see how you could do it otherwise,’ said Bakersfield high-end apartment developer Andy Fuller. Bakersfield’s multifamily market started 2022 ‘on fire’ with low inventory and low interest rates, Thurston’s report noted. Properties put on the market sold fast, helping push the average sale price up 15 percent to a new record for the city: $125,221 per unit.”
“Amid relatively steep interest rate increases, the pace of apartment sale transactions declined sharply in the third quarter, and the average price per unit dropped 7 percent. Fuller suggested it’s possible more than half of the projects that had been planned this year might not move forward because of how different conditions have become. That’d still be more than were built in recent years past, he added. ‘Things have changed, yeah they have,’ Fuller said.”
Bisnow Los Angeles in California. “During a recent attempt to acquire a property in North Hollywood, New Standard Equities CEO Edward Ring, whose company buys, upgrades and operates apartment properties in California and in the Pacific Northwest, said he saw firsthand how some who are attempting to exit the market before Measure ULA, the city of LA’s new real estate sale tax, goes into effect are butting up against an uncertain market and a buyer pool that expects to get an urgency discount.”
“Ring put an offer in for a North Hollywood property that hit the market because, he was told, the seller wanted to exit before the spring, when the transfer tax goes into effect. ‘Everyone swarmed on this one property, thinking it was going to be a deal,’ Ring said of himself and the five or so other bidders. Instead, Ring said ‘we came up pretty short in terms of where we thought value would be.’ He wasn’t the only one. Ring was told that the seller ‘found out where the market believes the values to be and has elected not to sell.’”
“Ring, like other buyers, is using debt to acquire new properties. He says they used to assume 65% to 75% of purchase prices as debt, now they are underwriting closer to 50% or 55%, because the cost of borrowing is up. That shift means their equity returns are dropping, so their prices have to as well, Ring said. Ring says his offers on properties have come down substantially, as his company believes values are down around 15%. ‘That’s a direct result of interest rates,’ Ring said. ‘We’re also not winning anything, so maybe we’ve overcorrected.’”
The Globe and Mail in Canada. “The most desirable small communities, such as those within a couple hours of Toronto, uniformly saw skyrocketing prices over the pandemic as people left big cities for remote work. But similar to how those markets had larger value increases during the pandemic, they’re also seeing larger decreases. The recent drops have been significant in Ontario municipalities such as St. Catharines and London, where the average selling price in December, 2022, was down between 14 and 15 per cent from 12 months prior, according to Zolo Realty. The drop was even more steep in Belleville, which was down 25 per cent in December.”
“Those numbers are large when compared to a year-over-year drop of just 9 per cent in Toronto. The situation was similar in British Columbia, where regions such as the Okanagan and Kootenay had price drops of roughly 17 per cent and 13 per cent, respectively, from their January, 2022, peak to their current level in December, 2022. The Metro Vancouver area only dropped 11 per cent during the same time.”
“Jeff Nelles, manager of Royal LePage ProAlliance Realty in Belleville, said people in his community may not be as financially pressed by high interest rates because anyone who bought in the early stages of the pandemic or earlier didn’t likely stretch themselves to own a home as much as someone in Toronto did. ‘We’re not seeing a ton who are going to get underwater in this, especially anyone who bought prior to 2020.’”
The Telegraph in the UK. “More expensive homes are bearing the brunt of the house price slump as they take longer to sell and achieve less of the asking price. Jonathan Hopper, of buying agents Garrington Property Finders said buyers of expensive properties are ‘acting more aggressively’ on price than those in cheaper markets, with more offers made at 15pc or more below the asking price.”
“James Greenwood, of buying agent Stacks, said asking prices are ‘over-inflated’ at the top end of the market because there are too many sellers who ‘think they are still going to get a Covid price.’ He said: ‘The over-excited, headless-chicken Covid market has disappeared.’”
From NL Times. “Existing home prices in the Netherlands were 6.4 percent lower in the fourth quarter of 2022 than a year earlier, the Dutch association of insurers NVM reported. Existing homes sold for an average of 407,000 euros in the fourth quarter, 3.7 percent lower than in the third quarter. The annual average price fell for the first time in nine years. ‘This marks a turning point compared to last year when the price increased by about 20% year-on-year,’ the NVM said. Twenty percent fewer newly constructed homes were purchased in the fourth quarter compared to the previous quarter. Those sales were down 46 percent compared to a year earlier. ‘This will increase further due to sharply increased land and construction costs and mortgage interest rates,’ said Chris van Zantwijk, the vice-chair of NVM Housing.”
News Corp Australia. “Money is a lot harder to get your hands on today than a year ago, and as a result, desperate would-be borrowers are fudging their finances to get approval. Comparison site Finder has revealed 1 in 8 mortgage holders admitted to lying on their home loan paperwork to get it over the line. The sample survey found 13 per cent admitted to falsifying details – a snapshot that would translate to more than 400,000 borrowers, given there are approximately 3.3 million mortgagors in Australia.”
“In the research, Finder also discovered 4 per cent (equal to more than 100,000) of home loan holders surveyed admitted they lied about their income and the same proportion again said they had falsified their level of existing debt. Home loans expert at Finder Richard Whitten said it isn’t unheard of that people stretch the truth while trying for a mortgage, but added that borrowers need to proceed with caution.”
“‘Being dishonest on a home loan application is a recipe for disaster. You might be committing an act of fraud and you could even lose your home in a worst-case scenario,’ he said. ‘While the lies might never come to light — your ability to afford the loan could create a lot of financial stress.’”
From ABC News. “In the cold early morning on New Year’s Day, Mr Kang arrived in Zhengzhou, in China’s Henan province, to demand answers in a bid to unfreeze his bank account. But shortly after he stepped out of the car after the 18-hour journey from Shanghai, he was bundled into a police car and detained. Mr Kang is one of more than a thousand people left unable to withdraw their own money after a financial scandal rocked four banks in rural China.”
“The 34-year-old said he had deposited about 2.1 million yuan ($450,000) – his family’s whole life savings — in his now-frozen account. Since April last year, at least 40 billion yuan ($8.5 billion) has been frozen in four of the small-sized banks, including Mr Kang’s bank. It triggered months of massive protests. Mr Kang, who gave only his surname as he feared repercussions from Chinese authorities, said he was ‘on the verge of collapse’ due to his family’s massive financial burden.”
“The financial strife has also caused immense personal loss. Four months ago, Mr Kang’s wife became pregnant. Although they had hoped to have a second child for a long time, he said they eventually aborted the pregnancy due to their dire financial straits. ‘We couldn’t afford to go back to the check-ups,’ he said. ‘[My wife] cried for a long time.’”
“According to Chinese state-owned media Xinhua News Agency, the China Banking and Insurance Regulatory Commission (CBIRC) in May said the incident was due to fraud committed by the banks’ shareholder, Henan New Fortune Group. The four rural banks had promised customers high returns of between 13 and 18 per cent, in what has now been described as a Ponzi-like scheme.”
“On New Year’s Day, Mr Kang said a man in plain clothes ‘came behind me and shoved me into the nearby police car while I was walking along the roadside. I was just looking for other depositors to go to Henan’s Banking and Insurance Regulatory Office together to ask about the case,’ he said. Mr Kang said police searched, interrogated, and verbally humiliated him and other seven depositors repeatedly after taking them to Zhengzhou’s Linshanzhai police station.”
“One police officer ‘slapped the table, very aggressively,’ Mr Kang said. ‘[He demanded that] I put down my phone password on paper with my name and ID number. I saw that there was a poster with some rules and regulations for the police on the wall, which clearly require that suspects ‘should not be beaten, verbally humiliated or attacked.’ They all violated them,’ he said.”
“One other bank customer, who asked not to be named, said he had more than 7 million yuan ($1.5 million) deposited at Shangcai Huimin Village Bank and Zhecheng Huanghuai Village Bank, which was all his family’s savings. He said he was beaten by police officers from the Linshanzhai police station when he went to Zhengzhou on New Year’s Day. ‘[They] first beat [me] in the office,’ he said. ‘Then I was dragged to the bathroom by two police officers, who beat and kicked me and attacked my head, face, abdomen, and eyes.’ The man also showed the ABC a photo he said was taken afterward showing scars and bruises on his forehead.”