A report from the Montana Standard. “Home sales have slowed to Great Recession levels as the housing market adjusts to elevated mortgage rates, said John Kasperick, a longtime economist at NorthWestern Energy in Butte, and total mortgage demand has sunk to its lowest level since 1997. According to statistics from December, home sales are down 58% from last year in Butte-Silver Bow County. Inventory is up 59% from last year and median days on the market is now at 44 days, up 131% from last year.The median sales price in December was $316,000, which is still up from 2021, Kasperick said. For comparison, the median sales price in Gallatin County was $786,000 and overall sales there are down 38% from a year ago. ‘As the market continues to adjust to the higher interest rates, there will be some downward pressure on home prices in our areas over time,’ Kasperick said.”
WREG in Tennessee. “Realtors in Memphis say you are more likely to buy a house below the listing price than you were at the same time last year. In Memphis, house prices rose by 9% in 2022, and the average house cost was $262,000. However, Michelle Hayes Thomas with Hayes Homes & Realty said that number dropped to $240,000 in December. After a year or more of it being a seller’s market, things are starting to slow down, allowing buyers to negotiate a little more. ‘The market is stabilizing,’ said Hayes Thomas. ‘It’s good for a healthy market for everyone to have opportunities, both the sellers and the buyers.’”
The Sun Sentinel in Florida. “For homebuyers who have been waiting to get relief in today’s market, some sellers may be more willing to offer concessions during sales. The increase comes as the dynamic between homebuyers and sellers shifts, giving buyers more power to negotiate for what they want. ‘It’s case by case, but I would say in my experience, sellers are becoming more agreeable to it,’ said Brian Bahn, with Lang Realty in Boca Raton. ‘In the last six months or year, sellers weren’t willing to work with buyers as far as adjusting the contracted amount to meet the appraised amount,’ Bahn said. ‘With demand not as high as it was two years ago, I foresee that sellers will be more open to further negotiation after the appraisal is done.’”
KVUE in Texas. “According to Zillow, the Austin metro area has plummeted from its list of hottest real estate markets in the country, falling to 30th place nationwide for 2023. That’s a big drop when you consider that Austin ranked No. 10 in 2022 and was the No. 1 hottest housing market in 2021. Homes within Austin city limits remain expensive at a median price of $525,250 in December, but that’s a 5.4% price drop from a year ago. Average home prices also dropped by 2.4% in Williamson County, and in Bastrop County by 6.5%.”
From USA Today. “Anna Raymond was ready to make the switch from renting to owning a home last spring. But after five failed offers, she and her husband decided to take a step back from house hunting. Then, in December, their real estate agent presented an offer too good to pass. A home in Longmont was up for sale, and the seller was willing to offer a 2-1 interest rate buydown. ‘I think for them, they just wanted a quick sell and for us, we wanted a good price. And so we were able to both be happy in the process,’ Raymond, 28, said. ‘We figure we can refinance within a couple of years and, worst-case scenario, if we don’t, our salaries will catch up.’”
“Redfin found a record number of seller concessions – offers like mortgage rate buydowns that help reduce costs – in the fourth quarter, especially among cooling ‘pandemic boomtowns’ like Phoenix and Las Vegas. ‘About almost 100% of the clients that I’ve had the opportunity to work with since the fourth quarter of last year, even now, are exercising that interest rate by concession from the seller,’ said San Diego-based real estate agent Andre Mejia of Connect Realty. ‘The market has finally shifted.’”
Market Watch. “Home builders are playing hardball by offering mortgage rates as low as 3% on new homes to boost buyer demand. Put simply, some builders are eating the difference between the prevailing mortgage rate and what consumers will accept, just to get inventory moving and empty homes off their back. In California, Pacific Point Communities is offering a 4-bedroom home at a mortgage rate “as low as 2.75%.” In Texas, Pulte Homes is offering a 30-year fixed-rate mortgage at 4.25% for single-family homes from three to five bedrooms. And in various parts of the country, K. Hovanian is offering a fixed-rate mortgage at 4.99%.”
“Builders also lowering mortgage rates to get around reducing prices, as this can affect the value of homes that have already been sold, said Jason Will, senior vice president of market growth at Embrace Home Loans, and also their ability to raise prices on future homes.”
From NBC News. “Renters are on track to get some relief in 2023 as a growing number of indicators suggest the red-hot rental market has started to cool. Also driving down rents is a wave of new apartment buildings that have been opening over the past year. In 2021 and 2022, more than 800,000 new apartments came on the market with apartment building construction at its highest levels in 50 years. ‘The balance of power in the rental market has really shifted very rapidly to renters,’ said Jay Parsons, chief economist for RealPage. ‘We’ve now got four straight months where month-over-month new leases have actually come down. The market has really changed materially,’ Parsons said. ‘So while we’re seeing 40-year highs in construction, the vast majority of this is luxury rental properties that will be leasing to six-figure-income households. We’re not really meeting that demand at the lower end of the market, unfortunately.’”
The Hamilton Spectator in Canada. “While initially cheaper, in the case of condo towers, properties can take years to build. Those who purchased in 2019 or 2020, when interest rates were lower, are facing financial challenges resulting in buyers being unable to close, said Shawn DeLaat, real estate agent in St. Catharines. Despite Niagara having fewer condo towers, DeLaat said the same has been happening locally, albeit on a smaller scale.”
“One development DeLaat represents began selling units pre-COVID, and delivered to buyers this year. Of the eight that had to close, four did not, he said. Instead, buyers chose to walk away. For some, that meant walking away from $25,000 or $50,000 deposits because when the scheduled closing date arrived, buyers could not come to the table with money. ‘These guys were all hedging their bets that their properties would be worth exponential amounts and now they’re almost worth what they paid,’ he said. ‘”
“It all stems largely from rising interest rates, with the Bank of Canada increasing the lending rate seven times in 2022, to 4.25 per cent. It also impacted the real estate market overall, with the average Niagara home falling about 29 per cent from its peak in February 2022.”
“Broker Michael Jawanda said he’s seeing a higher number of buyers going the assignment route. ‘Most people, at this point, won’t be able to afford the payments, whether it be a property for end-use or investors who would be looking to lease out the properties which in turn forces people to look to assign their properties,’ he said, adding he’s heard a few buyers going directly to the developers to see if they can negotiate the price, which is ‘often not the case.’”
“For those who can afford to close, they are doing so with the hope interest rates will decrease in the near future. And others, are ‘trying to get out now,’ he said. ‘They’re stuck in that bind.’”
The Toronto Star in Canada. “”It was once nearly unthinkable in the GTA, but data from HouseSigma suggests that more people are now losing money off-loading properties, a sign of another crack in the region’s volatile real estate market. A Burlington detached home that was sold mid-reno, for hundreds of thousands of dollars less than what it got in summer 2021. A Brampton townhouse that went for about $340,000 under what it fetched the year before. And an Etobicoke condo that was purchased in December for about $60,000 shy of what it got mid-pandemic.”
“‘There is an increase in units being ‘sold below bought,’ particularly when expressed as a percentage of the total sold,’ said Michael Carney, HouseSigma’s director of business development. Carney said these are likely people who bought between 2020 and early 2022, given the dramatic run-up in prices during that period. Indeed, all of the above examples were purchased at or close to the price peak when interest rates were at record lows, and then put back on the market in the past few months, according to sales data from HouseSigma.”
“Carney said some sellers are trying to upgrade to a bigger property that’s also gone down in price, taking a loss but staying in the market. ‘And then obviously there is talk out there that people are selling because of the mortgage rates,’ he said. ‘There are people who are definitely feeling the hurt, people who got variable rate mortgages when rates were 1-something, and now they’re looking at 4-something or 5-something.’”
“Nasma Ali, founder at One Group—Re/Max Hallmark, has heard about buyers getting nervous and not closing deals, despite the penalties that come with that. She is also hearing about ‘a lot of people who are now at this stage of feeling fear and panic.’ ‘Definitely I think some of these may have been investors who were planning on flipping,’ Ali said. ‘When you’re flipping, you’re not necessarily going to be selling at a profit in this market.’”
“Recent data from Urbanation shows that the GTA is expected to see a record number of new condo units completed this year. ‘To me that means that there’s going to be a lot of over-leveraged buyers that are going to have to sell something,’ said Ali. But overall, ‘you’re not going to see those mass sales. Right now a lot of people are just holding their breath,’ she added. They’re wondering, ‘When is the pain going to stop?’”
From Bloomberg. “Turmoil at trophy properties in London and Frankfurt offer a glimpse of the damage awaiting European real estate investors as they face the sharpest reversal on record. From a fraught refinancing process for an office building in the City of London to the strained sale of the Commerzbank Tower in Germany’s financial hub, investors are scrambling to find ways to bridge financing gaps as lending markets seize up from rapidly rising interest rates.”
“The reality check will start to hit in the coming weeks as lenders across Europe get results of year-end appraisals. Hefty declines in valuations threaten to cause breaches of loan covenants, triggering emergency funding measures from forced sales to pumping in fresh cash. ‘Europe is going to go through the great unwind of 10 years of easy money,’ said Skardon Baker, a partner at private equity firm Apollo Global Management. ‘The amount of distress and dislocation is off the spectrum.’”
“Sweden has so far been the epicenter of the crisis, with home prices projected to drop 20% from peak levels. The country’s listed property firms have lost 30% of their value over the past 12 months, and the Swedish central bank and Financial Supervisory Authority have repeatedly warned of the risks stemming from commercial property debt. Falling real estate values could trigger a ‘domino effect,’ as demands for more collateral could force distressed selling, according to Anders Kvist, a senior adviser to the director of the FSA.”
“While there are some pockets of stability like in Italy and Spain, which were hit harder after the global financial crisis, the UK is slumping and there are signs that Germany could be next.”