It’s Friday desk clearing time for this blogger. “In March 2020, Mark Joseph bought his first home: a spacious three-bedroom, 2.5-bedroom house in Saint Louis. He and his wife had recently had their second child. Joseph was convinced ‘someone else would swoop in and take it away if I didn’t make a strong offer,’ he says, so he paid more than the asking price. When Joseph moved in, he noticed the HVAC system, plumbing, and electrical wiring were in need of some costly repairs as he’d skipped having them inspected. Joseph has since had trouble keeping up with his mortgage payments. And despite his home value rising, it hast gone up as much as he initially anticipated.”
“‘Little did I know then that overpaying for my home meant overburdening myself with an increased mortgage payment for years to come—something I could have done without during such a tumultuous time,’ says Joseph, 32. Joseph is not alone.”
“Home sales fell each month in the second half of 2022, according to Pikes Peak Association of Realtors figures. Double-digit percentage increases in home prices during much of 2020 through mid-2022 began to slow last year and actually dropped by 2% in December — the first year-over-year decline in eight years, figures show. Also, some existing owners who bought homes a few years ago with a rock-bottom 3% mortgage can’t afford today’s loans and therefore can’t move up to a bigger home unless prices come down, said Tiffany Lachnidt, a veteran real estate agent. ‘We’re in gridlock right now, which is that the people that are in these really low rates, for them to be able to afford a bigger house, the prices are going to have to come down significantly, which obviously is going to reduce what they can sell their home for,’ Lachnidt said.”
“Local economists are saying a recent report projecting a 2008-like plunge in the Phoenix housing market is no reason to panic. Danny Court, senior economist with Scottsdale-based Elliot D. Pollack & Company, told KTAR News that Phoenix-area home prices have already fallen by over 10% from the May 2022 peak and could fall another 15% this year. That would return prices to the levels from the April or May of 2021. ‘I don’t think anyone thought they were getting a good deal in 2021 on their home,’ Court said. ‘So, really … the reason that the percentages look so drastic is because we had such a drastic run-up in prices. So, this is a small reset.’”
“During the start of the pandemic, sellers in Bakersfield were receiving multiple offers on their home well above the asking price within days of listing it. Now, it’s not nearly on that level anymore. ‘We started the market at about $370,000 median price, and we ended the year at about $370,000 median price,’ said Gary Crabtree, owner at Affiliated Appraisers. He said now buyers expect the seller to make concessions for the interest rate buy down, so they’re able to qualify for the loan. He said last month, 46 percent of all the homes sold in Bakersfield had some form of a seller concession.”
“An investor in solar power — and high-end Chicago real estate — appears braced for a cloudy day, if his 32nd-floor condo in the Palmolive building trades hands. A listing of a unit owned by an LLC controlled by Michael Ahearn at the historic building at 159 East Walton Place along the Magnificent Mile asks $5.9 million, down 7.2 percent from its last sale of $6.3 million 12 years ago. One floor below, a unit owned by Chicago-based money manager Harris Associates’ deputy chairman David Herro is poised to hit the market, after it had been listed for $10.9 million in 2020 before having its price cut down to $8.9 million and getting pulled off market without a sale.”
“On one hand that 2.5% drop in U.S. home prices marks the second-biggest home price correction of the post–World War II era. This ongoing housing correction is hardly one-size-fits-all. In particular, it’s driven by declines in overheated Western housing markets like San Francisco (down 11.9% since its 2022 peak), Seattle (down 13.5%), Phoenix (down 7.7%), and Las Vegas (7%). ‘I expect house prices to fall almost 10% peak-to-trough. I have revised the length of time it will take for house prices to reach their trough, which will likely be 2-3 years from now. Current homeowners are holding off selling, even if experiencing life events that would typically cause them to sell, hoping that mortgage rates come down and market conditions improve. But eventually they will need to sell, inventories will increase, and prices will weaken. But having said this, the current resilience in house prices suggests the adjustment in house prices will not be a serious threat to the financial system or macroeconomic problem,’ Moody’s Analytics chief economist tells Fortune.”
“The housing market just isn’t what it used to be. Residential home sales in the Vancouver area plummeted almost 52 per cent in December 2022 compared to the same month the previous year. ‘Prices are down about 10 per cent of the peak over the past six months and that’s…over the whole market,’ said Andrew Lis, REBGV’s director, economics and data analytics. Final numbers aren’t out yet for the Fraser Valley, but realtors say they’ve seen significant drops there too.”
“‘I mean it’s just down. We’re dramatically down,’ said Del Touet, owner of Royal LePage Preferred Realty in Mission. Touet said sales at his office took a big hit last year, dropping 28-30 per cent. Housing prices fell too. ‘Pricing in the Mission market is down 19 to 21 per cent overall,’ he said.”
“As Canadian homeowners grapple with the Bank of Canada’s flurry of interest rate hikes, one in three say they won’t be able to handle higher rates for long before they are forced to sell their homes. Maru executive vice-president John Wright said the Bank of Canada’s aggressive rate hiking cycle will be challenging for many, particularly those who got into the real estate market in 2020 and 2021 relying on an outlook ‘that in no way suggested rates would be taking the steep upward turn they have. ‘As a result, this quarter will likely witness many Canadians who chose variable mortgages then with cheap money, and who are now being forced to sell at a significant loss and potentially face financial ruin,’ Wright said.”
“A major crisis involving thousands of unfinished apartments across China awaits the government. The property loan market in the country is experiencing rising bad debts. They stand at 29 per cent of total loans this year. People are simply refusing to repay their mortgages and price declines in the existing-home market are now the sharpest in nearly a decade. Much capital was locked in semi-finished homes where construction was stalled for months, making unfinished flats near-worthless. Angered homebuyers refused to pay the mortgages in such a situation.”
“According to media reports, the boom encouraged speculative buying, with new homes pre-sold by developers who turned increasingly to foreign investors for funds. Annual sales of ‘dollar-denominated offshore bonds surged from $675 million in 2009 to $64.7 billion in 2020.’ The speculation ‘led to astronomical prices, with homes in boom cities such as Shenzhen becoming less affordable relative to local incomes than London or New York.’”
“Analysts estimate China’s outstanding government debts surpassed 123 trillion yuan ($18 trillion) last year, of which nearly $10 trillion is so-called ‘hidden debt’ owed by risky local government financing platforms that are backed by cities or provinces. As the financial pressure has mounted, regional governments have reportedly been slashing wages, cutting transportation services and reducing fuel subsidies in the middle of a harsh winter. The central government in Beijing has signaled it’s not coming to the rescue. ‘If it’s your baby, you should hold it yourself,’ the Ministry of Finance warned in a statement aimed at local authorities. ‘The central government won’t bail [you] out.’”
“Prestige buyers’ agents claim the market is ‘dead’ as potential buyers hold back in the hope that prices will fall and sellers wait for a lift in market activity that will deliver competitive sales. ‘Buyers are patiently waiting in the long grass like tigers waiting for their prey,’ says David Morrell, director of buyers’ agency Morrell and Koren. But some sellers, such as Judy Magub, a Brisbane historian and author, thinks now is the time to sell ‘because next year could be even worse.’”
“Average national capital prices are down about 10 per cent since their high last April, the biggest and quickest fall since CoreLogic started collating results in 1980. An increase in cash rates to 4.1 per cent by August would increase monthly repayments for a $1 million owner-occupier borrower paying principal and interest on the average variable rate by $2268 to $6937, according to RateCity. Repayments for a $2 million borrower on similar terms would increase by $4536 to $13,875, RateCity says.”
“Phoebe Blamey, a director of Clover Financial Solutions, another mortgage broker also based in Melbourne, adds: ‘There’s a lot of fear. There’s a fear that things are going to get worse.’”
“There are a number of reasons why house prices have soared since the late 1990s but chief among them has been cheap money. Cut-price fixed rates have enabled affordability to become increasingly stretched and facilitated property prices climbing further away from wages. Perhaps one day we will look back on the pandemic boom as the moment of peak madness, a time when Britain’s casino property market went on an almighty bender, fuelled by a heady cocktail of itchy lockdown feet, stamp duty holiday vibes and fixed rate mortgages below 1 per cent. How history treats the lockdown house price beano won’t be known for some time, but what is abundantly clear right now is that rising mortgage rates have well and truly broken up the party.”
“When Britain’s central bankers notched up yet another interest rate rise on Thursday, they added further woes to first-time homeowners like myself who bought nearly two years ago. With interest rates now at four per cent and my mortgage bill set to go up by hundreds every month, it’s hard not to feel a touch of buyer’s regret over my post-pandemic purchase. As we exchanged contracts it was hard to shake the feeling that we were about to fail the first test of home ownership: don’t buy at the top of the market.”
“And now, we are among the estimated one million homeowners who will this year see their fixed-term rates shoot up after the Bank of England’s action to tackle inflation. Hindsight is a wonderful thing but had we known where the inflation headwinds would take us, our decision may well have been different. I must confess that our finances have rarely been in a worse state, owing to the mounting costs of home ownership. What most people don’t often mention is the laughably poor state of Britain’s housing stock, much of which dates to the 19th century.”
“This was something that we soon learnt first-hand as our house began to show every day of its 130 years as soon as we moved in. As winter began to set in, leaks and damp patches appeared when it rained. Windows needed replacing. The boiler, of an indeterminate age, broke down in sub-zero temperatures, needing immediate repair. I still get a pang of jealousy when I meet renting friends who are still living close to the city centre, who can walk home from gigs and enjoy the undeniable buzz of London’s inner boroughs. Footloose and fancy free, they can simply move across the country with just a month’s if they are offered a new job, or simply get sick of city life. What’s more they usually don’t wake up in the middle of the night, worrying that their boiler is going to break down.”