A report from the Mountain Democrat in California. “During a recent interview for a listing I made the mistake of assuming the sellers were aware their home was not worth today what it was last summer. My mistake became evident after I presented recent neighborhood sales information and my estimate of the home’s value. In return I received an expression of shock and awe and was escorted out the door. This seller dismissed my information as being false and was a bit angry that I would undervalue their home.”
“Sellers are having difficulty adjusting to the new buyer’s market. How is it possible that their neighbor’s home sold last June for $75,000 more than agents are saying their home is currently worth? Worse, agents are suggesting home staging, pre-listing inspections and repairs and remodeling before listing. Sellers have been in denial, questioning if all of this is really necessary. Purchase contract cancellations are up. Buyers are bailing out of their escrows at the highest rate since 2008. The increasing mortgage rates disqualify some. Others will have second thoughts about buying now when home values may continue to fall.”
“The most frequent response from sellers when presenting an offer last year was, ‘This is great. Thank you.’ Now agents hear, ‘This is ridiculous. I wouldn’t consider that offer.’ Sellers who fail to negotiate are failing to sell. Buyers often don’t expect their initial offer to be accepted. They do expect a reasonable counteroffer. Sellers should not feel insulted when presented with an offer less than their expectations. Ken Calhoon is a real estate broker in El Dorado County.“
The Fresno Bee in California. “Zillow reveals that across ZIP codes both large and small in the Valley, the estimated values of homes dipped by an average of about 2.5% compared to July 2022, and in some areas by as more than 9%. That’s a far cry from the average increase of almost 38% across ZIP codes in Fresno, Kings, Madera, Merced and Tulare counties registered between January 2020, prior to the arrival of COVID-19, and June 2022. Within Fresno County, the sparsely-populated 93641 ZIP code around Miramonte, in the Sierra Nevada east of Fresno, saw the largest decline in value since mid-2022, slipping about 8.2% from a value of almost $278,000 in July to about $255,000 last month.”
WPTV in Florida. “The sizzling days of 2022 for the South Florida housing market are now a distant memory. ‘I call this period the pause,’ Jeff Lichtenstein of Echo Fine Properties in Palm Beach Gardens said.”
The Worcester Telegram in Massachusetts. “First-time homebuyers should not give up hope, according to Ashley Brennan, real estate agent since 2011 in Hingham. ‘We aren’t seeing the frenzy of multiple offers that first-time homebuyers were losing out on because of (offering) lower down payments,’ said Brennan. She also said that because the average number of days on the market for listings is longer (155, currently compared to just 38 at this time last year), buyers have more time to make educated decisions and can benefit from price reductions — which often happen as the number of days a property is on the market increase.”
The Southern Maryland Chronicle. “As 2023 began, so did some surprising new trends in the Southern Maryland housing market. Prices began to decrease in most jurisdictions, while homes are staying on the market for longer than many recent potential buyers have seen. Active listings increased roughly 94.5% from this time last year, and the total units sold saw a sharp decrease. 281 units sold last month across Southern Maryland, a decrease of 33.25% from 2022. However, more new listings came on the market last month, up 9.87% from 2022. Also, homes are staying on the market for longer, and prices are starting to decline slightly for the first time in years.”
“Homes sold on average for 96.8% of what they were listed for in January, which is down from roughly 99.9% in 2022. Where buyers were previously paying close to and over list price are now seeing many sellers offer concessions. ‘The market over the past few years has not been sustainable, and we are starting to see some of that dial back,’ SMAR 2022-23 President Michael Funk said.”
From Media Feed. “The housing market looks far different today than it did even six months ago. Gone are the wild 50+% price jumps we saw during the pandemic. Real estate markets are coming back down to earth — and that’s not a bad thing. (Unless you’re a seller. Then it sucks.) Melanie Allen from Partners in FIRE has a front-row seat this housing correction. ‘I live in Austin, and have been searching for a home since moving here in April 2022. At that time, even small condos under 800 square feet were selling for $300,000, and I didn’t see any single-family homes available for less than $400,000, even in the smaller towns surrounding Austin.’”
“‘I started noticing a change last fall. I saw deep price cuts on numerous homes, the small condos are now selling for between $250,000 and $300,000 and I even found some builders in the outskirts offering single-family starter homes for under $300,000. I’m currently under contract for a home about 20 miles northeast of Austin, a deal I never would have found when I first started house hunting.’”
Yahoo Finance. “Investors fled the housing market in the final months of 2022, purchasing roughly half the number of properties they bought in the previous year. Their absence was acutely felt in some pandemic boomtowns where investor home purchases fell nearly 70% year over year in the fourth quarter. ‘In 2021 and early 2022, we had rental hedge funds purchasing a lot of homes in the valley because rental rates had soared along with home prices,’ Shay Stein, a listing agent for Redfin in Las Vegas, wrote to Yahoo Finance. ‘As the market turned, they stopped making offers at the pace they were.’”
“Other cities that showed significant declines in investor activity were Nassau County in New York, Atlanta, Charlotte, Nashville, Sacramento, Riverside in California, and Orlando, Florida. ‘I think a lot of the iBuyers and large rental companies like Progress Residential slowed their buying because they had already bought so much in Phoenix and many of those homes were just sitting on the market,’ Heather Mahmood-Corley, an agent in Phoenix, wrote in an email. ‘A lot of the iBuyers are losing money on their homes and they’ve had them on the market 200+ days.’”
“In the boomtowns, prices have been trending downward since mid-2022. For instance Phoenix’s average home price fell 13% since May 2022, while Las Vegas’s price dropped 13.2% since June 2022. The average price in Austin, another popular boomtown, saw average prices dip 20% since May of last year.”
From Bloomberg. “Sales of commercial mortgage bonds have fallen off a cliff, plummeting about 85% year-over-year, as rising interest rates cut into lending volume and defaults spook investors. Adding pressure is a recent string of defaults in the office and retail property sectors, making bond buyers even more wary. ‘Everything is frozen, so there’s no raw material to make CMBS transactions,’ said Paul Norris, head of structured products at insurance asset manager Conning & Co., in a phone interview. ‘It’s very hard to bring new deals to market now, because there’s nothing happening in the real estate market. No one wants to refinance their buildings and there’s a massive gap in terms of expectations between buyers and sellers due to the uncertainty.’”
Bisnow New York. “A loan backing 11 apartment buildings Blackstone owns in Manhattan has been sent to special servicing. The CMBS loan is for $271M and spans 637 units in Chelsea, the Upper East Side and Midtown South. The loan was current as of this month, Commercial Observer reported, but was on the servicer’s watchlist in November. Blackstone continues to operate the largely market-rate properties, but higher-than-anticipated expenditures and its floating-rate debt on the portfolio have created a cash flow shortfall, which the world’s largest real estate owner has elected not to keep funding, a source said.”
“Its global portfolio is far from immune to distress. This month, lenders on a $548M portfolio of Nordic office and retail assets owned by Blackstone refused to grant an extension on an expiring loan, Bisnow reported. It is also facing a rush to the exits from investors in one of its signature funds. In January, Blackstone’s nontraded REIT, Blackstone Real Estate Income Trust, paid out just 25% of the repurchase requests made by shareholders. Late last year, Blackstone said it was putting a freeze on investors drawing money out, after a jump in repurchase requests forced it to act to prevent “a liquidity mismatch.”
The Globe and Mail in Canada. “Desjardins Group is shuttering its real estate brokerage FairSquare Group Realty in a surprising reversal for the Quebec financial services firm, which had bought the business in the first year of the pandemic when the country’s real estate market was booming. FairSquare, which was previously called Purplebricks, cited the slowdown in the housing market for the move, and said on its website that it was ‘no longer accepting new business.’ The website showed that FairSquare was registered to work as a brokerage in Ontario, Manitoba and Alberta.”
“‘The decision to cease the operations of FairSquare was not an easy one,’ Desjardins spokesperson Chantal Corbeil said in an e-mail. ‘We have [made] efforts to promote FairSquare activities, but the rapid deterioration of the housing market and its business model do not allow us to continue operations,’ she said.”
“The country’s real estate market has slowed significantly since the Bank of Canada made a series of interest-rate increases, which raised borrowing costs. The volume of home resales has plunged and January’s activity was the lowest since the Great Recession. Prices have fallen for 11 straight months and the typical home price is now 15-per-cent below peak values in February of last year.”
The Telegraph. “Mark Twain once advised: ‘Buy land, they’re not making it anymore.’ It is hard to know what the American literary icon would have made of the metaverse, but the investing maxim surely does not apply to cyberspace, where land is infinite. Yet companies and speculators have poured billions into parcels of internet land in a short-lived gold rush. Now, they are suffering through the market’s first downturn.”
“Cooling interest in the metaverse and cryptocurrencies has created a housing crash that would be catastrophic in the real world and left virtual property developers sitting on large losses. Investors imagined the rules of real estate in the physical world would apply to the virtual realm. Digital worlds were expected to become the new high streets, shopping centres and tourist attractions, making high-trafficked areas lucrative investments. Today, these virtual worlds look more like a wasteland.”
From IT Pro. “I live in Camden Town, in London, close to Regent’s Canal, down which I can walk in ten minutes to King’s Cross. The area around this great railway station used to be squalid and dilapidated but a couple of decades ago renovations began that would turn it into what was briefly dubbed ‘the Knowledge District.’ The British Museum, in Bloomsbury, was close so it moved its famous library to a new building at King’s Cross. Soon followed King’s Place, an avant-garde glass pile containing concert halls, art galleries and the Guardian newspaper.”
“Last of all, big tech arrived. Google – sorry, Alphabet – started its new European HQ, which is almost finished as I write, a vast edifice the size of a city block with a whole park on its roof. Facebook – sorry, Meta – pitched in with its own block-sized building, only just open, in that area between the canal and York Way that seems to sprout a new mini-skyscraper every time I walk though its Manhattan-lite main street.”
“Ten years ago I might have imagined this as a preview of a hi-tech future, but the last year has rapidly clouded any such vision, with mass layoffs and financial concerns. A recent UK survey investigated public perceptions of various digital product categories. Aproval drops off a cliff for emerging technologies such as the Internet of Things (IoT), with only 16% approval. A staggering 84% had either never heard of or were bored by the metaverse concept, too, rising to 89% for the nebulous Web3, the cocktail of technologies Zuckerberg has bet his company on.”
“The vast wealth that builds these opulent offices comes at a cost to this real world. The smartest minds are deployed to avoid paying the taxes that contribute to its upkeep. Amazon displaces high street shops, Google and Twitter displace local newspapers, Uber displaces taxi drivers, Airbnb displaces hotels, and so on and on. Newness and convenience have so far protected them from public wrath, but the metaverse suddenly becomes a revealing metaphor for the way the owners of these tech giants have detached themselves from the real economy. They can live in a fantasy world where colonising Mars, or the pursuit of physical immortality, can seem like good ways to spend money. Unfortunately for those fantasies, the real world is where silicon chips are made.”
“I’m also not suggesting that merely taxing tech giants more heavily would magically solve our looming economic problems. A massive change of mindset is required to induce cooperation between states and digital giants to deploy this semi-miraculous infrastructure for solving problems on this planet, rather than on Mars or the metaverse. If that doesn’t happen soon, those shiny new office blocks in King’s Cross might end up being renamed the Museum Of Globalisation.”