A report from the Tribune in California. “If 2022 was a roller coaster for San Luis Obispo County’s housing market, 2023 appears to have pumped the brakes somewhat. The median home price has cooled off to $790,000, a notable drop from last year’s price of $925,000, Redfin data showed.”
The Sun Sentinel. “Home sales plummeted to the lowest levels in at least a year in South Florida, as buyers and sellers grew wary of the housing market, new data shows. ‘The sellers are becoming more reasonable in their pricing,’ noted Bonnie Heatzig, executive director of luxury sales at Douglas Elliman in Boca Raton. ‘Coming off of 2021, it was such an incredible high for sellers, it was hard for them to reverse their thought to realize that they no longer have that price escalation.’”
The Albuquerque Journal in New Mexico. “The Albuquerque metro area housing market has continued to show signs of correction, with the latest data pointing to a decrease in closed sales and in the median sales price for single-family detached home sales. The median sales price last month dropped to $316,000 and closed sales stood at 520 — nearly 300 fewer closed sales year over year, according to the Greater Albuquerque Association of Realtors. The median sales price came in more than $10,000 less than in December, data shows. Since October, the median sales price has continuously decreased — dropping by $19,000 through January.”
“Carrie Traub, the 2023 GAAR president, said New Mexico — and especially the metro area — isn’t a very ‘wealthy place’ and said the way sales prices were increasing last year were untenable. ‘I’m welcoming the correction,’ she said. ‘The rate we were increasing (in sales prices) was unsustainable.’”
The Journal Sentinel in Wisconsin. “The developer of a proposed 28-story Wauwatosa apartment and office high-rise has dropped those plans − and says delays tied to neighborhood opposition played a role in that decision. John Vassallo is instead now proposing a car wash near the southwest corner of West Bluemound and North Mayfair roads. Vassallo said the project’s economic feasibility was affected by the big increase in lending interest rates over the past year or so. That made it more difficult to obtain financing for his proposed Drew Tower. ‘It’s a lot harder at 7 % than 3%,’ Vassallo said.”
“Vassallo is disappointed − in part because he believes the high-rise would have been better for Wauwatosa. Its value would have been an estimated $50 million, Vassallo said, or 10 times the $5 million car wash now planned. While Wauwatosa Mayor Dennis McBride hasn’t specifically expressed support for the Drew Tower, a car wash isn’t what the city needs, he said. ‘What we’re hoping for generally in Wauwatosa is balanced development projects where we seek the best and highest uses for our property,’ said McBride. ‘But a car wash certainly is not the highest and best use for that land.’”
The Dallas Morning News. “In case all those construction cranes in the skyline aren’t enough of an indication, a new study shows Texas leads the country in commercial real estate activity. With more than $70 billion in direct spending in the state in 2022, Texas accounted for almost 20% of nationwide commercial real estate sector contributions to the economy. And more than 1 million jobs in Texas were supported last year by the commercial property business, according to an annual study by the NAIOP Research Foundation.”
“‘Nonresidential building construction expenditures surged 41.6% in 2022 and are up 74.2% from 2020 levels,’ the annual report says. ‘Total construction spending was up an estimated 10.8% in 2022 and accounted for approximately 20.7% of total GDP.’ North Texas is the top U.S. market for construction of industrial buildings and apartments.”
Fox Business. “One market expert is sounding the alarm over higher interest rates being the ‘new normal’ and leaving the commercial real estate space feeling ‘extremely challenged.’ Key Advisors Group, LLC owner Eddie Ghabour warned consumers to prepare for the economic baggage that comes with another ‘six to eight months’ of rate hikes, declaring that he is ‘concerned’ for the real estate market. Ghabour continued, urging consumers to extinguish the belief that the Federal Reserve is going to bring rates down and ‘save the day.’”
“‘No one alive managing money has ever seen anything like this before. We’ve never had tightening this fast. We’ve never seen a bubble as big as the one we had in 2021, and we now have to get through that. And lastly, we’ve been conditioned to believe that the Fed is going to come in and save the day and rates are going to come down. We have to erase that from our mind. We are now going to be in a new normal of higher rates for the foreseeable future,’ he said.”
From Bisnow. “Columbia Property Trust has defaulted on a $1.7B loan backing a seven-building portfolio across four states. The firm, which had been a publicly traded REIT before being acquired by funds managed by PIMCO in 2021 for $3.9B, has already faced some difficulties with its portfolio of office buildings in gateway cities. It sold a Manhattan office building it had fully renovated for nearly $11M less than it paid in a deal that closed two weeks ago.”
“The seven buildings backing the defaulted loan were appraised for a combined $2.27B in 2021 and are in New York City, Boston, San Francisco and Jersey City, Bloomberg reported. All were saddled with floating rate debt, which has grown increasingly expensive since the Federal Reserve hiked interest rates by 4% in the last year.”
“The default is the latest evidence that interest rate hikes and dropping real estate values are causing strife among some landlords, particularly those who own older office properties. Commercial property prices have dropped 14% from their peak in March 2022, according to recent analysis by Green Street. Earlier this month, Columbia sold 149 Madison Ave., a 127K SF building where in 2020 WeWork abandoned its lease after the landlord spent $16M on renovations. The office space at the building was still vacant when the building sold for $77M, less than five years after Columbia paid $87.7M for it in 2017.”
The Los Angeles Times. “After a successful summer internship at a mortgage tech company, Alana Klopstein was thrilled to get a job offer. She signed the contract in January 2022, giving her peace of mind during her final year at UC San Diego. Then in June, three months before her start date, she got an email from the company. The market downturn had forced the firm to make difficult decisions, it read. Her offer was being rescinded. ‘It was really devastating,’ said Klopstein, 22, who lives in San Diego. ‘I had a vision of what my life would look like, what kind of adjustments I would have to make to transition into the working world after doing so many years of school, and that just wasn’t a thing anymore.’”
“Zening Zhao, 24, had interned at tech companies but started hearing rumors of layoffs or hiring freezes as he got closer to graduation. Working in finance seemed more stable, so he accepted a job as a Python software developer at a trading company in Chicago. After graduating in December from the University of Washington, Zhao packed up his life in Seattle, relocated and signed a lease for a new apartment. Five days before his start date, he got a call from his employer telling him his offer was rescinded because of reductions in company expenses.”
“‘I felt desperate at that moment,’ Zhao said. ‘I’ve prepared everything for the job. It’s the darkest day of my life so far.’ He’s now facing a tough job market flooded with out-of-work engineers — after submitting more than 100 job applications, he got only a few responses.”
“Isa Goldberg got hundreds of supportive comments and messages from connections on LinkedIn after she posted about her experience of having a healthcare consultant job offer rescinded just six days before her start date. ‘I was just flabbergasted,’ Goldberg, 27, who lives in Brooklyn, said of the rescinding. ‘I just took kind of an hour to cry, have an emotional moment, come to the ground and realize what was going on. It’s definitely a shock when you think you’re on the diving board of your career, and you jump off and you end up with a shallower bottom than you hoped.’”
From CTV News. “Nearly half of Canadians say they think mortgage fraud is common in Canada, while a sizeable portion think it’s acceptable to inflate income or misrepresent your employment to secure a mortgage. Those were the findings of the latest BNN Bloomberg and RATESDOTCA survey, conducted by Leger. The survey was sent out to respondents in mid-February, and surveyed 1,521 Canadian over the age of 18. Mortgage fraud can take several forms — this includes falsifying income, lying about a part-time or contract role, being full time or misrepresenting the source of your down payment, among other lies or omissions.”
“The survey found that while 70 per cent of Canadians say artificially inflating one’s income on a mortgage is never acceptable, 17 per cent of respondents said it is. Even more Canadians — 18 per cent — said it was acceptable to misrepresent elements of one’s employment in order to secure a mortgage. Forty-seven per cent of respondents said they feel mortgage fraud is common, while 12 per cent said they think it’s very common. Only five per cent said they think it’s very uncommon.”
“The issue of mortgage fraud in Canada has been a growing problem in recent years. Equifax has said that it has seen a 52 per cent increase in mortgage fraud cases since 2013. The problem is no doubt being exacerbated by an extremely unaffordable housing market across the country. RBC said that at the end of 2022, the average household needed to spend 62.7 per cent of their income to cover the costs of home ownership. That was the worst level on record. In some cities, such as Vancouver and Toronto, those numbers climbed to a shocking 95.8 per cent and 85.2 per cent of income, respectively.”
“High payments are due to a massive increase in interest rates in the past year, which have more than offset a decline in prices. The Bank of Canada’s overnight rate, which is used to help set lending rates, rose from near-zero at the start of 2022 to 4.5 per cent as of Jan. 25. Meanwhile, home prices across the country have fallen in that time. The Canada Real Estate Association shows that the average Canadian home cost $612,204 in January 2023, down 18.3 per cent compared to a year ago.”
The Guardian in the UK. “Philip Harris, a 42-year-old designer who has properties in south and east London, became a landlord by accident after meeting his now wife. She already had a flat, but rented it out, and the couple bought a property off-plan, when it was still at the design stage. When their children were born, they needed more space and bought a third property, renting out the second one. At the time, they saw their small portfolio as a retirement investment, but now, worried about mounting costs, they want to reduce the risk by selling one of the homes. It’s a picture playing out across the country.”
“Hadi Khalisadar is a not-so-small landlord, with 150 properties and his own lettings agency. He said 20% of the landlords he worked with wanted to sell. ‘Lots of landlords are very anxious, to the extent that some are saying they cannot afford their properties.’ Khalisadar wants to get rid of three of his homes, too. He says lettings are now ‘over-regulated,’ and rising interest rates have not helped.”
“For those in the sector, particularly smaller landlords, it’s a case of waiting to see if they can weather the storm. ‘It causes me huge amounts of stress and anxiety,’ says Harris. ‘We have a big mortgage and, on top of that, an outlay every month to cover the expenses. We are just trying to breathe through it, as we are hoping there will be some respite.’”