A report from Axios on Virginia. “Richmond home prices seem to be leveling off some after soaring for two years, per Redfin. The city of Richmond saw the biggest year-over-year drop in median sales price for single family homes in January, falling 11% to $280,000, while also seeing some of the steepest losses in listed and closed sales. Inventory was up 27% from last year.”
The Bradenton Herald in Florida. “Home prices are ‘showing no sign of falling back to pre-pandemic levels,’ the REALTOR Association of Sarasota and Manatee said in a news release. In Sarasota, 411 existing single-family homes changed hands, compared to 653 a year ago and the median price fell 1% from $464,500 to $459,999. ‘The real estate market in Sarasota and Manatee counties continues to be less active than the same time last year with significant decreases in the number of closed sales across all property types,’ said Brian Tresidder, Realtor association president. ‘Despite the decrease in sales, median sales prices for all property types are still higher than last year, with the exception of Sarasota single-family homes.’”
From Nerdwallet. “Homebuilders have hundreds of thousands of unsold dwellings in their inventories. And many homebuilders are offering incentives to prod buyers into signing purchase contracts: According to the National Association of Home Builders, 57% of builders offered some kind of incentive in February. The NAHB says 31% of builders reduced prices in February, by an average of 6%. That’s a sign of distress; builders don’t like to trim prices.”
“‘You can’t just blindly reduce prices,’ Sheryl Palmer, CEO of Taylor Morrison Home Corporation, said in a recent earnings call with analysts. ‘I think the more you just reduce prices, the more the consumer expects us to do.’ Plus, cutting prices in a housing development can infuriate customers who bought earlier, at higher prices. Using incentives can decrease the total cost of the buyer’s contract while making it appear they paid the same as their neighbors.”
From Fortune. “The real effect to pay attention to, said Michael Seiler, professor of real estate and finance at the College of William & Mary, is what Airbnb does to long-term rentals. Seiler decided to go deeper in his research, with co-authors in a paper, ‘Airbnb or Not Airbnb? That is the Question: How Airbnb Bans Disrupt Rental Markets,’ shared with Fortune.”
“In order to understand this Airbnb effect on long-term rentals, the authors focused on legislative bans on short-term rentals in general, and an Airbnb ordinance in Irvine, California, in particular. Irvine is one of the few cities that strictly enforces such regulation and actually prohibits Airbnbs in residential zoning areas. When you take away Airbnbs, rents go down. Seiler told Fortune that was expected, considering there’s a supply side effect that’s cutting into the market, in that rents go down and rental units shift toward long-term rentals, which makes rent cheaper.”
“‘You have oversupplied the market, so people stopped renting their property short-term [and] they started renting it long-term,’ he said. ‘That’s an increase in supply, and therefore that should put downward pressure on prices, and it did.’”
KSBW in California. “California State University, Monterey Bay announced it was scrapping a development project known as the 2nd Avenue Concept that would have exceeded the demand for faculty housing. According to CSUMB’s Chief Financial Officer Glen Nelson, the concept, first conceived in the early 2000s and formally proposed in September 2022, is ‘no longer needed’ given the university’s current housing inventory and the city of Marina’s own development projects. As of late, Nelson says, there is no waitlist for nonrenovated two bedroom, one bath apartment units.”
The Real Deal. “Distress is stressing out real estate investors. And last week didn’t help. Columbia Property Trust, a large office landlord controlled by PIMCO, has defaulted on $1.7 billion in loans tied to seven buildings across the country, marking one of largest office defaults since the start of the pandemic. In Los Angeles, Brookfield walked away from $784 million in loans connected to two of the firm’s trophy office towers in Downtown Los Angeles: 777 South Figueroa Street and the Gas Company Tower at 555 West 5th Street.”
“In New York, Cyrus and Darius Sakhai’s Sovereign Partners struck a deal with Pearlmark Real Estate to buy the Tower56 office building at 126 East 56th Street in the Plaza District for about $110 million. Pearlmark couldn’t refinance its mortgage on the property, and the sale price is roughly what is owed on the debt. It’s one of the first big forced sales to hit the New York office market — a trend many expect to grow this year as owners have trouble refinancing loans that come due.”
“Madison Realty Capital could lose its retail space at the Williamsburgh Savings Bank building in Downtown Brooklyn after a judge allowed lender Amherst Capital to proceed with its foreclosure on the retail condominium, owned by a joint venture of Madison and private equity firm Siguler Guff. The judge ruled the venture defaulted on a $22.2 million loan. Things weren’t all that rosy on the development side, either. Chetrit defaulted on the $85 million loan at 545 West 37th Street, a shovel-ready development site at Hudson Yards, Commercial Observer reported. Mack Real Estate is now the sole owner of the debt and the loan is being marketed by veteran dealmakers.”
“In Miami, development site prices plunged in the third and fourth quarters of last year, largely due to rising interest rates, according to developer Harvey Hernandez, as well as some brokers TRD spoke with.”
The Vancouver Sun in Canada. “Nearly a year ago, Sutton Group Westcoast pre-sold 21 units in a new Port Moody development in a single day. The number speaks to the frenzied market of early 2022. Since then, the Metro Vancouver real estate market has cooled considerably due to the rise in interest rates. At the moment, it seems everyone—developers, buyers, sellers, realtors—is holding their breath. ‘Our open houses are busier than ever,’ said realtor Jordon Sutton. ‘But the offers aren’t coming in. We’re at a stalemate here. We can feel the demand is being pushed back, and we’re not seeing the sales that just naturally occur.’”
“As for the Port Moody development, Hue by Marcon, which saw such record-breaking numbers last year, the first phase is gone. But units in the second phase are still available. ‘It took two weeks to sell the first phase, and now it’s probably going to take eight months to sell the second,’ Sutton said.”
The Telegraph in the UK. “The property downturn has forced one in 10 sellers to slash at least 10pc off their asking prices as demand slumps. High mortgage rates and the cost of living crisis mean homeowners are having to come to terms with the fact that buyers have drastically reduced budgets. Richard Donnell, of property website Zoopla, said: ’10pc of the total number of homes listed on Zoopla have had their asking prices reduced by more than 10pc.’”
“On a typical £294,000 home, based on the average UK house price in December according to the Office for National Statistics, this discount would be worth around £30,000. A further 17pc of listed properties had asking price reductions of between 5pc and 10pc, Mr Donnell said. Emma Fildes, of Brick Weaver, a buying agent, said: ‘Everything I’m getting sent is being reduced. Certainly for properties under £800,000, everyone is taking £50,000 off the price, and then another £25,000 comes off when the sale is agreed.’”
“Thea Carroll, an independent London buying agent, said: ‘We’re already seeing what I would call a ‘conversational 10pc’ – where the estate agent and buying agent agree that’s where the value sits under the instructed price – before formal negotiations have even started.’”
The Daily Mail. “Aussies have lashed out at the Barefoot Investor Scott Pape after he told homeowners they need to take some of the blame for their own decisions as interest rates soar. Earlier this month, a homeowner named Ben wrote to the financial investment guru asking ‘why is there no class action being taken against Philip Lowe and the RBA?’ over the Reserve Bank governor’s forecast interest rates would not rise until 2024. ‘How can the head of the RBA make unequivocal statements (not predictions) that interest rates will not rise until 2024 and then wash his hands and take no responsibility for the trauma (financial and mentally) his words have caused? Thousands of people, myself included, proceeded to purchase property based on these statements and are now in serious financial stress.’”
“Mr Pape replied and said that he thought Dr Lowe had ‘stuffed up right royally’ and should be ‘benched’ – but also called on mortgage-holders to take some of the blame for borrowing too much money. ‘Look, no one put a gun to your head and told you to borrow too much money when interest rates were at their lowest levels in recorded history,’ he said. ‘I’ve written about this every week for the last decade, mate! So sorry, but I won’t be joining your pity party.’”
“Pape’s sass did not go down well with some of his readers – with some unleashing at the popular financial adviser. ‘F*** you,’ one angry missive said. A reader named Linda wrote to Pape, saying: ‘As you enjoy your perch high up without mortgage stress, you won’t join in our ‘pity party.’ Yet my heart breaks telling my kids they can no longer do swimming lessons, no longer go to birthday parties, and no longer afford new shoes, among countless other sacrifices. ‘Meanwhile, my husband and I have added second jobs in our evenings and weekends to deal with the devastation caused by the rate rises and cost of living. For the first time in my life, I’ve started lining up at food banks each Tuesday so our children can have fruit and bread.’”
“The reader said they had taken out a hefty loan because Mr Lowe had forecast interest rates would not rise before they were increased nine consecutive times. Mr Pape responded to Linda, saying: ‘At the height of the pandemic the RBA flooded the banks with billions of dollars at the super-low rate of 0.1 per cent to support the economy. The banks shovelled out this money as quickly as they could… and for that round of limbo lending, they made it super simple for borrowers to shimmy across the line: they assessed them on the rosy scenario that rates wouldn’t go higher than 3 per cent.’”
“‘So are the banks fretting about their stuff-up? Nah. The banks know that the vast majority of their customers are like you, Linda – they will sell off their kidneys to keep their house. If you recently borrowed more than 80 per cent of the value of your home – which I have always advised against! – you’ll find that you are effectively trapped. And your bank knows it.’”
“A Reserve Bank program that handed the banks $188 billion to provide ultra-cheap home loans at the height of the Covid lockdowns appears to be playing a key role in Australia’s cost of living crisis. And now many borrowers are facing a severe ‘cliff’ in coming months – with mortgage holders who signed up to a very low fixed rate loan two years ago facing an abrupt 69 per cent surge in their monthly repayments. CoreLogic’s head of research Eliza Owen said the real pain would begin in April as ultra-low fixed rates started expiring, which was likely to see house prices fall further. Sydney’s median house price has already plunged by 15 per cent to $1.2 million during the past year. Making matters worse, two-thirds of Australia’s fixed rate loans are expiring in 2023, which means 23 per cent of all home borrowers will be coming off an ultra-low rate. ‘Hence the “cliff,’ Ms Owen said.”