A report from Business Insider. “Home rehabbers are quickly finding that the once-reliable method known as ‘BRRRR’ — short for buy, rehab, rent, refinance, and repeat — has become much riskier as home prices in hot pandemic markets fizzle out and 30-year mortgage rates reach the 7% threshold. But a perfect storm of softening home prices, increasing taxes, higher mortgage rates, and steep building-material costs has made the BRRRR model less attractive to investors. And Austin is particularly vulnerable, as home prices have fallen drastically since last summer, when they peaked.”
“John Crenshaw, a 27-year-old Austin investor who owns several rentals acquired via the BRRRR method, said that using it has become more challenging for him and his fellow investors since mortgage rates increased. Not only are homes selling and appraising for less than they were six months ago, which dampens the size of cash-out refinances, but lenders have become more risk-averse. ‘Instead of doing an 80% cash-out, a lot of people are only doing 75% or 70% cash-out, so you’ll only get 70% of your loan value back and the remaining 30% has to remain in the property,’ Crenshaw told Insider.”
The San Francisco Chronicle. “One of Lake Tahoe’s massive compounds on the east side just got a giant price cut. The Wovoka estate, originally listed for $55 million, now has an offering price of $35 million. Though the property is $20 million less than when it was listed last year, it no longer includes two parcels. ‘You can’t find acreage like this anymore on the Nevada side,’ listing agent Lexi Cerretti of Compass said.”
Bisnow Los Angeles in California. “Just under a year after buying a more than 1,000-unit apartment portfolio in Downtown Los Angeles, Laguna Point Properties is delinquent on the $329M loan it used to buy the apartments. The firm is more than 30 days delinquent on its loan, according to The Real Deal, citing data from DBRS Morningstar. A representative for Orange County-based Laguna Point Properties told Bisnow the loan isn’t in default but didn’t comment further. Occupancy across the portfolio had slumped to 87% in February, a significant drop from the 97% occupancy the properties had when the loan was secured, according to TRD.”
Bisnow New York. “The pain in Manhattan’s office market is reverberating out to Long Island City. Vacancy in Class-A buildings in the area was 43.1% at the end of 2022, according to Cushman & Wakefield, while overall vacancy hit a new record of 28.6%. Rents fell 7% from the year before, while office take-up was negative 1M SF, a two-year low, according to the brokerage. ‘You drive on Long Island Expressway leaving the Midtown Tunnel and head towards Long Island, you can see four or five buildings that have been redeveloped … Austell Place, you can look right through it,’ First Pioneer Properties President Suresh Sani said. ‘Unfortunately our building, having just one of six floors rented, you can look right through it too.’”
“‘My father always said … ‘Don’t worry, Suresh, the economy always gets better in America. If you lower your price in New York City, somebody will always take it,’ he said. ‘That’s not happening anymore … there has been a structural change in the office market.’”
Mile High CRE in Colorado. “Real estate veteran and turnaround specialist James King, founder of Denver-based King Communities, has introduced a real estate investment fund, providing people with the opportunity to invest in distressed real estate assets. The Contrarian RE Fund 1, LLC, researches, identifies and acquires multifamily and manufactured home communities that are being sold at steep discounts. ‘These opportunities are beginning to present themselves as more distressed assets are coming online and property owners are struggling with increased debt,’ said King, who along with his team of professionals has successfully owned and operated more than 2,000 units across the United States.”
The London Free Press in Canada. “London-area home sales fell off a cliff last month, with area realtors recording the fewest sales in nearly 30 years. According to LSTAR, the average price of a home was $621,000 in February, up $36,000 from January’s $585,000. But it was still 24 per cent lower than February 2022, when prices hit a record high of about $825,000. ‘Those Toronto buyers, if they’re not here, that makes a big difference,’ said Phil Bailey, a real estate agent with HouseSigma Brokerage. ‘There were homes that I sold where nine out of 10 offers were coming from the (Greater Toronto Area). Now you may only have one offer from the GTA.’”
AM 800 in Canada. “Another drop in property sales across Windsor-Essex for a year straight. The Windsor-Essex County Association of Realtors reports that sales in February were down 52.61 per cent across the Windsor-Essex region compared to last February. The average sale price was down 25.64 per cent to $532,777 compared to the same time last year. In February 2022, the average home price was $716,455.”
Moose Jaw Today in Canada. “It was mostly red down arrows for Moose Jaw’s housing market in February, as sales, listings, inventory and average house prices all dropped by double-digit percentages year-over-year, according to the Saskatchewan Realtors Association. The average home price was $223,026, compared to $272,091 last February or a 22-per-cent drop.”
Maple Ridge News in Canada. “The statistics from the Real Estate Board of Greater Vancouver show some sharp declines in the Maple Ridge and Pitt Meadows market. Over the past three months houses and townhouse sales are down 41 per cent compared with the same period last year, and apartments sales have dropped 57 per cent. The price of a single family detached home in Maple Ridge is down more than 20 per cent in Maple Ridge compared with a year ago, dropping to $1.17 million, and the price in Pitt Meadows is down 26 per cent to $1.12 million.”
The Telegraph. “Surrey Heath has been named the house price discount capital of Britain, with three out of five sales done at a cut the price to their initial listing. Julian de la Poer Beresford, of Hamptons estate agents in Sunningdale, said discounts in Surrey Heath average between 5pc and 8pc. Sellers in London and the South East are having to make the biggest adjustments. Across the South East, more than 5,000 properties were sold at a discount in February, accounting for 37pc of all sales in the region.”
“Richard Winter, a Surrey buying agent, said: ‘We have just bought a property that was listed last year for £1.75m. Back then, before Liz Truss, it had five or six people offering on it and the sale was agreed for just shy of £2m. That fell through at Christmas. We’ve just bought it for £1.6m.’”
Stuff New Zealand. “House price expectations are closing in on lows last seen during the Global Financial Crisis and could slump even further, ASB says. ‘House price falls have already been higher on a percentage basis than what we saw during the GFC, so we might see net price expectations drop down to a GFC low, if not surpass that, in the coming quarters,’ said ASB senior economist Kim Mundy. ‘We saw prices drop in the main centres such as Auckland and Wellington first because affordability was most constrained. However, we are now seeing widespread house price falls across the regions as interest rates continue to climb.’”
“Sales prices fell in most regions, with Northland, Auckland, Bay of Plenty, Hawkes’ Bay, and Wellington all recording annual drops of over 16%. The Auckland region’s median price had the biggest fall, down 21.7% to $940,000 from $1.20m last January. In the index, the region was down by 17.1% annually, and by 21.4% from its peak.”
Channel News Asia. “Rising interest rates in Australia have sent property prices tumbling in many cities. In Sydney, for instance, higher interest rates have sent prices falling by between 10 and 15 per cent since property values peaked more than a year ago.The central bank is taking much of the blame for initially suggesting that interest rates in Australia would not go up until 2024. This has led people to borrow more than they could afford. To make matters worse, rate rises are affecting the broader economy, said analysts, noting that there is no sign of a soft landing.”
“It is not clear when the interest rates and the rising cost of living will start to fall, but with the economy on a knife edge and many Australians already forced to cut back on their spending, the fear now is of a looming recession, they added. One resident said: ‘A lot of people have paid a lot of money for their houses and now interest rates are going up, they can’t afford to pay it all back because they borrowed too much.’”
The Vietnam Express. “I had a conversation one day late last year with Hoang, a motorbike taxi driver in Hanoi. He had left his hometown for Hanoi not just to earn money but also to hide from creditors. After marriage he had started trading land for a living, but the business put him in debt within just a few years after he bought too many pieces of land and the market suddenly fell. These days, when he misses his wife and children, he goes home for a short time and quickly returns to Hanoi for everyone’s safety.”
“He also told me about people who quickly became rich from the business. He blamed his own failure on ‘bad luck,’ and promised ‘once I have enough money, I’ll trade land again.’ I really hope Hoang gets ‘lucky’ next time though I am worried for him because, listening to his story, it is not difficult to see he has little knowledge of the real estate market. The success rate among amateurs like Hoang, in reality, is extremely low. Statistics show that only 25% of companies set up for trading property survive for more than a decade. As for amateur traders, less than 10% manage to get rich.”