A report from USA Today. “‘Prices would not have fallen if the Federal Reserve did not raise interest rates so aggressively,’ says National Association of Realtors’ Chief Economist Lawrence Yun. ‘One casualty of the Fed’s policy, aside from the regional banks, is the loss in home values for some homeowners.’ While experts agree that the Fed’s monetary policy slowed down the price growth last year, there are varied opinions on what would have happened if they had done noting at all. ‘I don’t think the affordability actually would’ve changed, but it would have like been ripe for a bubble. If interest rates stayed low for too long, then a bubble would’ve formed in the housing market where once interest rates went up, it would’ve been a much harsher fall,’ Yun said.”
KING 5 in Washington. “According to Northwest Multiple Listing Service, not only are the number of listings down but so is the number of people willing to pay for homes with mortgage rates of 6-7%. That’s having an impact on the median home price in King County which dropped 7% in February compared to the same time last year. But it’s Seattle’s tech hub, the East Side saw one of the biggest drops plummeting 21%. Newly retired Mark Griffin and his wife Mary Gleason thought they would sell their Sammamish home at the above asking price and put a down payment on their new home in Nevada. But by the time they updated and painted their home, which they bought in the late 1990s for $500,000, mortgage rates were soaring and tech layoffs were around the corner.”
“‘We were watching it go up and up and up and up and up and up… and then of course, we decided to take advantage of it and yeah, it just started coming down,’ Gleason said. The couple ultimately sold their home at 20% less than the asking price and said it was not enough to cover what they wanted to pass on to their children.”
The Idaho Statesman. “For the first time in over 10 years, the United States has witnessed a nationwide decrease in year-over-year median home prices. Boise and the rest of the Treasure Valley are well ahead of the national curve in price decreases. ZIP codes including Boise, Meridian, Nampa and Caldwell have witnessed a 4.2% decrease in median home value over the past year. According to Zillow, ZIP code 83703 — which encompasses west Boise and Garden City — saw the most significant yearly decrease at 6.9%.”
The Boston Globe in Massachusetts. “Greater Boston’s housing market was soaring so high over the last two years, it had to cool down at some point. And now, it has. The region’s housing market hit new lows in February, with the fewest single-family home sales seen in a single month since 2011, and the third straight month of year-over-year price declines, according to the Greater Boston Association of Realtors. And perhaps even more striking: the median price on a single-family home in Greater Boston fell to $700,000 last month, down 7.6 percent from $757,500, the median price in February 2022. It was the largest year-over-year price drop since October 2011.”
“‘As mortgage rates have risen, the buyer pool has shrunk, so sellers can no longer be as aggressive on pricing, bidding wars have become less frequent, and buyers have more room for negotiation,’ said Alison Socha, the president of GBAR. ‘Currently there’s very little upward pressure on prices.’”
Community Impact in Texas. “The Austin Board of Realtors’ market report for February shows a continuation of previous months’ trends in the Round Rock, Pflugerville and Hutto housing markets: high inventory and steadily dropping prices. In February, the median home sale price across all three cities was $399,500, according to the report. That is down 8.2% from $435,124 in January and down 14% from $464,550 last February. Round Rock, Pflugerville and Hutto had 743 combined active home listings in February, over seven times more than last February’s 103 active listings.”
Times of San Diego in California. “The U.S. has lost 58 ‘million-dollar’ communities — areas where the typical home is worth $1 million or more — since the housing market peaked last July, a new analysis shows. One of them is in San Diego County, in Bonita, where that home value has dipped to about $993,500, according to Zillow. The seven areas in the county where the typical home value remains above $1 million are Carlsbad, Coronado, Del Mar, Encinitas, Poway, Rancho Santa Fe and Solana Beach. Across the nation in the six months after the peak, the typical home in million-dollar cities lost an average of $114,500 in value. The typical U.S. home is worth 4.1% less than it was last July, according to the Zillow Home Value Index. In current million-dollar cities, such a home on average has lost 6.3% of its value.”
Bisnow New York. “As the global banking crisis continues to spread, so does its potential impact on the office market in the world’s financial hub. Credit Suisse, Signature Bank and First Republic Bank combine to occupy more than 2M SF of office space in Manhattan, according to Avison Young data provided to Bisnow. It is unclear what the future holds for the landlords of the banks, whose leases have expiration dates ranging from 2026 to 2038. Rob Kluge, senior managing director at Current Real Estate Advisors, said the banking crisis is likely to throw cold water on office deals across industries as companies are more cautious with their money.”
“‘The government and the still-standing banks have done a good job cauterizing the run on the banks and protecting the institutions, but what they’re not cauterizing is the lack of confidence in tenants in the market,’ he said. ‘This is really very nerve-wracking and it directly affects the banking where people get their money from. It’s obviously a slight contagion effect.’”
Mortgage News Daily. “The way bond math works, every man, woman, and child that owns a fixed-income security issued when rates were lower is now underwater on that bond or that security. As long as they continue to collect payments on that coupon, and don’t have to sell it, fine. If they are forced to sell the security at a loss and book it, that’s a different story. When people want their money out of a bank, and the bank needs to sell securities to pay off depositors, well, we’ve seen how that plays out. Along those lines, big bank problems make the headlines, but there are plenty of smaller depository bank mergers and acquisitions going on that don’t make the headlines. And the same thing is happening with vendors and mortgage bankers & brokers.”
From Reuters. “Distressed debt investors and large hedge funds are buying up Credit Suisse additional tier-1 bonds at rock-bottom prices after they were written down to zero in the Swiss bank’s rescue by cross-town rival UBS. The bonds, now trading at about 0.03 cents on the dollar, have become an opportunity for hedge funds, which are taking punts that the merger of UBS/Credit Suisse might not proceed or that the Swiss regulator might even reverse its decision, six traders and dealmakers said.”
From Market Watch. “Banking sector jitters and higher interest rates likely spell trouble for the roughly $5.5 trillion U.S. commercial real estate debt market. Multifamily properties have been a ‘favored’ property asset class in the wake of the global financial crisis. Since that time, the federal government has come to own nearly half of the $2 trillion multifamily loan pie (see chart), according to Deutsche Bank research. The Green Street Commercial Property Index pegged U.S. property values as down 15% in March from a year before.”
“Office properties, once considered a relatively safe investment, aren’t viewed the same way any longer, particularly with Kastle Systems’ gauging office vacancy in its 10-city barometer at only 47.3% as of March 20. Shares of office REITs, or real-estate investment trusts, have plunged 51% over the past 12 months, according to Morgan Stanley researchers. That compares with a 23% drop for the Dow Jones Equity REIT Index for the same stretch.”
The Associated Press. “Treasury Secretary Janet Yellen projected calm on Tuesday after recent regional bank collapses but told a gathering of bankers that additional rescue arrangements ‘could be warranted’ if any new failures at smaller institutions jeopardize financial stability. Yellen, who made her remarks at the American Bankers Association, said that overall ‘the situation is stabilizing.’ ‘And the U.S. banking system remains sound,’ Yellen said, drawing clear differences between recent events and the 2008 financial meltdown, which triggered trillions of dollars of financial losses globally. ‘This is different from 2008,’ she said. ‘2008 was a solvency crisis, rather what we’re seeing now is contagious bank runs.’”
CTV News in Canada. “Trends in Simcoe County show an increase in viewings and buyers re-entering the market after key interest rate hikes from the Bank of Canada warded off many last year. Lance Chilton, the broker of record at Re/Max Hallmark Chilton Realty, calls the local market ‘more or less balanced.’ ‘Inventory conditions are the same as they once were in 2018,’ he noted. ‘From 2020 to 2022, prices rose to about 43 per cent, which was rather rapid.’ Chilton said key interest rate hikes eventually bottomed out the local market by about September – that’s when home prices that peaked at around $1 million dropped to about $730,000.”
The Daily Telegraph in Australia. “The investment syndicate put together by the property spruiker Sasha Hopkins has seen its Byron Bay property sold for $4.4m at mortgagee auction. The 3816 sqm Paterson St holding last sold for $5m in 2021. It was offered with development concept images by Paul Clout Design being one of Byron Bay’s largest lots enjoying Residential R2 zoning which permits multi-dwelling housing. Sharon McInnes and Paul Prior of First National secured the sale last weekend with the listing having been with other agents for 500 days.”
“The price drop sat close to the 15 per cent standard decline that local HTW valuer Mark Lackey recently noted. The four bedroom pavilion-style house featuring two wings, was owned by Hunter Hopkins Project 7 Pty Ltd, one of the many entities within the collapsed Hopkins property investment empire.”
Asia One in Singapore. “This week, we spoke to someone who regrets getting a two-bedder condo unit, in an otherwise supposedly ‘safe’ location. S purchased a condo a few years ago, in the seemingly infallible location of Stevens Road. This is in the prestigious District 10 area, close to the famed Dalvey Road landed enclave, near multiple renowned schools, and just around a three-minute drive to the Orchard Road shopping belt. Another mistake that S made was to put too much emphasis on the future upside. Many buyers tend to look at the availability of a new MRT station as a sure guarantee of future profits, but sometimes it would have already been priced in if it was not bought before the announcement.”
“For S, the current issues are compounded by high maintenance fees. This is a trade-off for exclusivity: higher-end condos are more private, with smaller unit counts; but that also means fewer units to share the cost. S says that, in hindsight, they made some mistakes that cause them to regret the purchase: ‘When we first bought it, we really didn’t think about the practical aspects as a home,’ S says, ‘For example, it has an open kitchen and no real yard area. As a two-bedder there was space for one kid, but not a second one. Also, there’s no helper’s room. So it’s good for a couple with one kid, but beyond that, it’s very limited.’”
“Finally, S mentioned that the biggest hurdle to get over was the sunk cost fallacy. Over the past few years, it was increasingly obvious that this was not a good investment, but it was just hard to let go. ‘It was hard to just bite the bullet to realise the loss and move on. We kept thinking what if there might be further upside in the future, but the years of sitting on it waiting for something to happen could have allowed us to purchase a property with better upside.’”
“Sometimes called the ‘Concorde fallacy,’ (which was named after the supersonic jet that took people from Europe to the US in record time). Despite results showing that the economic outlook for the jet was not great, the British and French governments continued to throw money at the project in the hopes that it would work out – just because they’d already spent such a huge sum.”