It’s Friday desk clearing time for this blogger. “After reaching a peak of $670,000 in May 2022, median home prices in Northwest Austin have been consistently declining since August, according to the Austin Board of Realtors. February marks the seventh month straight of declining median home prices in the area. Compared to the previous year, median home prices are down 21.7%, data shows. The Austin-Round Rock metropolitan area peak in May 2022 was $550,000, while prices in February are down to $436,419. This represents a 12.2% decrease in prices compared to the previous year.”
“From one coast to another, the collapse of California-based Silicon Valley Bank has now sent tidal waves to Florida’s real estate market, one broker claimed on Thursday. ‘It’s definitely cooled down a bit. Gone are the days when we would put properties on the market and we would expect a bidding war within a few days,’ said Sandals Realty Group broker Amanda Glass. ‘It’s not happening anymore.’ The number of homes sold in Palm Beach County have also decreased. ‘It’s definitely shifted more towards a buyer’s market. The sellers have to do what buyers are interested in at this point and adjust more accordingly,’ Glass said.”
“A recent report from Rocket Homes shows Raleigh and Durham are still ‘seller’s markets.’ However, the market is slowly shifting, experts say. Properties are staying listed longer, and inventory is creeping up. ‘Even though new listings are down, there’s a ton of inventory,’ said Colleen Blondell, owner of Cary-based Blondell Properties. ‘Inventory has continued to increase since May of last year.’”
“In its February report, the Massachusetts Association of Realtors (MAR) shared that sales of existing homes (meaning ones that no longer have that new-home smell) in the Commonwealth declined for the 12th month in a row. But association president David McCarthy said those numbers need to be viewed in perspective: as COVID-driven sales when people clamored for more space to wait out the pandemic. ‘We had such a significant volume of sales in 2021 that it appears like the market is soft when it’s not,’ McCarthy said. In Greater Boston, however, the median sales price in both the single-family and condo markets dropped year-over-year in February. In the Quincy condo market, the median sales price slipped 4.7% to $405,000, and sales were down 52%. In Malden, the median sales price fell nearly 15%.”
“There were just 980,000 homes for sale at the end of February, according to the Realtors. At a recent open house in Cleveland, Ohio, home shopper Katie Berardi said higher mortgage rates have had an impact on what she and her husband can afford. The home she was touring was originally listed at $450,000, but no one showed up at the first open, according to the listing agent, who subsequently slashed the price. ‘This is a bigger house; you cannot build this house for $450,000 right now,’ said Michelle Santoro, an agent with Russell Realty Services. ‘But unfortunately, the market just didn’t like my thoughts, so we went down to $350,000, and now I’ve created a market frenzy.’”
“In the D.C. metro, almost 21,000 new apartment units were permitted last year. ‘The number of apartments under construction nationwide is up 25% from a year ago to nearly a million apartments under construction, which is the highest in nearly five decades,’ said Redfin deputy chief economist Taylor Marr.”
“East Bay landlords filled the foyer at Oakland City Hall on Tuesday afternoon, their rally chants and speeches echoing off the walls as they called for an end to the city’s COVID-19 eviction moratorium. Many property owners said they’re owed tens of thousands of dollars in rent from tenants they can’t evict. ‘How many of you are being stolen from right now?’ Seneca Scott, an activist and former mayoral candidate who organized the rally, asked the group in the foyer. They cheered in response. ‘We have government-enabled theft,’ he said.”
“A business roundtable brought frustrated small landlords in front of the Seattle City Council Wednesday. ‘I don’t think anyone would fault me for saying, ‘Hey, I don’t want to be a landlord in Seattle anymore’,’ said Ayda, a former landlord. She says the entire situation took an emotional and financial toll. ‘Absorbing a $120,000 loss was truly untenable. The city had no solutions for me,’ she said.”
“The lifeblood of the commercial real estate industry is under threat as regional banks reel from the recent marquee failures of two of their own. ‘I think a lot of people have been in denial about the value of their real estate because we haven’t seen trades,’ said Brett Forman, principal at Forman Capital, a South Florida-based CRE debt and equity lender. ‘I think it’s going to have a profound effect on regional banks.’”
“At the close of 2022, the value of office properties flagged as having a higher probability of distress already totaled nearly $40B, outpacing any other asset class. Transaction volume for office deals was down 66% year-over-year in February. Then came the bank failures. After months of funneling money into distressed assets, owners facing a dearth of available debt may choose to send the keys back to the bank — a phenomenon unfolding across several major metros. ‘You’re seeing some of the biggest landlords in the country default on their loans on purpose because they know they can’t make the economics work anymore,’ said Bill Baumgardner, executive vice president at VanTrust Real Estate in Dallas. ‘It’ll just continue to go in that direction.’”
“Already, some banks have moved to offload commercial mortgages. Renasant Bank filed a notice of foreclosure on an $11.9M loan attached to a two-story office building in the Atlanta area. In New York City, the owner of a nearly finished boutique office project said he was forced into bankruptcy court after his lender, Cecora Investment Advisors, initiated foreclosure proceedings, according to The Real Deal.”
“A secluded multi-bedroom mansion north of Toronto, a Scarborough bungalow, and an Etobicoke detached home that’s been on the market for months. The listings for these properties are peppered with language that reminds buyers to manage their expectations, to treat the properties ‘as is’ and do their own due diligence. They’re just a few examples of the rising number of forced sales in the GTA, according to realtor analysis of listing data. Toronto-based realtor Daniel Foch found 35 power of sale listings in February, up from 12 the year before and zero in February 2020.”
“‘We’re seeing more volume of distressed properties. That’s evidence that there’s increased distress in the market right now,’ said Foch. ‘A lot of it is just evidence of failed speculative activity,’ Foch said, referring to investors and would-be flippers, who got caught out by the changing market and rising rates. ‘In the majority of cases there’s more than one lender on the property he said. ‘It just shows to me that leverage is what kills in real estate.’”
“Speaking generally, Foch said there are also ‘quite a few’ homes that are halfway through extensive renovations up for power of sale. ‘It’s some people that were renting out properties that were cash negative, some people going to flip a property and maybe got caught, maybe they bought at a bad time, they bought it in January or February of last year and they gave up on the renovation because there was no point,’ he said.”
“Mortgage broker Jonathan Gibson said he’s seeing a lot of private lenders who were lending using home equity lines of credit (HELOCs). Now that the interest rates are so much higher, it’s just not worth it for many of them, and private mortgage renewal clauses are typically, ‘at the lenders’ discretion.’ ‘These lenders are basically saying we’re not renewing this thing, you can go find a new lender,’ he said.”
“The housing market has gone quiet, triggering the biggest sales slump in nearly 40 years. CoreLogic NZ’s new Housing Chart Pack indicated 60,859 properties were sold in the year to February, which was the lowest 12-month total since October 1983. ‘Few vendors are in a hurry to sell, given that unemployment remains low. And those buyers who have secured finance know that they can take their time too, with listings abundant and prices falling,’ said CoreLogic NZ chief property economist Kelvin Davidson.”
“The primary reason that the Fed finds itself in its present policy predicament of having to choose between reducing inflation and reducing financial market strains is that it kept monetary policy far too loose for far too long in 2021. At a time when the stock market and the housing market were booming, the Fed chose to continue flooding the market with liquidity. It did so by buying $120 billion a month in US Treasury bonds and mortgage-backed securities.”
“The net result of the Fed’s monetary policy largesse is that not only did we get multi-decade high inflation. We also got an equity and housing market bubble and very poor credit market decisions, including those in the banking system. One would have to engage in wishful thinking to believe that we will not see a rolling banking crisis later this year as more banks are found to have been swimming naked in the period of easy Fed money. One would also have to engage in wishful thinking to believe that the combination of a hawkish interest rate hiking cycle and a credit crunch at the regional banks will not lead to a recession later this year.”
“The moral of the story is that it would have been better had the Fed not been asleep at the wheel in 2021 when inflationary pressures were building and an asset price and credit market bubble was forming. However, that would seem to be water under the bridge and it will be we who will be paying a painful price for the Fed’s blunders in the form of a hard economic landing.”