A report from the Mercury News in California. “‘Silicon Valley Bank’s collapse is good for real estate,’ said Chris Thornberg, an economist and founder of Beacon Economics. ‘I mean it. If it forces the Federal Reserve to truly sit on their hands and let inflation run, that will make interest rates come down, and that will be a relief for home real estate markets.’ Year over year, prices were still down a whopping 19% — the largest decline in the state — highlighting the dramatic slide in the Bay Area market. The median home price in Santa Clara County was $1.5 million in February, an 18% drop from $1.82 million last year and a 2% drop from the previous month.”
From Newsweek. “If there’s one city where the local housing market is likely to suffer the impact of the recent U.S. bank failures, that’s San Francisco. ‘The San Francisco market was already under stress, even before the collapse of SVB,’ Cris DeRitis, deputy chief economist at Moody’s Analytics, told Newsweek. ‘Prices were already coming down 10 percent from their peak from the last reading. So that was already the primary market that was experiencing declines.’”
My San Antonio in Texas. “It seemed that last year, even Austin’s outlying areas were growing impossibly inexpensive for the average homebuyer. The northern suburbs were particularly hot, including Round Rock and Pflugerville, as outlined in a MySA story from March. However, Austin’s median home sales price has dipped to $439,419, the lowest it has been in almost two years, according to new data from the Austin Board of Realtors. In Hays County, which encompasses towns like Buda, Kyle, Wimberley, and Dripping Springs, and which contains portions of the cities of Austin and San Marcos, home sales increased 3.8%, with the median price falling 13.1% to $380,000. Active listings jumped a staggering 448.8% to 1,136 listings, no doubt in large part to a massive increase in development in the area.”
“In Bastrop County, where we previously reported was becoming a hotspot for young creatives being priced out of Austin, home sales jumped 28.8% compared to 2022, while median price decreased 20% to $349,990. Bastrop County also saw a huge increase in active listings of almost 400%, again a likely cause of major homebuilding in towns like Elgin and Bastrop.”
From KSL TV. “The Utah Association of Realtors reports that after 129 months of price increases, January marked the first year-over-year decline in statewide home prices. And in February, prices dropped again. ‘Home prices are down,’ said Deanna Devey, the association’s director of communications. ‘That’s good because affordability has really been an issue for buyers.’ The median sales price in Utah was $464,000 in February, according to the realtor group’s monthly report. That’s a 7.6% decline from last February’s median sales price of $502,000. Utah home prices reached their peak of nearly $540,000 in May of 2022.”
The New York Post. “A grandiose, Gatsby-esque Long Island mansion — a mashup of Las Vegas kitsch and West Egg elegance — is for sale once again. The stately home, on 8 waterfront acres, has been on and off the market for the past eight years, according to the Real Deal. The $100 million asking price dropped to $85 million — and then $55 million. It now asks $45 million.”
My Northwest in Washington. “Small landlords throughout Seattle let their frustrations fly over a flurry of grievances they are facing during a meeting with a city council committee. ‘We feel very vulnerable to a bad situation in our home that there may be no resolution for,’ said MariLyn Yim, a property owner in District 6. ‘In addition to us encouraging people not to buy in Seattle, which I hate to say, but every small landlord we know in Seattle has an exit strategy to divest and leave the city.’”
From ABC 6. “As financial troubles delay and cancel construction projects across the state, economic experts say we’re spiraling towards an economic downturn. Projects like the revitalization of the Superman Building, Fane Tower, and Tidewater Landing have been halted or hindered by recent financial troubles. Len Lardaro, professor of economics at the University of Rhode Island, cites rising interest rates, increased inflation, and supply shortages. ‘We’re actually approaching or possibly entering into the earliest stages of a recession in Rhode Island,’ said Lardaro. ‘All of this just means that the world has changed from a year ago. So, it’s not clear that these projects are viable any longer.’”
The Real Deal. “The upcoming auction of a Connecticut office complex demonstrates the depths of despair being felt by some landlords in the commercial real estate sector. The Campus at Greenhill, located at 108 Leigus Road in Wallingford, is set to be auctioned at the beginning of April, the Hartford Business Journal reported. Bidding will commence April 3 on Ten-X, running through April 5. There’s plenty to like about the modern office building, completed in 2012. But the reality of the property is much harsher, in line with the general shift away from suburban office buildings in a post-pandemic world.”
“Health insurer Anthem Blue Cross Blue Shield signed on for more than 200,000 square feet two years before construction was even completed; it’s down to a meager 48,000 square feet. There are a few other tenants, but the building is 60 percent vacant. Before the pandemic even muddied the waters, the mortgage holder foreclosed on the property.”
The Globe and Mail. “Toxic Treasuries, spread across the thousands of banks that make up the nebulous U.S. financial system, could conceivably give rise to a cascade of turmoil that officials are unable to contain. ‘It was a blind spot,’ said Cristian Bravo Roman, Canada Research Chair in Banking and Insurance Analytics at Western University. While policy makers were aware of the stress that rising interest rates put on bank holdings, ‘they didn’t think there was a systemic risk threat arising from it,’ Prof. Bravo Roman said.”
“The real risk lies with small and medium-sized banks, of which there are a multitude. In 2021, there were 4,237 banks insured by the Federal Deposit Insurance Corp. ‘There are U.S. banks left and right that are at risk of bank runs,’ said Sébastien Mc Mahon, chief strategist at iA Investment Management. ‘When people get scared, that’s when you have animal spirits take over. And illiquidity is the thing that can kill you in 24 hours.’”
From Fortune. “Once the crisis is past, who will enforce discipline in the banking system? The likely candidates all seem to have disqualified themselves. It was probably foolish to think that uninsured depositors would be a prime source of discipline for misbehaving banks, particularly in a case like Silicon Vally Bank, where customers were effectively required to hold deposits at the bank in return for loans and services. But by promising to bail out all the failed banks’ depositors, regulators have taken depositor discipline almost entirely off the table. (I say ‘almost’ because regulators are still waffling on exactly who is covered by the deposit guarantee.)”
“We now know it was an error (if not an act of policy malpractice) to set $250 billion as the threshold for ‘systemically important’ banks. The failed banks fell below that level but were declared systemically important all the same. Even more disturbing is the revelation that regulators probably wouldn’t have caught the problem anyway. Why? Because their ‘stress tests’ didn’t deal with a rapidly rising interest rate scenario.”
“That last revelation is particularly disturbing. (You can read more about it in Shawn Tully’s excellent piece here.) We’ve known for over a decade that we were in a historically unprecedented era of low interest rates–and that a return to the norm would be likely, if not inevitable. So why would the Fed not ‘stress test’ banks for the effects of higher rates? The Wall Street Journal attempts to explain the failure this weekend here. But it still boggles the mind. Market failure is the best argument for imposing regulation. And regulatory failure is the best argument for imposing market discipline. But what happens when both fail? That’s the unanswered question.”
The Australian Financial Review. “While Australian bank stocks have so far been insulated from the global banking turmoil triggered by the sudden collapse of California-based Silicon Valley Bank earlier this month, that doesn’t mean bank executives are complacent. In particular, they’re focused on what are known in banking circles as the ‘2021 and 2022 vintage’ home loans. These are the pandemic-era home loans that were written when the banks, loaded up with super-cheap three-year loans provided by the Reserve Bank, were competing furiously to write fixed-rate home loans.”
“According to bankers, there are already some signs of mortgage stress starting to appear in south-west Sydney and western Melbourne. Especially given the precipitous decline in residential prices. According to CoreLogic figures, Sydney house and unit prices plunged 13.4 per cent in the year to the end of February, while Melbourne prices were down 9.6 per cent and Brisbane suffered a fall of 6.3 per cent.”
News Talk New Zealand. “Kath Duncan has never seen Ōmaha like this. ‘There are for sale signs up in almost every street,’ she says. ‘I’ve been coming to Ōmaha for years and years and I’ve never seen so many houses up for sale.’ Duncan has owned baches in the popular beach town, 75 kilometres north of Auckland, for most of the past 30 years. ‘At any one time, there were only two, maybe three, properties,’ she said of the search. Ōmaha homeowners prize their properties and rarely sell, given the town is on a tiny spit of land where new housing developments are difficult. ‘The attitude has always been, if you’re lucky enough to get in on a property, you hang on to it if you can.’”
“That’s what made the recent string of ‘for sale’ signs so surprising, Duncan said. She wonders whether rising interest rates are starting to bite, especially among those who bought in recent years after the Covid pandemic. House prices have been falling for more than 12 months and data by analysts at CoreLogic shows just how much the Coromandel – as one example of holiday hotspots – has been hit. The median house value in Whangamatā is now $1.3 million – or 4 per cent less than three months ago and 13 per cent down on this time last year. There are also fewer sales at the same time as more homes are being listed and are taking longer to sell.”
“CoreLogic’s data shows 109 homes were sold in Whangamatā in the 12 months to March this year, or half as many as the 218 sold in the 12 months to September 2021, which was close to the peak of the post-Covid booming market. There are also about six times more homes listed for sale now than 18 months ago in September 2021. CoreLogic’s data shows 109 homes were sold in Whangamatā in the 12 months to March this year, or half as many as the 218 sold in the 12 months to September 2021, which was close to the peak of the post-Covid booming market. There are also about six times more homes listed for sale now than 18 months ago in September 2021.”
“Long-time Ōmaha agent Di Balich has also noticed more homes coming up for sale in the town, but she says she isn’t aware of people being forced to sell because they can’t afford to pay their home loans. As people’s lives were changing again post-Covid, they were starting to sell, especially those who might have been holding on to houses throughout 2022 to see whether the downturn in the market had passed. ‘Those people who saw the extraordinary capital gains (in 2020 and 2021) didn’t want to sell because they were thinking that they might miss out on growth, but are now realising we’ve come back to a normal market,’ she said.”
“For Duncan, meanwhile, the number of houses being listed doesn’t look like just a post-Covid reaction but a more notable change. ‘I keep saying, ‘Oh my god, look there’s another one for sale, now another one,’ she said.”