A report from the Los Angeles Times in California. “Industry experts generally agree that L.A.’s luxury market has slowed down this year, and the data agree. ‘I’ll do anything to sell,’ said the owner of one home in Brentwood who wished to remain anonymous to not affect a potential sale. ‘This market is a mess.’ The trend has led to a glut of mansions on the market. ‘The market reminds me of 2008. You couldn’t even give a house away, so you had to throw in all these incentives in order to sell it,’ said Anthony Marguleas of Amalfi Estates.”
The Tribune in California. “San Luis Obispo County’s housing market is looking to rebound from a slow start to the year. In the North County, the median home price in Paso Robles fell 13.7% year over year, dropping to $643,000. Cambria’s housing market saw declines in price and number of sales: the seven homes sold in February went for a median of $800,000, a 31.2% drop year over year. Los Osos saw a less precipitous drop in prices, falling 10.7% year over year to $777,500. Morro Bay saw lower prices, too, with the $808,500 median price representing a 19% drop from last year.”
“The three biggest South County markets — Arroyo Grande, Pismo Beach and Grover Beach — all saw median home sale price decreases in February, Redfin said, with Grover Beach’s median sale price dropping 27.1% to $705,000 from the previous year. Pismo Beach, the most expensive housing market in the county, saw its median sale price plummet 17.7% compared to February 2022, settling at $1.1 million, Redfin’s analysis found.”
From Fox Business. “Laura Johnson, a 59-year-old technology project manager, put her Seattle house on the market in September for $800,000. In October, after dropping the price to $745,000 and getting no offers, she took the house off the market. ‘In Seattle, sales just completely dropped off,’ she said. Ms. Johnson relisted her home in February for $750,000. She cut the price to $740,000 last week.”
“The median existing single-family home-sale price in San Francisco was $1.465 million in February, down from a peak of $2.06 million in March 2022, according to the California Association of Realtors. The median home-sale price in Idaho’s Ada County, which includes Boise, was $492,115 in February, down 10.5% from a year earlier, according to Boise Regional Realtors. In all of the 12 major housing markets west of Texas, plus Austin, home prices fell in January on an annual basis, according to Black Knight.”
Bisnow Dallas in Texas. “Owners and developers of office product in Dallas are battening down the hatches. Some owners may have no choice but to relinquish control of their buildings, said Adam Jackson, chief investment officer at Stream Realty Partners. This has already played out at some Dallas properties, including The Towers at Park Central, PIMCO’s 846K SF, Class-B office complex at the High Five Interchange. ‘The cost of debt is going to force the hand of a lot of these older office projects and cause them to be physically restructured,’ Jackson said. ‘We anticipate a pretty strong amount of foreclosures over the coming years, similar to what happened in the ’80s.’”
The Commercial Observer. “The central bank’s decision to increase interest rates by a quarter point on March 22 — the seventh straight rate increase in the last 12 months — came at a particularly precarious moment for the economy: Not only have two U.S. regional banks recently failed, but $936 billion in CRE and multifamily debt is due to mature in 2023 and 2024, with more than half of the debt provided by commercial banks. Joel Naroff, president of Naroff Economics and a former chief economist for several regional banks, described the present environment, especially the sudden rise in interest rates, as resembling the savings-and-loan (S&L) financial crisis in the late 1980s With the abrupt jump in interest rates, S&Ls had to pay up in the market on their long-term loans, as large portions of their asset bases were fixed-rate mortgages, explained Naroff.”
“‘You can see how the world changed on them,’ he said. ‘A lot of them were the walking dead until they were dead. Once you had a spike in interest rates, there was no way they could cover it.’ If this sounds familiar, it’s because a nearly identical situation happened in March at Silicon Valley Bank. ‘It’s similar to the S&L crisis in structure, in that they went out on the curve, they bought longer-term assets and they were still paying short-term money,’ Naroff said.”
From Reuters. “Many people hope the crisis of confidence infecting global banking this month can be repelled almost as quickly as it appeared. But that may simply be wishful thinking, certainly if history is anything to go by. Bank crises tend not to be resolved in weeks or months – they smolder for years. The U.S. ‘Savings and Loans’ (S&L) crisis of the 1980s and 1990s is a case in point. Coupled with deregulation and lax lending standards, the crisis reached boiling point in the mid-1980s and around a third of the country’s S&L firms – over 1,000 in total – would go bust. Most striking was duration of the problems – they stretched from the early 1980s right through the mid-1990s.”
“Another familiar echo is banks being unaware just how deep and far their risk-taking extends. As former Riksbank governor Stefan Ingves wrote caustically in the G30 paper: ‘Many pundits are concerned that banks’ behavior may be influenced by moral hazard, but ‘not having a clue’ seems to be as important in many cases.’”
Urban Milwaukee in Wisconsin. “The crashing occupancy rate, and proposed sale, of one of Milwaukee’s most valuable buildings could end up costing Milwaukee homeowners a couple of dollars per year. The100 East office tower, which has been in foreclosure since 2021, would be sold to a developer partnership for less than half of its assessed value. The buyers plan to redevelop the 35-story building as an apartment complex.”
Commercial Appeal Memphis in Tennessee. “The developer of The Lake District, a major mixed-use development in Lakeland, on Friday filed for Chapter 11 bankruptcy and announced plans to reorganize the same day the development was slated to be auctioned off.”
The Globe and Mail in Canada. “Toronto contractor Troy Barnes has had a busy few years. Things are different now: fewer requests for quotes and more people scaling their projects back to save money. He has also noticed more tradespeople looking for work, mostly because they aren’t fully booked for the first time in ages. ‘I noted a slowdown starting in last fall, into a complete dead zone in December and January,’ Mr. Barnes said. Things may be picking up again, but it’s too soon to tell. Contractors say they’re seeing more cancellations and smaller jobs, with many homeowners stuck with partially completed renos, as more and more of their budgets are consumed each month by the cost of servicing their debts.”
“Realtor Nasma Ali is seeing it too. Ms. Ali, who works in Toronto, is often the first stop for clients who want contractor recommendations or who are debating whether to renovate or move. She says she first noticed things getting quiet in late summer last year. She has seen several half-built houses on the market recently, presumably because people started to build and ran out of money. She also knows of people who are partway through a renovation and feel locked in to finishing it even though it has gone way beyond their budget.”
“‘Those people can’t just stop. … You just have to push through it. You’re bleeding money, but at least you can move back,’ she said. ‘People are just too worried,’ Ms. Ali said, noting that HELOCs typically have variable interest rates, so people who borrow today can’t predict what their payments will look like in a few months. ‘Before, it was free money.’”
ABC News in Australia. “Two companies run by controversial Sydney property developer Jean Nassif have been placed into receivership. Buyers were blocked from moving into the 900-apartment Castle Hill complex across five towers in 2021, after the NSW Building Commissioner confirmed ‘extensive signs of cracking’ were discovered in the building’s basement. Mr Nassif and Toplace — the builder of Skyview — later had their building licences suspended after significant ‘structural issues’ were found in two of the towers by NSW Fair Trading inspectors.”
“Recently, Mr Nassif’s 27-year-old daughter, Ashlyn Nassif, was charged with fraud offences relating to the Skyview development. The ABC is not suggesting that Mr Nassif was involved in her alleged offences. In court documents, it is alleged that Ms Nassif made and submitted false or misleading sales contracts in order to access a $150 million loan for the construction of three buildings in the development. She was granted bail and is yet to enter a plea.”
OneRoof in New Zealand. “Auckland’s $1 million losses have spread from the city’s southern suburbs to its trendy inner-west. A 100-year-old bungalow was snapped up at a mortgagee auction this week for almost $1m less than what the house sold for just 18 months prior. The four-bedroom character home in Sandringham was purchased in October 2021 for $2.56m, above its CV of $2.25m, and resold at Ray White Remuera’s auctions on Wednesday for $1.611m. While several Auckland homes have sold for near-$1m losses this year, most have been in the city’s south, where the rush to pick up development sites in 2021 inflated prices and saw modest homes being snapped up for $2m or more. The Sandringham bungalow is the first high-profile casualty of development market turmoil in Auckland’s inner suburbs.”
“Sandringham was one of several suburbs targeted by developers for intensification during the recent property boom, largely because much of the housing stock there sits on large flat sites zoned for townhouses. Developers, some new to the game, bought sites at inflated prices hoping to turn a profit by either flicking the properties with consents attached or by developing the sites themselves. However, rising interest rates, increased building costs and falling prices have put the squeeze on developers, some of whom can no longer make the sums work and hold onto their properties.”
“Houses in Papatoetoe, marketed as having development potential, have sold for almost $1m less than what they were bought for at the peak of the market. Last month, a four-bedroom home on Saint George Street in Papatoetoe that was bought just over a year ago for $2.3m sold for $1.305m. The Saint George Street house, was listed at the start of February, with the agents making clear it was an ‘urgent sale’ and that the ‘vendor’s circumstances dictate that this beautiful family home is now on the market and make no mistake it WILL sell.’”
“A ‘change in circumstances’ also forced the owners of a 1940s bungalow on King Street in Papatoetoe to sell in March at auction for $1.465m – almost $1m less than the windfall they had been expecting. Records show the owner of the three-bedroom home on King Street had sold the property at auction in November 2021 for $2.404m. However, the deal appears to have collapsed, leaving the original owner to sell it again, but this time getting a much lower price.”
“South Auckland Harcourts business owner Harsimran Singh told OneRoof last week that some sellers who had purchased development land in 2021 were now suffering and were reselling at major losses. Analysis by OneRoof’s data partner Valocity show individual properties that were bought in 2021 were now selling for anything from a few hundred thousand dollars to half a million dollars below what they got back then. ‘The developers have basically gone with capital growth off the table, [building] costs going up, interest rates going up, they’re not playing ball anymore,’ Valocity head of valuations James Wilson said.”