A report from Bloomberg. “In some Texas and Florida cities, foreclosures are rising, suggesting early signs of distress in the once booming housing market. In Houston, foreclosure filings jumped 37% in the first quarter from a year earlier, according to data from property tracker Attom. That was the biggest increase among the 15 metro areas with the most filings, followed by Orlando, Tampa and Miami. Homeowners who overpaid during the pandemic boom and used low-down-payment loans are getting into trouble, says Stephanie Parks, operations manager at the Short Sale Queen in Plano, Texas. Her company helps homeowners sell homes that aren’t worth what’s owed on them, often requiring some negotiation with lenders that stand to take a loss. ‘This all piles on for homeowners with lower income or those who stretched themselves financially to get into homes,’ she says. ‘Their payments are just skyrocketing.’”
The Real Deal on Florida. “Tech founder Brian Long and New York Times executive producer Liz Day sold their waterfront Coral Gables mansion for $16.5 million, a loss compared to their purchase price in 2021. It’s the latest deal to signal the market has mellowed from its pandemic era frenzy. Long and Day bought the Coral Gables mansion for $19.8 million in 2021, records show. Long and Day listed the mansion for $21.5 million in December and dropped the price to $20 million in January, Redfin shows. The $16.5 million price marks a nearly $3.3 million loss from their purchase price three years ago.”
The Wall Street Journal on New York. “When 432 Park Avenue launched sales to much fanfare in 2013, the condominium was hailed as one of Manhattan’s most prestigious addresses. The sleek, roughly 1,400-foot-high tower on Billionaires’ Row was briefly the tallest residential building in the Western Hemisphere. Within just a few years, however, the perception of the tower as a shiny new beacon for the superrich had been tarnished by claims that the building was beset by construction defects. Some homeowners are now unloading their properties for a loss, while would-be sellers are cutting prices. Billionaire financier Thomas Peterffy, for example, recently sold his 84th floor unit at 432 Park for $13.5 million, some 37% less than the $21.39 million he paid for it in 2016, property records show.”
The New York Post. “Compared with the glitzy, modern towers that punctuate the Manhattan skyline, the Plaza is losing its luster. In fact — since it was converted into a hybrid condominium and hotel in 2008 — the building never really gained much steam. Currently, according to StreetEasy, nearly a quarter of the Plaza’s condo units are listed for sale. Many have seen big price drops or have been sitting on the market, sometimes languishing there for years. Currently, Charlie Attias of Compass holds around a dozen Plaza listings. Today’s Plaza listings ‘are very well priced,’ Attias said. ‘The Plaza has great deals now. Prices are back to where they were 15 years ago, so there are deals to be made there. I think there is an oversupply in the Midtown high-end condo luxury market because of all the new construction, and it takes time to get absorbed,’ Attias said.”
“A few months ago, Tim and Jenny Smucker, of Smucker’s jam fame, sold their Plaza pied-à-terre — a one-bedroom with a terrace — for $2.5 million at auction. They had paid $2.9 million three years ago. In 2023, investment banker Ken Moelis sold his Plaza condo for $10.75 million — some 16 years after purchasing the three-bedroom spread for a higher $11.23 million. And five years ago, shortly before COVID, fashion designer Tommy Hilfiger sold his Plaza place for a mere $31.25 million — after it sat on the market for 11 years, once priced at $80 million.”
Newsweek on California. “A one-bedroom condo in the Yerba Buena of San Francisco is on the market for nearly $670,000. The property’s listed price on Zillow is less than its value has been since 2004, when it sold for $499,000. The home was at one point in May 2019 listed for sale for nearly $1.1 million but the listing was removed in June of that year. The next time it went on the market, it was valued at 32.5 percent less at $729,000. Since then, the unit has seen its pricing go down to its current listed price of $669,000. The market in the San Francisco-Oakland-Hayward area has plunged by nearly 11 percent on a yearly basis from the height of the pandemic when it shot up almost 18 percent, according to the Federal Reserve Economic Data, which cited Realtor.com.”
“‘I think this is a pretty normal price reduction obviously for San Francisco. I wouldn’t say it was anything drastically different. I think it’s just the overall market condition has changed because of the interest rate increase,’ Jing Fang, a real estate broker with a decade of experience in the Bay Area, told Newsweek.”
Market Watch. “Bank OZK’s stock was headed toward its largest one-day percentage drop in more than four years on Wednesday after Citigroup analyst Benjamin Gerlinger downgraded the Little Rock, Ark.-based lender to sell from buy on concerns over the health of two large loans. ‘We have newfound but substantial concerns with what we believe to be OZK’s largest individual loan (totaling $915 million), a multi-use project in Atlanta (‘Echo Street West’; $135 million loan) and life sciences construction lending in general,’ Gerlinger said. Gerlinger said has ‘trepidation’ over the two loans because of a lack of tenants thus far for the projects. Since 2020, the research and development district on San Diego’s waterfront backed by Bank OZK has been under developent. ‘We believe 0% of the 1.7 million square feet is leased — indicative of a difficult life sciences construction lending market,’ he said.”
The Deep Dive. “Prime Minister Justin Trudeau recently admitted that his government’s approach to housing aims to benefit existing homeowners, predominantly baby boomers, at the expense of younger Canadians. In an interview on The Globe and Mail’s City Space podcast, Trudeau emphasized the importance of maintaining high property values, stating, ‘Housing needs to retain its value. It’s a huge part of people’s potential for retirement and future nest egg.’ The Prime Minister’s comments have drawn sharp criticism from various quarters. John Pasalis, President of Realosophy Realty Inc., expressed his frustration on X, arguing that the government’s policy is unfair to younger generations.”
“‘It makes it crystal clear that the market for housing is not a free market where market forces set the price. It’s a manipulated market where governments drive home prices up to benefit homeowners,’ Pasalis posted. He further noted the political risk of such statements: ‘Does one need a Comms degree to know that this will piss off an entire generation who feel like they’ve been shut out of ever buying a home? Hearing our Prime Minister admit he’s trying to keep home prices high? Unbelievable!’”
The Telegraph. “Britain’s supply of homes for sale is at its highest point in eight years, according to research. The average estate agent has 31 homes for sale, up 20pc on the same point last year and the highest number since 2016, according to property website Zoopla. Almost a third of homes for sale were also listed for sale in 2023 but failed to find a buyer. Tom Bill, head of research at estate agency Knight Frank said: ‘Growing supply is one reason that UK house price growth this year will be limited to low single digits. However, the main obstacle for buyers is stubborn services inflation, which is keeping mortgage rates high. Asking prices therefore need to reflect the fact that buyers have more choice and tighter budgets.’”
From YLE. “Property prices dropped by an average of 4 percent in Finland during the month of April compared to the same month last year, according to preliminary data released on Tuesday by Statistics Finland. The data also revealed that apartment prices were down by an average of 5 percent across the country, while terraced houses fell by 1.6 percent. Among the country’s bigger cities, Vantaa saw the largest fall in property prices, as they were down by 9.1 percent year-on-year. There were also sharp drops in Oulu (7.7 percent) and Helsinki (6.4 percent).”
News.com.au in Australia. “Tradies and homeowners are nervous that a building company is on the verge of collapse after the construction firm lost its licence and appointed restructuring partners. The state building regulator, the Queensland Building and Construction Commission (QBCC), suspended the licence of Preferred Homes earlier this month, on May 7. Brisbane-based Preferred Homes had racked up quite a record prior to that, including non-payment of debts and failure to comply with an audit. The company’s restructuring partners are investigating whether the business is insolvent and will report their findings to affected creditors.”
“Ashton Close, who runs a brick rendering business, is currently out of pocket $8000 for two projects he worked on for the builder. ‘It was evident for us that they were having problems when they refused all communication efforts via phone when we began to follow up overdue invoices in December,’ he told news.com.au. ‘It boils my blood when they can’t answer calls.’ Mr Close said he knows of one homeowner who had signed a contract with Preferred Homes all the way back in 2020 but the build was still going. ‘The house is still far from completed,’ Mr Close said. He knows of at least six current projects the builder has underway, one of which is ‘riddled with defects.’ ‘They’ve got all these jobs that they haven’t touched for months,’ he added. ‘Why did it take five plus months for the QBCC to finally suspend their QBCC licence? If the QBCC had of acted quicker, it would have substantially limited contractor and customer pain.’”
From Nikkei Asia. “China’s recent plan to help local governments arrange purchases of unsold private-sector housing comes amid increasingly clear cracks in the finances of municipalities that rely on the property market for revenue. Underscoring the problem are the struggles of local government financing vehicles — investment companies used as an alternative channel to finance infrastructure spending — to repay their massive debts. This difficulty is illustrated by a rise in ‘hidden’ defaults outside public debt markets.”
“A local government financing vehicle (LGFV) in the Yunnan province capital of Kunming has missed the deadline for repaying the principal on 260 million yuan ($35.9 million) borrowed from a fund whose capital came mainly from wealthy individual investors. The LGFV, set up to fund redevelopment of a historic district in the city, faced a cash crunch with the real estate market slump that began in 2020. The most recent documents available, at the end of 2021, show it had 280 million yuan in cash and deposits, and 1.1 billion yuan in debts coming due within a year.”
“These vehicles raise capital through various methods, including publicly offered bonds and bank financing as well as shadow banking instruments like trust products. The close ties between LGFVs and local authorities have led to the vehicles being perceived as holding a tacit government guarantee, encouraging companies and affluent retail investors to put money into them. Data from research firm Shanghai DZH shows 196 instances of repayments not being confirmed for trusts or private investment products as of May, 99 of which have occurred just since 2023. This is believed to reflect LGFVs running behind on payments.”
“The People’s Bank of China has earmarked 300 billion yuan for financial institutions to lend to the state-owned enterprises that will do the actual buying. The central bank expects this to produce 500 billion yuan in loans. Local governments generally earn 20% to 30% of their revenue from the sale of land usage rights to developers, with some relying on it even more heavily. Few expect the buying program to resolve the problems with the housing market. BOC International (China) estimates that 6 trillion yuan would be needed to bring housing inventory to an appropriate level.”