A report from Barron‘s. “Austin, Texas, is seeing some of the nation’s steepest price declines for luxury homes, coupled with a growing supply of listings. With more properties to choose from, buyers are much more discerning and have little patience for pie-in-the-sky home prices, said Bridget Ramey, real estate adviser with Kuper Sotheby’s International Realty. ‘If the listings are not appropriately priced, buyers don’t even want to play ball. The city’s luxury home prices have corrected since they peaked in late 2021 and early 2022. ‘Those numbers were not real, and they couldn’t sustain themselves,’ she said.”
The New York Post. “Financially-strapped real estate developer Mohamed Hadid claimed he’s the ‘victim’ of a predatory lender after filing for bankruptcy over a prized California property, The Post has learned. Their knock-down, drag-out dispute stems from a $31 million loan Vella’s company Skylark Capital gave Hadid’s Tree Lane LLC in 2018 to develop a four-acre lot in an exclusive Beverly Hills enclave. ‘I believe I was a victim and now I have to fight my fight,’ Hadid said. ‘They gave us enough money to hang ourselves and then they stopped funding.’”
From Newsweek. “About 6.4 percent of sellers decided to lower the price of their properties during the four weeks ending May 26, the highest level since November 2022, according to Redfin. Meanwhile, Redfin’s homebuying demand index fell 12 percent on a yearly basis and was down 7 percent compared to a month ago in what was the lowest level in three months. ‘People who are buying right now are typically doing so because they’re having a baby or looking for a more family-friendly home,’ Christine Chang, a Redfin Premier agent in the San Francisco Bay Area, said in the analysis. She suggested that buyers to be wide-ranging in their search. ‘Consider single-family homes that are a bit outdated but don’t need major renovations, and/or homes in lesser-known, non-trendy neighborhoods,’ Chang said. ‘That type of home tends to sit on the market longer, and buyers may be able to avoid competition and get a home for asking price instead of engaging in a bidding war. Buyers who can get by with less space should consider a condo; they’re relatively unpopular right now and many are going under asking price.’”
Tech Crunch. “AI mortgage startup LoanSnap is facing an avalanche of lawsuits from creditors and has been evicted from its headquarters in Southern California, leaving employees worried about the company’s future, TechCrunch has learned. LoanSnap, founded by serial entrepreneurs Karl Jacob and Allan Carroll, has raised around $100 million in funding since its 2017 seed round, $90 million of which was raised between 2021 and 2023, according to PitchBook. For instance, Wells Fargo filed a lawsuit in August 2023 for $431,000, alleging a loan it bought from LoanSnap violated the bank’s income-to-debt-ratio policies. Because LoanSnap defaulted on the lawsuit (meaning it failed to respond in a timely manner), the judge ordered LoanSnap to pay.”
“Then, 2024 brought more legal troubles. In January, Connecticut’s Department of Banking alleged the company was partaking in ‘systemic unlicensed mortgage loan’ activity by employing unlicensed people. One employee told TechCrunch that the company was eager to hire those without much mortgage experience, with the idea of training them so they could one day get licenses.”
The Wall Street Journal. “Seattle-based developer Tyler Carr set out to build apartments in Boise, Idaho, where rents were rising the fastest in the country. In 2021, his company bought land near the growing downtown with plans to develop 104 rental units. Three years later, his land remains an empty lot. When market conditions deteriorated, his strategy no longer made financial sense. Interest rates and construction costs rose, Carr said, ‘and those two things really converged to make the project unviable.’ While most developers get tripped up before real activity begins, a few have found trouble after starting construction, leaving them with half-built properties. In downtown Phoenix, work stopped last fall at a 25-story apartment tower that was most of the way up. Contractors filed claims for millions of dollars over unpaid work.”
“Some decline was inevitable. About half a million new apartments opened in 2023, the most in 40 years. Based on what is already under construction, analysts expect a similar number to be completed in 2024. In some cities, the surge in building has meant there are more apartments than can be quickly leased without cutting rents, making some investors skittish about adding more units. Many regional banks are souring on the commercial real-estate loans already on their books. ‘Their current portfolios are getting marked down and they don’t have that much to lend,’ said David Frosh, chief executive of Fidelity Bancorp Funding, a California real-estate lender.”
“In Worcester, Mass., about a dozen apartment projects with more than 2,000 units are delayed, according to a May report from the city’s economic-development office. Struggling projects include buildings with as many as 200 market-rate apartments and affordable housing, said Joshua Lee Smith, a real-estate attorney working with developers who have stalled projects in Worcester. ‘The interest rates are at a point where a lot of investors are sitting on the sidelines,’ he said.”
Commercial Observer. “Money-losing sales of loans secured by offices and other types of struggling commercial real estate are gaining momentum. Banks in particular appear to be offering to sell substantially more loans secured by office buildings and other commercial properties than they put on the market last year. For example, Canadian Imperial Bank of Commerce (CIBC) agreed to sell $316 million of loans on office buildings in Austin, Phoenix, Seattle and San Francisco at a discounted price, according to the Financial Post. Deal-breaking disagreements between lenders and potential buyers over the value of such loans have become less prevalent, said Michael Gontar, CEO of InterVest Capital Partners, a diversified company that buys commercial real estate loans secured by offices and other assets. ‘Last year, there was more of a disconnect on value,” he said. ‘In the last six months, we’ve seen that thaw quite a bit. Sellers are taking losses where they need to, which is basically everywhere.’”
From Bisnow. “Common Living, one of the largest co-living firms in the country, is shutting down. The firm, which had been growing during the pandemic through acquisitions of failed co-living companies, filed for Chapter 7 bankruptcy late Friday, indicating its plans to liquidate assets and cease operations. The filing in the U.S. Bankruptcy Court for the District of Delaware says Common has an estimated $1M to $10M in assets and $10M to $50M in liabilities. Its June 2021 acquisition of Starcity — which added 1,000 units in California, New York and Barcelona — helped push Common’s portfolio to more than 5,000 units by mid-2022. Starcity had previously taken over failed co-living startup Ollie. Common was growing its footprint as the pandemic sapped demand for shared apartments, as renters instantly grew wary of sharing small living quarters with strangers.”
The Globe and Mail in Canada. “The receiver for The One condo tower is seeking to sell Sam Mizrahi’s unfinished skyscraper, saying creditors won’t accept anything less than $1.2-billion for the troubled project. The One’s lenders are owed $1.5-billion after Mr. Mizrahi and the tower’s co-owner, road-paving magnate Jenny Coco, defaulted on loan payments during the construction of the luxury condo and hotel tower in downtown Toronto. The sale of the partly constructed tower is likely to be difficult given the history of the building, today’s high borrowing costs and a slowdown in the condo market. Just over 70 per cent of these large upper-floor condo units have not been sold. And of the 19 that have been sold, nine of the buyers are in default. The One is years behind schedule and had defaulted on multiple loans before it was put into receivership. In October, the project’s lead lender asked an Ontario judge to put a third party in control, alleging that the development owed $1.6-billion to its lenders and was hundreds of millions of dollars over budget.”
CTV News in Canada. “An Ontario mother said her mortgage payments are about to practically double – translating to more than $2,000 extra per month if interest rates don’t dip on Wednesday – and it’s ‘harder than anything’ she’s ever faced. ‘You’re asking for $2,100 to just be pulled out of the sky and still afford all of my kids’ medical needs,’ Shawna Wood, a 40-year-old mother of eight children – half of whom have health challenges – told CTV News. After renting a house in Oro-Medonte for a decade, the family of ten bought the five-bedroom house about two hours north of Toronto for $800,000 in 2021. At the time, they locked in a 3.2 per cent fixed rate for three years. She said the bank offered her a 7.1 per cent renewal rate, which would translate to a leap from $3,000 to $5,100 per month for mortgage payments. ‘It makes you sick,’ she said. ‘We worked so hard to be first time home buyers.’”
“Her husband has increased his workload from 50 to 70 hours a week. In anticipation of the impending interest rate announcement, Wood said she and her husband explored leaving the province, selling the house, and refinancing it. For Wood, these are the questions she goes to bed at night thinking about, and wakes up in the morning with them still on her mind. ‘You dwell on it 24 hours a day, on top of everything going on,’ she said. ‘There is no eating out. There is no sending your kids to camp because you have this gigantic mortgage increase that is sitting and weighing on us and the kids are the ones who suffer.’”
From SBS News. “Australians hoping to crack into the housing market could consider a stream of inner city suburbs declining in value, as prices in other parts of the country continue to soar. Both Melbourne and Perth have seen several inner urban areas dropping in value over the last five years, according to Domain’s latest House Price Report. Units in Melbourne’s Carlton have seen the biggest shift nationwide, with a 33.30 per cent decline to a median value of $320,000. Melbourne, North Melbourne and Brunswick West, all located within 3km of the CBD, also saw unit prices drop by roughly 13 per cent. A minimum of 50 sales are required to get the median price of house and units in the area. Both unit and house price values fell over the last five years in the inner city suburb of Perth East, declining almost 10 per cent to a median price of $351,625 and $492,000 respectively.”
Radio New Zealand. “The property market remains stalled with more houses for sale and asking prices still lower than a year ago. The biggest price fall was in Wellington with the average price plunging 13.4 percent on April to $739,497, the lowest since November 2020, and 14 percent lower than a year ago. Public service job cuts and a tighter job market could be weighing on the market and asking prices, said the site’s chief executive Sarah Wood. ‘When the market is softer, price becomes the primary lever for sellers wanting to move their properties more quickly. Unlike other factors such as location or property size, price can be adjusted.’”