A report from the San Diego Business Journal in California. “People in the market for a new home are starting to get a break as the San Diego County real estate market cooled down a bit in August and early September. Chris Anderson, incoming president of the Greater San Diego Association of Realtors, said that she’s seen some sellers lowering the listing price of their homes. Anderson said some got caught up in the frenzy of rapidly rising prices that characterized the market of just a few months ago and put too high a price on their property.”
“The association reported that the median price of a single family home in August dropped $25,000, from $875,000 to $850,000. Anderson said she doesn’t expect prices to change much going into the end of the year. ‘I don’t see it going up much or going down,’ Anderson said. The run-up in prices that’s happened over the past year has a sizable number of people looking to move out of San Diego.”
The Denver Post in Colorado. “Metro Denver’s housing market continued slowing in September, with the number of homes and condos sold declining and the inventory of active listings on the market rising by a record monthly amount, according to the Denver Metro Association of Realtors. The number of homes and condos sold fell 10.9% to 5,233 between August and September, which is down by a fifth from the number sold in September 2020. The drop in sales was accompanied by a 10.9% monthly increase in active listings, which was much higher than the 0.8% gain typically experienced between the two months and a record for the two months.”
“Andrew Abrams, chairman of the DMAR Market Trends Committee said some buyers are waiting for home prices as the market cools down. But even if that does happen, buyers won’t necessarily see a lower monthly payment as worries about inflation put upward pressure on mortgage rates.”
“‘If interest rates go up, even at a lower price, your payments could be more. Word of advice: Jump into the real estate market now. Those who wait will literally pay for it,’ he said.”
From Mortgage Professional America. “Mortgage originators should build their business around purchase and pare costs down if they wish to survive in the current housing market, Phil Shoemaker, president of originations at wholesale lender Homepoint, has said. Shoemaker said: ‘We’ve seen the largest buildup of capacity in the history of mortgage banking and people are going to be using margin to try to fill the capacity they have and cover up the cost structure they have, and it’s going to be very, very painful.’”
“Shoemaker concluded: ‘It’s going to be rough on all of us. Build your business around purchase and be smart around costs and you’re going to survive. If you don’t see that, good luck.’”
From Free Malaysia Today. “A property developer group has called for the affordable housing policy to be revamped in view of the number of unsold properties in the country. This comes after housing and local government minister Reezal Merican Naina Merican revealed that a total of 27,468 new houses worth RM18.4 billion have not been sold in the first quarter of 2021. ‘The mandatory policy of provision of affordable housing should also be relooked. Rehda is in support of the policy, but when the supply of this housing category has exceeded demand, or they are not favoured or taken up in certain locations, the policy should be reviewed to suit the current needs,’ Real Estate and Housing Developers’ Association (Rehda) president Soam Heng Choon told FMT.”
“National House Buyers Association (HBA) honorary secretary-general Chang Kim Loong believed it was the best time to buy properties. ‘It is a buyers’ market now. Prices are low, and buyers should consider whether it’s for self-occupation or for investment. Buyers have lots of choices to look for completed property rather than risk ‘buying off the plans’. I’m sure buyers are concerned with the plight of victims of abandoned housing projects especially in these challenging times,’ he said.”
From Reuters. “The Australian Prudential Regulation Authority (APRA) signalled it would release an information paper on macroprudential policy in the next couple of months, putting banks on notice that a tightening was near. The Reserve Bank of Australia’s (RBA) head of financial stability, Michelle Bullock, recently flagged possible tools included serviceability and interest rate buffers, debt to income ratios and limits on loan to value ratios.”
“‘Raising interest rates is not possible given the weakness and uncertainty hanging over the rest of the economy, and crashing the economy to get more affordable housing will help no one,’ says Shane Oliver, head of economics at AMP Capital.”
From Reuters on China. “Growing worries about defaults at Chinese property developers triggered a rout in their shares and bonds on Tuesday with fresh credit rating downgrades and uncertainty about the fate of cash-strapped China Evergrande Group sapping investor sentiment. Chinese property bonds and shares came under heavy selling pressure, a day after Chinese home builder Fantasia Holdings’ said it had failed to make a $206-million international market debt payment on time.”
“Bond prices collapsed at a handful of the most indebted firms, with Fantasia bonds crumbling below 30 cents on the dollar while Kaisa Group and Central China Real Estate also saw price falls.”
From Bloomberg. “Fantasia Holdings Group Co. didn’t repay a $205.7-million bond that was due Monday, according to a company statement. Separately, property management company Country Garden Services Holdings Co. said that a unit of Fantasia didn’t repay a $108-million loan that also came due on Monday and said that a default was probable.”
“Fantasia’s nonpayment spotlights concerns that have become increasingly common throughout China’s real estate industry as investors struggle to quantify often hard-to-see debts. Just last week, the developer disputed a report that money for a privately placed bond hadn’t been transferred. The risks of opaque obligations were also flagged in recent days when people familiar with the matter said that a largely unknown dollar note with an official due date of Oct. 3 issued by an entity called Jumbo Fortune Enterprises is guaranteed by Evergrande.”
“Recent days have brought more examples of stress at other property firms. Sinic Holdings Group Co. has received a demand to repay some debt after missing two local interest payments.”
From Live Mint. “The woes of Chinese property development firm, Evergrande, heavily indebted to both domestic and foreign lenders and on the verge of collapse, has engendered a Schadenfreude moment amongst China sceptics: but is it premature? Even absent contagion, the Evergrande saga is but the tip of the iceberg of an overheated and indebted property sector which potentially threatens the edifice of the larger Chinese economy and, therefore, indirectly the global economy too.”
“For all of the skyscrapers, both commercial and residential, that dot the landscape of Chinese cities, large and even small, many of them remain empty and their property developers unable to sell enough units to pay-off the debt incurred in putting up the buildings to begin with.”
“In other words, the property sector in China, larger even than in the US on the eve of the collapse of Lehman, is a ticking time bomb that could have significant macroeconomic consequences beyond the property and financial sectors through the impact on Chinese households, who are heavily invested in a property market that has been in bubble territory for some time.”
“For those with a long enough memory, none of these recent developments should come as a surprise. As long ago as 2004, economist James Dean and I argued, and as I summarized for Mint readers much later (‘Will the elephant overshadow the dragon?,’ 5 March 2015, that the Chinese model is characterized by the glaring contradiction between ever-increasing economic freedoms and an authoritarian political dispensation. What is more, the economic development paradigm of the Chinese Communist authorities was focussed on an infrastructure-driven, ‘build and they will come’ model.”
“The consequence, as Dean and I argued in 2004, was a Chinese development success story that was something of a house of cards, and built upon excessive investment, including in housing—what the Austrian school of economics would call ‘malinvestment.’ Chinese growth statistics would, therefore, in an important sense be inflated. After all, if the economy grows rapidly because of a stock of property and infrastructure that ultimately will never be put to use, and which leads to the accumulation of large debts, such rapid growth may be unsustainable and, in a certain sense, illusory.”
“Every Chinese leader since Deng Xiaoping and his pioneering reforms of the late 1970s have managed to maintain the unwritten but all-important bargain with the populace: ‘we will give you the opportunity to get rich, and the price is that you must stay out of politics.’ But perhaps, just perhaps, the chickens may finally have come home to roost on the watch of authoritarian strongman, Xi Jinping—what, writing in 2015, I had reckoned might be an ‘implosion’ in the Chinese economy or a ‘belated and disorderly democratization’ of the society.”