A report from the Phoenix Business Journal. “Homebuyers across the country are furious with Zillow Group Inc for canceling contracts. Compounding the issue is the fact that many of these homeowners are waiting for their new construction homes to be completed, pushing the sale of their existing homes to Zillow until early next year. Jerry Culpepper had a sale agreement with Zillow for $351,085 for his home in Marietta, Georgia, that was set to close in February in time for their new home to be completed in Florida. ‘We tried to change our closing date to Dec. 31, 2021, or even in January, but she said that nothing could be changed,’ Culpepper said. ‘They have put us in a very difficult and stressful situation.’”
“Greg Hague, founder of Scottsdale-based 72 Sold, said Zillow saw the housing marketing softening and appreciation slowing. ‘I think it strategically overpaid for homes to gain market share, impress its shareholders, and push up its stock price,’ Hague said. ‘Now Zillow recognizes it’s likely to get burned because home appreciation won’t cover the inflated prices it paid. So it’s cutting its losses now, leaving those home sellers holding the bag; people who may have planned on the equity Zillow promised.’”
“The home flipping business offers a no-win proposition for home sellers, Hague said, with firms closing on homes if they think they can make a quick buck and walking away if they discover they are overpaying. ‘To me, the big bad on Zillow is tying up homes with a fine print clause that lets then walk away when they don’t think they’ll make money,’ Hague said. ‘Did the sellers who counted on money from the sale realize Zillow’s contract wasn’t really a contract; it was a one-sided option in Zillow’s favor? I doubt it.’”
The Oklahoman. “Zillow’s exit from iBuying — paying cash fast for houses (the i stands for instant) — has lots of Realtors singing ‘ding dong the wicked witch is dead.’ Make that zinging. Selling to Zilllow saves a seller from paying a real estate agent commission. The less iBuying the less threat to Realtors’ livelihood. Zillow said its house flipping failure would cause it to let go of a fourth of its workforce and take write-downs of up to $569 million. The debacle ‘made my job easier because now I can give my clients 569 million reasons the ‘Zestimate’ should be ignored,’ said Matt Eakle, a real estate investor and agent with Homestead & Co.”
“Zing! Bazinga even! Here’s another one: ‘YEET THEM INTO THE SUN,’ said Will Flanagan, an agent with Kevo Properties, wrote. (Yeet means hurl.)”
“Known for speaking his mind, agent, Scott A. Martin said Realtors brought their troubles on themselves. Note: He is a Realtor (meaning he is a member of the National Association of Realtors and a local Realtors group). ‘The way Realtors act towards Zillow is almost humorous,’ he said. ‘It’s just simply mind boggling to watch this industry as they express their frustrations and anger and even their hatred towards Zillow, while they also continue to blindly pay their local, state and national association dues — and they seemingly do so without question or concern.’”
“Realtors are inconsistent with their complaints, Martin said. ‘I just don’t recall any Realtors getting frustrated or angry when these other big-box websites, in other industries, started shutting down our small, locally owned businesses,’ he said. ‘As a matter of fact, almost every Realtor that I know has a Netflix account and an Amazon account. Need I keep going? It’s as simple as supply and demand. These big-box websites are simply supplying exactly what the consumers are demanding, and exactly what our industry and our associations have failed to supply.’”
“Zing!”
The Los Angeles Times in California. “Serena Shi’s taste for luxury seemed insatiable. Those trappings of the high life were gone when Shi, 37, shuffled into a federal courtroom in Los Angeles one recent afternoon wearing a beige jail jumpsuit with clanking chains dangling from her wrist and ankle shackles.”
“Speaking through a Mandarin interpreter, Shi admitted that she’d duped scores of investors in China into making $23 million in down payments on condos in California. They thought they were buying units in a trendy resort that Shi was supposedly building on a 47-acre patch of desert in Coachella. The project never broke ground.”
“Shi promoted the resort in forums on WeChat, the Chinese social media app. Green cards, she suggested, would be available to buyers who qualified for ‘EB-5’ visas under a program to attract foreign investors in U.S. businesses. The scale of Shi’s three-year swindle stunned investors, who hired lawyers in California to file long-shot lawsuits to recover losses. ‘I’ve been suing crooks for a living, and she was pretty far up there on the brazenness scale,’ said Justin J. Shrenger, one of the attorneys.”
“To pull the project together, she hired James D. Clark, an Arizona business consultant. After a nasty break with Shi, Clark would become a key witness for the FBI. In Beverly Hills, Shi leased an office suite on the 11th floor of a tower with a facade of curved black glass, just across Wilshire Boulevard from Neiman Marcus. Clark recalled walking with Shi down Rodeo Drive and stopping in Saint Laurent, Valentino and other haute couture stores where she spent tens of thousands of dollars on clothes she did not bother to try on. ‘I want this, this, this, this,’ she would tell sales clerks, Clark said.”
“Today, the land where Shi and Nazarian envisioned a resort that would define desert cool remains as barren as ever. ‘She took everybody’s money and ran,’ said Steven Hernandez, the mayor of Coachella. ‘Investor beware.’”
From Roger Montgomery. “The key driver for the short and medium-term direction of the Australian property market can be boiled down to just three words: access to credit. And, right now, the conditions for credit access are getting tighter. To my mind, it all points to a property market that is about to lose its froth. While agents try to explain the conditions as a function of a shortage of supply, or lockdowns, or a pre-Christmas rush, the reality is that there is one indicator that explains it all.”
“We don’t have a crystal ball but we do believe all of these factors fall under the umbrella provided by an indicator that explains the majority of short and medium-term movements in property prices in Australia. Some years ago, we explained the direction of the property market can be explained by access to credit. Whether it’s the TFF, yield curve targeting, first home buyers grants, APRA restrictions on investment and interest-only loans, or some other macro-prudential measure, it all falls under access to credit.”
“Loosen access to credit and house prices rise. Tighten or restrict access to credit, by any measure, and all of a sudden properties are being passed in at auction and real estate agents are scrambling to explain what’s going on.The conditions for credit access are changing. In early October APRA announced an increase in the minimum interest rate ‘buffer’ it requires banks to employ when assessing serviceability for new home loan applications. The buffer was increased from 2.5 per cent to three per cent above the rate offered on the product.”
“Additionally, the cost of access is rising. As Figure 1., below reveals, the cost of bank funding is rising. It all points to a property market cooling.”
From Caixin Global. “Long blessed with licenses that allow them to invest in a wide range of assets, Chinese trust firms poured the money they manage and channeled bank loans into property developers such as China Evergrande Group. But now with Evergrande in crisis and many other property developers also missing debt payments, these investments have come back to bite the trust industry.”
“Caixin learned that debt-ridden real estate giant Evergrande failed to pay interest on multiple trust products on time in September, and some trust products that had invested in the developer were in default by the end of October, including those of Citic Trust Co. Ltd., The National Trust Ltd., China Minsheng Trust Co. Ltd. and Everbright Xinglong Trust Co. Ltd. Losing money from their property investments, some trust companies are now suffering high liquidity pressure that has in turn prompted them to scale back their immense investments in the real estate sector.”
The South China Morning Post. “Major cities in China are slashing the price of land they are auctioning off. Beijing put 12 parcels of land on the market on November 19, including two in eastern Chaoyang district with a combined reserve price of 4.8 billion yuan (HK$5.9 billion), 15 per cent lower than they were priced in September. Hangzhou in eastern Zhejiang Province cut the price of four plots that had to be scrapped from the last round because of a lack of interest by as much as 15 per cent. Guangzhou, capital of Guangdong Province, auctioned six plots that did not find a buyer in September’s land auction, with prices down as much as 20 per cent.”
From Bloomberg. “Chinese Estates Holdings Ltd., a long-time supporter of China Evergrande Group, has further cut its stake in the embattled property developer. The Hong Kong firm, led by Chief Executive Officer Chan Hoi-wan, sold about 270 million Evergrande shares since its last disclosure on Oct. 6, lowering its stake to 2.36% as of Friday, according to a filing late Tuesday. It revised its expected loss if it got rid of all of its holding to HK$10.6 billion ($1.4 billion) from HK$10.4 billion last month.”
“Separately, Chinese Estates said it saw a HK$1.4 billion loss from offloading its notes in another cash-strapped developer, Kaisa Group Holdings Ltd. Kaisa’s stock slumped 73% this year before trading was halted.”