A report from the Oklahoman. “Landon Whitt, CEO of OKCReal, said he’s seen what may be some cooling in investor demand. ‘I have had three different investors get cold feet after placing an offer, and pull out of the deal, just in the last two weeks, all due to concerns about unstable returns,’ Whitt said. ‘Customers bringing cash above appraisal has ended for us since September.’”
The Motley Fool. “Jason Hall, and Matt DiLallo discuss what might have scared Zillow’s management so much that they decided to exit a major growth driver of the company so suddenly. DiLallo: ‘I question whether Zillow was doing this. Were they relying completely on the Zestimate? They’ve been pushing all these changes on the Zestimate, and I don’t know what you guys have noticed on your personal houses, but my Zestimate is just always way off for all the houses I’ve owned. It just seem like they realized way into it, they were way over their head, and it was just a little too late and the only thing they could do was to pull the plug. Otherwise, they’re just going to continue to blow up a bunch of money.’”
“Hall: ‘This is a business that if you’re really good at it, you can effectively use debt, and you don’t have to hang a ton of cash on every transaction, and the returns on that, the actual capital that you invest can be very good. The flip side of that is that it can compound the losses. I think they acted so quickly because they didn’t want to create a position where those losses were compounded, where the decent margins that they make in the good times were wiped out, plus a lot larger losses by the potential losses of trying to offload too much inventory in the wrong part of the season. By the way, what if there is a sudden slowdown in demand? I don’t think that’s going to happen just because there’s so little inventory in general, but I think they were thinking broadly about some sort of a black swan.’”
From Wealth Management. “Zillow’s recent disastrous exit from its iBuying business, spurred by its overpaying for homes in a highly competitive market that the company couldn’t then quickly flip at a profit, opened the question of how much these platforms might be disrupting the single-family home market and what role they will ultimately play in the trend toward more institutionally-owned SFRs.”
“Before Zillow’s meltdown, spurred on by its $1 billion in losses over the course of 3.5 years, the market share of national iBuyers rose to another all-time high, blowing past all previous records by a wide margin, according to Mike DelPrete, a real estate strategist who specializes in iBuying.”
“Zillow’s forecasts were off—by a lot. For example, Zillow Offers unit economics swung approximately 1,200 basis points from the second quarter to an expected -500 to -700 basis points in the fourth quarter of 2021, according to the company. ‘iBuyers can get into trouble if they pay above market for too many houses in a cooling market,’ DelPrete notes. ‘This results in a growing inventory of over-priced houses that are difficult to sell.’”
The Phoenix Business Journal in Arizona. “Local economists are wondering when this wild ride is going to end for a city that has been known for its affordability, a key reason why so may job-seekers have relocated to the region from California and other states.”
“‘With Phoenix remaining one of the strongest metropolitan areas in terms of year-over-year price gains, the question remains: when does this end,’ said Steven Hensley, advisory manager for Zonda. ‘It appears the answer could be soon. More recent home price data from October and November suggest there is considerable deceleration in prices throughout Phoenix. Also, given that Phoenix has ranked near the top in year-over-year price gains much of this year, the metropolitan area is unlikely to replicate next year because of how strong it was this year.’”
“House price appreciation is unsustainable at this point, said Kwame Donaldson, a senior economist for Zillow Group Inc. ‘Over the last year, average hourly wages in the U.S. increased by less than 5%,’ Donaldson said. ‘If house price growth were to routinely increase four times faster than wages, then housing affordability would become an issue for a larger number of Americans.’”
The Commercial Observer. “It comes across as a multimillion-dollar nightmare. The myriad things allegedly wrong with the high-rise condominium tower at 432 Park Avenue, the fifth-tallest building in New York City, are spelled out in a late September lawsuit in Manhattan Supreme Court, with lawyers for its residents calling it ‘one of the worst examples of sponsor malfeasance in the development of a luxury condominium in the history of New York City.’”
“There’s ‘horrible and obtrusive noises and vibrations’ due to that conspicuous height, the court complaint says. Elevators allegedly repeatedly shut down, not only trapping people inside the cars, but making for hours-long delays and denying occupants access to their condos. There was a recentexplosion, per the complaint, when a worker trying to repair water infiltration drilled through concrete and severed an electrical cable, cutting the feed to one of the building’s chillers and shutting down some of the air-conditioning. There have been two arc-flash explosions in the past three years.”
“TRD reported in late September that a four-bedroom unit at Extell’s Central Park Tower — at 1,550 feet, even taller than 432 Park — sold for $49.7 million, not the original asking price of $95 million. There have been 33 closings in the building, and the price has been an average of 25 percent below what Extell was aiming for.”
“‘Prior to COVID, the market was oversaturated,’ said Cesar Guevara, founder of MQ Realty, a brokerage that focuses on residential real estate in Manhattan and Queens. ‘There were a lot of projects that had started already, they had already been funded and there was a lot of stuff on the West Side, a lot of stuff in Midtown, a lot of the high-end luxury market just sitting there.’”
The Los Angeles Times in California. “The largest modern home in America could be auctioned in January starting at $250 million, its owner told a U.S. Bankruptcy Court official on Tuesday. Developer Nile Niami’s Crestlloyd LLC plans to hire two luxury home sellers to list the Bel-Air mega-mansion known as The One for that price and help find bidders for the auction, a reversal that could bring to an end a saga that has pitted a glitzy developer against a cadre of lenders.”
“‘We’re still going back and forth strategically speaking, but we anticipate that the listing price will be approximately $250 million,’ Crestlloyd manager Lawrence Perkins told the court. Outside of court, Perkins said the change of plans came after real estate experts who were consulted said any buyer would want to personalize the property — and therefore it made little sense to spend millions completing it. ‘The juice isn’t worth the squeeze to finish it, because someone’s just going to have to redo a lot of the work anyway,’ he told The Times.”
“The goal, he said, was to list the home and also schedule an auction to prevent buyer after buyer from getting cold feet. ‘What we don’t want it to do is drag on and on,’ Perkins said.”
From Newshub New Zealand. “First-home buyer activity has plummeted and real estate agents are seeing fewer buyers at auctions and open homes, a new survey shows. First-home buyers are pulling back for a variety of reasons, Tony Alexander told Newshub. ‘That’s a huge turnaround and will reflect not just the rising interest rates, but the CCCFA [Credit Contracts and Consumer Finance Act] changes, LVRs [ loan-to-value ratio restrictions] and DTIs [debt-to-income ratios,] all at the same time,’ Alexander said.”
“Cancellation of bank pre-approvals is another factor, he said. Fear of Missing Out (FOMO), has dropped to the lowest level since April 2020. A net 39 percent of real estate agents reported seeing evidence of FOMO in November, down from a gross 69 percent average over the last 19 months.”
From Bloomberg. “In less than two years, Chinese property developer Kaisa Group Holdings Ltd. has gone from being an up-and-coming player in Hong Kong’s property market to a desperate seller. As it strives to raise money to alleviate a liquidity crunch during China’s property deleveraging campaign, Kaisa has been reversing its expansion in the city with a series of asset sales in the past month.”
“It’s a dramatic volte face after founder Kwok Ying Shing and his family made headlines earlier this year with acquisitions ranging from land sites to luxury apartments and even a popular local newspaper. Now Kaisa, which became the first Chinese developer to default on offshore dollar debt in 2015, is trying to stave off a repeat that could come as soon as next week if bondholders don’t accept its plea for a lifeline.”
“The need for asset sales will become even more pressing if creditors don’t accept Kaisa’s request to swap its $400 million of notes maturing Dec. 7 for new ones due 18 months later. If the offer — which expires at 4 p.m. London time on Thursday — fails to win support, the struggling firm has said it may not be able to repay bonds and could consider a debt restructuring.”
“Kaisa’s woes have wiped out much of the Kwoks’ fortune. With shares slumping in all of the group’s trading units, the family’s wealth has plunged 85% to about $200 million from $1.3 billion in January, according to the Bloomberg Billionaires Index.”