A report from the New York Post. “Better.com became a pandemic darling as city dwellers sought to flee to greener and larger spaces in the suburbs, fueling a boom in the housing market and associated lenders. CEO Vishal Garg laid off some 900 employees on a Zoom call. The 43-year-old said that the ‘market has changed’ and that the company had to slim down to remain nimble enough to adapt to the evolving housing market, which appears to be cooling after a pandemic-boosted boom. ‘We should have done this three months ago,’ he said.”
From The Union. “Tahoe Sierra MLS president and Tahoe Luxury Properties agent Amie Quirarte said that she has seen a shift in the market for the past couple of months. ‘…things have started to taper off a bit … it seems that since there is some resemblance of normalcy,’ Quirarte said. ‘So that’s really shifted and I think that the frenzy has come and gone, so what we’re battling with now is where prices are gonna go.’”
“Quirarte said that in her experience the market has always been through its highs and lows, but she does not believe that there will be a crash or any dramatic dips in the market anytime soon. Her prediction is that in the next year the market will deescalate and become less competitive than it has been in the past two years. ‘I do think that we will see a decrease in property prices, which is a good thing because what was happening was not sustainable.’ Quirarte said.”
The Center Square. “According to Illinois Realtors, the housing market has slowed down considerably heading into next year. Officials at Realtor.com believe home prices will slightly increase and will remain high in 2022, but Northbrook real estate agent Katie Spaniak disagrees. ‘What I do see is that prices are going to come down,’ Spaniak said. ‘The one other thing you need to keep in mind as both a buyer and as a seller is those interest rates are going to go up. People who are in Illinois, a lot of them want to move out of Illinois. Not everyone, but a lot of people are, especially those empty nesters.’”
From Realtor.com on Hawaii. “Maui’s County Council is considering legislation to phase out a large portion of short-term rentals in apartment-zoned districts across the Valley Isle. Short-term rental owners say this is an example of government overreach. ‘It will pull the rug out from under us,’ an anonymous Luana Kai condo owner wrote in public testimony explaining that when she and her husband recently purchased the condo they had to take a large home equity loan on their primary residence in Seattle with the hope that their short-term rental income would offset Seattle’s high monthly expenses.”
From Bisnow New York. “A former real estate private equity firm CEO has been sentenced to five years in prison for fraudulently convincing hundreds of investors to collectively put $58M into funds he controlled. Eric Malley, the CEO and founder of MG Capital, was sentenced this week by U.S. District Court Judge Edgardo Ramos for securities fraud. He pleaded guilty in May.”
“Malley had created MG Capital Management Residential Fund III in 2014 and MG Capital Management Residential Fund IV in 2017. He claimed the funds had hundreds of income-producing properties across Manhattan, that were debt-free and were set to be leased to tech firms and a university. In truth, the funds had only mortgaged properties that had leases with individuals rather than corporations.”
“They also had fewer properties than he claimed, and they were not fully protected from loss as he had promised. About 60 investors put $23M in Fund III, and approximately 275 investors backed Fund IV for $35M. Fund III suffered net operating losses of about $860K, and its investors never received anything back. The holdings are now being liquidated. Malley will also have to make restitution payments of $33.2M and forfeit $5.6M.”
The Financial Post. “Low-interest-rates loving Canadians have lapped up $193 billion in new mortgage debt during the pandemic, taking total household debt to a record $2.5 trillion. But the party is about to end as central banks look to take away the punch bowl: The U.S. Federal Reserve and Bank of Canada have both signalled a faster return to monetary tightening next year as they pull the interest rate levers to tame inflation.”
“Another red flag: ‘low-quality’ mortgages now make up a quarter of all mortgages, compared to 14 per cent in 2019, underscoring the vulnerability of some households to higher rates. Other issues in Canada’s housing market are all emerging, with Bank of Canada blaming investors for frenzied market activity in the real estate market, and the federal government looking to squeeze out the ‘house flippers.’”
“More Canadian households are expected to be sensitive to interest rate movements as a quarter of outstanding mortgages by September 2021 were on a variable rate — from 18 per cent in February 2020. ‘The share of new mortgages with a loan-to-income (LTI) ratio above 450 per cent jumped to 22 per cent in late 2020, led by an increase in highly leveraged, uninsured mortgages,’ Oxford economists said. ‘This is well above the recent peaks in 2016 and 2017, and more recent data from the Bank of Canada suggests this share rose further to over 25 per cent in early 2021.’”
From News.com.au. “As more people take on dangerous levels of debt, the Reserve Bank of Australia (RBA) has issued a chilling warning to the nation’s homeowners, urging them to have a mortgage ‘buffer.’ Almost a quarter of people with a new loan owed the bank at least six times what they earned, official data from the banking regulator has revealed. And, with the median Australian house and unit price now at $698,170, an average-income earner would struggle to repay their loan.”
“Research director at RateCity, Sally Tindall, noted that ‘Australians are increasingly taking on eye-watering levels of debt compared to what they earn to get into an overheated property market. Record-low rates have enabled Australians to borrow more from the bank than ever before,’ she said.”
From Scoop New Zealand. “Rising interest rates, combined with further tightening of credit availability appear to be dampening the enthusiasm of investors and first home buyers. While house values continue to rise, what lies beneath QV’s latest figures is growing evidence that price pressure has shifted from the lower valued properties popular with investors and first home buyers, onto the higher valued housing stock where buyers are less impacted by credit availability and affordability constraints.”
“QV general manager David Nagel commented: ‘While the November numbers look extremely bullish there are growing signs that this property growth cycle is starting to transition. Real estate agents are reporting a significant upswing in listings, while open home attendance rates are falling. Some properties are being passed in at auctions, which was unheard of a few months ago. This isn’t a surprise given rising interest rates, changes to LVRs last month and now a further tightening of credit rules from December. This has taken a number of buyers out of the market, just as stock numbers are starting to increase, which is resetting the supply demand equilibrium.’”
“Residential property values in Rotorua have increased by an average of 7.5% this spring, reaching a new mean average home value of $742,615. Despite this, property consultant Derek Turnwald said local agents had been reporting falling numbers of participants at recent auctions and open homes. ‘It does appear that first-home buyers are being marginalised now, due to changes to the LVRs, rising interest rates and increased debt funding criteria of the banks. Investors also seem to be losing interest,’ he said. ‘Although the number of requests for appraisals is reasonable and it looks as though the traditional increase of listings over the summer months will occur, confidence does appear to be going from the market, with FOMO being replaced by a fear of paying too much.’”
From BBC News. “Concerns are growing over potential multi-million-dollar debt defaults by two of China’s biggest property companies. Investors are waiting for news about tens of millions of dollars of overdue interest payments owed by crisis-hit industry giant Evergrande. If, as the BBC understands, Evergrande did fail to make these payments on time, the stage could be set for a massive default by the world’s most indebted property developer.”
“It could trigger a so-called ‘cross default’ on Evergrande’s roughly $19bn of international bonds, putting it at risk of becoming China’s biggest defaulter. A cross default is a provision in a bond or loan agreement that puts a borrower in default if they default on another obligation.”
From ABC News. “Evergrande did not make payments on some $US bonds at the end of a month-long grace period, sources familiar with the situation told Reuters, setting the stage for a massive default by the world’s most-indebted property developer. No-one who invested in two bonds — issued by China Evergrande Group’s unit Scenery Journey Ltd — had received payment as of 1am AEDT on Wednesday, a source familiar with the situation told Reuters.”
“Evergrande has not issued any communication to bondholders about the missed payment, one of the five sources said. ‘From our point of view, it has been a question of when, not if [because of] the scale of the interest payments and then early next year redemption payments has made this [default] seemingly inevitable,’ said one bondholder, who declined to be named.”