A report from San Diego News in California. “MARKET REPORT (single family). 92115 College Area: The median November home price dropped 7% from October to $814,125. 92119 San Carlos: The median November sales price dropped 5% from October to an adjusted amount of $880,000. 92120 Allied Gardens, Del Cerro: The median home price for November plunged 17% from October to $935,000.”
“Home prices are leveling currently after an incredible multi-year run up. At the local Realtor meeting, other agents are remarking that instead of the usual 20 to 30 offers on a property, agents are receiving maybe four to 10 offers now.”
From Boise State Public Radio in Idaho. “Boise Regional Realtors said delays in construction have sharply cut total sales of new homes this year. Factoring in existing homes, November’s median sales price for all houses reached $537,900. Far more existing homes are available for sale in Ada County compared to last year – up 218% from Nov. 2020.”
From Inside Big Data. “Zillow recently shuttered its Zillow Offers business because of failed iBuying algorithms. A derailed algorithm on property valuations led the company to reduce the estimated value of the houses it purchased in Q3 and Q4 by more than $500 million. Zillow has already officially announced $304 million in Q3 losses. The event has once again raised concerns about the validity of AI models.”
“What is clear is that the algorithms didn’t account accurately for the relationship between the target variable (which was the price of the house) and the input variables (e.g., number of bedrooms, number of bathrooms, square footage, home condition). Prices on homes went down even for the same value of the input variables but the models were not updated to reflect the new relationships.”
Two reports from Bloomberg. “Federal Reserve officials this week will quicken their wind-down of bond purchases and signal interest-rate liftoff in 2022, economists surveyed by Bloomberg said, heralding a historic policy pivot to counter the fastest inflation since the 1980s. ‘It’s going to be the biggest hawkish shift in the history of the dot plot,’ said Laura Rosner-Warburton, senior economist at Macropolicy Perspectives, referring to Fed rate forecasts which have been published since 2012.”
“Treasury investors are losing more money than they have in four decades, once inflation is taken into account. And if markets are right, they’re unlikely to come out ahead for years. What’s more, the dynamic isn’t expected to change: The bond market is projecting that 10-year Treasury yields will hold below the inflation rate for the next decade, meaning any investment income will be more than wiped out by the rising cost of living.”
The Globe and Mail. “A war of words over the insolvency of a luxury townhouse condominium project in Oakville has pitted a titan of Canadian business against a custom-home builder with anxious buyers caught in the middle. At the still unfinished Sheddon site, there are signs of a project under strain.”
“For one, construction crews are still working to prep two unsold units for sale, even though more than a dozen buyers – many of them the cream of Oakville’s business and professional class – have already moved in to the complex on interim occupancy agreements. For another, inside the occupied units the list of ‘deficiencies’ buyers are waiting to get fixed have mounted.”
“‘Some in the building moved in a year ago, and still have no use of some of their bathrooms; there are people who have issues with insulation,’ said Andrew Zawadowski who bought into the project in 2016 when he was told it would be ready for move-in by 2018. Now, after living in the unit for the last three months he says he’s frustrated with the list of things left undone in his multi-million-dollar unit. ‘We have missing doors from our kitchen, LED lights that never go off, others that never go on … We waited six weeks for a doorknob to our storage locker,’ he said.”
“The buyers – who have joined a social circle that includes weekly cocktails – are nervous the Monitor may come back and ask them for more money to finish the project. Some units sold in the early days for $2.5-million to $3-million, but units sold more recently were in the $4-million to $5.5-million range.”
“‘We worry it will not be finished,’ said Mr. Zawadowski. ‘You could say ‘You guys are rich folks … nobody’s going to feel sorry for you.’ But on a human level, I’ve had no other place to live: I lived six months with my sister in law. We worry we’ll be homeless.’”
From Newstalk ZB on New Zealand. “This is going to sound harsh and I’m sorry for that but I don’t know how to say this any other way. Based on what the prime minister said about housing in an interview at the weekend, I don’t think she knows what she’s talking about. In one of her end-of-year review interviews she was asked if she wants house prices to drop and she said yes.”
“We think that’s’ the first time she’s said she actually wants to see a house price drop but it’s fine because many of us believe house prices are going to drop a little bit due to the impact of rising interest rates. But then she said she sees them coming back to the same level as prices were a year or two ago, that should be alarming. Because two years ago house values were 30% below what they are now.”
“Which would mean that someone buying in Auckland right now at the average house value of $1.48m would suddenly find their house worth only $1m. For house values to come back that much would be catastrophic. Never mind what would happen once homeowners lose that much equity in their homes, whatever it is that causes house values to drop by that much would be devastating.”
From IFR on China. “Market participants have been left to speculate about how the government will control the Evergrande implosion, and if bondholders have any hope of curtailing losses. ‘I’m not sure what a ‘risk management committee’ is but my guess is that this is a unique case given the size [of the debt], and the central and provincial government is asking Evergrande to proactively manage the fallout and not have a messy default,’ said a portfolio manager, who does not hold Evergrande bonds. ‘I don’t really think it will work.’”
From Bloomberg. “Shimao Group Holdings Ltd. drove Chinese property stocks and bonds lower over growing concerns about its ability to pay its debt, renewing concerns about the health of the sector. China’s crackdown on housing, which triggered a default at China Evergrande Group and led to a plunge in sales, is calling into question the way freewheeling property developers have financed homes to the masses through the widespread use of presales.”
“Shimao’s shares dropped 12% to the lowest in almost a decade, while its bonds plunged as much as 9 cents on the dollar. A yuan note tumbled more than 50% before it was suspended.”