A report from Bloomberg. “Homebuilders are headed for their sharpest monthly nosedive since March 2020 as the stocks get pummeled by fears of rising rates. ‘It’s a headwind to everybody across the sector, nobody is completely immune,’ analyst Rafe Jadrosich, who covers homebuilders and building products for BofA Global Research, said in an interview. ‘It will reduce the buying power of every type of home buyer, regardless of what price points they’re looking at.’”
From WBTV in North Carolina. “Two modern duplexes on Julia Maulden Place near Optimist Hall have been under construction for a long time by Charlotte standards. Mecklenburg County records show the original permit was pulled in July of 2020. In that time, potential homebuyers have come and gone, complained about catastrophic construction defects and been dragged into the financial entanglements of construction company City View Terraces. A WBTV Investigation found dozens of lawsuits, liens and judgements filed against the company that could prevent homebuyers from closing on new homes and threatens their deposits.”
“City View’s website touts its luxury homes in some of Charlotte’s hottest neighborhoods. Building those homes is expensive and records uncovered by WBTV suggest the company is in massive debt. ‘Oh, it was horrible. He had so many liens against him frankly, I did not think we would close this loan at all,’ real estate attorney Ralph McMillian said.”
The Dallas Morning News. “Despite the huge buyer demand, North Texas homebuilders sharply reduced the number of single-family home construction permits in December. It was the fifth month in a row that Dallas-Fort Worth builders took fewer permits to start houses than in the previous year, according to the Texas Real Estate Research Center at Texas A&M University. Local builders filed permits to start 3,323 new houses in December — more than 27% less than a year earlier. December’s permit total was the lowest since early 2020.”
“‘Our builder clients share that their focus remains on getting under-construction units completed and closed. Simply starting more units swelled much of the work in progress during much of 2021,’ said Ted Wilson, principal with Dallas-based housing analyst Residential Strategies. ‘Going forward, builders are taking a measured approach on initiating new units so that the construction backlog does not get further out of hand.’”
The Dirt on New York. “Poor Ronald Perelman. You almost gotta feel for the guy. To settle debts, and in the service of the aforementioned simpler life, Perelman has for the last couple of years engaged in a sort of billionaires-only yard sale. One of Perelman’s most valuable assets was an oceanfront spread on East Hampton’s swank Lily Pond Lane, though he has not occupied the estate for many years. The property was listed last September for $115 million, and records show the estate traded just after the first of the year at a hugely discounted $84 million.”
The Hollywood Reporter in California. “Nondisclosure agreements are on the rise — with an increase in recent years from the buyer’s side. That’s because sellers typically own the listing photos, and new owners not only want to keep home addresses private but keep pictures offline as well. ‘Everyone is on high alert over the recent home-robbery invasions,’ says Hollywood business manager Elizabeth Campos. ‘Nerves get rattled when they think of someone being able to recognize something in the home that directly ties them to it.’”
“Promising to outbid a top offer seems like a smart strategy, but other agents tell THR that the novelty can backfire. Re/Max agent Jordan Cohen says he actively advises sellers against trusting them, especially because of contingency laws regarding inspections, loans and disclosures, which give buyers ways to cancel contracts. ‘With open contingency laws in place, it is too easy to throw up an escalation clause where a buyer can lock up a house at a price they truly will not pay and try to renegotiate later,’ he says. ‘I am sure this is not always the case, but this is what I have recently seen happen.’”
From Geek Wire. “Now that the dust has settled, we can ask how could the smart and savvy team at Zillow Group, armed with cutting-edge AI methods and mountains of data, lose half a billion dollars buying homes in the second half of 2021. Zillow tested its approach over three years achieving profits that emboldened Zillow to rapidly scale up its iBuying business. The answer is that home prices were moving up rapidly during that period. As a result, even if Zillow’s purchase was modestly over-priced, Zillow was able to make a profit when the house was sold some weeks later. However, when the market cooled down in 2021, Zillow’s disadvantage was starkly revealed.”
“In other words, the proverbial tide went out, and we found out that Zillow was … exposed.”
From The Real Deal. “Los Angeles-based Oaktree Capital Management has seized a second Evergrande property in China as part of an unprecedented push to recover $1 billion in unpaid debt. Oaktree has seized a massive ‘Venice’ apartment complex on the Yellow Sea coast near Shanghai that had defaulted on a $400-million secured loan. This came after Oaktree, which manages $166 billion in assets, seized a large plot of land in Hong Kong called ‘Project Castle,’ where China Evergrande Group had hoped to build a Versailles-like mansion. The loan to that project came to around $600 million.”
“Oaktree’s control of both properties means the bedraggled Chinese real estate firm can’t sell them to raise funds to restructure $300 billion in debt. The financial health of the world’s most indebted developer spiraled down last year, prompting a series of defaults across China’s real estate industry that for decades fueled its growing economy.”
From News Hub New Zealand. “Real estate agents say ‘FOMO’ (fear of missing out) among first-home buyers is no longer a key concern, their fears having switched to inability to get finance. It comes as Credit Contracts and Consumer Finance Act (CCCFA), introduced to protect borrowers from unaffordable debt, put greater onus on lenders to ensure loans are affordable. Mortgage brokers have reported banks are placing greater scrutiny on spending, to ensure they comply.”
“First-home buyers are bearing the brunt of CCCFA changes, results show. A record 89 percent of real estate agents reported difficulty getting finance as buyer concern. Almost three-quarters (69 percent) reported buyers were worried about rising interest rates affecting their capacity to borrow and service a mortgage. Concerns about falling prices (‘fear of overpaying’), also went up.”
“In a REINZ and Tony Alexander survey of 385 real estate agents nationwide, conducted late in January, a net 65 percent reported seeing fewer first-home buyers in the market. ‘Right now, we’re in the period where the CCCFA changes are having the greatest impact, and people are having to cut back,’ Alexander said. ‘There is a risk that some of the negativity we’re seeing in the survey (and other commentary) is reflecting that this is the weakest period for first-home buyers.’”
The Sydney Morning Herald. “It’s easy to spend money – especially when you control the nation’s currency printing presses. But the Reserve Bank is now fast approaching the point where it has to decide how to deal with the end of the money creation spree that has kept afloat the economy since the advent of COVID-19. Over the past 2½ months alone, the bank has been creating $4 billion a month with which to purchase federal and state government bonds. That is money sloshing around the economy.”
“It’s not just the RBA. Globally, central banks have created about $US12 trillion ($17 trillion) due to the impact of COVID-19. But with inflation now moving up, unemployment on track to slip below 4 per cent for the first time since Grahame Bond gave us Farewell Aunty Jack in 1974 and Australians taking on record levels of debt, the time to switch from quantitative easing (QE) to quantitative tightening (QT) is approaching.”