A report from the News Sun in Indiana. “Larry Doyle, president of Campbell & Fetter Bank, ran some sample numbers to illustrate. ‘That’s a $318 increase. Same dollar amount. Same dollar amount borrowed,’ Doyle said. ‘We had nine price reductions (recently) and we haven’t seen price reductions in our market for several years. It just generally hasn’t happened,’ said said Mark Bock, managing broker for Mike Thomas Real Estate in Angola and LaGrange. ‘The sellers who were aggressive or have an aggressive prices have priced themselves out of the market.’”
“‘When I started in banking in 1998, interest rates were about 6% and I personally haven’t seen them reach that level again, until now as they begin to approach 6% once again,’ said Scott Gruner, president of First Federal Savings Bank in Angola. ‘We just experienced a historical long-term, low interest-rate environment. Because of that, many borrowers, particular younger customers, have never seen interest rates at these current levels.’”
“Housing affordability is going to take a shot in the short-term too until more time passes, incomes respond and the elevated interest rates people are seeing now become the new normal, Doyle said. ‘There’s no doubt that the price of either existing homes or new is outpacing people’s income. There’s no doubt about that,’ he said.”
From Yahoo Money. “The housing market has rapidly changed. Sellers, once in the driver’s seat at the start of the year, are much more accommodating to complete a home sale as borrowing costs skyrocket for buyers. A growing number of home sellers have been forced to readjust their home prices in recent weeks. ‘If you overprice your home in any market, you’re going to feel resistance,’ Lizy Hoeffer, owner and mortgage broker at Cross Country Mortgage LLC, said. ‘In the last three years, sellers have been able to get basically whatever they want for their house. We’re just not in a market like that right now.’”
“In the most populated county of Washington State, King County, the average price is over $1 million, according to Adriana Perezchica, real estate broker and owner of Via Real Estate Group. Despite the challenges, Latinos there – which comprise a large portion of her clientele – are buying in the outskirts for an average of $550,000. ‘Most of my clients are first-time buyers, with no knowledge or very little understanding on buying a property. ‘The majority work in the construction, labor and the hospitality industry,’ Perezchica said.”
From Summit Daily in Colorado. “After doubled interest rates, increased real estate demand and inflation, even house loans are now becoming too expensive for first-time buyers in Summit County, according to local officials. Lenders in Summit County are finding that some first-home buyers can’t even afford the mortgage they would be paying as a way to help them buy their new house. To apply and receive a loan, there are three main requirements: credit score, a down payment and income.”
“‘That’s the one that’s always the dealbreaker,’ Berkley said because in order to get a loan, the buyer must make double their debt payment. Meaning, to afford the hypothetical $3,500 mortgage, the buyer would have to be making at least $7,000 a month. ‘$84,000 a year to even qualify for a $400,000 loan,’ Berkley said. He added that even a quick online search would barely yield a single $400,000 home in Summit County.’”
From Yahoo Finance. “‘In the really overpriced markets, like Tampa, Austin, and West Palm Beach, you’re starting to see a lot of price reductions,’ Ralph DiBugnara, president of Home Qualified told Yahoo Finance. ‘A lot of those areas were just very, very overpriced.’ Provo Utah — about 45 miles outside of Salt Lake City — saw 47.8% of its sellers cut their list prices in May. Tacoma, Wash., Denver, Colo., Sacramento, Calif. and Boise, Idaho, are also areas where more than 40% of listings saw price drops in May. Seattle, Wash., San Diego, Calif., Houston, Tex., Phoenix, Ariz. and Orlando, Fla., are just a few of the more than 100 metro areas studied by Redfin in which at least 25% of sellers reduced asking prices in May.”
“The reductions are a sharp reversal from bidding wars and over-asking offers during the pandemic. ‘I think by end of summer, early September, you’re going to see a 10 -15% reduction in prices. But most of that is going to be based around the prices — the houses that are overpriced,’ said DiBugnara.”
“DiBugnara also predicts a slowdown in short-term rental homes. ‘I have about 15 [short term rental] properties in five states. Most of them are still booked through the summer. What I’m seeing is their future bookings — whereas people who are booking way ahead into September, October, and even for the holidays— those bookings have not been coming the same way they were coming over the last two years,’ said DiBugnara.”
From KTLA in California. “The RE/MAX study shows the total number of homes sold dropped drastically over the last year compared to the year previous. The study shows that nearly 25% fewer homes were sold in Los Angeles from May 2021 to May 2022, compared to that same timeframe the previous year. That 24.4% year-over-year decrease in homes being sold is the biggest decline among all metropolitan areas in the nation, according to the RE/MAX study. May is one of the busiest months for homebuyers according to RE/MAX, but despite this, the entire nation saw an 8.5% decrease in homes being sold this year versus last May.”
“James Sander, owner of RE/MAX Estate Properties in Los Angeles. He says the frenzy of appreciation on the housing market was ‘not sustainable’ and says he expects the market to become more stabilized. ‘The rising interest rate environment has returned the LA housing market to a more typical real estate market,’ Sanders said. ‘We’ve seen a drop in demand from 10 to 15%. Our inventory is up 36% from last year but still more than 75% below our typical pre-pandemic levels.’”
“The decrease in home sales isn’t limited to Los Angeles. Just down south in San Diego, home sales declined by 20.4% during that same timeframe.”
The Globe and Mail in Canada. “Here’s one thing the bond markets and the central banks have starkly revealed of late: Postpandemic financial life is terra incognita. No one knows how long it will take to return to normal, or even what normal looks like any more. The current outstanding value of all those IOUs, globally, is US$125-trillion. The bond market dwarfs all the world’s stock markets put together, which traded roughly US$61-trillion in 2019. Hundreds of billions of dollars worth of bonds are bought and sold and hedged and swapped and churned every day.”
“That profitable cycle recurred for 40 years, as rates and yields for the most part gambolled down the hill together. ‘Right now this year,’ Robert Armstrong, the widely read U.S. financial commentator for the Financial Times, told me recently, ‘there are a lot of bond traders who have rarely sold a bond for a loss in their entire careers, because interest rates just helped them all the time. Down and down and down and down rates go, while bond values go up and up and up and up. And you just buy bonds and sell them and you make money. And it’s a pretty good life.’”
“And then, six months ago, bond paradise evaporated, as the spectre of inflation loomed. For the past six months, instead of being a careful hedge against losses in the stock markets – down more than 20 per cent so far this year – bonds have been in their own freefall. ‘For a bond investor,’ said Brian D’Costa, president of Algonquin Capital, a (small) $500-million bond fund. ‘that’s horrific.’ If interest rates rise to 5 per cent, he predicts annual bond value losses of 20 per cent. ‘That wipes out 10 years of investment returns.’ Lots of people won’t be retiring when they thought they would.”
From Better Dwelling. “A global real estate correction has kicked off and Canada is expected to lead lower. That was the message from Goldman Sachs Research’s latest client note on rising rates. Advanced economies left interest rates too low for too long, and are now trying to make up for lost time. Fast-rising rates is slowing the inflation they created, but also the global economy. This will have a big impact on interest-sensitive areas like real estate, first to see the impact.”
“‘The pandemic-induced housing boom appears to be cooling off,’ notes GS. ‘From Toronto to Auckland, a slowdown in the housing market is underway as interest rates in developed economies are set to climb rapidly.’ They also mention home prices have already begun to fall in Canada, Australia, New Zealand, and Sweden. ‘In Canada, house prices have fallen the most in areas that had the most growth early in the pandemic,’ notes the bank to investors.”
“GS isn’t the only one that sees inflated home prices correcting after rate normalization. The Bank of International Settlements (BIS) recently warned low rates produced housing bubbles in advanced economies. While they argue it is a global phenomenon, they say it’s due to monetary policy errors repeated across multiple advanced economies. They suggest higher rates can be painful, but not tackling this problem can make it worse. If the trend isn’t correct, the BIS warns the fallout will be beyond the housing market.”
From Interest New Zealand. “‘The total number of people who are behind on payments is up 11.7% compared to the same time last year, indicating some consumers are starting to experience financial strain,’ says Centrix Managing Director Keith McLaughlin. ‘More than 100 construction companies have been placed into liquidation so far this year and defaults are up 10% compared to same time in 2021. Across the country, 25% of all company liquidations in May were from the construction sector. Credit scores for the sector are also plunging. The average credit score for new credit applications across the sector is down 8 points, as the potential risk of default increases across the sector.’”
The Daily Mail. “Three more Australian building companies have collapsed with millions of dollars in projects abruptly stopped and homeowners left in the dark amid an industry-wide crisis. Victorian builder Langford Jones Homes was the latest to go under, ceasing trading last Thursday owing creditors more than $10million. A father-of-two told News he has lost $300,000 because of Wulfrun going under, and believes there could be dozens of other families who are put under immense financial pressure like his, which is had been trying to refurbish his long-held home.”
“‘The underlying feeling is that fear of losing your home, that piece of land that has been in my family since the 1980s, where you grew up and spent your childhood,’ the man named Mark said.”
“Matthew Mackey, the Executive Director at engineering giant Arcadis, said the government need to get more involved or face a total collapse of the residential construction industry. ‘There has to be more collaboration at all levels to make sure it moves forward. We’re not going to be talking about builders going under but a complete lack of jobs,’ he told Daily Mail Australia.”
From Domain News. “Interest rates have been hiked a further 50 basis points by the Reserve Bank of Australia in its third monthly rise in a row after inflation showed no signs of a significant slowdown. Ray White chairman Brian White says he’s seen plenty of evidence of people panicking. ‘A lot of them are ‘OMG, OMG! What’s going to happen?, he said. ‘But I believe this is now an excellent time for buyers. When the market is strong, they don’t have much choice or time to work out which property they really want and to make decisions.’”
The Epoch Times. “The flurry of rulings from the Supreme Court has everyone’s head spinning. The most significant among them, even if it doesn’t capture all the headlines, is West Virginia v. EPA. The majority opinion is impressive, but the part I found truly wonderful is the concurring opinion by Justice Neil Gorsuch. This is where we see things headed, toward a major and much-welcome curbing of the power of the administrative state.”
“Just to review what this thing is, it’s an unelected bureaucracy that rules the country without oversight from voters or legislatures. For well over 100 years, most courts have given it a pass, just assuming that the ‘experts’ in the bureaucracies are handling things just fine, faithfully interpreting legislation, and merely creating rules for easy compliance.”
“The thing has taken on a power of its own. Strangely, the topic hardly comes up at all during elections, and that’s for a reason. Politicians running for office like to advertise their power to make change. They might even believe it. In reality, though, elected officials have very little influence over the conduct of public life relative to the administrative state.”
“Once you see the problem, you can’t unsee it. Consider the problem with inflation alone: it’s largely the responsibility of the Federal Reserve, which is among the most terrifying of the deep-state agencies. This thing was founded in 1913 with the promise that it would end ‘wildcat banking’ and contain the expansion of money and credit so that we would have a more stable economic environment to encourage growth.”
“Even now, people believe that the Fed is going to somehow fix recessions and inflations, even though a deeper analysis reveals that the Fed itself is the cause of both. The Fed surely can’t be both the problem and the solution, which is becoming as obvious as the fact that the Centers for Disease Control and Prevention can’t make a textbook pathogen go away with power and potions.”
“Now, the Fed has been revealed to be utterly incompetent, in a way that is no different from the CDC, NIH, DOL, DOE, DOT, HHS, DHS, FTC, SEC, and all the rest of these glorified 3-letter agencies employing nearly 3 million people who can’t be fired or controlled. The unique feature of our times is that the expert class in government has been unmasked as fakes at best and unrelenting menaces at worst.”