A report from the Wall Street Journal. “An unusually high number of homes across the country are being appraised below their agreed-upon sales prices, causing a number of deals to collapse. In recent months, during the height of the boom, many buyers waived their right to terminate a contract due to a low appraisal in an effort to make their offers stand out, which meant they were willing to pay cash to make up the difference. This tactic is becoming slightly less common as the market is cooling.”
“Earlier this year, ‘we weren’t having to worry about appraisals, because people were willing to waive them,’ said Jennifer Wauhob, a real-estate agent in Katy, Texas. ‘Now that they’re back on the table, we’re definitely feeling it.’”
From Hawaii Public Radio. “The median price of a single family home in Maui County in September was $996,500 — the first time it’s been under a million dollars since April. ‘I think the prices are leveling off but as the supply goes down, you know, I mean it’s simple economics right, the prices are going to go up. But you know how far can they go up?’ Keone Ball, 2021-2022 president of the Realtors Association of Maui, said.”
“Properties continue to hit the market, with nearly 120 homes and 130 condos listed last month.”
The Daily News Record. “‘We’re going to see this extreme price growth moderate in 2022, so this double-digit price appreciation over the last year, that’s going to slow down,’ said Lisa Sturtevant, chief economist of the Virginia Realtors. ‘It’s not a bubble bursting. It’s not a decline in prices, but the pace of growth will slow and will be more in line with incomes growing.’”
“Sturtevant said the forecasted subdued price increases will be a result of several factors: rising mortgage rates, increasing inventory of homes for sale and for rent, and decreased demand. ‘I understand [Sturtevant’s] predictions in saying that surely this can’t keep going,’ said Bob Hill, CEO of the Harrisonburg-Rockingham Association of Realtors. ‘It’s got to start coming down at some point.’”
From Bankrate. “After a few extensions, the mortgage payment pause officially ended – or will be ending soon – for 1.2 million out of an estimated 1.7 million loans that remained in forbearance as of August, according to CoreLogic. When the pandemic hit, Carl Johnson had to stop working as an entertainer at children’s parties. The Cincinnati resident knew he wouldn’t be able to keep up with his mortgage payments, so he went into forbearance 18 months ago.”
“Like millions of other borrowers, Johnson said his forbearance protections ended Sept. 30, and now he’s faced with having to catch up on his missed payments or possibly sell his home. He wishes he’d been better informed about how forbearance programs end before he applied. He expected to be able to go into deferment after his forbearance ended and make up the missing payments at the end of the loan. Instead, Johnson’s lender said he doesn’t have enough income currently for a deferment, and is encouraging him to consider a short sale or deed in lieu of foreclosure. And Johnson is hardly alone in facing some tough decisions now that CARES Act forbearance protections are ending.”
“‘This is the point that we’ve been worried about,’ said Selma Hepp, deputy chief economist at CoreLogic. With so many borrowers exiting forbearance in the next few weeks, lenders may have backups on their customer service lines. ‘There is like a pig moving through a python. It may be hard to reach some of the lenders,’ Hepp said, but emphasized that persistence is key. ‘Don’t give up, continue to call, continue to stay on top of this, it’s critical at this point.’”
“For some borrowers like Johnson, however, being in touch with their lender is no guarantee of an optimal outcome. ‘If they would have explained the options in any letter I would be OK, but my letters said, ‘We have options, deferment, etc., etc., not, ‘if you don’t make the income you have to sell for the most part,’ he said.”
The New England Real Estate Journal. “As I head into my 37th year as a Real Estate Appraiser, it is evident to me that this real estate market continues to be the hottest I’ve ever experienced. We do not set the market, we report it. Why then are there still appraisers not doing upward time adjustments when it is warranted? Two years ago, when I interviewed a few of them I got some disturbing answers, none of which made any sense or justified their position. Some appraisers have since figured out that they were inaccurately reporting. Others are still stuck behind the times, sometimes letting a stubborn ego get in the way.”
“Over the last year I have discussed the issue with many lenders, underwriters and reviewers. Their concern is that if appraisers aren’t keeping up and telling them that the market is increasing on reports and applying time adjustments, will they be able to recognize when the market is softening, stabilizing and ultimately declining as happens in the cycle of real estate.”
“Most Appraisal Management Companies (AMC) couldn’t do more wrong to work efficiently and make more money. It is frustrating to watch. It is comparable to how most lenders handle foreclosures and short sales. They couldn’t do more to lose money. The system is broken. Lenders and appraisers generally hate the current system.”
“Necessary changes had to be made to stop the collusion and fraud by mortgage originators and appraisers. However, the current system has had a lot of negative unintended consequences. The market is now softening in certain pockets of the market. It is wise to actually get the other offers agents are stating they got on a property. Often there aren’t as many as there used to be. There aren’t as many people at some of the open houses. We have seen a lot of sales fall through and come back on the market, sometimes a concerning number of sales. Are they falling through at home inspection, are there cases of buyer’s remorse, or did they lose financing? If so was it due to the appraisal or something else?”
The Star Tribune in Minnesota. “A downtown Minneapolis penthouse for $200,000 — can that be right? It’s true. The 23rd floor unit of a building near Loring Green that overlooks Nicollet Mall is now available for about the price of a Manhattan parking space, thanks to the latest price drop. So, what’s the catch? Well, built in 1979 during the denouement of Jimmy Carter’s presidency, it could use some updates. And it has a $2,344 monthly HOA fee, although the seller will cover those for six months.”
The Sydney Morning Herald in Australia. “Buyers of apartments in two 22-storey Parramatta towers found to have serious defects say they are trapped in a nightmare, with some no longer able to get loans from banks to settle on their purchases. They have been prevented from terminating contracts for units in the Imperial, and getting back deposits they put down years ago. Oliver Burgess, who signed a contract about four years ago for a unit in the Imperial, said the changes to the orders had ‘unfairly damaged’ the purchasers, leaving them in limbo.”
“Mr Burgess said some buyers of units off the plan in the complex could no longer get loans from the big four banks because of publicity surrounding the defects. Purchasers were also locked into a highly inflated price for apartments which, if they attempted to sell, would be worth ‘a lot less.’”
“Patrick Wang, who signed a contract for a two-bedroom apartment five years ago, said he was left in a situation where he was unable to settle or exit his contract. His application for a loan on the unit in the Imperial which he had paid a deposit for was declined after its valuation was changed due to the emergence of defects in the building. Mr Wang, whose father has also purchased a unit off the plan in the building, said there needed to be ‘fairness and clarity’ for purchasers if sunset clauses could be altered in favour of vendors.”
The South China Morning Post. “Few buyers are likely to step forward to buy China Evergrande Group’splot in the northern New Territories, which falls under the planned Northern Metropolis, because of the high land cost and lack of a detailed blueprint for the mega project, industry observers say. Despite Evergrande’s offer to sell it for HK$8 billion, or a loss of HK$900 million, no buyer seems interested, according to market observers.”
“Tom Ko, Cushman & Wakefield’s executive director of capital markets in Hong Kong, said prospective buyers could be waiting for a bigger discount as Evergrande could get increasingly desperate to offload the asset as debt payment pressure mounts. Leo Cheung, adjunct associate professor at the department of real estate and construction at University of Hong Kong, said the benefits to Evergrande’s parcel from the railways link remains to be seen as there is no detailed blueprint yet.”
“‘That place is out in the middle of nowhere after all,’ Cheung said.”
From Bloomberg. “Chinese builders are looking to payment extensions or debt exchanges to avoid default on imminent bond obligations as liquidity conditions tighten for the real estate sector. Investors are still waiting for clarity from Evergrande over a potential restructuring or solution for its liquidity crisis which some analysts say could drag on for months. Some of the firm’s bondholders fear Evergrande may sell assets that they’re counting on to back up their claims if the company collapses. It has $148 million due Monday involving three dollar-bond coupons, Bloomberg-compiled data show, after having given no signs it made interest payments expected in September.”
“More defaults from Chinese property firms are expected under Beijing’s deleveraging campaign, said Kenneth Ho, Goldman Sachs Group Inc.’s head of Asia credit strategy. The sector ‘needs some kind of policy change in order to restore confidence.’”