A report from the Real Deal on Arizona. “Two months ahead of hosting the 2023 Super Bowl, Arizona Cardinals owner Michael Bidwill sold his mansion in Paradise Valley at a loss for $5.3 million. Bidwill sold the property two months after listing it for $5.8 million, the Wall Street Journal reported. Bidwill bought the Paradise Valley property for $7.5 million in 2005, according to Redfin.”
From Boise Dev in Idaho. “The median cost of a home in the Treasure Valley is less than it was one year ago. The latest data from the Intermountain Multiple Listing Service shows the median price in Ada Co. in December stood at $515,000, down from $546,000 in December of 2021 – a decline of 5.6% It’s the cheapest level the median price has hit in Ada Co. since April of 2021, and 14.5% lower than the market’s peak in May of last year. In Canyon, the median ducked back under the $400,000 mark for the first time since April of 2021, landing at $390,000. That’s seven percent less than the same time a year ago, and 18.2% lower than the peak in Canyon County in April of last year.”
From Berkeleyside in California. “Berkeley’s astronomically expensive real estate market has cooled slightly amid rising interest rates, with the city’s median home sale price declining from $1.8 million last April to $1.3 million in November, according to Redfin. ‘Projects that don’t have a built-in, recognizable demand are going to be very, very hard to finance,’ said Patrick Kennedy, a developer. Nathan George of NX Ventures cited the San Pablo Avenue corridor in West Berkeley, which he and other developers are hoping to line with new apartments, as an area that could feel the slowdown more acutely. ‘You might not see anything get built there for a while,’ said George.”
Bisnow Dallas Fort Worth in Texas. “Several months of negative absorption at Class-B and C apartment properties are behind the decline, said Bruce McClenny, senior director of Apartmentdata.com. ‘They’re going into the new stuff — Class-A — but they’re really moving out of Class-B and Cs,’ he said. ‘Occupancy is going lower, and all of the sudden, landlords are adjusting prices to attract more [renters]. In 2021, demand dwarfed supply. Now, it’s reversed.’”
“DFW added around 20,000 new units in 2022, but absorbed less than 5,000, indicating a significant imbalance between demand for apartments and new supply coming online. There are more than 22,000 multifamily units under construction in DFW and another 77,000 are proposed, but when and if those projects get built is still uncertain, McClenny said. ‘Rents are going to come down — we are already starting to see that, and it may continue,’ he said. ‘Flat would be a great thing.’”
The Commercial Observer. “As the nation’s top commercial real estate financiers gather once again for the CRE Finance Council’s annual Miami conference, there are some dark clouds on the horizon for the industry. Transaction and lending activity has been largely in a holding pattern of late, with some lenders stepping back altogether in late 2022 while the market irons out economic question marks.”
“‘The focus of the conference at the moment is more around how you address the challenges for the current book and how you protect existing investments,’ Bill Sexton, CEO of Trimont Real Estate Advisors, told Commercial Observer. ‘There is also an eye on how we invest into markets as asset values come back and we start to get some sort of price discovery and we start to close the bid-ask spread, which is pretty wide right now.’ Sexton said there are likely potential lending opportunities in the latter half of 2023 for distressed office and retail assets, but at the moment ‘it is a bit like catching a falling knife.’”
“Warren de Haan, managing partner and co-CEO of Acore Capital, said the real wild card is how the banks will respond to dislocation in the CRE market with increased regulation, which has already led to liquidity problems. ‘Now, a lot of assets are staying on the balance sheet, but loans that were going to get refinanced from a maturity perspective are not getting refinanced,’ de Haan said. ‘The banks’ balance sheets are ballooning.’”
The Philadelphia Inquirer in Pennsylvania. “A New York mega-developer that had decided to build in Philadelphia during the pandemic called time on a 360-unit building into which it had already sunk $42 million of its own money. ‘The Durst Organization is pausing on construction of the mixed-use project at 300 N. Columbus Boulevard,’ read a statement from the company’s Philadelphia spokesperson Anthony Campisi. ‘There are definitely people I know who penciled out deals, and then when everything went on these past nine months, they decided to pause those projects until things calmed down,’ said David Segal, senior vice president with TriState Capital Bank. ‘They didn’t want a roller-coaster ride in terms of materials, labor and now, obviously, borrowing costs.’”
“‘Anything that’s speculative is a challenge, and by that I mean it probably doesn’t get done,’ said Bernie Shields, regional president for Philadelphia and South Jersey with M&T Bank. ‘In normal times, if something is more risky, you may just require extra equity going in. Right now, I don’t know that any amount of equity would get a lender interested in doing a commercial deal that doesn’t have substantial pre-lease.’”
WINK News in Florida. “Imagine renting a property for your vacation just to discover it’s actually a construction site. That’s apparently what happened to one woman in Naples, and now an investigation is underway. The woman paid for a rental, then her radar went off, and she suspected something wasn’t right. She took matters into her own hands and then called the Naples police. ‘My overall reaction to people that are scamming other people should be arrested and put in jail,’ said Joseph Angi, condo association administrator for the Naples Continental Club.”
“On December 4, Naples police said a would-be renter started a conversation about a vacation rental on Facebook messenger. They came to an agreement; then, the victim sent money through Zelle. When the contract arrived, the victim said it didn’t look right. She visited the property in person only to find homes under construction. ‘It is unreal what is happening right now. A lot of scammers take advantage of the fact that the homeowners are not here and are probably in a different country or different state,’ said Dirk Fischer, a broker for 5th Homes. Fischer said people are getting ripped off left and right.”
The Globe and Mail in Canada. “British Columbia is giving itself a new tool to combat money laundering – one that will be closely scrutinized by other provinces also awash in dirty money. Premier David Eby plans to introduce legislation in the spring to create ‘unexplained wealth orders.’ Known as UWOs for short, they are legal instruments that make it easier for the province to seize residential properties or other valuables suspected of being purchased with the proceeds of crime.”
“‘I think that for many British Columbians, it’s very frustrating to hear police say this individual is known to police, we have reason to believe this individual is involved in organized crime, they’re driving around in luxury SUVs with secret compartments where they hide weapons, they live in fancy homes, they have fancy jewellery and luxury goods, with no apparent source of income,’ Mr. Eby said in November. ‘And when we look at that situation, coupled with the report, the public inquiry into money laundering that says that we have a multibillion-dollar problem with money laundering in our province, action needs to be taken.’”
The Financial Post. “As Canada’s real estate market wrapped up 2022 with price declines, some condo investors are expected to put their properties up for sale within the year as variable mortgage rates continue to rise, a real estate expert said. Steve Saretsky, a Vancouver realtor, said the market for detached homes has already gone through a ‘nice’ correction in past months, signalling a similar direction for the condo market. ‘The market seems to be expecting lower prices (this year). I think that’s where buyer sentiment is right now,’ he told Financial Post’s Larysa Harapyn.”
“Some owners who used to break even on their condo investments are now facing a different reality. With variable mortgage rates up 400 basis points, Saretsky said some investors are now losing money as they are not allowed to increase the rent they charge by more than two per cent under rental restriction laws. ‘A lot of investors are opting to actually hit the sell button and I think that we’ll see maybe a little bit more pressure on the inventory side in 2023,’ he said.”
“Another thing to keep an eye on in 2023 is the pre-sale market. Those who have entered a pre-sale agreement during the pandemic will have to qualify at a stress test of seven and a half per cent, Saretsky said. ‘We’re certainly seeing some stories of (buyers) not able to qualify to actually complete close on these units … people that are ultimately caught off side with a huge move and rates,’ he said.”
“Benchmark real estate prices in Canada’s major urban centres are off dramatically from highs posted earlier this year. Figures released this week showed the overall benchmark prices for all categories of properties in Toronto, Vancouver and Calgary were down 21 per cent, 19 per cent and nearly five per cent, respectively, from highs posted earlier in the year.”
The Telegraph in the UK. “Prices fell for the fourth month in a row in December, meaning values are now down by 4.3pc compared with their August peak, according to lender Halifax. The average home in December sold for £281,272 – £12,720 less than in August. Emma Fildes, of Brick Weaver, a buying agent, said: ‘It’s all negotiation at the moment. Every deal I’ve done recently has had a discount on it. Without a doubt across the market there are definitely reductions,’ she added. Buyers have scope to argue 5pc to 10pc off asking prices, she said. ‘All sellers are expecting to be chipped.’”
“Andrew Wishart, of Capital Economics, a research consultancy, said the Halifax data suggested the housing downturn ‘is further advanced than we previously thought.’ Capital Economics has forecast a bigger drop of 12pc, but Mr Wishart said prices could fall further, with the risks ‘firmly to the downside.’”
“‘If you are buying a new-build, there are lots of discounts. Developers are desperate to get rid of them. And there will be all of those buy‑to-lets that people want to get rid of before the capital gains tax allowance changes,’ Ms Fildes said.”
The Sydney Morning Herald. “The Australian property market has notched its deepest downturn on record after national home values slumped 8.4 per cent since their peak, CoreLogic figures show, and experts warn more falls are yet to come. The previous record downturn was the 8.38 per cent drop between October 2017 and June 2019, when the bank regulator clamped down on runaway lending to investors. This fall since the peak in May has been faster, taking less than nine months so far, after interest rates rose at the fastest pace on record.”
“CoreLogic head of Australian research Eliza Owen said the housing market is more sensitive to rate rises than in the past because households have more debt. ‘A lot more people are going to be feeling the effects of higher interest rates,’ she said. ‘The fact that property prices have reacted so strongly is just another sign of how much more expensive housing is in 2023 – the fact that it’s had such a strong reaction to what would be a relatively low interest rate compared to the early 1990s.’”
“Sydney home values have fallen most in the downturn, dropping 13 per cent from their peak, while Brisbane values have fallen 10 per cent and Melbourne is down 8.6 per cent. The falls come after property prices boomed during the lockdown years as households armed with cheap loans searched for more spacious homes. AMP Capital chief economist Dr Shane Oliver expects the record decline in values to continue until a few months after the cash rate stops rising. He said some mortgage holders whose fixed-rate terms end may not be able to service their debt, leading to an increase in distressed selling.”
“Anyone who fixed their rate at about 2 per cent could expect an increase to 5 to 6 per cent, Oliver said. The most recent downturn was more widespread than the 2017-19 price falls, which were largely confined to major cities. This was because a pandemic-induced shift in buyer preference towards regional property and larger houses was reversing, he said.”