A report from the Oklahoman. “Prices for new homes are outpacing appraisals, busting purchase contracts if buyers and builders can’t come to terms and fill the financing gap. Metro-area Realtors discussion mentioned appraised values for new homes falling short of what lenders required to make mortgage loans by $14,000, $20,000, and $22,000. None of several appraisers asked for comment returned messages. Appraisal gaps aren’t necessarily uncommon for resale homes, but now they’re a problem ‘across the board,’ said Aspen Endriss with Home Creations.”
“‘Materials and trades are going up, and companies are responding to this by going up in price as well,’ she said. ‘Appraisals have been used the past to dictate the current prices of homes, but through the pandemic this has taught us this isn’t able to be true right now. The pandemic has brought us to something we never thought we would see again, and how we have had to adapt is by pushing prices higher to keep sustaining.’”
From Ilyce Glink and Samuel J. Tamkin. “Q: We live in a West Coast Florida beach town. We applied for a cash-out refinance in June, so we could consolidate our finances and pay off our mortgage on a long-held home in the north.We were shocked, as was the lender, when the appraisal came in much lower than expected ($575,000). The problem seems to be that there are no appropriate ‘comps,’ since the town is very small, and properties are extremely diverse.”
“A: We asked our friend Jonathan Miller, chief executive of Miller Samuel, a commercial appraisal company based in New York City. ‘The bank appraisal industry is literally feast or famine. The appraisal profession represents one of the last steps in the mortgage process on a purchase or a refinance and is the only one whose compensation is not contingent on the mortgage closing,’ he wrote in an email. ‘What the reader describes is exactly what happened during the financial crisis, where lenders lost their minds and pressured appraisers all day long.’”
“When it comes to financing or refinancing real estate, an appraisal is an opinion about the value of a piece of real estate. Most borrowers don’t realize that the appraiser is not working for them, only the lender. That’s why Miller believes the reader’s frustration is misdirected. ‘The only way an appraisal opinion is worthwhile is if appraisers take ‘full advantage of their third-party status,’ Miller noted, adding: ‘Otherwise, we are back in the housing bubble all over again.’”
From Willamette Week in Oregon. “Last week, WW reported on the effects of Zillow attempting to flip Portland houses using an algorithm. The result: Dozens of homes sit vacant across Portland. Residents of one block in the Piedmont neighborhood say a Zillow-owned home was occupied by squatters. Here’s what our readers had to say.”
“Kate Bowden: ‘Nobody has brought up the point I thought looking at these homes. You can see the price they paid and it was also pretty clear they didn’t actually do any flipping work. Why would anyone want to pay more than what Zillow paid to get the house a few weeks earlier? Also, they didn’t think about the skepticism people would have with a Zillow-bought home. They were not offering market value to the sellers.’”
From Guru Focus. “Zillow certainly sounded confident when it dove into the market head first. CEO Richard Bartons evangelized his daring decision with gusto: ‘We were comfortable saying that in three to five years we could have $20 billion in revenue in our Zillow Offers business alone. It seems like a really big number until you realize the house-transaction market every year is $1.5 to $2 trillion, so that’s maybe 1%, or a little over 1%, of transactions. In a market where we already are doing this, in Phoenix, we think the market share of the combined competitors [like us] is already 6%. In my crystal ball, I see this kind of supernova thing happening, I really do.’”
From Inside Nova in Virginia. “Every roller coaster eventually returns to the station, and when it comes to the past 18 months in apartment-rental costs, it appears one cycle of ups and downs is coming to an end. And the impact is being felt in Arlington as well as across the nation. Wild increases in rental prices that followed a decline – sometimes significant – in many of the nation’s urban areas appear to be calming, and perhaps returning to a more cyclical seasonality.”
“‘The market remains extremely tight, but we’ve not seen continued signs of that pressure gradually beginning to ease,’ said Apartment List. San Francisco remains down 14 percent from the start of the pandemic, Oakland 10 percent, Minneapolis 7 percent, San Jose 6 percent, the District of Columbia 2 percent and Fremont (Calif.) 2 percent. Boise, which has led the pack in appreciation for most of the pandemic era, has seen rents fall back in recent months, and in the latest figures its appreciation rate is not even in the top 10.”
From Buffalo News. “Across Western New York, the Covid-19 pandemic sent many landlords and tenants into a financial tailspin. They’re still trying to recover. At the rate he was withdrawing money from his savings account to pay taxes, repairs and other expenses on his rental properties, South Buffalo landlord Marc Pasquale worried about whether he would have anything left by the end of this year.”
“Pasquale said he was withdrawing up to $20,000 a month from his savings account during the pandemic just to keep up with the bills for 44 South Buffalo rental units. Some of his tenants stopped paying rent, even though they continued working during the pandemic, he said. ‘I’ve had a couple tenants buy houses because they made so much money,’ he said.”
“Pasquale fell behind on utility bills. But he said he was fortunate compared with many of his landlord counterparts, because he doesn’t have mortgage payments on any of his properties. ‘There’s landlords I talk to that are so far behind that they see there’s going to be no way out,’ he said.”
“Appolinaire Lekeuneu, who owns 20 rental units in Western New York, said 13 of his tenants currently aren’t paying rent and owe a collective $156,000. Lekeuneu has tried to sell two of his properties, but the nonpaying tenants living there refuse to allow potential buyers inside for showings, he said. Lekeuneu has missed five mortgage payments on his own home due to the lack of rental payments, he said. ‘I have personally contributed about $42,000 to maintain my rental properties and live off of, and have sold two vehicles,’ he said. ‘Moreover, I will also be unable (to) pay for my children to go to college because I have had to use money from our savings and retirement, as well as my intention on using those funds to save for my children’s college.’”
From CBC News in Canada. “A Toronto city councillor is about to introduce a motion asking the provincial government to bring in a speculation tax aimed at putting a chill into the red-hot housing market. Mike Colle, who represents Ward 8, Eglinton–Lawrence, told CBC News he’ll make the move when city council meets later this month. ‘$1.3 million for a starter home in Toronto. This is insanity,’ said Colle.”
“Real estate lawyer Bob Aaron was just a few years out of law school when the Bill Davis government introduced a 50-per-cent speculation tax on non-principal residences. It was later decreased to 20 per cent, then scrapped altogether. ‘That was April 9, 1974 — the worst day of my career,’ said Aaron, who remembers fielding endless calls the next day. They were from buyers trying to get out of purchases and from sellers wanting to make sure the deals were still going through. There were years of litigation after that. There was … blood in the streets when people saw the equity in their home was just evaporating overnight,’ he said.”
From News Liverpool in the UK. “Residents say they are ‘living in fear’ as government plans to replace unsafe cladding continue to stall. The initial plans will be paused after they proved to be inadequate, Housing Secretary Michael Gove has revealed – but this decision plunges hundreds of leaseholders into uncertainty once again. Julie Fraser, who works with the volunteer group Liverpool Claddiators, said: ‘Leaseholders are living with the fear, every night, that they’ll hear the fire alarm going off – just living in limbo, absolutely trapped.’”
“She bought her flat with cash for £75,000 around five years ago, dipping into her life savings to avoid mortgage on the property, as an investment for retirement. But between 2019 and 2021, the building’s insurance increased from £33,000 to £504,000, and leaseholders had to pay an additional £1,300 per person for a new alarm system.”
“Julie said: ‘These buildings are deemed dangerous, so the first start has to be making them safe. But leaseholders have been made responsible for the cost of this. Why should I be offered a loan to fix a building I didn’t plan, or design, so why should I pay the cost?’”
“Helen Rowe, a young mother of two, has been waiting for a solution for over two years now with no end in sight. Remediation costs, estimated to be upwards of £30k per apartment, ‘would render me bankrupt,’ Helen said. Although Helen is hoping for a change with Mr Gove’s arrival, she reflected that she went from ‘a young first-time buyer to now facing financial ruin.’”
“Pensioner Michael Daine is struggling to pay for repairs in his flat in Runcorn, which he purchased with his pension and savings for retirement. ‘I’m devastated and angry that they have seen me, as a leaseholder, as being responsible for any of the mess and that I should have to pay. I didn’t understand why those in power weren’t listening to the thousands of folk who were suffering because of their inaction and failure to hold those responsible, accountable. I don’t trust anybody now, and that’s sad. I’ve heard so much talk, but as yet, no action. It’s been two years for us now, paying and paying…my worry was either eating or heating.’”
From Nikkei. “China’s downturn in housing prices has spread from smaller cities to some of its largest population centres, prompting authorities to try to put a floor under markets that help fill municipal coffers. In the northeast, Tianjin last month instructed real estate companies to limit price cuts on property. Newly built properties must be sold for no less than 15% below the original price reported to the city government, a source familiar with the matter said.”
“But tougher mortgage requirements are just part of what ails the market. China looks to curb excessive borrowing in the property sector, which has gained global attention with the debt crisis at China Evergrande Group. Some cash-strapped developers have paid contractors in property instead. These contractors, in a rush to sell it, have helped to drive prices downward.”