It’s Friday desk clearing time for this blogger. “As of Oct. 24, Zillow had 250 homes on the market in metro Phoenix that were on average priced 6.2% below what the company had paid for them, according to Greg Hague, CEO of 72Sold. Of those 250 homes, 182 had price reductions averaging $41,000 per home, Hague said. ‘They’re calling us, saying ‘Show us one of those Zillow homes they’re giving away,’ Hague said. But Hague is cautioning his clients not to move too quickly.”
“‘We’ve looked at these homes and many are still not good deals because they overpaid for the homes,’ Hague said. ‘We looked at the homes and they’re still going to have to reduce these a lot more. Many are not good buys. Overall, we are seeing in the field, Opendoor and Offerpad also reduce prices and try to get rid of inventory because the market is softening.’”
“Justin Thorstad, founder of Libertas Real Estate, said he’s seen Zillow pay $50,000 to $100,000 over a home’s value. ‘The way they assess value is through Zillow’s algorithm, which has never been accurate historically,’ Thorstad said. ‘How could it be? There is no human judgment in that.’”
“Zillow is selling more than 80% of Dallas-Fort Worth area homes at a loss, according toBusiness Insider. And the company is losing money on more than 60% of the houses it sells in its five largest metro markets. James Gaines, the longtime Texas Real Estate Research Center economist, said he’s not surprised Zillow stubbed its toe in the home flipping business. ‘I think it got out of hand with them,’ Gaines said. ‘They started buying properties faster because they had the money.’”
“Zillow Group Inc.’s roughly $1.15 billion pile of mortgage bonds tied to its home-buying business has been thrust into the spotlight. At least one Zillow mortgage bondholder briefly listed a $12 million parcel for potential sale on Wednesday, via a ‘bids wanted in competition,’ or BWIC. However, the roughly 2.3% coupon senior Zillow bond, which was on a list of four ‘prime’ residential mortgage bonds, was pulled before its scheduled bid time Wednesday morning. Such an action indicates there’s considerable uncertainly around what price Zillow’s bonds might fetch as Wall Street digests the company’s exit from home-buying.”
“Unlike many residential mortgage bonds sold under the ‘fix and flip’ umbrella, Zillow’s bonds are backed by a revolving, not fixed, pool of collateral. It may mean a quicker outcome for bond investors. That’s because if Zillow no longer buys homes to replenish the deals, its bonds will ‘turbo down quickly,’ said one investor. Also, the mortgage to Zillow is ‘non recourse,’ meaning creditors can’t come after the company’s other assets if it fails to pay, making it easier to walk away.”
“As of Nov. 1, Zillow purchased 496 homes in South Florida and sold 136 of them, according to county records. Many of these deals were flipped for a profit, but some sold at a loss. Tali Daniel of Pompano Beach-based Maxima Realty recently listed a townhouse in Davie for $230,000 when the highest sale in the community to date was $210,000. Soon after, Zillow Offers purchased a neighboring townhouse for $250,000. Within a few days, she says, every townhouse in the building had its Zestimate raised to $250,000. Her client raised the price and ultimately sold their unit for $269,000.”
“‘That helped us tremendously with the sale, but it was ridiculous,’ Daniel said. ‘They buy the property and then raise the value of all the homes nearby to match the value of what they bought … Every seller I work with sends me a screen shot of what their house is worth on Zillow. If I say no, they will go with someone else who goes on what Zillow says.’”
“Angelenos bought nearly 1,000 fewer single family homes last month compared with October 2020 — a data point that demonstrates just how hot the market got during last year’s pandemic-fueled buying spree. The numbers on signed contracts come from a Southern California report published today by appraiser Jonathan Miller. ‘We’re at the tail end of the period a year ago where the market was supercharged coming out of lockdown, and sales and inventory were in the stratosphere,’ Miller said. ‘And we’re comparing against that distorted period.’”
“The median sold price for a Napa County home in September was $800,000, according to data service Bay Area Real Estate Information Services (BAREIS). That’s actually a slight decline from August when the median sold price topped $815,000. ‘I’m not sweating it,’ said Ellen Politz with Corcoran Global Living. Yes,’It is still very competitive and the serious buyers are still out there but we always see prices soften in the fall,’ she said. Of course,’It doesn’t feel normal, because 2020 was so frenetic. I also think that a lot of buyers got really burned out with the frenzy of the market and we saw buyers kind of pull back a bit.’”
“Politz has a listing at 2708 Pine St, Napa. Priced at $695,000, the home has two bedrooms and one bath, but is on a 9,000 square foot lot. ‘It’s not 100% turnkey but in this price range that’s what you get,’ she said. As of this week she had two buyers that were seriously interested, said Politz, but no offers yet. After setting another record in August, California’s median home price declined to $808,890, down 2.3 percent from $827,940 in August.”
“China’s property sector woes could spell trouble for prestige mega-projects in London, New York, Sydney and other top cities, as the developers behind them scramble for cash. Shanghai-based Greenland Holdings has just built Sydney’s tallest residential tower, has plans to do the same in London, and has billions of dollars worth of projects in Brooklyn, Los Angeles, Paris and Toronto. The developer says it remains committed to its flagship builds, including its long-delayed, 235m-high Spire London tower, but it put part of another major London site on the market earlier in the year, and other firms are hoisting for sale signs too.”
“Evergrande and Kaisa Group, which was the first Chinese property firm to default back in 2015, are both trying to sell Hong Kong buildings to drum up desperately needed cash, while Oceanwide Holdings has just had what was supposed to be San Francisco’s tallest tower seized by disgruntled creditors. ‘I suspect, as with anything, if you’re running into liquidity issues you start to look to sell your investment properties,’ said Omotunde Lawal, head of emerging markets corporate debt at asset manager Barings, which holds some Chinese property firms’ bonds.”
“As many Chinese firms overpaid for prime overseas sites in the scramble to secure them, the question is who will buy them, Lawal added. ‘Probably they are unlikely to get cost, so I think it depends on just how desperate they get.’ If they needed to sell and could sell for a profit, then I think they would just sell,’ said Chris Gore, a central London principal at real estate firm Avison Young. ‘There wouldn’t be a problem if a few wanted to sell, but if they all suddenly wanted to exit at the same time, they couldn’t.’”
“China’s property developers are struggling to pay bills that many of their bond investors didn’t know were there in the first place. Missed payments on off-balance sheet IOUs such as high-yield consumer products, secretive loans and private bond guarantees have rocked China’s credit market in recent weeks. Dollar bondholders are struggling to know their place in the repayment queue in the event of a default, forcing a dramatic repricing of risk that’s all but frozen the primary market for developers.”
“Kaisa Group Holdings Ltd. said on Thursday it failed to meet payments on wealth products, triggering a plunge in its bonds and shares. Fantasia Holdings Group Co. defaulted on a dollar bond last month only weeks after assuring it had sufficient working capital and no liquidity problems. Its failure to pay undermined the credibility of Chinese issuers just after Bloomberg reported China Evergrande Group was on the hook for an unknown bond issued by a separate entity.”
“‘A lot of these companies have a lot of private credit,’ said Philip Tse, director and head of Hong Kong and China property research at Bocom International Holdings Co. ‘It’s very hard to say who is safe now anymore because the whole market has lost its refinancing capacity.’”
“For bondholders and minority shareholders, the lack of transparency complicates their ability to assess risk and calculate the true value of a company’s assets. It is resulting in a sell-now, ask-later mentality that has started to infect securities of higher-rated issuers with no obvious liquidity problems. ‘The Kaisa debacle suggests investors need to be aware not only of upcoming public debt payments but of obligations such as WMPs which may not be widely known,’ said Andrew Chan, an analyst at Bloomberg Intelligence.”