A report from the Pueblo Chieftain in Colorado. “‘There’s layoffs coming, I am sure,’ said Randy Nobiensky, self-employed contractor with RH Builders. ‘We are all connected, all in the same boat, and with the interest rates where they are. People are not buying, they are buckling down.’ The impact has led builders, especially spec home builders who don’t have a buyer lined up in advance of the build, to halt construction on new homes, sell down their inventory and ‘wait it out,’ Nobiensky said.”
“‘They have five, 10 or 15 homes on the market, so they are going to stop building until the inventory they have has sold,’ he explained. ‘For our community, that is 90% of us. It’s scary because that’s how we make a living. It’s not looking good, but it’s just a cycle,’ Nobiensky said. The builders with a lot of homes on hand may be trying to liquidate them with sales very soon, he explained. One thing is for certain: Pueblo is not alone in experiencing the real estate slowdown. ‘The slowdown can be seen across a multitude of categories with numbers that are a far cry from the market frenzy of a year ago,’ said Martin Schechter of the Colorado Association of Realtors.”
The Colombian in Washington. “‘Local buyers can take comfort in declining mortgage rates and sales prices. The median residential sale price fell 2.1 percent from October to $514,000. In the long term, however, broker Mike Lamb doesn’t think housing will become significantly more affordable. ‘The froth that came with that crazy market is kind of blowing off,’ he said. ‘Bottom line is, I really don’t see prices getting lower.’”
KSAT in Texas. “Prices are going down because less people are buying. ‘You’re just going to see less people buying because they have less buying power. You’re going to need more for down payment, you’re going to need more to cover your monthly expenses with your mortgage. And so we’re seeing less buying pressure. What that’s done to the market is we’ve seen prices go down, but we haven’t seen valuations go down,’ said Jack Hawthorne, CEO of Keller Williams Heritage.”
“Hawthorne added there are specific trends in the local housing market. ‘San Antonio within itself is a hot market. Now we do see the east side of San Antonio getting a lot of love as we turn more into a suburb of Austin.’”
The Charlotte Business Journal in North Carolina. “A slump in Charlotte’s housing market persisted in November. Home closings and pending contracts year over year plunged for an 11th-straight month across the 16-county region, showed Canopy Realtor Association’s report for November. ‘When we look back at 2021 housing market numbers, what we saw was an anomaly compared to previous years, which makes the year-over-year declines that we’re currently experiencing appear significant,’ said Lee Allen, Canopy’s 2022 president.”
Palo Alto Online in California. “There’s no question that short-term rentals are a booming industry in Palo Alto, which routinely boasts more than 500 listings on Airbnb and where some ‘superhosts’ control clandestine empires of more than 20 homes. But as the City Council considered on Monday clamping down on the rental market, members and residents offered different takes on whether the trend is, on the whole, beneficial or detrimental to the well-being of locals. Vice Mayor Lydia Kou, a real estate agent, said she has heard from other residents who have complained about a big charter bus coming in and offloading a large number of people into a neighboring house.”
“‘The noise levels are high, there’s numerous cars parked on the street, there’s loud music — it goes on into the night,’ Kou said, ‘And even though police are called, oftentimes it’s really hard to disperse them and the owner or the company manager are nowhere nearby.’”
“Though Palo Alto has banned rentals of fewer than 30 days, the city has struggled to enforce this rule. At the same time, the city has an agreement with Airbnb that requires the company to pay a transient-occupancy tax (also known as a hotel tax). The city may not crack down on violations, but it certainly profits from them. ‘We have this conflict of our values, if you will. We prohibit short-term rentals, we’re struggling to create housing, yet we don’t enforce our ban on short-term rentals and are collecting TOT tax,’ said council member Tom DuBois.”
From Reuters. “Private equity holdings are being sold at a record clip in an opaque secondary market, investors say, as asset managers cash out to cover losses elsewhere and rebalance portfolios. Yet since such funds are difficult to exit before maturity – usually at least three years – money managers needing to cash out use a secondary market that has lit up in the last few months. The discounts on offer suggest there is a hurry to get out, and, while total turnover is hard to gauge, because deals are negotiated privately, it is at or near record levels.”
“Then there are pension funds that are forced out by the need to comply with their caps on allocations to such investments. They are among the biggest sellers. In steadier times, buyers usually extract modest discounts against book value, but these have lately widened dramatically. ‘Usually, you would have a portfolio trading close to book value … maybe a 1 to 2% discount. Today we’re seeing these top-quality portfolios trading at double digit discounts,’ said Jan Philipp Schmitz, head of Germany and Asia at Ardian, one of the biggest players in the private-equity secondary market. ‘As a buyer, you can be very, very picky,’ he said.”
The Washington Post. “As rising interest rates shake financial markets, dangers are growing in the ‘shadow banking system,’ a network of largely unregulated institutions that provides more than half of all U.S. consumer and business credit. Facing few of the disclosure requirements of deposit-taking banks, thes so-called shadow banks binged on borrowed money and acquired assets that could be hard to sell in rocky markets, analysts said. Non-bank mortgage providers such as Quicken Loans last year wrote more than 7 out of every 10 home loans.”
“Since the 2008 crisis, persistently low rates encouraged companies to load up on borrowed funds. Business debt this year rose to almost $20 trillion, equal to more than 78 percent of the economy, up from about 66 percent or $9.5 trillion in mid-2007, according to the Fed. ‘Risk is definitely building up, unseen and unmonitored, and it’s going to surprise regulators just like AIG surprised regulators in 2008,’ said Dennis Kelleher, president of Better Markets, a nonprofit that promotes tighter regulation of the financial industry.”
CBC News in Canada. “A group of Ontario residents who purchased pre-construction homes in Brampton at the peak of the recent real estate frenzy say they’re now struggling to close on their deals because of a perfect storm of rising interest rates, falling home prices and stricter federal mortgage rules. CBC News spoke to eight people who bought homes at the Paradise Developments Valley Oak community in late 2021 or early 2022. They all said they’re having trouble getting financing due to the sudden real estate downturn.”
“First-time homebuyer Gurcharan Rehal agreed in October 2021 to pay $1.959 million, plus $90,000 in upgrades, for a single-detached home that would house himself, his wife, their two children and his mother. ‘We thought, if we live hand-to-mouth, we can still afford it,’ Rehal, an Uber driver, told CBC News. But with his closing date approaching next month, he’s so far been unable to secure a mortgage.”
“An appraisal recently estimated the home’s value at $1.7 million — more than $300,000 less than what he agreed to pay for it. On top of that, he says the mortgage rate he was pre-approved for would have required monthly payments of $5,000, but now he’s being quoted amounts between $12,000 and $15,000 per month. ‘Me and my wife, I think we haven’t slept for [the] last three months,’ said Rehal. ‘Our kids, they can see the stress on me and my wife’s face.’”
“The buyers CBC spoke to say there are around 100 people in the same situation at the development. They provided a contact list showing approximately 60 households. ‘We are not able to eat, we are not able to rest,’ said Poornima Malisetty, who purchased a detached home in the Paradise Valley Oak community with an in-law suite for $1.9 million that’s now being appraised at $1.6 million. ‘Even if we win a lottery, we will not be able to close.’”
“The buyers are asking Paradise to extend their closing dates or reduce their purchase prices, and have protested outside the developer’s sales office. John Pasalis, president of residential real estate brokerage Realosophy Realty, said the situation highlights the risks of buying pre-construction in a hot housing market. ‘They’re not buying a home. They’re signing up on a contract that obligates them to buy a home in the future at some pre-determined price,’ said Pasalis. ‘If, between the time you sign on that dotted line and the time you’re about to take the keys, prices have declined, well, you’re on the hook for that difference.’”
“Buyers who want to break their contracts risk losing their deposits. But if those buyers walk away, builders could also sue them in an effort to recover the difference between the original purchase price and the price they end up selling the home for. That’s something Paradise might do in this case. CBC viewed an email sent to one homebuyer where a lawyer for Paradise threatened legal action to recoup ‘all costs, loss and damages it may suffer as a result of your client’s failure to complete this transaction.’”
“The average sale price of a detached home in Brampton went from $1,608,894 at its peak in February to $1,197,119 in November, a decrease of more than $400,000, or 25.5 per cent, according to data from the Toronto Regional Real Estate Board (TRREB). The number of detached home sales in the city dropped to 142 from 460 in the same period. Variable mortgage rates, meanwhile, that were around 1.45 per cent one year ago have increased to around 5.45 per cent, according to Ron Butler, founder of Butler Mortgage.”
“Kevin Lee, CEO of the Canadian Home Builders Association, said inflation has raised construction and labour costs, while higher interest rates have raised the cost of financing projects. Lee said developers have very little flexibility when it comes to recouping their costs. ‘When it’s coming time to close on purchases, it’s not like there’s a whole bunch of wiggle room on the builder-developer side of things,’ Lee said. ‘Otherwise, they’re in a situation of taking big losses.’”
“‘Emotionally and financially, this gonna disturb my whole life,’ said Rehal, who’s now unsure if he’ll ever be able to buy a house in Canada.”