A report from the Mercury News in California. “Signs of a homebuilding decline are already clear. In San Francisco, for instance, several of the city’s biggest housing developments are reportedly stalled. And in Concord, a 16,000-unit megaproject still in the planning stages is on hold after the developer asked the city to approve the addition of about 3,000 more homes to offset growing costs. Dean Wehrli, a principal with John Burns Real Estate Consulting, said tens of thousands of local layoffs by tech companies such as Facebook, Twitter and Salesforce also are having a big impact on housing demand, giving developers pause. And growing concerns about a recession freezing the local real estate market later this year are only increasing the uncertainty.”
“At the same time, the slow pandemic recovery of the region’s urban cores has some developers questioning whether it makes sense to pursue projects in city centers, where rents largely haven’t returned to pre-COVID prices. ‘Why would you want to live in a downtown if it is dark and empty and boarded up?’ asked Danny Haber, chief executive of Oakland-based developer oWOW.”
Go Banking Rates. “If you’ve been feeling priced out of the market the past few years, Odest Riley Jr., CEO of WLM Realty and Co., based in Inglewood, California said this is the year that regular, hard-working buyers will be able to get back in the game. ‘First-time homebuyers will be welcomed with their FHA loans,’ he said, ‘and sellers will be handed a dose of how it feels to not be in control of the whole transaction.’”
“This would be a major change of pace from the frenzy of the past few years. ‘From April 2020 to March 2022, sellers were able to put their properties on the market, kick their feet up and wait for a buyer to beg them to accept an offer,’ he said. ‘That time is long gone.’”
The Idaho Press. “Gem County ended the year with 326 total home sales, 21.4% fewer than in 2021, and the lowest level since 2019. Of those, 240 were existing sales while 86 were new construction. Those who are able to buy in today’s market have more options to choose from and more time to shop for a home than they’ve had in years. There were 106 homes available for purchase in Gem County in December, 76.7% more than in December 2021. Of those, 49 were existing/resale homes, and 57 were new construction. Buyers who haven’t looked at new homes may want to reconsider, as some builders are offering incentives and competitive pricing to move product, and many new construction homes have features and upgrades that aren’t readily available in the existing/resale segment.”
Fox 26 Houston in Texas. “Some experts believe the housing industry is teetering towards a buyer’s market and now is the time to act. ‘If your thoughts are I want to buy a home, get out now while there are fewer buyers and sellers are feeling it. They’re anxious to sell, so they’re willing to deal,’ said Tricia Turner CEO of Tricia Turner Properties Group. ‘They’re going to deal with you less when there is less competition and more buyers.’”
Bisnow Boston in Massachusetts. “Boston’s office market had appeared to be slowly recovering in early 2022, but as economic conditions continued to worsen in the second half of the year, the level of vacancy in the city rose to a new record high. Total availability in the Boston office market reached 17.4% at the end of December, a new all-time high that surpassed the vacancy rate seen during the dot-com bust of 2001, the Great Recession and the height of the pandemic, according to Colliers’ fourth-quarter market report.”
“Boston recorded 369K SF of negative office absorption in the fourth quarter and 1.4M SF in the full year, according to CBRE’s Q4 office market report. CBRE said its measure of Boston’s availability rate rose to the highest level in 20 years at 19.9%. The amount of space on the sublease market totaled 4.7% of all office inventory, an increase of 1.8% year-over-year, according to CBRE’s report, which said this is the highest sublease rate since the end of the 2001 recession. ‘You’re seeing vacancy climb across the board, and no neighborhood has been affected more than another at this point,’ said Suzanne Duca, director of research for CBRE.”
From CTV News. “Findings released by the Canadian Real Estate Association on Monday show that compared to December 2021, the number of homes sold in Canada dropped by 39 per cent. The amount they sold for also took a 12 per cent dip during the same period. ‘Right now it feels a lot like 2019,’ says Danielle Johnson, an agent based in Dieppe, N.B. That’s when the real estate market was more balanced. There’s also the lack of urgency that many were feeling during the pandemic, meaning selling strategies have changed.”
“‘Listing properties at the fair market value, which means not what your neighbour sold for in 2020 but more what your neighbours listed at and you should still be able to list it at that price and get a good offer. Gouging is not working right now,’ says Johnson. Johnson says, while the market has levelled out, sellers are still in the driver’s seat as long as they can be patient.”
“They missed the boat on the multiple offers, so they’re missing out on the gravy, the surplus, so you can still get a good offer. Your property hasn’t gone down in value 20 per cent, not at all. It’s just that you can’t anticipate to get over and above asking because people are not fighting over that property. People have buyers fatigue, they don’t want to play that game anymore,’ Johnson says.”
The Pretoria Rekord in South Africa. “If, as the The Economist magazine predicts, a global house-price slump is on its way, based on evidence in nine ‘rich economies’, SA’s market will similarly take a beating, which will significantly impact residential property prices. As it is, according to independent property economist and property valuer firm Rode & Associates, this will be the seventh consecutive year of decline in real property values (i.e. after having deducted inflation).”
“‘The thing is, after a boom period (such as was experienced when interest rates dropped to help sustain South Africans through the pandemic), it is hard for sellers to adjust their bullish expectations downwards,’ said Erwin Rode, MD and founder of Rode & Associates.”
Free Malaysia Today. “The Johor state government is seeking a relaxation of rules for foreign residents in Malaysia as a way for developers to sell off a large stock of unsold luxury condominium units and serviced apartments in the state. ‘I hope the requirement can be relaxed a little so that genuine buyers and investors can take up these expensive serviced apartment and condominium units that are RM500,000 and above,’ Jafni Md Shukor, the executive councillor for housing and local government told reporters in Kulai. ‘A review by the minister on the MM2H (rules and conditions), would open up the space not only to overseas buyers but also to investors to buy serviced apartments here. The developers would get the cash flow, and they can work on their next development projects.’”
“Last September, former deputy finance minister Shahar Abdullah said Johor had the highest level of unsold homes amounting to 6,000 units valued at RM4.7 billion, or 17% of the national property overhang and 21% of the national value. He said almost 60% of the unsold homes were apartments, with almost 43% costing more than RM500,000 each. The Johor state government had previously proposed that Putrajaya revive the MM2H programme as part of efforts to overcome the property glut in the state.”
From ABC News. “It took COVID-19 to, briefly, drag Australia into recession after around three decades without one. Even then, the pain was fleeting, lasting only a few months for most as record-low interest rates, unprecedented money printing and government stimulus dwarfing anything before it refloated the economy. The stimulus was so large that it not only righted the ship but propelled it at a rate of knots into a boom the likes of which Australia hadn’t seen since at least the heady years of the original mining boom in the early 2000s.”
“But now comes the hangover, in the form of inflation and interest rate rises the likes of which Australia also hasn’t seen in around three decades. If the cash rate hits 3.85 per cent, as forecast by two of the four major banks, our Sydney borrower will be up for almost $5,000 a month in repayments at a mortgage rate of about 6.3 per cent. Put another way, someone with an $800,000 mortgage is likely to have to find an extra $2,000 a month to meet their new repayments, or close to $500 a week.”
“More concerning, the analysis found that 15 per cent of owner-occupiers would have negative spare cash flows — that is, after paying their mortgage they would not even have enough money left over to buy life’s essentials, such as groceries, utilities, fuel, ‘as well as a small amount of discretionary expenditure.’ The Reserve Bank did its own modelling on this, published in October’s Financial Stability Review. The RBA concluded: ‘This latter group of (typically low-income, highly indebted) households would likely be forced to draw down on their stocks of saving in order to continue to meet their loan payments and essential living expenses.’ But here’s the kicker: ‘Some may have a limited ability to do this, given that low-income and highly indebted households typically have lower savings buffers.’”
“And there’s another risk to the Reserve Bank’s sanguine conclusion about the outlook for Australia. It is assuming that two years’ of savings buffer will be enough, and its modelling is based on rates peaking at 3.6 per cent. Implicit in this is an assumption that inflation will ease reasonably quickly without rates having to go too much higher than they are now. Graham Andersen, a financial tech consultant with decades of experience in the mortgage sector, believes that is a risky assumption to make.”
“‘The banks and regulators are hoping, not knowing, that interest rates will drop enough to solve the problem,’ he told me. ‘In the past, kicking the can down the road has worked because of low inflation and falling interest rates. It’s not a solution for 2023.’ He thinks that not only are a lot of individuals about to hit severe financial trouble, but the banks may be as well. ‘My view is that there will be enough who won’t be able to refinance and won’t be able to service their loans to become a problem for the banks.’”
“If we go back to the Reserve Bank’s modelling, the 15 per cent of owner-occupiers who will fall into negative cash flow equates to around half a million households. Even if just one in five of those ended up being unable to pay their mortgage, that would be more than 100,000 households defaulting or being forced to sell their home. Then the can might finally reach the end of the road.”