A report from CNBC. “‘It is definitely a hard landing for housing,’ said one homebuilder in the Denver area. ‘There’s this cliff that’s happening in January,’ said Gene Myers, CEO of Thrive Homebuilders in the Denver area. He predicted that the market will be ‘ugly’ by the start of next year. ‘Any hope of a soft landing really evaporated last spring, when it became so clear that our customers who are accustomed to such low mortgage rates just were going to go on strike. I think we’re seeing the most abrupt change in the market in my career, and I’ve been around a while,’ he said. ‘I’ve never seen sales just turn off, which for us happened in May.’”
“Sheryl Palmer, CEO of Arizona-based homebuilder Taylor Morrison, said entry-level buyers are clearly struggling. But she also admitted that higher-end buyers are not flooding in the door either anymore. ‘When we look at our move-up and our resort lifestyle buyers they absolutely can still afford to buy, but emotionally, you need to have the confidence,’ Palmer said. ‘Even at today’s rates, both our FHA and conventional buyers have a great deal of room, but being able to afford it doesn’t mean they have the confidence, given everything that’s going on in the economy today.’”
“Myers said he has heard talk of a 20% drop in prices for new construction. ‘And it sounds really harsh, but when we were looking back, because our construction costs have gone up so rapidly, we only have to dial back a little over a year to be 20% less than we are now,’ Myers said. ‘So to think about, well, we’re just going to go back to 2020 doesn’t sound nearly as crazy as a 20% price correction. But I think it definitely has to happen if we’re going to get velocity back.’”
The Aspen Times in Colorado. “By now, experts, buyers, sellers, and prognosticators agree we are in new territory — coming as weather predicted, if not already upon us. The numbers clearly show a dip in demand and sales activity around June the first as the Fed raised rates, and new listings came to market at stupid numbers. Buyers pumped the brakes, and summer offerings either sat or prices reduced. Dive into the data for Aspen, Snowmass Village, and the greater Roaring Fork Valley, and you’ll find shock and awe but also a few surprises. Year-to-date homes sales from Aspen to Carbondale are down dramatically, from 35% lower in Carbondale to 58% fewer in Aspen.”
“On the other hand, sales prices were off the charts at the first six months of 2022. The average price of a single-family home in Aspen was up 40%; condos and townhomes were even higher at 60%. That said, the chart does show those stunning numbers finally leveling off across the board. And, I can tell you I’ve not seen as many price reductions since the crash. I expect even more in the next six months.”
The Sun Sentinel. “As the housing market has cooled considerably, sellers are now wrestling with whether to sell their homes as soon as possible or hold off on selling. ‘It does appear that prices will come down a lot more because people are cutting their asking price,’ said Eli Beracha, director of the Hollo School of Real Estate at Florida International University. For Dr. Imran Mirza, the decision to put his home up for sale was an easy one. He saw the bidding wars around him and properties flying off the market, and decided to capitalize on South Florida’s record boom before a possible correction took place.”
“He finally closed on his five-bedroom, five—and-a-half bathroom house in Boynton Beach about a week ago for $1.4 million, a slight down adjustment from the price he wanted — $1.895 million. It was still a significant profit from the $900,000 he paid for the home in 2017. There are ‘these kind of profits where people live in their homes for 20 years, and they don’t see these kind of profits,’ he noted.”
The Tampa Bay Times in Florida. “A home buying frenzy triggered by historically low mortgage rates helped elevate Tampa Bay from a hidden gem to a real estate hot spot over the past two years. But now that rates have shot back up, experts say buyers are finally hitting the brakes. Now may be a good time to find a deal, especially if you’re able to buy in cash said Rachel Sartain Tenpenny from YES-Homes. Now that there’s less competition, buyers have more room to negotiate. ‘We’re starting to see the list prices come down but we’re not seeing the home values come down,’ she said.”
“For average buyers who still want to move, Lei Wedge, a professor of finance at the University of South Florida said their best bet is to look for new construction. ‘Builders are desperate to sell right now so many of them are subsidizing mortgages and dropping their prices,’ she said.”
Virginia Business. “Charlottesville Realtor Denise Ramey has a client who put in multiple bids for houses over the summer, when the market was booming, but they were all turned down. Now, with mortgage rates topping 7% for the first time in more than 20 years, he’s not sure if he will buy a house at all — or whether he might look outside Virginia to markets where he can get more bang for his buck. ‘That was a real eye opener for me,’ said Ramey, the president of Virginia Realtors. ‘I expected he would be reducing the price range, but I did not anticipate the level of frustration and negativity he expressed today.’”
“Normally, at this time of year, she would have 10 to 15 houses under contract to close in December. But not this year. ‘We’ve had another great year, but what I’m seeing is, it wasn’t even a slowdown, it was a ‘hit the brakes,’ she said. ‘It will be interesting to see what plays out. It really is that crazy of a market right now, where it’s very transitional.’”
The Hollywood Reporter in California. “A tight mayoral race will not be the only thing getting attention on Angeleno ballots on Nov. 8. Measure ULA, dubbed ‘the mansion tax,’ will also be up for a vote in the city. To put the tax in context, for a house like the one Shonda Rhimes sold earlier this year in Hancock Park, there would be a $1.155 million tax on the $21 million sale; for Ashley Tisdale, who sold in the Hollywood Hills for $5.9 million, a $236,000 tax. ‘Right now we’re dealing with multiple issues in real estate: a declining market, high-interest rates and high inflation,’ says Compass agent Aaron Kirkman. ‘The last thing we need is more imposed taxes in an industry that’s already struggling.’”
From Fortune. “Fast-forward to October, and that investor mania has been replaced by investor panic. To Redfin CEO Glenn Kelman, the Pandemic Housing Boom’s investor frenzy helps to explain why home prices are correcting faster this time around. Kelman is insinuating that real estate investors, including Redfin’s iBuyer business, helped to drive home prices up faster during the boom and will push prices down faster during the correction.”
“‘My take is that because builders and iBuyers account for more inventory, that leads to a faster correction. We’re one of them, we’re an iBuyer,’ Kelman says. ‘We notice immediately when fewer people are on our website and fewer signing up for tours…we’re sitting on $350 million worth of homes for sale that we bought with our own money, or worse bought with borrowed money. And what we always told investors is that we would protect our balance sheet by acting quickly. We don’t have hope as a strategy. We immediately started marking down things.’”
“‘As soon as demand weakened, we were marking properties down, and that drives prices down. Every other home for sale in a neighborhood where we marked the listing down now has a comparable sale that every buyer is going to know about and talk about,’ Kelman says. Look no further than this property in North Las Vegas. In May, Opendoor bought the home for $540,800. Just weeks later, Opendoor listed it for sale in July at $581,000. But Opendoor was too late: The Las Vegas housing market had already rolled over. Fast-forward to October, and the listing just got taken off the market after a series of price cuts brought its list price to $472,000.”
“‘I think that the religion people had from 1946 to 2008, that housing prices always go up, is dead. My parents believed that it was literally inconceivable for [home] prices to go down,’ Kelman says. But that housing ‘religion’ got broken, he says, by the 2008 crash. ‘So folks respond [now] to that [the correction] with almost PTSD, and they pull back much more quickly.’”
The Toronto Star in Canada. “Pre-construction condo sales plunged 79 per cent year over year in the third quarter amid soaring interest rates and construction costs that sent Toronto region developers to join their customers on the market’s sidelines. Sixty-seven per cent of developments, 189 projects with available units, sold no condos in the third quarter, said development tracking market research firm Urbanation on Monday. It calls into question the viability of a some projects, particularly those that launched a while ago and still haven’t met their sales targets to qualify for construction financing, said Urbanation president Shaun Hildebrand.”
“For now there’s about a 20 per cent premium buyers pay on a brand new unit. But if the gap between new and resale doesn’t narrow, that could lower the price of presale condos, said Hildebrand. ‘With more and more higher priced projects coming to completion and resale prices declining, by the second half of next year, if resale prices don’t see any improvement, basically these presale units will be worth less than what the buyer paid in pre-construction,’ he said.”
“That could lead to a glut in assignment sales — those are sales by investors who bought resale construction units but then sell them before the building is completed. It’s a trend that has already begun, but because assignment sales aren’t listed on the real estate industry’s Multiple Listings Service (MLS), it’s not clear how many of those are already on the market.”
The Aldergrove Star. “The word ‘glut’ isn’t one you associate with housing construction in Canada, but I saw it in print the other day, a prediction of the near future state of the market. I’m not sure it’s entirely right, but it’s worth looking at this question – are we finally building enough housing in Canada? Or even… too much? That depends on how you interpret the Canada Mortgage and Housing statistics. It’ll be no surprise to anyone living in the Lower Mainland that there’s a lot of housing being built, especially in suburbs like Langley, Surrey, Maple Ridge, and Abbotsford.”
“And over and over again, you will see pundits saying that Canada only builds about 200,000 homes a year, far fewer than we need. That last part, though? It’s not true. The number of homes being completed for years did hover around 200,000. But it’s been rising – in 2020 it was 222,670 – but that’s far below federal goals of building 400,000 homes a year. So how are we on the verge of a potential glut in homes? Total housing under construction at the start of 2019 – 250,510 units. 2020 – 270,202 units. 2021 – 302,729 units. 2022 – 337,459 units. As of the most recent data, for the third quarter of this year, that number stood at 367,977 units, a record.”
“But now, we’re seeing a lot of those homes, which were planned and designed and permitted several years ago, finally finish construction. And there’s more to come – the CMHC’s most recent data says the seasonally adjusted rate of home starts this year is hovering just below 300,000 for September.”
From Coventry Live. “The Bank of England said mortgage approvals for house purchases decreased from 74,400 in August to 66,800 in September. Alice Haine at investment platform Bestinvest, said: ‘The panic in the market in the first three weeks of September might have been driven by rising interest rate expectations – with the Bank of England increasing the base rate by 50 basis points on September 22 to 2.25% – but the situation escalated dramatically when former chancellor Kwasi Kwarteng unveiled his radical fiscal plan of unfunded tax cuts a day later. The mini-budget spooked the financial markets.’ Ms Haine said the ‘mortgage pain is far from over’ and that many people with deals expiring soon will have difficult decisions to make.”
“Karen Noye, a mortgage expert at Quilter, said: ‘Later this week, the Bank of England will likely once again ratchet interest rates up to try and tame inflation.’ She added that increasing mortgage rates and energy bills could ‘make some homes simply unaffordable for people to stay in this winter.’”
The Sydney Morning Herald. “Reserve Bank governor Philip Lowe fears Australians could find themselves lost in one of Dante’s circles of hell – the one named inflation. Hours after inflicting a little more pain on home buyers, business operators and ordinary households by lifting the official cash rate for a record seventh consecutive month, Lowe was in Tasmania explaining the RBA’s decision. Lowe revealed the bank’s board members had openly discussed how family budgets were dealing with the previous six rate rises, which were mixing with high petrol prices, skyrocketing grocery bills and soon-to-be-soaring power costs.”
“But before his crowd started to believe the bank was about to seek absolution for its past mis-deeds, Lowe effectively warned them to abandon all hope of financial relief: the RBA is not yet finished with rate rises. Like a preacher, Lowe described inflation in terms a sinner could easily understand. ‘It is a scourge. High inflation devalues your savings. It worsens inequality in our society and it undermines our living standards. It hurts us all by impairing the functioning of our economy,’ he said.”
“He went on to note that if the bank did not increase rates, as some have suggested they should not, the circles of hell would slowly constrict the country. ‘If this were to happen, the evil of inflation would be with us for longer and the eventual increase in interest rates needed to bring it down would be greater,’ he said. ‘This would increase the risk of a severe recession and a sharp rise in unemployment. It would be much better to avoid such a costly outcome and so we have acted strongly to avoid it.’”
“The only ray of divinity amongst all this is the expectation that unemployment will only gradually increase through to 2024. Yet that relies on everything going right. As Lowe noted, the bank is trying to walk a difficult trail and ‘we could be knocked off that narrow path.’ Off that path is a world of high unemployment, business bankruptcy, households unable to make ends meet, mortgagors paying off loans worth more than their homes. That’s a hell in anyone’s language.”