A weekend topic starting with Yahoo Finance. “I was talking to a high-profile Wall Street strategist the other day who told me she and her husband were house-hunting in the Hamptons. They saw a place they liked, but the asking price was too high. ‘It was as if the downturn in the stock market hadn’t happened,’ the strategist related. ‘I told the broker: ‘I’m paying what this house was worth back in February 2020, because that’s what it’s worth now.’”
“A provocative take, and one worth considering. The strategist is suggesting that a surge in the price of everything from stocks to crypto to real estate was a one-off that came and is now gone. ‘We believe what’s gone on in the market in the first six months of this year, and what will go on for maybe another year to year and a half, is bear market punishment for the ridiculous financial euphoria,’ says Bill Smead, chairman of Smead Capital Management.”
The New Herald in Michigan. “Doris LaBeau, broker at Re-Max Masters in Flat Rock and a 49-year real estate veteran, said the market for home sales is resetting, with economic conditions and social forces shaping the changes. ‘Those who are just starting will have more patience, maybe, because they haven’t been in the battle to date. I do believe there will be sellers having remorse because they didn’t jump on the market earlier, so there may be increased supply coming throughout the summer.’”
The Denver Channel in Colorado. “The number of homes and condos up for sale in the Denver metro rose by nearly two-thirds from May to June and the number of properties available on the market grew by nearly twice from a year ago, according to the Denver Metro Association of Realtors. ‘I think we’ll continue to see more inventory, prices slowing, higher days in the MLS and more adjustments with that,’ Abrams told Denver7, adding buyers have more negotiating power at the moment with the way things are going.”
“For those selling in this market? ‘As a seller, you need to reset those expectations because you’re no longer shooting for the moon on the top of the price you can get, you have to come back to reality a little bit,’ Abrams said.”
The Ahwatukee Foothills News in Arizona. “The Valley’s leading analyst of the Phoenix Metro housing market last week predicted that the entire region could see a balanced market – with supply meeting demand – by September. Buckeye is almost there, according to the Cromford Report, and likely will be the first to achieve this month what the Valley hasn’t seen in more than three years anywhere. ‘Queen Creek and Maricopa are about one week behind Buckeye. We then have Cave Creek, Chandler, Gilbert, Peoria, Phoenix, Surprise and Tempe all in a similar condition. Their markets are cooling rapidly and look likely to move into the balance zone within a matter of weeks rather than months. Unless the current trends change, we could be in a buyer’s market across much of Central Arizona by the beginning of September.’”
“While a sudden flood of new listings might be welcome by prospective buyers, the Cromford Report said they may be in for more heartache – and that sellers will be grabbing their crying towels along with them. ‘The last two months have been dismal for the Greater Phoenix housing market, with demand fading sharply and supply growing at one of the fastest paces we have ever witnessed,’ the Cromford Report said. ‘Either trend would have been negative but with both coming together, we have had a very chilly wind blowing through the market.’”
“‘For many weeks, we have been looking for some convincing sign of the relaxation of one or both of these trends,’ it continued. ‘We have not found any. Instead, over the last week, the situation has turned significantly worse, at least from a seller’s viewpoint. And it is worse from both a demand and a supply perspective.’”
“‘We do not pretend to know how much prices will fall in numeric or percentage terms, but the latest data suggests that it is already impossible for home prices to rise under the current market conditions,’ it said. ‘As people get more anxious to dispose of their housing assets, price cuts are growing in number and size. The very top and bottom of the market are least affected, but the mid-range, where the vast majority of transactions occur, is experiencing a big freeze. ‘When a buyer’s strike and a seller’s stampede occur at the same time, the market stalls in mid-flight. A price correction becomes inevitable. The Federal Reserve has stated that they want to see a ‘reset in the housing market,’ and it looks increasingly likely that their wish will come true.’”
From Mansion Global. “Many U.S. housing markets are witnessing a slowdown in response to rising mortgage rates and woes on Wall Street , and northern California has seen the biggest impact, according to Redfin. Out of the top 10 markets that have cooled the fastest over the three months from February to May, five were in northern California, including San Jose, Oakland, San Francisco, Sacramento and Stockton—and three of those five in the Bay Area, Redfin said.”
“‘The housing market has changed drastically in the last month because higher rates make homes even more expensive than they used to be,’ Joanna Rose, a San Francisco Redfin agent, said in the report. ‘At the same time, fewer people can afford pricey homes because of the volatile stock market.’”
“San Jose had the steepest decline in homebuyer demand, resulting in an inventory pileup by the end of May. The number of homes for sale was 10% higher compared to May 2021, while in February, supply was down 43%, according to Redfin. Additionally, pending sales across the metro were down 21.3%. The share of homes sold in two weeks was down 5% in May, compared to a 22% increase in February, the report said.”
“Outside of northern California, other markets that have cooled faster than anywhere else in the U.S. include Seattle; Boise, Idaho; Denver; San Diego, California; and Tacoma, Washington.”
The Dana Point Times in California. “Question: Dear Guru, is now a good time to sell my house? Answer: Probably not. Even the luxury market, which usually produces all-cash sales, has cooled dramatically because of stock market volatility. Because of the uncertainty in the market, I would wait to list your home in the first quarter unless there is a more urgent need. Residential real estate values peaked in March.”
From Pique News Magazine in Canada. “After a fevered couple years in Whistler’s always-hot real estate market, things appear to have cooled down somewhat over the past few month. According to the Whistler Listing Service, active listings have continued to climb this year, hitting 220 last month, up from 126 in January. (In a sign of the shifting market, Mitchell said Engel & Volkers has recently added a second whiteboard to their office where they track active listings.) Sales have cooled off, too, with 29 completed transactions last month, less than half of the sales in January and well below last year’s high of 113 sales, recorded in March 2021. Part of that is fuelled by the wider economic uncertainty that has already pushed property prices down in some of Canada’s bubbliest markets.”
“‘Anything that is a well-priced, attractive property where there is a limited amount of it is still getting good interest. Others can sit and wait. Where there’s multiple properties in a complex and buyers can re-evaluate and there’s no sense of urgency, that’s the difference,’ said Ron Mitchell, managing broker at Engel & Volkers Whistler.”
The Maple Ridge News in Canada. “The real estate market is rapidly changing in Maple Ridge. The latest stats from the Real Estate Board of Greater Vancouver show house sales are about half of what they were this time last year. Through April, May, and June of 2021 there were 530 houses sold in Maple Ridge and Pitt Meadows. This year, through the same three months there were 260 – a drop of 51 per cent. ‘It couldn’t last – it was not sustainable,’ said longtime Maple Ridge realtor Jan Hickman of last year’s record-setting pace.”
“She said buyers now have more time to make an offer, and can look at more options. She’s generally not seeing the multiple offers, and there is less chance of buyer’s making a commitment they regret, she said. ‘It’s a better market for everyone,’ she said. ‘Buyers are taking a little longer to make up their minds, and they have choices.’”
“Prices have also fallen in Maple Ridge and Pitt Meadows over the past three months, with the benchmark price of a house in Maple Ridge dropping 7.1 per cent to $1.38 million, and Pitt Meadows houses down 9.7 per cent to $1.39 million compared with the same time frame in 2021.”
The Telegraph. “When Dominic Ahern moved into his east London flat with his girlfriend in 2015, he thought he had made it. The then 33-year-old accountant had already been living – and renting – for 10 years in the city, patiently saving up the deposit for a £352,500 one-bed flat which they proudly called their own. At that time there were few better investments to be made anywhere in Britain – if not the world – than a London flat.”
“But not any longer. According to shock figures published this week by respected business news agency Bloomberg, the London flat is rapidly falling out of favour. The study, which is based on an analysis of UK Land Registry data, claims the value of London apartments has plummeted by 11 per cent since 2020 with the median sale now less than £400,000. Prices have fallen particularly in areas where newbuild developments are most prevalent, such as Tower Hamlets, Greenwich and Lambeth.”
“The Chinese developer behind the flagship Nine Elms project in Vauxhall, has recently been forced to sell its 50 per cent stake at a huge loss of around £187 million following disappointing demand for flats. Another Chinese-funded venture to develop homes and offices on the banks of the Thames and described, hopefully, as ‘East London’s answer to Venice’ has similarly faltered. Even the most luxurious developments are suffering. In May, the Telegraph reported that One Bishopsgate Plaza, a Singapore-funded venture where flats are priced between £1.3-£4.5 million, had secured buyers for only 55 of 160 apartments since marketing started in November 2019.”
“Already flats comprise more than half of London’s entire housing stock, more than double the proportion of any other city across the UK. So what is the future for these gleaming empty spires adorning the skyline, and the people left behind? The first inkling Dominic Ahern had that his London flat might not be the investment he envisaged was in early 2019 when he tried to sell. ‘We were there from the first time we started dating right through to getting married and having a baby so there is a sentimental attachment to the place,’ he says. ‘The hope would be that it doesn’t bankrupt us.’”
From News.com.au. “Australian governments’ multi-billion dollar efforts to help first homebuyers enter the property market have been hampered by a glaring flaw, which has only pushed up house prices and left those in greatest need of assistance at an even worse disadvantage. That was the key takeaway from fresh research published by the Australian Housing and Urban Research Institute this week. They found that Australia’s first homebuyer policies were ‘extremely one-sided,’ with the overwhelming majority of programs focusing on demand instead of supply.”
“And by pumping up demand without simultaneously addressing supply, those programs have caused higher prices. ‘When 21st century Australian governments assist first homebuyers, they do so with demand-side schemes that feed further house price increases – and in turn spur calls for more help,’ the study’s authors write. ‘Over the past 30 years, in tune with the dominant neoliberal mode of governance, the focus has shifted almost entirely to demand-side assistance.’”
“‘It is ‘as if increase of appetite had grown by what it fed on’, as Hamlet said of his parents’ affection for one another; a millennial Hamlet might say the same of his baby boomer parents’ proclivity for buying houses.’”
The Financial Post. “The run-up in inflation over the past year surprised central banks and consistently outstripped economists’ forecasts. I think it’s safe to say the reasons for central banks’ misjudgement of the recent surge in prices include: the ascension of academic over practical knowledge of the economy, the cult of celebrity central bankers and a growing trend to ‘groupthink’ in central banks, especially in de-emphasizing the money supply’s role in the economy.”
“Economists’ domination of central banks is suffocating. One former Fed governor told Fed historian Peter Conti-Brown that ‘Without a PhD in economics, the Fed’s staff will run technical rings around you.’ current Fed Chair Jerome Powell admits that being surrounded by hundreds of PhD economists is intimidating, complaining that ‘they talk to me like I’m a golden retriever.’”
The Associated Press. “Shinzo Abe often framed his economic vision as a policy bundle of ‘three arrows’: an integration of fiscal stimulus, loose money and structural reform that together would snap Japan out of its prolonged stagnation. In doing so, the former prime minister drew on the Japanese folk story of three brothers, each given an arrow. Separately, their arrows could be easily snapped; together, the arrows – and the brothers – were unbreakable.”
“”Mr. Abe, who was assassinated on Friday, meant the three-arrows reference as an illustration of the irrefutable logic of what came to be known as Abenomics. That parable did turn out to be strikingly relevant, but not in the way he would have hoped.”
“Two of his arrows, launched in 2013, struck home. Massive fiscal stimulus did boost Japan’s growth. Negative interest rates and quantitative easing finally vanquished the persistent deflation brought on by the real estate collapse of the 1990s. But the third arrow fell short, with the Abe government failing to fully counteract the productivity-sapping effects of an aging population. And, as the parable implies, two out of three arrows are not enough – a lesson other countries, including Canada, should heed.”
“According to David Edgington, a professor emeritus at the University of British Columbia and former director of the school’s Centre for Japanese Research, Mr. Abe’s policies did not succeed in pushing up real wages, as deflation gave way to rising prices. ‘While inflation ticked up a bit, most of the extra cash put into government bonds by the Bank of Japan went into the stock market,’ he said, adding that the country became a much more unequal society under Abenomics.”
“The official retirement age for government employees will start to gradually rise to 65 from 60 by 2031, starting next year. The retirement age for private-sector workers is effectively being moved up to 70, and there are plans to pare back benefits for those aged 60 to 64. All of those changes are happening relatively quickly. Workers in their 50s and 60s, not just those at the start of their working life, are seeing the terms of their retirement rewritten. That could be the most fundamental lesson from Abenomics: The longer the delay, the greater the pain.”