A report from Fox Business. “A year ago, business was booming for Touchstone Living Inc. The Nevada builder had a list of 639 qualified buyers who wanted homes in its development about 15 miles north of the Las Vegas Strip. Today, that list has shriveled to about 30. Owner Tom McCormick said, ‘I’ve never seen it change this fast,’ referring to the rapid decline in sales. Now that new-home sales have slowed, the risk of a glut is rising. About 800,000 single-family homes were under construction in September, on a seasonally adjusted basis, up 11% from a year earlier and 52% from September 2019, according to the Census Bureau. Many of those homes were started before the market slowed.”
“Some are already sold, but not all. In an effort to lure reluctant buyers or keep others from canceling, builders are paying upfront fees to mortgage lenders to reduce buyers’ mortgage rates and offering other incentives, such as long-term rate locks. Builders also are canceling deals to acquire land. There was an 8.1-month supply of new homes on the market at the end of August, according to the Census Bureau.”
“In September, Touchstone decided to start renting out some of its properties because it expects home-buying demand to stay low. ‘People still want to own homes, but they simply can’t afford it,’ Mr. McCormick said. ‘So the business plan has to change.’”
From Deseret News. “Since they peaked in May, home values in certain local markets have shifted downward — and areas with the biggest shifts are concentrated in the West, largely in states that went wild during the pandemic housing frenzy: California, Arizona, Nevada, Colorado, Idaho and, yes, Utah. Some counties on the south end of the state are seeing year-over-year price declines. That includes Washington County, home to booming St. George, down -3.7%. Kane County is down -12.9% and San Juan County is down -6.7%.”
Fort Morgan Times in Colorado. “These days, real estate prices in Durango, as in so many Western towns, have outrun most workers’ ability to buy or even rent modest digs. Candace McNatt, who works as an operating room nurse, tells the story of two clinical experts at the hospital, each making $160,000, who ‘have looked for a house forever. And he’s like, I refuse to pay $1 million for a house.’ In the end, ‘they paid over $1 million and are now house poor.’”
From Mission Local in California. “When Simon and Amy Jansuk in 2018 won the San Francisco housing lottery for a Below Market Rate unit, it well and truly felt like winning the lottery. They landed the unit for $460,000 and, just like that,atel felt much the same way. He beat out hundreds of lottery applicants to win the right to buy a one-bedroom unit at Mint Plaza for around $213,000. But that was then and this is now. Both the Jansuks, Patel, and other owners of BMR units contacted by Mission Local said they were broadsided when they learned of a 2019 policy change enacted by the Mayor’s Office of Housing and Community Development. They are now being encouraged to price and sell their units at a loss — in some cases, at a staggering loss.”
“For the Jansuk’s, Patel and others, their Gregor Samsa of a home has certainly metamorphosed into a giant cockroach. It’s an especially vexing one for the Jansuks. Their ‘affordable price’ allotted to them by the Mayor’s Office of Housing is $386,263 — some $74,000 less than they paid for their home just four years prior. ‘It’s a visceral response. It’s crushing,’ says Amy Jansuk. ‘The fact they’re asking us to start at that price and then negotiate with people is exhausting. It feels like everything we worked for is starting to deteriorate.’”
“‘There’s no question about it: This screws the sellers,’ sums up Supervisor Myrna Melgar, herself an alumna of the Mayor’s Office of Housing. ‘What they are doing is ensuring these units are affordable — but instead of doing it on the public dime, they are doing it at the expense of the family who is selling.’”
Bisnow Los Angeles in California. “ACORE Capital Managing Director of Capital Markets and Syndications Brent Wagner recounted an investment committee call the morning of the event discussing a potential deal on the Westside of LA. ‘That appraisal is 2 months old,’ Wagner said. ‘Well, it’s useless. There are no comps taking place,’ he said, which made it more difficult to figure out how much they should be paying. Additionally, several panelists said banks are largely at a standstill, having paused their commercial real estate lending. ‘It’s a massive slap in the face for everybody to get comfortable with that new environment,’ Wagner said.”
“‘If you’re borrowing money, and all of us do, your fixed rate is no longer at 5%, it’s at 7%,’ said Sonnenblick Development Chairman Bob Sonnenblick. ‘That has to have an effect on the price of any kind of existing asset, but it hasn’t yet repriced. So the market is kind of stalled right now. Once sellers understand that us buyers who are financing things have a higher cost of funds, I think you’re gonna see prices come down.’ That is a good thing, Sonnenblick said, calling the prices for LA real estate ‘insane.’”
“Meridian Capital Senior Managing Director Seth Grossman said prices were already dropping. ‘Every single deal I have in the pipeline right now that’s been in process for more than six or eight weeks has had not one but multiple price adjustments,’ Grossman said. ‘I had a deal close last week that had five different price adjustments that occurred since March.’”
Times of San Diego in California. “My husband and I bought and sold small apartment buildings for more than 47 years. Recently we sold our last two apartment buildings. We are done with owning and managing multi-family housing. Over the past few years, in the eyes of some, owning apartments became synonymous with being a greedy landlord. Local, state and federal legislators felt they needed to protect vulnerable tenants from their onerous landlords.”
“By now, we had been retired from our full-time jobs for several years. We were just a small ‘mom and pop’ operation. We had hoped that owning an apartment building would help to build a little nest egg to help us through our retirement years, and maybe even enable us to retire a little earlier. However, with the rents we charged and the expenses we paid, retiring early was just a pipe dream. How many other responsible apartments owners have decided to call it quits under the burden of unfunded and unreasonable government mandates. And who will be left?”
The Globe and Mail. “A short burst of activity in the Toronto-area real estate market was sputtering by the end of September. The market’s foray into uncharted territory is leading sellers to try some eyebrow-raising gambits, says Andre Kutyan, broker with Harvey Kalles Real Estate. He points to a four-bedroom house he listed for sale in late spring with an asking price of $7.75-million. When the property in an upscale midtown neighbourhood didn’t sell after several weeks, the owners agreed to reduce the asking price to $7.249-million.”
“The home still didn’t draw a buyer so the sellers informed Mr. Kutyan they’d like to change the price again – back to $7.75-million. Mr. Kutyan pointed out they had already tried that price – what was their rationale? ‘We don’t want to ruin the reputation of our listing,’ they said. The owners are in no rush to sell and they figure they are unlikely to strike a deal this fall. They are positioning the property to relist in the spring of 2023. They want the history to show the most recent asking price as $7.75-million so a future buyer won’t know they tried a lower price without success.”
“Mr. Kutyan points out that realtors can provide a complete listing and sales history to any client who requests the records. ‘You’re not fooling anyone,’ he says. ‘They’re hoping for some sucker who’s not going to find the information.’”
From Reuters. “Yields on UK government bonds, or gilts, drive swap rates and hence dictate how much lenders pay in the money markets. Fixed rates have jumped. Average two-year and five-year fixed rates hit 6.65% and 6.51% on Thursday, according to Moneyfacts, the highest since 2008. One year ago, the average two-year rate was 2.25%. Josh Hardy, a 32-year-old landscape gardener and economics student, was in the process of reserving a new-build house on the outskirts of Exeter, a prosperous cathedral city in south west England, when interest rates edged higher.”
“‘Anywhere between three to maybe four and a half percent, we could just about stomach,’ he said. ‘But the mini-budget sent the gilt market into chaos. Banks just began pulling mortgage products left, right and centre.’ His broker sourced a two-year fixed rate of 6.39%. ‘Essentially that has taken our prospective mortgage from 850 pounds a month as we were looking at it, to just short of 1,250,’ he said. ‘That was the final nail in the coffin. The idea of taking on a six, a six and a half percent mortgage and then sitting for however long in negative equity is just a scary prospect for a first time buyer.’ He pulled out.”
“With house prices outstripping wage growth, an average full-time worker in England had to spend more than nine times their annual salary on a home, more than double the level of just over four times in 2000, ONS data shows.”
The Daily Monitor on Uganda. “Majority of borrowers default on loans because they divert the money to other purposes, make wrong business decisions, or simply do not scrutinise the terms of offer, bank executives have said. The comments follow an enterprise story published yesterday which showed the collaterals advertised in this newspaper for sale between January-June, this year, doubled the numbers auctioned within a similar period in 2019. The findings illuminated the rising problem of loan default, leading to borrowers losing property including family homes, to lenders, among them financial institutions, loan sharks and savings and credit cooperatives (Saccos).”
“Mr Micheal Mugabi, the managing director of Housing Finance Bank, said loans go bad from the onset when the intentions for use have not been made clear or borrowers divert the money. ‘The number one cause for defaults is a diversion. Loans become bad from the moment of creation,’ Mr Mugabi said, adding, ‘[Therefore], the purpose of funds should be made clear from the onset so that discipline is observed and the money utilised for intended use.’”
“In interviews for yesterday’s story, some defaulters accused lenders of being aggressive and hard-nosed while pursuing recovery. Mr Kenneth Agutamba, the corporate communications manager at Stanbic Bank Uganda, in a rejoinder noted that ‘the action of taking possession of a mortgaged property when the borrower fails to keep up their mortgage payments is defined by the laws of Uganda. ‘The process can continue until an appropriate buyer is found. Foreclosure is not a desired process by the bank and customer because it is a ‘forced sale’, [and] in most cases the lender will lose money,’ he said.”
“A private money lender who preferred anonymity to protect their business, told this newspaper that many individuals who borrowed money defaulted, and selling off the collateral is the only feasible way to recover the finances. He, however, said some borrowers acquire loans for projects with no returns. ‘Some people borrow to pay another loan, others for weddings. Someone has called me to lend them Shs10m for a wedding and attached their car. When people borrow, they should have discipline and take in what they can chew. You get excited that you are getting a loan in 3 hours, but what are the measures?’ the lender said, referring to inadequate due diligence by borrowers.”