A report from Axios on Arizona. “A New York Post article reporting that Goldman Sachs has forecast a 2008-level housing crash in Phoenix sent ripples through the Valley’s real estate industry last week.The median Phoenix home sale price, which was $410,000 last month, has come down significantly since its May peak of $470,000, according to Redfin. The median home price in Phoenix increased almost 60% from $300,000 in March 2020 to its May 2022 peak. ‘The rate of increase has declined, but it doesn’t mean that the values are falling,’ Mark Stapp, executive director of the Master of Real Estate Development program at ASU, says.”
From Bloomberg. “Dan Noma, an Arizona real estate industry fixture, prospered in the boom times. His brokerage, Venture REI, made its name helping institutional buyers purchase rental properties. In December, Noma networked among the 2,000 people attending an annual real estate conference in Scottsdale. Single-family landlords, bankers and industry vendors gathered to discuss the state of the industry. The mood was subdued. Builders circulated lists of thousands of homes, signaling readiness to accept discounts on bulk deals. But, licking their wounds, the big investors weren’t biting. ‘They need to see prices comes down,’ Noma said.”
“Laurie Tayrien, a former schoolteacher, and her husband love the new market. In November the Tayriens paid $485,000 for what they call ‘their forever home.’ In June the seller, Opendoor, had paid $646,800. That’s a 25% loss in just five months. ‘They rode a wave, and it’s crashing on them,’ Laurie says. ‘It’s a corporation. I don’t feel bad for them.’”
From Westfair Online. “A trio of recently published data reports by leading moving companies has detailed a greater level of outbound migration than incoming arrivals for Connecticut and New York. Craig Oshrin, a broker with RE/MAX Heritage in Westport — who once owned a moving company — does not see a new wave of home sellers in Fairfield County who are looking to move out of state. ‘I’m seeing a market freeze, meaning there’s a lack of inventory all the way around,’ he said. ‘But I’m also seeing sellers getting nervous because those pandemic prices that they could get before are done.’”
The Gazette. “State demographers report Colorado’s population growth is coming to a screeching halt. Denver Realtor Sunny Banka said for the first time, she’s seeing people leave Colorado, mostly for Florida, to escape the imbalanced political climate. It is ‘something that I’m seeing in my own real estate career that I haven’t seen in the past 44 years, where we’ve had a kind of an exodus of clients selling their homes in Colorado and moving to other states,’ she told CBS. The report also quoted Krista Barker, who this year moved from Aurora to a development near Florida’s Daytona Beach.”
“She has tired of the ‘crime, homeless, political atmosphere. It was time to pack up. … I would walk every morning with my dog and every evening with my dog. Unfortunately, it got to a point in the area that I walked where homeless were setting up tents. You would run across syringes and bullet casings. You would hear gunshots in the middle of the night. … It was not safe anymore.’”
“To hear such talk of Colorado 20 years ago was nearly unthinkable. ‘They don’t allow panhandlers,’ said Barker of her new location near central Florida’s Atlantic coast. ‘They do not allow the homeless to set up tents. … It is just one of those situations where I feel comfortable. I feel safe.’”
Governing on California. “The mass layoffs announced in recent days, while certainly not all impacting San Francisco directly, aren’t a good sign for the city either. Tech companies make up nearly a third of the city’s private-sector payrolls. San Francisco already suffers an all-time record office vacancy rate of 27.6 percent. Meta has just put up 34 stories of office space — 435,000 square feet, enough space for 2,000 workers — for sublease. Even before the tech slowdown, San Francisco’s downtown was as empty as any city’s in the country.”
“The office recession is happening everywhere. Around the country, with rare exceptions such as Austin, Miami and Salt Lake City, downtowns are notably emptier in nearly every city. Retail and restaurant spending in Boston’s Financial District was down 20 to 25 percent last year, compared to 2019. The number of workers showing up downtown remains more than 40 percent below pre-pandemic levels in New York, Philadelphia and Washington. The number of workers showing up in Pittsburgh’s downtown is down by half. One Los Angeles office tower just went on sale asking for half its sales price back in 2015.”
“With wealthier people moving out, the Bay Area saw the country’s largest drop in household income between 2019 and 2021. For all the talk about turning downtown office towers into forests of condos, the demand isn’t there. The downtown condo market is the worst in the city. Housing prices in the city as a whole fell 13.3 percent last year, with at least one real estate forecast predicting San Francisco’s housing prices are set to decline the most in the country this year. Veritas, the largest landlord in the city, just defaulted on a $448 million loan.”
“On a recent Friday afternoon, attorney Joe Crawford was one of only two people spotted wearing a suit and tie on Montgomery Street over the course of more than an hour. He had rarely worked from home before the pandemic. Now, he rarely comes in. He had a deposition that day and had also come in the day before to attend a settlement conference. Prior to that, he hadn’t bothered coming downtown for a month. ‘You never really want to go into the office when it’s a ghost town,’ Crawford says.”
Multi-Housing News. “The self storage sector entered 2022 with no signs of winding down after a record-setting previous year. Investor interest and demand continued to be substantial. But the end of 2022 came with a notable cooldown, just like in other property sectors. Can the self storage niche hold on to its recession-proof reputation? Today, the bid-ask spread between buyers and sellers continues to widen. On one hand, buyers are pricing in increased uncertainty and more expensive financing, while sellers are still clinging to 6-months-ago pricing, noticed Michael Wachsman, director of acquisitions at Andover Properties—a company that has a portfolio of more than 12 million rentable square feet across more than 150 facilities in 18 states.”
“‘We expect many poorly capitalized investors will be less active buyers. Similarly, these investors may become forced sellers due to debt maturities or expensive interest rate cap requirements,’ he said.”
The Toronto Star in Canada. “In the heady days of February 2022, the GTA’s record high home values peaked. For the first time in history, detached houses in the City of Toronto were selling for more than $2 million on average — about $400,000, or 23 per cent more than just a year earlier. Borrowing money had never been cheaper. For two years, the Bank of Canada had held rates at an historic 0.25 per cent, fuelling the housing euphoria.”
“One year and eight interest rate hikes later, and the once fevered financial climate has turned frosty for many households. New homeowners, having achieved their dream, are plagued by shame and fear because they bought around the market peak that, in retrospect, seems like the worst possible time. Higher borrowing costs have also wiped out any advantage of fallen home prices for those looking to purchase.”
“The stress is showing in rising numbers of consumer insolvencies, said Laurie Campbell of Bromwich + Smith, a licenced insolvency trustee. Insolvencies were up 10 per cent annually at the end of November, the highest they have been since the start of the pandemic in March 2020.”
“First-time homebuyers have always been stressed but those who purchased around the market peak and chose a variable rate loan are likely feeling the most strain right now, said James Laird, co-CEO of Ratehub.ca. ‘We can’t fault them because at the time, our own central bank was telling us that rates are going to stay low for the foreseeable future and home prices are going to go nowhere but up. That was the common thinking,’ he said.”
“John Pasalis, head of real estate brokerage, Realosophy says social media has been unkind to people who are already stressed by the downturn in housing. It’s not uncommon for peak period buyers to be painted as stupid, greedy or the cause of the market correction. That’s particularly true of those who bought investment properties, he said.”
“‘These people are just families. They’re not sophisticated. They thought it would be a good investment because everyone says real estate’s a good investment. So they invested and now it’s weighing on their finances and they don’t know what to do. They can’t easily sell because now (the property) is worth less,’ he said.”
“The struggle many households are confronting now is also debt driven, says insolvency expert Campbell. In 1990, Canadians owed 90 cents for every dollar they earned. Now they owe about $1.84. People held onto their debt during the pandemic when there wasn’t much collections activity. Now, creditors want their money.”
From Domain News in Australia. “Sydney’s property market is in a groundbreaking fall, with $181,000 shaved off the median value of a house. Although the short-term data shows the market downturn is slowing, when measured over 12 months the New South Wales capital and Canberra recorded their steepest ever annual house price declines. House prices in Sydney have slipped backwards for three consecutive quarters and this has produced the deepest annual house price decrease in the city’s history, with the ACT in the same boat. House prices in Sydney (trickling down to a new median of $1,413,658) now sit 11.3 per cent below the peak of the cycle, which was reached in March last year.”
“On a national level, unit prices peaked earlier than houses over the pandemic and this is reflected in the new medians. The combined national median house price of $1,008,988 is $66,000 below the March 2022 peak and unit prices – at a national median of $596,771 – are $27,000 below the December 2021 price crescendo.”