A report from Market Watch. “The tide has turned, and buyers are now backing out of deals in the Sun Belt. Once pandemic boomtowns, 15.2% of homes in cities in the Sun Belt that went under contract in August fell through, or roughly 64,000 homes nationwide saw deals dropped, Redfin said. And ‘some buyers may also be backing out of deals because they’re waiting to see if home prices fall,’ the company added. City Percentage of pending sales that fell out of contract: Jacksonville, Fla. 26.1% Las Vegas, Nev. 23% Atlanta, Ga. 22.6% Orlando, Fla. 21.9% Fort Lauderdale, Fla. 21.7% Phoenix, Ariz. 21.6% Tampa, Fla. 21.5% Fort Worth, Tex. 21.5% San Antonio, Tex. 21.1% Houston, Tex. 20.6%.”
From CNBC. “There also can be affordability issues causing buyers to walk away, especially in new construction, said Al Bingham, a mortgage loan officer with Momentum Loans in Sandy, Utah. Buyers ‘are willing to walk away even if they can qualify because the house payments have gone up,’ Bingham said. ‘They just cannot afford it.’ ‘The market shifted really fast,’ said Stephen Rinaldi, president of Rinaldi Group, a mortgage broker.. ‘It went from people offering $40,000 above asking price, waiving inspections, promising their first-born … to not so much, because rates increased so fast.’”
The Dallas Morning News in Texas. “Redfin found that 21.5% of pending transactions in the Fort Worth area and 19.7% in the Dallas area fell through in August. During last year’s red-hot buying frenzy, buyers found they had to waive certain contract contingencies to compete for a home. ‘Now, with buyers having more of an upper hand, they may have more power to back out. Including inspection, financing and appraisal contingencies in a contract means a buyer can cancel their purchase if there’s an issue with the home, they can’t get a mortgage or the appraisal is different from the agreed-upon amount,’ the report said.”
The Sun Sentinel. “Homebuyers have lost six figures in buying power over the past year, thanks to soaring mortgage rates. It’s the equivalent of about $140,000, RedFin calculates. ‘Some people may have lost the ability to qualify overall. If you were very thin before — which many people were, given where the property values have risen to — you may have been basically pushed out where you can’t qualify for a whole lot,’ said J.C. de Ona, Southeast Florida division president for Centennial Bank. ‘At some point earlier this year, they were perfectly fine qualifying for a house in the area they were looking, but now they can’t.’”
From The Street. “Home prices are falling across the U.S. ‘Home prices have dropped roughly 15% from the January 2022 highs in certain parts of the country,’ said Pacwest Funding chief executive officer Joshua Massieh. ‘In some areas, we have already seen a 20% correction since January.’ Another big issue is new home construction developments are slow to deliver due to supply chain issues.’This is throwing a flood of homes into the market. Home prices have already adjusted to the new level of cost of borrowing, other real estate experts said,’ Massieh added. Take Seattle, Wash., where the residential real estate market has adjusted downward by approximately 20%, since April 2022.”
Montana Right Now. “The housing market in the Gallatin Valley has become an issue in recent years but as the summer heated up, the market began to cool. It seems as though the new developments being built are starting to ease the skyrocketing prices. Looking at single-family homes, around 200 new listings have been posted since July, and when there are more options prices tend to dip. These are the most recent median single-family home prices in the area: Bozeman – $871,500. Belgrade – $558,000. Livingston – $565,000. Three Forks – $560,000. Manhattan – $670,000.”
The Standard Times in Massachusetts. “Prospective homebuyers are keeping real estate professionals busy as they watch and wait in an up-and-down market in Bristol County and across the state. Bob Sullivan, a broker associate with Bay Market Real Estate in Swansea said the housing market has changed in that the sellers he works with aren’t quite used to the fact that their houses aren’t going to sell overnight right now. ‘It’s a very strong market, it’s just not a crazy overnight market,’ he said. ‘I’ve been in this for over 30 years, and I’ve seen it all. When we sign a listing, we usually sign for six months for a reason, and that’s because it’s the average marketing time.’”
The Orange County Register. “Southern California’s homebuying market collapsed this summer to the slowest sales pace on record. And it’s no stunner considering the typical house payment jumped by almost 50% in a year. From June through August, 54,416 residences were sold in the six-county region. That’s 20% below the same period in 2021, and the lowest count since at least 1988. That’s even slower than the bubble-bursting days around the Great Recession, and it’s slower than the often-forgotten deep homebuying slump of the early 1990s. The summer’s house hunters balked as the typical Southern California monthly payment rose by $1,055 in a year — a 47% jump — to $3,318 on the $740,000 median-priced residence.”
The New York Post. “The California home where Bob Saget lived for 20 years is getting a $770,000 price cut after three months on the market without a buyer, The Post has learned. The Los Angeles home now asks $6.99 million.”
From Bisnow New York. “For the leaders of some of the biggest investment vehicles in commercial real estate, the matter of whether the U.S. is on the verge of a recession is no longer a question of if, but when. Certainly, there have been some high-profile cases of office owners handing back keys to lenders. This week, Hines agreed to turn over a downtown Washington, D.C., office building back to its lender after the anchor tenant left. In New York, Blackstone gave up on a Midtown Manhattan office building earlier in the year, and multiple Chicago skyscrapers have suffered the same fate.”
“‘That just goes back to the fundamental issue that it’s extraordinarily expensive to carry the asset now, let alone to pay for the restabilization costs,’ Eastdil Secured Managing Director Grant Frankel said of offices being handed back. ‘So I think you’re gonna see a lot of that.’”
The Edmonton Journal in Canada. “Already activity has fallen substantially from record heights in March after the central bank began hiking rates to slow high inflation. In August, buyers purchased 1,809 homes in the Greater Edmonton Area, down from 2,055 in the same month last year and in 2020 when 1,874 homes sold. While last month’s activity was in line with historical trends, it remains a stark drop from March when a record 3,283 transactions took place. Average prices have also come down from March when the average price reached $415,000. In August, that figure was $377,000.”
“‘The housing market has slowed significantly, but how much is driven by perception among borrowers that ‘rates are rising, so I am going to hold off and see what happens?’ says Edmonton mortgage broker Marc Crossman.”
The Telegraph. “Britain’s richest homebuyers are ditching their traditional London stomping grounds and are decamping to the Home Counties en masse, new research shows. The average price paid across the top 1,000 sales so far this year was £3.4 million – roughly half the £6.3 million spend in 2021. said Dawn Carritt, of Jackson-Stops estate agents. ‘Key to this rebalance has been the void of international buyers during lockdown. Offers that are being made now feel much more grounded in reality than they did this time last year. Buyers do not want to enter the bidding wars we sometimes saw six months ago.’”
The South China Morning Post. “Property developers retreated as rising mortgage costs erode local homebuyers’ purchasing power, while losses in Alibaba and Tencent deepened. The Hang Seng Index has dropped 20 per cent from the recent peak on June 28, while the sell-off has erased US$1.3 trillion in value from the city’s stock market this year.”
From Bloomberg. “A spate of defaults by Chinese borrowers with seemingly impeccable onshore ratings has left antsy investors in the world’s second-largest credit market craving credible research to distinguish good debt from bad. Now a little known startup is seeking to tap that demand and is winning fans. Shenzhen-based Ratingdog has slowly been carving out a name for itself within China’s corporate-bond community by flagging risks well before defaults occur. Some creditors and fund managers, long used to seeing domestic raters assign ‘AAA’ and ‘AA’ levels for even defaulters, are turning to independent research firms such as Ratingdog to navigate a nascent market amid a liquidity crisis.”
“Though there was some buzz around Ratingdog even before the property crisis, it drew the attention of investors in August 2021 when it downgraded Shimao Group Holdings Ltd. and its onshore unit Shanghai Shimao Co. from the equivalent of investment grade to high-yield, highlighting credit risks at what was once one of China’s largest real-estate developers. Almost a year later, Shimao missed payment on a $1 billion dollar note, its first default on a public bond after months of mounting stress, while its onshore unit delayed some domestic payments.”
“Yet to this day, Shanghai Shimao remains an AAA-rated entity — practically the same as China’s sovereign — in the eyes of Chinese firm China Lianhe Credit Rating Co., which declined to comment. Even giants including S&P Global Ratings, Moody’s Investors Service and Fitch Ratings have had their fair share of trouble with regulators and lawmakers. More than a decade ago, they were partly blamed by regulators for fueling a housing bubble by handing out top grades on debt tied to risky mortgages, a market that collapsed in 2007 and sparked the global financial crisis.”
“Rising defaults will lead to deeper changes, said Jim Veneau, head of Asian fixed income at AXA SA. ‘Now China is accumulating a default history, so that history will then be utilized in terms of projecting future default probabilities,’ said Veneau. ‘That will ultimately lead to more credit differentiation.’”