A report from NPR. “The housing market has already slowed to a crawl, as mortgage rates top 7% for the first time in two decades. Kansas City homebuilder Shawn Woods said his company has gone from selling a dozen houses a month before the Fed started raising rates to fewer than five. ‘Never in my wildest dreams would I have thought we’d go from 3% to 7% within six months,’ said Woods, president of Ashlar Homes and the Home Builders Association of Kansas City. ‘I think we’re in for a rough six or eight months,’ Woods said. ‘Typically, housing leads us into downturns and it leads us out of downturns. And I think from a housing perspective, we’ve probably been in a housing recession since March or April.’”
WZTV on Tennessee. “Home prices are expected to fall significantly in the coming months in markets like Boise, Flagstaff, and Nashville, according to Moody’s. They are all projected to fall more than 20%. Joel Sanders with Real Stone Capital says demand is waning because of the significant increase in mortgage rates. With mortgage purchase applications down nearly 42% year over year (41.8%). ‘There’s no surprise that that’s down. I think what’s also interesting is a lot of room finance applications are down. Because with all of those bidding wars that were going on, people had a lot of equity built up in their home, and they were refinancing their mortgage to pull that equity out.’ But Sanders urges homeowners not to panic, as he believes the market will correct itself in time, and to be patient.”
From KOAA. “Ed Behr a partner with The Platinum Group Realtors, has worked in the Colorado Springs Real Estate Market for nearly four decades. He offered some honest perspective on the pluses and minuses of rising interest rates. ‘You factor in just the effects of inflation with how much you’re paying for groceries, gas, utilities, everything in life right now, I think it’s just making people pause, but it’s certainly not a time to panic,’ said Behr. Housing prices hikes have slowed dramatically. They are no longer rising at the rapid rate of recent years. Behr doesn’t see major price drops in the near future. And even if sellers have to make some price concessions they are likely still financially ahead.”
From House Digest on Washington. “After the record-setting competition in the real estate market that sent housing prices through the roof over the past couple of years, home prices in Seattle are beginning to see a downward trend. Recent data compiled by House Digest determines that the median price for a home sold in the Seattle area in the winter of 2018 was as low as $477,000. In May of 2022, the average price rose to $865,000, which is an increase of about 81%. By August, the average sale price had dropped to around $755,000. Several analysts predict that this trend may continue. ‘I predict prices will drop further as we move into the fall,’ explains Matthew Gardner, Chief Economist at Windermere. ‘The market is simply reverting to its long-term average as it moves away from the artificial conditions caused by the pandemic.’”
The Review Journal. “After last year’s buying spree, Southern Nevada’s housing market has been pumping the brakes for months. Sales totals have plunged from 2021 levels, sellers have increasingly cut their prices, inventory has soared, and homebuilders have pulled fewer construction permits. ‘Home-selling in a month is not a terrible thing; that’s fairly normal when we look at what the historic trends have been. Things are in this rebalancing moment. It’s not necessarily that sellers don’t have any power; it’s just that they don’t have all the power anymore,’ said Nicole Bachaud, senior economist with Zillow. ‘The market was very hot, and then all of a sudden, rates jumped up overnight essentially and kept jumping up. Now we’re in a different phase of the market. We’re no longer in this pandemic frenzy that’s induced by a ton of demand and limited supply.’”
ABC 7 in California. “Ernest Chen experienced it first hand. Chen moved to France during the pandemic. He recently returned to his San Francisco teaching job but continued renting out his home, opting instead to rent an apartment in the city. Chen says he got a great deal on his new apartment, but also took a loss on the home he’s renting. ‘It was $400 less than we were expecting,’ said Ernest Chen. ‘If you’re a renter and you want a good deal, now is the time to start looking,’ said Crystal Chen.”
ABC Action News in Florida. “For close to three years Oswald Robinson and his son rented a home in Riverview. According to their landlord, the rent was paid on time and the year-long lease did not expire until June 2022. But late last year the home went into foreclosure. And, in February, the bank sold the property to a new owner. Robinson thought he was protected by the lease. But in March, the new owner taped a notice to the garage door ordering Robinson and his son to leave the premises. Two weeks later the home’s new owner, Jose Lodeiro, filed a lawsuit in court against Robinson and his son. It accused them of living in the house illegally. The Robinsons didn’t respond to the court case and when they didn’t, the judge ordered an eviction.”
ABC 7 in Illinois. “‘Zombie properties’ and ‘zombie foreclosures’ are haunting some people in the Chicago area. The City of Chicago has issued tens of thousands of dollars in fines to people who are no longer property owners. Corita Sergeant built an empire of rental properties until the financial collapse in 2008 forced her to sell some of them. She lost others to foreclosure, including one in Chicago’s Burnside neighborhood. She thought the home, now knocked down, was in her past but she’s been fined for weeds.”
“‘It can range anywhere starting a $600 go anywhere to like $1,200,’ she said. Sergeant said the city even garnished her wages to pay fines. ‘It’s been years of this and I just don’t know what to do at this point,’ said Sergeant.”
WKBN in Ohio. “Youngstown City Council’s finance committee was presented with a new program to beautify some of the city-owned vacant lots. It centers around homeowners living adjacent to the lots and provides a way for them to eventually own them. Under the city’s new ‘Mow to Own Adjacent Lot Disposition Program,’ if the city owns the land, the homeowner could work towards buying it. ‘We want people to take care of the properties so we don’t have to constantly do it,’ said Mike Durkin, who oversees Youngstown housing code enforcement and demolitions which includes mowing 6,000 vacant properties three times a year.”
The Commercial Observer. “If the commercial real estate lending climate from 2012 to mid-2022 was the Titanic out of Southampton, England — sleek, agile, strong and seemingly invulnerable — the last six months have been the first hour after the ship hit the iceberg. Panic has set in, and the band’s striking up ‘Nearer My God to Thee.’ ‘At the end of the day, I think the vast majority of the market right now is definitely looking more apprehensive right now, just trying to take a little bit of a pause trying to figure out what’s going on,’ said Matt Stearns, head of originations at Black Bear Capital Partners. ‘People are looking for reasons to not do deals.’”
“Andrew Schnissel is one such lender who has taken the ball and run with it with the launch of Gramercy Capital, a new bridge lending platform. Schnissel, who was a partner at national hard-money lender, provides short-term bridge loans in New York City with the backing of an unnamed New York City family office. Schnissel said most demand for his platform comes from property owners in distressed scenarios in danger of defaulting on previous debt, especially with commercial mortgage-backed securities (CMBS) loans.”
“‘Banks are turning back in terms of leverage point and prefer to work with existing relationships,’ Schnissel said. ‘People who took out CMBS loans on commercial assets pre-COVID overinflated values, and those loans are underwater at this time, and base owners are in the process of being foreclosed on.’”
Better Dwelling in Canada. “Greater Toronto’s new construction housing has seen demand completely vaporize. Data from BILD GTA and Altus Group show new construction sales fell 90% in September. Prices are now falling, especially for condos which saw a $30k drop in the month. The segment was mostly bought by investors which have disappeared, helping inventory recover. Greater Toronto Area (GTA) new construction prices are falling, just not as fast as resales. Single-family homes (detached, semi-detached, and town) saw the benchmark price fall to $1.85 million in September. That’s a drop of 0.4% (-$8,400) for the month, with prices now 4.2% (-$80,698) lower than the July 2022 peak.”
“Condo apartments are seeing sharper price declines, which are coming suddenly. The price of a typical, or benchmark, condo fell to $1.16 million in September. This is a decline of 2.5% (-$30,200) from a month before, with prices down 7.4% (-$93,100) since peaking in February 2022. Monthly price declines were nearly 5x the rate of single-family.”
The Globe and Mail. “For Canadians retiring with mortgage debt, the likelihood of having to manage higher payments in the near future is a growing concern. Chris Merrick, a fee-only certified financial planner (CFP) with Merrick Financial Inc. in Toronto, says he’s seeing more clients in the Greater Toronto Area carrying mortgage debt into retirement. While Justin Prasad, financial advisor with BlueShore Financial Credit Union in North Vancouver, says a lot of retiring clients sold their homes and paid off their mortgages during the pandemic, other pre-retirees took out home equity lines of credit or fixed-rate mortgages to help their kids get into the housing market – leaving them open to higher payments after they’ve retired.”
“‘Before, when people were in a bit of a pinch, they would just sell their single-family home and then downsize and they would realize a nice windfall,’ he says. ‘Now, they’re stuck in a situation in which they’re not selling and they’re stuck with these higher payments.’”
The Australian Associated Press. “While rate hikes are driving down property prices, they also reduce borrowing capacity. ‘This has the property market rattled, with both buyers and sellers exiting in droves,’ RateCity research director Sally Tindall said. ‘The hordes of cashed-up buyers are gone, while some nervous home-owners who were thinking about selling are now benching their plans.’”
From ABC News. “The Reserve Bank of Australia (RBA) will be ‘very carefully’ watching how inflation evolves over summer, and it will lift interest rates aggressively in the new year if it thinks it needs to. Beauty salon owner Linh Linh will also be watching closely. She said she would like the rate increases to slow down so she has time to figure out what is happening to her finances. Ms Linh told the ABC she owns two properties, one was her family home (bought in 2015), and another house from which she runs her business (bought in 2019).”
“She said the rate rises are not only affecting her mortgage repayments. They are affecting her customers’ willingness to spend money too. ‘Everything has increased, so for me I actually experience that I need to pay double compared to the beginning of the year,’ Ms Linh said. ‘So of course, I need to cut down on holiday travelling or shopping, so my client is the same – they minimise the time that they pamper themselves, or spend in beauty services.’”
“Ms Linh is worried about how further interest rate hikes will affect her business and personal finances. ‘I hope in the future that we have a stable interest rate or it does not increase as quick, so at least we have a bit of time to adapt with that, and prepare our financial and everything,’ she said. ‘Because for me, I feel like whenever we struggle with the finance, it’s affecting a lot for my mental health.’”
From News Talk. “Some households and businesses will be challenged by rising interest rates and financial institutions should take a long-term view in supporting their customers, Reserve Bank governor Adrian Orr says. The report noted house prices in New Zealand continued to decline and had fallen 11 per cent from the November 2021 peak with Auckland prices down 15 per cent and Wellington declining 18 per cent. While house sales had fallen to levels seen in the aftermath of the global financial crisis.”
“The RBNZ report warned the decline in house prices meant some borrowers who bought houses in 2021 were now in negative equity. ‘Negative equity and mortgage servicing arrears are not widespread at present, but will grow if prices continue to fall and as mortgages reprice to higher interest rates. Significantly higher unemployment would lead to further stresses among households, and is the biggest risk to financial stability at present.’”
“‘Negative equity among borrowers does not in itself lead to losses in the financial system. However, the default of a borrower who is in negative equity means the lender may not be able to recover the full value of their lending, for example through a mortgagee sale. A significant number of borrower defaults in an environment of widespread negative equity would lead to material financial losses for lenders. Repayment increases will be particularly significant for many households that first borrowed in the past two years.’”