A report from Spectrum 1 on Massachusetts. “‘Landlords have gotten hosed the whole time here,’ said Mike DeLuca, who owns 35 rental units in Worcester. ‘It’s all about of the tenants. I’ll tell you right now, these landlords are never going to see the money. Never, ever, ever.’”
From Bisnow. “According to Newmark research, $782M worth of multifamily properties changed hands last year in Washington, D.C., roughly half of the volume in 2019, when there were more than $1.5B in multifamily sales. ‘The regulations have, in effect, frozen the market,’ said Peter Bonnell principal at major D.C. apartment operator UIP Cos.”
From City Limits. “Hundreds of thousands of New York households have fallen behind on their mortgages or property taxes during the pandemic, putting them at risk of losing their homes after statewide foreclosure protections expired earlier this month. A disproportionate number of those households are Black, Latino or Asian, potentially triggering a loss of equity in communities of color that outpaces even the 2009 financial crisis, experts say.”
“‘We are seeing mortgage distress rates that are really alarming and dwarf the numbers we saw during the Recession,’ said Jacob Inwald, the director of foreclosure prevention at Legal Services NYC.”
The Philadelphia Inquirer. “Burlington, Camden, and Gloucester Counties are among the housing markets nationwide that are most vulnerable to pandemic downturns, according to a year-end analysis by real estate data provider Attom. The analysis measured percentages of homes at risk of foreclosure, how much of the average local wage is required to pay monthly home costs, and percentages of homes that are worth less than homeowners owe.”
“New Jersey — in particular, areas near Philadelphia and New York City — has one of the highest concentrations of at-risk markets, according to Attom. Atlantic and Cumberland Counties in South Jersey were also among the top 50 most at-risk markets, which were mainly on the East Coast. Elsewhere in the nation, counties in the Chicago area and across California also are more subject to the effects of the pandemic.”
From 12 News on Arizona. “The area known as Rio Verde Foothills looks abundant, from the desert landscaping to the red-tile roofs. But one thing isn’t abundant: Water. The wealthy community north of Scottsdale is the site of the latest skirmish in a coming water war. There have been screaming matches, property damage and death threats, according to the people who live there. The hostilities are to the point where the residents who spoke to 12 News (KPNX-TV) wanted to remain anonymous.”
“Many residents have told 12 News that they weren’t made aware of the issues before it was too late. Residents who asked to remain anonymous in fear of retaliation said the following: — ‘That agent that we bought from didn’t mention at all the fact that water would be getting cut off.’ — ‘It’s something you would never, ever think to ask. (Not having water) isn’t a common thing you’d expect you’d have to do due diligence on. We closed on our house in November and it wasn’t until we started talking to neighbors that we realized that water was set to be cut off.’”
The Real Deal on California. “One of America’s best known comedy hosts is getting serious about unloading his estate in Bel Air. In October, less than a year after buying it, Trevor Noah put the airy, 11,400-square-foot mansion on the market for $29.8 million. Last Thursday Noah relisted the property for $27.5 million — the same price he paid for it in late December 2020.”
From Market Watch. “Former Federal Reserve Governor Randal Quarles said Tuesday that he thinks the Fed will move swiftly to raise its policy interest rate above the inflation rate because that is the only way to defeat inflation. When the policy rate is above inflation, it is what is known as a positive real rate of interest. Asked during a forum sponsored by a think tank focused on central banking, whether he thought the Fed would engineer positive real interest rates, Quarles replied: ‘The short answer is yes.’”
“‘We will see positive real interest rates, I think we will see that sooner rather than later because I think that is what will be required to get on top of inflation,’ Quarles said. Quarles said the policy framework the Fed adopted in 2020 meant that the central bank would wait until it saw ‘the whites of the eyes’ of inflation before raising rates. ‘We never said we’d let the army march over us,’ he said. ‘The army is on top of us. The Fed will act and it will be successful at containing inflation,’ he said.”
“There are unintended consequences of Fed raising interest rates significantly, Quarles said. The cost of financing the federal government will increase dramatically, he said, and there is the potential for unintended consequences from a private economy that has grown used to very low interest rates for a long period of time.”
From Reuters. “Today’s central bankers have the unenviable task of weaning a pandemic-hit global economy off cheap money amid unprecedented sovereign debt levels and with asset prices inflated by years of stimulus and near-zero interest rates. What’s more, the risk of errors may be all the greater given that many of them have no experience of raising interest rates – and hardly any have ever had to do it in the face of inflation at multi-year highs and pushing way beyond target.”
“In 2020, the largest ever one-year surge since World War II put global debt at $226 trillion, with debt held by governments alone rising to a record 99% of global output. At those levels, even a small move by central bankers to raise the cost of borrowing will be felt by national treasuries.”
The Daily Telegraph. “The dream of home ownership has slipped further out of reach for young Australians following a year of sharp price growth across the nation. Recent CoreLogic data showed home values increased more than 22 per cent throughout 2021, with Sydney prices surging 25 per cent to a median value of $1,098,412. For houses, this growth had been even sharper. Finder analysis showed values surged 39 per cent year-on-year to $1.3m – a figure estimated to be more than 11 times the average income of a Sydneysider.”
From Stuff New Zealand. “Roughly 60 per cent of home loans will need to be refinanced in the next year and for many borrowers, that will mean their interest rates doubling, according to Corelogic. CoreLogic chief property economist Kelvin Davidson said during the middle of last year, fixed-term interest rates were between 2 per cent and 2.5 per cent, and by mid-2022 they would probably be between 4 per cent and 5 per cent. With fixed-term periods generally evenly spread throughout the year, Davidson said as much as 20 per cent of fixed-term borrowers could be hit by that doubling as well as those on floating rates.”
“CoreLogic’s report highlights the impact of the runaway property market, with the total value of residential real estate reaching $1.72 trillion at the end of last year. That was 27 per cent above the total value of all residential property at the end of 2020, when the market was valued at $1.35t. Davidson said roughly a fifth of that $1.72t was made up of mortgage debt. He cautioned that despite seeming quite sound at the headline level, household debt was high relative to income. ‘To some extent the debt has only been sustainable recently because of low mortgage rates,’ he said.”
“CoreLogic data also showed the demand-supply imbalance was changing, with more properties appearing on the market even as fewer people were buying, suggesting a shift to a buyer’s market. ‘We suspect that by mid-2022 the balance of power could tip towards buyers,’ Davidson said. The rise in property listings was shown by a marked increase in listings on RealEstate.co.nz, which recorded 30 per cent more houses on the market in December than a year before (which equated to 4000 more homes being for sale) with stock more than doubling in four regions.”
From Bloomberg. “On the surface, the recent land auction by the Chinese city of Rizhao appeared routine. There were four bids, pushing the price up 11% to $170 million. A closer look reveals something curious: The offers were reportedly made by a finance entity owned by the Rizhao government, meaning the city effectively sold land to itself.”
“Across China, local government financing vehicles have replaced cash-strapped property developers as the biggest buyers of land for real estate development, stoking fresh concerns over the ability of these off-balance sheet borrowers to repay a debt pile that tops $8.4 trillion by some estimates. In nine of 21 large Chinese cities that packed in land sales over the last two months of 2021, at least half of the plots were bought by these so-called LGFVs, according to consulting firm China Index Holdings. Some of these purchases were worth billions of dollars.”
“‘Purchasing land will usually lead LGFVs to pile up borrowings and increase leverage,’ said Yuqing Fu, a portfolio manager of the HSBC Jintrust Stable Income Bond Fund. ‘It’s not easy for them to pare them down afterwards.’ Risks are rising on a few fronts. The vehicles are scooping up land just as prices are falling and the property market craters.”