A report from WFAE in North Carolina. “Charlotte real estate agent Maceon McCracken said that the market now seems to be finally ‘normalizing.’ She recently helped that same client sign a contract to purchase a home for $40,000 below the list price, a significant shift from just a few weeks ago. Real estate agent and broker Heather Hopkinson said she’s seeing a repeat of what happened after the 2008 market crash, a time when she saw low appraisals and quickly fluctuating home prices. She said that with such a fast-moving market, pricing information about comparable homes is inaccurate after 30 days when prices change, leading to appraisals that may no longer match.”
The Sun Sentinel. “The days of intense bidding wars, and few homes for buyers to choose from in South Florida, are coming to a slow end. ‘I think the slowdown is becoming more apparent,’ said Patty DaSilva, broker with Green Realty Properties in Cooper City. ‘We are having several open houses and people are attending, but the offers just aren’t coming in.’ Sellers might be adjusting their original list price down if it was priced too high, or sellers could be taking a lower offer than what they wanted. ‘Some sellers will say that it’s the only offer they have and the home has been on the market long enough,’ she said.”
“In Palm Beach County, the supply of homes on the market shot up 107% to almost three months’ worth of supply. For Broward County, the supply of homes increased 80% to about 2.7 months of supply. For Miami-Dade County, it jumped nearly 60% to 3.5 months of supply. It’s also taking longer for homes to go under contract.”
“‘In a declining market, you have to be careful not to overprice your home and chase a home down to the bottom, losing money every month the home sits. When the market was increasing, pricing a home above what it was worth was less important. More time on the market could literally catch up to a once-stale overpriced listing,’ said Whitney Dutton, with the Whitney Dutton Group in Fort Lauderdale.”
Prescott Enews in Arizona. “‘Now more than ever it’s important to use a local REALTOR®, like a member of PAAR, who has the experience necessary to navigate this changing market,’ said George Beitzel, 2022 PAAR President. ‘The Quad Cities added almost 500 new listings last month,. A REALTOR® will be there to help you navigate the competition and guide you through the entire process.’ Chino Valley was the only region to experience a slight drop in median sales price last month of 10.5%. However, it led the region in new listings added to the market with a 55.3% increase.”
KPHO in Arizona. “A new report is out by Zillow which is showing how quickly and dramatically home sales in the Valley of the Sun are dropping. As of this week, the average home value in the Phoenix market is around $451,000, a decrease of about 6% since May. The most startling statistic is that pending sales are down 42.4% compared to last September while new listings fell by nearly 10%. A number of price cuts are being seen across the board as well, with nearly half of homes on the market seeing a price reduction.”
The Review Journal. “Southern Nevada’s market appears to be in a logjam, and there’s no telling when it will break through. Following last year’s buying binge, house hunters have faced a sharp jump in borrowing costs and big price gains over the past year, and they’ve pumped the brakes on purchasing. Sellers have increasingly slashed their prices, faced a glut of competition, and dealt with a shrinking pool of people who can afford to buy a place.”
“‘It’s impossible for people in this market to afford these homes, and so something’s gotta change,’ said Nicole Bachaud, senior economist with listing site Zillow. Bachaud said Southern Nevada was once a ‘very affordable area,’ but that’s ‘not the case anymore.’ According to Zillow, 42 percent of Las Vegas-area home listings had a price drop in September, up from just 9.3 percent in February.”
The Orange County Register. “This is my last “Bubble Watch” column. Since May 2018, the trusty spreadsheet has dug into trends to see if any economic or housing market troubles lay ahead. With trouble officially here, a ‘watch’is no longer required. Buzz: The bubble burst. Again. Source: Home values face significant dips as rising mortgage rates and economic unease crush affordability and house hunters’ will to buy. Most notably, the California Association of Realtors forecasts a 9% drop in values statewide for 2023.”
“When homebuying becomes fodder for comedians, be nervous. The housing market has a bad habit of getting too popular. In February 2022, a Saturday Night Live TV skit parodied the housing insanity with a fake ad for Zillow’s online home-search services. The skit suggested online house-hunting was a new amorous thing. At the same time, two public opinion polls suggested searching for homes was more popular than sex.”
“I gave these developments six “stars” on my five-star bubble-warning scorecard. Choice words: When somebody important says ‘bubble,’ take it seriously. In March 2022, researchers at the Federal Reserve Bank’s Dallas branch released a report saying ‘house prices appear increasingly out of step with fundamentals.’ The warning was dismissed, shrugged off as overstating the market’s modest risks. Even the report said the ‘fear-of-missing-out wave of exuberance’ wouldn’t be a repeat of the bubble-bursting crash of the 2000s.”
“But report author Enrique Martínez-García told Fortune magazine:’This might be a housing bubble. The evidence suggests it looks like a housing bubble. A little bit like a duck. It walks like a duck, it looks like a duck, it certainly might be a duck.’ When the burst bubble in the 2000s, the statewide median tumbled 59% from 2007’s $594,500 high. It took 11 years for a new record price to be set. But the lesser-discussed bubble bursting of the 1990s cut prices by 20% from 1991’s $211,000 peak. A new high wasn’t seen for eight years. With history stated, I’ll remind you that ‘it’s different this time’ is always true.”
The San Diego News in California. “SFR Market Report:* 92115 College Area; Median home price down 7% from August to $957,000 with closed sales down 21%, and inventory steady at 51 homes currently for sale. * 92119 San Carlos: Median home price down 5% from August to $950,000 with closed sales down 5% to 18 sales, and inventory up 20% to 31 home currently for sale. * 92120 Allied Gardens/Del Cerro Median home price down 7% to $1,050,000 with closed sales up 23% to 27 homes sold and inventory of homes for sale up 31% to 34 homes available.”
From Market Watch. “Even if Federal Reserve Chairman Jerome Powell and his cohorts stopped hiking policy rates soon, the 30-year fixed mortgage rate still would climb to 10%, according to Christopher Whalen, chairman of Whalen Global Advisors. That’s because the Fed’s torrid pace of rate increases in 2022 takes time to seep back into mortgage rates, especially with the fed-funds rate already jumping to a 3%-3.25% range in late September, from almost zero a year before.”
“‘Lenders only slowly adjust their rates,’ Whalen told MarketWatch. ‘They are not used to seeing rates moving this fast, and typically would change rates only once a month or once every other month.’ ‘There is a lag effect in mortgages,’ Whalen said, adding that even if central bankers decided to hit pause on additional rate increases after their December meeting, the 30-year mortgage rate still would ‘easily touch 10% by February.’”
“Whalen, an investment banker, author and specialist focused on banking and mortgage finance, urged the U.S. Securities and Exchange Commission in 2008 to move complex and opaque derivatives “back into the daylight,” after banks and investors saw hundreds of billions of dollars in losses tied to structured debt, including subprime mortgage exposure. He also provided testimony to Congress in 2009 about systemic risks of the banking industry. Now, Whalen sees another major shakeout coming in mortgage banking as profitability continues to get pinched (see chart) and the housing market sputters. Importantly, Whalen also sees potential for home prices to give back all of their pandemic gains if rates stay high for all of 2023.”
The Globe and Mail in Canada. “Last summer, Hamilton realtor Sean St Cyr promoted a lucrative real estate investing opportunity across a number of Facebook groups. Investors could receive an average annual return of 20.2 per cent, the post stated, if they gave him a minimum of $100,000 to purchase a derelict three-storey building in the city’s east end, an area that has been in decline since a steel plant there started running into trouble decades ago. ‘Have you ever wanted to learn how to make serious money in real estate like the pros?’ Mr. St Cyr said in one of his many promotions for the deal.”
“Mr. St Cyr, a self-described international real estate investor and foodie, is one of the many investors looking for other people’s money, or OPM, on social media to fund real estate deals. He and legions of other promoters have helped fuel the real estate investing craze in Canada that revved up when home prices soared and COVID-19 restrictions led people to spend more time online. Every day, across the country, there’s a steady stream of requests in Facebook groups and personal pages for money to buy rental properties.”
“No one knows how many investors have got involved in real estate because of this explosion of online promotion. But over the first year of the pandemic, investor buying of residential properties doubled in Canada. By the middle of last year, investors accounted for more than a fifth of the country’s home purchases. However, with interest rates rising and real estate markets cooling, promoters may not be able to deliver the profits they have promised their investors.”
“When things go wrong with real estate, they can really go wrong. Tenants, including society’s most vulnerable, can be harshly evicted in the name of investment returns. Investors, many of whom call themselves risk-averse, lose their life savings. And no one has a full grasp of the impact these investors have on the real estate market. Regulators do not appear to be paying attention, either. Many promotions appear to be skirting securities rules. Promoters are either unaware of the rules or know they can get away with not complying with them. Without enforcement, promoters are raising capital with little to no legal scrutiny.”
“Carolyn Robinson relied on one of the many real estate investment influencers in Canada. After selling her house in Maple Ridge, B.C., in 2021, Ms. Robinson moved to Vancouver when real estate and the stock market were on a roll. With inflation increasing, she didn’t want to keep her cash in a chequing account. ‘I didn’t want it to just sit there and do nothing or sit there and shrink,’ she said.”
“She had heard about real estate guru Jodi Vetterl, whose website said she had a 20-year career in high-tech software sales for Fortune 100 companies. Ms. Vetterl’s mantra is to ‘invest only if you understand the investment, ensure that you can sleep at night and determine your exit strategy.’ Ms. Robinson read Ms. Vetterl’s book and paid $5,000 to access training modules and join a network of investors. The book included a chapter on Saskatchewan-based real estate company Epic Alliance Inc., and a description of the company’s investment opportunities.”
“She also researched Epic online, and could only find glowing reviews. So, Ms. Robinson made a sizable investment in a promissory note in mid-September, 2021. In October, she invested in another. Later that month, the Financial and Consumer Affairs Authority (Saskatchewan’s securities regulator) issued a temporary cease-trade order telling Epic to stop trading securities. Ms. Robinson was shocked. She had never heard of the FCAA. She said she received an e-mail from Ms. Vetterl, who repeated that investors had to do their own due diligence.”
“What Ms. Robinson did not know was that, according to other investors, in May, 2021, Epic had told investors the FCAA may contact them about their investment. Ms. Robinson had joined Ms. Vetterl’s investor group in June – one month after the Epic disclosure. ‘I wasn’t even aware of it when I joined the group,’ she said. ‘There was no care taken to make sure that I knew.’ A few months later, in January, Epic’s founders shuttered operations, stating the business’s money was gone and it was bankrupt.”
“The company had acquired at least 700 houses in Saskatoon and North Battleford and told investors it was either flipping or renting the homes for profit. But some of the homes had no tenants. And many weren’t generating enough rent to earn the promised returns, according to a report by court-appointed inspector Ernst & Young. Instead, Epic was using funds from share issuances and promissory notes to cover various operating expenses and shortfalls in its business, according to the E&Y report.”
“Reflecting on what went wrong, Ms. Robinson said, ‘I knew that due diligence was important. I had hoped that the track record of people who know more about this added some safety. And I was wrong.’ There’s a school of thought in policing called ‘broken windows’ that says a small sign of disorder leads to more disorder, and eventually more serious crimes. If the broken window does not get fixed, it shows that no one cares and it is okay to break more windows.”