A report from the New York Times. “Luis Solis, a real estate agent in Portland, Ore., marked a milestone weekend late last month. It was the first time in two years that one of his listings made it to Monday without any offers. This particular house was listed at $500,000, and after a Saturday open house there were promises of at least three bids, including one for $40,000 over the asking price. Then Monday came, and there were none. Then Tuesday, and Wednesday.”
“An offer finally came in, but instead of being 10 to 15 percent higher than the listing — something that became almost standard at the height of the coronavirus pandemic’s housing market — it was right at $500,000. And it was the only one. And the buyer took it. ‘We didn’t have the competing offers that would drive up the price,’ Mr. Solis said. ‘It’s not crazy like it was.’”
“So far, the greatest signs of the housing market’s slowing have shown up on the West Coast, where the budgets of aspiring buyers seem to have been broken by rising interest rates. In California, for instance, home tours in the last week of March dropped from a year earlier. Redfin has also seen fewer prospective buyers reaching out to agents, and a decline in search activity for homes.”
“‘We’re seeing some early indications that a growing share of home buyers, especially in expensive coastal markets, are getting priced out,’ said Daryl Fairweather, chief economist at Redfin. ‘What I’m expecting is for homes just to start getting fewer offers, and sellers will have to give up some of their power. It will eventually filter down to prices.’”
From Bloomberg. “If you’re wondering where the U.S. real estate market might start to show its first cracks, keep an eye on Boise, Idaho. The pandemic work-from-anywhere revolution transformed it into one of the hottest markets in the U.S., but home prices are leveling off there. Typical home values in Boise rose just 0.4% last month, down from a 4.1% monthly pace in June, according to Zillow data.”
“The incredible pace of gains was never going to be sustainable, of course, and that’s true of many of the pandemic-era miracle markets, even if you’re ultimately bullish on their long-term prospects. The slowdown is hitting some Western mountain towns now, but it’s also likely to catch up with Austin, Texas; Phoenix; and Tampa, Florida, among others. For all their lifestyle appeal relative value compared with California or New York, some of these markets compressed a decade worth of home price appreciation into a couple of years — a development that became downright unhealthy.”
The Chicago Tribune in Illinois. “‘Some sellers don’t realize interest rates will affect the price they will sell their property for and the time it will take to sell,’ said Amy Kite, owner of the Kite real estate team. ‘Sellers need to understand the buyer who makes them an offer today may reduce their purchase price as interest rates increase. We have seen this happen in the last couple of weeks. Sellers need to understand the real estate market has shifted and they may need to negotiate a little more than they did in the past and certainly plan on it taking longer to find a buyer.’”
The Sacramento Bee. “CalPERS’ decision to abandon development plans for the tallest office tower in Sacramento will end up costing the pension plan tens of millions of dollars once all the tallies are calculated. It also draws to a close one of the last failures of the pension plan’s speculative real estate investment program that imploded during the financial crisis in the late 2000’s. While most of the failed investments are long gone from CalPERS current $40 billion real estate program, the project at 301 Capitol Mall was still listed as an active project until last week when pension plan CEO Marcie Frost said CalPERS was abandoning development efforts.”
“Even in the boom real estate market of 2006, the Capitol Mall project might have been too ambitious for Sacramento. The project included more than 700 high-end condominiums that started at $360,000 a unit. ‘I think most people were of the opinion that it was aspirational, that actually accomplishing a project of that scale was problematic,’ said Randy Getz, an executive vice-president at commercial real estate firm CBRE’s Sacramento office. ‘I don’t think a lot of people were surprised when the deal blew up.’”
The Globe and Mail in Canada. “If home prices stagnate or even fall over the next couple of decades, the reverse is true. People who have strained to gain a foothold in today’s real estate market will face years of zero or negative returns on their investment. The truly lucky people will be those who avoided buying a house at today’s lofty prices. In talking to housing market experts in recent months for other stories, I’ve been struck by how unsure even the gurus are about the long-term outlook for home prices. As one economist said to me, ‘There is no more efficient way to look like a fool than to make a housing price forecast.”
“The most likely catalyst for declines would be significantly higher borrowing costs. In early 2020, the Bank of Canada dropped interest rates to nearly zero to cushion the economic blow of the pandemic. That gusher of essentially free money helped propel home prices more than 30 per cent higher over the next couple of years. The gusher is now dry. In an emphatic reversal of its pandemic-era policy, the Bank of Canada doubled its key policy rate this week and signalled more hikes will follow.”
From Toronto Sun. “On Wednesday, after much anticipation, the Bank of Canada doubled the benchmark interest rate from 0.5% to 1%, marking the most aggressive rate hike since 2000. With the goal of reigning in inflation, this increase was far from a surprise. At some point, the flow of cheap money that floated us through the pandemic was sure to slow down. But for Canadians accustomed to cheap money while carrying record levels of household debt, and also facing rising costs in most every aspect of their life, it’s a sobering moment made all the more daunting by the reality that this is simply one of a number of rate bumps we are likely to see this year.”
“In the immediate short-term there will be people who have already bought at the peak and have been prepping their houses to sell. Now say they don’t read the paper or their agent doesn’t pay much attention to this market, they might have no idea what’s underfoot. They might still be banking on listing low and waiting for the bullies to roll in. They will likely wonder why they’re not being swarmed with showings. They will certainly be shocked when offer night rolls around and no one shows up to bid. Then, you can bet, they will be panicking.”
“I say this because this is exactly what is already happening. Last week, I watched as offer nights came and went on four houses that would have inarguably been a bun-fight mere weeks ago. Good, though maybe not great, houses in desirable neighbourhoods that pandemic buyers would have absolutely flung themselves at, in no way dissuaded by a bizarre layout, a mutual drive, or location on a busy corner.”
“The urgency has now vanished from the marketplace. The FOMO is gone. Buyers are still out there, absolutely, though perhaps in smaller numbers but certainly more inclined to sit back and wait. Those houses will surely sell, but it won’t be in the blowout we have grown so accustomed to seeing.”
“For those already feeling the agonizing pressure of how to make ends meet, this could well be more than a sting — it could be a death blow. Like the novice speculators who casually picked up an investment condo or two without ever considering the concept of negative cash flow. Or the buyers who paid Toronto prices for preconstruction in the ‘burbs who will find themselves unable to close after the bank appraises the property at less than they paid for it.”
From Mansion Global on the UK. “A grand Surrey estate known as Bishopsgate House has returned to the market for £32 million (US$41.8 million) after initially listing for £50 million) in 2018. ‘Despite the noise about overseas buyer demand returning after the pandemic it is a very price sensitive market,’ Becky Fatemi, director at Rokstone, told Mansion Global. ‘You cannot stretch or tempt a buyer out of their price bracket this spring, they will only view what is firmly in their range.’”
“Ms. Fatemi told Mansion Global, ‘The family have left the property and don’t live there anymore. They have moved on. Although they have had rental offers they are now extremely motivated to sell, hence the significant price adjustment.’”
From Stuff New Zealand. “There’s a cruel irony that it’s the cost of living and inflation helping to send house prices tumbling. After giving house hunting a break, I was surprised to find myself alone at several open homes in Wellington recently. I noted uncleaned, untidy properties, without building reports or LIMs, before walking out the door again.”
“After many years of having the upper hand, vendors may find themselves in an uncomfortable position: a buyer’s market. I know what you’re thinking – stories of vendors with million-dollar stars in their eyes struggling to get the For Sale sign off their lawn are unlikely to move anybody, particularly when people are having to choose between eating, or putting fuel in their vehicle.”
“It’s both my privilege and my terror that I’m now both buyer and seller. One of those open homes resulted in a successful offer, and now I’m wading into the territory of first-time vendor. When I contemplated selling about a year ago, I had real estate agents leaving me chocolates and calling cards – one even offered to help me finish my renovations. This time, I detected a slight grimace when I asked whether it was realistic to secure a sale within seven weeks.”
“It’s funny how the heady years of astronomical price growth turn you into a greedy homeowner, though. Faced with the reality of what my sweet home of four years might sell for, I’ll admit, I was disappointed. Those who took on million-dollar mortgages in those blissful days of 2.5 per cent interest rates, and 10 per cent deposits, are probably sweating more than me. Or spare a thought for those who bought homes off the plans for a small fortune, and are now in a parallel universe where their home still hasn’t been built in a market that’s down turning.