A report from the Daily Mail. “In his three-minute call, Vishal Garg CEO of mortgage lender Better.com Vishal Garg, said that the ‘market has changed’ – meaning savage cuts to the $7 billion company’s workforce were needed to avert disaster. Two others said that Garg warned next year would be a ‘bloodbath.’ Garg told Fortune his ‘bloodbath’ comment had been taken out of context and was a broader reference to the mortgage market.”
The New York Post. “Garg added just half an hour after the firings that he was trying to create ‘Better 2.0,’ with a ‘leaner, meaner, hungrier workforce.’ The company had hired the ‘wrong people’ and had lost $100 million the previous quarter, he went on.”
The Real Deal. “iBuyers were all the rage in the third quarter, accounting for a record share of the housing market. But the new heights for selling and buying came at a price. Homeowners sold 27,244 homes totaling $10.6 billion through iBuying services, according to Zillow’s report for the third quarter, which evaluated the four largest: Opendoor, Zillow Offers, Offerpad and RedfinNow.”
“The median price of homes sold to an iBuyer was $376,000 in the third quarter, a record for the sector and a big jump from $333,000 in the second quarter. Selling to an iBuyer may have also been more lucrative than going the traditional route, as the median price of third-quarter iBuyer purchases was 13.9 percent higher than for the market overall.”
“While iBuyers were spending a lot, they weren’t necessarily making a lot. The median markup was 1.8 percent, down almost 5 percentage points from the 6.7 percent median markup in the second quarter. In eight of the 36 markets analyzed by Zillow, iBuyers sold a typical purchased home at a loss; Austin saw the biggest median loss at 7.7 percent.”
From Arizona Family. “In 2022, we might see less action from instant buyers, more commonly referred to as iBuyers. According to Zillow Research, homeowners in the Phoenix area sold almost $1.5 billion worth of homes to iBuyers last quarter, representing about 12% of all homes sold in the area. But one of the major players, Zillow Offers, is getting out of the business, telling investors it is too risky. ‘I think what it sends is a signal to the marketplace, and to the iBuyers in general, that that model may not be working,’ said Phoenix real estate agent Trevor Halpern. As of early December, Zillow said it had offloaded about 50% of the homes it bought.”
The Colorado Sun. “Aspen’s city council this week stopped issuing not just short-term rental permits, but permits for all home construction. A long line of fiery residents blasted the five-member council’s plan Wednesday night. Kim Raymond, an Aspen architect, said ‘many people will be devastated by this.’”
The Los Angeles Times in California. “An Encino real estate broker was sentenced Monday to more than 10 years in prison for her role in a family fraud ring that stole $18 million in emergency pandemic loans largely through fake businesses in the San Fernando Valley. Tamara Dadyan, 42, is one of eight convicted conspirators in the scam that was led by her brother-in-law, Richard Ayvazyan. Ayvazyan and his wife, who bought a $3.25 million house in Tarzana with proceeds from the loan scam, were convicted at a trial in June, but fled after slicing off their ankle monitoring bracelets.”
“Both Dadyan and her husband are awaiting trial on unrelated state mortgage fraud charges.”
From News.com.au in Australia. “‘It takes eight years to save for a deposit in Sydney and seven years in Melbourne,’ AMP Capital chief economist Shane Oliver said last week. ‘This is now squeezing out first home buyers yet again (who have seen their share of new housing finance fall from 25 per cent to 18 per cent since December) and increasingly existing owners looking to trade up are being squeezed out as well. The puff is coming out of the property market,’ he said.’”
The Sydney Morning Herald in Australia. “Home buyers are showing signs of fatigue in the face of sky-high property prices, with the median auction price for houses falling slightly last month in Sydney and Melbourne, figures show. ‘The sentiment of a buyer is changing, they’re more wary of not overpaying for a home,’ Domain chief of research and economics Nicola Powell said. ‘There’s this light at the end of the tunnel for buyers – they know if they miss out on this home they don’t need to go gung-ho on a single property at auction … The next opportunity is around the corner.’”
The Daily Mail. “Embattled Chinese property giant Evergrande was officially declared in default for the first time, as it admitted it won’t be able to pay back its debts. Fitch Ratings downgraded the property developer on Thursday night to a restricted default rating after it failed to make repayments on bond debt. The company was given a month-long grace period to meet repayments – to the tune of $A260million – but the credit assessor said Evergrande didn’t respond to requests for confirmation of payment.”
“Bloomberg journalist Srinivasan Sivabalan Tweeted on Thursday that the nation’s real estate debt crisis has ‘breached a red line.’ ‘Evergrande has defaulted on its dollar-denominated debt,’ Mr Sivabalan wrote. ‘About 95% of Evergrande’s >$300 billion debt is local. The default on $19.2 of dollar bonds sucks foreigners into China’s problems. Makes clear no bailout is coming.’”
From Bloomberg. “When China Evergrande Group finally acknowledged the need for a debt restructuring last week, the embattled property giant pledged to ‘actively engage’ with offshore creditors to create an overhaul plan. But the reality is that both Evergrande and its bondholders are likely to have little control over what happens next.”
“That power lies with China’s Communist Party, including authorities from Evergrande’s home province of Guangdong. Officials from the province dominate a risk-management committee unveiled by the developer this week to guide its overhaul. That’s unlikely to involve a bailout, with People’s Bank of China Governor Yi Gang saying Thursday that Evergrande will be dealt with in a market-oriented way.”
“Regulators have made it clear they have no appetite for an Evergrande rescue. At the same time, they’re now deeply involved in management of the company. Guangdong said last week it would dispatch a team to Evergrande to ensure ‘normal’ operations. The company has $19.2 billion in offshore dollar bonds outstanding, the most among Chinese developers. Another risk for creditors is the firm’s guarantees on related-party debts, including private placement bonds with limited disclosure. How much bargaining power do offshore bondholders have?”
“Not much. Some offshore bondholders see little use in pressing their case in Chinese courts, given the government’s heavy involvement in the overhaul. The fact that this is a cross-border restructuring with debt-issuing units listed in multiple jurisdictions creates another challenge for bondholders trying to get organized and show a united front. Evergrande’s overseas obligations also include bonds with keepwell provisions. These are essentially a gentleman’s agreement that often involves a pledge to keep an offshore issuer solvent, which may not be legally recognized in this restructuring.”