A report from Fast Company. “On October 12, 2021, in a sprawling desert community just 7 miles southwest of the Las Vegas Strip, Zillow closed a sale on a four-bedroom home at 7456 Grizzly Giant St. Just five days later, Zillow paused its iBuyer program, and on November 2, 2021, it shuttered the program altogether. Not long afterward, sources told me that Zillow was selling many of the homes from its books to institutional homebuyers. Those institutional sales included the four-bedroom home on Grizzly Giant Street. Zillow bought it for $381,614 only to sell it two months later to an LLC owned by Pretium Partners for $354,053. After finding success with its pilot home-flipping business in Phoenix and Las Vegas, the real estate listing site took the program, known as Zillow Offers, nationwide in 2018. Of course, it didn’t go as planned, as Zillow lost $881 million on home flipping in 2021 alone.”
The Real Deal. “South Florida agents say this season is delayed and inconsistent, but definitely still better than other top luxury markets. Price cuts are spurring sales, as buyers are expected to jump into the market as summer approaches. In Miami Beach and other barrier island markets including Bal Harbour and Indian Creek, 10 luxury single-family home sales closed in the first quarter, up 25 percent from eight sales during the same period of last year, according to the Miller-authored Douglas Elliman reports. Still, the median price for luxury homes fell 28 percent to just over $13 million. In Palm Beach, the overall number of single-family home sales and their median price each rose in the same time period. Isolating the top 10 percent of the market, luxury home and condo sales fell 10 percent to nine closings; and the median price fell 18 percent to $14 million.”
“Nelson Gonzalez, a top agent with Berkshire Hathaway HomeServices EWM Realty, said ‘huge demand’ still exists. ‘It’s just the very high-end buyers thinking the market is going to come down.’”
From Moneywise. “Jeff and Kim Haynes had their home in Rutland, Massachusetts, hoisted six feet into the air to make way for a new foundation after discovering deteriorating concrete in their basement. ‘It was about a year and a half ago that I noticed some cracking,’ Jeff told WCVB Channel 5 Boston. ‘I obviously wasn’t thinking it was going to be this.’ It was only after the Haynes had their basement drywall removed to inspect the issue that they found the concrete was infected with pyrrhotite — a naturally occurring mineral found in parts of New England that can compromise structural integrity if present in the aggregate material used to make concrete.”
“It’s a problem that homeowners insurance won’t cover and banks won’t provide loans for, since the value of the property sinks, according to WCVB. The Haynes say they’ll be coughing up over $250,000 for the work to fix it. ‘All of the sudden, one day, you start to notice cracks in your basement, and you come to find out that your house is worthless,’ state senator Peter Durant told WCVB. ‘That’s devastating for anybody to have to face.’ So far, state officials believe around 7,500 homes across Massachusetts could be at risk of pyrrhotite contamination.”
The Philadelphia Inquirer. “After more than two years of pursuing a consumer-protection case against ABC Capital — a Philadelphia company that ran a Ponzi-style international investment scheme fueled by distressed real estate and low-income tenants — Pennsylvania’s Office of Attorney General has reached an agreement with the company. The agreement, filed last week in Philadelphia Common Pleas Court, says the attorney general alleged that ABC and its chief executive, Jason ‘Jay’ Walsh, engaged in unfair or deceptive trade practices. But under the terms, Walsh will avoid paying fines or admitting wrongdoing, and he and his partners will be allowed to make real estate deals in the state. ABC and Walsh will be barred from running a property management company in Pennsylvania for 25 years, but are permitted to operate rental units using third-party property managers.”
“ABC was the subject of a 2022 Inquirer investigation that found Walsh and his partners collected funds from hundreds of investors from more than a half-dozen countries with promises to buy, renovate, and rent out rowhouses to generate steady returns. ABC was involved in the purchase of some 1,900 Philadelphia properties through hundreds of shell companies, before moving on to other U.S. cities. But investors said that after taking their money, ABC did not complete the renovations. Karla Cruel, a lawyer who has represented tenants dealing with ABC, said the lack of more aggressive enforcement efforts has contributed to a culture of impunity for real-estate fraudsters. “This encourages people to involve themselves in real estate schemes, [telling them], ‘In the end, nothing really happens to you, so go for it.’”
From KQED. “Dozens of California homeowners allege an Oakland-based lending company conspired with contractors to issue fraudulent loans for home improvement projects that were never completed. Nearly 160 complaints have been filed against the financial lending platform, Solar Mosaic, since 2019, according to data from the Consumer Financial Protection Bureau. And on Monday, a group of nearly 100 people drove from Los Angeles to protest outside Solar Mosaic’s headquarters in downtown Oakland, demanding to meet with the company and seek loan forgiveness and repayments.”
“Maria Amaya drove from her home in Hollywood to Oakland to join Monday’s protest. She paid thousands of dollars for her loan in cash and now wonders if she’ll be able to recoup the money. ‘They sent an email showing me blueprints of the plans they had finished, but when I went to the city, they had not received any plans or approved a permit or anything,’ Amaya said through a Spanish translator on Monday. ‘That was my life savings, my retirement.’”
Bisnow Los Angeles in California. “Local commercial real estate investor Jade Enterprises put its 24-story office tower at 660 S. Figueroa St. up for sale after 10 years of ownership. The office building is 37% leased now, but 12% of that is set to expire in the next three years, The Real Deal reported. Jade Enteprises bought the tower in 2014 for $80M and has spent $12M on upgrades and tenant improvements, according to public records. TRD estimates that a sale will happen at a hefty discount to replacement cost, which is estimated to be about $254M, or $900 per SF. It also seems likely that the building will trade for a good deal less than what Jade Enterprises paid. Office prices are dropping, and each sale seems to indicate that more discounts are to come. ‘2024 will be the year that more owners decide to sell their properties at a loss or realize that they need to convert or redevelop their properties to non-office use,’ according to a first-quarter 2024 report from Savills.”
Market Watch. “The roughly $20 trillion U.S. commercial real-estate market has been facing a big liquidity crunch that looks to get worse if interest rates stay high as a deluge of debt comes due. The potential for more carnage was in focus on Tuesday during a House committee hearing on the health of commercial real estate and regulatory changes that could possibly help stave off a crisis. ‘We are not seeking a bailout,’ said Jeffrey DeBoer, chief executive at the Real Estate Roundtable, a major industry lobbying group, in testimony in Washington, D.C. Instead, DeBoer talked of a ‘slow moving train wreck’ bearing down on commercial real estate, especially with a backdrop where liquidity has been pinched and with roughly half of the estimated $4.7 trillion of the debt on commercial buildings set to mature through 2027. Many of ‘these mortgages need to be extended and restructured,’ DeBoer said, adding that the banking system isn’t currently encouraged to do that.”
Blog TO in Canada. “An Ontario home sold significantly below its original selling price earlier this year demonstrates just how prices tend to fluctuate in the province’s turbulent real estate market. Located in Hamilton’s Huntington neighbourhood, this quaint three-bedroom, two-bathroom bungalow originally sold for $981,000 in January 2022. Just a few months after it was sold, the home was relisted for $1.225 million in July 2022 but was terminated a short while after. One month later, the property was listed for just shy of $1.2 million, although this price reduction failed to attract any buyers.”
“The bungalow saw a heavy price reduction in September 2023 when it was relisted for $879,000, although the discount was not enough to draw in any buyers. In November 2023, the home was relisted for a sixth time at $889,000, but once again sat on the market for months before being terminated in January 2024. Finally, the home was relisted for $689,900 in February 2024 and successfully sold just above its asking price for $720,000, although this amount was roughly $260,000 less than it was originally sold for just two years earlier.”
The Globe and Mail in Canada. “Saskatoon financial planner Janea Dieno says she’s seen a wave of financial pessimism pass through her clients as interest rates and inflation have risen. ‘Our conversations are centred around what they can expect to pay on their mortgage payment when it comes up for renewal,’ Ms. Dieno says. ‘The discussion is scary, as some clients are expecting [an increase of] anywhere from $500 to $2,500 a month on mortgage payments just because of the increase in interest rates. I think that is the leading cause of financial anxiety amongst homeowners.’”
“The most recent instalment of the survey, issued in early April, found almost half of Canadians (45 per cent) say they are $200 or less away from ‘failing to meet all their financial obligations, including three in 10 (31 per cent) who are technically insolvent and say they already can’t cover their bills and debt payments each month. Additionally, more than half (54 per cent) say if interest rates go up much more, they will be in financial trouble,’ the company states in a release.”
“MNP president Grant Bazian says his company’s insolvency trustees are seeing increased use of payday lenders among people making more than $60,000 annually, and that the numbers of people seeking insolvency services is ‘back to pre-COVID levels in many regions in the country’ and coming from every financial cohort. ‘When I talk to the trustees across the country: People are living beyond their means to keep a lifestyle,’ says Mr. Bazian, who is based in Vancouver. ‘Keeping up with the Joneses is a lot of stress. People see friends and family growing their lifestyle, and they might not be able to afford it, but are doing it anyway.’”
Cornwall Live in the UK. “A mobile home owner living in a park owned by controversial ‘Gypsy Billionaire’ Alfie Best says he regrets ever buying one due to huge bills and ‘bubbling’ sewage. Brian Smith, 57, says his home in Little Trelower Park, just outside of St Austell, is ‘unsellable’ due to an ongoing problem with sewerage charges and infrastructure. The problem is so bad he claims his neighbours sewage ‘bubbles up’ through their bathroom when the tanks are full. The retired resident lives with his wife in the Wyldecrest Parks property they purchased in 2022 and says the tanks have to be emptied every six days because ‘something is not right’ with the system. ‘It’s beginning to make our properties unsellable because it’s giving us such a bad name,’ he said. ‘Who is going to want to buy a property on a Wyldecrest Park in a minute?’”
The Telegraph. “Taxpayers will cover £85bn of losses made by the Bank of England on its quantitative easing programme which began during the global financial crisis. The Bank of England is in the process of getting the bonds off its books but £704bn of gilts remain. Quantitative easing will lose about £20bn a year until the early 2030s, according to the latest estimates by the Bank of England, which is equivalent to a third of the defence budget. Successive Chancellors agreed to indemnify the Bank against any losses on the scheme, leaving the taxpayer on the hook for the losses. estimates. Losses are mounting from the £895bn bond-buying scheme carried out between 2009 and 2021.”
New Zealand Herald. “The pain of high interest rates and a sluggish economy are only expected to keep weighing on those with debt. Banks are bracing for the value of bad mortgage debt to rise by around 40 per cent between now and the end of the year. They’ve told their prudential regulator, the Reserve Bank (RBNZ), they expect 0.7 of their housing loans will be ‘non-performing’ by the end of the year. In March, 0.5 per cent, or $1.8 billion, of banks’ $352b of housing debt was non-performing. Non-performing loans include those that are more than 90 days past due, as well as those that are ‘impaired,’ meaning the bank has reason to believe the borrower won’t meet their repayment obligations.”
“The RBNZ expected the average interest rate paid by those with mortgages to rise from around 6 per cent in February to 6.5 per cent by the end of the year. Back in 2021, the average interest rate being paid by mortgage holders was only 2.8 per cent.”