A report from Geek Wire. “‘We’ve tied up hundreds of millions of dollars in houses that you yourself wouldn’t want to own right now,’ Redfin CEO Glenn Kelman wrote. ‘Even before its overhead expenses, the RedfinNow properties segment will likely lose $22 – $26 million dollars in 2022.’ Kelman said ‘we’ll be ridiculed for thinking’ that RedfinNow could have succeeded. Shares are down more than 90% this year.”
From Yahoo Finance. “Buyers canceled nearly a third of deals in D.R. Horton Inc.’s fiscal fourth quarter, up from 19% a year ago, the Texas-based company said. The company is responding by walking away from land deals that don’t meet certain metrics as the market has shifted, writing off $34 million of deposits and expenses tied to the transactions, and offering more incentives to sellers to close deals. D.R. Horton quarterly results also echoed what Pultegroup previously reported in its latest earnings release. Order cancellations increased 24% in the period, up from 15% in the second quarter and 10% a year ago, while purchase contracts fell 28% from a year ago.”
“‘What it’s going to come down to is we need a stabilization [of] rates — full stop — that’s what we need,’ John Lovallo, an UBS analyst, told Yahoo Finance. ‘If rates were to continue to go up from here, it’s going to be very challenging.’”
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. ‘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.’”
KVVU in Nevada. “New home construction boomed in the Las Vegas valley in 2021, a former field supervisor reveals why homeowners are discovering problems barely a year in. ‘These homeowners at the end of the day to upper management they’re just a number- they are a sale,’ this former field supervisor said. ‘We had to delay one house two months because the framers somehow built the entire second story incorrectly with a bathroom that wasn’t supposed to be there.’ He said they had to work with homeowners who were being pressured by loan lock dates or interest rates rising.”
“‘Homeowners debt to income ratio had fluctuated and if we didn’t close by the end of their loan lock and they were going to have to re-evaluate their credit they would actually no longer qualify for the home that’s been delayed construction for months,’ the field supervisor said. This field supervisor said the business of home building became a rat race. ‘You had to get as many sales in as possible and hope that the trades could keep up with the work,’ the field supervisor said. ‘They you know can compliment themselves about how many houses they close every month and every quarter because to them that’s success but to us out there in the field every day it was a failure.’”
The Houston Chronicle in Texas. “Houston home sales stumbled for the seventh consecutive month in October — with even high-end home buyers taking a step back. Single-family home sales fell nearly 23 percent in October as buyers at almost every price point dropped out of the market, the Houston Association of Realtors reported. ‘We’re just having to readjust our sellers’ expectations,’ said Jennifer Wauhob, HAR Chair. ‘It’s not the same market that it was last year. You need a good marketing plan and you need to plan to be on the market for a month or more.’”
From Moneywise. “Kay Kingsman bought her very first home in the summer of 2021 — but now wishes she hadn’t. Kingsman, a travel blogger based in Portland, Oregon, says she decided to buy since she had plenty of money saved up from not traveling during the pandemic and mortgage rates were extremely low. She and many other pandemic homebuyers rushed into making a purchase that didn’t fully align with their needs — and they’re currently contending with the ramifications. Kingsman recounts finding beard shavings in the bathroom and the carpet smelling of cat urine when the previous owners vacated. The water pressure was weak and the air conditioning was busted.”
“She also discovered she had no parking privileges thanks to a messy lawsuit they left behind. ‘It’s just been a complete headache,’ she says. ‘[Homes] were selling so much above market rate. I didn’t want to wait too long,’ explains Kingsman. ‘And I was kind of swept up in this fast go, go, go motion.’ She hopes to eventually sell or rent out the home. ‘I feel like a lot of people are very sentimental about their first home and stuff, and I just can’t wait to get out.’”
From 425 Business in Washington. “More homes were available for buyers in King and Snohomish counties in October, and though pending and closed sales both declined. Looking at the 26-county NWMLS region, median sales prices for single-family homes and condominiums combined rose in most of the counties. The median sales price hit $595,000, up 3.5 percent from October 2021, though it went down about 9 percent from May, when prices peaked at $660,000, NWMLS said.”
From Bisnow San Francisco in California. “Meta’s dismissal of more than 11,000 employees Wednesday is the starkest indicator yet of a reckoning in the tech industry with ripple effects into the economy and office market in San Francisco and Silicon Valley. Tech industry layoffs have plagued the city and greater Bay Area in recent weeks, with Twitter and Meta’s dismissals being some of the larger examples, along with companies like Stripe and Chime.”
“‘These are companies that were just a few years ago flush with cash and taking on major new real estate obligations. I think what you’re seeing now is these companies, you know, pull back from this and recognize the enormous cost savings associated with hybrid working,’ The Boyd Co. President John Boyd told Bisnow. ‘And developers in New York are really freaking out about this,’ Boyd said of turmoil in tech. ‘I mean, the few bright spots in the office market, San Francisco and San Jose and in New York, that were, you know, major tech leases.’”
From Bloomberg. “Canadian real estate lender Romspen Investment Corp. has halted redemptions on its largest fund after a number of borrowers stopped making payments. The Toronto-based firm will ‘temporarily defer payment’ of redemptions until it’s clearer when borrowers will repay the loans and the fund can get cash from asset sales, according to a letter to investors dated Nov. 8. ‘Loan payoff activity remains suppressed.’ The move underscores the growing stress in the nation’s real estate market as a sharp rise in interest rates changes the economics of commercial projects and disrupts the housing market.”
“The Romspen Mortgage Investment Fund had $2.8 billion invested in 134 mortgages at the end of June, about evenly divided between Canadian and U.S. projects. Managers are now working to accelerate the sale of some assets to free up cash. Private lending funds gained popularity among investors hungry for yield during the era of rock-bottom interest rates. But mortgage finance vehicles have had a difficult year as rates increase. The rise in borrowing costs is also hurting developers as they seek capital to build new projects or refinance existing ones.”
“When developers can’t catch up on their payments, Romspen forecloses and deploys teams to continue work on projects before selling them.”
The Globe and Mail in Canada. “The Toronto-area fall real estate market is entering the final stretch of 2022 with dispirited buyers, a lack of inventory and the table set for an interest rate hike in December. The cautious mood in November follows a sombre October which saw sales in the Greater Toronto Area tumble 49.1 per cent compared with October, 2021, according to the Toronto Regional Real Estate Board. The average price in the GTA dipped 5.7 per cent from a year earlier to stand at $1.089-million at the end of October.”
“Rochelle DeClute, broker at DeClute Real Estate Union Realty, says rising interest rates have offset the drop in average price. House hunters who line up a preapproved mortgage and fail to buy before it expires find out they are approved for less each time they apply for a renewal. ‘They’re preapproved for a certain price and that price keeps dropping,’ she says. ‘That’s been discouraging. Meanwhile, the family money that propelled many first-time and move-up buyers during the run-up in prices during the pandemic is not as readily available.’”
“Some homeowners see a property in their neighbourhood sell quickly and expect the same result, she says. If their own house lingers, it’s hard for homeowners not to take it personally. ‘The reality of living through it is something sellers are not prepared for,’ she says.”
“Pritesh Parekh, real estate agent with Century 21 Legacy Ltd., says he is encouraging prospective buyers to figure out the repercussions for their budget if mortgage rates climb higher or they face economic hard times. ‘They should be asking the questions I don’t think people were asking two years ago,’ says Mr. Parekh, who has a background in finance. ‘As much as the stress test helps, do your own stress test.’”
“The impact of higher interest rates tends to hit borrowers about 12 to 18 months after rates begin to rise, Ms. DeClute says, so she is just now receiving the first calls from concerned homeowners. One buyer who purchased during the pandemic planned to hold onto the house for about five years and then use the profits from a sale to fund his retirement. But the increase in rates has made that plan unviable. ‘He felt strongly the market is going to continue to decline and he wants out.’”
“She is also hearing from families who have tighter cash flow than they had when they bought their house. Some have kids in expensive activities such as hockey and dance and they will have trouble stretching to make mortgage payments at higher rates. Ms. DeClute says some are running the numbers and deciding to simplify their lives. ‘They’re saying, ‘I don’t need to be in this pocket’, or ‘I don’t need this huge house.’”
The Copenhagen Post. “Housing prices are plummeting at the same pace they rose during the Corona Crisis. The Danish housing market is experiencing its steepest downturn since 2011. House prices fell by a whopping 1.6 percent in October and apartment prices by 2 percent to the extent that housing is already cheaper than it was this time last year. For example, in October 2021, the average house cost 17,329 kroner per sqm and apartment 34,431. Today, they cost 17,098 and 33,335 respectively. At this rate, prices will soon fall to pre-pandemic levels.”
“‘In the autumn of 2020, the demand for both houses and apartments had really started to increase, and buyers in many places were almost in line to buy a home,’ housing economist Birgit Daetz told Boligsiden. ‘This created fertile ground for the significantly increasing sales prices, which we especially saw in the spring of 2021. Now we have the exact opposite situation.’”
Newshub New Zealand. “The number of towns, regions, and cities hitting double-digit home value declines this year is growing, new data shows. Wellington – at a value decline of -17.6 percent – led the way for main centres and is alongside Auckland (-11.7 percent), Hamilton (-10.5 percent), Napier (-11.6 percent), Hastings (-11.5 percent), Palmerston North (-13.7 percent), and Dunedin (-10.4 percent).”
“The Auckland region’s average rate of home value decline has now officially hit double figures for 2022. The regional average is now a -11.7 percent decline in the 10 months to the end of October. Only Rodney (-7.2 percent) and Franklin (-8.9 percent) remain in single-digit declines, with the largest average reductions occurring across Auckland’s central suburbs (-12.4 percent), on the North Shore (-12.1 percent), and out west in Waitakere (-11.9 percent).”
“Local QV valuer Hugh Robson said with interest rates continuing to creep up – which is putting large numbers of potential home buyers off – and an increasing number of new listings, the market may start summer with a flood of unsold stock. ‘In fact, some agents continue to report having difficulty convincing sellers that the market is not what it was last year, meaning that their expectations are often well above the reality of the current market.’”
DTI News on Vietnam. “The property market is ‘struggling and risks falling into a slump,’ Lê Hoàng Châu, chairman of the HCM City Real Estate Association, has warned. Many companies were struggling to access bank credit, issue bonds and mobilise funds from customers, and were even resorting to selling their assets or products at large discounts or seeking risky loans at high interest rates, he said. Some had cut their payroll by up to 50 per cent, he said.”
“‘There is an oversupply of premium housing and lack of affordable commercial and social housing, and so more policies to increase the supply of the latter are urgently needed,’ he said.”
From Bloomberg. “China’s deepening property crisis is piling pressure on a $1.6 trillion corner of the country’s onshore bond market, as cities and local administrations step in as white knights to bail out troubled developers in a state-backed bid to aid the sector. After replacing builders as the biggest buyers of land earlier this year, the nation’s so-called local government financing vehicles, or LGFVs, have now become the main purchasers of half-finished projects of defaulters including China Evergrande Group. Their increasing involvement in real estate has analysts raising red flags.”
“David Qu and Chang Shu at Bloomberg Economics estimate total LGFV debt, including bank borrowings, to be as much as 60 trillion yuan, or about half of China’s GDP. Defaults would have major consequences, they said. LGFVs rose to prominence in the wake of the global financial crisis, when they played a crucial role in funding roads, bridges and subways as the central government stepped up stimulus to keep the world’s No. 2 economy humming. The phenomenon of LGFVs buying pending projects is especially acute in the southern Guangdong province.”
“As long as more developers slip into distress with China’s longest-ever home-market slump showing no signs of abating, there will be more pressure on LGFVs to help, said Ivan Chung, an analyst at Moody’s. Cities with strained finances will feel the pinch, he added. ‘LGFVs in economically weaker cities already carry higher credit risks,’ Chung said. ‘If halted projects there have big cash holes to fill, it may bring further risks to the LGFVs overseeing their deliveries.’”