A report from Arlington Now in Virginia. “In terms of homes experiencing a price reduction in Arlington County, things are hot, hot, hot. Within the past week, we’ve seen a nearly 20% uptick in these listings. Approximately two listings per day in Arlington County are having their prices reduced. It’s important to remember — these are just the owners that are proactively cutting the prices of their listings, let alone what may be negotiated down the line.”
The Jamaica Plains Gazette in Massachusetts. “I and others were hoping the fall market would be more robust, so far the condo market remains softer than it had been previously in 2021 and in past years. More condos have been coming on every week, and it just doesn’t seem like there’s enough buyers out there to keep up with the pace of the new condo listings. This is a significant change from past months and years. Again, this has also affected the single family and multi-family market, but not as much. – Ken Sazama, Compass, Sazama Real Estate.”
The Daily Independent in Arizona. “Two Glendale ZIP codes have been ‘cooling off in recent weeks,’ according to the report. Homes in 85310 have seen median list prices drop from $524,000 to $499,450, and the inventory has grown by six. ‘We’re already seeing prices move lower as a result,’ industry tracker Altos Research noted of 85310. The median list price in 85306 also has experienced a drop in four weeks, going from $427,000 on Sept. 6 to $406,000 on Tuesday.”
From Mortgage News Daily. “Both CoreLogic and Black Knight have looked at the million plus home loans that are still in forbearance as the majority of those borrowers are quickly approaching the end of their eligibility. Borrowers who are behind on payments generally have much higher unpaid principal balances as well as larger scheduled monthly payments than those who have stayed current. This is true even before arrearages are considered.”
“Black Knight, as part of its August Mortgage Monitor, looked at what has been touted as a safeguard against widespread post-forbearance foreclosures and says, ‘holding equity in one’s home might not be the blanket backstop to foreclosure activity everyone hopes.’”
“During the Great Recession homeowners with little equity were most likely to be referred for foreclosure, but since 2010 borrowers who are 120 days in arrears have similar rates of foreclosure starts regardless of equity. Ben Graboske, president of Black Knight Data & Analytics says of those who fail to take advantage of selling through traditional channels, ‘Whether [this is] due to lack of understanding of their equity positions or the foreclosure process in general is unclear. But given the large number of high equity homeowners currently struggling to make their payments, this represents a significant challenge for the industry: how to educate struggling homeowners on the post-forbearance, foreclosure and – if needed – home sale processes, to limit unneeded stress on homeowners and the market alike.’”
“Clouding the future of these borrowers even further, Black Knight says the white-hot housing market that has been driving increased equity has begun to show signs of cooling. Early reports on September sales suggest that cool down has continued.”
The Mercury News in California. “Financial and construction woes have jolted San Jose and Fremont residential projects linked to a failed developer and might imperil teacher and public employee pension funds invested in the properties. The housing projects that are hobbled by the problems created by Silicon Sage Builders and the company’s founder Sanjeev Acharya are The Almaden, a 91-unit residential complex on Almaden Road in San Jose; and Savant at Irvington, a 93-unit residential project on Osgood Road in Fremont.”
“The Securities and Exchange Commission has accused Acharya and Silicon Sage of fraud. Silicon Sage has been shoved into court-ordered receivership. The problems with the San Jose and Fremont housing developments are so severe that all of the investments in the two big residential complexes are in danger of being wiped out even if the projects are completed, TriGate Capital warned in documents filed with the U.S. District Court.”
“Also at risk of being completely erased: an unspecified amount of pension money from teachers’ and public employee retirement funds that were invested in both projects in the wake of assurances from Acharya that the residential complexes were bolstered by sturdy financial foundations — when the opposite was the reality.”
From Bloomberg. “China’s property industry has suffered its first default on a dollar bond since China Evergrande Group sank deeper into crisis in recent weeks, fueling investor concerns over other highly leveraged borrowers and about global contagion. Fantasia Holdings Group Co., which develops high-end apartments and urban renewal projects, failed to repay a $205.7 million bond that came due Monday. That prompted a flurry of rating downgrades late Tuesday to levels signifying default.”
“Creditors are now scanning debt repayment calendars as they try to suss out where the next flashpoints across the increasingly strained property industry may be. One date in investors’ focus is Oct. 15, when Beijing-based Xinyuan Real Estate Co. must repay a $229 million outstanding on a dollar bond. Fitch slashed the company’s rating by one notch to CCC last month, citing ‘heightened refinancing risk’ on the firm’s upcoming maturity in October.”
From News.com.au. “China Evergrande Group’s stunning downfall has dominated headlines for weeks now – and now, countless empty, towering Evergrande developments reveal the true extent of the catastrophe. According to research company Capital Economics, there are more than a million units Evergrande has already sold and promised to build, leaving buyers potentially in the lurch.”
“In a new analysis by The Wall Street Journal, the authors argue that while ‘global investors are worried the crackdown could trigger financial market distress or a protracted real estate downturn’, everyday people who bought apartments in unfinished blocks are simply ‘wondering where their money went.’”
“The publication spoke to a farmer, identified only as Jiang, who said she had recently paid 890,000 yuan ($A189,313) for an unfinished apartment in Lu’an’s Jade Palace development. But work on the project stopped months ago, leaving investors frantic. ‘We spent all our family’s savings on this apartment,’ Jiang told The Wall Street Journal. ‘We really don’t know what to do.’ The publication reported that smaller cities like Lu’an had been the hardest hit by Evergrande’s possible demise, as ‘rows of residential towers, some 26 storeys high, stand unfinished in this provincial city.’”
From Reuters. “New Zealand’s central bank hiked interest rates on Wednesday for the first time in seven years, becoming the second major developed economy to raise rates and one of several to dial back hefty stimulus unleashed in the wake of the coronavirus crisis. Norway’s Norges Bank last month hiked its key rate 25 basis points to 0.25% and forecast four more hikes by end-2022. Bank of Canada Governor Tiff Macklem believes the economy is moving closer to the point where the central bank will no longer need to continue adding stimulus via quantitative easing.”
“The message from the Federal Reserve is clear: it will likely begin reducing $120 billion monthly bond purchases in November and rates could rise faster than anticipated. A hawkish shift by the Bank of England last month has put markets on alert that rates in the world’s fifth biggest economy could rise sooner rather than later. The European Central Bank has taken a first small step towards unwinding emergency stimulus – it will trim emergency bond buys over the coming quarter.”
From Project Syndicate. “Central banks are the only economic actors capable of addressing the funding and market-liquidity crises that are now part of the new normal. There is not enough resilience in non-central bank balance sheets to address a fire sale of distressed assets or a run on commercial banks or other systemically important financial institutions that hold liquid liabilities and illiquid assets. This is as true in China as it is in the U.S., the eurozone, Japan, and the United Kingdom.”
“China’s real-estate bubble—and the household debt secured against it—is likely to implode sooner or later. The dangerously indebted property developer Evergrande could well be the catalyst. But even if Chinese authorities manage to prevent a full-fledged financial meltdown, a deep and persistent economic slump would be unavoidable. Add to that a marked decline in China’s potential growth rate (owing to demographics and enterprise-hostile policies), and the world economy will have lost one of its engines.”
“Across the advanced economies (and in many emerging markets), risk assets, notably equity and real estate, appear to be materially overvalued, despite recent minor corrections. The only way to avoid this conclusion is to believe that long-run real interest rates today (which are negative in many cases) are at or close to their fundamental values. I suspect that both the long-run real safe interest rate and assorted risk premiums are being artificially depressed by distorted beliefs and enduring bubbles, respectively. If so, today’s risk-asset valuations are utterly detached from reality.”
“Central banks, acting as lenders of last resort (LLR) and market makers of last resort (MMLR), will once again be the linchpins in what is sure to be a chaotic sequence of events. Their contributions to global financial stability have never been more important. The goals of 2% inflation and maximum employment can wait, but financial stability cannot. Since LLR and MMLR operations are conducted in the twilight zone between illiquidity and insolvency, these central-bank activities have marked quasi-fiscal characteristics. Thus, the crisis now waiting in the wings will inevitably diminish central bank independence.”