A report from the Real Deal. “More than one in four houses purchased by rental investors in the fourth quarter was a newly built home, according to data. Cash-rich investors see potential in single-family rentals, especially as mortgage rates rise, while builders benefit from selling in bulk, turning a profit more quickly.”
From Bisnow Houston. “As it becomes more difficult and costlier to find and buy a home in Houston and other Texas communities, housing developers are expanding their inventory of housing types, including build-to-rent. But not all developers are seeing the uncertain single-family housing market as an opportunity for growth. And developers aren’t necessarily marketing it as affordable, instead pointing to community amenities and other advantages more commonly seen in multifamily complexes, like maintenance.”
“‘Alex Kamkar, managing shareholder with master-planned developer Bold Fox Development, is skeptical the industry won’t prove exploitative for people looking to break into homeownership. ‘We’re all good capitalists here, and dollars are going to go find yield,’ he said. ‘But the idea that we want to put one of the sacred institutions like your home in the hands of BlackRock and its friends like [Ranieri Partners Chairman] Lewis Ranieri, who literally helped us get to the 2008 housing crisis, is not a good idea. Do we really want to be the generation that turned housing into The Hunger Games?’”
From MIT Technology. “Zillow begun buying up homes in 2018. It estimated returns of $20 billion a year. Zillow Offers, its “instant buying” business, followed startups like Opendoor and Offerpad, which had pioneered ‘iBuying.’ As it turned out, Zillow Offers had lost more than $420 million in three months of erratic house buying and unprofitable sales. So far, Automated valuation models (AVMs) have been able to access only a portion of the information that a family selling its home knows, explains Amit Seru, a professor of finance at the Stanford Graduate School of Business—failing to appreciate architectural style, unruly neighbors, how light hits the porch on late summer evenings, and myriad qualities contributing to a house’s human appeal.”
“Consequently, these AVMs can lead iBuyers to disaster when some sellers offer up ‘lemons’ (dud homes, say, with stinking carpets) and others offer ‘peaches’ (a charming home in a neighborhood full of amenities). By bidding an average price for both homes, the iBuyer ends up paying too much for lemons, while families with peaches—who feel harshly undervalued—refuse to sell.”
From Willamette Week in Oregon. “We get it. This is not Portland’s finest moment. Portland home prices fell 1.6% compared with last year, according to Redfin. Beaverton real estate broker John Tae says he’s seen a recent increase in Portland homebuyers seeking suburban refuge. ‘Number one is the homelessness issue,’ he says. ‘Especially in areas of higher-price-point homes where they step out and there’s a homeless encampment.’”
The Mercury News. “More Bay Area residents are turning to food banks. ‘We are barely making it,’ said Alberto Farias, a 35-year-old construction worker from San Jose, who waited in line at Our Lady of Refuge in the city last week to pick up food with his wife, infant, and 6-year-old daughter. The family has drained their savings and fears an unpredictable medical or car repair bill could bankrupt them. It’s always been hard, he said. ‘Now it’s really hard. My hair is falling out.’”
“PPIC found that over half of Californians are somewhat or very concerned about affording their rent or mortgage. And with prices blowing up, ‘it’s been harder and harder for people to maintain a quality of life that they are used to,’ said Rachel Lawler, a survey analyst at the PPIC.”
The New York Post. “It’s mold before its time. The new Hudson Yards station — opened in 2015 as part of a $2.4 billion, one-stop extension of the 7 train — is already falling apart. Iris Lieu, 34, who works in fashion, looked up at the holes above her. ‘The ceiling [is] not even finished,’ she said. ‘It’s a huge money pit,’ said straphanger Danny Stern, 33, a non-profit employee who was passing through the station on his way to Philly.”
The Toronto Star in Canada. “Mortgage rates are now high enough that many potential buyers will have to qualify at percentages above the stress test, which is presently 5.25 per cent or two per cent above the offered rate, whichever is higher, Sung Lee, a mortgage broker and analyst with Rates.ca noted. ‘As mortgage rates rise, not only do borrowing costs become more expensive, it can also mean that potential homebuyers are qualifying at a rate higher than the current stress test of 5.25 per cent,’ she said.”
“‘Simply put, the recent data leave little doubt that the economy can live with a jump to a one per cent overnight rate and, indeed, higher rates beyond that,’ wrote CIBC economist Avery Shenfeld. Nonetheless, Shenfeld said, Wednesday’s decision leaves little doubt that the bank is getting tough on inflation. ‘They brought out the big guns,’ he wrote.”
“‘If you had any intention of buying into this market, it would have been better if you did it yesterday,’ said Philip Cross, a senior economist and fellow at the Macdonald-Laurier Institute. ‘It’s going to be a lot more expensive 30 days or 60 days from now. At some point, these kinds of hikes shut down demand.’”
The Globe and Mail in Canada. “Capricious buyers are throwing the Toronto-area real estate market off kilter in April. Patrick Rocca, broker with Bosley Real Estate Ltd., describes the market as ‘spotty’ in midtown Toronto. Mr. Rocca was taken aback when a house with an asking price of $1.699-million attracted only one bidder. Despite the lack of competition, the property sold above asking. ‘Only one offer kind of threw me,’ he says.”
“Around the same time, a condo unit had some attention and one agent signaled that a client was preparing to make an offer, but the buyers backed away. ‘I was told I would have a bully and the bully never came.’ Mr. Rocca says one reason for the uncertainty may be that a bump in listings is taking the pressure off buyers to make quick decisions. According to data from the Toronto Regional Real Estate Board, new listings in the Greater Toronto Area (GTA) swelled 42 per cent in March compared with February.”
“Pritesh Parekh, real estate agent with Century 21 Legacy in Toronto, says the change in tempo from frantic buying in January and February to a more sedate pace in March and April can be unsettling to sellers and buyers. Throughout Toronto, Mr. Parekh noticed hundreds of price changes on listings in March, which indicates that properties failed to sell at the original asking price. Now the spectre of rising interest rates is spooking buyers, and the slight dip in the average price in March has some wondering if prices have farther to fall. ‘Psychologically, it has weighed on people quite a bit.’”
The Daily Telegraph in Australia. “The upcoming federal election, fears of an imminent interest rate rise and a general mood of economic uncertainty have combined to put Sydney’s housing market on ice. Auctioneer Clarence White said that potential rate rises and lacklustre sales results had created an atmosphere of hesitation at auctions. ‘Buyers are reading that the market is going to change, then they see auctions not going too well. They’ve now become frightened of paying too much,’ Mr White said. ‘It’s a fear driven market … before it was a fear of missing out, now it’s a fear of paying too much.’”
From Channel News Asia. “Hong Kong home prices have fallen more than 6 per cent since a peak in August, with no quick recovery in sight as residents leave the city at record rates. ‘I have never seen the property market as quiet in more than 15 years of buying and selling,’ said Ada Chan, 42, who is trying to sell her three-bedroom apartment near the University of Hong Kong. Chan bought the 500-square-foot apartment for HK$17 million (US$2.17 million) in 2018, and she thought it would be worth HK$18.5 million when she listed it. Now, she’s willing to take what she paid. ‘I’m just hoping it to be a tie game,’ she said.”
From Bloomberg. “Brazilian traders know inflation. After decades of dealing with wild bouts of it, they consider themselves experts on the topic. Their American counterparts, they say, got complacent. Years of subdued inflation in the U.S. have lulled them into a false sense of security, as the Brazilians see it. This in turn, the argument goes, led bond trading desks to misread the price spike that began last year and buy the Federal Reserve’s line that the episode would prove little more than a brief blip.”
“There’s a certain amount of schadenfraude to all of this — ‘look at those geniuses on Wall Street’ — and there undoubtedly have been moments over the past two decades when the Brazilian traders’ hyper-sensitivity to inflation has led them to erroneous calls on U.S. markets. But right now they’re raking it in. ‘You can’t keep counting on central banks because they may leave you empty-handed,’ said Bernardo Meres, a partner at SPX Capital, which has about 64 billion reais ($14 billion) under management.”
“‘There’s definitely a lot of leniency with inflation happening around the world,’ said Felipe Guerra, the 44-year-old chief investment officer at Legacy Capital, which has 21 billion reais under management. ‘We’ve seen it happen a number of times: Expectations get out of control, inflation spreads and the central bank is left to chase its tail.’”