A weekend topic starting withe the Washington Post. “When the Federal Reserve raised interest rates yet again this week, the central bank’s case for how it would tackle inflation without causing a recession boiled down to: It’s unclear. What are the odds of avoiding a downturn? ‘Hard to say,’ conceded Chair Jerome H. Powell. How high will interest rates go? ‘Very uncertain.’ In an hour-long news conference on Wednesday, Powell said ‘don’t know’ four times. ‘Economists, generally, are being humbled by the experience of the past year,’ said Karen Dynan, a former chief economist at the Treasury Department who is now at Harvard University. ‘And I think the Fed is also realizing that they don’t have as good a grasp on what’s likely to happen as they might have thought earlier.’”
From Market Watch. “In August 2020, as the nation was emerging from COVID-19 lockdowns, Jay Powell’s Federal Reserve announced a monumental shift. For more than a year prior to the pandemic, the Fed had been working on a new policy framework and the pandemic wasn’t about to stop the U.S. central bank from implementing what it had been putting together. ‘The economy is always evolving,’ Powell said. The Fed interest-rate committee’s ‘strategy for achieving its goals must adapt to meet the new challenges that arise.’”
“Powell was not referring to the extraordinary economic events associated with the early days of the pandemic. Instead, the policy shift had been designed for a world of low inflation, a reality that had dragged on for some two decades. ‘The framework document came after 20 years of it being very difficult to get inflation to 2%. And so, unfortunately, the framework assumed that type of environment was going to persist,’ said former Boston Fed president Eric Rosengren, in an interview.”
From Fox 5. “‘In the last 12 weeks alone, mortgage rates have soared more than two percentage points, cutting significantly into homebuyer purchasing power and likely causing shoppers to revisit their budgets,’ said Danielle Hale, chief economist at Realtor.com. In the current rate environment, buyers of a median-priced home would have to pay nearly $1,000 more on their monthly mortgage payment than if they had bought the same house last year. ‘In order for this year’s buyer to have the same monthly payment as last year, given a 7% interest rate, the median home price would have to decline by 45% to about $235,000,’ said George Ratiu, a senior economist at Realtor.com.”
The Richmond Times Dispatch in Virginia. “Agent Ashley Rolfe said this is part of the market prices going back to their normal levels with the rise in mortgage rates tied to the Federal Reserve’s increasing interest rates. ‘If you have a low rate, you’re going to have high prices. If you have high rates, the prices are going to go back down,’ Rolfe said. ‘It levels itself off.’”
The Salt Lake Tribune in Utah. “Prices on a median-priced single-family home in Salt Lake County have plunged by almost $50,000 in three months. Even so, sales are down sharply across the Wasatch Front because interest rates keep ticking up. ‘Housing is the sacrificial lamb of the Fed right now,’ said Dejan Eskic, chief economist for the Salt Lake Board of Realtors, noting that average payments have grown by 55% in a year. ‘If you’re a financially able buyer,’ Eskic said, ‘you have a lot of opportunity right now. You have bargaining power, and you have a lot to choose from.’”
“Galloping prices in Salt Lake County since April 2020 appear to have peaked in the second quarter of this year, at $637,000, and have since nudged down 7% in just three months, to $590,000. Job losses are starting to show up in Utah’s residential real estate, mortgage and title sectors, and ‘the days of easy sales,’ a spokesperson for the Board of Realtors said, ‘are pretty much over.’”
WRAL in North Carolina. “Across the Triangle, the median sale price of property listed on the Triangle Multiple Listing Service that closed in October 2022 was $392,000, the preliminary data shows. That’s the lowest median sale price recorded in any month since February 2022, and a drop of nearly $30,000 in sale price from the prior high of $421,757 recorded in June 2022. Across the entire Triangle, homebuyers are paying 99% of the original list price to buy the property, whereas a year ago, homebuyers were paying, on average, 101.8% of the asking price.”
“‘2021 was really an anomaly,’ said Tony Fink, a licensed real estate agent. For buyers, the most important question is a personal one, said Fink: ‘Can you afford to buy a home?’”
The Nevada Current. “Housing prices are tumbling in Nevada, but with interest rates on a fixed loan at 7%, qualifying for a mortgage, even at lower prices, is a challenge for first-time buyers who often lack the income for the larger payment. Lee Barrett, incoming president of Las Vegas Realtors, calls it a ‘perfect storm.’ But not one that can’t be navigated. ‘I think it’s a natural flow of the market. Everything that goes up has to make an adjustment.’”
“The median price of a single family home was $450,000 in Southern Nevada for September, down more than 6% since peaking at $482,000 in May. Median values in the Reno/Sparks area peaked at $615,000 in May, and fell to $535,000 in September.”
KTVQ in Montana. “With winter approaching, the housing market in Gallatin County seems to be cooling down. Broker Jackie Wickens said even though the prices seem high, things are actually starting to settle. ‘Interest rates are rising and with the pandemic kind of mellowing out, we’re starting to see prices come down,’ said Wickens.”
From KDVR TV. “The housing market in Colorado has been responding to interest rates. Homes are staying on the market later, buyers are paying less than the asking price, and the median value continues to fall. According to the Denver Metro Association of Realtors, the median sales price for a single-family detached home was $622,490 in October. This is down from $630,000 from September. Sales prices have declined every month since April when they reached a record median price of $680,000.”
Southern California Newsgroup. “‘Crash, correction or chill’ looks at economic and real estate trends that offer hints about how deep housing’s troubles may be. None of the 50 states have been a home-price loser in the past 24 quarters – that’s six years! Source: My trusty spreadsheet reviewed year-over-year home-price changes for each state as tracked by the Federal Housing Finance Agency’s quarterly indexes that go back 46 years. Historically speaking, this recent loss-free pricing streak for U.S. housing markets tops the 23-quarter streak that ended in 2006 – just before the bubble burst into the Great Recession.”
“The current no-loss streak seems in jeopardy as mortgage rates soar, purchasing wanes and recession fears grow. And California has a habit of being ahead of real estate’s curves – up or down. Between 1976 and 1999 there were only five quarters in which no state had a 12-month price loss. Since then, there have been 53 – wrapped around a market housing crash. Is this gap in a curious yardstick of housing tranquility simply a random pattern? Could this switch in volatility be the result of big-picture changes from housing’s economic standing to demographic swings to manipulation by policymakers? Or has housing’s well-known habit of being a boom-or-bust asset only gotten wilder?”
From Bloomberg. “As the Federal Reserve ramped up its hawkish policy guidance this week on still-raging inflation, the once-booming Faang megapcaps lost a further $568 billion in market value, bringing the cohort’s total capitalization to the lowest since mid-2020. With rising interest rates spurring an abrupt end to the leadership of Big Tech, the largest technology companies are wielding less and less power over broader indexes, as former high-fliers like Meta Platforms Inc. and Amazon.com Inc. crash anew in the latest wave of selling.”
“These trends have only intensified lately with American heavyweights like Amazon, Alphabet and Microsoft posting disappointing earnings — a big turnaround compared to the unbridled tech optimism of the low-rate era. ‘The single dimension that was driving those names to excess returns — that model is somewhat broken,’ said Phayre at Abrdn. ‘Come 2021, 2022 there’s a realization there’s going to be some form of payback for all the cheap money.’”
Global News in Canada. “Realtors in the Hamilton-Burlington area say October home sales are supporting ‘more balanced’ market conditions with sales below the 10-year average and new listings at levels higher than last year. Home sales continued to plunge in October, falling 40.8 per cent from the year before with new listings up 13 per cent from the same month in 2021. Inventory levels have risen from record lows by 192 per cent year over year, placing months of supply to a healthier 3.1 – an increase of 393.3 per cent from last year. ‘There is no question that we have seen a shift from the unsustainable activity that occurred throughout the pandemic as some of the supply challenges have eased,’ said Lou Piriano, president of the RAHB.”
“The average price for a detached home in October was $845,648, down 11 per cent year over year, with Hamilton’s apartment-style dwellings around $478,743. Sales in the city are down an estimated 31 per cent year over year for all property types combined. The lowest average prices continue to be in Hamilton Centre, where a home was around $536,432 at the end of October, down 11.4 per cent year over year.”
From The I in the UK. “People selling their homes should expect to slash their asking price by 10 per cent off as rising mortgage rates make homes unaffordable for many buyers. Luke Gidney, managing director of Leeds-based estate agency HOP, told i:’You need to be really realistic as a seller, if you want to sell your property you need to be realistic and consider a 10 per cent reduction on what you would have done six months ago.’”
“Half a year ago, an average house in Leeds would be put on the market at £250,000 and would be likely to sell for between £270,000 and £280,000. A recent property that was put on the market at £240,000 had to be lowered to £210,000 as an asking price, Mr Gidney said. ‘You have to work really hard to sell something at the minute. The problem we’ve got right now is the interest rates are making these properties unaffordable.’ He said the sentiment among some first-time buyers was ‘why buy now when prices next year might be 10, 20, or 30 per cent lower?’ He added that he knew of multiple buyers dropping out after an agreement because they were rethinking their decision.”
The Guardian on Australia. “Distressed housing listings are on the rise as mortgage holders struggle under the weight of seven consecutive interest rate hikes. The number of homeowners selling properties under distressed conditions has risen by about 15% since interest rates began to increase, SQM Research found, from 5,753 in May to 6,658 in October. At the same time, the housing market is slowing.”
“In the past month alone, distressed listings, where the seller is forced into making a loss or accepting a lower price than they usually would, jumped by 5.7% nationally, with increases of 7.8% in New South Wales and 7.5% in Queensland. The chair of the Property Investors Council of Australia (Pica), Nicola McDougall, said many homebuyers and investors overpaid for properties in boom market conditions last year – believing interest rates would stay low until 2024 – and were now feeling the pinch of spiking mortgages.”
“‘It’s not surprising that we’re starting to see an increase in distressed sales because of the sharp increase in interest rates this year,’ she said. ‘Mortgage repayments have increased so significantly in such a short space of time, which is starting to cause financial harm to many people, and especially those homebuyers who perhaps borrowed too much.’”
“In Sydney, values are down 10.2%, however it’s compared with a 27.7% rise in January. Melbourne values are down 6.4% since February, after rising 17.3%. Affluent inner-city suburbs have been among the worst hit. Sydney buyers agent Paul Mulligan said he’d received reports of declines in returns of up to 25% in both Surry Hills and the Northern Beaches.”
“‘I am hearing from sellers and agents that they are selling off investment properties in some areas where the return is useless,’ he said. ‘Most sellers are lots of mum and dad investors that make up the proportion of the average. People that have holiday rentals in coastal areas are also selling up.’ At the same time, just 59.8% of auctions held across capital cities in the week ending 30 October were successful, compared with 76.8% this time last year.”