A report from Market Place. “Kai Ryssdal checked in with Vivian Gueler, CFO at Pacific Trust Group, a mortgage lender in Los Angeles. You said then that business for you had ‘come to a screeching halt.’ And one can only wonder what life is like now in the mortgage business with rates at like almost 7%. Vivian Gueler: Oh, Kai. Yeah, if you can believe it, it’s actually gotten worse. It’s pretty doom and gloom. I mean, there’s been another huge wholesale lender, Finance of America, that announced closure this week. That, coupled with a couple of other biggies, we’re starting to see again more layoffs, you know, with lenders across the board. Definitely slower right now than 2008.”
The Orange County Register. “Forty-three percent of California homes sold below their initial asking prices by the end of the summer, compared with just 15% last spring. ‘Buyers and sellers are adapting to the new realities of the market,’ said Bay Area real estate broker Otto Catrina, CAR’s 2022 president. ‘As sellers adjust their expectations, well-priced homes are still selling quickly. And for buyers, (there are) more homes for sale, less competition, and fewer homes selling above asking price.’”
CBS Los Angeles. “The California housing market has seen a noted decrease in sales, causing the listing prices of homes to experience a drastic drop. ‘Huge change,’ said John Moreno, a local real estate agent. ‘Everything just kind of shifted starting probably at the end of Spring, beginning of Summer.’ He admits that for the first time in a long time, he’s been forced to price things differently for his clients looking to make top dollar on their property. ‘Sometimes, that ruling is gonna require maybe putting a list price lower than we would have six weeks ago, two weeks ago even.’”
“In a recent report by Zillow, the average price of a home in Southern California has dropped 6% since May — the biggest drop since 2012. ‘With the interest rates going up, everybody kinda freaked out,’ Moreno said.”
From Market Watch. “Zillow, Realtor.com, and John Burns Real Estate Consulting, all noted price drops in cities that were hot over the last two years. ‘Many more regional housing markets will soon follow the downward pricing path that’s already playing out quickly along the West Coast, along with markets that rode the recent home-price appreciation wave hardest such as Austin, Boise, and Phoenix,’ added Rick Palacios Jr., director of research at John Burns Real Estate Consulting.”
“Here’s the top five markets that saw the biggest peak-to-current declines, based on the company’s September Burns Home Value Index. All of the markets had peaked either in March or April, Palacios Jr. noted. Los Angeles, declined by 11% from its peak. San Francisco, declined by 11% from its peak. San Diego, declined 9% from its peak. San Jose, declined 8% from its peak. Orange County, Calif., declined 7% from its peak. Home values in Austin, Boise, and Phoenix also declined by 6%, according to the Burns index.”
“‘We’re finally seeing the market normalizing,’ said Andrea Crouch, board president of Phoenix Realtors. ‘Sellers are now having the opportunity to thoughtfully assess a more reasonable, and realistic, number of offers, while buyers are being spared from having to make what were often on-the-spot, snap decisions with their realtors.’”
The Gazette Journal. “Reno-based real estate appraisal and technology firm Clear Capital laid off more than a quarter of its workforce, citing a sizable decline in its business. ‘Clear Capital is restructuring all company divisions to reduce expenses and support our future business strategy amidst today’s housing market reality,’ said CEO Duane Andrews. ‘The impact of a rising interest rate environment in the mortgage industry has resulted in a significant decrease in volume from our customers, which has forced us to make some difficult decisions.’ Clear Capital has its headquarters in Reno as well as offices in Truckee and Roseville, California, and Bloomington, Minnesota.”
The Orlando Business Journal in Florida. “Some Central Florida Realtors are talking about ghosts, and it’s not because Halloween is around the corner. ‘Under $1 million dollars, it’s like a ghost town,’ said Deanna Armel, owner of Kissimmee-based Armel Real Estate Inc. ‘Over $1 million, people still are buying. They still have cash.’ As interest rates make homes pricier and buyers refuse to pay the skyrocketing prices common in the last two years, houses sit on the market longer, Armel added. ‘People are scared. They don’t think they can afford it.’”
The Dallas Business Journal. “The number of real estate agents who sold one or more homes last month dropped sharply in Dallas — and even more in Austin — in another sign of the rapidly cooling housing market in Texas. The number of active agents in Dallas fell to 756 in September from 947 in August, according to AgentStory. The active agent count in Austin dropped to 389 in September from 810 in August. Both markets had well over 1,000 active agents in March, April and May, before the number started to slide. ‘The rate of deceleration in Texas is profound,’ said jon Cardella, CEO of AgentStory. ‘Volume is falling through the floor.’”
“Homes are sitting on the market longer, according to a report by the Texas Real Estate Research Center at Texas A&M University. ‘Overall home sales have been in freefall since around April,’ according to the report.”
KVUE in Texas. “Home prices in the Austin metro area are dropping more than in any other city in the country, according to a new report from Realtor.com. Austin came in at No. 1 for the biggest price drop. In September, Realtor.com reports that the median home list price in the Austin metro was $558,275. That’s down 10.3% since June. Meanwhile, the percentage of sellers in the metro area who cut their list prices was up 252% in September compared with 2021.”
From Vail Daily. “Craig Denton of Berkshire Hathaway HomeServices Colorado Properties said he’s seeing price reductions in between 6 and 10 units every day. Those prices are still higher than those seen in 2019. Steffen Mehnert, the Vail Valley team leader for Keller Williams Realty added that brokers are again hosting open houses at homes up and down the valley. ‘There’s a real disconnect between buyers and sellers right now,’ Mehnert said, with buyers waiting for prices to come down, while sellers are hoping prices stay where they are.”
The Globe and Mail in Canada. “Since 2017 so-called multiple-property owners have been the largest group of buyers of Ontario real estate. This cohort has grown in recent years and they behave differently from other owners in a number of ways that appear to describe some of the features real estate investing defined by the popular acronym BRRR: Buy, rent, renovate and refinance. ‘COVID made investing in real estate sexy, where before it was a dormant asset class,’ said Jack Bernstone, a BRRR investor who amassed a portfolio of more than two dozen rental properties in Ontario by his late 20s.”
“Where he foresees trouble is among those BRRR investors who were over-reliant on cheap debt: ‘There is a huge portion of people who borrow the construction costs and the down payment,’ he said. ‘There’s a good chunk of investors that might get wiped out on this. … There’s losers already happening, I’ve seen it personally, people in my network are folding businesses.’”
The Telegraph in the UK. “Prospective homebuyers have lost thousands of pounds in deposits and legal fees after lenders pulled mortgage offers in anticipation of a market downturn. Marc von Grundherr, of London estate agency Benham and Reeves, said banks were even U-turning on offers after contracts between the buyer and seller had been exchanged. He said: ‘In my 25 years, I have never seen a lender pull a mortgage offer but we have heard of at least 10 cases. To go back on a firm mortgage offer is pretty awful and very stressful for everyone involved.’”
“In one instance a buyer purchasing a property worth just under £3 million in London had secured a mortgage offer at 2.2pc with a 35pc deposit. Mr von Grundherr said: ‘The property was off-plan and he had already exchanged and paid the deposit, then just under two weeks ago the lender, who is a major high street name, pulled the offer and hiked the rate to 4.8pc. It has more than doubled the financing costs and the buyer could lose their deposit and be sued by the seller for legal costs.’”
From Globes in Israel. “Just six months ago an investor could receive about 2% annual returns on leasing an apartment in Tel Aviv – let’s say NIS 6,700 a month rent on an apartment worth NIS 4 million. It looked like a paying proposition. As a solid investment option, it didn’t yield much. But the banks were offering mortgages at 1% rates (prime minus 0.6%) or linked to inflation, which had been in negative territory for the past five to 10 years. And of course in Tel Aviv, there was ‘permanent demand and no supply.’”
“Then the era of cheap money ended. Interest rates and inflation began rising quickly and the oxygen supporting the market suddenly thinned out, and the result, as Swiss bank UBS points out in its Global Real Estate Bubble Index 2022, which was published yesterday, is that the Tel Aviv housing market, as in many cities around the world, is looking risky, including the ultimate threat, the development of a ‘bubble.’”
“Investors can now obtain 3% returns on their bank deposits, without any risk. Those not owning an apartment understand that a mortgage, linked to prime or the Consumer Price Index, now has repayments costing hundreds of thousands of shekels more. Even tech employees are more concerned about a slowdown and the difficulties of servicing large debt.”
“Moreover, the argument that there is ‘no supply’ suddenly no longer seems to hold water. Tel Aviv is one huge urban renewal building site with denser, high-rise construction the order of the day, while in north Tel Aviv there are still land reserves for tens of thousands of new apartments.”
From Bloomberg. “The wave of stimulus aimed at reviving China’s housing market — billions in bank loans, interest rate cuts and support for developers — has done little to help Echo sell her home near Shanghai. The media worker has received only four nibbles from potential buyers in six months, and is considering a 10% cut to her asking price of 3.3 million yuan ($460,000). She thinks this stagnant housing market, the worst in China’s modern history, will drag on for years.”
“‘Everyone is waiting for a steeper drop in home prices before they make up their mind to buy,’ said Echo, who asked to be identified only by her first name for fear of retribution given her negative outlook. ‘There’s going to be a vicious cycle.’”
“Real estate accounts for about a quarter of domestic output and almost 40% of household assets. Bursting a bubble of this size without triggering a financial crisis is difficult for any government, and previous attempts in Japan from 1989, and the US in 2007-08 proved to be disastrous. Lengmu, a real estate agent in Shanghai, has only done two deals since the city lifted its lockdown in June. He says the average number of second-hand homes sold in one block has dropped to below 10 over the past six months, compared with around 30 to 50 in a good year. Clients have either left the city or are waiting for prices to stop falling.”
‘It’s really tough to broker a deal these days,’ said Lengmu, who only wanted his first name used and has worked in real estate for four years. He hopes the market will improve after the rate cuts. ‘If you can’t secure any deal, you don’t get paid anything more than your basic salary. I feel pressured.’”
“There’s plenty of supply already after developers like Evergrande went on a borrowing frenzy in the last decade to build more apartments. Bloomberg Economics estimates about 2.8 billion square meters of real estate is currently sitting empty — an area 47 times the size of Manhattan.”