A report from Bloomberg. “Cryptocurrencies plummeted so violently that a popular lending platform froze withdrawals to prevent a very modern kind of bank run. It was enough, for some, to resurface scary memories of the global financial crisis more than a decade ago. Christian Hoffmann, a portfolio manager for Thornburg Investment Management, said market liquidity has deteriorated so much that he’s thinking about the dark days of 2008. ‘Liquidity in the market is worse than it was leading up to Lehman,’ said Hoffmann.”
“‘It was quite the day. Like a freight train approaching and you can’t turn anywhere for help,’ said Misra, global head of rates strategy at TD Securities. ‘Today the bond market was present in all ferociousness!’”
The Associated Press. “Analysts say, that the Fed will have to inflict some pain — most likely in the form of higher unemployment — as the price of defeating stubbornly high inflation. ‘They need to accept the fact that you can’t fight inflation without imposing some pain on the markets and the economy,’ said Ethan Harris, head of global economic research at Bank of America. ‘They shouldn’t coddle the markets by kind of implying that there’s no major issue here, we’re going to have a soft landing for the economy. I think it’s too late for that. We have to have a hard landing.’”
From Money Wise. “U.S. mortgage rates moved back up in anticipation of next week’s Federal Reserve meeting, where policymakers are expected to hike the benchmark borrowing rate for the third time this year. ‘The interest-rate picture is not pretty for residential real estate,’ says Washington, D.C. real estate agent Corey Burr. Burr says the real estate market is already seeing shifts in supply and demand. ‘We are also experiencing fewer multiple-bid situations, more price reductions on list prices and a creeping back of the typical house appraisal and financing contingencies that help protect buyers,’ he says. For sellers, ‘it’s important to accept the new reality that the market is trending back to neutral.’”
The Ravalli Republic in Montana. “With national stories of other housing markets being overpriced and interest rates climbing, Hamilton real estate broker Darwin Ernst thinks that some people might be listing their homes now because they want to take advantage of what they believe could be the peak in home prices. ‘There is always action and reaction to the market,’ he said. ‘Historically, when we see interest rates go up, that pushes some people who are considering selling their home off the fence. They want to get them sold before the prices start to come down.’”
From WOWT in Nebraska. “Increased mortgage rates are affecting the housing market by pushing out some homebuyers and reducing the demand. This shift is leading to more inventory and longer listing times before houses sell. ‘The inventory for homes for sale in the month of April has gone up 5.9% from April of last year. And the months of supply of inventory has gone up 14.3% from April of last year,’ according to Tanner Sherman, a realtor in Omaha.”
“Ken Janson is another realtor who is seeing the market shift. ‘Their buying power is what it’s all about. If they had their heart set on a half-a-million-dollar house and now the payment on the half-a-million-dollar house is beyond their income stream, well then maybe they’re at a $400,000 house now. Which is still a fabulous house, but it’s not a half-million-dollar house,’ said Janson.”
The News Tribune in Washington. “According to Michael Robinson, a managing broker at Windermere Professional Partners in Tacoma, the story is in the stats, and what they reveal. Back in January, there were roughly 430 homes on the market in Pierce County. Today, there are roughly 1,400. That increase in available inventory means sellers can no longer afford to get greedy with their asking price.”
“‘It’s still a good time to sell, but sellers need to curb their irrational exuberance when pricing,’ Robinson said. ‘You can still command a really high price, and you can still essentially be in the driver’s seat when it comes to marketing and negotiations. But there’s a limit, because you’re not the only game in town. Now you have some competition, whereas three years ago you didn’t.’”
From Probuilder. “Since 2017, builders started an estimated 190,000 single-family built-to-rent (SFB2R) homes—about 64,000 of those in 2021 and in the first quarter of 2022. But what about the segment’s long-term future when the white-hot hoopla eventually recedes? ‘Capital tends to follow capital, but you don’t have $85 billion in expertise out there behind the capital,” cautions Chris Bley, co-president and chief investment officer for residential investment firm IHP Capital Partners.”
“He adds that SFB2R ‘is still a residential play, but a lot of people don’t understand the ‘build’ part of it.’ In their pursuit of this particular golden goose, he says, ‘some ducklings could get run over,’ meaning investors charging ahead without a builder wingman to guide them.”
From News Tucson in Arizona. “An off-campus student housing complex near the University of Arizona is facing multiple complaints from some of its tenants. They say they feel unsafe and say management is not doing anything about their concerns. The student housing complex in question is called Sol Y Luna – two side-by-side apartment buildings owned by Nelson Partners, a company that owns student housing in more than a dozen states. It is now facing lawsuits from investors and accusations of poor upkeep from tenants nationally and here in Tucson.”
“Nelson Partners is facing foreclosure on multiple properties and lawsuits from investors. In Texas, a judge approved a $50 million settlement to resolve claims of defrauding investors.”
The Rochester Beacon in New York. “A lender’s three-year-long attempt to force a foreclosure on the Hiram Sibley building and two adjacent East End properties is at least temporarily thwarted. The buildings’ owner is trying to reverse a recent Bankruptcy Court ruling ordering that foreclosure be allowed to move ahead. Currently a mixed-use blend of apartments, offices and street-level retail, the distinctive structure has been most familiar to many Rochesterians as home to a series of East End watering holes.”
“The transfers came as Thomas Masaschi’s Rochester umbrella company, DHD Ventures, increasingly fell under legal fire from lenders including US Income Partners, which in 2019 filed a series of lawsuits claiming that DHD had defaulted on some $20 million in loans. Some DHD properties were also falling behind on property tax payments.”
From Global News in Canada. “A Winnipeg real estate agent is confident the local housing market will remain steady, but mortgage and real estate agents alike say Winnipeggers are keeping a watchful eye on rising interest rates. Alberto Carmona told Global News ‘They are concerned because if they were pre-approved at three months ago or two months ago, the rate (was) 2.4, 2.6 per cent,’ he said. ‘If the pre-approval expires now, the bank needs to pre-approve them again with the new interest rate: 3.6. 3.8.’”
“Mortgage agent Beth Thrall says there’s panic in the air. ‘For first-time homebuyers that got into the market in the last two years at the 1.5 line, yes, it’s very scary,’ Thrall said. Mortgage specialist Peter Paley added that staying calm is key. ‘I think the most important thing for anyone to ever do in this kind of situation is not panic and pull out your old Excel spreadsheet into your household budget. See how much money’s coming in and how much money is going out.’”
From CTV News in Canada. “‘We’ve been seeing a shift happening across Windsor-Essex County in the last two months. We have started to see the price decrease,’ Dan Gemus, owner of Dan Gemus Real Estate said. Wendy Sutton listed her LaSalle home two weeks ago and was shocked by the lack of interest. ‘We’ve had no viewings, no phone calls. We had an open house last Sunday and not one person came,’ said Sutton.”
The Globe and Mail. “Magenta Capital Corp., one of Canada’s largest private mortgage lenders, has suspended new loan applications until September, according to an e-mail to its broker clients viewed by The Globe and Mail. It’s an unexpected move for a lender that has grown rapidly during the pandemic’s real estate boom. Because borrowers qualify for less from a bank, they are increasingly seeking out alternative lenders such as mortgage investment corporations, or MICs, which pool investor funds to provide loans and are not subject to the same restrictions as chartered banks.”
“The lender may be taking a break because the mortgage demand exceeds the amount of capital it has available to lend and investors are not chipping in as much new funding to meet the demand. Magenta did not respond to multiple requests for comment.”
From ABC News. “The Reserve Bank Governor has warned Australians they need to be prepared for substantial interest rate rises over the rest of this year, conceding he’s not sure how high they might go. ‘How fast we get to 2.5 per cent, indeed whether we get to 2.5 per cent, is going to be determined by events,’ said Philip Lowe. Under such a scenario, a family with a million-dollar mortgage would likely have to pay more than $1,000 a month extra than they were a few weeks ago.”
“‘At the individual level some people have taken loans that they may not have wanted to take out in retrospect, but the overall picture, which is really very much the focus of the Reserve Bank, is a pretty resilient economy,’ Dr Lowe said. ‘Sometimes my comments get interpreted as me having made a promise, or a very strong statement, that interest rates would stay where they were to 2024. In our own communication, in our own way of thinking, it was very much a conditional statement,’ he said.”
“He added that it was a ‘really good question’ to consider whether the economy had been overstimulated by the RBA and the federal government during the pandemic, and whether that was the reason for the coming rate rises. ‘But perhaps I can take you back to the dark days of the pandemic, back in February and March 2020,’ he reflected. ‘There were credible predictions that tens of thousands of Australians would be dead within a few months, that our hospitals would be overfull, that the unemployment rate would reach 15 per cent, that there’d be deep economic and social scarring in society and there’d be a generation of lost opportunity. We were facing incredibly scary, damaging times. We took out a lot of insurance. I think it was the right thing to do but I accept that others will have a different view. The Reserve Bank is committed to learning from that experience.’”
From Stuff New Zealand. “The country’s largest home loan provider has increased the rate it stress tests home loan applicants to 7.6%. Glen McLeod, director of Edge Mortgages, said by mid-next year, SSRs could hit 9%. He said the higher the hurdle created by SSRs, the fewer people will qualify for large home loans, which would reduce the buyer pool and could reduce house prices. ‘That could draw them (prices) back as vendors can’t get the price they’re hoping for because purchasers can’t afford to buy at that level.’”
The South China Morning Post. “The proportion of plots of land withdrawn in the first round of auctions held over five months between February and June this year in 20 major Chinese cities has increased, with cash-strapped developers reluctant to splash the cash. ‘Many developers are still facing a lot of stress in terms of financing, and from a long-term structural perspective, the high-growth period for housing is probably already over. So demand won’t be strong as before,. Chen Dong, Pictet Wealth Management’s head of Asia macroeconomics research, said.”
“More firms are joining China Evergrande Group and Kaisa Group Holdings on a list of developers failing to repay debt. Sunac, China’s fourth-largest developer by sales, for instance, failed to repay US$29.5 million (S$41 million) in interest on a US-dollar bond and was in default after a 30-day grace period that expired on May 12. It is also in negotiations with its onshore creditors to extend the deadlines for yuan-denominated bond payments.”
“About 60 per cent of China’s top 100 developers have not bought a single piece of land in the first five months of this year, according to data from China Real Estate Information Corporation (CRIC), one of China’s largest real estate brokers.”
From CBS News. “Amid a deepening sell-off in cryptocurrencies, two popular platforms blocked investors from buying and selling the digital assets. Crypto-lending company Celsius late Sunday said it was halting users from making withdrawals, trades and transfers between accounts ‘due to extreme market conditions.’ The company, one of the bigger cryptocurrency lending platforms with roughly 1.7 million customers and more than $11 billion in customer assets, didn’t immediately respond to a request for comment Monday.”
“The shutdown at Celsius sparked anger and frustration on social media, with the company giving no indication in its announcement when it would allow users to access their funds. ‘This is not okay. You’re losing trust with your patrons and NOT ACTING IN THE BEST INTEREST OF YOUR COMMUNITY!’ one person wrote to Celsius in response to their trading halt announcement. ‘This was yet another bank run. You’re not reinventing anything here. They were promoting their services as a better savings account but in the end you’re just another unsecured lender,’ said Cory Klippsten, CEO of Swan Bitcoin, who has been publicly skeptical of Celsius’ business model for years.”
“Lending platforms such as Celsius have come under scrutiny recently because they offer yields that normal markets could not support, and critics have called them effectively Ponzi schemes. It is the second notable collapse in the cryptocurrency universe in less than two months. The stablecoin Terra imploded in early May, erasing tens of billions of dollars in a matter of hours.”