A report from KHOU in Texas. “Although Corpus Christi homes are still selling, a downward trend in buyers is leaving houses on the market longer than even just six months ago, when homeowners were able to set their price, said mortgage loan officer Claudia Mostaghasi. ‘What sellers are doing is saying, ‘Hey, let’s lower the price,’ she said.”
The Bellingham Herald in Washington. “Bellingham is the No. 3 market at risk of home price decline, according to Corelogic. Bellingham was also featured in the study, as the market is expected to have the third-highest risk of home price decline in the next year, following Crestview-Fort Walton Beach-Destin, Florida, and Bremerton-Silverdale, Washington, markets. Bellingham recently saw a decrease in home prices in September, decreasing by $64,000 between Sept. 12 and Sept. 19, according to recent reporting from The Bellingham Herald.”
The Mail Tribune in Oregon. “Jackson County’s housing market slowed in September as interest rates climbed to their highest in 15 years, with existing home sales dropping 24.4% over last year, pending sales down 21.8% and new listings declining by 40.2% over last year, according to the Rogue Valley Association of Realtors. The median price for a rural home in Jackson County was $577,250 in September, down 9.3% from last year’s $636,750, the multiple listing service showed.”
The Daily News Journal. “Tennessee’s housing market shows signs of cooling, according to data gathered by Middle Tennessee State University. ‘A sign of uneasiness emerged in the corners of the housing market as reflected in significant drops in housing permit activities in Tennessee,’ said report author Murat Arik. Over the past two years, when the Federal Reserve lowered interest rates, Tennessee home buying skyrocketed. Builders couldn’t keep up with demand and the inventory of existing homes was extremely low. Houses sold quickly and offers were often significantly over the listing price.”
“‘I call it the 2020 covid interest discount,’ said Jason Galaz with Find a Home in Tennessee. ‘But that’s over. A lot of home sellers are still expecting high demand and they can make up a number. When their home doesn’t sell that quickly, they have a reality check.’”
The Honolulu Star Advertiser in Hawaii. “Sales of existing single-family homes on Oahu in September suffered their biggest drop so far this year as rising mortgage rates and near-record prices amid high inflation and recession concerns deterred buyers. Median sale prices for single-family homes on Oahu haven’t shown signs of significant weakness this year. In May this measure set a record at $1,153,500. September’s median sale price was $1,100,000. The median sale price for condos was $502, 500 in September. That was up 5 % from $478, 000 a year earlier. The record was set in June at $534, 000.”
“Chad Takesue, president of the Honolulu Board of Realtors, said in the trade association’s report that properties are spending more time on the market before moving into escrow and that purchase offers above asking prices are becoming less common. ‘We’re in a different market environment than we experienced one year ago,’ he said in the report. ‘With rising rates and inflation, buyers are reevaluating what they can afford, and this is having ripple effects across supply and demand in our local housing market.’”
The Santa Fe New Mexican. “The third quarter in Santa Fe real estate was much like the second quarter and even the first — except the prime summer selling season ended with a whimper. In the city of Santa Fe, third-quarter median home prices dropped $8,000 since the second quarter — but at $575,000, were 21.2 percent or $100,000 higher than the same time a year ago. As much as things have remained mostly flat for six months, there seems to have been a thinning of homebuyers on the market with inflation and high interest rates. The average number of days a home was on the market in the third quarter was 43 days, a marked increase from 24 days in the second quarter.”
The Business Times in Colorado. “Real estate activity continues to slow in Mesa County. Robert Bray, chief executive officer of Bray & Co. Real Estate in Grand Junction, described the change as a shift from a hot seller’s market to more of a lukewarm seller’s market. ‘It’s moving back to more balance in the marketplace.’ Property foreclosure activity continues to increase. Through the first three quarters of 2022, 188 foreclosure filings and 39 sales were reported. That contrasts with 21 filings and 15 sales for the same period in 2021. Annette Young, administrative coordinator at Heritage Title Co. in Grand Junction, said foreclosure activity hasn’t yet reached a worrisome level, but could. Bray agreed. ‘That’s something to keep an eye on.’”
The Nevada Appeal. “Inflation is the proverbial elephant in the room right now that may be causing you some financial discomfort, but don’t let that stop you from assessing what your situation would be as a property owner if you were to buy a home, or the relief you would feel if you were able to sell your property now. In either case, if you opt to sit on the sideline and watch you might find yourself frozen because you aren’t keeping up with the many adjustments that are impacting the real estate market as they occur which you would be if you are in steady communication with your agent.”
“Prices have adjusted a bit and there are fewer buyers competing manically. There are other buyers out there so don’t be complacent in your efforts. They aren’t, however, making reckless offers and neither should you. This isn’t a time to panic or act out of frustration. Stay the course, study the market, pay attention to the global goings on and how they may affect your local market. With that you will be comfortable moving forward… or staying pat. Either way is OK if the decision is made with open eyes and a good understanding of what is happening.”
Times of San Diego in California. “Lately San Diego home buyers have become more cautious and sellers a tad impatient. The extraordinary and immediate demand for housing in 2020 and 2021 has cooled for numerous reasons. For people in the market to buy or sell a home, the 24-hour news cycle can prove overwhelming. Is it a good time to buy or sell? Are we at the top of the market or should we wait for the market to adjust downward.”
“Have we become spoiled over the last decade watching the value of our homes rising exponentially, receiving multiple offers that may even exceed the asking price the moment a home goes on the market? As a Realtor I’ve had the challenge of calming sellers when their homes do not have a throng of buyers at the door the moment the house goes on sale. That was our world a few months ago.”
“For example, if a $1 million home dips 2%, that’s a drop in value of $20,000, and Realtors can work with buyers and sellers to make adjustments advantageous to both parties. I encourage buyers and sellers to keep calm and remain patient. Don’t panic if you list your home and offers don’t pour in overnight.”
The San Gabriel Valley Tribune in California. “We are marketing an investment opportunity in Chatsworth. Included is the owner’s desire to sell the building and remain – after the close – as a tenant. Known as a sale-leaseback, this deal structure has curried favor recently as our values have eclipsed sanity. But another interesting dynamic is occurring. Unless motivated by the need to place money via a tax-deferred exchange, private capital can earn 3-4% investing in government treasuries. These afford a return of 10x versus a year ago and come with the full faith and credit of the United States government – aka, very little risk.”
“If I’m buying at a 6% return and I choose to finance the purchase, I must be keenly aware of my borrowing costs as loan constants are now north of 7%. Allow me a simple example. Let’s assume you buy income property for $2 million. If $1 million is borrowed at 5.5% interest, the simple interest payment is $55,000. Easy. But, how is the $1 million principal repaid? That’s where amortization comes in. A fancy way of repaying the principal over the loan term. So. If the $1 million principal is repaid over 25 years at 5.5% interest, now the annual payment is $73,690. Your return on the $1 million (rent from your tenant) is $120,000, but your loan payback is $73,690, for a net of $120,000-$73,690 or $46,310.”
“See the problem? Your $1 million invested brings in $46,310 per year. Take the same $1 million and throw it into treasuries and you make $40,000. Hmmm. So what does all that mean? Continued downward pressure on pricing. If you want to sell to a private investor, be realistic. Times, they are a’ changing!”
From Market Watch. “The Federal Reserve has been showing no signs of letting up on aggressive rate hikes, even as its policies fuel carnage for the ages across the roughly $53 trillion U.S. bond market. But for many bond investors, keeping credit spigots open over the past nine months has meant enduring the sharpest whiplash from rates volatility in their careers, even though the pain still might not be over.”
“For a fuller picture of the wreckage, the selloff in Treasurys from 2020 through July 2022 was pegged as the worst in 40 years by researchers at the Federal Reserve Bank of New York, but also the third-largest since 1971. ‘I don’t think the bond market really knows which direction to go,’ said Arvind Narayanan, a senior portfolio manager at Vanguard. ‘You are seeing that in daily volatility. The U.S. bond market is not supposed to trade by 20 basis points in a day.’”
“But an area that looks cloudier, despite a recent uptick in workers reporting to jobs in-person, has been the office component of commercial real estate. ‘You just have too much space and the world has changed,’ said David Petrosinelli, managing director at InspereX, a broker-dealer. While trading securitized products, from mortgage bonds to asset backed debt, has been his specialty, Petrosinelli said debt deals across credit markets recently have struggled to cross the line or have been postponed, as issuance conditions have gotten worse.”
The Financial Post in Canada. “A couple we’ll call Ernst, 52, and Molly, 48, live in British Columbia. They have combined gross income of $178,000 per year from their jobs in technology and hospital administration, respectively, and take home $10,075 per month after taxes. They are in the process of buying a new home, but the market has thrown them a curve: Rising interest rates have driven down the price of their present home and raised the monthly mortgage cost of the one they are buying. They have spent most of their savings and now find themselves in a cash crunch. It’s a serious financial jam.”
“They thought their present home would sell easily for $900,000 but have no bids on an asking price of $850,000, barely above the $790,000 mortgage they are carrying. They have also agreed to pay $1,050,000 for a new home, on which they have paid a $50,000 deposit. They need $275,000 to close on the new house and will have to cover $40,000 to sell their old house including $35,000 fees if they wish to get out of their existing mortgage. That’s a total of $315,000 cash that they need to complete both transactions. They have $90,000 present cash, a drop in the bucket.Their liabilities include the $790,000 old house mortgage and the $1,050,000 new house mortgage.”
“Family Finance asked Derek Moran, head of Smarter Financial Planning Ltd. in Kelowna, B.C., to work with Ernst and Molly. The couple’s problems are not funding retirement but, rather, paying for their new home. ‘They have minimal net worth on their balance sheet, but they are not poor,’ Moran explains. The old home is not a financial disaster, he says. They paid $615,000, so they have had what amounts to free accommodation with a capital gain. However, rather than paying the mortgage down over time, they have used their equity as an ATM. It is catching up to them now.”
“If it were not for the large mortgage balance caused by overspending, they could retire early. However, to make up for it, they have agreed to work to Molly’s age 65.”
From Spalding Today in the UK. “One Spalding based mortgage adviser, who declined to be amed, feels first time buyers have been harmed by the new policies. He said: ‘The Chancellor says he wants to help first time buyers but he’s shot them in the foot. There’s no deals for them – they need things like 95% mortgages but those literally disappeared overnight as a result of the mini-budget. We had this with Covid. When that first came along, people said that we’d be hit with the rates going up. But what happened? The rate went down. This has got people in knots and I really think the Chancellor should have checked out the economics before he made these announcement but I don’t think he did. Average people are getting hammered now.’”
The Irish Times. “There have been days recently when mortgage broker Aaron McElhinney has had 25-plus voicemails on his mobile – and every time he responded, he received two more. ‘I have never seen as much panic, more so than the 2008 crash,’ says the finance expert from Derry. ‘It’s different this time, in that people are getting pulled in both directions with the cost of energy bills and the cost of their mortgages.’”
“One Co Antrim financial adviser said he had been inundated with calls from clients ‘stressing.’ ‘In my 34 years working in financial services, I’ve never experienced this,’ said the adviser, who did not want to be named. ‘I got a text message this morning from someone saying they’re becoming ‘obsessive’ about the predicted hike as their fixed rate mortgage ends next spring.’”
“In the northwest offices of Smart Mortgages, McElhinney is wading through hundreds of emails. Twenty minutes earlier, he has learned that Danske Bank is temporarily withdrawing its mortgage products. ‘There’s a lot of people scared, I’ve got to be honest. I’ve had clients ringing me with mortgages as low as £20,000 to £25,000, wondering what their repayments would be if the rate went to 10 per cent – and would they lose their house. There’s so much uncertainty driving the panic.’”
The Spinoff on New Zealand. “In a perfect world, everyone would win big on The Block NZ. Three long months of stress and hard work would be rewarded with a healthy profit on auction day, but last night’s pre-recorded finale of The Block NZ: Redemption reminded us that the real estate game isn’t interested in being fair. This year, four teams from previous seasons returned to redeem themselves and win big bucks, but the Orewa housing market had other ideas. Auction day began with James and Maree winning the People’s Choice Award, but it was all downhill from there.”
“Stacy and Adam won the right to choose the auction order, and having made no profit in their 2019 season, put themselves first to capitalise on the available buyers. Hopes were high as their auctioneer called their townhouse ‘biblical,’ but thoughts and prayers were needed when bidding began at a low $700,000. One Ray White agent appeared to be negotiating directly with the text app on her phone, and bidding climbed painfully slowly before the auctioneer passed the property in at $1.05 million, nearly $100,000 below reserve.”
“Despite every effort to avoid a repeat of 2019, Stacy and Adam made no profit again, and suddenly this was the bleakest finale of The Block NZ in years. ‘I might put a bid in,’ Adam joked, but he and Stacy were understandably devastated. This isn’t how redemption is supposed to work. The ghosts of auctions past returned to haunt them, and while this kind of outcome is always a risk with The Block NZ, nobody wanted to see it happen.”
“Host Mark Richardson explained that if a passed-in property gets an offer behind the scenes during the auctions, that team goes back in the running to win the grand prize of $100,000. That was little comfort for Adam and Stacy, or Quinn and Ben, who had the biggest house and the highest reserve. ‘Let there be light, as someone once said,’ their auctioneer pronounced as he opened the bidding, but someone needed more than magical sunbeams – again, the auction failed to reach reserve. ‘Is this real?’ Chloe asked. Last year’s record-breaking profits seemed like a cheese dream now, and the other teams were speechless.”
“The mood was as flat as Chloe and Ben’s big screen TV that rotates so you can watch TikTok videos of dogs doing funny things. The other teams were visibly shocked, but Quinn and Ben remained stoic in the face of heartbreak. This is also the second time they’ll leave The Block NZ with barely anything to show for it. ‘Times are tough out there right now,’ host-judge Shelley Richardson reminded us, sympathising with the buyers who could only afford to pay one million dollars for a house. Quinn said she’s gutted to have spent three months away from her children for nothing, and Shelley welled up. Bloody hell, we’re only halfway through.”
“Then it was Maree and James’ turn. ‘Rip the band aid off,’ Shelley told Mark, because this was going to hurt. Maree said they knew the market would be tough, but they were still shocked when bidding stalled nearly $70,000 under reserve when a phone buyer pulled out. ‘All they get now is regret,’ said the auctioneer, and it was hard to know who he was talking about.”
“For Mark Richardson, though, there was no better time to toast to redemption. The show ended by announcing the other two houses sold post-auction (teams whose houses sell after auction receive no profit – call the police, that’s a crime), and Mark popped up to call for applications for next season. Tell him he’s dreaming. After watching that emotional tumble down the property ladder, who would voluntarily put themselves through such agony? This time Mark, you really are a million miles away.”