It’s Friday desk clearing time for this blogger. “More homes have become available in Spokane and Coeur d’Alene, but the sales pace continues to remain muted compared to the chaos of the local economy as it emerged from the coronavirus pandemic. Mostly gone are the multiple cash offers over asking price that marked the past few years. Sellers are again finding they likely have to add that coat of paint or new floor to get full asking price, said Tom Hormel, immediate past president of Spokane Realtors. ‘We have to have those tough conversations with sellers that we weren’t having for a few years,’ Hormel said. During the housing rush, most home buyers did not have to upgrade their homes with new kitchen countertops or flooring before listing them to sell. ‘Now it needs to be. If you are going to price at the high end of the market, you better have all your ducks in a row and it better be right,’ Hormel said.”
“Don and Denise Rowlett have called the Pinehurst Inn home since 2008. For several years they ran the inn as a business; now the six-bedroom dwelling serves as a private residence for the couple and their family. Built in 1895 and extensively renovated in 1987, the property has always been difficult to insure. This spring, the Rowletts received a letter from their insurance company. ‘It basically said they would keep us insured until the end of the month then we were on our own after that,’ says Don Rowlett. Russ Schweikert, their agent and a partner at Ashland Insurance himself is not immune to the trends. After the premium on his rental property shot up 86%, he sent a ‘WTF’ to his own agent. ‘She said, ‘Write the check before they change their mind’. The good news in Oregon is that we’re not California.’”
“Just after dawn on the Ides of March 2024, Frisco real estate agent Courtney Benson got a text message from a client who wanted to halt his home sale. The client had just read a New York Times story that said a $418 million lawsuit settlement against the National Association of Realtors might ‘blow up the housing market.’ She wasn’t sure how to warm her client’s suddenly cold feet. Later that morning, another client also asked to withdraw a home listing as other outlets covered the news with similar breathlessness. Dallas agents I spoke with say confusion remains among their clients about the new rules of real estate, which will take effect August 17. Will commissions cascade? Will agents go broke?”
“The change has prompted some panic among potential buyers because these agreements could require buyers to pony up for buyer’s agent commissions if those commissions are not fully paid—or paid at all—by sellers, who have up until now typically covered commissions in full. ‘A lot of my buyers don’t have an extra bundle of money sitting there to pay a buyer’s agent,’ says Ann Stewart, a Richardson-based agent with Ebby Halliday. The Highland Parker I spoke to who haggled his commissions down also saved big on his $4 million, 6,000-square-foot home on Turtle Creek. He slashed 20 grand off his overall costs. He expects people in his tax bracket will continue to haggle, not because of the new NAR rules on commissions but because that’s what the wealthy have always done. ‘I don’t really see this as changing anything in the Park Cities or Preston Hollow,’ he says. Then he adds, impolitely: ‘Maybe it’ll matter more for those low-end homes in the M Streets or over by White Rock or way up in Prosper. But who cares about people who buy there?’”
“The term caveat emptor, or ‘buyer beware,’ has perhaps never been more important in the housing market than it is now. That’s because more and more buyers are being asked to sign contracts linking them to the real estate agents helping them find a house. One of the worst contracts was the draft from the California Association of Realtors, one of the largest and most influential groups in the country. Law professor Tanya Monestier of the University of Buffalo Faculty of Law evaluated the document at the CFA’s request, and found that the CAR draft contract was ‘virtually unreadable. No layperson will be able to understand and appreciate the terms they are agreeing to.’ She concluded that the contract ‘disguises the obligation of the buyer to pay his agent’ and that it ‘telegraphs how Realtors plan to circumvent the NAR settlement’ — referring to the class action lawsuit resolution signed by the National Association of Realtors in March.”
“Not every buyer-broker contract is worth trashing, though. The CFA holds out one from eXp Realty as exemplary, saying it could serve as a model for other groups’ contracts. ‘The contrast between the CAR and eXp contracts could not be sharper,’ says Stephen Brobeck, a CFA senior fellow. ‘The eXp contract is written with the buyer in mind. The CAR contract is written with the interests of the Realtor in mind.’”
“A New York-based real estate developer has agreed to pay back its foreign investors for two Queens real estate projects after allegedly committing fraud. Richard Xia and his company, Fleet Financial, have come to an agreement with the Securities and Exchange Commission to pay $272M for allegedly defrauding Chinese investors seeking green cards, The Real Deal reported. The SEC claimed Xia misled EB-5 investors between 2010 and 2017 to procure more than $228M in financing from 400 individuals for the two projects. The projects were Eastern Mirage, planned as an 18-story mixed-use medical center and hotel in Flushing, and Eastern Emerald, a 25-story hotel and condo development near LaGuardia Airport with a Japanese restaurant led by a Michelin-starred chef and a performing arts center.”
“The EB-5 program is a green card-granting mechanism for foreign investors who put at least $800K toward job-creating projects in the U.S. But the program has been plagued by fraud and has seen waning interest in recent years, driven by a drop-off in Chinese investors, the Government Accountability Office found.”
“The signs of distress are everywhere. Many of Vancouver’s priciest condos are being offered at big discounts. One downtown condo that was bought for almost $3 million is now on the market at $2.3 million. Many of these condos have been aimed at the international market. As Vancouver’s Steve Saretsky says, there has been a drastic drop in what was once an ‘unprecedented Chinese appetite to take capital out of the reach of the Chinese government’ — mostly by investing in Western real estate. ‘Globalization is now reversing,’ says Saretsky. ‘What happens if further Chinese wealth destruction necessitates Chinese liquidation of foreign housing ownership?’”
“The Canadian condo scene now comes with trans-Pacific turbulence, to say the least. At the elite, funky Alberni, designed by starchitect Kengo Kuma, an ‘extremely high’ inventory of 26 condos is for sale, says realtor David Hutchinson. Hutchinson says many of the scores of pricey condos that are now going on to the Vancouver market were originally ‘sold in presentation centres offshore.’ Most, Hutchinson believes, were snapped up as pre-sales. They were designed for flipping. Now many speculators are in a bind.”
“Toronto’s real estate market is suddenly inundated with a record number of homes that nobody wants to buy. Pouyan Safapour, president of Devron, explained that the disconnect between developers and the ‘end-users’ — those who eventually live in the completed units — begins at the pre-construction level. ‘There’s this misconception that it is hard to design and sell to the end user, and if we’re not designing and selling to the end user, who appreciates and cares about features and sizes of the suites, we’re going to be selling to investors,’ Safapour said. ‘Investors want something that is smaller and easy to transact, and so we developers fall prey to this way of thinking.’”
“Safapour believes that for the first time in a long time, the wants and needs of end-users in the condo market aren’t being buried by inflated investor demands. ‘What’s happening right now is quite healthy, because it’s become a buyer’s market and the consumers’ preferences are actually being seen,’ Safapour said, ‘and they’re saying, ‘We don’t just want small units.’”
“Ten years ago a slew of new words entered London’s property lexicon: oligarch, ultra-prime, and UHNWI (ultra-high net worth individuals). The centre of London — rebranded as ‘prime central London’ or PCL — had come roaring out of the global financial crisis. International buyers converged on Kensington, Knightsbridge, and Mayfair from every corner of the globe in search of a trophy London home. Richard Gutteridge, co-head of PCL at Savills, said buyers were flooding into London from every corner of the globe. ‘There was definitely a sense that people felt they were buying into a city that was top of the charts in terms of popularity, and demand was incredibly strong,’ he said.”
“But ten years is a very long time in the luxury property market. A series of unforeseen events today makes those homes look like very bad investments. Earlier this year, it was reported that the British billionaire and trading director of budget retailer B&M sold his London home for a loss making £23.4 million. Bobby Arora had paid £34 million for the Belgravia house a decade ago. The result is owners either mothballing their homes or cutting prices to the bone. ‘There are some contemplating selling their properties at a loss just to move forward with their lives,’ said Amir Eshtehardi of Wilfords Kensington.”
“More than 20,000 families have been forced to sell their homes in distress sales in Queensland. Queensland is the worst in the country for distressed listings, which is when properties hit the market due to forced circumstances. More than 20 per cent of mortgage holders in Australia have been forced to switch to interest-only repayments in the last two years as they face mounting financial pressure from 13 interest rate rises and increasing cost of living pressures.”
“Banks are struggling to sell defaulting borrowers’ collateral, primarily real estate, to recover the debts since the property market is sluggish. A State-owned lender recently decreased the reserve price of a 160sq.m house in Hà Nội’s old quarter to around VNĐ50 billion from the VNĐ70 billion it had sought in an auction in August 2022. In the last two years, it has held numerous auctions but has not been successful in finding a buyer for the property. Another lender is currently trying to auction land in a residential project in Nha Trang and slashed the reserve price by over VNĐ20 billion but it unable to find a buyer. Various resort properties and hotels in sought-after locations such as Hội An, Đà Nẵng and Phú Quốc Island are also being offered at discounts by banks.”
“With 70 per cent of its collateral comprised of real estate, the banking industry is grappling with non-performing loans worth VNĐ224.14 trillion as of the end of last March. Adding to the challenges to selling mortgaged real estate was the arrest in late 2022 of Trương Mỹ Lan, the chairwoman of Vạn Thịnh Phát. She is now on death row for financial fraud and other crimes.”
“The idea of China outstripping the United States to become the world’s largest economy has been a fixation for policymakers and economists for decades. Predictions of when exactly China would steal the US crown have come thick and fast ever since the 2008/9 financial crisis. As if the pandemic — which led to strict lockdown measures that brought the economy to its knees — wasn’t enough, the Asian powerhouse was also plunged into a real estate crash. The apparent change of fortunes for the Chinese economy was so stark that a new term emerged about a year ago: ‘Peak China.’ Wang Wen from Renmin University of China’s Chongyang Institute for Financial Studies told DW that the notion of Peak China was a ‘myth,’ adding that China’s total economic output reached almost 80% of the US output in 2021.”
“Other economists, however, believe that the issues that sparked the Peak China narrative were likely building for several years. ‘The Chinese economy grew so fast in the early 2000s because of high productivity,’ Loren Brandt, economy professor at the University of Toronto, told DW, adding that productivity was responsible for about 70% of GDP growth during China’s first three decades of reform, initiated in 1978. ‘After the financial crisis, productivity growth just disappeared. It’s now maybe one-quarter of what it was before 2008,’ the expert in the Chinese economy added.”
“The big fear is that all these factors could see China’s economy go the way of Japan. After World War II, Japan experienced an economic miracle, marked by decades of high growth that caused a massive stock market and real estate bubble. At its peak, Japan was predicted by some economists to overtake the US as the world’s largest economy. Then in 1992, the bubble burst, fortunes were lost, and the economy went into a tailspin. Japan has since failed to make up for several decades of lost growth.”