A weekend topic starting with WILX. “Lansing broker Kim Dunham said it’s a good time to buy if you can because the market will continue to inflate. We are still looking at a seller’s market, just not as extreme as it was last year. ‘So last year we were getting way over, on every single home. We were able to sell them for 30 and 50 thousand over,’ said Dunham, ‘Now that’s still happening, it’s just taking longer.’ Dunham has been in this market for 30 years, and said Mid-Michigan is ‘definitely in a transitional market.’”
From WXYZ on Michigan. “From Farmington Hills to Ferndale, homeowners are expressing worry over rising interest rates and anticipated falling prices that could soon be creating a troubling scenario. Hairstylist Jayme McNeil is among those watching the situation closely. ‘I hope for the best and plan for the worst,’ says McNeil who bought a home 10 years ago. She recalls relying on savings when COVID led to a lockdown for 3 months. She fears many could soon be falling under water, with loans becoming more than a home is worth.”
“‘We are already seeing a 5% reduction in home prices,’ says real estate expert Ali Charara, with Century 21 Curran and Oberski. He says fewer people are also refinancing now. ‘In this past month, you’re seeing a lot of inventory coming on the market,’ he said. According to the Michigan State Housing Authority, more than 16,000 households in our state are in line for aid. ‘This month I’ve seen over 30 different people regarding stopping foreclosures,’ says bankruptcy attorney John Kallabat.”
The Columbia Basin Herald. “It’s the nagging fear every homeowner has when economic times become hard: What if I can’t keep my home? That’s something quite a lot of people are worried about, said Nik VinZant, an analyst with QuoteWizard in Seattle. According to a survey done by QuoteWizard, 17% of people in Washington state are worried about losing their homes in the near future.”
“According to that survey, Washingtonians’ incomes have risen 26.5% between 2012 and 2021, while housing costs have gone up 116.3%. That’s a gap of 89.8 percentage points, and it spells trouble, VinZant said. ‘We’re seeing a high number of people that, once you get behind, it is very difficult to catch up right now,’ he said. ‘And I think what’s happening is that people are getting behind and there’s just no way out.’”
The Journal Record. “Oklahoma saw the greatest monthly increase in foreclosure starts among states that had at least 100 starts in August, according to a eport. Attom reported August foreclosure starts were up 80% over July in Oklahoma, followed by Tennessee (up 74%), Virginia (up 64%), Arkansas (up 53%) and Washington (up 50%). Forbearance has ended for the majority of Oklahomans who were enrolled in the program and the remaining few likely will exit the program in February, said Valenthia Doolin, director of homeownership at the Oklahoma Housing Finance Agency. ‘We have seen the number of foreclosures going to court going up,’ said Doolin, who expects that number to grow.”
From KCRW. “Prices are usually rising in Southern California’s residential real estate market. But over the last few months, the market has chilled slightly, with asking prices falling for many homes. What’s going on? Is this a blip or sign of a long-term trend? Homes are still selling, says LA realtor Dunia Handy Gill. She uses the example of Pasadena, where properties are turning over quickly. She says some homes are listed and purchased within a month.”
“‘I’m still seeing multiple offers. I’m seeing cash, but I’m also still seeing buyers with mortgages, but not [with] 30-year fixed mortgages, more of a seven ARM [adjustable-rate mortgage], even a 10 ARM. So mortgage companies are getting a little more creative in order to continue to have buyers that are able to purchase,’ Handy Gill says.”
From NPR. “A lot of homebuyers these days are turning to adjustable rate loans because they start out with a lower, more affordable interest rate. Katrina Wooten is in the process of buying a house near Gainesville, Florida. It’s still under construction and she hasn’t yet locked a home loan. But with mortgage rates doubling this year to around 6%, her monthly payments will likely be hundreds of dollars more than she’d originally budgeted for. ‘I was having panic attacks over it,’ she says. For a more affordable option, her mortgage broker has talked to her about considering adjustable rate mortgages.”
“‘A percentage point can make a really, really big difference in that monthly payment,’ says Holden Lewis who for the personal finance site NerdWallet. ‘So they grasp for that rescue ring, an adjustable rate mortgage. When you get a fixed rate loan, if mortgage rates rise after that, that’s the lender’s problem,’ says Lewis. ‘If you get an adjustable rate loan and mortgage rates rise, that’s your problem.’”
The Daily Mail. “Home prices across the U.S. recorded their biggest drop in 11 years by as much as 4 percent, leaving hundreds of thousands of borrowers at risk of going underwater — and those who bought along the West Coast worst hit. Worried property owners have taken to social media to express their fears about slipping underwater. One user warned that interest rate hikes were ‘devastating to young families’ who had only recently managed to get on the property ladder.”
“Another queried how many borrowers would ‘be underwater soon’ due to falling prices and rising interest rates, while one other warned of ‘2008 all over again’ and a market collapse, defaults and evictions.’”
From Fox News. “Zero down-payment mortgages and similar programs appear to have recently been gaining traction on Main Street. Bank of America announced Aug. 30 that it is launching a trial program, called the Community Affordable Loan Solution, offering mortgages that do not require closing costs, down payments or minimum credit scores. People in predominantly Hispanic or Black neighborhoods in Charlotte, North Carolina; Dallas; Detroit; Los Angeles; and Miami that meet specific income requirements will have access to the program.”
“Bankrate.com chief financial analyst Greg McBride told FOX Business that this is the ‘wrong end of the real estate cycle for zero down payment mortgages.’ ‘The risk to borrowers has grown because of the surge in home prices,’ McBride said. ‘If home prices stall, or even decline, a no down payment loan could be setting the buyer up for failure as they won’t have much, if any, equity stake in the home.’”
From KERA. “As interest rates have risen, the mortgage market has cooled, despite hot home sales just a year ago. That’s led to layoffs among lenders, including Home Point Financial. The nation’s third largest lender just announced 526 new layoffs come November: 150 of those will be in Texas. Mike Davis, economics professor at SMU’s Cox School of Business, blamed High Point Financial’s significant layoffs on rising interest rates. He said rising rates, which may go up again soon, mean two things for mortgage lenders. Neither of them are good.”
“First, fewer houses get sold. Next, and more importantly, he said the business of refinancing starts to fade away. And that’s true regardless of whether someone is trying to get a lower interest rate or hoping to pull cash out of their house. ‘To be a mortgage lender is kind of like to be an umbrella salesman. You know, when business booms, it really booms,’ Davis said. ‘The mortgage business was booming and these mortgage lenders wanted to have boots on the ground to capitalize on that. And now, you know, the rain has stopped. Nobody’s buying umbrellas. Nobody’s refinancing their mortgages.’”
From Business Insider. “Declining liquidity in the US Treasuries market represents the biggest systemic risk to financial markets since the 2007 housing bubble, if not bigger. That’s according to a Wednesday note from Bank of America, which outlined just how important the day-to-day functioning of the US Treasury market is, and how imperative it is that the market functions without hiccups. The aggregate amount of capital allocated to market-making has not kept pace with the very rapid growth of marketable Treasury debt outstanding. As trading in the US Treasury market decreases, while the issuance of US Treasuries increases, a period of illiquidity could materialize.”
“‘While this sounds like a bad science-fiction movie, it is unfortunately a real threat that has absorbed a large amount of people-hours over the past 10 years with very little output from regulators or lawmakers,’ the bank added. And while the Fed has stepped in to buy US Treasuries during periods of market stress, it’s a ‘tenuous long-term solution for the central bank to act as a buyer-of-last resort of the federal debt,’ BofA said.”
“‘It is not structurally sound for the US public debt to become increasingly reliant on Fed QE,’ BofA said. ‘It is risky in our view to rely on the Fed alone to solve the problem of Treasury market liquidity, resilience and functioning.’ Instead, BofA believes a better long-term solution is for the creation of a dealer of last resort that is not the Federal Reserve, which is governed by its dual mandate of price stability and low unemployment. ‘We believe such an entity should be formed before a crisis requires it.’”
From Bloomberg. “Many merchants, who sell more than half of the goods on Amazon’s web store, fear they’ll be forced to cut prices to move a mountain of inventory. ‘Consumers don’t seem to be spending much on anything beyond basic necessities, so sellers have to offer discounts and coupons and aggressive marketing, which can be expensive,’ said Lesley Hensell, a co-founder of Riverbend Consulting, which advises Amazon sellers. ‘The fourth quarter looks scary this year.’”
“The effects are rippling from sellers to firms that support them, including small business lenders. An Amazon merchant commonly borrows about $100,000 to buy inventory and pay for marketing campaigns during the holidays, paying the loans off with their proceeds. Seth Broman, chief revenue officer of Swiftline, which offers loans to online merchants, is turning down more loan applications this year. Rising costs and slower growth has simply made lending sellers money too risky, he said. ‘A lot of customers are over-leveraged, and their sales are off,’ Broman said.”
The South China Morning Post. “After China’s weakened exports surprised the market on the downside in August, shipping agents across China are struggling to find cargo during what is traditionally the peak shipping season ahead of Western holidays. ‘We are, in fact, seeing an off-season at present,’ a Jiangsu-based shipping agent said on condition of anonymity. ‘The overall shipping demand from customers is plummeting.’ Another agent, based in Tianjin, likened shipping prices to ‘cliff diving,’ because of their sharp descent.”
From Ottawa Life. “Fueled by the media and propagated by misinformed economist pundits, public anxieties about the real estate market will become a self-fulfilling prophecy if the government doesn’t act with urgency to protect Canadians’ largest asset class and prevent a real estate crash. Rising mortgage rates mean that the average Canadian needs to make a staggering additional payment of $800-$1100 per month for a mortgage of $800,000. This places enormous pressure on already strained households grappling with relentless inflation and rising costs of living — everything from higher gas and grocery prices to inflated hydro bills and property taxes.”
“Homeowners and the real estate market will feel the burden of this jarring payment increase for at least the next five years. If our government doesn’t act soon, the effects will be catastrophic and result in a major real estate crash in Canada, wiping the home equity and retirement savings of millions of Canadian homeowners across the country. As someone who has worked extensively in this industry for over 20 years, I can say with confidence that there is a way for the Canadian Government to combat inflation without collapsing the Canadian housing market and irreparably damaging the household balance sheets, credit, and home equity of everyday Canadians along the way.”
“The solution is simple: Canada needs to introduce 40-year amortization. The government must allow homeowners with existing mortgages to renew their mortgages up to 40-year amortization. When we look at the data and the realities of the market on the ground, this is the best solution we have available.”
“Sooner or later, our homeowners must renew their mortgages at the current high rates! If we don’t change course, many Canadian homeowners will buckle under the weight of unaffordable mortgage payments and runaway inflation within a few months once these mortgages are up for renewal. Many people will have no choice but to put up their homes for sale well below what they owe to the banks and the mortgage companies.”
“For over a decade, low interest rates in Canada combined with the increasing value of homes have helped millions of Canadians across the country build tremendous wealth and a stable personal balance sheet. The thriving real estate market has also supported and created millions of jobs in this country. But without a prudent government strategy to safeguard Canada’s most important asset class, there is a significant risk of wiping out the balance sheets of Canadian homeowners today and curtailing the wellbeing and prosperity of Canadians for generations to come.”