A report from the Wall Street Journal. “Getting a mortgage for a resort-area condo might become more difficult after Fannie Mae and Freddie Mac moved to tighten rules on buildings with many short-term rentals and hotel-like amenities, some Realtors and bankers say. Fannie Mae last month changed its rules to make it clearer that it won’t back certain loans in high-rent vacation areas, with Freddie Mac taking similar steps that go into effect next month.”
“The updated rules, which went into effect Dec. 7 for Fannie, are starting to generate pushback from Realtors and bankers who say entire buildings could be ineligible for financing even if only some units are rented out on a short-term basis. Bankers fear Fannie and Freddie may no longer buy loans on certain condos or force lenders to buy back mortgages on ineligible buildings. ‘Until there is more clarity from the agencies, all mortgage bankers are shutting off the valve on condo loans right now,’ said Rob Henger, director of mortgage banking at FirstBank Mortgage, a Nashville, Tenn.-based bank.”
From CNBC. “As of Jan. 5, just over 5% of all mortgages, or 2.74 million, are still in government or private sector Covid-related mortgage bailouts, according to Black Knight. ‘The relatively anemic rate of improvement in the first week of January means that there’s a larger unknown in the market than we were expecting even a month ago,’ said Andy Walden, Black Knight economist.”
From Fox 5 San Diego in California. “A moratorium on foreclosures has been in place since the beginning of the coronavirus pandemic but now that it is over, landlords are starting to lose their investment properties to foreclosures. ‘The foreclosure moratorium has stopped,’ said Real Estate Attorney Kent Sharp. ‘We are now seeing a lot coming forward with a lot of lenders saying, ‘You owe me money,’ and the reason they owe money is because a lot of landlords can’t pay the full amount that is owed.’”
The Emeryville Eye in California. “Emeryville ranked as the 6th most expensive city in the Bay Area to rent this month. For the year, Emeryville rents for a 1-bedroom unit dropped nearly 17% from a pre-pandemic high of $2,700. Two bedroom units fell nearly 22% from a pre-pandemic average of $3,570/mo. Sales prices reflected a 4.16% decrease in 2020. The average sales price decreased to $599,000 from $625,000. The Median Sales Price in December was $527,250, down -23.0% from $685,000 in December of 2019 and down -13.6% from $610,000 last month.”
“The total inventory of properties available for sale as of December was 20, up 100.0% from 10 in December of last year. December 2020 Inventory was at highest level compared to December of 2019 and 2018. While most single family homes sell fast, with multiple offers and above asking price, many condos sit for a long time and don’t sell at a high price. Many sellers of condos have yet to adjust their expectations and list prices. 6363 Christie Ave, Unit 821 is a 1 BedRoom, 1 Bath condo with 634 SqFt in the iconic Pacific Park Plaza building. It was listed in April, 2020 and is still available. The list price is $499,000.”
The Pittsburgh Post Gazette in Pennsylvania. “For landlords, the financial struggle is not that different from that of the tenants, said Aaron Bubenheim, owner of Riva Ridge Real Estate Services, a property management company that handles about 1,600 units in Pittsburgh. Some landlords who work with Riva Ridge own their properties outright, but others still have mortgages to pay off. ‘If a tenant is living in the house and they’re not able to pay the rent, then the tenant’s in bad shape and the landlord’s in bad shape,’ he said. ‘The whole flow of money that’s involved with rental properties is not happening.’”
“Already, some landlords are reaching a breaking point, said Josh Caldwell, president of the Pittsburgh Real Estate Investors Association. Often, at least once a week, he says he hears from a landlord who’s running out of money and needs help because tenants aren’t paying — ‘but [the] expenses keep coming.’ ‘The small landlords are the ones who are getting hurt the most. They’re the ones who don’t have reserves,’ said Mr. Caldwell, who owns 20 rental properties. ‘They’re the mom-and-pop landlords. Their retirement is being wiped out.’”
The Seattle Times in Washington. “Rents in once sought-after Seattle neighborhoods like downtown and South Lake Union nosedived in 2020. Across King, Pierce and Snohomish counties, rents dropped 3% compared with 2019, the biggest drop since the Great Recession, while average rents fell 14.2% near Lake Union. Apartment List estimated that in the city of Seattle alone, rents dropped 19%.”
“Some renters are looking to lock in better deals while the market is in a slump. Special deals, like a month or two of free rent or free parking, became more commonplace throughout 2020. By December, 51% of Seattle-area rental listings on Zillow were offering some kind of deal. When Michael Zaton moved from West Seattle to Columbia City in March, he found a one-bedroom, first-floor apartment for $1,745.”
“By December, a top-floor unit opened in the same building for the same price. ‘I latched on,’ Zaton said. ‘In March, the same apartment would have been around $2,000. Not only do I pay the same rent but I’m locking it in for another 12 months.’”
“At Goodman Real Estate, which owns 8,000 apartments across the region, CEO George Petrie has signed off on longer leases for Seattle buildings than was once the norm, he said, sometimes up to 18 months at lower rents. Rents in the company’s Seattle buildings have sunk 5% to 15%, and occupancies are down 10% to 20%, Petrie said. He expects the trend could last until the second half of 2021. ‘Am I willing to take it?’ Petrie said of a renegotiation offer from a tenant. ‘Yes. Why? Because I don’t know when Amazon is going to truly reopen, or Zillow, or fill in the blank.’”
“Buildings in Kent and in Pierce County, meanwhile, are 95% to 99% full and the company has kept rents flat or increased them, Petrie said. Goodman’s aren’t the only buildings with apartments sitting empty. The Seattle-area vacancy rate was higher in 2020 than at any point in the last decade, according to CoStar. The 7.3% rate was up from 5.8% from a year earlier. New apartments will keep coming: About 19,000 new units are under construction in the region, equal to about 5.5% of existing units, according to CoStar.”
From Westword on Colorado. “Suspicions confirmed: A new report from CoreLogic found that homes in metro Denver are overvalued even as prices continue to rise. And one of the authors of that study predicts that this ‘price bubble’ will keep growing this year. Consider these comments left by readers on Westword. Lindsay: ‘Housing costs everywhere are too high right now, but Colorado/Denver’s prices are insane. When you can’t even buy a dilapidated shack that wouldn’t ever pass inspection and just needs to be bulldozed…for $350,000, there’s a big problem.’”
“Angelo responds: ‘Denver is just collapsing in on itself. It’s sad.’ Replies Joe: ‘Californians, go home.’ A slight bright spot: The prices of condos aren’t going up as fast as those of detached homes, according to CoreLogic. And although the company didn’t get into the rental market, prices there are dropping.”
The Georgian Straight in Canada. “It looks like a Coal Harbour penthouse will get the record as the most expensive Vancouver condo sold this year. The full-floor apartment occupying the entire and top 26th storey of the Carina condo building went for $11 million. The seller let go of the property below its assessed value. B.C. Assessment placed the 2020 value of #2601-1233 West Cordova Street as of July 1, 2019 at $12,932,000. The $11 million purchase price was also below the original asking price.”
“On January 24, 2020, Royal LePage Sussex listed the condo for $13.8 million. A day before that, the property was on the market for $15.5 million. This January 23 listing was terminated. Royal LePage Sussex also listed the penthouse on May 24, 2019 for $15.5 million.”
From Better Dwelling in Canada. “Canada Mortgage and Housing Corporation (CMHC) warned first-time homebuyers in April to be careful about jumping in. Despite a lot of real estate agents mocking the organization, the agency was mostly right. Typical condo buyers in Toronto or Vancouver in May, are most likely down more than a downpayment in December. The estimate uses a 2.0% mortgage rate, with a 25-year amortization, and the benchmark price. The minimum downpayment is used, which is sometimes a little higher than 5% due to prices. Also included in the second set of numbers is the mandatory cost of mortgage insurance.”
“It’s important to note that these aren’t a comprehensive list of costs, nor value assessments. Big hits like transfer fees aren’t estimated, and neither is legal or maintenance. Interest payments aren’t included as a loss either, but the principal contribution is included for the purposes of equity calculations. The investment losses would be much larger if forced to sell, or one needs to move. Especially in the case of regions with a shortage of equity, that would require the owner ‘top up’ to sell. Yes, there are people that are so broke they can’t even sell the home they live in.”
“First, let’s look at the return on investment for your downpayment, since that’s how many agents sell condos. ‘Think about the leverage!’ Across TRREB, a benchmark condo buyer last May would have lost 147.95% on their downpayment. In the City of Toronto, a benchmark buyer would have lost 169.29% of their downpayment. Great reminder that leverage works both ways.”
“Greater Vancouver buyers did a little better, but it depends which half of the City you bought in. REBGV’s May benchmark condo buyers would have made a 76.88% loss by December. In Vancouver East, the return over the same period comes in at a slightly better 59.25% loss. Vancouver West is closer to Toronto, with the loss working out to 140.73% by December. In TRREB, a benchmark buyer would be in the hole by $3,805, or have negative 0.66% of value. In the City a benchmark buyer would be a little worse, down $10,792, or about 1.81% negative equity. Yes, these buyers are likely now negative equity.”
From Asia One on Singapore. “The bungalow at the centre of the Yang Yin saga is up for sale again — this time with the asking price slashed by $10 million to $25 million. Although it was put on the market in 2018, the property remained unsold as the two bids did not meet the expected price of $35 million.”
“Chung Khin Chun, a rich Singaporean widow, lived in the bungalow for over 50 years before she was embroiled in a public tussle for assets worth a total of $40 million. The elderly woman, who suffers from dementia, was nearly swindled of her property by former Chinese tour guide Yang Yin in 2014. He was later sentenced to 11 years and two months in jail.”