A report from Business Insider. “‘The uptick that we have seen in cancellations has really been in the last 30 to 60 days, and the leading driver has been buyers’ remorse,’ said Ryan Marshall, CEO of PulteGroup. ‘I think a big part of that comes from buyers that made a buying decision during the run up in interest rates, and as talk of recession increased, their remorse and fears have also increased with it.’”
“D.R. Horton is facing a similar problem. Although the company ended its third quarter with 56,400 homes in inventory – up 19% from 2021 — nearly a quarter of its contracts fell through in the three months ending in June. The cancellation rate of 24% increased by 7 percentage points from just a year ago. ‘Toward the middle of June, we got a 100 basis point increase in long term rates over about a three or four day period,’ said David Auld, the company’s CEO, on the earnings call. ‘I think that impacted cancellations.’”
From Market Place. “‘It does feel like someone just switched the light off,’ said Lawrence Yun, chief economist with the National Association of Realtors. Micki Maynard listed her mom’s condo in Ann Arbor, Michigan, in early May. ‘The market we had expected to compete in literally vanished in a week.’ That condo is still on the market, and Maynard has had to lower the price and improve the property to attract buyers — concessions she didn’t expect to make just a few months ago.”
“Josh Landen started house hunting in the suburbs of Tampa, Florida, in early March. So, when another buyer backed out of purchasing a new home under construction, Landen scooped it up. He signed a contract in April. But while he waited for construction to finish, he noticed a shift in the building company’s promotional emails. ‘The incentives have been increasing, and prices were decreasing.’ He talked the company into letting him cancel his initial contract so he could take advantage of the new deals. ‘We got a, frankly, a nicer house in a better subdivision for less money,’ he said.”
From Market Watch. “Sellers slashed home prices in June in areas that saw red-hot price appreciation earlier in the pandemic, including Reno, Nev., Austin, Texas, and Boise, Idaho, according to Realtor.co. Phoenix, Ariz. was a major hotspot earlier in the pandemic. Now, there’s a surge in homes being listed on the market. ‘Sellers are worried. They missed the peak of the market,’ Phoenix real-estate agent Kristy Ryan said. ‘So they’re putting their homes for sale as fast as they can, while their properties can still fetch a high price. The bidding war days are gone on most homes,’ Ryan added. ‘If the seller needs to sell, they’re slashing their prices to get a buyer in there.’”
“Boise, Idaho, another hot market like Phoenix, is also seeing a big share of homes going on sale. No. 6 on the Realtor.com list is Ogden, Utah, where 27.4% of listings are getting a price cut. The median home list price is $580,000. Sacramento, Calif., Colorado Springs, Colo., Evansville, Ind., and Medford, Ore., round out the bottom of the top 10 list. Aside from Evansville, where the median home list price was $246,000, the other spots all had median list prices of more than half a million dollars. A quarter of homes in all the cities had their prices slashed, according to Realtor.com.”
From 12 News in Arizona. “All over the Valley, a growing number of ‘for sale’ signs signal a change in the housing market. According to data from the Cromford Report, there is a 156% increase in the number of homes on the market compared to last year. The increase in available homes is the most the Valley has seen since before the Great Recession. ‘That is something we have not seen in a very long time,’ said Tina Tamboer, a senior housing analyst with the Cromford Report.”
“According to Tamboer, most of the homes on the market do not belong to your traditional family. Instead, the majority are either new construction or owned by companies like Opendoor and Offerpad. ‘I would say most of the inventory we are seeing is coming from an investor base,’ Tamboer said. ‘It’s really important for buyers to understand that the market has changed so quickly they need to shift their mindset as well,’ Tamboer said. ‘The people who realize the market has shifted first will be the ones who win.’”
CBS Boston in Massachusetts. “‘When I hear that the Fed has raised the rate, it makes me feel like somebody has punched me in the stomach,’ said Billerica realtor Curtis Knight. ‘Up until December when the rates were 3.1, it was the wild wild West. The phone rang off the hook every day. Now it’s very, very, different. Hardly any calls,’ Knight said.”
The Dallas Morning News in Texas. “Mr. Cooper Group Inc., one of the largest servicers and originators of home loans in the nation, saw its earnings and revenues sink in the second quarter as demand for mortgages plummeted. That led the company to cut almost 700 jobs since the start of this year. Coppell-based Mr. Cooper laid off 420 staff members in the second quarter and 250 in the first quarter, mostly employees who worked in originations, the company confirmed to The Dallas Morning News.”
“A Worker Adjustment and Retraining Notice filed with the state of California shows 120 of those cuts were at Mr. Cooper’s office in Santa Ana, Calif. Mr. Cooper had about 8,000 U.S. employees as of the second quarter. Mr. Cooper’s earnings were down 77%, from $658 million in the first quarter to $151 million in the second, the company reported Wednesday. Its revenues sank 43%, from $1.05 billion in the first quarter to $599 million in the second.”
From Fox 7 Austin in Texas. “‘We’re no longer seeing 40 offers sent in on the first day,’ said Cord Shiflet with the Austin Board of Realtors. But for those who recently bought homes well over asking price, the assessment is not as clear-cut. ‘That’s going to be a gut check question for me. And I’m going to say I haven’t seen anybody lose money on houses. I’ve seen sellers that had it in their head, hey, you know, we can just crush it on this market compared to what we can get a year ago. And they’re having to get those expectations more in line,’ said Shiflet.”
“A house located near McNeil and Parmer Lane is one of several going up for sale this week. The owners hope for a quick sale, even though they are aware the real estate market has slowed down. ‘Feeling very optimistic in regard to my son’s house because of the location. He is essentially catty corner from the new Apple campus that’s starting to fill up,’ said Ray Stawowy. ‘If it came to the point that I don’t get the price I want. I’m in a position that we would just keep it as an investment property and a rental.’”
Las Vegas Weekly. “In Southern Nevada, prices for existing homes have only recently started to drop slightly after a long run of monthly increases. ‘We are seeing some discounting from sellers now, which we weren’t seeing a few months ago. In those situations, sellers are often trying to keep buyers in their contracts. Sellers are beginning to pay some closing costs again,’ says Tony Humphrey, vice president of mortgage lending for One Nevada Credit Union.”
“One of the country’s biggest mortgage lenders, Wells Fargo reported in a quarterly earnings call earlier this month that fees collected from its mortgage banking operation fell from $1.3 billion during the second quarter of 2021 to $287 million during the second quarter of 2022. Matt Haugh, a Las Vegas area Realtor, has seen a definite downshift in the market lately. ‘A lot of buyers are on the sidelines waiting to see what’s going to happen,’ he says. ‘We have even seen many of the institutional buyers and hedge funds that buy properties with cash canceling contracts.’”
10 News in California. “For the last couple of years, San Diego’s home prices were skyrocketing, sellers were getting multiple offers well over their asking price, and ‘for sale’ signs were quickly removed. ‘We could sell a property in a weekend. Do a quick open house and we’re done, in escrow,’ said Sheri Jones, broker/owner of local S.A.K.K Realty. ‘Interest rates were in the two percent, easily, lender credits- a buyer can get pretty much whatever they needed, and a seller could get top dollar. I’m saying we were seeing $100k over asking, $200k over asking.’”
“But recently, there’s been a noticeable shift, and Jones has seen it firsthand. ‘With interest rates, we’re seeing anywhere from 5 to 6 percent on Conventional or FHA, we’re seeing homes stay on the market longer, we’re seeing prices drop,’ she said. ‘I actually had a meeting with my lender this morning and she gets a phone call, ‘buyer’s pulling out,’ she said. ‘And I’m seeing that as well, buyers are getting cold feet, and buyers are saying ‘I’m going to wait, and see what happens’. I know I lost a lot of buyers because they were already at the top of their budget and to see a huge increase like that, they just couldn’t afford it anymore.’”
“Buyers are able to negotiate, ‘Sellers are offering credit for closing costs, and then also they’re offering to pay for their buyer’s buydown to have a cheaper rate for them,’ she said. Jones said she’s telling sellers to be patient, and not price their homes too aggressively. ‘Let’s do maybe $30 to $50k under and also expect to get a lowball offer,’ she said.”
The San Francisco Business Times in California. “More homes are for sale at reduced prices in the East Bay, but it appears fewer buyers are willing to take the plunge at this point, and residential real estate brokers are now feeling the pinch of economic turmoil, especially at the higher end of the market. House hunters across Alameda and Contra Costa counties are recoiling and have little motivation to buy, Abio Properties partner and agent Linnette Edwards told me, emphasizing that the market is smack in the middle of a wild price correction with homes selling at $2 million seeing the most volatility.”
“She told me that pending sales for upper-end homes in that price point and above dropped last month from the prior month in both counties to the tune of 300%, noting that Contra Costa County has five months of inventory on the market right now, while in Alameda County, it’s almost three months of inventory. ‘In my 20 years of selling real estate, this is the fastest I’ve seen a market adjust down,’ she said. ‘Talking with other agents, some homes are receiving multiple offers and all the offers are below the listing price.’”
“The most current real estate numbers from the California Association of Realtors from May to June reveal that Alameda County saw an 8.1% drop in median sales prices for single-family homes while Contra Costa recorded a 4.7% month-over-month decline. Edwards told me that those numbers don’t even reflect the steeper price adjustments happening now, which will be evident in next month’s data, and that the pandemic gains have nearly evaporated with homes from Lafayette to Richmond now routinely going for hundreds of thousands under what they would have fetched in April.”
“‘The market has spoken and now buyers don’t feel comfortable with the pricing because simply put, inflation and interest rates have been very blunt and it impacted their willingness to buy. So they are willing to wait,’ she said. Condos continue to sit on the market longer than single-family homes, but that serves to reason since historically, condos are the first to drop and the last to appreciate, she said. But that’s also where some of the biggest deals could potentially be found. ‘I know it sounds like a real estate agent thing to say, but honestly, I think it’s a great opportunity to buy a condo because they’ve dropped in price and they’re sitting there, so that could be an investment,’ she said.”
From CTV News in Canada. “Three new townhomes on Nelson Street in Esquimalt, B.C., are weeks away from hitting the market. The question for the developer is – how will they be priced? ‘The market is changing, we are feeling it,’ said Xeniya Vins, who is developing the properties. ‘We probably would have been better off price-wise if we did pre-sell.’”
“‘In the last few months it’s been like someone has turned off the taps in terms of sales,’ said Marko Juras, a realtor with Fair Realty. In Victoria, sales are running at a 20-year low month over month. Meanwhile, condo prices have fallen six to eight per cent since the peak in March. ‘Single family homes, depending on the price range, are down anywhere from eight to 13 per cent,’ said Juras.”
The Globe and Mail in Canada. “‘We’re aware that the storm is brewing and likely to get worse,’ warns Toronto-based real estate lawyer Mark Morris.Today credit has tightened, extensions are rife and defaults are rising, says the principal with LegalClosing.ca. The process of buying and selling was ‘very clean’ when there was an abundance of money flowing through the system, Mr. Morris explains, but now that stream has slowed to a trickle. Some buyers appeal to sellers for more time to come up with the financing they need to close a deal, and defaults are also rising, says the lawyer, who has 15 to 20 problem files on his desk on a given day. Purchasers planning to rely on a home equity line of credit, or HELOC, to buy an additional property are finding that avenue closed.”
“Mr. Morris is carefully watching the new build segment, where he sees peril ahead. He points to the many people who signed a contract with a builder before construction on a new project began. A number of those buyers count on being able to sell the contract to another party without ever taking possession of the property. ‘That market is now illiquid,’ Mr. Morris says. ‘Buyers will find they cannot assign the product away if they can’t afford it.’”
“Some homeowners have let things slide to the extent that they have defaulted on mortgage payments, received letters from the lender, and eventually had the bank foreclose. ‘We have people come to us who have already been locked out of their house by the sheriff,’ says Samantha Brookes, chief executive of Mortgages of Canada. ‘They leave it until the last minute.’ She figures that more homeowners are going to be facing financial challenges as rates continue to climb and more mortgages come up for renewal. ‘I do believe by September or October we’re going to see a lot of people jump ship.’”
“Mr. Morris sees significant risk in the heavy debt loads that many Canadians have accumulated in recent years. People have borrowed against their home equity to pay for major expenditures in the past, but the practice of drawing HELOCs for everyday expenses has accelerated in recent years, he says. ‘People started using houses as bank accounts five or six years ago,’ he says, pointing out that people who borrow to maintain their lifestyle continually need to borrow more. ‘I’m not certain people appreciate how much homes have become part of salary,’ Mr. Morris says.”
Channel News Asia. “China’s deepening property bust is sending shock waves through the nation’s 400-million-strong middle class, upending the belief that real estate is a surefire way to build wealth. Now, as property developments stall across the country and house prices fall, many Chinese homeowners are slashing spending, postponing marriage and other life decisions, and, in a growing number of cases, withholding mortgage payments on unfinished homes.”
“Peter, for one, has given up on starting his own business and buying a BMW 5 series after construction on his 2 million yuan (US$300,000) home in Zhengzhou, the capital of Henan province, was halted by China Aoyuan Group. He is now saddled with a mortgage that’s eating up 90 per cent of his disposable income on a home he may never see. ‘I know every investment comes with a risk and you pay the price for your own choices,’ Peter said, asking not to have his full name or any personal details used for fear of reprisal. ‘But homeowners aren’t the ones to blame and shouldn’t bear the consequences.’”
“Hong Hao, a former China strategist at Bocom International Holdings, said the mortgage refusals will suppress house prices and sales, creating a negative wealth effect that will ripple through the economy. ‘I don’t think it’s a good bet,’ Hong said of the property market. ‘Many have gotten used to thinking home prices will never fall. But a paradigm shift is here.’”
“Andy Xie, a Shanghai-based independent economist, said the long property cycle had turned. ‘The high and rising prices were justified on growth, that is, one day income will catch up,’ Xie said. ‘That is no more.’ Many buyers, in particular the elderly, don’t have the luxury to wait. Liu, a retiree in Jingdezhen, couldn’t qualify for a bank loan and used his life savings of about 800,000 yuan on an apartment with an elevator. He has made two visits to the construction site and found no sign of activity. ‘The best we can hope for is that the government can fix it,’ said Liu, who lives on a pension of about 3,500 yuan a month. ‘But let’s be honest, even that seems like a forlorn hope.’”