A report from KOB 4. “Kelsey Norris and her family have been in their Albuquerque home for five years, and she’s grateful they were able to purchase it before the pandemic hit in 2020. They’ve started to think about upgrading, but the market hasn’t looked great. ‘Honestly, the house that we’re in is a little small for us, it would be nice to move into a larger house, but we’re priced out right now at this point,’ she said. Thousands of New Mexicans are in the same catch-22, and they have been for years. But Shelley Padilla with Realty One of New Mexico said things may be looking up. ‘When there’s more on the market, sometimes the prices will maybe sometimes drop a little bit. We are noticing a little bit in dropping in the list price,’ said Shelley. She claims there are about 1,000 more homes on the market in the metro than this time last year.”

The Review Journal in Nevada. “Notices of mortgage defaults in the Las Vegas Valley have been on the rise this year, according to a new report from UNLV. Nicholas Irwin, the research director at the Lied Center for Real Estate at UNLV, said the number of defaults has been rising steadily since January 2022. ‘This could be a symptom of a lot of people starting to fall behind on their mortgages,’ he said. ‘They were using a lot of their leftover money from COVID and some of the various federal efforts and people who were maybe trying to string a lot of this together are just not able to do that.’”

“The study also provided a heat map to where notices of default were centered. In 2022, they were largely centered around North Las Vegas. However, Irwin noted that hot pockets have risen all over the city in 2024, including in the northwest, southwest, central and eastern parts of the valley. ‘This has very much spread across the entire valley,’ he said. Last year was the worst year for real estate sales in the Las Vegas Valley since 2008, according to MLS statistics obtained by the Las Vegas Realtors.”

Silicon Valley in California. “New defaults for delinquent homeowners association dues have engulfed a troubled downtown San Jose housing tower that faces multiple legal entanglements. Litigation and real estate woes have engulfed the western high-rise of a two-tower residential complex at 188 West St. James Street. In April, nine condominium units were auctioned for a jaw-dropping average price of $31,900 in an effort by a homeowner’s association to recoup unpaid maintenance fees. An entity operating as FPP MB — affiliated with China-based real estate firm Z&L Properties — developed the housing towers, which together contain 600-plus units. Each tower has about 303 residential units. The condos in the tower beset by legal and delinquency woes are all being offered for sale.”

“In the latest battle over the towers, the 188 West St. James Homeowner Association has filed default notices against the owner of the western tower. The developer is on the hook for the payments for condos that are completed but unsold. Delinquencies have arisen for an estimated 24 condos in the western tower, the county records show. The FPP MB affiliate is also involved in a legal war arising from the auction of the nine condos in April.If the current bout of defaults proceeds, the HOA might again attempt to auction off the units.”

The Mercury News in California. “For many would-be homebuyers, a house that’s sat on the market for over 30 days in early summer raises a red flag. But a month may be a new normal in the Bay Area. Across Alameda, Contra Costa, San Francisco, San Mateo and Santa Clara counties, about 53% of active home listings in June 2024 were ‘stale,’ sitting on the market for 30 days or more without going under contract, a 6.5% increase from last June, according to Redfin. Nationally, the number of aging listings was 64.7% in June— almost 9% higher than 2023.”

“If there are fewer homes, why aren’t buyers rushing to make offers? Blame sellers. In anticipation of higher demand, homesellers are pricing their properties too high relative to what the market can support, real estate experts say. Higher prices combined with high interest rates means larger mortgage payments. As a result, homebuyers unwilling to swallow larger payments are leaving inventory on the market for longer periods of time in hopes that sellers will reduce their prices. Those who absolutely have to sell — such as people relocating to other states — may decide to lower their price and take a $40,000 to $50,000 loss, said Alex Khodadad, a real estate agent based in Contra Costa County and the East Bay.”

WFLA in Florida. “In Sarasota, about 500 people were rescued from flooded homes and taken to higher ground Monday, according to police. Many of these residents told News Channel 8 they’ve never seen the waters rise this high. ‘We’ve lived here for 46 years, and this is the first time we’ve flooded like this,’ Barbara Kronenberg said. ‘We’ve never had water in the road, ever. Even my fence is under the water, that’s never happened.’ Alfred Dewitt walked through his home knee deep in water trying to see what could be salvaged. ‘Well, our freezer is at that end and it’s floating,’ he said. ‘See our nice little laundry room, washer and dryer, nice stuff, it’s gone.’”

The Philadelphia Inquirer in Pennsylvania. “Juan Serrat is one of an increasing number of ‘concession surfers’ — renters looking to repeatedly cash in on incentives doled out by landlords, especially in hypercompetitive environments like Northern Liberties and nearby neighborhoods on the Delaware River, where thousands of new apartments have recently come online. ‘There is a little bit of a market inefficiency that is advantageous’ for renters, Serrat said. ‘I’m going to have to kind of ride that wave to find the next building.’ The surge in multifamily construction means Philadelphia developers and landlords are reckoning with a rental glut for the first time in decades. Rent increases have slowed and, at the high end of the market, reversed as concessions mask the fact that tenants are harder to attract at asking prices.”

“‘I fall in the category of never having given a concession before this year in my life,’ said Gary Jonas, founder of the HOW Group, which develops and owns rental buildings across the city. Now his company is offering, in some cases, two months of free rent for the first year’s lease. According to CoStar Analytics, the citywide vacancy rate passed 10% this year. Brenda Nguyen, an associate director at CoStar predicted most of the increased supply would be absorbed organically within a few years, but some new developments that pegged their financing to steadily increasing rents could be in trouble. ‘Say your financial assumptions were based on 5% rent growth. Instead, you’re seeing 1% rent growth,’ she said. ‘It’s not widespread, but I’ve heard about it happening. People who weren’t more diligent with their financing.’”

From Bisnow. “A wave of new construction coming to the market in the Sun Belt has left multifamily owners nervous as pandemic-era migration stabilizes. ‘For me, the key takeaway is that [we are] in the midst of clearly record levels of new supply coming into our market,’ Memphis, Tennessee-based Mid-America Apartment Communities CEO Eric Bolton said during a call with investors last week. ‘And we feel like we’re in the worst of the storm right now.’ In the second quarter, 119,400 units completed construction, bringing the year-to-date figure to a record 460,200 units — up 26% year-over-year, according to CBRE. A RealPage report estimates that as many as 670,000 apartments could be delivered by the end of this year, passing previous records by about 50%. The cities getting the most of those apartments are Dallas, Phoenix and Austin, with more than 30,000 units each, according to RealPage.”

“Colorado-based UDR, which has a Sun Belt portfolio representing 25% of its NOI, saw its FFO fall 5% year-over-year from 63 cents to 60 cents per share, just meeting its guidance. ‘Our Sun Belt markets … continue to lag our coastal markets,’ UDR Senior Vice President Michael Lacy said on a conference call. ‘Year-to-date performance was in line with our original expectations through the beginning of June, at which time we began to see some pricing deterioration due to elevated new supply and the concessions that came with it.’ Faced with the same issue, AvalonBay Communities executives said they are offering two or three months of concessions in their expansion markets like Austin and Charlotte.”

From Reuters. “Mortgage financing firms Fannie Mae and Freddie Mac are set to impose stricter rules for commercial property lenders and brokers, following a budding regulatory crackdown on fraud in the multi-trillion dollar market, the Wall Street Journal reported on Monday. Lenders would have to independently verify financial information related to borrowers for apartment complexes and other multifamily properties, the report said, citing people familiar with the preliminary plans. Additionally, lenders could face tougher requirements for confirming whether a property borrower has adequate cash and verifying their source of funds, according to the report.”

The Toronto Star in Canada. “In one month home prices in the GTA declined by almost five per cent in July as ample new listings and fewer buyers put pressure on sellers to lower their prices on top of a typically quiet summer market. Prices dropped for all property types with townhomes and semi-detached seeing the greatest price drops at 3.4 per cent and 3.3 per cent, respectively. ‘Buyers have a lot of negotiating power right now. As more buyers take advantage of more affordable mortgage payments in the months ahead, they will benefit from the substantial build-up in inventory,’ said TRREB market analyst Jason Mercer. On the supply side, buyers are benefitting from ample choice with the annual growth of new listings at 18.5 per cent, outstripping the number of sales. The sales-to-new listings ratio was 33 per cent indicating a buyer’s market.”

The Globe and Mail. “For the past couple of weeks, the share value of the S&P 500′s bellwether tech stocks has been falling. On Monday that panic evolved into pandemonium. Global markets tumbled, but Big Tech tumbled more. At one point, the AI standard-bearer Nvidia was down more than 7 per cent and the Magnificent Seven lost more than US$500-billion in market capitalization. The question of why this is happening now is interesting: It looks like the generative AI bubble is finally bursting. I wrote in April this year that generative AI technologies look like money pits with significant social costs attached: this prediction seems increasingly on point. Investors are less and less confident that generative AI technologies will provide the necessary returns on the huge investments made.”

“Several analyst and investor reports have come out recently making similar points. First, David Cahn at the venture capital firm Sequoia argued that generative AI needs to generate US$600-billion in revenues to pay back current infrastructure spending – and we’re nowhere near this. Then, Jim Covello, Head of Global Equity Research at Goldman Sachs, argued that, in light of future expected infrastructure investment, generative AI needs to find a ‘$1-trillion problem’ it will solve. It’s still not clear what this could be. Finally, the hedge fund Elliott Management has stated that Nvidia is in an AI ‘bubble land’ and that many AI technologies ‘are never going to actually work’ or ‘will take up too much energy’ – undermining the hype around generative AI. All of this highlights the problem of collectively putting too much money into one technological bet when it doesn’t offer a clear case for doing so.”

“All bubbles are driven in part by a self-fulfilling fear of missing out. Investors know that a bubble is a bubble, but they have to participate because they still make money. The past couple of years have been very good to investors in the stock market, especially those investing in the so-called ‘hyperscalers’ whose infrastructure investments underpin generative AI – for example, Alphabet, Amazon, Microsoft, and Nvidia. But it now looks like these corporations and others investing billions in data centres would be better known as ‘hype-scalers’: they’ve driven up expectations and investment but with little to show for it up to now. Generative AI technologies are currently underpriced or free. As Mr. Cahn at Sequoia noted, going forward firms will need to start generating revenues from their technologies, which means charging for them. Customers are unlikely to pay for technologies with ambivalent functionality – to say the least – and investors are coming around to this perspective.”

ABC News in Australia. “Financial services consultant Andy Barrow used to be a home owner in the nation’s most expensive city. It seemed as if he was one of the lucky ones, with many would-be buyers struggling to get into Sydney’s hot housing market in recent years. But Mr Barrow did not feel so fortunate as he lay awake most nights, feeling stressed about how he and his wife would continue to pay off their mortgage. Tired of feeling so helpless, the couple made the decision to sell their house in northern Sydney last year, abandoning the idea of home ownership. Mr Barrow and his partner are now renting on the New South Wales Central Coast.”

“‘It’s a massive relief,’ he told the ABC. ‘From four hours sleep a night — wringing my hands and worrying about the future — [to] the present — waking up refreshed [and] uninterrupted — it’s a big change.’ When the couple bought their place in northern Sydney in 2020, interest rates were at record lows and they found the repayments ‘doable.’ But two years later, Mr Barrow and his wife stopped working full-time, just as the Reserve Bank started lifting interest rates aggressively. It sent their repayments surging from about $5,500 to $8,500 per month. Mr Barrow is one of many Australians who have sold their homes within a few years of their purchase. The number of homes that have been resold in less than three years has jumped to 16 per cent, its highest level in at least a decade, according to figures from CoreLogic.”

“This year’s increase in short-term resales may also be indicative of mortgage hardship, with owners like Mr Barrow choosing to sell their homes before falling too far behind on their repayments. ANZ customer fairness adviser Evelyn Halls observed these numbers were ‘not quite reflecting the true amount of financial stress in the community.’ One reason for this is financially stressed Australians are choosing to default on their other bills before missing their home loan repayments. These missed payments do not show up in the narrowly defined mortgage arrears data, but are still a clear indicator of financial distress.”

“‘People are falling behind on council rates, utility bills — like their electricity, gas and water bills — telephone bills, other debts like credit cards and personal loans,’ Matthew Martin, legal director of Mortgage Stress Victoria, said. ‘We’re seeing people who are foregoing healthy diets, living off packets of two-minute noodles for their family to get by.’”

South China Morning Post. “Mao Zhenhua is the founder of China Chengxin Credit Rating Group and co-director of Renmin University’s Institute of Economic Research. He is a regular commentator on China’s economy, has been a professor at the University of Hong Kong’s Business School since 2022, and was among the first to warn about the underlying pressure on China’s property prices. The property market in China has been in crisis after a series of defaults by developer Evergrande in 2021. You first noted the potential consequences of their liquidity problems 10 years prior. How do you assess the downturn’s impact on China’s economy now?”

“Real estate has become the most intense issue affecting China’s economy. In the past, China’s real estate was a focus of investment for all of society. Real estate prices were rising continuously, and it was commonly accepted that every adult should have his own house, which is a unique belief. In this context, more middle-class families kept purchasing – even those not qualified to buy a house. This pushed property prices to new highs in a very short period of time around 2017, a sign a bubble was about to burst.”

“I noticed that Evergrande started to offer 20 per cent discounts as a selling strategy as early as 2016. It was widely believed this was an individual case limited to Evergrande, as this private developer faced liquidity issues due to excessive debt and a lack of bank support for its loans. On the contrary, I believed the cause was something much bigger. This was a sales problem for the whole industry – prices had peaked and would start on a downward trajectory. I was the first to urge that attention be paid to the downward trend in real estate prices. I also called on our regulators to perform more stress testing, especially on the banking sector. The banking sector believed that it had sufficient collateral, such as land. But the banks did not carry out sufficient stress tests on the total debt repayment capacity of the Chinese real estate industry.”

“Because of insufficient stress testing, I also believed that the problems of Evergrande could soon spread to other real estate companies. Policies were only adjusted about one year later, when many real estate companies were on the verge of bankruptcy. In 2021, I drew the conclusion that in China – like many other parts of the world – we do not need so many large real estate companies. The Chinese real estate industry was in oversupply.”

“The amount of land that Chinese real estate developers have acquired is astronomical. If the land sold to developers were to be developed according to their previous plans, it is doubtful that the Chinese market would have enough demand for it. We must abandon the idea that real estate construction must be the main contributor to the economy. It will take a long time to digest the supply that has accumulated. The era of large real estate companies is over. Of course, we’ll see some upgrades in cities or renovations, but the era of large-scale construction is over.”