A weekend topic starting with Sparta Independent on New Jersey. “‘It was ticking upward, but in the last 90 days or so, prices have started to flatten out, if not come down slightly,’ explained Realty Executives broker and Manager Nicole Monahan. This time last year, her Pike County office may have seen one or two listings with price reductions. Nowadays, it’s more like 20. ‘I think we’ve definitely hit the peak of where we’re going to be at.’ Monahan predicted that foreclosures will be on the rise in the next 18 months. ‘Usually it starts with car repossessions, and car repossessions have started to increase again.’”
“After finally finding the perfect home in Vernon, N.J., teacher Ben C.* and his wife nearly lost out on the deal two weeks before the anticipated closing date. They would lose the lower rate if they didn’t close in time. ‘We really pushed for this house because of the mortgage rate,’ he said. ‘Even when they said, ‘We’re not going to do the fixes,’ we were just like, ‘You could literally set the house on fire and we’re gonna take it, because we could not afford this house now if this house went back on the market. We would not be able to afford it whatsoever.’”
The Denver Gazette in Colorado. “The median price of a single-family home in Denver stood at $723,750 in July, down from $750,000 a month ago. Broker-agent Jennifer Markus said a monthly drop in price underscores the unusual rise that coincided with the pandemic and seemingly peaked in April. ‘Homes are sitting longer, and for some reason sellers seem to think they’ll be worth more next year,’ she said.”
From CBS Colorado. “‘We saw what was our steepest decrease in pricing for the average priced home, in our June report. I think we were sitting at right around $714,000 is the average price per home.. in July we dropped down $690,000 for the average price just a little bit above that,’ said Bret Weinstein, CEO of Guide Real Estate, who has been helping residents buy and sell homes in the Denver metro area for 10 years. ‘It’s kind of a seller beware. We are in a spot right now where the seller actually has to stage the house it has to look phenomenal it has to be priced appropriately. Buyers have a lot of options currently so if you’re the one who is saying while my neighbor got $750,000 three months ago, you’re not going to get $750,000 today,’ he said.”
The Rockwall County Herald-Banner in Texas. “Although the D-FW housing market is shifting, potential home sellers should rest assured that their houses still have plenty of sales value, according to an analysis by M&D Real Estate. Price reductions are happening, and properties are sitting longer right now than previously. The 30% in price appreciation is unsustainable, and rising interest rates are pushing buyers out of the market. ‘What has to happen now is that price appreciation from 2021 is going to back up and reduce to more normal levels, such as five to 10 % price appreciation,’ predicted Danny Perez, managing director of M&D Real Estate. ‘This still gives you a total of about 70% price appreciation in your home for the past 2.5 years — not a bad outcome at all.’”
The Houston Chronicle in Texas. “Houston’s housing market is finally slowing – but it’s not slowing as quickly as many other destinations that became hotspots for migration during the pandemic, research from Redfin suggests. The share of so-called ‘stale’ listings in Houston – or homes that sat on the market for longer than 30 days – jumped by about 10 percent in the Houston area in July. Now about 60 percent of homes are sitting on the market for 30 days or longer in Houston.”
“But home sellers in other markets popular pandemic destinations are in for a bigger shock. The share of ‘stale’ listings in Austin, for example, is up by nearly 51 percent year-over year, according to Redfin. In Dallas stale listings leapt about 43 percent. And in Phoenix and Oakland stale listings were up nearly 55 percent and 61 percent, respectively. With four months of declining sales in Houston, the pandemic buying boom is officially over in Houston. ‘The market did a 180-degree turn from early spring to late spring, with buyers backing out because of high mortgage rates. A lot of sellers are telling me they feel that they’ve missed out on the hot market,’ said Christopher Johns, a Redfin agent in Houston.”
ABC News on California. “Just a few months ago, the real estate market was favorable to people selling homes. Now, brokers are saying the market has shifted. ‘Today, week after week, we see more and more inventory come on the market and demand is down,’ broker Justin Itzen, who sells high-end homes in Orange County, California, told ABC News. ‘We did feel a very aggressive slowdown,’ said Itzen, that happened almost overnight. ‘During open houses it was like, ‘where’s all the buyers?’”
The San Francisco Business Times in California. “San Francisco home sales prices, at their most robust ever back in spring, continue to trend downward. Compass Real Estate reveals that the median sales price for a home in the city — now at $1.68 million — dropped 10% from June to July and has fallen 18% since its all-time high of $2.05 million in April. Moreover, the number of home sales in July was down 33% year-over-year, with house sales down 27% and condo/tenant-in-common sales down 36%.”
“The total number of listings with price reductions price leaped from 156 in June 2021 to 316 in June 2022, an increase of 102%. The city’s $5 million-plus luxury market hasn’t fared any better as only nine homes in this price range sold in July, representing a 50% year-over-year decline and a 40% drop since June. Compass Chief Market Analyst Patrick Carlisle said median home sales price appreciation rates in the Bay Area have generally seen steep declines from those in 2021 and early 2022, with some counties experiencing year-over-year median price declines in July. These changes vary in degree by county and market segment ‘but the direction of these shifts is near universal,’ he said.”
“In the inner East Bay — a region that includes Oakland, Alameda, Emeryville, Berkeley and Richmond — the median home sales price is down 12.5% to $1.223 million from the area’s high of $1.4 million in April and May. Compared to last July, that section of the East Bay has now seen a slight reduction in median sales price, which stood at $1.225 million in the summer of 2021. Pandemic gains have also disappeared for homes from Lafayette to Richmond, which are now routinely going for hundreds of thousands under what they would have fetched in April, as I reported last month.”
From Toronto.com in Canada. “The average price to buy a detached home in Toronto has fallen by nearly $400,000 since May and over $550,000 since hitting a record high in February. The average sale price for Toronto detached homes in July was $1,515,763. February the market price for detached units in Canada’s largest city peaked at a monthly average of $2,073,989 — representing a 26.9 per cent decline in just five months.”
“Detached home prices in Toronto had been faring better than neighbouring big cities in Mississauga and Brampton, but the detached home market in The 6 saw a steep decline in recent months and has now surpassed both those cities in price declines. Toronto, Mississauga and Brampton are the GTA’s three most-populated cities. The average price for Toronto detached homes dropped a staggering $221,249 — or 12.7 — in a month from $1,737,012 June to $1,515,763 July. Since May, the average price has fallen by $399,127 from $1,914,890 in only two months.”
“Mississauga and Brampton detached home prices peaked in January at averages of $1,964,077 and $1,652,088, respectively. Since then, the average price for a detached unit in Mississauga has fallen by $374,954 to $1,589,123 — or 19.1 per cent. Meanwhile, in Brampton, the average price for a detached home has fallen $439,100 to $1,212,988, or 26.6 per cent since January.”
The Globe and Mail in Canada. “From free Louis Vuitton bags to maintenance-fee holidays sales incentives for pre-construction condominiums are coming back, with some builders creatively targeting a key sticking point for some of today’s buyers: rising interest rates. Christopher Castellano, vice-president of sales and marketing at developer Camrost Felcorp said that the recent run-up in Bank of Canada interest rates has buyers fretting about near-term affordability. ‘Interest rates have knocked off about $500,000 from a purchaser’s affordability; that will drop you down two bands worth of pricing,’ he said. ‘People just don’t know what’s going to happen with interest rates … The stuff coming to market in the next 24 months has people sweating the most.’”
From Reuters. “Canada’s inverted yield curve is signaling the Bank of Canada may raise interest rates to a level that triggers a recession, placing the central bank in a tough spot as it aims to tame high inflation and engineer a ‘soft landing’ for the economy. ‘It makes sense that we should see more of an inversion this cycle than we have in the last few just because there is so much more of a central bank overtightening component to this,’ said Andrew Kelvin, chief Canada strategist at TD Securities. ‘That’s what happens when central banks fall behind the curve.’”
From CNBC. “Australia’s central bank on Tuesday raised interest rates by the most in 22 years and flagged more tightening to come. Most economists had doubted rates would rise that far given house-hunting Australians are sitting on A$2 trillion in mortgage debt making them very sensitive to borrowing costs. House prices have already begun to slip in Sydney and Melbourne following a stellar run in 2021, and consumer sentiment is back to the depths of the pandemic.”
“‘Consumer sentiment has never been this low at the beginning of an RBA tightening cycle,’ noted Gareth Aird, head of Australian economics at CBA. ‘It was also the first time house prices have fallen at the start of a cycle, and house prices matter,’ he added. ‘Pushing rates too high too quickly runs the risk of prices correcting sharply lower in the near term which would have a ripple effect through the economy.’”
From Bloomberg. “With interest rates now hovering around 5%, existing-home sales are down more than 14% from last year. Some potential buyers are sitting on the sidelines until rates or prices or both decline, while sellers are hoping the market picks up again so they can get a higher price. But don’t count on rates falling to those pandemic lows. They were the result of extraordinary market manipulation from the Fed. And unless this becomes a regular feature of monetary policy, rates are not going back to what they used to be.”
“The impact of the Fed’s interference may be felt for years. In the spring of 2020, the Fed was desperate to avoid economic collapse, so it reverted to its 2008 playbook. It cut rates to zero and brought back quantitative easing, buying long-dated government bonds and mortgage-backed securities (MBS). Most residential mortgages are securitized by Fannie Mae or Freddie Mac, and resold in what is known as an agency MBS.”
“In 2020, the mortgage-backed security market was in trouble, and the Fed was even more aggressive than it was in 2008. It effectively became the only ultimate buyer of these securities: Its holdings of agency MBS increased by $1.3 trillion between 2020 and 2022, while the market for agency mortgage-backed securities grew by $1.5 trillion. The Federal Reserve now holds more than 40% of the total outstanding amount of agency MBS, or nearly half the market.These actions were one big reason rates fell so low.”
“Buying mortgage-backed securities may have made sense in spring 2020, but why the Fed did not start tapering for 18 months, even as the housing market was clearly overheating, was never explained. A 2.6% fixed rate on a 30-year risky asset never made much sense. It suggests something is off in the market, either through some manipulation or a mis-pricing of risk. The Fed created major distortions in a market where many Americans have most of their wealth, and the impact may be felt for decades.”
“There will also be a hangover from the very low rates in 2020 and 2021. Like many people, I bought a home in the spring of 2021. Now between rising rates and a slower housing market, I am not sure I can ever afford to move. The housing market may be slower and less liquid for a long time.”