A report from the Dallas Business Journal in Texas. “The number of new homes sitting on the market is up significantly. The three-month moving average of active listings in the North Texas Real Estate Information Systems jumped from 933 in April to 2,915 in June – an increase of more than 200% in 90 days, according to an analysis of NTREIS data by Dallas-based HomesUSA.com. Some DFW builders have reported a surge in cancelations of contracts due to the higher rates and inflation.”
“Single-family home building permits declined sharply through the first seven months of 2022 compared to year-ago numbers in Celina (down 42%), Frisco (down 36%), and McKinney (down 30%), according to Addison-based Tomlin Investments, which tracks new home construction north of Dallas-Fort Worth. Home permits are also lower in Princeton (down 23%), Prosper (down 19%), and Anna (down 3%).”
The New York Times. “In 2022, the frequency of canceled deals has begun to rise again, reaching nearly 15% in June — the highest rate since the pandemic peak, according to Redfin, representing about 60,000 failed home sales across the nation. The locations where the highest percentage of deals fell through in June — many in the South and Southwest — are some of the most popular for buyers. In Las Vegas, just over 27% of deals collapsed in June, the highest rate among all markets, according to Redfin. Favored destinations in Florida followed, including Lakeland, just under 27%, and Cape Coral, just under 26%.”
From WSB TV on Georgia. “After several record months of soaring prices, the housing market in metro Atlanta is finally starting to cool off. ‘For about three weeks in a row, [buyers] woke up to a 5-gallon bucket of ice water thrown in their face,’ said Rob Smith, a broker with Keller Williams. Those factors, combined with the fact that many would-be buyers have been priced out by high prices and rising mortgage rates, resulted in a 31% annual decline in home sales last month.”
Foster’s Daily Democrat. “The average median price of single-family homes sold in Strafford County was $420,000 in July, down from the record high of $435,000 the market hit in June. The state median price fell to $450,000 in July, down from the $460,000 reported in June. Data from the New Hampshire Association of Realtors shows the consistent rise in single-family home prices over the course of the year, which is now in decline. The most recent July report shows that trend isn’t just occurring within the local housing market, it’s happening statewide.”
From WESH Orlando in Florida. “Real estate experts say there’s a silver lining to the higher interest rates — it’s tipping sales negotiations to buyers. Yara Neurauter just bought a home for her mother in Kissimmee. The house was originally listed at $395,000, but the seller ended up dropping it by about $20,000. ‘That really was awesome because that was basically the closing costs, so I didn’t need to add or to get that money,’ Neurauter said.”
“‘The interest rates kind of scare a lot of buyers off, so it gets the sellers to give the opportunity to the buyers that are still in the market, to get in front of them and purchase the property. Not for a higher price, because it actually slowed down the market a little bit, but it actually gives them the opportunity to buy the house for the price that it’s valued at,’ Melissa Correa with Ameriuno said.”
From Mansion Global. “Freebies and perks for homeowners such as a private club membership are a mainstay in the world of luxury real estate and intended to entice prospective buyers to sign on the dotted line. In the U.S. residential real estate market, gifts are offered by both developers who want to move apartments in their swanky buildings and individuals selling their homes. They range from modest to over-the-top, said Jonathan Miller, the chief executive of the real estate appraisal and consulting firm Miller Samuel, and are more prevalent when the market is soft.”
“‘When sales lag, freebies increase in a bid to incentivize buyers,’ he said. ‘These days, sales are slowing, and inventory is rising after two years of being the opposite, which suggests that we may see more of them going forward.’”
“Many of these extras are especially present in South Florida, Mr. Miller said, where the market is normalizing after the unprecedented boom it saw during the pandemic. ‘The frenzy in South Florida was intense compared with the rest of the country because it became a place where people wanted to live full time,’ he said. ‘Now that the numbers are inching toward pre-pandemic levels, freebies could push wavering buyers over the finish line.’”
“Kelly Killoren Bensimon, a real estate salesperson for Douglas Elliman in Miami and New York, said that the gifts that she has encountered in her business include everything from yacht access and use of a summer house to magnums of pricey wine. ‘One person I know of who was selling a $5 million house in the Hamptons even threw in a free Mercedes 280SL,’ she said. ‘They didn’t want to lower the price but were happy to sweeten the deal.’”
The National Post in Canada. “There’s a house for sale not far from me. It’s a dump — a small, older split-level on a modest-sized lot on a busy street in a so-so neighbourhood. The yard is weedy and unloved. The back has a shed and not much else. There’s no garage. Nevertheless, the guy wants $1.25 million. A few minutes drive in another direction is another house. It’s bigger, on a nicer lot, in a quieter neighbourhood. It’s been sold twice since 2015 and is on the market again. In 2015, it went for $720,000 and was notably tired-looking inside. The buyers spent some money on it and re-listed in 2019 for $980,000. Since then, it’s been spruced up further and is listed at $1.85 million. In other words, the latest seller wants almost $900,000 profit after three years on some upgrades and much better staging.”
“I’d be surprised if either seller gets their price. The costlier of the two has already been on the market a month, so no sign of a bidding war on that one. One of the many articles written lately on the state of Toronto’s real estate market reports that prices of detached houses in the city have fallen $500,000 since February, with sales down almost 50 per cent. In the surrounding suburbs, where prices have been only slightly less ridiculous, the decline has been similar: prices down $400,000 in six months, sales down 47 per cent.”
“I’ve seen this before, more than once. When the Toronto market blew up in 1989, after a similar period of euphoria, it took two decades to recover. I remember putting a big deposit on a high-rise condominium I didn’t really want, out of fear that it would be the last chance — ever! — to get my very own bit of property. Luckily, I quickly reconsidered and got most of my money back. But many didn’t, and they spent 20 years paying mortgages on buildings that weren’t worth it. It works that way because once buyers realize the bubble has burst, they’re not eager to blow a new one.”
“A lot of people have trouble accepting that fact. The guy near me who is asking close to double what he paid three years ago may be reluctant to accept that he missed the boat. A lot of people made a lot of money by flipping places during the price rise, often having done little more than sit on their purchase for a year or so.”
“It worked so well for so long, people came to accept it as the norm. House flippers thought they’d actually earned something, when they often just shuffled money around and waited. Now they don’t want to admit the fun is over, and figure if they just sit tight long enough, the market will turn foolish again and they can still get their big cash-out. It could be a long wait. The reason sales are falling so precipitously is that buyers now expect sellers to make the concessions. If prices have dropped half a million in six months, they might drop another half million down the road. Who knows? In the meantime, why offer more than you have to? Just in the past month, according to another report, the average Toronto home prices fell $133,000.”
“A lot of people are likely to get hurt as the market re-organizes itself: with houses that aren’t worth what they cost, with mortgages they can’t really afford, with homes they bought on the assumption they’d have no trouble selling their existing house at a big profit.The real estate business is a great game when it’s working in your favour, but it’s still a business and not a cash-printing machine. People keep making the mistake of thinking it’s guaranteed money. It’s not. Over time, property generally grows in value. But abuse it and it’s easy to get burned.”
The Globe and Mail in Canada. “888 Carnarvon St., No 1105, New Westminster, B.C. Asking price: $599,000 (March 26). Selling price: $598,500 (April 28). The owner-landlord was worried about rising interest rates, so listing agent Bryan Yan advised him to list sooner rather than later, back in March. After a couple of weekends, the owner thought they’d set the price too high, but Mr. Yan told him to wait. ‘I said I’d try to get the auction atmosphere, and get people closer to that price. So the seller was very happy he listened to me.’”
“The sellers had paid $391,000 for the new unit in 2009, and then turned it over to a property manager to rent it out. They have other units in the building that they are selling. ‘All my clients are selling off their investments,’ Mr. Yan said.”
Cyprus Property News. “Cyprus Central Bank’s recent financial stability report included some interesting data about the loans and property that passed into the ownership of Credit Acquiring Companies (CACs), shedding a little more light on what they own and how much of the market they have influence over. CACs own a significant number of properties, which were acquired either as part of the purchase of credit institutions’ non-performing loan portfolios or through debt-for-asset exchange agreements with borrowers.”
“More specifically, as of December 31, they owned 5,679 properties with a total value of €978 million. In other words, the Central Bank figures confirm what we have been saying for a long time: the Real Estate sector’s balance has changed because the owners and sellers of properties have changed. Dramatically. We want to clarify that these are the properties that are currently marketed. It is estimated there are other properties worth approximately €500-600 million in the hands of banks and CACs that have not yet been put on the market (and there are many individuals who have their property on the market but choose not to promote it because ‘they don’t want people/ their neighbours to know’).”
“In time we will see reductions in the prices of some properties of which ‘their time has passed’. This will make the life of some individuals/sellers even more difficult, as they will be faced with a reality check – you see, the days of ‘this is what I ask for if you don’t like the price, go elsewhere’ have passed.”
The Los Angeles Times. “Last November, hundreds of angry homeowners in Nanchang, the capital of China’s Jiangxi province, gathered on the roof of an unfinished apartment building. From their perch, they unfurled red and white banners along the outer walls and chanted demands for completion of the homes they had already partially paid for. On the dirt below, workers inflated a large airbag to catch anyone who jumped.”
“Nearly 500 miles away in Shanghai, a 26-year-old interior designer watched video of the protest on social media, and saw her life plan falling apart. The woman and her husband, who requested anonymity to avoid retribution, had purchased a three-bedroom unit in the sprawling Xinli City project presale three years earlier. It should have been finished that November. It wasn’t until she saw the video that she learned construction had stopped three months earlier.”
“Like the vast majority of Chinese homebuyers, they had begun making payments before construction was completed. For years, this type of arrangement, which accounts for more than 80% of China’s home sales, gave developers easy access to funds and fueled rapid expansion as home prices soared. But with financing drying up and debts coming due, the resulting cash crunch has left thousands of units unfinished, and owners boycotting their mortgages in protest.”
“Demands for answers have elicited excuses, threats or detention, the woman said, and has pushed Xinli City homeowners to take desperate measures. Last month, she stopped paying her 30-year mortgage, along with thousands of others who had bought half-built homes there. ‘It’s gotten to the point where no one is taking care of it. So we naturally also have to defend our own rights,’ said the woman. ‘If we the people are not happy, it’s difficult to have a stable society.’”
“What was once a virtuous cycle has turned vicious. Home prices fell for the 11th straight month in July, and dozens of developers have defaulted on their debts. The impact has rippled through land sales, labor, construction materials and home appliances. ‘We are seeing it everywhere,’ said Michael Pettis, a professor of finance at Peking University’s Guanghua School of Management. ‘You get these spreading waves, and the bigger the sector is, the more powerful those waves are. And in China, unfortunately, the property sector is huge.’”
“For the interior designer, buying a home someday was always a given. One month after their child was born in the summer of 2019, they went looking for apartments. Now the unfinished property in Xinli City looms over their lives. She and her husband have trouble sleeping at night. The authorities from her hometown have called her and even sought out her parents to try to get her to stop demanding that construction restart. To her embarrassment, many back home know about her predicament and seemed to be sneering at her behind her back.”
“‘But did we do anything wrong?’ she asked. ‘Our money wasn’t stolen or snatched, every person worked hard to earn it. We just want to live and work in peace and contentment.’ She said they have sunk their life savings, about $104,000, into the apartment. Her anxieties about money worsened during the two-month lockdown in Shanghai, when work from clients stalled and her income plunged. Even though her earnings have since returned to normal, she doesn’t see the point in paying more for a house that may not ever be completed.”
“She had hoped collective action would force a response. So far she’s been bitterly disappointed. ‘For us, buying a home in the province capital already isn’t easy. Now the home is gone, our money is gone, our household is having issues,’ she said. ‘I don’t have much faith in life anymore because of this.’”
“In Nanchang, banks and developers have remained silent on Xinli City’s future. Gu, a 32-year-old construction worker who declined to give his first name, has lost his appetite waiting for news on the project. He had purchased his apartment in the spring of 2020, back when an insolvent building and a two-year-plus pandemic still felt unimaginable. He didn’t think it was possible that such a large development could collapse. Now, the idea of buying a home, particularly one that’s yet to be built, leaves him with a headache and mild sense of panic. ‘There are too many unstable factors,’ he said.”
“In the wake of the boycotts, he’s noticed a similar shift among others around him — those who once harbored hopes of buying property no longer have that desire. ‘In this economy, cash is king, having money on hand is most important,’ he said. ‘Buying a home probably isn’t under consideration anymore.’”