A report from 5280 in Colorado. “This past summer Point2 showed metro Denver homes, on average, increased in price $94 each day between 2011 and 2021. As interest rates increased and the economy started to slow in mid-2022, real estate agent Daniel Dixon began hearing from potential millennial clients who hoped their window to homeownership might begin to open. ‘They think this is the moment the housing bubble bursts in Colorado,’ the 37-year-old says. ‘It’s a tough conversation to have. I’m telling people we’re never again going to see that $300,000 single-family home in Denver. It’s not happening, and that’s the reality we’ve just got to accept.’”
“‘I look at my parents and where they were heading financially at my age, and I just don’t see that as a possibility in my life,’ says McKenzie Fuller, 26, a young millennial from Iowa who shares a two-bedroom Capitol Hill apartment with her Gen Z friend. ‘If you don’t want to live in a complete piece of shit in this city,’ Fuller says, ‘you have to be willing to spend at least $1,100 per person.’”
The Orange County Register. “Home prices declined in two-thirds of U.S. metro areas this summer with the priciest markets suffering the most depreciation. Price declines between the spring and summer quarters were found in 125 metro areas – that’s 68% of the markets tracked – with a median loss of 3.4%. In the 55 metros across the nation with median prices above $400,000, 46 (or 84%) saw declines. In the 76 metros with median prices between $250,000 and $400,000, 53 (or 70%) had price declines. And in the 54 metros with medians below $250,000, 26 (or 58%) saw prices fall. Three of the summer’s 10 biggest drops came from California.”
“The No. 1 loser nationwide was San Francisco, down 16.1% to $1.3 million. Then came …Naples, Florida.: Down 12.2% to $746,600. Austin, Texas: Down 11.7% to $541,600. Boulder, Colorado.: Down 11.4% to $826,900. San Jose: Down 11.2% to $1.68 million. Seattle: Down 9.5% to $741,300. Fort Myers, Florida.: Down 8.7% to $420,000. Spokane, Washington: Down 7.8% to $422,500. Ann Arbor, Michigan: Down 7.7% to $377,200. Orange County: Down 7.7% to $1.1 million.”
“Not mentioned above were …San Diego: Down 6.8% in the summer quarter to $900,000. Sacramento: Down 6.1% to $535,000. Fresno: Down 3.4% to $410,000. Inland Empire: Down 3.1% to $567,000.”
From DS News. “ATTOM has issued a Special Housing Risk Report spotlighting county-level housing markets around the nation that are more or less vulnerable to declines, based on home affordability, foreclosures, and other measures in Q3 of 2022. ATTOM’s report shows that New Jersey, Illinois, Delaware, and inland California continued to have the highest concentrations of the most-at-risk markets in the country, with the biggest clusters in the New York City, Chicago, and Philadelphia areas.”
“‘As the prospect of a possible recession hangs over the U.S. economy, counties in three of the seven largest metropolitan areas–New York City, Chicago, and Philadelphia–are among the most vulnerable to a potential downturn in their housing markets,’ said Rick Sharga, EVP of Market Intelligence at ATTOM. ‘These counties, and many more in Central California share a number of traits–poor affordability, relatively high unemployment and foreclosure rates, and homeowners who are underwater on their loans–which could spell trouble if the economy takes a turn for the worse.’”
“At least 7% of residential mortgages were underwater in Q3 of 2022 in 28 of the 50 most at-risk counties. Nationwide, 5.7% of mortgages fell into that category, with homeowners owing more on their mortgages than the estimated value of their properties. Those with the highest underwater rates among the 50 most at-risk counties were:Peoria County, Illinois (16.8% underwater). Tangipahoa Parish, Louisiana (outside New Orleans) (15.7% underwater). Saint Clair County, Illinois (outside St. Louis) (15.1% underwater).Kankakee County, Illinois (outside Chicago) (14.8% underwater). Philadelphia County, Pennsylvania (14.5% underwater).”
“Roughly twice as many foreclosure cases were open in the third quarter of 2022 compared to same period in 2021.) The highest foreclosure rates in the top 50 counties were in: De Kalb County, Illinois (outside Chicago) (one in 289 residential properties facing possible foreclosure). Peoria County, Illinois (one in 326 residential properties facing possible foreclosure). Sussex County, New Jersey (outside New York City) (one in 410 residential properties facing possible foreclosure). Cumberland County, New Jersey (one in 433 residential properties facing possible foreclosure). Will County, Illinois (one in 457 residential properties facing possible foreclosure).”
North Shore News. “November housing sales and price data continued a downward spiral seen over the past seven months, with total transactions down 52.9 per cent from a year earlier and homes shredding more than 10 per cent of value since the spring price peak, according to the Real Estate Board of Greater Vancouver. Greater Vancouver sales in November were the lowest since 1967 and nearly 37 per cent below the 10-year average, while another increase in interest rate hike is expected December 7, the seventh from the Bank of Canada this year.”
“The condominium market, which accounted for half of all the November sales, is also stronger than most suspect, according to Ben Smith, president of Toronto-based Avesdo, a software firm that tracks real estate data. He noted in a recent column in Storeys that price comparisons between pre-pandemic 2019 and today shows Metro Vancouver condos proved a solid investment, with price gains of up to 150 per cent for new units in the past three years.”
“‘When reviewing recent data from the REBGV it’s not difficult to be swept away by the descriptions of decreased year-over-year sales or lowered month-over-month prices. But industry insiders know that real estate – and new home development in particular – is a long game, and comparisons between astronomical mid-COVID-19 activity and today’s more typical market simply can’t lead to reality-rooted conclusions,’ Smith said.”
From CBC News in Canada. “For nearly a decade, new condos have been regarded as sound investments in Toronto but rising interest rates coupled with the flattening of average sales prices since March mean some investors are facing an increased financial burden — even struggling to close on projects nearing completion. Those who invested in preconstruction condos in particular are in increasingly challenging positions. In some cases, they’re unable to finance the closing of a property due to lower than expected appraisals and interest rates that are significantly higher than when they bought the units.”
“‘Preconstruction condos for the most part that were purchased in 2019 through 2020, after commissions, after fees, those individuals are not making any profits on this side. They’re probably actually taking the loss,’ said Jordon Scrinko, CEO of Precondo, a firm that handles mainly preconstruction projects. He says it’s been a busy few months for his firm. But not busy in a good way.”
“‘It’s putting out a lot of fires, calming a lot of people down, trying to find out-of-the-box solutions,’ said Scrinko, who adds the firm has been getting lots of calls from other people’s clients looking for help as they approach a project’s completion. ‘We’re trying to make sure that .. we can provide them solutions and get them through what is relatively a tough time for them.’”
“Figures from the Toronto Regional Real Estate Board show since March the average sales price for condos in the GTA dropped nearly 12 per cent, and nearly 11 per cent in Toronto. At the same time, the Bank of Canada’s trend-setting interest rate has increased steadily through this year, now sitting at 3.75 per cent. A five-year fixed-rate mortgage at most Canadian banks sits at about five per cent. Some say the math doesn’t add up for many preconstruction condo investors who bought in over the last few years.”
“‘We have a wildly changed mortgage environment,’ said Rob Butler with Butler Mortgage in Toronto. He says investors who bought into the market 18 months ago could get mortgages, both fixed and variable, with fairly low rates of interest. ‘Those are long gone. Every rate that they look at today is in the fives,’ Butler said, adding that those who stretched themselves to invest in multiple units in recent years are in the most difficult position. ‘Even if [the buyer] could come up with all the down payment, even if he could qualify for mortgages at these new stress test rates … It’s a real big issue,’ he said. ‘They’ve got to find a way to finance the closing of three different condominiums in a marketplace where the rents probably won’t cover the cost of the mortgage.’”
“Scrinko says he’s never seen anything like it before. ‘We’re seeing a 50 per cent plus increase in assignment volume versus what would normally see,’ he said. While it’s difficult to track assignment sales since they’re not listed on MLS, Scrinko says he’s seeing deals to be had with much more competitive prices because of the volume. ‘I’ve said for years … never buy a preconstruction condo with the sole intention of assignment flipping it for profit. Yes, it’s worked for over a decade in Toronto but eventually it will bite,’ said Scrinko. ‘I guess today is the day.’”
“‘Even though rates may eventually come down, I think we’re in for a pretty rough year of difficult situations coming in 2023,’ said Butler ‘Winter is coming. It’s here for those investors. There’s just no mathematical sense to being able to make money on the property.’”
The Australian Financial Review. “For owner occupiers and property investors like Canberra-based Sharon Chan and her partner Duy Tran, the prospect of more rates is causing ‘uncertainty and fear.’ The couple, who have two young children, claim they are ‘just trying to survive’ as their cost of living rises and value of their major assets continue to slide. The nation’s residential property prices have dropped by about 7.5 per cent since the first of seven cash rate rises in May, which means price gains from the recent peak in June have been lost.”
“An owner-occupier paying principal and interest with 25 years remaining on a $1 million is already paying $6190 a month – an extra $1520 a year since rates started rising in May, according to RateCity, which monitors interest rates. A similar buyer with a $1.5 million mortgage is paying $9284 a month – $2280 extra since May. For a buyer with a $2 million mortgage, the increase is $4233 a month.”
“‘It’s creating a lot of pressure, causing us to economise and is making our attempts at financial planning very difficult as rates keep going up,’ says Chan, who is also attempting to negotiate a rise in rents on her investment property to cover increasing costs.”
“The outlook is even tougher for nearly 2 million fixed rate loans (including loans split between fixed and variable rates) worth more than $450 billion that are due for renewal in the next 16 months, an analysis of borrowing statistics shows. They typically fixed between 1.95 per cent and 2.09 per cent in 2020. Shane Oliver, chief economist at AMP Capital, warns the fall in prices is less than halfway to the expected nadir, with a tumble of up to 20 per cent likely before bottoming. ‘Those coming off fixed rates will see their mortgage rates jump to 5 per cent and 6 per cent next year, increasing mortgage stress and likely resulting in some distressed selling,’ says Oliver.”
“Buyers agents claim many buyers who purchased before the rate rises started in May are relying on the Bank of Mum and Dad – a term used to describe parental assistance – to help pay down the principal. ‘Many are very scared about rising rates,’ says buyers agent Cate Bakos. ‘If they could let go of the property by selling, they would.’”
The New Zealand Herald. “Bay of Plenty’s residential and lifestyle property sales have dropped by 41.6 per cent in one year and some real estate agents have exited the industry off the back of the ‘tough’ market. A rapid rise in interest rates is believed to have had a big impact and the boss of the Bay’s biggest agency said properties were taking longer to sell and pricing was down about 10 per cent. Another likened it to the ‘bubble bursting’ but said it could benefit first-home buyers, who would need less money for a deposit.”
“A OneRoof-Valocity Year in Review report reveals that to the year ending in October, Bay of Plenty residential and lifestyle properties sales fell by 41.6 per cent to 4130. A snapshot of Tauranga showed the average median house price fell $135,100 from a peak of $1.25 million in April to $1.23m now.”
“Tauranga Tremains Real Estate managing director Anton Jones said the market had changed drastically and ‘quicker than I’ve ever seen it.’ ‘Finance is a massive challenge within the industry at the moment. The market had also been going up and up and obviously the longer it goes up the bigger the fall.’”
“He said over time a lot of landlords had cashed in on their investments, which had all led to the ‘bubble bursting.’ ‘It was pretty evident in January and February that things have changed. And it immediately got harder to sell properties. They weren’t selling quick enough, therefore a lot of people were sitting on their hands waiting and that affects property prices.’”
“He said there weren’t as many people entering the real estate industry because everyone knew it was harder. You ‘tend to find when the market is going nuts people go ‘oh I may as well get into real estate because I’m going to kill it’. There will be a lot of older, perhaps more experienced agents who will be going ‘I can’t be bothered going through another one of these recessions … it’s too tough and I’m going to get out.’ If you are not selling it’s difficult.’”