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Posted On: May 16th, 2023 5:49PM
The house price crash?
Posted On: February 27th, 2023 4:33PM
The house price crash that could wreck your finances – and it's not in Britain
Prices are starting to fall. Mortgage arrears are starting to climb. Developers are going bust, and others are stopping work on homes they can no longer sell.
When the latest house price data for the UK are released this week, everyone will be looking for signs that the market is starting to collapse. But there is a market we should be worrying about far more – the American one.
There are plenty of signs of a severe downturn in US property, with home sales down for 12 straight months in a row, the weakest set of numbers for more than a decade. Anyone who thinks that is purely an American matter is kidding themselves.
If the US market crashes, it will tip the economy into recession, and that will ripple out across the world. If there are losses on mortgages, it will threaten the stability of the financial markets. It will determine what the Federal Reserve will do with interest rates, affecting every country's economy. In 2008, the collapse of the subprime mortgage market triggered a global financial crisis. It has happened before, and it can happen again.
With interest rates quadrupling over the last year, the British property market is not exactly looking healthy. Rightmove reported last week that home prices have stalled, with the weakest figures since the online agency started compiling figures. The Royal Institution of Chartered Surveyors reported that the market was at its weakest since 2009. Even so, it is hardly a catastrophe, at least not yet. Prices are stable, and not yet falling, or at least not very significantly.
It is a very different picture on the other side of the Atlantic. In many major cities, prices are now falling in absolute terms. In San Francisco, where many of the tech lay-offs are concentrated, they are down by 7pc this year. In Oakland, they are down by 4.5pc, and in New York by 1pc.
Meanwhile, with the Federal Reserve continuing to push up interest rates aggressively, and with inflation stubbornly refusing to come under control, the outlook is increasingly bleak. True, figures released on Friday showed new home sales picking up in January, but measured on an annualised basis they are still down by almost a quarter year-on-year. It is not a crash yet, but it is very close to one.
What happens to house prices will make the difference between whether there is a hard or a soft landing. The Fed is trying to engineer by far the hardest trick in the central banking playbook; slowing the economy down, and bringing inflation back under control, but without triggering a full scale recession.
It sounds straightforward enough, but it is very hard to achieve in practice. What happens to the housing market will prove the key to whether it succeeds or fails. If the property market stabilises, but remains broadly flat for a year, then consumer demand will only weaken slightly, and we can expect nothing worse than a mild slowdown.
If prices crater, it will be a different story, with demand collapsing, and a full-scale downturn all but inevitable. And if the US goes into recession, so will the rest of the global economy – because America is about the only thing that is holding it up.
Next, a housing crash will ripple out into the financial markets. There is $18 trillion (£15 trillion) of outstanding mortgage debt in the US market, compared with $14 trillion in 2007 at the peak of the last boom. The rules on mortgages mean it is a lot easier to simply walk away from your debts than it is in the UK. You lose your house, and your credit score takes a beating, but if your property drops significantly in value it can still be an attractive option.
Even worse, and despite increased regulation, mortgages are still packaged up and sold around the world. In reality, the solvency of the American financial system remains critically dependent on the health of the housing market. If it starts to crash, it could easily take down banks, hedge funds and fund managers as well – and that will hit the rest of the global economy very hard.
Finally, it will determine monetary policy, not to mention the likely outcome of the next presidential election. The Federal Reserve is expected to raise interest rates by another percentage point at most, and then gently start easing again. But if house prices crash, all bets are off.
Does Jerome Powell, the Fed chair, believe it is his job to rescue the market, or will he make controlling inflation the priority? Or will he immediately reverse course, and dramatically cut interest rates to salvage the market, fearful of repeating the mistakes of 2007 and 2008?
And even if he did, can a property collapse be turned around once it has started, or will it turn into full-scale panic? No one has the faintest idea, including, in all likelihood, the Fed itself. But one thing is certain. It will be very messy.
The stock market is betting it will be a perfectly executed soft landing, but it is touch and go. It was the US housing market that started the 2008 financial crash, with subprime mortgages turning sour, triggering banking collapses in every major economy.
We are all keeping a watchful eye on house prices in the UK – but right now it is a wobbling American market that is the biggest threat to the global economy.
Now For The Rest of The Story
The house price crash that could wreck your finances – and it's not in Britain (yahoo.com)
U.S. Home Sales Fall
Posted On: February 21st, 2023 4:41PM
By: Nicole Friedman
U.S. Home Sales Fall for 12th Straight Month
Sales of previously owned homes drop 0.7% in January to slowest level since October 2010
The U.S. housing market weakened in January for the 12th straight month as continued high mortgage rates kept buyers on the sidelines.
Sales of previously owned homes, which make up most of the housing market, fell 0.7% in January from the prior month to a seasonally adjusted annual rate of 4 million, the slowest since October 2010, the National Association of Realtors said Tuesday. January sales fell 36.9% from a year earlier.
January’s decline marked the longest streak of back-to-back monthly declines on record in figures going back to 1999, NAR said.
Existing-home sales dropped last year to the lowest level since 2014 after a surge in mortgage rates and record-high home prices raised the cost of many home purchases by hundreds of dollars a month. The drop in affordability, along with general economic uncertainty, pushed buyers out of the market.
Surprisingly strong inflation, jobs and retail spending figures in recent weeks have fueled expectations that the Federal Reserve could raise interest rates more than investors anticipated. The Fed has aggressively raised its benchmark federal-funds rate to cool the economy and bring down high inflation, hitting the rate-sensitive housing market particularly hard.
The average rate on a 30-year fixed mortgage rose to 6.32% last week, the biggest one-week increase in four months.
So far this year, buyers have been sensitive to changes in mortgage rates, real-estate agents say. Some of the sidelined buyers started to shop again in January and February as mortgage rates ticked down from last year’s recent highs and sellers were more willing to negotiate on price and give other concessions.
“I think the worst is behind us, [but] it really all depends on mortgage rates,” said Selma Hepp, chief economist at CoreLogic. “As soon as mortgage rates started coming down, I think people felt more comfortable.”
The national median existing-home price rose 1.3% in January from a year earlier to $359,000, NAR said, the smallest annual price gain since February 2012. Prices fell month-over-month for the seventh straight month after reaching a record high of $413,800 in June.
Economists surveyed by The Wall Street Journal had estimated that sales of previously owned homes rose 1.2% in January from the prior month.
Homes typically go under contract a month or two before the contract closes, so the January sales data largely reflect purchase decisions made in December and November.
Home-shopping activity increased in January and early February, real-estate agents said. Real-estate brokerage Redfin Corp.’s seasonally adjusted measure of home-buying demand, which tracks buyer inquiries, rose in the week ended Feb. 5 to the highest level since September before declining 1% the following week.
“A lot of people that gave up on the housing market in maybe spring and summer of last year are now like, ‘OK, I feel like I can breathe and get in again,’” said Wendy Dickinson of Coldwell Banker Realty in Charlotte, N.C. “People are understanding that the rates are not going to dip back down to 2.5%.”
Rob and Crystal Lucha started house hunting in the Austin, Texas, area in January after moving there last year for work.
“After sitting on the sidelines for a while, intuitively it felt like this could be a good time to buy,” Mr. Lucha said. “Homes were sitting on the market for longer.”
The couple had an offer accepted this month on a three-bedroom home in Leander, Texas, for $375,000, about 3.8% below the listing price, he said.
The higher interest rates have changed what many buyers can afford, even with prices falling from their springtime peaks.
Late last year, “so many households had clearly hit an affordability ceiling, where even if they wanted to move forward with a home purchase it was just not possible with rates at 7%,” said Danielle Hale, chief economist at Realtor.com. “It’s more of an open question, with rates closer to 6%.”
News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from NAR.
The inventory of homes for sale remains well below normal for this time of year, which could keep home prices in some regions from sliding further, economists and real-estate agents said.
Many homeowners have rates on their mortgages below 4%, and they are unwilling to give up their current rate for a higher rate on a new home. With prospective sellers sitting on the sidelines, economists expect the inventory of homes for sale to remain lower than normal this year.
Nationally, there were 980,000 homes for sale or under contract at the end of January, up 2.1% from December and up 15.3% from January 2022, NAR said. At the current sales pace, there was a 2.9-month supply of homes on the market at the end of January.
The typical home sold in January was on the market for 33 days, up from 26 days from the prior month, NAR said.
The share of first-time buyers in the market was 31% in January, up from 27% a year earlier. About 29% of January existing-home sales were purchased in cash, up from 27% in the same month a year ago, NAR said.
Existing-home sales fell the most month-over-month in the Midwest, down 5%, and in the Northeast, down 3.8%. Sales rose from the prior month in the South and the West.
Some large, publicly traded home builders reported higher demand in January in recent earnings calls.
A measure of U.S. home-builder confidence rose in February to the highest level since September, the National Association of Home Builders said last week.
Housing starts, a measure of U.S. home-building, fell 4.5% in January from December, the Commerce Department said last week. Residential permits, which can be a bellwether for future home construction, rose 0.1%.
For Te Rest of The Story: U.S. Home Sales Fall for 12th Straight Month - WSJ
Where home prices are dropping
Posted On: February 12th, 2023 6:23PM
Map: Here's where home prices are dropping the most...
Homebuyers are finally gaining leverage in the housing market, but where they can get the best discounts on home prices varies from metro to metro.
Some of the most popular pandemic boomtowns such as Phoenix and Seattle, plus perennially popular West Coast cities like San Jose and San Francisco, posted home price declines of more than 10% from their 2022 peaks, according to December data from mortgage technology and data provider Black Knight Inc. That outpaced the average national decline of 5.3%, off their June 2022 peaks.
Based on this study, home prices in Denver have dropped 6.9%
Overvalued markets will see sharpest declines
After mortgage rates surged to nearly 7% last year, home price growth began to slump across the country. As of December 2022, home prices had registered their sixth consecutive monthly decline – and Black Knight predicts those decreases will likely extend through 2023.
Approximately 14 of the 50 largest markets are already showing signs of a sharp cooldown, the report found, with home prices falling by an average 6% or more from their 2022 peaks on a seasonally-adjusted basis. Among the metros evaluated, prices declined at a sharper rate in the West.
San Francisco took the lead, with home prices there down 13% in December 2022 from their peak, Black Knight data showed. This was followed by San Jose ( down 12.7%), Seattle (down 11.3%), and Phoenix ( down 10.5%).
Still, home prices remain elevated for many homebuyers. For instance, the median home listing price in San Francisco was $1.3 million at year-end, according to Realtor.com, still up 3.7% year over year. However, the average home sold at $1.25 million, or 3.8% off the median listing price.
For the rest of the story - go to:
Map: Here's where home prices are dropping the most (yahoo.com)
Home-Buying Companies
Posted On: February 7th, 2023 3:32PM
Feb. 7, 2023 5:30 am ET
Home-Buying Companies Stuck With Hundreds of Houses as Demand Slows
Ribbon Home Inc. had a fast-growing business during the housing boom. The New York City-based startup purchased homes with cash on behalf of buyers. Then it sold the homes to the buyers at the same price, plus a fee, once the buyers got a mortgage.
This approach made their clients’ offers more appealing, since sellers often prefer all-cash transactions that can close quickly and are considered more reliable. Ribbon has been active in hot markets such as Atlanta and Charlotte.
But last year as mortgage rates surged, some Ribbon customers backed out of their purchases or needed more time to get financing. That left the company owning nearly 400 homes, according to property records analyzed by research firm Attom Data Solutions and confirmed by the company.
Ribbon is one of a handful of young companies known as power buyers. These firms created a niche business around helping home buyers gain an edge during the hypercompetitive housing boom. Now that the market has cooled, some of these companies are stuck with hundreds of homes they acquired on behalf of clients.
Orchard Technologies Inc., another power buyer that has been active in places such as Denver and Dallas, helps customers buy a new home and move before selling their previous home. If clients can’t sell their homes after four months, Orchard agrees to buy them.
The company now owns about 200 homes its customers were unable to sell, said its Chief Executive Court Cunningham. Mr. Cunningham said Orchard has had to buy homes from customers three times as frequently over the past six months.
Some executives said they don’t expect every power buyer to survive. Many relied on venture capital to grow during the height of the housing market, but they are unlikely to raise as much money now. Between January and late November 2022, venture investment in proptech companies decreased 21% compared with the same period the year prior, according to a report from Keefe, Bruyette and Woods Inc.
“People were doing all sorts of things to outbid or be the most competitive offer,” said Diane Vanna, a real-estate agent at Baird & Warner in Chicago, who in 2021 represented a buyer who won a bidding war against 36 other offers. “Now it’s really leveled off.”
For the rest of the story:
Home-Buying Companies Stuck With Hundreds of Houses as Demand Slows - WSJ
