A weekend topic starting with the Modesto Bee in California. "Joyce Fritz, founder of 12 Doors Real Estate and her team ran statistics with different resources to determine an accurate median starter home price in Modesto, she said. Data from RPR showed the median list price of starter homes in the city is $495,000. The median sales price is $440,000. 'I think that the benefit of being a homeowner versus a renter is it’s probably, historically, the single greatest way to build wealth in America,' Fritz said. 'Unless you are going to become an investor in some other way. I tell (renters), ‘You’re paying the mortgage, just not your own. You’re just going to be stuck in the cycle of not owning something that has an appreciating value.'"

Mansion Global. "A more than 13-acre California estate has slashed its price by $9 million, bringing its new asking price to just under $40 million. Located about 60 miles south of Los Angeles in Laguna Niguel, California, the home has been on and off the market since February 2022, when it first listed for $50 million, The Wall Street Journal reported. Located on the largest lot at Bear Brand Ranch Custom Estates, the house was most recently listed in early July for $48.995 million, listing records show, and assigned its new price last week."

KTXL in California. "Higher housing inventory and lower demand have contributed to a slight decrease in the average cost of rent in Sacramento for the first time in 13 years, a study shows. 'We (Sacramento) were at a 3% vacancy rate a year ago. Now we’re at a 5.5% vacancy rate,' said. Colliers research director Bob Shanahan said the million dollar question is 'Why is there less demand?' He speculated that the bay area migration into the Sacramento market may have reversed because of major technology companies calling employees back to the office."

The Faribault Daily News in Minnesota. "So far, Faribault and Owatonna are on track to issue significantly fewer new housing construction permits this year than they did last year. Local communities have proven adept at getting new multifamily housing built with help from the state and tax increment financing districts, so much that Faribault builder Rick Cashin said the multifamily housing market has 'softened.' 'A lot of multifamily housing is being built in Faribault — probably a little bit too much,' Cashin said. “We own 100+ apartments in Faribault and we’re noticing that the market is starting to soften.'"

The Oklahoman. "Oklahoma City is seeing developers hit with cost spikes putting projects on the cusp of cancellation. Clay Farha is trying to restart work on Classen Marquette at 1111 Classen Drive. Plans called for a four-story building with restaurants and retail on the first floor topped with three floors of apartments. Farha said his project also was hit hard by interest costs and that construction will start at the earliest in 2024, at the latest in 2025. 'What cash flows at 4% doesn’t cash flow at 8%,' Farha said. 'And what’s really hurting are the interest rates and construction costs.'"

The Dallas Morning News. "Texas apartment builders are putting the brakes on construction after years of booming building starts. But Dallas-Fort Worth still leads the state in recent apartment starts. Apartment starts in Texas’ biggest metro areas fell by more than 70% in the most recent quarter compared with average building volumes during the last two years, according to Institutional Property Advisors. Still, the 3,200 apartments started in D-FW in the second quarter were equal to those in the rest of Texas’ major metro areas combined, according to the report. Builders in the most recent quarter started 1,400 units in Austin, 1,110 in Houston and 700 apartments in San Antonio during the period."

"Deliveries of new apartments in major Texas markets will continue for more than a year because of the thousands of rental units already under development. 'Dallas-Fort Worth’s 72,900 apartments under construction — the most anywhere in the U.S. — will grow the North Texas market’s inventory by 8%,' according to the researchers. 'Before we get to 2025′s slowdown in apartment deliveries, the key metros in Texas will add further big blocks of rental housing during the remainder of this year and during 2024.' Two North Texas markets lead the state in current apartment building, with 10,430 rental units underway in the Allen-McKinney area and 8,650 new units on the way in Frisco. Denton and the central Dallas area also made the list of the 10 busiest Texas apartment building markets, according to Institutional Property Advisors. Less than 7% of D-FW apartments were vacant at midyear, increasing only slightly since before the pandemic."

The Daily Astorian. "After identifying vacancies as a critical problem last fall, the Northwest Oregon Housing Authority still has a significant number of empty units despite a waiting list that can take people years to climb. During a housing authority board meeting this month, staff reported an 88% occupancy rate across the properties the agency manages, meaning 12% of the 157 units at eight properties are sitting empty. 'All we hear is the shortage of housing, the shortage of affordable housing, and people are desperate for housing,' said Commissioner David Oser, who represents Clatsop County on the housing authority’s board. 'And yet, it’s like, when you offer it, it’s hard to find anyone to take you up on it. There’s obviously some kind of disconnect here.'"

My Northwest in Washington. "Dozens of landlords handcuffed by Seattle’s coddling of nightmare tenants is leading to a troubling trend: The landlords are ditching Seattle. 'It is so bad that people are just selling their properties and leaving in droves,' landlord Charlotte Thistle told The Jason Rantz Show. Thistle points to 17 new laws implemented by local lawmakers over the last several years as being part of the problem. These measures were pitched as ways to mitigate the threat of 'evil corporate landlords,' but Thistle says they end up hurting small property owners who are trying to provide affordable housing options. She said data shows nearly one-quarter of available rental units provided by small landlords being taken off the Seattle-area market."

"The eviction process has been slowly molded over the years to favor tenants. But they treat honest, good-faith tenants the same as irresponsible scoundrels. 'It’s just so bureaucratic and burdensome that it can take a year and $20,000 in legal fees to evict the person who’s creating a serious problem,' Thistle said. The Jason Rantz Show on KTTH previously chronicled the story of Jason Roth, a small landlord who is battling to get his home back from a nightmare tenant who was allegedly listing the property on Airbnb without paying any rent. Roth is still months away from an eviction hearing."

The Commercial Observer. "A second quarter 2023 U.S. capital markets report from Newmark found CRE debt origination volumes have declined by 52 percent year-over-year, and that the current market has 32 percent fewer lenders than it did at this time last year. Moreover, while private equity sits on a record $219 billion of dry powder, that might not be enough to stave off the wave of $625 billion in CRE debt maturing over the next three years. As lending volumes have collapsed, equity markets have also stalled, with transaction volumes muted. Investment sales declined 62 percent year over year, making the first half of 2023 the weakest half since 2013."

"'The values of assets are falling with the result that not only do potential buyers and sellers face a still volatile outlook, but buyers especially are wary of catching a falling knife,' the report concluded. 'This is even more the case given the large number of buildings are on their way to becoming distressed. Loans will need to be restructured before these assets can trade.'"

The Globe and Mail. "To say demand for private mortgages has risen would be the mortgage understatement of 2023. The higher interest rates go, the more desperate some Canadians are to get financed or refinanced. In just 10 quarters through September, 2022 – the latest national data from Canada Mortgage and Housing Corp. – private mortgage market share surged 45 per cent. It now accounts for more than one in 10 Canadian mortgages. Private mortgages are short-term financing products for people who can’t qualify for traditional mortgages. They’re offered by smaller companies and involve higher rates and fees in exchange for more flexibility compared to traditional banks. These loans are usually provided by mortgage investment corporations and individual private lenders."

"The problem with private lenders is cost. They sell mainly one-year interest-only loans, and in return for looser approval guidelines, their rates can be much more than 300 basis points above bank rates for uninsured mortgages. And then there are the fees. You’ll typically pay at least 200 bps to the lender and another 150-plus bps to the mortgage broker to get private financing. These days, it’s not uncommon for private borrowers to cough up four to five percentage points in total fees. That’s on top of marked-up closing and legal fees."

"Unlike regular brokers, LenderBidding sticks mainly to mortgage investment corporations. It doesn’t deal with all the biggest institutional non-prime lenders (which offer lower costs, assuming you qualify) and hard-money individual private lenders (which often offer more flexibility than MICs). But the company says it’s working to ramp up its ability to recommend such lenders in cases where they’re more suited to the borrower. 'Private or MIC lenders are always a last resort,' says LenderBidding chief executive officer Jason Geall. 'You don’t want to be stuck with a private forever because, at that point, you’re just burning through equity. Eventually, the music stops, and no chairs are left for the borrower.'"

The Telegraph in the UK. "It’s hardly what you would expect in today’s market, which feels better suited to gazundering (a buyer suddenly lowering their offer to a seller, typically just before exchange) than gazumping. Each week yields more bad news: construction companies are going bust faster than any time in a decade and rising mortgage rates have seen home sales, and prices, fall sharply – the 3.8 per cent annual price drop last month reported by Nationwide was the steepest since 2009."

"One buyer for whom a price cut changed little is Sonia Jones. She first put her Chiswick family home on the market in September 2022, for £1.85 million, to downsize to a smaller, new-build home in Brentford. But, despite knocking £100,000 off the price, she has still not had an offer she will consider. With her new home, she now has two mortgages; nonetheless, she has decided to take the Chiswick home off the market for a while."

"'What’s frustrating is that it’s been such a beautiful home,' she says. 'It backs on to an old church, so no one can build there, and the river is very near. I had two families at the beginning who it felt just right for but since then I just haven’t had many viewings. I’ve had four offers, but they all want £100,000 or £200,000 off – I wouldn’t do that.'"

"When John’s [not his real name] mortgage came up for renewal earlier this year on his house in Stroud Green, north London, he faced a monthly payment hike from £1,667 to £5,500. He and his wife, who both work in creative industries, found the financial prospect oppressive, he says. 'It was a lovely house but it just wasn’t worth killing ourselves for financially.' Their sale was fraught: the buyer of their Stroud Green home dropped their offer a few days before exchange, by £50,000. 'But by then, all the other people with offers had moved on so we decided to take it anyway,' he says."

ABC News in Australia. "Would-be home builders in regional Victoria are more cautious than ever about who they choose to build with, real estate agents say, as yet another construction company struggles against strong economic headwinds. Harmac Group entered voluntary administration this week, with administrators appointed to oversee the restructure and construction projects paused for the next five weeks. This meant tools would be downed on 50 sites under construction — 15 in Ballarat, 21 in Bendigo, 11 in Geelong, with the remainder in Melbourne."

"Ray White Ballarat director Will Munroe said he counted an increase in land blocks for sale in the area, as people who had purchased plots during the pandemic looked to offload them due to the increased cost of construction. For land that had not yet received a title, Mr Munroe said people used sunset clauses so they could hand the block back to the developer and have their deposit returned. 'There's a lot of resale blocks hitting the market because people just don't want to go through the hassle of building because it costs too much,' he said."

Voice of America. "For years, China’s property market has been a bubble. The property bubble, however, burst in late 2021 when China Evergrande Group, one of the country’s biggest property developers, defaulted on debt which rose to $340 billion by the end of last year. This month, another major developer, Country Garden, defaulted on millions of dollars of interest payments linked to two offshore bonds and warned of a net loss. Other developers could also be in trouble. President Xi Jinping is unlikely to follow the example of previous administrations, which pumped money 'like crazy' into the sector accounting for about 30% of the world's second-largest economy during the last big property market downturn in 2008, according to Shanghai-based economist Andy Xie."

"VOA: So, there were early signs of the property market trouble in offshore bond markets? Xie: Rich people basically got a haircut already. Developers basically told them you have to extend the deadline. When I have money, I’ll pay you. When I don’t, tough luck. These buyers are mainly private banking clients who are rich and buy high-risk bond funds but have no rights in China. We don’t know how much money is owed to them, but it’s hundreds of billions of dollars."

"But the government is not giving them money. Why? The banks won’t lend when they know the risk is too high. If you bring the bubble back, you create a bigger problem for yourself tomorrow. This government is not facing political opposition, it wants to go on forever, so it’s thinking, why bring problems to yourself to make the bubble bigger and threaten yourself later? This is what a lot of analysts don’t understand. Politics has changed. Xi Jinping is the owner of all the problems in China and this is his calculation. Domestically, the property developers owe 39 trillion renminbi in debt, according to a ratings agency. I think that is a low-ball estimate. I would expect a lot more. Basically, whatever debt is due, they have no money to pay back."

From TiPost on China. "After Country Garden, a 'model real estate company,' was mired in a debt crisis , the state-owned enterprise Sino-Ocean Group repeat the same mistake. If the market continues its downturn, more real estate companies will default on bond interest payment. It takes about two years from pre-sales to the completion of residential buildings. Most of the construction costs, material costs, and taxes can be postponed, which means that a large amount of capital can be used for free for two years."

"By repeating such steps and developing more and more projects, the amount of their capital keeps growing. However, the bosses don't consider the fact that this high debt and high turnover approach also leads to higher risks. Large companies like Evergrande and Country Garden simply pursue scale and speed in third- and fourth-tier cities without pursuing profits. They develop land in large quantities, sacrificing profits to build up their capital pool. Then, they go to first- and second-tier cities to make profits."

"What they could not see was that the real estate boom, created and fueled by the combined forces of China's economic growth, urbanization process, supply-side reform, and a deluge of strong stimulus, was coming to an end. Under the pressure of ensuring delivery, local governments have resorted to the strategy of depositing pre-sales proceeds into supervised accounts. This means that the project company can only receive the money after delivering the houses. The company's headquarters has become an empty shell. The previously abundant resources are now lacking, and the headquarters are helpless."

"As a result, the accelerated liquidity crunch of real estate companies led to debt defaults, trust crises, hindered sales, and the inability to sell assets even at a discount. The collapse of real estate companies seems to be a liquidity crisis, where the cash inflow is unable to cover all expenses, especially interest payments, and once the remaining funds are exhausted, defaults occur. At this point, there may not be any better solutions. It is merely a matter of who will bear the cost. Is the market to blame? The company cannot simply rely on the expectation of a forever buoyant market when it comes to make strategic and operational plans."

"Whether it is fortune or misfortune, it all comes from the mind. All troubles are the result of self-inflicted actions. Frankly speaking, relying on toxic solutions to quench thirst will inevitably lead to poisoning; relying on capricious luck will only invoke Murphy's Law. The debt crisis of real estate companies is a result of their own problems."