It Was A Pipe Dream And It’s Cost Us All

A report from the Tahlequah Daily Press in Oklahoma. “The cost of homes in Cherokee County has risen 54% since 2019, knocking many first-time homebuyers out of the market. People moving in from out of state are paying higher than what properties are worth, and it raises the market price and inflates the values, County Assessor Stephanie Teague said. Tyler Shockley, a real estate agent with Century 21 Wright Real Estate said he is seeing a lot of 100% mortgages, instead of paying a down payment, which increase costs to the buyer. ‘I do expect prices will go up once rates go down,’ Shockley said. ‘I hope that they aren’t going to have a crazy boom like they did before, but I do expect prices to trickle up as rates become more affordable.'”

From Denver 7. “Finding a home has been challenging for thousands of Coloradans, especially since the pandemic. Real estate expert Joy Dysart with HomeSmart said the promise of a federal rate cut stirred prospective buyers and sellers. In anticipation of the rate cut, more buyers started looking for their new homes. This anticipation also motivated sellers to list their properties. ‘I think the buyers are basically gaining ground just because inventory is higher. It’s the highest it’s been in a decade,’ Dysart said. Dysart also said that buyers now have more breathing room to make a decision. ‘They have more time to think about it. They can go back and look at the house more times. They can take a two- to three-day period to mill it over, to figure out their finances,’ Dysart said.”

Wood Working Network. “New single-family home inventory increased 1.7% to 467,000 in August, a 7.8-month supply at the current sales pace. Completed, ready-to-occupy inventory increased to 105,000 homes, which is the highest level since 2009. Median new home price fell back to $420,600, down 4.6% from a year ago due to builder price incentives amid multidecade highs for housing affordability challenges.”

WGME in Oregon. “A revaluation in South Portland is causing some residents to panic as some homeowners are seeing their tax bills rising thousands of dollars. ‘I’m going to have an additional $150 or more a month added to my tax bill,’ said South Portland resident Rosemarie DeAngelis. DeAngelis is one of many residents facing a 30 to 60 percent increase on their tax bill. ‘36.5. That’s too much, that’s too much,’ said South Portland resident Maryanne Brown. ‘I don’t see myself being able to be here in 10 years,’ said Barbara Everitt, a South Portland resident. ‘My property taxes monthly now are greater than my mortgage ever was, and that’s pretty significant,’ said DeAngelis. ‘So, there is a problem, and we need to figure out how to put our heads together and solve it.'”

12 News in Florida. “Palm Beach County Commissioners are talking about possibly offering low-interest loans to condo owners. County leaders say they’re getting calls from condo owners who are struggling to pay these special assessments. ‘Oh it’s horrible, it’s horrible!’ said Mona Guynn, a Singer Island resident. Guynn owns a two-bedroom condo at Dunes Towers, an oceanfront condo development on Singer Island. She says the special assessment she had to pay recently for building repairs was really expensive. ‘It was $70,000 for concrete work, plumbing work, all that and it’s still goin’ on,’ Guynn said. She says this isn’t the only assessment.”

“‘I know of three more coming. We don’t know how much, and we don’t know when,’ Guynn explained. She says some of her neighbors have already decided to sell their condos because they can’t afford these assessments. Guynn feels giving condo owners low-interest loans may not help very much. ‘That’s fine but you’ve got to pay it. You know, if you don’t have any income comin’ in, how are you gonna pay it?’ Guynn said.”

Turn to 23 in California. “‘We have seen fluctuation over the last 6 months, the median home value has gone up and down and up and down. More recently this month it has gone down probably about 4% here. Now I’m talking about Bakersfield it went from about 405,000 median home value down to about 380,000 median home value,’ said Kevin Oliver. Gary Crabtree the creator of the Crabtree report, said ‘We have seen a great influx of new construction mostly in the south part of town and also towards the northwest part of town. The main thing is that new construction is now almost commanding the market. Last month one of every three homes sold in Bakersfield was new construction.'”

Silicon Valley in California. “The loan for a San Jose site where two huge housing towers were proposed — but never broke ground — has been acquired by a group closely affiliated with the new owner of a big South Bay mall. The undeveloped housing site in downtown San Jose is a former Greyhound bus terminal where a company affiliated with China-based Z&L Properties had proposed two residential towers that would have produced a combined 708 units. Now, by owning the loan, the Texas-based affiliate could wind up owning the property through foreclosure or deal with the Z&L affiliate that owns the property.”

“‘Most of the time, getting the loan transferred to a new owner is a precursor to a foreclosure and the new loan holder owning the property,’ said Mark Ritchie, president of Ritchie Commercial, a San Jose-based real estate firm. ‘The last thing on earth banks want to do these days is to own foreclosed real estate. Banks don’t want to foreclose on properties if they can avoid it. By assigning the loan, the bank licks its wounds, gets out of the bad loan and just moves on.'”

Bisnow on Georgia. “‘You’re seeing a lot of loans that are almost finished with construction and the bank’s like, ‘Get it off my books,’ Red Oak Capital Regional Manager Ken Wood said at the Atlanta Marriott Buckhead Hotel & Conference Center. While the office sector has been the main source of distress in commercial real estate, multifamily hasn’t been far behind, with delinquencies and defaults piling up among investors who gobbled up buildings during the pandemic. Roughly 11% of multifamily CMBS loans were delinquent in August, up from 3% at the start of the year, according to securitized debt tracking firm CRED iQ. And MSCI projected last month that nearly $57B in apartment loans taken out by borrowers who capitalized on rock-bottom interest rates during the Covid-19 pandemic are potentially trouble.”

“Both Freddie and Fannie clamped down on lending standards as they have grappled with fraud over the past year. Three developers pleaded guilty in August to a $119M mortgage fraud scheme involving Fannie Mae loans, a conspiracy that forced JLL to take an $18M loss in the second quarter for originating those loans. Todd Robinson, a partner with the commercial real estate law firm Robinson Franzman, said the agencies now are requiring new borrowers to partner with seasoned developers when applying for loans as part of those increased underwriting standards. ‘I’ve had two deals recently in the last two weeks where it was what we call an emerging sponsor, maybe their first deal. Two or three years ago, Fannie, Freddie would rubber stamp that deal,’ Robinson said onstage. ‘Now they’re requiring that the [general partner] bring in an experienced operator … so that was kind of new to us.'”

The Globe and Mail in Canada. “The court-ordered breakup of former child actor Robby Clark’s insolvent 400-property real estate portfolio has devolved into a multiparty scramble to find value amid the wreckage. The unwinding of $144-million in debt Mr. Clark amassed before the collapse of his companies (referred to as Balboa et al. in court documents) comes after attempts to market the properties as a package failed. While some lenders are being given a chance to bid on the properties they loaned against, many are decrying the expensive buyout terms, the barrage of communications urging different collective action options and expressing severe misgivings about the entire attempt to restructure under the Companies’ Creditors Arrangement Act.”

“‘Why are they forcing me to pay $40,000 when there’s no benefit to me? Why am I getting dinged to pay legal fees for lawyers I’m fighting against? Why did I get dragged into this,’ said Peter Lindstrom, a private mortgage investor who holds a first mortgage on a house purchased by Mr. Clark’s companies in Sault Ste. Marie, Ont.”

“The term sheet put together by court-appointed monitor KSV Restructuring Inc. – which is running the sales and credit bid process – requires a non-refundable $10,000 deposit, and for successful bidders to pony up more cash at closing time to pay for a portion of the $15-million in Debtor in Possession loans that were spent on everything from unpaid property taxes and renovations to professional and legal fees during the eight-month-long insolvency. The KSV pool is also the only proposal that offers any chance of repayment for the unsecured promissory note lenders – who are sitting on $54-million of virtually worthless personal guarantees. Many of these promissory note holders have sent out e-mails advocating for the pool option.”

“An increasing number of lenders are coming around to the position that while lending money to Mr. Clark’s companies was a mistake, the court process to untangle his collapse may have been one, too. ‘Part of my DIP fees of $58,000 was almost $30,000 in renovations,’ said Cathy Hugh, a private lender who has raised questions about KSV-approved spending on renovations. ‘The judge made a mistake to allow this to go to a CCAA,’ Ms. Hugh said. ‘They were trying to find a solution that saves money for everybody; it was a pipe dream and it’s cost us all $15-million more.'”

The Irish Independent. “Construction work has not yet started on over 50,000 apartments that have planning permission in Dublin, according to new figures published by the four local authorities in the city. They show that building apartments in Dublin has largely become commercially unfeasible, as construction costs are now higher than what buyers are willing to pay. ‘In many cases, certainly in and around Dublin, they cost more to construct, when you take in all the costs including the land, than you can actually sell them for,’ said Bryn Griffiths, vice-chair of the quantity surveying group within the Society of Chartered Surveyors Ireland (SCSI). ‘There’s definitely a viability equation that isn’t stacking up. From a construction-cost point of view, we saw rapid inflation in 2021 and 2022. That has cooled, but it is still going up. What it isn’t doing is falling.'”

“Conor O’Connell, director of housing and planning at the Construction Industry Federation, said the problem is a lack of available funding. Mr O’Connell said the average cost of building an apartment in Dublin, though it varies according to location and whether the blocks have a basement, is in excess of €500,000, and they are more expensive than building a house. ‘The pension funds require stability in relation to public policy. With the rise in interest rates, and the rise of the cost of construction since ­Covid, an awful lot of those apartment blocks simply became unviable,’ he said. ‘Now no one is willing to fund them, because the yield – the criteria these international pension funds use – simply wouldn’t be there for them.'”

From ABC News. “On Tuesday, People’s Bank of China governor Pan Gongsheng said the central bank would reduce the amount of reserves banks are required to keep, freeing up more money for lending. The central government was even encouraging local governments to invest in the real estate market because, Monash University’s associate professor of economics He-Ling Shi said, property is ‘the number one financial time-bomb in China.’ Some 70 per cent of China’s household savings are parked in real estate, according to Reuters. But, the economist questioned, ‘If housing prices are going down, what’s the reason for investing in the real estate market?'”

The Vietnam Express. “Chairwoman of property developer Van Thinh Phat Truong My Lan has offered nearly 300 assets, including a 11,000-square-meter ‘mega project’ in downtown HCMC, to compensate bond fraud victims at her latest trial. Lan, who is accused of masterminding a fraudulent bond issuance scheme in 2018 that resulted in over 35,800 investors losing VND30 trillion (US$1.2 billion), listed a number of projects she was willing to offer as compensation in court Tuesday. She denied all culpability, but admitted to allowing the Saigon Commercial Bank management to issue the bonds through four of her companies.”

“‘I regret letting the bank use those companies to issue the bonds, which resulted in thousands of people losing their money,’ she said, adding she wanted to take responsibility for the consequences. Lan said that the value of the assets she has offered for compensation has totaled VND40 trillion, but the victims have yet to receive any money. She is now willing to put up more projects at a discount to raise more money for paying compensation, she said. She said she recently sold a building to state-owned Vietcombank at a 50% discount at VND2 trillion. Lan is in court on charges of fraudulent appropriation of assets through the issuance of bonds, money laundering and illegal trans-border movement of money. Earlier this year she was sentenced to death for embezzling money from the SCB between 2012 and 2022.”