Everyone Wins And No One Gets Hurt

A report from Realtor.com. “‘The market feels frozen in Colorado Springs,’ says Andrew Fortune, a real estate agent who says buyers and sellers are still adapting to the new post-pandemic normal. ‘Many real estate agents have moved on to other careers, as we have over 5,000 registered users in our MLS, but only around 1,000 homes sold every month.’ Southern California has remained slow, too. ‘Even though sellers have made price reductions and are motivated to sell, it hasn’t been enough to motivate the buyers to step into the market,’ says Cara Ameer, a real estate agent who works in both California and Florida. “Many are waiting for further interest rate decreases and remain ‘on hold.'”

“There is an influx of new inventory on the market, with 34% more homes actively listed in September compared with a year ago. The increase in pending sales and the increase in inventory ‘could signal that the window for major negotiation advantages may be narrowing,’ says Mike Wall, an agent with eXp Realty in Dayton, OH. ‘For sellers, it’s a reminder that there’s still demand, but you may need to be realistic about pricing to get deals done.’ ‘The 3.5% uptick in contract signings in September signals a cautious optimism among buyers who feel more confident about their ability to negotiate, despite high rates,’ says Scott Waters, a real estate agent in Glen Allen, VA. But the latest uptick in inventory is also a warning to sellers. ‘This is a wake-up call for sellers: Overpricing in a slow market won’t work,’ says Waters. ‘Contracts are being signed because sellers are finally bending on price. If this trend continues, buyers should expect more room for negotiation as the market rebalances.'”

Hawaii Public Radio. “Honolulu lawmakers have approved a controversial measure to establish an ’empty homes’ tax on Oʻahu. The Honolulu City Councilʻs Bill 46 would create a property tax on homes not occupied by long-term residents for at least six months out of the year. The empty home would be taxed at 1% of its tax-assessed value in the first applicable year, 2% for the second year, and 3% every year afterward. Oʻahu resident and business owner Roland Kuroda said he and his wife bought a second home that friends and family can use but is meant for their kids and grandchildren to eventually use as long-term housing. ‘ If I understand the bill as written, with our annual property tax plus the empty home tax proposed, we will have to pay $100,000 per year to keep the home in the use that I have right now. … I had to do (the math) over and over again because I couldn’t believe it,’ Kuroda told the council.”

WLRN in Florida. “Tim Johnson has owned his condo in Miami Beach for nine years. It’s about 900 square feet and has a balcony facing west. The building has 225 units. It was built in 1968. Johnson owns his unit outright. He does not have a mortgage. But he spends $1,200 a month on assessments. And that’s before his own insurance and property taxes. Johnson’s $1,200 in monthly fees for his Miami Beach condo is made up of two parts. The regular fee is $884, which he said was increased 26% this year. He also pays $315 a month for a special assessment. And he will continue to pay that for the next 15 years. It goes toward a $10 million project his condo association board approved about a year and a half ago. He thinks a portion of it goes toward building up the building’s budget reserves. ‘Since I’ve owned this apartment, there has been a special assessment almost the entire time, of one kind or another,’ he said.”

The Canadian Press. “Cleanup efforts are continuing on Florida’s west coast after two hurricanes made landfall in recent weeks. However, it appears Canadian snowbirds are divided on whether they want to stay or rethink their decision to own property in the state as worsening weather and surging property costs become a bigger fact of life. Martin Kinal, a Mississauga, Ont., resident, sold his Venice, Fla., vacation home earlier this year. Though his property is more inland and less susceptible to floods, he had a close encounter with Hurricane Ian. Kinal said one of his Florida neighbours decided to move to Arizona the following year because they realized ‘sooner or later, one will hit our area.’ ‘We decided to sell in May this year due to costs associated with keeping a vacation home in Florida,’ he said. ‘Since the pandemic hit, cost of everything seems to double.'”

“Ontario resident Ray Ferris, who owns a property in Treasure Island, Fla., says he’s concerned about what he will find when he heads south this winter. But he adds that he’s eager to get down there and help the city rebuild. Ferris and his wife spend two to three months a year at their vacation condo, which they bought in 2021, to escape the gloomy northern winters. For the rest of the year, they rent it out, but the latest storms could impact that. Ferris said renting out the condo helps keep up with condo fees, ongoing maintenance and insurance but he’s now worried he won’t be able to find renters. ‘We’re now concerned that nobody is going to vacation on Treasure Island, if it is in fact a ghost town,’ he said.”

Longview News-Journal. “The big cities of Texas attracted more home buyers than any other metro areas in the country during the pandemic, and housing prices exploded accordingly. Homes in Austin, Houston and Dallas fetched record valuations in 2021. But what came up also came down. Demand outstripped supply and expensive mortgage rates compounded the slide. Asking prices in Austin dropped by 10% between summer 2022 and spring 2023, the steepest decline in the U.S., according to RedFin. Neither the sharp price spikes nor the subsequent whiplash was felt in Longview.”

“In other states with low or no property taxes, rising values are a win for current homeowners. In Texas, however, high property tax rates can make sudden rises in property values painful if they outstrip growth in household earnings. ‘We don’t need to appreciate year after year in large numbers because we can’t keep up with the taxes that come associated with that,’ said Lori Keebaugh, who runs the Longview-based Keebaugh & Co. real estate brokerage. ‘Basically, if prices increase faster than what we’re moving up, we won’t have much movement in the market.'”

From Fortune. “Here’s a now not-so-funny joke from 2011. It’s a signed cartoon painting of three executives in the parking lot of a branch of Silicon Valley Bank (SVB), all chasing little Dr. Seuss characters with ‘Yield 1’ and ‘Yield 2′ written on them. A reminder: SVB famously failed in March of 2023, at least in part, because it chased yield. SVB invested heavily in long-term bonds that offered slightly higher yields instead of safer short-term options, seeking a better return on investment from their deposits—’chasing yield.’ Then, when interest rates rose in 2022, the value of those long bonds plummeted, resulting in significant losses that made the bank unable to cover its deposits, sparking a bank run in the spring of 2023.”

“While regulators, skittish depositors, and the Federal Reserve’s rapid rate hikes have all been blamed for SVB’s collapse, Felda Hardymon, a veteran venture capitalist—and Ken Wilcox, who spent 30 years at SVB, including a decade as CEO between 2001 and 2011—both had a simpler explanation. As Wilcox put it in an interview with Fortune: ‘I just think it was bad judgment … which is the polite way of saying stupid.’ Hardymon claimed the painting was a joke about how he was always reminding SVB’s leadership not to chase yield when he was on the finance committee in the 2000s and early 2010s. ‘I can confirm that in the finance committee we were often pushing back on ideas to use deposits, to invest deposits in a more aggressive manner. Let me just put it that way,’ he said.”

“By the end of 2022, SVB had invested more than 90% of its held-to-maturity securities portfolio in mortgage backed securities, municipal bonds, and Treasuries with maturities of over 10 years. It was a big risk, all for a paltry 1.63% return. As the Fed raised interest rates the value of SVB’s long-term holdings quickly fell, leaving the bank with billions in unrealized losses and a liquidity problem that ultimately sparked a bank run. In other words, their investment went bad and they needed more money to operate. After years of warnings and inside jokes about chasing yield, crisis finally struck SVB on March 10, 2023. Just two days later, Hardymon received a message from Michael Descheneaux, SVB’s CFO from 2007 to 2017 and president thereafter until the bank’s failure. It read simply: ‘Sad days.’ The former SVB board member’s response? ‘Yes. You shouldn’t have chased yields. Hope you are okay.’ Descheneaux didn’t respond.”

Business Insider. “Richard Barkham, the chief global economist of commercial real estate investment firm CBRE, says he sees an upheaval of Class B office buildings — a segment of office properties that struggle to attract tenants, mainly due to being older and in need of renovation. These second-tier properties have vacancy rates as high as 80%, he said, predicting that many could be ripped down or transformed over the next decade. ‘The banks are going to have to dispose of that real estate,’ Barkham told Business Insider in an interview. ‘So we will see. I think over the next — and this will pay out over two to three years — I think we’ll see a wave of offices going back to banks, and I say, they’ll be firesold and either demolished or converted.'”

“A CBRE analysis of planned, ongoing, and completed office-to-residential conversions since 2016 estimates that 1.38 billion square feet worth of office space could be converted. Barkham said the evolution could take around a decade to fully take place in cities. Still, for landlords facing a glut of unwanted space, it could be worth it to try to covert it. ‘There’s a solid base of really badly performing offices that’s going to go bust over the course of 2025,’ Barkham added. ‘It’s quite clear that we don’t need as much office space in the United States as we did. You will see vacant buildings, and you will see see-through offices for some considerable time.'”

Silicon Valley in California. “An office tower in downtown Oakland and a nearby parking garage have landed a new owner in a deal that provides a forbidding new sign of a weak Bay Area office market. The 15-story highrise and its parking garage have been bought for no more than $99.6 million, according to documents filed on Oct. 10 with the Alameda County Recorder’s Office. In 2019, Harvest Properties and AXA Investment paid $175 million for the office tower and the parking garage, Alameda County real estate documents show. At the time of that purchase, the Bay Area office market was riding a crest of tenant demand and investor optimism that helped to propel rents and values skyward.”

“That frothy exuberance began to dissolve in 2020 when government-ordered business shutdowns to combat the spread of the coronavirus chased away companies from countless workspaces, leaving office buildings empty. Even after government officials lifted the restrictive lockdowns, workers have returned to their offices at an uneven pace at best — and sometimes not at all. As a result, sky-high vacancies, faltering rents and a collapse in property values now haunt the Bay Area office market and its empty work sites. Office vacancy levels have reached record highs in the Bay Area’s three primary office markets, a new survey shows. In the July-through-September third quarter, San Francisco’s vacancy rate was the region’s worst, at 34.5%. Downtown Oakland had a 29.1% vacancy rate. Silicon Valley’s vacancy rate was 22%, reported JLL, a commercial real estate firm.”

Business in Vancouver in Canada. “The BC Financial Services Authority (BCFSA) is currently proceeding with at least 18 hearings against real estate agents and sub-mortgage brokers, alleging they worked with an unregistered broker and, in some cases, applied to lenders with fraudulent income documents, sometimes on their own behalf. At least two cases had gone to a hearing as of press time. Those cases revealed that the respondents had conducted business with former sub-mortgage broker Jay Kanth Chaudhary, who, between 2009 and 2018, allegedly arranged over half a billion dollars in mortgage loans with lenders based on falsified income records as an unregistered, so-called ‘shadow’ broker.”

“Last July, a BCFSA tribunal panel found realtor Rashin Rohani had bought five North Vancouver homes for herself using falsified income documents provided by Chaudhary. Rohani is appealing that decision, with a new hearing date to be determined. On September 25, realtor Qing Xing (Michael) He went before a tribunal to address allegations that he had submitted a mortgage application in July 2017 with falsified income information in relation to the purchase of his Surrey home.”

“BCFSA counsel alleged He knew of the false income documents submitted on his behalf by Chaudhary’s spouse Mana Erfani—a matter He contested at the hearing. Ultimately, He was able to acquire a $900,000 loan in 2017 having reported just under $30,000 of income in 2016, according to BCFSA counsel. As like Rohani, He has claimed he did not know Chaudhary provided lenders with false information, and said he did not know Chaudhary was unlicensed.”

“During testimony, counsel raised the name of sub-mortgage broker Shane Christopher Ballard as having worked with Chaudhary on He’s file. Ballard was issued a hearing notice on October 8, 2019, and is finally scheduled to appear before a panel on January 27, 2025. It is alleged by BCFSA that Ballard ‘submitted to lenders income and banking documents and employment information, including Notice of Assessments, T1 General Income Tax and Benefits Returns, Bank Account Statements, and Letters of Employment, in support of mortgage applications … when he knew or ought to have known that the documents and information were not genuine.'”

“Chaudhary was summoned to the Cullen Commission of Inquiry into Money Laundering in February 2021, where he admitted he systemically falsified mortgage applications. Chaudhary told the commission he understood his clients to be able to afford their mortgages because they often had undeclared income to sustain the payments. ‘Everyone wins and no one gets hurt,’ Chaudhary said at the time, adding that his conduct could have been prevented if lenders (such as banks) were able to verify income with the Canada Revenue Agency (CRA). Chaudhary’s home was raided in 2018 by BCFSA investigators and police, where they found an Excel spreadsheet of his clients indicating he arranged $511 million in mortgages, generating $5.3 million in client fees from 875 files.”

News.com.au in Australia. “According to PropTrack’s automated valuation model, the majority of suburbs or towns in three states or territories experience a house or unit value decline over the past quarter. The data shows house or unit prices in 55 per cent of all Tasmanian suburbs or towns the company has data for dropped for the quarter, while 62 per cent of those in the ACT also experienced value drops. But the most challenged market was clearly Victoria, with 79.5 per cent, or 770 of the 969 suburbs it has data for, recording a value drop over the past quarter. The greatest value loss was for houses in Bronte, NSW, where prices are down $485,601 or 7.8 per cent over the past three months to a $5.733 median.”

“PropTrack economist Anne Flaherty said seeing such mixed results across the nation was fascinating. ‘If we look at Perth, Adelaide and Brisbane, were really seeing an excess of demand relative to the supply of homes for sale,’ she said. ‘That means it’s still a really competitive market for buyers, with buyers having to put in offers fast and put in competitive offers to be successful in buying a property. On the other hand in Melbourne, there’s a huge amount of properties for sale at the moment, so buyers have a lot more breathing room and can be a lot more conservative in putting their offers in and can take their time a little bit more compared to other markets.'”

“Edge Realty’s Mike Lao said Adelaide’s northern suburbs had traditionally been affordable, and still offered the state’s, and in some cases the nation’s, most affordable housing. However, like many other places around Australia, that was changing. ‘The growth has been extraordinary,’ he said. ‘When I started in 2008, houses in Davoren Park were between $100,000 and $200,000. In 2019 they were still $100,000 to $200,000 and now some of them are selling for more than $700,000.'”

“Retail manager Lawrence Chan, 33, and his supermarket supervisor wife Lilisha Malla, 27, have recently built a home at Davoren Park, in South Australia, and Mr Chan says he was happy to hear of the suburbs solid growth – with house values up 8.8 per cent for the quarter and 30.9 per cent over the past 12 months. ‘The [SA Government’s] stamp duty exemptions allowed us to bid higher and will really help get more young people into the market,’ Mr Chan said. ‘It’s a fantastic family-friendly area and I think there’s quite a bit of room for the suburb and prices here to grow yet.'”