People Bought Investment Properties When Interest Rates Were So Cheap And They’ve Had To Let Properties Go

A report from Bloomberg. “Before Donald Trump’s election, Redfin Corp. projected mortgage rates would average 6.1% next year. But three days after the election, they revised their estimate upward to 6.8% – basically unchanged from today’s high levels. ‘The difference is Trump,’ said Daryl Fairweather, chief economist at Redfin. ‘There was a view that rates would gradually fall, but that no longer seems to be the case,’ said Thomas Ryan, North America economist at Capital Economics. ‘As a result, the housing market is going to stay frozen — as it is — for longer than we and other economists had expected.'”

“Malvin Le, a real estate agent based in Orange County, California, said his phone lit up immediately after the election with a few buyers ready to go shopping again. ‘The day after the election, I got three or four calls from buyers who wanted to see a house that weekend,’ Le said. ‘There are still buyers waiting to buy, they’re just waiting for a good deal.'”

Boston.com in Massachusetts. “‘With the peak selling season over, it’s not surprising that inventory has started to build,’ said Jared Wilk, GBAR president. ‘Buyers have more listings to choose from now than they did this summer, and that’s helped to relieve some of the upward pressure on prices, while also creating more opportunity for negotiation. In many communities, prices have stabilized with little to no appreciation … over the past 12 months. In fact, the market has become moderately more affordable as prices for homes and condos are down 10 percent and 6 percent, respectively, since peaking earlier this summer.'”

From News 4 Jax. “‘The market in Northeast Florida was continuing to see the effects of both interest rates and the upcoming election in October,’ 2024 NEFAR President Rory Dubin said. ‘This resulted in increased days on market, increased inventory slightly lower closed sales, and a lower median price that dropped below $400,000. Buyers need to be aware of the opportunities and the negotiating power of the realtor not only for pricing, but potential seller concessions that may be available, and everything else from repairs and time to closing.’ More inventory is giving buyers more negotiating power. Laila Hassan, a real estate advisor at Engel and Volkers First Coast, said this is the time to ask for concessions. ‘There’s more negotiating power than there was, let’s say a year ago, six months ago, people are starting to get better deals on homes,’ Hassan said.”

Fox 26 in Texas. “‘I take lots of pride in my home,’ said Johnnie Jefferson. Johnnie decorated her 6-bedroom 4-bath house in an upscale Richmond neighborhood herself. The 85-year-old nurse was one of the first non-physicians to own a medical clinic in the greater Houston area. She’s lived here since 2002. ‘It’s my whole life I have nowhere else to go,’ Johnnie said. ‘We put my lifetime savings into this house.’ Now Johnnie’s home is in foreclosure. Johnnie says the foreclosure follows a loan modification in 2012. ‘I had to spend nights in the hospital with anxiety,’ she said. ‘I developed depression. It’s just ruining my whole life.'”

“These attorneys say they are doing the best they can for Johnie under the circumstances. ‘We’re in federal court, and we are suing for Miss Jefferson to get the equity out of her house,’ said attorney Kietha Hamilton. ‘The property is worth approximately a million dollars. They sold it back to themselves for 600 thousand. There’s 400 thousand in equity we feel like Miss Jefferson is owed.'”

The Wall Street Journal. “It is hard to say precisely when art magazine publisher Louise Blouin’s financial problems began, but by November 2022 she was desperate. Saddled with debt and facing foreclosure on La Dune, an oceanfront estate in the Hamptons, Blouin borrowed $62 million from Georgia-based lender Bay Point Advisors, hoping to buy herself time to refinance or sell. Roughly 14 months later, however, the bridge loan ballooned to more than $80 million, thanks to a 24% default interest rate and late fees. La Dune, once asking $150 million, sold for $89 million after an auction in January. ‘I was just going in for a bridge for a few weeks and ended up in this tsunami,’ said Blouin, who has since described her dealings with Bay Point as a ‘nightmare” in New York bankruptcy court filings. She is now fighting Bay Point for a portion of the sale proceeds.”

“‘We fill in where banks stop lending,’ said Charles Andros, Bay Point’s co-founder and CEO. ‘Bay Point has systematically taken steps that result in making it more difficult for me to get them repaid,’ said Ronald Leventhal, a developer of Hampton Island Preserve, which Bay Point says owes more than $30 million. He alleged Bay Point is trying to wrest control of the project from him. ‘They can destroy people,’ he said. Leventhal said he has negotiated deals with Andros only to have Bay Point renege on terms at the last minute, or not follow through with funding as promised. ‘They are able to choke people,’ said Leventhal.”

The San Francisco Chronicle in California. “Venture capital has long been a key engine powering the Bay Area’s dominant industry. But now, those money managers are in historically troubled waters. A perfect storm of economic, regulatory and industry factors has mostly blocked tech startups from ‘exiting,’ or cashing out through acquisitions or going public. ‘We’ve raised a lot of money, and we’ve given very little back,’ said Thomas Laffont, whose Coatue investment firm is one of the biggest players in Silicon Valley, during his talk. ‘We are bleeding cash, as an industry. And it’s ironic because many of us, as investors, have told companies they need to get fit, they need to generate cash, but we as an industry haven’t done that yet. If we don’t get these companies to go public, in my opinion, we are, as an industry, going to have to face really hard questions with the ultimate funders of our industry'”

The Los Angeles Times in California. “The city of Fresno, with more than 500,000 residents, is in some ways a test case of what happens when a city cracks down on homelessness without growing systematic efforts to increase the affordable housing stock. City officials, conversely, champion the camping ban, saying public spaces have been cleared of trash and more homeless people are being connected with treatment and shelter beds. Individuals with outstanding arrest warrants have been detained during the sweeps. And there is ‘overwhelming support’ from residents, said Mayor Jerry Dyer. ‘For the past four years, we have been heavy on compassion and light on accountability. We have to deal with them, and absent the ordinance, it would be challenging for us.'”

“At some level, Fresno leaders are reacting to the same voter mutiny that is playing out across the state, from Orange County to Bay Area cities. Residents are fed up with sprawling tent encampments and the associated drug use and street crime. And they want their cities to be less welcoming. Councilmember Miguel Arias said the city has to set limits on its benevolence. He said he has family members who struggled with drug addiction and homelessness for years before finding their footing, and the city can’t wait years before taking back its streets. ‘We have done a lot more than we’ve ever done before, and we know there’s more to be done,’ Arias said. ‘But we also have to draw a line, like any family does.'”

KATU in Oregon. “The Portland Clinic will be closing all patient care and clinical services at its downtown location, citing ongoing safety concerns for staff and clients. The downtown Portland Clinic is one of the latest businesses to leave the area despite ongoing efforts from police, investors, and the community. ‘You’ve got Targets shutting down, you’ve got Safeway is a circus, you’ve got these guys shutting down,’ said Steve Schue who lives downtown. ‘I think some of the activity, it’s like they cracked down in one area, it moves a few blocks over.'”

Market Watch. “The current U.S. housing-finance system hinges on government guarantees, a domestic and international buyer base for this type of mortgage exposure, and a financing structure that stands on the shoulders of past mistakes — namely reforms in mortgage lending designed to prevent another 2008-style global financial crisis. That’s why any renewed push to privatize housing giants Freddie Mac and Fannie Mae under a second Trump administration should take care not to ‘pull the rug out’ from under the whole ecosystem, said Michael Bright, former manager of Ginnie Mae’s $2 trillion portfolio of mortgage-backed securities.”

“For most lenders, the end goal isn’t to make loans and hold them on their books, but to underwrite to the relatively strict standards needed for sale to housing giants Freddie Mac FMCC, Fannie Mae FNMA and Ginnie Mae. Those agencies then typically package up and sell their loans to investors as mortgage-backed securities MBB with government backing. Perhaps more crucially, these mortgages can be prepaid, a feature that allowed U.S. homeowners to refinance trillions of dollars in mortgage debt during the pandemic at near record-low rates. ‘The prepayable nature of this long-term contract is something Americans have access to,’ Bright said, adding that the U.S. has been the only place in the world to offer it.”

From Bloomberg. “Some lenders to Canada’s distressed condo developers are finding they have little choice but to buy the troubled projects they backed and finish the buildings themselves. As the country faces its biggest wave of receiverships among real estate developments in at least a decade, lenders are going to new lengths to avoid losses. In one of the biggest examples, British Columbia-based Gentai Capital and two partners spent $75 million (US$53.7 million) last month to buy a partially complete condo project in the city of Kitchener, about an hour and a half west of Toronto, out of receivership. ‘The preference would be just to get the cash back for the debt and be done with it,’ said Mike Czestochowski, vice chairman of CBRE Canada. ‘But this is the lender getting creative, and having their hand forced.'”

The Globe and Mail. “KingSett Capital Inc., one of the country’s most experienced commercial real estate investors, has halted redemptions and distributions from its flagship Canadian fund as it navigates persistent industry woes. Investors in the fund, which has $1.9-billion in equity and a total value of $4.9-billion including debt, will not be able to cash out of the fund or receive a cash distribution for the next year. Investors were also told that KingSett wants to pay down debt and has tried to sell assets to generate cash, but there has been little interest from large investors who used to snap up office towers and industrial properties as soon as they hit the market, according to two sources familiar with the meeting.”

“KingSett’s redemption and distribution freeze echoes similar moves by other large private real estate investors, including Romspen Investment Corp. and Hazelview Investments. Romspen has now halted its redemptions for two full years and has cut its distribution multiple times. Hazelview, meanwhile, has halted redemptions on its $1.3-billion Four Quadrant fund twice in the same year.”

From Reuters. “Croatia is set to become the latest European country to tackle a tourism-related housing price crunch, although some property owners fear the proposed legislation will hit business. This year the Croatia coastal tourist trap of Dubrovnik banned new private rental permits in its historic Old Town in a bid to keep young people from leaving as a result of high costs. ‘The owners of apartments are panicking, many of them took loans, invested in the apartments, logistics which will all be brought in question with this new law,’ said Jurica Lepinc, who owns a rental agency in Croatia’s capital Zagreb.”

From News.com.au. “A group of property investors on a boat on Sydney Harbour sharing the number of homes they own has divided viewers online. The people on the boat all work for Australian Property Scout, a property investment firm that claims to help people retire by 50. The clip’s caption on TikTok reads, ‘From admin to the top we are all property investors at APS.’ The person behind the camera goes around the boat, where people are drinking and celebrating, asking them, ‘How many investment properties do you have? ‘ Some people commented. ‘You make it so easy to hate you,’ another noted, prompting a reply from the owner of the business, Sam Gordon, who claimed, ‘the feeling is mutual.'”

“‘The government made the decision in the eighties to go away from social housing and turned to private investors to provide this. To say all properties are very expensive and rented very high is a massive generalisation – most landlords lose money holding their properties every year compared to the rent they receive,’ Mr Gordon said. Mark Brown, who owns a real estate agency in Victoria, said he can see why people could be offended by the clip because it is a hard time for Aussies right now. ‘People bought investment properties when interest rates were so cheap, and now interest rates have gone up, and their mortgages have doubled, and their rents haven’t covered it, and they’ve had to let properties go,’ he explained.”

“Property expert Kellie Richardson, who works alongside Mr Brown, said that 90 per cent of the properties they are working together to sell are failed investment properties. ‘We’ve got clients who have moved into their homes that they’ve spent three years building, and they’ve been in it for less than a week and then had to move it out,’ she said. Ms Richardson also warned that just because someone owns a lot of properties, it doesn’t mean they are cash rich. ‘You can own 10 different properties but it doesn’t mean those properties are working for you,’ she said.”

The Dispatch. “Halloween was widely celebrated in Shanghai, perhaps more than in Western cities. But 2024 was different. With little notice, police rounded up costumed partygoers, took them to stations, and forced them to remove their makeup and costumes before registering their names, IDs, and phone numbers. Uniformed officers posted notices stating, ‘All cosplaying is prohibited, and no Halloween makeup will be permitted.’ Elsewhere in the country, there are signs of growing economic discontent. Workers regularly protest layoffs and unpaid wages at the many struggling factories that dot the southern provinces. China’s domestic crackdowns belie a deep and growing sense of fear among its political elites. This insecurity runs counter to the frequent media portrayal of China as a confident and rising superpower and speaks to the growing economic and social crises gripping the country.”

“Rampant speculation in the housing market made homes increasingly unaffordable, even among urban white-collar workers, whose wage growth did not match soaring home values. By 2021, purchasing a home in China cost around 29 times the average annual salary, compared to just 5.6 times currently in the United States. Millions of young people have forgone marriage and children as a result, exacerbating the country’s fertility crisis.”

“China currently has more vacant homes than people to live in them, according to former National Bureau of Statistics official He Keng, who made a rare public critique of his country’s housing crisis last year. Despite rising prices, empty homes and high-rises have dotted the Chinese landscape for years. In May 2022, COVID prevention workers stood in the doorway of a young couple’s home during the infamous Shanghai lockdown. A police officer in hazmat gear claimed that if the couple did not comply with orders to attend a quarantine facility, it would affect their family for three generations. ‘We are the last generation, thank you,” said the young man, slamming the door in the officer’s face.'”

“The regime tends to blame many of China’s problems on foreigners, and virulent anti-foreigner government propaganda has inspired violent attacks on expats living in the country, including Americans and Japanese. Expats must also now contend with greatly expanded espionage laws that can result in their indefinite detainment on vague charges. China’s increased use of exit bans also keeps foreign personnel in the country indefinitely at their own expense, and since 2022 authorities have raided the offices of several foreign firms. When placed into the context of China’s spiraling domestic crisis, Beijing’s increased fear and hostility toward the outside world may also indicate its growing sense of insecurity at home.”

“Chinese authorities must increasingly contend with a dissatisfied populace. Amid a spiraling debt crisis and a struggling manufacturing sector, the leadership’s promise of jobs and upward mobility in exchange for young people’s compliance after Tiananmen Square seems impossible to fulfill. These factors leave Beijing little option but to use force to quell discontent at the exact moment it needs its young people to support its rapidly aging society. Unlike historical periods of acute crisis, this time the world will be closely watching how Beijing responds to discontent as elite fears continue to set in.”