Those Expectations Can’t Be There Anymore, The Market Has Come Back Down To Earth

A report from Bisnow. “Donald Trump’s election in November renewed hopes among some investors that Fannie Mae and Freddie Mac would once again be privatized. It turns out they didn’t have to wait for the next administration to get the ball rolling. The U.S. Department of Treasury announced late Thursday it was amending its agreement with the Federal Housing Finance Agency to begin unwinding its oversight over the mortgage lenders that was put in place after the Great Recession. The changes to the preferred stock purchase agreements, or PSPAs, between the Treasury Department and the government-sponsored enterprises of Fannie Mae and Freddie Mac are bureaucratic and byzantine but essential to the lenders’ eventual release from government oversight. The new agreement terms restore Treasury’s ability to consent to the release of the GSEs from conservatorship for the first time since 2021.”

From Barron‘s. “In reality, Thursday’s agreement will change little, and there are already indications that the Trump administration will disregard or amend it. Mark Calabria, who headed the FHFA under Trump, on X called the request for a report on release ‘hypocritical’ given that the Biden administration abandoned a previous study on Fannie and Freddie’s risks to financial stability. Jonathan McKernan, a former Republican FHFA staff member who now is a director at the Federal Deposit Insurance Corporation, noted that the new agreement can be ‘easily reversed.’ ‘We view this as political and do not see it as a significant roadblock to recap and release,’ wrote TD Cowen analyst Jaret Seiberg in a research note on Friday.”

Local News Matters. “Realtor.com, is moderately bullish about Stockton. On the less optimistic side, property data firm ATTOM lists San Joaquin County, where Stockton is the county seat, as one of the most ‘at risk’ for significant price declines. It’s one of 13 California counties that is listed as vulnerable, many of them in the Central Valley. Zillow lists the average price of a home in Stockton at $441,270 — up 2.2% in the past year. At the same time, however, ATTOM says San Joaquin County and a dozen other counties in California are vulnerable to pricing downturns based on a number of factors.”

“They include the percentage of homes facing possible foreclosure and those where mortgage balances exceed property values, also known as underwater mortgages. The formula also looks at housing affordability — the percentage of average wages required to pay for a median-priced single-family home — and local unemployment rates. ‘An almost unrelenting increase in home prices has surpassed most wage gains around the country to varying degrees,’ ATTOM said in a statement. ‘That has led to home ownership costs consuming more than triple the portion of average wages in some parts of the country compared to others.'”

The Atlantic on California. “Los Angeles has seen better days. Traffic is terrible, homelessness remains near record highs, and housing costs are among the worst in the country. By some measures, Los Angeles has arguably the worst housing-affordability crisis in the country. If a middle-class family ever wants to own a home, they’d better go somewhere else. The median home price in L.A. is over 10 times the median household income—more than double a healthy ratio.”

Local 10 in Florida. “Condo owners across Broward County are grappling with mounting repair costs and stricter safety inspections. For residents of Springbrook Gardens, a 17-unit condominium near Fort Lauderdale Beach, life has been upended. After additional inspections uncovered corrosion in the building’s foundation, residents are now facing millions in repair costs. William Brown, a longtime condo owner in a nearby 11-unit building, said his property recently completed its 40-year inspection. He says repairs, fees and restoration work have stretched budgets thin. ‘We got hit for a million dollars,’ Brown said. ‘A lot of my friends in Broward County can’t afford big assessments like here, and they’re going to lose their homes.'”

From Realtor.com. “There are plenty of condos on the market in Florida that are having difficulty finding a buyer, according to Cara Ameer, a real estate agent with Coldwell Banker in Florida. ‘Right now, people feel like they would be buying into a problem and they don’t want to take that on. I can’t say I blame them given all of the uncertainty. Many people would rather buy a single-family home or townhome with less fees that may not be subject to so much oversight.'”

From ZME Science. “In 2020, Karen Bilotti and her husband, Sam, started to notice fine lines in their basement’s concrete walls. Ordinarily, they might not have given them a second thought. But the Bilottis had recently heard about a growing group of nearby homeowners in Massachusetts with larger cracks in their foundations, and Sam began to worry. Sure enough, a test revealed they were positive for pyrrhotite. Like scores of other Massachusetts homeowners, they faced a grim decision: live with the knowledge that their house’s foundation was gradually failing, or pay as much as $300,000 to replace it without any guarantee of future support from the state. For now, Karen Bilotti and her family are holding off on replacing theirs. They received a $300,000 estimate to lift a house that cost them $500,000. They can’t afford it. ‘I wish I had a money tree growing in my backyard,’ she said, ‘but I do not.’ What was once their dream home is now, as Bilotti put it, ‘a nightmare.'”

From CBC News. “Interest rate cuts and changes to Canada’s mortgage rules could set the stage for change in the Greater Toronto Area’s real estate market this year, experts say. After a sluggish 2024, Royal LePage broker Shawn Zigelstein says he expects 2025 could see more activity from buyers who weren’t able to enter the market before. However, Zigelstein says he doesn’t expect a repeat of the bidding wars frenzy of the pandemic. ‘Those expectations can’t be there anymore. The market has come back down to earth.’ When it comes to condos, Zigelstein says he thinks the market is oversaturated due to a surplus of inventory. ‘There’s a lot of condominiums that are out there that are very well priced and unfortunately just aren’t getting the buyers in there.'”

“John Pasalis, president of real-estate brokerage Realosophy, said sales for small, micro-units are ‘unbelievable sluggish right now’ which may give buyers some negotiating power. ‘Those units, we have a ton of inventory not a lot of people buying them because they fall into the category where they’re a little too small for people to live in, to want to own or occupy them, and investors aren’t buying them,’ he said.”

From KALW. “Mexico City is the latest major metropolitan area to impose restrictions on Airbnb, after New York and Barcelona. As Emily Green reports, soaring housing prices have displaced many longtime residents. FEDERICO TABOADA: ‘The effects of Airbnb in Mexico City are quite toxic.’ GREEN: Federico Taboada is director of Mexico City’s Planning Institute and one of the architects of new Airbnb legislation. It restricts Airbnb units from being rented more than 180 nights a year. TABOADA: ‘Because of Airbnb and other facts, around 100,000 people leave the city because they can’t afford to pay rent.'”

“GREEN: Christian De Putron moved from Europe to Mexico City four months ago on a modeling contract. And like many foreigners, he rented an Airbnb in Condesa. Prices in this neighborhood have nearly doubled since 2020, according to analysts. DE PUTRON: ‘I was paying maybe $1,400 for a month. One bedroom – I was in a shared accommodation with 10 other people.’ GREEN: ‘$1,400 a person with 10 other people?’ DE PUTRON: ‘It was an online working space. So there was a lot of digital nomads living there. The price was really extortion.’ GREEN: Especially when you consider that 1,400 is more than the monthly average salary for Mexicans living in the capital.”

The Helsinki Times. “Investors in Finland face a rare and unsettling scenario as seven real estate funds have suspended or restricted redemptions and subscriptions due to a struggling property market. These measures, enacted by six major banks and investment firms, prevent fundholders from withdrawing their money or making new investments. The most significant closures include OP-Rahastoyhtiö’s OP-Vuokratuotto and OP-Palvelukiinteistöt funds, which together represent over 50,000 investors. These suspensions, announced on New Year’s Eve, aim to protect the interests of all fundholders by avoiding forced property sales at depressed prices.”

“The Finnish Financial Supervisory Authority (Fiva) confirmed the closures mark an unprecedented moment for the nation’s fund market. ‘This is exceptional. Nothing similar has occurred in the history of Finland’s investment funds,’ said Marko Hovi, head of the agency’s office. Real estate funds have faced mounting difficulties since late 2022 due to stagnant property transactions and falling valuations. Many funds have struggled to meet redemption requests as large property sales — a necessity for liquidity — remain unviable. ‘The property market has been practically frozen,’ explained Juha Takala, CEO of OP-Rahastoyhtiö. He highlighted that selling high-value properties at appropriate market rates has become increasingly challenging.”

Radio New Zealand. “New Zealand’s median house value dropped by $32,200 in the year to December, Corelogic says. Property values fell 0.2 percent in the month of December, the ninth drop in the past 10 months. It took them to 3.9 percent lower than a year ago and 17.6 percent below the post-Covid peak. But values are still 16.2 percent higher than March 2020. Over the year, Auckland prices were down 6.2 percent, Tauranga’s 3.8 percent and Wellington’s 6.5 percent. Over the year, Whangārei’s prices are down 5.6 percent, Gisborne’s 8.9 percent and New Plymouth 2 percent.”

“Corelogic chief property economist Kelvin Davidson said the large number of properties for sale in Auckland, both existing properties listed for sale and the flow of new builds, was keeping prices soft. ‘A sudden or strong upturn in property values across large swathes of the country still doesn’t seem particularly likely until the wider weakness of the labour market starts to turn around,’ he said. ‘The recent falls in property values may well come to an end shortly, but one factor for the year ahead that the market hasn’t had to contemplate before is likely to be the effect of debt-to-income ratio rules. These may not be a factor for everybody and won’t stop mortgage lending dead in its tracks. But by the middle of the year it certainly wouldn’t be a surprise if the DTI limits are a very common part of the general discussion around NZ’s mortgage market.'”