I Don’t Have The Money, I Can’t Live In The House, It’s Just A Horrible Situation

A report from the Wall Street Journal. “Real-estate investor Robert Rivani spent close to three years renovating an oceanfront mansion on Malibu’s star-studded Carbon Beach. Including the price of the original home, the project cost close to $27 million. He had been planning to list it for $40 million this spring. Last week, Rivani watched as the California wildfires tore the five-bedroom home apart, reducing it to rubble. ‘It’s catastrophic,’ he said. ‘How do you sum up losing over $20 million in 24 hours to any human being?’ Rivani said his insurance falls under the state’s already-stretched Fair Plan, which provides only up to $3 million in coverage for residential properties, so, even if it pays out, he says he will be out more than $20 million. No other insurer would cover the property for its full replacement value, he said.”

“‘The land that was once worth $15 million is probably worthless now, too,’ he said. ‘What value do you put on an entire community where the land is burnt to a crisp, where you don’t have restaurants or grocery stores, gas stations or working power?’ At least for now, Rivani anticipated that he will still have to make mortgage and property tax payments totaling north of $100,000 a month, even though there is no house. Rivani said he expects there will be a default crisis in Los Angeles as onetime homeowners find themselves unable to meet payment obligations. ‘We pay hundreds of thousands of dollars in property taxes a year and yet we don’t have working fire hydrants? It’s mind-blowing,’ Rivani said.”

Santa Cruz Sentinel. “The devastating wildfires burning through Los Angeles County this week are stoking concerns that California’s already faltering home insurance market could be thrown into deeper turmoil. Not only would existing homeowners continue to see rate hikes and lose coverage, but families that struggle to find insurance could not take out a mortgage to buy a home. In areas at extreme fire risk, from the Santa Cruz Mountains to rural corners of Northern California, fewer buyers could mean falling home prices, straining local tax bases and stunting efforts to emerge from the state’s lingering post-pandemic economic malaise.”

“Tim Linerud, whose home on stilts sits tucked into a canyon in Belmont, fears insurers’ response to the destruction wrought by the ongoing blazes. ‘We’ve had issues over the years of insurance companies canceling the policies because of the type of structure and the landscape of our property,’ Linerud said. ‘So any excuse of an insurance company to bail out, they’re going to use, and I’m worried about that.’ If insurers cannot cover those liabilities, it’s possible they could pass on those costs to all of their home and business customers in the form of higher premiums. ‘We are one event away from a large assessment — there’s no other way to say it,’ California FAIR Plan President Victoria Roach told lawmakers last year. ‘We don’t have a lot of money on hand, and we have a lot of exposure out there.'”

The Idaho Statesman. “Leslie Montgomery’s home on the eastern edge of Caldwell was supposed to be a safe harbor for her and her three children. A deeply religious author who has written several books on Christianity, Montgomery used the royalties she made from her latest book, The Faith of Mike Pence, to buy her new house in June 2023. But the home she bought from Lennar Corp. — the second-largest home builder in the nation — has become sickening, she said. Montgomery said she made a down payment of about $270,000 on the home and pays $1,900 per month mortgage on the two-story, four-bedroom home in Caldwell’s Mandalay Ranch subdivision.”

“Shortly after moving in, Montgomery started getting allergy-like symptoms, despite no family history of allergies, she said. Soon, her two sons and daughter also began getting symptoms. ‘We’ve all been sick,’ Montgomery said. Building issues have plagued the family since they first moved in, Montgomery said. To fix all the problems in the house would cost over $100,000, she said. Montgomery said she put all of her life savings into a down payment on the house. Insurance won’t pay for anything, Montgomery said, because it was a ‘builder issue,’ so she has paid out of pocket and used the rest of her money for environmental tests, medical costs, and living in hotels and Airbnbs since they were told to leave. ‘It adds up when you’re spending weeks at a time,’ Montgomery said. ‘We’ve had to go back and spend a night here or there because I ran out of money. I don’t have the money. I can’t live in the house,’ she said, her voice cracking with tears. ‘It’s just a horrible situation.'”

The Palm Beach Post. “The Florida condo market is recalibrating, as changes to the Condo Act tank the market for 30-plus year old condos. But developers looking to buy them are facing their own uncertainty. To address the lack of mandated maintenance of the state’s over 900,000 aging condominium units, the legislature made changes to the Condo Act, parts of which will go into effect in 2025. These changes mean many condo owners across the state will soon receive high special assessment notices and condo owners association fee increases. Older condo units are flooding the market but demand has dried up. With the deadline for the structural reserve studies at the end of 2024, buying these units doesn’t make sense.”

“As many condo owners will be unable to afford unusually high special assessments and COA fees, many condo projects may go into distress. It will be a game of patience for developers. Many will be willing to wait for certain projects to go into receivership and purchase projects in bulk. The threat of receivership may incentivize some unit owners to quickly organize and sell to a developer. If an association does not have a functioning board of directors, in many cases either a unit owners or one of the mortgage lenders will go to court to argue that a receiver be put in place. Once that happens, the entire situation is turned over to the courts; receivers have to answer to the courts, and all decisions need to go through court approval.”

Bisnow South Florida. “Many owners have been trying to sell their units before confronting the new reality. Condo listings rose 60% in Miami-Dade, Broward and Palm Beach counties in the third quarter, according to ISG World. Values for condos averaging 30 years or older fell more than $100K, from $325K in 2022 to $218K at the end of September 2024. Selling a building isn’t always a straightforward solution, said Sam Gaita of The Corcoran Group. Many developers have targeted aging condo buildings for new projects, but getting a critical mass of unit owners to agree to sell — and getting a fair deal — is far from a guarantee. ‘These are extremely complex transactions, and you need to have an experienced broker and an experienced lawyer representing the board,’ Gaita said. ‘I’ve seen and heard of horror stories of developers tying people up for years.'”

The Globe and Mail. “When Prime Minister Justin Trudeau stood in front of his residence on Monday to announce his resignation, he spoke of his efforts to ‘get the economy ready for the future’ and to make sure it was ‘working for everyone and not just a few.’ It was a familiar refrain, dating back to Mr. Trudeau’s landslide victory in 2015. From the get-go, his economic vision focused on redistributing wealth, tackling climate change, and expanding Canada’s work force through immigration and increased participation of women, youth and minorities – with a heavy dose of deficit spending and government hires to support those efforts.”

“But a decade on, economic metrics suggest Mr. Trudeau’s experiment failed to produce sustainable growth and Canadians are reeling from an affordability crisis. His brand of progressive economics has lost its lustre, not just in Canada, but in advanced economies around the world. Perhaps the government’s most astonishing failure was its approach to immigration. As pandemic lockdowns waned, the government opened the doors to temporary foreign workers and international students, leading to the fastest population growth since 1957.”

“The Trudeau government argued over the years that high immigration would boost economic growth by counterbalancing aging demographics and filling job vacancies. McGill University associate economics professor Christopher Ragan said he opposed that philosophy while he served on Mr. Morneau’s economic growth council. ‘I think they didn’t think very well and smartly about growth,’ Prof. Ragan said. ‘And that led them down this hopeful and naive path that, ‘Oh, we’ll open the gates for immigration and that’ll be our growth strategy.’ And I think that has failed miserably.'”

From City AM. “The amount of money sellers are making from residential property in the UK has shrunk to its lowest level in a decade, as a years-long boom in house prices slows, according to new figures. Most of the Londoners who sold their property at a loss last year were selling up in central London, and had bought the house within the last nine years, Hamptons found. Property values in some areas of the capital, like Tower Hamlets, remain below 2016 levels, Aneisha Beveridge, Head of Research at Hamptons, explained. ‘However, those who bought pre-2013 in the capital have seen much greater returns, outpacing inflation too,’ Beveridge said.”

From Domain News. “The Mornington Peninsula housing market has been softening, battered by a return to city living and economic pressures following the lockdown years. The peninsula’s median house value fell 5.7 per cent over the 12 months to the end of 2024, to $915,961. ‘The Mornington Peninsula is in a downturn and it’s one of the furthest markets from its peak than the other Melbourne house markets,’ said CoreLogic head of Australian research Eliza Owen. ‘Melbourne house markets are 6.5 per cent below their peak in March 2022, if you look at just the Mornington Peninsula, values are down 14.3 per cent from a high in March 2022.’ The typical house on the peninsula costs $172,417 less than at the peak.”

“A rush of Melburnians escaping lockdowns over-inflated the once-sleepy property market, but it had boosted prices past where they would have been otherwise, even after declines. ‘The reason the downturn has been more notable across the Mornington Peninsula is because it was one of those markets that really overshot growth through the pandemic period, and overall values on the Mornington Peninsula are still 22.2 per cent higher than in March 2020,’ Owen said. ‘It’s continuing to correct as interest rates are sitting higher and for longer than expected.'”