Sales saw their biggest slump for 13 years.
Sales of previously occupied homes in the US plunged in October, with rising borrowing costs and still-high prices contributing to the slowest pace of activity for over 13 years. Last month’s sales figures for existing homes were down 14.6% compared with the same time in 2022, and by 4.1% on a monthly basis to a seasonally adjusted annual rate of 3.79 million, according to the National Association of Realtors (NAR). The results missed analyst expectations, with economists on average having anticipated a clip of 3.9 million seasonally adjusted sales, according to FactSet. October’s figures mean sales have now dropped for five months in a row as prices continue to tick upwards despite the market cooldown. The median price of an existing home was up 3.4% on a year-over-year basis to $391,800, the NAR said, marking the fourth month in a row that prices have increased compared with a year prior. The Northeast, South, and West all recorded existing-homes sales declines, according to the NAR, although sales were unchanged in the Midwest. Economist weighs in on latest figures Lawrence Yun, the NAR’s chief economist, said a lack of supply and higher mortgages rates were the chief factors behind plummeting sales activity, with the 30-year mortgage seeing a weekly average rate of 7.79% in October. “Prospective homebuyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” Yun said. “Multiple offers, however, are still occurring, especially on starter and mid-priced homes, even as price concessions are happening in the upper end of the market.” First-time homebuyers continue to account for a significant portion of sales, with 28% of existing-home purchases made by new buyers in October, the NAR said. Individual investors or second-home buyers bought 15% of homes last month, a drop from 18% the month prior. Foreclosures and short sales, also known as distressed sales, were effectively unchanged on a month-over-month basis, hovering at the 2% mark. Still, Yun saw some cause for optimism in the slight decline in mortgage rates in recent weeks, even though they remain high compared with 2022. He said an increase in supply in the months ahead could also prove a boost to prospective buyers. “Fortunately, mortgage rates have fallen for the third straight week, stirring up buying interest,” he said. “Though limited now, expect housing inventory to improve after this winter and heading into the spring. More inventory will result in more home sales.”
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Real estate franchisor denies any wrongdoing in high-profile class action lawsuit.
Real estate franchisor RE/MAX has secured preliminary approval from a Missouri court for a settlement in high-profile class action lawsuits involving claims around commission-sharing structures. On October 5, RE/MAX agreed to a settlement involving a $55 million payment and changes to its business operations. This agreement aims to resolve the pending litigation and avoid the uncertainties and costs associated with protracted legal battles. Despite agreeing to the settlement, the firm continued to deny any wrongdoing as alleged in the lawsuits. This lawsuit is part of a larger legal issue in the industry, highlighted by a commission collusion case involving the National Association of Realtors (NAR). The suit scrutinizes the standard commission model in real estate transactions, alleging that it leads to inflated costs for sellers and stifles market competition. It argues that NAR’s policies effectively force sellers to bear the buyer’s commission, raising concerns about the fairness and competitive nature of the industry. “We are pleased with the court’s decision to grant preliminary approval of the settlement,” RE/MAX president and CEO Nick Bailey said in a statement. “This development signifies progress in our ongoing efforts and commitment to a resolution – it’s a positive step forward in bringing these cases closer to the finish line.” RE/MAX said it has already started the process of paying the agreed sum, with full completion expected following the court’s final approval. Once finalized, the settlement will shield all US RE/MAX affiliates, including franchisees and agents, from claims associated with the lawsuits and similar claims, it outlined. The final court decision is expected next year, and RE/MAX will have to implement the agreed-upon business changes within six months of that date. Despite the substantial financial implication of the $55 million payment, RE/MAX does not foresee a significant impact on its financial performance or cash flow. Office mortgage delinquency rates are now higher than those of retail properties.
Mortgage delinquency rates for commercial and multifamily properties rose for the fourth consecutive quarter, with office delinquencies driving the increase in the third quarter. The early delinquency rate inched up four basis points to 97.3% at the end of the third quarter, according to the Mortgage Bankers Association’s recent Commercial Real Estate Finance (CREF) Loan Performance Survey. Loans that were 90+ days delinquent, or in REO, rose to 2.2%, up from 1.7% in the previous quarter. Jamie Woodwell, MBA’s head of commercial real estate research, pointed to a notable shift in the market, highlighting that: “The delinquency rate for loans backed by office properties now exceeds those of loans backed by retail and hotel properties.” Office property loans saw another uptick in Q3, with 5.1% being delinquent, up from 4% in the last quarter. Retail loan delinquency was 5%, a slight increase from 4.9%, while lodging loans decreased to 4.9% from 5.3%. According to Woodwell, a silver lining is that delinquency rates for multifamily and industrial property loans are still under the 1% mark. Multifamily balances had a 0.9% delinquency rate, up from 0.7%. Industrial property loans saw a decrease in delinquency to 0.6% from 0.8%. Woodwell further elaborated on the challenges the commercial property markets are grappling with. “Commercial property markets are working through challenges stemming from uncertainty about some properties’ fundamentals, a lack of transparency into where current property values are, and higher and volatile interest rates,” he said in MBA’s report. This combination of factors has led to a “slow and steady uptick in delinquency rates, concentrated among loans facing more of those challenges.” When it comes to capital sources, CMBS loan delinquency rates stood out with the highest levels at 4.4%, up from 4.1% in the last quarter. In contrast, non-current rates for other capital sources remained relatively moderate:
Economy rebounds, but foreclosure filings tell a different story. Amid a turbulent economic landscape, the US has witnessed a significant uptick in foreclosure filings in the third quarter. A new ATTOM report paints a concerning picture, with foreclosure filings reaching 124,539, which marks a 28% surge from the last quarter and a significant 34% rise year-over-year. Delving deeper into the monthly data, September alone saw an 11% increase in foreclosure filings, up to 37,679 properties. “The number of new cases filed by lenders in the third quarter did rise just a small amount from the same period last year and actually dipped a bit quarterly – signs that the upward pattern may be easing,” ATTOM’s CEO Rob Barber said. “But foreclosure starts are nearly back to where they were two years ago when the federal government lifted a pandemic-related moratorium on most foreclosure filings.” Barber also attributed the higher foreclosure rate to pending filings finally processing. “Even with the national economic upturn and job stability, it’s evident that some homeowners are still grappling with the pandemic’s financial aftermath or encountering new challenges,” he said. Several states experienced spikes in foreclosure starts for Q3 2023. North Carolina led the pack with a 53% increase, followed closely by Louisiana at 47%. Pennsylvania, Alabama, and Nevada also reported substantial annual hikes of 24%, 18%, and 16%, respectively.
On the metropolitan front, New York City reported the highest number of foreclosure starts in Q3 2023, with 4,514, followed by Chicago (2,584), Houston (2,279), Los Angeles (2,273), and Philadelphia (2,104). However, not all cities followed the national trend. Some metropolitan areas with populations exceeding one million reported declines in foreclosure starts for the same quarter. Salt Lake City led this group with a 74% decrease, while Chicago, Kansas City, Columbus, and Milwaukee also noted reductions of 35%, 34%, 22%, and 21%, respectively. |
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