A report from the Dallas Morning News. “‘There’s no doubt about it, the market is slowing down from a very high peak,’ said Texas A&M economist Jim Gaines. Homebuilders also saw a dramatic decline in sales that led them to slow construction of new homes and opt out of buying more land. In the third quarter, D-FW saw the largest year-over-year decline in home starts in almost a decade, according to Dallas-based housing analyst Residential Strategies. The region’s median sale price has dropped almost 9% since its peak of $435,000 in June.”

The Sun Sentinel in Florida. “Homebuilders using sale incentives such as price discounts or free upgrades has been a standard business model for many builders, but it has been on the rise since July, when 43% of homebuilders reported offering some type of incentives, noted the National Association of Home Builders. It increased to 59% in November, and then reached 62% in December. K. Hovnanian, another homebuilder in Florida, has special financing offers due to the changing market. The company didn’t have to be too aggressive with incentives on new contracts during the last quarter of the year due to a strong fiscal year as they delivered on homes that were contracted when housing demand was high.”

“‘Now that the fourth quarter is behind us and because of the progress we have made on constructing additional quick, move-in homes, we are now becoming more aggressive in our attempts to find the market price that will spur demand in each of our markets,’ stated Ara K. Hovnanian, chairman of the board. In terms of price reductions, about 35% of builders reported reducing prices, a slight downturn from the 36% who reported doing so in November. On average, they reduced prices by about 8%, a slight uptick of 5% and 6% earlier this year. The price reductions aren’t at the level seen during the housing bust of 2008, when they peaked at about 10% in February of 2008.”

From WTOP News. “In the D.C. region, sales have already slowed significantly. ‘Home sales in November were down 42% compared to November 2021. That is remarkable in and of itself, but in November we hit a decade low in terms of home sales for a November,’ said Lisa Sturtevant, chief economist for Mid-Atlantic listing service Bright MLS. Bright MLS’s 2023 forecast says potential buyers will face less competition and gain some contract negotiating leverage, dynamics already observed by the Northern Virginia Association of Realtors.”

“‘Now we are seeing the return of home inspections and appraisals instead of waiving those contingencies, only one or two competing offers on a home, rather than 12 offers, and homes selling for closer to their list price, instead of tens of thousands over list,’ said Northern Virginia Association of Realtors Director Casey Menish.”

The Union Tribune in California. “San Diego faces a serious conundrum as to housing. Local governments’ efforts to induce more construction and to preserve naturally affordable housing so far have made only a marginal difference. Perhaps it is time to acknowledge that this region is bound to remain an expensive place to live, that the economy must adapt to this reality, and that continued growth will have to be up rather than out. San Diego will continue to grow and thrive well into the future, but we are being forced to adjust our vision of who will be able to participate in that future.”

The Los Angeles Daily News. “The U.S. housing market continued to sag for the fourth-straight month in October – with California metro areas having three of the nation’s biggest drops. The widely watched S&P CoreLogic Case-Shiller price index for 20 key metro areas fell 0.8% from September, the fourth consecutive monthly decline. San Francisco: Off 13% vs. the pricing peak. Seattle: Off 12.2% vs. peak. San Diego: Off 8.5% vs. peak. Denver: Off 6.7% vs. peak. Los Angeles-Orange County: Off 6.6% vs. peak. Phoenix: Off 5.9% vs. peak. Dallas: Off 5.6% vs. peak. Las Vegas: Off 5.4% vs. peak. Portland: Off 5.2% vs. peak. Boston: Off 4.0% vs. peak.”

Westword in Colorado. “Auraria Student Lofts, an apartment building aimed primarily at college students on the Auraria campus — and maligned by tenants and subject to numerous Orders to Comply from the Denver Fire Department — submitted a plan to get out of bankruptcy on December 14 after filing for Chapter 11 bankruptcy on June 9, less than an hour before the property was set to be auctioned off in a foreclosure sale. To get out of bankruptcy, Nelson Partners proposes completing about a half-million dollars of renovations and then selling the property at auction. It estimates that, once the renovations are complete, the property could be worth $65 million, enough to pay off the loan and earn some cash for Nelson Partners.”

“In this case, it appears that the new loan won’t interrupt the lien on the property from the first loan. That’s not out of goodwill toward DB Auraria, however. Despite students saying the building was predatory toward them, Nelson Partners claims it was the one that was the prey in the December 14 filings. ‘They’re saying it was what’s sometimes referred to as a ‘loan to own,’ says Adam Stein-Sapir of Pioneer Funding Group, a bankruptcy claim buyer based in New York. ‘You make a loan, but your intention, your expectation, is not that they’re just gonna pay you principal and interest over years and you’re gonna get all your money back one day. The intention of the loan was really to end up owning the property.'”

From Bloomberg. “Multiple stress points are emerging in credit markets after years of excess, from banks stuck with piles of buyout debt, a pension blow-up in the UK and real-estate troubles in China and South Korea. With cheap money becoming a thing of the past, those may just be the start. Distressed debt in the US alone jumped more than 300% in 12 months, high-yield issuance is much more challenging in Europe and leverage ratios have reached a record by some measures. Loan-loss provisions at systematically important banks surged 75% in the third quarter compared with a year earlier, a clear indication that they are bracing for payment issues and defaults.”

“The erosion of covenant protections also means the CLO holders and other investors in leveraged loans, such as mutual funds, are more vulnerable to losses than in the past. Recovery values as a result could be lower than average when defaults do occur, Oaktree said. Daniel Miller, Chief Credit Officer at Capra Ibex Advisors, is also worried about covenants, particularly those that circumvent the priority of creditors. ‘They are potential ticking time bombs sitting in the documentation,’ he said.”

The Montreal Gazette. “In a bid to bring inflation under control, the Bank of Canada raised its policy interest rate seven straight times starting in March, immediately boosting monthly payments for variable-rate mortgage holders. As inflation soared and borrowing costs shot up, Canada’s housing market began losing steam. Some, like Mouvement Desjardins chief economist Jimmy Jean, called it ‘the bursting of the Canadian real estate bubble.’ A single-family home in Greater Montreal sold for a median price of $520,000 in November, about 1 per cent less than in December 2021, industry data show.”

“For Quebecers with limited income, such as retirees, welfare recipients and the unemployed, the effect has been devastating.Quebec’s food banks now handle more than 2.2 million requests every month, a 20-per-cent increase year-over-year, according to data compiled this fall by the Banques alimentaires du Québec network. More worryingly, a growing number of food bank users have a job, says Martin Munger, Banques alimentaires du Québec’s general manager. ‘I’m shocked to see how many people with employment income don’t have enough money to feed their families,’ Munger said in an interview. ‘Something is very wrong with the system.'”

The South China Morning Post. “Hong Kong’s home prices dropped by the most in 14 years in November and look likely to fall again this month in what would be the longest series of monthly declines since the 2003 Sars epidemic. Barring a miraculous recovery in December, a 13-year annual rally in the city’s house prices is over. ‘The next home price index for December will see a decline of about 2.5 per cent,’ said Derek Chan, head of research at Ricacorp Properties. ‘Annually, the home price is expected to fall by 16 per cent, ending the 13 consecutive years of the rally from 2009 to 2021.'”

“In the first 11 months of this year, home prices have fallen by 13.8 per cent. From a peak of 398.1 in September last year, the home price index is down by 14.75 per cent. In November, ‘the housing market was at its worst moment,’ said Louis Chan, chief executive of the residential division at Centaline. The city’s property agencies are slashing headcount amid the slump in sales.”

“‘Real estate agents are facing unprecedented challenges,’ said Freddie Wong, chairman of Midland Holdings. The most intense ‘war of elimination’ in the history of the industry has broken out, and the unemployment rate among agents has soared, he added. ‘With the plunge in Hong Kong’s property turnover, there was an unprecedented heavy loss,’ said Wong.”

From Business Insider. “As Sam Bankman-Fried’s crypto empire collapsed, a 48-year-old software developer lost access to roughly $120,000 of funds on FTX US in early November. Nauman, who asked to be identified by first name only, is a California-based father of three, and planned to use that money for his childrens’ college education. He had roughly five bitcoin on his account, as well as a smaller position in Avalanche, adding up to about $120,000 based on November prices. Insider reviewed receipts of his FTX investments, which represented about 25% of his family’s nest egg. ‘If funds just evaporate one day, it’s crookery,’ Nauman said in an interview. ‘Then you realize you’re part of a Ponzi scheme. That’s what makes me really upset. A good chunk of my savings are gone because someone tried to defraud me.'”

From Mises.org. “The 21st century, only 23 years old, has already had two giant, international housing bubbles. It makes one doubt that we are getting any smarter with experience. Among the countries involved in the second bubble, both the U.S. and Canada fully participated in the newest rampant inflation of house prices. Prices this time reached levels far above those of the last boom peak. For a number of years, one could ask: When would that ever happen? Now we know: in 2022. Now, in late 2022, with mortgage interest rates higher, housing bubbles are deflating, and house prices are dropping on a nationwide basis in both the U.S. and Canada. Here we go again into another house price fizzle following another house price boom.”

“We can take as a key ironic lesson that when large numbers of people believe house prices cannot fall, especially when they are emboldened by central bank behavior, it makes it more probable, and finally makes it certain, that the prices will ultimately fall. Ten years, it seems, is long enough to dim the memories that prices can move dramatically in both directions, even on a nationwide basis. A bubble market when extended for years makes a great many people happy, since they are making money and seem to be growing richer, and the higher their leverage, the faster they seem to be growing richer. As the great financial observer Walter Bagehot wrote 150 years ago, ‘the times of too high price’ mean ‘almost everything will be believed for a little while.'”

“Recall that a price has no substantive reality: it is an intersection of human expectations, actions, hopes and fears. I like to ask audiences, ‘How much can the price of an asset change?’ My proposed answer: ‘More than you think.’ Of course, nobody, including the Federal Reserve and the Bank of Canada, knows just where house prices will go, but we can all guess. Noted economist Gary Shilling wrote in November, ‘Price declines are just starting,’ and ‘recent weakness probably has far to go.’ This seems to me likely. In any case, the second great housing bubble of this still young century is over and a new phase has begun.”