Those Who Overstretched To Go All-In Could Soon Be Feeling Burned

Abstract

"The regional housing markets seeing the most price cuts are in the very places that soared the most during the pandemic. As that pandemic housing boom fizzled out last month, things shifted quickly in Provo. In May, a staggering 47.8% of Provo sellers slashed their list price. That's up from 12.2% in May 2021. Just behind Provo was Tacoma, Wash.; Denver; Salt Lake City; Sacramento; Boise, Idaho; Ogden, Utah; Portland, Ore.; Indianapolis; and Philadelphia." The Portland Press Herald in Maine. "'CMBS conduit and secured-based lending transactions racked up approximately $263 million in realized losses during May 2022 through the workout of distressed assets, marking a sharp rise from the previous month,' wrote Marc McDevitt, a senior managing director at CRED iQ. 'CRED iQ identified 34 workouts classified as dispositions, liquidation or discounted payoffs in May 2022. There were two distressed loans securitized in Freddie K transactions that were in need of a workout, but only one of those loans incurred a nominal loss. '" "'Loss severities for the month of April ranged from 2 percent to 100 percent, based on outstanding balances at disposition. Total realized losses in May represented more than a threefold increase compared to April's realized loss totals of approximately $75 million. "Evidence that Canada's housing market is cooling has been obvious for several months, but now some economists say signs are appearing that the reckoning will be worse than they had feared. This month too Magenta Capital Corporation, one of Canada's largest private lenders, decided to temporarily halt new loan applications until September. Although Magenta accounts for only a small portion of total lending, it is a big player in the subprime market, says Capital, and its decision may only be the beginning." "'There will be so many more of these Mortgage Investment Corps suspending lending in the next eight weeks,' said Ron Butler, of Butler Mortgage, in a tweet after the news. 'When your modelling suddenly shows values dropping 5% a month in some markets, what else can you do?'" The Vancouver Sun.