FHFA appears to be making moves here.
No warning to suspend mortgage originators. The plot thickens https://t.co/ZZzy8ucige pic.twitter.com/M03W6kfsG7
— Darth Powell 🦈🇺🇲🇺🇦🇵🇱🇫🇮 (@GRomePow) August 7, 2023
Real estate haven turns perilous. $1 trillion coming due.
Apartment buildings, long considered a real-estate haven, are emerging as the next major trouble spot in the beleaguered commercial-property world.
Investors bid up the prices of multifamily buildings for years, attracted by steadily rising rents and the prospect of outsize returns. Many took on too much debt, expecting they could raise rents fast enough to pay it down.
Unlike office buildings and malls, which have been hit hard by remote work and e-commerce, rental apartments have low vacancy rates. The apartment sector’s main problem isn’t a lack of demand—rents have soared since 2020—it is interest rates.
The sudden surge in debt costs last year now threatens to wipe out many multifamily owners across the country. Apartment-building values fell 14% for the year ended in June after rising 25% the previous year, according to data company CoStar. That drop is roughly the same as the fall in office values.
Latest Housing Data Are Clear: ‘Bidenomics’ Is Heading Toward a Crash.
From the fourth quarter of 2020 to the fourth quarter of 2022, the U.S. housing market experienced one of the most significant increases in housing prices in American history. Data provided by the Federal Reserve Bank of St. Louis show that over that two-year period, the average sales price of a home skyrocketed more than 36 percent, from $403,900 to a whopping $552,600.
For the first time in history, the 12-month increase in home prices topped 15 percent for seven quarters in a row, beginning in the second quarter of 2021.
Many current homeowners celebrated the unprecedented rise in housing values, but those rapid increases came with an important caveat: whenever housing prices increase as quickly as they have in recent years, an economic, stock market, and/or housing crash is almost certain to follow.
The evidence on this point is well established. In the 1970s, late 1980s, and in the early to mid-2000s, there were similarly large, sustained growths in housing prices. In every case, a large recession followed. And although the rule doesn’t always apply perfectly, it tends to be that the bigger the increase in housing prices is, the harder the economy falls.
Washington can paper over a weak economy with funny money — that shows up in places like inflated home prices that make existing owners feel good — but eventually the truth will out.
h/t Stephen Green