Home prices are falling faster now than in 2006—Redfin’s CEO just revealed why
Redfin CEO Glenn Kelman GETTY IMAGES The Pandemic Housing Boom unleashed an “investor mania” unlike anything seen in the U.S. housing market since the aughts housing bubble. Average Joes poured into the market in hopes of building Airbnb empires. Institutional investors, like Blackstone-owned Home Partners of America, quickly expanded their single-family home portfolios. Homebuilders, eager to strike while the irons were hot, broke ground on a record number of “spec” homes. While iBuyers, like Opendoor and Zillow, ramped up their algorithmic homebuying programs. Fast-forward to October, and that investor mania has been replaced by investor panic. The ongoing housing correction—U.S. home prices have fallen 1.6% between June and August—has scared many investors to the sidelines. That marks the first national home price decline since 2012. The investor pullback makes sense. While most housing economists don’t foresee a correction on scale with the Great Financial Crisis bust—during which U.S. home prices fell 27% between 2006 and 2012—they do acknowledge that this home price correction is sharper than it was in 2006. The lagged Case-Shiller Index already shows that home prices are down 8.2% in San Francisco. To Redfin CEO Glenn Kelman, the Pandemic Housing Boom’s investor frenzy helps explain why home prices are correcting faster this time around. Historically speaking, home prices are sticky. Sellers simply don’t want to relent on price unless economics, like a supply glut, force their hand. That’s not as much the case for institutional investors and builders. If they think prices are about to drop, they want to get out first. The fact that the Pandemic Housing Boom saw investors become a higher share of buyers, Kelman says, ultimately makes the U.S. housing market more vulnerable to a faster swing down. “When the shiitake mushrooms hit the fan, you [investors] want to get out first. The way to do that is to figure out where the lowest sale is, and be 2% below that. And if it doesn’t sell in the first weekend, move it down [again],” Kelman says. In other words, Kelman is suggesting that real estate investors, including Redfin’s iBuyer business, helped drive home prices up faster during the boom and will push prices down faster during the correction. “My take is that because builders and iBuyers account for more inventory, that leads to a faster correction. We’re one of them, we’re an iBuyer,” Kelman says. “We notice immediately when fewer people are on our website and fewer are signing up for tours…We’re sitting on $350 million worth of homes for sale that we bought with our own money, or worse bought with borrowed money. And what we always told investors is that we would protect our balance sheet by acting quickly. We don’t have hope as a strategy. We immediately started marking down things.” Why was there an investor bull rush (see charts above and below) into the housing market during the pandemic? A combination of low mortgage rates, record appreciation, and soaring rents simply made it irresistible for investors. It brought out everyone from home flippers, to mom-and-pop landlords, to Wall Street juggernauts. But let’s be clear: Investor mania alone didn’t send U.S. home prices up 43% during the Pandemic Housing Boom. Instead, record home price appreciation was spurred by a perfect storm. The ability to work from anywhere saw white-collar professionals both pony up for larger properties and take off for far-flung markets like Boise. And historically low mortgage rates, which bottomed out at 2.65% in January 2021, made mortgage payments more affordable even as prices rose. Not to mention this all occurred amid a period of low inventory and favorable first-time millennial homebuyer demographics. While spiked mortgage rates have caused a historic pullback in buyer demand, it hasn’t translated into a massive inventory spike. Most homeowners aren’t scared. So how can home prices fall even if inventory levels are tight? It’s because leveraged investors don’t want to play the “wait and see” game. And all it takes is one home to fall below its comp price to reduce comps for an entire area. “As soon as demand weakened, we were marking properties down, and that drives prices down. Every other home for sale in a neighborhood where we marked the listing down now has a comparable sale that every buyer is going to know about and talk about,” Kelman says. Of course, so-called investor mania during the Pandemic Housing Boom wasn’t one-size-fits-all. The investor frenzy was particularly fierce in Western boomtowns like Phoenix, Austin, and Las Vegas. That helps explain why those frothy housing markets are correcting so dramatically right now. Look no further than this property in North Las Vegas. In May, Opendoor bought the home for $540,800. Just weeks later, Opendoor listed it for sale in July at $581,000. But Opendoor was too late: The Las Vegas housing market had already rolled over. Fast-forward to October, and the listing just got taken off the market after a series of price cuts brought its list price to $472,000. At first glance, one might assume Opendoor could soon take a loss of around 13% on the property. Not exactly. See, when iBuyers like Redfin and Opendoor buy a home, they charge sellers a “service fee” in exchange for the speedy transaction. On one hand, that buffers the potential loss for the iBuyer. On the other hand, that buffer means the iBuyer is less afraid to mark down the price. Not everyone agrees with Kelman. Back in May, Zillow officials told Fortune that the company’s failed iBuyer program—which notoriously overpaid for homes until Zillow announced in November it would exit the program—didn’t drive up U.S. home prices during the Pandemic Housing Boom. In Zillow’s eyes, the buying program was simply too small to do so. While Kelman attributes the swiftness of the home price correction that was brought on by rising mortgage rates to investors and builders, he says there were also other factors at play. For starters, he says the U.S. housing market has become more mortgage rate sensitive in the years following the 2008 housing crash. Second, he says the housing crash taught sellers and buyers alike that home prices can indeed fall. “I think that the religion people had from 1946 to 2008, that housing prices always go up, is dead. My parents believed that it was literally inconceivable for [home] prices to go down,” Kelman says. But that housing “religion” got broken, he says, by the 2008 crash. “So folks respond [now] to that [correction] with almost PTSD, and they pull back much more quickly.” Where will home prices head next? Groups like Freddie Mac and the Mortgage Bankers Association foresee home prices going sideways in the coming years. And firms like Moody’s Analytics and Goldman Sachs predict a peak-to-trough national decline of around 10%. If a recession hits, Moody’s predicts that national decline would come in between 15% to 20%. Simply put: Home price outlooks are all over the place. 2022 Fortune Media IP Limited. All Rights Reserved. Use of this site constitutes.
Oceanside gives final approval to Ocean Kamp project
A rendering of the sprawling Ocean Kamp project in Oceanside. Courtesy photo OCEANSIDE — The Oceanside City Council on Oct. 19 gave final approval for Ocean Kamp, a giant mixed-use development with a wave lagoon, to replace the former site of a swap meet and drive-in movie theater. The project will be a residential-commercial development with up to 700 homes, a 300-key resort, 134,000 square feet of retail and office space and a 3.5-acre wave lagoon on a 92-acre site at the northeast corner of Foussat Road and state Route 76. Two local groups filed appeals shortly after the Planning Commission approved the project in July — Diane Nygaard on behalf of Preserve Calavera, a group that advocates for open spaces and protecting natural resources, and San Diegans for Sustainable, Economic, and Equitable Development (SD SEED).O’side Partnership, the developer of Ocean Kamp, reached a settlement agreement with SD SEED that included several environmental concessions related to air quality, biological resources and water supply. As part of the agreement, SD SEED withdrew its appeal of the project. Nygaard and Preserve Calavera maintained their appeal, arguing the project would bring negative environmental impacts. “We agree this project could bring some benefits to Oceanside, but the project before you tonight also includes huge risks and huge impacts,” Nygaard said. “Those impacts include traffic congestion, air pollution, greenhouse gasses, compromising the regional wildlife corridor, among many others.” According to staff, the project will produce a $3.4 million net surplus to the city’s general fund at build-out, $295 million in one-time economic impacts from construction, generate nearly 1,800 jobs throughout construction, and drive $8.9 million annually in economic activity countywide. The San Diego Airport Land Use Commission reviewed the project and found it to be consistent with the Oceanside Municipal Airport’s adopted Airport Land Use Compatibility Plan. Additionally, the Federal Aviation Administration completed an aeronautical study of the project and determined it would not create a hazard to air navigation. An air quality report concluded the project would result in three metric tons of carbon dioxide equivalents per year, which is below the city threshold of significance at 3.5 metric tons established by the Climate Action Plan. Per the city’s plan, the project’s impact is less than significant in terms of greenhouse gas emissions. Nygaard and others also see the wave lagoon as wasteful amidst the state’s water supply issues and drought conditions, noting the pool’s close proximity to the ocean, where people already have access to surfing and other water sports virtually year-round. Jon Corn, CEO of O’side Partnership, argued the wave lagoon will be a huge economic driver and tourist attraction for Oceanside. “When I started on this project four years ago, I was kind of a wave pool doubter,” Corn said. “But then I went to a couple, and they’re amazing. They’re super fun and have an energy about them that is very thrilling and makes people happy to be around them.” Corn explained that, unlike the ocean surf conditions, which can vary, the wave pool creates consistent conditions all year round. “It gives us an opportunity to support Oceanside’s very rich surf history,” Corn said. “I believe it’s going to attract more surf and action oriented-businesses to want to locate here.” Corn also noted the wave lagoon will use approximately 5 million gallons a year — the same amount of water used to maintain a single hole of an 18-hole golf course each year. For housing, Ocean Kamp will provide all of its required affordable housing (10% of total units) on-site and short-term rentals will be prohibited. (In a previously approved version of the plan, the developer had committed to building only half of its affordable housing obligations and paying off the rest with in-lieu fees.) In addition to its trade agreement with a local carpenters union, the developer also entered into three new trade agreements with local plumber, sprinkler and iron workers unions. “We want to make this a local project as great as it can be for Oceanside,” Corn said. A majority of more than 40 members of the public spoke in favor of the project, several of which were local workers who are excited to be able to work closer to home instead of traveling far distances away from their families. A handful of surfers also believed the wave pool would be a valuable asset to the surf community, and others noted the addition of homes will help the city’s low housing numbers. Several people were still concerned about the project’s impacts on the environment and traffic. In response, city staff and developers said the Ocean Kamp project will generate far less traffic than the Oceanside Pavilions shopping center, a proposed retail plaza slated for the site 14 years earlier. The center was never constructed and later sold to O’side Partnership in 2018. October 26, 2022 - The Coast News Group
Couple Says An Airbnb Host Expected Them To Strip The Beds, Vacuum, And Do Chores, Plus More Stories From People Who No Longer Use The Service
"I won’t use Airbnb. It’s disgusting to see empty apartments, condos, and cottages waiting for bookings while people are living in tents." by Alexa Lisitza BuzzFeed Staff Recently, an Airbnb host complained about their bookings being low over the last few months, and it opened a floodgate of comments from disgruntled former guests. In mass, people began sharing all the reasons why they've stepped away from booking Airbnbs, including members of our own BuzzFeed Community. The reasonings ranged from overpriced cleaning fees to safety, low housing rates, and everything in between. Here's what they said: Note: Some submissions have been edited for length/clarity. 1. "My husband and I just do hotels now. Airbnb hosts have gotten so ridiculous with their pricing and expectations, we may as well stay home. The last one we went to wanted an additional $5 per person for hot tub use and they had cameras in the back." "No one used the hot tub while we were there, AT ALL, and a $40 hot tub usage charge showed up on the tab. Oh, my uncle was pissed and he fought it and won. They claimed someone 'sat on the stairs for three plus hours' and that justified the charge. WHAT THE FUCK?" –morganleslay 2. "A while ago I stayed at an Airbnb while at a work training. I dumped my stuff and headed to the training. It was medical, so as soon as I returned, I went to shower. That's when I noticed the camera in the bedroom that definitely captured both the bed and the shower." –TheLittleRedHeadThatCould 3. "I live in a town that is a gateway to Yosemite. At the nearby lake, 75% of the homes are short-term rentals." "In my town, we have over 300 short-term rentals. Businesses are suffering because they cannot find workers. With the price of gas, people don’t want to commute 40 miles, 80 miles round trip, for minimum wage. It’s a serious problem." –joybonham56 4. "I absolutely loved Airbnb Pre-COVID, and usually rented a room for myself while traveling around Europe. I met great hosts and neighbors, some of whom I keep in touch with to this day, and couldn't imagine switching back to a hotel room. Cut to this year when I wanted to rent out a place in Krakow, Poland, and 99% of the listings below 100€ were the same cookie-cutter studios Ikea threw up on." "Most were all from the same host. Some of them are in 19th- or early 20th-century buildings, but you can't tell because every apartment was flipped to look the same. And all three places I rented before COVID have been taken off the website. That's 2022 Airbnb for you." –cypresslicorice 5. "Over the last few months, I noticed an uptick in groups of people wandering around in my rental community with suitcases, looking like major tourists. During the summer months, I couldn't use any of the community's amenities because people that I had never seen before were congregating in our gym, pool, grill area, etc." "I pay $2,000 a month for a one-bedroom and could NEVER use our amenities. I asked the community what was up one day and they just said they didn't know. They were happy people were finally using amenities. I went on VRBO and Airbnb and found one woman that had 12 LISTINGS in our community. 12 FUCKING LISTINGS!!! I was infuriated and went to the leasing office because that goes against our lease and they immediately canceled all of her leases." –asdfghj2 6. "DEAR AIRBNB HOSTS, CHANGE YOUR KEY CODES!" "One time, I had the prior week's renters casually enter while we were eating dinner because they had forgotten to 'grab their food and beer.'" –BasicVision18 7. "I used to love Airbnb because I'd get a kitchen and I love to cook. But now the cost to stay has gone up so much and I don't feel as safe in them." "Especially when it comes to leaving my personal items or confidential work stuff. I'm back to feeling better protected in a hotel." –MischiefBrain 8. "I felt super unsafe as a woman renting." "I have been stalked online three times by the people I was renting from and ended up in a lot of sketchy situations." –Psyche 9. "I used to almost exclusively stay at Airbnbs when I was a big traveler in the 2010s. Cheap, private, and a lot homier feeling than hotels. Now I’m being priced out of my coastal community partially because of them." "Not that I can afford to travel anymore, but when I do it’s hotels only for me." –adrianao4caf40365 10. "Hotels charge so much for suites, so I turned to companies like Airbnb and VRBO to help a big family like mine. For the most part, our experiences have been good. But lately, especially since COVID became a thing, I’ve seen more cleaning fees." "It wouldn’t be a problem if I had little to no cleaning to do myself. I don’t mind taking out our garbage or washing the dishes I use. I should not have to start a load of laundry, strip beds, vacuum, etc." –angieg4ab10408b 11. "I won’t use Airbnb. It’s disgusting to see empty apartments, condos, and cottages waiting for bookings while people are living in tents." –Ginger 12. "I’ve always only used hotels, and I’ll stick with hotels. And all of the hotel cleaning and concierge services are included in the listed price." "They often have restaurants attached so you don’t have to cook, and I’m not asked to clean up the room and still pay for a cleaning. And Airbnbs are often just as expensive as the hotels and you get less service for it.'" –A_Panda 13. "I hate the hidden fees. A house will be listed at like $500 a night for five bedrooms and then if you increase guests or pets it'll jump up." –kimberlylinn 14. "It was hard to enjoy our Airbnb cabin in the woods when the host was watching us on his outdoor cameras and reporting on things he didn’t like us doing." "We stayed up late, drank, and used the fire pit late at night — none of which were against the policy. But he made me not want to go outside at all because we knew he’d be watching us." –NettlePines 15. "It used to be a good idea, especially if you wanted to take a trip with a large group, but now they demand too much AND add crazy rules. One place said no partying. I was trying to book for a bachelorette trip!" –Gabe Now I'm curious — do you have any nightmare short-term rental stories? If you feel comfortable sharing, tell me about it in the comments.
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