Sales of new U.S. single-family homes fell more than expected in April likely as higher mortgage rates and prices squeeze out first-time buyers and those in search of entry-level properties from the housing market, Reuters reported. New home sales plunged 16.6% to a seasonally adjusted annual rate of 591,000 units last month, the Commerce Department said on Tuesday. March's sales pace was revised down to 709,000 units from the previously reported 763,000 units. Economists polled by Reuters had forecast new home sales, which account for a small share of U.S. home sales, would fall to a rate of 750,000 units.
Mortgage lenders are scrambling to survive a sharp drop-off in the number of homeowners refinancing their loans, with demand drying up as interest rates rise, the Wall Street Journal reported. Mortgage giants including Wells Fargo & Co. and Rocket Cos. have trimmed staff this spring. Online lender Better.com has laid off or offered buyouts to about half of its workforce since last December. While home prices continue to rise and Americans are still buying houses, the drop-off in refinancing activity is a giant blow because refinancings made up the bulk of U.S. mortgage originations throughout the pandemic. Some lenders are considering selling themselves, convinced it is the only way to make it through, according to industry executives and advisers. Some lenders are selling assets, such as their rights to collect mortgage payments. Others are trying to drum up business by offering lower rates or cutting their fees. In March, mortgage lenders made $2.36 in profit on every $100 of a loan, the smallest amount since 2019, according to the Urban Institute. In 2020, that figure was as high as $5.99.
Chinese conglomerate HNA Group Co. must pay its former business partner SL Green Realty Corp. about $185 million in a dispute over a bankrupt Manhattan skyscraper, an arbitrator said, WSJ Pro Bankruptcy reported. The arbitrator, former judge L. Priscilla Hall, found that real-estate investment trust SL Green was entitled to a $184.6 million payment over an investment that it made in HNA Group’s 245 Park Ave., according to documents made public in a New York state court on Friday. SL Green should also be reimbursed for $856,000 in fees, she said. SL Green began arbitration proceedings in December, seeking to enforce deal terms that it said entitled it to more than $180 million in compensation. A lawyer for SL Green, Mark Ressler, asked the New York State Supreme Court on Friday to confirm the arbitration award, a routine move after an arbitration finding. The skyscraper’s owner — PWM Property Management LLC, a New York-based affiliate of HNA — filed for chapter 11 protection from creditors in the U.S. Bankruptcy Court in Wilmington, Del., last fall. In addition to the Manhattan building, PWM owns another skyscraper in Chicago.
Rising interest rates are making adjustable-rate mortgages an increasingly attractive alternative to common 30-year, fixed-rate home loans, the Associated Press reported. ARMs made up 13% of all home loans by dollar volume in March, their highest share since January 2020, according to CoreLogic. The increase coincides with a sharp rise in mortgage rates. The average weekly rate on a 30-year mortgage slipped this week to 5.25% from 5.3% last week, which was the highest level since 2009, according to mortgage buyer Freddie Mac. The average rate was 3% a year ago. Rising mortgage rates, in conjunction with sharply higher home prices, make homeownership less affordable. “It’s natural for homebuyers to be looking at ways to reduce that mortgage payment, and one of the ways is to use an adjustable-rate mortgage,” said Selma Hepp, deputy chief economist at CoreLogic. Such loans became less attractive the last couple of years as average long-term mortgage rates fell to an all-time low. ARMs’ share of all loans by dollar value sank to just 4% in January 2021 from 13% a year earlier, according to CoreLogic. ARMs have made up between 10% and 19% of all loans by dollar value over the last 12 years. At the height of the last housing boom in 2005 ARMs represented just under 45%, CoreLogic said.
Americans with homes that are repeatedly flooded by extreme weather events could soon have the federal government buy their houses under a new bill introduced Thursday by Rep. Sean Casten (D-Ill.), The Hill reported. The bill would allow the National Flood Insurance Program (NFIP), the federal flood insurer of last resort, to buy houses and zones deemed indefensible in lieu of continually paying to repair them. “You’re not obligating people to move, but you’re saying like, you know … if you want to avail yourself with the NFIP program, we’re going to structure it toward a buyout rather than rebuilding,” Casten said. Casten, who worked on the bill with Rep. Earl Blumenauer (D-Ore.), says it aims to solve two problems: one serious, the other potentially catastrophic. More immediately, there’s looming the risk of bankruptcy of the NFIP, which is straining under the weight of ever more frequent and severe flood events. Congress paid $16 billion to bail the program out in 2018, and Congress proposed another $20 billion in 2021. That problem is only growing. Flood damage could rise more than 25 percent by 2050, putting an additional $8 billion at risk. And 14.6 million homes are at “substantial” risk of flooding, according to data from nonprofit First Street. Large investors like Blackstone and Bank of America and reinsurers like Swiss Re carry out their own quiet retreat from endangered lowland and coastal properties, while selling off those properties to less savvy investors — and counting on the NFIP to serve as a free backstop, Casten added. That creates the potential for a domino cascade of bankruptcies analogous to the Savings and Loan Crisis of the 1980s, which saw community banks and pension funds wiped out across the country. “You’re not seeing the Blackstones come in and buy,” Casten said. Flood-prone properties are instead getting spun off to groups like “you know, the local Cleveland, Ohio, firefighters pension fund.”
Housing activity tumbled for the third straight month in April, as soaring borrowing costs weighed on would-be buyers, YahooFinance.com reported. Existing home sales fell to a seasonally adjusted 5.61 million units in April from a month earlier, according to the National Association of Realtors (NAR). That was down 2.4% from March and 5.9% from one year ago. The figures underscore the tough conditions buyers are facing: low inventory, rising prices and higher mortgage rates. The median listing price in April swelled to a new record $391,000, up 14.8% from April 2021. According to NAR, the numbers reflect fewer large listings and more mid-sized homes entering the market. Realtor.com analysts said growing home prices have increased the cost of financing 80% of a typical home listing by almost 50% compared with a year ago.
The Williamsburg Hotel went on trial in bankruptcy court as a top lender tries to install a chapter 11 trustee to oversee the bankrupt Brooklyn, N.Y., property, arguing the owner-developers running the business can’t be trusted, WSJ Pro Bankruptcy reported. Mortgage lender Benefit Street Partners LLC is seeking to appoint an independent trustee at the 147-room hotel following reports by a court-appointed examiner that its developers, Toby Moskovits and Michael Lichtenstein, siphoned off cash from the business, which they deny. The lender has questioned the movement of money between the hotel holding company 96 Wythe Acquisition LLC, a separate management company controlled by the developers and other affiliated entities. At trial on Tuesday in the U.S. Bankruptcy Court in White Plains, N.Y., the hotel’s director of finance, Jeremy Rauch, testified that his accounting team kept track of numerous fund transfers among those entities by using another affiliate called Northside Management LLC as a “clearing entity.” The developers often moved around funds as “lines of credit,” according to Mr. Rauch. And even though the transactions weren’t documented, Mr. Rauch said he was able to reconcile them by using the Northside account records. “They were trying to keep the hotel afloat. They’re trying to put in whatever was necessary to get the hotel running and operating,” Mr. Rauch said. “It was just whatever it takes to make it happen.” Mr. Rauch agreed when Judge Robert Drain, who is overseeing the chapter 11 case, asked if the developers moved the money around because they thought “it was all in the family.”
The process to sell a historic Manhattan property that houses an off-Broadway theater venue should be overseen by an independent bankruptcy trustee instead of its owner, a judge ruled, WSJ Pro Bankruptcy reported. The property owner, 78-80 St. Marks Place LLC, sought chapter 11 protection from creditors in December, before the expiration of a forbearance agreement on a defaulted loan. Last month, mortgage lender Maverick Real Estate Partners LLC alleged mismanagement and self-dealing at the property, which also houses a tavern and a gangster museum, and asked that an independent trustee be named to oversee its financial restructuring. Bankruptcy Judge Martin Glenn yesterday rejected a request by property lawyer Andrew Gottesman that the business be allowed to run its own sale process, as is common in reorganizations, with help from a real-estate broker. Judge Glenn ordered that a chapter 11 trustee be named. Lawrence Otway, the owner of 78-80 St. Marks Place LLC, who oversees the businesses of Theatre 80, William Barnacle Tavern and the Museum of the American Gangster, told the court Tuesday that private property shouldn’t be seized without “just compensation.” “I beg the court not to destroy” decades of work and endanger his ability to support his family, Mr. Otway said. A “predatory” company shouldn’t be able to make a “predatory” profit during the COVID-19 pandemic, in the process depriving the community of a cultural resource, he said. The property has struggled since COVID-19, with its 2020 gross revenue falling to roughly $106,000 amid pandemic restrictions, court records show, down from about $800,000 a year before the pandemic. The property owner said it failed to refinance its mortgage loan ahead of a debt maturity due in December 2020.
