The rent is, infamously, too damn high. That refrain has such staying power because the United States’s noxious rent crisis has shown no signs of abating, with rents rising over 30 percent since 2019. All manner of ill effects have resulted; the rapid simultaneous growth of the homelessness crisis is no coincidence.

Obfuscations aside, the correlation there is quite direct. But the origins of the rent and housing crisis itself can seem a bit more diffuse: perhaps some combination of shortages driven by lulls in development (though in truth, we don’t lack housing per se so much as we lack affordable, low-income housing). Those shortages, in turn, can be influenced by zoning law, mortgage interest rates, various public policies, and other variables like rising materials costs. Neither is it helping matters that Wall Street private equity funds are buying up homes in droves to flip them for profit.

But in 2022, a singular factor that exerts an outsized influence on rent hikes was identified: In October of that year, reporting by Heather Vogell in ProPublica turned up some remarkable revelations. Vogell found that the nation’s punishingly high rents are not solely attributable to vague and abstract structural trends. In fact, allegedly, landlord-coordinated price-gouging has been taking place, and at a staggering scale.

The ProPublica investigation found that a software called YieldStar, supplied by a company called RealPage, has provided a means to share pricing information between large corporate landlords. The program feeds this information into an algorithm that determines the highest possible rent and directs its users to set rents to maximize profit — effectively, legal challenges argue, a form of collusion-by-algorithm to keep rents high. The software has facilitated anti-competitive market manipulation on a scale that multiple state attorneys general and the Department of Justice (DOJ) have charged is tantamount to a nationwide price-fixing cartel.

The subsequent litigation efforts and government inquiries into RealPage and many of its clients continue to mount: class-action and private lawsuits are pending in multiple states, and may set an important precedent for analogous cases. Now, the Department of Justice has weighed in to support plaintiffs and is conducting civil and criminal investigations of its own — and relatedly, a recent FBI raid of one of its major clients indicates that RealPage is facing some real trouble.

Nationwide, the ubiquity of RealPage software among residential management corporations has meant that its algorithmic suggestions and competitor price data have in all likelihood played a determining role in the inflation of rents across the country, exacerbating the suffering of everyday people and inflaming the homelessness crisis. Depending on the outcome of litigation, the cases against RealPage have the potential to set major precedents: Inadvertently, RealPage may end up being comparably influential in the future prosecution of algorithmic price-fixing charges.

Price-Fixing at Scale

The sweeping success of RealPage’s algorithmic rent-setting software product, YieldStar, has its origins in a questionably green-lit 2017 corporate merger in which RealPage acquired four companies — its largest competitor Rainmaker Group among them. The latter company made a software called Lease Rent Options, which, once acquired, granted RealPage access to software technologies and reams of new client data. (The acquisition of the original, obsolete version of the YieldStar platform appears to date to 2002). RealPage found great success hawking its signature YieldStar product and later comparable software suites, thoroughly embedding itself in the industry and attaining near-ubiquity among major landlords. Today, RealPage has traded on that data and rent-raising acumen, expanding to immense proportions, and its products are now involved in the administration of millions of housing units worldwide.

That success is attributable to its adeptness at increasing profits — by a “consistent” 3 to 7 percent year-over-year growth rate on a given property, according to the company itself. At the highest levels, as rent climbs ever-higher and the increased income from those properties trickles all the way up to the top of the hierarchy, the largest corporate landlords have been treated (or rather, have treated themselves) to a profit windfall.

RealPage software works by computing and sharing both public and private rent data from the other local managers, including direct competitors, in RealPage’s extensive client portfolio. To a given client, the software then presents “suggestions” for just how high rates can (and should) be pushed for a property asset in the area. The sustained, elevated rates that the algorithm spits out are only possible when squeezing a powerless and captive audience — when all the other apartment complexes in town are doing it, too.

The effective result is coordinated price-fixing: i.e., the mutual (and illegal) agreement between competitors that none among them will undercut the other’s prices too severely, keeping their products as expensive as possible across the board and ensuring more profit for all. In addition, the widespread use of RealPage software may not only catalyze rent increases — it also incentivizes landlords to accept the low occupancy and high turnover rates that can come with inflated prices and evicting tenants to raise rent.

In effect, the program trains landlords to operate against what was considered conventional industry wisdom: that high occupancy is the best route to high profits. Instead, landlords now trade on RealPage’s key discovery, the strategic innovation that has enabled the algorithm to deliver such outsize returns: if profit is all you care about, then it’s more effective to prioritize income by rent-gouging instead of keeping more units occupied. Low occupancy and higher prices then worsen shortages, establishing a feedback loop.

It’s true that this modern variety of illegal coordination relies on algorithmic computations rather than the more traditional smoke-filled back rooms. However, it is appearing that, legally speaking, that distinction may be moot.

Wave of Litigation

Numerous lawsuits promptly followed the publication of the ProPublica investigation. Initiating the series was a suit filed in San Diego, with renter plaintiffs from both California and Washington State suing RealPage as well as massive landlords Greystar and Lincoln, which are some of the largest property management firms in the nation, just days after the article came out.

Analogous litigation has also been filed in Fresno, California. Across the country in Nashville, Tennessee, a number of private lawsuits against RealPage and landlords were consolidated into a single case. Suits against two of those defendants were settled in February, but plenty more remain ongoing. Additional class-action suits — including in a suit targeting RealPage plus nine landlord companies in Arizona, and another against RealPage and 14 landlords in Washington, D.C. — are also well underway.

Lee Hepner is an antitrust lawyer and senior legal counsel at the American Economic Liberties Project. Reached by Truthout, Hepner detailed the potential significance of the various incarnations of the RealPage litigation. To begin with, the government handling of the litigation from case to case is far from assured. Different parties in the Federal Trade Commission (FTC) and the Department of Justice, Hepner points out, fall across a spectrum of opinions as to the relevance of existing antitrust and price-fixing law to these sorts of cases.

An analogous case against Rainmaker (the same company that merged with RealPage), which was under fire for its provision of software that allegedly helped Nevada hotels coordinate prices, was thrown out by Chief Judge Miranda Du — it could not be proven, according to her ruling, that the hotels actively collaborated to fix prices. Du’s decision could prove highly relevant to other cases against RealPage, as it highlights a distinction in thinking among different elements in the criminal legal system.

While Judge Du saw the algorithmic aspect as a novel application of price-fixing law, Hepner explained that others in the legal system have a different approach: “You have a different school of people, including members of the Federal Trade Commission and Department of Justice, who have argued that price-fixing by algorithm is still price-fixing. There’s a little bit of an ideological disconnect between the camp that says, ‘This is price fixing — doesn’t matter that it’s being done with a software algorithm,’ and the judiciary, particularly the case of Judge Du, saying that this is a relatively novel application of price-fixing law because it invokes the functionality of these newer software algorithms.”

Hepner, speaking from experience as an antitrust lawyer, explained how difficult it can be to further a price-fixing charge through the court system. “These cases are making their way through the courts, and where they get tripped up is at the motion to dismiss phase,” he told Truthout. “The Supreme Court, going back to 20 years ago, has really raised the pleading standards required to survive a motion to dismiss phase. That phase is very early on in the litigation, before parties have been able to conduct any discovery, so they’re operating on limited facts.” The legal procedures structuring these lawsuits may well have a determinant impact on the results.

This might well explain the early settlement reached in the Nashville cases — there are difficult hoops that suits such as these must make it through. As Hepner said, “I think we’re learning whether existing law is adequate to confront the problem of algorithmic price fixing. And we’re learning that through how judges are applying it, in somewhat inconsistent ways.”

The Department of Justice has shown signs that, at least in some cases, it does back plaintiffs bringing the suit against RealPage, indicating that the case is a viable one; before the settlement, it gave an official blessing of sorts to the tenant plaintiffs in the Nashville cases, issuing a type of legal memorandum called a Statement of Interest of the United States, in which the DOJ reiterated the antitrust statues in question. Along with effectively siding with tenant plaintiffs against RealPage, the Justice Department also initiated a civil proceeding of its own in late 2022.

On two occasions, U.S. senators have written letters to the Department of Justice Antitrust Division requesting further, potentially criminal investigation into RealPage. First came Amy Klobuchar, Dick Durbin and Cory Booker in late 2022, followed in March 2023 by Elizabeth Warren, Tina Smith, Bernie Sanders and Edward J. Markey. The latter four urged in their letter that “the DOJ should act to protect American families and closely review rent-setting algorithms like YieldStar to determine if they are having anti-competitive effects on local housing markets that have seen increased institutional investor activity.” Evidently taking heed of their words, later that month, the Department of Justice opened a criminal probe, in a significant escalation. May’s FBI raid of the offices of RealPage client Cortland Management appears to be related to that inquiry.

Interestingly, it’s the third time that the DOJ has intervened in cases of algorithmic pricing lately; clearly, it considers algorithmic collusion as equivalent to the more familiar kind. In fact, in one of those cases, filed by a Seattle tenant against Yardi Systems, which produces comparable property management software, the plaintiff is leveling very similar charges as those faced by RealPage — in this instance against a Yardi price-setting software product called, far too pointedly, “RENTmaximizer.” In addition to the Nevada hotel case involving Rainmaker, Hepner also pointed to a case involving potential algorithmic price-fixing collusion via sharing private information, this time in the poultry industry: one of two lawsuits against the AgriStats software, another price clearinghouse venue, which it is alleged, facilitates “anticompetitive information exchanges.”

One of the ongoing class-action lawsuits against RealPage has been filed in Arizona by the office of Attorney General Kris Mayes. Truthout reached Mayes’s office for comment on the pending litigation. Asked about the nature of the charges against RealPage, Director of Communications Richie Taylor described the violation as follows: “The defendant landlords illegally colluded with RealPage to artificially raise rents and concealed their conspiracy from the public. By providing highly detailed, sensitive, non-public leasing data with RealPage, the defendant landlords departed from normal competitive behavior and engaged in a price-fixing conspiracy. RealPage then used its revenue management algorithm to illegally set prices for all participants.”

Chiefly, in this particular case, the violations are of antitrust and fraud laws on the Arizona books: the Arizona Uniform State Antitrust Act and the Arizona Consumer Fraud Act. The latter is relevant because, as Taylor explained, the Consumer Fraud Act “makes it unlawful for companies to engage in deceptive or unfair acts or practices or to conceal or suppress material facts in connection with a sale, in this case apartment leases.”

The AG’s office drew a direct link from RealPage’s widespread availability to the local rent crisis and tenant harms: “In the last two years, residential rents in Phoenix and Tucson have risen by at least 30% in large part because of this conspiracy that stifled fair competition and essentially established a rental monopoly in our state’s two largest metro areas.”

The Arizona class-action suit is pursuing an injunction to halt RealPage’s practices, as well as “restitution for consumers harmed by their conduct, civil penalties to the full extent authorized by Arizona law,” plus “any other equitable relief the Court deems appropriate.” In a certain respect, RealPage has already halted of its own accord: according to some sources, YieldStar has been shelved in the wake of the lawsuits. However, RealPage continues to operate a rebranded “AI Revenue Management” suite that empowers clients to “Maximize revenue potential with timely, actionable data.” The company will also be rolling out the new, AI-driven “Demandx,” promising “data-informed insights” to “optimize the entire demand funnel,” as the business press breathlessly reported.

Cartel Enforcers

RealPage has certainly found themselves on the defensive lately. But the Department of Justice and its Antitrust Division were not always such a bitter foe. It was under the Trump DOJ that the merger between RealPage and Rainmaker, which supplied the data and instigated the chain of events that brought RealPage software to nationwide prominence, was approved by the very same Antitrust Division. Well, not precisely the same one — in another ProPublica article, Heather Vogell cited a source who claimed that DOJ staff concerns raised internally at the time “were overridden by political appointees of former President Donald Trump.” The Biden Department, conversely, is keen to make antitrust enforcement one of its primary focus areas.

Reached for comment by Truthout, RealPage directed readers to a previously published statement. Company representatives have contested in court arguments that, because their software only offered “suggestions” and set prices by faceless algorithm, its functions did not amount to facilitating collusion or price coordination. Similar points were raised in the letter the company wrote in response to senators’ calls for investigation, claiming that reporting misrepresented the algorithm’s functioning.

Nevertheless, as Department of Justice prosecutors wrote in the Statement of Interest, “[W]hether firms effectuate a price-fixing scheme through a software algorithm or through human-to-human interaction should be of no legal significance. Automating an anticompetitive scheme does not make it less anticompetitive.”

And, more to the point, findings of the DOJ probe appear to indicate clear intent on the part of RealPage to incentivize and even enforce compliance with the algorithm’s calculated rent maximums — going beyond friendly “suggestions.” Again, in a price-fixing gambit, in order to reap the benefits, it is critical to ensure prices remain high throughout the market; one undercutting competitor can spoil the game.

As Hepner explained, there are indeed significant obstacles that a case of this sort must breach. But in the RealPage cases, it’s becoming apparent that evidence of active coordination and enforcement is rather damning. In a price-fixing case, said Hepner, “The burden of proof is on the plaintiffs to plead more than just what’s called ‘conscious parallelism.’ It’s got to be more than just the fact that competitors were raising or lowering their prices around the same time. You have to allege actual evidence of an agreement between the parties.”

“The key variable here, where we see the cases break,” he went on, is the evidence of RealPage’s enforcement of prices. “In the hotel price-fixing case in Nevada, the court did not find evidence that the parties were actually adhering to the price recommendations of this central Rainmaker algorithm. … Hotel chains weren’t necessarily taking the recommendations.”

“That’s very different in the RealPage cases,” Hepner continued. “The pleadings there suggested that there was actually a very cumbersome process [that was necessary if a client wanted to] deviate from the recommendations that were being made by RealPage.”

There was, Hepner noted, an allegation that individual clients of RealPage were assigned a pricing adviser who would ensure compliance with these algorithms. “The penalty for which could be, you get kicked out of the algorithm’s pricing recommendations, and you no longer get to use RealPage. They were really enforcing its price recommendations — and that was evidence of an agreement.”

The DOJ’s Statement of Interest echoed those findings that arose during pleading: “To ensure that the landlords abide by these ‘recommendations,’ RealPage puts significant pressure on them ‘to implement RealPage’s prices,’ including by requiring clients to submit requests to deviate to the ‘corporate office’ and tracking the ‘identity of the client’s staff that requested a deviation. … As a result, landlords using RealPage adopt RealPage’s recommendations 80-90% of the time. … Collaboration on prices, including via sharing nonpublic pricing and supply information, is thus the central feature of the product.”

The DOJ statement also describes and quotes an especially damning characterization: “As an employee for one landlord stated: While ‘we are all technically competitors, [RealPage product] helps us to work together … to make us all more successful in our pricing,’ as the software is ‘designed to work with a community in pricing strategies, not work separately’” [emphasis added].

The text of the San Diego lawsuit contains a similar charge, detailing RealPage’s encouragement and outright requirements of conformity with the “cartel’s” pricing demands:

If [landlords] wish to diverge from the “approved pricing” they must submit reasoning for doing so and await approval. RealPage encourages participating Lessors to have daily calls between the [landlords’] employees with pricing responsibility and the RealPage Pricing Advisor. … RealPage emphasizes the need for discipline among participating Lessors and urges them that for its coordinated algorithmic pricing to be the most successful in increasing rents, participating [landlords] must adopt RealPage’s pricing at least 80% of the time.”

Another factor upon which RealPage cases may hinge is the use of public vs. non-public information. It’s perfectly legal for a company to use publicly available information to set prices. But, said Hepner, “If you’re mixing non-public information into that analysis, and that non-public information is being shared with competitors, that, too, can be evidence of an agreement.”

The result is what’s known as a hub-and-spoke conspiracy, said Hepner. “RealPage, the hub, was enforcing its recommendation on the spokes, the landlords, which created a rim” of collusion. In the Nevada case, conversely, because recommendations were not enforced, “they could not prove that there was actually a rim connecting all of the spokes. Without that rim, you don’t have an agreement, under the law.”

It would seem that there is abundant evidence legitimating the charges tenants are bringing against RealPage in cases nationwide. However, again, as Hepner noted, the risk to these lawsuits is that, because major decisions are made in the pleading stage, “the court is exercising major discretion to make assumptions about the full facts and nature of the case before discovery has come to light, before you actually have that real information to base it on.” For that procedural reason — as well as the differences of opinion in the Department of Justice regarding the appropriateness of price-fixing law — it’s possible that some of these lawsuits may fail.

For the time being, as litigation mounts, RealPage’s operations continue in the background. The company’s offerings are not limited to algorithmic rent services; it also produces a tenant screening program, a type of product rife with bias — and a product over which RealPage was fined $3 million by the FTC for failing to ensure personal information was accurate. (RealPage is also now owned by private equity company Thoma Bravo, in an intersection of insidious housing trends.) Those deep pockets may help prolong the lawsuits far into the future.

Hepner offered strategic insights into the future progression of the cases: “If a price-fixing case can survive the ‘motion to dismiss’ phase, then you’re in full-blown litigation. … Some parties may decide, if they lost the motion to dismiss … [that they would] rather settle this than go through the whole process of litigating a very costly, expensive and cumbersome trial.” This was likely the origin of the early settlement reached in Nashville: “I think that’s what happened in the Tennessee case — some parties saw the motion to dismiss as the writing on the wall,” Hepner told Truthout.

Because of the high profile and the novel (i.e., algorithmic) aspects of these cases, it’s apparent that the ultimate outcomes of RealPage lawsuits may have a significant precedent-setting impact. Asked if he felt the RealPage litigation would form an influential precedent, Hepner said, “I think so. These cases are informing each other. … There’s certainly a dialogue going on, not just between the defendants, but among the district courts that are considering these cases. I think we’re watching as the law is being shaped in real time.”

Real People

The effects of RealPage’s price-setting facilitation and landlord profiteering were not confined to an abstract financial realm. They had substantive impacts on people’s lives, livelihoods and well-being. Truthout spoke with tenants of corporate landlords to learn how the rent crisis has impacted them. Sarah (who requested to go by a first name only to avoid any potential retaliation from her landlord) lives in a one-bedroom in a large apartment complex administered by a major corporate landlord in Tucson. Echoing the facts presented in the lawsuit by AG Mayes’s office, she described the everyday frustrations of living in Tucson, where median income levels rate below the rest of the state and the national average.

“In 2021 to 2022, rent increases went nuts. … My rent went from $1,240 to $1,450. They then raised me to $1,500 and started charging me for the garage, which I didn’t have to pay for my first year here.” Sarah alleges that a manager informed her that they adjust prices as often as “every two days to match the market.” When she attempted to press them about their use of RealPage to tune prices as high as possible, they demurred, claiming that it was proprietary information.

Sarah is hoping that the Arizona lawsuit brought by tenants and AG Mayes’s office against RealPage and its clients might eventually include her own corporate landlord, one of the largest in the region; right now, the company goes inexplicably unnamed in the suit, for reasons unclear.

In the meantime, though, Sarah says her rent has stabilized for now. “I think they probably know at this point they’ve stretched people out as far as they can go,” she told Truthout. “It’s just become unmanageable, since wages are so low in Arizona. I’ve had to change jobs like four times since I moved here, and have a second job on the side.”

As a result of long-stagnant wages and the rent crisis, stories like Sarah’s are not uncommon. Bri is a disabled woman of color who has lived in Boston for three years; she also requested that she be referred to by only her first name to avoid any consequences for speaking out. In that span, she’s moved three times, in large part due to rent increases. Her current residence is managed by Bozzuto Management Company — one of the 14 named alongside RealPage in the lawsuit filed in Washington, D.C. by Attorney General Brian L. Schwalb.

Bri described major frustrations in trying to secure housing compliant with the Americans with Disabilities Act (ADA) in a major city. First of all, before her tenure at a Bozzuto building, she lived in a unit owned by another property management corporation (almost without a doubt another RealPage customer, as the software’s use is endemic among corporate landlords, with Boston being no exception). When that company decided to increase her rent by $600 a month, an apartment for which she was already paying $3,150, Bri and her husband decided to move out.

She moved to a Bozzuto property in August 2023, paying $2,330 for a smaller ADA-compliant unit. But when a leak developed in her unit, she was forced to move to a different (though, she says, not better) unit — and was now paying $2,650 a month for the privilege.

“It’s a lot, to move. Every year I’ve had to move because the rent went up, or some problem with the commute. … It’s really frustrating that we couldn’t get the same rent [as the previous unit that was damaged by the leak],” she told Truthout. “Our unit is not too much different, other than our windows are slightly bigger.” And what’s more, she said, upon her next lease renewal, her landlord will be increasing her rent by another $300, on top of the already elevated rate.

Bri, speaking for herself and other tenants, described a pattern of poor responsiveness to maintenance issues and Bozzuto’s attempts to push for rent increases whenever possible. She reported seeing company social media posts boasting of 95 percent occupancy rates when the buildings were still unfinished — and while managers, she felt, did little to meet the needs of existing tenants. Yet there is little recourse, should she seek to move again. “One of the things I think about — with all of this price-fixing going on, in Boston, the smaller landlords are also raising their rents that much. There’s nowhere people can go for a reprieve,” she said. (Bozzuto Management Company did not respond to Truthout’s request for comment.)

“I’ve noticed [the impact on my finances],” Bri went on. “I don’t buy much. If I buy anything for fun, I notice it. I already don’t make enough to live in Boston. And I don’t think anybody else does. [Laughs.] My husband is unemployed, and it’s hard. We have this $300 rent increase in the middle of the year.” Bri does not, she said, see a commensurate increase in conditions or service that would justify an increase.

“[Over time, in Boston] quality of life has declined, not increased. [Charging more] doesn’t make any sense. At some point I decided, yeah, this has to be because of some algorithm.” When her husband went to the building managers to ask if they could maintain the same rent as their first unit, Bri said, he received stony indifference in return. “They don’t care, because they can always get someone else to take the apartment.”

Bri’s story is only one of millions, of course. At scale, RealPage software (formerly YieldStar, and now in its other incarnations) is so widespread that the true difficulties low-income people face from rent hikes are unimaginable in scope. Making housing unaffordable does not only drive hundreds of thousands of people out to suffer in the street. It also makes the everyday struggles of those who do manage to cling to housing that much more punishing.

Housing, a realm of social necessity (alongside others like education and health care), has fallen victim to the profiteers of the neoliberal era, who are so often the victors when terrains of the commons are opened up to predation. Whether or not RealPage persists through its legal challenges, its existence in the first place points to the broader concern: the perverse incentives introduced into structural functions when social necessities are made subject to the prerogatives of capital. Inevitably, the profits are privatized, the costs socialized. In this case, the costs borne by society are a housing crisis and untold everyday sufferings.

Instead of a perennially precarious underclass, in a moral world, adequate shelter would be supplied to all — not as a commodity but as a human right. As Bri said of the treatment she and her fellow tenants received from her property company, “They’re obviously running it like a business. Not like this is a place to live.”

Source: Truth Out

The post Real Estate Software Aided Price-Fixing “Cartel” Among US Property Companies appeared first on Amora Escapes.

PLUNGING US home sales are having a ripple effect on consumer spending, as fewer Americans are moving into houses that need to be outfitted with furniture and appliances.

The effects are visible across the economy. Spending on furniture and related items fell nearly 12 per cent from the year-earlier period in October. Home goods sellers including Z Gallerie and Serta Simmons Bedding have filed for bankruptcy this year, citing weaker demand, and more are probably coming. Williams-Sonoma’s chief executive said last month that consumers are hesitant to spend on expensive furniture. Home Depot, the hardware and appliance store, said its revenue will likely drop this fiscal year.

The Federal Reserve last year started a rate hiking campaign to tame inflation, and slowing the housing market is a key way to make that happen. In October, mortgage rates reached their highest level since 2000, helping to make housing the least affordable since at least the 1980s.

On Thursday (Nov 30), the effects of low affordability became even clearer: a gauge of pending sales for existing homes reached its lowest level since the measure started in 2001. Home loan rates have started drifting lower amid growing hopes the Fed will start to expand the money supply again next year, but it could take years for the housing market to return to normality.

“It’s just less affordable to buy a house today than it was a couple of years ago when rates were much lower, and that’s closed out a certain amount of spending that would have otherwise happened,” said Jack Kleinhenz, chief economist at the National Retail Federation.

The average household shells out US$8,000 more on home-related goods and improvements in the two years after a home purchase, according to a study published last year by professors including Efraim Benmelech at Northwestern’s Kellogg School of Management.

Falling revenue

Without that expenditure, retailers are feeling the pain. Williams-Sonoma, owner of Pottery Barn, estimated last month that its revenue will fall as much as 12 per cent this fiscal year. Ethan Allen Interiors, a maker and seller of furniture, posted a 24 per cent decline in sales in the latest quarter, due in part to slowing demand.

Some firms have struggled to navigate the broad decline in consumer expenditures. A series of companies that provide home furnishings have sought bankruptcy protection this year, including Z Gallerie, Mitchell Gold + Bob Williams, and discounter on Tuesday Morning. Pillow maker Pegasus Home entered bankruptcy in August, mattress wholesaler Serta Simmons did so in January and the photo frame seller NBG Home sought protection in February.

“From a creditor and trade vendor perspective, there’s concern in the industry,” said Jordana Renert, a partner in the bankruptcy department at law firm Lowenstein Sandler, referring to investors in stores that sell decor. “Until new home purchases pick up or mortgage rates decrease, I think the home-goods furniture industry may continue to see a pause in consumer spending and an increase in chapter 11 filings.”

With mortgage rates having risen as much as they have, it’s not clear when home purchase volume will resurge. Many homeowners are unwilling to sell, in part because that means letting go of the cheap mortgages they locked in during the pandemic. That’s translated to relatively more of the transaction volume coming from new home sales, where developers are looking to offload homes they’ve built.

More than 60 per cent of US home loans have rates below 4 per cent, according to data from Black Knight, while the latest 30-year Freddie Mac mortgage rate is closer to 7.2 per cent. On average, a 1 percentage point increase in mortgage rates relative to where borrowers have locked in leads to a 9 per cent decline in the rate at which people move houses, according to a study by professors including Julia Fonseca at the University of Illinois Urbana-Champaign. If a homeowner, for example, were thinking about changing jobs, the new position would have to pay much more for the consumer to be willing to give up their mortgage.

“Lock-in can prevent households from pursuing labour market opportunities that would have been worthwhile otherwise,” Fonseca said.

Homebuilder pressure

Lofty interest rates are not only crimping activity on the demand side, they are also pushing up prices on the supply side of the market and are threatening to keep them elevated for some time, said Robert Dietz, chief economist at the National Association of Home Builders.

The interest rate that homebuilders are paying to finance the construction of single-family homes is close to 13 per cent, Dietz said, and material costs have risen alongside inflation. That has made it more difficult for builders to break ground on new homes now, which could squeeze supply for two to three years. The impact could be felt across the economy for some time, according to Dietz.

“If you take all the challenges in the housing market and think of them almost as taxes on new housing supply, those taxes are restraining economic growth,” Dietz said. BLOOMBERG

Source : TheBusinessTimes

The post US Slowest Housing Market in Years is Weighing on Consumer Spending appeared first on Amora Escapes.

WASHINGTON, Dec 8 (Reuters) – More U.S. commercial property owners are expected to turn to commercial mortgage-backed security (CMBS) lenders next year instead of banks, according to a new Moody’s report.

Elevated interest rates, volatility in property values and weakened cash flows have led to tightened lending standards by banks and other commercial real estate (CRE) lenders through 2023.

Many new and existing borrowers are instead turning to CMBS, which pool individual loans and which have seen continued demand from investors focused more on the overall credit quality and yields of those securities’ loan pools, according to a Moody’s report published Wednesday.

Multi-loan (conduit) and single-asset, single-borrower (SASB) CMBS loan issuance has declined overall this year from 2022 levels. But the second half of the year has seen a spike in SASB and CRE collateralized loan obligation (CLO) issuance, Moody’s found.

About 19% of $42.3 billion in performing CMBS conduit loans maturing next year carry high default risk. But CMBS investors, attracted by 10% or greater yields on these loans, will help them achieve refinancing even as lenders have gradually required lower outstanding loan balances as a percentage of property value.

Landlords have struggled this year to keep up with rising coupon rates on mortgages, which most recently averaged 7.21%. That is double the average rate of 3.62% in 2020, according to Moody’s.

The hardest-hit commercial properties have been offices, which have experienced rising vacancies since more employees began working from home during the coronavirus pandemic.

About $12 billion in CMBS conduit loans maturing this or next year have already entered delinquency or special servicing, in which a third party helps the borrower work out a solution to avoid default.

While overall CMBS property yields will remain elevated in 2024, roughly $14.7 billion in SASB CMBS carries yield less than 8% and faces greater challenges to refinancing.

In the event of trouble refinancing, these and other CRE loans will face low interest from buyers. Moody’s expects transaction levels to remain low, matching 2021 levels, as wide bid-ask spreads between buyers and sellers have led to lower sales prices.

Borrowers’ debt service coverage ratios – their ability to make debt payments – have also declined closer to one-for-one. This has led to an uptick in interest-only loans as CMBS and other lenders continue putting capital to work, according to Moody’s.

Source : Reuters

The post More US Commercial Property Owners to Tap Securities Market in 2024 -Moody’s appeared first on Amora Escapes.

US EXISTING home sales dropped to the lowest level in more than 13 years in October as the highest mortgage rates in two decades and a dearth of houses drove buyers from the market.

Existing home sales tumbled 4.1 per cent last month to a seasonally adjusted annual rate of 3.79 million units, the lowest level since August 2010, the National Association of Realtors said on Tuesday (Nov 21). Home resales are counted at the closing of a contract.

October’s sales likely reflected contracts signed in the prior two months, when the average rate on the popular 30-year fixed-rate mortgage jumped to levels last seen in late 2000.

Economists polled by Reuters had forecast home sales would slide to a rate of 3.90 million units. Sales fell in the Northeast, West and the densely populated South, but were unchanged in the Midwest. Home resales, which account for a big chunk of US housing sales, plunged 14.6 per cent on a year-on-year basis in October.

“Prospective home buyers experienced another difficult month due to the persistent lack of housing inventory and the highest mortgage rates in a generation,” said Lawrence Yun, the NAR’s chief economist.

The rate on the popular 30-year fixed-rate mortgage averaged 7.31 per cent in the final week of September, before peaking at 7.79 per cent in late October, the highest level since November 2000, according to data from mortgage finance agency Freddie Mac.

Though it has since retreated following data this month showing the labour market cooling and inflation subsiding, the rate averaged a still-high 7.44 per cent last week.

There were 1.15 million previously owned homes on the market last month, down 5.7 per cent from a year ago. At October’s sales pace, it would take 3.6 months to exhaust the current inventory of existing homes, up from 3.3 months a year ago.

A four-to-seven-month supply is viewed as a healthy balance between supply and demand. With supply still tight, multiple offers were the norm in some areas, keeping house prices on an upward trend. The median existing house price increased 3.4 per cent from a year earlier to US$391,800, the highest for any October.

Properties typically remained on the market for 23 days in October, up from 21 days a year ago. Sixty-six per cent of homes sold in October were on the market for less than a month.

First-time buyers accounted for 28 per cent of sales, as they did a year ago. This share is well below the 40 per cent that economists and realtors say is needed for a robust housing market.

All-cash sales accounted for 29 per cent of transactions compared to 26 per cent a year ago. Distressed sales, including foreclosures, represented only 2 per cent of transactions, virtually unchanged from the prior year.

Source : TheBusinessTimes

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A Greenwich, Connecticut, estate—the last of a swath of hundreds of acres once owned by the Rockefeller family—has hit the market for $8.995 million.

The property combines two parcels for a total of 4.24 acres, including a five-bedroom Colonial-style home, according to the listing with BK Bates of Houlihan Lawrence, who brought the home to the market for the first time at the end of October.

“After being passed down for generations, the prewar estate is the last of the Rockefeller family land [in Greenwich] to hit the market,” she said in an email. “Situated on two parcels on a very prestigious street within walking distance to town, this gorgeous, private property is a very rare opportunity for a buyer.”

Around the turn of the 20th century, the Rockefellers owned about 500 acres in Greenwich. The family sold about 80 acres of the land to billionaire Len Blavatnik for $32 million last year, listing a roughly 54-acre parcel—the last large portion of the estate—for $21.5 million, in November 2022, The Wall Street Journal reported at the time. Greenwich Academy, a private school for girls, purchased that acreage for $18.35 million in August.

Ann Rockefeller Elliman, the daughter of Avery and Anna Rockefeller and the great-grandniece of industrialist John D. Rockefeller, most recently owned the estate, according to records with PropertyShark. She was married to Edward Scales Elliman, the son of Douglas Elliman, founder of the real estate company of the same name. Ann Rockefeller Elliman died in June at age 96. Representatives of her estate declined to comment.

The main house dates to 1949 and was renovated in 2022, according to the listing. It has a traditional floor plan, featuring a large living room with oversized windows, hardwood floors and a corner fireplace, listing photos show. There’s a formal dining room connected to the living area, and a separate kitchen with a family room and a breakfast nook on the other side. The ground floor also boasts a wood-clad library.

There are five bedroom suites on the upper level, although one—adjacent to the main bedroom—is currently used as an office, according to the floor plan. Combined, the suite includes two bathrooms and two walk-in closets.

Outside, there’s an expansive lawn, mature trees and a pool, surrounded by stone walls.

Source : MansionGlobal

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In the ever-evolving global investment landscape, investors are continuously drawn to new opportunities that offer value, stability, and growth. Dubai, known for its exceptional quality of life, unmatched safety, strong connectivity, tax benefits, and business-friendly environment, has emerged as a prime destination for international investors, particularly those from the United States.

This burgeoning appetite is not incidental but a calculated alignment with value, opportunity, and security that the city offers. When juxtaposed with other global cities, Dubai’s property prices not only stand competitive but also promise appreciable returns on investment.

Prime property prices in Dubai are notably cheaper by 20 percent-80 percent when compared to major cities such as Monaco, Hong Kong, New York, London, Geneva, Paris, Beijing, and Tokyo, even amidst a massive increase in rates during the post-pandemic period. A million dollars can secure a luxurious property in Dubai with an area of over 100 square metres (sqm), in stark contrast to 17sqm in Monaco, 21sqm in Hong Kong, and 33sqm in New York.

Moreover, the introduction of investor and golden visas through property acquisition has further sweetened the investment proposition, ensuring investors not only gain financial returns but also a gateway to global mobility and an enhanced lifestyle.

With a substantial diaspora from the MENA region, the U.S finds a cultural and economic bridge in Dubai, making it easier for investments.

A top FDI destination

Dubai’s ascension as a global leader in attracting Foreign Direct Investment (FDI), especially in future-oriented sectors, is noteworthy. The city, under the visionary leadership of Sheikh Mohammed bin Rashid Al Maktoum, UAE Vice President and Prime Minister, and Ruler of Dubai, has forged dynamic partnerships with international investors, accelerating innovation and creating enduring economic value.

In 2022, Dubai not only maintained, but solidified its position as the leading destination city globally for greenfield FDI projects, with 837 announced projects, according to the Financial Times ‘fDi Markets’ data. This achievement, amidst global uncertainty and economic challenges, is a testament to the city’s competitive strengths and attractiveness.

Moreover, the comprehensive strategy of the Dubai Economic Agenda (D33 Agenda), which aims to double the size of Dubai’s economy over the next decade, is set to further elevate the emirate’s status as a preferred destination for major international companies, investment, talent, and visitation.

In 2022, the US ranked third for FDI in Dubai, accounting for 11 percent, with many investors having recognised and leveraged the multifaceted opportunities offered by this vibrant city. The strategic geographical positioning, coupled with a robust economic and technological infrastructure, makes Dubai a pivotal axis in the global economic machinery.

As we navigate through the complexities of global investment terrains, Dubai emerges not merely as a viable but as a compelling destination for U.S. investors. At Berkshire Hathaway Home Services (BHHS), we are not only witness to this transformative investment wave but are also active participants, facilitating U.S. investors in navigating through Dubai’s promising property market.

Source : Zawya

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Cook County property tax bills will hit the mail Nov. 1 and are due Dec. 1, just in time for the holidays. The median residential bill went up 7.2% to $4,958.

But the highest increases were in the north and northwest suburbs, where property tax bills increased by 15.7%, the largest increase by percentage in 30 years. In Hanover Park, the median residential property tax bill went up by 19%. In North Lake, a western Chicago suburb, the median residential bill increased by 27%.

Tax bills went up for 81% of property owners countywide, 17% saw their bill drop and 2% saw the same amount on their bill.

One of the reasons for the increase was a state law allowing taxing bodies such as local governments to “recapture” dollars refunded to property owners in appeals. The tax burden shifted to residential property owners after commercial properties, hit by large reassessments in 2019, had their property values cut by nearly 20% during the appeals process.

In total, Cook County property taxes rose by more than $909 million from 16.7 billion to $17.6 billion.

Homeowners represent nearly $600 million of the increase and commercial property owners owe more than $300 million more in property taxes. Of the 940 taxing units in Cook County, 72% raised taxes.

Property owners who want to see their bill before it arrives in the mail or pay it can see it online at cookcountytreasurer.com.

Source : IllinoisPolicy

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A beachfront compound near San Diego has sold in an off-market deal for $44.1 million, according to San Diego County Assessor Jordan Marks.

The “monumental” deal is a record for the county, said Marks, who is also the county recorder and clerk.

The compound, on just over an acre, is located in Del Mar, a few houses down from a property purchased by Microsoft co-founder Bill Gates and his then-wife, Melinda French Gates, for $43 million in 2020, records show.

The seller is a corporation tied to descendants of C.E. Toberman, a California real-estate developer who helped build Hollywood landmarks such as Grauman’s Chinese Theatre, the Roosevelt Hotel and the Hollywood Bowl. The buyer’s identity is unknown.

Located on Sandy Lane, the property has a ranch-style main residence, a guesthouse and a detached apartment, with eight bedrooms combined, according to real-estate agent Brian Guiltinan of the Guiltinan Group, who represented the buyer and seller. There is also a tennis court and swimming pool.

“The real significance to the property is it is over an acre on the sand, with 110 feet of frontage” on the ocean, said Guiltinan. It is the largest parcel on the beach, he said.

Toberman built the house in the 1950s, according to Wendy Fletcher Dyer, one of his great-grandchildren. Dyer is president of Investors Leasing Corp., which owns storage facilities in Nevada and California and is the legal owner of the house.

Dyer, who was raised in a house four doors down, said at one point her relatives owned seven houses on the street, all of which have been sold off over the years. She said her late father, Charles “Kim” Fletcher, lived in the house with her stepmother, Marilyn Fletcher, until his death in 2019. Kim Fletcher was president and CEO of Home Federal Savings & Loan in San Diego. After he died, Dyer said, she and her siblings voted to sell the property.

“We enjoyed the house and beach for decades and we made a lot of good memories,” she said, but beachfront properties are expensive to maintain, and she and her siblings have their own lives. “This allows another family to move in and make their own memories, and we’re excited for them.”

Last year, however, Marilyn Fletcher alleged in a lawsuit that Investors Leasing Corp. and its shareholders tried to evict her from the property in order to sell it. Her complaint alleged that the shareholders removed her belongings from the guesthouse, changed the locks and posted a “No Trespassing” sign. In July, a San Diego court ruled in favor of the shareholders.

“It was an unfortunate situation, but it was resolved in ILC’s favor,” Dyer said.

Marilyn Fletcher couldn’t immediately be reached for comment.

Source : MansionGlobal

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MIAMI – An analysis done by Global Commercial Real Estate Services reports the cost of buying a home is at its most extreme since 1996.

That struggle is being felt by one local perspective homebuyer who tells CBS News Miami’s Chelsea Jones, that trying to find a property in this market is challenging.

Samuel Tuckerman is a native of Miami and lives downtown. Two years ago, he found a home at a great price. “Found a pretty good opportunity in North Miami for like $280K. Unbelievable deal for a penthouse,” he said.

The market was competitive and ultimately someone else got that home. So, instead of buying, Tuckerman decided to rent.

The Wall Street Journal cites an analysis done by CBRE, which found the average new monthly mortgage payment is 52% higher than the average apartment rent.

Local real estate expert Christopher Molina says there’s more to consider.

“That might be correct in that small, isolated area called New York. However, South Florida has many market forces working in its benefit. Homes have gone up 5% this year alone,” said Molina.

He says tax write-offs, deductions, and home equity can help lower costs in the long run.

Ultimately, he believes the time to buy is now.

“The market’s settled. You can make more offers. You can make lower offers; you can actually find the home you love. Yeah, it’s going to have a higher rate, but you refinance later,” Molina said.

However, for people like Tuckerman renting is the option right now.

“With these high-interest rates, it makes it really challenging to commit to something even though you could potentially refinance next year if they start to lower rates.”

Molina says inventory is limited in South Florida and will continue to be, so prices are likely not going to drop. He advises first-time homebuyers to look into programs and buy property.

Source : CBSNews

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ASHLAND — Property values in Ashland County have increased, on average, by 36% over the last year.

Ashland County Auditor Cindy Funk recently sent 25,000 letters to property owners detailing how much their properties have increased since 2020.

The state-mandated process is known as the triennial update, and it’s based on sales of real estate within Ashland County.

County auditors across the state must reappraise all their real estate parcels every six years and update their values every three.

The main difference between the two processes is that the three-year update relies on home sale data. The reappraisal is more comprehensive.

Funk said property values across the county increased anywhere from 5% to 45%, depending on separate neighborhoods and communities.

“In my neighborhood, we had a few large sales,” she said.

The letters were mailed Sept. 21 and 22, and specified the percentage of an owner’s increase. The auditor’s office then gave residents the option for “informal reviews” starting Oct. 2-6 and again Oct. 10-13.

Property owners with questions or concerns are encouraged to come to speak to an official at the Ashland County Office Building, 110 Cottage St., from 9 a.m. to 3 p.m., Funk said.

Though property values increased by 36% on average, tax rates won’t, Funk said.

“We don’t know what the tax rate is going to be, but it won’t be the same as the property-value increase,” the auditor said.

Factors such as levies for schools, libraries and first responders will play into a specific community’s tax rate.

Funk said tax rates will likely be determined by late December.

Legislative responses

Larger looming tax bills in 2024 have caught the attention of state lawmakers.

A bill introduced Sept. 12 would freeze property taxes of Ohioans 70 or older who make less than $70,000 a year and who have owned their home for 10 years or longer.

Currently, Ohio’s tax commissioner uses the last year of home sales data to determine tax rates.

Another bill, introduced in May, changes that to three years. It would also remove the tax commissioner’s discretion to set property valuation increases.

Legislators have not voted on either bill.

Source : AshlandSource 

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