Real eState

Liberating Our Homes From the Real Estate–Industrial Complex

Published

2 weeks ago

March 14, 2023

Megan Johnson

For the last six years, I have been running the architecture blog McMansion Hell, which highlights the most ridiculous examples of bloated, nouveau riche residential architecture in the United States. When I began the blog in 2016, the Internet was rife with prime examples of genuinely weird specimens. However, in the last couple of years, particularly since the onset of the pandemic, it has become more and more difficult to find unique houses—houses with interiors that exhibit the true whimsy of people for whom money is no issue. In their place are empty, vast rooms painted gray, wood floors replaced by what’s already being recognized in social media circles as a new “landlord special” flooring type: beige-gray (greige) laminate. When there is furniture in these rooms, the furniture itself is white, gray, or greige. The rugs are white or extremely muted colors. Occasionally, you’ll see some pastels or other earth tones thrown in—or the obligatory HGTV “pop of color” in the form of a cushion or poster—but the trend is overwhelmingly gray. Some rooms are so colorless one wonders if the photograph itself is in grayscale.

Back in the day, there used to be more distinction between the aesthetics of the ruling class and those of everyone else. But much like how tech billionaires walk around wearing Patagonia vests and khakis instead of Hugo Boss suits, the modern manse isn’t so different from the midrange new construction offerings from mass builders like Ryan or Pulte Homes. In this architecture critic’s view, this is a shame, as aesthetic eccentricity is one of the only things that make wealthy people even remotely interesting. Of course, anyone who’s been house- or apartment-hunting recently knows that the greige problem extends far beyond the petite bourgeoisie. (Working-class listings still tend to have a great deal more variance; it costs significant time and money to purge one’s house of unique possessions and paint every wall the same color.) The problem is so extensive that if you were to take a prototypical McMansion Hell sample from Zillow’s results, i.e., any suburban county, sorted by price from high to low, you’d likely find that more than 60 percent of first-page results have been greigeified. The same could be said about any other form of lucrative real estate: condos in major cities, recently flipped apartments, and, of course, new construction. The greigification is so pervasive that it’s even become a meme. The question is: Why?

Greige is stubbornly difficult to historicize. A recent Guardian article on the color cites everything from the minimalist aesthetics of the tech industry, Goethe’s derision of bright colors in his 1810 Theory of Color, IKEA’s popularization of Scandinavian modernism, and Kim Kardashian as potential influences. The same article claims that popular shades of greige have topped paint color charts for at least 12 years. This places them at the beginning of the recovery from the 2008 recession, a time when gilded, pseudo-European interiors painted in earth tones like olive and beige were associated with mid-aughts excess. 2010 was also a time when the so-called “urban renaissance” picked up steam in cities around the world. Modernism made a comeback. Mad Men was on TV, followed, in 2013, by Fixer Upper, the Waco, Tex.–based hit reno show that ushered in the era of “farmhouse modernism,” clean, sparse, often gray interiors mixed with folksy rustic accents.

But I would posit that something more important than pop cultural fervor also began to take place: the reorganization of the real estate industry away from traditional vectors—television shows and magazines—toward the Internet. The industry’s platformification through outlets like Zillow and Redfin very quickly shifted home viewing away from in-person visitation toward online browsing. Prior to these listing aggregators, looking at real estate online required trawling through multiple listing services or visiting a realtor’s website directly. Both methods were clunky to use and not easily searchable or filtered. Start-ups like Zillow, which began by crawling these other websites and reposting listings to a central source, offered powerful tools for search and comparison. Mass aggregation of listings allowed potential buyers to compare properties from different brokers and firms side by side, granting them access to more listings than ever before. Realtors, in turn, made use of more detailed data about what exactly sells—among not only their own listings but also those of their competitors. If, for example, more neutrally styled houses were selling better among similar listings in the same area, it follows that realtors faced increased pressure to encourage sellers to neutralize their own houses.

This logic was already in place during the heyday of the aughts, when HGTV programmed show after show about how making simple changes like painting interiors and changing finishes added significant value to the selling price of a house. (Designed to Sell is an emblematic example.) It’s a realtor adage that a neutral interior with unobtrusive furniture allows buyers to imagine their own life in a space, whereas a highly customized, eccentric interior is a deterrent—after all, people have different tastes. All of this is a broader symptom of the increasing commodification of the very notion of a dwelling: The home is no longer seen as a space of personal expression or comfort, or as the backdrop of everyday life, but primarily as an investment and as an asset—meaning that enforcing one’s aesthetics is a financially detrimental decision. Those with the capital to become homeowners (already a diminishing segment of the public) conceive of their houses as being for selling before they even live a day in them. That financialization logically reached its apex in the 2000s-era transformation of houses into junk credit default swaps—literal, intangible illiquid capital—with devastating consequences. The often predatory practice of house and apartment flipping continues in the same vein, attended, in turn, by its own litany of pop culture enablers (Flip or Flop, Fixer Upper, etc.).

The shift away from in-person showings to online browsing only accelerated during the pandemic, along with another emerging phenomenon: virtual staging, the use of 3-D modeling to stage a house instead of stagers bringing in actual furniture. Virtual staging originated around 2008; however, advancements in modeling technology have only recently made it viable and popular. As a practice it creates uncanny-valley listings that hover on the border between the real and the contrived—more and more so as the technology improves—but also saves sellers thousands of dollars in staging fees. Necessary to the success of virtual staging is a certain type of real estate photography: high-res, over-lit, and HDR-heavy. HDR, or high dynamic range, combines multiple photos taken at different lighting settings into a composite image, creating pictures where different lighting sources are blended together—for example, the pendant lights over a kitchen island glow warmly at the same time as sunlight from the window forms a baseline layer of uniform light, thus creating a spacious-seeming room with few shadows. HDR is a photographic artifice distinct from how we see light and shadow in real life. These settings, plus other developments in post-production techniques—walls can be straightened despite the use of wide-angle lenses, colors enhanced, items removed—all serve to create abnormally uniform, smooth images. Sometimes these post-processing effects are so effective, it is almost impossible to distinguish virtually staged houses, usually sussed out by abnormal shadows or too-smooth fabric surfaces, from traditionally staged ones.

If you look at real estate photography blogs from the mid-2000s, more emphasis is placed on the composition of the photo, the positioning of the photographer in the room, the use of flash and physical reflectors to achieve desired changes in light, and little tricks like shelving away too-bold furniture that dominates a space above post-production techniques. This is partially because those techniques were still clunky at the time; think 2012 Instagram filters versus what’s possible now thanks to artificial intelligence and overall sheer computing power. Of course, there has always been a hint of exaggeration to real estate photography—and all photography, which is itself a creative simulacra of real life.

A unique twist central to the why of greigification is that the neutral gray colors are integral to this new post-digital kind of unreality. The more uniform the color, the easier it is to apply postproduction features without them looking contrived, and the easier it is to drop in virtual furniture, as the even, diffuse light enhanced by gray as a color helps soften the edges of the virtual furniture, blending them into “reality.” The light in these photos does not appear to come from any specific direction, so the weird shadows “cast” by 3-D furniture don’t seem too out of place. It is entirely possible thanks to the significant expenses saved by eliminating physical staging that greige might not be done with us, even though we seem to be done with it.

It makes sense that we’re experiencing greige fatigue because, well, it’s been 10 years or more of the stuff. Trends have a shelf life, and this one is no exception. A more interesting question is: What comes after greige? HGTV itself has gotten more bold in its latest offerings, the monotone interiors shifting more toward an eclectic mix of bohemian chic and mid-century modern, albeit still with white backsplashes, marble countertops, and gray floors. Elle Décor has had a soft spot for maximalism since I was last a subscriber in the mid 2010s. Even Marie Kondo has moved past minimalism.

However, if we really want to move past interior conformity, we have to think about housing and home in a radically different way. The house has a use value and an exchange value, and as long as capitalism has governed our world, the exchange value has reigned supreme, affecting everything from housing scarcity to aesthetic homogeneity in the pursuit of profit. The reality is, most of us don’t live in perfectly staged houses. We live in kinda shitty walk-up apartments stuffed to the gills with our own personalities. Those never make it on HGTV. If we as a society liberate our homes from the real estate–industrial complex, if we start viewing them not as investment assets but as canvases for creativity and self-expression—regardless of what others think about, say, lime green walls—then greige is definitely done for. When housing itself is seen as a human right, when it is freed from the tendrils of capital, then, and only then, will our walls and floors and kitchen countertops be free. And even then, you can still paint them greige if you really want to.

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Real eState

Commercial real estate is in trouble. Why you should be paying attention – CNN

Published

21 mins ago

March 27, 2023

Megan Johnson

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.

New York
CNN
—

Economists are growing concerned about the $20 trillion commercial real estate (CRE) industry.

After decades of thriving growth bolstered by low interest rates and easy credit, commercial real estate has hit a wall.

Office and retail property valuations have been falling since the pandemic brought about lower occupancy rates and changes in where people work and how they shop. The Fed’s efforts to fight inflation by raising interest rates have also hurt the credit-dependent industry.

Recent banking stress will likely add to those woes. Lending to commercial real estate developers and managers largely comes from small and mid-sized banks, where the pressure on liquidity has been most severe. About 80% of all bank loans for commercial properties come from regional banks, according to Goldman Sachs economists.

“I do think you will see banks pull back on commercial real estate commitments more rapidly in a world [where] they’re more focused on liquidity,” wrote Goldman Sachs Research’s Richard Ramsden in a note on Friday. “And I do think that is going to be something that will be important to watch over the coming months and quarters.”

Recently, short-sellers have stepped up their bets against commercial landlords, indicating that they think the market will continue to fall as regional banks limit access to credit. Real estate is the most shorted industry globally and the third most in the United States, according to S&P Global.

So just how big of a deal is this threat to the economy? Before the Bell spoke with Xander Snyder, senior commercial real estate economist at First American, to find out.

This interview has been edited for clarity and length.

Before the Bell: Why should retail investors pay attention to what’s going on in commercial real estate right now?

Xander Snyder: Banks have a lot of exposure to commercial real estate. That impacts banking stability. So the health of the market has an impact on the larger economy, even if you’re not interested in commercial real estate for commercial real estate’s sake.

How bad are things right now?

Price growth is slowing and for some asset classes it’s starting to decline. Office properties have been more challenged than others for obvious reasons.

Now private lending to the industry is starting to slow as well — bank lending was beginning to dry up over a month before the Silicon Valley Bank failure even happened. Credit was getting scarce for all commercial real estate and a fresh bank failure on top of that only exacerbates that trend.

How do you expect banking turmoil to make things worse?

I think more regulatory scrutiny is coming for smaller banks, which tend to have a larger concentration of commercial real estate loans. That means small and medium-sized banks are going to tighten lending standards even more, making it more difficult to get loans.

Does the possibility of a looming recession play into this?

As credit becomes scarcer and more expensive, it’s hard to know exactly what buildings are worth. You get this gap opening up between sellers and buyers: Sellers want to get late 2021 prices and buyers are saying ‘we don’t know what things are worth so we’ll give you this lowball offer.’ That was already happening and the result of that price differential was bringing deal activity down.

There’s no broad agreement on asset valuations. Economic uncertainty will exacerbate that trend. And if you’re a bank, it’s a lot more difficult to lend against the value of a building if you don’t know what the value of the building really is.

So how worried should we be?

A lot of people hear commercial real estate and they think it’s all the same thing and the trends are they’re all the same but they’re not. The underlying fundamentals of multifamily and industrial assets remain relatively stable on a national level.

It’s different for office and retail properties. There’s been a fundamental shift in how we use office space and that has changed demand. That’s something you should have your eye on, especially as low-interest office loans come due. We’re running into a situation where office-owners have to refinance at a higher rate and only 50% of the building is being used. That doesn’t translate to good cash flow metrics for the lender.

I think retail also faces challenges. A lot of people are still sitting on excess pandemic savings that are beginning to be spent down and the Fed is certainly trying to nudge unemployment up a little bit. So I imagine that both of those things will impact retail spending and therefore impact retail as an asset class.

Economists forecast recession and elevated inflation

Stagflation, the combination of high inflation and a weakening economy, could make a comeback. The majority of economists expect a recession sometime this year and forecast that inflation will remain above 4%, according to The National Association for Business Economics’ latest survey, released Monday.

It appears as though the fog has lifted since last month’s survey, which showed a significant divergence among respondents about where they think the US economy is heading in 2023.

“Panelists generally agree on the outlook for inflation and the consequences of rate hikes from the Federal Reserve,” said NABE Policy Survey Chair Mervin Jebaraj. “More than seven in ten panelists believe that growth in the consumer price index (CPI) will remain above 4% through the end of 2023, and more than two-thirds are not confident that the Fed will be able to bring inflation down to its 2% goal within the next two years without inducing a recession.”

Still, more than half of NABE Policy Survey panelists expect a recession at some point in 2023. But only 5% believe the United States is currently in one. That’s nearly four times lower than the 19% who believed the US was in a recession in August.

Banking turmoil brings us ‘closer right now’ to recession: Fed President Kashkari

The recent meltdown in the banking industry could tip the US into recession said Federal Reserve Bank of Minneapolis President Neel Kashkari.

“It definitely brings us closer right now,” he said during a CBS Face the Nation interview this weekend.

“What’s unclear for us is how much of these banking stresses are leading to a widespread credit crunch. And then that credit crunch, just as you said, would then slow down the economy,” he added.

While Kashkari said that the financial system is “resilient” and “strong” he said that there are still “fundamental issues, regulatory issues facing our banking system.”

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Real eState

Build Rentals/Apartments: Ownership is a Privilege and Not A Right

Published

14 hours ago

March 26, 2023

Steven Kaszab

The availability of apartments and units that can be rented is staggeringly low. Because vacancy is so tight, competition in the open market has intensified, lifting rental prices along the way. In Canada, rent for a two-bedroom unit rose 5.6% in 2022. Some of the highest rental prices were recorded in Ottawa-Gatineau at 9.1%, Toronto at 6.5%, and Calgary at 6%.

Less housing stocks, higher prices. The marketplace and our elected officials all knew this would happen. Real Estate Agencies and land developers all but jumped for joy at the prospect of selling homes that sold for $350,000 a few years ago, and are now selling for 3X the amount. Bidding wars drive prices higher and higher. Developers who make a home at @$195,000 cost sell these homes as affordable within the 650-1M range.

So much for independent home units. What about apartment buildings? Are they being built? In Quebec they are but not in the # needed. Europeans are comfortable with renting an apartment for decades, but not so in the rest of Canada. Status, and keeping up with the “joneses” have been all the rage. First-time home buyers will spend decades gathering enough funds to make an initial deposit if the bank so allows it. Why do developers not build rental units/apartments? Well, developers would need to look upon such builds as long-term investments, waiting some time to get back their costs and make some profit. Building other types of homes guarantee them immediate compensation, gratifying their profiteering.

Why do regional, City, and Provincial Governments prefer housing builds of larger houses? The revenue they make of course. Even Premier Ford’s push to have 50,000 houses built in a few years centers upon individual homes being sold, not rented(aftermarket). Has our economic system forgotten the small fry, the average Canadian who does not make a salary over $100,000 annually? Yes, it has, and the reason for this forgetfulness is that the wealthy and mid-level middle class hold greater influence on these elected officials. They are the same people, while the dirty unwashed working stiff has very little in common with real estate agents, developers, and elected officials too. A true class system with regard to housing exists in Ontario and Canada. Are the New Democrats crying out loud for reforming this system? No, they are not. They want to represent the higher-ups. those with excess revenue and economic purchasing power.

Rental Units are Needed Stupids. A housing revolution is needed not just in Ontario but across this land. Why won’t the government put its hands into the direct building of these units? They have the funds, and the regulations to make sure these units are made appropriately and in a timely manner. The very power of the elite, real estate, and developers lobby will always sway our elected officials away from competing with these financial aggressors. In 2016 548 formers members of a government in Canada registered as lobbyists, often representing the wishes of those who once were their suppliers(developers). What am I saying? Perhaps many of our elected representatives have been padding their pocketbooks and ensuring their future careers in well-paid jobs. Corruption? Find out how much an MPP or MP was worth when they started their position, and after 4-5 years what are they worth???

Only the average Canadian, worker, student, or elderly who cares about their children’s future, can force this issue before the politicians in Ottawa, Toronto, and through out Canada. Protests like those that happened in Ottawa last spring could really change the way our representatives represent us. A wee Revolution we need indeed.

Housing and shelter are human rights. Right? So get off your couch and gather with like-minded neighbors to demand real affordable housing, and build nonprofit apartments too.

Steven Kaszab
Bradford, Ontario
skaszab@yahoo.ca

Real eState

Homebuyers move swiftly to ‘lock in a good deal now’: Mortgage rates continue to melt as economists dream of a real estate ‘rebound’ in spring

Published

20 hours ago

March 26, 2023

Megan Johnson

Homebuyers move swiftly to 'lock in a good deal now': Mortgage rates continue to melt as economists dream of a real estate 'rebound' in spring — Homebuyers move swiftly to ‘lock in a good deal now’: Mortgage rates continue to melt as economists dream of a real estate ‘rebound’ in spring

Mortgage rates are still falling as the Fed announced another quarter-point rate hike on Wednesday — and indicated increases may be nearing their long-awaited end.

In the meanwhile, the homebuyer front is seeing “improved purchase demand and stabilizing home prices,” says Freddie Mac chief economist Sam Khater.

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“If mortgage rates continue to slide over the next few weeks, look for a continued rebound during the first weeks of the spring homebuying season.”

Khater and other experts are anticipating more buyers will return to the market as rates become more affordable. However, that doesn’t mean housing prices are going to subside anytime soon.

30-year fixed-rate mortgages

The average 30-year fixed rate slid further to 6.42% this week, compared to last week’s average of 6.60%.

A year ago at this time, a 30-year home loan averaged 4.42%.

“With rates below 6.5%, more Americans can purchase the median-price home by putting 18% down without being cost-burdened,” says Nadia Evangelou, senior economist for the National Association of Realtors (NAR).

Evangelou anticipates the housing market to rebound even faster than expected if mortgage rates continue their decline this spring.

15-year fixed-rate mortgage rate trend

The average rate on a 15-year home loan tumbled from 5.90% to 5.68% this week. This time a year ago, the 15-year fixed-rate averaged 3.63%.

Hannah Jones, economic research analyst at Realtor.com, notes that despite the Fed’s softened stance on additional rate hikes, the federal funds rate will still remain fairly high — “meaning that a higher interest rate environment is here to stay for the time being, including for home loans.”

Jones says that while buyer demand is increasing due to slightly lower financing costs, many Americans are still grappling with affordability challenges.

“At the current price and mortgage rate level, the typical housing payment on a median-priced home is still 36.4% higher than one year ago.”

U.S. home sales pick up in February

There was an unexpected uptick in new home sales in February, inching 1.1% from January to an annual pace of 640,000 new home sales, reports Realtor.com. This is still 19% lower compared to the housing market a year ago, but sales may continue to rise as mortgage rates fall.

“Higher mortgage rates are the new normal, which leaves home shoppers measuring their willingness to participate in the market with each change in rates,” writes Jones.

She adds that sales activity is becoming increasingly concentrated toward new homes that haven’t been started yet — making up about 23% of new home sales in February, compared to 17% in January — suggesting that “buyers are looking to lock in a good deal now, before construction has started.”

Although lower mortgage rates signal increased affordability, the median new home sale price climbed to $438,200 last month — 2.5% higher than the same period last year.

“As long as the housing market remains undersupplied, buyer competition will put upward pressure on prices,” explains Jones.

Mortgage applications continue to rise

Demand for mortgages rose 3% from last week, according to the Mortgage Bankers Association (MBA).

Homeowners have also been more encouraged to refinance — thanks to lower rates — with the refinance index climbing 5% since the week prior.

“Both purchase and refinance applications increased for the third week in a row as borrowers took the opportunity to act, even though overall application volume remains at relatively low levels,” says Joel Kan, vice president and deputy chief economist at the MBA.

Kan notes that mortgage rates haven’t plunged as drastically as Treasury rates due to increased volatility in the mortgage-backed securities market.