The use of CRE loan modifications is soaring at smaller banks
Regional banks vulnerable after taking lower down payments
Slumping office property values are rippling through US banks, with smaller lenders in particular ramping up the use of loan modifications in their commercial real estate books.
The typical bank with less than $100 billion of of assets modified 0.32% of its CRE loans in the first nine months of the year, a Moody’s Ratings report found. That’s a big increase from the first half of 2024, when it was just about 0.1%.
Real estate guru Barbara Corcoranhas revealed the mortgage rate drop that she believes would cause the housing market to “go ballistic,” while warning that there is a “desperate need” for more first-time buyers to get onto the property ladder.
Corcoran, 75, shared her expert insights on the current state of the market during an appearance on Fox Business’ “Cavuto: Coast to Coast.”
She told host Neil Cavuto that if mortgage rates drop to anywhere within the 5% range, it could trigger “incredible” homebuying activity.
As of Dec. 12, mortgage rates dropped to 6.6% from 6.69% the previous week, falling incrementally for the fifth week in a row.
Noting that mortgage rates have been “bouncing around” between 6% and 7% for some time now, Corcoran conceded that she doesn’t know whether “we will ever see a 5% number.” However, if such a drop were to occur, “it would be incredible for the market.”
“Rates have been bouncing around for a while now … so people are confused, they don’t have big expectations, they’re no longer waiting for a tremendous rate drop. But if that happens, God, it would be incredible for the market,” she said.
“The buyers themselves have gotten accustomed to the rates being what they are, and they just got tired of waiting,” she went on. “But I am wondering if we’ll ever see a 5% number, because anything with the 5% in front of it is going to make this market go ballistic.”
‘We need more first-time buyers’
Barbara Corcoran spoke about the fall in mortgage rates.ABC
Corcoran, who is also a savvy investor on “Shark Tank,” said on the show that what the market needs right now is more people willing to buy a home for the first time.
“What we’re losing right now and what we desperately need right now is more first-time homebuyers,” she said, before offering a shocking statistic: “Less than 24% of the people are first-time buyers, an all-time low.”
Existing-home sales are up
Interestingly, in a potentially bright spot, existing-home sales have gone up in the past month, by 3.4%, she noted.
This is the first year-over-year gain in existing-home sales in “the better part of three years,” Cavuto pointed out.
However, she added that “first-time buyers were not really a part of” those sales.
Corcoran noted that the uptick in home sales isn’t a huge surprise given that there are more “houses on the market.”
Barbara Corcoran noted that even though home sales are up, most of them are not first time homebuyers.Getty Images
She added that while buyers have choices, they’ve also become accustomed to the status quo and aren’t holding their collective breath for a mortgage drop.
“So there were 25% more choices for the buyer coming out and looking. On top of that, buyers themselves have gotten accustomed to the rates being what they are, and they got tired of waiting,” she said.
Buyers would go ‘ballistic’
Addressing Corcoran’s view of the impact lower mortgage rates could have on the market, Realtor.com® Chief Economist Danielle Hale agreed that it would be a very big deal for buyers.
“Every drop in mortgage rates is going to make a difference for some home shoppers who are on the margin,” Hale explains.
While Hale doesn’t anticipate a giant slash in the rate, she agrees a sharp drop would certainly jolt the market.
“If we see a slow, gradual decline in mortgage rates, which is more in line with the Realtor.com® forecast, I think we’ll see a gradual build in buyer and seller activity. If we were to see a sharp drop in mortgage rates to 5%, that could bring in a lot of buyers and sellers at once—and really jolt the housing market. It’s going to be not only about the rate itself, but how we get there.”
The reverse, an increase in the mortgage rates, could slow things way down.
“It could slow down the whole market, it would slow down the whole economy, it would slow down all the support services for the housing market—it would be a terrible thing,” she says of a higher mortgage rate.
However, Corcoran also doesn’t anticipate the rates going in that direction.
“I don’t think people are thinking it’s going to go much up,” she said. “That could happen, but I don’t think you’re going to see interest rates above 7% again. I’m hoping it’s going to go and hover around 6% or even go lower.”
What this means:On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For November, Realtor.comreportedinventory was up 26.2% YoY, but still down 21.5% compared to the 2017 to 2019 same month levels.
Now - on a weekly basis - inventory is up 23.5% YoY.
• Active inventory increased, with for-sale homes 23.5% above year-ago levels
For the 57th consecutive week, the number of homes for sale has increased compared with the same time last year. However, this week’s growth was the slowest since March 2024. As the mortgage rates remain close to 7%, the combination of sluggish listing activity and muted buyer demand has led to a slowdown in inventory growth. The pace of growth suggests a more cautious environment where sellers are holding back, and buyers are taking their time—creating a more balanced but tentative housing landscape.
• New listings—a measure of sellers putting homes up for sale—increased 16.5% post-Thanksgiving, and adjusted to 2.6% after accounting for holiday timing
The number of newly listed homes has returned to its pre-Thanksgiving level, resulting in a large year-over-year growth as Thanksgiving falls later in 2024 compared with 2023. After adjusting for the holiday timing factor, the year-over-year increase in new listings is 2.6%.
Here is a graph of the year-over-year change in inventory according to realtor.com.
Inventory was up year-over-year for the 57th consecutive week.
However, inventory is still historically low.
New listings remain below typical pre-pandemic levels.
ATTOM, a leading curator of land, property data, and real estate analytics, today released its third-quarter 2024 U.S. Home Flipping Report showing that 74,618 single-family homes and condominiums in the United States were flipped in the third quarter. Those transactions represented 7.2 percent, or one of every 14 home sales, nationwide during the months running from July through September of 2024.
The latest portion of flipped properties was down from 7.6 percent of all sales in the U.S. during the second quarter of 2024, extending a common pattern seen during annual Spring and Summer buying seasons when other types of home sales spike. The flipping rate returned to the 7.2 percent level recorded in the third quarter of last year.
However, while the flipping rate followed historical trends, profits turned back downward for investors who buy, renovate and quickly resell homes following a period when their fortunes had been improving.
The latest data showed that home flipping nationwide typically generated just a 28.7 percent return on investment before expenses on homes re-sold during the third quarter of this year. That was down from 31.2 percent in the second quarter of 2024 after six straight quarterly increases that had signaled a marked improvement for the flipping industry.
The typical profit margin on homes flipped during the third quarter of 2024 – based on the difference between the median purchase and median resale price for home flips – slid down to only half of the mid-50 percent peak hit in 2016. It also stayed withing a range that could easily be wiped out by carrying costs that include renovation expenses, mortgage payments and property taxes, exposing again the struggles U.S. home flippers are having in turning healthy profits.
Gross profits on typical flips around the country, meanwhile, decreased to about $70,000 . That was down roughly $5,000 from the prior quarter and $10,000 from highs reached two years ago, although still up slightly from the third quarter of 2023.
“Home flippers just can’t seem to shake the doldrums. After more than a year when things were getting better, they turned notably worse again over the Summer,” said Rob Barber, CEO for ATTOM. “One quarter’s worth of numbers isn’t enough to make any grand statements about another downturn. The next six months should speak more to that, especially amid an ongoing tight housing market that should work in their favor. But as interest rates remain double what they were a few years ago and inflation keeps raising renovation costs, investors continue to have a tough time making the kind of profits that would lure more into the game.”
Home-flipping rates drop quarterly in two-thirds of U.S.
Home flips as a portion of all home sales decreased from the second quarter to the third quarter of 2024 in 115 of the 183 metropolitan statistical areas around the U.S. with enough data to analyze (62.8 percent), although they were still up annually in 95, or 51.9 percent of those markets. Measured against the same period of 2023, a majority of flipping rates changed by less than one percentage point. (Metro areas were included if they had a population of 200,000 or more and at least 50 home flips in the third quarter of 2024).
Among the metro areas analyzed, the largest flipping rates during the third quarter of 2024 were in Warner Robins, GA (flips comprised 22.7 percent of all home sales); Macon, GA (16.8 percent); Atlanta, GA (13.6 percent); Columbus, GA (12.8 percent) and Memphis, TN (12.7 percent).
Aside from Atlanta and Memphis, the highest third-quarter flipping rates among metro areas with a population of at least 1 million were in Birmingham, AL (11 percent), Phoenix, AZ (10.7 percent) and Tampa, FL (10 percent).
The smallest home-flipping rates were in Seattle, WA (3.5 percent); Des Moines, IA (3.7 percent); Honolulu, HI (3.8 percent); Portland, ME (3.9 percent) and Madison, WI (4 percent).
Typical home-flipping returns down in more than half of U.S.
The median $315,250 resale price of homes flipped nationwide in the third quarter of 2024 generated a gross profit of $70,250 above the median investor purchase price of $245,000. That resulted in a typical 28.7 percent gross profit margin before expenses in the third quarter of 2024, down more than two points from 31.2 percent in the second quarter of 2024. It also was down from 29.7 percent in the third quarter of last year.
The latest nationwide figure remained only about half the 56.3 percent level reached in mid-2016 and well below a more recent peak of 48.8 percent in 2020.
Profit margins decreased from the second to the third quarter of this year in 106 of the 183 metro areas analyzed (57.9 percent) and were down annually in 105 of those markets (57.4 percent).
Metro areas with the biggest quarterly declines in typical profit margins during the third quarter of 2024 included Salisbury, MD (ROI down from 129.8 percent in the second quarter of 2024 to 61.8 percent in the third quarter of 2024); South Bend, IN (down from 89.4 percent to 36.4 percent); Gainesville, FL (down from 64 percent to 20 percent); Peoria, IL (down from 78.2 percent to 36.4 percent) and Youngstown, OH (down from 54.1 percent to 20 percent).
Metro areas with a population of at least 1 million and the largest quarterly profit-margin drop-offs were Buffalo, NY (ROI down from 100 percent in the second quarter of 2024 to 73.5 percent in the third quarter of 2024); Honolulu, HI (down from 24.4 percent to 5.9 percent); Tulsa, OK (down from 59.1 percent to 40.8 percent); San Jose, CA (down from 26.8 percent to 12.1 percent) and Pittsburgh, PA (down from 115.3 percent to 101.8 percent).
Profit margins below 30 percent in nearly half of nation
The recent fallback resulted in typical gross profit margins of less than 30 percent in 80, or four of every 10 metros with enough data to analyze in the third quarter of 2024. That was up from 73 of the same group of metro areas in the second quarter and 69 a year earlier. Typical profit margins surpassed 50 percent in the third quarter of this year in only about one-third of the areas reviewed.
Markets with the largest gross returns on investment for typical home flips completed during the third quarter of 2024 again were concentrated in lower-priced areas, especially in the Northeast and South. They were led by Ocala, FL (141.5 percent return); Pittsburgh, PA (101.8 percent); Scranton, PA (100 percent); Flint, MI (98.9 percent) and Columbus, GA (93.8 percent).
Aside from Pittsburgh, the largest investment returns in the third quarter among metro areas with a population of at least 1 million were in Cleveland, OH (78.3 percent); Rochester, NY (78.2 percent); Baltimore, MD (78 percent) and Richmond, VA (75 percent).
Metro areas with a population of at least 1 million and the lowest returns on typical home flips in the third quarter of 2024 were Austin, TX (4.5 percent); Honolulu, HI (5.9 percent); Houston, TX (6.2 percent); San Antonio, TX (6.6 percent) and Dallas, TX (6.9 percent).
Higher-end markets still have best raw profit numbers
The largest raw profits on median-priced home flips in the third quarter of 2024, measured in dollars, were concentrated in areas of the West, South and Northeast regions where typical resale prices mostly topped $400,000. Eight of the top 10 fell into that category, led by San Francisco, CA (typical gross profit of $234,000 on a median resale value of $1.1 million); New York, NY ($170,000 profit on a median resale value of $600,000); Washington, DC ($170,000 profit on a median resale value of $545,000); Salisbury, MD ($168,016 profit on a median resale value of $440,000) and Boston, MA ($160,000 profit on a median resale value of $625,000).
The South also continued to dominate the low end of the spectrum, with 13 of the 15 lowest raw profits on median-priced transactions during the third quarter. Most came in areas with median resale prices below $300,000. The smallest were in Warner Robins, GA (typical 3,500 profit on a median resale value of $268,500); Killeen, TX ($5,302 profit on a median resale value of $240,627); Boise, ID ($7,936 profit on a median resale value of $439,469); Lubbock, TX ($12,372 profit on a median resale value of $200,688) and Amarillo, TX (14,852 profit on a median resale value of $170,852).
All-cash financing still comprises two-thirds of home flips
Nationwide, 64.1 percent of homes flipped in the third quarter of 2024 had been purchased by investors with cash only. That was up slightly from 63.1 percent in the second quarter of 2024, and up from the 61.6 percent portion in the third quarter of 2023. Meanwhile, 35.9 percent of homes flipped in the third quarter of 2024 had been bought with financing. That was down from 36.9 percent in the prior quarter and 38.4 percent a year earlier.
Among metropolitan areas with a population of 1 million or more and sufficient data to analyze, those with the highest percentage of homes flipped in the third quarter of 2024 that had been purchased with cash included Buffalo, NY (81.7 percent); Cleveland, OH (80 percent); Birmingham, AL (79.9 percent); Detroit, MI (76.4 percent) and Orlando, FL (74.1 percent).
Average time to flip nationwide decreases by a week
The average time it took from purchase to resale on home flips went down from 166 days in the second quarter of 2024 to 159 days in the third quarter. It also was down from 162 days in the third quarter of 2023.
Smaller portion of home flips going to buyers using FHA loans
Of the 74,618 U.S. homes flipped in the third quarter of 2024, 10.4 percent were sold to buyers using mortgages backed by the Federal Housing Administration (FHA). That was down from 11 percent in the second quarter of 2024, although still up from 10 percent in the third quarter of 2023.
Among metro areas with a population of 200,000 or more and at least 50 home flips in the third quarter of 2024, the highest percentages of flipped properties sold to FHA buyers — typically first-time home purchasers — were in Shreveport, LA (28.9 percent; Lakeland, FL (28.9 percent); Greeley, CO (25.9 percent); Visalia, CA (25.3 percent) and McAllen, TX (24.8 percent).
One of every six counties has home-flipping rates of at least 10 percent
Home flips accounted for at least 10 percent of all home sales in 155, or 15.7 percent, of the 989 counties around the U.S. with at least 10 flips in the third quarter of 2024. That was down from the 19.5 percent portion of all counties with enough data to measure in the second quarter of 2024. The leaders in the third quarter of this year were all in Georgia: Houston County (Warner Robins) (24.1 percent flipping rate); Cobb County (Marietta) (23.9 percent); Haralson County (west of Atlanta) (20.9 percent); Peach County (outside Macon) (20.1 percent) and Rockdale County (east of Atlanta) (19.7 percent).
Report methodology
ATTOM analyzed sales deed data for this report. A single-family home or condo flip was any arms-length transaction that occurred in the quarter where a previous arms-length transaction on the same property had occurred within the last 12 months. The average gross flipping profit is the difference between the purchase price and the flipped price (not including rehab costs and other expenses incurred, which flipping veterans estimate typically run between 20 percent and 33 percent of the property’s after-repair value). Gross flipping return on investment was calculated by dividing the gross flipping profit by the original purchase price.
It isn't just nuclear projects getting in on the "selling power to data centers" trend - now oil supermajor Exxon is joining the trend.
In fact, Exxon is planning a large natural gas-powered plant to supply electricity directly to data centers, incorporating technology to capture over 90% of its carbon emissions, according to the New York Times.
This would be Exxon’s first power plant not dedicated to its own operations. Carbon capture systems remain rare and costly, despite federal subsidies, limiting their broader adoption.
CEO Darren Woods said this week: “There are very few opportunities in the short term to power those data centers and do it in a way that at the same time minimizes, if not completely eliminates, the emissions."
Exxon exec Dan Ammann added: “We’re being driven by the market demand here. It’s low carbon, it’s available on an accelerated timeline and it avoids all the grid interconnection challenges.”
Tech giants are increasingly willing to pay extra for reliable clean energy, including nuclear power. Here are Zero Hedge we spent most of 2024 documenting numerous tech giants like Google, Meta and Microsoft all inking deals with nuclear power generators to secure data center power in the future.
The New York Times adds that Exxon, having secured land and engaged potential customers, plans to launch its gas-powered plant within five years—faster than building new nuclear reactors.
Uniquely, the plant would operate off-grid, avoiding lengthy grid connection delays. This move highlights how the growth of data centers and AI is transforming the energy sector, pushing Exxon into a business it once avoided.
Chevron could be next, too. Its CEO Mike Wirth predicts off-grid power projects will become more common, and Exxon is exploring similar ventures, aiming to launch a gas-powered plant with carbon capture technology.
Exxon plans to spend $30 billion over six years on emission reduction and alternative energy while expanding oil and gas production. The company sees growing electricity demand from data centers as an opportunity to enter the power business, leveraging its expertise in carbon management and pipeline networks.
The UK government will deliver a "sweeping overhaul" of council planning committees aimed at "unblocking the clogged-up" system, Angela Rayner is expected to announce.
Reforms proposed by the deputy prime minister would see planning applications which meet local development plan requirements bypass council committees.
This would be aimed at ending delays to new homes, cutting the time and resources spent on individual schemes and providing more certainty to housebuilders.
Rayner, who is also the housing secretary, said: "Building more homes and infrastructure across the country means unblocking the clogged-up planning system that serves as a chokehold on growth.
"The government will deliver a sweeping overhaul of the creaking local planning committee system.
"Streamlining the approvals process by modernising local planning committees means tackling the chronic uncertainty and damaging delays that act as a drag anchor on building the homes people desperately need."
The deputy PM said the government was "tackling the housing crisis we inherited head-on with bold action" as it worked towards building 1.5 million homes over five years.
The housebuilding commitment was one of the six "milestones" the prime minister set out in a wide-ranging speech on Thursday, against which the public can measure the government's performance.
Under Rayner's proposals, council officials would have a strengthened role in decision-making about planning while the councillors who sit on the committees will get new mandatory training.
Alongside the reforms, the government is this week expected to confirm sweeping changes to the national planning policy framework – the document which sets out national priorities for building – following a consultation.
This is expected to see increased housing targets which will be mandatory for the first time, with the aim of reaching the government's pledge to build 1.5 million homes this Parliament.
Rayner said: "Through our planning & infrastructure bill, alongside new national planning policy Framework and mandatory housing targets, we are taking decisive steps to accelerate building, get spades in the ground and deliver the change communities need."
The Conservatives said Labour had set a house-building target that the Office for Budget Responsibility "has already said they can't achieve — because of their own budget".
A Tory spokesman added: "Following the Labour Mayor of London's lead they will almost certainly fail to meet their house-building commitments.
"These measures are nothing more than a list of empty promises which will do nothing to ensure that Britain has the housing it needs where it needs it."
