Business
Where Housing Prices Have Crashed and Billions in Wealth Have Vanished
Michael Wilson was hopeful when he put his three-bedroom house up for sale: Over a dozen would-be buyers came to the initial showing.
But about a year later, the property is still for sale. Offer after offer fell through because the prospective buyers were unable to sell their homes.
Welcome to New Zealand, one of the world’s most troubled housing markets. Over the last 18 months, homeowners and investors have lost billions of dollars in wealth after prices that spiked during the Covid pandemic started plunging as mortgage rates also soared.
“If we listed it, say, two months before we originally did, it would have literally sold the next day,” Mr. Wilson said. He and his wife, Jade, might finally have found a buyer for their three-bedroom house in Te Awamutu, a pretty North Island town of 13,000 people. But if they are lucky they will be paid about 15 percent less than they originally sought.
The pandemic’s disruptions to jobs, wages and living conditions caused a yo-yo effect in housing markets in many countries, including Sweden, Britain, Canada and Australia. Few places have experienced as wild a swing as New Zealand, which last week slipped into a recession.
Property in New Zealand has traditionally been expensive and in short supply. Now a combination of even higher prices, poorly constructed housing and the biting effects of interest rate increases has pushed the housing crisis to the top of the agenda, ahead of national elections this year.
During the pandemic, as people took advantage of low mortgage rates and relaxed lending rules, house prices soared almost 50 percent. Since November 2021, after New Zealand’s hawkish central bank embarked on one of the most aggressive rate-tightening cycles in the world to tackle rising inflation, prices have plummeted 17.5 percent, eradicating more than $6 billion in household wealth, according to Statistics New Zealand estimates.
Home sales fell to a record low in the three months through December, and houses now sit on the market for an average of 47 days, with some languishing for many months.
Calls for the government to address the housing shortage grew more urgent in February, when once-in-a-generation storms and flooding damaged thousands of homes on North Island, some irreparably. Then five people died in May in a devastating fire at a hostel in Wellington, the capital, that was inhabited mostly by men without stable housing.
Despite relatively low wages and ample land — New Zealand has a population of five million spread over an area the size of Colorado — a dearth of building, coupled with low borrowing costs, meant that buyers had long been willing to pay for older homes that were poorly built and insulated.
“You’re just lucky to have shelter, rather than worry about the quality of shelter,” said Shamubeel Eaqub, an independent economist in Auckland.
Property values in New Zealand are also highly susceptible to the rise and fall of interest rates. Unlike U.S. mortgages, which are effectively backed by the government and often set for as long as 30 years, home loans rarely have fixed rates of more than a couple of years. Buyers and homeowners with mortgages now face interest rates of at least 6.5 percent on new loans, up from about 2 percent in 2020.
Housing problems touch virtually every corner of the population, including those on painfully long waiting lists for public housing, underserved renters for whom property ownership seems out of reach and more affluent people who bet big on property and are now seeing their investments fall in value.
Homes are among the least affordable in the world, with a median price of 780,000 New Zealand dollars, or about $480,000, compared with about $407,000 in the United States, according to Redfin.
“You’ve got an enormous number of people who live week to week, paycheck to paycheck, who see an extraordinary amount of their take-home pay eaten up by housing costs,” said Chris Bishop, a member of Parliament for the center-right opposition National Party. “It’s a big driver of inequality and of poverty generally.”
The problem has defied policy fixes by successive governments, and the politicians know that New Zealanders have a lot at stake in the issue. Most New Zealanders own a home, and 57 percent of household wealth consists of land and houses, according to the Reserve Bank of New Zealand. That is partly because there is no capital-gains tax, meaning money made on sales is typically not taxed.
“Property investing is the great New Zealand hobby,” said Max Rashbrooke, a researcher on economic inequality in New Zealand.
Adding to the gloom: A rare moment of bipartisanship in housing policy appears to have hit the skids.
In late 2021, New Zealand’s two major political parties co-signed legislation making it easier to construct three-story buildings in the central areas of cities and towns, to avoid extensive suburban sprawl. But Christopher Luxon, the leader of the National Party, said last month that he intended to walk back that commitment and return to a model in which many new houses are built on former farmland at the edges of cities.
Prime Minister Chris Hipkins said he had called on the opposition to offer changes to the law rather than scrap it.
The two parties’ dueling approaches will be put to the test in the nation’s election in October.
In the meantime, homeowners are doing what they can to manage the troublesome mix of more expensive mortgages and falling prices.
Lisa Lamberton recently sold her home in the city of Whanganui and is moving farther north to be closer to family. She is philosophical about paying higher rates. “When you’re a homeowner, at some point rates aren’t going to be in your favor,” Ms. Lamberton, 42, said. “From my perspective, it was always going to happen.”
James Faber, a warehouse operator and part-time property investor in Palmerston North, spent months trying to sell a property as the market dropped. It ultimately sold for about 360,000 New Zealand dollars, 130,000 less than he had hoped.
Last month, seeking to avoid a similar wait, Mr. Faber, 38, listed another property at auction with a starting price of one New Zealand dollar, against the advice of his lawyer and his property agent. The home eventually went for 400,000 New Zealand dollars — more than other comparable recent sales, he said, but far less than the council estimation of 570,000 New Zealand dollars 18 months earlier.
Even then, he said, he was shocked by the lack of interest in the auction. “It’s a fricking dollar reserve,” he said. “I still can’t believe half the city didn’t come to the open home.”
President-elect Donald J. Trump is considering an executive order to allow TikTok to continue operating despite a pending legal ban until new owners are found, according to a person with knowledge of the matter.
The possible executive order, reported earlier by The Washington Post, is under discussion as TikTok faces a deadline on Sunday to be banned in the United States unless it finds a new owner. The popular video-sharing app is owned by ByteDance, a Chinese company. Republicans have said for years that they see the app, which has been downloaded to millions of smartphones, as a national security risk. It has become a rare issue that has united both parties in Congress.
If the Supreme Court upholds the law, which will ban the app unless ByteDance sells it to a non-Chinese company, special treatment from Mr. Trump might be the only way for TikTok to continue operating in the United States in the near term. The law requires app store operators like Apple and Google and cloud computing providers to stop distributing TikTok in the United States.
An executive order could try to direct the government not to enforce the law or to delay enforcement to complete a deal, a move that past presidents have used to challenge laws. It is unclear if an executive order would survive legal challenges or persuade the app stores and cloud computing companies to take steps that could expose them to huge penalties.
Alan Z. Rozenshtein, a former national security adviser to the Justice Department and a professor at the University of Minnesota Law School, said an executive order should be “taken with a medium-sized boulder of salt.” Such an order is not a law, he said, and legally would not change the legislation passed by Congress and signed by President Biden.
While there is some speculation that the app will still work if it has already been downloaded, the law also affects internet hosting companies like Oracle and other cloud computing providers, and it is unclear how video load times and the functionality of the app may respond.
One person close to Mr. Trump’s team said some of his allies had loose discussions about buying TikTok but provided no details. Mr. Biden, whose term ends on Monday, a day after the ban is set to go into effect, is also under pressure to find a way to save the app.
The New York Times reported late Wednesday that TikTok’s chief executive, Shou Chew, is expected to attend Mr. Trump’s inauguration on Monday and was offered a seat on the dais. TikTok declined to comment.
Mr. Chew is expected to be joined by other tech executives on the dais: Mark Zuckerberg, the co-founder of Meta; Jeff Bezos, the Amazon founder; Elon Musk, Mr. Trump’s megadonor; and Tim Cook, the chief executive of Apple, who personally donated $1 million to the inaugural committee.
Mr. Trump had previously backed a TikTok ban but publicly changed his stance last year, soon after meeting with Jeff Yass, a Republican megadonor who owns a large share of ByteDance.
Mr. Trump has said they did not discuss the company. But Mr. Yass helped found the trading firm Susquehanna International Group and is one of the biggest supporters of the conservative lobbying group Club for Growth. The group has hired people with ties to Mr. Trump, such as Kellyanne Conway, his former top adviser, and the Republican adviser David Urban, to lobby for TikTok in Washington.
TikTok has also worked to make inroads with the Trump team through Tony Sayegh, who was a Treasury official during Mr. Trump’s first administration and now leads public affairs for Susquehanna.
Mr. Sayegh has relationships with the Trump family and was a core part of the campaign’s decision to join TikTok this summer. Several members of the family, including Ivanka Trump, Donald Trump Jr. and Kai Trump, the president-elect’s granddaughter, have also joined the app.
Mr. Trump’s interest in TikTok is not entirely because of his advisers. He came to see how well videos about him performed on the platform, and his advisers credited it with helping him to expand his reach to a new type of voter during the campaign.
Any actions Mr. Trump might be able to take on TikTok are complicated. The law gives the president the ability to extend the deadline for a sale only if there is “significant progress” toward a deal that would put the company in the hands of a non-Chinese owner.
It also requires that the deal be possible to complete within 90 days of an extension. It is unclear exactly how an extension will work if Mr. Trump tries to deploy it after the ban takes effect.
TikTok has maintained throughout its court challenge to the law that such a sale is unworkable in part because of the prescribed time frame. A group led by the billionaire Frank McCourt has mounted a bid to buy the app — though without its mighty algorithm — in recent months.
Mr. Trump could also try to work around the law by instructing the government not to enforce it.
But app store operators and cloud computing providers could require more than a soft assurance from Mr. Trump that he will not punish them if they fail to execute the ban, said Ryan Calo, a professor at the University of Washington School of Law. The potential legal liability for companies that violate the law is significant: Penalties are as high as $5,000 per person who is able to use TikTok once the ban is in effect.
“You could have a policy not to enforce this ban,” said Mr. Calo, who was part of a group of professors who urged the Supreme Court to overturn the TikTok law. “But I think that maybe conservative companies would just be like: ‘OK, you’re not going to enforce it. But it is on the books, and you could enforce at any time.’”
Mr. Trump’s pick for attorney general, Pam Bondi, has declined to say whether she would enforce the law.
“I can’t discuss pending litigation,” she said at her Senate confirmation hearing on Wednesday. “But I will talk to all the career prosecutors who are handling the case.”
Mr. Trump has a third option: appealing to Congress to reverse a policy it overwhelmingly approved with broad bipartisan support last year.
“Congress can undo this anytime,” Mr. Calo said.
On Thursday, Senator Chuck Schumer of New York, the Democratic leader, said on the Senate floor that he was worried about the possibility of a ban on TikTok.
“It’s clear that more time is needed to find an American buyer and not disrupt the lives and livelihoods of millions of Americans, of so many influencers who have built up a good network of followers,” he said. He added that he had also made those views clear to the Biden administration and accused Republicans of blocking a bill that would have extended the deadline for a ban by 270 days.
A White House official said on Thursday that the administration’s clear view was that TikTok should operate with an American owner. Because of the timing of the potential ban — taking place over a holiday weekend before the inauguration — it would fall to the next administration to carry out the law, the official said.
Catie Edmondson contributed reporting.
Two California representatives in Washington are trying to combat the state’s home insurance crisis that has left many residents without coverage as wildfires tear through the Los Angeles area.
Reps. Maxine Waters (D-Los Angeles) and Brad Sherman (D-Sherman Oaks) reintroduced on Thursday the Wildfire Insurance Coverage Study Act, which calls for an assessment of the home insurance market in communities with high wildfire risk. The bill easily passed the House Financial Services Committee with bipartisan support last Congress, but was pulled from consideration before getting a vote by the full House.
The bill’s return comes after a week of desperate firefighting in Southern California, where entire neighborhoods have been reduced to ash and rubble. The fires have claimed thousands of homes and businesses in the Pacific Palisades, Malibu, Altadena and other communities.
Before the fires sparked, the home insurance market in California was already in crisis as insurers opted not to renew thousands of policies in areas deemed to be at high risk of fires, including those that were hit by the current blazes. Some homeowners who didn’t have their coverage canceled saw their rates rise sharply.
“Over the years we’ve watched insurance companies raise premiums, reduce coverage, and abandon wildfire coverage in high-risk areas altogether,” Waters said in a statement. “This leaves families and businesses throughout the state of California without the resources they need to recover.”
The Wildfire Insurance Coverage Study Act would require the Government Accountability Office to examine the availability and affordability of home insurance in fire-prone areas. The GAO would also gather data on disparities in access to wildfire coverage and make recommendations for federal actions to stabilize insurance markets.
“The devastating fires in my district and the greater Los Angeles area underscore the need for Congress to focus on the availability and cost of fire insurance coverage,” Sherman said.
Although insurance is a state-regulated industry, Waters said her bill would “help Congress and the federal government better understand what federal tools are available to respond to the risks posed by wildfires.”
The bill also calls for an inquiry into the role climate change plays in exacerbating wildfires.
Also this week, California lawmakers introduced legislation they hope will fill gaps in support for renters and homeowners affected by the fires, as well as the inmate firefighters the state relies on.
On Wednesday, Rep. Isaac Bryan (D-Los Angeles) proposed a bill to raise the pay for inmate firefighters during the hours that they are “actively fighting a fire” to match the rate of the lowest professional state firefighter wage.
California has long relied on incarcerated firefighters on the front lines, with hundreds of prison firefighters deployed in Los Angeles in recent days. The practice has drawn criticism from some for the meager pay these inmates receive for the potentially life-threatening work.
The firefighters make between $5.80 and $10.24 daily as well as an additional $1 hourly wage on the front lines, for shifts that can last as long as 24 hours, according to the California Department of Corrections and Rehabilitation.
“We are seeing our incarcerated folks putting their lives in harm’s way and protecting whole communities,” Bryan said in an interview. “We bring up how they are doing this work for slave wages, but we never do anything about it.”
Rep. John Harabedian (D-Riverside) introduced this week AB 238, a bill aimed at delivering financial relief to Californians forced to shoulder payments for both temporary housing and mortgages simultaneously.
Another bill, AB 246, calls for a rent freeze across Los Angeles County and would create a civil penalty for landlords who violate it. The effort comes as L.A. City Council moved to bar evictions for some tenants and pets amid the emergency.
Over the last week, the videos started appearing on TikTok from users across the United States.
They all made fun of the same thing: how the app’s ties to China made it a national security threat. Many implied that their TikTok accounts had each been assigned an agent of the Chinese government to spy on them through the app — and that the users would miss their personal spies.
“May we meet again in another life,” one user wrote in a video goodbye set to Whitney Houston’s cover of Dolly Parton’s “I Will Always Love You.” The video included an A.I.-generated image of a Chinese military officer.
The videos were just one way that some of TikTok’s 170 million monthly U.S. users were reacting as they prepared for the app to disappear from the country as soon as Sunday.
The Supreme Court is set to rule on a federal law that required TikTok’s Chinese owner, ByteDance, to sell the app by Jan. 19 or face a ban in the United States. U.S. officials have said China could use TikTok to harvest Americans’ private data and spread covert disinformation. TikTok, which has said a sale is impossible and challenged the law, is now awaiting the Supreme Court’s response.
The possibility that the justices will uphold the law has set off a palpable sense of grief and dark humor across the app. Some users have posted videos suggesting ways to circumvent a ban with technological workarounds. Others have downloaded another Chinese app, Xiaohongshu, also known as “Red Note,” to thumb their noses at the U.S. government’s concerns about TikTok’s ties to China.
The videos highlight the collision taking place online between the law, which Congress passed with wide support last year, and everyday users of TikTok, who are dismayed that the app may soon disappear.
“Much of my TikTok feed now is TikTokers ridiculing the U.S. government, TikTokers thanking their Chinese spy as a form of ridicule,” said Anupam Chander, a professor of law and technology at Georgetown University and an expert on the global regulation of new technologies. “TikTokers recognize that they are not likely to be manipulated by anyone. They are actually quite sophisticated about the information they’re receiving.”
TikTok declined to comment on the users’ references to its ties to China.
Some users are not willing to give up the app — or their supposed spies — so easily.
Hundreds of TikTok videos over the last week have cataloged how teenagers could keep using the app in the United States, according to a review by The New York Times. One of the most popular methods described is the use of a VPN, or a virtual private network, which can mask a user’s location and make it appear that the person is elsewhere.
“They can’t actually ban TikTok in the U.S. because VPNs are not banned,” Sasha Casey, a TikTok user, said in a recent video that was liked over 60,000 times. “Use a VPN. And send a picture to Congress while you do it, because that’s what I’ll be doing.”
While VPNs can make it appear that a phone, a laptop or another electronic device is in a remote location, it is not clear if the technology can circumvent the ban. A device’s real location is stored in many places, including in the app store that was used to download TikTok.
TikTok fans also seem to be behind the sudden surge in popularity for Xiaohongshu, the most downloaded free app on Tuesday and Wednesday in the U.S. Apple Store. Hundreds of millions of people in China use the app, which, like TikTok, features short videos and text-based posts. Xiaohongshu means “little red book” in Mandarin.
Mr. Chander anticipates that the Supreme Court will uphold the ban law this week, though he believes that TikTok has the winning case. He said the downloads of Red Note and the Chinese spy memes showed that many Americans did not agree with their government’s security concerns, particularly at the expense of free speech.
“When the United States shutters a massive free expression service, which our democratic allies have not shuttered, it will make us the censor and put us in the unusual position of silencing expression,” Mr. Chander said. “It will make Americans who use TikTok really distrustful of the U.S. government as carrying their best interests.”
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