Cyberattack Chokes Property Market

August 15, 2023

THE BIG SPLASH

Cyberattack Chokes Property Market

The US real estate market is currently facing a major hurdle due to a cyberattack that hit a crucial online service provider.

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  • Rapattoni, a California-based company, has been targeted, disrupting the operations of home buyers, sellers, real estate agents, and listing websites for the past five days. The attack impacted Rapattoni's software and services, which provide Multiple Listing Services (MLS) to regional real estate groups all over the country.

  • MLS is a vital tool that offers instant access to information about upcoming homes for sale, purchase offers, and sales of listed homes. This cyberattack has had far-reaching consequences. Realty agents have observed a sharp decline in activity on online real estate platforms.

  • The outage has hindered the listing of new properties, altering prices, marking homes as sold, and even listing open houses. While Rapattoni has referred to the incident as a cyberattack, it is widely believed to be a ransomware attack, a form of hacking where cybercriminals encrypt or steal sensitive data and demand payment for its release or decryption.

  • Realtors are navigating this disruption by resorting to alternative approaches such as in-person meetings and other databases to stay informed about listings and market updates. However, the absence of the MLS data is significantly impacting the real estate ecosystem.

  • Rapattoni has provided limited updates about the ongoing efforts to restore their systems, leaving real estate professionals in uncertainty. As some real estate services rely on alternative data vendors, the extent of the damage varies, but the urgency to restore services remains high.

  • The incident underscores the vulnerabilities of essential online services in the real world, emphasizing the need for robust cybersecurity measures to prevent such disruptions in the future.

A SCOOP OF FORECLOSURE

More than 250 Colorado homes have been auctioned off at sheriff’s auctions for a fraction of their market value since 2018 after being foreclosed on by homeowners' associations (HOAs), according to a Colorado Sun investigation.

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  • In this state, where almost half of the population resides in HOA-governed communities, the process of HOA foreclosure has come under scrutiny.

  • Unlike traditional mortgage foreclosures, these actions stem from unpaid HOA dues, sometimes as small as a few thousand dollars before growing due to interest, fees, and court costs.

  • This approach can erode or completely eliminate generational wealth. The homes are sold at auction after court rulings, a process that can take over a year. Legal advertisements for these auctions are often buried in low-circulation newspapers, making it hard for affected homeowners to be aware.

  • Bidding starts at the debt owed to the HOA, which includes interest and fees. The situation has highlighted the need for changes in HOA foreclosure laws to safeguard homeowners’ equity, but such efforts have been met with resistance from associations.

  • The HOA foreclosure process underscores how quickly the erosion of property equity can occur due to unpaid dues.

A SCOOP OF MARKET DATA

The scarcity of available homes, a driving force behind rising home values, has led to nearly 8.2% of homes in the US being valued at $1 million or more, just shy of the record 8.6% seen in June 2022.

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  • This trend indicates how tight inventory is pushing more properties into the million-dollar range.

  • The share of such homes has doubled since pre-pandemic times, when it was around 4%.

  • Despite an economic soft landing, high-end buyers are feeling more confident in making significant purchases, possibly leading to increased demand.

  • However, mortgage rates nearing 7% continue to impact buyers. Redfin also reported that the total value of the US housing market hit a new record of $46.8 trillion in June, a 19.1% increase in two years.

A SCOOP OF LUXURY

Despite challenges in the overall multifamily sector, luxury apartment demand has remained steady due to rising housing prices and mortgage rates.

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  • A report from Marcus & Millichap's Institutional Property Advisors (IPA) division reveals that while Class A vacancy rates saw a 30 basis point increase from the end of 2022 to mid-2023, Class B and C apartments faced higher increases of 40 to 80 basis points during the same period.

  • This trend defies expectations, considering the "record construction" of nearly 200,000 apartment units delivered in the first half of 2023, surpassing the previous record by 25,000 rentals.

  • The demand for high-end apartments, particularly among millennials, is supported by the high barriers to homeownership.

  • The report also highlights how the difference in monthly payments between Class A apartment rentals and typical mortgage payments on median-priced houses has contributed to the apartment market's stability.

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