A report from the Wall Street Journal. "As the novel coronavirus causes turmoil in property markets, some of the most risk-hungry real-estate lenders are starting to come under pressure. Funding debt investments with bank loans has allowed REITs and debt funds to juice up their profits, but it puts them at risk at a time when real-estate lending markets are freezing up. The first warning signs are already emerging. In downtown Brooklyn, developer RedSky Capital planned to replace an entire block of low-rise buildings with a mixed-use skyscraper."

"But on March 1, RedSky stopped making payments on its $154.6 million mortgage, its lender, Apollo Commercial Real Estate Finance Inc., a mortgage REIT sponsored by private-equity firm Apollo Global Management, said in a public filing. People familiar with the matter say the project’s problems predate the spread of the virus. Residential mortgage REITs, which primarily buy bonds backed by residential home loans and finance these investments with short-term debt, have faced a surge in margin calls from their lenders."

"Commercial mortgage REITs generally borrow $2.50 to $3 for every dollar of their own money that they invest, said Steven DeLaney, an analyst at JMP Securities. Mr. DeLaney said most mortgage REITs are well equipped to make it through the crisis. Still, he said, they should rethink their business models and consider using less debt and shift to unsecured loans. 'Those things you don’t think about in good times,' he said."

From The Hill. "A flood of missed home-loan payments caused by the coronavirus outbreak is threatening to bankrupt U.S. mortgage lenders and deepen the economic toll of the pandemic. The nonbank mortgage industry dramatically expanded while low interest rates and a rebounding economy helped drive housing prices to new heights and fuel a reemergence of mortgage-backed securities."

"'There was definitely a shift where the banks decided it wasn’t as economical for them because it’s a low-margin, high-volume business in the best of times,' said Graham Steele, former chief Democratic counsel on the Senate Banking Committee. 'And it just felt like the economics didn’t work well for the banks, and so you had nonbank servicers step in because it’s a little more economical for them.'"

"The sudden collapse of the economy is a particularly daunting first test for many firms who’ve only known the boom of the post-recession recovery. 'The level of potential non-payment in April due to the pandemic (and potentially beyond) could quickly exhaust their cash reserves and send them into bankruptcy. This could produce a tsunami of illiquidity,' wrote Beacon Policy Advisors, a Washington research consultancy."

The Times of London. "Banks in Britain could face losses of more than £15 billion on loans that backed leveraged buyouts and other highly geared transactions, research suggests. These loans risk going sour as an economic slump affects the cashflow of companies with heavy debts. Fideres, a specialist finance consultancy based in London, expects direct losses worldwide from leveraged loans to top $100 billion, with losses in collateralised loan obligations of another $100 billion, based on information known so far."

"Collateralised loan obligations are packaged-up pools of leveraged loans, which are then divided into different tranches of risk to suit different investors. They are similar to the sub-prime collateralised debt obligations — packaged pools of higher-risk mortgages — that went badly wrong in the 2007-09 financial crisis. Alberto Thomas, co-founder of Fideres, predicted: 'It is going to be two to three times worse than in the global financial crisis.'"

"Lenders today are much more exposed than they were in the aftermath of the banking crisis, Mr Thomas said. So-called covenant-lite loans accounted for only 14 per cent of leveraged loans in 2008, but that proportion has grown to 76 per cent today. Covenants are conditions attached to loans that give lenders much more protection in difficult times."

"Struggling borrowers are also more likely to default than they were in the last crisis, he said, because central bankers then were able to slash interest rates, dramatically lessening interest bills on loans linked to benchmark rates, such as Libor. This time official interest rates are at or close to zero."

The Buffalo News in New York. "After years of bustling sales and rising prices, Buffalo's housing market has ground to an abrupt halt. Meanwhile, most real estate agents are trying to do whatever they can for clients. But without new deals, they can't make money. 'I’m not working and this is my busy time,' said Stephanie Morgan, co-owner of JRS Morgan Realty. 'This is where I really start to build the income for the rest of the year.'"

The Daytona Beach News Journal. "Ormond Beach investor Ty Lohman saw the writing on the wall and acted accordingly a few months ago to avoid what he believed could be an oncoming disaster. No, not the coronavirus pandemic. The anticipated glut in apartment properties in the Daytona Beach area. Lohman and his wife Tovah, a real estate broker, sold several of their apartment complexes last year. They reinvested the some of the proceeds by purchasing commercial properties. In normal times, those retail properties would be a safe investment with a guaranteed steady flow of revenue. But these past few weeks have been anything but normal."

"'There’s no retail tenant who hasn’t contacted their landlord already,' Colliers International Vice Chairman Bradley Mendelson told the Wall Street Journal. Many landlords, he said, will have no choice but to let their tenants know they’re in the same boat: 'If you don’t pay your rent, I can’t pay my mortgage.' That could trigger an onslaught of commercial mortgage loan defaults, Mendelson warned."

From Morningstar on Canada. "John Pasalis, President of Realosophy, is here today to talk about what could potentially happen to Canadian real estate. Saldanha: So, let's talk about people who are forced to sell right now. A lot of investors in real estate in Canada rely on either rental income or income from things like Airbnbs. Now, with demand falling across especially Airbnbs, what are some of the options, especially for people who are forced to sell?"

"Pasalis: It's going to be very – so, people who are forced to sell now, I mean, of course, are listing their properties on the market as soon as possible, aren't delaying. The challenge is going to be for the investors, and I think that's kind of what everyone has been talking about. I mean, if you have two or three rental condos, there's a lot of talk now in the press about tenants going on a rental strike and not paying their rents. And legitimately, I mean, if their incomes have been cut, they can't pay their rent, and the province are basically saying tenants are not going to get evicted during this short period. So, if you're an investor and you're not collecting rents, it's of course going to be hard for those investors."

From Domain News in Australia. "Australia’s rental market has been flooded with new listings. New data from Domain revealed 39,252 more properties have been listed over the past two weeks alone. Domain economist Trent Wiltshire said people who had lost their jobs were looking for ways to save money by moving back in with their parents or partners and vacating properties."

"There were also more short-term rentals coming onto the full-time rental market, he said. 'It does seem like there’s an Airbnb effect,' Mr Wiltshire said. 'We’re likely to see the rental vacancy rate rise and downward pressure on rents because there is more choice in properties.'"

"Business development manager with Place Residential rentals Rebecca Russell said landlords were quickly dropping the rent prices for these particular properties in order to fill them. 'You used to be able to get $500 [for these properties], now it’s $400 per week,' she said."

From Good Returns New Zealand. "The unprecedented covid-19 outbreak has many economists predicting a short, sharp downturn in the housing market. Tony Alexander weighs up the negatives for homeowners in a post-coronavirus environment. 'Absence of income means inability to raise a deposit, get a mortgage, and perhaps even continue to keep the house one already owns. The complete absence of tourism this year and the much lower numbers of inbound travellers for years to come will bring Airbnb dwellings back to the market. Reduced employment, visa holders leaving, students not arriving, suggest rent assumptions will need to be redone. Over the past four years, investors have switched their focus from Auckland out to the regions. We’ve seen this before; it often does not end well with over-supplies revealed in some locations."

From Bloomberg on the UK. "Short-term rental properties offered on websites like Airbnb Inc are being dumped on London's normal letting market as the coronavirus outbreak shuts out tourists, pushing down the capital's rents. Most inner London areas saw an increase in the number of properties with asking-price cuts of more than 10 per cent in the two weeks from March 9 compared with a year earlier, according to property website Zoopla. The amount of cuts was more pronounced in the richest boroughs."

"'Some markets where short-term rentals have been a big factor, we could possibly see some financial stress there' as a result of the pandemic, said Neal Hudson, a residential property analyst. Landlords no longer being able to pay their mortgage 'could contribute to excess selling in the market, pushing prices down.'"

The Wall Street Journal. "Janet Yellen, the former Federal Reserve chairwoman, said Monday bad choices by broad swaths of the financial industry and companies, abetted in part by low rates and regulatory shortcomings, are likely to make it harder for the economy to recover from the coronavirus crisis. While the banking and financial sector was in 'generally in good shape' ahead of the crisis, problems were already taking shape, Ms. Yellen said."

"'Non-financial corporations entered this crisis with enormous debt loads, and that is a vulnerability. They had borrowed excessively' and they did it not so much for productive purposes like investment, but for buying back stocks and paying dividends to shareholders, Ms. Yellen said. And while these firms borrowed, investors also let their guards down in their hunt for high yields, the former central bank official said."

"All of this took place because low interest rates made it easier to borrow and regulators didn’t have the right powers to stop it. Regulators could only step in if this borrowing threatened the bank making loans, and for the most part it didn’t, Ms. Yellen said."

"The corporate borrowing binge 'creates risk to the economy. And I’m afraid we’ll see that in spades in the coming months, because it may trigger a wave of corporate defaults. Even where a company avoids default, highly indebted firms usually cut back a lot on investment and hiring, and that will make the recovery more difficult,' the former central banker said."

"The Fed has long been dogged by complaints that the low rates it put in place during the financial crisis allowed financial market excess to build. Some Fed officials warned ahead of the coronavirus pandemic that high levels of corporate borrowing were not themselves a systemic risk, but could amplify trouble if it arrived."