A weekend topic starting with Politico. "The Federal Home Loan Banks, a group of government-sponsored lenders whose mission is to finance housing and community development, loaned tens of billions of dollars to three crypto-friendly banks before they failed last month. Critics of the FHLBs say the loans to crypto-exposed banks are just the latest example of a government-backed lender playing fast and loose with financial risk while counting on taxpayers to pay the bill. Fannie Mae and Freddie Mac — the giant companies behind half of the country’s residential mortgages — lowered their standards for loan guarantees to subprime borrowers in the years leading up to the financial crisis, prompting the government to seize them at taxpayers’ expense in September 2008 to stave off catastrophic losses."

"'If you tell a lender there will be no consequences for a bad loan, then they’ll lend very liberally,' said Con Hurley, an adjunct professor at Boston University and the former director of the Boston FHLB. 'The losses are borne by the FDIC, and that’s where the moral hazard comes in. There’s absolutely no incentive for the Federal Home Loan Bank of San Francisco to do diligent underwriting – they win either way, whether the loan pays off or is taken over by the FDIC.'"

From KAKE. "The Federal Housing Administration, a department of HUD, initially increased loan terms from 30 years to 40 during the pandemic. Since that time the government found a need to make this a permanent solution. This comes as a result of the pandemic, the financial crisis in 2008, as well as the recent increase in interest rates. 'We've seen that there are just a lot of folks facing hard times and to be quite frank, having more people face homelessness and be on the streets is not a great outcome for anyone or society as a whole,' said the U.S. Department of Housing and Development's Public Affairs Officer Brian Handshy. The increase in terms is specifically for FHA-type loans. Handshy is hoping this will make a difference by curtailing a hike in foreclosures."

From Bloomberg. "Central banks risk losing their autonomy if they’re not publicly accountable over past mistakes, including playing down the risks of inflation that has punished consumers and hurt economies, Mohamed El-Erian warned. El-Erian, chief economic adviser at Allianz SE and Bloomberg Opinion columnist, said the market doesn’t trust the Fed’s forward guidance on interest rates. 'The marketplace itself is doubting the Fed,' he said. Policymakers also face another challenge from financial-stability risks as interest rates rise, El-Erian said. The financial system has been 'conditioned to live with ultra-low interest rates and abundant liquidity,' he said. It’s unclear yet how it will operate in 'a world of higher rates for longer.'"

"The IMF earlier this week warned it was too soon to sound the all-clear from the turmoil in the banking sector. The recent bank breakdowns were symptomatic of a 'perilous combination of vulnerabilities' that have been 'lurking under the surface of the global financial system for years,' the IMF said in the report. Those have now been exposed by an aggressive tightening of credit by central banks to fight decades-high inflation, it said."

From Market Place. "Given that this economy is more likely to fall into a recession, it’s a wonder where it is right now. A good way to look at it is through the lens of cartoons from the ’60s — Wile E. Coyote chasing the Road Runner, running off a cliff, spinning his legs and then plummeting with a crash. So, are U.S. consumers now that coyote, falling to the bottom of the economic cliff? 'No, we’re not seeing a falloff of the cliff at all,' said Joanne Hsu from the University of Michigan. She said it’s more like the coyote is windmilling, trying to stay aloft by spending it up."

From Market Watch. "Tom Capasse, a veteran of distressed property investing, won’t say the sky is falling when it comes to a credit crunch bearing down on the estimated $21 trillion U.S. commercial real-estate market. But Capasse does see a wave of distress unfolding in the coming months as more borrowers buckle under the weight of higher interest rates, tighter credit and other pandemic aftershocks. 'You are going to see strategic defaults,' said Capasse, CEO of Ready Capital Corp, of landlords walking away from properties or handing the keys back to lenders. 'You are going to see a lot more of that in the office sector.'"

"After an era of easy credit and low interest rates, property values are expected to fall, eroding the equity that borrowers have in properties and likely leading to climbing defaults. 'The Fed is getting its way. It is going to have a traditional cyclical decline in real estate,' he said."

From Mansion Global. "Ending a crushing surge in U.S. rental prices, the median asking rent fell annually for the first time in three years, declining 0.4% year over year in March to $1,937, according to Redfin. This is also the lowest the median asking rent has been in 13 months. Austin, Texas, and Chicago were the two major metro areas that saw the largest annual decreases in rent, with Austin rents falling 11% in March and Chicago dropping 9.2%. 'Rents are falling, but it feels more like they’re just returning to normal, which is healthy to some degree,' said Dan Close, a Redfin real estate agent in Chicago. 'It’s similar to the cost of eggs. You can say egg prices are plummeting, but what’s really happening is they’re finally making their way back to the $3 norm instead of $5 or $6. Rents ballooned during the pandemic, and are now returning to earth.'"

Bisnow Houston in Texas. "An Irving, Texas-based investment group’s mission to entice investors to generate passive income from high yielding multifamily investment opportunities is not going according to plan in Houston. Applesway Investment Group, led by founder and CEO Jay Gajavelli, saw its inability to pay loans on a four-property portfolio lead to foreclosure and resale at auction last week. Meanwhile, it is facing a $1.6M lawsuit for unpaid work at some of those properties and fending off accusations one property was uninhabitable and filled with vermin."

"Applesway, a company focused on acquiring 'cash-flowing multifamily properties with value-add potential' for investors, according to its website, bought up the four properties from August 2021 to April 2022, as Ningi Research noted on Twitter."

"'I'm sick and tired of working for money. If I don't go to work, no money is coming,' Gajavelli says in a prominently featured promotional video on Applesway's site, going on to paint a picture of how he emerged out of financial insecurity and could do the same for others. 'So I was asking this question: Is there any way my money works for me? Is there a way I can have a steady stream of income month after month?'"

The Orange County Register. "A significant winner in California’s real estate chill is the renter. The post-pandemic return to normalcy that’s decelerated California housing markets is forcing landlords statewide to compete for tenants. Meanwhile, renters are seeing the most available units in nearly two years. Plus, developers saw 2021’s landlord-friendly conditions of rising rents and few vacancies and rushed to build. Statewide permits for multifamily housing totaled 106,000 in 2021-22 – a huge jump from the 71,000 average for two-year periods in the previous 30 years. So, landlords will have to fill up those new units, too."

"Just ponder rents in California’s 12 most populous counties, as tracked by ApartmentList. Rents are off their peaks in all 12 markets – and are even down over three years in San Francisco and Alameda counties. So when counties are ranked by their rent dip from pandemic peaks, you see prices falling faster in Northern California."

The Guardian on California. "Predictions of San Francisco’s decline are almost cyclical, the national spotlight turning to challenges like inequality and homelessness. But a fresh era is undeniably underway for the tech world. The industry has changed massively in the past years, hitting a wall after a long run of impressive growth that was bolstered by the shift to online life that was forced by the Covid-19 pandemic. The financial district was once a bustling center of high-earning workers enjoying $17 salads for lunch and synergizing over coffee meetings – with headquarters for companies like Uber, Twitter and Salesforce centralized in the hub. Today, the streets were nearly silent."

"I stopped for coffee at the market below the headquarters of Twitter and previously Uber, once a popular morning coffee spot for many tech workers. But there was none to be had – the shop closed three months ago due to lack of demand, a worker told me. 'The workers left during Covid, and they never came back,' she said."

CBS Bay Area in California. "In early 2022, San Francisco mobilized to tackle the problems that had been building over decades in the Tenderloin District: Homelessness, an exploding drug crisis, the growing presence of drug cartels and a sense that things were spinning out of control. Sixteen months later, what has changed?  'It's almost every day,' Jorge said referring to a mound of trash on the street. 'Every single day they have a mess over here.'"

"In the day-after-day, camp-by-camp effort to connect people on the streets with some kind of shelter, there is the one element that looms over just about everything. 'There's complicated pieces and there's some that are pretty obvious,' said Mark Mazza with the San Francisco Department of Emergency Management. 'And people out here will be clear with us. They are addicted to drugs that they need to be using constantly.'"

The Los Angeles Times. "Last week, I wrote to you about California’s population ebbs and flows, which grew even stronger through the COVID-19 pandemic. So we asked: What’s driving those of you who have moved — or plan to move — to, from or around the state? A few common reasons emerged from the responses we got: the soaring cost of living; skyrocketing rents and home prices; growing concerns over local crime; a desire to be closer to family; dissatisfaction in the state’s government."

"Catherine F. moved from Santa Cruz County to Indiana. 'We are progressive Democrats who feel that California has undermined its liberal promise and has failed to address the growing gap between rich and poor, housed and unhoused residents. [We left due to the] absurd cost of living, terrible traffic, skyrocketing property crime, poor public amenities (parks, bike paths, etc.), unresponsive and obstructionist city and county government.'"

"Sophie H. moved from Alameda County to Humboldt County. 'We moved a year before the pandemic started. My husband has a job at a large software company in San Francisco. The commute got harder and longer. Our house was crammed between two others. You always had to watch your back. We lived in a desirable neighborhood, but in nine years there were several muggings, a guy roaming the street with a knife and lots of car break-ins.'"

"'We craved space, nature, working from home and no crime, and we found it. But the biggest difference is a sense of community in a small college town. People are super friendly. You can make friends easily. It’s quiet, the air is clean. All the hassles of city life are gone.'"

Palo Alto Weekly in California. "After a significant decline in home prices and sales activity during the latter half of 2022, homebuyers made a comeback early this spring. Whether the market will remain on track for a healthy recovery, however, remains unclear following the epic collapse of Silicon Valley Bank on March 10 and Signature Bank on March 12. Homes that did not sell last year and were relisted this year are finally finding buyers, albeit at lower prices. When compared to the peak in early spring 2022, the home sales have declined across all Midpeninsula cities as both buyers and sellers remain anxious about low visibility down the road."

"In Palo Alto, total home sales have decreased by 28%, while Los Altos saw a decline of 25%, and Menlo Park experienced a bigger drop of 37%. Home prices also saw a decline. From the start of this year to March 15, the median price of single-family homes sold in Palo Alto was $3.33 million, 19% lower than that for the same period last year. The home price in Los Altos held relatively well, only dropping by 8% to $4.15 million. Even with multiple offers, buyers remained disciplined and avoided overbidding. At the same time, sellers were afraid of losing offers, even those below asking."