A weekend topic starting with Bloomberg. "A changing of the guard among the biggest buyers of US Treasuries has Wall Street veterans bracing for further pain in the world’s largest bond market. Increasingly absent are steady-handed investors including foreign governments, US commercial banks and the Federal Reserve. In their place, hedge funds, mutual funds, insurers and pensions are piling in. Market watchers are quick to note that unlike their more price-agnostic predecessors, the new buyer base is likely to demand a heavy premium to finance Washington’s spendthrift ways, especially with debt sales set to surge as deficits swell."

"'We have an abnormal supply-demand situation in that the quantity of debt the government has to sell is a lot' and will 'remain a lot,' Ray Dalio, the founder of Bridgewater Associates, said earlier this month' He expects 10-year yields to exceed 5% in the near future. 'The buyers are less inclined to buy the debt, for a variety of reasons' including that 'many have gotten whacked. There’s lots of losses.'"

Business Insider. "A Treasury bond auction Thursday saw weak demand, adding to growing alarms that the explosion in the supply of US debt could overwhelm Wall Street. The US sold $20 billion of 30-year bonds, but dealers had to take up 18% of the supply, more than the typical share of about 11%, after investors balked. The auction tail, or the gap between the lowest bid price versus the average, was the narrowest since November 2021, according to the Financial Times. The yield on the 30-year Treasury jumped 12 basis points to 4.856%, and the 10-year yield surged 10 basis points to 4.7%. Thursday's results followed other soft Treasury auctions this week, including a $46 billion sale of three-year notes and a $35 billion sale of 10-year bonds."

Market Watch. "U.S. homes may be wildly unaffordable for first-time buyers, but mortgage bonds backed by those same properties could be dirt cheap. Shocks from the Federal Reserve’s dramatic rate increases have walloped the $8.9 trillion agency mortgage-bond market, the main artery of U.S. housing finance for almost the past two decades. 'It’s really, really struggled,' Nick Childs, portfolio manager at Janus Henderson Investors, said of the agency mortgage-bond market during a Thursday talk on the firm’s fixed-income outlook. Banks awash in underwater securities have pulled back too. The repricing of similar bonds helped hasten the collapse of Silicon Valley Bank in March. 'Banks have been not only absent, but selling,' said Child."

Multi-Housing News. "Near-term survival loomed as a major concern for small and medium sized multifamily businesses at the Middle Market Multifamily Forum’s sixth annual Northeastern conference. High interest rates, inflated construction costs and substantially decreased transaction volumes are among the hazards facing the sector, said panelists. Many speakers attributed the state of the dealmaking landscape to the Federal Reserve’s policies, which have led to the highest funds rate in more than two decades. As of the second quarter of 2023, investment sales were down by 71.8 percent year-over-year, according to a report from Newmark. Those numbers seem unlikely to rebound soon and waiting out the storm may not be an option."

"'Survive to ‘25 is not even enough,' reflected Ira Perlmuter, Chief Investment Officer at IJP Family Partners, a family office based private equity firm. 'You are going to see 36 months of really tight problems,' he added. On a separate panel, a group of capital markets and investment management experts explained how they are adjusting to the current landscape, making the most of stringent lending terms and scarcity of debt. 'Your best lender is your existing lender,' said Gary Newman, Managing Director of BrightSpire Capital. 'There is such a dislocation in the market between the bid and the ask that there are not a lot of sales or investment transactions that make a lot of sense to us.' All of this is taking place at the same time that more than $1 trillion in existing loans face maturation."

From Bisnow. "This isn't your father's financial crisis. As distress proliferates across the U.S. and a wall of debt comes due, today's owners are faced with a different — and more complicated — calculus about whether they can hold on to their buildings. Some are throwing in the towel and choosing to sell. But unlike prior downturns, the velocity of transactions has been slow going amid an air of uncertainty that has negotiations frozen in place. Net charge-offs and delinquency rates for bank-held CRE loans increased in the second quarter, with all major property types showing greater distress, according to Trepp. Meanwhile, MSCI is tracking $1.4T worth of CRE debt set to mature between 2024 and 2026."

"'The capital markets are severely dislocated,' BH3 Management co-CEO Greg Freedman said. 'We have not seen the illiquidity on the debt side of CRE how it is today since 2008, 2009. The last chapter of this crisis has not been written yet,' Freedman said. 'If this financial crisis is a 20-chapter book, we are probably on Chapter 3 or 4. There’s a lot to continue to unpack."

Coastal News Today in Florida. "With concrete blocks stacked on the left lot, and a near-finished house on the right, Jim Toto opens the door of the canal-front, Gulf-access home for a tour. Toto, owner of Toto Custom Homes, bought five adjacent lots earlier this year and went right to work, trying to satisfy a seemingly unquenchable thirst to build, build and build some more across Southwest Florida … despite interest rates that keep climbing and costs that are doing the same. The northwest portion of Cape Coral, off Burnt Store Road, continues to fill with new homes similar to the ones Toto has been building. 'First and foremost, I think it’s because the prices of property, not too long ago, were very affordable,' Toto says. Before the COVID-19 pandemic, lots in this region were selling for $60,000 to $80,000. Now, they are going for $225,000 to $500,000, depending on the location and whether they come with a seawall."

The Messenger on California. "Across Los Angeles’ most exclusive neighborhoods, multimillion-dollar mansions are increasingly sitting on the market. Inside their gates, salt water pools have gone all summer without a single swimmer, private movie theaters screened neither Barbie nor Oppenheimer and the pins in home bowling alleys have stayed steadfastly upright. The issue? Now more than ever, these homes are not for sale, but for rent. A concoction, consisting of high interest rates, a new transfer tax on sales, and the end of the pandemic, has been poisonous to the area’s ultra luxury rental market."

"'A property that would otherwise be coming on the market for sale is really coming on the market for lease,' said Billy Rose, co-founder of residential real estate brokerage The Agency. 'I'm one of those people.' Rose, who is looking to move to Santa Monica and downsize, is currently renting in the area while looking for a buyer for his Westwood Hills home. 'If there were a point where I couldn't sell it for a number that I felt comfortable selling, I would just lease it out,' Rose said."

"In Beverly Hills, especially, supply has skyrocketed. In January 2012, 254 properties at that price point were available to rent. As of Oct. 11, there are 1,035 properties. The growth in supply was much needed during the pandemic, when affluent residents of Los Angeles and across the country chose to camp out in mansions. Between August 2020 and July 2021, total spending volume on rents in Beverly Hills exceeded $12 billion monthly. In August 2021, that plummeted to $3 billion. It’s since fallen further. Last month, Beverly Hills’ ultraluxe rental market brought in $1.7 billion."

"'In the higher end market, short term rentals have really compressed in terms of the nightly rate,' said Stuart Heller, CEO of Stay Awhile Villas, a luxury vacation rental company in Beverly Hills, Los Angeles and Malibu. 'Properties that were possibly $7,000 a night are probably $3,000 a night, and the properties that are worth $3,000 per night are more like $1,500 per night.' Real estate agents say the main culprit in the rise in rentals is high interest rates, which lock homeowners into what’s referred to as ‘golden handcuffs.’"

"'Renters have pretty good negotiating power right now. I'm seeing a lot of homes where somebody will come and see the home and they'll try to go, ‘I will give you $20,000 less than 'you're asking for a month,’” said Compass agent Megan Majd. 'It obviously is up to the owner and based on their needs, but I'm finding that sometimes owners need to realize that the market is not as strong as it was.'"

The Daily Voice. "The number of homes bought over the third quarter of 2023 declined in Westchester, Putnam, and Dutchess Counties, according to the Houlihan Lawrence Westchester-Putnam-Dutchess Q3 Market Report. According to Houlihan Lawrence CEO Liz Nunan, it is an 'opportune time to sell north of New York City,' as long as prices are not set too high. 'While the demand might suggest otherwise, buyers remain discerning. Accurate pricing remains critical as overly inflated prices can cause homes to be overlooked and seller disappointment,' Nunan said."

From CBC News. "Canada's housing market continued to cool last month, new numbers from the Canadian Real Estate Association show Friday, as the number of homes sold has now fallen for three months in a row and benchmark prices slipped lower, too. Benjamin Reitzes, an economist with Bank of Montreal, agrees with the assessment that the housing market is in for a bumpy ride as long as interest rates remain at their current level. 'The current level of interest rates and prices don't mix well. One of the two needs to come down, and it doesn't look like the Bank of Canada is poised to cut rates any time soon,' he said. 'Housing could be in for a rough winter, though as usual, location matters a lot, with some provinces likely to struggle more than others.'"

"Vassil Staykov, a realtor in Toronto, says the main theme of the housing market right now is a vast disconnect between sellers who are stubbornly trying to get the high prices they have their hopes pinned on, and buyers looking for a bargain. 'We're coming off of three years of skewed data that have changed our perception of everything, but the real story is lack of absorption — stuff is just not selling.' Staykov says buyer fatigue is settling in, but not of the usual type, where buyers stop trying after being disillusioned from losing in multiple bidding wars. Instead, they're getting fed up because sellers are refusing to accept that the market has cooled. 'I'm getting low-balled left, right and centre on three listings right now, and I'm also low-balling a bunch of listings myself,' he said."

The Globe and Mail. "Bank of Canada deputy governor Nicolas Vincent said that companies continue to raise prices more frequently than before the pandemic and warned that this behaviour could become 'self-perpetuating,' making it harder to get inflation back under control. In his first speech since becoming deputy governor, Mr. Vincent described how business price-setting changed during the COVID-19 pandemic and after restrictions lifted, with companies raising prices more frequently and by larger amounts than usual."

"'If you continue to expect your suppliers and competitors to make frequent price changes, you might be more prone to do the same yourself, creating a feedback loop,' Mr. Vincent said, according to the English translation of the speech. 'Under certain conditions, this could make prices even more sensitive to shocks. In other words, if recent pricing behaviour settles into a new normal, it could complicate our return to low, stable and predictable inflation.'"

"The change in price-setting during the pandemic caught central bankers off guard. Economists rely on models to predict inflation, and the Bank of Canada’s models assume prices are relatively 'sticky' – that is, companies change them infrequently because of competitive pressures and because it costs money to change prices. This core assumption was challenged during the pandemic and the reopening of the economy as COVID-19 receded. Health-related shutdowns fractured supply chains and changed consumer spending habits, while government support measures juiced demand throughout the economy."

"This confluence of events led to a steep rise in business costs, a higher willingness to pay on the part of consumers, and weaker competitive forces as inflation become widespread and price-signals malfunctioned. 'During the recovery from the pandemic, firms started to mention that they were experiencing a rapid increase in their costs as well as high demand for their products and services. Meanwhile, customers had few choices because supply was low across several industries,' Mr. Vincent said. 'This may explain why firms told us that their customers, aware of the widespread cost pressures firms were facing, appeared willing to pay higher prices. Confronted with these changes in their business environment, firms reacted by raising prices more often than usual and by larger amounts.'"

Insauga in Canada. "A pair of lakeside homes in Bowmanville and Ajax and a threesome of Oshawa condos make up the least expensive homes sold in Durham Region in September, with sale prices of the five properties ranging from $425,000 to $525,000. The fifth-highest selling property sold in Durham in September was the first to top the half-million mark, with this three-bedroom townhouse at 1010 Glen Street in south Oshawa selling last month for $535.000. The renovated townhouse features plenty of space inside – including a finished basement – and more outside with a spacious backyard. The property last sold 13 years ago for just $89,900."