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When Repo Rates Jumped In September, Was That A Warning Sign?

A report from Westword on Colorado. “Apartment supply throughout Denver has gone up of late. In 2017, by CoStar Group David Pierce’s estimate, ‘there were just under 20,000 units under way, which ‘ was the most at any point in recent history.’ However, ‘the amount has steadily trended downward, and today we’re closer to 14,000 market-rate units under way.’ Moreover, a lot of the buildings targeted luxury consumers, which didn’t address the struggles of folks looking for more affordability and led to a glut of pricey pads that are lingering on the market for longer than their owners likely anticipated.”

“‘If you look at the ultra-high level, we’ve seen rents in places like Cherry Creek and the Golden Triangle fall significantly, sometimes by 10 percent from where they were in 2015 and 2016,’ Pierce says. ‘We’re seeing there’s a limit in Denver for what some people are willing to spend.'”

From The Daily Texan. “One of the most common lines from those invested in the growing amount of high-rises and urban development in Austin is the argument of ‘affordable density.’ More dense housing, the argument goes, equals a greater supply of housing per square foot, which means a reduction in demand and, in turn, price.”

“Kevin Quist, an economics and civil engineering senior and member of the West Campus Neighborhood Association, has noted a mixed message sent by the West Campus housing market. ‘In some areas of West Campus, we see the supply of housing increase along with a supply of pricing, while in other parts like the northern areas of West Campus, we have seen a drop in pricing consistent with the rise of supply,” Quist said. ‘It doesn’t seem to have an immediate short-term correlation.'”

From AZ Family in Arizona. “The number of 911 calls made from elevators in the Phoenix and Tempe areas has risen steadily over the past five years. Technicians blame a ‘perfect storm’ of new and aging buildings. The building with the highest number of 911 calls in that time period is a student housing apartment near the ASU Tempe campus. Riders called 911 32 times from University House over two years. That building is only six years old.”

From Cavilier Daily in Virginia. “Persistent facility issues continue in Bond House, as mice have been spotted inside the building and residents continue to report a host of challenges. Second-year College student Uché Chima said that she has seen multiple mice in her apartment. Chima also shared a video of a mouse that scurried under her stove.”

“‘I could not sleep knowing that there’s a mouse in a brand new apartment,’ Chima said.”

“Second-year College student Aaron Entzminger said he has not seen mice, although his friends have. However, Entzminger has faced numerous issues in Bond, including the water never being hot and having to file numerous work orders. ‘The bathroom door on my side [of the apartment] to this day has not been fixed even though we have submitted like three or four work orders,’ Entzminger said. ‘I just don’t think this is worth the money.'”

From KTBS in Louisiana. “The Louisiana State University Board of Regents approved a $3.25 million deal with an Australian company, so that LSU-Shreveport can assume control of its own student housing. ‘Thank goodness,’ said Clair Miller, a University Court resident and sophomore at LSUS.”

“One day before learning of the buyout, 3 Investigates visited Miller’s apartment. The wooden cabinet framework was rotting and Miller said she had a cockroach problem. In one of the apartment’s two bathrooms, there’s a hole in the ceiling above the shower, where maintenance crews repaired a leak Friday. Miller said she first noticed the leak Aug. 21 and reported it to management shortly after. ‘Water was just streaming down from the overhead fan,’Miller said.”

The Associated Press. “As colleges and universities come alive this fall, some campuses sit closed and empty after succumbing to a recent wave of fewer students and financial challenges. In Poultney, Vermont, population 3,300, Green Mountain College had occupied a prominent spot at the end of the main street for 185 years. That changed in the spring, when the environmentally minded liberal arts school closed after commencement, citing a drop in enrollment and financial challenges.”

“Sophia Vincenza Milkowski, of New York City, graduated two years ago and stayed in Poultney because she liked it so much. ‘We’re still trying to figure out what Poultney even is now without it there,’ she said during a break from work at a taco restaurant. ‘We’re all feeling its absence,’ she said, ‘whether we were a part of the college or not.'”

“Across the country, 71 private nonprofit colleges and universities have closed since 1995, including schools that announced they would shutter in June 2020, according to the National Association of Independent Colleges and Universities.”

From Multi-Housing News. “As the sources of multifamily development financing—debt and equity—jostle for business, their strategies and products continue to evolve. Kyle McDonough, principal at Tower Capital in Phoenix, confirms that banks continue to prefer developers they already work with. Multifamily development is booming in metro Phoenix McDonough expects that multifamily financing overall will remain plentiful. ‘Everybody’s trying to get it out the door.'”

“When it comes to debt, commercial banks are recognized as the biggest source of financing for multifamily construction, according to Jay Maddox, principal with Avison Young in Los Angeles. Banks have returned to the main stage of multifamily development lending after pulling back three years ago due to overbuilding concerns. However, debt funds—such as Colony Capital and Square Mile Capital—are becoming more important as they offer more flexibility on terms and, typically, non-recourse loans, in response to which some banks have loosened their lending criteria.”

The Commercial Observer. “For as long as capitalization rates have been calculated in real estate, there has been an ongoing debate as to what they should be, given interest rates, cost of capital, returns on alternative investments, supply and demand constraints, tax incentives, et cetera.”

“Using multifamily as an example, cap rates on Class A product were approximately 300 to 400 basis points higher than the 10-year Treasury nationally. This spread broke down at the peak of the cycle in 2006, when cap rates were only 100 bps over the 10-year Treasury, as investors bid up prices to unsustainable levels. The 2008-2009 downturn then caused the pendulum to swing the other way, with spreads peaking at more than 5 percent in 2012.”

“Today, we are back to 3 percent or so as Treasury yields have plummeted. However, there is now a very wide disparity between property types and sub-markets. Class A apartments in rent-regulated buildings had been at 3 percent cap rates before the recent rent regulation changes, which will cap their upside. But they rose almost 2 percent overnight, although there haven’t been any notable trades to explain that rise. Why else have these traditional benchmarks come unstuck, and where do we go from here?”

“For institutions with long-term money to put out, any alternative is better than buying sub-2 percent Treasurys. If interest rates were to rise, those current Treasury buyers would have a capital loss. The bidding up of Class A real estate is a better alternative and is one of the primary reasons cap rates haven’t risen even though fundamentals, in many markets, have deteriorated and foreign investment has mostly dried up. Being able to leverage those assets with sub-4 percent mortgages only exacerbates the situation, causing cap rates to further compress.”

“So where are we now? As long as interest rates stay at or near current levels, cap rates aren’t going up sharply, barring a deep recession, anytime soon. The true test will be when interest rates someday spike due to an exogenous event. When repo rates jumped in September, was that a warning sign? Will institutions audible from real estate back to fixed-income instruments? Will cap rates rise simply because financing is more expensive? The answer to all three questions is likely yes. But to what degree? As the accompanying chart illustrates, there is definitely a correlation between cap rates and interest rates: Only the peak of 2005 and 2006 defied it.”

“We know how that turned out.”

From Senior Housing News. “Senior living is in the middle of a transformative period. Supply and demand dynamics are imbalanced. Providers are grappling with oversupply in markets across the United States, while determining how to address the arrival of the baby boomers and the growing middle market.”

“And the available labor pool is at record lows during the longest economic growth period in the nation’s history. But that boom may be reaching an end, with rumblings of a possible recession in 2020. In short, the industry is in the midst of a ‘sea change’ — one that industry stakeholders should be taking a more proactive approach to address.”

“The extended length of the current economic growth cycle has resulted in some unintended consequences, Brightview Senior Living CEO Marilynn Duker said. One is an excess of capital in the debt and equity markets looking to place deals. ‘We would actually welcome a recession, because [the capital markets are] a bit too frothy. We’d like to see things settle down a bit, in that regard,’ she said.”

This Post Has 90 Comments
  1. ‘The true test will be when interest rates someday spike due to an exogenous event. When repo rates jumped in September, was that a warning sign? Will institutions audible from real estate back to fixed-income instruments? Will cap rates rise simply because financing is more expensive? The answer to all three questions is likely yes. But to what degree? As the accompanying chart illustrates, there is definitely a correlation between cap rates and interest rates: Only the peak of 2005 and 2006 defied it. We know how that turned out.’

    It’s funny how these people think real estate is a commodity that has to be continuously supplied like tomatoes. And those cap rates keep plunging without consequence. Oh, the elevator doesn’t work? We’ll get to it some day when we have the money. Cockroaches? Mice? But there’s so much capital!

    1. My landlords have termites in their attic. They have been there for years, and I even took a photo of one and sent it to them. They tried some unproven low-price oil treatment that didn’t work, rather than tenting, which is more expensive yet effective. Good luck to them with this issue if they ever try to sell.

      1. i want to see before and after pictures of the inside of these luxury student condo buildings after they’ve been lived in by. college students for ten years. Who comes up with these ideas?

        1. Like the LSU article shows, it’s mostly a bunch of foreign outfits. It was another “story” these guys invented. In a recession people go back to school therefore student housing is recession proof! Can’t build enough of that wonderful stuff. Except overall enrollment is down and only going to get worse. Oops!

          And I’ll note again, these money losing cap rates are at a time when dollar rents and the percentage of income spent on rents has never been higher.

          1. You’d probably get more responsible tenants with Section 8. Not sure how that figured into the business model.

          2. “In a recession people go back to school…”

            And live in a student apartment throwing keg parties as if they 19 again? Oh come on, every back-to-school adult I know is doing 80% of their school work online. These “foreign outfits” can’t figure this out?

          3. every back-to-school adult I know

            Was working full-time and going to school at nights and/or on weekends.

  2. ‘If you look at the ultra-high level, we’ve seen rents in places like Cherry Creek and the Golden Triangle fall significantly, sometimes by 10 percent from where they were in 2015 and 2016’

    There are some people who thought they had a pension or life insurance that are gonna find out they don’t.

    1. Cherry Creek is one of the only neighborhoods in the City of Denver that you are very unlikely to see panhandlers, homeless, tweakers, etc. The Cherry Creek North Business Improvement District and the Denver Police keep most of the undesirables out of the area. Janus Capital’s world headquarters is located there, as are many hedge funds, private equity firms, and private banks.

      https://cherrycreeknorth.com/about/about-the-bid

      1. I stayed at the Marriott in the area for business once, a lot of women on the prowl for a rich husbands in that area.

        1. Grandpa always said, “You can marry more in a minute than you can make in a lifetime.”

  3. ‘The extended length of the current economic growth cycle has resulted in some unintended consequences, Brightview Senior Living CEO Marilynn Duker said. One is an excess of capital in the debt and equity markets looking to place deals. ‘We would actually welcome a recession, because [the capital markets are] a bit too frothy. We’d like to see things settle down a bit, in that regard’

    OK so why? Cuz they are losing money, that’s why. Too much supply is killing everybody. Don’t expect central bankers to ever understand how much destruction they are causing.

    1. https://www.rentcafe.com/blog/apartmentliving/luxury-apartments/8-out-of-10-new-apartment-buildings-were-high-end-in-2017-trend-carries-on-into-2018/
      Lifestyle • Luxury Apartments • Real Estate News
      8 Out of 10 New Apartment Buildings Were High-End in 2017, Trend Continues in 2018
      September 21, 2018
      Nadia Balint

      “There is no better visual depiction of urban development than seeing an old parking lot replaced by an edgy tower apartment building. If just a few short years ago it was a sensation to see the incessant rise of high-end rental buildings in our cities, by now they are beyond pervasive. As recent as 2015, three-quarters of the new apartment construction completed that year were high-end. In 2017, the construction of luxury rental properties had risen to 79% of all apartment construction in the U.S.

      Encumbered by high construction costs and encouraged by a surge in demand for rentals, developers have bet big on luxury apartments. Back in 2012, high-end properties represented about half of all new completed construction, but now these projects occupy the lion’s share of the multifamily industry. Of the 1,600 large-scale apartment buildings completed in 2017 in the U.S., 1,270 (or 79%) classify as high-end properties, according to property data and quality ratings by Yardi Matrix.

      Aiming even higher, 2018 is shaping up to be another year for apartments at the top end of the market. Nationally, about 87% of all large-scale apartment buildings completed in the first half of 2018 are high-end.

      – Classic misallocation of capital and malinvestment, driven by central bank (aka the Fed) easing/ultra-low rates/etc. While the market was looking for “affordable” housing, the developers embraced greed due to the cattle prod of the Fed and only saw $ signs. Not only did they targeted the wrong tier, but they WAY overbuilt. I can only image a large hole in the ground (e.g. meteor crater) as a monument to their greed and stupidity. An equal share of blame falls at the the feet of the central banks as enabling technology (i.e. electronic printing press).

      – Similar situation to China’s “ghost cities”, but a little smaller scale. In any case there will almost certainly be some fire sales on this of epic proportions, coming soon to an MSA near you.

  4. “‘If you look at the ultra-high level, we’ve seen rents in places like Cherry Creek and the Golden Triangle fall significantly, sometimes by 10 percent from where they were in 2015 and 2016,’ Pierce says.

    A 10 percent drop isn’t significant, Pierce. But once those developments go into foreclosure and are auctioned off for a fraction of their current Yellen Bux valuations, then rents will indeed drop bigly.

    1. ‘A 10 percent drop isn’t significant’

      It’s a death-knell. They flew in there with a 3% cap rate.

      “Importantly, the cap rate formula does NOT include any mortgage expenses. As you can see in the formula for net operating income below, the expenses do not include a mortgage or interest payment.”

      https://www.coachcarson.com/cap-rate/

      And this 10% rent drop doesn’t count vacancy or concessions, which we’ve seen can double or triple the effective rent decline. Remember the Oklahoma University guy saying their apartments were “cash-flow negative from day one”? This is how they got there.

      And those very same OK apartments lost 30% of value recently.

      1. “Remember the Oklahoma University guy saying their apartments were “cash-flow negative from day one”?”

        I do.🤣

        1. September 10, 2019

          “The trustee representing bondholders who invested $250 million in a luxury dorm at the University of Oklahoma accused the college Monday of breaking a promise to lease retail and parking spaces over the 40-year term of the bonds. Bonds issued in 2017 to finance the 1,230-bed complex known as Cross Village, which had a 27% occupancy rate at the end of March, lost a third of their value after the university terminated the agreement.”

          “‘Major mutual funds, which aim to judiciously invest ordinary peoples’ valued savings and pension monies, lent $250 million based on the belief that the University would honor its obligations and not unnecessarily jeopardize Oklahoma’s standing in the municipal market,’ Arent Fox, the law firm hired by UMB, said in the letter. ‘This belligerent act sends a loud and clear message to the marketplace and business community. YOU CANNOT TRUST AND SHOULD NOT DO BUSINESS OR BUY BONDS OF THE UNIVERSITY OR THE STATE OF OKLAHOMA.’”

          “Colleges from Texas A&M to Kean University in New Jersey have tapped non-profits to finance student housing in an effort to hold down debt as they cope with declining state aid and pressure to limit tuition increases. The University of Oklahoma case highlights the risk of projects that rely on third-party support and recalls a decision by Michigan to terminate a lease in a bond-financed building after four years, leading to a default in 2017, according to Municipal Market Analytics.”

          http://housingbubble.blog/?p=2335

        2. Is buying a cash-flow negative rental property much different than buying stock in a cash-flow negative company or a negative-yielding government bond?

          I believe that I see a pattern here!

          1. Cracks in the central banking cartel’s self-prescribed quantitative easing mandate are now visibly apparent.

            The Financial Times
            European Central Bank
            Former central bankers attack ECB’s monetary policy
            Sharp criticism of Draghi’s measures underlines challenge for his successor Lagarde
            A cyclist rides across a bridge as the skyscraper headquarters of the European Central Bank (ECB) stands beside the River Main in Frankfurt, Germany, on Thursday, Sept. 8, 2016. ECB president Mario Draghi will hold a press conference later today after the Governing Council sets monetary policy for a euro-area economy that’s looking in need of heightened stimulus for a while to come. Photographer: Jasper Juinen/Bloomberg
            © Bloomberg
            Martin Arnold in Frankfurt yesterday

            A group of former senior European central bankers has published a memo attacking the loose monetary policy of the European Central Bank, which they argued was “based on the wrong diagnosis” and risks eroding its independence.

            Their criticism comes in response to a package of easing measures announced by the ECB last month that triggered unprecedented opposition within the top echelons of the central bank.

            The rare public attack on the ECB underlines how Christine Lagarde could have a fight on her hands after she takes over from Mario Draghi as president of the bank at the end of this month, if — as expected — she decides to loosen monetary policy further in the face of the eurozone’s mounting economic slowdown.

          2. “Former central bankers attack ECB’s monetary policy
            Sharp criticism of Draghi’s measures underlines challenge for his successor Lagarde”

            This fake-baking, leather-skinned walking cadaver is no different than Draghi. These people have proven they have absolutely no idea how to run a banking system or the worlds’ economies. One thing is for certain – the end is near when it comes to their cheap money garbage. Once they’re at zero, they’re finished. This “negative rates” bullsh!t will blow up in their faces.

      2. ‘A 10 percent drop isn’t significant’

        I talking about from a renter’s perspective. 10% off a ridiculously overpriced “luxury” rent is still more money than I choose to allocate for putting a roof over my head.

        1. Exactly. It’s like 10% off an $85,000 pickup truck. 50% off might start to approach affordability for the masses.

      3. – A 3% cap. rate says you WAY overpaid for the property, and as you mentioned Ben, the loan financing costs are “extra”. Developers never borrow money for their projects though, so “hakuna matata.” The ultimate liquidation is now “baked into the cake.” Epic fail.

        – Reference: Historically good cap. rates are something like 7-10%. They simply overpaid.

        1. Yes, but why did this run on for years? Because they could sell for more or cash-out refinance. Returns from rents became irrelevant. Meanwhile a 40 year high in construction (it’s a commodity now) buried the metros in oversupply.

  5. That changed in the spring, when the environmentally minded liberal arts school closed after commencement, citing a drop in enrollment and financial challenges.”

    The cost of higher education has tripled since the 1990s, while the quality of education provided has declined. Bloated administrations have added worthless high-priced positions like “Chief Diversity Officer” and padded their payrolls with overpaid leftist ideologues, while hiring low-wage assistant professors to actually teach, or should I say indoctrinate, the special snowflakes.

    If there’s one thing that fills me with more schadenfreude than seeing “I’m not giving it away” greedheads chasing the market down, or Real Journalists getting pink slips from failing globalist propaganda outlets, it’s seeing the cultural Marxists who have subverted our higher education system being cast out of their ivory towers and into our oligarch-looted economy where the market value of their “skills” is nil.

    1. +1

      Any Victim Studies™ instructor who gets laid off should consider trying to #LearnToCode.

    2. Try selling stuff on ebay you think is worth a lot because its supposedly rare and old……..and realize you value it more then anyone else does..

      “I’m not giving it away” greedheads chasing the market down,

    3. – Also “+1”.
      – Reference:
      https://tinyurl.com/y42v9tga
      (link to book @ Amazon.com)
      The New School: How the Information Age Will Save American Education from Itself Hardcover – January 7, 2014
      by Glenn Harlan Reynolds

      “Economist Herb Stein famously said that something that can’t go on forever, won’t. For decades now, America has been investing ever-growing fortunes into its K-12 education system in exchange for steadily worse results. Public schools haven’t changed much from the late 19th century industrial model and as a result young Americans are left increasingly unprepared for a competitive global economy. At the same time, Americans are spending more than they can afford on higher education, driven by the kind of cheap credit that fueled the housing bubble. With college graduates unable to secure employment or pay off student loans, the real-world value of a traditional college education is in question.

      In The New School, Glenn Harlan Reynolds explains how parents, students and educators can, and must, reclaim and remake American education. Already, Reynolds explains, many Americans are abandoning traditional education for new models. Many are going to charter schools or private schools, but others are going another step beyond and making the leap to online education—over 1.8 million K-12 students already.

      The New School does not prescribe a one-size-fits-all solution for education. Americans require a diverse system of innovative approaches—each suited to a family’s needs and spending potential. But with the profusion of online education, school choice, and even a return to alternatives like apprenticeships and on the job training, Americans hold the power to lower costs and improve outcomes from the ground up.”

      – As a parent w/ student at CU Boulder, I can fully appreciate the issues with U.S. higher .edu. However, I also see that change is coming. See Herb Stein quote, above. My hope is that online learning/MOOCs/etc. will eat the lunch of the bloated, liberal/left/Marxist, brick and mortar universities, and restore balance to “the Force.” There has been massive negative productivity in this sector. 2+2=4 hasn’t changed and the internet has made information readily accessible, but now need untold thousands of administrators to “help” with the education process. Oh, and let’s not forget the lux student housing and other expensive “perks” (coming out of my tuition payment). The value prop./value add is now in question. People are wising up (finally). Student debt is not a problem either.

      1. Some of us like being with others and want to get out of the house into a “classroom” The social skills seem to be lacking in todays kids, but you are right the cost is way beyond what it should be. What is needed intensive short term training. 6 moths -year 30 hours a week, either paid for by Unemployment, pell grants and a job afterwards. I did this 5 month paralegal training while collecting unemployment, and they had to report attendance each week any missed days without a dr note and you were docked 1 days UI. Worked for a number of years but realized i can talk professionally to Lawyers Judges, court people, and my research skills were great westlaw lexis but my writing skills were never good enough.

      2. I like Khan academy as much as the next person, but online education is not the panacea for curing all educational woes. It is a tool and can be very effective if used properly. But one shouldn’t discount the value of a good educator who knows how to guide. I’m not talking about mindless lectures, I’m talking about a skilled instructor who knows how to assess a student’s proficiency and then structure pedagogy to ensure mastery and learning. Lots of tools in the toolbox, but a good educator who is proficient in the subject being taught AND who knows how to get his/her students to learn is still valuable.

    4. And the product this fake school cranked out ended up working a taco shop 2 years after graduation. Pretty sure a high school dropout could handle that job.

      Was that commie who just had a heart attack’s wife involved? She’s good at running a fake school into the ground while enriching herself.

      1. Warren should charge a wealth tax to all the major Universities for milking the students. Harvard has something like 90 billion extra laying around.

        1. The first step would be just making them pay taxes in the first place. Since most endowments are tax free, they don’t pay taxes. In theory this might be good, but its not like the students really benefit from these massive endowments because the students still have sky-high tuition.

    1. That COEXIST bumper sticker says so much more and it intended. First of the all cross is the last letter after all the others. Kind of appropriate for most of its users I suspect. Secondly, is mere coexistence somehow aspirational? Can’t we raise the bar a little bit and aspire to do something more than coexist? Like maybe build a more advanced productive and prosperous industrial society? Or are we supposed to be one big happy family living a primitive subsistence level existence working in the rice fields in communal labor camps?

      1. This type of language would likely be censored on Facebook or Twitter (it’s already illegal in Western Europe) and on Reddit would be downvoted into invisibility i.e. comment score below threshold. Cultural relativism is a lie.

        The used needles in creeks and on playgrounds is just a symptom of the broader degeneracy of the modern U.S. The trend is toward more degeneracy, and I don’t expect it to reverse in my lifetime.

        “It’s Clownworld, Jake. Forget about it”

        1. Citizen! Your use of the term “degeneracy” marks you as a reactionary troglydtye and unrepentant member of the Basket of Deplorables. Your social credit score has been downgraded accordingly, although the trip to the re-education camp will have to wait until the collectivist comrades get their permanent Democrat supermajority. Forward!

      2. “Or are we supposed to be one big happy family living a primitive subsistence level existence working in the rice fields in communal labor camps?”

        You do not need to be happy just compliant.

    2. “’We also want to bring more awareness of how the growing homeless situation affects residents in the cities that are favorable to homeless people,’ he said.”

      Oh? And just how are residents affected by living in cities that are favorable to homeless people?

      “Green understands the need for the city and county to offer a range of services for people experiencing homelessness, however he believes they also have unintended consequences, like attracting more people to Boulder.”

      Bahahahahaha … unintended consequences. Bahahahahaha.

    1. From the Guardian article:

      “According to accounts filed at Companies House, UK landlords are expecting rent payments from WeWork that could top £5bn over the course of its lease agreements. The 2017 accounts show that subsidiaries of the UK parent company, WeWork International Ltd, have signed non-cancellable operating leases worth more than £3.2bn.”

      Call me Nostradamus, but I think a lot of those UK landlords are going to be left holding the bag once this scam Unicorn company burns through its investor cash and files for bankruptcy.

    2. Re the pic at the top of the Guardian article… That does not look like a place where work is going to get done.

      1. Aren’t these We-yada-yada-unicorn outfits the kind that are burning through VC money? It seems the harder they work the further behind they fall. They may as well play games or host on YouTube; they would actually have a fair shot at breaking even.

      2. “That does not look like a place where work is going to get done.”

        Hehe…want to make a little money? Invest a lot of money.

      3. That does not look like a place where work is going to get done.

        I’ve interviewed at places that were far worse. But I keep getting told that this is the future of the office because this is how millenials like to work.

        1. this is how millenials like to work

          Ask any millennial and they’ll say sure, I love it. Whatever. So when can I start?

          1. Are millennials really that much of the workforce that businesses are catering to them?

          2. Opposite problem. They are financially screwed. So they don’t argue about working conditions. Which allows employers to lie and say their money saving measure was because “millennials want it”.

          3. They are financially screwed. So they don’t argue about working conditions.

            That’s what I thought.

    1. Uhhh, guys…

      “These homes are not just properties that are rented out to house families; they have been transformed into a new class of financial asset and investment vehicle. According to the NBER study, the homes have been capitalized into single-family rental bonds, which has grown into a $15 billion-plus market. Three Real Estate Investment Trusts (REITs) backed by single-family rental assets have had IPOs with a market capitalization of more than $18 billion.”

    2. These RE syndicates bought multiple homes directly from the fed.gov for a song with fed.gov financing (the private-public partnership) after the fed.gov bought ’em from the investment banks at par (full face value of the mortgage). Then these RE syndicates turn right around and fleece the renters, who were patiently waiting for prices to fall.

      1. Then these RE syndicates turn right around and fleece the renters, who were patiently waiting for prices to fall.

        I remember there being a lot of discussion here, after the previous crash, about corporate investors buying up shacks. The For Sale/pending sign would come down and after a quick paint job a For Rent sign would appear.

        1. I confess to having ridden up the corporate real estate investment gravy train for a while in the post-2009 period, by investing in a REIT mutual fund. As long as the Fed, Fannie Mae and Freddie Mac were running a Screw the Renter, Reward the Investor wealth redistribution scheme, I figured it couldn’t hurt to be on the receiving end of it. I may have gotten off the train too early, but I won’t be riding it when the bridge washes out.

    1. Good article. So that’s where a lot of the tax money is going. Turning medical hospitals into de facto mental institutions.

      1. At our hospital, we called these patients “frequent fliers”. Everyone in the ER knew certain patients who just came in repeatedly for different issues.

        1. We had a woman in the office who fit this “frequent flier” profile. She had health insurance, so the clinic probably enjoyed her visits. The others in the office chalked it up to her loneliness, empty nest, divorced, obese, etc., but she was always on time, and she alerted us early enough when she was not coming in that day, so she was accommodated. Eventually her SSDI disability gig was approved, and she retired in her forties. I ran into her recently while grocery shopping, and she smiled warmly looking better than ever having lost a lot of weight.

  6. There’s Nothing Normal About the Fed Pumping Hundreds of Billions Weekly to Unnamed Banks on Wall Street: “Somebody’s Got a Problem”

    excerpt:
    Congressional committees should have been instantly on top of the Fed’s actions when they first started on September 17 because the Fed had gone completely rogue from 2007 to 2010 in funneling an unfathomable $29 trillion in revolving loans to Wall Street and global banks without authority or even awareness from Congress. The Fed also fought a multi-year court battle with the media in an effort to keep its giant money funnel a secret.

    1. Excerpt 2:
      There are only two ways to look at what is happening today. It starts with basic math. As of June 30 of this year, the four largest commercial banks held more than $5.45 trillion in deposits. The breakdown is as follows: JPMorgan Chase has $1.6 trillion; Bank of America clocks in at $1.44 trillion; Wells Fargo has $1.35 trillion; and Citibank is home to just over $1 trillion.

      With $5.45 trillion in deposits, why isn’t there enough liquidity to make loans in the billions. Either the big banks are backing away because of something they see on the horizon or something very troubling has happened to their liquidity.

      1. It may or may not be coincidental that this repo liquidity issue reared its ugly head right after drones and missiles fired by parties unknown lit up Aramco’s oil infrastructure in Saudi Arabia, causing oil prices to briefly spike. In the hypercomplex, interconnected world of derivatives trading, that could’ve meant some TBTB bank ended up being a counterparty on a wrong-way derivatives bet. DB alone has a reported $43 trillion in derivatives exposures, which is vastly more than the bank holds in reserves. Who knows how much derivatives exposure these banks have racked up with their greed, hubris, and search for yield in a near-ZIRP interest rate environment?

      2. “…or something very troubling has happened to their liquidity.”

        “Securities eligible as collateral include Treasury, agency debt, and agency mortgage-backed securities.”

        1. Matt Levine from Bloomberg had a good take on this a few days ago. If I can find his excerpt, I will post. He helped me make sense of this.

          1. Here is a piece:

            “But here I want to abstract away from that stuff and just focus on the big simple weird thing—that during the repo spike banks could still borrow at 2% even as they were lending at 5 or 10%—and what it tells you. One very very simple thing that it tells you, one that I am almost embarrassed to mention here because it is so obvious, is that the repo spike was not an indication of a crisis for banks. The fact that the big banks could, at the height of the repo spike, borrow unsecured—without collateral, based only on their own financial strength—at around 2% means that investors just were not particularly worried that banks were running into trouble. The repo spike was bad for (some) hedge funds and non-bank broker-dealers, people who fund themselves in the repo market and don’t have access to bank-type borrowing. But the banks were fine.”

            And:

            “And if you want boring banks then the repo spike is almost something to celebrate: The market went haywire and created opportunities for banks to make a profit, and they mostly passed on it because (1) the rules told them not to take risks, (2) their own internal requirements told them not to take risks, and (3) they forgot how to take risks. “

      1. “No market forces or rugged individualism happening here”

        We are now so far away from those things, it’s ridiculous.

    1. “Dope will get you through times of no money better than money will get you through times of no dope.” —Gilbert Shelton, The Fabulous Furry Freak Brothers

  7. “Providers are grappling with oversupply in markets across the United States, while determining how to address the arrival of the baby boomers”

    Wouldn’t the baby boomers absorb the supply? What am I missing? I suppose that those baby boomers don’t have the money to consume this luxury senior housing any more than their millenial kids have the money to consume luxury apartments.

    And it’s going to get even more interesting when it’s GenX’s turn. There are very few GenX in comparison to baby boomers. Rather than having my pick of retirement communities, I wouldn’t be surprised if all of the half-filled communities fall into disrepair.

    By the way, the “birth-dirth” of 50-year old has been filling in with immigrants. However, those immigrants have no interest or funds for active adult. Immigrant grandmas live in multigenerational homes.

    1. The cost of living in these facilities is what you might be missing.

      My father EOLed in one of them about five years ago, and it was about $4,400 a month.

      And in my neck of the woods these facilities are sprouting like weeds everywhere.

      1. $5,000 a month here in the south Denver suburbs.

        This was not a chain facility like an apartment building, it was a private home with rooms for 8 residents in a neighborhood of only single family houses.

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