The Lending Institution Wants To Dump The Property That Turned Out To Be A Bad Deal
A report from the Ahwatukee Foothills News in Arizona. “‘We’re in a unique situation in Maricopa County. Nearly 200 people daily are moving into Greater Phoenix, and the inventory is still limited while demand is strong,’ said Butch Leiber, president of the Phoenix realtors board of directors. ‘Year-over-year housing numbers look weak, especially given the drastic shift from May to December 2022, but the trend behind the numbers is shifting upward.’ The average sales price dropped 6.1% to $588,444 from 12 months earlier.”
“‘Homes are selling for less than asking price – a change from a year ago,’ said Leiber. ‘The trends of the last three months show that perhaps the worst is behind us and that the market is coming closer to where it should realistically be. The last few years, Phoenix enjoyed an extraordinary run, but now we see the market normalizing. I believe we’ve seen the worst of it as we head out of the eye of the storm.'”
The Philadelphia Inquirer in Pennsylvania. “Bill Glazer, owner of Keystone Development + Investment, is one of the Philadelphia area’s busiest redevelopers. He took questions from The Inquirer on how builders are dealing with higher interest rates and bank troubles. How’s business? Every asset class is facing pressures. We are seeing universally that capital availability is being pulled back for every class.You know that Toll Bros. was unable to pull off their condominium project. They demolished [part of Jewelers Row in Philadelphia], but they did not build. They sold the ground to Pearl Properties. You read that the big Durst project on the waterfront stalled. Most new, ground-up projects are being shelved or paused or sidelined. The contractors are still finishing up jobs in their pipeline. But it’s coming.”
The Real Deal on Texas. “As the spring buying season crept up in the Lone Star State, April flowers failed to bloom in Houston. Inventory is overflowing in the Bayou City’s real estate market; meanwhile, prices remain relatively high, according to the Houston Association of Realtors. While new listings were down more than 8 percent in April, year-over-year, the city’s available properties shot up nearly 63 percent. When homes come onto the market in Houston, they are increasingly staying there. Median days on market have increased 67 percent from 20 days to 33 year-over-year, according to Redfin.”
“Would-be homebuyers are pulling back, reports from HAR suggest. Sales volume in the Bayou City has been on a steady decline since last summer, prior to the winter seasonal decline. ‘I think rising interest rates are going to be a continual concern for buyers moving in, even into the summer months, but I think we’re going to have a strong summer,’ said Cathy Trevino, HAR chair. ‘It’s kind of hard to tell. I wish we had a crystal ball. We’ve heard from many economists that toward the end of the year interest rates may go down. So, we do have a lot of buyers that are on the fence, who are then turning more towards rental, which is definitely peaking as well.'”
From Fortune. “According to John Burns Research and Consulting, institutional investors—those owning over 1,000 homes—bought 90% fewer homes in January and February than they did the first two months of 2022. Look no further than Invitation Homes, the largest owner of U.S. single-family rental homes, which recently became a net seller. In the first quarter of 2023, Invitation Homes bought 194 homes, while it sold off 297. That’s a jarring shift. ‘We’re pretty much on pause across all [homebuying] strategies,’ Tejas Joshi, director of single-family residential at Yieldstreet, which owns over 700 single-family homes, recently told Fortune. ‘I don’t think [house] prices have bottomed yet … On average, we have another 5% decline nationally, and it’ll vary by market. Peak-to-trough, 12% to 15% [national] decline.'”
“High interest rates, coupled with frothy home prices, mean that buying new single-family rentals doesn’t make a lot of sense right now for some institutional investors. Joshi says Yieldstreet is waiting for either house prices to take another leg down or interest rates to come back down. Or both. ‘If short-term [interest] rates came down around 4%, and if home prices were about 15% lower than the peak last year, that is a valuation that supports the equity return that investors need to make,’ Joshi tells Fortune.”
The Los Angeles Times in California. “In the days before Los Angeles’ ‘mansion tax’ took effect, the luxury market moved at hyperspeed. Prices were slashed, escrows were rushed and million-dollar deals were closed as panicked sellers offered exotic cars and lucrative bonuses to anyone willing to buy their properties by the end of March. It was a manic, desperate attempt at avoiding Measure ULA, a new transfer tax that levies a 4% charge on all residential and commercial sales in the city above $5 million and a 5.5% charge on sales above $10 million.”
“On April 1, everything froze. In March, when the luxury market reached the peak of its frenzy, there were 126 home and condo sales above of $5 million in the city of L.A., according to the Multiple Listing Service. In April, once Measure ULA took effect, there were two. Oron Maher of Maher Commercial Realty said that over the past month negotiations have become a game of hot potato, with sellers and buyers both asking the other to cover the tax. ‘Buyers are saying it’s a seller’s tax, but sellers are saying they can’t sell unless the buyer can raise the price,’ he said. ‘It’s all leading to less transactions.'”
Bisnow San Francisco in California. “Office owners in Silicon Valley are coping with a cascading set of challenges that began years ago with the pandemic and continue today. ‘If you are the owner of an office asset, I don’t need to tell you that you are the proud owner of the most-hated asset class in America,’ Briggs Development President Jeremy Rogers said.”
From Storeys in Canada. “A foreclosure date has been set for several parcels of land relating to one of the 16 projects by Coromandel Properties listed in its petition seeking creditor protection, according to BC Supreme Court documents obtained by STOREYS. The named project is referred to as Alberta 40, a nod to its closest intersection — Alberta Street and W 40th Avenue. Sat one block away from the Oakridge Centre redevelopment, it’s comprised of of six parcels of land. According to the petition, filed by Coromandel Properties in February, the developer incrementally acquired the Alberta Street site between 2017 and 2022 for a total of $35.16M, with plans to build two 18-storey residential towers housing a total of 349 rental units. The Court noted, however, that no rezoning application has been advanced with the City of Vancouver because Coromandel Properties ‘lack the funds to do so.’ No rezoning application or development application exists on the City’s Shape Your City portal for any of the addresses.”
“Lanyard filed their own foreclosure petition against Coromandel Properties in February. The amount owing as of February 16, 2023 is $16,716,882.45. According to Lanyard, daily interest is accruing at a rate of $4,840.15, an amount Lanyard points out can only be covered for three days by the rental income from the sites. Last week, STOREYS reported that Coromandel Properties was no longer involved in four projects it was co-developing with Peterson Group. According to provincial court registry filings, foreclosure proceedings have been initiated for at least eight of the remaining 12 projects.”
The Times Colonist in Canada. “Real estate sales numbers and prices have softened this year compared to last year’s hot market as the number of properties on the market continues to climb. ‘Sales numbers for this April are more moderate than the higher levels we’ve seen in recent years,’ Victoria Real Estate Board chair Graden Sol said. The benchmark price for a single-family house in the Victoria core (Victoria, Esquimalt, Oak Bay, Saanich and View Royal) was $1.264 million last month. That was a decline from April 2022 at $1.423 million. Last month’s benchmark price for a condominium in the Victoria core was $565,000, down by 10.3 per cent from $630,200 the same month last year.”
From NL Times. “Thanks to falling home prices and rising wages, first-time buyers will soon have more chances in the Dutch housing market, according to an analysis by economists Gerard Eijsink and Dorinth van Dijk of De Nederlandsche Bank (DNB). ‘Affordability for starters will be better from mid-2023,’ they said. Home prices in the Netherlands started falling in August last year, but not faster than mortgage interest rates increase. Any improvement in affordability is desperately needed. In 2022, a household with an average income of 67,500 euros could borrow up to 321,000 euros at an interest rate of 4%, while the average house price in the fourth quarter of last year was 415,000 euros. A study by Calcasa showed that at the end of 2022, the average first-time buyer could only afford 3.4 percent of homes available on the Dutch housing market.”
The Manila Bulletin. “Whatever happens in the global economy, the Philippine economy is resilient enough to continue growing at 6 to 7 percent for the entire of 2023. What could experience a major slow down is the market for high-priced residential units, whether condominium or detached units. The same will hold true for office space since there is an ongoing glut due to the phasing our of the POGO business and increasing tendency of BPO-IT workers to work from home.”
From Tribune 242. “It’s a process no one wants to see happen but it happens far more frequently than we realise. Want to know just how often and how many repossessed properties there are in The Bahamas? Just look up distressed properties on any bank’s website. One bank in particular does an exceptionally good job listing every vacant lot, single family home, commercial property, Grand Bahama and Family Island properties with geographical, site and physical descriptions along with pricing. There are more than ten pages of listings. Another bank has fewer distressed properties but generally higher in value. The listings of distressed properties on yet another bank’s website reflects risks of some neighbourhoods that seem to pop up most frequently.”
“Property repossession is so common that just about every financial institution has a department or at least an individual assigned to it, even if they give it a fancier name. And there are real estate professionals who specialize in distressed property transactions. Of course, there are also smart investors with deep enough pockets to snatch what appears on a distressed property list quickly if it has potential and the price is right. Sometimes the lender has too much money in the game to make it worth a look.”
“By the time a single-family residence is repossessed the story around it is pretty predictable. The same owner who could not make payments also could not afford the costs of repair and upkeep. So by the time the lender gets to court, the judge signs off on the right to repossess, the homeowner is served and due process takes place, the property in the middle of the tug-of-rights can be in a state of shambles.”
“It’s this other side of what happens to the unintentional bystander victims of repossession that gets far too little attention. What happens to the house next door, across the street, what happens to the community? The lending institution takes ownership but not pride of ownership. They want to dump the property that turned out to be a bad deal. If you want to see how many there are, check out the bank websites noted above. Nearly every bank in The Bahamas has lists of distressed properties and distressed is the right word for most of them. And it is not just banks. Insurance companies, credit unions, other financiers all count on an individual’s or a company’s ability to pay back and all without fail have encountered the customer who at some point cannot or does not.”
“So strewn throughout New Providence, Andros, Abaco, Exuma and nowhere more so than in Grand Bahama are distressed properties owned by a bank or lender, properties left to fester with overgrown weeds, peeling paint, fallen down gutters, tree limbs stretching across others’ yards. Pools become cesspits of mosquito larvae since there is no electricity to operate a pump. At night, there are no lights, making the abandoned property an open invitation for the homeless grateful for a roof over their heads and not the least concerned about rodents or who holds the title.”
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‘Year-over-year housing numbers look weak, especially given the drastic shift from May to December 2022, but the trend behind the numbers is shifting upward.’ The average sales price dropped 6.1% to $588,444 from 12 months earlier’
Long gone are the daily TV station reports about to the moon Alice! How about the median price UHS? There are at least 17 cities in this giant sh$thole. What are prices in Buckeye? Queen Creek? No, we’ll just mash it all together and leave you wondering. (Like they do in Austin). If they aren’t covering it, you can bet crater.
BTW, 500k pesos for a shack is bat sh$t crazy. Just in case you forgot.
‘In March, when the luxury market reached the peak of its frenzy, there were 126 home and condo sales above of $5 million in the city of L.A., according to the Multiple Listing Service. In April, once Measure ULA took effect, there were two’
What’s the percentage decline out there? Even a calculator would have to squeeze out a bunch of zeros.
‘over the past month negotiations have become a game of hot potato, with sellers and buyers both asking the other to cover the tax. ‘Buyers are saying it’s a seller’s tax, but sellers are saying they can’t sell unless the buyer can raise the price’
That’s a real pickle Oron. Could it be they owe more than what they can sell for?
‘So strewn throughout New Providence, Andros, Abaco, Exuma and nowhere more so than in Grand Bahama are distressed properties owned by a bank or lender, properties left to fester with overgrown weeds, peeling paint, fallen down gutters, tree limbs stretching across others’ yards. Pools become cesspits of mosquito larvae since there is no electricity to operate a pump’
PSA: there’s an easy fix to this and it can be used for general mosquito control. It’s called Mosquito Dunks. It kills the larvae in water before they hatch. So you kinda break the life cycle. What I do is place buckets around the yard, drop a piece in each one. Replace and refresh the water as needed. I’ve read every 30 days but it varies.
going long on green lawn spray paint in DFW area
RE didn’t get hit that badly in the DFW area during the 2008 crash because prices were still very affordable. I bought a 2650sf in summer 2008 in Collin County for $175K. It was “valued” at $225K at the peak in late 2006. Property taxes were $3100 and insurance at $800. By the time I sold for $450K in 2022, property tax was $7,800 and insurance at $1800.
Now average home prices are $500K or more in many decent areas. Austin is closer to $700K. People will be paying $15-20K for taxes and insurance. This isn’t sustainable.
Near where I’m renting, they are moving forward with a massive development of 3200 SFR’s just east of me. Another development of 400 houses north. Another one of 200 houses to the south. This is in Mckinney TX. All this used to be farm and ranch lands 5-10 years ago.
A reader sent these in:
Jobs day: Pretty 🔥
– 3.4% unemployment, matching lowest in >50 years
– 253K job gains, v 185k expected
– 4.4% yearly average hourly earnings gain, v 4.2% exp
Downward revisions to prior months are the sole weak spot. Not the steady slowdown the Fed has been waiting on.
https://twitter.com/jeannasmialek/status/1654464514526519296
T-Mobile has joined the great exodus from the San Francisco downtown shopping core by vacating its flagship store near Union Square.The vast space — 17,000 square feet on two levels — was emptied out on Mission Street.
https://twitter.com/sfchronicle/status/1654286311396704256
As an accountant with clients that rent out beach houses, they tend to be (hugely) cash flow negative IME. (I’m in the north, so they sit idle much of the year). All they have is price appreciation. If that tanks….
https://twitter.com/1webster92/status/1654593759726714880
I agree. I’m in an Airbnb FB group and they’re all flipping out because of low bookings
https://twitter.com/b_bonaventure_/status/1654285682343555073
I spoke at length w/the guy who turned on the gas for our home today
“I’ve been turning on gas all over North Dallas for the last 3 years. Buyers talk. There’s more flippers than you can imagine. ONE guy was buying 6-7 homes a month in Celina”
https://twitter.com/texasrunnerDFW/status/1654137232721162241
Two more things:
1. The specific cities in his work region that he mentioned observing high flipping behavior in are: Prosper, Celina, and Frisco
2. I just reminded myself why I need to get off Twitter, stop staring at charts and data, and TALK TO REAL PEOPLE…
https://twitter.com/texasrunnerDFW/status/1654141552418082816
Total US Deposits by Bank:
1. JP Morgan: $2.4 trillion
2. Bank of America: $2.0 trillion
3. Wells Fargo: $1.4 trillion
4. Citibank: $1.3 trillion
5. US Bank: $500 billion
6. PNC Bank: $450 billion
7. Truist: $420 billion
8. Capital One: $350 billion
9. Goldman Sachs: $350 billion
10. TD Bank: $330 billion
The top 10 banks in the US currently control 65% of deposits while the top 15 control 75%. JP Morgan and Bank of America alone control 31% of deposits in the US. This crisis is only accelerating consolidation of banks and making the big banks bigger.
https://twitter.com/KobeissiLetter/status/1654293839174066176
Second highest surge in credit card debt in history… just in time for record high credit card rates
https://twitter.com/zerohedge/status/1654562336416362496
Let me get this straight: Regional banks were paying little to no interest to depositors, when fed funds is at 5%. The regulators did nothing.
Then depositors figured it out & moved their money to money markets.
And now the regulators blame the short sellers. Mkay…
https://twitter.com/agnostoxxx/status/1654423333109223426
Non Prime is the New Subprime
BTW, non-QM DSCR loans are what many STR operators used when they bought properties
https://twitter.com/texasrunnerDFW/status/1654190816158535696
Soft Landing stories from 1970’s
https://twitter.com/TommyThornton/status/1654596085610840066
Soft Landing stories from 2000
https://twitter.com/TommyThornton/status/1654596334299631617
Soft Landing stories ahead of GFC 2006-2007
https://twitter.com/TommyThornton/status/1654596670565253120
Same in late 2006. All that changes is the year. ☺️⬇️
https://twitter.com/JohnMoser66/status/1654837168081084417
This house in Australia has continually rejected offers for purchase, most recently a $50 million dollar offer, per 7News:
https://twitter.com/unusual_whales/status/1655014836085080065
‘why I need to get off Twitter’
Coming from yet another pithy puddle watching jaw flapper.
Coming from yet another pithy puddle watching jaw flapper.
I watched a couple minutes of an interview with her one time and thought “who the f**k is this, and why is anybody interested in what she’s saying?” She was all dolled up and not a single hair was out of place. I still have no clue who she is or where she came from.
“Let me get this straight: Regional banks were paying little to no interest to depositors, when fed funds is at 5%. The regulators did nothing.
Then depositors figured it out & moved their money to money markets.”
I just coached a friend on how to do this yesterday. Luckily she pulled $10Ks out of a megabank, so no harm done.
“And now the regulators blame the short sellers. Mkay…”
It seems like it was executives at failing banks who led the blame game. Regulators may have been quick to pile on…
Ban on short selling? US regulators, White House raise alarm on misconduct amid banking crisis
1 min read .
Updated: 05 May 2023, 07:51 AM IST
Sounak Mukhopadhyay
– Short sellers have raked in profits as shares of regional banks in the US continue to plummet.
– Short sellers have raked in profits as shares of regional banks in the US continue to plummet.
– US federal and state officials have begun to investigate the possibility of market manipulation amid the ongoing banking crisis.
Calls for greater regulatory oversight of short selling practices have grown as regional bank shares continue to be under pressure. Short sellers borrow shares they expect to fall in value and then hope to repay the loan at a lower cost, profiting from the difference. According to analytics firm Ortex, short sellers gained $1.2 billion in the first two days of May.
In the wake of the banking crisis, short sellers have raked in profits as shares of regional banks continue to plummet. US federal and state officials have begun to investigate the possibility of market manipulation behind the significant fluctuations in banking share prices over recent days. The White House has also vowed to monitor “short-selling pressures on healthy banks”.
The collapse of First Republic Bank, the third mid-sized US lender to fail in two months, has seen shares of regional banks resume their downward trajectory this week. On May 4 alone, short sellers profited $378.9 million from betting against certain regional banks. The increased short-selling activity and share price volatility have caught the attention of regulators in recent days.
Although the banking sector has sound fundamentals and sufficient capital levels, increased short-selling activity and stock price fluctuations have raised concerns among state and federal officials and regulators. The U.S. Securities and Exchange Commission (SEC) has promised to go after any form of misconduct that might threaten investors or markets.
Ban on short selling?
While short selling is not illegal and considered part of a healthy market, manipulating stock prices is. The SEC defines manipulation as “the intentional or willful conduct designed to deceive or defraud investors by controlling or artificially affecting stock prices”.
Despite worries over bank soundness hitting share prices, the SEC official said on Wednesday that the agency was “not currently contemplating” a short-selling ban. US officials at the federal and state level are, however, looking into the possibility of market manipulation behind the significant fluctuations in banking share prices over recent days.
…
https://www.livemint.com/news/world/ban-on-short-selling-us-regulators-white-house-raise-alarm-on-misconduct-amid-banking-crisis-11683251155054.html
“According to analytics firm Ortex, short sellers gained $1.2 billion in the first two days of May.”
Bulls make money through reckless gambling activities fueled by a protracted period of extraordinary accommodation = WINNING
Bears make money on short bets against reckless speculation and poor risk management practices = MANIPULATION
From my personal experience, sweeping the dirt under the rug does not make the dirt go away. It merely hides it from view.
My guess is the people complaining about short sellers will somehow profit by having them sidelined.
Markets News Report
US to Ban Short-Selling, JP Morgan Says
2 mins
By Oluwapelumi Adejumo
7 May 2023, 09:36 GMT+0000
Updated by Ryan James
7 May 2023, 09:36 GMT+0000
In Brief
– JP Morgan analysts predicted that short sellers might be temporarily banned.
– American bankers have written to the SEC about their concerns.
– Short sellers have made over $1 billlion from betting against these struggling banks.
…
https://beincrypto.com/us-ban-short-selling-jp-morgan/
T-Mobile has joined the great exodus from the San Francisco downtown shopping core by vacating its flagship store near Union Square.
San Francisco is quickly turning into South Africa/Zimbabwe. The rot is also present in other communities and will spread until California is mostly uninhabitable.
As an accountant with clients that rent out beach houses, they tend to be (hugely) cash flow negative IME
They rent for $4000+ per week in North Carolina. Say you get 15 weeks a summer that’s $60K. So unless the LL bought it when it was cheap there is no way it will cash flow positive.
“T-Mobile has joined the great exodus from the San Francisco downtown shopping core by vacating its flagship store near Union Square.”
Who is going to pay the reparations?
One of the reasons these woke joke businesses are leaving. They don’t walk the walk.
I have to laugh at these people who rant about ‘the hottest job market in 50 years!!!11!!1’ Do they not notice the most people pitching tents on the sidewalk in 50 years? The majority of government statistics are intentionally misleading and meaningless, just more fake news. For the average person, the job market doesn’t offer many real opportunities to advance and often times is just a ticket to serfdom. If we look at real metrics like average wages to average rents/home prices etc, the job market sucks in most cities. It gets tiresome hearing supposedly intelligent people parroting government propaganda.
From what I have heard and seen, yeah, it’s easy to get a burger flipper job. Get a job that pays well? That’s another story.
You are not counted in government unemployment statistics once you are no longer receiving unemployment insurance. So once you’re bene’s run out EVEN IF YOU HAVE NOT GOTTEN A JOB, you are no longer officially unemployed. Is that not great or what? (/sarc)
I have to laugh at these people who rant about ‘the hottest job market in 50 years!
Let’s go Brandon!
‘Year-over-year housing numbers look weak, especially given the drastic shift from May to December 2022, but the trend behind the numbers is shifting upward.’
Realtors are liars.
…but the trend behind the numbers is shifting upward.
Pablum personified. There’s no data provided to support this.
Economists are saying interest rates expected to go downward by end of year?
Lol I highly doubt that wishful thinking.
“According to John Burns Research and Consulting, institutional investors—those owning over 1,000 homes—bought 90% fewer homes in January and February than they did the first two months of 2022. Look no further than Invitation Homes, the largest owner of U.S. single-family rental homes, which recently became a net seller.”
It seems like inventories should eventually increase with all these institutional investors cutting and running.
Have you noticed an unusually large number of cockroaches this spring?
BUSINESS
Jerome Powell’s sappy talk on banks is weak after multiple collapses
By Charles Gasparino
May 6, 2023 | 10:54pm
Under Jerome Powell, many regional banks have floundered.
REUTERS
‘The US banking system is sound and resilient,” Jerome Powell proudly stated, just days after the government took over First Republic Bank, marking the second-largest bank failure in US history. In our Fed chair’s world, First Republic is just another one-off, like Signature and Silicon Valley banks before it.
Sorry, one-offs (as Powell is trying to frame First Republic) rarely come in threes, or fours if you count the ill-fated Credit Suisse’s forced merger with UBS by the Swiss.
…
https://nypost.com/2023/05/06/jerome-powells-sappy-talk-on-banks-is-weak-after-multiple-collapses/
New York Post
Nearly 200 banks at risk for same fate as SVB: study
By Matthew Sedacca
March 18, 2023 12:03pm Updated
Nearly 200 more banks may be vulnerable to the same type of risk that took down Silicon Valley Bank: the value of the assets they hold.
There are 186 banks across the country that could fail if half of their depositors quickly withdraw their funds, a new study published on the Social Science Research Network found.
Even insured depositors — those with $250,000 or less in the bank — could have problems getting their cash if these institutions face the sort of run that SVB saw a week ago.
The concern is that these banks hold a significant amount of their assets in interest rate-sensitive financial instruments like government bonds and mortgage-backed securities. The value of those older, low-interest investments dropped sharply as the Federal Reserve hiked interest rates over the past year.
…
https://nypost.com/2023/03/18/nearly-200-banks-could-fail-the-same-way-svb-did-study/
Don’t vultures normally wait for their prey to expire before consuming?
Reuters
5 minute read
May 7, 2023 3:59 AM PDT
Last Updated 6 hours ago
Bank buyers expect sweeteners as US government sets new bar
By Saeed Azhar, David French and Tatiana Bautzer
First Republic Bank branch in San Francisco
NEW YORK, May 5 (Reuters) – The government-brokered purchases of First Republic, Signature and Silicon Valley banks have created a vicious cycle in which troubled lenders need to fail — and get government assistance — before buyers will step up, industry sources say.
The latest case in point: The Federal Deposit Insurance Corp (FDIC) chose JPMorgan Chase & Co (JPM.N) as the winning bidder in an auction to buy collapsed lender First Republic Bank on Monday.
After First Republic struggled to find a private-sector buyer for weeks, the FDIC seized it and struck a deal with JPMorgan to take control of most of its assets. JPMorgan said it would pay $10.6 billion to the FDIC, while locking in a loss-sharing agreement with the government on residential mortgages and commercial loans. The FDIC would also provide JPMorgan $50 billion of financing for five years at an undisclosed fixed rate as part of the deal.
“After what happened with First Republic, banks don’t want to buy any other bank before the FDIC takes over,” said Mayra Rodríguez Valladares, a financial risk consultant at MRV Associates who trains bankers and regulators.
“It’s cheaper, the stock price goes down and you don’t have the natural problems in M&A (mergers and acquisitions) negotiations that may not end in a deal.”
…
https://www.reuters.com/business/finance/bank-buyers-expect-sweeteners-us-government-sets-new-bar-2023-05-05/
If the banking crisis offers one lesson, let it be this
2 min read . Updated: 01 May 2023, 05:53 PM IST Bloomberg
US financial authorities have taken possession of California’s troubled First Republic Bank, which will be acquired by JPMorgan Chase bank (AFP)
The official takeaways are perfectly sensible. Supervisors need to be more assertive, and attentive to the dangers of sudden growth spurts and interest-rate increases
US regulators have extracted some valuable lessons from the country’s first banking crisis in more than a decade. But one stands out: If banks were stronger in the first place, the whole unfortunate episode might’ve been avoided.
How, despite all the regulatory reforms since the 2008 financial crisis, did officials yet again find themselves scrambling to avert a systemwide disaster? Last week, both the Federal Reserve and the Federal Deposit Insurance Corp. offered their explanations in separate reports on the failures of Silicon Valley Bank and Signature Bank — part of a rash of collapses that persisted this past weekend as authorities seized distressed regional lender First Republic Bank and sold it to JPMorgan Chase & Co.
The Fed’s review of SVB’s demise elaborates on a now-familiar story. The bank’s management sacrificed soundness for profit, relying too heavily on large, uninsured deposits from its tech-industry customers and investing too much in long-term bonds that lost value as interest rates rose. Its rapid growth outpaced the Fed’s oversight processes: Supervisors saw the problems, but didn’t recognize their full significance or press hard enough to fix them. Relaxed rules for midsized banks, adopted in 2019 as part of a broader regulatory easing, allowed SVB to ignore certain losses and liquidity issues that might otherwise have required it to shore up its finances sooner. When depositors recognized that the bank’s losses exceeded its capital, they fled with unprecedented speed, triggering a broader run that only government intervention could stop.
…
https://www.livemint.com/news/world/if-the-banking-crisis-offers-one-lesson-let-it-be-this-11682943461989.html
“The bank’s management sacrificed soundness for profit, relying too heavily on large, uninsured deposits from its tech-industry customers and investing too much in long-term bonds that lost value as interest rates rose.”
Somehow that doesn’t seem like the shortsellers’ fault.
The banking crisis isn’t over. But how bad will it get?
4 min read AP 05 May 2023, 03:53 AM IST
– While many thought the sale of First Republic ‘would stop the ‘who’s next?’ conversations, investors are clearly continuing to focus on remaining players that are deemed the weakest’ analysts at UBS wrote in a note to clients
– Bank shares have sold off on Wall Street this week following the government seizure and subsequent sale of First Republic Bank to JPMorgan
NEW YORK : Uncertainty continues to pummel the banking industry, despite assurances from financial regulators and bankers such as Jamie Dimon this week that the worst of the recent crisis is over and the health of the banking system remains strong.
Bank shares have sold off on Wall Street this week following the government seizure and subsequent sale of First Republic Bank to JPMorgan. It was the second-largest bank failure in U.S. history and the third failure of a midsize lender in two months.
While many thought the sale of First Republic “would stop the ‘who’s next?’ conversations, investors are clearly continuing to focus on remaining players that are deemed the weakest” analysts at UBS wrote in a note to clients.
The bigger worry is that the bank failures might lead to doubts about relatively healthy banks, creating a financial contagion that could impact the wider economy. Averting that scenario was the reason the U.S. put tighter restrictions on major banks following the financial crisis 15 years ago.
It is difficult to ignore the sense of unease in banking right now, though there’s no need for concern if your money is in a bank insured by the Federal Deposit Insurance Corp. and you have less than $250,000 there, which covers most accounts.
Bankers and regulators have tried to reassure investors that the worst of the crisis is past, to little avail. JPMorgan’s Dimon said Monday that he believed “this part” of the banking crisis was over. Federal Reserve Chair Jerome Powell vouched for the health of the financial system on Wednesday.
A renewed sell-off Thursday focused on PacWest Bancorp and Western Alliance Bancorp, two smaller regional banks whose shares have been under pressure since Silicon Valley Bank failed in mid-March and set off the current crisis. PacWest fell 51% after acknowledging it was considering putting itself up for sale.
PacWest was targeted because of a high concentration of large, uninsured deposits from venture capital and tech clients, the same type of customers who triggered bank runs at Silicon Valley and First Republic. The UBS analysts estimate that about 23% of PacWest’s deposits come from the venture capital and tech space.
But even Midwest regionals such as Comerica and KeyCorp are down more than 20% this week. That could reflect growing concerns about large amounts of real estate loans, particularly in the office property market, which continues to suffer the effects of the pandemic.
…
https://www.livemint.com/industry/banking/the-banking-crisis-isn-t-over-but-how-bad-will-it-get-11683238724561.html
“That could reflect growing concerns about large amounts of real estate loans, particularly in the office property market, which continues to suffer the effects of the pandemic.”
Something about this sentence makes me suspect we have only seen the tip of the iceberg so far. A ban on short selling will not melt the iceberg.
cockroaches
Like Charlie Gasparino?
The stock market could become ‘untouchable’ if the regional banking crisis continues to spiral, Fundstrat says
Matthew Fox
May 5, 2023, 10:49 AM PDT
Trader at NYSE
A trader works at the New York Stock Exchange NYSE in New York, the United States, on March 9, 2022. Michael Nagle/Xinhua via Getty
– The stock market could become “untouchable” if the regional banking crisis continues to spiral out of control.
– Fundstrat’s Tom Lee warned about the potential implications if the Fed, FDIC, or White House intervenes.
– “This raises too many tail risk issues including credit tightening, commercial real estate, and wide economic implications,” Lee said.
…
Thank you everyone for the Temecula info yesterday. The wonders and connectivity of the internet!
And for anyone interested in the shit show that is Chicago/Cook County, and why people are fleeing the most populated region of Illinois, here’s a the link to the latest drama:
https://cwbchicago.com/2023/05/after-20-years-veteran-cook-county-prosecutor-quits-farewell-email.html
Cook County prosecutor quits after 20 years: ‘this State and County have set themselves on a course to disaster’
CHICAGO — A 20-year veteran prosecutor walked out of the Cook County state’s attorney’s office for the last time on Friday.
Jason Poje, a long-time felony trial attorney for the office, entered his two-week notice on April 21. But before he moved on to the next chapter of his life, Poje sent a goodbye email to 85 colleagues late Friday afternoon.
In his farewell, Poje extended thanks and appreciation to his colleagues. And he explained why he decided to leave the office — and the state. Here’s what he wrote:
After 20 years, I always kind of figured an email like this would start with “It is with a heavy heart that I leave…” The truth is, I can’t get out of here fast enough.
Let me start with the positive. There is not a single day that has gone by that I have not felt truly honored to work with such an incredible group of people who spent every waking hour on behalf of victims. This opportunity has been a gift for which I have no words to explain the extent of my gratitude.
My partners, our Victim/Witness advocates, our Investigators, our support staff, the police officers and detectives, time after time I see each of you putting everything you have into helping people we encounter on the worst days of their lives. So often I see our personal lives, and indeed at times our own well-being, set aside just to do a little bit more on that last case for that last victim. It’s been nothing short of inspiring not as a lawyer, but as a person.
And yet, I’m leaving. Why could that be? The simple fact is that this State and County have set themselves on a course to disaster. And the worst part is that the agency for whom I work has backed literally every policy change that had the predicable, and predicted, outcome of more crime and more people getting hurt.
Bond reform designed to make sure no one stays in jail while their cases are pending with no safety net to handle more criminals on the streets, shorter parole periods, lower sentences for repeat offenders, the malicious and unnecessary prosecution of law enforcement officers, overuse of diversion programs, intentionally not pursuing prosecutions for crimes lawfully on the books after being passed by our legislature and signed by a governor, all of these so-called reforms have had a direct negative impact, with consequences that will last for a generation.
Many years ago my family found a nice quiet corner of the suburbs. Now my son, who is only 5, hears gunfire while playing at our neighborhood park, and a drug dealer is open-air selling behind my house (the second one in two years). If it were just me to consider, I’d stick it out. I’ve been through stupid State’s Attorney policies before. But this Office’s complete failure to even think for a moment before rushing into one popular political agenda after another has put my family directly in harm’s way.
The current people in charge of this state, including the [State’s Attorney’s Office] suffer from a fundamental misunderstanding…we live in a society with adversarial court and criminal justice processes. Defense attorneys, legal aid clinics, Public Defenders, defendant advocate groups…they fight like hell to protect the rights of criminal defendants. And they should. Their work is as noble as our’s. But we have an obligation to fight like hell on behalf of the People. It should go without saying that this must be done ethically and evenhandedly. When both sides vigorously defend their positions, a balance is reached between protecting rights while preserving some sort of order and safety. Once we start doing too much of the defense’s job, once we pull our punches, once we decide that it’s worth risking citizens’ lives to have a little social experiment, that balance is lost. The unavoidable consequences are what we are witnessing in real time, an increase in crime of all kinds, businesses and families pulling up stakes, and the bodies piling up; the whole time with a State’s Attorney who insists that there is nothing to see here, and if there is it must be someone else’s fault. And then they wonder why they cannot retain experienced prosecutors or even hire new ones…it’s because any true prosecutor recognizes the importance of this balance, and that they will not be permitted to be a prosecutor under this administration.
I will not raise my son here. I am fortunate enough to have the means to escape, so my entire family is leaving the State of Illinois. I grew up here, my family and friends are here, and yet my own employer has turned it into a place from which I am no longer proud to be, and in which my son is not safe.
To everyone in the trenches in the State’s Attorney’s Office and in law enforcement, my one regret is that I cannot be at your side anymore as you continue to fight the good fight. I do not envy the task you have before you, but you have my utmost respect for carrying on. I hope one day you are successful at returning some kind of common sense and security to our communities.
Thank you all so much for this opportunity to serve. I will treasure every moment of this chapter in my life. Be safe, be well, fight hard.
Jason F. Poje
Assistant State’s Attorney
Poje is not the first state’s attorney staffer to put their departing thoughts in writing.
Natosha Toller, the office’s well-respected chief of criminal prosecutions, announced her sudden departure in an email last February. High-profile supervising prosecutor James Murphy followed her out the door in July after firing off an email that reflected on the office’s mission and offered a blistering appraisal of Cook County State’s Attorney Kim Foxx.
Foxx herself announced last month that she will not seek reelection in 2024.
I’m actually quite fond of both Temecula and Chicago, with ties to the latter in my past. I just reached a point in my life where I was done with long, cold winters, but I can’t speak for everyone on this.
Those long, cold winters make one appreciate summer that much more. Too much of a good thing is not good. I once moved to a place where it was summer or spring every day. I missed winter so bad I left.
PS this is not the person moving to Temecula. Its just that every day there is something like this here in this disaster of a state.
https://cwbchicago.com/2023/05/after-20-years-veteran-cook-county-prosecutor-quits-farewell-email.html
Cook County prosecutor quits after 20 years: ‘this State and County have set themselves on a course to disaster’
Does your friend favor disaster-oriented states?
Bond reform designed to make sure no one stays in jail while their cases are pending with no safety net to handle more criminals on the streets, shorter parole periods, lower sentences for repeat offenders, the malicious and unnecessary prosecution of law enforcement officers, overuse of diversion programs, intentionally not pursuing prosecutions for crimes lawfully on the books after being passed by our legislature and signed by a governor, all of these so-called reforms have had a direct negative impact, with consequences that will last for a generation.
I will not raise my son here. I am fortunate enough to have the means to escape, so my entire family is leaving the State of Illinois. I grew up here, my family and friends are here, and yet my own employer has turned it into a place from which I am no longer proud to be, and in which my son is not safe.
To everyone in the trenches in the State’s Attorney’s Office and in law enforcement, my one regret is that I cannot be at your side anymore as you continue to fight the good fight. I do not envy the task you have before you, but you have my utmost respect for carrying on. I hope one day you are successful at returning some kind of common sense and security to our communities.
Thank you all so much for this opportunity to serve. I will treasure every moment of this chapter in my life. Be safe, be well, fight hard.
Jason F. Poje
Nothing will change. The Soros backed DA’s will mostly be “re-elected”, crime will rise and other lunacies, such as “reparations”, will spread.
Burger King to close 400 stores. No more cheap hamburgers. I actually liked Burger King more than McDonalds.
I remember when the first opened McDonalds with those 15cent hamburgers and those delicious fries, about the same price. Than Jack in the Box opened the first drive thru and everybody followed.
I liked going to Big Boy car hop service myself, or A&W Root Beer.
“I actually liked Burger King more than McDonalds.”
+1 Char broiled patties!
Well one of the houses on my street I wrote about the other day officially closed. Nope, no bubble here.
Sold in April of 2021 (so middle fo the bubble). for 263k. They just lived in it. no updates, no remodels, nothing. (old neighborhood). Put it on the market in March for 413,000.
Under contract in 3 weeks.
Closed in about 5 weeks at 399,500
avg price of a house here is probably 185k or so (small town middle of nowhere), so this is a high end price on a above average home.
WTH?
How does it appraise? 2 years ago at 3% it was worth 260 and now at 6.5% it’s worth 399k????? Insanity continues. Of course that one will now be the comparable for the not quite as nice house 2 houses up that went on the market at 389k and under contract in 24 hours.
No fraud here. (/sarc)
“Sold in April of 2021 (so middle fo the bubble). for 263k.”
“Put it on the market in March 2023 for 413k, sold for 399.5k.”
That is an overall increase of nearly 52%. Clearly, the latest lender has little, if any, skin in the game.
Clearly. I want to know who did the loan and hope it’s not my local bank. (cuz if so, i’m cutting out)
Did your preferreds CR8R?
Bloomberg
Markets
Preferreds Get Burned in Historic Rout Spreading From Banks
– US banks aren’t selling new preferreds amid high costs
– Small lenders’ preferreds have slumped since SVB collapse
– Why Did First Republic Bank Fail So Badly?
By Tasos Vossos
May 7, 2023 at 7:38 AM PDT
Investors are bailing on preferred shares at a historic clip because of the growing concern about the health of US regional banks.
A $12.2 billion iShares exchange-traded fund tracking the wider preferred market sank 5.1% last week, marking one of the biggest selloffs since the global financial crisis.
Preferreds, a kind of hybrid security, are popular with banks because they help meet capital requirements without diluting shareholders. But now, the market is being upended in a selloff fueled by regional bank failures.
Issuance by banks is running at its slowest pace since 2018, and money managers say trading in the secondary market is a challenge.
“Without issuance and with money on sidelines, it’s just ‘what do you do?’,” said Allen Hassan, head of preferred stock trading at Ziegler Capital Markets, who has been trading the securities for more than 20 years. “It doesn’t feel like there’s a lot of confidence out there.”
…
https://www.bloomberg.com/news/articles/2023-05-07/preferreds-get-burned-in-historic-rout-spreading-from-banks#xj4y7vzkg?leadSource=uverify%20wall
UK
Thousands of landlords sell up to avoid net zero rules as buy-to-let no longer ‘viable’
Investors forced to ensure their properties have an EPC rating of C or higher from 2028
By Alexa Phillips 7 May 2023
https://www.telegraph.co.uk/property/buy-to-let/thousands-of-landlords-sell-avoid-net-zero-rules/
Yahoo
Business Insider
Warren Buffett strikes a dour tone on the US economy, warning the easy-money era is over
Theron Mohamed
Sat, May 6, 2023 at 5:38 PM PDT·2 min read
– Warren Buffett issued a negative outlook for the US economy on Saturday.
– The Berkshire Hathaway CEO said the boom period for his businesses has ended.
– Higher interest rates and banking pressures are stoking fears of a US recession and credit crunch.
Warren Buffett expects an economic downturn this year, he said during Berkshire Hathaway’s annual shareholder meeting on Saturday.
“The majority of our businesses will actually report lower earnings this year than last year,” the famed investor and Berkshire CEO said, attributing the expected downturn to a wider economic decline.
…
https://finance.yahoo.com/news/warren-buffett-strikes-dour-tone-003852903.html