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This Is Just An Inevitable Correction From Absurd Pandemic Prices

It’s Friday desk clearing time for this blogger. “A luxury real estate brokerage that handled some of Orange County’s biggest and most iconic home sales has shut down. Villa Real Estate closed all three of its offices in Newport Beach and Laguna Beach, leaving 125 agents scrambling to find a new brokerage. Jamie Duran, president of Coldwell Banker Realty Southern California, said her division has been ‘very busy in talks with quite a few brokers.’ ‘Companies call us and want to be acquired,’ Duran said ‘They just want to get out of Dodge with their shirt on.'”

“The sprawling apartment empire built by Veritas Investments, San Francisco’s largest and most controversial landlord, is unraveling at a rapid clip as multiple troubled loans backed by thousands of the company’s apartment units flood the marketplace. Rents are still between 5% and 10% lower than they were before COVID and, in some neighborhoods such as South of Market, it’s closer to 20%. ‘The market is in free fall, in one sense. Downtown is exposed significantly,’ said veteran San Francisco landlord David Gruber. It would be difficult for a buyer to make solid assumptions about what the portfolios are worth, he said. ‘Everybody is spooked by this stuff. Who is the lender going to be? How do you forecast? How do you know the values?’ Gruber said. ‘San Francisco is the poster child for everything that is wrong nationally. I don’t know how many people want to deal with it.'”

“A strongly criticized new Florida law restricts the real estate buying power of foreigners from seven countries, a startling move for Miami’s global property market. ‘The biggest winners are going to be local residents, as well as those moving down from the Northeast. There will be less competition to acquire property,’ said Jack McCabe, owner of real estate and economic research firm Jack McCabe Expert Services in Deerfield Beach. ‘The biggest losers will be those with high-dollar properties, as well as developers who have catered to foreign buyers. You look at Hialeah, Sunny Isles (Beach), Doral where you have a large concentration of foreign buyers, those marketplaces will have more of a dramatic effect.'”

“The heat wave in the Hamptons is over when it comes to summer rentals, real estate brokers told On The Money. The number of available rentals in the posh Long Island enclave out East is growing, even as demand for season-long rentals has fallen – and the market is taking a hit, Susan Breitenbach, a broker at Corcoran Group, told On The Money. While many rentals have dipped to pre-pandemic levels, others have been slashed as much as 50%, Breitenbach adds. Of course, some brokers note this is just an inevitable correction from absurd pandemic prices. ‘The pandemic was once in a lifetime pricing we’d never seen before,’ David Mazujian, licensed real estate salesperson at the Corcoran Group said.”

“The median sales price for a single-family home in Maui County dipped in April to $1.1 million compared to the $1.24 million median price at the same time a year ago, but home sales continued their downward trend as changing mortgage rates discourage buyers. In Maui County in April, 57 single-family homes were sold, down 48.2 percent from 110 sold in April 2022. Over the last 12 months, the number of single-family home sales each month has been down from the previous year. Maui County’s housing inventory has seen an upward trend over the past year.”

“The owner of a B.C. mortgage company is facing several lawsuits from investors, accusing him of not repaying them. On Tuesday, an estimated 50 investors attended a hearing at the B.C. Supreme Court, and another 350 watched the proceedings online. ‘There’s been a lot of people who are very concerned about their investment,’ said Chris Ramsey, a lawyer of one of the investors. ‘I’ve had calls from many investors who borrowed money against their houses to invest in this in this company. And obviously, this is a very serious issue.'”

“Troubled Swedish real estate group SBB has sold most of its shares in construction company JM for 2.8 billion Swedish crowns ($276 million), the company said, taking a significant loss on a stake bought less than two years ago. Th transaction gives SBB a much-needed cash infusion after scrapping a share issue this week when ratings agency S&P Global downgraded the company’s debt to junk status. SBB originally bought most of the shares, a roughly 20% stake, in June 2021 for 326.30 crowns per share. The sale at less than half that price could trigger an accounting loss of some 3 billion crowns, Carlsquare analyst Bertil Nilsson said. SBB is likely to continue selling off assets this year to reach a goal of divestment amounting to 6 billion crowns, the analyst added.”

“The average price for a home on the market fell sharply last quarter in the four largest cities in the Netherlands. The housing inventory on offer has also become more extensive. In the four largest cities of Amsterdam, Rotterdam, The Hague and Utrecht, a home cost an average of 480,000 euros in the first three months of 2023. That’s 8.2 percent less than a year earlier. Land registry Kadaster said that small private investors are now selling more homes than they are buying. Kadaster further noted that the budget that first-time buyers have available has ‘solidly’ decreased. At the same time, NHG national mortgage guarantee program said that the increased mortgage rates have reduced the financing options available to homebuyers. This will result in the Dutch housing market becoming increasingly stalled, NHG said.”

“The rising cost of living, says Richard Gray, chief executive of Harcourts South Africa, is coming at the general public ‘from all angles’ and most people are struggling. Another interest rate increase may therefore ‘push’ some homeowners ‘over the edge of affordability,’ forcing them to sell. Already, increasing numbers of homeowners are selling their properties because of financial stress. ‘This is a good investor buyer market because some home owners are under pressure. There is an uptick in investor properties and this trend will continue,’ said Sharon Kayise, Tyson Properties’ rental agent in Johannesburg.”

“Luxury home prices have fallen globally for the first time since the 2008 global financial crisis, according to Knight Frank. ‘Annual prices are now falling in 16 of the 46 markets tracked. While two-thirds of markets are still seeing positive growth, the large size of price declines in the weakest markets has pulled the overall index negative,’ Liam Bailey, Knight Frank’s global head of research, wrote in the report. Wellington saw the most significant price fall with a decline of more than 27%, followed by Auckland and Christchurch, which witnessed prices drop 17% and 15.3%, respectively. Other under-performers include Stockholm and Vancouver, ‘reflecting weakness in their broader national markets,’ the report said.”

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Someone Got Hosed

A report from the Globe and Mail. "It’s a troubling question that has been echoing…

This Post Has 50 Comments

  1. ‘her division has been ‘very busy in talks with quite a few brokers.’ ‘Companies call us and want to be acquired,’ Duran said ‘They just want to get out of Dodge with their shirt on’

    But it’s still a sellers market!

    1. I’m sure this is contained to Newport Beach and Laguna Beach, places where no one really wants to live anyway.

  2. ‘The sprawling apartment empire built by Veritas Investments, San Francisco’s largest and most controversial landlord, is unraveling at a rapid clip as multiple troubled loans backed by thousands of the company’s apartment units flood the marketplace. Rents are still between 5% and 10% lower than they were before COVID and, in some neighborhoods such as South of Market, it’s closer to 20%. ‘The market is in free fall, in one sense’

    How do those 5% cap rates look now?

  3. ‘There’s been a lot of people who are very concerned about their investment,’ said Chris Ramsey, a lawyer of one of the investors. ‘I’ve had calls from many investors who borrowed money against their houses to invest in this in this company’

    Oh dear…

    1. ‘I’ve had calls from many investors who borrowed money against their houses to invest in this in this company’

      Any decent investor buys his wife a paid-off place to live before setting sail among the sharks and mistresses.

  4. A lot of these threads and articles reference “the pandemic” as a factor in the economy and house prices.

    Three years on, I believe that the alleged disease of COVID was only incidental to the government response to it.

    It was only ever about control, it was never about your health.

      1. Citizens don’t wear masks. Only slaves wear masks. Slaves, and prisoners i. handcuffs being dragged in and out of court.

        1. A few weeks ago I saw a twenty-something male on a scooter with a mask, no helmet. You can’t fix stupid.

          1. I routinely see HS students shambling along the sidewalk on their way home from school, wearing their stupid masks.

      3. Musk is a charlatan through and through. I don’t trust him as far as I can throw him. He is on the bleeding edge of the climate change scam, profiting obscenely off of it while taking taxpayers for a ride into the trillions.

  5. A quote from Senator J.D. Vance:

    “I want to focus on one of the under-discussed components of the housing crisis in our country today, and that is its connection to mass illegal immigration … We cannot, as a country, absorb 10 million people and still provide high quality housing to the rest of our citizens. The math doesn’t work. The numbers don’t make sense. The increase in housing prices and rents is clear for all to see.”

    1. Denver Mayor Michael Hancock is complaining about the lack of free money from Uncle Sugar to pay for the illegal invasion of Denver.

      As a thirteen year resident of Arapahoe County, I wish only the worst on the City of Denver, and especially its voters.

      I make a point of not generating any sales tax revenue for Denver, and other than the electrical supply house, I pretty much boycott all businesses in Denver.

      Parts of Arapahoe County are really nice, Cherry Hills Village, Greenwood Village, you never see any homeless or graffiti or trash there.

      Denver, is in an economic death spiral, which its voters voted for.

      Your property taxes will get you nothing in the City of Denver. You get no services, no law enforcement, just a bottomless money pit paying for homeless and illegals.

      1. We moved out Colorado Spring end of April, got all cash, over asking in 1 day, took the money and ran. CS is Denver 25yrs ago, but the writing is on the wall, Denver 2.0 in the making.

      2. I’m in Collin County and treat Dallas County the same way. I make it a point to never stop and spend money there. The problem is those locusts are fleeing up here after turning Dallas into a pile of poop. That and the masses of people fleeing California, Illinois, and New York.

        1. The IL residents fleeing IL for TX are probably more conservative than the average Texan. Few democrats in IL are like “I’m gonna move to Texas”

  7. A reader sent these in:

    Have you ever wondered why so many economists/strategists/journalists and other peripheral to risk taking parasites have been so vocal against interest rate hikes? Yea…you guessed it…coz normalizing the absurdity of monetary and fiscal policies will end the lifting of all boats…Survival instinct…

    https://twitter.com/INArteCarloDoss/status/1656637854917771264

    European Commercial Real Estate Values May Fall Up To 40%: Citi

    https://twitter.com/danjmcnamara/status/1656635911927373827

    The US government continues to spend money like a drunken sailor w/ the budget deficit widening to $1.9 trillion. This is occurring when the economy is still in an expansion with the Unemployment Rate at a 54-year low of 3.4%. What happens to the deficit when a recession hits?

    https://twitter.com/charliebilello/status/1656645331231145985

    Roughly two-thirds of mortgages have an interest rate below 4%. This is the #1 factor driving the limited housing supply as many of these homeowners literally can’t afford to move…

    https://twitter.com/charliebilello/status/1656644259141894147

    🚩🚩🚩 We are starting to see recessionary signs emerging in the labor market. Continuous claims nationwide 4w average has risen considerably and more importantly the number of states where the rise exceeds a certain threshold is now flashing a recessionary signal. Add this to list of things that have flipped of late. Including signs that consumers spending on leisure seems to have peaked. Confirmation should come in the form of a successive number of initial claims > 265-275 K

    https://twitter.com/INArteCarloDoss/status/1656719896594481156

    FFS-Michigan housing prices soaring against these horrific demographic and economic fundamentals should be all the “red flag” you need to see how broken the US housing market thanks to hyper monetization. But housing just another symptom of a broken system.

    https://twitter.com/Econimica/status/1656751937142894592

    How you know you’ve made it…

    https://twitter.com/indexnforgetit/status/1656694544245858304

    This is what a net worth of $100 million looks like in Congress.

    https://twitter.com/ibie43/status/1656743897731846144

    2 years into researching property in NE TN. When I started it was peak boom time; now it’s looking a little more interesting:

    https://twitter.com/thekitchentwit/status/1656740783037227009

    I wonder what the backstory is on this. Who within FHFA was fighting for the change and why. And what were the internal politics that led to recinding the change?

    https://twitter.com/JohnWake/status/1656712481161764864

    Stan Druckenmiller at Sohn 2023: “I’m sitting here staring in the face of the biggest and probably the broadest asset bubble, forget that I’ve ever seen, but that I’ve ever studied.”

    https://twitter.com/Stephen_Geiger/status/1656416819312222219

    Softbank reports 32 billion loss. Equivalent to Namibias GDP.

    https://twitter.com/great_martis/status/1656549892066791424

    Currently no rent being paid on 20% of US office space. Getting worse? Think of how many companies are riding out expensive leases with no intention of renewing, plans to downsize sq ft. Regional banks have much of the exposure to this market.

    https://twitter.com/WallStreetSilv/status/1656734856825405457

    Core inflation has not made any notable progress to the downside so far in 2023 and remains far above the Fed’s 2% target.

    https://twitter.com/NorthmanTrader/status/1656290386707374080

    1. “literally can’t afford to move”

      Think about this. They are literally prisoners of their debt interest rate, prisoners of debt.

      They’re not owners, they don’t actually own anything. The bank owns them.

      See also: my name.

    2. “This is what a net worth of $100 million looks like in Congress.”

      Seems like AI could generate a video of AOC shoving Diane in her wheel chair a flight of stairs.

      1. Down a flight of stairs?

        How about that scene in Hannibal where Hannibal Lecter pushes wheelchair bound Mason Verger into the pen of feral hogs? LOLZ

    3. This is what a net worth of $100 million looks like in Congress.

      I was going to say that she looks like she belongs in a nursing home, but no, she looks like she belongs in a morgue. She looks ghastly.

  8. “In Maui County in April, 57 single-family homes were sold, down 48.2 percent from 110 sold in April 2022.”

    There must be more than a few hundred homes Maui! Although Google sez the population is only 164,000 or so.

    Also from Google:

    “The 2020 census estimated there are 71,439 total housing units in the county.”

    57/71,439 = 0.08% turnover, or 1 home in 1,250 selling in April. Seems low for a place where lots of senior citizens live.

  9. “The US government continues to spend money like a drunken sailor w/ the budget deficit widening to $1.9 trillion. This is occurring when the economy is still in an expansion with the Unemployment Rate at a 54-year low of 3.4%. What happens to the deficit when a recession hits?”

    “Stan Druckenmiller at Sohn 2023: “I’m sitting here staring in the face of the biggest and probably the broadest asset bubble, forget that I’ve ever seen, but that I’ve ever studied.” “

    “Core inflation has not made any notable progress to the downside so far in 2023 and remains far above the Fed’s 2% target.”

    —

    https://zensecondlife.blogspot.com/2023/05/the-super-clusterfuck.html
    ZEN SECOND LIFE
    Life outside the corporate Matrix
    Thursday, May 11, 2023
    THE SUPER CLUSTERF*CK

    “However, what is never discussed in the lamestream media is that rate hikes of 5% STILL have not brought inflation under control. Why? Because the Fed balance sheet is 95% correlated to the CPI and lately it’s been rising again to counter the incipient banking meltdown.”

    “THIS balance sheet is the epicenter of the Fed’s policy error dating from 2020 to now. It increased 100% during the pandemic and it has only come down 5% since the Fed started tightening. It is the SOLE source of monetary inflation. Only a dunce assumes that a 1.5% reduction in interest rates in March 2020 caused 40 year high inflation. Especially now that rates are 3x higher than they were pre-pandemic.”

    —

    https://thefelderreport.com/2023/05/09/the-great-wealth-illusion/
    The Great Wealth Illusion
    jessefelder May 9, 2023

    “It’s no secret that for the past decade and a half the Federal Reserve has made it its mission to create a “wealth effect” in the economy by boosting asset prices. Back in 2010, Ben Bernanke explained, “…higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.” And so he began a process of printing money with the explicit purpose of inflating asset prices, a policy that has been continued by each of his successors.”

    “Over this time, quantitative easing, as the policy is called, has been inordinately successful in boosting asset prices while not so effective in boosting the economy.”

    “But when you look at household net worth relative to the growth in the money supply, it’s clear that the rise in the former was nothing more than an illusion. Net worth has actually declined relative to M2 since 2008 and is now back to levels not seen in the 20 years prior to that time. The truth is that there has been no “real” wealth created at all when measured this way.”

    “And when you deflate GDP by the growth in the money supply, the picture is even more damning. Since quantitative easing began in 2008, the trajectory of the economy in relation to the growth of M2 has been far more deeply negative than that in household net worth. The truth is that there has been no “real” growth in the economy since 2008 when it is measured in this way; in fact, the economy has been in protracted decline relative to the money supply for decades, a phenomenon that has only worsened during the QE era.”

    “As today’s CPI report reminds us, that after decades of disinflation the most recent round of money printing has lead to the return of inflation. At the end of the day, it may not be the economy or household net worth but inflation that the central bank’s great monetary experiment has been most effective in stoking.”

    —

    – Insert my shocked face here…

    https://news.gallup.com/poll/505478/americans-lack-confidence-major-economic-leaders.aspx
    Economy
    May 9, 2023
    Americans Lack Confidence in Major Economic Leaders
    by Jeffrey M. Jones

    “WASHINGTON, D.C. — With the U.S. facing a deadline to increase the nation’s debt limit and the threat of an economic recession looming, Americans lack confidence in a variety of key U.S. leaders on economic matters. Gallup finds between 34% and 38% of U.S. adults expressing a “great deal” or “fair amount” of confidence in President Joe Biden, Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen and congressional leaders in both major parties to do or recommend the right thing for the economy.”

    —

    – Parting quotes here:

    “The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.” – Ludwig von Mises

    “The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.” – Ernest Hemingway

    “Inflation is a monetary phenomenon. It is made by or stopped by the central bank.” – Milton Friedman

    – The Fed is the central bank of the U.S. The Fed is also a scam, enabling fiscally reckless and feckless Congressional spending. This is as it’s been throughout history. Not different this time. Asset bubbles always burst. The bigger the boom, the bigger the bust.

  10. Stop calling them migrants.

    They’re not migrants, it’s a criminal invasion of military age males. A criminal invasion.

    Washington Post — U.S. sees record migration influx as pandemic border restrictions lift (5/12/2023):

    “Illegal border crossings have topped 10,000 per day this week, the highest levels ever, as the Title 42 border policy expired at 11:59 p.m. Thursday. Thousands of migrants forded the Rio Grande into the Brownsville, Tex., area, or arrived elsewhere, including more than 800 miles away on the dusty strip of U.S. land between the riverbanks and the border wall east of downtown El Paso.

    With Border Patrol stations and processing centers maxed out, officials authorized the release of migrants without court dates at locations where facilities exceeded 125 percent of their holding capacity or other thresholds were surpassed. But a federal judge stepped in late Thursday to block the release plan, granting a temporary restraining order sought by Florida’s attorney general.

    The ruling cuts off a potential pressure valve for the Biden administration after senior officials have repeatedly assured they are prepared for the strains and have a broader strategy that will reduce illegal crossings.

    As the midnight expiration time passed, Homeland Security Secretary Alejandro Mayorkas posted a video statement to Twitter, warning that “people who arrive at the border without using a lawful pathway will be presumed ineligible for asylum.” He also warned that 24,000 Border Patrol agents and officers and thousands of troops and contractors are on hand to enforce the policy.

    “Do not believe the lies of smugglers,” he said. “The border is not open.”

    Shortly after, the American Civil Liberties Union tweeted that it was suing to stop the restrictions, saying they close off “access to safety for the majority of people seeking asylum in the United States.”

    https://archive.is/k1pGZ

    “This sucker could go down” — George W. Bush

    1. This is a invasion of the US Border, and you can’t call it anything else. This is a Government body failing to protect the Borders for reasons that are treasonous to the Constitutional provisions and duties set by the formation Constitutional Republic.
      This invasion subjects US Citizens to undue harm, overtake, and threat to life, liberty and pursuit of happiness, by this not vetted 7 million in a short time
      The One World Order doesn’t want Borders or sovereign Nations or Constitutional protections for the individual…This NWO insurrection wants Global dictorship by a small group of Private Parties that want to subject human populations to enslavement, deprivation and mass genocide and replacement by AI/robots ..A group so deranged ,reckless, arrogant and evil and psyopathic that they threaten all life forms and ….earth itself..

    1. If I recall the ending of the story, an actual wolf shows up and nobody is prepared, due to too many past false warnings.

    1. Why current US recession warnings are unlike all the others
      Analysis by Nicole Goodkind, CNN
      Updated 7:44 AM EDT, Fri May 12, 2023

      New York (CNN)

      Economic experts are once again ringing the alarm bells over an imminent downturn. A US recession is coming, they say, in the second half of 2023. That time frame begins less than three weeks from now.

      JPMorgan CEO Jamie Dimon warned on Thursday of great economic danger lurking just over the horizon. Given the risks that lie ahead, he told Bloomberg news, “I would take a mild recession happily.”

      Billionaire investor Stan Druckenmiller didn’t mince his words this week at the Sohn Investment Conference. A hard landing is coming, he cautioned, and “it’s just naive not to be open-minded to something really, really bad happening.”
      …
      https://www.cnn.com/2023/05/12/investing/premarket-stocks-trading/index.html

      1. “it’s just naive not to be open-minded to something really, really bad happening.”

        I read that rising pasta prices in Italy are a serious issue. They ain’t seen nothin’ yet,

    1. An article I posted recently claimed US housing prices would soar in the event of a debt default, but I am missing the logic. The normal result of a sovereign default is soaring interest rates, which could be the final nail in the coffin for floundering US housing demand.

      1. The normal result of a sovereign default is soaring interest rates, which could be the final nail in the coffin for floundering US housing demand.

        I think the logic is there is lots of money on the sidelines, and in the event of a default that cash will go into hard assets such as real estate since it only “goes up” and it is a great “inflation hedge”.

        1. I guess it gets down to whether there really is a huge free cash pile on the sidelines just itching to get into real estate. But if the supposed free cash is in fact mainly dumb borrowed money, I can’t see how the higher rates that would likely result from a default would help stimulate much new investment.

          1. If the government goes deadbeat, your bank deposits will be less meaningful as well.

    1. Brace for a real-estate recession as commercial property will be the next domino to fall in the US, say top Guggenheim and Apollo execs
      Zahra Tayeb
      May 10, 2023, 4:07 AM PDT
      Office building at 263 Old Country Road in Melville, NY, available for rent for over a year on April 17, 2023.
      A vacant office building in Melville, New York.
      Photo by Howard Schnapp/Newsday RM via Getty Images

      – A real-estate recession is coming as commercial property will be the next domino to fall, according to top execs.

      – “That’s the next shoe to drop in the US. Like everything else, it has been priced so tightly,” Apollo’s co-president told the FT.

      – Tighter credit conditions and remote-work trends are among factors disrupting the commercial property industry.
      …
      https://markets.businessinsider.com/news/stocks/commercial-real-estate-cre-property-recession-debt-risk-guggenheim-apollo-2023-5

  16. Does it seem like some are overworrying the credit crunch / recession scenario?

    1. A recession and a credit crunch could result in $1 trillion of corporate debt defaults, Bank of America says
      Jennifer Sor
      May 12, 2023, 9:36 AM PDT
      trader worried
      Don Emmert /AFP/GettyImages

      – A full-blown recession and credit crunch could spur an 8% corporate default rate, BofA estimated.

      – That would put nearly $1 trillion of existing corporate debt in distress, the bank said in a note.

      – Investors have been worried about a recession as high rates and tighter credit squeeze the economy.
      …
      https://markets.businessinsider.com/news/bonds/recession-credit-crunch-us-economy-debt-default-bank-of-america-2023-5

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