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They Placed The Biggest Possible Bet On Something That Went Bottom-Up

A report from the Idaho Statesman. “For the first time since the years after the Great Recession, city officials project that Boise homeowners will see decreases in their property taxes. The same trend is happening across most of Ada County, said Brad Smith, the chief deputy at the Ada County Assessor’s Office. He said the last time property values went down was in 2012. Since early last year, home prices in Boise have fallen by 10%, Boise Regional Realtors President Debbi Myers told the Statesman by phone. Across Boise, Meridian, Nampa and Caldwell, homes have seen a 4.2% decrease in value since early last year, according to data from the National Association of Realtors. ‘The explanation for that is really pretty simple,’ Myers said. ‘We were undervalued pre-COVID, and then we had a surge during COVID that was not in line with any reality. And now it’s kind of correcting back to where it should be.'”

The Dallas Morning News. “From July 2021 to June 2022, the median age of Texas homebuyers was 56, according to new research from Texas Realtors derived from a National Association of Realtors survey. That’s almost nine years older than the typical buyer from just a year before, who was 47. During the same period, the share of first-time buyers in the market dropped from 32% to 24%. A decade before, 39% of Texas buyers were first-timers. In 2023, home prices across the state finally stalled out. As of April 2023, Dallas-Fort Worth single-family home prices had sunk 5% from a year before to $404,450 while sales were down 8%.”

Yahoo Finance. “Many cities across the country, some homes are selling for tens of thousands of dollars less, sometimes even hundreds of thousands of dollars less than they were just a year ago. Here to explain, Yahoo Finance housing reporter, Rebecca Chen. ‘So the numbers that we’re seeing show that some of the San Francisco housing are $220,000 less than just a year ago and this is per house. Experts we previously chatted with say, it’s because buyers are just not as aggressive in the market. There’s not as much wealth in the tech ecosystem. So there’s not that much IPO going on, the VC funding has really dried up and because of the tech layoffs. And also, we are seeing that pandemic boomtown prices are really coming down.'”

“‘So Austin, Texas, Boise, Idaho, prices are dropping in these places as well. And Austin saw a 15% decline this year. It’s about $85,000 less compared to last year per house in Boise, and this is really the market where in the last two years, market went crazy over. It’s skyrocketed over 40% in just one year. And in Boise, Idaho we’re also seeing similar things where it’s a 15% drop, and that’s about $80,000 less in a house compared to last year.'”

The Guardian on California. “Once home to some of the most expensive and sought-after office space in the world, San Francisco today is suffering from one of the most hollowed-out downtowns in North America. Walking along Market Street, the main thoroughfare, ‘office space available’ and ‘for sale or lease’ signs solicit new businesses. Office vacancy in the first quarter of 2023 ranged between 26.4% and 29.4%, depending on the tally. It has sparked speculation that the city is at the verge of a so-called ‘doom loop,’ a spiral down into debt that will force it to cut social and transportation services, which will in turn perpetuate more disinvestment.”

“‘San Francisco really placed a bet on huge commercial office development, more than anywhere else maybe in the world,’ said California assembly member Matt Haney. ‘They placed the biggest possible bet on something that went bottom-up. They lost. So now we have to adapt and adapt quickly.'”

“Sitting in Salesforce Park was Chris Carlsson, a local historian and co-director of Shaping San Francisco, which provides walking, biking and bay cruise history tours of the city. He gestured to the soaring towers around. He thinks their value is about to crater. ‘The people holding that value will lose it. And they will be sad, and they’ll be jumping off buildings, and they’ll be freaking out,’ said Carlsson, who sheds no tears for property investors. ‘That’s fine. That’s capitalism, right?'”

From Bisnow. “Activist investor Jonathan Litt shorted major office-owning REITs in the earliest stages of the pandemic, and so far he has proved prescient. Litt reiterated his commitment to short bets focused on office buildings in urban cores in an interview with CNBC on Tuesday. Litt said his Land & Buildings Investment Management continues to maintain a short position on Washington, D.C.-based JBG Smith, whose stock has already lost 62% of its value since May 2020. Litt declined further comment to Bisnow when reached through a representative.”

“New York office buildings are now projected to lose 44% of their value by 2029 due to ‘persistent’ remote work keeping demand in excess of supply, a new academic study published this week found. Buildings with expiring leases see less hope than ever of maintaining similar cash flows, especially as inflation drives operating expenses upward, Litt said. ‘This isn’t a work-from-home story anymore,’ Litt said on CNBC. ‘This is a financing story … And as these debts come due, there’s really nowhere to go because lenders aren’t lending to the space.'”

From Market Watch. “Cash-strapped landlords with maturing property debt aren’t being scared off by 12%-16% rates of interest, said Ben Miller, CEO of Fundrise, which recently launched a new $500 million credit fund to make property loans to borrowers in need of liquidity. ‘We have been turning away deals. We have too many deals,’ Miller told MarketWatch on Friday. ‘The problem is too any deals and not enough dollars in the world today. The team has been trying to prioritize what we think are deals with the lowest risk.'”

“Miller pointed to stress evident among small-time syndicators in multifamily properties, as highlighted by The Wall Street Journal, as an example of fallout already hitting real estate as credit conditions tighten. ‘They are the first to get foreclosed on because they are less capitalized,’ he said. ‘But institutions have the exact same problem.'”

The Toronto Star. “As bills pile up, many Canadians are already feeling the pain and making difficult choices as they struggle to repay debt — and a series of reports this week revealed just how bad it’s getting. Even Canada’s Big Five banks, those reliable generators of profits, are feeling the impact. Their quarterly earnings took a hit this week as they reported putting aside billions of dollars to shield themselves from bad loans. One finance expert said that could eventually make it even harder to borrow as the banks rein in their own spending.”

“It’s all taking a toll. A report from BDO Debt Solutions published Thursday said 30 per cent of respondents to an online survey in April feel ‘overwhelmed by debt and don’t know what to do about it.’ During the early years of the pandemic, when interest rates were still low, government support was flowing and banks weren’t aggressively collecting missed loan and credit card payments, and ‘it was really masking the fact that people were using credit to make ends meet,’ said Mike Braga, senior vice-president and licensed insolvency trustee at BDO.”

“‘Now that things are getting back to normal from a business perspective,’ said Braga, ‘collections are ramping up and interest rates are increasing. You’ve got this perfect storm of all of these individuals with debts that they thought were manageable before, who can no longer manage.'”

“‘Borrowers have been dealing with a higher rate environment for several months ow. We are seeing insolvencies, impairments and losses increasing toward longer-term averages,’ said Graeme Hepworth, chief risk officer at RBC, adding, ‘the full impact of higher rates on the economy will take time to translate into credit losses.'”

“RBC reported a 14-per-cent drop in profit on Thursday, which was partially because it recorded $600 million in PCLs. But Canada’s largest bank also said its expenses were up significantly and CEO Dave McKay attributed that in part to ‘aggressively’ hiring too many people last year, saying it ‘overshot by thousands of people.'”

The Globe and Mail. “Dubbed the Great Consumer Squeeze, Canadians are facing the outcomes of the twin shocks of declining purchasing power, as the cost-of-living is increasing faster than wages, and fast-rising interest rates, forcing consumers to devote a greater share of their income to debt repayment. Now, despite these current positive signs of solid consumer confidence, there are alarming signs that a rising number of households are struggling with their debt.”

“In some instances, particularly in British Colombia, Alberta and Manitoba, insolvencies are now above their prepandemic levels. Interestingly, households in B.C. and Alberta are also among the most indebted in the country, thereby making them more vulnerable to the sort of shocks we have seen over the past year. But the headline insolvencies numbers do not tell the full story. The proposal component of insolvencies, also referred to as a renegotiation of terms, is rising at a rapid pace, while bankruptcies remain subdued. Proposals in Canada are about 10 per cent above their 2019 levels and every province between Ontario and B.C. has proposals well above their prepandemic levels; in Manitoba, this figure is 50 per cent.”

“Although the fast-rising and high level of proposals may be a return to normal, it also suggests that an increasing proportion of households are falling behind on their financial obligations and require a change in their lending terms to avoid bankruptcy. With the strong labour market enabling a steady stream of income for borrowers, lenders prefer revising their lending terms instead of dealing with the higher costs of bankruptcy and foreclosure.”

“In this context, the labour market is the Achilles’ heel of the Canadian economy. A change in the labour market owing to a negative shock or a delayed adjustment to the sharp increase in interest rates has the potential to rapidly change the economic outlook. Given the high level of household debt and the high cost of servicing this debt, most Canadian households require two or more incomes to remain current on their payments. A significant change in the employment conditions and job losses would likely lead to an even greater surge in insolvencies, compounding the impact on the wider economy.”

“Even in the absence of such a shock, we should expect insolvencies to continue to rise. As interest rates remain close to their highest level in a decade, more and more borrowers will be renewing their loans at higher interest rates, some of which may become insolvent because of the significant impact on their payments. Moreover, as insolvencies are a lagging indicator of the economic cycle, peaking about a year after a shock, the current rise in insolvencies likely barely takes into account the full extent of the rate hikes of the past year.”

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This Post Has 100 Comments

  2. ‘San Francisco really placed a bet on huge commercial office development, more than anywhere else maybe in the world’

    This is true. But what city doesn’t have pretty much everything bet on commercial real estate? It’s the base of commerce, jobs, income and tax revenue. This is why shutting them down was always playing with fire.

    A recent example: Old Navy bailed on SF after 30 years. In those 30 years they endured down years. It’s those long time businesses that stick out bad times. When they give up, look out below.

    1. “This is why shutting them down was always playing with fire.”

      A scorched earth strategy pushed by democrats to ruin the Orange Man.

      1. ruin the Orange Man

        It’s much deeper than that. They want to ruin us, take away traditions, morals, community, family & etc. so that their socialist utopia can then fill the vacuum.

      2. A scorched earth strategy pushed by democrats to ruin the Orange Man.

        Orange Fever is still alive and well. I am so sick of hearing the anti-Trumpers that they have been trained to not open their pieholes around me anymore.

        1. anti-Trumpers

          I was looking at planter/pot risers on Amazon and had some anti-Trump book recommended.

    2. San Fransicko is getting all the press but the reality is that the entire bay area has a big problem. However, what I find really interesting about the SF situation is that SF is actually one of the smallest cities in the country by land area. It’s only 7 miles wide by 7 miles long! It’s not like they have this massive sprawl of failure that they have to contend with. It takes a special kind of stupid to screw it up the way they have.

  3. And what you thought you owned, you’ll lose all of it in the divorce anyway. My former co-worker is doing just that, at age 31.

    1. The best thing a young man can do for himself in this system is to buy and stash gold and tell nobody, especially if he plans to marry and have children.

      An old friend of mine’s father got taken to the cleaners by his mom. Cleaned him out through the court system. He lived the life of a pauper after that, and scratched and clawed his way back to where he had a pension and assets when he died.

      He gave it all to my friend and stiffed the two daughters, all of whom were adults by this time. He hated women after his experience. My friend, having a kind heart, started sharing it with the sisters even though that’s not what his father wanted. Then my friend started complaining to me because the girls had their hands out every first of the month, like they were entitled to it. He started resenting them and told me he didn’t want to pay them any more, but was struggling with how he would tell them. He ended up dying unexpectedly and they got it all.

      1. I guess I’m the lucky one, as I had no net worth to speak of when my marriage went to hellinahandbasket. I had the kids though, so had to press on. I love them all and we have no drama.

    2. This is another example of why it matters which state you choose to reside in. Not all states share the western US property laws. In TN, for instance, if there is a divorce, you leave with what you came with.

    3. I watched a co-worker friend go through a divorce from a spouse who was incorrigible and pugnacious. The local county’s arbiters couldn’t stand her either. Once his son was done with community college and on his feet, my friend drank himself to death.

    4. I’ve been advising a friend with a special needs child. It’s the second marriage for both she and her husband, who is physically abusive with her and verbally abusive to both of them. The husband’s daughter lived with them for a time and would never acknowledge my friend’s special needs child. My friend’s been married 8.5y. Assuming she doesn’t need to pull an emergency eject button, which she is prepared to do, she’s hanging in for another 1.5y. Men can be d!cks as much as women can be b!tches.

          1. The cycle of physical abuse is on the order of months to a year. The longer she can hold out the better. If he files for divorce, which he’s “afraid to do,” he’s screwed. If she leaves in fear of her and her child’s physical safety, he’s screwed. If she leaves after 10 years of marriage, he’s screwed. She’s prepared for an emergency exit, if necessary.

  4. ‘They are the first to get foreclosed on because they are less capitalized,’ he said. ‘But institutions have the exact same problem’

    Long after the FOMO, the breathless articles in the boom, it always comes back to credit.

    ‘Even in the absence of such a shock, we should expect insolvencies to continue to rise. As interest rates remain close to their highest level in a decade, more and more borrowers will be renewing their loans at higher interest rates, some of which may become insolvent because of the significant impact on their payments. Moreover, as insolvencies are a lagging indicator of the economic cycle’

    Everyday, there are K-dns calling up mortgage brokers trying to get out of a bind. Igloo prices go up 40% or more in a year, for 2 years, and you expected what?

  5. ‘With the strong labour market enabling a steady stream of income for borrowers, lenders prefer revising their lending terms instead of dealing with the higher costs of bankruptcy and foreclosure’

    Sound lending!

  6. The 13% in our area ,are all giddily planing what to do with the 1.3 Million $ they’re expecting from Pie-in-the-sky thinking (reparations) ……for each person……they really do believe it’s coming , it’s an off-kilter world …..that would make the money flow again ….

    1. Democrat Party is the party of institutionalized anti white hatred, and more importantly, nobody hates white people more than white Democrat voters.

      My suggestion to all of these haters, is to stop “culturally appropriating” white technologies like electricity and indoor plumbing.

      Go move to Haiti or Zimbabwe, and stay there.

    2. I read that 77% of blacks nationwide want and expect reparations. I think the goal is to spark nationwide riots and violence when the reparations never materialize. Then, the gooberment can declare a state of emergency and martial law, and we can kiss elections goodbye.

      That said, I recall reading that one of the members of the Clowniformia reparations committee suggests that the 1.3M be paid in installments.

      they really do believe it’s coming

      Why wouldn’t they? The Left is letting them literally get away with murder. They have become the Left’s Golem, perhaps a tool for eventually declaring martial law.

      1. “I read that 77% of blacks nationwide want and expect reparations.”

        If my white ancestors moved here after the slavery era, can I claim an exemption? Or do I owe due to the color of my skin, not the content of my character?

        2. Stupid questions get stupid answers! Of course you have to pay. You, by virtue of being white, live and participate and benefit from the white supremacist society they created, therefore must pay up. Having ancestors who own slaves ain’t got nothing to do with it. You pay simply because you exist. It’s inter generational and tribal shared culpability and liability.

      2. “I think the goal is to spark nationwide riots and violence when the reparations never materialize. Then, the gooberment can declare a state of emergency and martial law, and we can kiss elections goodbye.”

        That’s a bit over the top. The country has experienced many previous race riots, most recently over Black Lives Matter, with less dramatic outcomes.

        1. Do you really believe the 2020 riots were organic? That those pallets of bricks just magically appeared on strategic intersections?

      3. +1

        The Fentanyl Floyd riots were a good preview of what the violent left has planned for whitey.

        See also: Reginald Denny in Los Angeles 1992, that type of incident will soon be a daily occurrence in Democrat Party sh*thole cities.

      4. ‘perhaps a tool for eventually declaring martial law’

        You guys live in a different world than I do. Try cutting off the tee vee.

        2. I don’t watch TeeVee either.

          Why do you think I’m buying property in a rural county? It’s not just because of the lower price.

          There’s a restaurant in Westcliffe that displays a small placard inside the front door with two revolvers that says “we don’t call 911.”

          Get out of cities. Get as far away from them as possible, because only bad, bad things are coming.

        3. I have a TV, but never watch network news or globalist “entertainment” programming.

        1. We have around 40 million ‘africans’ in the US, give or take. (We wont get into all of the new arrivals who surely are/were oppressed or those who identify as such but just use an accepted average.) If they all get 1.3 million dollars then this will only cost us 52 trillion dollars. Sounds reasonable to me. Why not double it just for good measure? I’m sure it will be fine.

    3. If the federal government is already groaning under the weight of mandated social security and military benefits, it is hard to imagine sufficient political support to add race- based reparations to the federal tab. And local reparations movements are likely to spark outmigration…like in San Francisco.

      1. Opinion
        California’s Outmigration Problem | Opinion
        Peter Roff , Newsweek Contributing Editor
        On 5/4/23 at 9:48 AM EDT

        Cultures have character—things that define them, differentiate them from others, and create the kind of mutual identity on which countries and civilizations are built.

        One that is almost unique to America is a kind of “wanderlust” that not only involves the desire to travel but the feeling that better opportunities are waiting for each of us somewhere other than where we currently are.

        It’s an impulse that’s caused America to grow. Whether it was the search for trails westward from the original 13 colonies, or the Great Migration when southern rural blacks moved to the rapidly industrializing north, or the gold rush that sent thousands of “forty-niner miners” to California in search of great wealth, the possibility that economic security could be found just by looking for it has caused populations to shift and communities to grow.

        What is not yet evident—except to the people who study the issue of outmigration closely—is that it is happening again. People are leaving blue cities and blue suburbs for the better economic conditions that exist in the red states.

        The state most adversely affected is California. It’s lost so many people compared to other states that for the first time since it gained statehood in 1848, it lost a congressional seat in the reapportionment that followed the 2020 national census.

        The reasons people are leaving are the subject of a new film by Siyamak Khorrami, who left his native Iran with his family when he was 16 in search of a better life. He understands what’s driving the “wanderlust” so many California residents are feeling.
        …
        https://www.newsweek.com/californias-outmigration-problem-opinion-1798186

        1. The wife & I left California to escape a sinking ship. “Wanderlust” didn’t have anything o do with our decision.

          Visited some SoCal friends a couple of years ago. They were upset because the week before three “immigrants” sawed the catalytic converter off their Jeep that was parked in their driveway. There was video evidence and the friends actually saw the perps, as they were driving away at 4:00am, and could describe the vehicle.

          The response from the police was to “contact your insurance company and file a claim” as “this particular type of theft has become so common that we don’t have the resources to follow up on it”.

          Next day our car (a 2-ton Mercedes) gets totaled while driving near our old neighborhood. I don’t know how he managed it but the guy who hit us, another “immigrant” with multiple neck tattoos, managed to drive off from the scene of the accident. We were going 45MPH and the guy that hit us must have been doing at least twice that speed. My guess is that he was racing around cars as we had witnessed others repeatedly doing during our stay there.

          K-9 cop shows up a couple of minutes later, I told him that the now FELON immigrant that fled the scene couldn’t have made if far based on the condition of our now wrecked car. He gave us the same answer that our friends received a couple of weeks earlier. “Well, you’ve got insurance, right?” and ignored our pleas.

          Based on his response and looking at my now worthless automobile and seeing, over the prior 2 days the sh@thole that my old stomping grounds has become, I was less than politically correct in my description of the POS that caused our grief that day. This seemed to piss off the cop who preceded to speak the “diversity is our strength” speech that I am sure he learned in one of his required equity courses. I took my wife’s hint and just walked away from the clown (mid-speech) who never did get on his radio to give out the perps or his car description.

          When we got hit all hell broke out in the traffic behind us. Californians like to follow the bumper in front of them and I could see nothing thru my mirror but bits of my car and tire smoke as chaos ensued. Luckily no other vehicles got involved.

          We are still not sure what occurred, exactly, as NOT ONE person in any of those vehicles who witnessed the accident even bothered to stop in an attempt to render any assistance that might have been needed.

          1. As your experience demonstrates, this has nothing to do with watching TeeVee. The nation is turning into a sh!thole, though some locales are further behind the curve than others. On one hand I could console myself with the fact that my little burg is less diverse and more peaceful than the average (which might account for sticky house prices here); but I am also seeing it deteriorate in real time.

          2. as NOT ONE person in any of those vehicles who witnessed the accident even bothered to stop in an attempt to render any assistance that might have been needed

            The hallmark of a third world country.

      2. it is hard to imagine sufficient political support to add race- based reparations to the federal tab.

        It’s impossible to fulfill and they know it. So why are Dems jawboning for it? In the short term it’s pandering, but as Newsom learned the day of reckoning arrives sooner than expected. You’d think that Dems nationwide would be doing their best to memory hole this, but they aren’t.

    4. The 13% in our area

      Here in the Centennial state they are just under 4%. There have so far been no rumblings about reparations here, despite the state being very blue. I suppose the PTB have other priorities now, such as electricity being 100% fossil fuel free by 2030.

      I once thought that reducing Denver’s brown cloud (the city allegedly has the worst air pollution in the country) wasn’t a bad thing, but right now Dumver has much bigger problems than that and no one running for city hall has any proposed solutions, just more of the same failed policies. It’s only going to get worse in Dumver, a lot worse.

      1. I was thinking about all this Denver stuff. Even in the 1970’s the City of Dallas was terrible. Not the metro, not the whole county, but the City. You know what we did? We didn’t go there. I’ve heard it’s had ups and downs since, but I’ve never wasted 2 minutes thinking about it in all these years.

        1. FWIW, Denver’s problems have been spreading to Larimer county, 50 miles away. Car theft is off the scale. I know people who have had their catalytic converters stolen. The local cops seems to be too busy busting meth houses to do anything else.

    1. …now it’s kind of correcting back to where it should be.

      Soon to be followed by millions of people correcting back to what they are worth.

  8. “And now it’s kind of correcting back to where it should be”

    I wonder what line Debbi was using back in ‘21 and early ‘22. I’m sure it was something along the lines of “priced out forever”. Better change your number Deb.

  10. “He said the last time property values went down was in 2012. Since early last year, home prices in Boise have fallen by 10%, Boise Regional Realtors President Debbi Myers told the Statesman by phone.”

    The good news: Your property taxes went down.

    The bad news: You just implicitly paid a few years’ worth of taxes in home equity losses.

  11. Ok, so I saw in the news yesterday that the Targets now are being threatened to be blown up by someone in the Pride group that didnt like Target moving the weird products to back of store.
    Just mentioning it if you were going to go to Target today, you might consider a possible increased risk of being blown up..
    Is this a distraction tactic to take peoples eyes off the other insane happenings, like Border Invasion, Bidens crimes, real estate crash, World Order Agenda, off the charts Covid deaths,etc?
    Constant waves of insanity , one by one , while the “normies” are made out to be domestic terrorists.
    Never seen anything like it…

    1. “Consenting adults in the privacy of their bedroom” is the libertarian attitude.

      Remember when Senator Rick Santorum warned about the “slippery slope” back in 2012, and was mocked by Real Journalists?

      He was right, because now they’re coming for your children.

      These things only happen in dying civilizations.

    2. Targets now are being threatened to be blown up by someone in the Pride group

      I have my doubts about this. The Narrative is that these people are good, wholesome and “are just like us”. The way they control Target is via “regime change”. Have the CEO fired and replaced with someone more compliant.

      1. “The way they control Target is via “regime change”. Have the CEO fired and replaced with someone more compliant.”

        I thought that Jackson’s 1980s Rainbow Coalition was credited with corporate regime change and financial shakedowns under the guise of promoting diversity.

  12. Re: homes have seen a 4.2% decrease in value

    OMG, the sky is falling!

    Re: And now it’s kind of correcting back to where it should be.

    And where should it be, am I allowed to ask?

    Re: They placed the biggest possible bet on something that went bottom-up. They lost. So now we have to adapt and adapt quickly.

    Since it is a zero-sum game, who gained as a result?

    Re: Activist investor Jonathan Litt shorted major office-owning REITs

    Ah, so.

    Re: this perfect storm of all of these individuals with debts that they thought were manageable before, who can no longer manage

    After goosing them into a borrowing frenzy with its series of QE, LIRP, ZIRP, NIRP and other novel devices, the Fed can now sit back and relax while benignly watching the aftermath of their actions as Nero had watched the burning Rome.

    But not to worry. It is merely a transitory phenomenon and it is only a matter of time before Fed will find an excuse to pivot and turn on its inflation engine full blast. After all, sanity has always been only a temporary disruption of the usual state of affairs . . .

  13. Do you worry that Wall Street’s debt ceiling agreement party may have ended last Friday, and it’s all downhill skiing from here?

    1. Markets
      DOW 33,093.34 1.00%
      S&P 500 4,205.45 1.30%
      NASDAQ 12,975.69 2.19%

      Fear & Greed Index
      Don’t expect the stock markets to rejoice about the debt ceiling deal
      By Elisabeth Buchwald, CNN
      Published 8:40 AM EDT, Sun May 28, 2023
      The US is now 9 days away from potentially defaulting on its debt

      New York CNN —

      You’d expect the stock market to surge after the White House and House Republicans reached a tentative deal to raise the debt ceiling, But markets may have other plans.

      The stock market, for the most part, has been ignoring the serious risks associated with the United States defaulting on its debt. Even if Congress passes a bill to raise the debt ceiling and President Joe Biden signs it, it could take months before stocks and other financial markets move on.

      “One of the concerns I have is that even in the run-up to an agreement, when one does occur, there can be substantial financial market distress,” Treasury Secretary Janet Yellen said last week.

      “We’re seeing just the beginnings of it,” she said, referring to stock and bond market volatility in recent days.
      …
      https://www.cnn.com/2023/05/28/investing/debt-ceiling-deal-stock-market/index.html

      1. It seems this is the new narrative these days. Since I don’t know much about treasury market but I think I will be right to predict that this will NOT drain any liquidity at all. Worse, it will cause to increase in liquidity. Just watch it.

        We live in a FUBAR world, and only a total collapse can cure this.

    2. Economy
      Debt-Ceiling Deal Is Done. Why Recession And Stock-Market Drop May Follow.
      Debt ceiling concept
      The debt-ceiling deal has only mild spending curbs, but one detail could help tip the U.S. economy into a recession and derail the stock market. (Elizabeth Plumb/Lightspring/Shutterstock)
      JED GRAHAM 08:00 AM ET 05/28/2023

      Worries over the debt ceiling have had the stock market on edge, yet the Saturday night deal to avoid a default may not trigger a big relief rally. That’s because aggressive Fed tightening and the end of the last Covid-era fiscal giveaways appear likely to help push the U.S. economy into recession later this year.

      The rocket fuel of easy money and excessive government spending that propelled GDP, inflation and, for a long while, the stock market is nearly spent. A fiscal hangover is just beginning.

      While the debt-ceiling deal reached by President Biden and House Speaker Kevin McCarthy includes pretty mild spending curbs, one detail could pack a punch. News reports indicate that the deal will codify into law the Biden administration’s planned end of the student loan payment freeze that has helped fuel spending over the past three years.

      That will likely deepen a spending slowdown at a time that growth already has slowed almost to a stall. Yet the Federal Reserve, after five percentage points of rate hikes, may step even harder on the brakes. After last Friday’s hotter-than-expected PCE inflation report, Wall Street now thinks another rate hike is likely in June or July.

      Meanwhile, any debt-ceiling relief for investors will be fleeting because the stock market is about to lose its own fiscal support.

      The Treasury’s inability to issue debt in recent months has more than offset Fed efforts to tighten financial conditions by unloading assets purchased during the Covid-19 pandemic. But Treasury issuance is about to surge following a deal to raise the debt ceiling. That means we’re about to get Fed quantitative tightening on steroids.
      …
      https://www.investors.com/news/economy/debt-ceiling-fight-is-just-the-start-these-big-fiscal-drags-could-derail-u-s-economy-stock-market/

      1. “Treasury issuance is about to surge following a deal to raise the debt ceiling. That means we’re about to get Fed quantitative tightening on steroids.”

        Am I understanding correctly that Treasury yields are set to increase further, sucking up the liquidity glut that underpins risk asset prices?

    3. Finance ·economy
      Top economist David Rosenberg says we’re already in a recession, but ‘nobody has noticed’
      BY Prarthana Prakash
      May 26, 2023 at 11:02 AM PDT
      NYSE brokers
      Are we already in a recession?
      Spencer Platt—Getty Images

      For over a year now, so many people have feared the “R” word coming for the economy that this hypothetical recession has likely become the most widely predicted in history. Why did a recession seem inevitable? It could have been the 10 back-to-back interest rate hikes since last March, or the subsequent drag on housing market activity, or the large-scale culling of jobs across sectors and an extended stock market rout in 2022 that left the economy, especially the tech sector, on edge. Or it could have been all of the above (plus inflation.) But now, a well-known economist says we don’t need to look on the horizon for a recession to come—it’s already here and we all missed it. We were looking in the wrong place, he says.

      “Nobody talked about the release of real GDI today,” David Rosenberg, the founder of Rosenberg Research and formerly a chief economist on Wall Street for roughly two decades, at Gluskin Sheff and Merrill Lynch, wrote in a tweet Thursday, referring to the gross domestic income numbers that came out the same day.

      GDI dropped 2.3% in the first quarter of 2023, following a 3.3% decrease in the last three months of 2022. That’s the worst decline in two consecutive quarters since the COVID-19 pandemic began—and two consecutive quarters of decline is what economists call a “technical recession.”

      When you consider gross domestic product, on the other hand, the economy expanded 1.3% in the first quarter of this year, staving off recession from that perspective. Together, GDI and GDP are considered key indicators of how the economy is doing, and Rosenberg argued that everybody was ignoring what a key data point was conveying.

      “Averaging it (GDI) out with GDP, the economy has contracted for back-to-back quarters and in 4 of the past 5!” Rosenberg wrote. “The recession has arrived and nobody’s noticed.”
      …
      https://fortune.com/2023/05/26/are-we-in-recession-economist-david-rosenberg-gdi-gdp/

      1. Several times, I’ve gotten stuck in traffic because the right lane was blocked by cars in line for a Saturday morning food bank. Breadlines are here and have always been here.

        1. How curious, as the DC area is supposed to have the highest average incomes in the nation. I don’t even know where the foodbank is in my little burg.

  14. A reader sent these in:

    The problem you have is a couple generations of people think 5% mortgage rates in Canada are high…

    https://twitter.com/mortimer_1/status/1662245952046919682

    Canada: We are so smart, we didn’t make mistakes like the U.S. did in 2007. US: Ummm… you have mortgage loans with amortizations longer than the expected lives of some lenders…Canada: Come to Canada and buy real estate!

    https://twitter.com/mortimer_1/status/1661365509714247680

    The 1-month Treasury bill yield has moved up to 6.02%, the highest level we’ve seen with data going back to July 2001.

    https://twitter.com/charliebilello/status/1662428436260954115

    The Fed’s preferred measure of inflation (core PCE) came in above expectations (4.7% vs. 4.6% estimate) and remains well above the Fed’s 2% target level. The market is now pricing in a 65% probability of a rate hike at the June FOMC meeting and no rate cuts until November.

    https://twitter.com/charliebilello/status/1662150571397087245

    Internet never forgets

    https://twitter.com/MichaelAArouet/status/1661255670187057153

    Don’t worry this isn’t 2008……its worse

    https://twitter.com/GRomePow/status/1662547396897964032

    State Farm halted new homeowners insurance applications in California. Insurance carriers are raising rates and pulling back in the wake of the pandemic and historic fires.

    https://twitter.com/SactoGeoff/status/1662249912396926976

    When they pass the debt ceiling the U.S. government needs to create chaos in Europe & the stock market, driving up demand for the newly issued government bonds. This has always been the plan 🤫

    https://twitter.com/FinanceLancelot/status/1662253673982967808

    The face of a man who bought 1970’s value add deals in the Southeast with zero real estate experience, at 3% cap rates, floating rate debt, no rate caps, didn’t realize property taxes would increase, insurance went up by over 40% in a year and still managed to raise over $20M from LPs from his dining room table on Zoom with a fake green screen. But damn, I love those glasses.

    https://twitter.com/MultifamilyMad/status/1662439426801238017

    Remote work is cutting NYC office value by half, per NYP.

    https://twitter.com/unusual_whales/status/1662116631450095616

    Got an Uber. Model X shows up. Comically bad ride quality — like riding in the back of a pickup.

    https://twitter.com/coloradotravis/status/1662178140029067265

    The housing market is still PRICED at 3% mortgage rates. Either people get 40% real increases to their wages or Housing market prices fall 40%

    https://twitter.com/GRomePow/status/1662131416661135360

    RH CEO Gary Friedman on the call: “…maybe the worst home environment at the high end that I’ve ever seen in my career. I’ve never seen luxury housing down at the levels we’ve seen from recent reports, and we’re at 20-year high interest rates.”

    https://twitter.com/bespokeinvest/status/1662099232155910150

    1. Come to Canada and buy real estate!

      I refuse to set foot in that dystopian tyranny.

      1. Don’t think your own country is that far behind. Need to find a new country. Anyone?

        1. As I’ve said, Canada is a protoype for the future US.

          Need to find a new country.

          The problem is: where to go?

          Mexico or Latin America? Fat chance. I was reading an article in the Mexican media about how highways leading out of Mexico City are utterly unsafe. These aren’t desolate highways, they are heavily transited multilane motorways, crucial to Mexican trade and commerce, and truckers are robbed and kidnapped on it. Where is the Mexican National Guard? (they are escorting caravans to the American border). The highway from Mexico City to Queretaro is one of the worst. Queretaro is supposed to be a tech/industrial hub, with many multinationals present there. How can that work if the highways to Mexico City, Guanajuato, etc. are unsafe?

          Plus don’t think that other countries will welcome you with open arms, not unless you arrive with a wheelbarrow full of case.

    2. Got an Uber. Model X shows up.

      That is one expensive taxi. The few times I have been in an Uber it’s usually something like a Camry.

      1. A Tesla model is allegedly now outselling the Camry in California and Australia, making Tesla the number one car there. Regardless of what anyone thinks about Mr. Musk, this is a big achievement.

  15. Why would any real estate investor not living in their investment home(s) want to HODL while prices are falling? Seems like the road to guaranteed losses which are avoidable, given that real estate is a highly liquid asset.

    1. Famed economist David Rosenberg says home prices are set to fall further as buyers retreat to the sidelines and a hawkish Fed means stubbornly high mortgage rates
      William Edwards
      May 26, 2023, 1:30 AM PDT
      A realtor sign advertises that the price of a house has been reduced
      David McNew/Getty Images

      It’s a terrible time to buy a home.

      The data tells this story: existing home sales are down 23% from last year, and have posted monthly declines 14 out of the last 15 months, economist David Rosenberg pointed out in a recent client note.
      …
      https://www.businessinsider.com/housing-market-crash-further-home-price-declines-coming-david-rosenberg-2023-5

      1. David Rosenberg?

        He was still babbling about “transitory inflation” not long a go.

  16. “From July 2021 to June 2022, the median age of Texas homebuyers was 56, according to new research from Texas Realtors derived from a National Association of Realtors survey. That’s almost nine years older than the typical buyer from just a year before, who was 47. During the same period, the share of first-time buyers in the market dropped from 32% to 24%. A decade before, 39% of Texas buyers were first-timers.”

    Take homes:

    1) Only old guys with accumulated wealth can afford to pay bubble valued prices.

    2) Hopefully those same old, wealthy guys don’t mind catching themselves falling knives, as home prices are CR8Ring in Texas.

  17. Save and Invest
    1 in 4 renters are successfully negotiating lower prices—here’s how to do it
    Published Thu, May 25 2023 12:53 PM EDT
    Mike Winters
    PeopleImages | Getty

    Most renters don’t negotiate lower rent prices when their lease is up for renewal, even though it works 25% of the time, a recent survey finds.

    With the rental market cooling, the success rate for haggling cheaper rent has risen from 17% in October 2022 to just over 25% as of April 2023, according to Avail, a platform for do-it-yourself landlords and tenants.

    However, only 28% of those surveyed said they negotiated the price on their most recent lease renewal.

    “Renters certainly have more leverage now,” says Jon Leckie, a data researcher for Rent.com, a rental listings site. “With more inventory and less demand, landlords have to compete for tenants more than they did just a few months ago.”
    …
    https://www.cnbc.com/2023/05/25/how-to-negotiate-for-cheaper-rent.html

  18. I’m in Breckenridge right now. A cashier told me that Fairplay where she lives used to be affordable, now it’s not, and that it sucks.

    At least the pigs all got theirs.

    1. Are your ski towns loaded with young people living out of their vehicles, too? It seems every 3rd car is a pickup with a makeship house on back, an SUV with a rooftop tent, a #vanline mobile, or an RV.

      1. There are many places in this country that easily rival that area in natural splendor and are cheap AF. Why do people put up with it?

  19. ‘The people holding that value will lose it. And they will be sad, and they’ll be jumping off buildings, and they’ll be freaking out…That’s fine. That’s capitalism, right?’

    That’s the spirit Chris!

  20. ‘This Deal Is Insanity’: Conservatives Blast McCarthy’s Debt Ceiling Deal With Biden

    by Jamie White
    May 28th 2023, 11:13 am

    House lawmakers furious over deal raising debt ceiling by $4 Trillion with no cap on spending for 2 more years, maintaining Democrats’ wish list, and keeping in place IRS expansion by 98%

    Rep. Dan Bishop (R-N.C) pointed out that the deal effectively keeps in place the 87,000 IRS agents that were funded in Joe Biden’s “Inflation Reduction Act.”

    So there will be 85,260 more IRS agents rather than 87,000 to eat you alive. Big win.

    https://www.infowars.com/posts/this-deal-is-insanity-conservatives-blast-mccarthys-debt-ceiling-deal-with-biden/

  22. Does the Sherman Antitrust Act apply to rental housing? How much of the homelessness problem is due to big landlords colluding on rent and driving struggling families into the street?

    1. Orange County Register
      Business
      Corporate landlord’s California buying spree alarms tenants: ‘I only earn enough to pay the rent’
      Gladys Balcazar in her apartment in Imperial Beach on April 18, 2023. Balcazar, who puts 83% of her income toward rent, is a single mom living with her son who has a disability. (Ariana Drehsler for CalMatters)
      PUBLISHED: May 25, 2023 at 6:05 a.m. | UPDATED: May 25, 2023 at 11:40 a.m.
      BY ALEJANDRO LAZO AND WENDY FRY

      Gladys Balcazar says she can barely afford food after paying rent to her new landlord, Blackstone Inc, one of the world’s largest private equity firms.

      Balcazar, a 60-year-old janitor, lives with her 27-year-old son in a two-bedroom apartment in Imperial Beach. She supports her son, who has a disability, on a salary of $2,800 a month.

      Blackstone bought her building and 65 others in San Diego County in 2021, becoming one of the region’s biggest landlords and alarming lawmakers, affordable housing advocates and Balcazar. In March Balcazar’s monthly rent rose $200 to $2,000.

      “All of this has really depressed me because I don’t see a way out,” she said in Spanish. “I only earn enough to pay the rent, and after that there is nothing left.”

      Adding to her stress were large swaths of dark mold outside her building, on walls and window ledges, climbing to a roofline. A building manager said she would be responsible for mold remediation in her unit if she moves out, Balcazar said.
      …
      https://www.ocregister.com/2023/05/25/corporate-landlords-california-buying-spree-alarms-tenants-i-only-earn-enough-to-pay-the-rent/

      1. Isn’t Blackstone the corporation partnering with the University of California to make buckets of money off California’s housing crisis?

        2. 04.24.2023
          United States
          Capital Education
          The University of California Is Bailing Out Private Equity Giant Blackstone
          By Matthew Cunningham-Cook
          Blackstone headquarters in New York, on April 20, 2023.
          (Michael Nagle / Bloomberg via Getty Images)

          Amid a housing crisis that is leaving thousands of its students and employees homeless, the University of California is bailing out private equity behemoth Blackstone, siphoning billions of dollars to privatized student housing and corporate landlords.

          As the world’s largest private equity firm faces potential losses from a cloudy real estate market, its executives blocked jittery investors from withdrawing their money from one of its real estate funds, while insisting that rent increases and evictions will bolster returns.

          Now, the Blackstone Group’s real estate investment trust has received a multibillion-dollar bailout from a source whose employees and students are already suffering through the housing crisis: California’s public university system.

          Just months after Blackstone’s real estate investment trust purchased America’s largest owner of private student housing, the same trust received a $4.5 billion infusion from the University of California’s Board of Regents, two of whom have close ties to the company. The investment rewards the financial firm only a few years after the company and its executives spent $5.6 million to kill California ballot initiatives that would have expanded rent control in the state.

          Blackstone, a firm that’s valued at $111 billion and manages $991 billion in assets, also faces broader headwinds in its real estate sector. The profits that the firm distributes to shareholders plunged 36 percent last year, driven by real estate losses.

          Effectively, University of California (UC) is funneling cash into privatized student housing and corporate landlords — doubling down on a controversial investment strategy that comes with a massive layer of fees and Wall Street profits — instead of doing its part to address a growing housing crisis, one that affects its students and employees.

          In 2021, 5 percent of UC students, or more than fourteen thousand, experienced homelessness, while the university’s unions report that many of their mostly blue-collar members simply cannot make ends meet due to California’s spiraling cost of rental housing.
          …
          https://jacobin.com/2023/04/university-of-california-private-equity-blackstone-corporate-real-estate-investment

          1. “One of the main decision-makers behind the plan to pump billions of UC dollars into Blackstone was Richard Sherman, chair of the UC Investment Committee, who has strong connections to the investment firm.

            Sherman, who heads up music mogul David Geffen’s investment office, collaborated with Blackstone on the 2012 buyout of music publisher EMI. What’s more, the late Blackstone cofounder Pete Peterson purchased his New York penthouse from Geffen in 2007.

            An additional member of the eleven-person Investment Committee, Mark Robinson, also has ties to Blackstone. Robinson is a partner at investment banking firm Centerview Partners, which advised Blackstone on a $2.2 billion acquisition in 2021.

            On behalf of the regents, the investment was launched by Jagdeep Singh Bachher, UC’s chief investment officer — who has been accused of making investments in response to pressure from individual regents with conflicts of interest in the past.”

            The large public trusts always have a few jooz on the board who are willing to diddle the trust accounts in order to rescue their share prices prior to an exit sale.

        3. As the saying goes, “Politics breeds strange bedfellows.” So it goes with the ultraliberal state of California partnering with an ubercapitalistic corporate real estate behemoth.

          1. Here’s to hoping the Blackstone-California partnership loses boatloads of money, then is broken up by federal antitrust regulation. Rents are high enough in California without corporate landlords buying large swaths of the market in order to engage in price fixing.

          2. The Washington Post
            Business
            Blackstone CMBS Default Presages Bad Times for Property Owners
            Analysis by Chris Hughes | Bloomberg
            March 6, 2023 at 11:14 a.m. EST

            Blackstone Inc.’s clash with lenders backing a small portion of its European real-estate portfolio is more than just a little local difficulty in a market with specific problems. It could well be a pivotal moment in the property cycle, serving as a warning of the grim prognosis for lower-quality office and retail assets everywhere.

            At issue is Blackstone’s default on around €300 million ($319 million) of the remaining principal of €531 million of commercial mortgage-backed securities financing properties in Finland. The CMBS supported assets acquired in the 2017 purchase of Sponda Plc. Pandemic travel restrictions, the popularity of hybrid working, rising rates and neighboring Russia’s war in Ukraine have lowered Finnish rents and valuations. So a refinancing by the time the debt matured in the middle of last month wasn’t possible.

            Blackstone sought more time to arrange an orderly sale of the properties, offering to repay some of the debt and to increase interest payments in return. But negotiations with the CMBS investors failed to produce a long-term extension. Now a so-called special servicer will take charge of getting creditors their money back. This could involve a speedier liquidation than Blackstone might have wanted, risking lower valuations.
            …

    2. April 18, 2023
      What the RealPage Antitrust Lawsuits Mean for Residential Landlords and Renters
      Meghan Rice, Steven Williams
      Cohen Seglias Pallas Greenhall & Furman PC

      Renters nationwide are filing class action lawsuits against Texas-headquartered property management software company RealPage, Inc. and landlords who subscribe to RealPage’s services and software. These lawsuits claim that RealPage and the subscribing landlords formed a “cartel” that improperly controls a growing number of rental properties and, thus, violates federal antitrust laws.
      …
      https://www.jdsupra.com/legalnews/what-the-realpage-antitrust-lawsuits-4857527/

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