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This Was My Entire Plan, And I’ve Just Kind Of Watched It Go Up In Smoke

A report from Bloomberg. “Worsening conditions in the U.S. mortgage-backed securities market are doing little to ease fears over financial contagion. Demand for home purchases and refinancing continued to take a hit last month, as U.S. mortgage rates increased to their highest levels since November. For many potential buyers, the near-record amount of rental apartments available is becoming increasingly attractive. MBS current-coupon yield spreads over Treasuries are near the highest level since the 2008 subprime crisis as economic and political concerns weigh on performance, writes Bloomberg Intelligence strategist Erica Adelberg.”

“The environment has also created unique opportunities. Dawn Fitzpatrick, chief investment officer of Soros Fund Management, pointed to the valuations of agency MBS. ‘Two-thirds of your current holders — it’s central banks and banks — have turned into sellers,’ she said.”

Don’t Waste Your Money. “During the years of the pandemic, the big story in real estate was rising home prices. This year, that story may be changing. Lately, the number of houses for sale in Sarasota has really increased. In fact, Realtor.com reported that ‘there were nearly 2.3 times the number of active listings this May compared with last.’ And they’re taking almost twice as long to sell. Naturally, the inventory glut has led to a drop in home prices — at a rate of -4.7% over the last year. Boise tops the list of metro areas with dropping home prices over the last year — with a percentage price drop (per square foot) of -7.8%. In fact, Boise real estate agent Rob Inman told Realtor.com that there are a number of homes available that are much lower than the median listing price. ‘Now, you can actually find stuff between $350,000 and $425,000, right in that entry-level price point,’ he told the site. ‘There’s even new construction.'”

“Austin’s median listing price drop was similar to Boise’s, at -7.7%. That’s not surprising, since the pandemic price growth in Texas’ capital was the highest of all the cities on this list. Home prices rose by 75% between February 2020 and May 2022. According to Realtor.com, ‘the median home list price, not standardized for size, went from about $364,000 to almost $630,000.'”

D Magazine in Texas. “The Dallas City Council’s marathon meeting earlier this month culminated in twin measures that will rein in the short-term rental market in the city. By December, short-term rental operators (who largely use Airbnb and Vrbo to list their properties) in single-family residential neighborhoods who still want to generate revenue will have to rent their properties to long-term tenants or sell. The Council declined to grandfather existing registered STRs into that zoning change, so even the most law-abiding operators are eliminated.”

“Every operator we spoke with said that they understood the frustration with irresponsible operators—because it was frustrating for them as well. ‘Dallas saw an STR investment rush the past two years. A lot of people with little property management experience joined the sector,’ said France Falcon, who operates several properties on Airbnb. ‘There were a lot of ‘Airbnb Gurus’ going viral, selling online courses claiming this is an easy way to make passive income, creating unrealistic expectations for investors. This coupled with really low interest rates, made the STR market in Dallas become fairly saturated.’ Falcon said that the party houses didn’t offer the experiences that make properties stand out, so to survive and compete with better-performing STRs, they lowered their prices. ‘You would see three bedroom homes in single family neighborhoods on STR platforms for the cost of a one star motel room,’ she said.”

“Sandra Figueroa said those party houses impacted her own guests. ‘Two of my listings are next to ‘party’ homes and TikTok-inspired hosts who are trying to make a quick buck,’ she said. ‘I have been plagued with trash, noise, and threats to safety as well. I completely understand how the sudden unregulated boom in this industry over the past few years has created significant challenges for cities and its citizens to navigate.'”

“A few of the operators we talked to said they would likely either sell or reluctantly pivot to long-term rentals. ‘I purchased my properties when interest rates were as low as 2.25 percent, I cannot sell these properties in a 7 percent (or more) interest rate market,’ said Robert Wiley.”

The Associated Press on California. “Retiree Pamela Haile has paid property taxes, insurance and other bills on a house she lets out in Oakland, but for more than three years her tenants have paid no rent thanks to one of the longest-lasting eviction bans in the country. The eviction moratorium in the San Francisco Bay Area city expires next month and Haile can’t wait. The 69-year-old estimates she is owed more than $60,000 in back rent, money she doubts she will ever see. Moreover, the tenants have trashed her house and it will cost tens of thousands of dollars to make it habitable, she says. ‘There is nothing natural about being forced to house and have people live in your property for over three years and not pay,’ said Michelle Hailey, who is also Black and owns a triplex where both her tenants stopped paying. ‘There is nothing natural, ethical or even humane about that.'”

“Hailey considers herself lucky because she was able to recoup some money through a rent-relief program. The tenants moved out, but she has a stack of bills and can’t afford to renovate. She purchased the property in 1999 after earning big for writing some songs. The artist figured the triplex would provide steady income as well as help fund her retirement. ‘So this was my entire plan, and I’ve just kind of watched it go up in smoke,’ said Hailey, 59. ‘We’ve never had a situation where you would have government-sanctioned freedom to not pay your rent.'”

The Financial Times. “The 20-storey tower at 529 Fifth Avenue stands out from the other buildings around Grand Central Station. It is also remarkable as one among a small number of towers that have recently changed hands, giving a clue as to the value of Manhattan’s older offices now that the commercial real estate sector has emerged from a historic era of ultra-cheap money. Silverstein Properties sold the building three months ago for $US105 million ($156 million). In price-per-square-foot terms, that was even less than a plot of land across the street commanded in 2015.”

“‘In New York, buildings are selling for less than the value of the land they sit on,’ said Will Silverman, managing director at Eastdil Secured, a real estate investment bank. ‘We are seeing prices lower than they have been in 20 years in absolute dollar terms.’ Craig Deitelzweig, chief executive of Marx Realty, said he was hearing of ‘new buildings every day’ being returned to lenders. ‘It is the very beginning, but it seems that every asset class is at risk with these new interest rates and the very tight credit markets.'”

The Toronto Sun. “When the market turned back in winter 2022, I remember reading something about how Canada’s propensity for variable rate mortgages in tandem with our relatively short mortgage terms would ultimately provide our central bank with an edge in their fight against inflation. Unlike the United States, for example, where 30-year largely fixed rate mortgages are the norm, Canadian borrowers come up for renewal somewhere inside five years. One way or another, the theory went, the pinch of rising borrowing costs will be more immediately felt and belts will soon be tightened. The idea, as I recall, was that the end of cheap money would bring some pain, but at least that reckoning would come quickly — we just needed to get to the other side.”

“One year later, the battle rages on. How is it that people are holding on? Well, it seems that few anticipated the power of the extended amortization periods. Thanks to static payments, many of the homeowners sitting on variable rate mortgages have yet to actually feel the acute pain of their leverage — it’s entirety theoretical at the moment, an issue to be grappled with during the 4 a.m. thinks and dealt with at renewal time. Dubbed ‘extend and pretend,’ it explains a lot about how it is that consumer spending continues, malls are still full, and summer travel season is shaping up to be a biggie. Now all eyes are looking to 2024 and 2025 when the bulk of the rock bottom pandemic mortgages will come up for renewal and original amortization terms will theoretically kick back in again.”

“Assuming this happens, there will be many borrowers who will simply be unable to stay in their homes and will need to sell. Belts will be tightened. But say for a moment that the Feds decide they want to build on their promise made in Budget 2023 to ‘protect existing homeowners with mortgages who are facing exceptional circumstances.’ Say that shakes out to pressure being put on the Office of the Superintendent of Financial Institutions to change the rules requiring mortgages to revert back to original amortization period at renewal, a rumour that once sounded inconceivable but is starting to seem within the realm of possibility. What then? That edge we had suddenly seems like a huge liability.”

The Telegraph in the UK. “Mortgage prisoners are being left ‘suicidal’ and at risk of destitution as standard variable rates approach double digits, campaigners have warned. Around 200,000 households remain trapped in mortgage deals set at some of the highest rates, after taking out home loans with banks such as Northern Rock that collapsed during the financial crisis. Many mortgage prisoners whose loans were sold by the Government to so-called vulture funds, which buy up discounted debt, are facing even higher costs. The firms that bought their debts are so-called inactive lenders, which offer no other mortgage products despite being licensed to do so, meaning the borrowers are unable to switch to cheaper rates.”

“The situation is pushing homeowners into mental health crises and towards homelessness, according to Rachel Neale, of campaigning group UK Mortgage Prisoners. She said: ‘We have had people openly put on the [Facebook] group that they want to commit suicide if this rate rise happens because they have nowhere to go. It’s devastating – families are in impoverished situations, they’re facing homelessness. These people aren’t on the 4.5pc or 5pc that the average person is now seeing. Their interest rate has gone from 4.5pc, which everyone is moaning about, all the way up to 9pc, 9.5pc and 10pc and above.'”

98 FM in Ireland. “According to the latest Daft.ie house price report which shows nationally prices are 0.5 percent cheaper than last year. It’s the first time in three years that house prices have fallen. The average listed price nationwide in the second quarter of 2023 was €309,648, up 2.4% on the average for the first quarter – but slightly lower than this time last year and one-sixth below the Celtic Tiger peak. In Dublin, prices in the second quarter of 2023 were 1% lower than a year previously, compared to a fall of 6% seen a year ago. The average price of a home in the city is now €425,000, 14% below peak levels.”

From Bloomberg. “Two more Chinese developers have failed to meet dollar-bond payments, occurring amid renewed home-sales softness and a lack of aggressive stimulus. Central China Real Estate Ltd. said it didn’t pay interest on a note before the end of a grace period on Friday and that it would suspend payments on all offshore debt. Smaller peer Leading Holdings Group Ltd. disclosed in its own exchange filing Friday night that it hadn’t paid the entire $119.4 million of principal plus interest due on a dollar bond issued a year ago as part of a debt swap. The property sector’s unprecedented cash crunch resulted in record defaults on Chinese issuers’ dollar bonds last year and still-elevated missed payments so far in 2023.”

“Central China’s announcement likely isn’t a big market surprise given trading levels for the firm’s shorter-term dollar bonds, according to Zerlina Zeng, senior credit analyst at CreditSights. ‘Most smaller privately owned developers still face dire liquidity conditions because of the muted recovery of contracted sales,’ she said. The Central China and Leading Holdings notes on which payments weren’t made have been indicated at below 30 cents on the dollar much of this year, according to data compiled by Bloomberg. Such prices are generally considered deeply distressed levels and signal investor doubts about on-time payment.”

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This Post Has 75 Comments

  1. (Chong)
    Up in smoke
    Thats where my money goes
    In my lungs
    And sometimes up my nose
    When troubled times
    Begin to bother me
    I take a toke
    And all my cares
    Go up in smoke

    (Cheech)
    Up in smoke
    Donde todos es mi rey
    There are no signs
    Que dice no fumer
    So I roll un “bomber”
    Y me doy, un buen toke-ay
    Y despues I choke
    Y todos mis cares
    Go up in smoke
    Come on let’s go get high

    (Cast)
    Up in smoke
    That’s where I wanna be
    ‘Cause when I’m high
    The world below
    Don’t bother me
    When life begins
    To be one long
    And dangerous road
    I take a toke
    And all my cares
    Go up in smoke

    https://genius.com/Cheech-and-chong-up-in-smoke-reprise-lyrics

    2. One of my favorite lines in the movie was- cop pulls them over and ask for his license. He said: Its on the bumper man!

  2. ‘You would see three bedroom homes in single family neighborhoods on STR platforms for the cost of a one star motel room’

    That would leave money for ammo and booze France.

    ‘I purchased my properties when interest rates were as low as 2.25 percent, I cannot sell these properties in a 7 percent (or more) interest rate market’

    That’s quite a pickle Bob.

    2. *”. . . I cannot sell these properties in a 7 percent (or more) interest rate market . . ”

      As long as were getting down to brass tacks here, that statement is BS!
      Yes, you CAN sell the properties, you just don’t WANT to.
      God forbid you L LLL L Lose ( I sound like Fonzie) MONEY!!

    3. Walgreens politely calls their broke customers “Cautious Consumers” while stressed-out NAR agents use derogatory terms such as “Picky Buyers”, “Won’t get off the fence”, “Won’t pull the trigger!”, etc. etc.

      and the real estate industry perpetually wails about “DON’T INSULT THE SELLERS”, yet it’s A-OK to scold the buyers!?!

      have another Bud Light & then get back to yer Sam’s Club sample cart

      2. I must admit I got a probably unhealthy pleasure out of sending realtors through the roof low-balling listings during the last bust. And I always left them with my number so when they called me back to say they’d consider my offer I could undercut the previous offer. Soooooo much fun.

      3. “I purchased my properties when interest rates were as low as 2.25 percent, I cannot sell these properties in a 7 percent (or more) interest rate market”

        As the soon to be bankrup speculator said, I can’t sell here, I’m losing too much!

        “while stressed-out NAR agents use derogatory terms such as “Picky Buyers”, “Won’t get off the fence”, “Won’t pull the trigger!”, etc. etc.”

        “Deadbeats” is the one I’ve heard.

        1. “I purchased my properties when interest rates were as low as 2.25 percent, I cannot sell these properties in a 7 percent (or more) interest rate market”

          If he waits long enough he’ll also have to bring some cash to the closing. 🙂

    4. Lennar is working with a company called Icon in Texas to build 3d printed houses. I watched a cool video on one of them where they have four machines printing houses. They claim they can complete one every two weeks and the guy working for Icon said they hope to get the crew down to one guy to tend the machines. These houses aren’t maybe someday, they are doing an entire development of 100 of them right now. Lennar is currently pocketing the difference in cost but that should change soon. In theory these machines could just be turned loose at some point and print as many houses as needed. There should come a day when you can rent one and choose the design from a file list. These houses shouldn’t cost a penny over 100k in TX.

      https://www.youtube.com/watch?v=Y-4S7cdo3tY

        1. She makes some good points and of course there have been some wild claims, however, I think we can agree that under the right management it could easily cut costs and production time by a significant amount. Now we just need some robots to put in the roads and utilities. (Maybe Skynet will just pave everything over!)

    5. That’s such BS. Of course you can sell it Bob

      You just can’t sell it at what you paid for it (probably) .

      Turns out leverage works both up and down.

  4. ‘The Central China and Leading Holdings notes on which payments weren’t made have been indicated at below 30 cents on the dollar much of this year, according to data compiled by Bloomberg. Such prices are generally considered deeply distressed levels and signal investor doubts about on-time payment’

    So fook the gringos continues and they ‘doubt’ repayment? Hello bloomberg. These airboxes won’t get finished, yer bonds won’t be repaid and pooh bear is so broke he’s registering properties so he can start taxing them!

  5. ‘the number of houses for sale in Sarasota has really increased. In fact, Realtor.com reported that ‘there were nearly 2.3 times the number of active listings this May compared with last.’ And they’re taking almost twice as long to sell. Naturally, the inventory glut has led to a drop in home prices’

    Glut?

    ‘Boise real estate agent Rob Inman told Realtor.com that there are a number of homes available that are much lower than the median listing price. ‘Now, you can actually find stuff between $350,000 and $425,000, right in that entry-level price point,’ he told the site. ‘There’s even new construction’

    When new shacks are under the median price, yer officially fooked Rob.

  6. ‘We have had people openly put on the [Facebook] group that they want to commit suicide if this rate rise happens because they have nowhere to go’

    You know Rachel, I’ll bet you a pint that every single one of these whiners is still eating.

  7. ‘Two-thirds of your current holders — it’s central banks and banks — have turned into sellers,’ she said.”

    Banksters unloading toxic-waste crap on pension funds & retail investor muppets. Here we go again.

  8. The Council declined to grandfather existing registered STRs into that zoning change, so even the most law-abiding operators are eliminated.”

    Die, speculator scum.

  9. ‘I purchased my properties when interest rates were as low as 2.25 percent, I cannot sell these properties in a 7 percent (or more) interest rate market,’ said Robert Wiley.”

    Sure you can, Robert, but it’ll mean some serious sawin’ and slashin’ – so get to it.

  10. ‘She purchased the property in 1999 after earning big for writing some songs’

    Where did the refi money go Michele?

    ‘In New York, buildings are selling for less than the value of the land they sit on’

    Look at the bright side Will, yer property taxes will go down.

    1. Do I hear a country western, cry in your beer, I got the real estate blues song in your future Hailey?

  11. KDVR — Colorado renters make half what it would take to afford a starter home (6/26/2023):

    “Starter homes used to be defined as houses under 1,400 square feet with barebones amenities. But since these homes are effectively extinct, Point2Homes considers a starter home to be anything in the bottom third of the area price range.

    Nationally, renters make less than half of what they need to buy a starter home in 41 of the 100 largest secondary markets.

    With its relatively high-income levels, Colorado’s renters are in better shape but still far short of what it would take for a home. In four metro markets, renters make between 49% and 36% less than what they would need.”

    https://kdvr.com/news/data/colorado-renters-make-half-what-it-would-take-to-afford-a-starter-home/

    Effectively extinct?

    Another central banking success story.

    1. The houses themselves are not effectively extinct — I live in one, as does everyone within a mile of me. The starter PRICES are effectively extinct.

      If renters make half to buy a starter home, then a two-spouse couple should be able to afford a starter home, or close to it. House prices made a big jump when women entered the professional workforce.

      1. so, you’re saying that we now must work twice as hard (2 people must work) to just stay in place?

        Gosh, big government/banksters love us

        1. Not “now,” and it wasn’t started by the banks. Blame the boomers and the feminists. It started in about 1985, when there were enough DINKs (double income no kids) to start setting housing comps at two incomes. It got even worse when the DINKs became DICKs (double income couple kids) and applied their two incomes to houses in good school districts. Even then, house prices were within reach for these couples, until the dot-bomb and 9/11. Then we started the interest rate money printing game and house prices haven’t been the same since.

  12. “MBS current-coupon yield spreads over Treasuries are near the highest level since the 2008 subprime crisis as economic and political concerns weigh on performance, writes Bloomberg Intelligence strategist Erica Adelberg.”

    Those are federally guaranteed, right?

  13. MarketWatch — Blame rising home prices for the Great Resignation, new research suggests (6/27/2023):

    “Millions of people – particularly older workers – who quit their jobs during the pandemic did so because their homes had appreciated in value so much that they could afford to take a step back from the labor force, a new study concludes.

    “High house prices allowed many older Americans to retire early; if not for the high house prices, their labor force participation in 2021 would have been similar to 2019,” the study stated.

    The median price of a resale property in the U.S. was $396,100 as of May 2023. In 2019, before the pandemic, the median price was $277,700.

    Matching labor-force participation rates between those in their 20s and up to those in their 70s, and home prices, the researchers found that when homes rose in value, homeowners participated in the labor market less.”

    https://www.marketwatch.com/story/theres-a-surprising-link-between-the-pandemic-housing-boom-and-great-resignation-researchers-say-be77196c?mod=home-page

    Imagine having an actual productive economy where people make and sell things instead of a phony* economy based on cash out refis?

    * as phony as the alleged pandemic itself, as well as the 2020 election.

    1. “…Imagine having an actual productive economy where people make and sell things instead of a phony* economy based on cash out refis?…”

      Remember back to the early 80’s when technology made cash out refi’s a viable product for many banks.

      Remember thinking when I saw the first ads for cash out’s in the LA times.. this can’t be good.

      Today, cash outs are the unstoppable monster.

    2. Otherwise known as the Wealth Effect. But this time, those retiring boomers were smart and actually cashed out their houses, instead of staying house rich and cash poor.

      1. From the article
        ————
        “CarrieLynn Reinhard, who teaches communication arts and sciences at Dominican University, wrote: “People should just refuse en masse to pay their student loans back when payment resumes this summer. What will happen? Tank your credit score so no one can afford a home ever? Oh, gee, how horrible..”
        ————

        They will garnish your paycheck, CarrieLynn.

        1. Recession and AI will solve that problem. Then they’ll have to give her UBI to have something to garnish.

        2. “CarrieLynn Reinhard, who teaches communication arts and sciences at Dominican University, wrote: “People should just refuse en masse to pay their student loans…”

          Shouldn’t faculty be held to a higher standard?

        3. You don’t even get to go to court to fight that garnishment either. They just enter an order administratively and bam, garnishment, unable to stop it, can’t discharge with bankruptcy. And the balance continues to balloon. What she should do is go on the income driven repayment plans and pay as little as possible for the next 20 years.

      2. Bring back debtor’s prisons for these allegedly “educated” clowns who owe $80,000 for their Master’s degree in Obama Studies.

        Let them re-pay their debt on piece work pay stamping license plates and working on a crew picking up garbage on the side of the road.

  15. There is a heading at the top of this article titled “Climate Coach” whatever that is.

    Washington Post — Why meat eaters may soon be digging into duckweed (6/27/2023):

    “Plants use rubisco protein — technically known as Ribulose-1,5-bisphosphate carboxylase/oxygenase — as the catalyst for photosynthesis, combining CO2 from the air with the building blocks for sugars and carbohydrates composing the base of our food chain.

    Rubisco is arguably the most abundant protein on the planet. Every green leaf has it. But this tireless molecule is locked inside plants’ cells, spoiling almost as soon as it comes into contact with the outside world. At the moment, eating salads is the only way to consume much of it.

    Rubisco doesn’t just provide the protein we crave. It’s one of the world’s most versatile proteins, shape-shifting into forms resembling egg whites, meat, milk, gluten or even steak — all extracted from leaves. If we can harvest enough, it may elevate plants from a side dish to the main course — and as I found, it tasted surprisingly good.”

    https://archive.fo/csK9P

    And a reminder that the attendees at last year’s G20 conference in Bali dined on wagyu beef.

    Globalists gonna globe.

    1. The author eats three salads a day and bench presses 60 pounds. I.e. he is every blue-haired feminist’s ideal man. Act accordingly.

  16. Wall Street Journal — Gun Violence Drives Denver to Return Armed Police to Schools (6/26/2023):

    “After the killing of George Floyd in 2020, the school board in a unanimous vote removed the district’s 17 Denver Police Department officers from their posts at 18 middle- and high-school campuses. More than three dozen school districts around the U.S. also ended school-policing programs.

    The Denver board made its decision at a time of nationwide protests over police mistreatment of people of color. Parents and others who backed the school police ban said they believed officers unfairly targeted Black and Latino students, a group comprising around two-thirds of the district’s student body.”

    https://archive.fo/TzReA

    Don’t buy a house in Denver. Don’t pay property taxes to Denver. Don’t enroll your kids in Denver public schools.

    How many of the kids bringing guns to school have a father in the home? Sounds like a “content of their character” kind of problem.

  18. “But say for a moment that the Feds decide they want to build on their promise made in Budget 2023 to ‘protect existing homeowners with mortgages who are facing exceptional circumstances.’”

    As someone pointed out a few days ago, this equates to stealing houses from responsible people.

    “Say that shakes out to pressure being put on the Office of the Superintendent of Financial Institutions to change the rules requiring mortgages to revert back to original amortization period at renewal, a rumour that once sounded inconceivable but is starting to seem within the realm of possibility.”

    Forget paying your rent, forget paying your student loan, forget paying your mortgage. Eventually the government will own all loans because why would anyone else want them?

    1. “requiring mortgages to revert back to original amortization period at renewal”

      I don’t get what that means. Would a 5-year fixed mortgage revert to… another 5 years? Or did he mean to say revert to the original interest rate?

      1. Canada loans are quite different from US loans. They amortize the loan when you get over say 30 years, but the interest rate (and thus the payments) are only fixed for 5 years. Then, at the end of 5 years, they recalculate the loan at today’s interest rate but now amortized over 25 years. (since obviously 5 years have elapsed) (this works great when interest rates are falling, not so great when rates are rising)

        But to kick the can down the road further because rates are now going up for the first time in 40 years, when that first 5 year expires, they amortize the loan over 30 years again (instead of 25), or even 40 or 50 years (or longer) so they can get the payment to affordable levels at today’s higher interest rates.

        Of course this means you never actually pay off the house and/or build any equity. Your 30 year loan 5 years ago just became 35 or 45 or forever. You will owe forever. And of course all you are paying is interest. But hey, the banks can show it as a money good loan and the banks are making plenty of money.

        1. Wow, thank you. So it’s the American equivalent of refi-ing, but restarting the 30-year clock. Every 5 years. It might not be a bad idea to do one time, if you expect interest rates to decrease again. But it’s probably better to rent at that point.

        2. “But hey, the banks can show it as a money good loan and the banks are making plenty of money.”

          Banks can also get a 100% equity investment while the loanowner implicitly rents the home indefinitely.

  19. Everyone has a plan, until their ARM gets fed into a wood chipper. If it really is ‘different this time’ then I suspect we have a long, long way to hit bottom.

    350K- 425K ‘entry level price point.’ Huh? I’d like to sample some of that hopium kush the realtor in Boise has been smoking. Based on income for everyone not in the top 10% I’d say ‘entry level’ is somewhere around 100-180K for most. The only places I’ve seen this is Kansas/Oklahoma, and parts of the midwest.

    We’ve been looking for a summer home in Alaska for a couple years, Should have pulled the trigger back in 2019 when our son moved there. I hope I live to see the days of 60-100K condos in anchorage, and 150-250K nice beachfront properties on the Kenai again. Arizona is becoming overstuffed with insufferable twunts.

    1. If Blackstone is red hotcakes, how come they keep walking away from underwater properties?

      The bigger they are, the harder they fall!

      1. More Owners of Distressed Office Properties Simply Choose to Walk Away
        By Lyle Niedens
        Published June 27, 2023
        Office towers in New York City
        Image courtesy of [RICOWde] / Getty Images.
        KEY TAKEAWAYS

        – Office owners small and large facing loans they can’t pay or refinance increasingly have chosen to give the keys back to their lenders.

        – The resulting losses eventually impact the $1 trillion U.S. market for commercial mortgage-backed securities (CMBS).

        – Real estate investment giant Blackstone, the world’s biggest commercial landlord, has bailed on numerous office properties.

        The downturn in the market for commercial office space has caused an increasing number of distressed property owners to make the decision to simply walk away—from mortgages they either can’t pay now or can’t afford after they refinance at starkly higher interest rates.

        Owners from small niche property developers to private equity giants such as Blackstone, the world’s largest commercial landlord, have all made that decision in recent months.1 The trend adds another troublesome wrinkle to a commercial office market riddled with troubled loans, rising delinquencies and plunging property values.

        “There are a lot of owners kneeling down and going to church,” said Vince Schwab, executive managing director in the San Francisco office of real estate investment broker Marcus & Millichap. “I’m kidding, but it’s kind of true.”

        “It’s going to be a long haul. There’s a lot of stuff going back to the bank,” said Schwab.

        Darin Mellott, vice president of capital markets research with commercial real estate and investment services firm CBRE, concurs.

        “There are some market players who have made the determination that, ‘We’re giving the keys back,'” Mellott said, adding there’s a basic problem with that: “Lenders don’t want to be asset managers.”

        That means loan losses will flow substantially to investors in securities backed by expected cash flow from commercial mortgages—a $1 trillion U.S. market.

        Bad Loans Don’t Discriminate

        In a disparate office market that fluctuates depending on property type and location, some attractive properties continue to command record-high rents.

        However, other swaths of large metropolitan downtown areas face outright collapse. Schwab said office values in downtown San Francisco, on a square-foot basis, have dropped 60-70% from their peak just a few years ago.

        Though property age, type and location may discriminate, the size of the deal or loan does not. Schwab, who specializes in deals of less than $30 million, said offices of all types and sizes face loan problems. And when owners bail, the downstream effects take time to work out.

        “It’s really a case-by-case basis,” Schwab said. He noted a lot depends on a lender’s recourse agreements, the terms of any commercial mortgage-backed debt security (CMBS) containing a defaulted note, and underwriters and brokers involved in the original deal.

        Regardless, he said, it’s always a complex process.

        More and More Troubled Notes

        It’s also a process that’s becoming more common. Delinquency rates on U.S. commercial office property reached 4% in May, more than double the 1.7% rate of just six months ago.

        Meanwhile, the number of commercial mortgage-backed securities loans transferred to so-called “special servicers” have spiked. Special servicers take over troubled loans or loans in default from master servicers of CMBS loans, who normally handle payments and communicate with borrowers.3

        In May, loans on office property made up 41% of all commercial property loans transferred to special servicers, and the number of office loans in special servicing increased to 6.2% of all office property loans. That’s up from 3.6% just six months ago and the first time in 13 years the special servicing rate exceeded 6%.4

        As they did during the subprime home-lending frenzy that precipitated the 2008-09 global financial crisis, interest-only loans now haunt the market. Such loans accounted for 88% of CMBS issuance in 2021, up from 51% in 2013.5

        Blackstone Bails

        Surging interest rates have made refinancing those loans a losing proposition for office property owners. This year alone, the Mortgage Bankers Association estimates that $92 billion in non-bank office debt will mature.6 Borrowers will either need to refinance that debt, default on it or sell the underlying property.

        Blackstone, the real estate investment giant that earlier this year raised $30.4 billion for its latest fund, has chosen to walk away more than once.

        The firm stopped making payments in March on both a $325 million loan for a Las Vegas office park it owns and a Midtown Manhattan office tower it bought in 2014 for $605 million.78

        In addition, the firm reportedly has considered walking away from a $274 million loan it took it in 2017 to buy Club Quarters hotels in Chicago, San Francisco, Boston and Philadelphia. A special servicer took over that loan in June 2020, as travel halted abruptly in during the Covid-19 pandemic. Blackstone hasn’t made a payment on the loan since then.
        …

  22. Rhode Island Senator Arrested For Keying Car With ‘Biden Sucks’ Bumper Sticker

    By Kelen McBreen
    Tuesday, June 27, 2023

    Perpetuating the stereotype that Democrats are violent and intolerant of their peers with opposing viewpoints, a Democratic Party state senator from Rhode Island was recently caught vandalizing a vehicle because he was triggered it had an anti-Joe Biden bumper sticker.

    The politician, Democrat State Senator Joshua Miller, was captured on police body cameras following the incident.

    In the police footage, Miller told officers the man with the “Biden Sucks” bumper sticker might be “one of the gun nuts” and could have recognized him as a state senator.

    Miller admitted to the crime and told police the vehicle owner yelled at him and “dared” him to key the automobile at which point the Democrat was arrested on a misdemeanor vandalism charge and taken into custody.

    https://www.newswars.com/dumb-democrat-rhode-island-senator-arrested-for-keying-car-with-biden-sucks-bumper-sticker/

    1. “The politician, Democrat State Senator Joshua Miller…”

      Incredible behavior for a State Senator.

    1. Why would an investor HODL housing if they knew negative equity appreciation was in the bag?

  25. Is the purpose of student loan debt relief to remove culpability for debt that will never be repaid, regardless?

    2. TheHill.com
      Education
      Student loan debt: Borrowers brace for Supreme Court decision
      by Lexi Lonas – 06/26/23 2:20 PM ET

      President Biden’s student debt forgiveness plan will finally see an end to its months-long limbo in the courts this week.

      With repayments set to start again in October after a years-long pandemic-related pause, the Supreme Court’s forthcoming ruling on the legality of Biden’s proposal is the last piece of the student loan puzzle, offering a clearer landscape moving forward.

      Many borrowers are fearful as the conservative-majority Supreme Court, which could make its decision known as soon as Tuesday morning, seemed skeptical of Biden’s plan during oral arguments in February.

      “Generally, I hope that no matter what happens with this Supreme Court decision, that our decisionmakers keep talking about options when it comes to providing student debt relief,” Sabrina Golling, a 27-year-old student loan borrower, told The Hill on Monday.

      “No plan to reduce or eliminate student debt will be perfect, and no plan could ever benefit everyone the same amount, but we should not let the perfect get in the way of the good when it comes to trying to limit the impact of these debt burdens. I am not overly hopeful that this attempt will pass, but I am hopeful that we can keep talking about the possibilities as time moves on, since this problem isn’t going away any time soon,” she added.

      The justices heard two cases against the forgiveness plan, one brought by two individual student loan borrowers and another from six Republican attorneys general.

      The justices first must decide whether the challengers have standing, meaning the right to sue the government over the plan. The plaintiffs must pass this bar to even have the case considered, at which point the court will determine if the government has the power to implement the proposal.

      While Democrats have tried to maintain an optimistic tone, even Biden himself has shown skepticism at the idea the Supreme Court will rule in his favor.
      …
      https://thehill.com/homenews/education/4068249-student-loan-debt-borrowers-brace-for-supreme-court-decision/

    3. Would passage of student loan debt relief make it easier for other borrowers with debt they don’t want to repay to stiff creditors, such as real estate investors with underwater mortgages?

  26. Forbes
    Money
    Investing
    A Deeply Inverted Yield Curve Sounds Recession Alarm
    Simon Moore
    Senior Contributor
    I show you how to save and invest.
    Jun 28, 2023, 03:45am EDT

    The slope of the U.S. yield curve has been among the best recession predictors historically, but after inverting in 2022, the U.S. has not seen a recession yet. Now, the signal is testing the lows of 2023, suggesting an even greater chance of recession over the coming 12 months. Is the signal simply wrong, or could a recession be on the way?

    The U.S. Treasury market is taken seriously by investors for its size and liquidity. Typically the yield curve slopes upward as longer-dated bond maturities earn higher yields.

    Sometimes that relationship changes. That’s what we’re seeing now. The Federal Reserve have pushed up short-term rates to over 5% to fight inflation, but the the yield on the 10 year bond is under 4%. That means that the 10 year yield is 1.7%, lower than the 3-month yield, and 1% lower than the 2-year yield. This degree of inversion is unusual. It’s something not seen since the 1980s, which was another period of relatively high inflation. In recent history, even lower levels of inversion have come ahead of recessions.

    A Recession Predictor

    Historically, an inverted yield curve has meant a recession is coming. Research from the New York Federal Reserve suggests that there’s currently a 70% chance of a recession by May 2024, based on what the yield curve is implying.

    Historically, this indicator has seen recessions occur with much lower estimated probabilities, so the high chance of a near-term recession may be cause for a alarm. However, so far the U.S. economy has defied expectations, jobs growth has remained robust, and predictions of recessions have proved false to this point.

    Why It May Work

    Aside from historical correlations, there are a number of reasons why an inverted yield curve may forecast recessions. An inverted yield curve can suggest that the Federal Reserve is raising rates above normal levels, just as they appear to be now, and that can often cause a recession. Also, an inverted yield curve can create a more challenging environment for banks and other financial intermediaries, that can also be recessionary.

    However, the economic recovery since the pandemic has been abnormal in many ways and defied the predictions of many economists. In the same way, maybe the yield curve indicator is set to get it wrong too.
    …
    https://www.forbes.com/sites/simonmoore/2023/06/28/a-deeply-inverted-yield-curve-sounds-recession-alarm/?sh=2d652ec07609

    1. “In the same way, maybe the yield curve indicator is set to get it wrong too.”

      This time is different?

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