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The Era Of Cheap Money Is Well And Truly Over

A report from the Marina Times in California. “In San Francisco 251 homes were sold in September, down 23 percent from the previous year. Homeowners are reluctant to sell their homes now because of the cost of securing a replacement home. And those who do choose to sell their homes often have unrealistic expectations when it comes to the value of their properties. ‘San Francisco sellers are not quite up to date on the market. They are being overly aggressive on pricing,’ said Eileen Mougeot with Corcoran. ‘Everyone has heard about high mortgage rates, but insurance has also become a big deal. And between these two things, buyers are being more cautious. They still want to buy, but they are just being a lot more conservative.'”

“‘Sellers are having a hard time accepting this,’ Mougeot continued. ‘I’m seeing a lot more prices reduced, and if they aren’t reduced, homes are on the market for a lot longer — particularly at the higher end of the market. Sellers are just not going to get what they were going to get a year and a half ago.’ San Francisco home prices peaked in April 2022. The median price of a single- family home that month was $2.1 million, and the median price for all San Francisco homes that month was $1.6 million. In September 2023, those median prices had fallen to $1.65 million and $1.4 million, respectively.”

“What’s more, according to an October Business Times report, Bay Area workers who took advantage of remote work during the pandemic to move to far away, lower-cost cities may now find themselves in a painful predicament if called back to the office. Some of the hottest cities for those joining the Bay Area exodus — are seeing home prices fall sharply from their pandemic peaks. August’s median home prices in Austin, Dallas, and Boise, are all down 18 percent from their peaks reached in May 2022.”

The Times Union on Connecticut. “The streets in Katie Barcelo’s neighborhood aren’t quite finished. In fact, her home is surrounded by others that have been unfinished for more than a year. Barcelo’s Cambridge Court neighborhood in Simsbury has been incomplete for years, now. There are no street signs or stop signs, and the street lights are not connected to electricity. Drainage systems are incomplete and erosion is evident. ‘I love my house. I love my neighbors,’ Barcelo said. ‘I’d love it a lot more if I could pick up my house and move it somewhere else. Some day it may be great, but my kids will be in college by then,’ said Barcelo, who has two young children.'”

“Complaints and lawsuits from neighborhood residents have finally culminated in action. William Ferrigno, arrested earlier this month on a larceny charge by local police, now has the attention of Connecticut Attorney General William Tong. Last week Ferrigno, the owner of Sunlight Construction Inc. and developer of Barcelo’s neighborhood, had criminal charges filed against him by Tong’s office: three counts of failing to refund deposits. Officials have said Ferrigno collected hundreds of thousands of dollars in deposits for the construction of new luxury homes in Avon and Burlington, but never built the homes or returned the deposits.”

From Curbed. “For a while in the early days of COVID, it felt as if everyone from the city was either Airbnb-ing at a house upstate or buying a house upstate to Airbnb it. ‘People discovered there was this hack to buying a second home and having other people pay for it,’ says Jennifer Grimes, an upstate broker and the owner of Country House Realty. ‘You could get on the real-estate ladder even if you couldn’t afford to buy in New York City.’ And even if you could afford to buy in New York City, why not earn a little extra money to offset the taxes? ‘Everyone was an Airbnb buyer,’ Grimes says. ‘Or at least it felt like everyone was.'”

“Three years later, things have changed. It also doesn’t help that buyers were snapping up everything that hit the market in the low-interest-rate era. Weekend visitors paying $600 a night before the cleaning fee want a modernist showpiece with pale-wood interiors, not a suburban-style ranch near the highway. ‘It’s a sea of mediocrity,’ says one broker of the mid-tier Airbnbs. All of this has, of course, led to some buyer’s remorse. Grimes says she recently noticed some of her agents were re-listing houses people had only just bought. ‘People were not making the money they thought they would. It was a bit of a gut punch.’ Although not too much of a gut punch, she added: Prices in Ulster County, for example, did go up 56 percent between 2020 and 2022, after all.”

The Tampa Free Press. “Many Americans are convinced that the federal government either does too much to control their daily lives or does not work at all. Yet whatever work is getting done in Washington is not being done in the spacious office buildings supplied by taxpayers. According to The Washington Times, many federal office buildings are ghost towns — sans the tumbleweeds. The Times reported last week on a new Government Accountability Office report that revealed two dozen federal agencies had offices with an average vacancy rate of about 80% during the time period the GAO studied earlier this year. ‘Not a single agency topped 50% use,’ the Times noted.”

“As the Tampa Free Press reported in early October, a watchdog group known as Open the Books issued a report that found eight federal agencies spent $3.3 billion on new furniture from 2020 to 2022, even as none them topped 35% occupancy in that time because of the pandemic. Open the Books CEO Adam Andrzejewski noted in a statement at the time, ‘For some reason, we’ve bankrolled another billion dollars in desks, chairs, couches and more — while employees clock in from their own living rooms.'”

From Fortune. “The housing market has gotten so unaffordable and difficult to navigate, you’d be forgiven for thinking there was some kind of conspiracy. A Missouri jury just decided there actually was. Around 2pm ET in a federal courtroom, a jury found the National Association of Realtors, and the largest national real-estate broker franchisors, including Berkshire Hathaway’s HomeServices, had conspired to artificially inflate the home-sale commissions paid to real estate agents. The jury ordered NAR and others to pay nearly $1.8 billion in damages to a class of more than 250,000 home sellers. Under antitrust law, that figure can be tripled to over $5 billion, at the court’s discretion.”

“When the lawsuit was initially filed, it included Anywhere Real Estate (formerly known as Realogy) as a co-conspirator to NAR’s practices, but that company reportedly settled out for $83.5 million. The market digested the news by immediately taking major brokerage stocks down 5% or more. Just a few hours after the verdict, the big drops included Zillow plunging by $600 million, eXp World Holdings by $200 million, and Opendoor by $150 million. On the smaller side, Redfin lost $32 million and Compass lost $61 million. This means that the market wiped out over $1 billion from brokerage stock in a matter of hours as their business model got a stiff challenge from a Kansas City jury.”

The Globe and Mail. “Canadian homeowners are increasingly turning to alternative and private lenders as rising interest rates make it harder to qualify for a mortgage from a bank, new data show. The total value of outstanding loans from credit unions, mortgage investment corporations and other private lenders reached $388.6-billion in the second quarter of this year, according to Statistics Canada’s survey of non-bank mortgage lenders. The stress test does not apply to non-bank lenders. ‘Due to more difficulty in qualifying, many folks have to take a private mortgage,’ said David Steinfeld, who has seen an uptick in demand for private lenders at his firm Stonefield Mortgage.”

“The other factor driving borrowers to the alternative mortgage market is homeowners’ inability to make higher mortgage payments. ‘A lot of homeowners are having a difficult time paying their mortgage,’ said Samantha Brookes, chief executive of mortgage brokerage Mortgages of Canada. ‘Some are refinancing and ending up with a higher interest rate. Others are not able to refinance if they had purchased in the past few years.’ For borrowers who have no choice but to sell, they are doing so as home prices have been declining. Some homeowners are trying to hold out for the high prices that were around during the height of the pandemic and are turning to short-term financing as they wait for a better time to sell. ‘Sellers who are not solvent are taking short-term loans to bridge them to a sale, trying to avoid drastic price reductions,’ Mr. Steinfeld said.”

“The higher the loan-to-value (LTV) ratio, the higher the risk is for the lender if their borrower stops making payments and the lender has to sell the property. Because home prices have been falling, lenders have been reducing their qualifying LTVs. Ms. Brookes said her brokerage is having a difficult time finding a lender for borrowers with high levels of debt and in locations where home prices have dropped. ‘Lenders are very strict and typically do not make exceptions on their LTV,’ she said. ‘Lenders don’t want to take on the risk.'”

The Evening Standard. “The number of mortgages approved to home buyers fell to the lowest level since January in September, while remortgage approvals slumped to a 24-year low, according to Bank of England figures. Simon Gammon, managing partner at Knight Frank Finance, said: ‘The traditional autumn pick-up in housing market activity failed to materialise this year. Mortgage rates have eased to a plateau following a volatile year and it’s going to take some time for buyers to get to grips with what they can now afford.'”

“Alice Haine, personal finance analyst at investment platform Bestinvest, said: ‘The era of cheap money is well and truly over, so households should prioritise clearing expensive unsecured debt and building up a rainy-day pot to withstand any unexpected expenses.'”

From The Local. “Norway’s rental market is once again making headlines – this time for the influx of homes onto the market rather than a supply shortage. Christian Rasmussen, the managing director of the rental platform Hybel, told the newspaper Finansavisen that there had been a 50 to 70 percent rise in rental advertisements compared to the previous year. During this period, Hybel has seen a total of 1,767 homes advertised for rent, compared to 1,143 during the same timeframe in the previous year, indicating an average growth rate of 55 percent.”

“The reason for the increasing number of homes becoming available for rent is more home going unsold. This means sellers are temporarily renting them out while they wait for the market to pick back up. Not all real estate industry analysts are convinced that the latest developments in Oslo’s rental market will stand the test of time. Managing director of the Norwegian Association of Estate Agents, Carl O. Geving, told The Local that the recent headlines might be somewhat overstated. ‘I’m not too sure about it. Maybe it’s somewhat overstated. A lot of new homes were sold in 2021, and now the buyers are taking them over. One can see that the market is slower now; maybe you need more time to sell a used home, and some people will probably rent it out if it’s difficult to sell… However, I’m not sure that these figures are accurate. In my opinion, it’s a bit overstated; the situation isn’t that bad (that people are renting out properties because they can’t sell them),’ Geving said.”

From News.com.au. “A NSW building company says it is on the brink of collapse after failing to pay a court-ordered refund to a customer and the regulator seeking to have it struck off the business register. The sole director of the company has notified a court of plans to place the business into liquidation, though it has yet to go under. Inventive Building Pty Ltd, which according to ASIC trades under the name Panelup, is a Wollongong-based business on the NSW south coast that specialises in off-site manufacturing for add-ons to existing houses.”

“John Liou claims his experience with the building firm has been nothing short of a nightmare and now he is waiting for the business to either go into liquidation or pay him back his money. Mr Liou, from Sydney, was looking to put a granny flat in his backyard so he could move in his 75-year-old mother with health conditions to take better care of her, and engaged Inventive Building. ‘They kept saying it will be ready in six weeks. They never did anything,’ Mr Liou, 50, lamented to news.com.au.”

“Mr Liou signed a contract with Inventive Building in March last year, paying $53,000 as a deposit for the $65,000 build. Fast forward 18 months, and there has been no progress on his build, while the holes sit unused in the back of his home, gathering leaves. ‘I’m paying interest on the $53,000 loan I’ve taken out,’ Mr Liou added.”

South China Morning Post. “Hong Kong’s sliding home prices have snared more mortgage borrowers in negative equity as the market value of their properties decreased at a faster rate than their loan balances. So-called upside down loans more than tripled to 11,123 cases in the third quarter, according to data released on Tuesday by the Hong Kong Monetary Authority (HKMA). The aggregate value of negative-equity loans also more than tripled to HK$59.3 billion (US$7.6 billion), compared with HK$17.4 billion at the end of June. ‘This is worrisome if we look at the aggregate value,’ said Hannah Jeong, head of valuation and advisory services at Colliers Hong Kong. ‘It is almost double [the aggregate value] of the 2005 and 2008 slumps.'”

“Cases soared to 12,164 at the end of December – the highest mark since the first quarter of 2005 – as home prices plunged a further 7.7 per cent in the fourth quarter after falling 8.5 per cent for the first three quarters, according to the HKMA. The current high level of negative-equity cases largely relates to bank staff housing loans or loans under mortgage insurance programmes, which generally have higher loan-to-value ratios, the HKMA said. Hong Kong’s property prices began to slip in the second half of this year due to a number of factors, including high interest rates, falling transactions and developers’ price cuts on new home sales, said Eric Tso, chief vice-president at mReferral Mortgage Brokerage Services. Coupled with a high level of unsold inventory of new flats, developers will tend to sell at low prices, he said.”

The Wall Street Journal. “After being stuck in a housing downturn for two years, cities across China are giving real-estate developers the go-ahead to cut prices on new homes to revive sales. They are quickly running into resistance from homeowners who don’t want to see the values of their properties go down. In Huizhou, a southern Chinese city near the metropolis of Shenzhen, one of the country’s largest state-owned developers dropped its prices during a national holiday in early October. Apartments in Poly Sunshine Town, a large high-rise complex, were on sale for about half the price that other units went for in 2020 and 2021.”

“The lower prices were met with strong opposition from residents who previously bought homes in the same development. Some of them complained to local government officials, accusing the developer of disrupting the market, and demanded compensation for their losses. Under pressure, the local housing authority ordered the developer, a unit of China Poly Group, to stop the reductions and invalidate all contracts with the lower prices, according to National Business Daily, a Chinese media outlet. Similar incidents took place in October in Wuhan, the capital city of central China’s Hubei province, and in Xiamen, in the southeastern Fujian province, according to property agents and local media reports.”

“‘This is a tug of war among homeowners, developers and local governments as the market continues to seek its bottom,’ said Bruce Pang, chief China economist at Jones Lang LaSalle. In mid-October, a video posted on the Chinese social-media platform Douyin—which was verified by a local property agent in Xiamen—showed people shouting ‘refund the difference’ outside a sales office of Poly, the same developer that had cut prices in Huizhou. On a message board used by residents to contact the Xiamen government, one poster wrote that the developer ‘maliciously’ lowered prices by half a million yuan, equivalent to around $68,000, overnight. ‘We implore the government to stand up for us, to revoke the illegal sales contracts, and to compensate homeowners for our losses,’ it added.”

“‘Maintaining social stability is important,’ said Tao Ran, a professor at the Chinese University of Hong Kong in Shenzhen. Local governments also don’t want home prices to fall too much, because that could cause land values to plunge and further reduce a key source of their revenue, he said. If prices aren’t reduced, it would be impossible for the market to bottom out, Tao said. ‘People need to feel that this is not the beginning of a sinking spiral,’ he added.”

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This Post Has 74 Comments

  1. ‘All of this has, of course, led to some buyer’s remorse. Grimes says she recently noticed some of her agents were re-listing houses people had only just bought. ‘People were not making the money they thought they would. It was a bit of a gut punch.’ Although not too much of a gut punch, she added: Prices in Ulster County, for example, did go up 56 percent between 2020 and 2022, after all’

    So yer saying they bought at the very top of minor respiratory illness Jen?

  2. ‘Sellers who are not solvent are taking short-term loans to bridge them to a sale, trying to avoid drastic price reductions’

    Hold yer ground sellers. Borrow as much as you can, sell the kids, and stop EATING fer Jebus sake!

    2. Those who dig in their heels and await the coming of the Spring Miracle Revival ushered in by the new era of prosperity wrought by #Bidenomics will Shirley be rewarded! So stick to yer guns, greedheads!

    3. “Some homeowners are trying to hold out for the high prices that were around during the height of the pandemic and are turning to short-term financing as they wait for a better time to sell. ‘Sellers who are not solvent are taking short-term loans to bridge them to a sale, trying to avoid drastic price reductions,’ Mr. Steinfeld said.”

      Pure comedy!

  3. ‘paying $53,000 as a deposit for the $65,000 build. Fast forward 18 months, and there has been no progress on his build, while the holes sit unused in the back of his home, gathering leaves. ‘I’m paying interest on the $53,000 loan I’ve taken out’

    Yer a winnah! John, I can feel it.

    1. Who does that?

      Maybe 10% if the contractor needs to buy a bunch of stuff and store it on the job site of your backyard.

      Better yet. Be your own General Contractor and hire the trades as you need them. It’s not that hard and gives you total control of the small project.

      1. I don’t know about Australia, but local jurisdictions in the US are pretty hesitant to allow an ADUs (accessory dwelling unit) in someone’s back yard. While it sounds great to take care of Mom, an ADU can turn into a slum shanty pretty quickly, especially after Mom is gone and the house is sold. The town also wants proper permits for public issues like running sewer lines and ensuring that first responders can reach the dwelling for fire or medical emergencies.

        1. San Diego has gone all in on them to ease the housing shortage. Neighborhoods all over the city are now being dotted with slumlord apartments as the rules are open to interpretation and all sort of shenanigans are going on with it. Soon they will all be filled with illegal invaders paying above market with Bidenbucks. Winning!

  4. ‘a video posted on the Chinese social-media platform Douyin—which was verified by a local property agent in Xiamen—showed people shouting ‘refund the difference’ outside a sales office of Poly, the same developer that had cut prices in Huizhou. On a message board used by residents to contact the Xiamen government, one poster wrote that the developer ‘maliciously’ lowered prices by half a million yuan, equivalent to around $68,000, overnight. ‘We implore the government to stand up for us, to revoke the illegal sales contracts, and to compensate homeowners for our losses’

    Stamp yer little feet residents!

    2. It’s funny how they never demonstrate when prices go up, after they buy, as new buyers pay more to be their neighbors.

      Shouldn’t they cough up the difference…to be fair?

    3. I don’t know the Chinese system, but do they have any voting or elections at all? If any local or higher government in the US cut house prices unilaterally, every one of the them would be voted out in the next election. There are simply more homeowners than renters.

      1. Hello Oxide, How ya doin?
        In the case of China, these are unfinished concrete skyboxes we’re talking about here, not houses. Not in any shape or form. The skyscrapers are vacant, but the “owners” consider their “investment rock-solid”.
        Geez, what a colossal CF this will be, when reality finally settles in at some point. Who knows when it will occur, but as everyone here knows, it shall certainly entail a lot of “stamping feet” and perhaps even “banging of pots and pans”. Recovery of lost capital, not so much.
        —Geezer

  5. ‘People discovered there was this hack to buying a second home and having other people pay for it,’ says Jennifer Grimes, an upstate broker and the owner of Country House Realty.

    Die, speculator scum.

  6. “‘We implore the government to stand up for us, to revoke the illegal sales contracts, and to compensate homeowners for our losses,’ it added.”

    Good luck stopping prices from CR8Ring by government fiat in China’s ridiculously overbuilt housing landscape.

  7. It’s not a hack.

    It was pure speculation.

    It was using cheap and easy money to circumvent existing housing and hotel regulations to destroy neighborhoods.

    And now they broke it up yer azz.

    ““For a while in the early days of COVID, it felt as if everyone from the city was either Airbnb-ing at a house upstate or buying a house upstate to Airbnb it. ‘People discovered there was this hack to buying a second home and having other people pay for it,”

  8. Around 2pm ET in a federal courtroom, a jury found the National Association of Realtors, and the largest national real-estate broker franchisors, including Berkshire Hathaway’s HomeServices, had conspired to artificially inflate the home-sale commissions paid to real estate agents.

    It’s about time these racketeers started being held accountable for their swindles.

      1. Lawyers have been filing class actions against realtors since the 60’s over commissions. This is the first victory I’m aware of. As I try to sell people, the realtors charge 6% not because it’s difficult to sell a house, it’s because you, the client are difficult to deal with. You are paying them to deal with you. As they say it’s always best to be the first born, the second wife, and the third realtor!

  9. 1. Utterly crazy cat lady insane prices dropped to just utterly dog lady insane prices.

    2. Still, that is a massive drop. There a lots of underwater fooked buyers thinking of jingle mail.

    The median price of a single- family home that month was $2.1 million, and the median price for all San Francisco homes that month was $1.6 million. In September 2023, those median prices had fallen to $1.65 million and $1.4 million, respectively.”

  10. “Alice Haine, personal finance analyst at investment platform Bestinvest, said: ‘The era of cheap money is well and truly over, so households should prioritise clearing expensive unsecured debt and building up a rainy-day pot to withstand any unexpected expenses.’”

    Alice in Wonderland dispensing delusional advice as ‘Murican debt donkeys living paycheck to paycheck are far more likely to stiff creditors.

  11. I came across this:

    ‘The Georgetown compound that includes a property where Jackie Kennedy once lived found a buyer at auction last week. The residential compound along the 3000 block of N Street NW (map), which includes the house that Jackie Kennedy lived in following President Kennedy’s assassination, was auctioned after hitting the market for $26.5 million in March. Jonathan Taylor and Max Rabin of TTR Sotheby’s International Realty represented the sellers and Sotheby’s Concierge Auctions facilitated the auction process. The buyer bought the listing sight unseen, according to a source.’

    https://dc.urbanturf.com/articles/blog/georgetown_compound_where_jackie_kennedy_once_lived_finds_buyer_at_auction/21630

    They took out the part where it sold for $9.25 million. I wonder why?

    1. Invade the world, invite the world. And if I recall correctly, Hizzhonor himself said not too long ago that all were welcome.

    1. Of course the libs think that this means making the billionaires pay more in taxes. What we really need is more *people* paying taxes. That is, WORKING. Or, at the very least, breaking even instead of sucking off the state. How many billions are siphoned off to “help” the homeless, or to
      young strong men on disability playing games, or making their way through the juvie court system? That’s who we need to help to get back into the workforce.

  14. NAR has over 1M paying members – will they each be charged $2000 to settle —- or will NAR appeal the ruling for 5+ years.

    The jury ordered NAR and others to pay nearly $1.8 billion in damages to a class of more than 250,000 home sellers. Under antitrust law, that figure can be tripled to over $5 billion, at the court’s discretion.”

    1. will they each be charged $2000 to settle

      That’ll clean out the roster.

      or will NAR appeal the ruling for 5+ years

      That’s costly!

  15. from CNN

    “…WeWork’s shares plunge 37% on bankruptcy reports…”

    Oh no, How will humanity survive without WeWork?

    Of course, no one could of seen this coming.

    WeWork, NAR fraud, Luxury Student Housing… The list goes on….

  16. – Thanks Ben for the great posts, as usual!
    – What a global RE sh*t-show.
    – There are now many FBs, some of whom are still in denial and don’t know it yet, while for others it’s slowly dawning on them. 😬
    – It distills down to: “ The Era Of Cheap Money Is Well And Truly Over”. Also add massive fraud, scams, skims, cheats, Ponzis, and other amoral, unethical behaviors compounded by our new Socialist, post-Christian world of self-absorbed, sociopathic hucksters and willing and able greedy, but financially illiterate investors.
    – Enjoyed the boom? Now enjoy the bust!
    – I’m fine renting for the past few years. Rent vs. buy clearly on the rent side, with buy more than 50% more expensive in many MSAs. Seems like bargains could be coming for those with patience.
    – Grab yourself a craft beer and some popcorn and watch the slow motion train wreck that is RE play out.
    – Guberments and their lapdog Central Banks did this. Debt out the wazoo. Keynesian vs. Austrian economics. No contest in my view, and yet here we are. They keep trying for the “right” kind of Socialism.

  17. TUE, OCT 31 20236:05 AM EDT

    Zombie firms are filing for bankruptcy as the Fed commits to higher rates

    https://www.cnbc.com/2023/10/31/zombie-firm-bankruptcies-amid-fed-interest-rate-hikes.html

    KEY POINTS

    Roughly 10% of companies in the U.S. are considered ‘zombie firms’ according to a Federal Reserve estimate published in 2021.

    The Federal Reserve’s swift interest rate hikes are making long-suspected zombie firms go bankrupt.

    In the first 9 months of 2023, 516 companies filed for bankruptcy, according to S&P Global Intelligence.

    In the U.S., 516 publicly listed firms have filed for bankruptcy from January through September 2023. Many of these firms have survived for several years with surging debt and lagging sales.

    “The share of zombie firms has been increasing over time,” said Bruno Albuquerque, an economist at the International Monetary Fund. “This has detrimental effects on healthy firms who compete in the same sector.“

    Zombie firms are unprofitable businesses that stay afloat by taking on new debt. Banks lend to these weak firms in hopes that they can turn their trend of sinking sales around.

    “A really healthy, well-capitalized banking system and financial sector is one of the most important factors in ensuring that unhealthy firms are wound down in a timely way rather than being propped up,” said Kathryn Judge, a professor of law at Columbia University.

    Economists say that zombie firms may become more prevalent when banks or governments bail out unviable firms. But the Federal Reserve says the share of firms that are zombies fell after the Covid-19 emergency stimulus measures were implemented. The Fed says banks are refusing to keep weak firms in business with favorable extensions of credit.

    The Fed economists point to healthy balance sheets at U.S. firms, despite the increasing weight of interest rate hikes. The effective federal funds rate was 5.33% in October 2023, up from 0.08% in October 2021.

    “The biggest implication of the rapid rise in interest rates that we’ve seen the last five or six quarters, actually, is that it reestablished cash,” said Lotfi Karoui, chief credit strategist at Goldman Sachs. “That actually puts some constraints on risk assets.”

    The Fed says it thinks interest rates will remain higher for longer. “Given the fast pace of tightening, there may still be meaningful tightening in the pipeline,” Fed Chair Jerome Powell said at an Economic Club of New York speech Oct. 19.

    1. “…Roughly 10% of companies in the U.S. are considered ‘zombie firms’ according to a Federal Reserve estimate published in 2021….”

      My gut tells me that 10% is artificially low, at least in high technology.

      Wouldn’t be surprised one iota if 10% is revised higher in the near future.

      1. “Wouldn’t be surprised one iota if 10% is revised higher in the near future.”

        As the future moves in to become the present those firms that are currently on the margin of being zombies will cross the line and will then enter zombieland. So, yeah, this 10% figure is almost certain to be revised higher.

        Popcorn? Anyone?

      2. “Wouldn’t be surprised one iota if 10% is revised higher in the near future.”

        – Your gut is right.

        – The actual number is N. of 20% from the data I’ve seen.

        – Can-kicking meet higher rates.

        – Where’s my creative destruction? Coming soon, I think.

        – The economy is a sh*t-show. 💩 🎪

        – 🤡 🌎

        1. “…The economy is a sh*t-show…”

          Price inflation (especially groceries and gas) is just mind numbing. (At least here in SoCal).

          Example:

          Paid $4.98 for large fries yesterday at McDonalds.

          It was not that long ago that a BigMac *meal* (with large fries and a Coke) was under $5.00.

          We are entering the Zimbabwe economy.

          1. Went out to dinner last night. I like leave the house on Halloween. In years past the restaurants would be busy, as I appeared to not be the only one thinking that way.

            The restaurant was a ghost town last night. So either people are getting into Halloween or they are slamming their wallets shut.

          2. So either people are getting into Halloween or they are slamming their wallets shut.

            Not slamming their wallets shut around here. Went out to lunch today and had a 15 minute wait at an upscale mexican joint. They seemed short on staff so not all sections were open, but still quite a large number of people out (where a lunch on average is $15-20 + tax and tip per person)

          3. Dinner was $130 for two. A bit more than the enchilada plate at Casa Burrito. Maybe that’s why.

      3. From the article: “But the Federal Reserve says the share of firms that are zombies fell after the Covid-19 emergency stimulus measures were implemented. ”

        That’s why they’re only calculating 10%. Companies are still burning through stimmie chex… as are the VCs that funded them.

  18. Manufacturing Surveys Scream Stagflation: Inflation Accelerated, Demand Muted, Jobs Cut For First Time Since COVID

    https://www.zerohedge.com/markets/manufacturing-surveys-scream-stagflation-inflation-accelerated-demand-muted-jobs-cut-first

    After the unexpected rise in September, expectations were for October’s Manufacturing surveys to hold their gains around 49-50 level – despite the recent collapse in ‘hard’ macro data.

    Sure enough, S&P Global’s US Manufacturing PMI printed 50.0 final for October (in line with the flash print and expectations and up slightly from September’s 49.8). But, ISM’s Manufacturing survey printed well below expectations (46.7 vs 49.0 exp vs 49.0 exp)…

    (A chart appears here …)

    The PMI survey highlighted that demand conditions were historically muted overall, with firms downwardly adjusting their output expectations for the year ahead and cutting employment for the first time since July 2020.

    ISM warns that “the October reading (46.7 percent) corresponds to a change of minus -0.7 percent in real gross domestic product (GDP) on an annualized basis.”

    New orders and employment fell (second weakest since COVID lockdowns) as prices rose…

    (Another chart appears here …)

    Siân Jones, Principal Economist at S&P Global Market Intelligence, said:

    “October PMI data signalled a stabilisation of US manufacturing conditions amid a renewed rise in new order inflows and firmer output growth. Demand conditions reportedly showed signs of improvement as customer interest revived, but this was once again largely focused on the domestic market as new export orders fell at a quicker rate.

    However, it was not all good news at all – backlogs down, jobs down, output expectations down, inflation up:

    “Of concern were reports of dwindling backlogs of work, previously used to help support production, as firms also revised down their expectations for future output to the lowest in 2023 so far.”

    “At the same time, manufacturers cut employment for the first time in over three years as workloads were reportedly insufficient to warrant additional hiring or the replacement of voluntary leavers. ”

    “On the price front, manufacturers saw sharper increases in costs and output charges, as inflation regained some momentum in the sector. Higher oil and oil-derived input prices again spurred hikes, as rates of inflation accelerated for the third month running.”

    Finally, we note that, with a 6-month lag or so, US Manufacturing surveys have been following the path of financial conditions. Six months after financial conditions began to ease late last year, US Manufacturing surveys started to pick up…

    (Another chart …)

    …but as the chart shows, the recent aggressive tightening of financial conditions suggest the sentiment surveys are about to run out of their upside steam.

    Will that slower growth be accompanied by slowing inflation? For now, inflation expectations are on the rise once again…

  19. Americans Panic Search “Give Car Back” As Subprime Auto Loan Delinquency Erupts

    https://www.zerohedge.com/markets/americans-panic-search-give-car-back-subprime-auto-loan-delinquency-erupts

    Recent data from Edmunds reveals that an unprecedented 17% of American car purchasers now have monthly car payments of $1,000, a significant increase from just 7% three years ago. This trend highlights the extent to which consumers, despite being financially stretched, are willing to take on massive auto debt in these uncertain economic times as macroeconomic headwinds pile up.

    New Google data, first revealed by X user CarDealershipGuy, shows Americans are searching “give car back” on the internet has soared to a record high.

    (Here is a chart …)

    CarDealershipGuy added, “For everyone DMing me: No, you can’t “give back” a car – That’s a repossession.”

    This year, we have been dutifully tracking the auto sector, considered a leading economic indicator, to pinpoint the arrival of the crushing auto loan crisis and even the possibility of the onset of the next recession.

    The latest sign of an auto crisis emerging materialized in recent weeks:

    The percent of subprime auto borrowers at least 60 days past due on their loans rose to 6.11% in September, the highest in data going back to 1994, according to Fitch Ratings. -Bloomberg

    (Here is another chart …)

    What’s clear is the subprime borrower, who took out 84-month +$1,000 monthly car payments, is getting squeezed in the high-rate environment.

    The auto loan crisis, something we called a “perfect storm” earlier this year, appears to be unfolding.

    2. “84-month +$1,000 monthly car payments”

      That’s a $60K – $70K car, depending on the interest rates. I guess they’re all buying sexitrux. Even a Camry MSRP is under $30K.

      1. I saw a lowly Chevy Blazer with a $50K+ price tag. With a 6 year loan the monthly nut is about $1K.

        For a Chevy Blazer, not a BMW, a Benz or a Lexus.

        For a Chevy.

  20. I think I see where this is going.

    US Citizens beware of terrorists attacks. Report to police if you see something. By the way, we want to take your guns.
    Don’t look at the not vetted people crossing the borders, no threat by that.
    We are in this together. Be safe, we will protect you from the current threat.

    Seriously, is anyone noticing all the threats. Lets see,
    Covid threat
    Climate Change threat
    Terrorist threat
    White people threat
    Gun shooter threat
    Co2 threat
    Bio-weapon threat
    Misinformation threat
    Hate speech threat
    Necular threat

    Give up your rights, shelter in place, join the military now, we are in this together. War, War War. Be afraid, Government will save you. Long dark winter. Trust the Science. Print more money. Emergency powers evoked. Don’t notice people dying from vaccines, nothing to see here.

    Seriously, they arent going to stop . So it was pre-planned, so it shall be done.

    1. “Climate Change threat”

      (Here is an article that touches on and exposes the Climate Change Threat …)

      Mark Lynas ‘99% Consensus’ on Climate Change – Busted in Peer Review.

      https://wattsupwiththat.com/2023/10/31/mark-lynas-99-consensus-on-climate-change-busted-in-peer-review/

      (Here is a snip of the article that pretty much sums it up …)

      What a surprise – a study which claims over 99% consensus appears to be unsupported by the evidence, because neutral papers were misclassified, and skeptic papers were ignored.

      Lynas, et. al., is probably the worst case of confirmation bias ever published. Of course, we all knew that when we first saw it. The Lynas paper was all about grabbing headlines, not science. Now watch the fun as Lynas et. al. tries to defend their paper, with even greater levels of nonsense.

  21. Housing market affordability is so bad that Zillow says it will take you 13.5 years to break even on a purchase from July onward

    https://finance.yahoo.com/news/housing-market-affordability-bad-zillow-100000012.html

    Today’s housing market is the least affordable and least accessible it’s been in decades as mortgage rates reached 8% this fall and home prices continue to rise. Yet, every day homes are still sold as new buyers shell out tens of thousands of dollars for a down payment and lock into historically high mortgage payments. So just how bad is affordability? Zillow crunched some numbers and says it will take you a remarkably long time to break even if you buy a house under these market conditions.

    Many do this not because they’re thrilled at the prospect to buy into such unaffordable conditions, but to bolster their financial stability for the future. In other words, the sooner they can become a homeowner and start building equity in their starter home, the sooner they can break even on that investment and eventually afford something better. But Zillow’s analysis shows that things have gotten so out of whack in the housing market, it’s taking much longer than normal for owners to be able to sell their homes for a profit.

    New homebuyers can expect to spend about 13.5 years in their house before breaking even on their investment, Nicole Bachaud, a senior economist at Zillow, wrote in the report released Monday. Zillow’s analysis took into account typical and forecasted home value increases based on the Zillow Home Value Index, assumptions for closing costs, agent fees at the time of sale, maintenance costs, and interest payments. Zillow’s estimates are based on market conditions as of July, when mortgage rates were over 7%.

    “As mortgage rates near 8% and home prices level off, it now takes longer to break even on a home purchase when considering the cost of interest,” Bachaud wrote.

    While Zillow doesn’t have historical data on breakeven durations, the timeline for homeowners to break even on their property is, typically, around four to six years, according to several real estate experts and resources. To see this timeline extend to well more than a decade could be a shock to future homeowners.

    “Breaking even on a home purchase holds significant importance for homeowners, serving as a crucial milestone that signifies financial stability, home equity accumulation, and the creation of financial flexibility to pursue future financial goals,” Matt Dunbar, senior vice president of the southeast region for national mortgage company Churchill Mortgage, tells Fortune.

    Not all markets and not all buyers will face decade-plus breakeven thresholds
    Several factors go into determining how long it’ll take for a homeowner to break even on their house, including her mortgage rate, down payment amount, closing costs, insurance, property taxes, and annual appreciation rate.

    Location of the home also plays a large role: Metro areas with high home values have “considerably shorter” breakeven points, according to Zillow. With a 5% down payment, San Francisco’s sits at seven years and six months, per Zillow’s calculation, while San Jose’s is six years and eleven months.

    “These metros have a strong history of consistent growth, allowing homeowners to recoup their initial investment in a relatively shorter period of time if home values rise at the same rate they have risen historically,” Bachaud explains.

    There’s a much longer runway to breaking even on a home in more “affordable” markets, however. In fact, it could take new home buyers in Cleveland, Ohio; Baton Rouge, Louisiana; El Paso, Texas; Akron, Ohio; and Indianapolis, Indiana; at least 20 years. In these areas there has historically been slower growth rates, meaning that it will take more time for home values to increase enough to build equity, Bachaud wrote.

    Some real estate investors have a different take on where home values will appreciate the most. Contrary to Zillow’s standpoint that higher-priced markets will show more growth, more affordable markets with “robust job and population growth” will have the highest home appreciation values in the near future, Kurt Carlton, co-founder and president of national private residential investment property firm New Western, tells Fortune.

    The breakeven point is not the only deciding factor in selling a home
    Among the many reasons why people decide to sell their home is to upgrade to a larger or more expensive home. When it comes time to do this, it’s helpful to have at least reached a breakeven point on the original home so that they can make a profit or at least not incur a loss.

    In their report, Zillow designed a dashboard to see how factors such as down payment percentages and interest payments affect breakeven durations. The higher the down payment, for example, the less time the duration tends to take.

    That said, every homeowner’s situation will differ.

    “The time it takes to recover your initial investment in a home can be extended and depends on various factors, including the current real estate market and your personal situation,” Bachaud wrote. “Deciding when to buy or sell a home is a personal choice, and it involves assessing your long-term financial goals, the potential for your property’s value to increase, and your ability to manage mortgage payments.”

    Plus, the calculation for buying versus renting has changed in recent months due to higher mortgage rates. For now, rent payments trail mortgage payments, making homeownership not make financial sense for some buyers. However, homeownership is still a way to build long-term wealth.

    “In the longer term, buying still beats renting,” Bachaud tells Fortune. “The increased equity and appreciation translate to higher household wealth.”

    A major implication for a longer breakeven duration is needing to keep a home for a longer time, Ben Bowen, a global adviser with Premier Sotheby’s International Realty, tells Fortune. Sellers aren’t likely to give up their home “if they have to bring a check to the closing table,” says Bowen. “Nobody wants to lose money on a home purchase.”

    That said, there are plenty of non-financial reasons to sell.

    “It is important for homeowners to break even or make a profit on a home purchase, but at the end of the day, it’s not the most important criteria for most people,” he says.

    1. So with recent data showing it’s 52% cheaper nationwide to rent than to buy right now there is no such thing as a property ladder to get on. Buying is an escalator that only goes down. And btw, that rent to own disparity only got to 33% at its worst in the last housing bust, so what does that tell ya?

  22. This Economic Indicator Says the S&P 500 Could Drop 20%: Here’s Warren Buffett’s Investing Advice
    By Trevor Jennewine – Oct 27, 2023 at 7:50AM

    Key Points

    – The U.S. Treasury yield curve has been inverted for the past year, signaling that the economy could soon slip into a recession.

    – The S&P 500 declined by an average of 31% during the past 10 recessions, implying 20% downside from its current level.

    – Warren Buffett says market declines are the best time to buy stocks, and he has warned investors to avoid market-timing strategies.
    …
    https://www.fool.com/investing/2023/10/27/sp-500-could-drop-20-heres-warren-buffetts-advice/

  23. “Climate Change Threat. ”
    The Suns orbits and cycles is what determines climate cycles.
    Real Scientist say we are going into a Solar minimum cycle for a couple decades, which would bring on a cooling cycle.

    It’s a big fraud that co2 is creating doomsday.
    Scientist are urging the World Health Organization to declare a global Climate Emergency. The corrupt WHO, who is tied in with the WEF, Bill Gates etc, a unelected Organization that wants power handed over to them by Treaty by 194 corrupted Countries Governments.
    The UN 2030 sustainable earth agenda, that if adopted, would genocide billions, based on the fraudulent solutions to fraudulent Climate Change Emergency.
    Manufactured emergencies to justify Powers taking over and enslaving humans in their One World Order.

    1. “…CO(2) is creating doomsday….”

      Often wondered about the millions of tons of CO(2) created by volcano eruptions. [1]

      These eruptions have been going on for millions of years.

      So why didn’t civilization end thousands of years ago?
      Just sayin’

      [1] From Google:
      There are about 1,350 potentially active volcanoes worldwide, aside from the continuous belts of volcanoes on the ocean floor at spreading centers like the Mid-Atlantic Ridge.

  24. https:// nitter. poast. org/ amandaorson/ status/ 1719463570251886812#m:

    The real estate agent compensation rate of ~5% was set by the NAR in 1940.

    The 50-50 buyer/seller agent split in 1913.

    The cost to transact a home in the US is 200-400% more than most Western nations.

    Change is not only coming, but *long* overdue.

  25. (WARNING, CAUTION, DANGER: This article is not housing related!)

    Mao with money

    https://angrybearblog.com/2023/11/mao-with-money

    The October 30 issue of The New Yorker has a piece on Xi’s China called “China’s Age of Malaise.” While the mainstream media continues to promote the idea that China has become a wellspring of creativity and economic competition, the reality is that China is retreating into the rigid, sclerotic political dogmatism that characterized the Mao era and that brought down the Soviet Union. The money grafs:

    “Early this year, the Party launched a campaign to educate citizens on what Party literature habitually refers to as “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era.” All manner of institutions—laboratories, asset-management firms, banks, think tanks—are expected to make time for regular lectures, followed by the writing of essays and the taking of tests. Some business executives report spending a third of the workday on “thought work,” including reading an average of four books a month. A microchip engineer at a university lab told a friend, “Going to meetings every day literally eats away at the time for scientific discoveries.”

    “The over-all effect is a revival of what the late Sinologist Simon Leys called the “lugubrious merry-go-round” of Communist ritual, and a culture of deliberate obfuscation that he likened to deciphering “inscriptions written in invisible ink on blank pages.” The return of disappearances and thought work on this scale has made clear that, for all of China’s modernizations, Xi is no longer pantomiming the rule of law; he has returned China to the rule of man. At his core, a longtime observer told me, Xi is “Mao with money.””

  26. (Who says Janet Yellen doesn’t have a sense of humor …)

    Treasury Department to sell $112 billion in bonds to deal with debt load.

    (Janet wants to sell more bonds so as to handle the debt load. Got it.)

    https://www.yahoo.com/news/treasury-department-sell-112-billion-141149925.html

    The U.S. Treasury Department on Wednesday announced bond auctions in a move to handle debt.

    The Treasury said it would launch sales of $112 billion of bonds in order to re-finance $102.2 billion of privately held Treasury bonds maturing Nov. 15, increasing bond auction debt sales November through January 2024 to manage intermediate to long-term debt.

    (There is no doubt about it: With this kind of thinking it becomes apparent that we are screwed.)

  29. ‘The current high level of negative-equity cases largely relates to bank staff housing loans or loans under mortgage insurance programmes, which generally have higher loan-to-value ratios’

    Aka subprime.

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