Real Estate REgurgitations

[RE]

Always a lively indicator to watch when the financial system is teetering, which it definitely is now that the Bond market has collapsed.  Mortgage rates remain astronomical and sales are slumping.

The headline loser of this story took a 50% loss on a $20M SF palace purchased only a couple of years earlier.  This person has to be in real financial trouble to sell it off at that price.  Margin call somewhere else in his portfolio perhaps.  If the economy goes into recession, which currently looks likely to me by the 2nd quarter of 2024, mortgage defaults could start rolling in like 2008.  If that happens, Houston, we've got a problem.

https://www.newsweek.com/san-francisco-home-sale-10-million-loss-housing-market-collapse-1849859

San Francisco Home Price Drops $10 Million as Housing Market Collapses

RE

[RE]

"Correction" implies that once it's finished being corrected, it will be right.  That outcome is highly unlikely.  The only thing that happens during these "corrections"  is a lot of small investors and homeowners lose their shirts and their homes while the hedge fund managers short the market and make a killing and the TBTF Banks get bailed out by da goobermint.  Then everybody goes right back to doing exactly the same thing, because that's how bankers make money.  Getting people to take out the biggest loans possible and run up their debt so that every last penny gets hoovered up in interest payments is the system in need of correction, nobody is making any effort to correct that, and nobody who is the beneficiary of this legalized theft ever will.

However, this latest doomsday prediction does imply the "correction" will be even bigger than the sub-prime fiasco and financial crisis of 2007-8, which if true means we're in for some really lively days ahead in the world of collapse watching.  The 2008 GFC came whisper thin close to completely wiping out the monetary system, and only some truly creative fraud concocted by the Smartest Guys in the Room has kept the system afloat for the last 15 years.  Given that overall global finances are in far worse shape today than they were in 2008 and the political balance between the FSoA, China and Russia is more precarious than ever, a wild roller coaster ride on the currency markets and potential Sovereign Defaults may finally be the Tipping Point we have been expecting in the Collapse Watchers International Association (CWIA) since it failed to arrive on 12-21-2012 as predicted by the Mayan calendar. 

It probably doesn't bode well for my getting out of the Gulag here and into an apartment too soon, but hopefully I'll keep my current roof over my head as the dominos begin to fall.

https://www.foxbusiness.com/real-estate/real-estate-investor-warns-us-entering-greatest-correction-lifetime

Real estate investor warns US is entering the 'greatest' correction of his lifetime

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[K-Dog]

In order to jump-start the housing industry, Cardone is urging Powell to "step aside" and let the market correct itself.

Markets do not correct themselves.  The author Cardone is one of the "nobody who is the beneficiary of this legalized theft ever will."

De wisdum of de markeet.

is !!

We HAD to destroy the village to save it.  Same kind of thinking.

https://callingbullshit.org/

[RE]

De wisdum of de markeet.

is !!

"Wisdom of the Market" is one of the Fundamental Axioms repeated by the True Believers of Capitalism.  No matter how many times it is demonstrably clear that the market has no wisdom at all, the line is repeated as a mantra.  Any problems that crop up are never because the market is stupid, but because of "regulation" and "goobermint interference".  Resistance is Futile.  You will be assimilated.

RE

[RE]

Hard as it is to believe, it sounds like the affordable housing problem is even worse in Oz than in the FSoA.  I guess the Wisdom of the Market doesn't apply to Real Estate. 

https://www.bbc.com/news/world-australia-67723760

The year the Australian Dream died

RE

[RE]

The collapse of the commercial RE sector is beginning to hit the banks, which so far claim to have sufficient reserves to cover their losses.  Given the fact that occupancy rates are down to about 50% and a couple of office towers were sold recently at 50% off firesale prices, I find this hard to believe.  Even covering 10% losses out of capital structure is enough to make a bank insolvent.  All they are covering here are losses on notes due this year, not taking the haircut on the full valu of the property, except in the cases where the full building is sold off, which isn't happening that much, relative to the total size of the market.   So while they can absorb the losses this year, without a magical rebound in the market next year,, they'll have to do it all over again.

This may in large part be the reason for the push by many CEOs for the return to the workplace and less work from home.  Work from home made many of those office spaces unnecessary.   Not only the banks take the loss on these properties, so do the lease holders.  If they don't get people back into those offices, they can't unload their leases.

This looks like a slow motion version of what happened to residential RE when the Adjustable Rate Mortgages reset 2006-7.  That took a few months to balloon up, this could take a couple of years.  Same general outcome though, the TBTF banks will need a bailout...again.  Problem is the interest rates are much higher now so printing funny money is much more expensive.

Don't be fooled by the headline, this isn't just a German bank problem.  As goes Deutchebank, so goes Credite Suisse and JP Morgan Chase.

https://www.cnn.com/2024/02/07/business/pbb-bad-loans-real-estate-crisis/index.html

German bank braces for wave of bad loans in 'greatest real estate crisis since the financial crisis'

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[K-Dog]

For sure, your article is about US commercial real estate a German bank has trouble with. This came out two hours ago, Yellen said yesterday:

These factors will "put a lot of stress on the owners of these properties," Yellen said, speaking before the House Committee on Financial Services Tuesday.  She cited an increase in interest rates and the higher vacancy rates resulting from a shift to hybrid and remote work—as well as a swath of commercial real estate loans that will soon come due.

A place for foreigners to park money has been US commercial real estate.  I think it is part of back door citizenship.  I could be wrong.  Back door citizenship might only apply to the homes being bought on all sides of me.

Anyhoo, the bubble bursts.  Only while things grew could the banks do well.  Now Yellen is yellin again for more socialism for the rich.

I call for the other kind.

[RE]

Now Yellen is yellin again for more socialism for the rich.

As always, privatize the profits, socialize the losses.

RE

[RE]

A place for foreigners to park money has been US commercial real estate.  I think it is part of back door citizenship.  I could be wrong.  Back door citizenship might only apply to the homes being bought on all sides of me.

Commercial RE has long been considered a rock solid investment class that would only increase in value, therefore considered low risk.  It's a part of every big bank's capital structure.  Has nothing to do with citizenship at all, these are all international banks that operate all over the world.

The rich Chinese are buying RE around you because their own RE market is in the toilet and they are trying to park their money in safe overseas investments open to them.  Residential RE is in that class.  If it wasn't for the Chinese money, the whole western property market would collapse.  It will anyway of course.  The Chinese have a poor record investing in RE.  They Buy High, Sell Worthless. lol.

RE

[K-Dog]

The rich Chinese are buying RE around you because their own RE market is in the toilet and they are trying to park their money in safe overseas investments open to them.  Residential RE is in that class.  If it wasn't for the Chinese money, the whole western property market would collapse.  It will anyway of course.  The Chinese have a poor record investing in RE.  They Buy High, Sell Worthless. lol.

RE

I helped one of them cut down a tree a couple of years ago unsolicited when I saw he obviously did not know how to use a chain saw.  It was obvious he considered me a madman for helping a stranger.  He still lives across the street.  I have not seen him since.

[RE]

Well, perhaps not Slo-Mo after all.  The C-Word has already hit the MSM.  CONTAGION.

The reason I put up the story about the German bank was because of a simple rule.  When CEOs and Fed Chairmen make reassuring public statements that there's nothing to worry about and the problems can be contained, you immediately know for sure it's time to start worrying and it definitely can't be contained. lol.

Now it becomes a question of which of the systemically important banks will be the first domino to fall and need a bailout.  Deutchebank seems like a good candidate.  Issue is the German economy is already on the rocks and it's difficult to see how they can pull off the same kind of bazooka with the Euro as Da Fed did with the Dollar in 2008 to bailout DBank.  Without a bailout though, Dbank going down is like Lehman, except an order of magnitude worse.

The stock market should be fun the next couple of days.

https://fortune.com/europe/2024/02/07/commercial-real-estate-german-bank-deutsche-pfandbriefbank/

'Greatest real estate crisis since the financial crisis': German bank alerts the market on exposure to commercial real estate

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[monsta666]

Deutschebank are a strategically important bank in the EU. They are too big to fail and will be bailed out if it comes to that. The only thing that makes this harder is the Germans are not in direct control of the EU central bank so any bailout will be more convoluted. However, despite its weaknesses the German economy is the heart of the EU. Germany cannot be allowed to fail.

I still maintain that the real acid test will come when oil supply starts going down year-by-year significantly and prices rise because of it. Can the EU and by extension the global economy survive? Now I know the peripheral economies will suffer first but there is only so much supply loss that can occur before the failures begin to manifest in the core economies. How long will it be for that to happen is the big question...

[RE]

Deutschebank are a strategically important bank in the EU. They are too big to fail and will be bailed out if it comes to that. The only thing that makes this harder is the Germans are not in direct control of the EU central bank so any bailout will be more convoluted.

Convoluted is a major understatement.  The Dollar has a 1:1 correspondence with USTs.  The Euro on the other hand is backed by the bonds of all the countries that use it, not just Germany.  I can't see France for instance selling bonds to prop up a German bank.  So Germany has to sell all the bonds, but the German economy and Tax base isn't as big as the FSoA.  You need the whole European Union to have that much economic power.

Even if they do manage enough bond sales to cover the losses, the Euro will crater against the dollar by at least 20%, probably more.  Energy and Food, anything priced in dollars will go through the roof.

There is no exit here.  If they can keep this one together, they really are the smartest guys in the room.

RE

[RE]

Add Germany to the FSoA, UK, China, Canada & Oz as another one sinking into the collapsing RE Black Hole of Debt.

How is it that all these countries with different goobermints can be having exactly the same problems?  Simple, because they all use the same banking system with the same faulty assumptions all trading securities around on the same international markets on Wall St, the City of London, Hong Kong and Tokyo.  All the RE all over the globe has been artificially propped up in value by low interest rates, and it's all overinflated asset valuations that need to drop by 50% or more before it would even be close to correct for a normal correction.  As it is, with so many now in trouble at the same time, everyone will be looking to sell, and WTF is going to buy?  That is a recipe for a complete crash and frozen market.  None of the TBTF banks could handle that kind of capital devaluation, and no Goobermint could bailout all of them together.

This is the accident waiting to happen at the moment, and you can sense the tension in all the articles trying to downplay it and spin that it can be contained.  Can it?  Can the Smartest Guys in the Room pull another rabbit out of their hats?   Tick, Tock...

https://www.ft.com/content/dd396d80-9626-48c6-b276-a1ea4e5f6fad

The German property collapse is happening in residential too

RE

[RE]

They keep repeating the Mantras "manageable", "can be contained", "no contagion",  "not as bad as 2008".    Does anyone else here sense the desperation in these reports and pronouncements?  Property values are dropping like a rock,landlords are walking away from buildings, interest rates are up, and there's still a couple of $TRILLION$ in debt coming due by 2025.  Why do I have trouble buying this hopium?

There is a silver lining to this though.  Due to $400B or so in fines the courts have dropped on Trumpovetsky, he's probably going to have to sell at least one of his skyscrapers in NY into this sinking market.  His assets were inflated to even give him a purported net worth of around $2B.  The price he might get on a sale could very well be less than 50% what they are assessed at.  That could cause a reavaluation of all his holdings, which could end with his liabilities exceeding the assets and the banks might call in the loans.  Can you spell BANKRUPTCY?     Currently his GoFundMe page isn't even covering the accumulating interest on the penalties.

Hope he has a good stash socked away in offshore accounts.  lol.

https://www.dawn.com/news/1815175/echoes-of-the-2008-financial-crisis

Echoes of the 2008 Financial Crisis

RE