Fire Sale!
"Invitation Homes, the largest publicly-traded holder of single-family properties, reported that it disposed of slightly more single-family properties than it acquired last quarter, and that most of the small number of properties it acquired last quarter were from “builder partners.”"
https://calculatedrisk.substack.com/p/lawler-invitation-homes-net-seller?utm_source=post-email-title&publication_id=443155&post_id=118857297&isFreemail=false&utm_medium=email
I'm going to stomp my little feet!
A group of lawmakers, including Sen. Elizabeth Warren and Rep. Pramila Jayapal, urged the Fed to halt its rate hikes. The request came the day before the Fed is expected to raise its benchmark rate by a quarter of a point.
https://www.cnbc.com/2023/05/02/warren-jayapal-urge-fed-to-stop-raising-rates.html#:~:text=A group of lawmakers%2C including,a quarter of a point.
PacWest Bancorp, $PACW, now down 29%, stock halted. Western Alliance Bank, $WAL, now down 25%, stock halted. Metropolitan Bank, $MCB, now down 24%, stock halted.
Triggered:
The Vancouver Sun in Canada. “Over the last year, the Duecks’ mortgage payments nearly doubled, increasing by $2,600 a month. The Duecks are far from alone. When borrowing rates fell to record lows in recent years, about three out of every five Canadian mortgage holders chose variable rates, up from the typical average of about one-third, said Brendon Ogmundson, the chief economist with the B.C. Real Estate Association.”
A ‘trigger clause’ is hit when the static monthly payment isn’t high enough to cover rising interest costs, and then the borrower has to start paying more or stretch out the amortization of the mortgage.”
‘No one ever paid attention to (the trigger clause) because it was ‘when pigs fly’, he said. ‘Well, pigs flew last year.'”
The tax base:
Omaha WOWT in Nebraska. “Vacant lots and high-interest rates hurt more than just the property owners. They could hurt everyone that benefits from county programs. ‘We have one source of revenue, and it’s property taxes,’ said Douglas County Commissioner PJ Morgan. Morgan pointed to 90th and Dodge as an area of concern. ‘You’ll see that almost every building has ‘for lease’ signs on it,’ he said. ‘There are floors in Regency that have been vacant for two to three years.'”
F U Pay me:
From Bisnow. “Lenders are getting impatient. Check-in desks and rooms need a tuneup. These are the kinds of challenges coming to a head in the hotel landscape that are expected to help thaw the recent freeze in the industry’s financing markets, several executives said. ‘The lender is saying ‘I’ve extended you for the last three years, you gotta pay me.’ Brands are saying ‘you haven’t reinvested in your assets, you’ve gotta do that.’ You can’t just keep kicking the can,’ said Peachtree Group Chief Investment Officer Brian Waldman.”
This is going to get worse and worse as digital bidding on distressed residential property gets easier and easier especially on high end residential properties.
U.S. regulators tackle money laundering in the luxury home market
https://legal.thomsonreuters.com/en/insights/articles/u-s-regulators-tackle-money-laundering-luxury-home-market
Is that a lot?
NYU Stern School of Business
Interest rate risk beyond MBS: The estimated losses on securities are only part of the total unrealized losses banks suffered from the rise in interest rates. Loans, like securities, also lose value when interest rates go up. Total loans plus securities as of December 2022 was $17.5 trillion. Applying the average duration of loans and securities (3.9 years), the total unrealized losses on total bank credit as of December 2022 is $17.5 × 3.9 × 2.5% = $1.7 trillion. This is only slightly less than total bank equity capital of $2.1 trillion in 2022. Hence, the losses from the interest rate increase are comparable to the total equity in the entire banking system.
https://pages.stern.nyu.edu/~pschnabl/research/DSS_SVB.pdf
“In San Francisco, the office vacancy rate ‘is about 30 percent, or about 35 million square feet that is not currently being used,’ Colin Yasukochi with commercial real estate firm CBRE told NBC News Bay Area. ‘And that’s the highest that we’ve ever seen in San Francisco.’ A former San Francisco WeWork building has seen its property value slashed by about 66 percent, according to Trepp, which tracks CRE data. The building at 25 Taylor Street was once almost entirely leased to WeWork, the formerly highflying co-work startup. The building was valued at $28.1 million in 2014, but was recently appraised at $9.5 million, according to Trepp.”
