Author Archives: Bone Fish

Why An American Mortgage Crisis Can Happen Anywhere And How (audio)

 

When the next housing bust gets big enough, there will be a mortgage crisis, and it will hit banks, shadow banks, and mortgage insurers no matter what the mortgage laws are.

Source: by Wolf Richter | Wolfstreet.com

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Real Estate On New York City’s “Billionaire’s Row” 40% Unsold Due To “Unrealistic” Prices

The area known as “Billionaire’s Row” in Manhattan is becoming one of the biggest real estate gluts in all of the city. 40% of apartments in the area are now sitting unsold in towers that top out at 100 stories, according to the New York Post.

Only half a decade after the One57 building became the city’s first “supertall” residential skyscraper, only 84 of its 132 condos have been purchased. This means that more than a third of them are still on the market and none of them are under contract.

The story is the same down the road – six nearby buildings have as much of 80% of their units available, according to data, with the total value of all unsold inventory estimated to be between $5 billion and $7 billion.

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And the supply glut is only going to get worse, as Central Park Tower, at 217-225 W. 57th St. is set to put an additional 179 apartments on the market next year. No deals for the new building have closed, which means if it opened today it would push the overall unsold percentage in the area to nearly 65%. Listings online show asking prices for units between $2.1 million and $64 million. Brokers are blaming the high prices for the sales drought.

Top broker Dolly Lenz said: 

“When people come here from other parts of the country and from around the world, the first thing they want to see is Billionaires’ Row. We toured them through the properties but many felt they were too pricey for the market — $7,000, $8,000 and $10,000 a square foot.”

Lenz also said that these prices were caused by a combination of costs of property, construction, financing and high-end marketing, in addition to developers who have clauses in their contracts that keep lenders from forcing them to drop prices.

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Many brokers feel pessimistic, expressing that the drought in Billionaire’s Row could telegraph a coming drought for the entire market. The Post provided a host of pessimistic quotes from brokers:

  • “Empty buildings are never good for the city,” one broker said.
  • “This happened in 1988 to 1992, when there were a glut of condos that didn’t sell. They were smaller and less expensive, but it led to bad times.”
  • Another broker said the prospects for selling the vacant apartments were grim.
  • “They are priced out of the constellation of buyers out there now,” the broker said.
  • “It’s all a function of price. You can do the most spectacular marketing and offer the most incredible amenities, but it all comes down to price.”
  • “There’s a whole food chain that relies on people living in these buildings,” one broker said.

One local resident said of the vacancies:

“To find out that people aren’t living in the condos is just, ugh. I wish this was all affordable housing. This really upsets me. So many are struggling in the city.”

An Extell spokeswoman disputed some data provided in the article, stating that One57 “is over 85 percent sold in units and over 90 percent sold in value.”

About one month ago, we reported that Manhattan’s housing market was on its “worst cold streak in 30 years”. We also took note of the rising prices that are pricing potential buyers – even the billionaires – out of the market.  

By one broker’s count, Q1 marked the sixth straight quarterly drop in sales volume, the worst streak in at least 30 years.

Per the FT, sales tumbled by 11%, according to broker Stribling & Associates, by 5%, according to Corcoran, and by 2.7% for co-ops and condominium apartments, according to Douglas Elliman and real estate appraisal firm Miller Samuel.

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While the average sales price for new developments climbed a staggering 89.4% to $7.6 million, that figure was exaggerated by a single purchase: Ken Griffin’s purchase of a $240 million penthouse at 220 Central Park South, which, according to some, was the most expensive home ever sold in America. But depending on the report, the median sales price ranged from 2% lower to 3.2% higher. And although the entry level market in Manhattan – that is, apartments priced at $1 million and below – had held up for most of the past year, it has recently started to suffer.

“It’s like a layer cake,” Jonathan Miller, CEO of Miller Samuel, told CNBC. “When you have softening at the top, it starts to melt into the next layer and the next layer after that, because those buyers further down have to compete on price.”

According to one broker, sellers with unrealistic expectations are the biggest barrier to sales, because they’re refusing to adjust for the fact that listings have been piling up and sitting on the market for longer periods, giving buyers more room to negotiate, and more options.

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Inventory has climbed 9% over the past nine months, and there’s a glut in new developments that’s only going to get worse.

Source: ZeroHedge

Good Thing? US Treasury Curve Flattens To Zero As Unemployment Falls To Lowest Level Since 1969

Good thing! US unemployment has fallen to its lowest level since the 1960s.

The US Treasury 10-year – 3-month yield curve has flattened to zero as unemployment hits its 50 year low.

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Is this signaling the end of a business cycle? Or is it signaling the excesses of central banking?

We are seeing turbulence in the US yield curve given the many economic uncertainties around the globe, like Brexit, China trade, etc.

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At least devaluation of the US dollar Purchasing Power has slowed.

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Source: Confounded Interest

Trump’s Worst Failure So Far?

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Funny thing, media commentary on employment almost never includes the immigration dimension—even now, when Democrats are desperate to downplay the strength of this cyclical recovery. Result: there’s absolutely no public awareness (except by VDARE.com readers) that continued immigrant displacement of American workers is emerging as one of President Trump’s worst policy failures.

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Why America Has All The Leverage In China Trade Negotiations, In 3 Charts

Those curious who is more impacted by the sudden re-escalation in trade hostilities between the US and China can get a quick answer by looking at the market reaction to Sunday’s unexpected news: while the S&P is down barely 1%, overnight Chinese stocks plunged nearly 6%, their biggest drop in over three years, indicating just how much more sensitive to every twist and turn in trade relations Chinese stocks are.

Of course, one can counter just how smaller – and far less relevant – the Chinese stock market is in comparison to the S&P500, which is also the basis for the vast majority of household net worth for Americans, and global investors (whereas in China, it is the local housing that is far more critical and accounts for roughly 70% of household net worth).

But it’s not just the stock market that shows why China should tread very lightly in its ongoing negotiations with Trump, or why the US president has decided suddenly to re-escalate. Below we lay out [ ] charts showing just why the US indeed continues to have the upper hand in negotiations with China, starting with the relative importance of the US and European economies to China rather than vice versa.

As the first chart below from Deutsche Bank shows, the US and Europe are “much more important for China than China is for US and Europe” as China remains the nation with the highest beta, or the highest relative impact, from a 1% move in either direction for either the US or the Euro area.

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Second, whereas the US is now actively contemplating the launch of MMT, and exploding the US twin deficit by issuing virtually unlimited amounts of debt – which it ostensibly can do as long as the US Dollar is the world’s reserve currency – China is already near its leverage peak. In fact, as shown in the chart below, both China’s willingness and ability to lever up is now quite limited according to Deutsche Bank’s Torsten Slok.

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Last, and certainly not least, is what we said back in January represented a “tectonic shift” in China’s economy, when we observed that this year, for the first time in history, China’s current account deficit will turn negative meaning that China will henceforth need financing from the rest of the world, and specifically the US. Which is why, as we said five months ago, it is not Beijing that has leverage over the US, but rather the US whose ability – and desire – to allocate capital to China could mean all the difference for China’s economic growth, or lack thereof.

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Finally, and tangentially, assuming trade talks collapse and Trump follows through on his threat of hiking taxes on Chinese imports, it would, as Torsten Slok shows in his latest chart, push US tariffs – which are already higher than most advanced economies – higher than many emerging market countries making the US one of the leading protectionist countries in the work.

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That alone would cripple China’s economy, and is perhaps the main reason why Trump decided to once again flex his muscles, if so far only on twitter.

Source: ZeroHedge

Trade Deal Dead: Trump Says 10% China Tariff Rising To 25% On Friday, Another $325BN In Goods To Be Taxed

So much for months and months of constant leaks, headlines, tweets, and press reports that US-China trade talks are going great, and are imminent amid an ocean of “optimism” (meant solely to sucker in amateurs into the most obvious bull headfake since 1987). 

Just after noon on Sunday, President Trump tweeted that 10% tariffs paid by China on $200 billion in goods will rise to 25% on Friday, and that – contrary to what he himself and his chief economist, Larry Kudlow has said for months, talks on a trade deal have been going too slowly.

And, just to underscore his point, Trump also threatened to impose 25% tariffs on an additional $325 billion of Chinese goods “shortly.”

With the tariff rate on numerous goods originally set at 10% and set to more than double in 2019, Trump postponed that decision after China and the US agreed to sit down for trade talks; following Trump’s tweet it is now confirmed that trade talks have hit an impasse and that escalation will be needed to break the stalemate.

It was as recently as Friday that Vice President Mike Pence told CNBC that Trump remained hopeful that he could strike a deal with China (at the same time as he was urging for a rate cut from the Fed).

Curiously, on Wednesday, the White House – clearly hoping to sucker in even more naive bulls to buy stocks at all time highs – said the latest round of talks had moved Beijing and Washington closer to an agreement. Press secretary Sarah Sanders said, “Discussions remain focused toward making substantial progress on important structural issues and re-balancing the US-China trade relationship.”

In recent weeks there were multiple reports that China and U.S. were close to a trade deal, and an agreement could come as soon as Friday. Major sticking points the U.S. and China have been intellectual property theft and forced technology transfers. There has also been disagreement as to whether tariffs be removed or remain in place as an enforcement mechanism.

While it was not clear why Trump has decided to escalate his tariff policy, the most obvious explanation is that for a White House, which has been obsessed with pushing the S&P to record levels, this was the last lever it had at its disposal. And now that the S&P is back at all time highs, the lies can end, if only for the time being.

Source: ZeroHedge

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S&P Futures Plummet As China Said To Cancel Washington Trade Trip, All Eyes On S&P 2,890

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Steven Mnuchin better have the PPT on speed dial tonight…

Charon took the newly dead across the river Acheron or Styx if they had an obolus to pay for the ride. Those who could not had to wander the banks of the Acheron for one hundred years. Corpses in some regions in ancient Greece were buried or burned with 2 gold coins, called an aureus on their eyes to pay the fare.