Implode Explode

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Tracking the many faces of the global credit implosion.
Updated: 12 min 48 sec ago

How racist official housing policies supercharged today's US wealth gap

4 hours 28 min ago
In the postwar period, white Americans were given attractive, government-subsidized mortgages to move to all-white suburbs, the best known of which was New York's Levittown, that were not accessible to blacks and other minority groups. That helped white families that benefited from those mortgages to build housing wealth.

The Federal Housing Administration at the time not only "refused to insure mortgages in predominantly African American neighborhoods" but also actively subsidized "the movement of white families out of cities into single-family homes in the suburbs," Rothstein said.

Racial segregation was built into public-housing policy. Contracts in suburban subdivisions were made with an FHA subsidy that explicitly required that no blacks be allowed to move in, either initially or through future sales.

All those policy decisions led directly to the race gaps we see now. "Without federal government policy of this kind we would not have the kind of segregation in any metropolitan area today," Rothstein said.

Trump Organization worth one tenth of value previously reported

7 hours 8 min ago
The Trump Organization in New York is reportedly worth one tenth of the value it previously claimed. 

Donald Trump's family business had previously ranked near the top of Crain's New York Business' list of largest privately held companies.

But this year it has fallen from number three to number 40 after the President disclosed the organisation's revenue to federal regulators. 

While the Trump Organization claimed $9.5bn (£7.2bn) in sales last year, Mr Trump's public filings suggest revenues of less than a tenth of that amount, between $600m (£450m) and $700m (£530m).

...

"It was obviously important to Donald to have his company at the top of the list and I don't know why he felt that way but the numbers that he presented are just flagrantly untrue," Aaron Elstein said.

House passes sweeping tax bill; Teeing Senate Up For Battle

Thu, 11/16/2017 - 14:07
The House on Thursday passed legislation to overhaul the tax code, moving Republicans one step closer to achieving the top item on their legislative agenda. 

The measure was approved by a vote of 227-205. No Democrats voted for the bill, while 13 Republicans broke ranks to oppose it.  

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Senate Republicans have their own tax bill, which is currently being considered by the chamber's tax-writing committee.

The Senate legislation differs from the House's in a number of ways. Unlike the House bill, the Senate bill fully repeals the state and local tax deduction, delays the corporate tax cut until 2019 and repeals ObamaCare's individual mandate. 

The Senate's bill also sunsets tax cuts for individuals after 2025, in order to comply with the "Byrd rule" that the measure can't increase the deficit after 10 years if it is to pass with a simple majority.

No more than two Senate Republicans can vote against their bill if Democrats are united in opposition to it. Already, Sen. Ron Johnson (R-Wis.) has said he doesn't support either the House or the Senate bills because they provide more of a benefit to corporations than to other types of businesses. Sen. Susan Collins (R-Maine) has expressed concerns about including repeal of the individual mandate, but has not taken a hard stance yet on the measure.''

The Shock of Sweden's Housing Market is Hitting the Country's Currency

Thu, 11/16/2017 - 11:11
Can a central bank steer the housing market? Not so long ago, Sweden's Riksbank decided: no. Now, there's a risk that decision may backfire as the biggest property market in Scandinavia risks sinking into a correction.

The evidence of price declines was so worrying on Tuesday that it contributed to a 1.5 percent slump in the krona against the euro. A weak currency puts the Riksbank's inflation target at risk. So should it be looking at the housing market more closely?

Developments in Sweden's housing market "could spark some doubts at the Riksbank as it may affect the overall economic outlook and inflation," Nordea analyst Andreas Wallstrom said in a note.

America's ‘Retail Apocalypse' Is Really Just Beginning

Fri, 11/10/2017 - 09:52
The reason isn't as simple as Amazon.com Inc. taking market share or twenty-somethings spending more on experiences than things. The root cause is that many of these long-standing chains are overloaded with debt--often from leveraged buyouts led by private equity firms. There are billions in borrowings on the balance sheets of troubled retailers, and sustaining that load is only going to become harder--even for healthy chains.

The debt coming due, along with America's over-stored suburbs and the continued gains of online shopping, has all the makings of a disaster. The spillover will likely flow far and wide across the U.S. economy. There will be displaced low-income workers, shrinking local tax bases and investor losses on stocks, bonds and real estate. If today is considered a retail apocalypse, then what's coming next could truly be scary.

Until this year, struggling retailers have largely been able to avoid bankruptcy by refinancing to buy more time. But the market has shifted, with the negative view on retail pushing investors to reconsider lending to them...

Foreclosed $51 Million "Billionaire's Row" Penthouse Sells At A 30% Discount

Thu, 11/09/2017 - 11:57
``Kola Aluko's posh penthouse apartment in One57, one of Manhattan's most expensive luxury towers, has finally sold after months of delays in what New York realtors agree is the most expensive residential foreclosure in city history. The sale price - a paltry $36 million - suggests that the stress seen in the ultra-high-end real estate market in New York City has only worsened as buyers brace for a glut of new luxury buildings coming online in the coming years... "It's probably the most-expensive foreclosure we've ever seen in luxury development," said Donna Olshan, president of high-end Manhattan brokerage Olshan Realty Inc. "I don't know of a foreclosure that's larger than that."''

Douglas Elliman's profitability falls over 50% with fewer new dev closings

Tue, 11/07/2017 - 19:16
The New York-based brokerage pulled in $190.4 million in revenue, up 3.2 percent from $184.5 million during the prior-year period, according to filings by its parent company, Vector Group. But net income was $4.2 million -- down from $8.7 million in 2016.

Those numbers were the result of a strong low-end market but softer new development segment, where Elliman has had fewer closings despite a robust pipeline of projects it is marketing.

"There were more closings in '16 than in '17 -- quite a bit more," Chairman Howard Lorber said during an earnings call Tuesday.

Overall, Elliman closed $7 billion worth of sales during the quarter compared to $6.8 billion in 2016. For the first nine months of the year, Elliman closed sales worth $19.8 billion compared to $18.9 billion a year earlier.

Lorber said the low-end of the market is "very, very strong," as is the high-end. The mid-market segment is "kind of quiet," he said.

China's Central Bank Chief Warns of ‘Sudden, Contagious and Hazardous' Financial Risks

Mon, 11/06/2017 - 13:55
China's financial system is becoming significantly more vulnerable due to high leverage, according to central bank governor Zhou Xiaochuan, who has made a series of blunt warnings in recent weeks about debt levels in the world's second-largest economy.

Latent risks are accumulating, including some that are "hidden, complex, sudden, contagious and hazardous," even as the overall health of the financial system remains good, Zhou wrote in a lengthy article published on the People's Bank of China's website late Saturday.

The nation should toughen regulation and let markets serve the real economy better, according to Zhou. The government should also open up markets by relaxing capital controls and reducing restrictions on non-Chinese financial institutions that want to operate on the mainland, he wrote.

"High leverage is the ultimate origin of macro financial vulnerability," wrote Zhou, 69, who is widely expected to retire soon after a record 15-year tenure. "In sectors of the real economy, this is reflected as excessive debt, and in the financial system, this is reflected as credit that has been expanding too quickly."

Lobbying Frenzy Begins on Tax Bill; Party-Line Vote Ability In Doubt

Sat, 11/04/2017 - 08:33
The Republican tax rewrite unveiled on Thursday has set off a scramble among lobbyists and interest groups desperate to preserve prized tax breaks that are suddenly at risk in the sweeping bill moving through the House.

...

The rapid pace set out by Republican leaders is by design: They want to prevent the kind of arm-twisting that has long bedeviled previous tax overhaul efforts by leaving little time for outside groups to blitz lawmakers with concerns. Several consultants and lobbyists said on Friday that individual companies were just beginning to digest how the 400-plus page bill, which drastically changes how American businesses are taxed at home and abroad, would affect their bottom lines.

...

The groups pushing back the hardest on Friday included those in the real estate industry. Some of them had raised concerns before the bill was released, only to discover their biggest fears realized in the draft legislation. The bill includes several measures long opposed by those groups, including a limit on interest deductions for new home purchases of $500,000 or more and an expansion of the standard deduction.

The Mortgage Bankers Association plans conference calls and discussions with members of Congress throughout the weekend, said David Stevens, the group's president. Realtors are running online ads raising concerns over those provisions.

...

Representative Kevin Brady of Texas, the chairman of the House Ways and Means Committee, said no decision had been made about whether to include repeal of the so-called individual mandate. But he said Mr. Trump wants its inclusion, and he indicated that Republicans wanted to evaluate the fiscal effects of taking that step. Senate Republicans may not be as enthused about its inclusion.

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[However, a Tax Foundation] analysis found that the draft legislation would cost too much to survive the budgetary requirements needed to pass the Senate on a party-line vote -- a sign that Republicans will almost certainly need to rework it in order to keep their hopes alive for delivering a bill to Mr. Trump's desk by December.

The analysis found that the bill would add $2 trillion to the federal budget deficit over the next decade, an amount that shrinks to $1 trillion even when additional economic growth effects from the bill are factored in.

"This does not pay for itself," said Scott Greenberg, a senior analyst at the Tax Foundation.

Homebuilders Plunge as New Buyers Could See U.S. Tax Break Cut

Thu, 11/02/2017 - 19:38
The bill's talking points, released Thursday, suggest that the interest deduction for existing home mortgages will be preserved in full, but newly purchased homes will see the cap

cut in half, to $500,000.

The SPDR S&P Homebuilders exchange-traded fund, ticker XHB, and an S&P index that tracks builders plunged in early trading. If the losses hold, it would be the worst day for both in more than a year. Luxury homebuilder Toll Brothers Inc. fell as much as 7.3 percent, and retailer Home Depot Inc. also saw heavy losses.

We cryeth not many tears over this, frankly...

Rent Is Eating Up a Record Share of Americans' Disposable Income

Mon, 10/30/2017 - 16:50
``Nominal disposable personal income in September was up just 2.9 percent from a year earlier, marking the 22nd straight month in which it grew at a slower rate on a year-over-year basis than rental inflation.''

Lennar Makes Deal for CalAtlantic as Home Builders Face Challenges

Mon, 10/30/2017 - 15:38
The home-building sector in the United States has faced an array of challenges, including natural disasters, a long-running labor shortage and increased regulatory costs. Now, two of the nation's biggest residential-construction companies are merging in hopes that their combined heft will help them counter those forces.

The Lennar Corporation said on Monday that it would merge with the CalAtlantic Group to form America's largest home builder in a stock-and-cash deal worth $5.7 billion. The deal would create a behemoth with around 240,000 building plots in 21 states, a market value of about $18 billion and combined revenue of $17 billion over the past 12 months.

Lennar and CalAtlantic anticipate reaping $250 million in annual cost savings and paying down debt obligations. But the deal will not alter a basic problem: The construction of new homes in the United States lags below historical averages.

A decade after the big housing bust dealt a blow to many smaller home builders, the industry's largest firms continue to grapple with higher regulatory expenses that make building homes -- especially starter homes -- too costly, some housing-finance experts said. The situation confounds some people, given the pressing need for affordable housing for young families.

What a perplexing situation -- no matter how the deck chairs are rearranged, normal folks are still too broke to buy even a modest home! Who could have foreseen this???

2017 just set the all-time record for store closings

Thu, 10/26/2017 - 13:57
``Since January 1, retailers have announced plans to shutter more than 6,700 stores in the U.S., according to Fung Global Retail & Technology, a retail think tank. That beats the previous all-time high of 6,163 store closings, which hit in 2008 amid the financial meltdown, according to Credit Suisse. Walgreens helped vault this year's tally to a new high when it said Wednesday that it plans to close about 600 locations.

Wilbur Ross Strikes Out on Manhattan Condo Sale

Wed, 10/25/2017 - 18:35
... the mercurial Manhattan condo market got the better of U.S. Secretary of Commerce Wilbur Ross. The billionaire cabinet head sold his 5,573-square-foot penthouse at the Briarcliff for $15.95 million, a $2 million loss on what he paid a decade ago, records filed with the city show.

...

Ross, who made his money investing in distressed assets, bought the duplex at 171 West 57th Street for $18 million ... in 2007, according to records. He first tried selling the four-bedroom, five-bathroom home for $21 million in 2015, but slashed the price after failing to attract a buyer.

Lord & Taylor 5th Ave. Building, Icon of New York Retail, to Become WeWork Headquarters

Tue, 10/24/2017 - 08:12
... after Christmas next year, less than a quarter of its space will be home to Lord & Taylor's flagship store. Instead, the retailer said on Tuesday, the Midtown Manhattan fixture will become the new global headquarters of WeWork, the seven-year-old office space start-up. Lord & Taylor will rent the bottom floors, redesigning them into a smaller version of its department store.

In selling its flagship building to a WeWork joint venture for $850 million, Lord & Taylor and its parent, the Hudson's Bay Company, are bowing to pressures that have increasingly weighed on the retail industry. It is an acknowledgment that even the grand physical shopping spaces of old can now fetch higher values as offices catering to millennial workers.

...

Retail sales at Hudson's Bay were down about 1 percent in the first half of the year. As of Monday's close, the retailer had a market capitalization of roughly $1.7 billion, or a tenth of WeWork's private market valuation.

...

Hudson's Bay has faced enormous pressure to sell its trove of real estate holdings -- including its crown jewel, the Saks Fifth Avenue flagship store farther up Fifth Avenue. That property was appraised recently at about $3.7 billion.

One of Hudson's Bay's shareholders, the real estate investment firm Land and Buildings Investment Management, has pushed for the company to sell the Saks store, suggesting it might be desirable to a hotel developer or as bricks and mortar space for Amazon.

...

Beyond the Lord & Taylor building sale, Hudson's Bay struck agreements to lease some of its other retail space to WeWork, including in Hudson's Bay stores in Canada.

....

While WeWork normally leases space in commercial buildings, it set up WeWork Property Advisors to buy some property outright. Among the advantages of such arrangements is that the start-up would be able to enjoy any rise in the value of the real estate where it sets up its co-working spaces.

Manhattan Office Bubble Fizzles without Big Chinese Buyers | Wolf Street

Mon, 10/23/2017 - 14:22
``Over the past few years, and building up into a powerful crescendo that culminated just a few months ago, Chinese conglomerates have been buying up whatever they could get their hands on with precariously borrowed money. But now they're being reined in by Chinese authorities who are worried about the soaring debt levels of those conglomerates and about their acquisitions at inflated prices and about a financial crisis that these debt levels could trigger when they go bad. And trophy markets, such as Manhattan, are among the first to feel the effects.''

Unprecedented Housing Bailout Revealed; China Property Sales Drop For First Time In 30 Months

Sun, 10/22/2017 - 14:44
``According to a fascinating new WSJ report, China's housing downturn is likely far worse than meets the eye, as under Beijing's direction more than 200 cities across China for the last three years have been buying surplus apartments from property developers and moving in families from condemned city blocks and nearby villages. China's Housing Ministry, which is behind the purchases, said it plans to continue the program through 2020. The strategy, supported by central-government bank lending, has rescued housing developers and lifted the property market...''

Global Housing Affordability: NYC Far From The Worst

Sun, 10/22/2017 - 14:38
Average monthly take-home pay won't cover the cost of buying a 1,000-square-foot residence or renting a three-bedroom home in any of the 105 metropolitan areas ranked by the Bloomberg Global City Housing Affordability Index -- based on a general rule of thumb among U.S. lenders that people should spend no more than 28 percent of net income on housing costs. Only 12 cities would be considered affordable if they spend 50 percent.

...

Residents face many obstacles, including urban land-use regulations, underdeveloped rental markets and difficulty getting financing, according to Enrique Martínez-García, a senior research economist at the Federal Reserve Bank of Dallas who studies housing prices. Policy solutions to these problems aren't clear, he adds.

"Not having access to credit is a challenge to develop a healthy housing market," he said. "But opening it up too fast might be a problem as well; it might actually lead to a boom-bust episode."

What would happen if Amazon brought 50,000 workers to your city? Ask Seattle.

Fri, 10/20/2017 - 08:45
Maybe no city could have built housing fast enough to keep prices from spiraling upward during Amazon's growth, but Seattle - despite nearly leading the nation in new apartment construction - hasn't come close.

On the sidewalks, alongside rentable neon bikes, people subsist in tents and sleeping bags in places locals say they did not congregate at 10 years ago - a warning sign for cities nationwide trying to capture a version of Seattle's glory.

"We don't have enough housing for low-income people especially, but we also just don't have enough housing," said Myers, a longtime Seattle housing advocate. "And Amazon obviously impacts both of those things."

Officials at Bellwether Housing, the city's largest nonprofit manager of affordable housing, at 2,000 units, report a vacancy rate of 1 percent. "It's very rare that someone moves out, because they have nowhere else to go," said chief executive Susan Boyd.

A state analysis of evictions found they were driven not by social problems but by economics. As Amazon's boom has continued, the city approved a rule this year requiring landlords to accept the first viable renter who applies - rather than cherry-picking a tech worker. The government also adopted an inclusionary zoning policy requiring developers to set aside some new units at below-market rates or pay into a fund to develop other affordable units.

HSBC Tries To Sell Stake in Times Square Office Tower, Once Lost By Macklowe, for $445M (VALUED ABT. $250 mln in 2010)

Mon, 10/16/2017 - 11:04

According to The Real Deal, "The 44-story tower was built in 1990 as the headquarters of German publisher Bertelsmann. In 2006, Vornado Realty Trust bought the retail space for $260 million. A year later, Harry Macklowe paid the Blackstone Group $830 million for the office portion of the property. Macklowe lost the property to his lender, Deutsche Bank, which sold it to CBRE Global Investors."

... In 2010, a 49 percent stake in the property was purchased by HSBC, in a deal that valued the office space at $520 million. Then in 2011 the remaining 51 percent was acquired in a deal valuing it at $660 million, respectively. Adobe Systems, Viacom, Verizon, Pillsbury Winthrop and Duane Morris are among the tenants of the building.

We expect the results will not be great. The commercial market is definitely on the rocks, and an office tower just a flew blocks north of Times Square -- recently financed -- is already distressed (reported a few months ago).