In the last week - Commercial Real Estate Stress
- New York Community Bank (USA) - Aozora Bank (Japan) - and now: *Deutsche Pfandbriefbank, under pressure in Europe, more real estate cracks, banking concern, etc" Source: Bloomberg, Lawrence McDonald
A Los Angeles office building just sold for 52% less than its price five years ago.
The office building was originally purchased in 2018 for $92.5 million. Now, it sold for $44.7 million even after over $11 million in renovations. Just weeks ago, the Aon Center in downtown LA sold for $147.8 million, 45% less than its previous purchase price in 2014. Source: The Kobeissi Letter
Evergrande, which has now been ordered to liquidate, has an astonishing $300 billion in liabilities.
That places it near the very top of the all-time list of corporate bankruptcies. A lot of Evergrande's liabilities are down payments that Chinese homebuyers made on apartments that remain unbuilt. But even just looking at the bonds and loans outstanding, the amount is greater than $80 billion. Source: TME, Axios
While the US economy remains very resilient, many consumers continue to struggle and need to find ways to keep their purchasing power
Pay rent or parents
If you cannot afford your rent, you are in good company.
According to Harvard University, half of all renters in the United States are paying more in rent than they should. That is defined as using up more than 30% of your income. The good news is rent is coming down in most of the country. The median asking rent is just above $1,700, which is down $63 from its peak in July 2022. That number is going to vary from city to city, but even in Manhattan, rents dropped for the first time in more than two years in November. https://lnkd.in/e_dmjidG
A Hong Kong court has ruled that Evergrande, China's largest real estate developer, must be liquidated
The stock is now down another 20% today on the news and trading has been halted. Evergrande is now considered the most indebted property developer in the world. This comes at a time when China's HY Real Estate Index is down 85% in 2 years. China is also preparing hundreds of billions in economic stimulus along with considering a ban on short selling. Source: The Kobeissi Letter
BREAKING: 14% of all commercial real estate (CRE) loans and 44% of office building loans are now in "negative equity."
In other words, the debt is now greater than the property value on all of these properties. Currently, US banks hold over $2.9 trillion of CRE debt, the majority of which is held by regional banks. Office building prices are down 40% from their highs and CRE as a whole is down over 20%. All as rates rise and many of these loans are due CRE is beyond bear market territory.
The median price of a new home sold in the US is down 17% from its peak in October 2022 (from $496,800 to $413,200)
After the last housing bubble peak the median new home price fell 22% nationally before bottoming. Source: Charlie Bilello
