China Hemorrhages Third Of All Billionaires Amid Property Market Crisis

 Chinese billionaires have lost massive wealth due to the property market downturn and turmoil in the world's second-largest economy. In response, Beijing has rolled out yet another stimulus package, this time on Tuesday, as the Communist Party of China seeks to appear more proactive in supporting the economy amid a decades-long, investment-driven growth model that has hit stumbling blocks over the last several years.

The multi-year economic downturn has roiled the billionaire class in China, with many losing their billionaire status and being downgraded to centi-millionaire. 

Financial Times cites new data from research group Hurun, which shows the number of dollar billionaires plunged by over one-third in the last three years. The destruction of the billionaire class has been met with a barrage of stimulus measures to address underlying structural problems (debt, fertility crisis, deflation, property market woes, ect...), crushing the economy into a slow growth regime.

Hurun data shows that at the 2021 peak, there were 1,185 dollar billionaires in China. By the second half of 2024, that number plunged to 753, or about a 36% plunge, surpassing a 10% drop in the renminbi's value against the dollar over the same period. This year alone, the number of dollar billionaires in China tumbled 16%, when the renminbi only depreciated by 2.5% against the dollar. 

Source: Financial Times

China's decades-long investment-led growth boom in the property market minted billionaires upon billionaires. However, the downturn has wiped out many entrepreneurs with huge fortunes tied to property developer firms. 

Rupert Hoogewerf, chair of the Hurun Report, commented on the billionaire list, indicating it "has shrunk for an unprecedented third year running, as China's economy and stock markets had a difficult year."  

Topping the list is ByteDance founder Zhang Yiming. He surged to the top, beating out "bottled water king" Zhong Shanshan, with a net worth of $49.3 billion. 

Source: Financial Times

The Hurun report said that newly minted billionaires represent a "new generation of entrepreneurs in China that is much more international than their predecessors." 

As we explained early Tuesday following the announcement of yet another Chinese stimulus package, the 10 trillion yuan package may be insufficient to kickstart the economy ... and explained in "Why China's Rally Won't Have Legs" ... is that China's peak credit impulse - the all-important reflationary variable that propagates across the global economy - has dwindled, and so has the boost to growth.

In other words, to achieve the same stimulus level as a % of GDP, China would need to inject tens of trillions more. And since it can't do that, at least not without its middle class kicking and screaming (literally), China's house price will continue to slide, having recently tumbled by a record YoY amount...

What does this mean for the Chinese billionaires tied to the housing market? Well, the pain train will continue until Beijing unleashes a real stimulus bazooka.

https://www.zerohedge.com/markets/china-hemorrhages-third-all-billionaires-amid-property-market-crisis

'Neighbors not keeping up? Your neighbor’s junk can tank your property value'

 Curb appeal is extremely important when selling a home—and messy neighbors not only send red flags to potential buyers; they can cost you big bucks.

“Unfortunately, a neighbor’s unkempt property can very much distract or deter potential buyers,” says Robert Dodson, sales manager and broker at Charles Burt Realtors in Joplin, MO.

More than half of real estate agents (55%) believe that junk or clutter in neighbors’ yards “significantly decreases” your property value, according to a recent study by StorageUnits.com.

At least 28% of real estate agents feel it would diminish your property value by 15% to 20%.

Another 21% believe the decrease would be more in the 30% to 50% range.

The top items in neighbors’ yards that real estate agents said would lower your property value the most are: trash (85%), excessive clutter (82%), yard waste (69%), old cars (57%), building materials (52%), and too many cars (42%).

Meanwhile, 10% of real estate agents say neighbors’ RVs can harm your property value, while another 10% believe their boats can.

At least 7% feel neighbors’ cars parked in the driveway instead of the garage can also have a negative effect.

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More than half of real estate agents (55%) believe that junk or clutter in neighbors’ yards “significantly decreases” your property value, according to a recent study by StorageUnits.com.searagen – stock.adobe.com

How to speak up if you have a messy neighbor

So, how can you politely ask neighbors to clean up their act?

“If you have a rapport with your neighbor, be upfront and let them know you’re going to list your home,” says etiquette expert Lisa Grotts, from Healdsburg, CA. “A polite way to encourage your neighbor to improve their yard without causing tension is to explain that their home has just as much to add to the selling process as yours does.”

Use a friendly tone, and make the approach light and considerate without coming off as confrontational.

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The top items in neighbors’ yards that real estate agents said would lower your property value the most are: trash, excessive clutter, yard waste, and too many cars.J.A. – stock.adobe.com

Grotts suggests saying something like this: “Hi, Trish. I hope you don’t mind me bringing this up, but I noticed the yard’s been looking a little overgrown lately. I completely understand how life can get busy — it happens to all of us! I just thought I’d mention it in case you hadn’t had the chance to take care of it. If you ever need a hand or a recommendation for a landscaper, let me know. We have a terrific team.”

If you get any pushback, offer to foot the bill for the yard cleanup or a house cleaner, and see if that encourages them to agree.

What to do if your neighbor won’t cooperate

If, after being upfront and polite, your neighbors still don’t want to clean up, Grotts suggests taking things step by step.

“Wait and see, offer a friendly follow-up and, if all else fails, go to your HOA or report the issue to local authorities,” she says. “Perhaps they can be the ones to intervene.”

Your real estate agent can always speak up, as well.

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Meanwhile, 10% of real estate agents say neighbors’ RVs can harm your property value, while another 10% believe their boats can.RealPeopleStudio – stock.adobe.com

“Agents also have a unique opportunity to canvas the neighborhood and have conversations with the neighbors about the endeavor to sell a specific property and how they can help make the neighborhood appear more attractive,” says Dodson.

If that doesn’t work, you may just have to live with the eyesore next door and hope for the best.

There is one more thing you can do, though.

“As an agent, I purposefully will write the directions to a property that follows a route that is more appealing to the eye if the most direct route has unfavorable scenery,” says Dodson.

https://nypost.com/2024/10/30/real-estate/your-neighbors-junk-can-tank-your-property-valueheres-what-to-do/

The Housing Boom Economists Expected in 2024, Was a Bust

 The widespread theory (not in this corner) was the Fed would cut rates, mortgage rates would tumble, and that would stimulate existing home sales. What Happened?

The Housing Turnaround That Wasn’t

The Wall Street Journal reports This Year’s Housing Turnaround Ended Before It Started

The real-estate industry hoped 2024 would be a recovery year in which mortgage rates fell and home sales climbed. Mortgage rates dipped over the summer and hit a two-year low in September as they moved toward 6%.

But buyers continued to hold back. They have been spooked by expensive home prices and low inventory. Even at two-year lows, rates were still too high for many buyers, and now they have rebounded to their highest level in nearly three months.

Now, sales of existing homes are on track for their worst year since 1995 for the second year in a row, according to the National Association of Realtors. Even if this year’s sales slightly exceed last year’s level, they are still on track for the worst two-year period since the mid-90s, when the country’s population was considerably smaller.

“People are only moving if they have to,” said Nicole Dudley, a real-estate agent in the Phoenix area. “We’ll go a week without a showing, which is a long time compared to even last year.”

Powell’s Comment

“The real issue with housing is that we have had, and are on track to continue to have, not enough housing. And this is not something that the Fed can really fix,” said Powell.

I agree that the Fed cannot fix housing. But the Fed sure broke housing. Powell does not remotely understand the problem.

There is not a shortage of housing in the classic sense. The real problem is there is a shortage of housing people can afford to pay because the Fed broke the housing market with a nasty brew of bubble-blowing inflation.

Moving Target Trifecta

In a September, survey of more than 1,000 homeowners and renters, 70% said the highest mortgage rate they would accept was 5.49% or lower, according to John Burns Research & Consulting.

I don’t doubt that response at all. But it’s not just a matter of lower rates.

It’s a matter of lower rates, lower prices, and an economy on firm footing.

Mortgage rates fell from 8 percent to 6.11 percent. The impact on housing was nonexistent.

Existing-Home-Sales

There was a brief bounce in January of 2024. But there was one in January of 2023 and 2022 as well. I suspect something is amiss with Seasonal adjustments.

Regardless, mortgage rates continued to decline throughout 2024 but sales are where they were a year ago.

Median Prices

The National Association of Realtors notes the median existing-home sales price climbed 3.0% from September 2023 to $404,500, the 15th consecutive month of year-over-year price increases. All four U.S. regions registered price increases.

First-time buyers were responsible for 26% of sales in September – matching the all-time low from August 2024 and November 2021.

Median prices keep rising and that is for less, and less house.

Yet Another Record High for Case-Shiller Home Prices

The recently released Case-Shiller national and 10-city home price indexes hit new highs for July.

Case-Shiller home price indexes and BLS CPI measures through July, chart by Mish

On September 28, I reported Yet Another Record High for Case-Shiller Home Prices

The pre-pandemic Case-Shiller national index was 370.9. Now it’s 553.1.

Home prices are up 49 percent in less than five years. And thanks to Fed QE wizardry, people could have and did refinance their mortgage at 3.0 percent or even less.

That put extra money, every month, into everyone who refinanced then. Extra money fueled inflation.

A $150,000 House in 1988 Now Costs $707,500 Thank You Fed

Using Case-Shiller data of repeat sales, on August 10, 2024, I noted A $150,000 House in 1988 Now Costs $707,500 Thank You Fed

This is a mess entirely of the Fed’s making. And it’s what happens when the Fed, and economists in general do not count home prices as inflation.

And Now?

Now the Fed says it cannot fix a problem it created. If only it would admit it created the problem.

And Lawrence Yun, the NAR chief economist cheerleader blames poor sales on the election.

For discussion, please see Head NAR Cheerleader Blames the Election for Poor Existing-Home Sales

Finally, clever readers will note I only discussed two of the three things holding back sales.

The three things were prices, mortgage, rates, and the economy. Let’s finish with the latter.

October 22, 2024: 20 Percent of Households Making Over $150,000 Live Paycheck to Paycheck

The Fed has grossly distorted the housing market and no fix is in sight. 

October 23: Fed Beige Book Shows Only 3 of 12 Regions Growing, 3 Declining

The Fed Beige book shows a mostly steady economy in 6 of 12 regional reports. “Steady” is in context of the the worst Beige Book in years.

October 24: Continued Unemployment Claims Are the Highest Since November 13, 2021

Continued claims look bad. But they are only part of the picture. The complete picture suggests recession.

That makes three strikes. Prices don’t support more sales. Mortgage rates don’t support more sales. And the economy does not support more sales.

End the Fed

I believe I have made the case to end the Fed. Rather, the Fed made the case against itself.

This idea was a discussion focus on this blog and the Mises Institute in a series of recent posts.

Please see Fed “Playing With Fire” Take Two, Who Starts the Business Cycle? for a discussion of ideas and alternatives on ending or reigning in the Fed.

https://mishtalk.com/economics/the-housing-boom-economists-expected-in-2024-was-a-bust/

NY Fed says banks obscuring commercial real estate risks by extending loan terms

 Banks have been tweaking the terms of commercial real estate mortgages to obscure losses, and in delaying the day of reckoning, are increasing risks to the broader financial system, a paper released Wednesday by the Federal Reserve Bank of New York said.

The commercial real estate sector, or CRE, has been under heavy pressure from the pandemic and its aftershocks. Lockdowns and the widespread rise of remote working has reduced the need for office buildings and similar structures, and thus far, the sector has shown few signs of recovery. On top of that aggressive Fed rate rises between the spring of 2022 and July 2023 further pressured banks.

"Banks 'extended-and-pretended' their impaired CRE mortgages in the post-pandemic period to avoid writing off their capital, leading to credit misallocation and a buildup of financial fragility," the study's authors wrote, adding problems associated with this lending could arise quickly.

Fed officials have been bracing for some level of manageable trouble among the banks that do CRE loans but have broadly argued that whatever issues arise will likely be modest, concentrated in smaller banks and slow moving, as financial institutions navigate the troubled landscape.

And yet, as bad as the pressure has been on the sector, the issue thus far has failed to generate broader dislocations. The report noted "nonperforming loans and net charge-offs have remained low by historical standards, especially for weakly capitalized banks.

The paper notes that CRE mortgages are mainly issued and held by banks, with these firms accounting for 50.7% of the $5.8 trillion CRE loan sector as of the final quarter of 2023.

Banks with "weaker" marked-to-market capital levels tied to losses in their securities holdings are the primary vector for the CRE mortgage extensions. The firms have since the first quarter of 2022 "pretended that such credit provision was not as distressed to avoid further depleting their capital," the authors said.

Extending the maturity of these troubled loans has made it harder to make new CRE loans and increased the chances that troubled CRE mortgages will face an imminent reckoning, noting "the maturity extensions granted by banks also fueled the volume of CRE mortgages set to mature in the near term--a 'maturity wall' with the associated risk of large losses materializing in a short period of time."

The paper said CRE mortgages from weakly capitalized banks have a 0.2 percentage point higher probability of getting the terms extended versus better capitalized banks.

The Fed rate cuts that kicked off in September and are projected to continue could however bring some relief to CRE lending.

On Monday, Moody's lifted its outlook on the banking sector to stable from negative, in part of because "stabilizing asset quality for banks due to rate cuts, especially for CRE loans."

Meanwhile, a report from Goldman Sachs at the end of September noted "there remains little evidence of a credit crunch in the CRE market" even as it is clear lending is growing at a much slower pace.

https://www.marketscreener.com/quote/stock/THE-GOLDMAN-SACHS-GROUP-I-12831/news/NY-Fed-says-banks-obscuring-commercial-real-estate-risks-by-extending-loan-terms-48144128/

'Biden admin to award nearly $250 m to develop nearly 30,000 affordable housing units'

 The quarter-of-a-billion dollars comes from a fund set up in 2008

The Biden administration will award nearly $250 million to financial institutions and nonprofits in an effort to create nearly 30,000 units of affordable housing across the U.S. Treasury Secretary Janet Yellen said Wednesday.

The effort comes as housing costs for both renters and home buyers have surged to all-time highs over the last few years.

The median sale price of a home sold in the U.S. in mid-October was $384,400, which was 4.7% higher than the same period a year ago, according to data from real-estate brokerage Redfin (RDFN). At current mortgage rates, that translates to a monthly payment of roughly $2,600.

Housing affordability is a major concern for voters, especially younger ones, as they head to the polls in the Nov. 5 presidential election. Both Democrat Kamala Harris and Republican Donald Trump have touted policies that they say will rein in housing costs.

What the Treasury Department's money will do

The $246.5 million in awards is expected to result in more than 26,400 affordable-housing units, of which 25,600 will be rentals and the remainder to be occupied by homeowners, the Treasury Department said.

The money is expected to support both home buyers and to create more housing supply. The funds will finance the preservation, rehabilitation and development of affordable housing, the Treasury Department said, as well as enable individuals to purchase affordable housing.

The money can also be used to finance economic development and community service facilities such as daycare centers, and healthcare clinics, Treasury officials added.

The money announced today "will increase affordable housing supply and expand access to child care and health care for families across America," Yellen said in a statement.

"These awards are projected to leverage nearly $9 billion in private and public sector resources to spur development in communities that need additional investment to create opportunities for communities to get ahead," she added.

The quarter of a billion dollars comes from the Treasury's Capital Magnet Fund program. The program was created in the depths of the Great Recession in 2008 and its funding stems from Fannie Mae (FNMA) and Freddie Mac (FMCC), government-sponsored enterprises that back the bulk of residential mortgages in the U.S.

The Capital Magnet Fund awards grants annually to groups such as nonprofit housing organizations and Community Development Financial Institutions, which are credit unions, banks and other financial institutions that serve underserved communities.

They use the grant money to develop, rehabilitate, or purchase affordable housing targeted to service low income families, the Treasury Department said.

The 48 recipients of the money have five years to complete projects after receiving the award. To date, the Capital Magnet Fund has created more than 63,000 affordable homes, which include 55,600 rentals and 7,400 homeowner-occupied units, according to the agency.

A lack of inventory is one of the factors making the housing market particularly challenging for would-be home buyers.

The U.S. is short 3.8 million homes to meet home-buying demand from a growing number of households, Freddie Mac estimated in 2021.

Buyer are also contending with mortgage rates near 7%, which, on top of record-high sales prices, make monthly housing costs even more expensive.

For renters with extremely-low incomes, the U.S. is short of 7.3 million rentals that are affordable and available, according to the National Low Income Housing Coalition, a D.C.-based left-of-center housing advocacy group.

https://www.morningstar.com/news/marketwatch/20241023287/biden-administration-to-award-nearly-250-million-to-develop-nearly-30000-affordable-housing-units