It’s Friday desk clearing time for this blogger. “Christian Chapman, a former underwriter at Better.com, has worked in the mortgage business for almost 20 years and has been laid off by three other mortgage companies in the past. However, none of his previous firings were as ‘obtuse and dispassionate’ as this one, he said. ‘My heart just sank,’ Chapman told the BBC, adding that he is unsure on how to break the news to his five children. ‘How do I tell them I don’t have a job at Christmas?’”
“It comes as Better hopes to go public before the end of the year. It received $1.5 billion in debt and convertible notes earlier this week ahead of its planned debut. Better, which is backed by Softbank, received a $750 million cash infusion last week.”
“‘As an institutional investor, it is very difficult to explain to our clients why we would invest in SoftBank Group,’ said Makoto Kikuchi, chief investment officer at Myojo Asset Management Co. ‘We have to be aware of the worst possibility — that SoftBank’s business model will no longer make sense.’”
“Average sales price for Miami condos peaked at $643,000 in 2019, but fell to $553,000 in 2020. It bounced back to $607,000 by mid-2021. At least 4,470 condos in downtown Miami are ‘shadow’ rental inventory, meaning they are regularly listed for rent by owners. About 70% of them are available on monthly leases as opposed to annual leases. About 28% of them are furnished. Alica Cervera Lamadrid, president of Miami-based Cervera Real Estate, said investors usually list condos for rent to cover their expenses while depending on the appreciation of the condo’s value for their real profit.”
“‘As rental rates have gone up, very few people are upside down and some are making money renting in addition to the wonderful appreciation they have seen,’ Cervera said.”
“A roomful of Aspen residents, real estate agents and vacation rental representatives failed on Wednesday to persuade Aspen City Council to back off from a moratorium that bans new residential development for up to six months. ‘If you vote yes for a moratorium tonight, I would ask you to suspend your salaries from this city until you resolve it and the moratorium is lifted,’ said Bob Bowden, a luxury home builder and real estate agent. ‘Feel the pain.’”
“The Port announced Wednesday it will spend $14.5 million to buy almost 200 family homes from an out-of-town company that has struggled for several years to pay its taxes and maintain its properties. The homes, located throughout Hamilton County, are part of a portfolio of properties owned by Raineth Housing, a Los Angeles-based firm that has acquired hundreds of properties in cities across the United States. Raineth now is in foreclosure and its properties in receivership.”
“The city of Cincinnati sued Raineth in 2019 in an effort to force the company to pay fines and clean up several properties on Cincinnati’s West Side that had fallen into disrepair and, in some cases, had become so ‘blighted’ the city considered them a threat to public safety.”
“Scammers who defrauded a series of investors out of hundreds of thousands of pounds also destroyed families and marriages, according to one of their victims. Audrey Osborne and her three sons, ran a number of companies including Credence Finance and Dreamscape Homes, through which they fraudulently obtained mortgages. They also encouraged people, including family friends and employees, to invest in developments.”
“Another victim was one of their office managers, Claire Garland, who was hoodwinked and ended up losing more than £82,000. Explaining the impact on her, Claire said: ‘I worked for Credence for three years and they were like a family. I would never have agreed to work with them if I had known what they were doing. I had to sit a lot of exams in financial services to be able to get well paid work to afford the mortgage they’d left me with.’”
“Evergrande’s default marks a major structural adjustment to the Chinese economy, experts say. ‘We know that because Chinese policymakers are doing only just enough to keep it going without it turning into a major economic accident. The fact they’ve let Evergrande go under is the ultimate evidence they want it to go under – they want all of their Evergrandes to go under, because they want to stop overbuilding in the economy,’ said David Llewellyn-Smith, chief strategist at MB Fund.”
“He added Beijing knew that letting the property sector run was ‘simply setting themselves up for a much bigger accident in the not-too-distant future. China has built an enormous steel sector in part to service this construction economy that was a one-off.’”
“The loss of billions of dollars in commodity income will wipe out Australia’s current trade surpluses and current account surpluses. ‘It will be a huge hit to nominal growth,’ Mr Llewellyn-Smith said. ‘It will weigh very heavily on incomes, it’ll be very difficult to get wage rises, the budget will get hammered, you face the possibility of tax hikes to try to substitute for falling corporate revenue. It doesn’t have to be a catastrophe, but it means another lost decade. Most likely it will be another decade of bleeding out of living standards, which is what we faced after the last commodity crash.’”
“Concerned about moral hazard, and insisting that Evergrande’s problems won’t affect the financial system, regulators will be ‘happy to see the firm itself go under and investors take a haircut,’ said Louis Kuijs, head of Asia economics at Oxford Economics.”
“The defaults and slow-moving crises of companies in China’s property sector isn’t just hurting bond-holders and people waiting for their apartments – thousands of small suppliers of everything from tiles to cleaning services are waiting to get paid by the likes of China Evergrande Group. Feng Guoxun’s company is one such supplier. The 36-year-old says his advertising company is owed $200,000 by property developers including Evergrande, with those unpaid debts pushing him to the brink of bankruptcy. Feng said he is still waiting for the 489,500 yuan ($77,000) that the troubled developer — once the country’s biggest — has owed him since August.”
“He also claims Guangzhou R&F Properties Co., another major developer, has owed him around 800,000 yuan in payments for two years, and last month posted photos on Weibo of the contracts he signed with R&F and commercial acceptance bills Evergrande gave him in 2020 instead of immediate payment. ‘It’s an unimaginable number for us,’ said Feng, whose company was profitable until the pandemic hit in 2020 but has now lost all its staff. ‘If I can’t get my money back, I’ll have gone through all these years of hardship for nothing.’”
“Many small firms now find themselves in a situation similar to Feng’s. Late payments to small companies or paying for services with commercial acceptance bills instead of cash is such an issue that China’s cabinet recently vowed to crack down on it. Many highly-indebted developers only pay suppliers with the bills, which are a kind of IOU, and have now stopped repaying these amid an industry-wide liquidity crunch.”
“‘Evergrande’s problems are not just one company’s problem, but the problems of tens of thousands of small businesses that supply it,’ said Sun Wenkai, deputy director of the National Small and Medium Enterprise Research Institute at Renmin University in Beijing. ‘Small companies don’t have the power to set prices and they suffer from higher costs, so they are squeezed at both ends.’”