Mr Market after his 7th shot of QE – SF Homes and Commercial Real Estate meets the forecast (global?) Banking Crisis

For me, not only a moonlighting “economist” and vintage Flea Market vendor, but also a California licensed General Contractor/kitchen remodeler since the early 1990’s, it’s fascinating to watch the financial tides rise and fall due to the effects of the Fed’s Quantitive Easing injections of magic money into the economy that began with the 2008 Real Estate Crash. Just when our economy and Mr Market were sobering up (?), along comes the premeditated Covid Coup, destroying many small, local business’s via lockdown mandates and hyper restrictive do’s and don’ts enforced by a swarm of deputized (and often incompetent) health OAF-icials to maintain (now known) dubious social distancing and mask regulations while the multi national corporations, who were allowed to stay open and stay in business, reaped much of the newly created, covid QE funny money currency! Woo-hoo! Corporations and Mr Market indulged in a few more covid rounds of intoxicating QE punch, while much of American Main Street and working class was decimated. The WEForum neo-fascist globalists, Pie Face Gates, Big Pharma etc were very very successful with this part of the coup. 

Most of that newly created QE money benefited the “propertied” elites the most, the Main Street working folks the least, further denying access to the American Dream of home ownership. Deep pocket institutional real estate funds continued their single family home buying spree enabled by Obama’s post crash, underwater home owner betrayal, some investing/speculating on commercial/office real estate. Unfortunately for some of the Big Finance/Bankster “winners” though, despite the market reaching it’s recent all time highs, some in-house oversights on their end are likely to bite them in the butt big time by the end of 2024, or maybe sooner?! 

“In my humble opinion, banks are in worse shape now than in 2007. In 2007, there was one major issue on their balance sheets which caused a major financial and banking crisis. Today, there are multiple issues sitting on their balance sheets… The next thing that I think may surprise investors is the speed of a potential market reversal which may be setting up in the stock market”, says Avi Gilburt, an investment advisor, in his early March post, “Something Bad May Be Coming This Summer”. Gilburt has been closely examining and warning about the cracks in the house of banking for the last couple of years, long before most others were. I began tracking his forecasts around 2018 and soon noticed that when Avi speaks, wise money listens… and for good reason.

Comments Paul Fiorilla of Yardi Matrix, “most of these high risk loans will be coming due in 2024 and 2025, which means that the next 12–24 months will be critical in determining how the situation will play out and the severity of  delinquency’s (multi-family housing)… right now, the uncertainty and pricing that has stalled deals, also is preventing a wave of action on the default front. At some point, trades will start and set pricing standards. When pricing is set, “the damn wall break”, but that remains months or quarters away”. Yes indeed, Mr Market is known for his historical nasty habit of going way up before dramatically going “damn breaking” down. Which begs the question, just how “safe” is your bank? As “safe” as the mRNA jab? (Sorry, couldn’t resist!)

The rise in the Fed interest rates, the very same action that has fueled the Wealth Effect the middle class is currently enjoying, has obviously slowed, and in some cases stopped, the rip roaring rise in single family home prices as mortgage rates quickly inflated before receding to their new, but much higher normal. The single family home (SFH) market is understandably a bit anxious, not only because of the slowdown in sales and leveling off of home prices, but more so, because of the threat of contagion from the potential collapse of the commercial/office space real estate market (CRE) and the banks who are now exposed to the soon to be worthless loans. The Fed interest rate reset that caught many large and local banks off guard in their US Treasury holdings, could soon be double whammied if they are also exposed to non performing CRE, especially if the entity/person who took out that loan has the perfectly legal option to walk away from the loan/liability, ie, the CRE it previously owned. Wow! Moral hazard? Almost. Stranded assets? Likely!! And not what the loan originators anticipated. 

James Foord, The Pragmatic Investor explains, “According to the Mortgage Bankers Association, there’s about $1.2 trillion in commercial mortgage debt set to mature from now to 2025. There is an added risk here for banks because a lot of this debt is tied up in CMBS loans, which, by design, are easier to default on.”, ie, the perfectly legal “walk away” option embedded in a Commercial Mortgage-Bank Security. “CMBS loans are popular because they typically shield an owner’s personal wealth and other properties in the event of a default, making it easier to walk away… Not only do these loans limit the borrower’s liability, but they also give them the ability to cash out, which is like drawing out equity… According to this report, defaults on CRE could reach rates of 10%-20%. That’s equivalent to around one-fourth of the assets held by an average bank… I believe this could trigger a credit contagion.” Gilburt suggests that these are “levels that are comparable to or even higher than those seen during the Great Recession.” Please note, that although this perfectly legal loophole does NOT exist for SFH, it does not mean that SFH’s will escape a degree of contagion that eventually results in falling prices for residential homes! 

“Another concerning study came from the IMF. The agency has published a report saying that U.S. commercial real estate is currently seeing an unprecedented fall in prices… the current price decline is the steepest in at least half a century”, from Gilburt’s “New York Community Bancorp: Just The Tip Of The Upcoming Banking Crisis Iceberg”. He also mentioned in the same article that the Fed recently removed the claim “sound and resilient” from it’s recent update on the US banking system. Interesting revision. More interesting, the downstream effects the unwinding of the CRE market will have on the prices of SFH. Will institutional housing investors be forced to sell off inventory creating a cascade of affordable housing by 2025? Wishful thinking? Personally, I wouldn’t mind seeing home prices return to their affordable 2002 levels again. Something tells me I speak for a lot of people who would like to believe they still have access to the American Dream of home ownership.

At this point you might be wondering, does 2024 presidential candidate Kennedy Jr have some thoughts about over priced, unaffordable single family homes due to globalist institutional house buyers like Blackrock’s “property management” sub entities, etc, driving up prices, denying us working, flea market folks access to the vanishing American Dream? Damn right he does!! The Epoch Times reported (remember when “journalists” were called “reporters”?), “Robert F. Kennedy Jr. said that if elected president, he would create a three percent mortgage for Americans guaranteed by the government and funded by the sale of tax-free bonds, and he would work to make it less profitable for large corporations to own single-family homes in the United States.” Finally, a presidential candidate addressing Wall Street’s attempt to monopolize SFHome ownership! I would add addressing/tightly regulating AirBNB’s removal of SFHome on urban and suburban markets to the “Revitalization of the American Dream – Reset” (Dismal Dave attribution, please). Way Way overdue!!! 

According to The Epoch Times, “A MetLife Financial Management study contends that institutional investors could own up to 40 percent of single-family homes by 2030.”, which means those institutional landlords with their annual rent raising algorithms (illegal yet?) nudging more and more into eventual debt slavery! “And now they have a new target, which is to gain ownership of all the single-family residences in this country. And they are on a trajectory to do that,” Kennedy told supporters in Greenville, South Carolina, directing blame on companies like BlackRock, Vanguard, and State Street. Would this also have a positive, lessening effect on the epidemic of homelessness across every big/medium city USA as affordable home ownership is once again within reach of working class citizens… like, when America was great? Ya think?! And why aren’t the big city and state politicians talking about going after the elephant in the room that is these voracious real estate, institutional entities instead of continuing a litany of band-aid “solutions” to solve the homeless problem?! Answer, because they don’t have the guts to speak up, and/or fear of pissing off their campaign funders who, in big cities to small towns, are often the deep pocket real estate developers. 

How about a forecast you’re most likely hearing here first concerning single family homes meets simple “supply and demand”, Economics 101 – what are these big city property developers and institutional real-estate funds going to do as  our population declines, eventually (or suddenly due to covid vax induced de-pop, Part 3) creating less demand for an eventual oversupply of single family and multi-family housing? Those of you following the collapse of China’s largest multi-family real estate funder, Evergrande, may want to take heed.

Here’s one last nail in the argument for a CRE crisis migrating to multi-family apartments and the high likelihood that single family housing’s heyday has not only peaked, but is likely headed for “look out below!!” as the real estate dominoes fall in 2025. From 6/2023 CreDaily post, “Multifamily Sector Faces $8B Maturity Wall”… “The peak of debt maturities in October and November raises concerns about the possibility of distress surpassing the point where lenders can choose to extend loans or resort to foreclosure…with higher rates, borrowers are faced with the choice of selling or refinancing with additional capital…The multifamily sector faces a complex financial situation… the timing of this debt crisis couldn’t be worse” Hmmm, will multi-family/SFH speculative Blackstone, etc, continue to explore their property management aspirations when they realize the party’s over as increased risk exceeds profit and rent gouging opportunities? “Uncertain market conditions pose challenges for refinancing, forcing owners (the institutional investors/exploiters) to either sell their properties or bring additional capital to the table to avoid default or foreclosure.” Could this mean affordable housing and cheaper rents many be in greater supply beginning Q3, Q4 2024? It’s coming, it’s just a matter of when. I promise.

Have you noticed neither Trump nor Biden is taking about reigning in the monopolistic inclinations of these institutional housing investors? Neither has the guts to speak about it or to take effective action! The possibility of Kennedy undoing (?) what Glass-Steagal repealing Clinton, Good ‘ol Iraq war spender GW, and Bankster, Wall Street enabler Obama has done to wreck the possibility of attainment of the American Dream brings FEAR to the Administrative State to the point of refusing to mention his name, let alone acknowledge his presence as a formidable presidential contender. Unfortunately for the Admin/Deep State, it’s just a matter of time before they have to acknowledge the obvious, and they know it. The approaching tidal wave of support I hear from my flea market customers and conversations I have with Main Street working folks “in the field” gives me great hope that the pitiful mainstream media will sooner than later have to face this reality – Kennedy has STRONG momentum! When will a “reporter” with integrity working for the New York Times, Reuters, Associated Press, Project Syndicate, “progressive” Pacifica Radio (Thom Hartmann, Amy Goodman, alas!), etc etc, finally get a spine, tell the fascist DNC and RNC to FUCK OFF and bring the overwhelming Kennedy voter sentiment into the public conversation? It does give me pleasure to watch the publicly traded stocks of most/every mainstream media entity continue their decline into the land of “soon to be forgotten” bankruptcy (exceptions for tax payer funded by CIA/ Gov Intell corporate media). Good riddance! And all you “journalists” working for these lying, censoring, corporate media sacks of shit may find yourselves un-employable in the soon to be revitalized (my wishful thinking?) truth telling media coming in 2025 going forward. Just sayin. Your street cred, your journalistic integrity is done! And you need to take full responsibility for its undoing! Amnesty? Hoo-Haw!! Your digitally documented “work” is forever (assuming no intervening “Great Solar Reset” CME’s or mischievous micro-novas) on your Permanent, cloud stored Record! (ahhhh… venting can be so therapeutic!)

Lastly, concerning the “what goes up must come down” possibility of a deep correction later this year… this just in from Avi Gilburt, “It Is Time For A Serious Dose Of Caution”, “.. should I see further evidence over the coming weeks, then the probabilities rise quite dramatically that we could see a 25%+ market decline in 2024, just when everyone is now convinced that the bull market has returned and has much further to run.” Opps, there goes the wind in Biden-omic’s sails! Careful with that FOMO! For me, on the Flea Market frontlines, the big question is, how much will a major stock market decline, if it happens, and to what degree it happens, effect consumer spending and voter sentiment? Trump, Biden’s and Kennedy’s monetary and fiscal policy proposal’s will be given much much greater consideration before the November election. Oh Goody!

According to Forbes “Banking Statistics 2024”, 98% (94%!?!!) of Americans have “traditional”, plain vanilla bank accounts. Of that 94%, 48% (as of 1/31/24) have money in those Wealth Effect inducing CD accounts I mentioned in Part 1, most of which, I’m assuming, are yielding a savory, 5%, monthly statement, cash-ola. Will the current Fed created wealth effect minimize the perception of economic instability should Mr Market experience a corrective, most likely disruptive, magic money induced hangover? I guess that depends on just how disruptive it is. Also from Forbes stats, 40% of households do not own Mr Market’s Wall Street stocks, so, perhaps their psychological/emotional stake may be less an issue than for those who do. Today’s takeaway, keep yer powder dry!

As to the other lesser black swans like record consumer credit card debt, record government debt, contagion from China’s real estate/economic crisis, and the wars wars wars leisurely lingering over the horizon, any one of which could start the dominoes falling… cross that bridge when/if we get to it. Meantime, in Part 3, let’s follow up on the slow moving decimation of the American labor force due to the America Sucker Society’s (ASS) unquestioning trust in “safe and effective” vaccines, the CDC, FDA, Pfizer, Moderna, Gates, Fauci, et al, that our truly “deplorable”, censorship by omission, mainstream media continues to sweep under the casket… the casket that mainstream media will eventually be buried in.

Dismal Dave Lancon © March 2024. All Rights Reserved.

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