Leaving nothing left to chance; Fed policy created a CRE doom loop

NEMENTHY: Small US Banks and Commercial Real Estate—A Doom Loop?

Is a doom loop between the banks and US real estate market developing on the back of rising interest rates?
May 30, 2023

There is the possibility of a doom loop between small US banks and commercial real estate. The scenario looks like this:

  1. Small banks in the US hold over 70% of commercial real estate loans.
  2. Prices on most types of commercial real estate in most localities are falling; in some major cities it is estimated that 90% of properties are “under water” (e.g. debt on the properties exceeds the value of the property).
  3. A flight of deposits from small banks to large banks and money market funds decreases the capital available for real estate loans.
  4. The tighter loan market, including higher interest rates, is also making it more difficult to refinance real estate.
  5. In the event current owners of commercial real estate are unable to refinance, a wave of defaults may ensue, leading to further decreases in commercial real estate prices and default of small banks—a negative spiral or doom loop.

Now that you have the big picture, I will provide more color and context on each of the above points.

  1. Small banks in commercial real estate

Small and mid-sized banks (e.g. all except the top 25 banks) hold over 67% of commercial real estate loans. Commercial real estate constitutes some 43% of small bank loans in the US.

  1. Commercial real estate prices are falling, properties are “under water”

Commercial real estate prices have fallen about 5% since their peak in mid 2022, and are forecast to fall 15-20% further as the cycle plays out:

The above chart is based on US national averages. In cities hit by particularly high office vacancy rate (e.g. Los Angeles), the situation is much worse. According to Colliers, L.A. office towers carry an average of over $230 debt per square foot, while market value is $154/sq. ft. Brookfield, the city’s biggest commercial landlord, defaulted on over $1bn in loans this year.

In the US, it is estimated that there is approximately $1.5 trillion in commercial real estate loans coming due by the end of 2025 with the potential of being under water. This will create distress sales and further depress real estate prices.

  1. Flight of deposits from small banks

In the second half of March 2023 alone, some $230bn in deposits was withdrawn from US small banks. While the situation since then has more or less stabilized, this withdrawal leaves a gaping hole in the ability of small banks to finance and refinance commercial real estate. Further flights of capital remain possible. It is understandable that small banks have become so much more cautious on commercial real estate lending.

While increasing interest rates have caused bond values to fall, under current regulations banks do not need to write these down to market value if held to maturity. Hence although healthy on paper, according to Professor Amit Seru of Stanford University, almost half of America’s 4800 banks have de facto burned through their capital buffers.

Isn’t it ironic that US Treasuries, meant to be the pillar of stability of the global financial system, are now its Achilles heel?  All because the Fed acted irresponsibly in artificially depressing interest rates for years, then slammed on the brakes with the fastest interest rate hikes in US history.

  1. Tighter loan market

The prime rate—the rate which banks charge to their most creditworthy customers – has shot up from just over 3% at the end of 2020 to just over 8% as of May 2023.  Interest rates expense for those loans that are about to renew or variable rate mortgages has almost tripled over three years. Many bankers talk of tighter terms and conditions as well (coverage ratios, percentage of collateral, etc.)

An important source of liquidity for mortgage markets– Commercial Mortgage-Backed Securities (CMBS)  where banks securitize and resell bundles of mortgages — has virtually seized up. As of March 2023, the volume of CMBS lending declined by 85% compared to a year ago, further tightening the loan market.

  1. Negative Spiral

The above amply demonstrates the potential for a doom loop; this risk further increases in the event of a recession. At highest risk will be those properties with floating rate mortgages, or mortgages that will expire soon. There is also the potential for contagion. A foreseeable contagion would be towards municipal finance, as the amount of property tax paid by owners of commercial real estate could drop dramatically.

According to Fed Chair Powell: “We’re well-aware of the concentrations … in commercial real estate…the banking system is strong, it is sound, it is resilient, it’s well-capitalized.”  Is he talking of the same banking system?

Professor Seru’s interpretation is unfortunately perhaps more credible: “A lot of the US banking system is potentially insolvent.”

Les Nemethy is the CEO and founder of Euro-Phoenix Financial Advisors Ltd and a former official at the World Bank.

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50 thoughts on “Leaving nothing left to chance; Fed policy created a CRE doom loop

  1. JPMorgan sees signs that the dollar’s dominance is eroding

    LONDON (Reuters) -Signs of de-dollarization are unfolding in the global economy, strategists at the biggest U.S. bank JPMorgan said on Monday, although the currency should maintain its long-held dominance for the foreseeable future.

    The impact of steep U.S. interest rate rises and the use of sanctions that have frozen the likes of Russia out of the global banking system are driving the so-called BRICs nations – Brazil, Russia, India, China and South Africa – to challenge the dollar’s hegemony.

    The dollar’s share of traded currency volumes is just shy of record highs, at 88%, while the euro’s share has shrunk by 8 percentage points in the last decade to a record low of 31%. The share of the Chinese yuan, meanwhile, has risen to a record high of 7%.

    “De-dollarization is evident in FX reserves where (the dollar’s) share has declined to a record as share in exports declined, but is still emerging in commodities,” the strategists said.

    JPMorgan’s assessment is the most high profile of any large U.S. bank although heavyweight asset managers such as Goldman Sachs Asset Management have also voiced views on the trend.

    JPMorgan’s note on Monday estimated for global exports, the U.S. share is now down to a record low 9%, whereas China was at a record high of 13%.

    In global central bank FX reserves too, the dollar’s share is down to a record low of 58%, albeit a level that is still by far the largest globally.

    That share is lower, however, when accounting for gold, which now comprises 15% of reserves compared to 11% five years ago.

    Progress in internationalising the yuan has been limited, meanwhile, JPMorgan added, and is unlikely to change much given the country’s capital controls.

    The “CNY” is 2.3% of SWIFT payments, JPMorgan’s analysts said, versus 43% for the dollar and 32% for the euro.

    1. CJ I agree with your tone of urgency. The USA is collapsing fast. In a year or two the country I knew will be buried under insanity, poverty, desperation and hordes of aliens. Again, the regime wants maximum chaos and slaughter. That’s why firearms sales are allowed to go on and that’s why the culture of death in the entertainment media chugs on.

      1. It’s amazing what appears on Netflix and Amazon prime. The movie The Road meets LGBTQ, AI, and race mixing.

  2. This morning’s numbers are a swing and a miss with disappointments. Nothing Earth shattering but it does help promote a dovish monetary policy.

    S&P Global Composite PMI (May)
    Act: 54.3 Cons: 54.5 Prev: 53.4

    Services PMI (May)
    Act: 54.9 Cons: 55.1 Prev: 53.6

    CB Employment Trends Index (May)
    Act: 116.15 Cons: 116.31 Prev: 116.79

    Durables Ex. Defense (MoM) (Apr)
    Act: -0.7% Cons: Prev: -0.6%

    Durables Ex. Transport (MoM) (Apr)
    Act: -0.3% Cons: Prev: 0.2%

    Factory Orders (MoM) (Apr)
    Act: 0.4% Cons: 1.1% Prev: 0.6%

    Factory orders ex transport (MoM) (Apr)
    Act: -0.2% Cons: 0.6% Prev: -1.0%

    ISM Non-Manufacturing Business Activity (May)
    Act: 51.5 Cons: 54.5 Prev: 52.0

    ISM Non-Manufacturing Employment (May)
    Act: 49.2 Cons: 51.0 Prev: 50.8

    ISM Non-Manufacturing New Orders (May)
    Act: 52.9 Cons: 56.5 Prev: 56.1

    ISM Non-Manufacturing PMI (May)
    Act: 50.3 Cons: 51.8 Prev: 51.9

    ISM Non-Manufacturing Prices (May)
    Act: 56.2 Cons: 57.8 Prev: 59.6

  3. For anyone familiar with the New York City area mass transit system, especially the LIRR, the opening of the Grand Central Station terminal is just another case study in how cost overruns, shoddy planning, and the inability of civil engineers to determine its impact on MTA riders can destroy the best of intentions.

    This article doesn’t even touch on how the subway system loses ridership from the Grand Central terminal opening. Many LIRR riders who now arrive at Grand Central are within walking distance of their offices who once needed to take a subway ride after arriving at Penn Station. The MTA hires the best and brightest civil engineers and yet they still turn a $3 billion project into a $11 billion millstone with dire ramifications for MTA’s overall bottom line. Thus, the overall costs continue to accrue.

    I rode the subways daily for about 15 years and commuted on the Long Island Railroad for two, while also using the LIRR to visit family. Yes, this is what happens when Democrats have complete control over a public works project. And the people who live in the area wonder why their property taxes are so high.

    New York May Have Actually Lost Transit Riders by Building An $11 Billion Train Station

    East Side Access, long delayed and over cost, finally opened, but it isn’t drawing new riders and may actually be scaring some away.


    1. CJ a topic of discussion with a friend yesterday was the fate of cities. The USG has created zones dominated by feral, low IQ populations that are of no value to bankers. They create little wealth, they don’t borrow money, they are fed and housed by loans to USG. When bankers decide they don’t want to lend more, these populations will be eliminated.

      These people have destroyed the work of centuries and billions of dollars expended and they are driving out the people who can help them. Here in Appalachia I see Maryland plates and outsider VA plates more often than ever. They are fleeing the dunghole of MDDCVA.

      I expect the Chinese and Russians to destroy selected zones of Chicago, NY, Balt., LA, Buffalo, the Rust Belt, SF, LA, Portland, et al. Or maybe the USG will destroy them under cover of enemy action.

      Maybe the new GCS in Manhattan was meant to work poorly. Maybe the incompetence is cultivated. That’s what desegregation was about: to dilute efficiency, to drive out competent people and cause them to borrow money in order to escape.

      1. You get no disagreements from me. The concepts of multiculturalism, desegregation of all races, and even “No child Left behind” are all about lowering the expectations of those who excel and are brighter.

        Many who read these words will think I am a horrible racist, but I cannot think of a more effective way for the synagogue of Satan to steam roll the population with its private banking cartel than by diluting the entire population into one mixture of compliant robots. The only race that ever historically posed any problem was the white European people and now they need to be extinguished. Asians never posed a threat and certainly blacks never did. If the European Spanish never conquered Central and South America, the predecessors of the Hispanics would still be climbing up pyramids and ripping hearts out of sacrificial victims. Imagine what the Western hemisphere would look like if the white Europeans never exploited it for their gain and to advance Christianity.

        Whitey needs to be destroyed and with it, his culture. At first it was all about degradating whitey as an embarrassing colloquialism. Now it’s more forceful. Once why he’s gone the end time tribulation can begin.

        With Federal spending debt limits virtually now a thing of the past, a compliant mob of mixed robots pose absolutely no threat to the established order. There will be no more collapses just continual consolidation of wealth and power as the mixed robots become the victims in an Elysium-type setup. Take your subdermal implant and pledge allegiance to the New World Order, because the world is populated with a bunch of uncaring stooges and have been bred that way.

        House prices continue moving higher and so do the prices of income generating assets. Why should there be a collapse in stock prices anymore when the top 10% own 90% of all stocks?

        If we see what’s going on, at least own the income generating assets. Let the mix race idiots feather your nest while they continually vote for social largesse. Personally speaking, I can’t think of a better setup for asset prices over the next couple years.

        1. House prices here in the Carolinas are up from same time last year. Some housing bust……. Non-English speaking immigrants are taking over down here and driving rents higher. Where are they coming from? You’re right, the government hates us. The best way to shield us from this is to own the assets.

          1. You’re right. The government hates us. What I find the most ironic is that governmental financial and economic policy is actually the most aggressively adversarial to the very people it claims to be supporting; primarily the blacks and other ostensible minorities – those on the lower rungs of the financial ladder. Government doesn’t care for any of those people, but uses them as useful idiots to achieve its own selfish goals.

            At least 85% of all home buyers are white people, and although our government publicly detests white people, at least the white people understand the current economic situation; that’s why they’re out there buying the houses in an attempt to shield themselves from the catastrophe in Washington DC.

            The best way of voting against government economic policy is by procuring income generating assets, and the white people are doing that in droves. Own the stocks and own the houses. If we’re going to shop at the company store we might as well have an ownership stake in it. If the mongrels and mixed breeds are going to overrun the country, we might as well be the landlord.

            1. I work for a family owned business in NH which own a number of rental properties as a side business. Many people I work with rent from the company. Perfect example of the money being recycled back into the asset owners hands. These people have nothing. The rents are proportionally higher in NH compared with income. These people are better off not even working.

      2. “Russia and China.” All little instruments as well. Satan is the bigger instrument. It’s his little season, and curses are coming for dis obedience. The land has turned to whoredom, and thus, wickedness always follows forth. People steal, lie, and men lie with men. All abominations to the LORD.

        People want to believe and have faith in people, government, doctors (covid), middle man (churches), versus the Creator – come to me Lord Jesus says. I am the only way to the Father.

        If a tsunami hits nyc – regardless what the official story is – either an asteroid, Russia, China, etc – the true reason I believe will be because there’s not much light left in it.

        1. *murder not steal. Ofc stealing is rampant as well, but stealing isn’t an abomination. Some people steal a little food to survive. Others are stealing Gucci for profit – not to survive. That’s why I believe stealing isn’t listed as an abomination.

  4. CJ – right on again. All we need for asset prices to climb is fear. The CRE issues are real but the claims in the article you posted are exaggerated. The issues are primarily in office CRE, certainly not all CRE. Industrial, medical, multi family, hospitality is doing just fine. Sure regional banks hold 70% of CRE mortgages, but how much of that is office? None of these articles give you that breakdown and would have the unwashed reader think that all CRE is going to drop. Brilliant.

    1. If the FDIC and Fed left the large depositors of those insolvent banks twisting in the wind with uninsured deposit losses, I wouldn’t be so sanguine. But they said not to sweat it.

      They say don’t worry about bail-ins, don’t worry about deposits above $250k. The Fed (not the FDIC) has us covered.

      The media makes us go bananas with fear, while the FED swoops in and takes away all the government power. The FED knew what it was doing after it gave away money for 2 years after covid. Then it spikes interest rates in an unprecedented fashion to undo the damage its prior policy caused. The FED knew exactly who would be most adversely affected, which were the smaller banks. The FED also knows that many of these commercial properties are priced with historically low cap rates, due to the 0% policies that prevailed throughout the prior decade.

      I often marveled at how low the capitalization rates for these office towers were. I suspect these large institutional owners of the skyscrapers were hoping to make their profit on the back end when they sold. It worked for decades. Unfortunately the music stopped playing for them, and with respect to office towers, the investing public is beginning to realize that there is a secular change and that a permanent repricing is necessary.

      The FED knows in real time which banks are in trouble and its owners were just waiting for the proper time to respond accordingly. Notice that each time there’s a crisis, the FED gains more power. And we know who owns the Fed.

      It’s only the fear of collapse that allows the FED to gain its power and control over the economy and government. And you’re right to notice how not all commercial real estate is in the same shape. I keep reading stories about how insane the commercial market is down near the Mexican border with the near shoring of international trade. There’s a lot of CRE sectors that are doing just fine.

  5. For the engineers of the New World Order, it is imperative to continue spending trillions upon trillions of dollars going out to 2030, which will mark the Great Tribulation, or rather, what the mainstream calls the Great Reset.

    Going out toward that time, look for all this money to be stuffed into every asset class imaginable. End time Babylon as described in the book of Revelation is not one of classic collapse, but rather of amazing wealth creation.

    For those who wish to join me over the next few years, I have a YouTube video for you to watch.


    1. The end time system will climb a wall of worry and any collapses will only pose a risk to the objectives of these engineers. Thus, the authorities need to be ever so careful and walk a tightrope, one in which it allows it to achieve its objectives by creating fear and uncertainty, while not blowing up the system. If the system blows up the people will begin to wake up and there will be unforeseen delays in implementing endtime Babylon.

      As of right now they’ve been wildly successful as all I see are people getting poorer and poorer, while the wealth is being consolidated into the hands of the upper echelons who control the globe. It’s working remarkably well, so don’t underestimate it.

      1. Keep talking. There is no one out there saying what you are saying. Could this really be the end? You have a timeframe and use the Old Testament. The scary part is that what you claim makes sense. Don’t let others rattle you.

  6. Atlanta Fed 2Q GDP latest estimate: 2.0 percent — June 1, 2023

    The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2023 is 2.0 percent on June 1, up from May 26 after rounding. After Thursday’s construction spending release from the US Census Bureau and the Manufacturing ISM Report On Business from the Institute for Supply Management, an increase in the nowcast of second-quarter real gross private domestic investment growth from 5.9 percent to 7.9 percent was partially offset by a decrease in the nowcast of second-quarter real personal consumption expenditures growth from 2.3 percent to 1.8 percent.

    The next GDPNow update is Wednesday, June 7.

  7. There will soon be a GREAT shaking in the land of Israel. Jacob’s trouble will wipe away the misery. We will once again worship the God of our fathers.

    US Army Battle Hymn of the Republic


    I listened to some of what Ted Broer said yesterday about how the founding fathers were Freemasonic devil worshipers and that Abraham Lincoln was Karl Marx’s pen pal. Indeed, the civil War was not fought over slavery, but over states rights, and I think as an historian, that Lincoln was one of our worst Presidents.

    But even well-meaning people are fooled; these are the demoralization tactics that are used by our adversary to demoralize us into believing we were a nation founded by devils. It’s a demoralization tactic used by the adversary to convince us that we are not from the OT Israel, but rather some insignificant land, and that some satanic political state in the Middle East is Israel.

    Even our most hated domestic enemies recognized that the God of the Bible is what powers the United States and that’s why the number 13 is all over its founding. It’s the remnant of Manasseh, the 13th tribe.

    The God of Abraham, Isaac, and Jacob bless you and keep you; the Lord make his face shine on you and be gracious to you; the Lord turn his face toward you and give you peace in Jesus’s name. Amen.

    The weather is beautiful where I am today. I give thanks to my God.

    1. Amen.
      No doubt that the rumors about our founding fathers being Satanic are an attempt to demoralize Americans. Our adversary wants to discredit the Christian principles that this nation was founded on by discrediting our history and founding fathers.

      It is also interesting how mainstream archaeologists and historians suppress archaeological findings that prove the events in the Bible actually occurred. I have read about giant human skeletons being discovered and immediately suppressed by the higher ups. The archeologists that discovered these things were threatened with their lives if they reveal their discoveries. Satan knows the Bible is real but wants us to believe otherwise by covering up historical evidence of his misdeeds that were mentioned in the Bible. The Devil wants us to believe the Bible is a fairytale to enhance his ability to misdirect us and will suppress any proof of Biblical reality.

      I am sad to say that he has been very successful with most of the human race.

      1. Amen.


        Genesis 3:1-5

        The Fall

        Now the serpent was more crafty than any of the wild animals the Lord God had made. He said to the woman, “Did God really say, ‘You must not eat from any tree in the garden’?”

        The woman said to the serpent, “We may eat fruit from the trees in the garden, but God did say, ‘You must not eat fruit from the tree that is in the middle of the garden, and you must not touch it, or you will die.’”

        “You will not certainly die,” the serpent said to the woman. “For God knows that when you eat from it your eyes will be opened, and you will be like God, knowing good and evil.”

        Isaiah 6:8

        Isaiah’s Commission

        Then I heard the voice of the Lord, saying, “Whom shall I send, and who will go for Us?” Then I said, “Here am I. Send me!”

        He said, “Go, and tell this people:
        ‘Keep on listening, but do not perceive;
        Keep on looking, but do not understand.’

        “Render the hearts of this people insensitive,
        Their ears dull,
        And their eyes dim,
        Otherwise they might see with their eyes,
        Hear with their ears,
        Understand with their hearts,
        And return and be healed.”

        Then I said, “Lord, how long?” And He answered,
        “Until cities are devastated and without inhabitant,
        Houses are without people
        And the land is utterly desolate,

        “The LORD has removed men far away,
        And the forsaken places are many in the midst of the land.

        “Yet there will be a tenth portion in it,
        And it will again be subject to burning,
        Like a terebinth or an oak
        Whose stump remains when it is felled.
        The holy seed is its stump.”

  8. Headline number smashes expectations

    Average Hourly Earnings (YoY) (May)
    Act: 4.3% Cons: 4.3% Prev: 4.4%

    Average Hourly Earnings (MoM) (May)
    Act: 0.3% Cons: 0.4% Prev: 0.4%

    Average Weekly Hours (May)
    Act: 34.3 Cons: 34.4 Prev: 34.4

    Government Payrolls (May)
    Act: 56.0K Cons: Prev: 41.0K

    Manufacturing Payrolls (May)
    Act: -2K Cons: 8K Prev: 10K

    Nonfarm Payrolls (May)
    Act: 339K Cons: 180K Prev: 294K

    Participation Rate (May)
    Act: 62.6% Cons: 62.5% Prev: 62.6%

    Private Nonfarm Payrolls (May)
    Act: 283K Cons: 160K Prev: 253K

    U6 Unemployment Rate (May)
    Act: 6.7% Cons: 6.6% Prev: 6.6%

    Unemployment Rate (May)
    Act: 3.7% Cons: 3.5% Prev: 3.4%

    1. Based on the household survey, I suspect the FED will not look too highly upon these numbers when making a Fed funds rate change, if any. This is probably why bond prices and stock futures are not moving down substantially on this release.

      The differences between the establishment and household surveys are once again definitely different.

    1. Unreal. At the risk of sounding crass I think there is a life lesson here. If you’re gonna go big, don’t hesitate. A full send requires committment.

    2. Always great to quote the gay parsi queen from slave trading zanzubar stock steeped I’m demonology to know your head and heart are in the right place

    3. That driver was probably texting before hitting the tow truck OR it could be a vaxxident where she passed out. Also, usually those tow trucks are parked in a breakdown lane. Clearly that driver was out of it one way or another.

      1. Not out of it, just out of her league. I have noticed a lot of young female drivers speeding and tailgating and wonder what happens to them when they hit a situation they are not prepared at all to handle. Well, this is what happens. Listen to the audio, she came in hot, hit the brakes in panic and turned away from the ramp. Reckless disregard for everyone on the road including herself. Imagine if there were kids in the car.

        This is how it’s done:


        Regardless of how the situations were set up and who is at fault, this kid went straight at the best spot and pinned the throttle. He landed square and crawled out the back window, ALIVE and ready to face the consequences and reconcile his actions. Committment.

  9. If you are an NT-only Christian and believe God loves everyone and we can all live together in one country, you should embrace the Federal Reserve banking system and a powerful central government. They are both needed to perpetuate the Laodicean lie.

    Moreover, in order to make this Utopia a reality, we need a bullying government-run school system that can re-educate and shake out the instinctual survival instincts of its victims, who are the students.

    I know from my observations that two full generations of humans have been properly groomed. These people no longer pose any threat whatsoever. Two full generations of Christians now resemble Buddhists than true Christians.

    So, if you believe the Old Testament was written for the Jews, stop worrying and learn to love the monetary system. Relax, the government needs trillions more to prove me wrong. Trillions and trillions will be spent so the asset markets can be propped up as long as quantitative easing is in effect.

    Let’s all hold hands and live in harmony. Oh, as long as the NT-only Christians dominate the church, I will most assuredly own the income generating assets.

    Logically speaking, NT-only Christianity equals the current monetary system. Both rely on one another to prop up each other. Two lies for the masses. If I only cared about myself, I would prefer this current system over other types, since I know how to exploit it for gain. It’s actually very easy.

    1. Here’s the part that makes me laugh out loud; rather then admit their errors and slothfulness, today’s Christians are terribly double minded as the psychological algorithms against them have been wildly successful. Now, many of them are just hoping for the pretrib rapture to bail them out of the difficulties they now face because of their expedient lifestyle to fit in.

  10. Given the end of the debt ceiling situation, I’m recommending accumulating some longer-end Treasuries here; 7 to 10s as well as further out.

    Unit labor costs came in much better than expected and the debt markets responded favorably to this morning’s data. Specifically, with a productivity print that is slightly better than expected (less negative), this is good for inflation. When we see high levels of productivity, this generally tends to provide a disinflationary input. Low productivity numbers are generally not favorable for inflation. I noticed that unit labor costs here were much better than expected as well.

    Continuing Jobless Claims
    Act: 1,795K Cons: 1,800K Prev: 1,789K

    Initial Jobless Claims
    Act: 232K Cons: 235K Prev: 230K

    Jobless Claims 4-Week Avg.
    Act: 229.50K Cons: Prev: 232.00K

    Nonfarm Productivity (QoQ) (Q1)
    Act: -2.1% Cons: -2.7% Prev: 1.7%

    Unit Labor Costs (QoQ) (Q1)
    Act: 4.2% Cons: 6.3% Prev: 3.2%

    Once again, I think that we could see some value if we accumulate some Treasuries along the belly of the curve. Thus, for those who have been sticking their Treasury exposure into the overnight markets, I would tiptoe out into some of the longer durations.

  11. Is this the sign of a healthy and normal job market? Why are there so many job openings? Why did this month’s JOLTS data come in so much higher than expected? What is the sudden change since covid that is caused job openings to remain this high? Why aren’t these job openings being filled?

    This month came in at 10.103 million versus expectations of 9.35 million.


    Bernard’s and Andrei’s anecdotal observations flesh out in the JOLTS data.

  12. Fed’s Bowman Says Real Estate Rebound Affects Inflation Fight
    2 hours ago

    (Bloomberg) — Federal Reserve Governor Michelle Bowman said rebounding home prices could impact the US central bank’s work to lower inflation.

    “While we expect lower rents will eventually be reflected in inflation data as new leases make their way into the calculations, the residential real estate market appears to be rebounding, with home prices leveling out recently, which has implications for our fight to lower inflation,” Bowman said Wednesday in remarks prepared for a Fed Listens event in Boston.

    Policymakers have raised interest rates quickly over the past 14 months, bringing the federal funds rate to a range of 5% to 5.25%, from near zero, in a effort to cool prices.

    Since their meeting earlier this month, some officials have said it may be time to pause rate increases in order to assess how their policy so far has impacted the economy. Others argue that persistent inflation shows they need to keep going, or resume hikes later if they skip raising at their June 13-14 meeting.

    A report earlier this month showed new-home sales unexpectedly rose in April to the highest level since March 2022, indicating builders continue to benefit from limited inventory in the resale market.

    ©2023 Bloomberg L.P.

  13. Downtown commercial real estate might be in big trouble, but light industrial seems to be a different matter altogether in the SF bay area. In my small business complex a 1200 st ft unit with 9.5ft ceiling height got two offers at asking price. They opted for the all cash offer and is now in contract. A 1500 sq ft unit with 12′ ceiling height (identical to my unit) just sold for full price in about two weeks. Two more smaller units are being cleaned up now and will likely sell for asking. Price per st ft is about $320 – $340 sq ft. now. About two years ago I paid $236 sq ft. for my unit.

    1. Look at the chart included in the comments section of the previous post. Not all commercial properties are the same. White collar office space is the stuff of BXP and such. That’s a money black hole.

  14. Dow Jones commodity index falling below short term support. As the mRNA injections achieve their desired objectives, price pressures are fading.

    1. That’s right. Dead people don’t buy things. I see more people around me getting cancer diagnosis than ever before.

      1. I can tell the same from my area. 4 % increased the mortality rate here last year according to the media. I am seeing a lot of cancers around me too. Cancers are not new in this area, but they have increased a lot, according to my perception.

    1. Boise maybe used by housing bears to illustrate any bear market, but will fail to mention that house prices were up at least 70% prior to any pullback. Boise is a nice town.

  15. Fox News business had a segment on this morning talking about a trend among Gen Z where they stay in bed all day even if they aren’t sleeping.

    The lazy turds are primed for universal basic income.

    1. These lazy, criminal hillbillies around here are going to lose their asses soon. Mexicans are showing up in numbers. The cheap labor will displace them as a political presence. Their culture will dilute and recede.

      1. I am out here in Woodstock VA and the loads of non English speaking south Americans are growing. They are so out of place right now, but in 20 years I will be out of place. The US government is dumping them in heavily white areas to dilute and pollute.

    2. They are called NEETs. There was a private group that was tracking the data which got unfiltrated and taken over by the OECD who post similar data:


      The problem is global. These people are not forming relationships or families. I don’t blame the kids but they will have to break out of the trap and correct the situation for themselves – this problem has the SOS fingerprints on it.

  16. My wife sent me an auction notice for a cookie factory in Montreal. It has been unusual to see an entire factory auction for the past 10 years or so, Most are just excess asset disposals. The factory is surrounded by new house builds (most are $1mm+) and there was apparent pressure to close it so the remaining industrial in the area can be developed into housing as it is close to transit lines. There is plenty of old commercial real estate in Montreal that has been demolished for condos, the city is unrecognizable from just 15 years ago. If there is a huge bust, I would think selective demolition and redevelopment could look interesting.

    As for the cookie factory, they made a specialty cookie invented in Montreal called the “Whippet”.


    This was for many years considered a special treat reserved for guests, kids usually got ONE on a sunday. Changing demographics probably sounded the death knell for the factory – this type of cookie is familiar to white western european types. New immigrants don’t know this type of thing and don’t buy them – this notion is not on anyones radar in the food industry and makes it impossible to plan for the future, we just have to watch and react.

  17. Perhaps this can be summed up by a simple phrase? One can’t buy up the world at full price. Are we in Stage II of the covid con? Stage I is to first shake up or destroy the businesses that occupied the CRE. Stage III I think involves housing low or no income people. Or somehow related to housing.

  18. House price data blows away expectations, especially with the FHFA index numbers. FHFA House Price data only includes houses that are financed with Fannie Mae or Freddie Mac government agency mortgages. These are the properties that we would consider affordable. Case Schiller includes all properties and reflects the weakness in the higher end.

    FHFA House Price Index (YoY) (Mar)
    Act: 3.6% Cons: 2.4% Prev: 4.2%

    FHFA House Price Index (MoM) (Mar)
    Act: 0.6% Cons: 0.2% Prev: 0.7%

    FHFA House Price Index (Mar)
    Act: 398.0 Cons: 393.0 Prev: 395.5

    S&P/CS HPI Composite – 20 s.a. (MoM) (Mar)
    Act: 0.5% Cons: -0.4% Prev: -0.1%

    S&P/CS HPI Composite – 20 n.s.a. (YoY) (Mar)
    Act: -1.1% Cons: -1.6% Prev: 0.4%

    S&P/CS HPI Composite – 20 n.s.a. (MoM) (Mar)
    Act: 1.5% Cons: 0.4% Prev: 0.3%

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