It is not surprising that the REAL German Pfandbriefe 10-year rate is negative, since the NOMINAL rate is also negative. Especially since the NOMINAL German sovereign yield is negative.
When we subtract German inflation from the Pfandbriefe 10-year rate, we get a REAL Pfandbriefe rate of 2.365%.
A Pfandbriefe is a type of covered bond. A covered bond is a debt security that is common in Europe. It issued by a bank or mortgage institution and collateralized against a pool of assets that, in case of default of the issuer, can cover claims at any point of time.
On the short end of maturity, the REAL 1-2 year Pfandbriefe rate is -2.55.
Then we have negative REAL 30-year mortgage rates in the US.
Housing prices? Germany looks positively tame in terms of house price growth compared to the US, although the Eurostat data for German house price growth is lagged behind the already lagged Case-Shiller data.
Like the US, there is a considerable gap between house price growth and income growth.
Here is a chart for the US pointing to unsustainable house price growth.
How is the ECB impacting German house prices? Much like the USA.
John Burns consulting has this interesting chart showing a slight slowdown in home price growth. But HPI growth is still growing strong. At 17% YoY in June.
The Case-Shiller National home price index, growing at 14.6% Yo is lagged with reporting only as of April. But you can see the slowing M2 Money Stock YoY. Although M2 Money stock is still growing at a sizzling 13.84% YoY as of May.
So if John Burns is correct, then we should see an increase in the next Case-Shiller report for May, then a slight slowdown in Case-Shiller’s June report.
But if we look at new home prices (net of incentives), we see a 20% YoY price increase (Source: John Burns)
And the housing pump is primed with the lowest REAL 30-year mortgage rate since 1975.
I was reading the usual pundits talking about massive increases in housing coming onto the market, then I saw today’s existing home sales numbers from the National Association of Realtors.
US existing home sales were up 1.38% in June from May, but up 22.85% YoY.
But the scary numbers were median price of existing home sales YoY printing at +23.4% while EHS inventory increased to the highest level … in 2021 but 2021 is sill lower than anytime since 2000. Maybe July’s numbers will show that incredible spike.
Existing home sales were largely in the South, then Midwest, then West and finally the Northeast.
But look at distribution of EHS prices. Houses in the $100K-$250K range (green line) are rapidly vanishing while houses in the $500K-$750K (pink line) are rapidly increasing.
“Inflation has increased notably in recent months. This reflects, in part, the very low readings from early in the pandemic falling out of the calculation; the pass-through of past increases in oil prices to consumer energy prices; the rebound in spending as the economy continues to reopen; and the exacerbating factor of supply bottlenecks, which have limited how quickly production in some sectors can respond in the near term. As these transitory supply effects abate, inflation is expected to drop back toward our longer-run goal.”
Fed speak 101. Aka, “Things got so bad, that of course prices are rising from the pit of despair.” No mention of M2 growing like a bat out of hell or Fed Mission Creep.
But how about existing home sales for May 2021? Median price for existing home sales are up 23.6% year-over-year with surging M2 money supply.
On a month-to-month basis (MoM), existing home sales median price rose 2.8% on slightly higher available inventory.
I want to think that the Congressional Oversight Panel will ask insightful questions, but that is wishful thinking. It is all Kabuki Theater.
Here is the Congressional Oversight Panel questioningFed Chair Powell.
Washington Prime Group, a mall REIT, has filed for Chapter 11 thanks to 1) online-shopping trend and 2) Covid fear.
(Bloomberg) Washington Prime Group Inc., a real estate investment trust that operates enclosed malls and strip centers across the U.S., filed for bankruptcy after the Covid-19 pandemic drove away shoppers.
The Chapter 11 filing in Houston lets Washington Prime stay in business while it restructures its debts in a deal that it reached with certain creditors, according to the bankruptcy petition. The company, with assets estimated at $4 billion and debt of almost $3.5 billion, secured a bankruptcy loan of up to $100 million to fund operations during court proceedings.
Rent collections dried up and tenants filed for bankruptcy or went out of business as the pandemic spread around the nation in 2020. The Columbus, Ohio-based company, which has about 100 locations, began negotiating with its creditors last year and skipped a $23 million bond interest payment in February. Creditors had been extending a forbearance agreement amid the debt talks.
Still, Washington Prime’s share price surged in recent weeks as it was whipped into the frenzy of trading around meme stocks popular among retail investors and on Reddit message boards. The stock rose as high as $6.98 last week, from a price closer to $2 earlier this year. Trading was halted on Monday as investors digested news of the bankruptcy.
Washington Prime aims to deleverage its balance sheet by nearly $950 million, according to a company statement. The plan includes swapping unsecured notes for equity, a $190 million paydown of its revolving credit and term loan facilities and a $325 million equity rights offering.
The plan has support from creditors that hold about 73% of the principal outstanding of secured corporate debt and 67% of the unsecured notes. Bloomberg News previously reported that Washington Prime was weighing a bankruptcy filing as talks faltered.
The case is Washington Prime Group Inc., 21-31948, U.S. Bankruptcy Court for the Southern District of Texas (Houston).
Washington Prime, which has absorbed Columbus Ohio’s Glimcher Realty Trust in 2015, has been devastated by the Covid epidemic and fear-mongering. Hence, shopping mall foot traffic crashed and mall retailers have gotten burned. Sears is an example of a retailer killed by 1) on-line retail shopping and 2) Covid. Macy’s has done surprisingly well.
WPG’s 4 week change in Funds From Operations (a variant of earning per share) has fallen 35.50% while operating profits has tanked -33.23% over 4 weeks.
FFO has tanked since Covid … on top of the online shopping crushing of mall retailers. Reddit