Tuesday May 9 2017 Housing and Economic stories

TOP STORIES:            

One of Canada's largest mortgage lenders just imploded - (www.businessinsider.com) One of Canada’s largest mortgage lenders just imploded, and it may have serious consequences for Toronto real estate. Home Capital Group, a publicly traded company that engages in non-prime (a.k.a. subprime) lending, saw its stock drop over 60% in a single day. The reason? They’re facing a liquidity crunch, as their capital for subprime mortgages dried up very quickly. This could be the start of a broader trend of investors derisking, and it may kill a significant segment of high-leverage buyers. Home Capital's Massive Drop: The company’s stock has been on a steady slide for the past couple of years. It reached a peak of $55.24 a share in August 2014, before tumbling all the way down to $5.99 a share as of yesterday’s close. In the process, Home Capital Group has shed an estimated $2.6 billion in market cap, and is now worth just a little over $400 million. It’s been a rough couple of years.

Carmageddon: After Abysmal April Sales, Auto Workers Prepare For "Extended" Summer Shutdowns - (www.zerohedge.com) "People are starting to see that this is not necessarily a plateau.  It’s a meaningful reduction, and they’re starting to make plans around that." Auto OEMs typically shut down plants once a year during the summer to retool for model changeovers and whatever general maintenance is required.  But this year summer shutdowns will be about much more than just retooling plants.  With inventory soaring on dealer lots, auto OEMs will likely have no choice but to extend their typically summer shut down schedule and it will take a 'yuge' toll on the 1,000s of auto workers that are considered "short term" employees and not eligible for unemployment benefits...the folks who pretty much single-handedly voted Trump into the White House. As we noted yesterday (see "Auto Bloodbath: Every OEM Misses April Sales Estimates As Inventories Continue To Soar"), after an abysmal March print and growing speculation on wall street that auto sales are looking less like a "plateau" (Ford's label not ours) and more like a debt-fueled bubble on the verge of an epic collapse, auto investors were looking toward April auto sales for signs of hope.  Unfortunately, the "hope" trade failed to materialize as every single, major auto OEM missed their April sales estimates in fairly spectacular fashion. 

The Great Unwind Grips the 12 Hottest US Rental Markets - (www.wolfstreet.com) Zumper’s National Rent Report, on whose data this is based, tracks asking rents in multifamily apartment buildings. Single-family houses for rent are not included though they’re ultimately impacted by multifamily dynamics. In ludicrously expensive San Francisco, the median asking rent for a one-bedroom apartment dropped 5.3% from a year ago to $3,370 and is down 8.2% from the peak in October 2015. For a two-bedroom, it dropped 5.9% to $4,500 and is down 10% from the peak. This doesn’t happen often: The last episode of year-over-year rent declines in San Francisco ended in April 2010. These asking rents do not include incentives, such as “1 month free” or “2 months free.” Incentives were rare during the years of breath-taking rent surges in San Francisco. Now, with new apartments and condos flooding the market due to a historic construction boom that coincides with a slowdown in job creation, incentives have become common. 

Puerto Rico requests bankruptcy protection for public debt (LARGEST IN HISTORY) - (www.reuters.com) Puerto Rico's financial oversight board on Wednesday filed for a form of bankruptcy protection under last year's federal rescue law known as PROMESA, touching off the biggest bankruptcy in the history of the U.S. municipal debt market. The move comes a day after several major creditors sued the U.S. territory and its Governor Ricardo Rossello over defaults on the island's $70 billion in bonds. The request came under Title III of the PROMESA law is an in-court debt restructuring process akin to U.S. bankruptcy protection, as Puerto Rico is barred from traditional bankruptcy because it is a U.S. territory. The case was filed in U.S. District Court in Puerto Rico.

Alitalia Starts Bankruptcy Proceedings After Turnaround Fails - (www.bloomberg.com) Alitalia SpA started bankruptcy proceedings for the second time in a decade, throwing the survival of Italy’s flag carrier in doubt after the airline failed to fend off budget rivals. Shareholders voted unanimously to file for insolvency administration, the airline said in a statement on Tuesday. During a cabinet meeting convened in the evening, the Italian government approved the start of special administration and appointed Luigi Gubitosi, Enrico Laghi and Stefano Paleari as administrators. Gubitosi was appointed to Alitalia’s board in March and would have been made executive chairman if the recapitalization had gone through. Under Italian law, the government is tasked to appoint supervisors to turn around the company or order its liquidation.

OTHER STORIES:

U.S. Stocks Fluctuate With Dollar as Oil Retreats: Markets Wrap - (www.bloomberg.com)
Auto Sales Fall for Fourth Straight Month - (www.bloomberg.com)
Kyle Bass Sees China's Wealth Management Products as Key Risk - (www.bloomberg.com)

Pledging more austerity, Greece cuts deal with lenders - (www.reuters.com)
If Anything Can Shake the Fed’s 2017 Rate Path, It’s These Risks - (www.bloomberg.com)
It Took Investors Just Four Months To Pull Nearly $7 Billion From Hedge Fund Giant - (www.wsj.com)