KeNo's Housing and Economic Portal: Tuesday July 26 2016 Housing and Economic stories

Monday, July 25, 2016

Tuesday July 26 2016 Housing and Economic stories

Corporate debt seen ballooning to $75 trillion: S&P - (www.cnbc.com) Corporate debt is projected to swell over the next several years, thanks to cheap money from global central banks, according to a report Wednesday that warns of a potential crisis from all that new, borrowed cash floating around. By 2020, business debt likely will climb to $75 trillion from its current $51 trillion level, according to S&P Global Ratings. Under normal conditions, that wouldn't be a major problem so long as credit quality stays high, interest rates and inflation remain low, and there are economic growth persists. However, the alternative is less pleasant should those conditions not persist. Should interest rates rise and economic conditions worsen, corporate America could be facing a major problem as it seeks to manage that debt. Rolling over bonds would become more difficult should inflation gain and rates raise, while a slowing economy would worsen business conditions and make paying off the debt more difficult.

Why Italy’s housing crisis matters - (www.ft.com) In 2014 there were approximately 100,000 fewer construction companies in Italy compared with 2008, a fall of 16 per cent. This ran in parallel to a fall in employment of almost 30 per cent. The thousands of property-related businesses that folded as a result brought the already fragile banking system to its knees. Real estate and construction companies account for more than 40 per cent of corporate bad debts, up from 24 per cent in 2014 – a figure which is still rising. In the 12 months to May more than 70 per cent of the rise in gross corporate bad debt was accounted for by the construction and real estate sector.

Hamptons Mansion Buyers Have More Choices as Luxury Sales Slump - (www.bloomberg.com) It’s a good time to buy a home in New York’s Hamptons, especially for shoppers with more than $3 million to spend. Sales of luxury homes in the area, known as Wall Street’s beachside retreat, fell 20 percent in the second quarter from a year earlier to 57 deals, while the number of high-end listings climbed, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. The median price of transactions in the top 10 percent of the Hamptons market -- defined for the quarter as $3.55 million or more -- slipped 0.9 percent. Values rose for the lowest-priced properties. “The global phenomenon that emphasized luxury development, luxury sales and luxury purchases almost exclusively -- that’s been played out,” said Jonathan Miller, president of Miller Samuel. “That market is taking a breather.”

How the Oil Bust is Crushing a Downtown of Office Towers - (www.wolfstreet.com) Commercial real estate, particularly office space, in Calgary, Alberta, the epicenter of the Canadian oil bust with 1.2 million people, is collapsing at a breath-taking rate. As companies in the oil & gas sector have downsized or gone out of business, 25,000 people who used to work downtown have lost their jobs. Office vacancy rates have soared to 22%, the highest on record, according to the second quarter report by commercial real estate services firm CBRE. Vacancy for Class AA office space reached 17.6%, and for Class A space 18.9%. Older buildings are getting clocked: Vacancy rates for Class B buildings soared to 32% and for Class C buildings to 28%. It’s going to get worse: three towers with 2.3 million sq. ft. of office space are under construction in downtown and will be completed by 2018. Of this space, about 1 million sq. ft. is not leased. And even some of the pre-leased space may end up on the sublease market.

Amazon To Issue Student Loans To New "Prime" Shoppers - (www.zerohedge.com) On the off chance the US didn't already have a big enough problem thanks to a staggering $1.3 trillion in student loans which contrary to White House' claims, are crushing an entire generation under their interest expense weight, earlier today none other than billionaire Jeff Bezos announced he was entering the student loan business, when Amazon unveiled a partnership with Wells Fargo in which the bank’s student-lending arm would offer interest-rate discounts to select Amazon shoppers. In Amazon's latest attempt to entice shoppers into its premium Prime program, Wells Fargo will cut half a percentage point from its interest rate on student loans to Amazon customers who pay for a "Prime Student" subscription, which provides the traditional Prime benefits such as free two-day shipping and access to movies, television shows and photo storage.

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