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How Affluent Homebuyers Are Keeping Luxury Real Estate Market Afloat

How Affluent Homebuyers Are Keeping Luxury Real Estate Market Afloat

Submitted by Sam Bourgi of CreditNews

Undaunted by rapidly rising…



How Affluent Homebuyers Are Keeping Luxury Real Estate Market Afloat

Submitted by Sam Bourgi of CreditNews

Undaunted by rapidly rising mortgage rates, many rich Americans haven’t given up on their poolside pads and high-end condos just yet. Luxury home prices climbed 9% to hit $1.1 million, the highest third-quarter level ever recorded, reports Redfin. That’s almost three times faster than the price growth of non-luxury homes, which made it to a median $340,000 in the third quarter.

And while the overall housing market has been cooling thanks to a dwindling supply of affordable properties and mounting rates on home loans, the market for homes in higher price tiers has been chugging along relatively well.

“Wealthy homebuyers have more tools to weather the storm of high mortgage rates,” says Redfin senior vice president of real estate operations Jason Aleem.

Of course, their most powerful tool comes down to bucketloads of cash.

Affluent buyers have big cash cushions

Mortgage rates moving closer to 8% have pushed many middle-income Americans out of the housing market this year.

In the meanwhile, people who purchased homes and locked in 3% mortgage rates in 2020 and 2021 are now reluctant to sell, keeping inventory tight and prices high.

But some wealthy buyers can afford to sidestep high interest rates by shelling out the cash upfront. Bloomberg reported in September that the wealthiest 20% of Americans haven’t used up their excess pandemic savings just yet, citing Fed data.

And Redfin reveals over 42% of luxury homes were purchased in cash in the third quarter, up from 34.6% the same period last year.

The analysis defines luxury homes as those estimated to belong to the top 5% of their respective metro area based on market value, with non-luxury homes categorized as those estimated to be in the 35th to 65th percentile.

Other buyers could be opting for the riskier play: taking on a mortgage with a higher rate now, in the hopes they can refinance into a lower rate in the future—an option that many lower-income Americans can’t afford, Aleem notes.

“Affluent Americans are still spending big, in large part because of pandemic savings and resilient housing and stock values,” he explains.

While the supply of non-luxury homes for sale has shrunk by an alarming 20.8% since last year, active listings of luxury homes have risen nearly 3%.

There’s been a notable rise in homebuilding as well, with the number of housing starts rebounding in September by 7%, compared to the previous month, according to the latest government data.

Newly-built homes often fall into the luxury category, adding to its strong inventory.

But this trend might not last

Experts say some wealthy buyers could start pulling back if affordability conditions don’t improve.

“While many luxury buyers have the resources to forge ahead even when mortgage rates are elevated, stubbornly high rates and home prices will likely push some affluent house hunters to the sidelines in the coming months,” said Redfin chief economist Daryl Fairweather.

“High costs, along with the uptick in the number of high-end homes for sale, could cause luxury price growth to cool.”

And new construction could slow as well, with confidence among single-family homebuilders tumbling to a nine-month low in October due to ebbing demand, according to the National Association of Home Builders and Wells Fargo Housing Market Index.

“In the very short-term, single-family construction activity is likely to increase with permits rising in every month of 2023 thus far, but at some point mortgage rates are likely to put a lid on new construction activity for home purchase,” Conrad DeQuadros, senior economic advisor at Brean Capital in New York, told Reuters last month.

Redfin also notes that luxury home sales fell 10.6% in the third quarter compared to last year.

Although this figure is markedly smaller than the 17% plunge in non-luxury sales, it’s indicative that some wealthy buyers are already retreating in the face of high mortgage rates.

Tyler Durden Thu, 11/09/2023 - 15:25

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Popular party brand files Chapter 11 bankruptcy

A major provider of party supplies has filed for Chapter 11 bankruptcy seeking to sell its assets.



Retail suppliers are essential to the survival of retailers, since without adequate inventory to sell, stores can't generate necessary revenue to remain in business. Suppliers occasionally have hard times and sometimes need to file bankruptcy to stay afloat. Some of those suppliers will reorganize and continue operating. Others will sell their assets to a new operator or may have such severe financial distress that they will need liquidate and go out of business.

Fresno, Calif.-based Prima Wawona, the nation's largest peach producer that supplies grocers like Walmart and Kroger KR, filed for Chapter 11 on Oct. 13 seeking to sell its assets to its lenders or a third party buyer. The debtor's lenders have agreed to allow the company to use its cash to fund operations and keep paying vendors and suppliers while the bankruptcy case proceeds.

Related: Beloved fast-food chain files for Chapter 11 bankruptcy

Instant Brands, maker of Instant Pot, Corning and Pyrex kitchenware, filed for Chapter 11 in June to seek a sale of its assets. The company, which sells its products to numerous retailers, including Walmart and Target TGT, reached an agreement in bankruptcy to sell its assets to private equity firm Centre Lane Partners. The deal is expected to close in the fourth quarter. 

Party supply retailer Party City filed Chapter 11 in January to restructure its debts after rising inflation, supply chain issues, a helium shortage and fallout from the Covid pandemic caused financial distress. The retailer emerged from bankruptcy in October. One of Party City's suppliers also ran into some financial distress that led to a bankruptcy filing.

Anagram Balloons seeks sale in Chapter 11

Party City's affiliate and a top supplier Anagram Balloons on Nov. 8 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of Texas in Houston seeking to sell its assets to its first-lien note lenders. The company listed $100 million to $500 million in assets and liabilities in its petition.

The Eden Prairie, Minn., balloon retailer manufactures and sells foil balloons and inflated décor domestically and internationally to party supply specialty stores, grocers, mass marketers, parks, drugstores and discount variety stores. The wholly owned subsidiary of Party City provides products directly to retailers like Walmart WMT, Dollar Treen DLTR and Canadian Tire and through domestic and international distributors. The balloon maker was not a debtor in Party City's Chapter 11.

Anagram currently employs about 350 employees and operates a 500,000 square-foot manufacturing, production and distribution facility.

Anagram has faced financial distress resulting from unsustainable debt on its balance sheet, lingering effects from the Covid-19 pandemic, global inflation and helium shortages that put strain on its balance sheet. Party City had filed a motion to reject Anagram contracts in its Chapter 11 case, but it did not follow through with that motion. Anagram sought a restructuring solution with its creditors, but was unable to reach a consensus on a reorganization transaction, according to a declaration from the company's Chief Restructuring Officer Adrian Frankum of Ankura Consulting Group. 

Debtor Anagram Holdings filed a motion seeking $22 million in senior secured debtor-in-possession financing with $10 million available immediately on approval of a interim order in order to fund the bankruptcy case and sales process. The remainder would be available on final order approval. It also seeks a $15 million first-lien asset-based loan facility from its prepetition ABL lender Wells Fargo that will roll up prepetition ABL obligations.

Anagram Balloons seeks a sale of its assets in bankruptcy.

Image source: Shuttertock

Prepetition lenders will credit bid at bankruptcy auction

The debtor's first-lien and DIP notes lender will submit a stalking horse credit bid for the full amount of the DIP and first-lien debt in a Section 363 auction of the company. It currently owes $110 million in prepetition first-lien debt, $84.7 million in Second Lien Note debt and $15 million to Wells Fargo in ABL debt.

The debtor will seek higher and better offers for its assets from potential buyers through a bankruptcy auction that is proposed for Dec. 5. The debtor is proposing to close the sale Dec. 29. A hearing is scheduled for Nov. 17 to consider the debtor's bidding procedures.

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Bacteria-virus arms race provides rare window into rapid and complex evolution

As conceived by Charles Darwin in the 1800s, evolution is a slow, gradual process during which species adaptations are inherited incrementally over generations….



As conceived by Charles Darwin in the 1800s, evolution is a slow, gradual process during which species adaptations are inherited incrementally over generations. However, today biologists can see how evolutionary changes unfold on much more accelerated timescales.

Credit: Josh Borin, UC San Diego

As conceived by Charles Darwin in the 1800s, evolution is a slow, gradual process during which species adaptations are inherited incrementally over generations. However, today biologists can see how evolutionary changes unfold on much more accelerated timescales.

Rather than the evocative plants and animals of the Galapagos Islands that Darwin studied in forming his theory of evolution, Postdoctoral Scholar Joshua Borin and Associate Professor Justin Meyer of UC San Diego’s School of Biological Sciences are documenting rapid evolutionary processes in simple laboratory flasks.

Borin and Meyer set bacteria and viruses together in a closed laboratory flask — just two teaspoons large — to study coevolution in action. As viruses infect their bacterial neighbors, the bacteria evolve new defensive measures to repel the attacks. The viruses then counter these adaptations with their own evolutionary changes that work around the new defensive measures.

In only three weeks, this accelerated arms race between bacteria (Escherichia coli) and viruses (bacteriophage, or “phage”) results in several generations of evolutionary adaptations. The new findings, published in the journal Science, reveal the emergence of distinct evolutionary patterns.

“In this study we show the power of evolution,” said Meyer, an associate professor in the Department of Ecology, Behavior and Evolution. “We see how coevolution between bacteria and phage drive the emergence of a highly complicated ecological network. Evolution doesn’t have to be slow and gradual as Darwin thought.”

Meyer says the new study offers fresh perspectives on how intricate ecological networks develop across disparate ecosystems, whether they are food webs across the savanna, pollinator networks in the rainforest or microbes interacting in the ocean.

As bacteria and viruses adapted to each other’s presence over time, two prominent repeating patterns emerged. These included nestedness, a development in which narrow interactions between bacteria and virus specialists are “nested” within a broader range of generalist interactions; and modularity, in which interactions between species form modules within specialized groups, but not between groups.

“We were amazed to discover that our evolution experiment in tiny flasks had recapitulated the complex patterns that had been previously observed between bacteria and viruses collected at regional and transoceanic scales,” said Borin.

“When our research team first quantified this multiscale pattern in environmental bacteria and phage interaction data, we thought the emergence of such complexity required long periods of evolution,” added study coauthor Professor Joshua Weitz from the Department of Biology at the University of Maryland.

Meyer says capturing these evolutionary developments “in action” reinforces the power of evolution, which is often underestimated. Rapid pathogenic evolution continues to shape our world in new ways. Through COVID-19 and new mutations of SARS-CoV-2, viruses have demonstrated the potent capability for evolutionary adaptations that result in new strains when they encounter antibodies, vaccines and other roadblocks that keep them from effectively infecting and spreading. Such new concepts in microbial evolution are reframing the way patients are treated.

“We show that evolution can produce complex ecological networks quickly from very little external help,” said Meyer, who indicated that examples of such external evolutionary forces include isolation via geographical distance, environmental drivers and interactions with other species. “So we can use phage and bacteria as a model system to understand general evolutionary principles and help show how life on Earth has evolved into such diverse and complex ecosystems from simple beginnings.”

In related work, Meyer and Weitz are using artificial intelligence to study how phage could be used in the growing antibiotic resistance crisis. The research includes analysis of evolutionary data to determine which mutations in phage and bacteria can lead to infection and resistance. The research also highlights a new effort supported by the Howard Hughes Medical Institute to study how “jumbo” phages could be used as new therapeutic agents.

Coauthors of the Science paper include Joshua Borin, Justin Lee, Adriana Lucia-Sanz, Krista Gerbino, Joshua Weitz and Justin Meyer.

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Ethereum Spikes On BlackRock ETF Filing, “Heavily Institutional” Buying Sends Bitcoin Soaring

Ethereum Spikes On BlackRock ETF Filing, "Heavily Institutional" Buying Sends Bitcoin Soaring

Update (1230ET): Shortly after Bitcoin’s huge…



Ethereum Spikes On BlackRock ETF Filing, "Heavily Institutional" Buying Sends Bitcoin Soaring

Update (1230ET): Shortly after Bitcoin's huge surge overnight, Ethereum started to spike, reversing recent weakness vs Bitcoin...

The surge takes Ethereum to its highest since April...

With market participants pointing to BlackRock's filing for an Ethereum Trust ETF...

*  *  *

Bitcoin prices have exploded higher overnight, nearing $38,000, with the renewed bullish tone attributed to a combination of factors, including resurgent institutional interest, growing adoption, and a favorable macroeconomic climate.

Source: Bloomberg

For context, this price move has now erased the losses since the Terra stablecoin crisis 18 months ago...

Source: Bloomberg

As CoinTelegraph reports, while not expected until 2024, today, Nov. 9, marks the start of the period during which the long-awaited spot Bitcoin ETF approval announcement from regulators could theoretically come.

“We still believe 90% chance by Jan 10 for spot Bitcoin ETF approvals,” James Seyffart, research analyst at Bloomberg Intelligence, wrote on the topic.

“But if it comes earlier we are entering a window where a wave of approval orders for all the current applicants *COULD* occur.”

Reacting to Seyffart, financial commentator Tedtalksmacro agreed.

“BTC sure is trading like an ETF decision is due any moment,” part of his own commentary read.

However, Bloomberg's Seyffart noted that even if 19b-4 is approved, an S-1 approval could take weeks or months between approval and launch.

A total of 12 asset managers have filed for a spot Bitcoin ETF with the SEC.

Additionally, short-sellers might be exiting positions, fueling the move higher.

As CoinDesk reports, data shows just under $50 million in liquidations occurred in a four-hour period during early Asian trading hours, creating a "short squeeze"

Most notably, as Goldman Sachs' Crypto team points out, initial market data suggests that market activity was heavily institutional with four main indicators:

1. In October, we saw approximately $437m of inflows into BTC exchange - traded products (Bloomberg). On a weekly basis, BTC-based digital asset investment products led the largest single-week inflows into crypto funds since July 2022, for the week ending 27 Oct 2023. BTC-based funds accounted for 90% of the total crypto fund inflows, totaling $296m ( Bloomberg ).

2. Most noticeable change was on CME, where Bitcoin futures open interest notched to an all-time high of 20,369 contracts on 25 Oct 2023 ( CME Group ), and 6 of the top 10 open interest days for bitcoin futures occurred between 20 and 27 Oct 2023. Total open interest on CME hit $3.58b on 30 Oct 2023. In October, CME surpassed the 100k BTC mark for the first time, overtaking Bybit and OKX to rank second behind only Binance ( CoinDesk ) among exchanges offering standard Bitcoin futures and perpetual futures. The daily traded volume for the front 3 - month expiries on CME also notched a YTD high of 25,185 contracts on 25 Oct 2023

3. In addition, the open interest across BTC options also reached an all - time high of $15.4b on 27 Oct 2023 ( The Block Data

4. On - chain activity remains muted relative to rest of the year, with daily active address count of 1.1m (vs 950k addresses (annual average in 2023) ( Coinmetrics ) and DEX to CEX spot trade volume at 13% (vs May’23 21%) ( The Block Data ).

James Van Straten, research and data analyst at crypto insights firm CryptoSlate, wrote in part of his latest research, referencing data from on-chain analytics firm Glassnode, which showed U.S. buyers sustaining the rally.

“Americans carrying this thing,” William Clemente, co-founder of crypto research firm Reflexivity added.

The $37,000 milestone sets up the more significant $40,000 psychological barrier to be broken, instilling a renewed sense of optimism in the cryptocurrency community.

“It’s always gonna be this” way, said Zaheer Ebtikar, founder of crypto fund Split Capital.

“People can’t help it. [Crypto] is literally the most FOMO industry ever.”

Meanwhile, Ethereum is also soaring higher, touching $2000 for the first time since July as interest in DeFi, and more specifically 'yield farming' begins to emerge once again...

As Bloomberg reports, yield farming was once a popular method for crypto projects to bootstrap new users in a short amount of time. It was especially popular in the ultra-low-interest-rate environment during the Covid-19 pandemic. That changed when crypto prices tumbled and traditional interest rates rose. 

“It just took the industry a bit of time to adjust to a regime of high tradfi yields with low crypto volumes, and being able to create competitive product in that space,” said Leo Mizuhara, founder and CEO of DeFi institutional asset manager Hashnote. Tradfi is a popular term used to describe traditional finance.

The surge in ETH has reverted its recent weakness against BTC...

As we tweeted on Oct 20th, the ETH/BTC cross was at a critical support level and today's price action suggests a push back above that...

The key question on investors’ minds now is whether the market has structurally changed?

Tyler Durden Thu, 11/09/2023 - 12:35

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