What we could see is the ripple effect causing the economic collapse, starting with housing.
Fears grow of an eviction apocalypse
Most states paused evictions when the coronavirus hit — but those holds are expiring at about the same time that more generous unemployment benefits are set to dry up.
Why it matters: The one-two punch could easily exacerbate the housing crisis for Americans already bearing the worst of COVID-19's effects.
One fifth of adults polled in May said they had slight or no confidence they would be able to pay their rent or mortgage due in June, according to a weekly Census survey measuring COVID-19’s impact on Americans.
An Urban Institute analysis of Census data found nearly 25% of black renters deferred or did not pay their rent last month, compared with 14% of white renters.
In Michigan, courts are bracing for "a coming deluge" of as many as 75,000 landlord/tenant filings. (The state's moratorium expired this week.)
The big picture: The pandemic — which forced an economic collapse — is adding new burdens on top of the country's longstanding housing problems.
"There was a supply and affordability problem before, and the opportunity for it to get a lot worse presents itself, unless there's really good support coming from the federal, state and local level," Paula Cino of the National Multifamily Housing Council, a trade group for the apartment industry, tells Axios.
What they're saying: The result could be even higher rates of homelessness — leaving more people out on the streets in the midst of a global pandemic.
"Prior to the pandemic, our homeless shelter system in the U.S. was stretched thin, and also not set up for social distancing," Alieza Durana, a policy analyst at Princeton University's Eviction Lab, which is tracking states' measures, tells Axios.
"The run-of-the-mill devastation that normally occurs in the wake of an eviction is further amplified by the conditions of this pandemic and economic crisis itself."
Catch up quick: As with other measures that were passed in haste when the pandemic hit, cities and states enacted a patchwork of eviction halts with varying lengths and caveats.
Moratoria in places like Texas have lapsed.
Others are set to expire in coming days and weeks, including Louisiana and Pennsylvania, while New York State and other places have announced extensions.
At the federal level, the coronavirus stimulus package barred federally subsidized housing from evicting residents until July 25.
Between the lines: An eviction moratorium is not a rent freeze — which means that overdue rent is still accumulating for tenants who have been unable to pay it. Once a moratorium expires and landlords can get court approval to take or resume eviction action, residents could be months in the hole.
Even more troubling: Some of the expirations collide with the stoppage of more generous unemployment benefits that have helped keep unemployed Americans afloat.
Congress is still debating whether to extend enhanced unemployment benefits beyond July 31.
What to watch: It's possible that property managers or mom-and-pop landlords will negotiate with tenants before evicting them. But landlords themselves are likely feeling the pinch: Some states have also put halts on property foreclosures, and those pauses are about to end.
The cost of evicting an existing tenant may not be worth it, particularly if there is little demand from new renters to sign a lease.
The same is true for commercial landlords, although some have already said they are taking nonpaying retail tenants (such as Gap Inc.) to court.
Driving the news: San Francisco essentially made its moratorium permanent this week — prohibiting landlords from ever using missed rent for pandemic-related reasons as grounds for eviction, the San Francisco Chronicle reports.
"The City has a shortage of affordable rental housing, and a significant percentage of its households are renters and at risk of permanent displacement should they be forced to leave their current homes," officials wrote in the legislation.
The bottom line: There's the potential for a domino effect that would harm both tenants and property owners.
Landlords need rental income to pay their bills, taxes and mortgages.
Municipalities need tax income to pay workers and fund essential services.
https://www.axios.com/eviction-crisis-c ... 3af14.html
Add in the banking and FED stupidity.
Millions of Americans suffered long-term financial pain because of the Great Recession and the crash of September 2008. Now, the coronavirus pandemic is inflicting additional pain on millions of Americans, and UC Berkeley law professor Frank Partnoy — in a sobering article for The Atlantic’s July/August 2020 issue — warns that another banking crisis is a strong possibility.
“After months of living with the coronavirus pandemic,” the 53-year-old Partnoy explains, “American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there’s another threat to the economy too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed.”
Partnoy goes on to explain why he fears that possibility. Banks, according to Partnoy “learned few lessons from” the “calamity” of the “2008 crash” — and “new laws intended to keep them from taking on too much risk have failed to do so. As a result, we could be on the precipice of another crash, one different from 2008 less in kind than in degree. This one could be worse.”
In 2010, Partnoy notes, Congress passed the Dodd-Frank Act “to prevent the next crisis.” But one financial instrument that, according to Partnoy, has become problematic is what is known as a CLO or “collateralized loan obligation” — not to be confused with a CDO or collateralized debt obligation.
“After the housing crisis,” Partnoy notes, “subprime CDOs naturally fell out of favor. Demand shifted to a similar — and similarly risky — instrument, one that even has a similar name: the CLO or collateralized loan obligation. A CLO walks and talks like a CDO, but in place of loans made to home buyers are loans made to businesses — specifically, troubled businesses. CLOs bundle together so-called leveraged loans, the subprime mortgages of the corporate world. These are loans made to companies that have maxed out their borrowing and can no longer sell bonds directly to investors or qualify for a traditional bank loan.”
Partnoy observes that CLOs have been “praised by Federal Reserve Chair Jerome Powell and Treasury Secretary Steven Mnuchin for moving the risk of leveraged loans outside the banking system.” But according to Partnoy, that doesn’t mean that they aren’t risky.
Partnoy wraps up his Atlantic article on a troubling note, warning that the financial problems resulting from the coronavirus pandemic could become even worse if large banks are allowed to take dangerous risks.
“If we do manage to make it through the next year without waking up to a collapse, we must find ways to prevent the big banks from going all in on bets they can’t afford to lose,” Partnoy explains. “Their luck — and ours —will at some point run out.”
https://www.alternet.org/2020/06/bankin ... economist/
All this will definitely affect the Stock Market, the question remains how soon?