After Epic “Run on the Funds,” 10 More Real Estate Mutual Funds Shuttered as COVID-19 Batters UK Property Values

Triggered by the belated realization of the risks in mutual funds that offer daily liquidity but invest in illiquid assets.

By Nick Corbishley, for WOLF STREET:

Over the past two days, 10 open-end property funds in the UK have slammed their doors shut on investors, citing concerns about asset valuation. The funds’ two property valuers, CBRE and Knight Frank, say that it is currently impossible to accurately value the funds’ real estate assets amid the market chaos being caused by the response to Covid-19.

“The UK commercial property market is facing unprecedented circumstances as a result of the COVID-19 outbreak, and so valuation firms can no longer make reliable judgement on value. This is known as ‘material value uncertainty’,” said Paul Richards, managing director of the Association of Real Estate Funds (AREF), in a statement. To justify the fund suspensions, Richards cited new FCA rules applying to funds investing in inherently illiquid assets, such as commercial property:

“Funds with more than 20% of their portfolio subject to material valuation uncertainty are required to suspend subscriptions and redemptions in the interests of all investors. Although these rules are not due to come into force until September 2020, existing rules would require fund managers to consider suspending funds in circumstances like the ones they are facing at the current time.”

The first fund to shut its doors was Kames Property Income, with £504 million under management. That was on Tuesday. By Wednesday morning, Janus Henderson and Aviva, which respectively manage property portfolios worth £2 billion and £461 million, had followed suit. Then, over the next 24 hours, another seven funds did the same.

Between them, these funds manage some £11 billion of assets, equivalent to around a third of the total assets under management in the UK’s property fund sector. They invest in commercial real estate across the UK including offices, industrial property and retail parks, a sector beleaguered by retailer failures and crushed values. Just this week, one of the UK’s largest mall owners, Intu, warned that it was on the verge of bankruptcy after posting a £2 billion loss and a 22% plunge in the net asset value of its commercial properties.

Now, it’s the property fund sector that’s beginning to wobble. That includes the sector’s biggest player, the £2.9 billion Legal & General UK Property, which, like AREF, justified its decision to suspend redemptions by citing the “unprecedented set of circumstances caused by the COVID-19 virus” and its impact on “market activity across all sectors”:

“This means that “independent valuers are unable to rely on previous market experience to inform their opinion of values of the properties held by the Fund. We believe this suspension to be the fairest outcome for all investors, taking an appropriate forward looking view through the current crisis.”

Other large funds that have suspended redemptions include the £2 billion Janus Henderson UK Property, the £1.7 billion Standard Life Investments UK Real Estate, the £1.1 billion Threadneedle UK Property and the £1.1 Aberdeen UK Property. These open-end mutual funds are particularly prone to liquidity crises in the event of market sell-offs, as the Bank of England’s Financial Policy Committee warned repeatedly, starting in 2015.

When investors take their money out, the fund will use up the remaining cash and then has to sell assets in the portfolio to raise money to meet the redemptions. This is normally not a problem when the assets in question are highly liquid, such as large-cap publicly traded stocks. But when the assets are commercial real estate that can take weeks or months to sell, if they can be sold at all in a hurry, particularly in a downturn, there is a mismatch in liquidity between what the fund offers to its investors (daily liquidity) and what the fund holds (largely illiquid assets). Eventually, the fund runs out of cash and has no choice but to close its doors, leaving investors trapped and having to contemplate big losses.

In June 2016, in the aftermath of the Brexit vote, six commercial real estate (CRE) funds suspended redemptions. Now, things are even worse than that.

Almost all of the funds that shuttered this week blame their decision on valuation concerns. Words like “volatility”, “liquidity” and “cashflow constraints” were conspicuously absent from the press releases. BMO explicitly emphasized that the suspension of its two funds was “not related to any liquidity event”, which is curious given that many of these funds were already suffering a sustained wave of withdrawals long before the coronavirus struck.

In 2019, UK property funds suffered record outflows of £2.2 billion, equivalent to one in every 15 pounds of assets under management, according to investment funds transaction network Calastone. The sector has suffered net withdrawals in every quarter since 4Q-2018. By the end of last year, things had gotten so bad that M&G Investments, the fund management arm of UK insurance giant Prudential, decided to halt dealings in its direct property fund, which has more than £2.5 billion in assets under management, as well as its feeder fund.

Unlike its peers that suspended withdrawals this week, M&G made the decision to suspend its property portfolio after “unusually high and sustained outflows” triggered by “Brexit-related political uncertainty and ongoing structural shifts in the UK retail sector.” According to Morningstar, the portfolio had had only one month of positive flows since Britain voted to leave the EU in June 2016.

The gating of M&G in December, just two months after the closure of the £3.7 billion Woodford Equity Income fund which left investors facing losses of more than half of their money, has seriously spooked investors, who finally began to realize the dangers of entrusting their money with funds that offer daily withdrawals while investing in highly illiquid assets. This realization has turned into a run on the funds, forcing the other large open-end property mutual funds to close their gates, all at virtually the same time. By Nick Corbishley, for WOLF STREET.

The ECB promises to “monitor markets closely.” Then it came out with a new bond buying binge. Read…  European Banks Face Financial Crisis 2, Shares Hit 1988 Lows

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  83 comments for “After Epic “Run on the Funds,” 10 More Real Estate Mutual Funds Shuttered as COVID-19 Batters UK Property Values

  1. Rcohn says:

    I am bearish on real estate , but the rapidity of this collapse is astounding!
    Do think that this will be repeated in the US?
    And will this spread to residential real estate?

    • David Hall says:

      I expect some vacation homes might be offered for sale.

      • S says:

        Funny thing is that number of for sale listings for vacation homes was huge during the peak of the stock market last summer and fall. (I follow the Florida and South Carolina vacation market.) BUT the owners were all holding out for big dollars, or what I call “roping in a sucker”.

        In most markets I saw houses that were purchased two years ago, zero improvements made, and then relisted for sale at 25% over the previous purchase price. And these homes were 20+ years old with the original kitchen and fading roof tiles. Maybe my patience to not buy (and thereby be a sucker) will be rewarded.

    • Wolf Richter says:


      I’m going to write a whole article on your question over the next few days. I have some thoughts. It’s going to be a mess.

      • Shiloh1 says:

        Hi Wolf. Off topic I know, but did you see Wayfair is up big today? Did you buy a couch or something?

        • Wolf Richter says:


          Yes, these kinds of headlines are so funny. Wayfair shares [W] had collapsed by 87% from $173 a year ago to an all-time low yesterday of $22.60. Today it bounced after this gigantic sell-off as some dip-buying algos moved in or whatever, and shares jumped to $27, still down 84% from the peak.

          In terms of the trade: Those who bought last night at $22.60 and sold this morning at $32 had a 40% gain for holding this crap overnight! That’s a great trade in my book. If they failed to sell this morning at the peak, but sold near the close, they “only” had a 17% gain, which is still very good. But if they failed to sell today and are still holding the shares, well, good luck, then :-]

      • joe saba says:

        excellent – I was going to sell ours this summer but will likely hold off
        but nice LOTS might become very attractively priced

        looking forward to your analysis

      • Synergy says:

        I am a real estate agent in Ohio along with the other lines of work I engage in. I work with a number of residential property investors as well as invest myself. I have not seen any new listings come to the market for about 1.5 weeks since the restrictions took effect here. Nor have I seen any price reductions either. Everyone appears to be in wait and see mode.
        Traffic to my website with MLS listings has dropped off by about 40% and that is only over a 2 week period, when it should be going in the other direction during this time frame.
        I have been getting calls about cancelling purchase contracts as well and what are the consequences. I agree is will be a mess.

    • Thomas Roberts says:


      For America we have to consider the bubble bursting and the Coronavirus. The Coronavirus will be very difficult to predict and have some lasting effects “and substantial short term effects”, but, will begin to go away, probably next year. The bubble bursting will require permanent changes to certain aspects of America’s economy, which is compounded based on what other countries do “a big mystery”.

      For England, they are fu**ed, before Brexit they had almost no real economy, little manufacturing, some tourism, not nearly enough, the only thing holding the UK together is finance “for them, basically just corruption money and tax evasion”. Now that they have left the EU, the EU is gonna want that money that flowed through England and England has no leverage or advantages. The UK and the Commonwealth countries are all held together by finance, without all the money flowing, it will begin to fall apart and then the death spiral for England begins.

      • mikey says:

        They still have the city of London which can veto legislation and their network of tax shelter islands which probably have at least one quarter of the worlds money. Well, they manage it anyway. I guess a lot of it is owned by Chinese and Arabs. Still, centuries of money laundering without a loss is pretty hard to beat.

        • Thomas Roberts says:

          It is.

          But, today’s world is very different, between electronic networking, automated computer systems and more; you longer need a bunch of people in London to handle everything. The problem that England doesn’t seem to understand is that they can be bypassed; just skip London and have a contract in the Cayman Islands. That combined with the EU’s ability to pull all their stuff out of England and England playing geopolitics and refusing to give countries back their gold. Why use England? England going forward is simply too populated to be a mostly financial economy. It would be safer, easier, and cheaper to pick a smaller closer tax haven.

        • char says:

          Why use UK controlled tax havens like Jersey Gibraltar, etc. when you can steer that money through European controlled tax havens like Monaco, Lichtenstein, etc.
          You’re also wrong about the City. It can’t veto EU legislation anymore so any tax dodging that uses a method that is not used by any of the EU tax havens will very likely be attacked. Especially now that all the states need money

        • Thomas Roberts says:

          The EU will encourage Monaco and the other EU countries over counties and territories in the UK sphere. It’s not just EU money though, it’s everyone globally. Once, London’s status begins to faulter, the death spiral begins. Even those in England’s Commonwealth, but not under England’s direct control, will probably bypass England, more and more.

          Gibraltar will also likely be a part of Spain in the future.

          Other territories will also be stripped away from England to various countries.

        • Erle says:

          They could always sell the British Virgin islands for something before Hurricane Greta levels the place.

      • Unamused says:

        The bubble bursting will require permanent changes to certain aspects of America’s economy

        Agreed. As in the 1930’s, structural changes would be required to end the coming depression. Unfortunately, the US will not be getting an FDR.

        It is telling that reestablishing even the most reasonable financial regulations have not even been discussed, even while bailouts in the trillions dominate the headlines.

        without all the money flowing, it will begin to fall apart and then the death spiral for England begins.

        Between Brexit and his cov-19 response, Boris has fked up rather royally. Johnson and Farage are very likely to accomplish what the Blitz couldn’t do.

    • UK local authorities (civic councils) have been making highly geared investments into comercial RE.
      From Guardian newspaper:
      English councils went on a massive £6.6bn commercial property spending spree over the past three years, buying office buildings and shopping centres to offset the impact of government funding cuts, the public spending watchdog has revealed.

      The scale of the rush to acquire revenue-generating investments to fund council services has left many local authorities potentially badly exposed in the event of an economic recession or a property crash, the National Audit Office (NAO) said.

      Between 2016 and 2019, councils spent £3.1bn buying office developments, £2.3bn on retail property, including £759m on shopping centres, and nearly £1bn on industrial property – a 14-fold increase on the previous three years.

      • char says:

        For those that don’t know.

        Councils loaned cheap as a state institution and then invested in property to get a higher return so they could spend without raising taxes.This was not done to make the local area better as they rarely invested in their local area. It is not a “Save the local mall” action

        Dutch government institutions did something alike in the late ’90’s and it ended up in tears.

    • sc7 says:

      SoCalJim thinks that this will be EXCELLENT NEWS for real estate! Buy now!

      In all seriousness, stuff I’m hearing from the ground floor from real estate industry insiders is nothing but panic. Sellers making atypically large price cuts, offers falling through, buyer demand completely evaporating. The big problem is, real estate was already peaking, just as speculators and foreign buyers were making exits. Now that shelter buyer demand is dampened, it’s like running up stairs and then the next step isn’t there and you fall through.

      The MBS market still isn’t right, I’m seeing 30 year fixed from 4.625 to 5.125 with no points in many places today.

      • Frederick says:

        Residential real estate peaked in 2006 in real terms in many areas This will create a bloodbath in areas that were already in big trouble and later in the more stable areas

      • SocalJim says:

        sc7, I never said that and that is not my position. Well located real estate is an important part of a portfolio. You always need to hold hard assets and hard assets that have a return is better than gold. What hard asset would you hold?

        This chapter will end in either inflation or deflation. My bet is inflation because of supply line disruption combined with a printing press and shortages. But, I keep the cash position just incase I am wrong and deflation takes hold. So, cash assets combined with real estate works if you want a good return without betting the house. But, the real estate has to be well located in a job rich area such that renters are always available … that is a absolute must. Right now, I feel good with my Boston rentals because of all the new biotech and drug business prospects.

        Odds are this problem will subside when the weather warms because the virus transmission will decrease. So, a smaller virus problem will linger in the summer, but people will go back to work with masks. Airlines, bars, and restaurants will still suffer. Stock market will rally when this unfolds. Then comes the fall. Trump better get a vaccine out there before fall, or the problem comes back big in November. That November problem is the one I am trying to thing through and could require a different set of positions since it could impact the election.

        Bottom line is you need to manage your investments as a portfolio that performs without too much volatility in different scenarios. Otherwise, you will go bust.

        • Jon says:

          Bottom line is: real Estate is different and there would not be any impact to housing prices no matter how bad the economy is doing, so what people are jobless, they still need a shelter.

        • sc7 says:

          @socaljim – only having a little fun, I’m actually glad you’re back as a sometimes contrarian opinion (though sometimes I think you’re almost messing with people)

          That makes a lot of sense to me. As you say, well priced rental property is always a good bet. Rental demand in Boston will never disappear, especially in Boston proper.

          I continue to maintain prices are overvalued, especially in the suburbs. Most don’t pencil out right now for investment properties. I do think this recession will hurt sale prices in Boston, but usually that means upward pressure on rents, which have cooled in recent years and are probably due for a leg up.

          I agree with your concern about a November resurgence, but some data suggests this virus may not be that dampened by warm weather, either. If it comes back in November with a mutation, that will be a devastating blow. Even if not, -24% GDP in Q2 as Goldman is saying is probably enough to set us back years.

          Either way, I don’t see a vaccine developed, approved, and mass manufactured by the fall. I’d love to be wrong on that.


          A little too simplistic. People need shelter, but they also need to be able to pay for it. There have been housing busts and there will continue to be. Usually rents flatten, while home values dip. What’s coming looks more like 1987 than 2008 to me. I’m not one of the “big crash coming” people, but I do see an overdue correction to prices as this will take a lot of buyers out of the market. It’s silly to say “no matter how bad the economy” and “no impact to prices” in the same sentence.

        • char says:

          You forget AirBnB’s. I’ll bet that many will be dumped on the rental market because i don’t think the summer season will be great for those AirBnB’s that target the 2-3 day city trip stays.

    • Jon W says:

      I’m stuck in central London now. Everyone I know is working from home, and all of them say they are surprised how well it is going.

      In six months time when we might be able to go into work again, how many are going to be keen to wake early, climb onboard a horrendously expensive packed train, and trundle back into the city to sit in a tiny windowless desk module and pay through the nose for lunch? Similarly, businesses will look at the eye watering rents they were paying, and staff happy to take pay cuts to not have to come into the office again and reconsider the way things were.

      Sure central London will remain desirable to some folks, but a big shift to the way we live and work is coming, and the rampant rentierism in our major hub cities is likely to be the biggest victim of this change.

      • Jeff T says:

        This is absolutely correct. Remote working will now go mainstream. Government workers who are moving in mass to work remote (home and other places) will begin to stay remote. Office rents could be in trouble over the long term.

    • Jon says:

      This is going to hit hard for residential real estate over time. real Estate is like a titanic unlike stock market and the price decline would manifest after due time.
      But if you ask a realtor, he/she would still see: It won’t impact the real estate price.

      Not use, how can Fed can treat this health issue with helicopter money .

      Keeping all in prayer as the poorest of the poor are the ones most suffering.

      • Synergy says:

        I am a real estate agent (Realtor). This will affect it big time and anyone saying otherwise is smoking some good stuff. I have seen no new listings in my area (in the segments I keep track of) in the last 1.5 weeks. That is unheard of for this time of year.

  2. Morty Mc Mort says:

    Some investors.. did something…

  3. Rock Me Daddy says:

    just fasb-157 it

  4. Iamafan says:

    Wow, Panic buy.
    In the 12:10 PM Outright Coupon Purchase
    the Fed bought 100% of what was submitted.
    Total Par Amt Accepted (mlns) : $15,782
    Total Par Amt Submitted (mlns) : $15,782

  5. Joe says:

    Seems like people have suddenly jumped out of owning worthless computer digits into something that is real.

    • 2banana says:

      Something “real” in this case (real estate) has a monthly alligator to feed.

      Taxes, maintenance, utilities, upgrades, inspections, P/I, etc.

      Not mucho fun when that asset is depreciating…with leverage.

      • RD Blakeslee says:

        Not necessarily. Land in low population density places can be low maintenance.

        • Shiloh1 says:

          The same CBRE as Feinstein’s? Where do I send my share of the bailout money? I just need to find my stash of Forever stamps before they’re no good.

        • pirate says:

          forever stamps were prolly the best investment in the history of investments given when they first came out and what the price of a single stamp was then compared to now…

        • char says:

          Land in low density places often depreciates because the density becomes even less dense. It is also often so cheap that it can’t really be an important investment (say $10k) and transactions are so low that selling it can take years to sell.

      • Frederick says:

        Homeowners insurance is expensive especially if you live in a high risk location Mine doubled in cost from 2004 to 2010

  6. worldblee says:

    Can’t wait for the next update on the most splendid housing bubbles in the US…

    • Wolf Richter says:


      I might not do one until we see the new data show up. This will take months. The Case-Shiller runs one month behind and is a rolling 3-month average. The data that came out at the end of February was for closings that were entered into public records in October, November, and December.

      In March, the housing market got shut down in areas under lockdown. Until the lockdown is lifted, there won’t be any sales data. Then, when it’s lifted and sales start occurring, it will take a while before the data normalizes, and through that time, it will look strange.

      For example, if the lockdown is lifted on May 1, and in May the first sales start occurring, they would likely be entered into public records starting at the end of May and in June – if deals can even be made because the market has to go through price discovery first. Buyers and sellers may be very far apart, and it may take time to bridge the gap.

      So let’s assume we get a good flow of sales entered into public records in July (that’s probably wishful thinking), then the rolling average of July, August, and September data would be the first significant representation of the new housing market. And this data will be released that at the end of November!

      I have no idea how RE indices will handle the shutdown. A flat line for the period?

      • multifamily says:

        You won’t have any sales data but you will definitely have Rental Data. The national luxury apartment market was set to deliver the largest amount of units of any single year of the expansion in 2020. Historically it takes 4 jobs created to lease 1 unit. There will be blood.

      • 2banana says:

        The “lockdown” decrees, so far, are in New York, Pennsylvania and California for “non essential” workers.

        The definition of non essential is vague and loaded with the political leanings of the governors and mayors of those locations.

        This does leave 47 other states where real estate data should be flowing to some degree.

        Plus online real estate transactions, even in lockdown areas.

        • char says:

          First it was North Italy, a day later the whole of Italy, then Spain, then Austria, France, Belgium etc. and now the UK

          I expect the same to happen in the US that within a week or two almost all states are in lockdown

      • Sydney Collin says:

        Anecdotal, I know, but a data point…

        I’ve been helping my parent’s sell their Fremont (SF Bay Area) home. After a week on the market (2/23 – 3/2), we had 13 offers, 11 over the asking price. Escrow is scheduled to close 3/31.

        The buyers haven’t shown any hesitation. All contingencies have been removed, including the house appraised per loan requirements. We’ll be e-filing, since the courthouses are closed per California-wide lockdown.

        • sc7 says:

          Regret will sink in when they realize the gravity of the situation. Remember, most people don’t follow economics that closely. The buyers probably also know it’s too late to reasonably do something, and they probably need somewhere to live anyhow.

          Right now, withdrawing offers are due to either virus fears or down-payment money from stocks that evaporated. When layoffs hit and reality sinks in that we are in recession, things won’t look rosy.

          Your parents may very well have sold at the tip of the peak.

        • SocalJim says:


          Federal money, as well as foreign govt money, is pouring into Boston’s biotech and drug industry like never before. The amount of revenue they an capture is limited to how fast they can grow. Right now, they are hiring anyone who has a half way decent life sciences degree. That is an army of people that need Boston area housing. Since Boston now has the hottest industry in the country, Boston housing will hang in just fine.

        • Sydney Collin says:

          Sc7 –

          Yes, all good points you raise. Ones I’ve considered too.

          The buyer works at a pharmaceutical development company, so no worry of job security, with the race to develop a vaccine for COVID-19. Also, they’d stand to lose a $60K deposit, should they choose to walk away now.

          We’ll see. Crazy times ahead!

        • SocalJim says:

          Sydney Collin,

          More than just a vaccine. Going forward, drug production will be brought back to the US. The lack of competition in “US produced” drugs should result in substantial operation margins for US biotech and drug firms for quite a few years. The combination of those two items should be enough to fuel CFROI … this will also fuel CPI increases.

        • sc7 says:

          @socaljim. We weren’t talking about Boston area housing, but thanks for the re-assurance that housing in my area will be fine!

          No doubt biotech is going to see a boom from this, but it’s a small industry, nowhere near enough to support the housing market across the entire Boston Metro. ~24k work in the entire industry in research roles nationwide. What you are describing may very well put a floor under prices in the most desirable towns, and within Boston city limits, but that’s about it. Those areas were always going to ride this out with minimal impact anyhow. This will not save the suburbs as you approach 95 and beyond if we are headed towards a bust, and it won’t counteract the millions (versus 24k) of employees in other industries being decimated by this recession. I am hearing of layoffs well beyond the service sectors, namely those that provide services to restaurants, etc… these are skilled, white-collar jobs. Let’s not discount the loss of stock value to be used as a down-payment.

          If there’s an influx of cash toward a vaccine, it is temporary, not permanent, and if anything, is likely to result in increased pressure in the rental market for young recent graduates or transient employees. Many of them are already here at the Universities anyhow. I think you are vastly overstating amount of money and people that will be inbound for a temporary crisis (relative to the area’s size), few of which will be looking to take on a 30 year debt for a temporary task. More people on a project does not linearly reduce the time to cure, increased staffing is subject to diminishing returns.

          As I said, several people I know in real estate in the area are not seeing good things. There is not, and will not, be a “hot” housing market during the quarantine, and not after when MA unemployment claims have spiked 1,600% in a week. Several multiples more people have been laid off in MA this week than work in biotech nationwide. I don’t see how that heats up the market at a rate anywhere close to how much it’s about to cool.

          I am starting to think you’re trolling a bit…

          @Sydney Collin,
          That’ll do it. I know someone who is closing on a property near Boston, unfortunately, P&S was signed before things got worse, and it’s a tough pill to swallow seeing money fly out the window on a lost deposit. (Years ago I backed out after a bad inspection, and even then I didn’t like losing the couple hundred). I told her not to worry, in time, be it 3 years, 5 years or 7 years, the property will be worth the same or more, and she will have gained equity.

        • Wolf Richter says:

          Sydney Collin,

          “After a week on the market (2/23 – 3/2), we had 13 offers, 11 over the asking price. Escrow is scheduled to close 3/31.”

          Yeah, ancient history (2/23 – 3/2), and totally obviated by events. That was an eternity ago. Since then, all heck has broken loose. Fremont has been under lockdown since Tuesday morning (3/17). There are no more deals being made and no more homes being shown. The RE industry is shut down.

          I’m not even sure if you can close on the sale during lockdown. I wish you the best.

        • Sydney Collin says:

          We have everything signed & notarized. Since all courthouses are closed with the lockdown, our realtor says they can still do 8am e-recordings to close.

          Of course, that’s the word as of right now. Things could change a lot between now and 3/31.

          Like sc7 said, we’re hoping my parent’s house will close at the peak and they can escape.

          For sure, no bets are sure ones in this environment!

        • char says:

          $60k is a lot of money but not a lot if you a) can’t afford it because you lost your job or b) expect the market to crash hard.

      • Unreal says:

        “In March, the housing market got shut down in areas under lockdown. Until the lockdown is lifted, there won’t be any sales data. Then, when it’s lifted and sales start occurring, it will take a while before the data normalizes, and through that time, it will look strange. ”

        Gee, lockdown real estate activity?

        Japan is having normal activity in the real estate market. Australia is having normal activity and life goes on.

        Simple precautions to prevent the spread of the virus during the sale would more than likely allow that part of the economy to continue as normal.

        I get a kick out of some the idiotic things going on around the world in regards to the current siutation.

        Anybody remember that Spanish cop telling the guy on the beach to go home? Yeah, like he is going to get the virus from sitting on the beach all by himself.

        And then the one from Australia where they stopped the players from giving handshakes and hugs after the match, but players were on the field tackling each other………………

        • Wolf Richter says:


          I think you better get used to the unreal for a while.

          Australia isn’t under lockdown yet. All of California is as of today, and the Bay Area has been as of 3/17. Here, you cannot (should not) even drive or walk to look at a home that you might want to buy.

          You can probably make a deal sight-unseen over the internet, though, if buying homes sight-unseen is your cup of tea. Or you can wait a few months until all this is over, and possibly buy for a lot less the normal way.

        • char says:

          The outbreak in Spain is centered around Madrid. When they closed the schools a lot of people in Madrid thought:”let’s go to our home on the coast”. That is why they closed the beaches who are normally not deserted even though it is off-season

  7. gert7to3 says:

    I had some money in REITs and they have done worse than the market. Now I see why.

    • John Taylor says:

      I’m wondering about when people in high-rent cities will stop making payments. Evictions and foreclosures are suspended during the coronavirus outbreak.

      Many in big city areas spend 50% of their take-home pay on rent … it won’t take long for them to stop paying if their incomes drop dramatically because of shutdowns.

      Combine that with the retail closings and a huge push in both telecommuting and online classes and REITs look dangerous.

  8. 2banana says:

    Anyone remember when London was the hottest real estate market in the world? Like not even a year ago?

    Same with NYC, Vancouver, Sydney, etc.

    San Francisco on deck.

    Yellen bucks found their places to die.

    • qt says:

      All of these places have been dropping like a turd in a well (Ben’s quote) for years. Especially, if you look at the high-end, luxury market. At this point, the Everything Bubble is about to go…

      • Frederick says:

        Wonder how bad the crash will be in the Hamptons I sold my house there in 2015 Taxes and cost of living got out of control and after my divorce I was poor again

    • Paulo says:

      Last week RE showings and sales in Victoria BC were doing just fine and even up. Go figure.

      This is what really gets me. We just had an 8 month forestry strike, workers have been back at work for 5 days, and they are logging and building road again. Why? I have no clue. How can there be new US housing starts in this atmosphere? Logs to China? Not likely. This is starting to snowball.

  9. cb says:

    I own a small position in Oxford Square Capital Corp, ticker OXSQ, NYSE. As of last night it was down over 60%. It now sells for less that a 3 P/E ratio, and has a 37% dividend yield.

    OXSQ aside, which is not a Property REIT, I think REITS are worth taking a look at. With low prices and reasonable debt I might be interested.

  10. Willy Winky says:

    Yep, this is just a blip, a recession.

    The sky is NOT falling.

  11. Petunia says:

    I was checking Zillow in Florida for the last few days, lots of listings occupied by tenants for sale. I got the impression the REITs might be selling. Does anybody know if this is the case?

    • Frederick says:

      I’m sleeping well being out of the US real estate market or should I say bubble The gold under my pillow is comforting No counterparty risk with that and of course my wife’s wedding gold which has tripled in value since 2006

    • Wolf Richter says:


      That’s an interesting observation. It also implies that the REITS are not trying to sell parts of their portfolio to another investor in one piece, but each home individually to retail buyers.

      • Beardawg says:

        Petunia / Wolf

        This in an interesting observation. Though anecdotal, my principal source of income is low end Midwestern rental homes. I remodel, put in a tenant and sell to investors via seller-finance loans. I was braced for a freeze, but this investment “model” produces 20%+ annual returns and most tenants are HUD supported (their employment is a non-issue). Interest in my tenant-occupied remodeled cashflowing homes has not waned (I list with Zillow, not MLS), and I have 3 pending full price offers on one right now when I am usually happy to get a solid offer within 30-40 days on a normal listing.

    • Jon says:

      may be a lot of mom and pop owners trying to offload ?
      We do have lot of biases when it comes to drawing inferences:
      My friends who own properties think that real estate in san diego is impenetrable when it comes to price decline. They have their own theory which are partially true.

      I do have properties in san diego and was thinking about moving to a bigger place because of my needs but I ate some losses in stock market and now suddenly everything is topsy turvy for me w.r.t job security..

      I don’t want to buy a house in this climate when the whole economy is shuttered and so much uncertainity.

  12. gorbachev says:

    OXSQ.Pays out 46 mil.makes no profit and sells 65 mil.It will go out.

  13. Bobby Dents says:

    Remember when US Housing starts surged in December/January, especially Apartments??? They knew then. Everything was a ramp to get ahead of the shutdowns. With apartments, it was to lock in large chunk of the year’s production.

    The UK is a mess and probably will dissolve. I see Scotland shutting its borders down soon. Maybe everybody sick in Europe can be transported to England to pay back its debts.

  14. historicus says:

    Your story on the REIT that cycled through $2 Trillion in REPO money spins in my head.
    The FED kept them afloat IMO….and if they did, what do you think of that?
    IMO, the constant…CONSTANT appeasing of wobbly entities with Fed help made some of this worse.
    Why did the Fed feel like they had to save everyone , everything?
    Well, now they do. But doing so at market highs is one thing, systemic saving is a more noble venture.

    • Wolf Richter says:

      That mortgage REIT I was talking about (AGNC): since Feb 19, shares have plunged nearly 50% to an all-time low. Just fell off a cliff.

    • Unamused says:

      Why did the Fed feel like they had to save everyone, everything?

      You’re thinking about them as banks. You need to think of them as dominoes.

      Too much information. Sorry.

  15. Ricardo says:

    Go to now, you rich men, weep and howl for your miseries that shall come upon you.

    • Unamused says:

      I think something like these are what you’re looking for:

      Woe unto them that call evil good, and good evil; that put darkness for light, and light for darkness; that put bitter for sweet, and sweet for bitter!

      Isaiah 5:20

      Therefore, behold, I will proceed to do a marvellous work among this people, even a marvellous work and a wonder: for the wisdom of their wise men shall perish, and the understanding of their prudent men shall be hid.

      Isaiah 29:14

      My own people have been aiming these at me:

      Therefore the prudent shall keep silence in that time; for it is an evil time.

      Amos 5:13

      O that ye would altogether hold your peace! and it should be your wisdom.

      Job 13:5

      The funny thing is, they’re really not all that devout. Just overeducated.

  16. RedRaider says:

    Wolf, you don’t realize how lucky tou are to have this blog. It’ll keep you from going stir crazy during lockdown :-)

  17. Implicit says:

    Algos purchase 80% of the stocks, and many of the Companies that use the algos have balanced portfolios. When they decide to sell, RE ETFs like IYR get hammered too. Everything gets sold. Every aspect of the economy is affected, or infected. Company bond yields risng, as Wolf points out, will cause more liquidity problems.

    Its the reverse of the bubble: everything went up until there were no more shorts left (use to hear that all the tim). Well now the opposite is true. It won’t stop going down until there are no more short to mid term buyers left. Trying to keep some stash available, good luck.

  18. Old-school says:

    Read a good 60 page investment analysis on crisis investing. If done correctly investing at approximately the right time and in the right things it is the most profitable time to invest. Reasons are pretty simple as assets are sold below long term value because of fear and because of financial distress.

    As in all things investing, there are no 100% guarantees but it is the time that there is the biggest reward to risk taken.

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