— China New Home Prices Fall for Second Month; Citadel Buys Bankrupt Trucking Firm’s Loans; EY Rejects TPG Breakup Proposal; US Single-Family Housing Starts Surge; Amazon May Add Seller Fees; Golf Company Stock Crashes After IPO Surge; US Mortgage Rates Climb to 7.16%
1. China New Home Prices Fall for Second Month
According to data released today by the National Bureau of Statistics, new home prices in 70 Chinese cities fell 0.23% in July compared to the previous month, while second-hand home prices declined by 0.47%.
A research director at China Index Holdings said the real estate market has not yet recovered in August and will likely remain sluggish in the short term, as local policy support takes time to show results.
In July, total residential sales in China plunged 43% month-over-month to $90 billion, marking the worst monthly sales in six years.
Falling home prices are particularly unfavorable for major developers such as Country Garden.
______
2. Citadel Buys Bankrupt Trucking Firm’s Loans
Sources revealed that a Citadel affiliate recently purchased $485 million in debt from bankrupt trucking company Yellow Corp., previously held by Apollo Global Management and other senior creditors.
Yellow, on the brink of collapse, had been seeking bankruptcy financing to maintain liquidity.
Previously, Apollo and other creditors had offered $142 million in debtor-in-possession (DIP) financing, but after filing for Chapter 11 bankruptcy, Yellow found cheaper funding options.
Reportedly, Apollo’s proposed loan carried a 17% interest rate and high fees.
______
3. EY Rejects TPG Breakup Proposal
In July, private equity firm TPG proposed to acquire and break up the auditing division of Big Four firm EY (Ernst & Young). According to an internal email to partners today, EY will reject TPG’s proposal.
EY CEO Carmine Di Sibio wrote that the firm regularly receives breakup proposals from private equity, and TPG’s offer was merely an expression of interest without follow-up negotiations.
Supporters of the breakup argue it would allow both audit and consulting divisions to grow faster and eliminate conflicts of interest.
EY believes a takeover by TPG or other private buyers would significantly dilute partner equity.
______
4. US Single-Family Housing Starts Surge
The U.S. Department of Commerce reported that single-family housing starts in July rose 6.7% from June, to a seasonally adjusted annual rate of 983,000 units.
Kieran Clancy, an economist at Pantheon Macroeconomics, wrote that due to a shortage of existing homes, buyers are shifting to new homes, boosting both sales and prices.
Last week, the 30-year mortgage rate rose to 6.96%, nearing November’s 20-year high of 7.08%.
In Q2, the average mortgage rate on existing loans was 3.9%.
______
5. Amazon May Add Seller Fees
Bloomberg reports that starting in October, all sellers on Amazon who do not use its fulfillment service will be charged an additional 2% fee on top of the existing 15% commission.
Amazon says the new fee is to help cover the costs of maintaining its logistics infrastructure.
Currently, Amazon has over 2 million sellers on its platform and commands 37.6% of the U.S. e-commerce market—six times more than second-place Walmart.
With the U.S. FTC preparing to file an antitrust lawsuit against Amazon, this new fee policy has come as a surprise.
Many sellers believe the move is coercive and monopolistic.
______
6. Golf Company Stock Crashes After IPO Surge
Today, shares of $400 golf putter maker Sacks Parente Golf Inc. plunged 83%.
On Tuesday, the company went public and its stock skyrocketed 624%, marking the strongest IPO performance in the U.S. in 2023.
Today’s crash erased most of yesterday’s gains, though shares remain above the $4 IPO price.
Sacks Parente now has a market cap of $72 million, despite only $190,000 in revenue last year—an extremely high valuation multiple.
By comparison, the more mature Topgolf Callaway Brands has a $3.1 billion market cap and nearly $4 billion in annual revenue.
The wild volatility highlights Sacks Parente’s “meme stock” traits.
______
7. US Mortgage Rates Climb to 7.16%
According to the Mortgage Bankers Association (MBA), the average 30-year mortgage rate in the U.S. rose to 7.16% during the week ending August 11, matching the highest level since 2001.
High interest rates create two major pain points for the housing market: homeowners with low-rate mortgages are unwilling to sell, while buyers face limited inventory and rising borrowing costs.
James Knightley, chief economist at ING, said that both inventory and demand for existing homes are falling, which explains why home prices are still steadily rising.
The mortgage application index has now declined for five straight weeks and hit its second-lowest level since 1995.
______
This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.