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Swimming in cash from an unexpected budget surplus and federal stimulus money, California is planning rent forgiveness on a scale never seen before in the United States, the New York Times reported. A $5.2 billion program in final negotiations at the State Legislature would pay 100 percent of unpaid rent that lower-income Californians incurred during the pandemic and would be financed entirely by federal money. The state is also proposing to set aside $2 billion to pay for unpaid water and electricity bills. When California became the first state to shut down its economy last year, Gov. Gavin Newsom predicted dire shortfalls in the state’s budget. But a year later, the state finds itself with so much money that it is poised to not only cover 100 percent of unpaid rent for low-income tenants, but also to give an additional $12 billion back to taxpayers, by sending state stimulus checks of at least $600 to millions of middle-class Californians. The state’s separate rental relief program would be available to residents who earn no more than 80 percent of the median income in their area and who can show pandemic-related financial hardship. In San Francisco, a family of four would have to earn less than $146,350 to qualify. California is not the only state flush with money. At least 22 states that had unused pandemic relief money and that had trimmed their budgets anticipating fiscal challenges have now found themselves with a surprising surplus in revenue. Idaho is on track for a record-breaking $800 million surplus at the end of this month, while others like Oklahoma, Utah and Washington reported similar budget increases. And while some states haven’t yet decided how to spend the money, others are funneling the cash into education, construction and reviving local arts.

Numerous reports arguing that the Federal Reserve’s unprecedented monetary stimulus has unleashed a wave of cheap money that’s resulted in an army of undead corporate entities. Companies that should have expired in the Covid-induced economic crisis have instead been able to reanimate and survive by borrowing billions in cheap money from undiscerning investors. In doing so, the suggestion is that they’re sucking credit away from ‘good’ businesses and sapping productivity from the economy overall. It’s fun and relatively easy to mount arguments that central banks are distorting markets and creating literal monstrosities. But in the case of zombie companies, it might also just be wrong, according to a Bloomberg News commentary. New analysis from Michael Puempel at Goldman Sachs argues that creative destruction is alive and well, at least in the U.S. market for junk-rated bonds. Rather than adding to the amount of zombies in existence, the chaotic events of 2020 have instead wiped a chunk of them out. By Goldman’s calculations, the amount of junk-rated debt issued by zombie companies has dropped to its lowest level since 2009 thanks to a combination of defaults and central bank stimulus that has helped reduce borrowing costs and shift high-yield companies into the investment-grade bracket. Zombie debt fell from $70 billion at the end of 2019 to just $30 billion at the end of 2020, Goldman says. In fact, the picture looks even better below the headline number as the vast majority of zombie debt now comes from just a handful of companies. The single-largest issuer accounted for a third of the entire zombie total at the end of 2020, according to Goldman’s estimates. Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

U.S. home prices in May experienced their biggest annual increase in more than two decades, as a shortage of properties and low borrowing rates fueled demand, the Wall Street Journal reported. The median existing-home sales price in May topped $350,000 for the first time, the National Association of Realtors said Tuesday. The figure was nearly 24% higher than a year ago, the biggest year-over-year price increase NAR has recorded in data going back to 1999. Sales prices have been climbing sharply since last summer, when lockdowns related to the COVID-19 pandemic eased across the country and many people rushed to find more space and bigger homes. Others working remotely seized on the chance to move to a less expensive city. The price increase is contributing to a slowdown in the pace of home sales. Existing-home sales fell 0.9% in May from April, marking the fourth straight month of declining sales, NAR said. Sales are also slipping because there aren’t enough homes on the market to meet demand, say economists and real-estate agents. Homes that are for sale are moving quickly. The typical home that sold in May spent 17 days on the market, matching the record low reached in April, NAR said. Buyers with limited cash for down payments are struggling the most to compete. Just over half of existing-home buyers in May who used mortgages put at least 20% down, according to a NAR survey.

Krispy Kreme Inc. is targeting a valuation of nearly $4 billion in a U.S. initial public offering, according to a regulatory filing on Tuesday, as the donut chain aims a return to the stock market to capitalize on the record capital markets activity, Reuters reported. Known for its iconic glazed donuts, the company plans to sell about 26.7 million shares priced between $21 and $24 per share, the filing showed. At the upper end of the price range, it would raise about $640 million. Krispy Kreme's listing plans come at a time when the U.S. IPO market is witnessing unprecedented levels of activity, with companies having already raised around $171 billion, according to data from Dealogic, scorching past last year's record of $168 billion. The donut seller had confidentially filed with regulators in early May, which revealed a surge in revenue in the first quarter of 2021, driven by rising demand for sugary snacks during the pandemic. Krispy Kreme opened its first store in North Carolina in 1937 when it started selling doughnuts in local grocery stores. It first went public in 2000 but its unit had to file for chapter 11 bankruptcy in 2005. It sold 1.3 billion donuts across 30 countries in fiscal 2020, capping the highest level of sales in the brand's history, with net revenues of $1.1 billion.

The Consumer Financial Protection Bureau (CFPB) in coming weeks will adopt a rule requiring mortgage servicers to give struggling homeowners until next year to resume repayments, but is expected to carve out some groups of borrowers following industry pushback, Reuters reported. The CFPB in April proposed, among other measures, a new review process that would generally prohibit mortgage servicers from starting a foreclosure until after Dec. 31, 2021. The rule will throw a lifeline to hundreds of thousands of homeowners due to exit COVID-19 mortgage holiday or "forbearance" programs in coming months. The CFPB plans to finalize the rule and make it effective before the end of August, but has agreed to carve out certain groups of borrowers after the industry said that the proposal was too broad and beyond the CFPB's legal remit. A CFPB spokesperson said the agency is working on finalizing the proposal but did not comment on what exclusions had been agreed to.

An estimated 22 million people in the United States live in mobile homes, long pitched as an affordable path of homeownership to the working poor, people on fixed incomes and retirees, the New York Times reported. But banks won’t often lend to mobile home owners, partly because the loan amounts are too small to be profitable and because the federal government doesn’t typically guarantee those mortgages. Instead, the mobile home financing market is dominated by five lenders, including 21st Mortgage and Vanderbilt Mortgage — two units of Clayton Homes, a Berkshire Hathaway business. The pandemic hit owners of mobile homes especially hard. In August, the Urban Institute, an economic and social policy think tank, reported that 35 percent of mobile home owners had worked in industries that lost the most jobs during the pandemic. But government efforts to protect them have been patchy. Early on, federal housing agencies instructed mortgage firms to defer payments for struggling borrowers, but many mobile home owners were not covered by those guidelines. The $1.9 trillion American Rescue Plan Act, signed into law in March, included $10 billion for a Homeowners Assistance Fund, which earmarks money for the most vulnerable homeowners facing foreclosure. State officials lobbied the Treasury Department to make sure some of that money goes to residents of mobile homes. Treasury is expected to release new guidance soon on how the money can be spent. In the meantime, owners of mobile homes have had little choice but to rely on the good graces of the dominant financing firms.