Business

The Fed's man-made housing market recession hit so hard that 4 real estate titans just lost their Fortune 500 status

Not only did rock bottom interest rates during the pandemic spur a refinancing bonanza, but with the help of remote work and tight inventory, they also heated up the housing market in a way that hadnt been seen since the bubble. Borrowers simply couldnt pass up on 30-year fixed mortgages with a rate of 3%or in some cases 2%. Few companies, of course, benefited more from that housing boom than Rocket Companies, which during the roughest part of the lockdowns did $5 billion in sales in the second quarter of 2020 compared to $1.6 billion in the same quarter in 2019.

Thats behind us now: The mortgage rate shock created by the Federal Reserves rate hiking campaign has set off a housing market recession. While national home prices remain fairly stable, housing activity hasnt been so lucky. Residential fixed investment, otherwise known as housing GDP, has fallen for four straight quarters, while mortgage refinance applications and mortgage purchase applications are down 45% and 31%, respectively, on a year-over-year basis.

The Feds man-made housing market downturn has been so sharp that when the Fortune 500 list was unveiled on Monday, it was missing four major real estate companies, which had been on the list last year. That includes Rocket Companies (which was No. 282 on the Fortune 500 list unveiled in June 2022), Zillow (No. 424 last year), Anywhere Real Estate (No. 427 last year), and Compass (No. 495 last year).

Rocket Companies, the parent of Rocket Mortgage (formerly known as Quicken Loans), has clearly taken the biggest hit among the four real estate titans that dropped off the Fortune 500 list (a list of the 500 biggest publicly traded U.S. companies by revenue). Over the past year, Rocket Companies' revenue has fallen -54%, compared to -24% at Zillow, -6% at Compass, and -14% at Anywhere Real Estate.

Rocket Mortgage, which has been hard hit by the decline in the purchase and refi markets, hasn't just given up its pandemic sales gainsit has even fallen below its pre-pandemic revenue figures (see chart above). Not to mention, it's losing money right now, including a $493 million loss in Q4 2022 followed by a $411 million loss in Q1 2023.

In order to juice sales, Rocket Mortgage recently went as far as to underwrite a mortgage product that requires qualified and eligible mortgage borrowers to only put down 1%. That type of creative lending speaks to how challenging this macro environment is right now for mortgage lenders.

Just because a real estate/housing firm remained on the listor even climbeddoesn't mean it's all sunshine and roses right now. Look no further than Opendoor, which climbed 159 spots this year to No. 266 after ramping up its home flipping business in the first half of 2022. Only it turned out that Opendoor had loaded up on too many Phoenix, Bay Area, Reno, Las Vegas, and Boise homes just as those Western markets were slipping into full-blown home price corrections last year. That might explain why Opendoor shares are trading at just $2.37 as of Monday's close, which is far below its 2021 high of $34.

Of course, there are some bright spots for housing. Major homebuilders like Lennar, which climbed 12 spots on the Fortune 500 to No. 119, and D.R. Horton, which climbed 4 spots to No. 120, have seen their business outlooks improve. PulteGroup (No. 259), NVR (No. 376), and Toll Brothers (No. 382) also climbed up a few spots this year.

While activity levels in the existing/resale housing market remain frozen, the new construction market has seen a remarkable resurgence this spring. As mortgage rates spurred a housing downturn last year, builders like D.R. Horton and Lennar had the breathing room to reduce margins (i.e. cutting house prices and/or aggressive rate buydowns) in pursuit of attracting priced out buyers. And it's working: Builder cancellation rates have normalized, while new home sales are once again on the upswing.

Want more housing data? Follow me on Twitter at @NewsLambert.

Cboe Digital receives approval to expand crypto futures products for Bitcoin and Ether, calls it 'a win for the US industry'

On Monday, the U.S. Commodity Futures Trading Commission announced it approved an application from Cboe, one of the largest U.S. options exchanges, to offer margined futures contracts for Bitcoin and Ether.

At a time when segments of the U.S. crypto industry are retreating offshore amid accusations of regulation by enforcement, Cboe Digital president John Palmer described the development as a step forward during a time of uncertainty.

Were seeing expansion in the U.S. framework, not contraction, he told Fortune in an interview on Monday. This is a really good representation of that hard work across both sides of the fence, both on the Cboe Digital side but also on the regulator side.

Futures are a type of derivatives contract, where customers speculate on the price movements of assets like Bitcoin and Ethera common tool for institutional investors, but one that is growing more popular with retail investors, especially in the crypto space.

While Cboe Digital had previously offered crypto futures contracts, it did not allow margin trades. In practice, this has meant traders have had to post the full price of a Bitcoin to buy or sell futures contracts. With margined contracts, they only need to post a fraction initially, requiring less money upfront and allowing strategies to potentially earn higher returns on the capital deployed.

While other platforms, including the CME Group, also offer margined futures contracts for crypto assets, Palmer said that Cboes new approval is unique because it also offers spot trading under the same entity, where users are trading on the current price of assets like Bitcoin and Ether.

As he explained, this arrangement can be advantageous for traders like market makerswho provide liquidity to exchangesas well as other customers looking for greater efficiencies for other strategies like basis trading, where users look for price differentials between spot and futures contracts.

A departure from FTX

As Palmer explained, Cboes model bears a stark contrast to a proposal by the failed crypto exchange FTX, which sought approval for a different approach with the CFTC for futures contracts. With Cboe, users cannot buy futures contracts directly from the platform, but must instead go through futures commission merchants, or FCMsintermediaries who buy or sell contracts on behalf of clients.

In a 2022 application, FTX sought to cut out the middleman and allow customers to post margin directly to FTX without any brokers. The process, known as disintermediation, was widely criticized by players in traditional finance for giving easier access to risky investment products for retail investors and placing more responsibility in the hands of platforms.

This is a very traditionally focused model, Palmer said about the Cboe approach. That model has stood the test of time.

In a statement released after the approval of Cboes approval, CFTC commissioner Christy Goldsmith Romero agreed with the sentiment, citing Cboes more than 50 years of experience operating exchanges.

The proposed FTX model was never adopted by the Commission, but it put at risk customers bankruptcy priority, other customer protections, and financial stability, she said.

Cryptos U.S. future

Cboes approval comes at a time when crypto companies including Coinbase and Gemini are moving offshore to launch derivatives exchanges. While Palmer pointed out that their main motivation is to offer a popular kind of crypto derivatives contract still not approved domestically called perpetuals, he lauded regulators work in the U.S.

From our perspective in the U.S., whether there is or isnt regulatory clarity regardless of who the regulator is, we feel very comfortable working with them to continue to grow the asset class responsibly, he told Fortune. He described the approval as a win for the U.S. industry.

Cboe Digital plans to launch its margined futures contracts for Bitcoin and Ether in the second half of 2023.

Man suing Tesla for being a 'hotbed for racist behavior' wants to add 240 black colleagues to his incendiary complaint

A Black former assembly line staffer at Tesla is moving to add almost 240 other workers to his 2017 lawsuit in which he called the electric-car makers production floor a hotbed for racist behavior.

Marcus Vaughn says class-action status is appropriate to address Teslas failure to stop a pattern and practice of race discrimination and a hostile work environment at the factory in Fremont, California.

His request in a court filing Monday is backed by sworn statements from other Black former employees and contractors who claim they too were offended by racist graffiti sprawled in common areas and the use of slurs in the workplace, including the n-word, boy and monkey.

Tesla didnt immediately respond to a request for comment. Companies typically try to block lawsuits from winning class-action status, which allows plaintiffs to pool resources and exert greater leverage in settlement negotiations.

If a state court judge in Oakland agrees to let Vaughn broaden the case, it would raise the stakes for Elon Musks company. A jury in San Francisco awarded an individual worker $3.2 million in damages in April over similar discrimination claims. Owen Diaz won a $137 million jury verdict in 2021 in the original trial in his case, but asked for a redo after the judge slashed the damages award.

Tesla initially responded to Vaughns suit with a blog post titled Hotbed of Misinformation, denying wrongdoing and saying the company had fired three people after probing alleged incidents.

A female worker who was fired in 2018 said in a court declaration that a coworker told her she has monkey toes, while another called her Nicki Minaj, even though her only resemblance to the popular rap singer was that they are both Black women.

Another worker who quit in 2020 said he was told to keep my head down and mind my business when he complained about the use of offensive language and unfair treatment of Black employees to a White supervisor.

A third worker said he continued to feel unwelcome and unsafe after his verbal complaints over being called the N-word were ignored.

Tesla has been hit with a number of high-profile suits including one filed by the state of California in February of last year over its treatment of Black employees and contract workers at the Fremont plant.

In 2017, Vaughn worked from April to October on the production floor, first as a contractor through a staffing agency before he was hired by Tesla in August.

A hearing on his request for class status is set for July 14.

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'Cheers' bar sells for $675,000 at an auction that also included Adam West's Batman's costume and Johnny Carson's stage set

The bar from the television series Cheers sold for $675,000 at auction over the weekend, garnering the highest bid among the nearly 1,000 props, costumes and sets from classic TV shows offered up from a collection amassed by one man over more than three decades.

Heritage Auctions said that the items sold during its three-day event that wrapped up Sunday in Dallas brought in over $5 million. James Comisar has said that after his dream of creating a museum to house his collection failed to come together, it was time for the pieces to go to fans to enjoy.

The auctions success confirmed what I have always known: that television characters are cherished members of our extended family and that their stories and our own are inseparable, Comisar said in a news release from the auction house.

The Batman and Robin costumes worn by Adam West and Burt Ward in the 1960s television series went for $615,000, while the set where Johnny Carson hosted guests on The Tonight Show went for $275,000, Heritage Auctions said.

The set from All in the Family which included Archie and Edith Bunkers living and dining rooms and stairwell sold for $125,000, and the auction house said the same buyer also made the winning bid of $250,000 for the chairs used by the TV couple in the shows ninth season.

The couples original two chairs from the show reside in the Smithsonian Institutions National Museum of American History. Comisar said that those thrift shop chairs were given to the museum when it was thought that the show would end after its eighth season, but when it continued for a ninth, replicas were made at great cost. Those replicas which were the chairs offered at auction were then used in the shows last season and in its continuation, Archie Bunkers Place.

Exercise canhelp fight off' type 2 diabeteseven if it runs in the family.5 types of workouts to try

Type 2 diabetes may run in your family, but that doesnt mean youre doomed to live with the disease.

Middle-aged U.K. residents who exercised moderately or vigorously for an hour or more a day were 74% less likely to develop the potentially debilitating condition than those who were sedentary, according to a study published Monday in the British Journal of Sports Medicine.

The same held true even among those who were genetically predisposed to the disease, which tends to run in families.

Whats more, those who were at high genetic risk of developing the metabolic disorderbut who exercised often, and at high intensitydeveloped the condition less frequently than those who were at low genetic risk but generally inactive.

We are unable to control our genetic risk and family history, but this finding provides promising and positive news that through an active lifestyle, one can fight off much of the excessive risk for type 2 diabetes, Melody Ding, an associate professor at the University of Sydney School of Public Health in Australia, said in a news release about the study.

The condition runs in Dings family, and her father, in his 60s, was recently diagnosed with itmaking her work on the study even more meaningful.

As an already active person, I now have extra motivation to keep this active lifestyle, she said.

How to reduce type 2 diabetes risk through exercise

Experts tend to recommend at least 30 minutes a day of physical activity, five days a week, to ward off type 2 diabetesa major cause of blindness, kidney failure, heart attacks, stroke, and lower limb amputation.

Researchers found, however, that 68.4 minutes or more a day was the magic number for most study participants. The intensity of the exercise was also key, they found. How can you tell if your exercise is vigorous enough to be protective?

According to Ding, the right kind of exercise will:

get you sweating
leave you breathless to some degree
Examples include:
brisk walking

Examples include:

running
aerobic dancing
cycling uphill or at a fast pace
heavy gardening, which may involve digging

Added Mengyun Luo, a doctoral degree candidate at the University of Sydney and lead author on the study: If you have a family history of type 2 diabetesor even if you donttoday is the day to start being physically active.

Tim Cook says Apple's new mixed-reality headset is 'revolutionary,' but analysts say wait and see

Welcome to Apples new (mixed) reality.

The company on Monday made the highly-anticipated unveiling of its VisionPro headset that can transport users into a movie theater or replay a fond, recorded memory of a childs birthday partyall without having to leave their living rooms. The new headset catapults the tech giant into a new product line its first addition in years that it hopes will be a hit like the iPhone and Apple Watch.

But its also a huge gamble for Apple, which must overcome what is so far a lethargic market for virtual and augmented reality headsets. Other than video game enthusiasts, the market for bulky and, for some people, off-putting ski goggle-like devices has turned out to be relatively small despite billions of dollars spent by companies like Facebook to grab an early lead against rivals.

Apple hopes to shake up the market with its well-known design flair by making its headset sleek and adding high-end features, like the ability to navigate through virtual reality by using only hand movements and voice commands. Apple has used the playbook previously, to great success, with the iPhone, iPad, and Apple Watch: Enter a market relatively late with a product that is stylish and easier-to-use than established rivals, and charge a premium.

Indeed, Apple will have to overcome a starting price tag for the VisionPro that far exceeds the competition, at $3,499. Thats seven times more than Metas Quest 3 headset, which is around $500, and 75% more than the high-end Varjo Aero, which costs $2,000.

According to the International Data Corporation (IDC), more than 8.5 million VR headsets were sold in 2022. Nearly 80% of those devices were Metas VR headsets. Meanwhile, only about 278,000 AR headsets were sold.

Analysts arent expecting a major blockbuster, at least to begin with.

Vision Pro is something that investors will need to try before they believe. There are so many questions I have, that may take months to answer as content and applications build, Gene Munster, a longtime Apple analyst at Deepwater Asset Management, wrote on Twitter.

Similarly, Daniel Ives, a managing director at Wedbush, predicted that Apple will only sell 150,000 headsets in the first year of their release and take in negligible revenue from the product. He blamed the low sales largely on the devices high cost and added the first version is aimed mainly at outside developers, who the company hopes will create apps and other whiz-bang features for the device, rather than mainstream consumers.

Long term, however, Wedbush was optimistic about the headset, predicting Apple will sell roughly 1 million headsets after an expected price drop in the following year.

Not surprisingly, Apple CEO Tim Cook had nothing but good things to say about the VisionPro. Playing the role of chief pitchman during Apples WWDC conference for developers on Monday, he called the headset revolutionary and crowed that it was years in the making.

Its the first Apple product you look through, not at, Tim Cook told the audience, drawing a contrast with all the screen-focused products that Apple is known for.

Headsets from other manufacturers have required using handheld remotes to navigate and interact with the devices. In contrast, users of VisionPro manipulate and maneuver what they see by exclusively using their eyes, hands, and voice.

Users can swim underneath the surface of the ocean and seemingly project a movie into any space. It can also project a users Mac computer into any space, allowing users to write an email or edit a video with what appears to be a much larger screen.

VisionPro uses Apple technology and software to encode the users face into a digital persona and create a new experience in Facetime, putting users virtually face-to-face with people far away. Headsets before VisionProdescribed in Mondays presentation as just you and your contenthave sometimes been described as anti-social. Virtual reality devices remove the user from the real world with other people and vice versa. Apples solution to this is a feature called Eyesight that automatically detects when people are around. If so, it makes the eyes of the person wearing the headset visible to the others so it doesnt seem like theyre in their own world.

While the headset functions independently, a battery pack dangles from the back of the headset.

During the presentation, Disney CEO Bob Iger came on stage to announce a partnership with Apple. The Disney + streaming service will be available on the device, while other tie-ins appeared to be under consideration, such as swimming alongside a sea turtle in a National Geographic documentary or interacting with characters and scenes from Disney and Marvel movies.

Apple didnt give a specific date when VisionPro will be available. It only said that it will be sometime early next year.

The Fortune 500 is dominated by just 50 companies that raked in nearly half of all earnings

The 69th annual Fortune 500 list released on Monday is packed with interesting data about the latest trends in American industry. Fortune 500 companies generated record revenues of $18.1 trillion in 2022, the number of Black CEOs hit an all-time-high, 15 companies joined the list for the first timeincluding Airbnb and Lululemonand Texas had another standout year, boasting the most Fortune 500 corporate headquarters of any state.

But one of the most fascinating trends from the latest Fortune 500 list is the clear and increasing consolidation of the economy. The top 50 companies in 2022s Fortune 500 accounted for more than 48% of total revenues from the list and 45% of total earningsand they also employed nearly 40% of all workers.

Meanwhile, the top 25 companies on the Fortune 500 produced roughly 35% of total revenues and 30% of total earnings. And the top 10 firms alone accounted for $3.7 trillion, or roughly 20% of total revenues.

Consolidation in American industry is nothing new. Data from S&P Global Market Intelligence shows that in 91 of 157 primary industries, the five largest U.S. companies by revenue now account for 80% of their industries total revenue. Thats up from 71 industries in 2000. From crop producers and meatpackers to banks and waste management firms, consolidation has been widespread for decades, and well researched. But lately, the trend has been supercharged in some areas as rising interest rates and stubborn inflation weigh on smaller firms.

Leading venture capitalists, for example, have warned that they are seeing crushing consolidation across multiple industries as banks pull back on riskier lending. And regional banks are facing their own issues after the collapse of Silicon Valley Bank and Signature Bank in March led many depositors to flee smaller institutions for large firms where their deposits may be better protected by federal insurance.

Even the White House has taken note of American businesses increasing consolidation. President Biden signed an executive order in 2021 that was designed to increase competition in American industries. His administration cited data that shows over 75% of U.S. industries are dominated by a few large companies that now control more of the business than they did twenty years ago.