Stock Markets Drift Lower in a Bad Sign for Wall Street

European stocks open lower despite a strong day in Asia.

Major European markets opened lower on Monday despite a moderately strong day in Asia and a booming Friday on Wall Street.

Stocks in Britain, France and Germany were down, though by less than 1 percent, in morning trading. The sluggish performance came after markets in Japan and Taiwan rose more than 1 percent, leading a rally in the Asia-Pacific region. Futures markets signaled that Wall Street would open slightly lower.

Further demonstrating investor indecision, prices for U.S. Treasury bonds were mixed during early trading.

Stocks got a boost on Friday after U.S. jobs figures came in much stronger than expected. But investor worries seemed to return on Monday. Global stocks have risen strongly in recent days on government stimulus efforts and signs of recovery in some of the places hit hardest by the coronavirus pandemic. Some investors now wonder how long governments will be willing to give the global economy a push, and how long it will take for the world’s growth engines to come back to full speed.

Something remarkable is percolating in the commercial real estate market: Investors may end up losing millions in tax savings on gains from the sale of their properties because of the coronavirus pandemic.

Like-kind real estate exchanges, also known as 1031 exchanges (after the provision in the Internal Revenue Code), allow investors to sell a commercial property and pay no tax on the gains as long as the money from that sale is reinvested in other real estate. It could be a similar building, land or even air rights.

To reap the benefit, real estate investors need to identify a replacement property 45 days after the sale of the original property and close on the purchase within 180 days. If the criteria are met, the investors can defer taxes on the gains from the sale of the property. The deferral can extend until the investor’s death, at which point the capital gains tax is wiped out.

If the criteria are not met, the investors face not only an enormous tax bill for the gains but additional taxes for deductions taken while they owned the building. That can amount to millions of dollars for some properties.

As lockdowns complicated closing deals, the real estate industry lobbied the Treasury Department to get extensions on those dates. But once the relief was granted, deals began to fall apart.

Mortgage rates may be appealingly low, but people shopping for a new home this spring face a challenging market.

Demand, which was pent up during coronavirus stay-at-home orders, and a dearth of homes for sale are keeping prices high and setting off bidding wars in some areas as states continue to reopen for business. Some buyers may also find it tougher to qualify for mortgages, as lenders require higher credit scores and bigger down payments in response to higher unemployment and economic uncertainty in the pandemic.

Nationally, the median price for a home, excluding new construction, was about $287,000 in April, up more than 7 percent from a year earlier, the National Association of Realtors reported.

Now, with many states lifting restrictions on home tours, the housing market is reawakening. Shoppers are feeling more comfortable visiting properties: About two-thirds of people who attended an open house within the past year said they would attend an open house now “without hesitation,” a separate survey from the Realtors association found.

But some sellers remain cautious. They want to show homes by appointment only, and they want offers from serious buyers who have been preapproved for financing, said Lawrence Yun, chief economist with the association. “They don’t want casual shoppers,” he said.

Catch up: Here’s what else is happening.

  • An aviation dispute between the Trump administration and China appears to be softening, with the United States on Friday saying it will allow Chinese carriers to collectively operate two weekly round-trip flights to the United States. The announcement comes two days after the Transportation Department said it would ban all such flights in response to a similar ban on American passenger flights to and from China. After the department made that announcement, the Chinese government said it would allow two American airlines to operate weekly flights, paving the way for the reversal on Friday.

Reporting was contributed by Ann Carrns, Matt Phillips, Paul Sullivan and Carlos Tejada.

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