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- The great US deleveraging may have just ended – Quartz
Matt Phillips reports:
During the third quarter of 2013, total US consumer debt outstanding rose $127 billion, to a total of $11.28 trillion. That's the largest quarter-on-quarter increase since the first quarter of 2008, when the financial crisis was nothing but a glimmer in the eye of the financial markets.
- ReferBoost: Startup Spotlight – YouTube
No description available.
However, this social-media lead-generation platform may have potential for you.
- White House Economist: Federal Mortgage Backstop Needed in Overhaul – Real Time Economics – WSJ
The government should provide an explicit federal guarantee of certain mortgage-backed securities in order to ensure mortgages are available "at reasonable rates in good and bad economic times," a top White House economist said in a speech Wednesday that sketched out in greater detail the Obama administration's aims of any replacement of Fannie Mae and Freddie Mac.
Private investors should stand at the center of a revamped housing-finance market because private sector competition can provide better prices and services for consumers, said James Stock, a member of the White House Council of Economic Advisers.
"But financial markets are not perfect," he said. "And the government has a role in reducing the impact of financial-market failures on real economic activity, especially when those failures are exacerbated by a cyclical downturn."
Mr. Stock, an economics professor at Harvard University, said any overhaul must include features that make the market "cyclically resilient," or able to withstand market downturns without the kind of collapse that forced the government to take over Fannie and Freddie in 2008.
"… private sector competition can provide better prices and services for consumers…." However, most experts we've read have said that costs to consumers will definitely rise if the private sector takes over. We tend to agree with them. How about you? It will be good for landlords.
- Los Angeles's Biggest House Is Under Construction In Bel Air – Blockbusters – Curbed LA
Ordinarily, we'd avoid linking to a story like this; but we thought you might find it (obscenely?) interesting. Adrian Glick Kudler reports on Chateau des Fleurs:
Today our pals over at Curbed National came across an aerial construction shot of an enormous megamansion being built at the intersection of Bellagio Road and Stone Canyon in Bel Air, and word is that it's going to be 60,000 square feet when it's done (it's been reported that the lot is 10 acres; according to LA's zoning website, it's just about three acres). That might just make it the biggest private house in Los Angeles.
- Richard Fisher: Australia has a 'robust' housing market thanks to Asian buyers, but watch out for a bubble
What's keeping Australia's housing market up? Nassim Khadem reports:
Economist Steve Keen, who in 2008 famously warned house prices would fall by 40 per cent, has long been worried about Australia's high rate of mortgage debt, which he says is by far the largest component of debt in Australia today.
"There's a housing bubble, and it's predominantly mortgage-debt driven," he says. "Australia's peculiar government obsession with keeping house prices high via first home vendors grants, negative gearing, a capital gains tax rate that's half that for income tax, and no capital gains on the family home further turbo-charges our house prices compared to the rest of the world."
Keen says in global terms, there are only four countries where house prices adjusted for inflation are more than twice what they were in 1985, and Australia is one of them. "There were more — including the USA, Ireland and Spain — but their housing bubbles have collapsed, and taken their economies down with them," he says.
So it's a combination of 1) Asian cash with limited places to go besides other countries' real estate and 2) the Australian government's real-estate policies. Will it pop before the rest of the world rises enough again? Will China pop? There are a great many ifs.
- Buoyant year for Polish investment market — transaction volumes to exceed €3.1 billion by the end of the year 2013 transaction volumes currently stand at €2.064 billion. Jones Lang LaSalle
"… 70% of 2013 transactions in Central Europe…." Anna Podolak reports:
Agata Sekula, Head of Retail Investment, Central Europe, Jones Lang LaSalle, commented: "According to our research, the total volume of investment transactions on the Polish commercial real estate market in 2013 will exceed €3.1 billion, which will be comparable with 2007 and almost a 15% increase year-on-year. Poland, which accounts for 70% of 2013 transactions in Central Europe, remains a leading market in the region. It should be stressed that 2013 is also a very good year for the retail investment market. If investors execute their plans and manage to finalize deals that are scheduled to be concluded in Q4, the total volume of retail transactions may reach €1.7 billion, significantly exceeding 2012's €1.07 billion".
- Bundesbank Says Low Interest Rates Threaten Financial Stability – Businessweek
Stefan Riecher reports:
Germany's Bundesbank said that the European Central Bank's low interest-rate policy is endangering the stability of the financial sector.
"The longer the low-interest-rate environment lasts, the greater the undesired side-effects and risks for financial stability," Bundesbank board member Andreas Dombret said today in Frankfurt, where he presented the central bank's annual financial-stability report. "The low-interest-rate environment is placing a growing strain on the German financial system."
The Bundesbank's warning comes a week after the ECB reduced its benchmark rate to a record low of 0.25 percent to fight inflation at its lowest in four years and rekindle growth. About one quarter of the 23-member Governing Council opposed the move, among them Bundesbank President Jens Weidmann and Germany's representative on the ECB's Executive Board, Joerg Asmussen, according to two people familiar with the talks.
Fighting low inflation that could slip into disinflation or outright deflation is more important than worrying about hyper-inflation down the road, which will not happen if the central banks tighten up at the right time to the right degree and remain flexible.
In our view, out of an irrational fear of a repeat of the Weimar Republic's inflation (http://en.wikipedia.org/wiki/Hyperinfla tion_in_the_Weimar_Republic), Germany has unnecessarily and counter-productively saddled itself and Europe with Austrian School economics.
- Not Weimar but Japanification: [Highly recommended] Central Banks Risk Asset Bubbles in Battle With Deflation – Bloomberg
It's not the Weimar Republic we need fear but Japanification. Rich Miller, Simon Kennedy & Michelle Jamrisko report:
The easy money lacks punch because the "pipes" that carry stimulus from financial markets to the rest of the economy are "clogged," Mohamed El-Erian, Pimco's chief executive officer, said in an interview. Banks are wary of lending and companies are chary of spending after suffering the worst financial crisis and recession since the Great Depression.
… The Washington-based IMF … projects governments will keep cutting budgets, with the aggregate deficit of advanced nations at 4.5 percent of gross domestic product this year and 3.6 percent next year.
While Draghi has raised the possibility of charging banks to park cash at the ECB, colleagues have warned a negative deposit rate could hurt banks' profitability and make them even less willing to lend.
While the aggressive actions that central banks have taken haven't done all that much for global growth, they have boosted asset values worldwide, pushing home prices from Canada to Australia and Sweden to China to levels that may turn out to be unsustainable. Some Fed officials have pointed to costlier homes, farmland and bonds as causes for concern.
"We've seen real bubble-like markets again," Laurence D. Fink, chief executive officer of BlackRock Inc., the world's largest money manager with $4.1 trillion in assets, said at an Oct. 29 panel discussion in Chicago.
"While Draghi has raised the possibility of charging banks to park cash at the ECB, colleagues have warned a negative deposit rate could hurt banks' profitability and make them even less willing to lend." We disagree that it would hurt profitability or make them less willing to lend, especially the latter. There's one way to find out. Do it until it hurts.
- Simon Johnson on on the perils of Chinese banks' international ambitions. – Project Syndicate
Tough words for China by the always interesting Simon Johnson:
… the Chinese policy elite are also very taken with the idea that a first-rank country needs a prominent banking system that is active internationally. There is nothing wrong with this ambition, as long as it is handled with great caution. Unfortunately, it is now becoming clear that the hard lessons of recent financial crises have been lost on China.
- Mortgage bankers afraid Montana case could open up Pandora's box of risk | 2013-11-11 | HousingWire
Kerri Ann Panchuk reports:
Montana's Supreme Court is about to [Nov. 13, 2013] hear oral arguments in a case that has the potential to disrupt the legal concepts governing mortgage contracts nationwide, mortgage bankers claim in a brief filed with the state's highest court.
The case, which is scheduled for oral arguments, involves a couple who are challenging a Bank of America (BAC) default notice on the grounds that they were verbally offered a loan modification over the phone only to later face default.
The interesting thing in the article is that it doesn't say that the bank denies having verbally told the couple to skip a payment. Of course the couple should have gotten it in writing, but if the bank admits it did what the couple claims ….
There's moral hazard here in that the banks could take it that they can make all sorts of false verbal statements with impunity.
Perhaps banks should have to tell customers that 1) it isn't binding until it's in writing 2) do not trust any bank representative that a written document is forthcoming so just go ahead and act as if it's already been executed and 3) do not rely upon any verbal-only statements but wait until you have a fully executed document.
- Winners and Losers From Stimulus – NYTimes.com
Nelson D. Schwartz reports:
"Households are losing more on reduced interest they are saving on lower debt payments," she [Susan Lund, a partner at the McKinsey Global Institute] said.
Older households that are dependent on interest payments from savings were harder hit than younger people who are more likely to have home and car loans, she said.
At the same time, Ms. Lund noted, as a big beneficiary from very low borrowing costs, the federal government will have to pay up when interest rates inevitably move higher.
"If interest rates return to 2007 levels, federal debt service costs would increase by 20 percent, or about $75 billion a year," she said.
- Moody's Questions GSE Improvement Over Long-Term | Mortgage News | Daily National and State Headlines
… GSE market share remained at historic highs with lenders choosing GSE guarantees for the vast majority of new loan originations due to the GSEs continued cost advantage versus private capital. But the Federal Housing Finance Authority (FHFA) is attempting to contract the GSEs dominance of the housing market, the success of which remains an open question ….
If there's a "cost advantage," why privatize?
- Foreign investors hit by anti-speculation measures in Malaysia's 2014 budget | Property News
No real-estate flipping in Malaysia:
Malaysia's booming property market is expected to slow, once new taxes in the 2014 budget take effect next year.
Beginning January 1, real property gains tax (RPGT) will double from the current 15% rate. For disposals within the first three years, the new RPGT will be 30%.
For citizens, RPGT will be 20% for disposal in the 4th year, 15% for disposal in the 5th year. No tax is levied on disposals after the 5th year. For non-citizens and business firms, RPGT will be 30% within a 5-year holding period, and 5% in any subsequent year.
It will increase stability.
- Land, Homebuilders Back in Sharp Demand by Investors – CoStar Group
Buying lots of land for houses: Mark Heschmeyer reports:
Investors see a lot of runway in front of homebuilders as they prepare for the takeoff of the residential markets recovery.
As home price appreciation has climbed over the last 12 months after the bottom fell out of the business in 2006 and '07, many homebuilders have been expanding their land and lot holdings in the past year — in some cases by as much as 50%.
"Rapid home price appreciation, increased interest rates, and economic and political uncertainty have all… impacted consumer confidence and tempered the robust demand we experienced during the first half of the year," said Scott D. Stowell, CEO and president of Standard Pacific. "We have always maintained that the housing market recovery would likely be an uneven one, and that there would be bumps along the road to recovery. While we are certainly experiencing a few of those bumps now, when looking longer-term, we continue to maintain a cautious but positive outlook."
- How to Find Reliable Tenants | Real Estate and Rental Marketing Blog for Professionals – Zillow Pro Blog
"This is a guest post by Sian Morgan. Sian Morgan is with Amron Properties in North Tyneside, UK.":
Demand for rental property is increasing dramatically every year. This means that it's becoming more challenging for tenants to find a suitable property in their price range, which means you're likely to have a backlog of applicants. As a property manager, you owe it to your property owners and your other tenants to find the very best applicants among the pool of candidates.
Here are some steps to take to make sure your new tenants are lovely, not lemons: ….
- Don't take out a fixed-rate mortgage – MarketWatch
"People shouldn't use adjustables to stretch too far on a new purchase or refinancing," says Larry Luxenberg, a financial adviser in New City, N.Y. The lower initial interest rate on an ARM might tempt you to borrow more than you could with a fixed-rate mortgage—to stretch, as Mr. Luxenberg puts it—but that can backfire if an upward adjustment in the interest rate busts your monthly budget. If you can't handle an upward adjustment, you've borrowed too much.
- Proposal could shut many out of housing market – TODAY News – TODAY.com
It was this lack of "risk retention" that led to the surge of risky lending that has helped trigger millions of foreclosures and sent home prices tumbling, according to Sheila Bair, [former] head of the Federal Deposit Insurance Corp.
"The fact that securitizers did not have skin in the game with these loans, by and large, or meaningful skin in the game, led to a lot of the lax underwriting and abuses that we saw in the mortgage markets," Bair told the House Financial Services Committee last month.
An analysis by the National Community Reinvestment Coalition found little correlation between size of down payment and default rates. Based on a review of 1 million loans written for the most creditworthy borrowers in 2006 and 2007,the default rate ranged from 0.14 percent for those with a 20 percent down payment to 0.26 percent for those who put just 3 percent down.
Critics of the new standards argue that the current high default rate was mostly the result of a wave of predatory lending and exotic loans — from artificially low "interest only" payments to "no documentation" loans that relied entirely on a credit score to assess the risk of default.
Just don't go too far in re-relaxing standards. Right?
- Marcel Fratzscher on the three beliefs turning Germany against the euro. – Project Syndicate
"Marcel Fratzscher, a former head of International Policy Analysis at the European Central Bank, is President of the German Institute for Economic Research (DIW Berlin) and Professor of Macroeconomics and Finance at Humboldt University of Berlin." He writes:
… viewed from a longer-term perspective, Germany's economic performance is actually rather disappointing. A DIW Berlin study shows that, since the monetary union's launch in 1999, Germany has recorded some of the eurozone's lowest rates of GDP and productivity growth.
Moreover, real wages have barely risen; for more than 60% of German workers, they have actually fallen. Wages have risen substantially more elsewhere in Europe, despite the depth of the economic crisis. Given that Germany also has one of the eurozone's lowest investment rates, its GDP growth is likely to be among Europe's slowest in the coming years, making significant wage increases unlikely.
Of course, Germans are not entirely wrong; the crisis in Europe's periphery is weakening Germany's economic-growth prospects. But they should remember that, only a decade ago, Germany was the "sick man of Europe," and that strong growth and dynamism elsewhere in Europe contributed substantially to its recovery. And they must recognize that Europeans are all in the same boat; what is good for Europe is good for Germany, and vice versa.
The second illusion that blinkers many Germans is that other European governments are after their money. As a result, Germany has been reluctant to engage fully in the debate about a European banking union, owing to the belief that it would expose German taxpayers to major risks and unknown costs through bank restructuring and deposit insurance.
The article goes on and is well worth reading.
- Explainer: How does the Fed stimulate the economy? – CBS News
A nice job explaining by Mark Thoma, macroeconomist and time-series econometrician at the University of Oregon:
In her testimony Thursday morning in front of the Senate Banking Committee, Federal Reserve Chair nominee Janet Yellen emphasized that one of the Federal Reserve's primary duties is to pursue its dual mandate for maximum employment and stable prices.
The Fed attempts to pursue these two goals through changes in its target interest rate. For example, it decreases this rate when the economy is struggling, and it increases the target interest rate when inflation is too high. But how does the Fed do this? How does it change interest rates? And what happens at times like now when unemployment is too high, inflation is not a problem and interest rates are already as low as they can go? If the Fed cannot lower interest rates further, how does the it pursue its dual mandate?
- Census Reveals More Americans Moving for Business (Not Pleasure!) in 2013 | ApartmentGuide.com
Steve Harper reports:
With 2013 coming to a close, we now have the latest U.S. Census data gathered from this year, and things have changed again. Despite rising in 2012, the percentage of people moving to a new apartment or home in 2013 dropped back down to near record-low levels.
There is a relationship between the distance a person moves and his reason for moving. When a person moves within the same county, it's usually for housing reasons. But when a person moves a longer distance or crosses state lines, it's typically to relocate for a new job. In fact, 32 percent of interstate moves are job-related.
When you compare moving distances with reasons, the reversal in moving trends starts to make more sense: job market recovery has been sluggish.
- Shadow Banking Grows to $71 Trillion Industry, Regulators Say – Bloomberg
Ben Moshinsky & Jim Brunsden report:
The shadow banking industry grew to about $71 trillion, an increase of $5 trillion in 2012, even as it shrank in the U.K. and the Eurozone, the Financial Stability Board said.
"Improving bank regulation is not enough to fully address the weaknesses of the financial system revealed by the crisis," Agustin Carstens, governor of the central bank of Mexico, said in an e-mailed statement. "The shadow banking system continues to transform and innovate."
Supervisors consider shadow banking activities to be those that allow banks to carry out business off balance sheets, as well as those that give investors an opportunity to bypass lenders and the functions they traditionally fulfill on the markets.
Shadow banking makes the US's largest banks the largest in the world. Despite Dodd-Frank, the US government appears to be backstopping what it can't see due to "Too Big To Fail" having been insufficiently addressed.
- Breakingviews: The bad smell of Spain's wage cuts – YouTube
One feels for the Spaniards.
The mics are poorly balanced, but listen anyway with the volume handy.
Rubbish piles up in Madrid as cleaners protest 40% wage cuts and layoffs. Spain might need to shrink sky-high unemployment, but brutal wage cuts aren't a miracle cure, says Breakingviews.
- Prospects for the Eurozone: It Won't Be Germany to the Rescue | European Investment Conference
Bob Dannhauser reports:
Germany may not be the force that sees the European Union through its political and economic strains, according to Kai Konrad, director of the Max Planck Institute for Tax Law and Public Finance in Munich. At the Sixth Annual CFA Institute European Investment Conference, Konrad painted a picture of troubled states increasingly doubtful of the union's ability to join in stronger coordination of structural policies, not least because of the wariness of the more robust states toward bailouts and mounting liability risks. This combination of "austerity fatigue" and "rescue fatigue" might very well conspire to create a dark future for the eurozone.
- Reis: Rent Growth on Tap for 2014, but Peaked in 2012 – Multifamily Executive Magazine
Linsey Isaacs reports:
Rent growth has been steadily increasing over the last few years, but it looks like the industry peaked in 2012, according to an analysis by New York-based market researcher Reis.
While fundamentals like vacancy rates and supply absorption are healthy, the slow pace of job formation has hamstrung owners' ability to raise rents. Asking and effective rents both rose by 1 percent in the third quarter, but that growth is still below the quarterly average from last year. In previous cycles, rent growth would be well above 4 percent given the vacancy rates the industry is now seeing, the report says.
Jobs, jobs, jobs.
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