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- Houston real estate's dream run continues: Home sales break new record – CultureMap Houston
Houston's existing home sales broke more records in October, as the city's strong economy and low mortgage rates extended a phenomenal run for real estate.
A total of 6,020 single-family homes were sold in October — the most ever for an October in Houston, according to the Houston Association of Realtors. The previous record was set in October 2006, when 5,612 were sold.
"We need a 50 to 60 percent increase in home building to get back to normal," Yun [Lawrence Yun, chief economist for the National Association of Realtors] says.
Houston has a shortage of home construction labor and tradesmen, Masterson [Harry Masterson, president of the Greater Houston Builders Association] says. Many carpenters, bricklayers and plumbers found other work when construction dwindled in the economic downturn. The wild boom in the Eagle Ford Shale oilfields around San Antonio has lured away many construction workers with exceptionally high wages.
- Robert Reich (What Walmart Could Learn from Henry Ford)
Does he have it right? Robert B. Reich, Chancellor's Professor of Public Policy at the University of California at Berkeley, writes:
Walmart could learn a thing or two from Henry Ford, who almost exactly a century ago decided to pay his workers three times the typical factory wage at the time. The Wall Street Journal called Ford a traitor to his class but he proved to be a cunning businessman.
Ford's decision helped boost factory wages across the board — enabling so many working people to buy Model Ts that Ford's revenues soared far ahead of his increased payrolls, and he made a fortune.
So why can't Walmart learn from Ford? Because Walmart's business model is static, depending on cheap labor rather than increased sales….
Leaving aside other issues, it worked. It didn't ruin the economy in ways suggested by those today who stand opposed to increased wages, quite the contrary. Agree? If not, why not? In what way was Ford wrong in what he did?
In order to benefit the real-estate industry, shouldn't wages rise? Shouldn't more good jobs be created via fiscal policy too? We think so.
- EconoMonitor : EconoMonitor – China's New Grand Strategy
Interesting: Dan Steinbock writes:
Washington is in a hurry to complete a Trans-Pacific Partnership (TPP), which includes advanced economies in Oceania, all NAFTA partners, advanced ASEAN states, two Pacific nations and East Asia, minus China. The TPP, in turn, has intensified Asian-Pacific cooperation in which China does have a role, particularly through free trade talks among the 10 ASEAN member states, and their FTA partners. These talks aim at a Regional Comprehensive Economic Partnership (RCEP), which excludes the United States. Nonetheless, the Chinese concern remains that the RCEP will be less driven by upgrading and innovation than TPP.
What U.S.-China relations need is deeper cooperation, which, in turn, has the potential to support Chinese reforms and innovation. In the first nine months of 2013, Chinese firms spent a record $12.2 billion in the U.S. However, America is coping with a massive $8 trillion infrastructure investment bill. The debt-burdened U.S. local governments are courting Chinese investors to pay for the massive modernization.
Indeed, China's new grand strategy — market-driven economic reforms coupled with deeper regional integration — is very much in the U.S. interest.
- Canadian home prices in for a soft landing, overvalued by 26 per cent: Fitch Ratings | CTV Toronto News
TORONTO — Sky high prices in the Canadian real estate market won't be climbing for much longer, says a report by global rating agency Fitch Ratings.
The agency forecasted Tuesday that home prices across the country are in for a "soft landing" and will either flatten out or slightly decrease over the next five years. It estimates that current prices are overvalued by up to 26 per cent in some regions and could fall by as much as 10 per cent in some places.
Fitch Ratings said the Canadian economy will be exposed when this happens, as many homebuyers have financially stretched themselves to borrow for their home purchase and will be in for a shock once interest rates start to climb.
- Home prices on the rise in the West Valley [Metro Phoenix]
The decrease of properties for sale pushed up home prices, said Michael Orr, a real-estate analyst at Arizona State University's W.P. Carey's School of Business. The trend reflects a market where supply and demand are beginning to even out.
Yet, even with the increases, home prices are below their 2008 levels.
"The market is fairly subdued at the moment, but why is a tough question to answer," Orr said.
"… as we know, unexpected things can happen. It's not easy to predict the future," he said.
- JPMorgan agrees $13 billion settlement with U.S. over bad mortgages | Reuters
They finished cutting the deal. Karen Freifeld, Aruna Viswanatha, and David Henry report:
JPMorgan finally took its punishment on Tuesday, agreeing to a $13 billion settlement with the U.S. government to settle charges that the bank overstated the quality of mortgages it was selling to investors in the run-up to the financial crisis.
After taxes, the settlement should cost JPMorgan about $9 billion, because about $11 billion of the settlement is tax deductible, said Gregg Polsky, a law professor at the University of North Carolina.
Is $9 billion what the bank cost the economy? Is it anywhere near that amount?
We haven't seen the issue of insurance in any of this.
- [Highly recommended] No Sugarcoating It: A Hard Landing Is Likely [for China]
If China can head this off, it will be an economic, make that a political, miracle. Andy Xie writes:
China's rhetoric on growth and the Fed's on unemployment have reinforced each other in expanding a gigantic global bubble, bigger than the one before 2007.
When the bubble bursts, the impact on China and the United States will be very different. The United States' bubble is mainly in the stock market and in the properties for rich people. Its debt is not rising rapidly. Hence, when the bubble bursts, it is merely a round trip for speculators. China's bubble is sustained by debt. Its destructive power is much greater.
It's a three page article and well worth reading. We'd heard the carry-trade point before, but this is the most in-depth treatment of it we've seen, tying it clearly to a number of factors.
- Look out: China's housing bubble is now available in bitcoin. – Quartz
We were thinking just yesterday about when we'd see someone selling real estate for bitcoins. Gwynn Guilford reports:
… there's an even better reason Chinese investors might want to consider selling. In late October, a Hong Kong-registered online bitcoin trading platform abruptly disappeared, leaving 500 or so Chinese investors with a combined 30 million yuan ($4.8 million) in losses. Other estimates put losses for 130 people at 46 million yuan (link in Chinese). That site allowed users to bet on bitcoin price movements by borrowing up to 10 times the amount they had deposited in order to speculate. This caused wild swings in its trading volume (link in Chinese), according to the IT Times, and the company faced a cashflow shortage in September.
By the way, this wasn't the only bitcoin platform that's suddenly disappeared. A recent study from Southern Methodist University and Carnegie Mellon University found that 18 of 40 bitcoin trading platforms created in the last three years shut down. Of those, 13 did so without warning. Four never paid anyone back (pdf, p.3).
Bitcoin at your own risk.
Source … http://qz.com/147606/t/28944
- New Zealand Stops a Housing Bubble – Bloomberg
Peter Orszag, vice chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup, reports:
The New Zealand housing market is indeed heating up. Over the past year, house prices in Auckland have risen 17 percent, and in Christchurch, they're up 8 percent. Those two markets account for half of home sales across the country.
So what is the central bank in New Zealand doing about it? In October, it put a limit on high loan-to-value mortgages. Each bank must see that no more than 10 percent of its new mortgages finance more than 80 percent of a house's value. Before the limit took effect, such mortgages had reached 30 percent of new originations.
- London Lures Billionaires as Mansions Seen as Safe Haven – Bloomberg
Jeremy Kahn reports:
Fear as much as greed drives the super-prime market. Although a third of London's super-prime buyers are British, safety-seeking internationals predominate. Oil sheiks want an Arab Spring insurance policy. Wealthy French have fled President Francois Hollande's new tax regime.
Ultra-high-net-worth individuals from the periphery of the euro zone — Cyprus, Greece, Italy, Portugal — have sought to shift assets out of the besieged currency and into pounds. For Russians, de Keyzer says, "the Putin factor" — the fear of a sudden shift in political winds — cannot be underestimated. Russians and citizens of former Soviet republics indisputably drive the market among international buyers, says Tim Wright, a Knight Frank partner specializing in super-prime housing.
… Given the steep price gains since the financial crisis, some worry that London's super-prime market is a bubble poised to pop.
"It is difficult to say whether it's a bubble because people are not buying on traditional investment metrics," says Griffith of the Institute for Public Policy Research.
- Why Canadian companies are on a U.S. property buying spree | Financial Post
Garry Marr reports:
It's not exactly the 11th province just yet, but Canadian companies have been gobbling up property in the United States like never before.
We are easily outpacing every other country in what is called net real estate investment in U.S. commercial property, even ahead of a combined Europe.
Ed Sonshine, chief executive of RioCan REIT, says Canadians probably won't disappear from the U.S. landscape any time soon.
"Every forecast I've seen expects growth in the United States over the next two to three years to be better than here," said Mr. Sonshine, adding a shrinking dollar has taken a bite out of the Canadian appetite for property.
- Are You Making a HUGE Mistake by Skipping This Vital Landlording Task?
Kevin Perk writes:
As landlords, our greatest and most valuable assets are our properties.
Unlike other investment vehicles, such as stocks, we can directly affect the value and performance of our assets. We can actively participate to make our assets stronger and more valuable. And one of the most important things we can do are routine property inspections.
You might think that your tenants or your property manager will be your eyes and ears. Honestly, many will be. They will tell you when something is wrong. They will call you when the roof or the kitchen sink springs a leak.
But others will not.
- New Life and Value for Old Buildings – Urban Land Magazine
Leslie Braunstein reports:
Several hundred million square feet of U.S. office space is in need of modernizing and repositioning.
New construction techniques minimize impact on tenants, while bringing buildings to market in half the time of new construction.
Building operating costs can be reduced substantially with today's curtain wall and MEP systems.
In some areas, downzoning prohibits construction of new buildings as large as existing ones.
Tear down and rebuild or renovate and reposition? That was the question posed at a ULI Fall Meeting panel moderated by Richard T. Anderson, president of the New York Building Congress.
- Lending Tree: Home down payment averages shrink – Kansas City Business Journal
Rob Roberts reports:
LendingTree reported, average home loan down payments have dropped 9.4 percent in two years.
Because of improving home values and subsiding risk of borrowers defaulting, "lenders are putting more focus on purchase mortgages and are adjusting minimum requirements to attract borrowers," LendingTree CEO Doug Lebda said.
- Darwin's Retail: Survival of the Fittest – Urban Land Magazine
Brett Widness reports:
The 30-year decline of department stores was merely accelerated by e-commerce and the recession of 2007—2009, panelists said at ULI's Fall Meeting in Chicago. Shopping centers, having survived the worst contraction in 50 years, are often turning to restaurants and specialty retailers to replace department stores as anchor tenants.
- Don't rule out negative interest rates /Euromoney magazine
We've been promoting charging banks interest on excess reserves. It's referred to as negative interest on deposits.
Arguments against it include that costs would be passed to customers and the money-market function could freeze.
We've said that competition would drive consumers and firms to move their own deposits (time/savings and demand/checking) if costs were passed on to them.
Here are some details on what's happened where there have been negative rates.
Adam Hayter, head of international liquidity and investment management, and Llewelyn Mullooly, market and product manager at RBS, reports:
Examples of interest rates going negative in the past:
• In 2009 the Swedish central bank — the Riksbank — became the world's first to set a deposit policy rate of -0.25 per cent. Banks were theoretically being charged to keep their surplus cash there. However, this didn't have much impact on the 'real' overnight interest rates that filtered through to customers. In practice the policy allowed 'fine tuning' deposits to be placed by banks with the Riksbank at positive rates.
• The Danish central bank adopted a negative deposit rate in July last year of -0.20 per cent to prevent an influx of capital driving up the value of the krone. Although measures were taken to soften the impact on the country's banks, net interest income for them dropped to its lowest in five years as the banks passed on only a little of these costs to clients.
• For similar reasons to the Danish, the Swiss National Bank has set the lower end of its policy target range — the targeted three-month BBA Libor rate — at zero since December 2008. This has resulted in the overnight interbank deposit rate for Swiss francs remaining consistently close to zero and frequently well below.
• While the costs of negative central or inter-bank rates being passed on to customers has been limited, a number of US banks rep ortedly began selective charging of up to 0.25 per cent to corporate clients with large Danish krone and Swiss franc balances in 2012.
- Refi YES! — Distressed Home Sales: Rising or Falling? It Depends on the Source
Nick Timiraos reports:
… either RealtyTrac's methodology offers greater insight into what's happening to the share of distressed sales than the rest of the industry, or RealtyTrac's methodology isn't capturing the broader trend.
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