News: Real Estate, Risk, Economics. May 31-June 2, 2014

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Table of Contents
(Click to sections below.)

1) China's central bank wants lenders to fast-track housing loans! | Property News

2) Zhang Jun assesses China's options for maintaining an equilibrium between financial risk and economic growth. – Project Syndicate

3) China’s property market: End of the golden era | The Economist

4) Aurora Resolves Mortgage Modification Class-Action Lawsuit for $5.3 Million | Bilzin Sumberg Mortgage Repurchase Group – JDSupra

5) The Return of CMBS: It's a Great Time to Be a Borrower | Lodging

6) Stephen S. Roach forecasts stiffening economic headwinds for the US as excess Chinese saving dries up. – Project Syndicate

7) Developers profit from the poor through affordable housing programs – OC Housing News

8) Ronald Janssen: European Wage Depression Since 1999

9) Fannie Mae expands HomePath for Short Sales website | HousingWire

10) Is Europe (still) turning Japanese? A lesson from the 90’s – Bond Vigilantes

11) Andrew Sheng and Xiao Geng emphasize Chinese leaders' need to balance growth-enhancing competition with stabilizing controls. – Project Syndicate

12) Hurricane Insurance Deductibles: What? When? | Bankrate com

13) The Dance Of The Fed And The PBOC – Forbes

14) Wolf Richter: The Big Hoax Of The Wall Street Hype Machine | naked capitalism

15) Pimco’s McCulley Salutes Fed For U.S. Escape From Trap – Bloomberg

16) American Financial Network doubles loan volume by using automated accounting system | HousingWire

17) Here's investor Keith Rabois' bold new home-selling startup: OpenDoor | VentureBeat | Deals | by Jordan Novet

18) Is the 'Golden Age' for Multinationals in China Over? – Businessweek

19) China house prices post first fall in 23 months – Channel NewsAsia

20) Local Housing Markets Continue Gains with Five New Markets Reaching Full Recovery!

  1.    China's central bank wants lenders to fast-track housing loans! | Property News

    Housing sales by value saw a 9.9% drop during the year's first four months, compared with a year earlier. Housing starts also dropped 24.5% over the same period. In April alone, home sales fell 18% from the previous month, according to the National Bureau of Statistics.

    After April 2010, China imposed a slew of measures to cool property prices, amid fears of a property bubble – higher down payments, limits on the number of houses that people can buy, the introduction of a property tax in some cities, and the construction of low-income housing. Over 40 cities in China bought in these measures to various extents.

    Thanks to our loyal retweeter, https://twitter.com/KevinismyBroker, for this link.

    Add your comment.


  2.    Zhang Jun assesses China's options for maintaining an equilibrium between financial risk and economic growth. – Project Syndicate

    As Liu Shijin, Vice Minister of the Development Research Center of the State Council, recently explained, the dilemma facing the authorities is that another massive stimulus plan to boost growth would mean more outstanding credit – a problematic approach, given the enormous debt and financial risks that local governments have accumulated. But an excessively sluggish economy poses its own risks.

    To be sure, China's government was in a similar situation ten years ago. But the economy today is not performing as it was a decade ago. China needs new solutions.

    … the latest round of deflation-fighting policies, together with the massive stimulus package that the government launched in the wake of the global economic crisis, has led to oversupply in the housing market and idle capital in the manufacturing sector. Making matters worse, demand for Chinese exports in Europe and the United States has weakened considerably, and is not expected to rebound. All of this has diminished short-term investment opportunities in China, raising fears of a hard landing.

    The good news is that many local governments have recently loosened their grip on local real-estate markets, most likely following a central-government directive. This could be the start of a virtuous circle, with price adjustments helping to clear up stock. The movement of the housing market into a clearance phase, without causing a panic or collapsing, would be a crowning achievement for Li's tenure.

    It certainly would. The odds of pulling it off are not impossible in theory but are astronomically against him in practice.

    Add your comment.


  3.    China's property market: End of the golden era | The Economist

    Here's why we said what we did above.

    AFTER years of talking up China's gravity-defying property markets, local land kings are now singing a darker tune. On May 26th Yu Liang, the president of Vanke, China's biggest developer, declared that the "golden era" in which "everybody makes money out of property is gone." That came on the heels of comments by Pan Shiyi, the boss of Soho China, another property firm, likening the country's real-estate sector to the Titanic: "It will soon hit an iceberg."

    Some think the price cuts will lead to another market rebound. Others hope policy easing will do the trick. Cities are starting to reverse previous bans on owning multiple homes, for example, and the central bank has once again recently encouraged banks to extend mortgages. Many big cities still enforce policies to curb purchases, argue optimists, so there may yet be pent-up demand. That is a theory that may soon come to be tested.

    In our view, this time is different because they can't keep using the same techniques because the value-added-manufacturing-to-export model is drying up and they aren't becoming a consumer market quickly enough to absorb all the over supply (ghost towns).

    Add your comment.


  4.    Aurora Resolves Mortgage Modification Class-Action Lawsuit for $5.3 Million | Bilzin Sumberg Mortgage Repurchase Group – JDSupra

    The settlement fund containing $5.3 million is expected to be split among 15,000 mortgagors in California who were allegedly duped into entering illusory agreements with ALS that induced them to continue making payments with the false hope of curing their deficiencies. Borrowers claimed they were under the impression that their foreclosures were on hold while they were considered for a loan modification. In actuality, any such modification allegedly would have violated ALS' policies and procedures. The plaintiffs contend that the workout agreement program was an improper attempt to generate additional funds from non-performing loans, allowing ALS to continue to reap servicing fees.

    Add your comment.


  5.    The Return of CMBS: It's a Great Time to Be a Borrower | Lodging

    Insiders agree that CMBS is one of the biggest stories in hotel funding. "In 2007, CMBS issuance was at $230 billion, then it virtually disappeared," says Kevin Davis, executive vice president of the hotel investment banking platform at Jones Lang LaSalle (JLL). "It started to make a comeback in 2010 and 2011, and we had $86 billion in CMBS issuance in 2013. This year, some market observers believe it could hit $130 billion."

    … Certainly, relative to 2008, lenders are being more conservative in their underwriting. We're in a 65 to 75 percent LTV environment, but there's a lot of competition as more and more players are getting into the game, so lenders are becoming increasingly aggressive with LTV rates."

    Careful!

    Add your comment.


  6.    Stephen S. Roach forecasts stiffening economic headwinds for the US as excess Chinese saving dries up. – Project Syndicate

    A view that China has done enough: Stephen S. Roach:

    Unlike the Fed, which continues to dismiss the potential negative repercussions of QE on asset markets and the real economy – both at home and abroad – China's authorities have been far more cognizant of new risks incurred during and after the crisis. They have moved swiftly to address many of them, especially those posed by excess leverage, shadow banking, and property markets.

    The jury is out on whether Chinese officials have done enough. I think that they have, though I concede that mine is a minority view today. In the face of the current growth slowdown, China might well have reverted to its earlier, crisis-tested approach; that it did not is another example of the willingness of its leaders to resist extrapolation and chart a different course.

    As seen in the links above, we disagree.

    Add your comment.


  7.    Developers profit from the poor through affordable housing programs » OC Housing News

    Uh. Ugh. Raising the minimum wage won't change anything regarding affordability. All wages are relative.

    Read this article, and then be sure to read the next one below because productivity is one key component (among several) missing in Irvine Renter's analysis on the minimum wage.

    That said, we don't disagree with everything Irvine Renter posted.

    Add your comment.


  8.    Ronald Janssen: European Wage Depression Since 1999

    Probably one of the most popular slogans of the entire European Semester is the catchphrase that wages should be aligned with productivity. The reason for its popularity is that this phrase can be used with a lot of flexibility.

    We'd like to state outright here that the productivity gains are being absorbed by the super-rich rather than being shared with the general workforce. This points out that minimum wages can go up without cramping profits. The super-rich would simply have to pay themselves less relatively speaking. They would not be hurting. They would not stop reinvesting such that the whole economy would be hurt. Corporations would still have to reinvest to remain competitive.

    As for offshoring, those that have done so have not spread the lower labor-costs to consumers but paid themselves even more.

    Add your comment.


  9.    Fannie Mae expands HomePath for Short Sales website | HousingWire

    Fannie Mae is expanding the functionality of its HomePath for Short Sales website. The HomePath site is designed to "help real estate professionals efficiently complete short sales and resolve challenges directly with Fannie Mae." The site is open to any real estate professional working on a short sale of a Fannie-owned loan.

    It's an improvement.

    Add your comment.


  10.    Is Europe (still) turning Japanese? A lesson from the 90's – Bond Vigilantes

    Seven years since the start of the financial crisis and it's ever harder to dismiss the notion that Europe is turning Japanese.

    Now this is far from a new comparison, and the suggestions made by many since 2008 that the developed world was on course to repeat Japan's experience now appear wide of the mark (we've discussed our own view of the topic previously here and here). The substantial pick-up in growth in many developed economies, notably the US and UK, instead indicates that many are escaping their liquidity traps and finding their own paths, rather than blindly following Japan's road to oblivion. Super-expansionary policy measures, it can be argued, have largely been successful.

    Not so, though, in Europe, where Japan's lesson doesn't yet seem to have been taken on board.

    We aren't so confident about the UK. They look pretty bubbly. Of course, that's a different point, not deflation.

    Add your comment.


  11.    Andrew Sheng and Xiao Geng emphasize Chinese leaders' need to balance growth-enhancing competition with stabilizing controls. – Project Syndicate

    local autonomy facilitated bold productivity-enhancing activities, such as the use of rural land for industry and commerce and the creation of public-private partnerships to finance major infrastructure projects; private enterprises were thus able to seize market share from SOEs in the service and manufacturing sectors. But cities' hasty efforts to imitate one another's growth models also led to overwhelming environmental pollution, mounting debt, excess infrastructure capacity, rising inequality, depletion of farmland, and rampant corruption, including administrative abuses that encroached on citizens' property rights.

    No competition can work without clear, fair rules. That is the real challenge facing China's leaders today. If they succeed, a high-income China will be only a matter of time.

    Big "if."

    Add your comment.


  12.    Hurricane Insurance Deductibles: What? When? | Bankrate.com

    Know your coverage.

    If the home you insured for $300,000 has a 5 percent hurricane deductible, you would be responsible for the first $15,000 in hurricane damage as defined by the policy. With a standard, non-hurricane deductible, you might pay just the first $500 of a home insurance claim out of your own pocket.

    In some states, homeowners may be able to get a dollar-amount hurricane deductible by agreeing to pay a higher premium, though in high-risk shore areas the percentage deductibles may be unavoidable.

    "There is an advantage to a hurricane deductible that people overlook when the storm's not there, and that is, it gives you less-costly insurance today," she [Lynne McChristian, Florida spokeswoman for the Insurance Information Institute] says. "It's something that saves people money when the wind doesn't blow."

    Add your comment.


  13.    The Dance Of The Fed And The PBOC – Forbes

    Frances Coppola:

    The Fed is tapering QE, which causes dollar liquidity drought. PBOC no longer buying USTs also contributes to dollar liquidity drought. You would think that the combination of the Fed's taper with PBOC no longer buying USTs would cause bond yields to rise. But as the FT explains, the combination of lower UST supply due to fiscal tightening with increased demand because banks, corporations and individuals are looking for safe places to hoard increasingly scarce dollars is actually causing UST yields to fall, not rise. This suits PBOC well. Falling yields mean rising prices, and it still has substantial holdings of USTs. It's not about to release them on to the market to bring down the price of USTs.

    And nor is the Fed, for exactly the same reason. For once, the interests of both central banks are aligned. They are dancing cheek-to-cheek.

    We agree.

    Add your comment.


  14.    Wolf Richter: The Big Hoax Of The Wall Street Hype Machine | naked capitalism

    Should you invest in real estate or stocks? You hear it often. Here's a view on the stock market.

    The S&P 500 index keeps bumbling from one all-time high to the next as corporations are issuing record amounts of debt to spend record amounts on buying back their own shares: $160 billion in the first quarter alone, according to CapitalIQ. Borrowing money to buy back shares and hyping it ceaselessly as "returning value to the shareholders" is the most effective way to manipulate up the stock, even if revenues are declining quarter after quarter.

    In this climate of ZIRP, any major corporation can do it. The heavy buying during these low-volume times pushes up shares, the hype surrounding the buybacks pushes up shares, expectation of more buyback announcements pushes up shares, the mere idea that shares are being pushed up pushes up shares…. And in the end, the buybacks lower the share count for the all-important EPS ratio.

    The game works wonderfully. Though a game is all it is.

    Now, if real estate is also in a bubble…? We don't think it is to the extent stocks generally are, but one should invest for positive cash-flows and certainly not mere appreciation over the midterm. Short-term flipping can work if done properly and with an eye to when to quit. The long-term hold can certainly work too provide the cash flow is there. The recent slowdown in appreciation rates though speaks for itself.

    Add your comment.


  15.    Pimco's McCulley Salutes Fed For U.S. Escape From Trap – Bloomberg

    The new neutral view of PIMOC (the bond guys): Paul McCulley, Chief Economist, PIMCO:

    In 2010, McCulley praised the Fed for acting "irresponsibly" relative to conventional wisdom to reverse an economy mired in a liquidity trap, where borrowing or lending may not be stimulated because of a shortfall in demand.

    The Fed's unconventional policy pushed borrowing costs to record lows and helped fuel a five-year stock market rally that pushed some markets to new highs.

    "I don't think the equity markets are cheap, but I also don't think it has profound bubble tendencies," McCulley said. "I believe the equity market is fairly valued."

    Add your comment.


  16.    American Financial Network doubles loan volume by using automated accounting system | HousingWire

    The wave of the present-future:

    American Financial Network, a mortgage lender, has doubled its loan volume and added 50 new mortgage branches in the last 3-plus years. And they've done it by investing in technology.

    Add your comment.


  17.    Here's investor Keith Rabois' bold new home-selling startup: OpenDoor | VentureBeat | Deals | by Jordan Novet

    … OpenDoor will launch in July, its website promises.

    The startup will "work with sellers directly to purchase home[s]," "work with local partners to rehab, maintain, and improve our portfolio of properties," and "partner with local brokers and Realtors to market, list on [the multiple listing service], and resell to retail buyers and investors," according to the site online now at opendoor.com.

    This is still fix-and-flip but reportedly with an extremely streamlined way for sellers to sell to the flipper.

    Add your comment.


  18.    Is the 'Golden Age' for Multinationals in China Over? – Businessweek

    "For the first time in the history of this survey, more companies noted that their Chinese profit margins were lower than their companies' global averages than vice versa," the release notes.

    More than half of European companies say they believe foreign businesses are discriminated against in China. Worst affected were those operating in the legal, financial services, and transportation and logistics industries. Because of barriers to market access and regulatory constraints, European Chamber enterprises lost out on €21.3 billion ($29 billion) in revenue last year.

    While China remains important, companies are scaling back their plans there, the survey showed.

    Add your comment.


  19.    China house prices post first fall in 23 months – Channel NewsAsia

    Home prices in major Chinese cities posted their first monthly decline in nearly two years in May, an independent survey showed Saturday, providing new evidence the once red-hot market is losing steam.

    The survey added to signs that China's property market is cooling, with analysts pointing to factors including stringent bank loan criteria, expectations of falling prices, and financial trouble among developers.

    Add your comment.


  20.    Local Housing Markets Continue Gains with Five New Markets Reaching Full Recovery!

    Homes.com's Local Market Reports for March's reporting period reveals 35 out of the top 100 markets measured continued to show a complete price recovery – up three from February. A rebound of 100% or more means pricing for the market has surpassed its prior peak and reached full recovery.

    Add your comment.


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