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- Pictures Of The Global Real Estate Boom – Business Insider
Joe Weisenthal reports:
There’s no question about it: Property is back.
After the financial crisis, there was tons of talk about how people might be off property for good for awhile, and how nobody, for a long time, was going to buy property for an investment.
That mentality didn’t last long.
From California to London to East Asia, property prices and new developments are red hot.
Via Reuters, here’s what the boom really looks like.
- CPI: Noise Pollution at Low Altitudes – Real Time Economics – WSJ
Kathleen Madigan reports:
The CPI methodology was constructed when inflation was much higher than it is today. That results in greater formula errors at low rates. Consider a bathroom scale, says Mr. Weinstein. It is good at measuring weight changes in a human, but not accurate at capturing weight changes in a mouse.
- Blackstone and the “Raters” Duke it Out
The image doesn’t look like a detached single-family house to us.
Anyway, let’s keep an eye on the following:
The saga of Americas’ first security backed by rents generated single family rental homes took another fascinating turn this week as Blackstone, the private equity giant seeking to open up a new asset class, smacked head on into the ratings agencies that put a kibosh on the idea a year ago only to learn at least one of them, Fitch, hasn’t changed it’s [sic] mind.
According to Reuters, one clue as to how the deal may get the top rating is that it will be secured by individual mortgage liens on each underlying property rather than an equity pledge in the property-owning SPV. That will allow for the creation of a so-called real estate mortgage investment conduit (Remic) structure, according to people close to the deal. Remics, which are also used in CMBS, allow for the pooling of a diverse set of loans from different originators and offer flexibility in assembling a security.
- Funding Real Estate Development Isn’t as Simple as You Think
Benjamin Miller writes:
In today’s world, raising money from individuals is very inefficient and time-intensive and as a result, most developers choose to raise money from private equity funds.
When a private equity fund invests in a project, it typically holds a super-majority [super?] of the equity and therefore keeps the governance rights over major decisions and ultimately has the power. This can cause large problems for the developer if he does not stick closely to the agreed-upon business plan. When push comes to shove, the investment fund can even take over the property and kick out the developer. These realities have resulted in private equity funds becoming the primary driver of real estate development.
- Rana Foroohar: Why Housing Will Not Save the U.S. Economy | TIME.com
Rana Foroohar writes:
Earlier this week, I attended the Economist’s Buttonwood gathering, where Nobel laureate Robert Shiller was among the speakers. When asked about the recovery in housing, he said, “I’d much rather see the government raise taxes and fund infrastructure spending to create a recovery — it would be a lot better than cutting interest rates and possibly creating a housing bubble to stimulate recovery.” Wise words from the man who predicted the last housing crisis.
In our eyes, he’s right.
- Mortgage Rates Continue Breakout Move Higher
Matthew Graham reports:
Mortgage rates continued higher today [November 1, 2013], after breaking a very long, very flat streak following last week’s jobs numbers. Like yesterday, today’s culprit was stronger-than-expected economic data, this time from the national Institute for Supply Management (yesterday’s was the regional Chicago ISM). The losses were more pronounced, however, bringing the most prevalent 30yr Fixed conforming rate quote (best-execution) up to 4.25%.
Does it make sense to you that mortgage rates go up when the economy does better?
It tends toward inflationary pressure, which would move the Fed sooner than later to taper its purchases of mortgage-back bonds, one huge part of quantitative easing. When the Fed reduces buying, demand falls. Rates rise to attract more other investors to help pick up the slack.
The Fed’s buying has allowed the lenders and securitizers to keep rates low.
If that makes your head swim, don’t kick yourself. It can take a bit to wrap your mind around it and to have it become second-nature thinking.
- Reduced uncertainty and Japan | vox
When the two chambers of the parliament are controlled by different parties, or when the opposition controls the legislature under the presidential system, decision making on important policies is bound to be stalled or postponed. The recent ‘fiscal cliff’ in the US is a well-known example. In Europe, the government changes in the Eurozone countries increased uncertainty over the fiscal policy, resulting in the instability of the euro. In Japan, political power was transferred from the Liberal Democratic Party (LDP) to the Democratic Party of Japan (DPJ) four years ago, but the LDP regained control through the general election in December 2012. However, the Diet had been in a flux until this summer. During these government changes, certain economic policies, such as those related to tax, social security, and the labour market, have fluctuated.
A series of empirical studies have shown that political instability and frequent changes in governments have a negative impact on the national economy ….
We’ve always had a hard time swallowing the idea that uncertainty has little to no impact. Stability truly does allow for longer-term planning. That is not to say that we shouldn’t make progress but that we need to consider the good plans that have been laid down by various entities and try to work out what’s best on the whole. Society should make transitioning from obsolete practices as easy as possible in the aggregate. That way, the entire economy can move forward as rapidly as possible with the least amount of stress for all concerned.
Do you concur?