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- Stratospheric Views, and Prices – NYTimes.com
… nearly $11,000 per square foot. That’s Per. Square. Foot.
Manhattan has always attracted a number of well-to-do globe-trotters who would happily spend a couple of million, maybe even $10 million, for a snazzy pied-à-terre on the Upper East Side. But as increased numbers of global billionaires have set their sights on Manhattan, there has been an absolute explosion in prices for top-of-the-market luxury apartments.
One reason for that is simply a low supply of sleek apartments available for the rich and famous. There is not a lot of suitable, empty space in Manhattan for those sorts of developments, which can easily require more than a decade of planning and construction.
With the continued economic malaise across Europe and heightened political unrest in hot spots around the world, foreign and American billionaires alike are seeking safer places to park their assets. New York, say analysts, looks like a pretty safe bet these days.
There are millions of people in the US who work hard, are honest, and live a whole year on less than these people are spending on one square foot for their apartments. What do you think about that? Should anything be done about it? If so, what?
- No need to worry about hybrid ARM resets | Inman News
Of the hybrid ARMs originated during the easy-credit days of the bubble years, interest rates would need to jump a full 3 percent (300 basis points) for hybrid rates to increase. Indeed, most of those borrowers will likely see their initial rates, and therefore their monthly mortgage payments, decrease, not increase, when their loans reset ….
Initially, when the idea was first introduced that we should worry about resets, the Fed had not yet implemented its current quantitative-easing methods and levels. There was a legitimate concern the Fed could overshoot price (rather than monetary) inflation. However, if anything, the Fed has been severely undershooting all along by funding Wall Street rather than main-street firms, individual consumers, and households.
- BBC News – UK ‘fastest-growing Western economy’
The UK is set to grow faster than any other Western economy, according to the ICAEW – the body representing English and Welsh accountants.
How much of that is due to a forming housing bubble spurred on by overly low rates, overly relaxed lending standards, and ultra-rich and middle-class foreigners investing in primarily London, driving citizens out into the suburbs and farther?
- Real Estate Matters | If you buy a foreclosure, expect problems
Ilyce R. Glink and Samuel J. Tamkin write:
You certainly can talk to a real estate attorney about your complaint, but we recommend that you learn more about the issues you faced and how easy or hard it would have been for someone to find out about them. Just because you purchased a home with problems doesn’t mean that you will find a party responsible to sue and get money from.
We agree with that provided there weren’t purchase-agreement conditions stating that the property is warranteed against the discovered problems. That’s unlikely though with REO (bank Real Estate Owned). Banks usually sell “as is.”
- Cornell Seeks to Bolster Real Estate Program | The Sun
David Janeczek reports:
Another project Quan said will broaden the real estate program’s reach is is the Cornell International Real Estate Case Competition, which will be held Nov. 14 this year.
Quan said the five-year-old competition takes place every year in New York City and features teams of top real estate students from universities in China, the Netherlands and the United Kingdom, as well as top U.S. real estate programs. The teams are given four days to examine an actual real estate transaction and then present their analyses to a panel of judges made up of top real estate executives, according to the center’s website.
Do you think the starting salaries of the winning students are high?
- Fort Worth home prices expected to rise another 7.5 percent in the next year | Sandy Baker…
Sandra Baker reports:
Fort Worth home prices are expected to rise 7.5 percent by the second quarter of 2014, according to CoreLogic, a provider of residential property information and analytics.
The prices rose 6.3 percent in the second quarter from a year ago, CoreLogic said.
Nationwide, home prices increased 10.1 percent in the second quarter. They are expected to be 16 percent above the trough in the fourth quarter of 2011 by the end of June, CoreLogic said.
Price appreciation is projected to slow to 5.4 percent across all markets by the beginning of 2014, CoreLogic said.
“Prices are now rising in nearly 90 percent of metro areas, and in all metro areas with populations greater than 1 million,” said David Stiff, economist for CoreLogic Case-Shiller. “The strongest growth continues to be recorded in cities that were at the center of the housing bubble, but investor demand in those markets appears to be waning, meaning rapid rates of price appreciation are likely unsustainable.”
- Proposal to Tackle More Problem Properties in Rockford
Rockford, Illinois: Jessica Geraci reports:
ROCKFORD (WIFR) — Abandoned and crumbling homes are a common sight in several Rockford neighborhoods, a negative trend many people want to reverse as quickly as possible and some Rockford city council members plan to get more aggressive in dealing with problem properties.
- QE3 Update – The Real Estate Sinkhole Is Growing – Seeking Alpha
Ramsey Su writes:
At the moment, there exists a GSE reform bill authored by Corker and Warner. Its status is unknown. This bill heads in the direction of privatizing the agencies. If it is passed, there will be no more agency MBS for the Fed to buy, rendering QE3 useless.
On the other extreme, Obama has nominated Mel Watts as the director of FHFA, the agency that oversees Freddie and Fannie. Presumably, the director will lead the agencies out of conservatorship. Watts supposedly favors continuing the government’s role in the secondary market, and to include principal reduction as a remedy for borrowers in default. If Watts is confirmed and indeed converts the agencies into free mortgages for all, then there is no need for Mortgage Backed Securities, one might just as well roll them all into generic Treasuries, backed by the U.S. government.
However, the Fed could switch its source of bonds.
- Swiss Banks May Face Higher Leverage Ratio Requirements | Economy Watch
Swiss banks could be forced to raise their minimum leverage ratios to as much as 10 percent, reported the Wall Street Journal on Sunday, in a move aimed at improving industry stability — yet could see banks have to cut down on their service offerings.
Higher leverage ratios are meant to ensure that in the event of a crisis, banks can be recapitalised without causing panic or needing taxpayer cash. Credit Suisse and UBS, the two largest banks in the nation, recently announced that their ratios had reached 3.5 percent and 3.2 percent respectively.
The proposed ratios are two to three times higher than the requirements set out by the global Basel III accord, which is due to expire in 2019. The European Union also mandates just a minimum 3 percent leverage ratio by 2018, while U.S. financial regulators recently called for a leverage ratio requirement of up to 6 percent for the country’s big banks, also by 2018.
3% is mighty low. We should think that the lower the percentage, the less any government (its taxpayers) should conduct a bailout. The lower the ratio, the more investors in bank stocks and bonds should buy at their own risk and take the full hit in the event of a crash.
A better model would see bank regulators takeover a bank (at least temporarily), backstop it, and reorganize it setting it on a proper footing. The investors should still have to take the financial hit to the point of being wiped out before the taxpayers should foot any of the bill. Do you agree?
- Don’t Blame Congress for Cutbacks in Public Investment – Bloomberg
Matthew C. Klein writes:
It’s easy to criticize the economic policy choices of the U.S. Congress, so you could be forgiven for believing the Financial Times that the U.S.’s legislators are “threatening future growth” by cutting spending on “federal investments that boost output, rather than transfers such as pensions and health care for the elderly.”
Matt O’Brien at The Atlantic went further, saying that he hopes “you like the taste of seed corn, because that’s what our policymakers keep putting on the menu.” These complaints are misleading.
After reading Matthew’s article, we’d like to point out that state governments often operate under balanced-budget laws. They can’t deficit spend the way the US federal government can. Secondly, many businesses have been sitting on cash, but they really aren’t sure where to put it what with uncertainty. We think investing in research and development is the right place for most of them, but the federal government could help with that via better tax policies tied to on-the-job-training incentives to take up more of the unemployment slack.
- Welcome to the Two-Speed Economy | BlackRock Blog | Global Market Intelligence
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He writes:
Either the global and U.S. recoveries will eventually broaden or the rebound in manufacturing will peter out as inventories start to climb too high.
- FHFA to Stop ‘Forced’ Homeowner’s Insurance | Realtor Magazine
The housing regulator [Federal Housing Finance Agency] will ban fees for the coverage, which is often forced on borrowers whose regular homeowners’ policy has lapsed, despite industry objections that such a move encroaches on state regulators. Rather than set rules on what insurers can charge for such policies, which is generally the purview of states, the FHFA will prevent mortgage servicers that do business with Fannie Mae and Freddie Mac from accepting certain payments.
- Investors Cool to 2 Chinese Bank Offerings – NYTimes.com
Neil Gough reports:
Two Chinese banks that sold nearly $2 billion worth of shares in Hong Kong stock market listings received lukewarm receptions on Wednesday from investors concerned about how China’s financial system would cope with a potential deluge of bad debt that could swamp the country’s economy.
Local governments were responsible for much of that borrowing, as they plowed money into hulking infrastructure or pet projects in an attempt to create jobs and increase gross domestic product.
Now, as growth slows and the new leadership in Beijing searches for ways to rein in wasteful investment and reckless lending — topics that analysts say are on the agenda of a crucial Communist Party planning session that begins on Saturday [November 9, 2013] — some analysts and investors see big trouble ahead, especially for the financial institutions that bankrolled local government spending sprees.
Moody’s surveyed nearly 400 local government financing vehicles in June, concluding that only 53 percent of them had enough cash available to meet their debt and interest payment obligations in 2013 without resorting to refinancing or taking on new debt to pay off the old. “The stand-alone financial profiles of many L.G.F.V.’s are very weak,” the ratings agency concluded.
- 3 Reasons an Adjustable-Rate Mortgage Is a Great Idea
Sound advice: Patrick Morris reports:
Doing the calculation for the maximum potential rate increase and understanding the costs associated with it is crucial, he [“Jim Linnane, retail division sales manager with Wells Fargo Home Mortgage”] warned, as “too often the benefits of the low interest rates gets a lot of attention, but where rates could go doesn’t get as much attention.”
- The US Government is not “$16 trillion in the hole” | PRAGMATIC CAPITALISM
Cullen Roche writes:
There was a very scary sounding report on CNBC over the weekend that said the US government is “$16 trillion in the hole” The balance sheet the article used was overly simplistic and extremely misleading. The asset side of the balance sheet showed just $2.7 trillion in assets. Which is accurate, if you exclude almost all of the assets the federal government actually owns.
He certainly has a point.
- What’s wrong with Europe? | vox
Isabella Rota Baldini and Paolo Manasse write:
Italy, the largest net contributor relative to its GDP, pays to the EU budget 0.38% of its GDP per year; Hungary, the country that most benefits from the EU budget, receives transfers equivalent to 4.67% of its GDP. The size of the transfer scheme in the US is of a much larger magnitude. The poorest states, such as West Virginia, Mississippi, and New Mexico in the decade 1990-2009 have received transfers between 244 and 261% of their GDP in 2009, while rich states, such as New Jersey, Delaware, and Minnesota have given contributions that in total amount to 150-206% of their 2009 income.
The crisis has slowed down the process of convergence between European economies. This happened because the effects of demand shocks were amplified by pre-existing supply-side structural problems in the markets for goods, labour, and credit. The crisis has also highlighted the inadequacy of European institutions, and has exposed the faults in their design (Wyplosz 2013).
Unlike the US, the integrity of the Eurozone ultimately depends on the political will of each member state; this makes the Eurozone intrinsically vulnerable to speculative attacks. The way to shed the Eurozone from the risk of disintegration is long, and fraught with political obstacles. It requires each country to jumpstart the path of structural reforms, and it requires Europe to gradually establish a federal budget, an inter-state insurance scheme, and enforce a no-bailout commitment. Last but not least, the Eurozone needs to move away from centralized system of ineffective and invasive rules (Leipold 2013). This is a path worth pursuing, since the alternative — the disintegration of the Eurozone — is quite dire. The benefits of free movement of goods, persons and investments — the factors that make the US economy strong — could be at stake.
- More Store Closings, Asset Sales May Not Be Enough to Save Sears, Analyst Reports – CoStar Group
Mark Heschmeyer reports:
Scott Tuhy, a Moody’s Investors Service vice president and senior credit officer, noted that, as the retailer’s losses widen, planned asset sales are unlikely to help.
“As losses widen, Sears is getting more aggressive in paring back non-core holdings,” Tuhy said, adding that the efforts to pare back non-core holdings could help Sears to some extent. Tuhy said the Sears Auto Center business, which Sears has been working to reposition, would likely be of greater value to other firms that have greater leverage and scale in auto parts and related services than the rest of Sears does.
“However, while these asset sales will provide liquidity, they do not help Sears overcome its bigger problem – namely, how to stem losses and stabilize revenues, Tuhy said.
Sears, which had 3,418 stores, including its Kmart brand, as of March 2007, now has fewer than 2,073 – a reduction of nearly 40%.
- Eurozone inflation surprises to the downside. ECB will grudgingly be forced to cut rates. | Bond Vigilantes
More on the currency wars: Stefan Isaacs writes:
The ECB will no doubt have monitored the recent steady appreciation of the euro (see chart), which has effectively acted as a tightening of policy and will likely have a disproportionately negative effect on the periphery. Coupled with the latest inflation data, the strengthening of the euro will no doubt increase calls from the doves on the Governing Council (who should be acutely aware of the rising risks of a Japanese-style deflationary trap) to run a more stimulative policy.