Linking ≠ endorsement. Enjoy and share:
- 5 of the Smartest New Smart-Home Gadgets | AOL Real Estate
Lockitron: The Lockitron is a Wi-Fi-connected door lock that allows you to lock and unlock your door using your smartphone. The $179 lock is simple to install and works with any smartphone — as well as older phones via SMS message — to lock and unlock your door on command. As an admin, you can grant access to whomever you want, for any time period you want. So, you can give your neighbor a virtual key to go let your dog out when a meeting runs late, or pass out virtual keys to your whole family while they’re visiting. An online log lets you see when your door is locked and unlocked and by whom.
Is it hackable? What isn’t?
- Will US investors pull the pin on housing? | MacroBusiness
In and of itself, investor buying is not a bad thing. It provides a source of demand which helps markets to clear; and, in this instance, it is also helping to provide rental accommodation for households unable/ unwilling to purchase a home. However, where it does become an issue is when investor behaviour is short-term and speculative in nature. Available information is limited, but the pace of the gains and their geographical focus in hard-hit regions alludes to speculation, as do the many anecdotal reports of strong institutional investor interest.
Amidst the activity data, a downtrend is clearly beginning to emerge. From their peak in January 2013, new home sales have fallen around 8% (to August). Existing homes sales held up through the first half of 2013, but higher rates and a potential softening in investor demand has since resulted in a 5% decline over September and October; pending homes sales’ 8% decline over the five months to October points to further weakness.
With mortgage rates remaining elevated and employment and income growth still subdued, the near-term fate of the US housing market looks set to remain heavily dependent on investor appetite. Best highlighted by the RealtyTrac report, there is a real risk that this marginal demand will abate, resulting in a deterioration in conditions and price growth.
The Fed knows this too. We hope it will damper enthusiasm to taper prematurely.
- Resident retention requires planning to avoid move outs | Property Management Minutes
The phone rings, upon answering we learn a resident wants to give a move out notice.
The standard response usually includes a question about when their lease actually ends, quoting either the 30 or 60 day lease termination notice and/or the lease break policy with a closing remark that the notice must be in writing and include the forwarding address to comply with state/local security deposit laws as well as lease compliance.
Not exactly, a fond farewell to a valued resident.
Lori Hammond goes on to suggest questions leading to encouraging the tenant to stay.
Hey, we like this service: “-concierge service for packages delivered when the resident is away from home.” Of course, there are issues with having to sign for some deliveries.
The latch-key idea is interesting, but be sure to have insurance to cover any liabilities associated with taking responsibility for children. A lawyer experienced in that field should probably help with the form the parents or guardians should sign.
- Yuan Passes Euro as 2nd-Most Used Trade-Finance Currency – Bloomberg
China’s yuan overtook the euro to become the second-most used currency in global trade finance after the dollar this year, according to the Society for Worldwide Interbank Financial Telecommunication.
People’s Bank of China Deputy Governor Yi Gang said Nov. 20 it is no longer in the nation’s interest to keep building up its foreign-exchange reserves, which totaled a record $3.66 trillion at the end of September.
The People’s Bank of China will “basically” end normal intervention in the foreign-exchange market and broaden the yuan’s daily trading limit, Governor Zhou Xiaochuan wrote in an article in a guidebook explaining reforms outlined following a Communist Party meeting that ended Nov. 12.
- Harold James and Domenico Lombardi consider whether China or the eurozone has what it takes to replace the US as the world’s economic leader. – Project Syndicate
Harold James and Domenico Lombardi:
While China is expected to overtake the US in terms of output by 2020, decades of rigid population-control measures will weaken growth in the longer run, leaving the US economy as the most dynamic….
The belief that a common currency and a common capital market would buttress financial institutions and deepen markets was a driving principle behind the eurozone’s formation. But, given the lack of a single debt instrument equivalent to a US Treasury bill, the crisis caused eurozone member states’ public-debt yields to diverge. Bank lending subsequently withdrew to national borders, and the idea of a European capital market disintegrated.
Likewise, in China, the absence of currency convertibility — together with a weak financial supervisory framework, which reflects a broader problem related to poor implementation of the rule of law — is impairing the economy’s prospects for leadership.
What do you think?
- ekathimerini.com | Eurozone factory prices slump to nearly 4-year low in October
Eurozone producer prices fell more than expected in October, data showed on Tuesday, with the annual inflation rate at a nearly 4-year low in a fresh sign of a sharp fall in inflationary pressures.
Prices at factory gates in the 17 countries using the euro declined 0.5 percent in October against September, the EU’s statistics office said on Monday, the first monthly decline in five months.
In our view, that’s why the ECB’s QE actions are correct versus Germany’s push for EU austerity.
- Natural Interest Rate – The Long Short Run
If the economy as a whole desires to leverage up, the result is an inflationary boom. If the economy as a whole desires to deleverage, a depression ensues. It is then the central bank’s job to intervene in the banking system in order to push the market interest rate to the natural interest rate, thereby balancing the economy at full employment without excess inflation.
The problem now is that the natural interest rate — that is, the liquid safe nominal interest rate on short-term US Treasury securities — is less than zero. Thus, the central bank cannot push the market interest rate there. Until something happens to raise the natural interest rate, we are stuck with a depressed economy.
- Economiqs – DEFINITION OF DEFLATION
Deflation is characterized by a sharp decline in asset prices. For producers, the collapse in the price of goods and services is a disaster. Remember the Great Depression in 1929, which brouht about the bankruptcy of hundreds of thousands of businesses and caused massive unemployment in the United States. It not only affects the price of goods and services. There are three types of core assets: goods and services, real estate – homes, apartments – and financial assets – securities listed on the stock market. A lasting deflation crisis will cause a collapse in the price of all three of these types of assets. The effects are: large corporate bankruptcies, mass unemployment, real estate crises — a sharp drop in prices, non-rented accommodation – price collapse of stocks and bonds. This last point leads to a reduction in household financial assets and more broadly security holders.
Thank you, Philippe Narassiguin and Economiqs.com.
- Bruegel | Blogs review: The natural interest rate framework
Brad DeLong writes that in the Wicksellian framework, the natural rate of interest is the interest rate at which planned investment (plus net borrowing from the government) is equal to desired saving at full employment (plus the net capital inflow from abroad). If the market rate of interest is below the natural rate, planned investment is greater than desired savings, businesses seeking to invest cannot sell enough bonds to finance investment and thus dip into their cash reserves, the monetary hot potato starts, and you get unexpected and rising inflation (and full or over-full employment).
- The German coalition agreement – What Does it mean for the Eurozone?
Interestingly, the agreement does not contain anything substantial that would solve the European debt crisis, re-ignite growth in the euro periphery, or even dampen the disastrous impact of austerity. Instead, the agreement contains a strong commitment to all of the deficit and debt rules in its current form. There is also nothing about a debt restructuring fund and an outright exclusion of common debt (read: eurobonds). While the Social Democrats have often criticised Angela Merkel’s approach to fighting the eurocrisis, this obviously has not been important enough for them to really push for any substantial change in the coalition negotiations.
… For the time being, the message from Berlin to its euro partners is: the euro crisis is just not our priority. The economic problems you are experiencing are not our problems and we will not move until it becomes absolutely necessary.
- Assisted Living Construction Stays Hot, but Focused in Certain Markets – Senior Housing News
Among the 31 markets covered in NIC MAP31, those with the largest number of units under construction were Houston and Minneapolis, each with more than 1,000 units under construction and amounting to more than 20% of assisted living construction nationwide.
Other markets of note included Phoenix, with 858 units, Chicago with 676 units and Boston with 675 units under construction.
- US construction spending up 0.8 percent in October | AP Business Headlines | Dallas Busi…
One troubling sign: Home construction fell 0.6 percent in October from September, dragged lower by a drop in single-family homes.
Deutsche Bank chief U.S. economist Joseph Lavorgna said that spending on single-family houses should rebound given plans by homebuilders to ramp up construction.
“The recent dip should reverse course given the ongoing improvement in permits for new construction,” Lavorgna said in a client note.
… permits for single-family home construction rose only slightly and were at the same pace as in May.
Single-family houses make up roughly two-thirds of the residential construction market. The pace of homebuilding has rebounded from the depths of the recession. But sales of new single-family homes have grown more slowly, and higher mortgage rates could slow them further.
- Are Cash Sales Creating a Dangerous Mirage?
“All-cash is driving up home sales nationwide, which looks good on paper,” RealtyTrac said in its most recent Foreclosure News Report.
Cash buyers tend to fall into one of four categories: institutional investors, “rich people,” retirees, and foreign buyers, according to RealtyTrac.
The National Association of Realtors recently reported investors are making up 35 percent of cash deals, and retirees are making up another 12 percent.
The current trend of institutional investors and foreign buyers snapping up properties and turning them around for profits is not a sustainable one, according to RealtyTrac.
We don’t think it’s that “financing is too costly.” We think the all-cash institutional buyers just get their money extremely cheaply.
The wealth is further concentrating. Wages haven’t kept pace with housing appreciation. If there hadn’t been the huge all-cash buyers, the recovery would have look different but the wealth would have been more spread out throughout the general population. Do you agree?
- Prologis to Boost Japan Rents, Buy Warehouses on Abenomics Bonus – Bloomberg
Kathleen Chu & Katsuyo Kuwako:
Prologis Inc. (PLD), the world’s biggest warehouse owner, plans to increase rents and spend as much as $600 million a year to develop warehouses in Japan as Prime Minister Shinzo Abe’s policies boost corporate confidence.
Abe’s pledge to end 15 years of deflation and the Bank of Japan’s monetary easing policy, dubbed Abenomics, have boosted sentiment, contributing to a recovery in the nation’s property market. Industrial spaces, such as warehouses, returned 7.6 percent on average for the year ended July, more than double that for office buildings, according to London-based Investment Property Databank Ltd.
- Creating Policy is Only Half the Battle | Mortgage News | Daily National and State Headlines
It’s well and good to have thorough documentation of a business operations plan, but it’s just the first step. What is equally if not more important is an audit trail of how protocols are being carried out. Be advised that regulators will not only be asking whether policies exist, they will be asking for validation that policies are being executed in day-to-day operations. This is where the issue of preparedness truly comes into question.
- Higher Price Gains Align with Higher Levels of Distressed Sales
Krista Franks Brock:
… distressed sales are more prevalent among higher-performing markets, according to Clear Capital’s Home Data Index Market Report released Monday.
The average annual price growth among the 15 top-performing markets is 19.2 percent, and distressed sales make up 24.5 percent of sales in these markets.
In contrast, prices in the lowest-performing markets average 4.9 percent over the year, and distressed sales make up a lower 17.2 percent of sales in these markets, according to Clear Capital.
- Use Lean Six Sigma to Improve Your Real Estate Investing and Be More Efficient
A pretty good overview and ideas: Tom Sylvester:
The 7 Wastes & Real Estate
For each category above, here are some example of where waste may be potentially lurking in your real estate business and how to remove/reduce it.
Tom covers all of the following:
- Apartment Showing
- Automated Rent Collection
- Standard Materials
- Paperless Office
- Clean, Organized Office
- Clean, Organized Material/Tool Storage
- Quarterly Inspections
- Advertising Properties Ahead of Time
- Where to look in Riverside County for cashflow properties – OC Housing News
From 2010 through early 2013, it really didn’t matter where you bought in Riverside County. All the markets were undervalued, and all of them were poised for future growth. Now that institutional money has inflated prices in several markets, buyers still interested in these markets must be more selective. Some markets have more cashflow properties than others, and some have more to rise than others before they are no longer undervalued.
The list below shows the markets where the average homes are the most cashflow positive. It’s calculated by comparing average rents to the median cost of ownership. If you plan to hold the properties for life and live on the rental income in your retirement, I would ignore whether or not the market is over- or under- valued and focus solely on where rents are most cashflow positive.
- Refi YES! — Critics: New Nevada short-sale provision ineffective
If banks continue to impose arm’s length agreements and a judge later rules they shouldn’t have, lenders could face a class-action lawsuit from homeowners who were forced to sign the document, Vohwinkel said. If a judge were to rule that banks can, in fact, require the agreements, lenders could sue, claiming homeowners colluded with friends, family or investors to sell their debt-laden houses below market value, he said.
- Green China? It Leads the World in Adding Renewable Electricity – Businessweek
China has earned a reputation as the world’s worst polluter. But if the International Energy Agency is right, the Asian nation is on course to set an example for the rest of the planet on the use of energy from renewable sources over the next quarter-century.
According to the Paris-based agency’s World Energy Outlook, China will add more electricity generating capacity from renewable sources by 2035 than the U.S., Europe, and Japan combined. Hydro power and wind power will be the two main sources of China’s renewably sourced electricity, with solar photovoltaic cells coming in a distant third, according to the agency’s forecast.
We think China needs to reduce coal use a great deal more than they plan.
- Buying vs. Renting Office Space: What Are the Pros and Cons for Your Business? | SOHO Business Group
Every budding, young business has to face the decision at some point. Should they rent office space or attempt to purchase their own? It might not seem like much, but it’s usually one of the first big choices a new company is forced to make. And it’s one that they often get wrong.
- Red Hot Real Estate Cools For The Holidays – CBS New York
Laurie JM Farr:
Looking at strength over the long term, Rood pointed to a return to pre-recession levels by the close of 2017, with the former Fannie Mae executive suggesting that gains would reach a total of 24 percent over the next four years. Among the mixed bag of key indicators, chief among them is the continued low level of inventory, driving gains much higher than the national average in some locations.
- Springfield set to conduct auction of tax-foreclosed properties in blight-reduction, home ownership effort | masslive.com
SPRINGFIELD [Massachusetts] — The city is conducting its third municipal auction of the year on Dec. 11, aimed at finding buyers for 25 tax-foreclosed properties in Springfield including 21 houses for sale.
The municipal auction, begins at 6 p.m., at City Hall. Registration begins at 5 p.m., and auctions are conducted by Springfield-based Aaron Posnik Auctioneers / Appraisers, on behalf of the city.
City officials including Mayor Domenic J. Sarno say the auctions benefit the city by returning vacant, city-owned properties to the tax rolls, and by protecting neighborhoods from blight and promoting home ownership.
- Southland home buyers shifting to condos as house prices rise – latimes.com
In October, sales of previously owned condos and other attached units increased 3.3% over a year earlier, according to research firm DataQuick. Existing single-family home sales went the other direction, falling 7.2%. In the first 10 months of this year, existing condo sales accounted for 22% of all Southern California home sales, the highest percentage in more than a decade.
Although it remains unclear whether young adults will retain their desire for urban living as they age, attached homes are likely to become increasingly familiar to Southern Californians. There’s simply little space left for row upon row of single-family houses — especially in the coastal counties.
“It’s almost an iron law,” Gerd-Ulf Krueger, chief economist with KruegerEconomics, said of the coming denser development. “It’s set in stone.”
- Huge private equity firm claims stake in Twin Cities real estate | Minnesota Public Radio News
Renters in other cities have filed complaints against Invitation Homes [Blackstone] with the Better Business Bureau and panned the company in online reviews. They say the company is very slow in responding to requests for repairs.
Even though Invitation Homes is likely now the biggest landlord of single-family homes in the Twin Cities, the company has been in Minnesota such a short time that its track record isn’t clear.
A number of properties owned by Invitation Homes – in Apple Valley, St. Paul and south Minneapolis – are still vacant, six months after the company bought them.
Gallina, the Invitation Homes spokesman, said the empty houses — and complaints from renters in other cities — can all be explained by the fact that the company is still learning the business. He said it’s taken longer than expected to secure permits and licenses for home renovations and rentals.
- Real estate photography 101: Use a good camera – Prime Property
An analysis by the online realty firm found that for homes listed between $200,000 and $1 million, those with photos taken with DSLR cameras sell for $3,400 to $11,200 more relative to their list prices. And across all price ranges, homes with DSLR photography were more likely to sell within six months than those with point-and-shoot photos.
This would apply to photos of rental properties as well.
- Private sector creates 215,000 jobs in November vs. 173,000 estimate: ADP
As always, the numbers will be read through the prism of Fed policy.
If the private payrolls count is an accurate barometer for the nonfarm payrolls reading the Bureau of Labor Statistics releases Friday, it could up the pressure for the U.S. central bank’s Open markets Committee to ease off on the $85 billion in monthly bond purchases its carries out through its quantitative easing program.
We still think it’s a bit early for the Fed to decide to taper even a tad.
- UPDATE 2-Top U.S. banks faulted on correcting foreclosure abuses | Reuters
Dec 4 (Reuters) – Top U.S. banks, including Bank of America Corp and Citigroup Inc, failed to fully comply with a government settlement to correct mortgage servicing abuses, a monitor of the settlement said on Wednesday.
Bank of America failed to file accurate documents in bankruptcy proceedings, and Citi’s mortgage unit failed to notify borrowers about missing documents within 30 days of a request for a short sale, the monitor, Joseph Smith Jr., said.
- NextLanding: Startup Spotlight – YouTube
- A Hard Lesson from Motown: They Will Steal Your Pension
Another reason why they’ll be renting: David Cay Johnston:
Properly funded and invested, traditional defined benefit pensions are the most economical way to save for old age, combining contributions in a large pool to absorb short-term swings and the vagaries of professional investment management. They also have much lower costs than 401(K) plans. And they require a much smaller reserve against an unexpectedly long life, where the actuarial risk is concentrated in one person who must save too much or risk dire straits late in life.
But, as millions of workers are learning, the laws requiring that money be set aside and prudently invested are more loophole than safety net. This is producing not just misery for those left broke and helpless in old age, as seems about to happen in Detroit, but it is eroding trust in democratic government and the rule of law.
- The 10 Most Corrupt and Least Corrupt Countries in the World | Reuters
According to Transparency International:
Here are the 10 least corrupt countries in the world, according to the index [bullets added]:
- New Zealand (tied with Denmark for No. 1)
- Sweden (tied with Finland for No. 3)
- Singapore (tied with Norway for No. 5)
- Canada (tied with Australia for No. 9)
Does that make them better targets for real-estate investing?
- Want to Look Great on Global Education Surveys? Test Only the Top Students – Businessweek
Very interesting info about Shanghai: Dexter Roberts:
There is, however, strong reason to believe Shanghai is not representative of China. Brookings Institution education expert Tom Loveless makes that argument convincingly in an October blog entitled “PISA’s China Problem.” (His blog came out before the latest PISA survey release. Loveless also kindly refers to an earlier story on the topic by us at Bloomberg Businessweek: “Chinese Education: The Truth Behind the Boasts,” April 4, 2013.)
- Deflation Trap Tests Riksbank’s Resolve in Fighting Bubbles – Bloomberg
How does a central bank tackle consumer price deflation and a potential credit-driven asset bubble at the same time?
Most of the consumer price decline stems from weak commodities prices and the effect of globalization, factors the Riksbank has little control over, according to Bergqvist.
The transmission mechanism is broken in the Money Multiplier because of all the weakening of banking regulations. The end of the Glass-Steagall Act in the US via the Gramm-Leach-Bliley Act was the single biggest mistake. That mistake sent financial tsunamis throughout the world.
So, how does the Federal Reserve charge interest on excess reserves and keep the commercial banks from passing on the costs to depositors and borrowers forcing those banks to lend into the real economy (Main Street)? It would require bold action by the Congress and White House.
Of course, if the Congress and White House were to develop the will to undertake this, they could just as easily compel the banks without the Fed having to charge interest. The problem appears to be with the entire banking system where banking is not treated largely as a necessary public utility and natural monopoly to a great extent rather than very much as a “Too Big To Fail” private (though publicly traded) profit center for banking oligarchies.
In addition, we have to stop worrying about globalization of the cost of labor. It’s inevitable. We need to only concern ourselves with the quality of life for labor. If safety, environmental, and other such standards are equally high around the world, labor in richer nations won’t continue to suffer from unfair labor practices in other nations. All boats will rise with the tide.
- Mortgage applications take a holiday as rates rise
It didn’t take much for the mortgage market to plunge into a deep freeze.
As temperatures fell across the country last week, so did mortgage applications, down 12.8 percent from the week before, according to the Mortgage Bankers Association. That includes an adjustment for the Thanksgiving Day holiday, but the shortened week still played a role in the drop.
“Essentially, the very short work week had a significant impact on the number of applications. Interest rates were up slightly and that pushed down on refinances, but we attribute the size of the drop mainly to the holiday,” said MBA spokesman Shawn Ryan.
- US manufacturing sector expands much more than expected in November
The U.S. manufacturing sector expanded at its fastest pace in 2½ years last month, an industry report showed on Monday, while the pace of hiring in the sector also accelerated.
The Institute for Supply Management (ISM) said its index of national factory activity rose to 57.3 in November—its best showing since April 2011—from 56.4 the prior month.
Is this in anticipation of more exports, or have they actually received orders (domestic or foreign)?
When the taper comes, it will boost the dollar thereby harming emerging markets as immediate investment targets. A stronger dollar though will mean Americans will be able to buy imports more cheaply while US exports will become more expensive overseas.
How will it all balance out?
Here’s a different take on it: https://www.macrobusiness.com.au/2013/12 /us-economy-cant-take-qe/
Here’s the CNBC video:
- Multifamily Acquisitions: Five Deal Questions – Multifamily Blogs — Experts — Technology, Products :: MultifamilyBiz.com
John Wilhoit Jr.:
This post is a departure in that these “deal questions” I am asking you to consider have little to do with the nuts and bolts of buying a multifamily asset; they are specific to your long-term strategic thinking about your purchase. We all know that anyone can buy a deal; it’s what you do with it that makes or breaks the transaction.
Best practices in acquisitions requires a plan of action pre-closing (of course). Answer the following five questions prior to closing on your next acquisition and you will be miles ahead in creating a vision for the asset and how it fits within your holdings.
- Fed’s Williams: Cutting rate on banks’ reserves ‘would make sense’ | Reuters
(Reuters) – The Federal Reserve has more reason than ever to cut a key U.S. lending rate it has kept at just above zero since the depths of the financial crisis, a top Fed policymaker suggested on Tuesday.
The Fed set the interest rate it pays banks on their excess reserves at 0.25 percent when it introduced it in 2008, and it has sat there ever since.
But reducing that rate could force more money into the broader financial system in the form of loans to stimulate investment, hiring and economic growth. Banks keep about $2.5 trillion in excess reserves.
Critics worry whether money markets can still function if rates fall to zero; indeed, over the years, the Fed has considered and rejected the idea of reducing the rate in part because of that very concern.
But a new central bank tool blunts that risk, Williams said on Tuesday.
Known as a fixed-rate full-allotment reverse repo facility, the tool has been touted as a way to mop up excess cash in the financial system once the Fed needs to start raising rates.
But it could also be helpful should the Fed decide to lower the rate it pays to banks, Williams said.
“We do have this ability through this reverse repo that’s been tested by the New York Fed that basically makes sure we can control short-term interest rates even if we … lowered the interest on reserves closer to zero,” Williams said.
We’d like to see a layperson’s model of how that would work. Wouldn’t you?
- Top 5 Next-Gen Technology Trends for Insurers | PropertyCasualty360
Strategy Meets Action (SMA) surveyed 80 insurance-industry respondents to determine the top five next-gen technologies carriers are pursing. Respondents were 42% business executives, 48% IT professionals and 10% producers/others from carriers of all sizes across both commercial and personal lines, as well as a small number of life insurers.
…where most insurers intend to expand their capabilities.
1 — Analytics and Big Data
2 — Mobile Technologies
3 — Collaboration Technologies
4 — Cloud Computing
5 — Telematics
- Optimism Over Vietnam Property, With Caveats – NYTimes.com
Vietnamese lawmakers have debated draft laws aimed at allowing foreigners to buy more than one apartment unit, secure apartment leasehold rights longer than the current limit of 50 years and buy land, David Lim, a Ho Chi Minh City lawyer who is advising the government on land reform, said last month.
Mr. Lim said the draft laws were codifying years of piecemeal reforms and clearing up legal gray areas. They are likely to help the country compete with its Southeast Asian neighbors for foreign investment, he added.
- How Real Estate Fits Into Your Retirement – Yahoo Finance
Ann G. Schnorrenberg:
Homeownership used to be considered the American Dream. Most baby boomers grew up with a goal of owning their own home. Now, many members of the younger generation question whether it is a good idea to buy real estate.
No wonder – having watched the housing market collapse five years ago, combined with a difficult job market, buying a house or condo may not be a wise move anymore. Homeownership has been steadily falling from its high of 69.2 percent in 2004 to a current rate of 65 percent, according to the U.S. Department of Housing and Urban Development.
So, is it a good idea to buy a house or condominium? To be clear, this is a question about purchasing real estate as a residence, not as an investment. When considering whether to buy, there are three major issues to consider: liquidity, return on investment and the personal use value.
- Katharina Pistor crticizes the new great divide in international monetary management. – Project Syndicate
… a central bank’s mandate is price stability in the national economy that it serves, and price stability is influenced by exchange rates. So a case can be made that central banks should have the power to intervene in foreign-exchange markets, and that this power should — at least in times of crisis — include commitments to foreign central banks to provide unlimited liquidity in the domestic currency.
What is less clear, though, is whether the same justification can be used by central banks to create permanent swap lines with just a few other central banks of their choosing. This is akin to an announcement on a cruise ship approaching an iceberg that the crew will definitely rescue first-class passengers but not necessarily others.
The C-6 swap club’s members may be correct in thinking that global finance requires more proactive central banking. But is it fair or right that they should be allowed to take matters into their own hands and determine a system of international monetary management designed to serve their own interests, with little regard for other, equally exposed, countries?
- Appellate court throws out long-standing sniff test for ‘sham’ joint mortgage and title businesses | Inman News
In a major reversal for government efforts to regulate business ventures among real estate brokerage, title insurance and mortgage companies, a federal appellate court has thrown out HUD’s long-standing 10-point test that defines key standards for affiliates under the Real Estate Settlement Procedures Act (RESPA).
A federal district court concluded that the 17-year-old policy statement was unconstitutionally vague, did not constitute agency regulations and therefore did not merit deference by the courts. That decision was appealed, with the federal government weighing in strongly on the side of the buyers and HUD.
Now, the appellate court has upheld the lower court’s findings.
- Are the Chinese buying California homes in large numbers? – OC Housing News
Are Chinese buyers pricing you out?
The California Association of Realtors pegged foreign sales at 5.8% of the state’s transactions.
Let that number sink in, folks. This is not an invasion. Foreign buyers represent a small fraction of the buyer pool. In case you hadn’t noticed, the Irvine Company and FivePoint Communities are building thousands of new homes in Irvine. Shea Homes and Toll Brothers is building several hundred in Lake Forest’s Baker Ranch. Prices may be inflating, but that’s due to policies of lenders, federal reserve, and our government, not foreign buyers.
Some of the stories are a bit hyped and for purely marketing reasons, but we think that some of it is that the reader should combine foreign buyers with domestic institutional buyers to get an overall view of just how much all-cash buying is going on, why, and its overall impact.
- Report: Lending rules could have cut defaults in half – MSN Real Estate
Nearly half of all mortgage defaults from the housing bust might have been prevented by forthcoming consumer-protection regulations, but another 25 percent of loans that didn’t default might not have been made, according to an analysis by economists at Goldman Sachs.
The Goldman analysis tries to quantify the impact of the forthcoming “qualified mortgage” regulations, which were part of the 2010 Dodd-Frank financial-regulatory? overhaul. The law changed lending rules so that mortgage lenders are legally responsible for ensuring a borrower can repay a loan. The Consumer Financial Protection Bureau was tasked with writing rules for a “qualified mortgage” that lenders could make that would automatically satisfy the new ability-to-repay mandate.
In other words, lax regulation was a huge cause of the Great Recession.
- Indonesia’s Current-Account Gap Prompts a Rethink on Currency – Real Time Economics – WSJ
A weaker rupiah helps Indonesia’s exports by making them cheaper on global markets; likewise, it cuts demand for imports by making them more expensive. Trade data Monday showed exports rose 2.6% on-year in October while imports fell 8.9%, producing a small but surprising trade surplus.
“If fundamentally the rupiah should be weaker, there’s no point in intervening in the currency market continually and depleting your FX reserves,” he said. “You allow the rupiah to depreciate, while raising rates to make sure it doesn’t tank too sharply.”
Of course, higher interest rates help on the current-account front as well by attracting foreign investment flows.
“I don’t think most people expect the next bout of taper turmoil to be as severe as the one last summer, but let’s say it is and this inconsistency has created doubt about authorities’ commitment to low and stable inflation — that’s the kind of thing that could add to selling pressure on Indonesian financial assets,” he said. “Bank Indonesia may get more than it wished for in terms of currency depreciation.”
- Monetary Policy Will Never Be the Same | iMFdirect – The IMF Blog
The standard argument in favor of letting the exchange rate adjust was stated by Paul Krugman at the conference. If investors want to take their funds out, let them: the exchange rate will depreciate, and this will lead, if anything, to an increase in exports and an increase in output.
Three arguments have traditionally been given, however, against relying on exchange rate adjustment. The first is that, to the extent that domestic borrowers have borrowed in foreign currency, the depreciation has adverse effects on balance sheets, and leads to a decrease in domestic demand that may more than offset the increase in exports. The second is that much of the nominal depreciation may simply translate into higher inflation. The third is that large movements in the exchange rate may lead to disruptions, both in the real economy and in financial markets.
The evidence, however, is that the first two are much less relevant than they were in previous crises. Thanks to macroprudential measures, to the development of local currency bond markets, and to exchange rate flexibility and thus a better perception by borrowers of exchange rate risk, foreign exchange exposure in emerging market countries is much more limited than it was in previous crises. And thanks to increased credibility of monetary policy and inflation targets, inflation expectations appear much better anchored, leading to limited effects of exchange rate movements on inflation.
However the third argument remains relevant. And this is why central banks in emerging market countries have not moved to full float, but to “managed float,” that is the joint use of the policy rate, foreign exchange intervention, macroprudential measures, and capital controls.
“… the first two are much less relevant than they were in previous crises.” They are still relevant. We saw them in action when Ben Bernanke said the Fed will taper when the time comes, but the markets mistook that as saying the time has come.
- The Beginning of the End for the Apartment Pricing Boom? – CoStar Group
The apartment boom is eventually coming to an end; it’s only a question of when. An increase in deliveries and a cooling off or stabilizing of purchases by REITs are a couple of the reasons why this property type will likely see a correction in pricing.
New construction is starting to roll in and Exhibit 1 below reveals what the tip of the iceberg looks like. The grey bars show that sales of apartment buildings aged two years or less spiked dramatically in 2012, and that 2013 apartment sales will almost undoubtedly end up passing that.
What is perhaps more interesting is that pricing in 2013 has come down from 2012. This does not mean that the market for these types of assets has clearly topped out, but that it could soon.
It’s a matter of basic economics: Demand simply cannot keep up with the supply wave. Otherwise, one has to assume that either more buyers who have been mysteriously lurking on the sidelines will jump into the market, or that current buyers, fueled by even larger capital raises than in previous years, will be able to pick up the slack.
- Blackstone Builds Warehouse Landlord With Discount Deals – Bloomberg
Brian Louis and Hui-yong Yu:
IndCor Properties Inc., the Chicago-based industrial real estate company that Blackstone formed in 2010, has more than doubled in size since its inception and continues to make acquisitions. Demand for U.S. warehouse space is outpacing construction, leading to higher lease rates and declining vacancies as spending by consumers and businesses recovers.
“It’s an essential part of the economy as we move goods around the country,” Frank Cohen, Blackstone’s senior managing director overseeing industrial investments, said in a telephone interview. “You don’t just need it in New York or Los Angeles. You need toothpaste everywhere. The tile guy needs tile, or plumbing supplies, everywhere.”
- Calculated Risk: Thursday: Unemployment Claims, Q3 GDP
It appears these small independent lenders are focusing on the purchase market (probably marketing through real estate agents – and selling the loans to Fannie and Freddie). A result of this change in market share is the Purchase Index is probably understating the increase in purchase activity.
- Japan Cabinet approves 18.6 trillion yen ($182 billion) stimulus package
The Japanese government approved an 18.6 trillion yen ($182 billion) stimulus package ….
Japanese Prime Minister Shinzo Abe ordered the government to compile the stimulus package after deciding to raise the national sales tax earlier this year. Scheduled to take effect in April, the tax hike will lift the national sales tax to 8 percent from 5 percent currently.
New bonds will not be issued to pay for the package. Instead the package will be covered by tax revenues ….
Well, maybe the government’s spending will be more productive than letting the taxpayers retain and spend the money, but we think this is just mostly spinning wheels. It’s not as if Japan’s savings rate is still high. They have, however, been paying down household debt when possible. Also, Japan is lessening taxes on corporations. That’s subsidizing corporations at consumers’ (sales taxes) expense though. Regardless, why doesn’t Japan issue bonds rather than just produce debt-free yen and spend them into the economy?
- mainly macro: Here we go again
The only major lever the government has to do something about lack of growth and rising unemployment is fiscal policy, yet it is using this lever in completely the wrong (pro-cyclical) direction, making everything worse.
- Where are they now? 15 of the Most Expensive Retail Locations from 1988 — Cushman & Wakefield Retail
The most dramatic growth came from locations that were not on many people’s radar 25 years ago, including three of the most expensive shopping locations anywhere on the planet, all in Hong Kong.
When I was a boy, the main thing people associated with Hong Kong were inexpensive but well-made dress shirts. How times change.
- Currency wars and the euro | vox
Strong foreign capital inflows into Eurozone equity markets have been a key source of upward pressure on the euro over the last several months. Should this continue, there is likely to be a need for the ECB to become more aggressive on monetary policy (both relative to the US and Japan) to avoid excessive euro appreciation. Failure to react would create an additional headwind for Eurozone growth at a time when the recovery remains very weak and fragile.
There is already some evidence that the ECB is deviating from the old ways of the Bundesbank. However, more will be needed to avoid an excessively strong euro and excessively tight overall financial conditions.
- Are Home Sales Tanking? | Keeping Current Matters
Sales of non-distressed properties are increasing nicely. However, as the inventory of distressed properties continues to shrink, the number of overall properties sold may diminish over the next few months. This is a sign that we are entering a much healthier housing market.
Do you think that statement is supported? Can you think of any reasons why it may not be accurate? Feel free to chime in.
- RealtyTrac report shows ‘ultra-high-end foreclosures’ increasing dramatically in U.S. – Albuquerque Business First
A new report released by RealtyTrac Wednesday shows “ultra high-end foreclosures” have increased dramatically in the U.S. this year.
While overall U.S. foreclosure activity has decreased about 23 percent so far this year, activity on homes in the $5 million-plus value range is up 61 percent from the same time period in 2012, the analysis showed.
- Zillow: Home values will stabilize, mortgages will be easier to get in 2014 | Inman News
Zillow is making four “bold” predictions for 2014: U.S. home values will increase by 3 percent; mortgage rates will crack 5 percent; borrowers will have easier access to a mortgage; and the homeownership rate will drop to its lowest level in 20 years.
Zillow Chief Economist Stan Humphries says that the more modest home value growth he predicts for 2014 reflects a more mature, stable market that will exist a year from now. “(In 2014), home value gains will slow down significantly because of higher mortgage rates, more expensive home prices, and more supply created by fewer underwater homeowners and more new construction,” Humphries said in a statement.
- Qualified Mortgages | Dodd-Frank Mortgage
A number of the big banks will defy the tighter lending standards that are set to kick in next month, and will offer loans that don’t meet the definition of a qualified mortgage, a new designation intended to show that borrowers can afford their mortgages.
To be sure, lenders are not forbidden from making loans that don’t meet qualified mortgage standards. They could, however, face greater legal liability on such mortgages, according to the Journal. Mortgage investors are also likely to steer clear of purchasing such loans, according to the newspaper. [WSJ]
- Leading Japan Economist Says Abe On Right Track, BOJ a Risk – Japan Real Time – WSJ
A leading Japan economist says Prime Minister Shinzo Abe’s economic policies are on the right track, but warns that the Bank of Japan could upend the positive momentum.
Nomura Research Institute chief economist Richard Koo says Mr. Abe and his “Abenomics” program are finally addressing Japan’s fundamental economic problem: getting households and businesses to borrow.
Mr. Koo said the “trauma” that keeps Japanese companies from borrowing can be overcome with measures such as tax breaks for corporate investment — one part of Mr. Abe’s strategy. Another good move on Mr. Abe’s part is government stimulus to make up for a lack of private-sector demand, he said.
Mr. Koo disagreed, however, with government plans to lower the corporate tax rate in tandem with other tax incentives. Such a plan would reward all profitable firms, not just those that are investing, he said.
- Is Singapore real estate losing its shine?
Demand for Singapore real estate will fall next year, according to a report from global accountancy firm PricewaterhouseCoopers, which said the market slipped four places in its 2014 ranking of property markets.
“On the one hand, investing in real estate is getting more expensive due to the expected higher interest rates, compressed capitalization rates [which refer to the rate of return on a property based on its expected income] and tighter regulations. On the other hand some see room for better returns with low vacancy rates and potential for higher rentals,” he [Choo Eng Beng, real estate leader at PricewaterhouseCoopers (PwC)] said.
PwC said a huge spike in demand for Japanese property had propelled Tokyo to the top spot, following a five-year absence from the top rankings. The sudden increase in popularity is due to the government’s radical economic stimulus plan, which has resulted in a flurry of purchases in anticipation of higher prices, PwC said.
- Banks lobby to underwrite bad loans with no risk retention – OC Housing News
- This property was purchased on 5/19/1995 for $230,000. The former owners used a $218,500 first mortgage and a $11,500 down payment.
- On 12/22/1997 they obtained a $49,500 stand-alone second. Two and one-half years after purchase, they already had all their money out plus an extra $38,000 to blow.
- On 8/26/1999 they refinanced with a $240,000 first mortgage and obtained a $30,000 stand-alone second.
- On 9/28/1999 they opened a $60,000 HELOC.
- On 1/29/2002 they refinanced with a $297,000 first mortgage.
- On 4/16/2002 they obtained a $48,000 HELOC.
- On 3/18/2003 they refinanced with a $316,000 first mortgage and opened a $35,000 HELOC.
- On 7/15/2003 they opened a $79,000 HELOC.
- On 2/24/2005 they got a $153,000 stand-alone second.
- On 9/29/2005 they refinanced with a $472,000 first mortgage and opened a $94,950 HELOC.
- Assuming they maxed out the final HELOC, and given their past history, we can surmise they did, the total property debt was $566,950.
- Total mortgage equity withdrawal was $348,450 including their $11,500 down payment.
So would you give them a loan? I suppose you could gamble that another lender will be more foolish than you and refinance you out, but nobody wants to be the last lender when a Ponzi implodes.
You see, any rational person can spot a Ponzi. If lenders retained risk, they would not underwrite loans to Ponzis like these. So unless you think giving loans to people like this is a good idea, you should oppose efforts to soften risk retention standards.
We’ve read that FICO scores are vastly more important than down-payment percentages. Nevertheless, we aren’t even sure we like mortgage securitizations at all. 100% skin in the game was better. So was Glass-Steagall.
- Safety Tips for Landlords and Tenants for the Holidays
This is well worth reading. Sharon Vornholt:
We have now officially headed into the holiday season with Thanksgiving last week. Traditionally many people will also begin decorating their homes for Christmas this week. I thought it was a perfect time to talk about how property owners can keep their property and their tenants safe.
- Britain’s sugar rush economy fuelled by house prices masks perilous imbalance | Business | theguardian.com
It is not all good news. Britain is having a sugar rush recovery dominated by rising house prices and consumer spending. Business investment was supposed to rise this year but instead continues to fall. Net trade was supposed to boost growth but is subtracting from it. The recovery looks more unbalanced than ever.
- Home Prices Rise For The 20th Month – Business Insider
“The slowdown in price appreciation is positive for the housing market as almost half the states are now within 10 percent of their respective historical price peaks,” Mark Fleming, chief economist at CoreLogic said in a press release.
Adjusted for consumer-price inflation?