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- Shanghai Glut Rises With Tallest Tower: Real Estate – Bloomberg
When completed in 2015, the Shanghai Tower will be China’s tallest building. The 632-meter (2,074-feet) skyscraper will also deepen a glut of offices in the city, putting pressure on rents.
The project, in the Lujiazui financial district, will add 220,000 square meters (2.4 million square feet) of office space, or more than 10 percent of the new supply forecast for the city in 2015, according to RET Property Consultancy Ltd. About 2 million square meters of grade-A offices will be added between 2014 and 2015, more than double the supply in the previous two years, according to broker Savills Plc.
- Blackrock Jobs Barometer | BlackRock Blog | Global Market Intelligence
Policymakers around the developed world are trying to boost employment, including through ultra-loose monetary policies.
The charts below show a selection of metrics to gauge the strength of the jobs market in the United States, Eurozone, Japan and UK. The left bar chart shows how far various employment measures have moved since their worst points in and after the financial crisis. Click on the blue circles to view the history of individual gauges in line charts on the right.
Click on the “Employment to Population Ratio.” Is that all due to Baby Boomers retiring? We don’t think so.
- Annual Report to Congress Shows Progress | The HUDdle
Today [December 13, 2013], the HUD released its Fiscal Year (FY) 2013 Annual Report to Congress on the Financial Status of the Mutual Mortgage Insurance (MMI) Fund, which reports the results of an independent actuarial evaluation of the Fund. According to the independent actuary, the Fund has gained $15 billion in value and now stands at an economic net worth of negative $1.3 billion with a capital reserve ratio of negative 0.11 percent. This is a 92 percent improvement in the capital reserve ratio compared to last year. The independent actuary anticipates that under its model, and absent any policy changes, the Fund will reach the mandated two percent reserve ratio by 2015 — two years sooner than previously estimated.
- In The Balance : Wealth Recovery Still Not Complete, Remains Uneven Across Families and Locations
If the values of financial assets and house prices continue to increase rapidly, all three measures of household wealth likely will exceed their prerecession peaks in the near future. When average inflation-adjusted net worth exceeds its 2007 high and reaches a new peak, this will mark the end of the longest stretch without reaching a new wealth peak in three decades. Average inflation-adjusted net worth reached a peak at the end of 1972 that was not surpassed until the end of 1984.
In the earlier case (between 1972 and 1984), a rapidly growing population and high rates of inflation combined to offset a near tripling of household net worth in nominal terms. Since 2007, inflation and growth in the number of households have been much more subdued, but nominal net worth took a much steeper dive than anything experienced since the 1930s.
- Economy Watch: State, Local Tax Revenues Up; Small Businesses Less Grumpy | Commercial Property Executive
The Rockefeller Foundation reported recently that total state tax collections increased during the second quarter of 2013, the latest in a string of quarterly increases and an indication that the contraction of state government — which represented a major headwind for the entire U.S. economy during the worst of the recession — is over. Compared with the same quarter in 2012, state tax revenues were up 9 percent in the second quarter of 2013.
- FRB: FEDS Notes: Business Investor Activity in the Single-Family-Housing Market
… investor activity may pose risks to local housing markets if investors have difficulties managing such large stocks of rental properties or fail to adequately maintain their homes. Such behavior could lower the quality of the neighborhoods in which investors own rental properties. Moreover, if an investor suffers financial distress, it may be forced to sell a large number of homes at once or cut maintenance expenditures, which could lower house prices in the surrounding area.
Given the small aggregate share of homes held by business investors and investors’ currently low leverage ratios, we think that their activity to date probably is not a significant source of risk to financial stability. However, a future appreciable increase the extent of investor holdings and leverage, or unforeseen difficulties in managing such large single-family-rental inventories, could raise financial stability risks by increasing the odds of financial distress amongst a large number of investors, the institutions providing their funding, and homeowners in affected markets. In particular, it will be important to monitor the development of markets for bonds backed by rental-income streams for the development of potentially destabilizing structures or concentrated exposures.
… To the extent that public markets develop for bonds backed by the underlying income or assets of investor portfolios, there is greater risk of the development of shadow banking activities based on these securities or derivatives referencing them.
- United States – Top 10 hottest housing markets – CNNMoney
10. United States
Rise in house prices (1 year): 11.2%
Rounding out the top 10 is America, where improved sales and lower foreclosures have seen home prices surge. And while mortgage rates are on the rise, they remain low by historic standards.
The housing market recovery has been an important factor boosting the overall U.S. economy.
- P/C Industry Supportive, But Cautious on Federal Insurance Office Recommendations
The U.S. Treasury’s Federal Insurance Office (FIO) yesterday [December 12, 2013] released its highly anticipated report on “How to Modernize and Improve the System of Insurance Regulation in the United States” as mandated by the Dodd-Frank Act of 2010.
Agents and brokers agree that the FIO’s call to finally enact a uniform of agent and broker nonresidential licensing clearinghouse is good news.
The Independent Insurance Agents and Brokers of America (the Big “I”) supports the National Association of Registered Agents and Brokers (NARAB II) Act, which is such a licensing reform. Charles Symington, Big “I” senior vice president of external and government affairs, says the NARAB’s approach of using targeted federal legislation to address a long-standing, persistent problem in the market is the correct approach for modernizing insurance regulation.
“The Big ‘I’ commends FIO for its call on Congress to pass NARAB II,” Symington said. “This bill is a perfect example of how to modernize insurance oversight without encroaching on state regulation.”
- Mortgage rates are still so low because it’s a big world, full of surprises | Inman News
The Bank of Japan began this year to print an immense volume of yen, a last-ditch effort to end deflation and to get the place growing. The BoJ’s purchases of its government bonds have driven their yields below 0.7 percent, negative versus tentative inflation. So to get some real yield, Japanese investors in the last 90 days bought $98 billion in U.S. Treasurys.
… Banks now hold $606 billion in seconds. The toxic stuff — as reflected by the balance sheets of “ABS Issuers” (private-market asset-backed securities having nothing to do with Fannie and Freddie) — has collapsed by 63 percent, from $2.2 trillion to $819 billion and falling, and right-wing wizards of finance want to fold Fannie and privatize mortgages.
Ballyhooed in a lot of places: Z-1’s jump in household net worth by $1.5 trillion in the last 90 days, with rising home prices accounting for $400 billion of that gain. If you don’t own a home (35 percent of households and rising), you didn’t gain a dime.
Another $700 billion came from the rise in the stock market. Cool if you have some stocks, even if puffed in buy-backs. Not so cool if you don’t. More than half of U.S. households have no retirement savings at all.
Then there’s the $300 billion gain in “pension entitlements.” Given the pandemic of pension write-downs underway, a dubious gain.
- Why Only the Foolhardy Scorn Treasuries – Bloomberg
Many interest-rate forecasters have insisted that the three-decade decline in U.S. Treasury bond yields is over, and they may be right — finally. Yields on the 10-year note and the 30-year bond remain close to the recent highs reached two years ago. Then again, the Treasury bears have been proclaiming the end of the bond rally since rates began to decline in 1981.
That’s why we had no comment in the post above. Read A. Gary Shilling’s whole article.
- The healthiest housing markets? It may surprise you
… Zillow has found that the nation’s healthiest housing market is San Jose, followed by San Francisco, Los Angeles and San Diego, and just making it at No. 10, Sacramento.
“Rapid home value appreciation in the West, particularly California, is currently having a very positive effect on a number of other factors, including negative equity, foreclosure activity and the overall financial health of local homeowners. But that same rapid appreciation may cause affordability issues in the future in these markets, leading to potentially unhealthy conditions,” Zillow Chief Economist Stan Humphries said.
Hasn’t that already started happening?
Inventories of homes for sale in Phoenix are up 40 percent from a year ago. Some of it may be investors, and some may be regular home owners who have finally come into a positive equity position and can move.
That would be both.
- Number of the Week: Half of U.S. Lives in Household Getting Benefits – Real Time Economics – WSJ
… the biggest increases were in benefits aimed at helping the poor. The program experiencing the sharpest rise in participation was food stamps, officially known as the Supplemental Nutrition Assistance Program. About 16% of people lived in a household where someone was receiving SNAP benefits, up from just 11.4% at the end of 2008.
Participation in Medicaid, the government health-insurance program for the poor and disabled, also climbed. At the end of 2011, 26.9% of the population was living in a household where at least one member was receiving Medicaid benefits, up from 23.7% three years earlier.
A primary reason for the jump in households receiving benefits is unusually weak job growth throughout the recovery. The unemployment rate was 8.5% at the close of 2011, down from the 2009 peak of 10% but still far above the prerecession level of 4.7%.
If they want to cut benefits, then fund training and projects that create jobs at good wages. The whole economy will rise. That’s what happened with the New Deal and WWII (lifted the US out of the Great Depression), though we don’t need another world war to do it. Your view?
- Average Home Down Payment Falls to 15.73% – Yahoo Homes
“With home values improving, the risk of borrowers defaulting on loans has decreased, giving lenders more confidence to lend with less cash down from qualified borrowers.”
Just how strong is that correlation?
- Guidance documents > Consumer Financial Protection Bureau
Our Readiness Guide provides guidelines for institutions to evaluate their readiness and help them comply with the new 2013 mortgage rule changes.
- Congress’s inaction on real estate issues leaves homeowners and investors unsettled – The Washington Post
We don’t hear much about this:
Senate Finance Committee Chairman Max Baucus (D-Mont.) would terminate one of the oldest financial planning techniques used by real estate investors: tax-deferred exchanges under Section 1031 of the code. In a 1031 exchange, property owners can defer taxes indefinitely when they swap “like kind” investment real estate within time periods specified by IRS regulations. Under current law, investors can exchange rental real estate without incurring immediate tax liability even if they’ve racked up huge paper gains on their properties. Taxes generally are not due until the investors actually sell their real estate for money.
Baucus also would sharply increase the depreciation period for residential investment real estate from the current 27.5 years to 43 years. Stretching out the depreciation schedule means investors would be able write off less per year on their properties than at present.
On top of that, the Senate reform proposal would tax so-called “recapture” of depreciation — where the IRS requires payback of a portion of an investor’s earlier write-offs — at property owners’ ordinary income tax rates, rather than at lower capital gains rates, as at present.
- The Consumer Price Index and the ‘median CPI’ : Beyond the Numbers : U.S. Bureau of Labor Statistics
The broadest measure of consumer price change is the Consumer Price Index for All Urban Consumers (CPI-U), published each month by the U.S. Bureau of Labor Statistics (BLS). Shortly after the publication of the CPI, the Federal Reserve Bank of Cleveland publishes its ‘median CPI’.1 This article summarizes the difference between these two measures of retail inflation.
Differences between the CPI-U and the ‘median CPI’. The CPI-U measures the average price change urban consumers face each month, from food to gasoline to shoes, and represents the rate of inflation the average urban American is experiencing. As such, the CPI is a vital tool for assessing the performance of the economy and for adjusting Social Security cost-of-living adjustments (COLAs), poverty thresholds, and federal income tax brackets.
- Rich investors bet on ‘sane subprime’ loans – MarketWatch
Lender Citadel Servicing Corp., based in Irvine, Calif., has been approving borrowers with FICO scores as low as 500 (or in some cases lower) since last year. …
… will consider cases such as a divorce, but is unlikely to move forward with applicants whose credit history reveals they are habitually late with payments.
The firms say this lending is not risky because they only work with borrowers who have large down payments, typically at least 30%. That way, even if a borrower stops paying, the investors who funded the mortgage are unlikely to incur losses when the home is resold.
What kind of interest rates are they charging? To return 9% to investors, the rates have to be awfully high. How do people come up with 30% down who can’t make timely payments, sudden inheritance? Is this just setting them up to lose it?
- Delinquency Improvements Expected to Slow
Speaking of subprime:
… subprime delinquencies have dropped only about 15 percent from the peak of 42.96 percent in Q1 2010 to 36.56 percent at the end of the last quarter.
Both the national delinquency and the subprime delinquency levels remain well above the earliest data TransUnion has available, respective rates of 2.23 percent and 20.52 percent in the second quarter of 2007
Martin said, “The encouraging story surrounding subprime delinquency rates is that most of the decline observed has occurred since the beginning of 2012. As interest rates stayed low, house prices started to rebound — and that gave many subprime borrowers the option of refinancing or selling their way out of the delinquent mortgage before the logjammed foreclosure process caught up to them.”
So, perhaps the “smart” subprime borrowers can repair their credit at a higher rate for a while and then refinance.
- Chase Boosts Customer Loyalty With Mortgage Rewards
Chase’s Mortgage Cash Back rewards program allows customers who have both their mortgage and personal checking account with Chase to earn up to $500 annually. Since the program began four years ago, Chase has paid out $87 million to more than 368,000 homeowners.
- More borrowers will struggle to pay off home equity loans
… (HELOCs) [Home Equity Lines Of Credit]. These were largely interest-only loans for 10 years, but that decade is now up for some and coming up for many more. Now, as these loans enter their so-called amortization period—the time when borrowers must start paying down the principal—a growing number can’t.
“In the aggregate, the home equity market is experiencing lower delinquencies,” said Herb Blecher of Lender Processing Services. “However, among the HELOC population that has already begun amortizing, we are actually seeing an increase in new seriously delinquent loans.”
- Joseph E. Stiglitz says that the Europe will not recover unless and until the eurozone is fundamentally reformed. – Project Syndicate
Joseph E. Stiglitz, a Nobel laureate in economics and University Professor at Columbia University:
If Germany and the other northern European countries continue to insist on pursuing current policies, they, together with their southern neighbors, will wind up paying a high price.
The euro was supposed to bring growth, prosperity, and a sense of unity to Europe. Instead, it has brought stagnation, instability, and divisiveness.
It does not have to be this way. The euro can be saved, but it will take more than fine speeches asserting a commitment to Europe. If Germany and others are not willing to do what it takes — if there is not enough solidarity to make the politics work — then the euro may have to be abandoned for the sake of salvaging the European project.
Austerity is a poor ideology (no pun intended), not data-based.
- Tax the rich? Try the Russians first – Greg David on New York Blog | Crain’s New York Business
When it comes to taxes, it’s hard to separate myth from reality. Some of the confusion comes from willful ignorance; some from politically motivated efforts to simplify the complex. No matter the cause, it is time for straight talk as New York debates how to tax the rich more. Start with the biggest myth of all, propagated by Mayor Michael Bloomberg. He claimed that he wanted even more
Russian billionaires to move to New York City because they pay taxes to support the local government safety net. In fact, those billionaires are nonresidents and pay no city or state income tax. Plus, the real estate taxes on their penthouse pieds-à-terre are bargain-basement steals.
The “elimination of a special abatement for apartments that sell for more than $5 million” sounds right.
However, what’s the current tax rate? Also, what would be a fairer or completely fair rate?
- ekathimerini.com | Bluish, modernist charm celebrates 80th birthday
Apart from its trademark color, the so-called “Blue apartment block” (Ble polykatoikia) in Exarchia has lost a great deal of its original glamour over the years. But if there was ever a need to testify to the importance of this modern architectural gem, it would most probably come in the form of Le Corbusier’s now-vanished inscription next to the entrance: “C’est tres beau”: this is very beautiful.
- Slovenia to pay banks for bad loans with short-term bonds | Reuters
Slovenia’s bailed-out banks will be paid for 4.5 billion euros ($6.18 billion) of bad loans with two and three year bonds that will allow them to access cash and fund new business, the head of the country’s bad bank said on Monday.
Truth be told, this is accounting sleight of hand that they don’t care that you know.
The Fed’s QE, for instance, has been largely the Fed as the USA’s bad bank.
- China’s Shadow Currency | The Diplomat
A very revealing piece by Matthew Lowenstein:
China’s economy is straining to keep up a semblance of its former growth rate. The surest sign is the way a shadow market in bank paper has evolved to substitute the commodity that China is increasingly running short of: cash.
Bankers are passing around their own ersatz currency, stimulating trade with what, in effect, are off-the-books loans. As in the wildcat currency era of the United States, the antebellum period before America had a national currency, this paper trades at a discount from province to province. It is increasingly used for speculative purposes, is potentially inflationary, and is hard to regulate. The People’s Bank of China (PBOC) has been unable or unwilling to crack down, lest it provoke a serious slowdown. But when the world’s second largest economy must resort to passing around IOUs, the financial community should take note.
… a piece of paper — an IOU — is being passed around on which first a speculator and then a bank gives a guarantee. In this way, credit flows from the banks through shadow bankers and into property and other high-yield, high-risk industries such as mining or infrastructure.
Such Bankers Acceptance Notes (BAN’s) do not make for a good system. That system isn’t sustainable and is fraught with corruption.
- Oh my, Paul Krugman edition | Business Spectator
Steve Keen, Associate Professor of Economics & Finance at the University of Western Sydney:
… I’m convinced that the Neoclassical belief in Loanable Funds is the biggest barrier there is to the development of a realistic, monetary macroeconomics. If Krugman gives way on this belief, then maybe there’s hope that central banks and treasuries around the world will eventually do so too. They might finally start to develop economic policies that reduce the problems caused by the crisis, rather than making them worse.
We have a feeling that Krugman and Keen are talking at cross-purposes, but we will wait for Krugman to play this out and then see how Keen responds.
Is Krugman wrong that rising debt doesn’t have to directly add to aggregate demand even though it can (properly done, can be used as a macro tool to stimulate demand)?
Does it have to? Is Keen saying that it has to?
- Is California gentrifying the middle class out of the state or simply making current families poorer? Why California continues to be a financially challenging place to live for middle class families. – Dr. Housing Bubble Blog
Why they rent:
California home values went up by 25 percent in the last year ($70,000 for the median priced home). Per capita income went up by 1.5 percent nominally (or $930). So think about that: the typical California worker saw their income go up by $930 but the typical house went up by $70,000 (more than the median household income). Does this sound like a good economic situation for middle class families?
Yet, we are told that the California housing market is the “healthiest” in the nation. We wonder and doubt.
- The German Minimum Wage – Will It Destroy Jobs?
… in Germany. Here is room for maneuver to increase minimum wages. For many workers, this increase of their wage rates would be in line with their productivities. So no need for concern!
… In stark contrast to the situation at the bottom line is the situation for high income workers: earnings are far higher than productivity!
- Japan business mood hits six-year high as ‘Abenomics’ takes hold | Reuters
Small manufacturers’ sentiment hit a six-year high and the small non-manufacturers’ index turned positive, which means optimists outnumbered pessimists, for the first time since 1992.
Psychology is a large part of it. There’s no doubt about it. It’s forward guidance in Japan at work.
- Development Is Back! Now What? – Daily News Article – GlobeSt.com
… an extensive list of potential pitfalls and hazards awaiting developers. They offer, for example, in-depth reviews of the issues that can arise during environmental assessments, land surveys and impact fees—along with a whole host of other topics.
In this article we will cover some of the basics offered by Partner. In part 2, we will do a deeper dive into the nuances of these points.
What’s covered in Part 1?
Zoning Analysis …
The Preliminary Development Plan / Feasibility Study …
Geotechnical Study …
Traffic Study …
- New China property taxes to cool overheated housing market | Property News
To date, measures that have already been set in place to curb speculative buying include a 20% capital gains tax on sale of second and subsequent homes; a 70% down payment requirement for purchases of second homes; a ban on mortgages for purchases of third and subsequent homes; a prohibition on pre-sales for high-end properties; and, a restriction on apartment sales to unregistered residents. On a pilot basis and only for high-end and/or multiple properties, real estate taxation has also already been implemented in Shanghai and Chongqing, starting January 2011.
While details of the announced nationwide roll-out of the property tax, including when it will begin, have not yet been revealed, it is expected that the legislation will be aimed less at further raising local government revenues than at promoting social parity within the country. …
The reform plan also envisages further relaxation of restrictions on Chinese nationals wishing to invest in property abroad. This will give them an alternative to investing in the local property market, which drives home prices up and beyond reach of most end-use buyers.
- Trade your comps with CompStak | Investors Beat
Comps are highly valuable because they give a true picture of what’s really going on in the market. How much are tenants paying in rent? Who’s leasing from who? What types of concessions are landlords providing? While this information can be useful, it’s not always easy to find. CompStak is the first ever crowd-sourced platform where users can gather and share commercial real estate information.
Do you like this concept?