Linking ≠ endorsement. Enjoy and share:
↑ Janet Yellen’s Rookie Mistake: Speaking Too Clearly – Businessweek
This is an error on the order of Ben Bernanke’s taper talk, or is it?
… Yellen was asked what the Fed meant by “a considerable time.” … she said, “You know, this is the kind of term it’s hard to define, but, you know, it probably means something on the order of around six months or that type of thing.”
It is counter-productive to everything the Fed has been saying it’s been attempting to accomplish.
Bernanke quickly learned to a degree. Let’s hope Janet Yellen does too, though we are surprised by the Fed not seeing that it’s tapering is slowing growth prematurely.
The other possibility is that Yellen knows exactly what she’s doing, which is getting the markets to price in the change early, to lessen the shock later, as in deliberate forward guidance. If that’s the case, is it really the right move right now regardless? Why slow things so much so soon?
People are still hurting for jobs, and 5.5% unemployment as the new “normal” target is too high in our view. What’s changed that 4.5% isn’t still seen as the “normal”? This change simply seems like a way of keeping wages suppressed even in the face of rising productivity. It seems a way to keep more profits in the compensation packages of those in the 0.1%. As we see it, it’s not good in the short- or long-term for the economy as a whole.
↑ Developer Bankruptcy Rings Alarm Bell for China Real Estate Market – WORLD PROPERTY CHANNEL Global News Center
The prospect of a credit crunch has led the head of Powerlong Real Estate to forecast that one in five of the country’s thousands of developers could go under in 2014.
The property market in China is one of the biggest contributors to the country’s economy, accounting for 16 percent of GDP and 20 percent of all outstanding loans in china.
Hoi’s forecast has been given credence by the collapse of a privately owned developer, and a bond default by a solar-power company.
It was previously an easy “carry trade” to borrow money at historically low interest rates in the West, and reinvest it in such high-yielding bonds, which benefited not only from high dividends but also an increase in the value of the Chinese yuan.
Thanks to oversupply, particularly in smaller cities, the property sector is China’s No. 1 risk over the next two years, according to Nomura’s economist Zhiwei Zhang. Despite the emergence of unoccupied “ghost towns” such as Wenzhou and Erdos, the property market inventory has tripled since 2009, a ballooning that is hard to swallow as the labor force shrinks and urbanization slows.
“As China enters its first year of private-sector defaults, the moment when a hard landing could occur has arrived,” Société Générale’s China economist Wei Yao says. She already expects China to miss its 7.5 percent target for GDP growth this year – but sees the prospect of it getting much worse, adding there’s a 20 percent chance of a “hard landing” where growth falls below 5 percent.
↑ As credit tightens at home, Chinese sell Hong Kong luxury real estate | Reuters
Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland.
Wealthy Chinese were blamed for pushing up property prices in the former British territory, where they accounted for 43 percent of new luxury home sales in the third quarter of 2012, before a tax hike on foreign buyers was announced.
The rush to sell coincides with a forecast 10 percent drop in property prices this year as the tax increase and rising borrowing costs cool demand. At the same time, credit conditions in China have tightened.
↑ 4 Ways to Make Money in Real Estate | AOL Real Estate
Cash flow positive: Most real estate investors do not understand how to pencil out their real estate deal. What this means is putting conservative estimates of rents and expenses down on paper and making sure that the rents, less all the expenses, leave the owner some cash in the bank. We call these “cash flow positive” properties.
Buying properties with true positive cash flow is the best way to ensure that your investment will add to your wealth. Far too many buyers purchase negative cash flow real estate and take additional monies out of their bank accounts each month, for years, to cover the deficit. That is no way to invest your hard-earned capital.
↑ A Chinese housing market crash could be even more disastrous than America’s – Quartz
… The decade-long housing boom that’s kept China’s GDP aloft has so far defied the bubble warnings, which began as far back as 2007.
But the building binge is finally catching up with China. Not just because sales are faltering. After building around 13.4% more floorspace each year, China finally has too much housing, argues Zhang in a note this week. The quirks of China’s economic model mean that a housing crash will be more devastating for the economy than many realize.
“This is comparable to when the US property bubble burst, since property prices did not collapse in New York, but instead in places like Orlando and Las Vegas,” Zhang says. “In China, the true risks of a sharp correction in the property market fall in third- and fourth-tier cities, which are not on investors’ radar screens.”
If China’s housing market crashes, the ripple effect could be even more cataclysmic for its economy than the recent housing market collapses in the US and Europe were for their economies. …
↑ Loan modifications revived house prices, homebuilding, and the economy – OC Housing News
We had an opportunity in 2011 to put the economy back on a solid foundation. Homeowners of the next generation could have enjoyed a low housing cost, freeing their income to spend on other goods and services in the economy. Instead, we are opting for another generation of debt slavery where people don’t spend wage income, they spend borrowed money and surrender their wage income to lenders who take an ever-increasing piece of the pie.
I don’t consider that a success. Do you?
No, we don’t. How about you?
↑ Institutional home buying abruptly tapers off – OC Housing News
Now that the large funds are done buying, the housing market must be sustained on owner-occupant purchases, and owner-occupants aren’t stepping up. A great deal of wishful thinking pervades the housing market. Everyone is counting on a depleted buyer pool that has too much debt, too little savings, and too little desire to carry the rally forward and provide enough demand for lenders to finally resolve the bad loans they can-kicked over the last few years.
Combine this with the Fed’s taper, the attacks on Fannie and Freddie, the international economic crisis unfolding (especially China), and we may be looking forward to the second but delayed dip in the Great Recession.
Here’s an interesting video that you might think off topic but was embedded in the ochousingnews post.
↑ Will Job Growth Propel an Emerging Purchase Market? – YouTube
Freddie Mac’s Vice President and Chief Economist, Frank Nothaft, gives a video preview of the March 2014 U.S. Economic and Housing Market Outlook:
He’s very optimistic but doesn’t explain why. What are we missing? Is he basing his assumptions mostly on momentum or what?
We aren’t putting him down. We just don’t know why he sees green pastures when others see a drought ahead if we don’t change policies and practices.
↑ Bank of England | Publications | Quarterly Bulletin 2014 Q1 pre-release articles
This is interesting, but keep in mind that the BOE and the Fed operate differently. The BOE does not require a reserve ratio. The Fed requires 10% reserves against lent funds, which places a limit upon commercial bank lending, not that they are anywhere near that limit at this time and not that we know how well or whether the Fed actually polices and enforces it’s own established ratio.
If anyone out there knows the answer to that, we’d appreciate being informed about it.
↑ Federal grant will help raise houses in Jefferson – Washington Times
GRETNA, La. (AP) – The Federal Emergency Management Agency is providing a grant to help pay for the elevation of 16 houses [in] Jefferson Parish.
The grant covers about $2.1 million of the estimated $2.7 million total cost of the project.
↑ Moore approves new residential building code – Washington Times
City leaders in Moore, Okla., have approved new residential building codes requiring new homes to be built to withstand winds of up to 135 mph, making it the first U.S. city to adopt construction rules aimed at preventing catastrophic tornado damage.
↑ Britain’s Dyson to recall 1 million fan heaters | Reuters
Vacuum cleaner maker Dyson said it was recalling up to 1 million fan heaters because of a fire risk, delivering a blow to the British company known for technological innovation.
↑ New Orleans man pleads guilty to torching his rental home | Insurance Fraud News Service
New Orleans, LA — A resident of New Orleans, La., is awaiting sentencing after pleading guilty to multiple arson-for-insurance fraud schemes
Anthony R. Thomas had been charged with multiple criminal counts for his involvement in a 2007 scheme to burn his rental property for fire insurance, a 2009 scheme to burn another rental property for his accomplice to collect fire insurance and his attempt at covering up his involvement in the 2009 fire, U.S. Attorney Kenneth Allen Polite, Jr. announced.
↑ South Florida beaches eroded by Sandy replenished – Washington Times
LAUDERDALE BY THE SEA, Fla. (AP) – The U.S. Army Corps of Engineers says it has replenished 5.1 miles of beaches in South Florida eroded by Hurricane Sandy in 2012.
Starting in November, crews trucked 126,700 cubic yards of sand from a mine in Moore Haven.
↑ Historic Atlanta building being razed after crash | www.ajc.com
ATLANTA — A historic Atlanta building is being torn down because of damage it sustained in a crash between a bus and a delivery truck.
The Atlanta Journal-Constitution reports the late 19th-century building, which originally housed a Baptist church, was deemed unstable and condemned several months after the November crash that killed a FedEx delivery driver. The delivery truck and a transit bus crashed into the building’s foundation.
↑ Del. man charged with 14 burglaries at home sites – The Washington Post
CLAYTON, Del. — Police say a Delaware man has been linked to 14 different burglaries at home construction sites in Kent County where copper wiring and pipes were stolen.
↑ Fed Cuts Bond Buying by Another $10 Billion – NYTimes.com
Fed officials now forecast that the unemployment rate in 2016 will reach a new equilibrium between 5.2 percent and 5.6 percent, meaning that they do not believe the rate can be further reduced without precipitating inflation. That is about a percentage point higher than the prerecession rate.
Based upon what assumptions?
↑ QE Continues To Be Misunderstood – Forbes
Frances Coppola takes David Malpass to Modern Monetary Theory (MMT) school. The Fed creates the money. There’s no doubt about it. The banks didn’t have the balances to cover QE. If they had had it, the Fed’s QE wouldn’t have been even undertaken in the first place, at least not the part designed to increase bank liquidity. This is not to say that banks don’t create money. They create it also when they create debts, as Frances Coppola has explained many times.
↑ Many renters, landlords don’t understand rental laws
Nearly two-thirds of renters (62 percent) and half of landlords (50 percent) said the landlord has the right to terminate a lease in order to rent the home to his or her family member.
Truth: Landlords may not evict a tenant during the term of the lease simply because they would prefer to rent the unit to a friend or family member, or even to someone willing to pay higher rent.
Perhaps most people were assuming a month-to-month lease agreement.
↑ Distressed Property Sales Remains a Hot Little Market Unto Itself – CoStar Group
“This is a reflection that the ‘extend and pretend’ strategies many banks adopted in the wake of the Recession wasn’t pretending at all,” said Little. “We are seeing an uptick in transaction activity from banks selling deals that they have had in REO for a number of years. While many argued back in 2008 and 2009 to pull the Band-Aid off and sell all the bad assets (at the bottom of the market), banks selling assets today are actually making money beyond the written-down level of the loan,” Little said.
“This transaction volume for distressed will most likely start to fade by the second quarter of 2015, and only due to the inability of lenders and special servicers to properly price the remaining product,” Kennedy said. “We are watching for a compression of the spreads between buyers and sellers on tertiary market property. To date, they are still very far apart. If these deltas do not show signs of improvement, a lot of the distressed money may wait and see what new opportunities are available in more desirable markets when the next wave of resets start to occur in 2015-2017.”
↑ Britain Levies Annual Tax On Empty, Corporate-Owned Real Estate – Forbes
Presenting his annual Budget yesterday, Chancellor George Osborne announced that he would crack down on stamp duty avoidance through corporate ownership. “We are expanding the new tax we introduced to stop people avoiding stamp duty by owning homes through a company,” he told the British Parliament. “We will expand the tax on residential properties worth over £2 million to those worth more than £500,000.” From midnight on 20 March, “anyone purchasing residential property worth over half a million pounds through a corporate envelope will be required to pay 15% stamp duty.”
Foiling all expectations, the ATED extension was the only measure linked to stamp duty, as the Chancellor surprisingly shied away from reforming a tax that many now consider outdated to the point of being unfair. In England and Wales, stamp duty land tax rates range from 1% for privately bought homes priced between £125,001 and £250,000 to 7% for homes priced more than £2 million. Some of the thresholds, such as, for example, the leap to 3% stamp duty rate for properties priced more between £250,001 and £500,000, have remained unchanged for more than 15 years, even though real estate prices have soared in the meantime.
Although Osborne failed to address these concerns, he still focused heavily on property supply, priming Britain for a house building revolution. “Our country… needs to build more,” the Chancellor said. “House building is up 23%. But that’s not enough.”
Taken together, the new Budget measures should support 200,000 new homes, according to Osborne, who commented “We’re getting Britain building.” However, all this may yet not be enough, notes Susan Emmett, Director of Residential Research at Savills. “While these initiatives are welcome, they need to be seen in the context of total housing need. To meet the need for h omes, we should be building 240,000 new homes a year—statistics from the Department for Communities and Local Government show that, last year, only 110,000 were completed in England.”
One should think that building first and taxing later, if at all, would make more sense. Thoughts?
↑ Budget 2014: Stamp duty is ‘very bad’ for the housing market – Telegraph
Stephen Herring, the head of taxation at business advocate the Institute of Directors, said it is “ridiculous” that stamp duty has not been reformed.
According to the Office for Budget Responsibility, stamp duty receipts are forecast to reach £18.1 billion in 2018/19, up from £6.9 billion in 2012/13.
↑ Microhousing trend in Seattle ruining property values, warns real estate agent – Local – MyNorthwest.com
Capitol Hill Housing Advocate Dennis Saxman has seen the effects of microhousing in his own region of the city.
“I’d say it’s ground zero of [
the] all the developments. It’s the highest concentration,” Saxman said. “I think it’s contributed to huge increases in rent. I know someone who’s a landlord, and she talks with other landlords and they said, ‘You know, they’re getting $600 a month or $1,250 a month 250 square feet? My apartments are way larger than that, so a number of landlords up there have doubled rent or more, and evicted entire buildings.”
↑ Stocks rebound as better data offsets rate fears
Data released today on jobs, manufacturing and housing added credence to the thesis that the U.S. economy is poised for a solid rebound once the nasty winter weather gives way to spring.
The number of Americans filing for initial jobless claims came in lower than expected in the latest weekly reading, rising 5,000 to 320,000, which was below the 322,000 Wall Street expected.
Fresh data on manufacturing and housing also was greeted positively by Wall Street.
Bond prices were little changed a day after the Fed announced it would make further reductions to its bond-buying program. The yield on the 10-year government bumped up to 2.78% from Wednesday at 2.77%.
Premature, wishful thinking? Only time will tell.
↑ MortgageOrb: Freddie Mac: Mortgage Rates Ticked Down Slightly, But It Won’t Last
“Mortgage rates eased this week as housing starts declined 0.2 percent in February to a seasonally adjusted annual rate of 907,000, below consensus forecast,” says Frank Nothaft, vice president and chief economist, Freddie Mac. “The rate on the 10-year Treasury note rose following the Fed’s announcement Wednesday afternoon, and if this holds, interest rates may begin to trend higher going into next week.”
↑ Don’t Rely on Luck: A Lesson in Real Estate Investment
… a cheap house in a depressed area, with high crime, may end up costing far more in lost appreciation, repairs due to vandalism, and costs associated with high turnover of tenants.
↑ Some Larimer County homeowners can rebuild – The Denver Post
More than 20 Larimer County homeowners have been told they can rebuild their homes destroyed by September’s flooding, after federal and county officials had earlier denied their permits.
When the 73-year-old Dunning and her husband, Gilbert Dunning, 88, climbed over heaps of flood debris to look at their home off River Fork Road in the fall, they were surprised.
“First of all, our house was not touched,” Carolyn Dunning said.
The Dunnings and several of their neighbors called Larimer County to contest the initial assessments. The county sent letters to all of the 74 residents whose homes were declared more than 50 percent damaged, informing them that it would re-evaluate the original assessment.
↑ Scrap metal theft bill hung up despite leaders’ push | The Detroit News
Five years after Michigan targeted copper thefts plaguing cities like Detroit and disrupting railroads and utilities, plans to better restrict sales of stolen scrap metal are caught in a legislative fight despite agreement among political leaders and law enforcement that action is needed.
The legislation would tighten rules in what can be a lucrative scrap metal market, giving police and prosecutors more tools to bolster cases against thieves.
↑ Red Cross app helps those affected by floods – Washington Times
Red Cross officials have announced the release of a smartphone application they hope will save lives if Colorado and Wyoming experience floods from runoff this spring.
↑ Adair Turner: Rethinking The Monetization Taboo
Adair Turner sure has a handle on how the Modern Money Theory (MMT) works. He states here something we’ve been saying for years: the Fed doesn’t have to dispose of all the bonds it’s purchased.