Linking ≠ endorsement.
↑ Home Prices Fall in London’s Priciest Districts as Market Cools – Bloomberg
Home values in Kensington & Chelsea and Westminster, London’s most expensive boroughs, fell in April in the latest sign the U.K. capital’s luxury-housing market is cooling.
The average price paid for a home in Westminster, which includes Mayfair and St. James’s, fell 2.9 percent to 1.19 million pounds ($2 million), according to data compiled by Acadata Ltd. Values in the borough dropped 14 percent from a year earlier, the real estate research firm and LSL Property Services Plc said in a report today [June 12, 2014].
↑ More Empty Homes Than Buyers In China As Housing Market Corrects
As we said on Thursday, it has begun.
More Chinese homeowners have opted to leave houses empty rather than sell, a symptom of a cooling housing market that once buoyed China’s impressive growth.
China’s home vacancy rate was 22.4 percent last year, up from 20.6 percent in 2011, according to a survey from China’s Southwestern University of Finance and Economics. Builders who sought their fortune in a housing boom are now concerned about inventories, and these empty homes are more vulnerable to a cooling market.
It won’t work. With the economy cooling, there will be sellers. Those who wait will pay. China could have a bust that will take many, many years, even decades, to repair depending upon the radical steps leadership might be prepared to take.
↑ Qingdao’s Bad Break in Commodity and Real Estate Markets | The Diplomat
Property and commodities markets in Qingdao, a coastal city in Shandong Province, have been underperforming in recent weeks. First, there was a sharp decline in property prices as the real estate bubble burst this March. Some real estate prices in Qingdao have been slashed by 20-30 percent, as developers anxiously attempt to sell off their properties. Other promotions being used by local developers include a zero down payment, the inclusion of appliances in the purchase price, and payment for referring a friend. Yet buyers have adopted a “wait and see” attitude and are not purchasing new homes.
The article does a good job of explaining some of the recent scandals there as well, which are negatively impacting upon real estate.
↑ Real Estate Flipping: 8 Disclosures You Must Make
Investors who flip homes are the unsung heroes of real estate. They take neglected, run-down and sometimes intentionally damaged properties and make them livable, even beautiful, again. If you want to flip properties, you probably already know about pitfalls such as hidden problems and cost overruns. But did you know that when you sell a property, you’re required to disclose information about its condition that might negatively affect its value? If you willfully conceal such information, you could be convicted of fraud in addition to being sued. Selling the property “as is” will not exempt you from these disclosures.
The article goes on in some detail stating and discussing things that could/should be disclosed and why.
An excellent checklist could be started from the article for both buyer and seller.
Energy, jobs, and the far-reaching influence of the Millennial generation are the issues that will have the most significant impact on real estate both near-and long-term, according to The Counselors of Real Estate® organization, which today released its official 2014 Top Ten Issues Affecting Real Estate, a list it compiles annually.
“The list reflects growing economic and political turmoil, changing demographics and the lifestyle choices of an emerging generation, rising energy independence in the United States and a strengthening job market fueled in part by massive changes in the delivery of health care,” Dr. Kelly said.
The article covers the following:
3. The Millennials
7. Capital Markets
↑ UPDATE 3-UK’s Osborne gives Bank of England new powers to cap mortgages | Reuters
British finance minister George Osborne said on Thursday that he would give the Bank of England stronger powers to curb mortgage lending and reduce the risks that the housing market poses to financial stability.
British house prices have risen by 11 percent over the past year and are close to pre-crisis levels. The International Monetary Fund urged Britain last week to take steps to cool the housing market and reduce the risk of a bubble.
Osborne said the housing market was not an immediate threat to Britain’s financial stability but could become one in future.
By giving the BOE the power, does George Osborne also give it (Mark Carney) the responsibility and accountability relieving George Osborne if and when things sour as a result of George’s prior decisions? We don’t know Mr. Osborne well enough to say whether such political calculus is what moved him. Regardless, we think Mark Carney is capable within the current central-banking model, which itself is unfortunately woefully deficient.
The Department of Agriculture said Thursday it will distribute $24 million worth of grants to researchers to find ways to combat the citrus greening disease.
Though the disease — whose formal name is huanlongbing — has been identified in only one tree in Los Angeles, state agriculture officials have set up quarantine zones across swaths of Central and Southern California to isolate and eradicate the Asian citrus psyllid, an insect that spreads the disease.
Over two years ago, there was this mostly about homeowners with citrus trees: https://www.nytimes.com/2012/04/18/us/citrus-greening-disease-threatens-california-trees.html
Sort of good news:
The number of Americans seeking unemployment benefits rose 4,000 to 317,000 last week. The slight increase keeps jobless aid near its pre-recession levels, a sign that workers are dealing with fewer layoffs.
Is it sustainable; but more importantly, will we do better on the unemployment front?
↑ Treasury Auction Demand Rises to Highest Level in More Than Year – Businessweek
“A general nervousness persists about the longer term-growth picture and lack of inflation, which makes longer-term yields attractive,” said Dan Greenhaus, chief global strategist in New York at BTIG LLC. “When you introduce the developments in the Middle East to the picture, you have a strong backdrop for Treasuries.”
However, if Iraq gets out of control and oil prices spike, that will be inflationary and a drag on the economy even though the US is supposedly headed, at least for a while, to energy independence via fracking. That will help to further dampen US construction, not good for the overall US economy. So, all of these things and more are variables that interplay in ways that are difficult to predetermine. The geopolitical environment can suddenly change in unexpected ways.
Here’s an example that was more than somewhat predictable: https://www.dallasnews.com/news/local-news/20140612-kurds-step-up-as-iraqi-military-pulls-back.ece If the Kurds succeed, it will mean oil will continue flowing at least for a while. In addition, the Iraqi Shia have decided to mount a major counter-offensive and the Iranians have sent some 500 Republican Guards to aid their fellow Shia in Iraq. We will be surprised if the Wahhabi Sunni insurgency (ISIS/ISIL) holds onto its current territorial gains in Iraq.
↑ U.S. Economic Recovery Looks Distant as Growth Stalls – NYTimes.com
Some economists still expect a complete recovery. They say it takes a long time to recover from financial crises, and that the healing process has been set back unexpectedly by cuts in government spending, by Europe’s woes and, most recently, by a hard winter.
Other economists, also committed to the orthodox view of recessions, argue that the slower growth is here to stay, but say that it is the result of longer-term trends that predate the recession, like fewer Americans entering the work force and less innovation.
Gauti Eggertsson and Neil Mehrotra, economics professors at Brown University, argued in a recent paper that the combination of the financial crisis, fewer workers and rising income inequality could leave the economy in a state of “permanent recession.”
The paper, which sought to formalize recent conceptualizing about so-called secular stagnation, argued that in a normal cycle, falling interest rates would eventually generate sufficient demand to restore the economy to its historical growth rate.
During the 1930s, many economists predicted that growth would not resume its earlier pace. Alvin Hansen, a Harvard University professor, coined the term “secular stagnation” to describe his view that changed circumstances, including a lower birthrate, would prevent a full recovery.
Mr. Hansen was spectacularly wrong. After World War II, the number of babies boomed — and so did the economy.
But we aren’t just getting over WWII, far from it.
Title defects have become a major cause for concern within the real estate market in recent years, “which some feel cause wrongful foreclosures and others feel contribute to stagnation of what would otherwise be a smooth transition of assets within the secondary market,” according to executives at Nationwide Title Clearing Inc.
NTC says several title-related issues are jeopardizing transactions.
↑ Japan plans corporate tax cut, but does it need it?
Japan’s government is planning to cut the country’s corporate tax rate — a move that could prove as controversial as the recent consumption tax hike.
According to media reports, Japan’s ruling Liberal Democratic Party has cleared the way for a corporate tax cut in 2015 and Reuters reported on Thursday that the rate may be lowered to below 30 percent within a few years to help revive growth.
This is not news or good. Abe announced this as the plan long ago. We were against it then and remain so. It’s supply-side when the retail-tax increase was anti-demand-side. We thought the retail increase was a mistake. It’s slowed the recovery. Abe will probably not have any employment strings attached to the corporate cut. That will be a big mistake on top of a mistake on top of the earlier sales-tax error.
↑ What’s Next? The Implications of Technology for Real Estate – Urban Land Institute
ULI leaders from around the world react to futurist Vivek Wadhwa’s keynote speech about innovation at the 2014 ULI Asia Pacific Summit in Hong Kong.
- Moderator: Nicholas Brooke, chairman of Professional Property Services; chairman of the 2014 ULI Asia Pacific Programming Committee; and ULI Trustee
- Lynn C. Thurber, chairman of LaSalle Investment Management and chairman of ULI
- Ian Hawksworth, chief executive of Capco
- Scott Dunn, vice president of AECOM
- Henry Cheng, chief executive officer of Chongbang Group
- Vivek Wadhwa, vice president of academics and innovation at Singularity University
↑ Condos Make a Comeback as Towers Rise From Boston to L.A. – Businessweek
For the first time since the U.S. housing crash, new condominium towers are sprouting in downtown Boston, Seattle and Los Angeles as developers bet on the return of the riskiest type of residential real estate.
Buyers are signing deals to reserve units in two new high-end projects in Boston. A 41-story tower rising in Seattle is the first phase of the largest condo development ever in the city. In Los Angeles, a 22-floor building is slated for construction later this year, the first ground-up high-rise condo project downtown since 2005.
Construction cranes also spike the skylines of Washington, Houston, Miami, New York and San Francisco as financing gradually returns to a real estate class that lenders shunned for years.
↑  Peter Schiff on US econ & Lacy Hunt on ineffectiveness of monetary policy – YouTube
At the 14:30 mark:
Erin brings you her conversation with Dr. Lacy Hunt who believes that monetary policy is not effective with such high levels of debt in our economy.
We think Dr. Hunt makes a strong case for fiscal spending by virtue of the weak result of the Fed’s actions so far.
You’ll note that he mentioned the velocity of money more than once. It’s critical. We’ve been advocating that the Fed attach strings so that the Fed can influence the velocity.
It appears that the ECB is attempting to do that.
Unfortunately, the central bankers will probably be too little, too late, as usual.
↑ Weak Fundamentals Haven’t Slowed Apartment Construction in Tucson – YouTube
Tucson ranks among the nation’s weakest apartment markets by a number of measures — including overall occupancy, rent growth and average monthly rental rates. But that hasn’t prevented apartment development from kicking up to decade-highs.
↑ State of the Industrial Market from REIS – YouTube
Ryan Severino with Reis shares industrial market update and forecast including property level performance and investment sales outlook.
Webb told WFAA that the house was inspected before he and his wife bought it. He said they just learned that their homeowners insurance doesn’t cover earth movement.
His retirement savings were spent on the house, he said. And Webb said he’s paying for demolition.
↑ China Real-Estate Slump Threatens Li’s Economic Rebound – Bloomberg
The sinking real-estate market may undermine Premier Li Keqiang’s mini-stimulus policies aimed at arresting a slowdown that’s thrown his 2014 growth target into question. The property industry is the biggest downside risk to China’s economy, according to Societe Generale SA.
“The housing downturn is still playing out and has shown no sign of turning around,” Yao Wei, China economist at Societe Generale in Hong Kong, said in a note yesterday.
It looks like China’s growth will be cut in half. Their talking about 7.5%. We’re talking about 3.75%.
What a miracle it would take to turn it around! They’d have to completely reform their monetary system and to nothing resembling ours in the US or anything laissez-faire liquidators would have in mind.
Detroit announced settlements Friday with the city’s largest union and a group of holdout unsecured bondholders —moves that put the Motor City a step closer to exiting bankruptcy and may encourage more workers and retirees to approve the city’s grand bargain aimed at reducing pension cuts and rescuing the Detroit Institute of Arts.
↑ Treasury yields climb on Carney’s rate-hike signal – Bond Report – MarketWatch
Wow, people are so easily spooked.
Even as long-term Treasurys rallied during the spring, sending benchmark yields to an 11-month low, intermediate-term yields remained elevated above levels from last year. Investor jitters about when and how the Fed will raise its key lending rate returned this week, sending those yields sharply higher.
The nervousness follows a speech late Thursday by Bank of England Gov. Mark Carney, who suggested the central bank may need to raise rates before the market currently expects. That carried across the Atlantic, where some market participants wondered whether the Fed may send the same signals after it meets next week.
The Fed and the BOE are completely different animals. They are dealing with totally different circumstances.
What’s ironic is that a shoot up of Treasury yields in the face of a slowing/stagnant US economy will cause the Fed to do pretty much the exact opposite of raising rates.
↑ [Very highly recommended] CEO Pay Continues to Rise as Typical Workers Are Paid Less | Economic Policy Institute
Lawrence Mishel and Alyssa Davis:
That CEO pay grew far faster than pay of the top 0.1 percent of wage earners indicates that CEO compensation growth does not simply reflect the increased market value of highly paid professionals in a competitive market for skills (the “market for talent”) but reflects the presence of substantial rents embedded in executive pay (meaning CEO pay does not reflect greater productivity of executives). Consequently, if CEOs earned less or were taxed more, there would be no adverse impact on output or employment.
This analysis makes clear that the economy is recovering for some Americans, but not for most. The stock market and corporate profits have rebounded following the Great Recession, but the labor market remains very sluggish. Those at the top of the income distribution, including many CEOs, are seeing a strong recovery while the average worker is still experiencing the detrimental effects of a stagnant labor market. Compensation for private-sector workers has fallen 1.3 percent since 2010 and remains at 2009 levels.
If the trend continues and the middle and lower classes not only don’t start doing better via more equitable, fair compensation but continue sliding down, down, down, the economy will go into a tailspin and those at the top will rue the day because they will live in a failed-state dystopia with the rest of us.
↑ Auction.com iPad app lets real estate investors bid on homes from anywhere | Inman News
Not for the faint at heart or those without the money to lose:
Online real estate marketplace Auction.com has debuted a mobile application for iPad tablets that lets users bid for homes on the go.
Auction.com already had an iPad app that allowed users to monitor the progress of auctions, but the new one lets them actually participate in them, just as they may on a desktop.
Due diligence is difficult in this situation, but people have been highly successful bidding on properties. We suggest that if you’re going to get into this that you definitely find out first how they are successful (the techniques) and which pitfalls to avoid, etc.
The strings attached are really tiny threads.
Although the amount that banks can borrow will be linked to how much they lend to the real economy, the central bank will be powerless to direct how the cheap money is spent.
“It is a mistake for the ECB to try to hypothecate these funds with bank assets,” said Docherty [“Adrian Docherty, head of bank advisory at BNP Paribas”]. “The central bank has absolutely no control as to how these funds will be used, and they know that — the asset and liability sides of each bank’s balance sheet are completely separate. They call the funds targeted, but targeted is something quite different from being dedicated.”
“The ECB is keen to maximise take-up of this latest injection of cheap money, and for that reason it has made it an attractive proposition to banks,” he [“Nikolaos Panigirtzoglou, global market strategist at JP Morgan”] said. “The lack of conditionality, or very low conditionality, makes it much more appealing.”
The ECB declined to comment.
↑ Crowdfunding | Property Investment
… loose regulations within the crowdfunding world have drawn skepticism over the solvency of such investments. Landlords and developers might turn to crowdfunding because they have failed to acquire financing from banks or other traditional sources, while investors might lack the breadth of knowledge necessary to scrutinize potential investments ….
Swim at your own risk. Do your due diligence.
There are some limits yet on how much individuals are allowed to invest this way.
↑ WSJ Survey: Economists Pare Down Their Housing Addition – Real Time Economics – WSJ
Economists are lowering their expectations for the housing sector, again.
Their diminishing optimism is among the most noticeable trends in The Wall Street Journal’s monthly surveys of economic forecasters in the first half of 2014.
Better late than never.
↑ [Highly recommended] Event: How Can the SEC Address Systemic Risk?
Kara M. Stein is apparently a relatively aggressive regulator on the side of the common people: https://www.nakedcapitalism.com/2014/06/sec-commissioner-kara-stein-declares-war-sec-chair-mary-jo-white.html
Kara M. Stein, US Securities and Exchange Commission
Peterson Institute for International Economics, Washington, DC
June 12, 2014
Kara M. Stein, Commissioner of the US Securities and Exchange Commission (SEC), discussed possible ways to address vulnerabilities in the financial system on June 12, 2014, at the Peterson Institute.
Stein was appointed by President Barack Obama to the SEC and was sworn in on August 9, 2013. She joined the SEC after serving as Legal Counsel and Senior Policy Advisor for securities and banking matters to Senator Jack Reed. From 2009 to 2013, she was Staff Director of the Securities, Insurance, and Investment Subcommittee of the Senate Committee on Banking, Housing, and Urban Affairs. Before working on Capitol Hill, she was an associate at the law firm of Wilmer, Cutler & Pickering, an advocacy fellow with the Georgetown University Law Center, and an assistant professor with the University of Dayton School of Law. Commissioner Stein received her BA from Yale College and JD from Yale Law School.
A transcript of her remarks are here:
↑ Carney change of heart on rate rises – YouTube
FT economics editor Chris Giles assesses the first hawkish comments by Mark Carney since he started as Bank of England governor nearly a year ago, and what these signal about when the first interest rate rise is likely to take place.