January 17, 2014

Putting The Genie Back Into The Bottle

It’s Friday desk clearing time for this blogger. “Federal Reserve Chairman Ben S. Bernanke defended quantitative easing, saying it has helped the economy and shows no immediate sign of creating a bubble in asset prices. ‘We don’t think that financial stability concerns should at this point detract from the need for monetary policy accommodation which we are continuing to provide,’ he said today in Washington.”

“Bernanke said of all the concerns raised about bond buying by the Fed, the risk it could prompt financial instability is ‘the only one I find personally credible.’”

“Realtors are calling Lincoln’s housing market, strange, because of the limited number of listings and the competition of buying a house. In the summer of 2008 the city saw a record number of houses for sale. Now, it’s the total opposite and buyers don’t have a lot of options. Kim Zwiener with Sellstate Realty says buyers need to keep their eyes peeled and be quick on their feet. ‘Everybody’s looking at the same property and when new ones come on those buyers are ready to jump on to that property, get out there and look at it right away and write their offers right away,’ Zwiener said.”

“Khalil Oudah arrived at the Emaar sales centre in Abu Dhabi at 7am yesterday – three hours before the developer’s latest batch of villas went on sale. Like others in the queue who were invited to the event after registering online earlier last week, he didn’t know what properties would be available or for what price. ‘It’s my first time buying for the last five or six years,’ said Sulaiman Hamdo, who was also queueing. ‘I had a few properties in 2008, but sold them at a loss because I needed the cash.’”

“Sara Sayegh, whose family bought a three-bedroom villa in the sale, said: ‘It’s an investment. I’m hoping housing prices will go up.’”

“Real estate agents and people trying to sell their properties are convinced there is a glut of condos on the market in Montreal. New condos continue to be built throughout Montreal, especially in the downtown core, leaving owners of older buildings with a tough time making a sale. Realtor Colette Birks is promoting a two-bedroom condo complete with garage in NDG, but hasn’t had a nibble at her original $349,000 asking price. She’s now reduced the amount to $325,000.”

“‘In my whole career I have never seen such a quiet market,’ said Birks, who is convinced the sluggish economy is making buyers timid. ‘People are starting to be scared. You know, it becomes like a survival matter and you have to think that if you don’t make money you have to live with what you have.’”

“In the last months of 2013, the number of successful transactions in the market increased, especially for the segment of small apartments with reasonable prices. The Minister of Construction, Minister Dung, said real estate inventory is decreasing. As of December 15, 2013, the total value of inventory was estimated at nearly VND95 trillion, down 26.5 percent compared to the first quarter 2013. In particular, there are more than 20,000 unsalable apartments worth VND29.23 trillion. Currently there are about 4,000 housing projects and new urban areas in Vietnam, with a total investment of nearly VND4.5 trillion with 3,200 underway projects. The housing prices have fallen a lot compared to the 2008-2010 period. ‘The prices of most of housing projects have been reduced by 10-30 percent, returning to the prices in 2006,’ Minister Dung affirmed.”

“A realtor says the market is changing and sellers are going to have to get more creative to sell their homes. The house located in north Scottsdale is listed for a cool $2.4 million dollars. If you want the Ferrari, buy the house at full price and the car comes with it. Realtor Andrew Bloom says expect more incentives offered in luxury listings. He says cars, golf memberships and vacations are just some of the things people may offer as they try to stand out in a crowded market.”

“‘In this market, you have to offer some incentives. You want to speak to buyers out there and say hey, we’ve got a unique product and we’ve got something.. want to throw in with it, so we stand out,’ he said.”

“The Charlotte area has been among the nation’s largest areas for institutional investors, who tend to rent the home for a year or more. Sharon Collins with Remax Realty Consultants, said she is curious to see the end game for the institutional investors, whether it is offering the home for sale to the renters after the lease is up, or having confidence that housing prices will be up compared to when they made their purchase. ‘They obviously believe in ‘buy cheap, sell high,’ so it will be interesting to see if they are able to pull that off at the level in which they’ve invested,’ Collins said.”

“Trending housing data from November 2013 puts Maryland at No. 3 among the Top 10 states with the most foreclosures. The foreclosure rate is a 42 percent increase from a year ago, RealtyTrac reports. Delaware is No. 2 on the list, with foreclosures jumping 56 percent from October to November. The glut of foreclosures could create problems for middle-class homeowners. Doug Marshall, of Marshall Real Estate Auctions in Salisbury, is adamant that home values are brought down when foreclosed or bank-owned properties sell at auction for below-market value.”

“‘The foreclosure system in Maryland cannot work effectively when government is creating a scenario where families can live for up to 600-plus days without making a payment,’ he said. ‘That’s creating a cycle where, once that person vacates the home, it’s in disrepair. It’s sold at a worthless foreclosure auction at the courthouse. The bank buys it back, takes title to the property, and has to liquidate it.’”

“Former owner, Domingo Franco, obtained a mortgage for the Speedwell Street triple decker from JPMorgan Chase in August 2002, purchasing the house for $430,000. In 2009, he lost his job as a union carpenter and squeaked by with payments before going into default. Franco, is still living on the premises. Franco’s tenant, Josephina Luna, says she never received notice that Fannie Mae was taking possession of her home, but she did receive a notice requiring her to vacate the building. The bank foreclosed in August 2013.”

“Franco says he hopes new Federal Housing Finance head Melvin Watt will change Fannie Mae’s policies and allow him to stay in his home. ‘I do not want to live in this house for free,’ Franco says. ‘That never has been my intention. I understand that everyone who makes an investment wants to have a return.’”

“Ben Shalom Bernanke will step down from the most powerful position, at least in the world of finance, later this month, but his eight-year tenor as the chairman of the US Federal Reserve and the times in which he held the position will be studied for years, or perhaps, decades to come. The crucial thing from the Fed’s point of view would be putting the genie called quantitative easing back into the bottle. Only then will we be able to say with confidence whether Bernanke’s Fed averted a crisis, or ended up sowing seeds for another.”

“Bernanke kept a valuable promise that he made as the governor of the Federal Reserve board to the legendary Nobel Prize winning economist Milton Friedman. Friedman and Anna Schwartz had shown in their work, A Monetary History of the United States, 1867-1960, that the Fed was responsible to a great extent for the Great Depression. On Friedman’s 90th birthday in 2002, Bernanke said, ‘I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.’”

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