October 16, 2017

Asking For Trouble

A report from the New York Post. “A pair of top Obama-appointed bank regulators still serving in the Trump administration could spark another mortgage meltdown by lowering credit standards and encouraging risky lending practices. Democrat Mel Watt, who is serving a special five-year term as head of the Federal Housing Finance Agency, is pushing the mortgage-lending giants he regulates — Fannie Mae and Freddie Mac — to offer home loans to deadbeat borrowers with shaky credit, setting up conditions for another housing-market crash, industry officials warn.”

“Meanwhile, the other Obama holdover — liberal Democrat Richard Cordray, who continues to head the Consumer Financial Protection Bureau through 2018 — has launched an unprecedented crackdown on credit reporting bureaus for allegedly widespread errors and bias, leading the industry to strip some negative information from credit reports used by home lenders, which analysts fear could blind them to default risks. ‘We are dumbing down the requirements all over again,’ warned former chief Fannie credit officer Ed Pinto. ‘It’s the definition of insanity’”

From the Daily Camera in Colorado. “When it comes to a helping hand on housing, Boulder County’s well-to-do are getting a bigger boost from the feds than less well-off residents, according to a new report from online rental marketplace Apartment List.

High-income households received triple the federal dollars that low-income households did in 2015, according to the study, and nine times more funds than those of middle incomes. It’s a pattern being repeated all across the country, Apartment List found. Nationally, the total dollars spent on MID for high-income households ($60.6 billion) in 2015 was double that spent on Section 8 ($29.9 billion).”

“‘When you look at where the benefits are going,’ said Apartment List Housing Economist Chris Salviati, ‘it is a pretty striking figure.’”

From Reuters. “Global central banks, which fret about high asset prices, could take a page from the Bank of Canada which is helping cool an overheated housing market by raising interest rates even as inflation undershoots its 2 percent target. Like Canada, major central banks such as the U.S. Federal Reserve, European Central Bank and Bank of Japan set monetary policy based on an inflation target.”

“But too rigid a focus on inflation can lead to bubbles in financial and housing markets, jeopardizing hard-won recovery in countries where central banks have kept interest rates at historically low levels. ‘That is an important example of a responsible central bank acting on concerns of financial stability,’ said Stephen Roach, a senior fellow at Yale University’s Jackson Institute of Global Affairs and Morgan Stanley’s former chief economist. ‘Central banks that keep policy at crisis settings just because inflation remains below target are asking for trouble.’”

From CBC News in Canada. “CBC News has uncovered some revealing trends in Ontario government revenues that provide significant insights into the provincial economy. The fiscal-year-end numbers are contained in an annual document called the Public Accounts of Ontario. The 2016-17 version tells a story of an overall economic boom, but with some uncertainty about how widely it’s being felt.”

“For the first time since the recession in 2009, the province’s revenue from personal income tax actually went down. ‘This is highly unusual,’ said Sheila Block, senior economist with the Canadian Centre for Policy Alternatives, a left-leaning think tank. ‘We don’t see a drop in personal income tax revenues generally at any point except when we’re in a recession.’”

“The crazy rise in house prices across southern Ontario in 2016-17 was a big money maker for the government. The Public Accounts show the province earned $2.73 billion in land transfer tax, a 29 per cent jump from the previous year. ‘The government cannot rely on this type of increase; it’s not sustainable,’ said Robert Hogue, senior economist at RBC. ‘We’ve seen a significant correction in the housing market.’”

From Domain News in Australia. “Auction selling conditions in popular near-city areas were generally upbeat at the weekend but real estate agents say house prices in Sydney’s struggling outer western suburbs are starting to pull back. Sydney’s outer western suburbs are recording the lowest clearance rates of all the suburban regions – and it showed at the Professionals’ auction of a three-bedroom house at 35 Paxton Street, Belmore. Agency principal Michael Sabongi said the listing attracted no bidding and was now likely to sell privately at a price below the vendor’s expectations.”

“He said prospective buyers in the west had been ‘very, very nervous’ at weekend auctions after widespread media reporting of new data showing declines in the rate of Sydney house price growth. ‘Buyers are not able to borrow as much and it is affecting the market,’ Mr Sabongi said. ‘If the vendors want to sell, they have to meet the market or they have to take their property off the market. It is one of two things.’”

“He said the average house price in Belmore had been sitting at $1.15 million to $1.2 million: ‘We are now going to pull back to $1 million to $1.1 million or to $1.15 million. You will be able to get a house for that money, whereas you could not get one before.’”

“Buyer’s agent Paul Osborne, the founder of Melbourne-based Secret Agent, said the Sydney and Melbourne residential property markets shared similarities with large Canadian cities. ‘The Vancouver and Toronto property markets have been impacted as interest rates have headed up,’ he said. ‘Prices have started to fall quite noticeably in Vancouver and Toronto. It is hard to know whether that is where we are heading or whether we are just going to track sideways for a period of time.’”

“Mr Osborne suspects that prices for some B and C-grade properties in the inner suburbs of Sydney and Melbourne could pull back by more than 10 per cent in the coming months: ‘Confidence is a little more fickle than it has been in the past, so you start to see a bit more failure at auction. Then the buyers are looking at these failed auctions and are thinking: ‘Well maybe we need to revisit what we are prepared to pay for a property.’ It is a vicious circle.’”

The Sacramento Bee in California. “The summer’s overheated housing market in the Sacramento region has given way to a slightly cooler and saner experience for buyers this fall. The time that houses spend on the market has lengthened, prices have softened, and the inventory of homes for sale has grown. ‘Now is a great time to be a buyer, mostly because the summer bump is over and homes are sitting longer and prices are more negotiable,’ said Barbara LeBrecht, a broker with Weichert Realtors’ Galster Group in Fair Oaks.”

“During the peak buying season this year, homes were selling at a record pace. Many houses spent just days on the market before getting snapped up. Well-priced listings saw multiple offers, and would-be buyers found themselves on the losing end of bidding wars.”

“Another telling statistic is the high number of price reductions in the market these days, LeBrecht said. In one 24-hour period this week, she said, 287 new homes were listed for sale and sellers dropped their asking prices on 199 homes. Ryan Lundquist observed a similar set of changes across the four-county region that includes Placer, Yolo and El Dorado counties. He, too, said it was a sign of predictable seasonal decline.”

“‘Overall the market has a slower feel compared to a few months ago (and) values have begun to soften in many areas,’ Lundquist wrote. In many neighborhoods, he said, ‘homes are tending to have less offers, less traffic, and even sell for slightly less than the highest prices from a few months back.’ ‘News like this sometimes freaks people out because they think the market is tanking,’ the appraiser wrote, ‘but like clockwork the market almost always softens during the fall.’”