The Housing Bubble

CIA World Fact Book - Rank Order - Current Account Balance

https://www.cia.gov/cia/publications/factbook/rankorder/2187rank.html

No need to buy gold here…move along

In case you are wondering: quadrillion comes after trillion

MIND GAMES: What neuroeconomics tells us about money and the brain.

David Lereah is being stomped on:

AND THE AWARD GOES TO…
http://tinyurl.com/k33jq

Crtiticism in the tribune: http://tinyurl.com/jsqty

David
Bubble Meter Blog

I posted this question late last night in yesterday’s bit bucket. Would appreciate some more info. Thanks to Mozo Maz for his comment.
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Help, I am having a “discussion” with my brother on why banks foreclose on houses. He says the reason is to get title on the house and then do all kinds of things with it (he won’t expand on what these things might be). I say it is to sell it asap and that banks are not in the rental business or the house investment business (if yes, then why didn’t they just buy the house themselves to begin with). Anyway, I can’t find any statistics on what happens to foreclosed property can someone help?

I did find a truly AMAZING article in the NYTimes titled:
“THE NATION; U.S. Is Getting Stuck With a Glut of Repossessed Houses”
http://query.nytimes.com/gst/fullpage.html?res=940DE3DA1539F935A35750C0A96E948260
The amazing part is the article was written in 1988! I think they can just spruce it up a bit and publish it again in 2007

Thanks for your advice, comments, links, pointers, etc.
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Comment by Mozo Maz
2006-09-11 17:08:56
Banks are not chartered to manage real estate. And federal bank examiners get very insistent, that a bank under scrutiny must get rid of “non performing assets” like foreclosed homes, within about six months.

bubble world tour continues

next stop : singapore

http://immobilienblasen.blogspot.com/2006/09/singapore-bubble-world-tour.html

Well, well, now it starts, salary roll backs! Detroit news yesterday:
“Union president Janna Garrison said the district presented economic proposals that did not place priority on the needs of the classroom. She said some of the district’s proposals included a 5 1/2 percent wage reduction, and copays for health care benefits of up to 20 percent.”
“The district says it needs $105 million in concessions from its unions, including $88 million from the teachers, to balance its budget.”

And Florida news: “Experts Downplay Fla. Earthquake Fears”

Nothing like holding an ‘illiquid asset’ when fear creaps in the market place!

40% drop in home prices over next 3 years WOW!!!

U.S. equity prices declined by 40% in the three years after the dot.com bubble imploded. The decline in property values on average could be as large, and because of the regional character of the bubble, much larger in what had been the hot property markets.

The decline in household wealth that will follow from lower home prices is likely to be comparable to the decline in 2000, 2001, and 2002 that followed from the lower stock prices. Moreover the sharp slowdown in the rate of economic growth is not good news for corporate profits.

The New York area will be sharply affected both by the decline in home prices and in stock prices. Homes in the metropolitan area will remain more costly than in most other parts of the country, but they will become much more affordable than they now.

Mr. Aliber is professor at the University of Chicago’s Graduate School of Business and president and chief investment officer of Dorchester Capital Management.

Article on a cute couple that cant sell their condo.

http://tinyurl.com/rbu8r

rent vs price change in your hood
in 22151 rents up 15% while prices doubled= mean reversion comming

Did anyone catch the NPR story on government windfalls this morning?

It seems the State governments have a “surplus” from the growing economy since 2001. Naturally, most of them are finding ways to spend this money, with the exception of a few, Arizona being one that was mentioned.

A good portion of the money is supposedly earmarked for EDUCATION and overly-paid teachers. The report did not say where the majority of the extra income was derived but seemed to indicate is was a growing economy.

I suspect if an accouting was done, the majority of folks here know where that money came from.

One last thing, the City of Phoenix is REFUNDING some of the property taxes. They say it is the people’s money and they have no right to keep the surpluses. I guess the mayor and city council there know the imbalance in prices and fair market value have been stretched to the limit.
I just wish the rest of the country would get a clue.

I did some research on Stephen Kim, the very bullish analyst on the home building sector from Citibank. Kim (a young, probably Korean-American) received several awards for predicting that the HB stocks would go up in 2003-2004. Clearly that was a good pick and anyone who followed his advice then made a lot of money. He seems to be trying to repeat his performance of 2003-2004. If the housing market starts to recover in the first half of 2007, he will be a winner again. However, as a reader of this blog who is trying to project forward, a recovery any time next year seems very unlikely. Just like analysts who were right during the dotcom runup, it is very difficult to change shift gears and go in the other direction.

I am a big believer in the housing bubble and was even born and raised at ground zero (SF Bay area). I have watched the housing prices reach insane levels and firmly believe that these prices will plunge back to ’99 levels over the next couple of years. However, I have to question whether this bubble is a nation-wide phenomenon. For example, there are places in the South where it is still cheaper to buy than rent (30 yr. fixed). Because of this, I argue that no housing bubble exists in these areas.

I looked at a few homes near Montgomery, AL area (online) and was shocked at the mediocre appreciation experienced by the homes in this area. In fact, the appreciation experienced by these homes over the past ten years has been pegged to the CPI. I can take the 1995 price of a given home, multiply it by the CPI correction factor from 1995 and the resulting sum is usually in the ballpark of the asking price.

I bring this point up for two reasons, first I have the opportunity to temporarily relocate to this area (education opportunity) and am trying to decide whether I should buy or not. Secondly, I believe the overriding theme of many bubble advocates is that this is a nation-wide phenomenon. However, certain areas in the country still seem able to pass the “bubble test”. Specifically, it is still cheaper to buy than rent coupled with meager appreciation over the past decade (right in line with inflation). Granted, some may not find this a very desirable area, but when one considers a married couple working at Wal-Mart can still afford a 2000 sq. ft home with a conventional loan in a nice neighborhood, I have to wonder if the bubble is irregular in shape and sparred a few areas from this insanity.

“A 31-story hotel/condominium project tentatively named Boise Place will go up in the vacant lot at 8th and Main streets where the ill-fated Boise Tower never got off the ground, a developer said Monday.”

“Floors eight through 31 will house hotel rooms and condominiums. Most of the condos will range from 805 square feet to 2,200 square feet and will be priced from $400,000 to $1.25 million.
The top two floors will house five penthouses in the 3,700-square-foot range and will be priced at up to $4 million each.”

http://www.idahostatesman.com/apps/pbcs.dll/article?AID=/20060912/NEWS01/609120364

Times discontinues real estate blog
September 11, 6:50 pm
In perhaps another sign of the housing market slowdown, the New York Times announced on Monday that it had discontinued its real estate blog. The number of posts on the blog declined precipitously throughout the summer. more [NYO]

This is probably more for the weekend topic suggestion, However, it is on my mind now.

How would the bloggers here like to restore accountability into the culture/system?

I say, bring back public shame.

Criminal Trials for David Lereah and his ilk.

Civil Trials for most mortgage brokers, etc.

Obviously, blogs like this where the media can lurk and get a pulse on the zeitgeist.

What are other ways to at least ding bubble participants?

Sorry if already posted / discussed. The chart which accompanies this article suggests that this time truly is different…
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House prices in America
Gimme shelter
Aug 24th 2006 | CHICAGO
From The Economist print edition
Now that the party is over, how bad will the hangover be?

AMERICA’S housing market has banged its head on the ceiling; now investors and homeowners alike are wondering how soon—and how hard—it will hit the floor. On August 23rd the latest figures showed that in July prices of previously owned homes rose at their slowest pace in more than 11 years. In the past 12 months they are still (just) up in nominal terms (see chart), but down in real terms. The number of units sold fell by 11.2% from a year earlier, and the stock of unsold homes reached its highest level since 1993. Markets were waiting for figures on prices of new homes, due out the following day. But the softness was enough to stoke the worries that have been mounting about how badly the end of America’s housing boom will hurt the rest of the economy.

Falling demand is already pounding the construction industry. Housing starts, seasonally adjusted, fell by 2.5% in July and were 13.3% lower than a year earlier. Building permits for privately owned houses were down by 20.8%, year on year. And although the number of homeowners applying to refinance their mortgages has risen over the past five weeks, the demand for loans to buy new homes has fallen by nearly a quarter in the past year. It is little wonder, then, that an index of housebuilders’ confidence has plunged by 56% since June 2005 to a 15-year low.

The slump has been especially harsh at the high end, because rich buyers were at the forefront of the housing boom over the past few years. Toll Brothers, the biggest builder of luxury homes, said this week that in the latest quarter its orders for new units were almost half those of the previous year. The slowdown is also a worry for home-improvement chains such as Home Depot and Lowe’s, as well as for other businesses that have benefited from the housing boom.

http://economist.com/finance/displaystory.cfm?story_id=7843304

Here is an entry for the topic “HOUSE PRICES” on economist.com. It generally does a good job of describing the relationship between house price inflation and home purchase demand, but seems to have missed the fact that ARMs have become a defining feature of the later stages of the US housing bubble. The statement that home ownership provides an inflation hedge in the US because of our use of fixed-rate financing does not apply to those with broken ARMs.
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House prices

When they go through the roof it is usually a warning sign that an economy is overheating. House prices often rise after INTEREST RATE reductions, which lower mortgage payments and thus give buyers the ability to fund a larger amount of borrowing and so offer a higher price for their new home. Strangely, people often regard house-price INFLATION as good news, even though it creates as many losers as gainers. They argue that rising house prices help to boost consumer confidence, and are part of the WEALTH EFFECT: as house prices rise, people feel wealthier and so spend more. However, against this must be set a negative wealth effect. An increase in house prices makes many people worse off, such as first-time buyers and anyone planning to trade up to a better property.

As long as people think that their house is a vehicle for SPECULATION, rather than merely accommodation, it seems inevitable that prices will be volatile, prone to a boom-bust cycle. As house prices rise, profits are made, tempting more speculative buyers into the market; eventually, they start to pay too much, interest rates rise, DEMAND falls and prices plunge. People have also invested in housing as a HEDGE against INFLATION: house prices generally rise when other prices rise, whereas the real value of mortgage DEBT is eroded by inflation. However, when mortgage interest rates are variable (as they generally are in the UK) rather than fixed (as in the United States), they may rise painfully during times of high inflation as a result of MACROECONOMIC POLICY efforts to slow the pace of economic GROWTH.

One of the reasons why the United States has long-term fixed mortgage rates is the financing provided by government-sponsored agencies such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, nicknamed, respectively, Fannie Mae and Freddie Mac. Economists increasingly debate their role, especially as they have grown into some of the world’s largest lenders. Supporters claim that, as well as reducing macroeconomic volatility, they make housing more affordable, particularly for poorer people, and that other governments should play a similar role in the mortgage market. Critics say they have become a huge potential risk in the global financial system by creating a moral hazard through the controversial but widespread belief that if they were to get into difficulties the government would bail them out and, thus, their financial counterparties.

http://economist.com/research/Economics/alphabetic.cfm?letter=H#houseprices

Funny cartoon that was published in the “Toxic Mortgage” issue of Business Week. It shows a house sinking and a realtor tells the prospective buyers “There’s been some ’settling’ around the foundation.”

http://data.dmregister.com/duffy/details.php?id=2006-08-25

(sorry if this has already made the rounds)

An article in the latest Economist print edition shows that UK, OZ, and US are not out of the woods yet with respect to the house price / rent ratio, unless this time is different and prices have attained a permanently high plateau relative to rents. The accompanying graphs shows that US prices are currently 50% overvalued relative to the long-term average price / rent ratio, and UK and OZ are even worse.
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The global housing market
Checking the thermostat

Sep 7th 2006
From The Economist print edition
Property prices are cooling fast in America, but heating up elsewhere

HOUSES are not just places to live in; they are increasingly important to whole economies, which is why The Economist started publishing global house-price indicators in 2002. This has allowed us to track the biggest global property-price boom in history. The latest gloomy news from America may suggest that the world is on the brink of its biggest ever house-price bust. However, our latest quarterly update suggests that, outside America, prices are perking up.

America’s housing market has certainly caught a chill. According to the Office of Federal Housing Enterprise Oversight (OFHEO), the average price of a house rose by only 1.2% in the second quarter, the smallest gain since 1999. The past year has seen the sharpest slowdown in the rate of growth since the series started in 1975. Even so, average prices are still up by 10.1% on a year ago. This is much stronger than the series published by the National Association of Realtors (NAR), which showed a rise of only 0.9% in the year to July.

The OFHEO index is thought to be more reliable because it tracks price changes in successive sales of the same houses, and so unlike the NAR series is not distorted by a shift in the mix of sales to cheaper homes. The snag is that the data take time to appear. Prices for this quarter, which will not be published until December, may well be much weaker. A record level of unsold homes is also likely to weigh prices down. The housing futures contract traded on the Chicago Mercantile Exchange is predicting a fall of 5% next year.

http://economist.com/finance/displaystory.cfm?story_id=7891311

Some realtors and economists now argue that the decline in home prices will be modest and is nearly complete.

They are very likely to be mistaken.This decline is just beginning and will become more severe because of a recession that will be triggered by the falling home prices. This in turn will lead to a surge in unemployment and many of the newly-unemployed will no longer be able to afford their homes.

http://www.nysun.com/article/39480

Have homebuilder share prices reached a permanently low plateau?

Despite a steady drumbeat of bad news, PHM’s and other major builders’ share prices have stayed almost completely flat since the early-April through early-June swoon. Can anyone offer a non-conspiracy-theory explanation for how this could happen against a steady drip of worse-than-anticipated announcements?

(My leading non-conspiracy-theory explanation: Hedge funds make loads of dough by writing puts and calls just outside the trading range in which they peg the share prices. If this theory is correct, then it is bad news for TxChick…)

http://tinyurl.com/hhkb6

http://www.latimes.com/entertainment/news/la-me-911ports11sep11,1,6459564.story

“Danger Abides at L.A.’s Ports
Despite millions spent on security, experts see the vast complex as a vulnerable target.
By Dan Weikel, Times Staff Writer
September 11, 2006 ……

“In the five years since the attacks of Sept. 11, the vast ports of Long Beach and Los Angeles have been included on most lists of likely terrorist targets….. ”

“California’s attorney general ranks them third and sixth respectively on a roster of 624 possible targets in the state…….”

“A key vulnerability, Flynn and others say, remains the ubiquitous cargo container, the mainstay of international commerce and a potential Trojan horse in the age of terrorism.”

“There are concerns that too few containers are inspected, both in the U.S. and at foreign ports where they are loaded.

Federal studies show that radiation detectors used to scan containers on the docks have limited effectiveness and that evacuation and recovery plans for both ports are not fully developed……..”

“If terrorists were to explode a 10-kiloton nuclear bomb in the Port of Long Beach, Rand Corp. researchers recently calculated, it could kill 60,000 people instantly, expose 150,000 more to hazardous levels of radiation and result in more than $1 trillion in economic losses, at least 10 times the financial loss in the attacks on the Pentagon and World Trade Center five years ago……”

“Of the roughly 480 ships that arrive each month in the Los Angeles and Long Beach harbors, 50 to 60 are boarded and searched by Coast Guard maritime security teams before docking…….. ”

“After ships arrive in port, about 6% of the containers they carry are selected to be scanned on the docks with X-ray machines and hand-held radiation detectors, officials say. Then about 6% of those are selected to be unloaded for inspection at customs facilities…….
All trucks leaving the harbor areas are again scanned by radiation detectors…..”

MY Comments:

This is a long thorough article on the screening process for incoming cargo ships and containers and what steps The authorities are taking to guard against terrorist attacts on the Long Beach/LA ports. I only pasted a few snippets: the article is very long and thorough and needs to be read thoroughly to get a balanced assessment of Port Security procedures and their effectiveness.
I have always maintained that these ports are a prime target of a possible terrorist attact due to the incalculable economic damage/disruption they could deal to the US economy.
As much anti-terrorist funding as possible should be provided to bolster our ports.

Uh oh…

http://news.bbc.co.uk/2/hi/business/5337770.stm

IMF warns of global growth danger

The International Monetary Fund (IMF) has warned that a global slowdown is looking more likely because of high oil prices and a cooler US housing market.

“There are risks to the global economic outlook that have tilted to the downside,” the IMF said in a report.

It also said that the US dollar may fall unless policies on savings levels and investment imbalances were changed.

The report was released ahead of the IMF and World Bank’s annual meetings in Singapore later this month.

The official IMF event does not starts until 19 September, but leaders from the Group of Seven (G7) richest nations and finance ministers are already in Singapore discussing policies.

It hasnt been posted here yet, but there is an article on Yahoo finance by bankrate.com stating anyone can put a freeze on their credit rating for ID theft for all states, in addition Nevada and California and other select states a person can freeze their credit for any reason. Humm, could this be to stop banks from giving them a bad mark for not making mortgage or other timely credit payments?

or is this saying…O.K. to mess-up your finances - lets change the rules to protect people that make bad financial decisions…

Here is the article on credit freezing: A bill pending in the House of Representatives would limit who can put a security freeze on credit reports. If passed, this federal bill, the Financial Data Protection Act of 2006, would limit credit freezes to identity theft victims. Once you’ve been hit by ID theft you may request a credit freeze, not before.

A credit freeze gives consumers control over their personal financial information by allowing them to block access to their credit reports — a move that essentially prevents unauthorized credit checks. If lenders can’t check your credit report, they can’t grant credit to imposters.

Currently, 20 states have passed legislation allowing any consumer to place a credit freeze on his or her credit reports — whether a victim of identity theft or not.

The idea of allowing anyone, anytime, to place a freeze on his or her credit sparks controversy between consumer advocates and financial industry proponents. Some see credit freezes as too extreme, while others see them as “the biggest tool in the toolbox.”

The logic behind this bill, says Ed Mierzwinski, U.S. Public Interest Research Group, or PIRG, consumer program director, is “like saying you can’t get a seat belt until you’ve been in an accident.”

J. Craig Shearman, vice president of government affairs for the National Retail Federation, doesn’t think a security freeze is necessary for most consumers.

“Our concern is that the credit freeze issue has become overkill, because most consumers are never going to be the victims of ID theft. If millions of consumers place a credit freeze on their files, it can cause difficulties when trying to purchase homes, cars or even opening simple lines of credit at a department store,” he says.

If not a credit freeze, then what?
Opponents of security freezes say that placing a fraud alert on your account is just as effective for notifying the three credit reporting agencies that your information has been tampered with or stolen. A fraud alert, which is free, allows U.S. citizens to place a 90-day watch on their credit files, requiring banks and other credit lenders to take extra steps to verify their identities before issuing credit.

While a credit freeze offers good protection, it means a consumer may not be able to access his or her own credit during that time period, says Steven Katz, spokesman for TransUnion’s Truecredit.com. Fraud alerts allow you to go about your credit activities without paying or waiting to lift a freeze. An alert, unless removed or renewed by the consumer, falls off after 90 days. A credit freeze stays put until the consumer pays to remove it.

Consumer advocates warn that fraud alerts don’t live up to their labels. Calling fraud alerts a “fig leaf of protection,” Mierzwinski says that they merely place a flag on credit reports. They don’t stop credit from being issued.

The need to protect customers should not be underestimated, especially since most consumers don’t have the option of giving their consent about where their personal information is being sent.

“Credit bureaus and data brokers buy and sell your name, address, Social Security number and credit file to anyone who will pay for it,” says Evan Hendricks, editor of Privacy Times.

Chris Hoofnagle, the west coast director of the Electronic Privacy Information Center, says consumer reporting agencies’ interests are not in tune with consumers’ interests. “The credit bureaus are creatures that serve the creditors and don’t want any slowdown of instant credit.”

I cant think of a good reason to freeze credit ratings…anyone?

Morning bloggers, I found this on Realty Times…..lol…..now let’s play fair in the sandbox….lol!

http://realtytimes.com/rtmcrcond/California~Torrance~kaygrundhaus

Barbara Corcoran is on abc’s Good Morning America’s Show Me the Money morning business show right now, offering some very clever tips on how to market a home in the current slowdown.

1) Drop a dead celebrity into your living room. She suggests displaying a photo of Marilyn Monroe on the wall to get the conversation going.

2) Rent billboard space to advertise that your home is for sale.

3) Hold a joint open house with a bunch of your neighbors who are also selling their homes.

4) Rent a latte cart and park it in front of your home.

5) Offer free pizza and beer for a year as part of the sales contract.

Not mentioned: LOWER YOUR ASKING PRICE!!!

Does the fact that Robert Toll is elucidating the reasons the housing market overheated explain today’s skyrocketing homebuilder share prices (5%+ jump)? His musing about a downturn limited to two years duration is a strawman, as previous downturns in housing have lasted a minimum of four years.
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Greed, speculation helped overheat housing market: Toll CEO
By John Spence
Last Update: 11:27 AM ET Sep 12, 2006

BOSTON (MarketWatch) — Toll Brothers Inc. (TOL: 27.95, +1.33, +5.0% ) Chief Executive Robert Toll said the U.S. housing market got ahead of itself due to greed on the part of buyers and sellers, and that it now likely faces the highest level of speculative inventory ever. Toll said the current downturn is unique in his experience because it wasn’t driven by a “macro-event” although interest rates have risen steadily. “Every day there’s an article about how lousy housing is now and how dumb you have to be to buy a house now,” the CEO said Tuesday at the Credit Suisse Homebuilders Symposium. “I don’t know what it will take to turn this market — it could take two years, or it could take someone getting quoted in the New York Times saying the market has hit bottom.”

http://www.marketwatch.com/news/story/story.aspx?guid=%7BDFF933DD-D746-4A56-AFB5-A53A916DF126%7D

Great piece about fraudulent mortgage brokers being shut down in MA.

Is Cecere’s shocking revelation that housing supply and demand are out of balance providing yet another reason for the homebuilder share prices to rally? Or is it the investigation of Karatz’s option grants that is sparking investor optimism?
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KB Home CFO says housing facing supply/demand imbalance
By John Spence
Last Update: 8:22 AM ET Sep 12, 2006

BOSTON (MarketWatch) –KB Home (KBH : Last: 43.15 +2.04 +4.96%
12:33pm 09/12/2006 Delayed quote data) Chief Financial Officer Dom Cecere said the U.S. housing market is facing an imbalance between supply and demand, and that pricing pressure will continue just like in any other industry until it evens out. He said Tuesday the market needs to work its way through “the speculative inventory being dumped on the market” before home prices stabilize. KB Home is scaling back its land position to “reflect the realities of the market,” Cecere said at the Credit Suisse Homebuilding Symposium. Cecere said he could not comment on the company’s ongoing and previously disclosed internal review of stock-option grants given to Chief Executive Bruce Karatz.

End of Story

A Tale of Two Bubbles, by Dr. Irwin Kellner

(Not discussed:

1) Falling home prices and falling energy prices could turn out to be parallel symptoms of deflation in response to a slowing world economy, which the Fed will fight by any means necessary. Whether or not they will succeed in this epic struggle without breaking the financial system in the process is the trillion dollar question.

2) Home ownership is far more widespread in society than ownership stakes in energy producers. Thus the negative wealth effect of falling home prices is far more pervasive than that of falling energy prices.)
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http://tinyurl.com/fbk5k

IRWIN KELLNER
Will fall in oil price trump real-estate softness?
Commentary: Confidence disproportionately swayed by housing slump
By Dr. Irwin Kellner, MarketWatch
Last Update: 2:28 AM ET Sep 12, 2006

HEMPSTEAD, N.Y. (MarketWatch) — Falling prices of energy and housing are exerting opposing — but unequal — pulls on confidence and the economy.

Both are responding to the law of supply and demand. Prices of oil and natural gas have come down from their recent highs because demand is not keeping pace with output, thus causing inventories to rise. Home prices are down for the same reason: demand is falling, while the number of homes being put up for sale is rising.

You would think that falling prices of these two important items in the consumer’s market basket would be greeted with universal cheers. You would be wrong.

There are far more fans of falling energy prices than there are those who are rooting for falling home prices. Indeed, except for those relatively few families who happen to be in the market to buy a house, falling home prices are increasingly being looked upon as a threat to the economy, rather than a boon.
…
When home prices rise, we take that to mean that we are wealthier. Some of us even tap this increase in home equity in order to put this wealth to work. Conversely, on those rare occasions when home prices fall, which they are doing now, it has a deleterious effect on wealth, spending and thus on confidence.

BTW, witness list posted for the Senate hearing. Disappointed, to say the least.

http://banking.senate.gov/index.cfm?Fuseaction=Hearings.Detail&HearingID=236

lex, did you get my posting explaining that jm had said “bingo #11″ in a later comment (#23) on that thread?

ECB: Consistently Hawkish
Tuesday, 12 September 2006 11:58:31 GMT
- ECB: Consistently Hawkish

Written by Terri Belkas, Junior Currency Analyst
Central bankers continue to make comments regarding “vigilance”, but ECB President Trichet seems concerned with more than just Europe and the euro…
Jean-Claude Trichet, ECB President

“Global economic growth remains quite dynamic but uncertainties are also growing. We have the sentiment that the global economy grows at a robust pace. But while growth is quite dynamic uncertainties are also growing.” – September 11, 2006

Said that “central banks cannot afford to be complacent about inflation pressure” and emphasized the need to anchor inflation expectations.” – September 11, 2006

“On the exchange rates question, I trust…that excessive volatility and disorderly movements in exchange rates are undesirable for economic growth.” – September 8, 2006

Axel Weber, ECB Governing Council Member

“We have not decided that by the end of the year, the withdrawal of the (current) accommodative policy should be stopped. If the ECB’s main scenario on economic growth and inflation is fulfilled, then there should be a progressive withdrawal of the stimulative monetary policy. If our baseline scenario is confirmed, then there is a need to take action… There would be a need to withdraw our accommodative monetary policy. This does not mean we are going to have a restrictive policy.” – September 6, 2006

Jurgen Stark, ECB Chief Economist

“The next economic projections of the eurosystem staff will be important on discussions about the continuation of rate increases…At some moment, we will have to communicate what will happen after the end of the year.” – September 11, 2006

Said that there is a risk that inflation expectations may “harden at a higher level” should financial markets “wrongly assume” that the bank will tolerate an inflation rate of more than 2% permanently. – September 11, 2006

Yves Mersch, ECB Governing Council Member

“The ECB will exercise the strongest vigilance not only in the near future, but one should expect that the ECB won’t stop its determination to control prices at the end of the year. Monetary policy will remain very accommodative due to the very abundant liquidity in the market. We will do whatever is necessary to deliver on our mandate of price stability.” – September 7, 2006

The Head of the Eurogroup sounds apprehensive about the ECB’s candid nature…

Jean-Claude Juncker, Head of the Eurogroup

“I have asked ministers not to be too outspoken on monetary policy. I am a great defender of the independence of the central bank. I will continue to press for regular informal talks with Trichet to strengthen cooperation between the euro’s political and monetary arms. I wanted to take the heat out of the debate. Both of us have said there is an excellent relationship and that co-operation will be intensified.” – September 11, 2006

US Fed: Careful Navigation

Central bankers have made incredibly similar sounding statements, with the exception of Poole…

William Poole, St. Louis Federal Reserve Bank President

Noted that the Fed should have a policy “that is as tight as it needs to be,” though he also expects inflation to taper lower over time and sees some noise in the inflation data. He also warned that if inflation does not ebb, he would rather act sooner than later. – September 11, 2006

“We might have some weakness in certain sections of the country, but I think we’re just not going to have a housing crash that’s nationwide.” – September 6, 2006

Turning dovish?

Sandra Pianalto, Cleveland Federal Reserve Bank President

In reference to the August 8th FOMC meeting, “Although the elevated inflation numbers concerned me, and indeed they still do, the overall pace of economic activity - especially housing activity - had begun to moderate, and the full effect of the FOMC’s previous rate increases had not yet been felt. I viewed the pause as appropriate to give me the chance to accumulate more information before judging whether additional policy firming would be needed.” – September 8, 2006

Once a dove, always a dove…

Janet Yellen, San Francisco Federal Reserve Bank President

Commenting on the FOMC decision to hold rates, “I think this was the prudent course of action that properly balances the dual mandate given to the Fed by Congress—to foster price stability and maximum sustainable employment… I would argue that a gradual approach is likely to be better because there is a need to incorporate lags between policy actions and effects on the economy.” – September 7, 2006

Cathy Minehan, Boston Federal Reserve Bank President

“On the risks to growth, one obvious concern is the housing market…The Bank’s baseline forecast assumes a continued moderate downturn in residential construction…An even larger downside could result if nominal home prices actually decline, rather than flatten out as projected, affecting household wealth and overall spending more than anticipated.” – September 11, 2006

BoJ: Standing at a Crossroads

Officials defend their monetary and fiscal policy…

Toshihiko Fukui, BOJ Governor

“The change in the base year and other changes made a bigger impact than the market had thought. But I believe the data still confirms that prices have been on a moderate uptrend since the start of this year, and suggests that the year-on-year rate of change in consumer prices is projected to continue to follow a positive trend, as the output gap continues to be positive.” – September 8, 2006

“We always discuss currencies at the G7 meetings from various aspects as part of overall talks on future economic policy management. But this time, it is not clear what kind of opinions will be expressed in what way. But I think there is little possibility (for the G7 group) to discuss in depth on currencies in particular. I heard that there were some comments from Europeans on this issue, but I don’t expect in-depth discussions on the JPY in particular.” – September 8, 2006

Shinzo Abe, Japanese Chief Cabinet Secretary

“While we (the government and the ruling parties) are promoting reforms, I hope the BOJ will support the economy through monetary policy.” – September 6, 2006

Sadakazu Tanigaki, Japanese Finance Minister

“Our outstanding public debt stands at around 150% of gross domestic product and we have noted the need to prevent it from snowballing. We have no time to spare when it comes to fiscal reforms.” – September 5, 2006

Kaoru Yosano, Japanese Economic and Fiscal Policy Minister

“We’ve learned a lot from Mrs. Thatcher and from America, but we can’t follow exactly their path to reform…There’s a limit to our reforms. The market fails sometimes.” – September 8, 2006

PBoC: A Public Affair

Matters of the yuan have come to be a crucial issue in China, especially amidst international pressures…

Zhou Xiaochuan, PBoC Governor

“I think in the second quarter of this year growth was a little too high…My opinion is that liquidity is still abundant in China’s economy, so we are going to squeeze it…I think we are gradually expanding flexibility of exchange rates. That is our policy.” – September 11, 2006

Wen Jiabao, Chinese Premier

“We will firmly deepen the yuan exchange rate formation mechanism reform and let market supply and demand set the exchange rate level and gradually allow more exchange rate flexibility. Therefore, there won’t be any ‘unexpected’ adjustment to the yuan exchange rate.” – September 6, 2006

Wu Yi, Chinese Vice Premier

“China will continue to open up to attract more foreign investment.” – September 8, 2006

“Some problems still exist in China’s economy but these problems have a limited impact on the overall economy.” – September 7, 2006

Fan Gang, PBoC MPC member

“We still need to maintain investment growth at a certain level. (Annual) investment growth of around 20% is desirable.” – September 7, 2006

Bo Xilai, Chinese Commerce Minister

“At present, we need the developed (country) members to take the lead in making substantial concessions in order to create conditions for the quick resumption of the (WTO Doha Round) negotiations.” – September 5, 2006

The world is worried about dollar induced inflation except us.

D.R. Horton CEO says 2007 will be worse than 2006:

http://www.marketwatch.com/news/story/story.aspx?guid=%7B2EF984F1-3820-45DE-96D7-4DACED5CD6FA%7D

Darkly funny:

At http://www.realcentralva.com , the question du jour is “Should buyers forego inspection in a hot market?” This is dated 9/12/06.

Hot? You mean like dot-com hot?

Who in their right mind would forego an inspection, much less RECOMMEND it?

Who would even imagine bringing up such a question?

And this from Australia……..

http://www.invbiznews.com/wordpress/?p=451

Has this world gone completely mad?

My coworker just listed his condo in Canyon Country (Santa Clarita, CA) for $269,000 (2 bd, about 850 sq. ft.) - He’s the second lowest priced condo among 50 for sale in the same 800-unit complex (1 out of every 16). Many of his neighbors have it priced around $300K and have had it sit on the market for months. And many have reduced their unrealistic prices only to have it still sit. It’ll be interesting to see how this one plays out.