International Bits Bucket For January 28, 2008
Please post items of interest from outside the USA here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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This thread isn’t intended to discourage international posts elsewhere, but rather to focus the topic and take the strain off the regular bits bucket.
excellent idea and good timing. With the lack of good international housingbubble sites in Europe it would be nice to gather more facts here; in most of Europe the fun hasn’t even started yet.
Great idea, Ben. Nice move.
I like it too…
It gives a chance for the rest of the 95% of the world, to tell us what’s happening.
Hey, us ex-homies thank you. So, we’re a strain? Cool!!
Good timing as the international markets are cratering a good 12 hours before the USA gets it. Another 3%-6% hit on the weekend market. I thought I entered the matrix and logged on to last weekend by accident.
Europe hasn’t opened yet, but Asian markets are getting hammered again today. I wonder if Bennie and the Feds will have another surprise for us this week. I really ought to get satellite so I can see the international TV feeds. Maybe this will force the ECB to move. Shanghai down 6.6% and the Hang Seng down 5.52% as I type this. Good night, Gracie.
http://finance.yahoo.com/intlindices?e=asia
Holy cow!
Shanghai down 7.19% (bouncing)
Nikkei down 3.97%
Seoul Down 3.85%
cratering? I wouldn’t quite say that. But certainly weak. A constant grinding down bear market weak.
Got popcorn?
Neil
It is time for another FED tele-conference and additional 75 bsp cut before markets open in the US.
They only have 4 more of those in them.
After that, poopie-time?
after that Uncle Ben will proceed with negative nominal rates (like a 1% monthly tax on all savings accounts).
The Forever War … on Savers ;-(
Macroeconomic budget constraints are a bit esoteric for me to grasp, but I do believe that fiscal and monetary easing both have their effective limits — they are just a bit harder to pin down than more obvious household budget constraints (e.g., no money left in the bank account, and no creditors willing to loan you any more money).
Case in point:
The dismal dollar
Also, the Fed’s actions do not just have an effect on share markets. Alan Ruskin of the Royal Bank of Scotland says that rapid rate cuts mean the dollar risks becoming a funding currency for the “carry trade”, rather as the ill-starred Japanese yen has been. (The trade involves borrowing in a currency with low interest rates and investing the proceeds in a currency with higher rates.) Mr Ruskin says that the gap between 12-month dollar and Swiss-franc rates is already as low as it was in the last cycle, when the Fed cut rates to 1%. “By the end of this cycle, dollar short-term rates will be lower than all 40 liquid currencies except the Japanese yen and Hong Kong and Taiwanese dollars.”
If the dollar becomes part of the carry trade, it will tumble even further. And a falling currency makes it harder to persuade foreigners to finance America’s trade deficit. David Bowers of Absolute Strategy Research reckons the subprime crisis has “destabilised the symbiotic relationship between Asian and Middle Eastern savers and American consumers.”
Those foreign investors may also get spooked at the direction of Fed policy. They have seen the bank cut rates in response to last August’s credit turmoil and now a January stockmarket plunge. They may start to feel that the Fed has turned from a watchdog against inflation into a labrador puppy. Thanks to the global slowdown, there is no short-term inflationary threat. But the longer-term risks have probably gone up. And, as James Carville discovered in the 1990s, the bond-market vigilantes can be powerful enemies if they feel neglected.
http://www.economist.com/finance/displaystory.cfm?story_id=10567544
If the dollar becomes part of the carry trade, it will tumble even further.
A country that has a current account deficit, like the US, cannot support a carry trade. Only countries that have a current account surplus can, because the carry trade exports capital.
US interest rates cannot fall below those countries with a current account surplus (Japan, etc) because a higher rate is necessary to attract capital to the US to fund its current account deficit.
” .. a higher rate is necessary to attract capital to the US to fund its current account deficit.”
Maybe it would be a good thing if our “current account deficit” went unfunded. Such a circumstance may force us to live within our means (the horror).
Oh the horror of no war!!!! What will the pigs do????
RE: Carry Trade -
The Carry Trade is borrowing money ibn one country and loaning it out at a higher interest rate someplace else. Nothing more nothing less.
If I can borrow, dollars at 3% and loan these dollars out at 5.25%, I stand to make 2% after all hedging costs are calculated. Relative to my investment, I make approximately 12% .
Current account deficits have no bearing on the Carry trade. The only thing that matters is a willing buyer of the underlying currency, in this case the US dollar.
but European stock market is not impressed apparently …
It’s funny how US markets don’t fall nearly as much as the foreign markets in comparison in the last couple weeks. It’s like they can smell our bad breath and we can’t.
if you look at nominal values the US stockmarket didn’t advance much in the last five years compared to Europe. I think the fall is not much different if you look at % correction from the advance over the last five years.
Excellent post on the continuing insanity in Vancouver, Canada, the city which thinks it’s immune from global financial forces:
Vancouver Real Estate Bubble Uberpost
That post is the best thing since the former Vancouver Housing Blog.
I understand that, compared to last year, a lot more new listings are coming on the market in Vancouver. But sales are a bit stronger than last year. I don’t know who is buying at these prices.
Its still very difficult to be a bear in Vancouver.
“…stay tuned and grab some popcorn.”
Neil, what are you doing in Vancouver?
The secret’s out on phantom bids
TheStar.com - GTA - The secret’s out on phantom bids
Registry, open bidding needed to stamp out phony offer scams, some realtors say
September 15, 2007
Tony Wong
Gail Swainson
Staff Reporters
The incoming head of the Toronto Real Estate Board has come out swinging against phantom bidding tactics after denying they even existed when she ran for the job three months ago.
“It’s dirty realty, it really is,” Maureen O’Neill said of agents who fabricate offers during bidding wars. She is now calling on the Real Estate Council of Ontario (RECO) to yank the licences of agents convicted of using phony bids.
“Boot them out, we don’t need them in the business,” O’Neill said. “I don’t think these people should be allowed to sell real estate.”
Phantom bids can be used by selling agents to spark extra rounds of bidding or to spook potential buyers into rushing or raising offers. The practice is considered a breach of ethics under the Real Estate and Business Brokers’ Act of Ontario – administered by the Ontario council – and realtors who are caught can face hefty fines.
There are more than 52,000 real estate agents in Ontario (26,000 in Toronto) and last year they sold 194,793 existing homes in Ontario (84,872 in the Toronto market).
http://www.thestar.com/printArticle/256968
Eventually we will see this practice exposed in the high bubble
areas.
is that illegal? I think Dutch realtors do it all the time …
Seems simple ‘nuf to me. The disciplinary system is already there, so just stop talking and start ‘ahefty fining’. I say $10k per infraction sounds like a nice round number.
Actions speak louder than yapping.
should of said
Eventually we will see this practice exposed in the high bubble
areas in the US.
In the spirit of this new bits bucket, but older
http://www.businessweek.com/ap/financialnews/D8U7KS880.htm
Half of Spain’s real estate agencies have folded in the past year due to a slowdown in the once-booming building sector, an industry association says.
Of 80,000 that operated at the beginning of 2007, only around 40,000 have survived and some 100,000 employees lost their jobs, according to the Superior Council of Real Estate Agents, a nationwide grouping.
Now go back to sleep. Its contained.
But look how the article ends:
Baena said many more agencies will close in Spain in the next three or four months but that this is good because the sector had become “a joke,” with too many people trying to make fast money, sometimes with shady deals.
bummer this is from 1/17/08… otherwise it would be a good headline
“Sector has become a joke”
Got popcorn?
Neil
I remember two episodes from a British real estate TV series from last year where British buyers, flush with cash from the sale of their below average UK home, buy a big home in Spain plus a small realtor office to start their second life. Wonder how that is going … They also had some British realtors starting a second life in Spain, but not as a realtor.
In a lot of cases they were “flush with cash” from the refinancing of their below average UK home, not the sale.
yes, that is usually the case but these people were emigrating from the UK; they really sold their home. But although this is a real gain, you still have to use it wisely and not return for a long time at least, otherwise you still loose lots of money.
Everybody expects the Spanish Liquidation…
yo Yogurt, from the link “Average incomes have not increased to the extent necessary to afford the average home”
Im very sure there has been an greater than average increase in phantom bids that drove prices higher. What else can you say?
Do you have subprime loans up north?
They are not called “subprime” but they amount to the same thing.
A holiday today in Australia (Australia Day long weekend, even though Australia Day itself was on Saturday 26th). The markets therefore weren’t open here today, but I’m expecting some of the last Thursday/Friday recovery to disappear again tomorrow.
To Real Estate. I have been down at the NSW South Coast since last Thursday, with relatives. A family member has what I think you guys would call an old trailer at a camping/van park in a coastal town. Quite a nice situation, only 10 minute’s walk from the town centre but up on a headland backing on to a heavily forested native reserve so there’s planty of (feathered) bird life around.
Very heavy rugrat infestation during the weekend; looks like the park is generally aimed at families with young kids (and fisherpeople) rather than young adults.
I checked out prices while I was there. For a detached home nothing much under $300K in all the coastal areas, and considerably more if you wanted to be close to the beach.
Seemed to me like there was a lot of property on offer, and especially property aimed at retirees.
It’s the housing market stupid, Uk is in trouble
http://news.bbc.co.uk/1/hi/business/7212545.stm
Fortis takes a hit, another global bank takes the medicine.
http://news.bbc.co.uk/1/hi/business/7212533.stm
A dutch history of housing, is nothing new
http://www.guardian.co.uk/feedarticle?id=7258934
UK market: with 5% yearly decline, we need probably 15 years or so to erase the gains from the boom; even more in the Netherlands. -5% really is nothing compared to the prior runup.
Also I keep wondering how they can keep talking about ‘relatively benign inflation’ while it is at its highest level in at least 15 years (although the actual numbers still seem low, I think the sheeple have started to notice that their wages are not keeping up).
If it was uncovered that phantom bids were made by US Realtors… all hell would let loose… against realtors.
And im counting on it…to happen.
For those who havn’t followed the stock market carnage in Mumbai-India, speculators with leveraged positions have been wiped out of the market. Futures trading with leverage is very common in India and the avg montum, trader is leveraged upto 4-10 times his trading worth. the swiftness of the fall has caught many people with their pants down. I track Indias housing bubble on the site http://indiahousingbubble.com .
I didn’t know you had a blog on the Indian bubbles. Thanks. Bookmarked.
having trouble with the link.
stick “.blogspot” in front of .com
German CDU May Lose Hesse State
“Merkel’s Christian Democrats won 36.6 percent of the vote in Hesse, home to the European Central Bank and the Frankfurt stock exchange, compared with 37.2 percent for Kurt Beck’s Social Democrats, ZDF television projections showed. That’s the lowest CDU vote in Hesse since 1966 and means CDU state Premier Roland Koch will struggle to form a government with the Free Democrats, his preferred partner, which won 9.3 percent.
The result in Hesse, where the CDU has ruled for nine years, is a blow to Merkel’s party in its first major electoral test since taking power at the head of a Grand Coalition with the Social Democrats. It also underlines public backing for a policy shift by Beck’s SPD to champion “social justice,” including spreading economic gains through minimum wages.
“The result will send a shock wave to Berlin, showing Merkel that voters have a strong appetite for more social justice,” Hans-Juergen Hoffmann, managing director of market- research company Psephos GmbH, said in an interview. “This puts Merkel in a very difficult position as clouds appear over the economy, very difficult indeed.”
http://www.bloomberg.com/apps/news?pid=20601100&sid=a8rOFEZJ6eQI&refer=germany
The end result is a bit different, see
http://www.spiegel.de/international/germany/0,1518,531400,00.html
The two state elections in Germany underline a major paradigm shift from conservative neo-con politics to “social justice” politics, meaning that corporate profits should be shared with the employees. Expect increasing wages in real terms.
To be fair, the Hesse elections were also influenced by the CDU’s controversial xenophobic campaign on youth violence.
Rising wages will make it very difficult for the ECB to cut rates. That’s bad news for Spain.
“The two state elections in Germany underline a major paradigm shift from conservative neo-con politics to “social justice” politics, meaning that corporate profits should be shared with the employees. Expect increasing wages in real terms.”
Social justice? Sharing profits with wage earners? Increasing wages? Oh the blasphemy of it all!!! (gasp)
Yes, how dare the workers! What makes these worker parasites think they deserve some of the profits of their labor? The shame!
For NHZ:
http://www.reuters.com/article/ousiv/idUSL2044147020080127?sp=true
wow, you are early too
I already mentioned the article in yesterdays bits bucket
Think I have to send Ben some pictures for the HBB gallery some day, my friend has one of the few original Herengracht Indexes.
As mentioned yesterday, although he is well aware of what is going on worldwide, professor Eichholz is still in denial about the crash potential in the Netherlands. He (or the writer of the article?) says Dutch home prices have roughly doubled since 1979 (that is the year just before the -40% crash), but fact is that homeprices are now 6-10 times higher than 15 years ago - that’s quite something else. The home at Herengracht 150 that is mentioned cost EUR 140K in 1993, it would now cost at least 1.2-1.5M euros; and that is very similar to what I see around me. Although he is expecting some decline, apparently the professor thinks the Netherlands IS different and many factors will support the current ridiculous valuations. Oh well, he is a real estate professor after all so probably has to be very careful with what he says about the Dutch market …
European hedge funds in crisis:
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3256253.ece
Fork it. Next.
nearly two-thirds of London-based hedge funds had lost between 4% and 10% of their value
that would be a surprisingly small loss, considering that most EU stockmarkets are down 20%-30% from last summer … With all their hedging and leverage, I wouldn’t be surprised if some of the hedgies had been wiped out completely by now. Let’s hope that not all the bad bets end up with pension funds, banks (that are no longer allowed to fail in the UK, apparently) etc.
“Let’s hope that not all the bad bets end up with pension funds, …”
I agree nhz, but am not optimistic as at every turn I see the scoundrels running off with the loot and leaving a mess to be cleaned up.
(Ben, this break out IBB is a good idea.)
yes, I agree. For every hedge fund manager running off with say 1 billion income every year, someone else must be loosing about the same amount (as most of these are virtual profits, having nothing to do with real production/services). I don’t think these scoundrels ever give back the loot once they have it, and certainly the banks are not taking all the losses either.
This is why I do not have faith in investing with mutual funds. Any gain shown on a quarterly statement is “unrealized” by me. Anytime those bankers get record bonuses even with poor performance, that money becomes “realized” for them. I may have the cookie jar set up but it’s their sticky fingers that are emptying out. What they leave me are IOUs and fake numbers notes.
Absolutely disgusing!
That’s why I’m a huge believer in index funds. The Vanguard s&p historically trounces most mutual funds.
I’m a believer in Mr. Warren Buffett:
“Index funds are for people to lazy to do their homework.”
0% Y/Y price growth in SA
German CDU May Lose Hesse State
“Merkel’s Christian Democrats won 36.6 percent of the vote in Hesse, home to the European Central Bank and the Frankfurt stock exchange, compared with 37.2 percent for Kurt Beck’s Social Democrats, ZDF television projections showed. That’s the lowest CDU vote in Hesse since 1966 and means CDU state Premier Roland Koch will struggle to form a government with the Free Democrats, his preferred partner, which won 9.3 percent.
The result in Hesse, where the CDU has ruled for nine years, is a blow to Merkel’s party in its first major electoral test since taking power at the head of a Grand Coalition with the Social Democrats. It also underlines public backing for a policy shift by Beck’s SPD to champion “social justice,” including spreading economic gains through minimum wages.
“The result will send a shock wave to Berlin, showing Merkel that voters have a strong appetite for more social justice,” Hans-Juergen Hoffmann, managing director of market- research company Psephos GmbH, said in an interview. “This puts Merkel in a very difficult position as clouds appear over the economy, very difficult indeed.”
http://www.bloomberg.com/apps/news?pid=20601100&sid=a8rOFEZJ6eQI&refer=germany
The end result is a bit different, see
http://www.spiegel.de/international/germany/0,1518,531400,00.html
The two state elections in Germany underline a major paradigm shift from conservative neo-con politics to “social justice” politics, meaning that corporate profits should be shared with the employees. Expect increasing wages in real terms.
To be fair, the Hesse elections were also influenced by the CDU’s controversial xenophobic campaign on youth violence.
Rising wages will make it very difficult for the ECB to cut rates. That’s bad news for Spain.
Sorry for the double post. The first one had not appeared after one hour, so I thought it was lost.
South Africa: Year-on-Year House Price Growth for Dec 2007 Was 0%
Wow, don’t think we’ll see this sort of thing in the U.S.
http://indiahousingbubble.blogspot.com/search/label/unscruplous%20builders
What? The arrests?
IIRC, the Armenians were doing similar things in Brooklyn for the last few years.
My mom told me that her sister’s house in Calgary sold in just a couple of days, for around $500k, last week.
Did somebody get hosered, eh?
My brother works in construction in Dublin. He’s what they call a “foreman” which means he overseas an entire site and the work crew that moves between them. The builder he works for was compelled to do “support and maintenance” on all appt/condo buildings he built in Dublin for 10 years after constructions is completed.
Anyway, he says he’s gone from working five 12 hour days (with a half day on Saturday) to just 4 days a week. He says the huge amount of Polish workers who came to Dublin after they joined the EU have mostly left for London to work on Olympic related projects. Anyone have any questions, let me know and I’ll pass them on.
In the mean time here’s something for you all to enjoy:
http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/7210231.stm
Ben,
Thank you for creating the IBB. I love hearing from other HBB from around the world. Now how will I be able to get any sleep? This looks like it could be a 24 hour addiction.
Just my own personal experience about selling houses:
Before I got my current home, I visited some model homes. In Germany, houses are quite small compared to the US.
To hide the smallness of the model home, one vendor had handmade furniture in it, looking like off-the-shelf furniture, but 20% smaller in all direction. I measured. The bed was 1.60 meters long (should have been 2 meters).
The house looked much bigger.
Tale about crooks.
Oh yes …
someone doing some statistical checks on realtor data found out last year that the amount of living space in many Dutch homes had grown by around 50% (measured in sqft) over the last few years without any building/remodeling activity. Seems that realtors are now adding the size of the walls and all kinds of unusable open space inside and outside to the total amount of living space. Talk about crooks …
Two years ago I found a building where the listed amount of living space was absolutely impossible judging from the footprint of the building and the height (you can easily judge the number of levels from looking at the windows). The average ceiling height came down to 1.9 meters (which is not allowed here). The realtor had included an ‘optional’ top level in the calculation, because the current top level had nearly 4 m ceiling height in the middle, so you could add an extra floor there. But that was only an option for very small people who walk exactly in the middle of the room…
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