The Housing Bubble

“Lyons is surrounded by protected open space, so there will be no place for the poor people to go….”

Bigger and bigger government - helping poor people one community at a time.

There are not making land anymore…especially when it is all “protected” from the unwashed masses.

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Colorado flood towns may come back less diverse
AP | 9/24/2013 | HANNAH DREIER

Carmel Ross, 66, an artist and caretaker for the elderly, thought about the town’s future amid the splintered trailers that now surround the mobile home she rents for $430 a month.

“Who rebuilds a trailer park?” she asked, laughing through tears. “Lyons is going to become a different story now. It’s a loss of a way of life. The things could always be bought again, but there will no longer by any low-income housing in this town.”

Former mayor Tim Combs said the new Lyons might look more like Aspen, a tony, celebrity refuge that began as a working class hamlet.

“It’s going to upgrade the town. We’re going to see nicer houses replace a house that wasn’t so nice,” he said. “Lyons is surrounded by protected open space, so there will be no place for the poor people to go….”

Lyons residents were told at a town meeting Thursday that it might take officials six months to restore drinking water and working sewage…

Residents of the even more remote community of Jamestown have been told it could be a year before they can return.

“Nobody wants to see those McMansions built that people live in only three weeks of the year,” he said. “But it’s the way this country works — the poor people are always getting pushed out, with or without a flood.”

The people getting screwed are those who already have insurance.

They will be forced into Obamacare.

Maybe that was the plan all along.

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Affordable Care Act Makes Insurance Unaffordable
Political Realities | 09/24/13 | LD Jackson

Affordable Care ActRemember how we were told by President Obama that the Affordable Care Act would make health insurance more affordable for millions of Americans? Remember how he has slammed the efforts by Senators Ted Cruz and Mike Lee to defund the legislation most people call Obamacare? One of his favorite lines is to point out, falsely, that the GOP is wanting to prevent millions of Americans from obtaining health care insurance, just to mess with him. It may be news to the President, but our opposition of the Affordable Care Act has nothing to do with him, other than that we are trying to expose the lies that he, and others, have told about the legislation.

A prime example would be the case of Andy and Amy Mangione of Louisville, KY and their two boys. They recently received a notice in the mail from their health care insurance provider, Humana. The notice carried some very surprising and unwelcome news. They currently pay $333 per month for their high-deductible insurance plan. Starting in 2014, the cost of that plan will be $965. In case you are counting, that’s an almost triple increase of the original cost of the plan. According to the notice from Humana, the increase is the direct result of the Affordable Care Act, aka ACA.

When you are still a closed shop state (ie - you must join the public union as a condition of employment)
With the State House and Senate controlled by public unions
Without cutting one public union insane salary/benefit or pension

Property taxes are not going to stop exploding

Property taxes on a crack shack house in South Jersey can be easily over $10,000/year. $15,000-$20,000/year in North Jersey. 7% sales tax. State income tax. Very high car insurance rates.

At what point between 0% and 100% taxation do you become a slave?

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NJ Property Tax Burden Soars … Under Chris Christie
09/23/2013 | AP

The net household property tax burden in New Jersey rose 13 percent during Gov. Chris Christie’s first three years in office — a number that reflects both his success in reining in local government spending and his inability to restore a relief program that was gutted by his predecessor during the Great Recession, an Associated Press analysis of tax data has found.

The growth is only slightly lower than it was in the last three years of Democrat Jon Corzine’s time as governor, when the net tax bill went up 15 percent.

But it reflects a different approach: Christie, a Republican, has gone further to force local governments to keep costs down — and give them help doing it. Corzine also tried to control local government costs but did much of his work on trying to control taxes by expanding a rebate program, which he then cut.

Why do so many Americans live in mobile homes?
BBC News | 24th September 2013 | Tom Geoghegan

‘An estimated 20 million Americans live in mobile homes, according to new Census figures. How did this become the cheap housing of choice for so many people?.’

Not everyone who lives in a trailer park is poor,” says Charles Becker, a professor of economics at Duke University, and one of a handful of academics nationwide who has extensively studied the subject.

“And there are parts of the country, like Michigan, where living in a mobile home community doesn’t have the stigma it does in the south. You also have retirement communities in Florida where people aren’t poor at all.”

Where is obama’s red line?

Bin Laden is Dead / GM is Alive.

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Videos: Terrorist attack in Nairobi, 59 dead; Update: US diplomat’s wife killed
Hot Air | September 22, 2013 | Ed Morrissey

The al-Qaeda affiliate Al-Shabaab has launched a lengthy massacre in an upscale Nairobi mall popular with Westerners, with a death toll of at least 59 people so far. The attack comes in reprisal for Kenya’s participation in suppressing the terrorist networks that operate in al-Shabaab’s home base of Somalia, and specifically targeted “non-Muslims.” It’s essentially a replay of Mumbai from five years ago, with the only question remaining is how many more will the terrorists kill before getting killed themselves or committing suicide.

The Kenyan military remained in a tense standoff with Islamic extremists Sunday, as the toll rose to 59 dead, including children, and 175 wounded in the attack at an upscale mall, a Kenyan minister said.

Update: That’s not the only terror attack today targeting non-Muslims. Two suicide bombers attacked Christian churches in Pakistan today, killing 56:

“They are the enemies of Islam, therefore we target them,” said the group’s spokesman, Ahmed Marwat. “We will continue our attacks on non-Muslims on Pakistani land.”

U.S. Secretary of State John Kerry, who offered assistance to Kenya, said several U.S. citizens had been hurt and the wife of a U.S. diplomat working for the U.S. Agency for International Development was killed.

“housing makes you poor. Very poor.”

It certainly does at current massively inflated asking prices of resale housing considering prices are 250% higher than long term trend. If you buy a house in this environment, you’ll be deep in debt for the rest of your life.

Don’t do it.

Before the advent of cars and public transport, rich people always kept an area nearby for poor people to live.

How else would they get to work?

If peak oil is true, we may be going back to that.

If the FED takes the punchbowl away will risk assets crash?

If the FED keeps printing money to support risk assets does this mean when the bubbles pop there will be an even harder crash in risk assets?

When did a roof over your head become a risk asset?

Maybe New Zealand Can Solve Housing Bubbles
By William Pesek Sep 23, 2013 3:00 PM PT

As the world’s biggest economies search for ways to let the air out of giant asset bubbles, they might find some answers in tiny New Zealand.
Fittingly, the nation that begins the developed world’s day and the central bank that pioneered inflation targeting will probably be the first to raise short-term interest rates. The move could come next year as growth steadily returns to levels seen before the collapse of Lehman Brothers Holdings Inc. in 2008. But something far more interesting is afoot at the Reserve Bank of New Zealand’s headquarters in Wellington.

Faced with a scary housing bubble not terribly unlike that in the U.S. five years back, Governor Graeme Wheeler should be tapping the brakes now, and hard, or so holds classical monetary theory. Doing so, however, would jeopardize the nation’s 2.5 percent growth amid general global uncertainty. Instead, Wheeler is conducting an experiment: limits on leveraged lending.

The idea, says economist Stephen Koukoulas, is to “contain the house price bubble without inflicting collateral damage to the rest of the economy.” Koukoulas was an economic adviser to Julia Gillard, Australia’s prime minister until June. And it’s significant that he’s recommending that Australia’s much larger economy emulate New Zealand’s experiment.

What about the rest of Asia, including China, home to some of the biggest property bubbles in modern history?

Crisis Lessons

If the world learned anything from the crises of the last 20 years — from Latin America to Asia to North America to Europe — it’s the folly of one-size-fits-all remedies. Nor is there obvious utility to comparing a $160 billion first-world economy like New Zealand’s with an $8.2 trillion developing one managed by Communist Party bureaucrats and a state-run central bank.

But the mechanics of monetary policy are rapidly changing. Now that central banks have cut rates to zero, they are loath to use them to address bubbles for fear of wrecking the broader economy. In the best of times, monetary policy is a blunt instrument. Today’s uncertain times require more of a scalpel — something that the wonkish among us call “macroprudential policies.”

“The neoclassical synthesis, the idea that we can use monetary and fiscal policy to make the world safe for laissez-faire everywhere else, has failed the test,” Nobel laureate Paul Krugman wrote on his blog last month. “What does this mean? At the very least it means that we need macroprudential policies — regulations and taxes designed to limit the risk of crisis — even during good years, because we now know that we can’t count on an effective cleanup when crisis strikes. And I don’t just mean banking regulation. The logic of this argument calls for policies that discourage leverage in general, capital controls to limit foreign borrowing, and more.”

The International Monetary Fund made a similar argument in a report last week, and New Zealand is a case in point. In May, the Organization for Economic Cooperation and Development said Kiwi homes were the fourth most overvalued in the developed world, behind only Belgium, Norway and Canada.

True, Canada — along with Israel, Singapore and South Korea — has tried its hands at macroprudential tweaks, but with limited success. New Zealand’s are taking the form of what bankers are calling a “10/80 rule,” whereby only 10 percent of new mortgages underwritten can have to loan-to-valuation ratios of more than 80 percent. The measures are designed to cap household debt as much as head off an asset bubble.
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This is what I see around San Diego, too: Lots of land graded as though new home building activity might start tomorrow, yet very little actual building activity. The builders appear to be banking on inflation to make their land ever more valuable the longer they hold onto it.

ft dot com
Markets Insight
September 24, 2013 8:57 am
BoE lacks tools needed to prick property bubble
By John Plender
Reliance on interest rates is rarely enough

Since the early 1980s economies in the developed world seem to have lost their ability to grow spontaneously. Larger and larger doses of debt have been required to keep them on an upward trajectory. The limits of such debt-fuelled growth were exposed by the financial crisis when the US, UK and other over-indebted countries ran out of capacity to absorb excess savings from Asia and northern Europe.

Debt cannot increase forever. The twin policy challenge today is thus to encourage the innovation that will permit a return to less debt-intensive growth and to find ways of reducing outstanding debt to manageable levels. This latter priority applies as much to the private as to the public sector.

The US has achieved meaningful private sector debt reduction since 2009 thanks largely to its non-recourse system of property finance. Since overstretched borrowers can walk away from their mortgage debt, banks have no alternative but to take timely writedowns on property lending. In Europe it is another matter, especially where, as in the UK, governments perversely seek to address the debt problem by encouraging households to take on more debt.

As I commented here two weeks ago the UK government’s Help to Buy scheme ensures that house prices remain out of range for countless aspiring first-time buyers. It is doubly perverse in that pushing up house prices does little to address the underlying imbalance in a housing market where new supply is desperately short.

Between 1997 and the start of the credit crunch in 2007 house prices trebled, mortgage lending quadrupled, yet housebuilding remained stagnant. That reflects the historical experience whereby housebuilders have made as much or more from inflation in the value of their landbanks as from putting up houses. Nothing suits them better than a combination of rising prices and endemic shortages of supply. Modest building activity puts a veneer of respectability over lucrative speculation.
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How many millions of excess, empty and defaulted houses are on Freddie’s and Fannies books?

No property bubble in sight: planning official
Updated: 2013-09-13 07:13
By Wei Tian and He Wei in Dalian (China Daily)

An official with China’s top planning agency says it is too early to say if the property market is in a bubble.

“The property market is still doing fine despite some regional problems,” said Li Tie, director of the China Center for Urban Development under the National Development and Reform Commission.

He was speaking on the sidelines of the World Economic Forum “Summer Davos” in Dalian, Liaoning province.

China is still some distance away from a property bubble, Li assured an audience at a breakfast meeting on Thursday.
…
The National Bureau of Statistics says housing prices in 70 major cities rose by 7.5 percent on average in July from the same period in 2012. All cities but Wenzhou reported house price rises.
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case shiller up - reflects june sales- may june are always the perkiest

“How to get to mars. Very cool!”

http://www.youtube.com/embed/XRCIzZHpFtY?rel=0

run time = 6:33

‘California Senator Dianne Feinstein has proposed an amendment to the Media Shield Law that would ignore the protection afforded by the First Amendment and would limit the law’s protection only to “real reporters,” not bloggers and other upstart alternative media types.’

http://www.westernjournalism.com/feinstein-first-amendment-special-privilege-right/

Housing Market in Brazil Draws Caution

http://riotimesonline.com/brazil-news/rio-business/brazilian-housing-market-draws-caution/

RIO DE JANEIRO, BRAZIL – The discussion about housing prices in Brazil was sparked again by a statement from renowned U.S. economist Robert Shiller, who predicted the American housing bubble burst. Shiller is reported as saying, “One can’t know for sure, but I suspect that there is a housing bubble in the major cities of Brazil. […] The fact that prices have doubled in the last five years does not sound good.”

In Rio, Fipe-Zap index registers an overall rise in purchase prices of 224.7 percent since January 2008, with São Paulo not far lagging behind. In the same time, rental prices have only gone up 131.1 percent.

….Prices have risen, as incomes in Brazil have increased. The nominal GDP per head has increased by fifty percent since 2008. The newly generated middle-class is eager for housing and with the development of a mortgage market, demand has spiked.

Yet, housing prices, especially in Rio and São Paulo, have risen far more than income has, which for many is an indicator of a bubble.

……Caixa’s vice president of real-estate lending, Teotonio Rezende, dismissed talks of a bubble and attributed the increase in prices to a re-regulation of prices after depreciated values during the hyperinflation that plagued the economy in the 1980s and 1990s.

Johan Jonsson, CEO and founder of Agente Imóvel, agrees, “In the opinion of Agente Imóvel, there is no bubble. What has caused markets to crash around the world in all history are steep price increases nurtured by easy access to leveraged property financing. Brazil is nowhere near those conditions.”

Jonsson cites the substantial amount of down payment that has to be made in Brazil and the low mortgage default rate as explanations against a bubble. The rise in mortgages, eightfold in the last six years according to Bloomberg, can be justified due to its low level beforehand.

“Having said that, the cost of housing has risen faster than income in the last five years which may make due for a more modest growth in property prices in the near future. Again, though, this is not to be compared with a market implosion that a bubble burst should cause,” Jonsson continued.

my mil in tampa is waiting for 2002 to come along- a villa so not the most common thing, but still a 2001 price level
http://research.stlouisfed.org/fred2/series/TPXRSA

fed says it’s 2004 pricing already ????

“Want to be enslaved for your entire working career? Just buy a house a current massively inflated prices.”

And only net 25% of what you paid into it in the end.

Always remember……houses depreciate and are always a loss.

Good Morning Liberace

what do
hungary-portugal-argentina have in common
A: they stole everyone 401k
gov workers getting their,everyone else screwed

can’t happen here?

Given the inevitability of the U.S. housing market recovery, I find it surprising that banks would be announcing mass layoffs in their U.S. mortgage business.

Sept. 24, 2013, 11:03 a.m. EDT
Citi sags after announcing mortgage layoffs
By Christina Rexrode

NEW YORK (MarketWatch) — Financial stocks sagged on Tuesday, with Citi among the biggest decliners as the lender indicated it was scaling back its mortgage business.

Citigroup (C -0.71%) fell, following its announcement late Monday that it will cut 1,000 jobs in its U.S. mortgage business. The cuts are just a small proportion of Citi’s overall workforce – it had 253,000 employees as of June 30 – but they’re part of a longer pattern. One year ago, Citi had 261,000 workers.
…

Given the inevitability of the U.S. housing market recovery, I find it surprising that banks would be announcing mass layoffs in their U.S. mortgage business.”

yea WTF ?

what a tool

A Forbes contributor, Harry Binswanger, who is a disciple of the writer Ayn Rand, argued this week that people who make $1+ million a year are so valuable to society that they shouldn’t pay any taxes.
Far from these million-dollar earners paying more taxes, Binswanger argued, the rest of America should “give back” to the 1% by thanking them for their service to the country and rewarding them by exempting them from taxation.
This argument is the logical extension of an argument that many American entrepreneurs and investors make, which is that they are the country’s “job creators” and therefore deserve almost all of the country’s income and wealth. These “job creators,” this argument goes, should pay their employees as little as possible and keep every penny of profit for themselves. After all, they deserve it: They’re the ones who “create” the jobs that sustain the country.

Uhhh…

‘If policymakers had wanted to see signs of the housing bubble at the time it was inflating, perhaps they should have read local newspapers. That’s one take-away from research done by University of Michigan Ross School of Business assistant professor of finance, Cindy Soo. Ms. Soo used newspaper articles to measure the “animal spirits” in housing markets across the U.S.’

“News media give a channel and voice to what’s going on in the current market,” Ms. Soo says. Local housing stories reflect what hometown realtors, builders and “people on the street” think about real-estate markets. When participants are enthusiastic about any market, their “animal spirits” can bid up prices above what fundamentals would suggest.’

‘Ms. Soo collected housing-related newspaper articles published between 2000 and mid-2011 in the cities included in the S&P/Case-Shiller 20-city home price index. The results created indexes that measured sentiment in the 20 local housing markets. For the U.S. as a whole, the turns in the index led the boom and bust in Case-Shiller home prices by about two years. ‘

http://blogs.wsj.com/economics/2013/09/24/want-to-know-where-home-prices-are-headed-read-the-papers/

Came across this:

http://www.mv-voice.com/news/2013/09/22/local-students-and-grads-drowning-in-debt

‘Local students and grads drowning in debt’

‘Mountain View resident Patricia Zeider chose to attend Cal State University Monterey Bay for its location — just far enough from home that her mother couldn’t check in on her, just close enough that she could come home on weekends. She took out loans to pay for a nicer off-campus apartment as well as a semester studying abroad in South Korea.’

‘She was interested in cultural anthropology and planned to teach English to adults. She graduated in May of last year with about $28,000 in debt. She’s now sleeping on a futon in her mother’s mobile home and working 12-hour days at Starbucks and the Mountain View Public Library to make her loan payments.’

A comment:

‘Let’s see: rack up $28k in debt so you can study “cultural anthropology”? And wonder why you can only get a job at Starbucks?’

Some of these people are borrowing even more to go back to school, repeatedly, just so the loan payments stop for a while.

http://losangeles.cbslocal.com/2013/09/24/housing-market-revival-to-push-socal-rent-prices-higher/

There isn’t enough supply…not enough rooftops for the people who want to live under them.

You can keep saying that the lack of supply is an illusion, but non-current loan rates and vacancy rates keep falling…while shadow inventory keeps coming onto the market (as evidenced by lower and lower non-current loan rates), it is more than absorbed by demand.

If there are massive numbers of vacant homes somewhere hidden in the foreclosure process in California, where are they? RealtyTrac tracks “zombie foreclosures”, vacant homes somewhere in the foreclosure process…the number for the WHOLE of California is something like 30k the last I saw the data.

Or is the excess supply on the books of the lenders? Property Radar (formerly Foreclosure Radar) notes about 43k homes in all of California.

Where is the excess supply? Who owns it? Unless you have a plausible explanation for where this supply is, all other evidence points in the opposite direction (not enough supply).

California Housing Demand Crumbles 10%+

http://picpaste.com/pics/13e032544a7945948a486bcfd4dce404.1380064785.png

Demand collapses when prices are grossly inflated.

Long-Feared Mortgage Meltdown Is Here

http://finance.yahoo.com/news/long-feared-mortgage-meltdown-135400110.html

“The mini-boom in housing is already over: Realtors”

http://finance.yahoo.com/news/mini-boom-housing-already-over-153038079.html

This is what happens when prices are grossly inflated. Buying a house now is financial suicide. Rent, buy later, after prices crater for 65% less.

“Housing “Recovery” Endgame Escalates”

http://www.zerohedge.com/news/2013-09-23/housing-recovery-endgame-escalates

Remember…..A housing recovery is falling prices to dramatically lower and more affordable levels by definition. Given the fact there are tens of millions of excess empty houses, and prices and massively inflated levels, you’ll never recover financially if you buy a house now. Beware.

Since when is it OK in America to discriminate against middle-aged, white rich people, or any other group, for that matter? Though I thought we were striving to become a color-blind society, I increasingly doubt it.

P.S. If anyone can provide one iota of evidence of how subprime loans made low-income American families better off, including recentvintage federal government sponsored subprime lending, please post.

5 years after Lehman, subprime mortgages return
When The Michelson Building opened in the midst of the financial crisis, you could see through the empty floors. Other buildings in Orange County, Ca., also stayed empty after subprime lenders shut down.

by David Weinberg
Marketplace for Thursday, September 12, 2013

What happened to the subprime lenders?

Sunday marks the five-year anniversary of the collapse of Lehman Brothers, the largest Chapter 11 bankruptcy filing in this country’s history, triggered in big bets on subprime mortgages that defaulted. And we’re still feeling the effects of the crisis that followed, perhaps nowhere more so than the real estate market. Prices in most places still haven’t recovered to pre-crisis levels. And subprime mortgages all but vanished. Until recently.

At the beginning of 2007, New Century was the second largest subprime lender in the country, and it needed more office space. So the company signed a pre-lease with The Michelson, an office building still under construction in Irvine, Calif.

“Before the building was even completed, the mortgage market began to crumble and New Century basically went bankrupt,” says Andrew White with Jones Lang LaSalle. He’s in charge of leasing office space in The Michelson. When the building opened in the midst of the financial crisis, it was so empty you could see through it at night, “and that was the case for a lot of buildings in the area,” White says.

“This area” being Orange County, ground zero for the subprime industry. Five years after the crash, office parks in the area are filling back up, but not with mortgage companies. The car company Hyundai now leases the space that New Century wanted.

Among the mortgage companies operated out of Orange County was First Street Financial, ranked among the top 40 subprime lenders in the U.S. “In February 2007, I laid off a good amount of people and shuttered a very successful company that was still making money,” says the former head of First Street Financial, Dan Perl. “Why? Because I didn’t think the future looked too good.”

Today Perl has a much more optimistic vision of the future. He founded a new company called Citadel Servicing, which he says is the first subprime mortgage lender in the U.S. since 2007. Though he doesn’t like the term subprime, he prefers non-prime. They are essentially the same.

Subprime mortgages were created for people with less than perfect credit scores who couldn’t get loans guaranteed by Fannie Mae and Freddie Mac. But they were aggressively marketed to people who couldn’t afford them, with gimmicks like no down payment and no need to verify income. Lenders collected big upfront fees on these loans.

Perl’s non-prime loans go to people with subprime credit. But unlike the old subprime loans there are stricter rules. For one, the income of the borrower has to be verified now.

“We look at everybody’s income,” says Perl. “We look at their debt in relationship to that income. We look closely the property and if they can qualify under our guidelines even with some credit dings here and there, we will in fact make the loan.”

Those credit dings mean that borrowers pay a lot to get a loan from Citadel. Upfront fees can top $10,000. Interest rates start at about 8 percent. But Perl also requires a minimum down payment of 25 percent. So far Perl has raised $200 million to lend. He expects Citadel will have a lot of competition in the next year and a half. “What you are going to find is instead of a $200 million marketplace today, this is going to be a several billion dollar marketplace,” Perl says.

Unlike 2006, when anyone with a pulse could get a loan, there are restraints on the growth of the subprime industry. New regulations have tightened credit standards and that means a safer market than the one of the early 2000’s. But it also makes it harder for lower-income borrowers to get a mortgage.

“To be blunt, I don’t think we want to have a housing market or a mortgage market that favors middle-aged, white rich people. We’d like a market that’s more diverse that reflects the population,” says Guy Cecala, the publisher of Inside Mortgage Finance.
…

If you use a mortgage-financed housing purchase to compete with the all-cash investor sharks, you are committing the financial equivalent of seppuku.

A Stunning 60% Of All Home Purchases Are “Cash Only” - A 200% Jump In Five Years
Submitted by Tyler Durden on 08/15/2013 17:29 -0400

Remember when housing was the primary aspirational asset for a still existent US middle class, to be purchased with some equity down by your average 30 year-old hoping to start a family in his or her brand new home, and, as the name implies, aspire to reach the American dream? Those days are long gone. Back in those days the interest rate on the 10 Year bond mattered as it determined the prevailing marginal affordability of leveraged real estate. That is no longer the case, at least not for about 90% of Americans, because as Goldman shows, while before the great crisis only 20% of home purchases were “all cash”, since then the number has soared threefold, and currently the estimated percentage of cash transactions (by count and amount) has hit a record 60%. In other words, less than half of all home purchases are debt-funded, and thus less than half of all home purchases are actually representative of what middle-class America is doing.
…

REAL ESTATE
September 24, 2013, 1:31 p.m. ET
Chinese Property Investors Widen Footprint in U.S.
Developers and Investors See Opportunities From Houston to Seattle Amid Market Rebound
By ESTHER FUNG
Photo from Grand China Fund
Grand China Fund owns a stake in this Atlanta residential complex.

SHANGHAI—The upswing in the U.S. property market is attracting Chinese developers and investment firms, and they are dipping their toes into new cities.

While Chinese institutional investors are still drawn to their traditional favorites of New York, Los Angeles and San Francisco, many are now also headed to cities such as Houston, Boston and Seattle as they seek geographic diversity as well as bigger lot sizes.

These other cities—lesser known to some Chinese firms—now appear to offer fresh opportunities as energy or technology drives their economies and local Chinese communities expand.

In the second quarter of this year, Beijing-based real-estate investment firm Grand China Fund took an 80% stake in a 286-unit residential rental complex in Houston. That followed a 2012 investment in a 170-unit residential project in Atlanta, with another local partner. The firm put a total of about $15 million into the two projects, which are valued at more than $50 million. For both projects, it said it was attracted by the prospect of higher yields amid the lower prices compared with property in California and New York.

Gaw Capital Partners, a Hong Kong-based private-equity firm, is planning to raise $500 million for a real-estate fund that will invest in U.S. commercial property in the fourth quarter, targeting investors from Asia and North America. The fund manager said it will look at assets in “innovation centers” such as Portland, Ore., and Austin, Texas.
…

Why couldn’t the Fed’s $40 bn in monthly MBS purchases be used to buy and guarantee private mortgages? What is special about GSE debt, other than that it originates inside the Beltway?

THE OUTLOOK
September 22, 2013, 3:55 p.m. ET
Rethinking Fannie, Freddie—and the 30-Year Mortgage
Washington Ponders How to Reshape the Mortgage Market
By NICK TIMIRAOS
CONNECT

Washington is finally talking seriously about how to replace Fannie Mae (FNMA -3.68%) and Freddie Mac, (FMCC -3.08%) the mortgage-finance juggernauts that the government was forced to rescue five years ago. Just don’t expect quick action.

The firms are proving to be as difficult to shut down as the U.S.-operated Guantanamo Bay prison in Cuba. Republicans and Democrats are deeply divided over what to do. On the surface, the disagreements concern what role the government should play in the mortgage market.

But the real debate boils down to this: Should all Americans continue to have relatively easy access to the pre-payable, 30-year, fixed-rate mortgage?

American homeowners love the 30-year mortgage, which isn’t available in most other countries. It provides payments that are stable for the life of the loan, which makes finances easier to manage. In many other countries, homes are financed with adjustable-rate mortgages, where payments rise and fall with prevailing interest rates.

The government plays an unusually large role in the U.S. mortgage market because banks don’t like holding 30-year mortgages. During the 1980s, many savings-and-loan associations failed when rates jumped because the interest they had to pay to depositors soared above the payments they received on those 30-year mortgages. This is known as “interest-rate risk.”

Enter Fannie and Freddie. They don’t make loans. Instead, they buy them from lenders, package them into securities, and sell those to investors. They promise to make investors whole when mortgages default. In other words, they take the credit risk.

This middleman role is important. It matches banks with pension funds and other investors that are more willing to take on the interest-rate risk. The companies also set uniform standards that facilitated very liquid securities markets. The 30-year mortgage is available mainly because of government guarantees—implied before the crisis and explicit since 2008.

Those who want the government out of the mortgage business say the 30-year fixed isn’t all it’s cracked up to be. Because borrowers pay a lot of interest during the first few years of the loan, it’s hard to quickly build equity. This makes the loan less practical in an era where people move, switch jobs, and get divorced more often than in the past.

Defenders, however, say it’s the wrong time to push more people into adjustable-rate loans because interest rates are likely to rise over the coming decade.

Wouldn’t banks still offer the 30-year fixed mortgage without a government guarantee if it’s so popular? Maybe, but they would likely require bigger down payments and higher rates.

It’s a math issue. There is nearly $10 trillion in mortgage debt outstanding today with around $4.5 trillion backed by Fannie and Freddie. Scrapping the government’s role means finding trillions of dollars ready to absorb the credit and interest-rate risk for new mortgages, since the firms have backed around two-thirds of those made since 2009.
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For how much wrongdoing during the subprime mortgage debacle was JPMorgan responsible?

The good news: U.S. house price gains are at a seven year high.

The bad news: U.S. house price gains are slowing.