January 31, 2014

The Fiscally Irresponsible Will Be Burned

It’s Friday desk clearing time for this blogger. “London’s homes generated more wealth than the entire New Zealand economy last year as their total value soared by in excess of £100 billion, according to new research. The last handful of London homes to go on the market for less than £100,000 have been sold or are under offer. Agents said a ‘milestone’ had been reached, with flats never again likely to be valued in five figures, barring a property market collapse. Property search engine Placebuzz founder Andy Hatoum said: ‘This may be the last time we see properties under £100,000 being sold in the capital — well on land at least, as the only homes available in the category are houseboats.’”

“The Houston real estate market ended 2013 on a strong note, according to the latest numbers. The average price of a single-family home rose to more than $265,000 dollars, up more than 10% from a year earlier. ‘If you’re inside the Loop, you’re probably at bubble pricing right now, based on the lack of inventory,’ said Shad Bogany, immediate past chair of the Texas Association of Realtors.”

“Multi-family sales in southern Maine continued a strong rise in key markets like Portland and Saco/Biddeford over the past year, according to Brit Vitalius, president of the Southern Maine Landlord Association. ‘Half of the properties that sold in Portland went under contract from March to May. ‘In the spring it felt like there was a mini bubble,’ he said.”

“The future appears bright for the Las Vegas valley, according to the Las Vegas Metro Chamber of Commerce. Even with the positive outlook, there are some concerns, especially when it comes to housing. ‘We’ve used some policy decisions to create a housing market that has quite a few people living in a home that they’re not paying for. At some point, that’s going to have to give,’ said Jeremy Aguero, principal analyst with the local research firm Applied Analysis.”

“Slow job growth and a slower judicial process are impeding Connecticut’s ability to fight through a foreclosure crisis that refuses to quit, according to economists statewide. ‘Our average length of time for foreclosures to go through the system is one of the longest,’ said Pete Gioia, an economist. Though Gioia acknowledged that the judicial process helps some homeowners who are trying to regain their financial footing, he said there are some ‘deadbeats who tool the system.’”

“Property repossessionss, home auction notices and mortgage default activity in the Scranton/Wilkes-Barre metro area soared by 60 percent, compared to 2012, according RealtyTrac. ‘I’m a little busier than I have ever been,’ said Joe O’Connor, who has been selling foreclosed properties since 1988. ‘They just keep coming.’ Some of the sales represent ’shadow inventory,’ which banks withheld from the market to forestall downward pressure on home prices, Mr. O’Connor said. ‘I have had more pre-sheriff’s sale requests than I have ever had,” he said. “I’m getting more (homes) over $250,000 in the last three years than I did in the 20 years before that. In my opinion, we still have another two or three years of increased foreclosures coming.’”

“All good things must come to an end. And so, after enjoying the lowest mortgage rates in 50 years, it’s time to wave goodbye. The Official Cash Rate is finally expected to start rising, possibly as early as next week - which means those who bought houses during the good times could be in for a rude awakening. More than 60,000 New Zealand households who own or part-own their homes are already stretched, spending 40 per cent or more of their total income on housing. By the end of the year, someone with a hefty half-million dollar debt may need to scrape together an extra $400 or so each month.”

“Westpac chief economist Dominick Stephens says some people may have been operating under the mistaken impression that low interest rates would last forever. ‘We may find that some highly-leveraged borrowers are surprised and put in a difficult position by the substantial series of interest rate hikes that we think is coming, he said.”

“Yang Bin, economist: ‘China’s housing prices have been a growing bubble. Prices in Beijing have been exaggerated and unreasonably higher than similar in the United States. I want the bubble to fail. We all hope it will fail. It’s too unreasonable. The average Chinese lifetime income can’t manage to buy a house. The government works with the developers. They make the profit, one sells the land, and the other make the money. They monopolize the industry and deprive people of their life-time hard work. The high price has seriously affected the spending power of China. The house prices kill the entire spending power.’”

“Penrith’s booming property market could be headed for a sharp fall, leaving many out of pocket, a home-seeking economist has warned. ‘Either [home] prices fall 50 per cent or incomes rise by 50 per cent,’ said Rodney Forrest, who lives in Penrith and is managing director of an investment research house. He said this was because median home values in Penrith, about $455,000, were priced at about six times the average local income, far above the global average of three times local income.”

“‘We have rapid credit growth and maniac irrational expectations: the two ingredients of a bubble,’ Mr Forrest said. ‘Once the bubble bursts, the fiscally irresponsible will be burned.’”

“Janet Yellen probably will confront a test during her tenure as Federal Reserve chairman that both of her predecessors flunked: defusing asset bubbles without doing damage to the economy. Investors got a taste of the hazards in recent days when news of a slowdown in China’s economy, coupled with expectations of reduced stimulus from the Fed, helped trigger a rout in emerging markets that had been pumped up by easy money imported from the U.S.”

“The Fed is devoting ‘a good deal of time and attention to monitoring asset prices in different sectors’ to see if bubbles are forming, Yellen, currently Fed vice chairman, told the Senate Banking Committee on Nov. 14. ‘By and large,’ she said, ‘I don’t see evidence at this point in major sectors of asset-price misalignments, at least of a level that would threaten financial instability.’”

“Stephen Cecchetti, former economic adviser for the Bank for International Settlements, agreed with Yellen that there aren’t many signs now of dangerous financial imbalances. Yet that’s not a reason to sound the all-clear. ‘We’re into the sixth year of zero interest rates,’ he said. ‘You do worry that there’s got to be something going on that maybe you’re missing.’”




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69 Comments »

Comment by Whac-A-Bubble™
2014-01-31 06:14:01

‘China’s housing prices have been a growing bubble. Prices in Beijing have been exaggerated and unreasonably higher than similar in the United States. I want the bubble to fail. We all hope it will fail. It’s too unreasonable. The average Chinese lifetime income can’t manage to buy a house. The government works with the developers. They make the profit, one sells the land, and the other make the money. They monopolize the industry and deprive people of their life-time hard work. The high price has seriously affected the spending power of China. The house prices kill the entire spending power.’

Nice to know that Whac-A-Bubble™ has a Chinese Doppelgänger.

Comment by snake charmer
2014-01-31 07:47:34

I expect Yang Bin to be executed, imprisoned or forced into exile for his candor. The developed West, unfortunately, isn’t a good place for people with those views either. Maybe he can join Snowden in Russia.

Comment by Whac-A-Bubble™
2014-01-31 08:11:28

Who’d've thunk Russia would become a safe haven for the outspoken?

Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:06:29

They are a safe haven for people who speak out against the United States, but not for people who speak about the ruling party in Russia.

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Comment by Whac-A-Bubble™
2014-01-31 21:35:28

Do you mean like Puddy-cat Sedition?

 
 
 
 
 
Comment by taxpayers
2014-01-31 06:14:31

see port-argt-hungary
taxpayers and savers are being burned while governmentarains live well.

 
Comment by Whac-A-Bubble™
2014-01-31 06:16:01

“‘We have rapid credit growth and maniac irrational expectations: the two ingredients of a bubble,’ Mr Forrest said. ‘Once the bubble bursts, the fiscally irresponsible will be burned.’”

And that, in a nutshell, is why the fiscally irresponsible PTB will work 24/7 to keep the bubble inflated.

Comment by Anklepants
2014-01-31 06:21:39

Sounds like there is a need for more easing. Yellen’s challenge will be how to bring that about while also pretending to be fiscally responsible with the tapering.

Comment by Blue Skye
2014-01-31 13:48:06

“I don’t see evidence at this point…that would threaten financial instability.”

Please Janet, don’t let our instability be threatened.

How could something so sad be so funny?

 
Comment by Janet Felon
2014-01-31 14:06:09

We just need multi-generational loan products. Say, 100 year mortgages, 25 year car loans, infinite credit card limits and pay arrangements, all secured by the future earnings of the debtors’ offspring. That’ll really get this party cookin’.

Comment by Whac-A-Bubble™
2014-01-31 21:37:28

Don’t forget about zero-down, neg-am, option ARM, no-doc NINJA loans to help make housing more affordable to deserving wannabe homeowners.

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Comment by Ben Jones
2014-01-31 07:26:10

‘there’s got to be something going on that maybe you’re missing’

I woke up thinking about this situation. If you had told people in 2004 that in 5 years the global central banks would be monetizing mortgage backed securities, government debt and stocks (they are doing that in Japan, at least), no one would have believed you. And if you had added they would do this for years, it would have doubled the disbelief.

But why? Why was it so unthinkable at one time? Because printing money to manipulate markets is probably illegal in a free society, and the economic consequences would be disastrous. Besides, people would lose confidence in such an obviously phony market and it would collapse.

So here we are. Market participants went along with this ploy. We’ve all pretended the house prices we see reported are real. That a yard of land in Mumbai is worth more than a yard of land in Manhattan. Too many distortions to contemplate.

We talk about moral hazard. Something that governments and central banks create when they allow or fail to punish lawlessness, or when they bail someone out. The danger of moral hazard is that the bad actions will be repeated, even magnified. With central banks now having purchased trillion$ in assets with printed money, they have become more than enablers of moral hazard; they are the actors.

It’s been said that central banks can’t print wealth. We’re about to find out if this is true.

Comment by scdave
2014-01-31 08:00:36

when they allow or fail to punish lawlessness ??

Oh the punish alright…It just depends on who you are and who they choose to punish…And there are enough laws now that everyone gets a chance to be a criminal and get to answer “yes” on the “have you ever” question;

The number of offenses classified as crimes in federal statutes has grown enormously from a few dozen at the turn of the twentieth century to several thousand today. American society could not long function if we convicted and imprisoned the perpetrators of all acts now deemed criminal.

If our drug laws were fully enforced, for example, the current president and his two predecessors would be convicted felons. If we were as serious about unreported income as, say, Norway or Sweden have proved to be, Timothy Geithner wouldn’t have served as Treasury secretary. And so on.

http://www.city-journal.org/2014/eon0130ab.html

 
Comment by Whac-A-Bubble™
2014-01-31 08:13:13

“If you had told people in 2004 that in 5 years the global central banks would be monetizing mortgage backed securities, government debt and stocks (they are doing that in Japan, at least), no one would have believed you. And if you had added they would do this for years, it would have doubled the disbelief.”

I’m sure many folks are still in denial about the unprecedented level of market manipulation that played out over the past five years and the massive correction needed to restore markets to normalcy.

Comment by Housing Analyst
2014-01-31 16:03:42

We have a few right here on this blog that believe the last decade is normal.

That kind of delusion is unimaginable.

Comment by Whac-A-Bubble™
2014-01-31 21:38:28

They probably also think denial is a river in Egypt.

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Comment by Blue Skye
2014-01-31 14:35:07

“they have become more than enablers of moral hazard; they are the actors.”

Yes and an honest man has as much chance being elected to lead as Mary Poppins to be the next Mafia chief. These things tend to end badly.

Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:11:01

Are you trying to say that Janet Yellen is not an honest man?

Comment by Blue Skye
2014-01-31 16:37:25

I doubt that she is Mary Poppins.

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Comment by Whac-A-Bubble™
2014-01-31 21:39:28

I doubt her BIL is Mr. Banks.

 
 
 
 
 
Comment by Ben Jones
2014-01-31 07:53:13

‘Among the many reasons to dismiss President Xi Jinping’s pledges to transform China’s growth model, Gan Li may offer the best: an epic housing bubble that can’t be allowed to pop.’

‘Gan, a professor at Southwestern University of Finance and Economics in Chengdu, Sichuan and at Texas A&M University in College Station, Texas, recently crunched some disturbing numbers on the level and distribution of household income and wealth. After examining survey results from 28,000 households and 100,000 individuals, Gan believes that roughly 65 percent of China’s household wealth is sitting in real estate.’

‘An astounding 90 percent of households in nation of more than 1.3 billion people already owns homes. In the first half 2012, he found, about 42 percent of demand for properties came from buyers who already owned at least one. Many of these homes and apartments, it goes without saying, were bought in the midst of one of history’s biggest real estate booms and bubbles.’

“The Chinese housing market is clearly oversupplied,” Gan told Tom Orlik, a Bloomberg economist based in Beijing. “Existing housing stock is sufficient for every household to own one home, and we are supplying about 15 million new units a year. The housing bubble has to burst. No one knows when.”

‘China’s social compact is simple: We raise your living standards and you don’t head to Tiananmen Square with protest banners. Beijing is loath to test this arrangement after the events of 2011. Arguably, no episode in the last two decades spooked Communist Party bigwigs more than the “Jasmine revolution.” China’s pro-democracy protests inspired by the Arab Spring uprisings were peaceful, but their size and breadth — demonstrations emerged in at least 12 cities — shook then-President Hu Jintao’s government.’

‘The surging cost of housing was among the most cited grievances of protesters. Now, China risks enraging the ranks of homeowners throughout the nation if prices plunge along with GDP. Everyone knows China needs to rein in credit and curb its vast shadow banking system. If policy makers push too hard, though, they may provoke the ire of a new generation of middle class “fang nu,” or housing slaves — a reference to the lifetime’s work needed to pay off debts.’

‘There’s also the other end of the market to consider: newly minted millionaires and even billionaires among the ranks of the Communist Party.’

‘The pivotal role of housing in China’s economy makes the sector too big to fail. Nothing worries Xi’s government more than the specter of public unrest, which explains its increasingly aggressive moves to censor the Internet and mobile-phone texts. And nothing would unnerve the masses faster than watching 65 percent of household wealth evaporate in a matter of weeks.’

Comment by Whac-A-Bubble™
2014-01-31 08:14:42

‘… bubble that can’t be allowed to pop.’

How many of these are currently inflated, and what is the chance the global central banking cartel will manage to keep them inflated forever?

Comment by Whac-A-Bubble™
2014-01-31 08:15:50

Is it safe at this point to assume the emerging markets stock bubble has encountered a pin?

 
 
Comment by Blue Skye
2014-01-31 14:39:34

In my lifetime the Chinese government took all the private property and “purged” the landowners. Just lately they have doled out the property to the “workers” in exchange for a lifetime of debt payments. One would think that a lifetime is about the limit of human tolerance.

Comment by tresho
2014-02-01 08:44:19

One would think that a lifetime is about the limit of human tolerance.
Dead people don’t agitate against the government.

 
 
 
Comment by snake charmer
2014-01-31 07:54:42

“Stephen Cecchetti, former economic adviser for the Bank for International Settlements, agreed with Yellen that there aren’t many signs now of dangerous financial imbalances. Yet that’s not a reason to sound the all-clear. ‘We’re into the sixth year of zero interest rates,’ he said. ‘You do worry that there’s got to be something going on that maybe you’re missing.’”
________________________________/

How does someone this willfully ignorant advance to such a high policy position? The emperor has no clothes, you bozo.

Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:21:30

People advance by telling the lies that no one else is willing to tell.

Comment by Whac-A-Bubble™
2014-01-31 21:40:40

Others advance the lies by failing to point out that the emperor is streaking around naked in public.

 
 
 
Comment by Ben Jones
2014-01-31 07:56:35

‘Despite political unrest and the economic slowdown, Bangkok’s second-hand home market continues to grow but only in specific locations, led by the inner city and those along the Purple Line.’

‘Somsak Muneepeerakul, president of the Real Estate Broker Association, said brokers need to work hard as annual demand for second-hand homes is only 25% of the total supply, with demand for 70,000 to 80,000 units compared with a supply of 300,000 to 350,000 units.’

 
Comment by Ben Jones
2014-01-31 07:59:32

‘Buying by locally resident Chinese and those from mainland China is inflating housing bubbles in and around Sydney, where prices in some suburbs have surged as much as 27 per cent in the past year. That’s almost three times faster than the overall market.

‘A second-hand house in suburban Eastwood sold for as much as $1 million more than the expected price, according to John McGrath, chief executive of McGrath Estate Agents in Sydney, which set up a Chinese sales desk in September.’

‘McGrath agent Adam Wong, who brokered Ford’s apartment, said 95 per cent of the more than 100 people at the auction were locally resident Chinese.’

Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:25:08

Is “locally resident” the same as “Austrailan citizen”? Something tells me no. Why are Chinese people leaving China and buying real estate in white mans’ land? I guess they figure the Chinese guvment will be too lazy or broke to travel beyond China to nab the various white-collar criminals who have offshored themselves.

 
 
Comment by Ben Jones
2014-01-31 08:02:35

‘An Auckland real estate firm is offering groups of Chinese buyers guided tours of local properties. Many are cash buyers, and while that’s great news for sellers, there’s a perception in Auckland that Chinese buyers are driving up prices and shutting Kiwis out of the housing market.’

‘Some are looking for a home to live in; others would like to buy a property for a relative and some are looking for an investment property. One home was a four-bedroom 1900s villa in Eden Terrace, priced at more than $1 million. The second was a modern four-bedroom home over the bridge in Takapuna, priced at just less than $1 million.’

‘Business college director Ellen Wan joined the group to view the final property. She has lived in New Zealand for nine years and like many people is surprised how high prices have gone. But she thinks they may go even higher.’

“In the future the property market [will be] stronger, still can be stronger, because much more people like to live in New Zealand,” says Ms Wan.’

Comment by In Colorado
2014-01-31 08:23:45

Bay Area prices without Bay Area jobs or incomes.

Comment by scdave
2014-01-31 09:18:44

Exactly Colorado…Its about wealth also…Lots of wealthy people in Palo Alto and they drive prices because of it…

Comment by In Colorado
2014-01-31 10:50:43

I guess the displaced Kiwis can move to the South Island and herd sheep for a living.

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Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:28:51

” …because much more poeple like to live in New Zealand.”

No they don’t!

 
 
Comment by Combotechie
2014-01-31 08:05:18

“London’s homes generated more wealth than the entire New Zealand economy last year as their total value soared by in excess of 100 billion according to new research.”

Raise the prices and you raise the values. Raise the values and you generate wealth. Pure F*cking Magic (PFM).

And is this something that is easy to perform, this raising of prices, this PFM? Why, yes indeedy, just look around.

You don’t have to raise prices on everything, just raises the prices of the comps. Raise the prices of just a few number of houses that represent large expansive neighborhoods and - presto! - you just created millions of dollars of “wealth”.

PFM.

Same thing with stocks: Raise the prices of a relatively few shares of a company’s stock by cleverly trading them (trading them to yourself if necessary) and another presto happens as the price of EVERY SHARE of the company’s stock increases by the same exact amount.

PFM, largely because people think Price equals Value. And, amazingly, nobody seems to question how and why all this comes about.

P.T. Barnum would be proud.

Comment by Ben Jones
2014-01-31 08:11:50

‘people think Price equals Value’

Check out the photo of the “house” in the UK article.

Comment by snake charmer
2014-01-31 08:35:25

It’s an ugly, rundown tenement. That reminds me of the infamous “crack shack or mansion” quiz on expensive Vancouver properties from a few years ago.

The article adds that London property is “now seen as one of the world’s safest investments.”

I wish I could visit to see this personally. I’ve never been to London outside of changing planes in its airports, which in my view are the world’s most alienating, taking the form of shopping malls with gates attached. If not for a store selling teddy bears emblazoned with the Union Jack, I wouldn’t have known where I was. The jetways were one long bank advertisement, leading me to joke to my wife that we’d landed in a country called “HSBC.”

Comment by Blue Skye
2014-01-31 14:43:07

HSBC = The Hongkong and Shanghai Banking Corporation Limited

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Comment by Pete
2014-01-31 16:11:00

“The article adds that London property is “now seen as one of the world’s safest investments.”’
And the author adds the following odd statement: “Despite the rapidly increasing prices, there are no signs that the city’s property bubble has burst”

So he admits that it’s glaringly obvious that the city has a property bubble, but since it hasn’t popped yet, well…. How is one supposed to take that?

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Comment by scdave
2014-01-31 09:32:10

Wow…I just looked at it also…Buy as an investment ?? Gee’s…Does that shack rent for $5,000.+ per month because if it doesn’t, it does not seem like much of a “investment” to me…

I would also note the end of the video where the chinese gal said that she expects more chinese to leave mainland China…I don’t think these chinese buyers are looking for an investment at all…Its either for a family member, for themselves or just a place to diversify their assets out of their homeland…

Comment by In Colorado
2014-01-31 10:52:53

I don’t think these chinese buyers are looking for an investment at all…Its either for a family member, for themselves or just a place to diversify their assets out of their homeland

I knew plenty of upper class Mexicans who bought houses in Cali or Texas for those very same reasons.

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Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:33:31

If this bubble is going to continue, then at least we will get some entertainment out of it. I have always enjoyed insulting the looks of overpriced houses.

 
 
Comment by scdave
2014-01-31 08:15:25

(PFM)….LOL…That was hilarious combo…

 
Comment by snake charmer
2014-01-31 08:22:02

He sure would. The level of distortion has become grotesque. This is like a person who has had too much cosmetic surgery.

It’s repugnant to see the world roll out the red carpet to the beneficiaries of fraud and impunity in China. The idea that a corrupt regime and system can create money and give it to cronies who proceed to price out your own children from living in a city where they were born is brutally wrong.

 
 
Comment by Ben Jones
2014-01-31 08:06:52

‘The Annual Report on Chinese International Migration 2014 shows that a growing number of Chinese investors are rushing to go abroad in order to buy properties and establish permanent residence in places like Europe and North America.’

‘Charles Liu, who moved to California’s Silicon Valley from Beijing last year, recently spent $1.6 million on a single-family home with a lot size totaling 10,000 square feet (930 square meters) nearby San Jose. “We saved $400,000 for the down payment and expect to pay off the mortgage in five to 10 years,” said Liu.’

‘Liu added that competition is stiff among international buyers as fewer homes are for sale in the area’s super-heated real estate market.’

“‘We emigrated to Canada to ensure that we will live, and my son will grow up, there after I retire from my business in a few years,” said Liang Jiehui, owner of a Shanghai-based clothes trading company covering markets in North America.’

‘Liang and his wife obtained permanent residency permits in Canada five years ago by buying a house in Toronto for $600,000, though the family is currently staying in Shanghai as Liang’s store and factory are located there. “I felt very lucky to decide so early to complete the immigration process, as Canada restricted it after too many wealthy businessmen rushed to apply,” said Liang.’

“‘Investing in properties in France seemed to be a wise choice as housing prices there haven’t had any dramatic fluctuations caused by the economic recession in Europe,” said Luo Jingwen, a property developer from Hangzhou, Zhejiang province, who plans to move there soon with his family.’

“‘Most of the growth in private wealth flowing to real estate emanates from Asia, especially China, while private Asian transactions are now over three times that of 2007,” said Michelle Zhou, Manager of Residential Sales, Savills Property Services (Shanghai) Co Ltd.’

‘Zhou added that more Chinese buyers would choose to purchase properties in European countries in the next three to five years particularly in the UK as the housing prices there were expected to increase 20 to 25 percent by 2018.’

Comment by Rental Watch
2014-01-31 14:35:47

I heard an interesting perspective on the influx of Chinese buyers to real estate outside of China.

Clearly the number of buyers is greater than it would be if there was NOT an expectation that home values are going up.

However, a part of the reason for the purchasing of property in other countries is because it is a way to protect new-found wealth from seizure by the Chinese government.

I do find it interesting that the main foreign speculation in real estate seems to be coming from a communist country that wouldn’t think twice of seizing private property. I hear very little of other newly-wealthy folks from other BRIC countries buying real estate in other countries (other than a Russian oligarch from time to time).

Taking several steps back, this makes me wonder if we are seeing a mini “brain drain” from China to other places around the world (or a sign of its possibility). Finally private individuals are able to create a pretty fair amount of wealth for themselves…and if they have a long enough historical perspective, they recognize that they will only keep that wealth as long as the Chinese government allows it. It would certainly make me think about getting the F out of Dodge as soon as I could (or at least move money out in anticipation of needing to leave).

Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:42:26

The severley imbalanced (and newly ostentatious) concentration of wealth in China is due to the corrupt one-party system. It is not due to a sudden funneling of wealth to smart people.

Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:46:32

BTW, the official punishment for corruption in China is death. This means that if the current power structure changes, then the obscenely wealthy (and openly corrupt) members of the old guard will not mereley have their property seized. They will have their lives seized.

Also, people can’t own land in China anyway.

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Comment by Kidbuck
2014-02-01 01:45:10

Ditto for the USA.

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Comment by Ben Jones
2014-01-31 08:09:49

‘Economists and industry analysts warned a sharp downturn in the Norwegian construction industry is likely to have a serious affect on the wider economy. Experts said the new home construction sector has basically collapsed, and Norway is on the brink of a recession.’

“It seems we almost have had a collapse in the construction of ordinary housing for people,” Dag Aarnes, economics and taxation director at the Confederation of Norwegian Enterprise (Næringslivets Hovedorganisasjon). “It’s probably a warning of something very serious underway in the housing market.”

‘Banks had no doubt a construction downturn can shrink the economy. “We’re quite close to a recession now,” said the Chief Economist at bank-owed group Oak Alliance (Eika Alliansen), Jan Andreassen. “The loss of jobs in the construction industry can cause further deterioration of an already weak economy. Housing investment alone is NOK 140 billion (USD 22.7 billion). We can expect a fall of 20 percent, and that is NOK 30 billion, which again is more than one percent of GDP.”

‘As well as a fall in new home construction, new statistics showed housing prices at the end of 2013 were lower than the previous year end, for the first time in five years. House prices have dropped 5.3 percent since the peak last May.’

 
Comment by Fang Nu
2014-01-31 08:15:39

My permanent name here now.
I’m going to order a license plate.

It can be my new epithet also.
Homedebtor is too blatant.

Fang nu you!
A curse for sure.

Comment by Pete
2014-01-31 16:20:45

“My permanent name here now.”

Funny and appropriate, but who were you before?

 
 
Comment by Ben Jones
2014-01-31 08:19:22

‘Malaysians earning below RM1,500 monthly should opt to rent instead of buying low-cost houses, the head of Syarikat Perumahan Negara Berhad (SPNB) said today when deflecting criticism over the availability of such units.’

‘Datuk Dr Kamarul Rashdan Salleh, who is managing director of the firm that develops low-cost homes for the government, claimed that most of its units are left unsold because many low-wage earners could not obtain mortgages to finance the purchase.

’

”I can mention here that SPNB has almost 6,000 low cost units and to date we can only sell about 17 per cent of them. It is due to the fact that the low-cost buyers, they cannot get loans or mortgage from financial institutions,” Kamarul told a forum on property here.

’

”These people, when they can’t get loans from the bank, they become so angry. And at the end of the day they become angry at the government.”



’Kamarul suggested a need to revise the national housing plan to allow low-income earners to rent such units, to prevent such units from falling into disrepair.

 ”For those people, (earning) RM1,500 and below in terms of their income per month, they shouldn’t buy the house. This is from my point-of-view,” he added.

’

 
Comment by Ben Jones
2014-01-31 08:22:38

‘In Toronto’s condo market, the slowdown probably won’t lead to a crash. About 96 percent of the 20,000 condo units set to hit the market this year are already pre-sold, said Shaun Hildebrand, senior vice-president at Urbanation.’

‘About 60 percent of Toronto condo buyers are investors. Most of them will hold onto their units if they have trouble selling, and possibly rent them, rather than drastically drop the sale price, Hildebrand said.’

‘Tal of the Canadian Imperial Bank of Commerce, said a constraint on land in Toronto that’s driving up the price of detached houses is keeping demand for condos from disappearing.’

“It’s a market that will correct,” said Tal, who estimates that condo prices may fall up to 15 percent in Toronto this year. “Sales are already sliding down, dramatically in fact. Prices will eventually follow suit.”

Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:50:54

Traditionally, loans to investors have been considered higher-risk and, therefore, charge higher interest. But in Toronto, it’s considered a sign of stability that 60% of the condo-donkeys are investors. Lord knows that when a Canadian investor loses money every month, then that person will keep doing so forever. Canadonkeys are different here!

 
 
Comment by Ben Jones
2014-01-31 08:26:56

‘The number of houses sold in New Zealand fell in December from a year earlier, continuing a trend of a softening market, though the national median sale price rose to a new record, according to Real Estate Institute figures.’

‘The number of houses sold fell 1.1 percent to 5,688 in December from the same month a year earlier, and were down 18 percent from November, a bigger drop than the average decline, REINZ said in a statement. The fall in sales volumes was led by Manawatu/Wanganui, where turnover dropped 37 percent, followed by a 27 percent slide in Southland and a 24 percent decline in Wellington.’

“There is no doubt about. New Zealand’s housing market is slowing,” said Westpac chief economist Dominick Stephens. “Lower turnover is one classic indicator of a market slowdown. The other is that it takes longer to sell houses.”

“Prices in Auckland, which have been driving growth over the past year, fell 3.2 percent to $620,000, and were up 12 percent on the year.”

‘An international housing expert believes house prices in New Zealand are twice what they should be, and up to three times in Auckland. The 10th annual Demographia International Housing Affordability Survey, which ranks 360 cities in 10 countries according to their affordability, named New Zealand as having one of the least affordable markets in the world. Auckland ranked 347th of the 360 cities.’

“We’ve got a big, big bubble in New Zealand right across the board. Roughly housing is about double the price it should be but in Auckland it’s probably three times as much,” Mr Pavletich said.’

Comment by In Colorado
2014-01-31 10:57:47

What is amazing is that there are bubbles in countries where:

Large down payments are required
There are no 30 year, fixed rate mortgages
There is no MID
Wages are low
Income taxes are high

Comment by Ben Jones
2014-01-31 11:12:25

Singapore has high deposits now. But they first started trying to “cool” their housing market in 2009! It took them 5 years to get serious about it.

The risky leverage isn’t always apparent in the house loan. For instance, in China it’s the developers and local governments that are hanging it out there. I read yesterday that around 45% of Chinese debt will have to be refinanced in the next 12 months.

 
 
 
Comment by Ben Jones
2014-01-31 08:29:59

‘The Austrian central bank has downplayed concerns over whether the real estate bubble in Vienna and the rest of the country could shake financial stability.’

‘However the central bank said on Monday it will be monitoring the situation by creating a new fundamental price indicator.’

‘Residential real estate in Austria increased 39% between 2007 and 2013, the highest increase seen in the Eurozone. Vienna saw particular price hikes with the top-end of the market attracting foreign buyers looking for second homes.’

‘Low interest rates from the European Central Bank have been pointed to as one of the reasons for the price increases as it makes mortgages less expensive.’

‘Germany is also experiencing rises in real estate prices but the central bank Bundesbank has also said it doesn’t present a risk. “It is very unlikely that this will result in macroeconomic risks or dangers to financial stability,” the bank said in October, although highlighting that house price corrections in cases of over evaluation may lead to “perceptible” losses in wealth for some.’

 
Comment by Ben Jones
2014-01-31 09:03:17

‘The United States should be more aware of how its policies affect the rest of the world, the Reserve Bank of India (RBI) chief said on Friday, a day after complaining that global monetary policy coordination had broken down. Raghuram Rajan, a former chief economist at the International Monetary Fund, took charge at the RBI last September during the country’s worst financial crisis since 1991.’

‘India’s financial markets have boomed as U.S. Federal Reserve efforts to bolster economic growth at home with cheap money encouraged investors to seek higher returns in emerging economies. As the Fed began to talk of unwinding its policy last year, the money began to flow back out.’

“I have been saying that the U.S. should worry about the effects of its policies on the rest of the world,” RBI Governor Rajan said at an event on Friday organised by The Times of India newspaper.’

“We would like to live in a world where countries take into account the effect of their policies on other countries and do what is right, rather than what is just right given the circumstances of their own country,” he said.’

‘The turn in Fed policy, combined with signs the Chinese economy is slowing, has sent markets from Turkey to South Africa and Brazil reeling over the past week. Turkey and South Africa responded by raising interest rates this week to help support their currencies. The Reserve Bank of India also tightened monetary policy, saying the action was aimed at pushing down high consumer inflation.’

‘”International monetary cooperation has broken down,” Rajan told the TV channel. “Industrial countries have to play a part in restoring that, and they cannot at this point wash their hands off and say: ‘We will do what we need to, and you do the adjustment you need to.’”

Comment by In Colorado
2014-01-31 10:54:52

The United States should be more aware of how its policies affect the rest of the world, the Reserve Bank of India (RBI) chief said on Friday, a day after complaining that global monetary policy coordination had broken down.

They sure don’t mind when those policies offshore jobs to their countries. I’m sure they don’t shed a single tear for Americans who lose their livelihoods when their jobs are offshored.

Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 15:56:31

Exactly. And we absolutely can wash our hands. That’s just the thing. As long as I don’t have the right to vote in India, then it’s not my responsibility what happens in India.

 
 
 
Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 12:39:47

Increasing prices do not generate wealth. That just transfers wealth from the buyer to the seller. “Wealth” is a measure of purchasing power.

 
Comment by "Uncle Fed, why won't you love ME?"
2014-01-31 12:44:12

People are dum. When house prices were falling, and nothing was selling for MORE than five figures, I never read a quote claiming that “this is the last time anything will sell for more than five figures”. So why then, on the way up, do people claim that “this is the last time anything will sell for less than five figures”?

Comment by Housing Analyst
2014-01-31 15:47:00

I don’t know but this we do understand………

The next decline currently developing legs is going to make the last interrupted correction seem like a walk in the park.

 
 
Comment by Housing Analyst
2014-01-31 13:19:28

With current resale asking prices massively inflated 40-60% higher than reproduction costs(lot, labor, materials, profit), housing isn’t just “overpriced”. It’s a wholesale rip-off.

 
Comment by Whac-A-Bubble™
2014-01-31 21:51:54

“Agents said a ‘milestone’ had been reached, with flats never again likely to be valued in five figures, barring a property market collapse.

I pull in resolution, and begin
To doubt the equivocation of the fiend
That lies like truth: ‘Fear not, till Birnam wood
Do come to Dunsinane:’ and now a wood
Comes toward Dunsinane.

– Shakespeare’s Macbeth

 
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