The Risks You Think You Have Seen Before
It’s Friday desk clearing time for this blogger. “Changing market dynamics put more power in the hands of buyers than sellers, says Stan Humphries, Zillow’s chief economist. At the end of September, there were almost 19 percent more homes on the market than last year. Nearly 37 percent of listed homes on Zillow had at least one price cut in the past month, up from 33.6 percent in September 2013. ‘Sellers have had their day in the sun for several years in a row now. It’s time to get back to a balanced market and for buyers to have their day,’ Humphries says.”
“Brian Walters, a Redfin real estate agent who works in Alexandria, Virginia, has seen changing dynamics among his clients, too. ‘It seems like buyers have definitely picked up on what’s going on in the marketplace a little bit faster than sellers,’ Walters says. ‘They’re willing to go in and offer significantly lower than what would be expected to be successful offers that seem to pan out. They’re being a lot more aggressive during the home inspection period and asking for things to be repaired.’”
“August home sales data confirms what brokers say they are seeing: A cooling trend that, in some areas, is beginning to favor buyers. ‘We’ve turned the corner a little bit toward a buyer’s market,’ said Leslie Like, a broker with John L. Scott Real Estate. ‘The multiple offers have slowed down. Offers are a little more demanding on buyer’s part. In Hillsboro, Forest Grove, Cornelius, it’s quite a bit slower,’ she said. ‘You can feel the difference.’”
“Of about 5.43 million owner-occupied homes that were foreclosed on after 2007, only 2.1 percent of the borrowers – or 114,100 – had purchased a primary home by the end of 2013, according to Experian’s research. Of nearly 809,000 short sales on owner-occupied homes after 2007, about 44,300 – or nearly 5.5 percent – of owners have repurchased another home by the end of 2013. ‘I see a lot of people coming back into it with eyes wide open,’ Angel Johnson, a real estate professional with Redfin in Phoenix, told The New York Times. ‘They can get a loan, but they are still spooked.’”
“U.S. homeownership dropped to the lowest rate in two decades, with declines across the country and income spectrum, according to government data. The U.S. Census Bureau reported that the homeownership rate, which shows the share of occupied homes in which owners live, fell to 64.4% in the third quarter — the leanest result since 1994 — down almost a full percentage point from a year earlier. The homeownership rate in the third quarter fell in all four U.S. regions from a year earlier. Also over the past year, the rate fell among all age groups but one: those who are 55- to 64-years old. Meanwhile, the rate also fell over the past year for households with family income below the median, as well as households with income above the median.”
“The news from China’s property sector continues to be grim. Things could yet turn around. In late September, the central bank eased mortgage lending standards to shore up the housing market. The problem lies in why people would want to buy a second (or third) home in the first place. But that makes China’s housing market more like a stock market in terms of motivation to buy. A study by Southwestern University of Finance and Economics shows that China’s urban home ownership rate is already 87%, notes Kent Troutman, an economist at Peterson Institute for International Economics.”
“Meanwhile, the urban vacancy rate is around 22%. China’s leaders are counting on rural migration to cities to boost housing demand over the next decade or so—a process called ‘urbanization.’ As Troutman points out, though, rural home ownership is already at 97%.”
“New Census data ranking home ownership rates throughout the country reveal Auckland’s house prices are so high people are still left with debt when they reach retirement. Real Estate Institute of New Zealand CEO Helen O’Sullivan agreed Auckland’s low rate of outright home ownership reflected price growth. ‘It takes longer to pay off a house in Auckland,’ Mrs O’Sullivan said. ‘But it’s only been the last two years that we’ve seen Auckland’s price growth outstrip the rest of the country.’”
“Sharp spikes in house prices across Australia’s major cities in recent years have fuelled the passion for property. But it is not easy working out who or what is to blame. But real estate agents do see the potential for trouble ahead because of reckless lending to some buyers. ‘The flow of credit for first-time home-buyers is far too easy,’ says Mark Wizel, a director of real estate firm CBRE in Melbourne. ‘I think that it is a market that is fraught with a bit of danger because if there is a correction in the housing market buyers that have over-extended themselves to take up the opportunity of the great Australian dream may be left exposed.’”
“Moves to boost the U.S. housing market could fuel the next credit bubble, warned Alan Schwartz, the former head of Bear Stearns, which collapsed during the 2008 subprime mortgage crisis. Earlier this month, the U.S. Federal Housing Finance Agency announced plans to return to allowing Americans to buy homes with deposits as low as 3 percent in order to help boost the faltering housing market. ‘When you give credit to people with very low down payments, and they can walk away from their mortgage, that is sowing the seeds of the next cycle,’ Schwartz told CNBC.
“Last week, the U.S. Mortgage Bankers Association forecast there would be $1.19 trillion in mortgage origination during 2015, a 7 percent increase from 2014. ‘What I learned from the crisis is that as you get older, you get more used to the risks you have seen before-or think you have seen before,’ Schwartz told CNBC. ‘We saw another cycle coming and we assumed we would be able to handle it, and sometimes what you assume from the past is very different from the future. So it teaches you not to get complacent about the risks you think you have already seen.’”
“Say we didn’t hear that. Say we didn’t hear that rules for mortgages guaranteed by the taxpayers are going lax once again. Oh, but we did. Taxpayers, you are being handed the bag once again. What makes you particularly vulnerable are the potent political forces determined to keep the game going — an odd alliance of Wall Street financiers and advocates for low-income Americans. Powerful banking interests have fought every move to transfer risks from the taxpayers’ shoulders to their own. In response to an angry public, they said, ‘Rather than end the guarantees, let’s add safeguards to better protect taxpayers.’ Some new rules were made. Now they’re being unmade.”
“So-called advocates joined the push for easier mortgage terms – and they should be ashamed, by the way. ‘Easy money’ has been no friend of the poor’s. In most of the Free World, governments do not guarantee mortgages. Nonetheless, their people own homes. In this country, bankers and allied interests extract both lax rules and taxpayer guarantees. And to think, Fannie and Freddie aren’t even out of conservatorship yet.”
“Former Federal Reserve Chairman Alan Greenspan said that the Fed’s bond-buying program, which aimed to lower unemployment and spur stronger economic growth, fell short of its goals. He said that the purchases of Treasury and mortgage-backed securities did help lift asset prices and lower borrowing costs. But it didn’t do much for the real economy. ‘Effective demand is dead in the water’ and the effort to boost it via bond buying ‘has not worked,’ said Mr. Greenspan. Boosting asset prices, however, has been ‘a terrific success.’”
Finally…..signs of a more normal market. Buyers & sellers advantages moving back and forth, inventory growing, foreclosures approaching the lower end of historic rates, and financing availability increasing. These are all signs you expect to see in a healthy market…who thought it would take a decade to get there after the bubble popped?
Delinquencies and defaults are rising J._Fraud.
And there is nothing historic except for the tens of millions of excess empty houses sitting out there.
Sometimes you don’t know what you have until it’s gone.
There is nothing “normal” about this situation and it is hardly a “market”- hasn’t been for quite some time. But after it sheds all of the malinvestment and misallocated resources of the last decade, it will become a real market again. With price discovery and everything that entails.
Speaking of price discovery
Walnut Creek, CA Sale Prices Turn Negative YoY; Down 5% MoM As Demand For Housing Plunges
http://www.zillow.com/walnut-creek-ca/home-values/
http://www.latimes.com/business/realestate/la-fi-chinese-agents-20141101-story.html#page=1
Foreign money is another hurdle you have to go through besides domestic affordability.
Normal? I suppose if you consider government goosed financing normal.
“Say we didn’t hear that. Say we didn’t hear that rules for mortgages guaranteed by the taxpayers are going lax once again.”
“Taxpayers, you are being handed the bag once again. What makes you particularly vulnerable are the potent political forces determined to keep the game going — an odd alliance of Wall Street financiers and advocates for low-income Americans”
http://www.denverpost.com/opinion/ci_26831081/fannie-and-freddie-must-go
Huntington Beach, CA Sale Prices Collapse 21% YoY; Inventory Balloons On Rising Foreclosures
http://www.zillow.com/huntington-beach-ca-92646/home-values/
Huntington Beach Collapsing? I better look at the data, because that is not what I hear about Huntington Beach: Hmmm,
House prices up 1% for the year.
Market Health Rating = 8.3/10
Foreclosure Delinquencies = 3.7% (half the national average) and dropping?
Foreclosures: Less than 1 in 10,000 homes foreclosed in this market last year.
HA = Laughable Fool. No Analysis of Housing. Certainly no collapse in Huntington Beach.
HA = Housing Un-analysis Hip-shooter = HUH?
No J. _Fraud. Prices not “value”.
No HUH. Analysis…..not Homer Simpson chatter…..”D’oh!”
And the declines are accelerating J._Fraud.
Though the Huntington Beach market might be moderating a bit, I would NOT say that sales prices are collapsing - at least, not in any house worth living in. Prices seem to be holding steady, for now.
Depends how you view a 21% decline in transaction prices. A 20% +fall in equities is considered collapsing.
D’oh. You compare Walgreens stock to Rite Stock and say equities are collapsing. HA, ha, you are laughable…..
Falling prices J._Fraud. You’re sinking.
Here’s another example of falling sale prices and price discovery in SoCal
Los Angeles Area Sale Prices Plunge 8% YoY; Inventory Looms As Demand Craters
http://www.zillow.com/los-angeles-ca-90046/home-values/
“Taxpayers, you are being handed the bag once again. What makes you particularly vulnerable are the potent political forces determined to keep the game going — an odd alliance of Wall Street financiers and advocates for low-income Americans.”
Strange bedfellows are these two groups, these Wall Streeters and these advocates for low-income Americans. Both groups represent opposite ends of the economic spectrum while the group in the middle - the HUGE taxpaying group in the middle - will no doubt end up paying for it all.
Bahahahahahaha … one group, the Wall Streeters, is obviously doing it for the money in the Willy Sutton sense of that’s where the money is, while the other group implies that they are doing it “for the children” - but if you care to dig a bit you just may discover that the “for the children” group is also primarily motivated by the money.
I’m just thankful the banking industry allows me to refi my used car !
I have a used toothbrush - wonder if the bank will do a cash-out refi on that? Gotta get some money for holiday shopping, after all…
“Deutsche Skatbank, a division of VR-Bank Altenburger Land, which was founded in 1859, is not the biggest bank in Germany, but it’s the first bank to confirm what German savers have been dreading for a while: the wrath of Draghi.
“Retail and business customers with over €500,000 on deposit as of November 1 will earn a “negative interest rate” of 0.25%. In less euphemistic terms, they have to pay 0.25% per annum to the bank for the privilege of handing the bank their hard-earned money or their business cash.”
Makes sense; I hope this action spreads to the U.S.
Think about this: Hoarders of gold bullion pay others a fee for holding and protecting their gold stashes so why is the idea of charging a fee to hoarders of cash considered to be so outrageous?
Especially since every bit of the cash that hoarders get to hoard ORIGINATED - as in magically sprung into existence - from banks.
Ungrateful proles have no appreciation whatsoever for all the things their masters do in an effort to look after them.
Link:
http://www.zerohedge.com/news/2014-10-30/wrath-draghi-first-german-bank-hits-savers-negative-interest-rate
I suppose this should have been posted in the bits bucket but … oh, well.
The bank of Skat. Impressive.
“The bank of Skat.”
Are they purveyors of sh!tty assets?
“U.S. homeownership dropped to the lowest rate in two decades, with declines across the country and income spectrum, according to government data. … Meanwhile, the rate also fell over the past year for households with family income below the median, as well as households with income above the median.”
That statement has to draw a chuckle from anyone who ever cracked open a stats book.
U.S. homeownership dropped to the lowest rate in two decades ??
Yes, but its coming off a giant bubble which we all agree….It maybe just heading back to the mean….
Historical[edit]
Quarterly U.S. homeownership rates, showing recessions colored by percentage point changes of homeownership rate during each recession[11]
Year Home ownership rate[12][13]
1960 62.1
1961 62.4
1962 63.0
1963 63.1
1964 63.1
1965 63.3
1966 63.4
1967 63.6
1968 63.9
1969 64.3
1970 64.2
1971 64.2
1972 64.4
1973 64.5
1974 64.6
1975 64.6
1976 64.7
1977 64.8
1978 65.0
1979 65.6
1980 65.6
1981 65.4
1982 64.8
1983 64.6
1984 64.5
1985 63.9
1986 63.8
1987 64.0
1988 63.8
1989 63.9
1990 63.9
1991 64.1
1992 64.1
1993 64.0
1994 64.0
1995 64.7
1996 65.4
1997 65.7
1998 66.3
1999 66.8
2000 67.4
2001 67.8
2002 67.9
2003 68.3
2004 69.0
2005 68.9
2006 68.8
2007 68.1
2008 67.8
2009 67.4
decades in the making.
This distribution curve has a pointy head?
“The news from China’s property sector continues to be grim. … The problem lies in why people would want to buy a second (or third) home in the first place. But that makes China’s housing market more like a stock market in terms of motivation to buy.”
Corruption in the housing market
To those that have
The bureaucrat’s house-price discount
Nov 1st 2014 | From the print edition
OFTEN the trickiest part of being a corrupt bureaucrat is not how to find new ways to extort money or accept bribes, but how to hide the ill-gotten gains. No one wants to end up like “Uncle House”, as a district official in the southern province of Guangdong was dubbed by internet users. He was outed two years ago by online anti-corruption activists after acquiring 22 properties that on his salary he clearly could not afford.
However, research by Hanming Fang of the University of Pennsylvania, and Li-An Zhou and Quanlin Gu of the Guanghua School of Management at Peking University suggests that the housing market is a source of illicit riches, as well as a place to park them. The authors find that Chinese bureaucrats consistently pay less when buying houses, receiving on average a 1% discount.
The most likely explanation is that this is a form of bribe by property developers. Supporting this theory is the authors’ finding that officials who regulate property, and senior public servants, enjoy the biggest discounts. Those from provincial governments, for example, received a 4% reduction, roughly equivalent to two-thirds of their yearly salary.
The authors examined over 1m mortgage contracts, which contain detailed statistics on the applicant, such as his income and employer, and the house in question. They then compared the average price paid by bureaucrats with that paid by those in the private sector. These estimates probably underestimate the corruption as they do not cover houses purchased by the spouses or children of bureaucrats.
…
” China’s leaders are counting on rural migration to cities to boost housing demand over the next decade or so”
Yeah, those farmers are going to be snapping up all the empty, incredibly expensive apartments with the huge sacks of gold they carry with them.
‘Buying a home is scary; it’s a huge investment and responsibility. If it’s such a scary undertaking, why is the U.S. home ownership rate almost 65 percent? What are the advantages of home ownership? The tax breaks of home ownership outweigh those of a renter, since your interest, property taxes, etc are all tax deductible. Even some of the closing costs for the loan can be deducted. However, one of the best reasons to be a homeowner is the security of knowing that your monthly payment on your home will never go up. Not only that but you, not your Landlord, keep all the equity that home has gained.’
‘There are many other reasons that the home ownership rate is so high. It’s easier than ever for new homeowners to buy. There are some wonderful, low or NO DOWN PAYMENT loans. This is something new. It hasn’t always been easy for new homeowners. Back in “the day”, we old-timers had to have a 20 percent down payment and it literally took years to save those funds. The moral of today’s story? Take advantage while you can.’
And “back in the day”, people collected interest on their savings, so they managed to come up with the down payment after all. And they took out loans with a 20 year term max, and then they paid them off! Now, no one every pays any debts down, much less off, we accept debt servitude for life, so who cares how long it takes?
“Julie Vaissade-Elcock is a Mortgage Broker…”
Back in the day, a house could be purchased for less than 2 year’s earnings, and the total housing expense kept under 25% of take home pay. The 20% downpayment could be saved in two or three years.
‘Barrett Burns has been lobbying Fannie Mae and Freddie Mac to adopt his credit-scoring system, VantageScore, for years. So when he spotted Mel Watt, the companies’ regulator, sitting in a Las Vegas hotel with his family, Burns didn’t hesitate to approach and make his pitch.’
“I said, ‘We’d be pleased to come down and present our side of the business case to you,’” Burns, the chief executive officer of VantageScore Solutions LLC, said he told Watt at the annual Mortgage Bankers Association conference earlier this month. “He said, ‘Yeah, come on down.’”
‘The CEO’s chance encounter with Watt was part of his eight-year effort to break Fair Isaac Corp.’s lock on providing credit scores for loans backed by Fannie Mae and Freddie Mac. VantageScore’s supporters say its scores better predict creditworthiness for a broader spectrum of borrowers, including minorities and first-time homebuyers who are struggling to get mortgages today. In August, Fannie Mae and Freddie Mac, which buy most of the new loans for home purchases, began to study the feasibility of using VantageScore and other alternatives to FICO.’
‘The National Fair Housing Alliance says minority borrowers who don’t use credit often or who may use payday lenders in inner-city neighborhoods are penalized by FICO or unable to get a score. To rate consumers, FICO requires that they have borrowed money from traditional sources such as banks and credit cards within the past six months. The alliance also argues that the way FICO models score past delinquencies can hurt minorities who were disproportionately targeted by subprime lenders.’
‘With home lending to black and Hispanic borrowers at a 14-year low, the National Council of La Raza and the alliance are pressuring Fannie Mae and Freddie Mac to adopt alternatives to FICO, which may include VantageScore. In Congress, it has won support from Republicans including Representative Spencer Bachus from Alabama and Carolyn Maloney, a Democrat from New York.’
“We’re at such a low for people of color” in the mortgage market, said Jim Carr, a former Fannie Mae executive who is now a scholar at the Opportunity Agenda, a New York-based organization that works on racial equity issues. “We know, in fact, that there are compensating factors, including alternative credit scores that could open the doors immediately, and the households impacted are” minority ones.’
When we look back at this period, what will the discussions be about this push to lower standards and bank risk at the same time? Will there be the usual “housing advocates” insisting that subprime loans to minorities in general were never the problem. What do you expect when you loan a couple hundred thousand to a guy who hits the pawn shop three times a month?
BTW, if you read the article, FICO is cutting their standards to “compete.”
Signs of the housing bubble:
15. Race to the bottom. Check!
It was OK, as it was racially motivated.
Wait, that didn’t come out quite right…
“What do you expect when you loan a couple hundred thousand to a guy who hits the pawn shop three times a month?”
Plus plays PowerBall every time he stops at 7-Eleven to buy a pack of cancer sticks…
‘Matthew Pointon, a property economist at Capital Economics, said “sky high” prices in London and a lack of homes to choose from have put potential buyers off. He said: “That suggests price growth in London will slow rapidly from here.” He also warned there is a “risk that prices in London could go into reverse”.
‘He said: “If house price expectations turn sharply negative, a glut of supply coming on to the market could push prices down. “And if a mansion tax is introduced, prices in prime London are likely to take a hit. Estate agent Foxtons recently reported a “sharp and recent slowing of volumes” in London property sales.”
“What makes you particularly vulnerable are the potent political forces determined to keep the game going — an odd alliance of Wall Street financiers and advocates for low-income Americans. Powerful banking interests have fought every move to transfer risks from the taxpayers’ shoulders to their own. In response to an angry public, they said, ‘Rather than end the guarantees, let’s add safeguards to better protect taxpayers.’ Some new rules were made. Now they’re being unmade.”
Is it wrong as an individual American voter to feel politically powerless as you read about this?
J K Galbraith actually devotes a considerable part of his 1994 classic, “A Short History of Financial Euphoria,” to the cyclical making and unmaking of rules in the wake of a financial crisis.
“‘Effective demand is dead in the water’ and the effort to boost it via bond buying ‘has not worked,’ said Mr. Greenspan. Boosting asset prices, however, has been ‘a terrific success.’”
Most amazingly, asset prices appear to be rising further still now that QE3 is dead and gone. Who’d've thunk the program could keep boosting asset prices even after it went away?
Don’t look now, but the Dow Jones Industrial Average just hit an all-time high.
As for gold and oil specuvestors, Mr Market has grim tidings of great sorrow.
Bulletin U.S. consumer sentiment on rise in October: Univ. of Mich.
Market Pulse
Dow hits record high, while gold and oil futures plumb multi-year lows
Published: Oct 31, 2014 9:45 a.m. ET
By Tomi Kilgore
Reporter
NEW YORK (MarketWatch) — The markets are off to a wild start, after a surprise easing move by the BOJ overnight reminded investors that the end of the Federal Reserve’s bond buying program didn’t mean liquidity was drying up. The Dow industrials ran up over 140 points, and hit a fresh all-time intraday high of 17350.93 soon after the open. The Nasdaq Composite Index climbed 1.2% to trade at the highest level since March 2000. And the S&P 500 rose 0.9% to 2012, which is below its Sept. 19 intraday record of 2019.26, but above its Sept. 18 closing record of 2011.36. In other markets, continuous gold futures slid 2.9% to the lowest level since July 2010, crude oil futures dropped 1.5% to the lowest price seen since June 2012 and Dollar Index futures jumped 0.9% to the highest level since June 2010.
…
cheap gas= more Walmart money
happens all the time
their homes are going back down ,but that’s a balance sheet entry
cheap gas= more Walmart money
I suppose the pickup truck/long commute crowds might be seeing some non trivial savings.
Has Japan made a single correct macroeconomic decision since its own property bubble popped in the late 1980s? Everything it has done has been an attempt to put off facing the consequences of that speculative era.
The central banks’ coordinated hosing down of asset markets with created “liquidity” continues apace, without regard to social ramifications, which include rage and alienation among people not benefitting, meaning most of them. I was wondering the other day what the first Western nation to face a domestic insurgency will be.
‘what the first Western nation to face a domestic insurgency will be’
‘The agency in charge of protecting the Pentagon has sent out a warning that “ISIL-linked terrorists” want to attack employees and is urging them to change routines and mask their identities.’
“Attacks would most likely involve edged weapons, small arms, or improvised explosive devices (IEDs), and could be perpetrated with little-or-no advanced warning,” says the Oct. 24 two-page warning.’
‘The alert lists 11 protective steps that require employees to alter their ways of life, including:
⦁ Remove decals and other identifiers from clothing and vehicles.
⦁ Vary travel routes.
⦁ Avoid large gatherings and places where people congregate.
⦁ Guard what you post on Facebook and Twitter.
⦁ Do not post anything that links you to the Defense Department.
⦁ Do not post any opposition to terrorist groups.’
Man, this arming jihadists for regime change is trickier than they thought. I particularly wondered what DC was thinking when these same guys used a car bomb on a crowded Syrian street to kill one official, and killed 80 civilians in the process. That’s almost as crazy as blowing up a wedding to get one bad guy.
bare arms !
lots of ammo in my hood
ready for towlie
“Do not post any opposition to terrorist groups”
Do not mock Happy Fun Ball!
Try not to catch yourself a falling knife stacking gold.
Metals Stocks
Gold sinks to levels not seen since 2010 as BOJ rallies dollar
Published: Oct 31, 2014 9:36 a.m. ET
Analyst: Gold at $1,000 an ounce can’t be ruled out
By Shawn Langlois
Markets reporter
Barbara Kollmeyer
Markets reporter
MADRID (MarketWatch) — Gold took a hard fall on Friday, hitting levels not seen since 2010, as the dollar surged in the wake of a surprise stimulus move from the Bank of Japan.
Expanding on losses from Asia and Europe, gold for December delivery (GCZ4, -2.74%) slumped $36.80, or 3%, to $1,162.60 an ounce. December silver (SIZ4, -3.05%) gave up 57 cents to $15.84 an ounce.
A more hawkish-than expected U.S. Federal Reserve statement has already been weighing on gold this week. The Fed‘s official ending of its bond-buying stimulus program on Wednesday smacked prices hard, as gold shed 2.2% amid signs of a healing economy. The U.S. economy expanded 3.5% in the third quarter, data showed Thursday.
“The surprisingly robust US GDP figures yesterday confirmed the Fed’s more optimistic economic outlook of the day before and thus indirectly dampened demand for gold as a safe haven,” said analysts at Commerzbank, in a note.
Gold got further pummeled after the Bank of Japan shocked markets with a move to expand the pace of quantitative easing, triggering a 5% surge in the Nikkei 225 index (NIK, +4.83%). The dollar (USDJPY, +2.54%) touched its highest level against the yen since January 2008.
…
It’s a bad day to hold safe haven assets.
Bond Report
Treasurys fall after Japan’s surprise easing measures
Published: Oct 31, 2014 10:26 a.m. ET
Bank of Japan’s stimulus talk jolted global markets
By Ben Eisen
Reporter
Consumers aren’t opening up their wallets
NEW YORK (MarketWatch) — Treasury prices retreated Friday as investors pushed into riskier assets after a surprise easing measure by the Japanese central bank.
The Bank of Japan said Friday that it would quicken the pace of its purchases of Japanese Government Bonds as it fights a falling inflation rate. So-called quantitative easing measures tend to have the effect of incentivizing investors to buy riskier securities like stocks.
As equities surged across the globe Friday, investors left the perceived safety of U.S. government debt.
The 10-year Treasury note (10_YEAR, +1.00%) yield, which rises as prices fall, was up 2 basis points on the day at 2.326%. The yield was on track to close at its highest level in three weeks, according to Tradeweb.
…
Analyst: Gold at $1,000 an ounce can’t be ruled out
Incidentally, I wouldn’t rule out buying some at the $1K/oz price-point. That’s about what I would consider a reasonable price.
Of course, I am typically way too early (sold out of gold at $1200 on the way up), so I would guess that it will actually go lower than that.
Need to Know
Great time to load up on stocks, unless you buy into the post-QE disaster scenario
Published: Oct 30, 2014 8:15 a.m. ET
Critical intelligence before the U.S. market opens
By Shawn Langlois
Markets reporter
The high of my hometown Giants winning another Series. The low of wanting to reach through the screen and give that struggling portly fellow a hug. No, not Billy Butler. He’ll be fine. Rather, the Chevy guy doing his Chris Farley impression when handing over the MVP award. It’s a wonder GM (GM, +1.50%) shares are down only a couple of cents this morning.
But let’s not get into all the merriment of game 7. Baseball season is over and so is the Fed’s bond-buying program (professional segue; don’t try at home). Back to business.
Detractors contend the Fed has failed us in many ways, some of which won’t be felt for a while. But Yellen and her posse deserve a thumbs up for managing expectations. At least as far as QE3 is concerned. We knew it was coming, and when it finally did, the official end of the easing era stung the market like a cotton ball from a slingshot.
The critics don’t really see it that way.
“QE has been most effective in inflating asset prices and both the markets and economy are addicted to the stimulus,” said Peter Boockvar, chief market analyst for the Lindsey Group. “Without it, we will see a big adjustment. Our biggest worry is not what happens to markets — they obviously will correct — but what the Fed does next.”
…
“Greenspan said… ‘Effective demand is dead in the water’ and the effort to boost it via bond buying ‘has not worked…”
Why did they trot out Greenspan to say this and why did he speak in plain English? I doubt that it was accidental.
He observed that history shows central banks can only prick bubbles at great economic cost. “It’s only by bringing the economy down can you burst the bubble,” and that was a step he wasn’t willing to take while helming the Fed, he said.
So this Wall Street wh*re knew and saw what bad it was doing to the economy and he did not do anything to prevent the killing of the American economy. The old geezer needs to kick the bucket.
He is the maestro or speaking in tongues as he speaks a lot and says nothing.
What’s the historic record he’s continually referring to? This sounds suspiciously like Greenspan quoting himself.
You would think that 2008 would have discredited this guy completely, to the point where he would have to go into exile on the economics equivalent of St. Helena. But no, our culture is too unsure of itself to repudiate him.
Most amazingly, asset prices appear to be rising further still now that QE3 is dead and gone.
I thought QE was just being outsourced, not eliminated. Just like everything else in our so-called economy.
‘Chills in China’s property market are seeping into the fortunes of China’s richest tycoons. This year 17 real estate billionaires made the top 100 of the Forbes China Rich List. Their fortunes came to $63 billion, a 12% drop from the $71 billion that 21 property tycoons in the top 100 commanded last year.’
‘China’s richest woman last year also suffered a heavy blow. Yang Huiyan, the 33-year-old owner of Country Garden Holdings , lost $2.3 billion in her fortune from a year ago and slipped 12 notches to No.19. Shares of the property developer have fallen close to 40%. By the third quarter, the company has met 63% of its sales target for 2014, lagging far behind last year’s 104%. Investors became concerned about the company’s liquidity when new shares were issued in August to refinance debt.’
You know, I used to wonder out loud what would happen if a bunch of these bubbles popped at about the same time.
‘Dubai’s cooling property market is set to slow demand for accommodation in the Northern Emirates, despite rent rises reported during the three months to September, according to research from the real estate agents Asteco. John Stevens, Asteco’s managing director, reported last week that both rents and purchase prices in Dubai had fallen during the third quarter of the year, the first time that has happened since 2012.’
“With rental rates in some of [Dubai’s] more affordable communities softening further still in Q3, this inevitably has a ripple effect across the Northern Emirates,” he said. “This is an indicator therefore that rental rates in the Northern Emirates could be reaching their peak.”
Apparently collapsing property bubbles are great for U.S. stock prices, as the Dow is rallying to unseen heights as I type!
think we’re getting boned by the bank
Japan- 40% sales tax increase so they can pump up assets=wow !
It wasn’t that long ago when we collectively feared that Japan was invincible.
…and not long before that we thought westernizing their economy would be the best thing that ever happened to them.
‘Private insurers are considering a request by U.S. officials to guarantee mortgages for veterans — the fastest growing part of the market. The Department of Housing and Urban Development is urging mortgage insurers that rely on Fannie Mae and Freddie Mac for business to offer supplemental protection for lenders to military members and veterans. Only 25 percent of VA loan amounts are backed by the Department of Veterans Affairs — a limit that keeps some firms from fully participating in the program, Ginnie Mae President Ted Tozer said.’
‘Insurers including American International Group Inc. and MGIC Investment Corp. are looking at these loans as their role in the mortgage market expands. ‘It’s something I’m definitely interested in exploring,’ Donna DeMaio, who runs AIG’s United Guaranty mortgage-insurance unit, said in an interview at a Mortgage Bankers Association conference last week. ‘I’m really interested in new ways we can help produce access to credit.’
‘The 25 percent cap on VA insurance “leaves a lot of small lenders awfully exposed and reluctant to offer veterans credit under this initiative,” HUD Secretary Julian Castro said during his speech at the conference in Las Vegas. Getting another layer of protection would make them “feel confident when offering these loans — giving more of our nation’s heroes a chance to buy a home in the country they risked everything to protect.”
‘Mike Frueh, director of the VA’s loan guaranty service, said that while the 70-year-old program has about 1,500 firms making loans that it guarantees, the agency supports using extra insurance to draw in more. The reduction of lenders’ money at risk, a key part of VA lending since its creation, would be addressed by the insurers wanting “to make sure they’re making a safe bet.”
‘VA lending, which doesn’t require a down payment, has expanded as the U.S. draws down troops after more than a decade of combat in Iraq and Afghanistan. The VA has also taken business from FHA after that agency, which guarantees loans with down payments as low as 3.5 percent, increased the cost of its insurance to rebuild its depleted fund.’
‘VA loans accounted for $26.5 billion or 9 percent of mortgages made in the second quarter, up from 6.9 percent in all of 2013 and less than 2 percent a decade ago, according to Inside Mortgage Finance, a trade publication. The loans were used to finance 8.1 percent of all home purchases in the three months through September, an increase from 3.9 percent in the three months through May 2010, according to the Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.’
‘Higher FHA insurance premiums are also pushing borrowers to get loans from government-controlled Fannie Mae and Freddie Mac. They require loans with less than 20 percent down payments to carry mortgage insurance that covers the initial losses.’
‘The hot market often blamed for a potential housing bubble has recorded record sales numbers once again, indicating that if said bubble exists it may only be getting bigger. “Sales this past summer reaffirm that the new condo market in Toronto is on track for one if its best years on record,” Shaun Hildebrand, senior vice president of Urbanation said.’
‘One of Toronto’s most prolific developers, Brad Lamb, told the CBC in August that he estimates foreign investors make up about 50 per cent of the ownership of condos in Ontario’s capital city.’
‘Sales of single-family homes in the Attleboro area plunged more than 18 percent last month compared to September 2013, according to the latest statistics from The Warren Group. North Attleboro, Foxboro, Mansfield, Norton, Plainville, Rehoboth and Seekonk all reported declining sales volume.’
‘The median selling price of a Massachusetts single-family home fell in September, the first year-over-year decline since September 2012. “The decrease in the selling price of single-family homes and the number of sales in September is insignificant,” said Cassidy Murphy, editorial director at The Warren Group. “When we look at the increase in the selling price of single-family homes year-to-date, it is clear that the housing market is still dealing with low inventory and pent-up demand.”
There is no “pent-up demand”
CRATER
The thing about high prices; they encourage supply.
‘Is it me or does it seem like there is a new subdivision being built around every corner? Travel nearly any road in Forsyth County and if you don’t see homes sprouting up, it’s probably because you’re stuck in traffic behind the trucks carrying the lumber, moving the dirt or turning the load of concrete on the way to one of those communities.’
‘I had a client comment that it seemed like we are building more homes now than we did in the heat of the market before the housing bubble burst. My client asked me if that were the case. It’s hard for me to answer that question because not all new homes get entered in the MLS (multiple listing system).’
‘Many new homes are pre-sold, or contracts get put on new homes while they are at a stage prior to being “listed.” These factors make it hard to find accurate numbers of new versus resale transactions.’
‘So I decided to look at lot permits for Forsyth County. As you can see by the trend, not only are permits up, but they have surpassed pre-recession levels — significantly.’
What amazes me is new retail space coming on-line, when nearly every office building and strip mall here already has vacancy.
According to a realtor we know, sales in our little burg are cratering. She hasn’t closed a house in almost two months. Says that it’s because would be buyers are having trouble with financing.
Come on, Mr. Banker! Step up to the plate! Only you can save the market with EZ NINJA loans! We are counting on you to preserve the American way of life!
smelly Mel has 3% on the way
after the low rents move in they’ll quit paying
same as 07
“The thing about high prices; they encourage supply.”
And if the local governments allow supply, it will be built, and ultimately be the reason for the next correction.
It’s already happening R._Fraud.
“The thing about high prices; they encourage supply.”
Same story in North County San Diego. The bulldozers have been brought out of mothballs and fired up this year. Vast swaths of earth have been cleared for the next wave of new home construction.
We saw the exact same thing circa 2005 leading up to the 2008 meltdown.
‘China’s shadow banking sector continued to grow at breakneck speed in 2013 and now ranks as the third largest in the world, a report released by the Financial Stability Board showed on Friday. The FSB’s report nevertheless appears to underestimate China’s sprawling shadow banking sector.’
‘The country vaulted ahead in the rankings under a new, more targeted definition of shadow banking adopted by the FSB, a task force set up by G20 economies in the wake of the 2008/09 global financial crisis to improve financial regulations.’
‘The report comes amid a series of shadow banking defaults in China, including that of a 4 billion yuan ($652 million) credit product backed by China Evergrowing Bank in September, which brought increased scrutiny of the industry and the risks it poses to the world’s second-largest economy.’
‘In China, assets of “other financial intermediaries” - which exclude traditional financial institutions such as banks, pension funds and insurance companies - grew more than 37 percent year-on-year in 2013 to just under $3 trillion, data released with the report showed. China’s growth in assets of non-bank financial intermediaries in 2013 was second only to Argentina.’
‘But the figures may be overly conservative. Shadow banking may involve up to 27 trillion yuan ($4.39 trillion) of assets, equivalent to one-fifth of China’s formal banking sector, according to the Chinese Academy of Social Sciences.’
‘The sector’s assets have grown further since that estimate to 30 trillion to 40 trillion yuan ($4.91 trillion to $6.54 trillion), or about 60 percent of total yuan loans by financial institutions, said Chen Xingyu, a Beijing-based banking analyst at Phillip Securities (Hong Kong) Limited.’
‘The firm factors in certain shadow banking activities by traditional financial institutions such as off-balance sheet bank loans and insurance company financial products in its estimate, he said.’
‘The government does not want to completely quash this riskier lending. A central bank vice governor said last month that the benefits of shadow banking to areas of the economy generally starved for financing such as small and medium enterprises were undeniable.’
‘Under the broadest measure of non-bank financing, China’s share of global shadow banking quadrupled between the end of 2007 and 2013 to 4 percent, the report showed.’
‘Global non-bank financial intermediation grew by $5 trillion in 2013 to reach $75 trillion. The United States and Euro area each account for roughly one-third of global shadow banking, followed by Great Britain with a 12 percent share and Japan’s 5 percent.’
‘But a narrower metric for shadow banking introduced in this year’s report reveals that China had the third-largest shadow banking sector behind the U.S. and UK in 2013. The global shadow banking industry grew 2.4 percent to $35 trillion in 2013 under the narrower measure.’
‘Home prices in China dropped for a sixth consecutive month in October, a private survey showed on Friday, pointing to a persistent property downturn, despite government efforts to lift the market.’
‘Stuck with large inventories of unsold homes, Chinese property developers would remain focused on reducing the backlog in the coming months, CREIS added. Cooling in the real estate market, which accounts for about 15 percent of China’s economy, has crimped demand in 40 industries ranging from steel to cement and furniture, becoming the biggest drag on domestic activity, some analysts have said.’
“15 percent of China’s economy…”
I’m thinking they keep shrinking that number. No doubt those 40 other industries are “crimped”. We are seeing how so in the collapse of commodity prices.
Now it is cheaper to build than all that unsold inventory cost, and the unwind is half a year on its way.
“China Evergrowing Bank”
I presume the full name is China Evergrowing at 7.5% Bank?
Market down 1k points now back up 1k points, no wonder normal folks have no idea what to do, so they do the normal thing, they do nothing?
They sell. They get what they can get today knowing it’s going to be much less tomorrow.
Nope, continue to load up on CASH.
CHA’ CHING.
Until housing corrects, I am investing in stocks
Hold onto every dollar you have. You’re gonna need every last penny.
“I am investing in stocks”
I just wanted to say…good luck and we’re all counting on you.
#WallStreetCasino