What’s Behind The Property Fever?
A weekend topic on two papers, the first by Graeme O’Meara at the Economic and Social Review. “Abstract: This study contributes to the ongoing debate over the causes of housing bubbles. The argument that excessively low interest rates were responsible for the rapid increase in house prices over the last decade has received considerable attention in the literature. However, few papers have attempted to quantify the extent of house price overvaluation in countries that have seen housing booms and busts, in addition to quantifying the looseness of monetary policy. For a sample of 10 OECD countries, we estimate fundamental house prices using demand and supply side characteristics of the housing market. This is supplemented with analysis of price to rent ratios and fundamental price to rent ratios.”
“Loose monetary policy is defined as the deviation of the short term interest rate from the rate which the Taylor rule would prescribe. The empirical results suggest that for some countries deviations from the Taylor rule played a role in the surge in house prices and that a monetary policy stance less discretionary and more closely aligned with a Taylor rule could curtail some of the imbalance in the housing market.”
The full PDF is available at the link.
The second is by Dee Woo, the chief economist of Beijing Zhonghua Yuan Financial Institute. Titled:
China’s Insane Housing Market Will Tumble And Crash In 2017
“Summary
What’s behind the property fever in China?
The financial truth of the destocking of China’s property market.
Use quantitative analysis to predict when the bubbles of China’s housing market will burst.”
My thanks to the authors for sending this to me.
As the authors brought it to your attention, it would be awesome if they would also show up here to discuss…
This is what I found on the first author:
Graeme O’Meara
Economist at ComReg Ireland
Previous: Indecon, London Economics Ltd, Publicpolicy.ie
Education: University College Dublin
https://ie.linkedin.com/in/graeme-o-meara-7609019a
“Metro Denver home prices appreciated 8 to 12 percent last year, continuing to outstrip the national average, wage gains and the overall rate of inflation for the fifth year in a row.
The average price of a home sold in metro Denver crossed the $400,000 mark in November, while the median price was around $350,000, according to the Denver Metro Association of Realtors.
But developers have added apartments at a healthy clip, and that has provided some relief for renters. Apartment rent increases, running in the double digits in the summer of 2015, slowed to under 2 percent this fall, the smallest gain since 2010.
Looking ahead, a big supply of new apartments and slower population growth should keep rents down, even if developers stay focused on high-end units.”
http://www.denverpost.com/2017/01/01/top-business-stories-for-2016-denver-home-prices/
Wrong, the HA will tell you the housing prices in Denver have been falling 10% YoY… Just ask him…
Data my friend. Stick with the data.
Boulder, CO Housing Prices Crater 7% YoY
http://www.zillow.com/boulder-co/home-values/
LOL. Well, at least they didn’t puke on the carpet this time.
This might come in handy in the future.
http://www.wikihow.com/Clean-Vomit-out-of-Carpet
Remember, though:
“One thing to think about when washing vomit towels is that if it has chunks, they may get stuck in the washing machine.”
some of my friends here are real debbie downers.
U Need a new shtick.
And get that blinker fluid topped off.
That’s outside of your control… kwitcherbellyachin’ about things you can’t control and get on with your life.
The real estate talk has not abated at the lunch table. The coworkers still firmly believe that Denver real estate only goes up. When I remind them of how prices CRASHED locally (30%+ drops in price) in 2008 they dismiss that and insist it was an anomaly.
Many have been serially refinancing as rates came down, and they have been all so smug about how their appraisals have soared into the stratosphere. I remind them that unless they’re planning on retiring in Alabama or some other cheaper locale that those rising prices don’t actually do them any good.
The sell in one location and move to another narrative is a false one scripted by writers for the housing biz.
It seems like one that can work in some scenarios, but probably depends a lot on downsizing.
It’s the foundation of the Oil City plan.
“Many have been serially refinancing as rates came down…”
Have they also been treating themselves with equity extractions (aka f*cked buyer dividends) for being savvy investors?
Not that I know of. Most of them drive sensible cars. One drives a Lexus, but her husband makes $200K at his job (plus the $100K she makes)
CBS Oprah Winfrey Special Michelle Obama Says Farewell To The White House Full Interview:
https://www.youtube.com/watch?v=qGC6qBD2Q78
Vandalized Hollywood sign briefly reads “HOLLYWeeD”
“No, Los Angeles residents, it wasn’t your hangovers playing tricks on you. The Hollywood sign really did read “HOLLYWeeD” for a few hours on New Year’s Day.
Police were investigating Sunday after a prankster used giant tarps to turn two of the iconic sign’s white Os into Es sometime overnight.
The vandal, dressed in all black, was recorded by security cameras and could face a misdemeanor trespassing charge, said Sgt. Robert Payan.
The person scaled a protective fence surrounding the sign above Griffith Park and then clambered up each giant letter to drape the coverings, Payan said.
The prank may be a nod to California voters’ approval in November of Proposition 64, which legalized the recreational use of marijuana, beginning in 2018.
Hikers and tourists in the hills spent the morning snapping photos of themselves in front of the altered sign before park rangers began removing the tarps.”
http://www.denverpost.com/2017/01/01/vandalized-hollywood-sign-now-reads-hollyweed/
This wasn’t the first time this has happened and, hopefully, it won’t be the last.
https://www.google.com/search?q=hollywood+sign+modifications&biw=1360&bih=651&source=lnms&tbm=isch&sa=X&ved=0ahUKEwi9lo_ByKPRAhXig1QKHWXAD44Q_AUIBigB
Maybe some of those bums on the 16th street mall will head out to California. The winters are definitely milder there.
“The argument that excessively low interest rates were responsible for the rapid increase in house prices over the last decade has received considerable attention in the literature.”
A decision by the Fed to maintain insanely overvalued housing prices led to a deliberate policy to suppress interest rates to historic excessively low levels. Other developed economy central banks followed suit.
Exactly. The Fed led.
If the credit created out of thin air wasn’t there to loan people there would be no housing bubble.
Fear of missing out on free money is a big driver too.
Incorrect. You can have a fire without gasoline. It’s just more dramatic with the gas.
“FOMO”: Fear Of Missing Out
Sometimes I think people are more afraid of “missing out” than they are of disease and death.
“Other developed economy central banks followed suit.”
Can you imagine the carry-trade if they didn’t?
“Loose monetary policy is defined as the deviation of the short term interest rate from the rate which the Taylor rule would prescribe. The empirical results suggest that for some countries deviations from the Taylor rule played a role in the surge in house prices and that a monetary policy stance less discretionary and more closely aligned with a Taylor rule could curtail some of the imbalance in the housing market.”
Once a central bank is out on that limb, how can they ever drain the liquidity swamp without precipitating a crash?
Consider that they precipitated a crash the moment they started cheap easy credit.
Chinese Damas = Chinese middle-class women
Is that correct?
Don’t know, don’t care.
A good idea for landlords to make a few extra bucks.
http://www.news.com.au/technology/online/social/melbourne-landlord-blasted-for-installing-coinoperated-toilet/news-story/780c0048f0bf87afa325438ffaf6aa56
Wow, even CBS has caught onto the citizenship-by-investment story:
http://www.cbsnews.com/news/60-minutes-citizenship-passport-international-industry/
Steve Kroft up on his holier-than-thou hind legs. The US has its own similar program, although it doesn’t quite rise to the level of “citizenship”. But for a cool half million or more, you, too can become a legal resident of the US! Just buy yerself a convenience store, liquor store, no-tell motel, Subway franchise, heck, even a bait shack’ll do.
I remember a poster here on the blog, I think it was jess from South Carolina, telling about how Indian folks were buying up little backwater businesses in the Upstate right and left for stupid money, enough for the owners to get their teeth fixed, pay off debt and buy a nice little retirement cottage on a fishing lake. I don’t blame them for selling.
My understanding is that a Subway franchise is worth $50K, tops. I knew a woman who owned four of them. She paid something like $25K for each one.
Anecdotally, I’ve heard that owning a Subway franchise is akin to buying yourself a minimum wage job.
She almost never worked in them (she was a veterinary student, her mom bought them for her). She said that they hardly made any money, so she eventually sold them.
In some places - you can “buy” a diplomatic passport.
No searches at any border.
Cannot be arrested.
Etc.
Massive corruption everywhere…
‘In some places - you can “buy” a diplomatic passport.’
somebody watched 60 minutes last night
Where do I buy one of these?
In Dominica, apparently.
A daisy chain of promissory notes that never have to be repaid with real value.
D.C. Homelessness Doubles National Average as Living Costs Soar
http://www.nytimes.com/2017/01/01/us/washington-dc-homelessness-double-national-average.html
Nationally, homelessness has shrunk 12.9 percent over the last seven years.
a story from 1989
http://www.nytimes.com/1989/07/02/nyregion/rats-leaks-crackheads-and-all-apartments-beat-welfare-hotels.html?pagewanted=all
Was it Ray K who got hisself all in a state about Trump’s tweeting the other day? Well, get used to it, it ain’t gonna stop.
http://www.zerohedge.com/news/2017-01-02/trump-continue-freaking-mainstream-media-out-will-boldly-use-twitter-policy-announce
The MSM in concert with the CIA has soiled itself to the point of no return. No one with half a brain believes the Russian election hacking meme. Why? Four words:
“Weapons of mass destruction.” Oh, and a couple more: “Yellowcake uranium”.
I don’t care about Trump’s tweeting per se. It enables him to do an end run around the MSM and communicate directly with the people, which is a good thing. My point was that as President-Elect, he needs to reflect the institutional gravity of his office and refrain from obnoxious & unhelpful tweets that make him look churlish.
I’ve been watching about 30 minutes of this each night:
MASSIVE 2+ HOUR HILARIOUS DONALD TRUMP COMPILATION SPECIAL NEW YEAR 2017 EDITION
https://www.youtube.com/watch?v=l5WlQazN-m4&t=3204s
Helps to understand the guy.
It is hard to get a feeling from that how Donald is Hitler incarnate though.
Speaking of energetic lies, I am still in awe of Nychick’s awesome cameo here for just a few days screaming Russia, Russia, and then Poof.
Yep. Where is the HBB-specific search engine again? I forget. But it would be interesting to see when she first showed up here.
Yep. Where is the HBB-specific search engine again? I forget
I was going to say “use the JT Extension — there’s a link in the toolbar menu”, but sadly that search engine seems to have been taken down.
Guess I should remove the menu item, unless someone knows of a new URL, or different search.
Just use google.
Its an interesting commentary on the state of our eCONomy and culture that the new president will use a social media/medium company that - as far as I know - doesnt make money and never has but has a yuge market cap based on ethereal estimates, alignments of the stars, goat entrails and whatever else stock market analysts use nowadays to value assets. All the while the corrupt lamestream media continues to make fools of themselves on a daily basis carrying water for their corrupt overlords.
Jim Rickards talking his book, but his scenario is plausible, though 2017 seems more likely than 2018 as the year where the financial system locks up.
http://www.marketwatch.com/story/james-rickards-says-donald-trump-cant-stop-the-next-financial-crisis-2016-12-22?link=MW_latest_news
He is one of the several people calling year after year for a doom and gloom scenario. He talks a good shtick and someday he will be right.
All these guys have been saying this for years. They keep doubling down every year.
Sometimes you just have to eat some crow.
He would have been right based on fundamentals.
But the obama ZIRP, cheap money, socializing the loses, bailouts, destruction of contract law, nationalizing large parts of the economy, the taxpayer guarantee of everything, too big to fail, QE to infinity, bubble economics, etc.
And
obama adding more to the deficit than all other administrationside combined and accounting for inflation.
+1. Ponzi markets and asset bubbles always expand as long as they have new marks and are backed by trillions in created-out-of-thin-air central bank “stimulus.” But the financial reckoning day can only be deferred, not printed away.
“eat some crow”
That might be appropriate if the problems of a decade ago had been resolved, rather than doubled down upon. There is still a reckoning waiting, and it has grown more, and for longer, than any of us expected was possible.
Unless there is another “China Miracle” somewhere in the wings, you better buckle up.
I’m not worried about a financial crisis because I don’t owe anyone any money, I didn’t loan anyone any money, and I live with liberty in a free country.
But we don’t live in a truly free country any longer. Our founding fathers wouldn’t even recognize this as America.
If you think we have a free country, try cutting down a tree on your own property, or digging a hole, or a million other things, that you either can’t do at all, or without the blessing of the government.
We may still have freedom of movement, but our property rights have almost been completely stripped.
We all know how this will end.
2banana’s Law:
Long term Democrat rule + public unions + free shit army = misery, ruin and bankruptcy
Lord help you if you own a house or business there.
—
Illinois ends 2016 with an $11 billion in unpaid bills
Illinois Policy | December 26, 2016 | Brendan Bakala
Illinois state government has left the people of the Prairie State quite the stocking stuffer this holiday season: an $11 billion bill backlog that is expected to hit $14 billion by summer 2017. However, with money from a June stopgap funding agreement set to run out by the new year, nonprofit service providers and students receiving state grants may view it more as a lump of coal.
Funding for service providers hasn’t been a priority for the General Assembly for quite some time. Service providers wait, on average, nearly a year to be paid. Illinois politicians have been delaying payment to service providers since 2002, valuing increases in government-worker salaries and pensions more than compensating those who aid the most vulnerable Illinoisans. Spending on state-employee pension benefits increased 586 percent from 2000 to 2015, yet funding for human services only increased by10 percent during that time.
…
The state’s total pension debt has swelled to $130 billion, up 17 percent since 2015.
…
Illinois’ tax revenues have increased 70% more than inflation over last 3 decades
A lack of revenue is not driving Illinois’ pension problem.
The Syrian Ceasefire Has Shifted the Balance of Power to Assad
“One does not have to spend long in Washington these days to find that, while there are many important people who detest Assad and Vladimir Putin, this feeling is far exceeded by the hatred they feel for the victors of the US presidential election. These divisions are bound to further envenom and shape policy decisions towards the crises and wars exploding in the Middle East.”
These important people will not be important after January 20th…
Please, Trump, deport Rosie O’Donnell, though you’ll have to contract one of those Ukrainian AN-124 giant transports to ship out her fat azz.
http://www.nydailynews.com/entertainment/tv/rosie-o-donnell-writes-tweet-donald-trump-article-1.2931874
Good News: Washington Frozen Out of Syria Peace Plan
RON PAUL • JANUARY 2, 2017
As the US mainstream media obsessed last week about Russia’s supposed “hacking” of the US elections and President Obama’s final round of Russia sanctions in response, something very important was taking place under the media radar. As a result of a meeting between foreign ministers of Russia, Iran, and Turkey last month, a ceasefire in Syria has been worked out and is being implemented. So far it appears to be holding, and after nearly six years of horrible warfare the people of Syria are finally facing the possibility of rebuilding their lives.
What is so important about this particular ceasefire? It was planned, agreed to, and implemented without the participation of the United States Government.
So why all the media attention on unproven accusations of Russian hacking and President Obama’s predictable, yet meaningless response? The mainstream media does the bidding of Washington’s interventionists and they are desperate to divert attention from what may prove to be the beginning of the end of Syria’s long nightmare. They don’t want Americans to know that the rest of the world can solve its own problems without the US global policemen in the center of the action. When it is finally understood that we don’t need to be involved for crises to be solved overseas, the neocons will lose. Let’s hope that happens soon!
http://www.unz.com/rpaul/good-news-washington-frozen-out-of-syria-peace-plan/
“Obama’s predictable, yet meaningless response”
I don’t know if it was predictable. Stupidity is always underestimated. It’s only meaningless because the other side isn’t playing the same game.