Monday, December 17, 2012

Today's links

1---US housing prices revert to long-term per capita income growth, sober look
 
Over a long period, home prices tend to follow growth in per capita income. After bouncing off the recent lows, home prices have once again reverted to their long-run growth trend. (Housing, back at trend)  see chart
 
2---BOJ's money printing is offset by households' cash hoarding, sober look
 
3---Spanish Repossessed Property Prices Tumble 65% in Credit Crunch, Bloomberg
 
Prices of repossessed Spanish homes offloaded by lenders this year tumbled 65 percent as a million new properties remain unsold and buyers find it more difficult to get mortgages, according to Fitch Ratings.
The price decline is relative to the value of the property when the loans were made and is more than double the drop in real estate values recorded in government data. That compares with a 45 percent slump in Portuguese repossessed house values...

Spain’s property market is hampered by the country falling into its second recession in three years and struggling withEurope’s highest unemployment rate of 25 percent. Fitch published its latest study five years after a decade-long real estate bubble burst and just as Spain sets up its so-called bad bank to purge toxic assets from the books of troubled lenders.

“Fitch believes that the factors weighing on the Spanish residential property market will continue to deteriorate,”Madrid-based analysts Carlos Massip and Juan David Garcia wrote in the report. “The gap between original valuation and the sale price is a reflection of a distressed mortgage market, characterized by high borrower indebtedness, constrained affordability” and “falling property prices,” they wrote.
The drop in this year’s sale prices of repossessed Spanish properties is the sharpest since the financial crisis began and compares with an average 50 percent decline since 2007, the analysts wrote.
Repossessed property prices are lower than official real estate values because banks discount houses and apartments to achieve sales and clear their balance sheets. Banks in Spain seized more than 200,000 residential properties, adding to about 1 million newly built homes for sale, Fitch said.

4---Global powers will keep pouring oil on the fire in Syria - Hezbollah, RT

5---Right-wing LDP government to take office in Japan, WSWS 
 
6---Mainstream Media Finally Awakens to the Fact that Big Banks Are Criminal Enterprises, zero hedge
 
New York Times editorial argues:
It is a dark day for the rule of law. Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system. They also have not charged any top HSBC banker in the case, though it boggles the mind that a bank could launder money as HSBC did without anyone in a position of authority making culpable decisions.

Clearly, the government has bought into the notion that too big to fail is too big to jail. When prosecutors choose not to prosecute to the full extent of the law in a case as egregious as this, the law itself is diminished. The deterrence that comes from the threat of criminal prosecution is weakened, if not lost.

***
 Even large financial settlements are small compared with the size of international major banks. More important, once criminal sanctions are considered off limits, penalties and forfeitures become just another cost of doing business, a risk factor to consider on the road to profits.

***
 According to several law enforcement officials with knowledge of the inquiry, prosecutors found that, for years, HSBC had also moved tainted money from Mexican drug cartels and Saudi banks with ties to terrorist groups. Those findings echo those of a Congressional report, issued in July, which said that between 2001 and 2010, HSBC exposed the American “financial system to money laundering and terrorist financing risks.”
As the New York Times correctly points out:
If banks operating at the center of the global economy cannot be held fully accountable, the solution is to reduce their size by breaking them up and restricting their activities — not shield them and their leaders from prosecution for illegal activities.
 
The Washington Post writes that its not just HSBC:

A string of august names in global banking — Credit Suisse, Lloyds Bank, ABN Amro, ING Bank and now HSBC — have reached settlements in the past couple of years with the U.S. government for billions of dollars in tainted transactions. These investigations have revealed that weaknesses in the financial system lay not with the so-called hawala brokers of Karachi, Pakistan, but the bespoke bankers of London, Amsterdam and Geneva, and their American affiliates.

***

The settlement drew criticism that HSBC had escaped lightly, given the gravity and scale of the crimes.

If these people aren’t prosecuted, who will be?” asked Jack Blum, a Washington attorney and a former special counsel for the Senate Foreign Relations Committee who specializes in money laundering and financial crimes. “What do you have to do to be prosecuted? They have crossed every bright line in bank compliance. When is there an offense that’s bad enough for a big bank to be prosecuted?”
***
 The dealings had been flagged up to HSBC bosses by an anti-money laundering officer, but to no avail – the dirty business continued.

***
 [A couple of years ago, when Wachovia was busted for laundering drug money,] no one from Wachovia went to jail – and, said Woods at the time of the settlement: “These are the proceeds of murder and misery in Mexico, and of drugs sold around the world. But no one goes to jail. What does the settlement do to fight the cartels? Nothing. It encourages the cartels and anyone who wants to make money by laundering their blood dollars.”
 
7----It's all good, housingwire

Residential property values in the U.S. continued to gain momentum in October, showing signs of an ongoing expansion in national economic activity, according to FNC’s latest residential price index. By comparison, September values showed little change.

Home prices in the U.S. were up for the eighth consecutive month in October by 0.4%, leading to a total appreciation rate of 5.1% year to date. On the other hand, foreclosures dropped from 26.7% at the beginning of the year to 17.6% in October.

8---Consumer Spending in the U.K. Is High, Not Low, CEPR

While the saving rate has risen from the lows hit at the peak of the UK's highest bubble, at 5.3 percent it is still well below the levels that the UK saw before the wealth created by its stock and housing bubbles began to drive consumption in the late 1990s. As is the case with the United States, the UK is likely to suffer from inadequate demand until its trade gets closer to balance.
This means that, rather than fearing foreign investors fleeing the British pound, the government should be encouraging such flight. A lower valued pound is the only way that the UK's trade defiicit can move substantially closer to balance. Without more balanced trade the economy will need large government budget deficits to sustain full employment.

9---Housing back at trend, CEPR
Both the NYT and USA Today have convinced themselves that house sales are well below their trend level, with the latter telling us that a 5.5 million annual sales rate of existing homes considered healthy. In fact, we are pretty much back to trend levels of sales. In the mid-90s before the bubble began to distort the market, sales averaged about 3.5 million a year. A simple adjustment for the 15 percent population growth over this period would imply an annual sales rate of 4 million existing homes. That is somewhat below the current 4.5 million sales rate.
Friday, 24 August 2012 04:02

10---Existing home sales, already above 1997 highs, cal risk

11---Hope springs eternal, oc housing

....the expectations for higher home prices are still widespread. Nearly three-quarters of investors polled by J.P. Morgan expect home prices to rise 5% in 2013.
Kool aid will never die. Faith in the market is eternal.

Mortgage bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae still fund more than 90% of new home loans. Bank portfolios and other private lending make up the rest.
Considering risks, J.P. Morgan analysts conceded that the economy is “gloomy” and tight lending standards can stop a bullish homebuyer from proceeding with a purchase. On the supply side, the “shadow inventory” of more than four million homes near or stuck in foreclosure still looms, though that is dropping, the analysts said.
Those problems will persist for several more years. Perhaps by early 2016 we will be discussing a housing market where reduced credit quality and shadow inventory are not major issues, but until then, those are the elephants in the room
 

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