Tuesday, September 24, 2013

Today's Links

1---Wall Street jumps ship (on housing, that is), Testosterone Pit

The evil combination of jumping prices, sky-high vacancy rates, and compressing rents has raised the distinct possibility that the business model of buy-to-rent might not work – and that vast amounts of capital will be destroyed as this is being sorted out. But whose capital?

The Wall-Street funded, Fed-instigated buying frenzy has turned single-family homes, the bedrock of American society, into another speculative Fed-driven asset class, where prices jump and crash erratically. And now, the smart money has decided to sell. They too see the numbers.
One of the timeliest gauges of home prices is Redfin’s Real-Time Price Tracker. It relies on sales contracts reported to the MLS data bases upon signing in the 19 metro areas where Redfin is active. Last week, it reported that in August the price per square foot – eliminates the issue of larger versus smaller homes –was up a bubbly 17.7% from last year on a 6.2% increase in volume. But on a monthly basis, prices had dropped 0.4%. The chart paints what could become the beautifully rounded top of a bubble.  ...

Price increases per square foot have been dizzying. Year over year, Las Vegas is up 38%, Los Angeles 25.5%, Phoenix 24.7%, Riverside 31.2%, Sacramento 37.8%.... But on a monthly basis, prices in August have turned around in some of the hottest markets, including San Francisco (-2.5%), San Jose (-0.7%), Seattle (-1.1%), and Washington (-0.5%).
There were other indications of trouble: volume dropped “uncharacteristically” by 4.3% from July’s four-year high; normally volume rises, often strongly, in August. And of the active listings, 26% had their prices lowered, a four-year high – up from 11% in December....

So, in this market where first-time buyers have become rare – down to 29% instead of the 40% in a healthy market – and where mortgage rates and prices have jumped, pushing these homes beyond the reach of many strung-out consumers, how can big investors dump hundreds or even thousands of homes at a time? They’d have trouble selling them to people who’d actually live in them. They can only Wall-Street engineer their way out of them. And that’s what they’re doing. Because someone’s capital is going to be destroyed, and they don’t want it to be theirs.

2---Housing Smoke and Mirrors, GEI

The July Fannie Mae National Housing Survey, signalled that the Taper talk, instigated by Bernanke back in April, has had the desired outcome of raising interest rate expectations without significantly lowering economic performance expectations....

Despite inflammatory headlines to the contrary, the Fed’s Communication Policy is working......
Behind this increase in supply and falling prices, there has finally appeared a rise in delinquencies. It now remains to be seen, if this correction has been engineered by the Fed; or whether it is a systemic problem developing again that the Fed will ultimately have to apply even more of the balance sheet solution too in the future. Political ineptitude is also evident, as it was in 2008; but the Fed has stared into this void before and has seen a way through it.

Blackrock has been observed, subtly shifting its housing risk position away from direct home ownership towards lending exposure to the rental sector; as the dynamics of the sector and the economy slow. In Housing Smoke and Mirrors “Dude Where’s My Housing Recovery?” this situation was observed as follows:
In Housing Smoke and Mirrors “Style Drift” the strategy of the Blackstone Group was seen drifting, away from property ownership, towards lending against rental property assets[xiii]. This style drift has continued, with Blackstone Group now signalling its intentions to issue a covered bond against its rental property portfolio. Blackstone is hedging itself against a rise in interest rates that will reduce its profit margins; by effectively locking in its borrowing costs and maintaining the option on raising rents. Blackstone is not exiting the sector, so clearly it still believes in the early bubble thesis; it is however positioning for rising inflation and rising interest rates.

3---More Manufacturing Coming Back to the U.S., NYT

 the leading advantages include competitive labor rates, proximity to customers, product quality, skilled labor and transportation costs

4---Brazil's Rousseff to UN: US surveillance an 'affront', RT

“I would like to announce that we are preparing a lawsuit against Barack Obama to condemn him for crimes against humanity,” President Morales told reporters Friday in the Bolivian city of Santa Cruz. He branded the US president as a “criminal” who had violated international law.

5---Did the Fed just pop the stock market bubble?, CNBC

6---Banks find appalling new way to cheat homeowners, Salon

7--Consumer confidence slips, WSJ

8---Home Prices Rising at Fastest Pace Since Start of Bubble, WSJ

So much for the National Mortgage Settlement. Homeowners are now getting foreclosed on without their knowledge!

9---Foreign Investors Cut U.S. Treasury Holdings, WSJ

Overseas private investors cut their holdings of U.S. Treasurys for the first time in more than three years during the second quarter of 2013, likely a reflection of uncertainty surrounding the nation’s monetary and fiscal policies as well as expectations of stronger global growth.
Foreign private investors reduced their Treasury holdings by 2.4%, or $39.62 billion, to $1.591 trillion from the first three months of the year, the Commerce Department said Tuesday. That was the first time private investors trimmed Treasury holdings from the prior quarter since the end of 2009.
Overseas governments and related institutions pared Treasury holdings by about 2%, or $81.56 billion, to $4.009 trillion. Foreign official holdings of U.S. Treasurys hadn’t declined since the end of 2011.
The moves come against a backdrop of unorthodox policies at the Federal Reserve, political stalemate in Congress and signs that the worst of Europe’s debt crisis has passed.
Investors have been awaiting the Fed’s next steps for its $85 billion-a-month bond-buying program, which has held down yields on Treasurys. The Fed surprised markets last week when it said it wasn’t ready to start winding down the purchases

10---Gauging the trajectory of the US housing market, sober look

One reason to think that the jump in existing home sales is transient is the decline we've seen in new home sales - which most are attributing to higher rates. The divergence shown below is unlikely to be sustainable.


The August number for new home sales (to be released this Wednesday, 10AM ET) will be critical to gauge the trajectory of the US housing market. On Thursday we will also be getting the pending home sales index that should provide a glimpse into sales going forward.

11--Various items: NSA stories around the world, Greenwald

12---Lobbying frenzy in run-up to US health care exchange launch, wsws

13---The 161 people who own the world, info clearinghouse

14---Housing Market Slowing in All Categories, DS News

The U.S. housing market may be starting to taper off in comparison to the strong growth of the last several months, according to a new survey by Campbell/Inside Mortgage Financing HousingPulse. The survey involves approximately 2,000 real estate agents nationwide.

The data showed a slower growth rate in all categories of home sales: first-time homebuyers, current homeowners, and investors. Investors fared the worst, with their business traffic registering below what the survey considers a “flat” level. Investors appear to be fueling a slide in the sale of distressed properties as well.

“The HousingPulse Distressed Property Index, a measure of distressed properties as a share of total home purchase transactions, fell to 25.4 percent in August, based on the three-month moving average,” the report said. “That was not only down from a distressed property share of 35.8 percent seen as recently as last March, but also the lowest level ever recorded by the HousingPulse survey.

“The market is slowing dramatically following the increase in interest rates. Numbers in October/November will start to show the price plateau and sales volume decline,” reported one real estate agent from California.

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