Paul Krugman had an insightful post this week on secular stagnation. It alluded to the fact that bubbles may increasingly be coming to our rescue by inadvertently propping up our economy in a way that usually boosts employment.
We might try to figure out why we seem to need leverage and bubbles to have full employment, and try to fix it. More thoughts on that on another day. But what if that isn’t an option?
As a coda to the regional problems with trying to create national, ‘prudential’ policies for UK house prices… here’s this chart, via the ONS on Tuesday: Read more
The Q2 results from Wells Fargo and JP Morgan have again raised the issue of declining mortgage refinancings (if rates stay elevated), along with spurring more general worries about the housing market.
Here’s the Wall Street Journal on Friday: Read more
SocGen’s bathed-bear Albert Edward has been forced by overwhelming rage to look past the rich vein of Abenomics to the UK’s George Osborne. It’s the Chancellor’s latest meddling with the housing market that has got Edwards so inflamed:
George Osborne in his March budget proposed an unusually misguided piece of government interference in the housing market.
Peek under the lid of the Dutch housing market. It’s awfully idiosyncratic in there. Also it’s doing rather badly and has been the subject of recent, significant tax reforms that will drastically change its shape in the coming decades.
Right into the deep end, with this chart released last week by Statistics Netherlands (CBS):
Courtesy of Goldman Sachs.
Mortgage markets come in many different flavours. Some American states, for example, like theirs to be non-recourse. In such locations, a homeowner can walk away from their mortgage, and send the house keys to the lender secure in the knowledge that the only asset that can be seized is the property.
Such tastes no doubt contribute to a higher proportion of non-performing loans, as mortgage-holders are quite aware of their right to walk away — an option that becomes increasingly more attractive in an economic and housing downturn.
And now it would appear that the Spanish might prefer their mortgage market to have a taste of the non-recourse mortgage in future, as a pressure group succeeded on Tuesday in getting the country’s parliament to debate an initiative for making the change. Read more
Since housing generally went bust in 2007-2009, the sector’s performance has been a mixed bag globally. This has given the economics team at Goldman Sachs a chance to use the verb “bifurcate”, which is quite frankly one of the most brilliant words in the English language Read more
“Immobilie porn”, suggests Google Translate but we’re open to correction.
Either way, this piece from the FT on Tuesday makes for good reading. It suggests there may be a bubble building in the German property market with Berlin in particular looking peaky, although that must be caveated with the relatively sedate nature of the market previously. Read more
We noted our growing love for one John Mann MP before and it looks like his proposals are gaining some traction. From earlier in August:
Mann is suggesting that incentivising measures should include a suspension of all town centre car park fees up to Christmas, a reduction of Vat on DIY product, a crash programme of building pensioner bungalows and a re-introduction of green technology incentives such as solar panels. Read more
Last week we wrote about how US lending standards for mortgages have continued to tighten — in severe contrast to standards for other kinds of loans.
This was reinforced by the Fed’s senior loan officer survey for July, but we didn’t take a very close look at other parts that also shed some light on what’s happening with banks and the housing market. Read more
We promised you the second part of Hinde Capital’s “Britain is doomed” analysis…
… so here are some choice extracts from the report (which is now up in its entirety on their website): Read more
Total comprehensive income of $3.1bn (net income $2.7bn) vs dividend payments to Treasury of $2.8bn in 2012′s first quarter. Meaning – Fannie Mae hasn’t had to draw from the Treasury to pay back the Treasury for the first time… in a while.
The Spanish government may be bailing out Bankia by injecting cash in return for contingent convertibles to the tune of some €7-10bn, but many analysts have reacted with something along the lines of: “Haha! That’s cute! They are like ever so slightly less delusional about the trouble their banking sector is in! Adorable!”
Bankia is no canary in a coalmine. It’s more like the first sign that the inevitable support of the banking sector is finally materialising. Indeed, prime minister Mariano Rajoy was quoted saying: ”If it was necessary to reactivate credit, to save the Spanish financial system, I wouldn’t rule out injecting public funds, like all European countries have done,” in an interview with radio station Onda Cero, as reported by the WSJ. Finally playing catch up, are we? Read more
From the weird and wonderful head of Nicholas Colas, ConvergEx Group chief market strategist and bringer of alternative economic indicators galore.
This one’s focused on mobile home sales, a.k.a “manufactured” housing. Read more
Almost three times as many skyscrapers and high-rises are being built in Toronto than in New York, reviving fears that Canadian property prices are unsustainable, reports Bloomberg. Investors have rushed into Canadian housing in response to record low interest rates. Toronto’s condominium market has grown rapidly, with over a hundred housing units either under construction or in the planning stages. The “condo surge” of supply alone could drive down prices in the next few months even if interest rates remain low well into 2013, Bank of America analysts have warned.
With so much pessimism heading into 2012, we thought it would be prudent to discuss the possibility of positive surprises.
That’s the festive spirit of the economists at Bank of America Merrill Lynch, writing in a report released on Tuesday. Read more
US equities could be in line for a secular bull market as soon as next year, but European stocks should be handled with care.
That is a synopsis of the latest thinking from Citi. For more details read on: Read more
A question we’ve been pondering lately is just why there’s been such a renewed, intense policy focus on the US housing and mortgage markets in particular.
Or rather what we’ve really been wondering is, why now and not sooner? Read more
Details of Obama’s allegedly supercharged Home Affordable Refinance Program are here, and the Wall Street Journal had the scoop on Monday morning.
For our part, we’ll focus on this, from the FHFA’s Q&A (our emphasis): Read more
How big a hit should US banks take on their second mortgage portfolio?
A question that’s been asked again and again (and again and again) by this blog and others. Regulators are worried: Bloomberg reported last month that the Fed and the OCC are checking whether banks have put aside enough reserves to cover losses. Read more
A big hat-tip to Lorcan for this — the Irish 2011 census, which includes a nice chart of increases in housing stock, 2006-2011:
A housing milestone, of sorts.
Federally-backed loans already make up a majority of the mortgages classified as ‘seriously delinquent’ in the US financial system. In other words, there are more soured loans held or backed by the US’s giant GSEs — Fannie Mae and Freddie Mac — plus the Federal Housing Administration (FHA), than those held by banks and in private-label securitisations. Read more
Notice anything in the below chart, of five-year CDS for Spain, Japan and Australia?
Some graphics from Danske Bank to ponder ahead of the ECB’s Thursday meeting:
Just in case you were wondering…
Here’s something you might have missed during last week’s (UK) holiday.
Michael Cembalest has made a retraction. JPMorgan’s private banking chief investment officer (and reportedly the only JPM-er who refused to do business with Ponzi-schemer Bernard Madoff, according to Forbes) has a new view on the roots of the US subprime debacle. Read more
Here’s a convenient continuation of the rising-European-rates-meets-real-estate theme.
Standard & Poor’s reckon “fresh headwinds are gaining force in Europe’s real estate markets” due to rising interest rates (or at least, expectations of them) in a report out on Wednesday. Read more
Government reports don’t normally make for interesting eulogies, but this one is an exception.
The Treasury-HUD report to Congress on the future of the US housing market is out and generating qualified praise (though little surprise). Read more
US 30-year mortgage rates have jumped above 5 per cent for the first time since last spring, the Wall Street Journal reports, in a rapid rise that could present a challenge to the still-troubled housing market. The average rate on 30-year fixed-rate mortgages climbed to 5.05 per cent in the week ended Thursday, according to a widely watched survey by government-backed mortgage company Freddie Mac, up from 4.81 per cent a week ago. Reuters adds that the US Treasury completed a round of bond auctions this week, with Thursday’s sale of $16bn worth of 30-year bonds, which were sold at a high yield of 4.750 per cent, with 66.45 per cent of the bids awarded at the high.