New home construction in the United States rebounded in August from a July decline as the distressed housing market slowly continues to stabilize, government data released Wednesday showed.
Housing starts rose 2.3 percent from July to an annual rate of 750,000, the Commerce Department said.
The July rate was revised lower, to 733,000 from an initial estimate of 746,000.
The August pace in housing starts was a bit weaker than expected, with the consensus estimate at 770,000, but was 29.1 percent above the August 2011 rate.
Starts on single-family homes, the largest segment of the market, jumped 5.5 percent.
New building permits, an indicator of potential future homebuilding, were at an annual rate of 800,000, down 1.0 percent from July, the Commerce Department said. Permits were 24.5 percent higher than a year ago.
"August starts and permit numbers were so-so, but the broader trends suggest that the US housing recovery is solidifying," said Robert Kavcic at BMO Capital Markets.
Optimism among home builders rose to its highest level in more than six years in September, the National Association of Home Builders said Tuesday.
The NAHB/Wells Fargo sentiment index rose for a fifth straight month to its highest reading since June 2006.
"Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years," said NAHB chief economist David Crowe.
By AFP
Showing posts with label United State. Show all posts
Showing posts with label United State. Show all posts
Thursday, September 20, 2012
US housing market recovery gains traction
The recovery in the US housing market continues to gain traction, data released Wednesday showed, a key improvement in the struggling economy just seven weeks before the presidential election.
With the economy dominating a tight race between President Barack Obama and Republican rival Mitt Romney ahead of the November 6 vote, signs of life are welcome in the housing sector, where millions of Americans have tied up their savings.
A pair of August housing data releases Wednesday further cemented the rough road back from a 2006 price bubble, analysts said.Existing home sales jumped 7.8 percent from July, the highest pace since May 2010, and were up 9.3 percent from a year ago, and prices increased the most in more than six years, the National Association of Realtors said.
The median price for all housing types, including single-family homes, apartments and townhouses, rose to $187,400 in August, up 9.5 percent from a year ago, the NAR said.
That was the strongest year-on-year price increase since January 2006, just before the market collapse that drove the world's biggest economy into the severe 2008-2009 recession.
"The US housing recovery is for real," said Sal Guatieri, senior economist at BMO Capital Markets."Great affordability, pent-up demand and strong investor interest in rental units are driving the market, and QE3 can only help by reducing mortgage rates further.
"A separate report from the Commerce Department showed housing starts rose 2.3 percent from July, and were up 29.1 percent from the August 2011 rate.
Starts on single-family homes, the largest segment of the market, jumped 5.5 percent.New building permits, an indicator of future homebuilding, fell 1.0 but were 24.5 percent higher than a year ago, the department said.
The data came on the heels of a sharply brighter outlook in the housing construction sector.
The National Association of Home Builders said Tuesday its NAHB/Wells Fargo sentiment index rose for a fifth straight month to its highest reading since June 2006.
"Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years," said NAHB chief economist David Crowe.
The US central bank last week rolled out its biggest stimulus in two years, QE3, in part to boost home building and buying, and fight high unemployment in the aftermath of the Great Recession.
Federal Reserve Chairman Ben Bernanke said the QE3 program -- purchases of mortgage-backed securities at a pace of $40 billion a month -- should help lower interest rates, particularly on mortgage rates which have been hovering at historic lows.
QE3 "should provide further support to the housing sector by encouraging home purchases and refinancing," which in turn would "help the economy grow," Bernanke said.
Barclays analyst Michael Gapen cautioned that the housing recovery still faced significant challenges.
"Our view is that housing is in a recovery phase, but one that will be restrained by the availability of credit, the pace of improvement in labor market conditions, and the overhang from distressed and foreclosed properties," he said.
By AFP
With the economy dominating a tight race between President Barack Obama and Republican rival Mitt Romney ahead of the November 6 vote, signs of life are welcome in the housing sector, where millions of Americans have tied up their savings.
A pair of August housing data releases Wednesday further cemented the rough road back from a 2006 price bubble, analysts said.Existing home sales jumped 7.8 percent from July, the highest pace since May 2010, and were up 9.3 percent from a year ago, and prices increased the most in more than six years, the National Association of Realtors said.
The median price for all housing types, including single-family homes, apartments and townhouses, rose to $187,400 in August, up 9.5 percent from a year ago, the NAR said.
That was the strongest year-on-year price increase since January 2006, just before the market collapse that drove the world's biggest economy into the severe 2008-2009 recession.
"The US housing recovery is for real," said Sal Guatieri, senior economist at BMO Capital Markets."Great affordability, pent-up demand and strong investor interest in rental units are driving the market, and QE3 can only help by reducing mortgage rates further.
"A separate report from the Commerce Department showed housing starts rose 2.3 percent from July, and were up 29.1 percent from the August 2011 rate.
Starts on single-family homes, the largest segment of the market, jumped 5.5 percent.New building permits, an indicator of future homebuilding, fell 1.0 but were 24.5 percent higher than a year ago, the department said.
The data came on the heels of a sharply brighter outlook in the housing construction sector.
The National Association of Home Builders said Tuesday its NAHB/Wells Fargo sentiment index rose for a fifth straight month to its highest reading since June 2006.
"Builders across the country are expressing a more positive outlook on current sales conditions, future sales prospects and the amount of consumer traffic they are seeing through model homes than they have in more than five years," said NAHB chief economist David Crowe.
The US central bank last week rolled out its biggest stimulus in two years, QE3, in part to boost home building and buying, and fight high unemployment in the aftermath of the Great Recession.
Federal Reserve Chairman Ben Bernanke said the QE3 program -- purchases of mortgage-backed securities at a pace of $40 billion a month -- should help lower interest rates, particularly on mortgage rates which have been hovering at historic lows.
QE3 "should provide further support to the housing sector by encouraging home purchases and refinancing," which in turn would "help the economy grow," Bernanke said.
Barclays analyst Michael Gapen cautioned that the housing recovery still faced significant challenges.
"Our view is that housing is in a recovery phase, but one that will be restrained by the availability of credit, the pace of improvement in labor market conditions, and the overhang from distressed and foreclosed properties," he said.
By AFP
Wednesday, August 8, 2012
Boston Property beats Wall St forecast
NEW YORK: Office building landlord Boston Properties Inc reported quarterly funds from operations, a key measure of real estate investment trust performance, that easily surpassed Wall Street's forecast, in part due to termination income from a tenant at one of its largest buildings.
The company, whose chairman and chief executive is publisher Mortimer Zuckerman, reported second-quarter funds from operations (FFO) of US$206.8mil, or US$1.38 per share, compared with US$181.6mil, or US$1.24 per share in the second-quarter 2011.
Analysts on average expected Boston Properties to post second-quarter FFO of US$1.24 per share, according to Thomson Reuters. The company had forecast second-quarter FFO in the range of US$1.23 to US$1.25 per share.
FFO removes the profit-reducing effect that depreciation, a non-cash item, has on earnings.
Boston Properties owns or has interests in properties that are mainly first-class office buildings in New York, Boston, San Francisco and the Washington DC area.
By Reuters
The company, whose chairman and chief executive is publisher Mortimer Zuckerman, reported second-quarter funds from operations (FFO) of US$206.8mil, or US$1.38 per share, compared with US$181.6mil, or US$1.24 per share in the second-quarter 2011.
Analysts on average expected Boston Properties to post second-quarter FFO of US$1.24 per share, according to Thomson Reuters. The company had forecast second-quarter FFO in the range of US$1.23 to US$1.25 per share.
FFO removes the profit-reducing effect that depreciation, a non-cash item, has on earnings.
Boston Properties owns or has interests in properties that are mainly first-class office buildings in New York, Boston, San Francisco and the Washington DC area.
By Reuters
Wednesday, August 1, 2012
Real estate back in favour
It’s in demand again with signs of US housing market bottoming out
LONDON: Treated by many as a pariah after the US subprime collapse triggered the 2007 global financial crisis, real estate is increasingly bouncing back with insurance, pension and sovereign wealth funds.
The evaporation of interest rates on high-quality government bonds is encouraging asset managers to look again at prime real estate properties and stocks, where they find returns far outshooting socalled “safe” sovereigns.
Sovereign wealth funds are a US$4 trillion business and pension funds cover more than US$30 trillion, so even a small shift could move billions away from lower-yielding and more volatile assets.
Top-of-the-crop commercial and residential properties from London to Bangkok are in demand and there are signs of a bottoming out in the US housing market, prompting major investors to buy foreclosed homes to rent.
A sign of increasing interest in the sector can be seen in real estate funds, which have attracted more fresh money than other sectors this year, according to fundtracker EPFR Global.
Andrew Economos, head of sovereign and institutional strategy for JP Morgan Asset Management in Asia, says sovereign wealth funds are particularly active.
“Sovereign wealth funds are looking for positive yields and they are finding anywhere between 5% and 7% in real estate. They are getting yield on purchase as well as capital appreciation,” he said.
“They are diversifying across real estate into commercial, trophy properties as well as REITs (real estate investment trusts),” he said. REITs are securities sold like a stock and which invest in real estate properties or mortgages.
In one of the most recent high-end deals, Norway's sovereign wealth fund teamed up last month with Italian insurance giant Assicurazioni Generali to manage prime office and retail properties worth 550 million euros in central Paris.
Norway's sovereign wealth fund NBIM, which holds assets worth about 3.6 trillion Norwegian crowns (US$598.93bil), plans to raise real estate assets to as much as 5% of its overall portfolio from 0.3% at the end of March.
China's US$482bil sovereign wealth fund Investment Corp said on Wednesday this was one of the sectors it was now focusing on.
One way that investors are tapping the real estate market is through stocks and real estate investment trusts, which offer substantially higher dividend yields than sovereigns in areas spanning from Europe and the United States to Japan.
Dividend yields for stocks listed on the MSCI real estate index for the eurozone reach nearly 7%, according to Thomson Reuters Data-Stream, which beats by far negative or near zero yields for government bonds in core countries Germany or France. This is also higher than other sought-after assets including corporate bonds, which offer an overall yield of 3.24% on the iBoxx index.
The MSCI real estate eurozone index is up 13.1% since the beginning of the year compared with 2% for the overall MSCI index for the region, Data-Stream shows.
Yields on prime commercial or real estate housing the actual property rather than stocks vary widely but analysts give estimates of an average 35% for the best property in Europe.
“Certainly the work that we have done on an advisory basis to clients in the past three to four months has highlighted the importance of property in their portfolios,” said Ken Adams, global strategist at Scottish Widows Investment Partnership.
That market is highly polarised, however, with anything less than outstanding properties offering long leases with financially sound tenants in sought-after areas being spurned by investors put off by recession and the euro debt crisis and prices for these more secondary assets falling.
Commercial real estate, which had widely collapsed in the wake of the subprime crisis, was competing with other high-yield assets such as emerging market bonds and must offer the safety of a high-quality bond with better yields to attract investors such as pension funds, said John Danes, property research director at UK fund manager Aberdeen Asset Management.
“The return has to be very financially secure, with long leases and if there is some kind of inflation link as well, all the better,” said Danes, adding that he had seen increased interest across sectors, from long-let retail and offices to British supermarkets, which he said offer financially solid tenants and yields of 4.55%.
In the birthplace of the subprime crisis, in the United States, a number of investors are focusing on the opportunities that have been created in housing.
Blackstone Group LP has spent more than US$300mil to purchase over 2,000 foreclosed homes to rent and bet on a recovery of the US housing market, the firm said in mid-July.
Although analysts forecast any growth in the US housing market would be sluggish and it could take 10 years or more to go back to 2006 peak levels, commercial housing had seen nine consecutive quarters of uninterrupted improvement with vacancies down and rents up, said Citi analyst Jeff Berenbaum.
“Yields are in the high 3% to low 4% range for the strongest properties,” he said.
“For a risky market like commercial housing that's pretty historically low but if you compare with treasury yields, it's still a pretty wide spread.”
On the housing front globally, prime property in major cities has seen its strongest growth since 2010 in the second quarter, with a 1.3% growth in the year to June, according to Knight Frank's prime global cities index, which tracks the top 5% of mainstream markets.
By Reuters
Tuesday, July 10, 2012
New York City mayor promotes 'micro' apartments
New York City Mayor Michael Bloomberg on Monday launched a tender for the construction of "micro-apartments" in the Big Apple, where rents are exorbitant and the number of singles is on the rise.
A pilot project slated for construction in Manhattan's Kips Bay section will feature rental apartments ranging from 275 to 300 square feet (26-28 square meters) with kitchens and bathrooms, the mayor's office said in a statement.
Bloomberg explained it was "critical to the city's continued growth, future competitiveness and long-term economic success" to develop "housing that matches how New Yorkers live.
" "People from all over the world want to live in New York City, and we must develop a new, scalable housing model that is safe, affordable and innovative to meet their needs.
"The project is slated to respond to the changing demographics of a city where 1.8 million households are composed of one or two people, but there are only one million studios and one-room apartments, the mayor's office said.
Current standards in New York require that most new apartments be at least 400 square feet.But rental costs in the Big Apple are increasingly expensive.
In Manhattan, a studio cost an average $2,243 per month in May in a building without concierge, up 7.9 percent from the previous year, and $2,657 in a building with concierge, up 4.4 percent, according to the Manhattan Rental Market Report.
A one-room apartment cost about $2,959 without concierge, up 6.2 percent from 2011, and $3,777 with concierge, up 6.8 percent in a year.
By AFP
A pilot project slated for construction in Manhattan's Kips Bay section will feature rental apartments ranging from 275 to 300 square feet (26-28 square meters) with kitchens and bathrooms, the mayor's office said in a statement.
Bloomberg explained it was "critical to the city's continued growth, future competitiveness and long-term economic success" to develop "housing that matches how New Yorkers live.
" "People from all over the world want to live in New York City, and we must develop a new, scalable housing model that is safe, affordable and innovative to meet their needs.
"The project is slated to respond to the changing demographics of a city where 1.8 million households are composed of one or two people, but there are only one million studios and one-room apartments, the mayor's office said.
Current standards in New York require that most new apartments be at least 400 square feet.But rental costs in the Big Apple are increasingly expensive.
In Manhattan, a studio cost an average $2,243 per month in May in a building without concierge, up 7.9 percent from the previous year, and $2,657 in a building with concierge, up 4.4 percent, according to the Manhattan Rental Market Report.
A one-room apartment cost about $2,959 without concierge, up 6.2 percent from 2011, and $3,777 with concierge, up 6.8 percent in a year.
By AFP
Wednesday, February 29, 2012
US housing woes slowing recovery
WASHINGTON: The struggling US housing market is a “significant drag” on the overall economic recovery, Federal Reserve governor Elizabeth Duke told Congress in testimony obtained by Reuters.
“The failure of the housing market to respond to lower interest rates as vigorously as it has in the past indicates that factors other than financial conditions may be restraining improvements in mortgage credit and housing market conditions,” she said.
High rates of foreclosures were likely to persist for a while and push home prices down, Duke said in testimony prepared for delivery to the Senate Banking Committee.
The Fed has in recent months emphasised that turmoil in housing markets, where US homeowners have lost US$7 trillion in equity since 2006 from falling home prices, is a serious impediment to more robust growth.
The central bank released a study of housing woes in January that was criticised by Republican lawmakers for political meddling, but Fed officials have continued to voice qualms about the damage done by housing market setbacks.
Duke said the elevated pace of foreclosures was likely to continue “for quite a while” and would push prices down further. While some retrenchment from the over-eager lending that preceded the 2007/2009 recession had been necessary, current lending caution appeared to be standing in the way of lending even to credit-worthy households, she said.
By Reuters
“The failure of the housing market to respond to lower interest rates as vigorously as it has in the past indicates that factors other than financial conditions may be restraining improvements in mortgage credit and housing market conditions,” she said.
High rates of foreclosures were likely to persist for a while and push home prices down, Duke said in testimony prepared for delivery to the Senate Banking Committee.
The Fed has in recent months emphasised that turmoil in housing markets, where US homeowners have lost US$7 trillion in equity since 2006 from falling home prices, is a serious impediment to more robust growth.
The central bank released a study of housing woes in January that was criticised by Republican lawmakers for political meddling, but Fed officials have continued to voice qualms about the damage done by housing market setbacks.
Duke said the elevated pace of foreclosures was likely to continue “for quite a while” and would push prices down further. While some retrenchment from the over-eager lending that preceded the 2007/2009 recession had been necessary, current lending caution appeared to be standing in the way of lending even to credit-worthy households, she said.
By Reuters
Monday, January 16, 2012
Genting beats the odds
An analyst says it is well-positioned to build its RM11bil casino and hotel complex in Florida
The odds have turned to Genting Malaysia Bhd's favour to build a US$3.8bil (RM11.4bil) casino and hotel complex in Florida after a state Senate committee voted to allow the proposal to be debated by the state's lawmakers, analysts said.
The bill would deliberate on the issue of liberalising non-native American casinos. While the outcome would only be known in a few months, analysts say the move indicated that people supported the idea of legalised gambling to generate revenue for the economy.
The decision was positive for Genting as Florida may have as many as three Las Vegas-style casinos, with dealers and table games in addition to slot machines.
Currently in Florida, state laws only allowed casino gambling to resorts operated by native American tribes and slot machines at horse and dog race tracks.
“Genting would be well-positioned to secure the casino licence as it was the first to detail out its plans last year before any development has taken place,” said Alliance gaming analyst Cheah King Yoong.
“It's still early days and we still don't know the outcome. However, it's definitely good news for Genting. It has quite an ambitious plan in Miami,” said a gaming analyst from Kenanga Research.
Competition is hot too, as analysts say MGM Resorts International, Las Vegas Sands and Wynn Resorts Ltd are also interested in setting up casinos there.
Genting has submitted a master plan which showcased hotels, convention and entertainment centres, restaurants, retail and commercial facilities and residential towers on a waterfront site.
It is widely known that the measure is currently opposed by Walt Disney Co, the world's biggest theme-park company, whose flagship Walt Disney World is near Orlando, just over 300km away.
Another gaming analyst added that Genting may have won the battle, but it could be losing the war.
“The bill has not been finalised. What if they allowed a lot more casinos to set up shop? So although Genting gets the licence, it might still start off at a disadvantage,” said the gaming analyst.
“Furthermore, with Phase 2 of Genting New York venture coming up and estimated at a cost of more than US$4bil (RM12bil), should Genting be awarded the casino in Miami, how is it going to fund it?” asked the analyst.
Last week, it was announced that Genting had entered into a non-binding letter of intent with the New York State Urban Development Corp to consider developing an integrated complex next to its existing facility, Resorts World New York (RWNY) in Queens.
The new extension includes a convention and exhibition centre, up to 3,000 hotel rooms and an expansion of RWNY's casino. A binding MoU is expected to be inked by Nov 30.
“The timing of the developments will be important. Funding for both the developments in New York and Miami concurrently would mean spending close to US$8bil (RM24bil). I am sure Genting will work its way around that.
“However, investors are used with Genting being in net cash position. If debt levels were to rise to above 50%, then that would be something to ponder on,” said the gaming analyst.
Meanwhile, Cheah said the Greater Miami Chamber of Commerce's move to endorse casino resorts in South Florida was a huge plus point in helping to broaden the state's gambling laws.
“The endorsement by the largest business group in South Florida shows that the major business leaders understand the importance of having more income generation streams to boost the sluggish economy in the US. As such, odds are turning favourable to Genting 's Miami venture,” said Cheah.
Cheah believes that the market has not priced in the potential of Genting benefiting from the liberalisation of the gaming sector in Miami and the emergence of Genting as a global gaming giant.
The gaming analyst said that it was still early to talk about earnings potential should Genting be awarded the casino licence as this would be the first time a full-fledged casino was being constructed.
However, HwangDBS analyst Yee Mei Hui said that Resorts World New York was expected to contribute 16% to Genting Malaysia's 2012 earnings. She is estimating Genting to make RM1.75bil in net profit in 2012.
For the nine months to Sept 30, 2011, its net profit was up 17.95% to RM1.08bil while revenue was up 63.26% to RM6.16bil.
Genting gets some 90% of its revenues from its mainstay travel and leisure business in the Genting Highland Resorts.
By The Star
Thursday, January 5, 2012
Genting NY mulls US$4bil mixed-use complex in NY
KUALA LUMPUR: Genting Malaysia Bhd's indirect wholly-owned subsidiary, Genting New York LLC (Genting NY), is considering developing an integrated mixed-use complex worth at least US$4 billion in New York.
In a circular to Bursa Malaysia, the company said it entered into a non-binding letter of intent on Tuesday with the New York State Urban Development Corporation to consider the development of the complex.
"Genting NY will work closely with Empire State Development Corporation and the relevant parties, to negotiate terms in good faith, with a view to entering into a binding memorandum of understanding on or before Nov 30, 2012," it said.
The proposed project, adjacent to the Aqueduct Racetrack in Queens, New York, will include an integrated 353,000 sq m convention and exhibition centre with up to 3,000 hotel rooms and an expansion of Resorts World Casino New York City.
By Bernama
In a circular to Bursa Malaysia, the company said it entered into a non-binding letter of intent on Tuesday with the New York State Urban Development Corporation to consider the development of the complex.
"Genting NY will work closely with Empire State Development Corporation and the relevant parties, to negotiate terms in good faith, with a view to entering into a binding memorandum of understanding on or before Nov 30, 2012," it said.
The proposed project, adjacent to the Aqueduct Racetrack in Queens, New York, will include an integrated 353,000 sq m convention and exhibition centre with up to 3,000 hotel rooms and an expansion of Resorts World Casino New York City.
By Bernama
Tuesday, January 3, 2012
US is top 2012 property investment pick
NEW YORK: The United States will remain the top choice of most global commercial real estate investors in 2012, but the country has lost ground to Brazil which ranked No. 2 this year, according to a survey.
While the United States offers the most stable and secure option in commercial real estate, investors said improvement in rent and occupancy growth and the repeal of a 1980 foreign investment tax would have the strongest impact on their investment decisions, according to the 20th annual survey of Association of Foreign Investors in Real Estate (AFIRE) members.
For about the past year or so, investors in US commercial real estate have focused on gateway cities such as New York, Washington, Boston, San Francisco and Los Angeles, driving prices up and yields down.
Meanwhile, commercial property in Brazil, with its bubbling economy and safer investment environment, has become a hot spot for global investors. Sao Paulo, Brazil's largest city, jumped to the fourth best city for real estate investment dollars in 2012, up from 26th place last year.
The United States is still very desirable and was second behind the UK in attracting cross border investment in 2011, according to Real Capital Analytics preliminary figures.
“The negative is it doesn't promise a whole lot of capital appreciation because the prime markets are already fully priced,” AFIRE chief executive officer James Fetgatter said. “By no means will Brazil replace the United States, at least not in the forseeable future. Brazil is considered now a much safer place to invest and a place where you can get capital appreciation and good yield.”
AFIRE'S survey respondents hold more than US$874bil of real estate globally, including US$338bil in the United States.
About 60% of respondents said they planned to increase their investment in US real estate in 2012, down from a record 72% last year, according to the 20th annual survey.
Some 42.2% said they believed the United States in 2012 would offer the best opportunity for the price of their commercial real estate investments to increase, down from 64.7% last year's survey.
By Reuters
While the United States offers the most stable and secure option in commercial real estate, investors said improvement in rent and occupancy growth and the repeal of a 1980 foreign investment tax would have the strongest impact on their investment decisions, according to the 20th annual survey of Association of Foreign Investors in Real Estate (AFIRE) members.
For about the past year or so, investors in US commercial real estate have focused on gateway cities such as New York, Washington, Boston, San Francisco and Los Angeles, driving prices up and yields down.
Meanwhile, commercial property in Brazil, with its bubbling economy and safer investment environment, has become a hot spot for global investors. Sao Paulo, Brazil's largest city, jumped to the fourth best city for real estate investment dollars in 2012, up from 26th place last year.
The United States is still very desirable and was second behind the UK in attracting cross border investment in 2011, according to Real Capital Analytics preliminary figures.
“The negative is it doesn't promise a whole lot of capital appreciation because the prime markets are already fully priced,” AFIRE chief executive officer James Fetgatter said. “By no means will Brazil replace the United States, at least not in the forseeable future. Brazil is considered now a much safer place to invest and a place where you can get capital appreciation and good yield.”
AFIRE'S survey respondents hold more than US$874bil of real estate globally, including US$338bil in the United States.
About 60% of respondents said they planned to increase their investment in US real estate in 2012, down from a record 72% last year, according to the 20th annual survey.
Some 42.2% said they believed the United States in 2012 would offer the best opportunity for the price of their commercial real estate investments to increase, down from 64.7% last year's survey.
By Reuters
Wednesday, December 28, 2011
US rental demand lifts housing sector
WASHINGTON: Brian Keith is busier than ever as the architecture firm he works for rushes to wrap up work on a 300-unit apartment complex in Dallas.
The project is one of dozens the firm, JHP Architecture, has on its hands a surge of business driven by a rise in demand in the United States for rental properties.
The increased demand has forced JHP to expand, and it expects to keep hiring at least through the first quarter.
“We're seeing overall work come back and there's a backlog of contracts to go through,” said Keith, director of urban design and planning at JHP.
“There's strong interest in multi-family units and plenty of pent-up demand.”
With US unemployment at a lofty 8.6%, home foreclosures rising and property prices under pressure, more and more Americans have given up the dream of owning, opting instead to rent, a shift that is remaking the face of the US housing industry.
The percentage of Americans who own their home dropped from a peak of 69.2% in late 2004 to a 13-year low of 65.9% in the second quarter.
It edged up to 66.3% in the third quarter of this year.
On the flip side, the percentage of rental properties that are empty fell to 9.8% in the third quarter from 10.3% a year earlier.
In a recent report, Oliver Chang, an analyst at Morgan Stanley, dubbed 2012 “The Year of the Landlord.”
“Rents are rising, vacancies are falling, household formations are growing and rental supply is limited,” the Morgan Stanley report stated. “We believe the demand for rental properties will continue to grow.”
Groundbreaking for new housing jumped 9.3% in November to the highest level in 19 months, fuelling optimism that the battered housing market was regaining its footing.
The gains, however, were almost solely in multi-family housing. Groundbreaking for structures with five or more units shot up more than 30% from October to now stand at nearly double the year-ago level.
By Reuters
The project is one of dozens the firm, JHP Architecture, has on its hands a surge of business driven by a rise in demand in the United States for rental properties.
The increased demand has forced JHP to expand, and it expects to keep hiring at least through the first quarter.
“We're seeing overall work come back and there's a backlog of contracts to go through,” said Keith, director of urban design and planning at JHP.
“There's strong interest in multi-family units and plenty of pent-up demand.”
With US unemployment at a lofty 8.6%, home foreclosures rising and property prices under pressure, more and more Americans have given up the dream of owning, opting instead to rent, a shift that is remaking the face of the US housing industry.
The percentage of Americans who own their home dropped from a peak of 69.2% in late 2004 to a 13-year low of 65.9% in the second quarter.
It edged up to 66.3% in the third quarter of this year.
On the flip side, the percentage of rental properties that are empty fell to 9.8% in the third quarter from 10.3% a year earlier.
In a recent report, Oliver Chang, an analyst at Morgan Stanley, dubbed 2012 “The Year of the Landlord.”
“Rents are rising, vacancies are falling, household formations are growing and rental supply is limited,” the Morgan Stanley report stated. “We believe the demand for rental properties will continue to grow.”
Groundbreaking for new housing jumped 9.3% in November to the highest level in 19 months, fuelling optimism that the battered housing market was regaining its footing.
The gains, however, were almost solely in multi-family housing. Groundbreaking for structures with five or more units shot up more than 30% from October to now stand at nearly double the year-ago level.
By Reuters
Wednesday, December 14, 2011
Housing regulator sues Chicago
WASHINGTON: The Federal Housing Finance Agency said it was suing the city of Chicago to prevent it from enforcing a recently amended ordinance dealing with vacant properties.
FHFA said it was acting on its own behalf and as the conservator for Fannie Mae and Freddie Mac and said it had taken the action reluctantly after trying unsuccessfully to work the issue out with the city.
By Reuters
FHFA said it was acting on its own behalf and as the conservator for Fannie Mae and Freddie Mac and said it had taken the action reluctantly after trying unsuccessfully to work the issue out with the city.
By Reuters
Wednesday, November 16, 2011
Details of loans can widen reach to help distressed US homeowners
WASHINGTON: The reach of a government effort to help distressed homeowners refinance their mortgages could be largely determined by details on lender liability that will be announced.
The regulator for government-controlled mortgage finance firms, Fannie Mae and Freddie Mac, said last month that it was widening a programme to help borrowers with little or no equity in their homes refinance.
The initiative, known as the Home Affordable Refinance Programme, or HARP, hinges on lenders voluntarily writing new loans for borrowers hard-hit by declining home prices.
But many lenders have been worried that they could be forced to buy back refinanced loans if defects with the initial mortgage are found, a concern that has undercut the programme's effectiveness.
The regulator, the Federal Housing Finance Agency (FHFA), said it would relax the representations and warranties participating lenders had to abide by as part of its revamp of the programme.
Lenders would have learnt yesterday to what extent those contracts, which determine their liability for bad loans, will be waived.
“For those originating the new loans, they will look at how these waivers are going to structured,” said Bose George, an analyst with Keefe, Bruyette & Woods Inc in New York. “If they provide enough of a comfort zone, these changes to the representations and warranties could bring meaningful participation.”
HARP is open to borrowers who have little or no equity in the homes as long as they are making timely payments and their loans are guaranteed by Fannie Mae and Freddie Mac, which currently back about half of all US residential loans.
As part of the revamp announced in October, FHFA said it would scrap a cap that prevented borrowers whose mortgages exceeded 125% of the value of their homes from participating in the programme.
Analysts at Barclays Capital estimate up to 3.1 million loans are eligible for the programme. So far, about 894,000 borrowers have used HARP to refinance.
FHFA said the changes could double that number, although that would still fall far short of the five million homeowners the Obama administration had hoped to reach when the programme was unveiled in 2009.
While borrowers may move through the refinancing process at a faster rate under the retooled initiative, the breadth of the waivers on representations and warranties will largely determine the degree to which lenders and mortgage servicers are willing to make these riskier loans.
Those originating the loans have been skittish about refinancing higher-risk borrowers with the possibility a loan's government guarantee could be stripped if it sours or it is deemed defective.
Edward DeMarco, acting director of FHFA, said during a conference call with reporters last month the plan would wind up producing “substantial relief” from the representations and warranties.
But George cautioned that Fannie Mae and Freddie Mac might try to offset the waivers with an additional fee to cover the potential costs of being stuck with bad loans.
The companies have been successful at getting lenders to buy back defective loans, which has helped them bring in revenue.
By Reuters
The regulator for government-controlled mortgage finance firms, Fannie Mae and Freddie Mac, said last month that it was widening a programme to help borrowers with little or no equity in their homes refinance.
The initiative, known as the Home Affordable Refinance Programme, or HARP, hinges on lenders voluntarily writing new loans for borrowers hard-hit by declining home prices.
But many lenders have been worried that they could be forced to buy back refinanced loans if defects with the initial mortgage are found, a concern that has undercut the programme's effectiveness.
The regulator, the Federal Housing Finance Agency (FHFA), said it would relax the representations and warranties participating lenders had to abide by as part of its revamp of the programme.
Lenders would have learnt yesterday to what extent those contracts, which determine their liability for bad loans, will be waived.
“For those originating the new loans, they will look at how these waivers are going to structured,” said Bose George, an analyst with Keefe, Bruyette & Woods Inc in New York. “If they provide enough of a comfort zone, these changes to the representations and warranties could bring meaningful participation.”
HARP is open to borrowers who have little or no equity in the homes as long as they are making timely payments and their loans are guaranteed by Fannie Mae and Freddie Mac, which currently back about half of all US residential loans.
As part of the revamp announced in October, FHFA said it would scrap a cap that prevented borrowers whose mortgages exceeded 125% of the value of their homes from participating in the programme.
Analysts at Barclays Capital estimate up to 3.1 million loans are eligible for the programme. So far, about 894,000 borrowers have used HARP to refinance.
FHFA said the changes could double that number, although that would still fall far short of the five million homeowners the Obama administration had hoped to reach when the programme was unveiled in 2009.
While borrowers may move through the refinancing process at a faster rate under the retooled initiative, the breadth of the waivers on representations and warranties will largely determine the degree to which lenders and mortgage servicers are willing to make these riskier loans.
Those originating the loans have been skittish about refinancing higher-risk borrowers with the possibility a loan's government guarantee could be stripped if it sours or it is deemed defective.
Edward DeMarco, acting director of FHFA, said during a conference call with reporters last month the plan would wind up producing “substantial relief” from the representations and warranties.
But George cautioned that Fannie Mae and Freddie Mac might try to offset the waivers with an additional fee to cover the potential costs of being stuck with bad loans.
The companies have been successful at getting lenders to buy back defective loans, which has helped them bring in revenue.
By Reuters
Wednesday, September 21, 2011
US housing starts slow in August
US housing starts fell in August for a second straight month, another sign of the weakness of the American economy, the US Department of Commerce said Tuesday.
Builders started new homes at an annual pace of 571,000 units, down from 601,000 in July and 615,000 in May. It was also slightly lower than the pace for the first half of the year.
However, in a promising sign -- though from a less reliable indicator of the economy's health -- building permits issued in August jumped to an annual rate of 620,000, up from 601,000 in July and 606,000 in June, the department said.
The construction industry, one of the key pillars of the economy, has remained in a deep slump since the 2008-2009 recession, with ultra-low interest rates failing to give a boost to the sector.
By AFP
Builders started new homes at an annual pace of 571,000 units, down from 601,000 in July and 615,000 in May. It was also slightly lower than the pace for the first half of the year.
However, in a promising sign -- though from a less reliable indicator of the economy's health -- building permits issued in August jumped to an annual rate of 620,000, up from 601,000 in July and 606,000 in June, the department said.
The construction industry, one of the key pillars of the economy, has remained in a deep slump since the 2008-2009 recession, with ultra-low interest rates failing to give a boost to the sector.
By AFP
Saturday, May 28, 2011
Genting plans to build ‘Resorts World’ in Florida
PETALING JAYA: Genting Malaysia Bhd plans to build “Resorts World Miami” in Florida after buying a 13.9-acre land for some US$236mil from a US newspaper publisher, The McClatchy Co.
The company told Bursa Malaysia yesterday that its subsidiary, Bayfront 2011 Property LLC purchased the land, which includes a building currently housing The Miami Herald Media Co and an adjacent parking lot, with plans of building a mixed-use development.
Genting Malaysia said it was working towards developing a comprehensive master plan for the project called “Resorts World Miami”, which will include hotel, convention, entertainment, restaurant, retail, residential and commercial facilities.
The project aims to capitalise on Miami’s standing as one of the world’s leading tourism hubs.
“The acquisition involves large prime freehold waterfront properties facing the scenic Biscayne Bay. Located in downtown Miami, the properties are close to commercial, residential and shopping areas and are bordered by an extensive road network linking to Miami International Airport and South Beach, one of the world’s top beach destinations,” the company said.
The land is located directly across the street from the Adrienne Arsht Center for the Performing Arts of Miami-Dade County, which is among America’s largest performing arts centres. Miami’s new Museum Park development, the future home of Miami Art Museum and Miami Science Museum, is located immediately to the south.
Genting Malaysia is looking to fund the purchase through bank borrowings and internally-generated funds. It said that bank borrowings of US$200mil to partly fund the purchase, Genting Malaysia’s consolidated gearing ratio of 8.3% as at Dec 31 will increase to 12.4%, on a proforma basis.
“Resorts World Miami will be a landmark mixed-use development for Miami, Florida and the United States,” Genting Malaysia chairman and chief executive Tan Sri Lim Kok Thay said.
“Downtown Miami has experienced dramatic residential and commercial growth in recent years, and we believe the addition of a large-scale mixed-use and entertainment complex will be a welcomed addition, further elevating the area’s status as a global destination.”
Genting Malaysia said it was seeking to expand internationally in the leisure, hospitality and entertainment industry. The envisioned Resorts World Miami represents Genting Malaysia’s second venture in the US, after Resorts World New York at the historic Aqueduct Racetrack in the City of New York.
The seller of the land is the third-largest newspaper publisher in the US and is listed on the New York Stock Exchange. It is also the parent company of Miami Herald.
An analyst said based on the little information provided from the announcement said he was netural on the deal.
“It seems cheap, considering that they are buying at a property down cycle in the US and that this is prime property.”
However, he added, that it is not clear if Genting would be issued with a gaming licence. “If a casino is in the plans, then the move is a good one, considering that Miami is a top tourist site. But let’s see the details.”
By The Star
The company told Bursa Malaysia yesterday that its subsidiary, Bayfront 2011 Property LLC purchased the land, which includes a building currently housing The Miami Herald Media Co and an adjacent parking lot, with plans of building a mixed-use development.
Genting Malaysia said it was working towards developing a comprehensive master plan for the project called “Resorts World Miami”, which will include hotel, convention, entertainment, restaurant, retail, residential and commercial facilities.
The project aims to capitalise on Miami’s standing as one of the world’s leading tourism hubs.
“The acquisition involves large prime freehold waterfront properties facing the scenic Biscayne Bay. Located in downtown Miami, the properties are close to commercial, residential and shopping areas and are bordered by an extensive road network linking to Miami International Airport and South Beach, one of the world’s top beach destinations,” the company said.
The land is located directly across the street from the Adrienne Arsht Center for the Performing Arts of Miami-Dade County, which is among America’s largest performing arts centres. Miami’s new Museum Park development, the future home of Miami Art Museum and Miami Science Museum, is located immediately to the south.
Genting Malaysia is looking to fund the purchase through bank borrowings and internally-generated funds. It said that bank borrowings of US$200mil to partly fund the purchase, Genting Malaysia’s consolidated gearing ratio of 8.3% as at Dec 31 will increase to 12.4%, on a proforma basis.
“Resorts World Miami will be a landmark mixed-use development for Miami, Florida and the United States,” Genting Malaysia chairman and chief executive Tan Sri Lim Kok Thay said.
“Downtown Miami has experienced dramatic residential and commercial growth in recent years, and we believe the addition of a large-scale mixed-use and entertainment complex will be a welcomed addition, further elevating the area’s status as a global destination.”
Genting Malaysia said it was seeking to expand internationally in the leisure, hospitality and entertainment industry. The envisioned Resorts World Miami represents Genting Malaysia’s second venture in the US, after Resorts World New York at the historic Aqueduct Racetrack in the City of New York.
The seller of the land is the third-largest newspaper publisher in the US and is listed on the New York Stock Exchange. It is also the parent company of Miami Herald.
An analyst said based on the little information provided from the announcement said he was netural on the deal.
“It seems cheap, considering that they are buying at a property down cycle in the US and that this is prime property.”
However, he added, that it is not clear if Genting would be issued with a gaming licence. “If a casino is in the plans, then the move is a good one, considering that Miami is a top tourist site. But let’s see the details.”
By The Star
Thursday, April 7, 2011
US housing system a bad model: IMF
The International Monetary Fund on Wednesday singled out the United States as a poster child for bad housing policies, calling on Washington to reform for the sake of global financial stability.
"The US housing finance system, which has several unique features, needs to be reformed," said the IMF in its twice-yearly Global Financial Stability Report.
Four years after the US subprime mortgage crisis unleashed a global meltdown, the IMF offered up the United States as an example of what not to do.
Analyzing mortgage finance systems in 33 countries, the IMF painted a dysfunctional US model.
The United States generously subsidizes homebuying, but poorly regulates lenders, maintains financing mechanisms that are opaque and has a housing market today that is difficult for the poor to access.
According to an index developed by Fund economists, the United States is among the countries where governments intervene the most, topped only by Brazil, Singapore, India and Indonesia.
The US housing sector still has not recovered from the collapse of a price bubble in 2006 which triggered the subprime crisis as homebuyers with patchy credit began to default on payments.
For the 187-nation IMF, the fundamental problems in the US remain.
"The US housing finance system is unusual in many respects. An overhaul of important aspects of this system is needed," said the IMF, citing a fragmented regulatory structure and generous tax breaks.
"Such reforms would have a significant positive effect on the US financial system and would help bolster global financial stability," it said.
The IMF recommended three broad areas of "best practices": Enhanced regulation of mortgage lending, careful use of government participation in the housing sector and better transparency in the market for housing related securities.
The IMF offered a lukewarm assessment of the US government's housing finance reform plan proposed in February.
"While an overhaul of the housing finance system will take years to complete, US authorities need to step up their efforts now to develop and implement an appropriate action plan.
"The Washington-based institution supported the US government's plan for a progressive unwinding of the country's two mortgage finance giants, Fannie Mae and Freddie Mac.
The federal government took over the two collapsing companies in September 2008 in a bid to stabilize the financial system and agreed to pump money into them to keep them afloat.The IMF was clear in its criticism of US homeowner tax breaks, which enjoy broad support across the political spectrum.
"Apart from financial stability concerns, the US mortgage interest rate deduction is also costly -- at $104.5 billion in fiscal year 2011 it is the second-largest tax expenditure," it said, noting it had not shown a "discernible" impact on the home ownership rate.
Jan Brockmeijer, the IMF's deputy director of the monetary and capital markets department, underlined the reluctance of elected officials to address these questions.
"These are big issues, they have been recognized but they have not been dealt with. And it's not surprising that they have not been dealt with adequately, because they're very complex, politically complex in the sense of the housing market," he said at a news conference in Washington.
By The Star
"The US housing finance system, which has several unique features, needs to be reformed," said the IMF in its twice-yearly Global Financial Stability Report.
Four years after the US subprime mortgage crisis unleashed a global meltdown, the IMF offered up the United States as an example of what not to do.
Analyzing mortgage finance systems in 33 countries, the IMF painted a dysfunctional US model.
The United States generously subsidizes homebuying, but poorly regulates lenders, maintains financing mechanisms that are opaque and has a housing market today that is difficult for the poor to access.
According to an index developed by Fund economists, the United States is among the countries where governments intervene the most, topped only by Brazil, Singapore, India and Indonesia.
The US housing sector still has not recovered from the collapse of a price bubble in 2006 which triggered the subprime crisis as homebuyers with patchy credit began to default on payments.
For the 187-nation IMF, the fundamental problems in the US remain.
"The US housing finance system is unusual in many respects. An overhaul of important aspects of this system is needed," said the IMF, citing a fragmented regulatory structure and generous tax breaks.
"Such reforms would have a significant positive effect on the US financial system and would help bolster global financial stability," it said.
The IMF recommended three broad areas of "best practices": Enhanced regulation of mortgage lending, careful use of government participation in the housing sector and better transparency in the market for housing related securities.
The IMF offered a lukewarm assessment of the US government's housing finance reform plan proposed in February.
"While an overhaul of the housing finance system will take years to complete, US authorities need to step up their efforts now to develop and implement an appropriate action plan.
"The Washington-based institution supported the US government's plan for a progressive unwinding of the country's two mortgage finance giants, Fannie Mae and Freddie Mac.
The federal government took over the two collapsing companies in September 2008 in a bid to stabilize the financial system and agreed to pump money into them to keep them afloat.The IMF was clear in its criticism of US homeowner tax breaks, which enjoy broad support across the political spectrum.
"Apart from financial stability concerns, the US mortgage interest rate deduction is also costly -- at $104.5 billion in fiscal year 2011 it is the second-largest tax expenditure," it said, noting it had not shown a "discernible" impact on the home ownership rate.
Jan Brockmeijer, the IMF's deputy director of the monetary and capital markets department, underlined the reluctance of elected officials to address these questions.
"These are big issues, they have been recognized but they have not been dealt with. And it's not surprising that they have not been dealt with adequately, because they're very complex, politically complex in the sense of the housing market," he said at a news conference in Washington.
By The Star
Saturday, April 2, 2011
Property bubbles and bank non-performing loans
Real estate assets account for 25.6% of total assets, and that has lost US$2.4 trillion or 26% from its peak in 2007. — EPA
How worrisome are real estate bubbles for the banking system?
Based upon the recent subprime and then global financial crisis, very worrisome indeed. The reason why real estate is so important to our whole economic life is because we take it for granted. For households, our house is likely to be the largest single investment for most families.
For companies, the real estate and fixed assets are often, other than inventory, the most important asset, especially as collateral for loans from banks. For banks, the largest single asset held for collateral against bank credit is real estate. For local governments, real estate sales and property taxes comprise the most important source of revenue.
Hence, most people equate buoyant house prices as an indication of prosperity, and most property developers would like to convince governments that they should never let property prices deflate.
The surprising thing about real estate value is how often economists ignore balance sheet values until it is often too late. The real estate value is 225% of US GDP. It took only a 20% drop in real estate prices to wipe nearly 45% of GDP, precipitating the deepest crisis in US recent history. It was only after the US regulators finally decided to look closely at the credit of the US banking system that it was discovered that as much as half of total credit are real-estate related (particularly through mortgages or mortgage-backed securities).
On March 10, 2011, the 2010 Fourth Quarter US Flow of Funds data was published by the Federal Reserve Board. Real estate assets comprise US$18.2 trillion or 25.7% of total household assets. Real estate values lost US$6 trillion in the two years 2006-2007, US$1.2 trillion in 2009, and after a modest recovery in the first half of 2010, for the full year, lost another US$0.6 trillion in 2010. The result is that net worth of households may have recovered a bit from higher financial assets due to the zero interest rate policies, but is still US$7.9 trillion down from its peak year of 2007.
The same pattern is seen in the US non-financial corporate sector. Real estate assets account for 25.6% of total assets, and that has lost US$2.4 trillion or 26% from its peak in 2007. Commercial real estate seems to have stabilised somewhat in 2010, but the numbers do not completely show up in the non-performing loans of the banks.
Based upon the testimony of the Federal Deposit Insurance Corp to Congress, there is a clear association between the number of failed or failing banks with their exposure to real estate loans, particularly commercial real estate acquisition, development and construction loans (ADC). In the three years 2005-2008, ADC loans increased 75% and the concentration of ADC loans to total capital rose from 26% in 2000 to 50% in third quarter 2007.
Loans disbursed quickly tend to go bad. More than half of the subprime loans originated in 2006 and 2007 had defaulted by November 2010. Foreclosure of mortgages reached 2.8 million in 2009 and exceeded 2 million in 2010.
At the end of 2009, non-current residential construction loans held by FDIC insured banks rose from 1.45% of such loans to 25.7%. As a result of bad loans to the real estate sector, 322 FDIC institutions failed since 2008 (out of roughly 7770 such institutions) and another 860 banks are designated as “problem institutions”.
Many of these troubled institutions failed because of high concentration in ADC loans in commercial or residential real estate.
The S&P/Case-Shiller Housing Index showed a 2% decline in the year to September 2010, whereas commercial real estate prices showed around 3% increase. Nevertheless, rents for commercial real estate are still falling.
Thus, despite the quantitative easing, which seems to have helped in causing equity prices to go up, real estate prices have not recovered that much, suggesting that if real estate prices still go down, the banking system would still be vulnerable.
Why is real estate so important in the banking sector books? The main reason is that real estate is the primary collateral and base asset against leverage. What securitisation and financial derivatives have done is to leverage these assets considerably and, therefore, when the primary base asset price is falling, the value of the financial derivative assets fall on a multiplied basis, due to the leverage effect.
In a recent speech to Cambridge University, Lord Adair Turner, chairman of the UK Financial Services Authority, argued that neither the Basel III reforms nor the measures against “too big to fail” are sufficient to ensure global financial stability. He argued for higher capital ratios than those set under Basel III and also further regulatory measures against shadow banking.
In particular, he argued that it was the balance between debt and equity contracts in the economy and financial system, as well as the maturity transformation that are the basic risks in the financial system.
He is surely correct that financial instability is driven by human myopia and imperfect rationality as well as poor incentives” and that in order to make the financial system more stable, it will require a multi-faceted and continually evolving regulatory response.
Like Lord Turner, the US Financial Crisis Inquiry Commission is finally convinced that it is human failings that caused the financial crisis. It was the failing in ideology that markets are self-correcting that caused financial regulation to be “market friendly”. However, it is also the low interest rates that gave rise to asset bubbles and central banks cannot continue to deny that they had no role in allowing asset bubbles to form.
As we have now seen from the Japanese experience, real estate booms and busts have a long demographic cycle. In the growing stage for the population, real estate prices can grow, but when the population ages and then declines, real estate prices can deflate, causing massive losses if there was an asset bubble.
You may not be able to stop bubbles completely, but surely there are tools to stop the banks over-lending to that sector. What goes up can come down.
Tan Sri Andrew Sheng is author of the book From Asian to Global Financial Crisis and adjunct professor at the Tsinghua University and University of Malaya.
By The Star
Wednesday, January 26, 2011
US home prices still falling in November
US home prices dropped in November for the fifth month straight after appearing to have bottomed out from mid-2009 to mid-2010, according to the monthly S&P/Case-Shiller index released Tuesday.
The index, which maps prices in 20 key urban areas, fell 0.5 percent from October on a seasonally adjusted basis, after a 1.0 percent fall the previous month.
It was also off 1.6 percent from the year-earlier figure.All but four of the 20 metropolitan areas covered in the index fell.
Prices rose in Washington, San Diego, California; and Charlotte, North Carolina, while in hard-hit Las Vegas they were unchanged.
The five-month fall in the index represents a clear return to bearish sentiment in the market after a slow but steady rise from the May 2009 low through May 2010, according to S&P.
The seasonally adjusted index peaked in April 2006 and has since fallen in all but 13 months.
The November level was just 1.2 percent higher than the 90-month low struck in May 2009.S&P's David Blitzer said the data suggests "that a double-dip could be confirmed before spring."
Certainly (with) eight cities setting new lows, and with the only positive news concentrated in southern California and Washington DC, the data point to weakness in home prices," he said in a statement.
Economists at Barclays Capital Research said the November fall was smaller than expected.
"We expect softness to persist in the near term as home prices continue to face headwinds from the large pipeline of foreclosures entering the market," they said in a statement.
"However, we expect this to be a gradual process with some of the decline offset by increased housing demand."Inna Mufteeva, an economist at Natixis, echoed that view."
In the context of job market sluggish revival and continuous deleveraging of households, real estate remains the area of risk for the current economic recovery," Mufteeva said.
"Indeed, still-numerous foreclosures should keep home prices subdued in the medium term despite some improvement on the real estate market."
By AFP
The index, which maps prices in 20 key urban areas, fell 0.5 percent from October on a seasonally adjusted basis, after a 1.0 percent fall the previous month.
It was also off 1.6 percent from the year-earlier figure.All but four of the 20 metropolitan areas covered in the index fell.
Prices rose in Washington, San Diego, California; and Charlotte, North Carolina, while in hard-hit Las Vegas they were unchanged.
The five-month fall in the index represents a clear return to bearish sentiment in the market after a slow but steady rise from the May 2009 low through May 2010, according to S&P.
The seasonally adjusted index peaked in April 2006 and has since fallen in all but 13 months.
The November level was just 1.2 percent higher than the 90-month low struck in May 2009.S&P's David Blitzer said the data suggests "that a double-dip could be confirmed before spring."
Certainly (with) eight cities setting new lows, and with the only positive news concentrated in southern California and Washington DC, the data point to weakness in home prices," he said in a statement.
Economists at Barclays Capital Research said the November fall was smaller than expected.
"We expect softness to persist in the near term as home prices continue to face headwinds from the large pipeline of foreclosures entering the market," they said in a statement.
"However, we expect this to be a gradual process with some of the decline offset by increased housing demand."Inna Mufteeva, an economist at Natixis, echoed that view."
In the context of job market sluggish revival and continuous deleveraging of households, real estate remains the area of risk for the current economic recovery," Mufteeva said.
"Indeed, still-numerous foreclosures should keep home prices subdued in the medium term despite some improvement on the real estate market."
By AFP
Thursday, August 26, 2010
Housing slump clouds US recovery prospects
WASHINGTON: US home sales are plunging despite rock-bottom mortgage rates as high unemployment prevents people from buying houses and threatens to curtail economy recovery.
Existing-home sales plunged for the third straight month by a whopping 27.2 per cent in July to levels unseen in more than a decade, an industry group said on Tuesday.
Sales of single-family homes, townhomes and condominiums dropped to 3.83 million units from 5.26 million units in June, said the National Association of Realtors.
The slide was more than double the 12.1 per cent expected by most economists, with sales at the lowest level since 1999.
"The disappointing US home sales data has investors worried that the global recovery is unraveling," said Chris Lafakis, an economist at Moody's Economy.com.
Single-family home sales - accounting for the bulk of transactions - were at the lowest in 15 years, the association said, providing the latest statistics on the housing sector, which was at the epicentre of the financial crisis that plunged the nation into recession in December 2007.
If sales do not improve, rising inventories - there are nearly four million unsold previously owned homes in the market - could eat further into prices.
"The first worry is that we are not seeing much response in demand to the historic drop in mortgage rates," said Societe Generale analyst Aneta Markowska.
Thirty-year mortgage rates have fallen to a record low 4.42 per cent but mortgage applications for new purchases as of early August were sitting very close to cyclical lows.
"Housing and employment continue to be major problems for the US recovery," said analyst Andrew Busch of BMO Capital Markets.
By AFP
Existing-home sales plunged for the third straight month by a whopping 27.2 per cent in July to levels unseen in more than a decade, an industry group said on Tuesday.
Sales of single-family homes, townhomes and condominiums dropped to 3.83 million units from 5.26 million units in June, said the National Association of Realtors.
The slide was more than double the 12.1 per cent expected by most economists, with sales at the lowest level since 1999.
"The disappointing US home sales data has investors worried that the global recovery is unraveling," said Chris Lafakis, an economist at Moody's Economy.com.
Single-family home sales - accounting for the bulk of transactions - were at the lowest in 15 years, the association said, providing the latest statistics on the housing sector, which was at the epicentre of the financial crisis that plunged the nation into recession in December 2007.
If sales do not improve, rising inventories - there are nearly four million unsold previously owned homes in the market - could eat further into prices.
"The first worry is that we are not seeing much response in demand to the historic drop in mortgage rates," said Societe Generale analyst Aneta Markowska.
Thirty-year mortgage rates have fallen to a record low 4.42 per cent but mortgage applications for new purchases as of early August were sitting very close to cyclical lows.
"Housing and employment continue to be major problems for the US recovery," said analyst Andrew Busch of BMO Capital Markets.
By AFP
US existing-home sales at 15-year lows
A ‘for sale’ sign sits in front of a home in Alexandria, Virginia. Existing US home sales plunged a steeper than expected 27.2% in July. — AFP
WASHINGTON: Sales of previously owned US homes took a record plunge in July to their slowest pace in 15 years, underlining the housing market’s struggle to find its footing without government aid.
Tuesday’s report from the National Association of Realtors (NAR), which was much worse than market expectations, was the latest data that indicated economic activity continued to slacken into the third quarter.
The NAR said overall sales were at their lowest since it started the existing-home sales data series in 1999, with single-family home sales that account for most business at their lowest since 1995. Association chief economist Lawrence Yun characterised the overall sales as the softest since 1995.
The dismal sales report came as Chicago Federal Reserve president Charles Evans warned that the risk of a double-dip recession was higher than six months ago. He doubted that output will actually shrink but said recovery will be modest.
“It is becoming abundantly clear that the housing market is undermining the already faltering wider economic recovery,” said Paul Dales, a US economist at Capital Economics in Toronto. “With the increasingly inevitable double-dip in prices yet to come, things could yet get a lot worse.”
Existing-home sales dropped a record 27.2% from June to an annual rate of 3.83 million units. June sales were revised down to a 5.26-million-unit pace from a previously reported 5.37 million.
Financial markets had expected sales to fall only 12% to a 4.70-million-unit rate last month. The end of a popular home-buyer tax credit, which had supported sales and home-building activity, continues to haunt the troubled housing market.
Major US stock indices tumbled more than 1.3% as investors dumped riskier assets in favour of safe haven government debt. Prices for US Treasuries rallied, with the yield on the two-year note tumbling to a record low.
The cost of insuring US homebuilders’ debt rose. The US dollar fell to a 15-year low against the yen and also dropped versus the euro.
The housing market, which helped to push the economy into its worst recession since the Great Depression, has been mired in weakness following the end of the tax credit in April.
The incentive pulled forward sales and building activity, leaving a huge void that analysts said was also being exacerbated by a 9.5% unemployment rate.
The sour economy, especially the stubbornly high unemployment rate, is hurting President Barack Obama’s popularity and putting in jeopardy the Democratic Party’s control of Congress in November’s mid-term elections.
Almost three-quarters of Americans are very concerned about unemployment and more people now disapprove of Obama than approve of him, according to the latest Reuters/Ipsos poll.
The government is expected to revise down tomorrow growth in second-quarter gross domestic product to an annual pace of 1.4% from 2.4%, according to a Reuters survey.
Dallas Federal Reserve Bank president Richard Fisher told Fox Business Network that the US central bank decided to reinvest proceeds from its mortgage-related assets to avoid unintentionally clamping down on monetary policy when the recovery was showing signs of weakening.
The Fed, which has kept overnight interest rates near zero, has repeatedly said it stood ready to take further steps should the economic picture deteriorate. It announced this month that it would use proceeds from mortgage-related assets to buy longer term Treasury debt.
Some analysts said the drop in existing-home sales had been exaggerated by the end of the housing tax credit.
“We are seeing a bit of an over-correction from the end of the tax credit; we will probably see another month or two of this before we start the upward trend,” said Eric Fox, vice-president for statistical and economic modelling at Veros in Santa Ana, California.
“Later in the fall, we will probably be back to a more stable level. But at the same time, unemployment has remained stubbornly high and a lot of people are sitting on the sidelines until they see that there is a sustained recovery before they pull the trigger and buy a home,” he said. — Reuters
With home sales tumbling, the inventory of previously owned homes for sale rose 2.5% to 3.98 million units from June, representing a supply of 12.5 months – the highest since at least 1999 and up from June’s 8.9 months.
The jump in the supply of homes was almost double the six to seven months’ supply, given that has been historically consistent with stable prices.
Last month’s foreclosed properties accounted for 22% of sales while short-sales made up 10%. First-time buyers accounted for 38% of transactions, the lowest in 12 months.
The national median home price rose 0.7% from July last year to US$182,600.
By Reuters
Thursday, August 19, 2010
US wants new housing finance framework
WASHINGTON: The US government’s role in housing finance should undergo “fundamental change,” but it should still provide some guarantees in the mortgage market, said Treasury Secretary Timothy Geithner.
Setting the stage for what promises to be a long debate about fixing Fannie Mae and Freddie Mac, Geithner convened a conference of housing industry leaders and heard a range of ideas about reforms for the US$10.7 trillion mortgage market.
Almost two years after the government seized Fannie and Freddie to save them from collapse, there is a widely held view that reform is needed, but the agreement ends there.
“It’s safe to say there’s no clear consensus yet on how best to design a new system. But this administration will side with those who want fundamental change,” Geithner said.
Timothy Geithner … ‘This administration will side with those who want fundamental change.’ — AFP
Fannie and Freddie – recipients of US$150bil in taxpayer bailout money since being taken over by the Bush administration in 2008 – pose a vexing policy challenge to the Obama administration as November elections approach.
The firms’ pursuit of growth and profits helped precipitate the financial crisis of 2007 to 2009, but their vast resources also helped minimise its impact.
And since their takeover, the two have only become more prominent in the market.
Together, the two companies and the Federal Housing Administration now back 90% of new US home mortgages.
“We will not support returning Fannie and Freddie to the role they played before conservatorship, where they took market share from private competitors while enjoying the perception of government support,” Geithner said. “We will not support a return to the system where private gains are subsidised by taxpayer losses.”
But Geithner backed some government guarantee for mortgages and US support for housing more broadly, setting early limits on the reform discussion.
“There is a strong case to be made for a carefully designed guarantee,” he said. “The challenge is to make sure that any government guarantee is priced to cover the risk of losses, and structured to minimise taxpayer exposure.”
As the administration worked to draft a housing overhaul by January, the key question, Geithner said, would not be whether government has a role to play in supporting the mortgage market and the “American dream” of home ownership.
In Geithner’s view, government has a key role since private markets, as shown in the 2007 to 2009 credit crunch, “left to their own devices, find it hard to resolve financial crises.”
The conference, including some of the mortgage sector’s top lenders and investors, was billed as a “listening session” to help the administration develop its overhaul plan. It comes amid signs of persistent weakness in housing markets – an issue that could weigh on voters headed to the polls in November, especially in Florida and California.
Housing starts nationwide rose in July from a downwardly revised level in June, but the pace of new construction was much weaker than forecast and permits for future building fell to their lowest level in more than a year, according to a US Commerce Department report on Tuesday.
A Deutsche Bank study looked at mortgage delinquency rates in the country’s 435 congressional districts, all of which are up for grabs in November.
More than 15% of mortgages were delinquent by 90 days or more in 60 of those districts, with Florida and California accounting for 44 of them.
The average US congressional district had more than 9% of its mortgages delinquent by 90 days or more – over two and a half times the delinquency rate on Election Day in 2008.
Bill Gross, co-founder of Pacific Investment Management Co, which operates the world’s biggest bond fund, told the conference the administration should move quickly on a new refinancing programme for current mortgages backed by Fannie and Freddie. — Reuters
The US economy was approaching a “cul-de-sac” unless a positive fiscal stimulus came soon, he said.
By Reuters
Setting the stage for what promises to be a long debate about fixing Fannie Mae and Freddie Mac, Geithner convened a conference of housing industry leaders and heard a range of ideas about reforms for the US$10.7 trillion mortgage market.
Almost two years after the government seized Fannie and Freddie to save them from collapse, there is a widely held view that reform is needed, but the agreement ends there.
“It’s safe to say there’s no clear consensus yet on how best to design a new system. But this administration will side with those who want fundamental change,” Geithner said.
Timothy Geithner … ‘This administration will side with those who want fundamental change.’ — AFP
Fannie and Freddie – recipients of US$150bil in taxpayer bailout money since being taken over by the Bush administration in 2008 – pose a vexing policy challenge to the Obama administration as November elections approach.
The firms’ pursuit of growth and profits helped precipitate the financial crisis of 2007 to 2009, but their vast resources also helped minimise its impact.
And since their takeover, the two have only become more prominent in the market.
Together, the two companies and the Federal Housing Administration now back 90% of new US home mortgages.
“We will not support returning Fannie and Freddie to the role they played before conservatorship, where they took market share from private competitors while enjoying the perception of government support,” Geithner said. “We will not support a return to the system where private gains are subsidised by taxpayer losses.”
But Geithner backed some government guarantee for mortgages and US support for housing more broadly, setting early limits on the reform discussion.
“There is a strong case to be made for a carefully designed guarantee,” he said. “The challenge is to make sure that any government guarantee is priced to cover the risk of losses, and structured to minimise taxpayer exposure.”
As the administration worked to draft a housing overhaul by January, the key question, Geithner said, would not be whether government has a role to play in supporting the mortgage market and the “American dream” of home ownership.
In Geithner’s view, government has a key role since private markets, as shown in the 2007 to 2009 credit crunch, “left to their own devices, find it hard to resolve financial crises.”
The conference, including some of the mortgage sector’s top lenders and investors, was billed as a “listening session” to help the administration develop its overhaul plan. It comes amid signs of persistent weakness in housing markets – an issue that could weigh on voters headed to the polls in November, especially in Florida and California.
Housing starts nationwide rose in July from a downwardly revised level in June, but the pace of new construction was much weaker than forecast and permits for future building fell to their lowest level in more than a year, according to a US Commerce Department report on Tuesday.
A Deutsche Bank study looked at mortgage delinquency rates in the country’s 435 congressional districts, all of which are up for grabs in November.
More than 15% of mortgages were delinquent by 90 days or more in 60 of those districts, with Florida and California accounting for 44 of them.
The average US congressional district had more than 9% of its mortgages delinquent by 90 days or more – over two and a half times the delinquency rate on Election Day in 2008.
Bill Gross, co-founder of Pacific Investment Management Co, which operates the world’s biggest bond fund, told the conference the administration should move quickly on a new refinancing programme for current mortgages backed by Fannie and Freddie. — Reuters
The US economy was approaching a “cul-de-sac” unless a positive fiscal stimulus came soon, he said.
By Reuters
Subscribe to:
Posts (Atom)
Posts
