Posted by Jonathan J. Miller -Thursday, May 5, 2011, 9:11 PM
[click to open site]
The San Francisco Fed has a consumer friendly web site: The Economy: Crisis & Response. It’s quite good. Take some time and explore.
Of the many charts they offer, the chart above is my favorite and something we always seem to forget. Housing, like the economy is cyclical. Prices go up and prices go down. Doh!
Vicious Versus Virtuous recovery cycles…think….VVV
VVV revinded me of that big hit by The Hives about a decade ago on their album Veni Vidi Vicious
The hit song was appropriately named: “Hate To Say I Told You So.”
Posted by Jonathan J. Miller -Wednesday, October 27, 2010, 1:15 PM
Source: New York Federal Reserve [click to expand]
At least once a week I am asked about the breakout of the housing stock in Manhattan. My latest research/estimate has been 75% rental/25% owned for the borough and of the 25% owned, co-ops out number condos 3:1 or 75% to 25%. If you throw in townhouses, thats about 1% out of the 75%/25% co-op/condo relationship.
Ok, so apparently I wasn’t making this up. Here’s the New York Fed’s housing profile based on Census and the Housing and Vacancy survey. Phew! A great reference point for not only Manhattan, but all 5 NYC boroughs.
Posted by Jonathan J. Miller -Monday, October 25, 2010, 9:35 AM
[click to visit NY Fed press briefing]
Here is last week’s press conference on regional economic conditions with a focus on housing by the New York Fed. I highly encourage everyone to listen to the audio, especially the part 1 and part 4 downloads.
Here are some rough notes:
- NYC Housing is less volatile than rest of the nation.
- NYC prices rose later than the nation, peaked in 2008 (Manhattan)
- NY/NJ/CT Region – housing less important to economy as a mature housing market. Less dependent.
- Boom and bust generally bypassed upstate New York
- NYC housing market differences – 2/3 rental housing, dominated by multi-family, co-ops, low loan to value, high prices
- NYC construction slow to adapt to changes in demand, rapid increase in prices
- NYC housing expansion began in 1996 – unusually strong
- NYC 2007 market turned down later and prices stabilized
- Manhattan rents fell in 2007-2009, moderated in 2010.
- NYC saw less penetration of non-prime loans
- Employment in NYC has improved faster than the rest of the country but still “painfully high”
- Pockets of distress in outer boroughs – higher than national average
- NYC loan loan to value rates result in fewer “underwater” mortgages. Less future duress.
- Renting is cheaper than owning
- new units still coming on line
- slower job growth of high paying jobs
- prices rose faster than rents during boom (more price declines possible)
Regional Economic Press Briefing on Housing: Current Trends in the Nation and the District [NY Fed]
Powerpoint Presentation [NY Fed]
Posted by Jonathan J. Miller -Sunday, October 10, 2010, 6:39 PM
“QE2 may set a course towards Titanic trouble”
My friend and colleague Dan Alpert at Westwood Capital pens one of the best characterizations of the current economy chock full of salient sound bites in his most recent paper: The Bailout Trade Meets the Bernanke Put
This is the Bailout Trade – market behavior indicating that the economic environment is so clouded and
compromised that anticipation of more quantitative easing and cheaper money is offsetting the existence of
fundamental obstacles to recovery in the form of weak final demand, an excess of global capacity of labor and
productive resources, and a barely whittled-down overhang of bubble-era indebtedness in all sectors of the developed world.
And it gets better (the clarity of the paper, not the global economy)…
Near-permanent easy money policy, together with prior rounds of quantitative easing, in the developed
world have created a liquidity bubble, suspended in a solution of moral hazard…
as it relates to housing:
exogenous, and temporary, support of the value of fixed assets (homes, commercial real estate, etc.),
resulting in the overall retardation of the process of de-levering and the taking of resulting capital
losses necessary to clear out the lingering effects of the bubble years.
The Bailout Trade Meets the Bernanke Put [Westwood Capital]
Posted by Jonathan J. Miller -Tuesday, September 7, 2010, 10:15 PM
I like to check in on this NY Fed chart summary: U.S. Economy and Financial Markets – lots of national data located in one place.
Posted by Jonathan J. Miller -Wednesday, August 18, 2010, 11:48 AM
[click to expand]
For the Senior Loan Officer Opinion Survey, the Fed surveys approximately sixty large domestic banks and twenty-four U.S. branches and agencies of foreign banks on a quarterly basis generally covering changes in the bank lending practices and demand for loans.
It is a critical component of understanding the future of the housing market since bank underwriting now defines the types of properties and individuals being lent to, versus the prior free-for-all.
The July survey showed that for the first time, lending standards for prime loans actually eased – the first time in over 4 years. Alt-A (non-traditional) did not. The chart shows how the rate of tightening peaked around the Lehman bankruptcy circa September 2008.
Regarding residential real estate lending, a few large banks reported having eased standards on prime mortgage loans, while a modest net fraction of the remaining banks reported having tightened standards on such loans.
This is a critical first step in a long road toward an eventual housing recovery. Although one month does not make a trend, the pendulum has to make its way back to the middle position – a location it hasn’t seen in a long time.
There has been concern that the supposed increase in regulations our post-financial reform will prevent lending from easing in a meaningful amount to get the economy moving again.
However, the Financial Stability Board and Basel Committee for Banking Supervision [subscription] said in a joint statement Wednesday that the global economy won’t suffer if banks are forced to adopt tighter standards on capital and liquidity. I’m not sure how tighter regs don’t impair economic growth assuming “reckless” isn’t part of the equation, but perhaps it would reduce volatility we saw in the housing market.
The statement summarizes an interim report on the long-term effects on the economy of forcing banks to hold more capital and more liquid assets, relative to their overall balance sheet. The findings rebut banking sector complaints that such requirements would crimp lending to the real economy.
The July 2010 Senior Loan Officer Opinion Survey on Bank Lending Practices [Federal Reserve]
Fed Senior Loan Officer Opinion Survey Chart [Miller Samuel]
Posted by Jonathan Miller -Thursday, January 7, 2010, 11:47 PM
David Leonhardt had a fantastic front pager in the New York Times yesterday that was such a compelling read, I re-read it to try and absorb anything I missed the first time. The article Fed Missed This Bubble. Will It See a New One? looked at the case made by the Fed to enhance its regulatory power.
David asks the question for the Fed:
If only weâ€™d had more power, we could have kept the financial crisis from getting so bad.
But power and authority had nothing to do with whether they could see a bubble.
In 2004, Alan Greenspan, then the chairman, said the rise in home values was â€œnot enough in our judgment to raise major concerns.â€ In 2005, Mr. Bernanke â€” then a Bush administration official â€” said a housing bubble was â€œa pretty unlikely possibility.â€ As late as May 2007, he said that Fed officials â€œdo not expect significant spillovers from the subprime market to the rest of the economy.â€
I maintain that because of human nature, mob mentality, or whatever you want to call it, all regulators drank the kool-aid just like consumers, rating agencies, lenders, investors and anyone remotely connected with housing. Regulators are not imune from being human.
Once the crisis was upon us, the Fed and the regulatory alphabet soup woke up and began drinking a lot of coffee.
Which is why it is likely to happen again.
Whatâ€™s missing from the debate over financial re-regulation is a serious discussion of how to reduce the odds that the Fed â€” however much authority it has â€” will listen to the echo chamber when the next bubble comes along.
I think this whole thing started with the repeal of Glass-Steagal where the boundaries between commercial and investment banks which were set during the Great Depression, were removed. Commercial banks had cheap capital (deposits) and could compete in the Investment Banking world. But Investment banks could not act like commercial banks. Their access to capital was more expense motivating them to get their allowable leverage ratios raised significantly. One blip and they go under.
Posted by Jonathan Miller -Wednesday, November 18, 2009, 11:06 AM
A quick shout out to Sam Chandan at Real Estate Econometrics for his invite to me to speak to his MBA real estate class at Wharton last Monday. A lot of fun and no tomatoes thrown. Added bonus, they have Au Bon Pain as snack shop.
[click to expand]
The widely held belief that houses were used as ATM’s during the credit boom is a valid assumption given the massive withdrawal of home equity. Of course that parallels mortgage lending and as a result, housing activity boomed over the same period.
With the post-Lehman credit crunch, millions of homeowners can’t refinance their mortgages or obtain a mortgage for a purchase. The contraction in credit has choked off the high pace of sales activity our economy has grown accustomed too. Yet sales and prices appear to be leveling off after a steady decline.
Q: Who’s buying these homes?
A: People that can actually afford and qualify for a mortgage.
According to a recent public policy discussion paper from the Federal Reserve Bank of Boston by Daniel Cooper Impending U.S. Spending Bust? The Role of Housing Wealth as Borrowing Collateral
house values affect consumption by serving as collateral for households to borrow against to smooth their spending….house values, however, have little effect on the expenditures of households who do not need to borrow to finance their consumption.
In other words, the segment of the consumer market that needs to borrow to spend, aren’t spending now. That doesn’t mean “no one is spending” – this is the cause for significant confusion in interpreting the health of our current economy.
For those who borrow to spend
The results show that the consumption of households who need to borrow against their home equity increases by roughly 11 cents per $1.00 increase in their housing wealth.
During the housing boom, the excess demand was simply fueled by those who had to excessively borrow to spend. It doesn’t mean that everyone had the same thinking.
Back to basics.
Posted by Jonathan Miller -Wednesday, November 11, 2009, 9:31 PM
I’m thinking maybe credit isn’t going to lead us out of the recession. Banks are getting much enjoyment out of the wide spreads for now – gearing up for future carnage in commercial, auto loans, credit cards and industrial loans. This is apparent in the The October 2009 Senior Loan Officer Opinion Survey on Bank Lending Practices that was released on Friday. Its kind of the Beige Book equivalent of anecdotal credit practices.
The report basically showed that fewer banks are tightening mortgage credit policy and mortgage demand is up. Of course this doesn’t mean much yet since bank lending policy can’t really can’t get much tighter.
In the October survey, domestic banks indicated that they continued to tighten standards and terms over the past three months on all major types of loans to businesses and households. However, the net percentages of banks that tightened standards and terms for most loan categories continued to decline from the peaks reached late last year.2 The exceptions were prime residential mortgages and revolving home equity lines of credit, for which there were only small changes in the net fractions of banks that had tightened standards.
About 25 percent of banks, on net, reported in the latest survey that they had tightened standards on prime residential real estate loans over the past three months. This figure is slightly higher than in the July survey but is still significantly below the peak of about 75 percent that was reported in July 2008. For the third consecutive quarter, banks reported that demand for prime residential real estate loans strengthened on net. About 30 percent of banks reported tightening standards on nontraditional mortgage loans, which represents a decline of about 15 percentage points in net tightening from the July survey. Only about 5 percent of domestic respondents, on net, reported weaker demand for nontraditional mortgages, the smallest net fraction reporting so since the survey began to include questions on the demand for nontraditional mortgages in April 2007.
Posted by Jonathan J. Miller -Monday, October 12, 2009, 6:04 PM
In this podcast, I have a conversation with Justin Fox, economics and business columnist for Time Magazine and author of the book The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street.
As publisher Harper Collins says about the book:
â€œChronicling the rise and fall of the efficient market theory and the century-long making of the modern financial industry, Justin Fox’s The Myth of the Rational Market is as much an intellectual whodunit as a cultural history of the perils and possibilities of risk.â€
Here’s his interview on The Daily Show with Jon Stewart.
I first became acquainted with Justin by stumbling on his blog The Curious Capitalist which takes complex economic issues and translates them into everyday speak.
[Click to expand]
[Audio Quality Alert] What began as a 30-minute interview was cut to 18 minutes because of a random recurring podcast issue I have been trying to resolve: audio distortion. About 18 minutes into the interview I had to cut it short. My sincere apologies to Justin. But I got an idea and I set out this past weekend to solve the mystery. I am happy to report: problem solved going forward â€“ I explain how at the end of the podcast – so much for myth of the rational podcast.
Check out the podcast
The Housing Helix Podcast Interview List
You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.
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