Tag: Housing Affordability

Homeowners Staying Put and a Lack of Building Permits Have Created Supply Constrained Markets

WSJ – People Are Staying in Their Homes Longer – a Big Reason for Slower Sales – Laura Kusisto 11/3/19

U.S. homeowners are staying in their residences much longer than before, keeping a glut of housing inventory off the market, which helps explain why home sales have been sputtering.

Homeowners nationwide are remaining in their homes typically 13 years, five years longer than they did in 2010, according to a new analysis by real-estate brokerage Redfin. When owners don’t trade up to a larger home for a growing family or downsize when children leave, it plugs up the market for buyers coming behind them.

More homeowners staying put has helped cause housing inventory to dwindle to its lowest level in decades, which has also helped push up prices on homes for sale. Adjusted for population, the inventory of homes for sale is now near the lowest level in 37 years of record-keeping, according to housing-data firm CoreLogic Inc.

Fewer homes for sale is a big reason why even ultralow mortgage rates, record levels of home equity and a strong job market haven’t jump-started the sluggish housing market.

In the San Francisco metropolitan area, a typical homeowner stays 14 years, up from less than 10 years in 2010. Inventory in the same period has plunged more than 46%.

Meanwhile, the Seattle metro has seen a huge influx of new jobs, and housing supply hasn’t kept pace. Homeowners there are staying more than three years longer than they did in 2010. The inventory of homes for sale in Seattle has declined more than 50% over the last nine years, while home prices have risen more than 80%, according to Redfin.

But this isn’t just a problem in pricey coastal markets. Homeowners are staying longer in every one of the 55 metros that Redfin studied. Cities where it was once relatively easy to buy a home are seeing owners staying much longer, creating a serious inventory crunch.

Around Salt Lake City, owners now typically remain in their homes for more than 23 years, or nearly nine years longer than they did in 2010, according to Redfin. The shortage of homes has helped drive the median home price up nearly 75% in the same period to around $340,000.

Bloomberg – How California Became America’s Housing Market Nightmare – Noah Buhayar and Christopher Cannon 11/6/19

Some charts from the article that help paint the picture.

Bottom line, too little housing. You’ll note that HI is at the top of the list for housing prices and at or near what appears to be the bottom of the list of permits per capita.

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It’s tough to buy a home, even if you make good money

WSJ – So You Make $100,000? It Still Might Not Be Enough to Buy a Home. – Ryan Dezember, Laura Kusisto, and Shane Shifflett 10/15/19

In 2019, about 19% of U.S. households with six-figure incomes rented their homes, up from about 12% in 2006, according to a Wall Street Journal analysis of Census Bureau data that adjusted the incomes for inflation. The increase equates to about 3.4 million new renters who would have likely been homeowners a generation ago.

It isn’t unusual for high-earners to rent in pricey coastal cities like New York and San Francisco, where sky-high real-estate prices have long limited homeownership. Yet these markets account for less than 20% of the new six-figure renters, according to the Journal’s analysis.

To accommodate well-off renters, developers have raced to erect luxury apartment buildings around city centers. Investors, meanwhile, have bought hundreds of thousands of suburban houses to turn into rentals and are increasingly building single-family homes specifically aimed at well-heeled tenants.

The average tenant of the country’s two largest single-family landlords, Invitation Homes Inc. and American Homes 4 Rent, now earns $100,000 a year, the companies say. These companies own some 133,000 houses between them in attractive neighborhoods with good school districts around growing cities, like Houston, Denver and Nashville, Tenn.

In each of those cities as well as in Seattle, Cincinnati and Ann Arbor, Mich., the number of six-figure renters doubled or better between 2006 and 2017, making them the fastest-growing segment of renters in these markets, according to the Journal’s analysis.

The big home-rental companies are betting that high earners will continue renting. Bankrolled by major property investors like Blackstone Group Inc., Starwood Capital Group and Colony Capital Inc., these companies snapped up foreclosed houses with the expectation of renting them to educated workers who could afford to pay a lot every month but perhaps not buy.

High earners also tend to stay put and are willing to absorb regular rent increases if it means not having to move their children to new schools. That translates to lower turnover and maintenance costs for the landlords. “These tenants are treating our houses as if they are their homes,” American Homes CEO David Singelyn said at a real-estate investment conference this summer in New York.

Invitation and American Homes have reported record occupancy and rent growth as well as ever-growing retention as their average renters’ income has risen into six-figure territory.

Those who do want to buy a home face the additional hurdle of high prices that have surged beyond the reach of even relatively high earners in cities with strong jobs growth. Prices in 75 of the country’s 100 largest metro areas have surpassed their precrash highs, not adjusting for inflation, according to mortgage data and analysis firm HSH. Many of those cities, such as Salt Lake City and Raleigh, N.C., also have some of the fastest growth in high-paying jobs. The sharpest recovery, according to HSH, has been in Denver, where home prices have doubled since 2012 amid an influx of California tech workers and New York finance firms. Prices are nearly twice their precrash high.

It takes an annual household income of about $90,000 to afford Denver’s median-priced house, which costs around $471,000, according to HSH. But that is assuming buyers have 20%, or about $94,000, for a down payment.

“The lack of savings for a down payment in this country is grossly underestimated,” said John Pawlowski, a housing analyst at Green Street Advisors, who estimates that the typical renter’s net worth is about $5,500. “Consumer balance sheets are not good.”

Cashless Society…Sounds Great So Long as the Cashless Infrastructure is Running | US Asset Boom Has Not Been as Kind to All

WSJ – In Zimbabwe, Promise of Mobile Money Fades When the Power Goes Out – Bernard Mpofu and Gabriele Steinhauser 9/1/19

More than most other places in the world, this southern African nation with a long history of monetary dysfunction has staked its financial system on mobile money, which allows funds to change hands through the touch of a few buttons on an old-school cellphone or through a smartphone app.

But now, amid power cuts lasting for up to 17 hours a day, EcoCash breaks down frequently. The outages are blocking everyday economic activity and exacerbating a financial crisis that has left Zimbabwe’s government bankrupt and some five million people, about a third of its population, in need of food aid.

Eight out of 10 transactions in Zimbabwe—from buying milk to filling up a car or settling a utility bill—are done via cellphones, almost exclusively on EcoCash.

“We are more or less a cashless economy,” said Ashok Chakravarti, an economist based in Harare who believes that the EcoCash outages will hurt Zimbabwe’s gross domestic product, which the International Monetary Fund expects to shrink by 5.2% this year.

A government austerity program and limits on issuing T-bills haven’t stopped the new Zimbabwean dollar from losing value. Inflation spiked to 176% in June. Last month, the finance minister announced Zimbabwe’s statistics agency would stop publishing annual inflation data until February, saying it was distorted by the reintroduction of a local currency.

WSJ – Historic Asset Boom Passes by Half of Families – David Harrison, graphics by Danny Dougherty and Maureen Linke 8/30/19

Population Projections and the US Housing Divergence

WSJ – Daily Shot: Pew Research – World Population Projections in 2100 07/30/19

Bloomberg – America’s Housing Affordability Crisis Spreads to the Heartland – Prashant Gopal, Reade Pickert, and Noah Buhayar 7/29/19

Low mortgage rates and thriving employment should be the recipe for a strong housing market. Instead, they’re deepening America’s affordability crisis.

What began on the coasts, in areas like New York and San Francisco, is now radiating into the nation’s heartland, as well as to cities from Las Vegas to Charleston, South Carolina. Entry-level buyers are scrambling to purchase homes that are in short supply, sending values soaring.

Expectations that the Federal Reserve will reduce interest rates this week will do little to change the sober reality: For many, prices have risen much faster than incomes, pushing homeownership out of reach for a new generation of hopeful buyers. That’s cooling the market, with the 2019 spring season shaping up as the slowest for sales in five years, according to CoreLogic Inc.

“All signs point to a housing market that should be doing really well and it’s not,” said Danielle Hale, chief economist for Realtor.com. “The No. 1 constraint, despite low mortgage rates, is that people can’t find housing that they feel is affordable.”

Recent months have shown a growing divergence between the high and low ends of the U.S. market. Prices in the bottom third jumped about 9% in June from a year earlier, compared with 1.1% growth for the top third, data from Redfin show. Meanwhile, sales for lower-priced homes plunged almost 20% as buyers struggled to find properties in their range, according to Zillow.

There are some signs of a pickup in the market. Contracts to buy previously owned homes rose 2.8% in June from the previous month, exceeding economists’ forecasts, the National Association of Realtors reported Tuesday.

Still, the outlook is particularly bleak for first-time buyers. The number of new homeowners created in the second quarter was the lowest since 2006, and just a third as many as a year earlier, the Census Bureau reported last week. Black homeownership fell to the lowest level since at least 1970.

The housing recovery that began in 2012 has been unequal from the start. About 6 million Americans lost homes in last decade’s crash and needed time to rebuild their credit. Private equity firms such as Blackstone Group Inc. swept in to buy foreclosed properties at deep discounts and rented them back to many of those displaced former homeowners.

Now those people are back in the market, along with the bulging population of millennials eager for their first crack at homeownership. But many of the properties they want have already been picked over. Builders have focused on wealthier buyers willing to pay bigger price tags, and now some areas have too many expensive homes, and not enough where they’re needed.

Affordable homes disappeared first in technology and financial hubs like Silicon Valley and New York, where buyers with big paychecks pushed up prices. Now values are flattening after many would-be homeowners have been forced to the sidelines. In some areas, demand has also been hit by a pullback in foreign buyers and new federal limits on property-tax deductions – as well as fears that a recession may be around the corner.

June 15, 2018

Worthy Insights / Opinion Pieces / Advice

Economist – In investing, as in poker, following rules works best – Buttonwood 5/31

Markets / Economy

Economist – Central banks holdings of domestic government debt 5/31

WSJ – ECB to End Bond-Buying Program in December as Crisis-Era Policies Wind Down – Tom Fairless and Brian Blackstone 6/14

  • “The European Central Bank is closing a chapter on one controversial policy, government bond purchases, while extending the life of another: negative interest rates.”
  • “The central bank Thursday laid out plans to wind down its giant bond-buying program by the end of this year, but said it likely would wait ‘at least through the summer of 2019’ before raising its deposit rate, now at minus 0.4%.”

WSJ – Daily Shot: Deutsche Bank – US Budget Deficit Funding and % Holdings 6/14

Real Estate

WSJ – Daily Shot: Bloomberg – World’s Most Expensive Housing Markets Relative to Salary 6/12

WSJ – Daily Shot: Mary Meeker Internet Trends 2018 – Airbnb vs Hotel ADR 5/31

Wolf Street – Toronoto’s House Price Bubble Not Fun Anymore – Wolf Richter 6/4

Energy

WSJ – Daily Shot: US Total Crude Oil Production 6/14

Finance

FT – US fundraising for ‘blank cheque’ buyout vehicles hits record – Nicole Bullock 6/13

  • “Funds have been raised at a record rate in the US this year for shell companies that offer a ‘blank cheque’ to sponsors to pursue takeovers, providing further evidence of the rehabilitation of a controversial tool that waned in the wake of the financial crisis.”
  • “The so-called special purpose acquisition companies, or spacs, have raised $4.5bn so far in 2018 — the largest amount for this type of fundraising in the period, according to Dealogic, which began recording the deals in 1995. That followed a brisk 2017, the second strongest year on record with nearly $10bn sold.”
  • “The funds are placed in an interest-bearing account until a target is identified — and spac investors can get their money back if they do not approve of the acquisition. They are basically a bet that the sponsors can find a good company at a reasonable price.”
  • “Spacs offer investors, often hedge funds, a cash proxy with the option of the acquisition. Sponsors get a 20% stake in the acquired company, if investors approve it, for a nominal amount of money.”

WSJ – Daily Shot: BlackRock – Four big trends to drive ETF growth 5/31

Cryptocurrency / ICOs

WSJ – Daily Shot: Bianco Research – Cryptocurrency Market Caps as of June 11, 2018 6/14

Environment / Science

FT – Nikkei Asian Review: Thailand falls behind in global battle with plastic waste – George Styllis 6/13

  • “’Beating plastic pollution’ was the theme of World Environment Day on June 5, but Thailand is falling behind Asian and European countries in the fight against plastic waste.”
  • “The issue has been brought into focus after a dead whale was found last month to have swallowed 80 plastic bags.”
  • “The whale, found in Songkhla province, served as a reminder of Thailand’s problem with plastic, and the abject failures of the government and retail industry to bring the nation’s environmental consciousness in line with the rest of the world’s.”
  • “Thailand is the world’s sixth biggest contributor to ocean waste, while China is the largest. Thailand generates 1.03m tons of plastic waste per year, with over 3% of that finding its way into the ocean, Tara Buakamsri, Thailand country director for Greenpeace, told the Nikkei Asian Review.”
  • “Of the country’s total waste, plastic accounts for 12% — higher than China’s at 11%. A survey by the government in 2017 found that, on average, Thais each use eight plastic bags per day, which equates to about 198bn per year.”

China

WSJ – Daily Shot: PIMCO – China’s Contribution to Global Credit Creation 6/12

WSJ – Daily Shot: Trading Economics – Hong Kong Home Ownership Rate 6/12

April 6, 2018

If you were only to read one thing…

Bloomberg Businessweek – How Facebook Helps Shady Advertisers Pollute the Internet – Zeke Faux 3/27

  • Affiliate networks (‘affiliates’) = companies/brokers that design advertisements and pay to place them on social media sites on behalf of merchants.
  • “Granted anonymity, affiliates were happy to detail their tricks. They told me that Facebook had revolutionized scamming. The company built tools with its trove of user data that made it the go-to platform for big brands. Affiliates hijacked them. Facebook’s targeting algorithm is so powerful, they said, they don’t need to identify suckers themselves—Facebook does it automatically.”
  • “The basic process isn’t complicated. For example: A maker of bogus diet pills wants to sell them for $100 a month and doesn’t care how it’s done. The pill vendor approaches a broker, called an affiliate network, and offers to pay a $60 commission per sign-up. The network spreads the word to affiliates, who design ads and pay to place them on Facebook and other places in hopes of earning the commissions. The affiliate takes a risk, paying to run ads without knowing if they’ll work, but if even a small percentage of the people who see them become buyers, the profits can be huge.”
  • “Affiliates once had to guess what kind of person might fall for their unsophisticated cons, targeting ads by age, geography, or interests. Now Facebook does that work for them. The social network tracks who clicks on the ad and who buys the pills, then starts targeting others whom its algorithm thinks are likely to buy. Affiliates describe watching their ad campaigns lose money for a few days as Facebook gathers data through trial and error, then seeing the sales take off exponentially. ‘They go out and find the morons for me,’ I was told by an affiliate who sells deceptively priced skin-care creams with fake endorsements from Chelsea Clinton.”
  • “In a sense, affiliate scammers are much like Cambridge Analytica. Because Facebook is so effective at vacuuming up people and information about them, anyone who lacks scruples and knows how to access the system can begin to wreak havoc or earn money at astonishing scale.”
  • This is not a new game.
  • Affiliates are “…applying tricks on Facebook that had been invented by email spammers, who’d in turn borrowed the tactics of fax spammers in the 1980s and ’90s. New forms of media have always been hijacked by misleading advertising: 19th century American newspapers were funded in part by dishonest patent medicine ads. Within days of Abraham Lincoln’s inauguration, the makers of Bellingham’s Onguent were placing ads claiming the president had used their product to grow his trendy whiskers.”
  • “Fake personal endorsements and news reports are still the most effective tricks. Dr. Oz, the Shark Tank judges, and Fixer Upper co-host Joanna Gaines are among the most popular imprimaturs…”

Perspective

howmuch.net – How Much Income You Need to Afford the Average Home in Every State in 2018 – Raul 4/2

WSJ – Daily Shot: Deutsche Bank – US Households with Zero or Negative Home Wealth 4/5

WSJ – Daily Shot: Deutsche Bank – Road Quality in the US 4/5

Worthy Insights / Opinion Pieces / Advice

A Wealth of Common Sense – Situational Awareness – Ben Carlson 4/5

Bloomberg Businessweek – The Ancient History of Bitcoin – Peter Coy 3/29

  • “Cryptocurrencies may seem brand-new and disruptive, but look to the past and it’s clear they can be regulated.”

Civil Beat: The Associated Press – Hawaii’s Low Unemployment Rate Masks Underlying Problems 4/4

  • “In a state with a jobless rate of 2.1%, island residents have work if they want it. But their incomes often don’t pay the bills.”

NYT – Why China Is Confident It Can Beat Trump in a Trade War – Steven Lee Myers 4/5

  • “In the political realm, however, Mr. Xi enjoys advantages that may allow him to cope with the economic fallout far better than Mr. Trump can. His authoritarian grip on the news media and the party means there is little room for criticism of his policies, even as Mr. Trump must contend with complaints from American companies and consumers before important midterm elections in November.”
  • “The Chinese government also has much greater control over the economy, allowing it to shield the public from job cuts or factory closings by ordering banks to support industries suffering from American tariffs. It can spread the pain of a trade war while tolerating years of losses from state-run companies that dominate major sectors of the economy.”
  • “’The American agricultural sector is quite influential in the Congress,’ said Wang Yong, a professor of economics at Peking University, explaining why China has targeted farm products such as soybeans with possible retaliatory tariffs. ‘China wants the American domestic political system to do the work.’”

Visual Capitalist – The Jump from Millionaire to Billionaire, and How Long That Takes – Jeff Desjardins 4/4

WSJ – Even After a Tumble, the Stock Market’s Price Isn’t Right – Spencer Jakab 4/4

WSJ – At Quarter End, Tesla Suddenly Got Busy – Michael Rapoport 4/4

Markets / Economy

howmuch.net – How Vulnerable is Each State to a Trade War – Raul 3/27

Real Estate

WSJ – Daily Shot: LendingTree – Home Mortgage Purchase APR by Credit Score Range 4/5

Energy

FT – Alphabet becomes biggest corporate renewable energy buyer in US – Leslie Hook 4/4

  • “Alphabet bought enough renewable energy last year to match the power needs of all its data centers and global operations, making it the biggest corporate buyer of renewable power in the US.”
  • “The company has secured 3GW of renewable energy, making it the largest corporate buyer of renewable power, according to Bloomberg New Energy Finance, while Amazon and Apple are in second and third place.”
  • “Amazon has pledged that its cloud computing business will be 50% matched by renewables in 2017, while Apple has promised to source four gigawatts of renewable power by 2020, and has been trying to reduce the emission footprint of its supply chain.”

Finance

WSJ – Bill Ackman’s Pershing Square Faces Wave of Investor Redemptions – David Benoit 4/5

Cryptocurrency / ICOs

WSJ – Daily Shot: Barchart.com – Bitcoin 4/4

Automotive

WSJ – Car Makers Step Back From Cars – Mike Colias and Christina Rogers 4/4

  • “GM to stop production of the Chevrolet Sonic, Ford plans to end U.S. sales of Fiesta and Taurus amid Detroit’s broader exodus from passenger cars.”

China

Reuters – China’s HNA to sell some or all of $6.3 billion Hilton stake – Ankit Ajmera and Koh Gui 4/5

 

July 27, 2017

Perspective

NYT – The Cost of a Hot Economy in California: A Severe Housing Crisis – Adam Nagourney and Conor Dougherty 7/17

  • “A full-fledged housing crisis has gripped California, marked by a severe lack of affordable homes and apartments for middle-class families. The median cost of a home here is now a staggering $500,000, twice the national cost. Homelessness is surging across the state.”
  • “The extreme rise in housing costs has emerged as a threat to the state’s future economy and its quality of life. It has pushed the debate over housing to the center of state and local politics, fueling a resurgent rent control movement and the growth of neighborhood ‘Yes in My Back Yard’ organizations, battling long-established neighborhood groups and local elected officials as they demand an end to strict zoning and planning regulations.”
  • “For California, this crisis is a price of this state’s economic boom. Tax revenue is up and unemployment is down. But the churning economy has run up against 30 years of resistance to the kind of development experts say is urgently needed. California has always been a desirable place to live and over the decades has gone through periodic spasms of high housing costs, but officials say the combination of a booming economy and the lack of construction of homes and apartments have combined to make this the worst housing crisis here in memory.”
  • “Housing prices in Los Angeles, San Francisco, San Jose and San Diego have jumped as much as 75% over the past five years.”
  • Thus democratic State Senator Scott Wiener has sponsored “…one of 130 housing measures that have been introduced this year, would restrict one of the biggest development tools that communities wield: the ability to use zoning, environmental and procedural laws to thwart projects they deem out of character with their neighborhood.”
  • “’We’re at a breaking point in California,’ Mr. Wiener said. ‘The drought created opportunities to push forward water policy that would have been impossible before. Given the breadth and depth of the housing crisis in many parts of California, it creates opportunities in the Legislature that didn’t exist before.'”
  • “For the past several decades, California has had a process that sets a number of housing units, including low-income units, that each city should build over the next several years based on projected growth. Mr. Wiener’s bill targets cities that have lagged on building by allowing developers who propose projects in those places to bypass the various local design and environmental reviews that slow down construction because they can be appealed and litigated for years.”
  • “The bill applies only to projects that are already within a city’s plans: If the project were higher or denser than current zoning laws allow, it would still have to go through the City Council. But by taking much of the review power away from local governments, the bill aims to ramp up housing production by making it harder to kill, delay or shrink projects in places that have built the fewest.”

Worthy Insights / Opinion Pieces / Advice

FT – China’s credit squeeze sends warning on global growth – William Sterling (Trilogy Global Advisors) 7/18

  • “China has sent a deflationary chill through global markets this year by engineering a major slowdown in the growth of bank credit in the country.”
  • “In fact, we would argue that the unravelling of many of the so-called ‘Trump trades’ in global markets this year reflects the deflationary chill that China’s credit squeeze is creating, rather than simply registering skepticism about Trump administration policies.”
  • “Over the course of little more than a year, China went from exporting deflation to helping create the “global reflation” theme that was evident in global equity markets in the second half of 2016.”
  • “The most important global policymaker nobody has ever heard of is Guo Shuqing, the recently appointed chief of the China Banking Regulatory Commission (CBRC).”
  • “With the implicit support of President Xi Jinping, Mr Guo has issued a flurry of new regulations aimed at tackling corruption and speculation, including a requirement that banks account for previously lightly regulated ‘wealth management products’ in line with capital adequacy regulations.”
  • “The result is that the credit impulse, best understood as ‘the rate of change of the rate of change’ of credit relative to GDP, has declined by a whopping 17.5% of GDP in the first quarter of 2017.” 
  • “In the meantime, expect weaker commodity prices and less upward pressure on US interest rates.”
  • “China’s impact on the world economy is significant. Over the past five years its nominal GDP has expanded by $3.7tn, an amount that exceeds the GDP of Germany. In contrast, the entire global economy has expanded its nominal GDP by only $2.2tn.”
  • “As well as accounting for nearly 170% of the growth in the world’s nominal GDP in this period, it seems that China may have made US corporate earnings great again. Per Commerce Department figures, rest-of-world profits for US corporations were up by 25% in the first quarter of 2017, while domestically generated profits were down slightly and well below their peak of 2014.”
  • “The key concern for global investors is that even though China’s credit policy may be almost as important to the global economy as shifts in Federal Reserve or European Central Bank monetary policy, China’s economic policymaking remains far less transparent than in many other key nations.”
  • “Monitoring China’s credit impulse, therefore, is perhaps the best means open to investors to ‘watch what they do, not what they say’.”

FT – Ignore the Cassandra chorus, rates won’t skyrocket – Scott Minerd (chief investment officer Guggenheim Partners) 7/17

  • “The simple truth is that, while rates may trend higher in the near term, the risk is that we have not reached the point where the macro economy can sustain persistently higher rates. If anything, political, military and market uncertainties would more likely lead to another sudden decline in rates rather than a massive spike upward.”
  • “Investors would be wise to ignore the growing chorus of Cassandra cries and look through the noise to the fundamentals. There are many things to be concerned about in the world but skyrocketing rates is not likely among them.”

A Teachable Moment – Numbers Can Lie – Tony Isola 7/20

  • “Narratives without statistics are blind, statistics without narrative are empty.” – Steven Pinker

NYT – Behind a Chinese Powerhouse (HNA) a Web of Family Financial Ties – David Barboza 7/18

NYT – Saudi King’s Son Plotted Effort to Oust His Rival – Ben Hubbard, Mark Mazzetti and Eric Schmitt 7/18

  • A family matter made public.

Project Syndicate – Why Do Cities Become Unaffordable? – Robert Shiller 7/17

  • “The question, then, is why residents of some cities face extremely – even prohibitively – high prices.”
  • “In many cases, the answer appears to be related to barriers to housing construction. Using satellite data for major US cities, the economist Albert Saiz of MIT confirmed that tighter physical constraints – such as surrounding bodies of water or land gradients that make properties unsuitable for extensive building – tend to correlate with higher home prices.”
  • “But the barriers may also be political. A huge dose of moderate-income housing construction would have a major impact on affordability. But the existing owners of high-priced homes have little incentive to support such construction, which would diminish the value of their own investment. Indeed, their resistance may be as intractable as a lake’s edge. As a result, municipal governments may be unwilling to grant permits to expand supply.”
  • “Insufficient options for construction can be the driving force behind a rising price-to-income ratio, with home prices increasing over the long term even if the city has acquired no new industry, cachet, or talent. Once the city has run out of available building sites, its continued growth must be accommodated by the departure of lower-income people.”
  • “But this tendency can be mitigated, if civil society recognizes the importance of preserving lower-income housing. Many of the calls to resist further construction, residents must understand, are being made by special interests; indeed, they amount to a kind of rent seeking by homeowners seeking to boost their own homes’ resale value. In his recent book The New Urban Crisis, the University of Toronto’s Richard Florida decries this phenomenon, comparing opponents of housing construction to the early-nineteenth-century Luddites, who smashed the mechanical looms that were taking their weaving jobs.”
  • “In some cases, a city may be on its way to becoming a ‘great city,’ and market forces should be allowed to drive out lower-income people who can’t participate fully in this greatness to make way for those who can. But, more often, a city with a high housing-price-to-income ratio is less a ‘great city’ than a supply-constrained one lacking in empathy, humanitarian impulse, and, increasingly, diversity. And that creates fertile ground for dangerous animosities.”

Real Estate

WSJ – Foreign Buyers Pump Up U.S. Home Prices – Laura Kusisto 7/18

  • “Foreigners are buying U.S. homes at a record rate, helping push up prices in coveted coastal cities already squeezed by supply shortages.”
  • “In all, foreign buyers and recent immigrants purchased $153 billion of residential property in the U.S. in the year ended in March, nearly a 50% jump from a year earlier, according to a National Association of Realtors report released Tuesday.”
  • “That surpassed the previous record for foreign investment set in 2015, when foreigners purchased nearly $104 billion of U.S. residential property.”

WSJ – Property Developers Push for Open Drinking on City Streets – Esther Fung 7/18

FT – Retail woes lead to rising commercial mortgage delinquencies – Joe Rennison 7/17

  • “We see a lot of retail loans defaulting at maturity. Borrowers are just unable to re-finance their loans.” – Mary MacNeill, managing director – Fitch Ratings

FT – Will the death of US retail be the next big short? – Robin Wigglesworth 7/16

  • “Credit Suisse estimates that as many as 8,640 stores with 147m square feet of retailing space could close down just this year — surpassing the level of closures after the financial crisis and dotcom bust. The downturn is hitting the largely healthy US labor market — the retail industry has lost an average of 9,000 jobs a month this year, according to the Bureau of Labor Statistics, compared with average monthly job gains of 17,000 last year.”

FT – Blackstone warns of internet impact on US shopping malls – Robin Wigglesworth 7/16

  • “’The retail industry is clearly facing headwinds. And it’s the first time we’ve seen secular rather than cyclical headwinds,’ said Nadeem Meghji, head of North American real estate at Blackstone. ‘We’re now seeing pressures even on luxury retailers, which I didn’t expect to happen as fast as it has.’”
  • “The market for second-tier enclosed malls has virtually frozen given how concerned investors are, but Mr. Meghji estimated that in the past two years prices may have plunged as much as 40% on average for the 1,100 enclosed regional malls in the US. Even for the top 50, prices have probably declined by 20%, the Blackstone executive said.”
  • “The private equity firm’s $102bn real estate arm still owns some grocery shop-anchored malls in high-density population areas, but no longer has any exposure to the enclosed shopping mall sector.”

Energy

FT – California confronts solar power glut with novel marketplace – Gregory Meyer 7/17

  • “California is a leader in solar and wind power. The Golden State is well on its way to reaching a self-imposed goal of getting a third of its electricity from renewable sources by 2020, part of an aggressive agenda to cut greenhouse gas emissions.” 
  • “Yet this bold strategy is causing complications. At noon on clear spring days, too much solar power courses through the state’s electrical grid. Generators must pay customers to take excess supply — a condition called “negative prices” — or unplug their plants. Still, California consumers have some of the highest electricity rates in the country.” 
  • “Amounts of electricity generated by the sun and wind can vary in the space of hours, however, as clouds darken the skies or breezes die down. Every day, solar power fades towards dusk just as people come home and turn on lights, air conditioners and televisions.” 
  • “The imbalance market helps to iron out utilities’ power scramble as supply and demand shift during the day. It builds on longstanding markets for power delivered hours, days or months ahead by offering power delivered between five and 15 minutes in advance. When California suddenly finds itself with too much electricity, other states can now absorb it, and vice versa.”
  • “Participants say the imbalance market lowers overall costs for customers, makes grids more reliable and reduces carbon dioxide emissions by using clean energy that might otherwise be shut off. The ISO says the market has used 412,000 megawatt-hours of surplus California renewable energy since 2015, displacing 176,000 tons of carbon.” 

Environment / Science

WSJ – Daily Shot: statista – 20 Worst Cities Worldwide for Air Pollution 7/26

Health / Medicine

FT – ‘Urgent wake-up call’ for male health as sperm counts plummet – Clive Cookson 7/25

  • “The sperm count of men in the western world has fallen by more than half over a period of 40 years, according to an international study described by its authors as ‘an urgent wake-up call’ about declining male health.”
  • “’Decreasing sperm count has been of great concern since it was first reported 25 years ago,’ said senior author Shanna Swan of Icahn School of Medicine at Mount Sinai, New York. ‘This definitive study shows . . . that the decline is strong and continuing.’”
  • “Professor Allan Pacey of Sheffield university, who has been skeptical about previous research showing declining sperm counts, said the latest research dealt with many of his criticisms. But he urged people to ‘treat this study with caution as the debate has not yet been resolved and there is clearly much work still to be done’.”
  • “Prof Pacey pointed out too that the reported decline from 99m to 47m sperm per milliliter still left the average count within what fertility clinics regard as the ‘normal’ range.”
  • “In northern Europe today more than 15% of young men had a sperm count low enough to impair their fertility, Prof (Richard) Sharpe (of Edinburgh University) added, and ‘this is likely to get worse rather than better’.”
  • “The combination of declining male sperm counts and a growing delay in couples trying for a baby — often until the woman is in her 30s and her own fertility is declining — created ‘a double whammy’ for natural conception in modern western societies, he said.”

Bloomberg – China’s Sperm Count Problem Has Created a Billion-Dollar Market 7/12

  • While the above article focused on samples from North America, Europe, Australia and New Zealand, China too has its problems.

Britain

FT – UK plans to ban sale of new petrol and diesel cars by 2040 – Jim Pickard and Peter Campbell 7/26

  • “UK environment secretary Michael Gove has announced plans to ban the sale of new petrol and diesel cars in Britain by 2040.”
  • “The announcement follows the lead set by France two weeks ago and will be set out in the UK government’s long-awaited ‘air quality plan’ on Wednesday.”
  • “Mr. Gove will say that all new cars will have to be fully electric within a quarter of a century. His promise to ban other engine types — including hybrids — shifts the government further from its existing position, which was an ‘ambition’ for all new cars to be zero-emissions by 2040.”
  • “The coalition government’s ‘carbon plan’ in 2011 also predicted that all new cars sold after 2040 would have to be emission free, to meet a target of having no petrol or diesel cars on the roads by 2050.”
  • “The announcement is a milestone in the shift towards electric cars, which currently account for less than 1% of UK sales.”

China

FT – Wang Qishan: China’s enforcer – Tom Mitchell, Gabriel Wildau, and Henny Sender 7/24

  • Arguably the second most powerful person in China.

WSJ – China’s Visible Hand Starts to Squeeze -Jacky Wong 7/18

  • “Macau looks likely to be another target of China’s efforts to contain leverage and capital outflows.”

FT – China’s railway diplomacy hits the buffers – James Kynge, Michael Peel and Ben Bland 7/17

  • “China’s ability to build high-speed railways more cheaply than its competitors gave the technology a central place in ‘One Belt, One Road’, Beijing’s ambitious scheme to win diplomatic allies and open markets across more than 65 countries between Asia and Europe by funding and building infrastructure.”
  • “But less than two years after these hopeful words were uttered, a Financial Times investigation has found that China’s high-speed rail ambitions are running off the tracks. Far from blazing a trail for One Belt, One Road, several of the projects have been abandoned or postponed. Such failed schemes, and some that are under way, have stoked suspicion, public animosity and mountains of debt in countries that Beijing had hoped to woo.”
  • “In terms of scale, the rail push ranks as one of the biggest infrastructure undertakings in history. The total estimated value of 18 Chinese overseas high-speed rail schemes — including one completed (the Ankara-Istanbul service), five under way and 12 more announced — amounts to $143bn, according to a study by the Center for Strategic and International Studies, a Washington-based think-tank, and the Financial Times. To put this number in context, the US-led Marshall Plan, which helped revive Europe after the second world war, was completed with $13bn in American donations, a sum equivalent to $130bn today.”
  • “The size of China’s grand design has made its many shortcomings all the more eye-catching. The combined value of cancelled projects in Libya, Mexico, Myanmar, the US and Venezuela is $47.5bn, according to FT estimates.”
  • “This is almost double the $24.9bn total value of the five projects under way in Laos, Saudi Arabia, Turkey and Iran, where two lines are under construction, according to CSIS estimates.”
  • “So why is it that so many rail projects backed by China’s unrivalled financing firepower, huge construction companies and advanced technology fall by the wayside? The answers reveal much about the limitations in Beijing’s global development vision.”
  • Mostly it’s “…the vastly divergent capacities to take on and absorb debt. China’s economic heft and authoritarian system allows companies that enjoy effective government guarantees to load up on loans and operate at a perennial loss. China Railway Corporation, the state-owned rail operator and investor in the country’s high-speed networks, has debts of Rmb3.8tn ($558bn), much more than the national debt of Greece. This is partly because much of the 22,000km of high-speed rail in China runs at a loss, officials say.”

FT – China’s Xi orders debt crackdown for state-owned groups – Tom Mitchell 7/15

  • “’Deleveraging at SOEs is of the utmost importance,’ the Chinese president said at this weekend’s National Financial Work Conference, which convenes only once every five years. He added that the country’s financial officials must also ‘get a grip’ on so-called ‘zombie’ enterprises kept alive by infusions of cheap credit.” 

FT – Chinese purchases of overseas ports top $20bn in past year – James Kynge 7/15

South America

FT – Venezuela’s economic and political crisis in charts – Lauren Leatherby 7/25