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Yashi

Monday, April 28, 2014

Really real estate

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The housing market over the last year has been tough. According to the National Realtors Association's March report, pending home sales are down 7.9% year-over-year. However there are some signs of improvement. March pending sales were up 3.4% month-over-month for the first time since last summer.

Now that we're at the end of the refi boom and institutional investors are slowing their real estate purchases, the current numbers may actually show the "real real-estate market", Shari Olefson tells the WSJ. The next wave, she says, will be "boomerang buyers" who lost their homes during the crash and are finally returning to homeownership (after helping keep rents high during the recovery).

But it's not totally clear yet that those boomerang buyers are coming back as fast as investors are leaving — mortgage demand is at a 14-year low. It's also not clear that those buyers will be able to get a mortgage if they want one: Stephen Gandel writes that JP Morgan Chase has been losing about $1500 on every loan it makes lately, thanks to rising interest rates.

Despite weak data, Bill McBride likes where things are going. The current situation reminds him of 1994-95, when homes sales growth was flat and mortgage rates had just gone up, but the demographics supported a jump in new home buyers (all three of which he believes are true now). Sure enough, after several years of flat growth, new home sales grew by more than 20% in 1997. After hovering in the 300,000-400,000 range for the last year, he expects sales to double to 750,000-800,000 per month over the next several years.

Sonu Sam Varghese of Convex Capital Management isn't as bullish. He calculates a 10-city index that "tells us how the average housing indicator is growing, relative to its growth over the previous three years". The last two months look bad: more than a standard deviation below mean growth rates over the last three years.

The greater question is whether home sales growth, when it comes, will actually help boost the economy. Atif Mian and Amir Sufi write that "the days when housing was the predominant force driving economic activity are gone". The two ways that housing drives the economy, they write, are greater spending via refinancing — mostly among lower income households — and construction spending. Both are significantly below where they were during the boom in 2005-2006 and don't look to be recovering. — Shane Ferro

On to today's links:

Just An FYI
Brooklyn: A national leader in physical therapy-related Medicare fraud - NYT

Wonks
"We haven't increased fixed investment": why the recovery hasn't felt like one - Conor Sen

TBTF
BofA messes up some Merrill-related math, has to suspend its capital plans - Federal Reserve

New Normal
"The conditions that these guys work under is like sharecropping": Trucking as a middle class job is over - Lydia DePillis

Interesting
If the Rich Man's Bubble is popping, it almost doesn't matter - Josh Brown

Remuneration
The death spiral is a myth used to keep pay high - Robert Pickering (former head of Cazenove)

Plausible Theories
5 reasons Americans might be taking fewer economic risks - Noah Smith

Quotable
"America is a place where luxuries are cheap and necessities costly" - WaPo

Hilarious
How to write your own Piketty review, in 10 easy steps - WaPo

Oxpeckers
"There are things that you can't do in charts" - Jim Tankersley

It's Academic
"Learning from samples of one or fewer: Experiencing more aspects of experience" - James March, Lee Sproull, Michal Tamuz

Wonks
Drawing policy lessons from most-emailed blog posts - Paul Krugman

New Normal
Pimco conveniently phasing out phrase co-created with you know who - Dealbreaker

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Business Today: S&P 500 ends up with Apple, Pfizer; Nasdaq dips

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04/28/2014
Reuters Election 2012 Daily round-up of the day's top news from the campaign trail, the White House and all the politics in between
S&P 500 ends up with Apple, Pfizer; Nasdaq dips
NEW YORK (Reuters) - The S&P 500 ended higher on Monday after a volatile session, as gains in Apple and Pfizer helped offset another round of selling in some high-growth tech shares.
Pfizer chases AstraZeneca for potential $100 billion deal
LONDON/NEW YORK (Reuters) - U.S. drugmaker Pfizer Inc approached Britain's AstraZeneca Plc two days ago to reignite a potential $100 billion takeover and was rebuffed, raising investor expectations it will have to increase its offer to close the deal.
U.S. pending home sales jump, end losing streak
WASHINGTON (Reuters) - Contracts to buy previously owned U.S. homes rose in March for the first time in nine months, a sign the housing market could be stabilizing after suffering a setback from a rise in interest rates and a severe winter.
France meets Alstom bidders with pledge to protect jobs
PARIS (Reuters) - France said it would defend jobs and its national interest as it met suitors eyeing a breakup of engineering group Alstom on Monday and suggested it preferred Germany's Siemens over U.S. giant General Electric.
Toyota move to Texas is latest blow to Southern California
NEW YORK/DETROIT (Reuters) - Toyota Motor Corp. said it will move its U.S. sales headquarters from southern California to suburban Dallas, delivering the latest blow to California in a fight for jobs with arch-rival Texas, whose Governor Rick Perry has been actively poaching businesses from the Golden State.
U.S. senators ask federal agency to act on recalled GM cars
WASHINGTON (Reuters) - Two Democratic U.S. senators on Monday called on the Department of Transportation to urge owners of 2.6 million recalled General Motors cars to stop driving them until they are repaired, which could take months as dealerships wait for replacement ignition switches.
Buffett: Next Berkshire CEO should be only one to get options
NEW YORK (Reuters) - The next chief executive of Berkshire Hathaway should be the only one at the company to get options, Warren Buffett, the current head of the sprawling conglomerate, said on Monday.
Comcast in deal with Charter as it seeks approval for TWC
(Reuters) - Comcast Corp on Monday agreed to a three-way deal with Charter Communications Inc as part of Comcast's efforts to win regulatory approvals for its proposed $45 billion purchase of Time Warner Cable Inc.
AOL investigates cyber attack, says user data compromised
BOSTON (Reuters) - AOL Inc on Monday urged its tens of millions of email account holders to change their passwords and security questions after a cyber attack compromised about 2 percent of its accounts.
BofA suspends buyback, dividend increase after capital error
(Reuters) - Bank of America Corp said on Monday it will suspend a planned increase in its quarterly dividend as well as its latest stock buyback program because it miscalculated a measure of the capital on its books.
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