MacroScope

Britain’s Help to Buy unites analysts about its dangers

Even if they can’t agree how much Britain’s Help to Buy mortgage guarantee scheme will boost the housing market, analysts in the latest Reuters poll are united by an understanding of its dangers.

The government’s Help to Buy programme, unveiled in its March budget, is designed to boost mortgage lending and help buyers with small deposits get on the property ladder.

The poll predicts Britain’s house prices will rise at their fastest pace in four years in 2013, and data from Hometrack show London property was snapped up in April more quickly than at any time since October 2007 – adding to concerns Help to Buy might start a new house price bubble.

Analysts are largely split into two camps. On the one side, there are those who think Help to Buy will provide just a modest uptick in housing market activity. But even so, it doesn’t necessarily follow that the wisdom of the programme is sound:

The Help To Buy mortgage guarantee scheme may well give the market more of a boost from 2014. While measures to support the market are welcome, the scheme will encourage households to leverage up.

Surge in foreclosures strains social services in Philadelphia: Philly Fed report

In the wake of a historic housing crisis that has just recently begun showing signs of a turnaround, foreclosure counseling services are coming under strain. The foreclosure mess may be over for big banks, which recently settled with regulators for $8.5 billion.

Not so for homeowners, who continue to face a bureaucratic morass in dealing with lenders and servicers. According to a new report from the Philadelphia Fed, the city of Philadelphia’s already weak infrastructure for dealing with the fallout from the foreclosure crisis is fraying at the edges.

The report’s conclusion:

Foreclosure counseling in Philadelphia is in high demand, but the city’s housing counseling agencies have limited resources with which to meet that need. There is a high degree of reliance on public funding for operations, which is particularly problematic in the current environment of increased concern over budget deficits and public debt. Counselors are being asked to provide services to numerous clients, and agencies have to meet multiple sets of requirements to access and to maintain funding from the primary funding sources. In recent years, these pressures have led to a reduction in the number of agencies offering such counseling in Philadelphia and may continue that trend without new sources of funding to bolster service provision.

New drama casts American Dream in a cold light

The American Dream distorted almost beyond recognition by mass foreclosures, women working on straight commission, men not working at all, and an alleged “higher power” who wants you to be rich beyond your wildest dreams, is the subject of the Women’s Project Theater’s production of “Bethany,” a new play by the young playwright Laura Marks.

The central character, Crystal, (played by America Ferrera, star of the “Ugly Betty” television series) is trying to regain custody of her daughter, Bethany, who has been placed in foster care because foreclosure has left her mother homeless.

Crystal is a victim of the American Dream, portrayed in this work as little more than an elaborate con game where honest, frantic people run like rats on a wheel – with firmer, secure ground hopelessly out of reach.

U.S. housing recovery running out of steam? Not so fast, says Coldwell Banker CEO Huskey

U.S.home resales unexpectedly fell in December, but the drop was not large enough to suggest the recovery in the housing sector is running out of steam.

The National Association of Realtors said on Tuesday that existing home sales dropped 1.0 percent last month to a seasonally adjusted annual rate of 4.94 million units.

Reuters television’s Conway Gittens interviews Budge Huskey, CEO of Coldwell Banker.

Housing neutral for Fed doves; Operation Twist running on empty

A slightly bigger than forecast 5.7 percent rise in sales of new homes in September reported by the National Association of Realtors on Wednesday lends credibility to September’s jump in housing starts, but appears neutral for Federal Reserve monetary policy discussions.

The jump in new home sales seems to have largely justified the 11 percent jump in September housing starts, says Decision Economics senior economist Pierre Ellis. The inventory of houses for sale at the end of September rose just 1.4 percent, from the end of August and the months’ supply fell to 4.5 months from 4.7 months, he added.

Thus, the increased production of houses seems not to have involved any “over-exuberant optimism” – and the impact if demand were suddenly to evaporate would be contained, he said. “Healthy skepticism seems to prevail in builderland,” Ellis observes.

Banks keeping most of QE3 benefits for themselves

Federal Reserve officials have been worried that their policy of ultra-low interest rates may be having less of an effect than usual because of a “broken transmission channel.” In plain English, this means the money hasn’t really been flowing smoothly from liquidity-flooded banks to would-be borrowers.

Economists at TD Securities argue banks have passed on less than half of their lower funding rates as reflected in yields on mortgage-backed securities onto consumers.

During the current iteration of monetary policy easing, pass-though peaked at 66% during the third week following the QE3 announcement, when MBS yields rebounded from their post-QE3 lows and 30-year mortgage rates fell to a record-low 3.36%. However, since the QE3 announcement, our calculations suggest that banks have passed through an average of just 40% of their lower funding rates (i.e. lower MBS yields) in the form of lower mortgage rates.

In India, what goes up must keep going up

With a faltering economy, political gridlock, high interest rates, delayed monsoons and an epic power outage that has plunged half its 1.2 billion population into darkness, optimism is a sparse commodity in India.

Just not when it comes to rising house prices.

‘What goes up a lot must keep going up’ was the conclusion from the very first Reuters Indian housing market poll this week. And it sounded very familiar.

Past experience shows that respondents to housing market polls – whether they be independent analysts, mortgage brokers, chartered surveyors – tend to cling to an optimistic tone even as trouble clearly brews below the surface.

Art (not) imitating life: MoMA hosts foreclosure-themed exhibit

The long-awaited recovery in the housing market could finally be taking shape, some economists believe. Housing starts are up. Home sales have risen from their cyclical lows. Inventory levels are down sharply from cyclical highs. Builder sentiment is gradually improving.

But should developers, architects, marketers and financiers just hit the restart button and repeat the patterns that led to the U.S. foreclosure crisis? According to the Museum of Modern Art exhibition, “Foreclosed: Rehousing the American Dream,” the answer is no.

Instead of letting the recent crisis go to waste, the MoMA’s Architecture and Design Department and Columbia University’s Temple Hoyne Buell Center for the Study of American Architecture created some dynamic new architectural visions to address the needs of American communities.

Interview: Richmond Fed’s Lacker on Libor, ‘soggy’ growth and the limits of monetary policy

There appears to have been a significant slowdown in the second quarter. In particular we saw the pace of job creation slowed to a pace of 75,000 per month in the second quarter down from 226,000 in the first quarter and there are also concerns about slowing growth globally, beyond Europe but also in the emerging world and China, which was highlighted in the minutes (to the June meeting) this week. So, where do you think we’re headed? Are we just going to remain in a soft kind of pace? Are there upside risks to growth? Are there downside risks to growth?

Growth has definitely softened. The data are unmistakably weaker in the second quarter than we had hoped they would be. I think everyone recognized the first quarter and the end of last year were a little bit stronger than we might be able to sustain in the middle of the year but it’s definitely come in softer than I’d expected.

At the beginning of the year, it seemed as if Europe wouldn’t maybe weaken as much as we thought but lately the weakening from Europe has been coming online. In the U.S., I think we’re in a situation where we’re going to fluctuate from between the level where we are now to a level that’s more like we saw six or eight months ago. We’re going to have soggy patches, we’re going to have stronger spurts. If you look back over the last three years that’s the record you see. I don’t see a reason for that to change markedly.

Before the crash: Ambling through the ‘archives’

Moving from one house or apartment to another is mainly onerous, but one of its few pleasures is coming across papers you have not seen for years: the adventure stories your grown son wrote when he was eight years old or the book report he wrote on William Shakespeare’s Richard III when he was 10.

Another potential source of amusement is finding an older newspaper or magazine article or column, preserved on purpose or inadvertently. One reads these pieces with the benefit of time: You, dear reader, have seen the future at which the columnist, either hapless or prescient, could only make a guess, educated or otherwise.

So herewith are excerpts from two side-by-side columns published in the Summer 2005 edition of TIAA-CREF’s “advance,” two years before the financial crisis sent the global economy into its worst downturn since the Great Depression.