Archive for September, 2011

September 6, 2011

What you don’t know about how to improve the economy!

Organized labor and business leaders are on board, Mr. Obama said. “We just need Congress to get on board,” he said, prompting cheers of “Four more years!” from an audience filled with members of unions for autoworkers, public employees, service industry workers and teachers.

It remains unclear what new ideas Mr. Obama will propose on Thursday. But he faces high expectations after recent evidence that job growth has stalled and because of his own buildup since announcing a month ago that he would lay out a short-term stimulus program after Labor Day.

Mr. Obama also faces skepticism because of persistent unemployment. Recent polls give him his lowest ratings to date for job approval and his handling of the economy, though the ratings of Congress, and especially Republicans, are even more negative.

Mr. Obama has indicated that besides infrastructure proposals, he will call for extending and expanding temporary tax cuts for businesses and individuals, including a payroll tax cut for which he won Republicans’ support in December after agreeing to extend the Bush-era tax cuts on high income. He is expected to propose that employers get a tax credit for each new person hired, and to help local governments avert more teacher layoffs.

Separately next week, Mr. Obama is expected to recommend ways to reduce annual budget deficits to a special Congressional committee charged with finding up to $1.5 trillion in savings over 10 years. He plans to propose more than that in deficit reductions, aides say, partly to offset the stimulus costs.

But in Detroit Mr. Obama emphasized job creation. His backdrop was the high-rise headquarters of General Motors, which, along with Chrysler, has restructured and returned to profit and hiring after their rescue early in his administration.

“We’ve got a lot more work to do to recover fully from this recession,” Mr. Obama said. “I’m going to propose ways to put America back to work that both parties can agree to because I still believe both parties can work together to solve our problems.”

That expression of faith in bipartisanship drew loud groans of skepticism, reflecting a growing sentiment among Obama supporters that he is too conciliatory toward Republicans.

As if acknowledging the skeptics, Mr. Obama quickly added, to applause: “But we’re not going to wait for them. We’re going to see if we’ve got some straight shooters in Congress. We’re going to see if Congressional Republicans will put country before party.”

Flying here with Mr. Obama were several union leaders, including Richard Trumka, president of the A.F.L.-C.I.O., who has been critical of his compromises with Republicans.

Also joining Mr. Obama was Senator Carl Levin, Democrat of Michigan, who, as Mr. Obama told his audience, gave the president a Labor Day address that President Harry S. Truman delivered in Detroit in 1948, the year of his come-from-behind election after campaigning against “do-nothing” Republicans.

Afterward, Mr. Levin said he told the president, “Here’s a ‘give ’em hell’ kind of speech.”

The president’s Labor Day addresses trace the stubbornness of the crisis he inherited.

In 2009, he spoke to an A.F.L.-C.I.O. picnic in Cincinnati, just after the government reported 216,000 jobs lost in August — relatively good news because it marked a second month of declining losses from a high of 750,000 as Mr. Obama took office. Six months earlier, in February, a Democratic-controlled Congress had passed his two-year, $800 billion stimulus program of tax cuts and spending.

“It’s working,” Mr. Obama said then. Most economists agreed, though many have since concluded that the package was not forceful enough to counter a recession and crises in the financial and housing sectors. Republicans, who generally opposed it, continue to say that the stimulus program failed and that they will not support another round.

“We’re on the road to recovery, but we’ve still got a long way to go,” Mr. Obama said two years ago. That would become a refrain.

Last year, Mr. Obama was in Wisconsin with union families. While private-sector hiring had expanded for eight months, the unemployment rate was 9.6 percent — just a tenth of a percentage point lower than the year before. With his two-year stimulus plan winding down, Mr. Obama announced new plans for infrastructure projects and more.

“Now the plain truth is, there’s no silver bullet or quick fix to the problem,” he said in Milwaukee. “Even when I was running for this office, we knew it would take time to reverse the damage of a decade’s worth of policies that saw a few folks prosper while the middle class kept falling behind.”

But his infrastructure plans went nowhere before Republicans, capitalizing on voters’ economic frustrations, won control of the House in November.

September 5, 2011

Hong Kong is top performing global city in 2Q

Hong Kong Edges Out London as Top Performing Global City in 2Q, Says Knight Frank

Posted by Michael Gerrity 08/26/11

Based on international real estate firm Knight Frank’s Prime Global Cities Index, Hong Kong tops the list of best performing global cities in the second quarter of 2011.

Key Index Findings:

  • Prime property prices in the cities monitored by the Prime Global Cities Index rose by 6.8% in the year to June 2011, the comparable figure a year earlier was 13.5%.
  • Prime property in Hong Kong recorded the strongest annual growth; prices in June 2011 were 16.1% higher than twelve months earlier.
  • Hong Kong, Singapore and Shanghai are the only locations, based on the latest available data, where the cities’ prime markets have not outperformed the mainstream housing market in the wider country or territory.
  • London, Paris and St Petersburg are the only cities where prime property prices have reached their pre-recession peak. A number of the Asian cities tracked have yet to experience a decline during this cycle and continue to follow an upward trend.
  • Government anti-inflationary measures being introduced in Asia are starting to impact. Singapore’s prime market has responded with slower price growth, but other cities are further behind in the deflationary cycle.

Liam Bailey, Head of Residential Research at Knight Frank commented, “One of the most noticeable outcomes from the recent global recession was the divergence between property performance in the mainstream markets (generally weak) and the prime or luxury markets (generally much better).”

The Knight Frank Prime Global Cities Index has tracked this process, which until recently seemed to be strengthening – with improving conditions in the luxury global city markets set against renewed price falls in the mass markets, especially in the US, the UK and most of Europe.

“Our latest results confirm that annual price growth in prime city markets has slowed rapidly (from nearly 14% in Q2 2010 to barely 7% in Q2 2011). With growing concerns over sovereign debt and even for the outlook of the global economy, it seems likely that this process will continue – with still lower growth in the world’s prime city markets a likelihood.

“I think it would be wrong to become too fixated on the downside risks to the market we track in this index. The fact is that prime residential markets have acted as ‘safe-havens’ for investors over the past two years – with growing demand for property in London, New York and other key global cities as economic and geo-political concerns have pushed investors to look for stable locations for their wealth.

“In these important global markets the biggest risks seem to be concentrated for the time being in Asia – with the ongoing process of managed market cooling being buffeted by rapid supply growth – the outcome of this process is likely to determine how healthy the Prime Global Cities Index is looking a year from now.”

City by city analysis

Hong Kong has retaken its position at the top of our performance rankings partly due to strong annual growth of 16.1% and partly as a result of slower price growth in Paris, which topped the table last quarter. Despite the global financial crisis prime property prices in Hong Kong have followed an upward trend since Q4 2008, rising 75.9% over this period.

Asian cities appear to be responding to their governments’ regulatory measures to dampen price inflation, albeit at varying speeds. Singapore saw prime prices fall by 2% in the three months to June 2011 but Hong Kong, Beijing and Shanghai continued to record positive quarterly growth

Administrative measures such as new property taxes, restrictions on the number of property purchases and the promotion of subsidized housing have started to influence sales volumes in the key Asian cities but this has yet to feed through in a meaningful way on prices in several markets. We expect this will change in the second half of 2011.

Singapore’s slowing market, despite a rise in Chinese and Indonesian buyers in the last quarter, offers the first evidence that the Asian property market is moving into a new more negative phase. Concerns over the stability of the global economy, and in particular over EU and US debt, are causing uncertainty amongst Asian investors who have been pushing prices higher across the main cities over the past two years.

After a very strong year market conditions began to slow in Paris in the second quarter. Supply has increased in some of the most high-profile prime locations as vendors, particularly in the €4m to €5m price bracket, have taken advantage of the recent surge in prices. Interestingly foreign demand for Parisian property has remained healthy over recent months – with a number of new enquires from the Middle East and from Syrian buyers in particular.

Conditions in London’s prime market remain strong. Despite a recent rise in supply we expect prices to continue to grow in the second half of 2011, albeit at a slower pace. Offsetting rising supply has been the fact that buyer registrations have held steady and viewings have increased over the past two months.

Buyers in Monaco while facing lower prices than at their peak in Q3 2008, are still seeing asking prices of €40,000 to in excess of €50,000 per sq m for prime apartments, a reflection of the ongoing imbalance in the Principality between tight supply and cautious demand, that is nonetheless beginning to show the early signs of a more positive trend.

Both St Petersburg and Moscow have recorded positive annual growth since Q1 2010, with prime property prices in St Petersburg rising by 12.2% in the year to June 2011. Such strong price inflation is partly attributable to an improvement in economic and business sentiment in Russia since the start of 2011

September 5, 2011

Don’t Bank on a Rebound — Yet

Don’t Bank on a Rebound — Yet

Apologies for being a downer, but when it comes to real estate, it doesn’t pay to be a Pollyanna. And a handful of signs indicate that the residential real estate market hasn’t bottomed out yet.

1. Some pros still see lower prices

Housing analysts — in other words, brainy specialists who know a lot more about this than I do — aren’t very optimistic.

McCabe Research & Consulting CEO Jack McCabe believes the housing market won’t bottom out until foreclosures and short sales are less than 10% of the industry sales and the unemployment rate falls below 6%. He doesn’t see that scenario happening until 2013 at the earliest, he told The Miami Herald this week.

Stifel Nicolaus analyst Michael Widner told TheStreet.com last week that his firm sees national home prices falling 15% more.

Earlier this year, Robert Shiller — the worrywart Yale economist who has been more right than wrong in his Chicken Little housing prognostications in recent years — felt that home prices could drop 10% to 25% more before landing. He should know: he’s the Shiller behind the Case-Shiller index.

2. Fresher data shows a stale economy

Do you want a painful refresher on what has happened since then? The stock market tanked. S&P downgraded the country’s credit rating. Faith in the U.S. government is rattling on the left and the right. Unemployment rates continue to clock in stubbornly high, and it’s not going to get any better with Cisco (CSCO), Research In Motion (RIMM), and Bank of America (BAC) revealing thousands of layoffs apiece this quarter.

The end result is that the S&P/Case Shiller news wasn’t the only piece of economic data that the market is munching on this week. The Conference Board is reporting that consumer confidence hit a two-year low. This is a dipstick measuring the country’s sentiment for the month of August, a more current pulse of the economy than what housing prices did on the other end of this bruising summer season.

3. Mortgage rates won’t stay this low forever

The average 30-year mortgage clocked in at 4.41% last week, according to rate tracker Bankrate.com. It’s the lowest interest rate Bankrate has reported since it began aggregating mortgage information 26 years ago.

How long do you think this will last?

Home prices are obviously swayed by prevailing rates. If banks inch mortgage terms higher, prospective homebuyers get less bang for their borrowed buck. Buyers will need to lower their targeted price ranges — and so will sellers.

4. There is still a glut of housing inventory on the market

The Commerce Department reported that new housing starts dipped 1.5% in July. Building permits, an accurate measuring stick for future construction, fell 3.2%.

Dig deeper into the data and you’ll find that single-family homes actually fell by a problematic 5%, partly bailed out by a 6% increase in apartment building.

The disparity is telling. For starters, it indicates that consumer demand for ownership is waning. Too many condo flippers and realty speculators got burned by buying too many vacant houses that are now worth less than their underlying mortgages. Renting is the easy way to go these days, especially given that real estate has been a depreciating asset in recent years. Folks also can’t afford new and existing single-family homes at today’s prices. Banks need meatier down payments that many just can’t afford.

5. Location, location, relocation

Another likely explanation for the uptick in renting over home ownership is the urbanization trend that’s driving up demand for metropolitan digs.
The American dream is no longer a sprawling house in the suburbs with a white picket fence. Young adults are flocking to revitalized downtown areas where there’s stuff to do and the mass transit infrastructure to make it all accessible without the hassles of housing multiple cars, maintaining a lawn, and suffering through draining workday commutes.

Census data shows that we’re marrying later and having fewer kids. Did you really need that fifth bedroom?

The arms race is over. The Joneses lost — but so did you.

There’s no need to panic. We have likely seen the worst of the freefall in real estate prices. However, if you’re banking on a rebound over the next few years, you haven’t been paying attention.

September 5, 2011

California lawmakers wrestle with 12% jobless rate

Unemployment

Sacramento – — Sacramento

As California’s unemployment rate climbs – the state is stubbornly stuck with the second-worst jobless problem in the nation – leaders at the Capitol are focusing on jobs in the final three weeks of the legislative session.

Last week, Gov. Jerry Brown named a senior jobs adviser while legislative leaders met to decide what changes in laws they would push to spur employment. They said they will seek to streamline some permit procedures as well as loosen environmental regulations that can slow down new projects.

The proposals have yet to be completed, and some economists say a focus on regulations misses the real problem in the economy – anemic consumer spending – and will do nothing to create jobs to cut into the state’s 12 percent unemployment rate.

Even Brown downplayed the impact California could have in revving up a sputtering economy that is at the mercy of international forces.

“We’ve got the plan Obama has been looking for. And if you believe that, I’ve got a bridge to sell you, too,” Brown said. He added later, “We’ll do what we can at the state level. The state is a different kettle of fish than the nation. We don’t have the Federal Reserve, we don’t have the instruments of massive fiscal capacity that the United States government has.”

Spurring growth

The governor said long-term investment in education and infrastructure is important, even as the state has slashed spending for public schools and higher education, along with removing barriers to development.

Still, lawmakers and business leaders said they believe making changes that improve the business environment in California will spur job growth.

“Job creation happens on multiple levels. The state’s role is to make sure we don’t do anything that shrinks jobs,” said Assembly Speaker John Pérez, D-Los Angeles. Pérez is sponsoring a bill, AB29, that will create a permanent Office of Economic Development to assist businesses that want to locate or expand in California.

In the Senate, leaders are looking at laws to shorten and simplify the process to get permits to start businesses or begin new projects, along with easing some environmental regulations. One bill, SB226, would exempt some projects like the installation of solar panels from the state’s environmental regulations, meaning those projects would not have to undergo review and would be built faster