A report from Mises.org. “This December’s Federal Open Market Committee (FOMC) meeting might be the last time we get to hear a Q&A session from Chair Powell this year. Said near the conclusion of the December meeting, on p.26 of the transcript reads: ‘What I’m saying is there’s a sense among some that you wanted inflation, this is what you wanted, how do you like it, you know?’”
From Yahoo Finance. “Since the pandemic began, the nation’s central bank has aggressively printed trillions of dollars to keep the U.S. economy afloat. Doing so has ballooned the Federal Reserve’s balance sheet to nearly $9 trillion. ‘I have no idea what a normal balance sheet looks like anymore,’ said Federal Reserve Governor Christopher Waller on Dec. 17. Waller added that he would like to see the Fed balance sheet, which is about 35% of total U.S. GDP, reduced to ‘something like 20%,’ which would be roughly $6 trillion.”
The American Enterprise Institute. “Should the government subsidize buying houses that cost $1.2 million? The answer is obviously no. But the government is going to do it anyway through Fannie Mae and Freddie Mac. The Federal Housing Finance Authority (FHFA) has just increased the size of mortgage loans Fannie and Freddie can buy (the “conforming loan limit”) to $970,080 in ‘high cost areas.’ With a 20% down payment, that means loans for the purchase of houses with a price up to $1,212,600.”
“Similarly, the Federal Housing Administration (FHA) will be subsidizing houses costing up to $1,011,250. That’s the house price with a FHA mortgage at its increased ‘high cost’ limit of $970,800 and a 4% down payment. By pushing more government-sponsored loans, Fannie, Freddie, its government conservator, the FHFA, and sister agency, the FHA, are feeding the already runaway house price inflation. House prices are now 48% over their 2006 Housing Bubble peak.”
The Jackson Hole News and Guide. “My parents left Iowa and Arkansas in the 1970s to head West. In 1974, they moved to Telluride, Colorado, then a busted mining town aspiring to become another Aspen. That first winter they lived in the back of a van while they remodeled an old mining shack, which they purchased for $20,000. Neither had a college education, but in those days a degree wasn’t required to aspire to a middle-class life.”
“My childhood home in Telluride, although no longer in the family, recently appraised for just over $5 million, representing a 24,900% increase since my parents first purchased it. Wages, in turn, have been stuck in neutral for decades. And while wandering hippies may still show up in vans, few are able to purchase property of their own unless they’re packing a trust fund.”
The Pensacola News Journal in Florida. “Recent months have shown some promise, though, as inventory continues to climb and competition gets a little less fierce in the buyer’s market. Century 21 AmeriSouth Realtor Grey Burge said he expects somewhat of a leveling off. ‘I think the super red-hot feverish pitch we saw earlier this year that ran its course between March and July, I don’t think we’ll see that again next year. I think we’ve peaked as far as absolute frenzy goes, but I think it will stay strong and stay a seller’s market for some time, certainly the next six months or so,’ he said.”
From SocketSite in California. “The net number of homes on the market in San Francisco dropped another 18 percent over the past week to 600, representing 45 percent fewer homes on the market than at the same time last year but 50 percent more than there were prior to the pandemic and over 150% more than there were at the end of 2015.”
“At the same time, the net number of single-family homes and condos in contract across San Francisco (470) dropped 9 percent over the past week and is now 24 percent lower than at the same time last year with an average list price per square foot of the homes which are in contract having ticked down another 3 percent over the past week to $940 (which is 16 percent lower than the average asking price of the homes which remain on the market, 28 percent of which have already been reduced at least once).”
From News.com.au. “When the mining boom kicked off shortly after the impact of the global financial crisis began echoing around the world, some believed that it would last for decades and provide Australia with a veritable magic pudding of economic prosperity. Between 2011 and 2013, China used more cement than the United States did in the entire 20th century, as it built homes for tens of millions of people and expanded its infrastructure at the fastest pace in history.”
“As housing sales remain weak, property prices fall and the amount of unsold inventory continues to rise. For Chinese local government this is of great concern. With an average of roughly 40 per cent of Chinese local government revenue coming from the sale of land, the souring mood toward property purchases should be hitting their bottom line hard. Chinese local governments have turned to a novel but extremely risky solution.”
“In short, effectively buying their own land to ensure a stable stream of revenue. By using local government financing vehicles (LGFVs) which are state owned enterprises, local governments can purchase their own land with borrowed money.”
“‘These LGFVs are controlled by local governments and borrow under their guarantees, so that this effectively means that local governments are borrowing from the banks and treating the proceeds as if they were revenues,’ said Professor Michael Pettis of Peking University. ‘I am surprised this is allowed, but I guess local governments have little choice if they can’t otherwise sell enough land to meet revenue needs. But this represents a doubling down on the property sector. Why?’”
The South China Morning Post. “High-net-worth customers, who were among the biggest buyers of high-yield bonds issued by mainland Chinese property developers, have become some of the worst-hit investors amid the companies’ financial distress, leaving them reluctant to return to the market until the second half of 2022, according to analysts. ‘The credit crunches of mainland developers have shown no signs of improvement,’ Ng said. ‘Many of them need to sell their flats and other assets at big discounts.’”