Posts Tagged real estate
Turnaround In U.S. ISM Contradicts Analysts Best Guess
Posted by Oksana Grebenjuk in Fund Markets on Ноябрь 4th, 2010
Fixed income trading got off to a blistering start in a week where news events are likely to determine the fortunes for bond prices for the remainder of 2010. The first in a series of critical surveys showed the Chinese manufacturing expansion continued and is likely to be followed by more of the same around the world extending also to the service sector.
And while the diffusion indices are a positive influence on risk sentiment they will not be enough to stop more quantitative easing from either the Fed or the Bank of England. Markets continue to rally ahead of the FOMC statement precisely because the central bank’s action is a growth-positive event. On Friday the October jobs report may yet show a deeper thaw in the labor market if the latest initial claims reports are anything to judge by.
Eurodollar futures – The December 10-year note futures contract has erased an initial 10-tick gain, currently sitting at 126-10 to yield 2.61%. The manufacturing sector picked up steam throughout October with the ISM survey rising further into expansion territory rather than falling. The FOMC’s two-day meeting starts on Tuesday and markets may be slow until then. For now the bias is towards lower yields in anticipation of a large amount of quantitative easing. Ever since the Fed said it would survey market participants over their sense of direction in light of the magnitude of the actions of the central bank, dealers have geared up for more rather than les. Eurodollar futures have also pared earlier gains once again with implied yields now higher lower by a couple of pips across the curve. Read the rest of this entry »
What To Expect From QE II
Posted by Oksana Grebenjuk in Trading Markets on Октябрь 29th, 2010
Nearly everyone in the game expects Ben Bernanke’s gang to announce another round of quantitative easing (defined as the direct purchase of bonds) at the conclusion of the November 3rd FOMC meeting. However, given that this particular tool has a very brief history of use, there is quite a bit of discussion over what we should expect from the program.
First, the expectations in the markets are for the FOMC to announce the commencement of a bond buying program that will total somewhere in the vicinity of $300 billion to $500 billion by the end of January. Anything short of $500 billion could be viewed as a disappointment to traders as the market is now clearly set up to «sell the news.»
Given the Fedspeak that has been provided recently, we would expect the Fed to say that they will assess the situation at the end of January and decide from meeting to meeting whether «additional accommodation» is needed. Thus, look for the FOMC to start small and be «data dependent» going forward. However, it is important to understand that Ben Bernanke is likely to err on the side of too much stimulus so as to avoid any possibility of a Japan-style deflationary cycle.
So, what’s the plan? We expect to see the FOMC make purchases of bonds in the 2-year to 10-year range. The goal is to push longer-term interest rates lower in the hope that investors will stop hoarding short-term bonds and take more risks by moving out the yield curve, take on more credit risk, and investing in equities and/or real estate. Read the rest of this entry »
Housing’s a wreck. Builders rally. Huh?
Posted by Oksana Grebenjuk in Investing on Август 25th, 2010
Existing home sales plummeted in July. New home sales sunk as well, hitting a record low. And even though luxury homebuilder Toll Brothers reported a surprise quarterly profit Wednesday, that was largely due to a tax break. Sales were down slightly from a year ago and orders dropped 16%.
Despite this, some investors appear willing to once again bet that the housing market has hit bottom. Shares of Toll Brothers (TOL) were up more than 2% in early afternoon trading.
The S&P SPDR Homebuilders (XHB) exchange traded fund, which holds other builders such as KB Home (KBH) and Pulte (PHM), as well as building materials makers and home improvement retailers, rose 1.5%.
It’s a strange reaction to say the least. The broad market is down because of more gloomy housing data. But the companies that are most directly tied to the health of the housing market are up?
It doesn’t make a heck of a lot of sense. It may be a case of traders betting for the umpteenth time that this is finally a bottom for housing.
That’s a mistake. Now that the tax credit for homebuyers has expired, it’s difficult to imagine what can juice the real estate market again in the near-term. Read the rest of this entry »
Hedge funds, private equity expect tax hike
Posted by Oksana Grebenjuk in Budget on Май 19th, 2010
Private equity, real estate and hedge fund managers are increasingly resigned to a tax increase on their profits as U.S. lawmakers get set to vote next week on a long-delayed measure.
At issue is a change in the tax treatment of profits earned by partnership fund managers, known as «carried interest.» The measure would treat the profits as ordinary income subject to a 35 percent rate, more the double the 15 percent rate they are currently taxed at as capital gains.
The tax change, which lobbyists have managed to beat back for three years, has gained steam as lawmakers hunt for revenue to fund other popular tax breaks for business that have expired. Many lobbyists and former opponents now see passage of an increase as inevitable.
«Many people are resigned because it is round four,» said Francois Hechinger, a partner at BDO Seidman advising private equity and venture capital clients..
He added that they are still putting up a fight to try to soften the impact. «If it was really their choice they wouldn’t give up on it at all.»
The $20 billion or so of revenue that the tax change could raise over a decade would help pay for a politically popular group of tax breaks for individuals and business, including a corporate research and development tax credit. Read the rest of this entry »
For Landlords, the Numbers Are Starting to Look Better
Posted by Oksana Grebenjuk in Investing on Март 5th, 2010
Home prices are falling, rents are tumbling, and apartment vacancies are rising. So why are thousands of small investors becoming landlords?
Because real-estate prices have fallen much faster than rents, the math of buying a rental has actually improved substantially in most parts of the country. Money invested in an apartment complex today typically generates annual returns of 7% to 8% right off the bat, up from less than 6% at the peak of the housing bubble in 2006.
If your property appreciates in value or rents rise, you could end up with double-digit annualized returns when you sell it. But higher returns usually come with higher risks. If you overpay for a rental property or you buy in the wrong market at the wrong time, you can lose a lot of money.
In general, landlords should pick communities where real-estate prices and rents appear to have nearly bottomed out, and jobs are stabilizing. Some of the best deals are in places like Fort Worth, Texas, or Columbus, Ohio, where prices never went wild. Markets like Las Vegas and Phoenix, both plagued by overbuilding, and Detroit, hurt by auto-industry woes, still look dicey.
But other markets like San Francisco or Chicago can still be attractive for landlords who find the right neighborhoods. Fred Bertucci, 50 years old, has been investing in small apartment properties in the Chicago suburbs since 1990. In August, he and his business partner, Kevin Moriarty, 54, bought a six-unit apartment house out of foreclosure for $280,000. It brings in about $25,000 per year in net operating income, he says, or about a 9% yield on the dollars invested. That’s up from roughly a 5% yield several years ago when prices were higher, he says. Read the rest of this entry »
The worst is yet to come
Posted by Oksana Grebenjuk in Budget, Favourites on Февраль 17th, 2010
Over the next few years, a wave of commercial real estate loan failures could threaten America’s already-weakened financial system. So warns a new report from the Congressional Oversight Panel as part of its oversight of the Troubled Asset Relief Program, highlighting yet one more hurdle for this country’s fragile economy.
The panel, chaired by Harvard law professor Elizabeth Warren, says it remains «deeply concerned» that commercial loan losses could jeopardize the stability of many banks, particularly the nation’s mid-size and smaller banks. Read the 183-page report for yourself here.
Worries about CRE loans — those loans taken out by developers to purchase and maintain shopping malls, offices, hotels, and apartments — have been simmering for months, as we noted in an October article. See «How Banks Will Fare in a Commercial Real Estate Crash.»
The problems now plaguing commercial real estate have no single cause, and the panel notes that the loans most likely to fail were made at the height of the real estate bubble when commercial real estate values had been driven above sustainable levels and loans.
«[M]any were made carelessly in a rush for profit,» the panel said. Read the rest of this entry »
China vows to keep «hot money» out of property market
Posted by Oksana Grebenjuk in Investing on Февраль 12th, 2010
China vowed on Sunday not to let foreign speculative investment affect the property market, the latest expression of official concern that real-estate prices are racing ahead too fast.
The directive from the State Council, China’s cabinet, will serve as a guideline for local authorities and ministries, including the People’s Bank of China and the China Banking Regulatory Commission, to work out detailed policies.
«Relevant departments must enhance monitoring of loans and cross-border investment to prevent illegal inflows of capital into the property market and to avoid the impact of overseas hot money on China’s real-estate market,» the cabinet said.
It said the central bank and banking regulator should step up oversight and «window guidance» of mortgage lending.
About one-sixth of China’s nearly 10 trillion yuan ($1.5 trillion) in new loans last year flowed into the property sector.
Concerned that a property bubble could stir social and economic instability, Beijing has vowed to combat overly fast price increases, although its moves to date, such as restricting sales tax exemptions, have been relatively mild. Read the rest of this entry »
China takes new steps to curb bank lending
Posted by Oksana Grebenjuk in Banks on Январь 15th, 2010
China took new steps Tuesday to control bank lending, ordering institutions to set aside more reserves in a move to avert a surge in credit that Beijing worries might fuel inflation or asset price bubbles.
China’s nascent rebound from the global crisis was fueled by a flood of lending by state-owned banks last year. Bankers cut lending under government orders toward the end of 2009 but regulators worry credit might rebound this year.
The move indicates Beijing is confident growth can be sustained and has shifted focus to preventing financial excesses and economic overheating. The government is forecasting growth of 8.3 percent for 2009, up from a low of 6.1 percent for the first quarter of the year.
The central bank raised the amount of reserves that banks must hold by 0.5 percent to 15 percent of their deposits. Also Tuesday, the bank raised interest rates paid on one-year bills for the first time since August to absorb money from the market and cool credit growth.
«This series of moves by the central bank provides a clear sign that policymakers are following through on their pledge to guide credit in order to pre-empt rising inflation and avoid asset price bubbles,»said Jing Ulrich, chairwoman of China equities for J.P. Morgan, in a report. Read the rest of this entry »
Surprise! The Fed says don’t blame the Fed
Posted by Oksana Grebenjuk in Budget on Январь 4th, 2010
The Pope is considered to be infallible. Apparently, those who hold the title of Federal Reserve chairman want to be viewed that way as well.
Fed chair Ben Bernanke defends the decision by his predecessor Alan Greenspan to keep interest rates super low following the 2001 recession, saying that the Fed’s monetary policies were not the cause of the housing bubble.
In a speech Sunday, Bernanke said that it was the availability of exotic loans that allowed people who really couldn’t afford a home to get a mortgage that was the culprit, not the fact that rates were at then-historic lows.
By absolving the Maestro of any blame for the credit binge that led to the Great Recession, Bernanke also appears to be sending a strong message to Fed critics and the financial markets as well.
Rates, which have been stuck near zero since December 2008, are likely to stay there for some time — and Bernanke may be suggesting that this won’t lead to a repeat of last decade’s sins. Read the rest of this entry »
Buying at the Bottom
Posted by Oksana Grebenjuk in Investing on Июнь 18th, 2009
As the real-estate market heads for the ground, certain investors find themselves uttering some surprising words: «I’ll take two.»
Davis Nguyen thought long and hard about investing in foreclosed homes, but plunging interest rates convinced him that it was time to dive into the housing market.
So the San Jose, California, man bought not one, but two investment properties.
«I decided to jump in because the sales price is reasonable to make a long-term investment,» Nguyen said. «I’m looking for something that is easy to rent because I need to make a little bit of profit.»
Since last fall, Nguyen began looking for three-bedroom, two-bath homes ranging in price from $290,000 to $350,000 in three zip codes: 95121, 95148, and 95112. Read the rest of this entry »
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