Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-62285 Tue, 23 May 2017 04:33:42 GMT America's Cities Are Running Out of Room http://implode-explode.com/viewnews/2017-05-23_AmericasCitiesAreRunningOutofRoom.html A shortage of homes for sale has bedeviled U.S. house hunters in recent years, so why don't builders build more? One problem is that they're running out of lots to build on--at least in the places that people want to live.

Cities that were sprawling before the Great Recession have begun to sprawl again. Space-constrained cities, meanwhile, have run out of room to build. That reality has spurred developers to focus on center-city neighborhoods where high-density building is allowed--and new units command exceedingly high prices.   

At some point, said Issi Romem, chief economist at BuildZoom, vacant lots in desirable urban neighborhoods will run out. "If you have three days of rations left, you'll be fine on day one, two, three," said Romem, author of new research demonstrating home construction patterns. "On day 4, you have a problem."

Well, this is a little alarmist -- you don't necessarily need vacant lots; you just need inferior properties to demolish and replace with superior ones.

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iehi-feed-62282 Mon, 22 May 2017 15:16:24 GMT Interest-only loans could be 'Australia's sub-prime' http://implode-explode.com/viewnews/2017-05-22_InterestonlyloanscouldbeAustraliassubprime.html High-risk mortgage loans to young families, professionals and other over-extended borrowers amounting to more than six times household incomes could wipe out 20 per cent of the major banks' equity base, institutional investment fund JCP Investment Partners has warned.

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In a proprietary study of the nation's record high-and-growing household debt mountain, the Melbourne-based fund said Irish-style housing losses for the bigger-than-recognised pool of riskier borrowers could wipe out half of the banks' equity capital.

Interest-only loans, said JCP -- which is one of three Australian equities managers appointed by the Future Fund -- could be "Australia's sub-prime".

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Among the biggest concerns is what may happen when households feel they can no longer service their loans, for instance, as borrowing costs are reset higher or those with interest only mortgages are forced to repay the principal as well.

That creates a negative feedback loop -- experienced by Ireland after the financial crisis -- in which stressed borrowers slash their spending, in turn crunching the economy, driving up unemployment and adding to downward pressure on house prices.

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The fund's senior researchers Matthew Wilson and Craig Shephard found that about half of all the nation's mortgage debt was in the hands of borrowers whose debt was more than four times larger than their gross income.

The same borrowers had paid off less than half of their loans, the team found, based on data from several official and private sector sources that adjusted for changes in incomes and the collateral values of their homes.

The average loan-to-income ratio of these heavily indebted households was 6.4, or more than double the old banking "rule of thumb" that mortgage managers didn't lend more than three times a household's income "unless they were doctors".

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JCP calculated how the banks' balance sheets would handle an 2008 Irish-style loss on the high risk loans. It estimated that 50 per cent of the equity of Australian banks would be destroyed by soured loans to these high-risk borrowers.

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iehi-feed-62281 Mon, 22 May 2017 14:58:37 GMT Car loans, low rates, second mortgages: all the ingredients for a new credit crunch (UK) http://implode-explode.com/viewnews/2017-05-22_Carloanslowratessecondmortgagesalltheingredientsforanewcreditcru.html A credit crunch is brewing and when it happens, the UK is going to get hurt. That is the message emerging from senior executives in the financial services industry, who do not think Britain has changed that much since the 2008 credit disaster and the devastating crash that followed. Three developments lie at the heart of this disturbing analysis: spectacular growth in the sale of second mortgages, car loans and credit cards.

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Officials at the Bank have a growing list of concerns. Not only is there the second mortgage problem and the number of car loans: figures show consumer spending on unsecured credit has also rocketed in the last year. In March alone, the amount UK consumers owed on loans and cards grew by £1.9bn, the highest figure in 11 years.

Households are known to have increased their reliance on short-term unsecured loans to buy cars and furniture, and to kit out new kitchens. Some use them to maintain their lifestyle in the face of a decade of flat wages. Unfortunately, another group use credit to pay the monthly rent.

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Try as they might, the UK's two big high street lenders cannot put the financial crisis behind them. Last week, when Lloyds Banking Group was congratulating itself over its return to the private sector, it was still being haunted by the fraud perpetrated at the Reading branch of HBOS, the hotshot lender it rescued in 2008. To add to the pressure, Noel Edmonds, the TV celebrity, is leading the campaign for compensation for the victims of the fraud which took place in the run-up to the financial crisis.

This week, Royal Bank of Scotland will be transported back to those calamitous days of 2008. A high court judge will begin hearing a claim for compensation from investors who backed a £12bn cash call by RBS in April 2008 -- only for the Edinburgh-based institution to be bailed out by taxpayers six months later.

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iehi-feed-62275 Sat, 20 May 2017 19:30:34 GMT Home ownership among young families halves in 20 years (UK) http://implode-explode.com/viewnews/2017-05-20_Homeownershipamongyoungfamilieshalvesin20yearsUK.html iehi-feed-62274 Sat, 20 May 2017 14:35:02 GMT The Housing Moment Investors Dread Is Here http://implode-explode.com/viewnews/2017-05-20_TheHousingMomentInvestorsDreadIsHere.html The May University of Michigan Consumer Sentiment survey showed a six-year low among those who think it's a good time to buy a house and a 12-year high among those who say it's a good time to sell. Disparities of this breadth tend to coincide with break points and that's just where we've landed in the cycle.

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The silver lining in the dynamic that's just beginning to play out is what pricing pressures on the home front imply for the future of household finances -- that is after the recession comes and goes. The cost to rent and buy has never been as high as it is today for the average working young American. The preponderance of apartments constructed in the current cycle has been luxury units. At the same time, private equity investors with deep pockets swooped in and bid up the price of rental homes, leaving many would-be first-time homebuyers and renters alike with no choice but to remain at home with their parents after graduating from college.

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iehi-feed-62272 Fri, 19 May 2017 22:47:09 GMT Get Ready for "Quantitative Tightening" http://implode-explode.com/viewnews/2017-05-19_GetReadyforQuantitativeTightening.html iehi-feed-62269 Thu, 18 May 2017 14:41:12 GMT Households owe record amount, topping pre-recession peak http://implode-explode.com/viewnews/2017-05-18_Householdsowerecordamounttoppingprerecessionpeak.html The Federal Reserve Bank of New York said Wednesday that household debt, which also includes home equity lines of credit, stood at $12.73 trillion in the first quarter. That's above the $12.68 trillion outstanding in the fall of 2008, the previous record. The figure isn't adjusted for inflation or population size.

Even with debt levels back to record heights, analysts note that household borrowing appears more sustainable now than it did nearly a decade ago. Interest rates are lower, and lenders are much more focused on credit-worthy borrowers.

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iehi-feed-62254 Tue, 16 May 2017 13:52:09 GMT Goldman Says Swedish, Kiwi Housing Markets Most at Risk of Bust http://implode-explode.com/viewnews/2017-05-16_GoldmanSaysSwedishKiwiHousingMarketsMostatRiskofBust.html iehi-feed-62251 Tue, 16 May 2017 03:29:02 GMT "Peak China": Chinese Data Misses Across The Board As Housing Bubble Returns http://implode-explode.com/viewnews/2017-05-15_PeakChinaChineseDataMissesAcrossTheBoardAsHousingBubbleReturns.html iehi-feed-62248 Mon, 15 May 2017 22:55:27 GMT Global property bubble is ready to pop http://implode-explode.com/viewnews/2017-05-15_Globalpropertybubbleisreadytopop.html iehi-feed-62228 Thu, 11 May 2017 14:51:12 GMT Six Canadian Banks Cut by Moody's on Consumers' Debt Burden http://implode-explode.com/viewnews/2017-05-11_SixCanadianBanksCutbyMoodysonConsumersDebtBurden.html Canada's dollar and bank bonds declined after Moody's Investors Service downgraded the nation's banks for the first time in more than four years, signalling that soaring household debt combined with runaway housing prices leave the lenders more vulnerable to losses.

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The downgrade of the Canadian banks follows a recent run on deposits at alternative mortgage lender Home Capital Group Inc. that has sparked concern over a broader slowdown in the nation's real estate market as Canadians are taking on higher levels of household debt. The firm's struggles have taken a toll on Canada's biggest financial institutions, which have seen stocks slide on concern about contagion.

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iehi-feed-62227 Thu, 11 May 2017 14:49:41 GMT 'Stagnant' buyer demand puts the brakes on UK housing market | Business | The Guardian http://implode-explode.com/viewnews/2017-05-11_StagnantbuyerdemandputsthebrakesonUKhousingmarketBusinessTheGuar.html iehi-feed-62225 Thu, 11 May 2017 14:34:19 GMT New York apartment concessions rise as rents fall http://implode-explode.com/viewnews/2017-05-11_NewYorkapartmentconcessionsriseasrentsfall.html iehi-feed-62219 Tue, 09 May 2017 20:44:41 GMT Canadian Housing Market Bullishness At Near-Decade Highs -- Melt-Up or Wile-e-Coyote Moment? http://implode-explode.com/viewnews/2017-05-09_CanadianHousingMarketBullishnessAtNearDecadeHighsMeltUporWileeCo.html Expectations for Canada's housing market are heating up, with more than half of respondents in a weekly telephone survey predicting home prices will rise, the first time the measure has topped 50 percent in records dating back to 2008.

The bullishness comes even as a run on deposits at Toronto-based mortgage lender Home Capital Group Inc. leads to heightened scrutiny of a market which policy makers have said is divorced from economic fundamentals. The broad Bloomberg Nanos Canadian Confidence Index fell to 59 in the week ended March 5.

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"Consumer sentiment on real estate has gone from hot to hotter," said Nanos Research Group Chairman Nik Nanos... [The new foreign buyer's taxes] haven't led to more bets on a price decline either, and housing optimists now outnumber pessimists by a factor of five to one.

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Housing was the only upbeat note in the latest survey, with declines in three other major categories of job security, personal finances and the overall economy. The 22.4 percent who saw a stronger economy in six months was the lowest since January.

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iehi-feed-62218 Tue, 09 May 2017 18:33:11 GMT Canadians Are Buying A Record Number of New Cars, With A Record Amount of Financing (INCL. SUB-PRIME) http://implode-explode.com/viewnews/2017-05-09_CanadiansAreBuyingARecordNumberofNewCarsWithARecordAmountofFinan.html ``The uptick in average sale price is due to longer financing terms for buyers. According to the Financial Consumer Agency of Canada (FCAC), Canadians are "increasingly purchasing more car that they can afford," due to longer financing becoming fashionable. The agency notes that average leases have crept up 2 months, every year since 2010. According to the Bank of Canada (BoC), the average loan was 74 months as of 2015. Longer terms bring down monthly payments, but increases the total cost of the loan.

... The right to debt seems to be a topic all Canadians are embracing, and the auto sector is no different. The BoC has estimated that 25% of borrowers are non-prime, which incase you didn't know is Canadian-English for "sub-prime."... The boom of vehicle sales should be an indicator of a healthy economy, but is actually a drag due to the dependence on credit.

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iehi-feed-62215 Tue, 09 May 2017 18:25:13 GMT The Rock-Star Appeal of Modern Monetary Theory http://implode-explode.com/viewnews/2017-05-09_TheRockStarAppealofModernMonetaryTheory.html  onventional wisdom holds that the government taxes individuals and companies in order to fund its own spending. But the government--which is ultimately the source of all dollars, taxed or untaxed--pays or spends first and taxes later. When it funds programs, it literally spends money into existence, injecting cash into the economy. Taxes exist in order to control inflation by reducing the money supply, and to ensure that dollars, as the only currency accepted for tax payments, remain in demand.

It follows that currency-issuing governments could (and, depending on how you lean politically, should) spend as much as they need to in order to guarantee full employment and other social goods

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 "If you eliminate the tax on people working for a living and [let them] keep more money, the average family would have $625 of payroll pay. Why won't politicians do that? Because they believe the tax money is used to make Social Security payments. But that's a mistake." Even so, Mosler [one of the progenitors, and wealthy financiers of MMT] notes, "if anyone would propose that, it's not a big-spending liberal--it's something the Tea Party might propose."

This all makes a lot of sense as long as you abandon the notion that money actually might be something that has to do with wealth -- not that it is an arbitrary government construct. This is, of course, the system we had until the 1970s, when there was still a hard-money backing to the dollar. Assuming that that never comes back (which would be a tragedy, frankly), sure, it makes sense to re-focus priorities, so that there is a UBI, guaranteed jobs, no more QE or ZIRP to line billionaries' pockets, etc. But we worry about the long-term stability of the currency and financial system if any hard link is abandoned in favor of a pure "political" definition of money...

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iehi-feed-62208 Mon, 08 May 2017 20:25:43 GMT Repeat foreclosures in New York have reached an all-time high (HAMP TIME-OUT MOSTLY PROTECTED BANKS) http://implode-explode.com/viewnews/2017-05-08_RepeatforeclosuresinNewYorkhavereachedanalltimehighHAMPTIMEOUTMO.html The number of repeat foreclosure filings in New York City far outstrips that of other major cities like Los Angeles, while New York state is No. 1 for repeat foreclosures, outpacing every other state and the US as a whole.

In a report prepared exclusively for The Post, Attom Data Solutions found that in New York City last year, roughly 4,900 -- or more than half of all new foreclosures filed -- were repeats, up from just 5 percent in 2008.

Statewide, 73 percent of the 49,200 new foreclosure cases -- or roughly 35,916 foreclosures -- over the past 12 months were repeats, up from 20 percent in 2007, according to Black Knight, which collects data reported by servicers.

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"The same owners in the same properties ... are stuck in distress that never seems to resolve," said Daren Blomquist, senior vice president at Attom, adding, "It's more acute in New York than in other markets."

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Analyzing 700,000 loans with a balance of $135 billion at modification, Fitch found a rapid rise in re-defaults on loans modified since 2014, while the cumulative default rate of loans modified in 2015 is the highest of any modification vintage since 2010.

Failed modifications are debt traps for homeowners.

The Home Affordable Mortgage Program (HAMP) put in place by former President Obama in 2009, was supposed to help troubled homeowners remain in their house while working out a new loan with their lenders.

However, in practice, it was a boom for servicers, who placed people in the program and collected fees, while providing little debt relief.

"HAMP was a [government] forbearance program that left people at the edge of the cliff," said Damon Silvers, former deputy chair of the Congressional Oversight Panel for the Troubled Asset Relief Program (TARP).

Principal reductions on the debt could help stem the rising tide of re-defaults.

But Obama chose to structure the modification programs to protect bank balance sheets rather than force lenders to write down bad loans.

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iehi-feed-62207 Mon, 08 May 2017 15:37:23 GMT Spain's Government Presses Property-Bubble Rewind Button http://implode-explode.com/viewnews/2017-05-08_SpainsGovernmentPressesPropertyBubbleRewindButton.html iehi-feed-62206 Mon, 08 May 2017 14:51:11 GMT NY Foreclosure Mills Are Using A New Tactic http://implode-explode.com/viewnews/2017-05-08_NYForeclosureMillsAreUsingANewTactic.html iehi-feed-62194 Fri, 05 May 2017 14:47:59 GMT Even Wealthy feel pinch of housing costs as one in four Australians face mortgage stress http://implode-explode.com/viewnews/2017-05-05_EvenWealthyfeelpinchofhousingcostsasoneinfourAustraliansfacemort.html