Economy keeps Americans from moving
2009/03/20, 4:51 pm
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Americans stayed put last year, according to U.S. Census Bureau data released today.

During the last decade, millions of people living in colder and higher-cost areas sold their homes and moved to places like Florida and Nevada in search of cheaper homes and better jobs. Last year, with homes hard to sell and jobs harder to find, people stayed in older metro areas and populations in gritty cities like New York City and Philadelphia were more stable.

For instance, a net of 15,000 people left Cleveland for some place else in 2007-2008, compared with a net of 21,000 between 2005-2006. Sunbelt metro areas affected the most were those with the worst housing markets. For instance, the Phoenix area gained 50,000 domestic migrants in 2007-2008, half as many as it did two years earlier. Las Vegas increased by a net 14,000 domestic migrants, two-third fewer than two years ago.

Fewer new residents are depressing economies in troubled Sunbelt cities. Not only is it hard to sell the large number of unsold homes when there are fewer newcomers, but also a disproportionate share of existing residents are employed in the construction and real estate industries.

Here are some more tidbits from the data:

Sixty of Michigan’s 83 counties lost population.

Raleigh-Cary, N.C., and Austin-Round Rock, Texas, were the fastest-growing metro areas with growth rates of 4.3 percent and 3.8 percent, respectively.

The five metros with the biggest numerical gains were Dallas-Fort Worth, Houston, Phoenix, Atlanta and Los Angeles.

New Orleans’ population grew 2 percent to 1.1 million, still less than its pre-Hurricane Katrina population of 1.3 million.

Source: The Wall Street Journal, Conor Dougherty, and The Associated Press, Hope Yen (03/19/2009)


US real estate a bargain for Chinese
2009/02/17, 3:31 pm
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With U.S. home prices so depressed, the Chinese are coming
The Associated Press
updated 1:37 p.m. ET, Thurs., Feb. 12, 2009
BEIJING – Beijing lawyer Ying Guohua is heading to the United States on a shopping trip, looking not for designer clothes or jewelry, but for a $1 million home in New York City or Los Angeles.

He expects to get a bargain. Ying is part of a growing number of Chinese who are joining tours organized especially for investors who want to take advantage of slumping U.S. real estate prices amid a financial crisis.

“It’s a great time to buy because of the financial crisis, and houses in large cities like New York and Los Angeles will definitely go up in a few years,” Ying said. The home is an investment, but he’s also planning long-term: He hopes his 5-year-old son might use it if he goes to college in the United States.

While China’s ultra-rich have been buying property in the U.S. for years, the buying tours are new, made attractive by still-rising Chinese income levels and American real estate prices that have been falling for two and a half years.

More than 100 Chinese buyers have joined such tours since late 2008, according to Chen Hang, the China-born vice president of real estate at Fortune Group. The Pittsburgh, Pennsylvania, company shows foreclosed commercial property to Chinese buyers.

“The Chinese are going to seize the opportunity to take advantage of some great deals,” Chen said.

Ying, the Beijing lawyer, is one of 40 investors going to New York, California, Boston and Las Vegas on a Feb. 24-March 6 tour organized by Beijing-based SouFun Holdings Ltd., a real estate Web site. SouFun plans to show participants foreclosed properties priced at $300,000 to $800,000.

“We never thought these tours would garner such interest, but we’ve had an overwhelming response,” said SouFun CEO Richard Dai. “Before, we heard of Chinese or Hong Kong movie stars buying homes in the U.S., and now more and more Chinese can afford to have the same.”

The home-buying opportunities mirror a larger trend. Cash-rich Chinese companies are looking to buy resources made suddenly cheaper by the downturn or companies suffering under the global debt meltdown. On Thursday, the Aluminum Corp. of China, also known as Chinalco and the world’s leading aluminum producer, invested $19.5 billion in debt-burdened global miner Rio Tinto Group — China’s biggest overseas investment to date.

Because the authoritarian government has imposed controls limiting China’s exposure to international capital flows, the country has largely avoided the worst of the global financial crisis. Meanwhile, high-level incomes have continued to rise. China had the world’s fifth-largest population of millionaires in 2008 with 391,000, up 20 percent from the previous year, according to Boston Consulting Group.

But Chinese with money in the bank have few good investment options at home. Real estate prices have cooled and stock prices peaked in October 2007 after a two-year boom that saw shares rise six-fold in value. After years in which foreign money poured into China to take advantage of the hot economy, economists estimate that tens of billions of dollars began leaving the country in the last three months of 2008 as Chinese investors began bargain-hunting.

Chinese buyers are looking at both commercial property and homes to rent out or use on business trips. And the U.S. has plenty of unsold homes to offer — 3.67 million as of the end of December, according to the National Association of Realtors.

Many buyers are unfamiliar with U.S. markets, so they focus on well-known ethnic Chinese neighborhoods, according to John Wu, president of the Chinese American Real Estate Professionals Association in San Gabriel, Calif.

Lion’s Property Development Group in New York City organizes Chinese groups to visit New York homes. The company also treats visitors to Broadway shows and famous restaurants in hopes that they will take to the city and buy a $1 million to $2.5 million home.

Trips are pricey. Ying, the lawyer, paid $2,200 — nearly the equivalent of the annual income for many Chinese — plus airfare.

Participants in a 10-day January tour organized by Beijing-based Environment International Travel Agency had to show proof of an annual income of at least $30,000 and that they owned a car and property in China.

A real estate developer from the southern city of Changsha said he spent $3,500 for the 10-day trip to view $500,000 to $1 million homes, and it worked.

He found a house in California’s Silicon Valley that he planned to buy for his 20-year-old daughter, a university student in Boston who plans on attending graduate school in the Bay area.

“My daughter’s monthly rent is $1,000, so it makes sense to buy a place, because I’m getting a return rather than throwing money away,” said the developer. He would talk on condition that he be identified only by his surname, Zeng.

The price of the house, he said, was $1 million, compared with $1.3 million before the crisis in early 2007.

“The price is low now, but it’s in a good neighborhood with breathtaking views, so it will definitely appreciate,” he said.

Clash of the Utopias
2009/02/12, 12:19 am
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“When the Speyers bought Stuyvesant Town for over $5 billion, they were buying one of the last refuges of the Manhattan middle class. And remaking it was harder than it looked.”

Geithner unveils new bank rescue plan
2009/02/10, 5:02 pm
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Geithner unveils new bank rescue plan
At long last, the Treasury Secretary has announced how the Obama administration will try to stabilize the financial sector.
Colin Barr, senior writer
Last Updated: February 10, 2009: 11:46 AM ET
NEW YORK (Fortune) — Treasury Secretary Tim Geithner sketched out the broad strokes of the latest government attempt to stabilize the financial sector Tuesday morning.

Speaking in the Cash Room at the Treasury Department in Washington, D.C., Geithner introduced a four-point plan that aims to restart the flow of credit to businesses and consumers.

The administration didn’t put a price tag on the new plan and said it won’t ask Congress for more money, at least right away.

“Instead of catalyzing recovery, the financial system is working against recovery. And at the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it,” Geithner said. “It is essential for every American to understand that the battle for economic recovery must be fought on two fronts. We have to both jumpstart job creation and private investment, and we must get credit flowing again to businesses and families.”

The key points in the administration’s new Financial Stability Plan include:

Testing the health of big banks to weather an even deeper economic downturn. Geithner said the Treasury will “stress-test” the biggest banks and provide capital to those that need it, as the nation sinks deeper into its worst recession in decades.

He said the stress test will apply to institutions with more than $100 billion in assets – a list that comprises 13 banks, from giant JPMorgan Chase (JPM, Fortune 500) to Cleveland’s KeyCorp (KEY, Fortune 500), according to a report from analysts at the Stanford Group in Washington.

Analysts say big U.S. banks could use at least $1 trillion in new capital as job losses mount and more borrowers default on mortgage, auto and credit card loans. But Geithner said the administration won’t ask Congress now for more money – raising the question of how much capital it actually expects to provide.

Making credit more available to consumers and businesses. The Treasury will provide $100 billion in seed money to expand the Federal Reserve’s Term Asset-Backed Securities Loan Facility, in which investors in bonds backed by credit card and other loans can swap those bonds for Treasury securities, enabling them to get additional financing.

The move – which could create as much as $1 trillion in financing for consumers and businesses – shows the government is eager to bolster the capital markets, which provided a large percentage of funding for consumer loans before the bond markets seized up in late 2007.

Creating a private-public partnership to take toxic assets off banks’ balance sheets. Policymakers believe clearing bank balance sheets of badly deteriorated loans and securities is a prerequisite for restoring the normal flow of credit into the economy. Geithner said the plan will aim initially to use public financing to create as much as $500 billion in private sector buying capacity, with the prospect of an expansion to $1 trillion down the road.

Observers say drawing private capital back into the market is a key objective of any workable plan.

“Because the new program is designed to bring private sector equity contributions to make large-scale asset purchases, it not only minimizes public capital and maximizes private capital,” the Treasury Department said in a fact sheet about the plan. “It allows private sector buyers to determine the price for current troubled and previously illiquid assets.”

It remains to be seen, however, how the administration can break the stalemate between banks that are holding troubled assets at one price and investors who would buy only at a lower one.

Addressing the housing crisis. The Fed and Treasury will commit $50 billion to reduce mortgage payments and establish loan modification guidelines. Firms that receive federal aid will have to commit to participate in foreclosure mitigation plans, the Treasury Department said.

The administration said it will soon announce a comprehensive housing plan, which will lean in part on the Fed’s efforts to drive down mortgage rates by buying mortgage-backed securities issued by government-sponsored mortgage companies Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

The new financial rescue plan comes at a tricky time for the Obama administration.

Economic fundamentals are in steep decline around the globe, with the U.S. having lost 598,000 jobs in January and more than 3 million since the recession started in late 2007. Economists have called on governments to expand their spending to avoid a downturn as severe as the Great Depression.

But the $800 billion-plus fiscal stimulus plan championed by congressional Democrats has won little support from Republicans. Many of them say current stimulus proposals will be wasteful and ineffective.

Meanwhile, the government’s first effort at righting the financial problems – the Bush administration’s Troubled Asset Relief Program, which pledged some $350 billion to banks and other big companies starting in October – has been criticized as a giveaway to well-connected financial interests.

Geithner admitted Tuesday that the shortcomings of the first half of TARP are weighing on Americans’ minds.

“Our challenge is much greater today because the American people have lost faith in the leaders of our financial institutions, and are skeptical that their government has — to this point — used taxpayers’ money in ways that will benefit them,” Geithner said.

“We believe that the United States has to send a clear and consistent signal that we will act to prevent the catastrophic failure of financial institutions that would damage the broader economy,” he added.

The Obama administration has said it will tighten the terms of further aid to financial companies and demand greater accountability for how taxpayer funds are used. Last week, the administration unveiled a plan to restrict CEO pay at firms receiving government assistance.

Geithner didn’t ask Congress for additional funds Tuesday, though he suggested such a request could come down the road. Observers say the government will need much more money to fill the holes in the financial system before an economic recovery can take place.

“I want to be candid: this comprehensive strategy will cost money, involve risk, and take time,” Geithner said.

First Published: February 10, 2009: 11:12 AM ET
Private capital: the bailout wildcard

On the verge of new bailout

Rescue tally in the trillions – so far

Find this article at:

2 out of 3 Americans support the $15,000 tax credit, polls say
2009/02/10, 1:39 am
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(News Source: NAHB)

Washington, DC–Two-thirds of Americans support a $15,000 home buyer tax credit now being considered by Congress as part of its economic stimulus package and believe it will be effective in stimulating home sales, according to results from a new nationwide survey.

“This survey reinforces our view that the $15,000 home buyer tax credit in the Senate stimulus package will successfully tackle the housing and economic crisis head-on,” said David Crowe, chief economist of the National Association of Home Builders (NAHB).

The national telephone survey was conducted by Voter Roll Call of Verona, N.J. on Feb. 8.

The survey of more than 1,200 registered voters found that one-third of all respondents and 61 percent of renters would be more likely to buy a home if the $15,000 home buyer tax credit were to be enacted into law.

“This is extremely significant because normally in any one year only about 5 to 7 percent of households purchase a home,” said Crowe. “This is more evidence that this temporary, timely and targeted tax credit would trigger home sales, end the free-fall in the housing market, generate new jobs and help lead the economy back to higher ground.”

In addition, 64 percent of respondents said it was important that the $15,000 home buyer tax credit be included in the final package that is signed into law.

The $15,000 home buyer tax credit will push folks off the fence the day the bill is enacted, helping to stop house price declines and bring confidence back to the housing market, added Crowe. “Congress must make sure that the full $15,000 tax credit remains in the final stimulus package.”

Senate modifies homebuyer tax credit
2009/02/09, 7:11 pm
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Senate Modifies Homebuyer Tax Credit

During debate on the stimulus bill, Senator Johnny Isakson (R-GA) offered an amendment that significatnly expands the homebuyer tax credit. The credit would be $15,000 and would be available to all purchasers of a principal residence, not just first-time homebuyers. The legislation is still in flux and must be reconciled in a House-Senate conference. The chart attached compares current law with the House and Senate versions of the bill.

Where home prices are headed next
2009/02/09, 2:47 pm
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Where home prices are headed next
Want to know what your home will be worth this time next year? Check out these home price forecasts for the 100 largest U.S. markets, from Money Magazine.
Last Updated: May 8, 2008: 5:56 PM EDT
(Money Magazine) — The housing implosion is nowhere near over. In 75 of the 100 top U.S. cities, prices are expected to fall in the next 12 months according to Fiserv Lending Solutions.

The S&P Case/Shiller Home Price Index, which tracks 20 of the largest housing markets, showed prices plummeting by 12.7% in the 12 months ending February. That’s the biggest fall since the index began tracking prices in 2000.

Meanwhile, foreclosure filings more than doubled in the first three months of 2008, spiking 112%. So far this year 156,463 families have lost their homes to repossessions. Many markets won’t hit bottom till late 2009 or even 2010.

Pity the residents of Stockton, Calif., whose homes are likely to lose more than half of their 2006 value. But if you happen to live in Texas, congratulations: The housing tornado passed you by.