But youth unemployment is going to be a big problem in the coming months, according to the Wall Street Journal. Blame Mall Madness!
A retail-industry shakeout has made hourly jobs at chains such as The Gap and Macy’s hard to come by for the summer. A forecast from outplacement firm Challenger, Gray & Christmas suggests that the creation of retail jobs, which have typically accounted for a quarter of teenage employment, won’t pick up until back-to-school shopping gains steam in late July.
Americans Taking Cash Out of Their Homes
It’s great for the mortgage business.
Americans are refinancing, but in the process they are taking cash out at levels not seen since the financial crisis.
Nearly half of borrowers who refinanced their homes in the first quarter chose the cash-out option, according to data released this week by Freddie Mac. That is the highest level since the fourth quarter of 2008.
The Wall Street Journal reports cash-out level is still well below the almost 90 percent peak hit in the run-up to the housing meltdown. But it is up sharply from the post-crisis nadir of 12 percent in the second quarter of 2012.
“Consumer debt prices are fairly attractive, and the prospect of higher mortgage rates — and a change in the mortgage interest deduction on some lawmakers’ minds — may be increasing the allure of the cash-out transaction,” says the Collingwood Group Managing Director Tom Booker. “For those with education debt, this is an opportunity to lower their interest rate and create a federal tax deduction. In this case, swapping education debt for home equity may strengthen the household cash flow. In a bullish phase, rising home values can be the gift that keeps on giving.”
In a cash-out refi, a borrower refinances an existing mortgage with a new one, typically at a lower borrowing cost, that has a higher principal balance than the existing one. This allows the homeowner to pay off the old mortgage and still have cash left over for other uses.
The growing popularity of cash-out refis has helped buoy refinance activity. After booming for several years, demand for refinance mortgages had begun to slow as the Federal Reserve began increasing short-term interest rates and longer-term bond yields moved higher.
Regulators Treading Slowly But Surely Into FinTech
FinTech has no doubt changed the face of the financial services industry in the U.S., but experts are beginning to question how it will impact regulation.
“It has ended banking as we know it,” said Chris Church, chief business development officer of Digital Asset, at an International Monetary Fund meeting this year.
Another expert, Marco Santori, partner at law firm Cooley, spoke at another conference and said, “FinTech will hinder regulatory efforts because it is based on a decentralized model.”
“Regulators are likely to fail not only because they lack technical expertise regarding FinTech, but also because they have always been targeting nodes in the system and never had to face such a peer-to-peer network,” Santori added.
According to reports, this trend has the federal Office of the Comptroller of the Currency (OCC) examining how to navigate regulation in the age of FinTech. Last year the office published a report aimed to guide regulators in support of financial innovation and launched the Office of Innovation in an effort to better understand how that innovation is shaping the nation’s financial services sector.
The OCC also issued a draft licensing manual last March to help some FinTechs obtain a limited banking license. But those efforts, reports said, have led some industry players to call into question how large of a presence regulators should have among FinTechs that aren’t technically banks, with some critics claiming the OCC could stifle innovation by being too heavy-handed in the industry.
Only weeks after the OCC issued that manual, reports emerged that a lawsuit was filed against the office. The Conference of Bank State Supervisors launched the legal action, claiming the OCC is overstepping its authority over state-level regulators.
The lawsuit reflects a broader debate at play calling into question the balance between state and federal financial regulation, compounding broader debates over how these authorities should approach FinTech regulation overall.
read more: PYMNTS.com
EU Sets Guidelines for Members Luring London Finance Firms After Brexit
The European Union’s securities watchdog is moving to prevent national governments using differences in regulations across the bloc to lure business forced to relocate from London because of Brexit.
The Paris-based European Securities and Markets Authority released Wednesday nonbinding guidelines for national regulators on handling financial firms moving from the U.K. to stay in the EU’s single market.
The guidelines address a growing conflict: competition among the remaining 27 EU countries to lure banks, asset managers, and insurers in a bid to bolster local economies and amplify national prestige.
“The EU27 have a shared interest in building a common approach to dealing with relocating firms,” said ESMA Chairman Steven Maijoor. He said firms moving from the City of London need to be subject to the same standards of supervision across the bloc to avoid regulatory competition among remaining member states.
ESMA set out nine guidelines that national authorities should apply before granting licenses to firms seeking to relocate. Under the conditions, ESMA warned that obtaining authorization takes time and urged companies to start the process “as early as possible.”
One concern among EU regulators is that U.K. firms will set up shell or “letterbox” entities on the continent to retain market access. ESMA said so-called delegation arrangements — in which firms could keep substantial business in the U.K. — had to be strictly supervised.
As such, the watchdog calls for national supervisors to scrutinize the number of staff located in branches and to reject requests where the majority of business would be handled outside of the EU.
ESMA said companies should expect to relocate executives, and that authorities should ensure such senior managers “work there to a degree proportionate to their envisaged role, if not on a full-time basis.”
Since March, Valdis Dombrovskis, the EU financial services chief, has expressed concern over divisions and suspicion among the EU27 as they compete to lure business.
The bidding war among countries to host the London-based European Banking Authority, the bloc’s top financial regulator, is one example of continental competition for the spoils of Brexit.
EU officials said they have heard criticisms from some EU countries that others were offering lax enforcement of rules to make their jurisdictions more attractive to banks and financial institutions looking to stay in the bloc.
In response, ESMA warned national authorities against handing out licenses “where the activity carried out indicates clearly that the entity has opted for the legal system of a member state for the purpose of evading the stricter standards in force in another member state.”
read more: Wall St Journal
Cities Running Out of Room
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.”
Historically, cities grew outward, as builders developed tracts on the periphery — then filled in the land between various developments over time. When these so-called expansive cities of the South and Southwest run out of infill land on which to build, developers simply pushed out farther.
Some of these cities, like Austin and Nashville, have seen downtown boomlets. But more broadly, the building trends in those metros looks more like Dallas: Inside a 30-mile radius from the center of the city, new home sales decreased from 2000 to 2015. Outside the radius, though, sales are up by more than 50 percent. The same trend has played out to varying degrees in Phoenix, Atlanta and San Antonio, among other cities.
read more: Bloomberg
For NYC’s Roosevelt Island, $2 Million Condo a Sign of the Times
On New York City’s Roosevelt Island, a sliver of land across the East River from Manhattan, real estate broker Ben Garama is trying to set a record — and make a statement.
The Corcoran Group agent has listed a three-bedroom condo there for $2 million, the highest price ever sought — or paid — for a residence on the island, once home to a smallpox hospital and now bustling with construction of a new Cornell University campus.
With three-bedroom apartments in Manhattan selling for a median of $3.15 million, Garama says his potentially record-setting price is a bargain for homebuyers hunting for more space and who might consider the island over the more traditional alternatives of Queens and Brooklyn.
“My job as a broker is always to push the envelope,” Garama said. “Yes, it’s a new threshold, it’s a new price for the island, but it makes sense because I know we can get it.”
While $2 million can buy you a mansion in much of the U.S., it’s the going rate in Manhattan. The average home price in the borough was $2.1 million in the first quarter, a 2.6 percent increase from a year earlier, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. On Roosevelt Island, meanwhile, the median price of the 13 units that sold was $786,306.
read more: Bloomberg
Eating at CRE: Going Out for Lunch Is a Dying Tradition
The U.S. restaurant industry is in a funk. Blame it on lunch.
Americans made 433 million fewer trips to restaurants at lunchtime last year, resulting in roughly $3.2 billion in lost business for restaurants, according to market-research firm NPD Group Inc. It was the lowest level of lunch traffic in at least four decades.
While that loss in traffic is a 2% decline from 2015, it is a significant one-year drop for an industry that has traditionally relied on lunch and has had little or no growth for a decade.
“I put [restaurant] lunch right up there with fax machines and pay phones,” said Jim Parks, a 55-year-old sales director who used to dine out for lunch nearly every day but found in recent years that he no longer had room for it in his schedule.
Like Mr. Parks, many U.S. workers now see stealing away for an hour at the neighborhood diner in the middle of the day as a luxury. Even the classic “power lunch” is falling out of favor among power brokers.
read more: Wall St Journal
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