ECB Surprises, Fails to Extend Economic Stimulus
It’s all about what the European Central Bank (ECB) didn’t do than what it did.
The ECB has surprised markets and analysts by failing to extend its trillion-euro bond-buying program.
Expectations were high the central bank would prolonging the program beyond its current deadline of March 2017, but it did not.
As a result, the euro rose slightly against the U.S. dollar to near a two-week high and yields on the German benchmark 10-year Bund turned slightly less negative.
ECB President Mario Draghi said the central bank did not discuss extending the program at its latest monetary policy meeting.
“There are a few takeaways from Draghi’s news conference, says Prasad Chaganti, Managing Director and Head of CRE Advisory Business in Europe, “there are no major changes to growth projections suggesting that European markets are benefiting from the monetary policies in place. Also, QE in its current form may need a redesign and there is a possibility that post Q1, QE will exist but in a redesigned format extending to equities and real estate like Bank of Japan did. With low interest rates, inflation and considerable dependence on ECB’s stimulus for growth, European real estate sector continues to be an attractive asset class for medium to long term horizon in relative terms”.
The ECB held its key interest rates unchanged on Thursday, as expected. The rate on the ECB’s marginal lending facility stands at 0.25 percent, with the rate on the deposit facility at -0.4 percent. The fixed rate on the ECB’s main refinancing operations remains at zero. The central bank raised its economic growth outlook for the euro zone slightly for 2016, but cut it for 2017 and 2018. It now sees growth averaging 1.7 percent this year, having previously forecast 1.6 percent growth. It forecasts expansion of 1.6 percent in 2017 and 2018, down from its June forecast of 1.7 percent in both years.
The euro zone’s economy is seen being hampered by sluggish global demand, due to several factors, including the U.K.’s “Brexit” vote in June to quit the European Union.
Wall Street Bankers Eat their Words on Brexit
The Wall Street banking giants that helped fund the Remain campaign have torn up their forecasts for a UK recession in the wake of the Brexit vote.
Goldman Sachs, JP Morgan and Morgan Stanley warned of an economic slump after the EU referendum in June, but the powerful US investment banks, which donated a total of £1.25million to Remain, now believe the UK will avoid recession.
Leave campaigners accused bankers who signed up to the so-called ‘Project Fear’ of peddling ‘hysteria’.
Goldman Sachs, JP Morgan and Morgan Stanley warned of an economic slump after the EU referendum, but the powerful US investment banks, now believe the UK will avoid recession
The humiliating U-turns came as sterling rose above $1.34 against the dollar for the first time since mid-July having fallen from about $1.50 to $1.28 following the Brexit vote.
The change of heart at the banking giants follow a series of upbeat figures suggesting the UK economy is still growing after the vote to leave the EU.
read more: DailyMail
Now Companies Are Getting Paid to Borrow
Investors are now paying for the privilege of lending their money to companies, a fresh sign of how aggressive central-bank policy is upending conventional patterns in finance.
German consumer-products company Henkel AG and French drugmaker Sanofi SA each sold no-interest bonds at a premium to their face value Tuesday. That means investors are paying more for the bonds than they will get back when the bonds mature in the next few years.
A number of governments already have been able to issue bonds at negative yields this year. But it is a rare feat for companies, which also ask investors to bear credit risk.
The move has been driven by the European Central Bank’s expansion this summer of its bond-buying program from government to corporate debt, creating more demand for bonds and pushing down their yields. But even ifthe pricing is explainable, some investors are still trying to come to terms with the idea.
“We’re trying to get our heads around it,” Edward Farley, head of European corporate bonds at PGIM Fixed Income, said of Tuesday’s deals. “It seems pretty bizarre to ask a corporate to look after your money and give you back less in two to three years’ time.”
red more: WSJ
Wall Street on Alert to Danger of Donating to Trump
Wall Street is getting the memo: donating to the Trump-Pence ticket may be more trouble than it’s worth.
Goldman Sachs Group Inc. joined Credit Suisse Group AG and Northern Trust Corp. in warning or restricting employees regarding political donations to avoid violating the federal pay-to-play rule. The rule, meant to prevent firms and employees from making contributions as a quid pro quo for winning business, is complicating donations to the presidential race since Republican nominee Donald Trump chose Indiana Governor Mike Pence, the de facto head of the state’s public pension, as his running mate.
The Indiana system works with more than 50 large asset managers including BlackRock Inc., Blackstone Group LP and Bridgewater Associates, according to retirement plan documents. If the firms or employees donate to the Trump campaign, they will likely have to forgo compensation from Indiana for the next two years and possibly face other penalties, according to the rule.
Goldman Sachs banned all of its partners from making contributions to state and local candidates running for office, as well as state or local officials bidding for federal office. As of Sept. 1, every partner is considered a “restricted person” prohibited from engaging in political activities or making campaign gifts to those candidates or officials, according to an Aug. 29 internal memo sent to partners.
read more: Bloomberg
New York, London, Frankfurt, Copenhagen … Robbins, North Carolina, Situs’ Global Reach is Strong
Free-flowing work areas define the newly expanded work space at Situs’ building in Robbins, North Carolina. A remodeling project completed last year increased the company’s office to 30,000 square feet, and there is still room to grow.
Based in New York City, Situs works with clients worldwide to evaluate, optimize and manage real estate assets and securities. Its Moore County division serves primarily in a supporting role for these efforts.
“This is the dream realized,” said Nicole Bozich, a managing director for Situs’ local office. “If you look back 10 years ago, this is what we wanted to do and how we said we’d do it. And we have done it. We hit some hurdles, but in the ultimate dream — that is to build CRE (commercial real estate) experts in rural Moore County — we have succeeded.”
There is an engaging thread of irony in the local Situs story. Located in a renovated sock mill, space once abandoned when off-shore outsourcing obliterated the state’s textile industry, the Robbins operation serves as a textbook case for successful “rural outsourcing.” Renovations added more desks, windows and decorative arches for visual interest, but the factory floor feel remains. Where knitting machines once stood is today an orderly maze of cubicles, computers and a crack team of financial analysts.
“We have tried to keep some of that manufacturing atmosphere because it is part of our story,” said Bozich. “Our goal was to make the space more functional in ways that allow for a collaborative environment.”
First known as Hemp, then Robbins, the town has undergone enormous changes in the last century. However, none surpassed the rise — and eventual fall — of the area’s textile and hosiery mills.
Steven Bean knows this history well.
A hometown boy raised on a farm, he was member of North Moore High School’s class of 1981. The first person in his family to graduate from a four-year college, Bean began his professional career as a bank auditor. That role led him to financial institutions pursuing capital markets and commercial real estate and, eventually, he went to work with a mortgage-backed securities firm performing due diligence.
When commercial real estate analysis was first shipped overseas to India, Bean was right in the middle of those efforts. When that company was sold in 2006, he decided to take a little time off and traveled back home.
By then, the northern stretches of Moore County were ravaged by the twin losses of tobacco farming and the shuttering of manufacturing mills. Unemployment was high and morale was low.
A cousin appealed to Bean’s sense of place and asked him to consider Robbins for his next commercial venture. Using his experience with off-shoring and a strong belief that the local population was an untapped natural resource, he developed a then-unique business model.
Bean took his idea to the biggest fish in the pond — Situs — and pitched the idea of rural outsourcing. He recommended the small farm-friendly Robbins as an ideal location to grow a commercial real estate support team.
Situs leadership loved the concept and, in short order, the very first space redeveloped was the Robbins training room.
read more: The Pilot
Situs on the Global Stage
Situs Executive Managing Director Steve Bean also dissected the state of U.S. and Global Real Estate for China’s CCTV Nightly Business News:
Airbnb Adopts Rules in Effort to Fight Discrimination by Its Hosts
Airbnb introduced several changes on Thursday to combat discrimination in its short-term rental policy, after facing months of criticism that its hosts are easily able to reject potential renters based on race, religion, gender, ethnicity, age or disability.
In a 32-page report, Airbnb, based in San Francisco, said that it would institute a new nondiscrimination policy that goes beyond what is outlined in several anti-discrimination laws and that it would ask all users to agree to a “community commitment” starting on Nov. 1. The commitment asks people to work with others who use the service, “regardless of race, religion, national origin, disability, sex, gender identity, sexual orientation or age.”
In addition, the company plans to experiment with reducing the prominence of user photos, which have helped signal race and gender. Airbnb said it would also accelerate the use of instant bookings, which lets renters book places immediately without host approval.
The actions are a response by Airbnb to questions about discrimination that have threatened to cloud the company’s fast growth. In December, Harvard University researchers released a working paper that concluded it was harder for guests with African-American-sounding names to rent rooms through the site. Several Airbnb users shared stories on social media this year saying that they had been denied a booking because of their race.
read more: NYTimes
UBS May Escape Part of $2 Billion MBS Fine
A U.S. judge signaled on Tuesday that UBS AG may escape liability for at least a portion of an estimated $2.1 billion of losses stemming from residential mortgage-backed securities it sold in 2006 and 2007 before the U.S. housing market collapsed.
In a 239-page decision, U.S. District Judge Kevin Castel in Manhattan said U.S. Bancorp, as trustee for three trusts issuing the securities, did not show that UBS was willfully blind toward deficiencies in many of the loans.
“The trusts have not proved that UBS took deliberate actions to avoid knowledge that widespread breaches had occurred throughout the loans held by the trusts, thereby triggering UBS’s repurchase obligations,” Castel wrote.
Castel nonetheless said UBS had been put on notice about some problem loans, and would need to repurchase or pay damages on 13 out of 20 he examined.
The judge directed the hiring of a “lead master” to review thousands of loans underlying the securities, before determining the extent to which damages might be warranted.
Representatives for UBS and US Bancorp declined to comment.
read more: Reuters
Home Prices Grow Steadily Across the Globe
The gap between the best and worse performing countries in terms of house price growth is narrowing, as the strongest markets slow down.
Turkey topped the Knight Frank Global House Price Index in the second quarter of 2016 with an annual rate of growth of 14%. It is the fifth consecutive quarter in which Turkey leads the ranking, but its expansion has slowed from 19% in the first three-month period this year. The worst performer during the second quarter of the year was Taiwan, where home prices decreased 9.4% from the same time in 2015. In the first three months of the year, Ukraine sat at the very bottom of the rankings, with an annual rate of growth of -10.5%.
The results bring the percentage points separating the strongest and the weakest housing markets to 23 from 33 points in the same period of 2015, London-based Knight Frank reported.
Overall, the real estate consultancy firm’s house price index increased by 4% in the 12 months leading to June 2016, a rate that’s consistent with the last two year.
In addition to Turkey, Sweden—another top-five performer—also recorded a slowdown. Prices there grew at an annual rate of 9% versus 13% a year ago.
read more: Mansion Global
U.S. Mortgage Rates Remain Near Record Lows, but Fewer Applicants
Mortgage application activity was listless as summer unofficially ended and the nation prepared for the Labor Day weekend. Changes during the week ended September 2 were minor and moved in both directions depending on whether seasonality entered the picture or not.
The Mortgage Bankers Association said its Market Composite Index, a measure of applications volume, rose 0.9 percent on a seasonally adjusted basis from the week ended August 2 but was down 0.1 percent when unadjusted.
The average contract interest rate for 30-year fixed-rate mortgages (FRM) with conforming loan balances ($417,000 or less) increased to 3.68 percent from 3.67 percent, with points moving to 0.37 from 0.33. The effective rate was also higher than during the week ended August 26.
The average rate for 30-year FRM with jumbo loan balances (greater than $417,000) moved up 3 basis points to 3.66 percent and points rose to 0.30 from 0.27. The effective rate increased from the prior week.
The average contract interest rate for 15-year FRM was unchanged at 2.96 percent, with points increasing to 0.34 from 0.31. The effective rate was also unchanged.
U.S. Consumer Demand for Housing Fades
The Fannie Mae Home Purchase Sentiment Index fell 1.5 points to 85.0 in August but continued its gradual climb upward from the same period last year. Four of the six HPSI components decreased during the month, most notably the share of consumers who expect home prices to go up in the next 12 months and the share who say now is a good time to sell a home – decreasing 6 and 5 percentage points in August, respectively. Additionally, more consumers reported a positive employment outlook from the previous month, up 4 percentage points in August, and those reporting significantly higher household income fell 1 percentage point. Overall, consumer housing sentiment remains positive and bodes well for continued growth in housing activity.
“Consumers have a fairly optimistic 12-month outlook on housing at the end of the summer home-buying season, supported by increased job confidence and more favorable expectations regarding their personal financial situations compared with this time last year,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “The return to a slight upward trend in the HPSI during the spring and summer is, thus far, in line with our forecast, which calls for 4 percent growth in home sales in 2016 to the best level since 2006 and continued improvement for 2017.”
Fed Beige Book: Economy Expanded at a ‘Modest’ Pace
The economy continued to expand at a modest pace in July and August, a Federal Reserve report said Wednesday, a sign the U.S. could continue its uninspired growth trajectory in the third quarter.
Most districts across the country saw “modest” or “moderate” growth in the most recent period, according to the central bank’s beige book, a review of regional economic conditions. The survey collected anecdotal information on economic activity in July and August from 12 district banks.
Respondents from across the districts said they expected growth to continue at a “moderate” pace in the coming months.
Most districts reported tight labor markets, with moderate growth in hiring. Upward pressure on wages continued to build, especially for workers with specialized skill sets such as engineers and certain construction workers. That didn’t translate into significant inflation pressure, though. Price increases were described as “slight overall.”
Consumer spending, which had been a pillar of economic growth in the second quarter, was little changed in most districts, except for a slight slowdown in auto sales reported by five districts. Car sales hit a record in 2015 and have remained high, but it is unclear whether that pace of buying is sustainable.
read more: WSJ
Fintech: Trulia Bot
This is a pretty easy and fun to use bot that was launched on Messenger. Just type in the city where you want to live, how much you want to pay, and (if you want) the number of bedrooms and Trulia’s bot brings you a carousel of options. Choose the “Get Summary” button to get a paragraph description from the person who placed the ad and additional pictures.
Some potential areas for improvement: I’d like to be able to search by neighborhood and be given a way to explore neighborhoods. The ability to distinguish between properties with month-to-month and annual lease agreements seems like a good idea. Also, I’m not really sure what “low crime” means. An explanation of how Trulia defines low or high crime would be really helpful.
read more: VentureBeat
Lower Manhattan Population Doubles Post 9/11
The number of residents and new apartments in lower Manhattan has skyrocketed since 2000, while the number of jobs remains below pre-9/11 levels, according to a report Tuesday.
The report, released by state Comptroller Thomas DiNapoli, painted lower Manhattan as a burgeoning residential neighborhood that is far less reliant on the financial sector years after the 9/11 terror attacks. In 2014, there were nearly 50,000 people living in the area, for example, more than double the population in 2000. That influx coincided with a similar increase in housing units, which numbered 30,000 in 2015.
“Lower Manhattan is doing more than rebuilding; it is transforming and moving forward with resilience and hope,” said DiNapoli in a statement.
Private-sector employment has steadily grown as well, with the number of jobs reaching 228,300 in 2015, the highest level since the terror attacks, according to the report. However, the number is below pre-9/11 employment levels. And the majority of jobs are no longer in the financial sector. Instead, other industries such as business services and hospitality now make up a bigger slice of the pie.
The report did not examine the role of continuing government subsidies in boosting the area’s economy. A series of tax exemptions and other programs were enacted in the aftermath of 9/11 to encourage investment in a crippled lower Manhattan. Many of those programs were renewed in 2014, even though policymakers now describe the area’s turnaround as a success.
read more: Crain’s
NY Housing Inspector Charged with Making Dangerous Conversions to Home
A housing inspector endangered the lives of his tenants by violating the same building codes the city employed him to enforce, the Queens District Attorney’s office announced Tuesday.
Derrick Allen, 58, a Brooklyn inspector for the Department of Housing Preservation and Development who owns two buildings in Queens, was charged Tuesday with illegally converting the cellar space in his Rosedale and St. Albans properties into dangerous living quarters, according to the DA’s office.
The units — hooked up to illegal gas and water lines — lacked adequate exits and natural light, which District Attorney Richard Brown noted made the residencies dangerous not only for tenants, but emergency responders as well.
“Such conversions jeopardize the lives of not only the buildings’ residents but firefighters and other personnel who in responding to an emergency are confronted by a maze of rooms with no way out,” said Brown in a statement.
read more: DNAinfo