Aaron Layman's Katy Texas Real Estate Forum

Why Some Housing Markets Do Better Than Others: What Houston TX and Midland TX Have In Common

Texas has some of the best housing markets in the country. That's no secret. While many areas in the U.S., particularly the sand states, have seen home prices plummet during the past few years, cities like Houston and Midland have seen home prices move upward. While home prices in Detroit are 52% less than they were a decade ago, the Bayou city and the Permian Basin have seen a recent growth in demand for housing.

Bloomberg economist Edward Glaeser attempts a data-mining exercise to explain why some housing markets have fared better than others. Being a Harvard economics professor, you'd think Glaeser would have a better grasp on macroeconomic trends affecting housing. After weighing factors such as weather, education and technology, Glaeser seems to overlook the elephant in the room. I grew up in the Permian Basin, and I've now spent 15 years in Houston. I can tell you with a fair degree of certainty that any economist or professor who doesn't grasp the relationship between Texas housing markets and oil needs to polish their research skills.

Supply and demand are the ultimate driver of housing markets. Both Houston and Midland have benefited from a quick rebound in oil and gas exploration and energy prices in general. Most real estate markets in Texas were already experiencing lower than average home inventory levels, so the recent strength in the energy sector has only served to boost demand for housing in two of Texas' top-performing real estate markets.

Leases Accounted For 51 Percent Of Katy TX Real Estate Transactions In 2011, 35 Percent In Houston TX

HAR MLS data showed that leases accounted for 35% of Houston area residential real estate transactions last year. That translated to roughly 34,000 leases for 2011. Activity of singly family leases is higher still in 2012, with January 2012 figures up 15% compared to January 2011. Lease activity accouted for 32% of Cinco Ranch transactions last year, and a whopping 51% of transactions in the Katy area for 2011. There were 2231 lease transactions closed in Katy last year withing the boundaries of Katy ISD, compared to 4354 sales transactions.

The data is not surprising considering the current state of the mortgage market. Lenders are still being very stringent with underwriting standards. Anyone who's tried to refinance lately can attest to that. While purchasing a home still makes sense for many people these days, the single family lease market should remain active for years to come.

The decision to rent or buy a home is often difficult, and there are a number of factors to consider. The availability of inventory is often a big part of the decision-making process. You can view my recent post on renting vs. buying in Cinco Ranch for more information about costs here in Katy,TX.

Vacouver B.C. Real Estate Prices vs. Donegal Ireland: What Does $890,000 Buy?

Vancouver's overpriced real estate is no secret.  Here Mike Shedlock takes a look at the nosebleed prices of Vancouver B.C. vs. Donegal Ireland.  A cursory glance at listings in East Vancouver will turn up beauties such as this listing on East 3rd Ave for $899,500.

As is turns out, for the same price of a run-down 3 bedroom cottage in Vancouver, you could have purchased the beautiful 55-bedroom Sandhouse Hotel in Donegal Ireland.  The 50-year-old hotel recently sold at acution for $860,000.

 

 

 

Bank Of America Imposing New Fees On Checking Accounts, Charging Benefits Recipients With Fees On Prepaid Debit Cards

Bank of America, the poster child of bailout moral hazards, is apparently looking for more ways to boost sagging revenues by experimenting with new feesto "Essentials" accounts, as well as other monthly charges.  The move follows a failed attempt by Bofa to hike fees on consumer debit cards.

While Bank of America wasn't able to institute across-the-board fee hikes for debit cards, they did manage to create a back-door fee structure on debit cards in South Carolina.  Bofa has apparently struck a deal with the state where tax returns will be issued on a prepaid debit card.  The Bank of America debit cards come with a host of charges to access the funds.

"Last week, the Charleston Post & Courier’s David Slade wrote a column about South Carolina’s new practice of issuing tax returns in the form of prepaid debit cards from Bank of America. The state Department of Revenue announced the program back in December, but conveniently left off the long list of feeswhich customers without BofA accounts will be subject to.

For every withdrawal from a non-Bank of America ATM, BofA will take $2.50 off the top — in addition to any fees the ATM owner might charge. Want to get your money directly from the bank? The first time’s free, but every withdrawal after that comes with a $10 fee. Leaving the country? Bank of America takes 2% of every single transaction you make outside the United States. Had enough and want to close your account? No problem — after a $5.00 closure fee, of course.

As Slade puts it, why should you have to pay to access your own money? “They’re not even nickel and diming people, they’re five-dollaring and 10-dollaring people,” commented consumer advocate Sue Berkowitz, Director of the Appleseed Legal Justice Center."

Considering recent developments with the national mortgage settlement, Bofa's legalized theft of funds in South Carolina is not all that surprising.  What's surprising is why anyone, particularly a government agency, would do business with Bank of America at all.

Fannie Mae REO Inventory Declined 27% In 2011

Fannie Mae reported that REO (Real Estate Owned) inventory declined by a net 43,961 units in 2011.  Fannie was selling properties faster than they were acquiring (foreclosing) them. 

Fannie Mae REO Acquisitions and Dispositions
	2011	2010
Acquisitions	199,696	262,078
Dispositions	243,657	185,744
Net	-43,961	76,334

 

ECB's LTRO Won't Stop Collateral Contagion - Trust Is The Only Asset Bankers Have, And It's Evaporating

If you think the Federal Reserve is finished bailing out Europe (and pretty much the entire global economy) on your dime, I have some bad news for you...The money printers are just warming up!

Gordon Long explains why the rescue plan in Europe is a complete train wreck.  Those low interest dollar swaps a few weeks ago were just a precursor of things to come.  European banks don't want to lend to each other because trust seems to be fading.  I guess they don't believe in the quality of the assets on their books.

"There are approximately $55T of banking assets in the EU. This compares to only $13T in the US. Bank Assets in the EU are 4 times as large as the US.

In the US, debt held by the bank is smaller because retail deposits are a primary source of funds. EU banks use wholesale lending and, as a consequence, the debt held by banks is closer to 80% versus less than 20% by US banks.

Wholesale bank lending in the EU approximates $30T versus only $3T in the US, a 10 X differential.

Wholesale lending is fundamentally borrowing from money market funds and other very short term, unsecured instruments. The banks borrow short and lend long. It all works until short term money gets scarce or expensive. Both have occurred in the EU and this recently placed DEXIA into bankruptcy, forcing them to be taken over by the Belgium and French governments. The unsecured bond market fundamentally closed in the EU in Q3 2011, as fears mounted that an EU solution was not forthcoming.

Assuming $30T of loans is spread over three years, EU banks have a requirement for $800B / Month of rollover financing for wholesale lending outstanding.

Where is this money going to come from? No one is waiting around to find out as there will be cascading counterparty failures soon surfacing. Banking money in Europe is fleeing to custodial and official accounts of the ECB, the US Federal Reserve and any other central Bank willing to accept their cash."

PIMCO bond king Bill Gross recently tweeted: " What does LTRO stand for? 1- A shell game; 2-Cash for trash; 3 Three-card Monti; or 4. All of the above."





 

Look Out Below! - Bank Of America Closes Below $5 Per Share

The EU bailout isn't looking so good, and Bankrupting America got smacked along with other financials today, closing the day at $4.99.  Many institutional investors are prohibited from buying stocks below $5, so the situation just became a little more complicated for one belweather of American bank bailouts.

Everything Looks Fine From 40,000 Feet - Bill Black & Dante's Divine Comedy: Banksters Edition

As William Black is fond of pointing out, the whitewashing of bank fraud simply begets more bank fraud.  Here, Mr. Black takes Obama to task for his laughable 60 Minutes interview in which he downplayed Wall Street's criminal activity.  Black offers a few simple questions for the President which 60 Minutes and other reporters might want to address:

Why are there no prosecutions of the felons that drove the crisis and occupy the nine worst rungs of unethical and destructive acts?

Explain the five unethical acts by elite financial institutions that you consider the most destructive and least ethical – but which you believe to be legal. How do you rank the degree of unethical conduct and destruction in those acts?

What specific statutory provisions did you propose to make those five unethical acts illegal? As enacted, which provisions of the Dodd-Frank Act made those five unethical acts illegal? Who has been prosecuted for those formerly legal but seriously unethical and destructive acts that were made illegal by the Dodd-Frank Act?

Black proposes an end to the PAC Doctrine (Presidential Amnesty for Contributors).

China Miracle Meets The Law Of Gravity - Chinese Real Estate Prices Plunging

Imagine you just bought your new three-bedroom home from a reputable home builder for $250,000.  Everything is fine until you notice a few weeks later that the builder has just dropped the price of the same home by 25%.  While your new neighbors might be happy with the lower sale price of $187,500, it doesn't help you with your sudden plunge in equity (assuming you had a larger enough down payment).

This is what's happening in China right now.  Vacant malls, vacant cities and unsold inventory for builders point to an unfriendly reckoning for the China growth story.  Shanghai prices are down by 40% from the peak and China's real estate construction boom is now coming to grips with reality.

The implications for the global economy will be ugly.  The nitwit economists in the U.S. thinking we are going to avoid a double-dip recession have their heads in the sand.  We never left the recession, and the global economic backdrop is about to take the wind out of the sails of the little progress we have made since the financial crisis.

Why The Fed Continues To Fight Transparency

Good piece this morning at Naked Capitalism detailing the efforts required to open up the Fed's operations.  The Federal Reserve, for all of it's publicly-stated good intentions, is the morally conflicted political mechanism propping up a global mountain of debt.  The Fed's claim that it was lending out money at a penalty rate is ludicrous.  It's almost as asinine as the argument that all of the money was paid back, and in fact profitable for the Treasury.  A penalty rate for a loan to an insolvent borrower looks nothing like the Fed's discount window.  Warren Buffet's typical offer of a 9-10% guaranteed return on preferred shares is a penalty rate.  The piece also points out how the Fed conveniently overlooks the real market value of the insurance/backstop being provided to Wall Street's failed banks.

The problem with the Fed’s argument comes down to trust – and the institution that is asking us to trust it has aggressively fought every effort to obtain public disclosure and misled Congress about the state of the banks it was regulating. I have sympathy for the Fed’s predicament – it couldn’t say Citigroup was insolvent, but at the same time, the New York Fed did not have to, say, take the downside of $220 billion of that bank’s bad assets, with no upside and no resource (see page 20of this SIGTARP report). That Citi didn’t use this specific facility is not important – once investors realized that Citi is now version 2.0 of Government Sponsored Entity, it didn’t have to. These banks now have lower costs of funding than smaller banks, which is an annual subsidy of between $6B and $34B.And this doesn’t include these banks’ increased liquidity, which very obviously matters when you see a company like MF Global go down despite very likely putting on very similar bets as others (who are too big to fail) have. Economist Ed Kane, for one, has estimated the value of the de facto guarantee as over $300 billion annually.

The Fed doesn't want to tell you where the money went because that would look bad.  Telling you that you are providing financial assistance to insolvent institutions headed by people paying themselves huge bonuses might offend your sensibilities and cause you to actually give a damn.