AI
Sunday, March 02, 2003 1:05:59 PM
Zeev
yes, the vacancy rates refer to residential homes only.
Some background about the commercial real estate market is available here:
http://www.realtor.org/Research.nsf/pages/presentations_use
I'm not sure whether the Fed's could control the developments in the real estate market as much as you suggest. Apart of aggressive rate cuts of course, that also translate into lower mortgage rates.
Rather there were a number of developments during the last 10 years that were not engineered by the Feds. Most noteable, formerly banks' ability to grow their mortgage portfolios was rather limited by way of their capital constraints, they had to keep their equity rate. With the securitization of most everything that has changed, Freddie Mac and Fannie Mae have taken granted mortgages off the banks books so they could start all over again with new mortgage lending. The velocity of mortgages if you will, has increased sharply during the last 10 years. That has allowed much greater growth in mortgage lending than otherwise would have been possible.
In addition to that, the requirements towards mortgage lenders have been lessened in that the banks have lowered the required equity that was necessary to obtain a mortgage. I would probably not find the file quickly enough in that data jungle which is on my hard disc,
, but I seem to remember that this was the case. As the "easy" loans to well situated families were made banks had to lower the bar if they wanted to grow their portfolios even more. It is the same development we have witnessed in other markets (lowered standards for obtaining a credit card or the lowered equity necessary to obtain a car loan).
While I wouldn't overemphasize the role the Feds played in this I basically agree with you that these developments have had a smoothing impact on the economy during the last two or three years. And I agree that this has spared us an otherwise most probable shock therapy for the economy.
It has, however, not been without its price. And I believe that the price we're gonna pay will be in the form of subpar economic growth rates in the years to come. The economy in the maybe next five years will not be your father's economy, the marginal buyer in most markets has already been sucked into spending and it will be accordingly more difficult to mobilize that required marginal sale.
I like your stimulus package idea but am afraid that the ones pushing the buttons are not aware of that option. ng
I'm not so sure about your point with regard to the lowered owners' equity in real estate. The baby boomers are now in their maximum income bracket and their contribution to real estate equity should far outstrip the one of new owners, thus leading to an increase in owners' equity rather than a decrease. I believe it is due to lowered lending standards, but maybe I should browse the data once more.
Culmus
yes, the vacancy rates refer to residential homes only.
Some background about the commercial real estate market is available here:
http://www.realtor.org/Research.nsf/pages/presentations_use
I'm not sure whether the Fed's could control the developments in the real estate market as much as you suggest. Apart of aggressive rate cuts of course, that also translate into lower mortgage rates.
Rather there were a number of developments during the last 10 years that were not engineered by the Feds. Most noteable, formerly banks' ability to grow their mortgage portfolios was rather limited by way of their capital constraints, they had to keep their equity rate. With the securitization of most everything that has changed, Freddie Mac and Fannie Mae have taken granted mortgages off the banks books so they could start all over again with new mortgage lending. The velocity of mortgages if you will, has increased sharply during the last 10 years. That has allowed much greater growth in mortgage lending than otherwise would have been possible.
In addition to that, the requirements towards mortgage lenders have been lessened in that the banks have lowered the required equity that was necessary to obtain a mortgage. I would probably not find the file quickly enough in that data jungle which is on my hard disc,
, but I seem to remember that this was the case. As the "easy" loans to well situated families were made banks had to lower the bar if they wanted to grow their portfolios even more. It is the same development we have witnessed in other markets (lowered standards for obtaining a credit card or the lowered equity necessary to obtain a car loan). While I wouldn't overemphasize the role the Feds played in this I basically agree with you that these developments have had a smoothing impact on the economy during the last two or three years. And I agree that this has spared us an otherwise most probable shock therapy for the economy.
It has, however, not been without its price. And I believe that the price we're gonna pay will be in the form of subpar economic growth rates in the years to come. The economy in the maybe next five years will not be your father's economy, the marginal buyer in most markets has already been sucked into spending and it will be accordingly more difficult to mobilize that required marginal sale.
I like your stimulus package idea but am afraid that the ones pushing the buttons are not aware of that option. ng
I'm not so sure about your point with regard to the lowered owners' equity in real estate. The baby boomers are now in their maximum income bracket and their contribution to real estate equity should far outstrip the one of new owners, thus leading to an increase in owners' equity rather than a decrease. I believe it is due to lowered lending standards, but maybe I should browse the data once more.
Culmus
Culmus
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