Tuesday, March 3, 2015

Another "TWIST" on the Great Recession

How a US housing boom became a global financial crisis
brokerbeatNewCanaan edited & reblogged Tomas Hirst @ Business Insider ... an interesting read :

"I published an article about why the Clinton-era budget surpluses helped fuel the credit boom that (ultimately) led to the crunch and the recession that followed. It's fair to say not everyone agreed. In fact, some people really didn't agree at all.

Here's Bloomberg columnist and CIO of Ritholtz Wealth Management Barry Ritholtz's take:

In the (good natured) discussion that followed, it emerged that Ritholtz and I have a fundamentally different take in our narratives of the crisis. We both agree that mortgage originators were not forced to provide loans to people with no credit history, nor were financial firms forced to package those loans up, have ratings agencies stamp the resulting securities with an 'A' rating and flog them to credulous institutions around the world.

However, he followed that up by saying "had the bad loans not been made, there never would have been a problem".

I couldn't disagree more. Indeed I think the most important lessons of the last few years is that the emergence of the subprime crisis was a symptom, not cause, of the global financial crisis.

To understand why, you first need to think about the role that housing plays in the economy. When a bank issues a mortgage it simultaneously creates an asset — the mortgage contract — and a liability — the capital that is then used to complete the transaction. In effect, itbrings forward the future earnings of the buyer in order to provide a lump sum to the seller.

The buyer then takes possession of the house with the mortgage obligation, while the seller takes the capital and deposits it in the bank (for the sake of this example). The seller can then use that money to fund current purchases — for example, buying a TV or a car etc. In other words, the housing market can be viewed as the main transmission mechanism for bank-created money into the real economy (your and my pockets in other words).

How does this apply to the Clinton surpluses?

Well, the authors of the new paper that spurred my previous post claim that "following the Asian crisis in the late 1990s, a “glut” of global savings flowed towards US safe assets, finding its way into the mortgage market through the purchase of MBS [mortgage-backed securities]". This is based on the work done by former Federal Reserve chair Ben Bernanke in his seminal 2011 paper on the savings glut, in which he asserts that "international capital flows likely played a significant role in helping to finance the housing bubble and thus set the stage for its subsequent bust".

The theory, in essence, is that following the shock of the Asian crisis, emerging markets started to channel their savings into the US. In particular this money flowed into perceived "safe assets" such as US Treasury securities (Treasuries) and Agency debt (Agencies). This capital inflow showed up as a substantial US current account deficit which increased from $120.2 billion in 1996 to $530.7 billion by 2003.

Simultaneously, the US government of the day under President Bill Clinton elected to begin running budget surpluses. This had the effect of reducing the stock of US government-issued "safe assets" as the state began to pay down its debt. This created an incentive — though not the obligation — for the private sector to meet this demand for "safe assets" by creating some of its own. Thus we come back to mortgage securities.

The authors' of the latest paper write that "the boom in securitisation contributed to channel into mortgages a large pool of savings that had previously been directed towards other safe assets, such as government bonds". As Frances Coppola points out, this misstates what was actually going on. The inflow of capital was not "channelled" into the US mortgage market but, rather, it created the secondary market that gave banks a reason to continue extending mortgage loans into the system.

And here's where the story gets really interesting. The more credit the banks provided through the mortgage market, the more money consumers had available to pay for goods and services (including, for example, clothes and toys produced in China). This spending then fed the current account surpluses in emerging markets, which flooded back into the US in search of safe assets that would provide a steady stream of income.

So the credit market created what looked like a self-fulfilling cycle where banks issued mortgages, that money was spent on goods and services in the US, which provided the cash for emerging economies to buy the mortgage-backed securities that were then created. Glad that's clear.

And this is what happened — real home prices increasing by roughly 40% to 70% between 2000 and 2006:
US house prices

Critically, this system concentrated risk in the US housing market but because demand for the resulting securities was so high nobody foresaw any problems. But there was a big problem. There is a limit to the amount of future earnings that can be brought forward becausepeople actually have to be able to pay off the debt that they take on.

This poses two related risks — first, once you have a society where as many people who can afford to are already indebted you run out of your source of new assets to sell and; second, if people's expected income in the future fails to materialise then they may fail to be able to service their debt which could wipe out the value of their mortgages.

The key point that Ritholtz misses is that these risks exist even with non-subprime mortgage lending.

So what happened?

Here we have to hypothesise a little. But the majority of subprime mortgages were issued well after the housing market boom was underway at a time when, as the paper puts it, the Great Moderation had led "financial intermediaries to an (ex-post) overoptimistic assessment of the risks faced by their portfolios".

One theory is that when mortgage originators started running out of high-quality borrowers to lend to, they went in search of a new market — subprime. There was nothing necessary about this, it was greed pure and simple. But the fact that the subprime market became an ever larger share of total lending towards the end of the housing boom suggests that the lack of high-quality borrowers was a genuine constraint.

The foolish decision to chase the last pennies of the boom, however, was ultimately to prove the trigger for the collapse. In that way it was a sufficient cause of the crash. But there have been plenty of house price crashes before, not all of which can be simply attributed to the quality of the borrowers at the time the lending took place.

My contention is that the scale of the housing boom had already increased the system's vulnerabilities, and had been exacerbated by the Clinton administration's decision to run budget surplus. In the end as borrowers were maxing themselves out, a hit to future incomes was almost inevitable and with it a correction in the housing market.

And due to the packaging up and re-sale of those mortgage assets to "safe asset" seekers across the world the crash was almost guaranteed to send ripples through global financial markets.

.  .  .


Below please find my Listings lookBOOK 
of distinctive New Canaan properties.

.   .   .


We offer each and everyone of our clients
EXCEPTIONAL LISTINGS . EXCLUSIVE SERVICE . EXTRAORDINARY RESULTS

Regi van der Heyden, with William Raveis Real Estate, is consistently both a Top Listing and Top Selling Agent.  To access the MLS, receive a free home evaluation, and/or subscribe to daily home listings updates, email regivanderheyden@gmail.com or call/text at 203.644.5025  .  To receive brokerBeat BLOG  posts, enter your email address in the subscription bar to the right of this page, and click 'submit' -  then, automatically  find daily posts in your email as they publish - EASY !!!    My best always    &:>

Friday, February 27, 2015

PUBLIC OPEN HOUSES | February 28, 2015



1385 Smith Ridge | Sunday, March 1 . 1-3
Commanding Nantucket-Style stone and shingle home situated on four professionally landscaped acres overlooking expansive country views. AbelEstates.com has designed an Energy Star Certified ''smart home'' which is high-tech, energy efficient and built to last. This beautiful and stylish Manse has many special features including a grand two-story entry foyer, panel molding throughout, gourmet kitchen with sunlit breakfast room and adjoining family room with cathedral ceiling and 25’ stone fireplace. Elevator & generator. $5,695,000
Listed by Hannelore Kaplan at WIlliam Raveis Real Estate, New Canaan

.  .  .



1118 Oenoke Ridge | Saturday, February 28 & Sunday, March 1 . 1-3
Spectacular stone, clapboard and slate roofed custom estate located on New Canaan's most prestigious Ridge. Freshly renovated in 2014 with numerous upgrades. 8600 SF of generously proportioned living space, formal living room with fireplace, banquet sized dining room with fireplace, paneled Library with wet bar, built-ins, bay window seat & fireplace, gourmet kitchen adjoins family room with stone fireplace and French doors leading to terrace, sweeping lawns, heated pool and spa. Just minutes to NYC express train & town. $3,495,000
Listed by Hannelore Kaplan at WIlliam Raveis Real Estate, New Canaan

.  .  .



126 Harrison Avenue | Sunday, March 1 . 2-4
Antique Farmhouse with welcoming wrap-around front porch. Located ''in the heart of it all'' this updated 6BR turn-of-the-century home is move-in ready. Builder/owner lovingly renovated and expanded. Freshly painted living room with fireplace, dining room with period moldings, sunny chef's kitchen adjoins family room, luxury master suite & 3 additional bedrooms. Two bedroom rental apt/in-law suite/home office/or huge playroom over 3-car attached garage. Incredible value & opportunity. $1.395,000
Listed by Hannelore Kaplan at WIlliam Raveis Real Estate, New Canaan

.  .  .


Below please find Regi's Listings lookBOOK 
of distinctive New Canaan properties.

.   .   .


We offer each and everyone of our clients
EXCEPTIONAL LISTINGS . EXCLUSIVE SERVICE . EXTRAORDINARY RESULTS

Regi van der Heyden, with William Raveis Real Estate, is consistently both a Top Listing and Top Selling Agent.  To access the MLS, receive a free home evaluation, and/or subscribe to daily home listings updates, email regivanderheyden@gmail.com or call/text at 203.644.5025  .  To receive brokerBeat BLOG  posts, enter your email address in the subscription bar to the right of this page, and click 'submit' -  then, automatically  find daily posts in your email as they publish - EASY !!!    My best always    &:>

Thursday, February 26, 2015

Dare to be GREAT !!!




.  .  .


Below please find my Listings lookBOOK 
of distinctive New Canaan properties.

.   .   .


We offer each and everyone of our clients
EXCEPTIONAL LISTINGS . EXCLUSIVE SERVICE . EXTRAORDINARY RESULTS

Regi van der Heyden, with William Raveis Real Estate, is consistently both a Top Listing and Top Selling Agent.  To access the MLS, receive a free home evaluation, and/or subscribe to daily home listings updates, email regivanderheyden@gmail.com or call/text at 203.644.5025  .  To receive brokerBeat BLOG  posts, enter your email address in the subscription bar to the right of this page, and click 'submit' -  then, automatically  find daily posts in your email as they publish - EASY !!!    My best always    &:>

Wednesday, February 25, 2015

7 Reasons Every Home Buyer Needs Representation

brokerbeatNewCanaan edited & reblogged Christopher Pagli at Wm Raveis

Here are some questions to consider the next time you are on the fence about whether to use a Buyers Agent, when purchasing your new home ...


1) Do you know how to comprehend all of the local market data to best understand what is a good value, current trends, and absorbtion rates?

2) Are you familiar with a common residential real estate contract and how to interpret various clauses to protect yourself from making common buyer mistakes?

3) Do you know what not to say to the seller in order to avoid weakening your negotiating position?

4) Do you know the zoning regulations, building codes, and any other laws pertaining to real estate in the area you desire?

5) Are you familiar with the various loan types and special programs that you may qualify for?

6) Do you have the expertise to negotiate on your own behalf, especially if the seller has an agent negotiating for them?

7) Are you familiar with all of the documentation that is needed to complete a transaction in your desired area?

There is typically no fee for the expert services of a Buyers Agent - the Seller almost always pays the commission. There are times that a buyer can pay a commission if it is mutually agreed upon when signing an "exclusiveright to represent contract". Many of the items can be negotiated in the contract; length of time, specific areas, specific homes, to name a few.

Don't be afraid of the agreement. the purpose is to protect the buyer and the agent. Make sure your Buyers Agent properly explains the agreement in its entirety, along with the process, so that you fully understand what you are agreeing to. Setting expectations upfront is critical.

.  .  .


Below please find my Listings lookBOOK 
of distinctive New Canaan properties.

.   .   .


We offer each and everyone of our clients
EXCEPTIONAL LISTINGS . EXCLUSIVE SERVICE . EXTRAORDINARY RESULTS

Regi van der Heyden, with William Raveis Real Estate, is consistently both a Top Listing and Top Selling Agent.  To access the MLS, receive a free home evaluation, and/or subscribe to daily home listings updates, email regivanderheyden@gmail.com or call/text at 203.644.5025  .  To receive brokerBeat BLOG  posts, enter your email address in the subscription bar to the right of this page, and click 'submit' -  then, automatically  find daily posts in your email as they publish - EASY !!!    My best always    &:>

Tuesday, February 24, 2015

Building the Better Entrepreneur


Infographic Building the Better Entrepreneur Infographic

.   .   .

Below please find my Listings lookBOOK 
of distinctive New Canaan properties.

.   .   .


We offer each and everyone of our clients
EXCEPTIONAL LISTINGS . EXCLUSIVE SERVICE . EXTRAORDINARY RESULTS

Regi van der Heyden, with William Raveis Real Estate, is consistently both a Top Listing and Top Selling Agent.  To access the MLS, receive a free home evaluation, and/or subscribe to daily home listings updates, email regivanderheyden@gmail.com or call/text at 203.644.5025  .  To receive brokerBeat BLOG  posts, enter your email address in the subscription bar to the right of this page, and click 'submit' -  then, automatically  find daily posts in your email as they publish - EASY !!!    My best always    &:>

3 Reasons You Should Adopt an Attitude of Gratitude

brokerbeatNewCanaan edited & reblogged Adam Toren at Entrepreneur


Adopting a gratitude practice is a lifestyle and mindset choice that will drastically change your life and your business as an entrepreneur. Here are the three biggest reasons why you need a gratitude practice ...

1. Gratitude shifts your mindset

For something to change in your life, one of two things has to happen: your life changes, or you do. Waiting for life to change is a pretty passive solution. When you’re stuck in a problem mentality you miss out on all the opportunities for solutions that are knocking on your door every day, simply because you don’t even hear them or see them.

Open your eyes to a gratitude practice and all of a sudden things start to fall into place for you and for your business. Being an entrepreneur means being proactive, not passive, so switch your mindset and see life change.

How? Start by keeping a daily list of events that you are grateful for each night. Some call it a gratitude journal. You can call it whatever you want. But focusing on who came to your aid that day, what opportunities arose and how the day planted fruitful seeds for a better tomorrow will prove to you day after day that you are well taken care of and capable of succeeding with all the help that surrounds you.

2. Gratitude creates solutions

Adopting a gratitude practice takes you out of problem and toward a solution. It removes you from complaining mode and into a best-outcomes mindset. That’s a skill you need in your life and in your business decision-making. Whole companies and industries have been created from seeing solutions where others only saw obstacles. What will your contribution be?

How? Simply start by keeping a mental checklist of your triggers. We all have our things that set us off into complaining or annoyance. What are your complaint triggers during the day? Just observe them for a few days and keep a list as they pop up. Then try to set some time at the end of the week, 15 minutes should be enough, to look at those triggers and brainstorm solutions.

This can be part of your integrated gratitude practice because if you can see the opportunity in the challenges you face, you will probably be onto to solving a pain-point for many other people as well. Gratitude has a ripple effect that could just echo through your startup.

3. Gratitude is contagious
I can’t speak for you, but I personally don’t like being in business with 'users & slackers'. I don’t like whiners, complainers or otherwise unpleasant-to-be-around people. There are too many smart, talented and pleasing-to-be-around individuals in this world for me to want to work with or hire the ones that aren’t.

When you’re grateful you tend to exude and share that contagious positive energy. People like me like that and we tend to be drawn to you. Our energy is contagious and we do good things together and are better for having come together. That’s pretty much the only contagious thing happening in the world right now that you can get excited about.

How? Watch your words. What you say is usually how you act, so be aware of complaining and replace whines with positive words. Start with you, be the change and watch as the world changes around you and your gratitude practice.

.  .  .


Below please find my Listings lookBOOK 
of distinctive New Canaan properties.

.   .   .


We offer each and everyone of our clients
EXCEPTIONAL LISTINGS . EXCLUSIVE SERVICE . EXTRAORDINARY RESULTS

Regi van der Heyden, with William Raveis Real Estate, is consistently both a Top Listing and Top Selling Agent.  To access the MLS, receive a free home evaluation, and/or subscribe to daily home listings updates, email regivanderheyden@gmail.com or call/text at 203.644.5025  .  To receive brokerBeat BLOG  posts, enter your email address in the subscription bar to the right of this page, and click 'submit' -  then, automatically  find daily posts in your email as they publish - EASY !!!    My best always    &:>

Sunday, February 22, 2015

Design SUNDAY | Remodeling Your Bathroom

brokerbeatNewCanaan edited & reblogged Houzz
15 Design Tips
Pop quiz: What’s the average amount of space required for a toilet? How much does a basic bathroom remodel cost? And how do you pick out the right vanity? If your answers to these questions are some combination of “What?” “Huh?” and “Um … ,” don’t worry. You’re not alone.

There’s so much that goes into a bathroom remodeling project that unless you’re a professional who does it every day — or a homeowner who’s been through the process numerous times — then all the nitty-gritty details, processes, options and decisions are going to sound like they’re in a foreign language. But that doesn’t mean you shouldn’t prepare for the test.