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The Wall Street Journal survey of housing market in the US finds prices declined in all 28 major metropolitan areas for the fourth quarter of 2010. And the size of the declines on a year-to-year basis were larger than the previous quarter. Inventory levels are also rising.

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The real estate bubble in China continues to grow even after th pandemic. Local governments depend on land sales for about 60% of their revenues. The government in Beijing also is unwilling to let prices decline too much because this could create unrest. As a result households have continued to add second, third homes in speculative investment. Unlike the U.S. where households invest in the stock and bond markets and residential property investment is one of several options, in China this is the only option people believe. The notion of continually rising prices is built into the mindset in China. This is happening even as those who do not have homes are still priced out of the market, and those with savings are pouring them into housing, more so as people save more in 2020. This can be seen in the vacant homes rising to about 40% for those buying second homes. People are also taking on more debt with consumer, mortgage and other debt of households getting close to 60% of the country's GDP, a high leverage ratio. This also means there is less capital to invest in productive investments in industry as more and more savings are tied up in housing with large vacancy rates meaning the housing is not even being used. Some of the speculative nature of this can be seen in this report in the WSJ for cities such as Tianjin, Shanghai and Shenzen. ...

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President Biden visits Nevada and calls for a 5% cap on rent increases by corporate landlords with over 50 rental units. The WSJ report July 15 shows 25% of people renting apartments in the US pay over 50% of their income just to pay rent leaving little for food and transport, education and healthcare. This is a severe problem in Nevada and in the US across all 51 states. The president is closely following mortgage rates that went up from 3% to 8%, creating affordability issues for prospective homeowners. Another proposal of the president that he can act on as it does not require Congressional action is to use federally underused land and repurpose it for building 15,000 affordable housing units in Nevada. Such proposals across the 51 states are needed today to address acute rental housing shortage and price increases of about 20% by landlords.

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A WSJ survey of U.S. housing market prices and inventory in November 2013. Price gains moderated in the 3rd quarter of 2013. Gains were 1% in Orange County, 2% in San Diego, and 3% in San Francisco in the 3rd quarter 2013. Gains were over 20% in the 12 month period ending in September 2013 for San Francisco, Phoenix, San Diego, and Orange County, according to Zillow Inc, real estate website. Increase in interest rates on mortgages and rising prices have reduced the affordability of homes for new buyers.

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Fannie Mae will make a payment of $59.4 billion to the U.S.Treasury as a result of improvement of conditions in the housing markets that enable Fannie to writeup the value of devalued assets on its balance sheet. Fannie showed a profit of $8.1 billion for the first quarter of 2013 from its activities of guaranteeing and investing in home loans in the U.S. In 2008 the U.S. government bailed out Fannie Mae and Freddie Mac and the agencies received $117 billion in government assistance since then. With this $59.4 billion about $95 billion has been paid back to the U.S. Treasury. This also delays the debt ceiling deadline to Oct. 1, 2013 by generating more revenues for the U.S. Treasury in addition to higher tax revenues.

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Renewed warnings about the bubble in housing prices in China. Earlier warnings came from Krugman, Lardy, John Taylor. This one comes from Nomura economists Zhiwei Zhang and Wendy Chen. Could the government's action to curb rising housing prices not be adequate leading to a financial crisis as early as 2014, is the question posed by Zhang and Chen. They cite the rise of housing prices by 84% from 2001 to 2006, before the financial crisis of 2008 in the U.S., using the Case-Shiller housing price index. One problem- the government statistics may have underestimated the extent of the bubble. China's official index shows housing prices rising 113% in major cities from 2004 to 2012. Zhang and Chen say this is much smaller than the actual rise because it includes older, lower quality housing property. They cite an academic paper that adjusts for this and finds prices jumping by 250% in the period 2004 to 2009. Another problem is that China's housing prices growth slows after government action but then resumes the growth, leaving the risk exposure at the high level as before. Because the local governments are tied up in the housing bubble the problem would hit the banking system. About 14.1% of the outstanding bank loans are to local government financing vehicles, and 6.2% to property developers, according to Nomura economists. The declining potential growth rate in China means there is less room for bad loans to be absorbed by hyper growth levels than in the past. Errors in policy can magnify the risk including loosening monetary policy and exacerbating the bubble at the wrong time. In the absence of errors the risks still remain requiring the sale of public assets to bail out local governments and banks. The argument made by Krugman and other economists has been that China is not immune to the risks of a housing bubble going bad, in any way less than Sweden, the U.S., Spain and other countries, requiring bailouts of banks....

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China's growth will slow to about 3% in 2022 as the decisions made at the Central Economic Work Conference that ended on December 10 were to emphasize economic stability as the overriding goal. The goal of discouraging speculation in housing with the slogan housing is for living will remain in place in 2022. The goal of controlling surging debt that poses a serious risk to the economic future of China will also remain in place. The external environment remains uncertain and getting complicated with a change in the US and German governments in 2021 and shifts in policies.

A party congress will take place in 2022 in addition to the Beijing Winter Olympics. 

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John Taylor on the dangers of a loose U.S. monetary policy and the effects this had in fueling a housing bubble in Spain, Ireland and other EU countries. Taylor points to the bubble ocurring in emerging market economies from low interest rates. Taylor says the ECB's interest rate moves in 2003-2005 were affected by the Fed's low interest rates. He estimates the ECB set rates about two percentage points too low leading to housing bubbles in EU countries. A similiar process is taking place today with the Fed's near zero interest rate policy. Taylor points to interest rates in a group of 18 emerging market economies- including Brazil, China, India, Mexico and Turkey, which have held interest rates on average about 5 percentage points below widely used benchmarks fueling a doubling of global commodity prices between 2009-2011. The U.S. Fed's policies make it harder for central banks in emerging market economies to take aggresssive action against bubbles developing in these countries. Taylor says his does not mean that the Fed should not pay attention to the U.S. unemployment rate and long term unemployed, but should keep in mind the negative effects of slowing demand in emerging market economies and in the EU as a result of its monetary policy of keeping rates at near zero for long periods of time. This feeds back to the U.S. economy at a critical time....

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Gregory Zuckerman report in the WSJ on Jan 15, 2008 commented on the bets against housing that netted $3 billion to $5 billion for a financial firm that bet against subprime mortgages at the right time. It also commented on Alan Greenspan who joined the firm as an adviser after engineering a period of low interest rates that created conditions in the housing market for such speculative boom bust behaviour. The 2009 financial crisis marked a period of 10-15 years when the US lost its competitive advantage against China as a result of such speculation and poor leadership at the central bank. And leadership from the Reagan presidency in 1980 through 2009 that defunded infrastructure, manufacturing and public goods services in favor of deregulation and financial firms.

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Fletcher cites statistics from the federal Bureau of Labor Statistics showing that between December 2007 and June 2010, private sector employment in Texas went down by 0.6%. During that period public sector jobs increased by 6.4%. Government employees make up about 17% of the workforce in Texas. The Texas economy gets a large amount of federal money because of military installations and NASA- $227 billion in 2009, according to the Census Bureau. By comparison California received $346 billon in 2009. During the recession period after the global financial crisis of 2008, Texas received $25 billion in stimulus money. Richard Fisher of the Dallas Federal Reserve Bank acknowleges the federal money going into Texas, yet he points out the driving force in the economy of Texas is still the private sector. For the private sector there are several advantages to being in Texas. There are lower taxes- no state income tax and lower business taxes. The large supply of land for development and few land-use restrictions make development easier. Corporate efficiency was a key advantage cited by Fluor when it moved from Orange County, California to Texas. A growing energy sector has helped, along with the growing trade with Mexico. The housing regulations in the state have acted as a check on housing prices, and left Texas with less of the detrimental effects of the housing mortgage crisis than the rest of the nation, especially California and Florida. The governor of Texas, Rick Perry, says he is not against all regulation, and the kind of housing regulation in Texas certainly has played a good role for Texas. Perry's tort reforms have reduced the legal burden on business prevalent in the rest of the U.S....

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China's total public debt was 95% of GDP in 2022, Japan's was 62% in 1991. It's population aging faster than Japan's with population declining in 2022, Japan's declining in 2008 twenty years after its bubble burst. China's per capita income at $12,850 in 2022, compared to Japan's at $29,000 in 1991. China is facing more difficult headwinds than Japan in many ways. There is also higher tension in trade relations with US and EU limiting export growth. There is also the policy stance of the Communist Party that sees rural areas left behind with about 35% people in rural areas and Xi is slowing growth to reduce disparities and housing construction led speculative growth. In Japan urbanization was 77% in 1991, compared to 65% in China today. 

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Transcripts released for the U.S. Federal Reserve's Federal Open Market Committee (FOMC) 2006 meetings show Fed chairman Bernanke and then New York Fed president Geithner ignored the risks of a hard landing from the mortgage and housing bubble. Geithner even went so far as to say about retiring chairman Greenspan, who also ignored the risks from the bubble and set the tone during his long period as chairman at the Fed: "I'd like the record to show that I think you're pretty terrific, too...And thinking about the probabilities, I think the risk that we decide in the future that you're even better than we think is higher than the alternative." In evaluating the risks facing the U.S. economy in December 2006, at the height of the bubble, Geithner stated: "The current weakness in the economy still seems principally to stem from the direct effects of the slowdown in housing on construction activity... The softer than expected recent numbers don't argue in our view, for a substantial reassessment of the risks in the outlook." The Fed chairman, Ben Bernanke, said at the first meeting in March 2006: " Strong fundamentals support a relatively soft landing in housing... I think we are unlikely to see growth being derailed by the housing market." When a Fed economist gave a presentation in March 2006 on the risks in Iceland, Bernanke said- "We'd like a full report on the Icelandic," at which point the rest of the group erupted with laughter. Iceland defaulted on its debts in 2008. Warnings about housing by Fed Governor Susan Bies were ignored by Bernanke and Geithner. Two highly leveraged Wall Street investment banks collapsed in 2008- Bear Stearns in March and Lehman in September- from the impact of the bursting of the bubble in housing and mortgages. When they collapsed these banks were leveraged at about 30 to 1, as most of the warning signs had been ignored by regulators including the Federal Reserve....

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Healthcare coverage of illegal migrants is at the center of the fight between Democrats and Republicans leading to the government shutdown on October 1, 2025. A slight majority of Americans favor deportation of illegal migrants is shown in a recent NYT poll. Even higher numbers are likely to see higher priorities in the Nation than funding of housing and healthcare for illegal migrants when most families in the US are living from paycheck to paycheck and government subsidies and assistance are being cut after Covid.

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The Wall Street Journal's editorial columns have followed closely the working of Fannie Mae and Freddie Mac over the years. Especially during the last decade, when most of the excesses, missteps and failures in the operations of the two companies occurred at huge cost to the US economy and to taxpayers. The Journal quotes from the recent Treasury report on the planned winding down of the two agencies. And focusses attention on the question of what will replace Fannie and Freddie. Only the first of three options looks viable considering the goals of reducing misallocation of national resources, and winding down the federal government's role in housing, says the Journal. With this Option the federal government guarantees are limited to Federal Housing Administration (FHA) loans to low income buyers and VA assistance for veterans and farm programs- narrow segments that limits the guarantee strictly to 10-15% of the mortgage market. The Journal says that the conclusions of the Treasury report are what WSJ has been saying for 20 years: " The strength of this option is that it would minimize distortions in capital allocation across sectors, reduce moral hazard in mortgage lending and drastically reduce direct taxpayer exposure to private lender's losses." And the points about the benefits: " With less incentive to invest in housing, more capital will flow into other areas of the economy, potentially leading to more long-run economic growth and reducing the inflationary pressure on housing assets. Risk throughout the system may also be reduced, as private actors will not be as inclined to take on excessive risk without the assurance of a government guarantee behind them. And finally, direct taxpayer risk exposure to private losses in the mortgage market would be limited to the loans guaranteed by FHA and other narrowly targeted government loan programs: no longer would taxpayers be at direct risk for guarantees covering most of the nation's mortgages." This bit of wisdom is especially significant, as misallocation of capital that went on in housing for the better part of the last decade has hurt America and the American people. It makes sense to have explicit money allocated by Congress for housing help to the poor and have no housing guarantees that have hurt the economy....

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Morgenson cites Paul Diggle, property economist at Capital Economics in London, about why the $26 billion mortgage settlement between the state attorneys general, the U.S. government and the large U.S. banks is unlikely to make much difference to the foreclosure problems in the housing market. The agreement provides for reducing principal by $17 billion over 3 years for homeowners under water. Diggle points out that $17 billion is a drop compared to what is needed, because 11 million homeowners are now under water on their loans to the amount of $700 billion. The $17 billion is a mere 2.4% of the negative equity of $700 billion.

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Peter Schiff says home prices are still too high. They would have to decline another 20% just to fit the long term trend line indicated by the Case -Shiller index of an average 3.35% increase each year, based on long term historical data. He says economists underestimate how distorted the housing market has become, and how little it has normalized since 2008. This is based on average increase in home prices of 3.35% per year for the 100 years between 1900 and 2000, as determined by Yale economist Robert Shiller, which is just a bit above the average rate of inflation. Taking the January 1998 10 city index of 82.7 and following the 3.35% annual trend line, he says the index would be at 126.7 in October 2010. Case-Shiller showed that it was 159.0 for October 2010. Schiff uses this to show that the market needs to drop by 20.3% from the current level to get back to the trend line. He says that the home buyers tax credit, record low interest rates, and the increased presence of Fannie Mae and Freddie Mac and the Federal Housing administration have for now put a floor on housing prices. Conditions in the US housing market with high inventories, the high unemployment, savings depletion and debt, point to this overshooting by 5-10% on the downside. See Roubini, who points to housing losses in 2011....

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Inflation in the US eased from 8.5% to 8.3% in July according to the Labor Department consumer price index. This reflected declines in gasoline costs, airfares, and slower growth in cost of groceries. Climbing housing costs are a problem. They now make up 25% of the August 2022 inflation rate, up from 20% in February.

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China's housing developers are increasing the issuance of high yield bonds in 2013. European and American companies have issued $120 billion in junk bonds for Jan-March 2013. Chinese companies issued $8 billion to overseas investors for Jan-March 2013, increasing from $2.3 billion in junk bonds issued in the same period for 2012, according to Dealogic. Yields are dropping. In the U.S. yields have dropped from an historical level of 10% to 6% on junk bonds. The same pattern is seen for China's junk bonds. Yields for bonds issued by Chinese housing developers have dropped from 11-12% to 7-8%. Investors are taking on higher risks on these bonds and the current yields do not reflect higher risk, as the bonds are issued from overseas subsidiaries for foreign investors. As with the bankruptcy of Suntech Power, foreign bondholders could lose everything. These junk bonds are not backed by the company assets in mainland China, and local banks and creditors in China come first in getting their money back. ...

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Tution fees in the UK are 9450 pounds. The cost of housing about 7500 pounds in 2024, up 15% over the last 2 years. In addition to the over charges on student loans for Plan 2 Loans in Britain that take it from 4.3% with a surcharge of 3%, there is the 15% inflation in housing costs in Britain that households and student have to contend with. This situation is true today for Britain, the US and Germany, and other countries in the EU leaving less for food and transportation costs. This is why there is an added level of worry and anxiety for young people in Britain the EU and in the US, and for their parents.

Others one with a business economics degree and a solicitor apprentice in a law firm face the same situation. He works in finance and just sees it as he says a tax on having gone to university.  Similar stories across the US. It doesn't have to be this way for advanced nations education is FIRST PRIORITY.

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In this economy there is wide divergence in the US for upper income people earning well on assets they own at 5%+ for extra income and the lower middle classes wage earners that are struggling even with low unemployment and inflation at 3%. WSJ looks at these two divergent parts of the US economy and what can be done. Inflation could be worse with higher Trump tariffs on imports, says WSJ. The situation is a difficult one for families struggling even with higher incomes, as this one in Michigan in the WSJ, that finds it necessary to take money out of savings with prices higher but not reflected in inflation statistics of 3%. One example is higher housing and apartment rental costs with 25% of families having to spend over 50% of their income on home rental leaving little for food and expenses. President Biden has called for limiting price increases on home and apartment rentals to 5%, and Harris has proposed aid for families spending more than 30% of household income on housing costs. Strong action is needed. ...

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Picture of a weather sign outside a Pharmacy in Paris shows the heat wave hitting Europe- the Temp. 44 degrees C. This is 111 degrees Fahrenheit. In places loike Seville, Spain the temperature can get even hotter. Europe is woefully under airconditioned with many hospitals and public facilities lacking airconditioning. The US is far ahead in airconditioning. Conservative parties in Europe are accusing the liberals in power of not doing enough. In London Sadiq Khan is Mayor and housing construction rules require considering other cooling design options before putting in air conditioning. Some members of parliament call this "ridiculous."  In France the opposition parties say the government "is out of touch." Consider government views in France. Energy minister Agnès Pannier-Runacher says heat from large-scale air conditioning would make heat waves worse. “It’s a bad solution, We should air-condition for vulnerable people to give them a break, but on the other hand we shouldn’t do it everywhere.”  ...

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The PCE personal consumption expenditures index of the US Commerce Department is likely to come down slower than the CPI index by October 2023. The US Fed prefers to use the PCE index and this could lead to the Fed staying with higher interest rates for longer, says the WSJ. Medical care costs are likely to accelerate by the end of 2023, as housing costs decline. The PCE has a larger weighting for medical care costs than the CPI index. 

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What lies ahead of the US economy, first week of September 2007? John Makin who has worked with Treasury for many years as senior economist and was visiting scholar at Bank of Japan, and Prof of Economics at University of Washington, University of Wisconsin, and is now scholar at American Enterprise Institute, gives his assessment of what is happening and what to expect. He sees the callof recession easier and easier to make. A slowdown definitely. The US definition of recession 2 consecutive quarters of negative consumption growth make this a techincal isue. But a slowdown is definitely in the works argues Makin. Putting together the numbers Makin comes up with a negative 0.8% growth for the fourth quarter. Makin believes that the probability is high that the fallout of the mortgage and housing crisis as it filters through the economy and affects credit and consumption growth will result in negative growth late in 2007 and early 2008. As he puts it referring to the whole mess of ratings agencies giving 100% loan to value securitized morgages a triple A rating, and the gradual unwinding of this mess through the housing, banking and finance sectors as well as consumers, " this collective stupidity" he calls it , will cost us a recession. ...

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Questions about the euphoria for US stock market performance in 2011. Negative impact of housing market, rise in food and fuel prices, and the precarious condition of state and local government finances, raise concerns about the economy and stock markets for 2011-2012. John Makin sees a one third chance of sovereign debt crisis in the eurozone, and a 40% chance of China not making a soft landing, in a video interview with Wessel of the WSJ, December 30, 2010. This would impact stock markets in the US. WSJ's Brett Arends column also expresses similiar skepticism. Robini sees housing losses in 2011.

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This WSJ editorial points out a big concern in the third quarter 2012 economic growth figures- the figure showing non-housing related investment contracting by 1.3%. It says the U.S. borrowed $5 trillion and all it got in return was 1.7% economic growth- 1.7% being the growth in U.S. GDP for the first 9 months of 2012. It also points out that the growth came from consumer spending and the Federal Reserve's money printing. The consumer spending would be hard pressed to continue if incomes remain stagnant without the capital investment and hiring from the private sector. Government spending accounts for 0.7% of the GDP growth, and estimates for private sector growth in output is about 1.3%.