September 30, 2022

Economix Blog: Investors vs. Occupants in the Housing Recovery



Dollars to doughnuts.

One of the big questions about the sustainability of the housing recovery is whether it’s being driven by owner-occupants — the people who live in the houses they buy — or speculators.

In the last year or so, after all, some of the big institutional investors have bought up a lot of distressed properties because they perceived the market to be undervalued, and saw some major opportunities in the rental market. Blackstone, for example, is now the biggest owner of single-family homes, having purchased about 20,000 homes across the country, most of them foreclosures.

New data released by the National Association of Realtors suggests that investors are still playing a role in the market, but their influence is down from its peak.

Source: Realtors Confidence Index, National Association of Realtors Source: Realtors Confidence Index, National Association of Realtors

The chart above shows the share of monthly home sales that went to investors. The data come from the Realtors Confidence Index, which is based on about 3,000 responses each month from members of the National Association of Realtors. In February, investors accounted for about one in five purchases, which is close to the long-term average, according to Walter Molony, who works in the association’s public affairs office.

From Mr. Molony, here is the breakdown of home sales by use for 2003-11, from a separate, annual questionnaire filled out by about 2,000 home buyers each year. The 2012 numbers come out next week.

Source: National Association of Realtors Source: National Association of Realtors

He writes:

This tracked well with findings from the Realtors Confidence Index, but digression from monthly data in the R.C.I. that began in 2011 appears to result from additional purchases outside of [Multiple Listing Service] listed property (courthouse auctions, bulk purchases, etc., outside of publicly marketed property). That pattern likely began to reverse in 2012 as foreclosure inventory, most popular with investors, declined over the course of the year.

When I went to Sacramento a couple weeks ago to write about the recovery, I found some resentment of investors, at least among buyers. Investors have helped a very depressed market recover, but they have also been outbidding owner-occupants, particularly since many investors can finance their purchases entirely in cash rather than having to wait for a loan.

Here’s a look at the share of sales that were paid for in cash, from the Realtors Confidence Index survey:

Source: Realtors Confidence Index, National Association of Realtors Source: Realtors Confidence Index, National Association of Realtors

As of February, the share was about one in three, whereas Mr. Molony says that in a “normal market,” all-cash transactions account for closer to 10 percent.

Article source:

Economic Reports Surprise in Britain and Germany

While official data showed the British economy shrank more than expected in the fourth quarter, raising concern about another recession, a closely followed business confidence index in Germany beat economists’ forecasts for January, a sign that Europe’s largest economy is improving.

“It fits into a pattern we’ve seen for a while that Germany has tended to outperform other countries,” Eckart Tuchtfeld, an economist at Commerzbank, said. “This is not a one-off. The economic situation in Germany has improved” since the last quarter of 2011.

The Ifo institute’s business climate index rose more than some economists predicted in January for a third month in a row, with manufacturing and service industries, especially, performing better than expected. Sales at carmakers such as Daimler and Bayerische Motoren Werke jumped last year. SAP, the business management software maker, on Wednesday forecast higher earnings for this year.

In Britain, the economy is struggling to avoid falling back into a recession. Gross domestic product fell 0.2 percent in the fourth quarter of last year from the third quarter, more than the 0.1 percent some economists forecast, the government said Wednesday. Manufacturing shrank 0.9 percent; London has been trying to stimulate the sector in an effort to make Britain’s economy less dependent on services.

Prime Minister David Cameron called the figures “disappointing,” adding that “these are extremely difficult economic times.” He blamed the drop in G.D.P. on an “overhang of debt,” higher fuel prices and “Europe’s economies.”

The leader of the opposition Labour Party, Ed Miliband, said Mr. Cameron should stop blaming the euro zone’s economic crisis for Britain’s difficulties and start to admit that the government’s austerity measures cripple growth. “People are fed up with his excuses,” Mr. Miliband said.

The chancellor of the Exchequer, George Osborne, acknowledged that Britain had “substantial economic problems,” but that “dealing with those problems is made more difficult by the situation in the euro zone.” The government said it would stick to its plan to cut the budget deficit, which would eliminate about 700,000 public sector jobs, asserting that the plan helped to provide Britain with lower borrowing costs than countries such as Italy or Spain.

The International Monetary Fund on Tuesday cut its growth forecast for Britain for this year to 0.6 percent from 1.6 percent and predicted a mild recession in the 17 E.U. countries that share the euro as a single currency. Britain is a member of the European Union but not of the euro zone.

“The heightened uncertainty has damaged confidence, causing businesses and consumers to put their spending decisions on hold, paralyzing the U.K. economy,” Andrew Goodwin, senior economic adviser to Ernst Young’s economic analysis group, said. “There is a danger that this situation will persist, in the absence of a credible and sustainable solution to the euro zone’s woes.”

Britain’s dismal economic data Wednesday means the Bank of England is now more likely to expand its bond purchasing program, or so-called quantitative easing, when its interest rate setting committee meets next month. The benchmark interest rate is at a record low of 0.5 percent and the central bank is close to completing its £275 billion, or $428 billion, bond buying program meant to alleviate pressures in the credit markets.

“There is scope for interest rates to remain low, and, if necessary, for further asset purchases, to prevent inflation falling below the 2 percent target,” Mervyn A. King, the governor of the Bank of England, said in a speech Tuesday evening.

“As we head into a challenging year for the world economy, we have seen more positive sentiment in financial markets, and, at home, a fall in inflation,” Mr. King said. “But none of this implies that 2012 will be an easy year.”

Article source:

Economix Blog: A Low in Gallup’s Economic Confidence Index

Americans have given their economy a vote of no confidence. Or at least, very little confidence.



Dollars to doughnuts.

Gallup’s latest survey shows that Americans are considerably more pessimistic now than they were a year ago. Here’s a chart showing Gallup’s Economic Confidence Index for 2010 and 2011:


The index is based on daily interviews with 500 adults across the country, or about 3,500 people each week. Respondents are asked whether the economy is getting better or worse, and whether current economic conditions are “excellent,” “good,” “only fair” or “poor.” For each question, Gallup subtracts the percentage of people answering negatively from the percentage of people answering positively.

Then the two results are averaged to come up with a value that Gallup calls the Economic Confidence Index. A negative index value means that Americans are more pessimistic, and a positive value means they are more optimistic.

As you can see, the latest index measure was negative 49 (with a margin of error of 2 percentage points), compared to negative 29 a year ago.

Americans have been down on the economy for several years now. The index hit its recession-era monthly low of negative 60 in October 2008, and the highest level it has touched since then was a mere negative 21 (this past January).

These trends are concerning because worries about a poor economy can become self-fulfilling (or at least, self-perpetuating). If people believe the economy will get worse, they’ll hold back on spending and hiring, causing the economy to actually get worse.

Article source: