October 28, 2021

Economix Blog: A Place That Makes New York Real Estate Look Cheap

Think it’s expensive to buy a home in New York? Try moving to China.

Sources: International Monetary Fund, using CEIC Data; 8th Annual Demographia International Housing Affordability Survey; national statistical offices; and I.M.F. staff estimates. Note: Data for cities in mainland China (in red), Tokyo, and Singapore are calculated as the price of a 70-square-meter home divided by average annual pretax household income; data for other cities are the median house price divided by median pretax household income, as reported by Demographia. Sources: International Monetary Fund, using CEIC Data; 8th Annual Demographia International Housing Affordability Survey; national statistical offices; and I.M.F. staff estimates. Note: Data for cities in mainland China (in red), Tokyo, and Singapore are calculated as the price of a 70-square-meter home divided by average annual pretax household income; data for other cities are the median house price divided by median pretax household income, as reported by Demographia.

That chart comes from the International Monetary Fund (and was brought to my attention by Torsten Slok, the chief international economist at Deutsche Bank). It shows the ratio of house prices to annual household income: that is, how many years’ worth of income it would take to buy the typical house in a given city.

CATHERINE RAMPELL

CATHERINE RAMPELL

Dollars to doughnuts.

As you can see, the median house price in New York was equal to 6.2 years’ worth of the median pretax household income in 2011. The most comparable data we have for an array of Chinese cities — shown in red above — suggests that homes in New York are a steal compared to those in urban parts of the Middle Kingdom.

The Chinese data (which use a slightly different metric: the price of a 70-square-meter home divided by average annual pretax household income) show that in Shanghai it would cost 15.9 times the typical household income to buy a standard home. In Beijing, the ratio is even higher, at 22.3.

Real estate prices are so high in China, Mr. Slok explains, because people have few options for parking their savings.

The savings rate is phenomenally high in China. The consumer banking sector, however, is not nearly as built out as those in most developed countries, partly because the Chinese government restricts entry of foreign service-providing companies like financial institutions. So people have been investing their savings in a local sector that has had big returns — real estate — chasing home prices ever higher.

I should note, by the way, that housing prices in China began to fall in 2011 as the government tried to curb speculative real estate investment. Home prices then picked up again in the middle of last year and continue to rise.

Article source: http://economix.blogs.nytimes.com/2013/01/25/a-place-that-makes-new-york-real-estate-look-cheap/?partner=rss&emc=rss

DealBook: Wells Fargo Posts $4.6 Billion Profit, Up 17%

A branch of Wells Fargo in Manhattan.Cx Matiash/Associated PressA branch of Wells Fargo in Manhattan.

Wells Fargo reported its 10th consecutive quarter of earnings growth as a result of a booming business originating and refinancing mortgages.

The bank’s second-quarter profit was a record $4.6 billion, a 17 percent rise from the $3.9 billion profit it reported a year earlier. The San Francisco-based company earned 82 cents a share, which was more than the 81 cents expected by the analysts polled by SNL Financial.

Wells, with a relatively small presence on Wall Street, has largely skirted the controversies that have engulfed many of its large competitors and helped it pass JPMorgan Chase to become the largest American bank by stock market capitalization.

Wells has relied largely on its consumer banking business, and particularly its mortgage lending division, which has benefited from record-low interest rates.

The bank originated $131 billion of mortgages in the second quarter, up from $129 billion in the first quarter of the year. Meanwhile, the improving credit quality of the bank’s customers allowed the banks to set aside less money for loan losses.

Revenues for the entire company were up to $21.3 billion from $20.4 billion a year ago. Profits were up at each of the bank’s three business divisions: wholesale banking, community banking and wealth management.

The bank’s chairman and chief executive, John Stumpf, said the “the economic recovery remains uneven,” but that the bank benefited from signs of stabilization in the housing market. He said Wells had “record quarterly mortgage applications, increases in lending to consumers and businesses, and continued growth in deposits and cross-sell.”

Wells took a hit on Thursday when it was announced that it would pay $175 million to settle Department of Justice accusations that it discriminated against some minority homeowners seeking loans between 2004 and 2009. In making the settlement, Wells denied the charges.

Wells shares closed slightly down Thursday at $32.85, up from about $28 at the start of the year.

Article source: http://dealbook.nytimes.com/2012/07/13/wells-fargo-posts-4-6-billion-profit-up-17/?partner=rss&emc=rss

DealBook: Deutsche Bank Earnings Beat Expectations

Josef Ackermann, the chief of Deutsche Bank.Joerg Carstensen/European Pressphoto AgencyJosef Ackermann, the chief of Deutsche Bank.

Deutsche Bank, the largest German lender, on Tuesday reported third-quarter profit that was above expectations, as improvement in its consumer banking business helped offset a plunge in trading revenue that the bank blamed on the European sovereign debt crisis.

The bank said profit in the three months ended Sept. 30 was 777 million euros ($1.1 billion), after a loss of 1.2 billion euros in the period a year earlier. Analysts surveyed by Reuters had expected a net profit of 400 million euros.

But pretax profit in the corporate banking and securities division, which includes the investment bank, plunged to 70 million euros in the quarter from 1.1 billion euros a year earlier, the bank said.

“During the third quarter, the operating environment was more difficult than at any time since the end of 2008, driven by a deteriorating macroeconomic outlook, and significant financial market turbulence,” Josef Ackermann, the chief executive of Deutsche Bank, said in a statement. “Our performance was, inevitably, impacted by this environment.”

He said the bank had taken steps to reduce risk in investment banking, and put more emphasis on selling banking services to consumers.

Banks in Europe are under pressure to prepare themselves for the likelihood that Greece will default on its government bonds. Deutsche Bank, which reported a loss of 185 million euros related to holdings of Greek bonds in the quarter, is among institutions that may need to raise more capital.

The bank said its core Tier 1 equity, a measure of its ability to withstand financial shocks, was 10.1 percent at the end of the quarter, down from 10.2 percent at the end of the second quarter. European regulators are expected to push banks to raise the ratio to 9 percent by June at the latest.

While Deutsche Bank is above that level, it might still face market pressure to exceed the minimum by a more comfortable margin.

The bank could increase its capital ratio by selling new shares or, more likely, by retaining profit instead of paying it out to shareholders. The bank can also sell assets to raise the ratio of reserves to money at risk.

Article source: http://dealbook.nytimes.com/2011/10/25/deutsche-bank-earnings-beat-expectations/?partner=rss&emc=rss