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German Finance Minister Puts Focus on Unemployment

May 9, 2013 by Leave a Comment

LONDON — A failure to tackle high youth unemployment could destroy democratic support for the European Union’s governments, the German finance minister, Wolfgang Schäuble, said Thursday, in an apparent concession that the euro zone’s focus on austerity must be tempered by other policies.

Speaking at an investment conference in London, Mr. Schäuble cited joblessness among young people as Europe’s biggest problem, arguing that the Continent faced the difficult task of “enhancing growth but in a sustainable way.”

“We will have to speed up in fighting youth unemployment, because otherwise we will lose the support, in a democratic way, in some populations of the European Union,” he said.

Mr. Schäuble, seen as one of the hawks among European finance ministers, said he supported recent moves by the European Commission, the bloc’s executive, to give some countries more time to bring down their budget deficits. But he also emphasized the need for more structural reform in Europe.

Across the Continent there are growing signs of austerity fatigue among voters amid worries that a focus on retrenchment is pushing economies into a downward spiral. Last month, José Manuel Barroso, the president of the European Commission, said austerity had hit the limits of public acceptance.

The unemployment rate in Greece reached 27 percent in February, according to figures released on Thursday, and the jobless rate for young people was more than 60 percent. The overall jobless rate is also expected to be 27 percent this year in Spain, where more than half of young people are out of work.

Speaking before a two-day meeting of Group of 7 finance ministers in Britain, Mr. Schäuble argued that progress in stabilizing the euro zone crisis meant that it would no longer be the main obstacle to global growth.

He struck a conciliatory tone over plans, supported by Germany, for a European financial transaction tax. Mr. Schäuble said there was “a long way to go” before any decision on the proposal, which Britain has challenged.

Article source: http://www.nytimes.com/2013/05/10/business/global/german-finance-minister-puts-focus-on-unemployment.html?partner=rss&emc=rss

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House Prices Fall to New Post-Bubble Low as More Rent

May 31, 2011 by Leave a Comment

The Standard Poor’s Case-Shiller Home Price Index for 20 large cities fell 0.8 percent from February, the eighth drop in a row. Prices are now down 33.1 percent from the July 2006 peak.

“Home prices continue on their downward spiral with no relief in sight,” said David M. Blitzer, chairman of the S. P. index committee.

Housing is in persistent trouble, industry analysts say, not only because so many people are blocked from the market — being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage — but because even those who are solvent are opting out.

The desire to own your own home, long a bedrock of the American Dream, is fast becoming a casualty of the worst housing downturn since the Great Depression.

Even as the economy began to fitfully recover in the last year, the percentage of homeowners dropped sharply, to 66.4 percent, from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.

“The emotional scars left by the collapse are changing the American psyche,” said Pete Flint, chief executive of the housing Web site Trulia. “There was a time when owning a home was a symbol you had made it. Now it’s O.K. not to own.”

Trulia, a real estate search engine for buyers and renters that is based here, is a hive of renters, including Mr. Flint. “I’m in no rush at all to buy,” he said. He expects homeownership to decline further to about 63 percent, a level the country first achieved in the mid-1960s.

The new Case-Shiller data did not offer much room for short-term optimism. The national housing index, which is reported quarterly, fell 4.2 percent in the first quarter after a drop of 3.6 percent in the fourth quarter of 2010. This, too, is a new recession low.

Twelve of the 20 cities in the index hit a new recession low in March. Washington was the only city where prices rose both in March and over the last year.

Years of declines are teaching potential buyers to expect more of the same. Tim Hebb, a Los Angeles systems engineer, expertly called the real estate bubble. He sold his bungalow in August 2006, then leased it back for a year. Since then, the 61-year-old single father has rented a succession of apartments.

“I have flirted with buying again many times over the past few years,” said Mr. Hebb. “Let’s face it, people are not rational creatures.”

But he always resists, figuring housing is still overpriced and even when it stops declining it will stumble along the bottom for years and years. He says there is plenty of time to get back in if he should ever want to.

Housing prices are now back to where they were in mid-2002. Such a decline was literally unimaginable to the boosters and many of the analysts in the middle of the boom, who were fond of saying that house prices never fell on a national basis.

But as credit dried up and the easy refinances disappeared, the foreclosures began. Prices fell sharply in late 2006, 2007 and 2008.

The market turned around in 2009, prompting hopes that the worst was over. A government tax credit proved wildly popular but after it expired a year ago the declines resumed.

When demand will naturally reignite to stabilize the market is a matter of debate. Most economists have been saying that they think the price declines will level off in the second half of this year, although a few think they will continue until 2012. What no one seems to anticipate is any sort of a brisk recovery. Instead they see a muddling along until the foreclosure crisis diminishes and the excess housing supply is soaked up.

The financial blog Calculated Risk estimated the excess housing supply this week using 2010 Census data, which it compared to 1990 and 2000. The blog concluded that the excess supply in April 2010 was about 1.8 million units but probably several hundred thousand fewer now.

Article source: http://www.nytimes.com/2011/06/01/business/01housing.html?partner=rss&emc=rss

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Index Expected to Show New Low in House Prices

May 30, 2011 by Leave a Comment

Even as the economy began to fitfully recover in the last year, the percentage of homeowners dropped sharply to 66.4 percent from a peak of 69.2 percent in 2004. The ownership rate is now back to the level of 1998, and some housing experts say it could decline to the level of the 1980s or even earlier.

Disenchantment with real estate is bound to swell further on Tuesday when the most widely watched housing index is all but guaranteed to show prices of existing homes sank in March below the lows reached two years ago — until now the bottom of the housing crash. In February, the Standard Poor’s/Case-Shiller index of 20 large cities slumped for the seventh month in a row.

Housing is locked in a downward spiral, industry analysts say, not only because so many people are blocked from the market — being unemployed, in foreclosure or trapped in homes that are worth less than the mortgage — but because even those who are solvent are opting out.

“The emotional scars left by the collapse are changing the American psyche,” said Pete Flint, chief executive of the housing Web site Trulia. “There was a time when owning a home was a symbol you had made it. Now it’s O.K. not to own.”

Trulia, a real estate search engine for buyers and renters that is based here, is a hive of renters, including Mr. Flint. “I’m in no rush at all to buy,” he said. He expects homeownership to decline further to about 63 percent, a level the country first achieved in the mid-1960s.

Tim Hebb, a Los Angeles systems engineer, expertly called the real estate bubble. He sold his bungalow in August 2006, then leased it back for a year. Since then, the 61-year-old single father has rented a succession of apartments.

“I have flirted with buying again many times over the past few years,” said Mr. Hebb. “Let’s face it, people are not rational creatures.”

But he always resists, figuring housing is still overpriced and even when it stops declining it will stumble along the bottom for years and years. He says there is plenty of time to get back in if he should ever want to.

The market signaled further trouble on Friday when the April index of pending deals was released by the National Association of Realtors. Analysts had predicted the index, which anticipates sales that will be completed in the next two months, would be down 1 percent from March. Instead, it plunged 11.6 percent.

Many of those in the business of building and selling houses believe the current disaffection with real estate will pass. After every giddy boom comes the hangover, they acknowledge, but that deep-rooted desire for a castle of one’s own quickly reasserts itself.

“There’s no question that people are reticent to own,” said Douglas C. Yearley Jr., chief executive of Toll Brothers, the builder of high-end homes. “They’re renting and they’re happy renting because they’re scared.”

Yet those fears will fade, he predicted.

“Most people still want the big house with the big lot in the desirable school district in the suburbs. No one ever renovated the kitchen or redid a room for the kids in a rental,” Mr. Yearley said. “I think — I hope — we’ll be O.K.”

The market’s persistent weakness, however, runs the risk of feeding on itself. Buyers are staying away despite the lowest interest rates and the highest affordability levels in many years, which in turn prompts others to hesitate.

Trulia and another real estate site, RealtyTrac, commissioned Harris Interactive to take a poll last November about when people thought the market would recover. A third of the respondents chose 2014 or later. But in a new poll, released this month, the percentage giving that answer rose to 54 percent.

The sharp decline in prices since 2006 has meant a lost decade for many owners. But what may prove even more discouraging to potential buyers is academic research showing the financial rewards of ownership were uncertain even before the crash.

In a recent paper, a senior economist at the Federal Reserve Bank of Kansas City found that the notion that homeownership builds more wealth than investing was true only about half the time.

“For many households in many years, renting and investing the saved cash flow has built more wealth than homeownership,” the economist, Jordan Rappaport, concluded.

Economics affects potential owners in other ways. A house is a long-term commitment that many are loath to make in uncertain times like these.

“What I’m hearing from people is that they don’t want to be tied to a particular geography, which inclines them to renting,” said Mr. Flint of Trulia.

San Francisco is one of the country’s most expensive cities, so renting has a natural appeal here. But Associated Estates Realty Corporation, which owns 13,000 apartments in Georgia, Indiana, Michigan and other Midwest and Southeast states, also is seeing more people deciding to rent.

“We have more of what we call ‘renters by choice’ than I’ve seen in the 40 years I’ve been in the apartment business,” said Jeffrey I. Friedman, chief executive of Associated Estates.

For decades, the company has asked former tenants why they were moving out. During the housing boom, as many as a quarter of those moving on said they were buying a house. In 2009, the percentage of new owners fell in the first quarter to 13.7 percent, the lowest ever.

Last year, as the economy improved, the number rebounded. This year, it fell back again, to 14 percent.

Builders clearly believe that the future includes many more renters. So far this year, construction of multiunit buildings is up 21 percent compared with 2010, while single family-homes are down 22 percent. Sales of new single-family homes are lower than any time since the data was first kept in 1963.

Susan Lindsey, a San Diego software programmer, was once eagerly waiting for the housing market to crash. She said she would have no guilt about swooping in on some foreclosed owner who had bought a place he could not afford.

With prices now down by a third, however, she is content to stay in her $2,500-a-month rental. She prefers to invest in gold, which she has been buying since 2003.

“I could afford a median-priced house, no problem,” said Ms. Lindsey, 48, as she headed off for a holiday weekend in Las Vegas. “But I would be paying more to live in a place I like less.”

Article source: http://feeds.nytimes.com/click.phdo?i=a8da999657218017188616e8e9f629c1

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In Europe, Rifts Widen Over Greece

May 24, 2011 by Leave a Comment

Gloomy investors on Monday drove down Europe’s stock indexes by about 2 percent, while the euro fell nearly 1 percent against the dollar, touching a two-month low.

Meanwhile, yields rose on 10-year Spanish and Italian bonds, reflecting a market perception that the risks are rising that those two indebted nations might be following the downward spiral of Greece. Greek 10-year bonds reached a record 16.8 percent as investors demanded a high premium for holding them.

On Wall Street, major stock indexes were also down more than 1 percent, in part over the uncertainties in Europe.

The markets seem to reflect the growing discord within the 17-member euro zone currency union, barely a year after European governments came together with a 750 billion euro ($1 trillion) safety net for debtor-nation members. Tensions also remain over whether to restructure Greece’s debt and force bondholders to take losses.

It is clear that the bailout package and the austerity terms imposed on Greece have deepened its recession and added to its already substantial debt burden. The debate now is whether making more cuts and recharging a program to privatize many formerly government-run agencies and social services in Greece will be enough to persuade a reluctant Europe to lend the country another 60 billion euros.

“It looks like a real unraveling — everyone is taking their own position and as a result cooperation has become an impossibility,” said Paul De Grauwe, an economist in Brussels who advises the president of the European Commission, José Manuel Barroso.

The discord has become increasingly apparent since Greece’s financial decision makers were summoned to secret talks at a Luxembourg castle by their currency partners this month.

The Greeks probably knew that a tongue-lashing over the country’s stumbling financial overhaul effort was coming. What they probably did not expect was that beleaguered Spain and Italy, as opposed to economically robust Germany, would take the lead in upbraiding them.

The meeting, on May 6, showed that the disagreements in the euro zone were not just between richer northern countries like Germany and the less wealthy south.

Struggling countries like Spain and Italy fret that any Greek failure on spending cuts might cause investors to conclude that those two countries have no better growth prospects than Greece — even as their own austerity programs cause social and political unrest.

On Monday, the bond market seemed to fulfill Spain and Italy’s worst fears about being lumped in with Greece’s as a poor investment risk and the perception that the cuts meant to ease those countries’ debts will instead mire them deeper in recession.

Ten-year yields for Italian bonds edged up to 4.8 percent on Monday, from 4.7 percent last week. Rates for Spain’s comparable bonds rose to 5.5 percent, up from 5.2 percent. Euro zone unity has always been a challenge to maintain, given the member countries’ contrasting histories and cultures. That it should be crumbling barely a year after European governments agreed to a rescue package underscores the difficulty in translating grand policy ideals into workable achievements.

And that it is Spain and Italy now stressing the necessity of austerity — not Germany or the European Central Bank — is further evidence that bond market investors continue to be the most powerful voice in this debate, Mr. De Grauwe said.

Southern countries, he said, are afraid of contagion from Greece’s woes. “But history shows us that you cannot cut deficits in the midst of a recession.”

For Spain, devastating local election losses on Sunday by the governing Socialist Party created worries that Madrid’s plan to cut its budget deficit might founder. It had planned to reduce the deficit to 6 percent of gross domestic product this year in the face of a 20 percent unemployment rate.

Many Spaniards have now taken to the streets in protests organized through social media. (Spain’s deficit was 9.24 percent of gross domestic product in 2010.)

Article source: http://www.nytimes.com/2011/05/24/business/global/24iht-euro24.html?partner=rss&emc=rss

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