This Is Scary: Silicon Valley Is In Trouble, The 2s/10s Curve Is At Post-crisis Lows, House Flipping Is On The Rise Again…Ben Bernanke Is Worried


 

Investors Push Into a Resurging Market: House Flipping

House flipping, which declined after the financial crisis in 2008, is on the rise again, thanks to low interest rates and rising home prices. And with the renewed interest come investors looking for a high return.

But that real estate strategy — in which a home is bought, renovated and resold quickly — requires fast access to money, and developers are willing to pay higher interest rates for it. The loans are backed by the property and are short, typically running for a year or less. And the funds that finance them offer reliable returns of about 8 percent, for those who can meet minimum investments, generally $100,000.

The finance industry around house flipping has been active for decades, and it has been ticking up lately. Last year, 5.7 percent of all home sales were flips, the highest level since 2006, according to Attom Data Solutions, a national property database. The trend, popularized on TV series like “Flip or Flop” on HGTV and “Flipping Out” on Bravo, is attracting the interest of Wall Street: Last week, Goldman Sachs bought Genesis Capital, a leading lender to house flippers.

www.nytimes.com/2017/10/20/your-money/house-flipping-loans.html
UBS Global Real Estate Bubble Index
UBS Global Real Estate Bubble Index 2017
www.ubs.com/global/en/wealth-management/chief-investment-office/features/global-real-estate-bubble-index-2017.html
Ben Bernanke fears that should another sharp recession occur the Fed won’t be able to contain it.

Ben Bernanke is worried — and perhaps we should be, too.
As chairman of the Federal Reserve from 2006 to 2014, it was Bernanke, along with others, who prevented the worst recession since World War II from becoming the Great Depression 2.0. Now he fears that, should another sharp recession occur, the Fed won’t be able to contain it.

Traditionally, the Fed has sought to influence the economy by changing short-term interest rates. If a recession looms, the Fed cuts the “fed funds” rate to stimulate demand. If the danger is inflation, the Fed raises the rate to relieve wage and price pressures. Changes in the fed funds rate are assumed to nudge rates on mortgages, corporate bonds and Treasury securities in the same direction.
But there’s a practical limit to this approach: Once the Fed has cut the rate to zero, it can’t do much more. If the recession is deep, it may outlast the Fed’s therapy. To many economists, failure portends dire consequences: deflation (falling prices). Too little demand chases too much supply.

www.realclearmarkets.com/articles/2017/10/16/ben_bernanke_is_worried_maybe_we_should_be_102921.html


China consumer loans surge nearly 30% as debt worries resurface
www.reuters.com/article/us-china-economy-property-debt/china-consumer-loans-surge-nearly-30-percent-as-debt-worries-resurface-idUSKBN1CP162