Banks Are Giving the Ultra-Rich Cheap Loans to Fund Their Lifestyle

Billionaire hedge fund manager Alan Howard paid $59 million for a Manhattan townhouse in March. Just two months later he obtained a $30 million mortgage from Citigroup Inc.

Denis Sverdlov, worth $6.1 billion thanks to his shares in electric-vehicle maker Arrival, recently pledged part of that stake for a line of credit from the same bank. For Edgar and Clarissa Bronfman the loan collateral is paintings by Damien Hirst and Diego Rivera, among others. Philippe Laffont, meanwhile, pledged stakes in a dozen funds at his Coatue Management for a credit line at JPMorgan Chase & Co.

In the realm of personal finance, debt is largely viewed as a necessary evil, one that should be kept to a minimum. But with interest rates at record lows and many assets appreciating in value, it’s one of the most important pieces of the billionaire toolkit — and one of the hottest parts of private banking.

Thanks to the Bronfmans, Howards and Sverdlovs of the world, the biggest U.S. investment banks reported a sizable jump in the value of loans they’ve extended to their richest clients, driven mainly by demand for asset-backed debt.

Morgan Stanley’s tailored and securities-based lending portfolio approached $76 billion last quarter, a 43% increase from a year earlier. Bank of America Corp. reported a $67 billion balance of such loans, up more than 20% year-over-year, while loans at Citigroup’s private bank — including but not limited to securities-backed loans — rose 17%. Appetite for such credit was the primary driver of the 21% bump in average loans at JPMorgan’s asset- and wealth-management division. And at UBS Group AG, U.S. securities-based lending rose by $4 billion.

Borrowing Binge

“It’s a real business winner for the banks,” said Robert Weeber, chief executive officer of wealth-management firm Tiedemann Constantia, adding his clients have recently been offered the opportunity to borrow against real estate, security portfolios and even single-stock holdings.

Spokespeople for Howard, Arrival and Laffont declined to comment, while the Bronfmans didn’t respond to a request for comment.

Rock-bottom interest rates have fueled the biggest borrowing binge on record and even billionaires with enough cash to fill a swimming pool are loathe to sit it out.

And for good reason. With assets both public and private at historically lofty valuations, shareholders are hesitant to cash out and miss higher heights. Appian Corp. co-founder Matthew Calkins has pledged a chunk of his roughly $3.5 billion stake in the software company — whose shares have risen about 145% in the past year — for a loan.

“Families with wealth of $100 million or more can borrow at less than 1%,” said Dan Gimbel, principal at NEPC Private Wealth. “For their lifestyle, there may be things they want to purchase — a car or a boat or even a small business — and they may turn to that line of credit for those types of things rather than take money from the portfolio as they want that to be fully invested.”

Yachts and private jets have been especially popular buys in the past year, according to wealth managers, one of whom described it as borrowing to buy social distance.

‘Significant Benefit’

Loans also allow the ultra-wealthy to avoid the hit of capital gains taxes at a time when valuations are high and rates are poised to increase, perhaps even almost double. Postponing tax is a “significant benefit” for portfolios concentrated and diversified alike, according to Michael Farrell, managing director for SEI Private Wealth Management.

Critics say such loans are just one more wedge in America’s ever-widening wealth gap. “Asset-backed loans are one of the principal tools that the ultra-wealthy are using to game their tax obligations down to zero,” said Chuck Collins, director of the Program on Inequality and the Common Good at the Institute for Policy Studies.

While using public equities as collateral is the most common tactic for banks loaning to the merely affluent, clients further up the wealth scale usually have a bevy of possessions they can feasibly pledge against, such as mansions, planes and even more esoteric collectibles, like watches and classic cars.

One big advantage for the wealthy borrowing now is the possibility that rates will ultimately rise and they can lock in low borrowing costs for decades. Some private banks offer mortgages on homes for as long as 20 years with fixed interest rates as low as 1% for the period.

The wealthy can also hedge against higher borrowing costs for a fraction of their pledged assets’ value, according to Ali Jamal, the founder of multifamily office Azura.

“With ultra-high-net worth clients, you’re often thinking about the next generation,” said Jamal, a former Julius Baer Group Ltd. managing director. “If you have a son or a daughter and you know they want to live one day in Milan, St. Moritz or Paris, you can now secure a future home for them and the bank is fixing your interest rate for as long as two decades.”

Risks Involved

Securities-based lending does comes with risks for the bank and the borrower. If asset values plunge, borrowers may have to cough up cash to meet margin calls. Banks prize their relationships with their richest clients, but foundered loans are both costly and humiliating.

Ask JPMorgan. The bank helped arrange a $500 million credit facility for WeWork founder Adam Neumann, pledged against the value of his stock, according to the Wall Street Journal. As the value of the co-working startup imploded, Softbank Group Corp. had to swoop in to help Neumann repay the loans and avert a significant loss for the bank.

A spokesperson for JPMorgan declined to comment.

Still, for the banks it’s a risk worth taking. Asked about securities-backed loans on last week’s earnings call, Morgan Stanley Chief Financial Officer Sharon Yeshaya said they’d “historically seen minimal losses.” Among the bank’s past clients is Elon Musk, who turned to them for $61 million in mortgages on five California properties in 2019, and who also has Tesla Inc. shares worth billions pledged to secure loans.

“As James [Gorman] has always said, it’s a product in which you lend wealthy clients their money back,” Yeshaya said, referring to Morgan Stanley’s chief executive officer. “And this is something that is resonating.”

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Source: Banks Are Giving the Ultra-Rich Cheap Loans to Fund Their Lifestyle

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Reference:

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Retail Sales For June Provide An Early Boost, But Bond Yields Mostly Calling The Shots

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The first week of earnings season wraps up with major indices closely tracking the bond market in Wall Street’s version of “follow the leader.” Earnings absolutely matter, but right now the Fed’s policies are maybe a bigger influence. In the short-term the Fed is still the girl everyone wants to dance with.

Lately, you can almost guess where stocks are going just by checking the 10-year Treasury yield, which often moves on perceptions of what the Fed might have up its sleeve. The yield bounced back from lows this morning to around 1.32%, and stock indices climbed a bit in pre-market trading. That was a switch from yesterday when yields fell and stocks followed suit. Still, yields are down about six basis points since Monday, and stocks are also facing a losing week.

It’s unclear how long this close tracking of yields might last, but maybe a big flood of earnings due next week could give stocks a chance to act more on fundamental corporate news instead of the back and forth in fixed income. Meanwhile, retail sales for June this morning basically blew Wall Street’s conservative estimates out of the water, and stock indices edged up in pre-market trading after the data.

Headline retail sales rose 0.6% compared with the consensus expectation for a 0.6% decline, and with automobiles stripped out, the report looked even stronger, up 1.3% vs. expectations for 0.3%. Those numbers are incredibly strong and show the difficulty analysts are having in this market. The estimates missed consumer strength by a long shot. However, it’s also possible this is a blip in the data that might get smoothed out with July’s numbers. We’ll have to wait and see.

Caution Flag Keeps Waving

Yesterday continued what feels like a “risk-off” pattern that began taking hold earlier in the week, but this time Tech got caught up in the selling, too. In fact, Tech was the second-worst performing sector of the day behind Energy, which continues to tank on ideas more crude could flow soon thanks to OPEC’s agreement.

We already saw investors embracing fixed income and “defensive” sectors starting Tuesday, and Thursday continued the trend. When your leading sectors are Utilities, Staples, Real Estate, the way they were yesterday, that really suggests the surging bond market’s message to stocks is getting read loudly and clearly.

This week’s decline in rates also isn’t necessarily happy news for Financial companies. That being said, the Financials fared pretty well yesterday, with some of them coming back after an early drop. It was an impressive performance and we’ll see if it can spill over into Friday.

Energy helped fuel the rally earlier this year, but it’s struggling under the weight of falling crude prices. Softness in crude isn’t guaranteed to last—and prices of $70 a barrel aren’t historically cheap—but crude’s inability to consistently hold $75 speaks a lot. Technically, the strength just seems to fade up there. Crude is up slightly this morning but still below $72 a barrel.

Losing Steam?

All of the FAANGs lost ground yesterday after a nice rally earlier in the week. Another key Tech name, chipmaker Nvidia (NVDA), got taken to the cleaners with a 4.4% decline despite a major analyst price target increase to $900. NVDA has been on an incredible roll most of the year.

This week’s unexpectedly strong June inflation readings might be sending some investors into “flight for safety” mode, though no investment is ever truly “safe.” Fed Chairman Jerome Powell sounded dovish in his congressional testimony Wednesday and Thursday, but even Powell admitted he hadn’t expected to see inflation move this much above the Fed’s 2% target.

Keeping things in perspective, consider that the S&P 500 Index (SPX) did power back late Thursday to close well off its lows. That’s often a sign of people “buying the dip,” as the saying goes. Dip-buying has been a feature all year, and with bond yields so low and the money supply so huge, it’s hard to argue that cash on the sidelines won’t keep being injected if stocks decline.

Two popular stocks that data show have been popular with TD Ameritrade clients are Apple (AAPL) and Microsoft (MSFT), and both of them have regularly benefited from this “dip buying” trend. Neither lost much ground yesterday, so if they start to rise today, consider whether it reflects a broader move where investors come back in after weakness. However, one day is never a trend.

Reopening stocks (the ones tied closely to the economy’s reopening like airlines and restaurants) are doing a bit better in pre-market trading today after getting hit hard yesterday.

In other corporate news today, vaccine stocks climbed after Moderna (MRNA) was added to the S&P 500. BioNTech (BNTX), which is Pfizer’s (PFE) vaccine partner, is also higher. MRNA rose 7% in pre-market trading.

Strap In: Big Earnings Week Ahead

Earnings action dies down a bit here before getting back to full speed next week. Netflix (NFLX), American Express (AXP), Johnson & Johnson (JNJ), United Airlines (UAL), AT&T (T), Verizon (VZ), American Airlines (AAL) and Coca-Cola (KO) are high-profile companies expected to open their books in the week ahead.

It could be interesting to hear from the airlines about how the global reopening is going. Delta (DAL) surprised with an earnings beat this week, but also expressed concerns about high fuel prices. While vaccine rollouts in the U.S. have helped open travel back up, other parts of the globe aren’t faring as well. And worries about the Delta variant of Covid don’t seem to be helping things.

Beyond the numbers that UAL and AAL report next week, the market may be looking for guidance from their executives about the state of global travel as a proxy for economic health. DAL said travel seems to be coming back faster than expected. Will other airlines see it the same way? Earnings are one way to possibly find out.Even with the Delta variant of Covid gaining steam, there’s no doubt that at least in the U.S, the crowds are back for sporting events.

For example, the baseball All-Star Game this week was packed. Big events like that could be good news for KO when it reports earnings. PepsiCo (PEP) already reported a nice quarter. We’ll see if KO can follow up, and whether its executives will say anything about rising producer prices nipping at the heels of consumer products companies.

Confidence Game: The 10-year Treasury yield sank below 1.3% for a while Thursday but popped back to that level by the end of the day. It’s now down sharply from highs earlier this week. Strength in fixed income—yields fall as Treasury prices climb—often suggests lack of confidence in economic growth.

Why are people apparently hesitant at this juncture? It could be as simple as a lack of catalysts with the market now at record highs. Yes, bank earnings were mostly strong, but Financial stocks were already one of the best sectors year-to-date, so good earnings might have become an excuse for some investors to take profit. Also, with earnings expectations so high in general, it takes a really big beat for a company to impress.

Covid Conundrum: Anyone watching the news lately probably sees numerous reports about how the Delta variant of Covid has taken off in the U.S. and case counts are up across almost every state. While the human toll of this virus surge is certainly nothing to dismiss, for the market it seems like a bit of an afterthought, at least so far. It could be because so many of the new cases are in less populated parts of the country, which can make it seem like a faraway issue for those of us in big cities. Or it could be because so many of us are vaccinated and feel like we have some protection.

But the other factor is numbers-related. When you hear reports on the news about Covid cases rising 50%, consider what that means. To use a baseball analogy, if a hitter raises his batting average from .050 to .100, he’s still not going to get into the lineup regularly because his average is just too low. Covid cases sank to incredibly light levels in June down near 11,000 a day, which means a 50% rise isn’t really too huge in terms of raw numbers and is less than 10% of the peaks from last winter. We’ll be keeping an eye on Covid, especially as overseas economies continue to be on lockdowns and variants could cause more problems even here. But at least for now, the market doesn’t seem too concerned.

Dull Roar: Most jobs that put you regularly on live television in front of millions of viewers require you to be entertaining. One exception to that rule is the position held by Fed Chairman Jerome Powell. It’s actually his job to be uninteresting, and he’s arguably very good at it. His testimony in front of the Senate Banking Committee on Thursday was another example, with the Fed chair staying collected even as senators from both sides of the aisle gave him their opinions on what the Fed should or shouldn’t do. The closely monitored 10-year Treasury yield stayed anchored near 1.33% as he spoke.

Even if Powell keeps up the dovishness, you can’t rule out Treasury yields perhaps starting to rise in coming months if inflation readings continue hot and investors start to lose faith in the Fed making the right call at the right time. Eventually people might start to demand higher premiums for taking on the risk of buying bonds. The Fed itself, however, could have something to say about that.

It’s been sopping up so much of the paper lately that market demand doesn’t give you the same kind of impact it might have once had. That’s an argument for bond prices continuing to show firmness and yields to stay under pressure, as we’ve seen the last few months. Powell, for his part, showed no signs of being in a hurry yesterday to lift any of the stimulus.

TD Ameritrade® commentary for educational purposes only. Member SIPC.

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I am Chief Market Strategist for TD Ameritrade and began my career as a Chicago Board Options Exchange market maker, trading primarily in the S&P 100 and S&P 500 pits. I’ve also worked for ING Bank, Blue Capital and was Managing Director of Option Trading for Van Der Moolen, USA. In 2006, I joined the thinkorswim Group, which was eventually acquired by TD Ameritrade. I am a 30-year trading veteran and a regular CNBC guest, as well as a member of the Board of Directors at NYSE ARCA and a member of the Arbitration Committee at the CBOE. My licenses include the 3, 4, 7, 24 and 66.

Source: Retail Sales For June Provide An Early Boost, But Bond Yields Mostly Calling The Shots

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Critics:

Retail is the process of selling consumer goods or services to customers through multiple channels of distribution to earn a profit. Retailers satisfy demand identified through a supply chain. The term “retailer” is typically applied where a service provider fills the small orders of many individuals, who are end-users, rather than large orders of a small number of wholesale, corporate or government clientele. Shopping generally refers to the act of buying products.

Sometimes this is done to obtain final goods, including necessities such as food and clothing; sometimes it takes place as a recreational activity. Recreational shopping often involves window shopping and browsing: it does not always result in a purchase.

Most modern retailers typically make a variety of strategic level decisions including the type of store, the market to be served, the optimal product assortment, customer service, supporting services and the store’s overall market positioning. Once the strategic retail plan is in place, retailers devise the retail mix which includes product, price, place, promotion, personnel, and presentation.

In the digital age, an increasing number of retailers are seeking to reach broader markets by selling through multiple channels, including both bricks and mortar and online retailing. Digital technologies are also changing the way that consumers pay for goods and services. Retailing support services may also include the provision of credit, delivery services, advisory services, stylist services and a range of other supporting services.

Retail shops occur in a diverse range of types of and in many different contexts – from strip shopping centres in residential streets through to large, indoor shopping malls. Shopping streets may restrict traffic to pedestrians only. Sometimes a shopping street has a partial or full roof to create a more comfortable shopping environment – protecting customers from various types of weather conditions such as extreme temperatures, winds or precipitation. Forms of non-shop retailing include online retailing (a type of electronic-commerce used for business-to-consumer (B2C) transactions) and mail order

Global Boom in House Prices Becomes a Dilemma for Central Banks

Surging house prices across much of the globe are emerging as a key test for central banks’ ability to rein in their crisis support.

Withdrawing stimulus too slowly risks inflating real estate further and worsening financial stability concerns in the longer term. Pulling back too hard means unsettling markets and sending property prices lower, threatening the economic recovery from the Covid-19 pandemic.

Bubble Trouble

Countries seeing surging real house price growth

Source: OECD

With memories of the global financial crisis that was triggered by a housing bust still fresh in policy makers minds, how to keep a grip on soaring house prices is a dilemma in the forefront of deliberations as recovering growth sees some central banks discuss slowing asset purchases and even raising interest rates.

Federal Reserve officials who favor tapering their bond buying program have cited rising house prices as one reason to do so. In particular, they are looking hard at the Fed’s purchases of mortgage backed securities, which some worry are stoking housing demand in an already hot market.

In the coming week, central bankers in New Zealand, South Korea and Canada meet to set policy, with soaring home prices in each spurring pressure to do something to keep homes affordable for regular workers.

New Zealand policy makers are battling the hottest property market in the world, according to the Bloomberg Economics global bubble ranking. The central bank, which meets Wednesday, has been given another tool to tackle the issue, and its projections for the official cash rate show it starting to rise in the second half of 2022.

Facing criticism for its role in stoking housing prices, Canada’s central bank has been among the first from advanced economies to shift to a less expansionary policy, with another round of tapering expected at a policy decision also on Wednesday.

The Bank of Korea last month warned that real estate is “significantly overpriced” and the burden of household debt repayment is growing. But a worsening virus outbreak may be a more pressing concern at Thursday’s policy meeting in Seoul.

In its biggest strategic rethink since the creation of the euro, the European Central Bank this month raised its inflation target and in a nod to housing pressures, officials will start considering owner-occupied housing costs in their supplementary measures of inflation.

The Bank of England last month indicated unease about the U.K. housing market. Norges Bank is another authority to have signaled it’s worried about the effect of ultra-low rates on the housing market and the risk of a build-up of financial imbalances.

Beginning of the End of Easy Money: Central Bank Quarterly Guide

The Bank for International Settlements used its annual report released last month to warn that house prices had risen more steeply during the pandemic than fundamentals would suggest, increasing the sector’s vulnerability if borrowing costs rise.

While the unwinding of pandemic-era is support is expected to be gradual for most central banks, how to do so without hurting mortgage holders will be a key challenge, according to Kazuo Momma, who used to be in charge of monetary policy at the Bank of Japan.

“Monetary policy is a blunt tool,” said Momma, who now works as an economist at Mizuho Research Institute. “If it is used for some specific purposes like restraining housing market activities, that could lead to other problems like overkilling the economic recovery.”

But not acting carries other risks. Analysis by Bloomberg Economics shows that housing markets are already exhibiting 2008 style bubble warnings, stoking warnings of financial imbalances and deepening inequality.

New Zealand, Canada and Sweden rank as the world’s frothiest housing markets, based on the key indicators used in the Bloomberg Economics dashboard focused on member countries of the Organisation for Economic Co-operation and Development. The U.K. and the U.S. are also near the top of the risk rankings.

As many economies still grapple with the virus or slow loan growth, central bankers may look for alternatives to interest-rate hikes such as changes to loan-to-value limits or risk weighting of mortgages — so called macro-prudential policy.

Yet such measures aren’t guaranteed to succeed because other dynamics like inadequate supply or government tax policies are important variables for housing too. And while ever cheap money is gushing from central banks, such measures are likely to struggle to rein in prices.

“The best approach would be to stop the further expansion of central bank balance sheets,” according to Gunther Schnabl of Leipzig University, who is an expert on international monetary systems. “As a second step, interest rates could be increased in a very slow and diligent manner over a long time period.”

Another possibility is that house prices reach a natural plateau. U.K. house prices, for example, fell for the first time in five months in June, a sign that the property market may have lost momentum as a tax incentive was due to come to an end.

There’s no sign of that in the U.S. though, where demand for homes remains strong despite record-high prices. Pending home sales increased across all U.S. regions in May, with the Northeast and West posting the largest gains.

While navigating the housing boom won’t be easy for central banks, it may not be too late to ward off the next crisis. Owner-occupy demand versus speculative buying remains a strong driver of growth. Banks aren’t showing signs of the kind of loose lending that preceded the global financial crisis, according to James Pomeroy, a global economist at HSBC Holdings Plc.

“If house prices are rising due to a shift in supply versus demand, which the pandemic has created due to more remote working and people wanting more space, it may not trigger a crisis in the same way as previous housing booms,” said Pomeroy. “The problems may arise further down the line, with younger people priced out of the property ladder even more.”

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Stimulus ‘Pandexit’ Is Next Challenge as Recovery Quickens

As they tip toe away from their crisis settings, monetary authorities in economies with heavily indebted households will need to be especially careful, said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis who used to work for the ECB and International Monetary Fund.

“Real estate prices, as with other asset prices, will continue to balloon as long as global liquidity remains so ample,” she said. “But the implications are much more severe than other asset prices as they affect households much more widely.”

— With assistance by Theophilos Argitis, and Peggy Collins

By:

Source: Global Boom in House Prices Becomes a Dilemma for Central Banks – Bloomberg

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Critics:

A housing bubble (or a housing price bubble) is one of several types of asset price bubbles which periodically occur in the market. The basic concept of a housing bubble is the same as for other asset bubbles, consisting of two main phases. First there is a period where house prices increase dramatically, driven more and more by speculation. In the second phase, house prices fall dramatically.

Housing bubbles tend to be among the asset bubbles with the largest effect on the real economy, because they are credit-fueled, because a large number of households participate and not just investors, and because the wealth effect from housing tends to be larger than for other types of financial assets.

References

  • Brunnermeier, M.K. and Oehmke, M. (2012) Bubbles, Financial Crises, and Systemic Risk NBER Working Paper No. 18398
  • see eg. Case, K.E., Quigley, J. and Shiller R. (2001). Comparing wealth effects: the stock market versus the housing market. National Bureau of Economic Research, Working Paper No. 8606., Benjamin, J., Chinloy, P. and Jud, D. (2004). ”Real estate versus financial wealth in consumption”. In: Journal of Real Estate Finance and Economics 29, pp. 341-354., Campbell, J. and J. Cocco (2004), How Do Housing Price Affect Consumption? Evidence from Micro Data. Harvard Institute of Economic Research, Discussion Paper No. 2045
  • Stiglitz, J.E. (1990). “Symposium on bubbles”. In: Journal of Economic Perspectives Vol. 4 No. 2, pp. 13-18.
  • Palgrave, R.H. I. (1926), “Palgrave’s Dictionary of Political Economy”, MacMillan & Co., London, England, p. 181.
  • Flood, R. P. and Hodrick, R. J. (1990), “On Testing for Speculative Bubbles”, The Journal of Economic Perspectives, Vol. 4 No. 2, pp. 85–101.
  • Shiller, R.J. (2005). Irrational Exuberance. 3nd. New Jersey: Princeton University Press. ISBN 0-691- 12335-7.
  • Smith, M. H. and Smith, G. (2006), “Bubble, Bubble, Where’s the Housing Bubble?”, Brookings Papers on Economic Activity, Vol. 2006 No. 1, pp. 1–50.
  • Cochrane, J. H. (2010), “Discount Rates”, Working paper, University of Chicago, Booth School of Business, and NBER, Chicago, Illinois, 27 December.Lind, H. (2009). “Price bubbles in housing markets: concept, theory and indicators”. In: International Journal of Housing Markets and Analysis Vol. 2 No. 1, pp. 78-90.

Chinese Developer Woes Are Weighing on Asia’s Junk Bond Market

https://images.wsj.net/im-189934?width=620&size=1.5

Financial strains among Chinese property developers are hurting the Asian high-yield debt market, where the companies account for a large chunk of bond sales.

That’s widening a gulf with the region’s investment-grade securities, which have been doing well amid continued stimulus support.

Yields for Asia’s speculative-grade dollar bonds rose 41 basis points in the second quarter, according to a Bloomberg Barclays index, versus a 5 basis-point decline for investment-grade debt. They’ve increased for six straight weeks, the longest stretch since 2018, driven by a roughly 150 basis-point increase for Chinese notes.

China’s government has been pursuing a campaign to cut leverage and toughen up its corporate sector. Uncertainty surrounding big Chinese borrowers including China Evergrande Group, the largest issuer of dollar junk bonds in Asia, and investment-grade firm China Huarong Asset Management Co. have also weighed on the broader Asian market for riskier credit.

“Diverging borrowing costs have been mainly driven by waning investor sentiment in the high-yield primary markets, particularly relating to the China real estate sector,” said Conan Tam, head of Asia Pacific debt capital markets at Bank of America. “This is expected to continue until we see a significant sentiment shift here.”

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    It’s the Beginning of the End of Easy Money

Such a shift would be unlikely to come without a turnaround in views toward the Chinese property industry, which has been leading a record pace in onshore bond defaults this year.

But there have been some more positive signs recently. Evergrande told Bloomberg News that as of June 30 it met one of the “three red lines” imposed to curb debt growth for many sector heavyweights. “By year-end, the reduction in leverage will help bring down borrowing costs” for the industry, said Francis Woo, head of fixed income syndicate Asia ex-Japan at Credit Agricole CIB.

Spreads have been widening for Asian dollar bonds this year while they’ve been narrowing in the U.S. for both high-yield and investment grade amid that country’s economic rebound, said Anne Zhang, co-head of asset class strategy, FICC in Asia at JPMorgan Private Bank. She expects Asia’s underperformance to persist this quarter, led by Chinese credits as investors remain cautious about policies there.

“However, as the relative yield differential between Asia and the U.S. becomes more pronounced there will be demand for yield that could help narrow the gap,” said Zhang.

Asia

A handful of issuers mandated on Monday for potential dollar bond deals including Hongkong Land Co., China Modern Dairy Holdings Ltd. and India’s REC Ltd., though there were no debt offerings scheduled to price with U.S. markets closed for the July 4 Independence Day holiday.

  • Spreads on Asian investment-grade dollar bonds were little changed to 1 basis point wider, according to credit traders. Yield premiums on the notes widened by almost 2 basis points last week, in their first weekly increase in six, according to a Bloomberg Barclays index
  • Among speculative-grade issuers, dollar bonds of China Evergrande Group lagged a 0.25 cent gain in the broader China high-yield market on Monday. The developer’s 12% note due in October 2023 sank 1.8 cents on the dollar to 74.6 cents, set for its lowest price since April last year

U.S.

The U.S. high-grade corporate bond market turned quiet at the end of last week before the holiday, but with spreads on the notes at their tightest in more than a decade companies have a growing incentive to issue debt over the rest of the summer rather than waiting until later this year.

  • The U.S. investment-grade loan market has surged back from pandemic disruptions, with volumes jumping 75% in the second quarter from a year earlier to $420.8 billion, according to preliminary Bloomberg league table data
  • For deal updates, click here for the New Issue Monitor

Europe

Sales of ethical bonds in Europe have surged past 250 billion euros ($296 billion) this year, smashing previous full-year records. The booming market for environmental, social and governance debt attracted issuers including the European Union, Repsol SA and Kellogg Co. in the first half of 2021.

  • The European Union has sent an RfP to raise further funding via a sale to be executed in the coming weeks, it said in an e-mailed statement
  • German property company Vivion Investments Sarl raised 340 million euros in a privately placed transaction in a bid to boost its real estate portfolio, according to people familiar with the matter

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Source: Chinese Developer Woes Are Weighing on Asia’s Junk Bond Market – Bloomberg

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Critics:

The Chinese property bubble was a real estate bubble in residential and/or commercial real estate in China. The phenomenon has seen average housing prices in the country triple from 2005 to 2009, possibly driven by both government policies and Chinese cultural attitudes.

Tianjin High price-to-income and price-to-rent ratios for property and the high number of unoccupied residential and commercial units have been held up as evidence of a bubble. Critics of the bubble theory point to China’s relatively conservative mortgage lending standards and trends of increasing urbanization and rising incomes as proof that property prices can remain supported.

The growth of the housing bubble ended in late 2011 when housing prices began to fall, following policies responding to complaints that members of the middle-class were unable to afford homes in large cities. The deflation of the property bubble is seen as one of the primary causes for China’s declining economic growth in 2012.

2011 estimates by property analysts state that there are some 64 million empty properties and apartments in China and that housing development in China is massively oversupplied and overvalued, and is a bubble waiting to burst with serious consequences in the future. The BBC cites Ordos in Inner Mongolia as the largest ghost town in China, full of empty shopping malls and apartment complexes. A large, and largely uninhabited, urban real estate development has been constructed 25 km from Dongsheng District in the Kangbashi New Area. Intended to house a million people, it remains largely uninhabited.

Intended to have 300,000 residents by 2010, government figures stated it had 28,000. In Beijing residential rent prices rose 32% between 2001 and 2003; the overall inflation rate in China was 16% over the same period (Huang, 2003). To avoid sinking into the economic downturn, in 2008, the Chinese government immediately altered China’s monetary policy from a conservative stance to a progressive attitude by means of suddenly increasing the money supply and largely relaxing credit conditions.

Under such circumstances, the main concern is whether this expansionary monetary policy has acted to simulate the property bubble (Chiang, 2016). Land supply has a significant impact on house price fluctuations while demand factors such as user costs, income and residential mortgage loan have greater influences.

References

America’s Failure To Build Is Driving Home Prices Ever Higher

Some progressive groups oppose rezoning New York's wealthy Soho area to allow more housing

Another month, another explosive rise in home prices.  May’s median annual housing price rose 23.6%, a new monthly record.   Buyers are still buying, helped by low interest and mortgage rates.  But since housing construction hasn’t kept pace with demand and economic growth, it will take more housing production to reduce long-term pressure on prices.

The buying pressure in housing markets is setting records.  Although home sales fell slightly in May compared to April, houses aren’t sitting very long on the market.  According to the National Association of Realtors, total housing inventory is down 20.6% from a year ago.  Properties only last on the market for an average of 17 days, and 89% of sales in May “were on the market for less than a month.”

Given this high demand, we’d expect supply to respond.  Ronnie Walker at Goldman Sachs notes housing starts are rising, hitting their highest levels since 2006.  But it isn’t cooling the market off.  But Walker says despite these higher starts, “red-hot demand has brought the supply of homes available for sale down to the lowest level since the 1970s.”

Walker expects a “persistent supply-demand imbalance in the years ahead.”  New construction will come online, and more sellers eventually will enter the market, but his model foresees “home prices grow(ing) at double digit rates both this year and next.”

Tight future markets are confirmed by Harvard’s Joint Center for Housing Studies (JCHS).  In their 2021 report, these experts say “the supply of existing homes for sale has never been tighter,” and is at its lowest level since 1982.

So where are the houses?  What happened to supply and demand?  JCHS notes several reasons for underproduction, but the primary blame goes to restrictive local policies such as single-family zoning, minimum lot sizes, parking requirements, etc.  A 2018 survey of over 2700 communities found “93 percent imposed minimum lot sizes” with 67 percent requiring lots of at least one acre in size and sometimes more, many in suburban towns.

What about big cities?  Despite perceptions that there’s a lot of development in many cities, not much housing has been built in some.  Between 2010 and 2018, jobs in New York City increased by 22% “while the housing stock only increased four percent.”  Jobs in San Francisco and San Mateo counties rose by over 30% between 2010 and 2019, while new housing permits only rose by 7%.

There are strong political biases in these cities against more construction, but other liberal places are re-examining their housing policies, especially single-family zoning.  A New York Times 2019 analysis confirmed that many cities’ land area is dominated by single-family zoning —70% in Minneapolis, 75% in Los Angeles, 79% in Chicago, 81% in Seattle, and 94% in San Jose.  Combined with excessive parking requirements, zoning policy effectively takes land out of production while pushing its price sky-high and preventing multifamily options.

Cities’ anti-development policy means new housing is pushed further out in the metropolitan area, adding to suburban sprawl, longer commute times, and environmental damage.  Ironically, some progressive environmental groups have allied with anti-development forces, with the net result of fostering suburban sprawl.

In New York City, the left Sunrise Movement has joined with many other groups to oppose “upzoning” for higher density and more development in Manhattan’s Soho neighborhood, one of the wealthiest in the nation.  In contrast, Berkeley California, one of the most liberal cities in the nation, has voted to end single family zoning, persuaded by the argument that such policies result in racially segregated neighborhoods and lack of affordable housing for people of color.

But it isn’t just liberal cities that face this problem.  Even though red states like North Dakota, Utah, and Texas lead the nation in home building, a recent study found that only four of America’s 25 largest metropolitan areas “built enough homes to match local job growth.”  And much of that growth was in outlying suburbs, adding to sprawl and pollution.

Urban economist Ed Glaeser locates a good deal of the problem in the rising power of local citizen groups, especially existing homeowners.  Their housing investments often rise in value with scarcity, and they usually like the existing neighborhoods where they reside and don’t want new residents.

This creates an “insider/outsider” problem that limits housing. As Glaeser notes, current homeowners don’t “internalize the interests of those who live elsewhere and would want to come to the city…their political actions are more likely to exclude than to embrace.”  These anti-housing groups often are labelled “NIMBYs”, for “Not In My Back Yard.”

In response, so-called “YIMBYs” (Yes In My Back Yard) are pushing for policies such as relaxed zoning, allowing multi-family housing (at least duplexes to quadplexes) on single family lots, and allowing denser housing near mass transit stops (“TOD”, for “Transit Oriented Development.”).  They are having some success, but anti-development forces are deeply entrenched and politically powerful in many places around the country.

But would more development create not just housing, but add to affordable housing?  What about the impact on low-income and non-white families, who could face rising rents or displacement from gentrification while still not being able to buy a house?  In my next blog, we’ll look at the tangled racial history of housing development and home ownership. Unless renters and lower-income people can be mobilized to support development, NIMBY opposition to more housing will be hard to overcome.

Follow me on Twitter or LinkedIn.

I’m an economist at the New School’s Schwartz Center (https://www.economicpolicyresearch.org), currently writing a book for Columbia University Press on cities and inequality.  I have extensive public sector experience studying cities and states.  I’ve served as Executive Director of the Congressional Joint Economic Committee, Assistant Secretary of Labor for Policy, Deputy Commissioner for Policy and Research at New York State’s Department of Economic Development, and New York City Deputy Comptroller for Policy and Management.  I also worked as Director of Impact Assessment at the Ford Foundation.

Source: America’s Failure To Build Is Driving Home Prices Ever Higher

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Critics:

The United States housing bubble was a real estate bubble affecting over half of the U.S. states. It was the impetus for the subprime mortgage crisis. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012. On December 30, 2008, the Case–Shiller home price index reported its largest price drop in its history. The credit crisis resulting from the bursting of the housing bubble is an important cause of the Great Recession in the United States.

Increased foreclosure rates in 2006–2007 among U.S. homeowners led to a crisis in August 2008 for the subprime, Alt-A, collateralized debt obligation (CDO), mortgage, credit, hedge fund, and foreign bank markets. In October 2007, the U.S. Secretary of the Treasury called the bursting housing bubble “the most significant risk to our economy”.

Any collapse of the U.S. housing bubble has a direct impact not only on home valuations, but mortgage markets, home builders, real estate, home supply retail outlets, Wall Street hedge funds held by large institutional investors, and foreign banks, increasing the risk of a nationwide recession. Concerns about the impact of the collapsing housing and credit markets on the larger U.S. economy caused President George W. Bush and the Chairman of the Federal Reserve Ben Bernanke to announce a limited bailout of the U.S. housing market for homeowners who were unable to pay their mortgage debts.

In 2008 alone, the United States government allocated over $900 billion to special loans and rescues related to the U.S. housing bubble. This was shared between the public sector and the private sector. Because of the large market share of Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (both of which are government-sponsored enterprises) as well as the Federal Housing Administration, they received a substantial share of government support, even though their mortgages were more conservatively underwritten and actually performed better than those of the private sector.

See also

2 Specialty Retail Stocks To Add To Your Shopping List

2 Specialty Retail Stocks to Add to Your Shopping List

Let’s face it – retail is one of the most competitive industries out there. Consumer preferences are constantly changing and it takes a lot for these types of businesses to earn shoppers’ hard-earned cash. That’s one of the reasons why investing in specialty retail stocks can be a great long-term strategy if you choose wisely. Since specialty retailers focus on specific product categories, like office supplies, furniture, or men’s or women’s clothing, they are oftentimes able to carve out a unique niche and stand out among their competitors.

Thanks to all of the stimulus that has been added to the economy over the last year and the fact that a newly vaccinated population is getting back to shopping in person, we could see some strong sales coming out of the specialty retail space in the coming months. There are 2 specialty retail stocks that stand out as potential buys at this time given their unique brands and impressive earnings reports. Let’s take a further look at these intriguing stocks below.

RH (NYSE:RH)

RH, formerly known as Restoration Hardware, is a great specialty retail stock because it is doing something that is completely unique. While there are plenty of home furnishings stores out there, RH is distinctive in that it specializes in ultra-high-end luxury home goods and creating a unique shopping experience at every single store. Homeowners can find upscale products including furniture, lighting, bathware, outdoor & garden, tableware textiles, and décor at RH, and each one of the company’s showrooms offers an original and aesthetically pleasing experience.

The company counts Warren Buffett’s Berkshire Hathaway among its investors and is undoubtedly benefitting from a hot residential real estate market. With that said, RH has upside potential regardless of what’s going on in the economy, as the company doesn’t have exposure to seasonal inventory and caters to wealthy consumers that spend big year-round. The stock has been pulling back in recent months after a rally from $70 to $700 a share, but after the company’s latest earnings report it could be gearing up for more gains.

RH saw its Q1 revenues up 78% year-over-year to $860.8 million and delivered Q1 adjusted diluted earnings per share increase by 285% year-over-year to $4.89 per share. Other positives from the stellar report included an increased fiscal 2021 outlook and the fact that the company expects to be net debt-free by the end of the fiscal year. The bottom line here is that RH is a specialty retail company that is executing at a very high level, which is evident in both the earnings results and stock price.

Lovesac (NASDAQ:LOVE)

There’s a lot to love about this specialty retailer, which designs and manufactures modular couches and beanbags. What really stands out about Lovesac is how it has created a brand and product lines that have quickly become the favorite furniture of an entire generation. Millennials are among Lovesac’s most frequent customers, as they love the idea of the company’s flagship product, a unique modular furniture piece known as a “sactional”.

These are couches that are easily assembled and disassembled in order to meet the needs of the consumer. There are literally dozens of different ways that sactionals can be rearranged to fit in someone’s home, and the fact that customers can continue adding on pieces and accessories over time is perfect for creating repeat buyers.

While the company has 91 retail showrooms across the United States, investors should be impressed with the progress that it has made over the last year developing its digital sales channels. E-commerce sales were up over 250% in 2020 and although the company might not be able to keep up that torrid pace, Lovesac has proved it is more than capable of finding buyers online. Also, keep in mind that those showrooms are going to see foot traffic pick up as the pandemic winds down.

Lovesac just reported very strong Q1 2022 earnings results including net sales growth of 52.5% and diluted EPS of $0.13, up 122.1% year-over-year. Analysts also love the stock, as Lovesac recently got a price target increase from Craig Hallum on Thursday. Pandemic tailwinds are continuing to help this specialty retailer grow, and that narrative should remain in place for the foreseeable future. These are all great reasons why Lovesac is a great stock to consider adding to your shopping list.

By:

Source: 2 Specialty Retail Stocks to Add to Your Shopping List

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Critics:

A stock derivative is any financial instrument for which the underlying asset is the price of an equity. Futures and options are the main types of derivatives on stocks. The underlying security may be a stock index or an individual firm’s stock, e.g. single-stock futures.

Stock futures are contracts where the buyer is long, i.e., takes on the obligation to buy on the contract maturity date, and the seller is short, i.e., takes on the obligation to sell. Stock index futures are generally delivered by cash settlement.

A stock option is a class of option. Specifically, a call option is the right (not obligation) to buy stock in the future at a fixed price and a put option is the right (not obligation) to sell stock in the future at a fixed price. Thus, the value of a stock option changes in reaction to the underlying stock of which it is a derivative. The most popular method of valuing stock options is the Black–Scholes model. Apart from call options granted to employees, most stock options are transferable.

Stock price fluctuations

The price of a stock fluctuates fundamentally due to the theory of supply and demand. Like all commodities in the market, the price of a stock is sensitive to demand. However, there are many factors that influence the demand for a particular stock. The fields of fundamental analysis and technical analysis attempt to understand market conditions that lead to price changes, or even predict future price levels.

A recent study shows that customer satisfaction, as measured by the American Customer Satisfaction Index (ACSI), is significantly correlated to the market value of a stock.Stock price may be influenced by analysts’ business forecast for the company and outlooks for the company’s general market segment. Stocks can also fluctuate greatly due to pump and dump scams.

See also

Labor Shortage Will Push Wages Higher, According To Bank Of America

A man hands his resume to an employer at the 25th annual...

As the U.S. economy roars back to life, new analysis from Bank of America suggests wages are likely to climb higher in the near term thanks to mismatches between supply and demand for workers.

Employers are desperate to staff up quickly to meet surging consumer demand, but some workers have been slow to return for a number of reasons including virus concerns, childcare constraints, early retirement and more generous federal unemployment benefits, BofA senior U.S. economist Joseph Song wrote in a Friday research note.

It’s already clear some workers are holding out for higher pay before they reenter the workforce: The average self-reported reservation wage—the lowest wage a worker says they will accept to start a new job—has grown 21% since the fall for people earning less than $60,000 per year, according to data from the New York Fed.

According to Song’s analysis, wage growth will be stronger in sectors that were hit hardest by the pandemic—including construction, real estate and hotels and food service.

Those are also the industries that tend to employ more workers at the lower end of the income spectrum. The mismatch in the labor market will abate later this year once the reopening boom abates and more Americans return to work, according to Song, which will lessen the upward pressure on wages.

Crucial Quote

“The current labor shortage should sort itself out by the fall as growth normalizes to more sustainable levels and more workers return to the labor force as health concerns subside and generous UI benefits expire by September,” Song wrote. That means wage growth could slow down a little as employers pull back on pay following big wage hikes this year and once they no longer need to compete with a $300 weekly federal unemployment supplement.

What To Watch For

Next year, Song expects wages to rise again when unemployment reaches prepandemic levels, though that growth will be driven by “better labor market fundamentals” rather than transitory factors like the pandemic and enhanced government unemployment benefits.

Big Number

4.2%. That’s the unemployment rate Bank of America is predicting for the end of 2021, down from 6.1%. It expects unemployment will fall even further to 3.5% at the end of 2022.

Key Background

Companies are already beginning to raise their wages to attract more workers as they reopen. Amazon is raising its average starting wage to $17 per hour and McDonald’s plans to raise its average starting pay at company-owned stores to $15 per hour by 2024. Chipotle said earlier this month that it will raise its average wage to $15 per hour by the end of June. Under Armour said Wednesday that it is hiking its minimum wage from $10 to $15 per hour, and Bank of America itself announced this week that it would raise its U.S. minimum wage to $25 per hour by 2025.

Tangent

As big businesses hike pay, the Wall Street Journal reported Thursday that some small businesses are struggling to remain competitive. The chief client officer at a St. Louis office furniture dealership told the Journal that he has had to raise wages in order to fend off competition for workers from larger companies including Amazon.

Further Reading

Biden Administration Doesn’t Think It Can Force States To Pay $300 Unemployment Benefits, According To Report (Forbes)

As Fears Of Worker Shortages Grow, White House Economists Say Covid-19 Is To Blame—Not $300 Unemployment Benefits (Forbes)

Could Covid-19 Worker Shortages Create A $15 Minimum Wage—Even Without A New Law? (Forbes)

At Least 21 States Dropping $300-A-Week Federal Unemployment Benefits (Forbes)

I’m a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance

Source: Labor Shortage Will Push Wages Higher, According To Bank Of America

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The Macroeconomics of Labour Markets

The labour market in macroeconomic theory shows that the supply of labour exceeds demand, which has been proven by salary growth that lags productivity growth. When labour supply exceeds demand, salary faces downward pressure due to an employer’s ability to pick from a labour pool that exceeds the jobs pool. However, if the demand for labour is larger than the supply, salary increases, as employee have more bargaining power while employers have to compete for scarce labour.

The Labour force (LF) is defined as the number of people of working age, who are either employed or actively looking for work (unemployed). The labour force participation rate (LFPR) is the number of people in the labour force divided by the size of the adult civilian non-institutional population (or by the population of working age that is not institutionalized), LFPR = LF/Population.

The non-labour force includes those who are not looking for work, those who are institutionalized (such as in prisons or psychiatric wards), stay-at-home spouses, children not of working age, and those serving in the military. The unemployment level is defined as the labour force minus the number of people currently employed. The unemployment rate is defined as the level of unemployment divided by the labour force. The employment rate is defined as the number of people currently employed divided by the adult population (or by the population of working age). In these statistics, self-employed people are counted as employed.[5]

The skills required in a labour force can vary from individual to individual, as well as from firm to firm. Some firms have specific skills they are interested in, limiting the labour force to certain criteria. A firm requiring specific skills will help determine the size of the market.[6]

Variables like employment level, unemployment level, labour force, and unfilled vacancies are called stock variables because they measure a quantity at a point in time. They can be contrasted with flow variables which measure a quantity over a duration of time. Changes in the labour force are due to flow variables such as natural population growth, net immigration, new entrants, and retirements.

Changes in unemployment depend on inflows (non-employed people starting to look for jobs and employed people who lose their jobs that are looking for new ones) and outflows (people who find new employment and people who stop looking for employment). When looking at the overall macroeconomy, several types of unemployment have been identified, which can be separated into two categories of natural and unnatural unemployment.

References

Paul, Oyer; Scott, Schaefer (2011). Personnel Economics: Hiring and Incentives. Handbook of Labor Economics. 4. pp. 1769–1823. doi:10.1016/S0169-7218(11)02418-X. ISBN 9780444534521.

7 Creative Tips To Setup Your Real Estate Marketing In 2021

8 Creative tips to setup your real estate marketing in 2021

In this post, Cash for Homes Arizona talks about how you can become a strategic marketer in 2021 with these tips:

Today’s real estate marketing landscape is highly competitive. That means you have to do more than add listings or send emails. On top of that, the pandemic has complicated things further. That’s why unique marketing tactics like virtual tours and video marketing are the need of the hour.

1. Observe real estate website best practices

MLS sites and applications continue to remain one of the most valuable marketing tools in real estate. It carries the potential to generate high-quality leads. But, to attract those leads, your site must observe the best SEO and marketing practices.

Below are some of the most effective SEO practices that can generate great leads:

  • Make sure that your site is user-friendly, responsive, and easy to navigate across pages
  • Keep the layout and design eye-catching
  • Place a search bar on the website that has been IDX-optimized
  • Fill up your website with high-quality videos, infographics, and professional photos
  • Place appealing CTAs (call-to-action) buttons at all the right places
  • Give interesting descriptions to each property listed on the site
  • Give brief but comprehensive information about the neighborhood along with real estate resources for each listing
  • Implement the best SEO marketing strategy to secure top rankings in SERPs
  • Make sure to supply your contact information including email and contact number so it’s convenient for potential buyers to find you
  • Place sign-up links for your newsletter and all the social media profiles on which you are active

2. Boost engagement with polls, contests, polls and Q&As

With social media platforms like Instagram rolling out new and interesting features every day, engagement has become easier than ever. If you want to engage your real estate clients use Q&A stickers and polls in Instagram stories. Use interesting GIFs and put out appealing questions.

The more you can engage users, the better likelihood they have of coming back to you. Also, high engagement tells IG algorithms that you offer great content. As a reward, you’ll score better organic reach. You can also run all kinds of contests, reveals, and conduct giveaways all from within the IG stories.

It’s all about mastering the art of getting and keeping users engaged so they want to keep coming back for more.

3. Invest in video marketing

2021 is going to be all about the video. Video marketing is hot right now and it’s here to stay. It makes more sense for real estate as real estate is all capturing the appeal visual; which videos do well. In 2021 you must leverage the power of video marketing using hyperlocal targeting.

Be sure to produce videos consistently capturing the neighborhoods that you represent. In videos, you can cover different aspects of living in that area such as lifestyle, entertainment, housing features, and other perks of living.

To reach the maximum number of viewers from the areas you serve, use keywords within your titles and all the YouTube and Facebook ads you run with strong CTAs. This practice will help to drive traffic towards your real estate site.

4. Be sure to run a blog actively

It’s a good practice to have an active blog that you update regularly. If you don’t already have one, it will be good to start one. A blog can help you on multiple fronts. First, it acts as a source of education for both potential and present clients.

It also makes your business come across as a credible one since people like to Google everything online. Other than that, it also creates an open dialogue with everyone who’s part of the real estate game in your area. Optimizing your blog content for all the right keywords can also help you score top rankings against local searches. This will help you attract higher organic traffic and bring more customers to the door.

5. Offer home valuation to capture leads

Offering home valuation is an excellent way to capture leads and something to think about in 2021. For this method, you will need to create a landing page that offers a free evaluation to property owners. The visitors can come on to your site and get to know the worth of their cost. It’s better if you do this free of charge.

In exchange for this small favor, you can ask for the user’s contact details. You can evaluate the property in two ways:

  • Instant evaluation
  • Delayed evaluation

If you want to go with instant evaluation, you will have to build a tool. For that, you will need to work with a developer so he can build the exact kind of evaluation tool you want and embed it to work seamlessly within the site.

In case of delayed evaluation, you will need to physically visit the property to perform an evaluation before giving the estimate. Check out both methods and see which one works best for you.

6. Collaborate with a real estate Influencer

Influencer marketing is the big boy on the block. The year 2021 is going to see more of it. It’s extremely effective and everyone’s doing it, including real estate agents. Influencers have millions of followers.

For a nominal fee, they can help spread the word on your behalf and get your details out to thousands and millions of their followers. You must work in collaboration with them to get the maximum juice out of your influencer marketing efforts.

7. Use more of email marketing

Remember, we’re living in corona times. During the pandemic, there’s no better way to reach people than via their inboxes. As you’re adapting to the ‘new normal’, email marketing is pretty effective in sending regular updates to attract potential leads and clients.

You can use Email marketing and newsletters to give 3D visual tours of the properties available and also inform your followers about new properties up for sale. Make sure to use email marketing and newsletters as a key marketing plan in 2021.

 

Source: 7 Creative tips to setup your real estate marketing in 2021 – All Ontario

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U.S. Households’ Net Worth Hits Record $123.5 Trillion As Stocks Boom, But Debt Is Also Surging

While unemployment has remained stubbornly above pre-pandemic levels, record highs in the stock market have pushed the net worth of all households in the U.S. to a new high, despite the fast growth in household debt.

The net worth of households in the United States climbed to $123.5 trillion in the third quarter, up 8% from a year ago, the Federal Reserve said in a report Wednesday.

The Fed, which calculates net worths by subtracting overall debt held from the sum of assets like savings and equities, attributed the gains to the surging value of stocks, which jumped $2.8 trillion in the third quarter, as well as real estate, which increased in net value by $400 billion.

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Meanwhile, household debt, which includes mortgages, credit card debt and personal loans, jumped at an annual rate of 5.6% in the third quarter, reaching $16.4 trillion; that’s the fastest growth this decade, beating out a 3.9% increase in 2017.

Business debt fell 0.9% to $17.5 trillion in the third quarter, while federal government debt jumped 9.1% to $26 trillion.

CRUCIAL QUOTE 

“We’ve seen home prices rise, market prices for tradable instruments rise and savings increase… but those gains skew to upper income people,” KPMG Chief Economist Constance Hunter told the Wall Street Journal. “It’s a vicious cycle,” she added of the pandemic’s disparate impact on lower-income Americans. “Not only are lower-income households more impacted, they also are less likely to have the resources to draw upon to support their families.”

KEY BACKGROUND

The S&P 500 jumped 8% in the third quarter, while the tech-heavy Nasdaq Composite soared nearly 12%, and both have reached record highs in the fourth quarter–as has the Dow Jones Industrial Average. But far from everyone benefits from those gains. According to a Gallup poll in March and April, just 22% of Americans making less than $40,000 annually said they owned any stocks, compared to 84% of people making at least $100,000 per year.

TANGENT

There were 10.9 million unemployed people in the country last month, when the U.S. economy added a much lower-than-expected 245,000 jobs, according to data released by the Bureau of Labor Statistics last week. The number of unemployed people in the U.S. remains more than three times higher than it was before the pandemic, during which 22 million Americans have been forced into unemployment.

FURTHER READING

U.S. Household Net Worth Hits Record in Third Quarter (WSJ)

Unemployment Claims Spike Again As Covid-19 Spreads And Americans Wait For Federal Relief (Forbes)

10.9 Million Americans Are Still Unemployed—Rate Ticks Down To 6.7%, But Job Market Could Take Years To Recover (Forbes)Follow me on Twitter. Send me a secure tipJonathan Ponciano

I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com.

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Wall Street Journal

What’s News: American household net worth jumps $10 trillion to $80.7 trillion. Prosecutors charge four former leaders of defunct law firm Dewey & LeBeouf with fraud. Staples is closing 225 stores. Joanne Po reports. Photo: Getty Subscribe to the WSJ channel here: http://bit.ly/14Q81Xy Visit the WSJ channel for more video: https://www.youtube.com/wsjdigitalnet… More from the Wall Street Journal: Visit WSJ.com: http://online.wsj.com/home-page Follow WSJ on Facebok: http://www.facebook.com/wsjlive Follow WSJ on Google+: https://plus.google.com/+wsj/posts Follow WSJ on Twitter: https://twitter.com/WSJLive Follow WSJ on Instagram: http://instagram.com/wsj Follow WSJ on Pinterest: http://www.pinterest.com/wsj/ Follow WSJ on Tumblr: http://www.tumblr.com/tagged/wall-str… Don’t miss a WSJ video, subscribe here: http://bit.ly/14Q81Xy More from the Wall Street Journal: Visit WSJ.com: http://www.wsj.com Visit the WSJ Video Center: https://wsj.com/video On Facebook: https://www.facebook.com/pg/wsj/videos/ On Twitter: https://twitter.com/WSJ On Snapchat: https://on.wsj.com/2ratjSM

The Housing Market Is Still On Fire

The housing market has been on a tear since the spring. In a trend the Morning Brief has called both a surprising and defining feature of this pandemic-induced recession.

On Thursday, existing home sales were just the latest piece of housing data to exceed expectations, with homes selling at an annualized rate of 6.85 million last month, the fastest pace since April 2007.

Read more: Buying a house: What you need to know about home ownership

At this pace of sales, the housing market’s biggest pre-pandemic problem — a lack of affordable inventory — has only been exacerbated: there is currently just 2.5 months of inventory on the market.

Housing starts data published Wednesday showed new homes under construction rose to the fastest pace since February while permits to build homes are at more than 13-year highs. But this uptick in home construction isn’t likely to do much to ease this tightness in the market.

Back in September, Bloomberg Opinion columnist Conor Sen outlined how major homebuilders like Lennar (LEN) have outlined a cautious approach for the coming years, emphasizing moderate new building and careful debt management.

The scars of the housing crisis are deep and won’t likely be forgotten for some time.

“Homebuilders’ confidence has soared even though the actual production has not,” said Lawrence Yun, chief economist for the National Association of Realtors. “All measures, such as reduction to lumber tariffs and expansion of vocational training, need to be considered to significantly boost supply and construct new housing.”

But a resurgence in the virus combined with this troubling inventory dynamic likely keeps a lid on further gains in home sales in the months ahead.

“The clear message from the mortgage applications numbers, which have been drifting gently downwards since late August, is that home sales have peaked,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. On Wednesday, the weekly report on mortgage applications showed a 0.3% decline in total applications last week.

“We don’t expect a significant reversal of recent gains,” Shepherdson added, “but the period of surging home sales — new and existing — is over. Tighter lending standards appear to be reducing the flow of new applications, and the current downshift in growth in the face of the third COVID wave can’t be helping, either.”

But as Shepherdson notes, a lack of inventory will prevent any softening in home prices even if plans to purchase a home are tempered somewhat.

Leaving the housing market in much the same place we found it before the pandemic — undersupplied and oversubscribed.

By Myles Udland, reporter and anchor for Yahoo Finance Live. Follow him at @MylesUdland

Top News

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Fed, Treasury Secretary Mnuchin at odds over letting emergency lending programs expire [Yahoo Finance]

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Biden says he’s decided on treasury secretary nomination [Reuters]

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Summit Properties NW

The US housing market has been on fire since the coronavirus pandemic. Some of the signs: Super low inventory, low-interest rates, and strong demand from buyers looking for something different. What is driving this upward trend in what should be a devastating time for the US economy? Join your host Sean Reynolds, owner of Summit Properties NW and Reynolds & Kline Appraisal as he takes a look at this developing topic. #housingmarket#marketupdate ➜➜➜ SUBSCRIBE FOR MORE VIDEOS ➜➜➜ To never miss a video about personal finance & real estate related topics, please subscribe to my channel & then hit the bell notification here ➜ https://bit.ly/3bOA04n 🎙 𝑺𝒆𝒂𝒕𝒕𝒍𝒆 𝑹𝒆𝒂𝒍 𝑬𝒔𝒕𝒂𝒕𝒆 𝑷𝒐𝒅𝒄𝒂𝒔𝒕 iTunes: https://apple.co/2MkFziJ Spotify: https://spoti.fi/2Dh8EoL Stitcher: https://bit.ly/2FDK0QC 👫 Follow Summit’s Socials! Facebook: https://facebook.com/summitpropertiesnw/ Instagram: https://instagram.com/summitpropertie… LinkedIn: https://linkedin.com/company/summit-p… 💼 Summit Offers a Simple 80/20 Commission Split With No Other Associated Fees & A Low $10,000 Annual Cap! 👉 Learn More: https://summitpropertiesnw.com/career/ 🏡 Summit Properties NW, LLC. Office: (425) 451-3342 Email: inquiries@summitpropertiesnw.com 👍 Please Like, Share, and Subscribe For More News & Real Estate Insights

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