KeNo's Housing and Economic Portal: Wednesday January 22 Housing and Economic stories

TOP STORIES:

Adjustable-rate mortgages increasing housing market danger as rates rise - (www.latimes.com) In November, 11.2% of homes bought with loans carried adjustable-rate mortgages. That's double the rate of a year earlier. When Michael Shuken recently bought his family's first home, a four-bedroom in Mar Vista, his adjustable-rate mortgage helped them stay on the pricey Westside. For now, his interest-only loan costs him about 35% less per month than a 30-year fixed mortgage, he said. But he'll have a much bigger monthly bill in 10 years, when the loan terms require him to start paying off principal at potentially high rates. "What is going to happen if I can't restructure my loan and extend it? Are interest rates going to be 7%, 8%?" the 43-year-old commercial real estate broker said. "The home is big enough for me to grow into. The question is, will I be able to?" Adjustable-rate mortgages, which all but vanished during the housing bust, are again gaining popularity. Home prices and interest rates rose last year, and adjustable mortgages can help keep the monthly payment affordable — at least temporarily. Such mortgages offer a lower initial rate, but that rate can rise over time with market changes.

Bank of Finland Warns Debt Level Poised to Double: Nordic Credit - (www.bloomberg.com) The Bank of Finland is warning that the euro area’s best-rated economy risks sliding down a path that could see its debt burden rival Italy’s. Finland has little room to deviate from a proposal to fill a 9 billion-euro ($12.3 billion) gap inEurope’s fastest-aging economy if it’s to avoid debt levels doubling in the next decade and a half, according to the central bank. The northernmost euro member risks joining the bloc’s most indebted nations if the government fails to reform spending, according to calculations by the Helsinki-based Bank of Finland. Without the measures, debt could exceed 110 percent of gross domestic product by 2030, according to the bank. The ratio was 53.6 percent in 2012. Success with the plan would help restrain debt levels to about 70 percent by 2030, the bank said.

The Re-ARM-ing Of The Housing Market Bubble - (www.zerohedge.com) It seems we never learn... When Michael Shuken recently bought his family's first home, a four-bedroom in Mar Vista, his adjustable-rate mortgage helped them stay on the pricey Westside. For now, his interest-only loan costs him about 35% less per month than a 30-year fixed mortgage, he said. But he'll have a much bigger monthly bill in 10 years, when the loan terms require him to start paying off principal at potentially high rates. "What is going to happen if I can't restructure my loan and extend it? Are interest rates going to be 7%, 8%?" the 43-year-old commercial real estate broker said. "The home is big enough for me to grow into. The question is, will I be able to?" ... So, because they absolutely have to stay on the "pricey side" as opposed to move to what they can afford... it seems this attitude is becoming ubiquitous... More homeowners in Southern California were willing to take that risk last year. In November, 11.2% of homes bought with loans carried adjustable-rate mortgages, or ARMs. That's double the rate of the same month a year earlier, according to San Diego-based research firm DataQuick. "You saw a big swing in people taking adjustable versus fixed rates" when prices and rates shot up last year,

Death By A Thousand Cuts: The Silent Assassination Of European Democracy - (www.testosteronepit.com) This rise in anti-EU sentiment should hardly come as a surprise given the impunity with which European institutions have ridden roughshod over the lives and liberties of European citizens. Since taking off its mask of benignity in the wake of the financial crisis, the EU has pulled off one of the most audacious and ruthless power grabs of modern history — and without firing a single shot! Instead of using traditional means of warfare, it has employed much subtler — but in many ways no less brutal — forms of economic warfare to achieve its aims. And those aims are by now crystal clear: to slowly, almost imperceptibly, weaken nation-state institutions to the point of total dependence on Brussels; and then have them supplanted with EU institutions. It is the financial equivalent of death by a thousand cuts. As the Transnational Institute notes in its working paper “Privatising Europe: Using the Crisis to Entrench Neoliberalism“, the dark irony is that “an economic crisis that many proclaimed as the ‘death of neoliberalism’ has instead been used to entrench neoliberalism.” Predictably, privatisation has played a central role in this process, despite the fact that the funds thus far raised from state auctions represent a meager fraction of each nation’s total outstanding public debt. That niggling little detail, however, has not deterred the Troika from demanding fire sales of virtually all publicly owned assets and companies in Greece, as well as many in Spain, Portugal, Ireland and Italy.

Soaring Rents Force Some In China To Literally Live Underground - (www.businessinsider.com) Zig-zagging left and right through a maze of dark, narrow corridors in a high-rise's basement, 35-year-old kitchen worker Hu has joined the many thousands of Chinese fleeing fast-rising property prices by heading down - down underground. Hu lives here beneath an affluent downtown apartment building, in a windowless, 4 square-meter (43 square-foot) apartment with his wife. For 400 yuan ($65.85) a month in rent, there's no air-conditioning, the only suggestion of heat is a pipe snaking through to deliver gas to the apartments above and the bathroom is a fetid, shared toilet down the hall. "I can't afford to rent a house," said Hu as he showed off his meager appointments. Living in basement apartments isn't illegal in China, but like anywhere else it is nothing to brag about and Hu, who guts fish for 2,500 yuan a month at a popular Sichuanese hotpot restaurant on the street above, declined to provide his given name. "If I weren't trying to save money, I wouldn't live here," he said. Locals have dubbed Hu and his fellow subterranean denizens the "rat race" - casualties and simultaneously emblems of a housing market beyond the government's control.

OTHER STORIES: