The market for resale houses reached a "record high" in December, which has boosted annual sales above the results achieved in 2008.
He has indeed sold 27 744 units across the country last month, through MLS (Multiple Listing Service). This represents an increase of 72% compared to December 2008. It must be said that while the market had fallen to a floor that had not been seen for a decade.
The markets in Ontario, Quebec, Saskatchewan, New Brunswick and Newfoundland and Labrador have all recorded new highs for the month of December, according to statistics published by the Association of 'Building (ACI).
"In 2009, sales have been slow to start, but finished the year in good shape," said CREA President, Dale Ripplinger. As interest rates are still exceptionally low, it is possible that domestic sales remain near current levels over the coming months. "
Recall that after a sluggish start to the year, the resale market has posted gains in the 2nd and 3rd quarters. But it was really the last quarter of the year makes all the difference with a 59% jump in the number of transactions.
A total of 465 251 houses have changed hands through the MLS system in 2009. "This represents an increase of 7.7% compared to 2008 results, and the fourth highest annual level recorded to date," said CREA. Compared to 2007, however, the annual activity remained lower by 10.7%.
New average price in Canada: 348 840 $
In 2009, the average home price in major Canadian markets increased 5.5% over the previous year to $ 348 840 $.
"The latest statistics from the AIT surely provoke the usual rumors of speculation, said the chief economist at CREA, Gregory Klump. The wisest recognize that most increases occurred recently indicate temporary factors that could disappear by next summer. "
"In the second half of 2010, the price increases probably accuse a significant decline since a year has elapsed since the decline and recovery," he added. [...] The market should regain balance and price increases will be smaller in the second half of the year. "
dimanche 17 janvier 2010
The real estate regains its momentum
"After six dreadful months, between September 2008 and March 2009, where our sales have dropped over 50%, we experienced a tremor in the spring, and found a real momentum in recent weeks," welcomes Charles Marie Jottras, Group CEO Daniel Féau, whose turnover in 2009 exceeds 4.5% of that of 2008. Its agencies have Paris alone, made 150 sales of over 2.5 million euros. The Parisian lawyers identify themselves, 450 sales of over EUR 1 million, concluded in the third quarter of 2009, only 81 of which exceed 2 million.
The market has restarted first, because the sellers have their claims seriously revised downwards by at least 10% to 20%. Witness the sale in Paris for 12 million euros, the mansion of designer Kenzo, near the Bastille, which in early 2009 found the buyer - a television producer - at 25% less 9 million euros. New buyers interested in addition to high-end, beyond the 2.5 million euros, with prices dictated by wealthy foreigners.
The Russians, Britons and Americans are much less present than before, supplanted by oil wealth came from Kazakhstan and the Middle East, including Qatar, who have eyes only for the golden triangle of Paris, in the 8th arrondissement. Scandinavians, Belgians and Swiss are also buy a pied-à-terre in Paris, left bank instead. "I also note the return of many French who had to leave their job in finance in London or are just tired of living in Uccle, the suburb of Brussels," says Mr. Jottras.
"The cash is there," Eric Decailly summary, the Paris branch of Engel & Völkers, which has sold an apartment to renovate Haussmann, Place de l'Alma, to 2 million euros, after the seller has agreed a discount of 20%. "But in these circumstances, it must pay cash, without condition precedent to obtaining a loan, and through a company to avoid the withdrawal period of eight days imposed on property sales since the law Solidarity and Urban Renewal ( SRU) of December 2000, "says he.
Wealth is no longer the preserve of businessmen or industrialists hoary. Any young customers, enriched with LBO, stock options and other bonuses, are moving the market. Thus the Haussmann apartments with moldings, high ceilings and open view, is certainly still very popular, and prices that can reach 20 000 euro per square meter.
But these new rich also want modern homes, duplexes, lofts and townhouses, which are sorely lacking in the capital. They sometimes make use of decorators, who improvised their own merchants sell goods and apartments decorated and ready to live with beds made and topped dresser.
"The left bank, and its historic districts, attracts many foreigners and more successful than the right bank - 16th, 17th districts and Neuilly - more palatable to the traditional bourgeois French family, whose budget is, it not unlimited, "said Philippe Chevalier, agency Emile Garcin, who recently sold an apartment overlooking the Luxembourg Gardens at the price of 19 000 m2.
The record prices recorded by notaries in the third quarter of 2009 were affected by the 6th arrondissement apartments, a 214 m2 of seven rooms, located near the Invalides, which has been sold at 5.26 million euros, 24 600 euros per m2, and a duplex of 232 m2, near the Church of St. Thomas Aquinas, yielded 23 710 euros per m2, or 5.5 million. This remains below the 40 000 or 50 000 m2 of 2007 ...
Other goods very popular with foreigners, apartments with concierge services and can, as in a large hotel, tracking down a theater ticket at the last minute to book a restaurant or a launderer awake at night ... "Alas, this type of property is rare," laments Stéphane Imowicz, agency Ad Valorem.
The market has restarted first, because the sellers have their claims seriously revised downwards by at least 10% to 20%. Witness the sale in Paris for 12 million euros, the mansion of designer Kenzo, near the Bastille, which in early 2009 found the buyer - a television producer - at 25% less 9 million euros. New buyers interested in addition to high-end, beyond the 2.5 million euros, with prices dictated by wealthy foreigners.
The Russians, Britons and Americans are much less present than before, supplanted by oil wealth came from Kazakhstan and the Middle East, including Qatar, who have eyes only for the golden triangle of Paris, in the 8th arrondissement. Scandinavians, Belgians and Swiss are also buy a pied-à-terre in Paris, left bank instead. "I also note the return of many French who had to leave their job in finance in London or are just tired of living in Uccle, the suburb of Brussels," says Mr. Jottras.
"The cash is there," Eric Decailly summary, the Paris branch of Engel & Völkers, which has sold an apartment to renovate Haussmann, Place de l'Alma, to 2 million euros, after the seller has agreed a discount of 20%. "But in these circumstances, it must pay cash, without condition precedent to obtaining a loan, and through a company to avoid the withdrawal period of eight days imposed on property sales since the law Solidarity and Urban Renewal ( SRU) of December 2000, "says he.
Wealth is no longer the preserve of businessmen or industrialists hoary. Any young customers, enriched with LBO, stock options and other bonuses, are moving the market. Thus the Haussmann apartments with moldings, high ceilings and open view, is certainly still very popular, and prices that can reach 20 000 euro per square meter.
But these new rich also want modern homes, duplexes, lofts and townhouses, which are sorely lacking in the capital. They sometimes make use of decorators, who improvised their own merchants sell goods and apartments decorated and ready to live with beds made and topped dresser.
"The left bank, and its historic districts, attracts many foreigners and more successful than the right bank - 16th, 17th districts and Neuilly - more palatable to the traditional bourgeois French family, whose budget is, it not unlimited, "said Philippe Chevalier, agency Emile Garcin, who recently sold an apartment overlooking the Luxembourg Gardens at the price of 19 000 m2.
The record prices recorded by notaries in the third quarter of 2009 were affected by the 6th arrondissement apartments, a 214 m2 of seven rooms, located near the Invalides, which has been sold at 5.26 million euros, 24 600 euros per m2, and a duplex of 232 m2, near the Church of St. Thomas Aquinas, yielded 23 710 euros per m2, or 5.5 million. This remains below the 40 000 or 50 000 m2 of 2007 ...
Other goods very popular with foreigners, apartments with concierge services and can, as in a large hotel, tracking down a theater ticket at the last minute to book a restaurant or a launderer awake at night ... "Alas, this type of property is rare," laments Stéphane Imowicz, agency Ad Valorem.
vendredi 15 janvier 2010
Stabilization of the U.S. housing market
House prices in the United States remained stable in October compared to September, after five months of increases, according to the Standard and Poor's / Case-Shiller index measuring prices in the twenty largest U.S. cities.
United States
Prices of houses have remained unchanged in October in the United States while economists had forecast a sixth consecutive increase, shows the S & P / Case-Shiller index released Tuesday.
This index, which measures prices in twenty metropolitan areas, remained stable in October after rising 0.4% in September, according to a revised estimate. Economists polled by Reuters expecting an average index rose by 0.2%.
In one year, the Case-Shiller index shows a decrease of 7.3%, while economists were expecting a decline of 7.2%.
Contracts on U.S. equity indices have maintained their gains after the publication of statistics.
United States
Prices of houses have remained unchanged in October in the United States while economists had forecast a sixth consecutive increase, shows the S & P / Case-Shiller index released Tuesday.
This index, which measures prices in twenty metropolitan areas, remained stable in October after rising 0.4% in September, according to a revised estimate. Economists polled by Reuters expecting an average index rose by 0.2%.
In one year, the Case-Shiller index shows a decrease of 7.3%, while economists were expecting a decline of 7.2%.
Contracts on U.S. equity indices have maintained their gains after the publication of statistics.
China is worried about the housing market
Housing prices do not cease to rise in China, fueling concerns about an overheated property market. According to official figures, in December 2009, housing prices have increased by 7, 8% yoy and 1.5% compared to November 2009, reports the French newspaper People's Daily.
This surge in prices is becoming increasingly worrisome for the Chinese authorities who fear the creation of a housing bubble. The government had already outlined some steps to make credit less available habitat and prevent real estate speculation.
Moreover, the Chinese central bank has just raised the reserve requirement ratio for banks.
This surge in prices is becoming increasingly worrisome for the Chinese authorities who fear the creation of a housing bubble. The government had already outlined some steps to make credit less available habitat and prevent real estate speculation.
Moreover, the Chinese central bank has just raised the reserve requirement ratio for banks.
Towards a new record foreclosures in the U.S.
The American owners thought they had hit bottom in 2009. In 2010, they will still grow. The firm specializes RealtyTract provides more than 3 million foreclosures this year, after 2.8 million last year.
We announced recently, the tsunami caused by the subprime would soon give birth to new wave. According to the American firm taken over by L'Agefi, the probable new record sad part "in a context marked by house prices still in decline and the labor market at half mast.
Last November, another firm, First American CoreLogic, revealed that the rate of borrowers in default amounted to 23% mortgages. Thus, the number "of goods seized amounted to 2.21% of total units in 2009, representing an increase of 21% compared to 2008, and 120% compared to 2007.
Also according RealtyTract, "7 million homes could potentially be offered to the market by banks in the coming months." Side perspective, this is a "very gradual recovery" in the housing market is expected until 2013.
Gone are the days when Americans could boast of their home sweet home ...
We announced recently, the tsunami caused by the subprime would soon give birth to new wave. According to the American firm taken over by L'Agefi, the probable new record sad part "in a context marked by house prices still in decline and the labor market at half mast.
Last November, another firm, First American CoreLogic, revealed that the rate of borrowers in default amounted to 23% mortgages. Thus, the number "of goods seized amounted to 2.21% of total units in 2009, representing an increase of 21% compared to 2008, and 120% compared to 2007.
Also according RealtyTract, "7 million homes could potentially be offered to the market by banks in the coming months." Side perspective, this is a "very gradual recovery" in the housing market is expected until 2013.
Gone are the days when Americans could boast of their home sweet home ...
samedi 9 janvier 2010
Stabilization of the U.S. housing market
House prices in the United States remained stable in October compared to September, after five months of increases, according to the Standard and Poor's / Case-Shiller index measuring prices in the twenty largest U.S. cities.
Prices of houses have remained unchanged in October in the United States while economists had forecast a sixth consecutive increase, shows the S & P / Case-Shiller index released Tuesday.
This index, which measures prices in twenty metropolitan areas, remained stable in October after rising 0.4% in September, according to a revised estimate. Economists polled by Reuters expecting an average index rose by 0.2%.
In one year, the Case-Shiller index shows a decrease of 7.3%, while economists were expecting a decline of 7.2%.
Contracts on U.S. equity indices have maintained their gains after the publication of statistics.
Prices of houses have remained unchanged in October in the United States while economists had forecast a sixth consecutive increase, shows the S & P / Case-Shiller index released Tuesday.
This index, which measures prices in twenty metropolitan areas, remained stable in October after rising 0.4% in September, according to a revised estimate. Economists polled by Reuters expecting an average index rose by 0.2%.
In one year, the Case-Shiller index shows a decrease of 7.3%, while economists were expecting a decline of 7.2%.
Contracts on U.S. equity indices have maintained their gains after the publication of statistics.
Resumption of the housing market in Britain
Housing prices rose 0.4% in December compared to the previous month in the United Kingdom, an increase of 5.9% a year, according to figures released Thursday by the bank that specializes Nationwide. Although prices are still 12.2% below the peak recorded in October 2007, they returned 8.9% since the lowest reached in February 2009.
The United Kingdom had known, like the United States, a housing bubble that made very little available housing prices especially in large cities such as London. The historically low prices and the easing of access to credit, enhanced by maintaining interest rates at 0.5% since March last, explaining that recovery of the housing market in Britain.
However, we must not expect a sustained recovery in housing demand as the market conditions of employment contiuation to deteriorate, households prefer to wait some encouraging signs in this area and turned again to banks for house purchase. According to Martin Gahbauer, chief economist at Nationwide, "it is likely that we will not encounter any significant movement of the estate in 2010, neither upward nor downward.
The United Kingdom had known, like the United States, a housing bubble that made very little available housing prices especially in large cities such as London. The historically low prices and the easing of access to credit, enhanced by maintaining interest rates at 0.5% since March last, explaining that recovery of the housing market in Britain.
However, we must not expect a sustained recovery in housing demand as the market conditions of employment contiuation to deteriorate, households prefer to wait some encouraging signs in this area and turned again to banks for house purchase. According to Martin Gahbauer, chief economist at Nationwide, "it is likely that we will not encounter any significant movement of the estate in 2010, neither upward nor downward.
The UK property is not out of business
The year 2009 was excellent for buyers able to move liquidity. The number of potential buyers has greatly limited because financial institutions have rediscovered the virtues of caution: the supply of loans has been reduced by two thirds compared to its level before the credit crisis. The sellers have preferred to wait and not to lower their claims, while unemployment rose slightly below expectations. It is therefore quite logical that prices have increased and the volume of transactions has remained limited.
Difficulty borrowing
It seems that the situation evolves. In recent months, buyers have discrete facts frankly, while sellers have instead raised their prices. However, the difficulty to borrow is always greater. If the monthly number of mortgages granted has now reached double its low of 27 424, it is still well below what we knew before the crisis.
Except that the UK economy suddenly revived in 2010, banks do not risk paying too much the amount of the acquisition to borrowers whose monthly payments are too high in relation to their income. Credit institutions are still left too much credit for defects afford. This policy will crowd out the market first-time buyers. As long as unemployment is set loose incidents repayment will increase. The direction of price increase will be hindered or even completely reversed.
However, economic recovery alone would perhaps not in itself restore the situation. If you want to keep inflation in check, it will raise interest rates, thus increasing the burden on borrowers and those who invest in rental housing. So far, the rates of 0.5% they had avoided asphyxia. Any increase in push a number to sell.
The wealthy foreign buyers, who do not need to resort to borrowing, could save the London market. In fact, according to the valuer Savills, the price of high quality assets located in the center grew by over 7% since March, even if he had unscrewed from 23% just before, between 2007 and that month March.
However, this population of buyers will not continue to bear market if London remains an attractive city for rich people. However, according to Savills, this does not seem clear: the United Kingdom should not rely on its capital to exit the housing slump when it is immersed.
Difficulty borrowing
It seems that the situation evolves. In recent months, buyers have discrete facts frankly, while sellers have instead raised their prices. However, the difficulty to borrow is always greater. If the monthly number of mortgages granted has now reached double its low of 27 424, it is still well below what we knew before the crisis.
Except that the UK economy suddenly revived in 2010, banks do not risk paying too much the amount of the acquisition to borrowers whose monthly payments are too high in relation to their income. Credit institutions are still left too much credit for defects afford. This policy will crowd out the market first-time buyers. As long as unemployment is set loose incidents repayment will increase. The direction of price increase will be hindered or even completely reversed.
However, economic recovery alone would perhaps not in itself restore the situation. If you want to keep inflation in check, it will raise interest rates, thus increasing the burden on borrowers and those who invest in rental housing. So far, the rates of 0.5% they had avoided asphyxia. Any increase in push a number to sell.
The wealthy foreign buyers, who do not need to resort to borrowing, could save the London market. In fact, according to the valuer Savills, the price of high quality assets located in the center grew by over 7% since March, even if he had unscrewed from 23% just before, between 2007 and that month March.
However, this population of buyers will not continue to bear market if London remains an attractive city for rich people. However, according to Savills, this does not seem clear: the United Kingdom should not rely on its capital to exit the housing slump when it is immersed.
mardi 5 janvier 2010
Dubai : Real estate has big with the highest tower of the World
Dying late last year, in doubt, hit by the wrath of financial crises and real estate, Dubai intends to swim a few times still in excess water. Inaugurating today the tallest in the world, the "Burj Dubai, the emirate hopes to regain confidence eroded, but also improve its image in front of foreign powers.
Pushing a bit further the boundaries of architecture and real estate development shining symbol of the emirate, the "Burj Dubai" (or Dubai Tower, Burj meaning tower) now displays for all to see and luxury proportions are matched only by financial debt required for its construction. On top of its 164-storey tower in Dubai allowed to overshadow the Taipei 101 in Taiwan opened in 2004 and previously holding the record for the tallest tower in the world with 101 floors for 508 meters high. If the exact dimensions of the Burj Dubai are still a mystery, its supposed height of 816 meters (more than 2 ½ times the Eiffel Tower) break all the limits of the property.
If the height reached sufficient in itself to arouse the admiration, the excess is everywhere here. At nearly 40 kilometers per hour, two minutes to lift enough to carry visitors to the upper floors, the system will generate essential air conditioning condensation annual equivalent to 20 Olympic swimming pools and window cleaners will not rest because they will not least 6 to 8 weeks to clean up the facade.
Bordering the financial disaster last November, the emirate of Dubai is still facing a property market and construction extremely fragile. The completion of this tower will yet mobilized some 12,000 employees over the last 5 years. Pharaonic project if any, the overall cost of building the Tower of Dubai is estimated at more than 1.5 billion euros ... Nothing to worry unduly the developer Emaar Properties (whose government is a shareholder) since 1100 on some apartments in the tower, 90% have already been sold. In the opinion of the developer, the return on investment could rise to 10% on the first three quarters of 2010.
Pushing a bit further the boundaries of architecture and real estate development shining symbol of the emirate, the "Burj Dubai" (or Dubai Tower, Burj meaning tower) now displays for all to see and luxury proportions are matched only by financial debt required for its construction. On top of its 164-storey tower in Dubai allowed to overshadow the Taipei 101 in Taiwan opened in 2004 and previously holding the record for the tallest tower in the world with 101 floors for 508 meters high. If the exact dimensions of the Burj Dubai are still a mystery, its supposed height of 816 meters (more than 2 ½ times the Eiffel Tower) break all the limits of the property.
If the height reached sufficient in itself to arouse the admiration, the excess is everywhere here. At nearly 40 kilometers per hour, two minutes to lift enough to carry visitors to the upper floors, the system will generate essential air conditioning condensation annual equivalent to 20 Olympic swimming pools and window cleaners will not rest because they will not least 6 to 8 weeks to clean up the facade.
Bordering the financial disaster last November, the emirate of Dubai is still facing a property market and construction extremely fragile. The completion of this tower will yet mobilized some 12,000 employees over the last 5 years. Pharaonic project if any, the overall cost of building the Tower of Dubai is estimated at more than 1.5 billion euros ... Nothing to worry unduly the developer Emaar Properties (whose government is a shareholder) since 1100 on some apartments in the tower, 90% have already been sold. In the opinion of the developer, the return on investment could rise to 10% on the first three quarters of 2010.
The UK property is not out of business
The year 2009 was excellent for buyers able to move liquidity. The number of potential buyers has greatly limited because financial institutions have rediscovered the virtues of caution: the supply of loans has been reduced by two thirds compared to its level before the credit crisis. The sellers have preferred to wait and not to lower their claims, while unemployment rose slightly below expectations. It is therefore quite logical that prices have increased and the volume of transactions has remained limited.
Difficulty borrowing
It seems that the situation evolves. In recent months, buyers have discrete facts frankly, while sellers have instead raised their prices. However, the difficulty to borrow is always greater. If the monthly number of mortgages granted has now reached double its low of 27 424, it is still well below what we knew before the crisis.
Except that the UK economy suddenly revived in 2010, banks do not risk paying too much the amount of the acquisition to borrowers whose monthly payments are too high in relation to their income. Credit institutions are still left too much credit for defects afford. This policy will crowd out the market first-time buyers. As long as unemployment is set loose incidents repayment will increase. The direction of price increase will be hindered or even completely reversed.
However, economic recovery alone would perhaps not in itself restore the situation. If you want to keep inflation in check, it will raise interest rates, thus increasing the burden on borrowers and those who invest in rental housing. So far, the rates of 0.5% they had avoided asphyxia. Any increase in push a number to sell.
The wealthy foreign buyers, who do not need to resort to borrowing, could save the London market. In fact, according to the valuer Savills, the price of high quality assets located in the center grew by over 7% since March, even if he had unscrewed from 23% just before, between 2007 and that month March.
However, this population of buyers will not continue to bear market if London remains an attractive city for rich people. However, according to Savills, this does not seem clear: the United Kingdom should not rely on its capital to exit the housing slump when it is immersed.
Difficulty borrowing
It seems that the situation evolves. In recent months, buyers have discrete facts frankly, while sellers have instead raised their prices. However, the difficulty to borrow is always greater. If the monthly number of mortgages granted has now reached double its low of 27 424, it is still well below what we knew before the crisis.
Except that the UK economy suddenly revived in 2010, banks do not risk paying too much the amount of the acquisition to borrowers whose monthly payments are too high in relation to their income. Credit institutions are still left too much credit for defects afford. This policy will crowd out the market first-time buyers. As long as unemployment is set loose incidents repayment will increase. The direction of price increase will be hindered or even completely reversed.
However, economic recovery alone would perhaps not in itself restore the situation. If you want to keep inflation in check, it will raise interest rates, thus increasing the burden on borrowers and those who invest in rental housing. So far, the rates of 0.5% they had avoided asphyxia. Any increase in push a number to sell.
The wealthy foreign buyers, who do not need to resort to borrowing, could save the London market. In fact, according to the valuer Savills, the price of high quality assets located in the center grew by over 7% since March, even if he had unscrewed from 23% just before, between 2007 and that month March.
However, this population of buyers will not continue to bear market if London remains an attractive city for rich people. However, according to Savills, this does not seem clear: the United Kingdom should not rely on its capital to exit the housing slump when it is immersed.
Why Bernanke is in no hurry to raise rates
Flying in the face of the widespread belief that the loose monetary policy of Greenspan is responsible for the housing bubble, Bernanke said Sunday that the instrument of interest rates should be used only second spring. Explanations.
While the economic recovery continues, the U.S. financial markets await the time when the Federal Reserve will raise interest rates, currently at their lowest historical level, between 0 and 0.25%. In a speech Sunday at the American Economic Association in Atlanta, Ben Bernanke has stressed the need to strengthen financial regulation, suggesting that there would be little short-term changes in the monetary policy of the bank Central. Here's why:
The low rates are not responsible for the housing bubble that burst in 2008. The Fed is often accused of having fueled the housing bubble with interest rates extremely low which encouraged households to incur debt, sometimes well beyond their financial means. Indeed, after the bursting of the dotcom bubble and the terrorist attacks of September 11, the Fed chairman, Alan Greenspan, has drastically reduced rates to revive the economy. This has contributed to flood the market liquidity that have come feed the housing bubble. But for Bernanke, not only the reduction in rates was necessary, but above all, it was not responsible for the bubble, since the problem was in fact the lack of regulation: while the financial institutions taking huge risks by providing mortgage contracts "unconventional" to customers who could not afford to repay them, the authorities were too slow to identify and mentor those risks. The argument does not convince all economists. David Beckworth particular suggests that it is precisely this excess liquidity combined with the low return on dollar prompted investors to seek financial products more attractive returns, such as mortgage-backed securities "alien".
The monetary policy instrument is a "brutal" for the economy. The Vice-Chairman of the Fed, Donald Kohn, who insists on this point. Indeed, increasing interest rates to fight against the formation of a bubble in a specific sector penalizes the overall economy. This kind of "collateral damage" is even more risky that the U.S. recovery is still fragile: high unemployment (10%), modest revenue growth and falling real estate weigh heavily on consumer spending, the main engine of growth U.S..
No risk of inflation. One of the two objectives of the Fed is price stability. But the slow growth of wages and difficult conditions in the housing market yet discard any inflationary danger. Thus, "apart from fluctuations in energy prices and food, the basic trend is clearly downward," according to a note from Credit Agricole.
The weak dollar is an asset. Ben Bernanke did not officially admit, but the benefits of weak dollar can not escape the government. First, the depreciation of the dollar makes American products more competitive and give a boost to exports. The trade deficit was thereby reduced. Furthermore, the weak dollar also reduces the cost of American wages, which in theory allows to repatriate jobs to the United States, and thus fight against unemployment.
While the economic recovery continues, the U.S. financial markets await the time when the Federal Reserve will raise interest rates, currently at their lowest historical level, between 0 and 0.25%. In a speech Sunday at the American Economic Association in Atlanta, Ben Bernanke has stressed the need to strengthen financial regulation, suggesting that there would be little short-term changes in the monetary policy of the bank Central. Here's why:
The low rates are not responsible for the housing bubble that burst in 2008. The Fed is often accused of having fueled the housing bubble with interest rates extremely low which encouraged households to incur debt, sometimes well beyond their financial means. Indeed, after the bursting of the dotcom bubble and the terrorist attacks of September 11, the Fed chairman, Alan Greenspan, has drastically reduced rates to revive the economy. This has contributed to flood the market liquidity that have come feed the housing bubble. But for Bernanke, not only the reduction in rates was necessary, but above all, it was not responsible for the bubble, since the problem was in fact the lack of regulation: while the financial institutions taking huge risks by providing mortgage contracts "unconventional" to customers who could not afford to repay them, the authorities were too slow to identify and mentor those risks. The argument does not convince all economists. David Beckworth particular suggests that it is precisely this excess liquidity combined with the low return on dollar prompted investors to seek financial products more attractive returns, such as mortgage-backed securities "alien".
The monetary policy instrument is a "brutal" for the economy. The Vice-Chairman of the Fed, Donald Kohn, who insists on this point. Indeed, increasing interest rates to fight against the formation of a bubble in a specific sector penalizes the overall economy. This kind of "collateral damage" is even more risky that the U.S. recovery is still fragile: high unemployment (10%), modest revenue growth and falling real estate weigh heavily on consumer spending, the main engine of growth U.S..
No risk of inflation. One of the two objectives of the Fed is price stability. But the slow growth of wages and difficult conditions in the housing market yet discard any inflationary danger. Thus, "apart from fluctuations in energy prices and food, the basic trend is clearly downward," according to a note from Credit Agricole.
The weak dollar is an asset. Ben Bernanke did not officially admit, but the benefits of weak dollar can not escape the government. First, the depreciation of the dollar makes American products more competitive and give a boost to exports. The trade deficit was thereby reduced. Furthermore, the weak dollar also reduces the cost of American wages, which in theory allows to repatriate jobs to the United States, and thus fight against unemployment.
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