It really doesn’t need an explanation as to how the U.S. real estate bubble burst, however there is another country with a surging economy who could end up with a housing crash that could shock the global economy, China. China’s real estate market is slightly different than the U.S. because the types of housing that is exploding in China are condos rather than single-family homes. Throughout the years, demand has exceeded supply which has led to skyrocketing prices in anticipation that the condos will keep selling. However just like with the U.S. housing market in 2007, prices are starting to slide, builders are stuck with empty condos and homeowners who bought real estate beyond their means with the hope that prices keep going up are left in a precarious situation. Even though the U.S. housing crash led to the global Great Recession, it is unlikely that a Chinese real estate crash will sink the world into another recession, it will however make the recovery much harder.
The Chinese real estate market is relatively young since the Chinese people have only been able to own their homes since the late 1990′s, before all property was owned by the state. Often times real estate has been the only investment the Chinese people have been able to make because they had no other vehicle to put their investments in. Another cause of the bubble was a result of the Chinese government loosening restrictions on borrowing to keep the economy growing, also known as an expansionary policy, the goal was to keep the economy growing at 10% during the Great Recession. This has prompted housing prices to swell at rate of 50% over the span of three years ending in 2010. As said before the housing that was being bought were not single family homes but rather apartments and condos and investors all over have been looking to cash in (just like during the U.S. housing bubble).
The Chinese government did notice the run-up in prices by speculators and attempted to reign them in by higher down-payments, tough qualifications for mortgages, residency requirements and limits on investment purchases. These were similar reactions American banks had after the U.S. housing market burst. Eventually the developers did cave in and started liquidating inventories and lowering prices, understandably the recent home-buyers were not too happy with having prices drop on homes that they recently bought. As a result sales have dropped 20% during the first quarter and prices in some areas have dropped as much as 40% during the first quarter as well!
The question now isn’t whether or not the Chinese real estate bubble will burst, the question is how will it affect the global economy, after all the U.S. housing crash tanked the global economy. The Chinese people are not going to be affected as much as American homeowners were during the U.S. crash because the Chinese often require home-buyers to put up at least 20% of the mortgage. The developers on the other hand are in trouble, especially the ones that are over-leveraged, some have already declared bankruptcy. Other sectors of the economy that will be hurt are the banks who had loans collateralized with real estate and construction supplies manufactures (some even in the U.S.) are likely to get hurt too. However the banks aren’t as likely to get hurt by the Chinese housing crash than the U.S. crash because of the lessening dependence on CDO’s.
Even though the economy has been recovering at a snail-like pace, there is a possibility that the recovery may be fizziling out. One of the main indicators of economic health is bank lending, it has been rising for most of last year but has dropped in the first three months of 2012. The big four, JP Morgan Chase, Wells Fargo, Bank of America and Citigroup have been lending a total of $24 billion through January-March 2012, which is down $10 billion from the mark in 2011. The reason why a decrease in bank lending is problematic is that when banks cut lending, it makes it harder for small businesses to obtain capital that is needed for expansion or formation. Some other theories on why the drop in lending is bad is based on the demand theory that fewer loans are a result of businesses and individuals choosing not to borrow based on fears on the economy. However the latter seems unlikely because throughout the first three months of 2012, the U.S. economy has been growing with only March showing disappointing numbers.
The only type of loans that increased for big banks is mortgage lending, however most of those were taken out to refinance a home, not purchase a new one. However, just because the big banks have slowed down lending doesn’t mean that all banks in the U.S. have shrunk lending too, bank lending in general is still going up with Credit Unions increasing popularity. The increasing popularity of Credit Unions is good for individuals but for small business looking for capital to form or expand their business, it still is difficult to find Credit Unions willing to loan money to them.
Early voting for the May 12 municipal and school board races starts today and ends May 8. Here’s where to vote:
Killeen
Killeen Community Center, 2201 E. Veterans Memorial Blvd., 8 a.m. to 5 p.m. today through Friday and May 7-8.
Killeen City Hall, 101 N. College St., 8 a.m. to 5 p.m. today and Tuesday, 7 a.m. to 7 p.m. Wednesday and Thursday and 8 a.m. to 5 p.m. Friday and May 7-8.
Killeen ISD
Residents can vote at the Killeen or Heights early voting locations or at the Killeen ISD Central Administration Building, 200 N W.S. Young Drive, 8 a.m. to 5 p.m. weekdays through May 8.
Harker Heights
Harker Heights City Hall, 305 Miller’s Crossing, 8 a.m. to 5 p.m. today through Wednesday, Friday and May 7; 7 a.m. to 7 p.m. Thursday and May 8.
 2202 Scott, Copperas Cove
# of bedrooms: 3
# of bathrooms: 2.5
Approx. Sq. Ft.: 1906
Rent: $1250
Deposit: $800
Pets: At owners discretion, max. 2, $250 deposit each
The Tricare Dental Program will have a new contractor next Tuesday for the first time in 15 years. Tricare gave a $3.1 billion dental contract to Metropolitan Life Insurance Company last year after Tricare broke ties with its previous carrier United Concordia. Metlife will hold the contract for the next five years. The change in carriers will affect more than 2 million military family members, reserve members and survivors. If you are an active duty in the military or retiree, your dental coverage will remain unaffected.
Most current program en-rollers don’t have to file any paperwork or take any action during the transition. Only those enrollees who use automatic payments from their checking account or credit card to pay their monthly premiums need to reauthorize their payments to MetLife. Tricare’s dental program will now have access to MetLife’s network of more than 164,000 dentist locations. The dental program will have an annual benefit maximum of $1,300 and a lifetime orthodontic maximum of $1,750. For some perspective on this change, when originally covered by United Concordia, the annual benefit maximum was $1,300 and the lifetime maximum for orthodontics was $1,500. Finally Metlife will expand coverage to additional cleaning for pregnant women and survivor benefits for eligible family members.
 4700 Black Forest, Killeen TX
Bedrooms: 3
Bathrooms: 2
Sq. Ft.: 1155
Rent: $1,050
Deposit: $650
Pets: At owners disclosure, $350 deposit for each
Owner will provide pest control and lawn service.
Available May 15th!
Aster Floor Plan w/Elevation L. Tile flooring in wet areas, kitchen and dining. Black appliance package with microwave an deep stainless sink. All bedrooms have walk-in closets. Separate shower and twin sink vanity in the master bath. Upgraded bathroom faucets, blinds, covered patio and front porch. Pre-wired for security system
China has seen an explosion of economic growth since the government put in place major reforms in 1978, growing at an average of 10% annually. Over the past decade, China has moved up four places in the world economic rankings, surpassing France, the U.K., Germany and Japan, and is only second to the U.S. Currently, China accounts for a little more than 10% of the world’s economy. By 2027, economists predict that China will overtake the U.S. as the number one economy in the entire world. Despite the rise, the benefits of the economic expansion aren’t felt by all of the Chinese.
China’s GDP per person is $9,143 per year, which according to the International Monetary Fund is 91st in the world. Ironically, developing countries such as Iran, Azerbaijan and Botswana are ranked higher than the economic powerhouse. Even though China is lifting more of its citizens out of property and moving more citizens from rural areas to urban areas, it doesn’t mean that the average household in China lives like the average household in U.S. It is estimated that 200 million Chinese citizens earn less than $2 a day, to get some perspective on this number, there are nearly 300 million people in the U.S. If the living standards and the wages don’t increase enough to enable the Chinese to purchase the goods that they are producing, the Chinese economy will be unable to sustain its growth.
The monthly mortgage payment bill is the lowest it has been in decades. For example, if you were to put 20 down on a median-valued home ($154,400), only 12.1% of your monthly income would be used to pay down the mortgage or $616. The low mortgage payment in conjunction with the rising rent prices throughout the U.S., it is now cheaper to own a home rather than renting one (on a monthly basis) in 98 out of the 100 metro areas in the U.S. This is the perfect opportunity to buy for those with good credit as you are more likely to get approved for the mortgage loan. According to Zillow, the prices of lower-tier properties are rising and the higher-tier properties are falling
6200 Griffith
Rent: $1,000
Deposit: $750
Pets: At owners discretion
Omega floor plan offers 3 bedrooms and study. Kitchen has all appliances and whole house water softner. Large pantry and plenty of cabinets. Blinds throughout. Master bath has seperate shower, garden tub, and makeup counter. There is a large concrete patio in the back yard for outdoor activities. Garage door opener and Vivint security system with camera and remote programing.
U.S. home mortgage applications jumped last week as a result of the drop in interest rates leading to a greater demand to refinance. Due to concerns over the debt crisis in Europe, interest rates for the 30 year mortgages were lowered to a near historic low. The Mortgage Bankers Association said that the index of mortgage activity (refinancing and home purchase demand) rose 6.9% from April 6 to April 13. These indexes are seasonally adjusted and covers over 75% of retail residential mortgage applications. However refinancing and home purchase demand did not rise altogether, refinancing rose 13.5% while home purchase demand fell 11.2%. The refinance share of total mortgage activity rose 4.7% to 75.2% of applications.
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