Simply Unaffordable: These Cities Make USA Housing Look Dirt Cheap

As the late Robert Palmer crooned, housing is simply unaffordable in many cities. And most of those cities are outside the USA.

(Bloomberg) — As people around the world move into cities and look for housing, one thing is clear: Most will have a hard time paying for it.

Average monthly take-home pay won’t cover the cost of buying a 1,000-square-foot residence or renting a three-bedroom home in any of the 105 metropolitan areas ranked by the Bloomberg Global City Housing Affordability Index – based on a general rule of thumb among U.S. lenders that people should spend no more than 28 percent of net income on housing costs. Only 12 cities would be considered affordable if they spend 50 percent.

 

Residents face many obstacles, including urban land-use regulations, underdeveloped rental markets and difficulty getting financing, according to Enrique Martínez-García, a senior research economist at the Federal Reserve Bank of Dallas who studies housing prices. Policy solutions to these problems aren’t clear, he adds.

 “Not having access to credit is a challenge to develop a healthy housing market,” he said. “But opening it up too fast might be a problem as well; it might actually lead to a boom-bust episode.”
 

The Bloomberg index calculates the affordability of renting or buying in city centers and suburbs. Rankings are based on self-reported data, including net salary and mortgage interest rates, compiled by Numbeo.com, an online database of city and country statistics.

Since 2012, 48 cities in the Bloomberg index have become less affordable, while affordability improved in 51. (Historical data aren’t available for all 105.) In nine of the bottom 10, average net income fell, while income in eight of the top 10 cities rose as rental and mortgage costs declined.

Emerging economies currently have the least-affordable housing, led by Caracas and Kiev in Ukraine. The remaining cities among the bottom 20 include seven in Asia and six in Latin America. London is the least-affordable major city in Western Europe, with average monthly rent and mortgage payments equaling 135 percent of monthly net income.

In Rio de Janeiro, Brazil’s second-largest city, average monthly take-home pay of $640 won’t unlock a rental even on the outskirts of town, let alone provide the means to buy a house or apartment in the city center, where monthly mortgage payments approach $2,000. This contributes to multiple-income households and also may explain why more than one in five Rio residents lived in informal shantytowns called favelas in 2010, the most recent data available. Six of the 10 cities with the greatest deterioration in the past five years are in Latin America.

Seven of the top 10 most-affordable cities are in North America: four in the U.S. and three in Canada.  The least-affordable metro area in the two countries is Vancouver, where an influx of foreign cash has caused a surge in home prices. New York ranked near the middle of the index.

Two of the cities with the greatest improvement are in China: Shenzhen and Guangzhou. Even so, housing demand across the country continues to outweigh supply, “despite rapid construction and the large-scale delivery of new homes” in cities including Shenzhen, according to Kate Everett-Allen, head of international residential research at real-estate consultant Knight Frank in London. That’s because of “mass urbanization” and relatively low wages, she said, adding that home prices in several cities grew at an annual rate of as much as 40 percent last year.

Four Chinese metro areas, including Hong Kong, were among the 20 least-affordable in the index. 

Yes, the USA, while more affordable that the rest of the world, is suffering from low wage growth while home price growth is more rapid. In fact, the FHFA home price index is growing YoY at over 2X average hourly wage growth YoY. 6.63% versus 2.54%.

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Note that home price growth started to exceed hourly wage growth in 1998, the beginning of the dreaded housing bubble that blew sky high.

I guess Americans have been addicted to gov since the 1987 stock market crash.

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China’s Yield Curve Inverts (Small Beans Relative to Venezuela’s Curve Inversion And 2,713% Inflation Rate)

Inverted sovereign yield curves are generally bad news. And China’s inverted yield curve is no different. The 5Y to 10Y segment of China’s sovereign curve has inverted … again.

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But before anyone gets hysterical, the rest of China’s sovereign curve is upward sloping like the USA (blue for China, green for the USA).

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For comparison sake, I am including the mac-daddy of curve inversion: Venezuela (red line). Their 3Y sovereign yield is a gut-wrenching 58% while their 20Y yield is lower at 22%. And their 2,712.88% annual inflation rate.

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IMF Says Venezuela’s Inflation Rate May Rise Beyond 2,300% in 2018

(Bloomberg) Venezuela’s triple-digit annual inflation rate is set to jump to more than 2,300 percent in 2018, the highest estimate for any country tracked by the International Monetary Fund.

 

An intensifying political crisis that’s spiraled since 2014 has weighed heavily on economic activity. Gross domestic product is expected to contract 6 percent next year, after shrinking an estimated 12 percent in 2017, the IMF said in its latest World Economic Outlook report published Tuesday.

 

While Venezuela’s central bank stopped publishing inflation data in December 2015, the IMF argues the country’s consumer prices are estimated to leap 2,349.3 percent in 2018, the highest in their estimates, followed by the Democratic Republic of the Congo’s 44 percent. As oil production declines and uncertainty increases, unemployment is forecast to increase to about 30 percent in 2018, also the highest and followed by South Africa’s 28 percent and Greece’s 21 percent.

The Bolivarian Republic isn’t current with most of its key economic statistics, leaving economists scant data to crunch. Before Venezuela’s new legislative super body took over the functions of the country’s only remaining opposition-run institution this year, the sidelined National Assembly had started publishing its own inflation index due to the lack of official data. Bloomberg’s Cafe Con Leche Index puts the annual rate at 650 percent.

Be honest, if you were Maduro, would YOU publish the awful economic data coming out of Venezuela? Steven Hanke pegs Venezuela’s annual inflation rate at 2,276% as of September 26, 2017.

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Here is Venezuelan dictator Nicholas Maduro singing “Ain’t socialism grand?” 

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Venezuela’s 10Y Sovereign Yield Hits 34.1% (6 Mo CDS Hits 15,500)

Venezuela’s 10 year sovereign yield just hit 34.1%, the highest in the world.

Venezuela’s sovereign yield curve (green line, denominated in US Dollars) is steeply inverted. Venezuela’s SR CDS (and Petróleos de Venezuela SR CDS) are both showing extrememly high levels for the next 6 months (right-hand axis).

Socialism sounds wonderful (to politicians) when crude oil is selling at over $100 a barrell. But not so much when oil is under $50 a barrell.

With annual inflation running at over 2,000%, you know you’ve got trouble in oil city. 

Well, at least some Venezuelans have toilet paper and food.

Unlike these shoppers. And you wonder why annual inflation is over 2,000%?

 

Venezuelan Annual Inflation Rate Drops To … 2,276% (As Average Venezuelan Loses 20 Lbs In Weight)

The people of the once thriving country of Venezuela are suffering mightely.  Although lower than the all-time high of 2,432.9%, the current annual inflation rate is 2,274,78%.

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Compare Venezuela’s inflation with that of the USA which has 1.40 or 1.68% YoY, depending on your government measure of choice.

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To be fair, Venezuela has been deteriorating for some time, even before Hugo Chavez. But Maduro has taken control of the economy to a new low.

A survey by a top university found the average Venezuelan has lost nine kilogrammes (around 20 pounds) in the past year.

Venezuelan dictator Nicholas Maduro signalling “Twenty pounds lost .. without Jenny Craig.”

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Venezuela’s Inflation Rate Just Hit 2,061% (6 Mo CDS At Almost 13,000)

Yes, the US economy like Europe and Japan are suffering from chronically low rates of inflation (unless you count things like home prices,. rent, college tuition, healthcare, etc).

But not Venezuela! They just surpassed the year 2017 in terms of their inflation rate: 2061%!

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Venezuela’s sovereign curve remains steeply downward sloping with short-term rates in excess of 50%.

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And Venezuela’s CDS curve is similar in that it is downward sloping with 6 month CDS at almost 13,000.

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“Look amigo, I can spin the basketball just like Steph Curry!”

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Venezuela’s 10Y Sov Yield Soars To 32.43%, A New Record High (Worse Than Greece In 2012)

Venezuela has gut-wrenching inflation and skyrocketing sovereign yields. Here is the deterioration of the Bolivar (their currency) since 2013 when Nicolas Maduro was elected as their President.

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As of today, Venezuela’s 10 year sovereign yield hit 32.43%. That is even higher than the Greek 10 year sovereign yield at the height of the Greek default crisis of 30.25% in 2012.

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Ever since President Nicolas Maduro was selected, Venezuela’s sovereign yield curve has gone from steeply upward sloping to steeply downward sloping. And their sovereign curve has shortened.

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Staggering inflation and record high soveign yields. Maduro is even worse than his precessor Hugo Chavez.

Here is a photo of Maduro relieving himself from indigestion caused by his insane economic and monetary policies.

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