Shiller: “Wild West” housing prices will be “substantially lower” in years
Robert Shiller, of the famed Case-Shiller index, is notably concerned about housing, stocks and cryptocurrencies, where he sees a “Wild West” mentality among investors.
“I haven’t done that in print. I’ve been saying that” the Yale University professor clarified on CNBC’s “Trading Nation.”
According to Shiller, current home price action is also reminiscent of 2003, two years before the slide began. He notes the dip happened gradually and ultimately crashed around the 2008 financial crisis.
“If you go out three or five years, I could imagine they’d [prices] be substantially lower than they are now, and maybe that’s a good thing,” he added. “Not from the standpoint of a homeowner, but it’s from the standpoint of a prospective homeowner. It’s a good thing. If we have more houses, we’re better off.”
Prices are expected to climb in the near term, according to this recent blog from First American chief economist Mark Fleming who writes that, of the top 50 markets tracked, only three markets, all located in California, were overvalued, meaning the median existing-home sale price exceeded house-buying power, in December.
The market with the highest overvaluation was Los Angeles, where the median consumer house-buying power in December was just over $590,000, significantly below the median sale price of a home at approximately $729,000. San Francisco and San Jose were also overvalued, although to a lesser extent. However, all three overvalued markets are still significantly less overvalued than during the national housing boom peak in March 2006. Los Angeles, for example, was overvalued by approximately $286,000 in 2006, more than twice what it is today.
The remaining 47 markets are actually undervalued, many significantly so. In fact, in December 2020, the average percentage difference between house-buying power and the median sale price of an existing home in these 47 markets was nearly 59 percent. In 2006, only 34 markets were considered undervalued, and the average percentage difference between house-buying power and the median sale price of an existing home was 39 percent. Even locally, this time it’s different.
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Companies are sick of raising wages and plan to spend on tech instead
Rise&Shred has covered the lack of workers at all levels as the primary driver for higher unemployment.
Why aren’t people going back to work? It’s complicated but childcare costs are often cited as a big motivation. In return, many companies raised wages, but that’s not working out that well, either, according to the Cleveland Fed.
“A little more than 40 percent of our survey respondents reported that they had raised wages over the past two months, with the remainder indicating that wages had not changed,” the report states. “Reports of wage increases spanned a variety of industries but were particularly prominent in reports from staffing services firms, construction contacts, manufacturers, and transportation firms.”
Quite often, however, plans to add workers were hampered by the limited availability of qualified applicants to fill open positions. In some cases, companies reporting to the Fed indicated that they were planning to adopt more technology (in lieu of more employees) to keep up with demand.
One analyst indicates the money gained back in wages, would be rediverted into tech development.
“The hacking of the Colonial Pipeline just a few weeks ago underscored the vulnerability of so many private entities that are charged with protecting themselves from cyberattacks,” noted Invesco’s Kristina Hooper. “I would expect to see more spending on cybersecurity — and more innovation to meet these challenges.”
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BofA bans cold calling (!) to build referral network
That’s right, we’re talking about the rite of passage at many a’ sales shop: making the junior staff cold call.
Bank of America Merrill Lynch Wealth Management is banning trainee brokers from making cold calls, a vestige of an era when the industry pushed hot stocks on anyone who would pick up the phone… the program dates back to the 1940s!
According to the WSJ (metered paywall), the announcement formalizes a shift that executives have signaled for months. “We are leaning much more heavily on leads and referrals from the broader company,” Merrill President Andy Sieg said in April. “There is also an opportunity to be much more modern in terms of the way we are reaching out to prospective clients.”
The revamped program is intended to bring the firm’s prospecting techniques into the digital era and boost completion rates. It is also another step in integrating Merrill’s storied “thundering herd” of financial advisers more closely into Bank of America, which bought the brokerage in the depths of the financial crisis.
The changes are also intended to make it easier for trainees without an existing network to succeed. “We’re going to open up the possibility of a career in wealth management to a much broader selection of individuals,” Mr. Sieg said on call with reporters Monday.
Trainees will get more referrals from the bank’s pool of 66 million retail customers, people familiar with the matter said. They will also be encouraged to contact prospects over LinkedIn, which has a higher hit rate than cold calling, they said.
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