Perspective on European Central Bank's (ECB) tenth year anniversary. Russia's incredible bounce back from bankruptcy, a hundred fold increase in oil prices... Pimco
Click to enlarge. "Our primary conclusion to be drawn from the dominant GSE- vs. dominant private-ABS-regimes is that the primary driver of house price returns during the GSE-dominant years tended to be economic fundamentals, with some indication of short-term, largely offsetting effects from jumbos, subprime, and non-owner occupied investor loans. However, in the ABS-dominant years, with one exception, the loan-density related effects largely disappeared, as did the effects of economic fundamentals. Non-owner occupied loans and the hunger for yields by private ABS issuers exploiting the dynamics of the yield curve (while ex post found to be underpricing risk) drove house price returns to new highs, which did not abate until 2006. Subprime lending activity per se was not the primary culprit in driving house prices higher. Rather both were the products of an economic environment and permissive regulatory environment that allowed the house price market dynamic to play out." Time
Click to enlarge. "Our primary conclusion to be drawn from the dominant GSE- vs. dominant private-ABS-regimes is that the primary driver of house price returns during the GSE-dominant years tended to be economic fundamentals, with some indication of short-term, largely offsetting effects from jumbos, subprime, and non-owner occupied investor loans. However, in the ABS-dominant years, with one exception, the loan-density related effects largely disappeared, as did the effects of economic fundamentals. Non-owner occupied loans and the hunger for yields by private ABS issuers exploiting the dynamics of the yield curve (while ex post found to be underpricing risk) drove house price returns to new highs, which did not abate until 2006. Subprime lending activity per se was not the primary culprit in driving house prices higher. Rather both were the products of an economic environment and permissive regulatory environment that allowed the house price market dynamic to play out." Time
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