News Alerts, Aug. 16, 2013: Real Estate Plus

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  1. Media pulls a Freddie Krueger, creates a 'fake' housing bubble nightmare | REwired

    Like Freddie Krueger in the Nightmare on Elm Street movies, the specter of a Housing Bubble keeps popping up in the media, spooking those poor souls who remember how badly the last movie ended. But are we really about to see a sequel to the last boom and bust cycle? I don't think so, for a number of reasons.

    He goes on to give good reasons, though we'll take a bit of exception to Rick Sharga's #1 because of the unemployment and underemployment problem, plus student debt.

    Also, we haven't really seen too many serious real estate journalists make unqualified statements about bubbles. Anyway, even Zillow's economists have pointed to the potential for growing localized bubbles if we aren't careful.

    The idea is to take care. We don't want to be lulled to sleep as a nation the way the nation was placed under the spell of "this time is different" right before the crash: Great Recession.

    That said, Rick's article has plenty of merit.

  2. Apartment owner told to dismantle roof-top oasis – Xinhua | English.news.cn

    Wow, is this ever a strange and dangerous looking thing:

    BEIJING, Aug. 13 (Xinhua) — Photos of an elaborate, but illegal garden built atop a 26-story building in downtown Beijing have been feverishly shared and forwarded online since Monday.

    The urban management bureau of Haidian District on Monday deemed the man-made rooftop oasis as a piece of illegal construction. They posted a notice on the door to the apartment the same day, urging the builder to dismantle it within 15 days starting Monday.

    Photos show the top of the 26-story building covered in a man-made mound dotted with artificial rocks, greenery and a swimming pool.

  3. Florida sinkhole swallows parts of resort near Disney World – CNN.com

    What are building owners going to have to do about this? Will they sink probes under their buildings and around them to trigger alarms if areas open up? It must start becoming difficult to sleep peacefully with the threat of sink holes suddenly opening up in so many areas of the state.

    A 60-foot-wide sinkhole formed under a resort near Disney World in central Florida, forcing guests out as a 3-story building collapsed and another sank.

  4. Sony's wireless lens cameras for Android and iOS leaked in official images – Recombu

    Smartphones are great for taking quick pictures in the heat of the moment, but the small sensors just can't match up to what you'll find on DSLRs or Micro Four Third cameras Sony may be working on a somewhat awkward solution that would marry the best of both worlds, according to SonyAlphaRumors.

    If the lenses turn out to be real, then it's a pretty bold move on Sony's part. How many people will want to attach such a large accessory to their smartphone?

  5. Angry Bear: OBAMACARE, THE SEQUESTER and part time employment

    This article is fascinating especially if correct, and the author, Spencer England, appears to have the data to back it up. We include it because Obamacare deals with insurance (our field) and deals with such huge quantities of money and impacts upon, and will impact upon, the general, national, and even global economy and so many real-estate businesses and investors, etc., and in a large way, all for better or worse.

    …the data massively contradicts claims that Obama-care is responsible for the recent surge in part time employment. Moreover, it strongly supports the case that the recent increase in part time employment stemmed from the Sequester.

    Let's keep an eye on this issue as each part of Obamacare kicks in.

  6. There Has Been No Improvement in the Hires Rate in Two Years | Economic Policy Institute

    The "hires rate" is an important aspect to consider when looking at statistics covering unemployment and hiring: net.

    The June Job Openings and Labor Turnover Survey (JOLTS) data released this morning by the Bureau of Labor Statistics paint a grim picture of job opportunities in today's labor market. The "hires rate"—the share of total employment accounted for by new hires—is an important comprehensive measure of the strength of job opportunities because it incorporates two components: 1) net new hires, and 2) new hires that are due to "churn" (i.e., hires that are replacing vacated or lost positions….

  7. MarketWatch 666: the MBA & LPS on delinquent mortgages & foreclosure inventories at mid year; June's trade deficit

    What's up with the June spike in US mortgage delinquencies? Packed with charts and graphs (and no capitalization of the first letter in each sentence):

    despite this obvious deterioration in June mortgages, LPS Applied Analytics Senior Vice President Herb Blecher tried to spin it into a seasonal phenomena in the press release accompanying the release of the mortgage monitor, noting that payment situations deteriorated in June in all but 4 of the past 18 years…this may be true, but looking back over the record, we don't see a single month in the past two years that saw this large an increase in 30 day delinquencies; as we noted, the 30 day bucket saw an increase of 227,940 mortgages in June (from 1,243,194 to 1,471,134); last June's increase was from 1,390,010 to 1,464,660, only one third that of this June's at 74,960, and the delinquency rate increase in June 2011 was just 2.4%…even the infamous September spike in mortgage delinquencies accompanying the release of the iphone 5 was smaller at 219,998 new delinquencies…we did see June spending outpaced incomes by a bit last week, yet there is nothing else obvious in June data that we've seen to date that could have precipitated this apparent shortfall of homeowner budgets that would cause such a widespread and precipitous increase in new delinquencies…

  8. EconoMonitor: The Changing Debate Over China's Economy

    Very interesting observations and questions about economic analysis of China by Michael Pettis:

    …the tendency for over-investment in the late stages of the miracle-growth period leading to an unsustainable increase in debt.

    …the serious debate has not been about whether or not China's collapse is imminent. The disagreement was whether or not investment misallocation and the repression of household income growth were fundamental to the Chinese growth model. The bulls argued that they were not, and that while poor investment decisions and low consumption growth could indeed exist, these could be addressed administratively within the model and did not require radical reforms that would essentially result in an abandoning of the growth model.

    The skeptics argued that these were indeed fundamental to the model, and that worsening imbalances and an unsustainable rise in debt would be the inevitable and automatic outcome of maintaining current policies. For the bulls, although only after it became clear that debt was indeed growing too fast, debt problems are specific and localized problems created by irresponsible behavior on the part of individual actors, and they can be addressed by administrative measures on the part of the regulators. The skeptics, however, disagree. It doesn't matter how strongly the regulators clamp down on one sector or the other, high growth rates – the skeptics argue – necessarily mean that debt is rising at an unsustainable pace no matter how vigilant the regulators. Our conclusion was that unless the investment-driven growth model were abandoned, it would lead inexorably to a debt crisis.

    How much debt is there whose real cost exceeds the economic value created by the debt, which sector of the economy will pay for the excess, and what is the mechanism that will ensure the necessary wealth transfer?

    What projects can we identify that will allow hundreds of billions of dollars, or even trillions of dollars, of investment whose wealth creation in the short and medium term will exceed the real cost of the debt, and what is the mechanism for ensuring that these investments will get made?

    What mechanism can be implemented to increase the growth rate of household consumption?

    An analysis that points to an unsustainable trend is always right if the trend turned out indeed to be unsustainable. The fact that it may have taken many years before the limits were reached is not an indication that the model was wrong. It is simply how the economy works.

  9. Bond Hubris Overwhelms Fed in Riskiest Credit-Market Sectors – Bloomberg

    Riskier behavior:

    Bond investors trying to divine when the Federal Reserve will reduce its unprecedented monetary stimulus are increasingly looking to the riskiest parts of the debt market, which are booming like before the financial crisis.

    The amount of loans made this year that lack standard protections for lenders exceed the all-time high set in 2007, and only one other time have investors pumped more money into funds that buy lower-rated loans than they did last week. Bonds rated in the lowest category of junk accounted for the greatest percentage of speculative-grade offerings last month since 2011.

    Lacking Safeguards

    The market for so-called covenant-light loans that lack typical lender safeguards such as limits on debt has already soared to $155 billion this year, beating the record $96.6 billion in 2007, according to Standard & Poor's Capital IQ Leveraged Commentary and Data.

    Junk-bond sales rose 24 percent to $235.3 billion through Aug. 9 compared to the same period a year ago, according to data compiled by Bloomberg. Those securities and leveraged loans are rated below Baa3 by Moody's Investors Service and less than BBB-at S&P.

    Sales of payment-in-kind, or PIK, notes, which allow borrowers who can't meet interest obligations to pay with additional debt, total more than $6.5 billion this year, on pace to top the $8.1 billion issued in 2012, Bloomberg data show.

    Corporate bonds in the lowest rating tier of CCC made up 10.3 percent of the $22.4 billion in high yield sales in July, the most since 2011, according to JPMorgan Chase & Co.

    While the recent activity is raising concern, it doesn't match the frothiness of 2006 and 2007, when dealers packaged bonds backed by subprime mortgages into ever-riskier securities.


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