News Alerts. Oct. 21, 2013. Afternoon Edition. #RealEstate

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  1. Chase Manhattan Plaza Sale Sets Record for Chinese Buyers – Businessweek

    JPMorgan Chase & Co.'s deal to sell 1 Chase Manhattan Plaza to Fosun International Ltd. would be the largest purchase of a New York building by a Chinese buyer, showing Asian investors' growing appetite for U.S. real estate.

    Shanghai-based Fosun, run by billionaire Guo Guangchang, agreed to buy the 60-story lower Manhattan tower for $725 million, according to a statement filed to Hong Kong's stock exchange. The 2.2 million-square-foot (204,000-square-meter) steel skyscraper was completed in 1961.

    Source … http://www.businessweek.com/news/2013-10 -18/jpmorgan-tower-sale-sets-record-for- chinese-buying-in-new-york


  2. Families With Kids Go Homeless as U.S. Rents Exceed Pay: Economy – Bloomberg

    For households with children, rising housing costs, elevated unemployment and stagnant earnings are increasingly placing rent beyond reach. The housing slump made matters worse as former homeowners turned into renters, increasing competition for available apartments.

    Nationally, the average hourly wage among renters is $14.32 this year compared with the $18.79 needed to afford an apartment at a fair-market rent, as defined by the U.S. Department of Housing and Urban Development, without spending more than 30 percent of income on housing, a National Low Income Housing Coalition report found in March. The $4.47 gap this year is wider than the $4.10 differential in 2012.

    Not Affordable

    The report found that extremely low-income households could afford to spend no more than $495 a month on an apartment this year, while the national two-bedroom fair-market rent was $977.

    The rise in family homelessness is a function of a weak job market, and thus isn't something government programs can fix, said Mark Calabria, director of financial-regulation studies at the Washington-based Cato Institute, which supports limited government.

    Labor Market

    "The biggest driver now of increase in family homelessness is the labor market," Calabria said in an e-mail. "The most effective thing we can do is create jobs, which federal programs don't have a good record at."

    We think they don't have a good record because they haven't been freed up to do it. The WPA and CCC were government-created jobs creators during the Great Depression. It can be debated as to how effective they were, but they did create jobs and could have done even better at that had they not been constrained by fears by private enterprise of competition from the government. What people who are out of work need, what the US economy needs, is for the unemployed to be given productive, needed work at solid wages. Whether that's done by private enterprise or the government or both, it still needs doing. Provisions for the government employing people and then transitioning those government employees to the private sector could be explored. What's your take?

    Source … http://www.bloomberg.com/news/2013-10-18  /families-with-kids-go-homeless-as-u-s- rents-exceed-pay-economy.html


  3. Should real estate investors incorporate? – Oct. 18, 2013

    A lender may make it hard for you, however, to move a mortgaged property to an LLC. A transfer might also trigger a tax hit (not likely in Virginia, but rules vary by area). In both cases, the best fallback for shielding assets is umbrella insurance. In fact, even with an LLC, Hill advises getting a policy to be extra safe.

    Source … http://money.cnn.com/2013/10/18/pf/exper t/real-estate-investing.moneymag/index.h tml


  4. Multimillion-Dollar Cuts on New York's Trophy Apartments – NYTimes.com

    The Rybolovlev effect:

    It's the era of superlatives for trophy properties in Manhattan. Not a day seems to go by without a new contender for the largest, tallest or priciest.

    But all the hype can't obscure one possibly inconvenient truth: Fancy new developments may be trading at unheard-of values — pushing up against the $100 million mark — but resale apartments in white-glove buildings often struggle.

    Source … http://www.nytimes.com/2013/10/20/reales tate/multimillion-dollar-cuts-on-new-yor ks-trophy-apartments.html?adxnnl=1&pagew anted=all


  5. High Ranking China Official: "The Central Government Must Control Urbanization" (SBS Dateline on China's Empty Cities – Part 2)

     

    Wait five years, and the ghost cities fill up?

    "China's central government and the PBoC could end up bailing out all the toxic debt and the financial system to prevent a deflationary collapse…."

    Australia's SBS Dateline revisited China to see the progress of its urbanization plan (watch SBS Dateline's Adrian Brown tour through China's empty cities and malls in 2011), and it looks like nothing has changed. There are still ghost cities with empty apartment buildings, and the South China Mall they visited is now "crumbling." Most of China's empty urban developments and western city clones are being used as tourist attractions or for wedding photos. But the Chinese government is in the process of moving millions of people from their homes in the countryside to apartments in high rises, so it will be interesting to see what these cities look like in a few years. But, as noted previously on my blog (1, 2, 3, 4), all of the debt being used to finance mega "mal-investments" in the country could cause a financial crisis if credit growth isn't managed. Like the U.S. in 2008, China's central government and the PBoC could end up bailing out all the toxic debt and the financial system to prevent a deflationary collapse and social unrest.

    Source … http://www.distressedvolatility.com/2013  /10/high-ranking-china-official-central .html


  6. Home foreclosures down, but spike expected in coming months | Statesman Journal | statesmanjournal.com

    "New steps in Oregon's pre-foreclosure process have created a delay that is now becoming a log jam," Helmick [John Helmick, chief executive officer of Gorilla Capital] said. "Once the log jam breaks, which we expect to occur sometime in the next four months, we will see a spike in the number of Oregon homes entering the non-judicial foreclosure process."

    Source … http://www.statesmanjournal.com/article/ 20131018/UPDATE/131018004/Home-foreclosu res-down-spike-expected-coming-months


  7. Private and public debt in crises: 1870 to now | vox

    Oscar Jorda, Research Advisor, Federal Reserve Bank of San Francisco; Professor of Economics, UC Davis; Moritz Schularick, Professor of Economics at the University of Bonn; and Alan Taylor, Professor of Economics and Finance, University of California, Davis; Research Fellow, CEPR, say:

    The long-run historical record underscores the central role played by private-sector borrowing behavior for the buildup of financial instability.

    The idea that financial crises typically have their roots in fiscal problems is not supported by history.

    We find evidence, however, that high levels of public debt can matter for the path of the recovery, confirming the results of Reinhart et al. (2012).

    However, this effect is related to recoveries from financial crises rather than typical recessions.

    While high levels of public debt make little difference in normal times, entering a financial crisis recession with an elevated level of public debt exacerbates the effects of private-sector deleveraging, and typically leads to a prolonged period of sub-par economic performance.

    Of course, the US (and the EU) could simply issue a debt-free currency rather than borrow. Then it could spend what it needs to get out of the trough without incurring any interest charges. If it were to do that by supporting only truly productive, non-speculative investments, the result would not be dangerously inflationary at all, as growth would expand with the money supply.

    Please explain that to the leading economists and politicians.

    Source … http://www.voxeu.org/article/private-and -public-debt-crises-1870-now


  8. FX Math: German Court Decision Looms as Next Potential Global Crisis – MoneyBeat – WSJ

    Any minute now, Germany's constitutional court could rule against the European Central Bank's bond-buying program.

    Last summer's announcement of the bond-buying program, called "Outright Monetary Transactions," and the subsequent message from ECB President Mario Draghi that the central bank would do "whatever it takes" to save the euro, are widely credited as the beginning of the end of the European financial crisis.

    Most experts say a reversal by the German court is unlikely, but traders need to be aware of the possibility. Like the threat of a U.S. default, a refutation of the bond-buying program would be devastating for the global economy and would wreak havoc on financial markets. The euro would go into free fall and European debt yields would climb to dizzying heights, tipping the euro zone back into crisis.

    Source … http://blogs.wsj.com/moneybeat/2013/10/1 8/fx-math-german-court-decision-looms-as -next-potential-global-crisis


  9. Bruegel | Towards a Euro Union

    This is very deep article.

    Glienicker Group: Armin von Bogdandy (Max-Planck-Institut for Comparative Law and International Law), Christian Calliess (FU Berlin), Henrik Enderlein (Hertie School of Governance), Marcel Fratzscher (DIW), Clemens Fuest (ZEW), Franz Mayer (Uni Bielefeld), Daniela Schwarzer (SWP), Max Steinbeis (Verfassungsblog), Constanze Stelzenmüller (German Marshall Fund), Jakob von Weizsäcker (Thüringer Wirtschaftsministerium), Guntram Wolff (Bruegel)

    Eleven German economists, political scientists and jurists — the Glienicker Group — develop proposals for a deeper Europe.

    Crisis, what crisis?

    If public sentiment in Germany is anything to go by, there is little reason to worry about Europe. The period when it was feared that the euro might collapse seems a long time ago. Financial markets have calmed down. The design flaws of the monetary union seem to have been papered over, and European Council President Herman van Rompuy was able to claim, unchallenged, before the UN General Assembly in New York that the "existential threat to the euro" is over.

    We think this is fundamentally wrong. There is no reason to relax the guard. On the contrary, the complacency of large sections of the German public with regard to the euro crisis is not only unfounded: it is dangerous. None of the fundamental problems underlying the euro crisis have been solved — not the banking crisis, nor the sovereign debt crisis, nor the competitiveness crisis. National debt problems continue to escalate. Banks are overloaded with bad loans, crippling the private sector. In the crisis countries, a generation is being deprived of its livelihoods and opportunities. The margins of the political spectrum in these countries are becoming increasingly radicalized. And willingness to find common solutions for the euro area appears to be rapidly on the wane.

    We — eleven German economists, lawyers and political scientists — cannot accept the prospect of further playing for time and betting — with ever-larger wagers — that the crisis will eventually pass. Europe has structural problems that require structural solutions. Even though this is not a popular view at the moment, we are convinced that the monetary union needs deeper integration. More particularly, it needs a sufficiently powerful European economic government.

    Whether the indebtedness is public or private, it becomes a problem for the monetary union only if private creditors do not write off their losses on their own account, but socialise them. But that is exactly what happened….

    What's you view on the article?

    Source … http://www.bruegel.org/nc/blog/detail/ar ticle/1173-towards-a-euro-union/


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