Merry Christmas to all. Linking ≠ endorsement. Enjoy and share:
- Top 15 Markets for Real Estate Investing – Forbes
RealtyTrac's recent white paper on Single Family Rental Investing shows a range in the total ratio of expenses to rental income from 11% to more than 50% in different counties across the country. Putting the gross rent yields together with the expense ratio for your specific property gives the actual income that you can expect from a single family rental investment.
… Discounts to full sale properties can be up to 30% or more, but some amount of rehab is often required before the investment property can be rented.
Investors looking for maximum home price appreciation should consider the markets that are most undervalued today. …
… finding below-market deals in the Atlanta metro area will be difficult due to the high amount of competition from large investors.
- New US housing regulator to delay mortgage fee hikes
Well, on Saturday, we pondered what Mel Watt would do concerning Ed DeMarco's plan to raise GSE fees, fully expecting he would want to look at the situation first. Here's his preliminary answer.
U.S. Congressman Mel Watt, the incoming director of the Federal Housing Finance Agency, said he plans to delay the increase in fees on government-backed loans that the agency announced this month.
- 5 Reasons why the real estate re-boom is about to slow way down | Breakout – Yahoo Finance
Pretty good analysis:
From the blog Breakout: Author and real estate expert Shari Olefson on why the improving U.S. housing market will hit some headwinds in 2014
If she's right, the Fed was premature and might end up not tapering nearly as much as $10 billion a month. Construction starts are up; but if they can't move the inventory due to low wages, starts will stall.
- China pressures media to tone down cash crunch story – FT.com
Coming just six months after the cash crunch in June, the apparent replay last week will be highly embarrassing for the People's Bank of China, the central bank.
Soon after the June episode, senior government officials told the FT that the country would not see a similar situation again in the short or medium term.
Analysts say the PBoC has been struggling to adapt to a monetary environment that is becoming far more complicated due to the rise of a huge shadow banking industry over the past few years.
In June, and again last week, interbank interest rates mostly soared as a result of the PBoC's unwillingness to inject liquidity into the market as it attempts to enforce discipline on lenders.
But in both instances the central bank has had to reverse itself and pour huge amounts of cash into the system to bring rates back down to more normal levels.
- TREASURIES-Yields at high end of range draw buyers | Reuters
Did you think that bonds would completely tank? Many people did.
"The 30-year Treasury bond yield is a little below 4 percent and when you consider the very low inflation environment we have, these higher yields look historically compelling to pension funds and insurance companies who need those long duration assets," Stith said.
Buyers are stepping in, agreed Paul Montaquila, vice president and fixed-income investment officer at Bank of the West's capital markets division in San Francisco.
"The sentiment seems to be that rates are going higher, but gradually, not by leaps and bounds. So you will get buyers at certain levels and this seems to be one of those levels."
- How The Fed Turned Taper Selloff Into A Rally: The Real Reasons And Lessons – Seeking Alpha
The Fed scored a victory Wednesday with its beginning the taper of its QE program. Not only did it manage to avoid causing a market selloff, it caused virtually all major indexes to rally on the news.
How did they do it? As noted in our summary of last week's market action here:
By making the taper extremely minimal, clearly communicating that rates would remain low, and that future pace would likely be very gradual and remain dependent on data.
Our loyal readers will recall that we called for the Fed to educate the markets. That's what they did. The really amazing thing, more amazing than the Fed doing the educating, is how well the markets listened this time.
This reminds us to say again that commercial banks should be in the business of educating borrowers, especially business start-ups.
Recall also that we stressed jobs over inflation fears. Here is where the Fed increased its emphasis on jobs. It should be noted that one can also take this as an anti-disinflationary/deflationary measure.
The Fed changed its forward guidance – Low rates to continue long after unemployment rate drops below 6.5%" (as long as inflation doesn't rise much beyond the Fed's 2% threshold, and even then, only if the economy looks strong enough to handle higher rates)
- Diverging Homebuyer Affordability – YouTube
Freddie Mac's Vice President and Chief Economist, Frank Nothaft, gives a video preview of the December 2013 U.S. Economic and Housing Market Outlook.
Even though we've been seeing many articles and reports stating that incomes are too low relative to housing prices, interest rates, etc., and therefore payments, Freddie Mac reports that the income-to-payment ratio is the best it's been since 1980. That was news to us. How about you?
Of course, the unemployment rate is still way too high and there are millions who've stopped looking who would be in the job market were there more jobs available. We think that's part of overall affordability but won't quibble over it even though it's not a trifling matter for those without work who need it. We also didn't look to see how high-earners may have skewed the data.
- The Recession in Perspective – Compares output and employment changes during the present recession with the same data for the 10 previous recessions – The Federal Reserve Bank of Minneapolis
This page places the current economic downturn and recovery into historical (post-WWII) perspective. It compares output and employment changes from the 2007-2009 recession and subsequent recovery with the same data for the 10 previous recessions and recoveries that have occurred since 1946.
The 10 previous postwar recessions ranged in length from 6 months to 16 months, averaging about 10 1/2 months. The 2007-09 recession was the longest recession in the postwar period, at 18 months.
The severity of a recession is determined in part by its length; perhaps even more important is the magnitude of the decline in economic activity. The 2007-09 recession was the deepest recession in the postwar period; at their lowest points employment fell by 6.3 percent and output fell by 5.1 percent.
- What Happens When Unemployment Benefits Are Cut? North Carolina Offers a Clue – Real Time Economics – WSJ
… people will take jobs even if the work pays less than the job seekers want. In the participation effect, people will drop out of the measured workforce since actively seeking a job (a criterion for being labeled officially unemployed) no longer carries an advantage of receiving jobless benefits.
The North Carolina government decided in July to end extended benefits even though the state still met the economic criteria under the federal program. Since then, the North Caroline jobless rate has fallen 1.5 percentage points to 7.4% while the U.S. rate is down just 0.4 point to 7.0%.
So, the answer is to eliminate unemployment benefits and all welfare and have no minimum wage laws? Wouldn't that mean that we'd be living back in the feudal era where the vast majority were mere serfs, another way of saying slaves?
We don't think the unemployment rate is all we should look at but also the quality of jobs, including wage rates. We believe we can have good jobs and good, living wages and a very low unemployment rate all at the same time.
How do you view it?
We also wonder about those in the Tar Heel state who were thrown off benefits but who've not been able to find a job no matter how low the pay. Would such wage rates even pay the bills at the poverty line? Were it not for the minimum wage, we sincerely doubt it.
- The 13 Most Important Charts of 2013 | Economic Policy Institute
This is a good follow-up on the immediately preceding link above.
As we say goodbye to 2013, the economy is still failing ordinary workers.
What is being done to make it better? Not enough.
Public spending and public investment are too low, wages for increasingly productive workers are flat or falling, and the minimum wage is inadequate.
However, there is hope for 2014.
The policies that created these trends can be reversed. There is a renewed push to raise the federal minimum wage, states are raising their own minimum wages, and more policymakers are coming to terms with the downside of economic inequality.
EPI's top charts of 2013 explain why a full economic recovery and policies that ensure broadly shared prosperity should be policymakers' foremost priorities in 2014.
One of the best measures of labor market health is the share of 25- to 54-year-olds with a job. Looking at 25- to 54-year-olds instead of the entire working-age population provides more certainty that the trends we see are being driven by reduced demand for workers and not supply-related factors such as retiring baby boomers or increased college enrollment of young people. This ratio deteriorated dramatically through late 2009, essentially stalled for two years, and improved modestly over the last two years. But the 75.9 percent share of 25- to 54-year-olds with a job in November 2013 is identical to the share at the official end of the Great Recession in June 2009.
As we've said before, it hasn't been simply Baby Boomers retiring. What it's mostly been is the lack of political will and knowledge to do the right things fiscally. The Fed's policies were never going to be enough in a timely fashion. The government's insufficient actions resulted in a hollowing out of the middle class that didn't have to happen. It could have been avoided, including before the Great Recession.
- Mortgages Are About to Get a Lot More Expensive
Fannie and Freddie (and FHA) have become the dominant sources of mortgage financing in today's lending marketplace because they are offering rates and terms more attractive than what would otherwise be offered in a truly free lending market. Between the Fed pulling back MBS purchases and Fannie and Freddie increasing fees, rates have nowhere to go [but] up.
It's been a good ride for mortgage rates these past few years, but it looks like the party is finally ending.
We'll have to wait to see what Mel Watt will want to do and whether Barack Obama will back him if Watt wants to reverse Ed DeMarco's plans.
- U.S. house price gains to downshift abruptly next year | Reuters
U.S. home prices rose so quickly this year that analysts worried just a few months ago that a new property bubble was inflating. Those concerns are fading quickly.
A sharp rise in market interest rates has economists in a Reuters poll trying to figure out how much the U.S. housing market will cool next year.
Reduced economic stimulus by the Federal Reserve and more homes for sale will slice the pace of house price gains nearly in half in 2014, the survey found. Home resales are expected to hold near their current level.
This doesn't mean a downturn is imminent. Borrowing costs are still historically low, and steady job growth is helping more people afford homes. Most economists think the nation's housing sector will keep growing, just at a more modest pace.
Despite Freddie Mac's Vice President and Chief Economist, Frank Nothaft, having said that the income-to-payment ratio is the best it's been since 1980, we aren't so sure about borrowing costs being historically low relative to wage rates. Also, job growth hasn't been all that great in the face of people still marginalized on the sidelines. See the immediately preceding link above.
- Silicon Valley construction boom not without problems – Silicon Valley Business Journal
With projects as big as Levi's Stadium rising in Santa Clara and Apple's spaceship underway in Cupertino, Silicon Valley is experiencing a construction boom reminscent of dot-com days. That rush to build creates two side effects: A shrinking labor supply of skilled workers and rising construction costs.
- US mortgage rate will continue to rise: Pro
The questions were excellent.
Greg McBride, senior financial analyst at Bankrate.com, says that the Fed's tapering announcement had little impact on mortgage rates which should continue their "slow grind higher" through 2014.
- EconoMonitor : Ed Dolan's Econ Blog – Latest Economic Growth Data Give Cheer to Market Monetarists, or, What is the NGDP Gap and Why do we Care?
Ed Dolan tries to make econ-speak accessible.
Nominal GDP (NGDP) is simply gross domestic product expressed in current dollars, that is, measured according to the prices people actually pay for the goods and services they buy. That differs from the more widely reported real GDP data, which adjust prices to remove the effects of inflation.
What do these charts prove? They do not prove that market monetarists are right in all their policy prescriptions. Something other than monetary stimulus might be moving the numbers. The charts do not prove that the Fed has been doing a good job, nor that now is the time for it to taper off on its policy of quantitative easing. Many modern monetarists would read these charts as proof that the Fed has been too timid and should not even be thinking about tapering yet.
We side with the MMT crowd on this issue. The fiscal (that's the federal government in this case) spending was too little, too late, and not targeted well at all.
- Sober Look: The big steepener unwind
… what if the US economy unexpectedly accelerates? The Fed will be forced to begin pushing short-term rates up faster than originally expected. The market started to price in a higher probability of just such an event.
We still need at least 8 million new jobs and at pre-recession wages. Will the Fed, will Janet Yellen, know that and stick to what it will take to get there? Will she prod the Congress to spend what it will take to get there in the nearer future? If not, will the Fed taper and raise rates on weak data? We hope not, but it wouldn't be strange to them.
- Distressed Homes Attract Private Equity Funds: Video – Bloomberg
Realtytrac's Darren Blomquist discusses investors who buy and then rent out homes with Betty Liu on Bloomberg Television's "In The Loop." (Source: Bloomberg)
- Sales of bank-owned homes surge
Interesting, fast-paced market: Diana Olick:
Institutional investors, who drove the distressed sales market over the past few years, dropped off earlier this year, faced with bidding wars in some of the previously hot markets. Now they appear to have revived interest.
Their purchases represented 7.7 percent of all home sales in November, up from 6.3 percent a year ago. This may be because price gains are slowing down, and more inventory is coming on the market.
If you are an investor in 1-4 unit properties in Arizona, California, Nevada, Oregon, Utah, or Washington, please do the financially responsible thing and make sure you have proper Landlord Insurance with PropertyPak™. We love focusing on real estate and the economy in general, but we are also here to serve your insurance needs.
Hill & Usher (PropertyPak™ is a division) has many insurance offerings. See our menu above for more info and links.
Did this post help you? Let us know by leaving your comment below.
Note: This blog does not provide legal, financial, or accounting advice. Seek professional counsel.
Furthermore, we, as insurance producers, are prohibited by law from disparaging the insurance industry, carriers, other producers, etc. With that in mind, we provide links without staking out positions that violate the law. We provide them solely from a public-policy standpoint wherein we encourage our industry to be sure our profits, etc., are fair and balanced.
We do not necessarily fact checked the contents of every linked article or page, etc.
If we were to conclude any part or parts of our industry are in violation of fundamental fairness and the legal standards of a state or states, we'd address the issue through proper, legal channels. We trust you understand.
The laws that tie our tongues, so to speak, are designed to keep the public from losing confidence in the industry and the regulatory system overseeing it. Insurance commissioners around the country work very hard to analyze rates and to not allow the industry to be damaged by bad rate-settings and changes in coverages. The proper way for people in the industry to deal with such matters is by adhering to the laws, rules, and regulations of the applicable states and within industry associations where such matters may be discussed in private without giving the industry unnecessary black eyes. Ethics is very high on the list in the insurance industry, and we don't want to lose the people's trust. That said, the industry is not perfect; but what industry is?
For our part, we believe in strong regulations and strong regulators.
We welcome your comments and ask you to keep in mind that we cannot and will not reply in any way or ways where any insurance commissioner could rightly say we've violated the law of the given state.
We are allowed to share rating-bureau data/reports and industry-consultant opinions but make clear here that those opinions are theirs and do not necessarily reflect our position.