News Alerts. Jan. 11, 2014. #RealEstate

Linking ≠ endorsement. Enjoy and share:

1)

3 Hidden Bottom-Line Boosters | National Apartment Association

2)

Christine Lagarde sets out the priorities on which policymakers should focus to lift global growth in 2014. – Project Syndicate

3)

Surprise drop in euro zone inflation shows deflation risk | Reuters

4)

The Rise of MLS Rentals – ARMLS Blog

5)

Robert Reich (The Year of the Great Redistribution)

6)

Buy-and-rent investors get squeezed | Smart Real Estate Investing

7)

Secondary markets grew fast for CRE investors | Zoliath

8)

Fed Confident U.S. Unemployment Easing: FOMC Minutes

9)

Investors Increase Market Share, Ramp Up Non-Distressed Purchases

10)

Far fewer mortgage borrowers 'deeply underwater'

11)

HARP for Second Homes or Investment Properties | Zillow Blog

12)

Breathing New Life Into the Second U.S. Housing Bubble – Political Calculations – Townhall Finance Conservative Columnists and Financial Commentary – Page full

13)

Housing Affordability Falls, Signaling an Increase in Housing Supply

14)

News and Events – Narayana Kocherlakota Speech – Opening Remarks – January 9, 2014 | The Federal Reserve Bank of Minneapolis

15)

Gramm-Leach-Bliley Act – A detailed essay on an important event in the history of the Federal Reserve

16)

Good News and Bad News About Global Inequality : The New Yorker

17)

Sharp Drop in Unemployment Due to People Leaving the Labor Force | CEPR Blog

18)

The Greatest Myth Propagated About The FED: Central Bank Independence (Part 1) | New Economic Perspectives

19)

The 5 biggest changes coming to the mortgage industry | HousingWire

20)

Greenspan, the Keynesian | FT Alphaville

21)

Is Jobless Rate Really Falling? – Bloomberg

22)

How to Get a Low Interest Rate for an Investment Property | Credit.com Blog

23)

Euro plummets after ECB warns currency zone may need more support | Business | The Guardian

24)

The Post-Crash Rebound, Not Job Growth, Drove 2013 Price Gains | Trulia Pro Blog

  1. 3 Hidden Bottom-Line Boosters | National Apartment Association

    Good advice:

    Hidden costs are inevitable in property management, and most communities' maintenance shops and offices will be reduced at some point. Keeping a detailed, close eye on inventory will help some, but there are other ways to boost your bottom line.

    Melissa Palmer goes on to discuss these three actions: Consolidate contracts, reduce invoice processing, and in-house training.


  2. Christine Lagarde sets out the priorities on which policymakers should focus to lift global growth in 2014. – Project Syndicate

    Christine Lagarde, Managing Director, International Monetary Fund (IMF):

    … the world could still generate considerably more jobs without fueling inflationary pressure.

    A strong and lasting recovery that lifts all countries and all peoples requires policymakers to press ahead on all fronts — fiscal, structural, and financial.

    … the risks of stagnation and deflation continue to loom large.

    While the worst fears have faded, the emerging economies face new policy challenges. In responding to slower demand, policymakers must be wary of financial excess, especially in the form of asset bubbles or rising debt. They should also focus on strengthening financial regulation, in order to manage credit cycles and capital flows more effectively, and on reestablishing fiscal room for maneuver.

    … With demand from emerging markets weakening, low-income countries should bolster their defenses against a serious downturn, even as they continue to focus their spending on key social programs and infrastructure projects.

    Too many countries face a legacy of high public and private debt, fiscal and current-account imbalances, and growth models that are unable to generate enough jobs. The international community also needs to complete the regulatory reforms required to create a safer financial system that better supports the needs of the real economy.

    Well Ms. Lagarde, why is there any public debt at all, especially at the national level and especially in the USA? It has never made any sense that the US government borrow a dime. The US government has always had the ability to create money without incurring debt to do so. If the money thusly created were done so to match real productivity and the velocity of money (flow of money throughout the economy), there would be no inflation or deflation and no depressions or recessions of any note. The US should use United States Notes, not Federal Reserve Notes. The US should issue zero bonds and pay zero interest to anyone for anything.


  3. Surprise drop in euro zone inflation shows deflation risk | Reuters

    As Christine Lagarde suggested in the link above:

    Euro zone inflation fell in December after a small increase the previous month, increasing the European Central Bank's challenge of avoiding deflation as well as supporting the bloc's recovery.

    Consumer price inflation in the 17 countries then sharing the euro stood at 0.8 percent year-on-year in the last month of 2013, compared with 0.9 percent in November, data from the EU's statistics office Eurostat showed on Tuesday.

    December's reading takes inflation back to near a four-year-low of 0.7 percent in October.

    An inflation rate that is well below the ECB's target of close-to-but-below 2 percent carries risks in the longer term because it can deflate wages and demand, depressing the economy.


  4. The Rise of MLS Rentals – ARMLS Blog

    Year 2013 had the most residential rentals closed through the MLS [Multiple Listing Service] ever. Over 43,000 rentals closed, up 13.6% from 2012.


  5. Robert Reich (The Year of the Great Redistribution)

    Why they'll have to keep renting: Robert B. Reich:

    Where did those profits come from? Here's where redistribution comes in. American corporations didn't make most of their money from increased sales (although their foreign sales did increase). They made their big bucks mostly by reducing their costs — especially their biggest single cost: wages.


  6. Buy-and-rent investors get squeezed | Smart Real Estate Investing

    This will help ease the growth of bubbles.

    The auction prices of homes climbed faster than rents in 2013, so returns on investment dropped, according to a report from CoreLogic. According to CoreLogic, return on investment fell in eight of the 10 best buy-and-rent cities.

    … The yield represents an investor's rental profits divided by how much he spent to buy and rehabilitate the property. …

    … Nationally, homes sold in foreclosure auctions now go for just 4% less than regular sales, down from 16% in 2012, according to RealtyTrac's Blomquist. Home prices in general have soared this year, jumping nearly 14% annually through October, according to the latest S&P/Case-Shiller report. And rents have lagged. Census Bureau numbers show that rents only grew an average of 2.2% during the first nine months of 2013, compared to the same period in 2012.

    As profits on foreclosures drop, investors will cut back on purchases. Glenn Plantone, a real estate investor in Las Vegas, said that there were only 208 properties sold there at auction to third party purchasers — not lenders — in October. That was the first time in six years that a month had fewer than 300 of such sales.


  7. Secondary markets grew fast for CRE investors | Zoliath

    Since 2011, a large portion of the real estate value lost in the aftermath of the housing collapse has now been recovered. Certain markets, many of which are in California, have surged so rapidly, some experts believed a new bubble was forming.

    "Some markets have gotten way too pricy for a vast number of institutional investors who need a certain rate of return on their investment," Fasulo [Dan Fasulo, Real Capital Analytics' managing director] said. "Yields have gotten too low, so this has encouraged investors to basically expand the number of markets that they're targeting."

    According to Peter Muoio, Auction.com's chief economist, hotel, industrial and office space has been popular in recent times.


  8. Fed Confident U.S. Unemployment Easing: FOMC Minutes

    Because of concerns about the persistence of low inflation, "many" members said the Committee should "monitor inflation developments carefully for evidence that inflation was moving back toward its longer-run objective."

    The participants stressed the need to emphasize that the pace of the reduction in asset purchases remained dependent on the panel's outlook for the job market and inflation as well as the effectiveness and costs of the program.

    In discussing forward guidance about the Fed's key federal funds rate, which has been near zero for five years, a few members suggested lowering the unemployment threshold to 6.0 percent from 6.5 percent for a rate hike.

    But that was overruled by "most" members who preferred no change and instead wanted the Fed to provide "qualitative" guidance on the labor market indicators being assessed after the threshold is crossed.

    Given that the US economy is based upon debt money (that the US government borrows to create its currency rather than simply issuing it debt-and-interest free), we would set the unemployment rate at 5% as the top and the inflation rate as 3% until that 5% or lower unemployment rate were reached. We would allow unemployment to drop as low as it would (given that 3% inflation ceiling).


  9. Investors Increase Market Share, Ramp Up Non-Distressed Purchases

    Investors increased their purchases of non-distressed properties; although, they remained the biggest purchasers of distressed properties. HousingPulse reports investors contributed to 13.2 percent of non-distressed home sales in November, marking a seven-month high.

    While increasing their activity in the non-distressed market, investors still made up the greatest share of distressed sales—57.6 percent—over the three months ending in November. However, that figure is down from 60.7 percent a year earlier.


  10. Far fewer mortgage borrowers 'deeply underwater'

    …9.3 million properties, or 19% of all homes with mortgages, were "deeply underwater" in December, meaning borrowers owed at least 25% more on their mortgage than the home was worth. That's down significantly from 26% of all homes with mortgages, or 10.9 million properties, last January, RealtyTrac reported.

    An increase in home equity typically means fewer foreclosures, said Daren Blomquist, a spokesman for RealtyTrac. "Negative equity is the foundation that foreclosures are built on, but you need another event — a job loss or illness, for example — to trigger a foreclosure," said Blomquist.

    The more deeply underwater borrowers are, the more likely they are to conclude that it makes little sense to continue to pay off their loans when money is tight. "It takes away their motivation to save their properties," said Blomquist.


  11. HARP for Second Homes or Investment Properties | Zillow Blog

    If your property — primary residence, second home or investment property — is valued at less than what you owe, take advantage of the program and get a better rate and/or terms on your loan; you may be able to build equity faster. …visit HARP.gov to learn more and talk to your lender.

    To qualify a second home, it must be a single unit or condo; for an investment property, it must be a 1- to 4-unit home. Otherwise, all requirements for the primary home also apply to the second home or investment property:

    • Your mortgage has to be backed by Fannie Mae or Freddie Mac and acquired before June 1, 2009.
    • You must be current on your payments (no 30-day+ late payments in the past six months and no more than one in the past 12 months).
    • Your loan-to-value ratio (the amount you owe versus the amount your house is currently worth) must be greater than 80 percent.

    *Numbers based on reported refinance data from FHFA Refinance Report October 2013.


  12. Breathing New Life Into the Second U.S. Housing Bubble – Political Calculations – Townhall Finance Conservative Columnists and Financial Commentary – Page full

    It will be interesting to see what happens next. Following the end of November 2013, U.S. mortgage rates have once again risen to be close to the 4.5% mark, as speculation that the Fed would announce it would begin tapering its QE programs in December first gained steam, then became a reality when the Fed made it official at its Federal Open Market Committee's December 2013 meeting. If mortgage rates rise sufficiently high enough, they could once again put the brakes on the inflation of the second U.S. housing bubble, just as they did from July 2013 through September 2013.


  13. Housing Affordability Falls, Signaling an Increase in Housing Supply

    Why they'll continue renting:

    The current pace of growth is on par with that seen during the housing bubble period. However, a long stretch of low-to-no growth in housing, combined with population growth, means there is room for a lot of catching up.

    And Now . . .?

    Home prices and mortgage rates are increasing, once again putting downward pressure on affordability. With single-family housing becoming less affordable, the apartment market will benefit, as fewer renters can afford to buy a home.

    The most recent quarterly index rate of 171.3 is still well above the average affordability index of 138.7 reported from 1996 to 2008. Nor is the index likely to again reach the average of 203.7 reported from 2009 to 2012, when affordability was at its highest. Axiometrics forecasts the affordability index to average about 142 from 2014 through 2018 as the housing market continues its recovery, and home prices and mortgage rates moderate over the forecast period.


  14. News and Events – Narayana Kocherlakota Speech – Opening Remarks – January 9, 2014 | The Federal Reserve Bank of Minneapolis

    Narayana Kocherlakota, President, Federal Reserve Bank of Minneapolis:

    In order for the Fed to continue to be effective, it needs to communicate its policy decisions transparently to the public. Conversely, it also needs the public's input on how those policies are affecting them. …

    The FOMC has said that, under its current monetary policy stance, it expects the unemployment rate to decline gradually to desirable levels. It has said too that it expects inflation to move back toward 2 percent over the medium term. By easing monetary policy relative to its current stance, the FOMC could facilitate a more rapid fall in unemployment and more rapid return to 2 percent inflation. Hence, the Committee could do better with respect to both of its congressionally mandated objectives by adopting a more accommodative monetary policy stance.

    We agree.


  15. Gramm-Leach-Bliley Act – A detailed essay on an important event in the history of the Federal Reserve.

    The financial crisis of 2007-08 has caused many to call into question how effectively the law [The Financial Services Modernization Act (aka Gramm-Leach-Bliley)] carried out its goals. It is probably too early to answer definitively, but a few questions can be posed: ….

    The article links here: http://www.washingtonpost.com/blogs/wonk blog/wp/2013/07/12/elizabeth-warren-and- john-mccain-want-glass-steagall-back-sho uld-you/

    We concur with Mike Konczal's view.


  16. Good News and Bad News About Global Inequality : The New Yorker

    Why they'll continue to have to rent:

    … if you lined up all the people in the world, rather than all the countries, you might expect to find a narrowing in income dispersion thanks to the contribution of all those newly middle-class Chinese and Indians.

    But when Branko Milanovic, the World Bank's leading expert in this area, and a colleague, Christoph Lakner, recently carried out such an exercise, they couldn't identify any appreciable fall in inequality.

    … A commonly used measure of income inequality is the Gini coefficient, which ranges from zero (perfect equality: everybody gets the same income) to one (perfect inequality: one person gets all the income). According to Milanovic and Lakner's calculations, in 2008 the global Gini coefficient was somewhere between sixty-eight per cent and seventy-six per cent, depending on which specification they used. Previous studies mostly found global Ginis in the mid-sixties. If the new calculations are right, the world is an even more unequal place than we thought.


  17. Sharp Drop in Unemployment Due to People Leaving the Labor Force | CEPR Blog

    As we feared: Dean Baker:

    The headline unemployment rate fell sharply to 6.7 percent in December. However, this is not good news. The drop was almost entirely due to people leaving the labor force ….


  18. The Greatest Myth Propagated About The FED: Central Bank Independence (Part 1) | New Economic Perspectives

    L. Randall Wray:

    Most references to central bank independence are little more than vague hand-waves. In the US, the Fed is a "creature of Congress", established by the Federal Reserve Act of 1913, which has been modified a number of times. Elected officials play a role in selecting top Fed officials. And while the Fed is nominally owned by share-holding banks, and while the Fed's budget is separate, profits above 6% on equity are returned to Treasury.


  19. The 5 biggest changes coming to the mortgage industry | HousingWire

    There are five "forces" of change coming down the line for the mortgage industry, according to housing analysts at Citi (C).

    Force 1: GSE reform remains "operationally daunting."

    Force 2: The Qualified Mortgage

    Force 3: Higher capital requirements

    Force 4: Refi fades away

    Force 5: Higher compliance costs

    After taking these five forces into consideration, the Citi analysts then posit if it even makes sense to remain in the mortgage business with costs rising and opportunities shrinking.

    It does, they note, but with several caveats. For one, mortgage originations should no longer be a loss leader, with an anticipated return on the mortgage servicing. Therefore, only the big lenders will compete in the Qualified Mortgage space. In the non-QM, it will be nonbank competition in 2014. Furthermore, smaller banks will likely still offer mortgages, but with more and more relying on outsourced mortgage operations.

    "Independent mortgage servicers have been the beneficiaries, as they are unencumbered by capital requirements and are free to grow their servicing portfolios as desired," the Citi analysts conclude.


  20. Greenspan, the Keynesian | FT Alphaville

    Izabella Kaminska:

    To us, the most significant point is that good central bank policy probably breeds bubbles. But also, that this isn't necessarily a problem because, by affecting asset owners predominantly, it's mostly something that influences the perception of wealth rather than outright economic activity. The only reason this did not apply to the 2008 crisis, as Greenspan notes, was because the bubble was funded as much by capital as it was by leverage.

    We think this is missing the point of how devastating non-GDP-bubbles bursting still is. Greenspan touched on it when he said, "The 1987 crash, which was really the most horrendous thing"; but he simultaneously downplayed it by masking it with his notion that "you can't stop a bubble," concerning which we just fundamentally disagree.


  21. Is Jobless Rate Really Falling? – Bloomberg

    Matthew C. Klein:

    About 6.5 million jobs have been added since the trough four years ago even as more than 11 million people have given up looking for work. Those people still exist even if they aren't counted in the unemployment number, which is why the employment-population ratio hasn't really increased since the worst of the crisis. On the other hand, baby boomers started becoming eligible for Social Security benefits in 2008, so some people are dropping out of the labor force for benign reasons.

    If this confuses you, don't worry: The minutes from the Federal Reserve's latest meeting, which were released yesterday, indicate that America's monetary policy makers are also unsure what the data really mean.

    Aging and retirement explain some of the decline in the number of people looking for work. But that is an insufficient explanation for the broad reduction in the number of Americans in the labor force.

    Here's what we posted on Christmas Eve:

    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. http://propertypak.com/2013/12/24/christ mas-eve-news-alerts-dec-24-2013-realesta te/


  22. How to Get a Low Interest Rate for an Investment Property | Credit.com Blog

    If you talk to any mortgage lender about FHA financing, they will tell you it's for a primary residence only. However, there are two exceptions to the rule:

    1. Rental Property: This scenario will pass any litmus test. Say the house was purchased and the owner lived in it for a year. Then, the homeowner purchased a different primary home, moved into that property, and has been renting out the first home ever since. As long as the property used to be your primary residence and the loan is an FHA-insured mortgage, you can refinance the original property using an FHA loan.


  23. Euro plummets after ECB warns currency zone may need more support | Business | The Guardian

    The European Central Bank sent the euro tumbling on world markets after it warned that the 18-member currency zone may need further support to prevent a Japanese-style period of stagnation.

    The ECB president, Mario Draghi, said persistently high unemployment, falling inflation and difficult lending conditions were harming the recovery, and the ECB stood ready to use all the tools available to maintain confidence and growth.

    Speaking as the central bank kept interest rates at 0.25% on Thursday, he said the ECB would consider printing money as well as other measures should there be a further deterioration in the availability of credit or another drop in inflation.

    But that's what they want, a lower euro.


  24. The Post-Crash Rebound, Not Job Growth, Drove 2013 Price Gains | Trulia Pro Blog

    Jed Kolko, Chief Economist, Trulia:

    As the housing market continues to recover, factors other than the rebound effect — like job growth — will matter more for price gains. That means slower but more sustainable price increases.

    Rent Gains Driven More by Job Growth
    In December, rents rose 3.0% year-over-year nationally. Among the 25 largest rental markets, rents rose fastest in San Francisco, Portland, and San Diego. Unlike recent price gains, rent gains have a positive, statistically significant relationship with job growth. Of the five large rental markets with the biggest rent increases, four had job growth of 2% or more. But of the five large rental markets with rent declines or slowest increases, just one had job growth of 2% or more.


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