News, Commentary, & Analysis. Feb. 1, 2014. #RealEstate #Insurance #Economics

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Table of Contents
(Click to sections below.)

1) Global Analysis – Annual 2013 | State of the Climate | National Climatic Data Center (NCDC)

2) IA Magazine – Big 'I' Supports Bipartisan Flood Insurance Bill

3) The Biggert-Waters Act: Fix It, Don't Abandon It – The Equation

4) IA Magazine – Flood Insurance Bill with Agent Licensing Reform Passes Senate

5) Thoughts from the Frontline: Forecast 2014: The CAPEs of Hope | Editorials | Mauldin Economics

6) To Whom Does the U.S. Owe Money? | MyGovCost | Government Cost Calculator

7) Most Germans don't buy their homes, they rent. Here's why – Quartz

8) 4 Ways E-Commerce is Throwing Industrial Tenants for a Loop

9) Paint Additive – Avoid Roller Marks & Brush Marks – Upkeepers

10) What Do Green Buildings Really Have to Offer? | Vista Window Films Blog

11) Discovery of New West Coast Fault Lines Could Impact Rates; Development | PropertyCasualty360

12) Landlord News: City denies $411,441 claim from Southlake Village in apartment standoff | Wichita Eagle

13) Landlord News: Floor partially collapses at UK student party

14) Home inspectors deregulated in Kansas | The Dispatch

15) Apartment Trends Q4 2013 | ReisReports

16) NeighborWorks News: Survey shows chasm between renters, owners

17) Surveying Property: Modern Methods of Construction – Insulated Concrete Formwork (ICF)

18) European Scholars Find Prior Experience Heightens Perceptions Of Disaster Risks — WASHINGTON, Jan. 24, 2014 /PRNewswire-USNewswire/

19) Cities most at risk of extreme weather

20) Landlord News: Lawsuit filed in fatal balcony collapse in Philly

21) Flooded NY homeowners regret dropping insurance – ObserverToday.com | News, Sports, Jobs, Community Information – Dunkirk | The Observer

22) Emerging Risks: Going Green – Insurance Journal TV

23) Flushmate Expands Recall of Flushmate III Pressure-Assisted Flushing System Due to Impact and Laceration Hazards | CPSC.gov

  1.    Global Analysis – Annual 2013 | State of the Climate | National Climatic Data Center (NCDC)

    This is an excellent report that can help drive home the point that households and firms need insurance against the weather.

    Humanity also needs to take strong action to end the huge buildup of CO2 in the atmosphere. That means drastically reducing, even nearly eliminating, global fossil-fuel burning until we have technology to completely sequester the CO2. This means an all-out international effort to bring forth clean and safe alternative-energy generation and storage.

    Taking such steps will constitute wise risk management. Taking no such actions will constitute more than a huge risk. Taking no such actions will result in great and very costly turmoil that could otherwise have been avoided.

    • The year 2013 ties with 2003 as the fourth warmest year globally since records began in 1880. The annual global combined land and ocean surface temperature was 0.62°C (1.12°F) above the 20th century average of 13.9°C (57.0°F). This marks the 37th consecutive year (since 1976) that the yearly global temperature was above average. Currently, the warmest year on record is 2010, which was 0.66°C (1.19°F) above average. Including 2013, 9 of the 10 warmest years in the 134-year period of record have occurred in the 21st century. Only one year during the 20th century—1998—was warmer than 2013.
    • Separately, the 2013 global average land surface temperature was 0.99°C (1.78°F) above the 20th century average of 8.5°C (47.3°F), the fourth highest annual value on record.
    • The 2013 global average ocean temperature was 0.48°C (0.86°F) above the 20th century average of 16.1°C (60.9°F) and tied with 2006 as the eighth highest annual temperature on record and the highest since 2010, the last time El Niño conditions were present in the central and eastern equatorial Pacific Ocean. ENSO-neutral conditions were present in this region during all of 2013.
    • Precipitation measured at land-based stations around the globe was near average on balance for 2013, at just 0.31 mm above the long-term average. However, as is typical, precipitation varied greatly from region to region. This is the second consecutive year with near-average global precipitation at land-based stations.

    NOAA National Climatic Data Center, State of the Climate: Global Analysis for Annual 2013, published online December 2013.

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  2.    IA Magazine – Big 'I' Supports Bipartisan Flood Insurance Bill

    Section 205 phases out explicit subsidies for second/vacation homes, commercial properties, severe repetitive loss properties, properties undergoing substantial improvement, and properties experiencing substantial flood damage and rebuilding after substantial flood damage. However, it immediately eliminates all subsidies, with no phase-out, for properties bought and sold. Section 207 stops the "grandfathering" of policies located in communities with a new or redrawn map.

    As part of their government funding legislation this week, Congress is set to delay any work on implementation of Section 207 of Biggert-Waters until Sept. 30, 2014. This is a welcome development as it will afford Congress additional time to work on a more comprehensive measure.

    The Menendez-Isakson bipartisan bill is one such comprehensive measure, as it would delay implementation of the bought/sold provision from Sec. 205 and the entirety of Sec. 207 until after FEMA conducts the "affordability study" required by Biggert-Waters.

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  3.    The Biggert-Waters Act: Fix It, Don't Abandon It – The Equation

    Some additional details for you: Rachel Cleetus:

    … the Senate is gearing up to vote on delaying the reforms to the National Flood Insurance Program (NFIP) mandated by the Biggert-Waters Act. With rising sea levels increasing the risk of coastal flooding and the NFIP's debt mounting (over $24 billion currently), it's time for senators to find a sensible middle ground that protects both local communities and taxpayers.

    People who own homes and businesses along our coasts shouldn't have to bear the brunt of choices we have all made collectively — the choices that have contributed to growing carbon emissions and climate change. Yes, risk-based premiums are important. But so are other measures to protect communities.

    The insurance industry as a whole believes strongly that there is Anthropogenic Global Warming (AGW; human-caused global warming by virtue of industrial and other human activities pumping too much of the various greenhouse gases into the atmosphere thereby trapping infrared radiation), as does the US Pentagon.

    We had a rather quiet year in 2013, but there was over $10 billion in damages from severe thunderstorms alone.

    Once El Niño kicks in, as it surely will, weather will become that much more erratic and strong.

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  4.    IA Magazine – Flood Insurance Bill with Agent Licensing Reform Passes Senate

    S. 1926 now awaits consideration by the House of Representatives. In the House, similar legislation is pending: H.R. 3370, the "Homeowner Flood Insurance Affordability Act of 2013," which has more than 180 bipartisan cosponsors. However, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) has indicated he has plans to introduce competing flood insurance legislation in the near future. The Big "I" is working to ensure both that NARAB II will be included in any flood proposal brought up in the House, and that the House product provides real and meaningful relief from the premium price shock resulting from Biggert-Waters.

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  5.    Thoughts from the Frontline: Forecast 2014: The CAPEs of Hope | Editorials | Mauldin Economics

    John Mauldin:

    Not only does today's CAPE of 25.4x suggest a seriously overvalued market, but the rapid multiple expansion of the last few years coupled with sluggish earnings growth suggests that this market is also seriously overbought, as I pointed out last week and as we are seeing play out this week. Today's CAPE is just slightly less expensive than the 27x level seen at the October 2007 market peak and modestly below the level seen before the stock market crash in 1929. Although we are nowhere near the all-time "stupid" valuation peak of 43x in March 2000, a powerful narrative drove the markets to clearly unsustainable levels 15 years ago and a powerful narrative is driving markets today. Then it was the myth of dotcom and new tech, and now it is the tale of QE and the Fed.

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  6.    To Whom Does the U.S. Owe Money? | MyGovCost | Government Cost Calculator

    It appears for now that the Federal Reserve and China loaned the U.S. government over 75% of the net increase in the U.S. national debt in FY 2013

    And where did the Federal Reserve get the money to lend to the US government? It got it the same place the US government could have gotten it without borrowing. The difference is that with the Fed creating the "money" (even though the US Treasury prints the bills and mints the coins not making up much of the total money in circulation), the people owe bondholders interest. If the government had simply created the money without the Fed, the people wouldn't owe anyone any interest on it. So, why does the US do it the way it does?

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  7.    Most Germans don't buy their homes, they rent. Here's why – Quartz

    The government doesn't encourage it. Unlike high-homeownership countries like Spain, Ireland and the US, Germany doesn't let homeowners deduct mortgage-interest payments from their taxes. (There's more on the structure of European tax systems here.) Without that deduction, the benefits of owning and renting are more evenly balanced. "Both homeowners and landlords in Germany are barely subsidized," wrote Voightländer in a paper on low homeownership rates in Germany.

    Those regulations, a solid supply of rental housing, and the fact that German property prices historically rise very slowly —that's a whole other story—mean German rents don't rise very fast. And because one of the main reasons to buy a home is to hedge against rising rents, the tendency of German rents to rise slowly results in fewer homebuyers and a lower homeownership rate.

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  8.    4 Ways E-Commerce is Throwing Industrial Tenants for a Loop

    Distributors, importers and external vendors of all sizes fulfill much of the merchandise ordered on popular websites, such as Amazon, Walmart and Costco. These third-party vendors, many of which don't have sophisticated distribution expertise, are tasked with creating e-commerce fulfillment networks. Traditional industrial buildings do not accommodate these tenants very well because more employees are needed to pick, pack and sort merchandise as delivery times get shorter. For example, a traditional 500,000-square-foot distribution center may only have 50 employees, but the same sized e-commerce fulfillment center may require 500 workers.

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  9.    Paint Additive – Avoid Roller Marks & Brush Marks – Upkeepers

    Painting tips from the UK:

    Most ready made paints are created for certain average conditions which generally do not exist on the day you choose to do your painting! The result of that is the paint does not flow out well to leave a smooth finish and you end up with ugly roller marks or brush marks or streaks or lap marks.

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  10.    What Do Green Buildings Really Have to Offer? | Vista Window Films Blog

    WorldGBC also says in its The Business Case for Green Building review, there's a demonstrated link between the green characteristics of buildings and their ability to attract more tenants and command higher lease rates. McGraw Hill Construction's Green Retail and Hospitality: Capitalizing on the Growth in Green Building Investments report says that asset value increased by 11% for hotel owners who owned a green hotel building.

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  11.    Discovery of New West Coast Fault Lines Could Impact Rates; Development | PropertyCasualty360

    Anya Khalamayzer:

    New earthquake fault lines have been discovered on the West Coast, including in Los Angeles and Spokane, Wash. …

    Earthquake insurance is typically excluded under standard homeowners policies; most buyers in high-risk states in the Pacific Northwest purchase it as endorsement, and in California, from the California Earthquake Authority (CEA).

    The CEA works with 20 participating earthquake-ready insurers, covering 75% of the approximately 10% of Californians who have earthquake insurance.

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  12.    Landlord News: City denies $411,441 claim from Southlake Village in apartment standoff | Wichita Eagle

    City Hall has denied a $411,441 claim for damages and lost rent from the insurer of Southlake Village, the south Wichita apartment complex heavily damaged in a 32-hour police standoff last summer.

    The city is asserting immunity from the damages under the Kansas Tort Claims Act, a state law essentially establishing the government acts against citizens that carry liability, said Gary Rebenstorf, the city's director of law.

    Woosypiti was killed July 11 in a gunfight at the apartments. Six apartments were damaged when officers fired tear gas, detonated loud explosive devices and shot water into the apartments to try to drive him out after he fled a shooting at a south Wichita Kmart and took refuge in the complex.

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  13.    Landlord News: Floor partially collapses at UK student party

    Landlords should know:

    Lexington fire officials say about 100 UK students packed into an apartment for a party on the fourth floor of The Lex.

    They were partying right above Simon's apartment.

    Fire crews say the weight of the partiers caused the floor to buckle and partially collapse.

    Should landlords limit the total number of people who can be in an apartment at once? Should they limit it according to weight? Reinforced-concrete versus wood and other materials is a consideration. Basements versus higher floors is also; but even there, sinkholes and upper floors collapsing onto basements still represent just some of the risks. Decks and balconies can be especially dangerous and particularly railings. Where would you start, with the construction engineers?

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  14.    Home inspectors deregulated in Kansas | The Dispatch

    A Kansas law that regulated home inspectors has expired, raising concerns from home inspectors who helped write the law.

    Parham [Kerry Parham, president of the Kansas Association of Real Estate Inspectors] told The Wichita Eagle the law kept incompetent or unethical inspectors out of the business, protecting the public.

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  15.    Apartment Trends Q4 2013 | ReisReports

    Always interesting:

    Reis VP of Economics & Research, Dr. Victor Calanog, provides an update on the apartment sector performance for the 4th quarter of 2013.

    • National vacancies 390 basis points below cyclical peak.
    • Asking and effective rents up 0.8% from the third quarter.
    • Effective rent growth positive in 79 out of 82 markets.

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  16.    NeighborWorks News: Survey shows chasm between renters, owners

    … according to Harvard's Joint Center for Housing Studies, more than a third (35 percent) of all adults in the country are currently renters. And the NeighborWorks America survey found that slightly more than half (55 percent) of renters are not intending to change that status — at least not now. I am one of them (both out of choice and necessity), and sometimes, with the strong U.S. cultural bias towards homeownership, it can feel a bit like being a second-class citizen — especially if you aren't a 20-something fresh out of college, in which case everyone knows it's just a matter of time.

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  17.    Surveying Property: Modern Methods of Construction – Insulated Concrete Formwork (ICF)

    We thought you'd find this informative.

    … for this particular article I will focus on Insulated Concrete Formwork (ICF). This form of construction uses polystyrene blocks which act as permanent shuttering and are filled with in-situ concrete. Self-build.co.uk provide a good description of ICF: 'ICF is an insulated in-situ concrete system comprising hollow blocks or panels, usually made of polystyrene, and ready-mix concrete. The blocks are stacked and fastened together with metal or plastic connectors to create the walls of a building and are pumped full of concrete to form the structure. The polystyrene is used as a permanent part of the structure'.

    ICF offers a number of advantages compared to traditional construction methods, however the ease and speed of construction are arguably the biggest advantages. Firstly, the polystyrene blocks, which are connected with metal or plastic connectors, use semi-skilled labour for installation. There is no bonding material such as mortar so the polystyrene formwork can be connected and installed in a very short period of time, saving money on time and labour. Take a look at the video below to see how ICF is installed.

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  18.    European Scholars Find Prior Experience Heightens Perceptions Of Disaster Risks — WASHINGTON, Jan. 24, 2014 /PRNewswire-USNewswire/

    People who have experienced a disaster such as an earthquake, flood, or terrorist attack have a heightened perception of the risks posed by these and, in some cases, unrelated risks, according to a study involving 1,045 survivors of these incidents. A new study, which included participants from seven European countries, points to the importance of risk perception analysis in helping governments and others understand how people interpret and respond to crises.

    The new findings come at a time when emergency management officials are seeking to communicate with the public about the need for greater awareness of risks ranging from hurricane flooding and increased forest fires to terrorist attacks and climate change. Risk perception researcher Daniela Knuth, along with two colleagues from the University of Greifswald, Germany, and Lynn Hulse from the University of Greenwich, United Kingdom, outline how experience and "objective risk" affect risk perception. They define "objective risk" as the likelihood of the average person experiencing emergency events and their negative consequences. Their paper, "Risk perception, experience and objective risk: A cross-national study with European emergency survivors," appears in the journal Risk Analysis, published by the Society for Risk Analysis. The study draws on data from people in Germany, the Czech Republic, Poland, Sweden, Spain, Turkey and Italy.

    … they used data from a 2010 baseline survey about attitudes toward nuclear energy, a 2010 survey following the Gulf of Mexico Deep Water Horizon oil spill, and a 2011 post-Fukushima survey. They state that it is inadvisable to predict substantial public opinion shifts following major accidents without also considering whether individuals paid attention to the accident and how they may have been predisposed to respond.

    We find that last bit very interesting.

    Some people are predisposed to be better able to relate to the pain and suffe ring of others without having to personally experience the problem first or even without having to have been made aware of any such problem with someone they know or love, etc.

    There is a marked difference between those who must first experience a problem before they will give to a cause to alleviate that problem.

    For instance, the more sociopathic personality has a much more difficult time feeling for others and will not help out for purely altruistic reasons.

    See the full Journal article (PDF).

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  19.    Cities most at risk of extreme weather

    As the world's cities get more and more crowded, these weather events — known as "perils" in the insurance industry — pose an increased danger to built-up urban areas. And cities are especially vulnerable to one of the most damaging weather risks: floods.

    "If we look at where major cities are located, they are frequently found along coasts and rivers – mainly because of transport links," Peter Hausmann, head of catastrophe peril for Europe at reinsurer Swiss Re, told CNBC.

    "Coastal areas are at high risk of the impact from the sea, storms, storm surges, or tsunamis; while cities on the world's largest rivers are at risk of major floods."

    LaSalle's Gordon said that volatility in weather patterns was certainly concerning property investors, and insurance premiums were already starting to rise.

    As a result, flooding in particular could have a real impact on global real estate, he said.

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  20.    Landlord News: Lawsuit filed in fatal balcony collapse in Philly

    A civil lawsuit has been filed against the owner and landlord of a Philadelphia apartment building where a fire escape balcony collapsed, killing one man and seriously injuring two women.

    The roommates were hosting a birthday party and stepped out onto the fire escape when the platform collapsed.

    We mentioned above the dangers concerning balconies. It is a good idea to have them inspected by a qualified engineer who will sign off on safety. Make sure that engineer is licensed and properly insured.

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  21.    Flooded NY homeowners regret dropping insurance – ObserverToday.com | News, Sports, Jobs, Community Information – Dunkirk | The Observer

    Some western New York residents whose homes were damaged by a snow-swollen river this month had only recently cancelled their federal flood insurance policies because of rate increases.

    Other than for a triple net lease, tenants typically don't pay for a building's flood insurance, though it could be argued that the cost is passed on to them. However, if the rent is affordable, the main considerations for tenants are personal safety and the contents of the rental. Also, vehicles often sit at lower ground than the rental contents.

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  22.    Emerging Risks: Going Green – Insurance Journal TV

    There's more to consider when going green than generally meets the eye.

    In this interview, Stephen Clarke, assistant vice president of the ISO Commercial Property Division at Verisk Insurance Solutions, discusses the importance of understanding the potential risks of going green to avoid unintended consequences.

    Powered by InsuranceJournal.tv

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  23.    Flushmate Expands Recall of Flushmate III Pressure-Assisted Flushing System Due to Impact and Laceration Hazards | CPSC.gov

    Consumers should stop using this product unless otherwise instructed. It is illegal to resell or attempt to resell a recalled consumer product.

    Recall date: January 23, 2014

    Recall number: 14-089

    Recall Summary
    Name of product:

    Flushmate® III Pressure-Assist Flushing System

    Hazard:

    The system can burst at or near the vessel weld seam releasing stored pressure. This pressure can lift the tank lid and shatter the tank, posing impact and laceration hazards to consumers and property damage.

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