News, Commentary, & Analysis. Feb. 20, 2014. #RealEstate #Insurance #Economics

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Table of Contents
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1) Adair Turner criticizes economists' adherence to the belief that the benefits of capital-account liberalization outweigh the costs. – Project Syndicate

2) Kemal Dervis: Tailspin Or Turbulence In Emerging Markets?

3) Before Blaming the Robots, Let's Get the Policy Right – NYTimes.com

4) Calculated Risk: The Stimulus Success

5) Australia is asleep at the wheel | Business Spectator

6) 4 signs the real estate market is in trouble | REwired

7) Central banks are better off being 'reassuringly vague' | George Magnus

8) How to Calculate ROI on Investment Property – Just Ask Ben Why

9) Want to Make Money in Real Estate? Understand Returns | Zillow Blog

10) Rent may be too high, but it still may not be time to buy | The Salt Lake Tribune

11) How to Make a Low-Ball Offer on a House – YouTube

12) DSNews Webcast: Wednesday 2/19/2014 – YouTube

13) Speculators Are Buying Up Vacant Properties With Mixed Results For Cities – YouTube

14) Central bankers at a crossroads – YouTube

15) Electrician arrested in $2.5M fire in Utah

16) Belding firm works to fight ice dam damage | CharlotteObserver.com

17) Winter storms causing roof collapses across NJ

18) Flood Insurance Bill Increases Danger for Flood Prone Communities | RealEstateRama

19) Haley compares ice storm to hurricane devastation – WCIV-TV | ABC News 4 – Charleston News, Sports, Weather

20) Trio faces arson, conspiracy, insurance fraud charges in Saltonstall St. fire – News – MPNnow – Canandaigua, NY

21) BBC News – S Korea building collapse: President calls for inquiry

22) Update: Is Bitcoin coming unglued? | Hallmark Abstract LLC

23) CoreLogic's Acquisitions Portend Rapid Business Evolution in Property Insurance | Insurance Innovation Reporter

24) The Bank Rescue, Five Years Later – NYTimes.com

25) Clarifying my 40% price drop call and the factors still driving housing prices up

26) 2013 an epic year for data breaches with over 800 million records lost | Naked Security

27) Update on: Robert Reich (Why the Lousy Jobs Report Boosted Wall Street)

28) Foreign property investors alter "social fabric" | | MacroBusiness

29) Investing Using Creative Options & Leases

30) How to determine apartment market value

31) China survey shows a job market under strain – YouTube

  1.    Adair Turner criticizes economists' adherence to the belief that the benefits of capital-account liberalization outweigh the costs. – Project Syndicate

    "Adair Turner, former Chairman of the United Kingdom's Financial Services Authority, is a member of the UK's Financial Policy Committee and the House of Lords":

    … despite the growing evidence to the contrary, the assumption that all capital flows are beneficial has proved remarkably resilient. That reflects the power not only of vested interests but also of established ideas. Empirical falsification of a prevailing orthodoxy is disturbing. Even economists who find no evidence that capital-account liberalization boosts growth often feel obliged to stress that "further analysis" might at last reveal the benefits that free-market theory suggests must exist.

    It is time to stop looking for these non-existent benefits, and to distinguish among different categories of capital flows. Some are valuable, but some are potentially harmful.

    Add your comment.


  2.    Kemal Dervis: Tailspin Or Turbulence In Emerging Markets?

    Kemal Dervis:

    …Will the Fed's gradual reduction of QE bring with it more emerging-market problems this year? To what extent are today's conditions comparable to those that triggered the Asian crisis of 1997 or other abrupt capital-flow reversals in recent decades?

    … the exchange rate has to be managed — and in a manner that depends on a country's specific circumstances. Large net central-bank reserves can help ease the process. Otherwise, a significant rise in interest rates must be used to retain short-term capital and allow more gradual real-sector adjustment. Higher interest rates will of course lead to slower growth and lower employment, but such costs are likely to be smaller than those of a full-blown crisis.

    The challenge is more difficult for countries with very large current-account deficits. And it becomes harder still if political turmoil or tension is thrown into the mix, as has been the case recently in a surprisingly large number of countries.

    Add your comment.


  3.    Before Blaming the Robots, Let's Get the Policy Right – NYTimes.com

    Right on: Jared Bernstein:

    Before we can assess the state of technological unemployment, we have to get rid of bad policy-induced unemployment. At that point, perhaps we can get a better handle on what the robots are really up to.

    Add your comment.


  4.    Calculated Risk: The Stimulus Success

    This article is the most forceful we think we've seen from Bill McBride. Here's just a snippet.

    … more importantly – knowing that recoveries from financial crisis are slow – investment in infrastructure could have been larger and lasted longer (not just "shovel ready" programs).

    Bill is, of course, exactly right. He did call the bottom better than anyone else we saw out there, and we were looking at hundreds. As far as we can tell, he called it perfectly. We mean to the week.

    Add your comment.


  5.    Australia is asleep at the wheel | Business Spectator

    Steve Keen:

    Figure 6: America climbed down from the mountain of mortgage debt, while Australia continued to climb.

    Add your comment.


  6.    4 signs the real estate market is in trouble | REwired

    Trey Garrison:

    … Fed members are only kidding themselves if they think they can ever tighten monetary policy. The national debt is at $17.3 trillion and growing at about $700 billion this year. The cost of financing this debt, per the Treasury, was $415.7 billion in 2013, crudely estimated at an average rate of about 2.5%. At the moment, the 3 months bill is at less than 0.2% interest, while the 10 year note is only at 2.75%. If the cost of financing this debt were to increase by just 1%, it would cost the Treasury $173 billion more a year. There is no way that the dovish Fed chair Yellen would even dream of doing that.

    … the reason I remain bearish on real estate is that when the noise is filtered out, the market has only survived by means of an unprecedented amount of intervention. This dependency is not only unhealthy, its stimulating effect is now fading. If real estate prices cease to appreciate, the market will suffer, same as it did when the sub-prime bubble burst in 2006/2007. The Fed has already gone all in and there is little left it can do. Washington can always create a new set of laws to further erode private property rights as we knew them. Ironically, price appreciation is also not the answer, as it will just widen the income equality gap, turning would-be home owners into rent slaves of Wall Street's fat cats. It may be best for the market to freeze for an extended period and let consumers catch their breath.

    Well, the Fed is counting on growth. With growth comes more federal tax revenues to pay the interest on the national debt.

    Of course, our readers know that we are for using debt-free United States Notes to pay off the national debt.

    Add your comment.


  7.    Central banks are better off being 'reassuringly vague' | George Magnus

    George Magnus:

    By placing central banks and monetary policy at the centre of our economic universe, we have let governments off the hook from taking responsibility for sensible fiscal and debt management strategies, and from steering the economy gradually back towards sustainable growth and high levels of employment. In other words, we have ended up with a chronically unbalanced policy infrastructure, which, if unaddressed, is going to compromise severely our ability to cope with the next economic downturn or crisis, and or drive us into even more unusual and unpredictable policy responses.

    … To compensate and restore balance to the mix of policy-making, we need to look to governments to play their proper part in deploying policy tools designed to lead to economic stability and steady growth in incomes and employment. That'll make the job of central banks easier and more plausible.

    In 2007-08, I wheeled out the work and teachings of Hyman Minsky to demonstrate how and why I thought we were headed for a systemic meltdown. I ventured timidly at the time — Rogoff and Reinhart have expressed it more eloquently and empirically since — that it might take a decade to get over the crisis. And, that we shouldn't be surprised if government played a much bigger role in managing the economy, given that the religious belief in its self-correcting capacity during the Great Moderation had proved to be little more than…religious belief.

    Until now, this judgement has looked rather poor. If anything, the politics of austerity and structural reform in Europe, and a blatant anti-Federal government movement in the US have taken us in the opposite direction. Partly as a result, central banks have moved centre-stage. But with recent developments in Washington, London and Karlsruhe, perhaps now is a good time to call time. Monetary policy isn't going to help us with rebalancing and structural reforms, and without these, ultra-easy money is just going to l ead down a path to asset bubbles and new financial instability. Central banks need to do what they can to normalise monetary policy but only when they judge it appropriate. In the meantime, it is becoming a matter of growing urgency that governments pick up the reins of policy in the budgetary, infrastructure and corporate and fiscal governance arenas to prioritise high levels of employment and training, and income formation and fairness. And that's for starters.

    We agree.

    Add your comment.


  8.    How to Calculate ROI on Investment Property – Just Ask Ben Why

    One of the questions I am asked often is how I know if a property is a good investment. To me, the answer to this question translates into knowing exactly how to calculate ROI on investment property. The reality that folks are willing to put money under my management via syndication of real estate is in part a function of me knowing precisely how to calculate ROI — all of the ways to do so.

    Ben starts with the basics and then takes it through "Internal Rate of Return" and a bit more.

    Add your comment.


  9.    Want to Make Money in Real Estate? Understand Returns | Zillow Blog

    The bare-bones basics:

    Most people purchase real estate in hopes of earning wealth from their purchase, just as they would with any other investment asset. However, real estate is unique in that it has four distinct components of investment return. Essentially, here are the four ways you can make money as a result of real estate ownership:

    appreciation in value

    cash flows

    income tax benefits

    mortgage principal pay down

    Add your comment.


  10.    Rent may be too high, but it still may not be time to buy | The Salt Lake Tribune

    "There's a notion that we have in our heads that we have to buy a house and that it's somehow wrong to rent," says Anna Behnam, a financial adviser and managing partner with Ameriprise in Rockville, Md. "The reality is that it's not true for everyone and there are positive points to renting and to buying."

    Behnam says that renting offers the benefit of being able to move whenever you want to take a job in another part of the country or even just in a different location within the Washington area.

    "It's also nice not to have to pay for maintenance," says Behnam. "If your air conditioning breaks down, your landlord has to pay $6,000 to replace it, not you."

    Add your comment.


  11.    How to Make a Low-Ball Offer on a House – YouTube

    … if you offer $80,000 for a home priced at $100,000, you have to show "comps" on other neighborhood homes that recently sold for $75,000 to get the seller to bite.

    Add your comment.


  12.    DSNews Webcast: Wednesday 2/19/2014 – YouTube

    The National Association of Home Builders released their Housing Market Index Tuesday, reflecting a 10 point decline to 46. The index measures builder confidence in newly built, single family homes based on current home sales. It was the first time since May of 2013 that the index measured below 50, the neutral point between a market that is viewed as either good or bad. Observed traffic of prospective home buyers fared even worse over the month, falling 9 points to 31.

    Add your comment.


  13.    Speculators Are Buying Up Vacant Properties With Mixed Results For Cities – YouTube

    Something we haven't seen discussed elsewhere:

    Bill Black: As private equity and investment firms purchase vacant properties, it's leading to the restoration of homes and a decline in vacancy, but also causing a decline in tax revenue in some cities.

    Of course, if taxes on given properties are too high because they were not marked down to market by the taxing authority, then new owners have every right to seek adjustments. That, however, doesn't help the particular cities, but the object of the system as a whole is to recover the economy such that property values will "naturally" rise bringing in more property-tax revenue once again. It's a messy system that allows for considerable harm to public infrastructure and services, etc., while waiting for a recovery.

    Add your comment.


  14.    Central bankers at a crossroads – YouTube

    The US and UK central banks changed how they implement guidance. Andrew Goldberg, global market strategist at JPMorgan Asset Management, tells the FT's Ferdinando Giugliano that guidance has its uses but needs to allow for a broad range of variables.

    We disagree about slack.

    Add your comment.


  15.    Electrician arrested in $2.5M fire in Utah

    An electrician arrested in a Feb. 9 fire that destroyed a Salt Lake City apartment complex under construction had worked on the project, his employer said.

    According to jail booking documents, Bowman stated he intentionally started the fire.

    Add your comment.


  16.    Belding firm works to fight ice dam damage | CharlotteObserver.com

    "As the snow on the roof starts to melt, the water is going to hit the ice dams and run horizontally across the roof," Lew Stein, vice president of Modern Roofing Inc. of Grand Rapids, told the newspaper. "It goes inside because it cannot get off the roof."

    "You need to get inside the attic and see the cause of the problem," he said. "Normally, it's poorly insulated or there's a lack of ventilation."

    Add your comment.


  17.    Winter storms causing roof collapses across NJ

    Authorities across New Jersey are advising the owners of homes and commercial buildings to remove snow from their roofs.

    Add your comment.


  18.    Flood Insurance Bill Increases Danger for Flood Prone Communities | RealEstateRama

    This runs directly opposed to what many independent insurance-agencies and producers and real-estate brokerages and agents think on this subject of flood insurance:

    WASHINGTON, D.C. — February 19, 2014 — (RealEstateRama) — The House of Representatives should defeat flood insurance legislation passed by the Senate in January, because it would have the effect of misleading tens of thousands of homeowners concerning their vulnerability to flooding, undermine the flood program's viability and increase taxpayer costs, according to consumer advocates. The Consumer Federation of America (CFA) said the bill (S. 1926) also keeps in place massive and often hidden subsidies even for high-income homeowners looking to live or build in flood prone areas. CFA called on Congress to refocus the National Flood Insurance Program (NFIP) on ensuring actuarially sound rates and then using a stand-alone program of transparent subsidies to improve affordability for low-income homeowners in flood zones during a transition to full rates for all structures in flood plains in the United States. "The Senate proposal for reforming flood insurance asks America to stick its head in the mud, rather than address the problem of a flood program that is encouraging people to live in high-risk flood plains, unnecessarily risking people's lives and possessions," said J. Robert Hunter, CFA's Director of Insurance and former Administrator of the flood insurance program and Texas Insurance Commissioner. "You cannot lower prices by ignoring the real risk of flood; real reform requires transparency and honesty about the true cost of living in flood zones for homeowners, developers and taxpayers.

    However, we greatly appreciate the merits on both sides of the issue, especially where they overlap in their concern about saddling previously or still unaware property owners with new, huge premiums many can ill afford.

    Add your comment.


  19.    Haley compares ice storm to hurricane devastation – WCIV-TV | ABC News 4 – Charleston News, Sports, Weather

    Gov. Nikki Haley says this week's ice and snow storm has devastated parts of South Carolina worse than a hurricane.

    … "To see the devastation, this is so much worse than Hugo. I never thought that would be something we'd experience through an ice storm."

    They have a major slide show on their post if you're interested. The farther in you go, the more damage you see.

    Add your comment.


  20.    Trio faces arson, conspiracy, insurance fraud charges in Saltonstall St. fire – News – MPNnow – Canandaigua, NY

    CANANDAIGUA — New charges have been filed against three local people who police say set fire to a house at 41 Saltonstall St. on Dec. 22 at about 1:45 a.m.
    According to Ontario County First Assistant District Attorney Brian Dennis, Shallamar L. Hayward-Crawford, 29, and Samuel F. Crawford, 33, both of 2110 Route 21, Canandaigua; and William Bradley Jr., 21, of 3773 Route 247, Canandaigua, all face multiple charges related to the fire, which completely destroyed the 41 Saltonstall St. home, and damaged two adjacent structures.

    Kadien said there were "admissions made by all three suspects." None of the three have any previous convictions for arson-related offenses, and Crawford was on New York state parole for an unrelated offense, he said.

    Add your comment.


  21.    BBC News – S Korea building collapse: President calls for inquiry

    South Korea's President Park Geun-Hye has called for a full investigation into the collapse of an auditorium near the city of Gyeongju that killed at least 10 and injured more than 100.

    Emergency staff worked through the night to find survivors.

    More than 560 college students were believed to be attending a concert when part of the auditorium caved in.

    Nine of those killed in the disaster – blamed on the weight of snow on the roof – were students.

    The weather is also thought to have slowed down rescue efforts.

    Add your comment.


  22.    Update: Is Bitcoin coming unglued? | Hallmark Abstract LLC

    The crux of the brokerage firm's argument is that Bitcoin is a convenient and inexpensive way to transfer money.

    While in theory this may be true, any real estate transaction that Hallmark Abstract Service is involved in will typically include bank checks or checks issued out of an attorney escrow account for the very reason that the seller of a commercial or residential property does not want to take any chances with receiving payment for what is likely one of their most valuable assets.

    And forgetting about the fact that money in Bitcoin may be tied up for now, the seller who received payment the day before the 20% drop in value took an incredible hit on their sale.

    The bottom line is that while at some point in time Bitcoin may become an efficient marketplace suitable for large ticket transactions, it certainly seems that the time is not now.

    We agree that "the time is not now" and wonder if the time will ever even be. By the time Bitcoin is regulated and taxed, what advantages over US dollars will there be for mainstream purchases? Won't it simply be just another form of commercial "paper"?

    A great deal hinges on how the government ends up treating it. We don't see the IRS taking it for tax payments.

    There's also a built in ceiling on the number of Bitcoins that will be generated or "mined," as they say. That means that if Bitcoin continues to appreciate, the denomination will be unwieldy. The coins would have to be converted to make change, and the change could be substantial. Bitcoin would only be practical for huge purchases. We just haven't seen the benefit in this at all. So far, it's seemed like a Ponzi scheme and useful for skirting the law.

    Add your comment.


  23.    CoreLogic's Acquisitions Portend Rapid Business Evolution in Property Insurance | Insurance Innovation Reporter

    A very informative article by Anthony R. O'Donnell:

    Representative of a broader trend in data services consolidation, CoreLogic's recent acquisition of MSB and EQECAT telegraph the emergence of intense underwriting competition based on more granular and complex analysis of individual property risks.

    Add your comment.


  24.    The Bank Rescue, Five Years Later – NYTimes.com

    Phillip Swagel:

    … nationalization was unlikely from the start for both legal reasons and political ones, the latter including that administration officials did not trust the F.D.I.C. to handle a seized megabank, as would have been required by law. But investors did not realize this, and thought that new equity investments in banks would be at risk of being wiped out by a government takeover.

    Bankruptcies-cum-nationalization could have been temporary and less costly to the American taxpayers and economy. The FDIC could have hired clean bankers to help manage the transition and to keep the doors open. Most of the banks employees, including middle management that does most of the day-to-day operating of the banks, could have stayed on.

    Add your comment.


  25.    Clarifying my 40% price drop call and the factors still driving housing prices up

    Steve Keen:

    … I am first and foremost an economist — and a rebel one at that — and I had hoped the world would learn from this crisis that we can't base our collective economic welfare on borrowing money to buy second-hand houses from each other. But as Figure 5 and Figure 6 indicate (both below), we're doing precisely that again: mortgage debt is on the rise once more (and it never fell in Australia, with the First Home Vendors Boost being a major reason that it didn't do so), and this is driving house prices up again in the USA and Australia.

    Also, if China has worse than a soft landing, it will hurt Australia more than many Australians seem to think it will. Even a soft landing will slow Australia if Australia can't transition quickly enough away from mining.

    Add your comment.


  26.    2013 an epic year for data breaches with over 800 million records lost | Naked Security

    If it felt like the last year saw more and bigger data breaches than usual, well, that's because it did.

    2013 was a bumper year for data loss dominated by a handful of truly enormous breaches, according to a summary report from threat intelligence consultancy firm Risk Based Security (RBS).

    In 2164 separate incidents, over 822 million records were exposed, nearly doubling the previous highest year on record (2011). Four of those breaches made the all-time top ten and almost half involved the loss of password data.

    Hacking accounted for almost 60% of incidents, and over 70% of leaked records.

    Add your comment.


  27.    Update on: Robert Reich (Why the Lousy Jobs Report Boosted Wall Street)

    We've updated our commentary.

    Add your comment.


  28.    Foreign property investors alter "social fabric" | | MacroBusiness

    Australian housing-market bubble:

    Juwai.com, the leading broker connecting Chinese buyers with overseas property, estimates that 63m Chinese are rich enough to buy property abroad. It claims that over the last three years, the number of Chinese buyers in Australia has grown nine-fold, faster than anywhere else…

    Add your comment.


  29.    Investing Using Creative Options & Leases

    Interesting possible uses of real-estate options: Jack Miller:

    In the final analysis, investment boils down to sacrificing income and assets today in order to enjoy them at a point in the future. The less you invest for the higher return, the less sacrifice and. the sooner you can start enjoying the profits you make. Learn how an OPTION ( with or without a lease) can help you accomplish your goals much faster. It's time to JUMP IN to learn as much as you can about Options. You'll be amazed at how powerful an Option can be.

    Add your comment.


  30.    How to determine apartment market value

    Good tips on choosing and applying cap rates: Lorenzo Digiainfelice:

    When determining apartment market value, many buyers and sellers throw around cap rates leading to unrealistic expectations and undervalued property.

    Add your comment.


  31.    China survey shows a job market under strain – YouTube

    An early gauge of factory activity raises questions about China's drive to temper growth and reorient the economy towards consumption, with the employment reading scraping five-year lows.

    Add your comment.


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