News, Commentary, & Analysis. Feb. 22, 2014. #RealEstate #Insurance #Economics

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1) UPDATE 2-Detroit bankruptcy judge urges settlement in bond dispute | Reuters

2) Exposed: The myth of the global warming 'pause' – Climate Change – Environment – The Independent

3) Google Lifts Curtain on 3D Mapping 'Project Tango' Phone | News & Opinion |

4) Officials: Falling ice causes gas leak, sparking fire in Delhi Township | Lansing State Journal |

5) NH fire marshal warns of building collapse danger – News Local New Hampshire –

6) Homeowners in flood zones fear insurance spike – Washington Times

7) Bill Would Ban Tenants From Growing, Using Medical Marijuana | AOL Real Estate

8) Mortgage interest rates News: Borrowers could see rates spike as HAMP

9) Beneath Fed's United Front, Points of Dissension Emerge – Real Time Economics – WSJ

10) Housing Starts, Permits Tumble; Mortgage Applications Fall – DailyFinance

11) The FCC has a plan to save net neutrality, but no one likes it | The Verge

12) Monetary policy: We're getting closer | The Economist

13) Deleveraging Continues in Europe's Core Markets – Urban Land Magazine

14) Britain's, Not France's, Middle Class Is Being 'Run Into The Dust'

15) FED: Household Formation At Lowest Levels Ever Recorded In U.S.

16) The Housing Freeze: Is Weather Really to Blame? |

17) Testosterone Pit – Home – Housing Bubble II: What's Ruining Home Sales? Not The Weather!

18) Michael Spence believes that financial markets' dramatic shift in sentiment is badly misguided. – Project Syndicate

19) The View on Real Estate: Bob Knakal talks taxes – Video | Crain's New York Business

20) The deflation debate | vox

21) Abenomics hits a glass ceiling | | MacroBusiness

22) U.S. Deflation Risk Seen Growing in Wells Fargo Model – Bloomberg

23) Testosterone Pit – Home – The Madness of Abenomics In One (Crazy) Chart

24) Landlord and Renter IQ Quiz – Zillow

25) Wall Street Landlords Buy Bad Loans for Cheaper Homes – Bloomberg

  1.    UPDATE 2 – Detroit bankruptcy judge urges settlement in bond dispute | Reuters

    If the judge rules all or nothing for either side, it will have significant ramifications for US cities and consequently real estate within them.

    A federal judge on Wednesday gave Detroit and a group of bond insurance companies two or three weeks to settle a dispute over whether the city can treat certain bonds as unsecured debt, warning of an "all or nothing" ruling if no deal is reached.

    The outcome of the bond dispute is likely to turn on the definition of the word "pledge." Rhodes has to determine whether a pledge of Detroit property tax revenue to pay off the voter-approved bonds, which totaled about $410 million at the end of the city's fiscal 2012, is a binding obligation under Michigan law, as argued by bond insurers in two lawsuits, or merely a promise.

    Add your comment.

  2.    Exposed: The myth of the global warming 'pause' – Climate Change – Environment – The Independent

    When Kevin Cowtan of York University and Robert Way of Ottawa University found a way of estimating Arctic temperatures from satellite readings, the so-called pause effectively disappeared and the global warming signal returned as strong as before.

    Add your comment.

  3.    Google Lifts Curtain on 3D Mapping 'Project Tango' Phone | News & Opinion |

    "What if you could capture the dimensions of your home simply by walking around with your phone before you went furniture shopping? What if directions to a new location didn't stop at the street address? What if you never again found yourself lost in a new building?"

    The devices that are coming up wil revolutionize real estate, insurance, and just general living.

    Add your comment.

  4.    Officials: Falling ice causes gas leak, sparking fire in Delhi Township | Lansing State Journal |

    … it appears falling ice from the roof of the pole barn damaged a gas meter, causing a leak and sparking the fire, officials said.

    Add your comment.

  5.    NH fire marshal warns of building collapse danger – News Local New Hampshire –

    Ah, our thoughts exactly:

    "We ask people to use good judgment as to whether they can remove the snow and ice buildup themselves, or should hire someone to take care of it," said Wolfeboro Fire-Rescue Chief Butch Morrill.

    Good advice in this article.

    Add your comment.

  6.    Homeowners in flood zones fear insurance spike – Washington Times

    Banks can require that owners keep flood policies in place as long as they have a loan.

    That means for hundreds of property owners in the Columbus area — and an estimated 4 million people nationally — the only reprieve from paying much higher flood insurance premiums would be if Congress acts to delay or soften impending rate hikes in the next few days.

    One bill designed to do just that could be voted on in the U.S. House of Representatives next week, congressional leaders say.

    Some property owners in Bartholomew County are worried that, without a congressional rescue effort, their flood insurance costs could rise from perhaps $1,600 per year to $7,000 or $8,000 per year.

    Our hearts go out.

    Add your comment.

  7.    Bill Would Ban Tenants From Growing, Using Medical Marijuana | AOL Real Estate

    … the battle over legalized pot is heating up on the home front, a bill introduced in Michigan would bar medical marijuana patients and caregivers from growing or smoking the drug without landlords' permission. The issue, reports the Michigan news media, is the damage that can result.

    We think that some of this can be mitigated via vaping. See this: I-Team: E-Cigarettes, Used to Smoke Marijuana, Spark New Concerns. Of course, that article introduces other valid issues.

    In addition and as you no doubt know, Colorado and Washington state have legalized marijuana for "recreational" use. Others states are considering similar legislation. The Obama administration has so far not attempted to force states to comply with federal law and has said that it will not. All of this also introduces the issue of intoxicated tenants, guests, and others and liability that comes with marijuana intoxication as a cause of damages or losses. Statutes, case law (court decisions), and insurance products are quickly evolving in this area. It behooves landlords and property managers to stay current on this topic.

    Add your comment.

  8.    Mortgage interest rates News: Borrowers could see rates spike as HAMP

    This fall, about 30,000 borrowers will see their HAMP-reduced rates spike by a full percentage point, then rise each year until they reach the current market rate, according to a CNBC report.

    The average HAMP borrower will see about a $200 increase in monthly payments after three years, according to CNBC. But some borrowers living in more expensive areas like California could see monthly payment increases running over $1,000.

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  9.    Beneath Fed's United Front, Points of Dissension Emerge – Real Time Economics – WSJ

    On the face of it, the Fed presented a rare united front in the statement issued after its January policy meeting: It was the first with no formal dissents since June 2011, with all the voting officials agreeing the Fed should keep reducing its monthly bond purchases.

    Behind closed doors, however, there was more formal opposition to aspects of policy-making, according to minutes for the January meeting released Wednesday. One Fed governor sat out a vote on a key statement of central bank goals. And two opposed extending an experimental program aimed at enhancing the Fed's control of short-term interest rates.

    The reverse repo facility loans Treasury bonds owned by the Fed in exchange for cash. The tool is designed to drain liquidity out of the financial system, and Fed officials hope that when the facility is implemented on a permanent basis, the rate the central bank offers for what are effectively collateralized loans to the Fed will set a floor under which short-term rates won't fall.

    Add your comment.

  10.    Housing Starts, Permits Tumble; Mortgage Applications Fall – DailyFinance

    U.S. housing starts recorded their biggest drop in almost three years in January, likely weighed down by harsh weather, but the third month of declines in permits pointed to some underlying weakness in the housing market.

    … not all of the weakness in data can be attributed to the cold weather, amid evidence the economy was already losing momentum towards the end of the fourth quarter.

    … the National Association of Home Builders reported that U.S. homebuilder confidence suffered its largest one-month drop ever in February.

    In our view, the Fed can't get the economy rolling via a premature taper and with the federal government that thinks austerity is the right path rather than a new New Deal.

    Add your comment.

  11.    The FCC has a plan to save net neutrality, but no one likes it | The Verge

    … the FCC could just define broadband providers as common carriers. An earlier decision to classify them differently is what doomed the FCC's old policy, and the change would be a surefire way to make sure any new net neutrality rules would stand up. It would also be political poison. Wheeler has said he's leaving this possibility open, but it's clearly not one that the FCC wants to resort to right now. President Barack Obama has all but said the same in his support of the FCC. Nonetheless, the rules have yet to be actually written, so it's not clear that the FCC will be able to bend broadband competition rules to fit its needs. If it can't, reclassification is effectively the only way forward.

    Do you have a website or websites for your real-estate or other business? How do you feel about having your content such as videos possibly choked by telecoms favoring their own content over yours? Should the Internet be neutral on such matters, meaning should your content not be treated as second class by various telecoms? Is Net Neutrality a solution in search of a problem or preventative medicine?

    Add your comment.

  12.    Monetary policy: We're getting closer | The Economist

    "SPARE capacity is both wasteful and increases the risk that inflation will undershoot the target in the medium term." For that reason, Mark Carney announced on Wednesday, the Bank of England would aim to eliminate spare capacity in Britain entirely within two to three years. As we mention this week (you can read our leader on the subject here) this is a commendable policy innovation by the bank. It's one I think has been underappreciated since Mr Carney's statement.

    … estimation of output gaps isn't an exact science. That is a good reason to pair the commitment with knock-outs. The 2.5% inflation threshold is a decent one, a higher inflation threshold or a promise to wait until wages begin to rise meaningfully faster would be even better.

    I'm sure Janet Yellen would like to wait to see how the Bank of England's policy works in practice. She shouldn't. America has wasted enough time and output already. If Mr Carney can do this, so can Ms Yellen.

    We agree.

    Add your comment.

  13.    Deleveraging Continues in Europe's Core Markets – Urban Land Magazine

    Panelists at the ULI Europe Annual Conference in Paris last week see Spain's "bad bank" moving forward with plans to sell off troubled assets, while France and Germany continue to take a more measured approach.

    At a panel on the recovery in Spain, panelists confirmed buoyant sentiment for the country's investment market as the bad bank known as SAREB pushes ahead with a major sell-off of troubled real estate portfolios.

    They see this as a 10-year play.

    Add your comment.

  14.    Britain's, Not France's, Middle Class Is Being 'Run Into The Dust'

    George Tyler:

    Cameron's tactic opens a debate the British will lose. As described in the Financial Times by Janan Ganesh, the British economy has come to feature "Growth powered by financial services and consumerism, an indifference to all but the most avant-garde manufacturing, a workforce trading on its flexibility rather than its productivity…"

    Aside from the banking sector (more on that in a moment), Britain seeks international advantage using American-style wage compression. That has occasioned labor remuneration to grow faster in France and across northern Europe since 2000. In 2012, average hourly wages in France ($27) and Germany ($30.5) were 25 and 41 percent higher than in Britain ($ 21.6).

    What are these things others have that the US doesn't?

    1) Australian wage determination mechanism: Cost-of-living adjustments and productivity agreements (sharing gains via increased wages)

    2) Northern European corporate codetermination governance model

    The supervisory boards of major German stock corporations and SE's are subject to employee codetermination and are comprised of representatives of the shareholders and employees. Traditionally, the shareholder representatives on the supervisory board have a good understanding of the business activities of the company. Depending on the company's total number of employees, up to one-half of the supervisory board members will be elected by the company's employees. The chairman of the Supervisory Board is a representative of the shareholders, and the deputy chairman or one of the two deputy chairmen common to an SE is a representative of the employees. In the event of a tie vote, the deciding vote is cast by the chairman. (Source)

    Is any reader an expert in those and would care to explain them in the comment section?

    Add your comment.

  15.    FED: Household Formation At Lowest Levels Ever Recorded In U.S.

    Donna S. Robinson:

    According to Federal Reserve economists, the rate of new household formation has plummeted to it's lowest level since records began being kept at the end of WWII. Down some 59% from the historical trend, we are seeing around 550,000 new households formed each year, as opposed to the average of 1.35 million per year through 2006. This is nearly a 2/3 drop in new household formations, and is a big wake-up call for home builders, real estate licensees and real estate investors. …

    Household formations include any type of "new" housing. If someone leaves home, goes out and rents an apartment, that is a "new household". This runs the gamut of residential real estate from apartments to single family houses. As such, the economy continues to linger in it's funk, due to a slow housing market that is not creating new jobs at the pace needed to sustain an economic recovery.

    Donna is right that the employment/wage picture has been dismal.

    Also, formations that are occurring for other than the upper class are going into rental units/houses. Absorption of the middle and lower classes won't keep pace if wages continue stagnating and employment rates don't pick up. The economy will bog down. Construction will fall, which will keep homeownership and rents prohibitively high. It will be a vicious circle spiraling downward: a race to the bottom.

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  16.    The Housing Freeze: Is Weather Really to Blame? |

    This is in line with what we've been writing that the cold weather likely does not account for the poor economic numbers over the last few months.

    Kolko's [Trulia chief economist Jed Kolko] conclusion breaks down to three points:

    1. While last month was cold, it was only a few degrees below the historical norm in many areas around the country. “In fact, the Midwest had a slightly colder January in 2009, and the Northeast had colder Januaries in 2003, 2004, and 2009, too,” he said.
    2. Temperature isn’t the only factor to consider—precipitation affects housing activity, and all four of the country’s regions ranged from dry to normal throughout the month.
    3. The weather was harshest in the Midwest and the Northeast, the two regions that account for the smallest amount of housing activity, while the South and West remained relatively unaffected. “The impact of January’s weather on starts should be most negative in the Northeast and Midwest, so if starts decline most in the South and West, then weather’s not the culprit,” Kolko said.

    Add your comment.

  17.    Testosterone Pit – Home – Housing Bubble II: What's Ruining Home Sales? Not The Weather!

    Wolf Richter:

    Broadside after broadside. Applications for mortgages to buy a home, not to refinance one, dropped 6% for the week, to the lowest level since September 2011, 17% below the same week last year, the Mortgage Bankers Association reported on Wednesday. Not a one-week debacle: they've declined sharply year-over-year since fall. Blame the weather?

    Then the Census Bureau reported that in January single-family housing starts, an indicator for housing construction, plunged 15.9% and multifamily production 16.3% from December. Overall they were 2% below prior year — "due largely to unusually severe weather," explained soothingly the National Association of Home Builders (NAHB).

    OK, I get it. Life-threatening cold temperatures, polar vortices, and snow mayhem can put a damper on home construction. But housing starts also plummeted 17% in the West, including on the populous West Coast where the weather has been gorgeous.

    The "potent combination of rapidly rising home prices" and "significant uptick in interest rates in the second half of 2013 caused the monthly cost of owning a home using traditional financing to jump substantially in many markets over the last year," said Daren Blomquist, VP of RealtyTrac, whose housing affordability analysis has just been released. The monthly cost of owning a home was becoming "dangerously disconnected," he said. On one side, "still-stagnant median incomes"; on the other, prices that had been driven up "by investors and other cash buyers who are not tethered to the typical affordability constraints."

    Wolf blames the Fed for blowing up bubbles (putting median homes out of reach of the middle class) and also blames student loans for killing off home formations.

    Add your comment.

  18.    Michael Spence believes that financial markets' dramatic shift in sentiment is badly misguided. – Project Syndicate

    Michael Spence:

    The Chinese authorities need to address two issues. The first, establishing regulatory oversight, will be easier to resolve than the second: the potential for excessive risk-taking as a result of the implicit government guarantees that back state-owned banks' balance sheets. The authorities need to remove the perceived guarantee without triggering a liquidity crisis should they let some bank or off-balance-sheet trust fail.

    The list of other challenges facing China is long. China needs to rein in low-return investment; strengthen competition policy; correct a lopsided fiscal structure; monitor income distribution across households, firms, asset owners, and the state; improve management of public assets; alter provincial and local officials' incentives; and overhaul the planning and financing of urban growth. Thoughtful analysts like Yu Yongding worry that the difficulties of managing imbalances, leverage, and related risks — or, worse, a policy mistake — will distract policymakers from these fundamental reforms, all of which are needed to shift to a new, sustainable growth pattern.

    Will they do all of that? If so, will it all be in time?

    Add your comment.

  19.    The View on Real Estate: Bob Knakal talks taxes – Video | Crain's New York Business

    Bob Knakal, chairman of commercial brokerage Massey Knakal Realty Services, explains how real estate taxes increase despite a steady tax rate.

    Add your comment.

  20.    The deflation debate | vox

    Mickey Levy:

    There is far too much angst about the possibility of deflation in the US. With nominal GDP accelerating, labour markets improving, and the cost of housing shelter (owners' occupied rent) accelerating, the probability of deflation is near zero. It is highly probable — perhaps 80% to 90% — that core inflation has troughed, and will rise modestly in 2014—2015. Moreover, far too little attention has been paid to the fact that the vast majority of the US's recent disinflation has resulted from technological innovations that raise economic performance and potential. This is very different from disinflation/deflation associated with insufficient aggregate demand, which may adversely affect spending behaviour and exacerbate economic underperformance.

    We think the predictions about the near future are perhaps too rosy, and we've also seen arguments against blaming the robots, so to speak. However, we discount those more than a bit.

    (Futurism) It is our view that eventually, technology will remove the requirement for anyone to have to work for compensation to pay for living. The sooner the better that humanity decides that everyone will benefit from robots and other forms of technology doing all of the work that is seen today as necessary for human "advanced" civilization. "Work," per se, will be a personal choice; and compensation won't be required, paid, or received.

    Add your comment.

  21.    Abenomics hits a glass ceiling | | MacroBusiness

    Japanese society is growing older faster than any other OECD countries. The government introduced a new system in 2012 to promote the entry of highly-skilled foreign professionals.

    This is a start, but more needs to be done. The share of foreign labour in Japan is still a very low 0.3% (Australia's, by comparison, is 13.4%).

    The number of women in the Japanese workforce is also low compared to other developed countries. The female labour participation rate is 48%, Australia's is 58%.

    Add your comment.

  22.    U.S. Deflation Risk Seen Growing in Wells Fargo Model – Bloomberg

    The U.S. economy may prove more prone to deflation than the Federal Reserve acknowledges and that may present a reason to keep monetary policy loose, according to a model created by Wells Fargo Securities LLC.

    Deflationary pressures have been "relatively high" since January 2010 and now have a 66 percent chance of prevailing in the U.S., according to Charlotte, North Carolina-based economists John Silvia, Azhar Iqbal and Blaire Zachary. Their calculations include factors such as the personal consumption expenditures price deflator, unemployment rate and the Fed's inflation target.

    The model is "useful for policy makers, investors and consumers who can attach a probability with each more-likely scenario of future price trends: inflationary, deflationary or price stability," the economists said in a Feb. 17 report.

    Add your comment.

  23.    Testosterone Pit – Home – The Madness of Abenomics In One (Crazy) Chart

    There are two areas where Abenomics, the democratically elected economic religion of Japan, has succeeded: creating inflation without causing wages to rise, thus whittling down real incomes; and devaluing the yen by 25%, thus wiping out a quarter of the magnificent wealth of the Japanese without telling them directly. Grudging admiration is due Prime Minister Shinzo Abe for these accomplishments.

    Abe needs to halt the planned sales tax hike, install an industrial policy, target alternative energy like there's no tomorrow, reform Japan's immigration policy to immediately allow in young workers, and double down on creating liquidity with extremely strong capital controls to prevent the wrong kinds of outflows and to repatriate currency (and even install tariffs if necessary).

    It's been economic war, and Japan has been losing for two decades. Abe should not let up until Japan is running at least on par with the other major developed nations.

    Lastly, he should ditch the hyper-militarism. An arms race with China would be insane, nothing but a risky and useless diversion.

    Add your comment.

  24.    Landlord and Renter IQ Quiz – Zillow

    This is an example of a legal advertisement for a rental property: "Two-bedroom, two-bath unit, perfect for female roommates. $800 per month plus utilities."

    True is incorrect

    Correct Answer: False

    All landlords are required to follow the provisions of the Fair Housing Act prohibiting discrimination in advertising. You may not make any statement in an ad or notice that indicates a preference, limitations or discrimination based on race, color, sex, national origin, family status (e.g., number of children) disabilities or religion.

    Of course, a lawyer for the landlord would argue that the statement doesn't indicate a preference but was marketing knowledge that females like access to the bathroom often for longer periods of time for makeup purposes or what have you. Court decisions on it may vary.

    Those things said, we would never recommend or place such an ad because it would beg the argument and open the landlord/management up to some males or male/female couples or others legitimately complaining that the ad put them off, confused them, etc.

    There's a great deal more to this subject. The landlord and property manager should become familiar with federal, state, and local laws and regulations. You can limit the number of occupants but only in accordance with the specifics of applicable law, which vary by jurisdiction.

    See this for example: Roommate-finder doesn't facilitate discrimination, court rules. You will notice where the lines can become a bit blurry as to when and where which laws apply and that courts differ and can be overruled.

    Add your comment.

  25.    Wall Street Landlords Buy Bad Loans for Cheaper Homes – Bloomberg

    Now American Homes 4 Rent, the second-biggest single-family landlord, Barry Sternlicht's Starwood Waypoint Residential Trust and Altisource Residential Corp. (RESI) are leading acquisitions of non-performing loans, or NPLs, to expand their holdings of rental properties.

    The shift to loans comes after foreclosure starts dropped to the lowest level since 2006 and house prices jumped in Atlanta, Phoenix and other markets where investors have made the most purchases. The development is raising concern among housing advocates that private equity firms and hedge funds will be more likely to take possession of the properties rather than offer loan modifications. Residents may be displaced or transformed into renters of their former houses.

    Add your comment.

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