News: Real Estate, Risk, Economics. May 17-19, 2014

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Table of Contents
(Click to sections below.)

1) Larry Summers says Piketty isn't scared enough of our robot overlords – Salon com

2) Nouriel Roubini: Call me Dr. Boom – The Term Sheet: Fortune's deals blogTerm Sheet

3) BBC News – China's property market: deflating or worse?

4) Euro zone first-quarter growth disappoints, puts pressure on ECB to act | Reuters

5) For hotels, secondary cities no longer a second-rate investment

6) Higher debt, fewer delinquencies – Bankrate, Inc.

7) Mortgage Rates Fall To 11-Month Low; More Buyers Qualify For Loans

8) Mortgages Should Be Easier to Get – Bloomberg View

9) Foreclosure filings down 1%, bank repos up 4% | HousingWire

10) Builders Worked on More U.S. Homes Than Forecast in April – Bloomberg

11) Piketty's Charge – Project Syndicate

12) Homebuilders losing confidence in recovery – MSN Real Estate

13) More homebuyers say cash is king – Bankrate, Inc.

14) Pricing Grows for Smaller Deals – Daily News Article – GlobeSt com

15) Economic Impact Of Homebuilding And Remodeling | Bilzin Sumberg – Homebuilders – JDSupra

16) When Was the Last Time Treasury Yields Were This Low? | PRAGMATIC CAPITALISM

17) China Bad Loans Rise Most Since 2005 as Economy Slows – Bloomberg

18) Liberty Street Economics

19) Calculated Risk: A few comments on Housing Starts

  1.    Larry Summers says Piketty isn't scared enough of our robot overlords – Salon.com

    This is exactly why we've been writing for some time that we all need to start planning for the day when "work" isn't the means of obtaining what we need. Society is going to have to get beyond required work for compensation as the means of obtaining a high quality of life. We're just going to have to work it out so that just being human guarantees a high quality of life (at least money or the lack thereof not being an obstacle to it).

    Even where capital accumulation is concerned, I am not sure that Piketty's theory emphasizes the right aspects. Looking to the future, my guess is that the main story connecting capital accumulation and inequality will not be Piketty's tale of amassing fortunes. It will be the devastating consequences of robots, 3-D printing, artificial intelligence, and the like for those who perform routine tasks. Already there are more American men on disability insurance than doing production work in manufacturing. And the trends are all in the wrong direction, particularly for the less skilled, as the capacity of capital embodying artificial intelligence to replace white-collar as well as blue-collar work will increase rapidly in the years ahead.

    Also, in all due fairness to Thomas Piketty, in his book, he does address the issue of automation. Larry Summers just thinks he doesn't emphasize it enough. We think Thomas just has his priorities focused more on the immediately pressing needs of the lower socioeconomic classes and that he fully realizes that automation down the line will have to be dealt with.

    He's not a shallow thinker, and he doesn't lack the necessary compassion to have considered automation's impact upon workers, managers, and professionals, etc.

    Let's not forget who will own the means of production (the automated equipment)? Unless things change the pattern Thomas has thoroughly outlined in his book, it will be the super-rich, many of whom do simply inherit a great deal rather than necessarily meriting it over and above the rest of humanity.

    Of course and as we've mentioned a number of times in our posts, the workers must be paid enough to turn around and purchased the goods and services produced and provided by automation, else the super-rich will have insufficient sales and therefore poor returns on their capital investments, passive or otherwise.

    If the taxes Piketty has in mind are put in place, then the welfare state will function and the automation will produce and the super-rich will still have the lion's share while the lower classes do not live in austerity. It's having the capitalist's cake while eating it too.

    Technological advancements will eventually render the system moot, but until then, we need the proper incremental steps outlined and in place.

    Add your comment.


  2.    Nouriel Roubini: Call me Dr. Boom – The Term Sheet: Fortune's deals blogTerm Sheet

    "The threat of a fiscal crisis in the United States is done," said Roubini. "The Fed's unconventional monetary policy has worked."

    He said money is shifting between people who are likely to spend it to those who may sit on those funds. That's slowing the movement of money in the economy and holding back investment. For example, Roubini said if consumers don't have money to spend, companies will be less willing to spend the trillions they have put away on expanding their businesses.

    Perhaps he won't be Dr. Boom for long.

    Right.

    Add your comment.


  3.    BBC News – China's property market: deflating or worse?

    In 1998, the Chinese government allowed workers to purchase their allocated housing at preferential prices to privatise housing. As the market took off, so did prices. This is also because there are few investment avenues in China.

    Returns on savings were poor, and the state-dominated banking system offered few options. Plus, moving money overseas is also not an option for ordinary Chinese as the state imposes capital controls. Unsurprisingly, buying property is popular.

    Burst bubble?

    The problem is that commercial developers tend to be more leveraged. It's their share of the property market that raises concerns. And as China increases its urbanisation – currently just above 50%, which is below that of other major economies – more housing will be needed and developers will want to build.

    The best case for China is that property prices moderate. The worst case is that loans are not repaid which drags down the banks. And we in the West know all too well how that ends.

    Add your comment.


  4.    Euro zone first-quarter growth disappoints, puts pressure on ECB to act | Reuters

    The 9.5 trillion euro economy expanded only 0.2 percent quarter-on-quarter in the first three months of 2014, the same as the downwardly revised rate in the last quarter of 2013, while economists had expected 0.4 percent growth.

    The first quarter figure stayed positive mainly thanks to strong growth in the biggest economy Germany, which compensated for stagnation in France and shrinking output in Italy, the Netherlands, Portugal and Finland.

    Add your comment.


  5.    For hotels, secondary cities no longer a second-rate investment

    If you want to take the pulse of the U.S. economy, pay attention to hotels.

    Investment in real estate is on the rise across all property types, from offices to warehouses, multifamily housing and medical facilities. But few sectors compare to the increase in hotel investment, which this year is expected to hit $25 billion in the U.S., up 15 percent from 2013 and the highest total since the Great Recession.

    "Hotels are a leading indicator of market and property performance, and therefore of investor sentiment," said Lauro Ferroni, vice president of JLL Hotels & Hospitality.

    However, hotel use doesn't necessarily translate to the middle and lower classes doing better.

    Add your comment.


  6.    Higher debt, fewer delinquencies – Bankrate, Inc.

    Mortgage originations fell by $120 billion to $332 billion in the first quarter, the lowest level since third quarter 2011.

    That's an important indicator of household financial health, Andy Haughwout, vice president and economist at the New York Fed, said in a news release, noting that "the direction of future mortgage originations will have an important implication on the household financial outlook and we will continue to monitor it."

    Add your comment.


  7.    Mortgage Rates Fall To 11-Month Low; More Buyers Qualify For Loans

    Conventional mortgage rates are available below four percent with some lenders; and VA loans and FHA loans are increasingly priced below four percent as well.

    The reason for that is general economic weakness, the opposite of what the Fed says it wants. We think the Fed has taken its foot off the gas way too soon and needs to come up with other ways to stimulate the flow of money that's already in existence.

    Add your comment.


  8.    Mortgages Should Be Easier to Get – Bloomberg View

    … there's no need to worry that they'll bring back the crazy lending of the boom years. A return to that era is nowhere in sight, and delinquency rates on loans guaranteed since the crisis have been close to zero. There's also very little risk to taxpayers. Over the past few years, Fannie has roughly doubled the fee it charges to insure mortgage loans. Combined with low default rates, this has been a big driver of the ample profits Fannie has been delivering to the U.S. Treasury.

    Add your comment.


  9.    Foreclosure filings down 1%, bank repos up 4% | HousingWire

    "The rise in bank repossessions in many states is a sign that those markets are working through the final remnants of foreclosures left over from the recent housing crisis," said Daren Blomquist, vice president at RealtyTrac. "Many of these bank-owned homes are bottom-of-the-barrel properties in terms of location or condition, but they will provide some much-wanted inventory of homes for sale in some markets in the coming months. Investors and other buyers willing to do more extensive rehab will likely be best-suited for these incoming REOs."

    Add your comment.


  10.    Builders Worked on More U.S. Homes Than Forecast in April – Bloomberg

    The increase in housing starts was dominated by multifamily construction, such as condominiums and apartment buildings, which increased almost 40 percent to a 423,000 annual rate from 303,000 in March.

    Add your comment.


  11.    Piketty's Charge – Project Syndicate

    The English-language publication of Thomas Piketty's "Capital in the Twenty-First Century" has sparked widespread debate over the causes and consequences of rising inequality. Is Piketty's analysis mere fodder for professional economists, or will it move policymakers to act?

    There are 9 very interesting articles in this series. Check it out.

    Add your comment.


  12.    Homebuilders losing confidence in recovery – MSN Real Estate

    After three months of holding out steady hope, sentiment among U.S. home builders weakened slightly in May. A monthly index from the National Association of Home Builders slipped one point from a downwardly revised April figure. The index now stands at 45. Anything above 50 is considered positive sentiment.

    "It is clear that builder sentiment is becoming more in line with the market reality of a continuing but modest recovery," said NAHB Chairman Kevin Kelly, a home builder and developer from Wilmington, Del. "However, builders expressed some optimism that sales will pick up in the coming months."

    Add your comment.


  13.    More homebuyers say cash is king – Bankrate, Inc.

    Walsh says there are several reasons cash transactions are on the rise, including:

    Institutional investors, such as hedge funds, have been buying large quantities of distressed properties, although this trend seems to be slowing.
    As the institutional investors withdraw, they are replaced by individual investors and by buyers of second homes or vacation properties. Both groups often pay cash.
    Foreign buyers usually pay in cash.
    Tighter lending and stricter mortgage regulations make it more difficult to obtain loans.
    All-cash deals are often faster and easier for buyers.

    Add your comment.


  14.    Pricing Grows for Smaller Deals – Daily News Article – GlobeSt.com

    They may not grab headlines with as much ferocity as trophy assets, but investment sales outside the core markets are leading the way in some key metrics. That's one of the conclusions to be taken from this month's CoStar Commercial Repeat Sale Indices, released Wednesday.

    Add your comment.


  15.    Economic Impact Of Homebuilding And Remodeling | Bilzin Sumberg – Homebuilders – JDSupra

    … NAHB's report calculated the approximate number of jobs that are created and how much tax revenue is generated relative to the different types of residential construction projects.

    Add your comment.


  16.    When Was the Last Time Treasury Yields Were This Low? | PRAGMATIC CAPITALISM

    … it's the global chase for yield and expectations of ECB's monetary easing driving rates to new lows.

    Add your comment.


  17.    China Bad Loans Rise Most Since 2005 as Economy Slows – Bloomberg

    Nonperforming loans rose by 54 billion yuan ($8.7 billion) in the three months through March to 646.1 billion yuan, the highest level since September 2008, according to data released by the China Banking Regulatory Commission yesterday [May 14, 3014].

    Add your comment.


  18.    Liberty Street Economics

    U.S. involvement in what could be one of the world's largest free trade agreements, the Trans-Pacific Partnership (TPP), has garnered a lot of attention, especially since the entry of Japan into negotiations last year. The proposed free trade agreement (FTA) encompasses twelve countries, which combined account for 45 percent of U.S. exports and 37 percent of U.S. imports. This broad coverage of U.S. trade seems to suggest large potential gains for the U.S. from the agreement. However, three quarters of this trade is already within the U.S. free trade agreement with Canada and Mexico (the North American Free Trade Agreement (NAFTA)), making the assessment of potential gains to the TPP less clear cut. In this post, we investigate some implications of TPP for U.S. international trade, with a focus on identifying areas with the greatest potential for liberalization and, hence, benefits to U.S. exporters and consumers.

    …our analysis of the tariff data illustrates that the reports of Japan resisting tariff cuts in exactly these agricultural sectors call into question a large share of the agreement's purported gains from trade.

    It's a pretty tame article. The TTP is often ripped in alternative media.

    Add your comment.


  19.    Calculated Risk: A few comments on Housing Starts

    Most of the commentary today is focused on the increase in multi-family starts – and that single family starts have stalled. Yes, but going forward I expect multi-family starts to mostly move sideways and for single family starts to pickup (the opposite of most of the commentary).

    Add your comment.


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