News: Real Estate, Risk, Economics. May 22-23, 2014

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Table of Contents
(Click to sections below.)

1) How Smart Houses And Big Data Will Change Real Estate Economics – Forbes

2) Redfin plans massive expansion, pushing real estate service into as many as 46 new markets – GeekWire

3) Is It Better to Buy or Rent? – NYTimes com

4) Chicago kicks off second year of efforts to inoculate ash trees – chicagotribune com

5) Why monetary policy matters | vox

6) Diagnoses and Prescriptions: The Great Recession | Jared Bernstein | On the Economy

7) Aging Baby Boomers Becoming the Roommate Generation – Yahoo

8) The Recession's Effect on Job Churn | St. Louis Fed On the Economy

9) European Regulators Accuse 3 More Banks of Manipulating Interest Rates – NYTimes com

10) China's property market will stabilize: JLL

11) Refinance Applications Increase in Latest MBA Weekly Survey

12) Xinhua Insight: China's housing market not to crash: history revisited – Xinhua | English news cn

13) Behind the mortgage numbers

14) Two Fed presidents show contrasting views on housing – Capitol Report – MarketWatch

15) Why are savings so high among the young in urban China? | vox

16) China accepts creative destruction – YouTube

17) Breakingviews: Brace for trouble in China's property market – YouTube

18) Write-down of two-thirds of US shale oil explodes fracking myth | Nafeez Ahmed | Environment | theguardian com

19) It Wasn't Household Debt That Caused the Great Recession – Heather Boushey – The Atlantic

20) Kocherlakota Press Conference in Minneapolis on May 21, 2014 – YouTube

21) Understanding ASEAN: Seven things you need to know | McKinsey & Company

22) Why Overhauling Fannie Mae and Freddie Mac Needs Congress – Real Time Economics – WSJ

23) China Manufacturing Gauge Rises in Sign of Stabilization – Bloomberg

24) Homemade Bed Bug Trap – YouTube

25) DIY Bed Bug Monitor [Trap] – Sugar/Yeast Carbon Dioxide Trap – YouTube

26) Census: Seattle is the fastest-growing big city in the U.S. | FYI Guy | Seattle Times

27) Rental Properties: They Could Be Your Cash Flow Machine – DailyFinance

28) Eight finalists for prized real estate assignment in Seattle – Puget Sound Business Journal

29) 5 reasons the housing market will be just fine – Outside the Box – MarketWatch

30) Why The Housing Market Isn't Doomed – Business Insider

31) Fed Officials Saw Risk From 'Persistent Slowdown' in Housing – Bloomberg

32) Bill Would End Door-Slot Mail Delivery For 15 Million Addresses, Save USPS $2 Billion Annually – Consumerist

33) SmartThings gets real with connected home platform – SlashGear

34) Nearly 5,000 acres burned in Slide Fire – YouTube

35) Melting glaciers could trigger volcanic activity, new study suggests | Science Recorder

  1.    How Smart Houses And Big Data Will Change Real Estate Economics – Forbes

    The use of principle components to create measures of "house quality" from several variables is not new in real estate economics, but that is really just scratching the surface when it comes to machine learning models that could be utilized and doesn't really capture the potentially highly non-linear and interactive nature of the relationships between these variables.

    High-frequency and high-dimensional datasets are going to change a lot of research that until now has been relatively simple. Researchers just starting out their academic careers should definitely be taking a look at machine learning tools in anticipation of the exciting future of data.

    Add your comment.


  2.    Redfin plans massive expansion, pushing real estate service into as many as 46 new markets – GeekWire

    Redfin is going national — in a big way.

    The Seattle online brokerage is looking to hire real estate professionals in a whopping 46 new markets in 19 new states, according to recent job postings on the company's Web site.

    Add your comment.


  3.    Is It Better to Buy or Rent? – NYTimes.com

    The choice between buying a home and renting one is among the biggest financial decisions that many adults make. But the costs of buying are more varied and complicated than for renting, making it hard to tell which is a better deal. To help you answer this question, our calculator takes the most important costs associated with buying a house and computes the equivalent monthly rent.

    Add your comment.


  4.    Chicago kicks off second year of efforts to inoculate ash trees – chicagotribune.com

    City crews are kicking off their second year of work in the ongoing program to try to save as many ash trees as possible from the pernicious emerald ash borer.

    After inoculating 37,000 ash trees on city parkways against the insect last year, Streets and Sanitation crews will start working today to treat another 35,000 this year, according to the Mayor's Office. The City Council dedicated $1.4 million per year to the program.

    Add your comment.


  5.    Why monetary policy matters | vox

    Logical:

    In response to a 1% increase in the interest rate, output declines by 0.6% and inflation falls by one percentage point after two to three years.

    Add your comment.


  6.    Diagnoses and Prescriptions: The Great Recession | Jared Bernstein | On the Economy

    … you have to do everything you can to get the system back up. You have to reflate the credit system through both liquidity (as in the TARP) as well as Mian/Sufi-style principal reductions and cramdowns of mortgage debt that cannot realistically be serviced without sustained pain.

    … the problem was not only that we didn't do all of the above. It's that even when we did the right things, we didn't stick with them long enough.

    We're with Jared. How about you? Are you with Jared on this too?

    Add your comment.


  7.    Aging Baby Boomers Becoming the Roommate Generation – Yahoo

    Do you think this service would work for co-tenants?

    Affordable Living is non-profit and charges clients nothing for its matching services. It thoroughly vets both the housing-provider and the housing-seeker. Caraviello says the review process includes a visit to the provider's house, the getting of two personal references, and a cross-check of the potential housemates' names against the national registry of sex offenders.

    Loper says that level of due diligence was one of the facts that persuaded her to try living with a roommate. Asked what advice she has for other seniors thinking of sharing their home, she says to make sure the matching service performs an equally thorough background check.

    Add your comment.


  8.    The Recession's Effect on Job Churn | St. Louis Fed On the Economy

    Young firms (those less than a year old) have much higher rates of hiring and separations (more churn) than more established firms. However, most workers do not work at such young firms, and the fall has been steady, and not particularly cyclical, from about 5 percent to 3 percent from 1998 to 2011. In the same period, young firms' fraction of new hires fell from about 38 percent in 1998 to its low at 32 percent in 2009, though it recovered slightly. In other words, churn could diminish because all firms are doing less hiring and firing or because young firms, which hire and fire a great deal, are accounting for a smaller fraction of employment. Part of the decline in churn is the changing age profile of firms. The churn rate has fallen since 1998, it fell most sharply in 2009, and, aside from young firms, there has been no recovery.

    Add your comment.


  9.    European Regulators Accuse 3 More Banks of Manipulating Interest Rates – NYTimes.com

    European antitrust regulators on Tuesday accused JPMorgan Chase, HSBC and Crédit Agricole of having colluded to fix benchmark interest rates tied to the euro.

    Competition authorities at the European Commission said they had issued a so-called statement of objections — a formal step in antitrust investigations — to the three banks. The officials said their preliminary view was that the banks had colluded to influence the pricing of interest rate derivatives tied to the Euro Interbank Offered Rate, or Euribor.

    If a restaurant doesn't get high enough marks on a health inspection, regulators shut it down.

    Many restaurants would love it if they could remain open and pay penalties amounting to less than they make selling food under failing health standards.

    When was the last time a large bank lost its license upon being found to have engaged in fraud on a massive scale? When was the last time a bank had to pay out more in penalties than it made off the fraud?

    These are issues of moral hazard. It's attractive to go into the banking business to engage in fraud. It's profitable for them even when caught.

    Add your comment.


  10.    China's property market will stabilize: JLL

    When property prices drop and people come back into the market, are they buying investment properties that will remain vacant? If so, it seems to us that it's not sustainable at the rate they've built out China and given China's slowdown in general and all the other woes they face. What is it that we're missing?

    Here we hear that the switch is underway to provide for real end users: people who will live in the properties. We agree that, that's good (if that's what's happening), but we have difficulty seeing how the Chinese economy will clear all of its existing vacant properties without a huge write down.

    Michael Klibaner, Regional Director & Head of Research, China at JLL, says discounting is attracting buyers, which will lead to a stabilization in the Chinese property market.

    Add yo ur comment.


  11.    Refinance Applications Increase in Latest MBA Weekly Survey

    In case you're wondering why the bond market went the direction we had said it would rather than with all the "experts":

    "Renewed concerns about the state of the global economy, particularly in Europe, led to a flight to quality to US Treasury securities, thereby pushing interest rates down in the US," said Mike Fratantoni, MBA's Chief Economist. "Rates on conforming loans hit 6 month lows and jumbo rates hit 12 month lows. Refinance volume picked up somewhat as a result, but it still remains more than 65 percent below last year's pace. Purchase volume continues to run more than 10 percent below last year's pace."

    "Flight to safety" is the same expression we used when the taper-talk kicked in.

    Now, that doesn't mean we can call every move correctly or that we think we "know it all." We can't. We don't. We thought rates would stay low. They didn't.

    They went up and came back down. We thought they would go much lower. We're still waiting.

    The real questions are what the Fed will do and when will Congress drop the Austrian School approach and rather really stimulate where it's needed and in a huge way.

    The Fed will get it long before Congress will shift. At the glacial pace at which Congress catches on, it would take a depression much worse than the Great Depression to get them to realize.

    We've love to be wrong about it though.

    Add your comment.


  12.    Xinhua Insight: China's housing market not to crash: history revisited – Xinhua | English.news.cn

    … there are differences that will keep China free from bust American style: favorable demographic change, home upgrades, households' strong balance sheets, limited investment alternatives, strong income growth, and urbanization, according to Barclays at least. Beyond that, the Chinese government closely monitors and sometimes intervenes in the housing market.

    Residential mortgage as a share of GDP, is an interesting way of quantifying the respective Chinese and U.S. bubbles. Residential mortgages in China were less than 20 percent of GDP in 2012, while in the U.S. in 2006, mortgages accounted for more than 80 percent of GDP, according to the Federal Reserve Bank of St. Louis.

    favorable demographic change: Actually, we've read that the one-child policy will be the source for major problems as the aging population reaches mass retirement.

    households' strong balance sheets: Those balance sheets are predicated on a circular economy. The asset side wouldn't look great in a major correction.

    limited investment alternatives: This too is circular. It is the reason for the bubble. If the Chinese people could diversify, we think it would actually strengthen Chinese real estate.

    strong income growth: Again circular.

    urbanization: This holds the potential for major environmental damage/costs.

    All of these things could be managed, but does the Chinese leadership have what it takes? We shall see.

    Add your comment.


  13.    Behind the mortgage numbers

    David Stevens, Mortgage Bankers Association CEO, breaks down the latest numbers on housing.

    The low end is down. The high end is up.

    Add your comment.


  14.    Two Fed presidents show contrasting views on housing – Capitol Report – MarketWatch

    Dudley [William Dudley, president of the Federal Reserve Bank of New York] talked about debt from student loans hitting first-time buyers, and, in turn, trade-up buyers who depend on younger families to purchase their homes. And it could be tough to increase the supply of homes, Dudley said.

    Add your comment.


  15.    Why are savings so high among the young in urban China? | vox

    So, why are Chinese personal balance sheets so good relatively speaking?

    Household savings in China are high by international standards, and the young save as much or more than the middle-aged — a fact at odds with the standard life-cycle savings model. This column argues that neither old-age support by the middle-aged nor the one-child policy can satisfactorily explain this phenomenon. Rather, currently high housing costs and the prevalence of inter-generational shared housing are key reasons for the higher savings rates of the urban young in China.

    Add your comment.


  16.    China accepts creative destruction – YouTube

    Can China's meteoric growth continue? Most expect not, but is that necessarily bad? Henny Sender, FT chief international finance correspondent, explains to John Authers that slowing growth could be positive for China, if not for importers.

    We find affordability due to falling housing prices the most interesting. We still think it would first be a shock for the Chinese people.

    Add your comment.


  17.    Breakingviews: Brace for trouble in China's property market – YouTube

    This is in line with what we've been saying. We'll just have to wait to see if we've been right.

    China's property market is teetering on the brink of a major correction, but regional differences mean the pain won't be spread equally, says Reuters Breakingviews' John Foley.

    Add your comment.


  18.    Write-down of two-thirds of US shale oil explodes fracking myth | Nafeez Ahmed | Environment | theguardian.com

    If true, this will radically alter the Texas real-estate market in the not too distant future.

    Next month, the US Energy Information Administration (EIA) will publish a new estimate of US shale deposits set to deal a death-blow to industry hype about a new golden era of US energy independence by fracking unconventional oil and gas.

    EIA officials told the Los Angeles Times that previous estimates of recoverable oil in the Monterey shale reserves in California of about 15.4 billion barrels were vastly overstated. The revised estimate, they said, will slash this amount by 96% to a puny 600 million barrels of oil.

    We realize that the article is primarily about California's "find," but the overarching point appears to be that it's a pattern concerning fracking in general. Texas's real-estate boom is currently built on fracking. If the fracking aspect of the oil industry sinks, that real-estate boom will end.

    Add your comment.


  19.    It Wasn't Household Debt That Caused the Great Recession – Heather Boushey – The Atlantic

    …the Great Recession was the result of a sharp fall-off in consumption due to the unevenly accumulated household debt in the first six years of the 21st century. In that period, mortgage-credit grew more than twice as fast in neighborhoods with low credit scores than in neighborhoods with high credit scores, a marked departure from the experience of previous decades. When the housing bubble popped, the economic consequences were sharply magnified by the way debt was distributed across households and communities.

    How did this happen? Why did lenders suddenly shower less-creditworthy borrowers with trillions of dollars of credit? Mian and Sufi demonstrate this was enabled by the securitization of home mortgages by investment banks that did not seek federal guarantees from Fannie and Freddie—so called private-label securities, made possible by financial deregulation and the glut of cash in world markets in the wake of the Asian financial crisis of the late 1990s. That private-label mortgage-backed securities were at the core of the housing meltdown is no longer in doubt, but what Mian and Sufi bring to the debate is how an unequal distribution of debt magnified the economic risks—based on their path-breaking microeconomic research—and a new framework for considering who is to blame among policymakers for the still reverberating debacle.

    The mistake after that, according to Mian and Sufi, was not to forgive the debts of those with the greatest propensity to spend (to keep the economy humming). We'll add that the banks should have been nationalized, at least temporarily, rather than bailed out by the Fed. All federal spending should have gone into main street spending rather than finance capital.

    Of course, we saw the whole thing coming when Wall Street was so heavily deregulated and lacked obviously necessary governmental oversight.

    Add your comment.


  20.    Kocherlakota Press Conference in Minneapolis on May 21, 2014 – YouTube

    Narayana Kocherlakota, President of the Federal Reserve Bank of Minneapolis, takes questions from the press following his address to the Economic Club of Minnesota in Minneapolis on May 21, 2014

    The 13-minute mark is the "real estate" question. The resolution improves early in the video.

    Add your comment.


  21.    Understanding ASEAN: Seven things you need to know | McKinsey & Company

    China remains the Goliath of emerging markets, with every fluctuation in its GDP making headlines around the globe. But investors and multinationals are increasingly turning their gaze southward to the ten dynamic markets that make up the Association of Southeast Asian Nations (ASEAN). Founded in 1967, ASEAN today encompasses Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam—economies at vastly different stages of development but all sharing immense growth potential. ASEAN is a major global hub of manufacturing and trade, as well as one of the fastest-growing consumer markets in the world. As the region seeks to deepen its ties and capture an even greater share of global trade, its economic profile is rising—and it is crucial for those outside the region to understand its complexities and contradictions. The seven insights below offer a snapshot of one of the world's most diverse, fast-moving, and competitive regions.

    They do face rising sea levels and the threat of much more if ….

    Add your comment.


  22.    Why Overhauling Fannie Mae and Freddie Mac Needs Congress – Real Time Economics – WSJ

    So why not keep Fannie and Freddie in conservatorship? Mr. Parrott says this isn't a viable long-term option because the companies wouldn't have much capital. Ending the profit sweep and instituting a previous 10% dividend would leave the firms with insufficient profits in the coming years unless they sharply raised their loan-guarantee fees or grew their investment portfolios, which are required to be wound down.

    They could be left in conservatorship if a percentage (with a cap) of the sweep money were allowed to build up in a "trust" fund to be used in the event of another mortgage-market disaster.

    Add your comment.


  23.    China Manufacturing Gauge Rises in Sign of Stabilization – Bloomberg

    … the property market has cooled, with a 22 percent drop in new building construction in the first four months.

    Besides a government package of spending on railways and housing, and tax relief, the central bank has cut reserve requirements for some rural banks and called on the biggest lenders to accelerate the granting of home mortgages.
    Tentative Signs

    "Some tentative signs of stabilization are emerging, partly as a result of the recent mini-stimulus measures and lower borrowing costs," Qu Hongbin, chief China economist at HSBC in Hong Kong, said in a statement. "But downside risks to growth remain, particularly as the property market continues to cool. We think more policy easing is needed to put a floor under growth in the coming months."

    Add your comment.


  24.    Homemade Bed Bug Trap – YouTube

    UF/IFAS Entomologist Dr. Rebecca Baldwin demonstrates how to build a bed bug trap using household items.

    Add your comment.


  25.    DIY Bed Bug Monitor [Trap] – Sugar/Yeast Carbon Dioxide Trap – YouTube

    In this episode Jeff will demonstrate how to set up the sugar/yeast carbon dioxide trap for bed bugs. This do-it-yourself bed bug monitor was developed at Rutgers University and has been show to be highly effective at collected and monitoring for bed bugs. The trap uses a 4 gallon container with 150 grams of active dry yeast, 750 grams of sugar and 3 liters of warm water (100o F). Place all 3 ingredients into the container and stir for 5 minutes or until completely dissolved. Place the lid back on top of the container and this mixture should generate about 1.5 human expiration worth of carbon dioxide for at least 8 hours. It is best to be set in a vacant room but will work in rooms that are occupied. The mixture should be placed on top of interception devices such as the textured dog bowls shown in the video. After a night of monitoring, the ingredients of the trap can be disposed of accordingly and the interception devices inspected for the presence of bed bugs. For more information on bed bugs visit BedBug Central at www.bedbugcentral.com or Rutgers University's Extension site at http://njaes.rutgers.edu/bedbug/

    Add your comment.


  26.    Census: Seattle is the fastest-growing big city in the U.S. | FYI Guy | Seattle Times

    From July 1, 2012 to July 1, 2013, Seattle grew by 2.8 percent — the highest rate among the 50 most-populous U.S. cities. Seattle added nearly 18,000 residents in the one-year period, bringing its population to about 652,000.

    Add your comment.


  27.    Rental Properties: They Could Be Your Cash Flow Machine – DailyFinance

    The rent-to-value ratio is king, in my opinion; the prospect of having nice appreciation in your resale value is strictly secondary. Remember, buying a rental property is about cash flow, not speculation about growth.

    Don't over-leverage your investments. Doing so puts your empire at risk of crumbling during the next real estate downturn.

    Add your comment.


  28.    Eight finalists for prized real estate assignment in Seattle – Puget Sound Business Journal

    Eight real estate companies are finalists in the competition to develop residential and commercial projects around the future Capitol Hill light-rail station.

    Add your comment.


  29.    5 reasons the housing market will be just fine – Outside the Box – MarketWatch

    Very optimistic:

    … there's little wrong with housing that more jobs won't cure.

    Of course. Now cure un-and-under employment. That means altering the Fed's and Congress's plans so they'll jibe with creating good-paying jobs sooner than later. It means ditching austerity.

    Add your comment.


  30.    Why The Housing Market Isn't Doomed – Business Insider

    Here's another optimist.

    … with the weather warming up and mortgage rates declining, some economists expect the housing recovery to get back on track.

    However, the article doesn't mention jobs, unemployment, wages, etc. Yellen is thinking jobs.

    That said, we don't want to leave the impression that we think real estate will completely dry up.

    We're just waiting for the Fed to really get it. The taper was premature, and the Fed must focus on forcing velocity in lending.

    Add your comment.


  31.    Fed Officials Saw Risk From 'Persistent Slowdown' in Housing – Bloomberg

    We think that many of the optimistic articles on housing are to attempt to psychologically counter what came out of the Fed's minutes.

    Federal Reserve officials, while forecasting a rebound in growth during their April meeting, raised a warning flag over the industry at the heart of the financial crisis: housing.

    Add your comment.


  32.    Bill Would End Door-Slot Mail Delivery For 15 Million Addresses, Save USPS $2 Billion Annually — Consumerist

    A bill that would phase out door-to-door mail delivery over the next decade passed its first hurdle on the way to becoming a law.

    The real problem with postal costs is that the Congress has forced the USPS to fund its pension 75 years out in advance. No other business has to do that, not FedEx, not UPS. If the USPS were to be allowed to come back to sanity on pension funding, it would be profitable and calls to fully privatize Ben Franklin's baby would phase out.

    The USPS has to change with the times, but we think it's counterproductive to try to kill it off.

    Another problem with the curbside boxes is mail theft, which seems to be on the rise.

    Add your comment.


  33.    SmartThings gets real with connected home platform – SlashGear

    … SmartThings platform launched on May 21st, today [yesterday], at O'Reilly's Solid Conference. This platform includes over 100 already-made devices and connects over 5,000 developers.

    Add your comment.


  34.    Nearly 5,000 acres burned in Slide Fire – YouTube

    Nearly 840 personnel fighting the fire north of Sedona.

    Add your comment.


  35.    Melting glaciers could trigger volcanic activity, new study suggests | Science Recorder

    The study found that with the loss of billions of tons of ice, the bedrock rose at a rate five times faster than could be attributed to loss of ice alone ….

    If a volcano did erupt from beneath the ice sheet, "it would dramatically accelerate the ice melt and the flows into the oceans," he [Prof. Matt King, University of Tasmania] said.

    Add your comment.


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