News: Real Estate, Risk, Economics. Jun. 19-20, 2014

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Table of Contents
(Click to sections below.)

1) Four traits of the new normal in the US housing market – OC Housing News

2) Tax to brake S.F. real estate speculation headed to voters – SFGate

3) Blackstone India Office Bets Show Turnaround: Real Estate – Bloomberg

4) Politics and Commercial Real Estate | Commercial Observer

5) The Latest Inflation Worry Is, As Usual, Overblown | The Fiscal Times

6) 2 fires in 1 night, 5 in 1 week ruled arson – SFGate

7) Window Falls From 20th Floor Of Main Street Building In Hartford | WTIC FOX CT

8) Evacuation orders lifted as firefighters make progress against California wildfire | Fox News

9) {FunnelCast Contributor} Want to Lose 20 Pounds? | By Jeremy Neuer | The News Funnel

10) Industrial Production Rebounds In May – The Capital Spectator

11) Latest Housing Affordability Index Data Release

12) 3 diamonds in the housing data rough | HousingWire

13) Cops can access your connected home data

14) CPI rises, housing starts fall; Senate looks at high-frequency trading | Hot Stock Minute – Yahoo Finance

15) [Very highly recommended] 9 reasons the Fed should print more money – Vox

16) Cash Out Refinance | Kenneth Harney Articles

17) Mortgage volume tanks on tiny rate rise

18) China Housing Market to Stabilize: JLL's Klibaner: Video – Bloomberg

19) S.E.C. Investigating Carrington's Mortgage Deal With New Century – NYTimes dot com

20) Is Japan heading off course? – YouTube

21) Strong Apartment Performance is Emerging from an Unlikely Spot – Apartment Market Dynamics – YouTube

22) Zillow What Can You Buy on Minimum Wage | Zillow Real Estate Research

23) [Freddie Mac's] 2014: A Mid-Year Assessment – YouTube

24) [Recommended] High FOMC Turnover Makes for Mixed Messages

  1.    Four traits of the new normal in the US housing market – OC Housing News

    In the past, toxic mortgage products would have restarted the Ponzi scheme, but since these products are effectively banned, rather than restart the Ponzi scheme, sales volumes declined, and buyers are giving up. Unless mortgage rates tumble again, or unless incomes start rising in the face of high unemployment, house prices aren't going to move up from here — at least not any faster than wage growth will allow.

    After almost of dozen years of volatility, the market has reached a stable equilibrium where prices are high but affordable. Since we aren't likely to get an influx of supply, and since the weak economy means we aren't likely to get a surge in demand, we will maintain this equilibrium for the foreseeable future. This is a feature of the new normal.

    Lots of higher-paying Jobs, student-loan forgiveness, and lower interest rates would help.

    Add your comment.

  2.    Tax to brake S.F. real estate speculation headed to voters – SFGate

    Supervisor Eric Mar and tenant activists unveiled a ballot measure Tuesday that would impose a steep tax on investors who sell an apartment building within five years of buying it, a proposal they said is aimed at reining in real estate speculators who are helping to drive up housing prices by flipping rental properties.

    The "antispeculation" tax, which would apply solely to smaller, rent-controlled, multiunit buildings, will join several other housing measures on an already crowded November ballot. It asks voters to approve a graduated tax that decreases the longer an owner holds onto a property – starting at 24 percent of the selling price if a building is sold within a year of purchase, falling to 14 percent at five years and disappearing in the sixth year.

    He ["Jay Cheng, deputy director of government and community relations for the San Francisco Association of Realtors"] said he was baffled as to why the proposal exempts larger apartment buildings, saying it will just hurt "mom and pop" landlords who tend to own smaller properties. It could also have negative impacts on younger, first-time buyers who have to sell because their careers take them elsewhere, he said.

    As we were reading the article, we had the exact same concerns before coming to Jay Cheng's position. The proposal doesn't seem to us to be a well-thought-out plan. There could really be some hardship situations with landlords. What about existing owners, shouldn't they be grandfathered in?

    Add your comment.

  3.    Blackstone India Office Bets Show Turnaround: Real Estate – Bloomberg

    Blackstone Group LP (BX), the world's largest real estate investor, is leading a wave of investors in Indian commercial property as rents at three-year lows and Asia's worst-performing currency lured global companies.

    "Everybody has become very optimistic," Magazine said. "The biggest frustration was decision making. Even if the new government just starts taking decisions, it will stimulate the economy, and in turn real estate demand."

    Add your comment.

  4.    Politics and Commercial Real Estate | Commercial Observer

    Robert Knakal:

    Pessimists believe that we are in a bubble and that another downturn is right around the corner. Easy monetary policy for years, a tripling of the money supply and massive expansion of the Fed's balance sheet with mediocre (at best) gains in both GDP and monthly job growth support the pessimists.

    On the other side of the coin, optimists point to a low interest-rate policy that the government will have trouble abandoning (to the extent they are able to control it), given the catastrophic ramifications a substantial rise in interest rates would have on the federal balance sheet. Our federal debt is now over $6 trillion higher than it was six years ago, but our debt service payments are lower than they were then. An increase in rates would lead to massive deficits, something the government wants to avoid at all costs.

    We hadn't heard anyone for many months mention the impact higher interest rates would have on the federal fiscal budget.

    Yellen's job isn't about the federal deficit. It's about balancing inflation and employment. She wants to emphasize employment. Inflationary pressures have not been forthcoming. Tapering has only made that worse. The Fed needs strings attached, but the Fed doesn't want to put pressure on its owners, the very bank executives and shareholders that need to be pushed to lend, though we really need demand via more better-paying jobs!

    Add your comment.

  5.    The Latest Inflation Worry Is, As Usual, Overblown | The Fiscal Times

    Mark Thoma:

    … inflation is not nearly as harmful — most of the costs are eliminated through the indexing of wages, interest rates, and prices to the rate of inflation — and it is much more easily reversed. If we are going to make a mistake, then it ought to be in the direction of higher inflation rather than higher unemployment. Given all the false cries about inflation that we have heard throughout the recession, policymakers should wait until the evidence for inflation is clear before removing stimulus measures. And the evidence for wage growth is not clear at all.

    The Fed has learned its lesson and signs of an inflation problem will be met by interest rate increases sufficient to end the threat. Thus, the big fear at present is not that the Fed will enable a wage price spiral that results in high and persistent inflation; it's that the Fed will respond too quickly to any sign of inflation and increase interest rates too soon.

    We totally agree.

    Add your comment.

  6.    2 fires in 1 night, 5 in 1 week ruled arson – SFGate

    LAFAYETTE, La. (AP) — Lafayette fire officials say at least five vacant houses have been set afire in one week. They're investigating a sixth house fire.

    Add your comment.

  7.    Window Falls From 20th Floor Of Main Street Building In Hartford | WTIC FOX CT

    HARTFORD — Police say a window fell from the 20th floor of a Main Street building Sunday morning.

    No one was hurt. The buiding at 777 Main St. is undergoing renovation and a broken window was dislodged in high winds around 8:15 a.m. ….

    The building is the former Bank of America Tower, now being converted into the largest apartment complex in downtown Hartford.

    Add your comment.

  8.    Evacuation orders lifted as firefighters make progress against California wildfire | Fox News

    LAKE ISABELLA, Calif. — All evacuation orders were lifted Monday evening after firefighters made significant progress containing 50 percent of a smoky mountain wildfire west of a lake near Bakersfield, officials said.

    The blaze has destroyed three houses, damaged another and forced hundreds to flee their homes.

    Add your comment.

  9.    {FunnelCast Contributor} Want to Lose 20 Pounds? | By Jeremy Neuer | The News Funnel

    … our new office features an un-tethered work environment, meaning you see people wandering around with their lap tops and headsets and able to work anywhere in the office. In my time in Saddle Brook, I am typically sitting on a couch in a team environment, but there are also numerous conference and huddle rooms, all with the latest technology. Everything is wireless and documents are stored in the "cloud".

    While there are fewer private offices, one of the focuses was creating more "we" space versus "me" space. While some lost their private offices in the transition, there was definitely a trade off. The new space offers employees more reliable and consistent technology, as well as a healthier work environment.

    Fad, trend, or permanent?

    Paperless and wireless have made huge differences.

    Legal requirements for paper documents are hampering some industries. That will change.

    The jury is still out on all the wireless in terms of health though.

    Add your comment.

  10.    Industrial Production Rebounds In May – The Capital Spectator

    Industrial production in May rebounded sharply from April's decline, the Federal Reserve reports. Output advanced 0.6% last month, a strong reversal to the upside after a 0.3% drop in the previous month. The manufacturing component also revived, growing 0.6% in May vs. a 0.1% slump in April. More importantly, the year-over-year trend in industrial production (and manufacturing) continues to show improvement. Although the latest crisis in Iraq and the resulting rise in oil prices introduce a new phase of uncertainty for analyzing macro risk, today's upbeat news at least tells us that the industrial slice of the US economy has been humming along at a healthy clip.

    Add your comment.

  11.    Latest Housing Affordability Index Data Release

    At the national level, housing affordability is down for the month of April due to an increase in home prices while incomes and mortgage rates remain flat.

    Income levels are up 2.3% from last year. Adjustments in lending practices could provide more opportunities for borrowers to find affordable housing. New home construction could help low inventory levels and slow price growth which may make buying more attractive than renting.

    Is that adjusted for inflation?

    We don't want to lower lending standards to create a new bubble.

    Builders have to see natural, sustainable demand via more better-paying jobs and student-loan forgiveness.

    Add your comment.

  12.    3 diamonds in the housing data rough | HousingWire

    After weeks of steady declines and levels well below originations the same time last year, mortgage applications jumped a surprising 10.3% from one week earlier, according to data for the week endingsuperadmin June 6 from the Mortgage Bankers Association.

    "The jump in applications shows folks are taking notice of rates near six-month lows," said Quicken Loans vice president Bill Banfield.

    "The jump in purchase applications is especially good to see, as homeowners may finally be getting comfortable putting their home on the market with the level of inventory they see around them," Banfield added.

    When has Spring ever not seen more activity? When we're headed into a recession or already in one?

    Add your comment.

  13.    Cops can access your connected home data

    … smart home customers might be unaware that their security footage is being stored in some cases, and that it can be used against them in legal proceedings.

    … Once home security footage begins being stored on companies' servers, there's no reason why cops wouldn't seek that out as well.

    That means you may want to study the terms of service from your smart home provider to see what kinds of requirements they place on government and law enforcement data requests.

    Add your comment.

  14.    CPI rises, housing starts fall; Senate looks at high-frequency trading | Hot Stock Minute – Yahoo Finance

    … new home construction fell more than expected last month. Housing starts dropped 6.5% to about 1 million units in May according to the Commerce Department. However, the decline follows a 12.7% rise in April.

    Add your comment.

  15.    [Very highly recommended] 9 reasons the Fed should print more money – Vox

    Matthew Yglesias:

    All year, the Federal Reserve has been executing something monetary policy nerds call the taper. It's a measured tightening of monetary policy, as each month the Fed moderately reduces the amount of Quantitative Easing ? it does and the amount of money it prints. Everyone expects further tapering when the June 17-18 meeting ends. And everyone expects that if there is any change from the past several meetings, it's that there's at least a slim chance the Fed will speed the tapering up.

    This is a bad idea. The economy has added jobs for the past few months, but is still adding them much too slowly to bring us a rapid return to full employment and wage growth. There is absolutely no sign that anyone at high levels of the Fed is even considering this, but the best idea would be for Janet Yellen to shock everyone and announce that tapering is over and the Fed is going to unexpectedly increase the pace of QE.

    Here are nine great reasons why.

    Read the article.

    Add your comment.

  16.    Cash Out Refinance | Kenneth Harney Articles

    Whereas a decade ago people were pulling out extra money to pay for consumer spending — cars, boats, vacations — bankers say today they're focused on more financially sound uses.

    Bob Walters, chief economist for Detroit-based Quicken Loans, said his firm is seeing "a lot of debt consolidation" using cash-out refinancings. …

    … another frequent use of cash-outs: Recession-era real estate investors now cashing in their chips. People who bought a house for little or no cash at bargain prices during the recession, and who have built up equity during the past few years through loan amortization and property appreciation, now want to extract cash to make new investments.

    A recent client, for example, did a $170,000 cash-out refinancing on a house he purchased with a 3.5 percent FHA-backed mortgage in 2011. The client paid off the $147,000 FHA loan balance and took out a new conventional mortgage of $170,000. After transaction costs, he walked away from the refi with about $20,000 in cash, which he plans to use for a down payment on another investment house. The rate on the new loan: 4.875 percent for 30 years.

    Cash-out refis aren't the right financial option for everybody, of course. A home equity line of credit may be more flexible and cheaper.

    Be careful!

    Add your comment.

  17.    Mortgage volume tanks on tiny rate rise

    We're getting mixed signals from the mainstream media about applications. Diana Olick usually ends up having supplied the right numbers.

    It didn't take much to keep potential borrowers away from their mortgage lenders last week—a minimal rise in rates sent volume tumbling 9.2 percent on week, seasonally adjusted, according to the Mortgage Bankers Association (MBA).

    Applications to refinance a loan fell 13 percent on week, while applications to purchase a home fell 5 percent on week and are now 15 percent below the volume seen a year ago.

    Add your comment.

  18.    China Housing Market to Stabilize: JLL's Klibaner: Video – Bloomberg

    Michael Klibaner, greater China research head at JLL, talks about China's housing market and government policies. China's new-home prices rose in the fewest number of cities in two years in May as buyers remained reluctant to purchase in a slowing economy. Klibaner speaks in Hong Kong with Rishaad Salamat on Bloomberg Television's "On the Move."

    If this is right, the common Chinese investors are very naive. Of course, many American housing-market investors were extremely naive right up to the end when the Great Recession hit.

    We think it's mostly been smoke and mirrors by the Chinese government.

    We really need to know more about the discount buyers versus people buying houses to live in.

    His idea for 20% down for first-time home buyers would help.

    Add your comment.

  19.    S.E.C. Investigating Carrington's Mortgage Deal With New Century –

    On the eve of the financial crisis, the hedge fund manager Bruce M. Rose did a surprising deal that took his firm into the business of collecting mortgage payments from people with tainted credit.

    Now, seven years later, securities regulators are scrutinizing the deal, looking in particular at how part of it was financed.

    The Securities and Exchange Commission last fall began to subpoena documents from Mr. Rose's Carrington Holding Company about the purchase of mortgage servicing operations from the failed subprime lender New Century Financial, according to regulatory filings. …

    The S.E.C.'s inquiry presents a challenge for Carrington, which started as a hedge fund that mainly invested in subprime mortgage debt but now is something of a full-service real estate company. The firm, with more than 2,900 employees, manages $17.6 billion in mortgages and more than 4,000 rental homes across the United States.

    Add your comment.

  20.    Is Japan heading off course? – YouTube

    He has it right. As we said before he did it, Abe's tax policy is a terrible mistake: backwards.

    At first, Abenomics appeared to work; it led to a weaker yen and stronger Japanese stock market. But Charles Dumas, Lombard Street Research chief economist, tells the FT's John Authers that pursuing further devaluation could trigger a financial crisis.

    Add your comment.

  21.    Strong Apartment Performance is Emerging from an Unlikely Spot – Apartment Market Dynamics – YouTube

    Surprisingly strong economic growth in Reno is directly correlating with an apartment market performance that has far exceeded expectations of late. And while Reno still warrants some caution, the market has some important characteristics that set it apart from its bigger sibling city to the south, Las Vegas.

    Add your comment.

  22.    Zillow What Can You Buy on Minimum Wage | Zillow Real Estate Research

    Why they'll rent:

    In 2013, 3.3 million Americans worked in a job that paid at or below the federal minimum hourly wage of $7.25.[1] For many of these workers, finding affordable housing is a constant challenge. Still, nearly two-thirds of suburban minimum wage earners, and nearly half of urban minimum wage earners, owned their own home.[2] Of course, the ownership rate does not capture important differences in home size, amenities, convenience and quality, but is nonetheless illustrative of the options that minimum wage earners frequently encounter.

    … the minimum hourly wage would have to be $50.66 in San Jose, $36.67 in San Francisco, $33.45 in Los Angeles and $31.21 in San Diego in order for minimum wage workers to be able to afford the median bottom-tier home.

    Add your comment.

  23.    [Freddie Mac's] 2014: A Mid-Year Assessment – YouTube

    He'd still rather be too high, too optimistic, than to come in too low.

    Freddie Mac's Vice President and Chief Economist, Frank Nothaft, gives a video preview of the June 2014 U.S. Economic and Housing Market Outlook:

    Add your comment.

  24.    [Recommended] High FOMC Turnover Makes for Mixed Messages

    This article is packed with FOMC info. Here's an informative paragraph by Nouriel Roubini, Sheryl King, and Prajakta Bhide:

    How fast will the Fed get to 4% and with which policy rule? The median FOMC voter sees the fed funds rate at 1% by the end of 2015 and 2.25% by the end of 2016, only reaching the neutral level of 4% toward the end of 2018. This is an extremely slow pace of policy normalization, a process that would last about 3.5 years from start to finish, assuming normalization does not begin until mid-2015. In the 2004-06 normalization cycle, the rate went from 1% to 5.25% in just two years.

    Please note that nothing is fixed. They will adjust according to the data they have at the time. If things are too slow, the Fed rate will remain low.

    Add your comment.

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