Linking ≠ endorsement.
↑ Net Neutrality Real Estate Impact – YouTube
Proposed net neutrality rules by the FCC could hit real estate interests hard as some companies are allowed to buy speedier service.
↑ Nearly 40 injured in Houston-area building collapse | Reuters
Nearly 40 people were injured on Thursday when the ceiling of a garage apartment crashed down on Thursday onto about 100 people who had gathered for a religious event at a Houston-area residence, fire officials said.
↑ How to Prepare For a Real Estate Appraisal Inspection | Rowe Appraisal Group
Handy info including for landlords:
If you haven't had an appraisal completed on your home recently, one of the first things that may come to your mind is, "What do I need to get ready for this?". Here are some helpful things you can do prior to the appraiser coming to your home.
↑ Interactive map: Europe's social polarisation and the generational struggle | Olga Tschekassin at Bruegel.org
Are you thinking about investing anywhere in the EU? This info should prove valuable. Olga Tschekassin:
According to the latest Eurobarometer survey on the social impact of the crisis, 80% of respondents believe that poverty has increased in their country over the past 12 months. Over 30% of respondents in Greece, Latvia, Lithuania, Bulgaria, Romania and Hungary reported that their household ran out of money to pay for ordinary bills, food and other daily consumer items at some point during the previous 12 months. These alarming numbers are reflecting the perception of European citizens. But what do indicators measuring different dimensions of poverty and inequality actually show?
↑ America's crumbling infrastructure: Bridging the gap | The Economist
America saw two great booms in infrastructure spending in the past century, the first during the Great Depression, when the Pulaski skyway was built, and the second in the 1950s and 60s, when most of the interstate highway system was. Since then, public infrastructure spending as a share of GDP has declined to about half the European level. …
With interest rates low and companies sitting on $2 trillion in cash, this should be a good time to bring in private money to make up for the lack of public investment. That cause has not been helped by some high-profile flops: the consortium that took over a stretch of road in 2006 that runs from Chicago to the Ohio turnpike and is operated by Ferrovial of Spain and Macquarie of Australia is near bankruptcy. The involvement of two foreign infrastructure finance companies is telling: because America has been slow to adopt public-private partnerships its companies have little experience of them. The Port of Miami tunnel, a billion-dollar project which is due to open shortly, was financed by Europeans and used a boring machine built in Germany and shipped across the Atlantic in pieces to dig the tunnel.
A long road ahead
Jeff Immelt, the boss of GE, an industrial conglomerate, reckons that big public infrastructure projects require some government involvement, whether through subsidies, loan-guarantees or public-private partnerships. To this end John Delaney, a congressman from Maryland, has proposed a bill that would give firms a tax break on repatriated foreign profits if part of the money brought back was spent on infrastructure bonds. The bill has 35 Republican and 33 Democratic co-sponsors in the House and the support of seven Republicans and six Democrats in the Senate. Despite this, it remains stuck in Congress.
What is their answer to a lack of public spending? It's bonds and taxes. What's the right answer? It's debt-free currency spent into the real economy by the federal government for infrastructure. We don't need to issue any bonds or raise any taxes. We don't need to pay any interest on any debts because there wouldn't be any debts. Furthermore, if done correctly, there wouldn't be any inflation from the increase in currency because the increase would be fully absorbed by increased productivity.
Why isn't this being considered? It's not being even discussed because of vested interests that put their own personal interests before the public good and general welfare even though putting the public good first would also raise their own standard of living and overall quality of life.
In other words, such selfishness is shortsighted, ignorant, and frankly, foolish. Your thoughts?
↑ [Recommended for consideration] Slow-Growth China Is Already Here – The Globalist
Fascinating math: Martin Hutchinson:
If real Chinese growth in the last five years was only 2.2%, and there is a $3.5 trillion net overhang of bad debts waiting to take down the Chinese financial system and the country's economy in general, then the prognostication for China going forward must be pretty grim.
Presumably, the majority of the funding needed to fill the $3.5 trillion hole in the financial system will come from the state, which can well afford it since China's debt is still relatively low.
However, running an additional public sector deficit of 7% of GDP for five years, the probable period over which the hole would be filled in, would itself destabilize China's public finances.
Of course, in principle it would be possible to raise taxes or cut other government spending to fill the gap, but doing so within what would almost certainly be an unpleasant recession would be very unpopular.
Shiny new Buicks
This suggests that the Chinese government will do as so many Western governments have done since 2008. It will print money and increase government debt to solve the problems of the financial system.
↑ Lawsuit Adds to Concern Over China Commodities Fraud – NYTimes.com
What a mess:
China's commodities fraud scandal continues to widen, with more companies reporting losses on bogus aluminum and copper financing deals, while Chinese authorities now say gold contracts have also been faked to secure more than $15 billion in loans.
↑ Housing Barometer: Recovery Shakes Off Early-Spring Slump | Trulia Trends
Good info and focus from Jed Kolko:
Employment for young adults, however, took a step back. May's three-month moving average shows that 75.6% of adults age 25-34 are employed, which is just 35% of the way back to normal. That's down from 39% one quarter ago, though still an improvement from one year ago. Because young adults need jobs in order to move out of their parents' homes, form their own households, and eventually become homeowners, the housing recovery depends on Millennials getting jobs.
How has the recovery gotten this far without first-time buyers? Investors and other bargain-hunters bought homes near the bottom of the market, in late 2011, which boosted sales and home prices. Now that prices are near long-term norms — just 3% undervalued — the bargain-hunting engine is sputtering. Repeat buyers, who are trading in one home for another, are taking more of the market.
Would-be first-time homebuyers are stuck: rising prices and mortgage rates have reduced affordability before young adults have been able to recover from the jobs recession. A full recovery that includes first-time homebuyers is still years away; many young adults still need to find jobs and keep them long enough to save for a down payment and qualify for a mortgage. Until that happens, the clearest signs of recovery will be apartment construction and renter household formation, not first-time home buying, as young adults move from their parents' homes into their own rental units.
They need jobs but those need to be at good wages/salaries.
↑ Carlo Ratti and Matthew Claudel say that when it comes to the coming transformation of urban space, taxis are just the beginning. – Project Syndicate
In South America, Asia, and Europe, all levels of government are quickly identifying the potential benefits of building "smart" cities, and are working to unlock significant investment in that area. Rio de Janeiro is building capacity at its "Smart Operations" center; Singapore is about to embark in an ambitious "Smart Nation" effort; and Amsterdam recently channeled €60 million ($81 million) into a new urban innovation center called Amsterdam Metropolitan Solutions. The European Union's Horizon 2020 program has earmarked €15 billion in 2014-2016 — a significant commitment of resources to the idea of smart cities, especially at a time of severe fiscal constraints.
… governments should use their funds to develop a bottom-up innovation ecosystem geared toward smart cities, similar to the one that is growing in the US. Policymakers must go beyond supporting traditional incubators by producing and nurturing the regulatory frameworks that allow innovations to thrive. Considering the legal hurdles that continuously plague applications like Uber or Airbnb, this level of support is sorely needed.
At the same time, governments should steer away from the temptation to play a more deterministic and top-down role. It is not their prerogative to decide what the next smart-city solution should be — or, worse, to use their citizens' money to bolster the position of the technology multinationals that are now marketing themselves in this field. These companies' ready-made, proprietary, and typically dull offerings represent a route that should be avoided at all costs — lest we wake up to find our selves in Minitel City.
We agree with the points we highlighted/quoted.
↑ Fed Neutralized in Mortgage Bonds on Supply Slump – Bloomberg
It's not as complicated as typically portrayed.
The $5.4 trillion market for U.S. government-backed mortgage bonds is poised for its biggest first-half rally since 2010 as a surprising drop in supply outweighs a pullback in Federal Reserve purchases.
It was a good report, as far as such reports usually go.
Why was it a surprise? When the Fed started pulling back, the economy naturally slowed in the sector.
↑ European Nonperforming Loans Attract Fierce American Competition | Commercial Observer
The biggest buyers of distressed property in Europe are U.S. opportunity funds, particularly in the loan sale area, said a recent report by Real Capital Analytics, which identified 84 percent of the buyers of NPL portfolios in Europe as American in 2013.
"Europe is more bank driven than the U.S.," said Deloitte's Mr. Edmonds. For this reason, he added, "the effect of the crisis on the financial system in Europe was much more severe. As a result, you end up with a greater level of NPLs."
Furthermore, compared with the "U.S.'s history of taking quick actions," said Mr. Edmonds, "Europe's approach is slower and more cautious." (This trend has started to shift only recently, according to data from Cushman & Wakefield. The proportion of traditional bank lenders in Europe has fallen from 67 percent in the first quarter of 2012 to 55 percent in the first quarter of 2014.)
They're picking up bargains a little at a time ramping up.
↑ Mark Esposito and Terence Tse highlight the growing opportunity gap for young people from poor backgrounds. – Project Syndicate
Mark Esposito and Terence Tse:
Simply put, many jobs — particularly the most lucrative ones — are available almost exclusively to young people from wealthy backgrounds.
In the UK, for example, only 7% percent of children attend private schools. But roughly half of the country's chief executives, and two-thirds of its doctors, have been privately educated . This trend is expected to persist, with the next generation of doctors likely to be born into families that rank among the wealthiest 20% of the population.
There are several possible reasons for this pattern. For starters, the highest-status positions require the most prestigious educational background — and that costs money. Moreover, many internships — a prerequisite for the most attractive jobs — are unpaid, making them unfeasible for graduates whose families cannot afford to support them.
But money is not the only requirement. In many cases, sought-after jobs and internships — and even admission to top educational institutions — are far more accessible to those who are within the employers' personal or professional network.
This is one reason why college in the US, including grad school, should be all-expenses-paid by the public (free) for those who do the work. The national ROI would be huge and very nearly immediate.
↑ IMF: Corporate tax schemes hurt developing countries | GlobalPost
Developing economies are increasingly hurt by the way global corporations exploit taxation differences and move profits to low-tax locations, according to an International Monetary Fund report ….
But few countries can protect themselves in a competition for direct investment that increasingly appears like a "race to the bottom" in setting corporate tax rates, the IMF said.
That's exactly right and also is a good reason why the US shouldn't engage in that race to the bottom to re-attract corporations. As we mentioned in our last post, the US should consider placing a proportional tariff on the goods and services of corporations that dodge US taxes.
↑ As Home Sales Remain Restrained, Big Builder Eyes Home-Rental Market – Real Time Economics – WSJ
In response to a question from an analyst, Mr. Miller said on the call that Lennar is "considering" expanding into building homes intended for rent. That will depend, he said, on how long first-time buyers are stymied by stringent mortgage-qualification standards. If those would-be buyers are forced to turn to renting, Lennar is studying whether to start building single-family homes for them to rent in addition to the apartments it already constructs.
If first-timers remain unable to buy, then "single family development for rent might become a part of our portfolio going forward," Mr. Miller said.
Those comments reverberated within the housing market on Thursday. Several big investors, including Blackstone Group LP and Colony Capital, already are in the business of buying existing single-family homes to rent them out. But, so far, only a handful of small, closely held builders have constructed homes exclusively for rent.
They should definitely stick their toes in the water to find out more about actually running single-family rentals.
↑ Investors Who Bought Foreclosed Homes in Bulk Look to Sell – NYTimes.com
The Waypoint Real Estate Group, one of the first companies to raise money from private investors to buy foreclosed homes, is quietly shopping as many as 2,000 houses in California that it acquired in the last few years in several private investment funds, said three people who had been briefed on the matter but were not authorized to discuss it. The homes, which are largely rented, are being shown to other companies backed by investor money that have also scooped up distressed houses in states including Arizona, California, Florida, Georgia, Illinois and Nevada.
Waypoint is considering selling about half of its 4,000 homes.
Over all, institutional buyers have bought over 386,000 single-family homes across the country since 2011, according to RealtyTrac, a property research company.
"Most of these companies have 18-month track records as property managers, so they are still working out the operational details," said Michael Gutierrez, managing director of operational risk assessments at Morningstar Credit Ratings. "There have been growing pains."
↑ The inflation panic: The spontaneous combustion theory of inflation | The Economist
In the last few weeks, ominous warnings of inflation's imminent resurgence have multiplied, prompted by recent upside surprises on core inflation and the cavalier dismissal by Janet Yellen, the Fed chair, of those reports as "noise. "
On factual, theoretical and strategic grounds, I find the panic over inflation perplexing.
First, factual. Yes, core CPI inflation has rebounded to 2% from 1.6% in February and today we learned that core PCE inflation has risen to 1.5% from 1.1%. What should we infer from this? Nothing. In the short run inflation oscillates because of idiosyncratic movements in various components, such as rent, health care and imported commodities, but over longer periods, it is remarkably inertial: the best forecast of inflation over the next five years is inflation over the past five years. The nearby chart illustrates this ….
Many critics think the prolonged period of low real rates and the large size of the Fed's balance sheet are in and of themselves inflationary, but this is divorced from any consideration for why real rates are negative and the Fed's balance sheet so large in the first place. Charlie Evans, president of the Federal Reserve Bank of Chicago, calls this "the spontaneous combustion theory of inflation… Households and businesses simply wake up one day and expect higher inflation is coming without any further improvement in economic fundamentals."
↑ Digital identity cards: Estonia takes the plunge | The Economist
Secure, authenticated identity is the birthright of every Estonian: before a newborn even arrives home, the hospital will have issued a digital birth certificate and his health insurance will have been started automatically. All residents of the small Baltic state aged 15 or over have electronic ID cards, which are used in health care, electronic banking and shopping, to sign contracts and encrypt e-mail, as tram tickets, and much more besides—even to vote.
Estonia's approach makes life efficient: taxes take less than an hour to file, and refunds are paid within 48 hours. By law, the state may not ask for any piece of information more than once, people have the right to know what data are held on them and all government databases must be compatible, a system known as the X-road. In all, the Estonian state offers 600 e-services to its citizens and 2,400 to businesses.
Estonia is being "very clever", says Stéphanie de Labriolle of the Secure Identity Alliance, an international working group. Marie Austenaa of the GSMA, a global association of mobile-phone firms, praises it too. Allan Foster of ForgeRock, a firm that is working on government ID schemes in Belgium, New Zealand and elsewhere, thinks that the new satellite Estonians will help change attitudes to secure digital identities in their own countries, too.
This or something like it will be required to function.
↑ Lagos and Population Movement Globally | Sustainable Cities Collective
Facebook, the social media platform which is used by over 15 per cent of the earth's population recently compared users' hometowns with their current residences to uncover the top 10 cities that had "coordinated migrations"- or the movement of large numbers of people from one place to another and Nigeria's economic centre led the pack.
The Facebook data science team found the top destinations around the world in countries that are rapidly urbanizing where at least 20 per cent of the population of one city had moved to another city.
The data found that Lagos grew 18.6 per cent between 2000 and 2012 as a destination city, with majority of the migrants estimated at 96 percent coming from within Nigeria.
↑ The Pitchforks Are Coming… For Us Plutocrats – Nick Hanauer – POLITICO Magazine
The billionaire's soapbox to save capitalism (again) from itself: Nick Hanauer:
The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren't only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they'd be able to afford his Model Ts.
I know that virtually all of you feel that compelling our businesses to pay workers more is somehow unfair, or is too much government interference. Most of you think that we should just let good examples like Costco or Gap lead the way. Or let the market set the price. But here's the thing. When those who set bad examples, like the owners of Wal-Mart or McDonald's, pay their workers close to the minimum wage, what they're really saying is that they'd pay even less if it weren't illegal. (Thankfully both companies have recently said they would not oppose a hike in the minimum wage.) In any large group, some people absolutely will not do the right thing. That's why our economy can only be safe and effective if it is governed by the same kinds of rules as, say, the transportation system, with its speed limits and stop signs.
Wal-Mart is our nation's largest employer with some 1.4 million employees in the United States and more than $25 billion in pre-tax profit. So why are Wal-Mart employees the largest group of Medicaid recipients in many states? Wal-Mart could, say, pay each of its 1 million lowest-paid workers an extra $10,000 per year, raise them all out of poverty and enable them to, of all things, afford to shop at Wal-Mart. Not only would this also save us all the expense of the food stamps, Medicaid and rent assistance that they currently require, but Wal-Mart would still earn more than $15 billion pre-tax per year. Wal-Mart won't (and shouldn't) volunteer to pay its workers more than their competitors. In order for us to have an economy that works for everyone, we should compel all retailers to pay living wages—not just ask politely.
The only way to slash government for real is to go back to basic economic principles: You have to reduce the demand for government. If people are getting $15 an hour or more, they don't need food stamps. They don't need rent assistance. They don't need you and me to pay for their medical care. If the consumer middle class is back, buying and shopping, then it stands to reason you won't need as large a welfare state. And at the same time, revenues from payroll and sales taxes would rise, reducing the deficit.
This is, in other words, an economic approach that can unite left and right. Perhaps that's one reason the right is beginning, inexorably, to wake up to this reality as well. Even Republicans as diverse as Mitt Romney and Rick Santorum recently came out in favor of raising the minimum wage, in defiance of the Republicans in Congress.
If you are an investor in 1-4 unit properties in Arizona, California, Nevada, Oregon, Utah, or Washington, please do the financially responsible thing and make sure you have proper Landlord Insurance with PropertyPak™. We love focusing on real estate and the economy in general, but we are also here to serve your insurance needs.
Hill & Usher (PropertyPak™ is a division) has many insurance offerings. See our menu above for more info and links.
Did this post help you? Let us know by leaving your comment below.
Note: This blog does not provide legal, financial, or accounting advice. Seek professional counsel.
Furthermore, we, as insurance producers, are prohibited by law from disparaging the insurance industry, carriers, other producers, etc. With that in mind, we provide links without staking out positions that violate the law. We provide them solely from a public-policy standpoint wherein we encourage our industry to be sure our profits, etc., are fair and balanced.
We do not necessarily fact checked the contents of every linked article or page, etc.
If we were to conclude any part or parts of our industry are in violation of fundamental fairness and the legal standards of a state or states, we'd address the issue through proper, legal channels. We trust you understand.
The laws that tie our tongues, so to speak, are designed to keep the public from losing confidence in the industry and the regulatory system overseeing it. Insurance commissioners around the country work very hard to analyze rates and to not allow the industry to be damaged by bad rate-settings and changes in coverages. The proper way for people in the industry to deal with such matters is by adhering to the laws, rules, and regulations of the applicable states and within industry associations where such matters may be discussed in private without giving the industry unnecessary black eyes. Ethics is very high on the list in the insurance industry, and we don't want to lose the people's trust. That said, the industry is not perfect; but what industry is?
For our part, we believe in strong regulations and strong regulators.
We welcome your comments and ask you to keep in mind that we cannot and will not reply in any way or ways where any insurance commissioner could rightly say we've violated the law of the given state.
We are allowed to share rating-bureau data/reports and industry-consultant opinions but make clear here that those opinions are theirs and do not necessarily reflect our position.