Linking ≠ endorsement.
↑ LA Times – Shocked into reality by the Great Recession
Total household debt rose $129 billion from January through March, the first time since the recession it had increased for three straight quarters, according to the Federal Reserve Bank of New York.
Although debt remains down about 8% from the 2008 peak, it is up about $500 billion since hitting a post-recession low a year ago.
At the same time, the personal savings rate, which quadrupled during the worst of the recession to more than 8%, has been moving down again, Commerce Department data show. It's now less than half that recent peak level.
Dangerous trend? Mark Zandi, chief economist at Moody's Analytics, doesn't seem to think so. He thinks people will level off well before returning to the bad old days of reckless lending and borrowing. We hope he's right even while we think people are being premature in slowing or ending their household deleveraging and in decreasing their rate of savings.
↑ Woman charged with arson after attacking spiders with fire | Bundaberg NewsMail
Arachnophobes take note: a woman has been arrested on an arson charge after she tried to kill a spider with fire.
↑ 11 bodies found, building owners among 5 arrested | The Indian Express | Page 99
Eleven bodies have been recovered so far as massive rescue operations continued at the building collapse site at Mugalivakkam near Porur here even as police said they have arrested five persons in connection with the tragedy.
… Two alleged owners of the building were arrested Sunday morning along with two engineers as police rounded up five persons in connection with the incident and booked them under various sections of IPC.
Minister of State for Heavy Industries Pon Radhakrishnan, MDMK leader Vaiko and MMK chief M H Jawahirullah, who visited the site this morning, called for those responsible behind the incident to be brought to book. DMDK leader Vijaykant, meanwhile, issued a statement condemning the incident and sought action against those responsible.
↑ In corporate tax reform, Abenomics giveth, and taketh away | Reuters
Abenomics' corporate-tax changes are to run unprofitable business out of business, which will lead to great consolidation.
(Reuters) – For corporate Japan, burdened by one of the industrialized world's steepest tax rates, a tax cut at the center of Prime Minister Shinzo Abe's latest growth strategy will end up giving with one hand – and taking back with the other.
While the headline tax rate will fall, Tokyo, under pressure to shore up its finances with a public debt twice its annual GDP, is seeking to offset the tax cut by scaling back exemptions and deductions favoring small and loss-making companies.
↑ Canadians may no longer be top foreign buyers of U.S. real estate – The Globe and Mail
The Canadian dollar, which topped $1 U.S. for much of 2011 and 2012, weakened last year and has recently been trading at around 93 cents. A stronger Canadian currency makes it more attractive for Canadians to buy properties in the U.S. Many economists are expecting the loonie to slide below 90 cents in the year ahead.
Foreigners bought about $68.2-billion (U.S.) worth of existing homes in the U.S. in the 12 months leading up to March, 2013, down from $82.5-billion a year earlier, and accounting for about 6.3 per cent of the total sales. Of the property sales to foreigners, about half were to people with permanent residence outside the U.S. while the other half were to recent immigrants or temporary visa holders.
↑ [Recommended] Reverse Repo Risks – Money, Banking and Financial Markets
This is a good cautionary story.
… we argued that the Fed will use reverse repos (RRPs) and target the repo rate to restore normality. In a repo operation, the Fed lends overnight by providing cash against the collateral of securities. A reverse repo goes the other way: the Fed borrows overnight by receiving cash from its lenders while providing them securities as collateral. In this post, we will highlight a pitfall with the reverse repo approach to managing the Fed's balance sheet.
↑ Obama administration expands affordable housing plan
The Obama administration has called on Congress to allow Ginnie Mae, a government-sponsored enterprise, to securitize loans made under the Federal Housing Administration risk-sharing program, but so far lawmakers have not acted.
The risk-sharing program allows state housing finance agencies to underwrite multifamily FHA loans while agreeing to share the risk of losses on those loans.
Lew said that until Congress acts, the administration was directing the Federal Financing Bank to fund FHA-insured mortgages. Under the new plan, the Federal Financing Bank could provide $500 million to $1 billion in annual funding for rental housing projects.
↑ When real estate flips you the …
We don't agree with the middle-finger notion at all. We do, however, understand people being upset by the changing character of the traditional look. That said, with real-estate values what they are and with zoning and code allowing it, it's inevitable ("progress").
The cost of land in the nation's hottest urban neighborhoods is only going up, and that has developers building up, higher, even when the new construction might not fit in with the old.
The buildings have been nicknamed "pop-ups"—as tall as 65 feet, these modern rowhouses are springing up between smaller, historic homes.
↑ Income Restricted Coops | Coops Income Restristions
Even in New York City's red-hot residential market, listings with income restrictions are languishing.
"It's a Catch-22, since they can't earn more than a certain amount, but cannot qualify for financing at that income unless they make a massive down payment," Christopher Stanley, an associate broker with the Corcoran Group, who recently sold a $510,000 one-bedroom in Hell's Kitchen that required the buyer to pay in cash yet earn no more than $67,000 a year, told the New York Times. "Everybody wanted to buy, but most people could not qualify."
Co-ops in the Housing Development Fund Corporation, or HDFC, were originally intended for low-income New Yorkers, mostly on the Lower East Side and in Upper Manhattan, Brooklyn and the South Bronx.
Back when they were created in the 1970s, many of the apartments were sold for just $250 each, and, to keep them affordable, income ceilings were imposed on resales. An estimated 25,800 of these apartments still exist today.
But now that many of these co-ops list for well over $300,000, finding a buyer with that kind of cash and middle-class income can be a formidable challenge.
"You needed to be income poor, but savings rich," said Gary Cowling, an actor, who met the $67,000 income cap for a Hell's Kitchen co-op. "Acting and teaching does not make a lot of money."
↑ [Highly recommended] Why Europe's austerity experiment is doomed to fail (7 graphs) | Real-World Economics Review Blog
The narrative is that irresponsible government spending led to the crisis, and "fiscal consolidation" — a drastic reduction in the level of public debt thanks to years of budget surpluses — can end it. Greece in particular has been told to run budget surpluses of 4.5 per cent of GDP for the next decade or so, and to have a long-term target of a 4 per cent surplus every year. And Greece has no choice but to shoot for this target, since its budget must be approved by the EU.
So how does this narrative stack up against the facts?
Growing government debt thus appears to be more a symptom of the crisis than a cause. Its rise began after the crisis in both countries, not before; and the one that hasn't deliberately attempted to reduce government spending by austerity is the one whose public debt ratio is no longer rising.
The takeaways from this statistical comparison are that private debt dynamics are what drive the economy, and that public sector austerity fails because it forces the private sector to continue deleveraging. The EU-imposed austerity program is the reason that Greece and Spain are experiencing a Great Depression now, rather than the obvious (if fragile) recovery that is well underway in the US. It is a classic own goal by the mainstream-economics-obsessed bureaucrats in Brussels.
↑ Study: Renting is Hot, but Affordability Concerns Loom | ApartmentGuide.com
One of the most surprising figures to come out of the study concerns the number of people moving into rental houses. The total number of single-family homes rented from 2006-12 increased by 3.2 million, roughly twice the number of new apartments added.
There's plenty more in the article.
↑ BoE to the rescue? – YouTube
The Bank of England is attempting to slow the growth of house prices and mortgage lending with measures designed to stop a future credit boom. Kate Allen, property correspondent, discusses with the FT's John Authers what might happen to the property market if the BoE were to raise interest rates.
↑ BBC News – Jean-Claude Juncker 'will address UK concerns'
You might wonder why this would matter to real estate especially in the US if that's your interest. EU integration has a great deal to do with whether we will see another wave of national crises around the world. We are in favor of EU integration provided the EU is made more democratic rather than technocratic and elitist and provide it undergoes both economic and political integration and monetary reform particularly of its currency, which among other things, ought to be made debt-free.
Jean-Claude Juncker has told David Cameron he is "fully committed to finding solutions for the political concerns of the UK", No 10 has said.
The PM called the European Commission president-designate and the pair discussed working together to "make the EU more competitive and more flexible".
"The PM welcomed Mr Juncker's commitment of finding a fair deal for Britain," the No 10 spokesman said.
It comes after Mr Cameron was defeated in an EU vote over the new president.
Mr Cameron tried to block Mr Juncker's appointment by forcing a vote on the selection of the former Luxembourg prime minister, who is seen as a backer of closer political union.
But EU states voted 26-2 to appoint him, in what Mr Cameron described as "a bad day for Europe".
This is from before Junker won, but it's still informative and a bit entertaining.
↑ John Mauldin's take on Q1 GDP & Divya Narendra looks at technology & investing – YouTube
[At 6:21] Edward speaks to John Mauldin of Mauldin Economics to get his take on the latest revision of the Q1 2014 GDP. Mauldin takes a look at how the healthcare sector is affecting the economy.
↑ Jim Rickards talks Financial Warfare & Eric Schneiderman targets Barclays – YouTube
[At 4:43] Erin brings you part two of her interview with economist and author Jim Rickards.
↑ Pending home sales surge 6% in May vs. 1.2% gain estimate
The spring recovery in home sales gained further ground in May. Signed contracts to buy existing homes surged 6.1 percent from April, as home prices began to ease slightly. This is the largest monthly gain since April 2010, just before the end of the popular first-time home buyer tax credit. Despite the monthly gain, the so-called Pending Home Sales Index from the National Association of Realtors is down 5.2 percent from May of 2013.
Sales likely benefited from slightly lower mortgage rates. Rates have been expected to rise, as the Federal Reserve continues to scale back its purchases of mortgage-backed securities.
Rates were expected to rise by those who did not understand the flight-to-safety aspect when the Fed tapered. They weren't thinking globally. That said, we still maintain that the taper has been premature while also maintaining that the Fed is not where the action should be but rather the US Congress and fiscal spending, which should be way, way up, not driving to austerity. In other words, the hawks are still wrong.
↑ [Check out the math] The deflating Chinese real estate bubble could destabilize the world economy – OC Housing News
Many people envision the Great Reset, the ultimate culmination of Hyman Minsky's vision. So far central banks around the world have lowered rates and printed more money to prevent this reset from happening, particularly in China. Right now, the moral hazard in China is so extreme that nobody believes the central bank will allow the Great Reset to occur — even the central bankers believe it; however, when you consider the size of the enormous bubble in real estate in China, it's hard to believe the central bank can print enough money to save it.
If China prints enough money to paper over its bubble, it will flood the world with its currency, and its value will crash.
↑ Air Duct Cleaning Scams
Once sales agents are in the customer's homes they run reportedly bogus mold detection tests and tell the owner they must pay thousands of dollars to have the mold removed.
↑ [Recommended] Home Sales Increase in May – But It's a Pinto Disguised as a Ferrari | Tumlis : Blog
Only 27 percent of last month's sales were from first-time buyers. This is near the lowest level since the stat was first tracked by Realtors group. Economists consider 45 percent first-time buyers to be a healthy market.
So the question is: who the heck is buying to reflect this dramatic increase in existing homes?
Per this graph from Zero Hege it appears that the top homes are seeing the growth and accounting for the increase in existing home sales.
↑ Top 5 Considerations When Choosing a Fixed or Floating-Rate Commercial Real Estate Mortgage | Metropolitan Capital Advisors
Everyone would love to have the perfect fixed-rate loan when considering their next real estate acquisition, development, or property refinance. With interest rates at historical lows, a fixed-rate loan is very tempting. However, fixed rate loans may not always offer the best financing solution.
Here is our "Top 5" list to help you consider the benefits of a fixed versus floating-rate loan.
Prepayment penalties or prohibitions and short-term investments are good points.
↑ Memphis launches initiative to deter copper thefts – SFGate
MEMPHIS, Tenn. (AP) — Officials in Memphis have launched an initiative aimed at decreasing copper thefts in the city.
The CopperStoppers program will offer a financial reward if people supply information that leads to an arrest. The program will give up to $250 to someone for information leading to an arrest of a suspect in a copper theft and up to $1,000 for information that leads to the arrest of someone who buys or transports stolen metal.
↑ New York Towns Can Ban Fracking, State's Top Court Rules – Businessweek
June 30 (Bloomberg) –New York's cities and towns can block hydraulic fracturing within their borders, the state's highest court ruled, dealing a blow to an industry awaiting Governor Andrew Cuomo's decision on whether to uphold a six-year-old statewide moratorium.
Until the earthquake and groundwater issues have been put to rest, we agree with this decision. We think the industry won't be able to withstand the growing evidence that fracking is inherently too dangerous for the environment, for people's health, etc.
↑ [Highly recommended] Why New York Real Estate Is the New Swiss Bank Account — New York Magazine
This is long but very revealing.
With a little creative corporate structuring, the ownership of a New York property can be made as untraceable as a numbered bank account.
Wow! The level of secrecy that covers some obviously serious corruption is amazing. Governments are so lax. The ultrahigh net worth individuals' money talks globally. Politicians turn a blind eye.
↑ Yujiapu China | Yujiapu Manhattan
"Investing here won't be better than throwing money into the water," Chinese investor Zhang Zhihe told Bloomberg News. "There will be no way out — it will be very difficult to find the next buyer."
Why are the Chinese doing this to themselves? Is it due to their lack of experience with capitalism? If so, what was America's excuse in the lead-up to the Great Recession?
↑ Millennials Skip the Ring and Mortgage – Bloomberg View
A 2013 paper looking at changes in the skill demands of jobs makes a rather dismal case that the demand for "routine cognitive" work — the kind of jobs that used to employ a lot of college graduates — has plummeted since 1970. For a long time, nonroutine analytical and interpersonal jobs were taking up the slack, but they've plateaued since 2000. This is consistent with other research and new data on the evolution of productivity in the U.S. economy, which had a tech-driven boom starting around 1995 but seems to have returned to trend. All of these findings paint a notso-hotso picture of future millennial earnings.
On the other hand, the job market looked pretty dim in 1938, and things were about to get a lot better. So you don't want to be too deterministic with these sorts of forecasts.
Robotics and other technological advancements will change everything. We will have to completely redesign the economic/monetary system to match it. Humans will not need to work for money.
↑ Coppola Comment: Of interest rates and deficits
Quite apart from the fact that not everyone agrees that the UK's fiscal deficit is too large, I think it is very evident that loose monetary policy cannot offset fiscal austerity. Admittedly, the combination of tight monetary policy with fiscal austerity – as in the Eurozone – is far worse, but most economists agree that the UK's fiscal austerity in 2010-12 did derail its recovery despite the Bank of England's monetary offset. The reason for this is likely to be the regressive nature of QE and fiscal austerity, both of which disproportionately affect poorer people – who are also those with the highest marginal propensity to consume. Supporting asset prices for the rich does not have the same effect on AD as increasing benefits and cutting taxes for the poor. The UK government has now started to do the last of these, and lo! there is recovery. What a pity it took three years for them to realise that monetary and fiscal policies need to complement each other rather than being antagonistic.
Unless nominal incomes start to rise and/or the external deficit starts to fall, this recovery cannot possibly be sustainable. Fiscal austerity at the moment would be madness – and so would interest rate rises.
So I can't agree with those who would like to see interest rates rise soon. And I can't agree with Sumner about increasing fiscal austerity, either.
↑ Japan Inflation At A 32 Year High? | A Fistful Of Euros
… if the number of people employed is rising, why isn't what Prime Minister Abe calls the "virtuous cycle" starting to work, with jobs growth producing income growth to spur consumption, so lifting corporate profits and investment spending? Part of the answer lies in the kind of jobs being created. The growth in the number of workers on short-term or part-time contracts means that total earnings (as opposed to basic wages) across the economy are not rising. Employment was up 0.9% while disposable income among worker households FELL 3.4% in real terms. The numbers just don't add up.
The sales-tax increase was a mistake, but we'll have to wait to see whether the reduction in corporate taxes will somehow trickle out into the real economy. As far as we know, there are no real strings attached, which is not good. (See: T-LTRO: variation on a (ECB's) theme | Silvia Merler at Bruegel dot org)
↑ Knowing the Limits on Collection Practices for Property Managers | PropertyManager.com
One of the challenges in the management of rental properties involves collecting from residents behind on rent payment. Knowing the laws which govern the methods used for collection is a vital first step.
We can debate how far we'd push the envelope to make sure the rent is collected, but the key to avoiding legal trouble is awareness and compliance with federal, state and local regulations.
A good place to begin is the federal government's "Fair Debt Collection Practices Act" which is enforced by The Federal Trade Commission (FTC). You can go directly to their web page on this topic for details.
↑ 6 Acronyms Every Beginner Real Estate Investor Should Know | Money.com
Pretty much every time you learn something new, you also learn a whole new vocabulary to go along with it. Real estate investing is no different. Real estate investors must understand the terms and investment vocabulary. Here are some definitions of common acronyms to get you started:
↑ China house prices fall in June as concerns about property bubble ease | GantDaily.com
Prices had slid 0.32 percent in May month-on-month, the first drop in almost two years, but CIA said the rate of decline accelerated in June. Prices were down in 71 cities and increased in just 29, the academy said.
"… accelerated …"!
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.