News: Real Estate, Risk, Economics. Jul. 12-14, 2014

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Table of Contents
(Click to sections below.)

1) Homeowners: A new class of fools – real estate – millennials – Commentary

2) Oso debris cleanup starts again | HeraldNet . com – Local news

3) Tornado Hit Homes in Upstate New York Where 4 Died – Western Massachusetts Breaking News and First Warning Weather with WGGB . com ABC 40

4) Fed explores overhaul of key rate – FT . com

5) Stanley Fischer Urges Congress to Expand Fed's Mandate – NYTimes . com

6) 7 killed in Lowell fire – Metro – The Boston Globe

7) China's Booming Real Estate Market Finally Begins To Slide : NPR

8) Demand Slows in UK Housing Market Amid Bank of England 'Rhetoric'

9) Sacramento-Area Housing Market Bounces Back without Cash | KTXL FOX40

10) George Magnus on Chinese Economy & Eswar Prasad on Possible Asian Currency War – YouTube

11) Golf Ball-Sized Hail Batters S. African Insurers' Outlook – Bloomberg

12) Inflation Is Changing Japan, Says Incoming Suntory President – Japan Real Time – WSJ

13) Greek Banks See Quadrupling of Housing Loans by Next Year – Bloomberg

14) He's the Top U.S. Mortgage Salesman. His Daughter Isn't Buying It – Bloomberg

15) Market monetarist views are a mish-mash of the good and the silly that don't belong together anyway | longandvariable

16) D-FW new home prices soaring thanks to higher costs | Dallas Morning News

17) US set to record lowest deficit in years

18) Evacuations ordered in Central Wash. wildfire | KOMO News

19) Energy boom: Oil and gas industry driving American jobs, manufacturing – YouTube

  1.    Homeowners: A new class of fools—real estate—millennials—Commentar y

    Scathing commentary on homeownership by Todd M. Schoenberger, the founder and managing partner of LandColt Capital LP:

    According to the U.S. Department of Housing and Urban Development, privately-owned housing starts in May dropped an unnerving 6.5 percent from a downwardly revised April reading. And single-family housing didn't fare much better either, as starts fell by 5.9 percent against a lowered April print. This signals what is likely to be a brutal third and fourth quarter for the sector.

    If we were in the business, we'd be building to hold apartments.

    Add your comment.


  2.    Oso debris cleanup starts again | HeraldNet.com – Local news

    Huge, emotional job for the patient and careful:

    Spotters watch as through the estimated 200,000 cubic yards of material is sifted for remains and personal belongings at the site of the Oso mudslide Wednesday afternoon.

    Add your comment.


  3.    Tornado Hit Homes in Upstate New York Where 4 Died – Western Massachusetts Breaking News and First Warning Weather with WGGB.com ABC 40

    …one two-story home is gone, the structure blown away and leaving only the foundation.

    Madison County Sheriff Allen Riley says the home was blown hundreds of feet before it landed on an unoccupied house.

    Add your comment.


  4.    Fed explores overhaul of key rate – FT.com

    With the Fed targeting rates close to zero, the reliability of Fed funds has been less important but when the Fed starts raising rates — something markets expect it to do in the middle of next year — it needs to be sure that it is targeting a real benchmark.

    In particular, the Fed is looking at redefining the funds rate to include eurodollar transactions — dollar loans between banks outside the US markets — as well as traditional onshore loans between US banks.

    The central bank must be careful, however, because there are $174tn of US dollar interest rate swaps tied to Fed funds and it does not want to invalidate these.

    Add your comment.


  5.    Stanley Fischer Urges Congress to Expand Fed's Mandate – NYTimes.com

    Binyamin Appelbaum:

    Mr. Fischer also endorsed a suggestion by one of his predecessors, Donald L. Kohn, that Congress should instruct the Fed to maintain financial stability, adding it to the list of the bank's explicit responsibilities along with stable inflation and maximum employment.

    If we are to keep the Federal Reserve system (which we aren't advocating), adding stability would be wise. However, we would also prioritize mandates by placing maximum employment first and by adding avoiding moral hazard second followed by stability (which we take as the Fed's regulatory requirements; prudential) and then controlling inflation/deflation.

    Add your comment.


  6.    7 killed in Lowell fire – Metro – The Boston Globe

    Four adults and three children were killed when a fire raced through an apartment building early this morning, in the deadliest blaze in the state in two decades. In the chaotic scene, desperate residents dropped children from windows, jumped themselves, or were rescued by firefighters, authorities said.

    The nightmarish quality of the scene in the predawn hours was intensified by the detonation of fireworks inside the building during the blaze, according to witnesses.

    Do you allow fireworks to be kept in your rental properties? The fireworks may not have been the cause, but sometimes they are.

    Add your comment.


  7.    China's Booming Real Estate Market Finally Begins To Slide : NPR

    Huang says prices in Wuxi, which has a population of nearly 5 million, have already dropped 15 to 20 percent this year. He estimates it would take nearly 2 1/2 years to sell off all of Wuxi's current housing stock.

    In private comments leaked online, an official with one of China's biggest developers, Vanke, estimated that the city's unsold inventory was actually double that, almost five years' worth of empty apartments. By all accounts, the culprits are overbuilding, inflated prices and almost no local demand.

    Rui doesn't expect the market to crash. He says the government has many tools — from cutting interest rates to lifting restrictions on home purchases — that can prevent free fall.

    We think the people are generally seeing through all of that.

    Add your comment.


  8.    Demand Slows in UK Housing Market Amid Bank of England 'Rhetoric'

    Demand in the reviving housing market is the slowest it has been since early 2013 as strong words from the Bank of England and tougher mortgage rules from the financial sector regulator deter some would-be home buyers.

    That is according to a housing market survey by the Royal Institute of Chartered Surveyors (Rics) for June.

    Add your comment.


  9.    Sacramento-Area Housing Market Bounces Back without Cash | KTXL FOX40

    It turns out that the number of homes bought and sold, and the price of those homes, isn't the only indicator of a recovering real estate market. There's also the age-old question: will that be cash or credit?

    Cash is no longer king in the Sacramento real estate market.

    The video embed was auto-play without an apparent setting to turn it off, so we deleted it and ask you to click through to watch it if you want to see it.

    Add your comment.


  10.    [158] George Magnus on Chinese Economy & Eswar Prasad on Possible Asian Currency War – YouTube

    [@ 3:59] Erin sits down with economist and author George Magnus to understand what is happening in the Chinese property and shadow banking sectors.

    [@ 15:24] Erin brings you part two of her conversation with economist Eswar Prasad and whether or not there is a looming currency war in Asia.

    George Magnus mentioned oversupply and leverage as new developments. We agree. He is in our view, however, still too optimistic about how successful China will be in dealing with the slowdown.

    Add your comment.


  11.    Golf Ball-Sized Hail Batters S. African Insurers' Outlook – Bloomberg

    Angela Dike was showing clients how to make duck red curry and chocolate spring rolls in her Thai cooking class when hail stones as big as golf balls started slamming into the 18 cars parked outside.

    "They say these kinds of storms are one-in-20 year events, but now we've had two in two years," Van den Berg said in a June 25 phone interview.

    Add your comment.


  12.    Inflation Is Changing Japan, Says Incoming Suntory President – Japan Real Time – WSJ

    The emergence of inflation is already starting to change the mindset of corporate Japan, with the tide turning in favor of innovative risk-takers, says the incoming president of Japanese brewer Suntory Holdings Ltd.

    Mr. Abe's economic policies aimed at generating inflation and spurring growth are taking the the nation into uncharted territory, he noted.

    "Nobody knows for sure if they will succeed or how things will play out. But whatever happens, you need to learn to adjust your course as you try to move ahead," Mr. Niinami said.

    Add your comment.


  13.    Greek Banks See Quadrupling of Housing Loans by Next Year – Bloomberg

    Different approaches:

    Greek banker Theodoros Kalantonis, who has survived the worst of times the past six years, said he can finally see the resurrection of home lending.

    Next year "will be a turning point for the Greek mortgage market," Kalantonis, executive general manager of retail products and non-performing loans at Alpha Bank A.E. (ALPHA), said in an interview from his Athens office. "People will realize prices won't fall any further, latent demand will continue to increase and banks will be more active in promoting new loans."

    "We are seeing a lot of strategic defaulters, those who could pay but didn't, now coming forward to speak to banks to restructure mortgages," Kalantonis said. "This has clearly helped to slow down the rate of increase of non-performing loans and makes banks more confident and willing to start lending again."

    Skouzos said that although it will be "painful," banks should foreclose and auction properties, using whatever money they get for them to cancel the outstanding mortgage debt. "This would result in severe price corrections but would finally pave the way to the rebirth of a dead market," he said.

    "We will increase foreclosures but in a gradual and careful way, so as not to create a problem for the market," Kalantonis said.

    Kalantonis said his bank will negotiate with distressed borrowers to restructure their loans or offer to let them stay in their properties and pay whatever they can while the lender seeks a buyer for their homes.

    We sympathize with many borrowers because they were misled by lenders falling for the Wall Street hype of securitization and that the economy would never crash but keep growing and growing. Many of the borrowers were anything but deadbeats. They were gullible.

    Of course, there is real moral hazard, and banks owe it to society to keep those who can't manage it out of homeownership and mortgages.

    The last thing the world needs are lax, laissez-faire lending policies and practices again.

    Add your comment.


  14.    He's the Top U.S. Mortgage Salesman. His Daughter Isn't Buying It – Bloomberg

    The doubt is so pervasive that it's eroded entry-level sales and hampered the recovery. In May, the share of first-time buyers fell for the third month, to 27 percent, according to the National Association of Realtors. Historically, it's been closer to 40 percent of all buyers.

    Add your comment.


  15.    Market monetarist views are a mish-mash of the good and the silly that don't belong together anyway | longandvariable

    Tony Yates:

    Market monetarism seems to be trending in the twittersphere and the blogosphere. Before I ventured into these noisy arenas, I'd never heard of it. After reading some of the outputs, I find myself struggling to understand it. What the hell is it? Why is it so popular? Why does it have a name? Most of us don't go round declaring ourselves to be part of a school of thought, or coining terms to name ourselves.

    Market monetarism [MM here on] has embraced some of the following claims or views. This list might be incomplete, and it's possible that contrarian positions by MMs have been stated on some points below. So this critique risks doing some an injustice. But in order to start somewhere:

    Tony's comments may be hard going for the uninitiated, but one must start somewhere. He has it right about MM as far as we understand MM.

    Add your comment.


  16.    D-FW new home prices soaring thanks to higher costs | Dallas Morning News

    New home prices are soaring in some North Texas neighborhoods, thanks to rising construction costs and higher land prices.

    Add your comment.


  17.    US set to record lowest deficit in years

    The Treasury Department says the June surplus totaled $71 billion, following a $130 billion deficit in May. The government also ran a surplus in June 2013, bolstered by dividends from Fannie Mae, the mortgage giant under federal conservatorship for the past six years.

    The Congressional Budget Office is forecasting a deficit of $492 billion for the full budget year ending Sept. 30.

    The "crowding-out" crowd will take this as a good turn, but those who understand deleveraging by the private sector and the slow velocity of money in the real economy will take it for what it is.

    The now debunked-by-historical-evidence theory was that federal lending necessarily crowds out private lending thereby causing economic slowdowns. The fact is that during slowdowns of the type we've been experiencing since before the onset of the Great Recession, private borrowers deleverage (reduce borrowing), which slows the economy. The public sector needs to step in and spend to keep the money flowing through the economy. If it spends enough on the right things, the economy will not only not suffer but grow its way back and quickly.

    The problem with the current methods used by the Fed is that while there has been plenty of money created, it has not gone to the right investments and has been largely sitting somewhat idly for a whole host of reasons. The federal government has not stepped in and spent enough on the right things: for the products and services that would generate the most return (sustainable economic growth) on investment (tax revenues and money created spent).

    Add your comment.


  18.    Evacuations ordered in Central Wash. wildfire | Local & Regional | Seattle News, Weather, Sports, Breaking News | KOMO News

    One central Washington wildfire has burned across 28 square miles in just two days while another has broken out in hot, tinder-dry conditions.

    The Mills Canyon fire near Entiat has burned across more than 18,000 acres since it started Tuesday, fire spokesman Rick Scriven said Thursday evening. Residents of about a dozen homes have been told to evacuate, while more than 200 other homes were threatened.

    Add your comment.


  19.    Energy boom: Oil and gas industry driving American jobs, manufacturing – YouTube

    The U.S. is undergoing a massive energy boom that is fueling considerable economic growth in particular parts of the American economy, including jobs and manufacturing. JLL's Global Energy Practice Leader Bruce Rutherford discusses these affects.

    Two things: Will it last, and what about the environmental costs?

    Many wells die out much sooner than had been estimated; and unless we can sequester carbon and fix the ground water and seismic and other issues, the oil and gas fracking boom may be a bust.

    Our view is that we should be plowing our efforts into known clean alternatives.

    Add your comment.


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