News: Real Estate, Risk, Economics. Jul. 24-25, 2014

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Table of Contents
(Click to sections below.)

1) Zillow's June 2014 Real Estate Market Report | Zillow Real Estate Research

2) Fired Ed DeMarco saved taxpayers billions – OC Housing News

3) Frances Coppola discusses Fed Rate Hike & Anthony Randazzo on govt pensions – YouTube

4) Steve Keen talks Debt & Karl Denninger on iOS security issues – YouTube

5) Attorney accused of letting properties fall into disrepair

6) The Housing Market Is Improving, but There Still Aren't Enough Affordable Homes to Go Around – CityLab

7) Property prices continue to soar in Australia with Sydney's median price now $800,000 | Mail Online

8) Real estate developer optimism runneth over in Silicon Valley – Silicon Valley Business Journal

9) Realtors see company growth over transitioning housing market – Bennington Banner

10) JLL adds to Florida multifamily real estate team with Matt Wilcox – Jacksonville Business Journal

11) Sales of U.S. New Homes Fell in June After Large Revision – Businessweek

12) Morgan Stanley to Pay $275 Million in Mortgage Case – NYTimes . com

13) America's economy: Jobs are not enough | The Economist

14) Another false alarm on US inflation? | Gavyn Davies

15) CONVERSABLE ECONOMIST: Unemployment and Labor Force Participation: Revisiting the Puzzle

  1.    Zillow's June 2014 Real Estate Market Report | Zillow Real Estate Research

    Outlook

    In this somewhat uneven housing recovery, with above average home value appreciation, we still have many markets that will take a very long time to make it back to pre-recession levels. Home values in half of the nation's 100 largest metro areas will not reach their pre-recession peak levels again for another three-plus years. Our forecast calls for another 4.2 percent appreciation from June 2014 to June 2015. We believe five challenges remain for the housing market: 1) Negative equity remains high, with 18.8 percent of mortgaged homeowners nationwide underwater. Negative equity is especially focused among the least expensive homes, which is having an adverse effect on inventory in the bottom tier. 2) Therefore inventory remains too low, which is one of the factors impacting existing home sales, making it our second challenge. 3) Household formation is still relatively low, and we currently see more households being formed on the rental side. 4) Mortgage and rental affordability will remain key topics over the next few years. Rental affordability in most metros is much worse than historically, while mortgage affordability is currently quite good due to still depressed home values and low mortgage rates. Income growth will play a key role in alleviating both constraints in many markets going forward. Luckily, slowing home value appreciation and future employment and income growth will help in staving off future housing affordability issues in much of the nation. 5) Mortgage rate lock-in, however, will become an issue as mortgage rates rise and homeowners find it cheaper to stay in their homes with a low fixed mortgage rate versus buying a more expensive house with a higher mortgage rate. Again, this has the potential to seriously affect existing home sales in the future.

    Add your com ment.


  2.    Fired Ed DeMarco saved taxpayers billions – OC Housing News

    In my opinion, Dodd-Frank was good law; the ability-to-repay rules will prevent reckless lending, and the new mortgage regulations should prevent future housing bubbles, but we've done nothing to wind down the GSEs, and the too-big-too-fail banks are even larger, so there is still work to do.

    It's unfortunate Ed DeMarco won't be guiding this effort. He is a rare good bureaucrat in an environment where such good work isn't rewarded.

    We like plenty of the articles on OC Housing News; however, we disagree that Dodd-Frank was good law in that it isn't good enough. It's too complicated. It's taken years of rules-writing just to enact it, and they aren't done yet! It would have been superior to first roll back the deregulation going back to when the Ronald Reagan era started.

    In addition, that deregulation is what got the GSE's in trouble in the first place. The GSE's followed the market that was led by the Wall Street investment banks where all the trouble began when they started throwing money at Orange County mortgage brokers.

    Why would privatization be the smarter move rather than continuing with the GSE's?

    Ed DeMarco chose to ignore various solid plans put forth by those GSE's. He did so for the sake of those who would come to own the privatized industry that would charge a great deal more to pay grossly inflated bonuses to largely undeserving executives.

    Add your comment.


  3.    [165] Frances Coppola discusses Fed Rate Hike & Anthony Randazzo on govt pensions – YouTube

    Frances Coppola is always a very interesting and educational read. She's extremely knowledgable and on top of the current issues. Here, she comes across as an equally unassuming personality. How pleasant.

    We agree with her entirely that monetary policy alone is not the way to go. In fact, we'd end up using the fiscal entirely and nothing but rules; but that's a huge other topic we won't attempt to explain here.

    Suffice it to say that we'd use interest-free United States Notes (which are not based upon any debt at all) rather than Federal Reserve Notes.

    [@ 4:37] Erin spoke with Frances Coppola, the brains behind the blog Coppola Comment, about Federal Reserve policy, rate hikes, and financial warfare.

    [@ 14:57] Erin speaks with Anthony Randazzo of the Reason Foundation about the negative effects stock bubbles can have on state and municipal finances and pension plans.

    Add your comment.


  4.    [166] Steve Keen talks Debt & Karl Denninger on iOS security issues – YouTube

    Definitely one of our favorite economists, Steve Keen tells it as it is.

    That said, we want to qualify that statement by saying that we don't necessarily subscribe to all of Steve's suggested prescriptions.

    [@ 4:33] Erin brings you part two of her interview with Dr. Steve Keen, and they explore debt levels and whether steering the economy using short-term interest rates is dangerous.

    Add your comment.


  5.    Attorney accused of letting properties fall into disrepair

    Oops:

    ATLANTA — Busted windows, abandoned cars and weeds so tall you can barely see the house. It's a problem we've seen throughout the city of Atlanta, that's costing millions in taxpayer money to fight.

    A Clayton County attorney, hired to prosecute those offenders now finds himself accused of his own code violations at multiple properties.

    Add your comment.


  6.    The Housing Market Is Improving, but There Still Aren't Enough Affordable Homes to Go Around – CityLab

    Very emphatic and contrary to what many in the business of selling houses want to hear: Richard Florida:

    …the not so good news. According to Zillow, there is not enough affordable housing inventory to go around in most of the country's large metro areas. Homeownership may in fact be slipping out of reach—not just for lower income Americans, but working and middle class people as well.

    It's high time to rethink America's housing policy, which has long incentivized homeownership over renting. While this made sense for the old industrial economy—when building homes in the suburbs helped create demand for factories producing everything from cars to TVs to washing machines—it makes much less sense for the knowledge economy, which is powered by density and clustering.

    Indeed, what we're currently going through is not a typical housing cycle, but what I have termed a "great reset." The reset includes increased demand for housing in large, dynamic metros—especially knowledge-based ones—slack demand in older metros and exurban locations, and increased demand for locations at or near the urban core and walkable suburbs serviced by transit.

    Most of all, the reset involves a shift from homeownership to renting….

    Build, sell, own, manage, and rent multi-unit dwellings and apartments. Thoughts?

    Add your comment.


  7.    Property prices continue to soar in Australia with Sydney's median price now $800,000 | Mail Online

    While watching this, remember Steve Keen's words from above.

    The median cost of a house in Sydney is now $811,837

    Biggest banks have rolled out their lowest-ever fixed rate home loans

    Commonwealth Bank triggered the change on Wednesday by introducing a 5% mortgage

    190,000 new houses are to be built nationwide in 2014/15

    The construction figures are a record high and beat the 1994 boom

    Add your comment.


  8.    Real estate developer optimism runneth over in Silicon Valley – Silicon Valley Business Journal

    Multifamily was the one asset class where the developers were a little sour — but even that was only in terms of occupancy. Sentiment toward rents is still about 80, which is very strong.

    Add your comment.


  9.    Realtors see company growth over transitioning housing market – Bennington Banner

    This is a good follow-up to the post immediately above.

    Maple Leaf's owners Troy Richardson and Kathy Sollien and their affiliated Realtors work with property owners to lease and manage properties, and oversee the sales of many of the commercial and residential properties in town.

    Richardson and Sollien have headed the various parts of the multi-faceted realty business model since they founded Maple Leaf.

    "That's really what helped us: Because when residential sales are down, some of those business lines generate a steady income," Richardson said.

    Add your comment.


  10.    JLL adds to Florida multifamily real estate team with Matt Wilcox – Jacksonville Business Journal

    "The upward pressure on rents is coming from all angles of demographics in this country," Wilcox said, "and really, there's a pretty limited supply in state of Florida. There's simply not enough quality units to fulfill the demand we are seeing — we're under supplied on the pipeline side."

    …Wilcox said the market is far from overheated, and the market is supported by job and population growth, as well as declining home ownership rates across generations — more and more people of all ages and income levels, he said, are choosing to rent.

    It's not always a choice.

    Add your comment.


  11.    Sales of U.S. New Homes Fell in June After Large Revision – Businessweek

    Fewer U.S. new homes than forecast were sold in June and data for the prior month was revised down by a record, painting a troubling picture of a market struggling to gain traction.

    Sales declined 8.1 percent to a 406,000 annualized pace, the fewest since March and lower than any projection in a Bloomberg survey of economists, Commerce Department figures showed today in Washington. That followed a May rate of 442,000 that was 12.3 percent less than estimated last month.

    Restrictive lending rules, limited land supply, higher mortgage rates and more expensive properties are restraining housing, underscoring Federal Reserve Chair Janet Yellen's concern that the industry is underperforming.

    Incomes are lacking. Monetary policy hasn't created jobs. Fiscal spending on the right things would.

    Add your comment.


  12.    Morgan Stanley to Pay $275 Million in Mortgage Case – NYTimes.com

    …a federal appeals court sent a strong message to trial judges about the dangers of second-guessing the S.E.C. when it comes to settlements.

    A three-judge panel of the United States Court of Appeals for the Second Circuit said Judge Jed S. Rakoff of Federal District Court in Manhattan had "abused" his discretion when he rejected a $285 million civil settlement between the S.E.C. and Citigroup over the bank's role in selling mortgage securities. Judge Rakoff took issue with the S.E.C.'s settlement because it failed to require Citigroup to admit any wrongdoing.

    We actually side with Judge Rakoff.

    Federal regulators shouldn't go after entities in the first place unless those regulators are prepared to hold the line requiring admission of guilt. We think it should be legally required of regulators that they not settle without such admissions.

    It's too easy for wrongdoing banks and others to pay settlements where there's nothing left for policy makers to point to, to force through needed reforms.

    Add your comment.


  13.    America's economy: Jobs are not enough | The Economist

    …potential growth may be being depressed by the hangover of weak demand from the Great Recession, rather than by underlying structural forces. For example, the labour force has grown by just 0.3% per year so far this decade, compared with 0.8% in the previous decade, and the participation rate—the share of the working-age population either working or looking for work—has fallen from 65.9% at the end of 2007 to 62.8%. Some of that is structural: of particular note is the fact that the first baby boomers qualified for Social Security (the public pension) in 2008. Some is cyclical: those who have not found work since the recession are quitting the jobs market. But which effect is bigger?

    A new report by Barack Obama's Council of Economic Advisers reckons 1.6 percentage points of the 3.1-point decline in participation can be explained by ageing alone. It reckons another half point is clearly cyclical. …

    … Not only has unemployment fallen rapidly, broader measures of underemployment which include the unemployed who have given up looking for work have fallen even further. Yet participation has not risen. Meanwhile, employers are having more trouble filling jobs: in May 3.2% of all jobs went vacant, close to a seven-year high, suggesting the jobless lack the skills that employers are looking for.

    The longer the Congress waits to use fiscal spending to create high-paying jobs, the more people will not come out of "retirement" once things do pick up.

    Add your comment.


  14.    Another false alarm on US inflation? | Gavyn Davies

    Gavyn Davies:

    In order to assess whether inflation is or is not a generalised economic process, several core measures have been developed inside the Fed. These are designed to remove spikes in commodity prices and other "flexible" prices, so that more persistent, underlying inflationary pressures can be laid bare. In the latest inflation scare, several of these core measures had shown a marked increase to their highest levels since 2008, which was worrying. But on today's data, they have fallen back:

    Even before today, the leadership of the FOMC has shown no concern at all about rising inflation, and nor had the financial markets. Given the costs of being wrong about this, it is worth asking whether they are being complacent.

    It now seems probable that part of the recent jump in core inflation was just a random fluctuation in the data. There have been suggestions that seasonal adjustment may have been awry in the spring.

    But the main reason for the lack of concern is that wage pressures in the economy have remained stable, on virtually all the relevant measures.

    Correct!

    Add your comment.


  15.    CONVERSABLE ECONOMIST: Unemployment and Labor Force Participation: Revisiting the Puzzle

    Timothy Taylor:

    The US unemployment rate has been painfully high in the Great Depression and its aftermath, but the high unemployment rates of the early 1980s look even worse–at least at first glance. However, the 1970s and 1980s were a time when a rising share of the adult population, and especially women, were entering the (paid) labor force, while the last few years are a time when the share of the adult population is in the labor force is declining . Indeed, it's been a standard concern in the last few years that the official unemployment rate is not capturing the true pain in the labor market, because the official unemployment rate only includes those who are looking for work–not those who have become discouraged and given up looking. What's is the interaction between the unemployment rate and the labor force participation rate telling us?

    Add your comment.


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