News: Real Estate, Risk, Economics. Aug. 12, 2014

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Table of Contents
(Click to sections below.)

1) [Recommended] Coppola Comment: Marginally confusing

2) More Markets Slowly Inch Toward 'Normal' | Realtor Magazine

3) How 11 Rental Properties Have Increased My Net Worth By $600,000 in 3.5 Years | Invest Four More

4) Sober Look: Dodd-Frank creates a drag on residential mortgage growth

5) [Recommended] Writer Nomi Prins | Interviews | Tavis Smiley | PBS

6) Libertarian Fantasies – NYTimes com

7) [Highly recommended] When She Talks, Banks Shudder – NYTimes com

8) The Fed's Vice Chair Still Doesn't Know About the Housing Bubble | Beat the Press

9) Why Australia has one of the world's largest housing bubbles | Who crashed the economy?

10) Blame for blighted properties in Monessen reaches across globe | TribLIVE

11) Li Ka-shing, Wang Jianlin And China's Falling Home Prices

12) Southwest braces as Lake Mead water levels drop – San Francisco Chronicle

13) EPI and AEI Agree: Cutting Jobless Benefits Did Not Boost Employment | Economic Policy Institute

14) Long Mired in Slow Growth, Indy's Apartment Market Sees Big Gains in Q2 – YouTube

  1.    [Recommended] Coppola Comment: Marginally confusing

    Frances Coppola:

    Helicopter drops or fiscal easing that targeted the poor would be a more effective stimulus than QE. Even if people used the money to pay off debt it would STILL be a more effective stimulus than putting yet more money in the hands of those who already have more than they know what to do with. I refuse to accept that distributional matters are of no consequence.

    Agreed.

    Add your comment.


  2.    More Markets Slowly Inch Toward 'Normal' | Realtor Magazine

    About 16 percent of 350 metro areas tracked nationwide have returned or exceeded their last normal levels of economic and housing activity, according to the latest National Association of Home Builders/First American Leading Markets Index. Year-over-year, the index has gained seven markets.

    Add your comment.


  3.    How 11 Rental Properties Have Increased My Net Worth By $600,000 in 3.5 Years | Invest Four More

    We like reading Mark Ferguson because he doesn't hype his stories and remains reasonably transparent.

    I also have been lucky that prices have increased significantly in Northern Colorado in the last few years. I would say lucky for the sake of calculating net worth, but the increase in prices have made it harder to buy cheap rental properties with great cash flow.

    Add your comment.


  4.    Sober Look: Dodd-Frank creates a drag on residential mortgage growth

    Staying with the theme of credit expansion, one area where growth has been more constrained lately is residential mortgage lending. And one potential culprit seems to be the Consumer Financial Protection Bureau's Ability-to-Repay and Qualified Mortgage Standards Under the Truth in Lending Act (ATR/QM rule). These rules are part of the Dodd-Frank Act. …

    The ATR/QM rule has certainly not helped the housing market and may have created a drag on the US GDP. Welcome to the world of unintended consequences.

    We differ a bit. We don't think they were unintended. Higher standards definitely preclude some borrowers who would otherwise receive loans. The point was and remains to keep a bubble from forming and bursting again.

    Also, a lack of purchase money mortgages is at least partially off set by renting and new-apartment construction.

    A higher standard isn't the problem. We need good-paying jobs even to rent.

    Add your comment.


  5.    [Recommended] Writer Nomi Prins | Interviews | Tavis Smiley | PBS

    From TR until Reagan (?), Nomi Prins says her research at the various presidential libraries indicates that the banking dynasties collaborated with the Presidents in ways to regulate the banking industry.

    The writer and Wall Street veteran examines the genealogy of American power, about which she writes in her latest text, All the Presidents' Bankers.
    Nomi Prins left a 10-year career on Wall Street—with posts at Goldman Sachs, Bear Stearns in London and Lehman Brothers—to write about politics, money and relationships. Her articles have appeared in The New York Times, Fortune, The Guardian, The Nation and other publications, and her books include nonfiction, including Other People's Money, which predicted the financial crisis, and the historical novel, Black Tuesday. In her latest text, All the Presidents' Bankers, she gives an account of the hundred-year interdependence between the White House and Wall Street. Prins is also a senior fellow at Demos, a nonpartisan public policy research and advocacy organization.

    Add your comment.


  6.    Libertarian Fantasies – NYTimes.com

    Paul Krugman:

    …notion rests on the belief that the welfare state is a crazily complicated mess of inefficient programs, and that simplification would save enough money to pay for universal grants that are neither means-tested nor conditional on misfortune. But the reality is nothing like that. The great bulk of welfare-state spending comes from a handful of major programs, and these programs are fairly efficient, with low administrative costs.

    Actually, the cost of bureaucracy is in general vastly overestimated. Compensation of workers accounts for only around 6 percent of non defense federal spending, and only a fraction of that compensation goes to people you could reasonably call bureaucrats.

    That's true.

    Add your comment.


  7.    [Highly recommended] When She Talks, Banks Shudder – NYTimes.com

    We like very much the way Anat R. Admati thinks about banking. Binyamin Appelbaum:

    Ms. Admati's simple message is that the government is overlooking the best way to strengthen the financial system. Regulators, she says, need to worry less about what banks do with their money, and more about where the money comes from.

    Companies other than banks get money mostly by selling shares to investors or by reinvesting profits. Banks, by contrast, can rely almost entirely on borrowed funds, including the money they get from depositors. Ms. Admati argues that banks are taking larger risks than other kinds of companies because they use other people's money, and the results are that they keep crashing the economy.

    Her solution is to make banks behave more like other companies by forcing them to reduce sharply their reliance on borrowed money. That would likely make the banking industry more stodgy and less profitable — reducing the economic risks, the executive bonuses and, for shareholders, both the risks and the profits.

    Add your comment.


  8.    The Fed's Vice Chair Still Doesn't Know About the Housing Bubble | Beat the Press

    Dean Baker:

    Residential construction has recovered to some extent, but it is still well below its bubble peaks. Unless we see another bubble, there is no reason to expect construction to get back anywhere near its 2005-2006 share of GDP. Consumption has also recovered to some extent, but without the bubble wealth that drove it, there is no reason to expect it to reach the same share of output as in the bubble years.

    Agreed.

    Add your comment.


  9.    Why Australia has one of the world's largest housing bubbles | Who crashed the economy?

    Wow! Just wow.

    …if you think letting people steal money from their financial futures in order to buy houses today which they really can't afford is going to make real estate more affordable, you've been spending too many evenings with the goat. The opposite is probable. In Canada, it's fact.

    So maybe Xenophon just made an honest mistake and didn't do thorough homework before proposing this idea?

    Aussie Politicians and their $300 Million Property Portfolio

    Earlier this week, research surfaced on our politicians and their sizeable investment portfolios. In an article titled The Propertied Federal Political Class, the authors write:

    The public should ask "Are the property holdings of our federal politicians negatively influencing policy and causing them to ignore evidence?"

    It's a very good question.

    Their comprehensive research show 226 members in both houses of parliament with an ownership stake in a total of 563 properties — an average of 2.5 properties per member.

    The news spread like a virus, with Fairfax later picking up the story, The many houses of Parliament: property-rich pollies 'have vested interest' in high prices

    Oh and Xenophon I hear you ask? He owns just eight….

    Add your comment.


  10.    Blame for blighted properties in Monessen reaches across globe | TribLIVE

    Hersh isn't sure why people from another country invest in these properties.

    "We have tried to answer that question," she said. "We've heard that they are eBay transactions and simply have no idea what they're buying. They really don't understand the local market and think they're making a good investment."

    Court Gould, executive director of Sustainable Pittsburgh, said the spread of absentee owners is a sign of the times.

    "Clearly, we're in a time of a global economy, and now real estate is a global commodity," he said. "That's not necessarily a sign that people are investing in property because they think there's going to be a turnaround."

    Mandarino doubts that most foreign owners have ever seen their properties in person.

    "I've asked people, how did you find Monessen?" said Mandarino. "They said eBay. I asked an Indian gentleman once and he said he just typed 'cheapest homes in United States' in Google, and that's how he found Monessen."

    Add your comment.


  11.    Li Ka-shing, Wang Jianlin And China's Falling Home Prices

    Two of the men who have made the most money playing China's real estate market over the last two decades hedged their bets in recent days, as Li Ka-shing and Wang Jianlin diversified their investments away from the country's property sector.

    Although recent data does not support the notion of China's real estate market being a bubble waiting to pop….

    We see the data differently.

    Add your comment.


  12.    Southwest braces as Lake Mead water levels drop – San Francisco Chronicle

    Federal officials and water administrators in metro areas such as Las Vegas and Phoenix say they're committed to finding new ways to make every drop of river water count — from cloud seeding to pipelines to new reservoirs to desalination plants.

    They've been dragging their feet on desalination for decades. If they had started building when they should have, there'd be plenty of water right now.

    Add your comment.


  13.    EPI and AEI Agree: Cutting Jobless Benefits Did Not Boost Employment | Economic Policy Institute

    Joshua Smith:

    For economics to be taken seriously as a social science, its practitioners, no matter their political outlook, should be able to look at the same unambiguous data and reach the same conclusion. That is exactly what has happened in this case, with scholars from AEI and EPI agreeing that paring back jobless benefits did not have a positive labor market effect. If only Congress could get the memo.

    We'd rather Congress fund employment and high-skills training.

    Add your comment.


  14.    Long Mired in Slow Growth, Indy's Apartment Market Sees Big Gains in Q2 – YouTube

    Across the country, the apartment sector posted very strong revenue growth fueled by robust demand in 2014's 2nd quarter. The boom extended period the usual hotspots, reaching even Indianapolis — a slow-growth market that hadn't seen much momentum prior to Q2.

    Add your comment.


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