News: Real Estate, Risk, Economics. Aug. 23, 2014

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Table of Contents
(Click to sections below.)

1) 26 Real Estate Experts Reveal Common Investor Mistakes

2) Where you give up the most to afford a house

3) [Recommended] Atlantic Ocean key to global-warming pause : Nature News & Comment

4) Urban Institute: QM impact is overblown | HousingWire

5) Chronic shortages of housing supply inflates California house prices – OC Housing News

6) Longville volunteer fireman gets 5 years for arson – SFGate

7) $500K Settlement In Apartment Manager Sexual Harassment Case – CBS Detroit

8) Mill fire investigation may take up to a year | News | The Register-Guard | Eugene, Oregon

9) California Wildfire destroys 8 homes, 10 buildings – SFGate

10) NC lawmakers reach compromise on coal ash measure – Businessweek

11) Billionaire to pay $1.5M fine for Kentucky mines – The Washington Post

12) Governor Cuomo Issues Consumer Alert on Potential Home Repair Scams in Wake of Flooding on Long Island

13) [Recommended but qualified] China's Fire Next Time by Yu Yongding – Project Syndicate

14) The euro-zone economy: Cyclical stagnation | The Economist

15) Bank of America's $16 Billion Mortgage Settlement Less Painful Than It Looks – NYTimes com

16) [Recommended] Italy's Downward Spiral by Hans-Werner Sinn – Project Syndicate

17) IMF: Macroprudential Policies Better During Booms – Real Time Economics – WSJ

18) Australian Tax Office decides bitcoins are assets, not currency

19) Has China done enough to shore up its economy? – Forum:Blog Forum:Blog | The World Economic Forum

  1.    26 Real Estate Experts Reveal Common Investor Mistakes

    For many first-time real estate investors, taking the leap and buying an investment property is one of the scariest things they'll ever do. After all, there is a lot at risk if things go south.

    Two weeks ago I asked 26 real estate experts and successful investors a simple question:
    If you could list 3 common mistakes made by first-time real estate investors, which 3 would you list?

    I wanted to know plain and simple which three mistakes most often derailed first-time real estate investors when getting started in their investment careers.

    As an investor myself, I've spent money on coaching and paid for expensive tutorials in the hope that I would uncover the secret to real estate success. However, very few of these resources got me any closer to my goal of financial freedom. That's why I decided that I needed to go straight to the horses mouth.

    Read on to discover the three most common mistakes made by first-time investors, as listed by 26 of the industry's top real estate experts and investors.

    You can either skip to your favorite expert using these quick links or grab a coffee, get comfortable and commence scrolling.

    Add your comment.

  2.    Where you give up the most to afford a house

    Landlords make higher profits keeping more people renting by keeping rent rates high while house prices are high.

    "The health of the for-sale market is directly tied to the rental market, where affordability is really suffering" said Zillow Chief Economist Stan Humphries. "As rents keep rising, along with interest rates and home values, saving for a down payment and attaining homeownership becomes that much more difficult for millions of current renters, particularly millennial renters already saddled with uncertain job prospects and enormous student debt."

    Add your comment.

  3.    [Recommended] Atlantic Ocean key to global-warming pause : Nature News & Comment

    This is important to real-estate investing because humanity getting a handle on global warming and sea-level rises will greatly help us to mitigate and even reverse the long-term trend, thereby making coastal properties more valuable and much less risky.

    Deep-sea-temperature and current changes are, of course, measurable via deep-sea probes and other methods.

    We'll be hearing much more about this as time progresses.

    Let's hope the scientists nail down the various causes with a reasonable degree of certainty as to which is contributing how much.

    The hardest part, of course, will be anticipating what those various variables will do in the future. Patterns in other fields have been proven to change dramatically in unexpected ways, and this "lost heat" is apparently a good example of that happening in climate science.

    To conclude, however, that global warming has stopped rather than that the heat has been sinking (pun not intended) into something rather than increasing in the atmosphere at a steady rate would be the height of folly.

    Despite the naysayers, jet trails (also known as contrails and/or chemtrails) definitely slow warming. We know that because of the 9/11 pause on commercial flights in the US. The air cleared during that time, and the atmosphere heated proportionately. You don't hear much about that because of the sensitivity of the use of aerosols for whatever reasons. Environmentalists would be up in arms were the issue to become front-page headlines in the mass mainstream media.

    Rather than geoengineering to mask over the carbon burning, we'd much rather see massive reduction in carbon-burning ASAP. We'd like to see a Manhattan Plan for clean, sustainable, much safer, alternative (non-carbon) energy production and distribution.

    The proper way to fund that project would be via United States Notes (bond-free) rather than issuing bonds and Federal Reserve Notes, which Fed Notes with bonds raises the national debt and forces more wages to go to taxes to pay interest on the bonds.

    Add your comment.

  4.    Urban Institute: QM impact is overblown | HousingWire

    It turns out that all of the concern and trepidation surrounding the rollout of Consumer Financial Protection Bureau's new Qualified Mortgage and Ability-to-Repay rules in January wasn't worth it.

    Prior to the new lending standards going into effect, many in the industry worried that mortgage originations would drop sharply due to the new CFPB standards.

    But according to new analysis from the Housing Finance Policy Center team at the Urban Institute, there has been "surprisingly little impact" on the mortgage origination numbers since QM went into effect in January.

    Add your comment.

  5.    Chronic shortages of housing supply inflates California house prices – OC Housing News

    …you can either have sprawl, density, or high real estate prices. For better or worse, Californians generally chose high real estate prices.


    Add your comment.

  6.    Longville volunteer fireman gets 5 years for arson – SFGate

    BATON ROUGE, La. (AP) — A former volunteer firefighter from Longville has been sentenced to five years at hard labor for setting wildfires in woods near his home town, but could get out in as little as a year, the Louisiana Department of Agriculture and Forestry says.

    …he set the fires to be paid as a volunteer firefighter and for the excitement of fighting fires….

    Add your comment.

  7.    $500K Settlement In Apartment Manager Sexual Harassment Case – CBS Detroit

    GRAND RAPIDS (AP) — At least 13 women will share a more than $500,000 settlement after a federal lawsuit said a Grand Rapids apartment manager sexually harassed tenants.

    A judge approved the settlement with the entities that own and operate Alger Meadows Apartments this week, The Grand Rapids Press reported.

    Does anyone have information on how well this manager was screened before being hired? Was this his first offense?

    Residential property management is a serious position. People with a tendency to abuse authority make very poor candidates.

    Add your comment.

  8.    Mill fire investigation may take up to a year | News | The Register-Guard | Eugene, Oregon

    The mill property has an extensive amount of asbestos, a hazardous material, a company executive said.

    "There was more than what we originally thought," said Chuck Wert, executive vice president of Swanson Group, the mill's owner.

    The company had reported that old steam pipes were covered in asbestos insulation, but Wert said it was present in the mill's roofing as well.

    Wert said the company maintains a strong interest in rebuilding at the site, but is awaiting word on the insurer's settlement offer, which either would be the cash value of the mill or its replacement value.

    The replacement value is capped by the policy limit. Wert declined to say what that limit is, but indicated that it will cost significantly more than that to rebuild the mill. Wert has said it would cost more than $100 million and up to two years to rebuild.

    It's an argument for high limits.

    Add your comment.

  9.    California Wildfire destroys 8 homes, 10 buildings – SFGate

    KERNVILLE, Calif. (AP) — A wildfire northeast of Bakersfield burning in steep terrain has destroyed eight homes and 10 other structures, authorities said, but residents of some 200 homes under evacuation orders were allowed to return home Wednesday evening.

    Add your comment.

  10.    NC lawmakers reach compromise on coal ash measure – Businessweek

    RALEIGH, N.C. (AP) — State House and Senate leaders said Tuesday that lawmakers have reached a compromise on legislation to make Duke Energy curb pollution from its 33 coal ash dumps across North Carolina.

    House Speaker Thom Tillis and Senate President Phil Berger announced their chambers reached an agreement they said would give the state the strictest regulations on coal ash disposal in the nation. The legislation would require closure of all unlined coal ash ponds within 15 years.
    Coal ash contains such toxic chemicals as arsenic, mercury and lead. State regulators have previously conceded that all of Duke's leaky unlined ash dumps in the state are contaminating groundwater.

    Last month's impasse came down to a single provision in the voluminous bill defining which "low risk" ash dumps Duke would be allowed to cap with plastic sheeting and dirt. Environmentalists want all the ash dug up and moved to lined landfills away from rivers and lakes.

    Though they acknowledged some positives in the bill, environmentalists also warned Tuesday about a provision that appears intended to undermine a recent North Carolina judge's ruling that Duke must take "immediate action" to eliminate groundwater contamination leaching from its ash dumps if the pollution crosses onto a neighboring property.

    "Instead of protecting North Carolina's citizens and its clean water, legislators produced a bill that tries to weaken North Carolina's clean water protections and fails to protect 10 communities and rivers that are threatened by Duke Energy's coal ash storage and pollution," said Frank Holleman, a senior attorney for the Southern Environmental Law Center. "This bill would allow Duke Energy to leave its coal ash in place, threatening North Carolina communities."

    Add your comment.

  11.    Billionaire to pay $1.5M fine for Kentucky mines – The Washington Post

    Reclamation work at surface mines typically includes reshaping the land to its original pre-mining contours, along with planting trees and other vegetation to prevent soil erosion.

    It also helps prevent runoff and mud-and-rock slides that can negatively impact rivers and streams and other people's property below the mines and downstream.

    Add your comment.

  12.    Governor Cuomo Issues Consumer Alert on Potential Home Repair Scams in Wake of Flooding on Long Island

    This is good info:

    … Steps Consumers Can Take to Avoid Home Repair Scams

    Homeowners should beware of anyone who:

    • Comes to your home or calls you on the phone offering to make repairs.
    • Tells you that you must make repairs immediately or offers discounts if you buy their services today.
    • Pressures you to sign a contract immediately.
    • Tells you that they are doing work in your neighborhood and that they have extra materials left from another job.
    • Is not an established local business, but has come to the area from somewhere else to "help."

    The Cuomo Administration urged homeowners to avoid unlicensed contractors in areas where a license is required, such as Nassau and Suffolk Counties. In addition, homeowners are urged to avoid contractors who:

    • Don't supply references or whose references can't be reached.
    • Tell you there's no need for a written contract. By law, all contracts for $500 or more must be in writing, but it's a good idea to get a written contract even for smaller projects
    • Only have a P.O. Box address or a cell phone number
    • Cannot supply proof of insurance
    • Ask you to get required building permits. It could mean that the contractor is unlicensed or has a bad track record, and is therefore reluctant to deal with the local building inspector. However, you should verify with your local building department that all necessary permits have been obtained by the contractor.
    • Ask for money to buy materials before starting a job. Reliable, established contractors can buy materials on credit.
    • Demand payment in cash or want full payment up front, before work has begun. Instead, find a contractor who will agree to a payment schedule providing for an in itial down payment and subsequent incremental payments until the work is completed.

    Homeowners who believe they have been victimized by scams should consult a lawyer immediately. There are time deadlines to cancel sales and pursue legal claims. Homeowners can also contact the Department of Financial Services for insurance-related scams, or the offices of their county's District Attorney or the state Attorney General.

    Homeowners with disputes involving home improvement contractors can file complaints with the New York State Department of State at [2] or by calling 1-800-697-1220.

    Consumers should contact their insurance company, agent or broker to get answers to specific questions about insurance policies or claims.

    Consumers who need further insurance-related help should feel free to contact the New York State Department of Financial Services' Consumer Services Unit at 1-800-339-1759.

    Some suggestions for safe ways to find a contractor to repair your home include:

    • Check out contractors. Is the company reputable? How long has it been in business? Ask for references and then check them out. Make sure the company is licensed, bonded, and insured. Ask to see its insurance policy or certificate of insurance. There are on-line resources for finding out other people's experience with contractors.
    • Insist on a written contract that includes a detailed description of the work to be done and specifies exactly what materials will be used and their quality. The contract should include starting and estimated completion dates. The terms, including the price, finance charges and payments, should be what you agreed on. If not, do not sign it. Be sure to g et a copy of everything you sign when you sign it.
    • Ask if there is a guarantee or warranty. If so, make sure it is in writing. If the company won't put its promises in writing, look for another company which will.
    • Do not sign the contract until you read it carefully. If the salesperson pressures you to sign before you read and understand the entire contract — don't sign it. Never rely on the salesperson to read or explain the contract to you.
    • Do not pay for work in advance.
    • Inspect all of the work very carefully to make sure it was done properly. If you have any doubts or questions, do not make your final payment or sign a "completion certificate" until the work is properly finished.

    It is also always a good idea for consumers to document the damage that existed before repairs and the work that was done to correct the damage. A good way to do this is by taking date stamped "before" and "after" photos.

    Add your comment.

  13.    [Recommended but qualified] China's Fire Next Time by Yu Yongding – Project Syndicate

    Earlier this year, rumors of China's impending financial doom — triggered by either a housing-market crash or local-government debt defaults — were rampant. But, in recent months, the economy has stabilized, leaving few doubts about China's ability to grow by more than 7% this year. Given that the Chinese government had ample scope for policy intervention, this turnaround should come as no surprise. But the moment of financial reckoning has merely been postponed, not averted.

    We don't agree with understating the lack of transparency. China hasn't escaped. China has temporarily masked over. What's festering under the bandage?

    Add your comment.

  14.    The euro-zone economy: Cyclical stagnation | The Economist

    Consistently low inflation has prompted fears that Europe will soon slide into deflation. Prices are already falling in Spain and three other euro-zone countries.

    Deflation would be particularly grave for the euro area because both private and public debt is so high in many of the 18 countries that share the single currency. Even if inflation is positive but stays low it hurts debtors, as their incomes rise more slowly than they expected when they borrowed. If deflation were to set in, the effects would be worse still: when prices and wages fall, debts, which do not shrink, become harder to repay.

    The poor GDP figures will intensify pressure on the ECB to do more. Already in June it lowered its main borrowing rate to just 0.15% and became the first big central bank to introduce negative interest rates, in effect charging banks for deposits they leave with it. That has helped bring short-term, wholesale interest rates close to zero and has also weakened the euro. Both these effects will help to bolster the economy and restore growth.

    "…negative interest rates, in effect charging banks for deposits they leave with it. That has helped bring short-term, wholesale interest rates close to zero and has also weakened the euro. Both these effects will help to bolster the economy and restore growth," as we had recommended and said before they did it (toot-toot).

    Add your comment.

  15.    Bank of America's $16 Billion Mortgage Settlement Less Painful Than It Looks –

    The Justice Department said on Thursday that it had so far recovered nearly $37 billion from big banks for their role in selling shoddy mortgages before the financial crisis.

    Such a large number — intended to deter misdeeds in the future — suggests that Wall Street is being made to pay for its role in stoking the subprime debacle. Yet the financial pain inflicted by the settlements may not be as great in the end.

    The Justice Department had already forged huge mortgage deals with JPMorgan Chase and Citigroup, but in certain ways, the Bank of America accord is shaping up into the showpiece for the Obama administration. Some consumer advocates said that while the deal was flawed in many ways, it provided more relief than the other settlements.

    "It is better than previous settlements because it offers more principal reductions, more money for blighted areas and more money for new mortgages to low- and moderate-income home buyers," said Bruce Marks, founder of the Neighborhood Assistance Corporation of America.

    "I don't want the banks getting credit for taking my money," said Vincent A. Fiorillo of DoubleLine Capital, an investment firm that holds mortgage-backed securities. "It's very frustrating."

    Frankly, in the vast configuration of things, this doesn't even amount to a slap on the wrist. Furthermore, it's created the continuation of moral hazard. It's even a form of morale hazard.

    Bank of America made a huge mistake purchasing Countrywide, but that shouldn't matter.

    The nation should have been made whole on the backs of those who caused the Great Recession. Instead of that happening, the administration has made it possible for those who caused the problem to remain astronomically rich and to continue on while the mass of the people are still left struggling.

    Lastly, why has this taken so long?

    Add your comment.

  16.    [Recommended] Italy's Downward Spiral by Hans-Werner Sinn – Project Syndicate

    Hans-Werner Sinn

    Italy's new prime minister, Matteo Renzi, wants to stimulate growth. But what he really intends to do is accumulate even more debt. True, debt spurs demand; but this type of demand is artificial and short-lived. Sustainable growth can be achieved only if Italy's economy regains its competitiveness, and within the eurozone there is only one way to accomplish this: by reducing the prices of its goods relative to those of its eurozone competitors. What Italy managed in the past by devaluing the lira must now be emulated through so-called real depreciation.

    But accomplishing that is easier said than done. Raising prices is almost never a real problem. Lowering them or making them rise more slowly than prices in competing countries is painful and unnerving.

    Add your comment.

  17.    IMF: Macroprudential Policies Better During Booms – Real Time Economics – WSJ

    Wayne Arnold:

    The least effective policies, they found, were those requiring banks to sock away more cash during a boom as insurance against a downturn. Capping lending was more effective, they said. And the most effective policies of all, they concluded, were not caps on lenders, but on borrowers.

    The paper's findings appear to confirm a fear many central bankers have that macroprudential policies are "asymmetrical" — more effective in limiting credit during a boom than reviving credit when they're relaxed during a crunch.

    "What may work well in controlling something may not work as well in encouraging or promoting something," said Philippine central bank governor Amando M. Tetangco Jr., in an interview earlier this year. "The jury is still out" on macroprudential tools, he added.

    Add your comment.

  18.    Australian Tax Office decides bitcoins are assets, not currency

    We really don't understand the utility of Bitcoins. They have a Ponzi aspect concerning potential appreciation yet hold huge potential risks of crashing. They are not conveniently denominated either. What's the point?

    The value of the transactions are going to be taxed, and the system is going to be regulated. This will be done by the same people who've brought us the US Dollar, for instance. Why bother with a so-called "new currency"?

    Do people really imagine that national governments are just going to allow an entire economy to exist that it doesn't tax?

    It is branded as a digital currency and contains the word "coin" but, according to a new Australian Taxation Office ruling, the bitcoin will be considered property.

    Of course.

    Add your comment.

  19.    Has China done enough to shore up its economy? – Forum:Blog Forum:Blog | The World Economic Forum

    Stephen S. Roach:

    Unlike the United States, which relied largely on its central bank's efforts to cushion the crisis and foster recovery, China deployed an rmb 4 trillion fiscal stimulus (about 12% of its 2008 GDP) to jumpstart its sagging economy in the depths of the crisis. Whereas the US fiscal stimulus of $787 billion (5.5% of its 2009 GDP) gained limited traction, at best, on the real economy, the Chinese effort produced an immediate and sharp increase in "shovel-ready" infrastructure projects that boosted the fixed-investment share of GDP from 44% in 2008 to 47% in 2009.

    To be sure, China also eased monetary policy. But such efforts fell well short of those of the Fed, with no zero-interest-rate or quantitative-easing gambits — only standard reductions in policy rates (five cuts in late 2008) and reserve requirements (four adjustments).

    The most important thing to note is that there was no extrapolation mania in Beijing. Chinese officials viewed their actions in 2008-2009 as one-off measures, and they have been much quicker than their US counterparts to face up to the perils of policies initiated in the depths of the crisis. In America, denial runs deep.

    Unlike the Fed, which continues to dismiss the potential negative repercussions of QE on asset markets and the real economy —at home and abroad — China's authorities have been far more cognizant of new risks incurred during and after the crisis. They have moved swiftly to address many of them, especially those posed by excess leverage, shadow banking and property markets.

    The jury is out on whether Chinese officials have done enough.

    We still maintain that China is not transparent enough to merit the optimism.

    In addition, we don't fear the Fed's balance sheet, though we do say equities are in a bubble and admit that the Fed has play it's own bad bank (absorbed bad loans of commercial banks).

    Add your comment.

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