News: Real Estate, Risk, Economics. Oct. 4, 2014

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Table of Contents
(Click to sections below.)

1) US Real Estate Market Only Projected To Grow 3% Over Next Year

2) Mapping the Demise of the Working Class in San Francisco – The Numbers – Curbed SF

3) Deleveraging, What Deleveraging? The 16th Geneva Report on the World Economy | Credit Writedowns

4) The Fed would be crazy to worry about runaway wages

5) Key Inflation Reading Slips Further Below Fed's 2% Target – Real Time Economics – WSJ

6) The dollar is now everyone's problem – Money, Banking and Financial Markets

7) Now Is a Good Time to Invest in Infrastructure | iMFdirect – The IMF Blog

8) Helicopter money: Today's best policy option | vox

9) Markets' Rational Complacency by Nouriel Roubini – Project Syndicate

10) Germany's economy: Three illusions | The Economist

11) News Corp. to buy parent of Realtor com for $950 million – LA Times

12) US Apartment Vacancies Rise for First Time Since 2009 – Bloomberg

13) Regulatory Capture of the New York Fed: How Can Banks Capture What They Already Own? | Demos

14) Highlights of the AIA's Design Home Trends Survey – Architect Magazine

15) Where It's Still Safe for Single-Family Investors | Realtor Magazine

16) Our Misplaced Faith in Free Trade – NYTimes com

17) Jobless Rate in US Falls Below 6% as Hiring Picks Up – NYTimes com

18) Why Frame Walls When You Can Frack Wells? | John Burns Real Estate Consulting

19) ECB: Webcasts: ECB monetary policy decisions

  1.    US Real Estate Market Only Projected To Grow 3% Over Next Year

    'Real estate has always been local, but as we continue to put the housing recession further in the rear view mirror, the largely uniform performance of local markets is also fading,' said Zillow chief economist Stan Humphries.

    'We now have several different types of markets emerging, including markets that are still muddling along the bottom. Markets that shot up immediately after the recession ended and are now cooling quickly,' he explained.

    'And markets that are still very hot. Each of these environments presents unique challenges and opportunities for buyers and sellers, and what works in one area won't necessarily work in another,' he added.

    Add your comment.


  2.    Mapping the Demise of the Working Class in San Francisco – The Numbers – Curbed SF

    Creative class whisperer Richard Florida and researchers from the Martin Prosperity Institute have come out with a new report on the link between class and geography. You don't have to be inside a think tank to recognize the decades-long pattern of white-collar knowledge workers leaving the suburbs and returning to the urban core, but it is striking to see how economically segregated the Bay Area has become (echoing the trend in our post-industrial brethren Boston and New York).

    Add your comment.


  3.    Deleveraging, What Deleveraging? The 16th Geneva Report on the World Economy | Credit Writedowns

    This article struck us as odd. It seemed to do a great deal of handwringing over public debt while turning around and advocating QE. QE has been in need of fiscal-spending help.

    Perhaps they've drawn a brighter line between China and the UK than appeared as we were reading it.

    We do think China is in trouble but over standard Keynesian spending.

    What are your thoughts on it?

    Add your comment.


  4.    The Fed would be crazy to worry about runaway wages

    Fed Chairwoman Janet Yellen has said she thinks wages should grow 3% to 4% per year. That wouldn't be inflationary, because productivity gains would allow companies to pay more without cutting into their profits.

    In addition, many companies wouldn't have to raise prices to increase wages. They would just have to compensate their executives and shareholders less. That would boost the whole economy, which would also boost the executives and shareholders.

    Add your comment.


  5.    Key Inflation Reading Slips Further Below Fed's 2% Target – Real Time Economics – WSJ

    Consumer prices held flat in August from a month earlier, resulting in a closely watched annual inflation gauge slipping further below the Federal Reserve's target.

    The price index for personal consumption expenditures—the Fed's preferred inflation measure—advanced just 1.5% in August from a year earlier, the Commerce Department said Monday. August was the 28th straight month the inflation reading undershot the Fed's 2% target.

    Excluding volatile food and energy prices, so-called core prices also advanced 1.5% year over year.

    That's the strengthening dollar and the reason that most everyone is very premature in talking about the Fed raising rates.

    Janet Yellen isn't going to raise rates until inflation is up. If unemployment drops to 4% and inflation is still under 2%, she won't raise rates.

    She's rightly more concerned for people who are out of work or being paid too little than she is about a slight increase in inflation over 2 or 2.5%.

    Add your comment.


  6.    The dollar is now everyone's problem — Money, Banking and Financial Markets

    …in December 2007, the Fed introduced one of its most successful crisis mitigation tools, offering to lend U.S. dollars to foreign central banks that they could in turn lend to their banks. Recognizing that fire sales and defaults of these foreign banks posed a systemic threat back home, the Fed eventually provided 14 other central banks with large (in some cases, unlimited) dollar swap lines to meet the surge in funding dollar needs. (The official announcements are all available here.) At the height of the crisis in December 2008, the amount lent peaked at nearly $600 billion (see chart below).

    Add your comment.


  7.    Now Is a Good Time to Invest in Infrastructure | iMFdirect – The IMF Blog

    Abdul Abiad, Davide Furceri, and Petia Topalova:

    We find that the positive effects of increased public infrastructure investment are particularly strong if certain conditions are in place.

    First, the short-term boost to output is substantially larger when public investment is undertaken during periods of economic slack and monetary policy accommodation, with the latter limiting the increase in interest rates in response to the rise in investment (Figure 4, panels 1 and 2).

    Second, the output effects are bigger in countries with a high degree of public investment efficiency—where additional public investment spending is not wasted and is allocated to projects with high rates of return (Figure 4, panels 3 and 4).

    Finally, public investment that is financed by issuing debt has larger output effects than when it is financed by raising taxes or cutting other spending (Figure 4, panels 5 and 6).

    If you cut out the borrowing and rather just issue the currency debt- or bond-free, you'll do all the better.

    Stop thinking that governments that issue their own currencies necessarily need to tax or borrow (issue bonds, whether you think it's a wash or not) to spend.

    Add your comment.


  8.    Helicopter money: Today's best policy option | vox

    Biagio Bossone, Thomas Fazi, and Richard Wood:

    Note that where overt money financing operations are run by the Treasury, without involving the central bank (see below), none of the two routes above is necessary, since the Treasury directly finances the budget by issuing money or a money-like instrument.

    Finally, and most importantly, overt money financing involves no increase in public debt, whereas conventional bond financing does.

    …the government needs to exert a great sense of fiscal discipline in order to avert the risk of abusing the money financing.

    They're talking about the equivalent of United States Notes, which we've mentioned many times and are debt/bond-free.

    As for the discipline that needs to be exercised, the Monetary Authority ought to be a computer operating on open-source software designed to capture all transactions so that the total money supply will be exactly enough to meet real productivity needs and gains while avoiding inflation and deflation.

    The whole system would be controlled by bottom-up democratic choices for what projects are funded.

    This would be the exact opposite of the central planning of the Bolsheviks.

    The best ideas and practices would filter up and across the entire economy.

    It would truly be government of, by, and for the people.

    Add your comment.


  9.    Markets' Rational Complacency by Nouriel Roubini – Project Syndicate

    Good, quick overview of the geopolitical situation and potential future impacts: Nouriel Roubini:

    …the more generalized contagion to global financial markets that geopolitical tensions typically engender has failed to materialize.

    Why the indifference? Are investors too complacent, or is their apparent lack of concern rational, given that the actual economic and financial impact of current geopolitical risks — at least so far — has been modest?

    Add your comment.


  10.    Germany's economy: Three illusions | The Economist

    The jobs miracle was achieved in large part by creating lots of part-time and "precarious" jobs. Total hours worked have barely risen, even as the number of unemployed has fallen (from more than 5m in 2005 to fewer than 3m this year). Export success came not from greater productivity but from holding down wages. Meanwhile, much of Germany's non-traded service sector is notably uncompetitive. And credit for closing the budget deficit goes mainly to big tax receipts that came with high employment.

    Add your comment.


  11.    News Corp. to buy parent of Realtor.com for $950 million – LA Times

    Rupert Murdoch's News Corp. announced Tuesday a $950-million agreement to buy the nation's third-largest online real estate listing company, Move Inc., marrying the parent company of the Wall Street Journal with the Realtor.com website, which drew 26 million would-be home buyers last month.

    It will also give Realtor.com a broad marketing platform on the Wall Street Journal's digital network, which averages 500 million page views a month.

    Add your comment.


  12.    U.S. Apartment Vacancies Rise for First Time Since 2009 – Bloomberg

    The U.S. apartment-vacancy rate rose for the first time in almost five years, a sign that supply is starting to catch up to rental demand after a boom in multifamily construction.

    The vacancy rate rose to 4.2 percent in the third quarter from 4.1 percent the previous three months, the first increase since the end of 2009, Reis Inc. (REIS) said in a report.

    The national apartment-vacancy rate is likely to remain at less than 5 percent through 2018 as demand continues from younger adults and lackluster income growth prevents landlords from raising rents more, Severino said.

    Add your comment.


  13.    Regulatory Capture of the New York Fed: How Can Banks Capture What They Already Own? | Demos

    Wallace Turbeville:

    President Dudley had this to say about the current controversy: "I completely stand behind the integrity and work of our supervision staff. They are operating completely in the public interest." The real question is how the New York Fed and its president view the "public interest," given that the institution is constitutionally embedded in the banking system itself. It is ever so easy for a former Goldman partner and an organization that is a creature of the banking system to conflate what is good for the banks with what is good for the USA.

    Add your comment.


  14.    Highlights of the AIA's Design Home Trends Survey – Architect Magazine

    The AIA Home Design Trends Survey, released yesterday [October 1, 2014]], reported that as the housing industry continues to recover, homeowners are exhibiting a renewed interest in upgrades, including special function rooms, smart home automation features, and products that promote sustainability. The survey covers activity during the second quarter of 2014 with a panel of more than 500 architecture firms that concentrate on residential design.

    There are 5 interesting and informative interactive charts in the post.

    Add your comment.


  15.    Where It's Still Safe for Single-Family Investors | Realtor Magazine

    Investors purchasing residential rental property in the third quarter earned an average annual return of 9.06 percent, slightly down from the annual return of 9.65 percent a year ago, according to RealtyTrac's third-quarter Residential Property Rental Report, which ranks the top markets for buying residential rental properties. RealtyTrac analyzed the fair market rents for three-bedroom properties in 586 counties. Rental returns were calculated using annual gross rental yields. [(annual rent income before expenses divided by the investment in the property — or can use purchase price rather than capital invested) times 100]

    Using the capitalization rate is superior because it factors in operating expenses and vacancies.

    Add your comment.


  16.    Our Misplaced Faith in Free Trade – NYTimes.com

    Jeff Madrick:

    The skeptics are on to something. Free trade creates winners and losers — and American workers have been among the losers. Free trade has been a major (but not the only) factor behind the erosion in wages and job security among American workers. It has created tremendous prosperity — but mostly for those at the top.

    Any trans-Pacific agreement, its terms still a secret, should be discussed in the open with ample protection of worker rights and healthy debate over regulatory changes requested by developing countries or big business. A trade agreement with the European Union makes more sense, but the danger is that environmental, financial and product-safety regulations will be watered down to meet the demands of corporate interests.

    Add your comment.


  17.    Jobless Rate in U.S. Falls Below 6% as Hiring Picks Up – NYTimes.com

    Five years after the nation emerged from a crippling recession, the economy finally appears to be on track for a more robust recovery, bolstered by strong recent job gains and an unemployment rate that dipped below 6 percent in September for the first time since the summer of 2008.

    …signs of improvement were tempered by evidence that wage gains remained meager and that millions of Americans were still so discouraged by their job prospects that they had lost contact with the regular employment system.

    The nation added 248,000 jobs in September across almost all sectors of the economy, according to the Labor Department, which also revised what had originally been a discouraging August report, now estimating that 180,000 jobs were added that month. The latest gains put 2014 on pace to be the best year for job growth since the late 1990s, when Bill Clinton was in office.

    The actual percentage of working-age people with jobs — 59 percent — has not changed for four months, a reflection of just how many people have stopped looking for work. …

    Adding to the gloom, average hourly earnings are stuck in the mud, down slightly in September and up only 2 percent in the last year, barely ahead of inflation.

    …4.8 million workers are missing from the job force, neither employed nor actively looking for work. Some of that is attributed to demographics: As the large baby boomer population ages, many in that generation will leave the work force. But the participation rate for Americans 25 to 54, considered prime working age, is also at troubling levels.

    Add your comment.


  18.    Why Frame Walls When You Can Frack Wells? | John Burns Real Estate Consulting

    In late 2008, oil and gas pipeline construction workers earned $0.46 per hour more than new home framing contractors. Today, they earn $8.15 more per hour. It's no wonder labor is tight in the new home market, especially in Texas and Denver, the closest major markets to North Dakota. Since 2008, framing contractor wages have fallen 8%, while oil and gas pipeline construction wages have swelled by 20%.

    Add your comment.


  19.    ECB: Webcasts: ECB monetary policy decisions

    Introductory statement to the press conference (with Q&A)

    Mario Draghi, President of the ECB,
    Naples, 2 October 2014

    Add your comment.


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