Linking ≠ endorsement.
⇧ Kevin Simpson-Verger on Twitter: "On the Edge: Housing Market Confidence in the West" via Zillow Real Estate Research
We're linking directly to Kevins' Twitter status (post) to give him credit. He's our best retweeter. Linking to his Twitter is the least we can do. If you live in, or are just interested, the Seattle area, you might follow Kevin. Speaking of Seattle:
Ominous Clouds on the Horizon in Seattle, Despite a Mostly Sunny Outlook
• Housing market confidence has improved sharply for owners and renters in Seattle.
• About 6 percent of Seattle renters said they expect to buy a home within the next year, which would translate into 70,000 new homeowners.
• Seattle millennials are less optimistic than their peers nationwide about the financial and social benefits of homeownership.
⇧ Phil Gramm and Michael Solon: How to Distort Income Inequality – WSJ
How ironic it is that former US Senator Phil Gramm (R-TX), the deregulator of deregulators, cites a litany of welfare-state programs in an attempt to debunk Thomas Piketty.
We are more than confident that Mr. Piketty can hold his own against Phil Gramm, et al., so we won't pick apart Mr. Gramm's piece here.
We will say that we knew full well that Progressives understand that the welfare state has kept people from falling into the depths of poverty that predate the welfare-state era (of course).
Mr. Piketty hasn't been simply comparing the past to the present ignoring the welfare state that remains after Mr. Gramm's ilk got done with it (causing the Great Recession/Lesser Depression). Thomas has been comparing the plight of the middle and lower classes relative to the gains of the top income earners and wealth holders (over decades, not just since the pre-crash peak).
The Piketty-Saez data ignore changes in tax law and fail to count noncash compensation and Social Security benefits.
What the hockey-stick portrayal of global temperatures did in bringing a sense of crisis to the issue of global warming is now being replicated in the controversy over income inequality, thanks to a now-famous study by Thomas Piketty and Emmanuel Saez, professors of economics at the Paris School of Economics and the University of California, Berkeley, respectively. Whether the issue is climate change or income inequality, however, problems with the underlying data significantly distort the debate.
The chosen starting point for the most-quoted part of the Piketty-Saez study is 1979. In that year the inflation rate was 13.3%, interest rates were 15.5% and the poverty rate was rising, but economic misery was distributed more equally than in any year since. That misery led to the election of Ronald Reagan, whose economic policies helped usher in 25 years of lower interest rates, lower inflation and high economic growth. But Messrs. Piketty and Saez tell us it was also a period where the rich got richer, the poor got poorer and only a relatively small number of Americans benefited from the economic booms of the Reagan and Clinton years.
Honestly, Phil Gramm is saying that not falling into a grinding Great-Depression-type poverty means that those on the bottom are well off. It's pretty much common knowledge that this generation is not better off financially or economically than the generation before. One income in the 1950's-70's was enough to keep a family, and families were generally larger. Today, two incomes can't always make it, not without the welfare state — thanks to the likes of Phil Gramm and his utterly failed laissez-faire ideology.
As for the Hockey stick mischaracterization by Phil Gramm, we are equally confident that climatologist, geophysicist Michael Mann can more than hold his own.
The fact is that Climategate was a farce. The only thing that happened was that the scientists involved removed an anomalous set of tree-ring data that was not jibing with all the other data sets (a great many sources). The Climategate theorizers claimed that data was being deliberately hidden that proved there was no global warming. They simply didn't know what they were talking about. Here though is former Senator Phil Gramm trying to continue the falsehood.
Anthropogenic global warming is a fact. It is a risk. Prudent people will seek to mitigate and stop it rather than ignore it or attempt to claim that it's nothing but a good thing.
⇧ Foreclosures spike as banks ramp up repossessions
Diana Olick reports:
Most of the loans going through the foreclosure process now have been delinquent for several years, but a particularly troubling sign was the number of newly started foreclosures in October: 56,452 homes. That is a 12 percent jump from September, though down 4 percent from a year ago.This was the largest monthly increase in foreclosure starts since August 2011.
"Many of the mediation programs, loan modification programs and even short sale programs have run their course. Distressed properties that could not be saved by those programs are being placed back on the foreclosure track," noted Blomquist.
⇧ The halo effect of Cleveland's comeback on housing
… Cleveland has one of the more affordable housing markets in the United States. Its median metropolitan area home price of $120,000 is far less than the national median, and prices in the city proper are about half that.
⇧ Fracking Support Plummets Among Americans – EcoWatch
Fracking is quickly losing favor with Americans, a new Pew Research Center poll finds.
As more stories emerge about the dangers posed by the toxic fallout from the aggressive drilling process to communities near the operations, support for fracking tilts negative for the first time, with 41 percent favoring increased use of fracking and 47 percent opposing it. That's a huge swing from 20 months ago. In Pew's March 2013 poll 48 percent supported more fracking while only 38 percent opposed it.
⇧ Brooklyn Landlord Pleads Guilty to Negligent Homicide in 2010 Fire – NYTimes.com
Late one January night in 2010, someone doused a roll of toilet paper in paint thinner in a building in Bensonhurst, Brooklyn, and lit it, and five immigrants from Guatemala were killed.
The horror was compounded when investigators found that several of the victims were trapped inside illegally partitioned apartments. Prosecutors filed charges against not just the man accused of setting the fire but also the landlord, a rare step.
Rarer still was the outcome: The landlord, Vasilios Gerazounis, pleaded guilty to criminally negligent homicide, prosecutors said on Monday.
⇧ 4 face charges stemming from north Jersey heists – Washington Times
HACKENSACK, N.J. (AP) – Four men held in New York are facing charges stemming from a rash of home burglaries in northern New Jersey.
⇧ NYC rental market | NYC rental market report
In Manhattan, the vacancy rate last month was the lowest for October in five years, a function of the tight market, Miller said.
⇧ Commercial Brokerage Firms NYC | Best Commercial Real Estate Firms NYC
If you invest in commercial real-estate or want to or plan to, the linked article will let you in on some of what makes commercial brokers tick.
Commercial brokers are quite different from their residential counterparts. It takes them longer to crack into the market, they tend to stay at firms longer, and their world is arguably less glamorous — their jobs are less about understanding design, aesthetics and the lifestyles of the 1 percent than about being clued in on market information, deal structuring and a property's income potential.
⇧ Mexico's Growth Problem by Dani Rodrik – Project Syndicate
Dollar wages, moreover, have grown much more slowly than in China; As a result, labor is now some 20% cheaper in Mexico in relative terms. …
…living standards in Mexico have fallen further behind the US and most emerging-market economies. Probably no other country in the world presents a starker contrast between external success and domestic failure.
What lies behind the apparent paradox is the phenomenon of "the two Mexicos," the McKinsey Global Institute's evocative term for the extreme dualism that characterizes Mexico's economy. Large firms, oriented toward the global economy, have done quite well, whereas traditional, informal firms — exemplified by the ubiquitous neighborhood tortillerías — have performed poorly while continuing to absorb the bulk of the economy's work force. …
Mexico's failure to grow remains a puzzle, for which there is no simple explanation. It is unlikely that a single grand strategy — whether it is opening up the oil sector, improving access to finance, fighting informality, or, for that matter, altering industrial policy — can unlock the gates to rapid, broad-based growth. This uncertainty underscores the need for an agile, responsive government that can move on diverse fronts simultaneously, learn about the problems confronting the real economy, and respond pragmatically.
⇧ How the U.S. Government Could End the Student Debt Crisis Today by Raúl Carrillo — YES! Magazine
This is what we've been talking about. Raúl Carrillo:
Last month, Lower Saxony became the final state in Germany to abolish tuition for all students at public universities. Meanwhile, in the United States, student loan debt has passed the $1 trillion mark. The burden is now becoming increasingly heavy for middle-class and wealthy students, but especially for those from lower-income backgrounds. This injustice has spurred many organizations, like the Occupy Wall Street offshoot Strike Debt, to do what they can to pay off student debt on their own.
Borrowers could use the support of their government, but U.S. policymakers don't seem to see student debt through the same moral lens as officials in many other countries do. Can you imagine Secretary of Education Arne Duncan, for example, arguing that "Tuition fees are socially unjust," as German member of Parliament Dorothee Stapelfeldt told The Times of London? Or even, as she went on to say, that, "[fees] particularly discourage young people who do not have a traditional academic family background from taking up studies"?
…it doesn't have to be this way. To put it bluntly, there is no fiscal reason why the U.S. student debt crisis should exist.
At a basic level, the U.S. federal government doesn't need to scrimp and save to fully fund higher education. It can just spend money rather than lend it, without incurring any significant negative economic consequences. Although I'd love to reduce spending on, say, prisons, the federal government doesn't even need to take money out of other programs in order to alleviate student debt.
You may find this argument hard to believe. The way most politicians and journalists talk about the national debt and deficit spending makes free higher education sound impossible. But there's another way of looking at the problem, a vision advocated by a growing movement of economists, lawyers, students, and financial practitioners who deal with the institutional nuts and bolts of the economy on a day-to-day basis.
Uncle Sam can't go broke
⇧ UK residential market update in four charts | Global Briefing
…economic challenges overseas, coupled with low wage growth in the UK, mean that the first interest rate rise is now expected in the second half of next year. This has pushed down mortgage rates, as shown in the swap rate chart below (the five-year swap rate determines the pricing of five-year fixed mortgage deals)
⇧ Sequestration's Rising Toll: 100,000 Fewer Low-Income Families Have Housing Vouchers — Center on Budget and Policy Priorities
Following the sequestration funding cuts in 2013, most state and local housing agencies had no choice but to sharply reduce the number of families receiving housing vouchers. By December 2013, agencies were assisting about 70,000 fewer families than they had a year earlier, and the cuts continued to deepen during the first half of 2014: by June, agencies were assisting approximately 100,000 fewer families. (See Figure 1.)
The sequestration cuts have come at a particularly bad time. The number of renter households paying unaffordable housing costs is at historic highs, according to a recent report by Harvard's Joint Center for Housing Studies, which warns that the "spread of severe cost burdens [where renters pay more than half their income for housing] during the Great Recession and its aftermath is particularly alarming." The vast majority of renter households with severe housing cost burdens have low incomes. Yet, because of inadequate funding, only 1 in 4 eligible low-income households receives housing vouchers or other federal rental assistance.
While some progress has been made in reducing homelessness, it remains widespread. Close to 600,000 Americans, including some 50,000 veterans and 136,000 children, are living in emergency shelters or on the street on any given day, according to HUD's latest count. In addition, more than 1 million school-aged children and their families live in temporary motels or doubled-up with other families, according to the latest Department of Education surveys. Housing instability and homelessness can have a debilitating impact on children over the long term.
Research shows that vouchers are effective at reducing homelessness.
We think the incoming Congress will not be amenable.
Landlords, however, should favor increasing vouchers. People who pay with vouchers are more stable tenants than those who can barely afford the rent and for whom a layoff or termination regardless of fault could mean having to move out. Tenant turnovers are more costly for property owners.
⇧ A ray of sunlight on secretive corporate welfare | Al Jazeera America
Good Jobs First, a research organization based in Washington, D.C., and various tax watchdog groups have shown that often far fewer jobs were created than promised. Sometimes jobs are destroyed despite massive corporate welfare. The jobs that are created are too expensive; subsidies of more than $1 million per job are becoming common.
Politicians who give your money to corporations also get to crow about jobs they brought to town. Never mind that often these giveaways just shuffle jobs away from businesses that must pay their taxes in full and toward firms showered with tax favors.
Tell the board you want disclosure of all state and local subsidies to businesses, that you want the recipients and their brokers fully identified along with any fees paid, any campaign contributions by the companies and brokers and a rigorous accounting of how many jobs were added, if any. And tell the GASB that you want disclosures to cover the entire period of each deal as well as annual snapshots.
Send your comments to email@example.com … Governmental Accounting Standards Board, PO Box 5116, Norwalk, CT 06856-5116 and mention project 19-20E.
What do you think?
⇧ Why Keynes is important today | VOX, CEPR's Policy Portal
Peter Temin and David Vines:
We know that wages are sticky — countries in Southern Europe have found it impossible to implement requests from their creditors that they reduce wages swiftly. And we know that not all private actors in the economy are forward-looking. Before the crisis, borrowing and spending increased in ways that could not be sustained; now consumers are not spending and business firms are not investing even though interest rates are close to zero.
Those are the conditions described by Keynes in which expansive fiscal policy works well.
⇧ Large global benefits from the 2014 oil shock | Gavyn Davies
An alternative conclusion is that economists have been under-estimating the beneficial effects on GDP growth that will be felt in the next few months from the oil shock, assuming that oil prices stay at or below present levels for a while. Many oil analysts now seem to think that this will be the case, with a common view being that prices will drop below $75 a barrel before the end of the year, and then rebound only slightly next year. But they have been strangely reluctant to revise their official GDP forecasts upwards as a result.
If that view proves right, global GDP forecasts may be revised upwards in coming months, dissipating some of the gloom that currently surrounds the immediate future for the global economy.
However, Gavyn Davies failed to mention the fracking industry in the US being directly and significantly slowed the lower prices drop.
Also, while we are stuck at near-zero interest rates and with an incoming Congress that will fail at any fiscal stimulus but will rather try to drag the nation into austerity, there are many factors working against the reasons for the Fed's recent QE termination.
With those headwinds, unemployment could even rise. Wages certainly won't be pressured much. Consumers won't have as much pickup in discretionary spending as lower gas-prices would otherwise suggest. They will continue deleveraging and increase savings if they have their wits about them.
⇧ The UNC Coup and the Second Limit of Economic Liberalism | Next New Deal
The average length of time people are taking to pay off their student loans is up 80 percent, to over 13 years. …
Any serious populist agenda will have to have a broader agenda for wages, with full employment as the central idea. But it will also need to include social programs that are broader based and focused on cost controls; here, luckily, the public option is a perfect organizing metaphor.
The US has been headed in the wrong direction away from tuition-free higher education. As explained in a link above, there is no reason whatsoever that as a society, we charge our young adults to attend college. It's completely counter-productive.
⇧ Blackstone's Real Estate Strategy Looks to India: Video – Bloomberg
Jonathan Gray, global head of real estate at Blackstone, talks about the investors that inspire him, targeting real estate in India, how investors view the business of Blackstone, and what he sees next for the company and its succession plans. He speaks on "Market Makers."
⇧ Panel OKs sale of thousands of delinquent tax properties – Crossville Chronicle: Local News
Earlier this week Cumberland County's Delinquent Tax Committee requested the clerk and master to prepare for the sale of some 2,500 delinquent tax properties in the county.
The county hasn't conducted a large-scale delinquent property tax land sale for several years because officials were awaiting the outcome of a legal case that could have an effect on counties having to pay property owners association dues.
⇧ China October lending down sharply, signals deeper fourth-quarter slowdown | Reuters
The data follows on the heels of weak factory output and fixed asset investment released on Thursday, further cementing the view that the Chinese economy is on track to grow at its weakest pace in 24 years.
Top officials have repeatedly said Beijing can tolerate lower growth so long as employment rates remain high.
⇧ Appraisal Best Practices in Commercial Real Estate – YouTube
Ron Neyhart, Director of Valuation and Advisory Services at CBRE, joins Michael Bull in Studio One to discuss the current landscape and best practice related to appraisals.
⇧ Multifamily Market Update from Axiometrics – YouTube
Stephanie McCleskey, Director of Research at AXIOMetrics breaks down the performance of the multifamily market in the 3rd quarter and outlines what to expect as we move forward in 2014 and into 2015. Discussions include how population and new home starts impact the multifamily market as a whole, as well as year to date rent growth and new construction numbers. How will new supply affect the market? and is over building a concern for the sector?
⇧ Hawaii second-most expensive housing market in the U.S., Coldwell Banker report says – Pacific Business News
Realtors in Hawaii say that lack of inventory is one of the biggest problems facing the Hawaii real estate industry.
Overall, Hawaii ranked second in the country after Massachusetts as the most expensive state to own a home, where average listing price for a four bedroom, two bath home was $540,000.
⇧ Yellen meets with activists seeking Fed reforms – SFGate
More than two dozen activists demonstrated outside the Fed and then met with Chair Janet Yellen on Friday as part of a new campaign seeking policy reforms and a commitment to keep interest rates low until good jobs are plentiful for all workers. Although the labor market has steadily strengthened this year, wages have remained stagnant.
We commend Janet Yellen for meeting with these people.
⇧ Globalisation and the rise of the robots | VOX, CEPR's Policy Portal
Interesting concept: Dalia Marin:
Skill unemployment is on the rise in the US and the UK, where it doubled between 2000 and 2012, and in Spain and Italy, where it tripled in the same period. In Germany and France we do not see a rise in skill unemployment. The doubling of academic unemployment between 2000 and 2012 and the modest increase in the skill premium in the US, in spite of the slow expansion of education, suggest that capital bias technology is driving this outcome. In Germany, skill unemployment is low and did not increase between 2000 and 2012 precisely because education was advancing slowly there.
⇧ Fairer taxation for trust: the time is now! | OECD Insights Blog
Organisation for Economic Co-operation and Development (OECD):
Our Base Erosion and Profit Shifting (BEPS) Project aims to ensure the rules governing these systems are transparent, and that multinationals cannot exploit gaps between national tax laws or artificially shift profits to low tax jurisdictions where no real economic activity takes place.
We're moving fast. The first results of our BEPS project were released in September and we are on track to deliver the final package of measures a year from now. These efforts will neutralise the "cash boxes" companies use to keep trillions of dollars of profits offshore and free of taxation. They will also ensure that patent boxes can't be used to shift profits to countries where no substantial activities are carried out to generate those profits.
⇧ Joe Stiglitz Robots Jobs – Business Insider
For more than a century the Luddites, who believed that modern machines would lead to unemployment and impoverishment, have been held up as an example of how small-minded traditionalists hold up social and economic progress. In short, Stiglitz's message is that they were in fact right.
They were right if we don't do anything about sharing the benefits of technology.
⇧ A House Is Not a Credit Card – NYTimes.com
According to a joint HUD-Treasury report published in 2000, by 1999, a staggering 82 percent of subprime mortgages were refinancings, and in nearly 60 percent of those cases, the borrower pulled out cash, adding to his debt burden. The report noted that "relatively few subprime mortgages are used to purchase a house."
… If we want homes to be a vehicle for saving and building wealth, as they used to be, why are we instead encouraging people to increase their indebtedness? Even worse, we now know that too much credit results in people who once owned their homes losing them. It creates homelessness, not homeownership.
… if we're going to put government resources behind homeownership, and engage in practices that threaten the safety of the financial system in the name of homeownership, shouldn't we at least talk about the fact that we're actually encouraging the opposite?
⇧ China's New World Order by Lee Jong-Wha – Project Syndicate
China accounts for a 3.8% voting share of the IMF and a 5.5% share of the ADB, compared to 16.8% and 12.8%, respectively, for the United States and 6.2% and 12.8% for Japan.
Moreover, the advanced economies have staked their claim to leadership in these institutions. Europeans have led the IMF and Americans have controlled the World Bank since their establishment after World War II. Likewise, the ADB has had Japanese presidents since its founding in 1966.
Frustrated, China finally decided to push for the establishment of the AIIB, in which it will be the largest shareholder, with a stake of up to 50%. China will also provide the AIIB's first president, and the bank's headquarters will be in Beijing.
What the AIIB may not be able to do is contribute to improved economic governance in Asia — not least because Japan, Australia, Indonesia, and South Korea, whose total GDP is roughly equal to China's, are not yet members.
⇧ Mortgage Debt Forgiveness Tax Relief – House – REALTOR Action Center
If H.R. 2994 is not enacted, hundreds of thousands of American families who did the right thing by short-selling their home will have to pay income tax on "phantom income." Moreover, more distressed homeowners will decide to take a pass on opportunities for short sales, opting instead for continued delinquency or possible default until foreclosure, or simply to walk away from the property. This will destabilize the communities where such homes are located.
⇧ Investors focus on Denver's booming energy economy | The Investor
Sometimes referred to as "Houston of the Rockies" thanks to its booming energy economy, Denver is a city now unquestionably fixed on the radars of national and foreign investors. As the Rocky Mountains is the regional operations hub for the oil and gas industry, Denver's recent boom is being largely driven by the Niobrara Play—a shale formation considered the engine behind the metro area's surging economy.
Reports of new construction may remind some of the last oil bust and subsequent skyrocketing vacancy rates, but there exist at least two guards against returning to the days of empty "see through" office towers. First, there is not nearly the same amount of construction and development as in the 1980s; the risk of a repeat supply glut and overbuild is minimal. Equally important, while energy is indisputably a major player and primary driver, it is no longer the only game in town. Today, technology, healthcare and financial companies all want a piece of Denver, too — a city far more diversified than it ever was.
… Millennials — the 25 to 34 age cohort often labeled the "future workforce" — are Denver-bound; the city trails only Washington, DC as the nation's top in-migration destination. The need to attract a millennial workforce could spur redevelopment of older office properties toward more efficient, higher-density spaces.
It will be interesting to see how long lower oil-prices last and the impact on Denver.
⇧ Remote Nevada quakes result from stretching crust
GRANTS PASS, Ore. (AP) — Scientists say a swarm of earthquakes since July in the remote desert linking Oregon, California and Nevada can be traced to the constant stretching of the Earth's crust.
The Sierra Nevada is moving northwest about a half-inch a year, leaving gaps in Nevada's northwestern corner, where one fault has produced hundreds of small quakes, Glenn Biasi of the University of Nevada Seismological Laboratory said Wednesday.
⇧ OLYMPIA, Wash.: New rules for timber harvests near unstable slopes | Northwest News | The Bellingham Herald
OLYMPIA, Wash. — A state board wants new rules for timber harvests on landslide-prone sites.
The Forest Practice Board voted Wednesday that the Washington State Department of Natural Resources should require landowners to provide more technical information when planning timber harvests near potentially unstable slopes.
We're all for it.
⇧ Larose floodwall project to start in January | DailyComet.com
A project to protect 375 homes and 15 businesses in Larose, including North American Shipyard, from flooding and storm surge will begin in January.
In January, crews will begin construction on 2,648 feet of an 8-foot floodwall along Industrial Park Road near North American Shipyard. The project will also elevate a section of Industrial Park Road to 7 feet to improve drainage.
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