News: Real Estate, Risk, Economics. Jan. 13, 2016

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Table of Contents
(Click to sections below.)

1) One person dead in Renton house fire | The Seattle Times

2) 178 structures damaged in Cape Coral tornado

3) The Next Real Estate Bubble: Will Another Bring Down the US Economy?

4) Building roots: Real estate investor focuses on renovating Tupelo properties – Daily Journal

5) Why Lowering the Marginal Corporate Tax Rate Does Not Increase Growth | naked capitalism

6) Robert Jenkins' partial list of bank misdeeds – UPDATED 10 Jan 16 | Finance Watch

7) Where are workers earning the most? – Agenda – The World Economic Forum

8) US Apartment Rents Decline in Fourth Quarter, Bucking Annual Trend – CoStar Group

9) Can US Remain an Island of Stability in the Global Economy? – The New York Times

10) These economies have the best infrastructure – Agenda – The World Economic Forum

11) The Closed Marketplace of Economic Ideas by Federico Fubini – Project Syndicate

12) Ten Tools to Combat Workers' Compensation Fraud

13) The simple political economy of secular stagnation | Real-World Economics Review Blog

14) After pruning manager lists, real estate investors now want results – Pensions & Investments

15) Russia Seeks $20 Billion Budget Lift as Oil Alarms Siluanov – Bloomberg Business

16) US Boosts Scrutiny of NY, Miami Cash Real Estate Deals – Bloomberg Business

17) Alberta housing market braces for worst year since financial crisis – BNN News

18) 'Frenetic' price growth in real estate market to slow in 2016: Royal LePage – Business – CBC News

19) The Government Boldly Just Set Up Another Real Estate Meltdown – Michael Hausam – Page full

20) Gilbert's Bedrock buys Corktown properties

21) Report: Denver commercial real estate finishes 2015 strong – The Denver Post

22) Housing market needs incomes to grow: Fannie Mae – Yahoo Finance

23) Decatur Man, Mysterious Sidekick Sought For Real-Estate Scam

  1.    One person dead in Renton house fire | The Seattle Times

    One person died in a Renton house fire Friday night, according to the Renton Fire department.

    Firefighters responded to a house fire in the 300 block of Factory Avenue North at about 9:15 p.m. where they found the building fully engulfed in flames ….

    Add your comment.


  2.    178 structures damaged in Cape Coral tornado

    According to the NWS preliminary report, the tornado lasted just seven minutes and was on the ground for 3.4 miles. It damaged 178 structures, destroying one home and leaving 14 with major damage. More than 100 power poles were knocked down.

    Add your comment.


  3.    The Next Real Estate Bubble: Will Another Bring Down the U.S. Economy?

    … the fact that rents are expensive doesn't necessarily mean that "rents are in a bubble." In fact, it's difficult to imagine what, exactly, a "rent bubble" would look like. If rents were really in a bubble, it wouldn't make sense that household formations were up so much in recent months. There's no justification for paying bubble prices for rents, since renters can't gain from asset appreciation. A rational renter would double up with friends and family members and wait for those prices to come down. But instead, Americans have been forming new households of their own, after years in which this behavior was depressed by a weak economy and job market.

    A better explanation for high rents is that the homebuilders like DR Horton ( DHI 1.39% )
    and Pulte ( PHM 1.64% ) are facing supply
    constraints—such as a lack of attractive, buildable land and skilled workers—and are having trouble ramping up production to meet demand. This would explain why house prices are high while actual home-sale volume and new single-family home construction is low.

    I disagree with Mark Hanson's analysis, though I agree with his idea that 20%+ down is sensible.

    The issue I have concerns the "unorthodox" capital notion. The institutional buyers had the cash-raising ability so they could easily replace family buyers who were crushed by the housing crash.

    We aren't in a housing bubble. We're in housing-scarcity mode. Until incomes go up enough to force up demand enough, there's no reason to fear a general bubble forming. The current political climate is not conducive to the system suddenly becoming compassionate and intelligent enough to house the entire population as it could be housed (and without forming a bubble anyway).

    Add your comment.


  4.    Building roots: Real estate investor focuses on renovating Tupelo properties – Daily Journal

    This is a nice story by Zack Orsborn about a young man (Chris Rakestraw) who's made a good go of it in small-scale, residential real-estate renovations.

    The takeaway seems to be that Chris loves what he does. He loves his work.

    Add your comment.


  5.    Why Lowering the Marginal Corporate Tax Rate Does Not Increase Growth | naked capitalism

    All other things being equal, lowering taxes is generally a race to the bottom.

    Is that what we want?

    Looking at data from 1999 to 2009, with the explanation that the first decade of the 2000s ushered unprecedented levels of international economic integration as a result of trade liberalization and globalization policies championed in the 1990s, the study shows that reduced corporate tax rates can increase FDI but over time that increase leads to a negative impact on GDP.

    Among the reasons for this paradox is the elusive concept of "capital formation": a shorthand for genuine wealth creation.

    FDI may not create it because today a significant portion of that FDI may be in financial instruments for debt-reducing, tax-deductible write offs, as opposed to operational FDI that generates real economic activity.

    There's no doubt about it.

    Add your comment.


  6.    Robert Jenkins' partial list of bank misdeeds – UPDATED 10 Jan 16 | Finance Watch

    This list was compiled by Robert Jenkins, formerly a member of the Bank of England's Financial Policy Committee and now Adjunct Professor of Finance, London Business School and Senior Fellow at Better Markets, and first delivered at the Finance Watch conference "Confidence, ethics, and incentives in the financial sector" on 17 November 2015.

    How many of the banks involved lost their banking license? How many of the top executives of the banks have been prosecuted?

    Why do so many poor people go to jail and so many rich ones not and even though the crimes of the superrich are astronomically worse? The superrich own the system. It's not truly democratic. We live in a plutocracy. It's terrible risk management. It's bad business.

    Add your comment.


  7.    Where are workers earning the most? – Agenda – The World Economic Forum

    Luxembourg's place at the top of the chart is in part a result of a high minimum wage ….

    Well, should I say, "Duh"?

    Add your comment.


  8.    U.S. Apartment Rents Decline in Fourth Quarter, Bucking Annual Trend – CoStar Group

    U.S. apartment rents posted one of the weakest fourth quarters since the end of the most recent recession, according to the latest analysis of the U.S. multifamily market by CoStar Group.

    My guess is that it is not a consequence of construction but rather landlord and management fears about the global economy and its potential slowing impact on the US economy. Owners and managers see the lowering unemployment rate but also see wages still not keeping pace with even low inflation. They know about the many other negatives, such as student debts and the Fed raising rates possibly prematurely.

    Add your comment.


  9.    Can U.S. Remain an Island of Stability in the Global Economy? – The New York Times

    If something does go wrong, the usual buffers in the global economy look to be weakened or nonexistent right now. Government deficits are high in much of the world, and even where they aren't, political leaders have shown no desire to open the spending floodgates in an effort to bolster economies. If the American economy were to slump and President Obama were to ask the Republican Congress for fiscal stimulus, it would give new meaning to "Dead on Arrival."

    It would also mean the US would slump into the worst depression in its history.

    Add your comment.


  10.    These economies have the best infrastructure – Agenda – The World Economic Forum

    This is why lowering taxes is a race to the bottom.

    Well developed infrastructure is a critical factor underpinning economic growth and strength. Effective transport, power and communications networks create the conditions for businesses to grow and the wider economy to function effectively.

    Now, if you think that all infrastructure ought to be privately owned and used only upon the payment of user fees, well, we're living in different universes. We need in underlying infrastructure so that everyone will have a basis upon which to develop. Someone who is broke and without assistance wouldn't be able to pay the user fee to even get to a job opening. That's just the beginning.

    Add your comment.


  11.    The Closed Marketplace of Economic Ideas by Federico Fubini – Project Syndicate

    Federico Fubini:

    … ideas tend to advance and retreat slowly, like glaciers, not precipitously, like armies.

    But replace the names of the leading economists with products in any other market — cars, for example, or semi-conductors — and most people probably would agree that the RePEc ranking looks like a closed, inefficient market with high entry barriers. Might the world's leading economists be so keen to protect their own ideas that they ignore (or, worse, stifle) innovation from unexpected quarters?

    For a group of people so committed to free markets and so enamored of "creative destruction," that is a question that urgently needs to be addressed. The answer may hold enormous implications not only for intellectual growth, but also for human welfare.

    That is such a polite understatement.

    Add your comment.


  12.    Ten Tools to Combat Workers' Compensation Fraud

    There's plenty to think about from this article by Dalene Bartholomew.

    I'll add that you want your employees to understand and to appreciate how costly to all of them each claim is. No claim is paid in isolation. Every claim is part of the overall cost that ripples not just through the organization but the entire economy.

    Fraud is unethical. People who commit fraud typically do not make good fellow employees. If they cheat the carrier and the employer, they could cheat other employees very directly and not just via false workers-comp claims.

    Add your comment.


  13.    The simple political economy of secular stagnation | Real-World Economics Review Blog

    Yes, after 2008 we did entered an era of secular stagnation — i.e. depressed demand. Why do I think this? Macro demand consists of household consumption, government consumption, investments and exports. About this:

    A) During the last decades, the labor share has declined (graph 1). Source. This leads to lower household consumption.

    Add your comment.


  14.    After pruning manager lists, real estate investors now want results – Pensions & Investments

    "It's beginning to look like a bubble in the making. Historically, real estate got in trouble where there was overbuilding, overleverage or both," Mr. Leary said.

    While leverage is creeping up, there's not much overbuilding. This time it's a different kind of bubble, he said.
    Bubble in expectations

    "I don't think it's a bubble that will immediately explode, but there is a bubble in manager promises and client expectations," Mr. Leary said. "There's little room for error."

    Add your comment.


  15.    Russia Seeks $20 Billion Budget Lift as Oil Alarms Siluanov – Bloomberg Business

    With all due respect to Russia, Russia's Finance Minister, Anton Siluanov, is either a 1980's-style-neoliberal dupe (who hasn't a clue how to handle and fix Russia's economic and financial ills) or he's a shill for that very misguided neoliberalism.

    Vladimir Putin has openly stated that one of his main goals is to move Russia toward greater and greater autarky (national self-sufficiency). It is not necessary to borrow to accomplish that or to deplete Russian "reserves" or to reduce government spending or fear price inflation.

    When will they learn?

    Issue the necessary rubles without engaging in any borrowing. Target the money directly at the proper projects to increase Russia's ability to supply what Russia has been importing. Issue and tax away the money exactly so the people will be able to afford to absorb the supply at desired price levels. In other words, control inflation and deflation via matching the money supply to the projects non-speculative needs and in accordance with the velocity of the money's circulation. That control can be, and should be, done in real time.

    It will take time to ramp up, but it's definitely doable. The sooner Russia starts, the better.

    Add your comment.


  16.    U.S. Boosts Scrutiny of N.Y., Miami Cash Real Estate Deals – Bloomberg Business

    It's about time!

    "We are seeking to understand the risk that corrupt foreign officials, or transnational criminals, may be using premium U.S. real estate to secretly invest millions in dirty money," FinCen Director Jennifer Shasky Calvery said in a statement. Both New York and Miami are popular with wealthy foreign buyers.

    Add your comment.


  17.    Alberta housing market braces for worst year since financial crisis – BNN News

    Alberta's woes will weigh on the national market. But Mr. Soper also expects the sizzling markets of Toronto and Vancouver to lose some steam this year. Home prices should increase 5.5 per cent in Greater Toronto and 9 per cent in Greater Vancouver, well below last year's levels as buyers get pushed to the sidelines by a lack of affordable options.

    Add your comment.


  18.    'Frenetic' price growth in real estate market to slow in 2016: Royal LePage – Business – CBC News

    "While most of the country will continue to see house value appreciation in 2016, we expect that the pace of price increases in Greater Vancouver and the Greater Toronto Area — where real estate appreciation has significantly outpaced job and wage growth — will settle to a more sustainable, single-digit price increase trajectory," Soper said in a statement.

    Add your comment.


  19.    The Government Boldly Just Set Up Another Real Estate Meltdown – Michael Hausam – Page full

    Is Fannie Mae lowering lending-standards too much?

    "These loans are insane. The default rate is going to be through the roof!"

    "Doesn't matter. The guidelines are the guidelines and we're going to make a fortune."

    If you were conscious and sentient in the mid to late 2000s, you know the answer to this question, but go ahead and consider it anyway:

    What happened to the real estate market when a huge number of borrowers, who had competed with one another to drive up housing prices to record levels, stopped making payments on loans they never should have received?

    Exactly. The bottom fell out.

    Understanding what Fannie Mae is doing with this new loan program, lets see if we can let the past inform an answer to a question about the future:

    What will happen to the real estate market when a huge number of borrowers, who will be competing with one another and driving up housing prices, stop making payments on loans they never should have received?

    Are enough people going to be able to use the lower standards to cause a crash? Are enough people going to be ignorant enough to take out reckless loans? Eventually, the Great Recession's causes will fade. Young people will come up who won't remember the lessons. Is Fannie Mae banking on that already? Who's behind this? Is it government or Wall Street types or both?

    Add your comment.


  20.    Gilbert's Bedrock buys Corktown properties

    Dan Gilbert's real estate activities in Detroit remain fascinating.

    Add your comment.


  21.    Report: Denver commercial real estate finishes 2015 strong – The Denver Post

    The positive trend ought to continue throughout 2016 for all three sectors of the commercial real estate market, said Jessica Ostermick, director of research and analysis for CBRE in Denver. Industrial, office and retail all saw lease rates increase in 2015.

    The attractiveness of Denver's labor market continues to drive demand for office space, said Alex Hammerstein, senior vice president with CBRE's Occupier Services Group.

    "It was another strong year. We're seeing rates go up, we're seeing new construction, we're seeing activity from grocers, restaurants, a variety of different retail users expanding, we're seeing the new housing construction," Lee said. "Retailers love to see new houses coming in. That will help spur more development."

    Add your comment.


  22.    Housing market needs incomes to grow: Fannie Mae – Yahoo Finance

    Here's Fannie Mae's Chief Economist, Doug Duncan, saying at the end of the video part of why I questioned above whether lower lending standards will be enough to cause another crash any time soon: there may not be enough low-price houses out there yet.

    Add your comment.


  23.    Decatur Man, Mysterious Sidekick Sought For Real-Estate Scam

    A Decatur man and his female sidekick have been posing as real estate agents and ripping off prospective home renters in Gwinnett County and elsewhere in metro Atlanta, police say.

    Gwinnett authorities are looking for information about the pair, who, according to a police news release, have been finding vacant-home listings on the internet, then creating their own, fake listings advertising the homes at affordable prices.

    Add your comment.


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