News: Real Estate, Risk, Economics. Mar. 24, 2016

Linking ≠ endorsement.

Table of Contents
(Click to sections below.)

1) Market gridlock? San Francisco's starter home inventory down 70% in four years – On The Block

2) Thurston County real estate experts raise concerns about regulations | The Olympian

3) Jefferson Bank brings in Mark Dotzour to talk real estate, potential bubbles and the end of San Antonio's current cycle – San Antonio Business Journal

4) 93-year-old with Alzheimer's is target of Dallas real estate firm's lawsuit | Dallas Morning News

5) Helicopter Money Takes Flight as Latest Drastic Monetary Idea – Bloomberg Business

6) Investors Urge Oil Companies to Stress Test Portfolios Against Two Degree Scenario | DeSmogBlog

7) The Daily Shot; March 23 – Global Macro Currents

8) mainly macro: Time to rewrite a bit of oral history

9) United States New Home Sales | 1963-2016 | Data | Chart | Calendar

10) Michael Hudson on Debt Deflation, the Rentier Economy, and the Coming Financial Cold War | naked capitalism

11) Misnomers | VOX, CEPR's Policy Portal

12) Cruz Seeks Economic Wisdom in the Wrong Place – Bloomberg View

13) Update: With Property Claims Added, North Texas Hail Damage May Reach $600M

14) Report Suggests More Planning Needed for New Hampshire Coastal Hazards

15) Podcast 36 Update on my $500,000 Flip, Rentals in Florida and Developing Land – YouTube

  1.    Market gridlock? San Francisco's starter home inventory down 70% in four years – On The Block

    Regionally, starter home inventory is currently down most in the West and South, namely in Salt Lake City, San Antonio, Austin, San Diego, Nashville and Orange County. But starter home affordability is down most in California, especially in Oakland, Los Angeles, San Jose, San Francisco, Sacramento and Orange County.

    Add your comment.


  2.    Thurston County real estate experts raise concerns about regulations | The Olympian

    "(Regulations) are being forced through public policy at the (Thurston County) courthouse to force people into urban areas," said Gary Edwards, a Thurston County Commission candidate and former Sheriff. "It's like a Communist move as far as I can see. I'm just letting you know where I'm standing," he added, eliciting laughs from the audience.

    Thomas struck a note of balance at the end of his moderated discussion, reminding the audience about the importance of sales, resales and housing market activity, but also about quality of life and the environment.

    Urban sprawl is not a good thing while neither is packing people together so tightly that they can't move or breathe.

    Add your comment.


  3.    Jefferson Bank brings in Mark Dotzour to talk real estate, potential bubbles and the end of San Antonio's current cycle – San Antonio Business Journal

    Rah-rah, but is it justified? "Past performance does not guarantee future results." That holds in real estate just as much as in equities. Texas was slapped by the Great Recession that began with a real estate collapse in Orange County, California due to Wall Street deregulations. What could still happen to send San Antonio tumbling?

    I'm not predicting gloom but simply saying that one must remain realistic about possibilities else repeat past mistakes.

    Add your comment.


  4.    93-year-old with Alzheimer's is target of Dallas real estate firm's lawsuit | Dallas Morning News

    A neuropsychologist who diagnosed Ruth with Alzheimer's disease last year dated her "cognitive decline" to as early as 2010, two years before she first signed with the brokerage firm.

    Ackerman questioned that doctor's assessment and called the timeline "convenient."

    "The defendant keeps asserting her age and circumstances is somehow an excuse for not following the rules," lawyer Jamie Wall told the judge. "Somehow entitling a person who happens to be 92 and who happens to perhaps not have the money some immunity from having to follow the rules.

    Rough stuff. Proving when someone became or didn't become incompetent could take some real digging. On what history of events did the neuropsychologist base 2010? That's what I'd like to know. If the history is clear, or not there, seems to be the issue.

    Add your comment.


  5.    Helicopter Money Takes Flight as Latest Drastic Monetary Idea – Bloomberg Business

    The theory — never attempted by a modern major economy — is to fuse monetary and fiscal policies now both running out of room. Cash-strapped governments sell short-term debt straight to their central bank for newly printed money that is then injected straight into the economy via tax cuts or spending programs. The usual intermediaries, like banks, are bypassed.

    The idea is to spur spending and investment directly rather than influence bond yields or sentiment. Central banks can be saved from permanently underwriting governments by establishing growth or inflation limits.

    …The ECB is prohibited from financing states and lacks a single Treasury to work with, while the Fed is constrained in what assets it can buy.

    "I don't think helicopter money gets rolled out quite yet," said Ewen Cameron-Watt, chief investment strategist at BlackRock Inc. "You need a considerable downturn and further decline in inflation expectations first."

    "Cash-strapped governments sell short-term debt straight to their central bank for newly printed money …." That's not the only way.

    The US government can issue money directly without selling debt (that is, without borrowing).

    I'm a strong advocate and have been for many years now. Avoiding inflation would be easy; and yes, there is such a thing as a free lunch. It's what the Fed handed the insolvent banks and investment houses after the crash of the Great Recession that those organizations caused via their deregulations obtain through Congress by campaign funding and revolving-door promises and then signed by the then President (who's made tens of millions since).

    Add your comment.


  6.    Investors Urge Oil Companies to Stress Test Portfolios Against Two Degree Scenario | DeSmogBlog

    "We believe producing these assets is essential to meeting growing energy demand worldwide, and in preventing consumers — especially those in the least developed and most vulnerable economies — from themselves becoming stranded in the global pursuit of higher living standards and greater economic opportunity."

    So essentially Exxon's approach to "managing the risks" to the climate by burning fossil fuels is to ignore any risks.

    After decades spent funding climate denial it is no surprise that companies like Exxon are refusing to address a two degree limit as the future. Hopefully investor pressure won't allow them several more decades of denial about the future of fossil fuel use.

    Add your comment.


  7.    The Daily Shot; March 23 – Global Macro Currents


    This next chart illustrates why the housing market shouldn't be growing at this rate. Here is the relative change in house prices vs. wages (1991 =100). This will price a significant number of households out of the housing market.

    Add your comment.


  8.    mainly macro: Time to rewrite a bit of oral history

    Simon Wren-Lewis:

    The deficit went up because of the recession following a global financial crisis, and this chart proves it.

    It's amazing that Osborne can get away with shifting the blame from deregulation to Labour spending.

    A great deal of it is the Stockholm syndrome.

    Add your comment.


  9.    United States New Home Sales | 1963-2016 | Data | Chart | Calendar

    Sales of new single-family houses in February of 2016 were at a seasonally adjusted annual rate of 512,000, up 2 percent from last month and compared to market expectations of a 3.2 percent rise. Sales rebounded from a downwardly revised 7 percent drop in January, as home sales in the West surged but fell in the remaining three regions.

    Add your comment.


  10.    Michael Hudson on Debt Deflation, the Rentier Economy, and the Coming Financial Cold War | naked capitalism

    New York University's money and banking course was a travesty. It was about helicopters dropping money down — to be spent on goods and services, increasing prices. There was no understanding that the Federal Reserve's helicopter only flies over Wall Street, or that banks create money on its own computers. …

    When President Clinton ran a budget surplus in the late 1990s, that sucked revenue out of the U.S. economy. When governments do not run deficits, the economy is obliged to rely on banks — which charge interest for providing credit. Governments can create money on their own computers just as well. They can do this without having to pay bondholders or banks.

    That is the essence of Modern Monetary Theory (MMT). It is elaborated mainly at the University of Missouri at Kansas City (UMKC), especially by Randy Wray — who has just published a number of books on money — and Stephanie Kelton, whom Bernie Sanders appointed as head of the Senate Democratic Budget Committee.

    [Here, he changes the subject without making it clear. He shifts away from governments creating money without borrowing. He's now referring to governments paying off their debts but still being under the governments-must-borrow system.] If the government were to pay off its debts permanently, there would be no money — except for what banks create. That has never been the case in history, going all the way back to ancient Mesopotamia. All money is a government debt, accepted in payment of taxes

    This government money creation does not mean that governments can pay foreign debts. [He means that certain governments ought not to do it for the reasons he gives, not that they cannot. It also does not apply to the US.] The danger comes when debts are owed in a foreign currency. Governments are unable to tax foreigners. Paying foreign debts puts downward pressure on exchange rates. This leads to crises, which often end by relinquishing political control to the IMF and foreign banks. They demand "conditionalities" in the form of anti-labor legislation and privatization.

    In cases where national economies cannot pay foreign debts out of current balance-of-payments revenue, debts should be written down, not paid off. If they are not written down, you have the kind of austerity that is tearing Greece apart today.

    JR: Why does economic thought minimize the role of debt? I.e. I read Paul Krugman and he says the total amount of debt isn't a problem, for example you can't find the internet bust in GDP or the 1987 crash

    MH: When economists speak of money, they neglect that all money and credit is debt. That is the essence of bookkeeping and accounting. There are always two sides to the balance sheet. And one party's money or savings is another party's debt. [This is simply incorrect to say as a blanket statement. Balance sheets do not necessarily balance to zero. There are balance sheets representing zero debt. Were the US to not borrow but simply create money to pay for whatever, it would owe nothing, ever; and nobody would necessarily owe it anything either or to each other. The US would tax simply to control supply to control price inflation if needs be. One would owe only the tax. All other things being equal (meaning leaving private borrowing out of the picture), that would be the only liability attached to the issued money. While issuing the MMT statement that all money is inherently debt, MMT never bothers to make the distinction between money created via borrowing versus money created without borrowing. Why that is, I can't say. MMT is roundly criticized for being incomprehensible when all it really is, is that MMT talkers don't flesh things out as they speak and write but rather race in giving their long statements. I've done my best to make that clear to them, but to little or no avail. It's a shame because I agree with them on pretty much everything else.]

    … Once a class or economy falls into debt, the debt overhead tends to grow steadily until it stifl es market demand and subjects the economy to debt deflation. Income is sucked upward to the creditors, who then foreclose on the assets of debtors. This shrinks tax revenue, forcing public budgets into deficit. And when governments are indebted, they become more subject to pressure to privatization of public enterprise. Assets are turned over to monopolists, who further shrink the economy by predatory rent seeking.

    When economists treat depressions merely as self-curing "business downturns," they are really saying that no government action is required from "outside" "the market" to rectify matters and put the economy back on track to prosperity. So equilibrium thinking is basically anti-government libertarian theory.

    But when banks are subjected to "equilibrium" by writing down debts in keeping with the ability of borrowers to pay, Wall Street's pet politicians and economic journalists call this a crisis and insist that the banks and bondholders must be saved or there will be a crisis. This is not a solution. It makes the problem worse and worse.

    … decline was offset by the Federal Reserve and the European Central Bank trying to re-inflate the Bubble Economy by Quantitative Easing — providing reserves [helicopter money] to the banks in exchange for their portfolio of mortgages and other loans. Otherwise, the banks would have had to sell these loans in "the market" at falling prices.

    In the name of saving "the market," the Fed and ECB therefore overruled the market. …

    MH: Money is debt. It is a claim on some debtor. Government money is a claim by its holder on the government, settled by the government accepting it as payment for tax debts. [… if there are such taxes due, which there don't have to be. Just because money can be used to pay taxes does not mean that all money is debt. I can use money to pay back a bank loan; but if I don't owe any bank anything, that hasn't altered the nature of the money I have that I can use for other purposes: barter purposes (money as a means of exchange, which is a description that rubs MMTers the wrong way for no good reason that I've been able to discern even after having conversed with them for probably hundreds of hours). Anyway, more power to Michael Hudson, who I'd consult in a flash and regularly were I President of the US.]

    Add your comment.


  11.    Misnomers | VOX, CEPR's Policy Portal

    In the words of Ricardo (1817): "… it must not be inferred that I consider the system of borrowing as the best calculated to defray the extraordinary expenses of the State. It is a system which tends to make us less thrifty — to blind us to our real situation". Like modern behavioural economists, Ricardo understood that in their daily lives most people abide by the old saying, "worry about that bridge when you cross it".

    Governments ought not borrow. They don't need to. They don't, however, have to be "thrifty" either. They simply need to be productive in a real and proper way and not supply more or less money than planned production merits: easy as pie.

    Add your comment.


  12.    Cruz Seeks Economic Wisdom in the Wrong Place – Bloomberg View

    Wow! Is Barry Ritholtz ever being charitable here.

    I'll be frank. Phil Gramm was a major disaster. He was either an economics illiterate or a gigantic shill for plutocracy.

    If it hadn't been for Phil Gramm and his ilk, the Great Recession would not have happened.

    Did he do a mea culpa the way Alan Greenspan admitted that Alan was completely wrong? I don't remember Phil doing that. If he has, please point me to it. Thanks.

    Add your comment.


  13.    Update: With Property Claims Added, North Texas Hail Damage May Reach $600M

    Look at that auto glass.

    An insurer trade group says it estimates that damage caused by hailstorms that rolled through the Fort Worth area last week will reach $600 million in auto and property claims.

    Typical DP-1 Extended Coverage:

    When a Premium for Extended Coverage is shown in the Declarations, Perils 2 through 8 are made part of Perils Insured Against.
    2. Windstorm or hail.
    This peril does not include loss: a. to the inside of a building or the property contained in a building caused by rain, snow, sleet, sand or dust unless the direct force of wind or hail damages the building causing an opening in a roof or wall and the rain, snow, sleet, sand or dust enters through this opening; or b. to the following property when outside of the building:
    (1) awnings, signs, radio or television antennas or aerials including lead-in wiring, masts or towers; or
    (2) canoes and rowboats.

    Add your comment.


  14.    Report Suggests More Planning Needed for New Hampshire Coastal Hazards

    Using 1992 levels as a baseline, New Hampshire sea levels are expected to rise between 0.6 and 2 feet by 2050 and between 1.6 and 6.6 feet by 2100, the report said.

    Add your comment.


  15.    Podcast 36 Update on my $500,000 Flip, Rentals in Florida and Developing Land – YouTube

    I am in the process of flipping a house I bought for $500,000, I am looking to invest in Florida and much more on this episode of the Invest Four More Podcast.

    Add your comment.


If you are an investor in 1-4 unit properties in Arizona, California, Nevada, Oregon, Utah, or Washington, please do the financially responsible thing and make sure you have proper Landlord Insurance with PropertyPak™. We love focusing on real estate and the economy in general, but we are also here to serve your insurance needs.

Hill & Usher (PropertyPak™ is a division) has many insurance offerings. See our menu above for more info and links.

Did this post help you? Let us know by leaving your comment below.

Note: This blog does not provide legal, financial, or accounting advice. Seek professional counsel.

Furthermore, we, as insurance producers, are prohibited by law from disparaging the insurance industry, carriers, other producers, etc. With that in mind, we provide links without staking out positions that violate the law. We provide them solely from a public-policy standpoint wherein we encourage our industry to be sure our profits, etc., are fair and balanced.

We do not necessarily fact checked the contents of every linked article or page, etc.

If we were to conclude any part or parts of our industry are in violation of fundamental fairness and the legal standards of a state or states, we'd address the issue through proper, legal channels. We trust you understand.

The laws that tie our tongues, so to speak, are designed to keep the public from losing confidence in the industry and the regulatory system overseeing it. Insurance commissioners around the country work very hard to analyze rates and to not allow the industry to be damaged by bad rate-settings and changes in coverages. The proper way for people in the industry to deal with such matters is by adhering to the laws, rules, and regulations of the applicable states and within industry associations where such matters may be discussed in private without giving the industry unnecessary black eyes. Ethics is very high on the list in the insurance industry, and we don't want to lose the people's trust. That said, the industry is not perfect; but what industry is?

For our part, we believe in strong regulations and strong regulators.

We welcome your comments and ask you to keep in mind that we cannot and will not reply in any way or ways where any insurance commissioner could rightly say we've violated the law of the given state.

We are allowed to share rating-bureau data/reports and industry-consultant opinions but make clear here that those opinions are theirs and do not necessarily reflect our position.

Subscribe