News Alerts, Aug. 21, 2013: Real Estate +

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  1. Sober Look: The US housing recovery has not produced the economic boom some had expectedNews Alerts, Aug. 21, 2013: Real Estate +

    …the so-called “housing services” sector (mostly rent and utilities), which is typically 12-13% of the GDP, grew by about 0.7% over the past 4 quarters. That’s roughly the growth rate of the US population. Clearly the “knock-on” effect of the housing recovery isn’t there just yet – other than more people in the US resulting in more rent and utilities payments…

    Read the source article …

  2. U.S. Consumer Confidence Falls From a Six-Year High – Bloomberg

    Higher mortgage rates are threatening to crimp momentum in the housing market that’s contributed to the economic expansion. At the same time, job growth and increased personal wealth tied to stock portfolios and home values are helping offset the effects of higher payroll taxes and federal government budget cuts that began early this year.

    “Interest rates are going up a little bit, that never helps,” Paul Ashworth, chief U.S. economist at Capital Economics in Toronto, said before the report.

    However and as we’ve been pointing out a great deal, the economy needs more full-time, better-paying jobs.

    Read the source article …

  3. Industry Execs Remain Cautious About Recovery | CCIM Institute

    Despite ongoing concerns about job creation, interest rates, and economic and fiscal policy, commercial real estate investment continues to make progress toward a slow, bifurcated recovery, according to results of the Real Estate Roundtable’s Q313 Sentiment Survey, which includes perspectives of senior real estate executives from a broad range of industry sectors.

    “Today’s survey indicates a commercial real estate sector and national economy stuck on a plateau of recovery — certainly improved since the worst days of the recession, but not moving forward in any robust way,” said Jeffrey DeBoer, RER president and chief executive officer.

    Read the source article …

  4. Analysis: Higher prices sap foreign interest in U.S. real estate | Reuters

    Such a quickly changing market:

    Calamitous declines in many of the nation’s housing markets during the economic crisis had attracted droves of international investors seeking to cash in on a weak U.S. dollar and rock-bottom property prices. Many were attracted to Sun Belt markets that had been battered by the crisis.

    The opposite trend is now gathering steam, and that will likely spell the end of the double-digit price gains seen recently in markets such as San Francisco and Miami, say people in the real estate business community.


    More experts expect the dollar to strengthen in the months and years to come as the economy improves and as the Federal Reserve tapers off a bond buying program designed to fuel the economy recovery. Interest rates are also expected to rise, although that is less important to buyers paying in cash.

    Read the source article …

  5. Four Portland condo buildings tied up in defect lawsuits | Four Portland condo buildings tied up in defect lawsuits |

    This is something your due-diligence before purchasing likely would not have tipped you off about unless the problem had already made the news this way. It’s all the more reason to have insurance coverage and to make sure the condo association has proper coverage too.

    Condo insurance can be a bit tricky for a number of reasons such as the terminology concerning the walls of condos and who’s responsible for plumbing, etc., in the partition walls within the units. You’ll want to make doubly sure that you’re walls, etc., are completely covered but without redundant coverage on your part (covering what the condo association already covers).

    A flood of lawsuits over allegedly leaky water pipes has tied up at least four Portland condominium buildings in court, leaving hundreds of condo owners essentially unable to sell their units until the legal wrangling is over.

    Owners associations at four Pearl District and downtown Portland condo buildings are suing the supplier of valves, gaskets and other piping products used in the buildings, claiming widespread failures have caused water damage in some units and will cost millions in repairs and temporary relocations.

    Read the source article …

  6. Real Estate Investing: Risks and Benefits | Zillow Blog

    If you plan to allocate some of your investment dollars to real estate, you’ll find several options in the marketplace. Each type of investment has its own benefits and risks, and you should fully educate yourself on those before you write the check. Below [in the linked article] are details on a few of the more common real estate investment types.

    Read the source article …

  7. Testosterone Pit – Home – “Wealth Effect” Mucks Up Housing, Costs Homeowners Dearly

    Mortgage applications have been on a brutal decline that started in early May. For the week ending August 9, the Mortgage Bankers Association’s Composite Index dropped 4.7%, with the Refinance Index down 4% and the Purchase Index down 5%. It isn’t a fluke. Mortgage applications have plunged 50% from early May and have hit a level not seen since April 2011.

    Average interest rates for 30-year fixed-rate mortgages, at 4.56%, are nearly a full percentage point higher than in early May. These higher rates have been colliding with much higher home prices. Result: a dizzying jump in mortgage payments. Sticker shock for prospective buyers.

    So first-time buyers now account for only 29% of total sales; prior to the housing crash, they accounted for up to half. The Fed’s “wealth effect” policies are pushing average Americans out of the housing market. Of course, they don’t have to be homeless. About half of the vacant single-family homes that these private equity firms and REITs have acquired are still vacant – maybe they’d cut some deals on rent….

    Read the source article …

  8. US Mortgage Lending is Tumbling « naked capitalism News Alerts, Aug. 21, 2013: Real Estate +

    We had predicted that the sharp rise in mortgage rates precipitated by the Fed’s taper talk would put a damper on the housing “recovery” and could even send it into reverse if rates continued to increase. They’ve in fact fallen over the past few weeks but are still markedly higher than in the spring. The central bank has been sending mixed signals over the last week or so, on the one hand seeming more inclined to taper based on its cheery view of the fundamentals, but concerned over what a budget slugfest might do to the confidence fairy.

    Read the source article …

  9. China moral hazard run amok | | MacroBusiness News Alerts, Aug. 21, 2013: Real Estate +

    Despite the government vowing in the early years after the AMCs’ establishment that it would not facilitate moral hazard by facilitating more NPL transfers, the resolution of the 1999 bad debts is really turning into the mother of all moral hazards: the banks escape with almost no penalty for their ill-considered lending.

    Presumably, making good on these bad loans means there’s been little incentive to improve lending practices, either.

    In fact, Anne Stevenson-Yang of J Capital Research wrote in March that the early aspirations that the Chinese bad banks would facilitate more responsible lending has given way to a consolidation of the big banks’ financing of the powerful state-owned entities:

    Stevenson-Yang described a “state-corporate fusion” a the core of China’s economic strategy, in which the Ministry of Finance, the Peoples Bank of China and state-owned enterprises “mix and match every manner of financial, fiscal, and fiduciary tool to meet the consensus goal of producing world-pacing growth figures”.

    The question is, what’s the end game? Particularly if there remains little incentive for the investments fuelled by all this fiscally-financed lending to be directed towards more useful purposes.

    In the meantime, the misdirected investment from stimulus spending still hasn’t been recognised on the country’s balance sheet. And “even compared to China’s record-breaking forex reserves”. Where might it eventually show up? Currency devaluations and inflation, Stevenson-Yang wrote. This, she says, is why it’s important to watch China’s net flows of hard currency.

    Read the source article …