Linking ≠ endorsement.
ST. PAUL, Minn.- Public safety officials in Minnesota are concerned over what they call a significant spike in the number of people killed in kitchen fires.
IRVINE, Calif. — June 18, 2014 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released its first-ever Natural Disaster Housing Risk Report, which assigns a natural disaster risk score to more than 3,000 county housing markets nationwide.
Scores assigned to each county’s housing market were based on risk data for three natural disaster events — hurricanes, tornados and earthquakes — and each county was assigned to one of five risk categories based on their score: Very High Risk, High Risk, Medium Risk, Low Risk, and Very Low Risk (see more detailed methodology below).
The interactive heat map shows county-by-county natural disaster risk levels for every county in the continental United States. Click on any county to see more detailed information.
↑ Star investigation: County code ignores unsafe conditions inside rental properties
This is an amazing story.
Chrystle Porter and Bobby Tate tried repeatedly to get a county code inspector to document the leaks and mold they say made their rental home unlivable.
But Pima County code enforcers told Porter they don’t deal with conditions inside occupied residential properties. That’s because the county intentionally adopted a limited set of property maintenance codes to avoid the expense of addressing unsafe conditions inside run-down properties.
The county adopted a limited version of the International Property Maintenance Code in 2003 that expanded enforcement to cover vacant structures but deleted sections related to occupied housing.
There’s no code enforcement inside rental properties.
The county says it doesn’t have the money, but what about fines for code violations? Can’t they be set high enough to pay for enforcement?
↑ These People Could Cause Another Real Estate Crash
There are still a few things that could very easily end the housing rally that we need to keep an eye on, and one of the biggest hazards is first-time homebuyers staying out of the market, which is already happening.
With the recent data indicating the market is slowing down, it is more important than ever to watch for signs of trouble.
… it’s not just student loan debt we should be concerned about. The average “millennial” (ages 22-33) spends 12% of their take-home pay on student loans according to a recent survey, which is surprisingly not the biggest debt burden they have.
Credit card debt is often the biggest problem for younger adults, and eats up about 16% of the millennials’ take home pay, on average.
↑ [Recommended] Housing falters as forecasters see sales drop : Business
The two-year-old U.S. housing recovery is faltering.
The Mortgage Bankers Association on Thursday lowered its forecast for combined new and existing home sales in 2014 to 5.28 million — a decline of 4.1 percent from last year that would be the first annual drop in four years.
Bullish forecasts in early 2014 from the MBA, Fannie Mae and Freddie Mac have been sideswiped by rising home prices and an economy that isn’t producing higher paying jobs.
This is what we’ve been saying for months on end now.
We don’t believe rates will go up unless the Fed continues to not pay attention. They say they are watching carefully, but we still haven’t heard the right noises coming out of their meeting minutes and press conferences. We think their forecasts are way too rosy.
The Environmental Protection Agency (EPA) is urging consumers and private industry to use safer alternatives to the flame retardants now found in many commercial products, including building insulation. Flame retardant chemicals such as hexabromocyclododecane (HBCD) and pentabromodiphenyl ether (pentaBDE) raise concerns for human health and the environment including potential reproductive, developmental, and neurological effects and can be persistent, bioaccumulative, and toxic to aquatic life.
↑ Asos Stops Taking Orders as Warehouse Damaged by Fire – Bloomberg
Asos Plc (ASC), the U.K.’s largest online-only fashion retailer, suspended taking orders after a fire at the warehouse in northern England that handles all its shipping.
Ten engines were needed to battle the blaze at the Barnsley site, the South Yorkshire Fire and Rescue service said in a statement on its website.
There can be no doubt that maintenance certification adds value to the professional team of any apartment community. It’s these men and women who ensure that the residents’ homes are in tip top shape, and that the grounds are enjoyable, well-kept and inviting.
We asked our very own Star Bradford, (pictured left grilling tasty hot dogs at The Boulevard Apartments, a Nolan Living community) who consults, and advises our property management teams throughout the Nolan portfolio, to sit down with us (virtually, that is) and share his thoughts and insights on the importance of certification and continuing education.
↑ Apartment rent hikes are slowing — finally – Amy Hoak’s Home Economics – MarketWatch
Good news for apartment renters: Rent hikes are finally starting to slow, a huge relief for those who have put up with annual increases over recent years.
A big reason for the slowdown is the increased supply of new apartment units on the market, said Hans Nordby, managing director of CoStar Group, a provider of information and analytic services for the commercial real-estate industry. “The first quarter of this year, 54,000 new apartment homes were delivered to the market [nationally] and demand was about 27,000 apartments,” Nordby said. “That causes vacancies to pick up a bit.”
Increased vacancies mean that landlords can’t be as aggressive in raising rents, if they want to keep their units filled.
We just saw above how new rental units have reduced the rate of rent-rate increases. However, the long-term trend concerning rental construction doesn’t look good for either renters or landlords because it doesn’t bode well at all for the economy as a whole.
… why does residential construction remain so tepid? Since 2008 the acquisition, development and construction (AD&C) lending has been too restrictive to accommodate the rising demand. That in turn has led to insufficient numbers of developed lots for construction.
Other reasons include highly restrictive zoning rules, as existing homeowners limit new construction in order to boost their property prices. Whatever the case, residential construction is running at half the level of longer term housing demand. And while the nation can get by for now, consider the situation 5-10 years down the road.
We know there are landlords who will disagree that this is bad for them; but if things get bad enough, many currently paying tenants won’t be able to pay at all.
The longer version swirls around a number of concerns: Worry about young adults who just can’t seem to get interested in homeownership. Rising interest rates that will discourage many people from wanting to sell. And as much as homebuilding would like to recover, builders are having trouble getting their hands on the right kind of dirt.
↑ Inflation Hysteria – Tim Duy’s Fed Watch
So what is going on here? Inflation is not a sustained phenomenon in the absence of participation from wage dynamics. If inflation accelerates while wage growth remains stagnant, demand will soften and so too will any incipient price pressures. Hence why Yellen sees the potential for downside risk for consumer spending in the absence of stronger wage growth. Moreover, as she notes, wage growth itself is not inflationary. We would expect wage growth should exceed inflation such that real wages grow to account for rising productivity. We might then expect inflation to be correlated with unit labor costs, and it is:
If you expect to see sustained higher inflation, you need to see sustained higher unit labor cost growth. No way around it. And even then you need to assume that firms respond by raising prices, rather than seeing profit erode. Note in particular sustained high unit labor cost growth in the late 1990s.
In short, you shouldn’t be looking at the inflation numbers without understanding the underlying wage dynamic. It isn’t until wages start to push higher that inflation becomes a more interesting issue.
That’s all very consistent with what we’ve been saying.
Minneapolis, USA. The talent gap in high-end job markets and a general increase of low-wage jobs are the two trends defining the fifth year of the US economic recovery, according to CNN chief business correspondent Christine Romans.
Speaking at the annual conference of the Institute of Management Accountants in Minneapolis, Romans shared insights into the lights and shadows of the post-crisis economic outlook in the US.
Although recovering since 2009, one of the reasons why the US economy might not be operating at its full potential (3.5% GDP growth according to the Federal Reserve) is linked to the structure of its labour market.
“On the one hand, you are seeing talent wars and CEOs complaining about not having enough people to fill skilled jobs; and everywhere else is low-wage workers who are taking to the streets protesting for $13 an hour [jobs]…that’s an important policy to consider over the next years,” Romans said.
↑ Consistency Remains the Story in Cincinnati’s Apartment Sector – Apartment Market Dynamics – YouTube
Cincinnati’s apartment market won’t rank among the national leaders by most measures. But it has become of the nation’s most steady, stable markets — albeit one with minimal upside. But one submarket stands out from the pack, and may offer opportunity going forward.
We’ve been waiting for complete information on the strings to be attached by the ECB (European Central Bank) on the new TLTRO (Targeted Long-Term Refinancing Operations). After this, we’re still waiting.
… how tight is the net-lending criterion? In practice, not so much. Figure 3 shows a 12-month cumulative flow of lending to the non-financial private sector (excluding households mortgages) for the euro area, as well as the four biggest countries. During the twelve months up to April 2014 (i.e. the period that will be used for the benchmark) net lending has been negative in the euro area, as well as in Italy and Spain, and almost inexistent in Germany and France. As noted among others by Frederik Ducrozet of Crédit Agricole, this means it should be rather easy for banks to meet the net lending benchmark. De facto in Italy and Spain, net lending will “just” need to be “less negative”, i.e. the pace of deleveraging in the corporate loan portfolio will just need to be slowed and not necessarily reversed. This is what can be said based on the current information available, but the ECB has mentioned that further details (possibly clarifying this point) will be released at a later stage.
Quite obviously, the most important and delicate part of the scheme is the safeguard mechanism to ensure that the funds are actually used for the purpose they are intended to, i.e. lending to the real economy. At the moment, this is not yet entirely clear. The ECB press release says that banks will be required to pay back the funds borrowed under phase 1 of the TLTRO as early as September 2016 (i.e. 2 years before maturity), if their net lending will be below the benchmark during the period from 1 May 2014 to 30 April 2016. However, as noticed by market analysts, nothing explicitly prevents banks from using the funds of the TLTRO to buy government bonds. According to the information available up to this point, Spanish and Italian banks could use part of the funds borr owed in Phase 1 to buy government bonds and still qualify for Phase 2, as long as their loan portfolio does not shrink faster than it has been shrinking over the last 12 months. And even in case they were not to qualify for Phase 2, the only consequence at the moment appears to be that they would be forced to repay the funds earlier but could still enjoy the profits of a carry trade in the meantime. ECB’s president Draghi has said in the Q&A that “there are going to be additional reporting requirements”, which are probably part of the “details” the ECB will publish at a later stage.
↑ Tax-driven mergers: Inverse logic | The Economist
Lawmakers are likely to find that simply trying to prevent inversions just leads to more cat-and-mouse games with corporate tax-planners. It would be better to reduce the incentive to leave America by cutting its corporate tax rate to around 25% (partially paid for by hacking away the current thicket of corporate allowances) and moving to a “territorial” system that taxes only domestic profits, as most other countries do. Among other benefits, this would encourage American firms to bring home their foreign profits to invest them in America. Until then, inversions will remain on boards’ agendas. With so much at stake—each percentage-point cut in Medtronic’s tax bill adds $60m to its bottom line—the temptation is simply too great.
The US should be careful not to enter into a race to the bottom to re-attract multinational corporations.
We do like the idea, however, of “hacking away the current thicket of corporate allowances” where those allowances are detrimental to, among other things, good stewardship of the environment for instance.
What the US could do after making some fair adjustments to the system is place some level of tariffs on all corporations that engage in this re-domiciling to foreign nations.
↑ A European New Deal financed by the EIB, with ECB QE-backing, is the optimal policy: Now recommended also by W. Münchau | Yanis Varoufakis
Faced with deflationary forces in its core, and a lasting depression in the periphery, the Eurozone requires a major investment drive. One of the Modest Proposal’s policy recommendations is that the European Investment Bank (along with the European Investment Fund) embarks upon a massive investment drive (up to 8% of Gross Eurozone Product) without any national co-funding. These investments could be funded through 100% issues of EIB-EIF bonds, with the European Central Bank purchasing, in secondary markets, sufficient quantities of these bonds to ensure that their yields stay well below 1.5%, thus making a European New Deal not only possible but also self-financing — and off the books of national budgets.
This is all very nice, but why issue bonds rather than simply issue debt-free currency to accomplish the exact same thing only without charge?
↑ Why We Need Subprime Mortgages For A Healthy Housing Market
Subprime mortgages are making a comeback, but don’t worry about a repeat of the mortgage crisis anytime soon. Reforms have been implemented to ensure these loans are done responsibly, and lenders are requiring just as much (or more) documentation of a buyer’s ability to repay as they would for a conventional loan.
Here’s why things are different this time around ….
Let’s hope they don’t relax the standards to get us into trouble again. They’ve already started doing some of that. The longer we go without problems, the more some will push for further and further and further relaxation until we’re ripe for another crash.
↑ [Recommended] Yao Yang is sharply critical of the Chinese government’s approach to mitigating property risk. – Project Syndicate
While both interest-rate liberalization and deleveraging are critical to the long-term health of China’s economy, the skyrocketing cost of borrowing is forcing many low-risk companies, which are unable to offer sufficiently high rates of return, out of the market. At the same time, real-estate developers who have borrowed heavily from shadow-banking institutions, based on the assumption that property prices would continue to rise steadily, may struggle to repay their debts, with a sharp decline in prices inevitably leading to defaults. Given that the formal banking sector provides a large share of shadow-banking finance, this could initiate a chain reaction affecting the entire financial sector.
They should begin by eliminating non-market-based restrictions on the real-estate sector, which have generated serious distortions not only to the economy, but also to people’s lives, with couples divorcing temporarily to gain the right to purchase an additional apartment.
Of course, there are right and wrong ways and degrees to do that, eliminating non-market-based restrictions, assuming China wants a truly mixed economy.
↑ The Reality of Student Debt Is Different From the Clichés – NYTimes.com
The deeply indebted college graduate has become a stock character in the national conversation: the art history major with $50,000 in debt, the underemployed barista with $75,000, the struggling poet with $100,000.
The anecdotes have created the impression that such high levels of student debt are typical. But they’re not. They are outliers, and they’re warping our understanding of bigger economic problems.
If you want to argue that American universities charge too much money for too little education, you can make a pretty good case. But the people paying the real price for those failings aren’t the ones who fit the clichés.
Well, we agree with much (but definitely not all) of the article but especially find that it fails to understand or state the difference between say the California of the 1960’s versus now. At one point, in-state tuition was free.
As far as we’re concerned, college, including advanced degrees, should be free for those who can and will do the work in a timely manner. We think that, that one change alone would result in the US being the most successful nation in all meaningful categories.
That said, we want to point out that student debt must be viewed in light of the quality, or lack thereof, of jobs waiting for both dropouts and graduates. The pay is not there except for a narrow band of professions, which would be flooded if all students were to shoot for degrees in those fields. That would, in turn, only lower pay in those as well.
In my judgment, this five-point plan is a good step forward, but the ECB is still too politically and legally constrained to be able to do the right thing promptly. In reality, money and credit growth in the eurozone is far too low and needs to be substantially raised if deflation is to be avoided. Sadly for the present, the prospect of ECB purchases of asset-backed securities — or any other kind of securities —will remain only a possible option, and implementation can’t be counted on.
More than a year ago, I forecast weak domestic demand in the eurozone resulting ultimately in deflation. My forecast has not changed: The threat of deflation in the eurozone remains.
↑ The Housing Number That Really Matters: 2.28 Million | Money.com
At the current pace, it would take 5.6 months to sell all the homes on the market. Six months is considered a healthy balance between buyers and sellers. The 5.6 number means it’s still, on average, more of a sellers’ market, but far better than late 2012 and early 2013, when there was less than a five-month supply of homes.
New construction is a bit wobbly, however. Yes, builders are building more homes, but they are mostly apartments (the rental market is still going gangbusters). Builders have been slow to commit, worried about the financial health of buyers. Economist Brad Hunter of MetroStudy, which analyzes the new home industry, says consumers are still skittish, but traffic through builders’ showrooms continues to improve. So sales should rise soon, he says.
As with everything real estate, it’s all local. Construction is healthy in southern California, Texas and Florida, while Arizona and Nevada are down, Hunter notes.
“Builders have been slow to commit, worried about the financial health of buyers.” Correct they are. Wages and salaries for the middle and lower economic classes are the issue.
↑ The Enormous Wage Potential of Infrastructure Jobs | Brookings Institution
This is one reason we call for more fiscal spending for public-sector-infrastructure jobs at least until the private sector finishes deleveraging.
As our recent report reveals, infrastructure jobs tend to pay 30 percent more to lower income workers—wage earners at the 10th and 25th percentile—relative to all jobs nationally, but the differences are especially striking when looking at specific occupations.
David Cay Johnston:
We should not be surprised that multinational companies and national governments prefer to keep us in the dark. If you had the power to avoid all that messy democratic process, with debate about the merits of policies, demands that you justify your proposals and results that might not be to your liking, wouldn’t you try to make secret deals that impose your will on everyone else?
… demand talks be held in the open, not behind closed doors where only governments and the biggest companies affected by the rules know what is really going on.
Regardless of your views concerning Julian Assange and WikiLeaks, per se, do you, as we, find this secret agreement [Trade in Services Agreement (TISA)] abominable?
↑ Zillow Economist On The Housing Market – Business Insider
In an email, Stan Humphries, the top economist at real-estate site Zillow, had the best characterization of the market that we’ve seen. Read this whole thing, especially the part that we’ve highlighted:
There’s no doubt that these can be confusing times for ordinary people trying to read the tea leaves. Home sales are up for the month, but down for the year. Case-Shiller is way up for the year, as always, but slowing. Inventory is coming back, but not at the low end of the market. Negative equity is falling, but is still extraordinarily high in many areas … The reality is that the market is moving from one defined by distortions including high negative equity and constricted inventory, to one defined by fundamentals like household formation rates, jobs and income growth. Unfortunately, some of these fundamentals are still fairly weak. This is a multi-year process that we are far from done with. This ride is not for the faint of heart, but we are slowly getting back to normal.
Stan Humphries is one of our favorite real-estate analysts. So far, we’ve never detected spin or attempts to psych the industry.
↑ U.S. consumer confidence, new home sales rise | Reuters
… as mortgage rates level off and house price appreciation slows, signs of life are emerging.
The inventory of new houses on the market was unchanged at 189,000 units. At May’s sales pace it would take 4.5 months to clear the supply of houses on the market, the fewest since June 2013. That was down from 5.3 months in April.
In our view, the article makes things sound a bit better than they really are; but we’d like to be wrong.
… the Third Plenum clearly and explicitly addressed the relevant issues head on, proposing at the end exactly the kinds of policies we would have expected if China is to embark on a new set of policies aimed at driving sharp increases in social capital.
The problem for China, of course, and as I think nearly everyone understands, is to implement these liberalizing reforms well before the country starts to bump up against its debt capacity constraints.
… I suspect the reason credit growth in the past year or two has not slowed nearly as sharply as it should, or as sharply as required by the economic analysis implicit in the Third Plenum reform proposals, is precisely because of the expected impact of meaningful credit constraint on GDP growth. Any attempt to rein in credit will sharply reduce GDP growth, and there is of course likely to be a positive correlation between lower growth and a stronger and more unified opposition. Xi must take steps to slow growth, but he might not yet be able to do so.
↑ Nevada State Apartment Association – Apartment Market Summary: May 2014
The May national occupancy rate of 95.0% was the highest since Axiometrics began monthly tracking of apartment properties in April 2008. The previous record of 94.8% was set in August and September 2013 and April 2014. Axiometrics reported quarterly before that, and the second quarter of 2001 was the last time occupancy reached 95% on a quarterly basis.
The national occupancy rate has increased steadily each of the past four months and is higher than the 94.7% recorded in May 2013, even though supply is increasing.
About 180,000 new units have been delivered throughout the U.S. during the past 12 months, but absorption has been strong.
↑ Something Very Disturbing Is Happening In The California Housing Market | Zero Hedge
What stands out is that while California is by far the most vibrant market when it comes to the most expensive segment (at +6%, the highest in the nation), it is shambles when it also comes to the two lowest price buckets, both of which blow out any myth of a recovery for the “non-1%” out of the water, with a collapse of 40% in sales in the $0-100K range, and a 20% plunge in the prime $100-$250K market (the Median existing home price across the US in May was $213,400).
The city attorney’s office claims Leonarda Duenez Aguilar illegally turned a Sylmar barn into living quarters with unlicensed plumbing and electrical work, including adding a bathroom and kitchen without permits. Prosecutors also say there were no smoke alarms.
↑ Cabins along Lake Isabel damaged by storm
North Dakota had some strong storms with damage.
↑ Judge Rules Bad Science to Blame for Possible Wrongful Arson Conviction
The Arson Research Project at the Monterey College of Law in California has highlighted at least 31 convictions based at least partly on debunked fire investigations, including that of a Texas man executed in 2004, and experts believe there are many more.
↑ [Highly recommended] Chandler on the rise of Sterling and Auerback on Hyman Minsky – YouTube
Both interviewees did an excellent job.
[At 4:28:] Erin sits down with Marc Chandler to talk about FX markets. One point of discussion is the rise of the British Pound to the 1.70 level to the US dollar. The Chief Currency Strategist at Brown Brothers Harriman answers more basic questions about currency, as well as enlightening with more macro currency issues and how they affect the economy.
[15:28:] Then, Erin also talks to Marshall Auerback of the Institute for New Economic Thinking. Marshall is a former fund manager and a devotee of celebrated economist Hyman Minsky. He tells us where the US economy is headed, and whether we have slayed the financial crisis beast.
↑ Kate Good: How Stabilized Apartment Communities can Compete with New Product – YouTube
Relatively inexpensive tips: