Real estate, risks, economics, & more: links & commentary for April 27, 2019

I’ve said repeatedly that the US government must subsidize the development of more affordable housing and subsidize poor renters paying rent. These measures would benefit the overall economy.

It’s amazing that individuals put their own selfish interests above the good of the whole.

Landlords renting to those whose rent payments are subsidized are not worse off but better off. Landlords are much better off with less turnover and fewer tenants stressed out by barely being able to make the rent or not being able to make it at all. People who are stressed out financially are much greater risks in a whole host of ways. Plus, there’s the humanitarian aspect. Good landlords want their tenants having happier, more prosperous lives. Just because a tenant does better doesn’t mean he or she will suddenly move out because of buying a house. Many people prefer not having to mess with the maintenance aspects of owning.

Landlords should support having the federal government subsidize construction and rents.

Her bill, reintroduced in March and co-sponsored by another presidential candidate, Kirsten Gillibrand, includes a hefty infusion of money to nonprofit developers of affordable housing, paid for by raising the estate tax. A Moody’s analysis projected that the added resources, about $50 billion a year, would help build enough new housing to push rents a decade from now about 10 percent lower than they would be without Ms. Warren’s bill. [Source]


The reason for a lack of price inflation is simple and clear. Owners and executives are keeping more of the profits for themselves. The Fed never seems to want to say it.

Daly cited two gauges developed by San Francisco Fed economists, which divide up the items in the inflation basket based on whether or not they are sensitive to cyclical pressures, and help explain why inflation rose last year before coming back down again.

The gauges show that the inflation rate for such cyclically sensitive items has been flat for the past two years, and remains well below levels achieved in previous expansions. The inflation rate for other items, which is harder for policy makers to influence, jumped last year before sliding again in January.

“To the extent we’ve got low inflation in an environment with sub-4 percent unemployment, I think that that’s indicative of the fact that we don’t have an active Phillips curve in this environment, and you have to look to other channels for signals about inflation,” St. Louis Fed President James Bullard told reporters on April 17 in Annandale-on-Hudson, New York. [Source]

… neighbors often balk at shelters because of misconceptions about the city’s homeless, and Win’s survey highlights those misbeliefs. While families with children represent over 70 percent of New York City’s homeless population, 62 percent of those polled believe that the city’s homeless are primarily single men and women. Some 65 percent also assumed that having a job is enough to stave off homelessness, but one in three homeless families have a working adult. The country’s level of working poor—those who spend 27 weeks or more in a year either working or looking for work, but whose incomes fall below the federal poverty line—came in at just shy of 10 million in 2016, according to U.S. Bureau of Labor Statistics data.

Even those who opposed shelters coming to their neighborhoods admit living near one “isn’t as bad as we thought it would be,” as Dion Ashman, a longtime Crown Heights resident, told Curbed in October. Ashman, who opposed a family shelter opening on Rogers Avenue and Crown Street, even helped bring a lawsuit on behalf of concerned neighbors to halt the project.

“The things that people were concerned about, the quality of life issues, those haven’t really materialized,” he told Curbed. The advisory board for that shelter, of which Ashman is a member, shifted to meeting every three months instead of monthly because there simply wasn’t much to report within that window. “There wasn’t really enough new material to report on at the end of every month,” Ashman added. [Source]

Everyone who wants to live inside a decent place should have that as a guaranteed human right. I don’t care whether they are working or not. The basic necessities of life should be met for everyone no matter the reason for the individual’s circumstances. The vast majority of people who are lazy are so because they’ve been repeatedly kicked down and don’t see the point in trying. Given a real chance, given real support, they’d rise to the occasion. Most homeless are not lazy to begin with. Many are ill and need kind assistance whether they know it or not.

… Chicagoans have a new online tool for tracking the road repair projects, utility work, and special events impacting their neighborhoods.

Known as ChiStreetWork, the free web-based application went live on Tuesday, city officials announced. It uses the familiar Google Maps interface to display a wide range of information including past, current, and future repaving initiatives and permits for water, sewer, gas, or electrical projects impacting the public right-of-way. [Source]

Perhaps [no perhaps] the most important factor in the turnaround: the Federal Reserve. Markets began to stabilize, and stocks climbed again, after Jerome H. Powell, the Fed chairman, said in January that the central bank would be “patient” before raising interest rates again, after four increases in 2018.

… businesses remain cautious, in part because they expect the economy to cool gradually as the effects of last year’s tax cuts and spending increases fade. [Source]

The Fed did not change due to Trump but due to their own internally generated models/data.

If the Fed had a higher inflation target going into the 2007-2009 slump, policymakers would have been forced to respond earlier and more aggressively to the downturn, likely shortening its severity and duration.

Moreover, policymakers would have refrained from raising rates over the last two years despite signs that, despite a low unemployment rate, wages for most workers had yet to pick up substantially ….

As someone who grew up under a hyperinflationary Brazilian economy during the 1980s, I offer my two cents: We’re not in Rio anymore―It’s time for the Fed to adopt a higher inflation target.

What’s the right number exactly? Two percent was chosen rather randomly, a trend that began in New Zealand and was then adopted by other mimicking, consensus-seeking central bankers.

Let’s start with 4%, as ex-IMF economist Olivier Blanchard has suggested, and see what happens. [Source]

I called for 5% when it became apparent that the fiscal stimulus was way too small and there wasn’t going to be a follow-up. It was my publicly stated view that the unemployment target should be below 3% and that 5% price inflation might be necessary to get us there. That was around 10 years ago. I even thought the Fed knew it. Maybe they did.

During the last couple weeks, strange things have been happening in Ireland. A mysterious organization called the Irish Tax Agency launched a Facebook campaign to advertise how Irish tax authorities gave preferential treatment to international property investors. The Sunday Business Post revealed Ireland’s economic development agency, the IDA, was paying for changes to Wikipedia pages about itself and its chief executive. It had gotten caught up in an “edit war” with a Wikipedia user who kept on making edits “linking Ireland and its stakeholders to negative stories, particularly on economics, taxation and Brexit.”

For a long time, Ireland has used taxes to aggressively attract incoming investment. Now this strategy is being questioned.

Ireland is a tax haven …. [Source]

… the fiscal outlook for many Americans continues to stagnate, and that includes seniors.

According to a study published today by the journal Health Affairs, half of America’s middle-income seniors will be unable to afford housing and healthcare within 10 years. The study, using data from the Health and Retirement Study by the University of Michigan, found that 54 percent of middle-income people who will be over 75 in 2029 “will not have sufficient financial resources” to pay for healthcare or housing costs.

The authors estimated that 81 percent of middle-income seniors who don’t have equity in housing will earn less than $60,000 a year, but the estimated assisted living rent and medical out-of-pocket spending costs will be $62,000. [Source]


If you’re interested in democratic-socialism and whether it can work in a mixed economy, read this: “Explosion of Interest in Worker Cooperatives Drives Economic Changes.”

Employee ownership coupled with democracy in the workplace is democratic-socialism at the organizational/enterprise level. It’s not failing but growing and often beating the competition while lifting the poor. I’ve always been an advocate. I was born that way.

Concerning Social Security, what’s missing from this (deficit hawkish/) article?

When the funds are depleted, Congress has a few options: it can pass a law to keep benefits at the same level, which would increase the country’s deficit, or it could choose to raise the age that Americans get benefits or increase payroll taxes. [Source]

Whenever you see the Peter G. Peterson Foundation mentioned in a way that even slightly hints that it’s view on Social Security is realistic, you know you’re reading false propaganda whether the author intends the propaganda or not. What’s missing from the above is the government simply issuing the funds without increasing the deficit. That would mean issuing the money but not issuing bonds or debt at the same time. The old would continue spending. Demand would continue being met. Price inflation wouldn’t be a problem. GDP would go up. There is no problem with even increasing SS benefits!

The Objective of Money Laundering

When you buy an asset, whether a home or an oz of pink kush, you try to get the best value for your time and money. You want a deal. The seller is trying to extract the maximum price they can get from you, without driving you away. They don’t want you to get a great deal. The balance of interests go back and forth, and is a fundamental part of a functioning market. Opposing interests help balance things, plus or minus a dash of exuberance.

If you are money laundering, that’s not the case. The objective is to move as much cash, as fast as possible. This often involves large assets, and the bigger the price – the better. Especially if there’s a recurring payment component. Both the seller and the money laundering buyer want the highest acceptable price.

Sellers often feel somewhere between a genius and a lottery winner when they find this buyer. Competition between interests align, and there’s minimal friction preventing prices from going higher. The seller assumes their master negotiation skills prevailed. The money laundering buyer gets to move more money than they were asking for. The buyer seems “irrational,” but that’s just the market. Real estate agents without a clue, begin to rationalize and normalize this behavior. There’s no more land is a popular explanation.

… say you’re shopping for a home in Anyplace, BC. You’re watching the homes in the neighborhood climb at an average of 5% from last year. You find a place you’re ready to put on offer on, do some research, and come up with an offer. All of a sudden, a money launderer shows up, and offers the owner 10% over ask for a “quick close.” You’re not too worried, your agent told you the place a few doors down is going to be on the market next week.

Unfortunately, the new place now uses the home owned by the money launder as a comp. Now the ask is 10% more than you were expecting, because the marginal buyer set the price down the street. Someone else bites, and buys it before it “goes too high.” Now the money launderer’s buy was just validated in the system. But wait – there’s more.

Remember, the goal of laundering isn’t to buy a house, it’s to clean the money. They list the home again, let’s say another 10 points higher than bought. Bonus points if they can turn it into a wash trade, and sell it to another associated launderer. A regular family shopping down the street uses your washing machine as a comp for their buy. Behavior typically only seen in the frothiest of asset bubbles, can surface quickly. Exuberant buyers, both illicit and legit, compete and drive prices higher. [Source]

It creates bubbles that pop. Hot markets are where that action is.

Following a path previously laid out by the likes of real estate search engines Zillow and Redfin, and taking a page out of the playbook of iBuyer platforms Opendoor, Offerpad, and others, real estate agency Keller Williams is about to start buying and selling houses.

Next month, Keller Williams will launch an iBuyer offering, which will be called “Keller Offers.”

… An iBuyer is the catchall term for online real estate investors, who seek to reduce transactional property costs via digital tools. These investor[s] will typically make an “instant” offer on a home. Thus, the term i(nstant)Buyer.

Companies like Opendoor, Offerpad, Perch, and others have been operating in the space for some time, and in certain cases, have raised money hand over fist. [Source]

Cash is king. You can also get a loan later. It’s why the rich get richer.

… there is more turbulence below the surface than the optimist’s eye might recognize. Retail closings continue, initial unemployment claims have started to tick higher in some places, and job postings have declined in many district states (year over year). That’s what the Federal Reserve Bank of Minneapolis found in its most recent Beige Book report on current business conditions, released April 17.

But there’s more to the labor market story—more disconnects between labor demand and supply—than even these recent events suggest, according to supplemental insights and data from numerous contacts across the Ninth District. [Source]

It sounds like a great deal of laissez-faire ideology coming through rather than hard data.

… would delay treatment time, increase taxes, and eliminate private health insurance companies

“Medicare For All would save individual families thousands of dollars a year and save the American health care system trillions by eliminating duplicative costs across insurance companies, zero’ing out billions in advertising costs, and ending excessive CEO pay,” Adam Green, co-founder of the Progressive Change Campaign Committee, told The Intercept in an email.

“Medicare For All would also ensure families can use whatever doctor they like, even if they switch jobs or lose their jobs — and people would be happier as dental, vision, and home long-term care are covered and co-pays and deductibles are eliminated,” Green said. “The only ones who understand Medicare For All and oppose it are the Big Insurance and Pharmaceutical companies who will finally have their power challenged — and the corporate-funded think tanks who are paid to give Democrats losing political advice.” [Source]

Just because I’m an insurance broker doesn’t mean I think that Enhanced Medicare for All is a bad idea. I’m a big-picture person. Private health-insurance companies could transition into other coverages, and those that wouldn’t should still have a truly decent safety net for all employees while they are trained for and look for other work.

Five years after Flint entered the national consciousness, the perpetrators of this man-made crisis continue to go unseen and unscathed. And Flint is just the beginning. Because of bad corporate actors, derelict landlords, and governmental neglect and mismanagement at all levels, our nation’s infrastructure has become toxic and dilapidated, in need of more than $2 trillion worth of investments and 21st century policies that prioritize the most affected and proactive prevention rather than costly yet reactionary and incrementalistic approaches …. [Source]

… we need an International Green New Deal: a pragmatic plan to raise $8tn – 5% of global GDP – each year, coordinate its investment in the transition to renewable energy and commit to providing climate protections on the basis of countries’ needs, rather than their means.

Call it the Organization for Emergency Environmental Cooperation – the namesake of the original OEEC 75 years ago. While many US activists find inspiration in a “second world war-style mobilization”, the International Green New Deal is better modeled by the Marshall plan that followed it. With financial assistance from the US government, 16 countries formed the Organization for European Economic Cooperation (OEEC), dedicated to rebuilding the infrastructure of a devastated continent and coordinating its supply of energy.

… Confronting the climate crisis will require more than keeping fossil fuels in the ground. We will also need major scientific breakthroughs to develop renewable sources of energy, adapt existing infrastructure, detoxify our oceans and decarbonize the atmosphere. No country alone can fund the research and development necessary to meet these challenges. The OEEC would pool the brainpower of the global scientific community: a Green Manhattan Project.

“Advanced” capitalist countries today are literally falling apart. In the US, net public investment has fallen below half of one per cent of GDP. Across the eurozone, net public investment has remained below zero for nearly a decade. …

… Austerity means extinction.

The promise of an International Green New Deal is to avoid the pitfalls of cold war politics and unite humanity in the only project capable of preserving a habitable planet. To do this, however, we need a powerful progressive international movement to demand that our leaders begin to act beyond their own borders. Let’s start building it. The children are watching. [Source]


Apartment complexes: “How to Effectively Manage Package Acceptance.”

… researchers found that extreme winds in the Southern Ocean have increased by 1.5 metres per second, or 8 per cent, over the past 30 years. Extreme waves have increased by 30 centimetres, or 5 per cent, over the same period.

As the world’s oceans become stormier, Professor Young warns this has flow on effects for rising sea levels and infrastructure.

“Although increases of 5 and 8 per cent might not seem like much, if sustained into the future such changes to our climate will have major impacts,” Professor Young said. [Source]

In the following six cities, residents never experienced a day when ozone or particulate pollution spiked into unhealthy ranges, and average year-round particulate pollution in these cities ranked among the lowest nationally. In alphabetical order, these are the cleanest metropolitan areas in America:

Bangor, Maine
Burlington-South Burlington, Vermont
Honolulu, Hawaii
Lincoln-Beatrice, Nebraska
Palm Bay-Melbourne-Titusville, Florida
Wilmington, North Carolina [Source]

The “State of the Air” report — which reflects air quality measurements from 2015-2017 — found that air pollution worsened in many cities compared to previous years’ findings, which is in part due to the impact of climate change. Warmer temperatures exacerbate ozone formation and wildfires, which are major contributors to soot pollution.

“There is no clearer sign that we are facing new challenges than air pollution levels that have broken records tracked for the past twenty years, and the fact that we had more days than ever before when monitored air quality reached hazardous levels for anyone to breathe,” American Lung Association president Harold Wimmer said in a statement. He also called the findings “eye-opening.” [Source]