Tag: WSJ

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Real Estate News

NAR – pending home sales tumble in May for third straight month

NAR – pending home sales tumble in May for third
straight month

The ongoing supply shortages that are propping up home
prices in many metro areas caused pending home sales in
May to slump for the third consecutive month, according
to the National Association of Realtors (NAR). None of
the major regions saw an increase in contract activity
last month. The Pending Home Sales Index, a
forward-looking indicator based on contract signings,
decreased 0.8% to 108.5 in May from a downwardly
revised 109.4 in April. The index is now 1.7% below a
year ago, which marks the second straight annual
decline and the most recent since November and December
of last year. Lawrence Yun, NAR chief economist, says
it’s clear the critically low inventory levels in much
of the country somewhat sidetracked the housing market
this spring. “Monthly closings have recently been
oscillating back and forth, but this thir d consecutive
decline in contract activity implies a possible topping
off in sales,” he said. “Buyer interest is solid, but
there is just not enough supply to satisfy demand.
Prospective buyers are being sidelined by both limited
choices and home prices that are climbing too fast.”
The persistent housing shortages seen in several
markets are most severe, according to Yun, in the lower
price ranges. That’s very apparent when looking at the%
change in closings in May compared to a year ago. Sales
of homes under $100,000 last month were down 7.2% from
last year and up only 2.0% for those between $100,000
and $250,000. In higher price brackets, sales expanded
incrementally all the way up to massive increases of
26.0% for homes priced between $750,000 and $1 million
and even more for those $1 million and up (29.1%).

Weaker financial and economic confidence could also be
playing a role in the slowdown in contract activity.
NAR’s quarterly Housing Opportunities and Market
Experience (HOME) survey, released earlier this week,
found that fewer renters think it’s a good time to buy
a home, and respondents overall are less confident
about the economy and their financial situation than
earlier this year. “The lack of listings in the
affordable price range are creating lopsided conditions
in many areas where investors and repeat buyers with
larger down payments are making up a bulk of the sales
activity,” said Yun. “Meanwhile, many prospective
first-time buyers can’t catch a break. Prices are going
up and there’s intense competition for the homes
they’re financially able to purchase.” Existing-home
sales are forecast to be around 5.63 million this year,
an increase of 3.2% from 2016 (5.45 million). The
nation al median existing-home price this year is
expected to increase around 5%. In 2016, existing sales
increased 3.8% and prices rose 5.1%.”A much higher
share of homeowners compared to a year ago think now is
a good time to sell1, but until they do, sales will
likely stay flat and low inventory will keep price
growth moving swiftly,” said Yun.The PHSI in the
Northeast decreased 0.8% to 96.4 in May, but remains
3.1% above a year ago. In the Midwest the index was
104.5 in May (unchanged from April), and is 2.8% lower
than May 2016. Pending home sales in the South declined
1.2% to an index of 123.4 in May and are now 1.4% below
last May. The index in the West subsided 1.3% in May to
98.6, and is now 4.5% below a year ago.

ABC News settles ‘pink slime’ food-libel lawsuit

ABC News has settled a defamation lawsuit filed by the
maker of a processed-meat product that critics dubbed
“pink slime,” bringing to a close a high-profile legal
test of so-called food-libel laws intended to shield
the food-production industry from bogus food-safety
scares. Terms of the settlement weren’t announced. Beef
Products Inc. sued ABC News, anchor Diane Sawyer and
reporter Jim Avila in 2012 for $1.9 billion, over a
series of stories about its lean, finely textured beef
product—what critics dubbed “pink slime”—claiming it
was the victim of journalistic hit job that harmed its
business. A judge dismissed the claims against Ms.
Sawyer before the start of the jury trial, which began
earlier this month in South Dakota. Due to a South
Dakota food-libel law that triples damages against
tho se found to have knowingly lied about the safety of
a food product, ABC News was facing, potentially, $6
billion in damages. Beef Products, a family-owned South
Dakota meat processor, said in a Wednesday statement
the settlement validated that lean, finely textured
beef, made from defatted beef trimmings in a process
involving ammonium hydroxide, was safe. “While this has
not been an easy road to travel, it was necessary to
begin rectifying the harm we suffered as a result of
what we believed to be biased and baseless reporting in
2012,” Beef Products said. “Through this process, we
have again established what we all know to be true
about Lean Finely Textured Beef: it is beef, and is
safe, wholesome, and nutritious.”

MBA – mortgage applications decrease in latest MBA
weekly survey

Mortgage applications decreased 6.2% from one week
earlier, according to data from the Mortgage Bankers
Association’s (MBA) Weekly Mortgage Applications Survey
for the week ending June 23, 2017. The Market Composite
Index, a measure of mortgage loan application volume,
decreased 6.2% on a seasonally adjusted basis from one
week earlier. On an unadjusted basis, the Index
decreased 7% compared with the previous week. The
Refinance Index decreased 9% from the previous week.
The seasonally adjusted Purchase Index decreased 4%
from one week earlier. The unadjusted Purchase Index
decreased 5% compared with the previous week and was 8%
higher than the same week one year ago. The refinance
share of mortgage activity decreased to 45.6% of total
applications from 46.6% the previous week. The
adjustable-rate mortgage (ARM) share of acti vity
decreased to 7.0% of total applications. The FHA share
of total applications increased to 10.3% from 10.1% the
week prior. The VA share of total applications
decreased to 10.3% from 10.4% the week prior. The USDA
share of total applications remained unchanged at 0.7%
from the week prior.

Dow surges more than 100 points as bank shares jump

US equities traded higher on Wednesday as bank stocks
led the charge. The Dow Jones industrial average jumped
137 points with Goldman Sachs and Disney contributing
the most gains.The S&P 500 advanced 0.7% with
financials rising 1.3% to lead advancers. The SPDR S&P
Bank exchange-traded fund (KBE), which tracks large
banks, spiked 1.7% higher as investors braced for the
release of the Federal Reserve’s stress test results.
Analysts expect several big banks to come out of the
test with substantial increases in return to
shareholders — potentially using cash reserves to pay
out more than 100% of their profits. As a result,
higher figures would also reflect banks’ confidence in
their own financial health. Shares of JPMorgan Chase
and Goldman Sachs both climbed about 1%. Stocks also
jumped after the European Central Bank tried to walk                                                                                  back remarks made by ECB President Mario Draghi a day
earlier. A source familiar with Draghi’s knowledge told
Reuters that Draghi intended to signal tolerance for a
period of weaker inflation, not an imminent policy
tightening. Draghi said Tuesday “the threat of deflation
is gone and reflationary forces are at play,” sending
the euro to a one-year high against the dollar. The
currency pulled back from those levels on Wednesday
following Reuters’ report.

WSJ – labor shortage squeezes real-estate developers

About two-thirds of the contractors who are struggling
with the labor shortages gripping the construction
industry say it has become a challenge to finish jobs
on time, according to a new survey. More than one-third
of contractors said they are being forced to turn work
down and 58% said they are putting in higher bids, said
the survey sponsored by USG Corp. USG 2.80% and the US
Chamber of Commerce. Three-quarters of those who said
they are having difficulty finding skilled labor said
they are simply asking their employees to work harder.
“Basically they’re just making people work harder as a
way to cope,” said Steve Jones, senior director of
Dodge Data & Analytics, which was the research partner
of USG and the Chamber on the project. The survey was
conducted as part of the development of a new economic
indicator launche d earlier this month named the USG +
US Chamber of Commerce Commercial Construction Index.
It was designed to gauge such trends as backlogs,
revenue projections, access to financing and labor
issues. Two-thirds of the contractors surveyed
predicted there would be more workers in the next six
months. But 61% of the respondents reported problems
finding skilled laborers in such trades as concrete,
interior finishes, masonry, electrical and plumbing.
“There is reason for concern in the lack of qualified
talent,” said Tom Donohue, chief executive of the
Chamber in a written statement.

Industry officials are warning that labor shortages
will become more acute if the Trump administration
moves ahead with its plan to spend $1 trillion on
infrastructure. “We couldn’t absorb $1 trillion worth
of brand new work,” said Mr. Jones. “We’re already
strapped just dealing with the work we already
have.”Labor shortages are partly due to the increasing
number of construction projects moving forward. During
the first four months of this year, construction
spending amounted to $359.5 billion, 5.8% more than the
same period in 2016, according to the US Census Bureau.
Also, tens of thousands of workers left the building
trades during the economic downturn. Even before it
hit, the construction workforce was aging, Mr. Jones
said. “You had an aging workforce in an industry that
doesn’t lend itself to long careers because it’s hard,
physical w ork and then you lose a whole bunch of
people,” he said. The USG and Chamber survey asked four
questions on coping strategies to the 61% of
respondents who said they’re having difficulty finding
skilled labor.

Categories
Real Estate News

CoreLogic – cash sales share in 2015 lowest in seven years

Published on: Mar 25, 2016 @ 10:37 am

CoreLogic – cash sales share in 2015 lowest in seven
years

Cash sales accounted for 33.4% of total home sales in
December 2015 and 33.9% of total home sales for the
full year 2015. The full year 2015 cash sales share was
the lowest since 2008. The December cash sales share
was  down 3.3 percentage points year over year from
36.7% in December 2014. On a month-over-month basis,
the cash sales share fell by 2.8 percentage points in
December 2015 compared with November 2015. The month
over month decrease in cash sales share was larger than
normal for the month of December, indicating that the
elevated share reported for November, and attributed to
the new federal mortgage rules (TRID), was temporary.
The cash sales share peaked in January 2011 when cash
transactions accounted for 46.6% of total home sales
nationally. Prior to the housing crisis, the cash sales
share of total home sales averaged approximately 25%.
If the cash sales share continues to fall at the same
rate it did in December 2015, the share should hit 25%
by mid-2017.

Real estate-owned (REO) sales had the largest cash
sales share in December 2015 at 59.2%. Resales had the
next highest cash sales share at 33.4%, followed by
short sales at 30.9% and newly constructed homes at
15.4%. While the percentage of REO sales that were
all-cash transactions remained high, REO transactions
accounted for only 6.9% of all sales in December 2015.
In January 2011 when the cash sales share was at its
peak, REO sales represented 23.9% of total home sales.
Resales typically make up the majority of home sales
(about 79% in December 2015), and therefore have the
biggest impact on the total cash sales share.  Delaware
had the largest cash sales share of any state at 57%,
followed by Alabama (50.1%), New York (46.5%), Florida
(46.3%) and Mississippi (45%). Of the nation’s largest
100 Core Based Statistical Areas (CBSAs) measured by
population, Detroit, Mich. had the highest cash sales
share at 62.7%, followed by West Palm Beach-Boca
Raton-Delray Beach, Fla. (53.4%), Miami-Miami
Beach-Kendall, Fla. (53.2%), Fort Lauderdale-Pompano
Beach-Deerfield Beach, Fla. (51.2%) and North
Port-Sarasota-Bradenton, Fla. (51%). Syracuse, N.Y. had
the lowest cash sales share at 12.5%.

Fourth-quarter GDP revised up; corporate profits fall
US economic growth slowed in the fourth quarter, but
not as sharply as previously estimated, with fairly
strong consumer spending offsetting the drag from
efforts by businesses to reduce an inventory overhang.
Gross domestic product increased at a 1.4% annual rate
instead of the previously reported 1.0% pace, the
Commerce Department said on Friday in its third GDP
estimate.  GDP growth was initially estimated to have
risen at only a 0.7% rate. The economy grew at a rate
of 2.0% in the third quarter and expanded 2.4% for all
of 2015.  Economists polled by Reuters had expected
that fourth-quarter GDP growth would be unrevised at a
1.0% rate.  The upward revisions reflected a stronger
pace of consumer spending than previously estimated.

Consumer spending, which accounts for more than two
thirds of US economic activity, rose at a 2.4% pace
rather than the 2.0% rate reported last month. That
reflected more consumption of services than previously
estimated.  The fairly solid pace of consumer spending
underscores the economy’s underlying strength and
should further allay fears of a recession, which
triggered a massive stock market sell-off early this
year.  Spending is being supported by a tightening
labor market, which is steadily lifting wages, and
rising house prices.  Gasoline prices around $2 per
gallon are also helping to underpin household
discretionary spending.  Inventory investment was
revised lower. Still, inventories remain high relative
to domestic demand.  Businesses accumulated $78.3
billion worth of inventory rather than the $81.7
billion reported last month. As a result, inventories
subtracted 0.22 percentage point from GDP growth
instead of the previously reported 0.14 percentage
point.

Zillow – February market report: peeking at home value
peaks

Median home values in more than a quarter of the
nation’s metro housing markets are currently, or were
recently, as high as they’ve ever been.

In February, home values rose 4.3% year-over-year to a
Zillow Home Value Index of $184,600.  Median home
values in more than a quarter of the nation’s metro
housing markets are currently, or were recently (within
the last year), at peak and as high as they’ve ever
been, according to the February Zillow Real Estate
Market Report. But what do home value peaks really
mean?  As with most things in real estate, the answer
depends on where you are.  The national Zillow Home
Value Index was $184,600 in February, 5.9% below the
record median home value set in mid-2007. But over the
past year, many housing markets in the South,
especially Texas and Tennessee, have joined many
Western housing markets in blowing past their previous
median home value highs. Dallas home values set a new
record at $180,700 in February, up 13.7% from last
February. Nashville home values rose 9.5% to a median
of $189,100.

In a general sense, the idea of home values being at
their “peak” is easy to take out of context. In a
normal market – in which nominal home values grow
fairly consistently year after year at a roughly 2% to
3% annual pace – home values are always reaching new
peaks. In this example, home values in Anywhere, USA,
can be reliably counted upon to be modestly higher this
year than they were last year, and to be a bit higher
next year than they are this year. Aside from periodic
slowdowns or small dips in home values caused by local
economic factors, nominal home values should always
just keep chugging slowly upward in normal times.  But
the past decade-plus has been anything but normal for
US housing, which has distorted this definition of
“peak” home values. By now we’re all familiar with
housing’s rough arc in the 21st century: a rapid
acceleration in home value growth between roughly 2000
and 2007, followed by an almost equally rapid decline
from May 2007 through early 2012 and then a steadier
climb back again in more recent years. The very broad
nature of last decade’s housing boom and bust means
that the majority of local markets have followed a
similar path as the US as a whole, though the severity
of their local booms and busts and exact peak and
trough dates will vary somewhat.

But not all local markets experienced the housing boom,
bust and recovery the same way. Some markets just kept
chugging away slowly, never really falling much in the
first place. It has taken others years to slowly claw
their way back to pre-recession levels after a
difficult bust. And still others had only a mild bust
period, recovered quickly and have been setting new
peaks for years.  Pittsburgh is a good example of a
market that has just kept chugging along, with no clear
boom and bust period, only steady growth over the past
two decades. Rather than experience a sharp dip during
the bust, home values in the Pittsburgh area more or
less flattened out without falling too much between
2008 and 2013, before resuming their somewhat more
rapid rise during the recovery. Far from being a cause
for concern, the fact that home values in Pittsburgh
are currently hovering very near their “peak” is really
just a sign of remarkable stability in the market.
Boston is an example of a market that had a clear
run-up in home values, a distinct decline during the
bust, and a long recovery over the past few years.
During the boom years, home values in Boston peaked
early relative to the nation, at $384,900 in September
2005. What followed was a long six-year period of
falling home values, reaching bottom in November 2011
at $311,800, a drop of almost 19%. It took until
January 2016 for home values in Greater Boston to
surpass their prior peak. Home values in Greater Boston
are, after years of bust and recovery, finally starting
to break new ground again, and look to be on a
sustainable growth path going forward.

Finally, a market like Denver is indicative of a market
that quickly shook off the bust and has taken off like
a rocket in recent years. Prior to the recession, home
values in the Denver area peaked at $237,600 in May
2006. During the bust, home values fell to a low of
$207,300 by August 2011. By July of 2013, Denver-area
home values had already surpassed their earlier peak,
and haven’t slowed down since. Currently, home values
in Denver stand at $326,300 – 37.3% higher than May
2006 values, and up a whopping 57.4% from their August
2011bottom.  This rapid growth in home values is
largely driven by Denver’s own massive population
growth over the past decade-plus, combined with a
limited supply of new homes for sale. This kind of
rapid and unflagging growth could be worrisome, and may
indicate a local bubble starting to form in Denver and
similar markets like the Bay Area. But even so, rapid
growth on its own isn’t enough to indicate a bubble as
long as this growth is driven by solid underlying
economic fundamentals like strong job and wage growth,
true housing demand and limited supply and not rampant
speculation – which is the case in Denver.  So while
taking a peek at peak home values naturally piques our
interest and is useful in determining how far some
markets have come and how far others still have to go,
interpreting what it really means is all a matter of
perspective.

In February, the median US home value rose 0.2% from
January and 4.3% from February 2015, according to the
Zillow Home Value Index. US home values have grown on a
year-over-year basis for 44 straight months.  Home
values in 26 of the nation’s 35 largest metro markets
grew faster year-over-year than the nation’s 4.3%
annual pace in February. Home values grew by more than
10% per year in six of those large metro markets:
Denver (up 14.5% year-over-year), Dallas (13.7%),
Portland (13.4%), San Jose (11.4%), San Francisco
(10.9%) and Miami (10.5%). None of the nation’s largest
metros experienced annual home value declines in
February.  The US median rent in January was $1,383 per
month, up 0.1% from January and 2.6% from February
2015, according to the Zillow Rent Index. US rents have
grown year-over-year for 42 consecutive months.  Median
rents in all but one of the nation’s 35 largest metro
markets grew year-over-year to some extent, with only
Cleveland experiencing an annual decline (-1.2% from
February 2015). Rents grew fastest year-over-year in
the San Francisco (up 10.5% from January 2015),
Portland (up 8.7%) and San Jose (up 8%) metros.

Outlook

Looking ahead, Zillow expects national home values to
continue growing, rising another 2.3% through February
2017. Rents are also expected to keep growing over the
next year, at a 1.7% pace through February 2017.  The
new home value records being set in a number of markets
mean we’re no longer making up ground lost during the
housing recession –we’re laying a new path forward,
based on demand for housing and economic growth
throughout the economy. In some markets, these new
highs are a return to normalcy, and in others are a
reminder that not all markets react the same to broader
economic trends.  Finally, the fact that many other
markets are still off pre-recession peaks by double
digits – places like Las Vegas (down 33.8% from Q2 2006
peaks) and Orlando (off by 29.5% from prior peaks) –
may not even mean those markets are far from full
recovery. Instead, their long path back just highlights
how extraordinarily inflated home values were in those
areas during the housing bubble.

US weekly jobless claims up

The number of Americans filing for unemployment
benefits rose last week while revisions for prior weeks
showed the labor market was much stronger than
previously thought.  Initial claims for state
unemployment benefits increased 6,000 to a seasonally
adjusted 265,000 for the week ended March 19, the Labor
Department said on Thursday. The prior week’s claims
were revised to show 6,000 fewer applications received
than previously reported.  Economists polled by Reuters
had forecast claims rising to 268,000 in the latest
week. The government also revised data going back to
2011, which showed claims trending lower than
previously reported. Claims for the week ended March 5
were the lowest since November 1973.

WSJ – more Americans are again moving to suburbs than
cities

Economists to real-estate agents have debated  whether
the housing boom and bust of the last decade has
dramatically remade the way Americans live or merely
created a temporary disruption.  US Census data
released Thursday provides strong support for the
latter thesis—that shifts in where Americans move were
merely temporary, according to analysis by Jed Kolko, a
senior fellow at the Terner Center for Housing
Innovation at the University of California, Berkeley.
For one thing, the rate at which Americans are moving
to the suburbs is once again outpacing the rate at
which they are moving to cities. That picks up on a
decades long trend that only very temporarily reversed
during the recession.  Urban counties grew by 0.8% in
2015 to roughly 77 million people, compared with
suburban counties, which grew by nearly 1% to 159
million people. Mr. Kolko defines counties as urban
based on how dense they were as of the 2010 census.
Overall, the US population grew by 0.8% from 2014 to
2015, or a difference of about 2.5 million people.
Suburbs have been outpacing cities in population growth
for decades. In 2001, suburbs grew about 1.2% while
cities grew by about 0.7%.  The trend was exacerbated
by the housing boom, when easy mortgages helped buyers
afford homes being built at a rapid pace in far-out
suburbs.  In 2006, suburbs grew by 1.5% while cities
instead actually lost nearly 0.4% of their population.

Cities grew faster than suburbs for one year during the
last decade, in 2011. While much has been written about
the revival of cities, the overall population trends
underscore that people flocking to cities remain a
select class, mostly of the young, educated and
affluent who can afford rising prices. In the meantime,
America overall continues to suburbanize.  “Rich, young
people are outbidding others for urban housing and so
the faster growth in the suburbs certainly reflects
tight housing supply in dense neighborhoods,” Mr. Kolko
said.  Another decades long trend that has re-emerged is
the growth of the South and the West at the expense of
the Northeast and the Midwest. The South and West both
had population growth of 1.2% in 2015, far ahead of
0.2% growth in the Northeast and Midwest.  During the
aftermath of the housing bust, the South and West saw
sharp declines in the rate of population growth, while
the Northeast and Midwest held relatively steady,
although they continued to grow more slowly.  Some
familiar metro areas also emerged as big population
losers and winners. Austin was the biggest population
gainer for four years running from 2011 to 2014. But
this year it was surpassed by Cape Coral-Fort Myers,
Fla.—also the leader in population growth during the
bubble from 2004 to 2006.  Youngstown, Ohio, has been
the biggest population loser since 2010 and continued
to hold that title. It also lost the most population
for most of the boom from 2003 to 2005,  but it was
surpassed for a few years by New Orleans and Detroit.

Categories
Real Estate News

CoreLogic – distressed sales accounted for 12% of homes sold nationally in November 2015

Published on: Jan 27, 2016 @ 8:18 am

CoreLogic – distressed sales accounted for 12% of homes
sold nationally in November 2015

–  Of total sales in November 2015, distressed sales
made up 11.9% and real estate-owned (REO) sales made up
8.7%

–  Maryland remains the state with the largest share of
distressed sales among all states at 20.3%

–  Denver-Aurora-Lakewood, Colo. had the lowest
distressed sales share among the largest Core Based
Statistical Areas (CBSAs) at 3.1%

Distressed sales, which include REOs and short sales,
accounted for 11.9% of total home sales nationally in
November 2015, down 1.9 percentage points from November
2014 and up 1.4 percentage points from October 2015.
This month-over-month increase was expected due to
seasonality, and the magnitude of the change was in
line with previous Novembers.  Within the distressed
category, REO sales accounted for 8.7% and short sales
accounted for 3.2% of total home sales in November
2015. The REO sales share was 1.5 percentage points
below the November 2014 share and is the lowest for the
month of November since 2007. The short sales share
fell below 4% in mid-2014 and has remained in the 3-4%
range since then. At its peak in January 2009,
distressed sales totaled 32.4% of all sales, with REO
sales representing 27.9% of that share. While
distressed sales play an important role in clearing the
housing market of foreclosed properties, they sell at a
discount to non-distressed sales, and when the share of
distressed sales is high, it can pull down the prices
of non-distressed sales. There will always be some
level of distress in the housing market, and by
comparison, the pre-crisis share of distressed sales
was traditionally about 2%. If the current
year-over-year decrease in the distressed sales share
continues, it will reach that “normal” 2-percent mark
in mid-2019.

All but nine states recorded lower distressed sales
shares in November 2015 compared with a year earlier.
Maryland had the largest share of distressed sales of
any state at 20.2%[1] in November 2015, followed by
Connecticut (19.1%), Florida (19%), Michigan (18.9%)
and Illinois (17.8%). North Dakota had the smallest
distressed sales share at 2.7%. Nevada had a 5.4
percentage point drop in its distressed sales share
from a year earlier, the largest decline of any state.
California had the largest improvement of any state
from its peak distressed sales share, falling 59.2
percentage points from its January 2009 peak of 67.4%.
While some states stand out as having high distressed
sales shares, only North Dakota and the District of
Columbia are close to their pre-crisis levels (within
one percentage point).  Of the 25 largest CBSAs based
on mortgage loan count, Orlando-Kissimmee-Sanford, Fla.
had the largest share of distressed sales at 21.2%,
followed by Tampa-St. Petersburg-Clearwater, Fla.
(20.7%), Baltimore-Columbia-Towson, Md. (20.4%),
Chicago-Naperville-Arlington Heights, Ill. (20.4%) and
Miami-Miami Beach-Kendall, Fla. (20.3%).
Denver-Aurora-Lakewood, Colo. had the smallest
distressed sales share among the largest CBSAs at 3.1%.
Las Vegas-Henderson-Paradise, Nev. had the largest
year-over-year drop in its distressed sales share,
falling by 5.5 percentage points from 20.3% in November
2014 to 14.8% in November 2015. Riverside-San
Bernardino-Ontario, Calif. had the largest overall
improvement in its distressed sales share from its peak
value, dropping from 76.3% in February 2009 to 10.9% in
November 2015.

Oil prices attempt to trim losses

Oil futures pared losses on Wednesday, echoing a modest
stock market recovery, but analysts said a surprise
ballooning in US inventories and little chance of the
world’s major producers agreeing to cut output would
likely temper any rallies.  Fresh evidence of slowing
growth in top commodities consumer China, along with
caution before the outcome of the US Federal Reserve’s
first policy meeting of the year, earlier knocked
around $1 off the price of oil.  Senior OPEC and
Russian officials on Tuesday stepped up vague talk of
possible joint action to eliminate one of the largest
oil surpluses in modern times, although few market
watchers believed this would result in any cuts to
output.  Brent crude was last down 26 cents at $31.54 a
barrel by 1347 GMT (8:47 a.m. ET), having hit a session
low of $30.83, in lockstep with European equities
edging off the day’s lows. US futures fell 65 cents to
$30.80 a barrel.  Oil has risen from last week’s 2003
lows after speculators unwound some of the record-high
bearish positions they had racked up over the last six
months.  “There is dove-tailing of moves in oil with
moves in equities that is happening and of course the
equity markets, we’ve seen, are so prone to risk
aversion,” BNP Paribas global head of commodity
strategy Harry Tchilinguirian said.  “Right now oil is
buffeted between short-covering, cross-asset
correlations and its own weak fundamentals.”  Oil
prices have fallen nearly 16% in January, bringing
total losses since the start of the decline in mid-2014
to 77%. US crude stocks rose by 11.4 million barrels
last week to 496.6 million, the American Petroleum
Institute said, topping analyst expectations for an
increase of 3.3 million barrels.

Mortgage applications down

Mortgage applications increased 8.8% from one week
earlier, according to data from the Mortgage Bankers
Association’s (MBA) Weekly Mortgage Applications Survey
for the week ending January 22, 2016.  This week’s
results include an adjustment to account for the Martin
Luther King holiday.  The Market Composite Index, a
measure of mortgage loan application volume, increased
8.8% on a seasonally adjusted basis from one week
earlier.  On an unadjusted basis, the Index increased
0.3% compared with the previous week.  The Refinance
Index increased 11% from the previous week.  The
seasonally adjusted Purchase Index increased 5% from
one week earlier. The unadjusted Purchase Index
increased 0.4% compared with the previous week and was
22% higher than the same week one year ago.  The
refinance share of mortgage activity decreased to 59.0%
of total applications from 59.1% the previous week. The
adjustable-rate mortgage (ARM) share of activity
increased to 6.9% of total applications.  The FHA share
of total applications decreased to 12.7% from 13.7% the
week prior. The VA share of total applications
increased to 11.1% from 10.8% the week prior. The USDA
share of total applications remained unchanged from
0.7% the week prior.

Franchisees fight back against $15 wages
The International Franchise Association, the industry’s
largest trade group, wants the Supreme Court to take up
its challenge to portions of Seattle’s $15 minimum wage
law.  Seattle’s City Council in June 2014 voted to
raise the minimum wage in increments, hitting $15 an
hour by 2017 for businesses with at least 500 staffers.
The $15 level is more than double the federal hourly
minimum of $7.25.

The International Franchise Association and five
Seattle franchisees quickly sued Seattle, which like
New York City has moved to treat smaller franchised
businesses like larger companies.  They argued that the
mandated $15 pay unfairly lumps franchised businesses
with large employers. The association and franchisees
want to be recognized as smaller businesses to get more
time to raise pay incrementally to $15 by 2021.  “Our
appeal has never sought to prevent the City of
Seattle’s wage law from going into effect,” franchise
association President Robert Cresanti said in a
statement this week. “Our appeal to the Supreme Court
will be focused solely on the discriminatory treatment
of franchisees under Seattle’s wage law and the
motivation to discriminate against interstate
commerce.”  The association said a response is due from
the city of Seattle within 30 days, and the Supreme
Court is expected to announce this spring whether it
will hear the case.

In March 2015, a federal judge threw out the franchise
groups’ lawsuit, and the decision was upheld in
September by the 9th US Circuit Court of Appeals.  For
now, Seattle wages are tiered. The wages range from
$10.50 to $13 an hour, depending on the size of the
employer and whether the company pays toward medical
benefits.  A representative from Seattle Mayor Ed
Murray’s office could not be immediately reached for
comment.  The impact of higher mandated pay on
franchisees is contentious.  A recent survey from the
conservative Employment Policies Institute, a
conservative nonprofit research organization, found
franchisees are more harmed than nonfranchised
businesses when implementing wage hikes.  The survey of
more than 600 businesses found franchisees are more
likely to take “offsetting steps including reducing
staff, reducing hours and using automation to manage
the increased labor costs caused by minimum wage
increases” than are nonfranchised businesses.  This
trend was more pronounced in the fast food and hotel
sectors — more than 80% of franchised fast food owners
said they would be more likely to reduce hiring, versus
58% of non-fast-food restaurant owners. And nearly 90%
of franchised hotels said they would raise room rates,
compared with 70% of nonfranchised hotels.
Policymakers will compound the damage of a $15 minimum
wage by arbitrarily targeting businesses with a
recognizable brand for uniquely-harsh wage mandates,”
Michael Saltsman, the Washington, D.C.-based
institute’s research director, said in a statement.

Zillow – rapid reaction: December new home sales

–  Sales of newly built homes rose more than 10% in
December from November, to 544,000 units sold (SAAR),
the best month for new home sales since February 2015
and second best since 2008.

–  Similar to existing home sales, some sales that may
have otherwise closed in November may have been pushed
into December because of new settlement and disclosure
rules.

–  The seasonally adjusted median price of a new home
fell 4.3% from December 2014, to $285,200, the biggest
annual decline since early 2012.

New home sales had a strong December, recording their
best month since February 2015 and second-best since
2008, according to the US Census Bureau. Additionally,
for the first time since July 2015, both new and
existing home sales for the month moved in the same
direction, reversing a months-long trend in which one
would rise, and the other would fall. But even with the
strong finish, sales of newly built homes are still
running slightly below their February level and were
roughly flat over the course of 2015. Additionally,
like existing home sales, new home sales in December
were likely boosted by recently adopted changes in
settlement and disclosure rules that pushed closings
that may have occurred in November into December. The
price of new homes, which have been fetching a large
premium over existing homes as builders focus on a
higher-end clientele, fell 4.3% year-over-year in
December (seasonally adjusted) to $285,200, the biggest
annual decline since early 2012. This is some — modest
— good news for buyers struggling to find a home to buy
and get a hold in the market.

WSJ – what’s ahead for jumbo-loan borrowers in 2016

The jumbo-mortgage market reached new highs in 2015 and
recent turmoil in global stocks is unlikely to slow it
down much in 2016, industry experts say.  Lenders
provided an estimated $320 billion in jumbo mortgage
financing in 2015, which translates to 19% of all
mortgage lending, says Guy Cecala, CEO and publisher of
Inside Mortgage Finance. That’s up slightly from 18% of
the market in 2014 and the highest market share since
2002, he says.  While a down stock market might mean
less available cash for some home buyers to purchase an
expensive home, historically people also have shifted
assets to real estate as a safer investment, Mr. Cecala
says. “Whether that plays out depends on how long the
stock market stays down,” he adds. The market dip is
likely to keep interest rates below 4% for a while
longer, which also could make borrowing large sums more
attractive, says Keith Gumbinger, vice president of
mortgage-rate website HSH.com. The Federal Reserve also
is less likely to raise short-term rates this spring,
he adds.  Mr. Gumbinger expects the Fed to raise
short-term rates no more than two to three times in
2016, with the average 30-year, fixed-rate jumbo not
topping 4 5/8%. Five-year, adjustable-rate mortgages
could go up to 4%, he adds.

Fear of rising rates and home prices could spur a
homebuying frenzy in the spring, says Ray Rodriguez,
regional mortgage sales manager for Cherry Hill,
N.J.-based TD Bank. Existing borrowers with
adjustable-rate mortgages nearing the end of their
fixed-rate may also rush to refinance, he adds.  Still,
overall refinance rates are expected to be lower than
in 2015 since so many borrowers have already
refinanced, says David Adamo, CEO of Stamford,
Conn.-based Luxury Mortgage. An unexpected rate dip in
winter-spring 2015 triggered a refinance frenzy.
Loosened credit-qualifications rules will continue in
2016, but nothing like what occurred in the 2000s that
led to the mortgage crisis, Mr. Adamo says. Last year,
minimum FICO scores for jumbos dropped to 660 for some
lenders, for example, and down payments could be as low
as 15% or even 10%. Still, borrowers with a credit
score of 740 or above who put 20% down can expect to
get the best interest rates.  Jumbo borrowers have
loans that exceed conforming limits of government-back
loans, $417,000 in most places and $625,500 in some
high-cost areas. The Federal Housing Finance Agency
didn’t raise baseline limits last year because home
prices haven’t returned to prerecession levels
nationwide. But 39 counties in the US—covering Denver,
Nashville and Napa, Calif., among others—were bumped
into the high-cost category, so borrowers there now
qualify for more financing.

Also last year, the Consumer Finance Protection Bureau
introduced new documents that aim to make it easier to
compare different mortgage offerings. Many lenders were
concerned that a new rule requiring a three-day waiting
period for borrowers to receive and review the
documents would delay closings or kill deals, but
lenders, real-estate agents and borrowers largely
adapted to the change, says John Schleck, Bank of
America’s online and centralized sales executive. “We
spent a lot of time getting ready and it paid off,” he
adds.  Finally, more borrowers will be able to conduct
business virtually this year, a trend expected to rise
rapidly in future years, says Victor Ciardelli, CEO of
Chicago, Ill.-based Guaranteed Rate. That trend isn’t
limited to online lenders either. For example, Wells
Fargo Home Mortgage rolled out a new feature for its
YourLoanTracker service in which borrowers can receive
and upload documentation via a mobile or other digital
device, as well as track loan progress, says Brad
Blackwell, executive vice president and portfolio
business manager for the company.  Unless the bottom
falls out of the economy, jumbo lenders predict
continued demand, Mr. Cecala says. Regional banks and
nonbank lenders were able to expand their jumbo
mortgage volume largely because of continued enthusiasm
on the part of big banks to buy and hold them in
portfolio.  Wells Fargo remains the nation’s largest
jumbo lender, both for originations and purchasing
loans from other lenders to hold in portfolio. “We have
a strong appetite for jumbo lending,” Mr. Blackwell
says.

Categories
Real Estate News

WSJ – farmland prices decline across parts of midwest

Published on: Nov 16, 2015 @ 10:35 am

WSJ – farmland prices decline across parts of midwest

Farmland values fell in parts of the Midwest in the
third quarter, reflecting a downdraft in the
agricultural sector driven by three years of lower crop
prices, according to Federal Reserve reports on
Thursday.  The average price of “quality” farmland in
the St. Louis Fed’s district, which includes parts of
Illinois, Indiana and Missouri, dropped 2.6% from a
year earlier, as farm incomes weakened considerably,
the Fed bank said.  In the Kansas City Fed’s district,
which includes Kansas and Nebraska, irrigated-cropland
values declined 1%, while the average price of
nonirrigated land rose 0.4%, the bank said. Irrigated
farmland depends on man-made water systems rather than
rainfall.  In the Chicago Fed’s district, which
includes Illinois and Iowa, prices for farmland
remained largely the same in the third quarter compared
with a year ago, and rose 1% versus the second quarter
of this year, the bank said.  The reports largely
underline a slowdown in the agricultural economy that
has softened farmers’ demand for cropland after a
years long run-up in prices. Both crop prices and land
values rose sharply for much of the past decade, driven
higher by drought and burgeoning demand for grain from
ethanol producers and overseas buyers. That led flush
farmers to bid up land values. This autumn, however,
farmers for the third straight year are harvesting
bumper corn and soybean crops, further elevating global
supplies and adding pressure to prices that have fallen
by more than half since 2012.  Midwestern bankers
surveyed by the Fed banks in both the St. Louis and
Kansas City districts said farm income fell
significantly in the third quarter, and many expect a
continued cooling of land values in the current quarter
as farmers adjust to leaner times.  “Because of some
concern about the fall harvest and the recent dip in
livestock prices, agricultural bankers have a rather
dour view of farm income prospects in the fourth
quarter of 2015,” the St. Louis Fed said in its report
on Thursday.

The Chicago Fed said most Midwestern lenders it
surveyed think farmland values will drop in the current
quarter, implying that the lack of an overall decline
in the third quarter “was merely a pause in a
longer-term correction,” wrote David Oppedahl, senior
business economist at the Chicago Fed, in Thursday’s
report.  The report cited stable prices for corn in the
third quarter, as well as a lack of available farms for
sale as likely factors propping up land values in the
Chicago region.  Agricultural land values in Iowa and
Illinois, the two largest corn-producing states, both
declined from a year earlier, though the losses were
offset by higher prices in Wisconsin and Michigan.
Average ranchland values rose both in the St. Louis and
Kansas City Fed’s district, though bankers in both
regions expect prices for the land used to raise
livestock to decline versus year-ago levels in the
current quarter.  Both the Chicago and Kansas City Fed
districts said financial conditions for farmers
weakened in the third quarter, with loan repayment
rates down and expected to decline further as the year
wraps up. Mr. Oppedahl said an index of repayment rates
for loans excluding real estate in the Chicago region
could drop to the lowest level since 1999, while more
farmers facing financial strain could be forced to hold
farm sales or sell off assets in the next three to six
months compared with year-ago levels.  “Land values
have definitely been declining,” said Brandon Rutledge,
34 years old, who grows corn and soybeans and raises
livestock in Le Roy, Ill.  Less farmland than normal is
going on the market in Mr. Rutledge’s area because
nearby land prices have dropped, he said.  The farmer
added that he plans to drive a hard bargain with seed
suppliers and apply less fertilizer to his cropland to
cut costs and stay profitable for this year. Still, he
said, “it’s going to be tight.”

 

Empire State manufacturing activity rooted in
contraction

Business conditions in the state of New York continued
to deteriorate in November, declining for a fourth
straight month despite recent signs of stabilization in
the US manufacturing sector, according to the Federal
Reserve Bank of New York.  The Empire State’s business
conditions index came in at -10.7 this month, compared
with -11.4 in October and -14.7 in September.
Economists surveyed by The Wall Street Journal expected
the gauge to improve to -5. A reading above zero
reflects expansion; a reading below that level denotes
contraction.  The index is still firmly in
contractionary territory and again fell short of the
bounce economists expected.  The US manufacturing
sector remains under pressure from weaker global demand
and from the stronger US dollar, which makes exports
more expensive. Recent reports from some pockets of the
country have shown modest improvement, though producers
in the northeast have continued to report unfavorable
conditions.  The gauge follows the government’s latest
employment report, which showed no change in overall
manufacturing hiring activity last month but a slight
improvement in the length of employees’ workweek.  The
New York Fed survey is the first monthly factory report
released by regional Fed banks. Economists use the Fed
surveys to forecast the health of the national
industrial sector as captured in the monthly
manufacturing report released by the Institute for
Supply Management, next due out Dec. 1.

NAR – drone landscape still evolving as realtor, other
commercial use grows

The Federal Aviation Administration continues its work
to integrate unmanned aerial systems, also known as
drones, into the National Airspace System, and Realtors
stand ready to take advantage of their many benefits.
That’s according to panelists at the “Using a Drone in
Your Business: Knowing Your Risk” session held as part
of the 2015 REALTORS Conference & Expo.  “This
technology is an incredible tool for real estate
professionals, but can be dangerous if the wrong person
is in control,” said session moderator Kolleen Kelley,
Realtor and 2015 Risk Management Committee vice chair.
Other panelists included Eric Myers, vice president of
Victor O. Shinnerer & Company; Lesley M. Walker,
National Association of Realtors associate counsel; and
Dean Griffith with FAA’s Office of the Chief Counsel.
The panelists spoke about the extensive benefits of
using drones in real estate, but also warned the
audience that following the rules is of critical
importance to mitigate potential risks and liabilities.
Wide-scale commercial use of drones is currently
prohibited, but the FAA has streamlined a waiver
process for individuals and businesses interested in
using drones for commercial purposes. So-called Section
333 waivers are already in use by dozens of Realtors
and other operators currently using drones for their
business.

Panelists widely agreed that the use of drones for
commercial purposes will only grow with time, even as
issues related to safety, privacy, insurance and the
regulatory framework continue to evolve. They advised
the audience about the importance of hiring approved
operators with strong risk management practices,
sufficient insurance coverage and, most importantly, a
Section 333 waiver from the FAA.  The speakers also
reminded Realtors to be thoughtful about agreements
with outside companies to ensure that ownership of any
photographs taken is clear, as intellectual property
laws and rules still apply.  Walker pointed to NAR’s
policy statement in noting that the association
supports the integration of unmanned aerial systems
into the National Airspace System, or NAS, and a clear
regulatory framework for interested Realtors to
responsibly make drones a part of their business.  This
includes making safety a top priority, and earlier this
year NAR joined an industry “Know Before you Fly”
campaign and partnered with the National
Telecommunications and Information Administration’s
“Multistakeholder Process: Unmanned Aircraft Systems”
to further highlight the importance of safety,
security, and privacy in commercial drone use.

The FAA is currently moving through a rulemaking
process to address the integration of drones into the
NAS, which Griffith noted FAA hopes to complete by June
2016.  In September, NAR President Chris Polychron,
executive broker of 1st Choice Realty in Hot Springs,
Arkansas, testified before a US House Judiciary
Subcommittee on the value of drones in real estate.
“Commercial drones represent an opportunity to create
jobs and businesses, as well as to support the business
of real estate,” said Polychron. “NAR is pleased to see
this important issue get the attention it deserves and
will continue working with the FAA to advance clear
regulations that are affordable for users, safe for
their communities, and mindful of the safety and
privacy of individuals.”

Global oil prices mixed

As of 9:30 a.m. ET, US crude oil prices slid 0.59% to
$40.52 a barrel, while Brent, the international
benchmark, declined 1.01% to $44.02 a barrel.  Oil
prices edged up on Monday on geopolitical concerns
after Friday’s deadly attacks in Paris claimed by
Islamic militants, but gains were muted due to a global
crude glut.  France carried out large-scale air strikes
against Islamic State sites in Syria overnight, giving
oil market investors reason to step up buying activity
after a week in which crude benchmark prices fell as
much as 8%.  “Some risk premium is factored into the
market after the terror attacks in Paris. We had an
oversold market, so it is a technical recovery as
well,” said Frank Klumpp, oil analyst at
Stuttgart-based Landesbank Baden-Wuerttemberg.
Front-month Brent crude prices were up 34 cents at
$44.81 a barrel at 0415 ET. US futures traded 36 cents
higher at $41.10 a barrel.  An OPEC delegate from a
Gulf producing country said he believed that in the
mid-term oil prices could get some support due to
rising tensions especially if the international
community takes more steps to reduce smuggling of oil
and hits oil facilities under Islamic State’s control
in Syria and Iraq.  But oil and other commodities could
also come under renewed pressure on fears the attacks
will further slow the global economy.  Many analysts
also continue to believe prices will remain under
pressure due to abundant stocks of oil and slowing
economic growth.  “Our outlook is skewed negative into
(the first half of next year). Macro headwinds remain,
crude oil inventories are building,” Morgan Stanley
said.

Categories
Real Estate News

WSJ – study reignites debate about broker interests

Published on: Dec 1, 2014 @ 7:22 am

A new study by George Washington University’s Center
for Real Estate

and Urban Analysis has rekindled the
debate over whether there are conflicts of interest at
some of the country’s largest commercial real estate
brokerages.  Brokers who represent only office tenants
have argued for years that conflicts exist at firms
that represent both landlords and tenants—and that
their tenant clients often suffer as a result. Brokers
at the so-called full-service firms that represent both
have argued back that such potential conflicts aren’t
an issue, partly because they typically disclose such
relationships to all of their clients.  The George
Washington study, written by Peter Smirniotopoulos, an
adjunct professor, supports the critics of the
full-service firms, arguing that conflicts may not be
resolved through current disclosure practices.  “The
conflicts of interest issue has not been addressed in
any systematic way benefiting tenants,” the study
says. “If legal ethics prohibit an attorney or a law
firm from representing both the landlord and a tenant
[in a lease]…how can the divergent interests of those
same parties nonetheless be adequately represented by
the same [real estate firm]?”

Executives at full-service firms who have read the
study, which was released late last month, have
challenged its conclusions, pointing out that their
professional ethics require them to represent their
clients’ best interests, whether they are landlords
or tenants.  They also noted that the study was
undertaken by the Center for Real Estate and Urban
Analysis in partnership with Boston-based Cresa, one of
the largest firms that represents only tenants and a
big critic of the full-service firms.  Mr.
Smirniotopoulos, who also is a consultant in the real
estate industry, said in an interview that Cresa
provided a “gift letter” that helped finance the
research. But the Center has complete control over the
study’s scope and objectivity. “It had to be
consistent with scholarly work,” he said.  New York
City long has been at the center of the
conflict-of-interest debate because Julien Studley, one
of the pioneers of the business of representing only
tenants, founded his firm here. Earlier this year, that
firm was acquired by Savills PLC in a deal that valued
Studley at up to $260 million. While Savills is full
service, its US division—now named Savills
Studley—has remained a tenant-only shop.  “The
industry is replete with conflicts,” said Mitchell
Steir, the head of Savills Studley, which represents a
number of major tenants in New York. “Each side
deserves an advocate.”

Cresa’s office in New York has been a relatively
small player, but it has grown since it was taken over
by Mark Jaccom, who worked at Studley at an earlier
stage in his career. Mr. Jaccom said the New York Cresa
office employs about 45 people and will represent
tenants in about 1.5 million square feet of deals this
year, up from 600,000 square feet in 2013. The deals
brokered by Cresa this year included Affinity Health
Plan’s lease of about 95,000 square feet of space at
Simone Development’s Metro Center Atrium in the
Bronx, Mr. Jaccom said.  Brokerages that only represent
tenants use the conflict-of-interest issue to lure
business from full-service firms. “You question how
hard [full-service firms] push the landlord who gives
them tens of millions of square feet of business for a
tenant looking for 20,000 square feet,” Mr. Jaccom
said.  But executives at the firms with the largest
offices in New York say that tenants clearly like the
service they get from full-service operations.  “We
represent more tenants for more space than any other
firm,” said a spokesman for CBRE Group Inc. “That
speaks volumes for the value that we deliver for
them.”

Executives at the top firms also pointed out that
tenants get more insight into the market when brokerage
firms also represent landlords.  “Having a broad
perspective from all angles in the market coupled with
a strong adherence to confidentiality is a clear
advantage to our clients,” a spokeswoman for JLL said
in an email.  Some brokers at full-service firms
acknowledged that the potential for conflicts of
interest exists. But they said it happens very rarely
because both tenants and brokers are becoming more
sophisticated.  The issues raised in the George
Washington report “are valid issues,” said Peter
Hennessy, head of the New York region for Cassidy
Turley. “But the level of sophistication of brokers
is such that they’re able to manage the conflict
issue,” he said.  The report recommends further
study, better self-regulation and the development of a
“model code of conduct” in the commercial brokerage
industry.

WSJ – ISM manufacturing index slows slightly in
November

The US manufacturing expansion slowed only a bit in
November, even as foreign producers struggled,
according to a survey released Monday by the Institute
for Supply Management (ISM).  The ISM’s manufacturing
purchasing managers index fell slightly to 58.7 in
November from 59.0 in October. Of the 18 industries in
the survey, 14 reported growth.  Economists surveyed by
The Wall Street Journal had expected the latest PMI to
drop to 58.0.  Other factory sectors around the world
aren’t doing as well as US goods producers. In
November, China’s two factory readings and the
Eurozone PMI were barely above 50. The readings for
Germany, France and Italy stood at contractionary
levels.  In the US, however, manufacturing is still
fairly robust although a little off the boil from
September and October.  “Comments from the panel are
upbeat about strong demand and new orders, with some
expressing concerns about West Coast port slowdowns and
the threat of a potential dock strike,” the ISM
report said.  The new orders index edged up to 66.0 in
November after it jumped to 65.8 in October. Moreover,
the exports index rebounded to 55.0 from 51.5 in
October.  The ISM production index slowed to 64.4 after
it hit a multi-year high of 64.8 in October.  Labor
demand remained solid last month. The employment index
eased to 54.9 from 55.5.  The ISM’s prices paid index
plunged to 44.5 from 53.5. The ISM said it was the
first report of falling input prices since July 2013.
US manufacturers continued to build inventories last
month. The ISM inventory index stood at 51.5 from 52.5
in October.

The great divide in California’s housing market

The divide in California’s housing market is vast and
shows no signs of stopping. According to an article in
Zero Hedge, the upper end of the housing is market on
fire, while everyone else struggles.  For majority of
the borrowers, record-low mortgage rates are not enough
to boost originations and offset tight lending
standards.  But the luxury housing market in California
depicts a completely different story.  “It’s pretty
mind-blowing, to be honest,” Los Angeles real estate
agent Cindy Ambuehl told the LA Times. “The luxury
market has been completely on fire.”  “It’s just
a completely different story between the two segments
of the market,” said Selma Hepp, senior economist for
the California Assn. of Realtors. “Those who are
doing well are doing really well.”  To put this in
perspective, the article noted that in the third
quarter, 1,431 homes worth over $2 million were sold in
the six-county Southland, up 14% from a year ago. In
the second quarter, 1,436 of such homes were sold, the
highest number ever. Sales of homes worth over $10
million are on track this year to double the prior
record set during the peak of the last housing bubble.
Meanwhile, for the overall California housing market,
Madeline Schnapp, director of economic research for
Property Radar, said in its September housing report,
“The California real estate market is stuck in low
gear. High prices and relatively tough lending
standards have pushed many would be homeowners to the
sidelines.”

For many Americans, retirement won’t be golden

The blissful vision of retirement may die hard, but the
financial contours of most Americans’ post-career years
are changing rapidly and radically.  Born of the
optimism during the post-World War II economic boom,
when private and public pension systems expanded,
“retirement” for decades became a distinct period when
people could expect to spend more time with
grandchildren, indulge in their hobbies and generally
enjoy the fruits of their labor.  But demographic,
economic and political factors have altered that
landscape.  Although the needs of longer-lived retirees
are increasing, most notably from a health-care
perspective, traditional sources of income are
dwindling.  Gone are defined-benefit pension plans and
retiree health benefits, and going are Social Security
benefits. Retirement costs are rising, while expected
returns on personal savings are falling.  The upshot is
that Americans of all ages and most income levels will
have to alter their plans. They will have to work
longer and change their lifestyles both before and
during retirement.  And in many cases, they will have
to rein in their expectations about their “golden”
years.  “Retirement was a 20th-century idea that won’t
exist in the same way in this century,” said certified
financial planner Ric Edelman, chairman and CEO of
Edelman Financial Services, which has about 25,000
clients.

For millions of Americans, the retirement outlook is
bleak. The latest annual study of the retirement
readiness of baby boomers and Generation X by the
Employee Benefits Research Institute found that 38% of
Americans in the lowest-income quartile of those
generations will likely run out of money during their
first year of retirement.  By year 10, 64% of them will
be penniless and 11% of those in the next-lowest
quartile will be in the same predicament. When
long-term-care costs—the biggest wild card—is
factored in, the numbers get worse.  “It’s astounding
how fast retirees in the lowest-income quartile will
run out of money,” said Jack VanDerhei, research
director at EBRI. “An abundance of other people are
going to become indigent when they need nursing care,
and no one knows who is going to pay for it.”