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Bedford Corners Real Estate

Are Hedge Funds Blowing Bubbles? | Bedford Corners Real Estate

Last month the New Republic published a provocative article on hedge funds and real estate investing (Your New Landlord Works on Wall Street) by former TV producer David Dayen. He said out loud what many people have been whispering.

Dayen argued that Wall Street hedge funds, backed by billions from wealthy investors, are turning the once sleepy business of renting and managing houses into a festering real estate bubble that’s bound to burst and blow up everyone standing nearby, from tenants to hedge fund investors to homeowners to the entire national real estate economy. “It’s the next Wall Street gold rush, with all the warning signs of a renewed speculative bubble,” he said.

Another Bubble Brewing?

The essence of his case is that the billions hedge funds are pouring in the REO-to-rental business will jack up prices for distress sales far above their value as an asset.  Home values will follow and artificially inflate home prices once again, only to crash once more.  Two bubbles in less than ten years.  “There’s far less excuse for such nonchalance this time, coming just a few years after we saw the precise consequences of the bubble, and the means by which it grew,” he concluded.

In the interim, the funds will do a poor job rehabilitating the foreclosures they buy and make life miserable for their tenants, especially when compared to the “typical owner of a single-family property for rent is a local mom-and-pop business with a stake in the community who manage properties as a primary vocation.”

“For the most part, they have partnered with large property management companies to deal with day-to-day operations. The houses they purchase often come to them in substandard condition. And the management companies, with thin profit margins of their own, tend to renovate as little as possible before seeking renters,” writes Dayen.

Forget housing and jobs … energy is the quiet killer | Bedford Corners Real Estate

Flashback to 2008 and you may recall the hot summer with skyrocketing gas prices that passed right before the financial markets collapsed.

What has been lost in all the financial news as of late is just how high energy prices soared in 2008, placing extreme pressures on consumers  before the meltdown.

Perhaps, high gas prices were not the cause of the crisis, but they certainly put a squeeze on spending, adding to the pain.

It’s easy to forget the precious role energy plays in personal budgets, but Deutsche Bank analysts are now warning us not to.

After all, with higher social security payroll taxes now in effect and unemployment above 7%, higher gas prices are the last thing consumers and economists want.

Here it is from the horse’s mouth. Deutsche Bank analysts explain their energy fears this way:

“We are keeping a watchful eye on energy prices, because gasoline prices have increased nearly 50 cents over the past three months, and this is occurring at the same time that households are adjusting to a 2% increase in the payroll (social security) tax. Our overall economic growth outlook for 2013 is largely dependent upon domestic economic drivers, so we are cognizant of the potential for rising gas prices to tax consumption by sapping households’ (and businesses’) wherewithal to spend.”

In other words, an energy hike could spook consumers, which in turn has the potential to derail confidence created by rising home prices and sales.

Boehner: No Reason To Block Keystone XL Pipeline | Bedford Corners Homes

WASHINGTON (AP) – A new State Department report is the latest evidence that the long-delayed Keystone XL oil pipeline from Canada should be approved, supporters say.

The draft report, issued Friday, finds there would be no significant environmental impact to most resources along the proposed route from western Canada to refineries in Texas. The report also said other options to get the oil from Canada to Gulf Coast refineries are worse for climate change.

The new report “again makes clear there is no reason for this critical pipeline to be blocked one more day,” said House Speaker John Boehner, R-Ohio. After four years of what he called “needless delays,” Boehner said it is time for President Barack Obama “to stand up for middle-class jobs and energy security and approve the Keystone pipeline.”

Environmentalists see the State Department report in a vastly different light.

They say it was inadequate and failed to account for climate risks posed by the pipeline. The report also is based on a false premise, opponents say — namely, that tar sands in western Canada will be developed for oil production regardless of whether the Keystone XL pipeline is approved.

“Americans are already suffering from the consequences of global warming, from more powerful storms like Hurricane Sandy to drought conditions currently devastating the Midwest and Southwest,” said Daniel Gatti of the group Environment America. Production of oil from Canadian tar sands could add as much as 240 billion metric tons of global warming pollution to the atmosphere, Gatti said, a potential catastrophe that would hasten the arrival of the worst effects of global warming.

Gatti and other opponents said development of the vast tar sands is far from certain, despite assurances by the project’s supporters.

“Tar sands can be stopped, and we are stopping it,” Gatti said, citing a rally in Washington last month attended by an estimated 35,000 people. Project opponents also have blocked construction in Texas and Oklahoma and have been arrested outside the White House gate.

The pipeline plan has become a flashpoint in the U.S. debate over climate change. Republicans and business and labor groups have urged the Obama administration to approve the project as a source of jobs and a step toward North American energy independence. Environmental groups have been pressuring the president to reject the pipeline, saying it would carry “dirty oil” that contributes to global warming. They also worry about a spill.

The State Department review stopped short of recommending approval of the project, but it gave the Obama administration political cover if it chooses to endorse the pipeline in the face of opposition from many Democrats and environmental groups. State Department approval of the 1,700-mile pipeline is needed because it crosses a U.S. border.

The lengthy report says Canadian tar sands are likely to be developed, regardless of whether the U.S. approves the Keystone XL pipeline, which would carry oil through Montana, South Dakota, Kansas, Nebraska and Oklahoma.

The report acknowledges that development of tar sands in Alberta would create greenhouse gases but makes clear that other methods of transporting the oil — including rail, trucks and barges — also pose a risk to the environment.

The State Department analysis for the first time evaluated two options using rail: shipping the oil on trains to existing pipelines or to oil tankers. The report shows that those other methods would release more greenhouse gases that contribute to global warming than the pipeline. The Keystone XL pipeline, according to the report, would release annually the same amount of global warming pollution as 626,000 passenger cars.

A scenario that would move the oil on trains to mostly existing pipelines would release 8 percent more greenhouse gases such as carbon dioxide than Keystone XL. That scenario would not require State Department approval because any new pipelines would not cross the U.S border.

Another alternative that relies mostly on rail to move the oil to the Canadian west coast, where it would be loaded onto oil tankers to the U.S. Gulf Coast, would result in 17 percent more greenhouse gas emissions, the report said.

In both alternatives, the oil would be shipped in rail cars as bitumen, a thick, tar-like substance, rather than as a liquid.

The State Department was required to conduct a new environmental analysis after the pipeline’s operator, Calgary-based TransCanada, changed the project’s route though Nebraska. The Obama administration blocked the project last year because of concerns that the original route would have jeopardized environmentally sensitive land in the Sand Hills region.

The administration later approved a southern section of the pipeline, from Cushing, Okla., to the Texas coast, as part of what Obama has called an “all of the above” energy policy that embraces a wide range of sources, from oil and gas to renewables such as wind and solar.

The draft report issued Friday begins a 45-day comment period, after which the State Department will issue a final environmental report before Secretary of State John Kerry makes a recommendation about whether the pipeline is in the national interest.

Kerry has promised a “fair and transparent” review of the plan and said he hopes to decide on the project in the “near term.” Most observers do not expect a decision until summer at the earliest.

Canadian Natural Resource Minister Joe Oliver said Friday that Canada will respect the U.S. review process and noted the importance of the pipeline to the Canadian economy.

Obama’s initial rejection of the pipeline last year went over badly in Canada, which relies on the United States for 97 percent of its energy exports.

——

Associated Press writers Rob Gillies in Toronto and Dina Cappiello in Washington contributed to this report.

—-

Follow Matthew Daly on Twitter: https://twitter.com/MatthewDalyWDC

(© Copyright 2013 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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Survey Indicates Growing Concern Over Builder Costs | Bedford Corners Homes for Sale

The monthly NAHB/Wells Fargo Housing Market Index often includes a set of “special” questions on a topic of current interest to the housing industry. In January 2013, the special questions asked builders about the problems they faced in 2012 and expect to face in 2013. The survey was divided into 5 different sections with significant problems faced by the builders. One section covered problems related to building costs.  A year earlier, similar questions asked about problems faced in 2011, so it’s possible to trace the evolution of problems builders faced in 2011, 2012 and expect to face this year.

Chart1

According to the latest survey, more than three-fourths of the builders expect building materials prices to be one of their significant problems expected in 2013, up substantially from 46 percent in 2012 and 33 percent in 2011. Second is cost/availability of labor, a significant problem 51 percent of builders expect to face in 2013, up from 30 percent who said they faced the problem in 2012 and only 13 percent in 2011.  Nearly half of the builders expect cost/availability of developed lots to be a significant problem. This is also up from 24 percent who said they faced the problem in 2012 and 21 percent in 2011.

Against the backdrop of impending health reforms scheduled to go into effect in 2014, 42 percent of the builders expect costs of health insurance be a significant problem in 2013.  Like many of the cost categories further down on the chart, problems with health insurance were slightly less common among builders in 2012 than in 2011, but expectations indicate this small improvement is likely to be reversed in 2013.

The tendency for cost problems to become more widespread among builders—especially the top 3 categories of costs (materials, labor and lots)—is something you might expect as residential construction recovers from its trough. At this stage of the cycle, however, rising costs are beginning to emerge as a significant obstacle to a further and stronger recovery.

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This entry was posted on Friday, February 8th, 2013 at 2:27 pm and is filed under Data. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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