October 2, 2016

People Are Getting A Little Nervous

A report from the Post and Courier in South Carolina. “Marc Ross, chairman of the National Apartment Association, visited the Lowcountry last week on a five-day tour of four markets as distant as Seattle and Birmingham, Alabama. Right now, the apartment home business in the U.S. appears to be healthy and active. ‘Real estate is very attractive. It’s the darling of investment,’ says Ross, a San Antonio, Texas-based real estate developer and manager. Most metro areas are ‘a little bit overbuilt (apartment-wise) but that’s not dangerous,’ he says.”

The Lansing State Journal in Michigan. “There’s a bar chart on Michigan State University’s website that looks like a city skyline, except it’s upside down. It depicts the huge drop in Michigan high school graduates over the next decade. And international students from China, a big driver of enrollment at MSU in recent years, is also leveling off, the university reports. In fact, MSU President Lou Anna K. Simon has told local officials there’s no need for more off-campus housing.”

“I’m not the only one wondering if this trend is going to collide with the ever-growing number of construction projects along the corridor that runs alongside the university and west along Michigan Avenue to the state Capitol. I hear it over coffee and cards. I’m glad the Great Recession is over. It stunk. I’m glad to see cranes outlined against the skyline. But, I’ve got to ask, who will live in these apartments and what will happen to those left behind?”

“Bob Trezise, executive director of the Lansing Economic Area Partnership, is in the business of encouraging development. He’s excited to see the projects along the corridor but acknowledges there may well be a student ‘bubble’ – more supply than demand. ‘I do think there’s probably some sort of student housing bubble going on but I think that’s a good thing because it increases competition,’ he said.”

The Columbus Dispatch. “This fall, about 3,000 Ohio State University sophomores who in past years would have lived off-campus moved into OSU dorms, in the first year of the university’s policy requiring sophomores and freshmen to live in residence halls. And on the edges of campus, developers are building pricey new apartment buildings aimed at students who can afford a bit of luxury. When all the new buildings are open, that’ll be another 3,000 or so bedrooms.”

“There seem to be more ‘For Rent’ signs on houses and apartments near the campus this fall than in past years. ‘One guy told me, a small operator with 10 units, that half were unrented,’ said Wayne Garland of Buckeye Real Estate, which rents 950 units. ‘It has become more competitive.’ Garland said 97 percent of his units are occupied, but only after he knocked down the monthly rent on some two-bedroom units that were going unfilled from $1,050 or $1,100 to $700 or $750, to attract single tenants.”

Crain’s Chicago Business in Illinois. “It’s too early to tell, but banks may be starting to provide the downtown Chicago apartment market with something it could use right now: restraint. They’re tightening lending guidelines for new developments and being more selective when picking projects to finance. With more than 6,000 apartments under construction downtown, that’s widely viewed as a good thing, a sign of a market that is functioning well.”

“‘The market’s a little tighter,’ says Chicago developer Tony Rossi Sr. ‘There’s a lot of product out there, and people are getting a little nervous.’”

“Still, the lending slowdown isn’t apparent to the naked eye. Banks held $5.9 billion in Chicago-area construction and land loans—a figure that covers all property types—at the end of the second quarter, up from $4.7 billion a year earlier, according to research firm Trepp. Also at the end of the second quarter, 21 apartment buildings with 6,385 units were under construction in downtown Chicago, according to Appraisal Research Counselors, a Chicago-based consulting firm.”

“The numbers suggest a pullback in bank lending may be coming too late to avert an apartment glut. Appraisal Research forecasts that developers will complete a record 5,000 apartments downtown next year and about 3,800 in 2018. Those numbers far outstrip a key measure of demand, absorption, which is averaging about 2,500 units a year.”

KDVR in Colorado. “Denver’s apartment rental market could finally be cooling after years of increasing prices. A record number of new apartment communities means more vacancies and and falling rent prices for consumers. ‘I’ve never seen anything like this. We haven’t been building this many apartments since 1973,’ said Cary Bruteig, President of Apartment Appraisers & Consultants, Inc. & Apartment Insights.”

“Bruteig said that 110 apartment communities are currently under construction in the metro and 125 more properties are in planning stages. ‘Right now renters are moving into apartments at a very fast pace but we are still building faster than that which is why vacancy rate is already moving up and why rent growth is already slowing,’ Bruteig said.”

“With a vacancy rate of about 5%, some buildings like the brand new 7/S Denver Haus in Capitol Hill are offering a free month’s rent and luxury amenities to lure new tenants. ‘Concessions are the early warning sign that the market may be softening,’ said Bruteig. ‘We’re probably close to the peak of the rental market right now.’”

“The largest concentration of new apartment buildings is in downtown Denver. That also means the area has the highest number of vacant units which is good news for renters who now have the slight upper hand when shopping around for a place to live.”




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86 Comments »

Comment by Ben Jones
2016-10-02 15:14:55

‘The numbers suggest a pullback in bank lending may be coming too late to avert an apartment glut. Appraisal Research forecasts that developers will complete a record 5,000 apartments downtown next year and about 3,800 in 2018. Those numbers far outstrip a key measure of demand, absorption, which is averaging about 2,500 units a year.’

Ringggg.

Hello?

Mrs. Sixpack?

Patricia speaking.

This is Bob Backslapper from Rock-Solid Life Insurance.

Yes, Bob, why are you working on a Sunday?

Well, first of all, my condolences on your husbands recent passing, but I’m calling because I have some bad news.

Oh dear…

Comment by In Colorado
2016-10-02 20:57:08

We’re going have to pay your claim with apartments. You’re free to try to sell them or rent them out, but believe me, you’d be wasting your time.

 
 
Comment by Ben Jones
2016-10-02 15:18:54

‘One guy told me, a small operator with 10 units, that half were unrented,’ said Wayne Garland of Buckeye Real Estate, which rents 950 units. ‘It has become more competitive.’ Garland said 97 percent of his units are occupied, but only after he knocked down the monthly rent on some two-bedroom units that were going unfilled from $1,050 or $1,100 to $700 or $750, to attract single tenants.’

And thousands more on the way.

‘With a vacancy rate of about 5%, some buildings like the brand new 7/S Denver Haus in Capitol Hill are offering a free month’s rent and luxury amenities to lure new tenants. ‘Concessions are the early warning sign that the market may be softening,’ said Bruteig. ‘We’re probably close to the peak of the rental market right now.’

And thousands more on the way. So how could it be that almost every market has been misjudged? Because they were listening to signals that had nothing to do with supply and demand.

Comment by Blue Skye
2016-10-03 04:14:47

And the money was too cheap to pass up.

 
 
Comment by Ben Jones
2016-10-02 15:22:14

‘The latest luxury high-rise to open its doors in Portland’s Pearl District is the concrete, steel and glass NV residential and retail building, which occupies a city block. Residents started moving into the 284-unit apartment tower, with its main entrance at 1261 N.W. Overton St., on Sept. 16 and the grand opening took place Wednesday, Sept. 28.’

‘The building’s name, NV, which is pronounced “envy,” is “a play on the French phrase ‘Autre Ne Veut,’” which translates to “I want no other,” according to marketing materials.’

‘NV is competing with properties such as Park Avenue West, where 573-square-foot studios rent for $1,604 month, and Enso, which has similarly sized studios renting for around the same price. The Louisa rents 701-square-foot studios for $1,457 to $2,057. The high-end Janey and Block 17 apartments are also nearby.’

‘Rental rates at NV start at $1,595, and 10 percent of the units were pre-leased before the building was completed, according to Andrew Cox, Unico Properties vice president and regional director.’

‘What will it take for you to move in? Luxury apartments in the neighborhood boast pet washing stations, lobby wine bars and guest suites for rent. Non-Pearl District landlords are luring in new tenants with gifts of massages, $99 deposits, waived application fees or a 50-inch TV.’

 
Comment by Ben Jones
2016-10-02 15:39:47

‘Governor Haruhiko Kuroda has ruined his chances of getting a second full term, according to Nobuyuki Nakahara, who has advised the prime minister on the economy and was an intellectual father of the Bank of Japan’s first run at quantitative easing in 2001.’

‘The central bank’s switch to yield-curve targeting compounds its earlier error of adopting negative interest rates and is a disappointing move away from monetary-base expansion, Nakahara, 81, said in an interview on Sept. 30. In a stinging attack on the BOJ’s recent actions, he said the decision to conduct a comprehensive review of monetary policy had invited defeat on reflationist efforts and would raise questions about Abenomics as a whole.’

“They are trying to clean up the mess of negative rates. It’s impossible to do a stupid thing like keeping the yield curve under government control,” said Nakahara. “They changed the regime to rates from quantity, meaning those who support quantitative easing were defeated. Reflationists on the BOJ policy board lost. An exit from deflation is going to be far away.”

‘Under the new yield-curve regime, the central bank has pledged to keep the yield on benchmark 10-year debt around zero. The problem in this, as Nakahara sees it, is that if the yield falls further below zero, the BOJ will have to slow its sovereign debt purchases to push the yield back up and markets will interpret this as tapering. This in turn will push the yen up and stocks down, he said.’

“They should end negative rates, but they took action to save face and offset the failure of negative rates,” Nakahara said. “Bringing the rate up to zero means tightening, causing the yen to rise. The current framework is very vulnerable to external factors.”

‘The governor’s propensity to deliver surprises also drew the ire of Nakahara. He described the about-face in adopting negative rates in January — which came the same month as ruling this out — as being “like the attack of Pearl Harbor.”

Saw it coming miles away:

‘They should end negative rates, but they took action to save face and offset the failure of negative rates’

Comment by 2banana
2016-10-02 16:24:39

To summarize:

Government creates a problem and then demands more government to fix the problem.

Bigger and bigger government with more and more regulations and higher and higher taxes can save us this time…

Comment by Professor Bear
2016-10-02 20:38:52

Do central banks really operate by regulations, or do they pretty much do as they damn well please, on the premise that the entire global financial system will go up in flames unless their preferred course of action is followed?

Comment by Raymond K Hessel
2016-10-03 05:05:00

Central bankers can count on the servility of voters like you who bend over for the crony capitalist status quo by electing its chosen water carriers election after election.

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Comment by Professor Bear
2016-10-03 05:46:31

Why didn’t you stop the water carriers yourself if it’s so upsetting to you? Constantly moaning about the situation seems like a losing strategy.

 
 
 
Comment by In Colorado
2016-10-02 21:00:17

FWIW, central banks are controlled by the banking clan and not by the governments of the nations where they operate.

Comment by redmondjp
2016-10-02 23:13:35

‘Tis true. In fact, the bankers are the ones actually in power, with our government carrying out their will.

Which is why who the president is really doesn’t matter.

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Comment by 2banana
2016-10-03 04:02:11

I remember Bush I putting 1500 bankers in jail.

I remember Iceland putting their bankers in jail.

I remember obama putting zero bankers in jail despite widespread fraud and total disregard for banking laws.

Yes - elections have consequences.

 
Comment by Blue Skye
2016-10-03 05:19:34

Having one who isn’t being bribed and promised future millions would be a nice start though.

 
Comment by In Colorado
2016-10-03 09:06:34

I remember Bush I putting 1500 bankers in jail.

All rubes who ran S&L’s. They aren’t the banking clan, they’re just minions, henchmen. Did Bush put a Rothschild or a Fed Governor in the slammer? No, he didn’t.

 
Comment by Jesus Navas is my Lord Savior
2016-10-03 09:56:09

Bush Jr. bailed them out Fookers.

Bush Jr was more conservative than daddy, wasn’t he? We need more conservatives like Jr and Cheney.

 
 
 
 
Comment by taxpayers
2016-10-02 17:25:45

Didn’t Japan start easing in 1990 ?

 
 
Comment by aNYCdj
2016-10-02 17:04:15

my best friend is moving to texas after 25 years in ny…..selling big house here $600 k buying cash there $250k…

her sister works for dh horton and is probably going to buy this…

any thoughts?

http://www.drhorton.com/Texas/Houston/Tomball/Express-Vintage-Creek/Plan-1863.aspx#ExteriorViews

Comment by Ben Jones
2016-10-02 17:21:23

‘works for dh horton and is probably going to buy this’

Job with a shack builder in Houston, what could go wrong? BTW, I can’t see two cars fitting in that garage unless you plan to crawl out the window.

Comment by In Colorado
2016-10-02 21:02:25

Maybe two hatchbacks, but not an F-150 and a large SUV.

 
 
Comment by phony scandals
2016-10-02 18:22:25

Comment by aNYCdj

“my best friend is moving to texas after 25 years in ny…..selling big house here $600 k buying cash there $250k…”

It’s tough to argue with someone who has decided to move back to the United States and pay cash for a place to live no matter who the builder is.

Comment by Ben Jones
2016-10-02 18:34:03

25 year New Yorker, straight to Houston. Not much of a culture shock.

Comment by Pukes
2016-10-02 18:53:38

I’d say you have enough coastal pukes in TX.

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Comment by rms
2016-10-02 19:05:59
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Comment by rms
2016-10-02 23:00:24

Welcome to Texas

 
 
Comment by phony scandals
2016-10-02 19:38:32

Local Cop taught the CCP class I took, during the class he explained how you could fly within the United States with your firearm in one bag and your ammo in another.

A dude in the class raises his hand and asks… So when I am flying into LaGuardia

The instructor stopped him there… I said the United States not New York or California.

Florida Concealed Carry Reciprocity - Conceal Carry HQ
http://concealcarryhq.net/concealed-carry-reciprocity-information/florida-concealed-carry-reciprocity/ - 126k -

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Comment by oxide
2016-10-03 09:59:55

So you’re best friend’s sister is one working for Horton? Than, what’s your best friend going to do? And why Houston?

Comment by Ben Jones
2016-10-03 10:02:39

‘why Houston?’

It’s got a huge outdoor sauna.

 
Comment by aNYCdj
2016-10-03 17:07:23

why houston??? he has no family left in america, and she has family in Houston and Charleston sc……and they both refuse to move to Charleston….anyway…with a paid off house and a home business they will do fine….

he was working for cnn on 9/11

https://www.youtube.com/watch?v=KaLRCb_TrmU

https://www.youtube.com/watch?v=KELCr16txNY

 
 
 
Comment by Apartment 401
2016-10-02 22:08:56

The Donald speaks yesterday in Manheim, Pennsylvania:

https://www.c-span.org/video/?416260-1/presidential-candidate-donald-trump-rally-manheim-pennsylvania

The man is on fire, on point, on message.

Globalist shills need to choke on their own vomit and DIE.

And if you need some help with that, I’ll hold your throat for you and pin you to the ground and look you in the f*ing eyes as your body enters its spasms and convulsions of death.

I watched my native state get economically eviscerated by NAFTA.

Turnabout is fair play you globalist f*cks.

Comment by oxide
2016-10-03 09:05:58

The man is on fire, on point, on message.

…and on the Teleprompter.

This pattern has been going on since he won the nomination. Trump blusters and makes bad headlines. Campaign staff reins him in to be on message with teleprompter rallies. Trump restrains himself for about 7-10 days. But Trump can’t stand being restrained for long, so he re-blusters, campaign staff reins him in, rinse and repeat.

Problem is, Trump is on-message at less visible rallies. But he blusters in a very public way, for example at debates and on Twitter. It’s probably not a good idea to restrain him at rallies. All that pent-up bluster will be ready to blow just in time for the second debate.

 
 
Comment by Professor Bear
2016-10-02 22:32:31

Sorry to learn the value of my sister’s Denver condo is about to be severely undercut by the appearance of a bevy of new apartments.

 
Comment by Palm Beach County
2016-10-03 03:30:13

7 Chinese cities just cracked down on residential speculators
Beijing and other cities dramatically increased down payment requirements
October 02, 2016 04:30PM

http://therealdeal.com/miami/2016/10/02/7-chinese-cities-just-cracked-down-on-residential-speculators/

 
Comment by Raymond K Hessel
Comment by rms
2016-10-03 07:25:31

Restaurants have always been the economic “canary in the coal mine.”

Comment by oxide
2016-10-03 10:04:47

It was pretty crowded in Applebee’s on Friday night…

 
 
Comment by MightyMike
2016-10-03 08:49:58

Those bankruptcies are meaningless. The sector is changing all the time, with some chains growing and others shrinking or going out of business.

 
Comment by YellenBux
2016-10-03 09:17:45

More Yellenbux expiring at a frantic pace.

 
 
Comment by Raymond K Hessel
2016-10-03 04:01:25

The Fed is getting ready to take its crony capitalism to new and more brazen heights.

http://www.zerohedge.com/news/2016-10-02/jpmorgan-joins-yellen-and-summers-hinting-fed-may-buy-stocks-next

Comment by rms
2016-10-03 07:29:59

The fed has purchased stocks in the recent past:

Higher share prices are part of the Fed’s plan. Back in November Mr Bernanke wrote in the Washington Post that “higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.”

Central banks have been supporting share prices
http://www.economist.com/node/18178399

Comment by Ben Jones
2016-10-03 07:40:11

‘Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion’

Rigged! And is this not “trickle down” economics that Rio and Mike lash all the time. Where oh where are they to denounce this inequality machine that is the Federal Reserve?

I say that only in jest about Rio. His socialist paradise has completely come apart.

Comment by MightyMike
2016-10-03 08:53:34

I don’t recall mentioning trickle down economics on this blog. And I think that you’re mistaken. That wealth effect would be an example of trickle down. Rich people benefit from rising stock prices and their increased spending benefits the non-rich.

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Comment by Ben Jones
2016-10-03 08:55:41

So you are a trickle down guy. OK, you and Rio can fight that out. Here’s something I posted on the other multifamily post this weekend:

‘‘Our July Elliott Wave Financial Forecast said: “Many pension fund assets are far more precariously positioned today than they were before the 2007-2009 bear market. Losses are already mounting.”

‘The publication mentions that the funding gap for public pensions in 2012 was $1.83 trillion. Today, it’s an astounding $3.4 trillion, almost twice as large. A big part of the public pension problem is low yields.’

‘The September Financial Forecast elaborates on how one pension system has ramped up risk to compensate: “The Dallas pension system now has more than half of its assets in alternate investments such as homes in Hawaii, a Napa Valley vineyard, an apartment tower in Dallas and a stake in the American Idol production company. In 2010, Money Management Letter cited the Dallas plan as “one of the best-diversified funds in the U.S.” Six years later, Idol is off the air and the Dallas pension system is the prime exemplar of the danger of diversification in search of higher returns.”

‘Less than a month after the September Financial Forecast published, we learn that financial fear is running rampant among Dallas pensioners. “Dallas’s police and firefighters are quitting in droves, wagering that financial-market losses are about to render their promised pensions too good to be true. With the city considering benefit cuts to help close a retirement-fund shortfall that grew by $1.2 billion last year, more than 200 workers have decided to retire or leave, about double the normal rate. …”

‘The public-safety system has just 45 percent of the assets it needs to cover benefits, down from 64 percent at the end of 2014 and half what it was a decade ago.’

‘Other public pension funds are also in trouble, including the nation’s largest. The California Public Employees’ Retirement System (Calpers) returned only 0.6% on its investments through the year ended June 30. It was the worst performance since the bear market ended in 2009. This is far below the 7½% that Calpers needs to meet its existing obligations.’

 
Comment by Ben Jones
2016-10-03 08:59:48

August 11, 2016

‘The past month has been an emotional roller coaster for Dallas police and firemen. Thursday afternoon, the bad news continued. The Dallas Police and Fire Pension System is a billion dollars in the red, and the plan to bail the system out is already being called “unacceptable” by some.’

‘The bailout plan, unveiled Thursday, is a proposal that police and fire employees knew was coming. But the fact is, the Dallas Police and Fire Pension System is actually closer to $2 billion in the hole.’

‘If things keep going the way they are going, the pension fund will be broke by 2030. That’s why consultants unveiled the bailout plan, which one police veteran called so drastic he believes it will be voted down by rank-and-file.’

‘What’s more, the City of Dallas would immediately have to contribute $600 million into the fund just to keep it solvent. “There is no choice. There have to be deep cuts,” said pension fund board member and Dallas City Councilmember Phillip Kingston. “We tried to make them the least painful as possible. There have to be deep cuts and there is no guarantee the city is going to love contributing the amount that being asked.”

‘The pension fund got into trouble after former administrators made millions of dollars in risky real estate investments. Some of those administrators and advisors are reportedly now under federal investigation. The pension system is in such bad shape pension system officials says dramatic cuts must be made beginning this October.’

 
Comment by Ben Jones
2016-10-03 09:01:45

‘Dallas Police & Fire Pension System returned a net -12.6% for the fiscal year ended Dec. 31, said the $2.8 billion retirement system’s annual report. “Real estate performance was adversely impacted by changes in the estimated fair value of certain development stage properties, as well as declines in the estimated enterprise value of certain real estate related business ventures which were previously included in the private equity asset class and reclassified in 2015 to the real estate asset class due to the high correlation of the nature of the business to the real estate industry,” the report stated.’

http://thehousingbubbleblog.com/?p=9816#comment-2572665

So Mike, you want to explain how glorious these artificially low interest rates have been again? These pensions used to be able to invest in relatively safe bonds, but not since Bernanke and Yellen have been running things.

 
Comment by MightyMike
2016-10-03 09:40:17

I didn’t say that I was a trickle down guy. I only stated that the stock market wealth effect and associated increase in consumer spending is an example of trickle down.

 
Comment by trickle down guy
2016-10-03 10:08:41

Good to see another trickle down fan. Thanks Mike.

 
 
 
Comment by Professor Bear
2016-10-04 02:03:25

Given that investors have been dumping shares, isn’t it incumbent on the Fed to shore up prices?

 
 
 
Comment by palmetto
2016-10-03 04:01:39

“It makes me feel bad that people think this of all Salvadorans,” she said. “Violence was the reason I left — when they killed my brother. And now we are experiencing the same violence.”

Wherever you go, there you are.

http://www.nytimes.com/2016/10/03/nyregion/they-keep-finding-bodies-gang-violence-in-long-island-town-fuels-immigration-debate.html

Makes a person nostalgic for the old Mafia, which used to keep the neighborhoods orderly and didn’t go after the children (as a general rule).

But keep having candlelight vigils and making roadside shrines, that’ll work.

 
 
Comment by Raymond K Hessel
2016-10-03 04:19:59

What’s not to trust about the Party of Corruption that has been comprehensively captured by the Vampire Squid and its ilk?

http://dailycaller.com/2016/10/02/michael-moore-people-dont-trust-democrats-anymore/

 
Comment by Professor Bear
2016-10-03 04:43:41

Any thoughts on why high-end U.S. property prices are dropping as of late, or how long it will take for this trend to “trickle down” to the rest of the market?


Property prices in both the New York and Greenwich Conn. areas continue to drop. There are reports of problems in other areas; in particular, numerous high-end properties (+$10 million) on both U.S. coasts are not selling, forcing sellers to lower their prices, and sometimes to take losses.

 
Comment by Professor Bear
2016-10-03 04:58:40

Speaking of nervous people, I wonder how the Trump campaign is feeling about the sudden media frenzy over Trump’s taxes, or lack thereof?

The most shocking part of Donald Trump’s tax records isn’t the $916 million loss everyone’s talking about
By Allan Sloan
October 2 at 4:22 PM
The New York Times says a $916 million loss in the ’90s might have allowed Donald Trump to legally avoid paying any income taxes for almost two decades (Sarah Parnass/The Washington Post)

Despite what Donald Trump says, we really can learn a lot from his tax returns — even from the partial ones made public by The New York Times.

The major takeaway from the three pages of Trump’s 1995 returns that the Times made public is that Trump is right when he says the system is rigged. What he doesn’t say is that it’s rigged in his favor and in the favor of people like him — and against regular people, those of us who earn money, pay income tax on it, and financially support the country in which we live.

 
Comment by Raymond K Hessel
2016-10-03 05:03:07

“Bad corporate actors” = competitors of Goldman Sachs who fail to contribute the requisite payola to the Clinton Foundation or the DNC.

http://www.reuters.com/article/us-usa-election-clinton-idUSKCN12309Y

 
Comment by Raymond K Hessel
 
Comment by Raymond K Hessel
2016-10-03 05:08:49

Fundamental transformation is well entrenched in Fresno, CA. Thank an open-borders crony capitalist or Libertarian next you you see an incident like this.

https://www.washingtonpost.com/news/post-nation/wp/2016/10/03/we-run-the-streets-video-shows-angry-mob-attacking-chp-patrol-car-with-officer-still-inside/?utm_term=.e887ffbd827a

 
Comment by Professor Bear
2016-10-03 05:12:55

Still feeling the Bern?

Sanders: Trump’s taxes prove system rigged
By Eric Bradner, CNN
Updated 11:37 AM ET, Sun October 2, 2016

Comment by Ben Jones
2016-10-03 06:56:11

This is actually relevant to this post. I’ve prepared taxes. The tax code is ridiculously favorable to real estate. Jingle tells us all the time how much income his rental properties have sheltered. These people buying apartments often use up the tax benefits and sell, then buy another one and start all over again. Why a 30 or 40 year old complex might have been completely depreciated several times over. And look at primary houses; is it any big mystery they receive out-sized tax benefits?

And Mr Sanders, how long have you been in the senate? Is the tax code not one of your duties? Did you not know this enormous part of it was there? I’ve got an idea; propose to get rid of it. Let’s get cracking, no more mortgage interest deductions for anyone. Just eliminate the accelerated depreciation for rental properties, that would only seem fair.

Why do I think not one smidgen of this will ever be proposed or enacted by a single congress person of any party?

Comment by Ben Jones
2016-10-03 07:26:23

Let’s expand on this. Do the actions of the central bank not rig the system in favor of real estate? Stocks and bonds too, those wealth dogs. Why is it only one candidate has brought up the interest rate rigging by Yellen and said she should be ashamed? Are the Democrats hypocrites with all this rigged system, inequality bashing?

 
Comment by Rental Watch
2016-10-03 11:17:57

Serious question…I’m no CPA…my understanding is that multi-family depreciation is over a 27.5-year schedule…how can one property that is 40 years old be depreciated several times over (sells for a higher price, and then the depreciation is off a higher base?)? That said, unless the sale is tax deferred (through a 1031 exchange), the depreciation is recaptured on sale–it’s a timing difference, as opposed to a permanent giveaway.

I personally think that the biggest giveaway in real estate is the 1031 exchange, especially when combined with the automatic step-up in basis on death. I’ve heard people say that a meaningful part of their estate planning is to execute 1031’s until they die…and then get the step-up in basis for their estate.

So, they get income sheltered by depreciation for their whole life, and never pay the depreciation recapture (because of the 1031 exchanges and basis step-up on death).

Certainly some depreciation makes sense…everyone likes to repeat how buildings deteriorate over time…even with proper maintenance, but is the proper timeframe 27.5 years? 40 years? 75 years? I tend to think that actual deterioration happens over a much longer timeframe than current depreciation schedules…thus a benefit for property owners.

I also think that 1031s should be significantly curtailed, but there needs to be some consideration for family businesses–perhaps 1031s should still be available if the owner of the building is also the occupant (but not for investment property)?

I agree with you that the biggest impediment for simplifying the tax code is political rather than practical, so I’m going to make my favorite suggestion for an executive order:

If you are in the House or Senate, you should be required by law to do your own taxes without the assistance of a CPA, or computer. You may use a calculator and pencil, but you must show your work.

 
Comment by oxide
2016-10-03 13:30:50

“Why do I think not one smidgen of this will ever be proposed or enacted by a single congress person of any party?”

Because it would lose them the vote of every homeowner in their districts. If you buy a $350K house 3.5% down at 4%, MID will give you about $4000/year, at most. Not sure I would call that an “outsized” benefit, but enough to cost a vote.

That said, I’m all in favor of getting rid of the MID for anything that is not a primary residence.

Comment by Rental Watch
2016-10-03 16:13:38

The standard deduction is $12,600 per couple. The MID gives you a lot less than you think in actual benefit.

The MID in that regard favors the wealthy borrowers in states with high state income tax (since they most likely have blown through the standard deduction).

I’d favor getting rid of the MID for everyone.

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Comment by Carl Morris
2016-10-03 20:09:43

The MID in that regard favors the wealthy borrowers in states with high state income tax (since they most likely have blown through the standard deduction).

As well as the religious who donate 10% to their churches.

 
 
 
 
 
Comment by Professor Bear
2016-10-03 05:26:07

Has the stress of the campaign unhinged Trump? It almost seems as though his handlers have completely lost control over his frequent self-destructive episodes of oral diarrhea.

October 2, 2016 12:04 p.m.
Trump Finishes His Very Bad Week by Driving His Trainwreck Off a Cliff
By Chas Danner

according to his prepared speech, Trump was supposed to use Saturday night to introduce a nine-sentence statement about the recently leaked audio recording of Clinton offering her thoughts about Bernie Sanders supporters. Instead, 25 minutes later, Trump had also ridiculed Clinton’s recent bout with pneumonia, suggested she wasn’t “loyal” to her husband, suggested she was “actually crazy,” ridiculed Sanders, connected “acid-washed” tweets to America being a third-world country, once again complained about his debate microphone, and offered an ominous warning about voter fraud on election day in “certain areas.” He then went on to wonder aloud if maybe he should have just completed another season of The Apprentice instead of running for president.

Comment by Ben Jones
2016-10-03 06:26:55

‘His Very Bad Week’

Another one? The media says this every week but the polls indicate otherwise. Looks like this constant pounding of the HBB with such stories isn’t turning the election. But I could have told you that. Nobody here cares.

Comment by palmetto
2016-10-03 07:00:34

For anyone who has the time, (90 minutes) Judicial Watch, the organization that more or less started the whole inquiry into the emails and the Clinton Foundation, has an excellent panel discussion that sort of sums everything up and gives some great perspective.

https://www.youtube.com/watch?v=KsgapaYCs40

 
Comment by In Colorado
2016-10-03 09:02:08

As much as the media rags on him for not paying any income tax, the fact is that he didn’t cheat. I’m sure that any Joe SixPack who had access to loopholes would do the same. Isn’t that what H&R Block advertises, that they will find every deduction for which you qualify?

Are the loopholes Trump used unfair? Perhaps. But Trump, or any other taxpayer, would be a fool to not use any that are available.

Comment by Rental Watch
2016-10-03 11:32:27

The loss carryforwards aren’t really loopholes. I think HRC has some that she used in 2015.

I think the funniest thing is that Giuliani called Trump a business genius for using them…the CPA would be fired for malpractice if they didn’t use them.

And taking a $915 million dollar loss is evidence NOT of business genius, but of a massive business failure.

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Comment by Rental Watch
2016-10-03 12:15:54

^ spelling failure…lol

 
Comment by aNYCdj
2016-10-03 16:55:18

rw 1995 was the worst year in nyc for real estate after the gulf war and recession their were lots of closed businesses and it bounced back in a big LUXURY way…..sad but true not much average was built or renovated

 
 
 
 
Comment by phony scandals
2016-10-03 06:46:59

“Trump Finishes His Very Bad Week”

Says the MSM but the ‘Basement Dwellers’ on the Internet say otherwise.

Hillary’s Belittling Of Bernie ‘Basement Dwellers’ In Leaked Recording Blows Up The Internet

http://www.weaselzippers.us/298800-hillarys-belittling-of-bernie-basement-dwellers-in-leaked-recording-blows-up-the-internet/ - 35k - Cached - Similar pages
22 hours ago

Comment by phony scandals
2016-10-03 07:14:39

Scroll down on the comments of the weaselzippers article and it has a picture from the Original Jaws movie with Roy Scheider looking off the back of the boat saying…

We’re gonna need a bigger basket

 
Comment by MightyMike
2016-10-03 08:44:24

These people will learn in a few weeks that the Internet doesn’t always reflect the real world very well.

Comment by phony scandals
2016-10-03 09:00:30

“These people will learn in a few weeks that the Internet doesn’t always reflect the real world very well.”

Early voting and absentee mail-in ballot fraud?

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Comment by MightyMike
2016-10-03 09:47:32

Yeah, the fraudulent votes will represent something like .0001% of the total votes cast. If you’re reading about fraudulent voting on crackpot collectivist right wing websites, it means that they’re getting ready for Trump’s loss.

 
Comment by phony scandals
2016-10-03 10:35:21

This message has been brought to you by the Southern Poverty Law Center.

 
 
Comment by Professor Bear
2016-10-03 09:00:51

Don’t you realize that the entire MSM is engaged in a rigged effort to discredit Trump’s rise in the polls? The Internet is the only unbiased information source.

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Comment by phony scandals
2016-10-03 09:14:53

I guess you looked through the Chas Danner archive.

 
 
 
 
Comment by phony scandals
2016-10-03 07:25:09

Chas Danner? Undoubtedly a DUMBO Dweller.

Chas Danner - Archive - New York Magazine
http://nymag.com/author/Chas%20Danner/ - 339k - Cached - Similar pages
Sep 25, 2016 … View an archive of articles by Chas Danner for New York Magazine.

Comment by Ben Jones
2016-10-03 07:32:38

‘The Clinton comments came from audio of her private fundraiser at the home of former Trinidad and Tobago ambassador Beatrice Welters in McLean, Va., on Feb. 16. The recording came to light when hackers breached an email account belonging to a campaign staffer.’

“There’s just a deep desire to believe that we can have free college, free health care, that … we just need to, you know, go as far as Scandinavia, whatever that means, and half the people don’t even know what that means,” she told a laughing crowd of big-money donors.’

‘Clinton said she was “bewildered” at the chord that had been struck by Sanders’ outsider campaign. “If you’re feeling like you’re consigned to being a barista … then the idea that maybe, just maybe, you could be part of a political revolution is pretty appealing,” she said. “I mean I’m still trying to understand the revolution part,” she said to laughter.’

This was the most telling part to me:

‘She also derided them for naively falling for rival Sen. Bernie Sanders’ “false promises” — including his free-college pledge that she has since adopted as her own.’

‘Sanders fans and Trump supporters seized on the comments Saturday as the hashtag #BasementDwellers trended on Twitter. Many of them drew a parallel to the “basket of deplorables” slur that Clinton used to describe Trump voters last month. “Scoot over #Deplorables we Bernie #BasementDwellers are going to need some room in that basket!” wrote Kcora Jaretsky.’

“I can only imagine what demeaning, condescending things she said about #BasementDwellers to her rich friends in her hidden Wall St speeches,” tweeted Jonathan Isaacs. “We might be #BasementDwellers in your eyes, but we told you #BernieOrBust was real,” wrote Dustin Templeton. “Good luck without us in November.”

http://nypost.com/2016/10/01/clinton-offends-basement-dwelling-millennials-in-leaked-recording/

Comment by phony scandals
2016-10-03 08:40:33

“false promises” — including his free-college pledge that she has since adopted as her own.’

Wow, no wonder Bernie looks so bummed out sitting behind Hillary at the rallies.

He probably feels pretty bad about selling out his Big Basket of Basement Dwellers.

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Comment by dropping like a rock
2016-10-03 09:54:48

There is no way I can vote for Trump.

Comment by Jesus Navas is my Lord Savior
2016-10-03 10:03:03

Yep vote Hillary and vote often.

 
Comment by Don't then. It won't matter anyways.
2016-10-03 10:06:14

^

 
Comment by Don!
2016-10-03 10:35:26

Trump is the champion of smokin’ hot women.

 
 
Comment by Professor Bear
2016-10-03 11:38:28

Does Trump’s Big Fat Bubble warning have you concerned about your leveraged stock and real estate investments?

SUSAN TOMPOR
When Donald Trump mentioned a ‘big, fat bubble,’ it put us on edge
Is an economic meltdown on the way?
Susan Tompor | Detroit Free Press Personal Finance Columnist
1 day ago

The big, fat Miss Universe moment during the first presidential debate triggered a justified social media backlash — and GOP presidential candidate Donald Trump’s offhand remarks about an anonymous 400-pound hacker only made things worse.

The real news nugget, though, from Monday’s event? Trump’s short remarks relating to a possible forecast of yet another economic meltdown.

“Believe me,” Trump said, “we are in a big, fat ugly bubble.”

 
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