NAR reports that housing sales overcounted since 2007.

A disturbing item from CNBC and the NAR indicates that housing sales have been overcounted for the past four years:

Data on sales of previously owned U.S. homes from 2007 through October this year will be revised down next week because of double counting, indicating a much weaker housing market than previously thought.

The National Association of Realtors said a benchmarking exercise had revealed that some properties were listed more than once, and in some instances, new home sales were also captured.

This information has implications for our understanding of inflation data over the past few years. It would appear that the collapse of the housing bubble was more severe than we originally believed, despite massive federal government spending to prop up the market.

Marcellus shale drilling vs. mortgage company restrictions

As natural gas drilling becomes more common in Pennsylvania and elsewhere, lenders are becoming more reluctant to make loans and accept mortgages on properties on which natural gas drilling takes place. Lenders have placed restrictions on natural gas drilling as a condition of approving loans. Lenders do this out of fear of liability for environmental damage or that environmental damage will reduce the value of the mortgaged property.

These new lending policies have taken borrowers and real estate sellers by surprise, according to last week's New York Times:

As natural gas drilling has spread across the country, energy industry representatives have sat down at kitchen tables in states like Texas, Pennsylvania and New York to offer homeowners leases that give companies the right to drill on their land.

. . . .

But bankers and real estate executives, especially in New York, are starting to pay closer attention to the fine print and are raising provocative questions, such as: What happens if they lend money for a piece of land that ends up storing the equivalent of an Olympic-size swimming pool filled with toxic wastewater from drilling?

Some lenders have placed outright prohibitions on drilling on mortgaged properties, while others require the owners to obtain permission from the lender. Other lenders will not approve loans if natural gas drilling already takes place on the property.

The Marcellus Shale development has tremendous potential to increase property values, benefit Pennsylvania's economy and blunt the effect of skyrocketing fuel prices. But property owners especially must be aware that signing a natural gas drilling lease might limit a buyer's ability to obtain a mortgage to purchase the property in the future. The income and resulting increased value from the gas lease should be weighed against potential borrowing problems of future buyers and the resulting decrease in price resulting from a restricted pool of buyers.

Homeownership decline in 2010

The AP and the Census Bureau report that homeownership saw continued nationwide declines in 2010:

The American dream of homeownership has felt its biggest drop since the Great Depression, according to new 2010 census figures released Thursday.

The analysis by the Census Bureau found the homeownership rate fell to 65.1 percent last year. While that level remains the second highest decennial rate, analysts say the U.S. may never return to its mid-decade housing boom peak in which nearly 70 percent of occupied households were owned by their residents.

Inflation surges in September

From CNBC comes bad news on the inflation front:

U.S. producer prices rose more than expected in September to record their largest increase in five months as gasoline prices surged, a government report showed on Tuesday.

Harrisburg passes Ordinances 13 and 14; Rental inspection program

Harrisburg City Council voted unanimously last night to adopt Bills 13 and 14. These bills have been pending in various forms for almost 4 years. They impose new registration requirements on landlords as well as vicarious liability on the landlord and property manager for the actions of tenants. Bill 13 also imposes a residency requirement (plus 50 miles) for owning investment property in the City.

Bill 13 expands the inspection period from three years to five years. The passage of Bill 14 shifts the city's emphasis from inspection upon purchases of residential properties to regular inspections purely of investment properties. Regular inspections have been required by law in Harrisburg since 1996. Proponents of Bills 13 and 14 have argued that the inspection program was not previously enforced because City manpower focused on inspection of residential purchases. City officials have previously stated that this program will increase revenue for the City.

These bills passed on the same night that the City voted to proceed with a bankruptcy filing and voted to increase parking fees.

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update - Breitbart confirms today that Harrisburg has filed its bankruptcy petition.

Metal theft; North Beaver Township bridge

I have written previously about metal theft and the implications of rising metal prices and metal theft for inflation and the real estate market. In today's inflationary environment, Metal thieves are constantly finding different metal things to steal in ever greater quantities. An item in today's Ellwood City Ledger in Western PA proves that point:

As the value of scrap metal — including copper and steel — increases, thieves have been becoming more daring and less respectful of institutions such as churches and schools.

But one group of thieves might have set the standard last week by stealing a 50-foot-long bridge. State police said the bridge was stolen between Sept. 27 and Wednesday in North Beaver Township. The theft was discovered shortly after 9 a.m. Wednesday.

Despite recent commodity price declines, metal theft continues and will remain an indicator of strong inflation until government spending is brought under control.

Chinese slowdown may provide relief for fuel prices.

A news report last week from CNBC contained an interesting item with implications for the economy, both locally and nationally:

Copper, hit by concerns of a Chinese slowdown, tumbled 7 percent to a 1-year low.

The drop in copper prices is significant, as it may signal relief to property owners around the country that have faced relentless pressure from metal thieves.

More importantly, the reference to a "Chinese slowdown" may provide relief to the U.S. economy as a whole. If the Chinese economy worsens, China may purchase fewer resources from around the world. Chinese purchasing has provided the impetus for much of the oil price increases over the past several years. If Chinese oil purchasing declines, we may see fuel prices decline, with positive effects for the U.S. economy and the real estate market. [Actual gasoline price declines may be minimal, as runaway spending by the U.S. government might more than offset the effects of lower Chinese demand.]

August inflation report

Inflation rose throughout the U.S. in August. The AP report included rent plus items recently excluded from the CPI, including food and fuel.

Click here for a discussion of the effect of continued inflation on real estate sales and prices. Regardless of the effect on real estate prices, it is not subject to reasonable dispute that continued inflation will contribute to metal theft - not only from private housing and commercial structures, but also from public facilities and utility infrastructure.

Carlisle Rental Housing Task Force recommendations; Rental inspection ordinance shot down.

Last month, I wrote about the Carlisle Rental Housing Task Force and its efforts to advise Carlisle Borough Council regarding a potential rental inspection ordinance.

Yesterday evening, the task force finalized its recommendations. Those recommendations did not include a rental inspection ordinance:

But the audience was only interested in one of the 19 bullet points put forward: "rental units need to be inspected (interior and exterior) on a regular basis."

The task force's two-hour meeting at Borough Hall concluded with a vote on the most controversial aspect of the group's work. But both sides had said all they had to say at previous meetings and there was no discussion on the issue, which failed by a 5-5 vote.

The audience was heavily populated by landlords and spontaneous applause broke out after the inspection motion failed.

Carlisle Sentinel

The Task Force recommendations did include a number of items that have failed in other jurisdictions or are illegal, including mandatory lease amendments (such matters are governed solely by state law), mandatory registration (which requirements are usually ignored by a substantial percentage of landlords) and a residency requirement. The recommendations also include a voluntary inspection program.

These recommendations will not be considered by Carlisle Borough Council until at least September.

Metal thefts in schools.

Metal theft has increased to the point of threatening this fall's opening of schools in parts of California:




The above films shows that metal theft has become more brazen, the thieves are more knowledgable and are branching into new areas.

In other metal theft news this week, thieves have stolen -

• highway guard rails.


• bronze flower vases attached to cemetary headstones.


• iron sewer grates.


• HVAC parts from a center for cancer stricken children.

As the dollar continues to lose value, any unsecured piece of metal becomes the equivalent of real money in ever widening sectors of the economy. This is a nationwide trend that real estate investors cannot ignore. The ascendency of metal value affects not only the physical safety of buildings, but (most importantly) the fluctuating value of real estate.

Palmyra tables rental registration ordinance.

On Monday (July 25th), Palmyra Borough tabled a proposed rental registration ordinance:

Council President Keith Costello made the motion to table advertising the ordinance, saying he had learned about a study of such laws by the Pennsylvania State Association of Boroughs.

"We've had a lot of good input from landlords regarding the regulation," he said. "We haven't had any input from tenants. It would be interesting to see what other boroughs are doing in this area, and if there are some good ideas out there that are applicable to our borough we should use them."

H/T Lebanon Daily News

Hazleton Inspection Ordinance tabled; Ordinance 2011-13; Hazleton Area Landlords Association

On Wednesday, July 20, 2011, the Hazleton City Council considered a rental inspection ordinance. The ordinance would have required city inspections of every rental property in the City. The Ordinance was tabled by a unanimous vote of Council after numerous landlords, including the Hazleton Area Landlords Association, brought various facts to the attention of council.

A fair amount of discussion focused on the legal principle that the City could not use a measure like this as an income generator. I believe that Council lost much of their enthusiasm for this proposal when it became apparent that the fees imposed on landlords could not be used to close budget gaps or fund other projects.

Equally disturbing to Council was the news that prior ordinances had not worked. City employees reported to Council during the meeting that the 2006 rental registration ordinance had not been successful in obtaining addresses and registrations from every landlord with property in the city. Hundreds of property owners remain out of compliance with that measure. Council has not found the answer to the question of how the City would be able to conduct inspections of every unit when it could not ensure compliance with a simple registration ordinance.

More information was reported in the Hazleton Standard Speaker.

The following clip is from WYLN.

Metal thefts cause death, power outage and related hardship.

Metal theft continues unabated in recent days and weeks:

• Thieves have stolen $45,000.00 worth of railroad rails in Cambria County.




• Thieves have stolen 18 markers made of copper, brass and bronze from the graves of war heroes in a veterans cemetary in Massachusetts.




• A man died stealing copper from a Duke Energy substation in South Carolina, causing 3,000 people to lose power.

The fire chief in South Carolina referred to the discovery - near the thief's body - of "items that would be used in the metal theft industry, cutters and that type thing."

It is disquieting that metal theft is now referred to as an "industry."

Carlisle proposed rental property inspection; Carlisle Rental Housing Task Force meeting.

In Carlisle on July 18, 2011, the Carlisle Task Force on Rental Housing convened a panel discussion on proposed rental housing legislation. The Task Force invited panelists to address questions related to the operation of rental inspection ordinances in various parts of Pennsylvania. The panel consisted of myself (speaking on behalf of landlords), a representative of PAR and representatives of numerous municipalities, including Lancaster, West Chester, Bellefonte, Gettysburg, Shippensburg and Chambersburg.

The general purpose of the meeting seemed to be for the municipal representatives to explain how well their inspection ordinances worked for those municipalities. Despite their conclusions, they provided very few specifics regarding why an inspection ordinance is needed to address particular problems. The representative from Bellefonte stated that 95% of problems with rental properties related to the exterior of the buildings, thus indicating that 95% of problems can be observed and addressed without an inspection ordinance. Similar conclusions can be drawn from their conclusions and comments regarding police activity at rental units.

Lancaster's representative acknowledged that Lancaster's inspection program is partially funded by grants from the federal government.

The West Chester representative acknowledged the prior litigation whereby the Chester County Court forced the borough to refund more than one million dollars in inspection fees to the landlords several years ago.

The Task Force is set to vote on its recommendations at its August meeting.

Federal and state governments attempt to treat symptoms of inflation

Various states and the federal government are considering measures to make it more difficult to sell stolen copper. These measures are being considered in response to the upsurge in stolen copper and other metals in recent years:

When thieves ransacked eight air conditioners in an apartment complex in the city of Mobile, Alabama, the culprits made off with $800 worth of scrap metal and left residents with $38,000 worth of damages. "We've had copper robberies since forever," said Officer Christopher Levy of the Mobile Police Department, "but we've seen a spike so far this summer." Record copper prices have caused a surge in U.S. copper thefts, plaguing law enforcement and local governments and prompting states to pass new laws. "Since the beginning of the 2004 spike in copper prices, copper theft and copper prices have been directly linked," a 2010 U.S. Department of Energy study on copper wire thefts said.

These laws will not address the real problem, as metal prices will continue to rise as long as the currency is being devalued. The Reuters article attempts to explain the rise with reference to increased Chinese usage, but that explanation tells only part of the story. Copper is not the only metal that is being stolen in larger amounts. Other commodities have seen rising prices for several years, including fuel, gold and silver. The new laws will only treat the symptoms. If the government truly wants to stop the brazen metal thefts that now plague homes and businesses, the government must stop reckless deficit spending.

In related news, California scrap metal thieves have stolen the irrigation system from a vineyard, threatening the entire grape crop.




For other examples of rampant metal theft in recent months, click here.

Mortgage applications decline for fourth week in a row in July.

Nasdaq.com reports that mortgage applications declined last week for the fourth straight week despite lower interest rates:

The Mortgage Bankers Association's seasonally adjusted index of mortgage application activity fell 5.1 percent in the week ended July 8, nearly identical to the 5.2 percent drop recorded the week before.

Refinancing, which makes up more than 65 percent of mortgage activity, slipped 6.2 percent. The MBA's measure of new home purchase applications edged down 2.6 percent.

This decline is not necessarily uniform throughout the entire country.

Copper thefts in Lower Merion Township, Montgomery County; downspouts, gutters

Click here for previous posts on increasing thefts of copper (and other metals) and how they reflect rising inflation. Previously, metal theft has focused on utility wires, catalytic converters, air conditioners, transformers, railroad tracks, etc. Abandoned or rehab real estate has often been targeted for copper theft in recent years.

From CBSPhilly.com comes the story of copper thefts targetting gutters and downspouts in occupied homes in Montgomery County:

A rash of copper thefts in Montgomery county has residents on alert

They may not seem like your typical targets, but thieves in Montgomery County are looking for copper. Gutters and downspouts made of the precious metal are being stolen from people’s homes along the Main Line.

Lower Merion Township Police have reported a significant increase in the thefts of copper down spouts and gutters being taken from homes throughout the area.

Pennsylvania HB 1696; Moratorium on county wide reassessments.

At the end of June, the Pennsylvania legislature enacted HB 1696, which imposes a moratorium on county wide reassessments in 4th class counties.

The full text of the bill appears here.

The Almanac covers the effects of this law on Washington County's reassessment plans.

The list of Pennsylvania's fourth class counties is as follows: Beaver, Butler, Cambria, Cumberland, Fayette, Schuylkill, Washington. The effect of this bill on Cumberland County is expected to be minimal, as Cumberland engaged in reassessment in 2010.

CCAP contains a breakdown of all Pennsylvania counties by class.

The moratorium shall last until November 2012 or until further reform is enacted - whichever occurs later.

Metal and copper thefts get more brazen in Pennsylvania and elsewhere; Cranberry Township; SEPTA car thefts;

I have written previously about rising metal theft as an indicator of continued inflation and its impact on real estate prices.

Recent news reports indicate that metal theft not only continues unabated in Pennsylvania and elsewhere, but that it has become more brazen and is being done at great risk to the thieves:

• In Cranberry Township (near Pittsburgh) thousands of residents remain without power because thieves (at great physical risk) stole "all the copper groundwire" at a substation on Route 19.


• SEPTA riders in Chester, Montgomery and Delaware Counties have been victimized by thefts of catalytic converters while their cars were parked in SEPTA lots during the day.


• Thieves near San Francisco knocked down 300 utility poles in order to steal copper wire and also stole an entire transformer - at great risk to themselves.


• In Sacramento, thieves have stolen a large number of brass components of fire suppression systems from commercial businesses.


• Pipe thieves near Detroit have caused possibly four house explosions by stealing the natural gas pipes from residential dwellings.


• Numerous churches near Miami have lost the use of their air conditioning when copper thieves stole copper tubing and wiring from a/c units.


• In early June, thieves caused a CSX train to de-rail in Massachusetts by stealing steel rails from the railroad line.
  

These cases are not simply an indication of rising crime due to the economic downturn. Metal theft is a specific type of crime that exists solely because inflation has pushed commodity prices higher. Metal theft goes hand-in-hand with an increase in legitimate scrap dealers, companies that offer to buy your gold on late night infomercials, rising gasoline and food prices and other commodity based activity.

Remember, commodity prices affect the economy as a whole. The real estate crash of 2006-2008 was accompanied by a major commodity price increase.

The market for commodities is robust, as the smart money flees the dollar (or defies physical and legal danger) in favor of hard assets. The desperation with which thieves now target metal provides specific evidence that inflation is out of control. All real estate investment decisions must accept this reality.

Federal foreclosure assistance; Emergency Homeowner's Loan Program (EHLP); Pennsylvania participation

From Nasdaq.com comes details of a new $ 1 billion federal program to bail out homeowners facing foreclosure. The bailout takes the form of interest free loans.

This program will have the effect of delaying the price correction that we have needed to reignite sales volume since the market crash of 2006-2008.

The program is available in 27 states, but does not include Pennsylvania. Residents of Pennsylvania may apply for PA administered assistance that draws funds from the federal program.

There are more details at The Boston Globe, including the information that in some cases, the loans might not have to be repaid at all.

Metal theft points to direction of inflation and economy

As inflation picks up, the value of scrap metal rises. These price increases affect real estate in two ways:

1. Increasing commodity prices can help predict the general direction of prices of all goods, inclusing real estate; and


2. Increasing scrap metal values place real estate at risk for theft and vandalism.

In particular, metal theft demonstrates the declining value of the dollar and the lengths to which thieves will go to obtain something with real value. Metal theft has been rising in recent years, and in particular in recent weeks. Consider the following news items:

• This year, thieves have stolen at least 50 city trash cans (iron) from the streets of Pittsburgh, with each can now having a scrap value of between $ 1,500 and $ 2,000.


• In Washington D.C., thieves are posing as road crews to steal underground copper wire, causing parts of the city (including traffic signals) to go dark.


• In Chicago, scrap metal thieves are suspected of stealing a handicapped child's wheelchair.


• In Sacramento, thieves were arrested dismantling railroad tracks in broad daylight for the purpose of stealing the metal.

The problem is nationwide and is no longer limited just to copper or just to abandoned houses or houses undergoing rehabilitation. Iron is considerably less valuable than copper, yet thieves are targetting that metal also.

Glut of foreclosed homes may deepen real estate downturn.

A recent article in the New York Times estimates that lenders own more than 872,000 foreclosed homes at this time:

All told, they own more than 872,000 homes as a result of the groundswell in foreclosures, almost twice as many as when the financial crisis began in 2007, according to RealtyTrac, a real estate data provider. In addition, they are in the process of foreclosing on an additional one million homes and are poised to take possession of several million more in the years ahead.

For each home a lender sells, they foreclose on many more:

In Atlanta, lenders are repossessing eight homes for each distressed home they sell, according to March data from RealtyTrac. In Minneapolis, they are bringing in at least six foreclosed homes for each they sell, and in once-hot markets like Chicago and Miami, the ratio still hovers close to two to one.

Before the housing implosion, the inflow and outflow figures were typically one-to-one.

The problem is apparently widespread and will contribute to continuing stagnation for several more years.

Cumberland Valley School District school tax increase

On May 20th Cumberland Valley School District in Cumberland County approved a tentative budget with a 2.9% school tax increase. This tax increase follows a county-wide reassessment last year and a 9.5% school tax increase by the nearby Camp Hill School District in 2010.

Cumberland Valley officials did not comment as to whether this tax increase bears any connection to the statewide lawmaker 2001 pension increase that has been projected to cause large school tax increases throughout Pennsylvania in 2012.

New Giant and Weis Markets in Hampden Township

The Harrisburg Patriot-News reported last week that Giant plans to open a new 90,000 square foot supermarket in Hampden Township, Cumberland County, while Weis Markets plans to open a 63,000 square foot supermarket nearby. Both supermarkets are planned for Valley Road (near Wertzville Road) - roughly in the northern portion of the developed part of the Township.

If both stores are completed, the number of supermarkets within the Township will double. Hampden is the most populous municipality in Cumberland County.

These plans reflect continued growth in Hampden Township and continued population saturation/expansion in a northern and western direction from the Susquehanna River through Cumberland County. These stores would be part of a trend of development through and near a long strech of Wertzville Road in northern Hampden Township (and northern Silver Spring and other Townships) over the past decade, including office parks, gas stations, retail centers and a school.

Real estate prices, gasoline prices and stranded motorists.

From Pittsburgh came a report last month on one way in which rising gasoline prices have already begun to affect consumer behavior:

With gas prices pushing $4 a gallon, a lot of people are trying to stretch their dollar at the gas pump, but some of them are trying to stretch it a little too far.

Since the beginning of March, AAA has seen an 18 percent increase in the number of roadside calls for people running out of gas.

I have speculated previously on the relation between gasoline (and other commodity) prices and real estate sales. With this report, it becomes apparant that consumer behavior is already starting to change. While it may appear to be a small matter that more consumers are being left stranded on the roads, this trend is an indicator of larger behavioral trends, including major purchases such as real estate.

Even though commodity prices have stabilised (and even dropped slightly) over the past two weeks, it is highly likely that the recent commodity price run-up will trigger another round of real estate price decline and/or sales stagnation.

Harrisburg to announce new blight policies

Mayor Thompson of Harrisburg is set to announce new policies aimed at blighted properties within two weeks. This announcement apparently results from a large empty building on North 18th Street in Allison Hill:

[Code Officer] Patton said his department has cited the building owner nine times, but the problem remains. According to Thompson, in two weeks she will announce new, stricter policies against city blight.

It is not yet known what those new policies will be.

Quote of the day - short sales and foreclosures

“These days, there are no traditional sales. They’re all short sales or bank-owned.”

Zar Zanganeh - Las Vegas real estate broker - Bloomberg.com - April 26, 2011 (speaking of Las Vegas real estate market).

Maronda Homes, Inc. files bankruptcy petition; Title issues of which to be aware.

Last week, the Pittsburgh area's third largest builder filed for bankruptcy protection.

Maronda Homes Inc., the region's third-largest home builder, filed for bankruptcy protection from creditors yesterday amid a national and local housing market that continues to stagnate.

H/T Pittsburgh Tribune Review

The builder assures buyers that settlements will continue as scheduled:

For Maronda customers, homes will be built, and closings will be held on time "with no issues whatsoever," according to attorney Joseph F. McDonough, representing Maronda.

U.S. Bankruptcy Judge Judith Fitzgerald approved an order that closings continue, he said.

It may be true that closings will continue as scheduled, but title agents will face additional issues as a result of the bankruptcy filing and whatever legal/debt issues forced Maronda into bankruptcy.
Title agents should do the following in addition to their regular duties handling the closings:

• scrutinize all bankruptcy orders to make certain that sales are authorized and liens are removed.


• devote additional diligence to the judgment index in the county in which the real estate exists.


• make certain that all subcontractors and materialmen have been paid prior to closing. The period for filing mechanics liens was expanded in 2007 to six months following the performance of the work. Even if the subcontractors have filed no lien prior to settlement, any lien they file up to six months after settlement could take priority over the new deed and the new mortgage.


• be certain that all real estate taxes have been paid - especially for the current year - instead of relying only on the records of tax claim bureau.

Buyers should be careful to hire a real estate attorney for settlements instead of letting the mortgage broker or realtor choose a non-attorney title company to conduct settlement. Non-attorney settlement companies may not be aware of the above issues, especially the mechanics lien issues.

These concerns should be addressed always, but in the current real estate market these issues are more likely to create a problem.

Maronda conducts development in five states, including western Pennsylvania.

HB 377 passes both house of Pennsylvania legislature; Sprinkler requirement repealed.

House Bill 377 has now passed both houses of the Pennsylvania legislature. Click here for items on the history of this legislation.

The sprinkler requirement for new single family home construction is now repealed.

Amendments to the repeal bill also would make it more difficult for the legislature to adopt large scale revisions to the Uniform Construction Code in the future without careful consideration.

Middletown Borough considering a voluntary rental inspection program.

The Middletown Borough Council President wants to initiate a voluntary rental inspection program for investors:

Middletown Borough Council President Diana McGlone wants to establish a voluntary apartment inspection program.

Her idea, which is in its infancy, is to encourage landlords to have their properties inspected and, in return, those that pass would be placed on a star list of rentals on the borough’s website. Listed properties would be more attractive to renters, said McGlone, who is one of a few council members who owns rental properties in the borough.

While a voluntary program would eliminate most of the legal problems associated with the inspection programs of other municipalities, such a program would create new legal challenges while probably leading to a mandatory program in the future. I am not sure that the Borough wants to be in the business of recommending particular properties to the general public as the "star list" proposal seems to imply.

Higher District Justice jurisdictional limit in Pennsylvania

As of January 2011, Magisterial District Justices in Pennsylvania can hear cases involving claims as high as $12,000.00. The old limit was $8,000.00, where it had remained since roughly the mid-1990's.

Pennsylvania HB 377; residential sprinkler requirement.

House Bill 377 today passed the Pennsylvania House of Representatives by a vote of 154-39. The bill now moves on to the Pennsylvania Senate.

Click here for the history of this bill.

Flood watches for Central Pennsylvania; implications for Seller disclosures.

The National Weather Service has issued flood watches this weekend for numerous counties in Central Pennsylvania (and beyond).

There are specific disclosure requirements for properties that endure flooding in any amount.

Click here for advice for buyers and sellers of flood prone properties and here for additional information regarding the seller's disclosure.

House Bill 377 passes Labor and Industry Committee;

Click here for information on Pennsylvania House Bill 377. This bill seeks the repeal of Pennsylvania's newly enacted sprinkler requirement for new home construction. HB 377 was reported out of the House Labor and Industry Committee last week and is expected to be voted on by the full House early this coming week.

The full text of HB 377 can be found here.

update - PAR has issued a "call to action" in support of Bill 377.

Pennsylvania residential sprinkler requirement; House Bill 377

Since January 1, 2011, all new houses built in Pennsylvania have been required to contain sprinkler systems. This requirement adds thousands of dollars to the cost of construction. The sprinkler requirement also creates potentially higher insurance costs for homeowners, as sprinklers that activate accidentally can create tremendous water damage within a home.

Pending now before the Pennsylvania House of Representatives is House Bill 377. HB 377 would repeal the sprinkler requirement for new homes and would provide consumers with a choice at the time of the construction contract.

HB 377 is currently before the House Labor and Industry Committee and is expected to be reported out of committee shortly. A vote on the bill might occur in the full house as early as next week.
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click here for an update.

Fuel prices and real estate prices.

The major economic focus in the news recently has been the rise in oil and gasoline prices:

Benchmark crude for March delivery was up $6.35 a barrel, or 7.4 percent, at $92.55 a barrel in electronic trading on the New York Mercantile Exchange.

"The Middle East will remain the market's focus today with moves in the oil price probably the best single indicator of the market's assessment of the wider implications of events there," said Adrian Foster, an analyst at Rabobank International.

Rising crude prices are a particular worry for investors as they reinforce fears of inflation and raw materials costs. They also stoke worries of a big drop in global demand levels, as experienced in previous oil price shocks in 1973-4, 1979 and 2008.

If you want to know how the fuel prices will affect real estate, look at historical information from the previous "oil price shocks" identified above. The real estate market may react in a similar fashion to those prior periods.

Even though Central Pennsylvania has historically been more stable than other parts of the country, the effects of the ongoing real estate downturn appear to be spreading:

Communities once believed to be immune to the housing crash are now seeing devastation in their cities. Seattle, Minneapolis and Atlanta are among these cities according to The New York Times.

Click here for earlier speculation as to the direction of real estate prices.

Luzerne County Housing Authority; Bedbugs

The Wilkes-Barre Times Leader reported last month on a bedbug problem experienced by the Luzerne County Housing Authority:

Fagula said the authority nipped a slight bedbug problem in the bud. Exterminators eradicated the bloodsucking pests from three facilities and employees educated tenants on how to avoid future infestations.

“We tried to be a little proactive. Our maintenance superintendent Joe Grady found on the Internet a device you can place in the unit that attracts the bedbugs, something our guys can go around and check every week,” Fagula said, adding that the units cost about $1 each and the authority bought about 240.

“These are placed underneath the bed and, if there are bedbugs in there, they’ll be attracted to this device and get trapped in there and we can know right off the bat. So far, we’ve had good luck and good success. Three weeks ago, we put them in every unit in Lee Park and in every unit in Plymouth, and the results have come back and we haven’t found any bedbugs, so that’s a good sign,” Fagula said.

The bedbug products referenced by the maintenance supervisor are featured here.

Penbrook litigation featured on ABC27 WHTM

Yesterday, ABC27 News in Harrisburg broadcast interviews with local business owners about the Penbrook situation.


Click here for previous posts about Penbrook, including posts about Penbrook charging business owners criminally with filing false tax returns - even when the Borough has not seen the owner's return at all.

Bedbugs and attorneys - a word of caution.

If you are an attorney seeking to make a big payday representing tenants in bedbug litigation, here is a word of caution from a recent New York Times article. Don't let your clients come to your office:

Even Steven Smollens, a housing lawyer who has helped many tenants with bedbugs, has his guard up. Those clients are barred from his office. “I meet outside,” he said. “There’s a Starbucks across the street.”

Once your office becomes infested with bedbugs, your business will suffer. Other clients will not want to come to your office:

In recent weeks, bedbugs snuggled into the seats at AMC’s movie theater in Times Square, crept around a Victoria’s Secret store on Lexington Avenue and the offices of Elle Magazine and hitchhiked into the Brooklyn district attorney’s office.

“There were attorneys that didn’t want to come to our building,” said an assistant district attorney who would identify herself only as Caroline A. “I don’t blame them; I wouldn’t want to go somewhere where there is known to be bedbugs.”

The consequences from bedbug litigation are only beginning, but I imagine that if an attorney (or his clients) brings bedbugs into his office building, the landlord would be justified in evicting that attorney. Check your own leases before you put your practice at risk.

Penbrook Borough updates

There is a new website dedicated solely to the battles involving Penbrook Borough and the Borough's fights against property owners and investors. Click here to view this site.

Check out my posts involving Penbrook here (or click the "label" at the bottom of this post).

Pennsylvania bedbug legislation; Senator Farnese; DDT

Bedbugs have become a more common problem in recent years, as these insects have spread mainly among hotels in urban areas throughout the Northeast.

They resist traditional insect treatments. The known insecticides that kill bedbugs were banned years ago by the federal government.

In 2010, Senator Farnese (D - Phila.) introduced legislation that would have imposed tremendous costs upon landlords in an effort to combat bedbugs. In particular the bill would have required landlords to provide for inspection every time a new tenant leased a unit or every time a lease was renewed. This bill expired with the end of the legislative session in 2010, but Senator Farnese expects to reintroduce it under a new bill number soon. He is now seeking co-sponsors.

On Tuesday, January 11, 2011, representatives of PROA met with Senator Farnese' staff in Harrisburg. We stressed the prohibitive costs that this bill would create for landlords and we presented various alternatives, including expedited eviction for tenants known to have caused a bedbug problem in the unit.

We also discussed the availability of pesticides. According to the New York Times:

Bedbugs, once nearly eradicated, have spread across New York City, in part because of the decline in the use of DDT.

While it was the federal government that banned certain pesticides (thus precluding a real solution by state legislators), state legislators can help address the problem. Senator Farnese's staff indicated that the Senator will conduct hearings in this matter. We asked that the Senator's committee seek testimony on pesticide bans and pesticide solutions. A growing public awareness of the pesticide aspect of this story could influence the federal government.

Meanwhile, real estate owners should contact their federal congressmen in an effort to push for repeal of DDT bans.

Housing market entering depression status nationwide

CNBC reported yesterday that the housing market nationwide is now officially in a "depression":

Home values have fallen 26 percent since their peak in June 2006, worse than the 25.9-percent decline seen during the Depression years between 1928 and 1933, Zillow reported.

November marked the 53rd consecutive month (4 ½ years) that home values have fallen.

What’s worse, it’s not over yet: Home values are expected to continue to slide as inventories pile up, and likely won't recover until the job market improves.

Zillow includes the following graph:


Zillow housing graph

Each year in gray shows a decline. The uptick following 2008 is merely a decline in the rate of decrease, not an actual increase in values or prices.







While most commentators think that the housing market will improve only when employment numbers improve, the real cure for this depression would be for the government to allow prices to fall. At some point, prices would finally reach the point where they should be - where real estate is affordable to consumers without the need for a credit bubble to spur buying. The government only delays this process by propping up prices with stimulus money, targeted tax credits, etc.