Thursday, May 31, 2012

Student loan bubble to impact Pennsylvania real estate?

We like to think that it would be useful to learn that a bubble exists before it actually bursts.  But is such knowledge really useful to us?  Would we change our investments or other behavior if we learned of a bursting bubble in advance?  While we were warned many times of the real estate bubble from 2005 to 2007, such warnings were largely ignored. Now, we are being warned of a student loan bubble from various sources, including law professor/author Glenn Reynolds:
I’ve been writing for years about a bubble in higher education: too much demand, causing sky-high prices — all because of cheap government money, much like the housing bubble. Now those warnings have become conventional wisdom — so conventional that they’ve reached The New York Times and even 60 Minutes.

Business Insider has attempted to narrow the focus of this bubble to about 18 states, including Pennsylvania. Business Insider's article also focuses on the financial harm that may befall the schools that have contributed to this bubble.

When this bubble bursts, it will affect the general real estate market by restricting liquidity and causing lending requirements to tighten further. Bankruptcies and foreclosures will tend to increase also. While the coming crisis will not directly affect those who are neither indebted for student loans nor employed in higher education, the additional downward pressure on the real estate market will affect all of us.

Sunday, May 27, 2012

DNA sampling for dogs at apartment complexes.

The Rosedale Estates apartment complex in Minneapolis has begun a new program for cracking down on tenants that do not clean up after their dogs. From now on, the complex will collect DNA samples from every dog that lives in the complex. These samples will be held by a private laboratory that will compare the samples to dog feces left on the premises. The complex began this program in response to a growing problem that left the outdoors virtually unwalkable. The Minneapolis CBS affiliate has more details.

This program would be legal in Pennsylvania, as landlords may go so far as to exclude dog owners entirely. Landlords may charge dog owners for the initial sampling. Landlords may charge violators for the cost of the comparison testing once a violator is identified. Landlords should be careful to enforce such a program uniformly, as a situation with as high a volume as that at the Rosedale complex would tempt selective enforcement.

I believe that this policy could be enforced even against guide dog owners so long as it is enforced uniformly and so long as it does not appear that the policy exists for the purpose of excluding the visually impaired. Such a policy would invite litigation, so this policy should be restricted for the most severe cases, such as the situation at Rosedale in Minnesota.

Monday, May 7, 2012

Fuel prices in "free fall."

CNBC reported Friday that oil prices were in "free fall." (Observers will note that gasoline prices at the pump are falling also.) While the article cited many factors, the main reason for the decline is the economy:
But the big driver is the concern that the U.S. economy is not strong enough to withstand a weak European economy and slower growth in China. The disappointing April jobs report Friday, showing just 115,000 nonfarm payrolls were added, was the latest catalyst for a second day of heavy selling.
The federal government has printed (or "quantitatively eased" or whatever they are calling it now) trillions of dollars in the last several years. Fuel prices have more than doubled since January 2009. The printing press has not stopped, yet prices are now falling. For the price of a basic commodity to fall while the printing press runs amok is an extraordinary circumstance. At a certain point, even a runaway printing press cannot make people spend money. We should remember this lesson when we consider the effect of lower mortgage rates or new federal subsidies on the real estate market.

Sunday, May 6, 2012

"Equity Stripping" scams on the decline

Real estate scams are apparently on the decline as the real estate bubble continues its collapse:

“Equity stripping is largely a thing of the past because there’s no equity to strip,” said [DOJ official] Perez.

“Equity stripping” is a scam where con-artists persuade confused or ill-prepared people to sign home-loan contracts that transfer the property rights. Victims — often old or ill-educated — are left without their homes, but with much new debt.

Instead of equity stripping, the con artists are moving to new areas, Perez said.
H/T Daily Caller
The collapse of the bubble has created a situation where, at least as far as real estate is concerned, there is nothing left to steal.

Saturday, May 5, 2012

Housing prices at ten year low and unlikely to recover for a generation

Recent news on the national housing market has been uniformly negative. A recent Yahoo news article reported January housing prices hitting a ten year low.                                                                                                                                                        
                                                                                                                                                                A more recent Reuters article predicts no recovery for a generation:
The Housing market is likely to remain weak and may take a generation or more to rebound, Yale economics professor Robert Shiller told Reuters Insider on Tuesday.
Shiller, the co-creator of the Standard & Poor's/Case-Shiller home price index, said a weak labor market, high gas prices and a general sense of unease among consumers was outweighing low mortgage rates and would likely keep a lid on prices for the foreseeable future.                                                                                    
"I worry that we might not see a really major turnaround in our lifetimes," Shiller said. . . . . . He said suburban areas in particular might endure further price declines as high gas prices increase demand for "walkable cities."
While regions like Central Pennsylvania have seen more price stability, the long term stagnation throughout the economy shall have residual effects in this region.