Mar292017
San Francisco Metro Housing Market Report: March 2017
Double digit rental rate increases are driving rapid home price appreciation in San Francisco.
Historically, properties in this market sell at a 24.1% premium. Today’s premium is 11.4%. This market is 12.7% undervalued.
Median home price is $828,000, and resale $/SF is $532/SF. Prices rose 7.0% year-over-year.
Monthly cost of ownership is $3,815, and rents average $3,406, making owning $408 per month more costly than renting.
Rents rose 8.2% year-over-year. The current capitalization rate (rent/price) is 3.9%.
Market rating = 8
Wells Fargo reaches $110 million class action settlement over fake accounts
Earlier Tuesday, Wells Fargo announced that its Community Reinvestment Act rating is being downgraded by the Office of the Comptroller of the Currency, due in part to the bank’s fake account scandal that led to a $185 million fine from the Consumer Financial Protection Bureau, the OCC, and the city and county of Los Angeles.
But the fallout from the fake account fiasco, which stemmed from more than 5,000 of the bank’s former employees opening more than 2 million fake accounts to get sales bonuses, is far from over.
In fact, the bank’s financial hit from the scandal is about to get worse, as the bank announced late Tuesday that it reached a $110 million settlement in a class action lawsuit brought on behalf of the bank’s customers who had a fake account opened in their name.
According to the bank, the settlement will cover people who claim that Wells Fargo opened an account in their name without their consent, enrolled them in a product or service without consent, or submitted an application for a product or service in their name without consent from Jan. 1, 2009, through the date the settlement is finalized.
The settlement is not yet finalized and still must be approved by the court.
The bank said that it expects this settlement to resolve claims in 11 other pending class action lawsuits that also claim that unauthorized accounts were opened in customers’ names or that customers were enrolled in products or services without their consent.
According to the bank, if the settlement is approved, the entire settlement amount of $110 million will be set aside for customer remediation, minus attorneys’ fees and costs of administration.
It’s hard to claim it was just a few bad apples when 5,000 employees were involved. One thing I’ve learned in this business is that people will do exactly what you incentivize them to do. I’m sure the fake accounts started out as an unintended consequence of their aggressive sales quotas, but eventually upper management had to become aware of the situation and decided to turn a blind eye because the numbers looked so good on paper.
Exactly. That level of malfeasance can’t go unnoticed. It takes multiple levels of management to cooperate or encourage this behavior for it to ensnare over 5,000 employees. It’s the definition of a conspiracy — criminal conspiracy in this case.
So, in other words, once the lawyers take their cut, the aggrieved people will get a coupon for $5 off next time Wells Fargo is selling that horse at their ATMs.
LOL! That’s about it. But then again, anything that causes a bank that behaves like this some pain, is a good thing.
Rents in Megacities Can’t Go Up Forever
As rents and home prices in the most productive megacities continue to climb, the obvious question is whether this is sustainable. Will New York, San Francisco and London become unstoppable juggernauts, soaking up more talent and becoming more expensive each year? Maybe not. I can see several reasons this growth in megacities will prove bounded rather than spiraling out of control.
We live in a special time where clustered activities are unusually important for economic growth. Some activities, such as dentistry and cement production, don’t cluster geographically very much, for obvious reasons. In contrast, finance (New York and London), information technology (the Bay Area), and entertainment (Hollywood and New York) are the most clustered. For whatever reasons, it makes sense to have many of the top decision-makers in one place.
Leading cities have become so expensive in large part because two of these clustering sectors — finance and information technology — have been ascendant. There is no particular reason to expect those trends to continue forever, and that will bind rents in affected cities.
Many more economic sectors tend to be spread out geographically — such as higher education, caring for the elderly, installation of smart-home equipment, fracking, restaurants — and if more economic activity takes these forms, to some extent rents will equalize across different cities.
The rise in the size and value of the financial sector clearly is checked by the total amount of portfolio wealth. But what about information technology? Might it not outpace the productivity gains in other sectors of the economy, year after year? Maybe, but even if it does that doesn’t have to all show up in Bay Area real estate prices.
History lesson: Rents have always gone up.
History lesson:
rents have always gone upthe dollar continues going down.Facts are stubborn.
Rent may still go up, but the rate of rent increase may slow. Trees can’t grow to the sky.
The retail apocalypse has officially descended on America
Thousands of mall-based stores are shutting down in what’s fast becoming one of the biggest waves of retail closures in decades.
More than 3,500 stores are expected to close in the next couple of months.
Department stores like JCPenney, Macy’s, Sears, and Kmart are among the companies shutting down stores, along with middle-of-the-mall chains like Crocs, BCBG, Abercrombie & Fitch, and Guess.
Some retailers are exiting the brick-and-mortar business altogether and trying to shift to an all-online model.
For example, Bebe is closing all its stores — about 170 — to focus on increasing its online sales, according to a Bloomberg report.
Some are going out of business altogether, like The Limited which recently shut down all 250 of its stores.
Others, such as Sears and JCPenney, are aggressively paring down their store counts to unload unprofitable locations and try to stanch losses.
This has long been predicted, but it looks like Dooms Day is finally here.
Rising debt service costs is the straw breaking the camel’s back. In an era of cheap debt, poorly performing centers can stay afloat, but when borrowing costs rise, only the best ones will survive.
Demand for houses still grows despite interest rates increasing
Potential existing-home sales decreased in February as interest rates continue to rise, according to the Potential Home Sales model from First American Financial Corp., a provider of title insurance, settlement services and risk solutions for real estate transactions.
Potential home sales increased to a 5.7 million seasonally-adjusted, annualized rate. While this is down 0.5% from January, or 28,000 sales, it is up 2.4% over the past 12 months.
Potential home sales measures existing-homes sales, which include single-family homes, townhomes, condominiums and co-ops on a seasonally adjusted annualized rate based on the historical relationship between existing-home sales and U.S. population demographic data, income and labor market conditions in the U.S. economy, price trends in the U.S. housing market, and conditions in the financial market.
Although January existing home sales increased to the fastest pace in a decade, First American’s report shows the market underperformed its potential by 4.5% or 142,000 sales. In February, that underperformance sank to 2.5%.
“Steady income and job growth combined with increased building permit activity has increased the market potential for home sales on an annual basis,” First American Chief Economist Mark Fleming said. “Demand from Millennials and first-time homebuyers remains robust despite the strong spring sellers’ market and rising rates, resulting in a shrinking underperformance gap, as the market aligns with its potential.”
And this market potential looks to only grow stronger in the coming months, even as interest rates continue to increase.
“Nevertheless, the outlook for further increases in market potential remains bullish, as strong job and income growth, and increasing demand from Millennials and first-time home buyers in general, bode well for the housing market,” Fleming said. “Additionally, according to the most recent First American Real Estate Sentiment Index, there is increasing confidence among real estate professionals that buyer demand will remain strong, even if rates exceed 5%.”
Here’s how California ended up with too much solar power
California’s power-grid operators are dealing with a glut of daytime electricity produced by household, government, business and industrial solar installations.
This forces the electricity prices on state’s real-time marketplace to plummet, leading some power-plant operators to shut down until demand catches up with supply later in the day.
And increasing amounts of wind and solar energy are being wasted or “curtailed,” as they call it, because no one can use it, according to data obtained from the California Independent System Operator (Cal ISO).
Last year 305,241 megawatt hours of solar and wind electricity were curtailed — a loss of enough carbon-free electricity that could have powered about 45,000 California homes for a year. This was almost double the amount of clean power that was lost through curtailment in 2015.
This energy loss coincided with a 28 percent yearly increase in electricity produced from large-scale solar plants on the state’s control grid, according to the data. The grid system, which excludes Los Angeles, Sacramento, and Imperial Valley area utilities, last year got 11.9 percent of its electricity from solar plants, up from 9 percent in 2015 and 6.3 percent in 2014.
The waste could increase unless changes are made. State power officials are pushing to get 50 percent of power from renewable sources by 2030 as required by state law.
Parrots flying high on drugs are annoying farmers by plundering poppy fields to feed their opium addiction
Parrots flying high on drugs are annoying farmers by plundering their poppy fields to feed their opium addiction.
The drug-addicted birds sit perched in wait until the morphine-rich area is exposed by workers slitting open the flowers’ pods to help them ripen.
The parrots then swoop down in silence into the opium fields – having learned not to squawk – and frantically nibble off the stalks below the pod before they are spotted.
Video shows them retreating to high branches where they gorge on the plants leaving them sleeping for hours – and even falling to their death.
This phenomenon was first reported in 2015, but this year it has spread across to other regions for the first time.
Farmers now claim they are getting warnings from the Government’s narcotics department – which controls opium farming – over their reduced yields.
Sobharam Rathod, an opium farmer from Neemach, India, estimates parrots are stealing around ten per cent of his crop and he has been given a warning.
The big problem going forward (especially for ILLIQUID debt-based so-called assets such as housing), is the same problem that triggered the 08 financial collapse. In that…
ANY type of
loandebt becomes TOXIC once the monthly pymnts can’t be madeLet’s review…
The 08 $1.3tril systemic financial debacle that brought the derivatives-world to its knees was RRE/housing debt centric.
The current >$3tril systemic financial debacle brewing (% of total loans outstanding becoming toxic continues to INCREASE, not decrease) is CRE/student/auto debt centric.
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