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The Metldown Remains a Whodunit
The Wall Street Journal :: January 17, 2012
If not for hindsight bias, financial pundits would have no shtick at all. Happily, the world is a conveyor belt delivering surprising events that we can criticize others for not foreseeing. Lately our profession has been feasting on newly released Federal Reserve minutes from 2006, which reveal Ben Bernanke's hair barely smoldering over the end of the housing bubble: "I think it would take a very strong decline in the housing market to substantially derail the strong momentum for growth that we are currently seeing in the economy." Tim Geithner, then head of the New York Fed, opined that "financial market data" gave off no sign of trouble. Kevin Warsh, a fellow Fed governor, agreed: "Capital markets are probably more profitable and more robust . . . than they have perhaps ever been." What idiots. And yet they were right. Jobs, consumption and stock prices were holding up smartly despite the well-recognized turn in housing markets. Then came the financial panic. Did the housing bubble cause the panic—or was the panic somehow separate, making everything worse, including the housing crunch? Good question. Gratifying, then, is the attention showered on a recent book by Jeffrey Friedman and Wladimir Kraus, "Engineering the Financial Crisis." Their work is refreshing for many reasons: It does not assume the housing bubble is the whole story. It allows that honest ignorance (especially about the interaction of complex regulations) might explain the behavior of bankers and regulators. It asks especially interesting questions about the triple-A mortgage derivatives at the heart of the financial meltdown.
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Homeowners Stop Waiting to Spruce Up
The Wall Street Journal :: January 20, 2012
Americans are stepping up spending on home improvements for the first time in years, giving a small lift to the beleaguered construction sector. Economists forecast that spending by homeowners and landlords on everything from minor sprucing up to full-scale remodeling rose modestly in 2011. That would mark the first year since 2006 that such spending increased. Forecasting firm IHS Global Insight is predicting a 3.3% increase to $152.4 billion in 2011, not adjusted for inflation, and an additional 5.7% in 2012. That comes amid other signs of momentum in residential renovation, such as a report this week showing confidence among builders of single-family homes is at its highest level since mid-2007. An index of remodeling activity compiled by BuildFax has climbed steadily from 103.3 a year ago to 137.9 in November, the latest available data. The index fell between October and November, likely due to seasonal factors, BuildFax said. "People are remodeling instead of moving," said David Crowe, chief economist at the National Association of Home Builders.
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2012 Could Be Multifamily's Best Year
GlobeSt.com :: January 18, 2012
Barring an economic meltdown—or continued stagnancy—2012 is on track to be a great year for multifamily. That was one of the points speakers agreed upon at the National Multi Housing Council’s 2012 Apartment Strategies Conference yesterday. The conference immediately preceded NMHC’s Annual Meeting, which drew over 2,100 attendees to the Boca Raton Resort & Club here. In the opening session moderated by Mark Obrinsky, NMHC’s vice president of research, Jay Lybik, vice president of market research for Equity Residential, and Ron Witten, president of Witten Advisors, discussed what’s next for apartment recovery. The decline in the homeownership rate has benefited the sector, but not to a great extent. These days, it’s demographics and household formation that are driving demand for apartments. And even if the for-sale housing market improves, the ownership rate likely won’t hit the 69% peak again but rather, stay in the 64% to 65% range. Additionally, young adults—especially single women—are putting off marriage and home purchases in favor of renting. Still, without economic growth, demographics only go so far. The good news, the speakers noted, is that 60% of the job growth that’s occurred in the past two years has been among 20- to 34-year-olds. And while jobs are growing, incomes aren’t; one speaker noted that whereas the average 30-something male earned $40,000 in the 1970s, today he’s more likely to earn $35,000. Add to that student loan debt—averaging $25,000 for recent grads—and the pressure on young adults intensifies. That may make it more difficult for them to pay high rents, but it also means they won’t be able to purchase a new home, either.
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The Allure of Apartments
National Real Estate Investor :: January 17, 2012
Apartment fundamentals have improved significantly and are outpacing the recovery of other property types. After peaking at 8.0 percent in the first quarter of 2010, the national apartment vacancy rate declined 240 basis points to 5.6 percent as of the third quarter of 2011, according to Reis. In addition to positive net absorption, an improving job market and favorable demographics have supported a sharp rise in apartment rents. Reis reported that effective rents increased by 2.3 percent in 2010, and we expect rent growth to accelerate through 2013 as demand remains strong and construction remains below its historical long-term average.As a result of the quick recovery of apartment fundamentals, interest in purchasing core assets has driven up the pricing of class-A apartments in primary markets to near pre-crisis levels in both cap rates and price per unit. As of the second quarter of 2011, the average transaction cap rate, including all asset classes, declined by about 20 basis points to 6.6 percent, while average cap rates for class-A apartments in primary markets declined to 4.7 percent, according to Witten Advisors. The apartment sector’s robust recovery is supported by favorable demographic trends (echo boomers), declining homeownership, a limited supply pipeline, and attractive government-sponsored entity (GSE) financing. Based on these demand drivers, we believe the apartment market will likely experience a continuation of improvement in vacancy and rent growth over the next three to four years.
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Man vs. Machine, a Jobless Recovery
The Wall Street Journal :: January 17, 2012
In no other U.S. recovery since World War II have companies been simultaneously faster to boost spending on machines and software, while slower to add people to run them. Part of this is the old story of substituting capital for labor. But a combination of temporary tax breaks that allowed companies in 2011 to write off 100% of investments in the first year and historically low short- and long-term interest rates have pushed that process into overdrive. Hiring, meanwhile, is too slow to bring the unemployment rate down rapidly. Employers have added workers at a monthly rate of 142,000 for the past six months, half the pace needed to significantly reduce unemployment, which is now at 8.5%.
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What's the Allure of Dollar Stores?
Smart Money Magazine :: January 17, 2012
While your mind was elsewhere -- fretting over the lousy economy, perhaps -- chances are a Family Dollar store opened in your neighborhood. Or a Dollar General. Or a Dollar Tree. And it's probably packed with folks stocking up on value-brand paper towels, discount greeting cards and dollar portions of frozen fried chicken. As economic indicators go, this is not a good sign. It's been a rough sled for retail, but the dollar-store business is growing like crazy. The national chains are drawing higher-income shoppers, reporting record profits and opening new stores on a daily basis. Dollar General, with more than 9,800 locations, is now the nation's largest retailer by store count. Middle-class shopping centers used to shun the discounters, says John Tomlinson, an analyst at ITG Investment Research. Today they're courted as one of the few options for filling vacancies. Oddly, their success isn't due to mind-blowing prices. Dollar General says 75 percent of its merchandise costs more than a dollar. Family Dollar cites a similar stat and admits it can't always undercut Wal-Mart. "There's some things we can beat them on and some things we can't," says spokesperson Josh Braverman. Even Dollar Tree, which miraculously sells everything for a dollar or less (including, on a recent visit, feather boas and home pregnancy tests), can't claim low-price leadership. The store's elfin containers of Palmolive, Clorox and Duncan Hines brownie mix cost far more on a per-ounce basis than the larger versions sold at Wal-Mart. Nor are dollar stores popular for incredible closeout deals. Back when they specialized in overstock and manufacturer's seconds, the shops were a great source for unintentionally interesting finds (quirky figurines designed by, one imagined, the criminally insane) and impossible bargains (5 pounds of peanuts for a buck). Now, giants like Procter & Gamble make products in small sizes just for dollar-store shelves.
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Train Your Brain to Focus
Harvard Business Review :: January 18, 2012
Next time you are sitting in a meeting, take a look around. The odds are high that you will see your colleagues checking screens, texting, and emailing while someone is talking or making a presentation. Many of us are proud of our prowess in multitasking, and wear it like a badge of honor. Multitasking may help us check off more things on our to-do lists. But it also makes us more prone to making mistakes, more likely to miss important information and cues, and less likely to retain information in working memory, which impairs problem solving and creativity. Over the past decade, advances in neuroimaging have been revealing more and more about how the brain works. Studies of adults with attention deficit hyperactivity disorder (ADHD) using the latest neuroimaging and cognitive testing [PDF] are showing us how the brain focuses, what impairs focus — and how easily the brain is distracted. This research comes at a time when attention deficits have spread far beyond those with ADHD to the rest of us working in an always-on world. The good news is that the brain can learn to ignore distractions, making you more focused, creative, and productive. Here are three ways you can start to improve your focus.
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