Daily Briefing: Monday, March 25, 2013
TODAY'S TOP STORIES
Young adults’ finances may be hard to repair
WASHINGTON – March 25, 2013 – Young generations were badly hit in the recession, and it could have widespread effects on their lives, from delaying homeownership to starting a family and even retiring one day.
A new study from the Urban Institute shows that those under the age of 40 have accumulated less wealth than their parents did at the same age. That coincides with a time when the average wealth of Americans has doubled over the last quarter-century, according to the study.
“In this country, the expectation is that every generation does better than the previous generation,” Caroline Ratcliffe, an author of the study, told The New York Times. “This is no longer the case. This generation might have less.”
Young adults are facing stagnant pay, a tough job market, soaring student loan debt and some who did own a home may have faced lost equity or even foreclosure during the housing crisis.
Will younger adults ever be able to catch up?
According to the Urban Institute study, if a person delays buying a home to age 40 instead of age 30, that alone could result in a $42,000 loss in home equity by the time that person reaches age 60.
Still, “strong and sustained job and wage growth would cure many of the ills facing younger workers,” The New York Times reports. “But their delayed or diminished wealth accumulation might still have a lasting impact on their finances.”
Source: “Younger Generations Lag Parents in Wealth-Building,” The New York Times (March 14, 2013)
Home equity rebound could push spending
NEW YORK – March 25, 2013 – A rebound in home equity prices can push consumers to spend, boosting the U.S. economy, an economist at research firm CoreLogic said.
With the percentage of U.S. homes considered “underwater” falling, spending could increase and more homeowners could feel more confident taking out loans, The Wall Street Journal reported Tuesday.
A recent CoreLogic report said there were 1.7 million fewer homes considered underwater in the fourth quarter of 2012 than there were in the same period in 2011. The percentage of homes worth less than what was owed on their mortgages – the definition of underwater – fell from 25.2 percent at the end of 2011 to 21.5 percent a year later, the report said.
“Home equity is the biggest source of wealth, so if equity is increasing, that has a very large effect on household spending and consumer psychology,” CoreLogic economist Sam Khater said.
Increased confidence among homeowners can also have a direct effect on the housing market, making it easier for people to move to better jobs if the chance to do so comes up. When a home is worth less than what is owned to the bank homeowners tend to hold on, waiting for a point where they could at least break even before putting a home on the market.
More homes on the market means it is easier to move. It also means more commission checks for real estate agents.
“All the things that fed on the downside feed positively on the upside,” said Joseph LaVorgna, chief U.S. economist for Deutsche Bank.
Citizens CEO: Give insurance consumers more choice
WEST PALM BEACH, Fla. – March 25, 2013 – The CEO of Florida’s largest property insurer, Citizens, said a change he wants could help as many as 30 percent of new customers find coverage outside the state-run carrier, while another panelist at a roundtable Wednesday called for state action to address problems spotlighted by reporting in The Palm Beach Post.
The answers emerged from a hail of questions at the newspaper’s Straight from the Source Roundtable on property insurance, a free event suggested by readers.
The No. 1 change he wants from state legislators, Citizens President and CEO Barry Gilway said, is a new “clearinghouse” to make sure customers are aware of options they may have in the private marketplace before they are sent to Citzens. It’s the state’s biggest insurer with 1.3 million customers.
“Customers don’t get access to the total market,” Gilway said. Under a clearinghouse, he said, “that policy would be shopped to virtually every insurance company in Florida.”
One problem, he said, is agents may be tied to only one or a few insurance carriers and may wind up writing policies with Citizens to keep auto or other business. He mentioned as an example State Farm, which is writing little new property insurance in the state.
The clearinghouse would be designed to improve on the current system but is not a “panacea,” he acknowledged.
In many instance, customers in mobile homes, homes older than 50 years and those near the coast may not have any realistic options besides Citizens, he said. But in his view, perhaps 1,500 out of every 5,000 new policies headed for Citizens may have a real choice of insurers that the customer does not necessarily know about.
It’s perhaps the biggest issue in the legislature right now for agents, said Brian Samberg, president of Southeast Insurance agency in Boca Raton and past president of the Professional Insurance Agents of Florida.
“There are some issues with the details we would like to see worked out,” Samberg said. He said he’s not opposed to the concept but he wants to make sure the results are in the best interests of agents and consumers alike.
The clearinghouse is a “great idea,” said William F. “Chip” Merlin, president of Merlin Law Group, which represents policyholders against insurers and has office in Tampa, West Palm Beach, and other cities.
But another area that could use some attention from regulators and legislators, he said, is business practices one state advocate calls “abusive” at the state’s largest private insurer, Universal Property and Casualty of Fort Lauderdale.
A Post story Wednesday highlighted cases where the insurer accepted premiums for years but denied claims based on items from a customer’s credit history not disclosed on an application, such as old tax lien in another state.
“I bet today now that this is coming out it will get some attention,” Merlin said. “We need some stronger regulation, from the insurance commissioner and (Chief Financial Officer) Jeff Atwater -- the Legislature needs to do something.”
Audience members asked why rates need to keep going up when Florida has been spared from major storms for seven years.
“Give the absence of hurricanes in the last few years, why does our annual insurance rate keep rising so much each year?” asked Kirk Spresser of West Palm Beach.
One way to keep rates stable is to change the Florida Hurricane Catastrophe Fund, said Charles Grimsley, chairman and president of the Florida Property and Casualty Association, which represents many Florida-based home insurers. The Cat Fund helps make sure insurers can pay claims if bad storms hit.
Some bills in committee would shrink the Cat Fund, forcing insurers to buy more expensive private reinsurance and raise consumer rates 3.6 percent if private reinsurance rates stay the same, according to a Senate staff analysis.
But Grimsley’s group proposes that the Cat Fund kick in earlier, after $5 billion in losses to insurers instead of $7 billion.
That would keep rates stable at little added risk to the Cat Fund, he said. |
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Home listings: 20 seconds for love at first sight
NORFOLK, Va. – March 25, 2013 – Researcher Michael Seiler tracked the eye movements of 45 people viewing 10 online real estate listings with six photos in August 2011, determining that 95 percent of participants viewed the first photo – an exterior property shot – for just 20 seconds.
The study is relevant because knowing how house-hunters view a listing online can help agents fine-tune their marketing approach. Founder and director of Old Dominion University’s Institute for Behavioral and Experimental Real Estate, Seiler says participants moved their eyes in a “Z” pattern from the upper left corner and after reaching the bottom right corner, they scanned up the right column of the screen.
After viewing the home-exterior photo, 76 percent looked at the property description; but 41.5 percent did not bother to ever read the agent’s remarks – which can be annoying if they include all capital letters, overhyped adjectives and brand names. Seiler determined that overall, participants devoted 60 percent of their time to photos, 20 percent to property descriptions and 20 percent to the agent’s comments; and he found that their interest diminished after clicking through numerous properties.
“You have to grab people’s attention within two seconds,” Seiler remarked. “Do it the way a billboard does.”
Some agents ensure the photos, property descriptions and remarks can be seen without scrolling; while others limit their remarks to only a few paragraphs and focus more on the lifestyle and neighborhood than appliances and other features.
Source: Wall Street Journal (03/22/13) P. M7; Tanaka, Sanette
Economists fear farmland bubble
DES MOINES, Iowa – March 25, 2013 – Many owners of farmland are scrambling to sell to both investors and farmers who have benefitted from recent high crop prices. But analysts warn that the boom-and-bust cycle of farming cannot sustain this surge.
The New York Times reports that, despite the state’s drought, Iowa farmland prices have nearly doubled since 2009, far surpassing the last boom’s peak in 1979. The price of irrigated land in Nebraska has similarly doubled since 2009.
However, with forecasters predicting the price of corn to fall, many predict that the price of farmland will fall with it.
“You can’t continue to see the price increases in land like we’ve been seeing. That’s just heading for trouble,” Michael Duffy, an economist in farm management at Iowa State University.
Compounding the problem is the high debt levels carried by many farmers. The Federal Deposit Insurance Corporation has been warning about this trend since at least 2011 when they held a symposium in Arlington, Va., for bankers, regulators, and investors titled “Don’t Bet the Farm: Assessing the Boom in U.S. Farmland Prices.”
Debt held by U.S. farmers has risen nearly 30 percent since 2007, according to New York Times research. They also report that regulators and critics say that figure is likely higher when adding in uncounted debt from specialized finance institutions, seed companies like Monsanto, and equipment manufacturers like John Deere.
Source: As Crop Prices Surge, Investment Firms and Farmers Vie for Land, New York Times (March 18, 2013).
Florida Realtors Take 5: Make international sales
Coco Waldenmayer: Add certifications and become a real estate expert - then build a team of expert advisors and market yourself to targeted countries. Watch video.
Make a note of it
Florida Realtors CRSP-13 to replace CRSP-12 later today
CRSP-13 replaces CRSP-12 in Form Simplicity and elsewhere. There are no significant changes, but formatting was adjusted and alphabet letters added to addenda.
AROUND FLORIDA
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