KeNo's Housing and Economic Portal: Monday June 3 Housing and Economic stories

TOP STORIES:

Next Group That May Be Slammed by Debt: Farmers - (www.cnbc.com) Debt racked up by American farmers threatens to throw the agriculture industry out of its current economic boom and into a bust, according to a new study. Released last month by the Federal Reserve Bank of Kansas City, the report warns that if farmers use their accumulated wealth instead of profits to finance their agricultural investments, they could end up in greater debt, risk bankruptcies and suffer the potential loss of their farms. "The big concern is for 2014 and 2015, when commodity prices are expected to fall," said Nathan Kaufman, an economist at the Fed Bank in Kansas City and a co-author of the report. "The Department of Agriculture has predicted a 25 percent drop in farm income in 2014, and if incomes levels for farmers fall, the tendency in the past has been for them to use their savings to keep buying equipment and land and putting themselves in bigger debt. That creates a financial crisis for them." Adding to the worries is a possible bust in farmland prices, which have had three years of double-digit growth, said Kaufman. That's key because farmland accounts for 85 percent of a farmer's assets. "Land prices are used as collateral for many farm loans, so if they fall, that could increase the amount of debt for farmers," Kaufman added.

House flipper Blaine Murphy sentenced to two years in prison - (www.cleveland.com) A Florida man who bought dilapidated houses in Cuyahoga County and sold them using forged documents to make a quick buck was sentenced today to two years in prison. Blaine Murphy, who prosecutors said presided over his felonious housing-flipping scheme from his $1.2 million house in Naples, Fla., also was ordered to pay restitution of $1 million and fines totaling $100,000. Common Pleas Judge Richard McMonagle said if Murphy is released early from prison he must serve the remainder of his term under house arrest in Cleveland's foreclosure-ravaged Slavic Village neighborhood. The two-hour sentencing hearing came after McMonagle and lawyers in the case drove past three of the homes that Murphy owns on the city's East Side. According to prosecutors, Murphy would buy rundown houses sight-unseen from banks. Then, instead of fixing them up, he would sell, or "flip" them to another buyer at a profit. In doing so, he would ignore code violations and fail to pay taxes.

13 Cleveland firefighters indicted by a grand jury in payroll abuse ... - (www.cleveland.com) A Cuyahoga County grand jury indicted 13 Cleveland firefighters Wednesday, accusing them of illegally paying co-workers to cover most of their shifts -- freeing them to work other full-time jobs or run their own companies while continuing to collect salaries and benefits from the city. The indictments, which include counts of theft in office and soliciting or receiving improper compensation, might mark the first time firefighters anywhere in the country have faced felony charges for the illegal practice, commonly known as "caddying." Cuyahoga County Prosecutor Timothy J. McGinty said in a news release that the firefighters each failed to work at least 2,000 hours -- the equivalent of about one year -- of their scheduled time. The most egregious case involved firefighter Calvin Robinson, who had colleagues work 8,456 hours on his behalf. That amounts to about 4 1/2 years, according to the release.

Brooklyn to California Bubble Threat Grows in Housing - (www.bloomberg.com) Just a year since the U.S. housing market hit bottom after the biggest plunge in eight decades, signs of excess are re-emerging. An open house for a five-bedroom brownstone in Brooklyn, New York, priced at $949,000 drew 300 visitors and brought in 50 offers. Three thousand miles away in Menlo Park, California, a one-story home listed for $2 million got six offers last month, including four from builders planning to tear it down to construct a bigger house. In south Florida, ground zero for the last building boom and bust, 3,300 new condominium units are under way, the most since 2007. The U.S. spring homebuying season has been marked by a frenzy of demand fueled by the Federal Reserve’s drive to push down borrowing costs, a scarcity of listings and Wall Street’s new appetite for foreclosed homes. While values remain well below their peak, economists including Stan Humphries of Zillow Inc. (Z) and Mark Vitner of Wells Fargo & Co. assert prices in some areas are rising at an unsustainable pace -- a dramatic shift from early 2012, when billionaire Warren Buffett said housing “remains in a depression.”

Wall Street As Landlord - (www.renternation.com) What does Wall Street’s multi-billion dollar investment in single-family homes mean for residential renters? What does it mean for the providers of multifamily housing? What does it mean for future homeowners? These questions come readily to mind as major hedge funds, REITs, and institutional investors continue to pour seemingly unlimited amounts of money into single-family rental properties. Encouraged by the availability of cheap money and the fallout from the foreclosure fiasco, these well-heeled investors have suddenly made the titans of Wall Street some of the nation’s largest landlords. According to a recent article by CoStar Group, a real estate information service provider, a national survey of renters suggests that demand for single-family homes will be more stable than multifamily demand. Single-family home residents are 18% more likely than apartment residents to stay in their current homes five years or longer, with one of every four residents planning to stay in place five years or more compared to one out of five apartment renters. The article maintained that “while the recovery in for-sale single-family housing is expected to affect the apartment market to some degree, observers note the transition from renter to owner will likely be slower in this cycle due to several barriers, including higher cash requirements and stricter mortgage underwriting as well as higher student loan debt among young adults making it more difficult for renters to become buyers.”

OTHER STORIES:

Slower Chinese growth adds to pressure on leaders - (finance.yahoo.com)
Cooling prices, falling imports highlight euro zone's malaise - (www.reuters.com)

Japan GDP Jumps Most in Year as Consumers Open Wallets: Economy - (www.bloomberg.com)