EARTHQUAKE INSURANCE - WEIGH THE RISK AND COST

The San Andreas – Locked, Loaded and Ready to Go

Seismologist warns the “Big One” is Imminent

Susan Williams   

In his recent keynote at the National Earthquake Conference, Thomas Jordan, director of the Southern California Earthquake Center declared that, “The springs on the San Andreas system have been wound very, very tight. In particular, the southern San Andreas fault looks like it’s locked, loaded and ready to go.” The Pacific plate is slipping northwards along the North America plate, taking cities such as Los Angeles, San Diego, Santa Barbara, San Francisco and Monterey along for the ride, while other California cities sit directly in the fault zone.

A 2008 USGS report based on a simulation of a magnitude 7.8 earthquake on the southern San Andreas Fault warned that such an earthquake could cause more than 1,800 deaths, 50,000 injuries and $200 billion in damage along with severe, long-lasting disruptions.

So what can homeowners do to protect themselves and their property against the next “big one”? First, they should investigate their level of risk. Since typical homeowner’s policies don’t cover earthquake damage, an additional earthquake policy is a smart first move if the property is within a high-risk area. In the past, some homeowners assumed that earthquake coverage was too expensive. However, what many may not know is that rates for earthquake policies from the California Earthquake Authority (CEA) have come down and now include more deductible flexibility.

Retrofitting older homes to mitigate earthquake risk can potentially lower insurance premiums. Simple things like making sure the strapping on water heaters are secure, anchoring large bookcases, TVs, and pictures to the wall and knowing where and how to shut off gas and water valves can help homeowners protect their home and belongings.

Finally, everyone should know what to do during an earthquake – DROP! COVER! HOLD ON! Every at-risk family should have an earthquake plan that includes who to contact and where to meet if an earthquake hits. 

ANEMIC ECONOMIC GROWTH -WHAT EFFECT ON HOME PRICES

Q1 GDP Revised Up to 0.8% Annual Rate

by Bill McBride on 5/27/2016 08:33:00 AM

From the BEA: Gross Domestic Product: First Quarter 2016 (Second Estimate)

Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 0.8 percent in the first quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 1.4 percent.

Eric Rosa comments - What effect does anemic  GDP growth have on national home prices? On first glance, one would think that slow growth means family income  growth would also be very slow. That makes sense. And... slow family income growth translates into  slow home price increases. That makes sense. But, maybe that slow income growth  results in more families staying in their homes, not "moving up" and not selling their homes. And just maybe, that lack of homes for sale, low inventory levels, results in prices going up at a pace much faster than GDP growth. I THINK THAT IS WHAT WE HAVE GOING ON RIGHT NOW.

WIRE FRAUD AND REAL ESTATE

WIRE FRAUD IN REAL ESTATE TRANSACTIONS HAS BECOME A HUGE PROBLEM. Most real estate transaction funds ($$ dollars) deposits, transfers and disbursements involve Bank wires. Bad guys literally all over the world are trying and  all to often succeeding in fraudulently directing wired funds into their accounts and then "vanishing" with the money.

ALL PARTIES INVOLVED IN REAL ESTATE TRANSACTIONS (BUYERS, SELLERS, AGENTS, LAWYERS, ESCROW PERSONNEL, TITLE COMPANIES) SHOULD USE THE PRECAUTIONS LISTED BELOW.

Precautions related to bank wire transfers include:

ALWAYS PERSONALLY VERIFY wire instructions.

DO NOT AGREE to requests to forward wire instructions to other parties (or their brokers).  

BE VERY SUSPICIOUS of emails with purportedly updated, revised, or corrected wiring instruction It is extremely rare that a lawyer or title agent will change wire instructions during the course of a transaction.

PERSONALLY CALL the party who sent the instructions to confirm the ABA routing number or 

SWIFT code and the credit account number, but do not use the number provided in the sender’s 

email.  A hacker may have inserted a fraudulent telephone number in the email.  Use only phone numbers that you have called before or can otherwise verify. 

MAKE SURE you are not sending or requesting sensitive financial information in emails (e.g., SocialSecurity numbers, bank accounts, credit card numbers, wiring instructions). Also, use strong passwords (e.g., 8 characters including both letters and numbers, nothing obvious) and periodically change your passwords.

DON’T open attachments or click on links from unfamiliar sources because they could contain malware or be a phishing scheme which once opened allows a hacker the same access that you have to 

your computer and accounts.

MORE CHINESE MONEY COMING TO BUY US REAL ESTATE ?

Chinese U.S. Real Estate Demand Tip of the Iceberg

New study says Chinese buyers will spend $218 billion despite Beijing’s attempts to control capital outflows.

By        ABBY SCHULTZ       May 20, 2016

China’s efforts to stem capital flowing out of the country so its economy, and currency, stabilize, may dampen the fast-and-furious pace of investment in U.S. real estate. But as a new report from the Asia Society and Rosen Consulting Group predicts, China’s controls on this capital outflow only stand to temporarily slow -- and will hardly stop -- the tide of cash streaming to U.S. real estate.

By 2015, Chinese investors were the source of $350 billion into U.S. commercial and residential properties and investments, Rosen Consulting says. Even with tighter capital controls, direct investment into existing U.S. commercial and residential real estate alone in the next five years will reach $218 billion, accelerating through 2025 as China’s economy returns to equilibrium. More startling is Rosen Consulting’s figures don’t capture all the dollars coming from China to the U.S. through such means as partnerships, private equity funds and 

limited liability corporations.

Another crucial insight from the report: Chinese investment in U.S. property to date is the tip of the iceberg of what’s to come. This is true for institutional players, ranging from developers to insurance companies, but it’s also true for China’s wealthy.

The rich are buying homes and luxury apartments, but they’re also investing in funds and partnerships that are buying into commercial projects. An example is Ping An, the Chinese insurer, which is tapping China’s high-net-worth investors for an RMB private equity fund to finance U.S. residential projects in a joint venture with Pacific Eagle Real Estate Fund, the report says.

There are also uncounted smaller real estate investment projects funded by individuals who pool investors together to buy, say, a handful of budget hotels or several apartment units in a high-rise. “That’s going on way below the radar of what can be specifically tracked down and quantified and also from what most people see going on,” says Arthur Margon, partner at Rosen Consulting Group and an author of the report.

One reason U.S. real estate investment by China’s wealthy has only “scratched the surface” is common U.S.-style investing vehicles like real estate investment trusts and private equity funds focused on real estate are relatively new in China, Rosen Consulting says. Both avenues have potential to grow. Investing may also spike if the Chinese government opens its individual investor program allowing for foreign investment into U.S. REITs and other investment vehicles, the report says.

Certainly plenty of Chinese are buying U.S. property for themselves or family members, enough so that China blew by Canada last year as the biggest foreign buyer of U.S. residential properties, purchasing 33,000 homes, according to the National Association of Realtors. The actual number is probably far more as the identity of many investors using trusts and special vehicles to buy U.S. real estate isn’t known.

Home purchases by China’s rich could accelerate as buyers get more access to financing. Between 2013 and 2015, an average of 71% of Chinese home buyers paid for homes with cash, NAR reports. That’s in part because U.S. banks tightened lending criteria for foreign investors post financial crisis. Today some wholesale mortgage lenders are lending to Chinese buyers and Chinese banks with U.S. operations will lend to Chinese investors based on assets they hold in China, the report says.

A global push to expose tax evasion and money laundering by forcing owners of offshore companies to reveal who they are could mute buying enthusiasm, though. Many foreign investors use special purpose vehicles legally for tax and wealth planning, but they still may not want to be named. The U.S. government is piloting a program in Manhattan and Miami that requires foreign property buyers to reveal who they are if they pay all in cash or use a special corporation. If this catches on, some Chinese investors may say ‘forget it’, or they’ll wait until they have a better idea of how the rules will be implemented. “But the motivation to buy among lots and lots of people in China is strong,” Margon says.

Back in China, the government’s attempts to keep capital at home could also mute U.S. real estate buying. Chinese banks, for instance, are being asked to look for over-invoicing of exports, a common tactic for getting money out of China, while state-owned banks are on watching for “unusual transactions” that indicate friends and family are pooling together funds to buy real estate, the Asia Society report says. China limits foreign investment for most individuals to the equivalent of $50,000 a year.

Some big deals, like China’s Gemdale Properties’ high-profile partnership with Hines, a top-shelf global real estate firm, to redevelop Boston’s South Station are moving forward but “we are hearing other deals are happening much more slowly than they did two years ago,” Margon says.

But Rosen Consulting doesn’t expect brakes on capital outflows to last more than two years. That’s because China remains driven to be integral to the world’s global economy. “Our view is these global forces acting on Chinese financial services sector are long-term forces,” Margon says.

CHINESE POUR $110 BILLION INTO US REAL ESTATE

Investment is set to double in the next five years as wealthy rush to get their money into overseas assets, especially houses

The Waldorf Astoria hotel in New York was bought by the Chinese group Anbang. But Chinese purchases of residential property outpaces commercial deals. The Waldorf Astoria hotel in New York was bought by the Chinese group Anbang. But Chinese purchases of residential property outpaces commercial deals

Chinese nationals have become the largest foreign buyers of US property after pouring billions into the market in search of safe offshore assets, according to a study.A huge surge in Chinese buying of both residential and commercial real estate last year took their five-year investment total to more than $110bn, according to the study from the Asia Society and Rosen Consulting Group.The sheer size of that total has helped the real estate market recover from the crash that began in 2006 and precipitated the 2008 economic crisis, they said.

Chinese investment in property has also helped to inflate prices in other developed countries, notably the UK and Australia in the wake of the dip in world stock markets in 2015.

And despite a slowdown due to Beijing’s subsequent clampdown on capital outflows, the figure for the second half of this decade is likely to double to $218bn, the study said.“What makes China different and noteworthy is the combination of the high volume of investment (and) the breadth of its participation across all real estate categories,” including a “somewhat unique entry into residential purchases,” the study said.

The authors of the study said their numbers, based on public and real estate industry data, understate the total. They necessarily miss purchases made by front companies and trusts that do not identify the sources of the funds.

But the study said Chinese buying of US homes far outpaces its investment in commercial land and buildings.

Between 2010 and 2015, Chinese buyers put more than $17bn into US commercial real estate, with half of that spent last year alone. Unlike many countries, there are very few restrictions on what foreigners can buy in the US.

But during the same period at least $93bn went into US homes. And in the 12 months to March 2015, the latest period for which relatively comprehensive data could be gathered, home purchases totaled $28.5bn.That took the Chinese past Canadians, who have long been the biggest foreign buyers of US residential real estate.

Geographically, Chinese buyers are concentrated in the most expensive markets: New York, Los Angeles, San Francisco and Seattle. Property in Chicago, Miami and Las Vegas is also popular.That focus means they pay well above the average US home price: last year, Chinese buyers paid on average about $832,000 per home in the United States, compared with the average for all foreign purchases of $499,600.

The motivations are broad: some are buying second homes, some are buying as they move to the United States on EB-5 investor visas; some are investing for rental and resale.Most of the money in US homes, the study noted, is private wealth, not corporate.“This familiarity of utilizing real estate as an investment or wealth preservation tool is more prevalent in China and reflects the broader comfort of purchasing second homes in the United States by Chinese individuals and families,” the study noted.

Since last year, there has also been the motivation to get money outside China and into dollar assets amid worry about the continued fall in the yuan, which was devalued slightly against the US dollar in August.The study says it expects a lot more commercial real estate buys in the United States by Chinese companies.