Reblogged from Confounded Interest:

President Obama is in Fairfax Virginia today at 11am announcing his new mortgage refinancing program. The program is meant to compliment his already existing HARP 2.0 program for borrowers whose loans are not held or insured by Fannie Mae or Freddie Mac. Rather, it is meant to allow mortgage refinancing to 1 out of 3 borrowers who are not eligible for HARP 2.0 which would be an estimated 3.5 million homeowners. That is on top of the anticipated 11 million borrowers who could refinance their loans through …

Cap Rates v 10Y Treasury

The looming question for 2012 is, will Cap Rates decline as C-B and other investment
interest rates are hovering near zero? What will RE investor expectations be like?
The demand for class A assets seem to be waning, while Class B & C may be on the rise.

Couple that with slightly rising rents and a probable increase in those
Class B & C assets and overall Cap Rates will likely fall a bit in 2012.

Well, you can forget the mostly impractical CPI-U Index published by
the government. What matters abundantly and has a significant
impact to the average consumer is Household Inflation.

Those household ‘commodities’ are the everyday items we all use and mostly
need with a few basic ‘wants’ in the mix as well. Such as; Food, Fuel, Apparel,
household Appliances and Electronics.

According to the “Basket of Goods” utilized in the governments CPI-U index,
inflation is approximately, +3.4% (NSA). The simple fact is that this ‘measure’ of
inflation is not relevant or indicative of real-world household/consumer price inflation.

The fact is that aggregate household-commodity inflation on nominal prices
from one year ago in October- (y-o-y comparative analysis ) for these items-
(Food, Fuel, Apparel, Appliances and Electronics) has risen +35.30%. (cumulative)
(For a breakdown of commodities and price-levels, see the graphs below)

What this really means is that the purchasing power of the average U.S. consumer
has greatly decreased, approximately 35% for these basic staples from 2010.

So what exactly has been the causation of the rapid acceleration in food, fuel,
clothing and electronics then? It”s certainly not Demand-Pull inflation. ‘Demand’
for most household commodities and gasoline has been less than last year and
personal consumption has dropped a whopping 24% from Q2 to Q3.

Could a portion of commodity inflation be tied to a Cost-Push? Perhaps,
but it would be a minor amount of the overall aggregate price rises.

Well on the food side, we know that the prices of cornmeal, sugar, rice and wheat
have been driven up by a variety of factors- first, is the slight drop off in crop
yields and second, is speculation as well as the effects of monetary supply
and wage stagnation.

inflation cereal rice pasta meat eggs

Total Rise of Cereal, Rice, Pasta, Cornmeal, Meat, Poultry, Fish, Eggs: 20.82%

inflation milk fruits bread

Total Rise of Milk, Fruits, Vegetables, Bread: 24.39%
(Total Aggregate Rise of Staple Food Commodities: 22.60%)

Examining Apparel, Appliances and Electronics, specifically, home video
and audio, we see only a moderate increase in price levels from Oct. 2010.

tv clothes appls

Total Rise of Apparel, Appliances and Electronics: 5.54%

On the fuel side, it is down to OPEC and to some extent, futures trading. We know that
OPEC will no longer sell crude for less than $90.00 per barrel for any length of time.
This ‘built-in’ price floor sets the stage for the loosely monitored, but undeniable
‘fixed-pricing’ basis on crude. Mix in speculative trading and the market is able to
some extent, manipulate the cost per barrel.

avg gas prices

Total Rise of Regular Gasoline Per Gallon Nationally: 7.15%

Given the fragile state of the U.S. economy and the unprecedented unemployment/underemployment rate of 22%-23%, how much more
price inflation can the average household absorb?

An ideal economy retains price-stability, which at the moment we have
none of. So what does our inflation analysis reveal? Well, the obvious is that
most household commodities are costing over 35% more than they did in 2010.

Secondly, price-inflation seems to be somewhat fragmented and without argument,
some of these price rises are transitory, with a historic trend of being somewhat
predictable. But that has not been the case as of late.

Yes, most household food commodities have been shifting downward since
the beginning of 2011, with retail gasoline following suit, while the rise in rents are
averaging only about 5% nationally. On the other side of the coin, housing asset
prices have declined and continue to fall, with auto prices remaining fairly stable.

So as we close out 2011 the U.S. economy remains in a state of flux with most
tangible assets deflating, while commodities are still above 2010 price levels and
could easily rise again. The bigger question looming is what will this ‘push-pull’ yield
going into 2012? Much of it depends on the broader macro-picture, the all important
labor market, the presidential election and the Eurozone crisis will all play a role in the
macro economic picture.

The bottom line is that the variables involved, both domestically and abroad are
unknown in terms of predictability and performance. The U.S. as well as Europe
and parts of Asia could remain in this unstable economic environment for a couple
of more years or perhaps even longer. But here at home, the dollar can only be
stretched so far, before it eventually breaks.

Indeed, the Private Sector added 120k jobs, (revised downward to 100k)
but -315k stopped searching for work altogether, which is why the U3 rate dropped.
The country is averaging -350k first-time unemployment claims per week.
While only averaging approx. 125k jobs added per month. It takes at least
100k per month just to keep the rate steady and 200k per month to lower the rate.

Now on to the more disturbing and eye-opening statistics-
Long-Term unemployment. The mean (or the average for those not familiar)
duration of unemployment in November 2010 was 34 weeks.
The mean duration of unemployment in November 2011 WAS 41 weeks. A increase of +7.1%.

Up until this year, the duration had been hovering in the 30 to 35 week range,
but has now made a significant jump since 2010. What does that data reveal?
For one thing, unemployment is not easing or subsiding at all.

The BLS is simply lying and deceiving the American public. The labor market is in
serious trouble and no one is tackling the problem head on. A lot of rhetoric and finger-pointing
from politicians, but no action. As the duration of the long-term unemployed keeps climbing,
so does the desperation.

Another interesting point to note is that the BLS changed the long-term
metric from 24 months or 100 weeks to 60 months or 260 weeks.

The take away here is that more and more workers are going without a job
for longer and longer periods of time. The negative results will be felt as
purchasing power is reduced further and further. And, as household/consumer inflation
keeps rising, the value of a dollar will keep sinking.

Our prediction is for a continuation of a depressed economy, more foreclosures
and higher commodity prices well into 2012. As it is, foodbanks and food pantry’s
are stretched to their limits. There are approximately 43 million people receiving food stamps
and 16 Million children in America living in poverty. Very sad and shameful indeed.

Most of the increase were for multi-family starts. Now the question becomes, exactly how many of those 227,000 MF units are luxury high-rise, institutional, affordable, etc. There is no breakdown of the specific type of dwelling, which is critical in determining who is funding these starts and who are the investor/builders.

Also, the Census counts each apt or unit within a MF dwelling is counted as a “Start” -
This in itself is basically a useless and absolutely misleading metric.

Single-family starts actually only increased 1.7% to 425 ,000 in
September from August  2011. Factor in that approximately 5% of all
starts never actually get completed. So, of the actual 1.7%, the rise is
only going to be about 1.6%. That is huge difference from the ‘sensationalized’,
liar-created headline of 15%…eh.

Now on to the more PRESSING and obvious question; WHY? Why indeed.

There is a MASSIVE glut of housing inventory, and when the number of existing and distressed homes are calculated there are over FIVE MILLION homes available- with another 2.15 Million ready to drop. AND, an additional 1.87 million that are ready to go into the foreclosure process!

• 1.494 million homes are already foreclosed on.
• 2.15 million mortgage loans are already in the foreclosure process.
• 1.87 million mortgage loans are 90+ days delinquent.

Add it all up and the U.S. housing market could be staring at
SEVEN MILLION available homes on the open market. This does NOT
include New Home inventory, the New Starts, OR SHADOW inventory.

So ask yourself, with 5 Million existing homes on the market, with the very real possibility of 7-9 million available homes, WHY are housing starts increasing? Exactly. There is NO logical rhyme or reason. There is something very wrong with this ‘manufactured’ picture. You can bet that there is a multitude of corruption taking place within the real estate industry.

We know that the home builders have been cooking their books and manipulating their finances in order to stave off complete collapse. In fact many builders have been reporting positive earnings and even having the audacity to report that builder confidence was up recently.

We also know that many builders are sitting on empty lots and tracts of sub-divisions that are financed. These lots and sub-divisions have strict time-lines that must be met in order to guarantee and continue the financing.

So, when BUILDING deadlines must be met, what is a shady builder to do? Start building.  Most of these projects will start then sit idle and many will be ghost homes. It’s a lot of trickery and deception, that needs to be investigated.

The bottom line is; there is NO legitimate increase in building DEMAND. You can have all the ‘starts’ you please, the REAL credible metric is DEMAND. And folks, overall, there is NO housing demand to speak of.

In closing, we are pleased to state that once again, as always we have brought clarity and truth out into the light from the deception and lies which the media, banks, wall street, the government and the real estate industry perpetuates on a constant basis regarding the economy and the real estate industry.

PropertyEconomics provides Commercial and Residential Valuation Services
(non-appraisal) for all types of real estate properties throughout New Jersey.

Valuation Analyst George Gervasi, is a nine year, real estate valuation professional,
having performed hundreds of commercial and residential real estate appraisals since 2002.

Our services include; Broker Opinion of Value (BOV) reports,
Broker Price Opinion (BPO) reports, Narrative Valuations reports, Income Estimates,
Income-Based Valuations, Property Asset Valuations, Evaluations and more.

Call or email for your valuation needs

With the changing and beginning of each new season, it’s time to give your property the “once over” and perform some preventative maintenance. While there is plenty to do on the exterior and interior, this article is going to focus mainly on the mechanical components that heat, cool, pump water and vent your property. (The hot water heater/furnace/boiler/fans/pumps/etc)

In my younger days, as a HVAC mechanic, one of the more enlightening things I gleaned was the importance of preventive maintenance. A little P.M., goes a long a way in extending the useful life of  mechanical systems.

Your home or business cannot fully function without efficient and proper working mechanical systems. All too often the mechanical systems are overlooked and regarded as an after-thought.

When in fact they are the heart and organs of the property. The HVAC and hot water systems provide heat when you are cold and cooling when you are warm. Hot water for the shower/bath, dishwasher and wash sinks. Fans provide ventilation while pumps provide or discharge water as needed.

While they operate mostly unnoticed behind the scenes, the  fact is the mechanical’s are the most important systems of a property. Major repairs or full replacement of any one or all systems can very, very costly. That is why it is vital to maintain them with a little TLC every season.

Hot Water Heaters
To maintain the peak efficiency of your water heater and ensure the best water quality for you and your family, flushing the hot water tank once a year should be on you “to-do list.”

Sediment, from minerals, dirt and rust forms in the bottom of the water heater. This can sometimes prevent the drain valve from working properly and also affect the operating efficiency of your water heater- which in turn costs you more money.

There are two main types of tank style water heaters, gas-fired (natural or propane) and electric powered. This how-to addresses both types.

If the hot water heater is electric, turn off the electricity powering the heater. You will need to turn off the breaker or remove the fuse in the electrical panel. Turning the power off to the heater is crucial to ensure the heating element does not turn on once the heater is drained. This could cause the element to burn out and require replacement of the element and even the entire water heater.

If the water heater is a gas-fired, mark the current temperature setting on the temperature dial and then turn the gas dial to the lowest setting or the pilot/away/vacation setting. On some older models you may have to shut the gas valve off and re-light the pilot after completing the task.

Next, turn off the cold water supply valve to the heater which is generally located on the top side.

Attach a garden hose to the drain valve located at the bottom of the heater. This drain valve typically looks like a regular outdoor hose bib and may be hidden under a removable cover.

Drain Valve

Run the hose from the valve to a working drain location. If you don’t have a drain available you will need to use a bucket to contain the drained water. Note of caution here: the water is going to very hot. Please take the appropriate measures to protect yourself by wearing the proper safety gear and use common sense.

If the bottom drain valve is a plastic handle instead of brass of metal or a screw type, the valve may be difficult to open and could break if forced, so be easy on the valve when opening, try using a rag or one of those rubber jar openers if the valve is stuck. For the brass or metal valves use a proper screw driver (if applicable), or you can use a little persuasion via channel locks or pliers- but be very careful not to snap or break off the valve handle/stem.

If the drain valve happens to clog up during the draining process, open back up the cold water supply valve, this will usually clear the blockage. If  this fixes the clog, go ahead and close down the cold water supply and continue draining the heater.

Then open a hot water faucet in the house (one closest to the water heater if possible). Open the drain valve on the water heater and also open the pressure relief valve. (usually located on the upper end of the tank- it will be a brass type valve with a small lever attached)  once both of the valves are open allow the tank to completely drain.

Pressure Relief Valve

Once the water heater is empty, close the bottom drain valve and re-open the cold water supply. This is done to try and dislodge any additional sediment in the heater by flooding cold water back into the tank. Partially fill the heater, a few minutes should do the trick, then close the cold water supply once more and drain the heater again.

Examine the water being drained to see if it is clear or is there still some sediment in the discharged water. Once drained, re-open the cold water valve and let the flowing water drain out of the hose for a few minuets to ensure all the sediment is flushed out.

Once the water runs clear, close the bottom drain and pressure relief valves and allow the tank to begin to re-fill, don’t forget to close the hot water faucet as well. With the bottom valve shut, remove the hose. Sometimes, the pressure relief valve may drip after you close it. In this case ‘snap’ the lever a couple of times to dislodge any particles or debris that might be preventing the valve from properly ‘seating’.

The next step is to allow the tank to fill for 5 to 10 minutes before turning back on the electric power (if it is an electric water heater) or turning back on the gas valve. Don’t forget to re-set the temperature setting to the mark you had previously made.

Go ahead and also check the flue pipe as well, making sure it is secure and not loose. If it seems a bit loose, carefully tighten the sheet metal screws or snug up the slip joints. Carbon Monoxide is a by-product of combustion, so don’t take any short-cuts here. Every home needs a working Carbon Monoxide detector whether you have a gas or oil supplied unit. So don’t forget to test the detector as well. If this maintenance task is not something you feel comfortable doing, call in a pro.

[ Oh, you did remember to switch back on the flux capacitor, right?  : } ]

Now on to the central cooling/heating systems
Before turning on the air conditioning units for the warmer months there are a few simple steps to perform to ensure a proper and efficient functioning system.

Begin by turning off the electric breakers and switches that power the furnace or air handler (sometimes found in the attic) and the outdoor condensing unit(s). Perform a visual check of all the duct work connected to the unit(s). If you see gaps or disconnected ducts you’ll want to seal these up. You can use aluminum foil tape or duct tape or even silicone caulk on sheet metal duct work.

If the ducts are insulated make sure the insulation is securely attached and covering the ducts to help the efficiency of the system. Next up, make sure the copper refrigerant lines are not pinched, bent or unsecured on the inside and outside of the units. (if the copper lines are bent or pinched it’s time to call the HVAC professional) The furnace or air handler will most likely have a condensation pump to rid the condensation produced by the indoor A/C coil and high-efficiency heating unit. Give it a quick check for pump operation and the hose connections.

One of the more simpler tasks is to replace the air filter (air filters should be changed monthly) So go ahead and replace or clean the air filter(s). (see the paragraph below on air filters – also the section on the blower/fan and motor)

Now we turn our attention to the outdoor A/C condenser. Be sure to keep it clear of any shrubbery, foliage, mulch, etc. as you want maximum air flow to the unit. Get out the garden hose and spray down the coils from top to bottom  Don’t stand too close and use too much water pressure as this could bend the condenser  fins, which will inhibit the efficiency of the unit. Also do  not spray water directly on to the fan motor.

Check the refrigerant line set that connects to the unit and make sure the larger copper line is insulated. If some of the insulation if deteriorated or is missing. Repair or replace. You can buy pipe insulation from any hardware or home center store. After you have washed down the coils be sure to allow the unit to fully dry before operation.

One more thing regarding the air conditioning system. Before you turn it on for the first time, try to do so when it’s above 65 degrees so as not to damage the compressor. ( it has to do with the crankcase oil temp)

Heating System
Typically, your heating system will be either gas-fired or oil-fired.
If your heat is supplied by a forced air type furnace, turn off the thermostat, shut off the gas valve and then the emergency switch. (marked by a red switch box or plate) Remove the access panel(s) to be able to examine the burners and components.

If the furnace is gas-fired, just ensure the gas line looks secure and is snug at all the joints. A quick way to check for leaks is to make up a solution of dish soap and water then either brush it or apply it over the connection joints. If the solution bubbles, there may be a slight leak. Note: You’ll want to check for gas leaks before you shut the system off.

The most common problem is a loose fitting or pipe connection. Break out the pipe wrenches and snug up the connection. No need to over-tighten just a half turn or so should stop the leak. Re-check the joint with the soap solution. If the leak still persists, call in the expert.

If the furnace is oil-fired, visually inspect the oil lines running from the oil tank to the burner assembly. The connections will most likely be brass compression fittings or brass flare fittings. If you see any drips or residual, oil, the connections may need a slight tightening. Brass fittings are ‘soft’ and care should be taken when using a wrench on the fittings. The best type of wrench to utilize is an exact size open end type. Always use two wrenches to prevent twisting the copper line it is attached to.

Now go ahead and visibly check the flue/vent pipe, as well as by hand, to make sure it is secure and has the proper fit. If it is loose, you may need to call in a professional. If you are a seasoned DIY’er, the attached sheet metal screws may just need some tightening up. If it is a high-efficiency furnace with a pvc type flue, just make sure it is secure at all points. If you are unsure call a pro. Carbon Monoxide flue gases are nothing to be casual about, they can be deadly. Again, a working Carbon Monoxide detector should be installed and just use some common sense.

The next step is to generally visually inspect all of the interior components. If you see something out of the ordinary, call in a pro. But, as long as everything appears okay you will want to clean out any dirt or debris from the burners and/or bottom tray of the burner box. A vacuum with a small hose attachment should do the trick. Just be careful not to damage any components inside the unit, use care.

If you happen to have an older gas furnace with a ‘standing’ pilot light, I recommend keeping the gas valve off and the pilot out during the off season.

Why? Not to save on gas usage as it is rather very minimal, but to extend the life of the thermocouple (a thermocouple is an electronic/micro voltage device that senses when the pilot flame is hot enough to ignite the gas supply from the gas valve – it also serves as a safety device, so the gas valve does not continue to feed raw gas into the furnace/mechanical room area) The most common reason for a standing pilot furnace/water heater/boiler not igniting is the thermocouple, or failure of it.

After you have cleaned out the inside and burner area of the furnace, it’s time to replace the filter(s). Some furnaces have them inside the ‘return’ air section of the unit itself. Others have the filter in the return air grill, usually located inside the interior of the property.

Most are one inch thick, the more efficient are two inch thick material type filters. There are various types of material filters available, ranging from the very cheap type to some very good high-efficiency pleated type air filters. Which are a bit more expensive, well worth the money in trapping dust, allergens and impurities.

Your existing filter will have a size on the side or edges, if not, take the filter with you to the hardware or home improvement center to get the exact replacement size. Now here is where I recommend getting the higher efficiency filter.

Some furnaces will have an electronic/electrostatic type filter system. If this is the case, you can remove the filters (make sure you disconnect or shut of the power source before you do so) and either hose them off or even clean them in your dishwasher. (yes, your dishwasher!) Just don’t mix the filters with your plates and utensils. Follow the manufactures recommendations is you are unsure.

While you are in the ‘return’ air section of the furnace, inspect the motor and fan or blower unit. Newer models will have direct-drive, sealed blower/motors, but on older versions, the motor and fan might be belt-driven and have lubricant ports for the bearings. If so, just  a few drops of a light weight (10w) non-detergent oil will do just fine. Check the belt for tightness and wear. Replace if necessary.

Okay, time to button back up the furnace and re-check its operation. Open the gas valve, turn on the emergency switch and then the thermostat. If all is well go ahead and shut it back down for the spring and summer months. As previously stated, you can keep the pilot light off on the standing pilot models. Come the fall/winter season, just re-light the pilot.

If you have a hot water or steam boiler supplying the heat, you may want to call in a plumber (who is familiar with boilers) or a heating specialist. Boilers can be a bit more tedious to tune-up or service for the average DIY’er. There are many more tasks  to perform on a boiler, especially if it is oil-fired. So call the expert for this one. If you are confident of your skills, then source one of the many how-to tutorials on the web, such as:

Do it Yourself Boiler Maintenance
DIY Boiler Maintenance & Cleaning
Home Heating and Boiler Systems

By performing these basic maintenance tasks, you can extend the useful life of your hot water heater, pumps, fans heating and cooling systems, thereby saving some money in the long run.

With both cap rates falling and interest rates rising, just how much lower can the spread between these two figures go before investors begin to push back? Consumer confidence has crept back to relatively normal levels, lowering demand for safe-haven U.S. Treasury bills and subsequently driving the yield in an inverse direction.

Commercial real estate seems to have bottomed out. Cap rates for net lease investments stabilized in early 2010 and rapidly compressed over the following 12 months. As the economic world has changed over the past few years, rates and their relationships have changed as fast as dollar-store concepts are expanding.

via Commercial Property Executive- Cap and Interest Rates Face Off

This sharp spike in gas prices, along with an approximate 13% aggregate increase in food prices will only place more downward pressure on the local and national economies. More monies spent on food & fuel means less discretionary and disposable income to spend on other goods & services.

Rest assured that Retail Sales will feel the pinch in the coming months.

Add to the mix, a depressed housing market that continues to decline in price and increase in inventories which will only all add up to a double-dip recession. In fact, we are already in the early stages of a double-dip recession, it’s just that the white house on down to the states will not officially come out an announce it.

Of course the standard rhetoric of why oil is jumping up in price per barrel is that the crude prices are being driven by the violent situations in Libya and fears that the unrest may spread to other oil producing areas in the Middle East. Meanwhile, Libya is only a very minor producer/exporter of crude.

Funny how there is no mention by the media of OPEC, who has the ultimate, final say in crude prices. Plus, the oil company lobbyists, politicians and some of the worst criminals of all, the speculators on wall street. All of these entities collude to increase oil and gas prices at will. They are all in a king-sized bed together, performing deviant, despicable actions against the American public and the world, with zero accountability.

What does it mean for the average working class family? Well, all of the relevant economic indicators point to a declining economy that is worsening. (forget the stock market- that is a false indicator of any real micro economic conditions)

Do not be fooled by the lies and rhetoric from the media, politicians, shill economists, some realtors and cheerleaders. The REAL economy is is very serious distress. There are more families receiving food stamps than ever before in our nations history.

U.S. unemployment stands at 22%. New Jersey unemployment is really over 13%, not the deceptive 9% reported by the Labor and Workforce department. House prices continue to fall and inventory continues to rise. 24% of all mortgage holders are in default of their loans and 23% of mortgage holders are underwater (having negative equity).

How anyone can make the statement of economic growth is absolutely stunning. In fact it’s downright insulting to the public’s intelligence. Of course most who do tout this deception are nothing more than pathological liars and self-serving deviants who only want to line their own pockets at anyone’s expense and could care less about the average working class persons well-being.

Today, the BLS is stating a lowly U3 rate of 8.9% unemployment. Are they kidding?
Unfortunately, no they are not. The TRUE U3 rate is over 10% while the underemployment/unemployment rate stands at over 23%

There are approx., 33+ Million persons out of work or underemployed this includes; former workers with expired benefits, long-term discouraged workers (persons who have dropped out of the labor force altogether) F/T to P/T “under-employed” workers (those forced to accept less hours) and 1099/contract workers who do not have steady income.

Even the BLS is reporting (if you know here to look on the BLS website) that their measure of the U6 unemployment rate in February 2011 was at 16%. (They exclude the long-term discouraged) So when you add back the long-term discourage work force to the U6 rate, it jumps from 16% to around 23%.

Twenty three percent of the U.S. work force are unemployed from full-time work.  But the government still keeps grinding out the propaganda to the American public, believing that
most are just plain gullible and unaware.

See the next post Below for the BLS’s own graph.

The audacity of this government knows no bounds. But as usual PE brings clarity and truth to forefront.