Published on: July 16, 2013
NEVER MIND. Remember Federal Reserve Chairman Ben Bernanke’s pretty clear statement that the Fed could begin ‘tapering’ its economic stimulus program by the end of this year? Well, ‘fogetaboutit!” He said recently that “highly accommodative monetary policy for the foreseeable future is what’s needed in the U.S. economy.” Speaking to a group of economists, Bernanke stated flatly, “There will not be an automatic increase in interest rate when unemployment hits 6.5%.” Given the weakness of the labor market, and low inflation, he added, “it may be well sometime after we hit 6.5% before rates reach any significant level.”
PERVERSE IMPACT. As home prices have blazed past their pre-boom peaks in several major markets, analysts have warned that rising interest rates could short-circuit the housing recovery. But at least in the near term, they appear to be having the opposite effect – spurring hesitant buyers to take the plunge.
UNSETTLING. Hurricane Sandy provided only a hint of the devastation and disruption climate change will bring. An “Initiative for Rebuilding and Resiliency” outlines a plan for managing “flooding, rising temperatures and extreme storms” in the New York area; a report commissioned by the World Bank looks at the impacts on the coastal cities and low-lying areas in Africa and Asia where some of the world’s poorest populations are most vulnerable to the effects of climate change and least able to manage them.
BANE TO BOON. Foreclosures and short sales have been the bad guys in the housing market, blamed for depressing prices and impeding the recovery. But no more. CoreLogic reports that soaring prices in the distressed portion of the market are actually driving increases market-wide.
EASING UP. Fearful of undercutting the housing market recovery, bank regulators are backing away from some of the more stringent mortgage regulations they have been considering, the Wall Street Journal reported.
RISING TIDE. Congressional Democrats and Republicans haven’t agreed on much in recent memory, but they do agree that looming increases in federal flood insurance premiums would be “devastating” and have asked the Federal Emergency Management Association (FEMA) to stop them.
VIEW POINT. The construction of 22-foot-high dunes along the New Jersey shore will protect beachfront homes from the devastation of future storms like Hurricane Sandy, but it will also impair the views owners of those homes enjoy. To what extent should owners be compensated for that loss and how should the value of their loss be calculated? Those were the questions the state’s highest court considered recently and resolved in favor of local governments seeking the easements required to construct the dunes.
Harvey and Phyllis Karan, the plaintiffs in this closely watched case (Borough of Harvey Cedars v. Karan) own a home on Long Beach Island with a view their appraiser valued at $500,000. When they rejected the $300 the borough offered as compensation for the easement that would block their view, local officials moved to take a portion of their property by eminent domain. The couple sued and a lower court ordered the borough to pay them $375,000 to compensate them for the taking. The borough appealed that judgment to the state’s Supreme Court.
The key issue, the court said, was not whether the owners should be compensated, but whether the compensation should consider the value of the protection the dune provided as well as the value of the view the property owners were losing. (Although the decision did not mention Hurricane Sandy specifically, analysts said the court was almost certainly influenced by the fact that the Karns’ property, protected by the dune at the time, was not damaged by the storm.)
The high court concluded that the lower court had erred in refusing to allow the jury to consider testimony from an engineer, who had calculated that there was a 56 percent chance a storm would cause “catastrophic damage” to the property without the dune. The jury should have considered what the Karns’ gained as well as what they had lost, the court said, noting, “In a partial-takings case, homeowners are entitled to the fair market value of their loss, not a windfall, [and] not to a payout that disregards the home’s enhanced value resulting from a public project.”
The calculation of the property’s fair market value would doubtless consider the view, the court agreed. “But it is also likely that a rational purchaser would place a value on a protective barrier that shielded his property from partial or total destruction.” □
WORTH QUOTING: “Despite the progress we’ve made since 2008, the biggest banks continue to threaten the economy. The four biggest banks are now 30 percent larger than they were just five years ago and they have continued to engage in dangerous, high-risk practices that could once again put our economy at risk. “ Sen. Elizabeth Warren (D-MA), announcing the bi-partisan bill she is co-sponsoring with Maria Cantwell (D-Wash.), John McCain (R-Ariz.) and Angus King (I-Maine) that would resurrect the old Glass-Steagall barrier between commercial and investment banking.