Published on: November 9, 2016


The Federal Reserve is signaling that a December rate hike is almost certain. As widely expected, the Federal Open Market Committee left rates unchanged at its November meeting, reflecting somewhat more concern than the FBI about interfering in the impending election. But the committee’s post-meeting statement indicated that Fed officials see the moon, and sun, and stars aligning nicely to justify the long-awaited increase in the Fed’s benchmark rate, which has remained unchanged since last December.

federal-reserve“The committee judges that the case for an increase in the federal funds rate has continued to strengthen, but decided, for the time being, to wait for some further evidence of further progress toward its objectives.”

The statement is almost identical to the one issued after the October meeting, except for the addition of one word – “some” to describe the evidence Fed officials want to see. That word speaks volumes, according to Fed watchers, who parse every syllable of Fed pronouncements. “[It] suggests they don’t need to see much more [evidence] to raise rates,” a Wall Street Journal analysis noted.

Also notable by its absence in the November statement was the Fed’s expectation that inflation will “remain low in the near term” – language that was included in the previous three FOMC statements.

Recent economic reports have indicated that inflation pressures have begun to increase modestly – moving slowly toward the Fed’s 2 percent target, as the third quarter growth rate hit nearly 3 percent, rebounding from slightly better than 1 percent in the second quarter. A strong October employment report (see below) provided additional evidence of underlying economic strength.
Although reflecting growing confidence in the economy, Luke Bartholomew, an analyst at Aberdeen Asset Management, told the Journal, the FOMC statement does create enough “wiggle room” to allow the Fed to stand pat “should economic and financial conditions change” after the election.


american-1239040_1920The October employment report fell a little below predicted job totals, but notched stronger than anticipated wage gains, providing additional support for the Fed’s anticipated December hike (see above). An upward adjustment in the September jobs report added almost 30,000 jobs, somewhat offsetting the shortfall in the October total. The unemployment rate dipped slightly (from 5 percent in September to 4.9 percent), but the labor participation rate slipped to 62.8 percent from 62.9 percent, reflecting a small decline in the number of working-age people who are either employed or actively looking for work.

The most positive news was the increase in average hourly earnings, which rose to $25.92 – up 0.4 percent compared with September and up nearly 3 percent for the year-to-date. That represents the fastest pace since the financial crisis.

“As the job market gets tighter, firms are responding to tougher competition for workers by raising pay. This is a big positive for income growth, consumer spending, and the overall economy,” Stuart Hoffman, an economist at PNC Financial Services, told the Wall Street Journal.

“The trend in wage growth is rising,” Ian Shepherdson, an economist at Pantheon Macroeconomics, agreed. He expects that upward trend to continue next year “as the drag from low headline and core inflation fades and people seek bigger nominal [wage] increases…With the labor market very tight,” Sheperdson says, “employers will struggle to resist’ that pressure.

marijuana-998664_1920MARIJUANA RISKS

Condo association boards wondering about whether or how to regulate the possession and cultivation of marijuana, that could expand if voters approve recreational use of the controlled substance, might note with interest and concern recent reports detailing the risks of indoor marijuana farming. A New York City firefighter was killed when a home that was being used as a marijuana farm exploded. The investigation is ongoing, but news reports indicated that farmers often use propane or butane to power carbon dioxide generators to speed plant growth. “If you raise the CO2 level, [plants] will grow faster,” Michael O’Hare, a cannabis cultivation expert, told Insurance Journal. Marijuana farmers also rely on external gas sources, like propane, to avoid spiking the use of metered gas to levels that might trigger suspicion.

Investigators found plants “the size of small trees” growing in the two-story house, according to the Insurance Journal report. They also found an assortment of “combustible items,” including grow lamps, and liquid fertilizers.

The New York explosion was not an isolated event. More than 30 people were injured last year in Colorado when butane that was being used to extract a concentrated form of marijuana exploded. Also last year, an explosion triggered by a butane leak severely damaged a marijuana dispensary in Santa Fe New Mexico.
In Washington State, federal prosecutors are pursuing charges in five cases involving explosions related to marijuana production.


Aggressive apartment construction is finally slowing the pace of rental increases nationwide. Rents in the hottest apartment markets increased by a little more than 3 percent in July, according to the most recent report by Axiometrics. That’s the slowest pace in nearly three years. Separately, Fannie Mae reports that more than 556,000 multi-family units were under construction in June of this year, up from 512,000in January. Condo construction is also increasing, with 72,000 units in the development pipeline in June compared with 69,000 in January.

“Lower rates of job growth and an abundance of new supply have been causing decreased apartment performance in [many major] metros,” Jay Denton, senior vice president of analytics for Axiometrics, said in a press statement. While he expects the construction pace to slow in most areas next year, he also predicts that “relief from new deliveries will not truly be felt until 2018.”


abode-987096_1920Americans are becoming less mobile, and that is not good news for the housing market. The trend began during the economic melt-down, when many homeowners were turned upside down, trapped in homes worth less than the outstanding mortgages on them. The housing market rebound has restored much of that lost equity, as values have almost regained their pre-recession peaks. But homeowners who could move, at least in theory, are proving reluctant to do so.

The average tenure for homeowners held steady at around six years between 1987 and 2008, according to the National Association of Realtors (NAR). Then the “Great Recession” hit, pushing the average to 7 years in 2008, 8 in 2010, and 9 years since 2011. In 2006, first-time buyers expected to move up in about six years; in 2015, they expected to remain in place for 12 years, the NAR reports.

That extended time frame has “major economic implications,” industry executives note, primary among them, fewer transactions, reduced income for real estate brokers and reduced demand for home purchase mortgages.

On the positive side, owners who remain in place will be more likely to remodel their homes, increasing business for contractors and for retailers, such as Home Depot. Another benefit, NAR analysts note: “Owners who stayed put over the past decade will…regain the equity they lost, which will make their retirement years more comfortable.”


Fannie Mae and Freddie Mac are both on track to pay “substantial dividends” to the U.S. Treasury this year.

Home builders and environmentalists are opposing tougher FHA financing requirements for homes built in designated flood plains. Builders say the proposed rules will “severely disrupt the housing market” and put home prices out of reach for many potential buyers.

Low interest rates and improving consumer confidence boosted home purchase lending in the second quarter to its highest level in nine years.

After increasing steadily for more than a decade, the average size of newly constructed homes has begun to decline as builders focus more on entry-level homes.

Consumers generally understand that credit scores are important, but they are pretty much in the dark about how the scores are calculated.



Association boards are responsible for preserving and protecting association property, and the governing documents typically give them considerable authority to fulfill that obligation. But some documents also require owner approval for maintenance expenditure above a specified limit, creating a conflict like the one the Montana Supreme Court addressed in Western Ranch Estates Unit II Homeowners Association v. Montana Twenty-Second Judicial District Court.

small-river-979541_1920When a flood destroyed one of four bridges in the subdivision, William Baldi and Teresa Kennedy, who owned three of the lots, petitioned the board to repair the bridge, which they used primarily to access their lots (although two of the other bridges worked for them, as well). They cited a provision of the governing documents authorizing the board to “improve and repair the bridges as the need may arise for the benefit of owners of the lots.” But two other provisions also applied. One required owners to approve all work, with the exception of emergency repairs, at an annual or special meeting; the other required a majority of owners to approve expenditures exceeding $1,500.

Two-thirds of the owners attending the 2014 annual meeting rejected the bridge repair; the following year, only four of the 96 members attending the meeting approved the repair. Baldi and Kennedy sued the association, asking the court to order the board to repair the bridge and to preclude any additional assessments against them. The trial court sided with the plaintiffs, concluding that the bridge repairs were mandatory and that owners could not block them.

The appeals court disagreed. The lower court’s conclusion that the bridge repair was mandatory was “incorrect both facially and in light of the remaining language” in the governing documents, the court said. The errors: Because the owners could use two other bridges, repair of the damaged bridge was not, in fact, “necessary.” And the intent of the documents to require owner approval of any work and to require a majority to approve expenditures exceeding $1,500 was “abundantly clear.”

“A reading of the Articles in full establishes both that the Articles do not mandate the reconstruction of a lost bridge unless ‘necessary,’ and that a majority of the membership must approve any such reconstruction,” the court held. The lower court’s contrary conclusion was “erroneous,” the court said, and should be overturned.


“There are a lot of things that we thought we knew that haven’t turned out quite as we expected.” ─ Eric Rosengren, president of the Federal Reserve Bank of Boston.


Marcus, Errico, Emmer & Brooks specializes in condo law, representing clients in Massachusetts, Rhode Island and New Hampshire.