Situs Newswatch 7/14/2017

The Next Jobs Humans Lose to Robots: Real Estate Appraiser 

Twenty-five years ago, Brian Weaver was told at a seminar that the real estate appraisal profession would be killed off by technology in five years. It didn’t happen. But he now thinks the forecast wasn’t exactly wrong — just early, according to Business Week.

Weaver works at the appraisal licensing board in Illinois. Appraisers size up the value of a home before a lender gives the buyer a mortgage. He says a reckoning has arrived for the industry, which employs about 73,000 mostly college-educated people in the U.S. “The future for appraisers specializing in residential mortgage work is coming to an end,” he wrote in a recent newsletter for peers. “No bang. Not even a whimper.”

That’s because the breakthroughs predicted at that seminar a quarter-century ago are finally happening. Advances in big data and computing are helping automation creep into knowledge-based professions, threatening to knock off jobs in much the same way robots have been doing at factories for decades.

“Technology is evolving so you need to evolve as well,” says The Collingwood Group Managing Director Tom Booker. “Information technologies have become better at making objective judgments based upon rules and data. In the real estate industry, there are many activities that fit that description. Tasks that are based on standardized data and judgments will be high-value targets for automation. The result will be humans taking on the tougher work and the more uniform tasks are performed by systems. This is not disruption but evolution … and it will move at a faster pace.”

Zillow Group Inc. says its algorithms are learning to capture not only the crude facts about values in the surrounding neighborhood but also more sophisticated price indicators, such as whether the living room has hardwood floors or the kitchen has granite countertops. While Zillow’s software isn’t used in appraisals — its numbers are available on its web site for free — lenders have long used internal and third-party computer models to help value homes.

And now mortgage companies such as Freddie Mac are starting to get more comfortable with transactions that require less involvement with a human appraiser.

“The Commercial Real Estate appraisal industry has been through many changes over the years,” says Situs RERC’s Assistant Vice President Jennifer Rasmussen. “This is one of the reasons why Situs RERC developed its industry-leading start-to-finish valuation management and support services.”

Rasmussen says people will still be important in the bigger picture. “While computers are certainly more efficient at standardized tasks, there are many ways that human, real estate professionals add alpha; appraisal is both an art and a science,” she says. “Robots have a tough time executing subjective tasks.”

Financial institutions seeking expanded insight into real property investment should consider engaging an SEC-registered independent specialist. Please visit  Situs RERC to learn more about our real estate research and valuation advisory services.

We’ve Been Warning You: Here Comes Amazon
Investors in online real estate database specialist Zillow are on edge after it emerged that Amazon, the e-commerce behemoth responsible for forcing a number of companies out of business, might be about to launch a rival realtor hiring service.

According to multiple news outlets, at some point Wednesday, while Prime Day was breaking records, a “Hire a Relator” link suddenly appeared on Amazon’s website. The page, which was later taken down, was reportedly located in the Home and Business Services section, a part of Amazon’s website dedicated to connecting customers with experts in home improvement, electronics installation, and various other services.

The link asked users to enter their zip code. It also featured a “coming soon” message, together with the option to receive an email when the service is made fully available.

read more: Investopedia

Death By Amazon
Bespoke Investment Group has created an index of the major retail names it thought would be most hurt by Amazon, called “Death by Amazon,” and it was trading at a four-year low as of Monday.
The index of 54 stocks is down more than 20 percent on an equal weighted basis this year. But in market cap, the group has lost $70 billion this year alone while Amazon has gained $120 billion.

Some of the 54 retailers in the index edged higher, including Macy’s, which was offering free shipping to its customers Tuesday. Kohl’s, Costco, TJX, Kroger and Target were also all slightly higher Tuesday. Rite-Aid and Walgreen Boots Alliance were lower.

Most of the stocks on the list are sharply lower for the year, with a few exceptions. HSN, which is in a merger with QVC, was up 14 percent year to date. Wal-Mart, which battled back against Amazon with its purchase of Jet.com, was up about 6 percent so far this year.

“I think [Wal-Mart] got a big bounce from that move. The Jet.com acquisition was taken as a sign the company was going to get serious about online. That was one of the reasons the stock rebounded,” said Paul Hickey, co-founder of Bespoke. “It pulled in a little, and it hasn’t regained its footing since the Whole Foods news was announced.”

Amazon announced a merger last month with grocer Whole Foods Markets, rattling retail stocks, as well as some food companies. Some of those companies were selling off Tuesday, including Kellogg and General Mills.

Analysts expect Amazon, with supermarket distribution, to affect pricing for a whole raft of packaged foods. It could also be a strong booster of the Whole Foods 365 brand, creating a bigger rival for some name brands.

“I think consumer loyalty towards brands is evaporating. … This isn’t because of Amazon for these companies specifically. Consumers don’t necessarily equate quality with these old style brands anymore,” Hickey said.

Another factor, he said, is a rally in the agricultural commodities, which means costs for cereal makers and other food companies will be higher.

As for the “Death by Amazon” index, Hickey said many more names could have been added, such as mall REITs, which have been hurt by online shopping.

But when Bespoke created the index, it chose to include only the most vulnerable retailers. The range of categories shows how broad the Amazon effect has spread. From Vitamin Shoppe to Foot Locker, Bed Bath and Beyond and Dick’s Sporting Goods, Amazon has spread pain across the retail spectrum.

Hickey said some retailers were excluded from the list because they either sold Amazon-proof products or had developed their own web strategy, like Home Depot.

read more: CNBC

Is Abercrombie Next?
Abercrombie & Fitch terminated talks with potential acquirers, dashing hopes of investors who saw a takeover as the best way to rescue a retailer struggling to rekindle its appeal with shoppers.

The move sent the shares down as much as 20 percent, to $9.77 in New York on Monday. The announcement followed months of speculation that Abercrombie might be acquired by Express Inc. or American Eagle Outfitters Inc.

In leaving the bargaining table, Abercrombie has few easy options. The retailer was a mainstay of shopping malls and college fashion in the ’90s and early 2000s, but it’s lost much of its allure. The company also has been hit hard by a broader slowdown in mall traffic and the shift of shopping online.

Chairman Arthur Martinez pledged “sound, aggressive action” to enhance shareholder value over the long term, according to the statement. The company pointed to solid comparable sales at its Hollister business and said it’s following through on measures “to position the Abercrombie brand for revitalized performance.”

In May, Express and American Eagle Outfitters were said to be discussing a takeover of the company and news of the deal caused shares to jump at the time. The company’s stock had risen 1.3 percent this year through Friday’s close, trailing the 8.3 percent gain in the Standard & Poor’s 500 Index.

The retail industry has been shaken by bankruptcies and a rising tide of store closures this year as consumer preferences also shift to spend on experiences such as food and travel instead of physical goods.

read more: Bloomberg

You’ve Got It All Wrong: E-Commerce is a Jobs Engine
Retailing is dead. Sales clerks are losing their jobs by the thousands. The employment picture for young people with only a high school education is going to get even worse. And all this is happening because of Amazon and its ilk, which are driving the shift among consumers toward e-commerce.

We’ve heard this story over and over in recent months: The echo chamber keeps repeating that the retail apocalypse is upon us.

And yet, according to one economist, Michael Mandel, it is all wrong. We have it backward.

Mr. Mandel is turning heads from Washington to Silicon Valley with a provocative and unorthodox argument: He asserts that the move toward e-commerce is creating more jobs than are being lost in the brick-and-mortar retailing industry — and that these new jobs are paying much higher wages than traditional retail jobs.
Mr. Mandel has combed through the job statistics on a county-by-county basis and come to this counterintuitive view: From December 2007 to May 2017, by his count, the e-commerce industry has created 397,000 jobs in the United States, and this compares with the loss of 76,000 jobs in the traditional retail industry. And those jobs related to e-commerce, he says, pay about 30 percent more than the brick-and-mortar ones.
read more: NY Times

Cohn Reportedly Trump’s Top Candidate to Replace Yellen at Fed
President Donald Trump is increasingly unlikely to nominate Federal Reserve Chair Janet Yellen next year for a second term, four people close to the process said.

National Economic Council Director Gary Cohn is now the leading candidate to succeed Yellen as the world’s most important central banker, these people said. Yellen begins two days of congressional testimony on Wednesday, and her own future in the job may come up in questioning.

If Trump taps Cohn for the Fed, it could enrage economic nationalists in the White House and some staunchly conservative Republicans on Capitol Hill who don’t like the former Goldman Sachs president’s background as a Democrat who generally favors free trade.

And it would spur a backlash from progressive lawmakers who have blasted the president for picking multiple Goldman alums to run economic policy.

But sources on Capitol Hill and inside the White House and the Treasury Department said that, at least as of now, if Cohn decides he wants the job, he is likely to get it.

read more: Politco

Yellen’s Dovish Forecast
Federal Reserve Chair Janet Yellen tells Congress the central bank is likely to reduce stimulus later this year.

The Fed accumulated its $4.5 trillion balance sheet as it sought to stimulate the economy during and after the financial crisis. The expansion came largely through the purchase of Treasurys and mortgage-backed securities.

She also said the balance sheet reduction and rate increases would be gradual. Yellen also noted rates won’t have to rise as much to get to neutral, as in previous decades.Yellen says “the evolution of the economy will warrant gradual increases in the federal-funds rate over time to achieve and maintain maximum employment and stable prices.”

NYC Airbnb Battle Targets Landlords

In its running battle to stem the tide of illegal Airbnb listings, New York City has been alienating a powerful ally: landlords.

Building owners often have detailed knowledge of what is happening at their properties, information they might be happy to share with the de Blasio administration as it seeks to oust problematic tenants who operate de facto hotels out of their apartments.

But several landlords who have reported illegal home sharing to the Mayor’s Office of Special Enforcement have themselves been slapped with violations. ‘If you want us to cooperate with you, you have to stop fining us,’ said Jeffrey Goldman, a partner at Belkin Burden Wenig & Goldman who specializes in representing landlords.

read more: Crain’s NY

Can Brexit Still Be Stopped?
Doubting the inevitability of Brexit is suddenly in vogue.

BBC Newsnight Political Editor Nicholas Watt declares, “I’m beginning to hear talk, in some quarters, that Brexit may not actually happen.”

Six months ago, such heresy would have been dismissed as the ravings of an anti-democratic zealot. Today, not so much.

In “Story,” his bestselling manual to writing Hollywood blockbusters, Robert McKee describes the narrative arc of a movie.

A winning plotline, he writes, has an inescapable, and with hindsight, predictable trajectory. An “inciting incident” provides the story with seemingly unstoppable momentum that carries forward through twists and turns until the third act, when a sudden reversal of fortune leaves cinema-goers elated or crushed.

Brexit is not, of course, a movie (not yet, anyway). But after a year of twists and turns it’s beginning to feel like one — and we’ve just reached the end of the first act.

But as we head into the second act of Brexit, we’re unsure of anything except that — as that other great Hollywood grandee William Goldman put it — “nobody knows anything.”

A very senior politician and household name, now more or less backstage, emailed … a suitably cinematic analogy for this moment in our story.

“It’s like the promised land is in sight,” he wrote, referring to the possibility that a full exit from the EU could still be avoided. “There’s no inevitability about Brexit anymore. But since we have no Moses character to part the waves, we are still in danger of being washed away like Pharaoh’s Army.”

He’s not alone in feeling a shift in the political winds. On Twitter, the Sun’s astute political editor, Tom Newton-Dunn, commented: “I’ve been amazed by how pessimistic Brexiteers have now become. Most ardent Leaver I know texted today: ‘We’ve blown it.’”

read more: Politico EUU.K. County Governments Pile Into Real-Estate Investments
In Britain, an unlikely group is piling into commercial real-estate investments: local governments.

The central U.K. government has cut back on funding for local entities known as councils since the 2008 financial crisis. To plug the gap, local officials have been hunting for yield in property. In all, local councils have poured £1.8 billion ($2.32 billion) into commercial real estate in the past 12 months, up from £406 million in the previous 12-month period, according to property data firm Real Capital Analytics.

The bet is that income from renting out offices and malls will help cover costs for libraries, social services and other expenses. “The level of demand has taken everybody by surprise,” said a property broker who has worked on more than a dozen deals with councils.

But the surging activity has sparked warnings that the risks being taken with public money are too great. “Concerns center on the perceived lack of expertise of councils in this specialized arena, which could lead to costly errors that have consequences for taxpayers,” said Tom Leahy, director of market analysis at Real Capital.

Ultralow interest rates at central banks around the world have pushed down yields on asset classes like bonds. In response, institutional investors increasingly have turned to commercial real estate, where yields tend to be higher. For U.K. councils, the government spending cuts have only exacerbated the need for new ways to generate revenue. The decision to invest in property “is just a function of the search for yield,” the broker said. “They can’t get it in the bond market. They don’t trust the stock market. Property is what makes sense.”

In recent months, Surrey Heath Borough Council has bought two retail properties and one industrial property in Camberley, where it is based, according to Mr. Leahy. Barnsley Borough Council, meanwhile, this year invested £70 million to fund the construction of a new shopping center. In May, Uttlesford District Council in Essex bought a 50% share in Chesterford Research Park, a biotechnology and pharmaceutical research facility, for £45 million.

“As funding from central government diminishes, Uttlesford, like other councils across the U.K., is seeking alternative routes through which to generate long-term income,” the council said in a statement in May. Late last year, Spelthorne Borough Council spent £360 million to buy an office campus of oil giant BP PLC, the biggest deal in the past 12 months. The council said its central-government funding will be withdrawn completely by 2018, forcing it to find innovative ways to fund services and create new revenue streams.

When bidding against other investors, these councils have a distinct advantage: cheap debt.

read more: Wall St Journal

How About an Apocalypse-Safe Bunker?
The super-rich and ultra-paranoid are preparing for the breakup of civilization by purchasing apocalypse-safe bunkers worth millions of pounds.

The 15-story underground luxury compounds are said by the sellers to be able to withstand everything from extreme weather like tornadoes, to a full blown nuclear attack.

But in 2008 Larry Hall bought the decommissioned site and has subsequently spent $20m (£15.5m) converting it into luxury apartments.

His company, Survival Condo, is now selling them for prices ranging from $1.5m (£1.2m) to $4m (£3.1m). Buyers can purchase a half-floor or full-floor unit.

Unlike most flats, the bunkers come with concrete walls which are 9 feet thick.
The silo cap is also able to withstand winds in excess of 500 miles per hour, far greater than the winds of F-5 Tornadoes, which have winds of up to 300 miles per hour.

Each facility has more than 54,000 square feet of protected space, and are able to sustain 75 people for upwards of five years.

Survival Condo claims that they “have the highest level of military grade security that offers both lethal and non-lethal measures in order [to] protect our residents.”
Additionally, the apartments have a full fibre optic intranet, data-streaming capabilities for education, information, and entertainment, as well as silo-to-silo network links and communications.

Not only are these compounds ready for any fathomable disaster, they are fully decked out in amenities designed to appeal to Survival Condo’s customer base. The compounds consist of a cinema, indoor pool and spa, medical first aid centre, bar, rock climbing wall, and gym.

Survival Condo claims to have customers all over America, and because of this, each has in place a plan to reach their bunker in case of a major catastrophe.

read more: The Independent

How to Swap Your Vacation Home Tax Free
Say you own a vacation home that you’ve rented out most of the time and also used as your personal residence some of the time.

Now you would like to unload this property and acquire another one that you would also rent out most of the time. With real-estate prices surging in many areas, your current property may be worth far more than your tax basis (generally the purchase price plus the cost of improvements minus any depreciation deductions you’ve claimed for rental periods). If so, selling could trigger a big taxable gain (the difference between the net sale price and the property’s tax basis). Not good — especially if you want to use the sales proceeds to buy another vacation property. But there’s a way to avoid the unwelcome tax hit.

Instead of selling, you could swap your vacation home for another one in a tax-deferred exchange under Section 1031 of our Internal Revenue Code. In fact, the IRS has even supplied the recipe for how to exchange mixed-use vacation properties, meaning those that are rented out part of the time and also used for the owner’s personal purposes part of the time. Here’s what you need to know.

When available, a tax-deferred Section 1031 exchange is a great tool for real estate owners. It allows you to unload one property (the relinquished property) and acquire another one (the replacement property) without triggering a current income tax bill on the relinquished property’s appreciation (the difference between its fair market value and its tax basis).

The untaxed gain gets rolled over into the replacement property where it remains untaxed until you sell the replacement property in a taxable transaction. But if you still own the property when you die, any taxable gain may be completely washed away under the current tax rules, thanks to another favorable provision that steps up the tax basis of a deceased person’s property to its date-of-death value. Under this deal, taxable gains can be postponed indefinitely, or even eliminated altogether if you die while still owning the property. Real estate fortunes have been made in this fashion without sharing much with Uncle Sam.

read more: MarketWatch

Have a prosperous day and a great weekend at your summer house or wherever life takes you.

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