Two indicators of inflation this week showed rising wholesale and consumer prices, giving more credence to the likelihood the Federal Reserve will continue hiking interest rates.
Wednesday’s report on consumer prices showed inflation over the last 12 months is up 2.4 percent, according to the consumer price index, a metric of prices on common consumer goods. Also this week investors received results of the March Producer Price Index and learned wholesale prices are now up 3 percent over the last 12 months. This is just the second time the rate has hit 3 percent since the government recalculated its index in 2013.
The takeaway from these two popular inflation metrics is a strong-as-ever sense that inflation is now humming at or slightly above the Federal Reserve’s target annual rate of 2 percent. Along with healthy employment numbers, this means bankers will be likely to increase interest rates in order to keep inflation in check and prevent the economy from overheating.
Analysts now predict with about 85 percent certainty that the Federal Reserve will increase rates at its June meeting. That would be the second hike of the year. The Fed has estimated three rate increases this year, though some analysts are beginning to wonder if that could increase with continued inflation and economic growth.
For mortgage professionals, the economic news this week suggests the recent rate trend will continue. Economic growth, inflation and a more hawkish Fed will continue to give reason to expect rising rates in 2018, even as market volatility, political unrest and trade fears keep a lid on things.
Coming this September I'll hold several seminars to explain why it's a great idea to shop for your home (or any investments) during the Fall season. Prices are a little better and I'll explain why including why economists are always talking about seasonal patterns in real estate. Every year I see just a little bit better pricing and I want you to take advantage of it. This is another way to get a little more appreciation when you buy. Stay tuned for more details.
Another tip for Buying Smart!
At the same luncheon panel (see blog post below) retrofit laws were discussed. Seismic retrofitting of older buildings that are especially vulnerable to collapse when a major earthquake eventually happens is a key issue in each of the four cities; Beverly Hills, Los Angeles, Santa Monica and West Hollywood. Yet each city is at different stages of formulating an earthquake retrofit ordinance.
Since most of the buildings that fall under the rent-stabilization ordinances are older and were built to less stringent earthquake standards, the retrofitting is needed to protect the buildings and guarantee tenants still have a home after an earthquake hits.
“[By enacting these seismic retrofit ordinances], we are maintaining and preserving our rent-stabilized housing stock into the future and supporting our rent-stabilized tenants as well as our rent-stabilized landlords,” said Noonan, explaining the reason behind West Hollywood’s policy, a statement to which the other cities’ representatives concurred.
Retrofitting a building can cost anywhere from $100,000 to over $1 million, depending on the size and type of building. Such costs can be higher than some landlords can afford, so having tenants absorb some of those costs may be part of the plan.
Los Angeles, which passed its earthquake retrofit ordinance in 2017, allows 50% of the retrofit costs to be passed through to tenants, with a maximum cost of $38 per month for a period of no more than 10 years. Los Angeles building owners have been officially notified of the mandatory retrofits and now have seven years to complete them.
West Hollywood passed its retrofit ordinance earlier this year and is currently determining how much, if any, of the retrofit expenses can be passed through to tenants. The city held two public meetings in May to get resident input and also has an online survey for tenants and landlords to fill out. Noonan said the city’s staffers will present a proposal for pass-through costs at the June 14 meeting of the city’s Rent Stabilization Commission, followed by a public meeting explaining the proposal on June 16. The Rent Stabilization Commission will then vote on that recommendation at its July 12 meeting and the City Council will likely take it up at its Aug. 6 meeting. Once that pass-through amount has been determined and landlords officially notified, owners will have five years to complete the retrofits.
Santa Monica has also passed a seismic retrofit ordinance but has not yet determined the pass-through costs to tenants. That decision has been delayed because it is unclear in the city’s charter whether Santa Monica’s City Council or Rent Control Board has the final authority in the matter. However, Costello said it looks like Rent Control Board has the authority.
As for Beverly Hills, the city is currently studying the matter, but has not passed an ordinance. Otazo said they are closely watching how the neighboring cities handle the retrofit ordinances and pass-through costs before making their decision.
Building L.A.'s rail system will create thousands of jobs. Can a transportation boarding school fill them?
Photo Above: Shown is an artist's rendering of the boarding school at the Vermont and Manchester site, which could have a transportation and infrastructure focus. (Courtesy of L.A. County Supervisor Mark Ridley-Thomas)
Boarding school conjures a certain image: children in preppy blazers, leafy quadrangles in New England and tuition that costs more than many families earn in a year. That stereotype would not apply if officials carry out their vision for a dusty, trash-strewn lot in South Los Angeles that has sat vacant for more than two decades.
Their pitch? A transportation boarding school, free to its students.
The school would offer a vocational and college-preparatory curriculum, tightly tailored to train students for jobs in the transportation industry. Officials say some could find work with the Metropolitan Transportation Authority or local contractors after graduation; others could go on to college to study engineering, architecture or urban planning.
The 4.2-acre site at Vermont and Manchester avenues where the school would be built has been vacant since the 1992 Los Angeles riots, when a swap meet was torched and burned to the ground. Since then, the land has been caught in a tug-of-war between politicians and residents who disagree on what should be built there to address blight.
“For 25 years, we passed this spot and thought about insurrection,” said Los Angeles County Supervisor Mark Ridley-Thomas, who is also a Metro director, at a press event Monday. “But today, we think about resurrection.”
Though the proposal is in its infancy, it has sparked resistance from some South L.A. residents who say the neighborhood needs more sit-down restaurants, grocery stores and retail space — not a boarding school.
Los Angeles County won ownership of the lot through eminent domain in April. The boarding school is a key piece of the county’s development plan, along with apartments, a job training center, a plaza for transit riders on Vermont, and 50,000 square feet of retail space, including a grocery store.
Metro hopes graduates could address a critical need in Southern California: qualified workers. Nearly a dozen new rail lines are to be built across Los Angeles in the next four decades, creating thousands of vacant positions in construction and engineering. Already, Metro struggles to fill some jobs. The agency hires about 2,200 people per year, and is continuously recruiting for some positions, including track inspectors and engineers, Peterson said. About 40% of Metro’s 11,000 employees are eligible for retirement today. In L.A., officials hope to attract students from across the county who have been homeless, in foster care, or involved in the criminal justice system — and have reached out to LACOE, the Los Angeles Unified School District, community colleges and social service agencies for advice.
“What we’re trying to do is really flood the market with qualified people,” said Metro Chief Executive Phil Washington. “We want to be the farm team for the industry.”
Crissi Avila will teach you how to buy smart. We’ll look at location, development, and turnover so you can spot opportunities long before most even start considering them.