Monday Morning Cup of Coffee: Flood insurance back in the news, and obsessing about a rate hike

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Monday Morning Cup of Coffee takes a look at news coming across the HousingWire weekend desk, with more coverage to come on bigger issues.

The historic flooding in Louisiana last week destroyed more than 60,000 homes and displaced hundreds of thousands of homeowners. It also renewed questions about the National Flood Insurance Program.   

Reuters reported Sunday on the number of homeowners who did not live in designated high-risk flood zones, and therefore didn’t have flood insurance.

Now facing total losses, the Federal Emergency Management Agency is encouraging those homeowners to take out low-interest Small Business Association loans to rebuild. From the Reuters story:

Those residents without flood insurance are eligible for up to $33,000 in FEMA individual disaster assistance funds, although most will likely receive less than that, based on payments following other major disasters…

FEMA spokesman Rafael Lemaitre said the individual assistance is intended to supplement insurance and to provide short-term relief for immediate needs.

Other coastal communities are thinking long and hard about what a 1,000-year flood (with or without a hurricane) would do to their communities. The Tampa Bay Times ran a story over the weekend that supported spreading the risk by once again making flood insurance a mandatory part of homeowner’s insurance. From the article:

There is an alternative out there if anyone in D.C. is willing to look. It’s simple. It’s proven. It may not be universally beloved, and could use refining, but it’s better than seeing the National Flood Insurance Program go billions and billions further in debt at the expense of taxpayers.

Now that the Olympics are over, what’s going to take the place of those nightly doses of feel-good athletic spectacle? What are we supposed to focus on for the next two years while we wait for the Japanese prime minister to magically reappear from the other side of that green tube in Tokyo? Well, besides fantasy football. 

We can always obsess about the Federal Reserve. They don’t play beach volleyball (at least that we know of) or dive off 30-foot platforms in perfect synchronicity, but they have their own intrigues.

For Fed watchers, the question continues to be: Will they or won’t they in 2016? Remarks by Vice Chairman Stanley Fischer on Sunday, reported by Bloomberg, revived the idea of a rate hike in the back half of the year.

“We are close to our targets,” Fischer said in a speech at the Aspen Institute in Aspen, Colorado on Sunday. “Looking ahead, I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes,” he added, without giving explicit views on his rate outlook.

On Friday, Fischer will join Fed Chair Janet Yellen and other Fed officials in Jackson Hole, Wyoming, for the Fed’s annual retreat, and stimulating the economy is surely at the top of their agenda. But in the face of weak growth, the Fed has limited options, an article in The Wall Street Journal contends.

A low rate in normal times puts the Fed in a bind when another recession hits. During the past four downturns dating back to the early 1980s, the Fed cut short-term rates by 5 percentage points or more in an effort to stimulate growth by boosting borrowing, spending and investing.

It now looks like it won’t have that room to maneuver next time. Officials will need to turn to other tools to support growth in a downturn. That includes bond purchases and assurances of low rates in the future.

The next FOMC meeting takes place on Sept. 20-21, but it’s hard to imagine the committee voting for a rate hike before the election. It’s actually easier to imagine them playing beach volleyball, although a search of the terms “beach volleyball FOMC” doesn’t turn up any helpful articles.

What happens when cities with lots of jobs push housing prices to levels out of reach for many of those employees? The jobs move elsewhere. A New York Times piece on Sunday reported on a number of Silicon Valley startups that have relocated to Phoenix for its affordability and quick 90-minute commute time to San Francisco.

The Phoenix metro area was hit hard by the housing bust, but it is experiencing a strong recovery. The unemployment rate has recently fallen below 5 percent, the lowest in eight years, and several Silicon Valley companies, including Yelp and Uber, have opened new offices in the region. A reviving downtown Phoenix now has a cluster of companies that make business software.

The median home price in the Phoenix metropolitan area is $221,000, according to Zillow. In San Francisco, it is $812,000.

For the first time since May, the FDIC closed a bank for the week ending Aug. 19. The Woodbury Banking Company of Woodbury, Georgia, was acquired by United Bank.

The number of bank closings has dropped drastically since the height of the financial crisis. In 2010,  the FDIC closed 157 banks, compared with only four so far this year. 

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