Info Bytes 12.15.22

GIVING THANKS

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Notice

• Quite a few state legislatures reacted to the pandemic by making it easier for common interest communities to communicate electronically.  CIC homeowners in Washington state can opt into receiving electronic notices.  Read more on our Notice page and view the example opt-in form.

  1. Located outside of Washington State?  Check your statutes.

• Last week's CIC Info Bytes featured a reminder that owners in Washington State (and some others) have the ability to opt into electronic notice.  Oddly enough, a volunteer director subsequently suggested penalizing owners who do not opt in by charging them a fee.  That's illegal.  With fees out the window, "voice blasts" and text messages were suggested to "save money."  Here's our Notice PSA:

  1. In most (all?) states, notice must be delivered in a tangible medium (essentially written down) so that it can be retained, retrieved, reviewed and directly reproduced.

  2. Text messages are a form of electronic communication that's only permissible to deliver formal notice to owners who opt-in; furthermore, text messages are somewhat impractical considering the length of most formal notices.

  3. Incorporated or not, your association is a business.  Delivering notice to your members is a relatively inexpensive portion of the cost of doing business.  Cutting costs by eschewing required procedural steps is a fast track to a lawsuit.

  4. What you don't know can hurt you and your association.  Don't assume!

  5. If you don't know or understand your statutes or property-specific governance, ask!  Many questions receive free, high-quality answers if you know who to ask.  Try r/HOA on Reddit.  No membership required. 

They Fought the Law...and the Lawn Lost

• Many state legislatures have guaranteed the right for homeowners to install drought resistant and/or wildfire ignition resistant landscaping, but Maryland is the first state to guarantee the right to earth-friendly "low impact" landscaping via 2021 House Bill 322.  Free your yard with wildflowers.

  In September 2017, the homeowner association sent the Crouches a letter saying their yard was in need of seasonal maintenance, which the Crouches said they heeded. Two months later, a cease and desist letter from the homeowner association's lawyers arrived. If they didn't change their yard back to a "neat, clean" lawn, the lawyer for the association wrote, the Crouches could face fines or worse….

  In the end, the Crouches spent $60,000 on lawyers fees, but they say it was worth it. This fall, with the new law backing them up, the Crouches let their dead coneflowers, sunflowers and other perennials stand. Mr. Crouch awoke one frigid morning this November to find six birds on the stalks, feasting on the seeds.

  They Fought the Lawn. And the Lawn Lost - Cara Buckley | The New York Times

  I Fought the Law (And The Law Won) - The Bobby Fuller Four

The Price Is Wrong

• …It takes almost as much money to convert an old building to residential as it does to build a new one from scratch. No one will do it unless the price is right… Why the Dream of Turning Empty Offices Into Housing Is a Bust - Henry Grabar | Slate

Insurance Calamity

• …Florida has just under 10% of U.S. homeowners insurance claims, yet nearly 80% of the nation's homeowners insurance lawsuits, according to the state's Office of Insurance Regulation… Lawmakers also are concerned about the rapid growth of Citizens, the last-resort insurer. Citizens expects to end 2022 with about 1.2 million policyholders and its projections show 1.7 million policyholders next year, up from about 440,000 in 2019…. With that growth, Citizens' risk exposure would jump to $650 billion in 2023.

  Florida Lawmakers to Tackle Ballooning Property-Insurance Crisis - Leslie Scism, Arian Campo-Flores, Deborah Acosta | WSJ

Location, Location, Location Density, Density, Density

• Current housing regulations in Seattle (and many municipalities across the country) limit the number of single-family residences per lot. What are developers to do? Creative use of legal loopholes, of course!

  • Look carefully at the plan below: SFR1 and AADU1 are…the same. The ADU is simply another SFR. Is a single-family home by any other name just as sweet?

• Many lawmakers appear to agree on the need to make three big changes around the state. Such changes will likely be discussed at the Capitol.

  • Removing bans on denser forms of housing, such as townhomes.

  • Eliminating "design review boards" statewide for residential projects…

  What Washington's housing legislation could look like in 2023 - Joshua McNichols | KUOW

FOMC In Action

• The Fed did all that was expected Wednesday. The central bank raised rates 50 basis points (check) and Chair Jerome Powell warned it's only the end of the beginning (check). "We still have some ways to go," Powell said (as he has before). Still, some on Wall Street saw new tea leaves to read. - Bloomberg Evening Briefing 12/14/22

  "The Fed's going to have to keep policy uncomfortably tight for an extended period, and to us, that means there's still a lot more room for upside," Nelson said in a Bloomberg Television interview with Jonathan Ferro. "It's very possible that the Fed does cut rates, maybe not necessarily next year, but in 2024 and beyond, but the odds that they cut rates back to zero is very low. So the floor for rates, let's say three, four, five years out, is much higher than it would have been in past cycles." - Bloomberg 5 Things 12/09/22

  As "generationally high inflation" slowed economies across the world, the Fed and other central banks have countered with interest-rate increases to tame price increases. That "will ultimately succeed, but at a cost of a global recession in 2023," according to Vanguard's report. Vanguard sees a 90% chance of a recession in the United States by the end of next year.

  Vanguard sees a recession in 2023 — and one 'silver lining' for investors - Andrew Keshner | Marketwatch [Paywall]

  How Long Should Powell Keep Raising Interest Rates? Fed Officials Are Divided - Nick Timiraos | WSJ

  The yield curve is now deeply inverted, with short-term rates far above long-term ones. The yield on the 10-year Treasury note, lately at 3.61%, is 0.79 percentage point below the yield on the two-year note…More worrisome still is that the 10-year yield is now below the rate on three-month Treasurys—something that many economists, including at the Fed, view as a much more reliable recession indicator.

  The Treasury Market Throws a Curveball - Justin Lahart | WSJ

Federal Funds Rate: 1979 - 2022 (covering the last 6 recessions)

Example Fidelity Money Market 7 Day Yields as of December 14, 2022

Be Prepared

• Speculation about a potential recession has plagued much of 2022, and is now seen as all but inevitable in 2023. Asset management giant BlackRock recently wrote in its 2023 Global Outlook report that a recession is "foretold," while in December, JPMorgan Chase CEO Jamie Dimon reiterated a prediction that a recession is coming in 2023. A survey published by business-focused think tank The Conference Board in October found that 98% of CEOs were preparing for a U.S. recession in the next 12 to 18 months.

  How to Prepare for a Recession - Anna-Louise Jackson | TIME

Easing Inflation

• Prices cooled again in November, rising 7.1 percent compared with last year, the smallest year-over-year increase since last December. They also climbed 0.1 percent over October, beating analysts' expectations. And a measure known as "core inflation," which strips out volatile categories like food and energy, rose 0.2 percent — the smallest increase since August 2021, according to data released Tuesday morning by the Bureau of Labor Statistics.

  Prices cooled last month, raising hopes that inflation is easing - Rachel Siegel | WaPo

Words of Wisdom from Mohamed El-Erian

• We have a tendency to think that the world is mean-reverting. Last year, that played out with inflation. The minute people started warning about inflation, they were told not to worry. It is transitory, meaning it's temporary, it's reversible, we can, quote, "look through it." And therefore, don't change behaviors, don't change policies.

  This year, as we look at the risk of recession, the same people who dismissed inflation as transitory and were wrong, are saying, don't worry, it will be short and shallow. And again, a concept of mean reversion. What we really are seeing is structural and secular changes that have to be taken seriously by governments, by central banks and by companies.

  Ezra Klein Interviews Mohamed A. El-Erian - The New York Times