The Housing Bubble

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The LA Times reports from California. “Southern Californians facing the loss of their homes are finding refuge in rentals. At larger apartment complexes, monthly rents have declined an average of 4.9% in the last year. Joyce Ann Cato is out of work and about to lose her San Bernardino home to foreclosure. As Cato searches for another job, she and her daughter, Minjoy, have landed in a Pomona house that they rent for $1,795 a month, substantially less than the old mortgage payment but still a hefty chunk of the mother’s $2,500 monthly income. ‘Well, it is reasonable because I don’t have to pay the house now,’ Cato said. ‘I am able to pay that.’”

“The decline in prices marks a significant reversal from the boom years, when rents increased as people flooded into the Los Angeles area, attracted by a diverse economy. Now many of the region’s key industries — construction, trade, manufacturing, tourism and entertainment — are reeling. Los Angeles County’s unemployment rate soared to 12.8% last month.”

“Thomas DeLong said he lost five homes to foreclosure, including investment properties, an inheritance and the house he lived in with his girlfriend. DeLong said renting was a relief after years of worry and a financial juggling act that came crashing down all around him. He walked away from the mortgage on his final home in September and began renting a house for about $1,400 a month, with utilities, in the high-desert area of Perris.”

“‘You are trying to pay all these people, and unfortunately, you have to go through a process of elimination, and even though we did that, we still lost everything,’ DeLong said.”

The Associated Press. “John and Donna Pringle were newly widowed when they fell in love and decided to slip into retirement together at a sprawling community being built for the 55-and-up crowd a few miles from their homes in this sun-bleached Southern California town. The Peppertree subdivision promised an expansive swimming pool where visiting grandchildren could splash and swim, a gym stocked with exercise equipment and hundreds of similarly aged neighbors.”

“But when Peppertree’s builder abandoned the project months after the Pringles moved in, the pool disappeared behind a locked iron gate, the exercise machines were repossessed and the 13 existing residents were left alone to grow testy with each other in their cramped corner of the 85-acre development, looking out at empty, overgrown lots stacked with abandoned metal pipes and roof tiles.”

“‘We really feel cheated out of our retirement,’ said Donna Pringle, 72, as she and her 81-year-old husband sat outside on their porch. Theirs is one of only seven occupied homes in the planned 470-unit subdivision. ‘We’ve worked all our lives toward this and it’s not what we were promised.’”

The Union Tribune. “Mortgage defaults in San Diego County fell 7 percent from September to October in a sign that, at least for the moment, housing distress is easing, according to figures released by MDA DataQuick. So far this year, there have been 31,215 default notices, eclipsing the 26,668 for the same period last year.”

“University of San Diego economist Alan Gin read the figures as a sign of an improved housing market in the wake of improved sales and modest price increases in certain neighborhoods. ‘(Banks) don’t want to take back properties, hoping that the housing market will turn around and owners can work things out,’ Gin said. ‘And so even the fact that they are holding back some (from default and foreclosure) is a sign of what state the market is in.’”

“Foreclosure sales in the large ZIP areas of La Mesa-Mt. Helix, western Rancho Bernardo and University City were 100 to 220 percent higher than in September, while Oceanside, College and southern Escondido were off between 23 and 33 percent. ‘That in itself may be a trend,’ Gin said. ‘In the past, foreclosures were concentrated at the very low end and this might be an indication that things have spread out some, that it’s less in low areas and an increase in the high end.’”

“These days, Realtor Matt Battiata, the CEO of The Battiata Real Estate Group…is concentrating on his family — wife Amy and five children — and the tough housing market. ‘Property values are down an average of 40 to 50 percent in San Diego County alone,’ Matt says. ‘A lot of people are upside down — they owe more on their mortgages than their houses are now worth, and foreclosures are rampant. The banks are overwhelmed and because they are so overwhelmed, they aren’t always making the’ smartest decisions in handling mortgage defaults.”

“‘It’s a freak show out there. And I don’t see it starting to get any better until 2013. My work for most of my clients these days is in short sales.’”

The Herald. “One of the main concerns that an agent-broker panel voiced at the recent National Association of Realtors convention in San Diego was a prevailing rudeness in today’s highly competitive market. Speakers traced the cause to a lack of education, communication and etiquette during the boom years, when when not enough time was spent mentoring new members of the nation’s largest trade organization.”

“The association has gone out of its way at its national convention to help prepare its rank-and-file members by offering more than 20 classes in basic computer applications. The Technology Learning Center at the annual convention drew more than 4,200 attendees to the classes last year and 5,700 in 2007.”

“The Technology Learning Center was canceled at this year’s convention. That’s because Stewart Title had sponsored the popular program in the past. A new California bill places significant restrictions on the types of training a title company can provide to the real estate industry. The California law seeks zero tolerance in any incentives to real estate sales agents.”

“I thought about how California got to that $10 number when a San Diego-based writer reminded me that a few years ago California-based Southland Title Corp. and its subsidiaries, Southland Title of Orange County and Southland Title of San Diego, were alleged to have spent at least $174,000 on food, beverages and entertainment plus $62,000 on gifts and gifts certificates and $218,000 more on business support services. The amazing piece was that the same company was fined $1.5 million two years before for similar practices. That’s a lot of free lunches — and it gives you an idea of what Southland felt it had to do to stay in the game.”

The Bakersfield Californian. “The California Department of Real Estate has barred former real estate agent David Crisp from working in any real estate-related field for three years. The state revoked the licenses of Crisp and Cole last year after finding them guilty of fraud and dishonest dealings, among other charges, in an administrative hearing. More than 140 properties connected to Crisp, Cole and their relatives and business associates are troubled, with most going into foreclosure.”

“Meanwhile, the company’s officers and their associates face several civil lawsuits from lenders. Crisp’s actions ‘epitomized the rampant greed that contributed to the market collapse,’ Real Estate Commissioner Jeff Davi said in a statement released Monday. ‘He should not be allowed to work in any capacity related to finance or real estate.’”

“As of Monday, there was no ban on Cole. ‘That isn’t to say there won’t be one in the future, but at the moment there is not,’ said Department of Real Estate spokesman Tom Pool. Cole hung up when contacted by a reporter Monday.”

The County Sun. “ICB Financial’s president and CEO says the company is open to buying a troubled bank’s assets, as long as its the right fit. The parent company of Ontario-based Inland Community Bank reported $97,000 in third-quarter losses compared with $221,000 in losses in third quarter 2008. Losses stem from two residential construction loans that the business bank is trying to sell,said Jim Cooper. Another two have already been wiped off the books.”

“‘We’re posting record gross revenues, but the majority of it is continuing to go to provisioning for credit losses,’ Cooper said.”

“More than $1.5 million in prepaid assessments to the Federal Deposit Insurance Corp. is also affecting the bank’s financial picture. ‘Those of us that are still standing are paying for those that’ve failed,’ Cooper said. ‘I think (FDIC Chairwoman) Sheila Bair will end up having to do this again by third quarter next year. They’re projecting they’ve got up to 500 more (bank failures).’”

The San Francisco Chronicle. “United Commercial Bank of San Francisco liked to boast that it was the first U.S. bank to buy a bank in China. Instead it will go down in history as the first U.S. depository institution to fail after its parent company took money from the Treasury’s Troubled Asset Relief Program. When regulators shut down United Commercial Bank on Nov. 6 , ‘it was like deja vu,’ says Richard Newsom, a retired West Coast bank and thrift regulator.”

“United Commercial Bank grew from the ashes of United Bank, a San Francisco thrift that failed in the mid-1980s as a result of ‘reckless construction lending,’ Newsom says. Likewise, the FDIC cited commercial real estate and construction loans as a cause of United Commercial Bank’s failure, along with ‘alleged fraud.’”

“That may have surprised people who still saw it as a conservative bank catering to Chinese Americans in San Francisco, Los Angeles and a few other cities with large Asian communities.”

“Julianna Balicka, an analyst who followed UCBH until last week, says ‘the real problem started’ when the company wanted to buy a bank in China but needed $10 billion in assets to do so. ‘Management got greedy about growth,’ she says. Between the third and fourth quarters of 2006, its assets surged from $8.3 billion to $10.3 billion.”

“‘It was one of the worst times to push growth given what happened in the housing and credit cycles,’ Balicka says.”

The Contra Costa Times. “Say goodbye, finally, to hopes of extending that $10,000 tax credit for buyers of new, unoccupied homes in California. It’s all but dead for this year, says one lobbyist who patrols the state Legislature on behalf of homebuilders. ‘We were disappointed neither of those bills panned out this year,’ said Allison Barnett of the California Building Industry Association. ‘We’re looking for options next year.’”

“If you’re among those who think we’ve seen enough new beige-colored houses for a while, here’s welcome news. It will take until 2016 for area builders to get back to production levels of 1999. That’s a prediction from Folsom building industry consultant Greg Paquin. He sees a 2016 with 10,921 sales in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties. That would compare with 10,656 in 1999.”

“This year’s expected sales totals in the region: 3,048. Paquin still calls current events in the capital region ‘an economic recession and a housing depression.’”

The Sacramento Bee. “There’s life again at the upper end of the local housing market. We’re hearing of a number of recent sales of homes priced above $1 million, mostly in Sacramento’s older, established neighborhoods. Lyon Real Estate agent Debbie Davis reports two recent sales on swanky Crocker Road in Sierra Oaks Vista – one going for $1.65 million, the other for $1.3 million.”

“A nearby property on Hawthorne Road closed three weeks ago at a price of $1.27 million, she says. The reasons for the pickup in a market segment that’s been hardest hit by the housing downturn? Killer deals, Davis says.”

“‘People tell me the prices are so low (relative to a few years ago) and they want to get into these neighborhoods at a discount,’ she says.”

The Mercury News. “With many Americans still spooked by the stubbornness of the Great Recession, hesitant to splurge while the economy remains so iffy, Black Friday this year seemed to fall into a gray area. Some Bay Area stores drew killer crowds, but others were dead. And despite the hype of deep discounts and early-bird openings, one mantra echoed from Silicon Valley to San Francisco: Consume with caution.”

“Many shoppers seemed conflicted — they lusted after the great markdowns, yet they thought hard before going for their wallets. Instead of the unbridled spending of past years, many people window-shopped and moved on, as if they’d come to the malls just to pretend happy days were here again. ”

“‘Last year was better because the recession was just getting started and people didn’t realize how bad it was going to be,’ said Rashid Mohammed, standing alone at his iPod Place kiosk Friday morning in the Great Mall in Milpitas. ‘Now they do, and they’re not spending like they used to.’”

The Lompoc Record. “There will be fewer places to shop in Lompoc this holiday season, as at least six local businesses have closed in recent weeks. The businesses represent a diverse cross-section of the local economy: Awards and Things, Creative Kids tutoring academy, Honda Motorcycles, Johnny’s Bar and Grill, McConnell’s Ice Cream, and Sports Nutz.”

“Phil Skillin, the owner of Video Library will raise the closure count to seven this week, when he closes his store after the Thanksgiving holiday. ‘You’re the fourth person I’ve had in the store. The first two were looking for jobs,’ Skillin said.”

The Desert Sun. “Paul R. Ryan is a seasoned business operator who can see only faint light at the end of the tunnel from what he thinks is not just a recession but a deep economic depression. But at the same time, the CEO of Fantasy Springs Resort & Casino thinks the things that made the Coachella Valley such an attractive place for economic development at the start of the 21st Century will return, and he spends much of his time preparing for the turnaround.”

“‘All the things that made the Coachella Valley such a dynamic growth area three, four years ago are still there,’ he said. ‘We still have great sunshine, affordable land and provide an opportunity for people from northern states to get into an ideal area. I think all those great things remain true and by 2012, we’ll start coming back to normal.’”

“Looking at the economy, he said he didn’t ‘believe we are in a recession. I think we are in a deep depression.’ He said he did not think the flow of information from the government educated Americans on how bad things are.”

“Ryan said that when he ‘was a kid, my father used to tell me that the entire economy was built on the housing industry. He’d say that when you build a house, you are employing the guy who makes shingles, one who does plumbing, another who does landscaping and that’s the lifeblood of the economy.’”

“He said he felt the Coachella Valley was a great example of this concept. ‘When the housing industry was healthy, we were the second fastest growing county in the entire United States,’ he said. ‘But until people get back to work, this will be a very depressed area and will remain depressed until they go back to work.’”

The Daily Democrat. “When Rochdale Grange was proposed as 44 apartments of affordable housing for Spring Lake in Woodland in 2004, everything was a go, according to David Thompson. ‘Three years later, you could hardly find the project’s heart beat,’ Thompson reported recently. ‘The owners of the subdivision were in receivership, the bank which now owned the subdivision had been seized by the FDIC, and the financing had fallen apart (the tax credit program no longer worked and the state agencies had lost their bonding and funding capacity). The project had entered a Bermuda Triangle of financial hurricanes.’”

“However, Luke Watkins of Neighborhood Partners ‘found a way to pilot the ship first to safety and then to success,’ stated Thompson, and at noon, Tuesday, there will be a groundbreaking. ‘Working with all of the players (The city, the state, the receiver and the bank) Luke Watkins re-structured the financing of the entire project,’ Thompson reported. ‘His efforts finally secured special funds from the federal government’s American Reinvestment and Recovery Act assigned through the Tax Credit Allocation Committee of the state of California.’”

The Manteca Bulletin. “It is true that unemployment in California has topped 12 percent and that foreclosures are still piling up while government at all levels is going on crash financial diets that are hopefully shedding fat without cutting into the muscle. But between the stories of the demand for free meals and the requests at food closets being up significantly as well as the story of one Brentwood family that has been able to keep their home and enjoy Thanksgiving at home through a loan adjustment were three reports of how people were coping with Christmas in these challenging economic times.”

“One San Jose woman was talking about how rough the downturn has been on her family before rattling off a list of stuff she intended to buy after waiting in a Best Buy parking lot overnight. The list included a couple of big screen TVs, an MP3 player and two laptops.”

“Another woman told a TV reporter that things were tight and they were cutting back on spending as she struggled to hold about two dozen articles of clothing while waiting in a checkout line at an Old Navy store. Still another talked with consumers at the San Francisco Auto Show including one bemoaning the weak economy before saying he would probably be buying a new Mercedes in 2010.”

“Tom Joad meet the 2009 version of the ‘Grapes of Wrath.’”

“Yes, there are some barely getting by…The vast majority of us aren’t drowning in the downturn although it is safe to say that can change with the loss of the job since more than a few of us are the proverbial check or two away from the edge. Yet when stores are packed and non-necessities – sorry but big screen TVs, iPods, cell phones that can run nuclear power plants and download MTV, and video games aren’t essential to survival – are flying off the shelves this isn’t a repeat of The Great Depression.”

“It is unfortunate what has happened with housing where many buyers either let greed, bit off more than they should of, hoped against hope that the bubble would keep going , didn’t fully understand what they were doing, or in the case of those hit by unemployment are losing their homes.”

“It is not the end of the world and they aren’t the first Americans forced to start over because of an economic meltdown.”

“Edna Towle – my maternal grandmother – was forced to sell her 1,000-acre ranch at the height of the Great Depression in 1936 in order to meet bank loans. She had been abandoned by her husband to run the ranch in the foothills of Nevada County with seven kids to raise in 1929. With three kids still at home at age 55, she moved to town and started cleaning houses, working the night shift at the cannery, and took on odd jobs. She bought a small lot and built her own home by her own hand going along as she could.”

“The house is more than modest by today’s standard. It has three bedrooms, one bathroom, and less than 800 square feet. She never complained, never looked back, and never cursed her lot in life. She had kids yet to raise and had to support herself. She did what she had to do.”

“When she died at age 85, all of the possessions she had were essentially in her modest home as she didn’t even have a car. But she raised seven kids essentially on her own, refused to wallow in self-pity, demanded of herself and others that they do the best they could, and paid all of her debts. And she also made sure to help those who were less fortunate however she could.”

“She also refused to judge herself against others who had more material things. It is something that those who have to start over today should keep in mind especially if they are not among those who are walking away from their home simply because it is worth less today than it was when they bought it. There is great dignity in doing the right thing. There is no shame in failing if you tried to do the right thing but couldn’t overcome circumstances. You can fail and you can get back up again.”

“Success in life isn’t about big screen TVs, big houses, touring Europe, or the latest gadgets. It is about how you deal with trials and tribulations.”

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

The Sydney Morning Herald reports from Australia. “Worried that $500,000 is too much to pay for a Melbourne house? The Reserve Bank isn’t worried and it expects prices to climb higher still. In a speech that amounted to a defence of Australia’s historically high house prices, Reserve Bank deputy governor Ric Battellino told a Melbourne housing conference yesterday to expect worse and to recognise that buyers were getting value for money. Prices would climb further because the global economy was growing again and because Australia had entered ‘a new upswing” that would extend its record 18 years of continuous economic expansion.”

“While there was ‘a common perception that house prices relative to household income in Australia are high’, Australia’s population was ‘more concentrated in a few large cities’ than were other populations and Australians had more free income with which to pay for housing.”

”’Australians seem to spend less of their income on non-housing consumption than is the case for US households, with a significant part of this difference explained by lower health costs in Australia,’ the deputy governor said. ‘Australian households, as a whole, appear to have the financial capacity to sustain a relatively high ratio of housing prices to income.’”

“The latest RP Data research puts the typical price of a Melbourne house at around $500,000 after climbing $46,000 over the past year and the typical price of a Melbourne unit at $398,000 after climbing $37,000.”

“‘Census data shows at 2006 there were 8 per cent more dwellings in Australia than there were households,’ Mr Battellino said. ‘Presumably, most of this surplus reflects holiday houses and second houses.’”

“‘Australian households as a whole appear to have the financial capacity to sustain a relatively high ratio of housing prices to income,’ Mr Battellino said. ‘It is certainly the case that the ratio is higher now than it was 20 years ago. However, this is largely explained by the fact that lower interest rates have allowed households to take out bigger home loans without increasing housing loan repayments. In turn this has given households more buying capacity in the housing market, which has been reflected in house prices.”’

The Business Spectator in Australia. “RBA deputy governor, Ric Battelino presented a speech that did everything in its power to justify bubble price structures for Australian housing. This is retrospective claptrap. Australian house prices rocketed to record multiples between 1995 and 2003, provoked by a generational mania that had its principal foundation in a colossal credit bubble fueled by non-banks and banks’ huge offshore borrowing.”

“We were concentrated in a few large cities before then and multiples had not expanded. It was also long before the commodities boom, population surge or housing supply issues. Prices may have been supported and boosted further by the surge in national income after 2003 but, even so, multiples of income remain 80-odd per cent above historic averages.”

From News.com.au in Australia. “More than one third of Australians plan to buy a property in the next two years despite concerns over higher living costs and rising interest rates, a survey…commissioned by mortgage broker Mortgage Choice, found. Mortgage Choice corporate affairs manager Kristy Sheppard said more borrowers were now taking ‘ownership’ over their financial situation.”

“As a housing market service provider, Mortgage Choice is pleased to see 41 per cent of respondents planning to buy property in the next two years and 43 per cent of them planning on an investment property,’ Ms Sheppard said.”

“The Australian housing market has emerged from the financial crisis relatively unscathed compared to its global counterparts, which would probably be part of the reason why 64 per cent of respondents believe house prices will rise in the period to November 2010.”

“Ms Sheppard said that while many borrowers were concerned about rate rises, 40 per cent were prepared for increases of at least five percentage points, a much higher figure than was forecast for the next few years. ‘This suggests many borrowers can comfortably repay their home loan sooner, if they put their mind and budget to it,’ she said.”

From Smart Company in Australia. “Over $68 billion worth of property developments are planned or underway on the Gold Coast, with the value of the work across all sectors now higher than expected during 2007, a new report has revealed. But head of property research at Advisor Edge, Louis Christopher, says the market is flooded and developers would do better to seek investments in other areas.”

“The figures also come after insolvency experts PPB announced earlier this week that 25% of all resorts and hotels on the Gold Coast are being watched due to fears they may become insolvent. The region was hit hard by the downturn, with housing prices falling up to 40% and several companies falling into receivership.”

“But Christopher says the Gold Coast market is flooded, and investors should consider moving their interests elsewhere as the area is not experiencing a recovery. ‘We are recording thousands of properties on the Gold Coast that have been on the market for over six months, literally thousands of them. This is not a market that has recovered unlike the capital cities throughout the course of this year, and is very similar to what we are seeing in other holiday locations across the country…very weak.’”

“‘At this stage, I think it’ll be very tough for developers to compete in the area unless they’ve got something essentially very, very good, or at or below market value. There is just too much stock listed.’”

“The luxury property boom continues. Yesterday it was $17 million for an unfinished mansion on Gold Coast’s exclusive Hedges Avenue. Today, a mystery buyer has paid $25 million for a mansion in the Melbourne suburb of Hawthorn. Earlier this month, Lachlan Murdoch paid $23 million for a mansion in the exclusive Sydney suburb of Bellvue Hill. He beat a strong field of bidders including Russell Crowe and Nicole Kidman for the property, which has sweeping views of Sydney Harbour.”

“The sudden boom in prestige property comes after a difficult period at the top of the housing market, where prices plunged by as much as 30% in some capital cities. Tony Kelly, managing director of the Melbourne office of valuer Herron Todd White, says an increase in the interest from international buyers is helping to push prices up sharply. The Federal Government’s recent decision to relax foreign property ownership restrictions has led to an influx of foreign buyers at all levels of the property market, he says.”

“‘When you think about what goes on in the southern part of the hemisphere, Australia is really one of the safest places to put money into property. Our economy is very stable and it’s been very strong compared to a lot of other places,’ he says. ‘If you’ve got some money in India and China, then Australia looks like a pretty safe place.’”

“A second contributing factor is a strategy used by agents to take selling campaigns out of the public spotlight and pitch high-end mansions to quiet, cashed-up buyers. ‘What they are trying to do at the minute is really marry somebody who might need to sell quietly with some of this international money coming in,’ Kelly says.”

From Asia One. “Property prices in Singapore jumped an all-time record 14.3 per cent in the third quarter, in tandem with the rise in prices elsewhere, according to some of the latest global data. However, property experts here say the steep rise in housing prices is unlikely to continue, thanks to a slew of government- introduced measures to prevent the market from overheating.”

“Quarter-on-quarter house price changes in Singapore, Britain, Canada, Germany and South Africa are back in positive territory after the financial crisis, according to Global Property Guide’s latest data. In the third quarter, price rises have occurred in 16 countries, and fell in only 11, of the 27 countries that have published their latest quarterly figures.”

“Hong Kong’s housing market, meanwhile, has entered a phase of irrational exuberance. House prices there rose by 3.1 per cent over the year to Q3, a significant improvement from the 7 per cent year-on-year decline ending Q2. In the three months to September, house prices jumped 11.1 per cent.”

“As for the Singapore market, some say prices may have already peaked. Mr Donald Han, managing director of real-estate brokers Cushman & Wakefield, noted that mass-market prices are already hovering at peak levels, aided by active pick-up in residential activity for the mid to low-end properties. Sell-out launches of private condos The Caspian near Jurong Lake and Alexis near Queenstown MRT station in Q1 show that confidence and liquidity have returned to the marketplace.”

“‘But Q3 prices have gone up too fast, in too short a time,’ he warned. ‘The steep V-shaped recovery cannot be sustained. The market needs a breather.’”

“But there could be more buzz for luxury properties priced above $2,200 psf.

Said Mr Han: ‘Top-end prices can go up by 25 per cent, as high-end investors look for bargains in Districts 9, 10, 11, Sentosa Cove and the Marina Bay areas.’”

“He also expects prices to climb 11 per cent for high-end units (priced between $1,500 and $2,000 psf) and 7 per cent for mid-tier ones.”

“Meanwhile, investors in Dubai, UAE, have something to be optimistic about: Dubai’s nominal house-price index increased 7 per cent in the third quarter, a significant improvement from an 8 per cent fall in Q2.”

The Associated Press. “Just a year after the global downturn derailed Dubai’s explosive growth, the city is now so swamped in debt that it’s asking for a six-month reprieve on paying its bills — causing a drop on world markets Thursday and raising questions about Dubai’s reputation as a magnet for international investment. The fallout came swiftly and was felt globally after Wednesday statement that Dubai’s main development engine, Dubai World, would ask creditors for a ’standstill’ on paying back its $60 billion debt until at least May.”

“Dubai became the Gulf’s biggest credit crunch victim a year ago. But its ruler, Sheik Mohammed bin Rashid Al-Maktoum, had continually dismissed concerns over the city-state’s liquidity and claims it overreached during the good times. When asked about the debt, he confidently assured reporters in a rare meeting two months ago that ‘we are all right’ and ‘we are not worried,’ leaving details of a recovery plan — if such a plan exists — to everyone’s guess.”

“Then, earlier this month, he told Dubai’s critics to ’shut up.’”

“The more than 2,600-foot (800-meter) Burj Dubai is scheduled to open in January as the world’s tallest building. But many other projects, including a tower even taller than the Burj Dubai and satellite cities in the desert, are still just blueprints.”

“The standstill will likely not immediately affect CityCenter, an $8.5 billion casino complex opening next month in Las Vegas that is half-owned by Dubai World. A Dubai World subsidiary and casino operator MGM Mirage agreed with banks in April to fully fund and finish the six-tower, 67-acre development of plush resorts, condominiums, a retail mall and one casino on the Las Vegas Strip.”

From NineMSN Money. “Brad Pitt, Angelina Jolie and David Beckham are set to lose millions on their luxury homes in Dubai, as the emirate’s debt spirals out of control leaving the future of the housing market hanging in the balance. Nakheel’s Palm Jumeirah development sold 2,000 luxury villas and apartments within a month in 2002, amid the explosive growth of investment in Dubai.”

“At one point, Dubai was said to house 80 percent of the world’s cranes.”

“With Nakheel unable to pay its debts, construction is likely to stall on the island, leaving the luxury villas surrounded by an ugly building site – which could see property values plunge. House prices in Dubai fell 47 percent in the second quarter, compared with a year ago, and Dubai World may be forced to sell off assets – including Nakheel developments - in order to repay its vast debt.”

From Live Mint. “It’s true that Dubai’s problems stem from the surreal happenings in real estate there, with the place being home to the world’s tallest tower and the biggest man-made islands. Real estate prices have fallen by around 50% in the sheikhdom and are expected to continue to fall. At the same time, the debt restructuring is a clear signal that there are still lots of buried mines out there and it’ll be a long time before the world economy will be out of danger.”

“Many of the economies and banks in the West continue to be on life support and their capacity to weather shocks is much diminished. Matters are not helped by the fact that many international banks have lent heavily to Dubai, banks that are still in a vulnerable position and need to raise capital. But if Dubai was a real estate bubble waiting to burst, other emerging markets, too, are overextended. Analysts have been warning about Eastern Europe, with their high foreign currency borrowings and dependence on exports.”

“Vietnam, another darling of emerging market investors, is also facing problems. And finally, while Dubai may be facing severe overcapacity in housing, China, the big daddy of all emerging markets, is also facing overcapacity in a host of industries, made worse by huge growth in credit.”

The Jakarta Globe. “One of the country’s largest property developers, PT Ciputra Development, plans to expand into China with a residential project due to start next year, with revenue of about $1.3 billion expected to accrue over 12 years, the company said on Monday.”

“‘The project, which consists of houses and high-rise units, promises a high profit margin of more than 40 percent gross, which is why we’re interested,’ said Tulus Santoso, a Ciputra Development director.”

“The project will include a total of 20,000 units, with the keys to the first 500 units — about 60 percent of them houses — to be delivered in 2011, he said. ‘In China, individual housing units can fetch three times the price of high-rise apartments.’”

“‘We will have to see later how the China project performs as this is their first venture in China,’ said Natalia Sutanto, a property market analyst at brokerage firm PT Ciptadana Sekuritas. ‘They’ve already been quite successful with their property developments in Vietnam and Cambodia.’”

The Thanh Nien Daily in Vietnam. “National Assembly representatives on Saturday voiced their disagreement with the annual house tax proposed by the finance ministry, saying it would cause adversely impact many citizens. According to the draft submitted early this month, homeowners would have to pay an annual house tax of 0.03 percent of the assessed value, which is based on total construction costs. Houses built for VND500 million (US$27,901) or below will be exempt from this tax.”

“‘With the current per capita income (less than $1,000 a year) the housing tax shouldn’t be levied within the next ten years,’ Ho Chi Minh City representative Tran Du Lich said.”

“Many deputies also said that to effectively curb property speculation, the stated aim of the draft on housing taxes, the draft should target those who own more than two houses. Tax rates on housing area should also be increased, as the proposed one wasn’t high enough to deter land speculation, said deputy Truong Xuan Quy from the northern province of Tuyen Quang.”

“‘The (proposed) tax rates are too low to curb land speculation, especially for land left idle,’ said Le Dung NA deputy from the Mekong Delta province of Tien Giang.”

“Representative Ngo Van Minh from the central province of Quang Nam, said, ‘We should never ask those who only own one house to pay tax,’ as people have already paid taxes when buying constructional materials.”

The Lahaina News in Hawaii. “‘What is happening with the real estate market?’ This is the number one question that I am asked on a daily basis.
The answer? A property priced right based on recent comparable sales, in a good location and in clean, modern condition will sell. In other words, if you are a serious seller, you are now entering your property into a beauty contest with a price war raging.”

“There are 101 pending sales on West Maui, which is up 20 percent from 60 days ago and over the past ten months. On West Maui, there have been 16 residential home sales closed since Oct. 1, 2009. The lowest was $450,000, and the highest sale at $2,800,000 was in Launiupoko. Seven of the home sales were over $1 million.”

“West Maui condo closed sales since Oct. 1, 2009 total 34. The lowest priced fee simple condo was $179,000 for a 486-square-foot studio. Only four condo sales were over $1 million, and none of the condos sold as high as $2 million. Four of the condominium sales were leasehold, and the remaining was fee simple. Price per square foot ranged from $282 to $1,370.”

“This is a far cry from the $9,000 per square foot Paul Brewbaker quoted for elite Hong Kong properties in a recent speech on why Hawaii properties are an investment that international investors should seriously consider. Comparing the price per square foot numbers with international markets can make West Maui a real bargain.”

The Herald News in New Zealand. “Even with two earners, Donna and Terry Victory struggle on below-average wages to feed themselves and their 14-year-old daughter. Mrs Victory, 34, earns $15.94 an hour after almost nine years as a teacher aide for 27.5 hours a week at a school for disabled children in South Auckland.”

“Mr Victory, 37, also earns below the average wage of $25 an hour after 7 years as a fulltime quality assurance technician in the printing industry. Their combined incomes of just $933 a week after tax, averaged over the year and excluding overtime, gives them just $33 a week for food, petrol and other living costs after meeting their automatic payments of $1800 a fortnight for the mortgage, rates, insurance, a car loan and hire purchases on a fridge and washing machine.”

“‘We rely on Terry’s overtime to be able to make ends meet,’ Mrs Victory said.”

“This year that overtime has dried up with the recession, forcing the family to borrow twice from Mrs Victory’s parents. They are getting by now only because the overtime has picked up again since the recession bottomed out in mid-year.”

“Until 2006 they were renting, but the house was damp and Mrs Victory and her daughter Shontelle were constantly sick. When the landlord raised the rent, they applied for a state house. ‘They asked, ‘Are you on a benefit?’ ‘No, we both work,’ she said. ‘Well, you don’t qualify’ they said.”

“‘So then we thought about trying to buy our own house and were lucky enough to get a mortgage broker who secured it against my parents’ house. We had no deposit. We had huge loans from our wedding. We consolidated the loans into the mortgage.’”

“They bought a modest house in Papatoetoe for $279,000, paying off the mortgage at $1200 a fortnight. The interest rate dropped this year. But they used the difference to take a new loan for a car. ‘We don’t earn low enough to get Government help, and we don’t earn high enough to get by,’ she said. ‘We are stuck in the middle.’”

Okay, for those of you who’ve asked, here’s an excerpt from “A Roadkill Christmas,” my account of how I made do on a meager holiday budget a couple of years back. For those with a lively sense of culinary adventure, nothing beats the fun of “found” protein sources. And for those with perhaps less-than-welcome relations all expecting to be fed and entertained come Thursday, it’s a dandy way to discourage them from showing up in the first place.

“Roadkill….” “No, really.”

Times are hard. And accordingly, the creative cook must work with the ingredients on hand.
 Sometimes these are pristine and readily available, and sometimes, well, you have to make due with what you’ve got.

If you’re facing a feasting holiday with a depleted larder, take heart. One of my all-time favorite Christmas dinners featured a roadkill, and to this day my mouth waters as I remember how magical the meal turned out to be.

For those whose initial reaction might be revulsion, let me just say that properly prepared, it’s not nearly as gawd-awful as you might imagine. And with a little creativity, (and the stomach to google for butchering instructions,) it’s at the very least bound to be memorable.

It had been snowing on and off that December evening, and by the time I got to the canyon on my way back from town, there was ice all over the road. I was fortunate I’d been driving slowly, because if I had sped by like I usually did, I’d have missed it. The plumage caught my headlights and reflected off the glistening ice…a peacock. Likely estray from the ranch up canyon. I pulled over and carefully peeled it off the pavement. It was a big one, maybe 15 pounds or so, and already beginning to freeze. Granted, there was a sizable chunk out of the breast where whatever had nabbed it had gouged out a dinner, but danged if I was going to let that discourage me. I mean, how often do you get a chance to dine on peacock?

I got it home, skinned and gutted the thing, blasted it clean with a garden hose and carefully trimmed the mangled part from the carcass. Then I coated it with kosher salt, set it in the refrigerator, and went to bed. The next morning, I rinsed off the salt, patted it dry, inspected it for any unspeakable things I’d missed the night before, and finding none, re-koshered it, and stuck it back it in the fridge for another 12 hours.

That night I gave it a final rinse and brined it overnight in a huge stockpot to which I’d added two cups of salt, a cup of maple syrup, and enough cold water to cover. The next morning I dried it, stuffed it with figs and black walnuts from the orchard, along with a quartered orange, and a bit of fresh chopped ginger. Then I trussed it, rolled it in cracked black pepper and dried garden herbs, and slow-smoked it over apple wood for the next two days while I combed the oak forest and rummaged through the remnants of my garden and pantry for stuff I could use for accompaniments.

I’d alerted a couple of my epicurean nerd friends of my find, and they were sufficiently intrigued (and trusting, as nerds alone at Christmastime tend to be,) to venture up from Pasadena to join me. Knowing both my cooking and my propensities, they’d brought along a bottle of good champagne, and a selection of excellent peppery merlots. (Nerds tend to make fascinating drunks.)

I ended up serving the beast with a wild current jelly I’d put up the previous summer, grilled root vegetables from the garden, wilted winter greens with balsamic vinegar I’ve been reducing out in the shed, and wild rice with shallots and morels. It was extraordinary, baroque in the best sense of the word. Stuffed and satisfied, we ended the evening giddy with the delicious irony of the whole thing (and a nice Armagnac.). Roadkill had turned out to be the most extravagant dining experience any of us had had in ages, and certainly one of the most memorable.

magister artis ingeniique largitor venter

by ahansen

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A review of the media and the housing bubble continues with southern California.

The good:

Voice of San Diego, April 2005: “The developers have learned a new trick after the last local real estate price bubble popped in 1989. It’s called controlling the ‘absorption rate.’ It goes like this: A builder gets the land and zoning approvals to build new housing subdivisions, but only builds in small numbers of new homes. That is done for two reasons. One is to make sure that housing prices remain high by limiting the supply of new homes, and the other is to ensure that they can sell all the homes in each partial release of homes before they invest in the next.”

“The San Diego Building Industry Association has done a very slick public relations job of linking the problem of a lack of affordable housing and regulatory restraints on unlimited homebuilding in the public’s mind. The argument is that we could build a lot more homes if the regulations didn’t get in the way.”

“The truth is that builder actions to limit the number of homes they release into the market at any one time is a key factor driving up home prices, along with all the young speculators who are getting in with nothing down. Many of the speculators are going to go bust when the price bubble bursts, but the builders will continue to profit as much as they can.”

The Press Telegram, May 2005: “Properties across the board are sitting on the market longer thanks to a rise in the number of homes for sale. The state’s housing inventory is double the level of last year, according to the California Association of Realtors.” Sales of homes for $1 million and up rose from 19,100 in 2003 to 33,100 in 2004.”

“‘I think it’s a psychological threshold as well as a threshold for financial obligation,’ said Robert Kleinhenz, an economist with the CAR. In talking with realtors, more people are backing out of the luxury market, or looking at more affordable options inland, he said.”

“Even at the high end of the market people are shopping for the best deal, said Richard Daskam, with Keller Williams Realty in Long Beach.”

Again the Press Telegram in May 2005: “A blazer and slacks just don’t cut it for one local real estate agent. Heath chose to wear a bikini on a billboard she posted earlier this month. The advertisement is turning heads quicker than a Naples Island open house. ‘It’s kind of flipped people out,’ said Heath, who reported receiving almost as many calls from Realtors upset with the ad as those voicing support. ‘A couple of agents are having a fit about it, but that’s because they just didn’t think of it first.’”

“In a competitive business like real estate, people are increasingly being forced to find creative ways to get people to remember their names, marketing experts say. ‘The problem is everybody has a (real estate) license nowadays, and unless you differentiate yourself, it’s tough to make a living.’”

The Desert Sun, April 2005: “Retiree Fred Crutcher, 68, and wife, Patricia, have had frustrating experiences as both buyers and sellers. While they’re very happy with their new home in northern Palm Springs, they’re still trying to sell their former home, a large two-level condo in southern Palm Springs.”

“The couple listed the at $589,000, but have since reduced the price twice, it is now listed at $580,000. ‘It’s really hard to tell why it hasn’t sold so far,’ said Crutcher. In the meantime, the couple is now having to pay two mortgages, not to mention homeowners’ association fees in two places.”

The Orange County Register: “‘We’re dead in the water as far as home-price appreciation’ if interest rates rise another half-point, said one in Laguna Niguel. ‘Wages are just not in line with home prices.’”

“Paul Scheper of L.L. Financial in Aliso Viejo noted..’inflation fears, prompting an increase in rates. It’s a knee-jerk reaction’…there’s ‘no need for concern or panic - unless the … (jobs figure) does the same thing again.’”

The bad:

Union Tribune, May 2005: “Bill Holz of Eastlake is a Navy command master chief…He and his wife Nancy decided to put their home on the market after less than two years of ownership. Using prices of comparable homes as their guide, they listed it in early February for $919,000, nearly double the $509,000 they paid originally.”

“‘We upgraded the house to the hilt. We probably have $100,000 in upgrades…People don’t make enough money to buy them. Your buyer pool is like a pyramid, the higher the prices, the smaller the pool of qualified buyers. We’ve got to get somebody moving up from another house or condo or town house that might be able to buy these houses.’”

“Alleda Harrison (a realtor) said the current market requires sellers to price their homes less aggressively. Instead of tacking on 10 percent or $25,000 to the price last paid in the neighborhood, sellers should hope they can get a price equal to the last comparable home sold nearby.”

UT, April 2005: “More than 40 percent of the 120 units in Park Boulevard West condo complex are non-owner occupied. At the 86-unit Crown Bay project, roughly half of the property tax bills are mailed to addresses outside the complex. At the 211-unit Horizons tower, it’s about about 35 percent. ‘You’re not going to lose money on property,’ (said one speculator.)”

The North County Times, May 2005: “‘Home values and purchase prices have gone up so tremendously, it’s led to a number of products to assist consumers to be able to buy and to provide flexible options so they can afford what they buy,’ said according to Doug Perry, of Countrywide Home Loans.”

“When Paul Espinoza decided to refinance the home he owns he decided to go with an interest-only package in order to reduce his monthly payment. What he didn’t know at the time he signed his refinancing documents was that his principal amount would continue to climb. ‘The cost to you is really the amount that the principal goes up over the period of the loan,’ said Espinoza who felt that he wasn’t made fully aware of that possibility by his lender when he arranged for the new deal. ‘I’m curious why this isn’t mentioned by loan officers?’”

“Rob McNelis, president of the California Association of Mortgage Brokers’ San Diego chapter said, ‘We’ve all known this rapid price appreciation is unsustainable. Historically, the real rate of home price appreciation is around 3 to 3.5 percent; not a bad day at the races when you realize it’s free money.’”

North County Times, May 2005: “The Realtors report issued last week found the median price of detached homes in Carmel Valley closing in on $1 million, up an even $30,000 from March to $985,000 in April. ‘The theory is, hey, you’ve got two homes, either a vacation home or a primary residence,’ Jim Vanderspek, an Escondido certified public accountant, said. ‘If you don’t want to rent a second or vacation home, it makes a lot of sense to move every two years and then be exempt from capital gains every time.’”

“People who are that property-rich, Vanderspek says he knows of one person with six houses, may not think renting out their home is a good idea, he said. Leaving the house vacant reduces maintenance costs and potential problems with renters. And if you buy with cash, as some are doing, there’s no mortgage to pay off. ‘People are deciding to buy real estate as a straight cash investment. They can just own it and watch it go up in value,’ he said.”

The Santa Maria Times, May 2005: “Financial experts have lately become fixated on the “bubble economic theory,” which basically insists that economic forces create bubbles in various markets, then counter-forces burst the bubble.

The collapse of tech stocks in the late 1990s is a classic demonstration of bubble activity. That market went crazy for several years, turning teen-agers into Ferrari-driving multi-millionaires. The kids who used to be known as computer geeks quickly became sirs. Then that bubble burst, and the sirs went back to geekism and Ford Fiestas.”

The thing about bubbles is no one really knows how long they/ll last. America/s homes are not dot-com stocks in the late 1990s or the Japanese stock market of the late 1980s. Homes have utility that stocks don/t have 7 you can live in a home. If the housing market softens and you lose a little short-term equity, it/s a safe bet you/ll get that value back just by waiting out market swings 7 and have a comfortable place to live while you/re waiting.”

“In other words, don/t sweat the bubbles, which seem to be connected and have a life of their own.”

The LA Times, May 2005: “Kim Kaul, a 36-year-old San Diego homemaker, was an unlikely player..with four young children and a rented apartment. Kaul saw a posting on the Internet..He sold the contract to Kaul for $8,500, money she took out of the family’s meager savings.. the Vegas market caught a chill.”

“She found a tenant, who pays $1,250 a month. But her mortgage was $3,000. When her husband lost his job, the situation became dire. The couple paid the January mortgage with borrowed money, then gave up. ‘I’m sure the market’s going to pick up, but I can’t hold out that long. This is kind of a bummer.’”

The LA Times, April 2005: “The LA Times is reporting on a ‘real estate expo less like a hard-nosed business event than a Gen-X and boomer-friendly rave. ‘It’s a mega-event,’ added Bill Zanker, president of the Learning Annex. ‘L.A. is responding like wild. Everybody in L.A. is talking about real estate. It’s the new aphrodisiac..the new type of rock concert.’”

“The New York-based company (is) famous for its workshops and classes such as cardio striptease and tarot card reading.”

“What they are calling the ‘classes’…’The Lazy Way to Create Real Estate Wealth, How to ‘Quick Turn’ Real Estate in Los Angeles With No Money, Credit or Risk, and How to Get Free Money From the Government for Real Estate.”

Market observers, you decide.

May 2005: “We expected things to level off a little bit this year, but it appears that’s not the case,’ said Jim Link, association vice president. ‘People are concerned that if they didn’t buy now, they won’t be able to afford to buy later.’ Mike Davis, president of the association’s Santa Clarita Valley division, said ‘It’s (a) good to buy and (a) better time to sell,’ Davis said. ‘If someone is going to relocate they should do it sooner (rather) than later.’”

March 2006: “February marked the 13th consecutive month that the region’s median price rose at least 20% year-over-year..’There’s still plenty of gas left in the tank,’ said DataQuicks John Karevoll.”

“Economist Christopher Cagan says the price increases are moving inland and ’suddenly starting to pop, and when it comes, it comes like a really hard whip crack.’”

“In Los Angeles County, sales dipped 8.6%, in Orange County sales fell 11%, in Ventura, sales slid 3.9%, and in Riverside County, sales edged down 2.7%. Michael Davin of CataList Homes in Hermosa Beach believes the region’s high prices are ’sucking the oxygen out of the market.’”

“‘San Diego should have hit the wall about a year ago,’ Karevoll said, ‘but since then prices have..gone up another 16%. There is some uncharted territory we’re in right now,’ he said. ‘And we would love to have had a chart.’”

April 2005: “County residents moved out of Southern California entirely, too, largely in search of cheaper real estate. It’s affordability that’s causing middle-class flights. People can’t afford housing in Los Angeles, but want to stay in the Southwest and will commute long distances. ‘We’re getting a little bit too expensive,’ economist Jack Kyser said of the county, noting a similar trend in Orange County, where 27,590 residents left for other counties last year.”

May 2005: “DataQuick analyst John Karevoll said he gets more calls about San Diego from East Coast financiers than for any other market he monitors. ‘We’re being watched,’ Karevoll said. ‘We’re under the magnifying glass.’”

“Anne Throckmorton said that most real estate professionals remain optimistic. ‘We went around our group, asking about each state’s market areas, and there wasn’t one area where the market was down,’ she said. ‘It was a very ebullient attitude.’”

May 2005: “With no savings, and a college loan to repay, Kelly Pearson took out a mortgage for 100 percent of the price of the house. Closing costs were paid for by a $10,000 gift from her parents. Her plan: to borrow more soon and invest in a condo. The number of homes sold in San Diego in March fell compared with the number sold in March 2004, the eighth monthly year-over-year decline in nine months. The number of San Diego listings swelled 27 percent in March, to 7,062 houses for sale, up from 5,555 for sale in March 2004.”

“Jerry and Laura Satran’s Sunday open house is empty. (They) are asking $1.3 million. But here they are, the second week the house has been on the market, drumming their fingers. The previous Sunday, Jerry says, 40 visitors stopped by. No offers. Two weeks later the Satrans receive an offer: $1.2 million. Not the full asking price. No one seems more disappointed than the neighbors. One woman suggests the Satrans would be hurting the entire block if they settled for less than $1.25 million. ‘She says she was only going to be here for two years, so don’t screw up the comps,’ says Laura. ‘She’s not being cruel, everybody who lives here is in it for the investment.’”

May 2005: “Steve Johnson, of the self-described ‘real estate think tank’ ‘The resale market is the most significant driver of the new housing economy, due to the trillions of dollars of equity relative to debt. Conservative lending practices and a universal merchant marketing/retail approach to new home production drastically limits speculative building in this region,’ Johnson said.”

May 2005: “It’s old news that fewer than one of every five California families can afford a median-priced home in the state. A far different question might be to ask what percentage of families can afford any home at all. ‘It would appear that close to half of California families are on the outside of the market. ‘That is unhealthy,’ said Steve Johnson, director of a real-estate think tank.”

“Another factor helping some people is the fact that some lenders now are offering 40-year mortgages. ‘It seems like all we’re doing is renting from the bank anyway,’ Johnson said. ‘I remember when mortgages went from 20 years to 30 years, so I suppose this is not that big a deal.’”

“Economist Jack Kyser says people with lower incomes could benefit if we were able to ‘unlock’ parts of the housing supply. ‘There are some areas, such as South Los Angeles, which are very affordable and very centrally located,’ Kyser said. ‘The thing that’s keeping this part of the supply “locked’ is problems with crime and with poor schools. It won’t happen overnight, but if we could improve safety and the schools in some of these areas, we could add a lot more housing supply.’”

April 2005: “In some neighborhoods of Los Angeles where, in addition to offering as much as $75,000 over the asking price, buyers are sending flowery bios, pictures, and letters to sellers. ‘I just oohed and ahhed my way from room to room,’ read one letter to Jane Centofante, who was selling her 2,000 square-foot home in Westwood, a tony L.A. suburb, for a cool $1.49 million. ‘I gather from your [house] that you are warm and smart and bring incredibly beautiful detail to your world.’”

“‘They’ve had to kiss a lot of frogs before they find their prince,’ says Ms. Jacobson, a native New Yorker. ‘But those other frogs will find their palaces, too. There are still plenty of opportunities.’”

March 2005: “In his report, UCLA Anderson Forecast Director Edward Leamer …points out that historically; economic expansions have not lasted very long, with five of the last nine lasting only 14 quarters or less. The current expansion is 12 quarters old right now and Leamer sees no growth spurt on the horizon that will extend it much further.”

“In a detailed discussion, Leamer reveals that the three longest expansions in history all experienced growth spurts during which the rate of growth of GDP was abnormally high and the rate of unemployment was driven down. Each expansion is different, with different stimuli bringing about the growth spurt. But Leamer sees no clear stimuli on the horizon in 2005, ruling out both tax cuts (which have already occurred) and monetary stimulus (which has also occurred through low interest rates). An increase in government spending is doubtful (unless it is wartime spending), leaving only exports as a possible ray of hope. Exports were a major factor in the length of the Reagan expansion, and the declining dollar vs. the Euro should stimulate this sector.”

“Leamer concludes with the assertion that a recession is in the future; he just doesn’t know when yet. He doesn’t see it in 2005, but believes it could happen in 2006.”

“In California, UCLA Anderson senior economist Christopher Thornberg says that at best the state economy can be expected to maintain slow growth over the next few years as the weak housing sector saps off strength created in other parts of the state’s recovering economy. ”

May 2005: “‘Affordability is a serious issue,’ said Esmael Adibi at Chapman University in Orange. ‘The fact is that more people are trying to buy more housing than their incomes can justify.’”

“By letting short-term interest rates hit rock bottom, the central bank helped drive down mortgage rates. That in turn created an exaggerated demand for housing, Adibi said. ‘The Fed caused some of the problem, no question,’ said Adibi, who believes local housing prices may start to fall by the end of the year.”

“Adibi and others suggested that Greenspan might be trying to reduce the impending shock of a slowing housing market. But Greenspan’s remarks may be ‘too little, too late,’ said Christopher Thornberg, a senior economist at the UCLA Anderson Forecast who has been among the few economists to emphatically describe California’s housing market as a bubble.”

“People have been freely spending ‘because they feel wealthy’ thanks to soaring home prices, he said. ‘When the market cools, it will have implications beyond real estate,’ Thornberg added.”

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Last week, the media kept itself busy trumpeting Oprah’s upcoming retirement and Lou Dobbs’s unexpected resignation. Mrs. Palin’s solo comeback tour through the lower 48 had millions glued to their screens. And something extraordinary happened in Washington– though you’d never know it from The News.

In a mighty sucker-punch to the sanctity of the Fed, and to the chagrin of the banking industry, the Democratic party leadership, and of the very Beltway way of doing things, the House Financial Services Committee passed HR 1207; the Ron Paul - Alan Grayson “audit bill,” authorizing the Government Accountability Office to conduct the first real audit of the Federal Reserve in that institution’s seventy-year history.

The MSM has largely ignored the story—and perhaps with good reason. When an improbable coalition of progressives and libertarians, labor leaders and cold-war conservatives, led by a couple of self-admitted wingnuts and egged on by a cadre of moonbat bloggers manages to put aside its partisan bickering and outmaneuver the most powerful institutions on the face of the planet, it does not bode well for Business as Usual in our nation’s capitol. Or, by extension, their finger-puppets in the media.

Here’s what happened:

Back in February of this year, veteran free-marketeer, Ron Paul, R-TX, and wealthy freshman maverick, Alan Grayson, D-FL, introduced a bill that attempted to force some accountability for the roughly $4,000 per American man, woman, and child that the Federal Reserve has seen fit to distribute for us without our consent—and to who-knows-whom—in the wake of last autumn’s financial meltdown. The bill gained immediate bi-partisan support in the House and was, of course, immediately attacked by the Powers that Be as needlessly intrusive, inflationary, and a threat to the independence of the central banking system. “Just another damned excuse for Congressional meddling,” was among the kinder accusations I heard bandied about.

The bill worked its way through committee and finally came up for a vote on Thursday. It was challenged by a last-minute, competing version of the proposal, which was so watered-down it would have essentially gutted the audit by posing a host of restrictions on what could and could not be presented for GAO examination.

This “serious compromise,” as these challenges are known, proposed by FIRE’s own point-man, Mel Watts, D- N.C., was unexpectedly supported by key Democrats like Chairman Barney Franks—who had spent the last year proclaiming his support for an audit. Franks argued that Congressional interference in the workings of the Fed could have an inflationary effect on the economy, and “too much transparency” could compromise national security.

A flurry of eleventh-hour lobbying by “a cross-section of prominent economists,” as they called themselves, (seven out of the eight of whom, as it turned out, had extensive dealings with the Fed, and half of whom are currently serving on the Fed payroll,) was circumvented by some inspired procedural maneuvering on the part of Paul’s supporters. Bolstered by a letter organized by liberal blog, FireDogLake.com, Grayson managed to convince wavering Democrats that their liberal base was behind the bill. Bucking Frank, Democratic support held, and the bill passed in a 43-26 landslide.

Although its ultimate signing into law is uncertain at best, Thursday’s vote is notable on several levels. Most significantly, it serves notice to the Fed, the banking industry, and lawmakers of all persuasions, that when an angry and committed populace rallies behind a just and reasonable cause, no amount of official “entitlement” is going to deter them.

Secondly, it represents a crack in the strict enforcement of party line politics. Although the GOP supported this bill for laughably hypocritical reasons—after all, no one could credibly argue that Paulson/Geithner, Greenspan, Goldman, et al are socialist lackeys—it was the Democratic holdouts and their progressive allies who were responsible for finally passing the bill that Dr. Paul has been proposing in one iteration or another since 1983.

Say what you will about the motley sponsors or their ideological eccentricities, this is our money they’re handing out. This is our legacy they’re suborning to their private ends. These, supposedly, are our representatives, not the paid-for handmaidens of an entrenched corporate oligarchy. And these people stood up for it! No wonder the MSM wants to brush this issue under the carpet in favor of their usual mind-numbing drivel.

That Congress, our institutions, and our futures are owned and directed by a few favored entities may have been acceptable when the economy was booming and the nation was an undisputed powerhouse, but seventy years behind a veil of secrecy has fostered a central banking system that has shown itself to be intrinsically incompetent, if not outright corrupted. And seventy years is long enough.

Yes, there are dangers inherent in a free and open society. Granting Congress—and this would be our Congress, with all its hemi-brained knuckleheads—oversight of an institution as complex and critical to our international functioning as the Fed, is a scary proposition indeed. And giving it a California-style legislative initiative so it can manipulate monetary policy for expedient political ends would be the stuff of nightmares.

Then there is the argument that the Fed (and perhaps the judiciary) are the only independent national institutions America has left. Do we really want them subjected to the political whims of a largely uninformed electorate?

But as we have seen with our military and security apparatus, the costs of non-transparency are just as troubling, and after all, the Paul-Grayson bill simply authorizes an audit of the Federal Reserve—not its abolition. And audits are by definition, an accounting after the fact. So the argument that Congress may use the audit process to unduly influence monetary policy loses some of its steam—on this track at least.

Fraught with unknowns though it may be, allowing an entitled and unregulated shadow agency to continue disbursing trillions of our tax dollars to favored entities is far more disturbing. As Congressman Grayson said in a radio interview with Salon’s Glen Greenwald last April,

“Let’s suppose for the sake of the argument, that Mr. Bernanke decides to give a billion dollars to a fledging institution called the Dick Cheney Savings and Loan, and its only asset was a numbered Swiss bank account. How would we know? How would we know that that happened? The answer is, if you take the Federal Reserve’s view of things, we wouldn’t. And that’s disastrous.”

To the politically idealistic among us, this small mutiny among principled elected officials could herald the rebirth of a true populist democracy in the United States; one in which the partisan dictates of competing ideologies are set aside in the interests of bringing accountability and transparency back into the legislative process. Perhaps this truly representative vote is the beginning of the end for the old boy, business-as-usual power base that has so strangled our market economy and the very governance of our Country. At least it’s a good start.

And that’s a reason to be Thankful.

Travel well. Eat safely!

by ahansen

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.

Post off-topic ideas, links and Craigslist finds here. Please visit the HBB Forum.