January 31, 2012

Bits Bucket for January 31, 2012

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January 30, 2012

Bits Bucket for January 30, 2012

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January 29, 2012

Just Another Indictment Of Our Corrupt Political System?

Readers suggested a topic on the latest proposals out of Washington. “Typical Obama: All of a sudden… 4 years after the crash… he has the idea to go after the bankers for their criminal behavior… 4 YEARS!!!!… HE WAITED UNTIL A RE-ELECTION YEAR TO PANDER TO STUPID VOTERS…. & act like he’s ‘doing something.’ He put up every roadblock… until now… to thwart any investigation into his banker buddies.”

A reply, “There is never a better time to pander to stupid voters, whose memories are only slightly higher on the evolutionary scale than rodents. By contrast, what are the GOP candidates doing on the issue of restoring a Rule of Law in the banking sector?”

The Gannett News. “President Barack Obama announced during Tuesday’s State of the Union address that he asked U.S. Attorney General Eric Holder to form what he described as ‘a special unit of federal prosecutors and leading state attorneys general.’ New York Attorney General Eric Schneiderman joined Holder and other officials Friday at a news conference to discuss the formation of the Residential Mortgage-Backed Securities Working Group. Federal and state officials will target the creation, promotion and sale of the financial instruments that provided fuel for the overheated housing market and the run-up in prices.”

“‘Americans lost close to $7.5 trillion in home equity over the last five years,’ Schneiderman said. ‘That’s where the wealth of the working class and the wealth of the middle class was. And that’s why we have to make sure we hold people accountable.’”

“Schneiderman, New York’s top law enforcement official, wouldn’t predict when any the architects of the housing bubble might go to jail. ‘I can’t comment on the specifics of the investigation,’ he said.”

From KPCC. “In his address to the nation, Obama said ‘responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom to get some relief.’ Obama said that’s why he’s sending Congress a plan ‘that gives every responsible homeowner the chance to save about $3,000 a year on their mortgage, by refinancing at historically low interest rates. No more red tape. No more runaround from the banks.’”

‘Congresswoman Judy Chu of El Monte said, ‘It isn’t enough.’ She said mortgage lenders own 12,000 homes in her district. ‘In one ZIP code in a city in my district, Covina, the rate of foreclosure was 738 percent in just over two years.’”

The LA Times. “Some liberal groups have been pushing for a broader investigation into the financial crisis and praised the initiative. ‘By launching this investigation, President Obama will take a crucial step toward holding the 1% on Wall Street accountable for the big bank fraud that nearly torpedoed the economy,’ said Justin Ruben, executive director of MoveOn.org.”

“If the goal is to get criminal convictions — Obama called in his State of the Union address ‘to hold accountable those who broke the law’ — it will be difficult to accomplish, said Thomas Gorman, an attorney at Dorsey & Whitney in Washington. ‘Frankly, it’s coming to the table somewhat late,’ said Gorman, a former enforcement official at the Securities and Exchange Commission. ‘There’s a huge body of information out there about what happened, and there have been very few criminal charges brought.’”

The Guardian. “Is this, finally, the moment Obama gets tough with Wall Street? Among the populist pledges rolled out in the speech was tough talk against the too-big-to-fail banks that have funded his campaigns and for whom many of his key advisers have worked: ‘The rest of us are not bailing you out ever again,’ he promised.”

“Does the formation of the new task force signify a move to more progressive policies, as MoveOn suggests? Longtime consumer advocate and former presidential candidate Ralph Nader doesn’t hold much hope: ‘This financial crimes unit, that’s like putting another label on a few doors in the Justice Department without a real expansion in the budget.’”

“Delaware’s Beau Biden, the vice president’s son, expressed similar concerns about the task force, asking: ‘How many FBI agents are being put on it? How many investigators? How many prosecutors?’”

“This is the Occupy Wall Street conflict distilled. Will Eric Schneiderman’s new job lead to the indictment of fraudulent financiers, or to just another indictment of our corrupt political system?”

Bits Bucket for January 29, 2012

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January 28, 2012

Bits Bucket for January 28, 2012

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January 27, 2012

Somebody Might Buy It For Less Than It’s Worth

It’s Friday desk clearing time for this blogger. “A partner in the 46-story Trump Soho, the condo hotel that opened in April 2010 in the Hudson Square district over the objections of neighborhood preservation advocates, last week put the building on the auction block. Of the 391 units, about 90 have been sold and 42 were currently listed for sale with prices ranging from $995,000 for a 425-square-foot studio to $8.74 million for a 2,331-square-foot two-bedroom suite.”

“Sean Sweeney, director of the Soho Alliance and one of the neighborhood critics of the project, said he thought the Trump Soho was in financial trouble. ‘Trump and his shady partners have learned the hard way not to come to Soho with a dubious scheme that violates our zoning and expect the community to roll over,’ Sweeney said. ‘Trump behaved arrogantly and now his brand name is attached to a bankrupt property being sold at public auction to the highest bidder,’ he added and concluded with, ‘Soho to Trump: You’re fired!’”

“For around four years, China has been building around 1 billion square meters of housing a year, ten times the figure in the U.S. The amount needed to accommodate real owners — people moving from farms to the cities, for example — is 700 million square meters. Prices in the frothiest markets are fifty or sixty time rents. The 50 to 60 multiple is far above the level in most U.S. markets at the height of the bubble in 2006; in those heady days, a multiple of 40 was considered giant.”

“While the government’s official figures show modest declines starting late last year, those numbers are famously unreliable. A better view comes from owners trying to sell their units. Losses of 30% aren’t uncommon. In fact, many owners who paid, say, $600,000 in 2010 are furious that their landlords are now offering unsold units in the same building for $450,000.”

“As professor and mentor at the University of Chicago’s Booth School of Business, Robert Aliber observes, ‘In China, the housing boom is a far bigger source of growth than is widely recognized, and it’s totally unsustainable. China’s spurt of a 10% growth rate is likely to be history.’”

“The million-dollar view from this 28th floor corner condo at the Ritz-Carlton Hotel and Residences is beyond one of a kind. But for a very long time, no one was buying. This ‘mansion in the sky’ took 180 days to sell. And it’s far from alone. ‘I think we’re seeing already with the Ritz that there’s not a lot of demand for resale (condos) in this price range,’ says realtor John Pasalis, who has been watching this sector closely and is concerned about an oversupply of luxury condos. ‘In some ways this (the number of Ritz and Trump units now for sale) is the sign of a market that was very speculative and is reaching a point where investors are starting to realize that just because they bought (early) doesn’t mean they are going to make an easy buck.’”

“According to the National Association of Realtors, non-residents of the United States accounted for some $41 billion of real estate purchases in 2010, and as of late 2011, 23% of all international sales were to Canadians. Canadian buyers are able to finance about 70% of the purchase price from either banks or private lenders, and often use home equity lines of credit for the down payment to ‘generate cash flow with almost 100% leverage,’ says Wendy Fedoruk, a Calgary-based investor, consultant and broker.”

“‘It wasn’t an accident that Phoenix and Las Vegas had a bubble,’ says Calgary-based broker and consultant Mike Wolf. ‘People want to live there.’ After all, he points out, the weather is good and the cost of living is low. Nevada has a business-friendly climate, with no state income tax. ‘You can buy a house here and have a good life just working at McDonald’s,’ he says.”

“Ash Cutchin, owner of Ash Cutchin Real Estate Appraisals, noted that when Wingate and Associates assessed the county’s 12,000 properties last year as required by law, the Roanoke firm did not include foreclosed properties. ‘They kind of seemed to ignore foreclosures,’ said Cutchin, noting that in 2011, one-third of home sales in Hampton Roads, which includes Southampton County, were foreclosures.”

“‘They have a willing buyer and a willing seller, neither under duress,’ said Harold Wingate, president of Wingate and Associates. ‘In other words, if you put your house on the market and I offer you $50,000 less than you’re asking, you don’t have to sell it. But, if you get foreclosed on, the bank owns your house, and they don’t want to hang onto it. They want to unload it, so somebody might buy it for $100,000 less than it’s worth.’”

“A foreclosed mansion on the shores of Lake Norman is no longer the most expensive real estate listing in the area. The home took more than $22 million to build. It was previously listed at $8 million. Now it is a bargain at $5.9 million. The broker who has the listing said there’s been a lot of interest, but so far no offers, so the bank decided to make a drastic reduction in price.”

“‘We still have had long interest. But BB&T is ready to sell that property. We’d love to get it off the books,’ said Debbie Monroe, Broker with Lake Norman Realty.”

“Mitt Romney’s campaign has staged rallies at foreclosure hot spots and struggling construction companies. Tampa retirees Chris and Mary Lou Ferguson, lost $200,000 when they sold their home. ‘That’s our nest egg, gone,’ said Mary Lou Ferguson.”

“Struggling to keep her business going after the recession, Land O’Lakes homeowner Lisa Shorts tried six times to reduce the mortgage on her home before the bank finally sent her a foreclosure notice. ‘They have the capacity to take the loss,’ she told Romney. ‘Why have they not been forced to do that?’”

“Area housing experts believe the banks are purposely holding back on releasing more foreclosure properties to the market. ‘I know for sure that there is still a fair number of homes being foreclosed every day,’ Skip Murphy of The Address Realty in Redding said earlier this week. ‘And a great many more are somewhere in the pre-foreclosure limbo. I see vacant and empty homes in every local neighborhood.’”

“‘Since that inventory is mostly under government control via Fannie (Mae), Freddie (Mac), HUD, the government will solely determine 2012’s housing market,’ said Murphy, who also sits on the board of the Shasta Association of Realtors. ‘And Fannie and Freddie are the only lenders willing to offer 30-year loans. So it’s all in their court.’”

“One-third of single family home sales in King County last year were sales of distressed properties, while one-half of single family home sales in Snohomish and Pierce Counties were distressed, according to a new report from Washington Property Solutions. The median price paid for a single family home in King County in a short sale was $286,000, while the median price for bank-owned properties was $202,000.”

“However, Washington Properties Solutions CEO Richard Eastern said, ‘There’s a myth out there that you will be able to sell a short sale significantly below market value.’ Actually, ‘there is a bit of a check-and-balance process,’ Eastern said, with lenders typically basing their valuation on three active listings and three closed sales in the surrounding neighborhood. One challenge he sees is that banks do not take the listing history into account in evaluating offers on a distressed property. Eastern recently had a deal fall apart on a property that originally listed for $200,000 before dropping to $190,000. The only offer on the home in four months was for $163,000, which the lender rejected as too low, even though it was the only offer made, he said.”

“Federal Reserve Chairman Ben Bernanke has proposed one solution to help the country’s ailing housing market: ‘redeploy foreclosed homes as rental properties.’ In a white paper released earlier this month, Bernanke noted the flow of new REO homes could be ‘perhaps as high as 1 million properties per year in 2012 and 2013.’”

“Skilled and intelligent specialists, trained in neoclassical economics in leading US institutions, did not see their enormous housing bubble until it burst in front of them with horrendous consequences. What makes Australia’s ‘experts’ any more competent?”

“That Australia’s residential property market has resembled the Ponzi stage of financing for the last 11 years is nothing short of astonishing. On aggregate, net real rental income has resulted in continuing losses starting at $966 million in 2000, and peaking at $8.8 billion in 2008. Rental income has not exceeded interest costs since 2000, let alone met the costs of maintenance, rates, agent fees, and property tax.”

“As investor Jeremy Grantham has noted: ‘Bubbles have quite a few things in common but housing bubbles have a spectacular thing in common, and that is every one of them is considered unique and different.’”

Weekend Topic Suggestions

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Bits Bucket for January 27, 2012

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January 26, 2012

Bits Bucket for January 26, 2012

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January 25, 2012

Bits Bucket for January 25, 2012

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January 24, 2012

This Deflation-Like Attitude Among Buyers

The Lakeland Times reports from Wisconsin. “Property values are continuing their dramatic downward slide in Minocqua and in other northern Wisconsin property-taxing entities, and the region is no exception as the nation struggles with a devastating housing market implosion that just doesn’t seem to have an end in sight. Even as people lose as much as 50 percent of the value of their homes, and sometimes more, average property tax bills are staying put right about where they were. Minocqua town chairman Mark Hartzheim said one property in Minocqua that had listed at more than $700,000 had sold recently for $269,000 or $279,000.”

“‘Now the sevens, that was way too high,’ Hartzheim said. ‘That’s when the market was hot. But there was a time when that could have been legitimately sold for 500-something.’”

“Others have cited other properties in apparent similar freefall, including a lakefront property with a 3,000 square-foot home and 150 feet of frontage, which was going at $350,000, down from around $850,000. Hartzheim says it’s the tax rate that fluctuates, not the levy amount, and fluctuation is a two-way street. Just as your taxes won’t go down by 25 percent if you lose 25 percent of the value of your property, they don’t rise by 25 percent if your property rises in value by that much.”

“‘You ride the bubble up, you ride the bubble down,’ he said.”

The Herald Palladium in Michigan. “Over the past year, Paul Dumke, a consultant with Core Real Estate in Bridgman and Stevensville said, many sellers have realized that houses must be priced according to current market conditions, not based on a value of five years ago. ‘Now they’re realizing this is no different from the stock market ‘and I have to take my pill,’ said Dumke, a Realtor for seven years and president of the association.”

“For example, a house in Union Pier sold for $295,000 last year, down about 13.5 percent from $335,000 three years earlier. But a person who takes such a loss in selling a house may come out ahead when buying a different house that has also lost value.”

The Post Bulletin in Minnesota. “Home sales in Austin increased by a whopping 17.1 percent in 2011. Low interest rates and a wide selection of homes helped increase sales, said Angie Schott, a Winona Realtor who’s the the SEMAR MLS president.”

“I would not say we are out off the woods yet with regard to the housing slump, since there are many sellers yet struggling to sell at a price that balances what they purchased their home for, Schott said. ‘Rather we may be at the start of a stabling market, and we can watch the data at the start of 2012 to know for sure.’”

The Northern Star in Illinois. “Members of the local Move On Council braved freezing winds to protest against banks foreclosing homes during the last four years. ‘The reason we’re out here is because in the last four years, one in 10 homes in DeKalb County has been foreclosed,’ said Richard Gallati, core member and recruitment coordinator for the Move On DeKalb Sycamore Council.”

“Although she is not a member of Move On, Julie Kiefer-Bells, of DeKalb, said she believes the crisis would not have happened were the Federal Consumer Protection Bureau (FCP) around years ago. Kiefer-Bells said it is too easy to misunderstand the fine print. This is why several homeowners believed their incomes would rise.”

“‘But that didn’t come out to be true,’ Kiefer-Bells said. ‘They started losing jobs, and that’s why so many who were innocent and believed those things could not handle the mortgage amount. It’s heart-breaking to skim through the classifieds and see so many homes for sale.’”

The Chicago Tribune in Illinois. “The Illinois Association of Realtors reported that existing-home sales in the Chicago area eked out a 1.3 percent gain last year, compared with 2010. However, sales within the city of Chicago dropped 7.2 percent from 2010, to 17,715 homes sold. For the year as a whole, median prices declined 11.9 percent and 13.8 percent for the Chicago area and the city, respectively.”

“‘People are gravitating toward foreclosures and short sales right now and that’s causing the median prices to drop,’ said Loretta Alonzo, a real estate agent at Century 21 Alonzo & Associations in La Grange and president of the Illinois Association of Realtors.”

“‘There’s this deflation-like attitude among buyers that the longer I wait, the better price I’m going to get,’ said Jack Ablin, chief investment officer at Harris Private Bank. ‘It’s a cat-and-mouse game with sellers. And buyers believe time is on their side. If we can get a couple months where homes stabilize, it will give buyers a sense of urgency.’”

The Newark Advocate in Ohio. “There were 778 homes sold in Licking County the last half of 2011, up from 666 during the last six months of 2010. But, the expiration of the home buyer tax credit likely stifled activity late in 2010. Anna Kuhns, a Newark resident in temporary housing since returning to the area in November, continues searching for a home for herself and her husband. ‘I’ve been a little disappointed, especially in the Newark-area older homes,’ Kuhns said. ‘People may have an overestimation of what their home is worth. Some look like they’ve been on the market a long time, but there hasn’t been a dramatic price cut.’”

“Kuhns said she bought a much larger home in Indiana for the same mortgage payment she made in Newark, before leaving for six months. She seeks a four-bedroom, two-bath home here for $210,000 or less. She finds some homes too old without proper maintenance, some newer homes too small, and others overpriced. The sellers are either downsizing or underwater on their mortgage and can’t afford to negotiate much on the price.”

“Still, she describes herself as optimistic about the market in 2012. ‘It really has nowhere to go but up,’ Kuhns said. ‘It’ll probably stay the same or go up a little bit.’”

“Stephen Johnson, the city of Newark’s auditor, bought a new house, but has been unable to sell his old house, so he’s stuck with two homes, for now. His former home has been on the market for six months. ‘I don’t believe anybody has looked at it the last several months,’ Johnson said. ‘I think it must just be uncertainty on the part of the buyer. People are afraid of losing their jobs or (having) their pay frozen.’”

“Johnson said he might resort to renting his former residence if it doesn’t sell by the summer. ‘We reduced the price once,’ Johnson said. ‘I’m willing to entertain any offers, but I don’t want to lower the price right now. Price doesn’t seem to be the issue. It’s just (lack of) traffic.’”

Bits Bucket for January 24, 2012

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