The Housing Bubble

Gas will eventually cost below $3.00 per gallon in the USA. Annnndddd……, the SUV will come back with a vengence. I can see the “HOLLYWOOD” sign from my window. Hollywood Blvd and Vine is a twenty minute walk. Because I know the deep heart of citizens of LA is my proof. So. Be. It.

From the Editors of American Banker
Fed Survey Highlights Bank-GSE Disconnect

Banks seem unprepared for the pullback Fannie and Freddie are planning as a Fed survey shows a sizeable chunk of lenders expect to sell or securitize large mortgages to the GSEs.

Worst. Apartment. Ever. Apologies if this has been posted before, but I just had to do it again.

http://www.craigslist.org/about/best/lax/716584559.html

NEW YORK (CNNMoney.com ) — Prime mortgages are starting to record disturbingly high default rates, which could slow any potential housing recovery.

The delinquency rate for prime mortgages worth less than $417,000 was 2.44% in May, compared with 1.38% during May of 2007, according to LoanPerformance.

http://money.cnn.com/2008/08/12/real_estate/prime_defaults_price_drops/index.htm

” two-thirds of U.S. corporations paid no federal income taxes from 1998 to 2005″

http://www.freep.com/apps/pbcs.dll/article?AID=/20080812/NEWS07/808120358

——————————————————————-
So all the “taxcuts” you were promised never made it your way. And everyone wonders why the dollar isn’t worth the paper it’s printed on while the corporatists in control of our govt. raid the US Treasury…… at your expense….. Admonish those who promise “taxcuts” who never seem to identify the primary benificiary.

http://www.nytimes.com/2008/08/12/business/12transfer.html?_r=1&oref=slogin

Leaving Wall Street for a Job Overseas

‘As Wall Street’s troubles deepen, big investment banks are moving some key employees to increasingly influential hubs of finance in Asia, the Middle East, Europe and Latin America, regions where the banks had already been building up business to tap rising growth potential.

This trend is happening alongside another that is funneling jobs from traditional financial centers like New York and London. Because of price pressure, jobs lower down the corporate ladder are moving overseas, especially India.

For many bankers, moving abroad is an experience they had always wanted. For the banks, the relocations are a way to retain skilled workers who might otherwise be caught in waves of layoffs that have already claimed 80,000 finance jobs globally.

“Banks like Morgan Stanley and Merrill Lynch are playing musical chairs,” said Gustavo G. Dolfino, president of the WhiteRock Group, a finance hiring firm. “Why are they doing this? They want to keep the talent.” ‘

“Relocating workers, while expensive, makes sense as record revenues are flowing in from places other than Wall Street. For a number of bankers, though, the moves are less voluntary.

“Some are being told, ‘I don’t care if your wife has to stay here, this is what you have to do,’ ” Mr. Dolfino said.”

***********
NYC and area real estate is going to miss these people.

Most companies in US avoid federal income taxes

http://biz.yahoo.com/ap/080812/corporations_income_tax.html

More than 38,000 foreign corporations had no tax liability in 2005 and 1.2 million U.S. companies paid no income tax, the GAO said. Combined, the companies had $2.5 trillion in sales. About 25 percent of the U.S. corporations not paying corporate taxes were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts.

Too bad the middle class and small businesses can’t find these loopholes. This is another reason why it’s hard to listen to whining corporate types who scream of unfair US taxation for pushing them and their operations offshore. Government for the corporation, by the corporation…

Apartment building foreclosures putting families on the street:

“In the first six months of the year, 27 percent more homeless families came to the county for help than in the same period last year…While foreclosure is having an effect, very few of the families that need shelter are homeowners who lost homes to foreclosure, county officials said. But when foreclosed apartments put poor people on the street and they begin looking for a new apartment, they may find themselves competing with people who once owned homes. Recent reports have put the apartment vacancy rate in Minneapolis at between 3 and 4 percent, with rents rising.”
http://www.startribune.com/local/west/26852669.html?page=1&c=y

JPMorgan loses $1.5 billion since July
http://biz.yahoo.com/rb/080812/jpmorgan_outlook.html

JPMorgan said trading conditions have “substantially deteriorated” in the third quarter compared with that of the second, and spreads on mortgage-backed securities and loans have “sharply widened.” The estimated losses exclude hedging, the firm said.

In a research note to clients on Tuesday, Lehman Brothers cut its 2008 earnings estimates for JPMorgan to $2.30 a share from $2.60, but maintained its “overweight” rating and $50 price target on the stock

Losing 1.5 billion in two weeks is not a sign of good things to come. How long can they lose like this before Uncle Ben drops by with free money? And how can anyone trust the ramblings of Lehman?

High-end foreclosures:

http://tinyurl.com/6yysu4

“Called “Essencia,” the ultramodern house has six bedrooms and seven baths, a wine cellar, home theater, saltwater vanishing-edge pool, high-tech wiring and the curvilinear architectural form that Concepto Design Group specializes in. Completed in 2006, it was listed for $21.5 million and in January 2007, San Diego Magazine published a three-page spread titled “Above It All.” In June, the lender, Federal Home Loans Corp., foreclosed on the property and listed it for $12.9 million.”

That’s potentially quite a haircut.

“Maxine Gellens, a longtime La Jolla real estate agent, said high-end foreclosures are no different from those involving $200,000 starter condominiums whose values have fallen below loan balances or whose monthly payments have become unsustainable.”

“If you overextend or borrow too much, it doesn’t matter what the price of the property is, you’ll see that differential and you’re not going to be able to sell it,” Gellens said.

“DataQuick searched public records to identify the most expensive foreclosures in the county, using Zillow as well as its own findings, and came up with the 23 most expensive properties.”

“They include five properties each in La Jolla and Rancho Santa Fe, four in Carmel Valley, two each in Del Mar and Encinitas and one each in Bonita, downtown San Diego, Jamul, Point Loma and Poway.”

“The homes were purchased between August 1997 and December 2006 with prices from $635,000 to $7,450,000, according to county records.”

“A check of addresses, court records and employment data revealed that the owners included business executives, real estate experts, partnerships, a teacher and others. Most could not be reached, and none would speak on the record.”

Where did all the gold NUTS go?

Gold, Platinum Lead Commodities Into Bear Market on Growth Risk

Aug. 12 (Bloomberg) — Gold, platinum and silver plunged to their lowest in more than seven months, leading commodities into a deeper bear market, on concern that a spreading global economic slowdown will reduce demand for raw materials.

Precious metals also slumped as crude-oil prices fell and the dollar gained, reducing their appeal as an inflation hedge and alternative investment. Gold has tumbled 22 percent from its record $1,032.70 on March 17. Platinum and silver are down 35 percent and 33 percent from their peaks.

http://online.wsj.com/article/SB121850371670731857.html?mod=todays_columnists

I wonder if the decline in property prices will put a dent in eminent domain thefts. It seems like it is always “luxury condos” that going to built in places where the government takes property in this manner. With the glut of condos on the market, maybe developers will eventually not be so anxious to build more.

“In their ruling, the judges unanimously reversed a lower-court decision giving the city of Long Branch a green light to pursue its redevelopment plan. That has put a serious crimp into the city’s hopes for taking the homes of about a dozen longtime residents — and turning them over to a developer to put up luxury condos in their place.”

I don’t know if everyone rememberes my previous post about this girl who is NOT getting rich in Real Estate but thinks she is.

She has 2 duplexes with 2 rentals in each. She was talking about not breaking even until late 2009. 3 out of her 4 tennants are now behind on their rent payments and all 4 seem to have some sort of payment problems.

http://wealthisgood.blogspot.com/2008/08/three-fourths-of-tenants-late-on-rent.html

6 Signs of a Crummy Real Estate Agent

It’s also a good idea to check with the state agency simply to ensure that your agent is in fact licensed—as scam artists have been known to pose as real estate agents to perpetrate fraud.

http://promo.realestate.yahoo.com/6-signs-of-a-crummy-real-estate-agent.html

is this their new excuse for all the fraud commited?

UBS writes down $5bn in 2Q property losses. Maybe these big banks will just continue to write off billions and when they get to 2 or 3 trillion it will all be over? How much has been written off so far, about $500bn?

http://biz.yahoo.com/ap/080812/earns_switzerland_ubs.html

zillow comes to jesus?

Aug. 12 (Bloomberg) — Almost one-third of U.S. homeowners who bought in the last five years now owe more on their mortgages than their properties are worth, according to Zillow.com, an Internet provider of home valuations.

http://www.bloomberg.com/apps/news?pid=20601103&sid=a3uzhDOF9FXI&refer=us

Funny coincidence: The Fed’s definition of “nontraditional mortgage” matches my definition of “high-risk mortgage.”

Tougher lending policies spreading
Fed survey: More banks have tightened standards
By Martin Crutsinger
ASSOCIATED PRESS

August 12, 2008

WASHINGTON – More banks are tightening lending standards on home mortgages and other consumer and business loans as a deepening credit crisis exerts a heavier toll on the economy.

The Federal Reserve said yesterday that the percentage of banks reporting tighter lending standards rose across various loan types in its July survey. In April, the central bank had found that the percentage of banks reporting tighter lending standards was already near historic highs.

The new survey, conducted in early July, found that about 75 percent of the banks surveyed indicated they had tightened their lending standards for prime mortgages. That was up from about 60 percent of banks that said they were tightening lending standards for prime mortgages in the previous survey.

The Fed’s July survey covered 50 banks that hold about 80 percent of the residential mortgages on the books of all commercial banks.

Out of this group of 50 banks, 32 said they were still originating so-called nontraditional home mortgages. Among these 32 banks, about 85 percent said they had tightened their lending standards, up from 75 percent who said they were tightening lending standards for nontraditional mortgages in the April survey.

The Fed defines nontraditional mortgages as adjustable-rate mortgages with multiple payment options, interest-only loans and “Alt-A” mortgages that require limited verification of income.

Worry About Stretched Firms, Consumers Hits Debt Markets
By SERENA NG
August 12, 2008; Page C1

Like a bad penny, credit-market troubles keep turning up.
[Showing Stress]

A range of corporate bonds and securities backed by consumer loans and mortgages have sagged in recent weeks to levels last seen in March, when worries about a financial crisis hit a high. Back then, investors sold most types of risky assets, as the near-collapse of Bear Stearns Cos. raised worries about a broad market meltdown.

This time there is much less panic, but concern is building about the health of businesses and consumers.

The weakness is most visible in the debt of auto makers, retailers and companies in sectors reliant on consumer spending. Bonds issued by some financial institutions are also strained.

While a large-scale credit meltdown looks unlikely now, rising bond yields will make it harder and more expensive for corporations and individuals to finance their businesses, homes, education and day-to-day expenses.

HUH? It looks like we have had a large-scale credit meltdown for a year running already. Wake up, WSJ editors!

Could the dollar’s rally be cause for Southern Comfort?

Dollar’s Rally Is No Cause For Comfort
By Mark Gongloff
Word Count: 484 | Companies Featured in This Article: Coca-Cola, McDonald’s

First, the good news: The U.S. dollar is making a comeback.

Now, the bad news: The U.S. dollar is making a comeback.

In the past month, the buck has bounced nearly 7% against the euro, which on Monday closed below $1.50 for the first time since February. It has cracked through its 200-day moving average against the European currency for the first time in nearly two years, interrupting a long, downward trajectory and possibly signaling still more gains. The dollar is up about 6% against a basket of six major currencies.

Less student loan credit.

http://www.nytimes.com/2008/06/02/business/02loans.html?_r=1&emc=eta1&oref=slogin

Fed Survey Highlights Bank-GSE Disconnect

WASHINGTON — Banks seem unprepared for the pullback Fannie Mae and Freddie Mac are planning as a Federal Reserve Board survey shows a sizeable chunk of lenders expect to sell or securitize large mortgages to the government-sponsored enterprises.

Polling 52 senior loan officers at domestic banks, the Fed found 44% said they expect to securitize or sell loans of over $417,000 to Fannie and Freddie in the next six months….

Fannie and Freddie have said they plan to scale back mortgage purchases in the coming months.

After reporting an $821 million second-quarter loss last week, Freddie said it would hold its mortgage portfolio at its current level of $792 billion. Fannie said Friday that it lost $2.3 billion in the quarter and would quit purchasing alternative-A mortgages. It said its broader buying philosophy would be decided “day by day.”…

Bankers continue to say they are not tightening because of concerns about the stability of financial institutions. Only 4.8% of the bankers said they stiffened standards because of a deterioration in their current or expected capital position. Instead, many of the bankers — 52.4% — said they are restricting the loans because of the tough economic outlook.

As expected, bankers were particularly vigilant on home loans. Nearly three-quarters of the respondents said they had tightened standards on prime mortgages. More than 84% said they had tightened nontraditional mortgage standards, and 85.7% said the same for subprime mortgages.

The effects of the housing crisis continued to spread to other types of loans. More than 80% of the bankers said they were tightening standards on revolving home equity lines of credit….”
American Banker
Aug 12

I wish I could be shocked or stunned or amazed, but from the bankers to the people on the street, there is rampant cognitive dissonance. The numbers and effects are to large for a reasonable person to intuitively grasp. The bankers believe Fannie/freddie will bail them out. lol

http://bbs2.mrlandlord.com/

Mr. Landlord website: asking landlords whether they’re in or out during this downturn.

Some interesting comments here. I like how you can tell which state every poster is from.

I think our FL contingent will get a kick out of Dave’s comments:
“I’m in for a good while yet. The (unidentified) port here is in process of more than doubling in size. That means 1500 new jobs in next 3 years, I’ll take a piece of that.”

A Danish fix for the US mortgage crisis

By George Soros

“…The problems in the banking system have left the two GSEs as the only game in town in the mortgage market. Their market share of new mortgages has doubled over the past year and is now close to 80 per cent. Much of the balance is accounted for by the Federal Housing Administration, a fully guaranteed government agency. As the two companies fight for survival and try to reduce their need for new capital, the availability and cost of mortgages in the US suffer. Coming at a time when the supply of houses is swollen by a rising tide of foreclosures, this is a recipe for disaster. House prices have already fallen sharply and will continue to fall unless mortgages are made available on more favourable terms to a broader group of people…..

Fortunately, alternatives are available. Hank Paulson, the Treasury secretary, has suggested the use of covered bonds, a mortgage-financing vehicle popular in Europe. I would recommend the system of mortgage credit used in Denmark, where loan-to-value ratios and underwriting standards are strictly enforced by a single, strong regulator. These mortgages are transformed into instantly tradable bonds. Cover for the bonds is provided by both the mortgages and the credit of the financial institutions issuing them. The mortgages remain on the balance sheets of the issuers, eliminating the moral hazard inherent in the US system, which is based on earning fees from selling them on to the market….”
FT
http://www.ft.com/cms/s/0/ac770b58-67aa-11dd-8d3b-0000779fd18c.html

you missed it !
http://biz.yahoo.com/rb/080812/usa_housing_prices.html

How’s My Bank or Why One Rating Just Isn’t Enough
August 12, 2008

“…A second factor we like to monitor closely is lending capacity, an exclusive measure developed by IRA. By looking at the lending, commitments and other factors of a bank, we are able to characterize the posture of an institution in the marketplace. Is your bank aggressively seeking to lend or is it in a defensive posture?

Looking at changes in a bank’s lending capacity can provide insights into an institution’s overall stance in the marketplace and soundness. For example, look at Happy State Bank and you see an institution with an Exposure at Default, a Basel II expression that in simple terms refers to a bank’s unused credit lines, below 40% of existing loans. This means that the bank has $0.40 in unused lines for each $1 of drawn lines. When this figure is combined with existing loans, Happy State Bank’s total exposure is just below 100% of total assets.

Look at a larger player like Washington Mutual (NYSE:WM), however, and we see an EAD of 55%, meaning the bank has $0.55 in unused credit lines for every $1 of drawn lines. Total exposure, defined as loans outstanding plus the unused commitment obligations of the bank, come in at 120% of total assets, a fairly aggressive credit posture compared with peers.

Banks like WM with credit card operations tend to have total exposures well-above 100% of total assets, while more conservative institutions tend to come in below 100% exposure to total assets. Maybe that’s why Wells Fargo (NYSE:WFC), which over the past decade has consistently has kept unused lines below 60% of drawn lines, is able to manage its higher loss rate portfolio with better overall results than its peers. Compare that 60% EAD for WFC with over 200% for JPMorgan (NYSE:JPM) or Citigroup (NYSE:C). …

For example, in Q1 2008 BAC’s subsidiary banks had an aggregate loss rate of 136.18bp (annualized) vs. just 74bp for its peers. A loss rate of 136bp equates to a “BB” ratings using industry breakpoints. This loss rate for BAC’s subsidiary banks was a full SD above the large bank peer group - and we haven’t even started to see the tens of billions of dollars in losses to come from the Countrywide acquisition. While BAC has historically reported above-peer loan loss rates, the percentage increase in losses observed in Q1 and Q2 2008 by BAC’s subsidiary banks was also above peer. …

Institutional Risk Analyst
Aug 12

http://www.suntimes.com/news/1102847,CST-NWS-real12.article

More Chicago homeownazz underwater, even according to Zillow!

Yups having tough time finding GFs to finance their lifestyle/dreams.

House prices edge higher in June

http://biz.yahoo.com/rb/080812/usa_housing_prices.html

The index may be evidence that a bottoming process is underway for the housing market that has been mired in its worst slump since the 1930s. But the index is not “smoothed” or adjusted for seasonal forces, such as the typically stronger spring and summer selling season, according to IAS.

Who writes this crap? Where’s the bottom when housing dropped 11.5 percent over the past year? All is well again from the MSM clowns. Buy now or be priced out forever!

Oh my word. Gold is down another $10.

BULLETIN
BLUE-CHIP STOCKS PACE TUESDAY RETREAT; DOW INDUSTRIALS DOWN AS MUCH AS 120 POINTS
Paul B. Farrell
PAUL B. FARRELL
America needs a ‘Good Depression’
Seven reasons a ‘good’ depression beats a new Great Depression
By Paul B. Farrell, MarketWatch
Last update: 7:14 p.m. EDT Aug. 11, 2008

ARROYO GRANDE, Calif. (MarketWatch) — Yes, a depression. Spelled: D-e-p-r-e-s-s-i-o-n. Wake up America, recessions don’t work any more.
…
Last November we posted “17 reasons America needs a recession.” Today it’s far worse, and getting worse still. See previous Paul B. Farrell.
Most economists predict it’ll take till 2010 to burn off our excess housing inventory. RGE Monitor say Fannie and Freddie bailouts aren’t working; they’ll soon be “profoundly insolvent” and need to be “nationalized.” Treasury Secretary Henry Paulson has no long-term plans, he’s a caretaker, plugging holes, anxious to get back to Wall Street’s money machine, running out the clock till he turns over the catastrophe he enflamed to a new bunch of politicians and their armies of 42,000 greedy lobbyists.

Lessons learned? Zero. Why? Wall Street, Washington and Corporate America are a one-trick pony with one narrow-minded strategy: Economic g-r-o-w-t-h, bull markets, megabonuses. In good times they tout “free markets.” But when greed bombs, these big babies throw free market “principles” under the “Reagan Revolution” bus as their lobbyists go whining to Congress for megabillion taxpayer bailouts and access at the Fed casino’s discount window to siphon off more taxpayer money. What hypocritical wimps!

Another prediction accurately called by posters on the HBB comes true! Amazing - they should just hire this blog to sift thru the economic tea leaves.

http://money.cnn.com/2008/08/12/real_estate/prime_defaults_price_drops/index.htm

“The ‘profit’ they report on their tax return is vastly different than the profit they report on their books. The division has existed for a long time and it is by design. But telling public corportations that if they want to have no income for taxes, they have to tell their shareholders that they had no income for the year, would set up a very interesting tension in the reporting.”

Thoughtful people were wondering who they were lying to in the late 1990s — the IRS or the shareholders? It turns out they were lying to the shareholders much more than the IRS.

Crank up those downward revisions! After all, the loss doesn’t seem as bad if it happened a while ago rather than now.

heh heh, nothing like humiliating the frenchies….
“You want some freedom fries with your crow?”
A trash-talking frog is croaking today.
Gary Kamiya

http://www.salon.com/sports/olympics/2008/08/11/relay/index.html

Reading this blog helped saved my housing sanity. I couldn’t figure out how people were buying homes at ever-higher prices. I figured I was a lousy saver or lacked rich relatives or something. I’ve been trying to patiently wait for things to happen. So I wait, and wait, and wait. I see some cracks as houses bought 2-4 years ago are being listed for sale. Thanks to this blog, was able to check http://www.masslandrecords.com and see the history on a house listed last week.

8/2002 – purchased 278K, with 2 mortgages (80%/20%)
6/2003 – two new mortgages totaling 328K.
8/2004 – new mortgage at 368K.
5/2006 – new 2 year ARM mortgage at 390K.
Listed for sale now at 395K.

I would like to ask reader’s opinions on these numbers involving 2 houses in the same neighborhood bought by one couple. Both houses, in the New England area, went up for sale this summer, offered by the same realtor. Last month, they sold the first house. When I attended an open house at House #2, approximately 2,400 square feet, according to the realtor the couple is selling the second house to so they can “move to a bigger one.”

This history:
House #1 - When this house purchased the house was in move-in condition (owned by an older couple). While there they did the typical granite countertops and stainless steel appliances.
2/2005 – purchased for 326,500. Got 5-year ARM mortgage at 5.375% for the full amount.
5/2005 – got an open-ended mortgage (HELOC?) for 36K.
In 2006 rented the house for around 1,850/month as they purchased house #2. Along with listing house for sale, were also listing it for rent.
7/2008 – sold the house for 366K.
Property taxes around $2,900/year.

House #2 - This house had more updates. Did put in an air conditioning and new heating system, though the old 50+ fuel tank is still there. In addition to the usual granite and stainless steel, chef kitchen with sub-zero refrigerator and professional oven, new custom cabinets, did repaint the exterior and knock down a wall to expand the kitchen area, along with some marble bathroom updating.

8/2006 – purchased for 508K. Got mortgages of 406,400 and 50,800.
1/2007 –financing statement filed against house for new heat and air conditioning system
8/2007- replaced the larger mortgage with a 500K mortgage
Property taxes approximately $3,900/year
Been on the market for over two months (at least 2 open houses) asking $600K.

Would like to know how these numbers are working for the couple. Maybe they know something I don’t that’ll get them to that bigger house.

“A couple of Olympics jokes are making the rounds in Beijing.

First one is a riff on the fact that while many Chinese are extraordinarily proud of the Olympics, they are also put out. Hundreds of thousands of migrant workers were sent home from Beijing before the games began as constructions sites shut down. Many factories are temporarily closed. Lots of people are forced to work overtime. The nation is jittery that something may go wrong.

In short, people are exhausted and uneasy.

Here’s the first joke:

“At the closing ceremonies, International Olympic Committee President Jacques Rogge announces that the IOC has decided that the next Olympics will be held again in Beijing instead of London since the games were so successful. The news sends millions of Chinese into a faint. Even the doctors swoon. Only the police are strong enough to withstand the news, and they immediately shout in unison: “Go to hell, Rogge!”

Another joke is about the song sung at the opening ceremony, “You and Me.” The English “you” sounds like the Chinese word for “oil” and English “me” happens to sound like the Chinese word for “rice.” So many people say the song reflects the “One World, One Dream” so precisely because the world is expecting more oil and rice.”
From China Rises
http://washingtonbureau.typepad.com/china/2008/08/jokes-about-the.html

I am sure these are funnier in Chinese, I still find them sardonically amusing.

Trump was on GMA today and according to him now is the time to buy. He has called the bottom. He also said today is a good time to be a buyer and not a seller. He also said to get out of the cities that are dying and head for the cities that have jobs.

http://abcnews.go.com/GMA/story?id=5562889&page=1

So everyone since “The Donald” has called the bottom, better hurry up and get your house before prices go to the moon. (sarcascm off)

Sorry if this is a duplication, but I didn’t get around to reading the Hot Properties column in the Sunday LA Times until I was munching my corn flakes this morning.

This is a follow-up to my observation of Sharon Stone’s investing expertise in Beverly Hills.

She bought in ‘06 for $11M. Never occupied.

Listed 5/08 for $10M (this price reduction is what made the news a month ago).

No sale, so listed for lease at $58K/mo.

8/08 leased for $35K/mo. (”Ouch”)

So, my back of the envelope says IF she put 20% ~ $2.2M down, then she had payments of about $53K/mo for the last 1.5-2 years. Her wishing lease price might have covered the mortgage plus a little, but at $35K/mo I estimates she’s losing about $18K/m0.

So I’d guess she’s lost about $1.1M on the monthly nut, plus her down payment ($2.2M ?), plus, oh, yeah property taxes of say $210K. Somewhere over $3M so far, plus insurance, plus lost income if the down payment if it was NOT in Indymac CDs plus………

aMUSEing, yes?

“If you think prices in California were drug induced, these are twice the price and have nada, zip, zilch.

Prices of Tornimäe luxury apartments down by half?

On the 30th floor of Tornimäe house in Tallinn, Merko is selling an apartment with the price of EEK 60,000 per square metre, whereas two years ago the prices of such apartments were over EEK 130,000 per square metre, recalls aripaev.ee.

Real estate transactions’ value down 38 pct in Q2
Only few can afford bargain of real estate

In an advertisement posted at city24.ee, a two-room apartment on the 30th floor at Tornimäe 7, Tallinn, is being sold with the price of EEK 131,250 per square. Merko Ehitus webpage is offering to sell a two-room apartment in the same house and on the same floor with the price of EEK 60,000 per square metre.

Almar Otter, representative of Merko, said that they are different apartments. According to Otter, the apartments of higher floors were sold on an auction two years ago, and then prices were over EEK 130,000. He couldn’t comment who is selling an apartment with that price now, but guessed that the seller is trying to get back the money he spent then.

But now the market situation has changed and Merko is selling the only apartment unsold on the floor for the price of EEK 60,000 per square metre.

Otter still doesn’t agree with the claim that price has gone down by half. He emphasises that two years ago no certain price was set to the 30th floor apartments; the price was discovered in the course of an auction.

He added that the apartment Merko is selling doesn’t have as good a view, but admits that the price has still fallen.”

http://www.balticbusinessnews.com/Default2.aspx?ArticleID=7f9d8a62-f1a2-4347-a2c4-902dbe1b1a17&open=sec

$1USD = 10.496 EEK
$5716.46/ sq Meter or 10.76sq ft
or $531/sq ft

This makes Cal look cheap! PEOPLE PAID $1000/FT

http://biz.yahoo.com/rb/080812/usa_housing_prices.html

This article indicates that housing prices went up in June. Probably insignificant and admitedly not seasonally adjusted. Anyone have insights into the validity of the index used?

latest news
Gold futures trade at lowest intraday levels since mid Dec.
Hedge funds hit skids in July as commodity prices tumble
By Jay Miller
Last update: 1:14 p.m. EDT Aug. 12, 2008

Hedge funds had a rough July as bets on rising commodity prices and falling financial stocks failed to pan out, according to research firm Morningstar Inc.

The Morningstar 1000 Hedge Fund Index fell 3.07%, its worst monthly performance ever.

“In July, the bet on long commodities and short financials didn’t work as well for hedge funds,” said Daniel Farkas, hedge fund analyst for Morningstar. The trade has been a favorite of traders for some time.

Budget deficit soars to $102.8 billion in July

The government says the federal budget deficit soared in July, pushed higher by economic stimulus payments and $15 billion in outlays to protect depositors at failed banks.
The Treasury Department reported Tuesday that the deficit for July totaled $102.8 billion, nearly triple the $36.4 billion deficit recorded in July 2007.

http://biz.yahoo.com/ap/080812/federal_budget.html

tiny tidbits

“The fact is that income inequality is real; it’s been rising for more than 25 years.”
George W. Bush.

“Why is it in America, the rich and the corporations can use the means at their disposal to control and profit from the masses it is labeled as part and parcel of capitalism and is defended and when the masses use the means that they have available to control the corporations and the wealthy it is called “class warfare”?”

“America is on vacation from its financial, fiscal, and economic problems, having left the centers of power in Wall Street and Washington for a Nantucket-of-the-mind, where, in a haze of artisanal vodka and bong smoke, it’s out in the cool dune grass watching imaginary whalefishes blow, leaving only the TV Bubbleheads behind back home. Larry Kudlow of CNBC was practically drooling into his cufflinks on screen last week when the dollar popped against the Euro, and crude oil slumped, and the equity markets climbed up a flagpole.

This sort of euphoria is actually an alarming pre-crash symptom, in this case of a patient (the US) entering the terminal phase of sclerosis. Our society and all its playerz — especially the appointed communicators — just can’t fathom the reality of the threats we face, which are 1.) the loss of primary energy resources, 2.) the loss of technological potency, and 3.) the loss of a comfortable standard of living….”

Celebration Foods Inc
Jessup, MD
Celebration Foods, maker of Carvel ice cream cakes, gave notice that it would lay off 201 workers at its Jessup plant in August. Connecticut-based Celebration is closing its 40,000-square-foot plant on Patuxent Range Road in Jessup. “The decision to close the plant did not come lightly,” Celebration Marketing Director Pam Russell wrote in an e-mail. Cost pressures, particularly the rise in commodity costs, prompted the closure, Russell said. After Celebration recently opened a new plant in Connecticut, it became clear that the company could not operate both that plant and the one in Jessup and remain a low-cost food producer, Russell said. Celebration closed a plant in Marlboro, Mass., in May and laid off about 90 employees there, according to a report in the Worcester (Mass.) Telegram & Gazette. The company’s Jessup plant decorated popular Carvel ice cream cakes like the popular “Fudgie the Whale.” When Carvel made the world’s largest ice-cream cake in 2004, it first did a test run at Jessup, and the plant was named a “Plant of the Year” by Food & Drug Packaging Magazine for 2005.

and

Pilgrim’s Pride to idle plants, cut more jobs

SAN FRANCISCO (MarketWatch) — Pilgrim’s Pride Corp. announced plans Monday to idle two processing facilities and cut 600 jobs, further steps to offset surging feed-grain costs and weak prices for chicken-breast plans to stop production at its Clinton, Ark., chicken-processing plant and a secondary plant in Bossier City, La. The company said both moves, likely to be completed within 60 days, won’t result in “material” financial charges.

Struggling to make a profit this year, the company has already closed a processing plant and seven distribution centers, resulting in 1,700 job losses and a 5% volume cut in chicken production.
The latest move brings the company’s job cuts up to 2,300, while production will now be cut by 6.25% by this fall. ….”

Fried chicken and Ice cream, thank god they only laid off at the Latrobe,PA brewing plant (it only makes Sam Adams- not something really good.) What is America coming to when chicken producers lose money on every sale, Ice Cream is not profitable and beer makers are laying off personnel?

“Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research, said any good news of the day was simply overshadowed by the latest concerns about the financial services sector. Banks and brokerages have taken more than $300 billion of write-downs since the credit crisis began last year.”

$300 billion so far. does anyone remember what the original estimate was when this crises began?

Here’s a funny juxtaposition from Tucson’s Arizona Daily Star newspaper…

Story: Signs of stability emerge in Tucson housing market

OTOH, the reader comments are less glowing. One even questions the expertise of the reporter, and, get this, her editor jumps into the fray to defend her.

http://finance.yahoo.com/tech-ticker/article/47134/Sucker’s-Rally-Alert-Dow-Going-Below-10000?tickers=%5Edji,%5Egspc,%5Eixic

Barry Ritholtz, CEO of Fusion IQ and editor of The Big Picture, thinks this is just the latest in a series of predictable bear market rallies and that we won’t be done until the Dow is below 10,000.

Ho ho hee hee haw haw HAWWW — oh please stop tickling my funny bone!!!

The Associated Press August 12, 2008, 4:21PM ET
Florida mortgage regulator resigns under fire
By BILL KACZOR

TALLAHASSEE, Fla.

Florida’s top mortgage industry regulator resigned Tuesday amid allegations his agency let thousands of convicted criminals, including bank robbers and racketeers, work in the home loan business.

Gov. Charlie Crist and the state’s three Cabinet members, who together oversee the Office of Financial Regulation, also approved emergency rules to stop the licensing of ex-convicts as mortgage brokers.

Freddie Mac Will Stop Buying New York Subprime Mortgages
By DONNA KARDOS
August 12, 2008 12:39 p.m.

In its latest effort to deal with the fallout of the subrprime credit crisis, government-sponsored mortgage buyer Freddie Mac said it will not purchase subprime mortgages secured by properties in New York state with note dates on or after Sept. 1.

The move is Freddie’s response to recent New York legislation, effective Sept. 1, that creates a new category of subprime mortgages. The state has said the legislation is intended to curb abusive lending practices.

Hey Ben, as always thanks for the blog. I really appreciate it.

Could you bring back the Wall St. and Washington thread? The BB gets awefully big during the day and the W&W thread used to help with that I think.

Please?

Pretty please?

Is Megabank, Inc unusually mendacious during this implosion phase of the Great Credit Bubble, or is this merely business as usual viewed through the distortionary lens of a financial panic?

And regarding UBS’s future, isn’t it on the Fed’s too-big-to-fail list?

Figures add up to huge challenge
By Haig Simonian in Zurich

Published: August 13 2008 00:05 | Last updated: August 13 2008 00:05

Two figures underline the scale of the challenge facing UBS after the damage to its blue-chip reputation as a money manager caused by its massive losses on risky US credits.

In the second quarter of 2007, the world’s biggest wealth manager received no less than SFr34bn ($31bn) in net new money from its clients. By contrast, in the same period this year, the corresponding figure was a net outflow of SFr43.8bn ($44bn?).

Even stripping out the big swings in flows to the group’s global asset management operation from big institutional investors, the damage to the UBS core private banking franchise is impossible to miss.

Reputational damage and, for some private clients, fears about the bank’s future, triggered a huge outflow of funds. More than a net SFr17bn left the group’s core wealth management operation, with a further SFr2bn leaving business banking Switzerland.

Executives from the bank on Tuesday tried to play down the extent of the swing, noting that a significant part – some SFr8bn – of the private banking outflows represented seasonal movements in the US, where clients would regularly withdraw funds to meet tax bills.

What an implausible crock of bullsh!t. Why didn’t those “seasonal movements” show up in last year’s Q2 results? Besides, I thought UBS’s U.S. clients typically evaded making tax payments?

My sincere hope for the aftermath of the Great Credit Bubble implosion is that a Phoenix of better banking practices rises from the ashes.

Friday, August 8, 2008

Mortgage crunch hits prime borrowers

Many with good credit took out the same kinds of loans behind the subprime mess and those borrowers are starting to feel the same pain. Host Tess Vigeland talks to a listener with good credit and an interest-only loan.

Many with good credit took out the same kinds of loans behind the subprime mess and those borrowers are starting to feel the same pain. Host Tess Vigeland talks to a listener with good credit and an interest-only loan.

Friday, August 8, 2008

Prime versus subprime loans

How did prime borrowers end up in the same boat as subprime borrowers? Host Tess Vigeland asks real estate investor Jeremy Brandt what was behind the push towards adjustable-rate and interest-only loans.