The Housing Bubble

OK, so we have yet another new server this morning. Testing, testing.

quick somebody type something really ludicrus. I’ll start.

zerohedge has an Eric Sprott paper from aught five scribbed regarding PPT intervention. Corporate Credit spreads are still elevated, but are coming in. May four date set for stress test data set announcments. WFC brings in the saucy Q1 on wednesday. What else, oh yeah…quant box blowups with the Orwell rally continue though the remainder of earnings. Macke says two positions “cash and fetal.” Japan is not only buying down the curve, they are openly going to engage the equities.

based on the Madden reitrement Im shorting turducken,and beer is not just for breakfast anymore.

I went to a conference a little while ago - actually, I didn’t have a ticket/membership so I didn’t really go, but I did attend some of the sessions when my boss gave me his name tag for the second day. One session was a presentation by compensation consultants. Very very eye opening.

So, to start with, I think a lot of their clients are trade and business associations. They told us that all the real estate groups are pulling back executive compensation. Good news, yes? Oh, now for the rest.

They told the group flat out that you couldn’t reduce executive bonuses because if you did that too many times (I think that translates to twice) the executives would demand higher base pay. Huh? In this economy? They did acknowledge that it was hard to pay performance bonuses when executives didn’t hit their performance goals. Solution? Well, the associations are non-profits (that means can’t distribute profits through stock ownership, not that they can’t make money), so no stock, so can’t just readjust option strike prices to fix things. No, they recommended that the executives be given retention bonuses instead of performance bonuses to keep them from leaving or demanding pay increases.

So (and this example is entirely my own) lets say your membership director has always had to increase membership by 10% each year to earn his performance bonus. Been hitting his number easily for the past 10 years. And why should that have been all that hard? Your industry has been increasing in size by 15 to 20% per year for most of that decade. This year, your industry is collapsing. Membership director can’t hit his numbers. Probably, no one could. But he would miss his bonus. So you just call it a retention bonus so you never lose his incredible skill at signing up people in the biggest boom your industry has ever seen and doing powerpoint presentations telling the CEO, COO, CFO and Board how clever they are for serving the needs of this booming industry.

See how it works?

One thing they did not explain was where the trade groups were supposed to get the money to pay these bonuses when their membership lists were collapsing, but hey, that is for another conference I guess.

http://www.nytimes.com/2009/04/18/sports/baseball/18yanknotes.html

It will be interesting to see what happens with the price of sports tickets. I think these prices were in many ways a symptom of the fake prosperity we have had over the past 10 years.

I was at yesterday’s game and noticed what is mentioned in the above article. The lower priced seats were full and the luxury boxes and seats on the field were practically empty. It’s a very nice stadium, but it is beyond insanity to pay $2500 to watch a baseball game or any other sporting event for that matter.

Test….This is only a test…Of the HBB system. If this were a real comment You would be reading it and marveling at my prose and wit. Sadly this is only a test. We now return you back to regularly scheduled board.

Mortgage scammer sentenced to 13 years

By JEFF OSTROWSKI

Palm Beach Post Staff Writer

Friday, April 17, 2009

WEST PALM BEACH — Peter Affatati of Coral Springs has been sentenced to 13 years in federal prison for his role in an ambitious mortgage scheme.

Affatati and three other men used straw buyers and bogus loan applications to apply for $40 million in mortgages on more than 50 properties in Florida, Nevada and New York, the U.S. attorney’s office said.

Properties in the scheme included homes in Boca Raton, Highland Beach, Loxahatchee, Jupiter, Hobe Sound and Port St. Lucie.

Arizona struggles to handle unemployment surgeApril 18, 2009 12:03 PM ET

All Associated Press newsTUCSON, Ariz. (AP) - State workers are falling behind as they struggle to deal with a surge in unemployment insurance claims.

Department of Economic Security spokeswoman Liz Barker says DES has added staff and employees are working nights and weekends.

But 13,722 claims for new and extended unemployment-insurance benefits were filed last week alone. A record 107,000 Arizonans were getting unemployment as of April 11, a 283 percent increase from the 28,000 in January 2008.

Great news for San Diego renters! Rents are dropping like a rock!!!

HOUSING: Rents falling as vacancies rise at major complexes
Families sharing space or moving out as recession cuts deeper

By ZACH FOX - Staff Writer | Wednesday, April 1, 2009 9:26 PM PDT ∞

Apartment complexes, such as this one in Escondido, have lowered their rents in another sign of a deepening recession. (Photo by Zach Fox - Staff Photographer)

A handful of big local apartment complexes have cut rents in an attempt to fill empty units, a sign the recession is deepening.

Even though a foreclosure pandemic has forced thousands of local families from their houses, apartment managers said they are struggling to keep their units rented, even in desirable communities on the coast.

At the same time, pressure on landlords is delivering relief for renters, who have seen their costs rise in each of the last 13 years, according to figures from the Bureau of Labor Statistics.

Tradition, an apartment complex near the Aviara Golf Course in Carlsbad, has cut its asking rent for a three-bedroom apartment from $2,015 to $1,799 per month, said Kris Nelson, business manager for the complex.

Tradition has seen its vacancy rate rise from a fairly consistent 3 percent to 8 percent recently, Nelson said.

“We keep a regular survey in the area as far as how other apartment rentals are doing, and all of us are literally feeling the same thing,” she said.

I believe the headline on this story is tautologically correct. It is mathematically impossible for San Francisco Bay Area home prices to fall at a 46 percent annual rate for any length of time, and hence the rate of home price decline is bound to soon slow down.

Home price decline starting to slow
James Temple,Carolyn Said, Chronicle Staff Writers
Friday, April 17, 2009

(04-16) 10:53 PDT SAN FRANCISCO — Bay Area home prices are still falling, but the pace slowed significantly in March, extending a trend that is beginning to foster real hope that the market is approaching the bottom.

The median sales price across the nine-county region stood at $295,000 for existing single-family homes last month, a 46.3 percent drop from a year ago but off just 0.5 percent from February, MDA DataQuick of San Diego reported Thursday.

Here’s a place to consider if TSHTF: a friend from South Africa sent me this:

the government of Congo-Brazzaville (not to be confused with Democratic Rep of Congo) has offered local farmers 11 million hectares of land in their country on a 99 year lease, no tax payable and all profits can be repatriated. A few French farmers have taken them up on their offer and already produce chocolate, coffee, and are about to plant vines Anyone game?

Just FYI.

San Diego Reader
Stories
City Lights
How About Trying a Free Market?
By Don Bauder | Published Wednesday, April 8, 2009

On March 23, stocks were headed for a fabulous 7 percent gain. The Obama administration had just come out with a program in which private investors could buy toxic bank assets by putting up almost nothing; the U.S. government would ante up more than 90 percent of the dough. It was a case of no risk and huge rewards; Wall Street was exultant. The president’s economic guru Larry Summers deadpanned that the market was reacting favorably to the program — but, gee, the government really didn’t worry about the stock market, he intoned, as his nose grew to three feet long.
…
After the bursting of the tech-stock bubble in 2000–2002, the Federal Reserve needed another bubble. It lowered interest rates to the floor. In previous years, Congress had made many steps to encourage home ownership: tax breaks, creation of Fannie Mae and Freddie Mac to buy mortgages and sell them to investors. Politicians hyped home ownership of low-income families by encouraging issuance of subprime mortgages and peddling of them to investors. The country set itself up for a nuclear explosion: lenders didn’t care whether a borrower could afford a mortgage; after all, it would be sold to Wall Street and then to investors. The paper was peddled in the form of highly and deliberately complicated derivatives containing those mortgages.

San Diego, which had always had high home prices and moderate incomes, was on the leading edge — of the precipice. Citizens snapped up mortgages with teaser rates that would later balloon. San Diego became the capital of exotic mortgages. Foreclosures cascaded. Prices have plunged more than 40 percent since their 2005 peak — one of the biggest declines in the nation.

Now San Diegans’ stocks and home values are down 40 percent or more. And the government intends to prop up both. You may think that’s good news, but it’s bad news for long-term stability and sanity. Moral hazard makes it so.

What I don’t get: With US property prices dropping at double-digit rates in so many parts of the country, why don’t more homeowners just hand over the keys to the bank and start renting?

US property prices down 29pc and still falling fast

US house prices have fallen 29pc from their peak and are still tumbling at the fastest rate on record, according the closely watched Case-Shiller index.
By Ambrose Evans-Pritchard
Last Updated: 9:16PM BST 31 Mar 2009
US property prices down 29pc and still falling fast

Antlee Accius sits in the former living room of his foreclosed home in Miami, Florida Photo: GETTY IMAGES

The latest figures dash hopes that emergency action by the US Federal Reserve over the winter would at least slow the pace of decline.

Prices dropped 19pc in the 20 largest cities in the year to January, with an accelerating downward lurch during the first weeks of 2009.

There was a flicker of life last week when the National Association of Realtors reported a 5.1pc rise in sales of existing homes in February, a sign that overhang of foreclosed houses is slowly starting to clear – especially on the West Coast.

Anecdotal reports hint at a burst of sales in March, helped by an $8,000 tax credit for first-time buyers.

Chris Whalen, from Institutional Risk Analytics, said the crisis is spreading from bubble zones such as Arizona and Florida into rock-solid neighbourhoods in the East. It is also climbing up the credit ladder.

“Sub-prime has peaked in terms of loss rates but the problem now is prime property, and commercial real estate is falling off the table,” he said.

There is concern that delayed time bombs on Alt-A (one notch above sub-prime) and Option-ARM “teaser” mortgages offered in the final phase of the boom have yet to detonate. The upward resets are heavily clustered in 2009 to 2010, although Fed policy should cushion the blow.

Equity Premium Puzzle SOLVED

Wall Street Journal
* APRIL 18, 2009

Flashbacks of the 1970s for Stock-Market Vets
By TOM LAURICELLA

John Spooner remembers that during the depths of the 1970s bear market, a joke made the rounds.

Q: “What do you call a stockbroker?”

A: “Waiter!”

That joke, says the Smith Barney veteran, is making the rounds again. The only difference, he notes, is that today brokers are known as financial advisers.

The credit crisis and the depth of the stock-market decline, even after recent gains, have had many investors looking to the Great Depression for parallels. But for some, today’s environment brings back memories of their early years on Wall Street during the 1970s when stock investors bailed out of the market and, for the most part, didn’t come back for a decade.

“The summer of 1974 was so bad that we used to go out to the bars at lunch and not go back to the office,” says Jeffrey Saut, who got his start on a trading desk in 1971 and today is chief market strategist at Raymond James Financial. “It felt like stocks were never going to go up.”

View Full Image
THAT ‘70S BEAR: Market veterans recall a lost decade for stocks and see similarities. From left: John Spooner, Lloyd Glazer, Charles Johnson
Photographs provided by the subjects

Today, many market pros, including Mr. Saut, are thinking the worst of the stock-market declines are likely over. But few harbor hopes of a sustained bull market and many think stocks could go mostly sideways for at least the rest of the year.

Meanwhile, the math required for investors to recoup their losses is daunting: It will take a 74% rise in the Dow to reach its peak hit in October 2007. More dispiriting for many is that the Dow is down 22% from where it was a decade ago.

Much like the current market, investors entered the 1970s still heady from the go-go years of the mid-1960s, even after a bear market that lasted from the end of 1968 through 1970.

The Dow rallied to hit an all-time high of 1051.70 in January 1973 but from there it was all downhill as the oil crisis and Watergate sent stocks into a 45% tailspin. Despite periodic rallies in the years to come, the Dow wouldn’t recover to hit a new high until November 1982.

One-two knockout punch of pensioners by the Fed:

1) ZIRP has blown liabilities through the roof. Coupled with massive asset price declines, many pension plans have to currently be on the brink of insolvency.

2) Next up: “Higher than expected” inflation, which will quickly erode the value of any fixed income pensions which survive the current period of high insolvency risk.

SOMEHOW THE MSM HAS COMPLETELY MISSED THIS STORY!!!!

The biggest property tax deadbeat in Dane County is hoping to shed the title by selling some of its holdings at bargain basement prices.

Kraus Real Estate and Builders, Inc. of Sun Prairie next month will attempt to unload 60 properties that have contributed to an overdue tax bill of more than $815,000.

The properties up for auction include condominiums, single family homes and undeveloped lots

J. P. King Auction Company of Gadsen, Ala., is billing the Saturday, May 2 event as the “largest real estate auction ever in Wisconsin.” .

total retail value of $10 million to $12 million.

?? “I know somebody up there is going to get a hell of a deal,” King said in a phone interview. “This builder is making history by utilizing the auction process during a slow real estate market.”

The slowing real estate market and general economic downturn have also resulted in a record amount of delinquent property taxes, according to Dane County Treasurer Dave Worzala.

The amount of delinquent taxes owed to the county has nearly doubled since 2005, climbing to $13.3 million through Dec. 31, 2008. The number of tax delinquent properties jumped 27 percent last year, from 2,845 to 3,942.

And Worzala noted the total from April 1 of this year is running about 300 properties ahead of the same date a year ago.

“That’s pretty solid evidence the trend is continuing,” said Worzala, who was appointed treasurer last July and elected to the post in November 2008.

While the back taxes are technically owed to Dane County, they actually belong to the various units of government including cities, towns, villages and school districts. The county collects the taxes, divides the money up and sends it along to the proper entity.

While some $13 million in unpaid taxes is tiny compared to the county’s $493 million overall budget, Worzala said the county can’t carry the load forever — even with the 18 percent annual interest rate charged on bills past due. Taxes are considered delinquent if not paid in full by the due date, even if only $10 short.

“The county has reserves and cash flow, so it’s not like we don’t have the money,” said Worzala. “But it’s impossible to continue on like this because these large increases will start to add up after four or five years. That’s why we need to be proactive.”

The list of property tax delinquencies is historically dominated by real estate developers, home builders or land speculators who delay paying taxes in hopes of recouping those costs when an office park or subdivision is completed. Despite the 18 percent interest penalty, it’s often more feasible to leave the taxes unpaid until the last possible moment.

But with the residential building market still in a funk — there were 667 permits for new construction in all of 2008, down 43 percent from 2007 — more and more developers are seeing their tax obligations soar.

“In the case of the upcoming Kraus real estate auction, AnchorBank is offering special financing packages to help move the unsold properties.

Buyers on auction day will automatically qualify for financing with 5 percent down plus an additional 5 percent at closing within 30 days. Anchor is offering 30-year fixed rate loans at 5.4 percent and 15-year loans at 4.95 percent.

“This auction process is a new thing for us so we’re not sure how many people will show up,” said Clark Hofer of Anchor’s East Towne office. “I’ve been getting a few phone calls and it would be great to get 300 or 400 people out there.”

Meanwhile, Dale Knapp of the Wisconsin Taxpayers Alliance said if Dane County is having problems collecting unpaid taxes, he can only imagine what it’s like elsewhere.

“We really haven’t had a slowdown like this since the early 1980s,” he said. “I can see how the counties are worried.”

Krugman krugman.blogs.nytimes

Brad DeLong lists three possible explanations for the Obama administration’s bank policy, and expresses angst that officials don’t seem to be clear about what they’re actually up to. Matthew Yglesias points out that the president seemed to offer a fourth narrative yesterday. I’d add that in the past we’ve heard yet another narrative — that we can’t imitate Sweden because we have too many banks — that happens to be all wrong.

Can I say that this very proliferation of narratives is disturbing? I don’t want to claim moral equivalence with the Bushies, who were utterly cynical about such things, but the ever-shifting rationales for an unchanging policy do bring back unhappy memories of the selling of the 2001 tax cut, and for that matter — again, no moral equivalence! — of the selling of the Iraq War.

Hello to all. I’ve been a reader these past months and have appreciated all the expertise I’ve found here. I thought perhaps someone might shed some light on a particular obstacle I am consistently coming up against as I search for an inexpensive - as in reo/foreclosure - in an adult community to live out the time left to me.

It seems as a member of the public, it is very tough to get access to any bank owned deals.

Recently I saw online, closed listings indicating that three homes in the area I am looking to relocate to had been sold for LESS than HALF the amount that had been their asking prices. One of the homes I had looked at last summer, but at more than twice the price, I couldn’t afford it.

These were homes in good condition.

A realtor friend confirmed to me that a realtor had bought all three, on the same day. I checked the county foreclosure listings and called the county office. These properties had NOT been sold at foreclosure by the County Sheriff. The Sheriff indicated that most properties in this location go for close to the amount owed on the mortgage, which these days is usually close to 100% or more of current market value

It seems Joe or Janet 6Pak who really wants to buy a home to actually LIVE in, are never privy to the deals the realtors are managing to get.

I saw a home online I suspected was bank owned. I researched half the day online, making calls to the township to find the block and lot etc., the bank owed, etc. but can find no way to attempt to purchase direct from the bank in the same way that I suppose that realtor was able to with those 3 less than half price home purchases.

I called the bank involved, who directed me to their foreclosure website…which directed me to a “third party” website to register with to get it’s bank owned list. Yup, the third party site I was being asked to join was a realtor’s site.

Is there anyway ordinary folks get get these bank owned deals except from the realtors who buy them first if the amount owed is cheap enough, only to double the price to flip to the end buyer??

Thanks for any insight forthcoming on this.

I loved the title of this article.

Analysis: Obama braces country for slow, steady recovery

Chef braces patrons for tasty dinner.
Financial Advisor braces customers for more wealth.
Ice Cream man braces children for sweet treats..

2 more banks fail, lifting this year’s tally to 25

Regulators on Friday shut down two more banks, boosting the number of failures this year to as many as in all of last year.

The tally of 25 bank failures this year all but guarantees the number that fall into the arms of regulators will surpass what was seen in 2008. Two of the nation’s largest savings and loans failed in 2008: Washington Mutual Inc. and IndyMac Bank. Last year’s total was more than in the previous five years combined and up from only three failures in 2007.

http://tinyurl.com/cjba4l

I found this little gem in the Salt Lake Tribune. It seems that those with money are getting great deals on there own falling knifes. Cauton this will make you sick and mad as heck. link
http://www.sltrib.com/business/ci_12167444

Olympiagal,

Thought you might like this article

The Urban Scavengers

http://tinyurl.com/dmn676

Read the comments. There’s some great links.

I’ll be at NAB/Vegas next week. If any HBB’ers will be there, let me know!

So, I have a friend who got a degree in Marketing at Texas Tech; after a few years of working at the container store, he decided he didn’t want to keep doing that; thus, he applied to some sort of ‘express’ Master’s Nursing Program at Columbia University. Somehow, he got accepted even though his GPA wasnt that great at Texas Tech.

The program had two phases; during the first year, you took a bunch of classes and interned at some hospital during the 2nd semester. At the end of the 1st year, they take some comprehensive test, and if they pass it, they move on to the 2nd phase of the program where they become a Nurse Practitioner.

Well, my friend did not pass the test, but he is still allowed to work as a nurse b/c of the coursework; he is just allowed to become a Nurse Practitioner. Anyways, he got tired of working a hospital for a year, and he found a job with a medical equipment company where he trains doctors in how to use their equipment. He just got a 105k job offer to transfer to California.

It pisses me off so much cause he’s not a smart guy, and somehow he’s getting a bigger paycheck than me b/c he got into ‘healthcare’. WTF??????

This country is so screwed up; it seems healthcare and finance are they way to go to make some money. Smart people going into other sciences and engineering are losers nowadays.

Leaders
Housing
Building castles of sand

Apr 16th 2009
From The Economist print edition

Governments spent a fortune encouraging people to buy houses. That was a mistake they now risk repeating

BANKERS, frauds, predatory insurers: there has been a stampede to punish the villains of the global meltdown. Yet one culprit is not only rarely seen as an offender, but is also being cosseted and protected. Governments’ obsession about home ownership has contributed as much to the meltdown as any moustache-twirling financier.

The bust began in America’s housing market and soon spread to government-sponsored institutions created to increase home ownership, Fannie Mae and Freddie Mac. Part of the problem came about because of policy. In most rich countries the state subsidises private housing. Some places (America, Ireland and Spain) give tax relief on mortgage-interest payments. Others, such as Britain, eliminate or lower the tax on capital gains from sales of someone’s main house. Still others use state-backed outfits to direct credit to housing or to make it easier for first-time buyers or the poor to buy their own homes. Subsidies are not to blame for everything—the housing bubble affected a range of markets regardless of how much they were subsidised—but the distortions aggravated the boom and bust by making housing artificially attractive.
…
Battering-ram required

In their efforts to stem the financial crisis, governments have thrown money at everything, including housing. Some of this is justified, but they are making their ultimate task harder. The state should in the medium term be aiming to slash subsidies for housing. That means, in America, cutting the size of the loan on which people can deduct mortgage interest from $1m now to, say, $300,000 and ideally to zero. There is no argument for a tax break worth, in practice, ten times as much to the rich as to the poor. Countries should start phasing out the unlimited capital-gains tax advantages given to houses—which people treat partly as an investment. And any government weighing whether to create institutions to boost home-ownership should take note of the disasters elsewhere.

APPLES AND ORANGES
Let’s not Take Another Bubble Bath

History repeats itself, but not without a few wrinkles. We make the connections, then we pick them apart.
By Barrett Sheridan | NEWSWEEK
Published Apr 18, 2009
From the magazine issue dated Apr 27, 2009

The Comparison

Talk of the housing boom and bust often leads to our previous great collective mania, the dotcom bubble. Even Warren Buffett mentions them in the same breath. When history books are written, they “will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s,” the Sage of Omaha wrote this year.

Why It Works

Government lent a helping hand: a sales-tax moratorium spurred the Web economy, and low interest rates encouraged home purchases. Both busts sent stocks tumbling by more than 30 percent, and the real economy sank into recession. In the aftermath, corruption became apparent: Bernie Madoff follows in the footsteps of Enron’s Ken Lay.

Why It Doesn’t

Magnitude. Today’s bubble inflated not just stocks but bonds and derivatives. Plus, this recession will be uglier: unemployment, which peaked at 6.3 percent last time, could hit 10 percent. And the dotcom bust left behind useful infrastructure, like broadband cable lines. This time? Empty McMansions and toxic assets.

It was all part of the same credit bubble, IMO, and the Fed is working ever so hard to reflate it; never mind the gaping hole blown into the bubble’s epidermis by last fall’s Wall Street collapse.

The bursting housing bubble has inspired a whole generation of writers to wax eloquent about the bad policies that spawned it. It must take a concerted effort for the Fed’s leadership to ignore the plethora of sagacious postmortem analysis that the bubble’s collapse is generating.

The Housing Crisis and Our National Attitudes Towards Saving
Rob Shapiro

Rob Shapiro is Chair of NDN’s Globalization Initiative and Former Under Secretary of Commerce for Economic Affairs
Posted April 17, 2009 | 11:33 AM (EST)

Read More: Economy, Great Recession, Housing, Millennial Generation, Politics News
…
One way to glimpse how these tough times may affect our national psychology is to understand the forces that make times so tough. We’ll start today with an aspect close to people’s sense of themselves: their homes, or more generally, housing. We’ve all now lived through an historic housing bubble which, to begin, was very different socially from most bubbles in history: Unlike tulips, the South Seas, the 1920s stock market or other famous bubbles, this one was not primarily the business of speculators and affluent people. Nearly 70 percent of Americans own their houses, including most middle-class people as well as a broad swath of moderate and even low-income families. So, this bubble’s impact is being felt very broadly. That should be no surprise, since we give home purchases super-sized tax breaks and regulatory subsidies.

The irony is that while we go out of our way to encourage Americans to put their savings in this basket, in the form of home equity, we also encourage them to keep those savings small. First, we provide a large mortgage deduction which encourages people to buy houses — and to buy way above what they could afford, but for that deduction. That’s one reason why housing prices generally trend upwards. But the way we provide the deduction actually cuts against saving much, since the deduction isn’t for what we “save” by owning our houses — there’s no tax break for the downpayment, for example. Instead, it effectively encourages people to save relatively little, since they get to deduct only the interest on the mortgage loan, which represents what they don’t own or “save.” The natural result is that most people borrow 90 or 95 percent of the value of their house — just as Bear Stearns and Lehman Brothers did. We also encourage people to keep their “savings” in housing small, by providing tax breaks for them to pull out the equity in their houses in the form of tax-preferred refinancing and home equity loans.

The result is that large numbers of people end up saving relatively little by owning their houses — and that’s especially the case when a housing bubble creates an illusion of significant savings. Federal Reserve data show that people’s home equity, or what they “save” through their homeownership, as a share of the value of their homes, has been generally falling for 60 years — which happens to be the time period since we enacted the major tax preferences for housing. Moreover, since 1985, that share has fallen from nearly 70 percent to 43 percent. Strikingly, this share remained stable during most of the bubble — because as housing prices rose, people withdrew more and more of what they had “saved” as equity. And in the two years since the bubble first burst, home-equity savings has fallen by about one-third, from 60 percent to 43 percent.

Today, an estimated 12 million people are under water with their mortgages. Since they owe more than their houses are worth, the bursting bubble wiped out their life savings. Moreover, the data which show that people’s home equity is still equal to 43 percent of the value of their homes combines two very different groups of people: Nearly half of homeowners own their houses free and clear (mainly older people), while the other half has modest or little equity.

Honk if we are paying your mortgage.

Bill Would Bring Relief for Homeowners
By Laura Cohn
Kiplinger’s Personal Finance
Sunday, April 19, 2009

If you’re considering filing for personal bankruptcy because you’re having trouble making the mortgage payments on your primary residence, keep an eye on the so-called “cramdown” bill. The measure, which is part of President Obama’s housing plan and is making its way through Congress, would allow bankruptcy judges in Chapter 13 proceedings to reset the terms of certain mortgages so that more homeowners can keep their homes.

The move would be a big change. At the moment, a Chapter 13 filing stops the foreclosure process and gives homeowners time to restructure their payments with their lender. But as the law currently stands, you don’t have the ability to alter the terms of your loan.

Okay, I know it’s bad form to come back here and comment on old Bits Buckets…

But I couldn’t let the comment pass that Amtrak was more expensive than air travel.

Yes, there is the high ticket price (hint: it isn’t subsidized, esp. in NE corridor), but:

Airlines benefit from generous subsidization in that the terminals (airports) are built with billions in local and national gov’t funds.

Whereas Amtrak not only owns its stations, it must pay property tax on them!

Amtrak was saddled with heavy debt in the last decade which has crimped its operations because of the high-speed rail debacle. Congress mandated the change, then failed to follow through on loaning money for land swaps in CT and RI (very expensive marshes, apparently), and, worse, they got Bombardier installed as the contractor, even though they had an inferior and more expensive product (sound familiar?). Even so, the NEC line’s “Acela” train has slaughtered ticket sales on those once-profitable NY/BOS/WAS “shuttle” jumps.

Run before crawl, yes… we need double-tracking, more trips in some regions (SE is a joke–can go JAX to Charleston, but not back because single return trip leaves at 4:50AM), and REGIONAL high(er) speed rail, around metro hubs. It took decades for France to complete TGV system, but once running they decided to move away from air subsidies.

BNSF was announcing a massive project in the early 2000’s to disentangle passenger and freight lines in Chicago. It was a public-private project that was supposed to cost $9B (and, they hoped, halve or more their time moving freight through the Chicago terminal). Weren’t they full speed ahead on that? What happened?

Wall Street Journal
* APRIL 18, 2009, 10:49 A.M. ET
UPDATE: Ex-Fed Chmn Volcker: US Faces ‘Long Slog’ To Recovery
By Brian Blackstone
Of DOW JONES NEWSWIRES

NASHVILLE (Dow Jones)–Former Federal Reserve Chairman Paul Volcker on Saturday warned that while the severity of the recession may be waning, the U.S. faces a “long slog” toward recovery.

Volcker also said that the Fed’s recent interventions into credit markets will inevitably lead to a review of the Federal Reserve Act, and urged patience in addressing financial regulation.

In comments to a Vanderbilt University conference honoring the 90th birthday of Dewey Daane, who served as a Fed governor in the 1960s and early 1970s, Volcker said that while the current downturn isn’t like the Great Depression of the 1930s, “we’re in a Great Recession for sure.”

“It does look like rather a long slog in terms of recovery…though the rate of decline is going to slow,” Volcker said.

Green swimming pools FOR EVERYONE!!!!

Foreclosures leading to green pools
by Alyson Zepeda/Cronkite News Service (April 18th, 2009 @ 12:01pm)

YUMA, Ariz. - Joey Martinez steps around an overgrown bougainvillea bush to scoop a cupful of water from a green swimming pool. Several dozen mosquito larvae squirming inside suggest a job well done.

“When I first showed up here two weeks ago, this dipper would have had 10 times as many larvae in there,” said Martinez, a vector control specialist with the Yuma County Department of Public Health.

The light oil Martinez spread over the top of the pool suffocated most of the bugs, while the growth inhibitor he added to the water will ensure that survivors will be too crippled to live long, let alone bite people and potentially spread the West Nile virus.

Micki Bowman called the county after noticing insects coming from this vacant home next door. A look over the fence showed that the pool had turned black, a problem she blamed on those who foreclosed on the property.

“It just isn’t fair,” she said. “If they’re going to take away somebody’s home I think they should come and maintain it until they can sell it again.”

Yuma County’s three-person vector control staff is always busy at this time of year dealing with mosquitoes where they traditionally breed. But the foreclosure crisis also has officials here and elsewhere scrambling to deal with water in swimming pools, tires, trash cans and other items at vacant homes.

“We never really had as many pools that were turning green,” said Brian O’Green, environmental health manager for the Yuma County Department of Public Health. “With the economy, the numbers have increased dramatically in the last couple years.”

The problem is especially acute in areas where pools are common, said Craig Levy, director of the Arizona Department of Health Services’ vector-borne disease program.

“I think anyplace where you have a lot of pools it is a problem, and I think that does mean that there needs to be a shift in strategy and resources in dealing with them,” he said.

Maricopa County’s population, pools and foreclosures make it the state’s hotspot for green pools. Officials there have received 600 more complaints than they’d received at this point last year.

“Not only are we getting new vacant homes, we are going back to vacant homes that we treated last year,” said David Guerrieri, the county’s enforcement supervisor for vector control.

It looks like deja vu all over again.

Wall Street Journal
* REVIEW & OUTLOOK
* APRIL 18, 2009

‘The Largest Failure’
J.P. Morgan Chase CEO Jamie Dimon on the lessons of Fan and Fred.

‘Perhaps the largest regulatory failure of all time.” That’s how J.P. Morgan Chase CEO Jamie Dimon describes the “inadequate regulation of Fannie Mae and Freddie Mac” in his annual shareholder letter, released this week.

Mr. Dimon devotes nearly a quarter of the 28-page letter to analyzing what caused the panic of 2008, and he hands out plenty of blame all around. But he calls it “amazing” that Fannie and Freddie were allowed to grow “larger than the Federal Reserve” thanks to Uncle Sam’s implicit guarantee of their obligations.

Mr. Dimon gets obviousness points for observing that Fan and Fred’s regulator “clearly was not up to the task,” but he’s too polite, or cautious, to say why: For years, the two mortgage giants twisted arms on Capitol Hill to keep that regulator weak, and Fan and Fred’s Beltway friends obliged. Today, of course, all those same enablers claim that they really did want better regulation, and it was the “other guys” who stood in the way. But that wasn’t the tune that Barney Frank, for example, was singing when he advocated “rolling the dice” on Fan and Fred’s “safety and soundness” in exchange for more money for affordable housing.

In his letter, Mr. Dimon raises a cry of “never again.” But as we move toward creating a “systemic risk regulator” that supposedly will bring to heel two dozen of the largest and most politically savvy financial institutions in the world, the lessons of Fannie, Freddie and their hapless regulator remain all too relevant.

Observation:

The top economists in the US (the ones with immediate access the MSM bully pulpit) seem to be overly eager to spot signs of a recovery. They appear to be in a state of collective denial regarding the systemic collapse of the financial system which just occurred in the second half of last year, much as the American Illuminati was collectively oblivious to the onset of the Great Depression after the Wall Street collapse of 1929.

The Edge vs the people of Malibu

U2 guitarist upsets his neighbours with plans to build five luxury homes.
By Guy Adams in Los Angeles

U2 guitarist The Edge has been labelled an environmental hypocrite over his plans to develop five mansions on a hillside overlooking the Pacific Ocean.

He is one of rock music’s most principled stars, nobly fighting poverty in Africa, lobbying for world peace, and saving the planet. But U2’s David Evans may have finally picked a fight too far: against America’s wealthiest Nimbys.

The guitarist, better known by his stage name The Edge, has upset residents of Malibu, the seaside city north of Los Angeles, by attempting to build five new luxury homes on a pristine hillside overlooking the Pacific Ocean.

Neighbours in Sierra Canyon, an exclusive district inhabited by the likes of Dick Van Dyke, Kelsey Grammer, and James Cameron, have launched a noisy campaign against the development, which they claim will “permanently scar” the landscape.

Evans, a supposed environmentalist, is accused of wanting to flatten the top of a mountain, put a road through slide-prone areas, and move 70,000 cubic yards of earth for construction of the “McMansions” which will boast views of the world-famous Surfrider Beach.

Critics claim his construction will harm wildlife, cause noise and dust pollution, add to land erosion and run a water pipe through pristine wilderness.

Today’s SD Union-Tribune shows the March DataQuick numbers for San Diego. However, they no longer are showing the full breakout of used single family homes and condo sales. I am not sure whether this is to hide the ongoing severe price declines in used single family homes, or because they can no longer afford the print space.

No matter — the DataQuick web site gives the full details. Here is a summary of single family home sales, median prices and year-over-year price changes by area of San Diego:

Region / Sales / Median Sale Price / Year-over-year Price Change
Central San Diego 458 $300,000 -30.1%
East County 303 $279,500 -26.0%
North County Inland 561 $330,000 -22.2%
North County Coast 274 $375,000 -27.2%
South County 323 $310,000 -21.8%

Voz,

Saw you posting in American Visionaries Part 4:

“I hate to be the one to say it, but my days here are numbered. I have read, enjoyed, and absolutely enjoyed the past 4 years of reading the blog. I may not come around as often, but I’m calling the bottom of price and interest rates for residential.

180 days….then Im gone… thanks man. Winter aught nine, the bottom. sit on the fence at your own peril. I suspect though you may have yerself a couple of “bank book REO’s in the headlights””

Why are you calling a bottom. What is it you see?

April 17 (Bloomberg) — Bank-regulating lawmakers in swing districts are reaping increased campaign contributions from firms most affected by their actions, government filings show.

New members, Republican and Democratic, are finding it is easier to take in donations from finance, insurance and real- estate political action committees now that they are incumbents. Those industries gave at least $483,203 to the 14 freshmen on the House Financial Services Committee in the first quarter, according to reports filed with the Federal Election Commission this week. That’s more than three-quarters of the $632,237 the members collected from the industry during their campaigns.

Party leaders assigned 11 of the 24 freshmen who won their seats by the narrowest margins to the financial services panel. Now, as they consider the broadest rewrite of financial rules in decades, those members are getting money from donors such as the American Bankers Association, Citigroup Inc. and Visa Inc.

Sounds like business as usual.

Twelve voices were shouting in anger, and they were all alike. No question, now, what had happened to the faces of the pigs. The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which.

Have any noticed the ammo shortage ? Try finding 9mm all gone.

White House chief of staff Rahm Emanuel cited first-quarter reports from major banks showing they are making money as an encouraging sign. “But that doesn’t take away that some are going to need resources. We believe we have those resources available in the government as the final backstop to make sure that the 19 are financially viable and effective,” he said

There making money but we will have to of course give them more??????????????????????????????

The Wall Street Journal is turning into an NAR mouthpiece these days. Don’t believe them. There is no urgency to buy a home when prices are dropping at over a 20 percent year-over-year rate, and no reason to not wait until the housing market bottoms out before even thinking about buying a home.

The Economist has a couple of articles in the current edition arguing about what a stupid idea it is to own a home, and I expect this confered wisdom to trickle down to the sheeple some time over the next twelve months. I hope to be the first one to post an article here that claims real estate is the worst possible investment. This is likely to show up first in either the Wall Street Journal or the New York Times.

Wall Street Journal
* REAL ESTATE
* APRIL 18, 2009, 10:56 P.M. ET

Getting Going
Why Houses Look Better and Better
By DAVE KANSAS

Some people think it’s a good time to buy a house. Is it?
…
Don’t Hunt for the Bottom

Some prospective homebuyers naturally want to know when prices will actually hit bottom. Pinpointing a bottom in home prices, however, is very difficult, akin to picking the bottom in the stock market. But data and research indicate we’re getting close.

A recent report from Banc of America Securities-Merrill Lynch argues that the housing market could start to demonstrate modest growth and improvement later this year. This forecast relies on long-term mortgage rates continuing to decline. It also notes that a weak job market will hamper growth in housing.

Mortgage rates are a key element to buying a home since lower rates make it cheaper to finance your home purchase. Last week, Freddie Mac 30-year mortgage rates ticked up to 4.87%. Merrill Lynch predicts that the Federal Reserve, through the purchase of long-term Treasurys and other tactics, will drive 30-year mortgage rates to 4.2% by year end.

If you believe now is a good time to buy a home and your lifestyle and budget support such a choice, there are a few strategies to consider in order to get the best price.

Know what you want. This requires doing the requisite amount of research so you know exactly what you want and what you can afford. Once that’s done, being ready to buy quickly can help you drive a good hard bargain.

Be ready to pounce. Cash, of course, is king. If you can write a check for a home, you can drive a very tough bargain in a world of eager sellers. Not everyone has that kind of kitty, so the next best thing is having a pre-approved mortgage. Many sellers are looking to close a deal smoothly and quickly, so having everything lined up ahead of time can strengthen your negotiating position.

I have some suggested conditions for banks that want to pay back TARP monies early. How about if they are required to repay all forms of government largess since the onset of the crisis, including (1) AIG bailout jackpot winnings and (2) the value of the below-market interest rate subsidies on LAF, TALF, BLAF and BARF loans from the Fed?

Financial Times
US to put conditions on Tarp repayment
By Krishna Guha and Daniel Dombey in Washington
Published: April 19 2009 23:31 | Last updated: April 19 2009 23:31

Strong banks will be allowed to repay bail-out funds they received from the US government but only if such a move passes a test to determine whether it is in the national economic interest, a senior administration official has told the Financial Times.

“Our general objective is going to be what is good for the system,” the senior official said. “We want the system to have enough capital.”

If we are talking about retracting the AIG payouts, which for all intents and purposes were insurance policies on CDO packages, then we should also get the Katrina monies back that the government spent there.

What I don’t get is that how can banks be taking loses on mortgages. Didn’t they all (at least the 0 downs) have mortgage insurance?

The New York Times today ran an article about the letters the President receives. Apparently his aides select 10 a day for him to read.

One was about housing:

Some letters begin “I didn’t vote for you”; others end “May God bless.” One missive came in the form of baseboard molding, covered with $2.70 in stamps and a scrawl urging the president to “Fix housing 1st!” Heaps of letters offer advice on the best treats for the first dog, Bo, and people have sent in colorful dog sweaters.

I suppose by “Fix housing 1st” it meant either “Fix the PRICE of houses so I can get some money from my hare-brained investment” OR it simply meant “where’s my FREE house?”