The Housing Bubble

By DON JORDAN

Palm Beach Post Staff Writer

Tuesday, April 21, 2009

BOYNTON BEACH — City hall will be closed on Friday, June 12.

And every Friday after that for the foreseeable future.

City commissioners approved a new four-day work week that will eliminate most city services on Fridays. Employees will work four, 10-hour days and city hall will be open an additional hour each day Monday to Thursday, under the new schedule.

According to city officials, moving to the four-day week will save about $150,000 yearly in utility, custodial and fuel costs.

The city is bracing for an estimated budget deficit of as much as $16 million - more than one-fifth of this year’s general fund budget - due to shrinking revenue from property taxes and other sources.

NPR just reported that the head of Freddie Mac was found dead at his home, an apparent suicide. Confirm?

As Andrew Bergman has shown, the fantasy world of the movies played a critical social and psychological function for Depression era Americans: In the face of economic disaster, it kept alive a belief in the possibility of individual success, portrayed a government capable of protecting its citizens from external threats, and sustained a vision of America as a classless society. Again and again, Hollywood repeated the same formulas: A poor boy from the slums uses crime as a perverted ladder of success. A back row chorus girl rises to the lead through luck and pluck. A G-man restores law and order. A poor boy and a rich girl meet, go through wacky adventures, and fall in love. Out of these simple plots, Hollywood restored faith in individual initiative, in the efficacy of government, and in a common American identity transcending social class.

http://www.digitalhistory.uh.edu/historyonline/hollywood_great_depression.cfm

Been trying to be all cultural-like and all until mud season is over and it’s safe to be outdoors again. Anyone aware of any recent pop culture cinema/literature/art that has been inspired by the current downturn (such as the recently featured documentary)? I was thinking how box office receipts are up right now, and during GD I the movie industry was one that did relatively well.

CNN website link- Freddie Mac Acting CEO found dead:
http://www.wusa9.com/news/local/story.aspx?storyid=84706&catid=158

Worst foreclosure rates found in 4 states
Report finds Calif, Fla., Ariz. Nevada have 26 cities with worst foreclosure rates
Wednesday April 22, 2009, 6:45 am

WASHINGTON (AP) — The 26 U.S. cities with the worst foreclosure problems are concentrated in four states — California, Florida, Arizona and Nevada, a report released Wednesday shows.

The report on foreclosures for the first quarter by RealtyTrac Inc. said the highest foreclosure rates were found in Las Vegas, Merced, Calif. and the Cape Coral-Fort Myers area in Florida. Next on the list were the California metro areas of Stockton, Riverside, Modesto, Bakersfield and Vallejo-Fairfield.

Rounding out the top 10 were Phoenix and Port St. Lucie, Fla. Outside of the four high-foreclosure states, the worst foreclosure rates were in Boise City, Idaho (No. 27) and Greeley, Colo. (No. 29).

The number of American households threatened with losing their homes grew 24 percent in the first three months of this year and is poised to rise further as major lenders restart foreclosures after a temporary break.

Nationwide, nearly 804,000 homes received at least one foreclosure-related notice from January through March, up from about 650,000 in the same period a year earlier, RealtyTrac said last week.

The big unknown for the coming months is President Barack Obama’s plan to help up to 9 million borrowers avoid foreclosure through refinanced mortgages or modified loans.

The Obama administration expects it to make a big dent in the foreclosure crisis. But it remains to be seen whether the lending industry will fully embrace the efforts, despite a promise of $75 billion in incentive payments.

From this morning’s Washington Post: “In Notes Left in Family’s Killings, Md. Man Details Debts, Depression”

The man who killed his wife and three young children and then himself in a tiny town in northwest Maryland last week was at least $460,000 in debt and owned a Florida house that was in foreclosure, according to property records and police.

…

The Woods were unable to sell the home in Jacksonville, Fla., and their mortgage was “way beyond their capability to pay,” he said.

Records show that the family bought the Florida home in 2005 with virtually no money down, taking on a $208,000 mortgage. The next year, the Woods took out a second mortgage for $108,000.

…

According to investigators, Francie Billotti-Wood, 33, and the couple’s 5-year-old son, Chandler, were each shot twice in the head with a .25-caliber handgun. Chandler’s younger brother, 4-year-old Gavin, was shot three times; daughter Fiona, 2, was shot once.

After they were shot, their throats were slashed almost to the point of decapitation, officials said. Wood killed himself with a shotgun.

…

Several experts said slayings of entire families by fathers and husbands are often associated with economic hardship.

Do you think someone was going to make him a scapegoat? I mean, the guy was just 41, and with Freddie Mac for 16 yrs. Something doesn’t jive. I hope to God, they didn’t have kids.

Non-HBB related.

I’m seeing a herd of “Vacation in Michigan” commercials on teevee.

A dollar short and a day late……

Usually when a chief financial officer of a company commits suicide, it means all hell is about to break loose. Fraud, scandal, ssex and violence.
The fall out is going to be monumental! Unless of course, Eddie Haskell gets on tv and says its all ok.

The Freddie Mac CFO. Did he pass away in the same park that Vince Foster did…Ah The pieces ,or clues come together slow.Was Bill Clinton lurking in the bushes perhaps ?? In all truth ,I feel sad for the poor fellows family.The Job probably killed him..

Who is the Mack now, John?
And the other Mac, Freddie
57 or 45 - same difference.
Lawyers, guns, and money.

the $h*t has hit the fan…

Winston says he died from lead poisoning unrelated to his work.

Hey…Snap Out of It!

$8,500 credit….4% 30 year fixed…$70,000 condo’s

but coffee @ Denny’s is still $1.99?

Hwy’s 14% mortgage interest rates… have gone the way of the Dodo bird

“…Conventional mortgages averaged 4.61 percent in 1951, 4 percent when backed by the Veterans Administration, and 4.25 percent by the Federal Housing Administration, according to “The Postwar Residential Mortgage Market,” a 1961 book written by Saul Klaman and published by Princeton University Press. Rates during the 1930s were as high as 7 percent.

The most famous suburb was Levittown, developed by William Levitt on a former tract of farmland about 30 miles east of New York City. The community had more than 17,000 homes built on 60- foot-by-100-foot lots and each cost about $6,990. The project landed Levitt on Time magazine’s cover in July 1950.

Levittown Project

World War II veteran Frederick Johs, 86, bought his first home in 1954, a Cape Cod-style, gray two-bedroom house in Levittown. Johs, a former Army corpsman in France and England, got a VA-insured 30-year mortgage at 2 percent. He paid $8,400 for the house, including a $1,000 down payment, and his monthly mortgage was $60.:

Mortgages Falling to 4% Become Bernanke Housing Focus:

By Brian Louis and Kathleen M. Howley April 22 (Bloomberg)

Geithner acknowledges U.S. fault in crisis (short)
http://www.reuters.com/article/newsOne/idUSWAT01129920090422

Real Estate Broker Bull from the 4/20/09 NY Observer

There is this disconnect between buyers and sellers, and it’s very hard to get somebody who knows that their neighbor’s house sold for $3 million last year to admit that their house may be only worth $2.2 million in this market. When someone has already spent their money on their home and they have already decided that they can sell their house for $3 million, it’s a hard psychological adjustment to realize that they can really only sell it for $2.2 million.

I think that all we really need to get things moving is just some confidence in the market, a sense of urgency, because right now people just aren’t feeling like they have to jump on a property.

Gee, I guess it was impossible to predict the housing/banking crisis

http://www.haaretz.com/hasen/spages/1077151.html
———-
“It was possible to foresee, and some people did. … I have a colleague at Princeton who says there were exactly five people who foresaw this crisis, and this does not include … Ben Bernanke. One of them is Prof. Robert Shiller, who also predicted the previous bubble. The problem is there were other economists who predicted this crisis, like Nouriel Roubini, but he also predicted some crises that never came to be.”

He was one of those who predicted 10 crises out of three.

“Ten out of three is a pretty good record, relatively. But I conclude from the fact that only five people predicted the current crisis that it was impossible to predict it. In hindsight, it all seems obvious: Everyone seemed to be blind, only these five appeared to be smart. But there were a lot of smart people who looked at the situation and knew all the facts, and they did not predict the crisis.” …
————
From Kahneman’s point of view, the most important moment of the recent economic crisis came when Alan Greenspan admitted at a congressional hearing that his theory of the world had been mistaken. “Greenspan expected financial firms to protect their interests, because they are rational companies and the market is rational, so they would not take risks that would threaten their very existence,” Kahneman says.

“Where did he go wrong? Because he did not distinguish between the firms and their ‘agents’ [their managers]. There is a huge gulf between the companies and their agents. Firms take the long view, while agents have short perspectives and take the short view. The compensation models of the corporation and their agents are different. The executives did not commit suicide when they took risks; it was the corporations managed by these agents that committed suicide.

Local builder THP suspends operations:
http://www.philly.com/philly/blogs/from_the_source/43415557.html

For FPSS, PB, packman, WT etc.

Recovery may be gradual, however, Kohn said, and added that the Fed would not hesitate to deploy new weapons to boost growth if the anticipated rebound is weaker than expected.

“The risk that inflation could be lower will be exacerbated to the extent that economic activity falls short of the path that I have described,” he said. “In these circumstances, the Federal Reserve would continue to look for ways to relieve financial pressures and encourage spending.”

___

What exactly would it take for you guys to be convinced that these people will create inflation at ANY cost?

An announcement of 1.5 trillion towards buying T-Bills?

___

“At its previous meeting in March, the Fed renewed its pledge to keep interest rates very low for an extended period. It also committed to push an additional $1.15 trillion into the economy by buying longer-term Treasury securities and buying more debt and mortgage-backed securities issued by mortgage finance agencies.”

Must reading

___

Federal Reserve Vice Chairman Donald Kohn’s question-and-answer session at a Vanderbilt University conference Saturday was going as countless others surely have in his years as a top policy maker.

Until Paul Volcker raised his hand.

Then, Kohn was grilled over the Fed’s apparent effort to convey that it considers a roughly 2% inflation rate to be appropriate for the economy in the long term.

Former Fed Chairman Volcker, who along with Kohn was at a conference honoring former Fed governor Dewey Daane, questioned how the Fed can talk about both 2% inflation and price stability.

In the minutes of its January policy meeting, the Fed said that officials’ long-run inflation forecasts reflect what they think is consistent with the Fed’s dual mandate “for promoting price stability and maximum employment.”

It then said that “most participants” thought 2% inflation, as measured by the price index for personal consumption expenditures, “would be consistent with the dual mandate.”

“I don’t get it,” Volcker said, leading to a lively back-and-forth between the two central bank heavyweights.

By setting 2% as an inflation objective, the Fed is “telling people in a generation they’re going to be losing half their purchasing power,” Volcker said. And if 2% is the best inflation rate, and the economic recovery lags, does that mean that 3% becomes the ideal rate, he asked.

Kohn responded that by aiming at 2%, “you have a little more room in nominal interest rates … to react to an adverse shock to the economy.”

“Your problem is 2[%] becomes 3 becomes 4,” Kohn told Volcker. But other central banks with a roughly 2% target haven’t had that problem, Kohn said.

Fed officials, he added, “need to be clear about why we’re choosing the number we’re choosing.” He also said that while he doesn’t think deflation is much of a risk, “I can’t say the risk is zero” and the Fed must be mindful of the possibility that inflation expectations fall to the point that real interest rates rise.

The two fought to a rhetorical draw, with each conceding that he wasn’t going to persuade the other.

If it’s any consolation for Kohn, he wasn’t the only one on the business end of Volcker’s barbs. Volcker told New York Federal Reserve Bank President William Dudley, who also spoke at the conference, that he doesn’t understand what the Fed’s trying to accomplish by paying interest on excess reserves.

“Now I’m more confused,” Volcker told Dudley after Dudley addressed the topic in his speech.

That led to another back-and-forth that ended with Volcker telling Dudley, “I get the impression you’re beginning to like this.”

The same, it seems, could be said for Volcker.

This is for Oly:

Hope you’re feeling better.

Do people remember the NY Times article/opinion piece by David Leonhardt that the NoVa/DC/MD crowd was fuming over about a year ago? He had just moved from NYC to DC area and bought first house and argued that while prices might still have a little way to fall, it wasn’t much and it was a good time to buy.

Well, here is the new piece:

http://www.nytimes.com/2009/04/22/business/economy/22leonhardt.html?em

Homeownership = a “doom loop:”

www DOT globalpost DOT com/dispatch/worldview/090418/the-american-dream-nightmare?ref=patrick.net

The U.S. economy will begin to stabilize by the end of this year and a slow recovery will start to be felt sometime in 2010, but unemployment and economic pain will likely get worse before things get better, Thomas M. Hoenig, president of the Federal Reserve Bank of Kansas City, told a Lakewood audience Tuesday night.

Hoenig said there’s a “realistic expectation” that the stimulus program and other economic measures will be successful in starting the recovery. But then, he said, the really tough part of economic recovery will follow: slowly weaning the nation from the infusion of capital in the markets brought by the federal stimulus package.

“Can we withdraw all of the stimulus in a systematic fashion?” Hoenig asked. “If we don’t, then we will very much risk inflation and inflation, I often tell people, is the most regressive tax we can impose on our citizens.”

The unprecedented borrowing by the government to finance bank bailouts, stimulus spending and other economic programs — on top of expected renewed borrowing by the private sector as the recovery takes hold– will then almost certainly put upward pressure on interest rates, Hoenig said.

“People will begin to feel pain,” Hoenig said. “In about a year, you are not going to like me very much at all.”

Notes on the Solar Cell industry…..

In just the past couple of months, the industry that promised to be the next big tech boom has faltered and is contracting significantly. The price of the polysilicon substrate that is the foundation of conventional technology has collapsed. First Solar, the largest US manufacturer of solar cells took a $200M writedown in the first quarter on the value of its inventory (despite using a competing technology, CdTe thin film). China’s Solar giant, LDK Solar, took a similar writedown. The relentless expansion of facilities in this sector are grinding to a halt. Goverment subsidies globaly are falling at the same time credit and economic viability are whithering. Existing plants are reducing production.

It feels like somebody hit the E-stop from where I sit in this process. The US producers are saying that the Chinese stimulis will revive their sales and the Chinese producers are saying that the US stimulis will revive them. It’s a Mexican standoff.

Are there no manias left?

I’m with Voz; beer is not just for breakfast anymore.

Haretz reports that Israel asserts no war crimes committed in Gaza.

Who are they trying ti kid? Israelis are mass murderers.

American aid to Israel during an economic explosion is also not sitting well with conscious Americans.

NARPukes and spinmeisters are at it again.

“FHFA home-price index up from prior month”

http://tinyurl.com/dgkuz2

Whats up with the forum getting spammed by RealTURDS???

http://forum.thehousingbubbleblog.com/index.php?topic=312.msg2127#new

U.S. home prices rose 0.7 percent on a seasonally-adjusted basis
from January to February, according to the Federal Housing Finance Agency’s monthly House Price Index.

Blue, after the sun goes down, get over there and grab me a few cases of semi-dry Riesling!

http://democratandchronicle.com/article/20090422/NEWS01/90422001&referrer=NEWSFRONTCAROUSEL

Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators.

The number of so-called prime borrowers at least 60 days behind on mortgages owned or guaranteed by the companies rose to 743,686 in January, from 497,131 in December, and is almost double the total for October, the Federal Housing Finance Agency said in a report to Congress today.

Let’s go Alt-A!!!

BWAHAHAHHAHAHAHAHHAHAHAHHAAHHHHHHHHHHHHHHHHHH!!!

I missed quite a bit of the gay repartee from unbiased posters on yesterday’s bits regarding Fox News. Please look at these current numbers (or this:
“http://tvbythenumbers.com/category/ratings/top-news/cable-news”).

Live + Same Day Cable News Daily Ratings for April 20, 2009

P2+ Total Day
FNC – 1,316,000 viewers
CNN – 659,000 viewers
MSNBC –439,000 viewers
CNBC – 265,000 viewers
HLN – 328,000 viewers

P2+ Prime Time
FNC – 2,722,000 viewers
CNN—1,074,000 viewers
MSNBC –925,000 viewers
CNBC – 235,000 viewers
HLN – 688,000 viewers

Turbo Tax Timmy is looking pretty clueless.

“The only interesting moment came when, in response to a question from Warren on whether “liquidation of failing financial institutions” or “reorganization” of failing banks were “on the table” for the Obama administration, Geithner said that “we will look at all actions we think are necessary” to balance the two main priorities of protecting the taxpayer and ensuring a “better functioning financial system.”
“You had me at ‘all actions,’” interrupted Warren, and then after a little back and forth, repeated her initial question: “I think the question … started with the focus on all the tools on the table, liquidation, reorganization and subsidization. Am I hearing you say yes?
To which Geithner could only reply: “Well, we will take all sensible actions that are consistent with those obligations we have to the American people. And, again, the obligation about what is least cost and most effective will require a careful balance in these areas.”
There’s nothing to hang your hat on there, I’m afraid. I don’t think Geithner impressed the oversight panel with his answers, and I’m certain he didn’t say anything that will have the financial industry worrying that Obama administration is about to get tough.”

http://www.salon.com/tech/htww/2009/04/22/knives_for_geithner/index.html

This ‘duck and weave’ verbal masturbation is starting to remind me of all the BS excuses of the previous administration. It’s not inspiring a great deal of confidence that’s for certain.

Some people expressed interest and I responded with my contact info late in the day…if anyone wants to play with the firefox extension I’ve been working on to make reading the comments on this blog a little easier, send me an email: ‘drumminj’ over at the ‘yahoo.com’

So my organization is going through some “changes.” It’s interesting to see the response from various people. A lot of “friendly” and “outgoing” people are becoming a lot less friendly and a lot less outgoing.

Interesting (how people behave)…

It’s a good time to work from home:

http://www.reuters.com/article/lifestyleMolt/idUSTRE53L0SV20090422

http://www.reuters.com/article/newsOne/idUSTRE53K00G20090421

Global economic crisis hits German sex industry

BERLIN It did not take long for the world financial crisis to affect the world’s oldest profession in Germany.

In one of the few countries where prostitution is legal, and unusually transparent, the industry has responded with an economic stimulus package of its own: modern marketing tools, rebates and gimmicks to boost falling demand.

Your true character comes out when it’s tested, I concur.
As Robert Louis Stevenson said:
“Sooner or later, everyone sits down to a banquet of consequences.” - Nobody is getting out of this alive.

BERLIN (Reuters) - It did not take long for the world financial crisis to affect the world’s oldest profession in Germany.
In one of the few countries where prostitution is legal, and unusually transparent, the industry has responded with an economic stimulus package of its own: modern marketing tools, rebates and gimmicks to boost falling demand.

“We’re definitely feeling the crisis. Clients are being tight with their money. They’re afraid. You can’t charge for the extras any more and there is pressure to cut prices. Everyone wants a deal. Special promotions are essential these days.”

Time for a “stimulus” package?

BWAHAHAHAHAHHAHAHAHAHAHHAHAHAHAHAHHHHHHHHHHHHHH!!!

It’s NOT a Life or Debt situation.
Mom got a credit card offer.
There is Life after Debt.
Leave them kids alone.

Does anyone have any opinions on the FM CFO’s suicide? in terms of any correlations to the company’s health?

Seen live on Fifth Ave.

Man hawking “Obama-brand” condoms.

The live pitch in very loud tones: “best stimulus you will get”.

I love this city!!!

US Census Bureau: Fewer Americans moved to another home in 2008 than in any year since 1962.

Will 2009 and 2010 continue the trend? Muggy’s Magic 8-ball says “Yes.”

With all the tragic news further on up, here’s some FB schadenfruede you all can feel good about savoring…

Big city lights bothers Trump Tower resident

CHICAGO (AP) — Trump International Hotel and Tower stands in downtown Chicago, a location that hints at Katie Tarbox’s problem.
Tarbox tells the Chicago Tribune she did not figure in the impact of neighboring buildings when she bought her 37th-floor condominium.
Since moving into Trump Tower, Tarbox has discovered some floors of the office building across the street are lighted around the clock. The offending offices on ten floors facing Tarbox’s apartment are occupied by the prestigious law firm of Jenner & Block, which operates 24 hours a day.
Tarbox, a magazine editor, says it’s like having on a permanent night light. She said she has resorted to wearing two sets of eye masks to get some sleep.
Trump Tower management says Tarbox is the only resident to have lodged a complaint about Chicago’s bright lights.

cool inflation adjusted crude oil graph with whistles and bells

http://www.forbes.com/2005/11/01/oil-prices-1861-today-real-vs-nominal_flash.html

(hope the Fl thread comes soon, good stories on local market)

Fewer Americans moved in 2008 than in any year since 1962, according to census data released Wednesday, and immigration from overseas was the lowest in more than a decade.

“It does show that the U.S. population, often thought of as the most mobile in the developed world, seems to have been stopped dead in its tracks due to a confluence of constraints posed by a tough economic spell,” Dr. Frey said.

How do you say “trapped”?

There has never been a better time to buy a home!

Global economy may shrink for 1st time in 60 years
By JEANNINE AVERSA, The Associated Press

11:15 a.m. April 22, 2009
Charts show IMF’s economic forecast for the U.S. and selected countries - AP

WASHINGTON — The world economy is likely to shrink this year for the first time in six decades.

The International Monetary Fund projected the 1.3 percent drop in a dour forecast released Wednesday. That could leave at least 10 million more people around the world jobless, some private economists said.

“By any measure, this downturn represents by far the deepest global recession since the Great Depression,” the IMF said in its latest World Economic Outlook. “All corners of the globe are being affected.”

Question for y’all: I suspect that the servicer of my mortgage (a well-known bank with HQ in the southeastern US) may be on shaky ground. Is there any way I can change mortgage servicers now, or do I have to wait until they crash and burn? Or am I stuck with them or whoever comes along to replace them?

Remember how the San Diego tourism industry was supposed to keep the economy afloat in the absence of housing-related economic activity?

Empty rooms
A tumble in San Diego’s hotel occupancy rate since last year has left a larger stock … but tourism officials hope an $8.7 million`Happy Happens’ ad campaign can turn it around
By Penni Crabtree
Union-Tribune Staff Writer

2:00 a.m. April 22, 2009
(Jupiter Images) -
San Diego, launching a new tourism ad campaign today, is among several destinations stepping up efforts to attract visitors.

San Diego, launching a new tourism ad campaign today, is among several destinations stepping up efforts to attract visitors.

For San Diego’s sprawling tourism industry, it’s the $8 billion question: How do you pry the recession-wary out of their armchairs?

An estimated 31 million visitors to San Diego County last year spent about that much at local hotels, restaurants and tourist attractions. But with the ailing economy, those dollars are in serious jeopardy, some industry experts say.

The latest hotel performance statistics underscore the threat. In the 28 days through April 11, San Diego had the worst or second-worst drop-off in occupancy and revenue rates among rival California tourist destinations such as Los Angeles, Anaheim and San Francisco.

During that period, hotel occupancy in San Diego was about 65.9 percent, down 13.2 percent from the same time last year, according to Nashville-based Smith Travel Research. Los Angeles had a slightly worse showing, with hotel occupancy at 63.8 percent, a 13.6 percent drop from a year earlier.

In terms of revenue – or RevPAR, a crucial number that measures how much revenue a hotel generates per room – a San Diego hotel room commanded about $79.69 per day, a 25.4 percent decline from last year and the steepest drop among the major California hotel markets.

“Unlike the banks, we can’t play around with our numbers,” said Jerry Morrison, a San Diego hotel consultant. “And the numbers are pretty horrible.”

SAN DIEGO’S TOURISM BY THE NUMBERS

March 15 to April 11:

65.9 percent: Hotel occupancy

13.2 percent: Decrease in occupancy from same period last year

$79.69: Revenue per available room, or RevPAR

25.4 percent: Decrease in RevPAR from last year

SOURCE: Smith Travel Research

County office vacancy rate worsens
Report shows jump to nearly 19 percent
By Mike Freeman
Union-Tribune Staff Writer
2:00 a.m. April 22, 2009
OFFICE VACANCY

First quarter office vacancy rates for San Diego County’s largest business districts. Direct vacancy refers to offices that are empty today, excluding sublease space. The availability rate combines empty space and sublease space with offices that are on the market for lease but remain occupied for now.

Demand deteriorated further for San Diego County office space in the first quarter, with one research firm predicting that the market won’t recover until the end of 2011.

The vacancy rate for offices jumped to 18.7 percent in the quarter, according to a new report from CB Richard Ellis. That’s up from 15 percent a year earlier.

The report carries a stark prediction for when demand will snap back. Tonto Wheaton – the research arm of CB Richard Ellis – forecast the office market will worsen for 12 to 18 months.

Vacancy is predicted to peak at 24.5 percent in early to mid-2011. The market should begin to improve after that, the report says.

Such a vacancy rate would likely be among the highest ever in the county, real estate experts say. It could pressure landlords, especially those with big mortgages and inadequate reserves, to ride out a prolonged, steep downturn.

“If vacancy were to get that high, it would be very difficult on income-producing property,” said Will McLennan, executive vice president and chief real estate officer for Torrey Pines Bank.

Commercial real estate experts have been predicting that offices, retail buildings and warehouses will be the next shoe to drop in the financial crisis, particularly for debt-laden projects.

With vacancies up, values have plummeted. The result is that some landlords owe more on their buildings than they’re currently worth.

Direct Vacancy | Availability

1. Downtown 15.1% 18.4%

2. Mission Valley 17.8% 22.7%

3. Kearny Mesa 15.5% 22.8%

4. Carmel Valley20.2% 26.4%

5. Sorrento Mesa 17.8% 29%

6. University City 19.6% 27.1%

7. Carlsbad 26.9% 31.7%

Countywide 18.7% 24.1%

Small banks angry about treatment of big ones

‘Why are community banks paying for the sins of Wall Street banks?’

Many community banks say the financial bailout has favored large institutions. And they are upset about a special assessment the government wants to charge to shore up the Federal Deposit Insurance Fund.

Seth Perlman / AP

updated 1:01 p.m. PT, Sun., April 19, 2009

WASHINGTON - First they felt their reputations were stained by the financial meltdown. Now they’re paying a price they protest is unfair.

Small bankers are complaining loudly that they had nothing to do with the excesses of big Wall Street firms, freewheeling deals in the mortgage market and risky investments that precipitated the economic crisis.

Still, in the meltdown’s wake, community bankers find themselves under tighter scrutiny from federal regulators. They say the $700 billion financial bailout has favored large institutions. And they are upset about a special assessment the government wants to charge to shore up the Federal Deposit Insurance Fund, which failed banks are draining.

This all comes as the government, trying to stimulate the economy, pleading with banks — big and small — to lend, lend, lend.

“People on the street should be interested because community banks account for 45 percent of all small business loans,” said Camden Fine, president of the Independent Community Bankers of America. “They really are the engines of Main Street and if you have an overly aggressive and overly harsh examining atmosphere, then that causes the community banks to pull in their horns.”

“Criticism of loan portfolios in community banks has become so harsh that community bankers say, `I’ll just stop making loans until this thunderstorm passes,”‘ Fine said. He said small banks can turn to other revenue-making practices for a time and wait out the harsh examination environment.

Ok, WHO pulled the plug!?

America v. 4.0, an opinion piece
Almost everyone would be better off if we dismantled the Special Interest State, but there is no easy way to get there and no one will volunteer to go first.

AP Sources: GM to close most US factories for up to 9 weeks this summer to reduce inventory
Tom Krisher, AP Auto Writer
Wednesday April 22, 2009, 5:23 pm

General Motors Corporation

DETROIT (AP) — Two people briefed on the plan say General Motors Corp. will close most of its U.S. factories for up to nine weeks this summer because of slumping sales and growing inventories of unsold vehicles.

The people did not know exactly when the shutdowns would occur, but both say they will include the normal two-week closure in July to change from one model year to the next. Neither person wanted to be identified because workers have not been told of the shutdowns.

GM spokesman Chris Lee would not comment other than to say the company notifies employees before making any production cuts public.

GM is living on $13.4 billion in government loans and faces a June 1 deadline to restructure or seek bankruptcy protection.

My family still can’t afford to purchase a home, but at least the squatters are finding the myriad vacant homes that dot the California landscape a convenient source of free shelter.

On The Cover/Top Stories
Is California Going Bust?
Matt Woolsey, 03.25.09, 06:00 PM EDT
Forbes Magazine dated April 13, 2009

There has been many a time in California’s history when it seemed to outsiders to be barreling toward a cliff and to insiders as a place for unbounded optimism. A favorite Silicon Valley bumper sticker says, “Dear God, one more bubble before I die.”

That optimism is being sorely tested. Statewide unemployment, at 10.1%, is well above the national average of 8%. Per capita income growth, which used to be above average, is now lagging. In the last year home prices fell 35% in San Francisco, 30% in San Jose and 27% in San Diego, according to Radar Logic, a New York real estate derivatives firm. Half of the home sales in Los Angeles are from banks dumping foreclosed properties at steep discounts.

Tent cities of displaced homeowners have sprung up in the state’s Central Valley–even in the capital, Sacramento. Anthony Sanders, a professor of real estate finance at Arizona State, terms the huddles Mozilovilles, after the former Countrywide Financial chief executive. “Fresno is a nuclear wasteland. I wish there were a nicer way to say it,” says Patrick Lashinsky, chief executive of ZipRealty ( ZIPR - news - people ) in Emeryville.

The squatters living in abandoned homes are a greater threat to the economy than unemployment and crashing housing, Lashinsky says. “The damage done to the homes makes the ultimate resolution of foreclosed properties even more expensive to investors and banks.” In Riverside suburb Lake Elsinore, families of bobcats have taken up residence in vacant homes. The cats miss just as many mortgage payments, but at least they don’t steal copper pipes.

Here is something to watch with the onset of peak Alt-A and prime ARM resets over the next couple of years. Too bad they are just using the median sale price instead of a cleaner method that does not confound home size with market value, such as the Case-Shiller repeat sales methodology.

Real Estate
Introduction: Forbes Luxury Housing Index
Matt Woolsey, 04.22.09, 04:00 PM EDT
Each week, we track sale prices in the 500 most expensive neighborhoods by ZIP code.

A residential real estate index should act as a bellwether, a leading indicator of what’s happening in a particular market. And it should be something you can’t find anywhere else.

That’s what the Forbes Luxury Housing Index offers. How does it differ from other indexes such as the S&P/Case-Shiller Home Price Indices or the Radar Logic Residential Property Index?

They track metropolitan statistical areas (MSAs)–geographic entities defined by the U.S. Office of Management and Budget for use by federal agencies in collecting, tabulating and publishing federal statistics–which extend beyond the boundaries of the city center after which they are named. The San Francisco MSA, for example, might be down 20%, but that number includes prices in the city of San Francisco, where properties generally hold their value; Vallejo, a bankrupt city in the North Bay; Oakland, which has been devastated by foreclosures, and depending on the index you use, San Jose–a city of over 1 million people on its own.

What does that tell you about the area’s exclusive neighborhoods like Pacific Heights, or Belvedere across the bridge? Not much. Just as the price of homes in Babylon, N.Y., Newark, N.J., and Pike County, Pa., tell you almost nothing about what’s happening in tony Soho or the Upper East Side of Manhattan. All are part of the New York-New Jersey-Pennsylvania MSA, but they have wildly different property values.

The Forbes Luxury Housing Index offers a more granular look at high-end markets by tracking the weekly median home sale prices of the 500 most expensive ZIP codes in the country, using real estate statistics provided by Altos Research, a Mountain View, Calif.-based real estate derivatives research group.

With these 500 data points, we can track sales prices, days a home is on the market and how both are changing. Even better: Unlike most indexes, which measure housing monthly or quarterly, our data updates every week as new sales are recorded.

Each week, our index will update the biggest gainers and losers in the luxury market, and we’ll provide analysis of the trends occurring in the highest end of the real estate market.

Financial Times
Clever wheezes do not mend banks
By William Cohan
Published: April 22 2009 18:32 | Last updated: April 22 2009 18:32

So, what do all the $12.7bn (€9.8bn, £8.7bn), and counting, in first-quarter profits from what used to be known as Wall Street add up to? Have the past two years been one giant head fake, despite what we have been led to believe? Is the global meltdown we have been subsidising with trillions of taxpayer dollars over? Is the investment bank back?

Not so fast. While global banking activity has picked up considerably since the financial ice age that followed the collapse of Lehman Brothers – the nadir was September 29, the day the US Congress failed to pass the first version of the troubled asset relief programme and the market plunged 778 points – the thaw has been aided and abetted by some very clever schemes.
…
A true return of profitability on Wall Street will come with the return of public confidence in the way it does business. Concepts such as honesty and transparency are key, not a bunch of accounting gimmicks designed to manufacture profits and send markets soaring. The public will remain sceptical of the recovery – and the return of the investment banks – until then.

The writer is a contributing editor at Fortune and is the author of House of Cards: a Tale of Hubris and Wretched Excess on Wall Street

Looks like along with the dailies the Aus government is finally beginning to abandon the RE industry here…either that or the Aus PTB finally are waking up to the reality of the Global Depression That Has Yet to be Named.

1) PM Kevin Rudd says the “first homeowner’s grant” of $14K-$21K will not be extended beyond 30 June. He explains it with the informative: “It’s had strong useful results so far, but I have got to say all good things must come to an end.” More likely they’ve just finished doling out the stimulus funds for this year and are afraid to hand out more until the impact of point #2 below is clearer:

2) The IMF has just announced that the Aus economy will shrink faster than the global average this year. You can read all about these if you’re interested at the Sydney Morning Herald or Australian sites, but those are the relevant bits and the rest of the articles are just moaning by our Treasurer at how hard he finds it to put together a budget (my synopsis not his exact words).

I don’t pay much attention to IMF figures since they predict unemployment at 6.8% this year, and meanwhile it’s already hit 6.5% (using the same doctored statistics the US does). (And even our Treasurer admits unemployment will probably be at 10% this year.) The IMF also predicts a contraction here of 1.4%. (HA!!) So for whatever that’s worth. My main point is that the outlook for Aus this year is looking more and more like a bit of a quicker fall to make up for the delay.

Link in next post in the interests of time.

Das Link:
http://business.smh.com.au/business/economy-in-rapid-decline-20090422-afeg.html

Economists Seek Breakup of Big Banks

The more I read of Joseph Stiglitz, the more I like this guy. I believe he’s fairly Keynesian, but seems to have the right idea with the banks being too big for their britches. He slams the TARP every chance he gets.

“Columbia University professor Joseph Stiglitz and MIT professor Simon Johnson warned the Joint Economic Committee of Congress that the current government policy of propping up troubled financial giants could impede an economic recovery.

They each said spending taxpayer dollars freely on behalf of struggling big banks risks drowning U.S. productive capacity in debt — while handing what amounts to an enormously costly subsidy to politically powerful financial sector insiders…”

http://money.cnn.com/2009/04/21/news/too.big.fortune/?postversion=2009042112

More “Bailouts distorting economy and impeding recovery”:

“The current federal bailouts of big financial firms is distorting the economy and prolonging the crisis, said Kansas City Fed President Thomas Hoenig in testimony to Congress on Tuesday.”

http://www.marketwatch.com/news/story/Bailouts-distort-economy-prolong-crisis/story.aspx?guid=%7B3CE9EC61-BADB-444B-803C-6B61F79B0CAE%7D

A newly declassified narrative of the Bush administration’s advice to the CIA on harsh interrogations shows that the small group of Justice Department lawyers who wrote memos authorizing controversial interrogation techniques were operating not on their own but with direction from top administration officials, including then-Vice President Dick Cheney and National Security Adviser Condoleezza Rice.

At the same time, the narrative suggests that then-Defense Secretary Donald H. Rumsfeld and then-Secretary of State Colin Powell were largely left out of the decision-making process.

It looks like the Bush Nazis are about to go down in flames. Here’s hoping for yellow jump suits, and a date with destiny in the Hague for all these assholes.

Im gonna tell ya why I think Hoz is gone by telling you what he sold.

1. GM
2. UCPIX
3. TMM

Ive lost money on all three. I dont want to go into how much money he made me during the fall, but its less than the sum of the losses on the three above.

When the other three he got me into come in, its all coming home, but thats another story, because this is a live album.

Unfreakingbelielable. Toll Ceo claimed 80% of US market shows sign of turning. And then stupid Cramer chimed in to claim June 30, 09 is the bottom for housing.

http://www.cnbc.com/id/30352485

April 23 (Bloomberg) — China Cosco Holdings Co., the world’s largest operator of dry-bulk ships, said it’s in talks to delay or cancel orders for new vessels after slumping to a second-half loss on plunging freight rates.

“The prospect for the dry-bulk shipping market remains dim,” the shipping line said in an e-mailed statement late yesterday. It didn’t say how many of the 58 commodity vessels on order it was trying to delay.

The company expects its dry-bulk traffic to tumble 44 percent this year as China’s cooling economy saps demand for iron ore, a steelmaking ingredient. Shipping lines have probably already canceled orders for 260 vessels worldwide, according to Lloyd’s Register, as they scale back growth back plans drawn up because rates crashed last year on the global recession.

“There is no sign of recovery yet,” said Gideon Lo, an analyst at DBS Vickers Hong Kong Ltd. “China Cosco is likely to have a loss this year.”

These Option ARMs are likely to really take their Toll.

BusinessWeek
News April 22, 2009, 8:03PM EST
Option ARM Loans Turn into Nightmares
“Flexible” loans for small business owners now threaten them with bankruptcy and home foreclosure at the same time

By Mara Der Hovanesian
…
California Nightmare

Statistics are scarce because lenders don’t break down loan volume by types of borrowers. But sales of option ARMs to all homeowners, according to research firm First American CoreLogic, soared more than 75%, to $255 billion, from 2005 to 2007—the height of the housing frenzy. Small business loans backed by the government dropped 4.5% in the last two years of the boom.

The problem is acute in California, where small businesses account for more than 50% of employment. Homeowners in the state are liable for 60% of all the outstanding option ARMs nationwide, according to Credit Suisse (CS). Officials are trying to forestall a wave of business failures. Preston DuFauchard, commissioner of California’s Corporations Dept., is pressing large lenders to modify the loans. “California small businesses are at risk, since they were targeted for these toxic mortgages,” says Samuel D. Bornstein, a professor at Kean University in Union, N.J.

Such efforts come too late for Pamela Plouffe of Pine Mountain Club, Calif. She refinanced her home in 2003, extracting $50,000 to buy an apparel business. Last year her monthly mortgage payment jumped from $900 to $1,700 as customers dwindled. The bank foreclosed in October. Says Plouffe, 53: “I’ve got to start over.”

NEWS10 abc
Foreclosure “Tsunami” Threatens Business Owners
Posted By: George Warren
4 hrs ago

STOCKTON, CA - At the peak of the housing market, Tony Martin refinanced his home to pour cash into three small businesses. But what seemed like a smart move three years ago could cost Martin his home.

Martin’s adjustable rate loan has already reset once to more than 11 percent, and could go as high as 14.4 percent. “I’m trying to figure out how I’m going to pay it,” he said.

A survey of small business owners in California shows more than a third of them used risky adjustable rate home loans to get cash for business expenses, and most said they were “very worried” about their rising payments.

The study was conducted by New Jersey-based Bornstein & Song CPAs using survey responses from MerchantCircle, a business networking Web site.

Study co-author Samuel D. Bornstein said home loan defaults could lead to more than 2 million California small business jobs lost in the next four years.

Other survey highlights:

-34.9 percent of California small business owners used risky home financing to get cash for business expenses. These mortgages are at risk of default at reset.

-29.9 percent of California small business owners are “very worried” about their monthly mortgage payment due at reset.

-28.7 percent of California small business owners are at risk of “payment shock.” They do not know the monthly mortgage payment that they will be required to pay at reset.

-17.9 percent of California small business owners are at immediate risk of default, having missed one to three or more monthly mortgage payments.

“This survey is meant to highlight we’ve got a major catastrophe coming,” Bornstein said in a telephone interview. He said resetting loans create a cash flow crisis for small business owners.

“The mortgage brokers and bankers were targeting small business owners, especially with the Alt-A mortgages,” Bornstein said.

He said a large number of Alt-A and Option ARM loans began resetting last November, and the resets will continue through 2012.

“I call it the second tsunami of foreclosures,” he said.

Can anyone in the know please explain why Lewis has come down with a severe case of Spitzer face? Is the condition contagious, like some kind of venereal disease?

Wall Street Journal
* BUSINESS
* APRIL 23, 2009
Lewis Testifies U.S. Urged Silence on Deal
Bank of America Chief Says Bernanke, Paulson Barred Disclosure of Merrill Woes Because of Fears for Financial System

By LIZ RAPPAPORT

Federal Reserve Chairman Ben Bernanke and then-Treasury Department chief Henry Paulson pressured Bank of America Corp. to not discuss its increasingly troubled plan to buy Merrill Lynch & Co. — a deal that later triggered a government bailout of BofA — according to testimony by Kenneth Lewis, the bank’s chief executive.

Mr. Lewis, testifying under oath before New York’s attorney general in February, told prosecutors that he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant. As part of his testimony, a transcript of which was reviewed by The Wall Street Journal, Mr. Lewis said the government wanted him to keep quiet while the two sides negotiated government funding to help BofA absorb Merrill and its huge losses.

Bank of America CEO Ken Lewis testified he was pressured to keep silent about deepening financial difficulties at Merrill Lynch.

Q: Were you instructed not to tell your shareholders what the transaction was going to be?

A: I was instructed that ‘We do not want a public disclosure.’

Q: Who said that to you?

A: Paulson…

Q: Had it been up to you would you [have] made the disclosure?

A: It wasn’t up to me.

Q: Had it been up to you.

A: It wasn’t.

Under normal circumstances, banks must alert their shareholders of any materially significant financial hits. But these weren’t normal times: Late last year, Wall Street was crumbling and BofA faced intense government pressure to buy Merrill to keep the crisis from spreading. Disclosing losses at Merrill — which eventually totaled $15.84 billion for the fourth quarter — could have given BofA’s shareholders an opportunity to stop the deal and let Merrill collapse instead.

“Isn’t that something that any shareholder at Bank of America…would want to know?” Mr. Lewis was asked by a representative of New York’s attorney general, Andrew Cuomo, according to the transcript.

“It wasn’t up to me,” Mr. Lewis said. The BofA chief said he was told by Messrs. Bernanke and Paulson that the deal needed to be completed, otherwise it would “impose a big risk to the financial system” of the U.S. as a whole.

Wall Street Journal
* LETTERS
* APRIL 22, 2009, 8:00 P.M. ET

The WSJ’s Early Storm Warnings

The Journal’s editorial page has an incredibly accurate track record in predicting problems that would result from bad economic policy decisions over the last 10 years. I know, because I remember your warnings about loose monetary policy in the early 2000s, the pernicious effects of the growth of Fannie Mae and Freddie Mac, and so on.

To my knowledge, only The Economist comes close to the Journal’s record in having the foresight to warn about the root causes of the global crisis we’re living through today. Yet strangely, in my opinion, you have done a very poor job of publicizing your track record and proving that the causes of today’s problems are actually understandable and were quite foreseeable. Some regular readers like me may remember your warnings over the years, yet I doubt the majority does.

More importantly, non-Journal readers are totally oblivious to your track record. The reason this is important is that a misunderstanding of the true causes of today’s crisis may lead to disastrous new policy errors — witness Barney Frank’s new proposal on guaranteeing municipal bond issues, which you recently warned about (”Barney Frank’s Double Indemnity,” Review & Outlook, April 17).

In order to set the record straight, here is a modest recommendation: Summarize in a full page all the editorials over the last 10 years that warned against policy errors which were not addressed and led to the problems we are having today. Publish it on the editorial page and take full-page ads in competing mass print and online media . You’ll be getting recognition for your track record, bolstering your influence going forward, and educating the public at large. A win-win for you and the country.

Miguel Roman
Chatham, N.J.