The Housing Bubble

Aw c’mon folks. I can’t be the only one awake.

Would my Ford be vandalized if I manufactured (and wore) this bumper sticker?

Smash UAW Thieves
Boycott GM & Chrysler

From the Charlotte Observer:

Crescent files for Chapter 11 relief
The real estate meltdown brought about a stark reversal for Duke Energy’s once shining developer of high-end properties.

Crescent, known for luxury waterfront communities such as The Sanctuary on Lake Wylie, said the filing will allow it to reduce debt as it restructures its capital. A group of its existing lenders agreed to loan $110 million to help Crescent continue to operate as it reorganizes.

http://www.charlotteobserver.com/business/story/707191.html

I think you’d be at risk of being vandalized too.

I think people more or less fall into 3 categories:
1) They will buy from union manufacturers because they believe in unions.
2) They will boycott GM & Chrysler because of govt and/or union ownership.
3) They will buy the vehicle that best suits their needs (size, price, quality, features, etc.)

I doubt any bumper stickers will influence many people to switch camps, so the risk/reward says don’t put one of those on your vehicle.

U.S. Foreclosure Filings Top 300,000 as Bank Seizures Loom…

June 11 (Bloomberg) — U.S. foreclosure filings surpassed 300,000 for the third straight month in May and may hit a record 1.8 million by the first half of the year, RealtyTrac Inc. said.

A total of 321,480 properties received a default or auction notice or were repossessed last month, up 18 percent from a year earlier, the Irvine, California-based seller of default data said today in a statement. One in 398 U.S. households received a filing last month.

“The foreclosure bucket is filling faster than it’s emptying,” Jay Brinkmann, chief economist of the Washington- based Mortgage Bankers Association, said in an interview. “It will continue through next quarter at least.”

Job losses and falling property prices are delaying the housing recovery as more homeowners are unable to pay the mortgage or have difficulty selling or refinancing. The unemployment rate climbed to 9.4 percent in May, the highest since 1983, the Labor Department said last week. Prices in 20 U.S. cities dropped 18.7 percent in March, according to the S&P/Case-Shiller home-price index.

More home loans originated in 2005 or before are likely to default as unemployment climbs, said Rick Sharga, executive vice president for marketing at RealtyTrac.

A record 1.37 percent of all loans entered the foreclosure process in the first quarter, with 29 percent tied to borrowers with prime, fixed-rate mortgages, the MBA reported May 28. Homes in foreclosure totaled 3.85 percent of all loans in the quarter, up from 2.47 percent a year earlier, MBA said.

Wrong house demolished.

“Byrd said he cannot believe his eyes. The house his father built, brick by brick, with his own hands has been mysteriously demolished.

“You can’t imagine. It’s just incredulous that something like this can happen and no one contact the owner,” said Byrd.

Byrd grew up in the home with his nine brothers and sisters. It’s a three bedroom house on a little road bearing his family’s name.”

http://www.wsbtv.com/news/19715994/detail.html

Y’all sure did run up the score in the BB yesterday.

Bondholders Face Commercial Mortgage Losses as Principal Is Due…
By Sarah Mulholland

June 11 (Bloomberg) — Investors in bonds that packaged $62 billion of debt for U.S. offices, hotels and shopping malls are bracing for more loan defaults through 2010 as Bank of America Merrill Lynch says landlords’ monthly payments may jump 20 percent or more.

Principal is coming due on the so-called partial interest- only loans as an 18-month-old recession saps demand for commercial real estate. About $179 billion of such loans were written between 2005 and 2007 and bundled into bonds, according to data from Bank of America Merrill Lynch.

With soaring vacancies and falling rents, some cash- strapped borrowers will fail to cover the higher costs, said Andy Day, a commercial mortgage-backed securities analyst at Morgan Stanley in New York. About 87 percent of mortgages sold as securities in 2007 allowed owners to put off paying principal for several years or until maturity, compared with 48 percent in 2004, Morgan Stanley data show.

“The worst is yet to come,” MetLife Inc. Chief Investment Officer Steven Kandarian said yesterday in a Bloomberg Television interview. “Typically there’s a lag between when the economy softens and when the defaults actually occur.”

Investors have already seen prices on top-rated senior debt drop below 70 cents on the dollar from 95 cents a year ago, according to Aaron Bryson, a commercial mortgage-backed securities analyst at Barclays Capital in New York.

Just a Stopgap

Interest-only mortgages were designed as a stopgap to allow owners to do renovations and absorb other costs. Owners delay paying principal for the first several years, lowering their initial monthly expenses. Partial interest-only loans allow for postponement of principal payments for a portion of the term. Full-term interest-only deals require the principal at maturity.

(AP)- The Treasury Department reported Wednesday that the red ink so far this year totals $991.9 billion. The administration is projecting the deficit for the budget year that began Oct. 1, will total an all-time record of $1.84 trillion. That would be more than four times the amount of last year’s record deficit.

It’s entirely possible that the shortfall from taxes, plus more unexpected high ticket expenses over the next three-and-a-half months, will push the budget deficit for this fiscal year to $2 trillion. The government is trying to cure a crises caused by too much debt by going even more deeply into debt.

“The foreclosure bucket is filling faster than it’s emptying”

You mean to tell me that the ’snapping-up’ crowd is not doing its job?

Without gasoline sales and other commodity price rises, retail sales would show a negative in May…

WASHINGTON (Reuters) - Sales at U.S. retailers rose in May and the number of workers filing new applications for jobless benefits fell for a fourth straight week last week, according to official data on Thursday that suggested the recession was abating.

The Commerce Department said total retail sales rose 0.5 percent, the first advance in three months, lifted by strong gasoline and building material receipts. Sales fell 0.2 percent in April.

A separate report from the Labor Department showed the number of U.S. workers filing new claims for jobless aid fell 24,000 to 601,000 in the week ended June 6, the lowest since January 24.

“It looks like we are turning the corner. There is pretty clear evidence that the worst of the labor downturn has passed, but we still expect more job losses,” said Zach Pandl an economist at Nomura Securities International in New York.

“It looks like we are turning the corner. There is pretty clear evidence that the worst of the labor downturn has passed, but we still expect more job losses,” said Zach Pandl an economist at Nomura Securities International in New York

The worst of the flood is behind us, however the water will continue rising another ten feet. WTF?

There’s that word again: “fiduciary duty”
There’s that “other” word again: “Professional”
There’s that “other, other” word again: “Ethical”

Its been raining GOP cats & dogs in “The O.C.” this week, more from “Behind The Orange Curtain”:

“…The lawsuit accused the executives of reckless oversight of Fremont’s underwriting standards in violation of their fiduciary obligations to shareholders.

The lawsuit also provided a motive: By saving on the reinsurance costs, Fremont boosted profits by 120%, leading to a bonus for the executives.

“It was only by allowing the scheme to operate that defendants were able to exceed the target net income number by a hair more than the necessary number — 120.96% — and thereby trigger substantial bonus compensation to themselves,” said the lawsuit, which is still formally pending in Los Angeles Superior Court.”

“…Is Steve Poizner, the State Insurance Commissioner and a Republican candidate for governor, going easy on some of the financial executives behind the economic meltdown?

“Poizner has signed off on a court settlement that will pay $10 million to four top executives who steered Fremont General Corp. into bankruptcy.”

Candidate OKs $10 million for execs of bankrupt bank:
June 11th, 2009, OC Register by John Gittelsohn

I have a silly question.

If the Fed is just doing ledger entries to bring money into existence in order to buy down the treasury debt rates, what stops them from buying ALL the debt?

Ultrasound: it’s a girl!

Thank Jeebus. Two and out!

Interesting what passes for “intellect” in New York City, the Financial Capital of the World. Considering how most business in run in most capitals worldwide, the moniker is apt more often than not.

This dolt of an “economist” probably makes $200K annually for this and other erudite observations.

“It’s up to you, New York, New York!” Those days are over, Frankie. The worms have infested the Apple. Perfidy characterizes the intelligent there; stupidity characterizes nearly everyone else.

Was this legal? Or am I asking the wrong question again, as the Fed is above the reach of US law? One thing is for certain: If I were a large BoA shareholder, I would be interested in suing the Fed for twisting the BoA CEO’s arm into a breech of fiduciary duty.

market pulse
Jun 11, 2009, 10:00 a.m. EST
Lewis: Fed pressed me to finish Merrill deal
By Ronald D. Orol

WASHINGTON (MarketWatch) - Bank of America Chief Executive Kenneth Lewis said government officials pressed him to buy Merrill Lynch & Co. after he became aware of major losses at the investment bank, according to Lewis’s testimony prepared for a House government reform subcommittee on Thursday. Lewis said that Bank of America Corp. approached Treasury and Federal Reserve officials in mid-December, after shareholders had approved the transaction, to discuss the idea of breaking up the deal because he had “concerns about it.” In response, Lewis said Treasury and Federal Reserve representatives asked him to delay any such action, and ‘expressed significant concerns about the systemic consequences and risk to Bank of America of pursuing such a course.”

Just wondering if one of the green shots coming up is how this corporation plans to cut back by 10% real soon:

9:23AM Delta Air Lines says global recession, rising oil prices forcing additional changes to business (DAL) 6.55 : Co issued a memo to its employees. “We are all seeing negative impacts from the global recession and rising oil prices not only in the news, but also in our communities and personal finances. Clearly, the airline industry is not immune. Industry passenger revenues have declined nearly 20 percent in the first four months of the year compared to the same period in 2008. That trend is expected to continue in the near term. On top of this, cost pressures from rising jet fuel prices - up more than 20 percent since the start of the year - coupled with softer travel demand due to the spread of the H1N1 virus, have created a difficult business environment. These forces that are affecting the industry are creating significant headwinds for Delta. Declining revenues will overtake the more than $6 billion in total benefits we expected this year from lower year-over-year fuel prices, merger synergies and capacity reductions. This morning, at an investor conference in New York, we will announce additional steps to align our capacity with market demand, preserve liquidity, and ensure Delta’s long-term success. This plan includes reducing our system capacity by 10% compared to 2008. Capacity reductions will begin in September.”

$15,000 credit to homebuyers:
http://www.bloomberg.com/apps/news?pid=email_en&sid=aQmrxrzY0jfE&ref=patrick.net

There’s a bill working it way through congress giving every homebuyer a $15000 tax bonus, no restrictions on income or previous ownership.
What exactly would happen IF this bill passes?
The 15K can be easily turned into 75 - 150K purchasing power. That means rising real estate prices for as long as the program will be in place (1 year). After that prices will drop once again as funding and the “urgency to buy” dries up. That means the next generation of underwater homedebtors unwilling or unable to meet monthly obligations. You just can’t make that stuff up!

NEW YORK, June 11, 2009 /PRNewswire-FirstCall via COMTEX/ — Mortgage rates
soared this week, with the average 30-year fixed mortgage rate rising to 5.95
percent. According to Bankrate.com’s weekly national survey, the average 30-year
fixed mortgage has an average of 0.42 discount and origination points.

The average 15-year fixed rate mortgage jumped to 5.37 percent, while the average
jumbo 30-year fixed rate rose to 6.96 percent. Adjustable rate mortgages were up
this week as well, with the average 1-year ARM moving to 5.16 percent and the
5-year ARM climbing to 5.49 percent.

The rising mortgage rates have made it undesirable for many homeowners to
refinance their mortgages. Yet there is an option left for them: the adjustable
rate mortgage or ARM.

I hope Ken Lewis can clear this little thing up about Merrill so the rally can continue in financial stocks. Does anyone else get the impression these hearings are merely a formality to address issues of public outrage and nobody would ever really get in trouble and nothing would ever really develop as a result? The banks and the government have a very important scam to get back to and don’t need these kind of interruptions.

Having fun with employment numbers!

The Labor Department said today that initial claims for unemployment benefits fell last week by 24,000 to a seasonally adjusted 601,000. Still, the number of people claiming benefits for more than a week rose by 59,000 to 6.8 million, the highest on records dating to 1967. The department also revised last week’s data on continuing claims, replacing what had been a drop of 15,000 with an increase of 6,000.

(If it continued at that rate for a year 7,212,000 jobless would be getting unemployment money.)

“I believe that all government is evil, and that trying to improve it is largely a waste of time.”

~H.L. Mencken

Spending the day looking at new places. As expected, I wil be forced to move because they won’t give a “deal” to established tenants.

Stupid, stupid, stupid landlords! Do they even calculate that one month of non-renting in NYC = wipe out all gains for a year?

No green shoots, just red ink:

June 11 (Bloomberg) — Shirley Breitmaier’s mortgage payment started out at $98 when she refinanced her three-bedroom home in Galt, California, in 2007. The 73-year-old widow may see it jump to $3,500 a month in two years.
Shirley Breitmaier took out a $315,000 option ARM to refinance a previous loan on her house.
About 1 million option ARMs are estimated to reset higher in the next four years, according to real estate data firm First American CoreLogic of Santa Ana, California. About three quarters of those loans will adjust next year and in 2011, with the peak coming in August 2011 when about 54,000 loans recast, the data show.

If we do a dispassionate examination of the math we can examine what’s coming, and we will discover precisely why those who are calling for an economic recovery are dead flat wrong.

This woman gained an effective $3,500 a month in “purchasing power” by doing something that is extremely dangerous - that “money” came” not from earnings but from a bet “on the come” of a continued price appreciation in her house.

More than one million families did this, and if $3,500 is a reasonable “best guess” at the extra spending capacity per month that was generated, this means that the economy saw:

$3,500 x 1,000,000 = $3,500,000,000 per month in excess spending capacity, or $42 billion dollars annually.

But wait! Its much worse than just removing that spending capacity from the economy, because the interest costs on that recast loan remain, and continue to drag on aggregate demand until the original loan is fully amortized away (30 years!) or defaulted.

That $42 billion is final demand. There is also, of course, all the employment that is unnecessary. $42 billion is roughly 210,000 cars, as just one way of measuring it - that’s 210,000 cars that will not be built and the employees to build them that will be unemployed.

Further, there were about $750 billion of these loans originated between 04-08, and almost none of the losses from them have been taken by the banks. These loans are severely underwater and recovery is going to be lucky to reach 50% on them. (These loans, incidentally, are what sunk IndyMac, Downey Federal Savings and others.)

That’s another $350 billion in direct losses to the banks and other institutions that has to be taken and which is not being accounted for in the so-called “green shoot” claims, or in bank share price valuations. To quantify this in terms of market developments it is five times the “extra capital” that the banks have raised, five times the TARP funds that are being repaid, and one half the entire original TARP allocation.

These losses are real, they are inevitable, and they are currently being intentionally hidden instead of discussed and dealt with.

You can add the state of California to the long list of nightmares and problems caused by overhyped housing … yes, there are certainly many other problems with the state’s budget, but housing, again, is at the very center …

Also from the LA Times yesterday: Median home prices drop below 1989 levels in some parts of Southland

http://www.latimes.com/business/la-fi-cheaphomes10-2009jun10,0,4802553.story?page=1

T-Minus 49 days…

SAN FRANCISCO (Reuters) - California’s government risks a financial “meltdown” within 50 days in light of its weakening May revenues unless Governor Arnold Schwarzenegger and lawmakers quickly plug a $24.3 billion budget gap, the state’s controller said on Wednesday.

Underscoring the severity of California’s cash crisis, Controller John Chiang, who has previously warned the state’s government risks running out of cash without a budget deal, said revenues in May fell by $1.14 billon, or 17.7 percent, from a year earlier.

Additionally, the revenues of the government of the most populous U.S. state fell short of estimates in Schwarzenegger’s budget plan by $827 million, Chiang said.

He warned California’s state government is speeding toward a financial disaster unless officials act urgently to balance its books.

“Without immediate solutions from the governor and legislature, we are less than 50 days away from a meltdown of state government,” Chiang said in a statement.

California’s revenues have been on a dramatic slide as a result of recession, rising unemployment and its lengthy housing downturn.

The state’s revenues from personal income taxes tumbled by 39.3 percent in May from a year earlier while revenues from corporate taxes fell by 52.1 percent and revenues from sales taxes sagged by 7.6 percent, according to a report released by Chiang’s office.

“A truly balanced budget is the only responsible way out of the worst cash crisis since the Great Depression,” Chiang, a Democrat, said.

Remember in 2005 Ben Bernanke was Chairman of the Council of Economic Advisors, and said “There is no bubble”. He “couldn’t imagine” that housing prices would fall anywhere, for any length of time. He was a dead wrong egghead pump-monkey then; he still is.

Here is a little math quiz for y’all:

Answer: Assuming no overlap (i.e., the same hh would not have received more than one foreclosure notice over the three-month period), n = 398/3, or about 1 foreclosure notice for every 133 US hh’s. It doesn’t sound to me like we are going to run out of foreclosure inventory any time soon.

Jun 11, 2009, 4:58 a.m. EST
Foreclosures in May fall from April, rise from year ago
By Robert Daniel, MarketWatch

TEL AVIV (MarketWatch) — Foreclosure filings in May fell 6% from April, but rose 18% from May 2008, RealtyTrac reported on Thursday.

Foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on nearly 321,500 properties in the month.

May was the third straight month in which filings exceeded 300,000.

One of every 398 U.S. housing units was the subject of a foreclosure filing in the month, the Irvine, Calif., consultant reported.

US hh wealth has dropped by a full year’s worth of GDP or so over the past seven quarters — a 22% drop in net worth to US families. I am so happy the Congress could find $700bn+ last fall to make sure Wall Street’s bankers could keep getting their bonuses, as they did such a fine job of engineering this epic financial disaster.

Economic Report
Jun 11, 2009, 12:59 p.m. EST
Household wealth drops for 7th straight quarter
Private-sector debt declines for the first time on record
By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) — The net worth of U.S. households fell by $1.3 trillion in the first quarter, a seventh straight decline that has seen household wealth drop by nearly $14 trillion, the Federal Reserve reported Thursday.

Household net worth fell at a 9.9% annual rate in the first three months of the year to $50.4 trillion, the lowest in more than four years. Net worth — assets minus liabilities — peaked at $64.4 trillion in the spring of 2007, the Fed said in its quarterly flow of funds report. Read more.

U.S. families have lost 22% of their wealth since the peak. Much of the loss came in the fourth quarter of 2008, when households lost $4.9 trillion.

Households and businesses reduced their outstanding debt. Total private-sector debt fell at a 0.4% annual pace in the quarter, the first time that private-sector debt had declined since the Fed’s records began in 1952.

Households saw their assets drop by $1.4 trillion in the first quarter, including a loss of $448 billion on their real estate and $1 trillion on their holdings of corporate equities, mutual funds and pension reserves.

Liabilities of households fell by $114 billion in the quarter, as consumers reduced their debts at an annual rate of 1.1%. Consumer credit card debt fell at a 3.5% annual rate, the largest decline since 1980.

Disposable personal income rose at a 5.4% annual rate in the quarter to $10.8 trillion annualized. Net worth fell to 4.67 times disposable income, the lowest since 1992.

Owners’ equity in real estate dropped to a record low 41.4% of its value.

anybody else find it as comical as i do that they put “owner motivated” in their for sale ads? to me, the price they are asking says completely how motivated they are, nothing else. heck, i’d be motivated too if i was asking for $1,000,000 on a property that was only worth $100,000. i’d even say that i was VERY VERY motivated. if an owner isn’t motivated, why is it up for sale in the first place? just testing the waters?

Aberration!? Doesn’t the writer know that only one month’s worth of data is all that is needed to prove a bottom will soon be at hand?

How does the “more than 1.7m homes already repossessed” stack up against 900,000+ foreclosure filings over just the past three months?

Real Estate June 11, 2009, 12:01AM EST
Foreclosures Drop in May

But rising unemployment and mortgage rates mean the decline is more an aberration than the start of a positive trend

By Prashant Gopal

The May foreclosure figures are just out, and the number of filings in the U.S. dropped 6%. That should have plenty of people rubbing their eyes in disbelief. Good news, really? Could this be the beginning of the turnaround that so many homeowners have been hoping for?

More like a mirage in the desert. While Irvine (Calif.)-based RealtyTrac reported the decrease, foreclosures remain at the third-highest level on record. Economists warn that foreclosure activity is likely to remain high for some time, and still get worse.
…
Prime Borrowers Get Caught

Rising unemployment is becoming a major cause of foreclosures, which increasingly involve prime borrowers. Job losses have pushed Utah, Idaho, Oregon, Illinois, and South Carolina up the list of the highest foreclosure rates, says RealtyTrac Senior Vice-President Rick Sharga. (Utah, which was never a major subprime center, now has the fifth-worst foreclosure rate.) Another concern is that the expected reset of thousands of so-called pay-option adjustable-rate mortgages (ARMs), a particularly frightening loan that was popular in California, Nevada, and Florida during the boom, could cause another wave of defaults in coming years.

More than 1.7 million homes have already been repossessed since the foreclosure crisis began.

Palm Beach County foreclosure filings spike 33 percent in May from April

Palm Beach Post Staff and Wire Reports

Thursday, June 11, 2009

Foreclosure filings spiked in Palm Beach County in May, research firm RealtyTrac says in a report released today.

According to RealtyTrac, 3,782 homes entered some stage of foreclosure, up 33 percent from April and up 42 percent from May 2008.

In St. Lucie County, 1,293 homes received foreclosure filings, down 9 percent from April but up 13 percent from May 2008. And in Martin County, 256 homes went into foreclosure, up 17 percent from April and up 1 percent from May 2008.

Nationally, the number of households on the verge of losing their homes dipped in May from April, and the annual increase was the smallest in three years.

But as layoffs, rather than risky mortgages, become the main reason that borrowers default on their home loans, foreclosures likely will remain elevated this year and into 2010. Many economists expect unemployment, now at 9.4 percent nationwide, to rise as high as 10 percent, and some project it will exceed the post-World War II record of 10.8 percent.

Foreclosure filings fell 6 percent in May from April, according to RealtyTrac Inc. More than 321,000 households received at least one foreclosure-related notice last month - 18 percent more than a year earlier - but the smallest annual gain since June 2006.

Despite the drop from April, it was the third-highest monthly rate since Irvine, Calif.-based RealtyTrac began its report in January 2005, and the third straight month with more than 300,000 households receiving a foreclosure filing.

One in every 398 U.S. homes received a foreclosure filing last month, according to the foreclosure listing firm’s report.

The mortgage industry has resumed cracking down on delinquent borrowers after foreclosures were temporarily halted by mortgage finance companies Fannie Mae and Freddie Mac and other lenders.

“It would not be a huge surprise to see the numbers level off a little bit at this point,” said Rick Sharga, RealtyTrac’s senior vice president for marketing.

Schwarzenegger threatens to shut down state government

Gov. Arnold Schwarzenegger vowed Wednesday to let California government come to a “grinding halt” rather than agree to a high-interest loan to keep the state afloat if he and the Legislature do not close the yawning budget gap in coming weeks.

A loan would only “give them another reason why we don’t have to do it now,” the governor said. “What we need to do is just to basically cut off all the funding and just let them have a taste of what it is like when the state comes to a shutdown — grinding halt.”

In the wide-ranging interview, Schwarzenegger challenged legislative Democrats to resist the influence of special interests fighting the deep program cuts he has proposed to help balance the budget.

Clearly alluding to labor unions that oppose the cuts, the governor said: “Do they want to protect the workers that provide the services, or do they want to protect the people that get those services? The choice is up to them.”

http://www.latimes.com/news/local/la-me-arnold-budget11-2009jun11,0,4348474.story

WASHINGTON (AFP) – The World Bank said Thursday the global economy is set to contract some 3.0 percent this year, sharper than previously estimated, urging more aid for developing countries amid the spreading crisis.

The latest growth estimate marked a significant revision to the bank’s prior estimate of a 1.75 percent contraction in late March and came ahead of a two-day meeting of Group of Eight (G8) finance chiefs that opens Friday in Lecce, Italy.

“Financial markets seem to have broken the fall over past months but there are clear fragilities, and risks remain,” World Bank president Robert Zoellick said in a conference call with reporters.

Is this something like putting a “price” on someone’s head? And how are them “reputational consequences” looking about now?

Fed Memo Said Aid for Bank of America Would ‘Come at a Price’
By Craig Torres and Scott Lanman

June 11 (Bloomberg) — Federal Reserve officials recommended putting a “price” on any government aid to Bank of America Corp. in connection with its takeover of Merrill Lynch & Co., according to documents released by congressional staff.

The officials also foresaw “significant reputational consequences” for the bank if it abandoned the deal, warning that investors would conclude Bank of America was “too weak” to complete the acquisition, according to a memo of “talking points” prepared by two senior Fed officials. The memo was part of a package of internal Fed documents obtained by subpoena by the House Oversight Committee.

The documents offer insight into Fed officials’ views on the danger of Bank of America Chief Executive Officer Kenneth Lewis backing away from the Merrill Lynch acquisition over increasing concerns about the health of the brokerage. The “talking points” memo detailed consequences including more intrusive government oversight of the firm in the case of special aid.

Bank of America’s “assertion that it would successfully exercise the material adverse effects clause” to break off the Merrill agreement “is not credible, according to Fed and other key U.S. government attorneys,” said a Dec. 21 document, called “Talking Points for BankAmerica Discussion,” attached to an e- mail sent by Fed Governor Kevin Warsh to Chairman Ben S. Bernanke.

‘Consequences’ for Bank

“This would cause significant reputational consequences for BA, in the markets, with the public and with regulators,” the e-mail attachment said.
…

Two articles I found interesting

the International Energy Agency in Paris said that the slump in global oil demand in 2009 would be slightly less severe than previously expected, however. The organization revised its demand estimate upward for the first time in 10 months.

The IEA said in its monthly survey that global oil demand would fall by 2.9 percent to 83.3 million barrels a day this year. In today’s enviromment, even that is seen as good news. In May, the IEA was expecting a 3 percent annual fall in demand, the sharpest rate of decline since 1981.

Then from Bloomberg

June 11 (Bloomberg) — The World Bank, established in the wake of World War II to help eradicate poverty, cut its global economic outlook for this year, citing rising unemployment and weak production.

The Washington-based lender projects the world economy will shrink “close to 3 percent,” compared with a 1.7 percent contraction forecast in March, the bank said today in a statement. Developing countries may need $350 billion to $635 billion this year, less than previously forecast, to counter the effects of the global economic crisis.

3% contraction X world GDP =

Signs of Hope in Housing, But a V-Shaped Recovery Isn’t in the Cards
Posted Jun 11, 2009 01:21pm EDT by Aaron Task

As with the broader economy, there are signs of improvement in the housing market - or at least a bottoming process. The latest example came this morning from RealtyTrac, which reported foreclosures fell 6% in May vs. April.

In addition, mortgage applications have risen in recent weeks and speculative buyers are being very active in some of the hardest-hit areas, like Phoenix. Hedge fund manager and blogger Jeff Matthews writes the housing market is recovering faster than you think.

But like the broader economy, there are many obstacles in the path of a true recovery in housing, much less a rebound:

* Home prices remain elevated by historic levels, and analysis of other post-bubble episodes suggests a dip beneath the long-term trend is likely.
* Mortgage rates are rising. The average 30-year mortgage is up to 5.59% the highest in seven months, Freddie Mac reports, after recently touching 4.75%. This is going to crimp refinancing activity; meanwhile, Obama’s HARP program has only helped less than 13,000 homeowners refinance to date, The WSJ reports.
* U.S. consumers remain under tremendous stress because of high levels of debt and rising unemployment. Many observers believe May’s dip in foreclosures will prove to be a pause and expect delinquencies to start rising again this summer.
* Banks are tightening their lending standards after getting burned badly by their lack of standards earlier this decade.

The bottom line is the housing market is not getting worse, but those expecting a rapid or V-shaped recovery are likely to be disappointed, just like with the broader economy.

“The O.C.” (Hwy thinks that “The O.C.” has surpassed “Sarah the Barracuda” in the “gift that keeps giving” category.)

BWAHAHHAHAHAHHAHAHHAHHAHAHAHHHHHHHHHHHHH!!! (fpss™)

St. Regis owners, lenders face big losses:
June 10th, 2009,OC Register by posted by John Gittelsohn

Good luck getting anything for the troubled St. Regis, says an O.C. hotel expert.

“They have no equity left. Zero,” Reay said, adding that the lender, Citigroup Global Markets Realty Corp. also probably will take a bath on its investment.

“The lender in first position is going to lose a big chunk of money,” Reay said.

These days, luxury resorts like the St. Regis typically have occupancy rates as low as 15%, Reay said. That clobbers investors who paid top dollar for a property.

In 2007, the owners of the St. Regis borrowed more than $300 million for the resort from Citigroup: A $230 million loan on the property and a $81 million “mezzanine” loan based on the owners’ equity.

“That property is probably worth about $150 million now,” Reay said. “The problem is there’s no financing”

Southern California has a glut of new luxury resorts, many of which are struggling to fill rooms during the economic downturn, especially since corporate partiers at the St. Regis drew the attention of critics in Congress and the White House. For example: In November, the Irvine Company opened the Resort at Pelican Hill, where rooms start at $695 a night. Other new resorts competing for high-end customers include Terrenea in Palos Verdes and the Grand Del Mar in San Diego.

“There’s the AIG factor,” Reay said referring to the outcry that surrounded news that partiers from AIG spent $400,000 at the St. Regis after last fall’s federal bailout of the insurer. “We’re also in a deep recession. People aren’t traveling and staying in high-end resorts. Business travel has fallen off a cliff.”dpstregis1

The hotel’s owner is an limited partnership affiliated with Makar Properties of Newport Beach. Makar is also the developer of Pacific City in Huntington Beach, a multi-use residential, commercial and resort property that is planned to include a W Hotel. Construction of Pacific City appears to have come to a halt and Makar is being sued in Orange County Superior Court by one of the prime contractors, Wright Construction Co., for breach of contract.

Due to financial constraints there will be no 4th of july fireworks display in my SD city. who else?

NEVER happen! Barry is doing the big pay back now, gots to grease the wheels for the next election! As would any lowlife politician, which is the majority of the cesspool swimmers…

Business groups dare Obama to limit pay for union bosses.
By Amanda Carpenter on June 11, 2009 into The Back Story

Business groups are daring President Barack Obama to impose pay caps on labor union bosses in light of indications the White House will limit how much corporate executives can be paid.

President Obama has argued “corporate greed” has contributed to the economic crisis and appointed a “compensation czar” to review executive pay for several companies receiving taxpayer bailout money Wednesday. Now White House officials have told the press legislation should be enacted to limit executive pay in private companies through nonbinding shareholders votes.

What happened yesterday? Are you referring to ending the 2nd Amendment via treaty?

Ok….I think there’s been a discussion in the past about driving less to save energy, get exercise, blah blah. Here’s an example of where not driving causes problems.

Living in East Sacramento, CA close to the central city means I can bike a lot of places, including the local library. this evening I was riding home from said library when a jerk with a plastic bag on his head like some deranged super hero or wrestler SCREAMS at me while driving by. His intent was to scare which he did almost sending me out of the bike lane.

Well…..the car stops at the next light and he’s in the passenger seat with the window down. I pull up, set my bicycle down, walk up, and I’m just about to put my full 190 lbs behind a fist in his face when I realize there are witnesses and two small children in the back seat with mom behind the wheel. Mom looks scared.

So, they were stopped long enough that I had the chance to inform them that they are idiots for jeopardizing their lives, mine, and the lives of the small children in the back seat. They said nothing. Nor did they roll up the window.

Guy never took off the mask. Either it was dad or a teenager. Just stared at me. Idiots. It’s all fun and games in the safety of your car until you are faced with a real human being. An angry one.

2nd Amendment didn’t go away after that radical Muslim convert bent on domestic Jihad killed a GI a few weeks ago. Funny how the MSM blew right past that story. I guess that terrorist was the wrong race or something about offending Muslims before Barry went on tour.

Speaking of glow in the dark wasp nests:

Radioactive wasps bug out nuclear cleanup workers -
By Shannon Dininny, Associated Press Writer – YAKIMA, Wash. – If workers cleaning up the nation’s most contaminated nuclear site didn’t have enough to worry about, now they’ve got to deal with radioactive wasp nests. Mud dauber wasps built the nests, which have been largely abandoned by their flighty owners, in holes at south-central Washington’s Hanford nuclear reservation in 2003.

That’s when workers finished covering cleaned-up waste sites with fresh topsoil, native plants and straw to help the plants grow — inadvertently creating perfect ground cover for the insects to build their nests. Nearby cleanup work also provided a steady supply of mud, which the wasps used as building material.

Today, the nests, which could number in the thousands, are “fairly highly contaminated” with radioactive isotopes, such as cesium and cobalt, but don’t pose a significant threat to workers digging them up.

“You don’t know what you’re going to run into, and this is probably one of the more unusual situations,” said Todd Nelson, spokesman for Washington Closure Hanford, the contractor hired to clean up the area under the oversight of the U.S. Department of Energy.

As for the wasps themselves, they’re largely long gone — the insects don’t reuse their nests when they colonize each spring.

The federal government created Hanford in the 1940s as part of the top-secret Manhattan Project to build the atomic bomb.

The site produced plutonium for the first atomic blast and for the bomb that was dropped on Nagasaki, Japan, at the end of World War II, and plutonium production continued through the Cold War.

Anybody want to start a bond courier service?

San Francisco Chronicle Editorials
On the Incredible Shrinking Budget
California’s cash crisis

Friday, June 12, 2009

The latest ultimatums have arrived: State Controller John Chiang is warning the governor and legislators that, unless they act swiftly to balance the budget, the state will run out of cash by July 28. And Gov. Arnold Schwarzenegger is telling legislators that he would allow a government shutdown before he would permit them to bridge the gap with high-interest loans.

“Cash is king now, in terms of our focus,” Chiang said, adding that the state’s cash flow is about to become so precarious that a wildfire or other natural disaster could accelerate the day of reckoning.
…

Gloom over California home prices hard to shake
Thu Jun 11, 2009 9:09pm EDT
By Jim Christie

SAN FRANCISCO (Reuters) - Matt Bording doubts many in his financial bind would agree that home prices in California are near a bottom. And there are many in his predicament.

Bording owes more on his mortgage than his Richmond, California house is worth so he is giving up on the loan.

“We’re walking away,” Bording told Reuters, noting he will soon hand his lender the keys to the three-bedroom house he bought with his wife in 2005 because its value has plunged with his zip-code’s median home price over the last year.

“It’s down about 60 percent,” he said. “I don’t see that rebounding in a realistic time frame.”

Brisk sales of foreclosures are leading optimistic analysts to forecast an end to the misery of falling home prices in California, a first step to recovery in a key housing market at the epicenter of the U.S. mortgage crisis.

But Bording says his neighborhood is full of for-sale signs for known foreclosures and the disrepair of other houses suggest their owners share his view: “They may want to jump off a sinking ship.”

Neighbors are forcing neighbors into foreclosure
By PAUL J. WEBER – 12 hours ago

IRVING, Texas (AP) — Thousands of Americans who have generally kept up with their mortgages are still in danger of losing their homes because they made a fateful trade-off in this shaky economy — they let their homeowner association dues slide.

Many homeowners are learning to their surprise that condo and neighborhood associations that oversee security patrols, mow lawns, plant flowers and clean the community swimming pool may have the right to foreclose when dues aren’t paid. That right is often written into the purchase agreement signed by the homeowner.

Among those who have been threatened with foreclosure is Lacey Pilat, who lost her job catering lavish corporate parties and nearly lost her two-story house in this Dallas suburb.

“Basically, our landscaper was foreclosing on the house,” said Steve Pilat, her husband. “That’s the way we looked at it.”

Boston Real Estate Now
Markets
A California-style price collapse here? Dream on
Posted by Scott Van Voorhis June 10, 2009 09:00 AM

OK, I have a tendency to label folks predicting a price collapse here doom-and-gloomers – which may or may not be fair.

However, it’s easy to get fed up with housing prices around here.

Even amid the downturn they are simply too high. I found myself recently shaking my head over the sale of a ranch in Weston for $2 million.

Must have been some ranch.

Yet pining for a California-style price collapse is not going to make it happen here.

I am talking about a 50 percent or more plunge in prices, compared to the more modest, 20 to 25 percent decline we have seen here in the Boston area.

Five of the nine metro areas that have seen prices fall by 50 percent or more are in California.

Just check out the stunning, 41 percent nose dive home prices have done in the San Francisco Bay area over the past year, bringing the median sale price down to $304,000.

But there is a big difference between what happened in California and what won’t happen here.

That difference is the vast amount of new housing rolled out in the Golden State during the boom, compared to the Bay State’s anemic production levels.

Back in 2005, California churned out a stunning 208,000 new housing starts, the Construction Industry Research Board reports.

Perhaps this resort is bailout-worthy, too?

Don Kelsen / Los Angeles Times

The St. Regis Monarch Beach, shown in 2001, has six restaurants, a golf course and a private beach club but has been hit by a drop in bookings. The owners have defaulted on a $70-million loan, sources say

St. Regis resort in Dana Point faces foreclosure sale
Don Kelsen / Los Angeles Times

The St. Regis Monarch Beach, shown in 2001, has six restaurants, a golf course and a private beach club but has been hit by a drop in bookings. The owners have defaulted on a $70-million loan, sources say
The owners of the Orange County resort, known for being the site of a $440,000 AIG retreat after the federal bailout, default on a $70-million loan.

By E. Scott Reckard and Roger Vincent
June 10, 2009
Want to buy a five-star, down-on-its-luck resort?

The St. Regis Monarch Beach, infamous as the hotel where American International Group sponsored a luxury retreat just days after accepting a federal bailout, has been scheduled for a foreclosure auction.

Karma should not be mistaken for coincidence.

examiner dot com
St. Regis Monarch Beach woes underscores sign of the times
June 11, 2:24 PM

Perhaps it’s a coincidence – perhaps not. The St. Regis Monarch Beach, a beautiful property in Orange County, Calif., is on the foreclosure auction block according to a report in the Los Angeles Times. The 400-room resort, which features a golf course with ocean views as well as private beach club, is perhaps best known as the destination where American International Group (AIG) sponsored a luxury retreat days after accepting a federal bailout.

The property’s owners reportedly are in default on a $70-million loan from Citigroup Global Markets Realty Group. Citing sources, the LA Times said negotiations continue in an effort to avoid an auction, unless a deal can be worked out, the St. Regis will go on the block July 7. According to the newspaper’s sources, the St. Regis, which opened in 2001, is current on two other mortgages totaling $230 million.

The St. Regis is by no means alone in its financial woes during these tough economic times for hotels and resorts.

Median home prices drop below 1989 levels in parts of Southern California
www dot chinaview dot cn 2009-06-11 05:24:06

LOS ANGELES, June 10 (Xinhua) — Properties in several areas in Southern California are selling for less than they did 20 years ago, and that’s not including inflation, according to figures published on Wednesday.

The median price in the six-county area was 247,000 dollars in April, about what it was in 2002. But in mainly desert communities such as the Antelope Valley and Inland Empire, median prices have fallen below levels recorded in April 1989, according to MDA Data Quick, a San Diego real estate information service.

Prices also tumbled below 1989 levels in neighborhoods in areas like Palmdale, Hemet, Barstow, Desert Hot Springs, Victorville, Highland, Santa Ana and Oxnard, Data Quick said.

That means thousands of homes in those neighborhoods — even houses barely 20 years old and in decent shape — have lost every dime of their appreciation, giving back not just the gains of the recent bubble but steady increases logged over a generation, said the agency.

The median price is the point at which half the homes sell for more and half for less.

Losing two decades’ worth of gains in a single downturn “has never happened,” said UCLA economist Edward Leamer, who has studied local areas during booms and busts. “You’re seeing something that’s abnormal.”

Revenue at tribal casinos in California sinks along with the economy
08:40 PM PDT on Thursday, June 11, 2009

By JACK KATZANEK
The Press-Enterprise

Gamblers are still spending money at California’s Native American casinos, although they appear to have spent less each time they visited last year, a recently released report indicates.

Revenues at Indian casinos across the country were actually up 2.3 percent in 2008, according to the annual report from the Nation Indian Gaming Commission. But in California, where most of the 58 tribal casinos are in areas affected by last year’s collapse of housing markets, revenues were down 5.6 percent.

Tribal casinos in California had slightly less than $7.4 billion in revenues last year. Revenues are defined as the amount taken in from wagering less the winnings paid back to players. Overall, the 405 tribal casinos and bingo halls in 28 states saw more than $26.7 billion in revenue.

If you are tired of waiting for home prices to fall back to affordable levels wherever you may live, how about a $6,000 home for you — in Detroit?

Home sales rise as prices keep falling

BY GRETA GUEST • FREE PRESS BUSINESS WRITER • June 12, 2009

Metro Detroit home sales rose by 12.6% in May as compared with last year, yet home prices continued their fall — an indication that the market hasn’t hit bottom yet.
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Overall, 5,955 homes were sold in May, compared with 5,288 sold in May 2008, according to Realcomp, a Farmington Hills-based multiple listing service.

The median sales price for homes sold in May was $50,000, a 44.3% drop from $89,700 in May 2008.

Foreclosures continue to drag down prices. In May, foreclosure sales accounted for 60% of all homes sold. And the median price of foreclosed sales in the metro area was $26,400 compared with a median sales price of $110,000 on non-foreclosed homes.

In the city of Detroit, the median sales price in May was $6,000, down 29.4% from May 2008.

BusinessWeek
With Securitization Down and Out, Home Prices Will Falter
Posted by: Mara Der Hovanesian on June 11

Big banks keep making big noises at any opportunity about how they’re doing their bit to keep the economy going and making new loans. MBS analyst Laurie Goodman at Amherst Securities Group in New York City, one of the best MBS shops on the street in my opinion, begs to differ. In a report issued today, Goodman acknowledges that the ongoing skid in home prices (a 32% decline in home prices from the mid-2006 peak, as measured by the S&P/Case-Shiller 20-City Index) is due to over-extended borrowers in bad loans. Yet, she says, another factor is contributing to the declines just as much: a lock-down on mortgage credit, i.e. banks still aren’t lending.

The main culprit is that the securitization market, or the secondary market where investors buy these mortgages as investments, is still in lock-down mode. Even though the Fed has spent $531 billion of the $1.25 trillion it has allotted to buying Fannie Mae and Freddie Mac mortgages, “that’s done little to address credit availability,” Goodman writes.

If a bank makes a loan, it must either hold that loan on its balance sheet, or securitize it. Since the securitization market has shut down, all the loans made now are staying on the books. And that’s added pressure for banks already constrained by capital needs.

Here are some numbers from Goodman’s report which drive the point home: In 2008, there were $97 billion of prime jumbo mortgages (which are outside the parameters of conventional loans bought by government agencies, Fannie Mae or Freddie Mac) with just $6.6 billion of that sold on the secondary market and the rest held in-house in banks’ portfolios. In 2006, by contrast, $480 billion was originated with $219 billion of that turned into MBS pools, leaving $261 in banks’ portfolios. By Goodman’s calculations, that means that securitizations are down 97% and portfolio originations have fallen 66%.

32 pct, eh? I am losing track of the score…

Shiller Says U.S. Home Prices May Decline for Years (Update1)
By Kathleen M. Howley and Erik Schatzker

June 9 (Bloomberg) — U.S. home prices may continue to tumble for years, according to economist and Yale University professor Robert J. Shiller.

“Our sense that housing is a wonderful investment is really damaged now,” Shiller said in an interview with Bloomberg Television today.

The state of the economy will have a greater impact on interest rates than the housing market, Shiller said. The recession may end later this year, though the recovery may be lackluster, he said.

“We may have a recovery, but I suspect it will be a disappointing one,” Shiller said.

The Standard & Poor’s/Case-Shiller national index of home prices, named after the professor, has fallen 32 percent from a high in the second quarter of 2006.

Nashville home prices, sales drop in May
By Naomi Snyder • THE TENNESSEAN • June 10, 2009

Despite warmer days, low interest rates and generous tax incentives for first-time homebuyers, May appears to have been a ho-hum month for real estate sales here.

The median home price in the Nashville area fell 10.6 percent from a year ago to $169,900 in May, the Greater Nashville Association of Realtors reported Tuesday.

Sales of single-family homes, condos and land fell 28.9 percent from a year ago to 1,783 completed sales last month.

One of the brighter bits of data was the median price of condos, which was off only 1.7 percent from a year ago to a median sales price of $156,250 in May on 228 sales. A month earlier, condo prices were down 7.5 percent from the same period a year earlier.

“You’re always disappointed when you don’t see an increase,” said Christie Wilson, a broker with The Wilson Group Real Estate Services. “It’s the nature of the market right now. Sales are down. Values are down.”

Dallas-Fort Worth home sales drop almost 25%
12:00 AM CDT on Tuesday, June 9, 2009

By STEVE BROWN / The Dallas Morning News
stevebrown@dallasnews.com

North Texas pre-owned home sales dived almost a quarter in May from a year earlier. But median prices were down only a fraction, according to statistics released Monday.

Real estate agents sold just under 6,000 pre-owned single-family homes last month, Texas A&M University’s Real Estate Center and the North Texas Real Estate Information Systems Inc. reported. It was the lowest home sales total for the month since 2000.

Through the first five months of 2009, pre-owned single-family home sales in North Texas have fallen 24 percent from the same period of last year, and condo sales are off 33 percent.

The May declines are the latest in a long string of year-over-year home sale decreases.

And analysts are watching closely for some kind of leveling in the market.

“You never know for sure when the market has hit bottom until well after the recovery is under way,” said David Brown, who heads the Dallas office of housing analyst Metrostudy Inc.

“That being said, I believe the Dallas-Fort Worth single-family sales activity is in the process of bottoming out.

“We will, however, get more reports of monthly sales declines through the remainder of this year. I expect homes sales activity in the D-FW market to bounce along the bottom for the next year or so until consumer confidence and the job market demonstrate sustained improvement.”

Median home sales prices have dropped 4 percent so far this year to $139,500, according to the latest data.

The Vancouver Sun
Western Canada leading real estate industry in new home price declines
By Mario Toneguzzi, Canwest News ServiceJune 10, 2009Comments (3)

CALGARY - New housing prices across the country fell by three per cent in April compared with a year ago, primarily because of continuing declines in western Canadian centres.

In Calgary, Statistics Canada said new houses prices fell by 8.8 per cent from April 2008 to April 2009. Edmonton saw a year-over-year drop of 12.5 per cent while Saskatoon had an 11.9 per cent decline. In Vancouver, the drop was nine per cent.

The federal agency’s New Housing Price Index, released today, also showed that contractors’ selling prices decreased nationally by 0.6 per cent in April from March.

Between March and April, prices declined the most in Vancouver (1.2 per cent) followed by Edmonton (0.9 per cent) and Calgary (0.8 per cent).