The Housing Bubble

Good Morning Everyone!!!!

Got the chance today to debate someone who said the housing market at Bragg was “different” than everywhere else….

It was fun..

About half of U.S. mortgages seen underwater by 2011.

NEW YORK (Reuters) – The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.

Home price declines will have their biggest impact on prime “conforming” loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

“We project the next phase of the housing decline will have a far greater impact on prime borrowers,” Deutsche analysts Karen Weaver and Ying Shen said in the report.

Of prime conforming loans, 41 percent will be “underwater” by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties’ value, up from 29 percent, it said.

“The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding,” the analysts said. Prime jumbo loans make up 13 percent of the total market.

Deutsche’s dire assessment comes amid a bolt of evidence in recent months that point to stabilization in the U.S. housing market after three years of price drops. This week, the National Association of Realtors said pending home sales rose for a fifth straight month in June. A widely watched index released in July showed home prices in May rose for the first time since 2006.

Two articles in the MSM today about Chinese drywall. One in the WSJ and this one in the Sarasota Herald Tribune.

The SHT (interesting abbreviation!) article is about a resale that fell through when the buyer’s inspection found the drywall to be present. Here’s the good part: The seller and seller’s realtor still didn’t disclose the situation even after the deal fell through and the house was relisted, until SHT’s investigation.

Oh, and the sellers refuse to refund the buyer’s earnest money deposit of $20,000 on a $600,000 TOWNHOUSE!

http://www.heraldtribune.com/article/20090806/ARTICLE/908061057/2055/NEWS?Title=Drywall-discovery-sets-off-a-struggle-

Last week during a family emergency, I stopped at a well known donut and coffee shop in Mass, to get a dozen donuts to take to a small family reunion in support of my stepfather.
At the said donut shop, they take credit cards. I walked in, ordered my dozen donuts, whipped out my debit card, and the very overweight cashier took it, tried swiping it, and it failed. It did not go through due to a technical issue with the link between the donut shop, and their corporate offices in Braintree. Woman behind the counter, told me that I would have to pay in cash. I seldom carry any cash. I find that carrying cash burns a hole in my pocket the size of gibraltar, so I always use my debit cards for everything.
I told her, that, no I did not have cash, and that she had to honor the card, as she had nice stickers in the front of the store, and if you would, call your manager. She dutifully called her manager, all the while returning the donuts to the counter (health violation).
Manager, pretty much said, so sorry, get out of my store. I indicated that I never had any intention not to pay, but anyway, out the store I went.
I was at this point in time fuming mad. I called the corporate offices, where they procedeed to tell me that it was a technical issue, and that I was over reacting. I was not. I told them that there are always alternate ways of taking a credit card, like an imprint and a phone call. I also told them that there are alternate ways of communications, not only a T1, but regular POTS would do the job of authenticating quite nicely, and that the issue was not the technology, but the employees attitute towards their customer.
After this, I went to the competition, a couple of blocks down the street. I ordered a dozen donuts, and the people were nice, professional, and the place looked cleaner. I took the donuts to my gathering, and told every person there about my experience at the first place. Turns out that the second donuts are much better than the first one.
After this long diatrabe, I came to 2 conclusions.
Whoever was in Donut shop #1 had most likely read “fire your customer” and taken it a step farther. This is becoming an endemic problem across all industries. In Technology, how often are you answered with a quick resolution to your problem? You call, and get some dude/ette in chindia, taking basic information, yet telling you that somebody will contact you at a later time? And that person never ever contacts you? The US had the best customer service in the world. Companies prided themselves in the level of customer service provided. That all went out the window with the outsourcing of customer service functions to Chindia.
The second thing that I thought, was that no matter the problem, companies no longer take resposability. In this case, every single one of the people that I spoke to blamed something else out of their control. They took a company problem, and made it a customer problem. That is one HUGE no-no. The companies problems can never reflect on the service/product of the company.
The smaller donut chain earned a customer as long as they keep up their current level of service.
Sorry for the rant, but hope to shed some light on what ails us.

Next up: Christmas shopping season handwringing time…

Sluggish July sales show tight-fisted consumers
By ANNE D’INNOCENZIO, The Associated Press

6:57 a.m. August 6, 2009

In this July 31, 2009 photo, Sheika Smith, 26, of the Bronx, applies eye make up at the Sephora counter of the new JC Penney store in the Manhattan Mall during the grand opening in New York. Retailers are reporting sluggish sales for July as shoppers’ worries about jobs escalate, raising concern about the health of the back-to-school shopping season.(AP Photo/Mary Altaffer) - AP

NEW YORK — Shoppers, worried about job security and finding fewer options among the sales bins, remained tight-fisted in July, resulting in sluggish sales for many merchants and raising concern about the back-to-school shopping season’s health.

As merchants reported their sales figures Thursday, mall-based chains continue to be hit hardest as consumers focus on necessities. Among the disappointments were Macy’s Inc. and teen retailers Abercrombie & Fitch Co. and Wet Seal Inc.

Among the few bright spots was discounter TJX Cos., operator of the T.J. Maxx and Marshalls chains. which reported a sales gain that exceeded Wall Street estimates.

“The consumer is stressed and depressed,” said Ken Perkins, president of retail consulting firm Retail Metrics. “Back-to-school shopping season is going to be very late.”
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Struggling homeowners take banks to court
by Daniel Valentine | Staff Writer

A Bowie couple is suing Wells Fargo bank, alleging the bank should have known they could not afford the second mortgage they agreed to for their home.

In court papers filed June 29 in U.S. District Court in Greenbelt, homeowners Mountaga and Michelle Bah accuse the bank of pushing them into foreclosure by marketing a $30,000 second mortgage to the couple in 2000 and raising their monthly payments by about $700, which they were unable to pay.

According to court documents, the Bahs have asked for “legal and equitable relief as may be appropriate,” though lawyers hope that will include a chance to renegotiate with the lender.

The lawsuit is the latest of hundreds in the region that homeowners have filed in the past year to put off losing their homes, legal aid lawyers said. From April to June, there were 3,427 default and foreclosure filings in Prince George’s County according to a state report, making up roughly 36 percent of Maryland’s documented foreclosure events.

In court papers, the couple’s lawyer, Mary Goulet, argues that Wells Fargo knowingly approved the second loan knowing it would push them over their ability to pay and lead them to foreclosure.

“It’s clear to me and it would be clear to any bank that’s underwriting a loan that the Bahs did not win the lottery in 2000. They didn’t suddenly have this extra money to take out a second mortgage.”

The argument is known in legal circles as the “unclean hands” doctrine. Under Maryland law, contracts can be changed or nullified if one group negotiated a deal in bad faith, which Goulet is alleging.

“If you, as a bank, create a situation where you have pushed their finances into foreclosure, then you have unclean hands,” said Goulet, who is representing the couple for free.

Goulet said her office took on the pro bono case at the request of state officials, who have been urging lawyers to take on clients facing foreclosure for the last two years.

Wow, who put the line between spoiled rich kids playing with daddys’ money, and entrepenuer, and was dumb enough to pick the second option???????????? If you can’t make money with money your an idiot, its getting it at a young age that is tough, unless your born rich. What a stupid story about spoiled rich kids keeping the family tradition of greed alive.
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Young entrepreneurs to buy bank and move HQ to Austin

A couple of 20-something Austin businessmen are teaming to buy a La Grange bank with plans to expand and eventually move its headquarters to Austin.

Rob Gandy and Nate Paul are waiting for regulatory approval to buy Colorado Valley Bank. Gandy, manager of First National Bank in Austin, and Paul, president of World Class Capital Group LLC, expect to close the deal in September.

The two have done several business deals during the last year and began looking at buying a bank in late 2008, said Gandy, who is a third-generation banker. His father, Robert, is president and CEO of Edinburg-based First National Bank Group Inc., and his grandfather founded Illinois-based Soy Capital Bank & Trust.

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20-something entrepreneurs = spoiled kids?

Buy foreclosures now - before it’s too late

In many markets, if you want to buy a repossessed property, you better come with your best offer first — and fast.

NEW YORK (CNNMoney.com) — You’ve heard of speed dating? It’s got nothin’ on foreclosure buying these days. In many places, anyone who wants to buy a foreclosure better act fast, or they’re going to come away with bupkus.

REOs, the industry term for homes repossessed by lenders and put back on the market, are often selling in a day — sometimes in less.

“We’re seeing REOs go very quickly. Offers come in immediately after the listing comes on the market, within 24 hours,” said Brad Geisen, founder of Foreclosure.com. Some homes have been put into contract in less than 90 minutes.

In Stockton, Calif., foreclosure ground zero, the market has changed radically. Last summer, Cesar Dias became famous for founding the “foreclosure tour,” in which he packed potential buyers on a bus and ferried them around to some of the thousands of distressed properties.

Today, the foreclosure tour in Stockton is history. There are too few REOs.

“For every listing that comes out, we have 10 buyers,” said Dias, an agent with Approved Real Estate Group. “We had a lot of inventory last summer. Now we’re down to 1,500 listings — from more than 5,000.”

San Diego buyers face the same trend. “Agents have one or two REO listings now, compared with 15 or 20 a year ago,” said realtor Adrianna Delgado of the Delgado Group

And there’s almost no negotiating, no back-and-forth, after the initial bid. “We don’t get a counteroffer,” said Delgado. “The sellers just ask for your highest and best bid. If you’re not prepared to send in your best bid the first day, you may as well stop looking.”

In Florida there are so many buyers for foreclosure listings that real-estate investment companies, which had been snapping up properties, are now facing stiff competition, said Vanessa Grout, VP for acquisitions at New Valley, a real estate investment fund.

Even in distressed Detroit, REOs are still in high demand. “For a good house that’s not too beat up, in a good neighborhood, there’s no lack of buyers in this market,” said Andy Sakmar, founder of Century 21 Sakmar in the Motor City suburb of Rochester. “There are a lot fewer of these properties than a year ago, and the super buys get multiple offers.”

US firm closes down factory after French workers beat up boss.

US electronics firm Molex Inc announced on Wednesday its factory in Villemur-sur-Tarn in southwestern France was temporarily closed down to reassess security after a labour dispute turned violent.

Angry French workers facing lay-offs beat up a senior American executive after he visited the factory, an executive said on Wednesday.

Union members said workers had only jostled and thrown eggs at development director Eric Doesburg on Tuesday night when he left the factory in Villemur-sur-Tarn in southwestern France, which Molex plans to close down.

But director-general Markus Kerriou said Doesburg had to be escorted away by bodyguards after he was “really beaten” by about 40 workers.

“A medical examination confirmed the injuries, and we’ve decided to file a lawsuit,” Kerriou told Reuters.

Workers at the factory have been on strike since July 7 over its planned closure but Molex said there would be no further talks over a possible re-start.

A union leader at Molex said only “a few small incidents” occurred on Tuesday night. He did not say whether he was present at the events.

“Essentially, egg-throwing and maybe a light scuffle. But no one was injured,” Guy Pavan, a member of trade union CGT, told Reuters. “Egg-throwing has never caused serious injuries.”

Home sellers frustrated as short-sale deals collapse
Stephanie Armour, USA TODAY

Scores of homeowners who thought they’d cut a deal with their banks to sell their houses for less than their unpaid mortgages are seeing those agreements fall apart months later, contributing to the mounting foreclosures that threaten the housing market’s recovery.
The sales of homes for less than the amount owed the bank, known as “short sales,” have been widely viewed as an alternative that could help slow the foreclosure epidemic. In theory, delinquent homeowners escape a mortgage they cannot afford, and lenders, although taking a loss, avoid the even costlier process of completing a foreclosure.

Instead, many homeowners are watching potential buyers walk away as months pass while they deal with lenders’ lengthy delays, lost documents and unreturned calls, according to the National Association of Realtors (NAR). Not all the snafus are lenders’ fault; inexperienced real estate agents who fail to turn in complete paperwork also are causing holdups, as are severely underpricedhomes.

The problems have become such a kink in the market’s recovery that banks and the federal government are launching new efforts this month to simplify and speed up the short-sale process.

Just 23% of short-sale offers that homeowners receive from potential buyers actually close, according to a February study of 1,300 real estate agents by Campbell Communications. More than 90% of agents cited a slow response from the lender as the reason short sales were lost.

Firm Sues To End Factoring Relationship With CIT
Thursday 08/06/2009 - Dow Jones News

Scherr Inc., a New Jersey-based maker of men’s casual clothing, has sued to end its relationship with CIT, The New York Post reported Thursday. The suit charges that “CIT’s disastrous financial situation creates grounds for insecurity.” If Scherr prevails in court, legal sources say CIT could be hit with a deluge of similar complaints from companies looking to flee to rival factoring firms. CIT in recent weeks has turned down many clients seeking to end their contracts, the report said, citing sources. The suit, filed in New York State Superior Court is slated for a hearing Friday.

Here is an article which helps explains the jump in GSE share prices yesterday: It appears shareholders are optimistic that a move to strip away toxic assets will work to their benefit (meaning someone else will get left holding the bag — most likely Joe the Plumber and other Americans who live on Main Street).

Hopefully, rather than a headlong rush to plant the seeds for our grandchildren’s version of the Mortgage Market Meltdown of 2007, the PTB will consider the possibility that Uncle Sam should focus on regulating the private mortgage industry, rather than monopolizing it. Because it seems quite clear that one of the biggest imbalances that led to collapse was the weight of two 800 lb. government GSE gorillas competing unfairly (with an implicit too-big-to-fail subsidy priced into the rates they could offer) against private banks. Stronger regulation sans subsidization may be the ticket to a well-functioning mortgage banking system.

Fannie, Freddie are facing makeover
White House panel to plot future of mortgage giants
By Zachary A. Goldfarb and David Cho

THE WASHINGTON POST

2:00 a.m. August 6, 2009

WASHINGTON – The Obama administration is considering an overhaul of Fannie Mae and Freddie Mac that would strip the mortgage finance giants of hundreds of billions of dollars in troubled loans and create a new structure to support the home-loan market, government officials said.

The bad debts the firms own would be placed in new government financial institutions – so-called “bad banks” – that would take responsibility for collecting as much of the outstanding balance as possible. What would be left would be two healthy financial companies with a clean slate.

The moves would represent one of the most dramatic reorderings of the badly shattered housing finance system since Fannie Mae was created by Congress to support mortgage lending during the Great Depression. Fannie Mae and Freddie Mac have government charters to buy home loans from banks, which they repackage and sell to investors. The banks can then use the proceeds to offer more loans to home buyers.

The institutions became emblematic of the financial crisis when they were effectively nationalized in September amid a market meltdown that revealed much of their holdings to be troubled. The government has since pledged more than $1.5 trillion, including $85 billion in direct aid, to keep the mortgage market working through Fannie Mae and Freddie Mac.

The proposal, which is preliminary and one of several under discussion, is scheduled to be taken up today by the White House’s National Economic Council.

Internal discussions over the future of the companies began this year during the regulatory reform planning process and now are entering a more serious phase. National Economic Council Director Lawrence Summers has long wanted to overhaul the companies.

The government’s efforts so far “have taken the risk out of those two firms,” Treasury Secretary Timothy Geithner said. “The only question that remains is what form, what structure they ultimately will take.”

In an interview yesterday announcing that he would step down this month, James Lockhart, the chief regulator of Fannie Mae and Freddie Mac, said there needs to be a “good bank, bad bank” structure.

The “bad bank” would be a depository for Fannie Mae’s and Freddie Mac’s toxic assets. Then, the government could create new companies, if it chose to do so, that would attract private investment in support of mortgage finance.

Options for the “good banks” include consolidating the firms into a single government agency, leaving mortgage finance purely to private banks or maintaining a hybrid model.

The National Economic Council has looked at the “bad bank” option, among many others, in several internal policy papers. Any final decision would come after talks involving the White House, the Treasury Department, the Department of Housing and Urban Development and the Federal Housing Finance Agency.

A major problem has been that Fannie Mae and Freddie Mac own and insure trillions of dollars of existing mortgages. With the economy still in a deep recession, joblessness rising and defaults on home loans expected to continue to increase, there is great uncertainty over the size of future losses at Fannie Mae and Freddie Mac. That, in turn, is likely to drive investors from committing money to the companies.
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Focus on actual versus expected new weekly jobless claims, and you will feel better about a number which is 150,000 or so above the rule-of-thumb recession threshold of 400,000.

New Jobless Claims Drop More Than Expected
By Annys Shin
Washington Post Staff Writer
Thursday, August 6, 2009; 10:40 AM

The number of people filing for unemployment benefits for the first time fell last week more than expected, according to data released Thursday morning, the latest indication that the pace of job cuts is easing.

First-time jobless claims for the week ending Aug. 1 fell by 38,000 to 550,000, according to a Labor Department report. Economists had been expecting a drop of 4,000.
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Laid-off public school teacher Natalie Barmore, right, files for unemployment benefits online at a job fair sponsored by the school district Wednesday, July 29, 2009 in Detroit. The government said Thursday, July 30, the number of newly laid-off workers filing first-time claims for jobless benefits rose last week, though the increase was mostly due to seasonal distortions.(AP Photo/Paul Sancya)

In this Aug. 4, 2009 photo, job seekers participate at a job fair at the Vicksburg, Miss., Convention Center. The number of newly-laid off workers seeking unemployment insurance fell last week, the government said Thursday, Aug. 6, fresh evidence that layoffs are easing.(AP Photo/The Clarion-Ledger, Barbara Gauntt)

In this Aug. 3, 2009 photo, people looking for work search on computers at a Worksource office in Portland, Ore. The number of newly-laid off workers seeking unemployment insurance fell last week, the government said Thursday, fresh evidence that layoffs are easing.(AP Photo/Don Ryan)

In this Aug. 3, 2009 photo, Randy McSorley uses a computer to look for work at a Worksource office in Portland, Ore. The number of newly-laid off workers seeking unemployment insurance fell last week, the government said Thursday, Aug. 6, fresh evidence that layoffs are easing.(AP Photo/Don Ryan)

ITEM: The White House projects the deficit will hit $1.85 trillion for the budget year ending Sept. 30, a record that would quadruple last year’s all-time high gap of $455 billion.

The Treasury said Wednesday it will raise a record $75 billion in a series of auctions next week to help deal with the government’s soaring debt.

We are treading in depths of debt we have never trod before, and media are assuring us it’s gonna be OK. . . Geithner, Bernanke, and the other money guys “know what they’re doing.”

Remember how awful last year’s $455 billion shortfall was said to be? Where is the shock and awe over this year’s deficit of $1.85 trillion or more?

Is there more to this than meets the eye, or do the Obamonomics Team members plan to resurrect the zombie GSEs by handing their toxic assets over to Joe the Plumber and other Main Street Americans?

Aug 5, 2009, 10:49 p.m. EST
Government may unwind Fannie, Freddie: reports

By MarketWatch

LOS ANGELES (MarketWatch) — The Obama administration is considering a variety of options to overhaul mortgage giants Fannie Mae and Freddie Mac, including folding the companies into a new federal government entity, according to reports late Wednesday.
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Orange County mortgage foreclosure crisis “an epidemic”

MONTGOMERY – One in 208 households in Orange County faces foreclosure filing, according to the State Banking Department and RealtyTrac.

That was the highest ratio of filings in the state in the second quarter, according to the reports.

That is a “mind-boggling number,” said Alice Dickinson, the executive director of Orange County Rural Development Advisory Corporation. “If this was a disease, we would call it an epidemic; there would be bodies on the street.”

Dickinson said she is not surprised by the increase. The agency receives hundreds of requests for foreclosure help each month.

“It’s being fueled by people who are losing their jobs, that are losing part of their jobs,” she said. “By that I mean they may not be losing their entire jobs, but they may have had a second job or they may have been cut back on their overtime hours and a lot of folks took out a mortgage predicated upon keeping that income in the long term and that’s not happening. These folks are running into a problem now.”

Orange County, with 643 foreclosure filings in the second quarter, had an increase of more than 61 percent from the first quarter. “Quarterly increase trends, such as the ones we are seeing in Orange County, are a strong reminder that the crisis is not over and we must continue to fund sustainable, affordable ways to keep families in their homes,” said Richard Neiman, superintendent of Banks for New York.

Dickinson said her agency offers foreclosure prevention, mitigation and negotiation services for those in need.

Meanwhile, Democratic Orange County Executive candidate Patricia O’Dwyer called on the County Legislature “to immediately pass legislation that would lift the burden of paying property taxes on an annual basis and allow those homeowners to pay their taxes on a semi-annual or quarterly basis.” She said Rockland and Sullivan counties have passed just such legislation.

“During these difficult economic times, it is imperative that government give people value for their tax dollars,” she said. “What better value could be given than help so a family could remain in their home? The cost of government should not become an additional burden. Just as families are adjusting their spending, so too should Orange County government.”

Issing Says Officials May Have to Ignore Political ‘Screams’.

Aug. 6 (Bloomberg) — Otmar Issing, former chief economist of the European Central Bank, said inflation will pick up as soon as the financial crisis has passed unless governments and central banks remove economic stimulus measures promptly.

“Politicians and industry might scream” when the measures are withdrawn, “but this should not be an argument for central banks and fiscal policies,” Issing said in a telephone interview from Frankfurt yesterday. The exit “has to happen at a time when unemployment is still high or even still rising, because of the lagged effect of the crisis on labor markets.”

Policy makers worldwide have pumped money into their economies in a bid to counter the worst recession since the Great Depression. While some officials have warned about the inflation risks associated with increased money supply, others say removing the stimulus too soon may stymie a nascent economic recovery as rising unemployment damps consumer spending.

“As we have seen the strongest expansionary policies, fiscal as well as monetary, in the history of the world, I think it is rather straightforward that as soon as the crisis is behind us, inflationary pressures will emerge unless policies change course in a timely manner,” Issing said.

Dumb questions of the day:

With a huge and rising number of US households underwater on their mortgage loans, and a very low success rate with workouts, what is keeping very large numbers of homeowners with unrepayable debt burdens from returning their homes to the lender and walking away? Or is this already occurring but not adequately reported by the MSM financial press?

Just curious…

Current Economic Downturn Is Worst Since Great Depression
John Williams
Shadow Government Statistics
(A.B. in Economics, cum laude, from Dartmouth College in 1971, also M.B.A)
http://www.321gold.com/editorials/williams/williams080509.html

http://www.usatoday.com/news/nation/2009-08-05-rental_N.htm

Sounds like this guy has been ready the HBB.

Drop in homeownership likely to continue

The rate of homeownership is forecast to keep tumbling in the next decade to lows not seen since the 1980s, a trend that could redefine a key element of the American dream even after the housing market recovers.
The percentage of households that own homes hit a peak of almost 70% in 2004 and 2005. By the second quarter of this year, that slipped to 67.4%, according to the Census Bureau. Now, a University of Utah analysis projects it’ll drop to about 63.5% by 2020 — the lowest since 1985.

“It will fall steadily by about half a point per year,” says Arthur C. Nelson, director of the university’s Metropolitan Research Center. “We’ll have far more renters in the future.”

Homeownership has long been viewed a key to building stable communities and middle-class families. Federal policy encouraged it with tax credits and government-backed mortgages. Now, demographic changes, strict mortgage rules, energy-saving policies and lessons learned in this housing crisis are driving more people to rent.

About 57% of the 30.3 million housing units added from 2005 to 2020 will be rentals, Nelson says.

“So many of our federal and state and local policies are driven by the assumption that homeownership is inherently preferred over renting,” he says.

The housing collapse may have an impact.

“We’re returning more to what was normal in the 1960s,” says Dowell Myers, housing demographer at the University of Southern California. “People didn’t buy homes then as an investment. They bought them to raise families.”

Renting also may be more appealing because:

• Households are smaller. The youngest of 79 million Baby Boomers will turn 56 by 2020 and many will be empty nesters who favor small homes. The 20-something millennial generation is at a peak age for renting.

“What we used to think of as the typical American family — married couple with children — is really not typical anymore,” says Mark Obrinsky, chief economist for the National Multi Housing Council in Washington, D.C.

•It’s tougher to buy. The subprime mortgage crisis is tightening credit availability.

•Some arenew to the USA. Most recent immigrants rent.

•Somewant to save energy. From tax credits to mass transit, going green is reshaping growth.

Homeownership is not inherently good or bad, Obrinsky says. “Let’s give people the best set of housing choices. They want to be a renter, let them be a renter. If they want to be an owner and they can afford to be, let them be an owner.”

Central florida mansions bedevil builders. Front page of the Orlando Sentinel.

http://www.orlandosentinel.com/business/orl-empty-custom-homes-080609,0,2233008.story

Well, we’re in escrow on that house. It’s been a while since I posted on the negotiation so I’ll give the details again.

The house, genuine custom ranch with 9-11′ ceilings throughout, 3000sqft. on 3 acres, was listed at $325K, had been taken back by the lender for $336K, hadn’t been sold previously since ‘02 and that sale was for $450K. Built in ‘98 and first appraised by the assesor (owner builder) at $318.

The house is in really good condition, so we offered $275 cash. They countered with a gracious discount of $3000, at $322K! We counter-countered with $298K 50/50 down/loan. They took a long drag on a fat doobie and counter-counter-countered at $321K. $1000 dollars, wow! I was sorely tempted but managed to restrain my joy at this generosity. We told them to go pound sand.

3 weeks later, they called us back and said they’d take the $298K. I wanted to mess with them and take it lower at that point, but I have a wife who have been very patient these last four years, and she has a shotgun.

It has taken quite some time to get into escrow, over a month. I’m inclined to believe that the bank was hoping for a better offer in the meanwhile. Sucks to be them.

There isn’t a whole lot at this point that could kill the deal. The appraisal was conservative IMHO but met the purchase price plus a bit. The replacement cost ex-land per the appraiser was $450K.

In summary, It took 4 1/2 years and 4 moves but it seems we’ve used the bubble to trade our 2000sqft. 2 story tract house on a 7000sqft lot in east Palmdale for this house which perfectly fits our criteria. We netted $22K on the deal, equity-wise and came away with the house we plan on living in for the rest of our lives.

US food stamp list tops 34 million for first time.
08.06.09, 11:26 AM EDT

WASHINGTON (Reuters) - For the first time, more than 34 million Americans received food stamps, which help poor people buy groceries, government figures said on Thursday, a sign of the longest and one of the deepest recessions since the Great Depression

Enrollment surged by 2 percent to reach a record 34.4 million people, or one in nine Americans, in May, the latest month for which figures are available.

It was the sixth month in a row that enrollment set a record. Every state recorded a gain in participation from April. Florida had the largest increase at 4.2 percent.

Food stamp enrollment is highest during times of economic stress. The U.S. unemployment rate of 9.5 percent is the highest in 26 years.

Average benefit was $133.65 in May per person. The economic stimulus package enacted earlier this year included a temporary increase in food stamp benefits of $80 a month for a family of four.

Oly, we all miss you. Please come back.

Greg

Why do MSM financial journalists always equate higher interest rates with “hurting” the housing market and lower rates with “helping”? Don’t they realize that by properly pricing in a risk premium, higher interest rates serve to attract increased private investment in mortgage bonds? By dampening housing demand, higher interest rates can also serve to restore affordability to markets where many would-be buyers are currently priced out.

Mortgage-Bond Yields Rise to Two-Month High; Rates May Climb
By Jody Shenn

Aug. 6 (Bloomberg) — Yields on Fannie Mae and Freddie Mac mortgage securities rose to the highest in almost two months, signaling that interest rates on new-home loans will climb and hurt the U.S. housing market.
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Sinclair Stewart
New York — Globe and Mail Update
Last updated on Thursday, Aug. 06, 2009 12:36PM EDT

Well, it’s official: Some pigs can fly. Or at least they can in that fantasy land known as Wall Street, where the laws of gravity and logic were suspended for the better part of Wednesday afternoon.

American International Group Inc., Fannie Mae and Freddie Mac – a trinity of corporate fecklessness, if there ever was one – each posted staggering advances as investors appeared willing to gamble that even the shakiest pillars of the financial system were regaining a measure of strength.

That could prove a dangerous bet.
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test

Financial Times
Abuse claim over German car scheme
By Ralph Atkins in Frankfurt
Published: August 5 2009 22:45 | Last updated: August 5 2009 22:45

Criminals are buying up tens of thousands of German cars meant for the scrapyard and exporting them as they profit from and subvert a government scheme intended to bolster the sale of new cars, a German police trade union has warned.

Abuse of the car-scrapping scheme, which has been widely copied elsewhere in the world as an anti-recession measure, has become widespread, with an estimated 50,000 German cars sold illegally overseas since it was introduced, the BDK police professional organisation said on Wednesday.

Some 5 to 10 per cent of cars that have been supposedly written-off have instead been transported to Africa and east Europe, it added.

German government officials on Wednesday played down the scale of the problem, but Wilfried Albishausen, BDK deputy chairman, said that “what matters is that a subsidy has been introduced while totally overlooking that there are a lot of organised criminals with an interest and the structures in place to use it for their own purposes”.

The revelation could have implications for similar schemes across Europe and in the US but Mr Albishausen said he was not qualified to judge the scale of the problem beyond Germany because of legislative differences.
…

Anybody else have no access to this site for hours last night? Or is the PTB trying to silence me personally? They’ll never shut me

NY Post 8-5-09

GOLDMAN Sachs boss Lloyd Blankfein has warned his employees to avoid high-profile spending, as The Post reported — but his wife evidently didn’t get the memo.

Laura Blankfein and her friend Susan Friedman, wife of another Goldman honcho, Richard Friedman, caused a huge scene at Super Saturday in the Hamptons last weekend when they arrived at the event before the noon start time and balked at waiting in line with the other ticket-holders.

“Their behavior was obnoxious. They were screaming,” said one witness. Blankfein said she wouldn’t wait with “people who spend less money than me.”

Another observer said the women were so impatient, it was as if they were waiting on line for a kidney transplant instead of a charitable designer clothing sale.

Friedman shouted at the event organizer, “You have lost so much money because of this . . . Why should we be treated like the $650 donors?”

Sources said Blankfein and Friedman had bought tables with blocks of tickets going for $833 apiece, as did many of the women who were waiting patiently in line, happy to raise $3.4 million for the Ovarian Cancer Research Fund.

In the end, the hot-headed duo got in at 12:03 p.m., three minutes after those who arrived before them.

No word on how much of their husbands’ money they spent. But Lloyd Blankfein — wary of bad publicity over the big bonuses he and his colleagues expect to collect at year’s end — has called for an end to conspicuous consumption.

A Goldman Sachs executive was quoted in yesterday’s front-page Post story, “[Blankfein] wants to make sure we’re not being seen living high on the hog.” A Goldman Sachs rep did not respond to requests for comment left at the offices of both Lloyd Blankfein and Richard Friedman.

ClusterStock
Geithner’s Friends Are MIA After Tirade
Moe Tkacik|Aug. 6, 2009, 10:36 AM

Last Friday Tim Geithner unfurled a slew of four-letter words that were not TARP, TALF or PPIP while blasting the banking regulators charged with executing Obama’s overhaul of the financial system.
…
…if there is one constituency with whom we figured Geithner might have ingratiated himself by unloading on regulators last week, it’s the Wall Street banks.

Unfortunately, it seems Geithner has now alienated this constituency, too.

Edward L. Yingling, the veteran top lobbyist for the American Bankers Association, said that no one should be surprised by the public challenges to the proposal that have been raised by regulators. “Each of these people are known commodities and people on the Hill and you and others know where they are coming from and their philosophies,” he said. “John Dugan was Republican counsel of the banking committee. Sheila has had strong views since she arrived at the F.D.I.C.. Ben Bernanke is very highly respected.”

Geithner ought to be the banks’ best friend in Washington — but only for as long as he remains politically viable. And what Yingling seems to be making here is the obvious point that Geithner doesn’t get Washington.

From what we’ve learned over the past few months, it seems clear he thrives in emergency situations and playing behind-the-scenes roles. But not every situation is an emergency. The flaws in our regulatory structure are not going to be solved by yelling at people who have significant public support.

Since when did 550,000 job losses become reason for celebration as “better than expected” news?

Detroit mayor states unions ignore ‘fiscal realities’.

Aug 4, 2009, 1:25 p.m. EST
The Fed, bank regulators clash over future of bank regulation

FDIC’s Bair says council should oversee risk, while Tarullo makes case for Fed

By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) — Bank regulators on Tuesday clashed over the future of regulatory reform efforts, continuing to reveal a growing rift between regulators that support a White House proposal that would empower The Federal Reserve and those that don’t.

“If you have a single monopoly regulator [The Fed], it leads to regulatory laxities,” said Federal Deposit Insurance Corp. Chairwoman Sheila Bair at a Senate Banking Committee hearing on how bank regulation should change in response to the financial crisis.
…

Forbes to sponsor “Dying Cities” forum in Dayton, OH. Two of the invited cities can’t afford to send a rep.

Aug 6, 2009, 11:51 a.m. EST
Nearly half of U.S. mortgages seen underwater by 2011

By John Spence, MarketWatch

BOSTON (MarketWatch) — An estimated 25 million homeowners, or 48% of those with mortgages, will owe more on the loan than the house is worth by the first quarter of 2011, according to an analysis by Deutsche Bank released this week.

“For many, the home has morphed from piggy bank to albatross,” wrote analysts Karen Weaver and Ying Shen in a research report.
…

I have a question for you smart people. I am a lurker here and as soon as I get some extra dinero, I will make a contribution to Ben’s blog.

My opinion is there is collusion to keep inventory hidden so the supply is limited, thus creating higher demand and bidding wars. The shills on the OC blog said: Silly girl. The banks aren’t colluding.”

Can someone please give me a good argument to counter the shills?

Is This Statisitically Reasonable? (GS)

Karl Denninger
Market Ticker
published Aug 6, 2009

Remember what was said about Madoff when people started looking at his operation?

There were only two possible explanations for the firm’s apparently never-losing trading: They were either front-running or cheating in some other fashion, or the entire thing was a gigantic ponzi scheme.

We later learned that #2 was the case.

But is there an example of #1 somewhere? Hmmmm….

Aug. 5 (Bloomberg) — Goldman Sachs Group Inc. made more than $100 million in trading revenue on a record 46 separate days during the second quarter, or 71 percent of the time, breaking the previous high of 34 days in the prior three months.

Trading losses occurred on two days during the months of April, May and June, down from eight in the first quarter, the New York-based bank said today in a filing with the U.S. Securities and Exchange Commission. The company made at least $50 million on 58 of the 65 trading days during the quarter, or 89 percent of the time.

Just two days of losses in the entire quarter?

There are a lot of very good traders in the world, but nobody has that sort of record on any sort of consistent basis unless they’ve managed to rig the game.

You can be “the smartest guys in the room” but nearly-perfect records at the poker table are almost always an indication that someone has managed to figure out a way to peek at the other side’s hole cards.

Oh, and they’re gambling (or cheating?) with your money too - not their own:

Banks such as Goldman Sachs are benefiting from lower borrowing costs after the Federal Deposit Insurance Corp. in October started guaranteeing bank debt issues that mature within three years. Goldman Sachs said in today’s filing it had $25.1 billion of debt guaranteed by the FDIC under the agency’s Temporary Liquidity Guarantee Program. The bank sold about $30 billion of the FDIC-backed securities between November and March, according to company filings.

Is this an example of “heads we win, tails you lose, and we’re peeking at your hole cards”?

Inquiring minds want to know.

Wall Street Journal

* AUGUST 6, 2009, 2:31 P.M. ET

Fannie, Freddie Debate Not Hurting Mortgage Rates
By Deborah Levine

The increasingly public debate over what the government will eventually do with mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), taken over last fall, leaves the mortgage market still waiting for a decided resolution, analyst said Thursday.

The Obama administration is considering a variety of options to overhaul mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE), including folding the companies into a new federal government entity, the Washington Post reported Wednesday.

One option is to split the companies and putting their troubled assets in a new federally backed corporation, and possibly let to more viable portion of the company resume being shareholder-owned.

The important but unclear aspect is whether the entities, in any form, continue to carry the government’s implicit support of their debt to keep their borrowing costs low. The so-called government sponsored entities sell their own debt to finance purchases of mortgage-backed securities, which are bundles of individual mortgages. Their ability to finance those purchases at a low cost enable them to accept mortgages with lower rates, which helps homeowners.

“As long as the government guarantees are there, the products will trade as they do,” at rates far below what fully private companies have to pay, said Kevin Giddis, managing director of fixed income for Morgan Keegan & Co. “Any change would more than likely have a negative impact on the housing market.”

Isn’t affordable housing the GSE mission? And wouldn’t higher interest rates make housing more affordable, having a positive impact on their ability to achieve their mission? Me confused…

Nasdaq to stop offering flash trading Sept. 1

(AP) – 4 hours ago

NEW YORK — Nasdaq OMX Group says it will stop a practice that gives some brokerages a split-second advantage in buying or selling stocks.

The New York exchange operator is voluntarily ceasing the practice, known as flash order trades, on Sept. 1.

Flash orders give certain members of exchanges including Nasdaq, Direct Edge and BATS the ability to buy and sell order information for milliseconds before that information is made public. High-speed computer software can take advantage of that brief period to allow those members to get better prices and profits.

On Wednesday, Securities and Exchange Commission Chairman Mary Schapiro said the agency is moving in the direction to ban the practice.

Copyright © 2009 The Associated Press. All rights reserved.

SEC says brokers violated ‘naked’ short sale rule

By CHRISTOPHER S. RUGABER (AP) – 1 day ago

WASHINGTON — The Securities and Exchange Commission for the first time has enforced new rules intended to limit a practice known as “naked” short-selling.

The SEC said Wednesday that two traders and their firms have agreed to settle charges that they violated the rules without admitting or denying guilt.

The rules were put in place last year at the height of the financial crisis, and the SEC made them permanent last month.

The agency says New York-based Stephen Hazan and Hazan Capital Management LLC have agreed to pay $3 million to settle the charges, while Chicago-based TJM Proprietary Trading LLC agreed to a penalty of $541,000.

The two firms were charged with circumventing a rule that requires brokers to promptly produce shares in “naked” short-selling transactions.

“Naked” short sales involve bets against a company’s share price by investors who don’t own the shares at the time of the sale. Such sales can be used to drive down the share price of a company’s stock.

The SEC also charged Michael Benson, a TJM trader, for violating the rule, and the firm’s chief operating officer, John Burke, for failing to supervise Benson.

The agency suspended Benson from associating with any broker for three months, while Burke has been suspended from acting as a supervisor at any brokerage for nine months.

Hazan and his firm, as well as TJM and its two employees, also reached separate settlements with the New York Stock Exchange and several other private institutions. Hazan was fined $1 million by the NYSE.

Michael Bachner, a lawyer for Hazan, said his client decided to settle the charges because “the cost of defending these actions would have been similar” to the amount of the fines and penalties paid.

A lawyer for TJM declined to comment.

Short-sellers borrow a company’s shares, sell them, and then buy them back when the stock falls and return them to the lender — pocketing the difference in price.

“Naked” short-selling occurs when sellers don’t borrow the shares before selling them, and then look to cover positions sometime after the sale.

Copyright © 2009 The Associated Press. All rights reserved.

Hospitals & Education …they are so far ahead of the “Efficient Market” model of economics…(Hwy notices these are the cityscape places that still have cranes on their properties…)

From behind “The O.C.” curtain:

Chapman to auction premium parking to appease the lazy:

“Actually, we are not making any money from this,” says Mary Platt, the Chapman’s spokesperson. The school already runs a loss of about $1 million annually to operate its parking facilities, according to Platt.”

“…The new “cash for convenience” plan was the idea of economist and Chapman President James L. Doti and was refined by some of the school’s renowned economics faculty,…”

August 4th, 2009, by Ben Young Landis the OC Register

Staring labor market fundamentals in the face at this juncture in economic history is truly painful.

Seeking Alpha
Mid-Cycle Meltdown: A Look at This Week’s Jobless Claims
by: Sold At The Top
August 06, 2009

Today, the Department of Labor released their latest read of Joblessness showing seasonally adjusted “initial” unemployment claims declined 38,000 to 550,000 claims from last week’s upwardly revised 588,000 claims while “continued” claims increased 69,000 resulting in an “insured” unemployment rate of 4.7%.

…looking at past cycles (especially the last two recessions), this does not imply that the pain is over in the job markets.

If history is to be at least a rudimentary guide, first time and continued unemployment claims will likely remain unusually high for at least another year or two (… as they had in the aftermath of both the early 90s bust and the dot-com bust).

Given the fragile state of the economy and the substantial financial stress being felt by so many millions of households, there are serious headwinds to any sustained recovery.

Further, the current weakness in the job market continues to present the clearest picture of what is likely to be one of the most problematic aspects of this period of economic crisis namely how to make an immense and growing number of highly specialized (college educated) service/professional service workers productive again.

It’s obvious now that we have reached the first real test of our majority services-based economy.

Unlike the “tech-wreck” of 2000-2002, our current downturn is very broad, leaving no sector and virtually no corner of the country untouched.

With millions of college educated workers now on the market incomes will clearly suffer but moreover, it will be soon all too clear that our prior bubble economy significantly overproduced service workers (particularly professional service workers) for which current employment opportunities will be scant resulting in continued and fundamental vicious-cycle effects.

You can lead liquidity to a banker, but you can’t make him blink.

Financial Times
The liquidity pipes remain clogged
By Gillian Tett
Published: August 6 2009 17:10 | Last updated: August 6 2009 17:10

A decade ago, I was working as a reporter in Tokyo when I was asked to investigate the impact of Japanese-style quantitative easing. Back then, the Bank of Japan was pouring gazillions of yen into the money markets and politicians were angrily exhorting the Japanese banks to lend.

Indeed, at one point, the Tokyo government even created quotas, which stipulated that banks should make a certain level of loans to worthy small enterprises to combat a pernicious credit crunch.

But, when I examined what the Japanese banks were actually doing, the results were almost comical. In public the banks claimed they were lending to small enterprises; in reality some were only meeting the targets by lending to subsidiaries of Toyota.

Faced with a political order to lend, in other words, Japanese banks were ducking round the rules – and the liquidity was notably not ending up where politicians (or central bankers) had hoped.

Sound familiar? I am increasingly tempted to think so. In the last six months, European and US central banks have poured dizzying sums into the money markets and politicians have put pressure on the banks to lend. Last week, for example, Alistair Darling, UK chancellor declared his readiness to “get tough” with banks that were failing to lend. On Thursday, the Bank of England triggered surprise by announcing an expansion of its quantitative easing scheme.

But as I look at these endeavours, what springs to my mind is a vision of a plumber trying to force water into a domestic waterflow system whose pipes are badly clogged, if not broken. To be sure, liquidity is entering the banking pipes. Some is also trickling out at the end: banks still seem willing to lend to big, reputable companies (the Western equivalent of Toyota, as it were.)

However, numerous small or risky corporate ventures in the west currently complain that they cannot get loans. Consumers are facing rising borrowing charges too. Thus, in the West, as in Japan a decade ago, the liquidity is still not necessarily flowing to those who need it most. Those pipes remain clogged, even as water is forced in.

That, in turn, raises a fascinating question for investors and policy makers: where will all that “backflow” of unusued liquidity, as it were, go? Right now, some seems to be sitting in a quasi stagnant pool, deposited into reserve acounts with central banks.
…

Oly, I am going to bed, but Mom and Dad (both passed), always said I was born with a baseball, and a transistor ( Oly, how do you spell) radio in each hand. I think Wildflowers is the best album I ever heard. Tom Petty.

It beats Revolver, so that is saying something. It simply drips analog.