The Housing Bubble

Housing Recovery? Green Shoots “More Like Crabgrass,” Weaver Says
Aug 20, 2009

There are more signs of hope for the housing market. Improved median home prices and a revival of single-family construction combined with better-than-expected homebuilder earnings have bulls boasting.

Karen Weaver, global head of Deutsche Bank’s securitization research division, takes a more measured approach. She thinks it’s too “quite early to be calling a bottom” nationwide. “The green shoots are more like crabgrass.”

Here’s how she explains it:

Historically, from peak to trough, it takes more than four years for housing prices to bottom. That means some of the first and hardest hit areas like Phoenix and San Diego may, in fact, be near bottom. The Northeast, on the other hand, may still have further to fall since prices peaked in 2007.

However, if you’re looking for a full recovery, don’t hold your breath. Weaver says historically it takes 10 years for prices to return to previous highs.

In the meantime, prices will fall and foreclosures will rise. She believes national home prices will ultimately fall over 40% from peak levels, meaning recent talk of prices bottoming after a surprise turn in the Case/Shiller Index is premature.

Referring to a report done by the Federal Reserve of Boston - examining the Massachusetts downturn in the late ’80s – Weaver states, less than 7% of borrowers who had negative equity in their homes defaulted. Unfortunately, “the universe of borrowers is far riskier” today and unemployment more drastic. Therefore, she’s not counting on such low default rates this time.

Some have conjectured that perhaps the Chinese economy faces similar issues as those faced by the Western world at the end of a credit bubble. Here is a YouTube video depicting a veritable conclave of what appear to be nearly-empty skyscrapers in the central business district of a large Chinese city. What will become of all these skyscrapers if they are largely vacant? Is this an anomaly, or do many Chinese cities have a similar cityscape?

Texas bank hit by California dreaming…

Although the failure of Austin-based Guaranty Bank looms, its problems reflect the housing bubble in the Golden State rather than issues at home.

NEW YORK (Fortune) — Bank regulators have a Texas-sized problem on their hands — though it’s easy to see much of the trouble resides farther west.

Guaranty Bank, an Austin-based savings institution with $13.5 billion in assets, is expected to be seized by the FDIC by the end of the week. According to multiple reports late Wednesday, Spanish bank Banco Bilbao Vizcaya (BBV) has won the bidding for Guaranty.

Representatives for the FDIC and Guaranty were not immediately available for comment.

A private equity group led by investor Gerald Ford — who got a federal bank charter in November so he could buy failed banks — also reportedly made a bid for Guaranty. Other banks said to have expressed interest were JPMorgan Chase (JPM, Fortune 500) and Toronto Dominion (TD), which made a failed bid for Florida’s BankUnited when that bank was auctioned by the FDIC in May.

Guaranty’s (GFG) closing would mark the second-biggest bank failure of 2009, after last week’s collapse of Alabama’s Colonial Bank, which was seized by the FDIC and sold to regional bank BB&T (BBT, Fortune 500).

Guaranty reiterated Monday that it doesn’t expect to survive following its failure to raise new capital. The bank lost $174 million in the second quarter, according to its latest quarterly report to the Office of Thrift Supervision.

Yesterday I did my best channeling of Dave Ramsey and helped another soul get “debt-free”!

I told my client that in a few short weeks he can call Dave and yell with the other ex-debt slaves.

Of course, my program involves the debt snowball. You pile all the debt into a big ball and kick the focker on down the hill.

Chapter 7 Dave! He’s debt free!

Dissension in the ranks threatens to mar this year’s Jackson Hole central bank love fest. I hope they don’t forget to propose measures to align the risks to bank managers’ incentives with those facing their share holders. If top bank managers routinely get paid billions in bailout bonus money as a reward for bringing the global economy to its knees, then too-big will obviously keep right on failing, spectacularly and frequently.

Hoenig Stirs Debate on Bank Failures as Fed Forum Convenes
By Scott Lanman

Aug. 20 (Bloomberg) — The host for central bankers attending the Federal Reserve conference this weekend to discuss the financial crisis is a regional Fed chief who’s making waves with his proposal for letting big U.S. banks fail.

Thomas Hoenig, the Kansas City Fed president, will welcome Fed Chairman Ben S. Bernanke, European Central Bank President Jean-Claude Trichet and dozens of other central bankers to the annual symposium in Jackson Hole, Wyoming, starting today. Hoenig said he hopes the gathering will serve as a model for handling crises in the future.

Bernanke has urged Congress to back part of Hoenig’s proposal for dealing with faltering big banks, which would wipe out shareholder equity in any that receive government aid. The Treasury Department’s so-called resolution authority plan, while likely to result in stockholder losses, doesn’t require it.

“Tom is leading the mainstream on this,” said former Fed Governor Lyle Gramley, now senior economic adviser with New York-based Soleil Securities Corp. “He’s ahead of the curve.”

Hoenig, 62, took office in 1991 and is soon to be the longest-serving Fed policy maker. Out of the 12 regional Fed presidents, he is one of two to have served as a head of bank supervision. Hoenig is tougher than his colleagues on inflation, having dissented from interest-rate votes four times since 1995, always for tighter policy.

Alternative to Bailouts

Companies with weak capital or investor confidence shouldn’t be bailed out, Hoenig said in a private talk in Omaha, Nebraska, in March. He said the government instead should declare them insolvent, replace managers, remove the bad assets and require shareholders to take losses. Hoenig broke from his usual practice of speaking from notes on index cards for non- economic comments and released written text entitled “Too Big Has Failed.”
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I keep waiting to read about all of the jobs being created and or saved by all the BARF money. HBIC has got some splain’n to do.

U.S. jobless claims unexpectedly rise.
August 20, 2009, 8:54 am EDT

WASHINGTON (Reuters) - The number of U.S. workers filing new claims for jobless benefits unexpectedly rose last week, a government report showed on Thursday, fanning worries of an anemic recovery from the worst recession in 70 years.
Reuters - Attendees at a job fair line up to gather information about a prospective employer in a Washington hotel, …

Reuters - Attendees at a job fair line up to gather information about a prospective employer in a Washington hotel, …

Initial claims for state unemployment insurance benefits rose 15,000 to a seasonally adjusted 576,000 in the week ended August 15 from 561,000 the prior week, the Labor Department said. Analysts polled by Reuters had forecast new claims slipping to 550,000 last week from a previously reported 558,000.

Central bankers should get out of the capital markets, and banks back to business lending

Peter Crabb - Northwest Nazarene University - Idaho Statesman
Published: 08/19/09

This is the week for the annual central banker pilgrimage. Central bankers don’t flock to some ancient shrine. They head for one of the West’s most beautiful resort towns – Jackson Hole, Wyo.
…
As our current financial crisis unfolded last year, the August meeting was entitled “Maintaining Stability in a Changing Financial System.” At the risk of understating the situation, the financial system has since been unstable and changed dramatically.

Many financial institutions, both big and small, are no longer with us. The government has a much larger role in financial markets as direct lender and regulator. U.S. Consumers rate the financial industry as one of their least favorites, along with the auto and oil industries.
…
These central bankers will undoubtedly pat themselves on the back, and perhaps rightfully so, for having averted a depression. The financial crisis brought on a deep recession, but we are far from repeating the global problems of the 1930s.

What these bankers have not addressed is the problem of financial institutions that are “too big to fail.”
…

Do these concerns seem overblown to anyone besides me? Why would the dollar risk tanking at this point, now that green shoots have matured into sturdy trees and the financial crisis has ended?

At any rate, I personally never much cared for collusion at the top of the global banking cartel.

Bernanke Diverging With King Means El-Erian Sees Dollar Decline
By Rich Miller

Aug. 20 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke and fellow central bankers gathering in Jackson Hole, Wyoming, are showing scant signs of reprising the coordinated stance they took fighting the worst financial crisis since the Great Depression as they deal with its aftermath.

The danger is that such a disjointed approach will lead to volatile financial markets, a damaging drop of the dollar and slower global growth, Mohamed El-Erian, chief executive officer of Newport Beach, California-based Pacific Investment Management Co., said in an interview.

“The question is not whether the dollar will weaken over time, but how it will weaken,” said El-Erian, a former deputy director of the International Monetary Fund whose firm runs the world’s largest bond fund. “The real risk is that you will get a disorderly decline.”
…

“Stocks are opening moderately up this morning after a worse-than-expected weekly jobs report. New claims for unemployment benefits jumped unexpectedly to 576,000 last week”

Yahoo Finance : actual headline

Corporate Defaults Soar to $453 Billion, S&P Reports

Aug. 20 (Bloomberg) — Corporate defaults worldwide rose in 2009, surpassing the number for the whole of 2008, Standard & Poor’s said in a report today.

A total of 201 issuers defaulted through Aug. 12, affecting $453.1 billion of debt, S&P said. That’s up from 126 defaults totaling $433 billion for all of last year, the report said.

The speculative-grade default rate reached 8.6 percent in July, up from 8.3 percent the month before, according to the ratings firm. The number of defaulted high-yield bonds is now 10-times the level recorded in November 2007, S&P data show.

The rate at which U.S. high-yield issuers default on their obligations reached 9.4 percent in July, compared with 6.1 percent in Europe and 6.7 percent in emerging markets, S&P said.

Speculative grade, or high-yield, bonds are rated lower than Baa3 at Moody’s Investors Service and BBB- at S&P.

What’s the big concern over the FDIC running out of money? Isn’t there still a technology called a printing press?

Capitol Report

Aug 19, 2009, 3:51 p.m. EST
Expect banks to be hit with major fees for deposit insurance
FDIC considers another $5.6 billion fee on banks; 77 insolvencies for 2009 so far

By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) — The manner in which five banks collapsed on Friday, costing the resource-stretched Federal Deposit Insurance Corp. roughly $3.7 billion, is raising concerns about the agency’s depleted insurance fund used to protect depositors.

That’s driving expectations the agency will look in the short-term to cover losses by slapping large additional special fees on banks, with larger financial institutions taking on the brunt of the costs.
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The people in the state of MA are true believers. There is an unexplainable dead cat bounce with some properties flying off the shelves, or so the realtors tell us.
I think that as we housing bubble sitters waited until prices stopped rising from merely ridiculous to ludicrous, the next rebound believers will also see prices keep on dropping from new lows, to even newer lows.
I am seeing houses in southeastern MA that are at about 2002 prices. Of course a lot of the run up here happened between 1997 and 2002, so these are houses built when the dot com money was flowing freely, and newly minted Java jockeys with 13 years experience (snicker) were making 120K for sitting down in the Pets.com corporate offices.
The great last hope for this state is that the one will be able to inject some vitality into the biotech industry, but alas, you need an education, and some smarts to be in that industry, so no, all of you HS dropouts that where making 140K a year selling, flipping, contracting houses need not apply. I hear that McD’s is however hiring for their drive through, and you almost have what it takes…
As I am writing this, I also wonder how many of those HS dropouts bought the biggest digs in town, to show everybody else how not having an education, and being a “risk” taker led them to success…. Right until the sheriff shows up to put their stuff on the curb.
rant off, but it is fraying at my nerves to see the dead cat bounce, and although I know that there is a reason for it, it does not bode well with the marital unit, who is getting a really bad case of nesting insticts…

“Home foreclosures: The housing bubble peaked in July 2005. One half of Americans now holding mortgages will be unable to pay them in 2011. One household in every 355 homes received a foreclosure-related notice in July.” ~Floy Lilley

The above datum is from an excellent column by Floy Lilley on the prospect of one day returning the USA to a system of honest money. There is, of course, little actual demand for honesty in anything having to do with government, but the demise of the dollar has been very painful and the day may be approaching when the people, collectively, will want to do something about it.

Ms. Lilley points out that the old Constitution-mandated money standard provided relative peace and prosperity over a span of 136 years. The dollar not only retained one hundred percent of its value, it gained eleven percent! Imagine! The dollar we started with bought us eleven percent more after almost seven generations. Then, Congress picked a quiet 23rd of December in 1913 to suffocate our sound money system. After the advent of the Federal Reserve, the purchasing power of a dollar has plummeted over 95%

Cool coincidence: S&P 500 hits magical 1000 mark during central bank luvfest…

MarketWatch
U.S. stocks move higher after seesaw pre-opening-bell action; S&P reclaims 1,000 level

“The very nature of government social programs is to move away from private responsibility and toward centralized allocation of resources, redistributing them from some to others.”

~ Anthony Gregory

Mortgage Rates Fall This Week; 30-Year Fixed At 5.12% -Freddie Mac
Dow Jones News

Mortgage rates fell this week, but the average rate on 30-year fixed-rate mortgages stayed above 5%, according to Freddie Mac’s (FRE) weekly survey of mortgage rates.

Mortgage rates had fallen earlier this year as providers try to entice buyers amid the housing market downturn, but yields on Treasurys have jumped the past month, helping push mortgage rates higher.

The 30-year fixed-rate mortgage averaged 5.12% for the week ended Thursday, down from last week’s 5.29% average and 6.47% a year ago.
Rates on 15-year fixed-rate mortgages were 4.56%, down from 4.68% last week and 6% a year earlier.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 4.57%, down from last week’s 4.75% and 5.99% a year earlier. One-year Treasury-indexed ARMs were 4.69%, down from 4.72% and 5.29%, respectively.

To obtain the rates, the fixed-rate mortgages required payment of an average 0.7 point, the five-year adjustable-rate required an average 0.6 point and the one-year ARM required an average 0.5 point. A point is 1% of the mortgage amount, charged as prepaid interest.

No problem, giv’um mo money, deficits don’t matter.

The U.S. statutory debt is dangerously close to its limit! There’s only $373 billion left on Congress’s credit card. Treasury Secretary Geithner has warned Congress that federal borrowing may have to stop in September unless the debt ceiling is raised again. The debt is presently $11.727 trillion!! The limit is $12.1 trillion.

< Congress raised the debt ceiling TWICE IN 2008. It raised it again last February. It has raised the borrowing limit 71 times since 1940. But Americans keep sending spendthrifts to Washington only to complain when these elected politicians destroy the dollar and plunge the nation into crisis.

News from Yahoo:
“Mortgage Deliquencies rise”
“Jobless claims Unexpectantly rise last month”
“Cash for clunkers winding down”
etc..

But yet stock Market rises the last few days after the big drop. Goldman’s trading program must be really good.

The Grant County fair in Moses Lake, WA is in full swing right now, and last night I took my 9-yr old son to the demolition derby; he’s in the “car/truck phase” these days. I was surprised by the number teens/twenty-somethings using cellular telephones in text-messaging mode. They were busy checking and sending short messages about every three minutes apparently unable to sit still and enjoy the races. My thoughts drifted to the packed bleachers, and the $80/month per telephone.

Here’s my facebook post for today:

When the price of essentials goes down (food, oil, health care, etc.) everyone cheers. Housing goes down, everyone is in tears. Remind me again why propping up housing is a good idea? Last I checked, shelter is an essential need. Let it keep crashing…

Let’s see how many interesting responses I get. I think it boils down to who rents and who owns. HBB is the only place where I have encountered home owners who want prices to go down.

Here’s the first response - from an ex who bought in Emeryville, near Berkeley, close to the top of the bubble:

“Maybe because food, oil and health care are consumables / commodities, whereas housing, while serving as shelter, is an asset for home owners. And if that asset becomes a liability, then people lose their shelter. One could argue that advocating for the housing market to continue to crash is synonomous with advocating for struggling home owners to continue to foreclose and for people and families to be uprooted (home owners and renters alike). Maybe that’s why?”

Trying to be nice but still a little snarky, huh?

Here’s my response:

” The housing bubble was the largest financial mania in economic history and now owning a home is no longer about shelter but about investing and making money. If health care shouldn’t be driven by profit and greed, then why should housing?

It’s hard to make a case for buying a house that costs 5-10 times one’s yearly salary. Mortgages that size have created a system not of home ownership but of debt slavery to banks, who are the ultimate landlords. Bush’s “ownership society” was never intended to help out the average person.

A house should be a place to live - it’s not really an asset until it’s paid off or sold.

Still wish I had a buck for everyone that told me “housing never goes down” and “it’s different here”. Many people predicted this collapse years ago, and this thing isn’t even half over.

Foreclosures everywhere and yet there are MILLIONS of empty houses which will eventually be bulldozed. What a waste of resources.”

So let the facebook housing bubble wars begin. I guess I’ll see what my “friends” really think…..

More good news, brown squirts…

Mortgage Delinquencies Rise to Record as U.S. Home Prices Fall

Aug. 20 (Bloomberg) — Americans fell behind on their mortgage payments at a record pace in the second quarter as job losses and falling real estate prices thwarted government efforts to stabilize the housing market.

The share of loans with one or more payments overdue rose to a seasonally adjusted 9.24 percent of all mortgages, an all- time high, from 9.12 percent in the first quarter, the Mortgage Bankers Association said in a report today. The inventory of homes in foreclosure increased to 4.3 percent, the most in three decades of data, and loans overdue by at least 90 days, the point at which foreclosure proceedings typically begin, rose to 7.97 percent, the highest on record.

“We’ve seen a significant drop in the problem with subprime loans and we’ve moved now to a problem with prime fixed-rate loans,” Jay Brinkmann, the Washington-based trade group’s chief economist, said in an interview. “Job losses are driving it, and we expect that to continue into next year.”

Homeowners fall behind on their mortgage payments when they lose their jobs, and falling prices mean they can’t sell and pay off their loans, Brinkmann said. Companies have shed 5.7 million jobs since January 2008, the biggest employment loss since the Great Depression. The median U.S. home price fell 16 percent in the second quarter from a year earlier, the steepest drop on record, according to the National Association of Realtors.

The percentage of loans on which foreclosure actions were started was 1.36 percent, down from 1.37 percent in the first quarter, driven by the decline in subprime loans. New foreclosures on prime loans increased to 1.01 percent from 0.94 percent, while subprime loans dropped to 4.13 percent from 4.65 percent, Brinkmann said.

Colo. could be 1st state to lower minimum wage. Associated Press

DENVER — Colorado’s lowest-paid workers could make even less money next year. That’s because the state has an adjustable minimum wage that may become the first in the nation to drop slightly along with the cost of living.

Colorado is one of 10 states where the minimum wage is tied to inflation. The indexing is thought to protect low-wage workers from having flat wages as the cost of living goes up.

But because Colorado’s provision allows wage declines, the minimum wage could actually drop 3 cents an hour next year. If the wage is reduced by state labor officials in September as expected, it would be the first minimum wage decrease in any state since the federal minimum wage law was passed in 1938.

It’s a small drop, but the prospect has Colorado’s minimum-wage workers fearing times are about to get worse.

“I’m just scratching by now,” said Denver’s Raul Ramirez, 42, who works two minimum-wage jobs, selling ice cream from a cart in the summer and shoveling snow in the winter.

Ramirez said he takes home about $900 a month and can’t imagine how he could get by on less.

Everglades on the Bay enters bankruptcy.
South Florida Business Journal

One of the highest-profile condominium projects in downtown Miami, the 849-unit Everglades on the Bay, has filed for Chapter 11 bankruptcy protection.

The bankruptcy petition, filed by Cabi Downtown LLC Developers, listed $100 million to $500 million in liabilities and 200 to 999 creditors.

The original $256 million construction loan on the twin-tower project was made by Bank of America. The mortgage had a November 2008 maturity date that was extended a couple of months to Feb. 18.

An April 3 South Florida Business Journal article said the project was swamped with issues, such as contractor liens and reluctant buyers.

Gryphon Construction LLC of Fort Lauderdale was listed as having the largest unsecured claim, at $912,272, which was termed disputed. It was followed by Miami-based law firm Siegfried, River, Lerner De La Torre & Sobel, at $395,456, and Holly Sime Realty of Miami, at $193,750. The Holly Sime claim was also termed disputed.

Bank of America was listed as a creditor without showing the amount owed to it. Many individual creditors were also listed. The petition was filed Tuesday as a single asset real estate bankruptcy, which typically means the bank holding the primary mortgage on the property can have the bankruptcy dismissed in 90 days if a suitable reorganization plan is not approved.

The project, at 244 Biscayne Blvd., on the site of the former Everglades Hotel, sits among a handful of other high-profile condo projects on downtown Miami’s main thoroughfare. The city is suffering from a glut of units from a now-crashed building boom.

Here’s a SF Bay area update :

So I got the appraisal back on the house we’re buying, and we did a pretty decent job, I guess, because it came back higher than the purchase price, and the appraiser told me he was going to beat it down as hard as he could because banks don’t like high appraisals either. (That made no sense to me whatsoever.)

Anyway, the interesting thing we found is that San Mateo county is marked as a declining market now. Not just pockets, the whole county. The appraiser included some sort of wishy-washy hooey about how the area we bought into is holding even, or possibly even appreciating a tiny bit in SUPER special areas, but that’s bunk. Our lowball being accepted is proof positive that our “it’s different” area is a declining market.

The take home message? Don’t buy yet. (Do as I say, not as I do!)

Scottish government frees mass murderer.

LA Times Data Quick numbers are out for July:

http://dqnews.com/Charts/Monthly-Charts/LA-Times-Charts/ZIPLAT.aspx

Rep. Mike Ross (D-Ark.) said on Wednesday that providing healthcare to uninsured Americans is “not what this healthcare reform debate is about.”

In making his comments, Ross, who is the centrist Blue Dogs’ health reform point man, questioned one of the primary healthcare goals of the White House and Democratic leaders.

“That is a side benefit to healthcare reform and an important one,” Ross told the Arkansas Educational Television Network. Instead, the fifth-term congressman said the bill should focus on “cost containment.”

The Energy and Commerce Committee member reiterated that he wants to pass a health reform bill by the end of this year, a desire that may irk some Republicans who supported his effort to slow the bill before August recess.

“The extreme right had a two-week love affair with me,” Ross said. “The extreme right, simply, they do not want healthcare reform. And so, they saw me as killing healthcare reform because I put the brakes on
healthcare reform.”

The influential fifth-term Democrat identified several provisions that would prevent him from voting for the bill.

On the public option, Ross said he would not vote for a plan that would “force government-run healthcare on anyone. Period.” But he also said that the House bill contained a public plan that is “strictly…an option.”

Providing government subsides for abortions, coverage for illegal immigrants, rationing of care, and deficit increases comprised Ross’ deal-breakers.

“I’ve got the extreme right and the extreme left angry with me so I must be doing something right,” he said.

I read HBB every night but since I live in CA I never post because by the time I am reading most everyone is already asleep and dreaming about the next day’s post.

Anyway, loved NYCboy’s post about growing up in the 70’s - can totally relate (we must be the same age) and also the posts about consumption and wanted to recommend a great book:

Not Buying It (A Year Without Shopping) by Judith Levine

Highly recommend it!

Naturally the serial bottom caller brigade is predicting the high water mark will come this fall, but is this whatsoever reasonable, given that the tsunami crest of Alt-A and prime ARM resets is anticipated to continue for several more years going forward, and that new weekly claims for unemployment keep turning out “higher than expected”?

9% of all home loans are delinquent

Mortgage lenders say the flood of foreclosures has not yet crested. Highwater mark should come this fall.

By Les Christie, CNNMoney dot com staff writer
Last Updated: August 20, 2009: 12:14 PM ET

Is Obama’s foreclosure rescue plan working?

NEW YORK (CNNMoney dot com) — The number of Americans who have fallen at least 30 days behind on their home loan payments inched up slightly between the first and second quarters of 2009, but jumped 44% compared on an annual basis, according to an industry report.

That puts delinquencies at a record 9.24% of mortgages, according to the National Delinquency Report from the Mortgage Bankers Association (MBA). That represents more than 4 million of the 45 million borrowers covered by the report.

The combined percentage of loans past due and those already in foreclosure hit 13.16% during the quarter, the highest ever recorded by the MBA survey. OMG! This does not look like a green shoot.

“There was a major drop in foreclosures on subprime ARM loans,” said Jay Brinkmann, chief economist for the MBA, in a prepared statement. “The drop, however, was offset by increases in the foreclosure rates on the other types of loans, with prime fixed-rate loans having the biggest increase.”
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How can you trust leading indicators when the economy is on life support? It is like predicting a brain-dead patient will wake up any day and start reciting lines from Shakespeare.

Execs: Recession has hit bottom
Economic indicators index jump 0.6% in July according to the Conference Board, in the latest sign of possible recovery.

By Julianne Pepitone, CNNMoney dot com staff wrier
August 20, 2009: 12:09 PM ET

NEW YORK (CNNMoney dot com) — An index of economic indicators rose in July for a fourth straight month, in another sign that the recession is bottoming, said a report released Thursday.

The Leading Economic Index rose 0.6% in July, after a 0.8% increase the previous month, according to a report from the Conference Board, which has a membership of executives from around the world. The measure is based on 10 components including interest rate spread, unemployment claims and building permits.

“The indicators suggest that the recession is bottoming out, and that economic activity will likely begin recovering soon,” said Ken Goldstein, economist at The Conference Board, in a prepared statement.
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Another C4C… Cash 4 Corpses

Demand rises for publicly funded burials. USA TODAY
The rough economy is inflicting hardship on people even in death.

Coroners and funeral directors in several cities say the number of people seeking government-paid funerals, cremations and burials is spiking. Most counties and states will use public money to cremate or bury people who are too poor to pay for private services.

“People just aren’t in a position to pay $7,000 for a private funeral and burial,” says Lt. David Smith of the Los Angeles County Coroner’s Office, where the number of people seeking county burial has nearly doubled since last year.

The percentage of people in poverty in the USA is climbing, says Gregory Acs, a senior fellow at The Urban Institute. When the recession started at the end of 2007, about 12.5% of the U.S. population was considered impoverished, up from 11.7% in 2001, he says.

Among the counties noting a surge in requests for indigent burials:

• The Los Angeles County Coroner’s Office handled 205 indigent deaths in the last six months of 2007. This year, from Jan. 1 to June 30, the office handled 404 indigent deaths — a 97% increase. “It has put a major financial strain on this department,” Smith says. “I need to come up with $12,000 a month in a budget that’s locked up tight as a drum.”

Then in February, the county crematory notified the coroner it was overflowing with natural death cases and couldn’t handle cases from the coroner, who handles accidental deaths, homicides and unidentified people, Smith says. “My body count in my crypt swelled to near capacity,” Smith says, as he sought a crematory to handle the excess corpses.

Credit market and equity begins to diverge again (of course the same thing happened in Fall of 2007 before the market imploded so make your bets accordingly):

- GS CDS spread widens to mid-140’s from low 90’s (50% rise in perceived default risk) while stock price held steady, same for other banks.

- CDX12 & CMBX spreads widened considerably over the last several weeks while equities rose or held steady.

- 10 years Treasury declined 25bps while SP500 continue to rise since late July.

When in doubt, always believe the credit market over the equity market.

Now a conversation with economist David Rosenberg (for those of you who don’t know him, he was very early in calling a severe recession back in the fall of 2007) on inflation vs. deflation (sorry for the long post but it is worth reading):

“As for the inflation-phobes, gold demand hit a six-year low in 2Q, according to the World Gold Council (-8.6% YoY). What is most interesting is that since late July, the S&P 500 has managed to tack on 20 points even as the 10-year Treasury yield has declined roughly 25bps — both markets cannot possibly be right when it comes to depicting the macroeconomic outlook. Our money is with Mr. Bond. After all, we seem to recall that between mid-June 2007 and early October of that year, the 10-year note yield fell 60bps even as the S&P 500 jumped 70 points as it made a last-gasp move to a new high. And, we know who got that story right.

As we saw yesterday, the market responded to reports that another fiscal package was about to be unveiled — even though the last package has yet to fully percolate. This sounds more like desperation than anything else, but there is no question that greed is once again testing the long-term resolve of the marginal investor. Politics is emotional. Like religion, sports, family, house prices, it is emotionally charged and therefore gets a lot more press and the general public forms a strong opinion. After all, the government is doing things that fewer people are favouring, based on the polls, because it is spending other people’s money — that is what fiscal largesse boils down to. Spending our tax dollars. That’s why everyone is so crystal clear about the inflationary impact of an increase in the government balance sheet. Deflationary forces are tougher for the masses to understand.

We have said often that just as society couldn’t spell ‘inflation’ in 1937, it has no clue what causes deflation now. That’s beginning to change in the aftermath of the housing and credit collapse, but try to explain the deflationary forces contained in debt liquidation or global manufacturing over capacity or a socio-economic trend towards savings, and the notion of ‘deflation’ gets fuzzy for most thinkers (even Warren Buffet). That doesn’t change the fact that the deflationary forces are enormous (and current) and the policy-induced reflationary forces are a partial antidote.

To be sure, if the government fails to mop it up once the private sector debt liquidation ends, it does mean that an inflationary mistake lurks down the road. But as we have seen in other post-bubble credit collapse episodes, the initial period of deflation can last for years, during which the fundamental trend in bond yields will likely remain in one direction and that is down, to the surprise and dismay of the litany of bond bears that currently populate the capital market. The fact that a year ago, when the inflation rate was over 5% but core inflation was less than half that pace, the market mantra was that we should be focused on headline only — that the core would follow the headline. There was a plethora of Street research published on the topic; we recall that all too well. Today, the year-over-year headline price trend is running at a 60-year low of -2.0%, and now we are being told by the economics community to focus on “core” (which, by the way, has slowed to 1½%) because this is all an “energy story”.

So you see, most strategists and economists and market pundits claim that they are concerned about inflation, but in reality, everyone seems to want to see it. As long as we have a lack of pricing pressure, we will see bond yields trend lower, and as long as that happens, there will be a continued lack of confirmation over the growth rate in the economy that is embedded in equity market valuation. Energy prices may, for a short time, give a kick to the headline CPI numbers but rents are almost four times more important and comprise 30% of the index (and 40% of the core). To repeat — three variables: rents, wages and credit — will ultimately determine the trend in inflation. Down, in other words. If you are not yet convinced of that in the consumer arena deflation remains the primary intermediate-term risk, then go the article on page B8 of the WSJ and see if that changes your mind — discount coupon redemptions are up nearly 20% this year (Club Stores Accepting Coupons: Sam’s Club Joins BJ’s, Costco in Issuing Discount Chits to Members).

We should probably add here that even though the moves by the Fed have provided ample liquidity, they have not stopped the underlying fundamentals from deteriorating — see Corporate Bond Defaults Hit Record on page 19 of the FT. (S&P just reported that 201 companies with $453 billion of debt have defaulted this year, exceeding the entire tally of 126 defaults covering $433bln in ALL of 2008). The 12-month speculative-grade corporate default rate has risen to 8.58%, as of July, from 8.25% in June (the rating agency is forecasting that the default rate will rise to 14.3% by the first quarter of 2010, taking out the prior record of 12.54% set in July 1991).

By the way, we are sure that for a market grasping on to any good news it can get, there is bound to be a buzz over the article on page 11 of the FT — U.S. Office Prices Raise Hopes. But turn to the Lex column on page 10 of the FT and you will see that there is less to the story than meets the eye (commercial real estate values are down 36% from the peak, which makes this downturn even worse than what we saw in the residential market!).

From our lens, there is always a catalyst or a spark for the next economic expansion and bull market. In 2003, it was leverage and a housing boom. What is it today? Cash for clunkers? Digitized medical technology? Chinese consumption? Government incursion into the economy and capital market? Perhaps we should also recognize that heading into the post-recession environment of 1991, there was a tailwind from sub $20/bbl oil; and heading into the 2003 rebound, we had sub $30/bbl oil; so it may pay to ask the question as to how $70+ oil is going to play in the recovery, unless we are talking about recoveries in Saudi Arabia, Qatar and the UAE?”

Sounds like the Devil may want to stock up his bar, (heavy on the Scotch, Beelzebub). Could be this d-bag is heading for a dirt nap soon.

Ailing Sen. Kennedy Urges Seat Be Filled Quickly…

BOSTON - A cancer-stricken Sen. Edward M. Kennedy has written a poignant letter to Massachusetts leaders asking that they change state law to allow a speedy replacement of him in Congress.

The note has been sent to Gov. Deval Patrick and the state’s Senate president and House speaker while Congress considers an overhaul of the nation’s health care system, a life cause of Kennedy’s.

The letter acknowledges the state changed its succession law in 2004 to require a special election within five months to fill any vacancy. At the time, legislative Democrats — with a wide majority in both chambers — were concerned because then-Republican Gov. Mitt Romney had the power to directly fill any vacancy created as Democratic Sen. John Kerry ran for president.

But Kennedy writes “it is vital for this commonwealth to have two voices speaking for the needs of its citizens and two votes in the Senate during the approximately five months between a vacancy and an election.”

Ben, you asked me a couple weeks ago if I remembered the North-South Austin tug-of-war over Town Lake. I didn’t at first, but then did. I wasn’t ever there, but I remember hearing about it in the news now. That era - end of 80s & beginning of 90s - were indeed a wonderful time in Austin (except for those bankrupted or underwater in houses from boom period). Those were our first years in Austin.

Nineties were prime for infestors in central Austin neighborhoods. Mid-to-late nineties was when 78704 was “branded” (bumper sticker: “78704 Not just a zipcode A way of life!”) and the groundwork was laid for the promotion of obscene hip urban luxury condos and McMansions of the last 10 years.

Later, I’m going to try to grab a chance to add a post about surviving and lost bits of Austin life. But first I’ll do an update on the dominoes currently falling in the RE market here - which will be reruns for flashbacks for a lot of you.

Electronic sales have to have had a pop up this month. Went for a 30 minute walk in our college town yesterday. Saw numerous flat panel TV boxes curb side from 42″ to 52″. Tons of computer boxes as would be expected. This has to be the same nation wide.

I was informed years ago by a ‘reformed’ burglar that you should never put empty boxes that had contained valuable items on the street, in front of your house. Makes their job a whole lot easier, knowing what’s inside.

Please forgive my ongoing confusion, but don’t higher home prices imply less, not more, affordability?

Could someone who understands how to properly interpret propaganda please explain this mystery to me?

Has Government Intervention Stalled Home Price Declines?

By Nick Timiraos

Some housing analysts have made the case that home prices have stabilized in recent months, in part, because foreclosure moratoria earlier this year helped to limit the supply of homes coming on the market during the spring and summer—just as the policymakers simultaneously goosed demand by lowering mortgage rates and offering a tax credit to first-time home buyers.

That raises some big questions: What happens when those new foreclosures accelerate later this year, and more supply hits the market? Will prices decline further if those demand-side incentives run their course? Have government efforts simply hit the pause button on the housing market downturn?

The answers to those questions produce different estimates about how much further the housing market has to fall, and a new forecast from Lazard Asset Management offers several different scenarios. The most probable scenario forecasts that home prices have another 10-15% decline from the current level, though prices are expected to rise slightly through the end of the summer as government intervention helps boost the housing market.

But Lazard also offers two additional scenarios: a “bull” market forecast that predicts an 8% home price decline from May, and a “bear” market scenario that forecasts a 19% price decline from the first quarter of 2009.

“Even in our bear case, it is clear that the government intervention to increase affordability and demand through lower mortgage rates, and to decrease supply through foreclosure moratoria and modifications, are having a positive impact on house prices relative to what would have occurred in the short term,” writes Ronald Temple, portfolio manager and co-director of research at Lazard Asset Management. ”The key question is how sustainable the benefits of such intervention will be.”

In all of their scenarios, their “affordability” outlook sounds pretty bearish to me. I have no idea about the supposed benefits of government price fixing that this fool is describing.

Clunk!

AP Source: Cash for Clunkers to end on Monday.

WASHINGTON (AP) - The Obama administration plans to end the popular $3 billion Cash for Clunkers program on Monday, giving car shoppers a few more days to take advantage of big government incentives.

The Transportation Department said Thursday the government will wind down the program on Monday at 8 p.m. EDT. Car buyers can receive rebates of $3,500 or $4,500 for trading in older vehicles for new, more fuel-efficient models.

“It’s been a thrill to be part of the best economic news story in America,” Secretary Ray LaHood said in a statement. “Now we are working toward an orderly wind down of this very popular program.”

Through Thursday, auto dealers have made deals worth $1.9 billion and are on pace to exhaust the program’s $3 billion in early September. The incentives have generated more than 457,000 vehicle sales. Administration officials said they have reviewed nearly 40 percent of the transactions and have already paid out $145 million to dealers.

Administration officials said applications for rebates will not be accepted after 8 p.m. EDT Monday and dealers should not make additional sales without receiving all the necessary paperwork from their customers. Dealers will be able to resubmit rejected applications after the deadline.

President Barack Obama said in an interview Thursday that the program has been “successful beyond anybody’s imagination” but dealers were overwhelmed by the response of consumers. He pledged that dealers “will get their money.”

Court mix-up leaves Fla. family evicted for a day

http://www.seattlepi.com/national/1110ap_us_eviction_mistake.html

‘Is Population Growth a Ponzi Scheme?’
(Christian Science Monitor)

http://tinyurl.com/l7e4jz

…Growth, whether through immigration or natural increase, is a plus for some groups. For business, it means a boost in the demand for products. It also means a surge in low- and high-skilled workers, which can keep a lid on wage pressures. Religious and ethnic groups want more immigrants of their own faith and ethnicity to raise their political and social clout. The military regards young immigrants as potential recruits.
But the public pays a cost for a bigger population.
Mr. Chamie speaks of more congestion on highways, more farmland turned into housing developments, more environmental damage, including the output of pollutants associated with climate change.
In the current healthcare debate in the US, one costly question is whether the insurance covers some 11 million illegal immigrants…

Financial Times
The Fed’s independence is at risk
By Glenn Hubbard, Hal Scott and John Thornton
Published: August 20 2009 19:55 | Last updated: August 20 2009 19:55

As leaders gather this week for the annual Jackson Hole symposium on the economy, they should consider the future of the Federal Reserve as lender of last resort. Over many decades and especially in this financial crisis, the Fed has used its balance sheet to be a classic lender of last resort. But its ability to do so depends upon its economic credibility and political independence, attributes the Fed has compromised in this crisis.

As the crisis worsened at the end of 2007, the Fed created new liquidity facilities, some of which involved new recipients, beyond depository institutions, such as investment banks and corporate commercial paper issuers. In addition, in 2008, the Fed made extraordinary “bail-out” loans to avoid the failure of systemically important institutions – a $30bn (£18bn, €21bn) non-recourse loan, with a $1bn deductible, to assist JP Morgan Chase’s acquisition of Bear Stearns and the creation of a two-year $85bn credit facility for AIG. Also, the Fed, in partnership with the Treasury and Federal Deposit Insurance Corporation, guaranteed $424bn of losses on pools of Citigroup and Bank of America bad assets.

These actions have had a big impact on the Fed’s balance sheet. As of June 2009, its total assets had risen to over $2,000bn compared with $852bn in 2006, and only 29 per cent of these assets were Treasury securities, compared with 91 per cent in 2006. Traditional loans by a lender of last resort are sufficiently collateralised to prevent moral hazard for borrowers and reduce risk to the central bank. However, the adequacy of the collateral of these new Fed positions is unclear.
…
Ya think?

Ethiopian Review
China’s CIC set to invest in U.S. mortgages
Posted by Mehret Tesfaye | August 19th, 2009 at 4:04 pm |

HONG KONG – China’s $200 billion sovereign wealth fund, which lost big on its ill-timed 2007 Morgan Stanley and Blackstone bets, plans to invest up to $2 billion in U.S. mortgages as it eyes a property market rebound, two people with direct knowledge of the matter said Monday.

China Investment Corp plans to soon invest in U.S. taxpayer-subsidized investment funds that will acquire “toxic” mortgage-backed securities from the nation’s banks. CIC believes these assets are a safer bet than buying into the U.S. Federal Reserve’s Term Asset-Backed Securities Loan Facility (TALF), the people with direct knowledge said.

CIC is in talks with nine U.S. Treasury-designated Public-Private Investment Plan managers, the sources said.

They include: AllianceBernstein Holding, with sub-advisers Greenfield Partners LLC and Rialto Capital Management LLC; Angelo, Gordon & Co LP with GE Capital Real Estate, a unit of General Electric Co; BlackRock Inc; Invesco Ltd; Marathon Asset Management LP; Oaktree Capital Management LP; Trust Company of the West, a unit of Legg Mason; RLJ Western Asset Management LP, a venture formed by Legg’s Western Asset Management unit; and Wellington Management Co LLP.

CIC is expected to decide this month which of the nine PPIP managers will handle its investments in mortgage-backed securities under the PPIP plan, the sources said.

The fund is likely to select several, not all, of the firms, said the sources, who have direct knowledge of the matter, but asked not to be identified as the talks are confidential. CIC cannot invest directly in the PPIP.

CIC, BlackRock, Legg Mason and AllianceBernstein declined to comment. Officials from the other investment managers were not immediately available.
…

U.S. TREASURY APPROVES

Under the Public-Private Investment Plan launched earlier this year, the U.S. government plans to seed a number of investment funds with taxpayer money.

When combined with money from other investors, these private sector-managed funds are expected to soak up as much as $40 billion in soured, hard-to-sell securities clogging the balance sheets of banks.

CIC’s move comes after the United States and China ended their first annual Strategic and Economic Dialogue late last month. The two countries agreed to lead the global economy out of recession, with China seeking safer investments in the world’s leading economy.

“The Chinese government is always trying to seek a more ideal way to invest in U.S. assets rather than purely buying U.S. government bonds all the time,” said the source.
…

http://www.randpaul2010.com/

Dr. Rand Paul (son of Dr. Ron Paul) is running for the Senate. A recent poll showed he is a serious contender. His campaign has launched a Ron Paul-style “money bomb” for grassroots donations, since the corporate cartels and special interests who own most Republicrat candidates most assuredly will be contributing to his opponent. Write a generous check to Ben Jones, then please consider helping a good man send shock-waves through the Republicrat Establishment.

“Skip.
I have never seen the benefit of either provided that my employer pays me the equivalent so I can save for retirement and buy insurance myself.

You wish is coming true. Recently, we have seen companies like Ford, Starbucks, etc. cancel 401ks programs. Of course the employees got nothing in exchange. As Janis said “freedoms just another word for nothing left to loose”. Soon, I can see employees getting more freedom as health benefits are cut as well.”

Sorry Robin, I usually catch the spelling and fix it when I repost/reply.
Loose vs LOSE!

Just want to say re; the occasional posters who are disappointed that there isn’t a “more serious tone” to the HBB lately and from another, that there seems to be “flirting” rather than serious discussions.

I think the HBB gets so overwhelmed with the Seriousness of the PTB and all the money going hither and yon without reason and roi for the rest of us, and the constant drivel of the msm and the monotony of incessant detail, and the lies, that flirting and levity have given the hbb respite and a Break.

“just sayin”

A quarter of Florida mortgage borrowers behind on payments or in foreclosure
by Jeff Ostrowski
Fully 25.4 percent of Florida mortgage borrowers were at least a month behind on loan payments in the second quarter, the Mortgage Bankers Association says today.

The breakdown:

3.73% of loans were 30 days past due.
1.91% were 60 days past due.
5.16% were 90 days or more past due.
14.60% were in some stage of foreclosure.
The report looked at 3.5 million Florida mortgages. Nationally, Florida ranked second in foreclosures started (after Nevada) and first in foreclosure inventory.

Termite infestation destabilizes Icelandic banking system; bagholders to be identified shortly.

American Public Media Marketplace
Thursday, August 20, 2009
Iceland payback plan raises some noise
…
Iceland’s parliament is about to vote on a massive financial package. The plan is to repay more than $5 billion that British and Dutch savers lost in one of the Icelandic banks that failed last fall.

Sounds like chump change, until you calculate that since Iceland only has 300,000 people. It’s equivalent to asking us in the U.S. to fork over $4 trillion.

Marketplace’s Stephen Beard has the story.

STEPHEN BEARD: Protest by percussion. Icelanders demonstrate outside their parliament in distinctive fashion, banging pots and pans and even gongs. The din is a way of venting disgust.

JON BALDVIN HANNIBALSSON: The general feeling among the public is that we’ve been had. We’ve been tricked. And we are innocent victims.

Former foreign minister Jon Baldvin Hannibalsson. He says many Icelandic taxpayers do not believe they should pick up the entire tab for the collapse of the online bank Icesave.

HANNIBALSSON: They are called upon to pay huge debts. And they ask themselves: Did we take on the loans? Did we ask for the loans? Are we responsible for the loans? No, they were not.

When Icesave failed last fall, foreign depositors, mostly British and Dutch, stood to lose a fortune. The British and Dutch governments stepped in and compensated their citizens in full. Now they are pressuring Iceland to reimburse them. Dropping hints that the country’s application to join the EU and even its access to IMF loans could be in jeopardy.

Magnus Arni Skulason is a leading critic of the repayment deal.

MAGNUS ARNI SKULASON: Icelanders in general find it unfair that they are paying for the mistakes of Icelandic bankers and financial supervisory authorities both in Iceland and in Europe.

A protester in Reykjavic rails against the small group of Icelandic bankers that have ruined the country. “Termites,” he calls them, “they have eaten the fabric of our society.” That rhetoric is not too far removed from reality, says Jon Daniellsson — a lecturer at the London School of Economics.

He says the Icesave debt alone would be a crippling burden.

JON DANIELLSSON: Iceland is by far the worst affected economy in the global crisis. Its economy is spiralling down continually and taking on that sizeable burden is quite likely to cause the government of Iceland to end in bankruptcy.
…

Luckily, China is riding to the rescue of the US housing market, as otherwise this news would be highly concerning.

Washington Post
Troubled Mortgages Hit Record High
Problem Shifts From Subprime Loans to Jobless Homeowners

(Photo description)
A home has been foreclosed upon in Nevada. The majority of the foreclosure problem is in the Sun Belt states.

By Renae Merle
Washington Post Staff Writer
Friday, August 21, 2009

The proportion of homeowners delinquent on their mortgage or in foreclosure rose to its highest levels in at least four decades, according to industry data released Thursday, despite extensive government efforts to help borrowers and signs the economy is starting to heal.

The problem has shifted from the subprime loans that helped spark the foreclosure crisis to borrowers driven into delinquency by unemployment, according to the Mortgage Bankers Association, which issued the survey. The recession’s impact on the market could send foreclosure rates up through the end of next year, said Jay Brinkmann, the group’s chief economist.

“It is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves,” he said.

About 9.24 percent of borrowers were delinquent on their mortgage during the second quarter, according to the survey, and 4.3 percent more were somewhere in the foreclosure process. Overall, one in eight, or 13.16 percent, of mortgage loans were delinquent or in the foreclosure process during the quarter, according to the group.

That is the highest level ever recorded by the survey, which has been conducted since 1972, and breaks the high mark set during the first quarter. It is up from about 9 percent during the second quarter of 2008.

“I think these numbers reflect the gap between the number of modifications that have been done and the need that still exists,” said Charlene Crowell, a spokeswoman for the Center for Responsible Lending. “Until that gap is closed, the housing market will continue to suffer.”
…
I think these numbers represent a FUBAR housing market situation.

It occurs to me that financial company executives are the highest paid government employees.

Here’s how: Their companies created a giant black hole of bad debt, from which they were paid very handsomely. Government then stepped in to fill that black hole of debt. So, the financial companies simply switched the usual order - paying themselves first from the black hole, then having the government coming in and supply the money.

Most government contractors get a contract first, then pay themselves exorbitantly. The financial companies decided they could make more if they skipped the ‘getting the contract’ part.

market pulse

Aug 20, 2009, 8:40 p.m. EST
Japanese exporters drop, South Korean banks rise
By V. Phani Kumar

HONG KONG (MarketWatch) — Asian markets traded mixed early, with exporters dragging down Japan as the U.S. dollar fell below the 94-yen level.
…In Tokyo, the Nikkei 225 Average dropped 0.6% to 10,317.04, and the broader Topix fell 0.5%.

I hope this MarketWatch writer doesn’t mind a little editorial feedback?

“Ask not for whom the (opening) bell tolls — it tolls for thee.”

Market Snapshot

Aug 20, 2009, 4:26 p.m. EST
U.S. stock market and Chinese equities: apples and oranges
After rising 80% since March, benchmark Chinese index drops 20% in two weeks

By Kate Gibson, MarketWatch

NEW YORK (MarketWatch) — The U.S. stock market has been echoing blithely disregarding the movement of Chinese equities , at least in trading before the opening bell this week. But some analysts say the recent fixation on China’s stock market is overblown.

“Intermarket relationships around the world have never been stronger. So when the benchmark Chinese index pulls back 20% in two weeks, the world should take notice,” wrote Richard Ross, global technical strategist at Auerbach Grayson, in a note.
…

continued from above (apologize if first part ends up double-posted)

another story: “Star Riverside Halts Construction.” This is the big Australian “ultra-hip” luxury condo development on the north-east corner of I-35 and Riverside (fugly spot, close to ghetto-ish E Riverside, separated from downtown by I-35). They are freezing construction to do a mid-project redesign to more modest more affordable (ha!) units.

W Hotel and Residences (now offices, too!) is purportedly still under construction, while seeking new funding after Stratus bankruptcy. KLBJ radio reported: “On June 26, 2009, the loan agreement with Corus was assigned to a subsidiary of Stratus, which is jointly managed by Stratus and Canyon-Johnson, in exchange for a pay down of $250,000 of the outstanding principal balance of $2.1 million. As a result, Corus is no longer the lender and in the second quarter of 2009 Stratus recognized a $0.2 million loss on extinguishment of debt, which includes the write-off of unamortized deferred loan costs in the amount of $2.1 million.”

The obscene Zilker Park Residences right on the edge of the park (corner of Robert E Lee and Barton Springs Rd) had problems selling their $600,000 to million-dollar units and redesigned months ago, I think were adding a hotel. They’ve scraped some ground and put up some of that black retaining wall cloth.

Haven’t heard anything lately about the lawsuit last spring by residents against the Sabine, downtown condo conversion - common area including elevator not being properly maintained, dangerously shoddy remodel. But AFAIK the lawsuit continues.

It’s been over a year since construction of the La Vista on La Vaca luxury condo and office project, just south of Martin Luther King Boulevard (southern boundary of UT campus) stalled completely. That’s the one where the right lane of La Vaca St. was closed for a year, including months after construction stalled. The shell bears a poignant sign : “ Ground floor Restaurant / Retail space for sale.”

Central and south mid-rise condo complexes completed 2-3 years ago have unsold units, including Bridges on the Park on Lamar south of Barton Springs Rd, right across from the hike and bike trail and Caswell on N. Lamar across from Pease Park. There are at least 4 S. Lamar plots where condo complexes were aborted that have been standing for sale for over a year. The proposed high rise across from Lamar Plaza strip shopping center (Heart of Texas Music & former Salvation Army) never happened - not much land, steeply sloping, just above railroad tracks. Nearby condo conversion of shabby apartments (corner of Lamar and Treadwell - first stoplight south of Barton Springs Rd) now is touting “newly remodeled rentals.” Conversion units further south and west, Manchaca from Lamar to Ben White Blvd, have heavy among the 78704 foreclosures for over a year.

As to large defunct exurban developments in Travis county, on Sept 1, Avana (south of Circle C Ranch) will be in the county auction. So will Viscaya, on the south shore of Lake Austin. Rocky Creek Ranch on Hamilton Pool Road went back to the bank in the last month. So did another one; I don’t have name and details on hand now.

Again, this is nothing new on the national scale, but Austin was immersed in the Kool-Aid until recent months. Things have changed.

I’ll be in Austin this weekend for a change, so I’ll try to get out on Sun AM and take some pictures to post in a Flickr account.

And here is what the housing bubble was all about

Aug. 20 (Bloomberg) — U.S. pension funds contributed to the record $1.2 trillion that private-equity firms raised this decade. Three of the biggest investors, state pensions in California, Oregon and Washington, plunked down at least $53.8 billion. So far, they only have dwindling paper profits and a lot less cash to show the millions of policemen, teachers and other civil servants in their retirement plans.

The age old problem of how to get conservative investors to part with their money.

This housing bubble is thoroughly, utterly, completely popped. It is time to end the denial and start figure out how to pick up the pieces.

GOT POPCORN?

* WALL STREET JOURNAL
* REAL ESTATE
* AUGUST 21, 2009

Souring Prime Loans Compound Mortgage Woes
Programs Designed to Prevent Foreclosures Face Pressure

By NICK TIMIRAOS

A survey found that one in eight U.S. households with mortgages was in foreclosure or behind on its mortgage payments during the second quarter, putting added pressure on programs aimed at preventing foreclosures.

While foreclosure starts have slowed on the subprime loans that ignited the mortgage and banking crisis, loans extended to borrowers with good credit are deteriorating at a faster clip as falling home prices and mounting job losses weigh on more households.

The Mortgage Bankers Association said its latest survey, released Thursday, showed that 13.2% of mortgages on homes with one to four units were at least a month overdue or in the foreclosure process in the April-to-June period, up from 12.1% in the first quarter and 9% a year earlier.

As home sales have picked up in recent months, some were expecting foreclosures and delinquencies to ease. But Jay Brinkmann, chief economist at the MBA, said foreclosures weren’t expected to peak until later in 2010 when the economy improves.

“Just because we see prices level off doesn’t necessarily mean we’ll see a big reduction in foreclosures,” said Mr. Brinkmann, in part because many homeowners would still owe more than their homes were worth.

Deteriorating prime loans are increasingly behind the steady rise in delinquencies and foreclosures. Among prime loans, 9% were past due or in foreclosure at the end of June, up from 5.35% one year ago. For subprime loans, those for borrowers with weak credit records or high debts relative to income, the rate was 39.5%, compared with 30% last year.

Prime loans, however, accounted for 58% of foreclosure starts, up from 44% last year. Meanwhile, subprime mortgages accounted for 33% of foreclosure starts, down from 49%. Prime fixed-rate mortgages, usually considered among the safest of all loan types, accounted for one in three foreclosure starts, up from one in five.

More than 235,000 borrowers have begun trial mortgage modifications under an Obama administration effort launched in March that focuses on reducing monthly mortgage payments for borrowers who have fallen behind on their payments. An additional 60,000 borrowers with little or no home equity have refinanced to lower rates through a parallel program launched by the administration.

But modification programs may not be able to help the growing number of borrowers who are falling behind on their payments because they are losing their jobs. Most loan-modification programs have been designed to help borrowers with loans that reset to higher payments or with high debt-to-income ratios.

The first wave of foreclosures that began two years ago, when the economy was still relatively healthy, was triggered by a downturn in housing prices that made it harder for subprime borrowers to refinance mortgages that were resetting to higher payments. Now, foreclosures are increasingly being driven by traditional economic problems, including falling home prices, falling incomes and rising joblessness.

Four states — Florida, Nevada, Arizona and California — continue to account for a large part of foreclosures in the U.S., but their share of new foreclosures fell to 44% in the second quarter, from 46% in the first quarter. In Florida, nearly 23% of mortgages were past due, including 12% that were in some stage of foreclosure and 5% that were 90 days or more past due at the end of June. Nevada trailed closely behind, with 21% of mortgages that were late or in foreclosure.
…

Los Angeles Times | BUSINESS

Mortgage defaults soar to record 13%

In the second quarter, the number of homeowners behind on payments or in foreclosure rose along with the jobless rate, with California among states leading the way.

By E. Scott Reckard And Ronald D. White

August 21, 2009

Widespread joblessness is causing more Americans to fall behind on their house payments, triggering a new round of foreclosures that some analysts fear could delay the nation’s economic recovery.

A mortgage trade group reported Thursday that more than 13% of the nation’s homeowners were delinquent on their mortgages or in the process of having their homes repossessed during the second quarter of this year. That’s the highest figure since tracking began in 1972. California’s rate, 15.2%, was among the highest of all states.

The numbers underscores a worrisome trend. A spate of foreclosures — which began with speculators who walked away from their souring investments, then spread to high-risk borrowers who couldn’t make their payments when their low-interest mortgages reset — is now hitting unemployed homeowners with good credit scores, clean financial histories and conventional home loans.

The U.S. has shed 6.7 million jobs since the recession began, employment losses that have left even high-quality borrowers struggling. One in three new foreclosures from April to June was from a prime, fixed-rate loan, up from one in five a year earlier.

The rising tide of foreclosures could swamp positive economic trends such as improving home sales and a surprise increase in U.S. regional manufacturing, also reported Thursday.

“The broadening of the foreclosure crisis to include prime loans due to high and rising unemployment will delay a bottom in the housing market and threatens the economic recovery,” said Mark Zandi, co-founder and chief economist of Moody’s Economy dot communist.
…

The good news. . .

The bad news
.
.
.
.
I’M LYING THROUGH MY TEETH LIKE A SCUM-SUCKING BANKER!

“Friends of Sigurdsson” loans bite former co-CEO of Icelandic bank in the back of the neck:

Kaupthing chief defends bank’s loans to top shareholders

The former chief executive of Kaupthing has defended the business practices of the failed Icelandic bank, after its loan book was leaked on to the internet last month.

By Rowena Mason
Published: 9:13PM BST 20 Aug 2009

Hreidar Mar Sigurdsson, former co-chief executive, said loans to some of the bank’s top shareholders did not need to be disclosed as related-party transactions.

“These loans were not given in the last days of the bank,” said Mr Sigurdsson, who left after the bank failed. “We believed our loans were good, well secured loans.” Kaupthing was the biggest of Iceland’s three banks that collapsed last October, affecting thousands of British savers and many authorities.

Iceland’s prime minister Johanna Sigurdardottir, said Kaupthing’s loans totalling more than €6bn (£5.2bn) to top shareholders were “if not illegal, completely unethical”. Many were provided “without any guarantees or covenants”.

But Mr Sigurdsson said the inter-relatedness of the Icelandic financial sector was “clearly one of the weaknesses of the system”.
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The silver lining in this story: The stock market almost always does very, very well on days when federal regulators seize failed lenders. Buy lots of stocks on the opening bell tomorrow and make buckets of money.

* The Wall Street Journal
* AUGUST 21, 2009

In New Phase of Crisis, Securities Sink Banks

By ROBIN SIDEL

U.S. banks have been dying at the fastest rate since 1992, mainly because of bad loans they made. Now the banking crisis is entering a new stage, as lenders succumb to large amounts of toxic loans and securities they bought from other banks.

Federal officials on Thursday were poised to seize Guaranty Financial Group Inc., in what would be the 10th-largest bank failure in U.S. history, and broker a sale of the Texas bank to Banco Bilbao Vizcaya Argentaria SA of Spain. Guaranty’s woes were caused by its investment portfolio, stuffed with deteriorating securities created from pools of mortgages originated by some of the nation’s worst lenders.

Guaranty owns roughly $3.5 billion of securities backed by adjustable-rate mortgages, with two-thirds of the loans in foreclosure-wracked California, Florida and Arizona, according to the company’s latest report. Delinquency rates on the holdings have soared as high as 40%, forcing write-downs last month that consumed all of the bank’s capital.

Guaranty is one of thousands of banks that invested in such securities, which were often highly rated but ultimately hinged on the health of the mortgage industry and financial institutions. “Under most scenarios, they were good and prudent investments — as long as we didn’t have a housing or banking crisis,” says John Stein, president and chief operating officer at FSI Group LLC, a Cincinnati company that invests in financial institutions.
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It’s SOL time for Guaranty, thanks to the housing and banking crisis they never expected to have…

(View Full Image)
Texas-based Guaranty Financial Group was crippled by investing in securities issued by other lenders.

Texas-based Guaranty Financial Group was crippled by investing in securities issued by other lenders.

Texas-based Guaranty Financial Group was crippled by investing in securities issued by other lenders.

Texas-based Guaranty Financial Group was crippled by investing in securities issued by other lenders.

(All financiers need to write this on the black board 100 times until they have learned their lesson…)

* The Wall Street Journal
* OPINION
* AUGUST 20, 2009, 10:44 P.M. ET

Big Government, Big Recession

There’s no evidence for the theory that state spending has shortened this or any other slowdown.

By ALAN REYNOLDS

“So it seems that we aren’t going to have a second Great Depression after all,” wrote New York Times columnist Paul Krugman last week. “What saved us? The answer, basically, is Big Government. . . . [W]e appear to have averted the worst: utter catastrophe no longer seems likely. And Big Government, run by people who understand its virtues, is the reason why.”

This is certainly a novel theory of the business cycle. To be taken seriously, however, any such explanation of recessions and recoveries must be tested against the facts. It is not enough to assert the U.S. economy would have experienced a “second Great Depression” were it not for the Obama stimulus plan.

Even those who think government borrowing is a free lunch can’t possibly believe the government has already done enough “stimulus spending” to explain the difference between depression and recovery.
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The relative brevity of recessions before the New Deal is particularly surprising since the U.S. economy was then dominated by farming and manufacturing—industries far more prone to nasty cyclical surprises than today’s service-based economy.

In the late 19th and early 20th centuries, nobody thought the government could or should do anything except stand aside and let the mistakes of business and banking be fixed by those who made them. There were no Keynesian plans to borrow and spend our way out of recessions. And bankers had no Federal Reserve to bail them out until 1913. Yet recessions after the Fed was created soon turned out to be much deeper than before (1920-21, 1929-33, 1937-38) and often more persistent.

It’s clear that U.S. history does not support the theory that Big Government means shorter and milder recessions. In reality, recessions always ended without government prodding, long before anyone heard of Keynes and long before the Fed existed. What’s more, recessions ended more quickly before the New Deal’s push for Big Government than they have in the past three decades. The economy’s natural recuperative powers before the 1930s proved superior to recent tinkering by Big Government economists, politicians and central bankers.
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