The Decade That Wasn’t
The Day in Connecticut. “The good news for the region: Foreclosure filings last year fell 12 percent in New London County compared to the year before. The bad news: They’re still pretty high. The numbers are up more than 55 percent from where they were in 2007. And they are six times the level of foreclosures reached in 2006. Over the past year, said real estate experts, a good number of distressed properties have been sold, many of the transactions spurred by a first-time homebuyers tax credit.”
“‘A lot of it’s been absorbed,’ said John Bolduc, CEO of the Eastern Connecticut Association of Realtors,. ‘But there’s more to come. It’ll last probably another two years.’”
The New York Times. “As of the end of November, 22,200 single-family homes had sold statewide in 2009, a decline of 4 percent from the same period in 2008. The median price slid by 11 percent statewide — more like 15 to 20 percent in hard-hit Fairfield County. Builders all but stopped building in 2009. The number of permits issued had not broken 3,000 as of the end of November, a ‘pretty terrible’ tally compared with the more ‘normal’ level of 11,000 to 12,000 permits a year, said Peter M. Gioia, the economist for the Connecticut Business and Industry Association.”
“Sales in New Canaan…picked up at the end of the year…according to Denise Gannalo, an agent with William Raveis. Among those sales was a bank-owned property she originally listed for $3.9 million. The six-bedroom property finally sold for $1.9 million. While encouraged by rising sales, Ms. Gannalo sees trouble ahead for some who bought in 2005, the height of the market. This year alone, the average selling price in New Canaan fell by 21 percent, which may mean that some highly leveraged homeowners now owe more than their house is worth, she said.”
“Russell Pruner, an owner of Shore & Country Properties, said he thought that 2009 would ‘end up the worst year in the history of Greenwich real estate.’ Home values in town have dropped 25 to 33 percent over the past two years, and houses priced accordingly are drawing buyer interest, Mr. Pruner said. Mr. Pruner isn’t ready to declare that the Greenwich-area market has hit bottom. But he thinks the market may have fallen far enough to entice the renters waiting in the wings.”
“‘We truly have pent-up demand,’ he said. ‘We’ve got 100-plus people in rentals paying $10,000, $15,000 a month. That was a smart move in 2009, but will they pony up again for 2010? I don’t think they will.’”
The Stamford Advocate in Connecticut. “Simple economics can explain the plummeting home values in Darien, Greenwich and New Canaan — fewer Wall Street jobs and bonuses leaves fewer people able to buy mansions, right? Sure, say the experts, slack in demand explains some of it. But those double-digit house value declines in wealthy towns are also part of a larger story about an epidemic of debt addiction that has left a trail of misery from Bridgeport’s East Side to backcountry in Greenwich.”
“Lynn Padell, a Realtor with William Raveis Westport said the real pain in the wealthier communities has come in the $1 million to $2 million range, which was occupied by a lot of middle managers in the finance world. She said people don’t want to buy a house because the idea that it’s going to go up in value every year, and therefore worth taking on a jumbo loan of more than $750,000 has been shattered, Padell said. And that’s another thing, ‘People were getting in over their heads,’ she said.”
“Gillian Anderson, of Westport-based Anderson Wealth Management, said the era of easy credit took in everyone, noting the term ‘million dollar no-brainer,’ isn’t necessarily complimentary. She said many people used Wall Street bonuses to buy homes or at least make down payments. The truth is that many people in these income brackets were living beyond their means like people in the lower tax brackets.”
“‘If you make seven figures one year, you expect to make it the next,’ she said, explaining the mindset wasn’t any different on Wall Street than Main Street.”
The Associated Press on Maine. “Maine is partially out of the recession but has a long way to go, said Charles Colgan of the University of Southern Maine’s Muskie School of Public Service. ‘Recessions have two elements to them: One is the fall in output and the other is the fall in employment,’ Colgan said. ‘We have reversed the fall in output but not yet the fall in employment.’”
“A year ago, Colgan predicted the number of jobs in Maine would fall by about 20,000 to a low of 600,000. But the recession has been more severe than anticipated, and Maine’s job count fell to 588,000 in November, according to the Maine Department of Labor. The housing market remains bleak, he said.”
“He expects about 2,000 new homes to be built in 2010, down from 9,000 at the peak of the housing expansion in 2005. ‘The housing market that got us into this mess will not be what gets us out of this mess,’ he said.”
“Looking back, Colgan said the past decade was dismal. Maine’s job count rose 10 percent in the 1970s, 28 percent in the 1980s and 13 percent in the 1990s, but declined 1 percent in this latest decade, he said. Wages fell and the stock market declined, and government revenues are now at the same level they were in 2004, he said. ‘That was the decade that wasn’t,’ he said.”
The Press of Atlantic City in New Jersey. “At Fischer Woods in Linwood, while there certainly has been an impact on home values, the spectre of foreclosures appears to have been averted, according to brokers. At the peak of the bubble in mid-decade, one house in the exclusive neighborhood sold for $1.7 million, according to Lisa Alper-Russo, of Coldwell Baker Casa Bella Realtors in Linwood.”
“Last month, meanwhile, a home that Realtor Sam Cohen said would have been worth about $500,000 at the height of the market was sold for $299,000. ‘My client sat on his property for a couple of years,’Cohen said of the home, ‘and basically gave it away at the end. It needed a little work that my client wasn’t willing to do, and he got a cash offer and decided to take it. … I believe my client could have gotten more for it. But while he could have argubly gotten $350,000 or $400,000, he certainly wasn’t going to get $500,000.’”
“Anthony D’Alicandro, owner and licensed broker at Coldwell Banker Casa Bella Realtors, said there are several reasons for the ‘pretty sharp adjustments’ in home prices over the past year. First, construction of new homes reached inflated levels nationwide in the early part of the past decade — although not so much in southern New Jersey, he said.”
“‘The Borgata opened up in 2003 (for example), and there was a lot of job growth in the early 2000s.’ Eventually, he said, ‘Those demands started to subside. It got to the point that home values, in 2006 and 2007, didn’t make sense. The median home sale value didn’t mesh with the median income in the area. Prices just had to be adjusted.’”
“Second, D’Alicandro said, the various ‘crazy mortgage programs’ have mostly been eliminated, meaning that people are again buying homes and mortgages within their means. ‘That alone causes an adjustment in prices,’ he said. ‘The affordability factor is more realistic than it’s ever been.’”
“D’Alicandro, who signed a two-year contract with the New Jersey Housing and Mortgage Finance Agency to sell foreclosures in the state, said, ‘I have been more busy at the default end of the business over the last two months than the entire year leading up to it.’”
“‘There’s definitely been a slowdown (in foreclosures) this year,’ he said, citing efforts by the federal government to place moratoriums on bank takeovers of properties. ‘Now, all of a sudden you’re seeing some of those hit the market.’”
“Even when a home is for sale in Fischer Woods, said resident Patty Cofer, the neighborhood has chipped in to maintain vacant properties. One house that was recently on the market, Cofer said, was ‘a beautiful home. It’s just too big.’”
The Record in New Jersey. “Condo developers are doing more than crossing their fingers in hopes that their investments will grow in this economy. They have come up with recipes for success — like giving renters the opportunity to lease a luxury condo or auctioning condos off to buyers. Randy Lyn Ketive, president of Prominent Properties Sotheby’s International Realty in Fort Lee, says condos purchased as investments have long been available to rent. They are also available to renters when owners cannot get their desired selling price.”
“Right now, 30 condos are available for rent and as many for sale, with prices for one-bedroom units starting at $345,000 for purchase and $2,500 monthly for rent. ‘If someone comes in for a rental, we find out about their financial situation,’ says Angela Ferrara, vice president of sales. If they can make the down payment of about 20 percent, they will find that low interest rates, reduced home prices and a first-time-buyer’s credit make purchasing the unit a smart move, she says. If someone just wants to rent, that’s OK, too, she says.”
“Developers have also turned to auctions to sell their condos. ‘Our company’s been in business for over 40 years and seen all different [real estate] markets,’ says Max Spann Jr., president of Max Spann Real Estate & Auction Co. in Annandale. ‘Every time there’s a correction, you have to look at what the options are.’”
The Fosters Daily Democrat in New Hampshire. “Beginning in 2005, homes sales in Rockingham County began to drop, along with home values. Four years ago, activity in Strafford County also slowed, with an 18 percent drop in sales recorded from 2005 to 2006. But never mind that today, Realtors say.”
“Statewide last year, 10,832 home sales registered a 6 percent uptick over 2008, marking the first time in five years that activity ended a year with a cumulative increase. NHAR President Monika McGillicuddy credited the action to the first-time homebuyers’ tax credit, low interest rates and ‘competitive’ prices.”
“Joanna Rousseau, president of the Seacoast Board of Realtors, said falling prices contributed as much if not more to the increased demand. A majority of first-time buyers took advantage of the $8,000 credit but it wasn’t the primary incentive compared to prices, she said. The median sales price in Strafford County was $195,000 last year, down from $219,000 in 2008 and $250,000 in 2005, the apex of the cost summit. In Rockingham County, the median price was $257,900, down from $285,000 in 2008 and $337,000 in 2005.”
“If residential sales held a bright spot, condominium sales was a different story. They dropped by 0.2 percent statewide, 19.2 percent in Strafford County and 4.3 percent in Rockingham County — despite median sale prices dropping 13.3 percent and 9.3 percent, respectively. ‘Condo sales typically have their own mark compared to residential,’ said Ansel Crombleholme, president of the Strafford County Board of Realtors. But recently, with housing prices dropping, prospective buyers are bypassing condos in favor of homes, he said, giving them ‘more buying power.’”
The Concord Monitor in New Hampshire. “The state courts system has set up a new mediation program designed to give troubled homeowners and lenders a place to work out a solution when borrowers fall behind on mortgage payments. The new program comes as New Hampshire continues to deal with a historically high number of foreclosures stemming from the financial crisis. Through November 2009, the last month for which figures are available, more than 3,000 people had their homes foreclosed on last year. 452 foreclosures occurred across the state in 2005.”
“Gerald Little, president of the New Hampshire Bankers Association, said most New Hampshire banks monitor delinquency rates and try to reach out to borrowers who fall behind on their loan payments. ‘Sometimes banks have the problem that the borrower stops taking the phone call,’ Little said.”
The Nashua Telegraph on New Hampshire. “Little said he expects that most of the cases that go to mediation will already have been through the federal Making Homes Affordable program, which was also designed to encourage lenders to restructure loans to avert foreclosure. The program can only work for people who have some ability to pay back a loan. Borrowers who swam too far into the sea of debt may find themselves beyond rescue.”
“‘There are some people whom we are not going to be able to help,’ Borgstrom said. ‘You don’t want people to refinance or get into some other agreement and still not be able to pay. ‘The quality of the underwriting that went into many of those notes really almost doomed them from the start. For many of those folks, there is simply not much that can be done.’”
The New York Post. “President’s Obama’s $90 billion Wall Street tax plan could rain down pain on New York City while laying the groundwork for yet another economic bubble that could send the economy into a tailspin down the road, critics say. Critics of the tax said the fact that the Obama administration chose to call the tax the ‘Financial Crisis Responsibility Fee’ but failed to include those firms most responsible for Uncle Sam not recovering its TARP investment is laughable.”
“In his weekly radio and Internet address, Obama expressed confidence that lawmakers would approve the tax. ‘Like clockwork, the banks and politicians who curry their favor are already trying to stop this fee from going into effect. The very same firms reaping billions of dollars in profits, and reportedly handing out more money in bonuses and compensation than ever before in history, are now pleading poverty. It’s a sight to see.’”
“The tax comes after Wall Street banks are set to pay record bonuses after accepting billions in taxpayer help amid a still-shaky economy and 10 percent unemployment. One of the more vocal critics of the bank fee, JPMorgan Chase CEO Jamie Dimon, said the auto industry should clean up its own mess and slammed the president for forcing banks to dig into their wallets for more cash.”
“Meanwhile, New York City could be the biggest loser in the battle being waged between Wall Street and Washington, especially given that New York is the hub of finance with a slew of financial firms calling New York home. Sources told The Post that Mayor Bloomberg has been privately fuming since learning about the plan because it has the unintended consequence of cutting into bank earnings and as a result eats into the tax revenue that the city would see.”
“‘If you want to see what happens to a city when their major industry fails, just take a look at Detroit,’ said Bloomberg last week publicly about the bank proposal.”
The New York Times. “When an Israeli billionaire bought New York’s storied Plaza Hotel for $675 million, he envisioned turning the plucky grande dame with the globally recognized name into mainly a luxury condo tower that would cater to the world’s wealthiest buyers and offer stores to satisfy their every desire. The last 11 owners to sell their luxury condos at the Plaza Hotel sold them at a loss, including the owner of Apartment 409, which sold for $8.5 million less than it cost 16 months before.”
“Earl McEvoy, a mutual fund manager who paid $4.79 million for an apartment in October 2007, sold it last summer for $4 million. Guy Wildenstein, president of the Wildenstein & Company gallery on the Upper East Side and owner of a large private art collection, sold Apartment 409, and another unit he bought in August 2008 for $9.6 million went for $6 million 15 months later.”
“Then there was Oscar S. Schafer, a managing partner at the hedge fund O.S.S. Capital Management, who took a hit on No. 1709. He bought the three-bedroom unit for $14.6 million in May 2008 and sold it for $8.5 million in July 2009. And 9 of the 28 apartments in the building on the market have slashed their asking prices.”
“This spring, steps below where F. Scott Fitzgerald found his muse for ‘The Great Gatsby,’ the hotel is opening an upscale food court offering burgers and pizza. The Palm Court, the Plaza’s famous restaurant, has been closed. ‘It’s gone from being a landmark to being just a building,’ Clark Wolf, an independent restaurant consultant, said of the situation.”
She said people don’t want to buy a house because the idea that it’s going to go up in value every year, and therefore worth taking on a jumbo loan of more than $750,000 has been shattered, Padell said.
And these are the financial geniuses of Wall Street.
“Critics of the tax said the fact that the Obama administration chose to call the tax the ‘Financial Crisis Responsibility Fee’ but failed to include those firms most responsible for Uncle Sam not recovering its TARP investment is laughable.”
They played a hand of “heads I win, tail you go broke and get bailed out by the government” poker. The conservative Post, which would have objected to the government meddling by shutting down the game back in the day, now objects to the government trying to get money back from the winners.
“If you want to see what happens to a city when their major industry fails, just take a look at Detroit,’ said Bloomberg last week publicly about the bank proposal.”
If you want to know why an industry fails, it is because it is allow to evolve into an overpaid, politically powerful oligopoly. How long before there are just three huge, subsidized financial firms in NYC? And then none?
“And then none?”
It’s all good, because none of the politicians in office today will still be in office at that point…
The root cause appears to be a deeply-entrenched brand of crony capitalism which fosters a devolutionary process whereby vibrantly competitive American industries decay into too-big-to-fail oligopolies. The auto industry offers one example, and the FIRE sector provides another. I am not sure how one could end the problem without rewriting and enforcing a rule of law to end the crony capitalism which mutually benefits Wall Street and Washington. At the present, we seem headed for defunct economic superpower status at best and third world status at less-than-best.
“vibrantly competitive American industries decay into too-big-to-fail oligopolies.”
This ought go as “vibrantly competitive American industries get too large as their products and/or organizations become obsolete. They then divest themselves of their unwanted divisions or develop new products or go away and let other companies take the lead.”
I believe that we can have this dynamic scenario, and retrain our work force while not letting them starve or go destitute. Keeping the kids healthy, well fed, and in school, is also a good idea.
Some good roads, fast IT connections, better air travel, health care, communications, would help. I would like to see better trains and passenger train travel or at least make air travel less onerous.
What we are going to get is a great S. Manhattan and a really junky, cruddy, worn out, rest of America.
Roidy
+1, Roidy.
“retrain our work force without letting the starve or go destitute”
+1 as well. I don’t know if anyone caught the commercial but Staples ( who put a lot of mom & pops out of biz themselves btw ) had a great ad.
Local barbershop threatened by nat’l chain w/ “$6 Cuts!”.
Guy goes to Staples and gets big banner that reads:
“We fix $6 Haircuts”.
While *I* agree with what you said, the Powers That Be don’t…
” believe that we can have this dynamic scenario, and retrain our work force while not letting them starve or go destitute. Keeping the kids healthy, well fed, and in school, is also a good idea.”
Why? “Why bother?” is their viewpoint. Starving people prove how much “smarter” the crooks are than all of us, so they’ll encourage starvation just to make themselves feel superior.
Pondering,
Nor am I challenging ‘your’ viewpoint. It’s a given the PTB don’t give a rosy rip about any of us. It’s really up to us individually to pull ourselves ( as Ben suggested ) one at a time out of this hell hole and find our own place in the world.
Other than collection calls, employment counseling and loan work-outs.., none of us should be looking for a THING from the PTB.
when I saw fast food places in the late 90’s begging for employees w/ads on their marquees boasting how they paid $8.00 hr, I told my spouse (then girlfriend) how galling it must be to bidness owners to “have to” pay such a high wage to the hoi poloi, and to watch out for the backlash as the anger travels up the owners foodchain.
sho nuff, soon after, here comes the unchecked labor invasion from the south to drive down wages!
“Wages fell and the stock market declined, and government revenues are now at the same level they were in 2004, he said. ‘That was the decade that wasn’t,’ he said.”
That’s exactly what that decade was, and a lot more too, and little of it good. What it never had was the fantastic economy claimed by the shyster-in-chief right up until it collapsed.
“‘A lot of it’s been absorbed,’ said John Bolduc, CEO of the Eastern Connecticut Association of Realtors,. ‘But there’s more to come. It’ll last probably another two years.’”
A semi-honest realtor?
Quasi-honest…
Much of the current absorption is beind done by speculators, IMHO, and will end up back on the market within 5 years, at most.
‘We truly have pent-up demand,’ he said. ‘We’ve got 100-plus people in rentals paying $10,000, $15,000 a month. That was a smart move in 2009, but will they pony up again for 2010? I don’t think they will.’
That’s what, $120K to $180K per year? What kind of place rents for that? A smart move would have been to have a pied a terre close to work and a nice place somewhere else.
DennisN,
Why not? Works for Londoners! This is what I’ve advocated for my kids ever since they got married. During the week, we’re all so busy putting out fires, who really ‘cares’ where you spend M-F?
After all, it’s the weekends and vacation time that counts!
…Mayor Bloomberg has been privately fuming since learning about the plan because it has the unintended consequence of cutting into bank earnings and as a result eats into the tax revenue that the city would see.
‘If you want to see what happens to a city when their major industry fails, just take a look at Detroit,’ said Bloomberg last week publicly about the bank proposal.
So let me get this straight. Bloomberg is mad at the Federal goverment for taxing the banksters because HE wants to tax the banksters instead.
The intent of the new tax is to have the banks keep the profits themselves rather than pay it out as bonuses. Therefore the new tax should actually increase tax revenues for NYC.
I thought Bloomberg was supposed to be some financial whiz-kid.
“So let me get this straight. Bloomberg is mad at the Federal goverment for taxing the banksters because HE wants to tax the banksters instead.”
That’s funny.
I’m going to have to steal that one.
What happened to the “We’ll reduce taxes and make the pie bigger” dogma that we’ve been hearing from the Republicans for the past 30 years?
Stick with the program, or else people are going to think you are a hypocrite……..uhhh, wait……
Bloomberg has changed his party affilitation twice in the last ten years, from Dem to GOP to Ind. Hard to say what he is anymore.
“Simple economics can explain the plummeting home values in Darien, Greenwich and New Canaan — fewer Wall Street jobs and bonuses leaves fewer people able to buy mansions, right?”
Hummmmm….
Fresh round of Wall Street bonuses rekindles scrutiny
“The banks made money only because the taxpayers gave them a lot of money,” said New York Attorney General Andrew M. Cuomo (Andrew Harrer/bloomberg News)
By Tomoeh Murakami Tse
Washington Post Staff Writer
Tuesday, January 12, 2010
NEW YORK — As resurgent Wall Street banks prepare to hand out billions of dollars in bonuses — their first since returning federal bailout funds — the payments are drawing intense scrutiny from regulators and politicians.
New York Attorney General Andrew M. Cuomo sent letters on Monday to the nation’s eight largest banks demanding a detailed account of the bonuses planned for employees.
“The banks made money only because the taxpayers gave them a lot of money,” said Cuomo, who has requested a response to his demand by Feb. 8. “They are institutions that would have failed were it not for the taxpayer money . . . Let’s not forget there is a context here.”
…
“Simple economics can explain the plummeting home values in Darien, Greenwich and New Canaan”
My mom still owns her house in Old Greenwich. This deflating bubble is doing a number on me inheritance.
I love watching the dawning realization that the past decade was basically a screw-job on the American people, with jobs going nowhere or declining, wages declining, etc.
And yet, the same people want a return to those days since “then housing will only go up!”
How about we build a nation on real jobs with a real economy vs. scams, inflation-ponzi tricks, and so on? Nah… there’s no loot to be had in that idea!
Pondering for President!
“there’s no loot to be had” LOL!
Yeah well at least no ‘easy’ loot anyway. Pondering, I’m really hoping people have had about enough w/ their infatuation of early retirement and leaving the bal. of the workforce left to hold the bag/pay all the taxes.
It must be flood season in Phoenix. My daughter returned there at New Year’s to meet her husband and look for a place. Her husband got home from Iraq and they started looking in the Avondale neighborhood where his parents live. The military is apparently briefing the soldiers that the economic storm has passed in the US and things are getting better and better. So, SIL is stoked to buy. Daughter says not so fast. In the last two weeks she says the six block neighborhood went from one for-sale sign to dozens and dozens of for-rent signs. They are moving into their rental today.
Hey Blue they could get a winning lottery ticket and find out the LL has been stiffing the bank, so they can stiff the LL for a year or two
…who hoo!
You need to tell her that living that close to the in-laws is a bad idea.
10 miles away, minimum, is just about right. Too far away to just “drop by” unannounced, but close enough to get there in a hurry, if you need to.
150 miles is even better.
I agree completely, except for one point. The MIL will watch the baby for free.
“Free”
In dollars, maybe.
ha, so true!
GS, I had her living in my house in NY for the six month tour (while I lived on the boat) to give her that room to breathe. That’s all I can do for now, and all I should.
Blue Skye,
Very considerate of you. We -all- thank you. You know though, I’m not sure what is worse, filling these G.I’s up w/ sunshine ( or God forbid! ) telling them the truth?
Hey uh guys.., while you were doing your tour of duty overseas..? Yeah uh..
Anyway, The Housing P0rn Channel had an all-day-event w/ House Hunters International and I must say.., I’ve never seen anything ‘that’ staged in my LIFE! I’d even be willing to go so far as to say that many of the “hunters” were realtwhores themselves.
500k for that home in Playa Del Playa? No probalo. Is there any way to find out -when- some of those episodes were actually filmed?
Three thousand miles of open ocean works real good for me.
Skye, you raised a good ‘un there!
I was looking over the national forclosure statistics. I think that NJ and PA are suffering slightly less for a couple reasons.
PA has a property transfer tax and high taxes.
NJ has very high property taxes.
I think Texas falls into the category as well. High property taxes so slightly less flipping. Also, things would probably have been much better there if the last of the Bush spawn hadn’t revoked the ban on HELOCs.
Something to think about. Perhaps we are underestimating the amount of influence the capital gains tax reduction had on this whole bubble?
There is a massive housing bubble in NJ and eastern PA that has yet to deflate (except for the Poconos/Leigh Valley - they are in a tailspin).
NYC and the metro Philly area have held up rather well in this recession so far.
Bailouts to wall street have helped a great deal. And big Pharma is still holding on. Huge local/state public unions have yet to see much of layoffs even as tax revenue is tanking.
It is coming - like a freight train.
There is a massive housing bubble in NJ and eastern PA that has yet to deflate (except for the Poconos/Leigh Valley - they are in a tailspin).
2banana, you sound like my parents in eastern PA. (Mom? Dad? When did you sign up for the HBB?)
I think looking at the comparison between PA/Texas/NJ it isn’t as bad as Fla/Nev/CA. Still very very bad though.
Slightly less epoch levels of stupid lending and greed.
@anycdj
Agree. I vauguely remember the terms. Also thought the cap gains structure pushed bubbles in stock. You still get people on here exclaiming the virtues of buying growth stocks for that reason. Again, another bubble increasing phenomena.
Begining to believe we should re-instate the ban on use of stock options for paying executives.
What’s in the Poconos? All I know about that area is lots of Honeymoon Hotels with heart shaped hot tubs.
Maryland is in that general region as well - we are the Land of the Eternal Bubble.
5x income is “normal” for housing prices here, run-down, 60+ year old dumps that are poorly maintained are “bargins,” and unaffordable housing is a sign of a “recovery” and a “healthy economy.” Right… Argh!
Right - eastern PA, NJ, MD, etc. what the eff gives? Is there a freight train coming or are we foolin’ ourselves?
We all need to understand that it’s not just D.C. or PA or…
It’s here in California, too. The MSM if focusing all of its attention on the manure dumps in the middle of nowhere. Of course those places have fallen from $500K to $300K or so (maybe lower), but the places where people actually want to live **all across the country** have hardly fallen at all.
IMHO, this is the biggest red flag, and we need to pay close attention. See, it’s not “local” as the REIC wants us to believe. It’s widespread, which means that it’s something else that’s moving the markets (certainly govt intervention with credits and cheap loans, in addition to forcing inventory into the shadows???). We are still in a bubble, and it’s still driven by excess debt. Until this is resolved, this market is very dangerous for current and future buyers, IMHO.
Now come on Pondering, you know that Maryland in suburban DC, and DC is still untouchable
We have all the jobs here, don’t ‘cha know!
every other license plate is from Florida or Texas…..they need a place to live & should want to pay 5x their income for housing!!
Indeed! You know you’re rich when you’re in debt! That’s the Maryland Way! Debt is wealth!
Of course, I’ve had educated engineers “explain” to me that they consider their credit limit on their credit card part of their “savings” and “wealth” so idiocy knows no bounds around here… Isn’t Maryland supposed to be an educated state?!?
Only the 2 year provision of making it your prime residence…that’s what started the flippin mess. Maybe it should have been 5 years and no cap gains.
—————-
Perhaps we are underestimating the amount of influence the capital gains tax reduction had on this whole bubble?
aNYCdj,
Certainly hasn’t been lost on ‘me’? Hard to compete wit dat’ tax free money Yo!
And it was a big part of the the reason the Lost Decade ( American-style ) took so long for our equity markets to re-gain their footing after the dot.com bubble.
Who needs WS when you gots Main Street pump & dump loans that are “built to flip”?
“Last month, meanwhile, a home that Realtor Sam Cohen said would have been worth about $500,000 at the height of the market was sold for $299,000. ‘My client sat on his property for a couple of years,’Cohen said of the home, ‘and basically gave it away at the end. It needed a little work that my client wasn’t willing to do, and he got a cash offer and decided to take it. … I believe my client could have gotten more for it. But while he could have argubly gotten $350,000 or $400,000, he certainly wasn’t going to get $500,000.’”
Realtors STILL don’t get it. They are still determined to hold out for high prices even if the market doesn’t clear. His client sold because he was losing a couple thousand/month in holding costs and didn’t want to wait five years to sell the house. He could have “arguably” gotten $350-400k but didn’t have an offer for that much after two years on the market!!!
I’d like to see an agent say, “Cut the price on this puppy ’til it sells.”
Yes, I know. I’ve got the dreamer’s disease.
Generally, they have no reason to. The realtor bears none of the costs of holding, but gain when it sells for more.
It’s equivelent to gambling with someone else’s money, or maybe being the gambling advisor to someone you don’t really know all that well.
Gambling with other peoples’ money… that seems to be all our eCONomy is based on these days!
Funny, I looked at RE listing in the P.I ( Philippines ) over the 3-day weekend and prices there don’t seem to have come down at all?
Near as I can figure ( given how many islanders live up and down the west coast ) they’ve let their primary here in the States go “back to the bank” and kept their dream retirement home back in the islands?
Many probably took advantage of the outrageous appreciation they had 1997-2005 and MEW’d it back home! Now ‘there’ is something worth hanging ‘on’ to! How else can we explain it?
How else can we explain it?
Partly because it’s a cash type market. Total Philippine mortgage debt is equal to about 12% of its GDP. In the USA the figure is around 80%.
source: globalpropertyguide
“The number of permits issued had not broken 3,000 as of the end of November, a ‘pretty terrible’ tally compared with the more ‘normal’ level of 11,000 to 12,000 permits a year, said Peter M. Gioia, the economist for the Connecticut Business and Industry Association.”
Last week the bank that I deal with told me that the FDIC had passed the message to banks that the FDIC was the regulator and that banks were not to offer any more contruction loans unless there was 25% down. I talked with my friend who works with homebuilders all over this fine state, and they had told him roughly that each had had the same conversation with their bankers.
I don’t know when the FDIC did this but it will shut down construction loans for some time. My read on this is that the FDIC has looked through these banks they are shutting down and found the key factor that sank them. Loans to people who did not put up a down payment.
I loved the articles today
Last week the bank that I deal with told me that the FDIC had passed the message to banks that the FDIC was the regulator and that banks were not to offer any more contruction loans unless there was 25% down. I talked with my friend who works with homebuilders all over this fine state, and they had told him roughly that each had had the same conversation with their bankers.
FDIC, you are such a meanie!
Slim,
Yeah, just plain MEAN! Good Lord, what were they ‘requiring’ during the height of the boom? ( Nothing? )
They were asking for LESS than “nothing down”. Many boom-era Construction & Development loans had negative-down; in other words, they were wrapping into the loans the interest payments for the planned duration of development, so that the loans were “performing” right up until the interest reserves were depleted.
In essence, that meant the banks were paying the interest to themselves.
Prime,
Perxactly. A great case was Tim Blixseth and his upscale dev. in MT. Gates and Buffet were all going to join and Credit Suisse doled out Tim a couple hundred mil. in “profits” up front.
In fact, these guys were falling all over one another to “score” the loan!
not to offer any more contruction loans unless there was 25% down ??
Thats a massive understatement not a overstatement…25% down ?? Try 50% down at the minimum…I just spoke with a small developer friend over the weekend…He has a lot that he owns free and clear approved for four houses…He is a accomplished builder with 25 years experience…He asked for a construction loan for the houses…He was turned down…
scdave,
Not doubting a word of it, but the “free & clear” part isn’t what’s really at stake here. The problem is that he’s pledging that lot for collateral and… it’s not illiquid, we really don’t know what it’s worth?
Small comfort to lenders, especially considering all the inventory they -already- can’t sell!
Thats what appraisals are for….The lot is worth somewhere between zero and some number…Houses will sell for something between $1.00 and some number…Its just a math equation when it comes to analyzing and underwriting a construction loan…The point I was trying to make was, they don’t want to loan the money under any circumstances…I get confirmation of this from many sources…
scdave,
No doubt the lenders have gone knee-jerk over this, and I hate to see it too. Still, they’ve run their biz models into the ground to the point where they’re not calling the shots any more.
FDIC ( for better or worse ) is!
Yeah, I guess you are correct there DinOR…
scdave,
Like being in the middle of a NASCAR multi-car wreck still unfolding ( I actually don’t think I’m “right” about anything )
I don’t know where the chips are going to fall any better than anyone else? And your friend ’should’ be bent out of shape! Look how many know-nothings joined the ranks of builders just cuzz’ it looked like easy money.
Oh and then folded, dried up and blew away leaving local banks holding the bag? Somewhere between that “$1″ and ’something’ is where the bank is hung up?
We can be happy while living in less space - a tour of some very small homes:
http://www.huffingtonpost.com/2010/01/18/the-worlds-tiniest-homes_n_425400.html
I agree with the small houses slim particularly for students…Try getting cities and neighborhoods to buy off on it ?? NIMBY
FDIC, you are such a meanie!
They are not much of a regulator. First they allow criminals to lend, lend and lend and they they reverse course and say you have to do it the right way. That gap that occurs while banks switch from one method to the other is called “depression”.
That is where we are at for now.
“This spring, steps below where F. Scott Fitzgerald found his muse for ‘The Great Gatsby,’ the hotel is opening an upscale food court offering burgers and pizza.”
Recommended name for the new burger and pizza joint:
‘The Great Fatsby.’
The last line from that novel has a strange resonance today:
“So we beat on, boats against the current, borne back ceaselessly into the past.”
“the wheel and the car were no longer held together by ‘any’ physical bond”
Re: The Plaza Hotel
Here is an article detailing the carving up of the Plaza to maximize profits while forgetting that people who spend over $1M for a condo don’t like bad views, odd room dimensions, or columns in the middle of their living spaces.
http://www.vanityfair.com/magazine/2009/01/plaza200901
The bit about the condo with the staircase in the middle of the bedroom is hilarious!
Can’t they just buy them, never live in them, claim them as their primary residence, and then flip them since “real estate only goes up?!”
Oh, wait… Wow, what a surreal mess of condozes!
My twisted mind somehow first read this title as saying “…Force FHA to Walk the Plank“…
* JANUARY 19, 2010
Souring Mortgages, Weak Market Force FHA to Walk a Tightrope
By NICK TIMIRAOS
David Stevens bought his first home almost 25 years ago, paying just 3% down with a loan backed by the Federal Housing Administration. “I had no money in the bank,” he says. “If it weren’t for the FHA, I wouldn’t have gotten that home.”
Now, as FHA commissioner, Mr. Stevens has to decide how many others to let through that door. Souring FHA-insured mortgages are threatening the agency’s finances. Congress is pressuring him to tighten the easy-money standards that once helped people like him, and he is expected to announce revisions as early as this week.
FHA chief David Stevens is likely to announce tightened credit standards as early as this week.
But raising the credit bar could have a dangerous side effect. In many of the nation’s hardest-hit housing markets, the FHA backs around half of all new home loans. If the agency pulls back too quickly, the nascent housing recovery could fizzle, endangering the economy.
The dilemma puts the 52-year-old former mortgage banker squarely in the middle of the debate over how much the government should do to prop up the housing market, and how much risk taxpayers should take on to do it.
“How big a role do we need to play to keep the housing system functioning?” says Mr. Stevens, referring to the FHA. “Overcorrecting in either direction would be a terrible thing to do right now.”
Mr. Stevens is finalizing possible revisions to credit standards. Options include raising the minimum down payment, establishing a minimum credit score, increasing the amount that borrowers have to pay for mortgage insurance, and reducing the amount of money sellers can kick in for closing costs.
…
Good suggestions all Mr. Stevens ( however belated ) but we really need to look at fico scores and how they’re compiled before we can really move forward.
FICO? Why? For FHA loans, forcing buyers to put more skin in the game is absolutely the right way to go, not tweaking some black box credit score. A higher down will discourage fraud, weed out the truly financially weak, and improve the solvency rate of these loans.
“not tweaking some black box credit score”
Jimmy, exactly. I know we’ve discussed here before but all during the Boom, FB’s were able to leverage their home ‘equity’ into an ever-improving fico.
So it wasn’t really connected to your ability to repay the loan any more? You had a job, sold a home, paid off all your creditors and were totally ready to “re-load the game” for a fresh round of FICO-Quest.
MB’s in the trenches knew the score and how to sugar coat for the underwriters that really had no reason to question the application? But the MB’s knew the borrower had played this little game w/ their direction multiple times -previously-.
OK, I understand the context of your comment, and I think we’re in agreement that an overreliance on FICO caused and continued to cause multiple problems. I know how quaint 15%-20% down payments and actual underwriting may seem, but returning to those practices is the only way to return to a semi-normal, sustainable housing market.
Are you aware that FHA underwriting standards currently FORBID discriminating against people on the basis of FICO?
That’s right. You can apply for, and GET, an FHA loan even if you have never repaid anything else in your entire life.
All they require is evidence of (theoretically) being able to make the payments.
Truth.
* OPINION
* JANUARY 18, 2010, 11:54 P.M. ET
Restoring Faith in Financial Markets
It is time institutional investors exerted control over publicly held companies.
By JOHN C. BOGLE
‘Investing is an act of faith.” So I wrote in 1999, the very first sentence of my book, “Common Sense on Mutual Funds.” But as 2009 ended, writing in the updated 10th anniversary edition after the passage of this turbulent decade, I concluded that “the faith of investors has been betrayed.”
How so? Because the returns generated by our corporate stewards have often been illusory, created by so-called financial engineering and produced only by the assumption of massive risks. What’s more, too many of our professional money managers have failed to act as vigilant stewards of the money that we investors entrusted to them.
In short, far too many of our corporate and financial agents have failed to honor the interests of their principals—the mutual fund investors and pension beneficiaries to whom they owed a fiduciary duty. The ramifications were widespread—for the failure of money managers to observe the principles of fiduciary duty played a major role in allowing our corporate managers to place their own interests ahead of the interests of their shareholders.
…
And to think! It only took John a decade to figure that out?
He’s been the last honest man for a long time.
Boom and Doom?
Noted economist and author Richard Duncan said that, faced with sluggish global growth and a tapped out U.S. consumer, there’s little hope that China can keep its factory-geared economy in motion much longer.
Nobel laureate Stiglitz: US Does Not Have Capitalism Now. http://www.cnbc.com/id/34921639
It’s a system where “you socialize the losses and privatize the gains,” which is not capitalism, he said.
There’s “moral hazard everywhere,” he added.
For 50 years after the depression there was lots of regulation and not one financial crisis and in the last 30 years there have been 100 financial crises, he said.
Note he is not talking about the political parties. He is pointing directly at the confluence of business and government.
I think we need a general labor strike or this game is lost.
Agree, BlueStar.
Damn weather — messing up the builders’ confidence once again!
Economic Report
Jan. 19, 2010, 1:00 p.m. EST
Home builder confidence drops in January
NAHB index falls to 15, lowest since June
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) — Concerns about the poor job market and a further wave of home foreclosures depressed the spirits of U.S. home builders in early January, an industry trade group reported Tuesday.
The home builders’ sentiment index declined to 15 in January from 16 in December, the National Association of Home Builders reported. The index, now at the lowest since June, has declined in three of the past four months.
At 15, the index indicates that about one-in-six builders thinks the market is “good.”
The builders’ assessment of current buying conditions and the traffic of potential buyers declined in January. Their assessment of future buying conditions was steady.
Shares for health insurance, medical technology and pharmaceutical companies lead the broader market higher as the White House-backed health-care overhaul hangs in the balance. Democrats’ majority at stake in close race for Kennedy’s Senate seat.
Despite low mortgage rates and an expanded tax credit for buyers, “consumers are still waiting to see significant positive signs of improvement in employment and confidence, and this is slowing buyers’ return to the market,” said NAHB chief economist David Crowe.
“At this point, home builders have done everything we possibly can to set the stage for a housing recovery — we’ve thinned our inventories, we’ve kept new construction to a minimum, and we’ve fought for and achieved a great new buying incentive with the extension and expansion of the home buyer tax credit,” said Joe Robson, a home builder from Tulsa, Okla., who is the chairman of the builders’ lobbying and advocacy group.
The home builders’ index was released a day before the Commerce Department reports on housing starts for December. Over time, the home builders’ index is highly correlated with housing starts. Economists surveyed by MarketWatch are forecasting a 6% decline in starts to a seasonally adjusted annual rate of 540,000 from 574,000 in November.
Unusually cold and wet weather in December likely reduced new construction activity, after an unusually warm and dry November, economists said.
…
Here is a rare bird: A right-wing commentator who doesn’t routinely lie through his teeth!
What do you think is the matter with this guy, Eddie?
George F. Will
No Rational Exuberance
The underemployment rate is 17.3 percent.
Published Jan 15, 2010
From the magazine issue dated Jan 25, 2010
One of conservatism’s tasks is to discourage irrational exuberance—or any other kind of exuberance, for that matter. Today this task is not demanding because anxiety about the sagging economy and surging government debt is broad and deep.
Since the recession began in December 2007, Congress has passed two stimulus packages ($168 billion in February 2008 and $787 billion in February 2009), and last month the House passed a $154 billion jobs bill. The economy has been growing for more than six months. Yet job creation is sluggish.
Today’s unemployment rate is 10 percent; the underemployment rate—the unemployed, plus those employed part time, plus those discouraged persons who have stopped looking for jobs—is 17.3 percent. Almost 40 percent of the unemployed have been so for seven months or more—which is not surprising: Congress continues to extend eligibility for unemployment benefits, apparently oblivious to the truth that when you subsidize something you get more of it.
…
Professor Bear notes that when you subsidize housing in the face of the worst glut on record, you get a still worse glut.
There are commentators who are offering sensible solutions for the TBTF/systemic risk problem, if only those in power would listen and learn.
Let Wall Street run wild, without my money
By Allan Sloan
Tuesday, January 19, 2010
It’s bonus time, Wall Street’s days of wine and roses, when employees find out how rich they’re going to be. But this year’s bonus season has morphed into days of whines and poses.
The Street, tin-eared, is whining about the people who are enraged by multibillion-dollar bonus pools at a time of 10 percent unemployment and public angst. It’s trying to solve its problem by posing as a public-spirited operation (rather than Greedhead Central) by showing off charitable contributions and small-business loan programs. That maneuver can’t possibly work.
In happier times, Wall Street could explain away its obscene compensation levels by saying it needed to pay whatever it took to keep the best and brightest onboard. But that doesn’t resonate these days, given that Wall Street’s meltdown touched off the Great Recession, the effects of which linger almost everywhere but the Street.
The fact is that even sound, well-run outfits such as Goldman Sachs and J.P. Morgan Chase were saved by taxpayer money after the Great Credit Crunch in mid-2007. Had the Federal Reserve and other central bankers not flooded the world with cheap cash, Goldman and J.P. Morgan’s counterparties — the ones on the other side of their market bets — would have failed. That would have wiped out Goldman and J.P. Morgan. The $240 billion of TARP money that was lent to banks (most since repaid) was a relatively trivial amount.
In an ideal world, this year the Street would acknowledge the public largess by having the sense not to pay bonuses of more than six digits — hey, worker bees need money in order to survive in the high-cost New York City area — and they would make a nice, voluntary contribution to the government that saved it. But the Street isn’t in the gratitude business; it’s in the making-money business.
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Washington is no prize, either. It whines about Wall Street and adopts symbolic poses — denunciations of “obscene” bonuses and “fat-cat bankers” by President Obama, for example — but doesn’t do the substantive thing: breaking up those institutions so that they’re not too big to be allowed to fail. The pols don’t want to mess with institutions that have real power, are sources of campaign contributions and can offer lucrative post-public-office employment.
How can we bridge the Wall Street-Main Street divide? We can’t. But we can prevent funding bailouts only to watch the Street snap back and earn tremendous profits while the rest of the country continues to suffer.
First, we do the obvious thing: Break up giant institutions into safe and boring operations (such as taking deposits and making personal and commercial loans) and gunslinger operations (such as speculating in credit default swaps). We’ll provide federal backing to the safe and boring, but not to the gunslingers.
…
I have given some careful thought to what we have learned from this financial crisis. Here is a sketch of the lessons Wall Street has taught the world about how to steal for a living:
1) make sure you always steal very large sums of money, to make it worth the risk of getting caught red handed;
2) make sure to conduct your theft operation in bright daylight, so everyone can see exactly what you are doing;
3) announce to everyone that you are doing God’s work so they will think you are actually doing something socially beneficial;
4) conduct your theft operation during the height of a crisis, and justify it by saying the rescue was necessary to save the planet from a catastrophe;
5) make sure your PR team has briefed the MSM on all the reasons why your crisis response was necessary and socially beneficial;
6) have your lobbyists bribe top politicians and regulators so that they are supportive of the plan, especially given that they anticipate receiving a share of the loot.
You’re a quick study, PB.
Nailed it.