The Housing Bubble

Opening the Bag of Mortgage Tricks
http://www.nytimes.com/2010/12/19/business/19gret.html

I thought there was a drought in CA? Well, anyway, all you Cali HBBers, stay dry and avoid mudslides.

http://www.msnbc.msn.com/id/40736789/ns/weather/

Since the fine posters of the HBB are hardcore readers I am hoping for book recommendations for a young adult in transition. My Daughter is a high school senior, top student and good to very good athlete. I know many of the posters here have or have had college age children and wonder if any found a book particularly helpful to their child….thank you

Justices Offer Receptive Ear to Business Interests
By ADAM LIPTAK
NYTimes

The Chamber [of Commerce] now files briefs in most major business cases. The side it supported in the last term won 13 of 16 cases. Six of those were decided with a majority vote of five justices, and five of those decisions favored the chamber’s side. One of the them was Citizens United, in which the chamber successfully urged the court to guarantee what it called “free corporate speech” by lifting restrictions on campaign spending.

The chamber’s success rate is but one indication of the Roberts court’s leanings on business issues. A new study, prepared for The New York Times by scholars at Northwestern University and the University of Chicago, analyzed some 1,450 decisions since 1953. It showed that the percentage of business cases on the Supreme Court docket has grown in the Roberts years, as has the percentage of cases won by business interests.

The Roberts court, which has completed five terms, ruled for business interests 61 percent of the time, compared with 46 percent in the last five years of the court led by Chief Justice William H. Rehnquist, who died in 2005, and 42 percent by all courts since 1953.

Home-buying paralysis? Tips for getting the best deal faster

By Lew Sichelman
December 19, 2010

Kathleen O’Reilly of Re/Max Horizon in Elgin, Ill., should get a medal for showing houses.

A recent client looked at 45 houses before deciding on one. And you guessed it: The buyer settled on the first one O’Reilly had shown him. The place had everything the buyer wanted, the Illinois agent says, but he looked at 44 others before feeling confident that he was getting the best deal possible.

“Buyers have read a lot about foreclosures, short sales and how desperate sellers are,” says Sarah Ritter, a Re/Max Properties agent in nearby Western Springs, Ill., who is working with a couple who have looked at more than 40 houses and have yet to make an offer.

It’s not just a northern Illinois phenomenon either. It’s happening all across the country. Agents use words like “petrified” and “paralyzed” to describe “unsure” buyers. And who can blame them? After all, no one wants to buy a house now only to see it drop in value as soon as they move in, or maybe even before they take title.

At the same time, though, people are buying houses, and according to the latest figures from the National Assn. of Realtors, first-timers are leading the charge. Rookie buyers now account for a record 50% of all sales.

http://www.latimes.com/business/realestate/la-fi-lew-20101219,0,7137667.story - 157k -

Coalition united over bank bonus curbs
BBC

The coalition is united in its determination to curb bank bonuses, Vince Cable has told the BBC.

The business secretary told the Andrew Marr Show both coalition parties were “fully signed up” to “robust action”.

Lib Dem ministers have stepped up their rhetoric on bonuses, with Nick Clegg saying the government would “not stand idly by” if they were too high.

But Labour dismissed his words as “hot air” aimed at repairing his reputation after the student fee protests.

The coalition is anxious to avoid a round of lavish Christmas bonuses at Britain’s banks, many of which are part owned by taxpayers, at a time when the rest of the UK is having to tighten its belt.

But it is not clear what action, if any, ministers will take.

Police in Iran streets as subsidies are cut
December 19, 2010 7:55 AM ET
By NASSER KARIMI

TEHRAN, Iran (AP) - The Iranian government sent squads of riot police to man the major intersections of the capital as a controversial plan to cut food and energy subsidies and quadruple the price of gasoline went into effect Sunday.

Eye witnesses reported a heavy police presence in the squares and junctions of Tehran as well as some western neighborhoods of the city, though so far the city has been quiet.

In 2007, angry protesters set dozens of gas stations on fire after the government imposed a new system of gasoline rationing to cut down on access to the country’s heavily subsidized fuel.

Bad Chile Update:

It didn’t work. Seven months ago we moved to the southwest for the weather, cost of living, and jobs.

It didn’t work. After seven months of daily fears of a layoff, about a two months ago my hours and salary got significantly reduced (well, salary, I still need to work full-time to get the job done). The first week of December a few number-crunchers from corporate came for a short visit, which resulted in mass layoffs the day after they left. I survived. Barely. I was on the phone trying to get some work as one-by-one the cubes were emptied around me. Felt like the last days of Enron or Lehman Brothers. There are 57 cubes on my floor, currently 13 are occupied.

We discovered that the schools in this area weren’t as good as they were 30 years ago. The weather is still terrific. The failed narco-state state to our south worries us. Having a few lunches with professional recruiters in the area I’ve learned even those guys are trying to move because there aren’t any jobs here. I did poor research, poor planning, and got burned.

Being long-time readers of this blog, the Chile family always had a backup plan. A few months ago I began planting the seeds to return to my old job (same company). On Friday it was decided and accepted. We move next Thursday. The move coincides with the end of our lease (mobility is our top asset); we celebrated a small Christmas yesterday and mini-Chile got a Tonka dump truck he absolutely loves. He’s been driving it around all day. One toy that will last years. He is young, he won’t remember this.

My coworker’s fates are not nearly as happy. Many are stuck in houses, unable to follow the great migration to wherever the jobs are. More are living paycheck to paycheck, desperately computing if unemployment compensation will cover the mortgage, let alone health insurance.

More later…

NPR interviewing mortgage industry guy who is stunned that mortgage rates are headed up to 5% despite the Fed’s attempt to get them down even further, but they aren’t really upset as long as rates hang out at around 5%.

More trouble for the Bernake and his QEx?

SKorea plans levy on foreign currency bank debt

“SEOUL, South Korea – South Korea plans to impose a levy on non-deposit foreign currency debt held by domestic and foreign banks in a bid to defend itself against capital surges that could threaten the country’s economy, financial authorities said Sunday.”

http://news.yahoo.com/s/ap/20101219/ap_on_bi_ge/as_skorea_bank_levy;_ylt=A0LEao9GFw5NzA4Bwkis0NUE;_ylu=X3oDMTNuMGllcDZ0BGFzc2V0A2FwLzIwMTAxMjE5L2FzX3Nrb3JlYV9iYW5rX2xldnkEY2NvZGUDbW9zdHBvcHVsYXIEY3BvcwM2BHBvcwMzBHB0A2hvbWVfY29rZQRzZWMDeW5faGVhZGxpbmVfbGlzdARzbGsDc2tvcmVhcGxhbnNs

prev thread re DREAM ACT (by CoSpgs4):

“Yes. Let’s allow a pathway for many more college educated illegals to compete with many college graduates who can’t find jobs now.”

Just to note that college education had nothing to do with the DREAM ACT. It was pure attempt for mass-amnesty.
It barred the Gov from carrying out any investigation on the documentation provided (i.e. encouraging fraud) and provided immediate temporary work and travel permits (with full ability to soon sponsor relatives from abroad).

The education requirement was only exemplary. Two years spent in part-time community college (no need to complete or graduate) was an example, but it could be waived if requiring it would “cause hardship”.

So any illegal, even in his forties, could just file a claim under DREAM ACT, causing immediate halt of any deportation proceedings and immigration investigation related to said illegal, and giving said illegal immediate temporary green card. S*x predators and gang members were welcome too (only very long prison sentences were disqualifying, though waivers available too).

I could have imagined helping, under certain cicrumstances, illegals who graduate from real college and have no criminal record and do not get any other privilegies (over legal immigrants or citizens), but DREAM ACT was such a sickening act that I will never support any such bill again. Borders must be secured first.

“It was pure attempt for mass-amnesty.”

Amnesty huh? Amnesty is explicitly an act of forgiveness, a waiving of punishment for wrongdoing. These offspring of parents who came here illegally are guilty of nothing so it is not amnesty.

Banks still falling by the wayside.
FDIC shuttered half-a-dozen more banks Friday.

Individual accounts are still insured for a quarter-of-a-million dollars each, so most folks have nothing to worry about. Still, it’s unnerving to notice that 157 banks have fallen in 2010 compared to 3 in 2007. The savings and loan crisis of twenty years ago rings in our ears.
~ Bank Closures

So far this year the FDIC has spent some $21 billion on bank closures. The agency has a line of credit with the U.S. Treasury, which means the cost of bailing out depositors rests squarely on the pocketbooks of the American taxpayer - particularly future taxpayers who must somehow untangle the web of debt we are weaving for ourselves. <

Here is one way to beat the high cost of education. I think I will head on down to Kinkos tomorrow and print myself out an M.B.A. to get my income up.

At least 30 people apply for nursing licenses with forged transcripts from West Palm Beach

By Eliot Kleinberg and Daphne Duret
Palm Beach Post Staff Writer
Posted: 10:05 p.m. Saturday, Dec. 18, 2010

At least nine people obtained licenses in the past year to work in Florida as nurses, even though the credentials they used to get them were fake, according to documents obtained . One person has been criminally charged.

They were among more than 30 who applied for licenses with transcripts from the Academy for Practical Nursing and Health Occupations in West Palm Beach, even though they had not finished or never attended the school.

But did they knowingly defraud license boards, or were they duped by others who took large fees to help them “graduate”?

The Palm Beach County Sheriff’s Office is investigating the phony transcripts, but detectives won’t say what they’ve found or how widespread the problem might be.

And Florida officials can’t say with certainty how many people may be working with licenses they didn’t earn.

13M get unexpected tax bill from Obama tax credit

WASHINGTON (AP) — About 13.4 million taxpayers may be getting unexpected tax bills because they were awarded too much money under President Barack Obama’s Making Work Pay tax credit, a government audit said Thursday.

The tax credit, which expires Jan. 1, was designed to increase take-home pay by about $8 a week through new tax withholding tables. The credit was capped at $400 for individuals and $800 for married couples filing jointly.

However, the credit put millions of taxpayers at risk for not having enough taxes withheld from their paychecks, resulting in a tax bill when they file their returns, said the audit by J. Russell George, the Treasury inspector general for tax administration.

Those at risk included people with multiple jobs, married couples who both work, Social Security recipients who also work, and young workers who are also claimed as dependents on their parents’ tax returns.

“The Making Work Pay credit is a key tax credit designed to increase spending and stimulate the economy,” George said. “However, many taxpayers who are accustomed to receiving refunds when they file their tax returns may have owed taxes and incurred penalties in 2009, and may yet again in 2010, because they were advanced more of the credit than they were entitled to claim.”

More curmudgeonry from Fred Reed

“If Homeland Security says you must go through a CAT scan, naked, and singing the Star Spangled Banner, then you have to do it. There is no recourse. You can un-elect an elected official, but there is no way to get at a bureaucrat. If you do not submit, you go to jail.

“Shortly we will hear the death rattle of free expression. No government sees an advantage to itself in a free press, though countries with decent governments feel much less threatened. Our government fears nothing more.” ~ Awaiting the Storm ~ Fred Reed

“…the majority always votes for the candidates promising them the most benefits from the public treasury, with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.”

Fred’s web site is blocked on many federal installations for “promoting hate.” In other words, criticizing your government is hateful.

“Amnesty huh? Amnesty is explicitly an act of forgiveness, a waiving of punishment for wrongdoing.”

Many people in their forties who came here illegally few days ago could just provide “documentation” that they lived here years and took classes in community college years ago (or simply asking for waiver, since education would cause hardship). Submitting the DREAM ACT claim would give them immediate legal status (before any decisions, and investigating fraud not allowed). Besides, many have been using fake SSN or other documentation and commiting other forms of identity theft (ie criminal activity). Many who were convicted of crimes were eligible too (as only long prison sentences were disqualifying, unless waived).

Amnesty is certainly the right word. Their status has been illegal and it would have been turned into legal status (privileged, e.g. much better than legal H1B workers) by act of Amnesty.

Consumer, Business Spending Probably Increased as U.S. Economy Accelerated (Bloomberg)

Spending by U.S. consumers and businesses probably accelerated in November, a signal the economy is speeding up at the end of the year, economists forecast before reports this week.

Ten worst states for retirees
Marketwatch

Plenty of folks are aware of the best states for retirees. But what are the 10 worst states in which to spend your golden years?

People of Illinois, California, New York, Rhode Island, New Jersey, Ohio, Wisconsin, Massachusetts, Connecticut and Nevada — you probably already know the answer.

The list, with Illinois leading the pack, comes from website TopRetirementsdotcom. According to John Brady, president of TopRetirementsdotcom, the 10 states earn this dubious distinction largely because of three factors: fiscal health, taxation, climate.

As for fiscal health, six of the 10 worst states for retirees on TopRetirementsdotcom’s list were among those just identified by a Pew Center for States report as being in “fiscal peril.”

The report, “Beyond California: States in Fiscal Peril,” showed that “some of the same pressures that have pushed California toward economic disaster are wreaking havoc in a number of other states, with potentially damaging consequences for the entire country.”

Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin joined California as the 10 most troubled states, according to Pew’s analysis.

Of note, TopRetirementsdotcom’s Brady suggested that retirees and would-be retirees might want to avoid states in fiscal peril because these locales might be expected to face decreasing services and increasing taxation.

We have 70 plus inches of snow which is a record since 1902. I will need to buy a pickup truck with a plow. I have never owned a truck and don’t know anything about it. Any recommendations about the year brand, horse power, 2 wheels versus 4 wheels suggestions would be greatly appreciated. I am planning on buying a used truck. So far I have spent over $1800 just renting Trucks from Ryder for 8 days.

Here is the update on the building I bought. I called the county on Friday and was told they were filing papers for the deed to be recorded. The lady was not sure if the Title would be clean free of any liens. She did mention that the IRS lien and the county lien will be removed. I spoke to a real estate attorney who wanted a $5000 retainer and could not tell me what it will cost approximately to look into this matter further.

On a bright note I did buy a $70,000 phone system for the building at an online auction with 60 telephones for $350 plus 13 percent buyer’s premium. This phone system was functioning fine but the high school got rid of it as they had received a Government grant for a new system. The high Scholl paid a lot more to have it disconnected than I paid for the system.

Well I feel happy to have gotten an indirect Govt subsidy. Pork for me Yeah.

The news that interest rates are reverting towards historic norms should be welcome for retirees who depend heavily on interest-bearing CDs to fund their living expenses. Just don’t let your aging relatives’ investment advisers talk them into getting into long-term bond funds just before the guillotine blade drops.

For Whom the Bell Tolls
December 17, 2010 - 11:03am — europac admin
Peter Schiff
…
To stimulate after the bursting of the housing bubble (which itself resulted from the low interest rates used to juice the economy following the bursting of the dot-com bubble), the Fed lowered interest rates to practically zero. At that point, rates could go no lower. However, when that stimulus failed, the Fed decided to bring on the heavy artillery in the form of “quantitative easing,” or as it is known in the vernacular, “printing money to buy government debt.”

Lowering the federal funds rate, its traditional weapon, tends to make the most impact on short-duration debt. By its own words, the goal of quantitative easing (QE) was to lower long-term interest rates. It was hoped that this would achieve what low short-term rates had not: an increase in stock and real estate prices, a rise in household wealth, and consequently greater consumer spending, economic growth, and job creation.

However, the Fed’s plan backfired. The selling pressure on long-term bonds is overwhelming the Fed’s buying pressure. Spiking rates (which move inversely to price) are powerful evidence that the bond bubble has finally burst. The Fed threw everything but the kitchen sink at the bond market to force yields lower, yet they rose anyway. If bond prices failed to rise given such a Herculean effort to lift them up, there can be only one direction for them to go: down.

In true form, few on Wall Street hear the ringing. In a shocking display of rationalizing cognitive dissonance, some (such as Wharton Professor Jeremy Siegel in a WSJ op-ed) have even suggested that the spike in yields is proof that quantitative easing is working. Siegel heralded higher rates as indicative of economic resurgence, which supposedly was the Fed’s goal all along. In other words, QE2 worked so well, we skipped the lower rates and went directly to the higher rates that go with growth!

There is also a widespread belief that long-term rates will remain contained at historically low levels. Four percent is seen as the ceiling above which ten-year yields will not rise. I believe this ceiling will prove to be of the thinnest glass. Once yields easily break that level, they may quickly rise above five percent, where they will likely encounter some resistance, before heading significantly higher.
…

More green shoots from Mesa, AZ:

Among the 5 C’s of Arizona - Cattle, Citrus, Climate, Copper and Cotton - Copper once again is a hot commodity.

At least in Mesa it is, a hot item on the black market, causing police and city officials to review legislation regulating scrap yard businesses in an effort to hold them more accountable in the ways they purchase wiring and metals with untraceable origins.

The theft of copper wiring - as well as other metals throughout the city - again is on the rise as thieves target boxes of lighting fixtures at parks and even streetlights because of the premium it can bring in bulk amounts - $1.50 to $3 a pound for various types of copper and 75 cents to $1.50 a pound for brass, according to information from the Mesa yard of Arizona Recycling Corp.

This year in Mesa, 24 miles of wiring have been stolen.

Thieves, who often are stealing the metals to support a drug habit, not only are taking a chance on being arrested and going to jail, they risk being electrocuted from exposed wiring often caused by their quick actions of ripping it from an electrical box or tearing it from the ground, city officials say. Thieves also have targeted water back-flow devices for their brass along east Mesa basins that purify and re-process water. When these components are ripped out, it can cause thousands of gallons of water to be released before they are shut off.

“These thieves are becoming more brazen,” said assistant Mesa police chief Mike Denney. “Wire thefts are going on all over the city. If a guy takes a whole spool of copper wire and sells it at a scrap yard, its origin is unidentifiable. If citizens see any suspicious activity in the neighborhood or people pulling wiring out of electrical boxes or streetlights, they need to call police. These people usually steal the wiring at night during a time when no one is around and city workers would not be repairing streetlights or working in parks.”

(East Valley Tribune)

Apparently the fears that rising mortgage rates will result in lower housing prices is far overblown. If anything, a recovering economy is likely to push both interest rates and housing prices up over the next couple of years, due to rising demand for both houses and loanable funds as a natural consequence of economic recovery. So just relax, and for good measure, go out and buy a few investment properties in anticipation of the recovery!

* BY THE NUMBERS
* DECEMBER 17, 2010

Mortgage Rates Jump. Will House Prices Fall?
By JACK HOUGH

Borrowing money to buy a house just got more expensive. The average rate on a 30-year mortgage rose to 4.83%, Freddie Mac said Thursday. That’s an increase of about two-thirds of a percentage point in five weeks.

The rate increase means monthly payments on new mortgages will jump. Five weeks ago, a buyer with a 30-year loan would have committed to payments of $487 a month. Now it’s $526. That’s an 8% price difference – more than enough to give most shoppers pause.

Will costlier mortgages push already wobbly home prices lower? History offers some answers.

The recent rise in rates isn’t nearly the sharpest in Freddie Mac’s history. Over two years ended mid-1981, former Federal Reserve Chairman Paul Volcker raised the nation’s core interest rate, the Fed funds rate, from a target of about 11% to one of 20% in an effort to combat high inflation. As a result, 30-year mortgage rates marched from 11% in June 1979 to over 16% by April 1980. The recent 8% increase in monthly payments over five weeks has nothing on the record five-week jump: more than 21% over the period ended March 28, 1980. Monthly payments per $100,000 soared to $1,347 from $1,109.

The effect on house prices? They rose more than 15% from 1979 to 1981.
…

Considering all the assurances about the low-inflation environment we enjoy, it is truly remarkable how many pundits smell high inflation on the horizon.

* CREDIT MARKETS
* DECEMBER 19, 2010, 10:43 A.M. ET

Economic Optimism in Treasury Yield Curve
By MIN ZENG

NEW YORK—A closely watched gauge in the Treasury-bond market is signaling the U.S. economy may gain more traction.

The spread between shorter- and longer-maturity U.S. government-bond yields has widened to near a record high as longer-dated yields rise on expectations that inflation pressures will revive.

“It tells you the economy is getting better and some seeds could be planted for inflation due to the Federal Reserve’s monetary stimulus,” said Richard Schlanger, who helps manage about $20 billion in fixed-income assets at Pioneer Investments in Boston.
…

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/18/AR2010121803396.html

One of the very few Republicans who does not slavishly adhere to Wall Street’s dictates, Daryl Issa, is about to be elevated to a position where he might actually start demanding and getting accountability for the systemic frauds perpetrated by the likes of Chris Dodd, Barney Frank, and their TBTF bankster masters.

Wow, two houses just turned over on my block. This is crazy. I have only been here since July 1st, and I am now a long-timer! WTF. One couple moved out yesterday and another couple is moving in right now. The other house… they just moved, no goodbyes, nothing, just moving trucks and out.

It’s my family, the old lady, and the crazy Cuban guy who waters his lawn in various configurations of the following:

1. penny loafers
2. crocs
3. bath robe
4. speedo

And still surrounded by abandoned homes…

BBC
Bangladesh investors riot over stock market fall

Small investors stage street protests in Dhaka, Bangladesh, on Sunday after the stock market’s steepest fall in a single day Ordinary Bangladeshis have been tempted into the stock market by higher returns than banks

Hundreds of angry investors have staged protests in the Bangladeshi capital, Dhaka, after the stock exchange saw its steepest ever fall in a day.

Reports said they threw bricks at police, marched in the streets shouting slogans, and staged a sit-down protest.

Shares in the stock exchange suffered large falls within hours of opening on Sunday as panicked investors went on a selling spree.

The index ended the day down by 552 points or 6.72%.

What’s next for minimalist houses? How about a subdivision of tiny houses in Eastern Oregon?

NORTH POWDER — Ex-logger and gold miner Rich Daniels was making his living building storage sheds when his customers began commenting, “If this shed was bigger, I could live in it.” That got Daniels to thinking.

“So I made a cabin on wheels,” he said. He’s built and sold more than 100 minimalist homes — some that can be towed behind a pickup — over the past five years.

Now the 50-year-old builder has come up with an idea that may prove both brilliant and quixotic: a subdivision for 50 to 100 pint-sized homes geared to folks hurt by the real estate bust, jobless or on fixed incomes. Increasingly, he’s approached by people desperate to cut their living expenses, he said.

http://www.oregonlive.com/pacific-northwest-news/index.ssf/2010/12/whats_next_for_minimalist_houses_how_about_a_subdivision_in_eastern_oregon.html

Is it common knowledge that 8 to 13 million foreclosures are expected by 2012?

I have a word to the financially prudent prospective home buyers out there in blog land: DON’T — BUY — YET!!!!

Dec. 14, 2010, 11:53 a.m. EST
Mortgage help falls far short, panel says
Treasury likely to use only $4 billion on mortgage modifications
By Ronald D. Orol, MarketWatch

WASHINGTON (MarketWatch) — A $30 billion Obama administration program set up to help troubled homeowners modify mortgages has failed to help the vast majority of homeowners facing foreclosure, a congressional watchdog said Tuesday.

Specifically, the program is expected to prevent roughly 800,000 foreclosures — significantly less than the 3 to 4 million foreclosures that the White House aimed to stop, and vastly fewer than the 8 to 13 million foreclosures expected by 2012, the Congressional Oversight Panel for the government’s much-maligned $700 billion bailout package said in a report about foreclosures.

“Treasury has tweaked its main foreclosure prevention effort, the Home Affordable Modification Program (HAMP), but the changes have not resolved the panel’s core concerns,” the panel said.
…

Congressional Oversight Panel
December 14,2010

DECEMBER OVERSIGHT REPORT*
A Review of Treasury’s Foreclosure Prevention Programs
…
Executive Summary*

In April 2010, in its most recent report on Treasury’s foreclosure prevention programs, the Panel raised serious concerns about the timeliness, accountability, and sustainability of Treasury‟s efforts. As the Panel noted at the time, “It now seems clear that Treasury’s programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble…. Treasury is still struggling to get its foreclosure programs off the ground as the crisis continues unabated.”

In the intervening eight months, Treasury has tweaked its main foreclosure prevention effort, the Home Affordable Modification Program (HAMP), but the changes have not resolved the Panel’s core concerns. The Panel now estimates that, if current trends hold, HAMP will prevent only 700,000 to 800,000 foreclosures – far fewer than the 3 to 4 million foreclosures that Treasury initially aimed to stop, and vastly fewer than the 8 to 13 million foreclosures expected by 2012. Because Treasury’s authority to restructure HAMP ended on October 3, 2010, the program’s prospects are unlikely to improve substantially in the future.

In some regards, the program’s failure to make a dent in the foreclosure crisis may seem surprising. HAMP’s premise was straightforward: Because the foreclosure process allows lenders to recover only a small fraction of the value of a mortgage loan, lenders should generally prefer to avoid foreclosure by voluntarily reducing a borrower’s monthly payments to affordable levels. Through HAMP, Treasury attempted to sweeten this deal by offering incentive payments to all parties to a mortgage loan modification. Yet despite the apparent strength of HAMP’s economic logic, the program has failed to help the vast majority of homeowners facing foreclosure.
…

Happened to catch “Close to Home” on PBS “Frontline” last night. Originally aired in October 2009.

A chronicle of how the economy is affecting residents on the Upper East Side of NYC.

I didn’t know whether to laugh or cry.

-”It was a choice between fixing my Porsche, or paying for medical insurance”

-Told the story of a couple with a copy shop, with $200K of credit card debt trying to keep the place running.

-”This is the Upper East Side. This isn’t supposed to happen here….”

I’ve always felt that some in SoCal, and everyone in NYC and western Connnecticut live in an alternate dimension, vs. the schlubs out here in Flyover. This show did nothing to change my thinking.

North Carolina is planning on laying off 5000 to 6000 teachers at the end of the academic year. NC has a massive budget problem.

Saw a few more sold signs hanging on homes this week. Looks like the must buy now while interest rates are low sheep have been lured off the fence w/bond market tremors. Gheesh. Some of these houses are not cheap. Can’t wait to see them all back on the market in 5 years as the inflation moves to strangle the family budget.

You know the people tried to listen to the words of caution but their fatal flaw was they didn’t seek to do the hard work to understand the big picture. In the end, they were really still just waiting for someone else to tell them what to do.

Sad, really sad. Hey honey, where’s that holiday drink you promised me?

The Financial Times
Finance: A sparser future
By Francesco Guerrera, Justin Baer and Patrick Jenkins
Published: December 19 2010 18:43 | Last updated: December 19 2010 18:43

Banks
The new Manhattan headquarters of Goldman Sachs. Legislation now bans banks from the type of proprietary investments that used to bring in up to 10 per cent of profits

…the investment banking landscape that emerged from the most devastating financial turmoil in generations looks dramatically different from the one that preceded it.

Tough new rules, coupled with tightened regulatory scrutiny and increased mistrust on the part of investors, are driving radical changes in business models and behaviour. The masters of the financial universe are scrambling to find new ways of making money against a regulatory and economic backdrop that prevents them from placing the high-risk, high-reward bets of years gone by.
…

The Financial Times
Beware the stings in the ‘tail risks’
By James Mackintosh
Published: December 17 2010 19:41 | Last updated: December 17 2010 20:04

If Santa and his elves leave a large sack of money under the Christmas tree, it is less obvious than at almost any time in living memory how to invest it.

The happy consensus of the past 30 years that equities were the place to be has broken down after a decade of losses.

Equally, the rush into supposedly safe government bonds which followed the 2008 crisis risks turning into a rout as bond yields soar. Gold looks expensive, even to many who think it should be a store of value. To others it belongs with frankincense and myrrh in history, not in a portfolio.

Yet, the key to asset allocation is one’s view of the world.
…

Investors, as opposed to speculators, face a tough call. Equities do not look like a good long-term bet, given debt levels; many commodities are at all-time highs; gold is inherently speculative; and bond yields may go up a lot further before they eventually come down again.

Governments are trying to force people out of cash and into more productive assets. They have created an environment hostile to long-term investment in the process.
…

Police called as hundreds turned away from Auburn holiday giveway

Organizer Sean Wrench had posted fliers about the event at local food pantries. Last year, the event was held at the Knights of Columbus and had light attendance, Colvin said.

This year, organizers expected 300 to show up. They shut the ballroom doors after the first 1,000 people, on the advice of city code enforcement.

Colvin said everyone had the best of intentions, but the crowd overwhelmed them. There were about 30 volunteers with Forsaken Generation, but 15 of the hotel’s staff had to stop what they were doing and pitch in.

The event soon ran out of food, so the hotel cooked up pasta, pastries and rolls. Workers bought $400 in pizza from Little Caesars.

Another employee went to store to buy more girls’ toys. No child who made it into the ballroom was turned away without a toy, Colvin said.

The event was scheduled for noon to 4 p.m. People started lining up at 11 a.m. and the police were called to help with the crowds at 1 p.m., Colvin said.

(syracuse.com)

($174,000/$286,500 - 1)*100 = -39.3% — Nice haircut!

Posted on Sun, Dec. 19, 2010
Banks’ resales of homes illustrate price drop
By Harold Brubaker

Inquirer Staff Writer

When Tammy Bucci bought a three-bedroom house in Abington this year for $174,000 from a lender that had foreclosed on the property, she knew the previous owner had paid $286,500 in 2006.

“I got an awesome deal. The house is gorgeous,” said Bucci, who had not been seeking a foreclosure bargain. “I’m a single mom with three kids. I was just looking for something inexpensive,” she said.

Bucci’s house, with its new kitchen paid for by HSBC Mortgage Services, was one of 41 Montgomery County houses sold by lenders and other financial institutions - mostly after foreclosure - in September, based on when the deed was recorded.

The 39 percent decline in the price of Bucci’s house seems extreme for a region with a relatively mild 6 percent drop in average home prices since the 2007 peak.

But an Inquirer analysis of September’s sales of residential real estate in Montgomery County by financial institutions showed that prices fell an average of 29 percent if the previous sale occurred in 2003 or later, when price gains started accelerating.

By contrast, banks - often willing to take a discount when a foreclosed home is vacant - sold properties for an average of 25 percent more than the previous price if the earlier sale occurred before 2003, deeds showed.

On 36 foreclosed properties, banks lost 12 percent compared with the amount of principal owed when foreclosure was filed, according to court documents.
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Are any readers here familiar with the tale of how Sir Isaac Newton sold his shares in the South Sea Bubble ahead of its collapse, only to lose his shirt later by catching himself a falling knife in the dead cat bounce phase?

Just wondering…

* The Wall Street Journal
* NY REAL ESTATE RESIDENTIAL
* DECEMBER 18, 2010

Housing Hope From ‘Dr. Doom’
By CRAIG KARMIN

Nouriel Roubini, the New York economist whose warnings of a housing collapse earned him the nickname “Dr. Doom,” may be feeling better about the market these days. He just plunked down $5.5 million for an East Village penthouse loft, public records show.

Mr. Roubini’s purchase price was down about 25% from the peak asking price in September 2008, according to StreetEasy.com.

The three-bedroom triplex just purchased in the East Village by Nouriel Roubini features a cantilevered steel staircase, seen above in the rear.

The apartment was put up for sale in 2006, and the listing price was increased to $7.35 million just days after Lehman Brothers’ demise exacerbated the financial crisis.

Mr. Roubini, who teaches at New York University, warned in 2006 that overstretched borrowers defaulting on their mortgage loans would unleash a housing bust and deep recession.

His own credit status appears sound. Mr. Roubini took out a $3 million mortgage for his new East Village property, and earlier this year he borrowed another $600,000 against his TriBeCa loft, according to public records.

Mr. Roubini declined to comment. The listing broker, Richard Orenstein of Halstead Property, also declined to comment.

Mr. Roubini’s personal real-estate activity doesn’t necessarily means he thinks the U.S. economy is in the clear. He recently told The Wall Street Journal that economic growth was close to “stall speed,” too slow to keep unemployment from rising and housing prices from falling further. He put the chance of the U.S. slipping back into recession at 40%.

Still, real-estate people in New York were quick to seize on his purchase as a healthy sign for the local property market.

“Even the most bearish think our market has nowhere to go but up,” said Frederick Peters, president of Warburg Realty Partners.

“Dr. Doom is a little late to catch the bottom, but there’s still plenty of upside at this point.”

CLICK!

Silicon Valley home prices are where San Diego’s median was back in 2005. We know a couple in Richmond who bought a home at this price range in our old ‘hood. The guy commuted all the way from Richmond down to Silly Valley. If they had been patient, they could be buying a home close to work now, instead of sitting in an underwater mortgage in a much less desirable locale.

Silicon Valley real estate: House sales, median prices down in November
By Frank Michael Russell
frussell@mercurynews.com
Posted: 12/16/2010 10:02:36 AM PST
Updated: 12/16/2010 10:02:37 AM PST

Silicon Valley’s real estate market remained in a slump in November, with the number of sales and the median price of a single-family house in Santa Clara County both down year over year.

The median price of a house that changed hands in the valley was $510,000, down 7.3 percent from November 2009, San Diego real estate information firm MDA DataQuick reported today. The number of sales dropped 5.2 percent.

Sales were flat from the month before throughout the Bay Area, “in part because of lackluster sales in higher-cost areas,” DataQuick reported.

“Clearly, Bay Area buyers and sellers who can wait this market out are doing just that,” DataQuick President John Walsh said in a statement. “And if you’re buying or selling in the upper half of the market, it’s self-evident that you’re more able to put your move on hold.”
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Area home sales mark a dreary November
By Dale Kasler
dkasler@sacbee.com The Sacramento Bee
Published: Friday, Dec. 17, 2010 - 12:00 am | Page 6B

Home sales in greater Sacramento continued to lag in November.

Sales volume fell by 10 percent in the eight-county area compared with a year ago, market researcher MDA DataQuick reported Thursday.

Prices fell in practically every county in the region, with Sacramento County’s median price slipping 1.1 percent, to $175,000.

November’s results followed the pattern of the past six months. The market had been slowly regaining its health until June, when federal tax credits for homebuyers expired and the pace of economic recovery faltered.

Since then, home sales have tailed off, although not as sharply as during the worst of the market crash.

Experts said it’s not clear when conditions will turn around.

“Here we are, now in December, and we’re working through what I hope is the bottom of the market,” said Kris Vogt, president of the regional office at Coldwell Banker Residential Brokerage.
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Mortgage rates and housing starts rise, prices fall.
Posted by Jim Buchta
Last update: December 16, 2010 - 11:10 AM

Heads must be spinning in the data world today, three reports released this morning offer a glimpse into the winter housing market:

* Housing starts rose 3.9 percent in November, but gains could be influenced by the seasonal adjustment process, accoding to the Department of Commerce. Single-family permits are running below starts, which continues to suggest a weak outlook.

* CoreLogic’s October Home Price Index (HPI) shows that home prices in the U.S. declined for the third month in a row. It said that home prices, including distressed sales, declined by 3.93 percent in October 2010 compared to October 2009 and declined by 2.43 percent in September 2010 compared to September 2009. Excluding distressed sales, year-over-year prices declined by 1.5 percent in October 2010 compared to October 2009.

In the Twin Cities metro area home prices, including distressed sales, declined by -3.62 percent in October 2010 compared to October 2009. Excluding distressed transactions, year-over-year HPI for October is -3.72 percent.
…

If I were a prospective California home buyer, I would either wait until the news of falling prices is history, or else until the next housing market stimulus giveaway is announced some time next year.

Published: Dec. 16, 2010
Updated: 11:02 a.m.
1st dip in Calif. home prices in 10 months
By JON LANSNER
THE ORANGE COUNTY REGISTER

California home prices — including distressed sales — were falling at 0.89 percent annual rate in October, the first year-over-year decline in CoreLogic’s database for the state’s values since December 2009.

According to the CoreLogic price indexes, national home prices declined by 3.93 percent in October vs. a year ago. From a peak in April 2006 to October, national prices are off 30.2 percent.

Mark Fleming, chief economist for CoreLogic: “We are continuing to see the weakness in home prices without artificial government support in the form of tax credits. The stubborn unemployment levels and seasonality are also coming into play. When you combine these factors with high shadow and visible inventories, the prospect for a housing recovery in early 2011 is fading.”
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Seattle-area home price drops among nation’s biggest

Seattle-area home prices were down 7.2 percent in October from a year earlier, putting the area 39th out of 45 areas nationwide, according to a new report.

Nationwide, prices were down 3.9 percent from a year earlier, according to the CoreLogic Home Price Index.

“We are continuing to see the weakness in home prices without artificial government support in the form of tax credits,” CoreLogic Chief Economist Mark Fleming said in a news release. “The stubborn unemployment levels and seasonality are also coming into play. When you combine these factors with high shadow and visible inventories, the prospect for a housing recovery in early 2011 is fading.”

The decline in King and Snohomish counties was larger than the 5.4 percent drop in September and the biggest since December (8.9 percent). Nationwide changes ranged from an increase of 3.3 percent in the Houston area to an 11.2 percent drop in Jacksonville.

Washington state saw prices drop 6.8 percent, after a 5 percent decline in September. Washington ranked 45th among states and Washington, D.C.

Changes ranged from an increase of 4.6 percent in North Dakota to a 15.1 percent decline in Idaho.
…

Home prices decline for 3 months in a row
CoreLogic: Prospect for 2011 recovery fades
By Inman News, Thursday, December 16, 2010.

October home prices fell for the third straight month, according to an index maintained by mortgage data aggregator CoreLogic.

The 3.93 percent year-over-year decline in the CoreLogic Home Price Index was significantly greater than the 2.43 percent slip registered in September, and left home prices down 30.2 percent from their April 2006 peak.
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Is all real estate still local anymore?

Birmingham home prices fall again
Birmingham Business Journal - by Lauren B. Cooper , Staff
Date: Thursday, December 16, 2010, 12:13pm CST

Birmingham area home prices recorded another year-over-year drop in October according to a report from CoreLogic.

The research firm said home prices in the metro area, including distressed sales, fell 11.3 percent, compared to October of last year.

Excluding distressed sales, October home prices in the area fell by nearly 5 percent, said a news release.

Statewide, home prices fell 9.3 percent with the sale of distressed properties and by a fraction of a percent without distressed properties. And nationally, prices dropped by nearly 4 percent including distressed and by 1.5 percent excluding distressed.
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I can’t remember the news that Alabama was a housing bubble ground zero, can you?

Alabama home prices fall nearly 10 percent, according to report
Published: Thursday, December 16, 2010, 1:34 PM Updated: Thursday, December 16, 2010, 1:34 PM
Press-Register staff By Press-Register staff

A new report says prices for single-family homes in Alabama were nearly 10 percent lower this past October compared to October of 2009.

The survey by California-based CoreLogic said Alabama was second in the nation for home price decline, behind Idaho. However, when distressed properties were excluded from the mix, the rate of decline was only .07 percent.

“We are continuing to see the weakness in home prices without artificial government support in the form of tax credits. The stubborn unemployment levels and seasonality are also coming into play,” said Mark Fleming, chief economist for CoreLogic, in a statement. “When you combine these factors with high shadow and visible inventories, the prospect for a housing recovery in early 2011 is fading.”
…

I know how to fix this problem in a hurry: Mandatory prison sentences for the banksters who are responsible for sending out wrongful foreclosure notices.

Article published December 19, 2010
Fighting wrongful foreclosure uphill battle
ASSOCIATED PRESS

Christopher Marconi was in the shower when he heard banging on his door. By the time he grabbed a towel and hustled to his front step, a U.S. marshal’s sedan was peeling out of his driveway. Nailed to the front door was a foreclosure summons from Wells Fargo, naming him as a defendant. But the notice was for a house Mr. Marconi had never seen — on a mortgage he never had.

Tom Williams was in his kitchen opening the mail when he unsealed a letter from GMAC. It informed him that the bank would confiscate his house unless he immediately paid off his mortgage balance of $276,000. But Mr. Williams had never missed a mortgage payment. And his loan wasn’t due to mature until 2032.

Warren Nyerges opened his front door and found a scraggly-haired summons server standing on his stoop. He plopped a foreclosure notice from Bank of America into Mr. Nyerges hands. But he had paid for his house in cash, and he’d never had a checking account, much less a mortgage, with Bank of America.

By now, stories of bank robo-signers powering through hundreds of foreclosure affidavits a day without verifying a single fact have become common. But most of those involved homeowners who had stopped paying their mortgages. Now, foreclosure nightmare are descending on a new species of homeowner.

These homeowners paid their mortgages or loan modifications on time. Some even paid off their loans.

Worse, those on the receiving end of a bad foreclosure claim tell similar stories of getting bounced from one bank official to the next with no resolution while the foreclosure process proceeded.

Many resorted to paying a lawyer, even after presenting documentation. They say they have to sue not only to stop the wrongful foreclosure but also to win back their costs.
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So Long to Ya, 2010

Meredith Whitney on 60 Minutes right now. (started late because of the game) She’s discussing the collection of state budget fiascos.

Most remarkable aspect of current U.S. housing situation: It is well over four years since home prices started declining (in late-spring 2006), yet prices are still falling, AND IT STILL FEELS SUBVERSIVE TO DISCUSS FALLING HOME PRICES.

How many more years will it be until many are heard to say, “Real estate is the worst investment”?

The U.S. is not the only place on the planet with a problem of too much vacant real estate. Other centrally-planned economies face similar issues.

The ghost towns of China: Amazing satellite images show cities meant to be home to millions lying deserted

By Daily Mail Reporter
Last updated at 10:53 AM on 18th December 2010

These amazing satellite images show sprawling cities built in remote parts of China that have been left completely abandoned, sometimes years after their construction.

Elaborate public buildings and open spaces are completely unused, with the exception of a few government vehicles near communist authority offices.

Some estimates put the number of empty homes at as many as 64 million, with up to 20 new cities being built every year in the country’s vast swathes of free land.

The photographs have emerged as a Chinese government think tank warns that the country’s real estate bubble is getting worse, with property prices in major cities overvalued by as much as 70 per cent.
Ghost city: Kangbashi was meant to be the urban centre for wealthy coal-mining community Ordos and home to its one million workers, but its roads are eerily empty and the houses stand vacant

Ghost city: Kangbashi was meant to be the urban centre for wealthy coal-mining community Ordos and home to its one million workers, but its roads are eerily empty and the houses stand vacant
The mostly empty city of Bayannao¿er, which boasts a beautiful town hall and World Bank-sponsored water reclamation building

The mostly empty city of Bayannao¿er, which boasts a beautiful town hall and World Bank-sponsored water reclamation building

Of the 35 major cities surveyed, property prices in eleven including Beijing and Shanghai were between 30 and 50 per cent above their market value, the China Daily said, citing the Chinese Academy of Social Sciences.

Prices in Fuzhou, capital of the southeastern province of Fujian, had the worst property bubble with average house prices more than 70 per cent higher than their market value, according to the survey conducted in September.

The average price in the 35 cities surveyed was nearly 30 per cent above the market value, the report said.

Property prices have remained stubbornly high despite the government adopting a slew of measures since April including hiking minimum downpayments to at least 30 per cent and ordering banks not to provide loans for third home purchases.
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For all of the anit-unionists among us:

http://seattletimes.nwsource.com/html/businesstechnology/2013690017_jobsforlife19.html

“Germans get jobs for life during export boom”

“Germany’s export-driven industry is embracing an asset closer to home: domestic workers.

Unemployment in Europe’s largest economy has tumbled to the lowest level in 18 years, as companies seek skilled workers to sustain an economic rebound that shows few signs of cooling. The demand for local talent marks a shift from a decadelong trend of companies moving production abroad to escape high wages and German labor-market regulation that hampered hiring and firing.”

And further on in the article:

“German workers have more clout than in other countries because they are represented in the highest echelons of company management. Every supervisory board of publicly traded companies is evenly split between representatives for management and employees. That system, unique to Germany, gives work councils and union members more sway over strategy, hiring and firing, as well as the pay of senior executives.

Solmssen, a U.S. citizen who oversees compliance at the engineering company, said he has since revised his opinion, as Siemens “gains more from working with the labor representatives than what we give up.”

It’s beginning to look a lot like Christmas…

Japan stocks fall on renewed Korea tensions
Posted: 20 December 2010 1058 hrs

TOKYO: Japanese shares fell Monday morning as renewed tensions on the Korean peninsula eroded risk appetite and triggered falls in markets across the region, brokers said.

The headline Nikkei index of the Tokyo Stock Exchange fell 0.32 per cent, or 32.55 points, to end the session at 10,271.28. The Topix index of all first section shares shed 0.09 per cent, or 0.78 points, to 902.36.

Regional sentiment was hit by news South Korea is pushing ahead with a US-backed artillery exercise, prompting an emergency session of the UN Security Council at Russia’s request, brokers said.

The live-fire drill is planned at the South Korean island of Yeonpyeong, which North Korean forces shelled last month, killing four South Koreans, including two civilians.

Selling pressure also grew as profit-taking set in following recent gains, with trade sluggish as foreign investors took to the sidelines ahead of Christmas holidays, brokers said.

“There is a tendency for downward corrections when the market momentum is sluggish with foreign investors away,” Kenichi Hirano, operating officer at Tachibana Securities, told Dow Jones Newswires.
…

market pulse
Dec. 19, 2010, 11:07 p.m. EST
Chinese stocks tumble amid Korean tensions
By V. Phani Kumar

HONG KONG (MarketWatch) — Mainland Chinese stocks tumbled Monday on a wave of selling in late morning trade amid worries over geopolitical tensions on the Korean peninsula ahead of a South Korean military drill. The Shanghai Composite (CN:SHCOMP 2,812, -82.21, -2.84%) , which had opened higher, fell 2.8% by the midday break to 2,811.53. In Hong Kong, the Hang Seng Index (HK:HANGSENG 22,458, -257.01, -1.13%) lost 1.2% to 22,452.96. Castor Pang, research director at Cinda International, said investors were worried that both North and South Korea seemed like they were “not stable” and using the geopolitical worries as an excuse to wind down portfolios. He added that the fall may have been exacerbated by very thin trading volumes towards the end of the year. Mining and metal stocks fell sharply in Shanghai, with Yanzhou Coal Mining Co. (CN:600188 27.55, -1.58, -5.42%) dropping 5.4% and Western Mining Co. (CN:601168 17.71, -0.99, -5.29%) shrinking 5.3%, while Jiangxi Copper Co. (CN:600362 38.60, -1.84, -4.55%) lost 4.6%. In Hong Kong, Jiangxi (HK:358 23.90, -0.65, -2.65%) (JIXAY 123.00, -3.23, -2.56%) shrank 2.4% and Aluminum Corp. of China Ltd. (HK:2600 6.83, -0.19, -2.71%) (ACH 22.54, +0.14, +0.63%) dropped 2.9%.