The Housing Bubble

Strip-mall casinos multiply across nation
States, municipalities wrestle with growing number of ’sweepstakes’ joints. ~ MSNBC

Inside a one-story building on the edge of a strip mall in central Florida, Joy Baker calculates the sum total of her morning bets. It’s almost noon, and she’s down $5. Not bad. Her husband, Tony, sits a few feet away. “This is the most fun we’ve had in 20 years,” says Joy, who is 78 and retired. “At our age, we can’t hike. You can’t pay him to go to the movies. This gives us a reason to get up in the morning.”

Tony concurs. “We enjoy this,” he says. “We will be very bitter if the politicians take this away from us. I will take it personally.”

It’s a Wednesday morning in mid-March, and the Bakers are sitting inside Jacks, a new type of neighborhood business that is flourishing in shopping malls throughout Florida — and across America. Jacks bills itself as a “Business Center and Internet Cafe,” but it looks more like a pop-up casino.

Jacks is about the size of a neighborhood deli. There is a bar next door and a convenience store around the corner. Inside, jumbo playing cards decorate the walls. The room is filled with about 30 desktop computers. Here and there, men and women sit in office chairs and tap at the computers. They are playing “sweepstakes” games that mimic the look and feel of traditional slot machines. Rows of symbols — cherries, lucky sevens, four-leaf clovers — tumble with every click of the mouse.

John Pate, a 50-year-old wearing a Harley-Davidson T-shirt, says he is wagering the equivalent of 60 cents a spin. “This place is pretty laid-back,” says Pate. “You can come here and get your mind off everything. You’re not going to win the mortgage. You’re not going to lose the mortgage. It’s pretty harmless.”

http://www.msnbc.msn.com/id/42721939/ns/business-small_business/

Report: WaMu rewarded employees who pushed dangerous mortgages

By Kimberly Miller Palm Beach Post Staff Writer
Posted: 9:10 p.m. Friday, April 22, 2011

In the fall of 2006, Washington Mutual was so determined to push its riskiest mortgages on customers that it created a football-themed employee bonus “blitz,” offering “touchdown” incentives for every sale of a pick-a-payment loan.

A non-prime loan was a “field goal” in the game to win a $1,000 gift card at the expense of home buyers who were purposefully steered away from fixed-rate, 30-year mortgages.

The campaign to sell high-risk loans, which contributed to the 2008 demise of the nation’s sixth-largest bank, is outlined in a 650-page report released last week by the U.S. Senate’s Permanent Subcommittee on Investigations.

Florida is mentioned repeatedly in the report. Washington Mutual’s loan sales were concentrated in the state, which ultimately suffered above-average home value depreciation.

Two years after the blitz, Washington Mutual was seized by its regulator, the Office of Thrift Supervision.

It was ultimately sold to JPMorgan Chase for $1.9 billion. Without the purchase, Washington Mutual’s failure might have “exhausted the entire $45 billion Deposit Insurance Fund,” the federal report says.

http://www.palmbeachpost.com/money/foreclosures/report-wamu-rewarded-employees-who-pushed-dangerous-mortgages-1426463.html -

From the state that brought you Wall St.:

http://www.syracuse.com/news/index.ssf/2011/04/north_syracuse_school_district_5.html

The North Syracuse Central School District has paid $465,000 for 4.9 acres near its high school in its first step toward moving ninth-graders into the school and adding full-day kindergarten in the elementary schools. (CA: Adding full day kindergarten? I thought schools were shrinking programs.)

The district plans to someday use the land — east of Cicero-North Syracuse High School — for a parking lot. (CA: Someday?)

The land’s tentative 2011 full market value is listed at $59,500 on the county’s real property website. Last year, the town’s assessment on the land was $61,224, records show.

School district officials have said the assessor’s records don’t reflect what people were actually selling — and paying for — land in that area. Other lots in the area sold for as much as $250,000 an acre in recent years. (commercial interests were moving in a few years ago but is that demand still there?)

**********
It’s ok because the state is going to reimburse the district 88 cents on the dollar. Oh wait! Don’t we pay into state taxes? Apparently the dots are never connected as this purchase was (reportedly) supported by taxpayers overwhelmingly.

Deflation?

Termites eat millions of Indian rupees in bank.

LUCKNOW, India — It was an all you can eat buffet at the bank.

An army of termites munched through 10 million rupees ($222,000) in currency notes stored in a steel chest at a bank, police in northern India said Friday.

The bank manager discovered the damage when he opened the reinforced room in an old bank building on Wednesday, police officer Navneet Rana told The Associated Press.

“It’s a matter of investigation how termites attacked bundles of currency notes stacked in a steel chest,” he said. The money was put in the chest in January.

The termites had damaged bank furniture and documents in the past.

The police have registered a case of negligence against bank officials in Barabanki, a town 20 miles (30 kilometers) southwest of Lucknow, the Uttar Pradesh state capital. In India, police register a case before opening an investigation.

Realtors Are Liars

Sifting through current foreclosure orders I came across this fine company:

They must have participated in every scam known to the industry. A sample:

# A loan application prepared by Union Capital for a loan which ultimately closed on October 24, 2007, indicated that the borrower, a certified nursing assistant maintained two jobs. The loan application reflected the borrower’s gross monthly income as $5,101 monthly or $61,202 annually.
# A copy of a Verification of Employment (”VOE”) from the borrower’s primary employer maintained in the loan file indicated that the borrower earned $14.76 hourly for 40 hours a week or approximately $2,558.40 monthly and $30,700 annually.

Hundreds of similar outfits listed on the Massachusetts Enforcement website.

http://www.mass.gov/?pageID=ocasubtopic&L=5&L0=Home&L1=Business&L2=Banking+Industry+Services&L3=Banking+Legal+Resources&L4=Enforcement+Actions&sid=Eoca

Uggghhh, just found out what some of the people I know who would have been working in real estate 5 years ago are doing. Anybody heard of “ACN”? Looks like a typical MLM scheme, just slightly better disguised than most.

SHANGHAI (AFP) – Shanghai authorities have offered concessions to truck drivers who staged a strike over rising fuel costs, amid concerns that anger over inflation could spark wider unrest in China.

Hundreds of drivers picketed this week at shipping sites in Shanghai, the world’s busiest container port, calling for lower port fees to offset damaging hikes in diesel prices, in a strike that prompted a heavy police response.

The natives are getting restless.

Why is there no transaction tax on the derivatives market? If there was just a 1% tax on these trillions of dollar ‘bets’ it would completely change the discussion on the huge public debt issue. Based on the size of the market this could be a trillion dollar income stream. What would happen if Monsanto couldn’t forward sell/short their projected sales? I have heard Buffet has sold put on the S&P index out to 20-30 years and has pocketed millions already? Brilliant!

Hi. Several on this blog are always saying how “the rich” don’t pay their “fair” share in taxes. And that tax rates on the rich are lower then they have been or should be. I maintain that people pay taxes in dollars not percentages. But for those that are interested in percentages please see the below letter (22 April) to see who pays the income taxes in this country. Though a letter to the editor, newspapers, at least the NYT, fact checks letters. Some will argue that rich people have lots of unearned income. They probably do. But look at the dollar amount they pay. If someone with $300K in unearned income (say dividends) is paying $45K on it, they still are paying more than many people earn.

P.S. Speaking of rates, I think a fair tax would be the same percentage for everyone.

To the Editor:

The indignation of those on the left to the mere mention of tax cuts on high-income earners continues to puzzle me. Charles M. Blow’s argument that high-income earners are not paying their fair share of taxes is not supported by the facts.

To begin with, the tax cuts enacted by Congress in 2001 and signed into law by President George W. Bush lowered marginal tax rates for all income earners, not just the “rich.” Millions of low-income earners were dropped from the federal income tax rolls as a result, shifting the tax burden up the income scale.

As of 2006, 46 million American households paid no federal income tax. Those with incomes of $89,500 and up in 2006, representing the top 40 percent of income earners, paid 99.2 percent of all federal income taxes, according to the Congressional Budget Office. Incredibly, the top 1 percent of income earners paid 39.1 percent of all federal income taxes.

If 1 percent of the population pays 39.1 percent of all federal income tax receipts and 40 percent of the population pays nothing, which group is the glutton? Which is the plunderer?

SEAN F. FLAHERTY
Boston, April 16, 2011

From todays NYT - front page, above the fold
Builders of New Homes Seeing No Sign of Recovery
http://www.nytimes.com/2011/04/23/business/economy/23housing.html?_r=1&hp

* New single-family sales are now lower than at any point since the data was first collected in 1963, when the nation had 120 million fewer residents.

*.. sentiment might still be souring. Executives at Equity LifeStyle Properties, a Chicago firm that sells properties in resort communities, said this week they were seeing “a psychological change”: potential customers wanted to preserve their capital rather than risk it in real estate

*Builders and analysts say a long-term shift in behavior seems to be under way. Instead of wanting the biggest and the newest, even if it requires a long commute, buyers now demand something smaller, cheaper and, thanks to $4-a-gallon gas, as close to their jobs as possible.

Thu Apr 21, 2011 9:00am EDT

* Coverage protects against FDIC clawbacks

* Pays for both legal fees and lost compensation

* Marsh says will not cover illegal behavior

By Ben Berkowitz

NEW YORK, April 21 (Reuters) - Insurers are giving bankers a new tool to fight back against regulators.

Last year’s financial reform law allows regulators to seize up to two years of pay from reckless bank executives, but now insurers are offering coverage that can reimburse bankers whose compensation is confiscated.

Insurance broker Marsh said on Thursday it is launching such a program, which it calls the first of its kind. It did not name the insurers underwriting the policies.

http://www.reuters.com/article/2011/04/21/banks-insurance-idUSN2014051220110421

Nice to see the managed fund scam slowly losing air. Many of these “pros” are dimwitted offspring of the elite who need a big pay check….

BOSTON — Pay a fund manager above-average fees and it’s reasonable to expect you’ll have a better than 50-50 chance of beating the stock market.

Yet the latest numbers show a majority of managers aren’t keeping up their end of the deal. It’s a key reason why investors have been pulling cash out of managed funds at a rapid clip in recent years. It’s even happening to big mutual funds that have delivered above-market returns.

A few ugly numbers:

Over the past five years, nearly 58 percent of managed U.S. stock funds failed to beat a broad measure of the market, the Standard & Poor’s composite 1500. That’s according to S&P’s ninth annual scorecard of managed fund-vs.-index performance.

Investors pulled a net $323 billion from managed stock funds over the past four years, according to Morningstar. That’s about 10 percent of the assets those funds hold.

Index funds are different animals. Their investors expect to match performance of the market segment the fund tracks. Index funds typically charge less than managed funds because they don’t have to pay investment-picking pros.

Read more: http://www.mysanantonio.com/default/article/Stock-pickers-lament-about-money-going-out-the-1348795.php#ixzz1KMCWXnGd

Alright Floridians, at what point can I box up my neighbor’s cat and drop him off at the animal shelter? I spoke with the owners today and they said they’d “try” to keep him indoors, but he doesn’t like that.

I am tired of picking up chit and carrion about my property. And last night the cat was brawling with the neighborhood stray in our front yard and it woke the fam up. He also lounges on my son’s windowsill.

I don’t know if the owner was encouraging me, but she said, “he ain’t chipped or collared.”

Tonight there might be two prowlers in my yard.

I guess in this economist’s world, an independent central bank is entitled to pick winners and losers in the global economy as it sees fit? Probably a good idea to keep in mind all those bankers on the board of The Economist magazine when interpreting Ip’s perspective…

Economic theory versus the real world: An author spotlights the difference
April 05, 2011

Although the U.S. economy is doing better, some thorny financial issues still confront the nation. For perspective on how investors can interpret events, we interviewed Greg Ip, U.S. economics editor for The Economist and author of a new book, The Little Book of Economics: How the Economy Works in the Real World.
…
What do you think about the criticism that the Fed has faced in the past few years?

Greg Ip: I think the lion’s share of the resentment toward the Fed is related to the fact that we had a very deep recession with high unemployment. I also think there’s a segment of the population that is concerned that the Federal Reserve, which is by design a very powerful and independent organization, took some pretty radical steps in the last few years, steps that were probably necessary and justified to prevent the economy from sinking into a truly catastrophic collapse. But actions like bailing out individual companies or printing money are going beyond the bounds of what we expect the central bank to do. And it’s understandable that people would recoil at that.

I do think the storm cloud seems to be passing. Although there were discussions in Washington about weakening or altering the powers of the Fed, and perhaps subjecting it to congressional oversight or a government accountability office, most of those proposals came to naught, and I think the reason why is that the congressional leadership in both parties and in the White House realized that, for all its faults, the Federal Reserve is best left alone to do the best they can with the tools they have.
…

Economy
Dollar’s Decline Speeds Up
WSJ p. A1

The U.S. dollar’s downward slide is accelerating as low interest rates, inflation concerns and the massive federal budget deficit undermine the currency.

When I read certain websites I realize there is a certain number of upper income and lower wealthy households that have an Armageddon back up plan. That plan includes having purchased a home away from the city and they’ve been stocking those homes w/food, water, ammunition. Perhaps those people are responsible for this:

Obtaining housing in Vermont remains an uphill financial climb for a large proportion of the state’s residents, according to a report from the Vermont Housing Finance Agency.

• About 47 percent of renters and more than a third of homeowners who have mortgages pay more than 30 percent of their income for housing costs.

• The median home price in Vermont in 2010 was $195,000, up 3 percent over the previous year. That climb bucks trends in much of the rest of the country.

• Unlike much of the rest of the country, home vacancy rates are low.

• The median price of a newly constructed home in Vermont was $295,000.

http://www.burlingtonfreepress.com/article/20110422/NEWS02/110421009/Affordable-housing-out-reach-more-more-Vermonters-report-says?odyssey=obinsite

I more than “suggest” it …

Private-college group: Financial disclosure bill ‘needless’

A statewide college association says that Massachusetts legislation that aims to make the financial handlings of private colleges and universities more transparent is “needless” and would harm private education.

The bill is driven by a report released last spring that examined six area schools, including five in and around Boston.

The report, issued by the Center for Social Philanthropy at Boston-based Tellus Institute and partially funded by the Service Employees International Union, says some non-profit, tax-exempt higher education institutions were involved in high-finance-style practices that contributed to the global financial crisis.

“They made foolish financial decisions,” said state Senator Patricia D. Jehlen, a Somerville Democrat and the lead sponsor of the bill. “And the question is now, have they changed or are they, like many people on Wall Street, doing the same thing they were before the financial crisis and making other people pay for their mistakes?”

However, Richard Doherty, president of the Association of Independent Colleges and Universities in Massachusetts, said his association opposes the legislation and plans to denounce it when it reaches the public hearing process.

“It’s unclear to us what public policy problem the bill solves,” Doherty said. “We think there are any number of provisions in it that would cause harm,” to private higher education.

The bill, as it is drafted now, would require each private college and university in the state and their related organizations to report federal, state and local taxes they would have paid had they not been exempted as non-profits. Institutions owning more than $10 million in investments and/or real property would report a list of, and value, for each.

Doherty said the provision for calculating potential for-profit taxes “has a suggestion embedded in that that tax exemption is a loophole” and that “it’s unclear what’s done with that information and why it’s helpful.”

http://www.boston.com/news/local/breaking_news/2011/04/private-college.html

For those who are interested in the JoshuaTree Extension for Firefox 4, I’ve finally gotten around to uploading the new version to the website. Just click on the link in my name and follow the directions on the page.

However terrifying the prospect of a large earthquake, I don’t miss the omnipresent threat of tornadic thunderstorms in the Midwest.

Tornadoes Hit St. Louis and Close Its Airport
Jeff Roberson/Associated Press

Storm damage was seen next to a parking garage outside Terminal 1 at St. Louis International Airport on Friday.
By MALCOLM GAY and ELIZABETH A. HARRIS
Published: April 23, 2011

ST. LOUIS — A fierce storm carved a path of destruction here late Friday, downing trees, destroying homes and tearing parts of the roof off Lambert-St. Louis International Airport, forcing it to close.

“All airline operations have ceased,” said Jeff Lea, an airport spokesman. Airport officials said they hoped to be operating at 70 percent of the usual capacity on Sunday.

Half the windows were blown out in one section of the airport, and large chunks of the roof were peeled away by the wind in another. Debris was scattered around the airport. Nine tornadoes were reported in St. Louis alone.

“Glass was blowing everywhere,” Dianna Merrill, 43, told The Associated Press. Ms. Merrill was waiting in the airport when the storm struck.

“The ceiling was falling,” she said. “The glass was hitting us in the face. Hail and rain were coming in. The wind was blowing debris all over the place. It was like being in a horror movie. Grown men were crying. It was horrible.”

Despite the destruction, there were no fatalities or serious injuries resulting from the storm.

“We were very fortunate on that end,” Mr. Lea said.
…

Published:
April 19, 2011
Benefits of inflation
Economics professor says lower prices can have a down side
By Cheryl Walker (’88) Office of Communications and External Relations
Sandeep Mazumder

Rising food and gas prices make consumers worry about inflation, but Assistant Professor of Economics Sandeep Mazumder says they should be more concerned about deflation. Mazumder, who studies macroeconomics, explains how low rates of inflation can actually give the U.S. economy a boost. He argues that traditional economic models of inflation predict little-to-no growth in the inflation rate for 2011-2013. He recently made a presentation at the Brookings Institution to economists examining inflation in the recent recession and making predictions for whether deflation is on the horizon. He received positive feedback on his work from Federal Reserve staff, International Monetary Fund economists, and Council of Economic Advisers members.

Q. Concerns about inflation seem to be growing. Is this fear justified? Can inflation be a good thing?

A. Increases in some prices, such as gas, do not mean the sky is falling. Since the 1990s, research shows that U.S. inflation has not been as responsive to oil shocks as it was in the 1960s, 70s and 80s. I think people fear rising gas prices are a sign of higher inflation mainly because gas prices are the only prices that are visibly and publicly displayed! Typically macroeconomists focus on “core” inflation rates, which excludes food and energy prices. This essentially gives us an idea of the long-term underlying trend of inflation, rather than transitory changes in inflation. Typically we think total (also called “headline”) inflation should converge to core inflation, and changes in things such as gas prices are often just temporary price changes and not necessarily reflective of the underlying trend.
…

I am noticing a bit of a greed factor going on in the trades. I have contacted a few contractors for parking lot paving, roof repairs or replacement and the heating guys. They all make their trade sound very difficult, time consuming and are quoting prices which are 2 to 3 times the normal middle of the road prices. What is up with that? I don’t see deflation in the trades yet.

LOL. Larry Kudlow just referred to Ben Bernanke as the ‘Bernank’ on his radio show. Does Larry do that on his cable show?

Home-selling tactics to beat the deadbeats
By Scott Van Voorhis • Bankrate.com

The robosigning controversy has led to a slowdown in foreclosures. The lull is likely to be temporary and sellers’ advantage from a drop in foreclosures potentially fleeting, with many markets still flooded with distressed properties, according to Katie Curnutte, a spokeswoman for Zillow.com. There might even be a boomerang effect later in the year after banks get back up to full speed again with auctions, she says.

For home sellers, here are some tips on how to seize the initiative during a rare (relative) lull in the foreclosure crisis.

Sell sooner rather than later

Get your story out

Do your homework

Price aggressively without undercutting foreclosures

The aim is to sell your home and maybe come away with a small gain. Forget about making a killing. Few homeowners who are current on their mortgage can match a foreclosure price.

But buyers are still looking for low prices. Take a look at what other nondistressed properties are selling for in your neighborhood and then price below them. And drive home the point that the price is the price — with foreclosures the bank can take a better offer right up to the day of the closing, Weintraub says.

Burst those foreclosure fantasies

Many buyers haven’t a clue about what it takes to buy a foreclosed home. In many cases, individual buyers don’t stand a chance as they end up competing with investors ready to pay cash, Kimmons says.

If a buyer or agent doesn’t know this, enlighten him or her. “There is a significant percentage of buyers (that) could not buy a foreclosure if they wanted to,” Kimmons says.

http://www.bankrate.com/finance/real-estate/home-selling-tactics-to-beat-the-deadbeats-1.aspx - 70k -