The Housing Bubble

Yahoo news search on Blue Cross:

http://news.search.yahoo.com/search/news?ei=UTF-8&p=blue+cross&fr2=tab-web&fr=yfp-t-701

Bloated pay, hoarding of cash, rate increases…Arghhh I don’t know why I do this to myself. Sometimes I think it’s healthier to just ignore the fraud in this world….

A special thanks to the readers here who suggested Tequesta and Jupiter, Fl. as nice places to live. Of course, I’m renting.

Need to pair back those service sector jobs.
McDonald’s orders 7,000 touchscreen kiosks to replace cashiers

The fast food giant is poised to add touchscreen kiosks in more than 7,000 of its restaurants in Europe in effort to replace actual, human cashiers.

McDonald’s Europe President Easterbrook told the Financial Times (subscription required), via The Sydney Morning Herald, that the touchscreen kiosks should help speed up customer transactions up to three or four seconds. The European eateries currently serve about 2 million people per day; McDonald’s hopes it will get even more people to flock in through their doors.

Electronic menus that replace physical beings is nothing new. Microsoft has been pushing its touchscreen computer, the Surface, which has mostly been a big hit at Vegas casinos, hotels, and clubs — where users can order from the table, play around with the image onscreen, and… “flirt” with people at other tables. For the last couple of years, there have been touchscreen kiosks stationed at at least seven McDonald’s restaurants in Australia. McDonald’s says they have no interest in replacing cashiers with kiosks in Australia, however, or anywhere else for that matter.

Besides monetary incentive, and not to mention that the kiosks will also be getting rid of cash transactions since they only accept credit or debit cards, the kiosks are also a way to gather statistical information about people’s eating habits, said Easterbrook. The company could potentially track every last thing you order (or perhaps offer you a free Big Mac with every ten that you purchase?).

Realtors Are Liars

How low can theses prices go? This is just the asking price. The selling price would be somewhat lower?

Commercial building for sale

http://www.loopnet.com/xNet/Looplink/Profile/Profile.aspx?LL=true&LID=15438313&STID=cbre

If you are a libertarian or a member of the TEA Party, you should be concerned that Florida’s Governor, Rick Scott, seems to be ignoring the constitution. If that were my party, I’d be concerned since the constitution is important, right?

http://www.tampabay.com/news/politics/national/gov-rick-scotts-office-we-didnt-kick-anyone-out-of-budget-signing/1172245

More money flying out the door. No inflation here. Buy now and control your living expenses. Right. Yesterday my new water bill came. Last month there was a 30% surcharge, this month my water usage bill was the same $40 (past several years) plus a couple dollars of tax but with a newer surcharge the bill was $81.81. One thing you can’t control in property is water cost, energy cost, property taxes, HOA fees, and area demographic change as in nice to slum. Renting is good!

I totally agree with this guy that fundamentals currently look terrible for home builders. The only problem with his thesis is that they have looked comparably terrible for five years, now, with no capitulation, suggesting that the WS-listed builder share prices are some how artificially propped up.

Don’t be a sucker for short plays that never price in fundamentals, no matter how dire the picture.

These 12 Real Estate Stats Scream One Thing
May 27, 2011

The latest report from the National Association of Realtors reveals that residential real estate prices are more affordable than they’ve been in almost a decade.

The median price for existing homes fell by 5% year-over-year and now stands at just $163,700.

Score one for homebuyers.

In addition, money is cheap. Mortgage rates fell for the fourth week, with a 30-year fixed-rate loan hitting a yearly low of 4.63%, according to Freddie Mac (FMCC.OB).

Score two for homebuyers.

These two factors alone – depressed prices and cheap money – normally lead to rampant speculation.

But we’re not living in normal times. And if you’re tempted to jump back into the housing market now, you need to get your head checked first.

The truth is, the real estate market is overrun with terrible fundamentals. And I’ve compiled 12 stats to prove it. I’ll share the first six with you today and the next six tomorrow.

And just so you don’t kill the messenger, I’ll also provide some ideas on how you can profit from – or at the very least, reduce the pain of – further price declines.

So let’s get to it…
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Supply Glut #1: Existing Homes

At the end of April, there were 3.87 million previously owned homes for sale. That represents a 9.2-month supply at the current sales pace, up from an 8.3-month supply in March.

Supply Glut #2: Foreclosures
There are currently 2.25 million homes in the foreclosure process. That’s equal to an extra 5.3-month supply, based on the current sales rate.

Supply Glut #3: Shadow Inventory
There are currently 1.8 million homes in shadow inventory, according to CoreLogic. Shadow inventory includes homes that are seriously delinquent (i.e. at least 90 days past due), homes that are in some stage of the foreclosure process and homes that banks have already repossessed, but haven’t put back on the market for sale. That’s equal to an extra 4.3-month supply, based on the current sales rate.

Add it all up and we’re looking at about 18.8 months worth of supply that needs to be worked off.

And that, folks, is where basic economics applies.

That much excess supply is bound to lead to lower prices. All the government subsidies, home affordability programs, or cheap money in the world can’t overcome that fundamental principle.

So how about the demand side?
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Demand Destroyer #1: Underemployed and Underpaid

With unemployment resting at 9% and wage growth stagnant (up just 0.1% in March), millions of consumers can’t afford to buy a new home. Not to mention the fact that tighter credit restrictions are also severely limiting the pool of potential buyers.

Demand Destroyer #2. Consumers Not in the Mood
Even if consumers could afford to buy a home, they’re not in the buying mood. The latest National Housing Survey from Fannie Mae (FNMA.OB) reveals that 36% of Americans believe buying a home is risky nowadays. By comparison, only 17% thought so back in December 2003.

As Anthony Sanders, a professor of finance and real estate at George Mason University, says, “Risk is always a bad thing for the housing market.” Simply put, consumers buy when they’re confident, not afraid. And they’re clearly afraid now.

Demand Destroyer #3: Prisoners in Our Own Homes

Even if Americans wanted to buy a new home – and could afford it – they can’t. Not without coughing up a serious amount of cash at closing. Why? Because an estimated 11.1 million homeowners are sitting on negative equity. And close to five million are sitting on more than 25% negative equity, according to CoreLogic.

It’s All About the Fundamentals

The fundamentals don’t add up to an imminent rebound in real estate prices. On the contrary, in fact. Excess supply and historically weak demand point to nothing but lower prices ahead.

I know that’s a tough pill to swallow, given that real estate prices are already off 29.5% from the peak in June of 2006. But it’s true.
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Bottom line: Real estate prices are still declining… and headed lower still. So don’t fight it… just accept it. And then do something about it.

Here are a few ideas to consider…

How to Hedge Against – Or Profit From – Falling House Prices

The overwhelmingly weak fundamentals make a compelling case for selling short or buying puts on the iShares Dow Jones U.S. Home Construction Index Fund (NYSE: ITB).

As David Resler, Chief Economist at Nomura Securities International, says, “We’re still in the doldrums in the housing market.” Clearly that’s terrible news for the bottom lines and share prices of the 28 homebuilders and homebuilding-related companies included in the ETF.

Other more advanced options include trading futures contracts on CME Group’s (Nasdaq: CME) exchange. Contracts on home prices in 10 metropolitan areas are available. You can find out more information about these products on CME’s website or by visiting market maker, Jim Dolan’s, website: HomePriceFutures.com.
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Whatever you do, though, don’t rush to buy residential real estate. As I’ve hopefully demonstrated by now, prices are headed one way from here – down. So even though local markets differ, chances are you’ll get an even better deal the longer you wait.

This story is so predictable that it pains me to read it.

Housing inventory in Beijing’s Tongzhou totals 20,000 units
11:15, May 26, 2011

Tongzhou District of Beijing, where housing prices were once close to that of Beijing’s CBD area, has come to be an “outcast” of Beijing’s housing market because of the adoption of the housing purchase restriction policies. It will take seven years to consume the 20,000 units of housing inventory in Tongzhou that are worth more than 10 billion yuan. The sharp decline in housing demand has caused real estate developers to adopt new pricing methods to postpone housing sales.
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William G. Phillips: ‘Buy right’ and benefit in the long haul
7:43 PM, May. 28, 2011
Written by William G. Phillips

Sorry, we are experiencing technical difficulties. . . .

As we continue to work through the ill effects from the last few years, many folks have been trying to decide whether to sell their homes. No doubt, having a mortgage balance higher than your current home value is a frustrating position to find yourself.

Here’s the issue: Even three years after the economic tsunami, there remains a large inventory of housing stock. Nationally, the markets are healing; but we are in what I view as a technical correction period where supply far exceeds demand.

Absorbing inventories is a challenge because local property values are sensitive to any home sale where the selling price is less than other sales in the neighborhood. This is due, in part, to the way the appraisal world approaches value determination. Most all residential appraisals require comparison of other sales that have closed within six months of completion of an appraisal report. Appraisals that have to consider “liquidation sales” in their analysis will continue to hold values down.I should disclose that I am probably part of the problem as well as attempting to be a voice of reason. We have to liquidate property into this market to reduce carry cost on our real estate inventory, so the solution is not as clear-cut as we would like.
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Scottsdale’s ‘perfect storm’
By Dawna Freeman, For Postmedia News May 27, 2011
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When the bubble burst in late 2007, the overpriced Phoenix market went into a tailspin, spiralling down 53 per cent compared to the nation’s average of 31 per cent.

But in affluent Scottsdale, prices fell relatively little in 2007 and 2008. In March 2007 — according to the Cromford Report, the valley’s housing market daily update — homes in Scottsdale were selling for an average of $302.28 per square foot, more than double the $141.18 per square foot of January 2001 (all prices in U.S. currency).

Gregory Larson, an Arizona broker who specializes in selling Scottsdale real estate, explains the initial stall: “Fewer foreclosures in Scottsdale and the reluctance of homeowners to drop their prices meant fewer distressed sales and less downward pressure on home prices.”

By 2009, luxury markets in Greater Phoenix began to experience more significant declines, with median home prices in some communities hitting double-digit losses in 2010. By March 2011, Scottsdale homes had dropped 43 per cent to an average of $173.06 per square foot. By April 2011, distressed properties in Scottsdale had pushed foreclosures up to 39.1 per cent.

Cromford Report founder and housing market analyst Mike Orr says communities with little sales activity experienced a form of inertia that kept home prices artificially high. He says declines in higher-priced communities were necessary to stabilize the local market.
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Personal Finance
Is Real Estate for Suckers?
Published May 26, 2011

Are you a dope for buying a home in the U.S. right now?

If you need and want one, there’s no harm in that. Yet if you think it’s an investment that will actually appreciate, you’re taking a sucker’s bet.

During the bubble years, the “greater fool” theory prevailed. When you bought a home, you were confident that someone would buy it for a higher price than you paid. “Flippers” prospered from this mass psychology.

Right now, it’s a “lesser fool” market: You’re hoping that you’re not foolish for buying a depreciating asset in a troubled economic climate. Millions stay out of the market just to avoid the feeling of doing a fool’s errand.

Home prices are still dropping in many areas with no real bottom in sight. Zillow, the real estate tracking service, recently reported that first quarter prices were approaching the declines last seen in the Great Depression.

The U.S. home market is no longer in triage mode. It’s a train-wreck. Zillow said home prices “are no longer due to bottom out” this year. When will they, then? It may take years, and here’s why.

Anyone who bought during the bubble may never see any appreciation. Since most of them are “underwater” — the mortgage is more than the home’s value — they have no economic stake in the house. They may join a growing wave of “strategic defaults.” At least one quarter of the entire market is stuck in this way.

I’ve known several neighbors who’ve walked away. Why pay financing, taxes and maintenance on a property that isn’t likely to pay you back in the near future — if ever? It’s not an investment. The more you pay, the deeper you get into a sinkhole. Banks won’t re-value the home and lower your payment, so what’s the point? It’s simple emotional math.

Adding insult to injury are two more pieces of bad housing news. There are about $20 billion worth of mortgage resets coming due on adjustable-rate mortgages this coming year, my colleague Linda Stern reports.

If banks and mortgage insurers adhere to unusually high credit standards, millions won’t be able to refinance and will lose their homes.

On the high end of the market, the loss of federal mortgage guarantees for homes prices $729,750 and above, will hurt even more. Residents of expensive coastal states such as California, Connecticut, Massachusetts, New York and New Jersey may see prices plummet.
Will there be even more price declines as desperate sellers compete with highly-discounted bank-owned properties? In several markets, banks own from 40% to 56% of all properties (Detroit, Cleveland, Chicago, Minneapolis, Memphis, Tampa and Fresno), according to ClearCapital, a property information company.
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Markets with the highest negative equity ratios — those the most underwater — will have the hardest time recovering. Leading in negative equity by percentage, according to Zillow, are Phoenix (68%); Orlando (64%); Riverside, CA (48%); Tampa (47%) and Miami (43%). Only Boston, Dallas and Pittsburgh had underwater ratios in the single digits.
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I personally don’t blame people who lied about home-ownership in order to qualify for home-owners-only tax credits. What is fair about exclusively giving away free money to wealthy home owners, and leaving poor renters out in the cold?

Kenneth R. Harney
Columnist

Treasury inspector general highlights problems at IRS with homeowner tax credits
By Kenneth R. Harney, Published: May 27

Can the Internal Revenue Service handle tax credit programs that pump out billions of dollars to homeowners and buyers? A new federal investigation on home-energy tax credits suggests the answer may be: not quite yet.

The Treasury Department’s inspector general for tax administration audited the residential tax credit program created by Congress to encourage homeowners to install energy-saving equipment and materials in their houses and found some disturbing oversights.

One part of the program offers 30 percent credits with no dollar limit for solar-energy systems, geothermal heat pumps, wind turbines and fuel cells installed before Dec. 31, 2016. A second part of the program, for energy-efficiency home improvements, offered credits up to $1,500 for qualifying exterior windows and doors, insulation and roofing materials.

Both credits have been popular. More than 6.8 million taxpayers received credits during tax year 2009, totaling $5.8 billion through December 2010. But substantial numbers of the filings had problems that went undetected by the IRS, according to the inspector general’s investigation. In a review of 5 million returns, auditors found that more than 302,000 taxpayers, who received a total of $234 million in credits from the IRS, showed no evidence of actually owning a home — the minimum requirement for eligibility.

A review of a smaller sample of returns, supplemented with local real estate deed information, found that 30 percent “had no record of owning a home.”
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Homeownership dropped in San Diego, but the other side of the equation is missing from this discussion, which is those 131 “New Home Communities” that were pumping out cookie-cutter McMansions in droves circa 2005. Do you sense the disconnect between supply and demand?

San Diego homeownership drops in past decade
By Lori Weisberg, UNION-TRIBUNE
Wednesday, May 11, 2011 at 9:51 p.m.

A prolonged housing crisis and recession erased all of the homeownership gains of the last 10 years, leaving San Diego County with a lower proportion of owners than at the start of the decade, new census figures show.

The county’s 2010 homeownership rate now stands at 54.4 percent, down from 55.4 percent in 2000, according to the decennial census data released today. That’s far below the 58.2 percent rate in 2005, when San Diego’s housing market was booming and the ranks of homeowners swelled to nearly 606,000. By 2010, the county had nearly 15,000 fewer homeowners than during the housing peak.

While the overall number of homeowners did indeed rise — from 551,461 in 2000 to 591,025 in 2010 — the 7 percent increase lagged the overall growth in households and was far behind the 12 percent increase in renters, the 2010 census data revealed.

The slide mirrors the state of California, which saw its homeownership fall from 56.9 percent in 2000 to 55.9 percent in 2010.

For years, San Diego’s rate has hovered around 55 percent, falling to as low as 54 percent in 1990 and historically has trailed that of the state and nation. In fact, it is unlikely that in a high-priced area like San Diego the proportion of homeowners would ever approach the nationwide rate of 66 percent.

Housing experts, who expect the county’s homeownership rate to fall even further as more homes are foreclosed on, point out that the mid-decade spike in owner-occupied homes was an artificial gain, propelled by lax underwriting standards and rampant subprime lending. The reality is that the thousands of renters who were transformed into owners should never have purchased to begin with, they argue.

“The 3 to 4 percent of households at the margin who would normally be renters became owners because of the easy underwriting and subprime lenders and this psyche that you can never lose on housing,” said Norm Miller, a real estate professor at the University of San Diego.

“When prices were going up, everyone wanted to have a home as an investment, but that American dream was false and not sustainable. Now that the rate is lower, we don’t need to feel so bad because people aren’t getting as wealthy from their homes as they were during a very brief time in our history.”

The years between 2000 and 2010 were probably one of the most volatile periods in San Diego’s real estate market, considering the huge spikes in sales and prices followed by a precipitous decline in values and mushrooming foreclosures.

In 2004, housing sales peaked at more than 68,000, almost twice what they were last year. By 2008, the number of homes lost to foreclosure had ballooned to more than 17,000 as increasing numbers of borrowers found themselves saddled with debt that exceeded the value of their homes, according to DataQuick Information Systems. By contrast, the number of foreclosures between 2000 and 2005 never even reached 1,000 in any one year.

In the world of demographics, homeownership rates generally move up or down with glacial speed, so when change occurs, it is a sign that larger economic forces are at work.

“People don’t buy homes all the time, they stay in them a long time, so there’s a lot of inertia, and it’s not something you can change as quickly as the stock market,” said Dowell Myers, professor of urban planning and demography at USC. “It’s like turning a battleship, so it shows you how dramatic the crash was because you don’t turn a battleship that fast.

“We drew people into the market more quickly than we should have, and now we’re paying the price for that.”
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Luxury Home Values Decline in First Quarter of 2011
05/23/2011 | 09:05 am

Luxury home values dropped in Los Angeles, San Diego and San Francisco in the first quarter of 2011 compared to the fourth quarter of 2010, according to the First Republic Prestige Home Index by First Republic Bank, a leading provider of private banking, private business banking and wealth management services.

In the quarter ended March 31, 2011, the Index indicated the following:

Los Angeles area values dipped 0.5% from the fourth quarter of 2010 and slid 0.9% from a year ago. The average luxury home in Los Angeles is now $1.96 million.

San Diego area values fell 4.6% from the fourth quarter and decreased 5.1% year-over-year. The average luxury home in San Diego is now $1.63 million.

San Francisco Bay Area values lost 4.3% from the fourth quarter and were 1.9% lower compared to a year ago. The average luxury home in San Francisco is now $2.49 million.

“Luxury home prices fell in the first quarter of 2011 in all three of California’s major metropolitan centers,” said Katherine August-deWilde, President and Chief Operating Officer of First Republic Bank. “The market gains of the fourth quarter of 2010 reversed in the first quarter of this year. Prices fell as sales activity declined. The combination of low interest rates and lower prices have made luxury homes in California’s major metropolitan regions increasingly affordable.”
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What kind of ganja do San Diego home builders smoke?

HOUSING: Builders feeling hopeful, opening lots for sale
By ERIC WOLFF
Posted: Saturday, May 28, 2011 8:00 pm

Even as home sales slow and prices fall, optimistic San Diego and Riverside county homebuilders are opening more new communities than they have in the last two years, builders and analysts said.

The North San Diego County and Southwest Riverside County housing markets are glutted with bank-owned houses and short sales, which put a drag on local house prices. And sales of new houses, which tend to be more expensive, have dropped below 2010 levels.

Yet builders opened 18 new communities in San Diego County in the first three months of 2011, five more than in the same period of 2010, and 16 opened in Riverside County, six more than during the same period last year, according to MarketPointe Realty Advisers.

Builders spent 2010 snapping up cheap land from banks or from developers desperate to sell. Lower land prices translate to lower housing costs for buyers, especially with a bevy of energy- and water-efficiency improvements many builders now include on their models.

“Builders probably believe they’ve hit a bottom, and based on construction costs, they think they can make it work,” said Nathan Moeder, an economist with The London Group in San Diego.

Sellers of new homes face stiff competition from the used-home market, which is struggling to recover from the real estate bubble that imploded in 2006.

Foreclosures and short sales, in which borrowers sell for less than they owe in loans, dominate much of the existing market. In April in San Diego County, 27 percent of listings were foreclosures or short sales, and in Riverside County, 66 percent of sales were distressed, according to the California Association of Realtors.

Foreclosures and short sales tend to sell for low prices, and in turn push down prices for entire neighborhoods.

In April, the median house price in North San Diego County was $430,000, down 34 percent from the 2005 peak, although up 21 percent from a 2009 bottom, according to data from the San Diego County assessor.

In March, the median price in Southwest Riverside County slipped to $202,000, down 55 percent from the 2006 peak, and up 5.3 percent from a low in 2009.

Those low prices undercut sales of new houses, which were 32 percent more expensive than used houses in the region in 2010, according to a North County Times analysis of that same data.

Similar pressure pushed down homebuilding nationally, as builders applied to construct 385,000 houses in April, the lowest figure in three years, according to the Department of Commerce.

Locally, new house sales were down in the first three months of 2011 compared with the same period in 2010: The 232 new houses sold in North County the first three months of the year slid 20 percent from the same period in 2010, and the 302 sold in Southwest County were down 17.5 percent, according to MarketPointe. New house sales were elevated in 2010, thanks to state and federal tax credits.

Yet builders large and small seem optimistic about North County and Southwest County: Encinitas builder Galey Homes Inc. recently began construction on four new homes in Escondido, three of which have no buyer yet; Pulte Group Inc. opened four new communities in North San Diego County in the last month totaling 271 home sites, and Meritage Homes opened four new communities in Southwest Riverside County.
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Back in 2009-2010 when Ron Paul was waging a lonely battle for Fed transparency, Judd Gregg, then the top Republican on the Budget Committee and a member of the Banking Committee, said that “opponents of Federal Reserve Chairman Ben Bernanke’s second term are guilty of “pandering populism”.” Despite the efforts of the Fed and its Republicrat whores like Gregg, a legal case initiated by Mark Pittman exposed the Fed’s dirty laundry, revealing that not only did the Fed bail out primarily foreign investment banks during the financial crisis, but also that the biggest user of the Fed’s covert Short Term Open Market Operations facility, also known as a 0.01% subsidy, was none other than Goldman Sachs, contrary to the firm’s sworn statements that it did not really need bailing out. Gregg continued: “There’s a lot of populism going on in this country right now, and I’m tired of it.” Gregg warned that the growing tide of populism would threaten some of the most central institutions to the economy’s recovery. “What it’s going to do is burn down some of the institutions which are critical to us as a nation and as an economy to recover and create jobs,” he warned.”

Naturally, it was therefore only a matter of time that Gregg, following the end of his political career as a bought-and-paid-for stooge for Wall Street, has decided to step down, and work for one of these “central institutions to the economy’s recovery” - Goldman Sachs. To the mindless majority who continue to vote for Gregg and his ilk on BOTH sides of the isle, when are you going to wake up and realize who these “public servants” are really serving? Hint: It ain’t We the People.

Well, whatdoyaknow? Matt Taibbi has a blog and it is loaded with some interesting stuff.

Google “Taibblog” to get there.

ARM resets, a hot topic a couple of years back, have pretty much dropped off the map. What’s up with that?

Topic: Monetary Policy
2011 Will Begin With Hope and End With Despair

My predictions for last year ended up being accurate enough for me to decide to try again this year
by Walt Thiessen
(libertarian)
Saturday, January 1, 2011

Exactly one year ago, I predicted that the housing market would seemingly start to pick up, only to have those hopes dashed after a spring peak. I suggested that the year would stagnate, that each time unemployment seemed to go down, it would rear its ugly head again.

About the only prediction I made that didn’t come true was a slight miss. Contrary to Wall Street expectations, I was right in predicting that the Fed wouldn’t want to start increasing rates until the end of the year. Indeed, the Fed insisted on following through with its money creation policies, following “QE1″ with “QE2″. Meanwhile, interest rates have been creeping up, again as I expected. The only thing missing is that the Fed is still trying to keep interest rates from rising.
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2008, of course, is when the sub-prime mortgages reset up in peak amounts, borrowers defaulted left-and-right, and the banking industry suddenly realized that it had a major problem on its hands. Fannie Mae and Freddie Mac had already lost most of their stock’s value, and major investment banks either went under or got bought out by their peers in the industry. The entire system teetered on the brink.

The experts’ answer was a massive bailout, and that’s what it’s going to take this time as well. The difference is that the Wall Street Reform and Consumer Protection Act of 2010, signed into law by President Obama last July with the promise that the new law would guarantee that there would never be another taxpayer bailout, “Period!”, will enable the FDIC to bailout the banks that are too big to fail by dipping directly into the U.S. Treasury without having to do anything as pedestrian as asking Congress for permission. The new legislation gave the keys to the U.S. Treasury to the FDIC, and they’ll need them.

Even the U.S. Treasury doesn’t have unlimited funds on its own, but the Fed does. So the Fed will create the badly needed funds out of thin air once again and loan them to the U.S Treasury, which will turn around and give them to the banks. It’s so much easier to bailout wayward banks when you don’t need to convince the American people to permit it!

The problem with all this, of course, is that this newly created money will be highly inflationary, on top of the massive monetary creation already completed by the Fed. The monetary inflation will be immediate. The price inflation will come afterward, although the CPI will continue to show interest rates in 2-3% range, even as Americans find it close to impossible to pay for keeping a roof over their heads, food on the table, and money in the bank. But it won’t be inflation, you understand. Not really. The Fed and the other financial leaders will continue to assure us that the big risk is still deflation, and that inflation isn’t the issue at all. And so, the biggest bubble of them all, the grandaddy of all bubbles, which has already begun to expand, will accelerate its expansion.

I suspect that our leaders won’t admit until 2012 or later that inflation has reared its ugly head, but by the time they do admit it, it will be painfully obvious to everyone else, even as the government continues to tell us, “All is well! Remain calm!”

So what will all this mean for the economy? It’ll mean that the second “dip” will be upon us, the one that all the experts claimed would never happen because of the inspiring leadership of the Fed. Foreclosures, after the legal issues with robosigning have been pushed aside, will return to 2010 levels, and by the end of 2011 they’ll be accelerating. The already beaten down real estate market will take new hits, possibly driving prices down to levels not seen since the early 1990s. People who thought they had new jobs will suddenly find themselves unemployed again, as employers once again try to stem the bleeding while the economy falls back into stagnation and threatens to go into freefall.

I’ve been amazed over the past six months as I watch the news via Google News. Mortgage resets as a topic have virtually fallen off the media map. It’s like the issue just doesn’t exist for them. Well, by the time 2011 is ready wind up and 2012 waits in the wings, I fully expect that the media will once again be paying attention to them, as we all will.

GAO Finds Big Problems in Mortgage Modification Program
Government fails to act against loan servicers who fail to comply with program’s requirements
05/27/2011 | James R. Hood | ConsumerAffairs dot com

A study of the Home Affordable Modification Program (HAMP) confirms problems cited by consumer advocates, homeowners and others who have found the program routinely fails financially-troubled consumers trying to modify their mortgages and stay in their homes.

The Government Accountability Office (GAO) study found loan servicers losing documents, taking too long to make decisions and miscalculating homeowners’ income.

The study found that the Treasury Department had asked loan servicers to clear up the problems but has not sanctioned servicers who don’t comply and has not finalized any plans to punish servicers who continue to abuse homeowners.

The report echoes the findings of a December 2010 report by the Congressional Oversight Panel that called the program a failure. The findings also replicate the complaints that consumers have been filing with ConsumerAffairs dot com since the program’s inception.
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So is the robo-signing controversy pretty much all cleared up by now?

P.S. Bawn and bred in Brevard County, FL…

Foreclosure numbers fall, but market not in clear
Mortgage probe results will affect future loans
May 29, 2011 |

Foreclosed homes are typically sold “as is” and may cost thousands of dollars to bring the property up to standards of others nearby, such as this 2009 Palm Bay foreclosure. / Michael R. Brown, 2009 FLORIDA

Written by
JOHN McCARTHY

In April 2010, lenders filed 631 new foreclosure lawsuits in Brevard County.

A year later, just 212 such cases entered the local court system. That was the lowest number of foreclosure filings here since 2006, when the housing crisis was starting to unfold.

Last month’s figure was no one-month aberration. Foreclosure filings first began to drop sharply last fall, both locally and nationwide, and have continued their decline.

In the first four months of this year, lenders filed just 951 new foreclosures suits, compared with 2,881 during the same period in 2010, and 3,527 in 2009.

Does this mean the foreclosure crisis nearing its end?

Probably not. But how it plays out in the coming months and years might be very different than how it has unfolded up until now.

In the meantime, there are plenty of signs that the foreclosure situation is far from resolved.

Nearly a quarter of all mortgages in Florida are either delinquent or in foreclosure. Almost half of all homeowners in the state owe more than their houses are worth, making them more likely to default on loans. And while “short sales” — in which lenders agree to sales where they’ll receive less than owed — may ease the number of homes going into foreclosure, they still put downward pressure on home prices.

“The fact of the matter is that there is plenty of distressed properties on the market with a boatload more to come,” said Rick Sharga, senior vice president of RealtyTrac, a leading aggregator of foreclosure information.

But government probes over shoddy foreclosure practices, coupled with a glut of homes already foreclosed but not resold, could lead to banks slowing down the process of repossessing homes and pushing alternative solutions such as short sales.

‘Robo-signing’

The slowdown was first sparked last year by revelations of sloppy and improper legal work by lenders and their law firms. Most notable was “robo-signing,” the practice of having an employee — often one with little or no legal or financial training — sign hundreds or thousands of affidavits a day confirming they had reviewed foreclosure files and that the documents were complete and accurate.

News of such legal shenanigans forced lenders to fire these law firms — labeled “foreclosure mills” by critics — and reassign hundreds of thousands of foreclosure files to new lawyers who then had to review the volumes of paperwork already filed. That time-consuming process is ongoing.
…

Why close California State parks, when there potentially is a viable, Pareto-superior alternative, which is to charge sufficiently high entry fees to cover the cost of keeping them open? California risks throwing away tourism revenues by closing off access to public spaces for which at least some visitors would be willing to pay higher entrance fees.

By contrast to charging use fees at the entrance, relying on funding from the broken state budget is plainly a dumb idea.

California state park closures: Even parks that remain open are in bad shape
10:04 a.m. | Julie Small | KPCC

Because of a 25 percent cut to its budget, California’s Department of Parks and Recreation is planning to close one quarter of all state parks by next summer. While this has upset park advocates, the state parks system faces another serious issue: The parks that will remain open are in need of maintenance.

One of them is Malibu Creek State Park. Its beautiful red peaks, willow-lined streams and oak woodlands have appeared in scores of movies and TV shows, including Butch Cassidy and the Sundance Kid and MASH.

But under the sunny spotlight of a recent 90-degree day, a close-up reveals the starlet’s beauty is fading.

Not far from Mulholland Highway, a chestnut mare is corralled next to a sagging, white, early 20th century clapboard barn. The tin roof is torn in places, and much of the wooden siding is broken.

“It’s in need of historic evaluation and restoration,” says Suzanne Goode, a scientist with California State Parks. “We just do not have the funds to do it.”

This barn is just one of thousands of structures where maintenance has been deferred, according to Sara Feldman of the California State Parks Foundation. She says fixing out-of-order restrooms, crumbling buildings, and damaged habitats would cost $1.3 billion — money the state does not have.

“There’s all sorts of things related to infrastructure, sewage treatment, maintaining of trails and roads …that have been deferred and deferred because there isn’t any money for them,” says Feldman.
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If you want to keep parks open, increase the entrance fees, until the point where gate revenues cover the cost of serving a smaller visitor pool. Shutting down parks to everyone because current gate fees are excessively low to cover operating costs is a bad idea.

Vacationers may shun big-ticket vacations for parks, but will the parks be ready?
By Associated Press, Updated: Sunday, May 29, 9:01 AM

HELENA, Mont. — Closed parks, fewer services and more volunteer help are some of the ways states are coping with steep budget cuts that could limit vacations and long summer weekends for campers and outdoor lovers seeking recreation closer to home. Nationally Park Service budgets have also been hit, but the changes shouldn’t be as noticeable.

While park finances are weak, visitation is strong.

“It seems even $4 a gallon gas isn’t hurting but may even be an impetus to get people to think about the close-to-home state park vacation,” said Joe Elton, president of the National Association of State Park Directors and director of Virginia’s state park system. “I’m expecting Memorial Day weekend is going to be huge for us.”

State parks across the country are looking at serious cuts in services, fee increases or even closures as lawmakers look for ways to deal with their budget crises. The Oklahoma Tourism and Recreation Department closed seven state parks. In California, a lack of funding has threatened to force the shutdown of 70 state parks.

Other states have been creative in their efforts to avoid reducing services.

The Montana Fish, Wildlife and Parks Commission late last year refused state parks administrator Chas Van Genderen’s request to raise fees at some state parks after he said his division was in a “terrible fiscal situation.”

“In these tough economic times, people don’t stop using their parks,” Van Genderen said recently. “We’re going to be looking at any number of alternatives throughout the park system.”

That means using more volunteers in parks such as Lewis and Clark Caverns State Park near Bozeman and Pictograph Cave State Park near Billings, he said. Or exploring deals in which municipalities or counties take over the management or even ownership of some parks.

Montana starts taking online campground reservations this weekend, making it one of the last states in the nation to implement such a system.

“That was one of our responses to the tight economy,” Van Genderen said.

No matter how creative or austere the parks become, it will be difficult for the recreation areas to be completely self-sufficient, and state lawmakers need to recognize their obligation to keep up the nation’s wild places, Elton said.

“I don’t think it’s as appreciated as much as it should be that this is a birthright in America. We’ve preserved a good chunk of our wilderness and made it enjoyable to all our citizens,” he said. “I think the outlook is still dire in some places. (But) there is a growing recognition that we probably ought to not throw the baby out with the bathwater.”
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Foon Rhee: Dry times for many rainy day funds
By Foon Rhee
The Sacramento Bee
Published: Sunday, May. 29, 2011 - 12:00 am | Page 1E
Last Modified: Sunday, May. 29, 2011 - 9:43 am

Many of us were taught growing up to save for a rainy day, to sock away enough to cover the essentials – food, shelter and medicine – in case of emergency.

Local governments in the region did something similar, building up reserves over the years. But the rainy day that arrived turned out to be more like a Pineapple Express. In the last few years, during the worst recession since the Great Depression, many all but emptied their piggy banks to survive the deluge.

As the economy finally begins to recover, their level of reserves now is a pretty good measure of a city or county’s financial health. The range is eye-popping. Some, like Citrus Heights and Rancho Cordova, have substantial savings; others – Sacramento city and county, to name two – have little to nothing.

Established cities, especially those locked into longer-term labor contracts and burdened by pension obligations, are more likely to be struggling to rebuild savings in their general funds, which pay for basic services.

After three years of deep spending cuts and short-term patches, Sacramento County has no reserve to speak of; it has little flexibility as it wrestles with a $90 million budget shortfall for 2011-12. The county also is at risk of further downgrades to its credit rating that could eventually force it to quickly pay off bondholders – with cash it doesn’t have. “It’s very serious,” said interim County Executive Steve Szalay.
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Why are so many home buyers attracted to foreclosure homes these days? The thought that a former owner might return in an attempt to repossess what he views as rightfully his totally creeps me out.

Foreclosure attorney charged, held on bail
By Lily Leung, UNION-TRIBUNE
Tuesday, May 17, 2011 at 5:48 p.m.

A North County attorney whose license was suspended in April for telling clients to break into their foreclosed homes and retake possession of them was arraigned Tuesday on several felony and misdemeanor charges related to stalking, filing false crime reports and practicing law with a suspended license, authorities said.

The District Attorney’s office, in a San Diego Superior Court case, filed the charges against Michael T. Pines in the Vista courthouse. Pines, who has made national headlines for his unconventional tactics, is being held on a $227,000 bail. He has decided to represent himself in court.

Prosecutors charge that the 59-year-old for roughly two months had been advising an evicted family to retake possession of their home, and during that process, stalked and harassed the current occupants — Phillip Ladman and his family — as well as Ladman’s business partner, Ronald Bamberger.
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PB,

I know how you do love your clarifying equations. Have at it….

At a time when health insurance executives are drawing fire for excessive pay, Blue Cross Blue Shield of Massachusetts CEO Andrew Dreyfus told the Cape Cod Times on Thursday that he is declining his annual bonus.

Dreyfus said that while he believes in bringing CEO salaries into line, compensation is not a big contributor to premium costs at BCBS.

The 10 highest BCBS earners amount to one-tenth of one percent of the premium dollar, McQuaide said. He said the company’s 3,600 employees contribute two cents to the premium dollar.

http://www.capecodonline.com/apps/pbcs.dll/article?AID=/20110527/NEWS/105270317/-1/NEWSMAP

http://blog.chron.com/lorensteffy/2011/05/why-banks-fear-elizabeth-warren/

Why banks fear Elizabeth Warren

For more than a decade before the financial crisis, Warren warned in books and scholarly papers that the lending practices of the big banks would spell doom for the economy. She came to that conclusion after scouring hundreds of thousands of court filings as part of a sweeping research project to determine why personal bankruptcies were rising. Warren, a University of Houston grad and Oklahoma native, found that banks were willing to bankrupt their customers to make money in the short term.

San Diego listing of the day: The wishing price, square footage and location speak for themselves. (Hint: Some folks refer to 4S Ranch as “Foreclosure Ranch”…)

For Sale (MLS-listed)
$54,000,000
10546 HOLLINGSWORTH Way San Diego, CA 92127
Beds: 3
Baths: 2.5
Sq. Ft.: 1,957
$/Sq. Ft.: $27,593
Lot Size: -
Property Type: Residential, Detached
Stories: 2
View: Mountains/Hills
Year Built: 2005
Community: Amante in 4S Ranch
County: San Diego
MLS#: 110031256
Source: SANDICOR
Status: Active

On Redfin: 1 day
New Listing (24 hours)
MODEL PERFECT 3 bedroom PLUS loft “detached” home in Amante in 4S Ranch. Designer neutral palette with granite kitchen counters, surround sound, central vacuum, security system, intertom/stereo, BBQ Island with grill and fridge and portable spa in private, peaceful backyard. The home has an inside upstairs laundry room and also a loft which can be used as an office, workout room or can be made into a 4th bedroom. Designer window treatments and ceiling fans are also included. This is a MUST SEE!!

Oh look! The data supports my anecdotal. Quelle surprise!

New York State Association of REALTORS® Monthly Housing Survey
Median Sales Price of Existing Single-Family Homes

County ONONDAGA
Apr-09 $ 129,500
Apr-10 $ 128,295
Mar-11r $ 122,000
Apr-11p $ 128,750
Apr-09 to Apr-10 ‐0.9
Apr 10 to Apr 11 0.4
Mar-11 to Apr 11 5.5
April 2009-2011 ‐0.6

Oh Veeeee!!!!! Wouldn’t you refer to these numbers as statiscally flat?

As I’ve always done, I will tell you I still think prices will come back down because I watched it dip in 2008/9 when there was fear. The fear came from loss of jobs and drying up of credit. Sales are down 35% YOY but prices still have not budged. The 65% still buying are paying that base price and are buying anything nice quickly.

I don’t mind when you call me on not understanding something correctly. I don’t mind when you know more than me but don’t flippin come after me when I am telling the truth unless you’re armed w/some proof of your own. I don’t give a crap whether it feels good to you or not. I’m reporting what I see not how we emotionally feel about it.

Warning: pdf

http://nysar.com/content/upload/AssetMgmt/pdfs/monthmedian.pdf

It’s heartening to see Obama stand up for the disaster-stricken town of Joplin, but it will be interesting to see whether they rebuild to better withstand the inevitability of future EF5 tornado events. As I related in posts over the past week, it is possible to build tornado shelters to withstand 250 MPH EF5 tornadic winds. But I am not sure it is in the collective interest of politicians to do the best possible job of protecting communities from future disasters, as it costs more money, while fewer political points are scored if disaster strikes but nobody is harmed.

Obama tours tornado devastation, assures Joplin, Mo., it will be restored
Published: Sunday, May 29, 2011, 9:27 PM Updated: Sunday, May 29, 2011, 9:29 PM
McClatchy-Tribune News Service By McClatchy-Tribune News Service
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President Barack Obama talks to residents and views damage from the tornado that devastated Joplin, Mo., Sunday, May 29, 2011.

Steve Kraske, McClatchy Newspapers

JOPLIN, Mo. — On his first day back in the U.S. after a six-day diplomatic tour of Europe, President Barack Obama made a beeline for Joplin where he offered comfort and hope to a grief-stricken city where a devastating tornado struck a week earlier.

“There is no doubt in my mind that Joplin will rebuild,” Obama said at a memorial service at Missouri Southern State University here. “As president, I can tell you that your country will be there with you every single step of the way.

“We’re not going anywhere.”

A capacity crowd of 2,000 at the Taylor Performing Arts Center on the university campus greeted the president with a standing ovation and cheered him repeatedly throughout his 10-minute address.

His remarks and walking tour of some of the city’s hardest-hit neighborhoods came a week after the killed 142 people and destroyed much of Joplin.

“The cameras may leave. The spotlight may shift,” Obama said. “But we will be with you every step of the way until Joplin is restored and this community is back on its feet.”

Residents said they were thrilled that the president flew to their city and said his visit boosted morale.

“It’s nice to know he has our back,” said Angela Borchardt, 24. “That’s what I think the people of Joplin need to hear. He’s absolutely trying to take care of us at a time everything we have is gone.”

Nathan Gideon, 29, described the president’s visit as “awesome.”
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All tornadoes are local.

Ohio tornado total high this year; peak season still ahead
May 29, 2011

Tornadoes and severe weather have socked parts of Ohio this year, though without the loss of life other parts of the country have experienced. Historical data suggests we’re far from in the clear.

There have been 28 twisters in Ohio this year, the National Weather Service’s preliminary count shows. Only five full years have posted higher totals, and we haven’t even hit what has traditionally been the state’s peak tornado season, according to historical data provided to Central Ohio dot com by the weather service.

From 1986 through Feb. 28, 2011, 22 percent of all tornadoes in the state touched down in the three-week period between June 24 and July 13. Even though May has the third-highest tornado total in Ohio, more than half of the 495 recorded tornadoes struck from June through August, the data shows.

Geographically, the number of confirmed tornadoes reflects an expected pattern.

Lake Erie is the dominant force in weather for coastal communities and northeastern Ohio as a whole. For the eastern half of the state, it’s the Appalachian mountains and their foothills.

Mike Davis, meteorologist for 10TV in Columbus, said certain areas have topography that is more amenable to the formation of tornadoes.

“I tell people that weather is like real estate,” he wrote in an email. “It’s all location, location, location.”
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How is downsizing to a smaller abode going to work out for homeowners nearing retirement with negative equity? Based on underwater mortgage statistics I regularly see in MSM articles and post here from time to time, the affected group has to be large.

My parents are facing this situation, except their mortgage is fully paid off. But I would guess their home is probably off its bubble peak value by $20K or so. Luckily they most likely won’t need that lost money to survive the balance of their retirement years (they are in their eighties already).

Robert Powell

May 12, 2011, 1:10 p.m. EDT
Real-estate nightmare looms for retirees
Should you stay put, downsize or get out completely?
By Robert Powell, MarketWatch

BOSTON (MarketWatch) — Five short years ago, many learned men and women warned Americans against thinking that rising home prices would eliminate or lessen the need for them to save for retirement. Institutions and advisers alike advised people against relying on the equity in their homes to finance part or even all of their consumption needs in retirement.

Read August 2006 column: Will baby boomers tap home equity to survive retirement? Not necessarily.

Today, that’s no longer the case. In fact, we now have almost the opposite situation. With home prices falling for nearly five years, many Americans must consider what to do with their homes should prices continue to collapse and the equity in their homes — if they are still lucky enough to have any — disappears completely.

Should they stay in place and wait it out? Or should they bail out now and downsize? If they stay in place, should they pay down their mortgage, if they have one? And if they have a home-equity loan, should they refinance that or, if possible, accelerate the payments on that debt?

“As always, the answer to such questions is determined by the age, desires, financial situation and other characteristics of the owners,” said Barney Walsh, a pension- and retirement-planning consultant with Morgan & Walsh.

Others agreed. “The answer is [that] it depends on the individual situation,” said Nicholas Paleveda, an adjunct professor at the graduate tax program at Northeastern University. “If you have plenty of assets for retirement, there may be no reason to downsize. If you do not have sufficient assets for retirement, then selling your home to live in a smaller home may be appropriate.”
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Why is there clear evidence of capitulation in FL but not CA? Maybe Bill in Tampa has the right idea: If you don’t like the prices where you live, then move to where you like them. But my wife would not live in FL — no way, no how…

Bank-owned foreclosures account for a third of Palm Beach County’s 2011 home sales
By Kimberly Miller
Palm Beach Post Staff Writer
Updated: 10:47 p.m. Sunday, May 29, 2011
Posted: 10:14 p.m. Sunday, May 29, 2011

It took less than a week for interested buyers to home in on the two-story, five-bedroom foreclosure on Salt Water Creek Court west of Lantana.

Advertised as needing a little TLC - a pressure wash of the roof, fresh paint on the trim - the Savannah Estates home joins the ranks of Palm Beach County’s sought-after bank-owned properties, sales of which made up 31 percent of the area’s total purchases during the first part of this year.

With a list price of $316,000, a thick blanket of St. Augustine grass and a bathroom with a bidet, this home isn’t the typical foreclosure, which buyers have picked up for an average price of just $130,393.

Still, with competition high for distressed sales, it’s likely to sell fast.

“I’ve already had two people call me just from the signs in the window,” said James Smith, who works for Home Run Real Estate in Lake Worth, which is listing the property for federal mortgage backer Freddie Mac.

According to RealtyTrac, a real estate analysis company based in Irvine, Calif., foreclosures accounted for 32 percent of all home sales in Florida during the first quarter of the year, selling for an average price of $97,450.

Nearly 28 percent of home sales nationally were of foreclosed properties during the same period.
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