The Housing Bubble

Liars Are Realtors® (my apologies to liars)

Donation! Will do, Ben.

sure, and thanks for the good work . Snow is hitting the ground here in the mountains , maybe we’ll get that winter ,yet.

Done. Give a hint later in the week if you are coming out alright…

Apparently lots of former middle-class Californians have given up in recent years on California dreamin’.

Published: April 21, 2012 7:46 a.m.
The Great California Exodus
By Allysia Finley / The Wall Street Journal

‘California is God’s best moment,” says Joel Kotkin. “It’s the best place in the world to live.” Or at least it used to be.

Mr. Kotkin, one of the nation’s premier demographers, left his native New York City in 1971 to enroll at the University of California, Berkeley. The state was a far-out paradise for hipsters who had grown up listening to the Mamas & the Papas’ iconic “California Dreamin’” and the Beach Boys’ “California Girls.” But it also attracted young, ambitious people “who had a lot of dreams, wanted to build big companies.” Think Intel, Apple and Hewlett-Packard.

Now, however, the Golden State’s fastest-growing entity is government and its biggest product is red tape. The first thing that comes to many American minds when you mention California isn’t Hollywood or tanned girls on a beach, but Greece. Many progressives in California take that as a compliment since Greeks are ostensibly happier. But as Mr. Kotkin notes, Californians are increasingly pursuing happiness elsewhere.

Nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.
…

Though it is still a week early to “sell in May and go away,” he who sells first, sells best.

Stock Futures Slide Amid Debt, Economic Worries
By Adam Samson
Published April 23, 2012
FOXBusiness

Stock-index futures followed European markets deep into the red on Monday as traders fretted about political developments that threaten to derail progress on fighting Europe’s debt crisis and weak economic data.

Today’s Markets

As of 8:18 a.m. ET, Dow Jones Industrial Average futures fell 135 points to 12853, S&P 500 futures dipped 14.9 points to 1360 and Nasdaq 100 futures dropped 24 points to 2650.

Market participants had a slew of headlines from across the globe to digest to kick off what may be a busy trading week.

Markit’s eurozone PMI gauge suggested the 17-member currency bloc’s economic output contracted at the swiftest pace in five months in April. The measure came in at 47.4, down from 49.1 in March. Readings above 50 point to expansion, while those below indicate contraction.

Germany, Europe’s powerhouse economy, saw activity in its important manufacturing sector contract at a the swiftest pace in 33 months. Meanwhile, France’s key service-sector activity slumped to a six-month low.

“Germany’s economy continued to rest on a knife edge of recession in April, with modest service sector growth only just counterbalancing the escalating manufacturing downturn,” Tim Moore, a senior economist at Markit said in a note accompanying the data.
…

Got Treasurys?

ft dot com
April 23, 2012 1:16 pm
Eurozone angst spooks investors
By Hugh Carnegy in Paris, Matt Steinglass in Amsterdam and FT Markets reporters

Markets reacted nervously on Monday to the socialists’ first-round victory in France’s presidential election, as the eurozone crisis claimed another victim on Monday with the collapse of the Dutch government.

Analysis of François Hollande’s early lead – and the strategy he and Nicolas Sarkozy might adopt towards the far-right National Front’s unexpectedly large support – came amid a flood of statistical data underlining the tenacity of the eurozone’s problems.

The European Union’s statistics office said that although the 17 member states of the eurozone had reduced their deficits from 6.2 per cent of gross domestic product in 2010 to 4.1 per cent in 2011, overall debt still rose 1.9 percentage points to 87.2 per cent of GDP – the highest since the euro was created in 1999.

In The Netherlands, Mark Rutte, prime minister, will tender his government’s resignation at a meeting with Queen Beatrix later on Monday, clearing the way for elections.
…

Greek tragedy continues…

The Associated Press April 20, 2012, 3:56PM ET
Bond swap hammers Greek banks
By DEREK GATOPOULOS and NICHOLAS PAPHITIS
ATHENS, Greece

Four major Greek banks on Friday announced combined losses of (EURO)28 billion ($36.9 billion) in 2011, hammered by a recent bond-swap deal between Greece and with private creditors that leaves local lenders in pressing need of promised bailout money.

Although the debt restructuring occurred this year, Greece’s National Bank, Alpha Bank, Eurobank and Piraeus Bank incorporated the losses into last year’s results.

Hardest hit was National Bank, the largest Greek lender by assets, which said it had suffered an operating loss of (EURO)289 million ($381.25 million) last year, but a total loss of (EURO)12.3 billion ($16.23 billion) when including the damage from the debt swap.

“It is clear that the Greek banking system is suffering the consequences of the fiscal crisis,” NBG’s CEO Apostolos Tamvakakis said in a statement.

“It faces losses that amount to tens of billions of euros, mainly because of the debt exchange for Greek government bonds, and relatively smaller sums … from anticipated future losses in banks’ loan portfolios.”
…

Intelligent Investing
4/19/2012 @ 12:58PM
Beware: A Chinese Recession Is Coming
A. Gary Shilling, Contributor

This story appears in the May 7, 2012 edition of Forbes magazine.

My Feb. 28, 2011 column predicted that in China “a hard landing is likely” and “a recession in Europe is inevitable.” Both are ­unfolding.

China just reported its slowest quarter of GDP growth since 2009, with the economy growing at an 8.1% annualized clip from January through March of 2012, down from 8.9% in the final three months of 2011. Growth has been slipping steadily from the 11.9% pace in the first quarter of 2010, and Beijing seems unable to stop the slide at this stage of the game.

China’s response to the Great ­Recession was massive fiscal stimulus that amounted to more than 12% of GDP, twice the relative size of the U.S. package. Shock therapy worked last time around for China, nearly doubling GDP growth within a year, but it came with strong inflationary side effects. Food prices rose by double-digit percentages, stinging Chinese who live on subsistence ­incomes. Stocks stunk, Chinese savers couldn’t invest abroad, and banks paid negative deposit rates.

Housing boomed, since alternative investments were few, but prices rose beyond the reach of many would-be buyers. So the government tightened property financing.

They got what they wanted: House prices fell for the fifth consecutive month in February. Don’t look for a turnaround. Premier Wen ­Jiabao said in March that house prices “are still a long way from an appropriate level.”

Meanwhile, China’s central bank hiked bank reserve requirements from 15.5% in early 2010 to 21.5% last year. That’s a caveman tactic and amounts to credit allocation. The People’s Bank raised rates only 1.25 percentage points to keep cheap loans flowing to inefficient state-owned enterprises that ­employ around a quarter of Chinese and produce 45% of GDP.

What chance does the nonindependent Chinese central bank have in ­effecting a soft landing when the ­independent U.S. Fed, with all its ­sophisticated tools, tried 12 times in the post-World War II era to cool the economy and avoided a recession only once, in the mid-1990s?

Manufacturing is already in ­contraction, along with retail sales. Exports dominate consumer spending, which is a tiny 34% of GDP. In Brazil it’s 58%, 60% in India, 58% in Germany and 71% in the U.S.
…

Euro zone slump deepens unexpectedly in April
By Andy Bruce
LONDON | Mon Apr 23, 2012 8:01am EDT
An illustration picture shows a one Euro coin being melted by a smith in Skopje, December 6, 2011. REUTERS/Ognen Teofilovski

(Reuters) - The euro zone’s business slump deepened at a far faster pace than expected in April, suggesting the economy will stay in recession at least until the second half of the year.

Chinese factories enjoyed their best performance this year, the latest purchasing managers indexes (PMIs) also showed on Monday, but economists focused on the euro zone’s grim outlook which was worse than any projection in a Reuters poll.

The Markit PMI fell to 47.9 from 49.2 in March, a five-month low and confounding the forecast for a rise to 49.3.

Optimism from this weekend’s deal to boost the International Monetary Fund’s crisis-fighting firepower quickly evaporated and worried investors sold the euro and bought safe-haven German and U.S. government bonds.

“Today’s dismal PMI figures clearly indicate that the euro zone economy remains in dire straits,” said Martin Van Vliet, senior economist at ING.

“Our base case scenario is still for a gradual return to modestly positive growth in the second half of this year, but with the lingering debt crisis and the ongoing drag from fiscal policy, the risks are clearly skewed to a more protracted recession.”

European factories had their worst month since June 2009. Companies said their order books were shrinking and they were cutting jobs in reaction to falling demand.

The overall index slipped further below the 50 threshold that divides growth from contraction.

Politics added to the sense of concern about Europe on Monday. France’s presidential election was thrown wide open by the surprisingly high score of a far-right candidate in the first round vote while the Dutch government was set to resign in a crisis over budget cuts.

LOSING MOMENTUM

The United States is the only Western economy making a significant contribution to global economic growth but surprisingly weak employment data last week raised questions about whether this will continue.
…

Done, Ben.

You, this blog, and the motley cure that dwells here have been my lighthouse since 2006.

- Realtors are liars
- Cash is king
- Drink box wine (measure carefully!)

Homebuilder Outlook Plunges, Reversing Spring Rebound
Published: Monday, 16 Apr 2012 | 10:00 AM ET
By: Diana Olick
CNBC Real Estate Reporter

In a stark reversal during the heart of the spring housing market, confidence among the nation’s homebuilders dropped in April to levels not seen since January.

An association index measuring sentiment fell three points, changing course after seven straight months of gains.

It now stands at twenty-five; fifty is the line between positive and negative sentiment.

“What we’re seeing is essentially a pause in what had been a fairly rapid build-up in builder confidence that started last September,” said National Association of Home Builders Chief Economist David Crowe in a release.

“This is partly because interest expressed by buyers in the past few months has yet to translate into expected sales activity, but is also reflective of the ongoing challenges that are slowing the housing recovery—particularly tight credit conditions for builders and buyers, competition from foreclosures and problems with obtaining accurate appraisals,” the release goes on to say.

The three components of the index each posted a decline, both current sales and sales expectations down three points and buyer traffic down four points from March.
…

Regulator seeks speedier action on troubled US mortgages
WASHINGTON | Tue Apr 17, 2012 6:38pm EDT

(Reuters) - The regulator for Fannie Mae and Freddie Mac on Tuesday announced a new policy that aims to speed up the process mortgage servicers apply when dealing with distressed loans backed by the two U.S. government-run companies.

The Federal Housing Finance Agency said it has directed both Fannie Mae and Freddie Mac to develop “enhanced and aligned strategies” for securing a so-called short sale, in which the servicer or bank accepts less than the balance owed on a property, the regulator said in a statement.

FHFA Acting Director Edward DeMarco said the new policy will “prevent foreclosures, keep homes occupied and help maintain stable communities.”

Short sales often benefit neighborhoods clear out stagnant properties that may have a negative impact on home values that have already dropped more than 30 percent from their peak in 2006. The Obama administration has urged the mortgage industry to make such sales instead of starting the foreclosure process.

The new timeline will require servicers, who collect borrowers’ mortgage payments, to respond to a request for a short sale within 30 days and to make a final decision on the property at the end of 60 days.

The banks will also need to give weekly updates to any borrowers that might be aided by the short sale if the offer is under review.

The short sale effort will begin in June and then progress in stages as the mortgage industry reviews the new policy, FHFA said.
…

Silence can be deafening.

March 28, 2012, 7:04 PM
Geithner: Fannie and Freddie Favor Loan Write-Downs
By Alan Zibel and Jeffrey Sparshott

Treasury Secretary Timothy Geithner said Wednesday he believes that mortgage giants Fannie Mae and Freddie Mac favor writing down loan balances for troubled U.S. homeowners, despite resistance from their regulator.

Geithner’s remarks at a Senate subcommittee hearing add fuel to an ongoing debate over whether the government-controlled mortgage finance firms will reduce loan balances. They also highlight frustration among top Obama administration officials about their inability to influence the regulator of the mortgage giants, the Federal Housing Finance Agency.

“I think Fannie and Freddie themselves are actually pretty supportive of this,” Mr. Geithner said. Their regulator, he said “has been a little more conservative.”

The Obama administration has stepped up pressure on the regulator for Fannie and Freddie to grant reductions, which it doesn’t currently allow. In January, officials said they would triple the amount of taxpayer money that investors — including Fannie and Freddie – receive when they reduce loan balances.

The housing regulator, along with executives at Fannie and Freddie, has been evaluating the incentives the administration has offered. But the agency’s acting director, Edward DeMarco, has resisted doing so, saying that it may not make economic sense for Fannie and Freddie and could encourage more borrowers to default.

An FHFA spokeswoman did not comment on Geithner’s remarks but said the agency plans to make a decision on the incentives next month. Representatives of Fannie Mae and Freddie Mac declined to comment.

Mr. Geithner’s remarks underscore how tensions between the administration and Mr. DeMarco have grown in recent months.

“We have been encouraging Fannie and Freddie to take another look at the math, the economics of it,” Mr. Geithner said. ”We think there is a strong case in some circumstances to add principal reduction as part of their strategy to maximize return to the taxpayer.”
…

April 23, 2012, 8:39 a.m. EDT
Gold falls on dollar gains, Europe, China worries
By Barbara Kollmeyer, MarketWatch

MADRID (MarketWatch) — Gold and silver prices fell in electronic trade during Monday business hours in Europe, as the dollar rose on risk aversion amid worrying political developments in the euro zone and as China data showed continued contraction for the manufacturing sector.

Gold for June delivery (GCM2 -0.95%) fell $13 to $1,629.80 an ounce, down from the contract’s settlement at $1,642.80 Friday on the Comex division of the New York Mercantile Exchange, losing 1% on the week.
…

Index Futures:
S&P 500 1,361.00 -14.25 -1.04%
DOW 12,854 -134.00 -1.03%
NASDAQ 2,651 -23.00 -0.86%

There’s a slump in future(s)

Europe’s politics and lagging manufacturing in China filter into U.S. stock futures.

Would now be a good time to buy the dip?

Mortgage-Tax Break Curbed by Housing Slump

By Amanda J. Crawford - Apr 20, 2012 12:01 AM ET

The cost of one of the country’s most expensive individual tax breaks is shrinking as the number of Americans who own homes declines and mortgage rates hover near historic lows.

Federal tax filers claimed almost $71 billion less in mortgage interest deductions for 2009 than for 2007, a 14 percent drop, according to the Internal Revenue Service. That trend continued in 2010, the IRS said in a report last month, as preliminary data showed that lower interest rates, home ownership and home prices curbed use of the tax deduction by 7.2 percent.

“People are walking away and losing their homes and they no longer have the mortgage interest deductions,” said Andrew Hanson, an assistant professor of economics at Georgia State University who has researched the tax break. “That’s got to be a big part of it.”

Tax revenue fell as unemployment rose during the most severe recession since the 1930s, and the housing market was shaken by 16 million foreclosures since 2007. On the flip side were gains from declining use of the mortgage deduction, saving the U.S. government $13 billion to $26 billion from 2007 to 2010, according to an estimate from Hanson.

The effects extend to states, more than half of which allow the deductions either on their own or through use of federal itemization. In Arizona, officials say less use of such deductions was behind an 8 percent rise in tax liability for state residents in 2010 even as unemployment climbed to 10.8 percent that year.

http://www.bloomberg.com/news/2012-04-20/mortgage-tax-break-curbed-by-housing-slump-as-states-get-reward.html - 181k -

The Great California Exodus

A leading U.S. demographer and ‘Truman Democrat’ talks about what is driving the middle class out of the Golden State..

THE WEEKEND INTERVIEW
April 20, 2012, 7:19 p.m. ET

By ALLYSIA FINLEY

‘California is God’s best moment,” says Joel Kotkin. “It’s the best place in the world to live.” Or at least it used to be.

Mr. Kotkin, one of the nation’s premier demographers, left his native New York City in 1971 to enroll at the University of California, Berkeley. The state was a far-out paradise for hipsters who had grown up listening to the Mamas & the Papas’ iconic “California Dreamin’” and the Beach Boys’ “California Girls.” But it also attracted young, ambitious people “who had a lot of dreams, wanted to build big companies.” Think Intel, Apple and Hewlett-Packard.

Now, however, the Golden State’s fastest-growing entity is government and its biggest product is red tape. The first thing that comes to many American minds when you mention California isn’t Hollywood or tanned girls on a beach, but Greece. Many progressives in California take that as a compliment since Greeks are ostensibly happier. But as Mr. Kotkin notes, Californians are increasingly pursuing happiness elsewhere.

Nearly four million more people have left the Golden State in the last two decades than have come from other states. This is a sharp reversal from the 1980s, when 100,000 more Americans were settling in California each year than were leaving. According to Mr. Kotkin, most of those leaving are between the ages of 5 and 14 or 34 to 45. In other words, young families.

“Basically, if you don’t own a piece of Facebook or Google and you haven’t robbed a bank and don’t have rich parents, then your chances of being able to buy a house or raise a family in the Bay Area or in most of coastal California is pretty weak,” says Mr. Kotkin.

http://online.wsj.com/article/SB10001424052702304444604577340531861056966.html - 172k

How to bankrupt a city - The promise of easy money and public unions…

There is only one solution of course. Declare bankruptcy, wipe out the debts and cancel the public union contracts.

Coming soon to a city near you…
———————

Here Come the Municipal Bankruptcies
Michigan Capitol Confidential | 4/15/2012 | Anne Schieber

The city of Allen Park has a $2.6 million budget deficit this year and doesn’t know how it’s going to pay for it.

The city is asking taxpayers for more money but they’ve said no before and there’s no reason to believe they’ll be in any more of a mood when the May 8 millage election arrives.

Over the past 10 years, this Detroit suburb of just over 28,000 people suffered from the same malaise afflicting other Michigan cities. Its population dropped, in this case, 4 percent. Property values shrunk nearly 50 percent. Instead of doubling down by restructuring and cutting expenses, the city made a bet: Enticed by a state law requiring taxpayers to reimburse movie producers 42 percent of their expenses of movies shot in Michigan, the city decided to get into the movie business.

Without voter approval or an appraisal, Allen Park bought an old Visteon plant (originally Montgomery Ward’s main distribution center) to turn into a movie making enterprise to be called Unity Studios. It paid nearly $40 million for the property and improvements.

The movie studio never happened. There was no grand opening. No job fair. No prospects to pay off the millions of dollars in bonds the city sold to buy the property.

Bob Armstead and a number of angry residents have since spent countless hours trying to figure out how taxpayers were hoodwinked. He calculates that the city will be stuck with the mess for 28 years and ultimately it will cost taxpayers more than $100 million.

“I think it’s needed. I think it’s a wakeup call for everybody,” Sisko said at the March 13th council meeting. Council members were especially dismayed when the city’s biggest unions, those representing police officers and firefighters, refused to reopen their contracts for concessions.

The contracts have been a special irritant to taxpayers. Firefighters and police can retire at age 52, can factor in the best three of 10 years in salaries for pension formulas and receive full medical, dental and optical care for life. Members of the two unions contribute 6 percent of their salary to the pension program. According to the attorney representing the firefighters’ union, the city owes the pension fund $26 million and has no money set aside to pay for retiree health benefits.

How did everyone else celebrate earthday? I took public transportation (plus a lot of walking in the rain) to my social and cultural activities.

I also bought my nephew a used birthday present on ebay. Love it when someone with a good version of an item I want doesn’t check the comps before listing. Of course, none of the others seem to be selling, so perhaps his price was “better” despite being less than half of any of the other one, even though his looked to be in better shape. Gosh, I almost feel like I got a good deal on house.

STUDENT DEBT THREAT
Ever-increasing burden of college loans represents a gathering storm for economy, officials say
By Becky Yerak Chicago Tribune
12:01 a.m., April 23, 2012
Updated 3:47 p.m. , April 20, 2012

Move over, mortgages. Get out of the way, Greece. Another economic doomsday scenario is emerging.

Student loan debt has reached about $870 billion — exceeding credit cards and auto loans — and balances are expected to continue climbing, the Federal Reserve Bank of New York said last month.

Borrowers age 60 and above accounted for about 5 percent of that debt — and still owe about $36 billion in student loans. More than 10 percent of those loans are delinquent. The share for Americans age 50 and older is 17 percent. As a result, consumer advocates say, it is not uncommon for Social Security checks to be garnished or for debt collectors to harass borrowers in their 80s over student loans that are decades old.

In February, the National Association of Consumer Bankruptcy Attorneys referred to a “student loan ‘debt bomb’ ” and wondered if it was shaping up to become “America’s next mortgage-style economic crisis.” Such a burden could crimp an already weak economy.

“Student debt poses a large and growing threat to the stability of our economy,” Illinois Attorney General Lisa Madigan testified March 20 before a U.S. Senate judiciary subcommittee hearing in Washington on the looming student debt crisis.
…

ECONOMY
April 22, 2012, 8:36 p.m. ET

Urban Center Is Budget Hole
Kansas City, Mo., Must Set Aside Millions as Complex Falls Short of Projections
By ELIOT BROWN
[KANSAS3] Steve Hebert for The Wall Street Journal

Kansas City’s Power & Light District has lured tenants but has produced lower-than-expected sales and property taxes.

KANSAS CITY, Mo.—The tab is mounting for this Midwestern city on a bet it made during the real-estate boom on an $850 million entertainment district meant to breathe new life into its struggling downtown.

While the eight-block restaurant, nightclub and retail complex named the Power & Light District is mostly complete, traffic and sales are well below initial projections when construction started in 2006.

Such woes are common among real-estate developers who imagined values and rents in a fast-growing U.S. economy would continue to rise for years.

But the Power & Light District stands out because it was financed through a technique that seemed like it would pay for itself. Kansas City directed future sales and property taxes in the district to pay back the $295 million in bonds that the city issued for the project, which went toward infrastructure and to directly support the development. In the event there weren’t enough taxes, the city agreed to pick up the difference.

Today, the project, which sits near the onetime headquarters of Kansas City Power & Light Co., generates less than one-third of what is needed to cover the debt service on the bonds. The city is setting aside $12.8 million in its budget for the fiscal year that starts next month to cover the gap, a notable hole in a $1.3 billion budget that calls for $7.6 million in cuts to the fire department.

Given the sluggish real-estate recovery, the city expects similar gaps to persist for years. “Our street maintenance has had to come down; our budget for neighborhood and community services has had to come down,” says Scott Wagner, a first-term member of the city council. “You have a very large expense associated with a certain project, and that can’t help but stand out.”
…

“Stretching the central bank’s credibility” - what exactly does that mean?

Draghi’s ECB Rejects Geithner-IMF Push for Measures
By Jeff Black, Rainer Buergin and Meera Louis - Apr 23, 2012 5:47 AM ET
Bloomberg

European Central Bank officials led by President Mario Draghi resisted calls from the International Monetary Fund and U.S. Treasury to do more to stem the debt crisis roiling the euro-area economy.

Further measures to quell financial turmoil in Spain risk stretching the credibility of the bank’s monetary policy, Luc Coene, ECB Governing Council member and governor of Belgium’s central bank, said in an interview on April 21.

“We have done what we can do so far within our mandate and within the possibilities we have,” he said in Washington. “The only thing we could do is overstretch ourselves and then we would even lose the credibility we have at that moment.”

http://www.bloomberg.com/news/2012-04-22/draghi-s-ecb-rejects-geithner-imf-push-for-measures.html

KANSAS CITY, Mo.—The tab is mounting for this Midwestern city on a bet it made during the real-estate boom on an $850 million entertainment district meant to breathe new life into its struggling downtown.

All these investments depend on people with piles of cash from equity extraction. Those people are gone.

Europe’s Debt Crisis Getting Worse, Pimco’s El-Erian Says
By Susanne Walker and Kathleen Hays - Apr 11, 2012 3:21 PM ET
Bloomberg

Europe’s fiscal crisis is getting worse and will keeping fueling market instability, according to Pacific Investment Management Co.’sMohamed A. El-Erian.

“People are realizing that the tranquility that we have is bought rather than earned,” El-Erian said. “It depends on the ECB putting in liquidity in order to calm markets. At the first indication that the ECB may not be committed to this, people get really nervous.”

http://www.bloomberg.com/news/2012-04-11/europe-s-debt-crisis-getting-worse-pimco-s-el-erian-says.html

Want to know why I spend the majority of my time blasting Republicans? Because they do/say most of the stupidest things.

Note to Kansas Republican leadership: You don’t offer buyouts to people who have jobs that are in demand, and/or whose replacements will be even more expensive.

“Kansas State hospitals face staffing crisis”

http://tinyurl.com/7fj577u

A former co-worker got his nursing degree in 2009. He worked for the state at the local juvenile detention center for about a year, then left (and doubled his pay) at a local hospital.

I mentioned about 2 weeks ago that I resolved to find a new firm to work for since my firm decided not to shutter its real estate department/title company. After a year of cutbacks and layoffs, combined with a salary freeze/reduction for the younger workers, I decided it was the last straw. RE isn’t going to make a comeback anytime soon and, even if it does, it won’t be in exurban areas such as where my firm is located (Bel Air, MD).

I found a new job that’s as good as I could expect in a lot of ways. They’re very busy and very profitable–no real estate sink hole where all the profits from other practice areas get flushed.

Only downside? I still have to commute to the suburbs, about 30 min each way. It’s in Columbia, MD and public transit would take 3.5 hrs according to Google, whereas a car takes 29 min. And biking isn’t an option because I’d have to go through downtown at rush hour because you obviously can’t take a bike through the Harbor Tunnel. I can’t complain too much about this–this job pays better and has better long term prospects, not to mention not having to hear about “real estate is going to make a comeback” as an excuse for why I need to take a salary cut to help them stay in business. Just more motivation to keep working on moving to one of the larger firms in the city or to start my own practice in the city (I don’t have enough experience yet to learn some practice areas AND worry about generating business).

OMFG

The Onion
http://www.theonion.com/articles/florida-state-university-to-phase-out-academic-ope,5425/

REAL News
http://www.tampabay.com/blogs/gradebook/content/forbes-uf-athletic-budget-grows-while-computer-science-program-eliminated

Don’t buy on the dip, buy on the crater.

HBB Fundraising Week

One Benjamin on the way!

Just wanted to say that during my job search the past 2 weeks, I came up against quite a few air-headed “chicky poos” who inexplicably seem to be in charge of setting up interviews at many places. If you’re hiring someone who will be part of the revenue-generating business you’re trying to sell, why would you put some minimally-skilled, uneducated person in charge of the hiring process?

I understand that the lawyers (partners) get to make the final call, but if you delegate the “narrowing down” process to someone who just cut and pastes questions via email, it gives a very bad first impression. I didn’t take any of these firms seriously.

Another thing I noticed that seemed not to make sense was I ran into a couple law firms that have absolutely atrocious insurance. As in, high deductible plans or plans where only the employee is covered.

I’m going to use my wife’s excellent insurance (she’s a teacher) so it didn’t matter to me directly. However, this also gave me a very bad impression of those firms as low-end sweatshop mentality places. One of them actually does a lot of foreclosure work for Bank of America. They must have a fairly low profit margin, because they’re clearly only concerned with getting someone who will do the work at a minimally proficient level (or worse), rather than actually growing the firm.

OK, so those were just some observations I had… clearly the mantra that “first impressions matter” goes both ways and some firms/companies either don’t realize it or don’t care. And I can’t imagine the kind of people who would be satisfied working at these places. The turnover must be tremendous.

Those psychological questions in the HR (Human Remains) screening process are just dumb. I wish I could speak to my future direct report.

A bunch of stats and another rant on “Zero Hedge” about fat, lazy Americans. I’d just like to point a couple of things out….

-The writer discusses all of the people applying for disability benefits after their unemployment runs out…….this is proof that they are fat and lazy.

Maybe it’s a sign of something else……….like, maybe, there are NO JOBS. Especially, if you are:

-Over 45 (too much training/experience, won’t work for slave wages and will bail if and when a better job comes along), or

-Under 30 (not enough experience, costs too much to train).

Also says that Americans are out of work because they are stupid, and aren’t capable of getting advanced science or technical degrees. Says if you are a “specialist” you don’t have a problem finding work.

It’s actually the opposite. Employers are looking for “specialized” people that don’t exist. Either because they don’t want to pay for any training, or the want to use the “We can’t find qualified American…..s” spiel to justify hiring an H-1B. Or a combination of both.

I don’t know where he’s from, but around here the jobs that require advanced science and technical degrees are even scarcer that run of the mill McJobs. And pay less than they did five years ago…….25-40% less.

Globalization. Great if you are worried about the standard of living in China and Mexico, or if you are a business looking to increase profits by cutting costs. Not so great for anyone else.

“When the only tool you have is a hammer, every problem looks like a nail.”

The Northern European advocacy of fiscal restraint, lower debt and austerity versus liquidity injections and central bank purchases of government bonds. I think the Europeans have two bad choices. They have to choose the lesser of two evils.

Europe’s Austerity Backlash Gathers Steam in Merkel Test
By James G. Neuger - Apr 23, 2012 11:44 AM ET
Bloomberg

Europe’s backlash against austerity gained momentum, in a challenge to German Chancellor Angela Merkel’s budget-cutting prescriptions for resolving the debt crisis.

French President Nicolas Sarkozy lost the first round of his re-election bid and a revolt against extra spending cuts in the traditionally budget-conscious Netherlands propelled Prime Minister Mark Rutte’s coalition toward an early breakup.

Hollande pressed the advantage today, telling a rally in Quimper on the Brittany coast that a Socialist victory would “be the end of imposing austerity everywhere, austerity that brought desperation to people throughout Europe.”

This kind of message is what people want to hear. But does it make any sense?

http://www.bloomberg.com/news/2012-04-23/europe-s-austerity-backlash-gains-steam-in-challenge-to-merkel.html

“Prices for bottom-tier properties have improved since 2011, reports Zillow, while top-tier prices keep falling.”

So long as top-tier prices are falling, isn’t this also a good time to rent?

Mortgage payments at lowest level in decades
By Beth Braverman @Money April 23, 2012: 11:24 AM ET

(Money Magazine) — For today’s homebuyers, the weight of the monthly mortgage bill is the lightest it’s been in decades.

Put 20% down on a median-priced ($154,400) existing home, and your payment will come to $616 a month, only 12.1% of the median U.S. family income.

In 98 of the top 100 metro areas, it’s now cheaper to buy than rent.

“If you have good credit,” says IHS Global Insight economist Patrick Newport, “this is the best time in 40 years to buy.”

Want to trade up? You may think the buyer of your current home is getting a deal, but you might get an even better one on your next place.

Real estate’s best-kept secret

Prices for bottom-tier properties have improved since 2011, reports Zillow, while top-tier prices keep falling.

Want to invest? To get the best rate (a quarter to a half point higher than for your primary residence), you’ll have to put at least 25% down, according to federal guidelines.
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For all of the cat lovers here:

http://www.youtube.com/watch?v=0M7ibPk37_U

Very interesting. An orange piece of paper was pasted on the door to another apartment. A notice of a court date and the reason - failure to pay rent. These apartments are on one-year leases. There’s all kinds of scary language in the lease about what happens to people who don’t pay off the entire year.

Anyway - this person has got to go to court. If they don’t show up, they’ll get a contempt of court or some such and get jailed.

I thought wow - what about people with mortgages who just decide to walk? No harm, no foul? Just walk away? No court dates? No contempt of court? No risk of jail time?

We hear all the sob stories about homeowners. A renter? Don’t pay, and not only will your stuff wind up in the street in a few weeks time, but you’ll have to show up for court. No “just walk away” there. But precious few sob stories.

Related story:
http://www.cbsnews.com/8301-505144_162-57417654/jailed-for-280-the-return-of-debtors-prisons/

Global shares fall on European political uncertainty
By Chikako Mogi
TOKYO | Mon Apr 23, 2012 8:28pm EDT

(Reuters) - Asian shares fell on Tuesday as political uncertainty and disappointing data in Europe raised fears the euro zone could struggle to push through austerity measures and may stay in recession until late in the year.

After a Sunday vote in France placed the presidential race wide open, Dutch Price Minister Mark Rutte on Monday tendered his government’s resignation in a crisis over budget cuts, creating a political vacuum in one of the euro zone’s most stable nations.

U.S. stocks fell over 1 percent and European equities plunged to a three-month low on Monday, hurt by data showing the euro zone’s business slump deepened at a far faster pace than expected in April.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS inched down 0.2 percent while Japan’s Nikkei average .N225 opened down 0.8 percent.
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China is going hog wild building malls, just in time for a recession. This is definitely going to end badly.

April 23, 2012, 10:36 p.m. EDT
China tops world in shopping mall construction
By Chris Oliver, MarketWatch

HONG KONG (MarketWatch) — China dominates the world in terms of shopping-mall construction, with some cities little-known in the West throwing up retail centers on a scope unmatched anywhere else in the world, as developers place high expectations on the spending power of the Chinese consumer.

In terms of shopping-center space under construction, China holds the top three spots worldwide, and accounts for 8 of the cities that make up the top 10, according to CBRE, which released the data as part of its global retail survey earlier last week.

The world’s busiest mall-construction hub, Tianjin, a major northeastern Chinese port city near the capital Beijing, has more shopping-center space under construction than the entire existing mall-space inventory of any single European city, apart from Paris and Moscow, according to CBRE.

About 16 projects are in various stages of completion, entailing 2.45 million square meters (26.4 million square feet), according to the CBRE data.

Shenyang, an industrial city about an hour’s train ride from North Korea, ranks No.2 globally in terms of retail construction. The provincial capital, which also serves as a commercial hub for trade with Russia, Japan and the Koreas, is building 2.18 million square meters of retail space in 18 shopping development projects.

Also bustling with retail construction, and ranking third globally, is Chengdu, the capital of Sichuan province in China’s southwest. The city, home to 14 million residents, is located near the region devastated by a major earthquake in 2008, and it has about 24 retail development projects underway, equivalent to around 1.89 million square meters, according to CBRE.

Wuhan a provincial capital of more than 10 million in China’s central interior, ranked fifth, or just slightly behind Abu Dhabi. Nearly one million square meters of retail developments are underway in the city, according to the data.

Sebastian Skiff, executive director at CBRE Asia in Beijing, said at first glance, the nationwide numbers appear to be a “scary” symptom of the overbuilding that has been a part of China’s rapid growth.
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April 22, 2012, 9:52 p.m. EDT
New jail threat for Hong Kong bankers
Commentary: Are they scapegoats for mainland China equity fraud?
By Craig Stephen

HONG KONG (MarketWatch) — It is doubtful many would shed tears if a few unpopular bankers were to end up in jail. This fate now looms as a new career risk for Hong Kong bankers if proposals to make listing sponsors legally liable for the accuracy of prospectuses goes through.
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The Reaping is coming to Wall Street.

If history is any guide, the fallout will land on Main Street.

BUSINESS
Updated April 23, 2012, 3:58 p.m. ET

Music Stops for Wall Street Bankers
By ANUPREETA DAS And GINA CHON

Several major U.S. banks are planning to trim investment-banking units that were built for an era of deals aplenty. Anupreeta Das has details on The News Hub. Photo: Bloomberg.

Wall Street’s latest problem: too many bankers and not enough deals.

Amid new regulation, lower profits and a dreary market for mergers and acquisitions, several banks are planning to trim investment-banking units that were built for an era of deals aplenty.

Having already slashed bonuses, banks including Citigroup Inc., (C -1.89%) Goldman Sachs Group Inc., (GS -0.61%) J.P. Morgan Chase (JPM +0.30%) & Co. and Morgan Stanley (MS -2.86%) are preparing to cut dozens of jobs, including some held by senior bankers, according to people familiar with the matter. As they pursue this targeted round of trims as soon as next month, they and rivals are also revisiting profit expectations for their advisory businesses, people familiar with the matter said.

Until recently, Wall Street’s ax had largely fallen on trading desks, which shed thousands of jobs as business dried up due to regulations and lackluster markets.

But the cost-cutting focus is now expanding to deal makers and corporate advisers that have remained among Wall Street’s most high-profile professionals even as their contributions to banks’ bottom line has been dwarfed by traders. In addition to mergers-and-acquisitions advisory, investment banking includes raising capital through stock and debt.

“The whole paradigm of banking is changing so there is a lot of right sizing and that will continue throughout this year,” said Michael Karp, managing partner at Options Group, a financial-services industry executive search firm. All of the top firms “have overcapacity,” he added.

As is often the case in Wall Street’s Darwinian culture, the culling is expected to affect the old and the weak. The job losses will target underperforming bankers and those nearing retirement age, according to people familiar with the situation.

The goal is to remove people who aren’t “pulling their weight,” said one investment-banking head at a major bank, adding that “banks are overbuilt” in relation to the work available. As compared with years past, banks are less willing to keep those employees on board in hopes of a near-term recovery.
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WSJ dot com
COMMODITIES
Updated April 23, 2012, 3:26 p.m. ET

Gold Falls, Silver Sinks
By MATT DAY

NEW YORK—Disappointing global economic data and anxiety about Europe’s debt crisis drew investors to the safety of the U.S. dollar Monday, denting demand for gold and pushing the precious metal to its lowest price in more than two weeks.

The most actively traded contract, for June delivery, fell $10.20, or 0.6%, to settle at $1,632.60 a troy ounce on the Comex division of the New York Mercantile Exchange. That is the lowest settlement price since April 5.

Gold fell sharply early in European trading hours, as heavy selling jolted the market awake amid thin liquidity. The collapse of austerity talks in the Netherlands, the challenger’s lead in the first round of France’s presidential elections, and data showing contraction in the euro zone’s manufacturing and service economies all gave gold traders pause Monday.

“Europe sneezed and we are catching cold,” said George Gero, a vice president and precious metals strategist with RBC Capital Markets.

Some investors turn to gold as a safe harbor from turmoil in other markets, but that dynamic hasn’t held when worries about Europe’s debt crisis were front and center.

Silver, which sees more use by industry than as an investment, settled down 3.5% at $30.531 a troy ounce for the most-active May contract, the lowest price since Jan. 17.

Industrial metals saw sharper declines than gold Monday on weaker demand expectations after the release of European economic data and news of a continued manufacturing slowdown in key raw materials consumer China. HSBC’s gauge of China’s nationwide manufacturing activity remained in contraction for a sixth consecutive month in April, according to preliminary estimates.

A potential freeze in Europe’s financial system has spurred traders to favor the flexibility of cash instead of precious-metals futures. And rising concerns about Europe tend to prop up investment in U.S. dollar-denominated debt, driving the currency higher and weighing on dollar-denominated gold by making the futures appear more expensive for buyers using other currencies.

Also weighing on gold Monday was diminished expectations that the Federal Reserve would soon announce fresh steps to support U.S. economic growth, said Bart Melek, head of commodity strategy with TD Securities.

“People are saying, ‘I don’t think we’re going to see anything definitive’” from the Federal Reserve, he said. Gold tends to benefit from such accommodative monetary policies, as investors seek a hedge against weakness in paper currencies. But with the U.S. economy still expanding at a faster clip than many had expected entering the year, and some Federal Reserve officials vocally reluctant to take further action, the central bank isn’t widely expected to give the gold market new fuel with its policy statement Wednesday afternoon.

REVIEW & OUTLOOK EUROPE
April 22, 2012, 3:37 p.m. ET

The Dutch Collapse

Willem Buiter, Citigroup’s chief economist, told the House of Lords last October that Germany was “the only honest triple-A rated sovereign in the G-7.” The rest enjoyed their credit grades “but for the grace of God and the ratings agencies.” He was referring to France, but the admonition holds equally for the euro zone’s three remaining triple-A borrowers that aren’t Germany: Finland, Luxembourg and the Netherlands. With the collapse of the Dutch government’s budget talks on Saturday and the likely announcement of early elections, the ratings agencies may soon have reason to stop being so obliging.

The Netherlands’ problem isn’t its public debt, which was 66% of GDP last year. The budget deficit in 2013 is expected to be around 4.6% of annual output—higher than the European Commission’s 3% ceiling but hardly an outlier in Europe these days. Rather, the Netherlands’ problem is the ongoing bust in real estate, which has saddled households with mortgage debt exceeding 100% of GDP. Total household debt stands at 249% of GDP, the highest in the euro zone.

Unlike Spain and Ireland, where collapsing house prices have similarly threatened household and bank solvency, the Netherlands did not experience a construction boom that would have sent joblessness skyward when the real-estate bubble popped. Dutch unemployment is, for now, below 5%. But private debt has sapped consumption and investment, putting the country into recession since the third quarter of 2011. The country’s fiscal troubles are a consequence of its broader economic woes, not their cause.

That said, it’s worth asking why, with the stakes so high, Dutch lawmakers couldn’t agree on cuts and savings worth €14 billion—no small change but not insurmountable. The ruling coalition is grumbling about the obstinacy of Geert Wilders, the head of the euroskeptic Freedom Party. But markets began discounting the Netherlands months ago despite its gold-plated credit rating. Even without Mr. Wilders’s opposition to austerity, it was only a matter of time before market pressure would have political reverberations, as the examples of Greece, Ireland and Italy have shown.
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“Risk sharing” = somebody else helps to pay for your house

Origins of the Indebted American Homeowner
Equitable Mortgage Company
Source: Library of Congress Prints and Photographs Division
By R. Daniel Wadhwani
Apr 20, 2012 1:56 PM PT

Not long after the economic crisis began, the president’s landmark Conference on Homeownership reported that “down payments of 10 percent, 5 percent, and even nothing down” had become common practice in the home-mortgage market. Reliance on second mortgages and novel financing terms, the report noted, were also widespread.

Although these developments sound all too familiar, this Conference on Homeownership was held in 1931 and the president sponsoring it was Herbert Hoover, not George W. Bush or Barack Obama. We often think of the expansion of easy mortgage financing as a relatively recent development, but the growth of indebted homeownership has older and more complicated origins.

The rules and institutions for financing homeownership weren’t always as conducive to buying as they are today. In the 19th century, most Americans bought or built a home outright, or saved substantial nest eggs to make large down payments, because financial institutions either didn’t lend to average homebuyers or did so on relatively stringent terms. National banks were actually prohibited from lending on real estate and state banks typically limited mortgages to 50 percent of the underlying value of a property. Such loans also matured in a relatively short period, usually three to five years. These terms meant that buying a home often required years of saving and typically wasn’t an option for young families.

Although historians commonly view the New Deal as the moment that changed these lending practices, the easing of credit terms to homebuyers actually began decades earlier. In the late 19th century, many states sought to promote homeownership by passing legislation that enabled the formation of building-and-loan associations, which offered small amortized loans secured on homes. Building-and-loans were structured to accept lower down payments and make longer-maturity loans. Policy makers promoted them partly as conduits for ordinary Americans to gain greater economic security by accumulating property.

By the early 20th century, other types of institutional lenders started seeing mortgages as safe and attractive investments, especially as real estate prices rose in urban America. National banks successfully lobbied to relax the rules prohibiting them from lending on real estate. Residential mortgage lending by financial institutions grew about 20-fold from 1890 to 1930. As institutional lenders waded into the market, wealthy individuals and home sellers, who had once been the main suppliers of loans to homebuyers, were increasingly pushed into offering second mortgages with junior liens. By the 1910s and 1920s, these developments had made low-down-payment financing increasingly common.

Ordinary Americans welcomed these developments. For many, the easing of loan terms was crucial to buying into the American dream of economic stability and mobility. Homeownership became accessible even for relatively young families. As Robert and Helen Lynd noted in their 1920s study of Muncie, Indiana, the custom of “rent hunting” among newlyweds was steadily being replaced by home-buying. Labor Department studies from the period suggest that the expansion of indebted home-buying by young families was the linchpin in a broader shift in household economic planning that included increasing investment in children’s education, decreasing dependence on income from children and increased equity-building in the home in lieu of traditional saving.

Yet the expansion of indebted homeownership also introduced risks, which became clear during the Great Depression. In particular, for many buyers indebted homeownership entailed the risk of owning a highly leveraged asset at a moment in their economic lives when they were especially undiversified and vulnerable to shocks. The decline of real estate values during the Depression not only devastated these families, but also spilled over into the economy by inhibiting mobility, reinforcing downward pressure on home prices, and depressing personal consumption and investment.

New Deal programs responded by extending and institutionalizing credit practices in federal policy as a way of restimulating the borrowing that had become an essential element of economic growth. The Federal Housing Administration further extended the maturity of loans and assumed the risks that financial institutions bore in making them. And Fannie Mae created a secondary market for such loans. These programs were bold and novel in interjecting the federal government into real estate finance. But they were also betting that recovery would be based on re-establishing the trend toward indebted homeownership that had started decades earlier.

Our current housing problems force us to revisit the risks of indebted homeownership. Simple attempts to “fix” the American inclination for ownership by promoting renting seem naive in historical perspective. Long-held preferences for ownership in family economic planning; the cultural and political support for owning; and the economic interests of financial institutions have made indebted ownership a persistent feature of the U.S. economy — despite the crises it has experienced (and created) over the past century. A recent Pew Research Center poll found that 81 percent of Americans still believe that “buying a home is the best long-term investment a person can make.”

The idea that the pain created by the most-recent crisis will completely change such preferences seems misguided.

A more useful approach would be to mitigate the economic risks that indebted homeownership has introduced, particularly for highly leveraged and undiversified homeowners. A century of financial innovation and policy making has focused on making homeownership accessible. The same creativity ought to be devoted to the devising products, markets and policies to better deal with risks so that people can stay in their homes when crises arise. Risk-sharing policies and insurance innovations that protect homeowners against price fluctuations seem particularly promising.
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