Wed 3 Sep 2008
From the Star Ledger:
Bon Jovi breaks ground on new complex he’s helping to build
New Jersey rocker Jon Bon Jovi, Newark Mayor Cory Booker and Gov. Jon Corzine dug shovels into a vacant lot in the city’s North Ward Tuesday to toast the start of a new affordable housing project.
When complete, the project will provide 51 homes for low-income and special needs people. The project will also provide permanent housing for HIV/AIDS clients who are currently being served by Broadway House, a continuing care facility in the North Ward.
The state is funding most of the $15 million project through tax credits and additional funding. Bon Jovi is chipping in $1 million through his organization, the Philadelphia Soul Charitable Foundation.
“Together we started something and now it’s your turn,” Bon Jovi said at a news conference announcing the project. “Together we can make a difference, one street, one neighborhood, one soul at a time.”
Bon Jovi’s foundation has also embarked on similar projects in Brooklyn, Colorado Springs, Detroit, Philadelphia and Atlanta. According to the foundation, his group has played a role in building 140 homes in various stages of completion.
The Newark project is scheduled to be completed in fall, 2009. Applications will be accepted beginning in spring, 2009.
From USA Today:
Bon Jovi helps build homes for poor, AIDS patients
One of New Jersey’s best-known rock ‘n’ rollers has teamed up with the state to provide affordable housing in the state’s largest city.
Jon Bon Jovi’s Philadelphia Soul Charitable Foundation is providing $1 million toward construction of a 51-unit building that will cater to homeless people with special needs, like AIDS patients.
The $15 million building, called Genesis Apartments, will rise where there is now a vacant lot. Joining Bon Jovi at Tuesday’s ground breaking were Gov. Jon Corzine, Newark Mayor Cory Booker, fashion designer Kenneth Cole and his wife, Maria Cuomo Cole, who runs HELP USA, a national nonprofit that is helping to build the units.
“Today I believe we’re starting something,” Bon Jovi said. “Together, I believe we can make a difference, one street, one neighborhood, one city, one soul at a time.”
Bon Jovi, who’s foundation has built affordable housing in Philadelphia, New Orleans and other cities, said he teamed up with Cole to design and market a line of jackets in 2006 to raise awareness to combat homelessness. Profits from that line provided the money for the Newark project, he said.
Bon Jovi, Shaq, who is next?
http://seekingalpha.com/article/93653-new-york-city-yields-to-housing-crisis-housing-tracker
New York City Yields To Housing Crisis
Unthinkable Happens: Manhattan Apartment Prices Fall. “City records indicate that apartments in prime Manhattan neighborhoods are selling for less than their purchase prices — a phenomenon that until now was virtually unheard of in the seemingly invincible New York City real estate market… Jonathan Miller of Miller Samuel Appraisals: “The market condition story of Manhattan has been clouded by the inclusion of a high concentration of new developments into the housing stock. While prices of new developments have soared, resale activity is showing modest declines… apartments all over the city, in different income brackets, are now posting declines
More info in link.
From the WSJ:
Business Bookshelf
Foreclosed But Not Forgotten
By JAMES R. HAGERTY
September 3, 2008; Page A21
The Subprime Solution
By Robert J. Shiller
(Princeton University Press, 196 pages, $16.95)
In recent times, investment bankers have used “financial engineering” to design ever more complicated ways to manage risk. Such efforts, though, helped to bring about the current mortgage-default debacle: Bankers, overestimating the powers of their own sorcery, deluded money managers into thinking that there were safe ways to invest in subprime home loans, even the ones granted to flagrant deadbeats at the peak of a housing bubble.
With “The Subprime Solution,” Robert J. Shiller offers his formula to protect us from repeating such disasters: more financial engineering. It would be easy to sneer at this idea, but Mr. Shiller, an economics professor at Yale University, always deserves a hearing. He was among the first well-known economists to predict that the U.S. housing boom would end with crashing prices rather than with the more or less soft landing promised by Realtors, home builders, mortgage bankers and Wall Street financial engineers. Some say that Mr. Shiller’s jeremiads were premature, but investors and builders would be better off today if they had listened to him.
Mr. Shiller also helped create the S&P/Case-Shiller home-price indexes, among the most closely watched gauges of changes in housing costs. Many Realtors now claim that these indexes exaggerate the rate at which prices are dropping. Curiously, the same Realtors did not warn us against exaggeration in the first half of this decade, when the Case-Shiller indexes were soaring.
In what he describes as a “brief manifesto,” Mr. Shiller argues that bailouts of distressed borrowers are inevitable to avoid wrecking our economy and shredding our social fabric — even though bailouts may punish the prudent (say, through higher taxes) while comforting those who gambled on real estate and lost. “Much as we might like to,” Mr. Shiller writes, “we cannot quickly and reliably sort out who is at fault and who is not.”
From Housing Wire:
Fitch Warns on Option ARMs; “High Defaults Await”
Fitch Ratings on Tuesday released a wide-ranging look at option ARMs that paints a decidedly negative picture for the mortgage markets over the next 36 months. In fact, the picture is a downright scary one: the bottom line is that most outstanding neg-am mortgages won’t get out of 2011 alive, thanks to forced recasts.
Fitch analysts said they now expect roughly $29 billion in option ARMs to recast to higher monthly payments by the end of 2009, and an additional $67 billion to recast in 2010; of this, approximately $53 billion is attributed to early recasts.
“Though recent declines in the 12-month Treasury average rates have mitigated some risks, the majority of option ARM borrowers have elected to make the monthly minimum payment over the past 24 months,” Fitch said in the report. “As a result, a large number of these loans, especially those with 40-year amortization and 110% principal caps are expected to reach their recasts before the end of the five-year mark.”
The result? Fitch said it expects 90-day plus delinquencies — already ranging from 10 percent to 24 percent, depending on vintage — to more than double after recast for 2004-2007 vintage loans. It gets worse: Fitch also estimated that the potential average payment increase on the re-casting loans to be 63 percent, representing on average an additional $1,053 due each month.
“The combined impact of payment shock, negative amortization, declining home prices and restricted availability of mortgage credit may leave many option ARMs’ borrowers unwilling to continue paying their mortgage,” said group managing director Huxley Somerville.
From the Boston Globe:
Three Fed districts sought rate hike
One-quarter of the Federal Reserve’s regional district banks lobbied to raise the discount rate in July, signaling rising pressure to increase borrowing costs to banks even as economic growth slows.
Citing a rising danger of inflation, the boards in Chicago, Dallas, and Kansas City sought a quarter-point increase in the discount rate from 2.25 percent, according to minutes of officials’ discussions prior to the Aug. 5 policy meeting that were released yesterday in Washington. The other nine Fed district banks asked for no change, in line with the decision to keep the discount rate and benchmark federal funds rate unchanged.
The minutes indicate broader support for lifting interest rates than revealed by the tally at last month’s Federal Open Market Committee meeting, where just one of the 11 members voted for an increase. Officials are debating the likely impact of the retreat in commodities on consumer prices, which surged the most since 1991 in the year to July.
“It sounds like there’s a streak of conservatism emerging at the Fed,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
Mortgage Data Underscores Increasingly Dire Forecasts
Mortgage Trends
Fitch Warns on Option ARMs; “High Defaults Await”. “Fitch Ratings: Most outstanding neg-am mortgages won’t get out of 2011 alive… Fitch expects roughly $29 billion in option ARMs to recast to higher monthly payments by the end of 2009, and an additional $67B to recast in 2010; of this, approximately $53B is attributed to early recasts…. Fitch expects 90-day plus delinquencies — already ranging from 10%-24%, depending on vintage — to more than double after recast for 2004-2007 vintage loans… Fitch also estimated the potential average payment increase on the re-casting loans to be 63%, representing on average an additional $1,053 due each month.” (Housing Wire, Sept. 2)
http://seekingalpha.com/article/93664-mortgage-data-underscores-increasingly-dire-forecasts-housing-tracker
More at link
Oops me & Grim same info
Hmmm… For you gold bugs.
Institutional investors are always at the forefront of undertaking new investment directions, so monitoring these new areas of investment is essential for two reasons — in addition to telling us what they are doing, it also tells us what they are NOT doing…and one thing they are NOT doing is buying stocks…! What’s new in this regard — owning hog farms in China. Here’s that link.
And the headlines are: GOLDMAN SACHS, PROMINENT US INVESTMENT BANKER, buying Hoggeries in China. Investment banks, first and foremost, invest their funds where it will produce the highest financial return. Right now, that doesn’t mean buying stocks, or even distress-priced mortgage debt, as the financial news media speculated last week…but hog farms in China.
We wouldn’t be surprised if Goldman Sachs (GS) was the buyer of those 5,000 ounces of gold, using someone in Switzerland as a beard for the transaction…!
http://seekingalpha.com/article/93484-tuesday-september-2-week-in-review
Goldman up to something? Do they know something we don’t know, I think not!
That is Grim & I for the grammar police.
From the Record:
Three North Jersey companies planning layoffs
hree North Jersey companies expect to lay off more than 300 employees in the weeks after mid-October and shut a distribution center, a warehouse and a factory, state documents show.
North Bergen-based Emco Distribution LLC said it will lay off 103 employees on Oct. 19 and close its distribution center following the purchase of company assets by a Deerfield, Ill.-based competitor last month.
KIK Custom Products, a national manufacturer of consumer products for major brand companies, said it will close a warehouse and factory, according to an Aug. 18 letter to the New Jersey Department of Labor and Workforce Development.
The company expects to lay off 155 workers, beginning Oct. 17 and continuing through November, the letter said.
Hanjin Shipping Co., Ltd., the global cargo and shipping line from Korea, said it will lay off 60 workers and transfer some functions from its Paramus offices to Atlanta and Phoenix. The company expects the layoffs to begin Nov. 1 and conclude about two weeks later, according to an Aug. 27 letter to the department.
Two more from the August 2008 Warn Notices:
http://lwd.dol.state.nj.us/labor/lwdhome/warn/2008/0808warn.html
PHARMACOPEIA CRANBURY
10/3/08 - 64
ABBOTT LABORATORIES WHIPPANY
10/11/08 - 125
I don’t know if any of you guys have heard anything regarding this, but there’s been something on my mind lately.
It looks like more states in addition to NY will be reviving their predatory lending laws that will put even more pressure to reduce the subprime mortgage market. Just in case all the losses aren’t enough of an incentive.
One thing I’m wondering is there will be any new legislation that will allow homeowners that have been foreclosud to somehow wipe it clean off their credit records in certain instances.
I think it makes sense, if a lot of these loans were bad and shouldn’t have been issued and taxpayer money is being used to soften the blow for the banks, why shouldn’t there be some sort of remedy for homeowners that got suckered in by these bad loans to be able to wipe the slate clean so that they might be able to buy a home at a later date. Next time hopefully they will not make the same mistakes they made the first time.
Any thoughts?
Tom Give a fool another chance. I don’t know about that being so good. On the flip side not to worry banks aren’t going to give them a loan even with out the clean slate they need a DP. In most cases suckers my a** as far as I’m conserned & those of use who didn’t go there have the same credit in the end. No good Tom.
Tom: It would be a violation of the highest order. It would set a precedent whose stench would carry into the next decade.
USE = us
Spot on Chifi
Tom (11)-
Hell no.
Mike, not saying it would be a good idea, and I’m not sure if I would be for or against it, but I wouldn’t be surprised to see it happen.
I mean the GSE’s took up billions of bad subprime debt off the books of the banks last year. Wouldn’t you think that all the people that are claiming to want to help all these people in foreclosure might want to give something back to the people they’re supposedly helping? And it won’t even cost anything directly.
I’m not saying everyone gets a clean slate but if you could prove your mortgage meets the standards for a predatory loan and you get foreclosed on you get to knock that nastiness off your record.
chifi,
The stench of what’s been going on in the banking industry is going to be with us through the next decade and more regardless. This will just add another scent tone to make a more complex aroma :)
Been going through GSMLs in my town. Can’t post as link expire anyway but take my word it is a race to the bottom here in the hither lands.You can have a decedent home for under 250 easy & more to go. 3-4bd 2 bth
bi fam rm. Maybe a 4 bd center hall with a new kitchen Cherry nice 289, good area to. My block. Tall grass keeps growing on some. Boy they are slow getting these foreclosures to market (their loss). Waiting it out in my nice cheap rental.
Tom I hear you about them bailing out the other players, but I still think it is a bad precedent.
Make it even harder to get a loan as lenders will be CYA, if you can prove that it was a predatory loan you are off the hook on your credit score.
On the other hand it may happen if the O man gets in. Please this is not to start another political firestorm just the dems might be more inclined to go there imo.
Just as long as these housing projects aren’t in Rumson, right Jon?
Tom - add me to those against. You can still buy a home a couple of years after bancruptcy or foreclosure and a breather is exactly the remedy required for people who made massive mistakes - whether facilitated or not.
They won’t be homeless, the rental market has plenty to offer.
Mike, good to hear about your area (Vernon?). Just waiting for the wave to move a little more inward.
I doubt that either party would allow such legislation to go through, but I’m surprised that I haven’t been able to find any mention of it being brought up at all. I also don’t think that it would be entirely bad for the banks either.
The way I look at it is like this. The recent foreclosure legislation really doesn’t do much other than to try and make banks work with troubled borrowers to set something up so they don’t lose a customer. Which in many cases is good for the lenders since finding someone else to fill their spot isn’t as easy anymore. Some will be helped out by government backed loans and other programs.
It doesn’t look like foreclosures are going to go back to previous levels anything soon without some major intervention.
At some point I think taxpayer money may not be available to help banks keep their customers. So reducing the number of available customers may not be in their best interest.
Tom - I’m with lisoosh @ 21. But you probably already knew that from a few previous conversations.
TBW,
I think he is cool with it being built in Rumson — just keep it from being built on the north side of the river in Middletown.
Story in my local Town News last night regarding property reassessment in Paramus.
The article quotes a local Councilman as saying they had to reasses, due to the “dramatic decline in house prices.
He goes on further to discuss that the last reval took place at the height of the “housing bubble”, but that since then house prices have “declined dramatically.”
The new reval will see many homeowners receive a tax reduction, with many others staying the same.
In addition the commercial taxes paid by the towns commercial property owners will be increasing.
Tom “The way I look at it is like this. The recent foreclosure legislation really doesnt do much other than to try and make banks work with troubled borrowers to set something up so they dont lose a customer”
Faced with saving a relationship with a customer who costs it money, a bank may do well to lose the customer. As the old joke goes, “we lose $2 on every one we sell, but we plan to make it up in volume.”
3b
No talk of reigning-in town spending?
westfield comp killer:
149 summit court
Date Book Page Price
09/27/06 5610 145 $620000
listed for $479,000 mls#MLS ID# 2568868
must be on the rough side of town…………..
RGE Newsletter:
Good Morning!
Last week the FDIC released the Quarterly Banking Profile for the second quarter. FDIC chairman Sheila Bair sums the results up as ‘pretty dismal.’ In particular, Q2 earnings were 87% below the Q2 2007 level (i.e. $5 billion vs $36.8 billion) trimmed by sharply higher loan loss provisions (total $50 billion). Unfortunately, noncurrent loans have been growing even faster than the boost in reserves for the ninth consecutive quarter: the industry’s ‘coverage ratio’ fell accordingly to 88.5 cents of reserves for every $1.00 in noncurrent loans, a 15-year low. Banks have little choice but to build up loss reserves substantially in coming quarters, which occurs at the cost of earnings.
Whereas expected losses are booked against earnings in the form of loan loss provisions, unexpected losses result in capital writedowns. Already, global bank capital writedowns exceed $500 billion (out of the $1 trillion estimate for the entire financial system), the very number the IMF set as a ceiling for global bank losses in April. Far from being over, S&P acknowledges that “we’re at best maybe halfway through this cycle,” and therefore we may be navigating towards Nouriel Roubini’s $2 trillion global loss estimate. Interesting new research by the Federal Reserve Board shows that foreigners hold 39% of ABS backed by U.S. assets, meaning that 39% of associated mark-to-market losses will occur abroad. In numerical terms, and assuming a 20% markdown, this translates into roughly $475bn.
The 19 primary dealers on both sides of the Atlantic were at the forefront of the crisis so far and account for over 50% of writedowns. With equities and commodities following fixed income markets down there’s nowhere for investment banks to hide. Analysts are slashing the Q3 earnings outlook across the board and a recent survey among institutional investors reveals that another big financial firm is expected to collapse within the next 6 months.
Regional and smaller banks are vying with large banks and primary dealers for fresh capital ($350bn raised so far globally), but the window of opportunity is closing fast. The number of ‘dead men walking’ - in John Mauldin’s words – is rising quickly as is the number of banks on the FDIC list that are considered as troubled (i.e. 117 in Q2 up from 90 in Q1). Ironically, the FDIC might be itself on track to turn into one of the biggest casualties of this financial crisis. See “Can the FDIC Handle the Coming Banking Bust?”
A rather unexpected additional source of stress for banks are the GSEs. The FT last week reported that U.S. banks and insurance companies are the primary holders of Fannie&Freddie’s $36bn preferred shares. The latter were downgraded heavily in view of an imminent government intervention. The costs to the taxpayer of any government intervention are adding up accordingly from the initial $25bn CBO estimate to over $100bn among prime credit losses, preferred share and subordinated debt writedowns.
Turning to the non-bank sector it is clear that even the shadow banking system is in deleveraging mode. Hedge funds are closing in record numbers amid a dismal average performance especially in the past two months. Furthermore, cost efficiency considerations fuel a move towards ever higher asset concentration among the top 100 players. See “Shake-Out in the Hedge Fund Industry: Who Are the Haves And the Have-Nots?”
Some life has also returned to the heavily battered monoline insurer market. New York State Insurance Superintendent Eric Dinallo helped broker an agreement for MBIA to reinsure $184 billion in municipal bonds for the lower rated Financial Guaranty Insurance (FGIC). Analysts see the movement as a positive first step for all parties involved: MBIA, FGIC and the muni bond market. Recent deals with investment banks to relieve monolines –against a fee- from their CDO guaranty obligations are a further sign of the industry’s self-healing efforts.
Lioosh 22 yes Vernon If you just want a home & don’t have to have a spiral stair case & a media room plenty of good homes.
I hope it moves down for the rest of you guys. I can just imagine the carnage up here if it gets more reasonable down below.
(that is what Vernon folk call places off the highlands). It should be good shopping for me!
stan Says:
September 3rd, 2008 at 9:20 am
westfield comp killer:
Stan - SUBJECT TO BANK APPROVAL. I don’t know if it is on the wrong side of town, but it is far from town, almost in Clark…
Shore Guy/everyone else,
Recently I read how community banks have been doing pretty good business from some of these people that have had problems with subprime loans. Smaller banks can make a determination on someone’s credit worthiness based on more personal information, not just by plugging numbers into the corporat black box.
Just because some guy making 60k a year defaulted on his $500k arm after it reset and he was unable to keep up the payments after that, doesn’t mean he should be precluded from getting a $250k mortgage if he was keeping up with payments before the reset.
Having worked on ratings engines in the financial sector, I think it would be difficult for some actuary toiling away at their excell spreadsheet to work up a one size fits all solution. Joe Smallbanker on the other hand can sit down and say, hey it looks like you tried but you were in over your head, this is what we’re willing to do.
Anyway, I’m not trying to argue for it or start a debate about it. I was just wondering if anyone had heard about any one at a state or federal level looking to pursue anything like this. I’m not sure it would get passed but I am surprised that I haven’t been able to find that it hasn’t been talked about.
Rayc-
Didnt realize it was bank owned.
however, 4 bedroom in the ‘field under 500k.
haven’t seen that in a while
Stu,
It’s really scary to hear that reserves haven’t improved especially after the large discount rate cut. There was another report on here recently showing that the bucks being borrowed has been growing fast.
Kind of just seems like they’re shuffling around the reserves from the banks that still have them inline to the ones that pissed them away. The banks that used better judgment are now supporting the reserves of ones that didn’t through insanely cheap loans.
Stan,
That Westfield house also carries $13k+ in property taxes. Good buy, sure, for $479, but those taxes? Summit Ct., as Ray noted, is on the southern border, almost in Clark, and close to the freight line. But at least they don’t blast the whistle at the grade crossing down there anymore.
#11
“One thing I’m wondering is there will be any new legislation that will allow homeowners that have been foreclosud to somehow wipe it clean off their credit records in certain instances.”
so you are proposing that lenders be prohibited from doing due diligence on their borrowers? this seems to me a pretty direct route to raising the cost of capital for everyone substantially
Also, not sure the house is REO, but I believe it is a short sale.
#16
“And it won’t even cost anything directly.”
everyone who borrows in the future will subsidize the hiding of deadbeats through higher rates.
skep-tic 37 39 Yes that point to, bad bad idea.
39: Skep-tic
Ramen to that.
I’ve got the paperwork all filled out, some sent to the lender already….just waiting on finding a property I can afford :)
And while I wait, fees are going up, up, up.
I figure, roughly, if I find a bldg now, it’ll cost me an extra $15,000 to get a mortgage from when I first started looking in April…
(I can’t wait to see what it costs next year…wahoooo.)
About those deadbeats defaulting on mortgages? The banks won’t blink an eye making it up on honest borrowers like me…
Tom– you seem to have this view that local banks are generally run prudently whereas large commercial banks are run stupidly. Seven of the ten banks that have failed so far this year (see link below) had assets of roughly $250M or less. I think you will find going forward that community bank failures will vastly outnumber the failures of larger banks, and it is not simply because there are fewer larger banks. Many of these banks took very stupid risks based on more soft analysis of the type you seem to propose as superior.
http://www.lacefinancial.com/Member/documents/Failed_Banks_2008.pdf
Check your bank’s rating at,
Bank Ratings Screener
A is very good
B is good
C and D Yellow flag
E -> Red flag
Pre,
Will Lawyer Layoffs Hobble Manhattan Office Market?
http://www.observer.com/2008/real-estate/will-lawyer-layoffs-spell-trouble-manhattan-office-market
Since I work at a firm I am knocking on wood.
Not sure if this was posted last week:
Prime Foreclosures
Here’s a milestone: There are now more foreclosures on prime mortgages than on subprime ones.
http://norris.blogs.nytimes.com/2008/08/31/prime-foreclosures/
Did anyone see this news from yesterday?
Once the EU and UK Central Banks close the windows, that will put significant pressure on the US and the global credit problems.
Clott, who starts the ball rolling, Spain hitting the wall when the ECB closes the window or Korea not being able to roll over?
Scramble for cash as central banks dry up
British banks soon could be scrambling for short-term funding once more amid reports that supplies from Threadneedle Street and from Frankfurt may be drying up. The Bank of England explicitly ruled out extending its Special Liquidity Scheme (SLS), while the European Central Bank is reportedly considering tightening its lending criteria.
The two central banks have been huge suppliers of liquidity to British banks. The SLS is thought to have provided £50 billion or more, while the ECB has lent banks €467 billion (£378 billion) - much of it thought to have gone to UK institutions. Despite pressure from some British banks for an extension, the SLS will be closed to new applications from the week of October 20, the Bank said.
count me in with Cindy and lisoosh.
Before you sign a giant loan, you should have a clue… that also means READING it, knowing your finances and understanding what the loan entails.
Remember, a LOT of those defaults were folks looking to get ARMs figuring they would flip the place and make huge profits before the SHTF.
Why do they get to “clear their credit” when I have been working diligently and prudently to improve mine??
sl
3b,
i found where all the financial layoffs are actually happening….
City of London braced for fresh round of banking job cuts
The city is bracing itself for a further redundancies as Commerzbank prepares to cut more than half its workforce at Dresdner Kleinwort’s London operation in its takeover of its German rival. Commerzbank plans to slash up to 1,200 London jobs at Dresdner in businesses such as trading as well as in support functions. About 2,000 of Dresdner Kleinwort’s 5,500 staff are employed in London.
What let failed businesses fail???? What blasphemy is this?!?!
Fed’s Hoenig Says Institutions Must Be Allowed to ‘Fail’
Federal Reserve Bank of Kansas City President Thomas Hoenig said for economies to work best, institutions must be allowed to `fail.’ Economies must “find a balance between financial stability and a stable price environment and in doing so must be able to allow individual institutions to fail,” Hoenig said in a speech today in Buenos Aires.
Kettle,
You notice they always make these “allowed to fail” and “strong dollar” speeches when they are outside the country ;)
from my post at 49:
<i.Hoenig said in a speech today in Buenos Aires.
Does anyone else find this somewhat ironic?
Skeptic 42,
I would disagree with you. I do not have any hard data to back up my opinion, but it seems to me, from the things i have read that if anything the smaller banks were probably more prudent, but it is easier for them to fail as they do not have the political weight of Citi or BOFA, or the pure size of the portfolio that these larger banks carry.
Federal Reserve Bank of Kansas City President Thomas Hoenig said for economies to work best, institutions must be allowed to `fail.’ Economies must “find a balance between financial stability and a stable price environment and in doing so must be able to allow individual institutions to fail,” Hoenig said in a speech today in Buenos Aires.
_________________________________________________
How many times has this situation occured? They talk tough in between fed meetings and bail out everyone when push comes to shove. These guys are just talking to make themselves feel better cause in truth they have jobs with no power and no influence. They just do what they are told.
Hi there.
If New York City is the epicenter of the financial crisis, and home prices remain out of reach for most households, why aren’t we seeing more distress in this area (I’m looking in Hoboken)?
I know that home prices are falling around here, but why haven’t home prices crashed 30%-50% is New Jersey as happened in suburbs of Los Angeles and Miami?
Housing peaked 3 years ago, and Wall Street layoffs have been massive. But this crash isn’t really that bad at all.
Can somebody please explain?
#48 kettle: I knew there had to be an answer.
#53 I know that home prices are falling around here, but why haven’t home prices crashed 30%-50%.
It is happening, and in fact has been picking up speed the last couple of months.
HEHEH, All Hype,
I agree 100% on both points.
yo [53],
I’m getting the popcorn ready for the responses to your question.
#51
kettle– all of the overdevelopment you see all over the country– much of it was financed by these small local banks. I am not saying the large banks have been run well; I’m just saying that the idea that small banks behaved prudently seems clearly false to me.
Gary/yo,
More patience is necessary. I hope ;P
for the Palin Fans,
PIC (real not Photoshopped, G Rated)
http://img.photobucket.com/albums/v248/walker66/palin.jpg
A strong dollar is in the nations interest. That’s why we’ll have the dollar 2.0 after this one goes to zero.
#60 kettle1
Very flashdance like hair. i’m gettig all teary eyed and nostalgic
Mike - yeah I took a gander at Vernon listings. Houses I could both comfortably afford and would be quite happy to move into. I’ve never wanted a mansion or a “top town” in a “prestigious area”. Just a home that didn’t make me cry in frustration in a town where my kids aren’t likely to be shot. Just need them to be a LITTLE closer to work so I actually get to see my kids once in a while.
Nice to see though. There is hope.
vodka (46)-
My feeling is: flip a coin. BOE, ECB, Spain, Korea…all this stuff is coming to a head in the next few weeks, and all the bomb needs is a spark to detonate.
Wherever things go boom first, this next episode in world financial meltdown gets my vote as being this election’s October Surprise.
#53 yo,
I believe NYC/NNJ started taking off in prices about 1.5 to 2 years after California and the other now crashing bubble areas. If this is true and our area follows the same pattern,then our area should be getting hammered a year or so from now. If I’m wrong my family will most likely move to another state in a year or two. As much as we like certain aspects of NNJ, I’m not interested in becoming in indentured servant, I mean homeowner at the current valuations of NNJ.
I could be wrong on my theories. i have been wrong before, but it seems to me that a family of 4 needs to earn at least 170k, probably 200k to buy a pos starter home in a good town. How a family earning 170k can save 90 to 120k for a 20% dp and closing costs is another mystery.
skep-tic,
“so you are proposing that lenders be prohibited from doing due diligence on their borrowers?”
No. I didn’t propose anything. I asked if anyone heard if it was proposed. With all the talk legislators are doing about helping people in foreclosure it seems like something that can be done that matches up with their claims of wanting to help borrowers and won’t be a tax payer bail out.
Regarding local banks I didn’t quantify it this time but I do mean local banks. As in local NJ banks. The ones I have looked into in our area seem to have avoided subprime risks. None of the banks on the list you linked to are in this area.
I don’t see what the big deal is though. People are able to walk away from properties now without having a foreclosure on their record if their bank is willing to accept a deed in lieu of foreclosure. There are plenty of “deadbeats” banks don’t know about.
If people had a foreclosure because of a loan that shouldn’t have been given to them and under new or upcoming legislation may have been deemed illegal, why not clear it from their records? It doesn’t seem like it’s any worse than any other proposals and it’s benefiting the borrower not the banks, which these politicians keep yapping about.
#65 barien:As per #’s from 2006 U.S. Census data, 70% of household in Bergen co earn under 100k a year.
So I agree with you, something has to give,and it already is, prices are on the way down.
#53 - yo - Housing peaked 3 years ago, and Wall Street layoffs have been massive. But this crash isn’t really that bad at all.
Housing peaked 3 years ago on a national level. For the NJ market the price peak was last early spring IIRC. For NYC it was earlier this year. How far/fast the NY/NJ market declines will have more to do with how the recasting/credit deterioration of the alt a and option arm tranches. The former especially. In other words if we are going to become a really bad market, comparable to SoCal & Fla, we’ll start to see the indicative stress from now going forward. I don’t think we’ll get that bad unless things really tank on a national level.
Wall Street layoffs have been massive
I’m going to disagree. They really haven’t been that bad yet. Oh, it’s not good, don’t get me wrong. Everyone on the street has that special paranoia that you only get in bad times. The tension is in the air but the actual lay-offs haven’t been anywhere near what I was expecting. A lot of us were expecting a large market-movement type of correction (a la 1989 or dot bomb) which we haven’t gotten. We may still, but it hasn’t happened yet.
What I think we’re going to see, both in terms of jobs and house pricing, is a long slow bleed over the course of the next few years. Maybe not as dramatic as some would like but the Fed, current and any future administration are fighting any more declines with everything they have.
There’s more I could say but I’m currently having trouble with a server in Chicago I need to take care of.
#65
” it seems to me that a family of 4 needs to earn at least 170k, probably 200k to buy a pos starter home in a good town.”
I think this is right. The question (as you note) is whether it is worth it even if you can afford it. The decline in the northeast seems to be coming slower than the rest of the country. I don’t think this is because RE here is closer to being fairly valued (in fact, the NYC area is now the most expensive relative to income for the first time in about a decade, passing Cali).
I think it is more due to the nature of the housing stock (existing, almost entirely), and the stubborness/irrationality of existing sellers (as opposed to banks/homebuilders). If this takes another 5 years to unravel, it may not make sense to wait it out for some people.
#66
“I don’t see what the big deal is though. People are able to walk away from properties now without having a foreclosure on their record if their bank is willing to accept a deed in lieu of foreclosure. There are plenty of “deadbeats” banks don’t know about.”
what you are talking about is a negotiated modification of the terms of a loan, which is quite different from a unilateral default.
The process is starting to accelerate in NJ. In my parents mcmansion development near the Jersey Shore (houses priced 600-900k), they are getting a new “for sale” sign every other week. Of course, none of them sell. My parents will probably become the next one. They are broke. The question is, how many other of these families putting their house up for sale are broke as well?
#69 skep-tic,
i’m leaning more towards it’s not worth it. People will say things like we can go to NYC anytime we want. Well how often do they go? Hsrdly ever it turns out. We go to NYC for a day trip maybe 10 times a year. it would be cheaper for us to move to some place like Portland, Or and take a week vacation every year in NYC or San Francisco, than stay in NNJ. We’d have the same amount of time in the city, yet have a better quality of life.
An interesting speculation on americans drawing down retirement funds to fill current spending gaps.
10 Reasons why there will be no Second Half Recovery in 2008
Reason #3 - Consumer Psychology
People are now realizing that you cannot become wealthy with too much debt. In fact, they are realizing that stealing money from Peter to pay Paul is not a recipe for success. Consumer psychology is changing because the market is forcing people to live within their means. This is a global recession. The idea that we were going to decouple is now being proven false. The size of the largest economies are so intertwined that pain in one will ripple to another. The United States, Japan, China, the Euro-zone are all facing hard economic times.
I recently showed a chart that had a boost in the savings rate:
us savings rate
Initially my assumption was that people were saving money and being more prudent. After reading a few articles and seeing the overall contraction in M3 my perspective has now shifted a bit. This increase in savings looks more like people moving money from 401(k)s, investment accounts, bonds, or any other form of longer term investments into checking accounts to pay day to day needs. This is definitely not good. What I initially thought to be a silver lining is simply people raiding the storage cabinet to live for today.
72- Bairen.
I think it just has to do with the number of job opportunities available in this area relative to others. If your skill set is not dependent on being in such an area, I would move in a heartbeat.
Gary, Yo
Patience, The time scale of a housing bubble is at least an order of magnitude greater then stock markets. (days/months vs years.
See the linked chart of the Case-Shiller HPI comparing the 90’s bubble to the current one. The 90’s bubble showed a negative HPI value for 7 years. We are not even 2 full years into negative territory in this bubble yet. If you like the baseball analogy, then we are in just coming into the top of the second inning.
You had best settle in and get comfortable, this mess isnt going to be settled for another 7 years minimum and consider that we have a huge number of option arms that dont reset until 2011. If credit is tight now, then good luck refinancing in 2011!
http://upload.wikimedia.org/wikipedia/en/f/fe/Cshpi-peak.svg
more charts for gary and Yo,
Option Arm resets
http://4.bp.blogspot.com/_9ZzZquaXrR8/SL13I1ptjfI/AAAAAAAABmM/EITCUxonA_4/s1600-h/Resets.jpg
more charts for gary and Yo
http://2.bp.blogspot.com/_9ZzZquaXrR8/SL1yq1Tb4yI/AAAAAAAABls/dZ0v-2XpYgY/s1600/so-calprices-bc.png
Notice that the 90’s bubble took 10 Years from peak to trough. while this is for SOCAL, the general behavior is applicable to NY/NJ
Ben 71
Say hello to the next big social disaster that will of course be completely unexpected.
My parents will probably become the next one. They are broke. The question is, how many other of these families putting their house up for sale are broke as well?
Social Security is a pipe dream. While it will continue to exist you will be eating friskies if that is what you are living off of. A huge % of seniors and boomers depened on their homes for their retirement. That paper wealth is long gone now. SO they mystical home value retirement combined with SS idea is DOA. You are going to see a lot of families struggle with the younger generation neeeding to support the older generation at a time when 200K barely gets you a POS cape.
Oil, Supply destruction outpacing demand destruction:
http://energytechstocks.com.previewmysite.com/wp/?p=1656&preview=true
Oh, don’t we know it. I know people that were looking to retire off their house that were in year 10 of their mortgage. Meanwhile, they are now in negative equity and still hold the pipe dream that they’ll be able to take more equity out of their house in 5 years. When I was jogging around the development in 2004, I asked myself “why has the number of porsches and corvettes in the driveways tripled?”. Musta been those home equity loans. I won’t be asking myself why there aren’t any porsches in anyone’s driveway in 2 years. I’ll already know the answer to that one.
ben,
“why has the number of porsches and corvettes in the driveways tripled?”. Musta been those home equity loans. I won’t be asking myself why there aren’t any porsches in anyone’s driveway in 2 years. I’ll already know the answer to that one.”
If I had to make that choice, I’d choose the vette too :)
#80 - I had about the same WTF moment in 2k4 as well. Way too many BMWs and Mercedes in my working class neighborhood.
On the plus side, there should be some good deals on used Porsches soon.
#81 - I’d choose the vette too
ewww
On Topic - GMAC to cut its workforce by 60%.
HEHE 79
Various groups have been yelling and screwing warnings about this for years and they have been ignored. Regarding the Gulf of mexico; it is unlikely that they will ever get to pre katrina capacity. The quick and dirty of it is every time a hurricane comes through and damages infrastructure, extracting the oil becomes that much more expensive and hence less attractive economically as the cost/barrel increases with each storm.
Mexico and the north see are done, stick a fork in them. They are going to crash quicker then most main stream people would ever guess. The next big surprise will be Saudi. They keep their numbers secret, but the available data looks like they are very close to going over the edge and into a rapid decline.
House Prices Still Too High Despite Collapse
Despite early signs of a turn in the housing market, prices still have a long way to fall. In fact, we’re probably only halfway there.
There’s no perfect valuation metric for houses, but two measures–price-to-rent and price-to-income–are the best we know of. Asha Bangalore of Northern Trust provides recent charts of both, and a quick glance reveals how expensive house prices still are.
Price to Rent
Asha calculates the price-to-rent ratio using the Case-Shiller price index and the “Owner’s Equivalent Rent” component of the CPI. The horizontal “means” in her chart are one standard deviation above the long term mean (i.e., they’re not the average…they’re a standard-deviation higher than the average*). The higher mean includes the high prices of the bubble years, and the lower one doesn’t. Either way, it’s clear that house prices are still well above their long-term average level relative to rents. (And don’t forget that prices spend about half the time below the average).
oops, gotta watch that spell check! ;)
Various groups have been yelling and screwing warnings about this for years and
Screwing = Screaming
#72
I’m leaning in that direction as well. Even Cali is looking pretty good right now.
Kettle,
Yeah they’ve been pumping Ghawar with sea water for years, once that starts falling all bets are off.
The absence of bi today is especially refreshing.
yo, yo, yo, check this out: My response to comment
From: RE Hedge Fund Analyst and former Morgan Stanley Structured Finance Broker
Sent: Thursday, August 28, 2008 5:38 PM
Now we just need apts in nyc to come down in price. I can’t see how they don’t.
E: Because you have 23 yo “graduate students” that spend $20,000 on a sofas that mill about the streets while real people work………….
WSJ
People Who Live in Glass Houses It’s Not All Sunshine; Faded Furniture, Nosy Neighbors and Baking Heat Among Gripes By SARA LIN August 29, 2008; Page W1
The sun faded Sara Antani’s sofas and made it tough to read her laptop until she installed shades in her Manhattan high-rise.
She got her vistas. But she got other things she didn’t bargain for. The strong and relentless western light forced her to don sunglasses while reading. It made watching television and using her laptop computer almost impossible. The air conditioning could barely keep the temperature tolerable as sun baked the $1.5 million apartment on summer afternoons. And the sun bleached her pair of brightly colored European sectional sofas, which cost $20,000.
In June, Ms. Antani gave in, spending $12,000 on motorized shades that she keeps lowered during the day. “I love being able to see everything,” says Ms. Antani, a 23-year-old graduate student. But “the sun’s just in your eyes; you can’t focus. Everything is so bright.”
Wall-to-wall windows have become a signature of chic urban living, from Minneapolis to Miami. Home magazines and real-estate ads depict fashionable people in glass-walled towers lounging in front of endless views. But some residents say the reality can be less glamorous. Their windows often are streaked or spotty, even when washed regularly. The sun fades not just furniture but also kitchen cabinets, wood floors, artwork and even books. While urbanites are used to nearby neighbors, a glass-walled apartment without shades can be akin to being on display in a terrarium, especially at night. And temperatures near the glass can be chilly in the winter and roasting in the summer.
In Los Angeles, David Wood learned the hard way not to try to clean the expansive windows in his downtown condo on a sunny afternoon. The investment banker squirted Windex onto the inside of one of them — and it stuck. “The mist baked right into the window and stained it. I couldn’t get it out. It was that hot,” he recalls. The stain is still there.
Ann Johannson
Investment banker David Wood sprayed Windex on the glass of his Los Angeles condo — and it baked on. Rick LaBelle bought a downtown Chicago condo in October that came with sweeping views of Lake Michigan — and of the hotel across the street. “They can clearly see in,” he says. “Oftentimes people over at the hotel will wave.” The lack of privacy forced his daughter to retreat to a bathroom to dress. So the auto executive this month paid $15,000 for motorized shades to cover his windows.
Melanie Feinbloom says privacy is just one reason she spent $8,000 for 62 feet of curtains for her downtown Manhattan condo. After her family moved from a brick apartment building to the glass-walled high-rise, her electric bills doubled per square foot because of all the heat-transferring glass. It costs more than $500 a month to heat the 2,200-square-foot apartment at the height of the winter and at least $400 a month to cool it in the summer, says Ms. Feinbloom, an interior designer.
Complaints about glass houses date to some of the earliest examples. After architect Ludwig Mies van der Rohe completed his iconic Plano, Ill., Modernist house in 1951, the owner, Edith Farnsworth, started grumbling. Illuminated at night, the elevated glass box became a magnet for bugs. During the summer, “the sun turned the interior into a cooker,” writes Mies biographer Franz Schulze. Dr. Farnsworth sued the architect, in part over cost overruns but also because she contended that the house was unlivable. She ultimately lost her petition to rescind the added expenses, but her gripes were aired widely and resulted in a small backlash against Modernist architecture.
UNPREPARED FOR THE HEAT
Glass technology has improved since then. To cut down on sun damage and heat transfer, window makers use films on the surface and gases between the double panes that act as insulators, such as argon. Some windows even have a coating designed to shed dirt and reduce the need for washing. But problems continue. Terry Talentino, chief operating officer of Automated Shading Inc., says he has done work for thousands of apartment owners in Florida and Manhattan who are unprepared for how much solar heat gets transferred by their enormous windows. Many buy their condos based on preconstruction renderings or after viewing a sales unit with ideal conditions, such as less-sunny northern and eastern exposures, he says. “I’m not sure people really anticipate what they’re getting themselves into when they’re buying these,” Mr. Talentino says.
And even when residents decide they need to compromise their views and install curtains or shades, the installation can be problematic. The longer rods and extra fabric needed to cover a wall of glass not only are expensive but also often require installers to use extra-tall ladders or scaffolding. And sometimes these extra-long curtain rods or shades don’t fit into condo freight elevators and have to be carried up the stairs or taken up on top of the elevator cab — at extra cost.
Seasoned glass-house residents have developed strategies to cope with the sun-filled spaces. Connie and Jeff Watson, whose primary home has large windows, recently bought a second home in the new W Dallas Victory Hotel & Residences, which has floor-to-ceiling glass. Ms. Watson says she worked with her designer to carefully place every piece of furniture in the 4,800-square-foot apartment. Bright orange-and-red sofas were set back at least 10 feet from the windows. The rosewood grand piano went next to a small east-facing window. But they left some honey-colored leather dining chairs exposed to direct light because “it’s hard to fade something that color,” Ms. Watson says.
EVERYTHING BECOMES BEIGE
Window treatments are a must for glass walls, says New York interior designer Jamie Gibbs. Without them, he says, “You’d better pick beige interiors, because everything is going to become beige in two years.” Solar shades, which are made of a semisheer fabric, can cut down on heat and damaging ultraviolet rays while allowing residents to retain much of their view. But at night, with the lights on, solar shades aren’t enough for privacy. Mr. Gibbs says it is like a scrim on a theater stage with a light illuminating the actors from behind. “You see defined shadows. There’s not a lot left up to the imagination,” he says.
Then there’s the trouble with birds. Houston artists Dana and Hana Harper live in a 1960 house by architect Harwood Taylor with “wall-to-wall windows,” says Mr. Harper. The couple enjoys looking out over a wooded bayou, but they don’t like that birds periodically crash into the glass and die.
Architect Adam Rolston has a more comical problem with birds — wild turkeys, to be precise. Groups of them sometimes march up to the glass doors that line the sides of the Modernist house he built in upstate New York and peck at their reflections, often early in the morning, he says.
Yet most people who live in glass-walled homes insist they wouldn’t trade their views. Standing in his Manhattan living room overlooking the Hudson, Raj Mahajan says, “It brings a little bit of nonconcrete serenity to my New York existence.” But Mr. Mahajan, a 35-year-old financial-software executive, advises sleepover guests in the summertime to lower their shades before they go to bed. “If they don’t, they get scorched in the morning.”
HEHE,
just for fun, consider that for the last 2-3 months There have been supply shortages in diesel and other oil products throughout Saudi. It has been suggested that the recent new fields are not producing enough to maintain flow, so they have redirected product from local markets to the export market.
The local Saudi market works on a quota system, so there is no apparent reason for there to be a shortage and usage has not grow at that level as can best be seen from available data.
Another fun point is that Saudi has started to buy farm land like its going out of style. They have been making huge purchases in Mynamar, eastern europe, etc. They buy the land using a trust or hedge fund and supply the fertilizer and oil products need to grow the food.
i hope this comment from W will not make this board irritated.
“Fellow citizens: If the Hanoi Hilton could not break John McCain’s resolve to do what is best for his country, you can be sure the angry left never will.”
http://www.cnn.com/2008/POLITICS/09/02/bush.transcript/index.html
i hope this comment from W will not make this board irritated.
“Fellow citizens: If the Hanoi Hilton could not break JM’s resolve to do what is best for his country, you can be sure the angry left never will.”
http://www.cnn.com/2008/POLITICS/09/02/bush.transcript/index.html
“Shares of Corning (GLW 17.56, -1.94) are down 10% after the company issued a third quarter earnings warning due to lower-than-expected LCD glass shipments.”
Looks to me ike the consumer is running on empty!
Stu Says:
September 3rd, 2008 at 12:57 pm
“Shares of Corning (GLW 17.56, -1.94) are down 10% after the company issued a third quarter earnings warning due to lower-than-expected LCD glass shipments.”
Looks to me ike the consumer is running on empty!
Stu: I want to comment but cannot.
“i hope this comment from W will not make this board irritated.”
The only thing irritating about that quote is that I’m left wondering who spoon-fed it to our current baboon in chief.
bipolar: You are an anus that just expressed itself….
yesterday, there is 90 year old scholar who spoke with absolute authority that major media is “fair and balanced” as they claimed.
Here is my rating on liberal scale of major media (50% is netural) from left to right
newspapers:
NYT WP WSJ
89% 57% 15%
networks:
(MS)NBC CNN CBS ABC FOX
85% 80% 70% 52% 10%
Let me know if you agree.
#SC Says:
If you believe the media is “liberal” then you are truly ignorant. We have a corporate media in search of profits. That is it’s only agenda. Period. If the media really was liberal, then Gore would be president right now.
palins church controversy??
http://www.huffingtonpost.com/2008/09/02/palins-church-may-have-sh_n_123205.html
Hey BI:
I’m fairly certain that the average reading level of the audiences that watch those networks or read those newspapers drop dramatically from left to right.
Let me know if you agree.
A follow-up on GMAC.
They’re closing all the retail outlets and ceasing wholesale originations.
97#, yesterday u were whining when i compared u with mr. o (not the one). you thought i was talking abut your political view. i care less than nothing about it. your arrogrance and bully demonstrated here every day. that was what i meant.
#75 kettle: Contrary to gary, I am stating to see significant asking price reductions, and that will only accelerate.
I believe that by Summer/Fall next year we will see dramatic reductions, as we trend towards the bottom. Than a long slow flat period, like the last time around.
I remember it well, as I lived it.
#78 kettle:at a time when 200K barely gets you a POS cape.
And that cannot and will not be sustained.
Bi…Better read Kettle1’s link.
It appears she has one of her own personal Reverend Wright.
Of course, guilt by association is never acceptable by your party members.
I stand by my original prediction.
I can’t wait to hear this wonderful role model speak tonight.
Let’s see:
1. She supported the bridge to nowhere
2. Her experience is less than that of the mayor of Smallville.
3. She only got elected to Governor by a tiny vote since there were so many candidates in the race.
4. God makes her decisions for her and some companies she wants contracts with.
5. She preaches abstinence and then her daughter f’s around.
6. She’s selfish for accepting the nomination and putting her daughter through this.
7. Cop controversy
8. Is the down child her’s or her daughter’s (5 months of mono???).
9. She was a secessionist.
10. Rumors that her future son in law had impregnated another girl in the 8th grade.
11. Husband had a DWI.
12. Used to be anti-drilling now is for.
13. Used earmarks frequently.
Shall I go on?
tough times for ResCap
http://www.marketwatch.com/news/story/gmac-rescap-cut-1000-jobs/story.aspx?guid={BAC15435-0CF1-4003-A1CD-8E829FA06B74}&siteid=myyahoo&dist=myyahoo
100#, not true. though it is a little old,
WSJ has more circulation than NYT
http://www.infoplease.com/ipea/A0004420.html
MSNBC and FOX are basically equivalent. They both have made strategic decisions to slant a certain direction.
I think most other major media outlets actually try to be objective as institutions, but ultimately fail due to the individual biases of their reporters. I think it is just a fact that most people who choose to go into journalism are left leaning. This wouldn’t be so much of a problem to me if reporters didn’t constantly try to pretend otherwise. So in that respect, I actually respect Fox and MSNBC more than the others.