New Jersey Real Estate Report

From Reuters:

UBS takes $3.4 billion credit hit

Swiss banks UBS and Credit Suisse joined the ranks of casualties from a global credit crunch on Monday, fuelling fresh concern about the depth of the crisis.
…
UBS unveiled $3.4 billion in losses, mainly on securities linked to the U.S. subprime mortgage sector, swept out senior managers and slashed jobs, while Credit Suisse said its results would be “adversely impacted” by the market turmoil but it would remain profitable in the third quarter.

European credit spreads widened as the UBS losses underlined concerns about tight credit markets after short-term lending rates jumped on Friday, dashing hopes from earlier last week that credit conditions were easing.

“It definitely fuels ongoing worries on the markets. Credit spreads are widening again and the interbank (lending) market remains very tense,” said Valerie Plagnol, chief strategist at CM-CIC Securities in Paris.

In a speech at the Reuters headquarters in London, Greenspan said the market upheaval stemming from defaults on U.S. home loans to people with poor credit histories “was an accident waiting to happen”.
…
UBS, the world’s largest wealth manager, said the 4 billion Swiss francs ($3.42 billion) write-down would result in a third-quarter loss of as much as 800 million Swiss francs ($683 million).

“The critical time will be over in the next six months,” Chief Executive Marcel Rohner told reporters after UBS shed 1,500 jobs in its investment bank.
…
The Swiss banking giant is only the latest in a string of global banks that have reported hits from a downturn in the U.S. housing market, which has triggered a global credit crunch.

Banks worldwide have clammed up on lending to each other as they strive to calculate exposure to soured loans, forcing the world’s major central banks to inject emergency funds into the global financial system to prevent it grinding to a halt.

Credit Suisse said on Monday its investment banking and asset management results had been adversely hit.

“It’s probably safe to say UBS won’t be the last bank to announce something like this in the months ahead, but it begs the question as to how long this turmoil will continue,” said Eamonn Hughes of Goodbody Stockbrokers.

From the WSJ Real Time Economics Blog:

Sales of Pricier Homes Plummet With Credit Crunch

The market for higher-end homes took an especially strong blow in August as a result of the credit crunch: Sales of new homes priced above $500,000 dropped by more than a third in the latest government figures.

Today’s report on new-home sales show that 68,000 new homes overall were sold during the month, down from 74,000 in July (and off 22% from a year earlier). Sales of new homes priced at $500,000 or more plummeted: 6,000 were sold in August, after 9,000 for each of the previous three months (and 11,000 a year earlier).

The credit market turmoil, spurred by the subprime-market meltdown, has sent rates higher for “jumbo” loans — those $417,000 or more — and blocked many consumers out of mortgages. Lower demand is expected to push prices down even further for higher-end homes, whether new or previously owned. That means larger spenders “will pay a price as the housing market continues to unwind” and could hit consumption growth especially hard, says Joseph Brusuelas, chief U.S. economist at IDEAglobal.

…and people call me grim?

From the NY Post:

HOME WRECK
CARNAGE MOUNTS AS PRICES ARE SINKING FAST

From the New York Times:

They Cried Wolf. They Were Right.

IN May of 2004, Dean Baker, an economist in Washington who had been warning about excesses in the housing market, sold his two-bedroom condo after concluding that the market had lost its moorings from reality.

In a way, he was two years too early. Had he waited until May 2006 when home prices in the Washington area peaked, his home would likely have appreciated by roughly 38 percent from its 2004 value, according to an index that tracks home prices in the metropolitan region.

The case of Mr. Baker, who now happily rents a similar condominium a few blocks away, serves as a useful illustration about the perils of calling and timing financial bubbles. It may be easy to spot an out-of-control market, as Mr. Baker and others did, but quite another to predict when one has truly gotten out of hand.

In a replay of the years before the tech-stock bubble burst in 2000, housing market skeptics have spent much of this decade being tarred as the boys who cried wolf. Their predictions were proved wrong year after year as people continued to bid up the price of condos in Miami and new houses in suburban Phoenix.

Academics and economists like Mr. Baker came across as gloomy sourpusses who did not want Americans to have fun and grow rich by flipping second homes on the New Jersey or Florida coasts.

“The naysayers simply look silly at the end of the bubble,” said Mark Zandi, chief economist for Moody’s Economy.com who was among the experts raising questions about the underpinnings of the housing boom. “They are completely discounted and discredited because they have been saying things are askew for a year or two. It’s when the naysayers’ views have been completely discarded and discredited that the bubble inflates to its apex.”
…
Some in the real estate industry say the early cries of bubble should be called to account on the grounds of intellectual fairness. If the boosters have to acknowledge they were wrong when they provided justifications for prices that were, well, unjustifiable, then the doubters should also own up to the fact that they were too negative, too early.

“Even the people that were talking about booms busting, my goodness they were talking about it in 2001 and 2002,” said David Lereah, the former chief economist with the National Association of Realtors. “And they were wrong for four years and they only became right at the end of 2004.” He and his former employer had been criticized for the optimistic forecasts they made during the boom.
…
You got some of us sitting there in a distance saying that this is a bubble, we don’t know when its going to end,” said Christopher F. Thornberg, an independent economist who is based in Los Angeles. “And then you have mortgage brokers and real estate agents who are much closer to the buyer who are whispering in their ear that, well, yeah, there are some markets that are out of line but not this neighborhood.”