Bad News for Some...Good News for Some

Home prices take biggest dive

Survey finds 6.7% falloff in U.S.; 3.2% Chicago-area decline

By Susan Diesenhouse | Tribune staff reporter

December 27, 2007

With fewer buyers and a bulging supply of newly built houses, residential sale prices fell nationwide in October for the 10th consecutive month, posting the biggest monthly decline since these numbers were first compiled in 1988, according to the Standard & Poor's/Case-Shiller home price index.

The record 6.7 percent drop marked the worst falloff in same-house sale prices since the 6.3 percent decline during the real estate recession of April 1991.

"No matter how you look at these data, it is obvious that the current state of the single-family housing market remains grim," Robert Shiller, who helped create the index, said in a statement Wednesday.

Chicago was late to the bubble game, so late she will be to the burst. But burst she will. Chicago has the same bad fundamentals as the rest of the country. Home prices too high for average incomes, and over-supply. Chicago is suffering from the same valuation crisis as everyone else.

Chicago Condo Market in Trouble

Foreclosures on condo projects rise

Is conversion crush an ominous sign?

The condo slump has put developer Liviu Mihulet in a tight spot.

His lender, Northside Community Bank, filed a lawsuit in August to foreclose on a 32-unit condominium conversion the developer launched in January in West Rogers Park. The bank asserted that the property, at 6500 N. Claremont Ave., had declined in value and demanded that Mr. Mihulet put another $500,000 of equity into the project. When he refused, he says, Northside demanded he repay the $3.1-million loan.

"This was an insult," says Mr. Mihulet, who is trying to refinance the project.

It's an indignity more developers are facing. As weak condo sales make it harder to pay off construction loans and skittish banks try to reduce their exposure to the depressed market, condo developers are increasingly facing a fate similar to that of the thousands of Chicagoans who may lose their homes to foreclosure.

That's what happens once most of everybody buys something and the rest of the population cannot afford what's left over.

These People Are...

...Quite Probably THE Dumbest People in Chicago!





THESE people bought a house in the heart of ENGLEWOOD, and are regretting it now. That the boy only got his ass kicked once is a miracle. Now the ass-wooping might cause them to foreclose on their "dream home". Seems more like a nightmare to me....

Foreclosing on a dream

'I WOULDN'T WISH THIS ON MY WORST ENEMY' | Subprime loan and a run of bad luck have left Theresa Adamovitz with mortgage payments that she can't meet

December 10, 2007
BY KARA SPAK Staff Reporter/kspak@suntimes.com
Theresa Adamovitz had one thing to do before putting up her Christmas tree this year: File for bankruptcy.

...

The modest home in the 6100 block of South Loomis was a dream come true for Adamovitz and her then-husband when they bought it in 1997.

...

She totaled a car she still owed money on. Her job switched to hourly pay, costing her $500 in monthly income. Her son got mugged, needed surgery and lost his job. Her ex-husband didn't make his payments on the loan. The adjustable rate mortgage kicked in, jacking up the monthly payment to $1,853 from $1,175.

Buying something in the wrong neighborhood is a bad mistake no matter what.

Thank God, Not in Chicago!!

House prices seen falling 30 pct

By Julie Haviv

NEW YORK (Reuters) - Housing markets from Punta Gorda, Florida, to Stockton, California, will crash and suffer price drops of more than 30 percent before the housing crisis is over, a report from Moody's Economy.com said on Thursday.

On a national level, the housing market recession will continue through early 2009, said the report, co-authored by Mark Zandi, chief economist, and Celia Chen, director of housing economics.

The report paints a worsening picture of the hard-hit housing sector, which is in the midst of its worst downturn since World War II.

Read that again! It says from Florida to California. It clearly says NOTHING about Chicago. We are safe. Everything is fine here. Go buy a condo.

Not Just the Poor

Middle class and out of a home in Chicago

Poorer neighborhoods hit hardest, but wealthy, middle class also squeezed

December 4, 2007
BY ART GOLAB Staff Reporter/agolab@suntimes.com
The home mortgage meltdown isn’t just gutting the poorer parts of town.

It’s beginning to hammer wealthy and middle class Chicago neighborhoods like Lincoln Park, Lincoln Square, Irving Park, Portage Park and Mt. Greenwood — all areas where home mortgage foreclosures have shot up by 100 percent or more from 2006 to 2007.

The home mortgage meltdown is beginning to slam Chicago's wealthy and middle-class neighborhoods.
(AP)

Data released Monday by the National Training and Information Center shows that in Lincoln Park there were 18 homes in foreclosure during the first six months of 2006 — but that number more than doubled to 37 for the first half of this year.

In terms of sheer numbers, poor neighborhoods still are feeling the worst pain. But percentage increase in mortgage defaults is climbing faster in middle class areas, according to the data.

Poverty stricken West Englewood, for example, had 348 foreclosures, or 111 per square mile — yet that was just a 58 percent increase over the previous year.

But in middle class Portage Park, the heart of the Northwest Side Bungalow Belt, mortgage defaults jumped from 32 homes to 94, a whopping 193.8 percent.

Does anyone out there realize that prices went way too far ahead of income??? That is why the foreclosures are jumping. People could not afford the price tag, but they were goeded into stretching too far by the TV flipper shows, the real estate agents, the neighbors, the co-workers, et al. Now judgement day as arrived and they want a pass because they are too gullible.

Freezing the ARMS is a good first step,” said Rose, but he added that lenders should also work with borrowers to permanently change the terms of the loans so they don’t get into trouble again.

Also, government and lenders should to find new, healthier ways to bring mortgage money into poorer neighborhoods rather than just subprime lending.

"And to make sure this doesn’t happen again we’ve got to slap some rules on an industry that has gone virtually unregulated,” said Rose.

Overall in Chicago, the foreclosure rate was 40 percent higher for the first six months of this year compared to a similar period in 2006.

Does this sound about right?

Mr. Fvcked Borrower: Mr. Nanny-State Government! Mr. Nanny-State Government!

Mr. Nanny-State Government: What Mr. Fvcked Borrower?

Mr. Fvcked Borrower: I'm in trouble and I need your help!

Mr. Nanny-State Government: What is it?

Mr. Fvcked Borrower: I can't afford my lottery tick....er, I mean my HOME any more. I'm scared! Tell Mr. Lender to give me a break.

Mr. Nanny-State Government: Ok, Mr. Lender, go easy on Mr. Fvcked Borrower!

Mr. Lender: We know you lied on your lottery tick...er, loan application, Mr. Fvcked Borrower. But that was ok, because we liked the commissions. We will freeze your rate if you promise never to do this ever again. Do you promise never to get in over your head again with debt?

Mr. Fvcked Borrower: Oh, yes. Yes. I promise never to get in over my head again. Thank you sir, thank you.

[Mr. Fvcked Borrower is crossing his fingers behind his back.]

What's Going On Here?

Developer sought for West Garfield vacant parcels

By Jeanette Almada | Special to the Tribune
December 2, 2007

A mixed-use developer is being sought for several vacant city-owned parcels in the West Garfield neighborhood.

City planners at the Chicago Department of Planning and Development on Nov. 19 issued a request for development proposals for any of several lots, most of which are on the 3900 block of West Jackson Boulevard and West Adams Street, and at 201 S. Pulaski Rd.

The city hopes to find a developer who will build residential projects on most of the lots, and a mixed-use project at 201 S. Pulaski. Developers who propose environmentally friendly and energy-efficient projects, and particularly proposals promising to build U.S. Green Building Council LEED-certified projects will receive favorable consideration in the application process, a Planning Department project manager told the Community Development Commission last month.

Ok, I find this really weird. If Chicago R.E. is fine and not under the pressure that other markets are under, then this should not be happening. Having a good idea about how the City works, I find it difficult to believe that NOBODY wants these lots! Things must be really bad if the politicians cannot hand out sweetheat deals to their buddies.

Chicago to Lose $3.9 Billion

CNBC Video


Many major markets will take hits in the tax income. Chicago being one of the biggest hit.

I wonder how Daley and Toddler feel about all of this? They cannot really admit to a housing problem, Especially one that hits their town, since we all know that Chicago is invulnerable to the housing bust. Yet, this might be where all of the taxing problems are coming from. CTA on the ropes. Will CPS be next??

USA Today...Doom & Gloom Today??

Housing woes have domino effect


Ofcourse Chicago is different and will be just fine! Just go to yochicago.com for all the proof you need. But the rest of the country is SCREWED!

If you haven't yet felt the impact of the nation's credit crisis, just wait. Chances are, you won't have to wait long.

So far, the turmoil may feel a bit remote for average people: Failed mortgage lenders. Gargantuan write-downs by banks. Foreclosures for people who couldn't really afford the mortgages they got.

What about the rest of us? Are we in danger? No one knows for sure, but quite likely, yes.

As the credit crisis seeps into farther-flung corners of the economy, more of us will find it harder — and costlier — to borrow money. The value of the funds in our retirement accounts could shrink. People with subpar credit will likely find it more difficult to qualify for auto and home-equity loans. Even consumers who make the cut may need higher credit scores and more documentation.

With loans harder to get, people will hesitate to buy cars, boats and other big-ticket items. The gravest fear? That weak consumer spending — along with surging energy prices, a long housing slump and sluggish job growth — will plunge the economy into a recession.

Jeez, could all of this happen because some jerk actually lent $400,000+ to buy a 900 sq ft shoebox ranch on the NW Side?? Nah, remember, "Chicago Is Different!"

Repeat after me:

"Chicago Is Different!"

"Chicago Is Different!"

"Chicago Is Different!"

"Chicago Is Different!"

"Chicago Is Different!"

Feel better yet?

AARRGGHH!!!!

Fed chief calls for help on housing

Bernanke urges Congress to act, sees growth slowing

By William Neikirk | Tribune senior correspondent

November 9, 2007

WASHINGTON - Federal Reserve Chairman Ben Bernanke offered no immediate relief Thursday to Americans buffeted by a housing-induced credit crunch, record oil prices, a falling dollar and financial market turmoil.

In testimony before the Joint Economic Committee of Congress, Bernanke warned of slowing economic growth and gave no reason for hope that the central bank would cut interest rates again when it meets in December, instead cautioning lawmakers about the potential inflationary consequences of oil prices nearing $100 a barrel.

Good lord, doesn't he know that his rate cuts are causing those "potential inflationary consequences??!!

But Bernanke said there has been discussion about raising limits on the size of the loans that Fannie Mae and Freddie Mac can buy from lenders from the current $417,000, which would allow primary lenders to make larger loans that Fannie Mae and Freddie Mac could lump together and sell as mortgage-backed securities.

The federal government could guarantee the increased loan limit, he said, adding that any such move should be temporary. Jumbo mortgages, those above $417,000, have become harder to get since the troubles over subprime loans.

People cannot afford such outrageous prices! That is why the bubble popped. Increasing the conforming standard will help nothing.

Stagflation fears

One congressman suggested the country could be returning to a 1970s-style "stagflation," when slow growth and high inflation hammered the U.S. economy. But Bernanke said any such outbreak of stagflation now would be mild compared with the 1970s and not to worry.

YA! Someone finally said it! Rising prices + flat wages = STAGFLATION.

"I don't see any significant change in the broad holdings of dollars around the world," he said.

The dollar's value is rooted in the strength of the U.S. economy, America's trade situation and open markets, Bernanke said.

Please don't remind us, Ben.............

Wow! What Do They Know That We Don't??

Sometimes a news story gets you spooked. Especially when it's alittle bit out of the blue.

Make sure your bank deposits covered by FDIC

By Eileen Ambrose
October 14, 2007

You can go for years not thinking about federal insurance on bank deposits—and then a bank failure reminds you of how important this protection can be.

That happened Sept. 28, when regulators took over NetBank Inc., an Internet savings and loan based in Georgia.

In a failure, customers whose deposits are fully covered by the Federal Deposit Insurance Corp. have ready access to their funds. But if deposits exceed the insurance coverage, you may have to wait years to get your hands on the uninsured money, and you might not receive it all back.

Which is why it's prudent, even in these days when bank failures aren't common, to make sure your accounts are fully insured.

...

Most of us have never been through a bank failure, but NetBank can give you an idea of what happens to consumers. It was the second FDIC-insured bank to fail this year.

OOOOOOOOOOOOOOOOk. Bank failures?? Bank runs?? This is in the Chicago Tribune. I thought the Chicago mass media did not think there was a housing bubble. If housing and the economy is just fine, why should I be worried about my bank account, like it's the Depression all over again??

Further reading:

Google.com: "Northern Rock"

Google.com: "NetBank, Inc."

Why Would Anyone Want to Live in the City?

The Mayor does not even know:




'It's too much for the average person'

CITY HALL | Daley's call for record property tax hike stuns aldermen

October 11, 2007
BY FRAN SPIELMAN City Hall Reporter/fspielman@suntimes.com
Chicagoans would be saddled with the largest property tax hike in the city's history -- and pay more for everything from liquor, parking, telephone service and city stickers, to bottled water, auto leases and DVD rentals -- under a $293 million tax wallop proposed by Mayor Daley on Wednesday.

With rising home prices, stagnant incomes, highest gas prices in the nation, one of the worst commute times in the nation, government corruption, the falling dollar, rising taxes, failing public schools, reduced police enforcement in the taxpayer's neighborhoods, why would anyone with a brain choose to live within the borders of Chicago? Because of the restaurants? The Bean? The bars?? C'mon.

Is San Diego the Future?

Condo Auction a Symptom of Ailing Housing Market

by Scott Horsley

All Things Considered, October 5, 2007 · Nervous homebuilders were eyeing San Diego last weekend to see just how soft the real estate market has gotten.

One of the nation's largest homebuilders, DR Horton, auctioned off more than three dozen condos that had previously gone unsold. The condos went for an average of 30 percent below the peak price previously advertised.

There are many Chicago are developer auctions. Most are still available if you want to catch a falling knife.

Cramer Opens His Yapper Again

CNBC Video--Cramer says don't buy a home

WOW!! Mind you, I heard with my own ears on Mad Money a few months back that Cramer admitted to RENTING!!!! Yes, RENTING. Oh My God! Watch this video.

The NAR demanded a retration. Cramer and The NAR president-elect debated on The Today Show:

Video: Debate

Boy, you think the NAR with all their money that they could hire a professional debator.

Oh No He Didn't!

The Federal Reserve's Interest Rate Cut Does Not Help Americans

by Axel Merk


In our assessment, the Federal Reserve's (Fed's) interest rate cut was wrong. Forget about the "moral hazard" of whether the cut would plant the seeds for further bubbles. Lowering interest rates is wrong because it will do few any good, but cause many a lot of harm.

As the most imminent result, the U.S. dollar has accelerated its decline versus hard currencies. When a country's central bank cuts interest rates, it is rare that the currency reacts in textbook fashion and declines more than a token amount versus other currencies; that's because, amongst others, lower interest rates may boost growth and make the currency more attractive for investments. Not so this time with the Fed's cut: lower interest rates are unlikely to boost economic growth. The reason? The markets are facing a valuation problem, not a liquidity problem.

The DJIA going above 14,000 for the first time ever. But what does that really mean when your dollars are worth less than when it was at 10,000?

"It's A Buyers Market", But...

...Don't even think about...

Making a low-ball offer

By Amy Hoak
MarketWatch
Article Launched: 09/22/2007 01:41:01 AM PDT

CHICAGO - Home sellers are not automatically turning up their noses at offers that come in far below their asking price these days as prices stagnate and the inventory of homes for sale remains elevated in many markets.

But buyers who do ask for deep discounts still risk offending sellers to the point where they quash any deal. So before making an aggressive offer, some homework is in order, real estate professionals say. Further, buyers need to effectively explain why the price of a home should be lower.

Maybe THIS is the problem:

Homeowners Just Don't Understand Value Of Homes

Posted By:Diana Olick
Topics:Housing | Real Estate
Sectors:Construction and Materials

A new survey out today from Reuters/University of Michigan looks at homeowners’ perceptions of their own homes’ values. When the survey flashed over the wires this morning, my email lit up with all the “Alert” desk folks at CNBC saying, “Omigod, this is huge.” I don’t agree. I say it’s not huge enough.

The survey’s headline says, “A record 26% of U.S. homeowners say the value of their homes has fallen during the past year.” Further, 21% of homeowners polled in September expect the value of their home to decline in the year ahead. The survey finds even bigger numbers if you look at folks just in the West, but that’s an overall national picture.

Ok, so 26% is a record, but I have to ask, why isn’t it higher?? The latest survey from S&P/Case Shiller, which looks at the nation’s top 20 metros as well as a full U.S. National index, shows nothing but negative now, and given the trend, into the near future. The national index shows a price drop of 3.2% from a year ago, with the 10-city composite down 4.1% and the 20-city composite down 3.5% from a year ago.

Oh, I get it. the Greedy Sellers are completely out of touch. Hmmm, how much longer can they keep making adjusted rate payments? I am still holding my breath!

Thumbs Down

Fed's move called into question

Rising bond yields and a slumping dollar fuel inflation worries after the rate cut.

By Walter Hamilton, Los Angeles Times Staff Writer

NEW YORK — Yields on long-term Treasury bonds jumped, the U.S. dollar sank and the price of gold surged Thursday, intensifying questions about whether the Federal Reserve's move this week to stimulate the economy could backfire.

Though the central bank's cut in short-term interest rates on Tuesday stoked the stock market, it has spooked some other markets -- mainly by raising fears of higher inflation that could undermine the economy.

...

Whatever is driving long-term Treasury yields up, it's bad news for the housing market.

"The cost of getting a mortgage has gone up, not down, since rates were cut," said Jim Keegan, a bond fund manager at American Century Investments in Kansas City, Mo. "So far the market's voting that [the Fed cut was] not the right thing to do."

The average rate nationwide for 30-year mortgages edged up to 6.34% this week from 6.31% last week, mortgage finance giant Freddie Mac said Thursday. The 30-year loan rate has mostly been falling since mid-July.

We will see what happens, but I think it it will be safe to assume that the Fed will cut again. The all important Dow did not flourish for long after the cut.

The only real way to help the housing market will be to pay off 1/2 of all homedebtor's loans. But what a mess that will be. And that will ruin homeownership those that did not get in and those about to come up.

As we well know, the Fed's job is to help out Wall Street not Main Street.

Fed Cuts

In case you missed it, the Fed cut it's key rate:

Fed cuts rates by a half percentage point

Bold reduction in fed funds aimed to forestall disruption in markets, economy

WASHINGTON (MarketWatch) -- In a surprisingly strong move, the Federal Reserve unanimously voted to cut its overnight interest rate target by a half percentage point to 4.75% Tuesday, citing turmoil in financial markets as a threat to economic growth.

"The forest fires in the economy had been spreading rapidly in the July-August period, and the Fed has recognized that it is going to take more than just a few buckets of water to bring this situation back under control," said Brian Bethune, U.S. economist at Global Insight.

U.S. stock markets rallied on the first cut in the federal funds rate in more than four years. Financial markets and analysts had been expecting a smaller quarter-point cut.

What does this mean? Will you get a better rate now? Will you be ale to stave off high prices with a low low rate?

According to Bankrate.com, maybe not:

Mortgage rates lower, too? Not so fast

Whenever the Fed cuts the federal funds rate, customers call mortgage lenders, eagerly expecting to take advantage of a drop in mortgage rates. By the time these phone calls are over, customers frequently feel disappointed and even suspicious. It just doesn't seem right. Why would banks raise mortgage rates while the Fed is cutting rates?

Things aren't that simple (or that sinister). Mortgage rates go up and down according to investors' expectations of long-term inflation. Simply put: If investors think inflation will accelerate, mortgage rates (and other long-term interest rates) rise.

So, is long term inflation a problem?

Gold hits 28-year high after dlr sinks to record lows

and

Oil prices rise above $82 a barrel


Let us see what the dollar is actually doing:

Loonie's rise latest sign of our dollar's fall

The American dollar is tumbling around the world.

On Thursday it reached parity with the Canadian dollar for the first time in 30 years and hit its lowest level yet against the euro, also dipping relative to the British pound and hitting a nine-year low against the Indian rupee.

Parity means one Canadian dollar buys one U.S. dollar, so a bottle of maple syrup could cost an American as much in Toronto as it does in New York.

So with gold shooting up, oil making a new high and the dollar falling off the cliff, I'd say we might have long term inflation. One way to tell, let us look back to Bankrate.com:

Mortgage rates rise slightly

The Federal Reserve cut interest rates this week. So naturally, mortgage rates went along for the ride, right?

Wrong.

The benchmark 30-year fixed-rate mortgage rose 4 basis points, to 6.32 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of one percentage point.

So what has Ben wrought on us? Higher inflation and not necessarily lower interest rates that won't help the falling knife of the housing crash steam rolling away.

But there is more, international consequences are growing.

China threatens 'nuclear option' of dollar sales

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.

It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

and


Fears of dollar collapse as Saudis take fright

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

Ben Bernanke has placed the dollar in a dangerous situation, say analysts

"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.

"Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.

The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.

and

Iran to replace dollar with euro

The Iranian central bank is to convert the state's foreign dollar assets into euros and use the euro for foreign transactions.

"The government has ordered the central bank to replace the dollar with the euro to limit the problems of the executive organs in commercial transactions," Gholam Hossein Elham, a government spokesman, said on
Monday.

"We will also employ this change for Iranian assets [in dollars] held abroad."

Elham said that Iran's budget would in future be calculated in euros.

"Until now the budget has been calculated according to revenues in dollars but this calculation will now change," he said.

Can you see where this is going? I might be getting a little a head of a Chicago RE blog here, but the macro motions must be understood. The Butterfly Wing Theory is in full play. You might not have noticed the guy that lied about his income and had many ugly marks on his credit that over paid for a 1000 sq ft ranch in Norwood Park. But if multiplied by the hundreds, or thousands, or millions more such fools, you cannot help but notice a breeze. The problem is that now everyone holding a US$ is coming down with a cold.

Thanks, Ben!

Hair Cuts Are Scary

Fire Sale: Hovnanian Slices Luxury Home Prices

By AP 14 Sep 2007 10:29 AM ET Font size:

Hovnanian Enterprises, struggling like other home builders, is offering six-figure discounts on some of its properties this weekend as it attempts to draw interest in a slumping market.

Ross D. Franklin / AP

The sales blitz involves dropping prices by more 20 percent on some of its prime real estate.

The largest discounts are on the most expensive homes, including a 3-bedroom condominium by the Hudson River in West New York, which has been reduced $240,000, or 22 percent, to $862,000 this weekend. A 25-percent discount is
being offered on a 2-bedroom home in Jackson Township, N.J., which lowers its price tag to $300,501.

...

"We've certainly seen conditions in the housing market continue to deteriorate in the last several months," Chandan said. "The downward adjustment in prices, whether for new homes or existing homes, is going to be far more severe than what many people thought earlier this year."

...

"Depending on how successful it is, it might not be a one-time event," said Keith Gumbinger, vice president of HSH Associates, a consumer loan research firm in Pompton Plains, N.J., suggesting that buyers might wait if they thought a better discount was imminent.

Gumbinger found the sale remarkable, given low mortgage rates.

"You wouldn't think there is a need to go to the marketplace with such discounts," he said. "This is a pretty good indication from a prominent homebuilder that the market is troubled."

That Gumbinger guy is a blind fool.

I love the scare tactic with HOV. One time deal my ass. If a guy bought that condo for only $800k, would YOU buy a similar one for 20% more NEXT MONTH?? I think not.

Greenspan Said It, Not Me!

Greenspan: We've seen this turmoil before

Report: Economic bubbles can't be defused through interest rate adjustments, he suggests in speech.

September 7 2007: 6:07 AM EDT

NEW YORK (AP) -- "The human race has never found a way to confront bubbles," Former Federal Reserve Chairman Alan Greenspan said Thursday in reference to the euphoria that can precede contractions, or reactions, like the current market turmoil, according to a published report.

...

Bubbles can't be defused through incremental adjustments in interest rates, he suggested, the paper reported. The Fed doubled interest rates in 1994-95, and "stopped the nascent stock-market boom," but when stopped, stocks took off again. "We tried to do it again in 1997," when the Fed raised rates a quarter of a percentage point, and "the same phenomenon occurred."

There you have it, folks! From The Great Maestro himself. This thing needs to unwind on it's own and that is it. The sooner the better.

Another One Bites the Dust

Former Subprime Leader Ameriquest Closes

Saturday September 1, 12:25 am ET
By Gary Gentile, AP Business Writer

Former Subprime Leader Ameriquest Closes Amid Sale of Parent to Citigroup


LOS ANGELES (AP) -- Ameriquest Mortgage Co., once the nation's largest subprime lender, will close with barely a whimper, after the other assets of its parent company were sold Friday to Citigroup Inc.

Ameriquest, which saw its fortunes soar during the housing boom by lending to people with less than stellar credit, is the latest victim of a mortgage crisis that has left bankrupt companies and cash-strapped borrowers in its wake.

...

Under the agreement with ACC, Citigroup acquires servicing rights for $45 billion worth of loans. Terms of the deal, expected to close Sept. 1, were not disclosed.

...

The sale includes operational centers in Orange and Rancho Cucamonga, along with Rolling Meadows and Schaumburg, Ill., as well as a broker network extending across 48 states.

...

Ameriquest made a billionaire of its founder and chief owner, Roland Arnall, who is now U.S. ambassador to the Netherlands. He founded his company as Long Beach Savings in 1979 and built it into a major subprime lender.

How fitting. Who appointed him? I wonder how he got out of the S&L crisis in the 1980's? Probably the same way I'd imagine...

In March, the Texas Rangers severed a 30-year naming rights deal with Ameriquest and rebranded their home field as Rangers Ballpark in Arlington.

Boy, sounds like ENRON, eh? I wonder if the irony is lost regarding the team that accepted Arnall's money was the same team that Bush II owned...

I just cannot wait until Ditech goes under. I am so sick of their "People Are Smart" refi tv ad!

...and the savior might be:

RON PAUL!

I might be going out on a limb here.

Although I am a True Blue Democrat, I cannot help but agree with and admire Ron Paul. Check out his statement on high risk credit:

The real answers are, and always have been, found in the principles of the free market. Let the market set the interest rates. If we had been functioning under a true and transparent free market system, we would not be in the mess we are in today. Government, like the American household, needs to live within its means to get back on stable fiscal ground.

The Middle Class is always the victim. The Regular Republicans are only for themselves and the top tier, high net worth 10%'ers. The Regular Democrats are only for themselves and baby-sitting-check-getting-welfare-queens. Those of us in the middle that actually work and pay the taxes so everyone else can stay up late and party need to organize.

Can Daley help us?

No, he cannot.

Daley to target home foreclosures

Tribune staff report
August 19, 2007

CHICAGO - Speaking about the increasing number of home foreclosures in Chicago and in the nation, Mayor Richard Daley said Saturday that the city hopes to compile a list of people who lost their homes to foreclosures, in an effort to try to help them.

"We have to take a list of all of them, get all the mortgage companies and have to try to build their lives," the mayor said at a news conference announcing a new principal at Harper High School in West Englewood. He did not specify what the city would do with the list.

Sorry, Richie. There is no hope. I'm sure "the community" of West Englewood appreciates the words, but not even All The King's Men will be able to put Humpty back together. I wonder what culpability da Mayor and his developer buddies feel from whipping the public into a OwnACondo.com frenzy? Only now to see the error of their ways.

Can the Fed Help Us?

No they cannot.

I saw on CNBC that Lehman Bro's is predicting a 50 bp cut to the fed fund rate, and Goldman Sachs is calling for 75.

I liked Rick Santelli's match with Krazy Kudlow the other day. R.S. was claiming that this won't help the economy. K.K. was disagreeing, in that it *will* help Goldman Sachs. They are both correct.

Fed is taking care of its members and widening their spreads to help them cover their Hedges, LBOs, and MBS. But the banks won't lower their rates. They can't. They need to be profitable. The big boys know that there are allot of foreclosures coming down the pipe and have to prepare.

R.S. is correct that Harry Potter can't magically put the pieces back together. Houses will sell for MUCH less in the coming years. They already are. People over bought. Those of us left at the curb are not going to chase the car anymore. Sorry.

But these foreclosures are still a problem. The auctions will pass with NO takers. The banks will sit on them for as long as possible eating at their cash reserves. Their LTV's are way too high, and poof one day they will all agree to kill the Comps and dump them, MARKING THEM TO THE MARKET!

Video: R.S. v. K.K.

Don't Go Away Mad, Girl, Just Go Away

Audio clip from NPR about RE in MI and OH.

Listen here

Detroit = Englewood?

Funny, no mention of Chicago. All around us from Detroit to Cleveland to St. Louis, from California to Florida, the nations RE markets are going thermo-nuclear. But some how Chicago is impervious. Hm.

I think this Motley Crew song is appropriate....

Don't Go Away Mad lyrics

We Could Sail Away
Or Catch A Freight Train
Or A Rocketship Into Outer Space
Nothin' Left To Do
Too Many Things Were Said
To Ever Make It Feel
Like Yesterday Did

Seasons Must Change
Seperate Paths/Separate Ways
If We Blame It On Anything
Let's Blame It On The Rain

I Knew It All Along
I'd Have To Write This Song
Too Young To Fall In Love
Guess We Knew It All Along

That's Alright, That's Okay
We Were Walkin' Through Some Youth
Smilin' Through Some Pain
That's Alright, That's Okay
Let's Turn The Page

My Friends Called Today
Down From L.A.
They Were Shooting Pool All Night
Aleeping Half The Day
They Said I Could Crash
If I Could Find My Own Way
I Told Them You Were Leaving
On A Bus To Go Away

That's Alright, That's Okay
We Were To Kids In Love
Trying To Find Our Way
That's Alright. That's Okay
Held Our Dreams In Our Hands
Let Our Minds Run Away
That's Alright, That's Okay
We Were Walkin' Through Some Youth
Smilin' Through Some Pain
That's Alright Let's Turn The Page
And Remember What I Say Girl
And It Goes This Way

Girl, Don't Go Away Mad...
Girl, Just Go Away!

Jumbo Loss

This is from Bubble News Network:

Thornburg Mortgage’s Jumbo Decline

Larry Goldstone, president of Thornburg Mortgage attempts to persuade viewers that the 46% drop Thornburg’s stock today was an overreaction. You do have to give the guy credit for facing the music, although, what else does he have to lose. Either way Goldstone offers very little substance to reassure investors.

Originally aired on: 8/14/2007 on CNBC

Thornburg Mortgage lends jumbo loans. Their stock has taken quite a hit. It seems like 6,700+ SFR and condo sellers will have allot of trouble finding a buyer.

What will happen? Will asking prices actually go down? Think about that number: 6,700! Now granted on Realtor.com you cannot pick a specific price, but you get the idea. Not everyone will sell their house at that price. When will Chicago wake up?

I Got It, I Got It

It appears that nobody in the open market wants the junky mortgage backed securities anymore. Not even Canadians!

Coventree Fails to Sell Asset-Backed Commercial Paper

Aug. 13 (Bloomberg) -- Coventree Inc., the Canadian finance company that went public in November, failed to sell asset-backed commercial paper to replace maturing debt because of the credit crunch caused by U.S. subprime mortgage losses.

The shares tumbled 35 percent after the company extended maturities on C$250 million ($238 million) of commercial paper and sought emergency funding for another C$700 million of debt. Toronto-based Coventree's units have about C$16 billion of asset- backed commercial paper outstanding.

...

In the U.S., asset-backed commercial paper comprises about $1.15 trillion of the $2.16 trillion in commercial paper outstanding. The debt is backed by mortgages, bonds, credit card and trade receivables as well as car loans.

...

The company has other commercial paper maturing and may be forced to extend maturities on that debt too and draw more money from other sources, Coventree said.

I love the main stream media, it took about 1/3 through the article to get a definition of "commercial paper". I kind of figured that it was MSB's, but I did not want to put words in their mouths.

It appears that the Fed is trying to have it's cake and eat it too. They kept the Fed rate the same, but are throwing money at the problem. But who is catching it? And which problem are they talking about? Bush does not want a bail out for the lonely homeloaner. So why is the Big Banks getting free cash from the Fed, and where is it coming from?





The Fed Bought What?

What is significant about Friday's repurchase agreements is not so much their size, but the securities that the Fed exchanged for money: mortgage-backed securities (MBS). Indeed, the entire $38 billion dollar injection went to MBS purchases, the largest open market purchase of this asset type ever conducted by the Fed, smashing the previous record of $8.6 billion set back in September of 2005. See chart, above.

Remember, it's not the Fed's money to throw away. It's our. (And China's and Japan's and Russia's.........)

First Smartest Thing He's Said

It took 6+ years, but he finally said something smart.

Bush Rules Out Any Federal Bailout for Homeowners

Topics:Taxes | Politics & Government
Sectors:Oil and GasBy AP | 09 Aug 2007 | 05:58 PM ET Font size:

President Bush said Thursday concern should be shown those who've lost their homes but it's not the federal government's job to bail them out.

"Obviously anybody who loses their home is somebody with whom we must show an enormous empathy," Bush said. Asked whether he would champion a government bailout, Bush responded: "If you mean direct grants to homeowners, the answer would be `No, I don't support that.'"

There is video too! Boy, up until now, I thought he was 100% dumb.

Wait, I spoke too soon:

In a wide-ranging news conference at the White House, the president also said that he's interested in exploring the possibility of providing tax relief to U.S. corporations.

I ALMOST had some respect for Dubya... ALMOST.

The Shrinking Jumbo Loan

Mortgage Fears Drive Up Rates On Jumbo Loans

By JAMES R. HAGERTY
August 7, 2007; Page A1

Turmoil in the U.S. home-mortgage market is starting to pinch even buyers of high-end homes with good credit records, in the latest sign of rising anxiety among lenders and investors.

This surge in rates on so-called jumbo loans is particularly notable because rates on 10-year Treasury bonds have been falling. Normally, mortgage rates move in tandem with Treasurys, but market jitters have caused investors to ditch mortgage securities.

...

Lenders -- having already slashed lending to subprime borrowers, as those with weak credit records are known -- now are jacking up rates on jumbo mortgages for prime borrowers. These mortgages exceed the $417,000 limit for loans eligible for purchase and guarantee by Fannie and Freddie. They account for about 16% of the total mortgage market, according to Inside Mortgage Finance, a trade publication, and are especially prevalent in California, New Jersey, New York City, Washington, D.C., and other locales with high home costs.

...

Lenders were charging an average 7.34% for prime 30-year fixed-rate jumbo loans yesterday, according to a survey by financial publisher HSH Associates. That is up from an average of about 7.1% last week and 6.5% in mid-May.

The higher costs for such loans will put further downward pressure on home prices in areas where homes typically bought by middle-class people can easily cost $500,000 to $700,000.

Middle Class people can afford $500,000-700,000 mortgages?? That's news to me. The note on $500,000 @ 7.3% = $3,427.85! $700,000 = $4,799.00! What is Middle Class anymore? To qualify for a $500,000 loan in the traditional model, a family would need a income of $166,666.66. That's over 80g's per parent.

Anyway, this move by Wells Fargo (and others to follow?) will cause asking prices to drop. According to Realtor.com, there are 8,706 SFR, condos, townhomes, and MFRs in the Chicago city limits that are above $450,000. There are a total of 41,555 units for sale right now in Chicago! The jumbos are 20% of the market. And guess where those units are? The Middle Class and better neighborhoods. Anyone that bought a jumbo loaned house in the last 2 years are, as of now, underwater.

Take This Survey

CNBC.com has a survey for Wall St. and Main St. Take a look at it, and give your opinion.

Econ-Recon Survey

Cramer Says So

Cramer: No really, dump your house

I know that this clip has been all of the HP blog-o-sphere. I think it bears repeating. However, if you do not remember, the law deciders changed the bankruptcy laws.

Just becareful.

Housing Panic has a good thread about this.

Chicago RE at Risk

Forbes Magazine has us at #9 for Riskiest U.S. Housing Markets.

9. Chicago, Ill.

Chicago is a traditionally stable market, but is currently under pressure. Its 2.3% vacancy rate isn't unmanageable, nor is its price-to-earnings ratio, which is the 12th highest nationally. Chicago's problem is a very high share of adjustable-rate mortgages (45%) and a middle-of-the-road share of mortgages with loan-to-value ratios above 90%. Having a high share of one is sustainable if there's a low share of the other, but in a scenario like this, both lenders and borrowers have elevated risk.

These numbers spell trouble for Chicago. We are in the foreclosure nightmare cross-hairs. With almost half of all mortgages as ARMs just shows that many Chicagoans could not afford the house they bought with out the teaser loan rate. Once these loans adjust, they really will not be able to afford them. Soon the loanowners will walk the keys right into foreclosure. With such high LTV, many of the foreclosures will be passed by on the action block. Crain's describes the formula quite well here:

ADDING TO GLUT

That's bad news for the city's housing market. Foreclosed properties that don't sell at auction revert back to the banks, which pass them off to a real estate agent to sell, exacerbating Chicago's glut of unsold homes and threatening to push down home values.

Ya, I'd say we are at risk, too.

Mikey DOSEN'T Like it!!

China shying from shaky US mortgage market

By Olivia Chung

HONG KONG - While China is eager to invest a portion of its US$1.33 trillion foreign-exchange reserve overseas, it is unlikely to take a chance on buying additional US mortgage-backed securities (MBS) as they are now considered too risky, Chinese economists said.

During a recent trip to Beijing, US Department of Housing and Urban Development (HUD) Secretary Alphonso Jackson tried to sell China on the idea of buying more MBS. Investing in MBS Offers better returns for China than US Treasury bonds, and at the same level of risk, Jackson claimed.

[ Ya, good luck! Poor guy....]

...

However, it promises to be a tough sell for Jackson. The Chinese government may decline the offer given the current surge in mortgage defaults in the US, Chinese economists said. Moreover, China has invested most of its foreign reserve funds in US-dollar assets and wants to diversify its investment.

[I bet!]

...

Yi Xianrong, a senior economist and finance professor with the Chinese Academy of Social Sciences, a central government think-tank, attributed the previous surge of mortgage-backed securities bought by Chinese companies to inexperience in conducting risk assessments and their miscalculation of the US property market.

[He basically says here that the previous purchases of U.S. Mortgage Backed Securities were a mistake.]

...

Economist Shi Weigan echoed Yi's comments. "With a possible burst in the housing bubble in the US, it's not the right choice for Beijing to spend foreign-exchange reserve funds on the US mortgage-backed securities," Shi said.

[Thank you, but no thank you.]

Americans are so eager to buy Chinese crap, but the Chinese are not so eager to buy American crap. What does this tell Americans about the current status of the housing bubble? Wait for us to try to sweeten the pot.

That's One Way to Handle It

Metro briefs

EVERGREEN PARK:

Home fires suspicious
A home under construction in Evergreen Park was burned down over the weekend in a suspicious fire -- the latest of several such blazes in the southwest suburb. Last summer, several other homes under construction in Evergreen Park were set on fire, officials said. The latest fire, which occurred early Sunday, also damaged two adjacent homes.

I think we will see allot more of this stuff in the coming years. In an earlier post, I wrote about Naperville Fires. Seems like they are spreading!

The Logical Progression

The silver lining

SLUMP IS GOOD | Wannabe homebuyers see happy ending in dropping prices

July 8, 2007
BY ALEX VEIGA
Kurt Montufar isn't stressing over the housing slump. He's actually hoping things get worse.

Like many wannabe homebuyers who were priced out of the market during the last boom, Montufar spends time these days scanning real estate ads and news reports to determine if it's time to take the plunge and buy.

...

Meanwhile, price gains of just 1.4 percent or less were reported in New York, Chicago and Washington.

Those numbers have left many people trying to ''time'' the market to take advantage of the slump. But experts said that can be risky because there is little consensus on how long the current doldrums might last.

In addition, the market forces that helped drive the housing boom -- affordable financing and the alluring prospect of escalating home values -- are no longer a given. Potential price breaks could be wiped out if interest rates rise any higher.

...

Even if prices fall further, it could be tough for buyers to find affordable financing if interest rates increase much more.

In addition, lenders have tightened standards in response to a surge in defaults by subprime borrowers, and a number of subprime lenders have gone out of business altogether.

A number of wannabe buyers are pinning their hopes on foreclosures, which some studies predict will explode during the next two years as adjustable mortgages reset to higher interest rates.

Foreclosure activity jumped 62 percent nationwide in April from the year-ago period, according to Irvine-based RealtyTrac Inc. Among the states with the highest foreclosure rates were Nevada, Colorado, Connecticut, Florida and California.

Gino Barragan of La Puente, Calif., a lifelong renter, was among the hundreds of people who attended a recent auction looking for a good deal on a foreclosed home.

Barragan, 34, was hoping to find a condo costing less than $300,000. He found only one that he liked within his price range.

''I am willing to wait, but I'm keeping my eyes open,'' said Barragan, a teacher.

I like how they try to tag him a "wannabe" homeowner! Like, he's a dork because he didn't screw up the biggest financial decision of his life! What a LOSER!!!

"Best" Market?

Best Markets for Buyers

Best market? Until prices drop enough to line up with the Rent/Own Ratio and Median Home Price/Median Income Ratio, this market is far from best. The housing bubble should have popped two years ago. However, to keep things going, mortgage lenders started handing out toxic adjustable rate mortgages. And like consumption addicted hypes that they are, the American populace continued to buy far past their purchasing power. Now the chickens are coming home to roost and foreclosures are up.

By Matt Woolsey, Forbes.com
June 25, 2007

...

The easiest way to judge our list is to examine the area's housing supply vs. demand. A good measurement? Take the current rate of sales and figure out how long it would take to burn off the excess inventory at that rate.

...

Likewise, Chicago, at No. 5, has felt the effects of a housing supply growing in excess of demand. Brokers there say it's been a slow year thus far, and Moody's data supports that. Chicago ranked seventh worst for listings outpacing sales and fifth worst for the tightening rate of the market.

Because prices are still too high, the market is in a standstill. What will start the fall?

Not Just the South Side

Foreclosures are not just hitting the lower level of the economic spectrum.


New Developments in the Foreclosure Trend: The Rise of Middle-Class Foreclosures

While foreclosures are typically considered to occur mainly to low income homeowners, new data shows that the foreclosure surge is spreading into middle class areas as well. Exploring the causes for this can help buyers better understand the foreclosure trend.

Miami Beach, FL (PRWEB) June 18, 2007 -- As the housing market continues to move along sluggishly in the wake of falling home values, ForeclosureDataBank.com, a leading foreclosure information provider, has noticed a new trend emerging in the rising rate of foreclosures. Whereas the past few years saw the booming foreclosure rate mainly affecting borrowers with lower income, the analysts at ForeclosureDataBank.com are now predicting a drastic increase in foreclosures on middle class American homes all over the country.

The reason this new trend is so noticeably interesting is two fold. For starters, the statistics themselves don't lie. Recently, the Chicago Defender revealed some telling statistics about this popular city's foreclosure situation. During 2006, the state of Illinois experienced a 55% increase in its rate of foreclosure, with a great deal of homes in the Chicago area accounting for the hike. While foreclosures in poorer neighborhoods have been high during the past few years, it seems that in 2006 some of the biggest jumps came in traditionally middle class areas of the city. These include locations such as the Jefferson Park area, which saw a 90% increase, and the Bridgeport area on the southern side of the city, which experienced an incredible 112% increase in its rate of foreclosure.

Another interesting fact is that three neighborhoods that average close to the median income for Illinois residents ($48,000), Roseland, Gresham and Lawn-Gage Park, all currently have foreclosure rates that are seven times the national average.

Ouch! Those adjustible rate loans are staring to hurt.

Chicago So. Suburbs High on a List

But, it's not a good list.

4 suburbs on U.S. foreclosure list

Sunday, July 1, 2007 12:12 AM CDT
Post a Comment | Email this story | Print this story



BY KIRSTEN SRINIVASAN
kirsten.srinivasan@nwitimes.com
219.933.4158

Some south suburban ZIP codes rank high for foreclosures, but officials say they are part of a larger regional and national trend.

CNNMoney.com recently ranked Chicago Heights, Harvey, Calumet City, and Dolton ZIP codes among its top 500 ZIP codes for foreclosure filings nationwide. The problem is more widespread, said Ed Paesel, executive director of the South Suburban Mayors and Managers Association.

"Traditionally, (these communities) have had fairly high foreclosure rates," he said, but the increase in foreclosures is actually a lower percentage compared to other Chicago areas in the last two years. "It's not only a south suburban problem anymore."

Communities across the Chicago area have had "a large jump in foreclosures" in the last two years, said Beth Devers, housing director of Metropolitan Mayors Caucus.

So much for "The Ownership Society". Wait until the banks get over-loaded with these foreclosures. When they finally drop them like a cold potato, the local comps will destroy what is left of the Chicago Housing Bubble.

Starting to Get the Hint

Housing Bulletin — Marking Down House Price

Dennis Rodkin
Call it a wave of price cuts or a market adjustment, but there is no way to mask the fact that people selling residential real estate locally have been dropping their asking prices in droves. Deal Estate combed through data from the Multiple Listing Service of Northern Illinois and found that one out of three single-family homes sold in the Chicago area so far this month were bought only after the initial asking price dropped at least once.

...

Solid data for comparisons to past years is not available, but several real-estate agents who have made sales this month agree that price cuts are unusually common right now. “What’s happening is that people who priced their homes in early spring are coming down now anywhere from 5 to 10 percent,” says Mary Duncan, the sales manager at Prudential Elite Realtors in Naperville.

...

One home belongs to a couple that transferred here two years ago; now, having been transferred once again, they are essentially asking what they paid for the place back then. The second residence is a newly constructed house that has a twin next door, which sold, in 2005, for $299,900. After listing the newer house last fall at $334,900, Fields has dropped the asking price—to $299,900.

Keep going! Keep going! There is so much more "fluff" out there.

The fact of the matter is that some people are going to get screwed. When the music stops, someone will be without a chair. I'm just surprised it has kept it up as long as it has.

Renting Can Be Good

For retirees, renting can be a savvy move

For retirees, renting can be a savvy move

By SCOTT BURNS
Universal Press Syndicate

Q: Our townhome will be paid for in two years. My husband and I will both be 61. If we sold at that time, we would probably walk away with $400,000 to $450,000. The townhome will be about 15 years old. I am sure there will need to be some repairs — new roof, siding, etc.— because of the age of the building.

Why would it not be better to invest the money in a CD at 5 percent interest? That would yield about $20,000 a year without ever touching the principal. Then we could rent rather than own. I realize homeownership may eventually gain income, but homes also take a lot of money to maintain.

...

A: Very good idea. And ahead of the crowd. You are likely to find that the rent and utilities will be less than the operating cost of your house. And since you'll no longer have equity tied up in a house, you can put it to work to pay your rental expenses.

SEE?!

Not So Fast

Is That Gain on Your Home Really So Big?

Tuesday June 19, 9:54 am ET

By Selena Maranjian



Here's a not-so-uncommon scenario these days: You bought your lovely home, be it a castle, bungalow or yurt, for $200,000 five years ago. Today, it's worth about $300,000. That's a tidy 50% total gain, or 8.5% on a compound annual basis. Right?

Not so fast -- you've probably oversimplified matters. For example, think about what you've put into the home over the years. Some of those purported profits probably went to businesses like Home Depot (NYSE: HD - News), Lowe's (NYSE: LOW - News), or home-building supplier USG (NYSE: USG - News).

But, but, but....... I thought I was supposed to be a millionaire!?

You Mean We've Been Here Before?

Rate Rise Pushes Housing, Economy to `Blood Bath'

By Kathleen M. Howley

June 20 (Bloomberg) -- The worst is yet to come for the U.S. housing market.

The jump in 30-year mortgage rates by more than a half a percentage point to 6.74 percent in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, the National Association of Realtors reported.

``It's a blood bath,'' said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. ``We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.''

...

The primary cause of the 1990 to 1991 recession was a real estate boom and bust similar to the past seven years, Roubini said. A real estate ``bubble'' in the mid-1980s led to speculative buying and lower credit standards that resulted in widespread foreclosures, he said. The defaults triggered a credit crunch that turned into an economic recession in the spring of 1990, said Roubini, who is an economics professor at New York University's Stern School of Business.

He put the chance of a recession this year at ``50-50,'' above former Fed chief Greenspan's 33 percent estimate. A recession is a decline in gross domestic product for two consecutive quarters.

...

Housing Chain
Making it harder for those people to buy houses is going to create trouble all the way up the housing chain as people who own starter homes find it more difficult to sell their real estate and buy bigger properties, said Neal Soss, chief economist at Credit Suisse Holdings USA Inc. in New York.

``The subprime market has changed character dramatically, and that takes a number of entry-level buyers out of the picture,'' said Soss, who was an adviser to former Fed Chairman Paul Volcker.

Gee, it kind of sounds like there was a housing bubble before.



As you can see the bubbles in the 1970's and 1980's both came back to were they started. If the current ones follows the historic trend, there will be some VERY sad people.

Hello Chicago??

Chicago is not Florida..........yet. But give it enough time and this housing slump will turn into a bust. Let us take note of our older brother-in-bubble, Florida.

Price it right and it will sell

Home sellers coming down on sale prices

Carlton Proctor
cproctor@pnj.com

There's nothing wrong with the Pensacola Bay Area real estate market that several thousand more stories like Greg Chapman's won't cure.

Chapman put his East Hill home on the market in November 2005 at a time when residential prices were approaching post-Hurricane Ivan highs.

But it also was a time when the inventory of unsold homes was starting to climb rapidly.

Over the next three months Chapman got only three half-hearted inquiries about his three-bedroom brick home, listed originally at $193,600.

Frustrated and disillusioned by the process, he pulled his home off the market, deciding to bide his time and wait for the market to strengthen.

...

Harrod convinced Chapman to price the house at what he considered a fair market rate for that section of East Hill.

The result: the house sold the first day on the market at a price -- $165,000 -- Chapman said made him "extremely happy."

So happy, in fact, he proposed to his girlfriend that same day, and she accepted.

"Fair" means within reach.

I know everyone want to be a millionaire. But you cannot see ANY gains if you don't sell your wares first. The reason the market has hit the wall is because prices have far out reached the average home buyer.

Time to take a look around.

Time for a reality check.

Time to look to Florida.

The Housing Market is Silly, Silly I Say!

Look for it real close. The first time I read it, I missed it. Daley admits the housing market is in trouble.

Mayor Daley admits to housing slow down

It's designed to raise $1.1 million to help plug a $10 million hole in Mayor Daley's 2007 budget caused by weather-related overtime and lower-than-anticipated tax revenue tied to the housing slowdown. Daley has also cut off non-emergency overtime and suspended hiring unrelated to public safety.

...

Earlier this week, Daley declined to rule out a post-election tax increase. "We don't know yet. . . . It's a critical time. The economy has slowed down. Housing has slowed down. The [real estate] transfer tax has slowed down. You start making decisions much earlier than later," he said.

Having watched the housing market unravel in the last year plus, there is one problem. Sellers' expectations are too high. The boom years are past and gone. Maybe if people were not so greedy, and lowered their prices commerce could commence!

Where Will They Go?

Housing slump, job losses conflict

Immigrant workers often go uncounted

By Bob Willis, Bloomberg News: Alexandre Tanzi in Washington and Valerie Rota in Mexico City contributed to this story
Published June 4, 2007


The slump in home building, the deepest since 1990, has taken only a modest toll on the U.S. job market. Workers like Francisco Leon may be part of the explanation.

Two years ago, Leon, an undocumented immigrant from Guatemala, had little trouble finding construction work five days a week in northern Virginia. Nowadays, the 22-year-old mainly does odd jobs, often only two days a week.

As Congress debates whether to provide a path to citizenship for undocumented immigrants, workers like Leon, hired off the books for day labor, are among the first to lose their jobs as home building falters. Such workers often go uncounted as well, meaning official labor statistics don't fully reflect the decline in construction-related jobs.

Will the illegal immigrants stay when the jobs, the reason they came, are gone?

Where is His Cut?

Cook County Board President Todd Stroger might have the politician gene, but he lacks other ones.

Toddler and Property Taxes

Breaking with his father's avoidance of property tax increases and his own campaign promise not to impose them, Cook County Board President Todd Stroger made it clear over the weekend that he thinks a property tax hike is one way to balance the 2008 county budget. Stroger made the comment in an interview that aired on "Fox Chicago Sunday." In response to a question by hosts Dane Placko and Jack Conaty about how he planned to balance the budget, Stroger replied, "For years, we haven't taken any of the natural growth [in property values]. We should go to the next level that we can."

Foreclosures still raging

Chicago-area foreclosures, which set a record last year, are projected to reach full-blown crisis levels in 2007.

Cook County is on pace to record at least 30,000 and as many as 36,000 foreclosure filings this year, according to Cook County Circuit Court Judge Dorothy Kinnaird, who presides over the Chancery Division, which handles foreclosures. That would mean a 35% to 62% increase from 2006, when 22,248 filings were easily the highest in county history after having risen 36% from the previous year. (The court combines both commercial and home foreclosures, but residential mortgages comprise the vast majority of its cases.)

The driving force behind the foreclosures: adjustable-rate mortgages, which proliferated during the housing boom, according to a new report by the National Training and Information Center, a Chicago affordable-housing advocacy group. The mortgages offered low interest rates for a limited period and often let buyers skip down payments and get approval without showing proof of income, or both. Many buyers landed in trouble when their interest rates — and their monthly payments — adjusted upward, the NTIC said.

Chicago and Cook County is not the only place that is suffering problems. A wise political leader would look out side the walls of his fiefdom to gain some fore-sight to the problems he might occur one day. Just like Chicago is oblivious to the housing crash all around her, Toddler is oblivious to his own problems.

Property Tax Dilemma

Kevin Depew in Tuesday's Five Things wrote about the Property Tax Dilemma.

The Florida legislature plans to convene a special session in mid-June that could result in more than $30 billion in property-tax relief over the next five years, the Wall Street Journal reported.

*Thanks to the housing boom, the average annual property-tax bill in the U.S. was $1,132 per person in 2005, up 13% from 2000 in inflation-adjusted terms, according to data from the Commerce Department.
*The boom was so strong that in many areas housing prices rose too fast for local tax assessors to keep up, the WSJ said.
*Now, tax assessments are catching up just as market prices are declining, a double whammy for homeowners facing increasing mortgage payments due to resets, or homeowners now trapped in residents with property tax bills edging them out of their comfort zone.
*But that's the homeowners problem.
*Here is the dilemma for states: Reducing property-tax revenues threatens budgets of cities and counties. However, a property-tax cut could stimulate the economy by leaving homeowners with a bit more money in their pockets.
*Florida doesn't have a personal income tax, and its cities and counties depend heavily on property taxes to pay for services such as police and firefighters, the Journal noted.

I have read that the County's plan is to line up existing home tax assessments to new construction. Existing home have already been assessed. The taxes are based on those older numbers. There was a cap on how much they can go up: 7%. New construction is different. The County assigns taxes based on the SALES PRICE of the unit. Look in my right side Links for the CC Assessors and CC Treasurers web sites. You can find yours and everyone taxes.

The County's logic is that if you bought that N.W. Side bungalow for $500,000 then they will tax you at $500,000. Sounds fair right? Not to the Jones' that are pushing the edge of foreclosure with that 1/2 Million dollar note, just to "live the American Dream". With a steep hike in takes, the Jones' might go over the edge. Florida is learning that higher taxes can lead to more foreclosures, and more foreclosures mean less taxes coming in.

When will Toddler learn?

That's What I Thought

Average salaries lower than past generation's

The Associated Press

WASHINGTON - The part of the American dream that says children will be better off than their parents were has become a dream, not reality, according to an analysis of Census data released Friday.
A generation ago, American men in their thirties had median annual incomes of about $40,000, compared with men of the same age who now make about $35,000 a year, when adjusted for inflation.

That's a 12.5 percent drop between 1974 and 2004, according to data from the Pew Charitable Trusts' Economic Mobility Project.

Household incomes rose during the same period, though the main reason is that there are more full-time working women, a new report on the project said.

We get paid less, but you are supposed to dump more of our income on a mortgage.

This is what some authors call the Revolution of Lowered Expectations. Do more, get less; pay more, receive less. It starts with a, "HEY! Wait a minute." And shortly becomes a, "Eh, what do you expect?"

Not in the Top 100

Chicago was not in the MONEY Magazine Top 100 cities. This is not a surprise if you consider the numbers:

Chicago, IL Population: 2,873,790

Median family income
(per year) $46,748

Median home price $254,500

Sales tax 9.00%

Job growth %
(2000-2005) 0.70%

Test scores reading
(% +/- state average) -24.8%
Test scores math
(% +/- state average) -35.6%

Personal crime risk
(100 is nat'l average; lower is better) 351

It does not look good.

How does the median income family afford a median priced house?? The banks would have to loan out 5.4x the income for those people to qualify such a house!

Fun with math time: Per month, the principle and interest on a $254,500 home loan at 6.25% for 30 years = $1,567.00. A $46,478 year income / 12 (I'm being so nice, I'm not even taking out taxes!) = $3,895.66 a month. The Chicago median incomer in 2006 is spending 40.22% on his median priced home loan! If I add $300 a month for median taxes and insurance, the percentage would equal 47.92%!! Just short of one half of a median incomer's not yet taxed income is going to keeping him in his house!

I am suspicious of the Median home price. I believe that number is too low. Considering a 1 bed condo at Lincoln / Foster starts at $263,000!

Here is 115 homes for sale in Chicago for the $250,000 median price. As you will see, either it's a tiny condo, which taxes and condo assessments will chip further into your income, or it's in the ghetto.

Have fun!

Books to Read

I have read these books, and found them very informative.

America's Bubble Economy, Weidemer

Empire of Debt, Bonner

The Comming Economic Collapse, Leeb

The Two-Income Trap, Warren

When Corruption Was King, Cooley

Home Town Words

Chicago RE reporting is very propagandized.

In the height of the bubble, there were many many stories about how great it is here. The Trib and Suntimes RE sections were exploding with get rich stories and hot neighborhoods. Now the sections are thinned out. On the cover is an expose on the newest energy efficient light bulb that will save you 3 cents a month. Like that will save you from your lair-loan ARM explosion! But inside are still allot of the same over-priced houses and condos that have not sold in a year.

NO IS TALKING ABOUT THE BUST THAT IS OCCURRING ALL AROUND US!

No one but this guy. But I have to read about it in a New York publication.

For shame.

Spending May Take a Hit as U.S. Home Prices Decline (Update2)

By Bob Willis

April 27 (Bloomberg) -- Carol Francis says her customers are less likely to make big furniture purchases these days than they were at the height of the housing boom two years ago.

``The housing market right now is affecting everybody's spending,'' said Francis, a design consultant at Thomasville Home Furnishings in Woodbridge, Virginia, 25 miles south of Washington. Before, ``I had people who would buy two and three bedrooms of furniture. Now many come in and just buy one piece at a time.''

With home prices in danger of falling this year for the first time in at least four decades, Americans are turning wary about borrowing against their houses to pay for vacations, education or remodeling projects. In a reversal of the ``wealth effect,'' people who once viewed soaring home values as a rationalization for higher spending appear to be pulling back.

``We're in a housing recession; it's not over and it's going to spread to other parts of the economy, mainly consumer spending,'' said Paul Kasriel, director of economic research at Northern Trust Securities in Chicago. ``House prices are going to continue to fall, and that's going to play havoc with consumers because it means the home ATM is now draining, it's no longer filling.''

VERY interesting.....

It seems that Illinois Senator and Democratic Presidential candidate Barak Obama has a problem. Like many other Chicago area Democrats he is buddy-buddy with Antoin 'Tony' Rezko. Rezko's slumlord status may hinder Obama's rep as a Man of The People.

But there is more.

Here, is a detailed map of Rezko's properties. I find it VERY coincidental that Rezko has all these properties around the area of Washington Park! As any astute Chicago resident would know, Washington Park is planned to be one of the corner stones of Chicago's 2016 Olympic bid!

Oh what a tangled web we weave....

Don't rely on the City

City inspects for safety only, not quality

This really should not surprise you. But, in case you did not know.

Beware home buyers: Illinois does not require developers to be licensed, and city inspectors are not assessing the construction quality of the residence. The inspectors are responsible only for citing public-safety hazards such as an insufficient number of fire escapes.

"In Illinois, you have 'Wall Street' developers who drive cars and talk on phones and hire subcontractors. They don't build anything," said Nick Gromicko, founder of the National Association of Certified Home Inspectors, based in Boulder, Colo.

"Most states have very minimal or no licensing of developers and contractors," he said.

...

City inspectors, or any other government inspector, will check only for safety issues on new construction.

"A leaking window is something [government inspectors] wouldn't even catch," Gromicko said.<

Scales said city building inspectors review basic life-safety issues such as proper ventilation and lighting, and properly installed electrical and plumbing systems.

"They're not able to measure the quality of construction," Scales said.

The developer is responsible for correcting any problems.

It's best to watch the construction in person throughout its many phases.