Lies about the gummint from the real estate world

I came across a story on MSNBC about cities either never really hit by the housing bubble, or now in an all-clear situation after earlier concerns, such as San Jose, Calif.

And saw this comment, among those from real estate people there interviewed about that "all clear": 

“We would be in the clear if the government got the heck out of the (real estate) business,” said Bob Stewart, the broker at Coldwell Banker, The Real Estate People, based in San Jose.

Would that be the feds getting out of the way by Fannie and Freddie not buying up loans, no veterans' loans, no FHA, or what? 

We all who know history know that things like veterans' loans helped boost the housing industry after World War II.

To be fair, here's why Stewart said what he did:

Under federal initiatives like HUD's Neighborhood Stabilization Program – during which 400 cities and counties have received billions of dollars to slash housing blight in foreclosure-ravaged neighborhoods – “speculators” have shoved local “investors” and Realtors aside, Stewart said, gobbling up distressed San Jose properties and re-selling them on the cheap.

“Speculators went out and got their (real estate) licenses and are targeting underwater properties, getting them listed at a very low price and submitting an offer immediately to the lender. If the lender accepts it, they’ve made $300,000 to $400,000 (per house),” Stewart said. “There are enough of those here getting accepted that it’s keeping our prices” lower than they should be in San Jose.

However, Mr. Stewart, it was those same "speculators" that fueled the housing boom of the previous decade, before the bubble burst. You can't logically, rationally, have it both ways.

Beyond that, somebody has to buy underwater homes. And, per conservative business lingo, isn't another phrase for "speculator" simply "venture capitalist"?

It's all part of doublespeak we often see from conservative businesses. Government is supposed to "get out of the way" except when it's supposed to "help" businesses. Such help is never called "socialism," even when it is.

When the government helps a business competing with you, then it's "in the way," but when it helps your business, then it's just "stimulating the economy."

"Flippers" an important factor in housing bubble

The NY Fed says "flippers" were an important part of the housing bubble. There maybe some CYA here for the NY Fed, a *private* institution, on its failure to get Wall Street to rein itself in. But, I largely agree with the idea, substantiated by some research. And, I'm guessing a fair amount of these flippers were 2-20 percent, not just 1 percenters.

To put the header on the graphs above in plain English, each bar represents people who had at least one mortgage already on their hands when they took out another one during the year in question. Note that in the four "ground zero" states of the bubble, the percentage of people with multiple mortgages was nearly half!

Now, some of the people with just one mortgage on the books already may well have been movers, not flippers. Fair enough. Knock out two-thirds of the people with two mortgages, and at the height of the boom, in the four ground zero states, you still have 30 percent of buyers who are likely flippers.

Everything else adds up, then. At first, presumably because they had more money, "flippers" were better risks. But ... when the bubble started bursting, as bubbles do, they became worse risks.

And, as a later chart shows, many of these flippers' loans were securitized, as they were rushing to get in on the bubble. Hence, their troubles, as much as subprime first-time buyers' troubles, became Wall Street's troubles. And, their speculative buying hurt others:

We conclude that investors were much more important in the housing boom and bust during the 2000s than previously thought. The availability of low- and no-down-payment mortgages in the nonprime sector enabled investors to make these bets. This may have allowed the bubble to inflate further, which caused millions of owner-occupants to pay more if they wanted to buy a home for their family.

As noted above, I'm guessing a fair amount of these people were in the 2-20 percent. The Fed doesn't do an income breakout, but I can't believe that that many spec buyers were 1 percenters. Certainly not fractional groups within the 1 percent.

Finally, this is why I am against blanket-type amnesties or modifications of loans. Many people, whether using subprime loans of some sort to do so or not, were deliberately buying houses to flip them. They had at least one mortgage before, therefore, in addition to taking responsibility for investments in general, had some idea already of what the loan process was.

These people deserve no mercy. We don't give a do-over on bad stock purchases, either.

Loan modifications MUST BE on an individualized basis. Here, as well as elsewhere, we need realism from folks like Occupy Wall Street.

Underwater homes, underwater recovery

Until we get housing and mortgage debt issues addressed, places like Phoenix and Las Vegas, where home prices fell another 10 percent in just the second quarter of this year, are going to be a long-term drag on the economy.

Former Reaganite economics adviser Martin Feldstein has some reasonably sensible ideas, focused on wiping all debt above 110 percent of a home's current value off the books, with owners in turn signing a simple, hardcore statement that if they accept the cramdown, they could lose other assets in case of a default. 


As he puts it, large parts of the country are in a deflationary housing market.


That said, this isn't enough. We need to address the larger issues of:
1. Tax deductions for mortgage interest;
2. The myth of home as investment;
3. The quasi-myth, at least, of home as ATM.

And, that's just within the world of housing. We're not even talking about things like the widening income gap.


Until we look at the larger context, we will have some variant, if not as big, on this housing bubble in the future.

Team Obama suing #banksters on #CDO and #CDS - more on why this is likely 'show'

I said yesterday that, after Dear Leader's minions, including and starting with Little Timmy Geithner, along New York Fed members and others, have spent months attacking N.Y. Attorney General Eric Schneiderman, color me skeptical at least, and cynical at most, that any talk  of a federal lawsuit against banksters for their alphabet soup diarrhea of CDOs, CDSs, etc., is anything more than a hill of diarrhea-inducing beans.

 The suit's been filed. So, let's update this from yesterday Adding to my skepticism? It names no dollar amount for damages sought. (Fannie Mae and Freddie Mac reportedly lost $196 billoin on the alphabet soup crap.) So, let's look more at the reality of why this is probably a dog-and-pony show.

Here's how this will likely play out.
1. Team Obama goes through motions of filing suit.
2. Goddam Sachs, Citigroup, Morgan Stanley et al plead remorse. (Like AT&T pleading to "tweak" the T-Mobile takeover.)
3. Said banksters eventually agree to a settlement. (This is part of "doing God's work," of course. Loyd Blankfein will combine this with the "remorse" part for Goddam Sachs.)
4. Money for said settlement will pennies on the dollar, payable over a decade or more. Updated with the new link, 10 percent of this is about $20 billion. And, not coincidentally, that's what Team Obama suggested in initial settlement talks. Even prorated by company size among the 17 defendants, that's, say, $3 billion for Bank of America. BofA had that much profit in one quarter in 2010. Even if I temper my cynicism somewhat, and call it 20 percent on the settlement, payable over three years, that's $6 bil for BofA over three years, or $500M a year. It will be able to digest that, write it down on earnings statements, and possible even find a way to a tax deduction or two.
5. Said money is then used by Team Obama to create a successor to HARP and HAMP called HEMP: "Home Equity Maintenance Program." God, I love being snarky.
6. Said program is started, oh, say, July 2012? Just in time for the Democratic National Convention and some appropriate re-election PR?
6A. Said program, said start of payments, said percentage markdown of payments, etc., all get connected in some way to Democratic campaign contributions.
7. Team Obama tells Schneiderman: "We really, really tried. This is the best we can do. Now, for the last time, stop bothering the banksters."

Housing ownership falling back to '80s levels?

The New York Times says that yes, just such a thing could happen before the housing bubble finally, fully deflates.

This isn't just more and more subprime loans going belly-up. On the side of "fundamentals," it appears more and more would-be buyers are willing to continue the wait-and-see as to how much further the market might go.

And, this isn't just a decision in high-priced urban areas.

The Associated Estates Realty Corporation, which owns 13,000 apartments in Georgia, Indiana, Michigan and other Midwest and Southeast states, also is seeing more people deciding to rent.

“We have more of what we call ‘renters by choice’ than I’ve seen in the 40 years I’ve been in the apartment business,” said Jeffrey I. Friedman, chief executive of Associated Estates.

Beyond that, it appears that other Americans have finally stopped buying into the myths told by the National Association of Realtors and believed by people like my parents about the "investment" of owning a home.

Especially given the craptacularly cheap value with which many of today's Sunbelt suburban homes are built by the likes of D.R. Horton, et al, this is an investment that, frankly, sucks.

Besides, as long as there's such a glut of homes on the market, even if housing quality were better, there's no chance of serious appreciation.

That said, the continued slump affects more than just housing. Realtors were a major newspaper advertiser. And, they made money off legal notice classifieds for zoning changes, development hearings, etc. that city and county governments had to hold.

In the housing biz itself, this also affects subcontractors, many of whom, like carpenters, would be the contractor on farmed-out remodeling, etc.

The AP has a great follow-up story on the broader effects of the housing bubble. It also mentions the foreclosure fraud committed by mortgage signing services, a fraud the banksters don't want to accept any responsibility.

Are feds making big-time move on mortgage fraud?

A major federal lawsuit against Deutsche Bank's mortgage arm certainly raises that issue.

Here's the nut graf that says this likely isn't isolated:

"It would not be a fantastical stretch to think we are looking at other lending institutions as well," (Pheet Bharana), the U.S. attorney in Manhattan, said.

The details? The lawsuit is for more than $1 billion and alleges:

MortgageIT recklessly approved 39,000 mortgages for government insurance from 1999 to 2009 "in blatant disregard" of whether borrowers could make the required monthly payments.

At the same time, I don't know what percentage of the company's loans this involves, how much pretrial negotiation was attempted or other things. This may not be too much beyond the slap on the wrist level.

A decade of bubble burst in Vegas

As of the end of last year, Las Vegas housing prices were below those in January 2000.

To be fair, Cleveland and Detroit are in the same boat. But, neither's in the Sun Belt, the new economy, etc.

The Vegas numbers probably should be of concern for Phoenix and California's Central Valley, though. Add in cutting back on discretionary spending, though, and Vegas has its own unique problems. The gaming/casino industry will probably take the better part of a decade to fully rebound. So, some parts of America will have a Lost Decade, like Japan.

California and its seven ugly housing sisters

No, Texas didn't make this list. But, there's eight states in all, a mix of red, blue and purple politically, that may struggle most to come out of the recession because of housing-related issues.

Because the list includes two of the four largest states, two others in the top 10 and two others in the top 20, this is part of why the recovery is going to be soooo slow.

And, it's another reason to damn to hell Alan Greenspan of 2005 housing bubble knowledge.

More on the Texas economic miracle mirage

The average sale price on a pre-existing home in Dallas-Fort Worth, the state's largest metropolitan area, declined for the fourth straight month after going up in the first half of the year. While not a California, Arizona, Nevada or Florida-level problem, nonetheless, prices are off almost 10 percent form 2007. And, while the October decline wasn't the worst in the nation, it was worse than the national average. That's why it's funny, almost laughable, to read major DFW real estate agents essentially whistle in the dark about 2011.

That said, most of them probably voted for the eternally lucky Tricky Ricky Perry, and therefore have no choice but to whistle in the dark.

You thought the housing bubble was bad?

Commercial real estate prices are already further off their peak than housing values, and pwith a turnaround even further out of sight.

Unlike housing, it wasn’t overbuilding, but too much money sloshing around the system, spiking prices in commercial real estate as investment.

Full recovery could be a decade away, in part because commercial real estate deals were sliced and diced and repackaged even worse than home mortgages.

Goldman Sachs, friendly neighborhood repo man

G. Sachs, on top of all its bailout money, its being enabled to play fast and loose again with investment risks by Team Obama, etc., also be the company wanting your home if you have a delinquent mortgage.

Worse yet, it’s too chickenshit to be up front about this, so it hides behind shell companies.

Housing becomes another mini-bubble in midst of recession

If we weren’t, as a nation, so enamored of homeownership in the first place, causing the big bubble of earlier this decade, we wouldn’t need the government deliberately causing this new mini-bubble, which, like the misnamed cash for clunkers, won’t last too long.

Good news in SoCal? Home sales surge

Now, Southern California in particular, or the nation in general, don’t need a reinflation of the housing bubble that started in the Southland and got us onto the road of recession. But, a 7 percent price increase, and a 30 percent sales increase, are good news indeed.

Convert delinquent mortgages to rentals?

That’s the latest housing prop-up fix coming from the Obama Administration. Not totally bad; could be better if at least a partial rent-to-own conversion option were made part of it. Not to let delinquent buyers 100 percent off the hook, of course, but, a “carrot” of some sort, in part to keep them interested in not trashing out what could still become their house some day.

Next round of foreclosures coming

The L.A. Times details what I first looked at more than a year ago — the likelihood of a second peak in foreclosures.

The Times primarily notes that many people who applied for mortgage modifications didn’t get them, and now their application-time grace periods are about to expire. However, it overlooks that many people either bought new, bought second houses, or refinanced, at the end of the housing bubble, in many cases with Alt-A, if not subprime, loans.

In turn, from my (until now) professional perspective, means more tough times for newspapers. Banks don’t take out ads to sell foreclosed homes. Sheriff’s may do legal ads for tax-delinquency sales, but that’s it. And, more individuals looking to sell, to pinch pennies, will do “for sale by owner” routes.

Housing prices could stay depressed for years

That’s a serious claim, and it’s not just anybody claiming it. It’s the stance of Yale economist Robert Shiller, co-creator of the Case-Shiller Home Price Indices.

Shiller says nobody should be surprised if housing prices don’t start climbing before 2012. Read his reasoning why.

Home sales offer a glimmer of hope

A February jump in existing home sales offers a glimmer or two of economic hope.

True, much of the jump is sales of repos, but they have to be sold sometime.

And, the West, ground zero of the housing bubble, actually paced the increase.

Once again, Alan Greenspan absolves himself

This time, over the housing bubble. Surprised?

And, that said, Greenspan’s self-defense appears to be a perfect reflection of his position as an acolyte of hyper-rational neoclassical macroeconomics, whereas, rightly or wrongly, people’s critiques of him have an emotional edge as narratives.

Home sales economic ray of sunshine?

An iudex of sales of new homes are UP 6.3 percent.

That said, sales are still down in the bubble-laden West, and the National Association of Realtors cautions against reading too much good news into the data.

Is Obama in housing industry pocket?

I can't think of why else he would let homebuilders extend the period from which they can write off old losses for a retroactive tax break from two years to five years as part of his stimulus package, especially when some 1,800 union leaders, by petition, opposed a similar Congressional idea last April.
Daniel Gross has more on that at Slate.

If the U.S. Chamber of Commerce is so in favor, that's another reason to be skeptical.

And, in many parts of the country, the housing bubble has yet to be fully lanced, anyway.