Tucson real estate is holding up better than Greenwich’s

They’re only down to 2004 prices. The advice is the same, though:

The rise, 2001 – 2006, was +87% for both Average and Median prices.
The fall, 2006 – 2009, is -25% Average/-22% for Median prices.

And not only are prices down, the # of homes sold thru 2008 is also off a whopping 46% from it’s 2004 peak and, as things are going, 2009 looks to be on track for another new low.

So in case you’ve been uncertain, or had any delusions about prices and sales over the years, there they are. So ask whatever you wish – base your asking price on what you paid, or what you’ve put into it, or what some fantasy tells you it’s worth – but don’t plan on getting it unless you happen to be in the vicinity of 2004/2005 prices.

Confronted with unreasonable asking prices, buyers have little sympathy for, and, are not about to make up for, what sellers have lost in the downturn of the real estate market.

Okay, now this is finally different from Bush

WSJ: Obama to release Guantanamo terrorists suspects into the U.S. 

WASHINGTON — Attorney General Eric Holder said some detainees being held at Guantanamo Bay, Cuba, may end up being released in the U.S. as the Obama administration works with foreign allies to resettle some of the prisoners.

Michael Moore put down his jelly doughnut long enough to comment: “It’s about time! These poor guys, they’ve been sitting around in little cages for years, when all they need is love, hot cocoa and a few choruses of ‘Kumbaya’ to make them civilized. They do know that we New Yorkers voted for Obama, right? That the Bush folks live out there somewhere beyond the Hudson?”

Calculated Risk Blog

Reader Krazy Kat sometimes sends me links to articles on this blog, CalculatedRisk.com, and they’re always interesting. Here’s one explaining why there are two bottoms in housing declines: housing starts and new homes and then later, sometimes a couple of years later, existing housing prices. Obviously, homeowners will be more affected by the latter. Is the author right? Heck if I know but he or she seems to know a lot more than I do, so why not? I’m just guessing anyway. Scroll up (or down – it’s a great blog)  for more good stuff on the real estate market, mortgages, etc. Here’s what the author has to say about two bottoms:

In my previous post I discussed the question: Housing Starts: Is this the bottom?

We don’t know the answer yet.

But some readers are confusing a bottom in housing starts with a bottom in pricing.It doesn’t work that way!

There will be two distinct bottoms for housing:

1) First single-family housing starts and new home sales will bottom.

and then followed some time later …

2) Prices for existing homes will bottom.

Just about every housing bust follows this pattern. The bottom in prices could be a year, or two, or more away. It is way too early to try to call the bottom in prices. House prices will almost certainly fall all year and probably next year too. Prices will continue to fall. Prices are not at the bottom. 

Sorry for repeating myself.

Also, it is theoretically possible that single-family housing starts (off 80% from peak) and new home sales (off 78% from peak) could go to zero – but unlikely. Sometime this year housing starts and new home sales will probably bottom, but that doesn’t indicate a bottom for house prices.

Dodd: “That contribution is no longer operative.”

Chris Dodd is returning $103,000 paid him by A.I.G. during his “campaign” for president. Which is interesting – why would anyone give Dodd money to conduct what was an obviously futile run for the presidency? Even if Dodd, egotist that he is, believed in himself, no sane person gave him a rat’s ass of a chance to beat anyone, and he didn’t – he came in last in the few states he bothered to contest. But would a financial services firm contribute to the Chairman of the Senate Banking Committee? They would, and they did, by the millions. The possibility of such generosity surely didn’t escape Dodd when he was deciding whether to run. But if it was proper for Dodd to extort money from the industry he oversees as Chairman, why is it improper to keep that money now? The man from the Nutmeg state won’t say.

I’ll give the crook this much: once bought, he stays bought, as his AIG Dodd amendment proved. Boss Tweed would have liked him.

Useless advice from a single guy

If you’re the 61-year-old head of a big corporation looking for a little affection, don’t marry a 29-year-old Swedish bombshell, even if she does come with a phony “Countess” title. These things just don’t last. The former head of United Technologies, now 67, is back in court trying to fend off his ex-wife’s claim for extra money: $36 million just won’t do – not after four full years of marriage. Why, she gave him the best years of her life!

Dodd: my statement of yesterday is no longer operative

Turns out that the Dodd Amendment, which permits things like AIG bonuses, was drafted by Connecticut’s Senator after all. Yesterday he denied any such thing, saying someone else fiddled with his bill after he released it from his care. But that was then and today is today. As Obama said about the $900 billion pork-stuffed budget, “we’ve moved on.”

You know all that talk about preventative care saving medical costs?

Quite the opposite in some cases. As reported in the NY Times, PSA prostate cancer testing is worse than worthless, it causes unnecessary risks. Mammography seems to have the same dismal cost/benefit ratio. Both these tests are required to be paid for by medical insurance, by the way, in case you were wondering why medical insurance is so expensive.

Consumer Confidence

Ever wonder how Bush continued to receive even single digit approval ratings and the war in Iraq kept showing up as a good idea despite all of your impassioned pleas to the contrary? It’s been me – I’m a member of some Gallup panel and I speak for the thousands of my liberal friends who aren’t. Hee hee hee; it’s the only thing that lets me sleep well at night.

Anyway, as the result of being on that panel, the organization sends me from time to time advance notice of their recent poll results. I found this one interesting:

–By most measures, the U.S. economy continues to falter. But could it get worse? A strong majority of Gallup panelists think so. When asked to consider the recent economic downturn and say whether the worst is behind the United States or the problem may get worse in the future, 85% of respondents say the problem may worsen. Conversely, 15% of panelists say the worst is behind us.

There is not much difference when comparing different demographics throughout the Panel, save for one exception: Black panelists are more optimistic than respondents of other races. Specifically, 26% of black panelists say the worst is over.

Build a house in Old Greenwich

Effective today, Jordan Saper’s offering to build a 6,000 sq.ft. house on a half-acre at 7 St. Claire Avenue (just south of St. Saviors) for $3.8 million. That seems a bit rich to risk in this market, but Saper builds a nice home and if, as I assume, even he can’t get financing to build without a buyer signed up (alternatively, he simply won’t take the risk himself), this might be a good time to see how much house you can build for how little money. By the way, if he paid $1 million for the land itself, he’s only charging $433 a foot for the house itself. Not long ago, that would have been considered cheap – now, you might be able to do better.

Zimbabwe along the Potomac

Buying bread

The Wall Street Journal has a round up of economists’ reactions to today’s Fed decision to buy its own bonds here.

 Some are positive, some are not. I think I side with those who are frightened. One bright spot: mortgage rates should fall, at least until inflation kicks in. Look to refinance shortly, maybe. Or heck, buy a house!

• If there’s one aspect of the current environment that still amazes, it’s the fact that nothing amazes anymore. Even today’s announcement that the Federal Reserve plans on purchasing everything in America that isn’t nailed down raised relatively few eyebrows on our end… Effectively, the Fed is monetizing the Treasury’s debt, a strategy that appears in the encyclopedia under the heading “how to trigger inflation.” In any other environment, this monetization would be deeply troubling, but given the lack of end user demand, the prospects for a near term pop in prices is rather remote. The aggressiveness also suggests that the Federal Reserve remains highly concerned about deflation. –Guy LeBas, Janney Montgomery Scott
• These increases may reflect The Fed has decided to be the central bank that swallowed the Bank of England’s canary! … We are not, however, convinced of the sustainability of the Treasury rally (ten-year yields fell about 50 basis points in response to the news — very similar to the move in the gilt market). However, the scale of the Fed’s proposed purchases of Treasuries (relative to the size of the debt and the deficit) is much smaller than the Bank of England’s purchase (it would have had to be well above $1 trillion to be comparable). In addition, we are not convinced that we are headed for deflation and we worry about the longer-term inflation implications of these purchases. –RDQ Economics
• The Federal Reserve opened the sluice gates wide, hoping to fill the canyons of finance with liquidity. In an extraordinary step, the FOMC said it would double its purchases of mortgage-backed securities and agency debt from $600 billion to $1.25 trillion. More importantly, the announcement marked the Fed’s formal adoption of a pure quantitative easing policy… Although the notion of quantitative easing has been much discussed in the past few months, the policy clearly took effect today. Many thought it would never come to pass. In many ways this is a tragedy that could have been avoided. But that discussion is better left for another day. What is encouraging is that the diversity of voices and opinions on the FOMC were able to converge on a cogent and comprehensive policy to facilitate the flow of credi –Joseph Brusuelas, Moody’s Economy.com

 

So much for listening to experts

Yesterday I heard an economist on NPR predict that the Fed would not buy long term bonds because it was “a last ditch stand” ; its potential to explode inflation was so huge. “Like firing an unguided missile”, he said. Today comes news that the Fed is – you guessed it – buying long term bonds.  I won’t even pretend to know enough to guess whether the economist is right but it’s been my experience that when something bad can happen, it usually does.

UPDATE: Zimbabwe comes to America? If I understand this thing, and I’m not saying I do, it seems that the Fed is now issuing debt and printing funny money to “buy” it itself. Until today, there was some discipline imposed on our borrowing because if the buyers – Chinese, French, whoever- grew nervous over our spending, they’d quit buying. But now we’re our own buyers. Is this any different than Zimbabwe printing zillion dollar banknotes? If it is, please explain. Mongo have great pain between ears.

UPDATE II: Thanks, Instapundit!

UPDATE: There are some very thoughtful informative comments here and I recommend them highly. Here is the WSJ’s article today (Thursday) on the same subject – I think some of the comments are clearer, but what the heck.

Please let me ruin a company. Oh, please, pleeeese?

Remember the days when, to do well you had to do something right? No longer. Fannie Mae, Freddie Mac preparing to award their executives huge bonuses.

Economics 101

Give away something for free, people take more of it. Health care costs soar in Massachusetts under free health care program. Just wait for national health care and its cost controls.

Market Conditions

We have 638 single family houses for sale right now, of which 70 were built in 2008, 26 in 2007, 17 in 2006 and 13 in 2005. Not all of those 113 houses are spec houses, but it’s reasonable to assume that most are – certainly, 2008 homes are.

What’s going to happen to these, in a market that’s seen three houses go to contract all month (and, although twenty 2008 -built houses sold or went to contract in the past year, only six did in the past six months)?  I am guessing that we’ll have a mixed bag. Financially weak builders will lose everything and some of these will go for forty – twenty cents on the dollar. Those builders with the wherewithal to stay the course might lop a few million off their asking price but should, maybe, be able to eventually find buyers with the ability to pay millions of dollars for a house they like.

Long range, I think the best hope for builders is the realization that the houses they’ve erected won’t be available again for a long, time. No lender will ever again risk $6 million on a spec house until this crisis is long forgotten. Land values will fall to reflect the lower asking prices of new homes – let’s say, just for an example, Havemeyer drops back to the $950,000 range. A building lot then, will be worth something like $350,000, at best. The luxurious baths and kitchens buyers like so much just won’t be available in spec houses: the price of those homes won’t support them.

So I think we’ll see a new batch of modest homes with the occasional splendid, custom built mansion to accommodate the wants and tastes of, say, under-bosses from Queens or Ukraine. And a few heads of industry, perhaps. If you want a taste of what I think is our future, drive out Sherwood Avenue from Riversville to King Street, and cast an eye on what was built there during the seventies. I’m sure the houses are adequate to raise a family and enjoy a nice life, but they aren’t inspiring examples of the builder’s craft.

So if you think you may want something “special”, however you interpret that term, you may want to keep an eye out now for houses going under and houses selling for 70% of what they might have fetched two years ago. I have a feeling we won’t see their likes again. Which will come as a relief to many people but, judging from the way these things sold in their heyday, lots of folks liked them.

I’ve heard of church bake sales but this takes the cake!

Vatican defends Pope’s condom stands. What was wrong with modest, chaste lemonade stands? My heavens.

Foreclosures and short sales

I attended a packed meeting of realtors and lawyers this morning on the subject of mortgage foreclosures and short sales. A foreclosure, whether by auction of “strict”, where the borrower’s right of redemption is judicially extinguished, ends up with full title in the bank. A short sale happens when the owner sells to a buyer full title to the property, with the bank signing on for less than it’s owed. Either way, the borrower/owner loses his house, but what are you going to do?

There was talk of a mortgage mediation program, on which I’ll write later. Of interest for now is that mortgage foreclosures have doubled the past year, with no end in sight. And short sales? As Gene Marconi, chief counsel for the Connecticut Association of Realtors said, “I grew up in Torrington and cut my teeth on short sales. never, not once in my career, did I ever think I’d be here in Greenwich discussing short sales.” Well now he is. There are some interesting opportunities for buyers out there, and more coming each day.

And as an aside, before I receive any more angry comments deploring bottom feeders profiting on other’s misery, please read this Bloomberg article on cash-rich companies swallowing their weaker competitors whole. IBM, for instance, is bidding for Sun Microsystems.

March 18 (Bloomberg) — U.S. mergers and acquisitions may stage an unexpected recovery as International Business Machines Corp. and companies with cash prey on rivals struggling with depressed stock prices, bankers and lawyers said.

“Clearly this is the time to make an acquisition if you are a company that has the cash,” said Frank Aquila, a partner at Sullivan & Cromwell LLP in New York. “The best returns have come from acquisitions done during an economic downturn.”

It’s not nice, but if you’re solvent when much of the world isn’t, why not take advantage of your good fortune?

It didn’t add up

Bernie Madoff’s accountant has been charged with fraud. I almost feel for the poor schnook – he’s 49 years-old and facing 105 years in prison (an unlikely outcome, but still enough to keep one awake at night). His problem: he probably doesn’t know enough about the workings of the fraud to be useful to the Feds, so no deal for him. He’s been charged with falsely certifying that he’d examined Madoff’s books when in fact he did no such thing (but collected $150,000 or so a year for so swearing). If he wasn’t looking, he has nothing much to say, so it’s up the river with him. Wait, though, until the Feds grab someone with knowledge of the players and squeeze him. Bernie may be content to spend the rest of his days in an 8 x 12 ‘ room – others will not.

It will happen here

The CPSIA “no-lead” law is putting small toy makers out of business and food safety inspectors are banning the sale of home-made pies at church fairs. Now Congress is working up new food safety rules that will shut down farmers markets. Pshaw? You say? Go into your local thrift shop and ask to see their used toy selection. It’s gone.