Our new “Auto Czar” is an Edsel

Steven Ratner, Obama’s pick as the Czar to run our newly-nationalized automobile industry, is under investigation for soliciting kick backs from New York State’s pension fund. Oops! Perhaps he can be a cabinet member, instead.

Steven Rattner, the leader of the Obama administration’s auto task force, was one of the executives involved with payments under scrutiny in a probe of an alleged kickback scheme at New York state’s pension fund, according to a person familiar with the matter.

A Securities and Exchange Commission complaint says a “senior executive” of Mr. Rattner’s investment firm met with a politically connected consultant about a finder’s fee. Later, the complaint says, the firm received an investment from the state pension fund, then paid a $1.1 million fee.

The “senior executive,” not named in the complaint, is Mr. Rattner, according to the person familiar with the matter. He is co-founder of the investment firm, Quadrangle Group, which he left to join the Treasury Department to oversee the auto task force earlier this year.

Riverside Market

175 Riverside Avenue

When I was a kid we called these “Murphy Houses”, in honor of the contractor who bulldozed his way through Riverside in the 60s, breaking up big properties and jamming them with these inexpensive ($69,000 then) built-on-a-slab creations. This one was listed in 2007 for $1.595 million and sold yesterday for $1.075. Even adjusting for inflation, I suppose that worked out well for the owner. Interesting factoid: one of the Meeker daughters. on whose property this particular development sprung up, told my brother that her family had tried to sell the homestead with it’s eight building lots to one buyer for $75,000 back in 1966. The only one interested was Mr. Murphy.

35 Chapel Lane

This house on Chapel Lane enjoys waterfront on Cos Cob Harbor as well as an unimpeded view of the railrod tracks and I-95. It was priced at $3.5 million last summer by what I presume is an out-of-town broker (Property Network? Never heard of it), dazzled, perhaps, by the “Greenwich” name, even if it’s in Riverside. That didn’t work out and so today it’s back as a new listing priced at $2.1 million. The assessed value, by the way, is $2.140.

That Bernie! Making prison pay.

Photographers captured Ruth Madoff leaving the MCC with a bag of cash, presumably investments made by new investors Bernie’s been cultivating behind bars. Ya gotta have a plan, I always say, and Bernie obviously has one.

Should you buy a house now?

Here’s a look at the pros and cons from the WSJ. Just like the aroma wafting from Walt’s house on Round Hill, it depends. 

If you can borrow at 4.5% or 5% over 30 years, many purchases start to look appealing. Especially if we get a hefty dose of inflation down the line.

If that happens, your monthly payments will be low and you’d get to repay the principal over time with devalued dollars. That’s a double win.

Inflation isn’t guaranteed: The bond markets are only predicting about 1.4% inflation over the next 10 years, and BCA Research recently reminded clients that deflation, or falling prices, remains a danger. Unemployment is still rising and recent wages actually fell.

Yet if you had to bet from here, you’d bet on inflation in due course. The government is running massive deficits and has the printing presses at full throttle. That’s the classic recipe.

And inflation is the debtors’ friend — which is why it is surely going to prove the politically expedient way out of this mess.

Anyone purchasing hard assets like real estate, with a 5% fixed rate loan, ought to make good money if that happens.

When it comes to the house prices, it’s true they may not have fallen as far as you might expect.

A recent analysis in the Financial Analysts Journal (“When Will Housing Recover?”) suggested prices nationwide still weren’t cheap by historical standards in relation to household incomes.

Furthermore: the bigger the bubble, the bigger the bust.

But if you are thinking of buying a home, here’s the more positive news: While overall market averages may not be as cheap as you might have expected, you can probably ignore them.

There are plenty of deals taking place far below the official average levels. The indices are masking a huge disparity in prices.

Aggressive buyers are finding some simply terrific deals. And they’re paying with cheap debt, too.

Default rates are rising. Lots of sellers are forced. A buyer with options holds all the cards.

Once upon a time, the name of the real estate game was “let’s make a deal.” Today, it’s “take it or leave it.” If the seller won’t take your offer, his neighbor probably will.

Offially GAR sanctioned open house report

Okay, back from the broker open house tour and boy do I have great news for buyers! Every single house I saw – every one – was perfectly priced and on the best street in the best neighborhood of Greenwich. One house, just a tad over $3 million, was recently built and priced to sell now. There is a swamp instead of a yard but the skunk cabbage is coming up and the woods are redolent with their arresting aroma. Did I say priced to sell? This opportunity will be gone by tomorrow – I smell bidding war, unless it’s that skunk cabbage.

Other houses have seen their prices slashed to the bone, as much as $75,000 from, say, a $3.8 million price. If that doesn’t scream eager seller, I don’t know what does. Some of the older houses I saw might at first blush appear to be priced exactly where their neighbors were when they didn’t sell last year but in this year of perfection, we know that’s just an illusion. The professionalism of our crack real estate force would never repeat someone else’s mistake so you can rest assured that these prices are priced exactly right.

Does a new kitchen justify asking $700,000 more than the house next door sold for? You won’t hear me gainsay it. I’m a new, chastened man, and a team player. So get out there now and buy, buy, buy!

The value of improvements

A house on Stepping Stone is back on the market today, asking $3.195. That’s by no means a crazy price, or it wasn’t in what we used to think of in normal times, but this caught my eye because of what we may learn from it about today’s market. The house failed to sell in 2005-06 at $2.595 million so, after the listing expired, the owners installed central air, a new roof and two new furnaces, did “extensive landscaping” and built a terrace (I’m taking this from the two listing sheets so I may have missed some other improvements). Those are expensive items, but buyers kind of expect a working roof and furnace and tend not to give sellers credit for supplying them. Landscaping and a terrace will certainly make the place more attractive (it occurs to me that they may have also updated the baths) but again, will this make the place sell more quickly – definitely – and will a buyer pay $600,000 more than anyone would three years ago? We will see.

Sunshine on my shoulder makes me stupid

35 Sunshine Avenue (north of the Post Road in Riverside) came on the market last summer at $790,000, which I though was an aggressive price. It dropped to $650,000 – better, but still not there – and sold yesterday for $525,000. There’s another listing on the same street now, also worth just land value, priced at the same high level as this one was. The bank who owns the mortgage that dictated its price might want to look at the sale price of 35, compare 35’s land to that of its own listing, and prepare to take a loss or, as that Irish joke says, “brace yourself, Bridgette.”

Too late – Realtors, send this to your clients

On April 3rd I posted a question from a Midwestern reader:  He and a buyer were $50,000 apart. Should he take the lower offer and console himself with the thought that he’d more than make that “loss” back buying property in Greenwich at a lower price, or continue to negotiate? The dozen comments (check the link to read) were unanimous: take the money and run. Great advice but unfortunately, MidWest wrote in after he’d already lost the buyer, though he didn’t know that at the time. Yesterday he sent the following sad tale:

Thanks to all for this good advice. I should have taken his offer right on the spot. After starting at a low number, he raised his bid by 350K or 35% over 3 months. So I thought we could work out the last 25K since he strongly preferred some features of our home. But that must have been the straw that broke the camel’s back. The buyer went silent and in the meantime, bought a smaller house down the street for about 200K less. In this market, I needed to 1) set the list price ahead of the market decline, not behind it, 2) get over my pride and just accept the loss on the house, 3) be more decisive and give him the exact answer he was looking for on the spot and 4) keep him engaged in the negotiating process with formal offers (by the end he was just throwing out numbers verbally).

Lesson learned, I will be more prepared and realistic next time. But I also understand the next offer may be even lower.

I’m sorry for Midwest’s expensive lesson, both because we’ve written and I’ve come to know him as a great guy, but also because, who do you think he was going to use to find him a house here? Drat and darnation. Oh well, buyers, Midwest, are like buses – sooner or later, another one will come by (or come buy?). hang in there! Write when you get work.