Daily Archives: April 25, 2009

Stay on the sunny side, always on the sunny side, …

 Tucson’s best realtor reports:

I’ve been out showing homes for the past week or so and, for the last couple of days, we’ve been inside the pearly gates of Catalina Foothills Estates 10 and Pima Canyon. Both very desirable, lovely, luxury gated communities here in the Foothills.

But with 22 homes for sale in Pima Canyon and 17 in Cat 10, and none sold since October, even the most giddy optimist amongst us could see that things are not going too well in there, you would think.

But when the listing agent for one of the Pima Canyon homes smiled pertly and pointed out, ‘no sales, but at least prices are holding up in Pima Canyon’ I thought, gee, why didn’t I think of that.

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If you still have a job there, Wall Street wants to make nice

The Times reports that bonuses are back. If anything will bail out our 519 spec builders, it’s a load of rich idiots with money burning a hole in their pockets. If there are enough of these guys left, all will be well – I have no expectation that they’ve learned caution during their year in the wilderness. Personally, I think it’s a false dawn, but sellers won’t believe that.

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Is Antares still using that name?

I was thinking it might be a fun sort of name for a dynamic, growing real estate firm in Old Greenwich, but I wouldn’t want any confusion. I checked the tax records just now to see how the boy’s are doing with their adjoining houses on Mooreland Road and discovered that each is in the wife’s name. I doubt that will be enough to keep them away from creditors, but you never know. Interesting, I see that the town values Beninati’s house on 42 Mooreland at $11 million, while partner Jim Cabrera was forced to make do with a relative hovel on 44 valued at a mere $9 million. What happened to share and share alike?

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Ghost Buildings of 1929

NY Times
NY Times

From the New York Times real estate section, a fascinating tale of what might have been.

In April, a group headed by Albert Mayer, an architect and planner, acquired a swath of West Street south of Rector Street for a mixed-use development of offices and apartment houses.

Calling itself Downtown Homes, the consortium proposed an initial 40-story building of 428 apartments and 255 bachelor rooms, with a gym, banquet hall and handball courts. The idea was to accommodate the rapid increase of financial district workers in the growing crop of skyscrapers downtown.

The blocky tower was to have a white brick top with a gold cap, illuminated at night. But even more spectacular was the body of contrasting sections of red and buff, designed by the architects Thompson & Churchill. They are now known for the voluptuously pink faience tile entrance of their Hotel Lowell, at 28 East 63rd Street, built in 1927.

Henry S. Churchill of Thompson & Churchill told The New York Times in 1929 that he was introducing the cascade of color to fight what he called “the monotony of flat surfaces” common in emerging modernist designs.

Excavation for Mr. Mayer’s visionary Downtown Homes did begin in December but got no further, and the site was sold in a foreclosure in 1932 for $250,000. It is now the location of the entrance to the Brooklyn-Battery Tunnel.

The theory in the real estate industry was that happy days would soon be here again because the stock market had drained investment capital that might otherwise have gone into bricks and mortar.

In December, Alfred E. Smith, the former New York governor, told The Real Estate Record and Guide that “I haven’t much use for pessimists who say we are building too fast.” He was involved with the construction of the Empire State Building.

And in January 1930, Roland F. Elliman, vice president of Douglas L. Elliman & Company, assured The Times that the real estate industry in New York was far too prudent for speculative ventures.

In any event, he said, fail-safe protection was provided by “the conservative policies of lending institutions, whose executives refuse to make loans in excess of conservative valuations.”

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Here’s some change that’s better

John P. Murtha under fire for his corruption. The old fraud has endured in Washington since just after Lincoln’s assassination, though – if it takes that long to weed out all the crooks, Chris Dodd could die in office of old age.

Now, however, a string of federal criminal investigations of contractors or lobbyists close to Mr. Murtha, the top Democrat on the defense appropriations subcommittee, are threatening to undermine his backroom clout.

In the weeks since the news that prosecutors had raided the offices of the PMA Group — a lobbying firm founded by a former Murtha associate that became a gateway to his office and his biggest source of campaign money — about two dozen rank-and-file Democrats have risked his wrath by calling for a House ethics investigation of the matter. One Democrat has even foresworn seeking earmarks for the military contractors in his district because of ethical concerns about the process.

In a private meeting with the chairman of the House appropriations committee, Mr. Murtha, the unofficial leader of the “old bulls” who oversee the subcommittees, was forced to accept a series of new restrictions on his authority to grant earmarks, Democratic aides briefed on the meeting said. In previous weeks he had already acquiesced to another steep cut in the volume of earmarks he dispenses, down by half this year from a few years ago. He had also accepted new disclosure requirements, including public hearings, that cramp his ability to cut last-minute deals.

[snip]

While past presidents often courted Mr. Murtha with phone calls and private meetings,President Obama has extended to him no such courtesies. On a visit to the White House, the lawmaker told senior defense officials that it would be “foolish” and “ridiculous” to cancel all of a $13 billion contract to buy new presidential helicopters, as he later recounted to a defense industry newsletter. But Defense Secretary Robert M. Gates has insisted on scrapping the deal as a symbol of waste.

And in a recent meeting with the secretary, Mr. Murtha pushed a plan to divide a $35 billion contract to build a new airborne refueling tanker between two rival contractors — a compromise that pleases both but would cost the government much more. Mr. Gates listened with little response, several people briefed on their conversation said, but he later came out firmly against it.

[snip]

Mr. Murtha has continued his spring tradition of summoning military lobbyists to a big-ticket fund-raising breakfast just as he begins to oversee the year’s military spending bill. And he has vowed to continue steering military contracts to his constituents. “If I am corrupt,” he recently told The Pittsburgh Post-Gazette, “it is because I take care of my district.”

That last line says all you need to know about Washington.

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New name contest

No one (except Frank) likes his pick of EBT Realty for an operating title, so we’re opening the gates for a better one. Winner gets a free cup of coffee at our new offices, a free price opinion from David Ogilvy (just call him and use our name) and God knows what else. Here are some of my own ideas, already or soon to be rejected:

SBW Realty. Depending on whether we’re representing a buyer or seller, could be “Sound Beach Wiseguys” or “Sadder But Wiser”.

John Galt Realty. I love this one, but Frank and his liberal friends would ask, “who is John Galt?” and mean it.

For Love of Our Fellow Man – people would probably expect us to eat our commission, if you can believe it.

A Nursery School Diploma and a Broker’s License. Doesn’t distinguish us from our competition.

Frankly, My Dear, We Don’t Give a Damn. Off putting? Frank would like to see his name in the title, though.

Anyway, you get the idea. Fire away.

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Here’s my idea, Mr. President: fire half of them today, half the remainder next week

Obama asks federal workers for ideas on how to save money. Even the New York Time’s Krugman admits that the One’s idea of cutting $100 million from the budget is meaningless:

 “pretty soon, even here in Washington, it adds up to real money,” says the president.

Except, you know, really it doesn’t. Let’s say the administration finds $100 million in efficiencies every working day for the rest of the Obama administration’s first term. That’s still around $80 billion, or around 2% of one year’s federal spending.

Are people this stupid or is the will to believe just so powerful that it overcomes common sense? Damned if I know, but after one hundred days, the Mesiah is more popular than ever. I’m going with stupidity.

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If they still had them, now would be a good time for the Brits to turn out the lights

 

Anyone for Chinese?

Anyone for Chinese?

As Britain’s cities fail, trash removal slows, rats proliferate. Bubonic plague next? I wonder whether western civilization will end with a whimper, instead of the loud bang we all expected during the cold war?

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As California goes, so goes the nation?

Suggestion here that when california defaults on its loans, it will shut down the municipal and state bond market nationwide. That will be interesting.

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Even arsonists have stage names now

According to reports, the man blamed for causing that South Carolina wildfire is named “Marc Torchi”. Sheesh.

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Walter, there’s still time to get out of Dodge, even if your house is encumbered

A reader sends this link about Hennessee Group being fined by the SEC for advising clients to invest in the Bayou Fund.

Hennessee Group, which advised clients to invest in the Bayou hedge funds that were later discovered to be fraudulent, has agreed to pay $814,644 in fines to settle charges that it failed to properly investigate the funds.

The US Securities and Exchange Commission yesterday charged Hennessee and its principal, Charles Gradante, with violating securities laws by failing to perform their advertised review and analysis before recommending clients to invest in the Bayou fund. [emphasis added]

The move, which comes more than four years after the Bayou fraud was uncovered, could indicate that the SEC is working on a similar case against some of the advisers who put investors’ money into Bernard Madoff’s estimated $65bn “Ponzi” scheme.

Deborah Brewster, New York

The Bayou Fund was a big deal, sort of, before Bernie Madoff cast his own gigantic shadow, and four years seems a long time to take before reaching resolution. I suspect, though, that the SEC’s case against Fairfield Greenwich Group will move no faster and, since my former colleagues love charging by the hour, they will be in no rush to settle. I do fear that Walter’s legal fees are going to move past mere annoyance soon. 

 

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Maybe he’ll retire there, with his friends

Chris Dodd: "what are friends for?"
Chris Dodd: “what are friends for?”

Dodd’s cottage an unreported gift, says Judicial Watch.

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No one’s gonna steal my house!

From Minnesota Peg comes this link to a fascinating Wall Street Journal article about the disconnect between buyers and sellers of high-end houses.  As the article points out, it’s a lot like the old joke about the guy with the million dollar dog: “Well, I haven’t sold him yet.”

The latest data from the National Association of Realtors, which rattled nerves on Wall Street this week, showed national home sales are still weak. But they also showed how home sellers nationwide have split into two camps.

Call them “the haves” and the “don’t haves.” As in: Those who have to sell, and those who don’t have to.

The haves are the distressed sales. These include those in foreclosure, and those in pre-foreclosure “short sales.” Such sales are now booming – at bargain prices.

On the other hand, those who don’t have to sell are often hanging on to 2006 prices. And they are hanging on to their homes.

Prices aren’t dropping. And homes aren’t selling.

This could be ominous. It suggests – though it does not prove – that another shoe could be about to drop in real estate, as those who don’t have to sell realize they need to compete more aggressively with those who do. [emphasis added]

The latest housing numbers tell a story.

[snip]

In other words, the number of distressed sales has nearly tripled in a year.

That’s the good news. That’s a market clearing, at last. Distressed sales are taking place at prices at least 20% below the rest, the association says.

On the other hand, look at those who aren’t in foreclosure or a short sale. They’re selling their homes while still solvent. This used to be called the normal housing market.

Prices haven’t come down much. In some premium neighborhoods they have may even be rising.

But the volume of those “normal” sales is down sharply. They make up just 47% of 360,000 second-hand home sales. That’s 169,000 transactions.

How little is that?

Even a year ago, when the housing market was already in the tank, these non-distressed sales accounted for 82% of 375,000 second-hand home sales nationwide. Or 308,000 transactions.

It’s like the old joke about the man with the million dollar dog (“Well, I haven’t sold him yet!”).

When a real estate market collapses, volumes die first. Prices fall later. So news that volumes are drying up for non-distressed sales has to be an ominous sign. [emphasis added]

Those who live in premium neighborhoods often fancy that they are immune from the slump. “Oh, good quality will hold up,” they say. It’s true good quality may hold up for awhile. But that doesn’t mean anyone’s immune.

And over long terms, different real estate markets have to maintain some reasonably persistent connections. Otherwise many people would move to the cheaper neighborhoods.

The trade now — in theory, at least — may be to sell the place in an upscale neighborhood like Pacific Heights in San Francisco, if you can, and buy a foreclosure deal out in the ‘burbs.

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Sellers’ delusions

I spent a fascinating day with Frank Farricker and a local builder Thursday and was struck by the builder’s absolute faith in the inevitable resurgence of the Greenwich real estate market. Hang on for three, maybe five years, he reasoned, and all his projects would be back in the black. Unfortunately for this builder and many of his peers, hanging on for so long may not be possible, and by my logic, they’d be better off accepting the offers of the money guys Frank and I have available to bail out now. But so far, sellers, for the most part, are determined to go down with their ships. Which is okay – we’ll deal with the banks directly, eventually, but it does seem illogical.

Whatever, here is what the situation is:

Current (through April 25) inventory: 932 housing units, 224 condos and co-ops, 708 single family homes.

36 Condos asking $2 million plus, 71 single family houses asking over $8 million.

Sales/contracts this date: 

54 total units, 17 condos/co-ops, 37 single family

15 condos sold between $172,000 and $999,000. 1 sold at $1.3, 1 (240 Valley Rd) sold for $2.3. Again, number of condos priced over $2 million, 36.

14 SF sold between $400,000 – $999,000

14 SF sold between $1 – $2 million

 7 SF sold between $2 – $3 million

 8 SF sold between $3-$4 million

 0 SF sold between $4 – $5 million

 2 SF sold between $5 – $6 million

 3 SF sold between $6 – $7 million

 0 SF sold over $8 million

And again, number of single family houses listed above $8 million, 71.

There are plenty of Greenwich house sellers with the wherewithal to sit on their property for five more years. There are even more, I suspect, who either can’t or don’t want to wait. For those in the latter category, the right course of action seems obvious, to me.

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real estate auctioneer Sheldon Good Inc. goes bankrupt

Turns out that before his suicide, Mr. Stephen Good had been stealing money from the company. At least according to the survivors, this theft tipped the company into failure. Hmmm. This is the company that tried, and failed, to auction off that white elephant on Taconic for $19 million, but the concept still seems viable to me. We have billions (or trillions?) of dollars of under-water real estate, with eager buyers chomping at the bit to buy at least some of it. Auctions would appear to be a good way to match buyers with unwilling owners, so if Sheldon Good isn’t around any more, I’d think someone will rise to take its place. But that’s just an outside observation made without knowledge of the practical difficulties in matching those buyers and sellers, so what do I know? I’ll be interested to watch how this plays out.

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