ragerunner

As we have previously discussed, the concept of walking way is growing rapidly. I still don't have a problem with it, its simply a business deal. What I do have a problem with is looting on the way out, damaging the house or people that walk away who have Home Equity Loans. I'm believing more and more this is main streets way of 'showing its anger' at the banks and wall street. No riots, just walk away. Feeling entitled, homeowners walk away or loot fixtures Homeowners are walking away - even when they can afford their payments. Some loot on the way out the door, carting off light fixtures, appliances, anything of value. But today's homeowners are tired of watching the lenders who triggered the financial meltdown get bailed out while they suffer. They want revenge. "It went from being a shame to being behind on your mortgage to feeling like it's a big joke," said Jim Kelly, a Tampa homeowner who said numerous neighbors of his have stopped paying. "The big talk at cocktail parties is how underwater is your house and how long have you lived there for free." http://www2.tbo.com/content/2010/apr/02/feeling-entitled-homeowners-walk-away-or-loot-fixt/c_3/#comments

It's another unexpected, the economist were off moment. New jobless claims increase unexpectedly "The Labor Department said Thursday that first-time claims increased by 18,000 in the week ending April 3, to a seasonally adjusted 460,000. That's worse than economists' estimates of a drop to 435,000, according to a survey by Thomson Reuters." http://www.ibj.com/new-jobless-claims-increase-unexpectedly/PARAMS/article/19165

These guys are heavy hitters and usually don't make blank statements. Britain 'could lose cherished AAA credit within 12 months' Investment chief at Pimco warns of disaster facing UK's public finances and banking "One of the world's most powerful investment houses has given notice that Britain's cherished AAA credit rating could be lost within a year, with disastrous consequences for the public finances and the stability of the financial system." "Pimco is reducing the weight of UK, US and European sovereign debt in its portfolios. "Miracles are needed in the next six months in order to keep economic growth in the developed world," Mr Mather said." http://www.independent.co.uk/news/business/news/britain-could-lose-cherished-aaa-credit-within-12-months-1933967.html

I think the private sector has the right to maximize their profits (5%, 14%, etc.). But, their risk usually grows with those margins. Its a private business transaction, they have the right to 14% or 50% but, they also must shoulder the 14% or 50% or 100% chance of loses as well. As you know, there was much more to all of this. Including greed all both sides. This greed on Wall Street part included taking even more risk for profit by repackaging these loans and selling them off to other nations and institutions. Of course most of those packages had reversion clauses and/or insurance that went with them. So when the deals started going bad these buyers of these packaged loans came calling to collect. This is why the FEDs used more taxpayer money to shore up/bailout/takeover AIG. They were the insurance company for many of these toxic derivatives. This has now put the taxpayer on the hook for billions more that will never be recovered.

While I agree some what. To me this was about private companies deciding to loan money on extremely risky investments. They made a massive amount of money when these loans were made but, didn't like it or couldn't afford to deal with the risk. These are nothing more than business deals, if a homeowner defaults on a loan (business deal) then the bank gets the asset and has legal options to recover some of the loses (in some states). There was nothing in these business deal contracts that said, if the loan (risk) is defaulted on then all the other taxpayers should shoulder the loses. You don't see them offering the profits to the taxpayers? The problem is the banks and Wall Street firms love the upside but, have found the downside not as much fun. So, they are unloading the downside on all the taxpayers and taking their record bonus to the yacht club. I know we have also talked about the concept of moral obligation, which I have no problem with as long as its applies to both sides. For years now Wall Street and the Banks are functions with the mentality that the moral obligation is one sided.

They finally have confirmed what most believed, the taxpayer is holding a BIG BAG of CRAP. Wall Street has been allowed to dump the risk on us and take the profits that they made through the boom and move on. While no one will every challenge the FEDs on this, there is a good chance what they did wasn't even legal by our laws. Fed Reveals Bear Stearns Assets It Swallowed in Firm’s Rescue “The Fed absorbed that risk on its balance sheet and is now seen to be holding problematic, legacy assets,” said Vincent Reinhart, a resident scholar at the American Enterprise Institute in Washington who was the central bank’s monetary- affairs director from 2001 to 2007. “There is both an impairment to its balance sheet and its reputation.” "The Bear Stearns deal marked a turning point in the financial crisis for the Fed. By putting taxpayers at risk in financing the rescue, the central bank was engaging in fiscal policy, normally the domain of Congress and the U.S. Treasury, said Marvin Goodfriend, a former Richmond Fed policy adviser who is now an economist at Carnegie Mellon University in Pittsburgh." http://www.bloomberg.com/apps/news?pid=20601010&sid=aZA_RWY3IJ2I

That may all be true, but I think folks are taking issue with your claim that Italy and Japan, for example, are not "healthy" and do not have a "vibrant society." Convincing people that Arizona has a more vibrant society than Italy may be tough sell. I think this is a discussion about what is now and what may be. Today Italy, Spain, Japan are still functions relatively well, but, over the next 40 years it may be a different story. Japan is very aware their place as a major economic power is in danger and places like Italy and Spain are realizing they simply will not be able to pay for many of the programs and infrastructure that they currently have or need. The lose of the programs and financial ability to maintain their current system in 40 years may very well alter how 'healthy' their country will be. Greece, Portugal and soon to be Spain already are having their financial ratings cut because their debt levels to provide their services 'lifestyle' are become less and less sustainable. Some of the reasoning behind the creation of the European Union and the Euro was to postpone this on coming demographic and financial change in many of the european countries.

These types of statements usually are preludes to the next big problem. Remember, these are the same organizations that told us that subprime was contained, we would not have a recession, the banks are fine, and home prices would not drop significantly. It doesn't take a genius to drive around and see all the vacant store fronts and half filled or less office buildings. Geithner: Commercial real estate loans problematic "WASHINGTON — Mounting losses from commercial real estate loans will continue to be a problem for the U.S. and especially smaller banks, but it can be managed, Treasury Secretary Timothy Geithner said Monday." "Commercial real estate's still going to be a problem for the country," Geithner said in an interview with CNBC. "But we can manage through this process." http://www.google.com/hostednews/ap/article/ALeqM5iW_MEpD2t1ZKHYld6JokEpEWHtOwD9EOKUBO1

I think we are starting to see the beginning of the next leg down in housing. Waiting for the other shoe to drop Fears are growing of a second dip in the housing market "Yet the housing-market recovery has almost run out of steam. Sales of new and existing homes have fallen for three consecutive months. As a result inventories have grown, putting downward pressure on home values. According to some measures, prices are dropping again: the Federal Housing Finance Agency reported national declines in December and January." http://www.economist.com/world/united-states/displaystory.cfm?story_id=15772789

Great tour of Honolulu. I really enjoyed the street level views and all the old architecture. The beautiful tropical landscape is stunning.

Give it time. I think we are heading in that direction.

Half of U.S. Home Loan Modifications Default Again (Update1) "March 25 (Bloomberg) -- More than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months, according to a federal report." "Modifications are “clearly not working well and it’s not a surprise,” said Sam Khater, a senior economist at First American CoreLogic in Tysons Corner, Virginia. “It’s pointless to rewrite these loans because they’re underwater.” http://www.businessweek.com/news/2010-03-25/half-of-u-s-home-loan-modifications-default-again-update1-.html New Plan to Cut Some Mortgage Balances "The White House will announce Friday an expansion of its foreclosure-prevention efforts to include reducing mortgage loan balances for some borrowers, a controversial step that policy makers have long resisted, people familiar with the plans said." "Under the plan, the Federal Housing Administration will take on a much bigger role in government efforts to avert foreclosures by allowing some homeowners who owe more than their homes are worth to refinance into government-backed loans, according to people familiar with the plans." http://online.wsj.com/article/SB10001424052748704094104575143843436282202.html?mod=WSJ_hpp_LEFTTopStories This will only increase the number of defaults. There are going to be some very unhappy neighbors when they find out that the house next door got its mortgage written down to a lower dollar value, while their mortgage stays the same. More and more people are going to walk away, even if they could afford to pay. This will also drive down prices in neighborhoods even more. The FEDs and Wall Street need to stop the manipulation before it completely destroys the American landscape and the concept of risk.

Just recently visited several new urbanist developments in the Denver/Boulder area including one of the largest of these types of development in the US, Stapleton. While a lot is said and discusssed about these types of developments, they sure are a big step forward from your typical suburban, strip plaza projects that dot the American landscape. Please note: I try not to take pics of people, but all the project had plenty of people out and about. First up Stapleton. This project is on the former grounds of the Stapleton International Airport and is a massive project. I really liked the quality green/pedestrian space and the diverse architectural styles that gave the project a more organic feel. Holiday in Boulder. Interesting project built on the northside of town near an older industrial area. What made Holiday interesting was it nice mix of live work units, it integration of sustainable concepts, like the community garden and the feeling that it was a real place (not built by disney). Live Work units. Community Garden. Arista in Broomfield next to the 1st Bank Arena. This project should see more development once the BRT system is completed between Denver and Boulder. Construction of the future BRT station.

For those that are interested, here are a couple of quick reads on this subject. The social and economic impacts are going to very pronounced over the next 40 years or so. Japan http://www.medicalnewstoday.com/articles/20669.php Europe http://www.foxnews.com/story/0,2933,202224,00.html arenn, Nice article about your speech in the IBJ yesterday.

It can become a very bad thing if the decline is showing up in the younger generations (and it is). Its also a very big issue if you are having population decline and an increase in retirement individuals at the same time. This means you have less workers trying to fund the rapidly growing retirement segment. If the country happens to be a large welfare state then this becomes almost overwhelming, economically. This is happening across most of Europe, Japan, and Russia and we are only in the first inning of this massive demographic shift. The other issue is related to infrastructure. If a country has built cities and transportation networks to support a population of 100 million and in 50 years their population is going to fall to 75 million then you have a major problem. First, you no long can afford to operate everything and you start seeing huge vacancy rates in buildings. This is now starting to happen in parts of Europe and Japan. Japan has already started to 'mothball' small towns that are becoming empty. I also think that younger generations around the developed world will become more and more disenchanted if they see less services, higher taxes and little or no retirement options.

The euro system is really taking a beating right now and so will the european lifestyle in many of its countries. Add in population decline for many, a lack of workforce to off set the retiring force and you have a very nasty economic mix. Greek Crisis Risks Boiling Over "The Greek crisis has reached a new level. What started as a problem with the fiscal credibility of one euro-zone state has now exposed political fault lines running through the whole currency bloc." http://online.wsj.com/article/SB10001424052748704896104575139480622261378.html U.S. stock futures decline after data Portugal downgraded as Greece worries continue "Fitch also downgraded the rating of Portugal to AA- from AA and kept the country's outlook on negative, hurting Portuguese stocks including Portugal Telecom." http://www.marketwatch.com/story/us-futures-drop-before-durables-data-euro-sinks-2010-03-24?dist=beforebell

The truth is simple, home prices must be allowed to rebalance with income levels, funny loans must readjust, supply and demand must also rebalance, loans should be given for only what a person can truly afford and the foreclosure mess must have its day (years). The government can stretch the pain out, and it can fake a recovery, but at the end of the day reality will happen. I also believe that the taxpayer money that is being used for house buying assistance is only creating another round of home owners that will be in default down the road and upside down on their loans. Curses, foiled again Commentary: Housing's dead-cat bounce is deflated "The extension and expansion of the home-buyer tax credit that Congress enacted in late November in hopes of spurring sales has only placed a hex on the market. Sales of existing homes fell in February, the National Association of Realtors said Tuesday, marking a string of three straight declines since the tax credit got its second life. Just as vexing: The inventory of homes for sale climbed quite a bit, and median prices continued to decline, although at a slowing pace." http://www.marketwatch.com/story/housings-dead-cat-bounce-now-deflated-2010-03-23

Good point, before someone tries this they better know their state's anti-deficiency laws. Fortunately or unfortunately some of the big ones like California have not anti-deficiency laws. Maybe this is one way main street strikes back at wall street. Instead of riots or demonstrations, they simply hit them in the wallet.

It appears more and more Americans are realizing that buying a home is a business deal. That is all. If this approach to falling prices grows than we have a long ways to go in this housing bust. The banks may find that they have dug themselves a much deeper hole than they had previous thought, with all the taxpayer bailout money and record bonuses. More homeowners are opting for 'strategic defaults' "The way she sees it, big banks that helped fuel the mess all got bailouts while small fry like her are left holding the bag. No more." "Underwater on their mortgages and angry at banks, more borrowers are choosing to hand over the keys, even if they can afford the payments." "There is a growing sense of anger, a growing recognition that there is a double standard if it's OK for financial institutions to look after themselves but not OK for homeowners," said Brent T. White, a law professor at the University of Arizona who wrote a paper on the subject." "He and other experts said average Americans are fed up with hearing how they're supposed to honor their debts while businesses operate by another set of rules." http://www.latimes.com/business/la-fi-walkaway17-2010mar17,0,2297178.story?page=1&track=rss

The world has become one giant bubble. Maybe that is how we continue to 'float' in outer space. China in Midst of ‘Greatest Bubble in History,’ Rickards Says "March 17 (Bloomberg) — China is in the midst of “the greatest bubble in history,” said James Rickards, former general counsel of hedge fund Long-Term Capital Management LP." http://www.businessweek.com/news/2010-03-17/china-in-greatest-bubble-in-history-rickards-says-update2-.html Delta to cut 840 jobs, vacate airport's Concourse A http://www.bizjournals.com/cincinnati/stories/2010/03/15/daily19.html Hopefully the Cincy airport will continue to work on bring in more airlines and move past the concept that the airport is a major hub for Delta. The new airlines should be able off set some of the job loses.

Holy smokes batman, its another unexpected decline. Man, I am in the wrong business. I really need to be an economist. You can be wrong over and over and over and be surprised over and over and over and the market still will look to you to shake the magic 8 ball every month. Then they send you a pay check. Homebuilder Index in U.S. Declined to 15 in March (Update1) "March 15 (Bloomberg) -- Confidence among U.S. homebuilders unexpectedly declined in March, a sign the housing recovery is having trouble gaining momentum. The National Association of Home Builders/Wells Fargo index of builder confidence dropped to 15 this month from 17 in February, the Washington-based group said today. A reading below 50 means most respondents view conditions as poor." http://www.businessweek.com/news/2010-03-15/homebuilder-confidence-index-in-u-s-declined-to-15-in-march.html

A growing wrench in an already fragile economic system. I still believe that external forces are going to put a lot of pressure on any economic recovery efforts over the next few years. But, who knows, maybe we can all share the toys and play nice in the sandbox. I am sure the middle east will do the same so oil prices don't go through the roof any time soon!! Is China's Politburo spoiling for a showdown with America? The long-simmering clash between the world's two great powers is coming to a head, with dangerous implications for the international system. "China has succumbed to hubris. It has mistaken the soft diplomacy of Barack Obama for weakness, mistaken the US credit crisis for decline, and mistaken its own mercantilist bubble for ascendancy. There are echoes of Anglo-German spats before the First World War, when Wilhelmine Berlin so badly misjudged the strategic balance of power and over-played its hand. Within a month the US Treasury must rule whether China is a "currency manipulator", triggering sanctions under US law. This has been finessed before, but we are in a new world now with America's U6 unemployment at 16.8pc." http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7442926/Is-Chinas-Politburo-spoiling-for-a-showdown-with-America.html

This guy called the start of the recession correctly. Economy 'Far too Close' to Double Dip: Roubini "Poor economic data in the US coupled with Europe's debt crisis are contributing to an increase of the risk of the US economy going through a double-dip recession, Nouriel Roubini, who predicted the 2007 financial crisis, wrote in a research paper." http://www.cnbc.com/id/35792768

Cincinnati’s commercial real estate industry is in a crisis "And there could be plenty more rock-bottom deals in the works, based on a Business Courier analysis that identified 177 retail, hotel, office, industrial and apartment properties that are considered distressed. That means they’re in foreclosure or default – or are at risk for such trouble." ‘It could halt the economic expansion’ “It’s one of the reasons we have a half-speed recovery,” said Stuart Hoffman, senior vice president and chief economist for PNC Financial Services Group Inc. in Pittsburgh. “It’s not by itself enough to throw the economy back into recession, but if you throw a few other bad things at it, like a spike in oil prices or a lack of job growth, it could halt the economic expansion that’s going on.” http://cincinnati.bizjournals.com/cincinnati/stories/2010/03/08/story1.html?b=1268024400^2972801 This 'crisis' will only grow, not just in Cincy but across the country. There is no need to add any new inventory to the market, its already saturated at this time.

CincyDad and X, right on the money. Save the big boys, let main street slide, click your heals and hope the whole thing doesn't come crashing down in the future. But, just in case it does come crashing down, make sure the most well connected have received enough money to safely travel in their yatch to a far away land.