Sunday, September 6, 2009

Monday September 7 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

Is your suburb the next slum? - (www.realestate.msn.com) Once the symbol of the American dream, many suburban communities could be on their way to becoming tomorrow’s slums. The nation's suburbs — once the symbol of the American dream — are well on their way to becoming tomorrow's slums, some experts say. The one-two punch of a crippling recession and higher gas prices have quelled demand for many of the nation's fringe communities from Charlotte, N.C., to Sacramento, Calif., while at the same time demographic trends have begun pushing an aging population back to the nation's urban cores. That's prompting some planners to predict a huge surplus of large-lot suburban properties in the years ahead — as many as 25 million homes by 2030, according to Arthur C. Nelson, presidential professor of city and metropolitan planning at the University of Utah and director of its Metropolitan Research Center. Not all of these homes will sit vacant, Nelson says. Many of them will be divided up into multifamily rental properties. "You will have two or three households living in these large mansions in the suburbs," Nelson says, adding that this will bring property values down and put extra strain on public services. Suburban ground zero: That's already happening in places such as Elk Grove, Calif., a community 15 minutes outside Sacramento. Here, builders rushed to build subdivision after subdivision — putting up 10,000 tract homes in just four years at the height of the boom — confident that buyers from all over the Bay Area would trade up to these larger homes. They were wrong. When lending dried up and the economy soured, the bottom fell out of this market, even before all of the schools, parks and fire stations were built. Property values plummeted and many people walked away from homes they thought would never recover their value. Susan McDonald, founder of Elk Grove's Franklin Reserve Neighborhood Association, saw her old house in the neighborhood drop in value from about $550,000 at the peak to $230,000 when it sold again recently. (She bought again in the same area.) Many of the houses still sit empty, or have been rented out as Section 8 housing. Many of the lawns are brown and weedy. Graffiti are starting to crop up on walls and signs throughout the area. Sheets, not curtains, are tacked up in some windows. More alarming, property crimes in Elk Grove, such as burglary, larceny and motor vehicle theft — soared tenfold in the first six months of this year from the same period in 2007. Violent crime is on the rise, too, jumping 18% in that same period, according to reports by the Elk Grove Police Department. Now, McDonald's group and a local church are spending weekends mowing yards and cleaning up what banks and builders will not. They tip off police about suspected pot-growing houses —32 have been found since her association was formed a couple of years ago. "We're not going to let our lawns go, let people park their cars all over the lawn and let kids hang out on the streets past (the town's) curfew," McDonald says. "We are going to preserve our quality of life."

A Cul-de-Sac of Lost Dreams, and New Ones - (www.nytimes.com) The rose bushes are back in bloom on Beth Court, but the lawns on the block remain parched and browning, reminders of the absent families who once tended to them. Articles in this series explore how a block of eight homes in Moreno Valley, Calif., about 60 miles from Los Angeles, has been reshaped by the housing bust and recession. On a recent evening, a new homeowner lugged two large shopping bags from Home Depot across his front yard, where his young daughter danced a mad jig in her pajamas. Across the street, another group of newcomers — an extended family that had cobbled together enough cash for a down payment — began the long slog of cleaning out the garage. From her porch in the middle of the block, one of the street’s last original residents took in the action with a mix of relief and melancholy. She was happy to see the sale sign finally gone from next door, but absorbed its significance, too; the close friend who had lost the house to foreclosure would certainly never be back. For a few precious weeks this summer, all eight houses on this cul-de-sac about 60 miles east of Los Angeles were occupied, but the housing bust that has come to define the landscape and economy of Southern California — and much of the country — has fundamentally changed the block. “We had the perfect little cul-de-sac back here, our own little world,” said Eloisa Sanchez, the woman on the porch. “We’re afraid of what’s coming.” Since January, The New York Times has made regular visits to the fraying neighborhood to chronicle — in print, photographs and video — how, in one small place, the foreclosure crisis has reshaped the view of homeownership as a cornerstone of the American dream. The continuing economic fallout has brought a reckoning for those who believed that home equity would always rise, financing lives beyond their means, while also creating unexpected opportunities for people previously on the sidelines of homeownership. Over the last two years, half of Beth Court has been in foreclosure, and homes whose owners took out thousands of dollars in equity during the bonanza years are now worth less than half the price paid for them. In one house, the owner took in extended family members as tenants to help make the mortgage payments. At another, a stay-at-home mother went to work for the first time, leaving her children with the television. After selling his house to an investor at a large loss, a father of five prays daily that his family can remain as renters. Elsewhere on the block, belongings have been sold, marriages have been strained, and everyone worries daily about who will come to live next door. Nearly every family has been hit with pink slips. Most who have managed to stay are barely squeaking by, waiting for eviction by the bank or sitting in homes whose values have fallen too low to sell, their dreams of moving stymied.

Kiyosaki: Prepare for the worst - (finance.yahoo.com) "Is the crisis over?" is a question I am often asked. "Is the economy coming back?" My reply is, "I don't think so. I would prepare for the worst." Like most people, I wish for a better future for all of us. Life is better when people are working, happy, and spending money. The stock market has been going up since March 9, 2009. Talk of "green shoots" fill the air. Yet, in spite of the more positive news, I continue to recommend that people prepare for the worst. The following are some of my reasons: 1. I believe the stock market is being manipulated. I suspect the government, banks, and Wall Street are doing everything they can to keep the market from crashing. Our leaders know that nothing makes the world feel better than a raging bull market. Do I have any proof that the market is being manipulated? No. I just smell a rat, or a pack of rats. I believe greed, self-interest, arrogance, and fear control the financial markets. I suspect those in charge will do anything to keep us all from panicking... and I don't blame them. A global panic would be ugly and dangerous. 2. In my view, this global crisis has been caused by the Federal Reserve Bank, the U.S. Treasury, Wall Street, and the central banks of the world. They caused the problem, profited excessively in doing so, and now profit by being asked to fix the problem. Every time I hear a politician mention the word stimulus, my mind flashes back to high school biology class, when I touched battery wires to a dead frog to make it twitch. Today, you and I are the dead frogs. Pretty soon the dead frog will be fried frog. In the 1980s, our government's hot money stimulus was measured only in the millions of dollars. By the 1990s, the government had to ramp the stimulus voltage into the billions in order to get the frog to twitch. Today the frog has jumper cables with trillions in high-voltage hot money pouring through the lines. While most us feel better when we have more high-voltage money in our hands, none of us feel good about higher taxes, increasing national debt, and rising inflation for the long term. Another old saying goes, "Sometimes the cure is worse than the disease." I say the government stimulus cure is killing us frogs.

White House Deficit Estimate To $9 Trillion From $7.1 Trillion - (www.247wallst.com) The Administration quickly and fairly quietly raised its budget deficit forecast for the next ten years to $9 trillion from $7.1 trillion, an astonishing 27% increase. The new estimate is much closer to the number that the Congressional Budget Office posted earlier this year. One of the reasons for the change is that tax receipts are running below estimates due to the recession. The Administration believed unemployment would peak at 8%. The shortfall in government revenue could continue for another year or more. The White House budget forecast robust GDP recovery in 2010 and 2011. Many economists expect the improvement will be closer to 2%. Unemployment will almost certainly remain above 9% next year and perhaps even into early 2011. Tax receipts from businesses are also below forecast. A number of factors, especially weak consumer spending, have hurt many American companies worse than expected. The alternatives for fixing the deficit problem are all bad. One is to raise taxes. A much higher burden on individuals would almost certainly wound a recovery in consumer spending. Higher taxes on enterprises will make it more likely they will cut more workers. It becomes a vicious cycle which ultimately adds to unemployment. Another option is for the treasury to sell more debt. The New York Times recently reported that China’s appetite for US debt is falling. The paper writes “Figures released by the Treasury Department this week indicated that China reduced its holdings of Treasury securities by $25 billion in June, the most China had ever sold in a month.” That only leaves the Treasury one option, which is to offer higher interest rates on bonds. That will push up most other interest rates including those essential to the recovery, particularly mortgages. The only alternative that will work to help the rising red ink is too cut government spending. The Congress and The White House have not shown much interest in that. But, the time is coming when their hands may be forced. That leaves the only open question as which programs will be slashed and which will be preserved.

Fannie, Freddie shares strangely soar - (finance.yahoo.com) Shares of government-controlled mortgage finance companies Fannie Mae and Freddie Mac zoomed higher Monday as volume surged well above normal, but Wall Street says it continues to expect the troubled companies to report big losses. The shares' volume spike Monday and late last week is "kind of strange," said Keefe, Bruyette & Woods analyst Bose George. He thinks retail traders, coming from online brokerages such as Charles Schwab Corp., are driving the trading -- not institutional investors. "We continue to believe that the common stock is worth zero. They both owe the government about $50 billion each and have no capital of their own," George said. Even in a best-case scenario of a strong housing recovery, the two owe so much to the government that they're unlikely to make anything, he said. Earlier this month, Fannie posted a second-quarter loss of $15.2 billion, or $2.67 per share, and said it would ask the government for $11 billion more in aid. Freddie posted a quarterly loss of $374 million, or 11 cents a share. Fannie's request for more aid brought the total amount the Treasury Department will have issued the two to nearly $96 billion. But since it reported the results, shares of Freddie have more than doubled. They were up 31 cents, or 18 percent, to finish at $2.04 Monday, with 379.5 million shares trading, about 12 times their normal three-month average daily volume. Fannie shares were up 52 percent since they announced their second-quarter results as of Friday's close and soared 50 cents, or 42 percent, to close at $1.70 Monday with 807.5 million shares trading hands. That's more than 17 times its three-month average daily trading volume.

OTHER STORIES:

The Goldman Connection - (www.brucewiseman.net)

Existing House Sales Far Worse Than Advertised - (www.ritholtz.com)

Too Soon to Call a Housing Bottom - (www.huffingtonpost.com)

The Pareto Principle and the Next Wave Down in Real Estate - (Charles Hugh Smith at www.oftwominds.com)

Roubini warns of double-dip recession: report U.S. - (www.reuters.com)

More Proof Commercial Mortgage Defaults Continue to Rise - (www.cutimes.com)

The Man Who Sells America's I.O.U.'s - (www.nytimes.com)

Analyst Bove sees 150-200 more US bank failures - (www.money.cnn.com)

Got a complaint against BofA? You're on your own - (www.latimes.com)

Asking You to Buy a Couch, Now That You Can't Sell the Hous - (www.nytimes.com)

Recession spurs a modern-day gold rush - (www.msnbc.msn.com)

What is the Republican health care plan? - (www.healthcareforamericanow.org)

Bernanke's Appointment May Weigh on Dollar: Analysts - (www.cnbc.com)

Fed Loses Suit Demanding Transparency - (www.cnbc.com)

W-Shaped Recession Still Possible: Art Cashin - (www.cnbc.com)

US Regulators Examine Goldman's Tips: Report - (www.cnbc.com)

Oil Price to Average Above $73 in 2010: Poll - (www.cnbc.com)

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