KeNo's Housing and Economic Portal: Monday July 20 Housing and Economic stories

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Banks avoid property taxes, capital loss by only pretending to foreclose - (www.healdsburgbubble) This morning the Press Democrat ran a front page article titled: "Fight Against Blight". It details the plight of Phyllis Sharrow of Petaluma who has the unfortunate luck of living next to a foreclosed property. Weeds have overtaken the lawn of the abandoned home next door and her property value is being affected. Calls to Bank of America to try to get the place cleaned up go unanswered. This has been going on for 2 years prompting her to put a sign outside her home with an arrow pointing at the foreclosure stating: "Bank of America. Your taxpayer bailout dollars at work. Our home values lose!" Looking at the photo that accompanies the article we can see the address is 821 Madison Street. I pulled up the address on ForeclosureRadar.com and got the history of the property. Shockingly, the bank has NOT foreclosed on the home according to their data. Here are the details:  Loan Amount: $494,000, 9/29/2006,  Notice of Default - 4/25/2008,  Notice of Trustee Sale - $544,954 (neg-am?), filed 8/6/2008,  Notice of Trustee Sale Scheduled for 10/17/2008,  NTS then Cancelled... So it looks like the home was never foreclosed on and therefore is not owned by the bank. Is Bank of America just sitting on this loan and letting the property deteriorate? I've heard that banks are reluctant to foreclose because A) this forces them to recognize a loss on the loan, and B) if they do foreclose they are the owners and are responsible for the property taxes. To me it looks as if that is what is happening here. But how long can this go on? You would think the banks would want to flush out these loans before the mid- to high-end foreclosure crisis is upon us.

China Says Hundreds Detained as Violence Kills 156 as 30 million migrant workers lose jobs to global financial crisis – (www.bloomberg.com) China said more than 700 people were detained after ethnic rioting in the capital of Xinjiangprovince killed 156 people. The government blamed overseas Uighur groups for the unrest. A curfew and traffic blockade remained in effect in Urumqi, capital of China’s westernmost province, until 8 a.m., a government press officer, Yang Guoqiang, said in an interview. Three armed guards checked every visitor and bag with metal detectors at the Sheraton Urumqi hotel. More than 200 “rioters” trying to gather at Id Kah Mosque, the largest in China, were dispersed by the police last night, the state-run Xinhua News Agency said today. Uighur separatists agitating to split Xinjiang province from China used the deaths of migrant Uighur workers in a factory brawl in southern China to fuel divisions with the country’s ethnic Han majority, state media reported. As many as 30 million migrant workers have lost their jobs during the global financial crisis, as demand from the U.S. and Europe drops, exacerbating already simmering social tensions. “It’s like Mao Zedong used to say, a spark can spread the fire into the prairie, and that’s the situation in Xinjiang,” said Jean-Philippe Beja, a senior researcher at the French Centre for Studies on Contemporary China in Hong Kong. Uighurs, a Muslim group comprising about half of Xinjiang’s 20 million people, have long complained of discrimination and unfair division of the region’s resources with the Han, who make up more than 90 percent of China’s 1.3 billion people. Bloodied People: China Central Television yesterday aired images of smoke billowing from vehicles, crowds overturning police cars and bloodied people slumped on sidewalks in Urumqi. More than 825 people were also injured after rioting broke out in the city late on July 5, and the toll is likely to rise, Xinhua cited Liu Yaohua, the region’s police chief, as saying. China’s most violent civil unrest since 2008 spread yesterday to a second city in the region, Kashgar, the Associated Press reported, citing witnesses. The U.S. is “deeply concerned” about reports of deaths and injuries in western China, President Barack Obama’s spokesman, Robert Gibbs, said in a statement. Accused of Terrorism: China accuses separatists of terrorist acts, including attacks on police and bombings last year, and has drawn parallels between its attempt to fight the groups and the U.S. campaign against terrorism. “They think they have a free hand because the Western powers won’t really come up to defend Uighurs, who are of course Muslims, and it’s easy to say that they are fundamentalist,” Beja said. As of 2007, Xinjiang, a landlocked region about the size of Alaska, had the second-highest proven reserves of crude oil and natural gas among China’s 31 provinces and was the biggest producer of cotton. Per-capita annual income of rural households was 3,183 yuan ($466), against a national average of 4,140 yuan.

Obama Spin Doctors at Work to overturn Biden’s comments - Obama: Administration Did Not Misread Downturn - (www.cnbc.com) As Obama Administration plans stimulus package #2 and contrary to comments made this past weekend by Vice President Joe Biden, President Barack Obama says that the administration did not misread the economic downturn. “We haven't always gotten the numbers right, but I think the general overview is right,” Obama told NBC News Tuesday. “We went through an economic tsunami that was far worse than anything we have gone through since the Great Depression, and even early on I think we did not see the full magnitude of what was going to happen." The downturn came about faster than expected, and the information the administration had before it was not complete, Obama said. “[My administration] came in [on] January 20th. It was only after the first-quarter numbers came in, if you recall, that suddenly everybody looked and said the economy shrank six percent so it was happening much more rapidly at an accelerated pace than the projections out there at the time” he said. Obama said his administration is helping to “staunch the bleeding” caused by the economic crisis, but a long road lies ahead before the U.S will be able to pull out of the current recession. Job creation will come about at the end of the recession rather than the beginning, Obama said—and the country is still at the beginning. “This recession was going to be deep, and it was going to last for a while” he said. Even with the layoffs and the increase in unemployment, Obama is trying to assure people that he is concerned about job creation. He says that investing in energy, healthcare, and education is a necessary step to creating more jobs. “That is why ultimately getting our fiscal house in order over the medium and long term is so important” Obama said.

Hotels Feel the Pain of a Glut of Empty Rooms and Lower Room Rates - (Mish - globaleconomicanalysis.blogspot.com) Hotels are slashing rates to attract customers. However, it's not working and Resorts are Suffering From Financial Strains. From Arizona Central ... A glut of empty rooms and panic pricing are taking a serious toll on hotel and resort owners in the Phoenix area. Foreclosure proceedings were initiated against seven financially squeezed properties, two of them brand new, in the first half of the year. That's just one less than in all of 2008 and more than double the number in 2007, according to Ion Data, a Mesa real-estate research firm. There are other signs of financial stress, too, including major liens filed against resorts that recently expanded or renovated, and big projects being put on hold, some midstream. The worst part: Many experts say the foreclosure woes are likely in the early stages given the volume of big-ticket deals during the boom years, the severity of the hotel downturn in Greater Phoenix and few signs business will solidly rebound anytime soon. "This is probably still the tip of the iceberg," said Robert Hayward, principal with the Phoenix hospitality consulting and research firm Warnick & Co. Metro Phoenix, usually a magnet for vacationers and big meetings, continues to post some of the industry's biggest declines in occupancy, average daily rate and other measures, with many at the lowest levels on record, according to Smith Travel Research. Preliminary figures show June occupancy was about 45 percent, nearly 10 percentage points, or 17 percent, below June 2008, when occupancy was already hurting. Most are calling it an industry depression, rather than recession. Richard Warnick of Warnick & Co. said he'd be surprised if nearly all hotels and resorts, here and across the country, weren't in technical default on their loans, falling below required minimums on debt service coverage, for example, given the sad state of travel. That is often a precursor to more serious financial problems that prompt lenders to foreclose. Nationally, the number of delinquent hotel loans has been climbing sharply since the recession deepened last fall. The delinquency rate jumped from 0.3 percent of so-called hotel commercial mortgage-backed securities loans in September to 2.8 percent in May, according to Realpoint data provided by real-estate services firm Jones Lang Lasalle. The big questions are who is going to buy the troubled properties, when and for how much. The market for hotel deals is anemic. Nationally, there were just 19 transactions in the first half of the year, vs. 103 in the same period last year, according to Jones Lang Lasalle. "From our standpoint, transactions have really just stopped," said Jeremy Allen, vice president in the Phoenix office of hotel brokerage firm Molinaro Koger. He said the only activity is for smaller deals, those for $5 million and under. For bigger deals, such as the $120 million the Montelucia's German bank is reportedly seeking for the resort, there are a couple obstacles: financing and agreeing on a price in this volatile market.

Cramer: Oil Futures Market Is a ‘Farce’ - (www.cnbc.com) Without further regulation, Cramer told viewers on Tuesday, manipulation of the energy futures market is virtually inevitable. Right now traders can use near-unlimited credit to swing prices in either direction, and that’s causing false valuations of oil and natural gas. “The oil futures market? It’s a total farce,” Cramer said, adding that he was “stunned and outraged” by the speculation and Washington’s seeming inability so far to curb it. The Mad Money host named margin requirements as the big issue. Right now energy traders need to put only 10% down on a position big enough to move markets. Just last week a rogue London trader pushed Brent crude higher with a mere $10 million. As a result, Cramer said, people wondered if gas prices would cross $3, airlines were given pause, and the idea of a consumer-led recovery came into question. Those requirements need to be increased, he continued, if the manipulation is to end. Cramer also pushed back against anyone who says the energy markets are too “deep” to be manipulated. See: rogue London trader example above. And one has to wonder why no major oil companies admit to selling oil in these markets. It could be that they are “just too darned dysfunctional,” he said. More than that, though, Cramer said that people denying the effects of speculation have a “vested financial interest in maintaining the status quo,” or they are academics with no real-world trading experience. While the government finally seems to understand the severity of the problem, as the Commodity Futures Trading Commission on Tuesday announced it would consider limiting trader positions on commodities with finite supply, Cramer doubted the CFTC could fight off the industry’s powerful lobby. “They’re just too big, and they’re more powerful than the government,” Cramer said, “and they have never yet been defeated.” Worst of all? In the end, it’s the consumers who get hit the hardest. It was for them that the Mad Money host said he was speaking out.

T. Boone Pickens Calls Off Massive Texas Wind Farm - (www.cnbc.com) Plans for the world's largest wind farm in the Texas Panhandle have been scrapped, energy baron T. Boone Pickens said Tuesday, and he's looking for a home for 687 giant wind turbines. Pickens has already ordered the turbines, which can stand 400 feet tall—taller than most 30-story buildings. "When I start receiving those turbines, I've got to ... like I said, my garage won't hold them," the legendary Texas oilman said. "They've got to go someplace." Pickens' company Mesa Power ordered the turbines from General Electric (parent company of CNBC)—a $2 billion investment—a little more than a year ago. Pickens said he has leases on about 200,000 acres in Texas that were planned for the project, and he might place some of the turbines there, but he's also looking for smaller wind projects to participate in. He said he's looking at potential sites in the Midwest and Canada. In Texas, the problem lies in getting power from the proposed site in the Panhandle to a distribution system, Pickens said in an interview with The Associated Press in New York. He'd hoped to build his own transmission lines but he said there were technical problems. Wind power is a big part of the "Pickens Plan," which was announced a year ago Wednesday. Pickens has spent $60 million crisscrossing the country and buying advertising in an effort to reduce the nation's reliance on foreign oil. "It doesn't mean that wind is dead," said Pickens, who runs the Dallas-based energy investment fund BP Capital. "It just means we got a little bit too quick off the blocks." Pickens announced in 2007 plans to install the turbines in parts of four Texas Panhandle counties. He had hoped to complete the four-phase project in 2014 and eventually have 4,000 megawatts of capacity, enough to power more than one million homes. The total cost was expected to approach $12 billion.