KeNo's Housing and Economic Portal: Friday August 14 Housing and Economic stories

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TOP STORIES:

Congress' own healthcare benefits: Membership has its privileges - (www.latimes.com) Lawmakers can choose among several plans and get special treatment at federal medical facilities. In 2008, taxpayers spent about $15 billion to insure 8.5 million federal workers and their dependents. Too much, too fast, too expensive. Those are some of the objections lawmakers have voiced against the healthcare overhaul Democrats are attempting on Capitol Hill. But many Americans think Congress is out of touch. How, they wonder, can lawmakers empathize with the underinsured or those lacking insurance when they receive a benefits package -- heavily subsidized by taxpayers -- that most of us can only envy? Among the advantages: a choice of 10 healthcare plans that provide access to a national network of doctors, as well as several HMOs that serve each member's home state. By contrast, 85% of private companies offering health coverage provide their employees one type of plan -- take it or leave it. Lawmakers also get special treatment at Washington's federal medical facilities and, for a few hundred dollars a month, access to their own pharmacy and doctors, nurses and medical technicians standing by in an office conveniently located between the House and Senate chambers. In all, taxpayers spent about $15 billion last year to insure 8.5 million federal workers and their dependents, including postal service employees, according to the Office of Personnel Management. Generous plans are available in private industry. But the federal coverage far surpasses that enjoyed by 70 million Americans who are underinsured and at financial risk in the event of a major health crisis -- not to mention the estimated 46 million who have no medical insurance. "For the average worker, the Federal Employees Health Benefits Plan would probably look quite attractive," said Pete Sepp, a spokesman for the National Taxpayers Union, a pinch-penny advocacy group. Indeed, a question often surfaces: Why can't everyone enjoy the same benefits as members of Congress? The answer: The country probably couldn't afford it -- not without reforms to bring costs way, way down. Given their choices, lawmakers can tailor coverage in a way most Americans cannot. If a child has asthma, for instance, a federal employee might opt for coverage that costs a little more but has a bigger doctor network and lower office-visit fees.

Public pensions draw scrutiny amid Calif. crisis - (news.yahoo.com) California's rapid economic decline has prompted Gov. Arnold Schwarzenegger to propose what once was unthinkable — rolling back generous pensions in a state heavily influenced by public employee unions. The Republican governor said he's motivated by the need to save money. California has at least $63 billion in unfunded pension liabilities, an amount equal to roughly two-thirds of all annual general fund spending. The concern is shared across the country, as local and state governments wrestle with hundreds of billions of dollars in unfunded public employee pension and retiree health care costs. New Mexico this year approved longer work requirements — from 25 years to 30 years — for state employees starting in 2010. New Jersey last year raised the minimum age to qualify for benefits from 60 to 62. Kentucky now requires new police hires to contribute 1 percent of their pay to help cover retiree health benefits. And Georgia has started a hybrid plan for new state hires that blends a defined-benefit pension — with set payments based on salaries — and a 401(k). In California, Schwarzenegger dropped long-term pension reform from negotiations with lawmakers to close the state's $24 billion budget deficit. He said this week that he would press for pension reform now the state has enacted revised spending plan. "Again, everyone understands we are running out of money," he told reporters. "We cannot continue promising people things that we cannot deliver on." His proposal would not change the pension system for current workers, but would lower benefits for new employees. His office said such changes would save the state some $95 billion over 30 years. His administration has estimated that unfunded pension liabilities — money the state has promised to pay without earmarking where the funds will come from — could be as high as $300 billion if current investments fail to generate the projected returns. But the reform proposal met with quick resistance in a state where large public employee unions contribute heavily to Democrats, the state's majority party. The potential for reduced retirement benefits adds to concern that California will not be able to attract qualified employees, said Christopher Voight, executive director for the California Association of Professional Scientists. For example, he said, the state needs microbiologists to test for swine flu, but has a hard time keeping them because they tend to leave for better pay at private labs. Schwarzenegger wants to start by undoing a retirement package passed by California lawmakers in 1999 and signed by then-Gov. Gray Davis, a Democrat. Most state workers can retire as early as age 55. Their pension is based on 2 percent of their final salary multiplied by the number of years they worked. The payments rise with inflation. For example, a civil servant with 30 years in state government who made $70,000 a year could take early retirement at 55 with an annual pension of $42,000. Under Schwarzenegger's proposed reform, they couldn't retire until age 60. Employees in high-risk jobs — such as firefighters — can receive up to 90 percent of their salaries if they retire at age 50. Under Schwarzenegger's plan, they couldn't retire until age 55.

Fannie, Freddie Regulator Says Government May Not See $85 Billion Returned- (www.washingtonpost.com) The regulator of Fannie Mae and Freddie Mac said it was unlikely that the federal government would ever be paid back the entire $85 billion spent so far on bailing out the firms -- and added that the cost was going to rise as additional funds are drawn. "Their book is so large," James Lockhart, director of the Federal Housing Finance Agency, said at the National Press Club. "It's hard for me to see that they will be able to repay all of that." Lockhart's comments were a blunt acknowledgment that while the government has long said its bailout of the financial sector largely represents an investment that will be repaid, billions of dollars are likely to be lost. Some banks, such as Goldman Sachs and J.P. Morgan Chase, have successfully returned taxpayer money, and most other banks are expected to do the same. But the prognosis for the return of the government investment in several major firms, including American International Group and General Motors, is less clear. AIG is rushing to sell off its pieces to raise money and pay back the government, and GM is searching for a sustainable business model after going through a bankruptcy restructuring. But whether AIG will be able to raise enough money to repay the government and whether GM will be able to find a sustainable business model are not known. The government seized District-based Fannie Mae and McLean-based Freddie Mac, the nation's two major providers of money for home loans, nearly 11 months ago as the economic crisis intensified. The Bush administration committed $200 billion to keep them solvent, a figure the Obama administration doubled when signs appeared that the companies were eating through that cushion at a faster-than-expected pace. The government suggested that elements of the bailout would be profitable for taxpayers -- and required a hefty 10 percent dividend to be paid by Fannie Mae and Freddie Mac in exchange for investments by the government. The annual dividend the companies now pay rivals their annual profits even in the good years. Fannie Mae and Freddie Mac may need more draws on the Treasury's purse down the road. The companies, which own or insure more than $5 trillion in home loans, won't stop losing money for another year or so, Lockhart said. The companies have been called upon to carry out a large part of the Obama administration's housing recovery program, which includes modifying the terms of home loans to help borrowers avoid foreclosure and, with the assistance of the Treasury and the Federal Reserve, flooding the mortgage market with money to keep rates low. The Obama administration is likely early next year to outline its view of what the future of Fannie Mae and Freddie Mac should be, Lockhart said.

Real Estate Burst bubble spatters San Diego - (seattletimes.nwsource.com) Drive through California's inland suburbs and you'll spot the familiar mileposts of a real-estate bust: foreclosure signs, brown lawns and abandoned subdivisions. To see the damage in downtown San Diego, walk a few blocks. Then look up. There you'll see hundreds of unsold luxury condominiums stacked in vacant high-rises. Some units downtown are selling for less than half what earlier buyers had paid during the market peak. These see-through buildings, with names evoking European sophistication like Aria and Vantage Pointe, are the opulent spatter from the bursting of one of California's flashiest housing bubbles. From 2001 through 2008, more than 8,000 condominium units were built in downtown San Diego. That's double the number of downtown units built over the same period in Los Angeles, a city three times the size. So while sales of urban high-rise units are convulsing elsewhere, nowhere is the collapse more dramatic than in downtown San Diego. Flush with easy credit, developers and home buyers were eager to invest in "America's finest city," the nickname used by officials to tout San Diego's bayside location and perfect climate. Lines of buyers: At the height of the frenzy, hopeful purchasers queued up outside sales offices to plunk down deposits. There were occasional arguments over who was first in line. No one wanted to miss out with condo values riding an elevator to the sky. Near the peak, in May 2004, median resale prices of downtown condos hit $647,500, a 56 percent increase in just three years, according to San Diego research company MDA DataQuick. One savvy flipper made a $91,000 profit in less than two months in 2005 by reselling a 560-square-foot studio for $340,000. "There was a little bit of a mass hysteria mentality. ... People thought they would be priced out of the market," said Bradford Willis, 47, who signed a contract in 2004 to purchase a $341,000 one-bedroom condo in a planned luxury development. Willis said he bought on speculation because there was little existing inventory on the market, much of it priced above $500,000. Irrational exuberance has long since given way to buyer's remorse. Median resale prices for downtown units stood at $370,000 in June. That pricey 560-square-foot studio? It was foreclosed and resold this year for $162,000. Downtown San Diego, a 2.2-square-mile area, is now awash in condos. About 400 new and occupied ones are listed for sale, and more than 450 are in some stage of foreclosure and eventually will be put on the market. An additional 1,000 units that were under construction when the market soured are slated to be completed this year, adding to the glut and putting further downward pressure on prices. So far this year, 159 new homes have been sold downtown, according to DataQuick. At that pace, it would take several years to sell all the units recently completed or being finished this year. Developers are holding properties off the market.

Real Estate Photoshop jobs gone very, very wrong - (www.sfgate.com) Some real estate agents and home owners go a little too far in their attempts to spruce up a listing. Take for example this Woodside home: The $1.65 million property -- on Eastview Way -- isn't cheap, but the Photoshop job on the picture is. The almost neon blue sky better belongs in a Warhol painting than a photograph. Oddly, too, it looks like the blue sky in theother photos of the house-- presumably left untouched -- might have sufficed.

Not so natural blue: 515 Eastview Way

Robert Young/Coldwell Banker Not so natural blue: 515 Eastview Way: And it's not just Bay Area home owners/Realtors who get heavy handed with Photoshop. A listing for a home in Lake Stevens, Washington was widely circulated and mocked because of its bizarre, unnaturally green lawn in the photo. (The lawn has sincereturned to a more golden hue.)

An unnaturally green lawn found in this Lake Stevens, Wash. listing.

Prudential Northwest Realty/Redfin: An unnaturally green lawn found in this Lake Stevens, Wash. listing. We understand the urge to clean a photo up, but these extreme measures seem to suggest that brokers/sellers think buyers are idiots. (Hat tip to Burbedfor spotting the Woodside listing.).

OTHER STORIES:

Housing Bottom? No the Mother of All Head Fakes - (finance.yahoo.com)

The CRASH is just beginning - (caps.fool.com)

California's default rate soars to 9.5% - (www.latimes.com)

Downtown Fort Myers condo has 32 stories, and one occuppied unit - (www.news-press.com)

Foreclosures Spread As Unemployment Rises - (www.businessweek.com)

Median price for Croton On Hudson - (5t9pea.bay.livefilestore.com)

Confidence is liquidity - (www.theautomaticearth.blogspot.com)

Ackermann Says Bad Loans Are Next Wave of Crisis - (www.bloomberg.com)

The collapse in commercial property - (www.economist.com)

Free OFMP, Get Yours Now - (www.haloboyle.com)

Bank Overexpansion Hits Brick Wall - (www.minyanville.com)