KeNo's Housing and Economic Portal: Monday August 10 Housing and Economic stories

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Wall Street's Gains Equal Main Street's Loss? - (www.huffingtonpost.com) Stock prices have been on a tear lately, bolstered by quarterly earnings reports that have in many cases outpaced expectations and growing optimism that the worst of the crisis-cum-downturn is behind us. The S&P 500 index, for instance, is up more than 40 percent since its early-March lows, while the technology-laden Nasdaq Composite has scored a 13 percent gain -- and, through yesterday, a 12-session winning streak -- in the last two weeks alone. Ordinarily, a bull run like this would be cause for optimism, on the belief that savvy investors see a light at the end of the tunnel. But in the current environment, could the good news that is powering share prices be bad news for the economy? Consider the following recent reports from a cross-section of corporate America:

· Microsoft announced that revenues declined more than 17 percent amid falling global demand for PCs and servers. According to the Financial Times, the world's largest software company "sounded a far more cautious note about the prospects for a recovery in the second half of 2009" and its CFO said 'it's going to be difficult for the rest of the year....We're really still not sure we're out of the woods.'"

· The CFO of UPS, the 100-year old package delivery giant with a presence in 200 countries, warned the company didn't have "any confidence that either demand or activity is going to pick up substantially" in the next several months.

· Diversified manufacturer 3M, with operations in 60 countries, cautioned that it's "still facing a challenging sales environment with no meaningful improvement in demand yet from several major industrial customers," the Wall Street Journalreported. "He added there is a risk that recent upticks in orders could be a 'false dawn' caused by an over-correction in inventory levels earlier this year by 3M's customers rather than a sustainable recovery in demand."

· Texas Instruments, the second largest U.S. chipmaker, said "there's little evidence yet that real growth -- based on an improving market for cell phones, computers and other tech products, instead of inventory corrections -- is on the horizon."

· The CEO of WPP, the world's largest advertising company, was less-than-diplomaticwhen he noted publicly that he saw "no green shoots", "no yellow shoots" and "no moss" in the global economy.

· The Vice Chairman of General Electric, a company with 14 major lines of business and a presence in more than 100 countries, cautioned that "he isn't seeing an increase in orders even as U.S. economic statistics suggest the world's largest economy may soon shift to a recovery."

In sum, while a growing number of investors seem to believe that Main Street is on the mend, many of corporate America's senior executives -- who are normally not prone towards pessimistic outlooks -- are maintaining that they see no real evidence of a revival where it counts -- on the ground.

California still on the edge of fiscal abyss - (www.signonsandiego.com) After five months of wrangling, our leaders in Sacramento have finally reached a deal on the budget. We now have an accord that will allow the state to stride strongly into the future – at least for another six months or so until we dip back into the red again. Of course, to get that deal, the budget-cutters slashed $9 billion from schools and universities. By some measures, we already have the fourth-worst elementary school education system in the country, but maybe with those cuts we can leapfrog over Mississippi, Alabama and New Mexico to finally make it to No. 1. (On the other hand, 20 other states cut education spending this year, so we'll have competition on the race to the bottom.) The budget-cutters also chopped $1.4 billion from health care programs for the poor and borrowed nearly $4 billion from local governments, including an estimated $70 million to $100 million from the city of San Diego, since we're so awash in cash that we don't know what to do with it. Thank goodness that the Legislature didn't try to balance the budget by raising the tax on cigarettes, which is what the nasty anti-cancer majority proposed to keep from cutting health services. A 33 percent minority was able to block that scheme. Nor did the Legislature slap a tax on the Big Oil companies, which have been taking petroleum out of the ground in California since 1861 without paying royalties. Every other oil-producing state imposes royalties, but heaven forbid that we should follow the lead of Alaska, Wyoming and Texas. Thanks to Gov. Arnold Schwarzenegger's pledge to cut services instead of raising taxes, Occidental Petroleum – which generated $6.9 billion in profits last year – won't have to pay royalties on that new, 150 million-to 250 million-barrel field it discovered in Kern County. Under Schwarzenegger's proposal, multinational conglomerates also could have drilled off Santa Barbara without paying royalties – although the Legislature declined to back more offshore rigs. But all these steps – cutting services, pilfering city coffers – are mere stopgap measures, intended to keep the state running through December. They're predicated on the notion that the economy will dramatically improve by then. Come January, we'll have to start the cuts all over again, since it's highly unlikely that our recession-weakened tax payments will be able to keep up with the recession-caused demand for more state services. In the meantime, we've done nothing to attack the true causes of our fiscal malaise:

- A lopsided tax structure that relies heavily on volatile income taxes instead of more stable property taxes. In most states, taxes are split relatively evenly among property, income and sales taxes. In California, we derive 55 percent of tax revenue from income taxes, notably capital gains, which rise and fall with the stock market – an unintended consequence of 1978's Proposition 13.

- A ballot referendum process that loads the state budget with expensive spending packages without proper funding and crams the constitution and law books with ill-thought, poorly crafted rules and regulations that often make life more difficult for businesses and residents in the state.

- A term-limited, gerrymandered, highly polarized Legislature that's hobbled by the requirement that it can't pass a budget with a mere majority – which works for nearly every other democracy on Earth – but instead requires a two-thirds vote. The Democrats were often able to muster powerful majorities for their budget proposals, but they fell six votes short of that magical 66.7 percent, which is why the budget failed to hit its deadline – as has been the case for nearly every budget in the past two decades.

Property Appraiser's Records Are NOT Accurate in Florida - (www.eyeonmiami.blogspot.com) Eye on Miami reporter Gimleteye calls it "Contaminated Data" and looks at the larger implications. I just find it wacko that the Florida Department of Revenue will not allow counties in Florida to count distressed sales which means the entire State of Florida’s Property Appraisers are not counting half the properties changing ownership in their assessments under the guise of distressed. Worse it is not uniform, in Miami-Dade ALL foreclosures are distressed but in Broward County it is SOME foreclosures. In Broward County they post the distressed sale price and date in their public records, but they put a “D” next to the price signifying it is a distressed sale. Any property that is deemed distressed is not counted but at least Broward’s records are accurate. Miami-Dade County will not post any information related to the sale, except the buyer, creating inaccurate records. Look at the graphic at left and I will explain why, in Miami Dade there is little accuracy. County Commissioner Natacha Seijas (yes her name is spelled wrong in official records) bought a house in December 2008. How do I know this? Because I looked at her financial disclosure form. As you can see, in the graphic, I would NOT know this from the Property Appraiser records. I would assume she bought it in 2006 and paid $360,000 instead of the accurate information of 2008 for $225,000. If I looked up the records by the identifying numbers, I would get the old sales information, they are not correct either. As a reporter (okay I am taking liberties here) who values accuracy, I would be reporting wrong information if I base it on County Records. This ties my hands. I cannot go out into the outskirts of our cities seeking property turnover information. I will not know if the property has turned over. I cannot look for trends, to see if developers have had to dump properties. I cannot track anything with accuracy in Miami Dade County but if I reported in Broward County, I could. Currently, the Seijas property is assessed at $320,822 but she only paid $225,000 so her assessment won’t change as much as it would in Broward County. Broward counts some foreclosures in their assessments, those put on multiple listings and advertised. Miami Dade doesn’t county any. Each County in the State is able to set their own rules so don’t look for any uniform accurate records. Read Gimleteye's post July 24th for the far reaching implications. P.S. If you want to find Natacha's records at the Property Appraiser, key in Sejaz but to find her records at the Miami Dade County Clerk's office you had better use Millan, Natacha S. Go figure, same deed.

How Appraisers Are Threatening Real Estate's Recovery - (www.cnbc.com) The good news is that sales volumes of new construction are rising; the bad news is they're doing so despite growing trouble with appraisals. I can't seem to talk to anyone in the real estate industry on any topic without hearing something about appraisals. We've been over the new appraisal rules, requiring the fire wall between lenders and appraisers. We know the new rules are resulting in less qualified appraisers, perhaps with no knowledge of a local market, mucking up the process. Now we're hearing from builders that appraisers are using distressed properties, that is foreclosures and short sales, as comps for new construction. In her monthly homebuilding Survey, analyst Ivy Zelman notes: Commentary in this month’s survey was dominated by frustration with inconsistencies in the appraisal process. Survey respondents are concerned that these appraisal issues will make it difficult to stabilize home values, as appraisers are being extremely conservative using foreclosures and short sales predominantly as comps, based on fears of potential backlash or liability. Home builders are in direct competition with foreclosures in many markets, because a lot of foreclosures are new construction.

Builders can only cut their prices so far, given the money they've laid out to build. The National Association of Home Builders' Bernard Markstein told me this morning, that "in a lot of places the appraisers have not been adjusting for the fact that it's [the comp] a foreclosed home or a short sale, and we've even had cases where appraisals have come in 10 or 20 percent below the construction costs of a new home." Clearly we are settling in for recovery, despite the expected bumps in the road ahead and the land mines of rising foreclosures. The appraisal issue seems an unnecessary roadblock, when so many other tools, government and private sector, are being employed to jumpstart housing.

Clunkers become a new driving force for dealers - (www.latimes.com) Federal incentives of up to $4,500 for exchanging gas guzzlers for new fuel-efficient models are jump-starting sales. William Grammatica tried to replace his gas-guzzling 1997 Ford Explorer for two years with no luck. But all that changed Sunday with help from the federal government's new "cash for clunkers" program. The Placentia accountant, 38, walked into Miller Toyota of Anaheim with his family and found a red Toyota Highlander marked at $28,000. But he got it for $23,500, thanks to the clunkers program, which was in full swing last weekend at auto dealerships across Southern California. "It was a good opportunity to upgrade for better gas mileage while also being better for the environment," he said. "The timing was right." Nearly 16,000 dealers nationwide have signed up to participate in the trade-in program, Transportation Secretary Ray LaHood said Monday after his department issued regulations for the program last week. By the weekend, deals of all kinds were being made. Chrysler dealers were offering as much as $4,500 for gas guzzlers -- and another $4,500 off as well. Hyundai reported that the program has been responsible for about 14% of July sales so far. Under the $1-billion Car Allowance Rebate System, or CARS, the federal government will shell out from $3,500 to $4,500 depending on how much gas buyers save with the new car or truck. By trading in his Explorer, which averaged 15 miles per gallon, for the more fuel-efficient 20-mpg Highlander, Grammatica was eligible for the $4,500 cut. In a tough economy for automobile sales, dealers are hoping that the program helps them clear their lots. And based on the rush they saw this weekend, things are looking promising. The program will end either Nov. 1 or when the $1 billion of federal money runs out. Customers hoping to cash in had better hurry, said Terry Miller, general sales manager of Galpin Ford in North Hills. "The money will run out sooner than people think, so it's definitely a concern," he said. "We'll have to check regularly where the government is at with the money."

California's slow handling of appeals from workers denied unemployment benefits gets worse - (www.latimes.com) California is so slow in handling appeals from workers denied unemployment benefits that it may take years to catch up, state officials say. And the backlog is getting worse. With unemployment now at 11.6% in California and rising, there is a record backlog of more than 82,500 Californians who have appeals pending on their eligibility for checks of as much as $475 a week. At the same time, the state is about to furlough for three days a month the judges and support staff who handle the appeals. As a result, a June report to the California Unemployment Insurance Appeals Board predicted that the target for eliminating the backlog would be pushed back from June 2010 to February 2012. California's poor record of handling appeals has caught the attention of the U.S. Department of Labor. This year the federal government is providing about three-fifths of the estimated $28 billion in benefits to be paid to 2.1 million unemployed workers. The federal government also pays most of the salaries of state workers who administer unemployment insurance programs. Labor Secretary Hilda Solis, a Californian who previously served in the House of Representatives and the state Legislature, is concerned that Gov. Arnold Schwarzenegger's furlough order could make a big problem even bigger. The federal government has officially told California to exempt its unemployment program from any furlough mandate. "States do not save money by furloughing employees from federally funded positions, and these actions can lead to serious consequences for laid-off workers, who are in need of timely unemployment compensation payments," Solis said in a statement to the Los Angeles Times. "States need to ensure that benefits get to eligible workers on time, period." The Labor Department is sending a team of officials to visit appeals board offices in California this week. The department said it would be looking into appeals board plans to improve its performance, whittle down the backlog and deal with "long-standing appeals timeliness issues." California is one of about three dozen states swamped by a wave of recession-spawned unemployment insurance claims. Delays at the appeals board already average about two months, ranking the state the third worst in the nation. Last year, the Labor Department put California under a "corrective action plan." Federal law requires that at least three-fifths of all appeals be resolved within 30 days. But in California, less than 5% meet the deadline, according to federal reports. The number of unresolved appeals cases has about doubled since the start of the recession in December 2007. Schwarzenegger is committed to "helping California's unemployed during this difficult time," spokeswoman Rachel Cameron said. But, "with the state facing a cash crisis and a $26-billion budget deficit, all areas of state government" -- including the appeals board -- "must cut back and do more with less."