KeNo's Housing and Economic Portal: Saturday November 7 Housing and Economic stories

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TOP STORIES:

The Very Busy Politicians in Washington DC - (Ron Paul at www.safehaven.com) With a faltering economy, multiple wars, and the approaching demise of the dollar's reserve status, there are more than enough problems to keep politicians in Washington working day and night. In between handing out cash for clunkers and nationalizing healthcare, the administration is busy sending more troops overseas, escalating existing wars, and seeking out excuses to start new wars. Congress is working on "urgent" legislation to address crises like healthcare reform and climate change. The reforms are so very urgent that legislation must pass swiftly with no time to read the bills even though the new laws wouldn't take effect for several years! Meanwhile, the Federal Reserve is busy dealing with our dollar crisis by printing up more dollars. Yes, there certainly is a lot for Washington to do these days. Most, if not all, of what Washington is doing however, is more of what created the problems in the first place. Capitol Hill is filled with politicians running around putting out fires - but with gasoline. The truth is that all these fires keep so many powerful people employed and wealthy that it is not truly in many decision makers' interests to be very effective problem-solvers. If Washington ran out of problems, think how many lobbyists would be out of a job, and how many special interest groups would just disband? Sadly, whatever is bad for the greater economy is good for the economy and job market in DC. Of course, no form of government, not even one that respected its Constitutional restraints, would magically create a problem-free society. The question is: how should a society deal with its problems? The form of government that our founders envisioned, in which the federal government was strictly constrained by the Constitution, allows private citizens and communities to solve their own problems. The role of the government should be to protect contracts, punish fraud and violence through appropriate laws, law enforcement and the courts. Not a whole lot of laws or bureaucrats are really necessary to work on just that. Instead, new laws are constantly needed to fix the problems that previous unconstitutional laws created. We have ended up with an incomprehensible maze of laws and regulations that severely constrains the people and expands the government - the exact opposite of what our founders intended. This is all because the Constitution is treated like a suggestion manual instead of the supreme law of the land. Under the Constitution, politicians' hands are supposed to be tied in most of the areas they involve themselves in today. But somewhere along the line, politicians stepped out of Constitutional bounds and started pretending to solve our problems for us. All we have to show for it is more problems. Today, Washington politicians can busily "solve" one problem, knowing that unintended consequences from that "solution" will keep them and their friends all very busy tomorrow. The people are ultimately left suffocating under the burden of Washington's helping hands. It is coming to a point where our economy, our dollar, and indeed, the rest of the world have had about all the help from Washington that they can stand. The United States is headed the way of Rome and the Soviet Union, for the same reasons, unless we reverse the trend. I continue to hope that enough Americans will realize that the true strength of our country doesn't come from Washington, but rather the limitations placed on government in the Constitution. We must resolve to reverse the destructive course that we are on and then never again let big government problem-solving take over our lives and our country.

Buyers Sue Trump as Miamis Condo Prices Plummet - (www.bloomberg.com) Robert Cooper says he has found a way to make money in South Florida’s real estate bust. Cooper, an attorney in Aventura, Florida, sues for refunds on deposits in the nation’s largest condominium market. In the last two years, he filed lawsuits for about 1,500 buyers against companies and individuals including the Related Group of Florida, Dezer Development LLC, Corus Bankshares Inc., Donald Trump. More suits seeking refunds under a federal law regulating condo sales have been filed in South Florida than in the rest of the country combined, according to a search of federal court records. Fueling the litigation is a price crash that makes buyers unwilling to pour more money into bad investments -- even if they can get financing. Condos on which they made deposits of up to $1,000 a square foot in 2006 are now selling for $125 to $350 a foot, said Jack McCabe, a real estate consultant in Deerfield Beach, Florida. “If you’re thinking you can come here and buy and sell condos for a profit in less than five years, you’re sadly mistaken,” said McCabe, whose clients have included Credit Suisse Group AG and Pulte Homes Inc., the largest U.S. homebuilder. “You need a seven- to 10-year range.” Prices could fall to $100 a foot, less than half the cost of construction, and a value not seen in 20 years, he said. Vacant Condos: In Dade, Broward and Palm Beach counties, there are more than 43,000 condos and townhouses on the market, almost 1-1/2 times the number of single-family homes, according to Condo Vultures LLC, a Bal Harbour real estate brokerage. In downtown Miami, more than 8,000 condos stand vacant and unsold, relics of a building binge that added 23,000 condos from 2003 to 2008, said Peter Zalewski, principal of Condo Vultures. Over the past 12 months, condo prices fell 15 percent in the West Palm Beach-Boca Raton area to a median of $112,200, 36 percent in Fort Lauderdale to $85,100 and 31 percent in Miami to $144,700, according toFlorida Association of Realtors data. Those prices are likely to fall more when the $1 billion portfolio of South Florida condos financed by Corus Bankshares, the Chicago lender seized by federal regulators, goes on the market, Zalewski said. Investors led by Starwood Capital Group LLC won a bid for Corus’s loans. Two-thirds of the 2,537 condo units Corus financed in downtown Miami are unsold and unoccupied, Zalewski said. Corus Deal: Rather than drive prices down more, the Corus sale could help stabilize the condo market because Starwood, in its partnership with the FDIC, can hold onto the properties, said Craig Werley, principal of Focus Real Estate Advisors in Coral Gables. “Why on earth would they create more cutthroat competition when they’re in such a good position with the federal government?” said Werley, who co-wrote a study on the condo glut for the Miami Downtown Development Authority.

Some very ugly foreclosure numbers in Mass. - (www.boston.com) The Bay State may not be a national leader when it comes to the foreclosure epidemic. That honor still rests with such boomtown states gone bust as Nevada, Arizona and California. That’s the good news. But let’s not get smug here. The latest numbers from RealtyTrac are out, and they don’t look good for Massachusetts. Foreclosure activity, including initial notices starting the process, auctions and bank repossessions, jumped more than 17 percent over the past three months compared to the spring. And the third quarter numbers, when compared to the same period in 2008, look downright hideous – a 34 percent leap. Many of the overleveraged homeowners who took out all those goofy subprime loans during the bubble years have been foreclosed on already. The increase in filings is now being driven by an economy that appears to be on the mend, but is still shedding jobs at a worrisome rate. Nationally, foreclosure activity skyrocketed 23 percent in the third quarter over the same period in 2008, RealtyTrac reports. One out of every 136 household across the country got a foreclosure notice or other filing during the quarter – the most since RealtyTrac began tracking these trends in 2005. Where does it all end? One answer of course is when the job market finally stabilizes and the unemployment rate finally tops off and starts to come down. On that score, check out the “Adversity Index’’ put out by Moody’s Economy.com and msnbc.com. One of five metro areas in the country has emerged from the recession, according to the index’s latest report. The Cambridge/Metro is one of those lucky few. I live in Natick, so I am ready to really celebrate here! By contrast, the Boston/Quincy area is still stuck in the downturn. Such silliness aside, I think we’ll all know when the job market is starting to come back. And when it does, look for the beginning of the end of the foreclosure madness – at least until the next bubble bursts.

How Uncle Sam is killing your savings - (money.cnn.com) This is a quiz. What do the record-high Wall Street bonuses have in common with the record-low yields for savers? Answer: They show yet another way that prudent people, especially those living on fixed incomes, are being screwed by the government's bailout of the imprudent. Here's the deal. The government is spending trillions to keep interest rates down in order to support the economy and prop up housing prices, and those low rates have inflicted collateral damage on savers' incomes. "It's a direct wealth transfer from savers and retirees to overly indebted borrowers," says Greg McBride, senior financial analyst at Bankrate.com. Since October 2007, when government intervention in the financial system began picking up speed, yields on the ultrasafe one-year and five-year investments that many retirees favor have tanked. Two years ago the average yield on a five-year federally insured bank CD was 3.9%, according to Bankrate.com. Now it's 2.2%, a drop of more than 40%. Yields on one-year CDs have almost vanished: 0.92%, compared with 3.6%. On five-year Treasury securities, yield is down to 2.3% from 4.4%. On one-year maturities, you get a minuscule 0.3%, down from more than 4% in 2007. The rates on AAA-rated one- and five-year tax-exempt bonds, another safe saver haven, are down sharply, too, for bailout-related reasons that we'll get to in a bit. As for money market mutual funds, fuggeddaboutit -- the average is about 0.06% (no, that's not a misprint) according to Crane Data, down from 4.6% two years ago. It's become customary practice -- a wise one -- that when the U.S. economy falters, the Fed cuts very short-term rates, the only ones that it controls, to stimulate business. But this time the Fed hasn't confined its rate-suppression activities to the short-term markets. It's been a huge buyer of Treasury securities with maturities of up to 10 years, as well as mortgage-backed securities and Lord only knows what else. This buying pressure forces up the securities' prices, and thus reduces their yields. The Fed, which declined to talk to me, is the major buyer of mortgage paper, in what's clearly an attempt to hold down mortgage rates and prop up house prices. The Fed has also been a huge buyer of Treasury bills -- securities with a maturity of less than a year -- that Uncle Sam has issued to help fund the federal deficit and pay for various bailout programs. But wait, there's more. As part of the economic stimulus package, the federal government is promoting Build America Bonds, under which the Treasury pays 35% of the interest costs of project-related bonds issued by state and local governments. These BABs, as they're known, are taxable securities rather than being tax-exempt as normal state and local bonds are. The BAB program has sharply reduced the supply of new tax-exempt muni bonds. Almost $40 billion of Build America Bonds have been issued since the program began in April, according to Bloomberg. Chip Norton, a muni maven at Wasmer Schroeder & Co., says that by reducing the supply of new munis, Build Americas have been a major factor in driving down yields on one- and five-year triple-A munis to 0.5% and 2.3%, respectively, from 3.4% and 3.6% two years ago.

Banks vaporize $8 billion in small biz credit - (money.cnn.com) President Obama is trying -- again -- to help small business get the cash they desperately need. The President will visit a small business in Maryland on Wednesday to present a series of initiatives aimed at increasing bank lending to small businesses, according to a White House official. The programs the President will unveil include an increase in the maximum amount businesses can borrow through the Small Business Administration's primary loan program, which currently stands at $2 million. In addition, the Treasury Department will expand access for smaller banks to the Troubled Asset Relief Program (TARP), a move aimed at spurring more local lending by community banks. The TARP program was set up to recapitalize banks so that they would bolster their lending to consumers and small businesses. In March, as the administration and the SBA took steps to stimulate small business lending, Treasury Secretary Tim Geithner ordered the top TARP recipients to begin sending the Treasury monthly reports on their small business lending activity. "We need every bank in the country to do everything in their power to provide the credit that small businesses need to operate, expand and add jobs," Geithner said as he announced the new requirements. "Given the role many banks played in causing this crisis, you bear a special responsibility for helping America get out of it." But in the five months they've been sending in those reports, the 22 biggest TARP recipients haven't increased their small business lending. Instead, they've cut their outstanding balances by $8 billion. As of Aug. 31, the 22 reporting banks held a collective small business loan balance of $261.3 billion, down 3% from when they began reporting in April. As unemployment nears 10%, lawmakers are worried about the ripple effects of the credit clampdown. Small businesses employ half of America's non-government workers and traditionally create most of the country's new jobs, according to government estimates. "New firms generate jobs and revenue where there once were none," Nydia Velázquez, a Democrat from New York and the chair of the House Committee on Small Business, said last week in a hearing on increasing capital access. "But of course, entrepreneurs can't create new positions and paychecks out of thin air -- startups require significant capital to get off the ground."

OTHER STORIES:

Federal action prevented 2nd Great Depression - (money.cnn.com)

Sun Microsystems to cut 3,000 jobs - (money.cnn.com)

The return of oil price shock | Crude falls - (money.cnn.com)

College: More expensive than ever - (money.cnn.com)

Bailout victim: Your savings account - (money.cnn.com)

If foreclosure is imminent, stop making your house payments - (www.tampabay.com)

Keeping up with an avalanche of troubled mortgages - (www.marketwatch.com)

Thousands at San Fran. Cow Palace seeking mortgage help - (www.sfgate.com)

Median price of homes sold in Peoria, AZ drops 27.3% - (www.azcentral.com)

Minnesota Mortgage Crisis Far From Over - (www.builderonline.com)

Foreclosure crisis far from over for South Florida - (www.miamiherald.com)