KeNo's Housing and Economic Portal: Wednesday February 3 Housing and Economic stories

KeNosHousingPortal.blogspot.com

TOP STORIES:

JPMorgan CEO calls commercial real estate a 'train wreck' - (www.marketwatch.com) J.P. Morgan Chase Chief Executive Jamie Dimon said commercial real estate is a "train wreck" during a speech Monday, but noted that many of the problems in the sector have already happened and won't affect the economy too much. Dimon also said financial regulation is needed, but described the return of the Glass-Steagall Act, which separated commercial and investment banks, as a "quaint notion" and expressed frustration about recent criticism of the banking industry. "Commercial real estate is a train wreck, but it's already happened," Dimon said during a speech at a J.P. Morgan health-care conference in San Francisco. With roughly $3.5 trillion in commercial real estate loans outstanding, a sizable portion of that debt needs to be refinanced each year. However, the problem is that the value of the properties backing those loans has fallen, he said.

For Tishman Speyer, Keeping Commercial Landmarks May Be Harder - (www.nytimes.com) IT seemed a great idea at the time. In June 2007, Jerry I. Speyer and his son Rob bought six buildings in Chicago, making them one of the largest commercial landlords in the city. The Speyers, who focus on prominent towers like Rockefeller Center and the Chrysler Building in Manhattan that are packed with blue-chip tenants, were elated. They had captured several buildings at the heart of Chicago’s business district, including the sprawling Chicago Mercantile Exchange and the stately Civic Opera House. But within weeks, nearly everything went wrong. The Speyers, who are co-chief executives of Tishman Speyer Properties, had counted on selling three of the buildings to pay down $1.4 billion in loans used to finance the deal. But they could unload only one. Soon, the commercial vacancy rate in Chicago climbed to 15 percent, and property values plummeted. Now the Speyers are in tough negotiations with a representative of the Federal Reserve Bank of New York to restructure the loans on the Chicago properties. If those talks fail, the ownership group led by Tishman Speyer could face foreclosure. The Fed inherited the debt in 2008 when JPMorgan Chase bought the original lender, Bear Stearns, and the government took on many of its troubled assets. As it happens, Jerry Speyer was a director of the New York Fed from 2001 through 2007. The Federal Reserve, meanwhile, has hired the Blackstone Group — the very people who sold the assets to the Speyers in 2007 for a hefty profit — to handle the negotiations on its behalf.

US Does Not Have Capitalism Now: Stiglitz - (www.cnbc.com) ayers of money managers that don't bear the brunt of losses but walk away with big payouts when things go well have turned the US economy to a type of "ersatz capitalism," Joseph Stiglitz, Columbia University professor and Nobel laureate, told CNBC Tuesday. "An awful lot of people are not managing their own money," Stiglitz said. "In old-style 19th Century capitalism, I owned my company, I made a mistake, I bore the consequences." "Today, (at) most of the big companies you have managers who, when things go well, walk off with a lot of money. When things go bad the shareholders bear the costs," he said. Even worse, those giving the money to the companies are entities like pension funds that are managing money on behalf of other people, so there are "layers and layers of agency costs," Stiglitz said. It's a system where "you socialize the losses and privatize the gains," which is not capitalism, he said. There's "moral hazard everywhere," he added.

Bank of America to release some shadow inventory in Nevada - (www.lvrj.com) Bank of America expects to release about 6,000 foreclosed properties into the Nevada housing market in 2010, or about 500 a month, an executive with the bank said Wednesday. It's part of the so-called "phantom inventory" of foreclosed homes being held by banks as they work out loan modifications and negotiate short sales, two of the more desirable alternatives to foreclosure. Throughout the country, estimates of homes being taken back by Bank of America range from 11,000 to 14,000 a month in the early part of this year to 29,000 to 35,000 by November and December, said John Ciresi, vice president and portfolio manager for Bank of America in Towson, Md. The system became "clogged" by a voluntary moratorium on foreclosures while banks met the requirements of President Obama's Making Home Affordable mortgage plan program and by state legislation requiring mediation before banks can start the foreclosure process, Ciresi said at a panel discussion sponsored by the Nevada chapter of the National Association of Hispanic Real Estate Professionals. Some homes are being held back from closing escrow because of Bank of America's fiduciary relationship with investors, he said. "Let's say you have a $120,000 property and you have a $110,000 offer from a cash buyer and a $120,000 offer on a VA loan," Ciresi said. "Do I take the higher offer and hope financing is approved?"

Miami-Dade County Selling Foreclosures Online - (www.nytimes.com) Miami-Dade County started auctioning foreclosures online Monday, allowing potential buyers to place bids from anywhere in the world with the click of a computer mouse. The county, which has the seventh-highest number of foreclosed homes in the country, auctioned about 40 foreclosures on the first day. As the program ramps up, circuit court officials expect to auction 200 or more homes and commercial properties daily, up to triple the figure sold on the courthouse steps. Miami-Dade is now the largest county in the nation and the 12th in Florida to hold online auctions for foreclosures. The new system will help the county plow through its backlog of 115,000 foreclosure cases more quickly. Officials expect a larger pool of buyers since bidders no longer have to be present at the courthouse to participate. Investors can make deposits, place bids, monitor auction activity and pay for properties through the Internet. That allows court officials to move employees once responsible for in-person auctions to other jobs. And, increased competition among buyers could lead to higher prices.

Foreclosure picture bleak - Unemployment wreaking havoc - (www.telegram.com) A record 3 million U.S. homes will be repossessed by lenders this year as high unemployment and depressed home values leave borrowers unable to make their house payment or sell, according to a RealtyTrac Inc. forecast. Last year there were 2.82 million foreclosures, the most since RealtyTrac began compiling data in 2005. More than 4.5 million filings are expected this year, including default or auction notices and bank seizures, said Rick Sharga, senior vice president for the seller of default data and forecasts based in Irvine, Calif. There were 3.96 million filings in 2009. “This will be the peak year, and the main reasons are unemployment and house prices that have stabilized way below mortgage amounts,” Kenneth Rosen, chairman of the University of California’s Fisher Center for Real Estate and Urban Economics in Berkeley, said in an interview. Government and lender efforts to keep people in their homes are failing to relieve the worst foreclosure crisis since the Great Depression. Unemployment was 10 percent in December, unchanged from the previous month, while the so-called underemployment rate that includes part-time workers and discouraged workers rose to 17.3 percent from 17.2 percent, the Labor Department said Jan. 8.

What House Sellers Don't Tell Buyers - (online.wsj.com) As buyers ease back into the battered real-estate market, they're often hitting a stumbling block: fibbing by home sellers. Eager to unload their abodes, some sellers exaggerate the size of their lots or their houses. Others minimize their property-tax or utility bills, conveniently forget about pests, or play down flooding problems or noise. Real-estate experts say that while such misrepresentations aren't new, the tough market of the past few years has made buyers more wary, partly because they can't expect rising home prices to bail them out of costly mistakes. As a result, deals are taking longer, and more of them are falling apart as buyers find properties sometimes aren't all they're supposed to be. More than 30 states have disclosure laws requiring sellers to tell prospective buyers and agents about leaky roofs and other problems, according to the National Association of Realtors. But there's often a gray area involving the disclosure of problems the seller may not know about, such as a long-ago flood or hidden mold.