KeNo's Housing and Economic Portal: Wednesday April 21 Housing and Economic stories

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TOP STORIES:

From bucolic bliss to 'gated ghetto' - (www.latimes.com) "We loved how everything was family-oriented," said Willowalk resident Eddie Lopez, left, with wife Maria and six of their children. They bought their 5,000-square-foot house for $440,000 in 2006. It's probably worth about $170,000 now. The gated community in Hemet doesn't seem like the best place for Eddie and Maria Lopez to raise their family anymore. Vandals knocked out the streetlight in front of the Lopezes' five-bedroom home and then took advantage of the darkness to try to steal a van. Cars are parked four deep in the driveway next door, where a handful of men rent rooms. And up and down their block of handsome single-family homes are padlocked doors, orange "no trespassing signs" and broken front windows. It wasn't what the Lopezes pictured when they agreed to pay $440,000 for their 5,000-square-foot house in 2006. The 427-home Willowalk tract, built by developer D.R. Horton, featured eight distinct "villages" within its block walls. Along with spacious homes, Willowalk boasted four lakes, a community pool and clubhouse. Fanciful street names such as Pink Savory Way and Bee Balm Road added to the bucolic image. Young families seemed to occupy every house, throwing block parties and holiday get-togethers, and distributing a newsletter about the neighborhood, Eddie Lopez recalled.

Federal earmarks divide California's congressional delegation - (www.sacbee.com) In Elk Grove, the local congressman is not backing the city's request for $250,000 in federal money for a new teen resource center, one of the city's top local projects. That's because Republican Rep. Dan Lungren of Gold River, who represents the city of Elk Grove, doesn't support earmarks, the money used to pay for special pet projects back home. In Calistoga, the local congressman is trying to get Congress to approve $2 million for a new building that would house both a teen center and an art center. That's because Democratic Rep. Mike Thompson of St. Helena, who represents the city of Calistoga, does support earmarks. While Thompson is promoting 126 projects worth $309 million, Lungren is promoting none. With the nation facing unprecedented deficits, spending on pet projects is dividing members of Congress and the constituents they represent. Lungren is getting heat from local elected officials after he joined Republicans in approving a one-year moratorium on earmarks this year as a way to reduce government spending.

Irish taxpayers takes on banks' toxic debt - (www.thisismoney.co.uk) Irish taxpayers are set to become the country's biggest property owner following Dublin's latest attempt to cleanse its stricken financial system. The government is buying toxic debts with a face value of £14bn from the Republic of Ireland's five biggest lenders, with the loans placed into a state-owned 'bad bank'. But it is paying just 50 cents in the euro for the portfolio of mortgages and loans to property developers, many of whom have gone bust in Ireland's spectacular housing crash. Finance minister Brian Lenihan yesterday lashed out at the Irish banking industry for the 'appalling lending decisions' it made during the credit boom. With the exception of Bank of Ireland, which runs the banking wing of Britain's Post Office, the Irish taxpayer will end up as a majority or outright owner of every major bank in the land.

Failing US banks need to fear government closure - (www.news.yahoo.com) Failing US financial institutions must face the credible threat of government closure if reforms are to succeed, a key adviser to President Barack Obama said Tuesday. Paul Volcker, a former Federal Reserve chairman, said reforms being discussed by Congress hit on the "essential elements" of financial reform, but that a strong government arbitrator must emerge with the power to wind down firms. "There is a clear need for a so-called resolution authority," Volcker told members of the Peterson Institute for International Economics, a Washington-based think tank. Volcker said that massive government bailouts of a host of banks and insurance giant AIG over the past two years must not be allowed to convince others they can expect a government safety net, and so encourage risky practices, creating a so-called "moral hazard." He said the multibillion-dollar government bailouts raised the problem of "moral hazard writ large."

Loan Modifications Succeed by Increasing Borrower Entitlements - (www.irvinehousingblog.com) Loan modification programs are failing because borrowers are not willing to abandon their entitlements. The government will respond by allowing people to keep their discretionary spending on consumer goods, cars, vacations, massages and the like -- and taxpayers will be asked to subsidize it. Government backed loan modification attempts are ill-conceived because bailouts create moral hazard. However, the bailouts and the resulting moral hazard can be disguised inside the black box of obfuscation and paperwork of the HAMP program. If the banks and bureaucrats raise the standard of entitlement allowed under the loan modification program, more people will qualify -- and more people will be sustaining their indulgences on your tax dollar. If people are not forced to cut back discretionary spending before they obtain a government bailout, taxpayers are subsidizing their discretionary spending. The standards of what constitutes discretionary spending from essential spending depends greatly on the the spender's sense of entitlement. Personally, I really like to play golf. (I am on the course today for "business.") I don't spend the $150 per week I would like to on golf because it isn't an entitlement, and I can't afford to treat it as one. However, if I owned a house loan, and if my sense of entitlement made it right, I could consider my weekly round of golf an essential. Since this entitlement creates a hardship for me, I can petition my lender for a break on my loan payments. After all, their loan payment is discretionary spending and the US taxpayer is picking up the cost.

U.S. housing market shifts from liar loans to hard cash - (www.theglobeandmail.com) Exotic U.S. mortgages are disappearing in the Spartan post-meltdown era, supplanted by a decidedly old-school mode of financing – cash. In what experts say is a sign the battered U.S. housing market is cautiously finding a bottom, more Americans than ever are choosing to plunk down cold, hard cash to buy homes. Cash was the currency of choice in 27 per cent of all homes purchased in the United States in March, according a survey by the U.S. National Association of Realtors (NAR). That's up from 18 per cent a year earlier – and well above the historic norm of less than 10 per cent. Even those who do get mortgages are making much larger down payments than in the past.

OTHER STORIES:

Publishers Bet Future on an iPad They Haven't Yet Seen - (www.cnbc.com)

RIM Earnings Miss Forecasts, Pushing Shares Lower - (www.cnbc.com)

IPhone Breathes Down BlackBerry's Neck - (www.cnbc.com)

Realtors expect house values to decline or remain flat - (www.heraldtribune.com)

House price dip continues - (www.money.cnn.com)

Cse-Shiller House Prices Go Up -- and Down - (www.timiacono.com)

Housing prices headed for double dip - (www.cnbc.com)

Real Estate Still Overpriced in California - (www.mybudget360.com)

Should houses be worth twice what they were in 1996? - (www.gregfielding.housingstorm.com)

Signs point to higher mortgage rates ahead - (www.heraldtribune.com)

Lihir Gold Spurns $8.5 Billion Bid from Newcrest - (www.cnbc.com)