KeNo's Housing and Economic Portal: Wednesday May 5 Housing and Economic stories

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Goldman Real Estate Fund Lost 98 Cents on the Dollar - (www.cnbc.com) Whitehall Street International, Goldman Sachs’ international real estate investment fund, has lost almost all of its $1.8 billion of equity following soured property investments in the U.S., Germany and Japan, according to the fund’s estimates. By the end of 2009, the fund was down to its last $30 million, a paper loss of about 98 cents on the dollar, an annual report sent to investors last month said. The report said that Goldman was Whitehall’s largest investor, with a commitment of $436 million. Last year, Goldman took a loss of $1.76 billion from all its real estate principal investments. The Whitehall disclosure is the latest in a string of losses reported by bank-owned property funds that relied on debt, and it comes as the Obama administration is seeking to restrict banks’ investment in private equity funds.

Failed Bailouts and the Neverending Mortgage Crisis - (www.irvinehousingblog.com) The bailouts never seem to end, and neither does the flow of irresponsible debtors in need of a bailout. At the core of every con is a dream. A con artist tempts a victim with dreams of riches or power to come in order to get them to do something today. It wasn't long ago it was only realtors and mortgage brokers who sold the dream. Now, our own government is joining the choir. Over two years ago, I expressed by deep cynicism over the endless parade of Bailouts and False Hopes. As the bailouts continued, grew in number, and failed miserably, others have come to share my view…. Potentially the most expensive part of this plan for taxpayers is the new Federal Housing Administration refinancing option. (Yes, that is the same FHA that is already struggling under mortgage losses and announced last year that its capital had fallen below the level required by law.) Taxpayers will be required to stand behind a "homeowner" who owes mortgage debt equal to 115% of the value of the home and whose monthly mortgage bill is up to 31% of total income. Message to owners who borrowed responsibly: Next time, don't be such a sap. You'll also be pleased to know the Administration says the price tag on this latest housing plan won't exceed the $50 billion already earmarked for mortgage relief in the Troubled Asset Relief Program. Just don't expect it to end the mortgage crisis. These hopeless programs exist only to provide false hope to debtors. To the degree that they are successful is the degree to which we create moral hazard. Who wants to be the responsible one paying the bills next time around? If lenders and borrowers do not experience the consequences of their actions, they will repeat them. People get caught up in misguided compassion and think that these poor suffering souls need a bailout. They don't. Any bailout is paid for by those not receiving the benefits. It is a direct transfer of wealth from one household to another -- state sanctioned theft.

On auction block, Portland condos go for half off boomtime prices - (www.oregonlive.com) Shalene Murphy braved the ear-rattling auctioneer and cranked-up music Sunday to hunt for a bargain on her first home. The 39-year-old medical social worker came to the auction hoping to score a one-bedroom place in the city's biggest condo tower, the John Ross. Her limit: $220,000. Her reality: The bidding whisked past her. The one-bedroom condos, with starting bids in the $150,000s, went for $248,000 and up. "I did raise my paddle a couple of times, but it was like that fast," she said, snapping her fingers. "Within 30 seconds, it was outside my range." The bidding was brisk and the discounts were deep at Portland's third major real estate auction of the recession. Prudential Real Estate Investors, which has primary control of the tower, sold 47 condos in South Waterfront’s John Ross building in less than two hours. That was more sales than the owners had made in the previous five months. But they also came at steep discounts. Compared with the prices at the height of the real estate boom, the auction bidders took home condos at an average 50 percent discount. John Ross auction: The John Ross condos were listed for an average of $711,000 during the top of the housing market. They sold Sunday for about $316,000, according to winning bids announced at the auction.

What's To Be Done With The Nation's Ghost Towers? - (www.housingdoom.com) In the city of Tempe, AZ, a failed condominium project dominates the skyline, a monument to the housing bust and the stupidity of man. The project is closely linked with Mortgage Ltd., the company who's owner Scott Coles committed suicide. Mortgage Ltd., is also infamous for the problems with it's backer, Radical Bunny. Last week the project was offered at a foreclosure auction for $8 million and not surprisingly, there were no takers: [Thanks M!]…….. The most interesting part of the Arizona Republic article was the comments at the bottom. There's quite a debate as to what should be done with this project. It seems unlikely that it's worth anyone's while to finish the project- Tempe doesn't need another 375 luxury condos. Currently it is reported that the project is functioning as a "homeless shelter". [In spite of attempts to keep the homeless out.] Suggestions for uses for the towers run the gamut from senior housing to reducing them to a vacant lot. It won't be anything but an eyesore however, until someone is willing to put money into the project. So far no one's been interested. Problems like this aren't unique to the Phoenix area. Here's another good example, the Vantage Lofts in Henderson, NV:

No One Is to Blame for Anything - (www.nytimes.com) “I was right 70 percent of the time, but I was wrong 30 percent of the time,” said Alan Greenspan as he testified last week on Capitol Hill. Greenspan — a k a the Oracle during his 18-year-plus tenure as Fed chairman — could not have more vividly illustrated how and why geniuses of his stature were out to lunch while Wall Street imploded. No doubt he applied his full brain power to that 70-30 calculation. But the big picture eludes him. If the captain of the Titanic followed the Greenspan model, he could claim he was on course at least 70 percent of the time too. Greenspan was testifying to the commission trying to pry loose the still incomplete story of how the American economy was driven at full speed into its iceberg. He was eager to portray himself as an innocent bystander to forces beyond his control. In his rewriting of history, his clout in Washington was so slight that he was ineffectual at “influencing the Congress.” The “roots” of the crisis, he lectured, dated back to the fall of the Berlin Wall in 1989. In other words: Wherever the buck stops, you had better believe it’s not within several thousand miles of the Oracle. As he has previously said in defending his inability to spot the colossal bubble, “Everybody missed it — academia, the Federal Reserve, all regulators.” That, of course, is not true. In last Sunday’s Times, one of those who predicted the bubble’s burst — Michael Burry, an investor chronicled in “The Big Short” by Michael Lewis —told in detail of how Greenspan and others in power “either willfully or ignorantly aided and abetted” the reckless boom and the ensuing bust. But Greenspan is nothing if not a representative leader of his time. We live in a culture where accountability and responsibility are forgotten values. When “mistakes are made” they are always made by someone else.