KeNo's Housing and Economic Portal: Friday June 11 Housing and Economic stories

TOP STORIES:

Arizona threatens to cut off LA electricity supply - (www.telegraph.co.uk) Arizona could cut off electricity supplies to Los Angeles in protest at an economic boycott over the state's controversial immigration law. Los Angeles receives about 25 per cent of its power from Arizona, meaning a quarter of America's second largest city could be plunged into darkness. Politicians in the city voted last week to impose a boycott on Arizona which will affect about $8 million (£5.3 million) worth of contracts with the state. City officials will also stop travelling to Arizona. In response an Arizona utility commissioner raised the prospect of the state's utility companies cutting Los Angeles off. In a letter to the city Arizona Corporation Commission member Gary Pierce said: "If an economic boycott is truly what you desire, I will be happy to encourage Arizona utilities to renegotiate your power agreements so Los Angeles no longer receives any power from Arizona-based generation. "I am confident that Arizona's utilities would be happy to take those electrons off your hands. "If, however, you find that the City Council lacks the strength of its convictions to turn off the lights in Los Angeles and boycott Arizona power, please reconsider the wisdom of attempting to harm Arizona's economy." Mr Pierce said if Los Angeles was "serious" about its boycott and not just "posturing" then it would have to consider supplying its own power.

US state pensions becoming federal issue - (www.ft.com) Illinois used to have a plan to pay off the gaping shortfall in the pension funds that pay retired teachers, university employees, state workers, judges and politicians, Dan Long recalls. Mr Long, director of the Commission on Government Forecasting and Accountability, the nonpartisan auditing arm of the Illinois state legislature, remembers that, back in 1994, the state laid out a proposal that would have paid off most of what was then a $17bn gap by 2011. But Illinois could not stick to the plan. With financial year 2011 less than six weeks away, the pension arrears of the 1990s look quaint. Instead of a balanced system, the state faces unfunded liabilities of about $78bn, the biggest pension hole in the US, and contributions of more than $4bn for 2011, the largest single element of its $13bn budget deficit. Illinois is the poster child of unfunded pensions in the US. But state retirement systems could become a national concern, new research shows. Joshua Rauh, associate professor of finance at the Kellogg School of Management at Northwestern University said that, without reform, some state pensions might run out within the decade. By 2030, as many as 31 states may not have the money to pay pensions. And, if these funds exhaust their assets, the size of payments for the benefits they have promised will be too large to cover through taxes, putting pressure on the federal government for a bail-out that could potentially cost more than $1,000bn, he says. "It is more than a local problem," Mr Rauh said. "The federal government could be on the hook."

Germany's 'desperate' short ban triggers capital flight - (www.telegraph.co.uk) A year ago, Germany's financial regulator BaFin warned that the toxic debts of the country's banks would blow up "like a grenade" once hidden losses from the credit crisis caught up with them. An internal memo at the time showed that BaFin feared write-offs might top €800bn (£688bn), twice the reserves of Germany's financial institutions. Nobody paid much attention. But the regulator's shock move on Tuesday night to stop short trading on banks, insurers, eurozone bonds – as well as a ban credit default swaps (CDS) on sovereign debt – has left markets wondering whether the slow fuse on Germany's banking system has finally detonated. BaFin spoke of "extraordinary volatility" and said CDS moves were jeopardising "the stability of the financial system as a whole". It is unsettling that the BaFin should opt for such drastic measures a week after EU leaders thought they had overawed markets with a €750bn rescue package and direct purchases of Greek, Portuguese and Spanish debt by the European Central Bank. BaFin's heavy-handed move seems to proclaim that the rescue has failed. "The market is left asking what skeletons are lurking in the cupboard," said Marc Ostwald from Monument Securities. The short ban follows a report by RBC Capital Markets that circulated widely in the City accusing German banks of failing to come clean on 75pc of their €45bn exposure to Greek debt. German lenders have the lowest risk-weighted capital ratios in the world after Japan. They were slow to rebuild safety cushions after the sub-prime crisis, and now face a second set of losses on Club Med holdings. Reporting rules have let Landesbanken delay write-downs, turning them into Europe's "zombie" banks.

Greece braced for fresh strike - (news.bbc.co.uk) Much of Greece is expected to grind to a halt, with the country's trade unions staging another 24-hour general strike against planned austerity measures. Organisers are hoping that up 100,000 people will join the protests. There are fears of renewed violence after a strike in Athens two weeks ago led to the deaths of three people. Many Greeks are angered by spending cuts and tax and pension-age rises planned in return for a 110bn euro (£95bn) bail-out. The measures aim to achieve fresh budget cuts of 30bn euros over three years, with the goal of cutting Greece's public deficit to less than 3% of GDP by 2014. It currently stands at 13.6%.

Mortgage Foreclosures Hit Record as Job Losses Strain Budgets - (www.businessweek.com) A record share of U.S. mortgages were in foreclosure in the first quarter as job losses caused homebuyers to fall behind on monthly payments, thwarting government efforts to stem property seizures. The inventory of homes in foreclosure rose to 4.63 percent from 4.58 percent in the fourth quarter, the Mortgage Bankers Association said in a report today. The combined share of foreclosures and mortgage delinquencies was 14 percent, or about one in every seven U.S. mortgages.

Arizona's migrant law may affect housing market - (www.azcentral.com) Real-estate analysts are beginning to question what impact Arizona's controversial new immigration law will have on Phoenix's housing market. The new law soon could be factored into real-estate forecasts for the region, just as employment and foreclosure figures are. How Arizona residents and out-of-state homebuyers react to Senate Bill 1070 could drive population trends. Mike Orr, who publishes the Cromford Report, said from a housing-market perspective, the consequences of SB 1070 "seem more likely to be negative than positive." "Estimates are that there are several hundred thousand undocumented aliens residing in Arizona," he said in a recent housing report. "If the law has the intended effect and these people do leave, then both population and demand for housing will probably decline." Orr believes these are the two key issues: If certain parts of the population feel victimized or less welcome even though they have legal residency, they may choose to move voluntarily; and out-of-state or out-of-country buyers who are considering buying a vacation or investment home in Arizona may not, either to boycott the state or because the housing market seems less likely to improve.

OTHER STORIES:

Mortgage Applications Plummet To 13-Year Low As Buyer-Bait Expires - (www.businessinsider.com)

One in 7 US houseowners paying late or in foreclosure - (www.reuters.com)

Foreclosures hit record high of 14% of all mortgages - (www.marketwatch.com)

Mortgage delinquencies drag on economic "recovery" - (www.news.yahoo.com)

Prime mortgages going bust at a wonderful rate - (www.miamiherald.com)

Marc Faber and Mish debate inflation vs deflation - (www.Mish)

Can China handle its inflation problem? - (www.money.cnn.com)

Fed in No Rush to Sell Mortgage Assets, Minutes Show - (www.bloomberg.com)

Volcker Says Time Is Running Out for U.S. to Tackle Fiscal Woes - (www.bloomberg.com)

Builders lobby for continued pork for builders - (www.nbnnews.com)

For Rent: 1159 Carey Dr, Concord, CA 94520 - (www.patrick.net)