KeNo's Housing and Economic Portal: Wednesday June 2 Housing and Economic stories

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Mountain House: Another CalPers Investment to nowhere - (www.contracostatimes.com) Advertised as "The Town of Tomorrow," this new bedroom community near the Altamont Pass windmills once seemed like an ideal investment for CalPERS, the California Public Employees' Retirement System. Then the real estate bubble burst. Mountain House became the most "underwater" community in America — and much of CalPERS's money sank along with it. The pension fund's $1.12 billion investment in Mountain House shrank to just under $200 million in five years, CalPERS records show. That's a loss of more than $920 million, making it one of the biggest headaches in CalPERS's troubled real estate portfolio. For now the loss is just on paper, like a share of stock that has dropped, and CalPERS has said it is not bailing out. "We have made a decision to retain the asset in the long-term for the recovery of California's housing market," fund spokesman Brad Pacheco wrote in an e-mail. The question: How long will CalPERS have to wait? Jim Lamb, a Mountain House homeowner who manages rental houses here and elsewhere, said market values are near bottom but not quite there. It could be years before prices return to 2006 levels. In the meantime, Mountain House and other depressed real estate developments remain dead weight on CalPERS's $209 billion portfolio, administered on behalf of California's state and local employees. Although its stocks and other investments have partially recovered from the crash, its real estate holdings lost half their value, a drop of $13 billion, in the 12 months that ended Sept. 30. With an estimated population of 10,000 and its own ZIP code, Mountain House is the Central Valley housing phenomenon in miniature — a newer town near Tracy for Bay Area commuters, fueled in large part by subprime mortgages and other dubious lending instruments. Home prices topped $800,000 at the market peak. In late 2008, researcher First American CoreLogic released data showing that nearly 89 percent of Mountain House's home mortgages were underwater, a higher percentage than any other community in America.

American Taxpayers Looted To Bail Out The Euro - (www.propagandamatrix.com) New transfers of wealth from middle class go directly to French and German banks. American taxpayers have been freshly liberated of hundreds of billions more dollars as part of the IMF's new bailout package which is principally going straight to European banks, in addition to the Federal Reserve program to ship U.S. dollars to Europe, in a move that represents little more than a desperate effort to save the Euro and rescue the credibility of economic global governance. "The Federal Reserve late Sunday opened a program to ship U.S. dollars to Europe in a move to head off a broader financial crisis on the continent," reports the Associated Press. "The Fed's action reopens a program put in place during the 2008 global financial crisis under which dollars are shipped overseas through the foreign central banks. In turn, these central banks can lend the dollars out to banks in their home countries that are in need of dollar funding to prevent the European crisis from spreading further." As we reported last time this program was enacted, the Federal Reserve refused to say which foreign banks had received an estimated half a trillion dollars in credit swaps. The program is unconstitutional under Article 1 of the U.S. Constitution which states, “No money shall be drawn from the treasury, but in consequence of appropriations made by law.” In addition to the credit swap program being re-enacted, the IMF portion of a separate European bailout package amounts to around $287 billion dollars. Since American taxpayers represent around 20 per cent of IMF funding, they will fork out something in the region of $57 billion dollars which which primarily go straight to French and German banks, not to mention the billions more in transfers of wealth that will occur through the Fed's credit swap program.

An Ill-Timed Request for Aid By Fannie Mae - (www.nytimes.com) Fannie Mae’s request on Monday for another $8.4 billion in federal aid comes at a politically inconvenient time for the Obama administration, which is pressing to pass sweeping financial legislation without resolving the company’s future. The government has already transfused $137.5 billion into Fannie Mae and its cousin, Freddie Mac, since seizing the two mortgage financing giants in August 2008. The money covers losses on mortgages that the companies bought or guaranteed during the housing boom, allowing them to continue buying new loans. Democrats want to defer an overhaul of federal housing policy until next year, after the midterm elections. But Republicans have seized on the continuing losses to argue that a plan for the two companies should be a priority of the current legislation. It is an argument that Democrats have struggled to deflect. “I think it’s a fair claim to make to say we haven’t done enough to address Fannie and Freddie,” Senator Mark Warner, Democrat of Virginia, said in an interview on CNBC Monday. “It is the big elephant in the room.”

FL house sellers take it on the chin - (weblogs.sun-sentinel.com) South Florida's housing market may be showing signs of improvement, but try telling that to the homeowners who sold in March. More than half of all Broward County homes sold in March went for a loss, Zillow.com said Monday. Broward sellers took losses 54 percent of the time, essentially unchanged from a year ago. In Palm Beach County, 43 percent of homes sold for a loss, up 2 percent from last March. Stan Humphries, chief economist for the Seattle-based online real estate firm, called the results “sobering.” Many people dumping properties for losses bought during the peak of the housing boom in 2004 and 2005, before prices plummeted. “People are having to move for work or to reduce expenses,” he said. “They don’t have the luxury of waiting things out.” Also Monday, Zillow said 371,387 homes in Palm Beach, Broward and Miami-Dade counties were "underwater" -- worth less than their mortgage amounts -- at the end of the first quarter of 2010. That works out to about 44 percent of all single-family homeowners with a mortgage. The figure is flat compared with a year ago.

Why an Extended Bear Market is Likely - (finance.yahoo.com) It now appears the 14-month old bull market that so many analysts, mutual fund managers, investors and Wall Street types said would perpetually continue, has changed its mind. In fact it appears, all along it was never really a new bull market, but a bear market rally cloaked in sheep's clothing. A 1,000 point fall within a half-and-hour's time has a direct and nasty way of communicating its ultimate message. And now a host of new old problems are on the table. Let's analyze just a few reasons why the odds of an extended bear market significantly jumped. European Blues: It wasn't that long ago the euro dollar was touted as the world's very next reserve currency and the heir apparent to the US dollar. Now it appears, Europe's conquest will have to wait. Greece is expected to receive a $145 billion lifeline from other European countries and the International Monetary Fund (IMF). Has anybody wondered who funds the IMF? With about 20%, the U.S. is the largest contributor to the IMF. Greece is another U.S. bailout in disguise. What about France, Switzerland and Germany who own nearly $300 billion worth of Greek debt? What about other near-default countries like Spain and Portugal? Did we forget about the Dubai scare around Christmas?

Lennar Slashes Vegas Prices, Tax-Credit Hangover Begins? - (blogs.wsj.com) Home builder Lennar is slashing prices in Las Vegas–by more than 15% in some cases. Is this the start of the home buyer tax-credit hangover? The federal credit expired at the end of April and many speculate that home prices will take a dive as a result. Lennar, one of the nation’s largest builders, didn’t comment. The special appears limited to Sin City, which was dramatically overbuilt during the boom, fueling plunging prices and rampant foreclosures. But any price reductions are worth watching. Some industry watchers have warned that the tax credit, which offered buyers up to $8,000, pulled demand forward, and the market could soften now that there’s no financial incentive to buy. Builders also ramped up construction in recent months, expecting a flurry of last-minute buyers that some say didn’t materialize. That leaves them at risk of being saddled with unsold inventory that needs discounting to sell. Several companies, including the Ryland Group, say they’re keeping prices stable for now.