KeNo's Housing and Economic Portal: Saturday October 30 Housing and Economic stories

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A World Upside Down for Greeks - (www.nytimes.com) Giorgos Sofronas, 66, has run a small shop selling ladies’ bags in central Athens for more than four decades. This year, all of a sudden, the future became uncertain. Mr. Sofronas has seen his sales drop by 45 percent since the onset of an unprecedented debt crisis earlier this year that prompted the Greek government to increase taxes and cut public salaries, in return for a €110 billion, or $154 billion, rescue package from its euro-zone partners and the International Monetary Fund. The measures have sliced profit margins at businesses large and small and damped consumer demand. Watching shops closing one after another on his street has made Mr. Sofronas nervous, but he will not contemplate bankruptcy. “This business feeds nine people,” he said, referring to his family and five employees. “I can’t give up.” In Greece, small businesses — defined as stores or workshops employing fewer than 10 people, though many are one-person operations — account for 96 percent of all enterprises and employ around two million of Greece’s five million-strong work force. Many small businesses, particularly in Athens and on Greece’s many islands, support the tourism sector, a crucial part of the economy that is also reeling from the repercussions of the debt crisis.

Pittsburgh Deal to Fund City Pensions Put in Park - (online.wsj.com) A plan to lease Pittsburgh's parking assets for 50 years has run into a roadblock, renewing questions about how the city will fund its pension plan. Pittsburgh's city council nixed a deal this week to lease its parking assets to a consortium led by J.P. Morgan Chase & Co. Instead, the council is proposing that the city's parking authority issue a 30-year bond and pay it off with parking-rate increases. Part of the proceeds would go to the pension plan. Mayor Luke Ravenstahl said Friday that he was opposed to that proposal. The city pension plan, which had an unfunded liability of $718 million as of August, could fall into state hands without additional funding. The issue underscores tensions around the U.S. as lawmakers, city officials and residents clash over how to pay debts. J.P. Morgan Asset Management and LAZ Parking offered the city $452 million to operate garages, lots and 7,000 metered street spaces for 50 years. Mark Weisdorf, who runs J.P. Morgan's infrastructure-investments group, said the consortium might amend its offer. "Clearly, we were disappointed," he said. "But we believe it's still a viable option."

U.S. foreclosure mess chills investors, clouds market - (www.reuters.com) Investors who have been snapping up foreclosed homes are backing off in the wake of the U.S. foreclosure fiasco, driven by sagging inventory and fears over legal title, and some economists say the trend could hurt the overall housing market. With foreclosed properties accounting for a large portion of housing sales, and investors accounting for a large portion of buyers -- particularly in some key markets with very high foreclosure rates -- the implications for the broader economy could be serious. Investors who would buy, rehabilitate and then sell or rent foreclosures were playing a "huge role," in helping to clear the market, said housing economist Tom Lawler. But many of those investors are now staying on the sidelines. "We're like a plane flying around in a holding pattern, waiting to land," said Tony Alvarez, an investor in southern California who is currently renting out 40 former foreclosed homes. "Nothing is going on, and why? Fear has taken hold in the marketplace." Allegations that banks failed to review foreclosure documents properly or submitted false statements when they foreclosed on properties spurred a joint investigation by the attorneys general of all 50 states and triggered foreclosure moratoriums by some of the biggest U.S. lenders.

Bondholder ‘Immunity’ to Losses Challenged as Irish Bail Banks - (www.bloomberg.com) Two years after assuring senior bondholders that they wouldn’t lose their money if banks failed, the Irish government is making the same promise again. This time, some bondholders are skeptical the government will bail them out with taxpayer funds, sending down the price of senior guaranteed debt for Anglo Irish Bank Corp. to 90 cents on the euro, according to pricing data compiled by Bloomberg, to account for the risk it might not be repaid in full. Some equity investors, including Neil Dwane, who helps oversee about $80 billion of equities as chief investment officer at Allianz Global Investors’ RCM unit in Frankfurt, are angry the pledge is being made at all. “It’s as if bondholders have diplomatic immunity from losses,” Dwane said. “Two years into this crisis we’ve learned nothing and done nothing. Bondholders have got to understand that they can lose money when they invest in banks.”

Sudden and Dramatic Drop in U.S. Home Prices - (www.clearcapital.com) Clear Capital (www.clearcapital.com), is issuing this special alert on a dramatic change observed in U.S. home prices. “Clear Capital’s latest data shows even more pronounced price declines than our most recent HDI market report released two weeks ago,” said Dr. Alex Villacorta, senior statistician, Clear Capital. “At the national level, home prices are clearly experiencing a dramatic drop from the tax credit-induced highs, effectively wiping out all of the gains obtained during the flurry of activity just preceding the tax credit expiration.” This special Clear Capital Home Data Index (HDI) alert shows that national home prices have declined 5.9% in just two months and are now at the same level as in mid April 2010, two weeks prior to the expiration of the recent federal homebuyer tax credit. This significant drop in prices, in advance of the typical winter housing market slowdowns, paints an ominous picture that will likely show up in other home data indices in the coming months.