Sunday, November 30, 2008

Sad News

Blogger Doris Dungey, who wrote under the pseudonym "Tanta" at CalculatedRISK, has passed away after a serious illness.

CalculatedRISK appears on our "live feed" in the sidebar. The mainstream media and the finance/economics/bubble blogosphere embraced, respected, and relied upon Tanta's genius, analysis, and wit in her writings.

Read the memorial post at CalculatedRISK and the article in The New York Times.

Our condolences to Tanta's family and to CR himself on this very sad day. Tanta will be sorely missed.

Wednesday, November 26, 2008

Links 11-26-2008 Thanksgiving Weekend


October National Existing Home Sales Drop

October National New Home Sales Lowest Since 1982

The Case-Shiller Index, the widely-watched aggregator of prices 20 housing markets, has fallen 17% over the Third Quarter from 2007. This report comes from the period before the stock market crash in October.


The City of Charlottesville will have to cut Capital Improvement Projects for the 2010 budget. This impacts traffic, parks, trails, neighborhood improvements, and so on. The 2010 figure will be around $16 Million, roughly half of 2009's.

The County of Albemarle, which seems to grow poorer by the day, is looking for funds to keep its easement program going: buying up development rights from propertyowners to keep the County rural. The County also hopes some owners will just go ahead and donate.

The NYT reports on institutions of higher education suffering losses to endowments. UVa is mentioned several times, and COO Leonard Sandridge is quoted. Interestingly, there's no mention of the Missing Billion. Endowments of more than $1B typically have a 35% exposure to risky financial instruments; UVa's exposure is 75%. This detail is not mentioned in the NYT article.


Holiday Shopping this Weekend? Maybe Skip the Giftcards

Worst Financial Calls of 2008

Where Was Treasury Secretary Nom Tim Geithner During All the Turmoil?

A Visual Guide to the Financial Crisis

American's Foodstamp Usage at All-Time High

A Wealth Effect in Reverse

The Collapse of Commercial Real Estate

The Worst is Yet to Come: Anonymous Banker Weighs in on Coming Debacle of Credit Card Debt

Fed Risks 'Spitting in the Wind' With Latest Bailout

The Latest Fed Bailout: $600B to Buy Mortgages

Latest Federal Bailout Sets Off Rush to Refinance Mortgages. The new lower mortgage rates--about 5.5% today, and expected by some to move as low as 5%, will help only those who actually have a credit score of 720 or better, and at least 20% equity in their homes. Moody's Economy estimates there are at least 11.5 Million homeowners who owe more than their houses are worth; these are the folks who can benefit from Mortgage Mods.

Former Federal Reserve Chair Paul Volcker named by President-elect Barack Obama to head a new White House panel to help create jobs and bring stability to the ailing financial system.

The first operational audit of the $700 billion financial rescue plan, to be delivered to Congress next Tuesday, is expected to be critical of the Treasury Department’s failure to set up ways to track how its bailout money is being used in the marketplace.

Fed Announces It Will Buy $600 Billion of Debt; Mortgage Rates Drop

The Federal Reserve announced Tuesday that it will buy $600 Billion in mortgage assets from banks (total Bailouts now stand at $7 Trillion, btw.) By the end of the day, mortgage rates dropped significantly to 5.5% for a 30 year fixed.

The move is aimed at helping to lower housing inventories and try to stabilize the market in an attempt to finally find a bottom because housing prices keep plunging. The Case-Shiller Index of 20 Cities, a closely-watched aggregator of pricing, reported a 16% drop in house prices in the third quarter over 2007. It remains to be seen how many new buyers will come into the market. But already, brokers report a flurry of refi's.

Big news.

Monday, November 24, 2008

Daily Progress Article - "Our Economy: The Good, the Bad, and the Ugly" - And Some Perspective

Sunday's DP has a feature about the local economy. We offer some perspective on the numbers relating to housing.

The bolding is ours, as are the comments in parentheses and the color red. Otherwise, the material is from the article, which categorizes the local economy as a "mixed bag" and then subdivides issues into the good, the bad, and the ugly.

*11:30 a.m. There's an update at the bottom of this post.

The Good:

(Low home sales in the region were contrasted with low sales in other areas of the Commonwealth; therefore the drop qualifies as "good news" because it's not as bad as NoVa or Norfolk, etc. Hmmm.)

The Charlottesville region’s sales fell by 21.7 percent in the third quarter to its lowest point in seven years, compared with the third quarter of 2007, according to a market report by the Charlottesville Area Association of Realtors.

(Sales are at the lowest point in seven years: seven years ago was just about the beginning of the bubble.)

Yet real estate industry professionals see some signs for optimism. Jeff Gaffney, chairman of the new homes division of Real Estate III, said the Charlottesville region’s glut of housing is beginning to be whittled away and the average number of days it takes to sell a home has decreased. The number of homes listed for sale has dropped from 3,530 last month to 3,427 on Thursday. The average number of days on market fell from 128 in October to 113 last week, according to CAAR.

(A drop of 100 properties is seen as "good" news? This is how disastrous the market is right now. And fwiw, we're not confident that the decline in available properties is due to sales. More properties come on the market every day, especially in Albemarle and the other counties, which balance out the "solds." There's been nearly 15 months of inventory (and see update, below) on the market for the past few months. In September and October there were about +/- 145 sales EACH MONTH out of 3,550+ available properties.

Is a reason there's been a decline in numbers that some houses formerly for sale have been rented or made available to rent? And that others have been pulled off the market? Even casual observation and looking at Craigslist can give one this idea.)

“We’ve had a decline of inventory of housing for the last four months straight,” Gaffney said. “It’s still certainly a buyer’s market, but it’s headed toward balance. Maybe we’re turning a corner.”"

(This comment the only kind one would expect from a REALTOR in such a terrible market: "spin." The reality is, we're not "turning a corner" any time soon. Where are the buyers supposed to come from? NGIC isn't panning out to provide lots of househunters, unemployment will continue to rise, wages are freezing at UVa, and the price-to-income ratio in this area remains bubble-high, especially in the City proper.

The only way there will be a "corner" turned in this market is A) If sellers get realistic about what their property can fetch in this market from this point forward (sold comps hold less weight now)
and/or B) If suddenly mortgage rates drop below 5%, there are no downpayments, and mortgages are now 40-yr fixed. Hey, stranger things have happened. The reality? More properties will be coming on the market in the Spring and Summer because people who have been "waiting out the market" will realize that "waiting out" isn't an effective business strategy.)

(And BTW, we can't help but notice that reporter Brian McNeill didn't interview, or quote, Charlottesville Area Association of Realtors CEO Dave Phillips, who is usually the spokesmodel for local RE, after this debacle earlier in the Fall. Any connection? (Be sure to read the comments that follow the first link.))

The Bad:

Despite a few somewhat positive signs (???) for the real estate market, the Charlottesville area’s home sales are unquestionably slow.

Yet home prices have not fallen, making homeownership a still out-of-reach dream for many residents. At the end of 2004, the median home sales price in the region was $247,250. So far in November, the median sales price has been $257,883.

(As of the 23rd, it's $259K; these figures change daily at, as do DOM (days on market), depending upon what has been sold.

It's important to note that this figure is for the REGION, which is a five county area, the City, and in some cases The Valley. Median prices and Asking Prices in the City of Charlottesville are higher, sometimes significantly so, sometimes so inflated that one questions the judgement of the Seller or the Seller's Agent. See: MLS #459503, #459498, #459485, 459452, all "new" listings last week, months into a slow market, not to mention in the middle of a national economic crisis and global recession.)

At the same time, the financial industry meltdown has led to banks tightening lending requirements, making a mortgage loan significantly harder to obtain.

(Mortgages are "harder to obtain" because the applicant has to actually be qualified for the loan: stable job, down payment of actual money, good-excellent credit score.)

Along with the real estate slowdown, the pace of new home construction in the region has fallen to a level not seen in at least 16 years. Albemarle County issued only 360 residential building permits during the first nine months of 2008, down from 831 during the same period in 2007.

"The slowdown has led to layoffs by companies in the homebuilding and overall construction industries, including firms such as Church Hill Homes and other prominent builders.""

(Church Hill Homes didn't just have "layoffs." The two principals let major assets go into mass foreclosures, while they saved themselves with jobs at Eagle Construction (btw, don't miss the comments if you click on the link)).

The Ugly:

... (A) growing number of Charlottesville-area families have defaulted on their mortgage loans.

Shelley Murphy, director of program services for the Piedmont Housing Alliance, said she has seen an average of 10 people facing home loan default or foreclosure each week.

“We are seeing an increase,” she said. “We used to just have one person handling the default calls. Now we’re all taking those calls. There are four of us. I’m the supervisor and I’m taking those calls too.”"

(Anybody who reads The Hook will have observed that the weekly list of property auctions gets longer every issue.)

UPDATE, 11:30 a.m.  REALCentralVA has a post about the DP article.  Realtor Jim Duncan points out that there is actually 18.08 months of inventory in the Charlottesville, Albemarle, Fluvanna, Greene, and Nelson Counties.

He says, "I think that sales are down nearly 50% in Albemarle County and 25% in the City of Charlottesville...but median sales price is up $75K.  Really?"

To see graphs and learn more details, check out the post.

The entire DP article is here.

Citi Bad & Needs Rescue; Regulators Naughty; Obama Stimulus Plan

These links appeared on our sidebar on Sunday, November 23.

Federal Gov't Plans On Some Kind of Citigroup Rescue (We're shocked, shocked!)

Citigroup Saw No Red Flags Even As It Made Riskier Moves. (Blinded by $$$.)

Obama, Dems Plan $700B Stimulus Over Next Two Years. (Much larger than any discussed during campaign.)

Bush Admin Bank Regulator Played Advocate Instead of Enforcer. (No! Really?!)

Econ Links 11/24 - 26

These links appeared on our sidebar.

National Existing Home Sales Drop. Median Home Prices Now back to 2004. Median price fell 11.3% (MP is now $183,300) from a year earlier.

This is the largest year-over-year existing home price decrease since records began in 1968.

of Inventory stand at 10.02. This makes it the highest year-end inventory since 1982. And the C'ville area has 18+?!

Comrade Secretary of the Treasury Henry Paulson Changes His Mind, Again, and May Ask for Remaining TARP Funds. He's also considering putting together an office to address mortgage foreclosures.

Famed Commercial RE investor Tom Barrack talks about the collapse of Commercial RE and the coming failures of regional banks.

Obama Unveils Economics Team to Tackle 'Historic' Crisis

Citigroup Gets A Bailout

Friday, November 21, 2008

Stocks Up Looking Forward to Obama Announcement of Treasury Secretary & Econ Team

Whew! No Black Friday. After two disastrous days (and many weeks now), stocks ended up 500 points in a late afternoon surge to close at 8046.42.

The drop was 5.3% for the week due to renewed concerns about the global economic slowdown and the fate of major firms saddled with bad credit bets, such as Citigroup, which lost another 20% of its value.

Many are attributing the optimistic rise to the "leak" that New York Federal Reserve President Timothy Geithner will be named Treasury Secretary on Monday. Additionally, the entire Obama economic team is supposed to be announced, and "plans" for further use of Bailout funds, economic stimuli, unemployment, mortgage issues, housing bubble, etc. etc. etc. are expected to be forthcoming.

This is gives Obamanomics a two-month jump on 1/20/09 start date, much needed in these troubled times IOHO.

Updates on Giant Mortgage Losers Fannie & Freddie

These entities, which own or back a huge number of American mortgages, announced they will suspend all Foreclosures for single-family properties from Nov. 26 to Jan. 9.

Can the FDIC and big banks be far behind?

The cynics and responsible homeowners among us are of course disgusted about mortgage mods already.

Additionally, we wonder if this is just a device to get more consumers to spend their money on Christmas shopping. You're in danger of losing your house, you're gonna get a mod, this might be the last happy Christmas, those poor little kids. Understandable, but shortsighted. Retail sales are tanking, retailers are going out of business. But Christmas continues!

And Freddie is tanking so badly, with shares trading at less than a dollar for more than 30 days, its been warned it may be kicked off the NYSE.

List of Banks Receiving TARP Funds; Jobless Claims Reach 16 Year High

These links appeared in our sidebar on Friday, 11/21.

What Banks and "banks" have received Bailout Funds? Check out the TARP list. Includes some in our region: SunTrust - $3.5 Billion and BBT - $3.1 Billion.

"Extraordinary Popular Delusion."

New jobless claims reach 16-year high.

A? Black? Friday?

What's on tap for today?

Citigroup gets a bailout or goes bankrupt? Citigroup has lost half its value in four days. Shares of Bank of America and JPMorgan Chase are down 30%.

Dow below 7,000?

S&P sheds %s?

Read this brief article about how bad it is--and what could be done to help.

Thursday, November 20, 2008

Worst Crash Since Great Depression

Sadly, this isn't even Our Humble Opinion. It's numerical fact.

The Dow industrials fell 445 points, or 5.6%, to 7552.29 amid another selloff in financial stocks. Citi shares lost 26% and J.P. Morgan Chase dropped 19%. - WSJ

See David Leonhardt's "Stocks and Earnings Racing to the Bottom" - NYT

(And UVIMCO is really thinking of selling off public equity or shares in hedges? What? Probably not any more....)

"Worst Crash" graph is courtesy CalculatedRISK.

Wednesday, November 19, 2008

UVa's Endowment Fiasco Detailed in The Hook

At last, some local reporting on UVa's endowment fiasco by somebody who knows what she's talking about and explains it very clearly for the unschooled reader.

It's the cover story, Missing Billion, by Lisa Provence in this week's Hook.

Provence very carefully explains the history of the endowment's investing, defines hedge funds and private equity, and explains how UVa lost $1B.

No Wahoos are talking except in official printed statements, but others are. Blogger Henry Blodget at explains the potential ramifications:

"JP Morgan wealth-management strategist Michael Cembalest summarizes the situation:

The endowment's value as of October 2008 is $4 billion, and they have $1.6 billion in uncalled private equity, real estate and natural resource commitments on top of $1.4 billion already invested. [That's 75% of the endowment pledged to highly illiquid investments].

The endowment has now announced plans to sell not only public equity, but also several hundred million from hedge funds at a time of illiquid markets, and to explore selling their private equity in the secondary market (a "market" which only exists in the narrowest sense of the word; there's around $15 billion in buy side funds looking for very steep discounts).

Endowments like UVA's make annual contributions to a university's operating budget, so a portfolio with a 75% allocation to private funds (holdings plus future commitments) is a very aggressive one.

Sorry, UVA alumni. You're going to have to make those gifts all over again."

President John Casteen recently addressed the issue, sort of, in this statement to the community. Exec VP and COO Leonard Sandridge attempted to allay concerns in this press release.

Read UVIMCO's disastrous Third Quarter Report here.

See the post UVA: Sorry, Alumni, We Gambled Our Endowment and Lost.

Haircuts Continue - 702 Belmont Avenue

702 Belmont Avenue came on the market in May of 2008 for $519,000. 3 bedrooms, 2.5 baths, 2000 sq. ft., tiny lot, neighbors an armspan away.

Of course IOHO we thought the Asking Price was bubbly, given the neighborhood, the economy, the previous selling price (pre-"flip" renovations), and nearby "comps." We went on about these issues in this post.

In August, the price had dropped to $479,900 and the place was for rent for $2,100/per month. We commented on this phenom in an "Accidental Landlord" post.

Now the Asking Price has dropped to $449,000 (same MLS #453358). The rent has dropped to $1,600/month.

Are these the magic numbers?

Wednesday Econ News: Deflation, Home Prices Declining

The following links appeared in our sidebar 11/19.

Wednesday: Stocks plunge. Again. Below 8,000. Where's the Bottom? More losses feared.

Stocks hurt by latest fear: declining prices. Here's a primer on Deflation.

Home prices decline 9%. Foreclosures & Short Sales account for nearly 40% of transactions nationwide. Sales in the South are down.

New Construction Housing Starts in October: Lowest Level Since 1959

Nationwide housing starts fell to their lowest since the US Census Bureau began tracking the numbers in 1959.

There's a nationwide overhang of inventory. In the Charlottesville area, the number of new and existing unsold houses is at a 15 month inventory level (or higher)--meaning it would take this long to sell off all of the properties.

This doesn't include unfinished new houses and condominiums. Just driving around town, you see these projects that don't yet have buyers: Condos behind Hollymead Town Center, Belvedere on Rio Road, The Gleason downtown. These units will just add to the local glut.

The area doesn't need any more new construction, but the builders need to keep building because otherwise the loans, which were financed before the collapse of the economy, disappear.

But selling these? That's another story.

Read about the low level of new housing starts.

Mid-Nov. Econ News: UVa Endowment, Landmark Hotel, Whole Foods Market, John Casteen, City Budget Woes

These links appeared on our sidebar from 11/16-18

UVa has lost about $900 Million in Endowment investments since August. The school has over $1 Billion of further exposure due to private equity investments. President Casteen wants to reassure folks that everything is fine.

At least Everything is Fine with Casteen, who pulls down $800,000 per year. There's only one other public U prez who makes as much. Son of a shipbuilder to landed gentry in just one generation. It's the American Way--or used to be.

Whole Foods Market construction of the new grocery on Hydraulic has stopped, due to the company's weak sales during this recession. It's unclear whether the project will be finished.

The Landmark Hotel saga just gets nuttier by the day. Now owner Halsey Minor has fired developer Lee Danielson. Too bad. Danielson was responsible for major attractions on the west end of the mall, including the skating rink, a restaurant, and the movie theatre.

Later, it was reported that few construction workers showed up at the Landmark Hotel worksite, so apparently the project is "on." And Lee Danielson hasn't been fired. The hotel's construction blog hasn't been updated in a month.

The City of Charlottesville, like many American consumers, needs to tighten its proverbial belt, or its budget shortfall will rise in staggering amounts over the next five years.

All the numbers point to the City having budget woes for years. State budget cuts, lower sales tax and property tax revenues, rising costs of goods and services, weak national economy, few buyers for municipal bonds.

Treasury Secretary Comrade Henry Paulson Thinks He's Doing A Good Job With the Bailout...

...And lets us all know this in an OP-ED in the New York Times.

The entire piece is reproduced below. Don't miss reading/skimming the hundreds of comments that follow at the original site, including this one: "Translation (and Readers Digest version): We don't have the faintest idea of what to do." -- John G., NYC

Fighting the Financial Crisis, One Challenge at a Time


WE are going through a financial crisis more severe and unpredictable than any in our lifetimes. We have seen the failures, or the equivalent of failures, of Bear Stearns, IndyMac, Lehman Brothers, Washington Mutual, Wachovia, Fannie Mae, Freddie Mac and the American International Group. Each of these failures would be tremendously consequential in its own right. But we faced them in succession, as our financial system seized up and severely damaged the economy.

By September, the government faced a systemwide crisis. After months of making the most of the authority we already had, we asked Congress for a comprehensive rescue package so we could stabilize our financial system and minimize further damage to our economy.

By the time the legislation had passed on Oct. 3, the global market crisis was so broad and so severe that we needed to move quickly and take powerful steps to stabilize our financial system and to get credit flowing again. Our initial intent was to strengthen the banking system by purchasing illiquid mortgages and mortgage-related securities. But the severity and magnitude of the situation had worsened to such an extent that an asset purchase program would not be effective enough, quickly enough. Therefore, exercising the authority granted by Congress in this legislation, we quickly deployed a $250 billion capital injection program, fully anticipating we would follow that with a program for buying troubled assets.

There is no playbook for responding to turmoil we have never faced. We adjusted our strategy to reflect the facts of a severe market crisis, always keeping focused on our goal: to stabilize a financial system that is integral to the everyday lives of all Americans. By mid-October, our actions, in combination with the Federal Deposit Insurance Corporation’s guarantee of certain debt issued by financial institutions, helped us to accomplish the first major priority, which was to immediately stabilize the financial system.

As we assessed how best to use the remaining money for the Troubled Asset Relief Program, we carefully considered the uncertainties around the deteriorating economic situation in the United States and globally. The latest economic reports underscore the challenges we are facing. The gross domestic product for the third quarter (which ended Sept. 30, three days before the bill passed) shrank by 0.3 percent. The unemployment rate rose in October to a level not seen since the mid-1990s. Home prices in 10 major cities have fallen 18 percent over the previous year. Auto sales numbers plummeted in October and were more than a third lower than one year ago. The slowing of European economies has been even more drastic.

I have always said that the decline in the housing market is at the root of the economic downturn and our financial market stress. And the economy, as it slows further, threatens to prolong this decline, as well as the stress on our financial institutions and financial markets.

A troubled-asset purchase program, to be effective, would require a huge commitment of money. In mid-September, before economic conditions worsened, $700 billion in troubled asset purchases would have had a significant impact. But half of that sum, in a worse economy, simply isn’t enough firepower.

If we have learned anything throughout this year, we have learned that this financial crisis is unpredictable and difficult to counteract. We decided it was prudent to reserve our TARP money, maintaining not only our flexibility, but also that of the next administration.

The current $250 billion capital purchase program is strong medicine for our financial institutions. More capital enables banks to take losses as they write down or sell troubled assets. And stronger capitalization is essential to increasing lending, which is vital to economic recovery.

Recently I’ve been asked two questions. First, Congress gave you the authority you requested, and the economy has only become worse. What went wrong? Second, if housing and mortgages are at the root of our economic difficulties, why aren’t you addressing those problems?

The answer to the first question is that the purpose of the financial rescue legislation was to stabilize our financial system and to strengthen it. It is not a panacea for all our economic difficulties. The crisis in our financial system had already spilled over into the overall economy. But recovery will happen much, much faster than it would have had we not used TARP to stabilize our system. If Congress had not given us the authority for TARP and the capital purchase program and our financial system had continued to shut down, our economic situation would be far worse today.

The answer to the second question is that more access to lower-cost mortgage lending is the No. 1 thing we can do to slow the decline in the housing market and reduce the number of foreclosures. Together with our bank capital program, the moves we have made to stabilize and strengthen Fannie Mae and Freddie Mac, and through them to increase the flow of mortgage credit, will promote mortgage lending. We are also working with the Department of Housing and Urban Development, the F.D.I.C. and others to reduce preventable foreclosures.

I am very proud of the decisive actions by the Treasury Department, the Federal Reserve and the F.D.I.C. to stabilize our financial system. We have done what was necessary as facts and conditions in the market and economy have changed, adjusting our strategy to most effectively address the crisis. We have preserved the flexibility of President-elect Barack Obama and the new secretary of the Treasury to address the challenges in the economy and capital markets they will face.

As policymakers face the difficult challenges ahead, they will begin with two considerable advantages: a significantly more stable banking system, one where the failure of a major bank is no longer a pressing concern; and the resources, authority and potential programs available to deal with the future capital and liquidity needs of credit providers.

Deploying these new tools and programs to restore our financial institutions, financial markets and the flow of lending and credit will determine, to a large extent, the speed and trajectory of our economic recovery. I am confident of success, because our economy is flexible and resilient, rooted in the entrepreneurial spirit and productivity of the American people.

Henry M. Paulson Jr. is the secretary of the Treasury.

See the OP-ED in the original here.

Tuesday, November 18, 2008

What Should Happen to "Underwater" Mortgages?

Barry Ritholtz offers a plan at The Big Picture:

My...suggestion is to develop a plan that recognizes this simple truism: People paid too much for houses, and banks lent too much against value that simply isn’t there. The LTV needs to be adjusted to reflect this simple reality.

That’s why carving out a new realistic mortgage relative to home values, plus a 10 year balloon payment for some of the balance, can work.

•It shares the pain of bad decision making of both the buyer and the lender;

• It create an incentive for home owers (not a typo) to stay in their homes;

• It gives the banks an immediate write down of the balloon, and a possible recovery down the road;

• It drops the price of homes back towards something realistic.

Consider a $500k mortgage on a home purchased for $550k that is now worth $400k. I would have the parties negotiate something like the following: A new mortgage for $350k plus a $50k 10 year balloon. The $350k mortgage is affordable, the $50k balloon is interest free, tax free and can be folded into the main mortgage 10 years hence.

You can play with the numbers, for example, doing a $375k and a $50k balloon. The bottom line is both parties have to have an incentive to take some o the hit, and prevent an even worse outcome.

The post is here. It's in response to a WSJ proposal (which is inane), which you can read here.
Read Barry Ritholtz's entire proposal. To read about the Fannie/Freddie Mortgage Mods, go here. To read about the FDIC proposal, go here.

2400 Pine Garth Run. "New Listing," New MLS #, New Price, New Agent. Again.

Back in August we had a post about 2400 Pine Garth Run. It was part of the "Accidental Landlord" series: owners who could't sell their houses were listing them as rentals.

2400 Pine Garth Run was available for $799,900 to "own," or $3,000 a month to rent. It was a FSBO (For Sale By Owner). You can read the post linked above, but of course the Craigslist rental and "for sale" ads have long expired.

But 2400 Pine Garth Road is back, this time with a new MLS, #459434, an actual REALTOR, and the "new" price of $695,000 for a 5 bed/3 bath, 4500 sq feet 90's reno of a 60's structure on a couple acres, with a possible link to William Faulkner.

The County records show that this place last changed hands in the year 2000 for $360,000.

That's nearly a 100% "appreciation" viz. current asking price in eight years. Only "possible" in a bubble.

Last time we posted about this place, an email correspondent sent info about the various times, price points, MLS #s, and agents this place has had over the past several years. It's been on the market repeatedly.

IOHO: we're in an unprecedented global financial/credit crisis. Nothing like this has ever hit local, regional, national RE. Maybe the calculation needed for selling is that of how things "used to be" --a "realistic" annual appreciation of 3%. Following this logic, do the math. You'll see what an Asking for 2400 Pine Garth Run would be if there wasn't a bubble.

That's a big "if."

Monday, November 17, 2008

Finance/Econ News 11/16-17

There's so much finance/econ news in the past 48 hours that we took it off our sidebar for the sake of streamlining.

Stocks fall on concern that US Recession will deepen.

Kansas Fed Reserve Bank Prez says the Fed has "done as much as it can do" to revive the economy....

Bush admin will not seek remaining $350B in Bailout funds; it's left for the Obama admin.

The Securities and Exchange Commission has charged Mark Cuban with insider trading.

Is For Sale By Owner - FSBO - the way to sell your property?

Citigroup continues to tank.
Its shares are down in the single digits, and it will layoff 50,000+ workers in addition to those already gone.

Phil Gramm: Jackass.

Here's the text of the Statement by the G-20. The 20 major Nations, and Comrade Paulson, met this weekend to discuss the world's economies. Result: Discussion.

When Did Become a Rental Site?

We're not the brightest blog on the block, and what with the election and upcoming holidays and worldwide financial meltdown, we've been distracted like crows to the shiny.

So we must have missed the announcement that the property search website of CAAR, the Charlottesville Area Association of Realtors, is now listing rentals.

We first saw the pictured property in this ad from Craigslist, which offers an "adorable...built in 2004" 1,000 sq ft cottage for rent, near Foxfield, fully furnished, $1,350/month.

There's one picture in the ad, and then the reader is directed to and given MLS #457826 to access further pictures and contact info.

At the CAAR site, you'll find realtor info, many fetching pictures, and the rental price.

The shadow inventory continues to grow: every day, more bubble-priced, unsold houses become rentals. See this and this and this and...we could go on (or go sideways: see our sidebar for "Accidental Landlords" posts).

But advertising a house for rent on a REALTOR website devoted to selling?

Who knew.

Saturday, November 15, 2008

Econ News, 11/10-15

These links appeared in our sidebar this past week.


Charlottesville loses 500 Jobs in one year.
And then there's Luck Stone, Lexis/Nexis, and Circuit City which are shedding jobs. And let's not forget the REALTORS who aren't going to make any money in the coming months, either. (That is said with 0% snark, fwiw.) Retail sales, and thus sales tax revenues, are down in the City and the County.

Cville's new Landmark Hotel in $ trouble? Depends on who you ask. A subsidiary of Silverton Bank, located in Georgia, did the major financing for this project. The bank is, apparently, now experiencing issues. (Is it naive to wonder why a local or regional bank wasn't used for this project?)


The stock market closed, down, for the second week in a row.

October saw a record decline in retail sales.

Philiadelphia, Phoenix, and Atlanta all want money from Treasury, now that Comrade Hank isn't buying "troubled assets." So does San Jose. (Ridiculous!)

Continued unemployment claims are at their highest since 1983.

Fannie Mae has now taken over so many houses due to foreclosure that if they were collected into one city, it would be just about the size of Richmond, Va.

House Speaker Pelosi calls for Auto Bailout. (Not surprising....)

The luxury house builder Toll Brothers wants to subsidize new buyers because their business is tanking so badly:

“We urge Congress to stimulate demand by reducing mortgage rates and fees and by providing incentives such as a buyer tax credit for the purchase of all types of homes. We believe these initiatives would offer the greatest benefit for the taxpayer’s dollar," said Robert Toll, CEO. (Hmm. Is this in addition to lowering prices?)

American Express, the last major credit card issuer, is going to become a Bank Holding Company so they can get some of your money via the $750 Billion Bailout. (We've filed our own application to become a Bank Holding Company. Haven't you?)

Last week, Circuit City announced the closing of 150+ stores, including C'ville's. This week, the company filed for bankruptcy. (We're shocked, shocked.)

Insurance giant AIG gets $150 Billion of your money, instead of $85B. (Will they take another spa day to celebrate?)

5th Distric Phenom Tom Perriello lauded in online Slate Magazine, in an article entitled "Goode Riddance." (Goode pun, huh?)

"We don't have a moment to lose...." - Podesta on the Obama Transition, which is striving for the strictest ethics rules ever. (Is this really going to be so hard to achieve, given the departing admin?)

Friday, November 14, 2008

ANOTHER BAILOUT for Mortgageholders: The FDIC's Version

As we posted the other day, the Federal Housing Finance Administration has a mortgage modification program for troubled borrowers from the extremely troubled Fannie Mae and Freddie Mac (each posted gigantic losses this week. Again.). In that post, we also mentioned that Citi, Bank of America, and JPMorgan Chase also have programs in place.

But the Federal Deposit Insurance Corporation, the entity which oversees old-fashioned banks' deposit accounts for up to $250K, has another plan.

FDIC head honcho Sheila Bair is, frankly, tired of taking over banks each week. And the fact is, the FDIC is going to run out of money doing this.

The FDIC needs $24 Billion for this plan; Comrade Paulson et al over at the 4th Branch of US Government, Treasury, don't want this cash to come from the $750 Billion, since they have other plans.

The FDIC proposal justifies itself this way:

"Although foreclosures are costly to lenders, borrowers and communities, the pace of loan modifications continues to be extremely slow (around 4 percent of seriously delinquent loans each month). It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures."

This is the basic structure, and is intended for mortgageholders whose loans are NOT with Fannie or Freddie:

"This proposal is designed to promote wider adoption of such a systematic loan modification program:"

*by paying servicers $1,000 to cover expenses for each loan modified according to the required standards; and

*sharing up to 50% of losses incurred if a modified loan should subsequently re-default

This is the program in numbers:

Read the FDIC's proposal here.

THERE'S A PERSISTENT IDEA among the mortgage mod advocates that saving legitimately troubled debtors--plus those who were greedy (too much house), irresponsible, stupid, or taken advantage of--will somehow stop the freefall of housing prices and thereby rescue the US economy.

Some fine minds beg to differ. More on this in a future post.

National Existing Home Sales Drop 19% From September to October 2008

Housingwire reports:

"Stress in the real estate market caused U.S. home sales to fall sharply between September and October, according to a national survey of more than 2,500 real estate agents conducted by survey firm Campbell Communications Inc. in early November."

Nationwide, sales were down 19% from September to October.
In areas with higher foreclosures, sales were down even more: Florida 22%; California 32%; Michigan 51%.

According to the survey, agents report certain beliefs or behaviors on the parts of buyers and sellers:


*Agents say large numbers of potential home sellers remain in denial about the true value of their homes.

*Survey results show that a substantial portion of properties are being taken off the market without sales.


*Agents say that many homebuyers have adopted a ‘wait and see’ attitude.

*A majority of real estate agents responding to the survey specified “fear of falling prices” as a major impediment to people buying listed homes.

Read the Housingwire story here.

Locally, the most recent numbers for the past few months, including November (through the 13th) are below. These numbers combine the City and the surrounding counties, plus the Valley, and are from CAAR. Notice that September and October sales are equivalent (September may be higher, since we're missing final data.) But these two months reflect roughly a 60% drop in sales from August. Of course, we're now in the "slow" season, since May-August is the heaviest time of year.

These numbers don't reflect the recent national drop; but they show a deep slowdown from 2004 (click on the links below for more detailed numbers). And, more significantly, while sales are staying at roughly the same pace as the last couple of years, the unsold inventory keeps growing, so at this point it is roughly 15 months.

November (to the 13th)
Active Listing Inventory: 3,442
Number of Listings Sold: 30
Median price of Listings Sold: $251,000
Average Days on Market for Listings Sold: 90

Active Listing Inventory: 3,530
Number of Listings Sold: 146
Median price of Listings Sold: $253,000
Average Days on Market for Listings Sold: 128

September (to 28th)
Active Listing Inventory: 3,623
Number of Listings Sold: 146
Median price of Listings Sold: $242,500
Average Days on Market for Listings Sold: 117

Active Listing Inventory: 3,638
Number of Listings Sold: 242
Median price of Listings Sold: $276,750
Average Days on Market for Listings Sold: 105

Note: August & September 2008 sales are only a little lower than 2007; but this is about 40% lower than activity in 2004.

REALCentralVA has the specifics for the City of Charlottesville and the County of Albemarle. About 33% of residential real estate in this area is vacant. For Charlottesville/Albemarle numbers for August 2008, click here; for September 2008, click here;

Wednesday, November 12, 2008

Treasury Has Turned Itself Into the 4th Branch of Government

We have the Executive, the Judicial, and the Legislative branches of the United States Government, a "checks and balances" system that does everything we need it to. Or so we thought.

Who knew that Treasury, under the guidance of Comrade Secretary Henry Paulson, could become its own branch of Government? Which seems to be what's happening right before our eyes.

Remember the hullabulloo about passing the $750 Billion bailout bill? The one that failed in the House, was so dire Presidential Candidate John McCain interrupted his campaigning, the bill that then passed in the Senate and finally, after growing from three to 400+ pages, passed the House? It's no longer doing what we all thought it was so important to do.

Comrade Hank has shifted the focus of TARP, the Troubled Asset Relief Program, from buying up banks' bad assets--CDOs, bad mortgage paper, etc.--to consumer debt. He's given strong instructions to banks to lend lend lend, for autos, for student loans, and for the all important grease that makes the American economy hum, credit cards.

This week, the Stock Market is tanking on retailers reports: Americans have, finally, closed their wallets. The results are staggering, and expected to get worse. The big car companies are faltering and begging for loans, and retailers are feeling the cold shoulder. Starbucks, Best Buy, Gap and related brands, Macy's, Target, Neiman Marcus (sales down 28% in October) are all tottering; Circuit City, Mervyn's, Linens'n'Things, and others have filed for bankruptcy. And delivery company DHL is cutting 9500 jobs in the US and curtailing business.

Americans need to Spend! It's not Christmas unless everybody is in Debt! What will happen if Black Friday (the shopping day after Thanksgiving) doesn't put retailers in the black for the year?!

Answer: the recession will be that much longer and deeper.

It's not just consumer lending that's getting cash. House Financial Services Committee Chair Barney Frank (D-MA) has a plan to give GM, Ford, and Chrysler $25 Billion from the former "TARP" funds. He'll be holding a hearing on November 19.

Stay tuned.

Albemarle County: Building Permits, Taxes

The Daily Progress reports that building permits are down in Albemarle County. No surprise.

But this is good news. The necessity for new unsold houses is pretty much zero when there are already-built, never-lived in houses that are unsold, as well as the gigantic inventory of existing houses.

The bad news is that, partially due to real estate values plummeting, Albemarle County is facing a budget shortfall, and taxes may (will) go up.

Tuesday, November 11, 2008

The Federal Housing Finance Admin Has a New Plan For Fannie & Freddie Troubled Mortgageholders

The Federal Housing Finance Administration, which was created with the Bailout of Giant Mortgage Losers Fannie Mae & Freddie Mac, has announced a "streamlined mortgage modification program."

From the FHFA Press Release:

"As housing prices have fallen, delinquencies on mortgages have tripled, not just for subprime and Alt-A, but also for prime mortgages. Foreclosures have increased almost 150% from two years ago."

"Today we are announcing a major program designed to greatly reduce preventable foreclosures with a simplified, streamlined loan modification program to get struggling homeowners into mortgages that they can afford. It is an achievable goal if homeowners, banks, mortgage servicers, investors, Fannie Mae and Freddie Mac all work together."

"Fannie Mae and Freddie Mac own or guarantee almost 31 million mortgages, about 58% of all single family mortgages."


"The program creates a fast-track method of getting troubled borrowers to an affordable monthly payment where “affordable” is defined as a first mortgage payment, including homeowner association dues, of no more than 38 percent of the household’s monthly gross income."

"This affordable payment will be
achieved through a mix of reducing the mortgage interest rate, extending the life of the loan or even deferring payment on part of the principal."

[emphasis ours]


There's also an ambiguous sentence about what the mortgage servicer may do if it is unable to help the troubled borrower....

Read the entire Press Release.

Just yesterday, Fannie Mae alerted the government that it may need more than the $100 billion in funding pledged by the U.S. Treasury to stay afloat after reporting a record $29 billion loss, according to Bloomberg,

And this is Fannie Mae's take on National Housing Price Declines, according to the statement they just filed with the Securities and Exchange Commission:

"The deteriorating economic conditions and related government actions that occurred in the third quarter of 2008 have increased the uncertainty of future economic conditions, including home price movements. Therefore, while our peak-to-trough home price forecast is at the top end of the 15% to 19% range, there is increasing uncertainty about the actual amount of decline that will occur."

[emphasis ours]

According to CalculatedRISK, Fannie expects the decline to be more along the lines of 32% indicated by the Case-Shiller Index.


Major Banks Which Have Mortgage Mod Programs in Place:

Citigroup is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments; it will also expand the program to include mortgages for which the bank collects payments but does not own.

Citi plans to help an additional 500,000 homeowners who are not currently behind on but on the verge of falling behind, about one-third of all mortgages that Citigroup owns by adjusting their rates, reducing principal or increasing the term of the loan.

JPMorgan Chase & Co has expanded its mortgage modification program to an estimated $70 billion in loans, or 400,000 customers.

Bank of America starting Dec. 1 will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement reached with 11 states in early October.

Sunday, November 9, 2008

That Was the Week That Was

A historic week. We collected a few links.


Barack Obama's Victory Speech. John McCain's Concession Speech. Mark Warner takes the Senate Seat.

Tom Perriello Claims Victory for the 5th District, though Virgil Goode has not yet conceded the Congressional seat (Nov. 7), and may call for a recount after the current vote count is certified on November 24.

Local News:

*The UVa Endowment suffers a massive loss (Oct. 31). The Endowment lost $600 million from July to September, and an additional 20% in the first two weeks of October when the Stock Market was wiping everybody out and taking the global markets with it.

Unfortunately, according to UVIMCO's report, Virginia also has some frightening ongoing exposure:

We own $1.6 billion in private funds (private equity, real estate, and resources).

We have uncalled commitments of $1.8 billion to private funds. Under normal circumstances, we receive regular distributions from private funds and expect these distributions to exceed capital calls. However, in recent quarters we have received much lower distributions from our private funds than usual. In conversations with our private managers over the past two weeks, they tell us that the financial crisis precludes sales of existing investments, and we should not expect any distributions this quarter and few in 2009. None wish to forecast distribution activity in 2010 and beyond.

The best response to this is "Holy Crap."

UVa has already cut its budget ($10.6M) due to State losses and a mandate from Governor Kaine. The school is not alone in money issues.

*The latest U.S. Census estimates for Charlottesville showed that 23.7% of the City’s residents were living in poverty in 2005. The City Council is struggling with the issue (Nov. 6). (Here's a related story from Oct. 11.)

*Richmond-based national chain Circuit City is closing 155 stores due to declining sales and revenues, including the one in Charlottesville.

National News:

*Just one month into the new fiscal year, which began in October, the federal budget deficit has already reached $232 billion, according to estimates released Friday, Nov. 7.

*The US Jobless rate hits 14 year high: 6.5% (Nov. 7).

*General Motors is running out of money, and Congressional heavies Pelosi and Reid want to extend the TARP $750 Billion bailout to the giant automakers.

*The Senior Risk Manager from Bear Stearns, which got a $29 Billion bailout last March, has now joined the Fed to help assess the needs of banks at risk of failing and decide which need part of the $750Billion. What? Because he did such a great job driving Bear into oblivion?

*Stocks lost 10% in the two days after election, the worst two day downturn ever, but ended the week only 4% down.

*Nationwide, retailers are suffering.

More housing news shortly, in this landscape of iffy economic news. Like millions of others, we think Mr. Obama is The Change We Need. It won't be fast, it won't be easy--but it will come.

Saturday, November 1, 2008