March 30, 2009 9:00 pm

Headlines, Thoughts and Updates - March 30, 2009

Here are a few headlines, but I had to cut it short this morning. Too much going on. Our client conference call starts at 8:50AM Eastern this morning. The global violence is growing. Prepare yourself for something we have only seen in movies and fiction.

Violence in Pakistan - Here is the third major act of violence in the past two weeks. Why don't we hear about these in the US papers. First, we saw the police headquarters in Islamabad bombed. Last week it was a mosque, leaving 70 dead. And today another 60 dead at the Police Academy. - Mike

60 feared dead as gunmen storm Pakistan police academy - Gunmen have stormed a Pakistan police academy, triggering an intense battle with security forces in which 60 people are feared dead and hundreds have been taken hostage, local news has reported. - http://www.telegraph.co.uk/news/worldnews/asia/pakistan/5075299/60-feared-dead-as-gunmen-storm-Pakistan-police-academy.html - U.K. Telegraph _______________________________________

GM and Chrysler Kaput – We have a zero bet on GM with PUTs, and it will pay off handsomely. They cannot survive, but unraveling this pile of elephant dung will result in elephant dung throughout the US and global economy. It will not be easy. And it will be a devastating blow to millions of pensioners, employees, suppliers and more. - Mike

GM and Chrysler denied extra funds - The Obama administration refused on Sunday night to give fresh bail-out money to General Motors and Chrysler, telling the carmakers to come up with new plans or risk insolvency. GM has received .4bn in government aid and had asked for an additional .6bn. Chrysler has received bn and had asked for another bn. But both companies failed to meet targets on cutting their debt and reducing the cost of benefits paid to workers. The crisis talks between the companies and the administration's auto task force cost the job of Rick Wagoner, chief executive of General Motors, who was asked to step down by the White House after 30 years with the carmaker. Officials said on Sunday night that Chrysler would be given 30 days and GM 60 days to reach agreement with debtholders and unions, with new tougher targets for cost cutting, or they would lose their last chance for a government bailout, almost certainly sending them into bankruptcy. - http://www.ft.com/cms/s/0/a2ede9ae-1cc1-11de-977c-00144feabdc0.html - Financial Times
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Merkel Gets It – Germany has long been a nation of savers, so now it is only logical that they speak up and tell it like it is. Only Merkel has the guts to tell the world . . . stop spending like there's no tomorrow . . . because if we continue on this path . . . there will be no tomorrow. - Mike

Merkel warns on further stimulus - Angela Merkel, the German chancellor, will warn leaders of the world's largest economies next week against pumping too much money into reviving global growth, saying that such action would create an unsustainable recovery. - http://www.ft.com/cms/s/0/eda17b82-1b09-11de-8aa3-0000779fd2ac.html - Financial Times
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Liars Can Figure but Figures Don't Lie – We've seen a lot of numbers over the past two weeks pointing to a recover in housing and all sorts of other areas of the economy. Next month we will probably see revisions. But even if the numbers stand, you can make them look like whatever you want if you selectively choose numbers to fit your message. For those hat believed mortgage defaults were slowing and that housing was recovering, here is a WSJ article that paints a different picture. Moreover, as we have discussed with clients, there are many elements behind the numbers you have seen over the last few weeks.

Mortgage Defaults, Delinquencies Rise Article - Defaults on home mortgages insured by the Federal Housing Administration in February increased from a year earlier. - http://online.wsj.com/article/SB123840821794969275.html#mod=testMod - The Wall Street Journal
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Stocks Fall Sharply in Asia and Europe - Stocks fell sharply in Europe and Asia on Monday, amid signs of chaos in the auto industry and fears that the Group of 20 meeting this week will fail to come up with a plan to revive global growth. In Washington, the White House pushed out the chairman of General Motors on Sunday and instructed Chrysler to form a partnership with the Italian automaker Fiat within 30 days as conditions for receiving another much-needed round of government aid. The moves came just hours after the board of the French automaker PSA Peugeot Citroën said it had fired its chief executive. "I'm not sure the worst is behind us," Valérie Cazaban, a fund manager at Stratège Finance in Paris, said. "We're waiting for the G-20 and we're not sure everyone is in agreement on what needs to be done." - http://www.nytimes.com/2009/03/31/business/31markets.html?_r=1&hp - The New York Times
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Officials Prod Banks To Restart Lending, But Who’ll Borrow? - The Treasury and the Federal Reserve are throwing trillions of dollars at financial firms to prod them to lend more. But even if those programs succeed, debt-strapped families probably won’t want - http://www.investors.com/editorial/IBDArticles.asp?artsec=5&issue=20090327 – Investors Business Daily
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Is Calpers Waking Up? – They've finally decided to ask for better terms from the hedge funds that have raped them. Better late than never? NOT. It is far too late for Calpers. They have no hope of ever catching up, unless they put it all on the roulette wheel in Vegas . . . and win. Unfortunately, no one is really talking about the fact that Calpers and many other pension funds have been raped to death. They are in a coma at this point, and they have no clue what is going on around them.

California Pension Seeks New Terms From Hedge Funds - The California Public Employees' Retirement System said the largest U.S. state public pension wants to renegotiate new terms from hedge funds. - http://www.bloomberg.com/apps/news?pid=20601087&sid=aR_cVQn81GTo – Bloomberg News______________________________________

Totally Clueless – Direcotr Heim below actually believes they can hold their heads above water. What do they do if the markets does not recover? In fact, what happens if the markets drop another 10-30%? KaBoom. One final note. Pension funds still have no clue about how little value is left in their real estate joint ventures. - Mike

Pension funds called next big crisis - Click photo to enlargeSteve Wilson color illustration of a hand placing an “IOU” into the pensions piggy bank. The national economic collapse is battering municipal and state pension plans, and that means taxpayers will likely dig deeper into their pockets to pay retirees. “It’s a ticking time bomb,” said Trumbull Finance Director Lynn Heim. “Unless the market takes off, we will just be holding our head above water." - http://www.connpost.com/ci_12019394 - Connecticut Post

March 30, 2009 9:00 pm

Flyer Accuracy

It's the unwritten rule that if a home is for sale, it's advertised with the use of flyers. And in a flyer, you'll see some of the basics: square footage, bedrooms, bathrooms, and price.

Sometimes you'll see other language such as "New Plumbing" or "All Appliances Stay." That's great if true, but the seller and buyer should each verify this.

The flyer says "All Appliances Stay," but all of them? Really? What if the listing agent made a mistake and the seller didn't catch it? The buyer can insure this buy specifying individual appliances in an offer. Without that, there's not a guarantee the new Energy Star washer and dryer set will remain within the home.

Recently, I helped some buyers find their first home. The flyer advertised "New Plumbing." But when a home inspection was conducted, it was revealed that the new plumbing was done by the homeowner himself and not permitted by the county. When everything was settled, the buyers bought the home but only after the seller paid a licensed plumber to re-work the entire system, permit and all. The buyers had great leverage because they had, in hand, the flyer stating new plumbing.

If you're a seller and you're advertising your home with flyers (99% of you), make sure the information is accurate. If you're a buyer and you like what the flyer says, make sure you protect yourself by specifically identifying what you want.

March 30, 2009 9:00 pm

More Pain, No Gain: S&P/Case-Shiller Preview for January 2009

As I had noted in a prior post, given their strong correlation, the home price indices provided daily by Radar Logic can be effectively used as a preview of the more popular monthly S&P/Case-Shiller home price indices.

The current Radar Logic data reported on residential real estate transactions (condos, multi and single family homes) that settled as late as January 26 appears to indicate that price declines are continuing in every market while accelerating notably in some.

Clearly, the impact of the recent stock market crash and ongoing economic crisis is bearing down on both consumer sentiment and, more fundamentally, credit availability resulting in a significant pullback in spending on homes and other costly purchases.

As the economic fallout continues, look for more markets to experience a reacceleration of price declines.

Phoenix, Miami, San Francisco, and Los Angeles are clearly continuing their historic price slide as the number of distressed sales climb and buyer sentiment relents under the weight of the recessionary conditions.

Boston, Denver and Chicago all appear to be following the typical seasonal pattern of increasing prices during the high transaction months of the spring and early summer and price declines during the fall and winter but it is important to note that prices are clearly trending and even, most notably for Boston, accelerating lower.

The Washington DC and New York regions are nearly perfect examples of markets that have broken down under the strain of the housing bust and wider economic turmoil showing consistent price declines throughout spring and summer months where normally strong seasonal sales patterns typically brings increasing prices.

March 30, 2009 9:00 pm

UPDATE: Lenny Kravitz

The other day Your Mama discussed the Miami Beach, FL house that rock star Lenny Kravitz recently foisted on to the market with an asking price of ,850,000 and ever since some of the children have been hissy fitting about wanting to see some photos of the interior.

Well children, pour yourself a tall gin and tonic and brace yourself puppies because here they are.

If anyone were to ask Your Mama, and of course no one did, this kind of corny nightclub day-core applied to a private residence is exactly why Mister Kravitz can’t get sell his penthouse apartment in New York City. A sensible person–that being one with eyeballs–would need to get up in here and gut the place because let’s be honest, how many people actually want a metal grill catwalk that lights up from underneath in their home? Or a red lacquered living room that looks like a damn strip club? Or, lawhd have mercy, a hallway lined with mirrors and white faux-fur? Pleeze.

Now children, leave Your Mama alone for a bit because after peeping at Mister Kravitz’s decorative disaster down in Miami Beach, we are in desperate need of a nerve pill and a recuperative nap.

March 30, 2009 9:00 pm

In Other...

…real estate news about women who date rich and powerful men, Manuela Herzer, the much younger and former female companion of troubled Tinesltown tycoon Sumner Redstone, has purchased the Mulholland Drive compound of Lance Bass, the bug eyed ex-boy bander turned every one’s favorite Hollywood homosexual. We tease. Like everyone else, we like Miss Bass.

Property records reveal that Miz Herzer paid ,850,000 for the hill top estate that includes a total of 5 bedrooms and 8 bathrooms, two swimming pools, a guest house and spectacular views of both the San Fernando Valley and the glittery lights of Tinseltown. Unless the records are wrong, poor Lance Bass took a bit of a financial bath on this sale since the purchase price is slightly less than the ,880,000 records show he paid for the place back in October of 2003.

Mister Bass had been living in New York City recently, but to be honest, we’re not actually sure of his real estate wherabouts at this point.

Unfortunately, Your Mama knows next to nothing about Miz Herzner. She’s reported to be several decades younger than Mister Redstone–who apparently likes his ladee friends young enough to be his daughter–and in late 2008, amidst his seemingly amicable dee-vorce from the also much younger Paula Fortunato, Mister Redstone was twice spotted dining about town with Miz Herzer sparking rumors that there might be a reconciliation between the former lovebirds.

According to both Our Fairy Godmother in Beverly Hills and proven with property records, in November of 2008 the recently kicked to the curb Miz Fortunato forked over ,150,000 of her settlement money to buy a 5 bedroom and 9 bathroom house on Liebe Drive in Beverly Hills. Not bad for a gal who was a modestly paid 40-year old New York City school teacher before hooking up with her octogenarian ex-huzband in 2003.

March 30, 2009 9:00 pm

Live Like L'Wren Scoot

SELLER: L’Wren Scott
LOCATION: Tuxedo Terrace, Los Angeles, CA
PRICE: 9,999
SIZE: 1,712 square feet, 3 bedrooms, 2 bathrooms
DESCRIPTION: Celebrity-owned, but easy to show French Normandy Castle built in 1926 by Fred Hansen. The utmost in privacy and seclusion, yet minutes from the heart of Hollywood, this home is like a fairy tale come to life! Two secured entries off of street lead to a garden courtyard that feels like an English countryside. Privacy, seclusion, out-of-area experience are in abundance here. Perfect for artists, writers, entertainers or your client who simply wants to enjoy being home.

YOUR MAMAS NOTES: Considering this house has been on the market since July of 2008 and considering that the listing text boldly announces it is “celebrity owned,” it’s somewhat surprising all us nosy real estate gossips had not already sniffed this one out. Now that Rolling Stone senior citizen Mick Jagger and his ladee-friend L’Wren Scott are reportedly living in sin in London, Mizz Scott has less use for her modest–if not inexpensive–hideaway tucked into the hills of the Bronson Canyon area of Los Angeles and currently listed for sale with an asking price of 9,999.

Like a large number of gorgeous gals who wind up arm in arm with rock stars, Miss Scott started up her ladder of fame as a cat walker who worked her 6′4″ former Mormon stuff back in the 1980s for fancy fashion designers such as Chanel and Thierry Mugler. In the mid-1990s, Miss Scott decamped for the sunny west coast of the U.S. of A. where at first she headed up PR for Prada and then became a noted and in demand stylist to the stars dressing a-list ladees like Nicole Kidman, Julianne Moore and Ellen Barkin. Along the way, Miss Scott did up the costumes for a few movies, met Mick Jagger and then reinvented her professional life once again. In the last few years, Miss Scoot has transformed herself into a fashion designer with the same red carpet clientele she enjoyed as a celebrity stylist. It’s a good thing Miss Scott fraternizes with the demimonde children because those are the only damn people who can afford her 0 Bateau neck tank tops and ,875 satin bustle jackets.

Anyhoo, property records show that Miss Scott purchased her turreted Tuxedo Terrace house in June of 1996 for 5,000. Oh mercy children, remember the good ol‘ days when you could still pick up a starter home in Los Angeles for well under 0,000? Nowadays you gotta be well employed and reasonably rich to even think about buying a modest house like this considering that the mortgage alone will be well over four grand a month.

Records and listing information shows the French Normandy style house was built in 1926 by a gentleman Your Mama has never heard of named Fred Hansen. The house measures in at just 1,712 square feet and listing information indicates the house stands three stories tall and includes 3 bedrooms and 2 bathrooms.

There are, additionally, a living room with a vaulted ceiling, a formal dining room with stained glass windows and a small, lightly updated kitchen where there does not appear to be enough counter space to even make tuna fish sandwich let alone an actual mean. None the less, the kitchen does have a certain sort of relaxed, cottage charm and a magnificent mint green vintage stove. The not particularly large master bedroom suite includes a small bathroom with a soaking tub that appears to be molded from concrete and has a tiled niche for all Miss Scott’s lotions, potions and bubble baths.

Outdoor spaces include a secluded and walled courtyard at the front and an overgrown and elegantly wild backyard garden that we think our attitudinal pussy cat Sugar would find a wonderland of vermin hunting.

Photos show the home retains much of it’s original charm such as the carved stone fireplace in the living room and has been imbued with Miss Scott’s personal style, which Your Mama might describe as a kind of bohemian chic meets a Moorish manor house meets the Paris flea markets sort of thing. Clearly this is not a home ready for the pages of Architectural Digest, but it does look like the sort of place put together someone secure enough in their decorative joie de vivre that they don’t really care what’s considered to be the latest and greatest in day-core depicted on the glossy pages of magazines like Metropolitan Home.

In addition to their shared London digs, Your Mama presumes Mister Jagger has given Miss Scott the keys to his many other homes. Although we can not confirm ownership of each them, Mister Jagger’s long list of residences is said to include an apartment in Manhattan, a French chateau near Tours called La Fourchette, a two-floor flat next door to the 26-room townhouse in the Richmond Hill area of London (which Jerry Hall got in the dee-vorce), and two adjacent villas on the super swank island of Mustique. Your Mama read somewhere that Mister Jagger also has a 5-bedroom house in the Hollywood Hills, but we can’t confirm that so don’t go spreading that around like you know what yer talking about.

March 29, 2009 3:59 pm

Better Living Show Starts Today

Learning to live green won't cost you any this weekend. The free Better Living Show starts today and runs thru Sunday at the Portland Expo Center.

The Better Living Show is the "Northwest's Largest Sustainable Lifestyle Show." There will be food, music, and cooking demonstrations. But the focus will be on living sustainable.

Seminars will take place all three days with topics such as:

Buying an Energy-Efficient New Home
Beautiful, Edible, Organic Gardening
Federal Tax Credits for Energy Efficient Home Improvements
Easy Steps to Green Cleaning

There will also be a green jobs fair allowing people to explore careers in the alternative energy and environmental sectors, meet recruiters from Northwest green businesses and learn what is fueling the industry’s growth.

In addition, you can visit the Good Energy House to learn how to shrink your energy costs and your carbon footprint. And you can also bring the following items to the show to recycle:

• Electronics
• Cell Phones
• Household Items & Small Furniture details
• Car Seats
• Bike Helmets
• Styrofoam

March 29, 2009 3:59 pm

NO BOTTOM for New Home Sales

This is an update to my prior post further detailing my NO BOTTOM in new home sales call.

Again, the purpose of looking at the months of supply and overall inventory level is to see how imbalanced the new home market is.

So long as there is too much inventory, prices will fall.

Whereas in other markets (stocks, potatoes, etc.) falling prices can tend to lure in buyers, it appears that in the housing markets (new and existing) steadily declining prices may (at least for a time) tend to depress sales as buyers either become opportunistic for better deals or leery of buying into a large loss.

OR simply everything is playing out in the context of a weak economy where job market instability and flat to declining real incomes keeps buyer sentiment low… there are many ways to read it… certainly there are many different vicious circle cases to be made.

In any event, new home inventory levels are still too high for a convincing bottom in new home sales.

Study the following chart (click for larger) as it clearly illustrates the current imbalance.

Although in past "new home sale bottoms" the seasonally adjusted annual sales rate of new homes hovered around 400K units, the standing inventories were typically 100K units less resulting in a monthly supply of somewhere around 10 or less.

Today though the seasonally adjusted annual sales rate almost exactly matches the standing inventory level resulting in a seasonally adjusted 12.2 months of supply (12.0 unadjusted).

This obvious imbalance must defeat any sense of urgency (a key component of any home selling scam) for new home buyers particularly in areas where new homes dominate.

The extra inventory most likely appears obvious as certainly does the declining prices leaving even the most passive buyers logically sidelined for better deals and the new home market with continued declining sales.

March 29, 2009 3:59 pm

Question of The Day - Too Systemically Important For a Base Pay of $180K?

How great is this?… On the very day that Bankers meet with Obama to tell him that "We're All In This Together" Bank of America released plans to increase investment banker base pay by… get this… 70%!!

Simply Unbelievable!

Apparently "during such challenging times" they regularly "review compensation programs" to decide if investment bankers can get by with a mere 0K increase.

Wow! America you are suckers! That's your money! Ha! Ha! Ha!

Billion in government bailouts and hmm… have you checked the APR on your overdraft lately?

What’s it up to like 29% now?

March 29, 2009 3:59 pm

Unemployment Mashup – MA vs. RI February 2009

Subtitle: Crushing the Gap?!

As I had noted in my original post, historically it has been very unusual for there to be more than a 1.5% difference (either more or less) between the unemployment rates if Massachusetts and Rhode Island.

Recently though, we have seen a historically unusual spread between Rhode Island's high and accelerating rate and Massachusetts' far lower but now quickly rising rate.

In fact, the current 2.7% spread continues to exceed all but one spread seen in at least 40 years.
This indicates that either Rhode Island's current rate would need to fall dramatically or the Massachusetts rate would need to increase sharply…. My sense, especially in light of the financial turmoil seen since September, is that Mass will be the one playing catch-up.

Today's regional unemployment report shows that, in February, the Rhode Island unemployment rate rose again to 10.5% while the Massachusetts rate jumped again to 7.8%.

In February, Massachusetts experienced the largest year-over-year increase in unemployment since the recessionary environment that followed the tech-led dot-com bust jumping 69.57% on a year-over-year basis clearly indicating that Mass has now entered a period of truly explosive unemployment growth.