Housing Doom

"The bill clamps down on conflicts of interest at the Federal Reserve, making the head of the New York Fed, for example, a position appointed by the president of the United States and not hand-picked by the very bankers the New York Fed is responsible for regulating," the Connecticut Democrat told reporters as he unveiled his bill. // Critics said the proposed governance change could weaken the central bank's independence. – Reuters¹

Well duh.  As we noted in, among other places, Doom's introduction to our recent Jesse / Ives Smith re-post, the NY Fed is actually pretty independent from the Fed Board itself, and within its present configuration with the great banks of Wall Street has about as much independence from Washington as Florence did from the papacy during the 16th Century.

IMHO even granting the Fed supervision over the Second District would be an improvement

LATER: Obama's FDR moment seems to be turning into his Andrew Jackson moment,⁶ if he's got the will.  Just the prospect of the first real regulation of Wall Street's IBs in decades will inevitably turn Dodd's proposal into a Superbowl of financial lobbyists.  Meanwhile, the Daily Bell has an article² on the Joseph Stiglitz Fed criticisms which has some nice things to say about the web.

The Fed is in such bad odor because the Internet has exposed its conflicted inner workings to people throughout the United States for years. Viewers, however, likely did not take the Internet's presentations seriously for a long time. But the advent of the financial crisis has changed this perception. By now, even, many may have found the Internet-based free-market interpretations of the Fed's mechanisms more compelling than the dry-as-dust socialist perspectives offered in manifold university textbooks or distributed plentifully by the Federal government and the Fed itself.

The WSJ actually asserts³ that "[t]he biggest winner in Mr. Dodd's bill appears to be the central bank." Murdoch's gang is ignoring the US appointment of the NY Fed Pres under the proposal so hard they might as well be staring straight at it.  The story's first paragraph is pretty ironic since up to now those same big banks were hardly being overseen at all.

WASHINGTON—U.S. Senate legislation aimed at overhauling regulation of finance would cost large banks billions of dollars, prevent them from taking certain risks and create a new regulatory infrastructure to oversee their activities.

Financial blogger Jr Deputy Accountant (JDA — great handle ) doesn't appear to agree with me.⁴ And Igor points out that I wasn't even the first up on this story with the "D" word.  Don't miss JDA's just-released post "Chris Dodd Taps the Fed's Secret Backdoor."

Notice you didn't hear a peep out of the NY Fed when a handful of clever Fed Presidents were campaigning to keep the Fed "independent" and free from political interference. JDA will ignore the fact that they gave that up about 18 months ago when they pledged whatever it takes to prop up everyone except Lehman Brothers as this is not about arguing over whether or not they are actually independent but criminalizing the NY Fed. Duh.

… and the plot thickens; this⁵ just in from Salon.

The Financial Times' Tom Braithwaite dropped this intriguing bomb:

The new proposal would bar appointments of Wall Street bankers as directors at the New York Fed.

I hadn't seen this news elsewhere, and it took a little digging to find the relevant text in the bill. And having done so, it's unclear that the bill specifies exactly what the FT is reporting.
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Under the Dodd bill all class A and B directors will be appointed by the Board of Governors of the Federal Reserve System. …

Read the rest of this entry »

As we near completion of Doom transcript Sub VI Hotel for AEI seminar "Canadian versus U.S. Housing Finance: Comparison and Implications," along comes my morning paper with a clutch of business article which, taken together, paints a picture all too reminiscent of what twist was seeing in the south-west US markets towards the middle of the '00 decade.

These three pieces are all from the "C" business section of today's Halifax Chronicle-Herald, and added quite the kick to my breakfast cereal

Bruce Erskine — "Housing a deal in Atlantic Canada
RBC: Homes more affordable here"

Relatively low housing price increases in Atlantic Canada should support "brisk" regional real estate activity this year, particularly in major markets, [RBC senior economist Robert Hogue] said.

Sunny Freeman (CP): "Homeownership more costly
Expected rise in interest rates likely to keep prices high"

Strong demand, fuelled by exceptionally low mortgage rates, has increased competition for the limited supply of homes for sale, which continues to drive prices up, the report said.

RBC senior economist Robert Hogue said the problem is likely to get worse with an anticipated rise in interest rates in the second half of the year.

Roger Taylor: "What can we afford? Steele had better know"

A good affordability number is one of those good and bad indicators. While it is a good sign for anyone considering buying a home, it may also show that demand for real estate is slowing.

Here's a bit of self-serving MSM pabulum to start you on your day.

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NYT: "Most Online News Readers Use 5 Sites or Fewer, Study Says"

Which means that the majority of folks don't check up on Google News Biz, or the great blogger aggregations like Dollar Collapse and the Implode-O-Archive.

But Igor and the gang here at Doom think that unlike "most online news readers," people who make use of resources like our own sidebar might just be getting essential vitamins and minerals in their diet that those other guys lack, no matter how good their up-to-five selections are.

But as pay walls go up, sidebars stand down.  FT is already first few free, so it's only rarely we can put their stories up now.  As that model spreads, our data mining capabilities will fade away and you too can enjoy the benefits of being dependent on a few good sources.  The Atlantic asks, "How Will Online Journalism Ever Make Money?" but would it not be better to first ask how they can keep their readers informed?

Maybe it's more efficient to go straight to the WSJ without passing the AJC or the Canton Repository (let alone HousingWire or TheTrumpet) but somehow life would just become a bit less fun, IMHO.

It has been awhile since we've dug into the Las Vegas home sale numbers.  Of note this month is that the most interesting number is not a sale statistic at all- it's the number of single family homes that have rented.

The Greater Las Vegas Association of Realtors (GLVAR) has only been tracking the number of homes leased since 2006.  In January 2006, 1113 homes were rented. [This number only includes homes leased through the MLS.] That number has steadily increased.  In February 2010, a record 2102 homes were leased:

Note the difference in trend between the number of homes rented and the number of homes sold.  2390 homes sold in February, up slightly YOY from last year's 2288, but dropping from January's 2608, an unusual trend for this time of year:

Could it be that the thrill of homeownership is cooling off, or are fewer potential buyers qualifying?  It might be a combination of both.  With more homeowners walking away, people might be thinking twice about walking toward homeownership.

While sales have been headed down, listings are moving up.  Only 19,707 homes were listed for sale in December, a level not seen since February 2007.  However, listings have risen for the past two months.  There were 22,142 homes listed at the end of February.  Consequently the 5.8 months supply that we saw in December has increased markedly to a 9.3 months supply in February.

So where are home prices?  February's $135,694 is down 12.8% YOY, and 56.9% off of the June 2006 peak of $315,000.

So where are home prices headed?  Long time Doom nemesis Larry Murphy said last month: Read the rest of this entry »

This is one heck of a way to encourage flight-to-safety buys of Treasury Debt

From the first abuses of QSPEs to the latest headlines about 105 repo, the whole lesson of this financial crisis is that the economy is more fragile than we had previously thought and the system just can't stand any more adventures like this.

Doom is pleased to re-post this important article from the mysterious Jesse's café under his generous Creative Commons license.

"US Making Preparations for a Pre-Emptive Strike on Iran (or Some Other Eastern Destination)"

by Jesse

I  remember a few years back poking around some half-finished homes where the builder had gone into bankruptcy.  The homes were located in Queen Creek, AZ. The homes were poorly constructed, and weren't being helped by being left out in the weather.  Flooring had been warped by the rain, the roof underlayment was faded by the sun and a number of critters had moved in.  When I walked in, a bunch of pigeons flew out.

About a year later, another builder bought the homes and finished them off.  The walls were filled with bird nests and droppings.  Some places were black and damp, but I'm pretty sure the workmen just drywalled over it all.  I've always hoped that no one with severe allergies bought those things.

M has found a property that brings the whole critter issue up to a whole new level however.  He sent me the listing for the property at 36452 N. 105th Pl., Scottsdale, AZ. [MLS# 4333227] Here's a picture of this 4,759 sq. ft. beauty:

The listing says:

REO, Sold AS-IS, Home is incomplete in the beginning of construction, great for picking your own floor plan and upgrades. Beautiful mountain views, gated community, club house, community pool.

The Realtor comments states however:

[Realtor Remarks:  Please see documents tab to submit an offer.  Lockbox code XXXX. Buyer to verify all facts and figures. BEWARE OF BOBCAT LIVING IN PROPERTY.] Read the rest of this entry »

The clear and present danger posed by this deranged edifice built on the unstable foundation of subprime mortgages was not foreseen by the chief executives of America’s premier banks. It was not foreseen by government regulators, by Treasury officials or by the Fed. It was foreseen, however, by a handful of investors, who were aghast at the madness they saw on the Street and who used their prescience to make a fortune off the financial system’s calamitous meltdown. … – from Michiko Kakutani's review¹ of "The Big Short: Inside the Doomsday Machine", by Michael Lewis

I think Doom and Doomers were pretty much focused on just warning people as the risks become more and more compelling and obvious.  So were we also idiots for failing to enrich ourselves in the process?

Read the rest of this entry »

Hearty Doomish greetings go out to Ian M, his friends in and around UBC's comp sci department and nerds everywhere (hi Admin!)  This is your day

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Alas at some point along the way Ian's old man severely lost his way and became … an Arts nerd?

There was the time back on June 16, 2004 when the Chronicle-Herald picked up a stale wire story and I awoke to find …

"Orlando Bloom Named World's Sexiest Actor"

emblazoned all the way across page E1 of my breakfast newspaper.  I couldn't stop laughing for a week.

That was followed by a year and a half painstakingly constructing a Spenserian sestina to demonstrate the application to D-chiro-inositol of a radical new strategy for cyclitol specification, but for today perhaps it will be just as well if I limit the fun and games to a pair of ghazals inspired by one of the Gray Code examples in Knuth.  They're actually two of the draft sections for a long sequence of celebrations of our neighbourhood catch basins I've been working on titled Empire of Drains.

            Pawns

Be my sword you fat French spade, mucking to the prize.
Glow harder, swifter, smaller, oh spark struck in my father's eyes.

I found the willow wands unasked but they'll look nice
on the mantle, fire crackling, skirts rustling; tinkling of father's ice.

Outside, together, raise the picnic table, praise the cross.
How warm it is to shelter and forgather at my father's house.

Who wants to carry a caldron, mince mushrooms, memorize a curse?
Not I, a diamond scepter let me bear on father's horse.

But maybe it's for me when others judge the case.
If I could spell, would it disturb my father's ease?

Let me bear tankards while the children all carouse.
I see his club, there's no one in this awful house.

Locked fast inside the cockpit; see, this finger knows
I need to scream and dive upon my father's house.

Awake pentacle and float above my cloud. You'll rise
to when you rain like shekels, dancing in my father's eyes.

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            More Pawns

Despite the love no resting in my mother's arms.
I drained that cup for nation (Mother's) harm.

Burn this stick, I'll show you what I am.
Dentistry accorded with my mother's aims.

Sing out, out! It won't contain, this room.
Dance seven-times-seventy-times around my mother's home.

Ring-scores on glass sparkle in the gloom.
Last night I dreamed of mother, home.

Let them perceive a black sizzling when we come.
And what's for this night's supper mother, ham?

They came for singing, but I'll entertain the dome.
Tap wands, pull bunnies till my mother come.

Break in, the gate, I need to dig that loam.
The brush awaits let burn my mother's umb.

Smart toilet – what coin would operate, what alms?
Brush off this straw, then set me in my mother's arms.

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John Wise McLeod

Maybe Obama can launch HALM, Help For Lawmakers: [Thanks L!]

The state's money problems are so bad that lawmakers are getting eviction notices and calls from collection agencies about their offices back home.

At least five state senators say they've piled up so much unpaid rent, sheepish landlords are asking them when the government plans to make good on its bills.

"He said, ‘Ira, I'm sorry,'" said Sen. Ira Silverstein, D-Chicago, recalling a visit from his landlord delivering an eviction notice. "And what am I going to do? I can't argue with the man."

While none of the lawmakers has actually gotten the boot yet, they are getting a taste of the frustratingly slow pace at which the state pays bills as it careens toward a $13 billion budget hole. It's a pain that's magnified exponentially for school districts, drug rehabilitation counselors and businesses awaiting tax refunds.

It isn't just the rent that's the problem: Read the rest of this entry »

The recourse to defaulting mortgage borrowers. [slide 12] I think we … and I was brought up to date of some recent changes in Alberta that make it even more uniform across Canada. In this country roughly half the States allow recourse, half bar it, but even in the States where recourse is allowed, it doesn't seem to be pursued very often. And I think we've seen in some of the European countries, and Denmark is one that comes to mind, one of the strengths of the Danish system is, not just recourse, but aggressive pursuit of delinquent borrowers. // And that's what's key. It's not just having recourse, but it's making sure you go after them. And I think to some extent this reflects maybe one cultural difference between Canada and the US. And it is that Canada, at least in terms of housing finance, seems to have more of a creditor orientation whereas the US, given its populist history has long had a much more of a bias towards and tilt towards debtors. And I think where you see this particularly is with regard to recourse. – Bert Ely, a couple of paragraphs below the 1:15:00 point of Sub VI Hotel

When the bubble at The World burst last fall, Europeans fled for their lives, famously leaving the keys right in their luxury cars at the airport parking lot.  Could a similar situation be unfolding in slow motion in the American south-west?

It was lucky I spent yesterday finishing up Bert Ely's presentation from Sub VI Hotel, because today twist's old friend Hubble Smith from the LV Review-Journal is lead author on a must read article on strategic default trends in Nevada.  NV's a recourse State, but CA isn't.  Are former Californians going to have to flee back down Route 15 to escape the consequences of their failed flips?  And would those NV judgments be enforceable in CA, creating back-door recourse?  The gang at AEI is pretty hot on federally imposed standards for recourse and they're talking NV standards, not CA.

LV R-J: "Underwater homeowners leave behind mortgages, but lenders can still come calling: Moral, social variables play role in predicting defaults"

A subsidiary of Goldman Sachs Group filed more than 50 lawsuits against Las Vegas homeowners in one month last year. Some experts say the litigation could signal the beginning of a Wall Street backlash against defaulting borrowers.

[bankruptcy attorney Philip] Goldstein expects short-sellers to face a flood of collection actions in the coming few years. Second-mortgage lenders, especially, are aggressively pursuing borrowers.