HAPPY ST. PATRICK’s DAY!

A DAILY LOOK AT THE STORIES YOU SHOULD BE READING

Real Estate

- Piedmont is the last man standing in the housing decline. The storm isn’t over yet …

- In good news, housing construction surged in February. Can this momentum last?

- Landlords “never fear, Obama is here”

- It continues to be expensive to insure mortgages.

Finance

- Will somebody please force the banks to sell their assets to one of the thousand funds that are our there ready to buy!?

- When the economy is in a recession and the consumer is spending less, it might not be the best time to launch a $2,000 computer that is not an Apple.  Just a thought.

- Speaking of Apple, is your iphone “green”? Nope

- Warning to AIG executives: your money is not safe.

Ciriosly Funny

- Need a job?  There are plenty available in North Dakota.

Conditions in the world of building new homes remains poor to quite poor. The National Association of Homebuilders (or NAHB), the industry lobbyist group, released its monthly builder confidence index this morning, which registered a near-record low reading of 9. Sentiment was unchanged from last month, which matched analysts expectations.

The builder group is hopeful the market loosens up in the coming months, ending almost 4 years of rotten building conditions. Likewise, I am hopeful to find a bag full of money on the streets of San Francisco, somehow passed over by the swarms of transient, unemployed investment bankers scrounging Market Street for scraps, ending almost 4 years of rotten personal financial conditions.

The NAHB also made the bold statement that they believe the housing market will bottom around the middle of this year. This estimation is based primarily on the aforementioned statement that they hope the market will loosen up. There is little evidence the housing market is approaching a bottom, as prices are now tumbling in virtually every region of the country.

Anecdotal evidence of the challenges facing homebuilders mirrors the industry’s sentiment reading.

Banks are literally giving land away for free, but the economics of new construction are so upside down that builders are turning it down. The carrying costs – primarily fees paid to municipalities – are so high the land isn’t worth the price: Nothing.

One of the first signs of a housing turnaround will be when builders begin acquiring vacant land. Until this very modest indication of confidence is seen, the bottom will remain elusive — hope notwithstanding.

A DAILY LOOK AT THE STORIES YOU SHOULD BE READING

Real Estate

- If you can’t get a loan … ask the seller for some money.

- Loan modifications remain a complete mess.

- Foreclosure moratorium = foreclosures happen later rather than sooner.

- A playboy mansion is for sale!

Finance

- Even the rich guys are feeling the pinch.

- Consumers are feeling better … Cirios remains skeptical.

- China is not feeling so good about their biggest investment (America).

- Madoff ran a $50 billion ponzy scheme by himself … in other news, I can jump over buildings.

Ciriosly Funny

- With hard work and determination, anything is possible.

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By ANDREW JEFFERY

This post first appeared on Minyanville.

Despite herculean efforts to stop the foreclosure juggernaut, Americans are still losing their homes at near-record pace.

According to RealtyTrac, a firm that sells default data, foreclosure filings rose in February to nearly 300,000, up 6% from the month before. This figure is the third highest for any month since the housing market turned south in 2005.

As property values fall, more borrowers are finding themselves underwater – owing more on their homes than they’re worth. This, coupled with job losses, means homeowners are missing payments at an alarming pace.

Sky-high foreclosures are even more astounding when myriad loan-modification efforts and short-term foreclosure moratoriums enacted by big lenders like Fannie Mae (FNM), Freddie Mac (FRE), JPMorgan (JPM) and Bank of America (BAC) have been taken into account.

And while President Obama’s hotly debated $275 billion housing-relief package is barely a month old, its becoming clear that no cleverly worded press release or inspiring oratory can reverse the trend that’s firmly in place: Housing supply remains elevated, with buyers sitting on the sidelines awaiting better deals. Prices, as a result, will keep falling for the foreseeable future.

In fact, Rick Sharga, executive vice president at RealtyTrac, told Bloomberg he believes the country’s biggest lenders have yet to list over 700,000 bank-owned homes.

This “phantom supply,” as its known in the real-estate world, paints a bleak picture for the housing market in the near term. Even though strong sales activity in distressed markets is pushing aggregate inventory data back towards historical norms, phantom supply is patiently waiting to punish those bold enough to prematurely call a bottom.

Further, well-to-do areas, formerly immune from home price declines, are starting to follow their more bubbly counterparts over the proverbial cliff. In the San Francisco Bay Area, for example, 15 homes had sold for over $5 million by this time last year. This year: Just one.

Many of the most distressed markets are in their last gap of depreciation. And while material appreciation is simply fantasy, high-end markets will pick up where they left off and keep broad measures of property values under pressure.

But as this dynamic plays out — and the depreciation torch is passed from the “subprime” people to those who are “prime” — opportunities will emerge in markets that stabilize first. Just as housing prices overshot to the upside, they will likewise overshoot to the downside.

The opportunities are currently few and far between. But with each day that passes, the world of possibilities grows, if only ever so slightly.

A DAILY LOOK AT THE STORIES YOU SHOULD BE READING

Real Estate

- In good news, buyers looking for $5 mm homes have numerous choices.

- Saving money is very, very important because you do not want to end up like many Americans.

- If the world was run in a business school classroom, this would be good advice.

Finance

- If Citi can make money, I think we can all make money.

- What you need to know about what Big Ben said this morning.

- Seriously, what does the future of hedge funds look like?

Ciriosly Funny

- For as bad as things are here in the states, at least we don’t have to worry about attacks from crazed kangaroos……yet.

A DAILY LOOK AT THE STORIES YOU SHOULD BE READING

Real Estate

- Shouldn’t a MOD hurt your credit?

- If I told you I talked to this auctioneer after one of these events in Washington D.C. last year, would you believe me?

- Hold on … subprime is not the only reason we are in this mess!? You must be crazy

- When people think they can get almost $17.5 mm for a unit on a cruise ship, you know we are not at the bottom of the “housing” market.

Finance

- Today’s important stocks: Drugs and Electricity

- Finally, Warren Buffet is starting to listen to us.

- I apologize.  I cannot get enough of the bonus situation at Merrill Lynch.

- Financial news companies should not be the news.

Ciriosly Funny

- Lying about books you’ve read? Seriously?  I mean, I dont want to brag or anything, but Ive read them all.

By ANDREW JEFFERY

This post first appeared on Minyanville.

There isn’t an economic forecaster or media pundit alive who isn’t angling to be the first to (correctly) call the bottom in housing. Many have tried; they all have failed.

But what happens when one’s right?

At some point in the future, broad home price indicators will cease to slide, then stabilize and even begin to move back up. When, and in what shape that trajectory will be, of course remains a mystery. As I’ve written in the past, the eventual recovery in housing will be a prolonged, localized event. The rising tide will not lift all boats, as the fundamentals of the old cliché “location, location, location” will be truer than ever.

And although predicting the date of this event is a fool’s errand, savvy home buyers will be ready to jump in ahead of those who remain in their shells long after the best bargains are behind them.

Here are 5 simple things you, the future home buyer can do now, without putting your nest egg at risk, to be ready for the coming opportunities in real estate:

1. Have patience.

There will be false bottoms, dead-cat bounces and treacherous pitfalls on the path to a recovery in real estate. Be patient. Don’t believe the hype – a couple months of strong sales numbers don’t foretell and imminent rebound in prices. Let the beginnings of a trend develop before you begin your home search in earnest. Future appreciation will come slowly, as tightened mortgage guidelines and fear of the collapse we’re now experiencing will not be soon forgotten.

2. Find a market, do your homework.

Had your eye on that classic Victorian around the corner from your kids’ future grade school, and hoping the elderly couple living there knock off just in time for you to swoop in at the estate sale? Expand your search.

Pick a couple of areas you could be happy in – look in multiple cities even. By focusing too narrowly on a single street, or even a single neighborhood, you could be missing out on what could be a fantastic opportunity on the other side of town. Don’t compromise, but play with your list of priorities to give yourself the most “exposure” to localized markets that may become increasingly attractive.

Tour the schools, scope the neighbors – hang around on Halloween to see who gets egged. RealtyTrac.com is a great resource for watching foreclosure activity all over the country and in your backyard. Their free site provides a great overview of cities and neighborhoods, but you have to pay for the house-by-house detail. Unfamiliar with an area? Use RealtyTrac to eyeball major neighborhood dividers (railroad tracks, highways, main roads, etc.) and examine foreclosure activity on either side.

3. Find a broker and start a housing “tracker”.

Real estate brokers can be a valuable tool in your home search – use them.

An aside: The commonly used term “realtor” denotes an association with the National Association of Realtors, or NAR, the lobbyists who have been predicting a bottom since the downturn began over 3 years ago. Tread carefully with anyone proudly bearing an NAR pin. Contrary to what many tell you, you don’t need to be a realtor to have access to MLS. But I digress.

Today, with transactions down in all but the most distressed areas, any broker worth his (or her) salt should be out prospecting for future clients, not proclaiming the time to buy is now. Collect referrals, test drive a broker or 2 and find one you’re comfortable with. Your broker should not just understand the local market but be up to speed on the macro-level events affecting the real estate and mortgage markets. Ask him what a CDO (collateralized debt obligation) is – watch for a flinch. For better or for worse, understanding the state of Wall Street is as important these days as understanding the state of your street.

Ask your broker to help you develop a “housing tracker,” a simple tool that allows you to watch homes as they come on the market to see when and for how much they sell. Watching the life cycle of homes in a given market will give you a sense of how desperate sellers are, when asking prices drop and what concessions buyers are able to receive from sellers. As concessions begin to swing in favor of the sellers, the bottom may be nigh.

4. Start saving money.

If there’s one sure bet in the housing market, it’s that mortgage requirements will remain tight for the foreseeable future. Banks — Citigroup (C), Bank of America (BAC), JP Morgan (JPM) and Wells Fargo (WFC) being the obvious examples — are hoarding cash and reticent to lend even to the most qualified buyers. Unless a loan falls within guidelines set by Fannie Mae (FNM) and Freddie Mac (FRE), rates remain elevated and approvals elusive. This isn’t likely to change any time soon.

Save for a down payment and be able to point to liquid reserves (i.e. money in the bank) during the application process. Think about this as the lender’s cushion should you fall on hard times – and banks will need all the cushion they can get.

5. Think of your home as an investment, not just a place to raise your kids.

This may seem counter-intuitive, since speculation on housing prices played a huge role in creating the recent housing bubble. But speculating and investing are not the same thing.

A home, in addition to being a place to raise kids, is a massive financial obligation. Becoming emotionally attached to a house, rationalizing the financial realities away and hoping paychecks keep coming simply isn’t a viable home-buying strategy. As un-romantic as it may be, treat a home as you would a stock: Examine it, turn it upside down, run the numbers. Love it every day you’re there, but financial responsibility and emotional attachment don’t need to be mutually exclusive.

The time to buy may not be today — and it may not be tomorrow — but we’ll be closer to that day tomorrow than we are today. However, just as prices overshot to the upside, they’ll likely overshoot to the downside – be ready when that day comes.

Preparation, not hoping, will be the key to taking advantage of the opportunities that will present themselves on the other side of this mess.

Real Estate

A DAILY LOOK AT THE STORIES YOU SHOULD BE READING

- Maybe having an intelligent partner when looking to invest in real estate is a good idea … ask GE if they agree.

- Houses are selling in 5 minutes. No word on how long it took them to lose equity.

- Breaking News: Las Vegas real estate is in BIG trouble.

- Spitzer is back in D.C. … somebody call the paparazzi!

Finance

- Cartoon characters continue to deliver sound financial color.

- Housing is not the problem, the lack of jobs is.

- The middle eastern oil barons are not the only people crossing their fingers that you drive more.

- Wells Fargo cuts dividend … looks like buying subprime mortgages for $1.05 on the dollar was not such a good idea after all.

Ciriosly Funny

- If you cant afford to buy real estate, you could always get it for free.

A DAILY LOOK AT THE STORIES YOU SHOULD BE READING

Real Estate

- The biggest problem for the housing market right now? Foreclosures? …Deliquencies? ….Nope, its the economy.

- Welcome to the United States: the land where politicians and judges are the ultimate financial planners.

- Mortgage rates are rising.  Why you ask?  Because betting on American home owners requires a bigger return.

- In lighter news, celebrities are being forced to rent.

Finance

- If you get laid off by Berkshire Hathaway in Omaha, are there any other financial companies to work for in the area?

- Wait, you can build your business in a recession?  Crazy thought

- Somebody thinks the S&P 500 is not going to 600. We all hope you are right.

- No credit + no jobs = retail sales down

By ANDREW JEFFERY

This post first appeared on Minyanville.

Many months ago, long before bureaucrats dreamed up their massive, ill-conceived loan-modification programs, the free market found a solution to the mortgage mess.

Specialists in handling distressed debt amassed tens of billions of dollars to buy up bad loans at steep discounts. The offending institutions who had bought the stuff in the first place would be forced to own up to their mistakes, take their lumps and move on. Meanwhile, those deft enough to clean up the problems would reap their just deserts.

Alas, it was not to be.

Sometime around the middle of 2006, some regulator woke from a decade-long slumber and decided to hazard a look at the balance sheets of America’s largest financial institutions. To his horror, just about every bank in the country would be insolvent, given the going prices for delinquent mortgage debt.

He raced off to tell his boss, who alerted his superior, and so on up the chain until then-Treasury Secretary Hank Paulson got wind of the coming tsunami of losses. Paulson barely flinched, for Wall Street’s top brass was well aware their collective predicament. After all, it was the likes of his former charge, Goldman Sachs (GS), who designed and sold the toxic assets in the first place.

The choice then was simple: Step back and let markets sort out the mess, risking the lives of storied firms like Citigroup (C), Bank of America (BAC) and JPMorgan Chase (JPM) – or latch onto the absurd notion that these institutions were “too big to fail,” and begin a process whereby the American taxpayer’s hard-earned nest egg would be used to forestall the inevitable day of reckoning.

We now know how that sad story ends.

To prevent the market from clearing these assets at their true value — sometimes just pennies on the dollar — lawmakers, bureaucrats and big bank executives huddled together and devised ingenious schemes like the Super-SIV, HOPE NOW, Project Lifeline, TARP, and other utterly contrived “solutions” that, despite their claims to the contrary, were simply ways to extend the lives of these zombie banks.

Two pieces today, one run by Bloomberg charting the failure of myriad modification programs to address the problem of negative equity, and one in the New York Times documenting the exploits of former Countrywide executives buying distressed debt from the FDIC on the cheap, evidence the abject failure of government efforts to stem the rising tide of foreclosures.

Private investors, the ones best suited to forgiving principal or lowering interest rates to keep a family in their home, were handcuffed by political bumblings. But these programs, by preventing true price discovery in the housing market, have likely achieved their goals of their designers.

Our banking system has buckled, but not broken. The eventually recovery, however, has been pushed well down the line and the cost shoved onto future generations. Those responsible have by in large retained their posts at the institutions deemed “too big to fail,” save a couple token scapegoats tossed to the media wolves.

Meanwhile, the responsible few who did not speculate on their home, did not use credit as a vehicle for illegitimate economic growth and never thought they’d be asked to pick up the tab for those that did, have now been asked to shoulder the burden.

It should come as no surprise that housing prices keep falling — indeed they must in order for true stabilization to occur. But the slow bleed, the persistent drag on the fundamentals of our economy, is doing more damage under the hood than our wise leaders would care to admit.

Still, they insist the more economic control centralized in Washington, the better. After all, the ones that drove us off this cliff certainly should know how to break the fall.