The real estate blog.

On this day two years and eleven months ago, Alan Greenspan made the now infamous observation that homeowners should use adjustable rate mortgages.

On February 23, 2004 Greenspan observed -

While borrowers can refinance fixed-rate mortgages, Greenspan said homeowners were paying as much as 0.5 to 1.2 percentage points for that right and the protection against a potential rate rise, which could increase annual after-tax payments by several thousand dollars.

He said a Fed study suggested many homeowners could have saved tens of thousands of dollars in the last decade if they had ARMs. Those savings would not have been realized, however, had interest rates shot up.

“American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage,” Greenspan said.
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One would think that with so many people waiting on the sidelines to buy a house and with so many others losing their houses that population demand would cause rent prices to increase. In the most bubblicious areas of the country, the opposite is happening. Rents are decreasing.

That gives you an idea of exactly how overbuilt some areas of the country are.

Vacancies have risen in 29 markets in the fourth quarter of 2007, including Las Vegas, Palm Beach, Memphis, Orange County, Calif., and Orlando, according to Reis Inc., a New York real-estate research firm. Ron Witten, a Dallas-based housing analyst, estimates there are 760,000 vacant condos and homes for sale nationwide beyond what the market could normally carry, in addition to a surplus of 350,000 vacant rental properties.
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In an abrupt turn of events yesterday it seems Angelo Mozilo, CEO of Countrywide Financial (CFC), is looking at his “golden parachute” turn to a lead parachute.

Last week, Bank of America (BAC), announced it would buy the troubled mortgage lender for $4 billion in stock, bailing out the company suffering from the mortgage crisis and providing Mozilo with a $115 million compensation package for running the company into the ground.

It appears B of A has had a change of heart. The Wall Street Journal reported yesterday the deal with Countrywide could go south unless the terms of the deal are renegotiated.

Countrywide Financial Corp. shares dropped nearly 10% Friday amid growing investor fears that Bank of America Corp. could walk away from its agreement to acquire
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If I were to be true to the sentiment in the title of this post, I would have provided a photo of a bloated Marlon Brando as General Kurtz in the film Apocolypse Now. What an apt title to describe the chaos that is about to descend on American homeowners as the promise of a housing boom turns into an absolute nightmare.

No matter where I turn, the images remain the same…ugly. Today’s Tribune reports New-home demand fell 36 percent along Wasatch Front in 2007. While the truth is actually more positive than the headline may project, the facts are housing in Utah is in big, big trouble. The report indicates home demand fell 36% in the last year based purely on the number of permits requested.

It’s important to remember this is a builder number, not a consumer number. While it will accurately reflect builder sentiment, it doesn’t necessarily reflect consumer sentiment.
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For those of you worried that troubled homeowners would get some sort of bailout from the Federal government, you don’t have to worry any more. It’s now clear the bailouts are going to those who need it the least and deserve it the least.

Bank of America completed it’s purchase of Countrywide Home Loans today in a $4 billion dollar stock deal, effectively doubling down the $2 billion convertible deal it brokered in August.

Countrywide gets to continue operations and its stock (CFC) will converted to Bank of America (BAC) stock -

Shareholders of Countrywide will receive 0.1822 of a share of Bank of America stock in exchange for each share of Countrywide. The deal is expected to close in the third quarter and to be neutral to Bank of America earnings per share in 2008 and lift earnings per share in 2009, excluding buyout and restructuring costs.
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It’s January, that time of goal setting and review of the previous year’s goals. Like last year, I’m going to write my goals down publicly in hopes of actually accomplishing some.

Reviewing last year is a good place to start. I wrote:

Organize my personal paperwork to make a clean loan file and qualify for a full/lite doc loan.

A year later, this is something I still need to do.

If I choose an investment (non-owner occupied) property, I need to have a down payment of 10%. So I need to insure I have the appropriate savings to close such a loan.

I accomplished this, but unexpected emergencies depleted most of these funds. Put it on the list again for this year.

I need to actively search for suitable properties here in Salt Lake as well as possible duplex or 4-plex properties in Louisville or Northern Kentucky.
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Wow is the economy getting ugly. And no, it’s not just the national economy. Things are getting bad all over because the framework behind financing for consumer debt, commercial debt, mortgages and businesses seems to be collapsing.

Major financial institutions have announced their latest results and the numbers are staggering. $18 billion was written off by Citi. J.P. Morgan has written off 1.8 billion. Job losses are mounting, foreclosures are rising and we’re not paying our car loans or credit card bills either. We’re in a credit crisis and no amount of rate decreases by the Fed is going to help.

Don’t think Utah is immune. Already the outlook for 2008 has turned sour. Job creation has decreased and it looks like the slow down in residential employment is a key part of it.
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You know the old adage, “give a man a fish and he’ll eat for a day - teach a man to fish and he’ll eat for a lifetime?” As cliched it is, that’s the best way I can describe the politician’s plans to solve the housing crisis. Yes, it’s a crisis. With all the various components of housing failing - foreclosures, mortgages, overextended lenders, I’m convinced this is a crisis.

Today, the Secretary of Treasury went to bat for the interest rate freeze that will help a small portion of homeowners facing foreclosure -

Treasury Secretary Henry Paulson used a speech Monday to defend a plan brokered by the Bush administration to “freeze” mortgage rates for some subprime borrowers and also to call on Congress to pass legislation to head off a housing crisis.

Meanwhile, President Bush denied an economic crisis, citing mixed indicators -
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It was bound to happen. As houses in neighborhoods get boarded up because of foreclosure and abandonment, neighboring businesses eventually follow.

With $4.00 + coffee drinks, Starbucks is certainly a fine example of American excess. Over the past 10 years, Starbucks has grown exponentially here and abroad. Now it has hit a brick wall. While coffee is a necessity for some, myself included, Starbucks coffee is a luxury. Working five days a week, one can easily spend $80 to $100 a month if they buy Starbucks every day.

Last quarter, Starbucks announced its first same-store sales loss in the three years it has published those records. Much of Starbucks growth has come from opening new stores which management has also put a damper on. Today the Seattle based coffee company
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