Paradise Valley Real Estate Blog

Buy Phoenix Real Estate NOW, Blood is Running in the Streets

2008-03-17T12:27:00.000-07:00

IGNORE THE HEADLINES; NOW IS THE TIME TO BUY REAL ESTATE
Article by:
Robert W. Hand
Designated Broker/Owner
Equity Alliance Properties
www.equityallianceproperties.com

Ignoring the headlines is no easy thing to do with so much media buzz about recession, housing, sub-prime woes, the credit crunch, rogue traders, insolvent bond insurers, and nukes in Iran. People are afraid to make any big purchases right now when consumer confidence is, understandably, low.
When prices are falling, few people have the counter-intuitive discipline to buy homes, stocks, gold, or art but those who do pull the trigger come out way ahead in the long run. As John D. Rockefeller so graphically put it, “The way to make money is to buy when blood is running in the streets.”
That statement is absolutely timeless as it is profound and harkens to a day when that statement would have been made and taken in a more literal sense. Isn’t it just another way of saying, “Buy when the market hits bottom?” Hard to argue that we are not in a time when “blood is running in the streets,” literally in some instances. We are in a war that the world is tired of and our troops are fatigued from, the streets are lined with houses in foreclosure, home prices have dropped just as much as they so quickly rose during the boom, and the costs associated with real estate financing have dropped to an all-time low. Stocks have been pummeled this year, the GDP dropped last quarter, and talk of a recession has been running high.
Real estate consumers and investors have been standing on the sidelines “waiting” to buy real estate, looking for signs that the market has hit bottom. Well folks, we’re there. Just like with stocks, once you finally hit the absolute bottom of a cycle the only true indicator is that the prices are already up again. Prices have already started going up in many parts of the country as well as here in the Phoenix metro area. Location, location, location has always been the cry in real estate activity. And, in locations throughout the Phoenix Valley, prices have already been on the rise again: Paradise Valley, Scottsdale, and North Central Phoenix
The Federal Reserve is slashing short-term interest rates at the fastest clip in decades. Fed rate cuts always lift the economy eventually and the stock market typically starts to recover just when the headlines get the gloomiest. Sure, the market could take a dip again before a full recovery. But the recession may be halfway over already-or we may avoid one altogether.
As for housing, sure some skepticism is an appropriate response to the market events of the last couple of years. The formerly smokin’ hot markets of Arizona, Florida, California, and Nevada probably haven’t seen the worst headlines yet though they may be well close. And in Arizona, we are already seeing signs of a recovery in some areas.
Now, let’s say you want to be a homeowner, have good credit, plan to be in the area for several years, and have been waiting for the perfect entry point. The time is now to get serious, before an inevitable rise in interest rates wipes out your advantage. Interest rates will go up again and will make those monthly payments go up to where you can’t afford the house you want to buy and can buy right now.
For every 1% that interest rates go up, that is 10% less house that you can buy. For example, with interest rates at 5.5% if you can afford a home worth $210,000, then if interest rates go up to 6.5% then the most you could spend for a home would drop to $189,000, the same monthly payment as for the $210,000 home.
Now, let’s assume that interest rates go up to 7.5% (which is very likely). The amount of home you can afford will have dropped to $168,000 with the same monthly payment as a $210,000 home at the current 5.5% interest rate.
We are close enough to the absolute bottom of the real estate market that the bigger concern for homebuyers and investors has to be the inevitable rise in interest rates. That will have far greater impact on a buyer’s purchasing power, and in their capability to increase wealth through equity gains in their real estate. Stop standing on the sidelines, folks. Homebuyers and investors, the time to buy real estate is now. By the time you can read about it in the headlines, you will have lost a great deal of your purchasing power and opportunity for equity gains.

Citrus Season, Citrus Pickers Needed!

2008-02-21T14:34:00.000-08:00

You must be thinking, "he can't be talking to me?" Well, just maybe.

It is citrus season again in Arizona and the United Food Bank (UFB) is in need of volunteers to help pick fruit.

Many generous homeowners who have citrus trees would like to donate their fruit to UFB, but are unable to pick it. UFB will provide the equipment and is asking the public to provide the labor.

This is a great opportunity for group projects for the likes of service clubs, schools, scouts, and businesses. Individual volunteers are also encouraged to call.

To help, please call DeAnna Yazzie at 480-926-4897 x218 or e-mail dyazzie@unitedfoodbank.org.

Thanks for helping out in this cause. So much of this fruit goes wasted every year that it is truly a shame, given that so many people right here in our own country are starving and going without, not to mention globally. One Love!!!

Living in Paradise, Valley Residents and Outdoor Living Spaces, Kitchens

2008-02-12T09:11:00.000-08:00

Yes, we all love our outdoor living spaces. Here in Arizona where our climate is welcoming year round we use our outdoor living spaces more than many other parts of the U.S. For those of you who have traveled to Europe, the Mediterranean, North Africa, South America, Hawaii, and the like you will most likely have noticed how much care is taken in relegating importance to outdoor living spaces. For one, populations have crowded these older civilizations, space is much more limited, and so folks in those parts are so very motivated to make beautiful, comfortable outdoor living areas an extension of their home. I have been in such lovely outdoor living spaces where I have wanted to spend all day whiling away the hours in peace and tranquility...all of the comforts of "home" but in a gorgeous outdoor setting where the soul can drink in the spirit of place and time.

We have all seen modern floorplans that are "open" with the kitchen often connected both to a dining area and a large living area, some variation of the 'great room'. With kitchens sort of morphing into living areas doesn't it make sense then that outdoor living areas should evolve to include kitchen features? Well, that is exactly what we are seeing more and more in these days of modern living. Check out the article below for some inspiration on designing a world class outdoor living area complete with food preparation and dining space. You too can bring home the romance and charm of the old world while taking advantage of new products availble in this modern age. Enjoy! Robert Hand, http://www.equityallianceproperties.com/

New Homes: Cooking on Both Burners
by Dena Kouremetis

If the trend has been for kitchens to extend into living areas, then doesn't it follow suit that outdoor spaces are morphing into kitchens?

According to Hanley-Wood's CustomHomeOnline, one of the most popular new trends for custom homebuyers is to make big plans for outdoor entertainment.
People are looking at outdoor spaces differently and want to turn them into something they can use year-round -- no longer the little barbecue that Dad used to roll out from the garage on the first warm spring day. Outdoor kitchens, complete with built in BBQs, sinks, cook tops, refrigerators and cabinetry have become all the rage.
Backyards, side yards and (where space is limited) even enclosed front courtyards are seeing fully furnished living spaces in areas previously relegated to a patio chairs, dog runs or swing sets.
In a recent analysis by the HPBA -- Hearth, Patio & Barbecue Association -- this trend for outdoor kitchens is being perpetuated by a number of factors, not the least of which is the statistic that nearly 60 percent of all grill owners now cook outdoors year round (70 percent for gas grill owners).
To accommodate them, manufacturers who supply the barbecue hardware industry are offering increasingly higher quality, all-weather outdoor cooking appliances for both primary and the vastly popular vacation home markets. Couple that with the idea that a lot of existing homeowners are choosing to stay put for a while during this real estate market shakeout, and you've also got a remodeling explosion of outdoor kitchen additions!
Weber, a name in grilling known to even the apartment dwellers among us, recently asked homeowners what their "dream grill" would be. The overwhelming response was that it be self-cleaning and have side burners. Sure doesn't sound like the little dome-shaped grill with charcoal briquettes from the 1960s, does it?
Today's built-in deluxe grilling systems go even further and are outfitted with extras like storage and warming drawers, smoking systems, wok elements, infrared rotisserie burners and Teflon coated catch pans for easy clean-up.
Outdoor kitchens can include beer taps, patio heaters, halogen lighting, gas ovens, and gourmet bar and entertainment centers.
Who knows? With as sophisticated as some outdoor living spaces are becoming, we wouldn't be surprised if someday real estate appraisers began counting outdoor kitchens as a part of a home's overall square footage!
But if all this talk of food and the outdoors doesn't either make you hungry or give you a touch of spring fever, then we don't know what would.

Archeticts of Sup-Prime Securites over Chinese, Not Kosher

2008-02-11T11:06:00.000-08:00

Hey Folks,
Found a great article from Bloomberg on the sub-prime debaucle. It's not as dark, jaded, and cynical as my own blog posts regarding the same matter, BUT it is also a far cry from the milk toast rhetoric being sung by today's pundits. The article describes from a bird's eye view, how the whole thing was put together. This is some really good reading, written by Mark Pittman.

Subprime Securities Market Began as `Group of 5' Over Chinese
By Mark Pittman

Dec. 17 (Bloomberg) -- Representatives of five of Wall Street's dominant investment banks gathered around a blonde wood conference table on a February night almost three years ago. Their talks over take-out Chinese food led to the perfect formula for a U.S. housing collapse.
The host was Greg Lippmann, then 36, a fast-talking Deutsche Bank AG trader who aspired to make mortgage securities as big a cash cow for Wall Street as the $12 trillion corporate credit market.
His allies included 34-year-old Rajiv Kamilla, a trader at Goldman Sachs Group Inc. with a background in nuclear physics, and 32-year-old Todd Kushman, who led a contingent from Bear Stearns Cos. Representatives from Citigroup Inc. and JPMorgan Chase & Co. were also invited. Almost 50 traders and lawyers showed up for the first meeting at Deutsche Bank's Wall Street office to help set the trading rules and design the new product.
``To tell you the truth, it's not very glamorous,'' Lippmann says. ``Just a bunch of guys eating Chinese discussing legal arcana.''
Those meetings of the ``group of five,'' as the traders called themselves, became a turning point in the history of Wall Street and the global economy.
The new standardized contracts they created would allow firms to protect themselves from the risks of subprime mortgages, enable speculators to bet against the U.S. housing market, and help meet demand from institutional investors for the high yields of loans to homeowners with poor credit.
Boom Turns Bust
The tools also magnified losses so much that a small number of defaulting subprime borrowers could devastate securities held by banks and pension funds globally, freeze corporate lending, and bring the world's credit markets to a standstill.
For a while, the subprime boom enriched investment bankers, lenders, brokers, investors, realtors and credit-rating companies. It allowed hundreds of thousands of Americans to buy homes they never believed they could afford.
It later became clear that these homeowners couldn't keep up with their payments. Defaults on subprime mortgages have so far produced about $80 billion in losses on securities backed by them. The market for the instruments is so opaque that many firms still aren't sure how much they've lost.
Chief executives at Citigroup, Merrill Lynch & Co. and UBS AG were replaced. To forestall a housing-led recession, the Federal Reserve has cut its benchmark rate three times since August and is injecting as much as $40 billion into the credit system to encourage banks to lend to each other.
`You Can't Wait'
This is the story of how Wall Street transmitted the practices of southern California's go-go lending industry and the inflated U.S. real estate market to the global financial system:
-- In Orange County, California, a mortgage lender named Daniel Sadek was among those who took notice of the increase in Wall Street's appetite for subprime loans. He turned the staff at his firm, Quick Loan Funding, into a subprime mortgage factory. ``You can't wait,'' said his ads, aimed at high-risk borrowers. ``We won't let you.''
-- In Dallas, a hedge-fund manager named Kyle Bass taught himself to use the contracts pioneered by Lippmann's group, then went looking for mortgage-backed securities to bet against. He found them in instruments based on loans Sadek made.
-- In New York, the ratings companies Standard & Poor's, Moody's Investors Service and Fitch Ratings put their stamp of approval on securities backed by loans to people who couldn't afford them. They used historical data to grade the securities and didn't adjust quickly enough for the widespread weakening of criteria used to qualify high-risk borrowers. Among the securities on which they bestowed investment-grade ratings: those backed by Sadek's loans.
`Robert Parker of Raw Fish'
Lippmann was a Wall Street renaissance man, with a strong appetite for sushi and an online restaurant guide so comprehensive one blogger labeled him ``the Robert Parker of raw fish.'' He opened the kitchen of the $2.3-million Manhattan loft he lived in then, complete with six burners, two grills and 20- foot island, to an Italian cooking class.
The goal of Lippmann's group on that winter evening in 2005: to design a new financial product that would standardize mortgage-backed securities, including those based on high-yield subprime loans, paving the way for their rapid growth. Of the firms participating that night, Lippmann's Deutsche Bank is based in Frankfurt, UBS in Zurich and the others in New York.
In February 2005, pension funds, banks and hedge funds owned fixed-income securities that were earning returns close to historic lows. AAA-rated securities based on home loans offered yields averaging a full percentage point higher than 10-year Treasuries at the time, according to Merrill.
Lure of Subprime
The trouble was that most creditworthy borrowers had already refinanced their houses at 2003's record-low mortgage rates. To meet demand for mortgage-backed securities, Wall Street had to find a new source of loans. Those still available mainly involved subprime borrowers, who paid higher rates because they were seen as credit risks.
While the group of five banks had packaged billions of dollars in subprime-based securities, in February 2005 none was among the leaders in the home-equity bond business. Countrywide Securities, RBS Greenwich Capital Markets, Lehman Brothers Holdings Inc., Credit Suisse Group and Morgan Stanley dominated the industry.
The banks wanted more mortgage-backed securities to sell to clients. Creating a standardized ``synthetic'' instrument, or derivative, would leverage small numbers of subprime mortgages into bigger securities. In this way, the firms could produce enough to meet global demand.
Building the Rocket
``We called up the guys we felt like we knew and could work with,'' Lippmann says.
Deutsche Bank sprang for the take-out food, and traders and lawyers sat down to design a new product and create what would soon become one of the hottest capital markets in the world.
The meetings were monthly, beginning at 5 p.m., after the trading day, and lasted more than three hours each.
``In the beginning, everybody brought their lawyer,'' says Lippmann.
Eventually, the Chinese food was replaced with deli fare because some participants complained it wasn't kosher.
The group sought to bring ``transparency,'' or openness, and ``liquidity,'' or trading volume sufficient to ensure ease of buying and selling, to the mortgage market.
The most important issues centered on how to account for the eccentricities of mortgage bonds, perhaps the most difficult-to-value securities on Wall Street. Unlike corporate bonds, home loans can be paid back at any time.
`Pay as You Go'
Traditionally, the best mortgage traders have been those who can read macro-economic trends to guess when homeowners will pre-pay their loans. Until recently, early repayment was perceived as the biggest risk faced by Wall Street's mortgage desks.
One concern with creating a standardized contract for mortgage-backed securities was that it was difficult to agree on a simple method of determining how market-changing events affected the values of the complicated, layered instruments.
To deal with the complexity, the group of five decided to install a ``pay-as-you-go'' system. When something happened affecting the cash flows underlying the security, the seller would have to make cash payments to the buyer immediately, and vice versa.
ISDA Steps In
As the group nailed down the details, the International Swaps and Derivatives Association, which sets trading terms for dealers, arranged conference calls including more of Wall Street.
To this point, some of the biggest mortgage underwriters -- Lehman Brothers, Merrill, Bank of America Corp. and Morgan Stanley -- hadn't been included in the negotiations. These firms heard about the talks and demanded to be let in.
On the conference calls, which included the market leaders, things got testy. One point in dispute was whether the contract should be traded on the basis of price or yield.
``Some of those points of detail were getting a little heated on the calls, and it was just thought it would be better to have a meeting face to face to move beyond those points,'' says Edward Murray, a London-based partner of the international law firm of Allen & Overy who was the chairman of the meeting and the outside counsel for ISDA. ``To be frank, the dealers that were not in the group of five were not that happy that there was a group of five.''
ISDA sought to resolve the differences by calling a sit- down meeting at its New York headquarters. Over coffee and pastries, Murray faced a crowd of dozens of traders and lawyers. Kamilla and Kushman acted as discussion leaders.
`Talk Was Very Firm'
``Rajiv would say something, and I'd be absolutely convinced about what he said,'' Murray says. ``And then Todd would say, `Well, I don't agree.' And I would be absolutely convinced about what Todd said. And then Rajiv would say `Well, the reason you're wrong is' and so on, et cetera.'' Kamilla and Kushman declined to discuss the negotiations.
Michael Edman, one of Morgan Stanley's representatives at the ISDA conference, was less chipper, Murray says.
``Arms folded, frown on his face, I'm not sure that's exactly true, but he wasn't in a happy-go-lucky mood,'' Murray says. ``There wasn't any shouting or anything, but the talk was very firm.'' Edman, who no longer works for Morgan Stanley, declined to comment.
By June, the differences were sorted out, the new contract was endorsed, and banks that hadn't been party to the group of five negotiations signed on. The banks would go on to create similar derivative contracts to trade securities backed by loans for commercial buildings and collateralized debt obligations, or CDOs, which are securities backed by various kinds of debt.
Creation of Index
Another necessary step was to create an index to represent the market and help hedge general market exposure. It was called the ABX-HE and would be similar to the indexes traders use for baskets of stocks. This, participants believed, would add to the market's liquidity, or depth, by attracting more trading.
By September 2005, some within Deutsche Bank were beginning to worry about defaults on subprime mortgages and how that might affect the securities based on them. A team of Deutsche Bank analysts that month warned of growing subprime market risks.
The ABX-HE index started trading on Jan. 19, 2006. At 8 a.m. on the first day, John Kane of Sorin Capital started phoning dealers. Kane, then 27, was a trader at Sorin, which runs hedge funds that invest in mortgages and other securities.
His auto mechanic, in describing the debt burden he was carrying to own a home, had planted the idea in Kane's mind that the housing market might be in trouble. Kane thought it through, ran an analysis on available data, and decided to wager against, or ``short,'' subprime. To do that, he turned to the portion of the ABX index dealing with the lowest investment-grade subprime securities.
Investors Go Short
The trouble was that quotes from brokers selling the ABX were already dropping, an indication that a number of investors wanted to do the same thing.
``All the other dealers were already scared'' and dropping their bids, Kane said while on a panel at a November industry conference. ``All but Goldman. So I bought from them.''
On its first day, the index traded more than $5 billion. The cost of wagering against the securities was rising, a sign that traders saw an increased chance of default. An early warning was visible to anyone who knew where to look.
The new derivatives were a hit among the group of five's customers -- the banks and other institutional investors that bought them to lock in high yields.
In the months to come, Deutsche Bank and at least one other member of the group of five, Goldman Sachs, began using subprime derivative contracts to bet the other way and guard against the possibility that subprime mortgages might default.
Lippmann Explains
For Lippmann's part, he says, it wasn't that he had ``any secret knowledge'' of the damaging events that were about to unfold in the U.S housing market. Rather, he says, he thought the risks of a downturn were significant enough to justify the millions of dollars it would cost to ``short,'' or wager against, subprime securities.
He says he told his bosses: ``If we're right, we're looking at a sixfold gain. And since a housing market slowdown is not as big a long shot as that, we should take the risk.''
Lippman disputes that the derivatives the group of five helped create -- which banks packaged into CDOs -- caused the subprime crisis.
``The problems in subprime are what they are and derivatives did not cause them,'' Lippmann says. ``Derivatives enabled more CDOs to be created and the stakes to be bigger. But the transparency made people realize the problem faster.''
Others see things differently. Derivatives, or ``synthetics,'' are ``like wearing a seatbelt that allows you to drive faster,'' says Rod Dubitsky, director of asset-backed research for Credit Suisse. ``The total dollar amount of losses, all these losses you're seeing, are from synthetics. No question, it changed the game dramatically.''
(TOMORROW: A California lender heeds Wall Street's call.)

Paradise Valley Homeowners go Green: Recycled Glass Countertops are "IN", Granite is "OUT"

2008-02-11T08:08:00.000-08:00

Well, we all enjoy living in our luxurious homes in the desert. It's a blissful, peaceful lifestyle and yet for me anyway, at times I get to feeling a little bit like, "wow, do I really need all this, seems a bit like overkill." Seems alot of us have a growing conscience and perhaps collectively we all are gathering in a place of an expanding consciousness leading us down the path to GREEN building concepts. Well, if you are like me and you build your home before the whole Green thing came into play, don't fret. There are still plenty of ways to go green or at least greener when it comes to your existing home. We can replace our outdated A/C and Heating units with the highly efficient units containing variable speed motors (TRANE is the best, the innovator). We can decorate with green materials, remodel with green materials, put in gas-filled dual pane glass (if you don't already have it).

Of late, one of the very easiest things we can do to go green is to use recycled glass countertops for our kitchen and bathroom remodels. There we go...finally. Were you wondering when in the heck granite and marble was going to finally be "out"? I was, for sure. And I thought, man it is so beautiful and natural and everyone expects to see it in luxury homes and we all KNOW that granite has been so OVERDONE! Yep, granite has been overdone as have been the 3 or 4 "Tuscan" designs that every builder has copied over and over with some variations (turrents?....who on God's green earth needs a turret in their house?). These times will be marked by the whole silly phenomenon...same way the mid '80s to mid '90s are marked by the white stucco with pink tile roofs. Luxury homeowners; please stick with timeless architectural lines, don't copy others' work. When it comes to architectural features, think art. When it comes to redecorating/remodeling think ART from Recycled materials. Glass countertops are every bit as interesting as any sculpture or other work of art in your house. A bit more expensive than granite and marble, but a refreshing new look. The article below tells a bit more about this bold new move, from granite and marble to glass.

Green Living: Recycled Glass Is In
by Drew Johnson
Consumers wanting a beautiful-looking home while also doing their part to protect the environment have a myriad of options for decorating their kitchen.
And those looking to replace or install their counter tops should know, marble and granite are out and recycled glass is in.
Marble looks great, especially in the hands of master sculptors, but it is a limited resource. If you are looking to build or remodel your kitchen, check out recycled glass instead.
Recycled glass surfaces look good, are unique, and come in many different colors and styles. They also last just as long as marble and granite.
Vetrazzo, a company making glass surfaces since 1996, is located in Richmond, California, and has had its counter tops showcased in the Ritz Carlton hotel in Miami south beach and on the nationally televised program "Living with Ed."
Vetrazzo uses discarded glass from sources such as decommissioned traffic lights, windshields, used bottles and plate glass windows to create their surfaces. 85 percent of their surfaces are made of glass, and 100 percent of that glass is recycled.
Vetrazzo's surfaces comes in a wide range of colors, ranging from "Alehouse Amber" to "Firehouse Red." They determine the color of the surface by using different colored glass ingredients. For instance, "Cubist Clear" surfaces are created using clear glass from recycled windows, and "Bistro Green" comes from recycled soda bottles, olive oil containers, pickle jars and wine and water bottles.
According to Vetrazzo's website, their product is comparable to granite and marble in scratch resistance, heat resistance and stain resistance.
And as far as price goes, James, a sales rep for North Star Services, says, with installation, Verazzo is somewhat more expensive than non-exotic marble and granite, but buyers appreciate the fact their surface is recycled and completely made in America.
Our customers think of their surface as a work of art," says James, "It's as much of a conversation piece as a sculpture or a painting."

Thank you,
Robert Hand
http://www.equityallianceproperties.com/

Kudlow on Bernanke; Wants More Tax Breaks for the Rich & Corporations

2008-02-10T21:52:00.000-08:00

Well, Larry Kudlow, the all-too-predictable, bright but not brilliant economics journalist is coming to Bernanke's defense that much of the criticism aimed at him was undeserved. Mr. Kudlow's head is buried so deeply in the sand that I should feel sorry for him, but I don't. In the article below, he got it about 1/4 right, but only on the issue of the Fed's involvement in the mortgage crisis....so ok, he got the whole thing about 1/16 right. He addressed that one with all the vim and vigor of a naive school girl who still believes in Santa Claus and blushes in fury when those mean kids keep laughing at her (Larry Kudlow) for still believing and poke fun at the fact that she is still bed wetting. Sorry, but the gloves are off and have been for some time in this arena. See my earlier blog post(s) on the mortgage crisis, not for the naive little school boys and girls. The masses are idiots and Larry Kudlow is showing, once again, that his is just one of the sheep. And this yahoo is a pundit and well respected journalist? Where is the outrage? Oh yeah, I keep forgetting that the average American reads and listens for a comprehension level of a 7th grader.

After Kudlow sings Bernanke's praises, he then goes on to give us a look at his own economic policy, or perhaps more appropriately, what he wants for Christmas. That's right, he wants more tax cuts for corporations, eliminate the corporate capital gains tax. That's such a wonderfully democratic proposal; harkens back to Reagan years and the introduction of Reaganomics, the trickle down economy. That sort of top-down law making is not democratic at all but serves only the elite, the super rich, the few. Let's be clear, this type of legislative policy does not serve the common good of the people but of the few. How much more tax burden should the middle class bear? ALL OF IT? Apparently so according to Kudlow, and Republican front runner John McCain. JUST ELIMINATE ALL CORPORATE TAX! That will fix our wagon. Well, enough of me on Kudlow. You can garner a glimpse this maroon's own finite vision in his latest rant below. Merry Christmas, Larry Kudlow! I hope you get nothing but a big fat lump of coal in your stocking, God willing. Ya know, I'm being unfair. Larry Kudlow would make a great Fed Chief...really, just ask him and he'll tell you! In fact, he would make a great leader of the free world if we could just get him potty trained.

February 07, 2008, 5:52 p.m.
Bernanke’s Next Challenge
The Fed chief needs to end the stop-and-go policies he inherited from his predecessor
By Larry Kudlow
Charlie Plosser, president of the Philadelphia Federal Reserve Bank, warned this week about the risks of inflation, overly aggressive interest-rate cuts, and further damage being done to the Fed’s credibility. I agree with Plosser.I say this as a supporter of the “shock and awe” Fed policies that brought the fed funds target rate down from 5.25 percent to its present 3 percent. These aggressive actions were necessary, and they’ve paid off. The target rate is now properly below the 10-year bond yield, while the Treasury curve is upward sloping for the first time in nearly twenty months. The overly tight money period of 2006-07 has finally come to an end. And even though in its aftermath the economy could skip into mild recession, this is a positive, watershed event.Most economists ignore the fact that the sub-prime credit crisis, along with the extraordinary downturn in housing construction and home prices, is largely the result of the Fed’s massive tightening move that lifted the funds rate above 5 percent in the first place. Fed chair Ben Bernanke inherited this bucket of smelly molasses from his predecessor, Alan Greenspan. In straightening the situation out, Bernanke has opened the door to a rapid economic recovery. It’s a signal achievement for the former Princeton professor.Bernanke has taken a lot of criticism in the last year, and I think much of it is undeserved. Wall Street claims that he’s an isolated academic, unaware of the real-world difficulties of sagging capital markets, slumping stock prices, and slowing growth. But he moved aggressively once he saw the credit problem develop last summer. And new information obtained under the Freedom of Information Act reveals how he has been meeting with leaders in business, finance, and government all along. He has talked with John Chambers, the CEO of Cisco Systems, Sam Palmisano, the head of IBM, JPMorgan’s chief Jamie Dimon, former Senate banking head Phil Gramm, and international central bankers Jean Claude Trichet and Mervyn King. The street was wrong about Bernanke. He’s been on top of the situation. He took remedial action and the economy will be the beneficiary faster than people think.But here’s his next challenge. Bernanke needs to end the stop-and-go policies he inherited from his predecessor. Greenspan became a supreme monetary tinkerer in his final years, putting the Fed’s interest rate and monetary levers in constant overdrive. Go. Stop. Go. Stop. This Keynesian central-planning has damaged the Fed’s credibility. It has weakened the dollar. Entrepreneurs and investors can’t possibly plan ahead when interest rates bob up and down like yo-yos.I suspect Charlie Prosser was referring to all this when he talked about the Fed’s credibility this week. If so, he’s right. So let’s say good-bye to Fed tinkering once and for all, and say hello to permanent enhancements to the economy’s incentive structure. How about lowering tax rates on corporations? How about lowering the corporate capital-gains tax rate? Why not abolish the individual capital-gains tax? Or the dividend tax? Or the estate tax? Why not eliminate the multiple-taxation of savings and investment?At some point, the entire corporate tax structure should be thrown out, along with all the murky K-Street tax-earmark loopholes that litter the IRS code. We need to broaden the tax base and lower marginal rates. This is the key to maximizing future economic growth on the supply side. Without strong tax-reform measures to expand the production of goods and services, further Fed money injections are only demand-side “solutions” that will surely inflate prices and depreciate the currency.Back in the 1970s, policymakers in Washington were obsessed with increasing aggregate demand, but they forgot about aggregate supply. Today’s short-term-stimulus rebate package is a throwback to that era. It’s not economic stimulus; it’s political stimulus. Congressmen up for reelection are trying to “do something” in response to primary-season exit polls that say Americans are totally unhappy with the economy. But these rebates are budget busters. And how will Congress attempt to pay down $400 billion in budget deficits? Higher tax rates, of course. And then we’ll really be back in the 1970s.Out on the campaign trail, Sen. Hillary Clinton has a Nixonian idea to freeze interest rates on sub-prime mortgages. Exactly wrong. Doing so would cause financial havoc at home and abroad. Perhaps Sen. McCain, who is now campaigning as an heir to Ronald Reagan, will argue for strong, pro-growth tax reform to expand economic growth and a steady monetary policy to protect the dollar and reinforce domestic price stability. One can only hope.But if Bernanke can officially put the yo-yo interest-rate days behind us, we’re halfway there.

Getting the Word Out: It's a Good Time to Buy Real Estate

2008-02-10T08:27:00.000-08:00

Realogy, the parent company of some of the biggest player/names in the industry such as Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, ERA® and Sotheby’s International Realty® has started generating a campaign to spread the word that the Real Estate Market is back! They are making this effort in attempt to combat all of the negative press that the media has being stirring in their big, black caldron for the last couple of years. The article below by Beth McGuire of Rismedia best describes this effort by parent company Realogy. Please enjoy.

Get the Word Out: It’s a ‘Good Time to Buy’
By Beth McGuire
RISMEDIA, Feb. 8, 2008–”It’s a good time to buy real estate.” That’s the message Realogy, the nation’s largest real estate franchisor, wants agents to broadcast to buyers across the country.
The company is spreading the word through a national advertising campaign in USA Today, which began this past Wednesday and will run again on Feb. 13th and 20th. This is Realogy’s second national push in as many years to take a strong stance against the barrage of negative press directed toward the real estate industry over what is reported as the declining condition of the housing market.
The Parsippany, New Jersey-based parent of the Better Homes and Gardens® Real Estate, CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, ERA® and Sotheby’s International Realty® brands, ran a full-page advertisement in the front section of USA Today and expects to reach more than 3.9 million consumers with its message. The ad lets consumers know that recently-cut mortgage rates and a wealth of available properties, make today a “great time” to purchase a home.
The timing of the ad, titled, “Think You Can’t Get a Home Loan? Well Think Again. You May Be Pleasantly Surprised.,” aligns with the recent Federal Reserve interest rate cuts, and lets consumers know that: money is available for those who meet basic requirements; affordability has improved; rates are attractive; and inventory is plentiful.
In an exclusive interview with Alex Perriello, president & CEO of the Realogy Franchise Group, he said the ads aim to educate consumers who might be at the positive tipping point on buying a home.
“We want to educate the consumer with relevant facts about today’s real estate market,” he said. “There are a lot of positives, and we feel that reinforcing the positives will help clarify things for consumers who are on the fence what to do in today’s market. I travel a lot to real estate offices and I hear from a lot of our agents that buyers are out there, but that they are not sure what to do. We felt that talking openly about the opportunities may help people to see that it is a good time to get into the market, and we believe it is.”
Perriello said there are three common misconceptions consumers have about the real estate market right now :people can’t get a loan: affordability is out of reach: and consumers should wait for rates to go lower.
“I was watching a news show last week after the Federal Reserve made its second rate cut on Tuesday, and the host of the program said, ‘I don’t know if it will help because you can’t get a mortgage.’ You hear this over and over again. We want to set the record straight on that. If you meet very basic requirements - you have a job for the past two years, you can make the payments, you plan to live in the property and you have a credit score that suggests you are responsible, you can get a mortgage. These are all reasonable requirements.”
He added that affordability today is better than it has been in almost three years, and that interest rates are now at 40-year historic lows, so people shouldn’t wait to buy.
In the national scope of the economy, Perriello said that the Federal Reserve is doing a good job of doing what it can to avert a recession, but stopped short on any market predictions for the remainder of 2008.
“It’s too early to know how it will go,” he said. ‘We’ll see what the impact of the rate cut brings. Another wild card is [President Bush’s economic] stimulus package, which has gotten through the House but is now stalled in the Senate.”
To combat negative press, Perriello believes that all real estate professionals need to take a very proactive position in the marketplace. “We recommend they absolutely follow our lead,” he said. “We are providing to our franchisees the ad template so they can customize it with their branding and information in their local markets. There are some great talking points in these ads.”

Expect Another Real Estate Boom in Arizona

2008-02-09T20:59:00.000-08:00

Hey Folks,
It has been a buyer's market for quite some time, and but buyer activity has been a bit sluggish because of all the gloom and doomers. The media is finally starting to pick up the word and spread it across the country. Particularly exciting for us desert dwellers here in Arizona and particularly the Phoenix Metropolitan Area for a number of reasons. For one, according to the U.S. Census Bureau Arizona will lead the country in percentage population growth through the year 2030. Along with strong Population growth, we have a great job market to go along with it. Check out some of the statistics below from the Department of Economic Security. Here are a few of the high points:
EMPLOYMENT
Arizona's economy added 14,400 jobs in November 07 to reach a record total of 2,753,500 non-farm jobs.
Over the year employment growth for Arizona (1.5%) remains above the U.S. growth rate of 1.0%.
Arizona's service-providing industries added 17,600 jobs.
Government gained 1,700 jobs in Nov 07, setting a record at 433,800.
Overall unemployment for the Phoenix Metro area was 3.5% in Nov 07 compared to 4.7% for the U.S. and 4.1% for all of Arizona.

POPULATION
From July 2006 to July 2007 the overall population in the US grew by approximately 1.0%
Various regions across the US posted moderate changes in this time period (Northeast +0.2%, Midwest +.4%, South +1.4% and West +1.4%) while Arizona's population jumped by approximately 2.8% (from 6,165,689 to 6,338,755).
Over that 12-month period Arizona needed approximately 75,000 housing units to absorb that growth!

Against all of the bad press that the real estate market has been getting; declining markets, the sub-prime crisis, etc., there are reasons to expect that not only homeowners looking for their primary residence will begin to rush back to the market, BUT, we are starting to see investor activity pick up and may very well see a RUSH on Arizona real estate, again. That's right folks, likeley that we will see another real estate boom here in Arizona. But this time we will all have learned from the past and this next boom will be tempered with new sensibilities in lieu of the irrational exuberance of the most recent boom.

It is a simple case of supply and demand. The demand is HUGE here in Phoenix, Scottsdale, Mesa, and the surrounding areas. Once the natural demand has whittled away at the existing inventories, that demand will put such pressure on supply that we will again see real estate values rally. Investor anticipation is rampant, you can cut the atmosphere with a knife. Get ready for the CRUSH! This is going to be fun!!!

Real Estate values in much of Scottsdale and in Paradise Valley (the beverly hills of the southwest) have actually rebounded several months ago, certainly no longer a declining market in those areas. It is definitely time to get in on the action. Have you looked at interest rates lately? These are truly historic lows, the mortgage interest rates! More good news to follow. Thank you,
Robert Hand
www.equityallianceproperties.com

Sub-Prime Debaucle Traps even Credit-Worthy

2008-01-25T09:26:00.000-08:00

This article gives a bit of a more fair and balanced outlook on the subprime mess. Yes, it has gripped many credit worthy homeowners. Worse yet, it has the U.S. Economy on its knees and the Whitehouse doesn't even address it in their $150Billion stimulus package.

> Subprime debacle traps even credit-worthy
> by Rick Brooks and Ruth Simon
>
> One common assumption about the subprime mortgage crisis is that it
> revolves around borrowers with sketchy credit who couldn't have bought
> a home without paying punitively high interest rates. But it turns out
> that plenty of people with seemingly good credit are also caught in
> the subprime trap.
>
> An analysis for The Wall Street Journal of more than $2.5 trillion in
> subprime loans made since 2000 shows that as the number of subprime
> loans mushroomed, an increasing proportion of them went to people with
> credit scores high enough to often qualify for conventional loans with
> far better terms.
>
> In 2005, the peak year of the subprime boom, the study says that
> borrowers with such credit scores got more than half - 55 percent - of
> all subprime mortgages that were ultimately packaged into securities
> for sale to investors, as most subprime loans are. The study by First
> American LoanPerformance, a San Francisco research firm, says the
> proportion rose even higher by the end of 2006, to 61 percent. The
> figure was just 41 percent in 2000, according to the study. Even a
> significant number of borrowers with top-notch credit signed up for
> expensive subprime loans, the firm's analysis found.
>
> The surprisingly high number of subprime loans among more
> credit-worthy borrowers shows how far such mortgages have spread into
> the economy - including middle-class and wealthy communities where
> they once were scarce. They also affirm that thousands of borrowers
> took out loans - perhaps foolishly - with little or no documentation,
> or no down payment, or without the income to qualify for a
> conventional loan of the size they wanted.
>
> The analysis also raises pointed questions about the practices of
> major mortgage lenders. Many borrowers whose credit scores might have
> qualified them for more conventional loans say they were pushed into
> risky subprime loans. They say lenders or brokers aggressively
> marketed the loans, offering easier and faster approvals - and playing
> down or hiding the onerous price paid over the long haul in higher
> interest rates or stricter repayment terms.
>
> The subprime sales pitch sometimes was fueled with faxes and emails
> from lenders to brokers touting easier qualification for borrowers and
> attractive payouts for mortgage brokers who brought in business. One
> of the biggest weapons: a compensation structure that rewarded brokers
> for persuading borrowers to take a loan with an interest rate higher
> than the borrower might have qualified for.

An article to follow will debate this article

2008-01-25T09:23:00.001-08:00

I STRONGLY DISAGREE WITH THE POINT OF VIEW OF THE ARTICLE BELOW AND THE ARTICLE TO FOLLOW WILL BALANCE TO SOME SMALL DEGREE. Many of you who have been following my blog know that some time ago I wrote a post on the sub-prime mess that drills a bit deeper than the brash statements the headlines are making. Here's a viewpoint (below) from an "educated" man with his head in the sand.

> > Subprime Bailout
> > By Walter E. Williams
> > Wednesday, January 23, 2008
> >
> >
> > A subprime lender is one who makes loans to borrowers who do not qualify for
> > loans from mainstream lenders. It's a market that has evolved to permit
> > borrowers with poor credit history and an unstable financial
> > situation the opportunity to get home mortgages. The catch is they
> > pay a higher and typically an adjustable rate mortgage (ARM).
> > Encouraged by the housing bubble, easy credit, along with the
> > expectation that housing prices would continue to appreciate, many
> > subprime borrowers took out mortgages they could not afford in the
> > long run, particularly if interest rates rose and housing prices
> > depreciated.
> >
> > As with most economic problems, we find the hand of government. The
> > Community Reinvestment Act of 1977, whose provisions were
> > strengthened during the Clinton administration, is a federal law
> > that mandates lenders to offer credit throughout their entire market
> > and discourages them from restricting their credit services to
> > high-income markets, a practice known as redlining. In other words,
> > the Community Reinvestment Act encourages banks and thrifts to make
> > loans to riskier customers.
> >
> > According to an article in The Atlanta Journal-Constitution
> > (11/04/07) titled "Black Atlantans often snared by subprime loans,"
> > by Carrie Teegardin, a national study of credit scores, not just
> > mortgage loan applicants, found that 52 percent of blacks have
> > credit scores that would classify them as subprime borrowers
> > compared with 16 percent of whites.
> >
> > Many lenders did make loans to people who had no realistic ability
> > to pay them back. But that doesn't qualify as fraud, although there
> > might have been a bit of exuberance in the repackaging of the
> > mortgages into securities and selling them to investors. Some argue
> > that many borrowers defrauded the banks by misrepresenting their
> > income, the so-called "no doc" loans or "liar's loans".
> >
> > President Bush's plan to deal with the subprime crisis is to freeze
> > interest rates on adjustable rate mortgages. Freezing interest
> > rates would stop people's mortgage payments from increasing. That
> > is a gross violation of basic contract rights and would appear to be
> > a Fifth Amendment violation. If a contractual agreement is willingly
> > entered into and agreed upon by a borrower and lender, it is binding
> > and if broken by one party or the other, harsh penalties should
> > ensue. Now here comes government, under the Bush plan, to declare
> > millions of contracts null and void. The long run effect of the
> > Bush plan is to make lending institutions even more selective in
> > choosing borrowers. Then there's the question: If government can
> > invalidate the terms of one kind of contractual agreement where the
> > borrowers can't pay, what's to say that it won't invalidate other
> > contractual agreements where the borrowers encounter hardship and
> > what will that do to financial markets?
> >
> > The Bush bailout, as well as Federal Reserve Bank cuts in interest
> > rates, is a wealth transfer from creditworthy people and taxpayers
> > to those who made ill-advised credit decisions, and that includes
> > banks as well as borrowers. According to Temple University professor
> > of economics William Dunkelberg, 96 percent of all mortgages are
> > being paid on time. Thirty percent of American homeowners have no
> > mortgage. Delinquency rates were higher in the 1980s than they are
> > today. Only 2 to 3 percent of all mortgages are in foreclosure. The
> > government bailout helps a few people at a huge cost to the rest of
> > the economy.
> >
> > Government policy got us into the subprime mess and government's
> > measure to fix the mess is going to create more mess. As such I'm
> > reminded of Marcus Cook Connelly's spiritual play, "Green Pastures,"
> > where God laments to the Angel Gabriel, "Every time Ah passes a
> > miracle, Ah has to pass fo' or five mo' to ketch up wid it," adding,
> > "Even bein' God ain't no bed of roses." That's something the
> > president and congressmen should think about and leave the miracle
> > business up to God.

Bill of Rights for Arizona HomeBuyers and Renters

2008-01-25T09:09:00.000-08:00

The Arizona Department of Real Estate, Real Estate industry professionals, brokers, and attorneys, along with the Public worked together to put together the "Bill of Rights" a resource for all real estate consumers, found below:

Arizona Home Buyers' and Renters'
Bill of Rights
(A resource for all real estate consumers)

THE ARIZONA DEPARTMENT OF REAL ESTATE, in cooperation with industry professionals and the public, CREATED THIS “BILL OF RIGHTS” TO HELP EDUCATE YOU, THE CONSUMER, OF YOUR RIGHTS WHEN PURCHASING PROPERTY. As a buyer of real estate in Arizona, you have the right to KNOW material information about the property before you buy.

THE FOLLOWING list represents some of the IMPORTANT MATERIAL FACTS you should educate yourself on before purchasing any type of property in arizona.

YOU HAVE THE RIGHT TO KNOW:
· If the property is located in an incorporated city or unincorporated part of the county.

· If title insurance is available and if fire insurance can be acquired.

· If you will have fire and police protection and, if so, who provides this service.

· If the roads provide access for fire protection and police service.

· If the roads are maintained, and by whom.

· If utilities are available, and who provides them. (Water, Electric, Gas, Sewer, Trash)

· If the water supply is adequate.

· If the jurisdiction the property is located in has conservation restrictions and policies.

· If the property is located in a school district, and the distance to the closest schools.

· If there are any natural or geological hazards, pests or wildlife.

· If there are essential services near the property such as grocery and medical services.

· If there is crime in the area and the crime rate.

· If there is a Seller’s Property Disclosure Statement or an Arizona Subdivision Public Report. You have the right to review these documents before you purchase property.

There may be other items not listed above that you should educate yourself on before buying property. For a larger list, please Reference the Buyer’s Advisory Guide found on our website.
Visit www.AZRE.gov to begin answering your questions!
We are here to protect you and the PUBLIC.

Visit, www.azre.gov to find out more about how you, the consumer can protect yourself from the pitfalls of a real estate transaction.

Are You Ready for the Crush?

2008-01-22T09:05:00.000-08:00

Meet up with Bono and Al Gore in Davos Switzerland as the world braces for the fallout of the subprime mess. Great article below. These are interesting times indeed my friends. We are riding the leading edge of a tidal wave of change that is sweeping the globe at an exponential rate putting pressure on the economies, material resources, and energy resources of every region of the world. All the kings horses and all the kings men...well you know how that turned out. A real nail biter, not, waiting to see what comes from the summit in Davos. Well intentioned, and brilliant viewpoints, the best of minds at work, but the leaders of the free world have allowed greed to rule while touting global economic policies, all the while ignoring rudder position of a global system that has run aground. Blood for oil? We have sold out the futures of generations of children, and possibly the future of human life on earth for the capitalistic opportunities that lie in the riches of oil production and consumption. ARE YOU READY FOR THE CRUSH? I seriously doubt that any of us are. Trying against all odds to make a difference, below:
WORLD BRACES FOR SUBPRIME FALLOUT, from the Inman Blog
Where might Goldman Sachs Group CEO Lloyd Blankfein bump into actress Emma Thompson on his way to hear U.S. Secretary of State Condoleezza Rice talk about climate change and terrorism? Can you imagine George Soros and Merrill Lynch Chief Executive John Thain hitting up musicians Peter Gabriel and Yo-Yo Ma for autographs as they line up to see Al Gore and Bono discuss ways to simultaneously fight poverty and global warming? All theoretical possibilities at this week's annual meeting of the World Economic Forum in Davos, Switzerland.
Former U.K. Prime Minister Tony Blair, (now working part time for JP Morgan Chase) and Henry Kissinger and are among seven meeting co-chairs. According to MarketWatch's William Watts, the topic that's expected to dominate discussion is if strong growth in emerging economies will help the rest of the world to "decouple" from the U.S. mortgage meltdown and resulting economic slowdown.*
We shouldn't expect any new detailed proposals for getting us out of this mess, Watts says, but rather a discussion of what went wrong. The big question: is the "originate and distribute" model of packaging mortgage loans up as collateral for complex investments sustainable? U.S. Treasury Secretary Henry Paulson and European Central Bank president Jean Claude Trichet are on a panel discussion Thursday, "Systemic Financial Risk," where they will discuss what we've learned from the subprime crisis.
Can't make it to Switzerland? You can get "key Davos snippets" on Twitter, watch debates on YouTube, or join the Davos forum group on Facebook.
*Click "continue reading" for a quick summary of the systemic financial risk the U.S. mortgage meltdown poses and its potential impacts on the world economy.
Excerpts from: "Global Risks 2008: A Global Risk Network Report"
Systemic financial risk is the most immediate and, from the point of view of economic cost, the most severe. The financial conditions of the past decade have allowed for an exceptional period of economic growth and stability. But, with so many potential consequences of the 2007 liquidity crunch unresolved, the outlook for the future is more uncertain at the beginning of 2008 than it was a year ago.
A recession in the United States cannot be excluded in the year ahead, and economists are divided on whether domestic-led growth in Asian markets can drive the global economy. In Europe, the impact of economic uncertainty may be highly divergent. The role of the financial sector in the United Kingdom leaves it particularly vulnerable to financial turmoil, while large current account deficits in some central and eastern European economies may prove increasingly unsustainable in 2008. The resilience of the export-led growth of other major European economies may also be brought into question if disruption in the financial markets spreads more widely. Over the much longer term, the dollar may find itself under increasing pressure as the global reserve currency, undermining the geopolitical position of the US and foreshadowing the end of a hegemonic period in global economic history.
...
The increasing complexity of financial markets, and the rate at which financial markets are evolving, make the task of avoiding and managing systemic financial risk extremely difficult. Increasing global interconnectedness has multiplied the possible pathways for thecontagion of financial risk. Layers of leverage may have increased the possibility for magnification of risk. Financial innovation, in the form of complex financial instruments, may ultimately contribute to the opacity of systemic risk. At the same time, however, the increasing importance of the financial sector in the real economy has made the question ofsystemic financial risk more important than ever.
....
First, the US housing recession, which began in late 2006, has accelerated, with new housing construction at its lowest level since the early 1990s and house prices down nationally. Second, the world has experienced a crunch in global liquidity, affecting even essentially solvent financial institutions, and raising the prospect of tightening credit as banks are forced to readjust their capital ratios. Finally, the dollar price of oil rose to an all-time high, close to the inflation-adjusted peak of the early 1980s.
But if an eventual global re-appreciation of risk was foreseeable in early 2007, the timing and precise nature of the trigger event was not. In early 2007 many expected that any systemiccrisis would be the consequence of an unwinding of global economic imbalances – notably the US current account deficit. The actual trigger for the current systemic crisis was the collapse of a critical segment of the US mortgage business – the subprime mortgage market. It was widely thought in early 2007 that the main threats to financial stability would come from leveraged hedge funds. But it turned out to be problems related to complex security structures and off-balance-sheet vehicles created by the banking sector that have generated the systemic elements to the current crisis. Predicting what will happen is easier than predicting when and how events will unfold.
The meltdown of the US sub-prime mortgage market and the growing prospect of a global credit crunch dominated financial markets in the second half of 2007. An abrupt evaporation of liquidity and dramatic repricing of risk led to widespread financial instability, ultimately threatening the viability of smaller financial institutions even in well-regulated markets such as Germany and the United Kingdom.
The US Federal Reserve has projected direct losses related to sub-prime of US$ 150 billion; non-subprime financial losses may be considerably greater. As in past systemic financial crises, complacency in credit standards – driven by perverse incentives and moral hazard – lowered risk premiums to unsustainable levels. The periodic underpricing of risk in financial markets may be structural and to some extent unavoidable. But few systemic financial crises are entirely dissimilar to earlier episodes. This suggests room for improvement in the management of crisis including better early warning systems and more coordinated and forceful action by market supervisors and central banks.
Financial crises may never be avoided. But their frequency and severity may be significantly reduced. Is the financial system now more stable and resilient? Some recent experiences – such as the relatively benign Y2K rollover, the very short-lived market disruption following the events of 9/11, and the relatively muted effects of more recent spikes in the dollar price of oil – have led experts to conclude that markets are now more resilient to exogenous shocks. But many would argue that the overall resilience of the global financial system will only become fully evident under conditions of severe stress over the next year.

No Housing Initiative in Bush's $150Billion Relieft Plan

2008-01-18T14:24:00.000-08:00

That's right, no help from the infamous Bush regarding the current mortgage and housing crisis. A few billion dollars toward that end would do wonders. But it's not to be had, just adding credence to the article I wrote earlier regarding the hedge funds, the rich boys the back them, and the federal government that continues to protect them. Well here it is from another perspective. Sad, really sad. But who of you is surprised? This is, after all, the Bush regime we are talking about.

No new housing initiative in Bush's $150 billion stimulus plan
NAR looking for increase in conforming loan limit
Friday, January 18, 2008By Matt Carter Inman News
A $150 billion economic stimulus package unveiled by President Bush Friday doesn't address a top priority of the National Association of Realtors -- raising the $417,000 conforming loan limit to allow Fannie Mae and Freddie Mac to purchase "jumbo" loans.
The president's plan to stimulate economic growth would reportedly rely on tax cuts and incentives for individuals and businesses, with about $100 billion in relief such as tax rebates targeted to families and individuals.
Although the president today renewed his calls for Congress to pass legislation modernizing Federal Housing Administration loan guarantee programs, he announced no new initiatives specifically targeted at reviving housing markets or mortgage lending.
Earlier this week, the Treasury Department reiterated the administration's existing policy on the conforming loan limit: An increase will be permitted only when Congress passes legislation overhauling oversight of troubled mortgage repurchasers Fannie and Freddie.
Eight months ago, the House of Representatives passed a bill that would do just that. Approved by the House May 22 in a 313-104 vote, HR 1427, the Federal Housing Finance Reform Act of 2007, would strengthen oversight of the government-sponsored enterprises (GSEs) by creating an independent agency with powers similar to those of a bank regulator.
But disagreements over a number of issues -- including caps on Fannie and Freddie's $1.5 trillion loan portfolios -- have long been roadblocks to passage of similar legislation in the Senate, where a companion bill to HR 1427 has yet to even be introduced.
HR 1427 would give Fannie and Freddie the power to guarantee and securitize loans of up to $625,000 in high-cost housing markets, but not hold them in their own investment portfolios. New York Democrat Sen. Charles Schumer introduced a bill in September, S 2036, that would create a one-year window for the GSEs to purchase such loans to hold in their portfolios.
The Office of Federal Housing Enterprise Oversight, which supervises Fannie and Freddie, recently issued a report analyzing the potential impacts of those bills if they were to become law. OFHEO concluded that while raising the conforming loan limit might lower interest rates some borrowers pay for jumbo loans, it might also use up capital the GSEs could otherwise use to support the purchase of a larger number of smaller loans.
The newly eligible loans might be riskier than those now purchased by Freddie and Fannie, and the GSEs would have to charge higher fees to compensate for the risk.
House and Senate Democrats have introduced other bills -- HR 3838 and S 2169 -- that would temporarily raise the limits on Fannie's and Freddie's loan portfolios by 10 percent. Supporters say that would allow the GSEs to refinance $125 billion in subprime loans in a six-month window (see Inman News story).
So far, the Bush administration's efforts to revive the housing market have centered on two areas: FHASecure, a new FHA loan guarantee program that allows some delinquent borrowers with adjustable-rate mortgages to refinance into fixed-rate loans, and the voluntary "HOPE NOW" initiative in which loan servicers are attempting to reach out to troubled borrowers and, where possible, refinance or restructure their loans rather than foreclosing on their homes.
Critics say the new FHASecure loan program and HOPE NOW efforts won't help many of the 1.8 million homeowners facing interest-rate resets this year and next, and that falling home prices will make it harder for many borrowers to refinance.
A report issued this week by the Mortgage Bankers Association estimated that loan servicers were able to modify the terms of 54,000 loans during the third quarter of 2007, and established formal repayment plans with another 183,000 mortgage borrowers. But the report found that foreclosure actions were started on far more loans -- approximately 384,000 -- although many of those homes were not owner-occupied.
The National Association of Realtors Thursday said that any stimulus package must include an increase in the conforming loan limit, and urged the president and Congress to pass an FHA modernization bill.
Raising the conforming loan limit to $625,000 would reduce the supply of homes on the market by one to one-and-a-half months, NAR said in a statement, strengthen home prices by 2 to 3 percentage points, and increase economic activity by $42 billion. NAR claimed that increasing conforming loan limits could help reduce foreclosures by 140,000 to 210,000 and result in an additional 348,000 home sales.
"We believe that any stimulus package must address housing issues and increasing the conforming loan limits for these two government-sponsored enterprises," NAR President Dick Gaylord said in a statement. "The increase in loan limits would not only improve liquidity in the mortgage marketplace, but also boost home buyers' confidence levels, resulting in increased sales and economic activity."
Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., did not respond to a request for comment today.
The National Association of Home Builders, which has backed the administration's insistence that GSE reform bill be passed before raising the conforming loan limit, issued a statement today praising the proposed stimulus package, but said "any final package should address housing as a key component to help strengthen the economy."
NAHB President Brian Catalde called on the Federal Reserve to "move aggressively" and cut short-term interest rates at a meeting scheduled for the end of the month.

AZ Real Estate Forecast

2008-01-18T08:53:00.000-08:00

How does one react to the current news about real estate? The following report from the Arizona Republic may help.

Now is clearly a buying opportunity for real estate investors. Now is clearly not a good time to sell. Home owners should simply stay put for a few years. Now is clearly a good time to refinance for those with good credit and discipline to invest the savings.

New housing outlook: 5 years to recover
Catherine ReagorThe Arizona RepublicJan. 17, 2008 12:00 AM

Home prices will stop falling. New- and used-home sales will pick back up. And the subprime-lending debacle will be over but not forgotten.

But it could take a few years for that to happen in metro Phoenix.
The prognosis for the housing market's recovery came Wednesday at the Urban Land Institute Arizona's Real Estate Trends conference. The real-estate think tank's annual daylong gathering is one of the state's biggest and most influential real-estate events. There, top economists, analysts, developers, brokers and investors present candid market predictions.

"The bottom of the housing market may occur in 2008 or 2009, but a full recovery will probably take three to five years," said Elliott Pollack, an Arizona economist and real-estate investor. "This slowdown ends when housing prices stabilize, and they will. Unfortunately, the worst is still ahead of us."

Because of foreclosures, metro Phoenix home prices could fall 30 to 35 percent from 2006's peak and values won't likely return to that high before 2015, said Gadi Kaufmann of the national real-estate advisory firm Robert Charles Lesser & Co.

Home sales could drop to 35,000 and home-building permits could fall to 20,000 this year, Kaufmann told the audience of more than 1,000. That's more than a 30 percent drop from 2007.

Long-term, after 2010, the projections for population growth and changing demographics call for 40,000 to 42,000 new homes to go up in metro Phoenix.

"Many of us thought last year would be the worst for the housing market, but 2007 was just the beginning, due largely to the credit crunch," said John Chadwick, president of builder Pulte's Southwest operations. "But the long-term fundamentals are still good for Phoenix. This is still an affordable region for the West."

Foreclosures are the big wild card for the housing market. A record 10,000 metro Phoenix houses were foreclosed on in 2007.

How many more houses go into foreclosure this year, how those add to the market's oversupply of homes for sale and whether people who lose homes stay in the Valley all play a big part in when the market hits bottom.

"It's going to be ugly, ugly, ugly this year," Pollack said. "But in five years, this will all be a bad memory."

Too Much "Big Brotherism" for Pinal County Landowners

2008-01-16T08:34:00.000-08:00

Below is a great article from the Arizona Republic regarding government controls placed on developing land in Pinal County. With the best of intentions, have created laws and placed restrictions that tie the hands of both landowners and developers in a market that has always been self regulating. There is alot of pressure on local government to repeal these legal acts. Read more below. Thank you, Robert Hand, www.equityallianceproperties.com
Pinal owners fear loss of property rights
Lynh BuiThe Arizona RepublicJan. 16, 2008 12:00 AM
Mark Pace is worried about his retirement fund, which doesn't sit in a 401(l) or an individual retirement account, but in a piece of Pinal County desert near Coolidge. In the past decade, Pace has invested almost $50,000 on the 163-acre property that the farmer hopes to sell to developers when he retires from the fields. But Pace fears that the county might reduce the value of his land and his chances of scoring a cushy retirement nest egg.
In an effort to reduce speculative land grabs, Pinal County has recently used a clause attached to zoning cases that allows the Board of Supervisors to revert the zoning on land that has seen little or no development within 18 months. Pace is one of several Pinal County landowners who in recent months have been working to prove that he has started development to protect his investment.The Board of Supervisors recently reverted the zoning on three pieces of property from developable land back to general rural, a process that may have decreased the value of the land.The county's attempt to squash land speculation has critics saying the county has positioned itself for a lawsuit under a proposition meant to protect private-property rights. They also say now isn't the right time to force landowners to develop when the Valley's real-estate market is on a downturn."Landowners all over the country should be afraid of this," Pace said. "If they take away my zoning and the market does have an uptick, then I have to go back in to square one again."The voter-approved Private Property Rights Protection Act, or Prop. 207, requires landowners to be compensated for their property if its value is reduced by a government agency. The down zoning "diminishes the value of their property immensely and makes it difficult for them to sell it," said Lori Klein, the former executive director of the Prop. 207 initiative. The county received an update on 29 zoning cases in September. In many instances, supervisors granted extensions to landowners who showed development progress on their land. "You can't really plan for well-designed communities if you have these holdings that people are just sitting on and not really doing anything," Pinal County spokeswoman Heather Murphy said.But Pace, Klein and others say owners aren't sitting on their land, but are responding to a slow real-estate market. "It is unfair to ask developers and landowners to build infrastructure at a time when the market can't bear it," Klein said. "Leave people alone and let them build at the pace they can."

Rules of Engagement, 8 questions for REALTORs

2008-01-03T10:20:00.000-08:00

As many of you go out into the world of buying and selling homes you are faced with choosing a representative, a real estate agent, a REALTOR. Lots of folks will say, hey I know this gal...blah, blah, blah, blah. Hey that's great, maybe she's great too. Maybe she is just some yahoo that either just got her license and has no or very little experience navigating through the miles of paperwork that a real estate sales transaction generates, or how to conduct proper due diligence to help you avoid the pitfalls of what is the biggest business transaction for most households. Maybe she has been in the business for a while but has made some errors in judgement that may call into question her character. Maybe consumer(s) have filed complaints against her license through the state's department of real estate. All things to consider. So a referral is only as good as the source of that referral. Here is an interesting article I came across this morning that is one agent's perspective of "how to's" in helping to select a real estate agent.

Eight Questions to Ask ANY Real Estate Agent Before Signing ANYTHING
by Eric Bramlett
Everywhere you look, there are advertisements for Real Estate, and for Real Estate Agents. We're everywhere!
The reason is pretty simple: It's not extremely difficult to get your real estate license, a college degree is not required, and the income potential is pretty high.
Unfortunately, this means that there are a lot of BAD Real Estate Agents out there. The BEST way to find a good professional - in any industry - is to ask for a referral from a trusted friend or colleague. This does not, however, mean that any person referred to you is a quality professional - everyone has a brother, sister, aunt, uncle, or cousin who is in the business, after all - but it will increase your odds. There are a few questions that you should ask ANY Real Agent before signing a buyer's agency or listing agreement.
1. How long have you been in the business?
Pretty much any average person could decide they want to get their license today, and have that license in their mailbox a month later. Because of this, your Real Estate Agent's experience is VERY important. A new Agent will learn a LOT their first year, and will continue to learn more with every transaction. Don't automatically choose against a newer Agent - they typically bring a lot of energy to the transaction, and they will have LOTS of time for you. However, if you do decide to use a newer Agent, make sure they have a great support system behind them.
2. Are you a Realtor?
Not all Real Estate Agents are Realtors. Members of the National Association of Realtors have to adhere to a strict code of ethics, or otherwise face having their membership revoked. Also, you must be a member of the National Association of Realtors to have access to the MLS (Multiple Listing Service) which is what gives Realtors access to almost every home for sale in their market area.
3. What certifications do you hold?
There is an "alphabet soup" of advanced certifications that Real Estate Agents can earn. While it doesn't automatically mean that they are a good Agent, it does mean they are serious about their job.
4. What is your specialty?
Real Estate Agents typically categorize themselves as either "commercial" or "residential" which are vastly different. Even among Residential Real Estate Agents, though, agents will specialize in Buyers, Sellers, or Renters. Some Residential Agents successfully handle Buyers & Sellers, but make sure they come with plenty of satisfied customers. Agents typically cut their teeth working with renters.
5. Can I have a list of past customers?
Take the time to call a few of an Agent's past customers. Ask for their strengths and weaknesses (and make sure they don't share the Agent's last name.)
6. Who is your Broker? Can I call him/her?
Real Estate Agencies are moving towards the "mega-brokerage" mentality which means that many Agents today have never met their Broker. If an agent doesn't have their Broker's cell phone number, find out who they will call if they run into questions.
7. How many sales did you complete last year?
A good agent will complete at least 25 sales per calendar year. You want to make sure that the agent helping you through the largest purchase or sale of your life is a GOOD agent.
8. Is this your full-time job?
It always surprises me how many people are willing to let their office mate down the hall handle the purchase or sale of their home. You need someone who handles real estate transactions full-time, day in and day out, to make sure that your best interests are taken care of.
There are plenty of fantastic Real Estate Agents working today. Unfortunately, the incompetent Agents really stand out. (Did you hear about the Agent who contracted the wrong house?) Make sure that you find your Agent through a trusted source, and ask any Agent these important questions.

Build Green in Paradise Valley, Scottsdale, Phoenix, Mesa, all of Arizona

2007-12-14T10:40:00.000-08:00

Fellow Paradise Valley, Scottsdale, Phoenix, Mesa, and Arizona residents,
The Mayor of San Francisco is really taking the lead for our country attempting to set forth legislature to have construction in the city by the bay go GREEN. He's not just giving this lip service like so many politicians across the country. Read the article below for an uplifting view that gives hope. Imagine what a difference we would make if we began to adopt LEED green building standards NOW in Paradise Valley, Scottsdale, Phoenix, and Mesa as well as Northern Arizona and Tucson. Arizona and the Phoenix Metropolitan area would become shining stars. It's only by engineering marvels that a population of millions can live here in the desert and create a man-made oasis such as Phoenix, Scottsdale, or Paradise Valley. It is time we give back to nature a little bit by adopting solid green building practices. Take just a moment to take into account the carbon footprint of your own home. The time is now, not later. Check out this wonderful article below:

SF Mayor Proposes Green Building Requirement
by Brian K. Miller

SAN FRANCISCO-Mayor Gavin Newsom today proposed an ordinance that would make San Francisco the city with the most stringent green building requirements in the nation. The ordinance requires developers and renovators of larger residential and commercial buildings to achieve progressively higher levels of LEED certification from the US Green Building Council in the coming years.
"We’ve got to stop playing within the margins and get serious about addressing our reliance on fossil fuels," said Newsom during an announcement of the ordinance at 555 Mission St., Tishman Speyer’s under-construction office building, which is expected to achieve LEED Silver certification.
"A lot of people don’t realize that their homes and businesses also create a major carbon footprint, so today, by proposing these strict green building standards for our city, we’re saying enough is enough. It’s time to tackle global warming and climate change on all fronts."
If approved, the ordinance would require large projects--commercial and residential projects over 25,000 sf or 75 feet in height--to meet the base level of LEED certification starting in 2008. Large commercial projects would have to achieve LEED Silver certification starting in 2009 and LEED Gold staring in 2010. Large residential projects would have to achieve LEED Silver starting in 2010.
Mid-sized buildings would have to complete a LEED checklist but would not be required to achieve any LEED credits or points (the basis for the rating system) until 2009. Starting then, mid-size commercial buildings would have to achieve three LEED credits. The bar would be raised to four points in 2010, six points in 2011 and seven points in 2012.
Small and mid-size residential projects, starting in 2009, would be required to achieve 25 points from GreenPointRated, a rating system of BuildItGreen, a professional nonprofit membership organization that promotes energy- and resource-efficient buildings in California. The hurdle would increase to 50 points in 2010 and then 75 points in 2011 or 2012. The earlier increase would occur for multifamily residential buildings with more than five units.
Cumulative benefits this ordinance is expected to achieve through 2012 include: reducing CO2 emissions by 60,000 tons; saving 220,000 megawatt hours of power; saving 100 million gallons of drinking water; reducing waste and storm water by 90 million gallons of water; reducing construction and demolition waste by 700 million pounds; increasing the valuations of recycled materials by $200 million; reducing automobile trips by 540,000; and increasing green power generation by 37,000 megawatt hours.
The ordinance is based on the recommendations of a task force formed at the start of the year that included 10 members from San Francisco's ownership, developer, financial, architectural, engineering, and construction community. The task force issued its report and recommendations in June.

Alan Greenspan on the Credit Crisis, Article from the Wall Street Journal

2007-12-13T14:26:00.000-08:00

Hi all,
I so appreciate the clarity with which Mr. Alan Greenspan articulates his vantage point, insights, and intellectual prowess over the many facets of world banking, global economics, U.S. banking, and U.S. economics. The article below published 12/12/07 in the Wall Street Journal, authored by Alan Greenspan is an excellent treatise on the workings of monies at large. It is my pleasure to bring you this article. If you would enjoy a broad scope education from his perspective you may appreciate his book released this year, The Age of Turbulence: Adventures in a New World. Thank you for trusting us to bring you the most up to date, reliable, honest, and sometimes controversial source of real estate news in Paradise Valley, Phoenix, Scottsdale, Arizona, the United States, and world-wide. Article below:

The Roots of the Mortgage Crisis:
Bubbles cannot be safely defused by monetary policy before the speculative fever breaks on its own. BY ALAN GREENSPAN Wednesday, December 12, 2007 12:01 a.m.

On Aug. 9, 2007, and the days immediately following, financial markets in much of the world seized up. Virtually overnight the seemingly insatiable desire for financial risk came to an abrupt halt as the price of risk unexpectedly surged. Interest rates on a wide range of asset classes, especially interbank lending, asset-backed commercial paper and junk bonds, rose sharply relative to riskless U.S. Treasury securities. Over the past five years, risk had become increasingly underpriced as market euphoria, fostered by an unprecedented global growth rate, gained cumulative traction.
The crisis was thus an accident waiting to happen. If it had not been triggered by the mispricing of securitized subprime mortgages, it would have been produced by eruptions in some other market. As I have noted elsewhere, history has not dealt kindly with protracted periods of low risk premiums.

The root of the current crisis, as I see it, lies back in the aftermath of the Cold War, when the economic ruin of the Soviet Bloc was exposed with the fall of the Berlin Wall. Following these world-shaking events, market capitalism quietly, but rapidly, displaced much of the discredited central planning that was so prevalent in the Third World.
A large segment of the erstwhile Third World, especially China, replicated the successful economic export-oriented model of the so-called Asian Tigers: Fairly well educated, low-cost workforces were joined with developed-world technology and protected by an increasing rule of law, to unleash explosive economic growth. Since 2000, the real GDP growth of the developing world has been more than double that of the developed world.
The surge in competitive, low-priced exports from developing countries, especially those to Europe and the U.S., flattened labor compensation in developed countries, and reduced the rate of inflation expectations throughout the world, including those inflation expectations embedded in global long-term interest rates.
In addition, there has been a pronounced fall in global real interest rates since the early 1990s, which, of necessity, indicated that global saving intentions chronically had exceeded intentions to invest. In the developing world, consumption evidently could not keep up with the surge of income and, as a consequence, the savings rate of the developing world soared from 24% of nominal GDP in 1999 to 33% in 2006, far outstripping its investment rate.
Yet the actual global saving rate in 2006, overall, was only modestly higher than in 1999, suggesting that the uptrend in developing-economy saving intentions overlapped with, and largely tempered, declining investment intentions in the developed world. In the U.S., for example, the surge of innovation and productivity growth apparently started taking a breather in 2004. That weakened global investment has been the major determinant in the decline of global real long-term interest rates is also the conclusion of a recent (March 2007) Bank of Canada study.
Equity premiums and real-estate capitalization rates were inevitably arbitraged lower by the fall in global long-term interest rates. Asset prices accordingly moved dramatically higher. Not only did global share prices recover from the dot-com crash, they moved ever upward.
The value of equities traded on the world's major stock exchanges has risen to more than $50 trillion, double what it was in 2002. Sharply rising home prices erupted into major housing bubbles world-wide, Japan and Germany (for differing reasons) being the only principal exceptions. The Economist's surveys document the remarkable convergence of more than 20 individual nations' house price rises during the past decade. U.S. price gains, at their peak, were no more than average.

After more than a half-century observing numerous price bubbles evolve and deflate, I have reluctantly concluded that bubbles cannot be safely defused by monetary policy or other policy initiatives before the speculative fever breaks on its own. There was clearly little the world's central banks could do to temper this most recent surge in human euphoria, in some ways reminiscent of the Dutch Tulip craze of the 17th century and South Sea Bubble of the 18th century.
I do not doubt that a low U.S. federal-funds rate in response to the dot-com crash, and especially the 1% rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages and may have contributed to the rise in U.S. home prices. In my judgment, however, the impact on demand for homes financed with ARMs was not major.
Demand in those days was driven by the expectation of rising prices--the dynamic that fuels most asset-price bubbles. If low adjustable-rate financing had not been available, most of the demand would have been financed with fixed rate, long-term mortgages. In fact, home prices continued to rise for two years subsequent to the peak of ARM originations (seasonally adjusted).
I and my colleagues at the Fed believed that the potential threat of corrosive deflation in 2003 was real, even though deflation was not thought to be the most likely projection. We will never know whether the temporary 1% federal-funds rate fended off a deflationary crisis, potentially much more daunting than the current one. But I did fret that maintaining rates too low for too long was problematic. The failure of either the growth of the monetary base, or of M2, to exceed 5% while the fed-funds rate was 1% assuaged my concern that we had added inflationary tinder to the economy.
In mid-2004, as the economy firmed, the Federal Reserve started to reverse the easy monetary policy. I had expected, as a bonus, a consequent increase in long-term interest rates, which might have helped to dampen the then mounting U.S. housing price surge. It did not happen. We had presumed long-term rates, including mortgage rates, would rise, as had been the case at the beginnings of five previous monetary policy tightening episodes, dating back to 1980. But after an initial surge in the spring of 2004, long-term rates fell back and, despite progressive Federal Reserve tightening through 2005, long-term rates barely moved.
In retrospect, global economic forces, which have been building for decades, appear to have gained effective control of the pricing of longer debt maturities. Simple correlations between short- and long-term interest rates in the U.S. remain significant, but have been declining for over a half-century. Asset prices more generally are gradually being decoupled from short-term interest rates.
Arbitragable assets--equities, bonds and real estate, and the financial assets engendered by their intermediation--now swamp the resources of central banks. The market value of global long-term securities is approaching $100 trillion. Carry trade and foreign exchange markets have become huge.
The depth of these markets became readily apparent in March 2004, when Japanese monetary authorities abruptly ceased intervention in support of the U.S. dollar after accumulating more than $150 billion of foreign exchange in the preceding three months. Beyond a few days of gyrations following the halt in purchases, nothing of lasting significance appears to have happened. Even the then seemingly massive Japanese purchases of foreign exchange barely budged the prices of the vast global pool of tradable securities.
In theory, central banks can expand their balance sheets without limit. In practice, they are constrained by the potential inflationary impact of their actions. The ability of central banks and their governments to join with the International Monetary Fund in broad-based currency stabilization is arguably long since gone. More generally, global forces, combined with lower international trade barriers, have diminished the scope of national governments to affect the paths of their economies.

Although central banks appear to have lost control of longer term interest rates, they continue to be dominant in the markets for assets with shorter maturities, where money and near monies are created. Thus central banks retain their ability to contain pressures on the prices of goods and services, that is, on the conventional measures of inflation.
The current credit crisis will come to an end when the overhang of inventories of newly built homes is largely liquidated, and home price deflation comes to an end. That will stabilize the now-uncertain value of the home equity that acts as a buffer for all home mortgages, but most importantly for those held as collateral for residential mortgage-backed securities. Very large losses will, no doubt, be taken as a consequence of the crisis. But after a period of protracted adjustment, the U.S. economy, and the world economy more generally, will be able to get back to business.
Mr. Greenspan, former chairman of the Federal Reserve, is president of Greenspan Associates LLC and author of "The Age of Turbulence: Adventures in a New World" (Penguin, 2007).

U.S. Gov’t, Architects of Hedge Funds Cause Collapse of America’s Real Estate Economy

2007-12-08T20:03:00.000-08:00

By: Robert W. Hand
Designated Broker/Owner
Equity Alliance Properties
www.equityallianceproperties.com

Subprime Crisis? Heavens no, this is a complete collapse of the national real estate business sector of the U.S. economy with the mortgage companies and the federal government right at the heart of the matter. The effects of this break down of the nation’s overall real estate business enterprise with the subprime debacle well underway can be felt throughout every economic sector, including Wall Street.
Of course there are still those on Wall Street profiteering on the broken back of the real estate business economy; who originated and still draw huge amounts of interest on “interest only” loans, the predatory lenders, the beneficiaries of the federal government’s deliberately slow actions to remedy this fundamentally simple matter.
For most Americans, the most significant form of wealth we have is in the equity in our homes. Americans are losing their real estate endowments and the effect of a broken real estate business sector has brought the general economy to its knees. The masses are feeling it while the rich get richer. That’s right, the guys still making money off of these high interest loan products make the headlines saying, “Just let time fix it”. You didn’t think they were out of the game did you? Who do you think these “interest only” loan payments continue to be paid to? The longer this thing takes to get fixed, the longer they will continue to draw huge dividends on their “interest only” loan products that by design were never intended to be paid back as no money ever goes toward principal. Strong lobby money representing those interests is slowing down the process in Washington where debts take time to repay with a nod and a wink.
I released an article last month (provide link to article) portraying the less dramatic side of the facts and figures relating the number of incidences of loans in default as a small fraction of the number of loans overall, a number which is steadily climbing. Never less keeping those numbers in perspective, that still leaves, by some estimates, 1.1 million Americans losing their residential properties over the next 6 years.
Yes, this is a simple matter and it can be fixed with cash money, go figure. Let’s put the numbers of dollars to fix this problem into perspective in a fashion to which we’ve all grown accustomed; comparing it to the money we spend on the occupation of Iraq. To continue our military occupation in Iraq the U.S. Taxpayers pay: $270 million every day; $8.4 billion per month; a total of $600 billion spent and approved War-spending; another $200 billion requested for 2008 which would bring the cumulative total to $800 billion. There have been $10 billion mismanaged and wasted in Iraq per Feb 2007 hearings. There have been $1.4 billion Halliburton overcharges classified by the Pentagon as “unreasonable and unsupported”. $20 billion was paid to former Halliburton division, KBR for food, fuel, housing and other items. Pentagon auditors deem that $3.2 billion of that is “questionable and unsupportable”. Some figures predict the cost of the Iraq war topping out at over $2 trillion.
Just a small fraction of the capital Halliburton defrauded U.S. taxpayers out of alone would fix our mortgage crisis, would mend the broken real estate business sector of our economy, and would have a positive effect on the overall economy that would far exceed any amount of money we put back into fixing the system. So how much money are we talking about? Congressional Democrats led by Charles Schumer (D-NY) advocate spending just hundreds of millions (less than 1 billion) of dollars into nonprofits to help homeowners and the overall economy. A spokesman for the senator explains he is not suggesting the government pay off borrower’s loans in full, but believes a mixture of counseling and restructuring of the loans would bring down the costs of the program dramatically. Even if we paid all the loans in full it would be a pittance in contrast to the overall federal budget, let alone the Iraq war budget (if you can call Washington’s fiscal policies budgeting). Further, we can spread the cash outlay to fix the problem over a period of 6 years, according to the rate schedules of the remaining loans in question.
Such a partial bailout is estimated to cost no more than a few hundred million dollars. Compare that to the $8.4 billion we spend every month bringing Jesus and Democracy to Iraq with combat airplanes, helicopters, missiles, tanks and troops (gotta hand it to the neocons, the modern high priests of war; nobody has done anything this remarkable since the Jews and Romans hung Jesus on the cross). Even if we bail out everyone with a bad loan, what are we talking about in U.S. dollars…a month or two of what we spend rebuilding the Iraq we so surgically blew up? Piss off; the top runners of the presidential race spill that much in a single weekend at their white tablecloth fundraisers. Appropriation of a relatively small amount of funds would pull our economy out of the tailspin we currently find ourselves in! But who’s suffering…lower middle class, not the rich. The Bush Whitehouse neoconservatives were just this week exposed in lies and manipulation of intelligence data regarding Iran as a nuclear threat, that exposure shamelessly still not thwarting Bush’s rhetoric to invade Iran and threats of World War III as he continues to terrorize citizens abroad and here in America. We had better just by God save our hard earned tax dollars to fight another war on terror in Iran and forget allocating any funds to fix the U.S. economy which is, after all, only hurting the peasants. The war profiteers belong to the class of the super rich. George Bush should be impeached while he and his closest advisors, including Dick Cheney, should all be formally brought up on charges of international war crimes.
We have seen any number of articles written voicing the opinion, “why should we pay our tax dollars to bail out some idiot that was just too stupid to know what he was signing,” or invoking such profound truths as, “it’s just a bunch of greedy investors anyway, they knew what they were doing.” Perhaps those are fair characterizations in some instances, but who pays? We all do. Worse yet, this type of reaction is exactly what the profiteers of this debacle want to continue to hear, so the process remains stalled by the indecision and lack of common platform by constituents as profiteers continue to earn big returns on the money already loaned not yet in default. This has all been calculated to a “T” and has been executed as planned. Everyone at the top, the architects of the hedge funds, knew this was not designed to last! These were all interest only loans, which by design, were never intended to be paid back, as nothing is paid to principal.
Most folks who have fallen prey were not stupid at all but were just trying to secure their family’s future in real estate holdings. Mortgage brokers promised consumers that they could re-finance out of their nasty little adjustable rate 2nds or HELOCs in 6 months to 2 years depending on the loan program, pre-payment penalties, etc. No layperson could predict the market falling so far so fast. Refinancing out of these undesirable loan conditions quickly became a lost option as so many homes declined in value to far less than originally loaned on them. This has caught far too many people off guard, including seasoned investors and real estate brokers, to just write this off as some folks being careless or stupid. It’s a more sophisticated problem than that. There are folks that not only predicted this but calculated exactly what has transpired and are the beneficiaries thus: the major interests in and architects of the hedge funds that back these securities and continue to prosper from grotesque interest rates on “interest only” loans. You had all better understand that they don’t want legislation passed that keeps them from being able to charge insane amounts of interest as these “interest only” loans mature and reset.
You, the average homeowner pays the price, as do innocent individuals and families just trying to honestly buy their own ‘piece of the rock’. We are ALL losing equity in our homes (whether you have a mortgage or not) at an alarming rate as property values across the nation continue to decline due to the huge surplus of homes for sale. Some markets are declining much faster than others and we’re talking about significant amounts of depreciation from every homeowner in some metropolitan areas in Arizona, Nevada, California, and Florida to name a few. As more and more loans go into default, more and more properties go on the market in the form of short sales and foreclosures at well under market value. As more properties hit the market, this puts ever more pressure on existing inventories and prices go down further. We are getting to where we have so many short sales and foreclosures on the market that “under market” is the new norm. Our conventional methods for determining current market value and sales price takes into the effective average larger and larger numbers of homes with prices slashed. Buyers, seeing the declining market values don’t want to catch a falling knife. Folks who want to buy are waiting until they see evidence of the “bottom” of the market. They won’t perceive any indication of the “bottom” as meaningful other than seeing property values hold steady then raise again. This will not happen as long as more defaults resulting in short sales and foreclosures continue to flood the market day after day, week after week, and month after month. Consumers keep asking, as do REALTORs®, “when are we going to see the bottom of this market?” Well, it’s so simple even a cave man can do it; WHEN WE STOP THE CYCLE!!!
Why, then if it is such a simple fix, are we not already on our way to enjoying the recovery as a result of taking these simple steps. The answer: Greed and the power of lobbying money on capital hill have the process locked up and bogged down in red tape. Interest is earned over time and with interest rates already in place for the entities making money from these “interest only” loans, they just need more of the element of time to keep lining their pockets. This expresses one of the most frequently used relations in Algebra: Principal x Rate x Time = Interest Earned. Time is on their side, the super rich who invested in the hedge funds that back the mortgage securities we know as subprime loans. They are getting the time in earned interest they want because this Republican Whitehouse favors; big business, big money, and big campaign contributors in the form of lobbyists of which this group is well represented. Government is dragging their feet in spending the money to fix the problem at the pleasure of these predators.
So, folks, protect your equity, protect your interest in your own real estate holdings, protect your children’s chances of profitable real estate holdings in America and contact the congresspersons and senators whom preside over your districts. Give a positive voice to the budget to fix this problem. It will pay back huge dividends to our economy as a whole as we recover and stop the downward fall of the equity in your own homes.
This type of government subsidized economic recovery would not be without precedent. Consider the Savings and Loan crisis of the 1980’s where the government bailed out S&L’s to the tune of 150 billion 1980’s dollars. We can fix our subprime crisis today for a fraction of that amount.
Today on the hill there is proposed legislation to impose new limits on the adjustable rate mortgages scheduled to reset. Congress has been and is trying to pass legislation to put a freeze on interest rates. These are band-aids for a bullet wound. Let your voice be heard. Put some pressure on politicians to get this subprime debacle resolved with swift and certain action. It is a simple matter and the beneficiaries of this thing dragging out are the very entities who caused it in the first place. Together let’s end it, now.
Do you want to play hardball? All right, then let’s consider that the federal government does not want the average American to gain dramatically in personal wealth. Why would that be? Glad you asked. Since the years of Reaganomics and theories of a “trickle down” economy (always reminds me of being pissed on), and deregulation, our country has moved ever more from the worlds’ shining example of Democracy to a text book example of a Republic aristocracy with the Center of Power no longer held by the masses, the common man. The Power Center is now with the elite, the upper class, the super rich, the multi-billion dollar corporate entities, the Texas based oil brokerage firms that ultimately determine tax code, foreign policy, federal budget allocations, and the decision to go to war, with whom and when, and whom have the power and influence to throw elections.
It does not serve the rich constituents of this elitist government entity now with a stranglehold on America to allow its citizens to amass wealth. No, my friends, that would pull too much of the Power back towards the center. Think Washington doesn’t give any thought to that dynamic? Of course they do. Washington is so paranoid of the power of its citizens that they are breaking constitutional laws or re-writing the constitution as they see fit to ensure “CONTROL”, threatening our basic civil liberties in the process. That’s right, even firefighters (who can regularly in the course of their duties gain access into people’s homes without a search warrant) are now being trained to look for any signs that a citizen might not agree somehow with government policies and might thus be considered a threat to the government or even a terrorist. What a lot of bullocks. I’m a veteran of the U.S. Navy whose job was gathering and disseminating intelligence and have stood for protecting and honoring our nation. Now, it’s obvious I don’t agree with government policies. They would view me now as a threat! Sounds much more like a Republic regime than a Democracy. Sounds a lot like World War II Germany doesn’t it? Well, that’s America today, as we know it. Are you more comfortable with your head in the sand? That’s ok, go back to sleep, this article is about over. Germany went from a Nation of knowing to a nation of believing. Are we following in their footsteps as foolhardy, good-willed, ignorant patriots? Too often we blindly believe the lies told by the President and his government instead of challenging others and ourselves with the truth. I remember as a child learning of the atrocities in Germany under Hitler and asking, “how could all those people let this happen?” and “how could all those people have been fooled by their government?” In the words of Bob Dylan; “Patriotism is the last refuge to which a scoundrel clings; steal a little and they throw you in jail; steal a lot and they make you king.” This country has been preying on the good will of its unsuspecting citizens and it will be our undoing if we don’t wake up.
Lots of average Americans were making lots of dough during the real estate boom and in large part due to the ease with which funds were available to acquire primary and investment real estate. So many of us bought in to it and for most, it has only benefited the lending institutions. Once the real estate investment game became profitable for the common citizen it would self-destruct right before our eyes. The timing was calculated, planned, and the program executed by millions of exuberant homeowners and first-time real estate investors, not suspecting the falling axe. But those in the know, the architects of the hedge funds, knew exactly what would transpire. They didn’t bet their $billions on a hunch! Oh no, they calculated every phase of the process and watched it deliver dividends. Let me offer this challenge to other Real Estate Brokerage firms, Mortgage Brokerage Firms, Banks, and Title Companies: Equity Alliance Properties will pledge $1,000,000 of every $4,000,000 it brings in net revenue towards any program signed into law organizing such private funding. Let’s take back control of the real estate business sector for the greater good of the American homeowner.

Crisis or Opportunity - The Truth About the Arizona Real Estate Market

2007-11-02T14:07:00.000-07:00

With thousands of doom and gloom real estate articles and news media reports floating around, it’s time an industry professional takes on the responsibility of setting the record straight for the national and Arizona real estate markets.

The present real estate market is acting just as it should on the heels of the greatest real estate boom in the last 40 years. There is a long way to fall to get back to “normal”. This falling back into a normal market, coupled with the contraction of the sub-prime mortgage market has the real estate consumer, and many homeowners in a state of fear. The various media continue to depict a very grim picture of the markets in general without distinguishing between the national market and local markets, such as the Arizona real estate market, with factors unique in the ways of population growth and investor activity. I have seen numerous articles referring to the sub-prime debacle as a global crisis. That may be taking it just a bit too far.

The truth is, there is no geopolitical significance to recent events in the U.S. real estate market and the sub-prime crisis. To rise to a level of significance, an event -- economic, political, or military -- must result in a decisive change in the international system, or at least, a fundamental change in the behavior of a nation. The Japanese banking crisis of the early 1990s was a geopolitically significant event. Japan, the second-largest economy in the world, changed its behavior in important ways, leaving room for China to move into the niche Japan had previously owned as the world's export dynamo. On the other hand, the dot-com meltdown was not geopolitically significant. The U.S. economy had been expanding for about nine years, a remarkably long time, and was due for a recession. Inefficiencies had become rampant in the system, nowhere more so than in the dot-com bubble. That sector was demolished and life went on.

In contrast to real estate holdings, the dot-com companies often consisted of no real property, no real chattel, and in many cases very little intellectual property. It really was a bubble. There was virtually, (pun intended), no substance to many of the companies unsuspecting investors were dumping money into as those stocks rallied and later collapsed. There was nothing left of those companies in the aftermath because there was nothing to them when they were raising money through their publicly offered stocks. So, just like when you blew bubbles as a little kid, when the bubble popped, there was absolutely nothing left. Not so with real estate, which by definition, is real property. There is no real estate bubble! Real estate ownership in the United States continues to be coveted the world over and local markets will thrive with the Arizona Real Estate market leading the way, as the country’s leader in percent population growth, through the year 2030.

As for the sub-prime “crisis”, we have to take a look at the bigger picture of the national real estate market. To begin with, remember that mortgage delinquency problems affect only people with outstanding loans, and more than one out of three homeowners own their properties debt-free. Of those who have mortgages, approximately 20% are sub-prime. 14.5% of those are delinquent. Sub-prime loans in default make up only about 2.9% of the entire mortgage market. Now, consider that only 2/3 of homeowners have a mortgage, and the total percentage of homeowners in default on their sub-prime loans stands at around 1.9%. The remaining two-thirds of all homeowners with active mortgage prime loans that are 30 days past due or more constitute just 2.6% of all loans nationwide. In other words, among mortgages made to borrowers with good credit at application, 97.4% are continuing to be paid on time.

As for the record jumps in new foreclosure filings, again, you've got to look closely at the hard data. In 34 states, the rate of new foreclosures actually decreased. In most other states, the increases were minor -- except in the California, Florida, Nevada, and Arizona real estate markets. These increases were attributable in part to investors walking away from condos, second homes, and rental houses they bought during the boom years.

Doug Duncan, chief economist for the Mortgage Bankers Association, says that without the foreclosure spikes in those states, "we would have seen a nationwide drop in the rate of foreclosure filings." In Nevada, for instance, non-owner-occupied (investor) loans accounted for 32% of all serious delinquencies and new foreclosure actions. In Florida, the investor share of serious delinquencies was 25%; in Arizona, 26%; and in California, 21%. That compares with a rate of 13% for the rest of the country. This makes for some great buys for the savvy Arizona real estate investor in the area of short sales, foreclosures, and wholesale properties.

Bottom line: Those nasty foreclosure and delinquency rates you're hearing about are for real. But they're highly concentrated among loan types, local and regional economies, and investors who got their foot caught in the door at the end of the “boom” and are just walking away from those poorly performing properties. Most of those investors still have homes to live in, maybe more than one.

In the wake of the boom years, we now have a high inventory of homes on the market, Investors and speculators who quickly bought up homes dumped them just as quickly back on the market in hopes of a fast return. The frenzy of investors purchasing homes put pressure on inventories and drove prices up, further increasing investor activity. Then, as if all at once, many of those investors put their properties on the market, creating an imbalance in the reverse direction. With so many homes on the market, prices began to stall and then fell. Prices will continue to fall until demand chews up excess inventories.

With investors no longer a big part of housing demand, primary homeowners are slowly chipping away at the existing inventory. The Las Vegas housing market will rebound in March 2008, according to the largest and most respected appraisal firm locally. The main contributing factor to the sooner than later rebound of this southwestern city is a growing population and thriving local economy.

Arizona and Nevada are expected to lead the country in percentage population growth for the next 20–25 years. The population of Arizona is expected to approximately double during that time so we can expect a strong housing demand going forward. Normal inventory levels for Phoenix real estate are about 6-8 months. Current inventory is about 10-12 months. So, we are not far above “normal” inventories in Phoenix. There are, however, outlying cities in this large metropolis that have inventories in excess of 1 year. Queen Creek real estate inventory is the worst with approximately a 2-3 year surplus of homes on the market, mostly due to the large percentage of new homes purchased by investors and then quickly flipped back onto the resale market. Surprise and Peoria real estate markets have a 1-2 year inventory for largely the same reason. We are already seeing some Scottsdale real estate and Paradise Valley real estate prices increase in value. Billions of dollars are being poured into the local economy in the way of commercial development from the downtown area to Northeast Phoenix and Scottsdale.
The demand for Arizona homes will remain strong in years ahead as new populations create the need. The demand for housing across our great nation will remain strong as this next generation of young debutantes steps onto the home buying stage. Interest rates are still at historic lows and the lending institutions will continue to offer creative financing options. Sure, some hedge funds lost the air in their tires, but financing sub-prime loans is a high stakes game for the super rich and is not of geopolitical significance. They will find other ways to lend their billions for huge profits in the wake of this sub-prime debacle. Let’s not be gripped in the fear created by reports from all media types trying to “make news”. Let’s face it, the real numbers are not that bloody exciting. Ask yourself, is this an Arizona real estate crisis, or the perfect time to buy an affordable Arizona home? Proper timing and negotiating techniques make all the difference in the current Arizona real estate market. When choosing an Arizona realtor, trust the expertise and experience of Equity Alliance Properties. For up to date Arizona real estate market research, contact Robert Hand at 480.206.8133 or go to http://www.equityallianceproperties.com.