Housing Market

The battle of the home price databases continues. The Standard & Poor's/Case-Shiller index out this morning shows a record 16.3% price drop in July from the year-ago period. That was the largest slide since the index was created in 2000. The index tracks resale, single family home prices in twenty large cities. An older index that follows the ten largest cities plunged 17.5%, the biggest decline in its 21-year history.

Las Vegas was hit the hardest with prices down nearly 30%, followed by Phoenix and Miami, which were down 29% and 28% respectively. To put these declines in perspective, during the last big housing bust from 1990 to 1992, the steepest year-over-year decline was 6.3%. Prices peaked in October 1989, according to the Case-Shiller numbers. They hit bottom in February of 1994 but it took until January of 1998 for prices to reach their previous high again, a cycle of nearly nine years.

There was some good news in the Case-Shiller data. While all twenty cities showed year-over-year declines, six managed to post monthly increases from June to July. Those cities were Atlanta, Boston, Dallas, Denver, Detroit and Minneapolis. Denver had the largest month-over-month increase at 1.3%. "There are signs of a slow down in the rate of decline, but no evidence of a bottom," David Blitzer, head of S&P's index unit said.

The National Association of Realtors, whose data is reported by its members and follows the entire country, not just the largest cities, reported a 7% median home price decline in July to $212,000. The association is already out with its August numbers, which show a steeper 9.5% fall to a $203,000 median price nationally.

One reason why prices have declined so sharply is many of the homes being sold are distressed situations--short sales and foreclosures. “They’re bank-owned properties with dead lawns and green swimming pools," says Rob Jensen, a RE/MAX agent in Las Vegas. "They account for 75% of the sales right now. That pushes pricing down. It's just a snowball effect."

Jensen figures prices in Las Vegas are back to 2002 levels. But there is a silver lining. "So many people were priced out for so long," he says. "The last four years you couldn’t find a home for under $300,000. Now, you can find a great home with a pool for $250,000."

Steve Wynn, the billionaire casino mogul had steam coming out of his ears when I spoke to him on the day the big bailout failed. And he wasn't even a fan of it. Here's what he said:

“I am totally disgusted as an American by the leadership shown by both parties. We have a deficit, $350 billion. This bailout would cost $700 billion. We’re going to go to a trillion. I watched the debate. Lehrer should have asked them: What do you plan to do? If either one had real leadership he would have looked over to the other and said my fellow Americans, 70% of the budget are entitlements, Congress can’t touch that. Another 30% of the budget is discretionary, but it's things like national defense. We have as much ability to afford $700 billion as we do being Mary Poppins! America can’t afford another trillion dollars in debt. Our GDP can’t afford it. All Americans are going to pay the price. We’ll have a cheaper dollar and higher oil. We are going to save our institutions, but not by buying assets and bringing them to Washington. If a bureaucracy buys those credits its tantamount to Hari Kari."

"Those assets should stay where they were created. Warren Buffet showed us the way. The government stiffens the balance sheets of the troubled companies with preferred stock. All you institutions, we’re going to save you, but you have to cut your operating expenses, pay bare minimum salaries, no bonuses, until the government gets its money back. What will happen is the bankers will say tomorrow okay, let people stay in those homes. Instead of the Ditech commercial where you had people saying forget about paperwork. They’ll ask them to show how much they afford. Loans will get renegotiated. Homes will go back to $250,000. The people that live in them will pay what they can afford. The banks will have huge tax losses. The stocks will drop, just like they’re supposed to. This phony inflation in the economy will end. Shame on both the political parties. No more, enough is enough. Shame on both of those guys. Do they both have such a low opinion of us? Obama with his tax cuts and unpaid expenditures. McCain talking about earmarks. Earmarks run for one day. We can’t pay people social security at 65, we have to pay them at 70. What is this constant procrastination of the truth. I don’t give a damn about being polite.”

While the condominium market is pretty much in freefall in most metropolitan cities, it continues to experience relatively significant demand in New York City, and Anbau Enterprises Inc. plans to take advantage of the positive climate now that it has acquired a 55,000-square-foot parcel at 124 West 23rd St. in Manhattan for $19 million.

Chestnut Hill and Northwoods Apartments, two multi-family communities accounting for an aggregate 650 residences in Middletown, Conn., have just come under new ownership. Entities operating as Northwoods Apartment Associates L.L.C. and Chestnut Apartment Associates L.L.C. took the two Class A properties, located approximately 15 miles south of Hartford, off the hands of Middletown-Oxford L.P. and Connecticut Colony Associates L.P. in a transaction valued at $75 million.

KBS Real Estate Investment Trust I has announced that Home Depot USA Inc., has leased the entire 450,000-square-foot 170 Highland Park Drive building, a Class-A warehouse and distribution facility in Bloomfield, Conn., 12 miles northwest of Hartford.

Just days before the Port Authority of New York and New Jersey is due to release an update on the construction timetable and costs of rebuilding the 16-acre World Trade Center site in Lower Manhattan, new reports have surfaced claiming the planned transit hub is $500 million over budget and five years behind schedule.

The $700 billion bailout legislation now under consideration by Congress calls for the Treasury Secretary to implement a plan to stem foreclosures by working with servicers to modify loans.

It's not often we get to report breaking news on Hot Property, but I see the bailout seems to have died on the floor of Congress. The final vote was 205 for it and 228 against. A surprisingly large number of Republicans voted against it.

The Dow Jones average is down some 700 points so far today, 400 of that in the last ten minutes as vote was being tallied. It seems this bailout is toxic, much like the mortgages Treasury Secreatary Paulson hoped to buy with the money.

As my blog colleague Dean Foust lays out in an excellent story on Businessweek.com, Citigroup could end up getting quite a deal on its $1 a share purchase of Wachovia.

The acquisition quadruples the size of Citigroup’s branch network to more than 4,400 locations. Whereas before the company was really just a player in New York, California and Texas, Citibank—as its branches are known-- now has major positions in Florida, North Carolina, New Jersey and Pennsylvania. “Citigroup passed over Washington Mutual because they were focused on a bigger target: Wachovia.” says Bart Narter, senior vice president of the Banking Group at Celent, a Boston-based financial research and consulting firm. “Citigroup instantly becomes a major player in the Southeast and Mid-Atlantic regions.”

The deal could turn out to be a good one too for the F.D.I.C. which gets $12 billion in Citigroup preferred stock. The federal fund will only have to cough up money if the losses on mortgages Citigroup acquired top $42 billion, a very high number.

Unlike Washington Mutual investors, Wachovia shareholders are at least getting that $1 a share. There may be some additional assets for bondholders as Citigroup is not acquiring Wachovia’s AG Edwards brokerage firm. WaMu shareholders, by comparison, were wiped out. WaMu bondholders got more bad news. The firm, really just a shell at this point, declared bankruptcy. WaMu had some $ 6.8 billion worth of bonds outstanding, according to the research firm Gimmie Credit. On Friday they were trading at just 32 cents on the dollar.

Low Impact Living on has crisscrossed the country critiquing constitutional restaurants in a unnumberable of cities, from food lover’s havens like Novel York and San Francisco to food lover’s haystacks like Los Angeles and Chicago.  Nowadays we’re releasing our sights onto some of the littler constitutive-favorable enclaves of the US, like Boulder. Boulder is a town [...]