Property Grunt

Sunday, December 30, 2007

The Burbs

Still sick but better. I decided to risk it and go see UFC 79 at my friends place last night. It was awesome. I feel bad about Silva losing but at least he did not get knocked out. Chuck was back to his old self and I am curious about whether he will face Forest Griffin or Rampage Jackson. George St. Pierre ran a wrestling clinic on Matt Hughes. The irony is that Matt Hughes main expertise is wrestling. I have no doubt that George has answered all questions regarding his abilities. I can only imagine Matt Serra was taking copious notes at Madison Square Garden viewing party for UFC 79. He better hope that George St. Pierre qualifies for the Canadian Olympic Team, that way it will give Serra more time to recover.

This recent New York Times Article about people moving from the city from New York hits close to home because I am a child of the suburbs. The suburbs are often the goal of every parent that wishes to move their children out to fresh air, better schools and no crime. But as I can attest there a ton of hidden dangers for children in the suburbs from kids having open house parties when their parents leave town, to a freshman ending up with alcohol poisoning trying to show off by downing a bottle of Jack Daniels. Which actually happened at a party in my town. He got his stomach pumped but I am not sure if he was ever the same. And of course lets not forget school shootings.

Right now, as this article indicates, the suburbs are a pretty good deal, but for those of you who wish to go forward with this I offer the following analysis of this article that will give you more insight on the subject.

December 30, 2007
Cashing Out of New York City
THERE is a well-worn path between New York City and the surrounding suburbs. Over the years, many New Yorkers have made the move, looking for safer streets, better schools, bigger houses and more room to grow. Now another group is making the trek, and the reason is more squarely focused on money.

People are discovering that with Manhattan’s high apartment prices, they can cash out and get much more for their money outside the city, where the inventory is growing and the prices are falling. Some buyers, not quite ready for picket-fence lives, are even finding pockets of urbanism that didn’t exist outside the city a few years ago.
Stu Woods and Carole Gass are the kind of devoted New Yorkers who thought they would never leave Manhattan. In the 25 years they lived together in their two-bedroom Upper West Side apartment, they savored every stroll in Riverside Park, every shopping adventure to Fairway and every musical performance they could attend as a side benefit of Mr. Woods’s work as a studio musician.

Now they have sold their West 87th Street co-op for $899,000. It went within two hours at the first open house held by Jill Sloane, a broker at Halstead Property.
Mr. Woods and Ms. Gass used the proceeds to buy a three-bedroom ranch in Norwalk, Conn., for $690,000. They’re spending the holidays unpacking their Manhattan memories in their new home and celebrating the fact the they didn’t need a mortgage to buy it.
The widening gap between prices in Manhattan and the suburbs is what Ms. Gass said put this move into the “realm of possibility.”

“A couple of years ago, I think it wouldn’t have been an even swap,” she added. “We would have had to pay much more.”
Ms. Gass and Mr. Woods estimate that after taxes and train fare, they will have about $1,000 more a month to spend than they did before.

This is an example of perfect timing for this couple. Currently there is a world of difference between the suburban and urban markets. Although there some areas of the suburbs like Chappaqua and Pelham that are comparable to Manhattan in terms, the difference is that properties in Manhattan are moving while the suburbs are quite stagnant. So they sell high in Manhattan abd buy low in Norwalk.

Brokers agree that the deals are being found in the suburbs.
“You can negotiate better in the suburbs because their market is — at best — flat, and there’s a lot of inventory,” said Dottie Herman, the president of Prudential Douglas Elliman. “The prices of the city haven’t gone down. They keep going back up.”
New Yorkers are moving for reasons that are markedly different from those of 20 years ago. In 1990, when Jonathan Miller, the executive vice president and director of research of Radar Logic, a real estate research company, and his family moved to Connecticut from Manhattan, they were concerned about safety. “It wasn’t a move to save money,” he said.

Manhattan real estate prices are showing few signs of slipping. In fact, data from Prudential Douglas Elliman show that buyers spent an average of $1.37 million for a Manhattan apartment in the third quarter of 2007, a 6.3 percent increase compared with the same period last year.

Certain family-size apartments were more expensive than ever. Apartments with three or more bedrooms on the Upper West Side jumped by 46 percent to an average price of $4.5 million in the third quarter, according to Brown Harris Stevens.
The numbers stand in stark contrast to those of the suburban market. Figures released on Wednesday by Standard & Poor’s/Case-Schiller showed that prices for single-family homes in the New York City area dropped by 4.1 percent in October compared with October 2006.

Local real estate analysts see many signs that prices have dropped. Homes in Westchester and Connecticut are taking longer to sell, according to data tracked by the Coldwell Banker Residential Brokerage in Danbury, Conn. Even in coveted suburbs like Darien, Conn., the number of houses under contract dropped by 23 percent in November compared with the year before, the Darien Board of Realtors said.

I can confirm these facts for my town in Westchester because for the past two years years the local newspaper has made a mint off of the real estate ads and the frightening thing is that some of those houses are still on the market. Every time I visit see a slew of homes with for sales signs and these are not pieces of s**t, these are the kind of houses that would make Mike Brady jealous. And I suspect these areas are just as over leveraged as the rest of the country, I mean besides becoming empty nesters, why else would these people sell unless they are unable to afford the mortgage?

New Jersey sellers face even more problems: statewide, house prices have dropped by about 1 percent a month in the last several months, said Jeffrey Otteau, the president of the Otteau Appraisal Group in East Brunswick.

Buyers in Long Island’s most desirable suburbs are finding that they can get some of the best deals: Radar Logic’s figures show that median prices on the North Shore dropped by 7.7 percent in the third quarter compared with the same period last year.
Buyers are finding luxurious condos in the suburbs that they could not afford in Manhattan.

Jean Hassmer had been searching for an apartment similar to the one-bedroom co-op she owned on the Upper East Side, except that she wanted a doorman and slightly more space. But she couldn’t find anything in her budget — less than $500,000.
Then, in downtown Stamford, Conn., she saw a new 800-square-foot one-bedroom condo at the Classic that was within her budget. She now has a doorman, more space, sweeping views of woods, a private gym and rooftop swimming pool, a shuttle to take her to the Metro-North station, and free coffee and bagels while she waits for the bus.

She estimates that an apartment with similar perks would cost at least three times more in Manhattan. She also concedes that it was hard to leave. “If I could afford what I have in Stamford in the city,” she said, “I probably would still be in the city.”

Two words. Added value. And if she wants to have that feel of New York City, she can always jump on Metro North.

Even more willing transplants to the suburbs are surprised at how much less they are paying today than they might have just six months ago. Gary and Leslie Corrigan were able to buy a three-bedroom house in Darien for $635,000, though it had originally been listed at $659,000. Their mortgage is higher than the $2,000 they were paying in rent for a one-bedroom apartment on the Upper West Side. But they’re happier to own the house.

Janine Tienken of Kelly Associates Real Estate, who represented the Corrigans as a buyers’ agent, said that a similar house nearby with an extra bathroom and a slightly larger yard had sold eight months earlier for $702,000.

Three or four years ago, houses like the Corrigans’ sold for far more, she said. As she put it: “Sellers are more negotiable now. They’re not giving it away. But they’re listening.”

Buyers are finding that the suburbs are far more competitive than some parts of Brooklyn, which used to be the neighborhoods of choice for buyers priced out of Manhattan.

Ludovic and Fabienne Ledein, who live and work as jewelry designers in Dumbo, visited nearly a dozen lofts in Dumbo, Red Hook and Williamsburg looking for something to buy for less than $600,000. They needed enough space to work at home and to put up friends and relatives from Europe.

But what they wanted cost more than twice what they could afford. Still, they resisted the suburbs because they wanted a home that had an urban feel and would enable them to live around other artists.

They found their answer in Westchester County, in New Rochelle. For about $600,000, they bought 1,350 square feet in the newly renovated Knickerbocker Lofts, a converted factory downtown that was built 117 years ago. They liked what they saw and the fact that there was an artists’ collective nearby. They estimate that the 30-minute Metro-North ride to Grand Central will take as long as the subway from Dumbo to Midtown on bad days.

They have no illusions that when they move in in February that suburban life won’t come with its frustrations, as anywhere else would. “I just see it as an answer without spending $1.5 million,” Mr. Ledein said.

I do not mean to bag on New Rochelle or any of these areas however; each area of Westchester has its own little quirks. If the Ledeins accept these quirks then they should be fine.

Even buyers with that kind of money to spend are finding that the math makes more sense in the suburbs.

Barbara Pagliuca, a broker with Houlihan Lawrence in Chappaqua, N.Y., recently helped one family who had been looking for a 1,400-square-foot apartment in Manhattan. The couple, who owned a two-bedroom apartment on the Upper East Side, needed more space because they were expecting their second child.
When they started looking around in Westchester, they found that prices had dropped by about 10 percent in the last few months and that more homes were now into their price range.
Earlier this month, they closed on a 5,000-square-foot house in Chappaqua for $1.665 million, which was $84,000 less than the original listing.
Ms. Pagliuca said that in the long run, the couple was happy with the price because the house was in a good school district. “They’re obviously going to pay more tax on a house,” she said, “but they’re not going to pay tuition” for private schools.

There are two sayings in real estate: In the city it is “Location,location,location.” In the suburbs it is “Location, location, school district.” The primary reason why my parents moved us all to the suburbs was due to the excellent school systems. In the city you either to have to pay an arm or leg for private or take your chances with the public school system which requires a sharp mind and a sharp instinct for blood because you will be competition against a hundred other parents. The school system is a critical component of a prominent suburb, one I will touch upon in the near future.

In 1981, Russell and Cindy Demers met and became engaged in Manhattan. The couple now live in Scottsdale, Ariz., but they want to return to live in the New York City area after they retire in a few years. “Our feeling was that we need to buy now, even though we won’t be living in it for another five, six, seven years,” Mr. Demers said.

The couple spent six weeks e-mailing and talking by phone with a Manhattan broker about finding a two-bedroom, two-bath apartment with a view for about $1.5 million. Last summer, they toured apartments in Midtown and Hell’s Kitchen, around Madison Square Park and on the Upper West Side, but they found they would have to pay $1.8 million to $2 million for the space and amenities they wanted.

The Demerses found what they were looking for in Jersey City, where there are also a lot of new condos. They put down a deposit on a $1.412 million two-bedroom, two-bath apartment with a home office at 77 Hudson Street.

“We could have afforded Manhattan,” Mr. Demers said, “but we didn’t want to compromise too much.”
Edmund and Fun Li, who live on the Lower East Side, started searching for a house on Long Island after briefly looking for a two-bedroom in Manhattan. They have a budget of $600,000, and in the last six months, they narrowed their search to Merrick, where they have found that sellers have cut their prices in their range by as much as$25,000.

With help from their broker, Rhoda Nadell of Prudential Douglas Elliman, they narrowed their list even further. They want a house within a 10-minute walk from a train station, a finished basement and a gas stove, which they favor for cooking Chinese food. They’re confident that the market will only continue to work in their favor.

“Unless we see the perfect house, we’ll wait,” Mr. Li said.

Remember, the Perfect House is a myth. You have to give up one thing if you want another. That being said they are definitely taking the right position in waiting for the market to drop further and to find the right house that fits their needs.

However, they are exposing themselves to risk by making assumptions about the market. Which, unfortunately, is a common mistake that is often made.

First of all they are assuming that prices will continue to drop in the suburbs. What if they already hit bottom? What if demand starts to pick up because buyers realize the bargains and added value they can find in the suburbs? It is entirely plausible that the could happen and if it does they are back to square one.

Another variable is the Manhattan market. With the talk of recession, the subprime mortgage mess and the specter of layoffs stalking Wall Street, the Manhattan market is being watched very closely. Already the rental market is going soft and even with the influx of foreign buyers, who knows how long Manhattan will hold its own?

Let’s assume the Li's are apartment owners. If Manhattan tanks who is going to buy their apartment? Most buyers would probably balk at the Li's preferred selling price and would wait it out to see the market hit bottom.

If they own, they should take advantage of the current market and sell their apartment for the highest price possible. Then take the money put it into a safe investment vehicle where they can get a decent return on. Then they should take advantage of the soft rental market and rent.

If they are renting, then they have won half the battle. The other half is that they should monitor the suburban market very closely. They should keep a record of preferred homes for sale and they should also determine what they are willing to compromise on. Because if the suburban market begins to spike, they will have to move very quickly to find a good deal before the window closes.

Those of you who desire suburban living, please factor the fuel equation. If your house uses oil heat, you will be at the mercy at market forces. I know of one couple that was up to their eyeballs in debt just dealing with fuel costs. You are also going to need a car, which not only compounds your fuel expenses but also insurance and maintenance costs of the vehicle.

Saturday, December 29, 2007

Roll call: Still sick but trying to blog edition

The Sun Tzu of Finance.

I just want to thank Curbed and everyone else for their shoutouts. Yes. I am still ill. Not as bad as before but this f**king flu still won't leave my respiratory system and I am still coughing up phlegm but not as much.

A friend of mine has invited me to watch the UFC which I am dying to see since it has a pretty exciting card consisting of Liddell vs. Silva and Hughes vs. St. Pierre. I am going to take a nap and hopefully it will give this flu the heave ho.

Yesterday, I was watching the tail end of a discussion on Power Lunch on CNBC and apparently Bank of America has been getting hammered so badly by the subprime meltdown that they are cutting costs by getting rid of soap and soup. I am not sure what the exact details are and I am not sure how soup comes into the equation. But if BOA is going as far as cutting down on soap to lower their overhead then things are really bad.

Another item I saw on CNBC was Warren Buffet's new venture which is called Berkshire Hathaway Assurance Corp. The NYP provides more details.

Here's the rundown.

Municipalities and towns need cash to finance and expand operations and besides tax revenue they issue bonds. Of course investors are not going to buy any old bond and want assurances that they will get their return on their investments. This is where bond insurance comes in.

This is masterful move on Buffet's part because of the current status of the market.

As the New York Times article This Is the Sound of a Bubble Bursting has stated.

AT the state level, Florida’s sales tax receipts have slipped by nearly one-tenth this year, and by 14 percent in Lee County. That is a clear sign of a broad economic slowdown, said Ray T. Kest, a business professor at Hodges University in Fort Myers.

“It started with housing, the loss of construction jobs, mortgage companies, title companies, but now it’s spread through the entire economy,” Mr. Kest says as he walks a strip of mostly empty condo towers on the riverside in downtown Fort Myers. “It now has permeated everything.”

In recent years, Bishop Verot Catholic High School in Fort Myers had raised as much as $200,000 by selling goods at a dinner auction. Michael Pfaff, a Cape Coral mortgage broker, used to donate a weekend cruise on his 40-foot catamaran. But Mr. Pfaff’s business has all but disappeared, and he recently sold the boat. This year, the school canceled the auction and is deferring building maintenance.

The county school district’s decision to cancel construction of new public schools reflects a broader diminishing of resources. Developers have to pay so-called impact fees to the district to help fund new facilities. Two years ago, the district took in $56 million in such fees. Next year, it expects only $25 million.

New schools are no longer needed anyway, says the schools superintendent, James W. Browder. Many families connected to construction and real estate have moved away, so school enrollments are growing more slowly than expected. This could generate a snowball effect all its own: the new schools were to cost as much as $60 million each to build, so canceling them could mean further job cuts for the already reeling building industry.

Mr. Browder points out an upside of the housing downturn: Hiring people has become easy. In recent years, the school system struggled to find bus drivers, given the abundance of jobs at twice the pay driving dump trucks in home construction. “Now, we get 14 applicants for every job,” he says.

The county government depends on property taxes for a third of its general funding. Since taxes are assessed based on the previous year’s real estate values, it has yet to feel a dent. But agencies are under significant pressure to pare back in anticipation of a dip in next year’s funds.

Tax-cutting advocates cheer this prospect. Governments have gotten fat on the boom, they say. A constitutional amendment facing Florida voters in January would expand tax caps for many residences statewide.

“All the local governments were drunk with money,” says Mr. Kest, the finance professor. “Now, they’re going to have to cut back and learn how to manage.”

But local officials counter that they are already being forced to contemplate significant changes that could affect everyday life. The county’s public safety division, which operates ambulance services, says it could be obliged to cut staff. The county’s Natural Resources Department recently delayed a $2.1 million project to filter polluted runoff spilling into the Lakes Regional Park — a former quarry turned into a waterway dotted by islands and frequented by native waterfowl

This is where Buffet comes in. With his reputation and triple A rating he can provide the insurance backing for those bonds and with his reputation will allow him to easily borrow more money from investors.

I can't believe how brilliant yet simple this move was on Buffet's part and it is example of being aware of your terrain. With the subprime mess and the rate of foreclosures skyrocketing, Buffet probably realized that regardless of these problems municipalities still need to run and grow. Yet their core source of revenue, which is property taxes, has been reduced considerably due to the real estate market therefore they are more likely to go the bond route.

Now Buffet gets to play White Knight and comes in with his triple AAA rating in providing insurance for those bonds. And as he stated in an interview with CNBC, he doesn't have any trouble sleeping at night because he would never do a deal that would give him trouble sleeping at night. One of the advantages that Buffet has is that he can make a deal as big and as small as he wants. But if he does not get the rate he wants, it is not going to happen.

The crazy thing is that Buffet is pretty much the only game in town. As the Post states.

Many major bond insurers that traditionally dominated the $2.5 trillion municipal borrowing world are on the ropes, wracked by their own credit problems and cash-flow troubles, causing cash sources from investors to dry up for many municipal and state governments

The launch of Buffett's well-timed venture shook up the industry, and sent shares tumbling for two major municipal bond insurers - MBIA, which fell 17 percent, and Ambac Financial, down 15 percent

These firms are still trying to get their heads above water and who knows if any of them will be still be around in the next couple of years which clears the playing field for Buffet.

One of the attributes I admire of Buffet is his ability to stay behind the pack instead of following it and there is a huge difference between the two. When you are following the pack, you are basically taking the same path they are taking which usually leads to the same results. When you are staying behind the pack, you are simply observing their movements but you are not duplicating their actions but studying them. Then when the time is right you jump in.

What Buffet has done isn't complicated, all he did was time himself to extend his brand.

What I also find interesting is that I have not heard of Buffet jumping into the Tax Lien game which is undergoing turmoil of its own. My opinion is that he does not want to deal with the physical transactions of liquidating real estate which is already messy enough.

In the world of stupidity and desperation, the New York Times presents an article about card counting crews who are invading who are invading our nation's gambling establishments.

WHEN he hits the blackjack tables at the Foxwoods casino in eastern Connecticut, Mr. S is no longer a construction worker in his 20s laboring for a weekly paycheck. Dressed casually and acting as if he couldn’t care less what anyone thinks, he plays the part of a pushy rich kid who has no problem making bets that often exceed $1,000 a hand.

His act is observed knowingly by friends — his teammates, really, who hover incognito around the blackjack table. With time, Mr. S’s rich-boy persona may earn them all lots of money.

For the last seven months, the five friends — including a paralegal, a beer distributor and a pool cleaner — have been hitting the casinos in Atlantic City and Connecticut, risking their $50,000 stake in hope of winning hundreds of thousands of dollars by a strategy known as card counting.

Each team member knows how to count cards on his own, meaning he recognizes when the odds have shifted from the casino’s favor to the player’s. It’s then — when there are still a disproportionate number of picture cards and tens left to be played — that a card counter dramatically raises his bets.

Inspired by Ben Mezrich’s best seller, “Bringing Down the House,” a 2002 chronicle of a group of M.I.T. math whizzes who collectively won millions in Las Vegas in the 1990s, the team began visiting casinos in June, joining many others who came to card counting through the same route. The card-counters’ ranks will likely swell even more this spring with the release of “21,” a film based on Mr. Mezrich’s book.

First of all the movie is going to be a complete joke because the real M.I.T math whizzes are all Asian. Yes, they fulfill a stereotype, but Hollywood in its infinite wisdom made the majority of the cast all white. As far as I am concerned, it is akin to casting Pat Boone as the lead in a Malcom X biopic.

The only parties that will be rolling in the dough are Mr. Aponte because there will a ton of losers beating down his doors of his Blackjack Institute and these gambling institutions. Remember. THE HOUSE ALWAYS WINS.

I realize why these crews come together because they are looking for an instant tax free pay day because their winnings will be in cash. But for the amount of effort and time they are putting into this, I think they would be better off investing in a business or bettering their financial portfolio. Unfortunately with the way the economy is running, I foresee more people getting involved in these types of unorthodox projects to earn money.

These crews aren't cheating per se, but they are not only risking what little money they have but casinos usually frown on this type of behavior and they have their ways repelling these elements.

I am sure it would never come to this point. But why risk it?

Thursday, December 27, 2007


I have been up since 4 am coughing my lungs out, however I think I am getting better. So there will be no posts until I am well.

Sunday, December 23, 2007

Happy Holidays

Greetings folks! I just want to wish everyone Happy Holidays! Right now I have been fighting a very annoying flu that went to my head, to my stomach then back to my head. I think it is kind of ironic since I just watched I Am Legend yesterday at the IMAX.

It was well worth it, not because it was a good movie but because of the Dark Knight trailer.

That movie will be so amazing. And now I am watching The Stand on the Sci Fi channel.

Although I would like to discuss the current New York Times Article instead I would like to offer some suggestions for the last minute holiday shoppers.

First off is Ali Rogers most excellent book Diary of a Real Estate Rookie.

It is a brilliant, well thought book that details her maiden voyage in real estate. I recommend it not only for its educational value but also as a really great book to curl up to during the winter.

Another person who I also think very highly of is Frances Flynn Thorsen of the Realty Gram Blogger. Frances not only has one but two books on real estate. One is on HUD homes, the other is on real estate sales. If you have the desire to expand your knowledge on residential real estate and the government, she is definitely the go to person for that.

Last but not least is are those lovely Gawker Media people.

Some people call them a bunch of snarky media bloggers, but they are my snarky media bloggers and they have given me nothing but love. So I am going to plug their book The Gawker Guide to Conquering All Media

Have a Happy and Healthy!

Friday, December 21, 2007

Greenspan Shrugged

This week the New York Times published an excellent article on Washington’s role or lack thereof in the subprime crisis. We all have seen that movie but what I find interesting is Greenspan’s role and his reaction to it.

December 18, 2007
Fed Shrugged as Subprime Crisis Spread
WASHINGTON — Until the boom in subprime mortgages turned into a national nightmare this summer, the few people who tried to warn federal banking officials might as well have been talking to themselves.
Edward M. Gramlich, a Federal Reserve governor who died in September, warned nearly seven years ago that a fast-growing new breed of lenders was luring many people into risky mortgages they could not afford.
But when Mr. Gramlich privately urged Fed examiners to investigate mortgage lenders affiliated with national banks, he was rebuffed by Alan Greenspan, the Fed chairman.
In 2001, a senior Treasury official, Sheila C. Bair, tried to persuade subprime lenders to adopt a code of “best practices” and to let outside monitors verify their compliance. None of the lenders would agree to the monitors, and many rejected the code itself. Even those who did adopt those practices, Ms. Bair recalled recently, soon let them slip.

Of course the subprime had no desire to adopt these practices. They had free reign to do what they wanted. They also realized that sooner or later the party was going to end so they had to bang out as many deals as possible. Anything interfering with those deals was unacceptable.

Want to here something funny? I don’t blame Greenspan for the subprime crisis. In fact if I were in his position I would probably take the same actions.

After the dot com meltdown, Greenspan needed to get the economy rolling again and housing became that engine to power it up and get us out of the recession. So he had to be very careful with whatever actions he took did not stifle that resurgence.

Let’s not forget his new boss who was pushing home ownership; he wanted every American to have the chance to own a home. It was his version of a chicken in every pot and a car in every garage. Owning a home is great for the economy because it creates tax revenue for local governments and local business like contractors, landscapers benefit from the new demand for their services. Our commander in Chief is also a Republican. The mantra of that party is less government. Any pleas for more government assistance would have fallen on deaf ears.

Always outnumbered, Always outgunned.

The agencies, however, were like a Rube Goldberg machine with parts moving in different directions. The Office of the Comptroller of the Currency was in charge of nationally chartered banks and their subsidiaries. The Federal Reserve covered affiliates of nationally chartered banks. The Office of Thrift Supervision oversaw savings institutions. The Federal Deposit Insurance Corporation insured deposits of both state-chartered and nationally chartered banks.

Greenspan wasn’t trying to avoid responsibility when he said that the resources and manpower were not available to regulate the subprime lenders, he really meant it.

As for the CYA
Mr. Greenspan was against the idea. In an interview last week, he said he feared that Fed examiners would fail to spot deceptive practices and inadvertently give dubious lenders what amounted to a government seal of approval.
“I remember telling him, ‘be careful,’ ” Mr. Greenspan said. If the Fed gave the appearance that it was overseeing thousands of local institutions, which he said it did not have the resources to do, “we’re going to end up with a situation that very well could be worse rather than better.”

Is Greenspan right? Would it have made it worse? I don’t know. What I do know is Greenspan is not an idiot. During his tenure he has seen the ups and downs of the national and global economy. So he he has probably developed a very keen sense of timing of when to act and when to sit back and let things play out. Another reason why Greenspan has been so successful is that he knows his limitations; remember he went into finance when he realized that he did not have the talent to become a professional clarinet player. He is also a man who picks his battles very carefully. And from what the article has described, Greenspan did not have the resources nor did he have the backing of the Commander in Chief to go out and clean house. And if he had gone forward and attempted to take control of the situation, a brand new clusterf**k could have been created that even he could not deal with. What if Greenspan inadvertently ended up putting a halt to all those foreign buyers gobbling up those bundled up mortgages or stifled the growth of the economy?

Also Greenspan had to look out for his own welfare. He was at the end of his tenure and there was no way in hell he would do anything to jeopardize any lucrative financial opportunities that were out there. He can't rely on Andrea Mitchell to pay the bills.

That is why I can’t really fault him for the subprime crisis because there were a ton of variables involved and a lot of them were out of his control.

In other words Greenspan was dealing with his own Kobayashi Maru. A pure no win situation.

Monday, December 17, 2007

Roll Call: An Al Bundy Christmas edition

You better hope she buys some shoes.

The New York Observer did a profile of Sam Chang, Hotel Developer extraordinarie. Sam Chang has been relentless in developing hotels under name brands like Holiday Inn, Comfort Inn and Candlewood Suites.

I had the opportunity to speak with Sam Chang while working on a real estate class project that was focusing on hotels. He was very polite and generous with his time. Of course he was quite knowledgeable.

So how is he so successful? Here is one reason.

“Most developers don’t have the financing capabilities that Sam Chang does,” said Bill Fortier, Hilton Hotels’ senior vice president of franchise development, “so they have to get our licensing agreement before a bank will give them the money to build. Sam doesn’t necessarily need that, so he’ll go out and start building and then come and get the licensing agreement from us after the fact.”

Sam Chang has very deep pockets because all of his money comes from investors from China. Remember my entry on Chinese buyers? Sam Chang is example of utilizing Chinese money for development purposes. So he has the freedom to go where he wants to go.

Recently the New York Times presented an article on a tenants living without heat in the Bronx. Yes. Even in the 21st century, there are places in New York City where tenants are without the basics of living.

Most mornings, their neighbor Latrisha Lowman, 25, comes over to boil a pot of water on Mr. Hardy’s stove because her stove is broken. She takes the pot back to her apartment to give her daughter a bath.

The stove is the most relied-upon appliance. Tenants routinely set their ovens at 500 degrees and leave them on for hours with the door open, even though they are aware of the potential for fire and for carbon monoxide poisoning. “I already know that thing’s a danger,” said Mr. Wren as he sat in his bedroom while the oven warmed the kitchen.

I truly fear for the lives of these tenants because they are not only risking carbon monoxide poisoning but it is also a fire hazard.

And some more bad news on the retail front. Apparently women aren't shopping enough.

Retailers Face an Ominous Holiday Sign

Sales of women’s clothing, a traditional pillar of the holiday shopping season, are unusually bleak so far this year, according to a major credit card company, an ominous sign for the retail industry.

From high-end dresses to bargain coats, spending on women’s apparel dropped nearly 6 percent during the first half of the Christmas season, compared with the same period last year, according to MasterCard Advisors, a division of the credit card company.

Analysts blamed a rough economy, which has discouraged women — and mothers, in particular — from splurging on clothing for themselves and a lack of compelling fashions this winter.

The drop-off, which the credit card company described Sunday as “surprising,” bodes poorly for chains like Chico’s FAS and Ann Taylor, which specialize in women’s clothing, and could result in steeper-than-expected discounts on their merchandise in the final week before Christmas.

The slowdown is worrisome because women make the vast majority of purchases in retailing, and their spending is a closely watched barometer of the industry’s health.

Surprised? Surprised? No one has any f**king money. They are blowing on their mortgages or the foreclosure proceedings. They tapped out all the equity out of their homes and they are surprised that women aren't able to shop? What's the next surprise? Professional wrestling is fake?

Thursday, December 13, 2007

Have fun dodging the drug dealers.

Obviously these guys have never seen No Country For Old Men.

Now this is an interesting legal conflict between contractor and homeowner.

Contractor, homeowner at odds over fortune found in bathroom walls

Jim Nichols
Plain Dealer Reporter

Most folks are happy to reach into the pocket of a little-used jacket and find a long-forgotten $10 bill.

Multiply that feeling by 18,200 and you will understand how Lakewood home-improvement contractor Bob Kitts felt when he pulled a giant cache of Depression-era cash from the walls of an 83-year-old Cleveland home he was renovating.

As he was ripping plaster from bathroom-wall studs, Kitts found bundles of bills totaling $182,000 wrapped in pre-World War II Plain Dealer news pages and tucked into boxes. The money is in such good condition, and some of the bills are so rare and collectible, that one currency appraiser valued the treasure at up to $500,000, Kitts said.

But there's a hitch:

The walls from which Kitts pulled the money aren't his walls. The house isn't his house. Nobody knows for certain whose money it is.

Yet Kitts claims it as his own. He and his lawyer have dusted off an obscure, centuries-old legal doctrine called "treasure trove" - a common-law finders-keepers provision - that they believe gives him top claim to the wealth.

Kitts' lawyer has drafted a lawsuit that he hopes will force Amanda Reece to turn over the money she has kept, or at least share it.

Then again, he may not be a cent richer. Several court rulings have established precedent that undermines the applicability of the treasure-trove doctrine under these circumstances, said Reece's lawyer, John Chambers.

Reece would have accommodated Kitts, but the handyman got greedy, Chambers said. Now Reece has no intention of backing down in the face of what she considers a shakedown.

"In fact, I look forward to asserting our position," Chambers said in an interview last week.

It may be up to a judge to decide, said Heidi Robertson, a professor who teaches property law at Cleveland-Marshall College of Law at Cleveland State University. And that judge may have a challenge.

"It's certainly not a slam-dunk," Robertson said.

Kitts and Reece, classmates at Bay High School back in the 1980s, celebrated together one morning in May 2006. He was in his second day of gutting her bathroom when he found a box below the medicine cabinet. Inside it was $25,200 in pristine bills.

"I almost passed out," Kitts recalled. "It was the ultimate contractor fantasy. I've ripped out walls in my house, and all I ever found was steak bones."

He called Reece. She rushed home. Flushed with excitement, they found another steel box in the wall, tied to the end of a wire nailed to a stud. In it was more than $100,000, Kitts said.

"It was insane," he remembered. "She was in shock - she was a wreck."

They found two more boxes, filled with a mix of money and religious memorabilia.

Kitts took some of the currency for an appraisal and learned that many of the $10 bills were rare 1929-series Cleveland Federal Reserve bank notes, worth about $85 each. There also were $500 bills and one $1,000 bill.

They traced the home's Depression-era ownership to a businessman named Peter Dunne, Kitts said. The money bundles had "P. Dunne" written on them, but no sign of its origin. Dunne apparently died unmarried and childless, leaving behind a mystery - a fortune thatwould be worth an inflation-adjusted $2.7 million in today's money.

But the joy, friendship and contractual bonds of the former classmates dissolved like melting snow amid the heat of all that money. Now Kitts and Reece speak to each other only through their lawyers.

Kitts accuses Reece of greedily reneging on a promise to give him a 10 percent finder's fee. Reece's lawyer says Kitts rejected that and returned with a demand - 40 percent or he would file a lawsuit.

"He's trying to extort funds from me by putting it in the public domain," said Reece.

Now she worries that thieves will take crowbars to her brick home's plaster in search of more loot. Kitts already did that to other parts of Reece's home without her permission and found nothing, Chambers said.

Ohio and most other states have no specific statute governing what happens when someone finds a once-hidden treasure, so common-law principles dating to pre-Revolutionary Great Britain come into play, said Cleveland-Marshall's Robertson.

That common law has a fairly definitive "finders-keepers" bent to it.

That's true even when the finding is done on someone else's property, as long as the finder had permission to be there, courts have established.

That doesn't mean Kitts is clearly the winner. Unless the two sides settle, a judge or jury will need to decide whether he found money that was, in a legal sense, "lost" or "mislaid," Robertson and other lawyers say.

Kitts asserts he found lost money, and court rulings in Ohio establish that treasure trove's "finders keepers" law does indeed apply to something that was lost, if there's no reason to believe any owner will reappear to claim it.

But if it was absentmindedly mislaid on private property rather than lost, the owner of the property on which the discovery was made becomes the safekeeper of the lost goods, according to case law and legal texts.

In either case, the holder must make a good-faith effort to find the original owner or heirs before cashing in.

Kitts said it would be unfair for him to take everything.

"I don't want to do that - I don't agree with the law," he said. "But you've got to start somewhere.

"For such a happy, exciting adventure," he added, "I can't believe it just went to [ruin] like this."

There is a reason why $182,000 and valuables were stashed in a wall and it is probably not a legal one. If I were the owner I would just turn it over to the authorities. If the contractor wants the money, fine. Then the contractor takes the risk if someone decides to come back for it. And I am going to make it clear publicly that I have no claims to the cash. The irony is that in the end all that money is going to probably go to legal fees anyway.

Wednesday, December 12, 2007

Aww nuts

Pass the Malox.

The common mantra in finance is that when the real estate market is up than the stock market is down and vice versa. However it appears that mantra is being mashed into paste.

Fed Cuts Rate a Quarter Point; Stocks Dive

The Federal Reserve cut a key short-term interest rate today by a quarter of a percentage point, to 4.25 percent, signaling its concern that the credit crisis might be gradually damaging the broader economy beyond housing.

Policy makers also cut the discount rate to 4.75 percent, from 5 percent, essentially encouraging bankers to turn to borrow from the Fed to keep up their lending to consumers and businesses.

Investors reacted by sending stocks plunging and by bidding up Treasury bond prices. The Dow Industrials fell more than 200 points in a matter of minutes and kept sinking through the afternoon, closing off more than 294 points, or 2.1 percent, for the day, according to preliminary figures. Broader indexes like the Standard & Poor's 500 and the Nasdaq Composite fared even worse.

In an unusual statement after the meeting, the Fed’s policymakers declined to say whether they were more concerned about inflation or the outlook for economic growth. Their statement said that “Recent developments, including the deterioration of financial market conditions, have increased the uncertainty” about what will happen next.

It doesn't seem like anyone can do anything right. In fact it seems like any attempt to correct the situation just makes it worse. For instance, Bush's mortgage aid program has not been welcomed with open arms. Even Warren Buffet is a little concerned.

Billionaire investor Warren Buffett said the United States could slip into a recession if the jobless rate increases, he told CNBC television on Tuesday.

In a series of interviews throughout the day, Buffett, who built Berkshire Hathaway into a $205 billion conglomerate, gave a sobering view of the economy's prospects, including the assessment that holiday retail sales were not looking good despite a post-Thanksgiving holiday burst.

Consumer spending is seen as a key buffer preventing a weaker U.S. economy from sliding into recession as the housing market continues its free-fall and the banking sector remains challenged by a credit crisis.

"If unemployment picks up then we could be in for a recession," Buffett said.

Yesterday morning I heard this guy on Bloomberg Radio

Dec. 11 (Bloomberg) -- DuPont Co. Chief Executive Officer Charles Holliday said the U.S. economy will avoid a recession in 2008, buoyed by services and commercial construction as well as falling oil prices.

``The odds are not likely for a recession, but pretty slow growth,'' Holliday, 59, said yesterday in an interview in New York. ``So much of the economy is now the service sector that it takes more to take us into recession than it did.''

Morgan Stanley and Merrill Lynch & Co. have predicted the U.S. economy, the world's largest, will enter a recession as the worst housing slump in 16 years prompts lenders to tighten credit. Economists expecting the U.S. economy will shrink next year rose to nine last month from five in September, according to a survey by the National Association for Business Economics.

DuPont, based in Wilmington, Delaware, is the world's largest maker of car paint and supplies Corian countertops and Tyvek insulation to homebuilders. U.S. demand for automotive products will slow in the first half, Holliday said. Outside the U.S., where DuPont gets 60 percent of sales, growth remains ``solid,'' especially in Asia and Latin America, he said.

``We are in a recession in the U.S. housing industry right now,'' Holliday said. ``We think it will take longer to come back.''

Crude-oil prices may average about $85 a barrel next year, Holliday said, down from today's close of $90.02 in New York. DuPont, the third-largest U.S. chemical maker, expects the dollar to be little changed against the euro and yen, he said.

Since when are recessions selective? Either you are in one or not.

You know what I want to hear? I want someone in the financial hierarchy, someone with credibility to say, we are frakked. That this economy is undergoing a Cylon level beating. But like the Galactica and the fleet that she protects, we are going to find our way to Earth. You have to be a complete dunderhead to not know how dire of a situation we are in.

Of course no one is going to say that. Well, no one sane that is.

Monday, December 10, 2007


Yesterday morning I as in a jovial mood due to the runner’s high I was experiencing from the elliptical I was on and went out food shopping.

After gathering my items I headed over the checkout area and as I was placing my items on the counter in front of the cashier, I noticed one of the cashiers slip surreptitiously slip something in the hand of my cashier which turned out to be a cherry. She put it in her mouth and after chewing on the cherry she bent over in front of me to try to hide her actions but I realized once she put her hand in front of her face that she was spitting out the cherry pit in the palm of her hand. She had no gloves on nor did she have a paper towel in her hand. It must have been too strenuous to make that effort. Then she began to process my purchase. But before her infected hands could touch my food, I snatched all the items away from her grasp and tossed them back into the carriage and went to another cashier. She was completely baffled at my actions, which just shows how ignorant this person was. I mean if you spit a cherry pit in your bare hands in front of a person and then try to touch their food, you should expect a negative reaction.

Here’s the punch line. This did not happen at a bodega or a one of the Korean fruit stands. This happened at Whole Foods. Unfortunately they are not the only offenders.

A couple of months ago I was Trader Joe’s at the checkout when the cashier was having trouble opening up a plastic bag. So right in front of me, she stuck her large tongue out and dragged her finger down her tongue and then used her saliva on her fingers to get a better grip on the bag. A year ago, a Trader Joe’s cashier coughed all over my groceries as he was bagging them.

This type of behavior I expect from a Key foods in Queens not from Whole Foods or Trader Joes. It is not just disgusting but in this age of communicable diseases and schools hosing down locker rooms due to staph infections it is just plain dangerous. There needs to be more sanitary protocols, particularly at the points of purchase for consumer good, implemented.

At A&P and Food Emporium the cashiers usually wear rubber gloves and have sponges to help them open up the plastic grocery bags. At the A&Ps they even have disinfectant wet naps for the cashiers to use. This is not brain surgery. All it takes is a little common sense.

Unfortunately for any type of health protocols to be instituted for all grocery stores, some type of public health crisis will probably have to break out where the source of the contagion is from the unsanitary practices of cashiers at supermarkets.

I used think those automated checkout machines were annoying but now I use them all the time since they are quicker and they won’t spit on your food.

No pun intended, I don’t mean to bag on cashiers. It is a tedious job that where you have to constantly be on your feet and you are at risk for carpal tunnel syndrome. It is also probably very stressful since every customer that comes to them might the one that blows up in their face because of a price check. I have done my bit playing the cashier in my past so I am aware of the pitfalls.

But for now, I think I will be shopping at the Food Emporium.

Wednesday, December 05, 2007

Frozen mortgages and a beating.

It looks our Commander in Chief has come to save the day by freezing the rates on some mortgages.

WASHINGTON, Dec. 5 — The Bush administration reached an agreement with the mortgage industry today on a plan to freeze interest rates for up to five years for a portion of the two million homeowners who bought houses in the last few years with subprime loans.

The plan, hammered out after weeks of talks among Treasury officials, mortgage lenders and Wall Street firms, would allow distressed borrowers who are current on their payments to keep their low introductory rates and escape a jump of 30 percent or more in their monthly payments when those rates expire.

Democratic lawmakers and presidential contenders quickly criticized the plan for being too timid and promoted more ambitious proposals of their own.

You will have to forgive me for my doubts, but I am unsure if this will have any positive impact on our current situation. But I bet Wall Street will go crazy over this news tomorrow.

By now everyone has heard about this recording on Youtube where a guy got his ass kicked by a bunch of girls on the A train.

There is a saying in martial arts. Your best weapons are your two feet.

No. It is not for kicking ass left and right. It is to run away.

I am not blaming the victim here. These kids had no right to act this way and I hope they get caught and penalized for what they have done.

But unlike the incident that occurred on a bus a couple of months ago, this occurred on a train. All he had to do was move to another car or get a conductor. Whether it is a group of kids, adults or smurfs, if they are looking for a fight no amount of reason will prevent their actions. That is why Police officers are trained in the use of deadly force in case they are dealing with a perpetrator who refuses to yield to verbal commands. There is no shame in survival.

As you can see from this video, this pack of numbnuts are experiencing an adrenaline dump and are seeking to utilize it. All they are doing is ranting and raving. There is no logic in their words are actions. All they want to do is beat this guy down.

On a real estate level, this does not help at all. Who the hell wants to live in an area where you are required to be trained in Tae Kwon Do and Combat Sambo in order to take the subway?

Kids. I really don't advise following this path. There are a lot of angry f**king people out there, especially during these hard economic times. Pick the wrong person to mess with on the subway like these idiots did and you maybe getting a first class ticket to a world of hurt.

Tuesday, December 04, 2007

Are you kidding me?

I have no idea what I am doing.

Today I got this piece of job spam from Hot Jobs. I think this either some sick joke or someone in the editorial department fell asleep at the switch.

Good Year for a Bonus?
A recent survey from Buck Consultants reveals that 57 percent of employers expect to offer hiring and/or retention bonuses in fiscal year 2008. Median hiring bonuses range from 5 percent of base pay (for non-exempt employees) to 20 percent for CEOs. Customer Service Reps are in Demand
With the employment outlook looking good for customer service representatives, many employers are reaching out to candidates in other occupations or to people who have left the workforce, such as homemakers and retired workers. Don't be surprised if an opportunity comes your way.

Yahoo! HotJobs Featured Employer: Countrywide Financial

Customer Service and Call Center/Collections Reps – discover rewards worth talking about with Countrywide's Loan Administration division. See how the nation's number one home loan lender* and "One of America's Most Admired Companies"** can help make a difference in your work and life, with paid training, great bonus potential, and career growth – all in a dynamic environment, complete with an on-site cafe! Full-time and part-time shifts available.

Click here to apply online at: Yahoo! HotJobs

Countrywide is committed to leveraging the talent of a diverse workforce to create great opportunities for our business and our people. EOE M/F/D/V.

* "America's #1 Home Loan Lender" As ranked for 2006 by Inside Mortgage Finance (Feb. 2, 2007) ©2007
** "One of America's Most Admired Companies" Fortune, March 2007

If Hotjobs start to send out job listings for hedgefunds then I know someone at Yahoo is smoking crack. This has to be a mistake. Why the hell would Countrywide even consider hiring people right now?

Does anyone out there know how to post an email with graphics on a blog?

Monday, December 03, 2007

Preparing for the siege

Christine Haughney has written an excellent article on the current state of affairs between buyer and seller. She explains that despite record sales and evidence of buyers who are being shut out trying to look for deals, buyers are displaying a siege mentality by waiting it out.
She makes a pretty strong argument for buyers to hold their ground with some really scary ass stories.

Brokers say it is the buyers in this sector of the market who are now growing concerned about the impact of the weak national housing market and the effect that Wall Street losses might have on Manhattan apartment prices. So they’re lowering their bidding or stopping their searches altogether until they have more confidence in the market.

Manhattan has been able to weather the storm, however the question on everyone's mind is not if but when the s**t hits the fan for Manhattan. The reason why these buyers are going bargain hunting is not because their douchebags but because they want to hedge their bets and not get caught with their pants down.

Jason Loeb, 37, an equity analyst for a money management firm, has received a half-dozen e-mail messages from friends who have lost jobs because of downsizing at major banks. Those “I hope I land on my feet” notes, coupled with weak performance in industries he tracks like trucking and retail, convinced him that Manhattan real estate prices eventually have to decline.

He is not going to be the only who is going to be backing off. Right now as we speak there is a growing number of people are having second thoughts on whether to buy right now.

Some buyers have reason to be cautious. Shai Shustik, president of Manhattan Residential, a brokerage with many clients in the financial industry, said that since the end of August, his buyers had cut their budgets by 10 percent because of concerns about their bonuses. One lost his job at a hedge fund hours before he was due to sign a contract for a $1 million two-bedroom co-op on the Upper East Side.
“He was literally ready to meet the attorney that afternoon to return the checks,” Mr. Shustik said. “But he never did. He got laid off that morning.”

On the bright side, this guy is very, very lucky. Can you imagine if he was laid off hours after he signed that contract? He would be trying to flip that sucker.And with Citibank planning layoffs, that buyer won't be alone looking for another job.

In my previous entry, I presented an argument that buyers who are not in a dire to buy should wait. I hope this article provides further evidence on my perspective.

By no means do I take any satisfaction in any of this, because if Wall Street gets hit hard then we all are going to get hit hard. And I am not just talking about Manhattan but the rest of the country.

Sellers, if you want to be taken seriously, well you need to sit down with your broker and put together a new game plan. If the product is not moving, then some drastic price cutting maybe needed or sellers may decide to take it off the market till the next cycle which looks like it won’t be happening for quite awhile.

Brokers, keep the faith. This is not the time for despair. This is the time to find good buyers or have a sit down with your sellers. You have to figure out another plan of attack.

Sunday, December 02, 2007

Closet Space

In the spirit of content exchange, I present to you another video from Open House NYC on the subject of closet space. In my experience in sales and rentals, nothing will kill or close a deal quicker than closet space. People need to put their clothes, stuff and other junk away. In this video presentation, the Open House gang present the business associated with closets in NYC and how they work.

Saturday, December 01, 2007

In Memoriam

D.S 1975-2007

You are missed.