What’s Next for New York City Real Estate?

By CHRISTINE HAUGHNEY
Published: January 13, 2008
LOOKING back, 2007 was supposed to be the year that the Manhattan residential real estate market slowed down and began to look a bit more like the slumping national market.

But that didn’t happen. While there were periods when condominiums and co-ops sat unsold because buyers and sellers couldn’t agree on prices, the year ended with the average price of a Manhattan apartment rising to a record $1.4 million, though the number ballooned in part because so many wealthy buyers purchased extraordinarily expensive condos.
No one is predicting that 2008 will be a repeat of 2007. The sprawling pieds-à-terre may still sell for millions at the Plaza and 15 Central Park West, but in general, economists are predicting that prices will drop in some segments of the market and in some neighborhoods around the city.
“New York has had a very good run, and there are still a lot of people sitting around with cash,” said Christopher Mayer, the Paul Milstein professor of real estate at Columbia Business School. “But that doesn’t last forever.”
There are already signs of a more sober market ahead: Wall Street workers may face leaner bonuses this year and in years to come, borrowers may have a harder time getting mortgages and foreign buyers may reconsider the potential returns of investing in New York.
Mr. Mayer said that a national recession could weaken Manhattan prices even further because fewer workers could afford to buy in the borough.
Diane M. Ramirez, president of Halstead Property, is less concerned about a recession because the inventory of property on the market is currently low. She said that in the recession of the late ’80s, Manhattan dropped sharply because the city had an oversupply of apartments. “We had a deeper, longer recession than most cities,” she said. “We lost 20 to 50 percent value.”
When trying to gauge the real estate market — or, for that matter, the city’s economic outlook — the first stop is always Wall Street.
Wall Street jobs make up 5 percent of the total jobs in New York City but 23 percent of the city’s total wages, according to data tracked by the New York State DepartmenticesLabor. Annual bonuses are also tracked by real estate brokers with a fanatical devotion.
History shows that a great deal of the bonus money is used to buy real estate. Financial workers are typically the first buyers to show up with the cash in the spring buying market, and this helps shape demand for apartments.
“That energy of the bonus money really does get the spring market percolating,” Ms. Ramirez said. “The bonus tends to be the starting gate for them.”
While it may seem counterintuitive, considering how much havoc the subprime crisis has brought to the financial industry, one analyst is predicting that 2007 bonuses, which workers will receive over the next couple of months, will be about the same as last year’s record bonus year for some bankers.
These workers are compensated based on their performance for the whole year, and most banks did well leading up to the credit crisis last summer. So, while workers may not earn more than they did in 2006, they could still have plenty of money to put toward real estate.
Alan Johnson, the managing director of Johnson Associates, a firm that tracks compensation data, said that over all, bonuses should remain flat for a broad spectrum of the financial industry. “This year was a pretty good year for bonuses, roughly on par with 2006, some of them less, some of them more,” he said.
But, he said, that won’t necessarily be true a year from now, and this knowledge could keep traders and investment bankers from splurging on real estate this year as they have in past years.
“Everybody sees the storm clouds on the horizon,” because Wall Street firms have already had write-downs of more than $100 billion from their mortgage-backed securities businesses, Mr. Johnson said. “If you’re going to commit to some big purchase, it makes you pause. Your pay may go down.”
He predicts that by the end of 2008 employees at the top will be hurt the most: those whose total compensation of salaries and bonuses is more than $1 million could see cuts by 40 to 50 percent; those in the $500,000 to $1 million range could see cuts of about 20 percent; and those with pay of less than $500,000 could see 10 percent cuts.
Shai Shustik, the president of the brokerage firm Manhattan Residential Inc., which has many clients who work on Wall Street, says they are proceeding with more caution. “I don’t think people are as gung-ho and anxious to get out there and spend everything they made, like they did in 2007,” he said. “People aren’t going to stretch as much.” In the past, “the guys who tell you they’re spending $2 million spend $2.4 million or $2.6 million,” he said. “Now, they want to stick to $2 million.”
Many of these Wall Street employees might also find that their bonuses are being paid less in cash and more in stock.
Melissa Cohn, the president of the Manhattan Mortgage Company, said that one banker who had negotiated the contract on a $9 million town house had to pull out of the deal because he found out he would receive only $750,000 in cash from his total bonus. The remainder would take other forms, like stock, meaning that he would have less to spend in the near term on real estate. “He’s gone from the $9 million to $10 million range to the $5 million to $6 million range,” she said. “Everyone in general is being more conservative.”
Moving beyond bonuses, the fallout from the mortgage crisis is likely to touch a broad swath of the real estate market. Qualifying for mortgages, for instance, may be more problematic this year for buyers in all price ranges. The mortgage crisis, which was set off by defaulting subprime loans last summer, has forced lenders to tighten their standards across the board in both Manhattan and the boroughs.
Richard Barenblatt, a mortgage broker with the Apple Mortgage Corporation, advises his clients to prepare themselves for far stricter mortgage requirements than they would have faced six months ago.
For starters, lenders expect borrowers to make higher down payments for co-ops and condos. He said that before the broad defaults on subprime mortgages forced banks this past summer to tighten standards, buyers with good credit applying for full-income verification loans could qualify for mortgages worth 95 percent of the purchase price up to $1 million. Now these same buyers qualify for mortgages valued at only 90 percent of the price up to $1 million.
Some lenders are also requiring borrowers to have more money in reserve; for example, borrowers applying for jumbo mortgages — those surpassing $417,000 — may need to show that they have the equivalent of up to 12 months of mortgage payments in cash after closing.
Mr. Barenblatt encourages buyers to pay down credit card balances below 40 percent of their total combined credit card limits; for buyers with debt levels above that, he said, banks are less likely to approve mortgages.
He also thinks buyers should talk to their lawyers about getting mortgage and appraisal contingencies written into their contracts. A contingency is a clause that allows a buyer to back out of a deal if he or she can’t find a mortgage, if the lender changes the terms of the mortgage before closing or if an appraisal comes in unexpectedly low. In the past, sellers in Manhattan have often balked at contingencies, because there was usually another buyer waiting in the wings willing to buy without one. Mr. Barenblatt also encourages buyers to try to get preapproved for mortgages.
Condo buyers might find extra scrutiny when visiting the mortgage broker because lenders have seen too many cities around the country where new condos are sitting vacant or unfinished.
Some major lenders in New York have stopped giving mortgages at condo projects where the developer has not sold 90 percent of the units. These banks are imposing even stricter standards than those Fannie Mae and Freddie Mac are putting into effect on March 1 for mortgages below $417,000, according to Brad German, a spokesman for Freddie Mac. The threshold for the two government lenders: 51 percent of units must be sold.
“We changed our guidelines in response to shifts in the real estate market, including oversupplies in Florida, Las Vegas, Arizona and other condo markets outside of New York City,” he wrote in an e-mail message. “Our mortgage purchase guidelines are national in scope.”
These national guidelines are making it more difficult for condo buyers in Manhattan. Foreign buyers and financial industry employees have paid top dollar for these new apartments in the last year precisely because they required less money down and had more flexible requirements than co-ops.
Ms. Cohn of Manhattan Mortgage tells of clients who have had mortgage applications rejected by some banks because the building where they wanted to buy was not 90 percent sold out. “There has been an apocalyptic change in the lending market,” she said. “Banks that were market leaders have eliminated numbers of programs and products and have made sweeping changes.”
Foreign buyers, who have made about a third of the condo purchases in the last 18 months, have done so because they see it as a wise investment considering the weakness of the dollar, said Mr. Mayer of Columbia Business School. But, he added, even foreign buyers will walk away from deals if they don’t think Manhattan prices will remain strong or if they cannot expect high returns on their investments.
“They don’t need to buy real estate to make a bet on the dollar,” he said.
All of these situations could create a window of opportunity for buyers. In fact, certain market segments have already started to show signs of slowing.
Sofia Kim, who is the head of research for StreetEasy.com, said that out of the 24,000 apartments listed by the site at some point in 2007, about 20 percent, or 4,800, had cut prices, by an average of 8 percent.
Most sellers who cut their prices were offering one- and two-bedroom co-ops, Ms. Kim said. These price cuts were concentrated on the Upper East Side and in Chelsea, Greenwich Village and Midtown. In the coming year, she expects that sellers may continue to cut their prices if sales are slow.
Prices in Inwood and Hudson Heights, in the northern reaches of Manhattan, had dropped about 5 percent by the end of last year, according to fourth-quarter data released by Halstead Property.
Data from the Corcoran Group, tracking sales in Brooklyn in the fourth quarter of 2007, show that prices on certain types of apartments in coveted neighborhoods like Park Slope and Fort Greene had dropped slightly.
Some neighborhoods like Williamsburg and Greenpoint have had 15 percent price drops from their peak in the summer of 2005, and sellers are negotiating deals, said David Maundrell, the president of Aptsandlofts.com, a Williamsburg brokerage.
Brooklyn buyers, he said, have been especially fortunate in negotiating deals on new condos. Developers of new condos with fewer than 10 units have agreed to pay closing costs for buyers, while developers of larger projects have been willing to negotiate on price. “Most of my guys in the larger buildings will consider any offer,” Mr. Maundrell said.
Prices in New York City are not expected to be significantly affected by foreclosures this year, as the number of foreclosures in the city’s outlying neighborhoods is rising, but still low. Fourth-quarter data tracked by PropertyShark.com show that there were 605 foreclosures throughout New York City in the fourth quarter of 2007, a 71 percent increase over the 354 foreclosures in the same period in 2006.
But that is in a city of three million households and represents only 0.02 percent of New York City inventory. That’s far less than in Miami, which has a 0.25 percent foreclosure rate, and Los Angeles, which has a 0.21 percent foreclosure rate.
Ryan Slack, the chief executive of PropertyShark, said that the New York numbers may rise steadily through 2008, but they will still represent only a tiny share of the overall market. “They’re not that high a percentage of the inventory,” he said. “If you’re selling into the market, you’re going to be more affected by the dynamics of buyers and sellers than foreclosures.”
The rental market, which has been exceptionally tight for the last few years, is also showing some signs of loosening up. Marc Lewis, the chief operating officer of rentals and investment sales at Century 21 Fine Homes and Estates, says that the rental market slowed in the middle of September and has not picked up since.
The December survey of 10,000 apartments tracked by the Real Estate Group New York shows that the rental market fell from the previous month, especially on the Upper West and East Sides, and in Midtown East, Gramercy Park and SoHo. Some declines were striking; rent in studios in doorman buildings in the financial district, for example, dropped by $503, to $2,559 a month.
Mr. Lewis said there were fewer new hires relocating to Manhattan for jobs and paying high rents. He said that landlords were much more willing to pay commissions, offer a free month’s rent or both. And, he said, they’re much more willing to negotiate on apartments that rent for more than $2,000.
“If they have an apartment that’s empty for a week or two or a month, they’ll entertain an offer,” Mr. Lewis said. “It’s definitely going to continue for the next three, four or five months.”
In the end, economists and real estate brokers say they don’t expect Manhattan to suffer as severe a housing slump as the rest of the nation because there hasn’t been as much overbuilding.
That’s because banks stopped lending to developers to build more condos and developers turned nearly a third of the sites into other uses like hotels, offices and rental buildings, said Robert Knakal, the chairman of the commercial real estate brokerage Massey Knakal Realty Services Inc., based on what he saw from the projects that his company had marketed.
In addition, more of the condos that were built were snapped up by more Wall Street bankers and foreign buyers than some real estate industry experts had originally expected.
“What this means for the consumer is that there will be product available for them to look at, but not a significant oversupply,” Mr. Knakal wrote in an e-mail message. He added, “Buyers who are on the sidelines waiting for prices to drop significantly before buying may be there for a long time.”

Chase, Wells Fargo say they can weather subprime storm
Standard & Poor's warns of bigger losses on 2006 loans
Wednesday, January 16, 2008Inman News
Investors showed renewed confidence that financial markets will weather the subprime mortgage crisis after JPMorgan Chase & Co. and Wells Fargo & Co. reported write-downs on mortgage-related investments dented fourth-quarter profits but that the firms remain adequately capitalized.
Standard & Poor's Ratings Service, however, said home-price declines and losses on subprime loans made in 2006 will be greater than expected, raising the specter of further tightening of credit to prospective home buyers.
Shares of JP Morgan Chase and Wells Fargo both got a boost Wednesday after the companies disclosed that write-downs on mortgage-related investments were smaller than at some rival firms, and that both companies posted record revenue for the year.
Although JP Morgan Chase wrote down $1.3 billion in bad mortgage-related investments during the fourth quarter, it managed to turn a $3 billion profit and boost credit reserves to $10 billion. Fourth-quarter mortgage loan originations were $40 billion, up 2 percent from the previous quarter and 34 percent from a year ago, the company said.
For the year, JP Morgan Chase had record profits of $15.4 billion on revenue of $71.4 billion, growing its payroll by 6,307 positions, to 180,667.
At Wells Fargo, charge-offs on bad loans hit $1.2 billion, up from $726 million a year ago, and the bank boosted loan loss provisions by $1.4 billion. Fourth-quarter mortgage originations declined 20 percent from a year ago to $56 billion, largely because Wells Fargo has cut back or stopped making nonprime, nonconforming and home equity loans through third-party channels, the bank said.
Nevertheless, Wells Fargo posted a $1.36 billion profit for the quarter, and $8.06 billion in net income for the year. All told, Wells Fargo originated $272 billion in mortgages in 2007, down 7 percent from the year before, and grew its servicing portfolio by 12 percent, to $1.53 trillion.
Moody's Investors Service said today Wells Fargo can keep its "A" financial strength rating and "Aaa" rating on deposits, as the bank's diverse business model will help it endure greater-than-expected losses in its home-equity portfolio.
Stocks also got a boost today from a Labor Department report showing the Consumer Price Index rose by just 0.3 percent in December, raising expectations that the Federal Reserve will make a dramatic, 50-basis-point reduction in its target for the federal funds overnight rate when it meets at the end of the month.
The Dow Jones Industrial Average plunged 277 points Tuesday after Citigroup Inc. reported a $9.83 billion fourth-quarter loss driven by $18.1 billion in write-downs on investments tied to subprime mortgages. Investors were also alarmed by a Commerce Department report that showed retail sales fell 0.4 percent in December, a sign that the economy may be headed into a recession (see Inman News story).
Although stock market investors are rooting for short-term interest-rate cuts to stimulate economic growth, a dramatic move by the Fed could also send long-term interest rates up -- including those on 30-year fixed-rate mortgages -- if bond investors become concerned about inflation.
Falling home prices and rising delinquencies and defaults could also put upward pressure on mortgage rates, if investors who fund home loans demand higher returns for risk.
Analysts at Standard & Poor's Ratings Services said this week they now expect losses on subprime loans bundled up as collateral for investments in 2006 to reach 19 percent, up from a previous estimate of 14 percent.
The revisions were based on "growing economic consensus that U.S. home-price declines will be larger than previously forecasted and that the slump in the U.S. housing market is expected to last far longer than previously anticipated," Standard & Poor's analysts said.
Home prices have declined about 6 percent nationwide since the beginning of 2006, and Standard & Poor's Chief Economist David Wyss now estimates that before bottoming out in the middle of the year, home prices will have come down 8 percent to 11 percent from their peaks.
The rating agency said it has also changed other assumptions it uses to evaluate investments backed by mortgage loans, which could lead it to downgrade its ratings on those investments. Downgrades would force banks and bond insurers to undertake another round of write-downs, and further restrict mortgage lending.
Alt-A lender IndyMac Bancorp Inc. said Tuesday it was laying off 2,403 workers because the secondary market for loans it makes remains frozen, and it expects 2008 loan volume will dwindle to less than half of that seen two years ago (see Inman News story).
Today, bond insurer Ambac Financial Group Inc. said it is attempting to raise $1 billion in capital in order to keep its AAA ratings from Standard & Poor's and Moody's.
Ambac announced fourth-quarter write-downs of $5.4 billion on its credit derivative portfolio, and a $143 million loss provision related to securities backed by home-equity lines of credit and second loans.
With Ambac facing a fourth-quarter loss of up to $32.83 per share, Chief Executive Officer Robert J. Genader had been replaced by Michael A. Callen. The company promised further details when it reports fourth-quarter results on Jan. 22, a week earlier than planned.
While the news was not as grim at JP Morgan Chase and Wells Fargo, both companies did see increasing delinquencies and defaults on consumer loans, including auto loans and credit cards.
At Wells Fargo, the charge-off rate on credit-card debt rose grew from 4.3 percent to 5.01 percent, which the bank said was in line with industry standards. Credit-card losses for the quarter totaled $223 million, while losses on other revolving credit and installment loans, including auto loans, totaled $421 million.
The $1.2 billion in fourth-quarter charge-offs also included $277 million in bad second mortgages, up from $153 million in the third quarter, and $34 million in first mortgages, double the $16 million seen in the third quarter. The charge off rate on second mortgages rose to 1.46 percent, compared with 0.83 percent in the previous quarter.
Total nonperforming assets grew to $3.87 billion, up from $3.18 billion, including $649 million of foreclosed real estate and repossessed vehicles.
The bank said growth in nonperforming assets was due to a national increase in foreclosure rates. Due to "illiquid market conditions," Wells Fargo has decided to hold more foreclosed properties than it has historically.

Americans Pay for Housing Boom's Excess
By MADLEN READ and JOE BEL BRUNO,
AP
Posted: 2008-01-16 16:41:14
NEW YORK (AP) - The bill for America's excessive borrowing during the housing boom has arrived, and more people are having trouble paying it. JPMorgan Chase & Co. and Wells Fargo & Co., two of the nation's biggest banks, on Wednesday joined a growing chorus warning that the subprime mortgage mess is just the start of a sweeping lending crisis. And some fear that consumers falling behind on all kinds of loan payments could tip the economy's scale toward recession. Strapped consumers are having a tough time making payments on credit cards, home-equity loans, and even for their cars. This has caused three of the top five U.S. commercial banks that have already reported damaging fourth-quarter results to set aside some $12.5 billion to cover future loan losses - and that number will likely grow as the year wears on. Problems in the subprime mortgage t in 17 years. There was no sign of a turnaround in the last few months of the year. The Federal Reserve reported that the economy grew at a slower pace in late November and December as credit problems intensified and consumers tightened their spending. To some, it appears that the Fed came to its rate-cutting decision in August a bit too late. Others point to the falling dollar and surging oil prices, factors that usually prevent the central bank from easing its monetary policy. While debate persists about the Fed's timing and the extent of the slowdown, bank executives - who have scrambled to prepare for another tumble in home prices and higher unemployment in 2008, feel academic definitions are beside the point. "We're not predicting a recession - it's not our job - but we're prepared," JPMorgan Chase CEO Jamie Dimon told analysts after the nation's third-largest bank wrote down $1.3 billion and said profit dropped 34 percent. His financial institution didn't do all that bad. Rival Citigroup Inc. fared the worst during the fourth quarter, losing $9.83 billion after writing down the value of its portfolio of mortgage and mortgage-backed products by $18.1 billion. Wells Fargo, a more traditional bank that avoided last year's trading woes, saw its profit fall 38 percent due to troubles with home equity loan and mortgage defaults. JPMorgan is girding for home prices to decline further in 2008 by 5 percent to 10 percent; Citigroup's estimate of 7 percent falls within that range, too. "The banks are the infrastructure for everything, the heartbeat of the market," said Chris Johnson, president of Johnson Research Group. "They need to be fixed before the market, and economy, can move forward with confidence. They need to get all their dirty laundry out there." Banks and card companies like American Express Co. - which warned last week that it would add $440 million to loan loss provisions - said in the regions where home prices are declining, card default rates are rising faster. The same goes for auto loans, subprime mortgages and home equity loans in these areas, which include Florida, Michigan and California. A big reason for the rise in credit card default rates is that they are returning to more usual levels following a change in bankruptcy law that sent rates lower for a time. But the fact that more losses are being seen in the weaker parts of the country shows the increase is economically driven as well. Analysts believe this means one thing: Consumers will be the ones paying for years of lax lending standards by U.S. financial institutions. Many will become more restrictive about who gets credit in a bid to stem future losses - and that could curb consumer spending, which accounts for more than two-thirds of the economy. "We've pushed the envelope," Johnson said. "Along with the joy of a market that goes as high as ours is the agony of when it starts to correct itself."
Copyright 2008 The Associated Press. The information contained in the AP news report may not be published, broadcast, rewritten or otherwise distributed without the prior written authority of The Associated Press. Active hyperlinks have been inserted by AOL.
01/16/08 16:38 EST

PMI: Odds favor price declines in 13 top markets
Risks greatest in California, Florida
Tuesday, January 15, 2008Inman News
The chance that home prices will fall during the next two years increased in 39 of the 50 largest U.S. markets during the third quarter, according to the latest quarterly risk index from PMI Mortgage Insurance Co.
PMI's Winter 2008 U.S. Market Risk Index showed a greater than 50 percent chance of price declines in 13 of the nation's 50 largest housing markets, up from 10 in the previous quarter.
PMI said some of the increase in house-price risk was due to changes to its model, which now includes data on foreclosure rates provided by the Mortgage Bankers Association. But in many cases, higher risk scores reflected "a significant deterioration of the housing market in the third quarter."
There is a "high likelihood that home prices will be lower in many of these MSAs two years from now," the report said. Although the number of MSAs with relatively low home-price risk continues to outnumber those with relatively high risk, that could change if the economy and financial markets worsen further, PMI warned.
All but two of the 13 highest-risk markets were in California and Florida. In California, the report noted, markets in the Central Valley and Southern California are weaker than those in the Northern California MSAs, where employment continues to be strong.
The metropolitan statistical areas (MSAs) with the highest risk scores were Riverside, Calif., where PMI forecasts a 94 percent chance of a two-year price decline; Las Vegas (89 percent); and Phoenix (83 percent).
Markets that saw significant price increases from 2002 to 2005 are "at much higher risk of price declines" than those where prices appreciated more modestly, said David Berson, chief economist for PMI's parent company, The PMI Group Inc., in a statement.
Although housing affordability improved in 161 of 381 MSAs studied, it declined in the remaining 220 markets. Nationwide, the affordability index was 95.53, compared with 95.96 in the second quarter of 2007.
The number of MSAs experiencing year-over-year price declines during third quarter -- 89 -- was also up from 67 in the previous quarter, the report said, citing numbers from the Office of Federal Housing Enterprise Oversight (OFHEO).
Among the top 50 MSAs, the 13 judged by PMI to be facing a greater than 50 percent chance of price declines in the next two years were:
Riverside-San Bernardino-Ontario, Calif. (94 percent)
Las Vegas-Paradise, Nev. (83 percent)
Phoenix-Mesa-Scottsdale, Ariz. (83 percent)
Santa Ana-Anaheim-Irvine, Calif. (81 percent)
Los Angeles-Long Beach-Glendale, Calif. (79 percent)
Ft. Lauderdale-Pompano Beach-Deerfield Beach, Fla. (78 percent)
Orlando-Kissimmee, Fla. (74 percent)
Sacramento-Arden-Arcade-Roseville, Calif. (73 percent)
Tampa-St. Petersburg-Clearwater, Fla. (72 percent)
West Palm Beach-Boca Raton-Boynton Beach, Fla. (71 percent)
San Diego-Carlsbad-San Marcos, Calif. (69 percent)
Oakland-Fremont-Hayward, Calif. (65 percent)
Miami-Miami Beach-Kendall, Fla. (58 percent)
The markets identified by PMI as the least risky, with a less than 1 percent chance of price decline during the next two years, were Charlotte-Gastonia-Concord, N.C.-S.C.; Kansas City, Mo.-Kan.; Austin-Round Rock, Texas; Columbus, Ohio; Cincinnati-Middletown, Ohio, Ky., Ind.; Indianapolis-Carmel, Ind.; San Antonio, Texas; Houston-Sugar Land-Baytown, Texas; Pittsburgh, Pa.; Dallas-Plano-Irving, Texas; and Fort Worth-Arlington, Texas.
***
Send tips or a Letter to the Editor to matt@inman.com, or call (510) 658-9252, ext. 150.
Copyright 2008 Inman News

CONSIDERING A MOVE TO NEW MEXICO?
Last year, I had the opportunity to travel West for the first time! Lisa Davis, Taos realtor, provided an overview of the marketplace plus one of my friends was househunting.
If you are ever in the area, don't hesitate to say hi to Lisa or send her referrals! She'll do a great job. PS Let her know I sent you and you may have the opportunity to explore the ultimate green house..."the Earth Ship"

Here's Lisa's January newsletter regarding stats..

We have had such great snow this year, the Taos Ski Valley is hoppin'. The ski valley has announced some plans for refurbishing the village area which will enhance the appeal of the Taos Ski Valley, but the BIG news out of the Ski Valley is that starting in March, they are allowing snowboarding. This has been a hot topic for years and now, it's happening.

The attached newsletter offers a snap shot of the basic sales stats for 2007, as you will see, volume is down from 2006. This is no different from what is happening across the country. The volume and prices have reverted to a more normal market. I am curious to see what 2008 will bring, I have heard that the Fed's are expected to lower interest rates again this month.

As we all know, the media tends to sensationalize things and I think it's important to keep the following in perspective:
1. Real Estate is a long term investment. The boom created a misconception that real estate is a high yield, short term investment.
2. There is no such thing as a bad market. No matter where we are in a cycle there are still sellers and buyers...with low interest rates, it's still a good time to buy. NAR reports that 2007 existing home sales surpassed those of 2002, then a record breaking year!
3. Foreclosure perspective: Foreclosure is always bad news, the recent foreclosures that we are hearing about is predominately with sub-prime loans which are held by less than 10% of homeowners and most will not go into foreclosure. The foreclosure rate on prime loans is only 0.6 percent.

I wish you all a wonderful 2008...come on out to Taos and hit the slopes...or, don your snow shoes and take a walk through the woods...it's magical!

Sincerely,Lisa Davis, CRS, GRIAssociate BrokerResort and Recreation SpecialistFine Homes SpecialistPrudential Taos Real Estatehttp://www.enchantedtaos.com/lisa@enchantedtaos.comTel: 800-530-8899 ext 220Fax: 575-758-4833

STATS


2007 Total Units Sold (all types, entire MLS): 508 (compared to 752 in 2006.)
Dollar volume: 2007 $157,732,861 (compared to $197,553,722 in 2006.)
To break it down by category (not all categories shown):
2007 Single Family Residential total units sold: 214 (compared to 283 in 2006.)
Average sales price: $403,929. (compared to $359,873 in 2006.)
(2007 Median sales price $337,313) Average days on the market: 307
2007 Condo total units sold: 100 (compared to 144 in 2006.)
Average sales price: $279,226. (compared to $261,734 in 2006.)
2007 Land less than 5 acres units sold: 91 (compared to 144 in 2006.)
Average sales price: $123,832 (compared to $112,044 in 2006.)
2007 Land more than 5 acres and less that 10 units sold: 23 (compared to 46 in 2006.)
Average sales price: $127,741 (compared to $178,864 in 2006.)
2007 Land more than 10 acres units sold: 21 (compared to 52 in 2006.)
Average sales price: $193,733 (compared to $352,717 in 2006.
(Note: Available land is further away from Taos which is being reflected in the price)
What does all of this mean? Well it means that it’s a great time to buy in Taos! Some prices are
coming down along with interest rates! Opportunity is knocking!!!!
To put it in perspective, 2006 was a banner year on all accounts and the softening
of our market in 2007 is really more of a “normalizing”.

Dramatic Fed cut would hike mortgage rates
Commentary: Bernanke must make choice as political pressure intensifies
By Lou BarnesInman News
Long-term rates are unchanged this week, about the only things in finance that are. The 10-year T-note is still in the 3.80s, mortgages 6 percent, 5.875 percent, 6 percent. …
Two big speeches (Treasury Secretary Paulson and Fed Chairman Bernanke) and the demise of Countrywide overshadowed news of a steadily weakening economy and credit trouble spreading outward from mortgages.
The newest consumer data arrived in December retail results, uniformly lousy, and AT&T described a pullback in consumer spending on the most basic services. American Express -- good, tough, old outfit -- is the newest to announce rising defaults.
Countrywide: Its borrowers in process and sellers and Realtors nearby all should feel relieved. Fundings are now secure.
However, BofA's acquisition has all the fingerprints of a liquidation, one in the interests of banking regulators to avoid the collateral scramble and fire sale inevitable upon the instant of bankruptcy. The idiot stock market soared on the acquisition news on Thursday, and reality dawned today: BofA's stock is down, its credit-risk premium up, and Moody's is considering a downgrade.
So, what's the benefit of this deal to BofA, good money after the bonehead $2 billion infusion into Countrywide last September? First, good will and blessings from the whole regulatory apparatus. No other institution had the strength left to absorb the Countrywide wreck, and good deeds beget future favors. BofA's September infusion may have bought it control, but system conditions have since deteriorated so badly that it need not have paid a dime -- regulators would have come to call, hats in hands.
Deconstruct the deal: The prize inside Countrywide is its loan servicing portfolio; right now a migraine, but $1.4 trillion in mortgage customers is a huge base of clients who instantly become BofA pigeons. Loan servicing has a common market value in excess of 1.5 percent; even if this pool is discounted for bulk and trouble to 1 percent, that's $14 billion in value.
BofA is paying $4 billion for the overall wreck, meaning Countrywide -- minus its servicing portfolio -- has a negative value of at least minus $10 billion. Its dinky "bank" (really an S&L, easier regulation) is leveraged to the eyeballs and probably has a net-loss portfolio; and the insurance and securities and other tacked-on businesses have value only if originations run hot (not).
The massive origination arm has negative value also. Absent the fee-rich subprime and option-ARM game, Countrywide is a low-margin, commodity Fannie-Freddie shop just like the rest of us. BofA needs another brand name like a moose needs a hat rack, and assumes future losses from litigation, portfolio and downsizing. A lot of branch landlords are going to have some re-leasing to do.
Thus an industry re-sizes capacity from all-time-fantasy down to actual demand. Expect Washington Mutual to follow the merge-out parade.
The speeches: Treasury Secretary Paulson offered nothing, and the no-show hurt the markets. His gratuitous advice that firms re-capitalize ignored their grave difficulty in doing so.
Bernanke looked haggard. He has studied class-A financial crises his whole life, but leading the Western banking system out of one is a different matter. The speech is an excellent read. He is under no illusions: "... The financial system remains fragile" [!!]. Long sentence, third paragraph from the end, after many promises to intervene to save the economy: [compressed] "However ... unmoored inflation or eroded Fed credibility could reduce the Fed's ability to counter shortfalls in economic growth."
He is stuck: slash rates and take the inflation risk? Or fight inflation and let the economy fend for itself -- and become the most hated man in America?
If he cuts dramatically to save the economy, look for mortgage rates to rise. That's the largest probability, now, as political pressure on him is too strong to withstand.
Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.

Real estate rates dip overnight
30-year fixed rate at 5.52%; 10-year Treasury yield at 3.79%Monday, January 14, 2008Inman News
Long-term mortgage interest rates headed lower Friday, and the benchmark 10-year Treasury bond yield dropped to 3.79 percent.
The 30-year fixed-rate average sank to 5.52 percent, and the 15-year fixed rate slipped to 5.03 percent. The 1-year adjustable rate was down at 5.34 percent.
The 30-year Treasury bond yield fell to 4.38 percent.
Rates and bonds are current as of 7:15 p.m. Eastern Standard Time.
Mortgage rate figures are according to Bankrate.com, which publishes nightly averages based on its survey of 4,000 banks in 50 states. Points on these mortgages range from zero to 3.5.
In other economic news, the Dow Jones Industrial Average tumbled 246.79 points, or 1.92 percent, finishing at 12,606.3. The Nasdaq lost 48.58 points, or 1.95 percent, closing at 2,439.94.
Stock figures are current as of 7:30 p.m. Eastern Standard Time

I thought this would be optimistic for our wallets...of course any savings will go directly to fuel our houses and keep our lights on in 2008...But, think green both in prosperity and ecological conservation...change your light bulbs...now, what company is that? That's a best stock!
Drew


Best Stocks for 2008: Housing woes take a toll on Toll Brothers (TOL)
Posted Dec 20th 2007 10:30AM by Steven HalpernFiled under: Newsletters, Toll Brothers (TOL), Stocks to Buy, Housing, Best Stocks for 2008
For 25 years, Steven Halpern, editor of TheStockAdvisors.com, has surveyed the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is one of 100+ ideas in the Best Stocks for 2008 report.
"Homebuilders have been in a slump, to say the least," says Jim Farrish, editor of Sector Exchange.
"The technical charts on homebuilders look very similar to those of technology stocks during their rise from 1998-2000. In fact, the index has declined more than 70% peak to trough. Looking toward 2008 and the housing market, we could start to see a turnaround.
"The start is likely to be government aided, which is why we like this as an aggressive play, as the Federal government will put more money into fixing something than corporate America. Current proposals will not come close to fixing it, but will at least put a band aid on the situation and allow the healing process to begin.
"Our vote to benefit here would be Toll Brothers (NYSE: TOL). The company has one of the better-looking balance sheets in the industry and management has done a fairly good job of dealing with this downside market."Its weekly chart shows a decline from a high of $55 to a current price of $22. Their stock has found support near the $19.50 mark and has developed a trading range since July with the top at $23.50. With the stock currently near the high end of the trading range, we would look for a breakout as a buy point.
"If sales increase throughout 2008, we would look for the stock to rise near the $34 mark. There are a lot of things that need to come together for this play to achieve its goal, but then that is what makes it an aggressive opportunity.
"Thus, our entry point would be a break above $23.50 or accumulate shares on a pullback near the bottom of the trading range. Our stop would be $18 and the target $34."
Tags: best stocks 2008, BestStocks2008, contarian stocks, homebuilders, homebuilding stocks, housing stocks, jim farrish, money strategies, out of favor stocks, real estate stocks, sector exchange, sector investing, steven halpern, thestockadvisors.com, tol, toll brothers, TollBrothers, top stocks 2008, TopStocks2008

The GOOD, THE BAD, The Ugly

Notice the two postings regarding COUNTRYWIDE today?
One Good, One BAD, the overall UGLY for the REAL ESTATE MARKET and THE PUBLIC PERCEPTION of Economic Woe

Countrywide Home Loan Delinquencies Rise
Countrywide Financial Corp.'s shares tumbled for the second day Wednesday after the nation's largest mortgage lender said the delinquency and foreclosure rate of home loans in its portfolio surged in December.
The news drove Countrywide shares down almost 10 percent in midday trading. Shares slipped 54 cents to $4.93.
The drop followed a loss of $2.17, or 28.4 percent, on Tuesday.
The company said some 6.96 percent of the loans in its servicing portfolio were delinquent last month, up from 5.02 percent in December 2006.
About 1.04 percent of the mortgage loans were pending foreclosure, up from 0.65 percent.
Countrywide's loan fundings during the month rose 1 percent from the previous month, ahead of internal forecasts, the company said.
Calabasas, Calif.-based Countrywide said it funded $24 billion in loans in December, giving it a total of $69 billion for the fourth quarter.
Average daily mortgage applications in the month slipped from November, but Countrywide attributed that to a typical seasonal decline.
The company's banking operations had assets of $113 billion at the end of December, up from $83 billion at the end of November.

Countrywide sees business stabilizing
Mortgage lender closed more loans in November, but foreclosures also rise
Reuters
updated 8:24 a.m. ET, Wed., Jan. 9, 2008
NEW YORK - Countrywide Financial Corp., whose shares have tumbled amid worries about the largest U.S. mortgage lender's survival prospects, on Wednesday said it made more loans than it expected in the fourth quarter, though homeowner foreclosures and delinquencies rose.
In its monthly operating report, Countrywide said it funded $23.4 billion of mortgage loans in December, up 1 percent from the prior month, though down 44 percent from $41.7 billion a year earlier. Average daily mortgage loan applications fell 16.9 percent from November to $1.54 billion.
For the quarter, Countrywide said it funded $68.5 billion of mortgage loans, and $69.2 billion of total loans.
"Management is pleased with the progress we have made in positioning the company to navigate the current challenging environment," Chief Operating Officer David Sambol said in a statement.
Countrywide shares rose 47 cents, or 8.5 percent, to $6.02 in pre-market trading.
The shares had fallen 27.4 percent on Tuesday. Some of the decline came even after the Calabasas, California-based company rejected market rumors that it was considering filing for bankruptcy protection.
In its monthly report, Countrywide also said foreclosures and delinquencies among mortgage loans it services, or for which it collects payments, rose in December to the highest level since 2002, the earliest period for which figures are available.
It said the pending foreclosure rate rose to 1.44 percent from 1.28 percent in November and 0.70 percent a year earlier, while the delinquency rate rose to 7.20 percent from 6.52 percent in November, and 4.60 percent in December 2006.
Countrywide's mortgage loan servicing portfolio rose to $1.48 trillion at year end, as homeowners prepaid fewer loans.
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No easy answer to housing crisis, Paulson says
Administration looking at options as wave of mortgages to reset rates
The Associated Press
updated 3:53 p.m. ET, Mon., Jan. 7, 2008

WASHINGTON - The Bush administration is working to combat the country’s severe housing crisis but there is no simple solution, Treasury Secretary Henry Paulson said Monday, adding that a correction in the housing market is “inevitable and necessary.”
Paulson said the country was facing an unprecedented wave of 1.8 million subprime mortgages that are scheduled to reset to sharply higher rates over the next two years. He said this raised the threat of a market failure and was the reason the administration brokered a deal with the mortgage industry to freeze certain subprime mortgage rates for five years to allow the housing market to recover.
“By preventing avoidable foreclosures, we will safeguard neighborhoods and communities and fulfill our responsibility of protecting the broader U.S. economy,” Paulson said in a speech in New York. “However, let me be clear: there is no single or simple solution that will undo the excesses of the last few years.”
Paulson said that the deal the administration brokered with the industry to freeze certain subprime mortgage rates for five years did not involve the use of any taxpayer money. Conservative critics have complained that the administration’s plan represented government intrusion in the operation of markets that would end up rewarding some people who had taken out risky mortgages.
In his speech, Paulson raised the possibility that some sort of “systematic approach” may need to be developed to help homeowners with other types of adjustable-rate mortgages that are resetting to higher rates. The current plan only involves subprime mortgages, loans offered to borrowers with weak credit histories.
The steep slump in housing has been a serious drag on the overall economy. There are rising fears that the country could topple into a recession. Those worries were heightened after a report Friday showing that the unemployment rate jumped to a two-year high of 5 percent in December with job growth slowing to a crawl.
Paulson called the current housing correction inevitable after what occurred during the five-year boom in which sales and prices climbed to record levels.
“After years of unsustainable price appreciation and lax lending practices, a housing correction is inevitable and necessary,” Paulson said.
He said that the correction was taking a toll on the economy that would continue for a period of months.
“It will take additional time for markets to regain confidence,” Paulson said. “The overhang of unsold homes will contribute to a prolonged adjustment and poses by far the biggest downside risk.”
Paulson and President Bush both delivered speeches Monday declaring the economy is fundamentally sound. Bush received an update Friday from Paulson, Federal Reserve Chairman Ben Bernanke and other market regulators about how markets have been performing following a severe credit squeeze that began in August that roiled financial markets around the world.
The administration is considering an economic stimulus package that might include tax cuts to ward off a recession. Bush is expected to unveil the package, if he decides to go ahead with it, around the time of the Jan. 28 State of the Union address.
Asked about a stimulus package, Paulson said Monday that Bush has not made any decisions yet but that the administration was very much focused on the issue.
“This is a decision the president still has to make. When he makes it, we will report to all of you,” Paulson said during a question-and-answer session after his speech.
The credit crisis was sparked by raising defaults on subprime mortgages. Those defaults have already resulted in multibillion-dollar losses at many financial institutions who bought securities backed by the subprime mortgages that have gone bad.
Paulson said that those large write-downs showed the system was working.
“As markets reassess, we should not be surprised or disappointed to see financial institutions writing down assets and strengthening balance sheets,” he said.
Paulson said the administration is continuing to work with the mortgage industry to ensure the quick implementation of the agreement to freeze subprime mortgages that are due to reset if the homeowner is living in the house, is current with payments before they reset but cannot make the higher payments.
He said that last Friday more than 20 mortgage institutions that are part of the HOPE NOW alliance met to work through outstanding issues involved in the mortgage plan. “We expect most servicers to begin fast-tracking borrowers in the next few weeks,” he said.
Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Dirty deeds: Cities fight banks over vacant homes
As housing crisis deepens, cities fight lenders over abandoned homes
By Michael Orey
Business Week
updated 9:21 a.m. ET, Mon., Jan. 7, 2008

On Dec. 17 in a windowless Buffalo courtroom, Cindy T. Cooper, a prosecutor for the city, buzzes among a dozen men in suits, cutting deals. "You've got to unboard [the house], go in, and clean it out," she tells one. "If all the repairs are done quickly, I wouldn't ask for any fines." To another, she says, "the gutters weren't done right," and asks to see receipts for the work. It's "Bank Day" in Judge Henry J. Nowak's housing courtroom, more typically a venue where landlords and tenants duke it out over evictions and back rent. Instead, Cooper is asking lawyers for CitiFinancial, JPMorgan Chase, and Countrywide Financial to fix problems like peeling paint, broken masonry, and overgrown or trash-filled yards at houses the city says the banks are responsible for maintaining. It may be surprising to find these financial-services giants hauled before this obscure local tribunal.
In fact, Cooper and Nowak are at the forefront of a pioneering effort to deal with a vexing problem: The surging number of vacant and abandoned homes resulting from the mortgage market meltdown. The vacancies occur when lenders bring foreclosure suits against delinquent borrowers. Mere notice that such an action might be filed often sends residents packing. In Buffalo and other Rust Belt cities, the problem has been particularly acute, because in many cases banks are abandoning the houses, too, after determining that their value is so low that it's not worth laying claim to them. When city officials try to hold someone responsible for dilapidated properties, they often find the homeowner and bank pointing fingers at each other. Indeed, the houses fall into a kind of legal limbo that Cleveland housing attorney Kermit J. Lind calls "toxic title". While formal ownership remains with a borrower who has fled, the bank retains its lien on the property. That opens up a dispute over who is responsible for taxes and maintenance. Even when lenders do complete the foreclosure, they may walk away from the property, leaving it to be taken by a city for unpaid taxes, a process that can take years. Orphaned properties quickly fall into disrepair, the deterioration sometimes hastened by vandals who trash the interiors, lighting fires and ripping out wiring and pipes to sell for scrap. Squatters or drug dealers may move in.
The impact goes far beyond the defaulting homeowner, as neighbors and entire communities confront a spreading blight. Vacant residences deprive cities of tax revenue and can cost them thousands to maintain. A 2001 Temple University study in Philadelphia found that simply being within 150 feet of an abandoned property knocked $7,600 off a home's value.
In Buffalo, prosecutor Cooper is bringing lenders before Judge Nowak to hold them accountable. Wielding the threat of liens, which can hold up the lenders' other real estate transactions, she aims to make banks keep foreclosed homes in good condition until a buyer can be found. As an alternative, Cooper or Nowak may try to get lenders to donate properties to community groups or to pay for demolition when houses are beyond repair. "At least in Buffalo," says Cooper, "the days are gone when you can do a foreclosure and walk away without taking care of the property."
Those charged with violations by Cooper include participants all along the complex mortgage-industry food chain, from loan originators to servicers to the Wall Street trusts that buy up the vast majority of home loans and then securitize them. A similar initiative is under way in Cleveland, where Judge Raymond L. Pianka puts lenders on trial in absentia when they fail to respond to charges.
Even places with high property values, like Chula Vista, Calif., a San Diego suburb, are taking steps to avoid the neglect that can occur during lengthy foreclosures. "It seems like a number of the lenders aren't even doing things that are in their own best interest to preserve the asset," says Pianka — a problem he attributes to the fragmented nature of the business. "It's not an address. It's not a property. It's just a loan number," he says. "So they'll push a button in San Francisco, and it will set things in motion to do things with [a] property that don't even make sense."
The proceedings in Pianka's and Nowak's courtrooms offer a sobering reminder that underlying the attenuated ownership and esoteric products spun out of mortgages are actual buildings, some with leaky roofs or broken porch railings. The industry denies responsibility for properties to which it has not taken title. "The notion that a mortgage company has an obligation to make repairs on a property that it doesn't even own is very hard to comprehend," says Marco Cercone, a Buffalo attorney who represents a range of lenders before Nowak in the courtroom. Cooper says that banks and other financial firms once extolled houses as the best possible collateral for a loan. Now they're stuck with that collateral, and they don't like it.
If there ever is a national response to the messy legacy left by foreclosures, it might include something like the Buffalo system, which seeks to take action before the presence of abandoned houses hurts entire neighborhoods and which spreads the pain among many players. "We're kind of a crystal ball into what might happen" elsewhere, Cooper says.
Lenders may rue the day the State University of New York at Buffalo admitted Cooper to pursue a PhD in sociology and a law degree. The subject of her doctoral thesis, submitted in December, 2006: the role of banks in residential abandonment and why they should be accountable for property-code violations. The fourth-generation Californian says she quickly became attached to Buffalo for its history and architecture. Now 33, Cooper and her husband are rehabilitating a house that she bought after getting an IRS tax lien removed from the property. "My passion for this work is because I love this town," she says.
While researching her thesis, Cooper interned for Judge Nowak. Tall, soft-spoken, and unfailingly courteous, the judge, 39, began holding Bank Day earlier this year and schedules it once a month. The civility of the proceedings and the large number of bank lawyers in attendance belie a noteworthy fact: They are there under coercion. A few years ago, Nowak says, "the city became increasingly frustrated with the banks' role" in contributing to Buffalo's abandoned-property problem. (Estimates put the number of abandoned homes in the city at between 5,000 and 10,000.) In 2004, New York State amended the definition of "owner" in its property maintenance code to include not just titleholders but others who had "control" over a premises.
While the statute makes no reference to lenders, Nowak contends that the letters banks send to defaulting homeowners threatening to boot them from their houses show that they have begun to "assert some measure of control." On this premise, Nowak says, Buffalo began contacting banks "en masse" about foreclosed properties, but "a lot of times we'd just be rebuffed and ignored."
Cooper, as an intern, suggested a tactic that the judge adopted. When banks ignored summonses for code violations, Nowak began entering default judgments against them and imposing the maximum fine, which can reach $10,000 to $15,000. For a big bank, that's not much. The real pain comes because the fines give the city a lien that impedes the banks' ability to buy or sell other properties in the area. In addition, when lenders come to his court to get residents evicted from a particular property, Nowak refuses to grant the request until the bank addresses violations outstanding on other properties. Judge Pianka employs similar tactics in Cleveland. On Dec. 10, for example, he assessed a $50,000 fine against an absentee defendant, Mortgage Lenders Network USA, for 21 code violations at a home.
Even far from the Rust Belt, in places where empty houses retain significant value, the lending industry seems to have trouble preserving its collateral when homes are abandoned during foreclosure. In Chula Vista, a number of houses have been trashed by college students who have held parties in the vacant properties. In other cases, pillagers pull up in rental trucks to cart away cabinets, wood flooring, and fixtures stripped from the homes. But in October, an ordinance went into effect requiring lenders to register and maintain houses that have been abandoned during foreclosure.
Compliance, says Chula Vista code enforcement manager Doug Leeper, has been spotty. "What I need them to do is keep the water on and keep the lawn green," he says, noting that the first sign of abandonment is often a yard that has turned brown and a pool that has gone murky green.
That slide into decrepitude is exactly what Cooper is trying to head off in Buffalo. In February, she joined the city's law department, where one of her duties is prosecuting banks. She and Nowak each say their main objective is not collecting fines but bringing banks to the table to try to find constructive solutions for dealing with abandoned property. That doesn't mean borrowers are off the hook. Cooper typically charges both borrowers and lenders, and Nowak may fine homeowners or sentence them to community service. "Can both be responsible?" asks Cooper. "Absolutely."
The approach in Buffalo is paying dividends. In a case on Dec. 17, attorney Cercone addressed the status of a house that had gone into foreclosure in 2006. Cercone was representing JPMorgan Chase and Ocwen Loan Servicing (which in turn were representatives of a securitized trust that had purchased the mortgage). Cercone submitted an affidavit showing that Ocwen, which had been cited for violations in December, 2006, had spent $30,000 to repair the property, including scraping lead paint from the entire house. In September, the affidavit notes, JP Morgan Chase sold the property at a loss of $19,500, not including the cost of repairs. "The bank in this case dealt with the property as well as could be done under the circumstances," Nowak said from the bench, and he agreed not to impose any fines.
Still, even with novel and aggressive tactics, the path to resolution for many properties in Buffalo can be tortuous and protracted. A house at 1941 Niagara St. — one of dozens of properties that Cooper examined as a graduate studenthas yet to see its final chapter, though it may be close.
In 1998, Elizabeth M. Manuel obtained a $34,500 mortgage on the property from IMC Mortgage (since acquired by Citibank). By 2002, the loan had been sold into a securitization trust administered by Chase Manhattan (now JPMorgan Chase) as trustee. It also went into default, and Chase began foreclosure proceedings. In a court filing, Manuel (who could not be located for comment) said she left the home while the foreclosure action was pending. More than five years later, though, the title remains in her name. The house, although still standing, has become a fire-gutted wreck.
In May 2007, Nowak issued a default judgment against Chase for $9,000. But these cases can be notoriously difficult to untangle. Thomas A. Kelly, a spokesman for the bank, notes that Chase sold its trustee business to the Bank of New York Mellon in October, 2006, and couldn't locate anyone at Chase able to comment. But he reiterates the industry view that Chase can't be held responsible for maintaining a property it never owned. He acknowledges that if a home didn't seem worth taking as collateral, the bank may have made a decision to "just walk away."
The value of 1941 Niagara, estimate city assessors, is $4,500, of which $4,300 represents the value of the land. The home, Cooper says, is slated for "imminent" demolition.
Copyright © 2008 The McGraw-Hill Companies Inc. All rights reserved.
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Wall Street Eyes Housing, 4Q Earns Data
The start of 2008 has brought a harsh reality to Wall Street: The U.S. may indeed be headed toward recession.
So, after suffering punishing losses the first three trading days of the year, the stock market will be seizing on any data or forecast in the coming weeks that can help investors determine if their worst fears are coming to pass. And earnings are now part of the equation, with results from Alcoa Inc., the first of the 30 Dow Jones industrials to report fourth-quarter results, opening earnings season on Tuesday.
Analysts polled by Thomson Financial, on average, expect the aluminum producer to post a drop in per-share profit, but the company's outlook is likely to have a bigger impact on Wall Street.
Last week's readings showed that the economy continues to slump amid the ongoing mortgage and credit crisis, and that energy costs could have further to climb. Over the course of the week, oil prices hit the psychologically important $100-a-barrel mark, investors found out that manufacturing unexpectedly contracted in December, and — perhaps most devastatingly — payrolls grew less than anticipated last month, while unemployment hit a two-year high of 5 percent. When people start losing their jobs, they pare back spending and find it harder to pay their bills, a trend that would aggravate already deteriorated lending conditions.
The news pounded stocks. In just the first three trading days of 2008, the Dow Jones industrial average lost 3.50 percent, the Standard & Poor's 500 index fell 3.86 percent, and the Nasdaq composite index dropped 5.57 percent.
Economists and market analysts are still split on whether this year will bring recession, but virtually no one is completely discounting the possibility.
Keefe, Bruyette & Woods banking analysts are factoring into their forecasts a mild U.S. recession in 2008, and they predict the nation's unemployment will reach 6 percent by the end of the year.
There's hope, though: Fed rate cuts, companies continuing to find ways to make money, and ongoing growth overseas could save the U.S. economy from recession and stocks from a bear market, according to Michael Sheldon of Spencer Clarke LLC.
This week, as it has been for months now, Wall Street will be eyeing housing data — though bad news rarely comes as a surprise now to investors who have already sold off stocks related to homebuilding or mortgage lending. On Tuesday, the National Association of Realtors releases its forward-looking index of U.S. home sales for November. Economists surveyed by Thomson Financial predict the index will slip after gaining for two straight months, despite the association's forecast last month that sales and prices will start rising modestly next year.
KB Home's quarterly earnings report Tuesday could offer further insight into whether the housing market is near its bottom or has much further to fall. The homebuilder is expected to post a loss.
With the job market and energy sector in focus, the Energy Department's weekly report Wednesday on crude oil, gasoline and heating oil inventories and the Labor Department's weekly reading Thursday on jobless claims will be closely monitored.
Comments from several Fed officials could also give investors a clearer view of where the economy is headed, and if inflation is a growing concern to the central bank, which meets Jan. 29-30 to decide whether to lower interest rates again for the fourth time in a row.
On Tuesday, Philadelphia Fed President Charles Plosser will speak in Gladwyne, Pa., on the economy, and Boston Fed President Eric Rosengren will speak in Hartford, Conn., on the economy as well. On Wednesday, St. Louis Fed President William Poole will speak in St. Louis on economic and financial literacy, and Thursday, Kansas City Fed President Thomas Hoenig speaks on the economy in Kansas City, Mo.
Lastly, on Friday, the Commerce Department reports on November's international trade and December import prices. These two pieces of data that could indicate how the weakening dollar is helping or hurting the United States' position in global commerce.
© Copyright 2008 CSC Holdings, Inc.

Federal Reserve to loan banks $60 billion
Stepped-up lending intended to address credit crunch
Friday, January 04, 2008Inman News
With a surge in unemployment and rising oil prices as a backdrop, the Federal Reserve announced today it will make $60 billion in short-term loans available to banks this month -- half again as much as offered in December -- as the credit crunch shows few signs of easing.
To address fears about deteriorating credit markets, last month the Federal Reserve and four other central banks said they would inject more than $90 billion in liquidity into financial markets. The Fed made $40 billion in loans available to commercial banks in auctions held Dec. 17 and Dec. 20.
The auctions -- in which the funds available for 28-day loans go to the banks willing to pay the highest interest rates -- made it possible for banks to borrow at an average interest rate of 4.65 percent in December.
That's slightly less than the 4.75 percent rate the Fed charges for short-term loans at the "discount window," which some banks are reluctant to use because it's viewed as a last resort. The Fed has cut its target for the federal funds rate -- the amount banks charge each other for overnight loans -- three times since September, bringing it down from 5.25 percent to 4.25 percent.
Today, with oil prices flirting with $100 a barrel and a new report from the Department of Labor showing unemployment rose to 5 percent in December, the Fed said it would make a total of $60 billion in loans available to banks in auctions to be held Jan. 14 and Jan. 28.
In a statement, the Fed said it plans to continue conducting the twice-a-month auctions "for as long as necessary to address elevated pressures in short-term funding markets." The amount of auctions to take place next month will be announced by Feb. 1.
The latest numbers from the Department of Labor show the number of unemployed workers rose by 474,000 in December, to 7.7 million. Job growth in service industries, including professional and technical services, health care and food services, was offset by job losses in construction and manufacturing, the Labor Department said, bringing the unemployment rate to 5 percent -- the highest since November 2005.
Investors were gloomy about the jobs report, sending the Dow Jones Industrial Average down nearly 200 points in afternoon trading. Stocks in the index have lost about 5 percent of their value since Dec. 24.

Mortgage rates down on economic worries
Manufacturing, home sales, loan apps high on radar
Thursday, January 03, 2008Inman News
Long-term mortgage rates this week dropped to their lowest levels in four weeks on news of a sharp slowdown in manufacturing and new-home sales, Freddie Mac reported today.
According to Freddie Mac, the average 30-year fixed-rate mortgage fell this week to 6.07 percent from 6.17 percent a week earlier, and the average 15-year fixed was down to 5.68 percent from 5.79 percent. Points, or fees lenders charge for loan processing expressed as a percent of the loan, averaged 0.5 and 0.6, respectively, on the 30- and 15-year loans.
Freddie Mac reported that average rates on adjustable-rate mortgages (ARMs) also declined, with the five-year Treasury-indexed hybrid ARM falling from 5.9 percent to 5.78 percent and the one-year ARM dropping from 5.53 percent to 5.47 percent. Points on these loans averaged 0.5.
"The new year has begun with mixed signals on the direction of the economy and mortgage market," Frank Nothaft, Freddie Mac vice president and chief economist, said in a statement. "On the downside, the Institute for Supply Management's index of manufacturing activity showed significant contraction in this sector, perhaps a harbinger of a more substantial economic slowdown to begin this year. On the upside, the Conference Board reported that consumer confidence rose in December for the first time in five months, with more positive expectations for the next six months. Furthermore, interest rates have moved lower with average 30-year fixed-rate mortgage rates down about a tenth of a percentage point, the lowest in four weeks."
On home sales, Nothaft said the latest data sent "mixed messages on the direction of housing activity towards the end of 2007," and that the "latest forecast has total home sales continuing to decline in the first quarter of (2008) before starting a slow recovery."
Further weakening was seen in applications for home loans, as the Mortgage Bankers Association reported mortgage application volume declined 11.6 percent last week on a seasonally adjusted basis from the previous week, with the index tracking refinancings down 15.4 percent and the index tracking purchase loans down 8.5 percent.
According to Bankrate.com's mortgage-rate survey this week, "Declining new-home sales and weaker economic indicators gave investors new reasons to worry about the economy. Such worries typically prompt investors to park money in safe havens such as Treasury securities … With four weeks and an entire cycle of economic data before the next scheduled meeting of the Federal Open Market Committee, sentiment about the direction of interest rates and the economy may swing back and forth as worries alternate between economic growth and the outlook for inflation."

Real Estate Professionals --Meeting the Needs of Home Sellers
by Dr. Paul C. Bishop, Harika “Anna” Barlett and Jessica Lautz, NAR Survey Research

Selling a home is a major decision for most households. Whether that decision is driven by the desire for a larger (or just different) home, a relocation due to a job change or personal situation, or plans to retire in a different community, selling one’s home can be a major challenge.Fortunately, sellers can choose from many options when looking to successfully complete a home sale. Sellers can work with a real estate agent who will manage the entire transaction, or they can take on the entire selling and marketing responsibility themselves, without the assistance of an agent.In fact, most home sellers do work with a real estate professional. Results from the recently released 2007 NAR Profile of Home Buyers and Sellers indicate that among recent home sellers, 85 percent were assisted by a real estate agent. How those home sellers select their real estate agent, what they expect their agent to do for them in the home sales transaction, and whether or not they would use that agent again are just a few of the questions that the report answers. Highlights from The Profileare presented below.Home selling experienceSome home sellers have considerable experience in the buying and selling of homes. The typical home seller has owned three homes; about one third have owned two homes. Not surprisingly, older sellers typically have owned more homes than younger ones; 43 percent of sellers 45 to 64 years old, have owned at least four homes, while more than a third of sellers who are 65 or older have owned at least five homes. Despite their previous experience of home buying and selling, the majority of these sellers still rely on the expertise and knowledge of real estate professionals to help them in selling a home.Finding a real estate professionalMost home sellers rely on referrals from a friend or family member or on their own experience with a particular agent when they look for a real estate professional to assist in their home sale. Among recent sellers, 41 percent reported that they found the agent they used in their home sale as a result of a referral, while 23 percent used the agent in a previous home sale or purchase transaction. Although there are a number of other ways that sellers can find an agent, they are far less common.The most important factor when choosing a real estate professional, cited by 38 percent of recent sellers, is the reputation of the agent. For an additional 20 percent of sellers, the agent’s honesty and trustworthiness was the most important consideration. Both of these qualities are closely tied to the manner in which most sellers find an agent – through referrals or as a result of their own experience with a particular agent, both of which can serve to validate reputation and trustworthiness.“Please Help Me”Sellers can choose the level of service they would like their real estate agent to provide. Some sellers want their agent to perform many tasks and manage the process from start to finish; others choose to perform some tasks themselves. In most cases, real estate agents assisted recent home sellers with many tasks. Seventy-four percent of sellers worked with their agents to determine the asking price, while 81 percent reported that their agent entered their property in the Multiple Listing Service.Most sellers continue to favor full-service brokerage, where real estate agents provide a range of services that generally entail managing the entire process of selling a home. Limited services, which may include discount brokerage, and minimal services also are important business models for sellers who want to take an active role in the process such as holding open houses, contacting potential buyers, negotiating terms or preparing the contract. Comparable to findings in the previous year’s profile, the 2007 report found 81 percent of sellers use full-service brokerage, 9 percent choose limited services and 9 percent use minimal service, such as simply listing a property on a multiple listing service.Expectations and performanceSellers have several expectations of their real estate agent depending on the particular circumstances of each sales transaction. These expectations vary among sellers in part because some sellers are willing to take on more of the tasks associated with selling a home, while other sellers want an agent to closely manage the entire process.Most sellers expect an agent to market the home, with 90 percent of sellers reporting their home was placed on a MLS and 88 percent saying their home was listed on the Internet; eight in 10 had yard signs. For one-quarter of sellers, the most important expectation is that the real estate agent will help sell the home within a specific timeframe. Nearly an equal percentage expects their agent to help find a buyer for their home.Eight in 10 sellers, using all kinds of brokerage services, said their agent reviewed sales contracts and purchase offers, managed paperwork and contracts, negotiated with buyers and scheduled showings. Three-quarters worked with their agent in determining the asking price, and said their agents coordinated home inspections and appraisals.FSBOs and commissionsWhile the majority of home sellers use a real estate agent to sell their home, some take on the tasks associated with completing a sale themselves. Many of these “for sale by owner” (FSBO) sales are between a seller and buyer who knew each other prior to the sale, which in most cases would not require the assistance of a real estate professional. The percentage of sellers who sell their home themselves has changed little in recent years. The level of for-sale-by-owner transactions remains at a record-low market share of 12 percent, the same as in 2006. The level of FSBOs has declined since reaching a cyclical peak of 18 percent in 1997.Why do people try to sell a home themselves? One in five FSBO sellers sold their home to a friend or relative. But the chief reason that sellers choose to sell their home without the assistance of a real estate agent, cited by 56 percent, is that they do not want to pay a fee or commission. Seventy percent of open-market FSBO sellers – that is, FSBO sellers who sold their home to a buyer whom they did not know – cited the fee or commission as the main reason.But it is important to note that often a real estate agent’s commission is one of several points of negotiation when sellers choose an agent. In fact, sometimes the real estate agent herself initiates the discussion of the commission or fee for selling the home; other times the seller raises the topic. Among recent sellers, 39 percent reported that the real estate agent raised the topic of compensation, while an additional 31 percent of sellers reported that they initiated the negotiation over the fee or commission.“Repeat” businessReal estate brokerage is a “people” business, and consumers’ satisfaction with their real estate professional is essential for generating repeat or referral business with the same or new clients.Whether or not sellers would recommend the agent who assisted in their sale is a critical measure of the sellers’ satisfaction. Moreover, the important role of referrals and word-of-mouth in the process of selecting an agent suggests that potential home sellers value the experience of others when choosingan agent.Among recent sellers, 62 percent reported that they would definitely use the same agent again or recommend that agent to others. An additional 19 percent would probably use the agent again.CompetitionReal estate is a very competitive industry. There are well over a million REALTORS® serving property buyers and sellers. What is particularly unique to these professionals is that they share vital information with their competitors. The industry is also very entrepreneurial. Real estate professionals constantly experiment with business models and cater to a wide array of consumer interests and preferences. NAR embraces this competition, and to succeed in this marketplace, REALTORS® must place a high priority on client satisfaction. The 2007 NAR Profile of Home Buyers and Sellersreveals that REALTORS® and other real estate professionals are effectively answering the needs of home sellers.In August 2007, NAR mailed an eight-page questionnaire to 150,000 consumers who purchased a home between July 2006 and June 2007. The survey yielded 9,966 usable responses with a response rate, after adjusting for undeliverable addresses, of 6.9 percent. Consumer names and addresses were obtained from Experian, a firm that maintains an extensive database of recent home buyers derived from county records. information about sellers comes from those buyers who also sold a home. All information in The Profile is characteristic of the 12-month period ending June 2007, with the exception of income data, which was reported for 2006. In some sections comparisons are also given for results obtained in previous surveys. Not all results are directly comparable due to changes in questionnaire design and sample size. The median is the primary statistical measure used throughout the report. Due to rounding and omissions for space, percentage distributions may not add to 100.

This Slowdown We Can Handle
by Lawrence Yun, NAR Chief Economist


The economy is slowing. In the fourth quarter, GDP growth will have shrunk for the first time since the 2001 recession. The projected decline is only 0.4 percent, but it is nonetheless a decline. Because of the lag time in data collection, economic shrinkage will be reported in late January. At that point there will be shouts of RECESSION, RECESSION, and RECESSION. Beware of DoomsdayersNo worries though. Technically an economic recession comprises two consecutive quarters of contraction. (It is measured that way because only a sustained economic contraction leads to sustained net job cuts.) The projected fourth quarter decline is due to cutbacks in residential construction activity and from a statistical “quirk” in business inventory investment. The business inventory components generally regain quickly. The inventory-to-sales ratio is touching record lows (i.e., companies are operating with thin inventory) and some build-up in business inventory is inevitable going into 2008. The cutbacks in residential construction are continuing but most of the major declines have already occurred. Subsequent construction declines in 2008 will have less of an impact. Housing starts have fallen from their 1.5 million unit pace in the early part of 2007 to 1.2 million in the latter part of 2007. For 2008, housing starts are projected to be 1.15 million units – weak activity but still a rather mild decline from the final quarter of 2007.The other components of GDP will hold on. Consumer spending will continue to expand, albeit at a slower pace. It is difficult to foresee a consumer spending contraction given the fundamental improvement in household balance sheets. Compared to two years ago, salary payments to workers have increased by $700 billion, four million additional net new jobs have been added, and household net worth has risen by $8 trillion – principally from a rising stock market. Wealth in homes has declined by $200 billion in the past year due to the lower home prices (on average). On a net average though, if you add up the above figures, households are in better financial condition. Consumer spending will not contract.Business profit appears to have topped out in the past two quarters. However, business spending will advance at a respectable pace because aggregate corporate profits are considerably higher now compared to just two years ago. Government spending nearly always rises. Net exports also look favorable given the weakness in the U.S. dollar. Foreign purchases of U.S. products will remain strong because U.S. products are competitively priced.Eye on the FedAll in all, we will easily escape recession – despite the anticipated screaming headlines of impending doom. The GDP reading for each of the successive quarters in 2008 will be positive: 2.2 percent in the first quarter, 2.6 percent in the second quarter, 3.0 percent in the third quarter, and 3.1 percent in the fourth. Job gains also will continue into 2008.But even a temporary contraction in GDP has some benefits. Despite a relatively high inflation reading in November (0.8%), weaker GDP growth will hold back inflationary pressure in 2008. It is likely we’ll see another rate cut by the Federal Reserve. The Fed Funds rate will fall by another quarter point to 4.0 percent in January. Mortgage rates will hover near 6 percent – nearly comparable to the 45-year low rates we encountered in 2004 and 2005 during the housing boom years. Note, however, that is forconforming mortgages and not jumbo rates. But once the economy gathers momentum, mortgage rates will tick modestly higher.Foreclosures and FraudUnfortunately, foreclosure rates will continue to rise in 2008. That is a given due to the weak underwriting standards of past loan originations. Subprime mortgage loss write-downs will also continue. (Write-downs are based on assumed anticipated losses and not actual losses.) Because of inactive trading of subprime debts, the market value of these “toxic” loans is unknowable. It is possible that the actual losses – after tallying the figures for the next several years – could be measurably lower. In my view, a considerable share of the recent spikes in default rates is due to investors walking away from their loan obligations. Fraud is also a factor. However, homeowners will fight hard to keep their homes, so the assumed rise in default rates based on a simple extrapolation of recent figures may not be accurate. Investors/speculators and fraudulent loans will have defaulted quickly, thereby leaving fewer in the potential default pool at a later stage.Recent mortgage originations are much less problematic. We are back to the basics of sound underwriting. Nonetheless, past weak lending standards will mean higher foreclosures well into 2008. Therefore, it is critical for homebuilders to sharply cut back production so as to not add to the already high inventory. As always, we go back to our mantra: All real estate is local. There are wide variations with no one neighborhood trend looking like another. Some areas will see housing activity and prices moving up and some moving down. Local real estate professionals are critical in properly ascertaining local market conditions. In the aggregate, the national home sales and home prices will be very similar in 2008 as in 2007.

Where are mortgage rates headed?
Commentary: Jobs report to shed light on economy, inflation

Monday, December 31, 2007By Lou BarnesInman News
An inflation-inspired popup in rates is reversing on news of a weakening economy. Mortgages are still above 6 percent (they touched 6.25 percent at Christmas Eve worst), and markets will now hold until the release of all-powerful payroll numbers on Friday, Jan. 4.
The inflation news before Christmas was disturbing: The indicator was a technical one ("core personal consumption expenditure deflator"), but a Fed favorite jumping the 2 percent top-of-target range. Not by much, 2.2 percent year-over-year, but 2.9 percent in the last three quarters. "Headline" overall CPI is north of 4 percent, felt by everyone.
New claims for unemployment insurance are in an unmistakable uptrend, at 350,000 weekly within 20,000 of the level at onset of the last two recessions.
November data is old, but indicative: Orders for durable goods crept to a 0.1 percent gain versus 2.2 percent forecast, and personal spending soared by 1.1 percent, personal savings going negative by 0.5 percent -- hardly a sustainable party. Markets reacted to Friday's report of a 9 percent collapse in new-home sales as bad news; it is not -- we need these "incentive" discounters to take a couple of years off.
New Year predictions? Don't be silly. Not for 2008.
Instead, herewith a "bracketing" forecast, the probability borders of happy and poor outcomes set by today's mid-range optimists and pessimists. Outliers -- the wacky fringe -- need not apply (which excludes at least half of the commentariat).
First, on recessions in general: They are rare. Since the worst in modern times, the double-bottom '79-'82 affair, we've had only two, both short and shallow affairs, 1991 and 2001.
If you watch nothing else, watch the job market. Sensible optimists call for job "stability," meaning marginal gains and a gradually rising unemployment rate, the consumer staying in the game. Heard everywhere: "Historically, it's a bad idea to bet against the consumer." Reluctant pessimists counter that the job market is a lagging component of the economy, breaking after the start of recession.
Inflation. So long as oil, commodity and food prices behave as they have, it will be hard to find an optimist. In this case, bracketing goes to the world economy, and is three-sided. Economic optimists, many believing that a go-go world has "de-coupled" from the United States, are the inflation worrywarts; the slowdowners think that inflation is another lagging component and will fall back. The third bracket, pushing in from the cutesy sideline, says "stagflation." (I'll be judgmental, here: Stagflation was coined in the '70s during very high inflation and unemployment, both insignificant today by comparison. The stagflationists just can't make up their minds.)
Credit crunch. The hopeful see markets digesting trillions in bad assets "in a couple of quarters" -- Goldman Sachs. The non-apocalyptic skeptics see an impaired system short of credit suppressing growth for years -- Goldman Sachs (different guy).
Housing. Given an absence of optimists, I'll speak for the missing: Foreclosures will rise until 2011, but damage to the overall economy from housing alone (as opposed to the wreck in the financial system) will be less than forecast, as will be credit losses. Prices will stabilize in most Bubble Zones in 2008. Pick your own pessimist.
The Fed. Bernanke's solution to failure as a communicator is to stop trying. Hence, all is guesswork. Truly expert monetary mechanics are in a fierce argument, unable to tell if the Fed is fire-hosing cash to float the economy (and failing), or syringing just enough into banks to keep them alive. The range of serious opinion includes: Bernanke is a courageous, modern-day Volcker who will let the economy slide as far as he can to squelch inflation; or, now at the limit of the Fed's traditional power, is a passive Chairman. Quite incredible that we cannot tell which.
The World. Biggest forecast gap of all. Globalists expect strength to pull all through the credit wreck; old-timers look for Europe then Asia to follow the U.S. into the tank, then the U.S. to pull everybody out in 2009. I have increasing fondness for old guys.
Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.