(This is the third part of a series of discussions that I have been having with an old friend)
I recently ran across an old friend,(let's call him Felonius Funk), and we were discussing the many issues facing this country these days, and as the conversation led us to familiar grounds concerning our two industries, real estate for me, and Wall Street for him, we digressed for quite awhile on recent past history, and the current .
effects that it is still exerting on our present and foreseeable future.
What "Felonius" imparted to me was intriguing and maddening at the same time, and I know most people are too busy to pay attention to the players and the moves they are making, because of the smoke and mirrors they use to confuse and obfuscate the true import of their actions. In addition, the complication involved in these manuvers causes people's eyes to gloss over within a matter of seconds of attempted explanation.
This is my small attempt to add to the needed public dialogue about the puppet masters behind the curtain. Without further ado, I give you Felonius Funk, in his own words...
Is anyone angry yet? Do you listen to your media? Do you hear it blame "this" bank for making "this loan"? Rubbish! A large handful of global banks, investment banks, and insurance companies brought the whole system to its knees two years ago because of their outright overspeculation in a leveraged multi trillion dollar arena known as financial derivatives. Nobody is talking much about them in our precious media, so they still must be a secret. Analysts for the various financial firms aren't talking about them when they release their forecasts. So-called gurus who write investment newsletters aren't talking about them either. Why is it all so hush-hush?
Can we look at the ramifications today from what happened two years ago? The Federal Rerserve (which is a private corporation and really has no reserves) cut short term interest rates to the bare bones in order to try to stir businesses into action. What was the result? Retired people and senior citizens saw sharp declines in their investment income unless they were willing to take investment risks that they had never before taken in their lives. These people were used to receiving 3% to 5% for their CDs with their banks with relatively short maturities. Short term interest rates being basically zero, these people would have to tie up their monies for ten to twenty years to get those kinds of returns or leave the FDIC safety net to obtain those returns with shorter maturities. Are you angry yet?
Where did the money go that was given to the banks for loans? I'll tell you one place it did not go: Multi generation family owned businesses who were used to weekly/monthly borrowing just to replenish normal inventories. Many of those businesses have shut their doors. Are you angry yet?
Who paid attention to the Financial Reform bill? Derivatives are going to trade on a central exchange..........so they can go belly-up right in front of our very eyes instead of us receiving the information second hand from the over-the-counter markets. The Canadian banking model (high reserve requirements, the purchasing of mortgage insurance, and No derivatives) was not adopted by our Congress hence there are no safeguards to prevent another derivatives debacle from occuring. You heard a lot of talk about the repeal of the repeal of the Glass-Stegall Act. I suggest to you that the original repeal is NOT the problem. The repeal of Glass-Stegall created new competition between the banks, investment banks, and insurance companies. The results are that insurance rates and underwriting fees are as low as they have ever been. What Congress failed to address was leverage as it related to investment and speculation and, until leverage is addressed, nothing else really matters. The result is the resumption of the global high stakes casino.......with your money. Are you angry yet? Are you willing to bail them out again? Are you angry yet?
The sellout of Congress to Wall Street showed us that some of the people fighting financial regulation the hardest were some of the same people responsible for causing the roof to cave in two years ago. Remember twenty years ago? A few of the people who ran failed savings and loans wound up as executives of the RTC (Resolution Trust Corporation), the government vehicle used to clean up the mess. Congress has squandered a golden opportunity to bring some semblance of order back into our financial markets. No playing field can be considered level if one can continue to be blindsided by derivatives fallout. What's it going to take for you to get just a little bit angry?
Twenty years ago, we weren't too concerned about government permanently owning private assets. Government was brought in to clean up a huge mess created by the financial industry in the private sector. When the situation stabilized, government sold off the assets. Today it's different. Take a look at General Motors. It's fate was dictated by government. Are you aware of the entity that really kept GM afloat the last ten years? The real heroes of GM? Don't you dare say the labor unions! It was the bondholders.....the people like you and me who owned GM's debt. The bondholders gave and gave and gave while the unions continued to take and take and take. Who wound up with the controlling interest in GM as it came out of bankruptcy? The unions. Are you angry yet?
Much More To Come
Saturday, October 16, 2010
We Got the Funk, Felonius that is...
We Got the Funk, Felonius that is...
Gary W. Oakes, CRS, GRI, ABR, e-PRO
Crye-Leike Realtors
Address: 206-A Cool Springs Blvd., #101, Franklin, Tn, 37067
Office Phone: (615) 771-6620
Cell Phone: (615) 400-0098
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Friday, October 15, 2010
Monday, September 27, 2010
Thursday, September 2, 2010
FOOTBALL SEASON IS OVER. FOOTBALL SEASON HAS BEGUN. - Every Day Should Be Saturday
FOOTBALL SEASON IS OVER. FOOTBALL SEASON HAS BEGUN.
by Spencer Hall on Sep 2, 2010 2:44 PM EDT
150 comments
Hunter S. Thompson wrote "Football Season Is Over" at the top of his suicide note. The end of football season was, for him, a convenient time to check out of life via gunshot. It is not hard to understand why: looking out the window in February, when the whistle has sounded and big men pour into physical rehab or the bars for the winter, is bleak as hell's backyard no matter where you are. Up north there is snow, more snow, and grey cottony skies blocking the sun for months at a time. Down south the trees spit their leaves, and half of the mid-South looks like the back of a porcupine's ass. In Florida, the snow birds pace the sidewalks like bedraggled death-herons lurching from one cafeteria to the next. It may be the most macabre of all scenarios, but you wouldn't believe it until you see it.
You don't believe many things until you see them, because people remain visual learners. For instance, You won't believe that you can lose that game, and there the score sits in indisputable yellow lights on the scoreboard. You won't believe now that in four months you will sit at the window and see it all happen all over again and then find yourself staring at the metaphorical piece of paper reading: Football season is over. Camus stated that all reasonable men consider their own suicide. I'm not saying I think it is a noble decision in his case, or in any others.
If I were going to understand it, though? That first Saturday morning without football would be the day to do that.
My grandfather died in February. He looked like Bill Clinton crossed with Shrek. Personality-wise, he was more of the latter and the former, and in a good way. He liked to cook country ham on a hot plate on his sealed concrete patio. He tended a terraced garden big enough to feed a family and regarded squirrels with a hatred bordering on the pathological. He would take me out in his shed--a mini-house across the creek in the back of the property with wood-burning stove, radio tuned to WSM radio, and a hundred well-oiled tools hanging on the wall--and just sit there occasionally telling me stories while he fed split wood into the belly of the stove.
He was usually sipping on coffee during these chill sessions. Later, after his death, we would find whiskey bottles stashed all over that shed. I did not lick a taste for stimulants mixed with alcohol off the grass.
He was one of the first people I can remember telling me anything definite about football. My grandparents owned a Magnavox. They don't even make these anymore, and by they I mean "Americans who made televisions," a rare breed of people that existed before we collectively acknowledged the universal truths of international existence: that Asians make killer electronics, that Germans make face-ripping cars, and that we do best when just sit back and kind of improv like the brilliant bullshitting nation we are.
It was huge, and made a supernatural humming noise when you turned it on. For a time as a child, i believed televisions in wooden casings made to look like distinguished furniture could only pick up three types of programming: Hee-Haw, Gunsmoke, and Barnaby Jones. My grandfather seemed to live off pork products, black coffee, and those three television shows. He got vitamins from them, and were an important part of his balanced diet.
It shocked me one day when football came on the television and shattered my beliefs about the receiving abilities of wooden-based television arrangements. Vanderbilt was playing Tennessee. I was maybe eight years old at the time. Tennessee scored off a short TD run. My grandfather made a displeased grunt from somewhere in his enormous lantern-sized head, the same one that totters on my neck like a bowling ball taped to a gameday shaker.
"What's wrong, Gran-gran?"
"I'm thinking Tennessee's a little bit more physically equipped than Vanderbilt is." *
*He really did have this Foghorn Leghorn kind of diction. I thought I was making it up for comic effect until I watched an old video of a Christmas at their house and, in receiving a coffee thermos from his daughter, said he first wanted one when "your husband opened it in the car, and things smelled good, so I had to nose around the car and investigate where the smell was coming from." If anything, it was bigger and more exaggerated in real life.
"Are we pulling for Tennessee?"
"No, Spencer. We can't do that."
"Why?"
"We just don't. You can't cheer for Tennessee. We don't do that in Nashville."
"Can I cheer for Vandy."
"You can cheer for Vandy, but you can't pull for ol' Tennessee."
"Got it."
Cancer would eventually kill him, and not in the gradual, graceful soft-focus way movies about people dying young always have cancer doing its work. Cancer moved in, set his lymphatic system on fire, and then set to work on his brain. Toward the end of his life he told lies about his habits, extravagant, uncharacteristic lies about where he'd been, why he'd been saying strange things, or even where he got the Totes hat we'd given him for Christmas a month earlier. ("I got it from my friend the Jamaican sea captain!")
When he was buried, on a day in February when the rolling scroll of hills around Nashville did look like the back of an elderly hedgehog, I thought about relatively few things. I remembered that my cousin farted, and farted quite loudly on the stairs at the funeral home. The stairs acted as an amplifier, a kind of woofer for the frequency booming out his flatulence through the entire visitation. It remains one of the most spectacular bits of farting greatness I have ever seen.
I also remember thinking about what I learned from him. He sucked the marrow from chicken bones, because anything less than total consumption of the whole bird was wasteful. He laughed at himself in all situations even when he ripped his driver's side door off backing down the driveway. He wore two pairs of pants in retirement and kept one special for holidays. And he did not, for any reason, ever root for the University of Tennessee, even dead and being lowered into the ground wearing a strange suit I had never seen before.
My son was born in February. The timing was intentional, and not just for football. Pregnant women, being literal ovens of human bakery, hum along at an even 300 degrees Fahrenheit, and my wife thought better of attempting to carry a human pizza oven through the heat of an Atlanta summer. Instead, he came in the month without football when the weather was cold enough that, on good nights, she needed a single sheet over her to stay warm while I froze under three blankets. She didn't need to have a baby in summer: she carried the season with her in bold disregard for the calendar's conventions.
She reclined on the bed and slept for a while. In terms of labor, we got off easy: a late induction, eight hours of pure, hellacious suck, and then the epidural that landed her sleeping on the bed during the break. If you've been in a hospital overnight, you know it floats in its own plane of existence. No one walks the halls. The sound of intermittent moaning and murmuring nurses break the slience. Sleep deprivation makes the sound of the ice machine spitting fresh cubes into the bin seem like a crashing omen of bad, uncontrollable things. In the room, machines beep and whirr in rhythm.
On the street outside in downtown Atlanta, I watch one guy in two hours walk down the sidewalk, a tall, wispy man dragging a ragged piece of rolling, wobbling luggage so pitiful a more loving owner would have shot it. The wife slept on. Sitting on the couch I felt like Michael Collins in the Apollo 11 command module, staring out the window at a howling nothing and time that wouldn't move fast enough for me, death, or birth. In the middle of the night in a hospital everyone's alone no matter how many people are there.
In the morning, there was one more person in the room than there was the night before. If you drive out west for long distances, you will not see a sign for a destination until it is at least theoretically within a long day's drive, which out west can be a mind-boggling distance. When you finally see it, a veil of certainty creeps in: this is where you are going, this is where you have been, and you are progressing to this place, slowly perhaps and across long distances, but towards that place nonetheless.
Seeing your child born is the best moment in your life, but it's also a sign indicating mileage and distance. We're moving on here, and the end of this road is [X miles] ahead. You don't see the number, but you know it's there, and that without exits, stops, or pee breaks, you are running headlong toward it without stops. It doesn't change anything, but technically neither does the warning light on the gas gauge coming on in your car. Things might be the same, but you are decidedly not.
It was cold when we took him home for the first time. The wind whipped right around the side of Crawford Long Hospital. It cut right through me like it never had before.
Months later, it still does. If you're born without an emotion chip, this part can be installed at a later date. if you choose not to order this part, it will be forcibly installed upon the birth of your first child. Systems calibration will not be offered, and is not available anywhere. Systems may overload unexpectedly and without warning. No recalls will be made, and no improvements made on this faulty part. No apologies, The Management.
Other parents will tell you it "makes you realize what's important." This is partially true, if only in the sense that it makes you realize everything is important. I have gone from being a casual guest at the restaurant of life to a part owner, and it all terrifies and obsesses me. The lack of salt in the shakers before the lunch rush concerns me in a way it never did before. The empty tables on a Friday night fill me with dread. The pleasure of a well-organized kitchen working in perfect sync delights me like it never could before, and so does its collapse into complete anarchy. I no longer leave the plates on the table and assume someone else will bus them away, and I will not walk into a restaurant ten minutes before closing time and order food, because the person behind the grill is me. (And this is a dick move, and the last person I want to be a dick to is me.)
It is in part because you have something depending on you, but also because this space and time just became more finite and precious. It is the first bite of fall in the air of an endless summer, the hint that you have crossed into something else, something with falling leaves, a chill in the air, and a gradual shortening of the literal and metaphorical days.
Camus makes a guest appearance here again:
In the depth of winter I finally learned that there was in me an invincible summer.
Summer's never been my favorite season. Fall, however, is. I don't have a clue what will happen with John Brantley, or the Florida defense, or to Alabama, or Georgia, or Michigan, or USC, or Western Kentucky, or any other team. There are depth charts, and rosters, and points spreads and buses and planes headed to various points to play on various fields. Everything but those is filling the space between diversions staged to liven up the otherwise dull expanse of a working week.
I do know, however, that like everything else this experience, this randomness we do each fall means so much more to me now than it did before. It is not enough to admit that your seriousness becomes that much more serious when you reproduce. Your arbitrary passions, your silliness, your distractions become that much more intense now, if only because you understand how limited a resource they are. The whistle blows. The conferences order themselves. Then you will face the winter again, holding the note and understanding the urge to write those words on a sheet of paper: "Football season is over."
The experience, though, is now more than enough. The wind may cut through me now. It's an indicator that I'm alive, completely and fully alive in the indefinite span between arrivals and departures. This all matters so much more now, all of it, football and every other absurd fixation, the time, the space, the diversion, and most of all who you share it with, because it is finite, borrowed, and ultimately reclaimed. Its scarcity is its value; its pleasure is in its ultimate end. Its consolation is its rebirth and continuation.
In the depth of winter I finally learned there was in me an eternal September. This definite, very real September I'm writing in, however, is the only place and time I want or need. Football season is over; football season has begun. The rest is life, and it can and will wait until February, the question that always answers itself by becoming March, and then April, and then back to September again, where we do not root for Tennessee, because that is simply not done here.
This is great writing about a great time of the year by a man that you will hear much more from in the future. Mazel tov, Spencer!
Thursday, August 26, 2010
News Headlines
US NewsPage 1 of 3 | Next Page
Show Entire ArticleA Disillusioned Mr. Gross Returns from WashingtonCNBC.com | August 25, 2010 | 06:28 AM EDT
Famous PIMCO fund manager Bill Gross went to Washington last week and admits in his September note to clients that moments like heading to the Treasury for the first time in his 35 years in the business had the “little boy inside me is screaming 'Run!'"
The purpose of the visit to see Treasury Secretary Tim Geithner was, in Gross' own words “a Bill Gross, instead of a Mr. Smith, going to Washington, but with the same populist spirit: no filibusters or anything, but an idea or two on how to benefit Main Street as opposed to Wall Street, in the ongoing housing crisis."
Unfortunately for Main Street, Gross says he found little support in Washington for his ideas.
"Just like Oz isn't Kansas, Washington D.C. isn't Newport Beach or Des Moines, Iowa," he wrote.
Gross proposed rolling Fannie Mae [ FNM 0.5235
+0.011 (+2.15%) ] and Freddie Mac
[ FMCC 0.32
-0.01 (-3.03%) ] and other housing agencies into one giant agency and call it the Government National Mortgage Association guaranteeing a majority of existing and future originations.
This solution recognizes the necessity and not the desirability of using government involvement, he said.
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Wow, why am I not surprised by this...
Saturday, August 21, 2010
Lockheed Martin targets downtown Nashville, sources say - Nashville Business Journal
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Nice... if it turns out to be true!!
Thursday, July 15, 2010
The Funk Rolls On...
Tuesday, June 29, 2010
Gary's Blog: Old Friend, New Discussion, meet Felonius Funk!
I recently ran across an old friend,(let's call him Felonius Funk), and we were discussing the many issues facing this country these days, and as the conversation led us to familiar grounds concerning our two industries, real estate for me, and Wall Street for him, we digressed for quite awhile on recent past history, and the current .
effects that it is still exerting on our present and foreseeable future.
What "Felonius" imparted to me was intriguing and maddening at the same time, and I know most people are too busy to pay attention to the players and the moves they are making, because of the smoke and mirrors they use to confuse and obfuscate the true import of their actions. In addition, the complication involved in these manuvers causes people's eyes to gloss over within a matter of seconds of attempted explanation.
This is my small attempt to add to the needed public dialogue about the puppet masters behind the curtain. Without further ado, I give you Felonius Funk, in his own words...
Out of the Starting Blocks
When the private sector manages itself poorly, the only entity remaining to clean up the mess, unfortunately, is the federal government. Pondering events of twenty years ago, one can remember the bailout of hundreds of savings & loans plus a variety of banks of all shapes and sizes. Some of these institutions had strayed so far away from their core businesses that it was impossible to return them to the fold. Imagine small to medium sized U.S. financial institutions with art collections and/or defaulted third world debt on their books. Our larger institutions, at that time, were becoming too comfortable with new trading and leveraging techniques that eventually would lead to the collapse of 2008. These financial instruments often were not itemized on income statements or balance sheets. They were called "derivatives", and they were supposed to be a secret.
The classic definition of a derivative is a hybrid security whose value is tied to the value of another underlying security. Normal derivatives come in a variety of forms. A Treasury zero-coupon bond is classified as a derivative. The FICO zero-coupon bonds that were issued twenty years ago to create the capital needed for the S&L bailout are derivatives. A convertible bond or convertible preferred stock could be classified as a derivative. The budding problems twenty years ago and the huge problems we have today were not caused by the cash-based "normal" derivatives investments that are bought and held. Complicated mathematical formulas tied to mortgages, interest rates, currencies, and the probablility of their failures resulted in the creation of exotic derivatives contracts, exponentially leveraged, with no central exchange on which to trade. Trading to this day is done "over the counter. One of the major new areas of regulation tied to the financial reform bill now in Congress is the creation of a transparent central market where derivatives can be watched daily.
Three years ago a few so-called market "whistleblowers" began spoonfeeding an ignorant/compliant national news media that a mortgage "crisis" was on the horizon. Yes....we indeed have a mortgage crisis today thanks to lax lending practices demanded by a Congress with reelection first and foremost on the minds of many of its members. Fixing the mortgage crisis itself might cost the taxpayers five to ten trillion dollars. This crisis, however, was only the tip of a giant iceberg, a scapegoat and a coverup to the real problem: The real issue, however, is a derivatives market leveraged to the tune of between 600 trillion and 2 quadrillion dollars....depending on whose analysis one chooses to believe. When the dust settled following the Lehman Bros. collapse in 2008, shareholders and bondholders found out that the company was leveraged many times its equity. Remember Enron? Its accounting firm, Arthur Andersen, didn't survive the trial. Lehman shareholders have sued Ernst and Young.
More to come ...
Sooner or later, one get's it right...Hopefully!
Old Friend, New Discussion, meet Felonius Funk!
Gary W. Oakes, CRS, GRI, ABR, e-PRO
Crye-Leike Realtors
Address: 206-A Cool Springs Blvd., #101, Franklin, Tn, 37067
Office Phone: (615) 771-6620
Cell Phone: (615) 400-0098
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Tuesday, June 1, 2010
Housing: Plunge in Home Demand Without Aid Seen as Short-Lived - CNBC
US NewsPage 1 of 4 | Next Page
Show Entire ArticlePlunge in Home Demand Without Aid Seen as Short-LivedReuters | June 01, 2010 | 07:02 PM EDT
The retreat in the U.S. housing market after the government halted its hefty tax credit in April should be short-lived, analysts say, and the market may resume its path to stability.
Home sales surged in April before the month-end deadline to take advantage of the credit and demand dropped sharply in the following weeks. But mortgage rates near record lows and an improving jobs market will help underpin the sector, even without the artificial stimulus of tax breaks, analysts said.
A housing sector rebound is seen as a key pillar in the economy's recovery, which has gained steam as consumer spending picks up while manufacturing activity, which has led the upswing, stays strong.
"It's back to a fundamentals market where there are no gimmicks," said Mike Fratantoni, vice president of research and economics at the Mortgage Bankers Association.
The first-time homebuyer credit, as well as $1.4 trillion in debt purchases by the Federal Reserve, served their purpose: lowering mortgage rates and restoring life to the worst housing slump since the Depression.
Sales of new homes, juiced by the tax credit deadline, leaped almost 15 percent in April to a two-year high. Existing home sales jumped 7.6 percent in April and almost 23 percent in the year.
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This is really encouraging, and I am starting to see it in the market...
Monday, May 10, 2010
Housing Prices to Rise 3-5% This Year: John Paulson - CNBC
US NewsPage 1 of 2 | Next Page
Show Entire ArticleHousing Prices to Rise 3-5% This Year: John PaulsonCNBC.com | May 10, 2010 | 12:17 PM EDT
John Paulson, the hedge-fund manager who made $15 billion shorting the real estate market, said Monday that he expects housing prices to rise between 3 and 5 percent this year and another 8 to 12 percent in 2011.
Paulson, who made his comments in a conference call with investors, said home ownership is the most affordable it has been in 50 years. He said residential real estate is 60 percent more affordable than it was at the peak of the housing bubble.
Paulson added that his firm closely tracks home prices in California; he believes they are the most important indicator what the rest of the country's housing markets will experience six months from now.
He also said the United States is in a strong V-shaped economic recovery. He said his concerns about a double-dip recession have fallen sharply since the beginning of the year.
Paulson pointed out that only one-third of the federal government's stimulus funding has been spent, so the remaining two-thirds should provide an additional boost to the economy later this year and in 2011.
He also sees buying opportunities in U.S. and European equities, even though the consensus about Europe is generally downbeat. Paulson predicts a "very strong" period of corporate earnings growth in the months ahead.
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This could be Great News!!
Monday, April 12, 2010
Mortgage rates inch up
Buyers, Beware: Mortgage Rates Up Mortgage rates that once dipped below 5 percent have pretty much gone away, but don't expect rates to spike to 1980s levels now that the Federal Reserve has ended a program that purchased mortgage-backed securities to keep interest rates low, East Bay mortgage brokers say.
In just the past week, the average rate on a 30-year loan has jumped from about 5 percent to more than 5.3 percent. As mortgages get more expensive, more would-be homeowners are priced out of the market — threatening the housing market's fragile recovery.
Many analysts forecast rates will rise as high as 6 percent by early next year. For people who bought their first home in the 1980s, when rates stayed over 10 percent for several years, paying 6 percent for a home loan may seem like a steal. But it's coming as a shock to many first-time homebuyers this spring.
Rates are going up because of the improving economy and the end of a government push to make mortgages cheaper.
"It's unlikely we are going to see interest rates below five percent moving ahead," said a mortgage banker. "The reason is that we are exposed to market movements now and the security blanket, which was the Federal Reserve, is no longer there."
And if you wanted to refinance at a super-low rate, you may have missed your chance. Mortgages under 4 percent are still available, but only for loans that reset in five or seven years, probably to higher rates.
"Although the federal program has ended, it's too early to say whether it will result in a rush among consumers to get home loans or refinance existing loans. Rates are still incredibly low. We've been spoiled by 4.5 percent and 4.75 percent rates and think 5.25 percent is a disaster, but really it's a great rate.
"(The lower) rates are going away. We already hit bottom and that was awhile ago," said one broker. "I think we have to keep things in perspective. Rates have been gradually rising since last summer."
For people putting their homes on the market this spring, rising rates may actually be a good thing. Buyers are racing to complete their purchases and lock in something decent before rates go even higher.
It's all about affordability. For every 1 percentage point rise in rates, 300,000 to 400,000 would-be buyers are priced out of the market in a given year, according to the National Association of Realtors.
The rule of thumb: Every 1 percentage point increase in mortgage rates reduces a buyer's purchasing power by about 10 percent.
For example, taking out a 30-year mortgage for $300,000 at a rate of 5 percent will cost you about $1,600 a month, not including taxes and insurance. But the same monthly payment at a rate of 6 percent will get you a loan of only $270,000.
If you are waiting for the right time to buy a home, then this just might be that time...
Money Crunch Hits High-Dollar Houses
Money Crunch Hits High-Dollar Houses
In Franklin's immaculately landscaped New Urbanism neighborhood, Westhaven, past a Greek-inspired fountain surrounded by blooming tulips, sits a looming brick edifice that once was a $1 million house.
The bank foreclosed on the couple that owned it, and new buyers put a contract on it for $699,900 — easily a 30 percent price drop.
Over in Magnolia Vale in Brentwood, a buyer last summer scooped up a Greek-columned, 7,000-square-foot home for $808,500. The previous owner had paid $1 million three years earlier.
Foreclosures generally are rare in the housing market above the $500,000 price point, but they do occur. And real estate agents say a faltering economy has led to more than ever in Middle Tennessee.
The reasons why luxury homes go back to lenders seem painfully similar to lower-priced properties: Homeowners, investors and homebuilders get overextended with debts, lose income and walk away from houses they can no longer afford. But there are some major differences with properties built for upper-income buyers. With only a few exceptions, most of the foreclosures advertised above $500,000 are brand-new homes that builders lost to the bank and that no one lived in. Developers convinced that a housing boom two years ago would never end built luxury homes for wealthy buyers who never materialized.
As real estate sales slumped, lenders began foreclosing on builders who could no longer pay their bills. The builders had relied on a steady flow of home sales to pay off their construction loans or buy land. But the good times didn't last.
The result has meant more bank-owned homes coming on the market in some of the newest, most-expensive neighborhoods in the Nashville area, many of those homes in Williamson County, the wealthiest county in the state.
Builders Ed and Rebecca Newsham built a house in Heathrow Hills in Brentwood in 2007 using a $1.4 million loan. It has a pool, cascading waterfalls and 2,100-bottle wine cellar, along with gorgeous hilltop views of the countryside. But after waiting for years for a sale at a price over of $2 million, the Newshams, who had a stellar reputation as builders, filed for bankruptcy protection.
Reliable data on foreclosures by price are hard to track. Many Realtors who list homes for sale don't put the word "foreclosure" on the multiple listing service information that real estate agents share. Some say marketing a luxury home as "foreclosed" would be a black mark against the property, and it would encourage low-ball offers from buyers.
"Whenever buyers smell blood, the offers come in a lot less,'' said Steve Fridrich, president and chief executive officer of Fridrich & Clark Realty. He specializes in high-end sales and is seeing more troubled properties in that market.
Fridrich said he handled no foreclosures or short sales two years ago. Today, he has six. Still, other well-heeled homeowners are managing to hang onto luxury homes even if their careers or annual incomes have taken a hit with the recession. People who own $500,000-and-up homes tend to have other assets or savings with which to make mortgage payments even when they lose money on investments or get axed from high-paying jobs.
Sometimes, though, homeowners just can't keep their homes no matter what. "More people at the higher end are losing their jobs, as well — the vice presidents, the CEOs.
Others may have borrowed too heavily to buy expensive homes in exclusive neighborhoods.
It can take three to five years before a borrower can get another mortgage after a foreclosure — two years or more after a short sale. A short sale is when the lender agrees to a sale for less than what's owed on the mortgage.
Such a nick on a person's credit report can make it harder to get a business loan or even another management job. More employers have started to check credit reports of job applicants before hiring someone.
Still, some people are deciding to walk away from their homes and stop paying mortgages as a business decision, even if they can afford the payments.
When they look at a return on their investment, and they are so 'upside down' in their mortgage, it would take them five or six years to get it back. They just think they're going to cut their losses.
Happenings in High-Dollar Homes
Nashville Home Sales Soar 22 Percent
Nashville Home Sales Soar 22 Percent Interest rates are at historic lows, the government is shoveling thousands of dollars in tax credits at people who buy homes, and the Nashville real estate market responded in March with a 22 percent increase in sales compared with a year ago. With a new sense of optimism, sellers are putting more homes up for sale here, buyers are signing more contracts, and homes are moving at a much brisker pace that's likely to last at least until summer.
Don't expect the same for prices. Despite optimism among Realtors that there'll be a last-minute rush for sales before federal tax credits expire on April 30, median prices probably will remain down by double-digit percentages from their peak three years ago.
Stagnant prices could last at least until the summer, and some real estate experts say it may be eight years before Nashville-area prices recover to the heady days of summer 2007 when median prices swelled to $196,000 in a nine-county area.
In March, the median price for a single-family home in the Nashville area was $159,250, about flat compared with a year earlier, the Greater Nashville Association of Realtors said Thursday.
"When we start to see job growth really pick up in earnest, we might see sustained price increases for homes,'' said David Stiff, chief economist at Fiserv, a national research firm that tracks more than 300 housing markets. He thinks it could be 2018 before prices here get back to mid-2007 levels.
Realtors say they're getting a lot busier in April as the final days in which first-time buyers can get an $8,000 federal tax credit play out.
The tax credit applies to housing sales contracts signed by April 30 and closed by the end of June. There also is a $6,500 tax credit for existing homeowners.
The sharp increase in sales during March represents the sixth consecutive month that more homes sold here year-over-year, the Realtors association data show.
Sales rose for 6 months
John Gimenez decided to put his tiny 950-square-foot home on the market this week, just as the tulips bloomed and before the tax credit runs out. Within an hour of listing it for the first time, Gimenez had already shown his East Nashville house to an interested shopper. He is asking for $174,900, or $15,000 more than he paid for it three years ago before making improvements such as a new roof, new deck and new heating and air conditioning."We're very optimistic,'' said Gimenez, who plans to buy a larger house because he is getting married and wants children. "It seems like people are getting a little more confident."
Lucy Smith, the president of the Realtors association, said she expects sales to increase at least through early summer because of the tax credits.
"What happens after that, we'll just have to wait and see,'' she said.
All Nashville-area counties saw sales gains in the first quarter except for Maury County, home to the now idle General Motors plant at Spring Hill. Williamson County saw sales climb nearly 20 percent in the quarter, and Davidson County sales went up about 10 percent.
Pending sales up 30%
More people signed contracts as well, with pending sales up nearly 30 percent to 2,231 in March, the Realtors association said.Inventory climbed slightly, with 300 more single-family homes on the market in March compared with the year before.
Karen Rogers was one of those who put a home on the market recently — a townhome on Whitland Avenue in West Nashville.
"We are hoping to get interest from people qualifying for that tax credit,'' she said.
Rogers is finishing a medical residency at Vanderbilt and plans to move with her husband to Virginia for a permanent job.
They had purchased their two-bedroom townhome for $215,000 three years ago and hope to sell for $224,900.
Christie Bradley, a Realtor with Fridrich & Clark, said she is definitely getting busier because of the soon-to-expire tax credits. She put one house on the market on Wednesday and had four showings by Thursday.
As part of a nationwide push from the National Realtors Association, she will have four open houses this weekend.
"I ran out of agents to help me with my open houses, so I have my husband helping me,'' she said. Bradley and her husband also are trying to sell their own house.
Some take financial loss
Kelsey Najpaver and her husband have a contract to sell their home in West Nashville for $217,500 — or $2,000 less than they paid for it three years earlier.And Najpaver feels lucky. Other houses in the neighborhood were taken off the market after sitting around for more than a year without a sale. The Najpavers are moving because of the husband's new job."It's obviously not ideal,'' she said. "But we felt very fortunate just to sell it."
Condominiums listed in the Realtors' multiple listing service were flat at 200 sales in March, about the same as a year earlier. The average condo sales price was $137,450 here last month, down 12 percent from a year ago.
But price declines for single-family homes and condos have not been as dramatic in Nashville as other markets that experienced big housing bubbles. For instance, the Jacksonville, Fla., housing market saw a 40 percent drop from peak prices, and Sacramento, Calif., had a 55 percent collapse.
Great information on Nashville Home Sales for March 2010
Monday, April 5, 2010
Thursday, April 1, 2010
How to Get the Extended Home Buyer Tax Credit
You’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit. Here's what you have to do to get your benefit:
- Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract in place by April 30, 2010 with a closing date no later than June 30, 2010.
- Decide whether to:
- apply the credit to your 2009 tax return, filed on or before April 15, 2010;
- file an amended 2009 return; or,
- apply the credit on your 2010 return, filed on or before April 15, 2011.
- Attach documentation of purchase to your return.
Documentation of Purchase
Details concerning the precise documents required to confirm your purchase have not yet been released. When this information becomes available, we will include instructions and links to the appropriate forms.
When to Apply the Credit
Buyers purchasing homes on or before December 31, 2009 may claim the credit on their 2009 tax returns.
Buyers purchasing in 2010 will have the option to:
- Claim the credit on their 2009 return, even if the purchase is completed after December 31, 2009;
- File an amended return for 2009 if their purchase is completed after April 15, 2010; or,
- Claim the credit on their 2010 tax returns.
If you, or your client, purchased a home between January 1, 2009 and November 6, 2009, please see: How to Get the 2009 First-Time Home Buyer Tax Credit.
Applying the Credit to Your 2009 Taxes
You will need to do three things to claim the credit on your 2009 tax return:
- Fill out Form 5405 to determine the amount of your available credit;
- Apply the credit when you file your 2009 tax return or file an amended return;
- Attach documentation of purchase to your return or amended return.
Applying the Home Buyer Tax Credit to Your 2009 Tax ReturnBridge Loans: Using the Home Buyer Tax Credit Up-Front
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Obama Unveils $14 Billion Plan To Help Troubled Homeowners - CNBC
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Show Entire ArticleObama Unveils $14 Billion Plan To Help Troubled HomeownersReuters | March 26, 2010 | 10:43 AM EDT
The Obama administration on Friday announced a $14 billion effort to try to stem a rising tide of home foreclosures by giving lenders incentives to erase some mortgage debt and slash mortgage payments for the unemployed.
The new aid programs, funded from the $50 billion allocated to housing rescue under the Treasury Department's Troubled Asset Relief Program, will also allow borrowers to erase mortgage debt down to a maximum of 115 percent of their home's value by refinancing through the Federal Housing Administration.
The plan comes as President Barack Obama is under increasing political pressure to change his strategy for helping struggling homeowners and stem the tide of rising foreclosures and is the second major housing initiative announced in as many months.
Delinquencies on U.S. mortgages rose to nearly 14 percent in late 2009, led by a sharp increase in seriously overdue home loans held by the most credit-worthy borrowers, U.S. banking regulators said earlier on Thursday.
The new measures are a shift from the efforts announced last year, which focused on reducing interest rates for struggling borrowers who got risky loans.
The latest efforts are targeting unemployed workers and homeowners in places where home values have plunged across the board and it is increasingly making more financial sense for homeowners to walk away from their mortgage.
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