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U.S. Housing Price Forecast: Double-Digit Percentage Decline Still Ahead

“Housing rebound still fragile; St. Louis sales down 16% from May ‘08”

-St. Louis Post-Dispatch, June 23, 2009

“Option ARMs reset threatens housing rebound”

-Seattle Times, June 27, 2009

“Housing rebound continues, barely”

CNN Money.com, July 1, 2009

From headlines like these, I apparently slept through the U.S. housing bottom. Then again, maybe not. From Reuters today:

U.S. housing prices will fall by a double-digit percentage from already beaten-down levels, resulting in an overall 40 percent plunge by the time foreclosures peak in the second half of 2010, Barclays Capital economist Michelle Meyer said.

Meyer issued her forecast two days after the Standard & Poor’s/Case-Shiller Home Price Indexes showed for April an 18.1 percent year-to-year decline, compared with 18.7 percent in March, in the rate of home price declines in 20 major U.S. metropolitan areas.

The indexes have tracked the prices of U.S. single-family homes since 1987.

“While the early signs of improvement are in place for housing, the market will likely remain out of balance for some time, given the flood of foreclosures,” Meyer wrote.

“Home prices are likely to continue to fall, albeit at a slowing pace, even after the economy technically emerges from the recession.” Home prices have fallen 32.6 percent from their peak three years ago, S&P/Case-Shiller said.

On that basis, they would need to fall another 11 percent for an overall 40 percent peak-to-trough decline. Further declines could imperil metropolitan areas that have yet to experience the worst of the nation’s housing slump.

According to S&P/Case-Shiller, New York was the only major market to have above-average, month-over-month housing price declines in both March and April and also have a below-average decline for the year ended in April.

Home prices in that market fell 12.5 percent from a year earlier. The Denver area had the smallest drop, 4.9 percent.

Bloomberg’s Oshrat Carmiel talked more about the Manhattan residential real estate market today. Carmiel wrote:

Manhattan apartment prices dropped for the first time since 2002 in the second quarter as the collapse of Lehman Brothers Holdings Inc. and Bear Stearns Cos. caught up to property owners in the nation’s most expensive urban market.

The median price fell 18.5 percent from a year earlier to $835,700, New York appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate said today. The number of sales plunged by half, the most since Miller Samuel began keeping data in 1989.

“The standstill that existed after Lehman Brothers has been broken, and it was the sellers that cried uncle,” Pamela Liebman, chief executive officer of New York-based property broker the Corcoran Group, said in an interview.

Values are falling broadly in Manhattan for the first time in the almost four-year U.S. housing recession, with declines now seen in co-operatives and condominiums of every size and price. Private-sector employment in the city dropped by 91,200 jobs, or 2.8 percent, in the 12 months through May as Wall Street losses and asset writedowns topped $1.4 trillion.

The price of studio apartments declined 16 percent from a year ago to a median of $405,000, according to Miller Samuel. One-bedrooms dropped 17 percent to $650,000 and two-bedrooms fell 23 percent to $1.27 million. Three-bedroom units fell 37 percent to $2.35 million and four-bedrooms plummeted 47 percent to a median of $3.92 million.

Wake me when the housing bottom arrives, please.

Sources:

“US Home Prices Seen Falling 40% Overall: Analyst”
Reuters, July 2, 2009

“Manhattan Apartment Prices Drop as Lehman Hits Home (Update1)”
Oshrat Carmiel
Bloomberg, July 2, 2009

Hotel Loan Defaults Double In Second Quarter

“Luxury hotel boom: denver and colorado’s mountain resorts build to suit upper-upper upscale occupants.”

-ColoradoBIZ, July 1, 2006

“The stage is set for Nashville hotel boom as indicators favor expansion”

-Nashville Business Journal, January 19, 2007

“In Las Vegas, Too Many Hotels Are Never Enough”

-New York Times, April 24, 2007

“NYC Hotel Boom Could Help Ease Room Shortage”

-CBS 2 (New York City), December 16, 2007

“Tulsa enjoys hotel boom”

-The Journal Record (Oklahoma City), January 2, 2008

From Bloomberg’s Nadja Brandt and Dan Levy today:

As many as one in five U.S. hotel loans may default through 2010 as the recession means companies are spending less on travel and perks, according to University of California economist Kenneth Rosen.

The value of hotel properties in default or foreclosure almost doubled to $17.3 billion in the second quarter through June 24 from $9 billion at the end of the first quarter, data compiled by Real Capital Analytics Inc. show. The New York-based research firm, which began tracking distressed commercial property in November, expects hotel defaults to increase by as much as $2 billion this quarter, said analyst Jessica Ruderman.

“Hotels without question will have the highest foreclosure rate of any commercial real estate sector,” said Rosen, who runs a real estate hedge fund with $310 million in assets and is chairman of the University of California’s Fisher Center for Real Estate and Urban Economics in Berkeley.

Hotel owners are defaulting as room rates and property values tumble and the securitized mortgage market that fueled an 88 percent gain in U.S. commercial prices from 2001 to late 2008 is dormant.

Luxury hotel revenue fell 28 percent in April from a year earlier and has dropped for 12 straight months, according to Smith Travel Research Inc. in Hendersonville, Tennessee. The 29 percent decline in March was the biggest since October 2001.

A third of the $8.6 billion in securities backed by hotel loans due in 2010 are at risk of defaulting, data compiled by credit-rating firm Realpoint LLC in Horsham, Pennsylvania, show.

Guerrilla marketing?

Source:

“Hotel Loan Defaults Double as Recession Cuts Travel (Update2)”
Nadja Brandt, Dan Levy
Bloomberg, July 1, 2009

Weird Housing Tales, Part 20

When foreclosures are involved, weird stuff happens.  From the Chicago Tribune’s Mary Umberger this past weekend:

A Minneapolis man who city officials say had ample warning that municipal employees were coming to board up his foreclosed, ramshackle house because it represented a safety hazard learned recently that apparently he should move more quickly.

Ted Poetsch, who uses a walker to get around, told the Minneapolis Star Tribune that he was eating lunch when the crew arrived, and he began gathering some possessions— and then the truck drove away, having boarded up the home with Poetsch inside. Unable to leave, he phoned his lawyer, who eventually got police and a representative of the board-up company to return to help him get out.

Why do I have a feeling there’s more to the story than this?  Did Poetsch purposely get himself boarded-up in order to play the sympathy card to save his home? Or perhaps some malicious city official wanted Poetsch boarded-up in his home (likely scenario here in the Windy City). Or maybe the board-up company employees were just plain careless all along.

I smell a lawsuit…

Source:

“The word from Washigton: Market near bottom- maybe”
Mary Umberger
Chicago Tribune, June 28, 2009

Top Ten States With Highest Foreclosure Rates

Nothing funny with this “Top Ten” list…

States with the ten highest foreclosure rates in May 2009:

10. Ohio- 1 in every 446 households
9. Idaho- 1 in every 437 households
8. Colorado- 1 in every 436 households
7. Georgia- 1 in every 377 households
6. Michigan- 1 in every 326 households
5. Utah- 1 in every 316 households
4. Arizona- 1 in every 158 households
3. Florida- 1 in every 148 households
2. California- 1 in every 144 households

and numero uno,

1. Nevada- 1 in every 64 households

Tent City, Reno, Nevada

Source:

“Highest State Foreclosure Rates”
Slideshow
CNBC, June 11, 2009

Get a 7-Day FREE trial with RealtyTrac! Find a foreclosed property now!

Forecast: New York City Housing Prices To Plummet

If you live in the Big Apple, you might have heard about the latest Deutsche Bank forecast on housing prices for your area. And you’re probably hoping they’re wrong. Very wrong. From the Wall Street Journal website this past Tuesday:

How much further could home prices tumble in the New York City metro area? Deutsche Bank predicts a decline of 40.6% from the first quarter of 2009.

That’s a slight improvement over the 47.4% decline that the bank’s analysts had forecast in March, and it reflects in part the fact that prices have dropped since then. Still, prices would have to drop another 32% from the first quarter of 2009 to return the New York market to levels of affordability not seen since 1998.

Affordability measures whether a household at the median family income could purchase a home given median prices and at prevailing interest rates. (Deutsche Bank assumes a 5% mortgage rate, which means that prices could have to fall further if interest rates don’t return to the 5% level that they reached earlier this year.)

Already, affordability in some 74 of the top 100 U.S. housing markets have already returned to their historic highs.

Median prices in the first quarter of 2009 dropped to $446,000 in New York, down 19% from the peak of $552,000 set in the second quarter of 2007. Deutsche Bank forecasts a total peak-to-trough decline of 52.1%.

Some of the top California housing markets are now undervalued based strictly on affordability. But rising job loss and price-cutting foreclosure sales could lead to another 11% price decline in Los Angeles and a 14% decline for Riverside, Calif. San Diego appears closest to the bottom, with just another 8.7% decline before reaching bottom.

Bloomberg’s Brian Louis also picked up on the Deutsche Bank forecast, and added:

U.S. home prices may fall another 14 percent, led by the New York and Orange County, California, metropolitan areas, before reaching a bottom as an increase in unemployment offsets lower prices, Deutsche Bank AG said.

“Affordability is no longer the driving issue in the housing market, and we believe prices still have a ways to fall in many areas before home prices reach their trough,” Deutsche Bank analysts led by Karen Weaver, wrote in a report yesterday. “The bottom is getting closer, but we are not there yet.”

Home prices are forecast to fall 41.7 percent from their peak, Weaver said. That’s higher than a forecast she released in March and reflects “the actual declines to date and the expected future impact on home prices from rising foreclosure inventory and unemployment.”

Suzanne!!!

“Suzanne Researched This”
YouTube Video Link

Sources:

“Deutsche Bank Predicts 40% Drop in New York Home Prices”
Wall Street Journal, June 16, 2009

“U.S. Home Prices to Fall 14% More, Deutsche Says (Update1)”
Brian Louis
Bloomberg, June 16, 2009

Top Buffett Aide Disputes Green Shoots In Housing, Economy

Contrary to what is being uttered in Washington and on Wall Street these days, a top aide of legendary investor Warren Buffett told an audience gathered at a New York City investment conference yesterday that Buffett’s gang doesn’t see any signs of a near-term recovery in the U.S. housing market and economy. Bloomberg’s Michael McKee wrote Thursday:

The U.S. housing market is nowhere near recovery and signs of stabilization are premature, said David Sokol, a top aide to billionaire investor Warren Buffett who oversees the nation’s second-largest real estate brokerage.

Sokol was among money managers who told an investment conference in New York the economy is still deteriorating and they don’t have a lot of confidence in President Barack Obama’s economic policies.

“We’re not seeing the green shoots,” said Sokol, head of MidAmerican Energy Holdings Co., which owns HomeServices of America Inc. “We don’t see improvement.”

MidAmerican is owned by Buffett’s Berkshire Hathaway, and Sokol is considered a possible successor to Buffett as head of Berkshire. Sokol spoke before reports today showed new-home sales posted their second increase in three months during April, and mortgage delinquencies and foreclosures rose to records in the first quarter.

Homes in the process of foreclosure are creating a “shadow backlog” of unsold properties that will continue to hang over the market, Sokol, 52, said in a speech yesterday at the Ira W. Sohn Investment Research Conference in New York. While official statistics show a 10- to 12-month supply of unsold homes, “we believe the backlog of homes for sale is twice that.”

Many people who want or need to sell their homes haven’t put them on the market yet because the outlook for sales has been poor, he said. “It will be mid-2011 before we see the market in balance,” with no more than a six-month backlog, he said.

The National Association of Realtors reported yesterday that the number of previously owned houses on the market in April climbed 8.8 percent to 3.97 million, a 10.2 months’ supply.

Sokol suggested government efforts to ease the crisis are actually drawing out the recovery. “We really need to let the economics work through the system,” he said.

It is still difficult and costly for businesses to borrow, Sokol said, creating “headwinds” for recovery. He predicted the U.S. unemployment rate would rise above 10 percent from April’s 8.9 percent.

Green shoots?

Source:

“Buffett Aide Sokol Says Housing, Economy Aren’t Near Recovery”
Michael McKee
Bloomberg, May 29, 2009

First Quarter Median Home Prices Slide Year-Over-Year

“Housing rebound seen by end of 2007”

-MSNBC website, December 21, 2006

“Will Home Prices Hit Bottom by June?”

-Wall Street Journal, December 21, 2007

“Will Home Prices Hit Bottom in 2008? Yes, but . . .”

-Kiplinger, January 2008

“Bottom appears to be near for housing prices”

-St. Petersburg Times, March 7, 2008

“Bottom’s Up: This Real-Estate Rout May Be Short-Lived”

-Barron’s, July 14, 2008

The carnage continues. From Reuters this morning:

The National Association of realtors said Tuesday that home prices dropped in 134 out of 152 metro areas on a year-over-year basis during the first quarter of this year.

The national median price for an existing single-family home was $169,000, some 13.8% below the price in the first quarter of 2008. The median is the half-way point, with half the prices above and half below this level.

The realtors’ lobby group said foreclosures and short sales were keeping prices down.

“Many buyers sought deeply discounted distressed sales — foreclosures and short sales — which accounted for nearly half of transactions in the first quarter and weighed down median prices in most markets,” the realtors said.

Source:

“Median Home Prices Slide From Year Ago”
Reuters, May 12, 2009

U.S. Housing Market On The Way To Recovery?

Is it possible that the gravely-ill housing market in the United States is actually starting to recover? Bloomberg’s Kathleen M. Howley wrote this afternoon:

U.S. home prices rose 0.7 percent in February from January, the first consecutive monthly gain in two years, a sign that low interest rates may be moderating declines in real estate values…

Mortgage rates have tumbled 1.6 percentage points in six months, making houses and condominiums more affordable. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan increased 5.3 percent last week as Americans took advantage of interest rates near record lows. Home sales rose 5.1 percent in February from a month earlier, the National Association of Realtors said March 23…

The inventory of properties on the market fell to a 9.7 month supply in February at the current sales pace, down from April’s high of 11.3 months, and sales rose 5.1 percent from a month earlier, the Realtors group said.

The number of Americans signing contracts to buy previously owned homes rose 2.1 percent in February, led by a 14.5 percent jump in the Midwest and a 10.6 percent increase in the Northeast, the National Association of Realtors said in an April 1 report.

Despite all this recent good news, the patient might not be out of danger just yet. Howley added:

U.S. banks owned $11.5 billion of foreclosed homes in the fourth quarter, up from $6.7 billion a year earlier, according to the Federal Deposit Insurance Corp. in Washington. California and Florida metropolitan areas led the U.S. in foreclosures in the first quarter as unemployment and falling property values deepened the housing recession, according to RealtyTrac Inc., based in Irvine, California.

“Whatever damage has been done in California is only going to get worse because there is a glut of homes owned by lenders that aren’t yet on the market,” said Bruce Norris, a principal with the Norris Group, a Riverside, California-based real estate investment firm. “These homes are like a shadow inventory that is likely to drag down prices further when they come onto the market.”

Freddie Mac, along with larger rival, Washington-based Fannie Mae and banks including New York-based Citigroup Inc., have slowed or delayed foreclosures using various moratorium plans in the hopes that homeowners in default will be able to modify their loans.

And now, foreclosures are starting to accelerate. The New York Times’ David Leonhardt wrote Tuesday:

Fannie Mae, like many banks, is inundated with foreclosed properties. In recent weeks, banks have begun accelerating foreclosures again, after having held off while waiting to find out which homeowners would be eligible for the Obama administration’s assistance program.

Which could mean more falling prices ahead. Leonhardt added:

The glut of foreclosed homes creates a self-reinforcing cycle. Falling prices lead to more foreclosures. Foreclosures lead to an excess supply of homes for sale. The excess supply then leads to further price declines. Jan Hatzius, the chief economist at Goldman Sachs, says that the “massive amount of excess supply” means that home prices nationwide will probably fall an additional 15 percent.

This estimate hides a lot of variation, too. In Miami, Goldman forecasts, prices could drop an additional 33 percent, which is pretty amazing since they’ve already fallen 50 percent from their 2006 peak.

Nor is excess supply the only reason prices still have a way to fall. Nationwide, homes may not be overvalued by much. But in some cities, including New York, San Francisco, Los Angeles, Boston, Chicago and Miami, they remain very expensive. So while Mr. Hatzius and his Goldman colleagues are somewhat more pessimistic than most forecasters, the difference isn’t enormous.

Not only are foreclosures ramping up, but it appears they’re spilling out beyond the primary metropolitan areas into the secondary markets now as well. From the American Banker website today:

Foreclosure rates continued to climb in the first quarter in many parts of the country, casting doubt on the effectiveness of the Obama administration’s foreclosure prevention plan, a private foreclosure listing company said Wednesday.

“Industry efforts to date really haven’t put a dent yet in the wave of foreclosures,” said Rick Sharga, a senior vice president at RealtyTrac, an online foreclosure listing service that releases quarterly reports on foreclosure activity. “Despite the press reports we’ve had about the many hundreds of thousands of loans that have been modified or worked out or rearranged, the numbers have just kept going up.”

Sharga said that new municipalities had appeared on the map during the most recent period as areas with rising foreclosure rates, including Boise, Id., Fayetteville, Ark. and Charlotte.

“It appears we’re starting to see the problem spread beyond the primary metropolitan areas into the secondary markets,” he said, adding that while foreclosures in Detroit, Mich., were down, rates in Ann Arbor, Lansing and Grand Rapids had risen.

RealtyTrac is your destination for housing foreclosures.

Going back to the Times piece, David Leonhardt ended his article on a personal note and brushed aside any notions that the housing bust may be near a bottom. He concluded:

I’ll confess that this bearish picture isn’t exactly what I had hoped to find. A year ago, as part of a move from New York to Washington, my wife and I bought our first house. We did so fully expecting prices to continue falling (though perhaps not as much as they ultimately will, given the severity of the financial crisis). But we decided they had fallen enough for us to take the plunge. We preferred buying before the bottom of the market instead of renting and having to move again in a year or two.

Still, when I wrote about that decision last spring, I argued that anyone who didn’t have to move probably should not buy yet. Prices still had a way to fall.

They don’t have as far to fall today, but the great real estate crash is not over, either. So if you are part of the 30 percent of American households who rent and you’re trying to decide when to buy, relax.

The market is still coming your way.

Sources:

“Home Prices Gain 0.7% in February From January (Update1)”
Kathleen M. Howley
Bloomberg, April 22, 2009

“For Housing Crisis, the End Probably Isn’t Near”
David Leonhardt
New York Times, April 21, 2009

“RealtyTrac Sees Problems with Obama Mod Plan”
American Banker, April 22, 2009

Weird Housing Tales, Part 19

As usual, leave it to Chicago Tribune real estate columnist Mary Umberger to come up with some disturbing housing-related stories. Although, I’m somewhat concerned about her as she started this weekend’s column with:

It’s spring, and I’m sick of real estate/economic gloom.

Buckle up, Mary, as I have a feeling you ain’t seen nothing yet. From her piece yesterday:

A three-hour tour

You’ve heard, probably, of real estate agents who fill up “foreclosure buses” to schlep around would-be buyers to check out bank-owned properties that are on the market.

Now we have the foreclosure boat: Real estate agent Marc Joseph takes bargain-hunters on three-hour pontoon-boat tours of waterfront properties in Cape Coral and Ft. Myers, Fla. In February, the towns collectively had the second-highest foreclosure rate in the nation.

Odd job request

Here’s one sure-fire way to get those home sales moving again: A district government within the eastern Chinese city of Weifang has ordered all of its employees to buy or sell an apartment by June 30—or have their pay docked.

Reuters reported that the edict has workers so distracted that they’re unable to focus on doing their jobs.

Source:

“Some jump the gun on homes’ rehab potential”
Mary Umberger
Chicago Tribune, April 20, 2009

Fed Economists Question Mortgage Modifications

Last week, I pointed out a Washington Post piece discussing a recently-released U.S. government report which showed that even after having their mortgages modified, distressed borrowers were still defaulting in high numbers.

Friday afternoon, Bloomberg’s Scott Lanman talked about a paper by Federal Reserve economists and researchers that also increased doubts about the effectiveness of these modifications. Lanman wrote:

Policies aimed at easing home-loan terms for troubled borrowers may not be as effective in preventing foreclosures as more-direct aid to homeowners, Federal Reserve economists found.

Job losses and falling home prices have a bigger impact on delinquencies than mortgage terms, and modifications aren’t necessarily a better deal for investors than foreclosures, according to a paper by two current and one former economist at the Boston Fed Bank and one Atlanta Fed researcher.

The conclusion poses a challenge to housing advocates and to some extent the prevailing views of President Barack Obama’s administration, Fed officials and other U.S. regulators. Obama announced a $75 billion plan in February that concentrates on refinancing or modifying loans for as many as 9 million homeowners.

“One of the most influential strands of thought contends that the crisis can be attenuated by changing the terms of ‘unaffordable’ mortgages,” the economists said in the paper posted on the Boston Fed’s Web site today. Yet policies aimed at reducing a borrower’s debt-to-income ratio “face important hurdles in addressing the housing crisis,” the authors said.

Instead, the government should consider alternatives such as loans to homeowners to bridge the loss of income for one or two years caused by unemployment, or helping borrowers become renters, the economists said.

You can read the paper on the Boston Fed’s web site here.

Source:

“Fed Economists Say Mortgage Changes May Not Stem Foreclosures”
Scott Lanman
Bloomberg, April 13, 2009

Despite Modified Mortgages, High Default Rates Continue

Back on February 18, 2009, U.S. President Barack Obama said the following in a speech given at a Mesa, Arizona, high school:

Sub-prime loans — loans with high rates and complex terms that often conceal their costs — make up only 12 percent of all mortgages, but account for roughly half of all foreclosures.

Right now, when families with these mortgages seek to modify a loan to avoid this fate, they often find themselves navigating a maze of rules and regulations but rarely finding answers. Some sub-prime lenders are willing to renegotiate; many aren’t. Your ability to restructure your loan depends on where you live, the company that owns or manages your loan, or even the agent who happens to answer the phone on the day you call.

My plan establishes clear guidelines for the entire mortgage industry that will encourage lenders to modify mortgages on primary residences. Any institution that wishes to receive financial assistance from the government, and to modify home mortgages, will have to do so according to these guidelines — which will be in place two weeks from today.

For some time now I’d heard a good deal of rumbling about how such loan modifications probably won’t help a number of troubled “homeowners.” However, last week the Washington Post provided evidence in the form of a newly-released U.S. government report showing that even after having their mortgages modified, distressed borrowers were still defaulting in high numbers. Renae Merle wrote on April 3:

Troubled borrowers continue to default at high rates even on home loans that have been modified by lenders, according to a government report issued today. The report also found that an increasing number of borrowers default on their loans before making a single payment.

The report by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, which regulate mortgage lenders, focuses on the effectiveness of industry efforts to help troubled borrowers. It finds that a growing number of homeowners are falling behind on their payments and that borrowers with prime mortgages, which traditionally are considered less risky, are a growing part of the problem.

“It’s higher than we have ever seen it, historically, and the fact that it is still climbing is something we are keeping an eye on,” said John C. Dugan, comptroller of the currency. The report covers two-thirds of the mortgage market.

Merle talked about the success of the loan modifications. From the piece:

It also finds that despite increasing government and industry efforts, many borrowers are quickly falling behind on their payments after receiving a modified loan, which can include lowering their interest rate or extending the length of their loans. Of the borrowers who had loans modified early last year, for example, about 35 percent had missed at least three payments nine months after their loan was modified.

About 57 percent had missed at least one payment. Most borrowers, about 58 percent, received loan modifications that did not lower their monthly payments. The more a borrower’s payment is lowered, the more likely he or she is to stay current on a loan, the report found.

The report also found that an increasing number of homeowners, about 1.44 percent during the fourth quarter of 2008, are falling behind before making a single payment on their mortgages. That is up from 1.23 percent in the first quarter.

“…about 1.44 percent during the fourth quarter of 2008, are falling behind before making a single payment on their mortgages.”

Wow. Did you ever think that some people just aren’t meant to be homeowners?

Source:

“Home Loan Defaults High Despite Modifications”
Renae Mearle
Washington Post, April 3, 2009

TARP May Cost $167 Billion More Than Estimated

Despite being widely hated, ridiculed and otherwise smacked down by the public, the $700 billion dollar TARP program may turn out to be the best investment the taxpayer made all year…

We are still in the early innings of the TARP game, but the very early score indicates that the much-maligned $700 billion dollar rescue program may actually give a little back for the use of your money and, at the minimum, we get to hear a bit of all-too-rare good news.

-Brian Sullivan, FOX Business, December 17, 2008

Reuters’ Lisa Richwine checked on the score last Friday and discovered:

U.S. congressional budget analysts have raised their estimate of the net cost to taxpayers for the government’s financial rescue program to $356 billion, an increase of $167 billion from earlier estimates.

The Congressional Budget Office had originally projected the $700 billion Troubled Asset Relief Program would cost taxpayers $189 billion.

The additional cost, which applies to TARP spending for fiscal years 2009 and 2010, was included in the CBO’s March projection of a $1.8 trillion deficit for fiscal 2009, which ends September 30.

The TARP cost projection was raised due to changes in financial market conditions, new transactions and a shift in expected timing of payments, the CBO said.

The Treasury Department announced plans to use some of the money to help avoid home foreclosures and made new deals with Bank of America and American International Group. Those programs involved higher subsidy rates than previously estimated, the report said.

Think there might be a chance of invoking the slaughter rule?

Sources:

“Gasp! Horror! The Government is MAKING Money on the TARP?”
Brian Sullivan
FOX Business (New Ideas Blog), December 17, 2008

“Estimated U.S. taxpayer cost for bailout jumps”
Lisa Richwine
Reuters, April 3, 2009

Bailout Protestors March Near Wall Street

To sin by silence when they should protest makes cowards of men.

-Abraham Lincoln (16th U.S. President. 1809-1865)

From Reuters’ Christine Kearney last Friday:

Several hundred demonstrators protested near Wall Street on Friday against the handling of the U.S. economic crisis, government bailouts of private banks and corporations and bonuses paid out at insurer AIG.

Members of worker rights, healthcare and anti-war groups gathered in the rain holding posters that read “Bail Out the Unemployed” and “No More $ For Wall St & War.”

They also shouted demands for more jobs.

“This crisis is growing more dire everyday with so many people being kicked out of their home and jobs,” said Dustin Langley, a spokesman for the ‘Bail Out The People Movement’, the main protest organizer that called for a moratorium on U.S. home foreclosures and the creation of a national jobs program.

Hundreds of protesters lined up on Broadway to march past the headquarters of American International Group and close to the New York Stock Exchange and financial giants Bank of America, Chase and American Express, but were not permitted on Wall Street.

Michael Feinberg, 51, a rabbi who runs a nonprofit workers rights group, held a sign that read ‘Regulate The Profiteers,’ and argued that corporations who helped plunge the economy into recession should not have received bailout money.

“That money should have been used to put people to work, to create jobs and healthcare, not to reward greedy financial speculators,” he said. “This has to be a wake-up call that we have to change our national priorities about the way we do business in this country.”

Friday’s protest follows hundreds of others held around the United States since the bailout of investment banks began last year…

And in other news, Wall Street executives took to the road today to protest against blame being directed at them for the U.S. financial crisis…

Source:

“Activists protest bailouts near Wall Street”
Christine Kearney
Reuters, April 3, 2009

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Friday Freebie: The “A-Letter”

I love free stuff. And I bet a lot of you do as well. Which is why I’m starting a new series called “Friday Freebie,” where every so often I’ll introduce you to some free, yet possibly useful, finds of mine related to topics covered in this blog, starting with this post.

One of my favorite free newsletters that I like to read on a regular basis is the “A-Letter” that’s published by The Sovereign Society. The “A-Letter” is their “free offshore financial e-newsletter containing late breaking news, commentary and ground breaking advice about everything effecting the ‘offshore world’ delivered straight to your email inbox, six times per week.” Anyway, I thought the April 1 edition of the “A-Letter” was a real keeper— and thought-provoking. Here’s an excerpt from that issue:

2009 seems to be working out to be the “year of the fool” judging from headlines like…

 The Social Security Surplus is already gone…fini…no more. “Expected” to last through 2017, thanks to rosy estimates from the bean-counters in Washington, the surplus was annihilated in last year’s stock market crash…meaning the U.S. government will likely need to raise hundreds of billions more in Treasury sales in the coming years…aside from the trillions already scheduled, of course.

 Apparently dissatisfied with only causing the biggest bankruptcy in recorded history, a former Lehman Exec decided to gamble with 44 million American pensions. Former Lehman Managing Director Charles Millard – acting as head of the Pension Benefit Guarantee Corp. (PBGC, the federal government’s safety net for pensions) – boldly moved a substantial portion of the PBGC’s funds out of “boring” bonds and into promising stocks…all in hopes of avoiding a future government bailout. Unfortunately, he started this plan mid last-year, and his picks were already down by 23% at the end of September ‘08. Oh yeah, and he was almost a trillion in deficit when he started.

 Obama says Detroit Bankruptcy Restructuring is “inevitable,” after the latest round of media back-and-forth that pushed Waggoner out the door with a US$20 Million+ retirement package. I can’t tell you how glad I am that we gave these yahoos US$17 Billion last year just to stall the bankruptcy process for a few months. What a great investment that was.

 And on a similar note (wink wink) “The administration of President Obama is suffering very, very strong pressure from sectors affected by the U.S. economic recession,” (ed.: *cough* UAW *cough*) “and that is preventing it from acting correctly,” said Mexican President Felipe Calderon in a recent interview. A look at the list of Obama’s biggest campaign contributors suggests that Felipe was right on. Change? Well, I suppose changing from a neo-conservative puppet of an oil-man to a “bought and & paid for” cog in the Chicago machine does count as “change.”

 And just when you thought hypocrisy couldn’t possibly raise itself to new heights in Washington, President Obama nominated yet another tax dodger to his cabinet in Kathleen Sebelius, his nominee to Health and & Human Services. She owes US$7,000 in total due to some “unintentional mistakes.” Funny thing is, when I make an “unintentional mistake” on my returns, I tend to get whacked with fees, calls and threats from the IRS. Good thing she’s a member of the “Washington Club.”

 Housing Prices are Falling Faster than any other time on record, at least according to Case Shiller’s highly reliable statistics. The 20-city average decline hit 19% in January, muffling any speculation of a bottom forming in the housing market.

 Banks are Refusing to Take Ownership of Properties at the End of the Foreclosure Process in cities all across America, because the cost of the process is higher than the rapidly-declining value of the underlying real estate. But homeowners aren’t off the hook…they’re still obligated to take care of their mortgage and handle any maintenance and repairs that occur in the months after they vacate due to foreclosure.

 Commercial Real Estate Lenders are hesitating to push borrowers into bankruptcy for reasons ranging from misguided optimism to the harsh reality of having to write those debts off. As evidenced by companies like General Growth Properties and Centro, CRE borrowers are staving off bankruptcy for much longer than they would in any other situation. Apparently wishful thinking still qualifies as a business plan in some circles.

 And now the OECD is pleading the EU to begin Quantitative Easing, aka “printing money and throwing it at the problem.” Germany’s so far been vehemently against the idea, for reasons including the problems Eric highlighted with QE in the EU.

So…Which One was the Joke?

Could you figure it out? Which one of the above was a joke?

Well…you’re right. None of them were; they’re all real. I suppose that’s the joke…albeit a very morbid and existentialist joke. But hey, I work with what I’ve got.

And what’s worse; following this crisis as it unfolds on a daily basis, watching every blip of news and trying to decipher what it means for you and I – I’m starting to feel like the joke’s on us.

Us the taxpayers…us the voters. Even us the dollar holders, because the “inflation tax” that will surely follow Washington’s blundering bailouts will bushwhack the value of everyone’s dollars…no matter whether you’re American, Mexican, pink, purple, green or some lily-livered presidentially-appointed tax-cheat.

Hey, who said there was no such thing as a free lunch?

Source:

“In 2009, Every Day is April Fool’s Day!”
“A-Letter” Newsletter
Matt Collins
Sovereign Society, April 1, 2009