Macro: How Bankrupt Financials Will Impact Connecticut, NJ [Housing Tracker]

Seeking Alpha's Housing Tracker is a collection of housing-related excerpts from various sources, grouped by topic. Feel free to post any interesting links on the subject in the comments section below.

Quote of the Day

"I'm more scared than I've been in my life about our economy and our banks. I'm thinking about moving my money to United Bank of the Mattress." – A 65-year-old U.S. retiree. (WSJ, Sept. 18)

Macro Effects Of The Housing Slump

Paulson's Rally: Turning Point for the Market? “Mohamed El-Erian, co-chief executive of the huge money-management firm Pimco, and formerly manager of Harvard's endowment fund, says the market may now go through two or three stages of stabilization. First it will rise as more and more investors buy shares to cover their short positions. "You'll see a volatile, technical bounce," he says. But for the rally to last beyond a few weeks, he says, "you have to limit the deterioration of the broader economy and you have to stabilize housing. Those factors will ultimately form a bottom so stocks can rally not only in a technical sense but fundamentally, too.” (Barron’s, Sept. 22)

B of A's Biggest Bet Ever: Big Risks, and Rewards. “B of A's boss Ken Lewis: A true bottom won't emerge until the nation's housing market starts to stabilize, something he expects to happen in H1’09. "Interest rates have decreased, and our mortgage-refinancing volumes have increased," Lewis notes… Lewis forecasts continued high levels of loan charge-offs for B of A and the need to keep building loan-loss reserves. The bank has set aside $17 billion in the past four quarters for credit losses and to boost reserves. Even if residential real-estate losses, and losses on securities tied to residential mortgages, decrease, losses in the bank's credit-card and commercial-loan portfolios are likely to grow if the broader economy softens.” (Barron’s, Sept. 22)

We'll All Feel Greenwich's Financial Pain In Our State Budget. Connecticut: “Despite having only about 60,000 people, Greenwich contributed nearly $600 million in state income taxes in 2006… nearly 13% of all state income tax… The Connecticut income tax relies on the stock market for about 25% of its revenue. A huge drop in capital gains — and subsequent state income taxes — by a relative handful of Greenwich billionaires and millionaires could have a huge effect on the budget already projected to have a $147 million deficit. When… multiplied across lower Fairfield County — to investment bankers, traders and hedge-fund magnates…. the potentially profound impact on the state budget becomes clear.” (Hartford Courant, Sept. 21)

Meltdown Ripples Across Hudson.  NJ: “Lehman Brothers’ bankruptcy and Merrill Lynch’s takeover, for Jersey City, could mean… a loss of about 2,000 jobs at just two [Jersey City] offices. The mayor instantly predicted that the damage to his city, tied more than any other in New Jersey to Wall Street, by virtue of proximity and PATH train, was not over… Some of the 1,700 Jersey City jobs at Lehman might be saved under a deal with Barclays to buy parts of Lehman’s operations; More jobs [might] be saved in the Merrill takeover, and 200 jobs at A.I.G… were saved by the federal bailout of that company.” (NY Times, Sept. 19) 

New York City Added Jobs In August. “New York City added 2,600 jobs in August even as the city's unemployment rate jumped to 5.9% from a July rate of 5.4%… Real estate lost 1,100 jobs in August. The recent Wall Street turmoil may not affect employment numbers until November or later.” (The Real Deal, Sept. 19) 

Homeless Children: The Collateral Damage In The Foreclosure Crisis. “Job losses, home foreclosures and the economy are contributing to a nationwide increase in homeless children, says Barbara Duffield, policy director for the National Association for the Education of Homeless Children and Youth in Washington D.C. For the 2007-2008 school year, many districts saw double-digit increases in homeless students… Examining how home foreclosures were impacting children, Duffield discovered that some districts had more homeless students in a month than they did the previous year… Newport Mesa [California] Unified School District administrators say almost every motel in the district has homeless children.” (OC Register, Sept. 15)

                                        

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Comments

[Lark Williams:]

The biggest loser will be NYC apartment prices. Already there are reports of apartments selling for less than their purchase price. This will only get worse. What propped up the $1,200/sq.ft cost was lots of high paying jobs and foreign investors, with liquidity and high-value currencies. All those are gone -- pay is down, jobs are out, world-wide recession. Watch out below. This will be another famous NYC 30%-40% contraction

2008 Sep 22 04:52 PM

[FSquare:]

Agreed - How to play it - some REITs with mucho exposure to NYC
SLG, VNO, BXP and BPO (Good luck finding a borrow....)

2008 Sep 22 06:43 PM

[User 265729:]

"Paulson's Rally: Turning Point in the Market?" Dated bread if you ask me... Everything he does and says has a shorter and shorter shelf-life. Now he's spending almost $1trillion for a 24-hour rally/fix. This guy is going to be selling the White House on Ebay to keep the economy going until November.

2008 Sep 22 08:14 PM

[helplessobs...:]

We, living out in the countryside , were astounded at GS paying an obscene $27 billion in bonuses to their employees in 2007, 61% of revenues. With financial services representing 6% of GDP we also think their pay, 21% of gross wages is not justified. It now looks like GS overpaid and is fighting for its life, maybe the employees could refund part of the 2007 bonus money instead of US taxpayers propping up the firm.

2008 Sep 22 08:34 PM

[SA Editor J...:]

Hi Helpless Observer,
Canadian financial blogger Larry MacDonald posted an interesting article on the same subject of refunding excessive bonuses: seekingalpha.com/artic...
Interesting idea. Maybe its the start of a grass roots movement.
What do you think of his idea?
Best,
Judy

2008 Sep 23 01:59 AM

[Fairness:]

Judy, the obscene executive compensation payments is a major part of the problem, as it was exposed by this financial crisis as outright fraud.
I lately became a huge fan of capping executive payouts. Generally speaking, no executive worth getting paid more then the US president. No one, no matter how clever or educated, should be allowed to rob their employees and shareholders as shamelessly as the executives do nowadays. The irony of it is, it's all done legally, under the regulators' watchful eye; highway robbery nevertheless. That needs to stop, in the name of fairness, and in order for the investor to regain confidence in our financial structure and business concept.
Congress needs to cap executive compensation by law at about the US president's salary level, and index them for inflation. At the very least, executive pay should be tied to a reasonable multiplier of the average and/or lowest paid company employee. If we don't want people to revolt against being robbed by the government too (read heavily taxed) in order to bail out these shameless executive thieves, and keep them doing more of the same, Congress needs to act now. Not until some sort of cap is implemented, we shall see abuses and excesses disappear.

2008 Sep 24 11:49 AM