Good grief, I don’t mean to come across as so gloomy. I don’t even know how to play dominoes.
Tags: Bear Stearns
Good grief, I don’t mean to come across as so gloomy. I don’t even know how to play dominoes.
Tags: Bear Stearns
I can’t imagine what it would be like to lose everything you spent your career building up in one day. That’s what many of the employees at Bear Stearns are dealing with, and I am sure many of them had nothing to do with the downfall of the firm. A good friend of mine left the firm last year and is feeling like he made the right decision.
Can you imagine the litigation onslaught on its way? Employees could chuckle about something today.
According to Reuters this photo was found on the front door of Bear Stearns today:
Here’s some more gallows humor from WallStreetJackass referring to the page one WSJ article last fall on the bridge playing, pot smoking Bear Sterns CEO with a mocked up Bloomberg Terminal screen. Consistent with the reasoning why the economy is failing.
I have been out of the Carnival of Real Estate for quite a while and forgot how interesting it was to get posts from bloggers I wasn’t familiar with, as well as some great posts from long time friends.
I started getting post submissions on Monday and by today I had a lot of reading to do. Although the carnival hosts are expected to post only their favorites, how can I do that? I decided to provide a top ten list and then everyone else. I excluded a few get rich quick posts and those who seemed to be more interested in selling something or extra posts from those who submitted more than one. If I missed any legitimate posts, my sincere apologies.
Matrix Top 10 List
Here are other posts of note submitted in no particular order but are all a good read:
Its now 11pm EST on Sunday. Gotta get some sleep for a busy week ahead. an anticipated FOMC rate drop, plus more shoes to drop (are there any left?), making my March Madness picks and most importantly, someone has to paint that green line on the parade route tomorrow in Manhattan.
UPDATE: In my $2 per share Bear Stearns stupor and flood of emails, I inadvertantly left a great post off the list:
The use of national housing statistics has been a key source of confusion for consumers, real estate brokers, lenders, media, financial markets and government agencies among others. The statistics are often applied to local markets and properties. The reliance on these numbers for ground level use has a pet peeve of mine for many years.
When Radar Logic rolled out its first RPX Monthly Housing Report on October 2, 2007, we made sure that the focus was geographical housing patterns.
The report effort was based on the premise that there is no national housing market; rather, each of the MSAs, while having some economic influences in common like mortgage rates, is influenced primarily by local conditions.
I was encouraged by the release of the latest batch of market reports this week that have begun to make this point more clear in their press releases. When the market was rising, press release jargon tended to be much more focused on national numbers. I suspect we will see a shift in orientation since this is really a false premise.
Office Of Housing Enterprise Oversight [OFHEO] – November 29, 2007
The figures were released today by OFHEO Director James B. Lockhart, as part of the quarterly report analyzing housing price appreciation trends.
“While select markets still maintain robust rates of appreciation, our newest data show price weakening in a very significant portion of the country,” said Lockhart. “Indeed, in the third quarter, more than 20 states experienced price declines and, in some cases, those declines are substantial.“
National Association of Realtors – November 28, 2007
NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., emphasized that all real estate is local. “Keep in mind that home prices are up in 93 out of 150 metro areas, and there is a lot of confusion in the market from reports about national data. Broadly speaking, home prices in most areas are up modestly or fairly stable,” he said. “Areas with population or job growth are seeing the strongest home price gains.”
National Association of Home Builders [NAHB] – November 27, 2007
Their comments on the release of the S&P/Case-Shiller numbers this month…
“We need to put these numbers in proper historical context by analyzing them over the long term, rather than in one-year increments,” said Brian Catalde, president of the National Association of Home Builders (NAHB) and a home builder from El Segundo, Calif. “The statistics released today also reaffirm that all housing markets are local, and conditions in them are dictated by the local economy and job market.“
UPDATE: Economist Humor: A friend of mine, who happens to be a well respected economist, mentioned to me last week:
…there are 3 kinds of economists: the kind that can count and the kind that can’t.
Radar Logic has spent the last several years working for the market launch set for this Monday, September 17, 2007.
Its been a significant effort that has resulted in the development of the Residential Property Indexâ„¢, code-named RPXâ„¢. I became involved in this venture to provide commentary and research products to leverage the proprietary technology. The real estate market information covers 25 MSA’s plus a national composite. Its exciting stuff.
Here are a few snippets from the press release:
New York, NY – September 12, 2007 – Radar Logic Incorporated (www.radarlogic.com) announced that derivatives trading in the Residential Property Index (RPX) market will begin September 17, 2007. Trading will be based on the RPX Prices, single values representing price per square foot based on actual transactions in residential real estate in 25 U.S. Metropolitan Statistical Areas as well as a 25-city composite.
Dealers licensed to offer products in the RPX market include Morgan Stanley & Co. Incorporated; Lehman Brothers Inc.; Merrill Lynch, Pierce, Fenner & Smith Incorporated; Deutsche Bank Securities Inc.; Goldman Sachs & Co.; and Bear Stearns & Co.
Michael Feder, CEO and President of Radar Logic Incorporated said, “The launch of the RPX market provides both investors and participants in the real estate industry with sophisticated tools that have not been available to them before. The granular applications of the RPX-based derivatives should allow substantial utility for all interested participants. We are excited by the reaction that professionals have had thus far.”
More announcements to follow!
Real estate market watchers last week were thrashed by conflicting jobs reports. ADP released a payroll report on Wednesday as people were back from an extended 4th of July weekend. The survey showed a whopping net gain of 368,000 jobs, the largest increase in five years.
The implications with this report that were created are that the economy was moving along at a brisk pace and the Fed would likely raise rates at their next meeting in August and beyond. A gloomy scenario for the housing market as mortgage rates would follow suit, further choking off demand.
But alas, the government reported two days later that employers actually only added 121,000 in June [pdf], less than one third the amount touted in the ADP release two days before, painting a much weaker picture.
The irony here is that a number of economists revised their projections upward on Wednesday in response to ADP so when the government stats were released two days later, they were now below analysts forecasts giving the impression the economy was in worse shape than pessimists thought it was.
However, government data also shows that hourly wages are rising at their fastest pace [NYT] in five years, indicating that the labor market is still relatively tight and making the scenario of the Fed taking a break on their 18th consecutive rate increase next month less likely than many people would hope far.
Aside from mortgage rates, jobs data is the bellwether of housing related data because without jobs, no matter how low rates are, people don’t buy homes. There is not a uniform agreement on what condition the economy is currently in but everyone seems to agree that housing has already cooled.
The Fed could thus leave interest rates at 5.25 percent at its next meeting in August, rather than raise them by another quarter of a percentage point. “I think the Fed’s going to pause,” said Scott Anderson, senior economist at Wells Fargo in Minneapolis.
“For me, it is not clear-cut that the labor market has downshifted,” said John Ryding, chief economist at Bear Stearns. “Rather than there is lack of demand from employers, it may be that low unemployment has left fewer people to hire, so instead employers are paying their existing workers more and are working their work force for longer hours.”
For housing market watchers, a unifying understanding of the economy in the near term was not established last week and the uncertainty with will continue to chip away at housing consumer confidence, whether its justified or not.
Tags: Bear Stearns
Ever since I was a kid, I remember seeing and reading about Christmas trees on top of buildings under construction but they were not quite finished. I also remember seeing an American flag and there was usually a ceremony of some kind that was covered in the newspapers.
There has been a tremendous amount of construction in recent years and I started thinking about topping out ceremonies:
What is this all about? Why a tree?, and Why was I looking up instead of watching where I was walking?
According to Modern Steel Construction / December 2000 [pdf]
When or how it started, but the tradition of ‘Topping Out’ has become a cherished custom of Ironworkers whenever the skeleton of a bridge or building is completed. Topping Out is a signal that the uppermost steel member is going into place, that the structure has reached its height. As that final beam is hoisted, an evergreen tree or a flag or both are attached to it as it ascends.
This tradition of ironworkers is most closely associated with the International Association of Bridge, Structural, and Ornamental Ironworkers union in Washington, DC.
The project is not completed, but it has reached its maximum height. To commemorate this first milestone the final piece of iron is usually hoisted into place with a small evergreen tree (called a Christmas tree in the trade) and an American flag attached. The piece is usually painted white and signed by the ironworkers and visiting dignitaries (figure 1). If the project is important enough (and the largesse of the contractor great enough) the ceremony may culminate in a celebration known as a “topping out party” in which the construction crews are treated to food and drink.
For those who are into Scandavian mythology here is the History of the “Topping Out” Ceremony [Columbia University] via The Ironworker magazine.
Mohawk Indians are the most well-known ironworkers and are close associated with topping out buildings.
Here’s a sampling of local coverage for a typical event:
Topping Out at 7 World Trade Center
Topping Out At The Ukrainian Museum’s Top Project
Topping Out the Blanton: That tree on the roof? Means the new museum is A-OK.
Vought-Alenia plant to be topped out
but its not limited to the US…
I was writing another post about the housing situation in New Orleans and I kept coming across the phrase “post-Katrina” as in “post-Katrina policy landscape” [NYT] and it struck me how much negative economic or natural disasters help define a new period for the real estate market.
It gives people the ability to sweep away everything that occurred prior to the event and see things in the current market with a little more clarity. At that moment, history plays a lesser roll in defining how the current market is behaving.
It can also be a stressful period because, like most markets, buyers don’t like the unknown. When economic parameters change or are likely to change because of an event, it takes a while for participants to get used to the new rules. Its a delicate moment in time when buyer/seller psychology is at its weakest or most raw and the potential for misinformation is most high.
I find this whole concept this akin not to asking when it comes to real estate, “what were you doing when Neil Armstrong stepped on the moon?” but rather “where were you when the plane hit the north tower on 9/11?”
The irony is that the whole idea of real estate exudes optimism, hope, success, growth, shelter, safety and opportunity, but the events that define it are most often negative.
Here’s a list that helps define my interpretation of the real estate market after 20 years in the business. Some are more specific to New York City because that is where I work and there are certainly other milestones to consider. It also seems to me that the milestones are getting closer together, but that might just be only because they are fresher in my thinking.
After the release of our 3rd quarter Prudential Douglas Elliman Manhattan Market Overview last Tuesday to the media and the frenzy of coverage during the week as a result, the New York Times ran an excellent overview of the market story this weekend called A Mixed Message [NYT].
Since then, I have received many inquiries about the state of the market over the week from real estate brokers, wall street firms and lenders to interpret the statistics in the report that were played over and over in the media firestorm. Whats been fascinating about this whole experience is how much coverage was given to the average sales price statistic, which could not stand on its own without explanation. Hopefully I don’t sound too cynical but this stat was likely used because it showed the most negative result.
Here’s a quick list of the highlights of the current market that are most useful:
Here are a handful of all the interviews I did which basically re-iterate most of these points.