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Supposedly, JPMorgan in Negotiations to Raise Bear Stearns Bid

Good grief, I don’t mean to come across as so gloomy. I don’t even know how to play dominoes.

Tags: Bear Stearns

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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.

Tags: Canadian Housing Market, Bear Stearns

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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

1. Jay Thompson presents Deceptive Listings in the Phoenix Area posted at The Phoenix Real Estate Guy.
2. Aaron Dickinson presents Star Tribune Prints the Wrong Story posted at Twin Cities Real Estate Blog.
3. Howard Arnoff presents Understanding buyer agency posted at Charleston Real Estate Blog.
4. John presents The Worst of Home Foreclosures Yet to Come posted at Top Real Estate Blog and Tips of Selling Home from Real Estate Guru Who Sells Home Like Crazy.
5. MyNewPlace presents Green Apartment Construction Hinges on Living Density posted at MyNewPlace Blog.
6. Tim Anderson presents The Copenhagen Report: The sound of the popping bubble: A bit about psychology and Copenhagen’s housing market posted at The Copenhagen Report.
7. Dan Green presents Mortgage Video: Why It Matters When Mortgage Guidelines Change (Redux) posted at The Mortgage Reports Blog.
8. Dan Melson presents San Diego Housing Market March 2008: Heating Back Up posted at Searchlight Crusade.
9. Kathy Koops presents Why Bother Paying for Owner?s Title Insurance? posted at The Cincy Blog by Kathy Koops.
10. Cindy Jones presents Northern Virginia Foreclosures-What Don?t You See posted at VA Real Estate Talk.

Here are other posts of note submitted in no particular order but are all a good read:

• Roberta Murphy presents The WalMart Effect posted at Luxury Home Digest.
• Joe Manausa presents Tallahassee Real Estate – Area Analysis posted at Tallahassee Real Estate Blog.
• Rebecca Levinson presents Should you hire a property manager to protect your real estate investment? (Part I) posted at Connect2Agent – Home Buyers and Sellers.
• Brian Block presents 8.5 Lies about Real Estate posted at Virginia Real Estate News.
• Cliff Jacobson presents A Funny Thing Happened On The Way To The Listing posted at WebHomeUSABlog.
• DeeinAustin presents Stop Timing the Market and BUY! posted at Texas Realty Blog.
• Raymond presents The Slowly Fading and Elusive American Dream of Home Ownership posted at Money Blue Book.
• Sarah Bandy presents The New Jersey Real Estate Misconception posted at Tyler Talk A Lot.
• Lenore Wilkas presents San Mateo County Has Opened the Dialogue About Affordable Housing – San Mateo-Foster City Real Estate News posted at San Mateo-Foster City Real Estate News.
• Cindy Lin @ Staged4more presents “By the Divine Power Vested in Me, I Shall Sell Your House” posted at staged4more home staging tips + more blog.

Thanks to all of those who submitted posts. It was a fun read and I’ll be expanding my blogroll this week. Don’t forget to check out Inman News Blog, next week’s host for the Carnival of Real Estate.

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:

• Craig Schiller presents A Realtor Does the Crime… while His Seller Does the Time! posted at HOME STAGING, Rants & Ravings.

Tags: Bear Stearns, NAR, National Association of Realtors

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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.

Tags: NAHB, OFHEO, Radar Logic, Re/Max, Case-Shiller, NAR, National Association of Realtors

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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!

Tags: Bear Stearns, Goldman Sachs, Lehman

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Well, the shockwaves have reverberated through the appraisal industry. This email was sent from management to all WAMU appraisal vendors. [Inman ran a story about the announcement as well referring to my post about the WAMU decision].

The email is polite and respectful, perfect pr speak, shows the disconnect between cost-cutting efforts of upper management in periods of declining mortgage volume and risk management by using [appraisal management companies].

This message is intended for all Fee Appraisers

July 13, 2006


Dear Valued Partner:

Washington Mutual is a dynamic, growing company focused on delivering optimum results to our customers and shareholders.

We’re contacting you today to let you know that after a thorough review of our current appraisal processes, we made the decision to outsource the management of appraisal services to national appraisal management companies.

We will begin transitioning our appraisal needs to two vendors exclusively, throughout the remainder of 2006.

With the formation of this new long-term relationship, we will be reducing the volume of new appraisal orders that we send to you during this transition. We ask that you continue to complete your current assignments following normal processes.

We thank you for your hard work and your continued support of Washington Mutual.

Please know that we have valued your work and contributions to Washington Mutual and we wish you great success in the future.

If you wish to contact LSI or First American, you may reach them at:
LSI – Rick Prosser
rprosser@lsi.fnf.com
1-800-722-0300 ext 79084

First American (eAppraiseIT)
StaffAppraiser@eAppraiseIT.com

We thank you for your hard work and your continued support of Washington Mutual.

We wish you great success in the future.

Thank you,
Michelle White
Washington Mutual Residential Appraisal, Senior Manager
Greg Hoefer
Washington Mutual National Appraisal Production Manager

Tags: Appraisal Management Companies, Soapbox Blog, WAMU, Appraisal Process, Washington Mutual, LSI, First American

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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.

or

“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

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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.

“Topping out” is the term used by ironworkers to indicate that the final piece of steel is being hoisted into place on a building, bridge, or other large structure.

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.

Topping Out Bear Stearns NYC

Mohawk Indians are the most well-known ironworkers and are close associated with topping out buildings.

• Booming Out: Mohawk Ironworkers Build New York [Smithsonian]
  
• Mohawk Ironworkers Who Built the World Trade Center Profiled on Lost & Found Sound’s Sonic Memorial Project [NPR]
  
• Mohawk Ironworkers to be Honored at WTC Ceremony [Canku Ota]
  

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…

New unit at Northwick Park Hospital finished [UK]
New home to help juveniles re-integrate [HK]
TIOGA DOWNS PLANS MAY OPENING [NZ]

Tags: Appraisal Management Companies, AMC, Bear Stearns

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Theory of Negative Milestones

Explained

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.

Negative Milestones

• October 19, 1987 stock market crash
  
• 1990-1991 recession
  
• August 1998 stock market correction
  
• February – March 2000 NASDAQ correction
  
• June 2001 entering the recession
  
• 9/11
  
• March 2003 – start of the Iraq War
  
• June 2004 – Fed starts raising federal funds rate
  
• August – September 2005 – Hurricane Katrina and Rita
  

Tags: Hurricane, Hurricane Katrina

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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:

• The average price per square foot set an all-time record reaching $984 per square foot and rising 1.4% from the prior quarter. This is the telling statistic. The overall market increased this quarter, but not at the same torrid pace as before. The rate of appreciation has eased. In fact, since larger apartments generally sell for more on a per square foot basis than smaller apartments, one could make the argument that the shift in unit mix also tempered this indicator as well.
• There was a significant shift in the mix of apartments that were sold. The average sales price dropped 12.7% because the market share of entry-level apartments (studio and 1-bedrooms) spiked 5% and activity at the upper end dropped off.
  
• Entry-level sales surged because of concerns over modest increases in mortgage rates are expected. Of course, this has been the speculation since mid 2003 but this time, with rising fuel prices, comments from the Federal Reserve about housing, mortgage rates may actually rise.
  
• High end sales activity eased rather than prices dropped. The luxury market average sales price dropped 26% from last quarter because fewer sales at the upper end occurred. There were 17 sales at or above $10M in the 2nd quarter and only 4 sales at or above $10M tracked in the 3rd quarter. In fact, a high end broker contacted me to say there were 5 such sales this quarter, but didn’t realize that one of them closed in the prior quarter. Nevertheless, whether 4 or 5, the sales activity was well below 17 sales. This doesn’t indicate that prices collapsed, but that a shift in the mix of apartments that sold in the upper 10% of the market.
• Inventory did increase this quarter and was more heavily weighted with condos than co-ops. Since inventory came on at generally the same pace as the number of sales eased, inventory built up. This was attributable to seasonal considerations (thats a stretch) and bad economic news, rising gasoline prices, over saturation of bubble speak for the past 6 months and negative economic news relating to the 2 hurricanes.
  
• There are expectations of record Wall Street bonuses at yearend due to the solid year seen by investment bankers and a number of other sectors in the financial district. Historically, Wall Street bonus income has flowed through the real estate economy after the New Year.
  

Here are a handful of all the interviews I did which basically re-iterate most of these points.

[Focus on Business (Canada)]

[Bloomberg Television]

[WCBS Channel 2]

[WNYC Radio (Brian Leher Show)]

[WNYC Radio]

[Bloomberg Radio]

[WCBS Radio]

Tags: Wall Street Bonus, Hurricane, Canadian Housing Market, Radio

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