Friday, August 10, 2012

So Much, So Little Time

I have blogged a number of times during the past few years  about the impact of housing on the economy. Not just the final house sale but the flow-through impact as well, in fact this may be more important to the overall economy than the final act of the sale (GO HERE).

This article in Builder Magazine (GO HERE) has again pointed out the profound impact of the housing industry on the economy. This wide ranging review of the impacts of housing on regions, home improvement, and employment is a good read.

Less in More:
For some reason the press, especially in San Francisco and New York, has fallen in love with micro-apartments. These apartments, which are only 300 square feet, are the latest craze in urban development (GO HERE). Considering that a standard room at a Hampton Inn is about 330 s.f., what we really are talking about is a monthly hotel. And Hampton Inns serve breakfast. Remember, much of this is result of the number of high tech workers moving to these cities and the high cost of apartments. But, that aside, this trend is really to find a way to maximize the return on expensive urban land. Rents are expected to be in the $1,500 per month range. In the example sighted in the article, 23 units times 1,500 is $34,500 per month, or $2.92 per square foot, which is inline with the norm for larger apartments in the region. But the return for the lot under the building is $9.20/sf per month ($110.40/year), not bad.

But do you want to live in an apartment that is not much larger than your dorm room (even with the kitchen and bath included)? This kind of living will really make you pare down your stuff as our late great critic of society George Carlen said:


Couple of other short notes: We are finally getting to the last quarter on foreclosures, after this there will be clear sailing into the world of increasing homes prices and increasing interest rates. We have built so little new housing these last four years that it is inevitable that we will see prices increase, especially in those areas near high end jobs and better off urban districts (San Jose, New Jersey, Connecticut, high tech areas of the south, and of course Texas). I am of the opinion that this trend of increasing prices actually brings more buyers into the market, not less. It is the “not-to-be-left-behind” mentality. But remember what happen last time we had rampant price increases and a fast and loose banking system.

Banking in Today's World:
And having just recently refinanced through Wells Fargo I find this to be interesting:
Wells Fargo & Co.’s grip on the U.S. mortgage market has tripped alarms among regulators and lawmakers concerned that the bank’s control over one of every three new loans could hurt consumers and undermine markets.
Wells Fargo and its two largest rivals, JPMORGAN Chase & Co and U.S. Bancorp, made half of all U.S. home loans in the first half (of this year), according to Inside Mortgage Finance, an industry publication. Wells Fargo alone controlled 33.1 percent. In mortgage servicing, which involves billing and collections, four firms have 50 percent of the business, and Wells Fargo is No. 1 in that field, too, with 18.5 percent. (GO HERE) 

While I am one of the first to admit that the mortgage banking industry is a miasma of bizarre and strange rules, regulations, requirements, secret handshakes and looking over the fences. I always find it discomforting to think of such large chunks of any industry falling into the control of a just a few companies.

The Sergeant Shultz Defense: "I Know Nothing"
And lastly, as somewhat of a final candle on the cake, the Wall Street Journal reported today that the U.S. is not seeking charges against Goldman Sachs (GO HERE). After a yearlong investigation our Justice Department said Thursday that it won’t bring charges against Goldman Sachs Group, Inc. or any of its employees for financial fraud related to the mortgage crisis. Well that is fully expected and this will give you an idea why (GO HERE). Info Note: they did pay fines of a half a billion to end a mortgage fraud suit, but then again smoke doesn’t always mean there is a fire. BTW, Henry Paulson, past Treasury Secretary, was a former CEO of Goldman Sachs, just to throw that in. Side Note: memory in politics is long, the second highest contributor to the Obama campaign in 2008 was Goldman Sachs (GO HERE).

More Later . . . .

(I need a drink)

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