Here’s a little message I sent off to a friend on April 22, 2009. I made a mental note to come back to it in the Summer. I now submit this as my application into the Junior Nostradamus Club of America:

“To me, it’s 100% about revenue streams off the MBS. As commercial RE prices deteriorate and loans mature and can’t be rolled or refinanced, delinquencies/defaults rise, and the underlying securities degrade. Classic deflationary debt destruction. Too bad that no other sector of the economy shows anything other than contraction; there are simply no new players or industries that can rush in to save the day. BTW…RE was the business that rushed in to save the day in 2001! Too bad that this time around, an actual industry that produces something other than paperwork will have to save the day.

So, banks are getting killed on residential RE, about to get killed on commercial RE, sunk in derivatives quicksand, and mired in credit card, auto and student loan defaults. How long can they trade their way to record quarters? How long can they lend free money at 5% and convince us they’re the masters of the universe again? How many times can they pull a “lost December” trick?

In residential RE, we know that the biggest indicator of imminent default is the crossover into negative equity. That trend is up, not down. As residential MBS continue to degrade, no amount of engineering can lipstick the pig. The MBS revenue streams simply track the decline in the real market. Why else would everyone in DC so desperately be trying to prop up housing prices? The insane theory is: stop the price declines, save the MBS. Of course, no one will even touch MBS unless the gubmint backstops them with 6-1 leverage and an underlying put.

We all know where this ends. Off a freaking cliff. The only thing I’m trying to game now is when it will happen. I get a queasy sense of the beginning of a rush to the exits, as my listing clients over the past few weeks have become eerily compliant. My listings are selling now in 3-5 weeks, and sellers I’m approaching with some really low offers are taking them. There is massive, rapid deterioration in the luxury market here since 1-1-09, with wholesale 5-10% price reductions coming within 30 days of listing in the 700K- 1mm segment (not surprisingly, the job loss among the owners in this segment is rampant). Anecdotally, this means nothing…but I think this time, my little world is a microcosm of the RE market writ large. We’ve also already seen this scenario play through in the sand states, so it’s not as if the local market is in uncharted waters.

BTW, don’t buy the line that rates are great and mtg money is plentiful. The refi boom is abating, and the various Oblamma refi/purchase money programs don’t work, period. Qualification standards are being ratcheted up almost daily, and standard underwriting periods now measure 18-24 days (it takes 40 minutes to actually run a basic underwriting process). That tells me that the pipeline of mtg money is running dry…which is consistent with the general seizure of credit extension. We now have correspondents telling us lies (i.e., cannot verify employment, existence of assets) about files in order to delay and/or stagger closings. The cash just ain’t there. It’s on a negative feedback circuit from gubmint-to-bank-to-gubmint…or, gubmint-to-bank-to-balance sheet.”

Gentlemen, I have had men watching you for a long time, and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the eternal God, I will rout you out.

Andrew Jackson, the seventh president of the United States, to a delegation of bankers in 1832

“Tis surprising to see how rapidly a panic will sometimes run through a country. All nations and ages have been subject to them…. Yet panics, in some cases, have their uses; they produce as much good as hurt. Their duration is always short; the mind soon grows through them, and acquires a firmer habit than before. But their peculiar advantage is, that they are the touchstones of sincerity and hypocrisy, and bring things and men to light, which might otherwise have lain forever undiscovered. In fact, they have the same effect on secret traitors, which an imaginary apparition would have upon a private murderer. They sift out the hidden thoughts of man, and hold them up in public to the world.”

-Thomas Paine, “The American Crisis”

“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

-Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)

I’ll let everyone else add to the vitriolic discussion over the 700 billion-dollar-bazooka at njrereport.com, housingpanic and the other blogs. It is sad to see that a good many of the regular posters at those sites have more financial sense than King Henry and Ben Bergabe combined. Frankly, I’m also too busy and too mentally exhausted to generate a coherent post that covers the range of my opinions and feelings about the events of recent days. Suffice it to say, I’m using the words “rage”, “disgust”, “disappointment”, “disillusionment”, “criminal”, “idiot” and “expatriation” a lot in my current conversations. You know things are coming to a head when a guy like top homebuilding analyst, Mike Morgan, admits on conference calls that he goes to Sam’s Club every week to add to a growing personal hoard of food and water.

So, we’ll let the smart folks parse the financial ramifications of the Big Bailout. However, the less-examined issue is: why is it that the blogosphere saw this whole mess coming for over two years, called every shot perfectly…yet the mainstream media (MSM) has been completely blindsided by recent events? Has the MSM just been completely co-opted by corporate America? Are they now synonymous with corporate America? Are they no more than a stealth tool of mass narcotization, providing the cover of presenting entertainment as news so that investment bankers and their government enablers can rob us blind?

We now have the spectacle of a Federal Reserve chair and Secretary of the Treasury bum-rushing Congress like a teenager begging for the car keys on a Friday night. According to King Henry and Bergabe, imminent doom awaits us…unless they are given 700 billion, with no conditions, no oversight and no accountability. And, by the way, can we please give it to them NOW?

The US faces a possible Biblical generation (that’s 40 years) of economic pain, in order to execute a plan that reads like it was drawn on a cocktail napkin. Failed investment bankers and their minions are preparing to slink away- under cover of darkness- with billions in ill-gotten fees and commissions. But if you turn on CNBC after 5 PM, what do you get? Cramer, one of the investment criminals’ biggest cheerleaders? Kudlow? A former cokehead, whose denial has now turned itself on the precarious state of our economy? Donny Deutsch (no words can describe this moron…although “Elmer Gantry” always comes to mind when I see his vacant, smiling rictus of a face)?

Say what you want about the bubble blogs- and 90% of their content may be pure drivel- but the best of them contain the only truth available about the criminal enterprise that is about to rob our country, throw us all into poverty and saddle future unborn generations with crushing debt.

Here’s an interesting tidbit from Realtor Chris Fountain, of Greenwich, CT. Up until last week, he also wrote a real estate column in the local Greenwich paper. Seems as though some of that paper’s real estate advertisers didn’t cotton to his rather honest assessments of the difficult local market, so they figured out a way to shut him up. You can now check Chris at his blog, http://www.greenwichrealestate.blogspot.com

Just in case you don’t trust print media to give you the true story on real estate, here’s further confirmation that they aren’t. Of course, while every print media stock in the US continues to plunge toward 0, they aren’t going to alienate their biggest remaining advertisers: real estate companies. Read and enjoy:

My publisher, Greenwich Post, has just fired me – according to the owner, it came down to a choice between my readers, who liked me, and certain real estate agencies who did not. The latter pays bills, the former does not, so I got the heave ho. Fair enough, but I question the wisdom of eliminating one of the few items in a newspaper that, according to my readers,anyway, made the paper worth perusing. If you have no readers, who will advertise? Oh well. I’ll be punching up my posting activity on this site, so please check in regularly for truthful reporting on the real estate scene. If you’d like calm, reassuring news that your real estate investment in Greenwich is doing just fine, feel free to check the Greenwich Post each week.

One reason I was dumped was, I believe, my reporting a New York Times report that Realogy, parent company of Coldwell Banker, Century 21 and Soetheby’s, was in danger of going bankrupt. I hear from other agents that staff members of at least one of those firms haven’t been paid in 4 weeks – they got flowers on their desks this past Friday. That’s a nice touch, but try placating your landlord with a bunch of wilted orchids.

The following table contains closed residential real estate transactions in Branchburg for the first calendar quarter of 2008 (January 1 to March 31). However, unlike the inaccurate information promulgated by most agents and media sources, the “DOM” (Days on Market) column indicates the sum of days-on-market accrued through serial listings of the same home (it is a common agent “trick” to withdraw and re-list a home, in order to create the public impression of a “fresh” home that has seen fewer days on market). In addition, the “OLP” (Original List Price) column reflects the list price of each home at the time it was first offered for sale.

Note that there were only twelve closed transactions for the entire quarter. Even in 2007, most single months produced more closed sales. There is no more graphic indicator available of the accelerating sales slowdown in the local market.

Sales statistics posted at Branchblog will always be cross-checked to provide the most accurate and unbiased housing market snapshot possible.

Please direct specific inquiries to Chip Hughes at (908) 334-2329 or chip.hughes@att.net. Better yet, leave a comment!

All information is deemed accurate, but not guaranteed, and is provided courtesy of Garden State Multiple Listing System:

AVERAGES: 199 Days-on-Market; SALE PRICE: 89% of original list price.

Sorry for the scarcity of recent posts; I’ve been busy with a couple of charitable projects that should be finishing up later in May. Until then, I’ll try to excerpt the best of the real estate and financial press coverage of the accelerating decline in housing and mortgages.

Following is from Scott Goldstein, NJBIZ, April 28, 2008. Not a pretty picture; and the 1929 comparisons/analogies don’t help:

When it comes to creating private-sector jobs, New Jersey was a laggard in 2007 as compared with neighboring states and the rest of the country, according to a Rutgers University report released last week. Authors of the report say the state’s job growth will not improve this year while the nation enters a deep recession and a financial crisis that will be arguably the worst since the Great Depression. New Jersey gained just 3,700 private-sector jobs last year, an increase of only 0.1 percent over 2006. That was significantly lower than the increases in New York and Pennsylvania, which saw private-sector employment gains of 1.2 percent and 0.6 percent respectively, according to the study.

In terms of job growth, New Jersey fell significantly behind its economic peer states in 2007. The state has lost its role as regional economic dynamo,says the report, which was titled “Reversal of Economic Fortune” and co-authored by James W. Hughes, dean of the Edward J. Bloustein School of Public Policy at Rutgers, and economist Joseph J. Seneca.

Overall, New Jersey ranked 41st among the states in percentage of private-sector job growth last year, according to the Rutgers report. That was unchanged from 2006. New York ranked 17th, up from 28th in 2006, while Pennsylvania ranked 29th, up from 34th.

The Garden State may have suffered recession-related layoffs earlier than its neighbors because Wall Street job cuts hit back offices in North Jersey first, Hughes said in an interview. He says the state lost 7,900 financial sector jobs in 2007, mostly in the second half of the year.

The entire Northeast will likely falter in 2008, the study says. New Jersey lost 10,500 private-sector jobs in the first quarter of 2008, according to the state Department of Labor and Workforce Development. That’s a reflection of the national downturn, says Hughes.

He says the pharmaceutical and biotech sector accounts for about 41,000 jobs in New Jersey, while financial businesses ranging from banks to Wall Street brokerages account for 269,000 jobs in the Garden State. The importance of these sectors to New Jersey puts the state at particularly high risk of layoffs, says Hughes. “We are going to get hit hard”, he says.

Behind the national recession are factors including the bursting housing bubble, the subprime mortgage crisis, growing turmoil in the credit markets and soaring energy and commodity costs, according to the report.

Hughes says New Jersey and the Northeast are feeling a backlash from the lending boom that lasted from 2001 through 2006 “a period when we had cheap global credit, lending standards disappeared, there were record Wall Street profits and great job growth.”

There’s little that Gov. Jon S. Corzine and the rest of state government can do to ease the pain of the recession, adds Hughes. They are prisoners of forces that may have built up over a 10-year period, he says.

The following is not an endorsement of any party or specific Presidential candidate. Still, it’s nice to see some candidate make a statement on the current housing mess that at least mentions basic personal and corporate responsibility. This issue has been- and will be- demagogued to death in the coming months. Pandering to the masses and to fat, lazy bankers is not going to solve the current meltdown of credit and real estate markets.

McCain Rejects Broad U.S. Aid on Mortgages

By LARRY ROHTER and EDMUND L. ANDREWS
The New York Times; published: March 26, 2008

SANTA ANA, Calif. Drawing a sharp distinction between himself and the two Democratic presidential candidates, Senator John McCain of Arizona warned Tuesday against vigorous government action to solve the deepening mortgage crisis and the market turmoil it has caused, saying that “it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers.”

http://www.nytimes.com/2008/03/26/us/politics/26mortgage.html?_r=1&oref=slogin

The Kool-Aid Brigade wants you to know that prices have stabilized. They may have…but not in this universe. Check out the handful of truly scary graphs (courtesy of James Bednar, at the excellent NJ Real Estate Report) at this permalink (you may need to copy & paste in your address bar):

http://njrereport.com/index.php/2008/02/06/north-jersey-january-residential-sales/

This is chilling stuff. We appear to be well on the way toward record-high inventories, married to a record-low sales pace. Is this an environment in which prices will stabilize?