Monday, August 20, 2007

Delightful Juxtaposition in the Times

One story, The Manhattan Real Estate Slump That Wasn’t, says that Manhattan real estate is continuing to just go up and up in value. Demographics have for some reason utterly transformed to push this, the outsize finance bonuses that have been inflating real estate shouldn't be affected by the turmoil in the markets, the Manhattan economy -- which I believe is all finance and media -- isn't having any trouble at all, and foreigners and boomers are just consuming great gobs of real estate.

Clearly, this is deluded. It doesn't mention how hedge funds are tied to luxury Manhattan real estate prices and work to artificially inflate them, so when they pop, the real estate market will go with them. Actually, I haven't heard the term 'luxury Manhattan real estate' in a while, as the prices have sort of blurred any such distinction.

Obviously, the only people telling financiers that their bonuses will be fine this year are their managers, who are trying to keep them from returning to goat farming at least until the pick up their bonuses, which their managers are telling them will be fine. And boomers are buying in Manhattan because it's the only place in America still appreciating, and they want that real estate investment to appreciate.

Comically, the article asserts
A strengthening dollar, a severe terrorist attack or a national economy hobbled by housing market woes could inflict blows of varying strengths.
as if foreigners valued their investments in US Dollars. If the dollar depreciates against their currency faster than their US based assets increase in dollar-denominated value, of course, they're losing money. What seems to get lost in this analysis is that foreigners don't like to lose money. A selloff would be a little worse than a drop in buying.

Of course, your favorite line from the piece has to be
Julie Friedman, a senior associate broker at Bellmarc [says] “‘moral’ and ‘the highest amount’ don’t necessarily overlap.”
Is she going to put that on her business cards? So, this is just so much tripe from the Newspaper of Record, purely written to overwhelm whatever vestigial tendency to reason is left in the trend-following home buyer.

So, the New York Times editors are a prideful bunch, and they'd like you to know that whatever forces impel them to sell you easily predictable disasters, they're totally able to analyze them after the fact. This brings us to How Missed Signs Contributed to a Mortgage Meltdown. Now, personally, I think that referring to our current situation as a 'mortgage meltdown' is a little overblown. Magical bunnies could arrive from Mars tomorrow and expel little golden pellets into the hands of struggling homeowners, so it's too early to worry. I was being ironic. I know you can't always tell.
[T]here were ample warning signs that a financial time bomb in the form of subprime mortgages was ticking quietly for months, if not years.

As far back as 2001, advocates for low-income homeowners had argued that mortgage providers were making loans to borrowers without regard to their ability to repay. Many could not even scrape together the money for a down payment and were being approved with little or no documentation of their income or assets.


[T]he cast of characters who missed signals like the rise of delinquencies and foreclosures is becoming easier to identify. They include investment banks happy to sell risky but lucrative mortgage debt to hedge funds hungry for high interest payments, bond rating agencies willing to hope for the best in the housing market and provide sterling credit appraisals to debt issuers, and subprime mortgage brokers addicted to high sales volumes.

It's funny that they don't mention the newspapers. Do they understand that they're allowed to do research and analysis? There are many complaints that political coverage is all he-said/she-said horserace folderol, and of course topics like Climate Change involve serious in-depth consideration. This is all expensive, and papers are losing readership, so I could see them not wanting to spend the money.

But, why read the paper? If they're going to 'sheepishly admit' four years on that the Iraq occupation was sold on lies -- even though this was obvious at the time -- we're doing just as well listening to Rush.

No comments: