Union Park

Go to Google Maps.

Search for Union Park, Florida.

See what the street view is.

Yep, Union Park can be effectively described as a dump truck racing by an Amscot.

Throttle Back

You may have noticed that I haven't posted for a few weeks now (to all five of my readers, I apologize). I have a new business that I am working on which is extremely time-definite, as a new law comes into effect on June 1st which we are capitalizing on. The blog has been placed on the back burner temporarily while I tend to that business.

I will post "cream of the crop" links and musings as they come up, and perhaps begin a second blog to document the new businesses' development.

The housing correction and its inevitable conclusion are still greatly important and interesting to me, and will continue to be the focus of The Suburban Economist. After all, when the new businesses' sales explode in a few short weeks, I will have to invest all that money somewhere! What better place than East Orlando RE ;)

Volcker Interview

Paul Volcker was the Fed Chairman that you may recall kicked inflation's ass in the early 80s. He is a very smart man and dissects the current housing implosion and credit crisis quite well.

As an aside, you may notice that interviewer Charlie Rose has a nasty black eye. Of course, I had to Google this (hoping for a barfight story) and it turns out he got it while saving his MacBook Air from a fall.

Link

Mortgage Resets

Refinancing peaked exactly 5 years ago this month.

A major issue that has contributed to falling prices in real estate is the use of refinancing to "cash-out" equity from a house. Essentially, a second mortgage was taken out and could be a credit line or a lump sum payment. Consumers were encouraged by low interest rates and their home's skyrocketing price to go ahead and splurge: Buy a new SUV for your family. Take that needed vacation. Add on a fourth bedroom. After all, you deserve it Mr. and Mrs. American!

Taken October 17th, 2007 at Bank of America.

And consumers certainly did take out money from their home's ballooning values, many using variable rate loans that would increase at a later date (5 years being the most popular.) In a large number of cases, these loans were taken out with no proof of the borrower's ability to pay the reset rate. The house's increasing price would be the collateral. These new mortgages were then commoditized on the financial markets as various financial products, and sold to investors of all types.

Mortgage resets are peaking this month. (March 2008)

Now, borrowers are confronted with the price of this borrowed prosperity. Real wage growth has remained stagnant, and now the bills are going up (reset mortgage payments) and the property's market value (the collateral) is going down.

So when will the worst pain be felt through the housing markets? I estimate that the price deterioration will be steepest at about 6-8 months past the mid-2008 time period. This is after most of the resets will have taken place, and by early 2009, most of the homes that will be lost due to resets in this cycle will already have been evicted and sold, or at least on the market bringing prices down overall. We could see prices begin to curtail their fall, and perhaps even rise again, sometime in 2009.

Countrywide Foreclosures Tracker

Here's an interesting site for tracking a piece of data on houses going into foreclosure. It monitors the data on REO (real estate owned) posted on Countrywide's site.

Countrywide Financial is the largest mortgage company in the U.S. and issued between 17% to 20% of all mortgages created in 2006.

It looks like the steadily-growing listings on the Countrywide site shows some stability at around 15,000 listing nationally. Is this from increased sales of old REO, or a move down in new properties going up for sale? It's likely the former.

Florida, however, is a different case. The numbers keep rising in California #1 and Florida #2.

Florida

Link

1920s Boom and Bust

Miami Beach, Florida

Examining the past gives us clues to predict the future. Take this Wikipedia article on the Florida land boom of the 1920s.

The Florida land boom of the 1920s was Florida's first real estate bubble burst in 1925, leaving behind entire new cities and the remains of failed development projects such as Isola di Lolando in north Biscayne Bay. The preceding land boom shaped Florida's future for decades and created entire new cities out of virgin swamp land that remain today. The story includes many parallels to the modern real estate boom, including the forces of outside speculators, hurricanes, easy credit access for buyers, and rapidly-appreciating property values.

Link

The Subprime Primer

A sublime primer for the subprime grime (and perhaps crime.)

NSFSW due to stick figure profanity.