- Bad news for my favorite Seattle tower: "Smith Tower owner in default on big loan" http://t.co/yAJzvtHO via @seattletimes #
- Foreclosures = "corporate greed"? Huh? RT @RedfinSeattle: #OCCUPY .. the weekly King County real estate auction??? http://t.co/8G0iJ4Is #
Powered by Twitter Tools
Rate this post:
00
The Smith Tower will get a new owner who will renegotiate the original mortgage with a wink, and a nod or cashed out for the pennies on the dollar. The bottom line is that it’s numbers.
In commercial properties you have a broader base of numbers to work with. Commercial properties have long term leases that are the basis of the offers being made. In the Smith Tower case there is a huge vacancy factor, but the lease rates per square foot, minus restoration costs, will determine the offered price. The bottom line is that the underlying Note will be renegotiated, and the group who currently has the Note for the property will spread the losses out over a broader base of investments.
I’ve also presented before that you can dollar cost average over the course of time or geography. A national builder with lots they have accumulated over decades in an acquisition plan can continue to buy even in a “down” economy. They can average the cost, and building costs nationally. The housing market continues for good, bad, profit, or even losses.
The losses are absorbed by the consumer.
When you buy, and own, a family home your are a consumer who has no base to spread the profit or loss to. If you have a profit it goes directly to your future consumption. Any way you want to look at your family home the equity will be used for some college fund, retirement, the paid mortgage so you can have more money to spend, or the security of not paying a land lord. There is only money in, and money out.
The mortgage however is still in the larger pool of profit, and loss. The banks, lenders, and investors had the entire resources of the financial market to make calculated risks. The consumer based their financial decision on sales data? The consumer relied on appraisers? mortgage reps? Real Estate agents? redfin graphics?
Even if the consumer reads the papers, read financial analysis, through E*Trade? only kidding, no one would be that stupid, the analysis was of a growing global economy. I was so foolish to believe that China was finally housing the billion people they have. The reality turned out to be miles of empty condo buildings and bogus non performing construction loans.
When the consumer loses a home it is a net loss to the economy. All equity positions get lowered. The foreclosure mill of today, even bank owned properties, only benefit the broader mortgage markets. Losses will be weighed against other consumer debt payments. The investor pool of mortgage money is tied into financial instruments that are paying returns to pension funds, bank stocks, global marketing, and commercial Trusts.
The consumer, the individual home owner, ends up paying for the entire economic mess.
For some reason people here have the idea our tax dollars are going to be paying for something. Now that’s laughable. Our tax dollars are going into the same black hole of military spending that they always have. Government guarantees of mortgages are faced with the same short term losses as anything else. The losses of an exploded mortar shell in the deserts of Iraq are the same losses a mortgage might have.
The reality check you might want to research is the amount of foreign investment our “bail out” attracted. As I understand it our $1.3 Trillion dollars investment in the banking sector, or boost to industry, as been see as the right moves, done in a timely manner, that other governments have yet to address.
The foreclosure system is just another way to transfer more wealth back to the banks, lenders, and investors. Rather than offer any workable solutions to individuals, banks can’t wait to add more cash into their coffers. The problem banks have is there is so much to do, so much cash to be made, and they continue to operate at a lower expense. There is no rush to them, it’s all just free money waiting until they get around to scooping it up.
By slowing the process the banks continue to prop up the high prices they are getting paid; why rush when you can get 20% to 30% more by waiting.
The individual, all individual home owners, take continued consumer losses in the process. Your home prices are controlled by banking. That may be the same as always, but today you are taking on a net loss.
Let’s go back to commercial lending to make that point. Commercial loans have a balloon payment. The profit or loss is determined over a five, seven, or fifteen year period. Consumers have been waiting, in many cases, decades to see the losses they have. Individual consumers have no broader base to spread those losses. It comes out of the children’s fund. The foreclosure process has now become another gift to banking.
Rate this comment:
0 
0
[...] By coincidence I had commented on another coupld of links on Seattle Bubble: http://seattlebubble.com/blog/2011/10/29/weekly-twitter-digest-link-roundup-for-2011-10-29/ [...]
Rate this comment:
0 
0