21 May 2009

Business/Economic News for Thursday 21 May 09

20 May 2009

Business/Economic News for 20 May 09

19 May 2009

Ron Paul: "Audit the Fed, Then End It"

Although I do not agree with some tenets of Libertarian thought, I must say I find Ron Paul's latest sponsored bill, HR 1207, is one which I find more than intriguing. In essence, Ron Paul's position is the Federal Reserve bank has done more harm to our economy than good. Therefore, his new bill asks to audit the Federal Reserve, and once the audit is brought to the American people . . . we end the Federal Reserve.

I am not going to get into my views of the Federal Reserve today other than to say I read a book titled "The Creature From Jekyll Island" which is an in depth review of how the Federal Reserve was created. What I learned from that fascinating book is the Federal Reserve is neither a Federal bank, nor an official branch of the U.S. Government. What it is . . . and the vast majority of Americans do not understand this . . . is a bank that all banks seek loans from. In essence, it is the speaking serpent's head of a giant cartel of the country's (and world's) largest moneychangers, i.e., the banking cartel.

That said, Ron Paul's new bill is discussed in the following video which culls clips of Ron Paul presciently speaking in 1999 about a new bubble forming (the Housing Bubble) and the dangers of Freddie Mac and Fannie Mae. You will hear Ron Paul and others talking about how the Bush/Obama bailouts are nothing more than bailouts of Paulson's and Geithner's former employers.

Lastly, after you view this short video clip, you can then click on the this link to read Ron Paul's latest thoughts on ending the Federal Reserve titled, "Audit the Fed, Then End It." It's brilliantly concise and well written, even if you do not agree with his opinion:


18 May 2009

My Second Notice Of Foreclosure For A Key West Rental In The Past 12 Months

Last week, I read an article in the Key West Citizen which pointed out the surplus of housing inventory to be sold in the Lower Keys. Two different Realtors were quoted. They disagreed on how many homes were going to go into foreclosure, about how well/bad the market was performing, but the one thing they did agree on was this: we now have so many homes for sale in the Lower Keys that it will take Four (4!) years to sell it all off at today's slow sales pace.

What both Realtors seemed to have missed is this: Option ARMs and Alt-A loans which have turned many a Key West homeowner/investor into an upside down mortgage holder (meaning they owe more on their mortgage than their property is currently worth) are slowly making their way through the foreclosure process.

One national news story after another shows us that the next two years will be absolute hell for prime mortgages. One national news story after another tells us how one jumbo loan after another is going belly up. And in certain communities, brand new homes which would have sold for half a million bucks are being bulldozed to Earth as it is cheaper for the banks owning the foreclosed homes to pay taxes on cleared Earth than to maintain homes appraised at hundreds of thousands of dollars and which need to be maintained.

Our tits are in the ringer, our balls are in the blender. America's housing problems are nowhere near "bottom" and yet one pundit after another (take Alan Greenspan's latest cheerleading speech before the National Association of Realtors last week) with vested interests in Real Estate are coming out in the Key West citizen telling us not to be such gloomy gusses.

Meanwhile, I was served my second foreclosure notice for eviction for the past 12 months.

Let me be clear: I never fell for Sunny Day Real Estate nonsense which many of my blue collar brethren got sucked into after the dotcom meltdown. No, I never bought a home. Instead, I continued to fund my Roth IRA, steadily, with great companies which would not go bankrupt in what I predicted would be the Mother of All Recessions. And I rented.

Last year, the house I was renting (one of three in a quiet compound downtown Key West) was foreclosed upon. All three houses, a fourth one room shack, a swimming pool, were quoted at a sales price of $7,000,000 back in 2005. When we moved in back in September of 2007 to our $1800 a month cottage house, our landlord was asking $3,950,000 for the whole compound.

In May of 2008, a Monroe County deputy sheriff served us with notification that our formerly wealthy Master of the Universe landlord was being foreclosed upon. He was losing everything. He had not made a payment on his mortgage since December 2007.

When I confronted my ex-landlord with the public documents, he almost cried. He knew the jig was now up. All those rent payments I had made on time, every month, would no longer fund his ability to live.

I moved the very next month. A few months afterward, the other two cottage renters moved out.

The whole compound sold to someone from California . . . a supposed savvy "Real Estate Investor." He bought out my landlord's entire property for $1,295,000.

Talk about a fall in price: At one time the whole shooting match was $7,000,000. When we moved in, my landlord was seeking some greater fool to take it off his hands at the reduced price of $3,950,000. When he lost the place, it "only" took $1,295,000 to buy three houses, a one room apartment/shack, and a swimming pool.

The only way the new bagholder . . . and that's exactly what the ignorant Californian is . . . will survive is by renting out my old cottage house (the biggest of the three in the compound) as an illegal transient rental. Or so he thinks.

That's what the new owner is doing already. Unfortunately for him he has many things working against him:

  • 1. Key West is in a nasty Tourist Recession where guesthouses in that same neighborhood are constantly showing "Vacancy" signs out front.

  • 2. One of the neighbors next to the compound is a very fussy, cranky, nosy nutjob of a woman who will notice different cars parking in the two parking spots for the compound and will most certainly call Code Enforcement. I give the new owner three months before she puts a stop to his illegal rentals in that quiet neighborhood.

  • 3. Right before we moved out, my old landlord showed me paperwork requiring him to buy flood insurance for the first time ever for that property. With global warming and rising sea levels, his insurer put the squeeze on him.

  • 4. Knowing the taxes and total insurance on that whole compound, the new owner had to come up with $22,000 to $24,000 a year to cover just the basic costs of his "nut". This did not include maintenance. My last month there, my landlord had to spend $2,000 to have a leak in the underground swimming pool fixed.

That said, when I add up all the costs and risks associated with the old compound where I live, I realize the guy who bought the place was banking on illegal transient rentals to help him make his monthly nut. Knowing one of the neighbors who lives near there, I can assure you that the nightly rentals he thought would be a natch just aren't materializing.

So the new bagholder who thought he was getting a screaming deal is now looking for new renters. By the way one of the old cottages vacated by one of my old neighbors is still vacant . . . now in its fifth month with no one living there.

Oh, and everywhere in Key West, rents are falling fast and furiously.

Which brings me to my current situation:

Last week, it happened again. A sheriff knocks on my door. He serves me the foreclosure notice, and like the last server from a year ago tells me, "No need to freak out . . . there are so many foreclosures clogging up the system at the Monroe County courthouse, your current landlord will not lose this place until six months from now."

Well, as it stands, my one year lease is due to end in June of 2009 anyway. But I still looked over the 70 page document to see how my current landlord got himself into this mess. Some of the background I got from my landlord telling me. Some, I scooped right out of the 70 page foreclosure documents.

Some particulars:

  • 1. He was and still is a Realtor. He used to own part of a successful restaurant in town, but sold his interest so as to make a killing in Real Estate. (Sounds exactly like my last landlord who sold a very successful Key West guesthouses to fund his Real Estate empire).

  • 2. He bought property from 2003 through 2007. The market really topped in 2005, but to hear Key West Realtors spin, the top only happened in 2007. Nevertheless, my current landlord moved out of Key West to pay more attention to his more recent buys up on the West Coast of Florida. Interestingly enough, he was and still is active buying foreclosures.

  • 3. According to these court documents in my possession Mr. Real Estate Magnate has not made a payment on the mortgage to this condo I rent since December of 2008. Meaning he's taken the rent I send him - $1600 monthly - and has pocketed it for the past five months. I wonder how he's spent that $9,000? Did he use it to fund new purchases of foreclosures? Is he as bad off as my last landlord who was reduced to walking away from all his properties in California, North Carolina and Key West and reduced to living in a one room former toolshed with shower and toilet? I don't know. I do know he, like my last landlord, was one of these confident, cellphone slinging Realtors who think they are Masters of the Universe.

Regardless, I was moving at the end of June.

As I noted on this board a few months ago, rents in this same building for better situated apartments, with better views and more space are currently renting for $1400. A savings of $200 a month.

And downtown, there are numerous apartments I've been following which have been on the market for months. (One apartment near White Street started out 6 months ago asking $1600 a month. It is still being advertised, but it's latest price of $1350.)

Due to lack of time, and a new interest in a side business (plus I'm still deejaying at the hottest growing bar in town), my girlfriend and I have decided to simply move our belongings via an elevator in this building to newer, better, and most incredibly, cheaper digs.

Meanwhile, just this month of May 2009 four businesses in the same block as my bar (okay, one of them was a corner art gallery on the next block) have gone belly up and are running "Everything must go sales". Correction. Two of the businesses moved out their inventory during the middle of the night and left town. The other two are selling everything, including the fixtures on the wall.

Commercial Real Estate is the next leg down in Key West. Only the strong will survive this Great Recession.

And just another note, Reductions in price for houses for sale are running 20 to 40 a week in the Key West MLS.

So, is this a time to buy a home in Key West?

Check back in 2010 or 2011. Now is not the time.

Stat Counter from 10 Nov 08