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Wednesday, February 20, 2008

Housing/Subprime Roundup — Feb. 20, 2008

Items of interest:

NY Times:
A Towering Auction -- With bids topping $3 billion, the General Motors Building is well on its way to becoming the priciest office building in the United States.

Formal bids have been submitted for the 50-story marble tower, which overlooks New York’s Central Park, and the real-estate developer Larry A. Silverstein — possibly bidding in partnership with the California State Teachers’ Retirement System — has bid more than $3 billion, The Sun said, citing undisclosed sources. Reuters reported a similar figure, but also said that Mr. Silverstein likely offered less than the $3.5 billion that the building’s owner, the real estate magnate Harry Macklowe, is asking for. [...]

Mortgage Rates and Housing - Back in January as mortgage rates ticked lower by the day, the outlook for housing began to look better. Lower rates obviously mean lower monthly payments, giving potential home buyers more of an incentive to actually pull the trigger on a purchase. Part of the reason the Fed is cutting rates is to get mortgage rates down in order to spur buying activity and more refis in the real estate market.

Unfortunately, since mid-January, even in the face of large rate cuts by the Fed, mortgage rates have spiked sharply. As shown in the chart below, the average 30-year fixed mortgage rate has risen from a low of 5.25% on January 23rd to its current rate of 5.82% as of yesterday (they've ticked even higher today). [...]

30 year fixed mortgage rate-----
Wall Street Abandons Neediest Clients as Banks Withdraw Credit - A year ago $20 million would have gotten Luminent Mortgage Capital Inc. access to $640 million in loans to buy top-rated mortgage-backed securities. Now that much cash gets the firm no more than $80 million. [...]
Rich Karlgaard / Forbes:
America's Creeping Wimpification -- Our society is aging. Credit (or blame) better medicine, healthier lifestyles and, of course, the bulge of the 80 million baby boomers. As people age, many become risk averse. Is this what's happening to America? I begin to think so. Look at Western Europe and Japan: case studies for risk aversion. Not pretty.

The world outside the U.S. is changing faster than ever, as I blogged Friday. Technological evolution and business-model change is accelerating everywhere. And at the worst time--just when the U.S. is aging.

So the impulse among a growing number of Americans is this: "I'm tired of the rat race. Let's withdraw from the world. The world is moving too fast for us. Let's just get off and rest."

This is driving economic populism.

Bill Clinton became president at 46 and by his youthful enthusiasm pulled his anti-trade party toward commercial engagement with the world. Hillary Clinton, 60, the presidential campaign's aging boomer, says the opposite. She says: "We need to take a timeout from trade."

What a switch!

If demographics determine destiny, I fear for what America is becoming. We are becoming risk-averse wimps. The only one candidate resisting this is John McCain. He may be old, but he's no wimp. McCain's a maverick--a demographic maverick. [...]


Calculated Risk

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naked capitalism - Yves Smith

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The Daily Reckoning - Australia