If you want to know why we're in the current mortgage mess, read this puff piece from 1998. Money quote: "Fannie Mae and Freddie Mac operate independently each with a preferred lender base, but both are in the business to make sure that as many consumers become homeowners as possible."

That they did, with the result that together, the two entities now hold 46% of the national debt or they did in 2003, when the linked article was written. No one listened back then and I wonder if anyone is really listening now.

Appraisal woes
Interesting article here on the difficulties in appraising houses in a falling market.

Lenders are more cautious and, because house prices are falling so rapidly in some areas, won't accept a "comparable" sale that's six months old.

"In San Francisco, neighborhoods are small, which compresses the number of comparable homes, making appraisals particularly complicated. 'Any time you have a reduction in volume, especially because that is when the underwriting criteria of lenders tends to become more stringent, it's difficult,' said Charles Warren, who runs a San Francisco appraisal business called Warren and Warren. 'Lenders want to see comparables from the last 30 days, and all of a sudden you are left without any valid data. That exacerbates the problem.' "

And this bit of sound advice: "Buyers should make sure to leave their financing contingencies in place until the lender has signed off on the appraisal. The down market means that lenders are reducing appraisal values more often."

On a brighter note, I heard an interview with a tri-state lender this morning (Hudson something or other - they're opening an office in Greenwich but have been lending in Fairfield County for some time)and he was surprisingly optimistic about the housing market in this area. His bank has always held on to its loans, rather than repackage them and sell them on the national market, and, while the bank has insisted on a minimum 20% down, on average, its borrowers put 39% down. "Our customers are people buying homes," he said, "not speculators." So far this year, its Fairfield County loans are up 1,700 over 2007, which was their best year. So, there are buyers still out there.

The bank president also pointed out that the housing collapse has hit hardest in just seven states: Michigan, Illinois and Ohio, which he attributes to the collapse of auto sales and its effect on the income streams of people who work for auto parts suppliers; and Florida, Nevada, California and Arizona, which all suffer from a glut of speculative building. He still likes the Northeast as a place to make housing loans. I hope his enthusiasm is justified by later events.

Update

The bank is Hudson City Savings Bank.According to its website, it's doing very well. They specialize in jumbo prime mortgages, so no wonder they like Greenwich.

White Elephants and such

Reader Juan asks, "Will you provide the link for article by the 'colleague who compared assessed value...'? "

I would be glad too, if Greenwich Citizen posted the guy's stuff on line, but it doesn't (they didn't post my column, either, which I always thought was kind of dumb). Police blotter? It's there. Real estate? Who's interested in real estate in Greenwich, Connecticut?

Wanna guess who's next on the bankruptcy rolls?. Here's the part I like best about this Florida entrepreneur's delusions:

Another current McKinney project is a $135 million spec home, The Manalapan Residence. This three-story 67,670 square foot home includes 14 bedrooms, 24 bathrooms, an 18 car garage, a 6,140 sq. ft. master bedroom suite, lavish Grand Rotunda room for entertaining, dual water walls, aquarium ceilings and walls, movie theatre, casino and club room with stunning aquarium wet bar, oceanfront gourmet family kitchen, catering kitchen, outdoor summer kitchen, his/her offices, 10 wet bars, two wine rooms (one for red, one for white), gymnasium with beauty salon, two swimming pools (classical lap and grotto waterfall/waterslide), shark tank, two elevators, bowling alley, tennis court with pavilion, archery range, 1/4 mile jogging/go cart track, butterfly gardens, Italian and Floridian gardens, sculpture gardens, citrus orchard, guest house, staff house, back-up generator, full home automation, and more.

One reader has suggested that Greenwich residents who want to build a dream house just wait a few months and take something off the hands of a failed builder for pennies on the dollar. If you're also thinking of a little vacation spot in Florida, you may want to apply that advice to our south, too.

Okay, land values are going up in some areas;Do you suppose we in Greenwich can develop a market for cute little blonde kids?

School construction delayed again

It's hardly a surprise that the Hamilton Avenue School project has again missed its latest completion deadline, as described above - use incompetent volunteers to oversee a construction firm with, to be generous, a dubious history involving numerous allegations of involvement with organized crime and you can probably predict the results. But now the same group of volunteers is about to undertake the reconstruction of Glenville School. Hmmm. We've witnessing dropping test results, an inability to bring school construction projects in on time or anywhere near budget and our response is to welcome back the Superintendent and set her and her minions off on another quest. I'm not sure that's the best way to run a railroad.

The Boys are back!

Ever wonder where drake mallards got to during the summer? Turns out, they molt and don brown feathers like the hens - who knew? Now that fall is approaching, they're molting back and will soon be their colorful selves once again. I don't think my little iPhone camera can show those feathers but if you click to enlarge you might get a glimpse of the change. Otherwise, take my word for it - how much have you got to lose?

Correction!
I'm not the New York Times (no s..., Sherlock), so I put corrections in a prominent place or, at least, as prominent a place as a blog with 200 readers a day gets. Anyway, I was wrong about police overtime pay being included in the calculation of their pensions. Here's what someone I assume knows what he's talkingabout wrote:

"When the Greenwich Police Officers work overtime at a construction job it is NOT part of their pension. NO overtime, including patrol and private jobs, is included, their pension is based on just their yearly salary. Just wanted to clarify that."

I still don't like paying cops to direct traffic at construction sites but at least we're not paying twice for that "service" once when they're out on the street and again when they quit.

I've hit the big time!

First bit of spam has arrived in the comments box. No doubt computer generated by my mention of homeopathic "medicine" (it starts, "In 2003, my company came up with a way to treat most viruses, using already existing, safe drugs. It's the subject of patents pending....")I deleted it before i finished so, alas, if you want to invest in this sure-fire winner, you'll have to wait for it to appear in your own spam box.

The fellow who kept posting obnoxious comments seems to have faded away once I switched from automatic posting to moderated and I was considering going back to the unfettered format but if the computers have found me, I guess I'll keep things the way they are, at least for now.

Another myth bites the dust, no doubt to be replaced by five more

Airborne, a supposed cold-preventative mix concocted by a school teacher and adored by Oprah, has just agreed to pay millions of dollars to settle a lawsuit brought by the government. Users are undeterred, of course, because the stuff works in their minds and presto. "It's hard to prove something doesn't work if you don't catch a cold" one regulator said, which brings to mind the old joke of the fellow who's found painting a long green line on a Vermont road. "Keeps elephants away", he explains to an inquirerer. "But there aren't any elephants around here", he's told. "Works pretty well, then, don't it?"

If you ever care to have your faith in the native intellegence of Greenwich residents shaken just a bit, stand by the counter at a CVS and watch presunably well-educated consumers pay big bucks for homeopathic remedies, all of which have been thoroughly debunked by the FDA, Consumer Reports and any scientist I ever heard of. Doesn't matter to these folks and it's not my money, so I don't care. Until I remember that they vote.

(White) elephant graveyard?
What's happening to the market for our mega-mansions? To no one's surprise but their spec builders, their prices are falling even as they remain unsold (well that's dumb - if they sold, their prices would stop falling, even if their value didn't, but you get the point). Today 40 Zaccheus Mead lane, originally listed in February 2007 for $11,200,000, dropped its price again, this time to $7,995,000, 30% below original ask. The real problem with this property is its yard - it doesn't have one - but that sky high price didn't help much.

Interestingly, this latest price drop places Zaccheus in direct competition with 8 Copper Beech, which does have a yard (but "only" 11,000 sq.ft vs 15,000). Which will sell first, and at what price? We'll see. Ten Copper Beech, built at the same time as #8 was, like #8, priced at about $9,500,000 last summer, but its builder accepted a bid of $8,050,000 last February and got rid of the place. Number 8's owner has now matched that price and in fact dipped a little below it at $7,995,000, but February was then and August is now. Different markets.

Finally, I see that my colleague and columnist for another paper has compared assessed value to selling price and concluded that all our homes increased in value the past year. That's comforting but I don't believe it - something is wrong with his methodology, I think. In any event, even he admits that sales have dropped a wee bit, like 30%. He says, don't worry, be happy. I'm less sanguine.

Does anyone at the New York Times know anything about business and how it operates?
This error in which the paper completely screws up the meaning of profit either reveals an abysmal lack of knowledge or an abiding faith in the economic stupidity of Time's readers. Or both. It must have hurt to correct it.

Even I don't want to see our oceans destroyed
Here's an alarming article that OwlGore and I can agree to worry about: according to this scientist, and he certainly seems to know what he's talking about, we face the extinction of life in our oceans and a sea of slime. Ugh.

Just want to let you know that I read all sorts of things, including articles from the other side of my usual thinking. Well reasoned arguments, good; hysterical rants from fat frauds on houseboats, bad.

Okay, we finally have a justification for the $500,000 Greenwich kitchen.
Humans got smarter because we cook. Of course in our town, that just means the staff is learning new tricks but in principle ....

One way out of a bad real estate decision

Investors.com has an informative article today on an alternative for troubled homeowners, giving the lender a deed in lieu of foreclosure. It's simpler (and cheaper, so less is wasted on attorney's fees or - and this hurts doubly - real estate agent fees), faster and, at least according to the article, protects your credit history. I don't know about this last feature, one way or the other, but I am aware of at least two instances in town where would-be builders are bailing out of their projects by exactly this procedure, so something must have appealed to them. You might want to check it out, if you find yourself in this situation.

I would think that, if it's your kids' home you're trying to protect, you'd want to fight to the bitter end but if you're involved with a failed spec project, reading the writing on the wall and turning the land, half-finished house, whathaveyou to the bank might make sense.

Russians using any and all weapons in their invasion, but brave folks are fighting back.
Two Georgians claim they have Big Foot's body.

Tom Friedman has been in the sun too long.
I assume that everyone reads James Taranto's "Best of the Web" column in the WSJ but just in case you missed it today, he does a wonderful job of deconstructing Mr. Friedman's claim that solar and wind power could be cost effective if only Congress would give them a jump start. Maybe, but only if Congress raises the price of all existing fuels sky high (scroll down to "Gas heads towards $19.84 a gallon") as Taranto proves with quotes from Friedman's own column. So really, Friedman isn't arguing that we can get affordable energy from these alternative sources but rather, if we jack up everything else, they might make the cut. Not an encouraging prospect for a healthy economy, I don't think.

Here's Taranto on Friedman:

Friedman fantasizes about a solution to the energy problem that "will take more than a Manhattan Project":

'It will require a fundamental reshaping by government of the prices and regulations and research-and-development budgets that shape the energy market. Without taxing fossil fuels so they become more expensive and giving subsidies to renewable fuels so they become more competitive--and changing regulations so more people and companies have an interest in energy efficiency--we will not get innovation in clean power at the scale we need.'

Such a massive exercise of government control over the economy is "cost effective" only in the sense that ignorance is strength and slavery is freedom.

Club Road, Riverside. Bad photo, decent house on a half acre. I stopped by today to review for a builder but, at just a bit more than $2.2 million, this wouldn't be a bad buy "as is" for someone who wants a bit of a renovation job. It needs updated baths and a new kitchen would be welcome, and central air couldn't hurt, but you could be on Club Road, among plenty of $4 million houses (and up) for under $3.

A reader sent me this link to an article on the end of our consumer culture as we know it. It's a tad depressing and I'm not as gloomy as its author but it's always useful to know what some investors are thinking. And besides, he might very well be right, which is a scary thought.

Olympics - who cares?
I haven't been watching the Olympics - not one minute of coverage - and I'm glad to see that I'm not the only one. I've never been a big fan of watching other people pound water and as for large Armenians sweating over dumb bells well heck, I'll give that a pass, too. And while I admire the Chinese people, I detest the dictators who run their country so there's that, too. Plus, there's the cheating by officials.I'll be curious to see what the final ratings are; for all I know, it's just a handful of kooks like me boycotting the damn things and the rest of the country's glued to the set. Fine with me - enjoy.