Bo’s News Clips: DOJ sues S&P

As the housing industry slowly recovers, another suit is filed by the Justice Department for business malpractices that fueled the market meltdown. Standard and Poor will now have to justify reasons they inflated ratings of shabby stocks.

Meanwhile, the sale of million-dollar homes has never missed a beat as the well-heeled remain unaffected by the poor economy and flip expensive properties among themselves.

For a pdf version of the full stories, plus contextual articles on social, environmental and legal areas, contact Bo McCarver at bmccarver@austin.rr.com

 

Justice prepares civil suit against S&P over grading of financial products before crisis

By Jia Lynn Yang      Washington Post      February 4, 2013

The Justice Department is preparing to file a civil lawsuit against the ratings agency Standard & Poor’s centered on the company’s alleged misgrading of complex financial products at the heart of the financial crisis, according to an announcement by the firm Monday.

The country’s ratings agencies have been blamed for playing a major role in causing Wall Street’s meltdown four years ago. The Justice Department’s lawsuit would mark the first enforcement action against one of the country’s biggest ratings firms — after years of concern that the government has not pursued such cases aggressively enough.

Many observers, including the Financial Crisis Inquiry Commission, have criticized the agencies for giving top-notch ratings to financial products that were in fact dependent on shoddy mortgages. When the housing bubble burst and homeowners began defaulting on their loans, the products became worthless, setting in motion a crisis on Wall Street and then in the broader economy.

Full story at: http://www.washingtonpost.com/business/economy/justice-prepares-to-file-civil-lawsuit-against-sandp-over-alleged-misgrading/2013/02/04/e3605b5e-6eff-11e2-ac36-3d8d9dcaa2e2_story.html

 

US housing recovery gains steam

BBC      January 30, 2013

The US housing market rebound gained steam in November, new data suggests.

House prices were 5.5% up on a year ago, according to the widely-watched Case-Shiller index, the fastest rise since the market crash began in 2006.

However, separate data suggested US consumer confidence took an unexpected knock in January, as rises in income and payroll taxes came into effect.

The Conference Board’s Consumer Confidence Index fell sharply to 58.6 in the month, from 66.7 in February.

It was the lowest reading in more than a year. Analysts had been expecting a level of about 64.

“Consumers are probably pretty unhappy to notice that their payroll taxes have gone up,” said David Sloan, an economist at New York-based researchers 4Cast.

Full story at: http://www.bbc.co.uk/news/business-21250912

 

In hot market, home builders turn to IPOs

By John Gittelsohn        San Francisco Chronicle      January 31, 2013

Tri Pointe Homes Inc., a housing company financed by investor Barry Sternlicht, jumped after raising $233 million in the first initial public offering by a U.S. home builder since 2004.

The Irvine company and shareholders sold 13.7 million shares for $17 each, above the marketed range of $14 to $16, Tri Pointe said Thursday. The stock gained 12 percent on the day to $19.05.

Home builders are turning to debt and public-equity markets to raise cash as buyer demand for new construction rises amid low mortgage rates and a shrinking supply of existing residences for sale. Builders are expected to break ground on 650,000 single-family homes this year, up 22 percent from 2012 and about half the “normal” pace of 1.3 million annual starts, the National Association of Home Builders said in a Jan. 22 report.

Full story at: http://www.sfgate.com/realestate/article/In-hot-market-home-builders-turn-to-IPOs-4241068.php

 

Home prices rise in most cities

San Francisco Chronicle     January 30, 2013

Home prices in 20 U.S. cities rose in November from a year earlier by the most in more than six years, indicating the U.S. housing rebound is gaining ground.

The S&P/Case-Shiller index of property values increased 5.5 percent from November 2011, the biggest year-over-year gain since August 2006, a report showed Tuesday.

Nineteen of the 20 cities in the index showed a year-over-year gain, led by a 22.8 percent jump in Phoenix and a 12.7 percent increase in San Francisco.

Home prices adjusted for seasonal variations climbed 0.6 percent in November from the prior month, matching October’s increase. New York was the only city to show decreases both month to month and year to year. Over the 12-month period, values in the city decreased 1.2 percent.

End of story: http://www.sfgate.com/business/article/Home-prices-rise-in-most-cities-4234072.php

 

Home price rise fuels fear of boom mentality

Sharp increases in some markets could lead to a short-term mind-set, leading buyers to overextend themselves, some economists warn. The 20-city composite price is up 5.5% from a year ago.

By Alejandro Lazo        Los Angeles Times        January 30, 2013

Sharp home price increases — particularly in once-decimated cities such as Phoenix and Las Vegas — are raising concern among some economists that speculation could return to certain markets if such double-digit gains continue.

Prices jumped 22.8% in Phoenix and 10% in Las Vegas in a year, according to November data released Tuesday from the S&P/Case-Shiller indexes. Such increases could fuel a short-term mind-set, economists warned. California cities are also on the upswing, with San Diego rising 8%, Los Angeles up 7.7% and San Francisco increasing 12.7%.

Those gains are likely to grow when data for December are reported next month, economists said.

“It’s been a real roller-coaster,” said Karl E. Case, one of the creators of the index. “And there is a danger of igniting it again.”

Full story at: http://www.latimes.com/business/la-fi-home-prices-20130130,0,6688012.story

 

Million-dollar home sales soared in 2012

By Carolyn Said        San Francisco Chronicle      February 1, 2013

Led by an eye-popping $117.5 million paid for a Woodside mansion – the most expensive U.S. home ever – luxury properties in the Bay Area and California saw sales surge in 2012, according to real estate reports.

Mansions that had languished on San Francisco’s Billionaire’s Row were finally snapped up last year. Well-known moguls from tech and finance poured money into real estate. Expansive estates in Silicon Valley drew publicity-shy billionaires who set up shell companies to shroud their identities.

In the nine-county Bay Area, 11,041 properties changed hands in 2012 with sales prices above $1 million, up 29 percent from 2011, according to real estate service DataQuick of San Diego.

Of course, around here, a million dollars doesn’t necessarily buy a mansion. That price tag can easily adorn a two-bedroom condo in San Francisco, a run-down ranch in Palo Alto, or a suburban tract house in Moraga.

“Virtually all home sales in some communities were in the $1 million-plus category,” DataQuick said, listing Ross, Los Altos, Atherton and Hillsborough as Bay Area towns where that was the case. Hillsborough had 422 million-dollar-plus sales in 2012.

Full story at: http://www.sfgate.com/business/article/Million-dollar-home-sales-soared-in-2012-4244363.php

 

FHA to hike mortgage insurance premiums

Other changes, fees aimed at shoring up agency’s finances

By Mary Ellen Podmolik         Chicago Tribune        January 30, 2013

The Federal Housing Administration announced Wednesday that it will increase the mortgage insurance premiums it charges as part of several steps being taken to shore up its finances.

The agency also will require borrowers to pay mortgage insurance for the life of the loan.

Annual mortgage insurance premiums will rise by 0.10 percent for most new mortgages and 0.05 percent for loans of $625,500 or more.

In addition, homeowners with FHA-backed mortgages will be required to continue paying the premiums, based on the unpaid balance, for the life of the loan. Premiums no longer will be canceled when a homeowner has repaid 22 percent of the loan’s principal.

Down payment requirements for loans of more than $625,500 will increase. Instead of the current 3.5 minimum down payment, borrowers will have to put down 5 percent.

It also will become more complicated for borrowers with low credit scores and high debt-to-income ratios to get a loan. Other changes are planned for the agency’s reverse mortgage program.

The changes, which will apply to new loans, will be officially announced in the coming days, according to the FHA.

Full story at: http://www.chicagotribune.com/business/breaking/chi-fha-to-hike-mortgage-insurance-premiums-20130130,0,2738461.story

 

Council Split on How – and When – to Fund Housing

City scrambles to finance what voters rejected

By Mike Kanin       Austin Chronicle        Feb. 1, 2013

The November failure of a $78 million bond question that would have funded six years’ worth of affordable housing efforts has made for some interesting times at City Hall. In the scramble to replace what activists and politicos alike would have double-underlined as a fiscal necessity, Council members took two actions: The first was a December resolution (courtesy of CMs Laura Morrison and Kathie Tovo) pushing for a wide-ranging look at what the city could do on its own to fill affordable housing gaps; the second is a recent call from Mayor Pro Tem Sheryl Cole and Council Members Bill Spelman and Chris Riley for a fresh run at the ballot box.

In December, the Morrison and Tovo action called for City Manager Marc Ott to scour city books and “identify between $8 million and $10 million in potential resources that would allow the City to realize near-term opportunities for affordable housing projects and programs.” Such programs, suggested the resolution, could include as much as $4.5 million for a program that, through the Texas Department of Housing and Community Affairs, could bring back as much as $30 million in federal tax credits for housing. Both figures have since dropped. But the March 1 deadline remains.

Full story at: http://www.austinchronicle.com/news/2013-02-01/council-split-on-how-and-when-to-fund-housing/

 

How Dallas is Throwing Away $4 Billion

How can downtown attract new investment? Swing a wrecking ball.

by Patrick Kennedy        D Magazine      February 2013

As you undoubtedly know, the city of Dallas celebrated the opening of Klyde Warren Park in October. The green expanse stretching over Woodall Rodgers Freeway brought 44,000 visitors on opening weekend to the nexus of Uptown and downtown. A wonderful achievement, indeed. But what if I told you that for the same cost Dallas could have three or four more new urban parks plus generate $4 billion in private investment? All we have to do is get creative with a short stretch of highway.

IH-345 is the obscure official name for the sinuous, 1.4-mile elevated freeway that runs between downtown and Deep Ellum. It connects 75 to I-30 and I-45. It’s on year 39 of a 40-year lifespan and has already been repaired three times in the past 12 years. It has 487 fatigue cracks and spot welds. The Texas Department of Transportation has offered two recommendations: either keep repairing the old road or rebuild it entirely, at a price likely in the hundreds of millions. There is a third option, though, and it’s not getting the consideration it deserves. 

As an urban designer, I’ve been thinking about this highway for quite a while. Two years ago, a friend in real estate development and I were critiquing the various plans for downtown. No proposal to date effectively flipped what we saw as an upside-down real estate market. Land costs are too high, and demand is too low. The costs are driven up by owners holding underdeveloped land as they wait for a windfall when the next high-rise condominium tower lands on their parking lot. And demand is low because freeways have funneled it away from the city, out to the suburbs. So my friend and I began a two-year study of the IH-345 area, its traffic patterns, and the potential for redevelopment. Our conclusion: the highway should be torn down.

Full story at: http://www.dmagazine.com/Home/D_Magazine/2013/February/How_Dallas_is_Throwing_Away_4_Billion_Dollar_Investment.aspx

 

Homeless count shows 40 percent drop in Travis County

By Andrea Ball      Austin American-Statesman       February 4, 2013

The number of Travis County homeless people found living on the streets, in the woods, under bridges and in shelters has decreased 38 percent since 2008.

In 2008, 3,451 homeless people were found in the annual point-in-time count, an effort in which volunteers spend 24 hours finding and interviewing people without permanent homes. This year, 2,121 homeless people were discovered.

The count is conducted by the Ending Community Homelessness Coalition and other social services organizations. Some advocates for the poor say the numbers show that housing initiatives are getting more people off the street.

Full story at: http://www.statesman.com/news/news/homeless-count-shows-40-percent-drop-in-travis-cou/nWFn8/