Archive for December, 2010
By Steve Goldstein
I attended the grand opening of The Ascent Residences earlier this week. The new owners have done a nice job remodelling the interior and exterior. They kept the condos themselves intact. Of the 49 residences, 25 will be in the first release. Opinions from the broker community was mixed but many thought that with the upgrades and new pricing the entry-level 2-bedroom condos will move quickly. I’m personally taking a wait and see attitude. The one addition I would have liked to see would have been an aerial walkway to Avon and The Westin Gondola. Crossing highway 6 is problematic. But I’m hoping they are successful. It’s always nice to see new product on the market.
As promised, click on this link to see the THE ASCENT Price List.
What a fabulous day at The Beav. I made it up for a few runs this afternoon. Here’s a rundown:
1. Redtail to lower Goshawk – Redtail had been groomed and the snow was grippy and soft. Lower Goshawk was soft tracked-up powder with baby bumps.
2. Goshawk – Probably my favorite run on the mountain. It was wonderful. The power had been skied but there were still powder patches to be found. The bumps were small and friendly. There were a few twigs sticking up but easily avoidable.
3. Yarrow – soft powder that had set up slightly but still great skiing. Yarrow is such a hidden treasure.
4. Osprey on Grouse Mountain – Believe it or not, I didn’t hit a rock on Grouse all day. Osprey was also soft tracked-up snow with small bumps that were quite manageable.
5. Larkspur – I skied skier’s left in the small bumps that form on the side of the groomed run. I really like practicing my bump skiing on this run. The bumps were fairly well-formed and there were some great lines.
6. Screech Owl to Ptarmigan on Grouse Mountain – I like entering the lower entrance to Screech Owl. It is steeper but a longer run that is not well-known. I found many stretches of 9 inches of untracked powder! It was heaven.
7. Centennial to Gold Dust to Assay – By now my legs were burning. I enjoyed a fun groomed run to the bottom.
What a wonderful start to the ski season. Beaver Creek is skiing like the world-class resort it is.
Housing is the Forgotten Crisis
But what about the rest of us? When does the recovery kick in?
The stock market has finally climbed back where it was on that fateful weekend when Lehman Bros. filed for bankruptcy, but there has been little relief for the average family.
For typical Americans, two things determine their financial well-being: Their job and the equity they have in their home. They get almost all of their income from wages and salaries, while most of their wealth is tied up in their house. When wages and house prices are rising, they are confident. When wages and house prices are falling, they are fearful.
Policy makers may have rescued the banks, but they haven’t figured out a way to bring back the jobs that were lost, nor have they found any answer to the problem that was the nucleus of the crisis: housing.
There’s been a lot of focus on employment in recent months by voters, politicians and economic analysts. The big question in Washington has been what can be done about the unemployment rate, which has been stuck near 10%. Hence the salesmanship of the two parties to market the tax bill as a way to create jobs.
But there’s been less attention paid to the other part of the family balance sheet: housing.
Building on a bubble
Housing is the forgotten crisis.
It wasn’t always so neglected. Early on in the downturn, the government dug deep into its policy tool kit to find answers for the collapse of housing.
They lowered interest rates in an effort to boost affordability. They took over Fannie Mae and Freddie Mac, and they told the Federal Housing Administration to lend freely. The Federal Reserve purchased more than $1 trillion in mortgage-backed securities and bonds to support housing. They approved tax credits for buyers, and extended those credits several times. They tried to get lenders to modify loans.
Nothing has worked. At least, not well enough. The housing market is still dead, and worst of all, prices are falling again.
For a while, it seemed as if housing was at least bottoming out, if not improving. The low mortgage rates and tax credits boosted sales, but only temporarily. And when sales fell back, so did prices.
Nationally, home prices are down about 30% from their peak. In some cities, such as Phoenix and Las Vegas, prices are down more than 50% from the high point, according to the Case-Shiller home price index.
According to the CoreLogic home price index, home prices fell 1.8% in September, the fastest decline since early 2009. Other price measurements tell the same story of falling prices since mid-summer. Recently, Fitch Ratings projected that prices would fall another 10% in 2011.
According to the Fed, the decline in home prices in the third quarter subtracted about $584 billion from the equity Americans have in their homes.
More trouble ahead
Since early 2006, American families have lost $7 trillion in home equity — more than half of their equity has simply vanished. Many millions, of course, have lost everything they put into their house, and more.
Years of blood, tears and sweat equity gone. Remember, for most families, home equity accounts for most of their wealth. In the past, wealth in the form of home equity has often been the ticket to upward mobility; many a small business or college education has been funded from real estate wealth.
About 11 million families — about 23% of those with mortgages — now owe more on their house than it’s worth. Before the bubble burst, that figure was about 1%. About 5 million families owe at least 25% more than what their house would sell for; they are so far underwater that it could take a decade or more to regain any equity.
Another 2 million families could go underwater if their house loses 5% of its market value.
The impact of that much lost wealth could be severe if it continues, but the most recent declines haven’t had any visible impact on the economy. Housing remains invisible.
Rising housing wealth helped drive consumer spending in the middle of the last decade. The best guess by economists is that consumers will spend about a nickel more if their housing wealth rises by $1, or spend a nickel less if wealth falls by a dollar. The bubble boosted consumption by about 6 trillion nickels. .
When prices started to fall in 2007, consumers cut back on their spending, which helped to push the economy into a deep recession. Lately, consumers have been spending more freely, but with prices dropping again, consumers might get tight-fisted.
The upper middle class and the rich, of course, haven’t slowed down. Spending isn’t as volatile for them as it is for the rest of us. Their holdings of stocks, mutual funds and other financial assets are worth more than their home equity, so they feel richer than they did a year ago.
Not so for those in the middle or bottom of the income scale, who have fewer financial resources to buffer themselves from economic shocks. For them, the recession never ended. And it might be getting worse.
Rex Nutting is Washington columnist and international commentary editor for MarketWatch.
I’ve been very busy lately with my real estate business but broke away yesterday for a fabulous morning of skiing. It was a “blue-sky” Colorado day. Warm and sunny. The conditions were excellent and the crowds minimal. See the photos below.
I skied Redtail, Larkspur Bowl, Bachelor Gulch, and the front of The Beav. I decided to risk the early season conditions and ski Grouse Mountain. I was pleasantly surprised. The snow was soft and the bumps were small. There were only a few rocks poking through. I was concerned about my newly tuned skis but managed to ski Grouse unscathed. I stopped to say hello to Kim in her office in Bachelor Gulch. Overall, a wonderful day on the slopes.
As expected, mortgage rates have begun to rise, particularly in light of the recent move by the Fed. According to Freddie Mac’s weekly survey of conforming mortgages released on Thursday, mortgage rates climbed this week with the average rate on the 30-year fixed-rate mortgage at its highest since the end of June. Rates on the 30-year mortgage averaged 4.61% for the week ending Dec. 9, up from 4.46% last week. It’s the fourth week in a row that the mortgage rate rose; it averaged 4.81% a year ago.
General improvement in the economy over the last couple of weeks has also had an influence on the rise in rates, said Keith Gumbinger, vice president of HSH Associates, in an email. HSH is a publisher of consumer loan information.
Plus, after the election, political uncertainty has passed. With the latest agreement in Washington, some of the tax-rate uncertainty is removed from the equation, he said.
“With some greater certainty comes greater clarity and confidence about the durability of the recovery, and investors seem to be shifting at least some holdings out of ‘safe haven’ spots in favor of other opportunities,” Gumbinger said.
He also points out that while mortgage rates are on the rise, it’s important to keep the increase in perspective.
“Rates are still well below this time last year, when people were basically climbing over one another to get to them” if they could qualify, he said. “Rates are still outstanding, just no longer unbelievably low,” he said.