Well it's been another month and here abouts commercial construction is cratering.
Buildings are being abandoned in mid-construction.
The construction loan portfolio is imploding.
Industry experts are claiming that commercial real estate values have dropped 40% from the peak with another 33% drop from today's prices yet to come.
I had hoped for a sharp severe contraction that would set the stage for a snappy rebound like 1920 thru 1921.
However neither Bush nor Obama operates like President Harding: both committed to re-floating the 'bubbleers.'
The net effect is that the common man is subsidizing the high income crowd: making their bad investments government property/ blown money.
It would be better for everybody if the financial hits were taken by the highly geared speculators who made millions if not billions on the way up.
Unfortunately we have the best Congress that money can buy.
The water-drip torture of chronic erosion of real estate value -- particularly land -- just kills the construction trades.
Why Congress can't take us back to the old system that worked is a mystery. It's plain that no one wants to invest in mortgage backed securities anymore.
It's also plain that the US government is now the banker of first resort for residential mortgages: Fannie and Freddie are government owned as well as being government sponsored.
And with the government not allowing the big banks to fail under any circumstances they must be considered government sponsored enterprises.
Considering the government track record at the VA and the Post Office and at HUD -- yiikes!
10yr Treasury Notes are trading at 3.7% today. That implies that 30yr mortgages will soon be trading at 5.75%. ( These two rates bounce around a spread of 2 percentage points 97% of the time.)
Jumbo mortgages ( beyond $417,00; used for the McMansions ) are trading at 8% !
Right now the only ports in the hurricane are solar power and foreclosure rehabilitations. Since many of those really need the wrecking ball I recommend cross-training on excavators with a 'thumb.'
