Richard Suttmeier: Home Prices Could Fall Another 50%

Home Short Sales Bring Real Estate Prices Down

The housing market continues to deteriorate.

Thursday’s report on May pending home sales was down 30% from the prior month and nearly 16% vs. a year ago.

The market weakness spans the country. Sales in the Northeast, Midwest and South fell more than 30%, the bright spot, the West, only fell 21%.The news comes after last week’s record low new home sales in May, which plummeted nearly 33%. Experts say the expiration of the new homebuyer tax credit is to blame for the sudden market softness.

Unfortunately, the market could get worse and prices could fall further, says Richard Suttmeier of ValuEngine.com. High unemployment and struggling community banks are two main causes. Saddled with bad housing and construction loans, local banks will continue to restrict lending.Plus, the failure of the Obama administration’s mortgage modification program means a steady flow of short sales. “People are going to be surprised when they see there have been short sales,” which negatively impact appraisals in the local community, says Suttmeier.How low can prices go?Using the S&P/Case-Shiller index as his guide, Suttmeier suggests homes across the country could lose half their value. “If it gets back, like stocks, back to the 1999-2000 levels, that’s another 50% down in home prices,” he says.

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“The Worst President in My Lifetime”, Howard Davidowitz on Obama

President Obama is having a rough go of things lately. As noted here last week, for the first time in his presidency, more Americans disapprove of Obama (48%) than approve of him (45%), according to the latest WSJ/NBC poll. And 62% say the country is headed in the wrong direction.“The American people are right,” says Howard Davidowitz of Davidowitz & Co. A critic of Obama’s, from the start, Davidowitz refers to him as the “worst” President of his lifetime, even worse than of Jimmy Carter, based on: * — The War in Afghanistan: Davidowitz doesn’t see the point. As far as he can tell, after 7 years, hundreds of billions spent, and thousands of U.S. lives lost, the Afghans still can’t defend against the Taliban. Plus, the Afghan government is stealing billions in aid from the U.S. The WSJ reports, $3 billion in U.S. aid has been loaded onto planes by corrupt officials and flown out of the Kabul airport since 2007. “If they can’t be trained, if they’re stealing all our money, all our soldiers are dying. I don’t understand how any of this is logical,” proclaims Davidowitz. * — Out of Control Spending: Davidowitz thinks Obama has wasted time and taxpayer money pushing ‘Obamacare’ into law at a time when the debt-to-GDP ratio is expected to hit 62% by year’s end. “We’re going broke because of Medicare, Medicaid and everything else. He added another benefit, health-care. Can you explain that to me?” * — BP Oil Spill: “It could destroy the country,” he says. Davidowitz fears the continued loss of hundreds of thousands of barrels of oil per day will drive gas prices higher, further choking and already struggling consumer. Meanwhile, he questions why the President waited 50 days to contact BP executives. Davidowitz recognizes Obama was handed a difficult hand upon entering office, and admits the political system is dysfunctional. Actually, in the many times Davidowitz has appeared on Tech Ticker he’s rarely had a nice thing to say about any politician, regardless of party. What he’d like to see is a return to fiscal responsibility, lacking these days. “Ross Perot did a huge service to this country when he ran because all he talked about was the budget and what was going on and it forced Clinton to deal with it,” Davidowitz says.

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Howard Davidowitz says Wall Street is A Ponzi Scheme with Lies and Fraud

Day one of the Financial Crisis Inquiry Commission’s two-day hearing on AIG derivatives contracts featured testimony from Joseph Cassano, the former head of AIG’s financial products unit. Goldman Sachs president Gary Cohn was also on the Hill.Meanwhile, the Democrats are still trying to salvage the regulatory reform bill, with critical support from Senator Scott Brown (R-Mass.) reportedly still uncertain.According to Howard Davidowitz of Davidowitz & Associates, what connects the hearings and the Reg reform debate is the lack of focus on the real underlying cause of the financial crisis: Fraud.”It was a massive fraud… a gigantic Ponzi Scheme, a lie and a fraud,” Davidowitz says of Wall Street circa 2007. “The whole thing was a fraud and it gets back to the accountants valuing the assets incorrectly.”Because accountants and auditors allowed Wall Street firms to carry assets at “completely fraudulent” valuations, he says the industry looked hugely profitable and was able to use borrowed funds to make leveraged bets on all sorts of esoteric instruments. “Their bonuses were based on profits they never made and the leverage they never could have gotten if the numbers were right – no one would’ve given them the money in their right mind,” Davidowitz says.To date, the accounting and audit firms have escaped any serious repercussions from the credit crisis, a stark difference to the corporate “death sentence” that befell Arthur Anderson for its alleged role in the Enron scandal.To Davidowitz, that’s perhaps the greatest outrage of all: “Where were the accountants?,” he asks. “They did nothing, checked nothing, agreed to everything” and collected millions in fees while “shaking hands with the CEO.”

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Let Bad Banks Go Broke – says, Howard Davidowitz – Otherwise All These Bailouts Will Crush The Economy

Howard Davidowitz is a bear on America. If you’ve watched any of the recent clips, you know he’s negative on stocks, the economy and the political system. (If you haven’t seen them, check the links below.)Much of Davidowitz’s frustrations stem from the bailout of our financial system. “If a bank is bad, you let it go broke,” he says. “The bondholders lose their money, because they should. The stockholders lose their money, because they should. Lots of people get fired job, because they should. That’s the solution to the problem.”In the 1980s, Davidowitz’s firm worked on the restructuring of then struggling retailer Toys “R” Us. “We kept the good, we cut the bad. That’s how restructuring works,” he says. The national retail chain was cut down to 13 stores, but was kept alive. Today, the company is preparing for an IPO, five years after private equity giant KKR purchased the company for $6.6 billion. Again, Davidowitz believes the same measures should have been taken with the banks. Sure, bankruptcy is a painful solution in the short-term, but he believes the government’s rescue of some of our biggest financial institutions has had, and will continue to have, catastrophic economic consequences. As economist and Carnegie Mellon professor Allan Meltzer once said: “Capitalism without failure is like religion without sin.”

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Howard Davidowitz says, U.S. Economy is a Complete Disaster

The U.S. economy is in shambles and Americans will continue to see high unemployment and lower living standards in the years to come, Howard Davidowitz tells Henry and Aaron in the accompanying clip. Davidowitz lays much of the blame for the economy’s woes at the feet of the Obama administration, which he calls “the worst of my lifetime.”Obama “Mr. Mass Destruction”Davidowitz says that the key to Obama’s success is his ability to sell his policies to the public. He can confidently read from a teleprompter and appear competent and in control, when in reality, “it’s one big bag of empty words,” Davidowitz says of Obama’s messages.Davidowitz contends that the President’s spending, including the health-care bill, is creating massive deficits that will take the U.S. years to dig itself out of. “He is Mr. Mass Destruction,” Davidowitz says of Obama. “I mean he is a human destroyer. This guy has spent his way into oblivion and we don’t have a budget. He is surrounded by a bunch of complete incompetents, led by himself. “Housing GloomAs far as the actual economy goes, Davidowitz’s chief concern is the strained state of the housing market, from which the bad news continues to pour in. According to Davidowitz, Americans are facing an $8 trillion negative wealth effect from the bursting of the housing bubble.”We’re talking about some serious money here,” Davidowitz exclaims. “I mean this is a complete disaster and that’s why we are going to have a double dip. We’re guaranteed a double dip in housing.”Small Businesses and UnemploymentDavidowitz says that the job market is also in ruins, noting for every new job there are six applicants. As a result of the intense competition for positions, employers can offer lower wages. Young people entering the work force today can expect to make less money in their lifetime than previous generations. Considering the majority of new jobs are created by small businesses, Davidowitz argues that new regulations governing loans to small businesses are only making matters worse — both for the entrepreneurs and the millions of people out of work.”We have this insane new regulation,” Davidowitz says. “Community banks will not even be able to fill out the forms. They’ll pack up and quit. They’re already underwater. Commercial real estate is still terrible.” The Future a Massive StruggleAsked whether he thought the U.S. would experience another Great Depression, Davidowitz said the coming years will look more like Japan today vs. the U.S. in the 1930s.People will be making and spending less money and the nation as a whole will be dealing with the consequences of the deficit, he says. “We are in a struggle, day by day it’s ugly. At the core, when we look at our debt, we are going to have to deal with it.”A few months ago, while other analysts claimed that the economy would continue to follow a V-shaped recovery path, Davidowitz seemed out of step by insisting the nation’s problems were still dire. Regardless of what you think of his message or style, Davidowitz’s doom and gloom outlook now appears much more credible.

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Davidowitz wall st. d.c. bigwigs “buried our country … they sold us down the river”

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Howard Davidowitz is Yahoo Tech Ticker’s Best of 2009

Howard Davidowitz – Listen to this guy

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Commercial Real Estate Market – Next Shoe to Drop

Great Dpression Homless Man

Great Depression Homless Man

NYC Commercial Real Estate Wreckage

Here’s the scary thing about the commercial real estate situation:   It’s not even starting to get better, actually — Things are still getting worse faster says Moody’s.

The Moody’s Delinquency Tracker (DQT) measured a 41 basis point increase in the month of September. The DQT now stands at 3.64%. This represents a 310 basis points increase over the same time last year. The DQT is now nearly 350 basis points higher than the low of 0.22% reached in July 2007.

September had the largest monthly basis point change in the history of the tracker. The 41 basis point increase is slightly larger than the increases in May and June earlier this year. The tracker resumed its large monthly growth after a lower than average change in August.

The average rise in delinquency in the past six months is 34 basis points. This compares to a three basis point average increase for the same six month period in 2008 (April through September). In 2009 the delinquency rate has risen 269 basis points, nearly tripling since the beginning of the year.

The PBS NewsHour took a look at the bearish obsession du jour, the commercial real estate market.  Real estate analyst Bob White took them around to show some of the ugliest cases out there in New York City.

http://www.businessinsider.com/a-guided-tour-of-nyc-commercial-real-estate-wreckage-video-2009-10

Moody’s Delinquency Tracker - Commercial Real Estate

Moody’s Delinquency Tracker - Commercial Real Estate

“In the Tank Forever” U.S. Consumers Retailers in a “Death Spiral” Davidowitz Says: Tech Ticker, Yahoo! Finance

Retail maven Howard Davidowitz paid another visit to Tech Ticker this week. And despite signs of improvement in consumer confidence and retail stocks rising, Davidowitz is steadfast in his belief the consumer is dead.Rather than summarize, let me just highlight some of his best one-liners:On retail: * “The retail business is terrible… It’s almost all negative.” * “We’re going to close hundreds of thousands of stores.” On the consumer: * “They’re still over leveraged, they’re losing jobs, their credit has been cut back.” On America: * “We are in the tank forever. As a country we are out of control, we’re in a death spiral.” On the stock market: * “We’re in terrible shape. That’s what the fundamentals tell me. I can’t explain the stock market.”But it’s not all gloom and doom, believe it or not. Davidowitz, who runs a retail consulting firm Davidowitz and Associates, thinks certain discount retailers, grocers, drug store chains and a select few department stores can survive and prosper in the future.Most notably he likes the “extreme discounters” like Family Dollar, Dollar Tree (which was up almost 5% Tuesday after the company raised its outlook) and 99 Cents Only Stores. And, in the department store sector, he says, Kohl’s will “be the only winner” because of their cost controls. (Davidowitz has no positions in stocks mentioned.)

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“The Worst Is Yet to Come” If You’re Not Petrified You’re Not Paying Attention: Tech Ticker, Yahoo! Finance

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The green shoots story took a bit of hit this week between data on April retail sales, weekly jobless claims and foreclosures. But the whole concept of the economy finding its footing was “preposterous” to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.”We’re in a complete mess and the consumer is smart enough to know it,” says Davidowitz, whose firm does consulting for the retail industry. “If the consumer isn’t petrified, he or she is a damn fool.”Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: “The worst is yet to come with consumers and banks,” he says. “This country is going into a 10-year decline. Living standards will never be the same.”This outlook is based on the following main points: * With the unemployment rate rising into double digits – and that’s not counting the millions of “underemployed” Americans – consumers are hitting the breaks, which is having a huge impact, given consumer spending accounts for about 70% of economic activity. * Rising unemployment and the $8 trillion negative wealth effect of housing mean more Americans will default on not just mortgages but student loans and auto loans and credit card debt. * More consumer loan defaults will hit banks, which are also threatened by what Davidowitz calls a “depression” in commercial real estate, noting the recent bankruptcy of General Growth Properties and distressed sales by Developers Diversified and other REITs. As for all the hullabaloo about the stress tests, he says they were a sham and part of a “con game to get private money to finance these institutions because [Treasury] can’t get more money from Congress. It’s the ‘greater fool’ theory.””We’re now in Barack Obama’s world where money goes into the most inefficient parts of the economy and we’re bailing everyone out,” says Daviowitz, who opposes bailouts for financials and automakers alike. “The bailout money is in the sewer and gone.”