Continue Reading December 31st, 2008
Steve Wynn’s new Encore resort is just what Vegas doesn’t need right now–more high-end hotel rooms. Some friends of mine just stayed at the nearby Venetian resort for just $119 a night with $100 in restaurant and other credit thrown in as an enticement. They said they’d never seen the Strip so free of traffic.
The tough economy and abundance of rooms has casino builders doing their best to cut back. Among the high profile projects that have been shut down or put on hold in recent years are Boyd Gaming’s Echelon resort, George Clooney’s Las Ramblas, a Waldorf=Astoria and a W hotel.
A new report from Deutsche Bank analyst Bill Lerner screams “We have never tracked a greater number of stalled projects in Las Vegas than today,” some 41,000 new room cancelled. “What a difference two years makes.”
Lerner now forecasts that 25,000 new rooms will open over for the next three years. That’s half what he had been predicting a year and a half ago. Lerner figures at least one more project could enter the “bone yard.” Among the new ones still expected to open, MGM’s massive City Center in late 2009 and the Fountainebleau in 2011.
The city’s condo hotel market has also taken a hit.
According to Lerner: “Since the end of September, we have identified only 37 units closed
at the four actively closing high-rise condo / condo-hotel projects
we track (Allure, Palms Place, Panorama and Trump 1; there have been
no additional closings at MGM’s Signature III since we began tracking
earlier this year). This works out to be just over three closures per
month per project, or significantly below the theoretical average of
100 units per month per project in the prior economic environment.
Palms Place has now closed nearly 60% of its units, while Allure
(condo-only) has closed nearly 50%, with Trump 1 still below 25%
closed.”
Still. a recent review of the Encore in the Los Angeles Times concludes: “That dry desert floor outside town is littered with the corpses of pundits who have proclaimed that Las Vegas is overbuilt. And there’s probably a special section in that cemetery for people who underestimated Steve Wynn.”
Happy New Year everybody! Here’s to a better time in ‘09.
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Continue Reading December 31st, 2008
Rates on mortgage loans are the lowest in the 37-year history of the Freddie Mac Primary Mortgage Market Survey, according to a weekly report released Wednesday.
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Continue Reading December 31st, 2008
Credit where credit is due: Peter Schiff of brokerage Euro Pacific Capital saw this housing bust coming from a mile away. To prove his perspicacity, his brother (and p.r. agent) Andrew Schiff is recirculating some of the pieces that Peter wrote back in 2004, when most of us were just getting excited to be out from under the shadow of the 2001 recession and subsequent jobless recovery.
Here is what Andrew sent me after seeing my recent blog post about March 2004.
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Wednesday, February, 25 2004
There He Goes Again
In recent months the statements of Fed Chairman Alan Greenspan have become increasingly confusing and self-contradictory. So much so, that an impartial observer must conclude that his motives are somewhat less than honest.
This week, the Chairman was true to form as he continued misleading the public with respect to the enormous risks facing the U.S. economy. Rather than expressing an obvious concern over the increasing use of adjustable rate mortgages (ARM’s) he instead praised them, encouraged greater use, and expressed regret that too many homeowners were wasting money on fixed rate mortgages. In the same speech he declared that the high levels of consumer debt did not concern him because the cost of servicing that debt was so low. Given that reality, one would assume he would hope most borrowers would lock in those low rates. After all, when rates do ultimately rise, higher rates would certainly make the debt load unmanageable. These comments are even more peculiar given the concerns he expressed the following day over the mortgages insured by Fanny Mae and Freddie Mac, as ARM’s have a much greater default risk than do traditional fixed rate mortgages!
Rather than a reflecting the sophistication on the part of savvy American home owners, as Greenspan suggests, the reality is that most homeowners are choosing ARM’s because that it is either the only way they can afford to buy a home, or it is the only way they can afford to make ends meet. The average ARM is 50% larger than the average fixed rate, suggesting that the larger the mortgage the more likely it is that the borrower needs the lower payments to qualify. Also, financially distressed homeowners typically refinance fixed rates mortgages into ARM’s to save money. In so doing, they trade the benefits of lower current payments for the risks of higher future payments. Given the facts that interest rates and domestic savings are at historic lows, the budget and current account deficits are surging, commodities prices are soaring, and the dollar is collapsing, this is perhaps the worst time in history to make such a trade-off.
What Alan Greenspan is in effect saying to homeowners, or potential home buyers, is “go ahead, get that ARM, don’t worry about rising interest rates, I’ve got your back. It’s O.K. to pay $500,000 for that two-bedroom town home that sold for $300,000 two years ago, because you can afford the payments with an ARM. Can’t afford the car payments on that brand new imported SUV? Just refinance your fixed rate mortgage into an ARM. After all, you’re just wasting money with that fixed rate mortgage.”
Is it possible that Greenspan really is this naive? Or does he see the danger posed by ARM’s, but does not want to acknowledge his concerns publicly? I believe that he is so worried about the proliferation of ARMs that his comments were intentionally designed to defuse any legitimate fears that may be developing, particularly among America’s creditors, concerning this issue. Also, I believe Greenspan’s comments are specifically designed to help keep the housing bubble, and by extension the U.S. economy, expanding. Greenspan knows that the only way most home buyers can afford these ridiculously high prices is with ARM’s. Without them, housing prices would collapse. He also knows how important re-fi money is to the U.S. consumer. Since long term interest rates cannot fall low enough to facilitate another wave of fixed rate re-fi’s, he is trying to encourage homeowners to re-finance on last time: fixed to ARM.
Isn’t it odd for Greenspan to even make recommendations concerning which type of mortgage homeowners should choose? After all, he doesn’t comment on what stocks investor should buy, or what bond maturities to favor. He even refuses to comment on the dollar. You would think Greenspan would not want to put himself into a position of having to raise interest rates after encouraging home owners to refinance into ARM’s. Do such comments actually tie his hands in some respect? Do they leave the Fed or the U.S. government vulnerable to legal action from bankrupt ARM borrowers, who relied on the chairman’s comments in their decision to opt for the riskier loan?
The reality is that such absurd comments by Greenspan further reveal that his statements are more propaganda than sincere expressions of opinion. He says whatever he thinks he has to say to sustain the bubble economy, regardless of his personal beliefs. Everything he says is designed to postpone the day of reckoning as long as possible, no matter how much worse that day will become as a result. It is only when viewed from this perspective that Greenspan’s comments make sense.
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Schiff’s piece looks pretty smart in retrospect, doesn’t it?
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Continue Reading December 31st, 2008
Pantheon Properties has signed on two long-term tenants for more than 42,000 square feet at their Newark and Secaucus, N.J., industrial properties. Read more »
Continue Reading December 31st, 2008
Reusing and revitalizing Brooklyn’s deteriorated East River waterfront began with a groundbreaking in February on the piers area and now a $48 million contract was awarded to Skanska for Phase I of the Brooklyn Bridge Park project in New York City.
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