Friday Links

By Henry Goldman
Aug. 31 (Bloomberg) — The U.S. subprime mortgage crisis has
cooled New York City’s real-estate market and lowered Wall Street
revenues, reducing the city’s and state’s ability to finance mass
transit, Mayor Michael Bloomberg said.
Rising defaults on home loans made to borrowers with poor
credit ultimately will lead to less revenue at the Metropolitan
Transportation Authority, operator of the largest U.S. public
transit network, because it gets a percentage of real estate
transaction fees, Bloomberg said.
“At the same time expenses are going up. Something’s got to
give,” Bloomberg said. “You have either the tax base
subsidizing this, or the straphangers, or a combination.”
Bloomberg said that reduced revenue made it more important
to enact the plan he has proposed to charge motorists fees to
enter Manhattan’s most congested parts. The revenue from that
program could be applied to the mass-transit system, he said.
The cooling of the city’s hot real estate market will
probably end a period of unanticipated surpluses for the MTA and
to city and state government during the past three years,
Bloomberg said. The slowing revenues come at a time when the
transit agency is projecting a $965 million deficit in 2008
without fare increases and other gap-closing actions.
Higher borrowing costs, declining affordability and a jump
in the number of subprime defaults have sapped housing demand,
leaving a glut of unsold properties.
In 2006, 1 percent of real estate deals brought in about 50
percent of New York City’s revenue from the property transfer
tax, a situation that couldn’t be repeated amid tighter credit
because of subprime lending difficulties, the mayor said.
Wall Street profits “are now down 50 percent from what they
were last year,” he said. “That’s a lot of tax revenues.”

From the horse’s mouth…

“The word `bailout,’ I’m not exactly sure what you mean. If you mean direct grants to homeowners, the answer would be no, I don’t support that.”

Message from defaulted mortgage statement: “FUCK YOU PAY ME”.

Bush will only keep the housing market on life support as the Fed is doing for the stock market. It’s only a matter of time before the plug is pulled.

Please folks. Do understand that home prices will slowly plummet to 3X income (ouch!) or whatever that ratio was in 1995 (ouch!), the last bottom. It’ll be a slow death for excess ‘value’.

But then again, Bush does have a lot of credibility from his handling of Katrina, a real life/death situation. Right? 🙂

Pessimist or realist?