I’d call this a sign of the times. The Rochester Business Journal is reporting that home sales in Monroe County plummeted 11 percent this month, while automobile sales continued to climb. Unfortunately, the RBJ did not report on what types of cars are being sold. Based on other reports about plummeting SUV sales, I suspect that the answer is “a whole mess of Priuses.”

Rochester Business Journal:

Sales of existing homes in May dropped 11 percent compared with a year ago, the Greater Rochester Association of Realtors Inc. reported Friday. Though May closings, at 928, were up 10.7 percent from April, which posted 838 closings.

Rochester Business Journal:

Sales of new vehicles in Monroe County continued to increase last month, while used-vehicle sales fell in May, the Rochester Automobile Dealers’ Association Inc. reported.

Here’s a story I’ve been asleep at the switch on. One of John McCain’s chief economic advisers is none other than former Senator Phil Gramm. Phil Gramm was the father of the modern bank deregulation era that led to the subprime mortgage crisis. And more than that, he’s a lobbyist for UBS, one of the largest transnational corporations embroiled in the subprime mess:

Talking Points Memo | Great Company He Keeps

On the McCain/Gramm/UBS front (noted in yesterday evenings posts), it seems that not only is Sen. McCain’s top economics advisor, fmr Sen. Gramm, lobby and work for UBS, but according to today’s Financial Times the company is advising members of its private banking team not to step foot in the United States in order to avoid indictment.

The original story from MSNBC’s Countdown is here for your entertainment. Gramm was a tireless lobbyist against just about any reform measures or relief measures the Congress wanted to pass in the wake of the economic disaster he was largely responsible for. So now we know why John McCain’s economic policy where the subprime situation is concerned was, “you’re on your own, losers.”

Rochester Business Journal is today reporting that, while it’s been a topsy-turvy beginning of the year, the Rochester real estate market is in good shape compared to where it was last year at this time. Home prices have remained steady since last year, with a slight .1% decrease. Nothing on the order of what’s happening elsewhere, at least not on average.

Among the many things that drives home prices is - like all markets - the availability of homes. If there’s a lot on the market, the market gets depressed, which is part of the vicious cycle affecting many parts of the country where homes lost value and homeowners foreclosed, causing still more valuation loss. Take a look out how the numbers stack up for Rochester:

Rochester Business Journal

The inventory of homes listed for sale, at 1,940, decreased by 9.1 percent from 2,134 listed a year ago, and was up 6.9 percent from 1,815 in February.

In other words, we’re doing significantly better selling homes this year than we did last year, but there appears to have been a significant jump in listings over the last few months. From March of 2007 to February 2008, we had almost 15% less homes available in Rochester, but there has been a spike.

To what extent this is reflective of a seasonal ebb and flow of the marketplace, I cannot say. I am looking for answers. Still it’s a big jump, and I wonder if the problem of the ARM mortgage crisis is coming home to Rochester in earnest.

Leave it to the Bush Administration to find a way to make the Subprime/ARM Mortgage mess an excuse for even less regulation. I’ve been reading up a little bit on some of the proposed plans to reshape financial markets in the wake of the housing crisis and to some extent, the cure the Bushies are proposing seems to largely consist of the Federal government taking over the powers currently exercised by oversight bodies in several key industries germane to the housing sector.

At first blush, a proggie like me thinks that the Federal government’s direct involvement in such issues might be a good thing. But then I stop and think that this really means a huge weight off the backs of large financial institutions - a huge savings of time, money and resources - with dubious benefit to the public. This article from Kansas City is but one article on the subject. I’m not convinced one way or the other on the issue of new regulations and I’m trying to look further into it, but you have to wonder: why is the Federal government imposing themselves on the insurance industry as a means to solve the mortgage industry’s problems?

Kansas City infoZine News - Federal Plan Would Shrink States’ Powers - USA

The federal government is also trying to assert itself in the insurance sector, where it claims the patchwork of state laws makes it tougher for U.S. firms to compete abroad and for foreign firms to enter U.S. markets. State insurance commissions have powers such as setting rates, monitoring claims practices and reviewing policy forms.

The report issued by Empire Justice on New York’s subprime woes points out that, in fact, about 44% of all subprime mortages in Monroe County (not Rochester, as has been reported on the 13WHAM blog) were in some form of trouble as of October of last year.  Those mortgages are either already in foreclosure, behind by more than 30 days and therefore subject to foreclosure, or about to have their rates “reset,” thus potentially increase to dangerous levels.  Looking at the map that details where in MC the subprimes concentrate, we see some of the old familiar patterns of poverty and debt.  The City NE is particularly hard-hit, as is Gates and Greece, especially where it touches the city.

But another trend is worth noting, which is where the line of suburban sprawl and the line of subprime woes intersect.  Notice that the trend of deep red extends straight across route 104, through Webster, at minimum.  It would be interesting to see how red it is in Wayne County as well.  The subprime troubles seem to skip right over Brighton, then slam back down with force in Pittsford, Perinton and Henrietta.

It’s all part in parcel of the same thing: the focus on fast growth, new home ownership, home construction all lead to people gambling more than they should and getting into trouble.  Since 9-11, the sales of homes have been the only feather in the economic cap of this current presidential administration.  But as we can see, high growth means high risk.  Is it any wonder that the man who has tanked every business he’s ever run now appears to have his hands in his pockets during our economic crisis?

Most people tend to think of the media as a means to inform the public. Not the D&C. They see themselves as a vehicle for delivering messages they believe we need to hear for our own good. Whether or not that is the truth is irrelevant.

Take the opinions plummed from the local pool of “experts,” that the Bear Stearns deal isn’t going to have any effect on Rochester at all. Oh, heavens, no! We’re all going to be fine, because we all live in the Monroe County Smug Bubble, unlike all those poor bastards that live elsewhere.

Keep in mind that only 2% of the total national mortgage market is in foreclosure. What does 2% of the Rochester/Monroe County market look like? Well, not much at all. Yet 2% of the nation-wide market is enough to cause a recession (”or at least near, a recession,” in the words of the D&C), so what does that same 2% do to our economy here?

Well, that kind of question is just not acceptable to the D&C. I keep trying to answer that question, lacking as I do the resources of the D&C, but they patently refuse to cover the story at all. Rather, they’d prefer to hear from people who speak of “The Market” as though it was some sort of god, rather than the collective actions of fallible men:

Experts: Area has no bubble to burst | democratandchronicle.com | Democrat and Chronicle

“This is the market’s way of letting other (investment) firms know they should avoid the excesses of Bear Stearns,” Conboy said. “They shouldn’t play the way Bear Stearns played.”

As the news of Subprime foreclosures increases its dominance in the media and as more and more dire news comes out about our economy, it begins to manifest itself here in Rochester, even though most of the problems associated with the ARM market are well away from our modestly-priced homes.  The RBJ reports that local sales of homes decreased a breath-taking 27% from January to February.  This despite the fact that home values in Rochester have actually seen an 11% jump since this time last year, unlike elsewhere.  Also, the stock of available homes in Rochester is decreasing slightly, which will also serve to keep our home prices steadily rising.

Irondequoit just increased the assesments of their homes and that made the news, but an 11 jump across the board is definitely worth noting. . .

Elsewhere, a source close to me who has been dealing with a subprime mortgage in foreclosure just told me that the bank called them and unilaterally renegotiated the price and mortgage on the home.  One minute, they were demanding $3000 or the mortgage was going bye-bye; the next minute, they told the borrowers what the new mortgage price would be and that there would be no escrow for taxes and insurance.  No questions, no explanations, that’s it.

This may or may not indicate a tipping point, wherein banks have finally decided that taking a loss on one property that’s still generating revenue is better than taking a loss on a property that is sitting empty and generating squat.  That makes some sense, given the level of foreclosure across the country, and there’s no wisdom in shaking what is an otherwise stable realty market in Rochester.  Time will tell.

I’m curious to see if other borrowers have experienced this same curious turning?  If you’ve had similar dealings or know someone who has, please contact me and let me know.  We can keep your information confidential!

Whenever you hear about financial institutions being bailed out using “Depression-era procedure,” that’s something that should probably raise the red flag:

Talking Points Memo | Fed pledges to supply cash

The Federal Reserve invoked a rarely used Depression-era procedure Friday to bolster troubled Bear Stearns Cos. and said it will provide even more help to combat a serious credit crisis.

A study conducted by an umbrella of organizations including the Neighborhood Economic Development Advocacy Project in New York concludes that there were additional pressures on black and Latino borrowers to take the high-risk subprime mortgages that have now become such a huge problem:

Report: Minority US neighborhoods have disproportionate burden of subprime loans - News Wires - CNBC.com

The survey focused on lending to minority urban markets in New York, Los Angeles, Chicago, Boston, Cleveland, Charlotte, North Carolina, and Rochester, New York. In six of these seven urban areas, high-risk lenders’ market share in minority neighborhoods was at least three times the share in white neighborhoods. . .Advocacy groups have said poor and minority borrowers who qualified for traditional loans were nevertheless steered into risky adjustable mortgages.

I don’t know the methodology of the study and I don’t discount the possibility that race may have played a factor in lending schemes for some companies, but I do note that there is no indication in this report that income levels were factored into the equation. Certainly in the City of Rochester, poorer neighborhoods have been more blighted by subprimes and foreclosures than, say, those neighborhoods bordering Brighton. And in many cases, those neighborhoods have a higher concentration of minorities. Since lower-income people were largely targeted for subprimes, once might draw the wrong conclusion unless income was taken into account.

In fact, the article seems to suggest that this study was based on communities rather than borrowers, which if true, is way off the mark scientifically speaking. To say that communities were targeted is different than saying race was targeted: that poor communities and minority communities tend to coexist in this country is another sin altogether.

And once again, we find that this report perpetuates the wrong-headed thinking that has predominated coverage of the ARM crisis:

Report: Minority US neighborhoods have disproportionate burden of subprime loans - News Wires - CNBC.com

This concentration means these minority communities will shoulder most of the negative impacts of the subprime crisis _ foreclosures, sinking property values, lower tax bases, abandoned homes and higher crime.

To re-re-reiterate the point, sinking property values are the reason that the current crisis is upon us, not the effect of said crisis. And lower tax bases are the inevitable result of lowering property values. Also, since the crisis is moving up the economic ladder, it’s probably premature to think that only those neighborhoods cited in the report will face increased foreclosure. There’s plenty of fancy homes sitting with for-sale signs out front, believe it.

Dean Baker at the American Prospect weighs in on the prospect of a bailout of the fools who got us into this current economic crisis.  Rich yacht owners do not need to be bailed out, they need to be allowed to suffer their own consequences.

Put it another way: all these rich Republican types and financial bankers have spent a lot of money on lobbyists to keep the government “off their backs.”  They’ve done a whole lot of work to keep the government regulations to a minimum.  They wanted to be free of the government.  Well, boys, bon appetito!