[SK in CV]

I really don’t know much about what other parents do, or how other kids have ended up. What I do know is that the article’s list of “where did we go wrong” is nothing like what my dear ex-wife and I did as parents, nor nothing like what my kids experienced growing up. They’re in their mid-20’s now, and for the most part, self-sufficient and have been for a few years. The list reminds me of kids I knew growing up. I’m not sure the generation referenced is all that different from mine. I can’t say with any certainty that kids that grew up like that are failures as adults any more than kids who didn’t are successes. I have two kids that grew up in the same house and couldn’t be more different. I suspect a whole lot of it comes from inside the kid, what they’re born with. It’s more a parent’s job not to screw it up.

[SK in CV]

[quote=livinincali]

They aren’t cashing out in terms of selling the properties on the open market. They are cashing out in the sense that they are transferring their personal ownership to investors buying the bonds. Blackstone no longer owns the properties, the bond holders own the properties. The bond asset prices are priced at the newly appreciated homes belonging to the portfolio. It’s highly likely Blackstone is selling the crappy part of the 41K portfolio to a bunch of unsuspecting investors because the rental market is hot and appreciation is good right now. Just like the banks we’re selling garbage MBS, the rental market investors are doing the same thing.

Will this effect the price of your San Diego home? Probably not. The portfolio probably contains a bunch of junky properties in Stockton, Phoenix, Las Vegas and some Miami condos for good measure. The point is that Blackstone is betting the rate of appreciation in rents and house prices is going to slow down and they are going to unload while the getting is good.[/quote]

I don’t think this is what they’re doing. It looks like a straight securitized bond offering. Appreciation of the properties belongs to Blackstone (or their subsidiaries). What they’ve created is a new form of collateralized mortgage obligations, where the security is both the properties and the cash flow. (I don’t see how that’s a lot different than previous generations of CMO’s.) They bought the properties for cash and have now financed the properties and pulled cash out, on a small percentage of the properties they bought.

If you look at the charts in the link, the biggest chunk of properties that secure this offering are in AZ. Probably the west valley in Phoenix. (They’re NOT junk properties. They are properties that experienced some of the biggest drops in values 5 years ago.) They bought very little in the East Valley. Next largest chunk is in CA, though I suspect very little of that is in San Diego. The Stockton area is my guess. Next was FL and GA. Oddly, nothing or near nothing in NV.

[SK in CV]

[quote=flu]
If at all, it means its major suckville for folks trying to buy in those areas affordable housing or cash flow residentials because now you have one more 800lb gorilla to deal with[/quote]

I think most of your comment is spot on, though I’m not sure if they were active in MM. It doesn’t appear that they have any homes for rent there.

But with regards to the quoted part, they pretty much finished buying in most markets for much of the last year. They probably did drive prices up in the handful of markets they entered. And they only attacked very specific markets. While they were buying, they probably did push a lot of other buyers out. But I suspect that’s over with. So it should be past tense. Buyers did have an 800 lb gorilla to deal with. That gorilla is sleeping and the market is flattening out. Though it wouldn’t surprise me if they start marketing the properties that are not security for this bond offering in areas that experienced some pretty decent appreciation.

[SK in CV]

[quote=paramount][quote=svelte].

But churches collect money tax free while using public services such as streets and infrastructure.

[/quote]

That’s a myth, churches do pay taxes.[/quote]

In some places they pay property taxes. They don’t pay income taxes. But worse than that, not only are their profits (or more appropriately, collections over expenses) tax free, contributions are deductible, so it’s a double tax bonus. Estimates range as high as $71 billion dollars a year in tax subsidies to churches.

[SK in CV]

Just a reminder spdrun, we must have heard a dozen times after 2005 that “huge number of resets” are happening on variable rate loans at some point in the not too distant future. Not HELOCS, but first loans. And it would result in big things happening. It never did. HELOCs are even less likely to cause a blip. For one, hundreds of thousands of them were called due during the crash, solely because of the lenders’ perception of disappearing collateral. And second, HELOCs issued in the last 4 or 5 years are mostly good, irrespective of the interest rates.

[SK in CV]

[quote=flu][quote=SK in CV][quote=spdrun]If you read about what’s happening in Phoenix and Las Vegas, property is already correcting. Investors are leaving like rats, very little organic demand to replace them.[/quote]

No idea about Vegas, but investors are not leaving Phoenix like rats. Or like anything else. Big buyers have stopped buying. Still tons of rehab flippers in the central city. No widespread decline in prices. No widespread increase in inventory.[/quote]

I didn’t think so….[/quote]

Sadly, what we think doesn’t actually have any effect on the facts. Any actual evidence that investors are leaving (as in dumping properties), and organic demand is insufficient to maintain prices? If that’s actually happening, prices should be falling. It may happen, so far it hasn’t.

[SK in CV]

[quote=The-Shoveler][quote=SK in CV][quote=The-Shoveler]I am still saying it’s not about housing or Stocks, it’s about local municipalities not being in a position to afford another housing or stock market crash,

When the City of L.A. is sitting on surplus then I would start worrying[/quote]

Can you identify the nexus between the municipalities and the Fed?[/quote]

Logic:
The most important job of the Gov is to keep the citizens safe and provide basic services.[/quote]

I’m not saying the Fed’s actions haven’t been beneficial to municipalities. They have been. But who are the mayors and city officials that are lobbying the Fed governors? Where in the Fed charter is the welfare of municipalities a priority? Keeping the citizens safe and providing basic services isn’t part of the Fed’s job. The Fed is owned by banks. It acts, within its charge, for the benefit of those owners. If there is any influence that municipalities have with Fed governors, it escapes me. Can you identify it?

[SK in CV]

[quote=The-Shoveler]I am still saying it’s not about housing or Stocks, it’s about local municipalities not being in a position to afford another housing or stock market crash,

When the City of L.A. is sitting on surplus then I would start worrying[/quote]

Can you identify the nexus between the municipalities and the Fed?

[SK in CV]

[quote=spdrun]If you read about what’s happening in Phoenix and Las Vegas, property is already correcting. Investors are leaving like rats, very little organic demand to replace them.[/quote]

No idea about Vegas, but investors are not leaving Phoenix like rats. Or like anything else. Big buyers have stopped buying. Still tons of rehab flippers in the central city. No widespread decline in prices. No widespread increase in inventory.

[SK in CV]

Pretty much. Do you think it should be different than that?

[SK in CV]

[quote=harvey]
Any ruling that the state is on the hook for paying the debt of any city could have huge consequences. It would effectively give every small-town council in the state a multibillion-dollar line of credit.[/quote]

I’m not sure how this is true. The state law only applies to pension contracts, not to any other contracts. Cities would still be responsible for their own bonds.

[SK in CV]

[quote=livinincali][quote=SK in CV]I’m not sure where it says the state’s obligation can be dismissed. The state isn’t even a party to the bankruptcy.

If two parties owe a debt, and one of them is bankrupt, that doesn’t dismiss the other party. I don’t think the bankruptcy judge has the power to dismiss any obligations of the state.[/quote]

The problem is bankruptcy is a federal proceeding and in section 8 of the constitution it says

“To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States;”

The federal constitution trumps the state constitution and this bankruptcy proceeding is in federal court not state court.[/quote]

Per my comment above:

If the Michigan constitution is interpreted to mean that city pension obligations are also obligations of the state, federal supremacy is moot. The federal bankruptcy court can only rule on the obligations of the bankrupt debtor. The bankrupt debtor is the city of Detroit. It can’t rule on the obligations of a non-bankrupt debtor. It has nothing to do with supremacy.

[SK in CV]

[quote=njtosd][quote=SK in CV][quote=harvey]I don’t see anywhere where it says the state has any obligation to pay Detroit’s debts.

If it were just a question of the state cutting the check vs. the city, I don’t think the creditors and pensioners would be as concerned as they appear to be.[/quote]

Michigan constitution has an awkwardly worded section:

§ 24 Public pension plans and retirement systems, obligation.
Sec. 24. The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.

This can be read to mean that pensions of political subdivisions {cities} are an obligation of the state. I’d be lying if I said this is clearly what it says. But neither do I think that it’s clear that it says something different.[/quote]

Supremacy clause of the constitution states that federal law (i.e. bankruptcy law) supersedes the state constitution:

“The Supremacy Clause reads “This Constitution, and the Laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the constitution or laws of any state to the contrary notwithstanding”. This clause can be interpreted as saying that a federal court has the power to supersede a state law or even a state constitutional provision.”

http://msue.anr.msu.edu/news/what_is_at_stake_for_pensioners_in_municipal_bankruptcy%5B/quote%5D

If the Michigan constitution is interpreted to mean that city pension obligations are also obligations of the state, federal supremacy is moot. The federal bankruptcy court can only rule on the obligations of the bankrupt debtor. The bankrupt debtor is the city of Detroit. It can’t rule on the obligations of a non-bankrupt debtor. It has nothing to do with supremacy.

[SK in CV]

[quote=harvey]I don’t see anywhere where it says the state has any obligation to pay Detroit’s debts.

If it were just a question of the state cutting the check vs. the city, I don’t think the creditors and pensioners would be as concerned as they appear to be.[/quote]

Michigan constitution has an awkwardly worded section:

§ 24 Public pension plans and retirement systems, obligation.
Sec. 24. The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.

This can be read to mean that pensions of political subdivisions {cities} are an obligation of the state. I’d be lying if I said this is clearly what it says. But neither do I think that it’s clear that it says something different.

[SK in CV]

I’m not sure where it says the state’s obligation can be dismissed. The state isn’t even a party to the bankruptcy.

If two parties owe a debt, and one of them is bankrupt, that doesn’t dismiss the other party. I don’t think the bankruptcy judge has the power to dismiss any obligations of the state.

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