Slow Public Transit

So, you all know that I'm not really a big fan of the Rail Runner, and I think we've all heard of plans to try and expand it all the way down into El Paso and up to Colorado. But, here's the thing I've never understood... If they ultimately want to a train system like that, why the heck wasn't a high speed train system built? Consider this:

From Rio Rancho to Downtown Albuquerque, where she works, Richelle Hecker thinks she could pare a good 20 minutes off her commute if she drove to work.

But for her, it makes more sense financially — it costs about $10 a week and she limits the wear and tear on her vehicle — to do what she does now.

She boards ABQ Ride's Route 151 bus to get from Rio Rancho to Los Ranchos/Journal Center Rail Runner station, then takes the train to Downtown.

"I ride it because it's economical, but if it were actually saving time, I think more people would ride it," Hecker said.

That's the thinking behind a proposed study of a "bus rapid transit system" that could connect Rio Rancho and Albuquerque's Northwest Mesa to the city's East Side by way of the Paseo del Norte river crossing.

Speed trumps economy for the vast majority of the population. I'll never understand the rationale behind investing in slower modes of mass transit.

Free Speech Attacked

I rant and rave a lot about the problems in New Mexico government, but on the upside, I can't imagine Land of Enchantment government officials successfully coming after web publishers to stifle free speech:

The website of the city government of Conneaut, a small town situated near Ashtabula, Ohio, which itself is in the North Eastern corner of the state, is apparently in the middle of being redesigned and during the time that the city page has been off the web, a local woman named Katie Schwartz had put on her website some pages detailing council members and city government.

But, Manager Schaumleffel is not pleased that everythingconneautohio.com has also featured posts critical of the city government in the past and he is determined to shut down some of the site’s content. As a smoke screen for his efforts, the Manager claims that people will be “confused” by the site and might think that the section detailing city government is the official city website.

The City Council upheld the City Manager's decision by shooting down a motion that would have ordered Schaumleffel to rescind the letter and apologize to Schwartz. In this era of bigger government, this is something that we should all be watching very closely.

Will They Never Learn?

First, Mayor Chavez come up with the "brilliant" idea to shift one time construction revenue into the recurring costs pool. Now, he wants to bring back the idea with nine lives - the infamous Streetcar. Will it never end?

Plans for modern rail in Albuquerque aren't dead just yet.

Mayor Martin Chávez, still pushing for a streetcar system, is broaching the idea of a scaled-down project that would connect Downtown, the university area and the airport.

It would cost about $130 million — far less than the broader, $270 million system scrapped 2 1/2 years ago.

Even at a reduced price, the council may not be willing to climb aboard. Several city councilors, even those inclined to support the project, are skeptical about moving forward anytime soon.

A proposal to be considered next month, in fact, could limit the mayor's flexibility to pursue the project.

"Unless somebody drops $300 million on us, it's going to go to the voters some day," City Council President Isaac Benton said in an interview. But "I don't see any immediate movement on it."

Even if someone drops $300 million of our children's money (that is what we're talking about here, ours is long since spent) into our elected officials laps, it still doesn't change the fact that it will result in NEW recurring revenue expenses. Based on the current budget crisis, it is impossible to understand how anyone could think this is a good idea.

Voucher Programs Work

USA Today has a great editorial on voucher programs that allow for school choice and have been proven to improve student performance:

So it was curious that when President Obama recently allowed 1,716 of Washington's neediest schoolchildren to keep, until graduation, the vouchers they use to escape their failed public schools for higher-quality private ones, he also closed the program to new applicants. All this occurred as the Education Department reported that voucher participants show superior skills in reading, safety and orderliness. The news was buried in an impenetrable study released without a news conference.

Why the ambivalence? Because teacher unions, fearing loss of jobs, have pushed most Democrats to oppose vouchers and other options that invite competition for public schools. Put another way, they oppose giving poor parents the same choice that the president himself — along with his chief of staff and some 35% of Democrats in Congress — have made in sending their children to private schools.

Vouchers have improved the math and reading of inner-city children from Dayton, Ohio, to Charlotte, N.C., various studies show. The Washington vouchers improved the reading of girls and younger kids by about half a school year, though results for other groups were iffier. Yet opposition is so fierce that few voucher experiments survive past the seedling stage.

Isn't it time we put kids first? I thought the last election was all about CHANGE?

Senseless Legislation in a Weak Economy

Businesses of all sizes are struggling. Yet, what legislation do they decide to introduce in Congress?

A long-stalled effort to guarantee American workers paid sick days takes a big step forward Monday with the introduction of legislation by Congressional Democrats.

The proposal went nowhere during the presidency of George W. Bush, but as a senator and then a presidential candidate, Barack Obama backed it, and Michelle Obama embraced the idea last week in a talk to business leaders.

Companies are trying their hardest to keep the doors open, and Congress wants to make it more expensive do so. Where's the logic here?

Shifting Costs is not a Budget Solution

The Albuquerque City Council has a budget proposal from Mayor Chavez in front of them that makes absolutely no sense whatsoever in the current economic climate:

On the table now is the mayor's $475 million proposal for basic city operations. It would shift money out of the construction budget and into the operating fund to help offset dwindling revenue from the tight economy. The measure would also cut about 200 vacant jobs from the city payroll.

"There's not a lot of room to play around with," said Councilor Ken Sanchez, chairman of the council budget committee.

In hearings this month, councilors have already made changes to provide enough money for regular city employees to get 3 percent raises, starting July 1.

Shifting costs from one time construction expenditures to cover recurring expenses accomplishes one thing and one thing only... a postponement of the inevitable. It just means that you are putting off the layoffs of city employees and cutting of services until after the election. Of course, we are going to have the same problem next budget year. Actually, the problems next budget year were originally reported to be even worse.

Now, I realize there may be a handful of you, probably Mayor Chavez included, that believe that the worst is behind us, and that the picture for the future is brighter. Of course, this belief has no grounding in reality:

Loan servicers are overwhelmed by the flood of applications. Mortgage investors are angry about a congressional bill prohibiting them from suing servicers that modify loans. Foreclosures are rising as unemployment soars.

I don't live in the City of Albuquerque, but I would urge those of you that do to avoid voting for anyone not up to the task of making the hard decisions of truly balancing the City budget.

No Bailout for Tech Failures

Time has an interesting look at the ten biggest tech failures of the last decade. You know, companies and products that failed when common sense still dictated that it was okay to allow a business to have a lifecycle.

Some of this biggest and most recognizable brands in the world made the top ten. Heck, Microsoft is on there twice:

1. Microsoft Vista
2. Gateway
3. HD DVD
4. Vonage
5. YouTube
6. Sirius XM
7. Microsoft Zune
8. Palm
9. Iridium
10. Segway

These companies aren't getting bailouts, nor should they. As anyone who has ever taken a business class can tell you companies have lifecycles. Only the foolish expect them to last forever, and to invest in a company on its way out is, well, beyond foolish. Yet, that is exactly what the federal government has been doing with our taxpayer money.

Consider February reports regarding the amount of taxpayer money that flowed into GM and Chrysler:

General Motors and Chrysler LLC asked the government Tuesday for $21.6 billion in additional loans, but the final cost of a bailout of the auto industry could be significantly higher.

The two struggling auto giants have already received a total of $17.4 billion in loans. If they get the new loans they want, the price tag of the bailout would climb to $39 billion.

What's more, $7.5 billion in loans have already been approved for the financing arms of GM and Chrysler. Congress also approved funding last year for $25 billion in loans to help automakers convert their plants to produce more fuel efficient cars.

And, what did that huge investment get us? A temporary reprieve of a few months. Ultimately, the inevitable still happens - GM bankrutcy and massive job cuts:

The next auto businesses on the chopping block will be 2,600 General Motors dealerships.

GM Chief Executive Fritz Henderson said Monday that the company would by the end of the week start notifying dealerships it wants to eliminate over the course of the next year. The company said last month that it planned to eventually eliminate 42% of its 6,250 dealer locations, which employ more than 300,000 workers among them.

On Thursday, Chrysler LLC's announced that it is dropping nearly 800 Chrysler, Dodge and Jeep dealers, or about a quarter of its network, as part of its bankruptcy restructuring.

If we don't start letting more businesses move through their natural lifecycle without attempting to bail them out, our county will go bankrupt.

Investigation Upon Investigation

I have to admit at being a bit perplexed. It seems like the general level of public outrage during the NM Treasurer Scandals was significantly higher than it is today in the face of what appears to be a much larger bilking of the taxpayers here and throughout the nation:

Marc Correra has been at the center of the investment controversy in New Mexico.

He is the son of Anthony Correra, a retired stockbroker from New York who agreed to surrender his license in connection with insider trading allegations. The two share a Santa Fe business address.

Anthony Correra was on Richardson's transition team and a member of the search committee that led to the hiring of Gary Bland as State Investment Officer.

Geez, talk about a smoking gun. Governor Richardson puts a gut on the search committee to hire the the State Investment Officer who had to surrender his license to due to insider trading allegations. Then, his son is paid millions of dollars in fees for deals involving the State Investment Council:

Records show that [Marc Correra] was involved as a placement agent and shared in more than $11 million on nearly two dozen investment deals with the State Investment Council, which is appointed and chaired by Richardson and run by Bland.

Marc Correra shared in more than $4 million in fees for investments made by the ERB.

He has not been charged with any wrongdoing. His Albuquerque attorney, Sam Bregman, said Wednesday he had no comment.

And, when was the last time anyone remembering Sam Bregman having no comment? Heck, you even have a U.S. Senator's step-daughter and campaign manager of his Senate run being granted immunity. Bottom line, this isn't a pretty picture. Yet, the general public outrage just doesn't seem to be at the level it should be. If it was, it would be hard to see how anyone even remotely connected with this administration could be considering a run for anything in 2010.

Now, does that mean I think every elected and appointed official in the Richardson administration is corrupt. No. But, at the very least they were quiet enablers. At some point, heads should start rolling, right? How much longer can all of this go on? Think about the last few years. We've had...

• the treasurer scandal and its far reaching associations followed by...
• the state insurance scandal followed by...
• the housing authority scandal followed by...
• the court house scandal followed by...
• the Secretary of State scandal followed by...
• the New Mexico Finance Authority scandal followed...
• the State Investment Council scandal...
• the Attorney General scandal...

Isn't it about time to clean house? That's a heck of a list in just four years. I can't even keep track of which came first. New Mexico has been a one party state for so long that it proves the adage that power corrupts and absolute power corrupts absolutely. It's one of the reasons that I think, no make that I hope, that 2010 brings change to New Mexico. We need to restore a balance. It's also why Ed Rollins recent commentary makes perfect sense:

As bleak as things might seem today for Republicans, I have to put things into context.

I became a Republican in the summer of 1972. I was involved in running President Nixon's re -election campaign in California and became part of his administration at the start of his second term.

In very short order after my arrival in Washington in January 1973, the Nixon administration came apart at the seams with a daily soap opera of criminal charges, congressional hearings, federal indictments and the resignation of Vice President Spiro Agnew for bribe taking, followed 10 months later by the resignation of Richard Nixon who was about to be impeached by the Congress.

I was demoralized and ashamed of the leaders of my new party. But I wasn't going to quit because I still believed in the principles of strong national defense and smaller government, and in the idea that working people should do better than those who don't.

In the aftermath of all this, Republicans got slaughtered in the midterm elections of 1974, losing 48 House seats and five Senate seats. Republicans had only 144 House members in the 94th Congress.

Two years later, Jimmy Carter was elected president and I was convinced Republicans would be in the wilderness the rest of my political life. After the first 100 days, President Carter's approval rating was 69 percent -- higher than President Obama's.

And four years after that I was working in the White House as an assistant to President Ronald Reagan -- who defeated Carter by a landslide and won a Senate majority and a philosophical majority in the House. For 20 of the next 28 years, a Republican was in the White House.

What's been going on in New Mexico makes Watergate look like childs play. It's is time for a change. Anyone that is part of the current insanely corrupt government political structure in New Mexico needs to go in these next rounds of elections.

Markets Versus Economic Reality

I've been watching the markets rise with... I guess the word is surprise. It hasn't really made any sense to me. I've written before that I expected to see the Dow Jones Industrial Average (DJIA) trading at around 5,000. Yet, it has been steadily rising for weeks. That is until today.

See, today's plunge makes sense. There is nothing that has been in the economic news over the last several weeks that should give investors confidence. Banks stress test were reported and, despite the federal claims to the contrary, it was not pretty:

The nation's biggest banks are regaining their health, but some need to replenish their coffers to withstand any new difficulties, the government said in an upbeat report Thursday.

The Federal Reserve's highly anticipated "stress tests" found that 10 of the 19 largest banks needed to bolster their capital by a combined $75 billion. Most of that must be raised by two banks with a large California presence -- Bank of America Corp. and Wells Fargo & Co. -- highlighting the role of the state's housing market meltdown in the recession.

After the billions in bailouts more than half of the major banks are still in trouble. There are claims that the new housing market has picked up, but not enough attention seems to be paid to the fact that the foreclosure rate continues to rise:

Despite the efforts, however, more homeowners fell into default in March. Servicers initiated foreclosure proceedings against 290,000 mortgage borrowers, a jump of nearly 20% from February's 243,000, and the highest monthly total since the coalition began tracking data in mid-2007. Starts have risen by more than a third since January.

Stimulus packages have, as expected from this blogger, not resulted in people going out and spending more:

Retailers logged a second straight month of sales declines in April as consumers continued to pull back on all types of unessential purchases, the government reported Wednesday.

The Commerce Department said total retail sales fell 0.4% last month, compared with March's revised decline of 1.3%.

Sales in March were originally reported to have declined 1.2%. Economists surveyed by Briefing.com had been expecting April sales to be unchanged from the previous month.

And, today anyone paying attention to what Main Street looks like today, this should not come as a surprise. My youngest son attends a Charter School in Albuquerque. When I drive back to my home office after dropping him home, I more often than not drive up Menaul. If you haven't done so lately, I suggest you take the drive and pay particular attention to the number of empty store fronts between San Mateo and Louisiana. You're in for a shock. It looks to me that about 20% of those places of business are vacant.

It's not just the traditional bricks and mortar stores that are suffering:

The Eight Northern Indian Pueblos Arts & Crafts Show has become another victim of the weak economy. Organizers announced Tuesday they have canceled the annual show for the first time in its 38-year history.

"We all are" disappointed, director of programming and development Valerie Lyon said Tuesday. "It's just the economy. The economy had its impact on artists and sponsors."

The show, scheduled for July 18-19, had attracted only 51 artists willing to pay $400 for a booth instead of the usual 150-200, according to ENIPC executive director Michael Miller. And instead of $60,000 to $70,000 that has come in sponsorships in previous years, "we had one committed sponsor for $5,000," he said.

Keep in mind that New Mexico has traditionally been somewhat sheltered when it comes to radical swings of the economy because of our heavy reliance on federal spending. Yet, we are obviously hurting as much as the next state right now.

Even more troubling is that on an anecdotal level I've heard of more and more unemployed people taking their severance packages and jumping into day trading - because they are "some great opportunities to make quick money." Personally, I think that is nuts. I still think we're going to see the DJIA at 5,000 going into the 4th quarter of this year or the 1st quarter of next year. The worse is still ahead of us.

This brings me to President Obama's visit to New Mexico tomorrow. He is coming to hold a credit card town hall. If you think the housing collapse had a negative effect on the economy, wait until you see what happens when the current unsecured debt bubble bursts. Combined that with the ugly truth about current government spending:

The government will have to borrow nearly 50 cents for every dollar it spends this year, exploding the record federal deficit past $1.8 trillion under new White House estimates. Budget office figures released Monday would add $89 billion to the 2009 red ink - increasing it to more than four times last year's all-time high as the government hands out billions more than expected for people who have lost jobs and takes in less tax revenue from people and companies making less money.

The unprecedented deficit figures flow from the deep recession, the Wall Street bailout and the cost of President Barack Obama's economic stimulus bill - as well as a seemingly embedded structural imbalance between what the government spends and what it takes in.

We've only hit the tip of the iceberg.

Creation of Professional Students

An article in last week's Albuquerque Journal noted that CNM has surpassed UNM:

For the first time, Central New Mexico Community College has edged out the University of New Mexico as the state's largest higher-education institution.

CNM had 172 more students enrolled this spring than the University of New Mexico.

"I think it is a true testament to the quality of this institution. And of course I might be taking it a little too far, but the reality is that we're flexible, and we create opportunities for students to do distance learning and to come in the evenings and come on the weekends," CNM President Katharine Winograd said.

I'm not quite sure I agree with CNM's President. I think this switch has a lot more to do with the state of the economy than education quality of the institution. It's pretty simple when you think about it. People have less money right now, and it's cheaper to attend community college than it is to attend a traditional university.

Plus, more people need to get retrained for available jobs and community colleges have always done a better job of providing training related education. This trend is likely to continue if President Obama gets his way:

President Obama announced new steps to help unemployed Americans on Friday, targeting people who are out of work and want to go back to school.

The president outlined a plan under which the Department of Education will send colleges legal guidance, encouraging them to increase financial aid packages for the unemployed so they can enroll in educational and training programs while keeping their unemployment benefits.

That last part gives me pause... collecting unemployment while going to school. As it is, the cost of public education is subsidized by the taxpayers. Now, we're going to pay unemployment benefits on top of this subsidy? Community colleges have no entrance exams. Anyone can attend. Will some people take classes in order to avoid going to work. Will there be any penalty if they do not pass the classes with a "C" or higher?

Small Businesses to be Hurt by Cap and Trade

Despite intense pressure from Governor Richardson, the regional cap and trade legislation was not passed. At the time I wrote:

Make no mistake this is an additional fee that will ultimately be passed on to you and me - the consumer - at the pump. Whenever government seeks to impose fees to help with some grand scheme, we are the ones who find ourselves squeezed. This time will be no exception. What makes this flawed policy even worse is that the negative impact of this misguided legislation will be felt not once, but twice by hard-working New Mexicans.

Well, it looks like at least one Democratic Congresswoman realizes this will not only hurt consumers, but negatively impact small businesses throughout the nation if the Democratic controlled Congress and President are successful in this misguided effort:

Small businesses need rebates to ease the higher energy costs that may result from capping carbon dioxide emissions, the chairwoman of House Small Business Committee wrote today to the Democratic sponsors of the legislation.

Some businesses “will not be able to insulate themselves from such rapid energy price increases and could experience serious economic disruption,” Democratic Representative Nydia Velazquez of New York wrote to Representatives Henry Waxman and Edward Markey.

The federal government keeps bailing out big businesses to the detriment of taxpayers and small businesses. When is enough, enough?

Judge Sonia Sotomayor Proponent of Judicial Activism

It didn't take long after the news hit of Supreme Court Justice David Souter's retirement for speculation to begin in the media and political circles regarding his replacement. One name that has me really concerned is Sonia Sotomayor.

CNN's report last Friday on potential nominees highlights the fact that she was named a district court judge by President George H.W. Bush:

Judge Sonia Sotomayor of the 2nd Circuit U.S. Court of Appeals. Named a district court judge by President George H.W. Bush in 1992, she has been on the appeals bench since 1998. She'd likely have some bipartisan support. The 54-year-old is considered to have moderate-liberal views, and would be the first Hispanic justice on the high court.

However, this paints the wrong picture as it makes it seems that she should appeal to the more conservative amongst us. The reality is that if you believe in three branches of government with checks and balance system as intended by the founders of our country, then Judge Sotomayor is a bad choice for the U.S. Supreme Court.

I've written before about the disturbing and growing practice of judicial activism in our country, and it appears that Judge Sotomayor is a proponent of this abhorrent practice.

Obama Town Hall in NM on Credit Cards

It looks like President Obama is coming back to New Mexico, and the topic of conversation:

Gov. Bill Richardson says President Barack Obama is planning to visit Albuquerque next week to hold a town hall meeting on credit card debt.

Here is the thing. There has been an awful lot of talk on this front. Yet, if you want to file a complaint against what appears to be abusive practices, the federal government makes you jump through unnecessary hoops.

You might remember that not long ago I put up a post regarding what I thought was a rather questionable practice by Bank of America:

So, the question is raised, "Why would Bank of America intentionally set a Sunday due date if making payment on this date is going to cause the consumer to be considered late?" When I spoke to the customer service representative, I was told that when I logged online to pay my bill, there was a disclaimer that it would not be processed on time. Of course, by that point in time there is absolutely no way to make a timely payment on the account - because Bank of America purposely set the due date to fall on a SUNDAY. In fact, he told me, even if I had paid the bill on Saturday, the day before it was due according to my statement, it still would not have been processed in time.

In that post I indicated that I didn't take all of this sitting down. Instead, I spent some time researching which was the appropriate federal agency with which to file a complaint, and submitted a very detailed online complaint with the Comptroller of Currency.

What did I get for my trouble? I got an email response that said:

We handle a large volume of Emails. Since you have been assigned a case number, we request that you communicate with us through phone (800-613-6743), fax (713-336-4301), or regular mail as we do not process complaints by Email.

This is absurd. I'm not asking them to act on my behalf as much as I'm asking them to look into a situation which is no doubt impacting millions of Americans. Since I doubt I'll receive an invitation to ask questions at the President's town hall in New Mexico, maybe one of the Democrats reading this can ask the question I raised in that previous post.

Stimulus and the Albuquerque New Home Market

It's rare that I post someone's article here in full. Actually, I don't think it has ever happened before now. But, today that is precisely what I'm going to do. This weekend I received an e-newsletter from David Murphy, Publisher of SALESTRAQ™ of New Mexico, regarding the impact of the stimulus of package on the local home market. I found it very enlightening and asked his permission to reprint it in its entirety here. If you send David an email, I'm sure he'll send you a copy of SalesTraq of New Mexico’s current May 2009 “Fast Facts” spreadsheet....

An element of common wisdom shared among parents for many generations is that they shouldn’t allow their children to eat too much candy. If their children eat too much candy, they’ll get a tummy ache, and eventually, vomit. In like manner, as adults we should intuitively know that we shouldn’t indulge ourselves with too much personal debt, including the mortgage variety. Of course, it will feel good at first to have our hands on whatever it is the debt has acquired for us. But in the end the debt will give us adults a different form of tummy ache, known as an ulcer. The Federal Government of the United States of America on the whole, however, hasn’t seemed to grasp this simple concept of “too much debt is bad”. Perhaps the growing economic bellyache our Country is experiencing is a necessary evil – a lesson we need to learn that too much debt may be sweet at first, but becomes sour later on.

We’ll get to some housing data shortly, but think about this with me for a moment; any city / municipal or state governments that have debt obligations exceeding their projected income must choose between two courses of action (or utilize a combination of the two). The first course is to cut expenses. This may mean downsizing programs or even eliminating some of them. They might require lay offs of local government workers. The second course of action is to increase the revenue stream via higher taxes, either on public services or privately generated incomes. (Recent American “tea parties” bear witness to the lack of popularity that the second option affords). How is it, then, that in recent memory the Federal Government of the United States generally promises to take neither route and still manages to substantially grow itself? How can it promise to increase public services and public sector employment, while simultaneously decreasing taxes? What magic does the U.S. Federal Government possess that makes this paradox possible, and can such magic charm us indefinitely?

To ascertain the answer, let’s first consider that the U.S. Federal Government acquires its spending power through three primary channels. 1) Selling U.S. debt to foreign countries. 2) Taxes; on goods, services, and personal and corporate incomes. 3) Inflation / Currency Devaluation. “Huh?” . . . what’s that? That, is the magic which the Federal Government possesses which lesser forms of government do not – the ability to print U.S. dollars out of thin air. Let’s just call it by a sweeter, candy-like name . . . “Stimulus”.

What may come to mind when we see that word “Stimulus” is the so-called “Stimulus Package”, or ARRA (American Recovery and Re-Investment Act) that recently passed the U.S. House and Senate and was signed into law by President Obama. In truth, Government “stimulus” also includes all the prior and subsequent bailouts for various banks and businesses, home foreclosure moratoriums, as well as millions of “stimulus checks” sent to the Americans deemed most likely to go out and blow them right away on candy, flat-screen TV’s and a plethora of other consumables. (God forbid anyone should actually save it or pay bills with it - that would be counter productive to the Government’s efforts). Even write offs of mortgage interest on your personal income tax is a form of Stimulus. In sum, it’s ALL “Stimulus”. Remember the financial “bazooka ” that then U.S. Treasury Secretary Hank Paulson boasted could be used to salvage Fannie Mae and Freddie Mac back in July of 2008? He was simply referring to yet another form of “Stimulus”. (Of note, that bazooka theory didn't work out so well.)

But I digress.

How does the Government Stimulus impact the local housing market? In the most tangible way, there is currently an $8,000 first-time home buyer tax credit being offered (to anyone able to qualify for a loan that is). In typical fashion, the government defines “first-time” home buyers as anyone who hasn’t owned a home in the 3 years prior to purchasing this "first" home. (This is similar to saying that an individual busted for DWI just over 3 years ago can be caught now and regarded as a “first-time” offender.) Consequently, the government is able to deliver on its promise to essentially “lower taxes” by luring someone to buy a home that they otherwise would not, or could not, in exchange for some Stimulus candy. In the process, the U.S. Government must accordingly “print the difference” which has been lost in tax revenue. Will such Stimulus measures for luring home buyers ultimately succeed to pull housing out of its depression anytime soon? The answer to that, I believe, is no. It’s not for lack of trying on the part of the Government, but it’s something deeper and more profound. The country is simply piling up debt, ad infinitum, to the point where paying it back will become impossible. “We the People” are waking up to this dreadful fact.

In turn, the U.S. homebuyer psyche is in uncharted territory, as the local housing market is inextricably linked to the national economy right now in a way never before experienced by human society. There’s something fundamentally different about this recession/depression than those which have preceded it, and that fundamental difference is our modern day access to macro-economic information and its powerful effect on us. When, during all of prior human history, have we had such instantaneous access to such vast swaths of information about the economy? Economic news has now even become a form of entertainment, bearing a stronger resemblance to an NFL football game than to the academic and boring information outlets of old. It’s become popular and hip to talk about the economy, housing statistics, and investing, with the media utilizing fast-paced background music and high-velocity camera motions on shows to try to convince us why we should hold on to Bear Stearns’ stock when it really should have been dropped like a hot potato. The local housing market breathes and exists largely on the choices of men and women whose minds are being shaped as never before by what they daily see, read and hear about the broader U.S. economy. There is so much information out there today, and trying to digest it all can make one feel overwhelmed.

I hope that my assessment of the local housing market is more refreshing that that. My hope is that my evaluations are honest, fair and accurate. I am certain that I don’t always get the details perfect, but I hope that you can look with me at the local housing data with one eye, while keeping your other eye on the “big picture” which invariably drives the local housing market. Moreover, remember that numbers can be interpreted in a variety of ways. Let’s look at some important local data, and I’ll give you my interpretation of it.

I want to begin by taking a fresh look at where local New Home Base Prices are at, especially for the “entry level” buyer right now. Several months ago we looked at the increasing trend of smaller, less expensive floor plan options entering the local new home market. It’s time to look at that once again with updated information. The following data shows the number of local new home floor plans in the greater Albuquerque metropolitan area that have been available to be built for less than $150,000 – going back over the course of several years:

Quantity of local new home floor plans available to be built under $150K in the greater Albuquerque metropolitan area. (includes Single Family Homes, Condos, Town Homes and Apartment Conversions):

May 2003 = 570 plans
May 2004 = 437 plans
May 2005 = 227 plans
May 2006 = 46 plans
May 2007 = 49 plans
May 2008 = 37 plans
May 2009 = 65 plans

Only 5 years ago back in May of 2004 there were 437 different options for buyers to get in a new home for under $150,000 in the greater Albuquerque metropolitan area. Today, there are only 65. That’s an 85% decrease over the last 5 years. Having said that, there has been a 76% increase compared to just last year. Notice how the terms “85% decrease” and “76% increase” sound close to each other numerically. It seems like it might be close to a “wash” in terms of percentage, right? The reality behind the actual numbers, however, can become lost in the translation. Going from 437 to 65 is a huge decline that shows how out-of-whack local new housing has been over the last several years. What we are seeing, then, is a sharp correction of the supply side heading in the right direction of demand. This is a “good sign”, in one sense. It’s “good” because we need more affordable new housing, and it’s beginning to show up more in the market. In another sense, this is a “bad sign”. It is “bad” in the sense that these smaller, less expensive homes will generate less revenue. In other words, the sales agent makes less money on the smaller house because the price is obviously lower. The subcontractors who built the smaller home make less for the same reason. The local and state government makes less in tax revenue on the smaller home for the same reason. The primary beneficiary is then the homebuyer, who (assuming s/he keeps their job), has a smaller monthly mortgage payment to deal with. No matter how you slice it though, the majority of people with ties to the home end up making less money, which means less disposable income, which means local businesses begin to suffer, which means layoffs for some, which all feeds back into the recession cycle.

As the housing bubble deflates in real terms due to a change in home buyer demand for smaller, less expensive new housing, it also continues to deflate in subsidiary terms as previously built, price-inflated bubble era homes are foreclosed on, walked away from, or in some cases pillaged like a vulture cleaning the carcass of a dead animal. All of these realities combine to spell less tax revenue for governments of all shapes and sizes, and sends any true “bottom” of the housing market further off into the hazy future.

This “big picture” of what’s happening to the housing market and its effects on Government is difficult to analyze. It’s very similar to watching the formation of storm clouds. You just look up one moment and say to yourself, “Whoa! Look at those storm clouds! It was clear just an hour ago!” If you have ever seen a time-lapse film of gathering storm clouds, it becomes much more apparent how the storm actually formed. In general observation, the process is very slow, almost totally imperceptible. But if you speed up the film, the mind grasps how it all came together and happened in the first place. The same is true when looking at the U.S. economy and its ties to housing. In hind sight it’s easy to see what went wrong, but during the moment it was happening it was almost impossible to notice, even for our illustrious politicians.

But I’ve digressed, again.

Let’s focus briefly on the other end of the housing spectrum; the local luxury resale market. When home prices were inflating during the early and mid part of this decade, many luxury custom homes were built. I want to look specifically at homes which today are listed on the local MLS at or above $1,000,000. A search earlier today showed there were 150 properties on the local market that fall into this price category. So, how many sales in this price range happened during the first quarter of this year? The answer is, 1. There was only one resale home sold for over $1,000,000 during the 1st quarter of 2009. If even 3 such properties could sell during each coming quarter from here on out, and not a single new listing entered the market for over $1,000,000, then it would still take over 12 years to absorb the current supply. Ouch! In terms of housing bottoms, the luxury market has the farthest to go without question.

So, what’s yet to come?

In my opinion, we are near a bottom in housing in some ways, but that bottom will likely be with us for quite a few years. The recession/depression we’re in will likely appear to wane in coming quarters, partially through the effects of “Stimulus” and Government redefinitions of economic indicators, but in reality I believe that price inflation is right around the corner and will have significant negative effects. I say that because anything of real value has at its core, scarcity. If something is rare, its value is naturally higher. When the U.S. Government prints up hundreds of billions more U.S. dollars via “Stimulus”, it is by definition devaluing the currency. The rarity of U.S. dollars, and thus the value of U.S. dollars, is eroded away when trillions more come rapidly into existence. Combined with dwindling inventories due to lack of credit availability, rising prices are inevitable. The benefits of inflation are reaped by those who receive the newly created money up front. Expect to see over the next two years some companies (with government contracts of course) do exceedingly well, including producers of solar cells, wind turbines, and other renewable energy manufacturing companies. Expect also to see over the next two years, further suffering in the private sector, especially in chain retail stores, the auto sector, and yes, new housing. Going forward it will be a mixed bag to say the least.

The famous investor Warren Buffet placed his bets on See's candy back in 1972. His investment strategy has had a great return so far, because he knew that even in economic downturns, candy sales would remain intact. That's because candy is relatively cheap, it’s legal, and it’s a strong vice for those who might be feeling down and need a quick pick-me-up. Just remember, too much of it isn’t good, but you probably won’t hear that from Mr. Buffet. In like manner, too much debt isn’t good . . . but you probably won’t see or hear that from Uncle Sam either.

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New Communities for May 2009:

(No new communities opened in the last 30 days)
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Closed Out* Communities this month: (Floor Plans still available in the SalesTraq floor plan archive file)

(No new communities closed out in the last 30 days)

*Builder either no longer has lots available, or development has ceased for the time being
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More New Subdivisions and Developments COMING SOON:
CASA VERDE VILLAGE by Jenco Custom Homes (Far Northeast Albuquerque)
MESA DEL SOL Master Planned Community (Southeast Mesa)
VENTANA DEL BOSQUE by Aspire Homes (Downtown Albuquerque area)
VILLA LOMA TOWNHOMES by Points West Homes (Northeast Heights)