Boston real estate is in shambles: May capped off the worst year-to-date sales numbers for single family homes since modern records began, according to data from the Warren Group. The worst offenders: towns with expensive housing.
For example, Wellesley sold 58 single family houses YTD in 2009. In 2008, 123 were sold by this time. The average Jan-May sales volume since 1988 is about 125. The worst year prior to 2009 was 1989 at 97 units sold. Newton? Average Jan-May since 1988 is about 225. 2009? 116. The worst year prior to 2009 was 1990 at 155. That’s right. 2009 sales volumes in Newton are approximately 30% below the worst prior year since 1988. I just chose two random towns; the same pattern is evident across the Boston suburbs–see the Warren Group’s data for yourself.
Woe unto those who own expensive housing in the Boston area, or any expensive area on the coasts. This is an epic implosion. Remember: volumes precede prices. If volumes are the worst in modern history, the price declines are only going to accelerate (and they are off 20% from 2005 prices currently).
It’s bad enough that the nation’s infrastructure is crumbling–bridge collapses, frequent mishaps and accidents on the MBTA, now six dead in a Washington train crash–apparently the National Transportation Safety Board isn’t even keeping track. From the Bloomberg article on the Washington train crash:
The two most recent transit accidents the NTSB board reviewed were on Boston’s Massachusetts Bay Transportation Authority, spokesman Peter Knudson said. The board, which determines the causes of accidents, doesn’t keep statistics about transit incidents, he said.
So much for the Information Age.
The Guardian is reporting “Goldman to make record bonus payout“. Apparently the financial crisis has a silver lining, at least for Goldman. From the article:
Goldman Sachs staff can look forward to the biggest bonus payouts in the firm’s 140-year history after a spectacular first half of the year … A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm.
Judging from the astronomical profits racked up in recent years by investment banking firms, it seems clear that price competition in the sector wasn’t too intense. Crisis-driven consolidation probably gives the top firms substantially more market power, and this at a time when firms and governments are desperate to raise money. The article quotes an investment banking analyst:
David Williams, an investment banking analyst at Fox Pitt Kelton, said: “This year is shaping up to be the best year ever for investment banks, or at least those that have emerged relatively unscathed from the credit crisis. … These banks are intermediaries in the bond markets where governments and companies are raising billions of pounds of new money. There is also a lack of competition that means they can charge huge sums for doing business.”
The article says that the bank set aside GBP600MM in the first quarter to reward its 28,000 employees. If profits hold at similar levels for the rest of the year, employees can expect over GBP80,000 on average from a compensation pool of about GBP2.4B. Certainly a lot of money, but nevertheless a far cry from the $18.8B compensation pool (about $600,000 on average for 30,000 employees) in 2007.
Apparently a significant fraction of the profits come from selling government bonds:
Last week, the firm predicted that President Barack Obama’s government could issue $3.25tn of debt before September, almost four times last year’s sum. Goldman, a prime broker of US government bonds, is expected to make hundreds of millions of dollars in profits from selling and dealing in the bonds.
Those concerned about financial oligarchy in the U.S. may want to ponder the relationship between Goldman’s handsome profits, the AIG bailout that paid $12.9B to Goldman, and “The Guys From ‘Government Sachs‘”.
On the other hand, for those who were concerned that widespread condemnation of warped incentives in the financial sector might lead to substantive reform, this should be reassuring. It appears that society will continue to shower riches on well-capitalized, politically-connected financiers, while bearing the cost of any associated negative externalities.