Wednesday, June 3rd, 2009
It’s no surprise that investors are still wary of investing in derivatives, given the financial devastation that these vehicles’ collapse caused last year. Proof of the fact is that the IPO of a financial instrument designed to be on American home prices failed because its auction did not generate adequate investor interest.
According to its Securities and Exchange Commission filing, MacroMarkets turned down all auction bids because there was an “insufficient demand for an equal number of Down and Up shares”. In other words, MacroMarkets was forced to abandon the auction process because the offering would work only if there was an equal number of shares in both the “up” and the “down” trusts - and if each pair of shares totaled $50. The firm had initially set a minimum closing investment pool of $125 million, though CEO Sam Masucci did not disclose the value of the bids received before pulling the plug.
MacroMarkets sought out investment from homebuilders and banks who want to hedge their housing exposure, as well as foreign investors seeking a stake in U.S. real estate. The problem is that investors had difficulty valuing the shares because it meant predicting the movement of the 10-city index on which the offering was based. That’s not easy in a housing market where prices may not have bottomed out yet.
When housing trusts eventually restart, their shares will trade under the symbols UMM for “up” and DMM for “down” on the NYSE Arca, the New York Stock Exchange’s all-electronic U.S. trading platform.
Tags: auction, auction bids, banks, derivatives, DMM, Down and Up shares, financial devastation, financial instrument, foreign investors, home, home prices, homebuilders, housing exposure, housing market, housing trusts, interest, investing, investment, investment pool, investor, investors, IPO, MacroMarkets, New York Stock Exchange, NYSE Arca, Sam Masucci, Securities and Exchange Commission, UMM, US real estate, US trading platform, value
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Monday, June 1st, 2009
Las Vegas may be in the middle of a desert, but right now it’s underwater. Fully two-thirds of the once fast-growing city’s housing stock is underwater, meaning that the owners owe more on their mortgages 
than the home is worth.
According to www.zillow.com, borrowers who are underwater totaled 20.4 million at the end of the first quarter of this year, compared with 16.3 million at the end of last year. This represents 21.9 percent of all homeowners.
The irony in these numbers is that falling prices are making homes more affordable for first-time buyers who previously were shut out of the housing market. At the same time, the decline in home prices compounds problems for owners who get into financial trouble by making it harder for them to refinance and take advantage of the current low interest rates.
“What’s going on here is that you don’t have any markets that have turned around and you have new markets, like Dallas, that have joined the ranks of communities where home prices have fallen,” noted Stan Humphries, a Zillow.com vice president.
Zillow.com reports that the nation’s top 10 underwater cities are:
- Las Vegas, NV 67.2 percent
- Stockton, CA 51.1 percent
- Modesto, CA 50.8 percent
- Reno, NV 48.5 percent
- Vallejo Fairfield, CA 46.5 percent
- Merced, CA 44.4 percent
- Port St. Lucie, FL 43.5 percent
- Riverside, CA 42.8 percent
- Phoenix, AZ 41.7 percent
- Orlando, FL 41.7 percent
Tags: borrowers, city housing stock, communities, Dallas, desert, financial trouble, first-time buyers, home, home prices, homeowners, housing market, Las Vegas, low interest rates, Merced California, Modesto California, mortgage, Orlando Florida, Phoenix Arizona, Port St Lucie Florida, refinance, Reno Nevada, Riverside California, Stockton California, underwater, Vallejo Fairfield California, zillow.com
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