Thursday, December 31, 2009

My Wife Is Trying to Collect My Life Insurance

It all started on July 4th, 2009. I remember the day precisely because I was on the deck, grilling brats when my wife informed me "One of the kitchen ceiling lights is burned out". There appeared to be a hint of urgency in her voice. After 25 years of wedded bliss, I knew exactly how to respond to this request. "I'll get right on it". Now here represents a difference between men and women. There are four lights in our kitchen ceiling, so the loss of one constitutes a mere 25% decline in available lighting. (OK, since Labor Day there's only been two lights working, but I prefer to think of the room as "half-lit" rather than "half-dark".). Besides, my liberal friends have finally brought me around to their way of thinking. We don't need four lights burning when greenhouse gasses are inundating our planet. Where chores are involved, I find Al Gore's thinking to be right up my alley…not changing a light bulb becomes a "Convenient Truth". Hey, I'm always open to the other side of the political fence on those few occasions when liberal groupthink makes sense. My wife disagrees.

Besides, what possible dangers are involved in insufficient kitchen lighting? So what if one cannot tell if the chicken or pork is still pink and therefore inedible? From what I've read, colonics are an integral part of the homeopathic medical fad, and nothing cleans out your system better than a good case of salmonella. And there are definite dangers in changing these light bulbs. First, the damn thing is 11' above the floor. With my 5' 7" frame and a 6' step ladder, I must stand on the rung imploring "THIS IS NOT A STEP" in order to accomplish the deed. And thanks to the Democrats, the new bulb is an environmentally-friendly CFC reflector containing lethal amounts of mercury. One slip of the hand and the bulb falls 11' to the floor, releasing a plume of toxic vapors which will overcome me-precipitating my own 11' fall- and most likely kill the cats—amused as they would be chasing thousands of little mercury balls scurrying across the floor. (Hmm..note to self--always have cats present when installing new light bulbs).

(It's a LONG way up there)


To make matters worse, this 6' wooden ladder is down on the first floor in our storage room. That means I must carry it up three whole flights of stairs to our 3rd floor kitchen, negotiating landings and bearing significant weight on my shoulders. Apparently my wife has never considered how many accidents occur on stairs, nor the number of 50+ year old men struck down by cardiac arrest when carting heavy ladders around. Tell me ladies, is a single (OK, two single) light bulb(s) worth losing your best friend and spouse? I thought not.

Besides, it's not like I haven't done anything useful around the house since July 4th. I've supervised the sodding of the yard and the cleaning of rusty water stains from our white fence. Supervision involves making phone calls, hiring specialists and writing checks, which can be stressful. Especially writing checks. I also did a lot of stuff myself. I researched, purchased and set up a new laptop, even though I already have a perfectly good 17' model. A man can never have too many computers. I also researched, purchased, and installed a Blu-Ray DVD player, although I don't own a single Blu-Ray DVD. I bought a new Nikon D-5000 camera and new lenses came for Christmas. The book to teach me how to use the camera is 380 pages of 5" x 7" paper, all in English. I had to read it. And finally, I researched, purchased, installed and configured to my wireless router a combination fax, flat glass copier, scanner and photo printer. I don't have a home office so I'm not sure of what use the fax machine will be, or the copier for that matter. But it looks cool as hell next to my last year's purchase of a combo printer-photo printer with the same five digital photo card slots as my new printer.

As you can see, there are far more important things in life than changing light bulbs. Like installing the HD-DVR Satellite receiver in the bedroom to match the one in the great room, even though we don't have an HD TV in the bedroom. And my brother-in-law recently helped change the brake light in my car, an issue I immediately remedied after the third time a Dare County sheriff saw fit to pull me over.

So, all of this constant reminding and hints ("Hey Russ, it looks like you could change one of those light bulbs by merely standing on the kitchen counter") falls on deaf ears. Yeah right, like I'm gonna scramble up onto a 3'6" high counter without benefit of a step ladder, lean over two feet and attempt to remove a light bulb that's actually over the fridge. What do I look like, a 12-year old boy on a set of monkey bars? Men prioritize. It's in our blood. Along with 90 proof vodka and PBR.

I believe this is all an attempt to bring about my early demise and collect life insurance so she can have some 21 year old cabana boy move in and perform all those menial tasks. But I fooled her. I changed those freakin' bulbs today, and if I die later tonight from hauling that ladder round-trip over three flights of stairs (or, more likely, suffer from a sudden drop in blood pressure from being 11' in the air changing the first bulb), I'll get the last laugh. I guarantee that cabana boy couldn't program a DVD player much less configure a wireless router.

But, its time to go. Gotta find an HD TV to go with the bedroom receiver. Well, actually I called Steve Green at Audio-Video Providers. He's ordering it, bringing it over and installing it. Phew! Another busy day.


Tuesday, December 29, 2009

Outer Banks Real Estate--Investment & Commercial

The Virginian-Pilot recently ran an article covering the commercial vacancy rates affecting Dare County properties. As one who used to lend on these type of properties, I cringe every time I see one under obvious stress, or worse, foreclosure. Some of those loans are likely to be decisions I approved or asked others to approve.

Let's look at true commercial properties for this blog post. [Caution-- math ahead and involved in understanding this post].

How did these loans get into trouble so fast? Let's take a 10,000 square foot office building as an example. The developer finds a parcel of Hwy 158 land at $800,000, circa 2005. Assume construction costs of the building at $125 s.f. which with our building codes and permit costs represents conservative pricing. We now have a total cost of $2,050,000. The borrower gets half of the property under pre-leases before he visits the bank at $25 a s.f. The appraiser retained by the lender confirms the pre-leases, compares the rents with comparable properties and determines the entire building should be able to lease out at $25 square foot, and given current availability and rental pace, he also projects the building will be fully leased 12 months after completion. The bank is happy with the pre-leases and projections. A look at the possible tenants reveals well known local and national companies. The developers have outside businesses and their financials indicate over the past four years, they could contribute significantly to the project if rents faltered for a period.

OK, so what do we have? A $2,050,000 construction project, including lot purchase. $250,000 in gross rents, assuming 10,000 s.f. @ $25/s.f. The borrower puts 20% down, leaving a loan of $1,640,000. Typically, a bank during the boom would be loaning at 7% or so, and community banks would usually amortize those payments over 20 years. This gives us payments of $154,000 per year against gross rents of $250,000. But, more math is involved. There will be expenses, management fees, taxes, insurance, perhaps some vacancies. Most banks would take those gross rents and reduce them by at least 20%, leaving us 200,000 in "net operating income".

Running those numbers we have $200,000 in net rents against $154,000 in payments, for an after expense coverage ratio of 1.3 (200,000/154,000). Most banks want coverage to exceed 1.25, so this loan meets that minimum criteria. To be extra careful, the bank would also average in the personal income of the guarantors--let's say there are three of them--a physician, a Realtor, and a retired lawyer with substantial dividend income. Their post-personal debt income increases the coverage ratio even more to the bank's liking, perhaps to 1.6.

The building is completed, and it leases up as predicted. A large law firm, a real estate sales company, and an engineering firm take up 5,000 s.f. The remainder is leased by a small insurance agency, an architect, an office for a landscaper, and perhaps a title insurance company.

Three years later, we're in a real estate crash. Even though the bank was happy based upon the pre-lease agreements, rental projects and appraisal, our one-dimensional economy creates a major problem. Every single tenant is somehow tied to the real estate market. The attorney closes loans, the real estate comapny sells the houses, the engineer lays out the subdivisions and makes sure houses comply with building codes, the architect designs the buildings, the insurer writes the property insurance, the title company insures the attorney's work and the landscaper sods the yard for the new home. And the developers personal income? The Realtor's income is down by 2/3, the retiree's dividend income was destroyed in the stock market crash, and only the physician is left standing, unable to shore up the project on his own.

By 2008, many of these tenants are gone, en masse, or if surviving, are doing so with gross annual revenues 30-70% lower than what they had averaged each of the prior six years. This pattern is repeated all over the county and soon vacant offices are everywhere.

Rents have now declined to $18 s.f. Our $250,000 in gross rents is reduced to a mere $180,000, assuming the owner can lease the entire building in this environment. After 2o% expenses, our net revenues are $144,000. But our annual debt payments are still $154,000/yr. Even fully leased, we are $10,000 short in our ability to repay. If we are only 75% leased, more likely in the current environment, we're netting $108,000 against $154,000 in payments. Uh-oh.

Congratulations! We just made a $2 million bad loan; even though our building was entirely leased, appraised at cost or slightly more, and the owner put in 20% ($400,000) of his own cash.
And if some self-satisfied reader is telling himself that "anyone could have seen a worldwide crash rivaling the Great Depression" coming to the fore in 2007, I have a building to sell you for $2,050,000!

At this point, one might ask, what is the bank to do? Suppose it forecloses? What is the value of the building?

The appraiser will look at the rents in the market and the vacancies. More than likely, if the building is 25% vacant at $18 s.f, the appraiser is likely to settle on $15 s.f. as a truer reflection of the income potential. He will then take the $150,000 in projected rents and reduce them to a net income of $120,000. Next, he will compare this revenue stream with alternative investments and come up with what we call a capitalization (or "cap") rate. Let's say T-bills represent a safe investment at 3.5% and junk bonds return 11% in the current market. The appraiser looks at the potential tenants and now determines they will be composed of mostly small, "mom and pop" businesses. He picks a cap rate closer to junk bonds than T-bills, say 9%.

Next, the appraiser takes the net rents and divides them by the cap rate:

$120,000/.09=$1,333,3333

Thus, the same building that appraised at over $2 million in 2005, providing the bank an 80% loan to value is now worth $1.3 million. If the bank is still owed close to $2 million, its loan to value is now over 150%, and if it wants to sell the building, it will take a write down of $700,000 on this one loan. If the bank has two more loans in the same geographic area in the same trouble, we're looking at $2.1 million in losses. Now look at all the banks in the area and all the empty buildings and projects. The local total is potentially staggering. But, many of these banks are located all over the state, and are experiencing similar losses in those regions--Raleigh, Willmington, New Bern, Bertie County, Currituck. Some of those banks are national in scope, and invested in commercial and residential loans in areas suffering even worse than Dare County--Florida, California, Nevada, and coastal South Carolina. As the media has been warning, the wave of potential commercial loan failures could easily rival what we are witnessing on the residential loan side.

Just to make you sleep even less soundly, given the rate shopping malls are failing nationally, especially in mid-sized cities---you might not want to know that insurance companies are often the primary lenders in this sector. Better not count on that cash value, annuity or even the death benefit.....

Saturday, December 26, 2009

Random Acts of Christmas

Last week I was in Greensboro visiting my wife's brother. It was a dual purpose trip, CPE and a chance to see her brother and family. We are blessed by having remarkable in-laws on both sides of our family and we both enjoy visiting one another's family. Whenever I spend a lot of time out of the area, I sometimes reflect on what I miss about living in a larger city. We attended an excellent version of 'A Christmas Carol' in High Point, put on by the North Carolina Shakespeare society and part of a month-long Shakespeare festival. How I wish I could have attended all the plays included in the series. Then there was dinner at a real Chinese restaurant, something hard to find in our immediate vicinity. And the stores—full of displays, carolers, giant Christmas trees, happy shoppers.

Then I return home. Here, I am reminded of what it is like to be in a small town where you know almost everyone. On Tuesday I get a call from a friend trying to locate me. He wants to drop off something to me. We agree to meet at a local coffee shop the next morning. There he presents me with a beautiful calendar, full-sized, professionally printed and composed of local photographs taken by him. This is an annual tradition for him, and it's beautiful. And personal. While we are sharing coffee, a local builder comes in, another friend and a lodge brother. He joins the group and we enjoy a great conversation. My calendar friend leaves, but in comes a local Realtor. He and the builder strike up a conversation and I prepare to leave. The Realtor asks me to stay and we discuss the local economy and other aspects of current Dare County life. As we all depart, he invites us to the back of his car, opens the trunk, and introduces us to a tradition he keeps—he buys and distributes randomly bottles of wine to people he runs into during the Christmas week. Amazing. I get a bottle of Merlot, the builder takes a white wine.

The next day my wife and I hit Harris-Teeter in Nags Head and the new Food Lion. We run into no less than ten people we know—in line, cruising the aisles, whatever. My sister and mother call, and knowing my wife is tied up with doctors visits this week, asks me to find a condo they can stay in for two days since we are unable to travel for Christmas. I call the owner of one condo who provides me the name of the management company handling that facility. I write a joint email to my sister and the owner of the company hooking them up (and, lazily, taking me out of the loop!). Next thing I know, my sister calls, flabbergasted, that the condo was provided gratis. Just like that.

Yesterday, while checking Facebook, a chat screen pops up. A neighbor says she is sending her son over with some goodies. Next thing I know, we have some of the best cookies I've ever put into my mouth.

Yes, I miss the sports, culture, shopping and other aspects of the "big city". And then, each time I return to the Outer Banks, I am reminded why small towns are so important. Sure, in a large city the same things happen in your neighborhood and church. But the odds of daily encounters at stores, coffee shops and other venues with people you know are slim in those vast cities. As are random acts representing the true spirit of Christmas.

God bless us all.

Friday, December 25, 2009

A Customer Service Christmas Story

A friend of mine related this humorous (yet frustrating) story under the promise that I neither reveal his name nor that of the business involved. Let me also state that the fact the story revolves around a medical practice is incidental, it could happen anywhere and in any place. More to the point, virtually all of my medical experiences locally have been quite satisfactory, even excellent. But I digress. What follows is a dialog, embellished I am sure by the story teller and myself:

The entire dialog takes place over the telephone, last week…


Medical Practice: ____ ______ ? How can I help you.

Caller: I have a persistent earache, like swimmer's ear.

Practice: Your name?

Caller: Joe Smith

Practice: Let me pull you up on the computer. There you are. I see you haven't been here in two years. Is that correct?

Caller: Yes, that sounds right.

Practice: OK. We'll have to re-establish you as a patient. You are no longer one of our patients.

Caller: But didn't you just say I was on the computer and you pulled up my records and my last visit?

Practice: Yes. But we still have to re-establish you as a patient.

Caller: Aren't we doing that now, over the phone? It's just an earache, All I want is an appointment.

Practice: Well, as a new patient, we can fit you in January 14, 2010.

Caller: But I am not a new patient.

Practice: The doctor who treated you last is no longer with the practice. And, your patient records indicate that as of now, you are a new patient.

Caller: If I have records on your system, I can't be a new patient.

Practice: You could go to the Emergency Room at Outer Banks. Or one of the clinics in Nags Head or Kitty Hawk.

Caller: Emergency room? I have money and full health insurance. And, I'm already a patient at your practice.

Practice: I'm sorry, we can't do anything sooner unless you re-establish yourself as a patient.



Monday, December 21, 2009

Notes from Anonymous

I love it when I receive comments like the one following. It was sent in response to this post, but like many of the comments that arrive here, I think it deserves its own feature!

Obviously the people of Dare County and Nags Head DO NOT WANT Nourishment. If they did, they would have voted for it. Your experience in the lending industry, surely you know math and what makes economic sense... better yet, find someone to finance it... see how fast $30 mil floats into the ocean.


OK Anon. First, some numbers…..


$1.156 BILLION DOLLARS—Total personal income in Dare County---2006 US Census

$853 MILLION—Total earnings generated in Dare County--- 2006 Census

$86 MILLION---Dollar value of annual manufacturing shipments—2002 Census

$51.6 MILLION—Annual Retail Sales 2005-06 Fiscal Year—Dr. James Kleckley—ECU

$288 MILLION—Occupancy Tax Revenues Collected—2005-06 Fiscal Year—Ibid.

28.6%--Percentage of work force engaged in tourism/entertainment/hospitality—Ibid (vs. 9.4% state average)

18.6%-Percentage of work force engaged in retail sales –Ibid. (vs. 11.7% state average)

11.4%-Percentage of work force employed in real estate, primarily for rental/vacation homes—Ibid. (vs. 1.6% state average)

8.6%--Work force employed in construction and related-Ibid. (vs 6% state average)

$13 BILLION—Estimate of tax value of Dare County residential property

$1.8 BILLION—Estimate of tax value of Dare County commercial property


Next, a little risk management theory. Typically, risk mitigation (insurance, a hedge, loss control techniques) is called for if the marginal cost of reducing the risk is equal to, or less than, the marginal cost of taking the risk. Secondly, risk managers typically try to insure or mitigate large, unpredictable catastrophic losses (such as acts of nature) while retaining funds (self-insuring) for predictable, financially manageable losses.

Virginia Beach looks at the property tax and commerce value of their ocean front economy (and remember, they are a far more diverse economy than the Outer Banks) and still arrives at the conclusion beach nourishment is a cost of doing business. They treat sand replacement as an insurance policy.

Critics of nourishment are fond of reciting one mathematical fact---$30 million in, $30 million washed away. A zero-sum equation. Look again at the numbers above. I can show you with numbers what beach nourishment will cost, and I can show you facts relative to the dollar value of the local economy, which I assume to be almost totally reliant on not only our beaches, but the tax base "at risk", as well as the infrastructure. Would you bet $30 million a year to mitigate extreme damage that serves as the basis for a $1.1 billion dollar personal income base? Would you bet $30 million to preserve $853 million of annual, local earnings? How about $30 million to protect $13 BILLION of tax base, much of it east of Hwy 158 and on Hatteras, Highway 12? And what if we got "lucky" and the sand lasted two years, bringing our annual costs down to $15 million, while doubling the amount of personal income, earnings, and tax revenues protected? Go three years and the costs drop to $10 million per annum with a tripling of the wages, revenues and taxes saved. If we go five years, as the plan called for, the expense is a mathematical drop in the bucket.

Now, I've shown you my opinion of the math. Show me yours. Give me more thought than telling me $30 million is going to be flushed out to sea. As an opponent of beach nourishment, tell all of us what amount of tax base we will lose as we incorporate the concept of retreat. Estimate or project not only that number, but the effect on personal income, other non-property taxes, and lost infrastructure. Tell us how much "clean up" of destroyed ocean front structures will cost, and what will the debris do to our beaches? Explain to us, as Eye on Dare mentioned today, how we obtain a "revitalized" natural beach in South Nags Head when the present beach-- filled with the ghost's of homes and roads lost in the past-- is full of old septic tanks, foundations, and pilings in the surf zone.

Take your equation further. Let's say we do nothing and let ALL of the ocean front go, at any place and at any time. How far will you and your fellow travelers go? Do we abandon Highway 12 in certain places? If we let that go, do we abandon those homes and businesses on the west side of Highway 12? Once the beach front begins to fall into the ocean in earnest, how many tourists will cease to visit? Can you confidently tell all of us that not only will the lost revenues and taxes not harm those remaining (by raising our taxes to replace those lost), but that a battered beach in various stages of disrepair will continue to attract visitors? Show us your numbers.

So yes, I can do math. I can even do rudimentary risk management calculations. Now show me your stuff!!!

Sunday, December 20, 2009

OBX Investment Buyers---Where Are the Lenders?

I've discussed over the course of three posts issues I believe are affecting the local housing market as it pertains to county residents. To recap, we have been caught in a vicious circle. Housing prices for locals have never been cheaper, especially when coupled with low interest rates and first time home buyer credits. However, given the local market's reliance on construction/real estate/affiliated jobs, the pool of potential buyers has been shrinking. In fact, many of the local foreclosures have come from people formerly employed in real estate affiliated businesses. Thus we have loans, enticing rates, inventory--and few buyers.

The investment side of our market, which is in fact, the largest and most important segment of our residential sales is suffering a different set of woes. Potential buyers are present and looking. Prices are dropping. Inventory is high. But lenders are scarce, even invisible at some price ranges.

Let's start with the only two significantly active purchasers of secondary market mortgage loans: Fannie Mae and Freddie Mac. If one is buying a primary residence, Fannie Mae has increased the maximum loan from $417,000 to $460,000. This brings a few former "jumbo" loans into the conventional fold, but second homes and investment homes are excluded.

Fannie & Freddie still finance investment homes, although they require 25% down, the loan must be under $417,000, and new twists have surfaced: owners of rental property will often need to demonstrate a two year history of rental property experience, and rental income (historical or projected) is counted as many different ways as there are investors offering to purchase these loans.

Secondly, condos are completely excluded for FNMA/Freddie financing if they are investment properties. An absurd over-reaction to the condo glut affecting Las Vegas, Myrtle Beach and most of Florida, and one which should not have invited a wholesale ban. I will write another post on this later.

Finally, we come to houses that fall into the jumbo ($417-$1MM) and super-jumbo ($1MM+) price range. A significant number of our rental inventory, perhaps a majority of our seasonal rentals, fall into the jumbo category.

As I write this, there are NO secondary market investors actively buying loans in the jumbo investment housing sector. And until that situation changes, our local real estate market will require a long time to climb out of the current hole.

As a former banker, this lack of liquidity in the jumbo investment market is perplexing. During the bubble, mortgage lending on these type of homes bordered on the absurd. In many cases, lenders were loaning 100%, interest only, even negative amortization loans on these homes. Often times, income was not verified, credit scores below 620 were acceptable, and rental income was counted at 100% of projected gross revenues. Many of the lenders, through review of appraisals, were also aware that the values of these homes were climbing as much as 15% every six months. Thus, it is no wonder that banks extending these credits took a dive, and no surprise that the secondary market would experience a temporary void of cash as these players exited.

Typically, when bad money is chased from a market, good money rushes in to fill the void, replete with saner lending standards. For example, with appraised values at all time lows, lenders should be satisfied that at this juncture, financed properties will not decline in value over the course of the loan. And, while 100% financing with generous terms was wrong-headed, it makes zero sense to me that loans with reasonable terms are not available.

Suppose lenders re-entered the market with the following requirements for investment homes over $750,000:

  • 25%-35% down payment requirement
  • Two independently ordered appraisals with market values within 15% of one another.
  • Allowing 80% of net historical rental income (two or more years averaged) or 50% of projected rental income (on new homes) to be added to borrower income.
  • All loans fully amortizing at fixed rates. No ARMS, Pay Options or interest only.
  • All loans fully documented as to income, credit, and other normal criteria.
  • Credit scores of 720 or above
  • All loan to values subject to either purchase price, or in the case of construction, actual construction & lot cost.
  • Lot equity counted only if lot owned three or more years and original purchase price and down payment documented.
There is no reason loans following the above criteria would not perform well. When President Obama speaks to our economic pains, it is apparent that he, and the rest of the government fully comprehend the real estate market and its impact on the macro-economy. Far too much energy has been focused on foreclosures in the primary home-residential market. Even in that market, were it not for the investment dollars of Freddie and Fannie, lending would be tighter and rates higher.

But a large proportion of our national housing market is comprised of owner occupied jumbo homes, year round rental homes, seasonal rentals, and condos. At present, none of these markets are being served by the private sector at any reasonable level of risk analysis. Even buyers with 50% cash down payments cannot obtain financing (except for a handful of local banks that can afford to "shelf" a few such loans) for jumbo investment homes or condos at any price point. From everyone on the lending side I have spoken to, mortgage lenders are ready to roll. But the American mortgage system is dependent upon a healthy and active secondary market to fund mortgage lending. For reasons far too complex to discuss here, local banks will never be able to originate and hold mortgage loans on a large scale.

Why the market is refusing to offer products subject to proven, pre-bubble conservative lending practices is a mystery. And until it is solved, the Outer Banks will be caught in the no-financing trap.

Friday, December 18, 2009

Scientist: OBX Beaches Too Close to Ocean


First we were told Dare County houses were built too close to the beach, apparently including those in Kitty Hawk and South Nags Head that are over 40 years old and constructed at a time when the beaches were two, even three times wider. Indeed, some of the current ocean front homes in South Nags Head were three streets back from the beach when originally built—before those former streets were taken by the sea.

Next we were told the Beach Road itself was too close to the ocean. I remember one meeting where Jan DeBlieu of the Coastal Federation demonstrated to a small crowd of bird watching enthusiasts how a portion the Beach Road could be re-routed in southern Kitty Hawk/northern Kill Devil Hills to a point mid-way between its current location and the Bypass—leaving in its wake many "between the highways" homes as "ocean front territory"-- no longer worthy of protection. Jan called this "organized retreat", which I suppose is better than the French concept of retreat known as automatic surrender.

Next, in the comments section on the new local blog-- "SOD"--- (Sensory Organ on Dare) we learn from its editor that the Bypass itself was built too close to the beach. At least in Nags Head.


Whoa!..the beach isn't bumping the bypass..the bypass was put too close to the beach..now that's something we can talk about if we dig up some history.

So it came as no surprise when Dr. Owen H. Pilkey (Geologist—Dook University), and a long time critic of beach re-nourishment released a new study settling the issue once and for all. As Pilkey stated at a recent press conference in Nags Head, " After decades of study, I have determined God Himself made a big mistake when He created the world. It is quite obvious that when He constructed the beaches of the Outer Banks, and for that matter, all of the world's beaches He put them far too close to the ocean. Why God would place a beach next to the ocean is beyond mortal comprehension, but that's exactly what He did".

When asked by local reporters how one should deal with this issue, Pilkey surmised that retreat was the best idea he could think of. "Why God placed beaches near the ocean, where they are threatened by the elements on a daily basis will remain a divine mystery". Pilkey suggested that local beaches be re-located to Rocky Mount, and if the ocean continues its erosional march westward, Charlotte was also an option. Pilkey also informed the U.S. Navy that it should consider relocating its huge port in Norfolk further away from the Atlantic Ocean and Chesapeake Bay. "Des Moines would make a suitable location for a Navy base, as I predict erosion will not reach Iowa until at least 2025", Pilkey stated.

In a related statement, Pilkey also advised Holland to simply "Give the hell up" and let the ocean take over the country. He was similarly pessimistic about the future of Venice. In both cases, Pilkey believes that similarly to our beaches, God apparently built the Earth too close to the Sun, which causes occasional rises in sea level.

When asked to comment, God said he was too busy trying to solve the NCAA Football BCS crisis to be bothered with past mistakes regarding His design techniques. "When you build something as complex as the Earth in six days, some things are bound to slip through the cracks", He said. He apologized for locating beaches so close to the water, but reminded us that He bestowed mankind with sentient thought which He expected us to utilize. In fact, God stated, "Off the top of My head, have you thought about simply placing some sand on the beach to replenish the sand taken by the ocean?"

Wednesday, December 16, 2009

Oral Roberts Fails To Faith Heal Self...Appeared Perplexed


There was a time....

He stirred up controversy when Time reported in 1987 that his son Richard Roberts claimed that he had seen his father raise a child from the dead.[18] That year, the Bloom County comic strip recast its character Bill the Cat as a satirized televangelist, "Fundamentally Oral Bill." In 1987 Time stated that he was "re-emphasizing faith healing and [is] reaching for his old-time constituency."[18] However, his income continued to decrease (from $88 million in 1980 to $55 million in 1986, according to the Tulsa Tribune) and his largely vacant City of Faith Medical Center continued to lose money.[18]


News of Robert's death was reported December 15th. Larry King of CNN has booked Roberts for his show next week in order to ask how he died, why he was unable to heal himself, and hopefully, how and who raised him from the dead.

Reports from attending physicians indicated Roberts appeared perplexed in his final hours when his attempts at self-healing were met with failure.



Sunday, December 13, 2009

Saturday, December 12, 2009

All I Want For Christmas Is An 85 degree Day


Dear Al Gore; Nancy Pelosi, Harry Reid, and the Democrat Party:

Today I stood outside of a Food Lion store (the place your housekeeper might go to buy the food in your house) to collect donations for our local Food Pantry. We do this every year during the Christmas-Holiday- Festive Season, this time frame in December.

You know the time of year. It's when Santa Claus Uncle Sam distributes toys and gifts cold hard tax payer dollars in the form of cash to all the good little boys and girls bank presidents and people who refuse to pay their mortgage loans.

Well, anyway, God knows, Mother Nature be praised, it was cold as an Arctic Ice Cap a Republican's heart Nancy Pelosi's Botox injections. According to historical data, the average high temperature here in December is 55 degrees. Today, and yesterday, it was more like 42 degrees. Last winter and spring were even colder. That's a 13 degree colder deviation from our norm temperatures.

What the hell happened to Global Warming? After all those years of dire warnings, I fully expected Global Warming to occur—if not naturally, then at least by Executive Order from President Obama.

In fact, based upon your prediction that Florida would resemble the Sahara before President Bush finished his final term, I decided to remain on the Outer Banks. I expected to be swimming in 80 degree ocean water, enjoying the native parrots (fleeing from South America's searing heat) and sipping on a margarita by my outside pool in December. Instead, I am celebrating Christmas the Holidays this Festive Season December with the heat on, burning fossil fuels using renewable energy sources such as solar heat. It doesn't work so well on overcast winter days, by the way.

This unrealized warming wouldn't have anything to do with the recent revelations that your allies in the science fiction community were recently revealed to be lying covering up fudging data be possibly incorrect in their data interpretation of temperature trends?

Please take the time to respond with your usual bullshit intelligent, yet inconvenient and thoughtful truths as soon as you are finished buying carbon offsets for your 10,000 square foot home.


Sincerely,


Russell Lay


Local Buyers Part 3--Greg Cremia Responds

The following was submitted as a comment, but deserves wider viewing. They're from Greg Cremia, a local blogger and Realtor. My comments embedded below in a different color.

First, Greg--I have always made my money and will continue to do in the same business as you. So, I have no incentive to look at the market in a negative light. I do look at data, and data still says the opposite.

Kill Devil Hills westside has seen a 19% increase in sales over last year and there are still 13 more properties under contract. If these 13 units close before the end of the year it will be an increse of 30%.

The overall market, excluding Hatteras Island, shows 2821 listings, of which 2650 are classified as "active". 171 are under contract. That represents 6% of active listings under contract. That percentage has not changed significantly since late 2005. In fact, the actual raw numbers--2700 listings over 160 or so under contracts has remained in exactly the same range for the same time period. Almost all measurements of a healthy real estate market use 25% of listings under contract as "healthy". That is not the case here.

Further, percentage increases don't reveal what we need to know. If 60 houses sold in KDH last year, and 78 this year, that's a 30% increase, but barely makes a dent in the inventory overhang.

How much more do you want? The market is at a comfortable level and hopefully will remain like this. The last thing we need is to see prices start to escalate again.

As I mentioned above, we need listings to drop, or sales to rise in the 15-25% range of listings before we begin to clear out inventory. I agree some listings are probably not serious, but you won't have building resume if the overhang of existing houses persists for another two years similar to the last five. When you see three more mortgage brokerage firms shut their doors in 2009, you can't convince me houses are flying off the shelf.

And while we don't need higher prices, we certainly don't need a glut of foreclosures distorting the sales price. There is no economic reason why a proposed construction project should be appraising for less than comparable existing homes--it can only be explained by a severe market distortion, probably in land values. And, that was my point on excessively high-priced listings. Prices need to drop to well below the overinflated values seen on the west side from 2003-2005.

We are already seeing an influx of work at home buyers moving here and an increase in the number of buyers who do not want to rent their houses out. With the meager rental income, compared to the purchase price, there is not much incentive to rent these houses out. 20 years from now the OBX will most likely be a second home area for the well to do and we won't have all these rental houses.

That's good news. I agree with you on the rental value of west side properties. But, given the inventory of many west side homes in Kill Devil Hills and Colington, I don't see those houses being occupied by the "well to do". They are too old, too small, and functionally obsolete.

I also don't see the problem of buyers and sellers coming to an agreement. Of course, we don't show buyers over priced houses so we don't have to deal with un-realistic sellers and their un-realistic agents.

Again, perception. And how many foreclosures are you dealing with? I can assure you there are quite a few deals out there dragging out over the seven levels of decision making required to dump these properties. As I mentioned in my post, I am agreeing with some of what you say--I specifically said the buyers are there. But other Realtor's are not experiencing your batting average, which I would attribute to your skills as a Realtor. You obviously do a great job.

Next, the tax assessment has never been a good indicator of a properties market value. With the tax assessment only happening once every 8 years or so it is not a number to be used for determining value. Buyers have always been and still are the one determining factor of market value.

I never said it was a good indicator of property value. But it is a constant, and you need a constant to make historical, empirical comparisons, just as economists use inflation-adjusted dollars. Even though assessments are in place for 6-8 years, one can take sales data using those assessments and plot their deviations. While I realize Dare County re-assessed at the peak of the market, even during the last housing recession in the late 80''s here, properties did not deviate below assessed values as much as they are at present.

I have been selling real estate on the Outer Banks since 1989 and it is the only source of my income. My wife and I have sold 21 houses in 2009 and 2010 looks like it will be even better.

Likewise, we're writing twice as many mortgages in Dare as we did last year, excluding refinances. But last year was a horrible year, so a 2x increase isn't setting the world on fire. Our (meaning the entire county pipeline) pipeline for the 1Q in January also looks good, and mortgage loans seem to be closing in 30 days or less. But there are a ton of distortions in the market; foreclosed and short sale prices, $8,000 tax rebates, and artificially low mortgage interest rates. As a result, its impossible to assess the true value of homes on the market, and equally impossible to determine how strong the buyers market might be.

But in this case, I sincerely hope you are more right and I am more wrong. Thanks for the input, and any time you want to guest post, let me know. You can have an entire blog post with no commentary from me! Again, thanks.

Friday, December 11, 2009

Where Are The Local Buyers? Part 2

[3rd Quarter Home Prices--20 largest U.S. Metro Areas---courtesy of The Atlantic Monthly]


One more post about the local residential home market before I move on to out-of-town buyers and commercial real estate.

As I mentioned in Part 1, I don't believe our "year-round" residences, which are located in Southern Shores, west side Kitty Hawk, KDH, and Nags Head, as well as Roanoke and Colington Islands will experience a Renaissance in prices unless, and until the county moves beyond tourism and attempts to build a local economy with multiple inputs. Full time workers, retirees, and true second home owners (who tend to become active community participants) are needed to help balance the economy and smooth the economic cycles.


However, there is one other looming issue casting a pall on a west-side housing revival. While anecdotal in nature, I have my own first hand experience in this particular field. The issue? Buyers and sellers both are unable to conclude deals.

Trust me. Buyers are out there and they are tendering offers. From some of the offers I've witnessed, the buyers are well-qualified and even under current tough second home criteria, they would easily qualify for financing. The problem? Reluctant, stubborn sellers. especially those representing larger banks and mortgage lenders. They have proven resistant to price decreases, and are slow to review offers, make decisions, or issue counter offers. Problem Two? Low ball offers from buyers drinking far too much media Kool-Aid about sky-is-falling home prices with no end in sight for a price bottoming.

Even before the housing bubble, Dare County property typically sold at premiums 2-10% (or more) above assessed tax values. So, the figures below, which show what current homes have sold for as a percentage of tax value should open eyes on both the seller and buyer side of the equation. For November 2009 (and these numbers have been steady most of the year):

Currituck Beaches: 71% of tax value
Kill Devil Hills: 84%
Kitty Hawk: 84%
Manteo: 93%
Martin's Pt 70%
Nags Head 84%
Southern Shores 84%
Duck 81%

[Figures courtesy of Dave Watson; Southern Shores Realty]

Sellers should not list prices much higher than this current range (and that includes lender-owned properties), and buyers, if realistic, are wasting time making offers below these already depressed price ranges. Presently, an existing house will often sell for less than it would cost to buy the lot and build a new house. Obviously, this represents a serious price imbalance and I doubt seriously this situation will remain in place much longer.

Moreover, 2010 will bring changes. In the fall, the Feds not only extended the $8,000 first-time home buyer credit, they expanded it to certain groups of non-first time home buyers. Yet, by spring the amount of these tax credits will begin to phase out and decline and are scheduled to be fully rolled back by fall 2010.

Also, the Federal government has been a major purchaser of secondary market instruments known as mortgage backed securities. In the past, the MBS market, which supplies the raw material (loan funds) to fuel mortgage lending, was mostly the domain of the private sector. Banks, institutional investors, insurance companies, pension funds and others bought these bundles of loans, effectively re-seeding the lenders funding pools. Private buyers have all but disappeared, and the huge Fed presence has kept MBS rates low, which in turn, have kept mortgage loan fixed rates below 5%.

The Fed has announced that it will cease funding MBS's on 31 Mar 2010. If major private sector investors do not pick up the slack, it is likely sellers of MBS's will need to offer higher interest rates in the bundles to attract buyers, which can only be accomplished by raising the interest rate on the mortgage loans underlying these securities. Short version--mortgage loan interest rates have a good chance of rising by April of next year.

So...buyers and sellers.....right now you have historically low interest rates, home prices 10-30% below tax assessed value, and various tax credits for certain groups of home buyers. Primary residences and second home loans are relative easy to obtain up to $460,000.

If local buyers continue to squabble over, as I've witnessed recently--- $8,000 on a $360,000 sale price, opportunities will be missed. And offering $220,000 on a $340,000 list priced home? Save a tree, don't write an offer. Its an insult. We don't need any vultures looking to gain from other''s pain to replace the house flippers from the pre-crisis days.

Let's put our efforts into win-wins for all parties concerned.

Southern Living

On my way to teach class on Wednesday, what did I behold on Hwy 17 in Elizabeth City?

That's right. A red pickup truck, with the CB antenna decked out in Christmas lights....

Tuesday, December 8, 2009

Where Are The Local Buyers? Part 1

Being an ex-banker allows one to be close enough to former colleagues, customers, and competitors to gain insights not available to public, without having to know the specific players involved. All of this knowledge is pretty useless on a personal level, but sharing it with the general public can provide some insights into the Outer Banks ongoing economic woes.

As mentioned in yesterday's post, the fact that home sales are not picking up tremendously in the face of falling prices is something of a mystery. Or is it?

For starters, let's remember our economy is more real estate driven than tourism driven when we look at sustainable, middle class incomes instead of the gross raw dollars generated by the entire local economy. This is the result of a simple fact; while more dollars are spent on tourism activities, the bulk of this revenue goes directly to lodging and occupancy costs, which does not translate into salaries. Another large segment is expended on retail and entertainment, which generally supports low paying, service related jobs.

In contrast, construction and real estate revenues fuel significant incomes, for the upper as well as middle classes. Even unskilled labor in the construction trades generally earns more wages than a cashier at Wings, or a waitress at a family restaurant. This short explanation answers part of our question.

Currently, the only mortgage loans readily available and more easily obtainable are those for owner occupied primary residences. Here, you can obtain loans up to $417,000 at rates hovering just above or just below 5%. For true conventional loans, 90% financing is available, albeit with expensive Private Mortgage Insurance. FHA loans can provide 96.5% financing, and USDA and VA up to 102%. All of this is well and good, but finding buyers for these homes requires a rebound in the very sector that is depressed—real estate and construction. This creates a rather vicious circle that will continue to depress west-side, permanent residence purchasers.

Solutions? I can think of two. The first would require the county to begin expending as much effort in the area of attracting residents (and the requisite service related support businesses) as well as tourists. As many local forward thinkers have proffered, there is no reason why Dare County can't make an effort to attract high-tech individuals, artisans, consultants and others able to reside anywhere they choose. As mentioned here in previous blogs, attracting or expanding current college-level institutions would attract students in the off-season and generally well paid instructors on a year round basis. Retirees could also form an important segment of the economy, but much more progress must be made in making medical specialists more readily available. Our reliance on the Elizabeth City market for our physicians is a hindrance since most only see patients here once a week, and virtually none perform surgery at the Outer Banks Hospital. Also, the circus atmosphere at Albemarle Hospital, which recruits and then promptly fails to retain those same specialists, is an ongoing concern.

Another solution would be to market these west-side homes far more aggressively to true second home buyers. The Hampton Roads market is rife with high wage earners, many double-dipping from the Federal payroll. When I was a kid growing up in Virginia Beach, many of my friend's parents and grandparents, people of modest means, owned second homes on the Outer Banks. Virtually all of them were in the area of Kill Devil Hills where the Belk Center is now located, or between the highways on the eastern fringes nears what is now the bypass. These homes were never placed in rental pools; rather they were used on weekends, for family vacations, or "loaned" to friends.

While true second homes require a 20% down payment, they are otherwise easy to qualify for and not too difficult to underwrite. Retired military officers and NCO's, if working at new jobs, are generally able to afford a second home based upon their retirement income alone.

In any event, it is long overdue for this region to begin to market itself as a place to live permanently, or a place to own a second home, rather than solely a tourist destination offering income producing properties. Pulling off such an endeavor might require a PR effort similar to the programs currently run by the Visitor's Bureau, although I think the private sector could, and should, develop and fund such a program. And, besides medical services, we would also need to develop activities, programs and commercial entertainment that will keep people interested during those longer, colder winters. Community plays, musical events, adult continuing education and such are required in the winter months as well as the warm weather periods.

Tomorrow, I'll discuss one other aspect affecting our entire market, but especially the west-side properties. The subject matter will be the gulf between buyers and sellers.

In the interim, if you are waiting for west side prices to decline much more, I think you are out of luck. Prices right now are below what it costs to build. And interest rates, I suspect, will rise by summer for reasons to be explained later. But if you can afford a west side home and you aren't buying, you've missed an opportunity.





Monday, December 7, 2009

OBX Real Estate Update-Foreclosures



CLICK ABOVE FOR READABLE IMAGE

It's been awhile since I've discussed the current state of the OBX Real Estate market in these pages. For the next few days, I'll be exploring several segments of our local market. I'll be using data compiled from others, as well as information gleaned from my own discussion with local bankers, mortgage lenders and actual/potential borrowers.

Above (please click on image) is a month by month of foreclosure notices as tracked by a local Realtor from the Currituck and Dare County Clerks of Court. Note that a foreclosure notice does not automatically translate into a foreclosed property. Between the time a notice is filed and actual foreclosure occurs, the Borrower might cure the deficiency by making back payments, renegotiate the loan terms with the lender, declare bankruptcy, or enter into a full or short sale of the subject property with another buyer. Also be aware that the below numbers are not categorized by type of property; I am not sure if this list is single family dwellings only, or if it also includes vacant lots, commercial real estate and time share properties.

Regardless of property type, the numbers are instructive. While the local housing crisis first manifested itself in 2005, when buyers and lenders disappeared, significant foreclosure action was kept at bay until late 2007. Thus, 2008 represented the first full year of foreclosure activity that was significantly above our historical experience. As the numbers show, 2008 started strong, peaked in the summer, and stabilized at a slightly lower volume in the third quarter. Even so, there were 650 foreclosed properties in 2008, the vast majority in Dare County.

2009 started slow, likely the result of political pressure on lenders to stall the rate of foreclosures and work with borrowers on modified loans. The hiatus was short-lived; by early spring monthly numbers far exceeded the prior year figures. Through November, a total of 944 notices had been filed, a 45% increase over 2008 with one full month to count remaining.

As the numbers are not moving in an upward or downward slope (look at June through November to see how they bounce around) we won't know until April of next year if we have peaked and foreclosures will begin to abate. Certainly October and November 2009 saw declines from the monthly highs, but September revealed a significant increase after declines in July.

While none of this is great news, I am still confused why buyers are absent from the market. I have some ideas, and I'll discuss those in the next post.


Sunday, December 6, 2009

Bellini Rosso del Carlo --Tuscany


It has been awhile since I've done a wine review here, but I enjoyed this one so much I had to give it some notice. This wine is mostly of Sangiovese varietal, but I suspect there are some other grapes present also.

I bought this one at Total Wine in Chesapeake for the stratospheric price of $6.99. It was sitting on an end cap near the register, the price and store shelf-talker description intending to seduce one into a final, last minute impulse buy. My car was already full, but at 7 bucks, what the hell?

This wine is awesome, and would go great with pizza or plain old homemade spaghetti. Our neighbor had made some awesome sauce and brought some over when she heard about Rose's medical issues, so it seemed a good time to try the wine. Any other red sauce pasta would also make a great companion.

There is no vintage, and finding this wine online for further details is pretty hard. But I would classify it as very soft, with subdued tannins. Red fruit abounds, but I was hard pressed to pick a specific type. Light to medium body.

At this price, I'd give it four stars and recommend you buy in quantity for casual dining. It is also suitable for sipping and I doubt your party-goers would guess it cost less than $10.

Friday, December 4, 2009

“Going Rouge”—Sarah Palin-A Book Review


Rouge. Make-up. Lipstick. Lookin' good.

Although I haven't read the book, just from the title I know Sarah Palin has found her voice. Say what you might about the former Alaska governor and Vice-Presidential candidate, but you have to admit she's not a bad looking woman. In fact, among the ranks of nationally known female politicians she is easily in the Top Ten. Seriously. Think of the competition. A pant-suited Secretary of State. A Speaker of the House with a face tighter than the skins on Ringo Starr's tom-toms.

With Going Rouge, young American women can learn how to be a successful politician and apply rouge, skin conditioners, lipstick while sporting a $100,000 campaign wardrobe at the same time. Think about it. Nobody cares whether Katie Couric makes you look stupid on national television if everyone is looking at you, rather than listening to you. After all, if it worked for Katie Couric (how else to explain the fact she anchors a network news program), it can work for an Executive Office aspirant as well.

Although this reviewer has little experience with actually reading the book, or wearing rouge, I give it 5-stars and advise all of my readers to avail themselves of this long overdue book on a much overlooked subject area. If we can get better looking candidates from either gender, we'll all benefit in the long run.

Thursday, December 3, 2009

'Dem Damn Greedy Out of Towner Carpetbaggers

These houses have been in this state for at least 7 years. The sand is not coming back! They were incoming producing properties for out of towners. No one has ever lived in them. These people do not have the right to block public access on our beaches and compromise the houses around them. I see the damage they cause everytime the wind blows,I live behind them and fear for my home I LIVE IN ! Many people lost in investments recently all over the country,their 30 years of collecting ocean front rent has more than paid for them, it is pure greed and lack of concern for local residents.

Pearl


Yet another Pearl of Wisdom from a local. The above was a comment posted on Bob Muller's blog in response to this great post by our former mayor: What Next for South Nags Head? Bob's post echos the sentiments of several (but not the majority of) Nags Head and Dare County residents. Realizing the current (not some future, westward relocated beach) oceanfront is our primary revenue source, many of us support beach nourishment projects. At the same time, lacking the political will and funds to conduct such an undertaking, many homes are now located on the beach proper and obstruct the public beach as well as posing a hazard to surrounding homes. And continued use of sandbags increases erosional effects on adjacent (usually to the south) properties. Thus, Bob and I agree on the need to remove these structure once they have reached an obvious point of "no return".

Apparently, Pearl agrees with us also. But her tone and approach is different. In her quote above, I have highlighted in bold two specific comments I find disturbing and all-to-common in the soft underbelly of local residents. The first is the pejorative use of the term "out of towners", as if they are some breed of uncaring, useless people who don't "belong" in our community. The second is Pearl's use of the term "greed".

The former phrase depicts our community as a hostile place. These homes supply a significant portion of our tax base, including not only property taxes but occupancy taxes. The guests housed there generate revenues for local businesses and more sales, entertainment and other taxes to local coffers. As Pearl points out, no one lives in these houses most of the year. Pearl thinks this is mostly a bad thing, I suspect. In fact, its a good thing. All those taxes paid support our local government services, including schools. Yet none of these owners impact those services; their kids aren't in our schools and the owners never utilize our social services.Yet they pay for all the above and do so without the right to vote on the taxes they pay.

As to the latter comment, "greed" is highly overused, even by talking heads on cable news with M.A. and Ph.D behind their names. "Pearl" has no idea how much, if any, money these people have made from these "investments". Pearl doesn't know whether they have a sentimental attachment to these houses. Many are filled with personal items, paintings, even personal choices of furniture. Many of them have housed generations of the same family ownership who come here in the off-season to enjoy our area in the fall, celebrate Thanksgiving and Christmas, and revisit our community in the spring.

Sadly, I hear the same comments all to often about our seasonal visitors, a/k/a "the tourists".

And, while there were many comments similar to Pearl's supporting Bob's overall post, it seems no coincidence that my curmudgeonly friend Ray chose Pearl's gem to feature in his blog. Ray--too much Grinch at this time of year is bad for the soul :)......

Bah humbug Ray, and can we please put another coal on the fire??? It's cold. But no more gas on the fire....

Tuesday, December 1, 2009

Obama To America: Afghanistan VITAL to National Security (As long as we're done in 18-months)

It's official. Barak Obama is now George Bush. At least as far as war-fighting is concerned. In tonight's address to the nation, which was more campaign speech than strategy session, Obama revealed his plan for Afghanistan. Which was no plan at all.

Apparently, in Obama's mind, Afghanistan is vital to our national security, unlike Iraq (which he reminded the West Pointers, he opposed). How is Afghanistan vital to our security? He didn't really say, and every time he did mention the country he appended Pakistan to the name. We use drones to attack Pakistan for the most part, so why the need for the current troops, plus 35,000 more?

While declaring Afghanistan such a vital national security interest, Obama also set a time line of 18 months before troops start moving out of the theater. Even Bob Schaeffer of CBS News was incredulous in restating Obama's apparent contradiction...a vital war with a time limit. (Although Katie Couric stupidly tried to explain to Shaeffer that all Barak was doing was signalling the Afghan government we couldn't stay there forever. Shaeffer didn't swallow that bit of news, and even re-stated that our short term involvement was the ultimate Taliban goal).

What we ended up hearing was a war rationale with no strategic end or goal , no declaration of what would constitute a victory, a 35,000 strong troop surge, and a time limit for a supposedly vital war. None of that makes any sense at all, and all of it sounds exactly like the actions taken by George Bush, except Bush had the sense never to set a public deadline. Let's see if CNN, ABC, CBS, NBC, and MSNBC catch the similarity between today's speech and Bush's conduct of both wars, or if they give Barak a pass. I assume Chis Matthews is still feeling a chill run up his leg.

Our President already demonstrated that he wasn't about to honor his own deadline on Iraq, and I doubt he will do so in Afghanistan. And even if his resolve is strong, President Obama tonight pledged what the Taliban has always expected---we're not in it for the long haul. And as soon as we leave, the Taliban will be back in power. Thus, either Obama will be forced to leave troops in there beyond his first term, or in the alternative, more Americans (and NATO troops) will die without a clear objective or end game and a final result of the pre-9-11 status quo ante.

Let's see if anyone else besides the so-called "Faux News" and the far left attack the President as they did his predecessor.