Hoonah, Alaska? No, It's Maxwell Place!

The following has been excerpted from a blog by J. Christoph Amberger.
It is very representative of how I view the Hoboken situation surrounding real estate and the promotion of developments like Maxwell Place under such an environment. As I said before, the outcome from such inexperienced behavior is always ugly... read on and try to associate this situation with what we are witnessing. The mirror image is telling. In the case of 1025 MP, all the hoarding has forced underwater (cashflow negative) investors to rent their units while they await a recovery to their sell asking price.

Can you see what I'm seeing? 1125 MP will be delayed yet again. A few smart people have walked away given the excuse from delays.

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"The need to park capital in productive assets
Just think back to the beginning of the U.S. real estate boom.
As a publisher of financial information services, I dislike reminiscing about 2001. Even though April 2000 had marked the end of the Internet stock market boom, the flight out of equity didn’t really gather full steam until 9/11. But the trillions of dollars in stock market capitalizations did not “vaporize”, as many financial gurus claimed and instructed their marketing folks to trumpet. Capital flows shifted… away from stocks and straight into the one asset that, common sense told you, “the good Lord wasn’t making any more of.”
Instead of automatic contributions to 401(k)s and IRA portfolios, they transmogrified into mortgages. Down payments. “Earnest money.” They went to service 30-year mortgages, sub-prime mortgages, ARMs.
I recall talking to one of our Taipan VIP Members then who patted me on the shoulder, assuring me he had moved out of stocks completely and put all his money into real estate.
And for the next five years, real estate was the place to be.
All of America became like Hoonah, Alaska.

Desolate fish packing plant turns into tourist mecca
Hoonah, population 860, is a small village on Chichagof Island in Alaska, United States. It is only accessible by boat or plane. Its claim to fame was a fish packing plant that employed most of the population. About 14.3% of families and 16.6% of the population lived below the poverty line.
There are also about 3,000 coastal brown bears roaming the island wilderness. Their presence is not conducive to the desire for all-round safety instilled in normal American suburbs. But it was sufficiently attractive for cruise line Royal Caribbean to chose Hoonah — or Icy Point Strait — as a day stop for some of its Inside Passage Cruises back in 2005.
Now, every couple of days, a cruise ship disgorges several thousand passengers onto the island. They go look for bears, paddle kayaks up and down the rocky shore, watch bald eagles fight over fish carcasses — and flood businesses with cash in exchange for smoked salmon, mini Ulu knives (Made in China) and miniature totem pole keychains.
The town is awash in money. And in less than two years, real estate went through the roof.
On the one major road leading into town, you walk past a shack. In Maryland, you’d be able to buy a prefab counterpart from an Amish barnmaker for three thousand bucks. In Hoonah, they’re asking $300,000. Bring your own paint. And nails. And tar paper.
Not that anyone is buying. People live the way they have always lived… most of them in cottages provided by the Federal Government after a fire wiped out half the village back in the late 1940s…
Cottages that on paper are now worth more than a prosperous Mid-Atlantic suburb.

Landrush 2000
Alas, while the dear Lord hung up his shingle of creating more real estate six-thousand or 60 billion years ago (depending what time table you subscribe to), real estate developers and home builders had no such qualms.
Between 2001 and 2007, every quarter acre of free land in the vicinity of a fixed settlement was plastered with boxes made of ticky tacky boasting cathedral ceilings and brass entry lights. First, there was genuine demand. And it was obvious: American real estate was clearly undervalued… the Echo Boom generation was pushing into elementary schools… and the U.S. are adding the equivalent of Chicago’s entire population each and every year.
Then the pay-off of owning real estate became apparent. Soccer moms turned into real estate agents and carpenters turned into professional property flippers. Home equity loans fueled spending.
But demand for timber, copper, consumer appliances pushed up commodity prices. Especially oil.
In America, people started burning corn for heat and destilling grains into hootch to fuel their ride to Whole Foods. To the sensitivities I inherited from my German WWII- and Cold War-imprinted parents, that’s worse than lining a litter box with pages torn from a first edition of Goethe’s Faust.
For agro-commodity speculators, it was a windfall…
Until the greater fool theory ran out of greater fools.

Reversal of fortune
Suddenly, there’s little money left in selling real estate. (Except maybe in Hoonah!) And since the banks who enabled people to leverage themselves are running low on cash as well, stocks have been taking another beating — the second in a decade.
And with equity and real estate out of the picture, the markets have begun to look like the line-up of Presidential candidates in May.
Oil right now is the Obama of commodities: The one remaining thing left bobbing in a sea of ennui and disenchantment. Lightweight yet full of perceived potential usages. An object of hope for the drowning, the desperate, the drifting. And those who prefer the rainbow sheen of surface refraction to deeper exploration.
Much like the bubble machines for real estate and Internet stocks before, rampant speculation masks as solid demand. Predictions of $170 or even $300 per barrel seem as reasonable as a $300,000 price tag for a Hoonah shack or $500 for a share of Pets.com in 1998."

J. Christoph Amberger
excerpted from blog titled "Insiders Preparing for Major Drop in Oil Prices" posted July 27, 2008