Exurb's & Bond Defaults
Exurbs... The hangover from the collapse in real-estate prices is going to be a boom in so-called dirt-bond defaults.
These are bonds sold by municipalities to build the infrastructure for housing developments,
and are backed by the taxes paid by all the new residents who are going to move in.
If no residents move in, or too few do, the bonds aren't repaid.
The big jump we are going to see in the number of such municipal bond defaults this year won't be limited to Florida and California,
but will include all those places where the high tide of real-estate mania has now receded.
More bondholders are going to be affected this time around because the housing collapse is more national
rather than regional or isolated, and because of the relatively recent development of so many "exurbs."
These are the suburbs beyond the suburbs, where Americans have moved to enjoy the good life, commute (usually) be damned.
Not too long ago, the newspapers seemed to be filled with stories about people who gladly commuted two and even three hours each way for affordable real estate.
I wonder how much gasoline at $4-plus a gallon will dent the growth, and tax base, of such communities.
It's not just the price of gasoline that is going to make the nation's many far-flung communities less attractive....
the increase in the price of jet fuel is causing airlines to curtail service throughout the country.
Maybe we'll have to reconsider this whole flight-from-the- coasts idea that got such attention a few years ago.
Muni & Corporate Bond Defaults... During all of 2007, only $226 million in municipal bonds defaulted.
So far this year, $736 million in municipal bonds have defaulted.
That doesn't necessarily mean they didn't pay investors; they may have just drawn down reserves.
That's what happens just before they stop making payments to bondholders.
The record year, if you're counting, was 1991, when almost $5 billion went bust.
That's still small potatoes compared with what happens over in the corporate-bond market, where $36.6 billion blew up in 2006, and almost $24 billion in 2007.
Hattip to Bloomberg.
These are bonds sold by municipalities to build the infrastructure for housing developments,
and are backed by the taxes paid by all the new residents who are going to move in.
If no residents move in, or too few do, the bonds aren't repaid.
The big jump we are going to see in the number of such municipal bond defaults this year won't be limited to Florida and California,
but will include all those places where the high tide of real-estate mania has now receded.
More bondholders are going to be affected this time around because the housing collapse is more national
rather than regional or isolated, and because of the relatively recent development of so many "exurbs."
These are the suburbs beyond the suburbs, where Americans have moved to enjoy the good life, commute (usually) be damned.
Not too long ago, the newspapers seemed to be filled with stories about people who gladly commuted two and even three hours each way for affordable real estate.
I wonder how much gasoline at $4-plus a gallon will dent the growth, and tax base, of such communities.
It's not just the price of gasoline that is going to make the nation's many far-flung communities less attractive....
the increase in the price of jet fuel is causing airlines to curtail service throughout the country.
Maybe we'll have to reconsider this whole flight-from-the- coasts idea that got such attention a few years ago.
Muni & Corporate Bond Defaults... During all of 2007, only $226 million in municipal bonds defaulted.
So far this year, $736 million in municipal bonds have defaulted.
That doesn't necessarily mean they didn't pay investors; they may have just drawn down reserves.
That's what happens just before they stop making payments to bondholders.
The record year, if you're counting, was 1991, when almost $5 billion went bust.
That's still small potatoes compared with what happens over in the corporate-bond market, where $36.6 billion blew up in 2006, and almost $24 billion in 2007.
Hattip to Bloomberg.
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