Will JP Morgan Chase Losses Impact Boulder Real Estate?

There’s evidence that suggests that your Boulder real estate may become more valuable despite another bank showing losses. That evidence lives in the local numbers. If you look at the appreciation trends locally in Boulder real estate and many other Boulder County towns, you’ll see that although there’s fewer homes sold the average and median prices are still moving upwards.

With the possibility of the Fed dropping the overnight rate to banks again soon, despite indicators from some in the industry that it shouldn’t, this will continue to help soften the HELOC’s, consumer debt and other interest rates that could be affected by the Fed dropping the rates. Unfortunately, many of those with ARM’s already sliding info foreclosure having adjusted upwards into untouchable realms won’t get any relief from this move. Further, don’t be mislead by the common misconception that this will affect long-term fixed rate mortgage loan rates. But, ask yourself why you’d care. The last I heard the rate for a 30 year fixed-rate mortgage to a well-qualified buyer putting 10% to 20% down is about 5.65% to 5.8%. Not too shabby compared to what we’ve seen and still incredibly great terms.

All the while, we still hear frequent national media reports about the ‘mortgage crisis‘ and the banking and lending industry debacles. Even recent reports from the Wall Street Journal and the New York Times suggest that the Countrywide sale to Bank of America is somehow a bad thing. Looks good to me as both of them get what they want; Countrywide gets the strength of Bank of America at a critical crossroads and Bank of America gets

JPMorgan Chase & Co. said today that its fourth-quarter profit fell almost 35 percent after its exposure to subprime mortgages — though much smaller than at banking peers such as Citigroup Inc. — still ended up having to devalue its portfolio by about $1.3 billion.

“Exposure” to sub-prime mortgages? Would someone like to argue against the idea that JPMorgan, Citigroup or any other entity that invested in mortgage-backed securities didn’t know what they were getting into? Crap-a-lola. Investors were all too ready to take on the higher yields of the mortgage-backed securities and now they’re lamenting the losses. Guess they should have paid attention to the potential downside a little more carefully.

While all the attention on the current / recent losses for banks over this mortgage crisis is in the forefront, let’s not forget that the New York Times and other pubs report stats such as this example for JP Morgan Chase:

Revenue rose to $17.38 billion from $16.19 billion the prior year.

That’s over a billion in additional revenue.

Further from the Times:

Not all the bank’s operations performed poorly.

Commercial banking profit rose 13 percent to $288 million, Treasury and security services profit rose 65 percent to a record $422 million, and asset management profit rose 29 percent to a record $527 million.

And retail financial services edged up 5 percent to $752 million, as improvements in mortgage banking offset weakness in auto lending and regional banking.

The strength in JPMorgan’s other businesses and bigger loan-loss provisions going into the fourth quarter helped keep it from suffering a loss.

We’ll try to keep our eye on what CEO Jamie Dimon does going forward in 2008.


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