May 26, 2016

A Pagoda Of Cards

The Atlanta Journal Constitution reports from Georgia. “To afford an average apartment, low-wage earners in Atlanta must work many hours of overtime or else live with other wage-earners, according to a national advocacy group. Georgia is not even one of the more expensive states, in fact it ranks 27th – pretty much in the middle of the pack, according to the report, released by the National Low Income Housing Coalition. In no state – not even those with higher minimum wages – can a minimum wage renter afford the average two-bedroom apartment working just 40 hours a week. ‘In many counties of the metro Atlanta region, affordable apartment complexes and small but solid houses are being torn down to make way for luxury housing and more retail, while the average wage-earner is priced out,’ said Kate Little, chief executive of Georgia group.”

“The report concluded that a ‘modest, two-bedroom apartment’ at fair market rent and utilities would cost $949 a month in metro Atlanta. To afford that, renters need to earn $18.25 per hour, or about $37,960 a year, the report said. In metro Atlanta, the median wage – meaning half of wage earners are above and half below – is $17.47 an hour. Among the lower 48, the most costly state is California, where a worker needs $28.59 an hour to afford an average two-bedroom apartment, according to the housing report.”

From Michigan Live. “Realtor Dale Stuckey says he was floored last month when he got 38 offers on a home listed for $105,000 on the Northwest Side. ‘We had it on the market for one or two days,’ said Stuckey, whose buyers are waiting to close on an offer that was 10 percent over the asking price. Another listing for $175,000 in the Northview School District ended up getting 10 offers at $10,000 over the asking price, said Stuckey, president of the Grand Rapids Association of Realtors.”

“‘The panic mode is there from a buyers’ standpoint,’ said Stuckey. ‘You get people writing offers sight unseen, you’re getting offers now without inspections.’”

The Associated Press. “Stiffer competition among real estate agents also makes it harder to make money, especially since the improvement in the economy has made selling real estate more appealing to people in search of work. Membership in the National Association of Realtors totaled 1.17 million at the end of April, up from the post-collapse low of nearly 1 million in 2012. The Realtors had 1.36 million members in 2006, the year that the housing market began its crash.”

“‘Everyone was dropping out of the business in 2008. Now we’re flooded with real estate agents without a lot of inventory,’ says Janine Acquafredda, a broker with House N Key Realty in Brooklyn, New York.”

“Acquafredda’s sales over the past year are down about 25 percent from the previous year. In addition to a shortage of available homes, she sees fewer buyers with deep pockets from other countries who are able to put cash down and finalize a deal quickly. One reason: the stock market drop in China, where the Shanghai Stock Exchange’s major index is down 45 percent since June. ‘The business is just not as much fun as it used to be,’ Acquafredda says.”

The Ledger in Florida. “Florida’s economy continues to outpace the rest of the nation, but another recession is on its way, University of Central Florida economist Sean Snaith said. ‘It’s time to start talking about the next recession,’ Snaith said. ‘We will have a recession. I don’t know when exactly, but we’re going to have one.’”

“The current recovery already has lasted longer than most — the last upswing after a recession ended in six years, he said. But for many Americans, this expansion has not delivered prosperity, he said. GDP growth, the measure of output of the economy, has averaged 2.1 percent, compared with a historic average of 3.5 percent. ‘This has really been a lackluster recovery, to say the least,’ he said. ‘Wage and salary growth has been stuck in the 2.3 to 2.4 percent range for some time. Usually at this point in a recovery, we see wage and salary growth at 4.5 to 5 percent.’”

“The weak economies of other nations also are weighing down the U.S., representing what he called ‘the greatest threat to the current expansion we are currently in.’ ‘The Chinese economy is a pagoda of cards that will come down at some point,’ he said. So, Snaith warned the audience, put the next recession on their radar. ‘More likely the next recession will be triggered by some sort of global shock rather than something internally, not by a housing bubble or a dot-com bubble like in previous recessions,’ he said.”

The Press of Atlantic City in New Jersey. “Homes sold faster all over South Jersey last month, with the number of closed deals up sharply in most of the region from April 2015. Atlantic County led the way with an increase of almost 27 percent in completed sales of single-family homes over the year before, but prices continued to drop in the county, according to data from the New Jersey Association of Realtors. The median price of a single home fell to $168,500 this April, down more than 12 percent from last year.”

“‘Typically in Cape May County shore towns … we’re seeing steady numbers. People are buying, they’re coming down and looking at stuff and pulling the trigger,’ said Damon Bready, of ReMax at the Shore, who handles listings in several of those shore towns and on the Atlantic County mainland. ‘The majority in Atlantic County are (bank-owned) or short sales. They’re distressed.’”

NPR News on Massachusetts. “In 2005, Guillermo Galindo and his wife bought their house in Revere, Mass., for $450,000. They put about 5 percent down and ended up with a manageable monthly mortgage payment of about $2,000. He worked delivering medical supplies, and they got monthly payments from a family who rented the unit on the second floor. Galindo and his wife lived there for a few years with their baby daughter, and life felt pretty stable.”

“But that security began to crumble in 2008, when his employer started cutting his hours. The interest rate on his adjustable mortgage started creeping up. Then, he lost more income from his second floor tenants. Eventually, the young woman’s husband abandoned her and the baby. ‘At the end she was just was left alone and she stopped paying rent,’ he says.”

“He wouldn’t kick her out, but that meant Galindo was now really struggling to make his mortgage payments. Around the same time, he found out that his home had lost a huge amount of its value, about 50 percent, so he got in touch with his bank hoping to work out a deal. ‘They asked for more papers, I send them all. It was back and forth, back and forth, until they said they couldn’t help me, that the price was that. And they couldn’t do anything,’ he says.”

“His life savings were wrapped up in this house, and that’s where he wanted to raise his daughter. He kept talking with the bank, trying to figure out how to stay. Eventually they sent him a letter saying they were foreclosing. He fought it for another five months and finally said, fine, take it. They gave him $3,000 and he handed over the keys.”

“Galindo rents an apartment. His credit rating is still in the tank because of the foreclosure. And they don’t have any money for a down payment, so buying another house is not an option right now, and might not be for a long time.”