The Highest Unemployment Rate In Nearly 26 Years
-by the Mysterious Flying Miser
From the Huffington Post:
“These days, homeowners who got fixed-rate prime mortgages because they had good credit can’t make their payments because they are out of work. …Unemployment stood at 9.5 percent in June and is expected to rise past 10 percent and well into next year. The last time the U.S. economy was mired in a recession with such high unemployment was 1981 and 1982.
“But the home foreclosure rate then was less than one-fourth what it is today. Housing wasn’t a drag on the economy, and when the recession ended, the boom was explosive. No one is expecting a repeat. The real estate market is still saturated with unsold homes and homes that sell below market value because they are in or close to foreclosure.
“‘It just doesn’t have the makings of a recovery like we saw in the early 1980s,’ says Wells Fargo Securities senior economist Mark Vitner, who predicts mortgage delinquencies and foreclosures won’t return to normal levels for three more years. Almost 4 percent of homeowners with a mortgage are in foreclosure, and 8 percent on top of that are at least a month behind on payments — the highest levels since the Great Depression.
“…Around the country, the relationship between rising unemployment and foreclosures is growing. An Associated Press analysis of more than 3,100 U.S. counties found a much stronger link between foreclosure rates and unemployment this year than in 2007. …
“According to April figures, some of the highest jobless rates in the nation are in California cities like Merced, Modesto and Fresno that have been pummeled by the foreclosure crisis. In those areas, home prices have been cut in half.”
From the Washington Post:
“Rising unemployment levels helped push record numbers of homeowners into delinquency or foreclosure during the first quarter, according to industry data released yesterday.
“About 12.07 percent of mortgage loans were delinquent or in the foreclosure process during the quarter, according to a survey by the (Mortgage Banker’s Association). That is the highest level ever recorded by the survey, which has been conducted since 1972. It is up from about 8 percent during the first quarter of 2008.
“‘The increase in the foreclosure number is sobering but not unexpected,’ said Jay Brinkmann, the group’s chief economist.
“…The recession has become a major factor in the foreclosure crisis. For example, for the first time, prime loans, which are traditionally considered safer, represented the largest share of foreclosures during the first quarter, according to the data.
“Of the loans in foreclosure during the first quarter, 49.8 percent were prime loans and 43.2 percent were subprime.
“‘More than anything else, this points to the impact of the recession and drops in employment on mortgage defaults,’ Brinkmann said. ‘Looking forward, it does not appear the level of mortgage defaults will begin to fall until after the employment situation begins to improve.’
“The majority of the foreclosure problems remain centered in four states: California, Nevada, Arizona, and Florida, where home prices spiked the highest and are now in freefall. They account for 56 percent of the increase in foreclosure starts.”
From Reuter’s:
“U.S. home foreclosure activity galloped to a record in the first half of the year, overwhelming broad efforts to remedy failing loans while job losses escalated.
“Foreclosure filings jumped to a record 1.9 million on more than 1.5 million properties in the first six months of the year, RealtyTrac said. The number of properties drawing filings, which include notices of default and auctions, jumped 9.0 percent from the second half of 2008 and almost 15 percent from the first half of last year.
“‘Despite everybody’s best efforts to date, we’re not really making any headway against the problem,’ Rick Sharga, senior vice president at RealtyTrac in Irvine, California, said in an interview.
“One in every 84 households with loans got at least one foreclosure filing in the first half of this year.
“‘I don’t think this suggests the economy is any worse than anyone expected, but I certainly don’t think it shows by itself any signs of improvement,’ Sharga said.
“Problems emanating from loans made when standards were much looser have taken a back seat to defaults stemming from job losses and wage cuts.
“‘Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes are now worth represent a potentially significant future risk,’ James J. Saccacio, RealtyTrac chief executive, in a statement.
“In June, as home prices continued to fall, albeit more slowly, foreclosure filings rose 5.0 percent from May and 33 percent from a year earlier. June’s foreclosure activity was the third highest on record, and the fourth straight month of filings on more than 300,000 properties.
“RealtyTrac forecasts about 4 million total filings this year on 3.2 million households with loans, which means little improvement from the first-half performance. The prior record was 3.1 million filings last year, up from a more typical year when about 800,000 foreclosure actions would be made.
“The highest unemployment rate in nearly 26 years is the biggest factor keeping homeowners from staying current on monthly payments, Sharga said. But there could also be a whiplash caused by ‘the big white elephant in the middle of the room’ — option ARMs, or adjustable rate mortgages with the option to make minimum payments. ‘A lot of them are going to be seriously upside down, probably at least 40 percent upside down.’
“Nevada remained the state with the highest foreclosure rate, with one in every 16 housing units with a loan getting a foreclosure filing. Arizona, Florida, and California followed. Other states in the top 10 were Utah, Georgia, Michigan, Illinois, Idaho, and Colorado.
“California was the state with the highest total number of foreclosure filings in the first half, with actions taken on 391,611 properties, or one in every 34 housing units with mortgages.”
Here in the Beeg Apple, its taking a lot longer to see the damage.
A lot has to do with the fact many building here are co-ops and not condozes. and co-ops usually have a very strict financial policy to even get approved to buy in. Some of the upper crust co-ops require 50% down or even 100% …and plenty of reserves to meet the maintenance charges.
Its the newer crap boxes herein Long Island city I see totally dark at night that will have to be foreclosed on, or the builders will file for BK.
I didn’t see a lot of stupid buyers in my area Sunnyside, Instead when i look at the listings lots of old timers still want to get their retirement money out of their precious never updated 40 year old home. Only a few open houses weekly i should just go and check them out.
Hang in there. The Big Apple has many weirdnesses gonig on with housing, not just the recent bubble, and they interact in unpredictable ways.
Coops can only insulate themselves to a limited extent…
Last NYC real estate meltdown a number of coops (especially in Queens, where they were newer conversions) had to be saved from bankruptcy.
Reserve funds dwindle when cooperators don’t pay their fees and sponsors don’t pay theirs. (One of the reasons banks want 50% plus owner occupation is so the building board is run by the tenants, not the sponsor.)
Had friends living as “rent to buy” tenants in a newly converted coop in Astoria in the early 90’s - they moved out when the coop nearly went bust and two bedroom apartments like theirs were auctioned off for pennies on the dollar of the previous asking prices.
Just melting more slowly.
the chickens will come home to roost…in the coops
There was once a poster that had a lot of clever posts on here at one time named aladinsane. You wouldn’t happen to know him, would you?
The Baker’s Dirty Dozen of unemployment:
ILLINOIS 10.3
FLORIDA 10.6
INDIANA 10.7
TENNESSEE 10.8
KENTUCKY 10.9
NORTH CAROLINA 11.0
OHIO 11.1
CALIFORNIA 11.6
NEVADA 12.0
SOUTH CAROLINA 12.1
OREGON 12.2
RHODE ISLAND 12.4
MICHIGAN 15.2
We can’t be picky here in Kentucky. We’re proud when we’re in the top ten of any list. (But we prefer it to be basketball.)
U6 is 16.5%. Then factor in the life death model, the people transfered to the federal extention of unemployment (which I believe are then taken out of the stats), and you have U6 at 20.5%
Not to mention all the people under a DBA or 1099 (making no $ and that don’t quality.
Yup. All the local, nearly vacant stores and restaurants can’t be wrong. We bought a take-n-bake pizza over the weekend. The place was empty (there usually lines to order and pickup).
anybody have a view of (my spam)
here in Hartford County CT..people are still paying up for houses..2600sqft 410k in Simsbury..sold..we have parasitical insurance keeping everything alive here
if i get the MLS insertion package..will this help..
thanks for any input
I’m seeing this just west of you around Danbury and New Milford. I’m flummoxed by it. I want to know if these are cash buyers or is freaky financing still available.
I thought the insurance biz has long since left Hartford, CT and Springfield, MA???
“thought the insurance biz has long since left Hartford, CT and Springfield, MA???”
I think there’s only remnants, if any, of the insurance biz in Hartford. However the city of Hartford is not to be confused with the surrounding county. The city is supposed to be one of the roughest areas for crime in the Northeast.
Your spam invites deletion, Gary.
Ha ha ha! Mark Twain lived in Hartford County, CT, didn’t he? Some of my favorite banking crisis quotes come from Mark Twain, whose literary success was matched by his financial folly in succumbing to the wiles of scheming, scamming banksters
:
A banker is a fellow who is happy to loan you his umbrella when the sun is shining, only to ask for it back the minute it starts to rain.
– Mark Twain –
You aren’t a real estate investor fishing for greater fools who are trying to catch themselves falling knives, are you Gary?
A Quality Troll demands respect.
That’s why I graced him with the Mark Twain quote
“MLS insertion package”
Is this the more professional way of saying Joshua Tree?
“Almost 4 percent of homeowners with a mortgage are in foreclosure, and 8 percent on top of that are at least a month behind on payments — the highest levels since the Great Depression.”
12 percent of homeowners with a mortgage are at or near foreclosure, and the housing market has bottomed out? What are these people smoking?
Prof,
Central banks from all over the world are pumping money as fast as they can. This is the pump priming that they keep talking about.
Here is what I’m seeing. It is very confusing.
1) ARMs for Alt-A and Primes are early. It isn’t due to resets, but to not being able to pay to begin with.
2) Efforts of an immense scale are being conducted to reduce the interest rate so that the resets are muted or reduced. This won’t really work because of other pressures - the primes and alt a’s are going to fail because of an inability to pay. Unemployment is getting on toward 10%. Going higher ?
3) The basic cost of oil is going to drop. I hear that layoffs of offshore Louisiana and Texas personnel are rising to frightening levels. Still ,cheaper oil will help. Won’t help me, because I live in Louisiana.
4) Falling inventories are going to need to be restocked. How this helps the US since much manufacturing is already off shore is not clear. Still, it is supposed to restart the economy. Ok.
5) The stock market is shooting upward because they believe the housing market has hit bottom and will not be a further drag. They think that the bottom is in and so further damage will not be done.
6) Interest rates are zero. They will remain so for some time to come. This will help the investment banks to show a profit. Won’t help you or I. We will get a “stable financial system.” I thought I had one of those before 2001. Why I need to pay twice is not clear.
7) The 1 billion clunker fund from the US gov’t will be replenished. This will help and is a good idea.
9) Wall Street’s rally is on light volume trading.
10) The rally, which is huge by the way, is built on a “not as bad as we thought” viewpoint of analysts. What this actually means is the analysts do not understand what they are doing. It also means they cannot do it very well and should not be trusted.
11) Finally, WALL STREET IS GIDDY! This means something.
Heck, I don’t know. I didn’t trust the people whose job it was to prevent this or predict this. I can’t trust them now.
Roidy
If you’re from LA borrow money from Dem Rep Jefferson, or even Geitner,he didn’t pay his taxes either.
“Problems emanating from loans made when standards were much looser have taken a back seat to defaults stemming from job losses and wage cuts.”
It’s not really an either/or type of situation — more like a ten-car pileup.
“Problems emanating from loans made when standards were much looser have taken a back seat to defaults stemming from job losses and wage cuts.”
The job losses have merely moved up the day of reckoning. Many of these loans were doomed to fail from the day they were written.
The wage cuts are more insidious than the outright job losses but may have much the same impact. There will be increasing defaults on all types of consumer debt.
My corp just told us, the fed gov allows the company to cut our pensions in half, whether retired or not, if for one second the company underfunds (for one nanosecond and one penny).
There ya go, carte blanche. More rape and pillage and fear.
Cut all public employee pay AND benefits 25%. If they go on strike replace them as per Air Traffic Conbtrollers as Regan did !!! End of conversation.
“…An Associated Press analysis of more than 3,100 U.S. counties found a much stronger link between foreclosure rates and unemployment this year than in 2007.”
No, AP did not analyze the data from all those counties. Assuming that such county-by-county data even exists, gathering and analyzing it would have been a monumental task. Besides, there are only 3,079 counties in the U.S.
So did AP really do any kind of “analysis” at all, or did they just pull numbers out of the air?
From Wikipedia:
The U.S. Census Bureau lists 3,140 counties or county-equivalent administrative units in total. Some of them are parishes or boroughs.
Interesting. I got my 3179 number from a different Wikipedia article. Guess it shows the “value” of free information!
A couple weeks ago, one posted article’s author tried to connect foreclosures with the amount of “family formation” meaning a bunch of people living in the same house (if i recall). And they found a close correlation.
I think you can find lots of odd statistics that would similarly correlate, but are pretty much meaningless.
As to the relationship between unemployment and foreclosures, i don’t see it everywhere. In Stanislas County, Calif, unemployment often reaches over 11% every year.. it being an agricultural area. But it hit only 13.6 percent last December, while foreclosures had to be higher than anywhere in the country.. To top it off, the secondary job market is dominated by construction..
And imo, unemployment should be over 30% to even approach foreclosure numbers..
Question- Will economic crisis create fewer households by driving people to live together as roommates, etc. or create more households as economic stress tears families apart and cheap housing offers an easy way out?
Cheap housing.. hmm.. “Cheap” or not, housing is just about the most expensive thing people can buy. Add a credit crunch and economic downturn and.. well.. i doubt buying a home will be the best option for people who are financially stuck and need shelter.
Hey Joe:
If more people split up and rent separate houses, that will drive up rents and help support some sort of price based on that rent.
cheap housing no = buying house
Big V.. i dunno if the supply of new renters could possibly outpace the supply of houses, since a lot of the housing increase was not needed in the first place.. basic oversupply.
But if it does then yeah.. rents should rise some. Too many renters and not enough houses.
What factors will determine how most economically distressed people find shelter? Living on your own is far and away preferable to living with family or roomies, but like it or not sharing might be the most popular choice.
I think it’ll all come down to the overall amount of unemployment as one major factor. If it gets really bad, any port in a storm.
OTOH, if it’s not too bad and people can generally afford to rent, they will.
“As to the relationship between unemployment and foreclosures, i don’t see it everywhere. In Stanislas County, Calif, unemployment often reaches over 11% every year.. it being an agricultural area. But it hit only 13.6 percent last December, while foreclosures had to be higher than anywhere in the country..”
I have a friend in Modesto, and the unemployment there is something like 17% or 18% these days, and that’s on the good side of town. Home prices in the poor areas are now in the 1997/98 price range, and still falling. Bars across the windows and a lively Pit Bull in every other yard set the theme. No thanks!
Dog food futures, anyone?
From the Huffington Post? Really?
stuff comes from the upi, ap and bloomberg news, you name it, info is on the internets, so everyone uses all sources. Nothing is fresh.
Here is a great cautionary tale about the pitfalls of buying a condo during a housing bust. Caveat emptor!
Now Read This
Caught in housing crisis, family is sole occupant of 32-story condo
ASSOCIATED PRESS
2:00 a.m. August 2, 2009
FORT MYERS, Fla. – The Vangelakoses’ southwest Florida condominium has marble floors, a large pool overlooking a river, and modern furnishings that speak of affluence and luxury. What they don’t have in the 32-story building is a single neighbor.
The New Jersey family of five bought their unit four years ago, when Fort Myers was in the midst of a housing boom and any hints of an impending financial crisis were buried in lofty dreams of expansion. They made a $10,000 down payment and eagerly watched as builders transformed an empty lot into an opulent high-rise, one that now symbolizes the foreclosure crisis.
“The future was going to be southwest Florida,” said Victor Vangelakos, 45, a fire captain who planned to eventually retire and live in the condo.
Most of the other tenants in the 200-unit condo didn’t close on their contracts, and the few who did have transferred to an adjacent building owned by the same company because more people live there.
The Vangelakoses’ mortgage lender will not allow them to do the same. That leaves them the sole residents of Oasis Tower One.
“It’s a beautiful building,” said their attorney, John Ewing, who is representing 27 others who made deposits on units. “The problem is, it’s a very lonely building.”
When the Vangelakoses travel from Weehawken, N.J., to spend time in their Florida home, they have exclusive use of the pool, game room and gym, but they miss having a few tenants around.
“Being from the city, it’s very eerie,” Vangelakos said. “It’s almost like a scary movie.”
A large circular fountain in front of the building is dry. The automatic glass doors that lead to the front lobby are locked.
“It’s like time froze here six months ago,” Ewing said.
…
These stories always remind me of the mid-70’s movie “Omega Man”, starring Charlton Helston. As a child, I was fascinated with its bleak apocalyptic imagery. Secretly, I thought it looked like a cool way to live.
Sometimes, I wonder if the goldbug/survivalists don’t similarly secretly desire a meltown, because they secretly think it’d be cool. (’Finally! A use for my A-K! Mowing down my less well-prepared neighbors!’. And ’snapping up’ their properties for a single gold coin.)
Ahh,
There’s a great Twilight Zone episode “Time Enough At Last” with Burgess Meredith. The character gets exactly what he wants with the usual Rod Serling twist.
THAT was the eyeglasses, right? San Fran Gal? It finally klicked… the books, library, bomb, right?
I always wondered why he couldn’t find some other eyeglasses. Really weird prescription?
Yeah, the place was blown up, but somewhere there had to be a blown up Wal-Mart with a stack of the over-the-counter reading glasses…
Dude must have need an opthamologist, and, I guess, they were all dead.
the horror
Well I’m not completely a survivalist but I disagree with your thesis. I really don’t want to have to fight my way to any food or fuel sources. The whole “Mad Max” lifestyle does not appeal to me. I have a license to carry a concealed weapon but hope that I never have to use it. I don’t carry in town but do carry hiking in the wilderness since many wild animals are . . . wild. Cougars et al. on occasion try to eat people. I’m willing to shoot one that tries to eat me but would much prefer to have it look at me and keep on walking past.
I carry even though it’s extremely unlikely I’ll need it for the same reason I always buckle my seatbelt and keep a fire extinguisher in the kitchen. You’d feel really stupid if you didn’t and the unlikely event happened.
I practice law in the highest per capita murder rate of the United States. E. St.Louis, Il. Well, Granite City, Il., 3 miles away. I don’t even know how to shoot a gun. Never thought about owning one either. I hate guns.
more bang-bang…more biz
I don’t even know how to shoot a gun. Never thought about owning one either. I hate guns.
People like you will run screaming and wailing to people like me in any civil-disorder scenario. Because there won’t be a cop in sight when your tidy little worldview has its first brush with reality.
alpha: I don’t do criminal, but if I did, I would say “don’t say that alpha!”…
You know, I think someone told Rodney King to say what he said but, I believe what he said, “Why don’t we just all get along”.
I try to live my life that way, not in fear, and non-adversarial with another human being. (Except of course, every lawyer I deal with and 1/2 of my clients:))
Also, I am not a girlie man, I played a lot of sports, two at professional level, motocross, and AAA Baseball, and boxed in college. Just my thoughts.
Hey Sammy, don’t tell me what I am going to do, unless, you can come to my house in Collinsville, Il. and kick my ass without your fagggot gun. Shut up, sissy.
You want phone number and address? Little girl?? You got it upon request.
I guess I contradicted myself. However, somehow, I am not a hypocrite here, and will stand up for myself.
Also, I apologize Sammy. Plus, I’m not in as good as shape as I was, so you would probably kick my ass anyway. You’re welcome to come over though
I love a good fight!
We’re all still talking about the Twilight Zone, right?
alpha: Yeah.
You, me, San Fran Girl, and Sammy, are buddies forever in….The Twilight Zone…
LOL.
Okay. I am no survivalist because I vividly remember the survivalists in the Carter Malaise (incontenence, indigestion, diaper rash, whater). I saw them on TV talk shows. They were ridiculous! Predicted the end of western civilization (hey, so did Robert J. Ringer). Then before we knew it, it was morning in America.
The urban core will be where the real survival will happen when oil goes above $400 per barrel. Ambulances and helicopters and police will not venture out of a 50 mile radius from the center of large metro areas (NYC, Chicago, LA, Houston, Phoenix…).
Hope you smug rural types are surgeons to suit yourself (suture self! LOL - get it?). Little House on Prairie! LOL. Stinky outhouse on the Prairie.
DennisN- Why do you conceal your gun when hiking? Seems a holster would be the logical choice for a handgun.
Well liberal types go bonkers when they see a gun, and then go screaming off to the nearest ranger they find - even if he’s 40 miles away. Better to keep any gun hidden and not give them a reason to go ape-stuff for no good reason.
We have a constitutional right to carry a non-concealed gun with us - but just try to exercise that right. You will get hassled beyond all bounds.
Yeah, that’s what I figured. But if it’s in your pocket, it’s too small to be of much use, and if it’s in your backpack, you better hope it’s a slow mountain lion.
I’m actually surprised that lawyers don’t get training in firearms as a matter of course. How can you defend a client who is accused of using a gun in a crime if you don’t know the first things about them?
I’m always annoyed when I read in the press how a gun “just went off”. NO. Guns don’t just go off. Geez I would want my defense attorney to know enough about guns to avoid any silly theories spoken in front of a jury.
I use a fanny-pack, even though it’s in front. In it I carry my camera and my revolver. It’s a S&W “airweight” .38 plus P+. Only 15 oz. dry but will take the plus P+ hot rounds. Good to shoot a cougar or a wolf, and maybe even a black bear. The problem is that any gun big enough to be a “sure kill” on a grizzly bear will be left at home as “too heavy” when you want to go hiking. Any gun you carry is much better than a gun you leave at home because “it’s too big”.
.38 airweight…good choice. I don’t begrudge you carrying it in the field.
re: “…carry hiking in the wilderness.”
If you’re only hiking, don’t bother. You’ll just rub a blister and won’t have time to fire if you’re attacked anyway. Try a small canister of pepper spray –in hand and pin out–if you must.
Just for the record, I’m liberal as they come–and armed to the teeth. (As are most of my pansy libs friends. Might want to watch those assumptions!)
Well I know your story does give me worries. When the bear attacked you, I recall you were carrying but couldn’t get it out and use it.
A small gun also is a backup signalling device. There’s no cell phone coverage in most of central Idaho. It’s a true wilderness. I suppose I could get one of those satellite things but they are a lot heavier than a regular cell phone.
The wilderness around here is not Disneyland. Unprepared people don’t come back alive. I read sad stories in the local paper every year. It’s tempting fate to hike alone but what can I do? I’m retired at a young age and don’t have friends who can just take off a day to go hike. Even for a simple day hike I carry all sorts of emergency gear with me, from whistles and matches to topo maps to a sleeping bag. If you twist an ankle and have to overnight in the Sawtooths…..well it gets cold there at night. In, say, October it may be 60 degrees in the daytime but it will get down to 10 degrees at night. Stanley ID is often the coldest place in the lower 48, typically getting down to minus 30 degrees in January. People die from exposure there every year.
The 30-year loan is an anachronism. In today’s society, the odds of someone being able to go 30 years without a major financial stumble are very small.
House prices are currently based on the bygone era of steady employment and gold-plated health insurance policies. Maybe this business model as described in the San Francisco Chronicle is the wave of the future.
Sure, the company described will probably wind up bankrupt because they’re borrowing money against their current housing inventory to fund new purchases. However, how long will it be before a significant portion of the nation’s housing stock falls into corporate ownership (or government ownership)?
It looks like they’ve done their homework, understand the market, and have a business model that should work in the near term.
“We think the market is still going down, so we are against holding for an extended time,” said CEO Edwin Yeh. He is raising a $50 million fund to invest in foreclosures.
“– It avoids newer homes in cookie-cutter subdivisions. “If they’re all around the same vintage of mortgage, then they can all go upside down at the same time,” Watson said. Too many foreclosures will hurt rental income and future appreciation. Instead, it concentrates on older homes in neighborhoods where foreclosures are rarer.”
“– It avoids higher-priced homes. “As the price point gets higher, rents don’t cover (costs),” Watson said. “All of our analysis says it’s too risky. Also on the exit, we can easily justify a $100,000 home going to $200,000; that’s not that big a stretch. But a $300,000 home going to $600,000 is harder.”"
“– It focuses on core economic and demographic trends. “We pick neighborhoods that are close to mass transit,” Watson said. “We’re concentrating on areas with job growth; we looked at Stockton, for instance, but don’t see it rebounding. But in the Bay Area we’ve got such a diverse economy. It creates drivers for jobs in the blue-collar space and back office.”"
“– It’s finding that inventory is limited because lenders are sitting on foreclosures. “Banks own 530 homes in this ZIP code (Pittsburg’s 94565) but there are only 15 on the market,” said Staley, pointing to a three-bedroom updated home priced at $132,900 that had 22 offers. “It creates a hyper-competitive situation.”"
This meshes also with the numbers of Professor Bear from a few days for San Diego County showing a huge shadow inventory of foreclosed houses.
This is a decent business model, but I don’t know the management costs associated with leasing out distributed units. Even if you assume 10% loss on management, this still pencils out if they can count on total cost, purchase + repairs at $100k. Given management costs, transaction costs, maintenance costs, etc… I see this as a potentially profitable but not get-rich-quick business. Hard to scale up. And if things really tank, they may not be able to resell at a big profit.
By comparison, I’m paying $1200/mo to rent a unit that sells for $260-270k (new). This doesn’t come close to penciling out.
A quick check on craigslist does reflect 1500/mo for Pittsburgh… more like 1300 and then there are some deals and whole lotta section 8’s and pets accepted and well LOTS of competition for “blue collar” renters. Gee I’d sure hate to be the neighbors for the “investment” prpperties…
The 30-year loan is an anachronism. In today’s society, the odds of someone being able to go 30 years without a major financial stumble are very small.
Yup! A 5 or 10 year loan on a house is the most sense in this rapidly changing world. I wrote before that lifelong careers for the majority of the populace are over for good. Most people do not want this to happen. But they are like midgets trying to stop a locomotive and 100 boxcars from moving.
One can be an ostrich and pretend the government will cause 40 year careers to be commonplace. But dreams are not reality. Here’s the rub: 20-somethings or 30-somethings with families should not be afraid or embarrassed to be renters while their children are under 18. Then once the youngest leaves the house at 18, buy a house.
I’m the youngest of four siblings at age 50 and none of us ever owned a house. I was the only one to make mortgage payments for six years but had a 30 year loan. No biggie.
Face reality and save money. Simple.
Hey BiLA, 2 questions:
1. Why do you think you should buy a house when your kids grow up?
2. Why do you think kids will be ready to move out at 18? I don’t think that’s been the case for a long time now. Most kids either go to college (which means they’re not really “moved out”), or they spend a few years after high school working for such low pay that they can’t support themselves.
1.Because you need less space after the last kid leaves the nest. And if you rented all the time instead of live in a McMansion with a back 40 acres, you paid less than if you paid PITIM (PITI + Maintenance).
2. Good point. I lived with my parents until age 26. A sister lived off and on with my parents until she was 30. We both left permanently after we got our college diplomas. Me in 1985, her in 1987. I’ve been proud of her ever since.
Even we boomers didn’t get to have long careers. The typical silicon valley engineering job wasn’t a 40 year career path - heck most companies there would rise and fall over 5 years. My career as a EE in defense was a good run from 1977 to 1991 but then the USSR collapsed and took the defense industry with it. I worked long enough as a patent attorney to see the handwriting on the wall: much patent work was going to get outsourced to India.
RE the recession. I saw a series of charts comparing the current recessions with previous recessions, such as those in the early 1990s, 2001, 1973 to 75, 1980, and 1981 to 1982.
Now think about the last few recessions I listed. From 1973 to 1982, the U.S. had recessions in at least parts of six out of ten years. From 1976 to 1979, moreover, the U.S. had soaring inflation running beyond income gains. In addition, unemployment kept rising right until 1983. I know, I graduated from college that year, and finally got a real job in March 1984.
Average wages are still below the level of 1973 I believe, with household income higher only because of the rising number of two income households.
So when this recession ends isn’t really the issue. It’s whether a period of slow growth will be followed by more recession or inflation. I think we are somewhere in an era of recession that some might date to 2000, and which could continue another five or more years.
while we get recessions every so often, this situation may be unique..
take a look at the chart near the top of the wiki page. Wikipedia - United_States_housing_bubble
shows about 100 years of history… 1890 - 2004
It plots inflation-adjusted U.S. home prices, population, building costs, and bond yields (chart is from Robert Shiller’s Irrational Exuberance, 2nd ed)
I wouldn’t look to previous recessions for any answers as to how this one might unfold. This thing is different.
Hey Joe:
I remember you arguing a couple years ago that the US would not have a recession because the government would prevent it. Kinda weird that now you present yourself as a person with advanced knowledge on how to interpret today’s situation.
Don’t be puzzled. People change their attitudes all the time. This is precisely why politics is a waste of time. You spend a lot of time persuading people to vote for X. They vote for X. In two years they change again and vote for Y, who is the opposite of X.
“How I Found Freedom in an Unfree World,” by Harry Browne is timeless and explains that you should be happy that people change their opinions, respect it, and worry about yourself - the direct approach. Don’t worry about governments, religions, groups, or crusades.
I guess my thing about Joe is that all his comments are just designed to disagree with whatever a person happens to be saying. He’s like a Bizarro-World mocking bird. One day he’s telling you that the government can and will bail us all out, then the next day he’s telling you the world is unpredictable. He’s an intellectual kamikaze.
..his comments are just designed to disagree with whatever a person happens to be saying..
I have to disagree..
i don’t get off on agreement.. I don’t search for it and am not inspired or stimulated by it. I have nothing to learn from agreeing since I already hold the same view.
That said, I do agree with just about everything i see around here… or else I’d say so… in a way that doesn’t make it personal. Getting personal takes it to another level that has nothing to do with the topic at hand, and people might get offended.. and we should be careful to avoid that, imo.
As for this particular thread, i didn’t disagree with WT so much as try to add another perspective. Maybe 5 years to recovery is about right.. who knows.. but i think we are in uncharted territory without a guide, and anything can happen. If anyone disagrees i’d be happy to discuss it in a civilized manner.
I sometimes wonder if he isn’t practicing for his debate team. It is impressive how he can carry on five arguments at once.
I made the most money in my life under Jimmy Carter and retired for the first time, leveraging a 400k land loan at Bof A @ 4% while inflation was going @ 16% or so. Oh for the good old days !
“I made the most money in my life under Jimmy Carter…”
Were you employed by the government then?
Tee hee.
“Problems emanating from loans made when standards were much looser have taken a back seat to defaults stemming from job losses and wage cuts.”
The MSM is loath to admit that there are plenty of prime borrowers who simply bought too much house during the bubble. Ridiculous leverage went all the way up the food chain, so when something happens (job loss or salary cut) no one has much wiggle room to get through a downturn. And heck, with little or no skin in the game, why tough it out??
The MSM is loath to admit that there are plenty of prime borrowers who simply bought too much house during the bubble. Ridiculous leverage went all the way up the food chain, so when something happens (job loss or salary cut) no one has much wiggle room to get through a downturn. And heck, with little or no skin in the game, why tough it out??
I don’t know that they necessarily bought too much house, but they did pay way too much and, yes, such overpaying occurred from bottom to top.
I’m still not sure if the MSM won’t report this because they don’t want to offend their dwindling advertisers or they simply don’t understand what happened. Quality reporting seems to be as big a concern with the MSM as quality health care for Americans is for the insurance companies. They’re not necessarily opposed. It just isn’t a primary concern.
“…bought too much house, but they did pay way too much…”
In many cases, they bought too little house but paid too much money.
In many cases, they bought too little house but paid too much money.
We’ve seen the examples of people buying a bigger, nicer house than they should have ever been able to afford at any time based on their wages (e.g., the strawberry pickers buying a McMansion).
However, what you cite is the the more common example, people who bought less house than they should have been able to buy historically and paid too much. It’s easiest of all for these people to walk away. They end up in better housing for less money.
Well, SUN nightly news…”good news, housing sales have had best month for past 8 months AND the average prices are going UP, average 10k”
oh lawdy.
Got some great info from an open house on 1acre lot. Turns out the owners/builders wife is doing the open house. Their main house is for sale and tomorrow price is dropping 600k. The open house has been on mkt for over 1yr. The house/mini developement was owned by builder 2nd/and primary multi millionair who turned down 2.4mill last yr, then the stock mkt ate up his portfolio and price is SOFT at 1.3mill -loan due.
Then, owners wife states that they are selling all their properties, but everything is fine. They want to get out and get started on homes that start at $300k.
But the news said tonight. Everything is rosy………
I am getting dizzy.
oh yea, and, the 3 offers this (orig 2.5mill) house got, 1 couldn’t get financing, the other 2 were for trades. Banks on both sides didn’t want to entertain the trades.
“Unemployment stood at 9.5 percent in June and is expected to rise past 10 percent and well into next year. The last time the U.S. economy was mired in a recession with such high unemployment was 1981 and 1982.”
I recall the early eighties in California with clarity. Everything stopped for a couple of years while the interest rates were pushing 20%, and then the liability insurance sector went insane with 350% increases due to joint and several liability, which was sold to the little people as, “Everyone will get their fair share!” The rates doubled again the following year! My business was dead. I had to let everything go, cheap. The pretty girlfriend stepped out too. It was a real low spot in my life, and it took me several years to pay-off everything, and prepare for a return to college. To paraphrase Ray Kroc, if I happened upon a banker or insurer who was near drowning I’d shove a live hose down their throat!
Sherman Oaks Calif Buy a home for 550k that needs work,or rent similar home for 2k,i will stay a renter at a savings of 3k a month.The home goes down 5% this year,i rent for free,and keep my 100k….i surely dont need the 500 a month tax bill…..
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.
The Washington Post
California’s Reckoning — and Ours
By Robert J. Samuelson
Monday, August 3, 2009
California’s budget debacle holds a lesson for America, but one we will probably ignore. It’s easy to attribute the state’s protracted budget stalemate, now temporarily resolved with about $26 billion of spending cuts and accounting gimmicks, to the deep recession and California’s peculiar politics. Up to a point, that’s true. Representing an eighth of the U.S. economy, California has been harder hit than most states. Unemployment, now 11.6 percent (national average: 9.5 percent), could top 13 percent in 2010, says economist Eduardo Martinez of Moody’s Economy dot com. Meanwhile, the requirement that any tax increase muster a two-thirds vote in the legislature promotes paralysis. Democrats prefer tax hikes to spending cuts, and Republicans can block higher taxes.
…
California is stretched between a precarious economy and a strong popular desire for government. The state’s wrenching experience suggests that, as a nation, we should begin to pare back government’s future commitments to avoid a similar fate. But California’s experience also suggests we’ll remain in denial, prisoners of wishful thinking, until the fateful reckoning arrives in the unimagined future.
Book excerpt
No bailout can stop the sinking
The U.S.S. America is not fit to sail, argues author Chris Hedges
(Protesters at Congressional hearings last year jeer former Lehman Brothers CEO Richard S. Fuld, who walked away from the largest bankruptcy in U.S. history with millions in compensation.
Jonathan Ernst/Reuters)
From Saturday’s Globe and Mail
Last updated on Friday, Jul. 31, 2009 07:44PM EDT
In his seventh book, Empire of Illusion: The End of Literacy and the Triumph of Spectacle, veteran U.S. war correspondent and Pulitzer Prize winner Chris Hedges systematically attacks what he sees as the self-deluding and corrupt character of American society, economics and global influence today.
In this excerpt from the final chapter, he ties his analysis to the recent bailouts of banks and other corporations.
Democracy is not an outgrowth of free markets. Democracy and capitalism are antagonistic entities. Democracy, like individualism, is based not on personal gain but on self-sacrifice. A functioning democracy must often defy the economic interests of elites on behalf of citizens, but this is not happening.
The corporate managers and government officials trying to fix the economic meltdown are pouring money and resources into the financial sector because they are trained only to manage and sustain the established system, not change it.
John Ralston Saul writes that the first three aims of the corporatist movement in Germany, Italy, and France during the 1920s, those that went on to become part of the fascist experience, were “to shift power directly to economic and social interest groups, to push entrepreneurial initiative in areas normally reserved for public bodies” and to “obliterate the boundaries between public and private interest – that is, challenge the idea of the public interest.”
It sounds depressingly familiar.
The working class, which has desperately borrowed money to stay afloat as real wages have dropped, now faces years, maybe decades, of stagnant or declining incomes without access to new credit. The national treasury, meanwhile, is being drained on behalf of speculative commercial interests.
The government – the only institution citizens have that is big enough and powerful enough to protect their rights – is becoming weaker, more anemic, and increasingly unable to help the mass of Americans who are embarking on a period of deprivation and suffering unseen in this country since the 1930s. Creative destruction, as the economist Joseph Schumpeter understood, is the essential fact about unfettered capitalism.
“You are going to see the biggest waste, fraud, and abuse in American history,” Ralph Nader told me when I asked him about the bailout. “Not only is it wrongly directed, not only does it deal with the perpetrators instead of the people who were victimized, but they don’t have a delivery system of any honesty and efficiency.
“The Justice Department is overwhelmed. It doesn’t have a tenth of the prosecutors, the investigators, the auditors, the attorneys needed to deal with the previous corporate crime wave before the bailout started last September. It is especially unable to deal with the rapacious ravaging of this new money by these corporate recipients,” Nader said.
“You can see it already. The corporations haven’t lent [out the bailout money]. They have used some of it for acquisitions or to preserve their bonuses or their dividends. As long as they know they are not going to jail, and they don’t see many newspaper reports about their colleagues going to jail, they don’t care. It is total impunity. If they quit, they quit with a golden parachute. Even [General Motors CEO Rick] Wagoner is taking away $21-million.”
…
A home isn’t for everyone despite money:
http://www.msnbc.msn.com/id/21134540/vp/32242975#32242975
Yes, this crisis is tough, but I’ve read about our government plans and I trust we will get it over soon!!!
Spam alert, paging Dr. Ben….