The Eye Of The Storm
It’s Friday desk clearing time for this blogger. “The foreclosure crisis has mainly been a sideshow here in Massachusetts compared to hard-hit Sunbelt states like Florida, Nevada and Nevada. But…check out the latest Warren Group numbers - initial foreclosure petitions were up 20 percent in April, while foreclosure deeds, the final step, surged a whopping 80 percent. Even more to the point, the Warren Group’s Banker & Tradesman newspaper finds the days of banks letting troubled homeowners linger in limbo without pulling the trigger and selling the home at a foreclosure auction is long gone. The lag time between initial foreclosure filings and auction day has nearly dropped in half, down to 4.6 months, B&T reports. That’s down from roughly 8 months back in 2008.”
“It’s unlikely we will ever get to the complete meltdown seen in the Sunbelt states. But our own foreclosure mess is getting a lot harder to dismiss now.”
“A record number of Connecticut homeowners still are falling behind in their mortgage payments and facing foreclosure. The Connecticut Fair Housing Center in Hartford, which represents clients in foreclosure cases and runs foreclosure education classes, has not seen any lessening in the number of homeowners with troubled mortgages. Six months ago, enrollment in the housing center’s classes in Hartford might have numbered 12 to 15 homeowners. Now, the classes draw 25 to 35 from across the income spectrum — including “former six-figure” households — and from both urban and suburban communities.”
“‘We’re really not seeing a decrease in people calling us and signing up for our classes,’ said Erin Kemple, the housing center’s executive director. ‘My fear is that it’s just a lull, the eye of the storm.’”
“Brian Jacobsen, a Wisconsin Lutheran College economics professor, said the delinquency rates were nothing to get excited about as long as jobless rates remained high. ‘I’d like to say it’s getting better, but since there hasn’t really been any material improvement in labor markets or people’s household income, there’s really very little reason to assume we’re going to have improvements in the mortgage foreclosure situation,’ said Jacobsen, who is chief portfolio strategist at Wells Fargo Advantage Funds. ‘If you don’t have a job, how can you make your mortgage payment?’”
“Jacobsen said one positive sign was that early-stage delinquencies - those only 30 days behind on payments - decreased to 2.28% of mortgages in the quarter from 2.9% in the fourth quarter of last year. He called it a ‘glimmer of hope’ that there seemed to be fewer homeowners missing a payment for the first time. ‘It’s like a bathtub. If you want it to drain you should really stop filling it up,’ Jacobsen said.”
“As of March, 41,000 homeowners in Illinois had gotten trial mortgage reductions. But if they get rejected for a permanent one, they may be worse off than before. Last July, Robert Haag’s lender, Aurora Loan Services, gave him provisional approval to pay $1000 less a month while they analyzed his income and expenses. In April, they said he didn’t qualify for a permanent reduction. Now he and his family are preparing to say goodbye to their two-story house in south suburban Manhattan, Illinois.”
“Haag: If we had been denied upfront in say, June, and our principal balance on this home would still have been $220,000, I feel that we would have been able to sell it outright without having to do a short sale or foreclosure or anything of that nature and been able to walk away with at least our credit.’”
“Faith Schwartz heads the HOPE NOW Alliance. Schwartz says the reason banks send these lump-sum bills is cut and dried. The original mortgage contract is still in effect if someone doesn’t get a permanent modification. Schwartz: ‘Those moneys are still due, that note is still due to that investor. So that’s what happens.’”
“Haag: ‘I don’t understand what took so long for them to do simple calculations and tell me I didn’t qualify. I feel it might have been a tactic to generate as much income for themselves as they could before telling me I didn’t qualify.’”
“Aurora’s not getting any more income from him for for now. He says he plans to pay off family debt first. And the 13-thousand dollars he owes Aurora? He and his wife say they see no way out of that hole.”
“Facing foreclosure on their Shively home, Esther and Olugbemiga Afolabi were elated to get a lifeline from their bank in October. But the help turned out to be short-lived. Wells Fargo canceled the deal after five months and scheduled a June 8 foreclosure auction. Many are finding it only delays the reckoning for a few months. ‘For every borrower who avoided foreclosure through (the program) last year, another 10 families lost their homes,’ according to an April 14 report from the congressional panel that oversees the program.”
“A surge in bank foreclosures over the past two years has driven down median home prices in the Twin Cities. One of the key variables going forward for the housing market is the supply of newly foreclosed homes on the market. Tim Swierczek, president of the Minnesota Mortgage Association noted worrisome signals about many of the modifications. The government reported this week, for example, that half of the homeowners receiving government-backed modifications through a federal program still have monthly debt payments that swallow at least 64 percent of their monthly gross income.”
“‘Those are alarming numbers,’ Swierczek said. ‘Unless those folks have access to credit, they will fail.’”
“Southern Nevada vacant land values plunged during the first quarter as bank foreclosures and distressed sales drove prices downward, Applied Analysis reported. An estimated 137,500 Southern Nevadans are out of work. Banks aren’t likely to loosen lending criteria until there are eight months or more of sustained employment growth, observers say. ‘There is a tidal wave of vacant land foreclosures being processed, and 2010 will continue to see very high foreclosure levels for vacant land,’ Las Vegas-based land appraiser Charles Jack IV said.”
“New Treasury guidelines go into effect on June 1, which require loan servicers to collect upfront documentation from borrowers before letting them initiate new trial modification programs. The new requirements will ‘weed people’ out who would have not made it into the permanent program, and that is not necessarily a bad thing, said Zachary Urban, spokesman for the Adams County Housing Authority. ‘The last thing you want is to have someone spend all that time and effort at the front end, go through the trial, when there is no chance of them getting a permanent loan modification,’ Urban said. ‘That’s not doing the borrower any favor. When you think about it, really what the person needs to do is cut bait.’”
“Home sales and prices rose last month in Ventura County despite an overall sales decline across Southern California, but any celebration would be premature, housing experts said. ‘It would be premature to be enthusiastic. I don’t think people should start thinking their house price is going up,’ said Bill Watkins, executive director of the Center for Economic Research and Forecasting at California Lutheran University in Thousand Oaks.”
“‘We expect to see a rise in foreclosures this year compared with last year and among more homes in the higher-end market,’ Watkins said. ‘The recession has gone on long enough now that people who could afford their homes are losing their jobs and more people are walking away from their homes.’”
“Liz Dawn Donahue is angry that the townhouse and condominium project has disrupted the area southwest of the Arizona Canal and Chaparral Road for close to five years. Donahue and her neighbors are indirect victims of a housing bubble that burst, leaving them to cope on a daily basis with the developer’s failure and the uncertainty of what the lender will do.”
“‘I don’t want to look at this for the next five years,’ she said from her townhouse south of the stalled development.”
“Summit Properties LLC of Las Vegas started the $58 million Reflections project in late 2007. An investment banker was sure that buyers would snap up the urban condos even though the market was already starting to stall at the end of that summer. But sales never materialized and the property went into foreclosure, Donahue said.”
“Donahue said the condo buildings look good, but the undeveloped half of the site has attracted vagrants and partiers who were sneaking into a dilapidated building about 100 feet from her townhouse. Prices announced a year ago ranged from $695,000 to $1.3 million for the condos and $845,000 to $949,000 for the townhouses. When the market was hot, redevelopment pressure pushed north along the canal. Condo flippers descended and an apartment building across from Donahue’s Sarkis Manor townhouse complex was torn down. That property sits vacant now with one withering saguaro propped up by wooden stakes.”
“‘It used to be a beautiful neighborhood but now it looks awful,’ Donahue said.”
“Decorative Roman columns and plush furniture still adorn the silent marble-tiled entrance lobby at Bay Towers, where investors once snapped up condominiums to indulge in ‘luxury waterfront living.’ That was back before the fire. Today, the six-story building remains unrepaired and unoccupied. And the cash-strapped owner, South Florida developer Bay Towers Development, LLC, owes the city nearly $650,000 in delinquent fines and charges for code enforcement violations, unpaid water bills and false fire alarms, records show.”
“‘We’re not real hopeful that we’ll ever get any of that false-alarm money back. We’re just a drop in the bucket, compared to the whole picture,’ said Scott Gaenicke, spokesman for the Titusville Fire Department. ‘It’s kind of like getting blood from a turnip.’”
“(The) president of Bay Towers Developments, David Houri’s home is in foreclosure in Miami-Dade County Circuit Court, according to case files, and he is living with his wife and five children — ages 3 to 16 — in a Sunny Isles Beach apartment. Last month, his wife signed an affidavit stating the family is having a hard time purchasing groceries.”
“Meanwhile, his company continues leasing unsold units to tenants in the north tower.”
“Alpine Bank claimed 16 lots in the foundering Hidden Springs Ranch subdivision just west of Hayden on Wednesday morning when no third-party bidder appeared to exceed the bank’s own bid on the property during a foreclosure sale at the Routt County Courthouse. About seven people attended the sale, which involved three foreclosed properties, but none was there to place a bid. Routt County Public Trustee Jeanne Whiddon said it has been more than a year since she received a bid during a foreclosure sale.”
“Don Marostica, executive director of the Colorado Office of Economic Development and International Trade, kicked off Economic Summit 2010 with wide-ranging comments about global and national economies. He called the recession a ‘major transforming event’ that young people one day will tell their children about. Marostica said the recession’s impacts continue to unfold. ‘We’re going through a worldwide economy change, and it’s not over.’”
“Community bankers have to push back against the idea of ‘big bad bankers’ who have wrongfully been accused of causing the sub-prime mess, said Steve Brady, president and CEO of Ocean City Home Bank. Much to the chagrin of most bankers, Brady said, the ‘whole collapse’ was driven by speculators. ‘There were a number of people getting adjustable teasers rates buying five condos that had not been built,’ he said, adding that it could take five or six years to sell inventory in Florida, California and Arizona.”
“Urban theorist Richard Florida says so many people are trapped in homeownership today that it’s harming our economy. He’s written a new book, ‘The Great Reset,’ arguing that we need less homeownership and more mobility to rev up the nation’s economy. A new CoreLogic report says 45 percent of mortgaged houses in El Dorado, Placer, Sacramento and Yolo are worth less than the amount owed on them.’
“Home Front gets phone calls from people stuck professionally and personally because they’re in this condition. A young working couple want to return to India for a year or more to care for elderly parents. Will they have to ‘walk away’from the mortgage and their sizable down payment? A laid-off engineering professional in a region where no one builds eyes available jobs in other states. But neighborhood foreclosures have driven the family’s home values $100,000 or more below the 2003 purchase price. ”
“A 50-something construction industry worker wonders if it’s time to leave town. But how to sell a house in Natomas when the neighborhood listings are all bank-owned?’
“More happily, area renter Leslie Madsen-Brooks, 34, says: ‘My lack of a mortgage has allowed me to take a job in Boise.’ She’s leaving Davis – quite easily – in July to teach history at Boise State.”
Who trampled all of my green shoots?
I just thought of a new code word for the Obama administration: Monsanto.
“Just as the heavy use of antibiotics contributed to the rise of drug-resistant supergerms, American farmers’ near-ubiquitous use of the weedkiller Roundup has led to the rapid growth of tenacious new superweeds. To fight them, farmers are being forced to spray fields with more toxic herbicides, pull weeds by hand and return to more labor-intensive methods like regular plowing. The first resistant species to pose a serious threat to agriculture was spotted in a Delaware soybean field in 2000. Since then, the problem has spread, with 10 resistant species in at least 22 states infesting millions of acres. “What we’re talking about here is Darwinian evolution in fast-forward,” Mike Owen, a weed scientist at Iowa State University, said.”
Cool! Clone the superweed’s DNA with the soybean’s DNA and you’ll get a soybean plant that grows all by itself.
If you can’t fight them, clone them.
Sounds like we could have a lot of weed pulling jobs for the permanently unemployed.
And they can live in McMansion shacks, all of which will still be “worth” their 2005 price!
See, we have a solution?!
Yes, those very jobs that the Mexicans do because no-one else will………………..lol
I must be a bad person, because when I saw ’superweed’ I immediately went on a different tangent. I also thought being a weed scientist would probably be the munchiest job in America.
Natalie,
Monsanto has owned the ag seed business for a long time (gmo). Two great Documentaries on the subject of food are “The Future Of Food” (Monsanto’s story of controll/suing small Farmers) and “Food, Inc.” Speaking as a Political Atheist, it’s been a long road to this totalitarian nightmare. Both parties are bought off. And no, I am not addicted to hope-ium. Btw, you’re one bright, classy lady.
Would someone PLEASE remove these putrefying corpses piling up among the green shoots?
“Urban theorist Richard Florida says so many people are trapped in homeownership today that it’s harming our economy. He’s written a new book, ‘The Great Reset,’ arguing that we need less homeownership and more mobility to rev up the nation’s economy.”
Awesome! If many, many more underwater homeowners would just walk away from their mortgage debt obligation household financial drowning pools, we could get the economy revved up and humming in no time.
Green Shoots,
Interesting theory. Yesterday we discussed the “Stay but No Pay” crowd as being a “drain” on the economy, and there’s definitely something to be said for that.
I’m not necessarily married to the position, but I openly asked if the huge disparity between those that ‘can’ remain current on their mortgages but are deeply, deeply underwater shouldn’t be more the concern?
We’re trying to fill a banker-sized black hole on a monthly basis when those dollars would be better spent practically anywhere than covering their bad bets. Good to see the notion is gaining enough traction to at least be considered.
The macroeconomy would be much better off overall with a better equilibrium between buyers and renters. For instance, we currently have a huge glut of vacant houses which could be producing rent right now as I type, and instead the owners are foolishly expecting a buyer who is willing to pay an absurdly high price for enjoying the rights and privileges of home ownership to spontaneously materialize and make an offer.
“to sponatenously materialize and make an offer” LOL!
I mean that ‘is’ how it works isn’t it? As far as I can tell, all I see is more $’s getting flushed down the ole’ REIC-hole. Supposing you ‘are’ a well paid gov’t employee, have no fear of -ever- being laid off ( wife the same ) and you’ll never be transferred!
So you’ve got gubmint paychecks ( X 2 ) you’re perfectly current, but, you bought at the top of the market, and you’re overpaying your mortgage by a good 20 to 40%!
I’m not picking on gov. workers here, it’s just that it takes out about a mil. or so variables. Every month they make that PITI installment ( which is what we probably should call them ) it’s easily a grand more that ’should’ be spent ( or God forbid saved ) elsewhere in the economy.
And I’m not advocating they walk away, I’m just asking what we think is the more detrimental impact?
Labor mobility’s a bit of a problem for homeowners these days, as many HBB-ers have pointed out. Looks like Richard’s been lurking here.
“More mobility” just translates into “less job security.”
Anyone with a title of “Urban theorist” sounds like a person who wants us to all live in tiny, cramped little apartments like ants while embracing the “urban lifestyle” of crime, drugs, and poverty. No thanks.
How about decent jobs at decent wages? That would rev up the economy vs. the concept of life-long nomads wandering around the nation looking for work, which is a step backwards and common in 3rd world nations that have no real jobs.
How about decent jobs at decent wages? That would rev up the economy vs. the concept of life-long nomads wandering around the nation looking for work, which is a step backwards and common in 3rd world nations that have no real jobs.
Thwack! (A nail just got hit on the head.)
Indeed.
Well said, PTM.
Pondering,
Very most excellent point. If you’ll recall, no matter how dark things got ( and given your local market ) I’ve never brow beaten anyone for purchasing a home at what they felt was a bargain basement price.
If they felt secure enough in their job and could well afford the payment, my attitude was always, hey, more power to you!
In a lot of ways, our advocating being lifelong renters isn’t a service to most people. And who says just b/c you live in apt. doesn’t mean your finances can’t be a total mess? Regardless of how willing you are to become nomadic.
‘the concept of life-long nomads wandering around the nation looking for work, which is a step backwards and common in 3rd world nations that have no real jobs’
You know, there are countries in Europe where most people rent that have a better standard of living than the US.
‘My lack of a mortgage has allowed me to take a job in Boise.’ She’s leaving Davis – quite easily – in July to teach history at Boise State.’
This doesn’t sound like a step backward for this lady. Especially compared to:
‘A young working couple want to return to India for a year or more to care for elderly parents. Will they have to ‘walk away’from the mortgage and their sizable down payment? A laid-off engineering professional in a region where no one builds eyes available jobs in other states. But neighborhood foreclosures have driven the family’s home values $100,000 or more below the 2003 purchase price. ‘
‘A 50-something construction industry worker wonders if it’s time to leave town. But how to sell a house in Natomas when the neighborhood listings are all bank-owned?’
I’ve never understood the ‘pride of ownership’ thing about houses. I’ve owned and rented and think owning is overrated, especially at tax time or if I decided I needed to change jobs. But during a once in a lifetime housing bubble, it’s a different question.
Anyhoo, I’ve got to get my belongings on my camel and look for work at taco bell, as that’s the only job a renter can get…
The young couple from India can bring their ailing parents here and dump them onto Medicare and Medicaid, as about a million of their fellow countrymen here have done already.
Over 80 or so and they don’t move very easily. The change and hassle freaks them out.
One of my former neighbors has had to move her mom from Germany from the house that her husband built and she had lived there over 50 years due to her mom declining health. Her mom only knows her daughter, son in law and her granddaughter, speaks no English and get very bored with nothing to do. The reason she had to move to a foreign country and leave everything she knew behind… her worthless sons refused to help their mom out because they didn’t have time. One has been unemployed for 5 years and the other is retired. I find that to be a horrible thing when your own children refuse to help out in you last years.
Sorry for the rant, it just annoys me to no end.
Immigrants are not eligible for Medicare or Medicaid benefits unless they live here for five years continuously, after which they can purchase Medicare Part A for $600-$1000 per month from the US government. No giveaways.
That said, I have met immigrants who somehow managed to get MediCal (the California version of Medicaid.) I think that when Clinton did welfare reform he started the above rules, and that before 1996 it was easier for foreigners to get Medicare/Medicaid. No longer.
I used to like that lifestyle in my 20’s ..I lived in Tucson, ohio, NH, SC and more just bouncing around from TV station to station….I had good references but wasn’t ready to make the commitment to “settle down” Of course i had fun saw lots of our great country but didn’t save a whole lot..
Now it seems we have to travel light and go back to job hopping.
———————–
the concept of life-long nomads wandering around the nation looking for work,
From an ant:
I’m having trouble digesting your post. So, if we all buy houses - the jobs will come to us?
edgewaterjohn,
After a fashion.., YES! Robert Cote` long time contributor now pens “Exurbanation” and runs circles around most “urban planners”.
His contention is that, initially virtually all employment in LA was well, Downtown. As the area began to sprawl outward, the demand for everything from auto mechanics to zoo keepers ( sprawled right along ‘with’ it! )
Once critical mass is attained in outlying areas ( he lives in Thousand Oaks ) jobs have a natural procilivity to follow. Obviously there are limits to all of this ( as many busted builders will attest ) but his basic message is, you just have to show a little faith in capitalism once in awhile? ( Funny guy and great reading btw )
he lives in Thousand Oaks ??
I thought it was Calabasas ?? I miss him posting…Sharp Tack…
I don’t. If you’ll remember he threw a hissy fit cuz posters here wouldn’t agree with him 100% - on everything. Don’t let the door hit your ass, I say.
“Don’t let the door hit your ass, I say.”
Hah hah! Must have been my cantakerous posts that hit him on the rear bumper as he left the blog!!
More mobility is what we need? I take the opposite view. We need real communities where people have roots and feel some accountability to one another, not a floating population of atomized individuals.
But, but, but I thought we were “human resources”. You mean to tell me that we are actually people too.
I agree with Sammy in principle, but the reality is that too often we have to move for our careers. I’ve done it several times, uprooting my family. Luckily, it all worked out, and we are reasonably proximate to our most precious family members. When I retire I intend to follow my kids around as much as possible.
I have some wonderful friends who are Indian. When they and their siblings had children, their parents retired, sold their house, and traveled from child to child, helping out. I was so impressed at their ability to get along with lots of people in the house, and every sibling vied to get the parents to live with them. The parents, retired professionals, cooked, cleaned, got grandkids ready for school, and chauffeured them all around. Great role models. I don’t think I could live with my kids, and they probably couldn’t put up with us, but it would be great to be a supportive grandparent.
Jeepers! If everyone would just get all optimistic again and start buying stocks today instead of selling, we could stop this horrible correction dead in its tracks.
Indications
May 21, 2010, 7:54 a.m. EDT
After bashing, U.S. stock futures drop further
By Steve Goldstein, MarketWatch
LONDON (MarketWatch) — U.S. stock futures declined Friday after the previous session’s pounding that sent markets into a correction territory as worries over economic growth persist.
After early and modest gains, S&P 500 futures fell 9.1 points to 1,060.90 and Nasdaq 100 futures fell 15.5 points to 1,785.00.
Futures on the Dow Jones Industrial Average fell 81 points.
Market slide
The Dow closes down more than 360 points. Barron’s Bob O’Brien and WSJ’s Grainne McCarthy joins the News Hub with more. Plus, the financial overhaul heads to the finish line; and a historic look at all the stars that passed through the doors of “Law & Order.”
U.S. stocks and a range of assets across the globe tumbled on Thursday, hit by a combination of weak economic data, regulatory concerns and debt worries in the U.S., China and Europe. Breaching of key technical levels added to the decline.
The Dow Jones Industrial Average dropped 376 points, or 3.6%, to its worst close since Feb. 10, putting the blue-chip index over 10% below its April 26 high.
“There really wasn’t a silver lining in yesterday’s action,” said Marc Pado, a strategist at Cantor Fitzgerald. “Investors are moving to cash and will be content to wait for better signs of what will happen in Europe.”
…
Comment on “fat finger glitch” and other recent stock market weakness:
- U.S. stock market moves are a key component of the leading economic indicators.
- If the stock market just underwent a 10 percent correction, the leading economic indicators are “likely” to come in “weaker than expected” for May, when they come out next month.
- Coupled with yesterday’s “worse than expected” data release on new claims for unemployment and the “unexpected drop” in April leading economic indicators, all the green shoots of U.S. economic recovery look dead.
- Augmented by the unresolved global sovereign debt crisis (including the U.S. version), the termination of various U.S. residential housing price support programs, including the $8K first-time homebuyer credit and the Fed’s MBS purchase program, the case for a continuation of the recent dead cat bounce in U.S. residential real estate values appears dead in the water.
“Jobless Claims Jump, but Trend Is Unclear”
Funny, ain’t it, how the trend is only clear if it supports the Green Shoots case, but otherwise it’s murky?
Yes, and everything that tramples on the green shoots is “unexpected.” By who, exactly?
Currently it looks like everybody DID get all optimistic. The Dow’s up sharply.
“I don’t understand what took so long for them to do simple calculations and tell me I didn’t qualify. I feel it might have been a tactic to generate as much income for themselves as they could before telling me I couldn’t qualify.”
A MENSA candidate.
I immediately thought of you when I read that quote. I knew you couldn’t pass it up.
Give me a few minutes so I can clean the coffee off my keyboard and screen…still laughing!
Guys,
For how long have we been saying that in spite of all the grandstanding/Hope Now blah, blah that the PTB would very quietly and discretely sweep the whole matter of foreclosures under the carpet?
It isn’t so much sweeping them under the rug as sending them into the future. Might workif we were actually well into the good side of a V shaped recovery. But we aren’t. So it doesn’t work. Oops.
They’re turning our “L” shaped recovery into a “\” shaped recovery by trying to make it a “V” shaped recovery.
We could have had:
| /
L____/
Instead we’re gonna get :
\
\
\
\_________?
Sure, they slowed the initial slope, but I’m not convinced they raised the trough at all, or if we’ll even have a recovery instead of a revolution.
Well, that text formatting failed. I should have wrapped some html tags around it.
MENSA
He might not be the shiniest spoon in the drawer, but it’s an interesting development that it’s starting to occur to J6P that maybe he’s the sucker at the table.
“A MENSA candidate”
As we say in our home:
Mensa is the men’s bathroom and Girlsa is the lady’s.
“The government reported this week that half of homeowners receiving modifications still have monthly debt payments that swallow at least 64 percent of their monthly gross income. ‘Those are alarming numbers,’ Swierczek said. ‘Unless those folks have access to credit, they will fail.’ ”
And if they DO have access to credit, they will still fail — just a little farther down the road, and deeper in debt.
Yeah, and that’s gross income. So after withholding, I bet these people are eating ramen noodles every night.
Oh, but they do get that mortgage deduction!
I’m not sure if the reportof the report is actually right. If people will recall, I ran the numbers on my own income with the government program which is *designed* to reduce payments to 31% of gross income, and I came up with approximately 66% of NET income. Now I was running it for principal and interest only (not insurance and taxes), so maybe this is correct if you add those back in. But if I had to guess, the report should have said 64% of net.
Still totally unsustainable. I estimated that it might work for people with no more than 2 of the following expenses: car payments, significant transportation costs beyond car payments, childcare costs, alimony, student loan payments, credit card payments, significant medical costs (insurance and/or co-pays), and a few others. In other words, if you have an otherwise perfect financial life, you might be OK, but if not, forget it. And forget about saving for retirement.
polly,
I recall your giving us that breakdown, and it was sobering.
The issue I see cropping up is, I’m starting to see a disconnect between unemployment and foreclosures? I think we’re being fed a line here.
My guess is that much of the FC’s we’re seeing are really more the result of people that ‘both’ kept their jobs but are unable or unwilling to access even ‘more’ credit? They were able to keep their lives afloat as long as they could keep the plates spinning.
But as soon as ( and I know we all recall the letters lenders sent out telling homeowners their HELOC had been effectively shut down! ) the credit dries up and… they have to make choices. Isn’t it just possible that a good number of the unemployed simply -ditched- their unsecured credit, dropped off their cars and kept current on their home? We could have this all backwards, contrary to the MSM human int. stories.
DinOR, you have a point on the car dropoff idea.
A few years ago, I lived down the street from a church with a big parking lot. The church wasn’t the most hopping of places. Other than the Sunday morning and Wednesday evening services and occasional events like Vacation Bible School, that parking lot was deserted.
Well, that was perfect for someone, we neighbors never figured out who it was, to abandon his pickup truck in the parking lot. It wasn’t one of those big, honkin’ pickups we like to satirize on the HBB. It was one of those little imported models.
Well, we reported it as a stolen vehicle, and nothing happened. You’d think the police would be all over the situation, as abandonment of stolen cars is very common here.
Turns out that the truck had been ditched by its owner. We surmised that he/she had tired of making the payments.
Arizona Slim,
I have a good friend that bought in Portland in 2008. The units were like $165k..? Anyway, he got laid off not long after. His thinking was that ( and it’s not like we don’t discuss it here? ) in short order, int. rates will skyrocket and mort’s will become unattainable, regardless of credit!
He also surmised that ( as we ‘again’ have shared here often ) he would be much better off as an FB than a Bitter Renter. Dropped off his expensive sports car to the lender ( after driving it for mo’s without making a payment ) and picked up a nice Lincoln LS for about 7k.
Almost immediately defaulted on all his unsecured credit and has since gotten a ‘mod’ thru some ACORN offshoot. Now he pays less in PITI than he would in rent. Sub…stantially less. My buddy is pretty shrewd ( or shifty depending on how you want to look at it ) but I don’t think he’s alone?
In the case of the church parking lot truck, we didn’t get too concerned about the truck just being there. After all, it could have belonged to a church member.
What really rang our alarm bells were the vandals, who were, ahem, from a certain country south of this one. They lived in a nearby rental house. We noticed that, at this rental house, there were two cars (Toyota Corollas, IIRC) of exactly the same model.
We suspected that some sort of chop shop was operating on that property, what with the identical cars and their interest in disassembling the parking lot truck. That was when we called the cops. Who didn’t seem to care.
I can recall making an additional call to our city council’s ward office. That may have gotten things moving. That and the fact that one of my concerned neighbors knew a lot of people at that church. He probably spoke to them. Or maybe he spoke to one of his relatives, who owns a local towing service.
Whatever happened, the end result was that the car was removed from the church lot.
Arizona Slim,
Please, for all of our sakes, just get out of there. Please? The reports were hearing are disturbing. We realize you’ve done a great deal to help keep that community together but is it really worth it? Your own safety?
God love you for all you do, but I hope you’ll understand if were concerned.
Acorn offshoot? Months ago I posted a story (friend’s friend) that got a mod for 2%/ 40 year (after 5 yrs it goes to 3%)with balloon payment that lowered his payment from $2,800/mo to $775 ( total inc. tax). Turns out his bank went under and this was a gov’t loan. Also turns out that he could rent his place for twice what he’s paying. This guy is a realtor, who heloc’d for all the toys, what a scam. (our gov’t at work).
Kirisdad,
Makes me ill too. One of the differences ( and we’ve discussed this at length before ) is this clown was/is a REIC member!
How did he file his claim for a mod? I didn’t understand the loan? I’m not an expert in these matters? C’mon.
Oh btw, I just got off the phone w/ that very individual and after completeing the 3 mo. trial period he’s being told they can’t make it permanent as he’s on unemployment so he doesn’t “fit the lender’s guidelines”! I’ll keep you posted.
DinOR, I don’t know how he filed his claim. I’m getting this info second hand from a very pissed off co-worker. He’s livid over his friends scam. All I know is, the guy heloc’ed for a built in pool, harley, jet ski etc. then had his earnings cut during the RE downturn. From what I was told, his bank went under and scammer cried to every politician in FL. He got some kind of gov’t mod. When I read your acorn offshoot comment, I was wondering if this how he got it.
“…still have monthly debt payments that swallow at least 64 percent of their monthly gross income.”
and
“Unless those folks have access to credit, they will fail.”
pardon me while i go bang my head against the fracking wall for the next hour.
A major problem in Connecticut is the staggeringly high property taxes, which could crush someone getting behind in mortgage payments.
We lived there in 2006 and for the purpose of property tax our house was valued at $240,000. The tax was $800 a month (that’s not a misprint) and going up to $900.
We had a septic tank, well water, paid to have garbage picked up, and it was a volunteer fire department too.
A house in a nearby township at the same price with higher tax rates was over $1000 a month in property tax.
I have a friend in Los Gatos, CA, who according to Zillow is billed over $38,000 a year (over $3,100 a month) in property tax.
He’s currently underemployed.
DennisN,
I don’t believe there’s any place in the whole damned country that is ‘that’ nice to where that level of taxation?
All we need now is to have someone drop by and explain that it’s the result of “years of the -Federal- government pushing problems off to the state level that’s created this kind of a problem”!
corr:
“to -warrant- that level of taxation”
Hey! Those six figure cop and firefighter pensions need to get funded somehow!
the ones that get to retire at age 38?
those cops and firefighters?
I think the property tax rate in Los Gatos is 1.5%, including Mello Roose. Sounds like your friend bought an extremely expensive house.
Well he paid about $2.4 million then threw in about another $1 million in “upgrades” and “remodeling”. For example, he didn’t like the “quality” of the granite in the kitchen so he had a contractor tear it all out and put in new granite to his specifications.
If he didn’t want to pay 40 grand a year in property taxes, he shouldn’t have bought a 3 million dollar house.
sfbb,
I’m no fan of dinks etc. nor their largely empty/tax dodge homes but we have to ask ourselves.., is Dennis’ friend getting 100 X the police protection? Will the Fire Dept. get their 25 X as fast?
If taxes are about services, then we need to make sure there’s ’some’ relationship between the two.
If it weren’t for prop 13, he’d be paying the exact same amount as all his neighbors. (Roughly. He may have bought a monstronsity even for that ritzy neighborhood.)
And honestly, rich people DO get proportionally more value from social services/police/etc than poor people. What do you think is keeping the poor from marching with pitchforks and torches?
sfbb,
You realize of course, the minute I make a statement like ‘that’ it’s only natural you open yourself up to that brand of criticism.
No, you’re absolutely right, South Central..? ( Yeah, we’ll get ‘right’ on it, just after NBA on TBS ) Those people shouldn’t have to pay anything.
All that aside, I think we’ve seen just about the peak in salaries for the “hero trades”. When times were good, no one seemed to mind their Fire Chief was making 200k+ a year. That’s gonna’ change.
All that aside, I think we’ve seen just about the peak in salaries for the “hero trades”. When times were good, no one seemed to mind their Fire Chief was making 200k+ a year. That’s gonna’ change.
To which I say, read Robert Lowenstein’s latest book, While America Aged. It’s about the (numerous) problems in public and private pensions.
Bought a house in Los Gatos for $187k back in the 80s, sold close to $400k in the 90s. Same house sold in 02 for $800k and zillow has it at $1.2M — used to be a 1200 sq. foot 3/2 fixer upper. Now its close to 2,000 sq.ft.
Lovely town though. Used to be a fun place back in the 80s. Now its a pretentious, yuppy place. Sad.
DennisN….The difference between what Bob is saying and your friend in Los Gatos is that your friend new “going in” what his property taxes would be and they are now “Capped” with a maximum 2% per year increase…
Bob, on the other hand will never no what his taxes will be because the county assessor can raise them at will and will….
Ugh! There went the mortgage interest deduction, huh?
What does it matter where the money goes? To the banks, to the Feds, to the state/muni - bottom line, the houseowner ain’t keeping it.
I would suggest that the major problem isn’t the high taxes. It’s the politicians who impose them. There’s a solution to that, you know.
“The Warren Group’s Banker & Tradesman newspaper finds the days of banks letting troubled homeowners linger in limbo without pulling the trigger and selling the home at a foreclosure auction is long gone. The lag time between initial foreclosure filings and auction day has nearly dropped in half, down to 4.6 months, B&T reports.”
HA! So the federal government borrowed $billions and printed money to pump up the price of housing, and the consequence is that banks now feel they can get a descent return on foreclosurses and are tossing the FBs to the curb.
If there was ever an example of the fact that most people would have been better off defaulting and moving on, and having the prices be allowed to fall, this is it. The same people always benefit from public policies regardless of their intention.
The lag time between initial foreclosure filings and auction day has nearly dropped in half, down to 4.6 months, B&T reports. That’s down from roughly 8 months back in 2008.”
So much for plan A - stop paying the mortgage and living rent free for 2+ years…
stop paying the mortgage and living rent free for 2+ years… ??
Its the new “In” thing don’t ya know ?? Regular conversation now during backyard BBQ’s…No shame here…We are being strategic…
To quote Bush, that’s what I call “strategery.”
“So much for plan A…” providing yet another application of Stein’s Law to the housing mania:
Anything which cannot go on forever will stop.
– Herbert Stein –
‘the Warren Group’s Banker & Tradesman newspaper finds the days of banks letting troubled homeowners linger in limbo without pulling the trigger and selling the home at a foreclosure auction is long gone’
The numbers from various analysts and tracking companies are pointing to a potential unraveling of shadow inventory.
“The numbers from various analysts and tracking companies are pointing to a potential unraveling of shadow inventory.”
Wow, I wonder what that’s gonna look like. Does this mean the banks are entering the “acceptance” stage? Awesome.
IMO, what it looks like is what we are seeing. Record forclosures, up from records, in just about every part of the country. (Notice we’re seeing 70%-80% YOY increases in almost every market).
I’ve found quotes from UHS, etc, about this trend from the east to the west coast in the past month.
The media isn’t very good at default statistics. When I was on NPR in June 2007, I mentioned record foreclosures and the host said, ‘RECORD?’ like it was some big secret. And remember how the media theme for a while was ‘realty trac is double counting the houses’? So they downplay the statistics, then later zoom in on ma and pa losing the house cuz the mean old banks want their money back.
“(Notice we’re seeing 70%-80% YOY increases in almost every market).”
That sounds pretty typical for the red hot spring sales season!
It’s important to note that foreclosure doesn’t mean the house will go on the market. A major lenders REO broker we contacted in one N AZ county told us they only had 4 houses and that they were selling in a week with multiple offers. But we checked the tax roles and they own well over a hundred.
But, it is a trend worth watching.
“But we checked the tax roles and they own well over a hundred.”
Ben — you are awesome. Do you have enough research assistants on hand?
Any of you can do this for free. Pick an area and look up the county recorders website. The functions vary, but try searching the tax roles using the keyword ‘bank’. See who owns a lot of houses (spot check the results, cuz some will own land only). Then find out who is doing the marketing for that lender and ask them how many REOs they have to sell.
“…cuz the mean old banks want their money back.”
The MSM sure isn’t running out of housing mania victims to include in special interest stories these days.
It’s the
“acceptance”“Armageddon” stage –well-timed for the second unraveling of the U.S. stock market since Fall 2008.
“Armageddon” stage ??
Now sprinkle in North Korea, Iran, and the pigs and you have a real powder Keg….It will only take a spark…
Ah, wouldn’t that be nice to see the Shadow Inventory cleared out and on the market!
Housing prices would crash, and the last of the Bubbleheads would finally give up!
Before Uncle Sam stepped in last year to drive homes back towards unaffordable levels, San Diego home prices were on a great improving trend in affordability terms.
County housing 11th least affordable
By Roger Showley, UNION-TRIBUNE STAFF WRITER
Thursday, May 20, 2010 at 6:42 p.m.
San Diego County housing affordability dropped a notch this year as more higher-priced homes entered the market, the National Association of Home Builders reported Thursday.
Happy FDIC Friday to everyone who posts and reads here!
Can anyone who understands Sheila Bear’s expectation for a “steady rate of bank closures through the end of the year” in light of a doubling of the rate of closures over the same period last year please enlighten me?
And so long as the FDIC has no problem continuing operations with a $20 bn budget hole, why is there any concern about them “running out” of funds?
* The Wall Street Journal
* BUSINESS
* MAY 21, 2010
FDIC: ‘Problem’ Banks at 775
By MICHAEL R. CRITTENDEN
WASHINGTON—A total of 775 banks, or one-tenth of all U.S. banks, were on the Federal Deposit Insurance Corp.’s list of “problem” institutions in the first quarter, as bad loans in the commercial real-estate market weighed on bank balance sheets.
Poor loan performance in other sectors also continued to hurt banks, with the total number of loans at least three months past due climbing for the 16th consecutive quarter, FDIC officials said in a briefing on Thursday.
“The banking system still has many problems to work through, and we cannot ignore the possibility of more financial market volatility,” FDIC Chairman Sheila Bair said.
There were 702 on the FDIC’s “problem” bank list at the end of 2009 and 252 at the end of 2008.
FDIC officials said they expected the number of failed banks to peak this year after climbing steadily over the past three years. Regulators have shut 72 banks so far this year, more than double the number closed by this time last year. Ms. Bair said regulators were preparing for a steady pace of additional closures through the end of the year. A total of 237 banks have failed since the beginning of 2008.
The failures continue to strain the FDIC’s fund to protect consumer deposits, although officials signaled they were confident they had enough cash on hand to deal with the expected spate of failures, without having to assess new fees on the banking industry. The agency’s deposit insurance fund stood at negative-$20.7 billion at the end of the first quarter, a slight improvement from the end of 2009.
“We have the necessary industry-funded resources to complete the cleanup,” Ms. Bair said, in a reference to the fees that the agency assesses on banks for insuring their deposits.
Banks, squeezed by problem loans and the continued recession, responded by reducing their lending. The industry’s total loan balances grew by 3% during the quarter, but the increase was due to accounting changes that required banks to bring securitized assets back onto their balance sheets. Without taking into account these accounting changes, lending would have declined for the seventh straight quarter, as banks cut back across most major lending categories.
“There is a lot of credit distress still in the mortgage-portfolio area,” FDIC Chief Economist Richard Brown said at the FDIC briefing.
…
Well d’oh!
Much to the chagrin of most bankers, Brady said, the ‘whole collapse’ was driven by speculators. ‘There were a number of people getting adjustable teasers rates buying five condos that had not been built,’ he said, adding that it could take five or six years to sell inventory in Florida, California and Arizona.”
Banker : “We bankers were completely innocent! It was the speculators using subprime mortgages to snap up fistfuls of investment condos!”
Citizen : “Uh, exactly who gave them fistfuls of subprime mortgages to do this?”
B : “….. we did.”
C : “Uh huh. So… how are you blameless?”
B : “How were we supposed to know they were going to misuse them and default! Oh, btw, can we have a check to cover our losses.”
C : “What are you, crazy? No fu…”
Politician (Interrupting C) : “OF COURSE YOU CAN! There, there poor banker. Here, let me just hand you this fine upstanding citizen’s wallet. He knows you need support or the world will end! That’s right, take what you need. He knows you won’t take a thin dime more than is necessary to make you whole, right?”
C (yanking back his now empty wallet) : “What the hell? Are you serious?”
P : “Sure I am! Thanks for your contribution to saving our future prosperity! Now, if you’ll excuse me, I need to ask this kind banker for a loan.”
B : “Absolutely! I’ll give you a good rate! Only 4% over what I’m paying for this money you gave me!”
C : “But he’s paying NOTHING for that money! And you just gave it to him after taking it from me! WHAT THE HELL IS GOING ON!”
P : “There, there, citizen! It’ll be okay. Oh look! American Idol is on T.V.! Look look! So shiny! Now if you’ll excuse us.” (Wanders off hand in hand with B)
C (Glaring after them.) : “You know, maybe the Taiwanese and the Greeks have a point.”
So true!
Let’s not forget that Citizen gets to go back to his apartment and watch the F’d Buyers up the street not pay their mortgage for a year or more while he has to pay his rent every month. Argh!
sfbb,
Nicely done.
Ben and I used to talk about “phantom demand” and ultimately, this is the only place it could wind up! Remember though, a lot of these RE inv. seminars ( Casey Serin comes to mind ) were expressly told to get the loans simultaneously so it wouldn’t show up on your credit report.
One of the key mistakes we made in the early going was not treating the condo end differently? We should have forced the builders, lenders and specuvestors into the same conf. room and made them work it out amongst themselves before dragging the rest of us into it.
They should put the same warning on mortgage docs that they put on fireworks:
“Light fuse, and get away!”
Second order volatility:
Yesterday the VIX spiked 25%, today it has dropped 13% so far.
- Does the PPT cap the VIX when bovines threaten to stampede?
- And whither the VIX from here?
CBOE MKT VOLATILITY IDX
“Liz Dawn Donahue is angry that the townhouse and condominium project has disrupted the area southwest of the Arizona Canal and Chaparral Road for close to five years.”
As far as I can tell from my recent trip to Arizona, if there was an empty patch of desert anywhere in Phoenix, someone would plunk down a condo on it. Upscale sits right next door to empty strip mall. Very confusing for a midwestern boy. Sedona is nice, but all those vortexes caused me great mental confusion. The only city I could imagine living in is Flagstaff - nothing like living on an extinct volcano to make life interesting.
Does anybody know the housing situation there?
Both Ben and I live in Flagstaff.
Flagstaff’s motto: Poverty with a view.
Entry level housing 1200-1500sqft about $200,000. Maybe could get a trailer for less. My casual observation is that things have not moved much. I rent a 2/1 apartment for $800/month, I pay utilities. About typical I think.
The gov’t will now oversee all mortage loans before you get approval, these are the same folks who said “we didn’t even know there was a mortage crisis in this country?”
“Southern Nevada vacant land values plunged during the first quarter as bank foreclosures and distressed sales drove prices downward, Applied Analysis reported.
Who’d have thunk it. People finally looked around and said, “This is just vacant land.”
Just vacant land… in the middle of the desert!
So, do we make it to Dow 10,000?
And will CNBC play the tape of the celebration the first time that mark was crossed?
Nope, the PPT struck.
You’ll have to wait until Monday…
“We need less homeownership and more mobility”….
I have read this statement, or ones like it, in various places.
I have also asked the following question on HBB, and elsewhere, but no one seems able to answer it:
What do you think is the right percentage of homeowners in a society AND WHY??
Do you believe that 50/50 split is how it should be? Why?
Why not 10% of the population own all the property, and everyone else rent from them?
At what point (percentage) does a minority owning most of a nation’s property and renting it to the majority become serfdom?
Of course, maybe we are already there, as the banks are the owners and all the mortgage holders are the serfs.
The right homeowner percent is whatever the percent is when only those who have saved a downpayment, and plan to stay in the same place for years if not indefinately, own homes.
I don’t agree “We need…more mobility.” We’ve had the massive mobility, which doesn’t make sense with the homeownership levels we have had.
There are people who move every three years and buy and sell houses each time. That’s nuts. (Now they can’t.)
Often it’s a case of following the SAME job around as your employer plays games with sites….
In 1981 my employer, Lockheed of Sunnyvale CA, decided to play hardball with the city of Sunnyvale. They opened up a new “Lockheed Austin Division” and told several projects, mine included, that “you guys are all being transferred to LAD - start packing!”
Nobody on my project was thrilled at the idea of moving to Texas so the managers put their heads together, quit, formed a new company, and successfully bid for the project’s government contracts, taking that line of business away from Lockheed.
LAD languished for 15 years and folded in 1996. Anyone left at LAD was told they had to move to Denver to become part of the Lockheed Denver operations.
I think a question that needs to be asked is the necessity of mobility?
If humans are just simple units that can be transferred to more competitive advantageous positions - then the need for mobility is paramount. You would then require a higher percentage of rentals.
However, if a business can capitalize upon the community and exploit the advantage of long term association with their employees and invest in their future - then a higher percentage of homeownership would be called for.
I am a bit old fashioned and believe relationship development amongst all stakeholders is still a necessity for long term growth both in the property market as well as for corporations. However, given our present disposable sosiety - I think this realization is a fantasy and property volitility will continue to flourish (as with the stock market).
We are seeing the same trends here in Oz.
Is a more powerful PPT the answer to future financial crises, rather than elimination of systemic risk from the system before hand? I doubt it, but it sounds like we will soon find out:
White House Moves to Shape Financial Overhaul Bill
By DAVID M. HERSZENHORN
Published: May 21, 2010
WASHINGTON — Fresh off a Senate vote to overhaul financial regulations, the Obama administration on Friday immediately began trying to influence the process for combining the Senate and House bills, pressing for tough provisions in the face of a final onslaught of Wall Street lobbying.
In areas like protecting consumers, managing risk-taking by banks and dealing with institutions before they become “too big to fail,” the White House indicated that it preferred the Senate version over the House version, which was passed in December. Both the White House and Congressional Democrats said they hoped to get a bill signed before the Fourth of July.
“It is hard for me to think that this is going to take us more than a month,” said Representative Barney Frank of Massachusetts, who steered the legislation through the House.
A crucial exception to the administration’s general preference for the Senate version, however, is a provision within that bill that could require banks to spin off their profitable derivatives trading desks. Treasury officials suggested on Friday that they were open to a compromise that would allow giant banks to trade derivatives as long as those activities were kept separate from deposit-insured banks.
Senate passage of the bill on Thursday has put Congress on the brink of approving a broad expansion of government oversight of the increasingly complex banking system and financial markets. The legislation is intended to prevent a repeat of the 2008 crisis, but also reshapes the role of numerous federal agencies and vastly empowers the Federal Reserve in an effort to predict and contain future debacles.
…
“Treasury officials suggested on Friday that they were open to a compromise that would allow giant banks to trade derivatives as long as those activities were kept separate from deposit-insured banks.”
How would it be possible to completely wall off proprietary trading and still have it be part of the same bank?
ever heard of “affiliate compliance”?
* The Wall Street Journal
* MAY 21, 2010, 2:56 P.M. ET
US EQUITIES WEEK AHEAD: More Retailers To Report; Home Data
…
Homes Prices Could Show First Quarterly Rise In Years
The first-quarter reading of the S&P Case-Shiller home-price indexes will be released Tuesday. The measures rose year-on-year in February for the first time in three years, at minimum showing stabilization in the housing market. The National Association of Realtors last week said 91 out of 152 metro areas had price appreciation from the first quarter of last year, including 29 with double-digit increases.
Meanwhile, April readings on existing- and new-home sales are due Monday and Wednesday, respectively. Small increases from March are expected.
…
If any kiddies want to try out a beta version of the JT Extension, please email via the link on the web page (linked at my name).
I’ve added a menu with links to lavi’s search page as well as the extension’s web page, and changed the way it tracks read comments so that if you refresh the page, or accidentally click a link that doesn’t launch in a new window, you can go back and your unread messages are preserved.
I use it every day, but it’s helpful to get some feedback from people when trying new things.
The Economist
California’s budget crisis
Greece is the word
The largest state is in the largest hole
May 20th 2010 | LOS ANGELES | From The Economist print edition
COMPARISONS between California and the land of Socrates have become frequent recently. They are different, of course. California is nowhere near defaulting on its debts (though rating agencies consider that risk greater in California than in the other 49 states). But California has become America’s symbol of fiscal mismanagement as Greece is now Europe’s.
Arnold Schwarzenegger, California’s lame-duck governor, conceded as much on May 14th, when he updated his budget proposal to the legislature. After several rounds of painful spending cuts, California is now contemplating a budget that is, when adjusted for inflation and population growth, smaller than it was a decade ago. And yet the state still confronts a budget hole estimated at $17.9 billion in the current and coming fiscal years. Mr Schwarzenegger, a Republican in a high-tax state, wants to plug that hole without raising taxes, with more cuts and some federal aid.
The governor admits that California has already plucked the “low-hanging fruits”, and the medium and high-hanging ones as well, and must now “shake the whole tree”. So he proposes not just trimming but eliminating state programmes wholesale. Gone will be the state’s welfare-to-work programme of services and cash assistance to poor families with children, which could affect more than 1m families. Its loss, if the legislature allows it, would make California the only state not to offer such a programme. Gone, too, will be most state-subsidised child care, which would affect more than 200,000 children. The list goes on.
As Mr Schwarzenegger and the Democrat-controlled legislature began their haggling he made it clear that he wants, in his final year in office, to make one more attempt at fundamental reform. California has a volatile and outdated tax system that relies heavily on taxing income, especially capital gains. So Mr Schwarzenegger wants legislators to dust off an alternative system proposed by a bipartisan commission last year. It would introduce a new form of value-added tax while dramatically simplifying income taxes and scrapping corporate and sales taxes.
He inveighs with even more passion against the over-generous pensions of state employees, costing them at more than $6 billion this year, about the same as the programmes he is being forced to eliminate. The state’s largest pension fund immediately contested those numbers. But Californians are increasingly rebelling against the largesse distributed by Mr Schwarzenegger’s predecessor, Gray Davis, a Democrat, who wooed unions 11 years ago with juicy benefits.
Those pension deals, moreover, illustrate California’s more general problem: an asymmetry which guarantees that spending will always outpace revenues in the long term. It took a simple majority vote to increase public pensions, but it would take a two-thirds supermajority to raise taxes to pay for them. More recently, it took a simple majority to cut corporate taxes, but a supermajority would be needed to reverse that cut, and the minority Republicans will never allow that. Good at spending, bad at taxing, California is indeed not unlike Greece.
I really wish that fiscal conservatives would focus more on spending than taxation. Deficit spending is just delayed taxation… something we’ve gotten very good at.
Sounds like financial reform amounts to a WH takeover of the Fed (not that the de facto relationship wasn’t there already…):
The Economist
Central banks under scrutiny (2)
Prometheus bound
Financial reform will make the Fed more powerful and less independent
May 20th 2010 | WASHINGTON, DC | From The Economist print edition
THE decision of the European Central Bank to start buying government bonds follows a path trodden by the Federal Reserve in 2008 and 2009. Both entered politically charged territory to save the financial system at great risk to their reputations. For the Fed, one consequence is that the big financial-reform bill making its way through the Senate—a vote was expected after The Economist went to press—will leave it more powerful but more beholden to Washington, DC.
The Fed has fought for, and kept, its supervision of banks. It acquires important new powers to regulate big non-bank financial companies and even to break up firms deemed a threat to the financial system. Its only significant loss of turf is direct oversight of consumer protection. The Fed keeps its emergency-lending powers, though it needs the Treasury’s approval to use them (it has usually sought such approval anyway). It cannot lend to failing firms because that job now sits with the Federal Deposit Insurance Corporation under the bill’s new resolution authority.
The price of these powers, though, is to be drawn closer into politicians’ embrace. Since its birth the Fed’s governance has reflected a mix of political and financial influences. Monetary policy is the joint responsibility of governors in Washington, DC, appointed by the president and confirmed by the Senate, and presidents of the reserve banks, some of whose directors are, or are appointed by, bankers.
Critics have long seen the bankers’ role in the running of the Fed as an affront to democracy. Under the reform bill the president will now nominate and the Senate will confirm the New York Fed president (the most important of the regional governors). Fed-supervised banks will lose any say in the governance of the reserve banks. Barney Frank, the chairman of the House Financial Services Committee, wants to go further, either stripping all reserve-bank presidents of their votes on monetary policy or making them more accountable.
Such changes have some worried that the Fed will adopt a looser monetary stance.
…
Real Estate Weekly
May 21, 2010, 5:27 p.m. EDT
This week’s Real Estate stories
By MarketWatch
…
Forty-one percent of homeowners with a mortgage would consider walking away from their home if the loan were to go underwater, meaning they’d owe more than the market value of the home, according to a survey from Trulia.com and RealtyTrac.
But 59% of borrowers wouldn’t consider walking away — no matter how much their mortgage was underwater, the same survey found.
The research, released this week, is one of the most recent looks at the growing trend of “strategic default,” in which a homeowner stops making mortgage payments, even if he or she has the means to pay. Nearly 1,700 homeowners participated in the survey.
According to the survey results, 1% of homeowners with a mortgage say walking away would be their first choice if they were unable to pay their home loan.
But getting a handle on how many people are actually taking this tactic is difficult, since it requires a measurement of borrower intent.
Read more about strategic default in this week’s real-estate pages, plus read the most recent data from the Mortgage Bankers Association on mortgage delinquencies and foreclosures and a Realty Q&A with credit-score advice.
It’s not surprising that talk of strategic default is surfacing as many homeowners are underwater on their mortgages and feel like they have limited options.
“There’s a lot of visceral anger at the banks right now,” said Rick Sharga, senior vice president for RealtyTrac, speaking on a conference call to discuss the survey results and housing-market conditions.
MarketWatch
Real Estate Weekly
May 14, 2010, 3:44 p.m. EDT
This week’s Real Estate stories
…
Despite falling mortgage rates, fewer people applied for mortgages to purchase a home last week, according to data from the Mortgage Bankers Association.
Last week was also the first week in more than a year when there was no federal home-buyer tax credit to lure prospective buyers. To qualify for that credit, a contract needed to be in place by the end of April and the deal must close by the end of June.
Still, low rates helped spur people to refinance their loans.
“Rates on 30-year mortgages dropped to their lowest level since mid-March,” said Michael Fratantoni, MBA’s vice president of research and economics, in a news release. “As a result, refinance applications for conventional loans jumped, hitting their highest level in six weeks.
“In contrast, purchase applications fell almost 10% in the first week following the expiration of the home-buyer tax credit, as the tax credit likely pulled some sales into April that would otherwise have occurred in May or later,” he said.
The expiration of the credit could be prompting home sellers to slash prices: 22% of listings on the market as of May 1 experienced at least one price reduction — that’s a 10% increase from the previous month, according to data from Trulia.com.
“With more than a year of the federal government’s involvement, we are now re-entering the free market system. As we readjust to the free market, we expect to hit turbulence in some markets,” said Pete Flint, chief executive of Trulia, in a news release.
…
The egregious Richard Florida tailors his arguments to fit the needs of the corporations that fund him. And now corporations want a mobile work force that can move quickly from place to place for work. And the communities in which they temporarily reside should provide the attractive benefits to those corporate workers. Somehow I don’t think we can afford this.
It’s also important to note that countries that are majority tenant have much stronger tenant protections that most US communities do. Tenants cannot be evicted for many of the “just causes” provided in local rent control laws here, and rent increases are often strictly controlled. Tenants have other rights too. In some countries the tenants of a building can opt to allow pets, even if the lease prohibits pets. In parts of Canada landlords can’t prohibit pets at all.
Many people buy because renting is an onerous burden, not because they like yard work or want to paint the walls chartreuse.