The Housing Bubble

I had plenty of time yesterday to contemplate the old saw about “they aren’t making any more land”. I took the day and drove down to the Bruneau river’s canyon area. Driving in through farmland you cross a small creek - the Bruneau river - and wonder how such a small creek could make the 800 foot deep cuts through the dark grey basalt rock farther up. You gain altitude and the farmlands turn into scrub sage desert. The last part of the drive into the canyon overlook crosses Saylor Creek USAF bombing range, and a sign by the road states in laconic fashion:

WARNING. This road crosses US Air Force bombing range for the next 12 miles. Objects may fall from aircraft.

I got buzzed driving in by two eagles. One was a young golden eagle, the other was an F-15.

The canyon overlook appears out of nowhere. All of a sudden the road ends and you are standing at the edge of a cliff with the river 800 feet directly below you. The overlook area was carefully chosen at the vertex of a “V” shaped bend in the river so you can look upstream and downstream to good effect. It’s as difficult to do the Bruneau Canyon justice with a camera as it is the canyon of the Colorado River down in Arizona, but you can google image “Bruneau Canyon” and see many attempts.

I took a rugged alternate road back and stopped in the middle of nowhere to look through the chain-link fence at an abandoned ICBM base. Only the round concrete hats on the missile silos remain visible. Southwestern Idaho was the site of three early ICBM bases in the early 1960’s, hosting liquid-fueled Titan ICBMs. These quickly became obsolete with the adoption of the solid-fueled ICMBs in the mid-1960s so this base was only operational for about 4 years.

Land in Idaho is about 2/3 govenment owned: national forest, BLM, military. The total land is about 83K square miles so about 55K square miles are public lands. This public land divided equally among the 1.5 million residents would yield .037 square miles per person or a little more than 23 acres per person.

Does the government artificially limit the land for development and thus boost housing prices? It’s hard to make that claim in Idaho. Yes we all could claim our 23 acres but most of it is wildly inaccessible.

Are Americans de-banking?

FORTUNE — The financial crisis that destroyed some of the world’s biggest banks and sent others to the brink of failure have changed Americans’ idea of lending and borrowing. While most still seem to have no problems storing their money at banks small and large, a few trends indicate that everyone from consumers to some of the world’s largest companies are straying away from large financial institutions as sources of funding.

) Tapping into retirement

Most financial planners would belt a big ‘No!’ when it comes to taking a loan out against a retirement account. But a modest uptick of those in their peak earning years — 35 to 55 years olds — have gone against that advice amid the dismal economy, according a report Fidelity Investments released last week.

In a survey of 11 million people with retirement funds, 21.9% have a loan outstanding against their retirement during the three months ending in June. That’s a 10-year high from the 18.1% recorded during the first three months ending in March 2001.

What’s more, Fidelity reported 2.2% more people during the latest quarter of 2010 withdrew from their 401(k) because of financial hardships compared to the previous year during the same quarter. And 45% of participants who took hardship withdrawals a year ago also took another one this year to do everything from staving off an eviction to avoiding a home foreclosure.

Ironic holding the Fed conference at the site of so much pain. Seems even ol’ cowboy “Kid Kornblum “ has run in to trouble:

“The purchase price was mutually agreeable,” said Mack Mendenhall, an associate broker with Jackson Hole Real Estate Associates, who represented Ryan.

Mendenhall would not disclose the purchase price, saying a confidentiality agreement prevented him from doing so. The most recent listed price of the 225-acre ranch was $7.8 million, down almost 70 percent from the $25 million sought in 2006.

I tell ya I have tears in my eyes….

Formerly of northern California, the couple had no experience ranching, but owning a horse farm had always been a dream of Melinda’s, she said at the time.

David Kornblum became known in the valley for his cowboy poetry. Under the name Kid Kornblum, he called himself the “poet lariat” of Jackson Hole and performed humorous, original cowboy verses.

A few noticeable events happened on the ranch during the Kornblums’ time there.

In August 2003, a trio of Blackhawk helicopters carrying former Vice President Dick Cheney used the protected terrain as a landing and launching pad, reportedly buzzing Skyline Pond 18 times through three landings and takeoffs.

A year later, former ranch manager Alan John, who also was working at the Jackson Police Department, filed a lawsuit alleging his rejection of Melinda Kornblum’s sexual advances resulted in his termination as ranch manager. The parties settled the suit and ultimately agreed there was no sexually related contact between the litigants.

Just give them some colorful beads, don’t tax their wampum.

Indians protest NYS’s attempt to tax

ALABAMA, N.Y. (WIVB) - The last serious effort to collect taxes from the Indians brought tire fires to the New York State.

The year was 1997, the last time the state tried to collect taxes on Indian cigarettes. It resulted in a confrontation between Indians and State Troopers that shut down a section of the thruway. Could we see history repeat itself?

Coreen Thompson said, “We do not promote violence, but is it a possibility. Yes, it is very much a possibility because you’re messing with people’s lives.”

Thompson was in her teens then. On Friday, she and other members of the Tonawanda Seneca Nation in Genesee County held a peaceful protest.

“Yes we all could claim our 23 acres but most of it is wildly inaccessible.”

Except to Mexican drug cartels.

Should read Full-O-$hit spin mister…

SPIN METER: What Biden didn’t mention on stimulus
(AP)

FRESNO, Calif. — Vice President Joe Biden said this week that the Obama administration “hit the accelerator” toward spending $5 billion under the economic stimulus law to weatherize people’s homes, create thousands of jobs, help consumers save money and put the nation on track for energy independence.

Yet the weatherization program the vice president highlighted in his visit Thursday to New Hampshire is widely considered among the least organized spending projects under the $814 billion economic stimulus law and has regularly been targeted for criticism of its slow progress by auditors and outsiders. Biden didn’t hint much at its troubles.

Nearly 18 months since it started, the stimulus weatherization program has experienced spending delays, inefficiencies and mismanagement. In Biden’s home state of Delaware, the entire program has been suspended since May, and last month federal auditors identified possible fraud.

No,No,No, “we” have it figured out, print,baby,print! Go team Dingle-Barry!

Trichet Says Failure to Cut Government Debt Risks `Lost Decade’

Aug. 27 (Bloomberg) — William White, chairman of the economic development and review committee at the Organization for Economic Cooperation and Development, talks about the possible impact of household and sovereign debt on global economic growth.

European Central Bank President Jean-Claude Trichet said governments risk a “lost decade” of weak economic growth if they delay reversing the surge in public debt triggered by the financial crisis.

“The lesson from past history is that dealing with the legacy of accumulated imbalances is not simply a duty to be fulfilled after the economic recovery, but rather an important precondition for sustaining a durable recovery,” Trichet said yesterday in a speech at the Kansas City Federal Reserve Bank’s annual monetary symposium in Jackson Hole, Wyoming. “The primary macroeconomic challenge for the next 10 years is to ensure that they do not turn into another ‘lost decade.’”

Feldstein Sees `Significant Risk’ of Recession Again

Aug. 27 (Bloomberg) — Martin Feldstein, an economics professor at Harvard University, discusses the outlook for the U.S. economy.

The U.S. economy remains “weak” and “fragile” and has a “significant” chance of falling back into a recession, Harvard University economics professor Martin Feldstein said in an interview with Bloomberg Radio.

“I would say there’s still a significant risk, maybe one chance in three, that there will be a double dip, real GDP falling, before we’re in the clear,” said Feldstein, member of the committee at the National Bureau of Economic Research that dates the beginning and end of recessions.

Now for some important news! I hope she had her panties on.

Police: Paris Hilton arrested on cocaine charge.

LAS VEGAS – Police arrested Paris Hilton on cocaine possession charges late Friday night after stopping the car she was in on a Las Vegas street, authorities said.

Hilton was booked into the Clark County Detention Center on a charge of possession of cocaine, Las Vegas police spokesman Marcus Martin said.

The 29-year-old Hilton was in a car driven by a friend that was stopped when officers noticed what they suspected to be marijuana smoke coming from it, he told The Associated Press.

“Officers noticed a vehicle leaving smoke trail of a controlled substance (and) made a stop based on that,” Martin said.

During the stop, officers found what appeared to be a drug on Hilton and later tests showed that it was cocaine, Martin said. He didn’t know how much was found.

Wmbz posted this late in the day:

Banks back switch to renminbi for trade

“We’re now capable of doing renminbi settlement in many parts of the world,” said Chris Lewis, HSBC’s head of trade for greater China. “All the other major international banks are frantically trying to do the same thing.”

HSBC and StanChart are among a slew of global banks – including Citigroup and JPMorgan – holding roadshows across Asia, Europe and the US to promote the renminbi to companies.“

So if I understand this correctly the advantages we use by our central bank being the issuer of the world reserve currency will soon be waning. IOW, some time in the future the US will have to face paying back new or rolled over Asian debts with funds that are not their own currency/control. At that point we can expect an acceleration toward the final impact of our situation as the dollar loses value against the renminbi. Am I connecting the dots correctly?

While you tin hats continue to babble about this supposed “bubble” the elite folk are taking full advantage. Why simply Google “Concierge Auctions “ , luxury properties are flying of the shelf, and at top dollar! So much so that in an effort of transparency they are bound by contact not to reveal selling price.

“Both the seller, and buyer are bound by contract not to reveal the final bid price, to provide anonymity to both, according to Concierge Auctions. The buyer’s identity also remains anonymous. “

Not sure how revealing the selling price threatens anonymity, but hey what do I know …..

“The caliber of this property, paired with our unrivaled marketing and sales efforts, attracted some of the wealthiest people in the world, including CEOs, accomplished entrepreneurs, significant real estate developers, and many other highly-qualified individuals,” stated George Graham, CEO of Concierge Auctions. ”This overwhelming response proves that smart buyers are taking advantage of today’s economic climate, yet they are approaching the market with scrutiny. Today’s buyers are opportunistic but cautious. When an ultra-premier property like this hits the auction block and a seller is truly willing to allow the market to identify the price, it’s the perfect union.”

Auctions without reserve are the most compelling and transparent form of auction,” stated George Graham, CEO of Concierge Auctions. “They enable sellers to act from a position of strength, which is rare in today’s market. The seller allows the bidders to identify the value of their property, but in turn they name all the other terms of the sale - closing in 30 days without contingencies. In a Concierge Auctions sale the contract secured by the high bid is the end of the negotiations, as opposed to traditional brokerage methods, where an executed contract is typically only the beginning. Smart, savvy sellers should take notice: This is the future of luxury real estate sales.”

http://www.csper.org/intro-video.html

Prediction - the Glenn Beck rally is going to be big. Very big. I took the bus home last night instead of the subway and the whole city feels very very touristy. Buses are all over - there was one near Dupont circle near the front door of a hotel filled to the brim with fluffy grey heads. Older people in polos and shorts eating dinner in restaurants that normally have much younger patrons with different sartorial choices. Folks asking how to use the bus system. So, I promise I haven’t checked it out yet in the media and I am not down on the Mall, but my prediction holds. The attendance is going to be huge..

If small investors are fleeing the U.S. stock market in droves, then who or what is propping it up? I smell manipulation most foul.

In Striking Shift, Small Investors Flee Stock Market
By GRAHAM BOWLEY
Published: August 21, 2010

Renewed economic uncertainty is testing Americans’ generation-long love affair with the stock market.

Investors withdrew a staggering $33.12 billion from domestic stock market mutual funds in the first seven months of this year, according to the Investment Company Institute, the mutual fund industry trade group. Now many are choosing investments they deem safer, like bonds.

If that pace continues, more money will be pulled out of these mutual funds in 2010 than in any year since the 1980s, with the exception of 2008, when the global financial crisis peaked.

Small investors are “losing their appetite for risk,” a Credit Suisse analyst, Doug Cliggott, said in a report to investors on Friday.

One of the phenomena of the last several decades has been the rise of the individual investor. As Americans have become more responsible for their own retirement, they have poured money into stocks with such faith that half of the country’s households now own shares directly or through mutual funds, which are by far the most popular way Americans invest in stocks. So the turnabout is striking.

So is the timing. After past recessions, ordinary investors have typically regained their enthusiasm for stocks, hoping to profit as the economy recovered. This time, even as corporate earnings have improved, Americans have become more guarded with their investments.

“At this stage in the economic cycle, $10 to $20 billion would normally be flowing into domestic equity funds” rather than the billions that are flowing out, said Brian K. Reid, chief economist of the investment institute. He added, “This is very unusual.”

The notion that stocks tend to be safe and profitable investments over time seems to have been dented in much the same way that a decline in home values and in job stability the last few years has altered Americans’ sense of financial security.

It may take many years before it is clear whether this becomes a long-term shift in psychology. After technology and dot-com shares crashed in the early 2000s, for example, investors were quick to re-enter the stock market. Yet bigger economic calamities like the Great Depression affected people’s attitudes toward money for decades.

For now, though, mixed economic data is presenting a picture of an economy that is recovering feebly from recession.

“For a lot of ordinary people, the economic recovery does not feel real,” said Loren Fox, a senior analyst at Strategic Insight, a New York research and data firm. “People are not going to rush toward the stock market on a sustained basis until they feel more confident of employment growth and the sustainability of the economic recovery.”
…

We have QE2 and an extended period of interest rate jawboning ahead from the Fed…

Fed Ready to Dig Deeper to Aid Growth, Chief Says
By SEWELL CHAN
Published: August 27, 2010

JACKSON HOLE, Wyo. — The Federal Reserve chairman, Ben S. Bernanke, signaled once again on Friday that the central bank was prepared to act if the economy continued to weaken, as yet another economic report confirmed that the recovery had slowed to a crawl.

Mr. Bernanke made clear that while the Fed could take various steps, including large purchases of government debt, “central bankers alone cannot solve the world’s economic problems.” Speaking at the Fed’s annual symposium here, he hinted broadly that political leaders had to take steps to tackle the deficit and the trade imbalance.

Hours before Mr. Bernanke spoke, the Commerce Department lowered its estimate of economic growth in the second quarter to an annual rate of 1.6 percent, after originally reporting last month that growth from April through June was 2.4 percent. Economists had been predicting a steeper decline, and stock prices rose after the markets opened.

While Mr. Bernanke announced no new steps that the Fed would take immediately, he said the central bank was determined to prevent the economy from slipping into a cycle of falling wages and prices, a situation he said he did not think was likely. Instead he predicted that growth would continue modestly in the second half of the year and pick up in 2011.

Mr. Bernanke said the Fed, having kept short-term interest rates at nearly zero since 2008, had essentially four options:

It can purchase more government debt and long-term securities. It can try to coax down long-term interest rates by announcing its intention to keep short-term rates extremely low for even longer than the markets currently expect. It can lower the interest rate it pays on the funds banks hold at the Fed. And it can raise its medium-term target for inflation, which would discourage banks from sitting on their cash.

Mr. Bernanke suggested that the first of those options was the most likely, and all but ruled out the last two.
…

Talking Business
Widespread Fear Freezes Housing Market
By JOE NOCERA
Published: August 27, 2010

You have to wonder sometimes what they’re smoking over there at the National Association of Realtors.

Lawrence Yun, chief economist of the National Association of Realtors, told analysts on Tuesday that “the pace of a sales recovery could pick up quickly.”

On Tuesday, the self-proclaimed “voice for real estate” released its “existing home sales” figures for July. They were gruesome. Sales were down 27 percent from the previous month, and down 26 percent from a year ago. Annualized, the July sales figures would translate into fewer than 3.9 million homes sold this year — a staggeringly low figure. (The record high occurred in 2005, when more than seven million houses were sold.)

The months-to-sale number was depressingly high; the Realtors group reported that it now takes more than a year to sell a typical house, compared with six months in a normal market. The amount of inventory is high.

Lest we forget, these awful numbers are coming out at a time when the financial incentive to buy could hardly be stronger: the fixed rate on a 30-year mortgage is at an incredibly low 4.36 percent, according to an authoritative survey conducted by Freddie Mac.

Yet here was Lawrence Yun, the association’s chief economist, trying to turn lemons into lemonade: “Given the rock-bottom mortgage interest rates and historically high housing affordability conditions, the pace of a sales recovery could pick up quickly, provided the economy consistently adds jobs,” he said in a news release.
…

From an 8/27/2010 NY Times article (linked post to appear later):

‘Mr. Yun notwithstanding, most people simply do not believe that housing prices are even close to hitting bottom. “In the Bay Area, a house that was worth $300,000 a decade ago became a million-dollar home,” said Greg Fielding, a real estate broker and blogger. “Now it is listed at $800,000.” That price, he suggested, was still unrealistically high. The seller, meanwhile, doesn’t want to face the fact that his or her home is too richly priced, and won’t sell at a more realistic price — which may well be below his or her mortgage debt.’

The close of Joe Nocera’s article in yesterday’s NY Times describes a serious understimation of the fallout from the collapsed real estate bubble:

“A few weeks ago, some of the better known financial bloggers had a background briefing at the Treasury Department with officials who included Treasury Secretary Timothy F. Geithner. In their blog posts after the meeting, … they described a Treasury housing strategy that was essentially a play for time.

The tax credit for home buyers; the willingness to look the other way as banks refused to foreclose, pretending that the owners still planned to pay their mortgage; the half-baked government mortgage modification programs — they were all aimed at buying time until the economy recovered and employment picked up. At which point, they hoped, the housing market would have achieved enough lift that it could take off on its own.

At the end of June, though, the tax credit disappeared — and that’s when time ran out. On Friday, the new G.D.P. numbers came out, confirming what everybody already knew. The economy has not recovered — not even close. If the housing market is like an airplane on a runway, it is far more likely to crash at this point than it is to take off. That is why the July numbers are so scary to those in the housing business.

On the ground, they don’t look like a blip. They look like a very painful future.”

I drove with a buddy through Navajo country and southern Utah for four days. We spent three nights and drove 1400 miles but only spent $171 each. We both speculated what it would cost with our wives along. I saw Keet Seel which is evidence of the great Anazasi housing boom from 700 years ago. Probably only 1000 people in that huge valley created so much environmental havoc that they ended up in cannibalism. However, the Hopis claim to be ancestors of the Anazasi so life does go on even after disaster.

Updated August 26, 2010 08:11 PM
Does the Recovery Depend on Housing?

Single-family home sales in July plunged 25.5 percent below the level of a year ago, according to the National Association of Realtors, its lowest level since 1995. On Wednesday, the Commerce Department reported that new-home sales last month fell 12.4 percent from June.

Overheated real estate was one cause of the recession. But can the economy recover without a turn-around in the housing market? Many say job numbers have to improve first, but the bad news in home sales has spread a new gloom on the fragile recovery. Does the real estate market have to lead the way out of the hole?
…

Housing Seldom Leads
Updated August 25, 2010, 07:18 PM

Jeffrey Frankel is a professor at Harvard University’s Kennedy School of Government, and a member of the NBER Business Cycle Dating Committee, which officially declares recessions. He served on President Clinton’s Council of Economic Advisers from 1996 to 1999.

The recession that began in December 2007 was, of course, the worst since the Great Depression. Already by the end of 2008 – which was the point of fastest free fall in financial markets, gross domestic product, and employment — it was clear that the damage to both housing and jobs was unusually bad, even given the loss in output. The crisis had, after all, begun in the housing sector.
…
We can absolutely have a recovery where the housing sector lags behind. Just because housing was the first sector to go into recession does not mean that it has to be the first coming out. To the contrary. The inventory of unsold homes is too big to allow a strong recovery in construction anytime soon, unfortunately. But housing seldom does lead the expansion, even after more ordinary recessions. Other components of demand – consumption, business fixed investment, and exports – are more likely to lead the way.

Just in case you are not yet totally pissed-off with your government:

Meet the Freedoading Fifteen

http://finance.yahoo.com/taxes/article/110492/millions-of-american-taxpayers-make-money-off-federal-taxes?mod=taxes-advice_strategy

The URL for link to this opinion piece ends with, “the-housing-market-was-the-problem.”

The Housing Market Follies
August 26, 2010

Laura Tyson is the S.K. and Angela Chan Professor at the Haas School of Business at University of California, Berkeley. She was the chair of the Council of Economic Advisers and the National Economic Council in the Clinton administration and she is a member of President Obama’s Economic Recovery Advisory Board.

Back in December 2007 in an opinion piece for the New York Times, I warned that a vicious downward spiral of foreclosures, declining property values and mounting losses on mortgage-backed securities would drive the economy into recession.

…as a result of monetary and fiscal stimulus, financial markets have stabilized and the economy is recovering. But the economy is not growing fast enough to absorb the millions of Americans who lost their jobs during the recession.

The unemployment rate is 9.5 percent, more than double what it was in 2007, and the long-term unemployment rate has hit a record high, with half of the unemployed out of work for 6 months or more. What began as a crisis in the housing market has become a crisis in the labor market — indeed, about a quarter of the job losses have occurred in the construction industry itself. And the crisis in the labor market in turn is further depressing the housing market.

Hit by losses in jobs, income and wealth, households are tightening their belts, reducing their debt and adjusting their balance sheets. The demand for goods and services, including the demand for housing services, has fallen relative to household incomes and household incomes are growing slowly. Weak demand is the primary reason for disappointing sales of new and existing homes, although more stringent conditions imposed by lenders are also curtailing transactions.

Sales of new homes hit a record low in July. Unemployment, particularly unemployment that lasts for many months, and the resulting painful losses in income have become the major catalysts behind foreclosures. More than 1 million households are likely to lose their homes to foreclosures this year. Weak demand coupled with significant foreclosures translates into a large stock of unsold housing units which puts further downward pressure on housing prices particularly in locations that were overbuilt during the debt-fueled housing bubble. Declining housing prices mean that more households find themselves saddled with mortgages that exceed the value of their homes; and such households are more likely to default on their loans either out of necessity or choice.

The housing market may have triggered the recession, but it will not be the trigger for a sustained recovery. What’s needed is a significant number of new jobs to reduce the unemployment rate, to boost household incomes, and to strengthen household spending.

Biggest mistake made by economists and journalists alike over the course of the Great Recession: Assuming this is a typical recession, and hence severely underestimating its magnitude and eventual duration. Imagine an explosives specialist mistaking the magnitude and aftermath of a hydrogen bomb explosion as similar to that of a hand grenade, and you will have the rough idea.

Housing’s new nightmare
By Tami Luhby, senior writer
August 27, 2010: 2:43 PM ET

NEW YORK (CNNMoney.com) — In another ominous sign for the economy, the number of people falling behind on their mortgages for the first time is on the rise.

This grim statistic is only the latest bad news for the reeling economy. Home sales are in free fall, initial jobless claims remain high and the gross domestic product slowed to a near halt in the second quarter, government reports issued this week showed.

The increase in short-term delinquencies is leaving some experts wondering whether a new round of foreclosures is on the horizon, even as the current wave begins to ebb.

Some 3.51% of borrowers were 30 days late in their loan payments in the second quarter, up from 3.31% at the end of last year, according to new data from the Mortgage Bankers Association. The shift is a stark reversal from the steady decline in short-term delinquencies during 2009.

The blame lies in the sputtering labor market, experts say. More people are losing their jobs, as evidenced in the steady rise in initial unemployment claims, and this is prompting them to default on their mortgages.

“You can’t expect a recovery in the housing market in the absence of a recovery in the jobs market,” said Jay Brinkmann, the association’s chief economist. “It takes a paycheck to make a mortgage payment.”
…

All deep housing problems are mostly local.

Deep Housing Market Problems Mostly Localized

Aug 27 2010, 3:29 PM ET

The housing bubble and collapse were felt on a national level, but some markets were a lot more affected than others. Yesterday’s Mortgage Bankers Association second quarter delinquency data made clear that some states’ housing markets are struggling far more than others. If you follow the sector, then you can probably guess the worst states.

First, here’s a map of serious delinquency (from the MBA):

(link given in article)

The MBA defines “serious delinquency” as 90+ days delinquent plus foreclosure inventory. You can see that Florida and Nevada are the worst — by far. For Florida 20.1% of mortgages were seriously delinquent. For Nevada this described 18.9% of mortgages. The other states drop off significantly from there, with Arizona, California, and Illinois the only others above 11% at 11.9%, 11.3% and 11.1%, respectively.

If you look just at 90 days or more delinquent, then the worst are still mostly the same, though Nevada is now #1 with 8.6% of mortgages, followed by California, Arizona, and Florida, all three of which are between 6% and 7%. It’s interesting to note, however, that many of these states are doing relatively well in the early stage of delinquency, from 30 to 59 days. California, for example, is suddenly ranked as the 40th worst, or 11th best. Even Nevada comes in 33rd worst.
…

Landlord got a letter from his mortgage company yesterday. It came as a tear-off-the-tabs, no envelope kind of mail. He NEVER gets mail here at the rental. A quick check on the registry of deeds’ web site shows no lis pendens, but that wouldn’t show until three months past due.

How worried should we be?

My wife has three sisters who all live in Utah. The only one who is not currently renting took the $8K first-time buyer incentive to buy a condo, against her BIL’s sage advice. Time will tell how that “investment” will pan out.

Utah foreclosure rate climbs
By LESLEY MITCHELL

The Salt Lake Tribune
Updated Aug 27, 2010 04:44PM

More than 8 percent of Utah households with a mortgage were at risk of foreclosure this summer, reflecting continued weakness in the state’s economy and housing market.

Nationally, nearly 10 percent of homeowners had missed at least one mortgage payment as of June, the Mortgage Bankers Association said Thursday.

While some aspects of the quarterly report show improvement in problem loans both in Utah and the nation as a whole, the number of people losing their homes to foreclosure remains discouragingly high.

And the percentage of delinquent loans — those at least one month past due — continues to climb both in Utah and nationally. Many delinquencies result in foreclosures later on.

As of June, about 4.6 percent of all borrowers nationally were in foreclosure. In Utah, only about 3.4 percent of about 439,000 homeowners with a mortgage were in the process of losing their homes to foreclosure. While Utah’s foreclosure rate is lower than the national average, the state’s rate is climbing and is up from just under 3 percent last year. Utah is ranked 24th in the nation in foreclosures.

“Ultimately the housing story, whether it is delinquencies, home sales or housing starts, is an employment story,” Jay Brinkmann, the trade group’s top economist, said in a statement. “Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers.”
…

Iowa foreclosures rate hit record in 2nd quarter
Associated Press

DES MOINES — Foreclosures in Iowa hit a record in the second quarter as homeowners continued struggling to make mortgage payments during a sluggish job market, but at least one mortgage banking official sees hope that the rate will start to decline.

A report from the Mortgage Bankers Association shows Iowa’s foreclosure rate rose to 2.82 percent in the second quarter, up from 2.49 percent a year earlier and 2.77 percent in the first quarter.

The nation’s foreclosure rate was 4.57 percent in the second quarter.

But President Dan Vessely of Iowa Bankers Mortgage Corp. said he sees a sign of hope.

While 6.3 percent of Iowa borrowers were 30 days or more late in making their house payments in the second quarter, loans that were seriously delinquent — 90 days or more past due — dipped in the quarter, Vessely said.

Decline in foreclosures likely to be temporary
By Frank Ahrens
Washington Post Staff Writer
Friday, August 27, 2010

Foreclosures and late payments on home mortgages dropped slightly in the second quarter of this year, but sustained high unemployment and a stalled economic recovery could make the improvement short-lived.

Although one in 10 mortgages in the United States is still behind by at least one payment, the number of “seriously delinquent” loans - those that are at least 90 days late - dropped compared with the first three months of this year, the Mortgage Bankers Association said Thursday.

Also, the percentage of homes in foreclosure dropped to 4.57 percent in the second three months of this year, compared with 4.63 percent in the first quarter.

However, the number of seriously delinquent mortgages is still higher than it was during the comparable period last year.

“When I’m asked, ‘Are things getting better or worse?’ my answer is like most things these days,” Mortgage Bankers Association chief economist Jay Brinkmann said in a conference call Thursday. “It is a combination of good news and not-so-good news. And there are areas of concern even with the good news.”
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Desperate homeowners line up for mortgage modification marathon

By Kimberly Miller Palm Beach Post Staff Writer
Updated: 9:17 p.m. Friday, Aug. 27, 2010
Posted: 6:52 a.m. Friday, Aug. 27, 2010

WEST PALM BEACH ­- The Palm Beach County Convention Center filled again Friday with tales of mortgage woe.

But not everyone finds financial salvation with NACA.

Dennis Jacobs, 65, came from San Diego for the event and to visit his parents in Boca Raton.

A dentist, Jacobs sold his practice a few years ago, and is having trouble paying his mortgage. He’s not late on his payments, however, which makes him a lower priority. He didn’t get a loan modification, but didn’t leave angry either.

“I think it’s very helpful for people to see how all folks are affected by the real estate crash and downturn in the economy,” he said.

Seven hours after he arrived, Detroit resident Brian Kelley also left empty-handed.

He blamed a breakdown in communication between the owner of his loan and his servicer for the failure.

“I’m not disappointed,” Kelley said. “It was very educational. I got a lot out of it.

“The fight goes on.”

Green shoots bustin’ out all over…

Mark Zandi: One economist who’s expecting clear skies in another year

At a Monitor breakfast this week, economist Mark Zandi listed several reasons why he’s optimistic about the American economy. In six to 12 months, ‘we are going to be surprised at how well the economy is doing.’

Economist Mark Zandi at a Monitor breakfast Aug. 25: Households have their balance sheets in order and exports show promise.

Michael Bonfigli/Special to The Christian Science Monitor/File

By Francine Kiefer / August 26, 2010

Just when America is feeling blue again about the economic outlook – a sharp drop in housing sales is the latest reason to sigh – along comes a credible someone to cheer us all up.

Not about the near term, mind you. Mark Zandi, the chief economist of Moody’s Analytics and co-founder of Economy.com, told reporters at a Monitor breakfast Aug. 25 that the next six months or so will be rough.

But he’s an optimist after that. “I firmly believe that once we get by the next six to 12 months we are going to get our groove back and we are going to be surprised at how well the economy is doing.”
…
CLICK!

Don’t call the realtor a bitch:

http://www.page2live.com/2010/08/26/millions-or-not-dont-mess-with-mom/?cxntlid=cmg_cntnt_rss

Published: Aug. 26, 2010
Updated: 10:28 p.m.
18.1% of O.C. homeowners under water
By JEFF COLLINS
THE ORANGE COUNTY REGISTER
jcollins@ocregister.com

Fewer Orange County homeowners were under water last spring than in the winter, according to CoreLogic, a Santa Ana real estate data firm. But that decline was due mainly to distressed homeowners losing their homes to foreclosure than to rising home values.

* More than 102,000 Orange County mortgages — 18.1% — were under water during the second quarter of the year, meaning that the owners owed more than their homes were worth — also known as having “negative equity” or being upside-down.

* That’s down from 19.2% during the first quarter, CoreLogic reported.

* An additional 4.1% of homeowners with mortgages were on the verge of going under water, with less than 5% equity in their homes.
…

Foreclosures cut number of ‘underwater’ homeowners
Posted to: Business Residential Real Estate
By Josh Brown
The Virginian-Pilot

The number of homeowners in Hampton Roads who owed more on their mortgages than their homes were worth slid to just below 70,000 at the end of June, according to a new report.

That’s still more than one in five local mortgage borrowers - 21 percent - who are “underwater” on the loans, according to CoreLogic, which is based in Santa Ana, Calif., and tracks mortgages across the country.

Although the number of underwater homes has fallen by about 2,000 since the end of 2009, the firm attributed the decline to lenders foreclosing on previously underwater properties rather than home values stabilizing or going up.

CoreLogic’s quarterly report also said that 22,526 more mortgages will be underwater if home prices in the area decline 5 percent from their current level.
…

Foreclosure Relief: Good for Banks, Lousy for Borrowers
By MARK GIMEIN
Posted 6:00 AM 08/27/10
Economy, Real Estate

Home sales are hitting new lows, the number of homeowners behind on their mortgages is again climbing, as is the number of foreclosures. Housing market misery is widespread — but particularly intense for the troubled homeowners relying on the Home Affordable Modification Program (HAMP), the federal foreclosure relief program.

Criticized both by those who argue for more aid and those who think the lackluster program only delays a needed bank reckoning, HAMP stumbles along, more often simply prolonging the pain of foreclosure than providing a solution. The dismal new housing numbers — sales of existing homes are 27% lower than a year ago, new-home sales have fallen even more — underline just how little demand there is for all the properties that banks are foreclosing on.

Real Estate Mortuary’s Waiting Room

In extending the process, foreclosure relief in many cases simply stretches out borrowers’ slow bleed of resources. By keeping borrowers in limbo while letting lenders delay repossessing houses they can’t sell, foreclosure aid is now benefiting borrowers less than the lenders who created the mortgage mess. For lenders, mortgage modification is the waiting room in the mortuary, a convenient place to hold borrowers while the banks deal with the overflow of houses already repossessed.

Of some 3 million homeowners behind on their mortgages, only about half are eligible for HAMP. Most of the rest, ironically, don’t qualify because their income is too low to handle even a modified mortgage. For those that do qualify, HAMP offers little immediate respite: Homeowners have to immediately start making payments on a trial modification plan.

Some 1.3 million borrowers have gotten the trial modifications, which last for at least three or four months (though many banks have stretched this out for longer). But 600,000 of those have already dropped out, unable to make payments in the trial stage. Another quarter-million are in modification limbo, sending checks to the bank as they wait to know if they’ll get permanent adjustments.
…

San Diego County home prices decline
By Jennifer Davies, UNION-TRIBUNE
Friday, August 27, 2010 at 1:11 p.m.

Even with the horrific housing downturn, we here in San Diego are still pretty cocky about how our housing prices (typically) appreciate more quickly than, say, Dubuque, Iowa. Sure, we have our busts but we have our booms, too. Plus — the argument goes — we have one of the most desirable locales in the country with very little buildable land so our prices should outpace those less-glamourous areas.

But despite all that, San Diego doesn’t hold a candle to Dubuque, Springfield, Ill. or Buffalo, N.Y. when it comes to rising home prices, at least according to a recent report by the Federal Housing Finance Agency . The agency, which oversees Freddie Mac and Fannie Mae, tracks home sales price information by looking at mortgages — both sales and refinances — acquired through those lenders. (The good thing about this index is that it compares how the same homes perform over time. The not-so good thing about it is that looks at only conforming loans of $417,000 so a wide swath of the local market isn’t included. Also, the data is way back from the second quarter.)

In the second quarter, the metro areas with the largest increases in home prices were Springfield, up 2.68 percent from a year ago; Dubuque, up 2.41 percent; San Jose, up 1.89 percent; Orange County, up 1.45 percent; and the Huntington-Ashland area near the borders of Kentucky , West Virginia and Ohio, which was up 1.40 percent. San Diego, by way of comparison, ranked 50th of the 303 areas surveyed with a decrease in home prices of -1.05 percent.

But what is more interesting is the five-year appreciation numbers. Whereas San Diego County’s home prices are down more than 26 percent in that time frame, Dubuque, for instance, had a 13.67 increase. Other top performers include Shreveport, La., with price gains 15.75 percent; Amarillo, Tex.; up 15.39 percent; and Buffalo, up 13.60 percent.

Realtors’ confidence in the housing market down
By Jennifer Davies, UNION-TRIBUNE
Thursday, August 26, 2010 at 11:34 a.m.

If the current spate of bad housing news is getting you down, you’re not alone. A new survey of real estate agents and brokers found confidence in the housing market is at its lowest level since June 2009.

Point2 Technologies, which provides marketing software for the real estate industry, surveyed 1,055 brokers and agents nationwide and asked them to rate their confidence in market on a scale of 1 to 10 (1 being bad and 10 being good). In August, the Confidence Index averaged 4.87, a drop of 7.23 percent from July and a 17 percent drop from a year ago.

Point2 Technologies said the negative score means brokers and agents are predicting further “downside in home sales.”

In describing the current real estate market, agents and brokers from Virginia to California described it as “slow” or “very slow.”

Gary Kent, a local real estate agent, agreed that the pace of sales are much less brisk in what he calls the “post homebuyer tax credit hangover.”

“With homes that I’m selling, there’s a lot less interest,” he said. “Homes that should be selling aren’t so we have to reduce the price.”
…

Government jobs vanish, threatening upturn
Trims not as deep as in private sector but they stifle spending, trigger other job cuts

By Dean Calbreath, UNION-TRIBUNE

Monday, August 23, 2010 at 8:14 p.m.

California Gov. Arnold Schwarzenegger uses a chart to demonstrate changes in the employment outlook during a meeting of the Bay Area Council in Santa Clara, Calif., Friday, Aug. 6, 2010. (AP Photo/Marcio Jose Sanchez)

A new wave of unemployment has been building among state and local government workers that could derail the nascent recovery, according to several economic reports released in the past two weeks.

Nationwide, more than 300,000 state and local workers have lost their jobs in the past two years, including 48,000 in July alone. San Diego County lost 7,400 city and county workers between June 2008 and June 2010.

The National Conference of Mayors and other municipal organizations project the total job losses will rise to more than 500,000 by 2012, with police and fire departments, hospitals, clinics, public works, health, social services and parks taking the hardest hits. If state and local contractors are added, losses could increase to 900,000 unless the federal government steps in, said a recent study by the Center on Budget and Policy Priorities.

“What began as a trickle of job losses is becoming a flood,” said a report on the July job cuts by the liberal Economic Policy Institute. “The pace of job loss is accelerating and threatens to overwhelm the meager job gains in the private sector.”
…
Job losses June 2008 to June 2010

State government

Statewide: -8,800 / -3.3%

San Diego County: +200 / +1.4%

County government

Statewide: -18,500 / -5.1%

San Diego County: -1,800 / -8.1%

City government

Statewide: -14,100 / -4.9%

Countywide: -1,300 / -6.5%

Private sector

Statewide: -1,200,000 / -9.3%

San Diego County: -70,600 / -6.6%

NOTE: State and local governments do not include education, Indian reservations or special districts, such as municipal water authorities. Private sector includes all nongovernment payroll positions.

The recovery is losing steam, fast
By Neil Irwin

Another day, another lousy piece of economic data. The 27.2 percent fall in existing home sales in July was far below analysts’ official expectations (though in line with some of the whisper numbers that close watchers of housing data were expecting).

And financial markets have again taken notice; money continues gushing into safe U.S. Treasury bonds, sending the yield on those bonds to 2.52 percent as of 11 a.m. (it reached as low as 2.48 percent earlier this morning).

There’s a pattern here, and it’s not a good one. Virtually every major economic indicator to come out in the past two months has been disappointing in one way or another. Retail sales. International trade. Weekly jobless claims. The monthly employment report. Housing starts.

In fact, of the major data releases, the only one I can think of that has been decent over the past couple of months was last week’s industrial production report.

When the economic data first started turning soft earlier in the summer and it looked as though the recovery could be losing steam, I tried not to leap too far into major conclusions. Data is often uneven at economic turning points, and economic recoveries sometimes move in fits and starts.

But as the third straight month of weaker data comes to a close, the brutal reality is that all the indicators are pointing in one direction. The data are all either coming in in line with diminished expectations, or surprising in a negative direction. It’s not an uneven recovery– it’s not much of a recovery at all.
…

* BUSINESS
* AUGUST 28, 2010
Spreading Hayek, Spurning Keynes
Professor Leads an Austrian Revival

By KELLY EVANS

Peter J. Boettke, shuffling around in a maroon velour track suit or faux-leather rubber shoes he calls “dress Crocs,” hardly seems like the type to lead a revolution.

But the 50-year-old professor of economics at George Mason University in Virginia is emerging as the intellectual standard-bearer for the Austrian school of economics that opposes government intervention in markets and decries federal spending to prop up demand during times of crisis. Mr. Boettke, whose latest research explores people’s ability to self-regulate, also is minting a new generation of disciples who are spreading the Austrian approach throughout academia, where it had long been left for dead.

To these free-market economists, government intrusion ultimately sows the seeds of the next crisis. It hampers what one famous Austrian, Joseph Schumpeter, called the process of “creative destruction.”

Governments that spend money they don’t have to cushion downturns, they say, lead nations down the path of large debts and runaway inflation.

Eight decades ago, in the midst of the Great Depression, the Austrian school and its leading scholar, Friedrich A. von Hayek, fell out of favor relative to the more activist theories of John Maynard Keynes. The British economist’s ideas, which called for aggressive government spending during recessions, triumphed then and in the decades since, reflected most recently in measures like the $814 billion stimulus package. Austrian adherents were marginalized, losing influence in prominent journals and among policy makers.

But as the economy flounders, debt mounts and growth—revised downward Friday—flags, Mr. Hayek and his Austrian-school adherents like Mr. Boettke are resurgent as their views resonate with more people.

“What I’m really worried about is an endless cycle of deficits, debt, and debasement of currency,” Mr. Boettke says. “What we’ve done is engage in a set of policies that’s turned a market correction into an economy-wide crisis.”
…

* The Wall Street Journal
* WEEKEND INVESTOR
* AUGUST 28, 2010

Breaking Up Without Breaking the Bank
Dividing Assets Is Hard Enough Without Trying to Sell a Home, Business or Stock Portfolio in a Down Market. Here’s How to Ease the Financial Pain

By MARY PILON

Breaking up is always hard to do. In the worst economic downturn most of us have ever lived through, it can be downright excruciating.

Plummeting home values, sagging investments, job worries and exploding college and health-care costs have made parting ways and splitting assets more difficult than ever.

Even for couples with fewer assets than, say, Tiger Woods and Elin Nordegren, that is a good recipe for frustration and anger. One St. Louis family lawyer, Marta Papa, has seen such a rise in client hostility that she purchased a Taser, which she places on a nearby end table when couples come in.

“The scarier part is that I’ve had to use it three times” by casting a red laser-beam light as a warning, Ms. Papa says. “I guess the chocolates and classical music weren’t enough.”
…

wmbz why don`t you tell them to take off the feed bag and walk a little.

South Carolina health plan to pay for gastric bypass surgeryPosted on 13 August 2010 10:38 pm .

Obese government workers in South Carolina can have a gastric bypass surgery with the help of the state’s health plan under a direct program that will commence in January 2011.

With this, 100 obese people from the state will get a chance to have the surgery and it not cost them any money, instead, the pilot will pay the surgery for them.

The lawmakers have made the trial program compulsory and allotted a budget of more than $ 2 million dollars for the participants. In return, results of the program will be recorded and will be examine if the surgery lead to complete health savings.

In South Carolina, almost two-thirds of the residents are said to be overweight and obese.

http://whatisthetrend.net/south-carolina-health-plan-to-pay-for-gastric-bypass-surgery-20102685.html - 57k

Have you ever noticed the way language “speak” is used to manipulate facts.

Owners did not overpay - they “bought too much house”
When you charge your batteries they get stronger. When you charge your credit card it gets weaker. “charge it!”

A “mortgage”? A guarantee you will get up and out of bed on time every day and go work long hours for at least 30 years! How cool is that eh? you take what was a worthless plot of land and you turn it into 30 years of hard labor. No whips, No torture, all voluntary!

1:12 PM, 8/28/2010 REPORT ABUSE

Jeff, if I may ask, what was your income and what were the specifics of the loan for the $400,000 house you purchased.
John

12:57 PM, 8/28/2010 REPORT ABUSE

I am SPITTING FURIOUS that I worked a full-time job and two part-time jobs for years to buy a small townhouse that was within my means, while irresponsible people bought mac-mansions and are now getting a free ride. I wasn’t able to buy my townhouse (with a mortgage) until I was 48. Until then, I rented a garden apartment and used a laundry mat and made hard choices that required sacrifices. I avoided credit card debt and am ****** that people in debt are ENTITLED to government handouts.

kap

12:56 PM, 8/28/2010 REPORT ABUSE

they “bought too much house”

When you think about it, for what they paid they didn`t get enough house.

Well I paid for $400,000 worth of house and I only got $150,000 worth of house! I was either overloaned or under-housed! I`ve been hosed on my house! Why I oughta…

jeff saturday
12:44 PM, 8/28/2010

There has never been a better time to be a Megabankster.

Tent City Outside 2000 Avenue of the Stars Enters Second Day as Janitors Continue to Protest Layoffs at JP Morgan Chase-Owned Building
Share
By Service Employees International Union
Published: Wednesday, Aug. 25, 2010 - 7:06 am

CENTURY CITY, Calif., Aug. 25 — /PRNewswire-USNewswire/ — Janitors who lost their jobs cleaning JPMorgan Chase-owned Century Plaza towers began a 72-hour fast and vigil today outside of 2000 Avenue of the Stars to draw attention to the deep inequity in our economy and the need for U.S. workers to take the fight for good paying jobs to where it belongs—at the doorstep of the Wall Street banks and big corporations responsible for the lack of good paying jobs.

“I am fasting so that the company can think conscientiously about what we do. I am sacrificing for my son because he deserves a better future,” said Zoila Sosa, a janitor at 2000 Avenue of the Stars who was laid off.

The towers, where Zoila works, are owned by JPMorgan Chase, one of the largest banking and investment companies in the world and are home to some of the most prestigious tenants from throughout the city. Despite paying out $9 billion in executive bonuses and receiving $95 billion in taxpayer-funded bailouts, JPMorgan is insisting on layoffs at their buildings.

“It’s unjust the way they earn so much money. What I earn in one year they earn in five hours,” said Rosa Mirna Cruz, who works at 2000 Avenue of the Stars. “How is that fair and how is that good for our country? They are leaving us and our families without food and without a way to pay for rent, and they are taking jobs away from our city. They get billions, and we struggle to survive. All we are asking is that they stop unfairly laying off workers.”

The actions by the janitors illustrate the growing divide between Wall Street and the rest of America. JPMorgan Chase recently reported a 76 percent jump in profits in the last quarter. Meanwhile, 26 million Americans remain unemployed or underemployed, 1 out of every 8 mortgages is in default or foreclosure, and states and cities like Los Angeles teeter on the edge of bankruptcy.
…

They aren’t making any more prospective home buyers.

Birth And Divorce Rates Decline In A Sour Economy
Categories: Research, Public Health & Prevention
02:55 pm August 27, 2010
by April Fulton

Falling stocks are a big reason birth rates and divorces are falling too.

For every thousand people in the United States, there were 13.5 live births in 2009, says a report just out from the nation’s keeper of vital statistics. That’s down from 13.9 in 2008, and 14.3 in the boomlet of 2007, just before the recession officially began.

Not only is that the lowest birth rate in a century, it’s the second year in a row that birth rates have gone down.

“We are in a period when people are very cautious about making long-term, financial commitments, because that’s what a child is nowadays, as well as an emotional commitment,” says Stephanie Coontz. She teaches history and family studies at Evergreen State College and has written several books on marriage and family.

It’s the worst decline in births since the Great Depression, when people put off having babies when facing financial devastation, she says.
…

OT-
“1.8 kg of highly radioactive uranium-238″ was confiscated in Moldavia. The news report goes on and on about “dirty bombs.” My problem with this is U-238 is harmless and has a half life of 4.5 Billion years. You can hold it in your hand. It is used with U-235 to power nuclear reactors. It can’t make bombs. It can’t be used to make “dirty bombs.” It can be used to make reactors to power cities and nations cleanly. We have 10,000 years of 235 and 238 if we use it correctly.

Complete crap reporting. Maybe they missed “Radioactivity and Decay” in science class. Maybe they missed science class altogether.

Idiots.

Roidy

Home values way down but taxes often up; homeowners ask how it’s possible

By Jennifer Sorentrue
Palm Beach Post Staff Writer
Posted: 9:45 p.m. Friday, Aug. 27, 2010

Many Palm Beach County homeowners may feel like they’ve been drop-kicked in the gut after opening their preliminary property tax notices this week.

Property values across the county have plummeted, leaving many owners owing more than they paid for their homes.

Even those who aren’t under water felt the jolt. In many cases, not only did their property values fall, but they will pay more in property taxes next year.

“I thought to myself, ‘How does that happen?’ ” said Bob Deacy, who is slated to pay about $100 more in property taxes next year for his home in West Palm Beach’s historic Flamingo Park neighborhood. “I read it over three times.”

The increase came despite a 22 percent drop in his home’s market value.

Deacy bought his home $79,000 in 1997 and saw its value rise year after year. But to see it plunge this year from $189,143 to $147,296, is more upsetting than the proposed tax increase, he said.

“I am a realist, and I know that if you want improvements in your community you are going to have to pay,” he said. ” I didn’t think in a neighborhood that is sought-after it would go down as much as it did.”

By contrast, suburban Lake Worth resident Erna Altenor also watched her home’s value plummet but has seen her tax bill fall. Altenor bought her home for $260,000 in 2007. Its market value is now $73,581, according to her preliminary tax notice.

“I couldn’t take it no more,” said Altenor, who stopped reading the notice after seeing the new value.

State law prevents homeowners from being taxed on more than their home is worth. As a result, Altenor’s taxes have also plummeted to $1,055, down from $2,133 last year.

“That is good news,” she said.

http://www.scpr.org/news/2010/05/14/homeboy-industries-lays-300-people/

Homeboy Industries Suffer Massive Layoffs

Homeboy Industries, the Los Angeles institution whose mission for more than 20 years has been to turn jobs into a recipe for saving the lives of gang members, laid off most of its employees Thursday because of crushing financial problems.

Father Gregory Boyle, who started Homeboy Industries in Boyle Heights during the height of the city’s gang wars, said 300 people were laid off, including all senior staff and administrators. Boyle said he has stopped taking a paycheck.

“We let people know so they could apply for unemployment, which I’m going to do as well,” he said.

Inside the organization’s headquarters at Alameda and Bruno streets in Chinatown, employees — many of them former gang members — took turns embracing and consoling Boyle. Young men crowded around him and promised to come back even without pay.

“We love you, G. We’ll be here tomorrow,” said one. The 55-year-old priest called it a “Frank Capra moment,” but he was noticeably dejected.

For two decades, Homeboy Industries has offered counseling, removed tattoos and helped gang members find jobs. Its motto: “Nothing stops a bullet like a job.”

But Boyle said no amount of campaigning and fundraising could make up the roughly $5 million the organization needed to operate. He said pleas for donations had resulted in some help, but not nearly enough.

He acknowledged that the people Homeboy Industries helps have always been a hard sell, and more so when the economy is struggling.

“If these were puppies or little kids, we wouldn’t be in this trouble,” he said. “But they’re tattooed gang members with records. So I think a lot of people love this place, but not the folks who can write the big checks, the ‘Save the Hollywood sign’ check.”

The only employees not laid off were more than 100 who work in the organization’s businesses, including its store, bakery and Homegirl Cafe. Boyle said that for the moment, the social services offered would continue, precariously, only because employees said they would keep coming. Eventually, like others left in the lurch by the worst economic downturn since the 1930s, many would need to find work elsewhere.

“We cobbled together payrolls since November. But it was not enough to save us,” Boyle said. “Hope has left the building a little bit. Miracles happen. They just haven’t happened for us lately.”

Still, the priest emphasized to his staff that this was not the end for Homeboy Industries.

Boyle acknowledged some blunders. When he embarked on a campaign to raise money to buy the building on Alameda Street, the organization did not factor in enough money to pay for operations that serve more than 12,000 gang members and former gang members a year, he said.

The $5 million “should have been included in our capital campaign, and it wasn’t,” Boyle said. “And that was our error…. We sort of forgot that we were going to put a program in this place.”

Homeboy Industries probably would have weathered that mistake, but then the recession struck — and the organization became busier.

“The recession happened, and everyone and his mother, every ZIP Code that has a gang had people coming here from all over the county,” Boyle said.

Homeboy Industries has gotten plaudits from influential politicians, celebrities and, increasingly, high-ranking LAPD officials — though over the years, rank-and-file officers have been critical, calling Boyle an apologist for gangbangers who don’t always change.

But Boyle has become an L.A. icon because of his work, with some supporters saying he should be considered for the Nobel Peace Prize.

Hector Verdugo, 35, a former gang member from Boyle Heights who became a top administrator at Homeboy Industries, said it was only natural that the priest’s wards would try to comfort him when they saw him crying Thursday. Together, they prayed in the lobby and vowed to return as long as they could, even without pay.

“Everyone just said, ‘Thank you, G, for bringing us this far,’ ” said Verdugo, a father of three. “But this isn’t the end. Like Father G said, this is just a pause.”

Predictions:

3) Eventually, the QE1 and QE2 money will reappear from under the mattress as though from out of nowhere, serving to enable the elite to snap up assets at fire sale prices when everyone except the residents of Upper Richistan are scared, sidelined or SOL.

Analysis: The uncomfortable mathematics of monetary policy

Federal Reserve Chairman Ben Bernanke enters the Jackson Hole Economic Symposium in Grand Teton National Park August 28, 2010. REUTERS/Price Chambers

Federal Reserve Chairman Ben Bernanke enters the Jackson Hole Economic Symposium in Grand Teton National Park August 28, 2010.
Credit: Reuters/Price Chambers
By Pedro Nicolaci da Costa
JACKSON HOLE, Wyoming | Sat Aug 28, 2010 3:54pm EDT

JACKSON HOLE, Wyoming (Reuters) - Bigger, as the Federal Reserve may soon discover, is not always better.

The prospect of a renewed effort by the U.S. central bank to drive down already super-low borrowing costs raises the issue of whether such measures can help stimulate a recovery that is faltering due to a lack of consumer demand.

The sorry state of the U.S. economy, despite all the monetary and fiscal firepower the Fed and the Treasury have deployed, already befuddles the experts. Worries about a double-dip recession are rampant, and were the topic du jour at the Fed’s annual Jackson Hole conference.

Speaking at the event on Friday, Fed Chairman Ben Bernanke signaled he would be willing embark on yet another round of asset purchases should the economy weaken further, even if he currently believes that will not happen.

But there is a growing fear within and outside the central bank about whether the risks of such purchases outweigh the benefits. One concern is that it may take an ever larger amount of bond buying to get the same effect.

“If it’s buying Treasuries, which is what the Fed is talking about lately, I think it has low returns period, and maybe diminishing returns to scale,” said Alan Blinder, Princeton economist and former Fed vice chair, on the sidelines of the Fed symposium.

That’s partly because most of the impact of Fed easing, especially that which is accomplished through unorthodox means, comes from the “announcement effect” on market expectations, rather than the purchases of securities themselves.

In an example of just how meek the effects of unconventional policy might be, Larry Meyer, a former Fed governor now with Macroeconomic Advisers, once estimated that $100 billion in Treasury purchases might lead only to a 0.10 percentage point drop in long-term interest rates.

DROP IN THE BUCKET

So just how much bond buying would the U.S. central bank have to do to get reticent consumers spending again?

The figures bandied about are eye-popping. When the Fed first embarked on its policy of asset purchases, known as quantitative easing, Goldman Sachs economists estimated Fed credit to the banking system might have to expand to as much as $4 trillion to $5 trillion in order to grapple with the scope of the financial crisis.

According to Meyer, the Goldman estimates were in line with those of Fed staffers. However, the central bank’s policy committee saw this as complicating an eventual exit strategy, and stopped well short.

Instead, the Fed, in addition to slashing official borrowing costs to effectively zero, bought over $1.5 trillion in Treasury and mortgage bonds, bringing its balance sheet to a still-lofty $2.3 trillion from pre-crisis levels around $850 billion. Back then, this tack was widely seen by investors as the Fed pulling out the big guns.

But the policy, coupled with the government’s $800 billion stimulus, has not exactly gone as planned. While analysts say the measures likely prevented an even worse outcome, the U.S. economy, after rebounding from its worst recession since the Great Depression, seems to be slipping again.

“A gazillion dollars in stimulus and this is the best we can do?” said Keith Springer at Capital Financial Advisory Services, in Sacramento California.
…

Bernanke fights phantom problem, ignores real one
Aug 27, 2010 15:17 EDT

U.S. Federal Reserve Chairman Ben Bernanke said in his Jackson Hole speech on Friday he would fight deflation — but he ignored the federal deficit. Even Japan has not experienced sustained deflation, while the U.S. deficit remains at record levels. Bernanke’s diagnosis and treatment of a phantom disease are unlikely to produce faster growth.

Sir Ralph Bloomfield Bonington, the quack in Shaw’s “The Doctor’s Dilemma,” offered a single treatment for all diseases — to “stimulate the phagocytes.” In a similar vein, Bernanke appears to regard the anti-deflationary treatment that the Fed should have applied in 1930-32 as appropriate for all subsequent economic ailments.
…

Whether current U.S. economic policies are working, changing tack right now is a terrible idea, as it will make it easy for the architects of currently failing policy to shift the blame to those insisting on a new change. Better to stay on the horse we are on in mid stream, so that we will know exactly whom to blame in case the horse drowns along with its rider.

Aug. 28, 2010, 3:25 p.m. EDT

Fiscal policy based on alchemy: expert
Confused policy no help as U.S. on brink of deflation
By Greg Robb, MarketWatch

JACKSON HOLE, Wyo. (MarketWatch) — Lawmakers in the U.S. and across the world are preparing to retreat from stimulus measures based on theories that have no scientific basis and amount to alchemy, Indiana University professor Eric Leeper charged Saturday.

“Does any model exist to show that 18 months ago it made sense for the United Kingdom to expand fiscal policy, while now it makes sense to implement the recently announced 25% nearly across-the-board budget cuts?” Leeper asked.

Leeper urged central bankers gathered at the annual Federal Reserve policy retreat to end their taboo about discussing fiscal-policy issues.

Leeper’s remarks came a day after European Central Bank President Jean-Claude Trichet argued that across-the-board deficit reduction was the best strategy to foster growth in Europe and global economies after the global recession.

Leeper said there is no evidence to support Trichet’s view.

While some countries have succeeded in cutting budget deficits without producing a downturn, “there is no evidence that [if] many countries — say, much of Europe — undertake fiscal austerity measures simultaneously then economic activity will improve,” Leeper said.

With the U.S. economy teetering on the edge of a double-dip recession and possible deflation, U.S. lawmakers could help by fiscal expansion, he said.

Unfortunately, “U.S. fiscal policy, like its European counterparts, is too politically confused and paralyzed to be a player,” Leeper said.
…

Here is a truly shocking revelation:

Former IMF Economist Says Fed Isn’t Superman
Aug. 27, 2010

The former chief economist of the International Monetary Fund, Raghuram Rajan, tells MarketWatch’s Greg Robb the Federal Reserve can’t be expected to be a Superman in times of economic trouble.

MarketWatch First Take

Aug. 25, 2010, 11:22 a.m. EDT
Housing still at heart of our problems
Commentary: Prices could fall a lot more before it’s over
By MarketWatch

WASHINGTON (MarketWatch) — How in the world can Americans feel secure or confident in the economy when the value of their single-biggest asset is dropping?

Americans have already lost more than $6 trillion, on paper, on the value of their homes. Millions have lost something more tangible: the roof over their heads.

Now, four years after the housing bubble began to explode, it looks like home owners may have to accept further losses before it’s all over.

Home sales have collapsed following the expiration of the federal subsidy for buyers. The Commerce Department reported Wednesday that sales of new homes fell to the lowest level on record in July. See full story on new-home sales.

The report came just a day after the National Association of Realtors said sales of existing homes dropped to a 15-year low. See full story on existing-home sales.

The government has been trying to put a floor under home prices in an effort to protect the wealth of the middle class and prevent additional foreclosures. They were trying to buy time for the housing market while waiting for the job market to recover.

The homebuyer tax credit had some temporary successes: Home prices stopped plunging and actually increased slightly in the second quarter, the first gain in three years, according to the Federal Housing Finance Agency’s calculations released Wednesday.

That’s likely to be the last price increase for a while. Home owners now know that the only way to sell their home is to drop the price. And potential buyers fear that they may be overpaying for a home.
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Not everyone is buying the official, blatantly obvious lies about green shoots of recovery and such.

The Daily Reckoning
Too much mortgage debt? Here, have another loan.

You don’t need to worry about the recovery. Because there isn’t one.

A “bank owned” sign hangs on a home that is listed as a foreclosure on a HUD website, on July 21 in Hawthorne, Calif. None of the key components of recovery – housing, jobs, or consumer spending – suggest that the economy is returning to its pre-recession habits.

By Bill Bonner, Guest blogger / August 27, 2010

The stock market is rolling over. The Dow went down 133 points yesterday. Gold gained $4.

Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning

Stocks went down early in the summer. We thought that was the beginning of the big “second shock” we’ve been waiting for. But we were wrong. The stock market rebounded.

But now it is back at its July lows…and appears ready to keep going down.

Why? Because small investors are leaving the stock market. And large investors are beginning to realize that there is no real recovery taking place.

“Worries about US recovery deepen,” says a headline in The Financial Times.

Not here! Not at The Daily Reckoning headquarters. We’re not worried about the recovery. Because there is none.

None of the key components of recovery – housing, jobs, or consumer spending – suggest that the economy is returning to its pre-recession habits.
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I think her toe-less father should wash her mouth out with soap and then call Aflac before he tries to trim the hedges.

my parents and i spent all day yesterday and today at NACA and we got help. for all you idiots talking crap and saying we’re liars and taking people’s money you can screw yourself. my parents worked very hard to pay our ridiculous mortgage and my dad cut off his toes with the lawn mower and couldnt work for almost a year, this is why we got behind on our mortgage. it was so depressing being there waiting all day because there are so many of us losing our homes.
claudia
6:21 PM, 8/28/2010

They aren’t making many more first-time home buyers these days…

U.S. birth rate falls for second year in midst of recession
By the CNN Wire Staff
August 28, 2010 11:00 p.m. EDT

STORY HIGHLIGHTS

* The U.S. birth rate fell 2.6 percent last year, according to the National Center for Health Statistics
* An expert says the drop is likely because of the current recession
* The U.S. birth rate also fell in 2008

(CNN) — The number of babies born in the United States dropped 2.6 percent last year, according to a recent study, the latest in a long list of falling indicators.

The birth rate, which takes into account changes in the population, fell to 13.5 births for every 1,000 people last year, from 13.9 births in 2008, and 14.3 births in 2007, according to a new report from the National Center for Health Statistics.

The news is not surprising, said Andrew Cherlin, a sociology professor at Johns Hopkins University, given the sad state of the American economy right now.

“The birth rate is falling because of the Great Recession. When people are unsure of their financial future, they tend to postpone having children,” Cherlin told CNN.

“It’s stronger now than in the last couple of recessions because this is a stronger recession,” he added.

The U.S. birth rate has been declining since the start of the economic downturn in late 2007. When the economy picks up, so should births, said Cherlin, though he stressed it will take time for people to feel secure again.

Some of the women postponing having children now will have them later, Cherlin said, while others never will. During the Great Depression in the 1930s, roughly 20 percent of women never had children — a percentage that Cherlin predicts the United States will hit again.

The number of actual babies born in the United States dropped to 4,136,000 in 2009, from 4,247,000 in 2008, the statistics center said.

“I think it’s likely to be a few years before this turns around,” said Cherlin.

wvveteran at 7:57 PM August 28, 2010

Islam is not a true religion and shouldn’t have the protection of a religion in America. Islam is a military, political, and legal organization. Enemies of the American way of life are funding the bulding of mosques and schools in this country. Real muslims are hell bent on changing the American way of life to fit Sharia law. I really can’t understand why there are so many women supporting Islam in the USA. Under true Islam, a woman must have four male witnesses to prove rape. Under true Islam, a husband is encouraged to beat his wife if he objects to something she has done or if she disagrees with him. Under Sharia law, anyone that leaves the Islamic faith is to be stoned to death. If anyone criticizes the “Prophet” the sentence is death. If a women has an affair she is to be stoned to death. Look at the truely Islamic countries and how the lives of their citizens are lived under these oppreesive cleric driven governments. Why would anyone ever want to have even one true muslim in their country? It is an evil, primitive, cruel, and barbaric belief. We are letting the numbers of the followers of t

The Objectivist
The Un-American Dream
Don Watkins and Yaron Brook, 08.27.10, 12:00 PM EDT
End Washington’s homeownership crusade.

When the housing boom went bust and mortgage giants Fannie Mae and Freddie Mac failed, forcing taxpayers to cough up $150 billion and counting, Washington should have reconsidered its policy of promoting homeownership. It hasn’t.

Last Tuesday, Tim Geithner led a summit to determine the future of Fannie and Freddie. According to Geithner, “We will not support returning Fannie and Freddie to the role they played before conservatorship.”

We should hope not. But Geithner hastened to add that Washington would still play an important role in housing. “I believe there is a strong case to be made for a carefully designed guarantee in a reformed system, with the objective of providing stability in access to mortgages, even in future downturns.” HUD secretary Shaun Donovan put it this way: “The government’s footprint in housing finance needs to be much smaller than it is today.” Smaller? At a time when government backs 97% of new mortgages, it would be hard to make its footprint any larger.

For nearly a century it has been the policy of the U.S. government to increase American homeownership. Its efforts include (but aren’t limited to) bouts of easy money from the Fed, the mortgage-interest deduction, the exclusion of capital gains on primary residence sales, direct and indirect subsidies from the Department of Housing and Urban Development, and artificial liquidity pumped into the mortgage market via government sponsored entities Fannie and Freddie.

Policymakers assure us that the next generation of government housing programs will be “carefully designed” (bring on the next five-year plan, Comrade!). But the real question is why the government should be doing anything to promote homeownership.
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Fannie and Freddie Show the Danger of Mortgage Guarantees
Aug 27 2010, 1:43 PM ET

Housing policy reform is beginning to take shape. At this point, it looks like both the financial sector and Washington agree that the government must maintain a big role in the mortgage market. The favored strategy to do so thus far appears to be government mortgage guarantees that require a fee from banks that wish to obtain them. It would be kind of like depository insurance, except for mortgages. What could go wrong? Fannie and Freddie (F&F) provide a sufficient explanation.

The Federal Housing Authority, which oversees these two entities, released a report (.pdf) this week on their status. There are a couple important lessons contained in the assessment, some of which we already knew — like F&F allowed their underwriting standards to suffer so that they could better compete with banks for mortgages during the housing bubble. But there was an interesting nugget that hasn’t been widely discussed. The activity that caused most of their losses was mortgage guarantees.

Here’s a figure from the report that tells the story pretty clearly:

(See figure in the linked story)

Let me explain what’s going on here. The figure is concerned with F&F’s capital, which has been a major problem since it started incurring losses. It has needed $148 billion from the U.S. government through June to avoid insolvency. This figure indicates where those losses originate.

In particular, the “Capital Erosion” listing indicates each of F&F’s business strategies and the size of their respective losses. As you can see, “Single-Family Guarantee Earnings” has hurt F&F the most. Guarantees gone bad have cost the enterprises $166 billion — accounting for 73% of their total capital erosion.

The implication is clear: F&F weren’t charging nearly enough money to guarantee these mortgages. If their insurance premiums had matched the risk of the associated loans, then they would not have incurred these losses. Without this mistake, their capital losses would have been a small fraction of the $226 billion thus far. In fact, considered together, the entities wouldn’t have even needed a bailout. Their capital losses would have only been $60 billion, which would have eaten away most, but not all of their $71 billion cushion.

How did they get it so wrong? In part because it’s easy to guarantee something that you think is relatively safe. You don’t feel like you need to demand much of a premium in return. This can expose a firm to huge losses, however, while it maintains only a very small capital cushion to absorb them. The bond guarantors ran into precisely the same problem, which is why most still in business are hanging by a thread.
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Feature
SATURDAY, AUGUST 28, 2010
What’s Ahead for Fannie and Fred?
By JONATHAN R. LAING
The two government-sponsored mortgage giants played a key role in the housing boom and bust, Dismantling them now would be disruptive, but reform is essential.
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