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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Will the housing market impact of next week’s election outcome be major, minor or inconsequential? For instance, if Obama wins, will he stay the course on recent interventions? If Romney wins, will there be any significant policy changes?
I’m completely in the dark, perhaps because I have largely tuned out the campaign and did not watch any of the debates.
Further question: Who seems most likely to win at this point?
most likely to win
Wall Street
Military Industrial Complex
Private sector, for profit, government contractors
Spot on!
Post-midnight prices on morning of 11/3/2012 shows Obama heading towards $0.75 and Romney dropping towards $0.25. Approaching 3:1 odds against Mitt winning the popular vote…
‘the housing market impact of next week’s election’
The election seems to be all most want to talk about. Why not get it out of your system, but actually with a focus on housing? I even see reports asking why the candidates aren’t talking about housing. But there are some big issues: the fate of Fannie and Freddie. Bernanke’s role at the Fed and the QE/zero interest rate policy.
A lot gets said about the jobs/economy, right? But how huge is this idea that the central bank has that housing prices will save the economy? Shouldn’t that get a lot of attention in an election?
“But how huge is this idea that the central bank has that housing prices will save the economy? Shouldn’t that get a lot of attention?”
As you know, I tried to raise the issue here starting in early 2012, when the Fed published its white paper on housing. But I guess the trickle-up effect to the presidential debates failed in this case, as the candidates pretty much steered clear of any substantive discussion of housing issues. I guess they saw no political upside to touching this particular “third rail” of politics.
“Why not get it out of your system, but actually with a focus on housing?”
The paid pimps and housing trolls don’t want that. Your blog is a threat to the system. The entire system.
I think that no one is talking about housing for the same reason they’re not talking about illegal immigration. It’s just too fraught an issue to bring up during the campaign.
But AFTER the election? That’s going to get interesting.
After all the hostile rhetoric, is there any substantial difference between Romney’s policy platform and Obama’s?
Housing
Romney’s Housing Plan Looks a Lot Like Obama’s
By Karen Weise on September 24, 2012
Amid a Friday afternoon focused squarely on the details of Mitt Romney’s 2011 tax returns, the Republican candidate also quietly released a white paper on the candidate’s housing policy. As I’ve written before, the campaigns have remained quite silent on housing and foreclosures, even though the housing market’s struggles are arguably the biggest impediment to a broader recovery and more than one in five homeowners owe more than their houses are worth. The new Romney plan document is all of seven pages long—one of those pages is the cover, and three pages lay out the current situation and bash Obama’s policies. That leaves a one-page executive summary that recaps the two pages that actually outline the “plan.”
That part of the plan is, shall we say, light on details. So much so that Business Insider’s Joe Weisenthal wrote (in his headline no less) that the paper “has got to be a joke.” He pointed to how Romney addressed Fannie Mae and Freddie Mac, the government sponsored enterprises that guarantee mortgages and got a nearly $190 billion bailout. The white paper says: “The Romney-Ryan plan will completely end ‘too-big-to-fail’ by reforming the GSEs. … Rather than just talk about reform, a Romney-Ryan Administration will protect taxpayers from additional risk in the future by reforming Fannie Mae and Freddie Mac and provide a long-term, sustainable solution for the future of housing finance reform in our country.” Got that? So Romney will reform them and do something new. How Romney will “reform” them and what will replace them isn’t specified. Republicans typically talk about ending the GSEs, so if reforming them involves something different, it could be a departure from the views of many in the party.
Other parts of the Romney plan look an awful lot like what Obama’s plan has done—much of which has had only a limited impact. Romney wants to “responsibly” sell the 200,000 vacant homes that the GSEs picked up when borrowers defaulted and faced foreclosure. He explains that the government can do this by “returning these homes to private hands and renting them out.” The GSEs already began in February with a pilot to sell 2,500 homes and recently sold the first part of that portfolio.
…
It’s nice that paper writers can tell lies, and then you just eat them up. ROMNEY says he will reform them. IT doesn’t matter how. So immediately the writer tell us it won’t be any different. A pure Opinion.
It’s something different than OBAMA who has made the government 90% of house lending.
So, yes, it will be different, not the Same.
I know these leftist papers want to say that nothing Romney will do will be any different, so it doesn’t matter if you vote for Romney, and you like Obama better (wins on likability), so vote for OBama.
Who is Obama’s man at the FED. Bernanke.
And don’t start with he’s Bush’s man.
OBAMA had an opportunity to clean house.
HE didn’t.
ROMNEY says BERNANKE is GONE.
And good riddance. A huge difference.
There are major differences in ideologies.
OBAMA: everything should be done by more government agencies, and more government debt and spending while mouthing about how he favors ‘free enterprise’ and wants to cut the debt. How’d that campaign promise work out?
ROMNEY: cut back on government agencies.
Stop putting the taxpayer on the hook for stupid lending ideologies of Fannie and Freddie.
I would go after F(rank) RAines for a Big Clawback on the bonus money he absconded with.
This story is a propaganda piece to sway many people who really want CHANGE, to say, well, it won’t be any different. You might as well vote Obama back in. It’s a LIE.
So who is Romney going to put in charge of the Fed? Someone who will inflict austerity on the banks by slamming the bars on the Discount Window, casting AIG adrift, and sinking the QE?
I think not…
I believe the default choice is Inside Job star Glenn Hubbard.
Giving us the joy of having someone who will purse policies not in our best interest AND be a jerk when questioned about it. Same as we’ve got now.
’sinking the QE? I think not’
I’m not a Romney supporter, but he has made some statements like this:
‘In an August 23rd interview with FOX Business Network, Romney said he would not reappoint Fed chief Bernanke when his term expires in 2014. “I would select a new person to that chairman position, someone who shares my economic views, and is sympathetic to the needs of our nation. I want to make sure that the Federal Reserve focuses on maintaining the monetary stability that leads to a strong dollar, and confidence that America is not going to go down the road that other nations have gone down to their peril. I don’t think QE-2 was terribly effective. I think a QE-3 and other Fed stimulus is not going to help this economy. I think that is the wrong way to go.’
‘if Ryan become VP, he’s expected to push for forensic audits of the Fed’s secret monetary policy operations and its covert intervention in stock index futures. Equally important, a Romney-Ryan victory could lead to the early departure of Bernanke from the Fed, as early as February of 2013.’
‘In a detailed speech on monetary policy in December 2010, Ryan hardly minced words in his criticism of the Bernanke Fed. “There is nothing more insidious that a government can do to its countrymen than to debase its currency, yet this is in fact what is occurring,” Ryan said’
http://news.goldseek.com/GoldSeek/1350406800.php
This is all I could find on Obama and QE:
‘8 November 2010′
‘Barack Obama has launched a strong defence of America’s latest bout of quantitative easing, ahead of the G20 summit in Korea…Obama hit back at claims that the Federal Reserve risked destabilising the world economy through the $600bn (£370bn) “QE2″ programme announced last week. During a visit to India, Obama argued that stimulating the US economy was in everyone’s interests.’
“I will say that the Fed’s mandate, my mandate, is to grow our economy. And that’s not just good for the United States, that’s good for the world as a whole,” said Obama, during a press conference in New Delhi. “And the worst thing that could happen to the world economy, not just ours, is if we end up being stuck with no growth or very limited growth,” he added.’
http://www.guardian.co.uk/business/2010/nov/08/obama-defends-qe2-g20-summit
FYI, vice presidents have exactly as much power as presidents want them to have. Usually, that is “not enough to be annoying.”
Oh look! Romney made a “statement.” Better call the masons to carve it in stone somewhere.
As for VP… it is well known that the party bosses in New York didn’t like all the reformin’ that Teddy Roosevelt was doin’ as Guvner. So they conspired to “promote” him out of Albany to the Vice Presidency, where they figured he would have less power.
OOPS!!
‘Oh look! Romney made a ’statement’
I knew somebody was going to say something like this. If we aren’t going to look at positions of a challenger, there isn’t any point in even trying to discuss this. Romney hasn’t been in the WH so this is what we’ve got to go on.
We do know Obama liked QE2, and I’m pretty sure he likes QE 3 to infinity. I for one would like to hear someone ask if he favors higher house prices like Bernanke does.
Obama’s Secret Plan to Prop Up Housing Prices – Discounts for Speculators, Foreclosures for Mom & Pop!
Tuesday, September 4, 2012 14:09
Mike Whitney / Counterpunch.com
Private Equity firms are piling in to the housing market to take advantage of bargain basement prices on distressed inventory. The Obama administration is stealthily selling homes to big investors who are required to sign non-disclosure agreements to ensure that the public remains in the dark as to the magnitude of the giveaway. Aside from the steep discounts on the homes themselves, the government is also providing “synthetic financing to reduce the up-front capital required if they agree to form a joint venture with Fannie Mae and share proceeds from the rental or sale of properties.” (Businessweek)
In other words, US-taxpayers are providing extravagant financing for deep-pocket speculators who want to reduce their risk while maximizing their profits via additional leverage. The plan resembles Treasury Secretary Timothy Geithner’s Public-Private Partnership Investment Program, (PPIP) which Columbia University professor Joseph Stiglitz denounced in an op-ed in the New York Times. Here’s what he said:
The same rule applies here. Speculators are getting lavish incentives (gov financing, low rates, and severe discounts) in secret deals to buy distressed inventory which should be available to the public at market prices. If that’s not a ripoff, then what is?
…
ROMNEY: cut back on government agencies ??
Yeah….Except for the increase in Military spending…
Don’t forget the money flow from K Street to Wall Street and back.
Presidents are people too. They’re driven by personal agendas just as everyone else is. They’re not demigods.
So - Romney and 4 of his five sons are either in the finance or real estate sectors. I’m guessing Romney would institutionalize and make permanent the public money Wall Street gets, in order to help both sectors.
Obama - he’s going to continue on the same path, which is still massive intervention but probably just not as much and for not as long. But I’m thinking Obama would be less focused on helping Wall Street because it’s not personal with him, like healthcare was. And he would probably be less debt-centric, as he does seem to be more interested in the common man than Romney.
My $0.02.
Do the Republicans really have a secret plan to trash the economy if Romney loses? Seems like they already tried this back in the Summer of 2011; how’s it working out for them so far?
Op-Ed Columnist
The Blackmail Caucus
By PAUL KRUGMAN
Published: November 1, 2012
If President Obama is re-elected, health care coverage will expand dramatically, taxes on the wealthy will go up and Wall Street will face tougher regulation. If Mitt Romney wins instead, health coverage will shrink substantially, taxes on the wealthy will fall to levels not seen in 80 years and financial regulation will be rolled back.
Given the starkness of this difference, you might have expected to see people from both sides of the political divide urging voters to cast their ballots based on the issues. Lately, however, I’ve seen a growing number of Romney supporters making a quite different argument. Vote for Mr. Romney, they say, because if he loses, Republicans will destroy the economy.
…
Not like some dark powers can/will release the dogs of economic h3ll, simply that anyone who opposes the colossal expansion of the debt will crash the (fake) economy.
Why are the speculations of Paul Krugman news?
I can speculate as to what will happen to the economy under both candidates, too.
It’s pure speculation, and Krugman’s economic models and forecasts aren’t worth a dime.
It’s too bad the NYT is so slanted that they let this Fool push the democratic agenda in his column.
It’s unfortunate that many people don’t see it for what it is, a sales pitch for Obama, with voodoo economics as a supporting crutch.
Krugman isn’t a reporter. He is an opinion columnist. Accusing his column of being his opinion is a tautology.
Has Paul Krugman ever encountered a problem of any kind, to which he proposed a solution other than “more government spending”?
“they already tried this back in the Summer of 2011″.
What are you talking about? Sorry, but I don’t listen to the MSM nor the other sources of your information. Clarification would be appreciated.
How could the Rep’s do anything as they have no power? Block something in the Senate?
Regarding a “secret plan to trash the economy”, why would they need to even try? Obama and his minions are doing just fine all by themselves.
“What are you talking about?”
America’s debt ceiling
The mother of all tail risks
A US technical default would convulse markets. Nothing else is certain
Jun 23rd 2011 | WASHINGTON, DC | from the print edition
AMERICA’S debt is supposedly the world’s safest, backed by trustworthy courts and an unrivalled capacity to raise taxes and print money. Yet thanks to a quirk of law, talk of default is not confined to the European side of the Atlantic.
Unlike most countries America requires two legal steps to run a deficit: one to pass budget bills, the other to borrow the money. Congress sets a ceiling on how much the country may borrow. In the past it has always raised the ceiling before the Treasury ran out of cash, doing so on 16 occasions since 1993 alone. But it often attaches conditions, and this year Republicans who control the House of Representatives are insisting on particularly onerous terms. With the debt and the deficit at their highest in 60 years, they want to see at least $2 trillion in spending cuts over ten years and no tax increases.
If a deal cannot be reached before August 2nd the Treasury says it will be forced to default. It has not specified on what: it could choose to stop paying pensioners and soldiers before it stopped paying interest on its debt. But outright default cannot be entirely ruled out. What happens if the world’s most trustworthy borrower reneges on its debt?
The possibility has not gone unnoticed. Trading in credit-default swaps (CDSs) on Treasury securities has picked up and the price of protection against default, as measured by the CDS spread, has risen (see chart). One-year protection is now almost as expensive as five-year protection. This is more often seen in distressed markets where investors are pricing in an imminent default than with otherwise healthy borrowers with long-term problems.
…
Don’t buy stuff you can’t pay for.
Like WW2?
So the Republicans tried to “trash the economy” because they tried to get actual spending cuts without raising taxes???
The economy is trashed because:
1) Government is spending way more than it brings in, more than $83,000,000,000 per month
2) Businessmen see huge tax increases and huge cost increases in the future, but they don’t know exactly what those costs are going to be,
3) Fuel costs have doubled in the last 4 years, zapping people of their disposable income,
4) Government bureacracies are piling on new regulations in many different areas, raising the costs of doing business, taking away money that could be used to hire new employees,
Etc, etc, etc.
My question remains,
How could the Rep’s do anything as they have no power?
Huge costs businessmen my butt. They have plenty of money. The economy is trashed because the Bottomless Stockholder Maw wants 12% ROI instead of 6% ROI. If the corporations put that 6% toward quietly paying taxes and retaining workers in the US, the economy would recover.
And if people were really interested in helping small businesses, the single best thing they could do is institute a single payer/public option health insurance system.
Oxy, do you really own or know of stocks that are paying a 12% dividend? The business that I work for is struggling just to maintain cash flow and make payroll.
Perhaps I should have said “profit margin.” Did a little googly-eyes for ya, and I plugged some random tickers into google finance:
Colgate-Palmolive has a 15% profit margin.
Ford just reported 12%
SBUX: 10.68
Exxon Mobile is just over 12%
Verizon 14.8
Goldman Sachs 14.91%
HSN has an operating margin of 8.5%, I don’t even know who they are.
For dividends, 3-4% is considered excellent:
Colgate Palmolive
Walgreen’s
Exxon
Coke
P&G
http://www.istockanalyst.com/finance/story/6059748/5-dividend-stocks-you-can-hold-forever
OK, banks aside (because they are being subsidized by the Fed Gov), these companies are accumulating cash, not feeding the Stockholder’s Insatiable Maw. I don’t believe the sales of soap is going through the roof. That would mean they are cutting back inefficient operations and not investing. Short term dash for cash in an uncertain market or gross profiteering?
these companies are accumulating cash, not feeding the Stockholder’s Insatiable Maw
But it affects stock prices.
“And if people were really interested in helping small businesses, the single best thing they could do is institute a single payer/public option health insurance system.”
It all depends on how you pay for it.
If you pay for it by raising the INCOME tax, the small business owner takes it in the shorts. They stop paying insurance costs for their employees, but because public companies would dump their employee coverage (putting people in the single-payer system), the wage earners in the market (including small business owners) COULD end up paying more vis-a-vis higher taxes than they did paying the health insurance for their employees.
“Huge costs businessmen my butt. They have plenty of money.”
You must work for the government. Only a bureaucrat could come out with such an ill informed statement.
Read Woodward’s book. Both the Republicans and Democrats are to blame for that mess. A deal (which included up to about $800B in revenue via tax reform) was quite close until Obama suggested 50% more revenue, which blew up the opportunity for a big deficit reduction deal…
And then the spin machines took over.
‘Regarding a “secret plan to trash the economy”, why would they need to even try?’
Thank you so much for your questions, which inspired me to do a little research. I posted a really interesting find below.
I’d be interested in further information on this Frank Luntz fellow. His activities recall to mind a propaganda master from a previous era, Joseph Goebbels. Any further insights into his role in the flailing, failing Republican propaganda campaign would be appreciated.
Eric Cantor, Paul Ryan & Kevin McCarthy: Plot To Sabotage US Economy with Frank Luntz
On January 20, 2009 Republican Leaders in Congress literally plotted to sabotage and undermine U.S. Economy during President Obama’s Inauguration.
In Robert Draper’s book, “Do Not Ask What Good We Do: Inside the U.S. House of Representatives” Draper wrote that during a four hour, “invitation only” meeting with GOP Hate-Propaganda Minister, Frank Luntz, the below listed Senior GOP Law Writers literally plotted to sabotage, undermine and destroy America’s Economy.
…
Is it really legal for Congressmen to hold conspiratorial meetings to plot against a sitting president?
Just wondering…
If they are plotting to kill or injure him? No. Not if even one of them takes one action in furtherance of the plot.
If they are plotting to prevent any of his agenda being passed by Congress (no matter how beneficial to the country it might be)? Yes, of course it is legal. Why wouldn’t it be?
” Why wouldn’t it be?”
There could (in theory) be a law against it. For instance, California has laws that attempt to limit or eliminate closed-door meetings between policy makers.
If their is not such a law at the federal level, then I guess their actions were perfectly legal.
Law makers are protected from prosecution for actions they take in carrying out their office. Carrying out their office includes getting legislation they like passed and preventing legislation they don’t like from being passed. They can’t be prosecuted for any of it.
As far as I know, there is no sunshine statute for Congress. For pete’s sake a bunch of them share houses on Capitol Hill. You can’t get more “closed door meeting” than having to use the same bathroom in the morning.
Polly, as always, your insights are appreciated.
You’ve had more than enough Koolade.
iflation risk is what will eventually “trash” the economy.
Michael - Does that involve engorgement or merely an increase in prices and wages -
At what point, if ever, will the effects of the ever-darkening Eurozone economic picture wash up on American shores?
Will stimulus suffice to save the Eurozone economies?
Deeper euro zone factory downturn hardens stimulus view
By Jonathan Cable
LONDON | Fri Nov 2, 2012 6:51am EDT
(Reuters) - Euro zone manufacturing shrank for the 15th month running in October as output and new orders fell, a survey showed on Friday, fuelling expectations of further easing from the European Central Bank.
Manufacturers were the driving force behind the bloc’s recovery from the last recession, but the downturn in factory activity that began in smaller periphery countries has now engulfed core members Germany and France.
Europe is expected to remain the biggest drag on the world economy next year as its sovereign debt crisis rumbles on, and the situation deteriorated further in Italy and Spain - the two countries most worrying investors with whether they can keep paying their debts.
Ireland was the only one of the 17 countries using the euro seeing growth.
“The situation in the core economies is worsening. Rather than the strength in the core dragging the periphery out of recession it appears more likely that the core will follow the periphery into recession,” said Ben May at Capital Economics.
…
Shouldn`t bankruptcy take care of their problem? I guess the answer is yes unless they are strategic defaulters who want to be able to have their refi-cake and eat it too.
Posted: 4:31 p.m. Thursday, Nov. 1, 2012
Boca Raton couple tormented by foreclosure that won’t go away
It’s been three years since the foreclosure, the eviction notice, the yard sales.
Time has passed since she and her husband, James, were given 10 days to vacate their Boca Raton home of 19 years, the one where she raised her two children.
The couple — Deborah is 60, James 58 — moved into a small ground-floor apartment and tried to move on.
Then the phone rang.
The man calling Deborah Strassburger on a Friday afternoon last month was from NSM Debt Recovery, a division of Texas-based Nationstar Mortgage. He told her she owed more than $100,000 in unpaid debt stemming from the foreclosure.
The Strassburgers were shocked and confused. It wouldn’t be the first, or the last, time.
They tried to execute a short sale on the home and went through mediation with the lender. When all failed, the house returned to the auction block. It was bought back by the bank in January and sold to a new owner for $110,000 in July.
The foreclosure judgment against the Strassburgers was for $338,000. They say they were told during mediation that the lender wouldn’t pursue the deficiency — typically the difference between what is owed and how much the home appraises for at the time of auction.
Comments (not from me)
Posted by pbpostcomment at 8:58 p.m. Nov. 1, 2012 Report Abuse
After taking out a mortgage and refinancing 12 different times, TWELVE, you wonder how someone gets into a situatiuon like this. Everyone took money out at the height of the market and then walked away.
http://www.palmbeachpost.com/news/business/real-estate/local-couple-tormented-by-foreclosure-that-wont-go/nStXn/ -
I have said that I thought there was a massive shadow inventory in the North East, including Long Island where my first DBLL went back and bought in 2006. If I happened to be correct who if anyone would pay to rebuild a house that got major damage from Sandy on a house that had not had a mortgage payment made for years?
Would the bank or servicer or whoever have kept federal flood insurance on these properties and if so do they use it and let the non paying homeowner move back in after the house is repaired?
Do they get sued for not having clear title and not keeping flood insurance? Do the victims live in moldy houses?
New York Area Has Biggest Jump in Foreclosure Filings
By Dan Levy and Prashant Gopal - Oct 25, 2012 12:45 PM ET
The New York metropolitan area had the biggest jump in foreclosure filings among top U.S. markets in the third quarter as lenders began to work through a backlog in a region where seizing properties takes the longest.
The 69 percent gain in default, auction and repossession filings was the steepest among the 20 largest metro areas, according to RealtyTrac Inc. The region’s increase, propelled by a ninefold rise in Queens County, New York, and a more than tripling in Sussex County, New Jersey, ran counter to the national trend. Filings declined from a year earlier in more than three-fifths of U.S. metro areas, the Irvine, California- based data provider said today.
“New York will need to turn the corner to deal with the shadow inventory being built up,” Daren Blomquist, a RealtyTrac vice president, said in a telephone interview, referring to a swelling pipeline of pending foreclosures. The rising number of properties facing seizure “remains a threat to home price stability and growth,” he said.
While shrinking nationwide, the shadow inventory is growing in New York, New Jersey and Connecticut because of state laws that slow the process for seizing homes. The state of New York had the longest foreclosure process in the U.S. in the third quarter at 1,072 days, up from 974 days a year earlier, followed by New Jersey with a 931-day process, Blomquist said.
In the second quarter, New Jersey was behind only Florida in the rate of homeowners with seriously delinquent loans, which are 90 days late or in foreclosure, according to the Mortgage Bankers Association. The measure is a proxy for shadow supply, according to the Washington-based group.
New Jersey
The delinquency rate in New Jersey rose to 12.7 percent in the second quarter, the latest period for which figures are available, from 11.4 percent a year earlier, the association said. New York’s rate was 9.5 percent and Connecticut’s was 8.1 percent.
Nassau County
In the New York area, meanwhile, filings in Nassau County, on Long Island, rose 35 percent, Blomquist said.
http://www.bloomberg.com/news/2012-10-25/new-york-area-has-biggest-jump-in-foreclosure-filings.html - 155k
Perhaps washing them out to sea is a good solution for an excess supply of vacant, unwanted homes, especially if they are federally insured.
During the great hurricane of 1938, entire communities were washed out to sea.
This is not a problem anymore. If there is money owed on the supposed house, the bank sells the loan to the Fed at face value and forgets about it. The previous owners may now live the carefree life in their moldy car.
Washington Post editorial: Pulling the U.S. drone war out of the shadows
http://www.washingtonpost.com/opinions/us-drone-war-demands-accountability/2012/11/01/56627964-2380-11e2-8448-81b1ce7d6978_story.html
I have read many post by Ben on the use of drones by Obama and I have drawn a conclusion…
The military complex is more dominant in decisions that are made than any President….They run our countries foreign policy…Look what they did to Colin Powell…
Will federal income tax relief on forgiven mortgage debt expire at year-end 2012, as scheduled?
This example from the article seems like an implausible strawman: How many people ever take out a mere $10,000 mortgage to buy a house? I’d guess most car loans are larger.
I edited it to make it more realistic, with the same percentages as before, but with the principle amount in line with California-size home purchase mortgages:
If mortgage debt relief ends, what would it mean for short sellers?
2 hours ago • Lily Leung
A sense of panic is racing through the local housing market over the possible expiration of a law that lets certain home sellers get tax relief on mortgage debt forgiven by lenders. That panic, however, is unfounded in some cases.
The Mortgage Forgiveness Debt Relief Act, which has helped many financially distressed Americans since 2007, is set to end Dec. 31 unless Congress acts. The likely expiration has pushed home sellers in San Diego County scrambling to close on their short sales by year’s end, fearing they’ll have to pay taxes on the debt amounts forgiven by their lenders.
What many of those people don’t know is that, in some cases, the expiration of the debt relief act won’t affect them at all. Whether or not you will pay taxes on forgiven mortgage debt hinges on several factors including income and the circumstances of your loan.
“It depends,” said G. Scott Haislet, a California attorney and member of the California Society of CPAs. “Every situation is a little different … Really, it’s fact-based.”
A little background: The U.S. government enacted the mortgage debt relief law to help folks who’ve had part or all of their loan balances of their primary homes forgiven from 2007 to the end of this year. Forgiven mortgage debt usually is considered taxable income, so the law has been a welcome relief for many borrowers. Consumers could get relief from taxable income on loan balances of up to $2 million, or $1 million for a married tax filer who’s submitting a separate return. California conformed to that rule but with lower maximums.
So, let’s say you took out a $10,000 mortgage, pay back $2,000, default on the loan and get the remaining $8,000 forgiven by the lender. Before the mortgage relief act, you may have gotten taxed on the $8,000 of forgiven debt.
…
Is it the election or “superstorm” Sandy that has Mr Market on edge today?
I vote “superstorm” Sandy, as the uncertainty surrounding the tight election race has gone on for months on end, while nobody could have foreseen the tremendous damage toll of “superstorm” Sandy.
Further, the Fed announced in advance that they were going to “supply liquidity” the day the markets reopened this. First the MSM asked no questions about why Mr Market shrugged off the hurricane’s October surprise for a couple of days before finally reacting, then today they serve up a completely ridiculous explanation for the sell off. It’s par for the course.
“… this week.”
It must be the election that has Mr Market on edge. It couldn’t possibly be the massive hurricane that hammered the entire eastern seaboard this week, resulting in the first closure of the U.S. stock market since 1888, the flooding of the NYC subway system, and an ultimate damage toll at least in the tens of billions.
Stock vote of no confidence
With just four days before voters head to the polls, nervousness about outcome sinks stocks.
How do the Marketwatch peops “know” this isn’t the real reason the market tanked today?
Nov. 2, 2012, 5:34 p.m. EDT
NYC marathon canceled — mayor’s office
SAN FRANCISCO (MarketWatch) — The New York City marathon will not be held on Sunday because of disruptions caused by superstorm Sandy, officials said Friday. Mayor Michael Bloomberg had said earlier that holding the event, which draws runners from around the world, would demonstrate that the city was on the road to recovery. There was no information about whether the race would be rescheduled.
“…the event, which draws runners from around the world, would demonstrate that the city was on the road to recovery…”
What, if anything, would a failure to hold the event demonstrate?
My hunch: The ‘little rainstorm’ turned out to be ‘worse than expected.’
So, Japan has had ZIRP for 20-some years. However, IIRC, they typically run in a mild deflationary environment.
Here, we’ve had ZIRP for about four years now. And we run in around a 2% inflation environment, at least (excluding the necessities - food, housing/rent, medical, education, energy, and even it seems to me, clothes).
How long will the populace, and the 800 lb silverback in the room - seniors - accept this level of wealth erosion?
I personally think that the prior 4 years were masked somewhat through the recovery in the stock market.
If we have 4 years of stagnant stock market, ZIRP, and 2%+ inflation, we will see a big shift in sentiment toward a candidate who runs on a “fix the deficit” platform.
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