Article 43

 

Sunday, June 27, 2010

Bad Moon Rising Part 39 - The Doomed US Homeowner

4-sale.jpgmiddle-class-squeeze.jpg

Between 2.5 wars, a few major natural disasters, an economic mess, a heaping helping of social programs and agriculture subsidies, and the US’s loss of the world tech leadership position....we just couldn’t seem to find the time.
- After Discovery’s Launch, What’s Left For the Shuttle?, Slashdot

Every now and then I check out the estimated value of my house on websites like ZILLOW and AOL REAL ESTATE, and watch it go down, down, down.

According to those figures, I’M ALREADY a member of the NEGATIVE HOMEOWNER EQUITY club, and ONE CATASTROPHIC EVENT away from joining the WALK AWAY FROM YOUR MORTGAGE, and TENT CITY clubs.

The green line is my houses worth the past few years - from $250K to $100K today

More than half the homes for sale in my middle-class neighborhood are foreclosures.

Just wait until the SHADOW INVENTORY is let loose on the market.

Homeowners are DOOMED.

And IF THE GOVERNMENT keeps DOING NOTHING to slow down LAYOFFS and OUTSOURCING, and nothing to stop the continued EXODUS of our MANUFACTURING BASE to places like VIETNAM, Obama’s plan to HELP UNEMPLOYED HOMEOWNERS is little more than a sliver of bread thrown at a STARVING nation.

The middle-class is DOOMED.

Our great nation is DOOMED.

While THE SHIFT of AMERICA’S SLIDE to CHINA’S RISE as the dominant word power continues.

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1.2 Million Households Lost To Recession
As friends and families double up, “overcrowding” is up fivefold

By Jown Schoen
MSNBC
April 8, 2010

Since Richard Brown lost his job to the recession and his Boston home to foreclosure a year ago, he’s been working short-term consulting assignments until he gets back on his feet. In the meantime, he’s been couch surfing.

“I’ve lived with my brother, my cousin, my friend and my dad,” he said. “The IRS keeps calling me, asking me: What’s your address? And I say, “What week is this?”

Armed with college degree and an MBA, Brown, 49, built a solid resume over three decades as a corporate controller for several Fortune 500 companies, including W.R. Grace and Wal-Mart, before launching his own global consulting business with clients in Europe and Mexico. But when the Panic of 2008 sent clients scrambling, he was unable to keep up with a jump in his mortgage payments and lost his home to foreclosure.

Brown represents one of the more than 1.2 million households lost to the recession, according to a report issued this week by the Mortgage Bankers Association that looked at data between 2005 and 2008. That number doesnt include information from 2009, when job losses and foreclosures continued to rise.

So it’s likely that the full impact of the 8.4 million jobs lost and nearly three million homes foreclosed on since the recession began has taken an even bigger toll on the number of American households.

“Given the depth of the downturn in 2009, and the ongoing weakness in the job market through the beginning of this year, this study gives no reason to expect that household formation has picked up at all,” said Gary Painter, a professor at the University of Southern California who conducted the study.

The study also shed some light on what happens to the people in those “lost” households. Its widely assumed that many who lose a home to foreclosure become renters. But since the recession began, there has been a five-fold increase in overcrowding of remaining households - defined as more than one person per room, according to the study.

That doubling-up is happening as families who lose their homes move in with friends or family. In other cases, younger people have delayed moving out on their own, instead staying with their parents until the economy improves. Others who fail to find work after graduating from college move back home.

Falling homeownership levels

The decline in households is weighing on both the home buying and rental markets. Since the number of home foreclosures began surging in 2007, the national homeownership rate has been steadily falling. But renters also have been forced to double up or move in with friends or family. Thats a major reason that the vacancy rate for U.S. apartments stood at 8 percent in the first quarter, the highest level since 1986, according to a report this week from Reis, a real estate research firm.

The future pace of household destruction or formation is uncertain. A lot depends on how quickly the job and housing markets recover. The outlook for both is mixed.

Though many economists expect the economy to add several hundred thousand new jobs a month as the recovery gains strength, it will likely take years to restore employment to its pre-recession levels. After the 2001 recession, it took four years of job growth to restore a 2 percent drop in employment. This time around employment levels have fallen by 6 percent.

Homeownership levels, meanwhile, continue to decline. New foreclosures filings are running about 300,000 a month, according to RealtyTrac. There are currently some 5 million homeowners that are 90 days or more past due on their mortgages, according to Fannie Mae chief economist Doug Duncan.

Though the pace of foreclosures has recently begun to taper off, there are indications they may pick up again as lenders redouble efforts to work out bad loans, and mortgage defaults continue to bring new foreclosures.

“Some of the foreclosure backlogs are working their way through the system at this point,” Duncan told CNBC.

Millions more homeowners who are current on their mortgages owe more than their home is worth. Though the government recently issued another round of guidelines to lenders urging them to reduce the principal owed on those loans, the process is mostly voluntary.

Rise in homelessness

So far, lenders have been slow to cut the size of a mortgage to make monthly payments more affordable. As a result, an increasing number of families are walking away from their homes in a process known in the industry as strategic default.

“That can become contagious, said Duncan,” as neighbors follow suit. “If they see someone else in their neighborhood that walks away, it increases the likelihood they will seriously consider not paying theirs, he said.”

It’s not a move to be taken lightly. The resulting damage to a borrowers credit history can hurt job prospects with a new employer or create a barrier to renting.

In some cases, the loss of a house to foreclosure is leaving families homeless, though there is little national data available on how many are affected. A RECENT STUDY by the Department of Housing and Urban Development found family homelessness on the rise since the recession began, with the biggest increases in suburban and rural areas.

Other groups, like the National Alliance to End Homelessness, report that a rising number of older adults are without a permanent place to live.

“The limited existing research tells a story of increasing homelessness among adults ages 50 and older, the group said in a recent report.”

The formation of new households isn’t expected to pick up again until at least 2012, according to the MBA study, even as the population continues to increase. Between 2005 and 2008, those 1.2 million households were lost even as the population grew by 3.4 million.

In the meantime, former homeowners like Brown are left scrambling for alternatives. He recently move into a rooming house where he continues to track down consulting work.

“I pay $600 for a third-floor room that gets hot in the summer,” he said. “It’s a blow. I dont belong here. I’m an educated person. Ive held executive positions. And here I am in a boarding house where Russian is a first language.”

SOURCE

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New Home Sales Plummet To Record Low

By Hibah Yousuf
CNN Money
June 23, 2010

New home sales plummeted to a record low in May, the first month following the expiration of the homebuyer tax credit. This snapped a two-month streak of gains.

New home sales declined 32.7% to a seasonally adjusted annual rate of 300,000 last month, down from an downwardly revised 446,000 in April, the Commerce Department reported Wednesday. Sales year-over-year fell 18.3%.

This is the slowest sales pace since the Commerce Department began tracking data in 1963. The prior record was set in September 1981, when new homes sold at an annual rate of 338,000.

“We expected a slowdown, but the extent of this decline was a surprise,” said Anika Khan, an economist at Wells Fargo. The figure was even worse than her relatively pessimistic forecast of an annual rate of 380,000 in May.

A consensus of economists surveyed by Briefing.com had expected May sales to slide to an annual rate of 430,000.

“Clearly, the lack of a tax credit had a lot to do with it, and it’s going to be a bit of a bumpy road ahead as we get a few more months of payback,” Khan said.

Home sales had surged in March and April as homebuyers scrambled to sign contracts ahead of the April 30 deadline for the tax credit. First-time homebuyers qualified for a tax credit up to $8,000, while repeat buyers could get as much as a $6,500 break.

Homebuyers have until June 30 to close deals, but the Senate may vote to push that deadline back to Sept. 30.

Khan expects home sales to remain depressed through the third quarter as home construction continues to contract and lending standards remain tight. But, she said, sales should pick up slightly in the fourth quarter.

Although, she added, we are still years away from a normal level of new home sales—an annual rate between 800,000 and 900,000.

“A full housing recovery is contingent on employment,” Khan said. “When we see the unemployment rate abate, and some growth in salaries and incomes, we’ll get some sustainable momentum in the housing market.”

A real estate industry report released earlier this week showed that existing home sales, based closed sales rather than signed contracts, slipped slightly last month but remained elevated.
0:00 /5:20Double-dip fears haunt housing

Price and inventory: The government report showed that the median price of new homes sold in May was $200,900, down less than 1% from April but a 9.6% drop from May 2009.

An estimated 213,000 new homes were for sale at the end of May, the lowest inventory level in more than 40 years.

Still, at the current sales pace, the government expects it will take 8.5 months to sell through that inventory, up from 5.8 months in April. Six months of inventory is considered normal market conditions.

Sales by region: Sales fell the most in the West, where they decreased by more than 50%; the Northwest saw sales declined by about a third. Sales in the South and Midwest declined by about 25%.

SOURCE

Bad Moon Rising
Part 1 - Part 2 - Part 3 - Part 4 - Part 5
Part 6 - Part 7 - Part 8 - Part 9 - Part 10
Part 11 - Part 12 - Part 13 - Part 14 - Part 15
Part 16 - Part 17 - Part 18 - Part 19 - Part 20
Part 21 - Part 22 - Part 23 - Part 24 - Part 25
Part 26 - Part 27 - Part 28 - Part 29 - Part 30
Part 31 - Part 32 - Part 33 - Part 34 - Part 35
Part 36 - Part 37 - Part 38 - Part 39 - Part 40
Part 41 - Part 42 - Part 43 - Part 44 - Part 45
Part 46 - Part 47 - Part 48 - Part 49 - Part 50
Part 51 - Part 52 - Part 53 - Part 54

Posted by Elvis on 06/27/10 •
Section Bad Moon Rising
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