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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Housing
August 6, 2013 at 10:32 AM

Obama’s mortgage shuffle

President Obama will travel to Phoenix this afternoon to give a speech on home ownership, mortgages and the role of Fannie Mae and Freddie Mac. The White House hasn’t released a text of the speech yet, although we do have this fact sheet. My initial response is that this is as tone deaf as the president using an Amazon.com distribution center as the embodiment of “middle-class jobs” (although, as the Seattle Times’ Brier Dudley wrote, this may not have been a coincidence). The last thing Phoenix needs is a presidential boost to its pathological and unsustainable dependency on sprawl house-building, which sent the metro economy into a full-out depression when the bubble burst and faces an uncertain future because of climate change and water. The president could bring this huge but limited city a national laboratory, a billion in research dollars for Arizona State University or a new contract for Boeing’s helicopter plant in suburban Mesa — one of the relatively few well-paying nodes in an otherwise low-wage, housing-dependent economy. But more housing? It’s like standing outside an AA hall and intercepting first-time meeting-goers with a case of booze.

There’s also the unfortunate specter of the president’s failure to help average Americans even as Wall Street was bailed out by taxpayers. The Home Affordable Modification Program was intended to help as many as 9 million struggling house owners modify the terms of their mortgages. But the program has reached about 880,000 people. One big problem has been foot-dragging by the banks.

As I read the new proposal, if that’s the right word, the president wants to continue Fannie and Freddie, at least for a time, but under a different business plan. And then make a transition to a mortgage market based entirely on private capital.

We need a rock-solid foundation for financing homeownership with a bigger role for the private sector, where taxpayers aren’t on the hook for the irresponsible behavior or bad decisions of financial institutions and we finally put an end to an era where Fannie Mae and Freddie Mac could expect a bailout for risky behavior in pursuit of profits

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Comments | More in Fannie Mae and Freddie Mac, Housing | Topics: Fannie Mae, Housing

June 27, 2013 at 9:33 AM

Housing permits seek a new normal, in charts

Two new graphics from the Federal Reserve Bank of St. Louis show how residential building permits are faring in the slow recovery:

WAfredgraph

Seattle

In the aftermath of the housing crash, Washington permits have a long way to go before they reach their old peaks. Note the severity of the falloff during the Great Recession compared with other recessions (marked in grey). For Seattle-Tacoma-Bellevue, the improvement is slightly more pronounced. Even so, it remains weak.

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Comments | More in Housing | Topics: Housing, Seattle, Washington state

June 11, 2013 at 10:22 AM

Household wealth still far from recovery

Four years after the official end of the recession, the average American household has recovered only 62.8 percent of the wealth it lost in the crash. The findings come from a new report by William Emmons and Bryan Noeth at the Federal Reserve Bank of St. Louis. That’s in real dollars. All household net wealth has rebounded 114.3 percent from the trough to a record high, but it doesn’t account for inflation or increased population. Adjusted for these factors, the number is well below where it stood in 2006. And the recovery is highly uneven, mostly benefiting the better off with the stock-market boom and saving the big banks.

According to the Fed’s Survey of Consumer Finances, household finances were “severely” affected by the downturn. Median household wealth dropped 39 percent. Among those worst hurt were the young, those with less than a college education, minorities and those carrying heavy debt. With wages largely stagnant, wealth was increasingly dependent on housing, which was in a bubble. In a separate essay by Emmons and Ray Boshara, the importance of household balance sheets to the larger economy is explained. This element was largely discounted by many macroeconomists before the collapse.

It has come as somewhat of a surprise, therefore, that many economists now are calling the Great Recession of 2007-09 a “balance-sheet recession” and that balance-sheet failures of the type described above are seen as important contributors to the downturn and weak recovery.

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Comments | More in Consumer spending, Debt, Demographics, Great Recession, Housing, Inequality, Jobs/Unemployment

May 31, 2013 at 10:20 AM

Vote: The housing recovery

Seattle house prices rose 10.6 for the year as of March, according to the Standard & Poor’s/Case-Shiller home-price index, and the increase between February and March was among the best in the 20-city survey. This sector, which was at the heart of the recession and the excesses that caused it, is finally healing. So today’s question concerns how this turning point is affecting you.

Read on for the best business stories of the week and the haiku…

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Comments | More in Housing, Real estate

May 2, 2013 at 10:15 AM

Rent burden rises for working households

Falling incomes and higher rental housing costs put increasing pressure on working families from 2008 to 2011, according to a new report from the Center for Housing Policy. Using Census Bureau American Community Survey data, the report found that nationally rental costs rose 5.9 percent while incomes declined by 3.2 percent.  Some 26.4 percent of working renters spent more than half of their household income on housing costs. Costs for owners in this cohort dropped 3.2 percent while incomes fell 4.2 percent. They paid 20.9 percent, basically unchanged from 2008.

The advocacy group defines working households as those with incomes less than 120 percent of the median for its area, and whose members worked at least 20 hours per week on average. Metro areas with the highest share of households facing a “severe housing burden” were Miami, Los Angeles, New York, Orlando and San Diego.

Seattle-Tacoma-Bellevue’s rate of working households spending more than half of their incomes on housing was below the average of the 50 largest metros, at 23 percent in 2011. That’s 134,428 households and up from 22 percent in 2008. The data don’t include households where the working-age people are unemployed. In Portland, the number jumped to 24.3 percent from 20.9 percent.

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Comments | More in Housing, Income/living standards

October 11, 2012 at 9:50 AM

Turnabout: America heals as the global economy slows

The conventional wisdom held that this time China would lead the world out of recession. That hasn’t happened. China’s growth rate keeps being revised downward — most recently by the World Bank — and the leadership succession in Beijing is causing great uncertainty. Meanwhile, the eurozone crisis grinds on, with much of the continent as well as the United Kingdom in recession. Brazil, India and other hitherto fast-growing emerging markets are struggling.

In the United States, a long-awaited upswing in the business cycle is gaining traction. The unemployment rate fell to 7.8 percent in September from 8.1 percent the month before despite a rise of workers entering the labor force. September foreclosures fell to a five-year low, and evidence continues to accumulate that the housing market is finally hitting bottom. Prices in many areas are rising. Fresh evidence on the housing front just arrived, as Weyerhaeuser hiked its dividend two cents to of 17 cents per share on Nov. 30 to shareholders of record Nov. 9. It said there were signs of an improving housing market. The Consumer Confidence Index improved in September. The stock market rally continues. Inflation is tame.

This is not your father’s recovery, or like any we’ve seen since the end of World War II, but it’s real if very slow and uneven. Many signals are mixed.

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Comments | More in China economy and business, Eurozone, Housing, Interest rates, Investing, Jobs/Unemployment

February 9, 2012 at 9:40 AM

Less than meets the eye in mortgage settlement

Five big banks have agreed to a $25 billion settlement over mortgage abuses. There’s much reason to be suspicious about the deal. About $20 billion is supposed to be “spent” by Bank of America, JPMorgan Chase, Citigroup, Ally Financial and Wells Fargo to help underwater homeowners refinance and give relief to others in danger of foreclosure. What this really means is open to question. Only about $5 billion in bank money is really involved, a slap on the wrist. It’s unclear whether second liens will be addressed.

The best journalism on this issue has been committed by the blog Naked Capitalism. It points out that the settlement includes “roughly $17 billion is credits for principal modifications, which as we pointed out earlier, can and almost assuredly will come largely from mortgages owned by investors. $3 billion is for refis, and only $5 billion will be in the form of hard cash payments, including $1,500 to $2,000 per borrower foreclosed on between September 2008 and December 2011.”

In addition,

We’ve now set a price for forgeries and fabricating documents. It’s $2000 per loan. This is a rounding error compared to the chain of title problem these systematic practices were designed to circumvent. The cost is also trivial in comparison to the average loan, which is roughly $180,000, so the settlement represents about 1 percent of loan balances. It is less than the price of the title insurance that banks failed to get when they transferred the loans to the trust. It is a fraction of the cost of the legal expenses when foreclosures are challenged. It’s a great deal for the banks because no one is at any of the servicers going to jail for forgery and the banks have set the upper bound of the cost of riding roughshod over 300 years of real estate law.

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Comments | More in Banking, Housing, Real estate

January 9, 2012 at 10:05 AM

Why we need a consumer protection bureau

More than 500 readers voted in Friday’s poll about whether we need the Consumer Financial Protection Bureau, one of the few meaningful reforms to come out of the bubble and crash fueled by Wall Street fraud. Nearly 73 percent said we did, even though congressional Republicans have been blocking President Obama’s choice to lead the agency and have expressed hostility to the CFPB even existing.

Fresh evidence for its need came with the Sunday column by the New York Times’ Gretchen Morgenson. She details the suit by Nevada Attorney General Catherine Cortez Masto against Lender Processing Services, the giant foreclosure and default outfit that works for major banks:

With this case, she demonstrated how enlightening an in-depth study can be. The complaint, which came after a 14-month inquiry, contends that L.P.S. deceived consumers by committing widespread document execution fraud, misrepresenting its fees and making deceptive statements about its efforts to correct paperwork. Investigators interviewed former L.P.S. employees and customers and examined foreclosures the company had worked on.

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Comments | More in Banking, Consumer protection, Housing

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