Financial News

[Balta1701]

It can't stay "This" bad because it's once again resumed its plummet and continuing this trend would within a year or two make all housing free everywhere...but it doesn't have to get any better once things level off. The housing market is still massively overbuilt and, combined with a Japan style lost decade and a tolerance of 10% unemployment at the national level, it could easily be depressed for well over 10 years.

[NorthSideSox72]

It can't stay "This" bad because it's once again resumed its plummet and continuing this trend would within a year or two make all housing free everywhere...but it doesn't have to get any better once things level off. The housing market is still massively overbuilt and, combined with a Japan style lost decade and a tolerance of 10% unemployment at the national level, it could easily be depressed for well over 10 years.

I don't see it. New construction has dropped off massively (which is good for the overall market), population increase hasn't abated that I have seen. I'd assume that some time in the next year or two, we see it go back to more or less being similar increases to before 2000 - just a little over inflation.

 

Hard to say where the EXACT bottom is - I was thinking we were in the territory late last year, but it looks now like its late this year or early next, from what most experts are saying. Overall, the current period is good for buyers, if you have the capital. You can't win trying to find the exact bottom of the market. Looking back in a few years, it will be somewhere in the 2009-2011 period, more or less.

 

[Balta1701]

I don't see it. New construction has dropped off massively (which is good for the overall market), population increase hasn't abated that I have seen. I'd assume that some time in the next year or two, we see it go back to more or less being similar increases to before 2000 - just a little over inflation.

 

Hard to say where the EXACT bottom is - I was thinking we were in the territory late last year, but it looks now like its late this year or early next, from what most experts are saying. Overall, the current period is good for buyers, if you have the capital. You can't win trying to find the exact bottom of the market. Looking back in a few years, it will be somewhere in the 2009-2011 period, more or less.

The number I'm watching as sort of a tell-all is the "months of supply remaining". Normally in a non-depressed market, there's somewhere in the range of 5-6 months of supply available. At the peak of the collapse in 2008, we saw 11 months of supply on the market. The housing credits hit and took some of that away because it created an investment opportunity again...but now that those credits have ended, the reports from a lot of areas suggest that right now may be the slowest time for housing sales in years/decades, and we might well push a new record of 12+ months of supply on the market.

[jasonxctf]

I'll give you a live example of why people are struggling with a refinance of mortages today.

 

My wife and I bought our home in Dec 2006. We put 20% down so we could avoid having to pay PMI and wouldn't have to escrow our taxes.

 

From then until today, rates have dropped nearly 2%.

 

According to Zillow (which seems to be the site that all banks use along with appraisals to assess your value) my homes value has dropped by $70,000. And quite frankly, we're lucky with that number. Many other areas in Chicagoland value has dropped by a far greater percentage.

 

Thus, with the way the amortization schedule works, the loss in home value exceeds the principal paid in each month.

 

So for me to re-finance today, again without having to pay PMI or Escrow my taxes, I would need to come to closing with nearly $19,000. Plus, I would have to pay closing costs, fees, titles, assessments, etc. So I'd estimate that the total cost would be around $21-22,000. That would be to save $200 per month in payments. So it would take me 100+ months, to break even on what I'd have to bring to closing.

 

Now, I could re-finance, pay the $3,000 in costs/fees but now have to pay PMI to save the $200, however PMI alone would be $150 per month. So where's the savings?

 

So I'm forced to sit on the sidelines until either (1) My property value starts to recover or (2) I continue to pay down the principal to get me back to 20% of the value... all while keeping my fingers crossed that rates don't go back up.

[NorthSideSox72]

I'll give you a live example of why people are struggling with a refinance of mortages today.

 

My wife and I bought our home in Dec 2006. We put 20% down so we could avoid having to pay PMI and wouldn't have to escrow our taxes.

 

From then until today, rates have dropped nearly 2%.

 

According to Zillow (which seems to be the site that all banks use along with appraisals to assess your value) my homes value has dropped by $70,000. And quite frankly, we're lucky with that number. Many other areas in Chicagoland value has dropped by a far greater percentage.

 

Thus, with the way the amortization schedule works, the loss in home value exceeds the principal paid in each month.

 

So for me to re-finance today, again without having to pay PMI or Escrow my taxes, I would need to come to closing with nearly $19,000. Plus, I would have to pay closing costs, fees, titles, assessments, etc. So I'd estimate that the total cost would be around $21-22,000. That would be to save $200 per month in payments. So it would take me 100+ months, to break even on what I'd have to bring to closing.

 

Now, I could re-finance, pay the $3,000 in costs/fees but now have to pay PMI to save the $200, however PMI alone would be $150 per month. So where's the savings?

 

So I'm forced to sit on the sidelines until either (1) My property value starts to recover or (2) I continue to pay down the principal to get me back to 20% of the value... all while keeping my fingers crossed that rates don't go back up.

Just as a note... when I bought my first home, I put 10% down, and did not pay PMI nor pay taxes into escrow. I got an 80% mortgage and a 10% equity line at the start. And I simply told the primary mortgage holder I didn't want any tax escrow taken, and they said "OK". I put the money in savings each month to pocket the interest instead.

 

[Jenksismyhero]

Has anyone seen a report that divides the housing market by purchase price to evaluate the drop in value? Seems to me that the lower level homes (0-250k) weren't hit as hard. It's the higher end homes that have dropped 20 or 30%.

[Balta1701]

Has anyone seen a report that divides the housing market by purchase price to evaluate the drop in value? Seems to me that the lower level homes (0-250k) weren't hit as hard. It's the higher end homes that have dropped 20 or 30%.

I wonder if part of that isn't location...for the simple reason that California was a major part of the price increase bubble, and 0-$250 k homes in Orange County are, um...rare.

[Jenksismyhero]

I wonder if part of that isn't location...for the simple reason that California was a major part of the price increase bubble, and 0-$250 k homes in Orange County are, um...rare.

 

That's my point though. People are using all these national numbers to say how horrible the housing market it is, but what happens if you take away the west and east coasts? I know when I bought my house in May of this year, the Chicago numbers didn't match the national numbers. Prices actually increased a percent or two in a couple of the months. Obviously as a whole we've seen a dip here the last couple of years, but it's not nearly as drastic.

 

I just wonder how much the "majority" of the country has been affected by the market drop.

[Balta1701]

That's my point though. People are using all these national numbers to say how horrible the housing market it is, but what happens if you take away the west and east coasts? I know when I bought my house in May of this year, the Chicago numbers didn't match the national numbers. Prices actually increased a percent or two in a couple of the months. Obviously as a whole we've seen a dip here the last couple of years, but it's not nearly as drastic.

 

I just wonder how much the "majority" of the country has been affected by the market drop.

Well, the increases in "a couple of those months" were right in the period when the government was dumping a few tens of billions of dollars in to the housing market, so frankly, those really don't count.

 

Part of the answer to your question is...you're right...in a place like Texas, which amazingly had strong state level regulations of mortgage issuers, there has been much less of a housing price decline than there has been in California, where the mortgage market was the old west. But even with that...most places have seen something of a decline...and even in places that didn't have a huge bubble, unemployment is still often shooting up because of the loss of industries and retail, and unemployment has really taken over as a major driver in the housing-loss market.

 

[kapkomet]

House values didn't go clear out of control here, either.

[NorthSideSox72]

House values didn't go clear out of control here, either.

Markets like DFW and Chicago didn't get as out-of-control high, so no surprise they aren't dropping as far.

 

[Balta1701]

In the week ending Aug. 14, the advance figure for seasonally adjusted initial claims was 500,000, an increase of 12,000 from the previous week's revised figure of 488,000. The 4-week moving average was 482,500, an increase of 8,000 from the previous week's revised average of 474,500.

Highest since November.

[Jenksismyhero]

Highest since November.

 

Go Stimulus!

[Balta1701]

Go Stimulus!

Exactly, it's time for more stimulus.

[NorthSideSox72]

Exactly, it's time for more stimulus.

What its time for is a measure that doesn't provide just a temporary and artificial bump. Its time to do something that will help energize private sector jobs that will actually result in growth.

 

[Jenksismyhero]

What its time for is a measure that doesn't provide just a temporary and artificial bump. Its time to do something that will help energize private sector jobs that will actually result in growth.

 

No, we should just extend unemployment benefits. Screw spending money to create jobs, lets just pay people not to work. Trust me, eventually they'll WANT to go back to work, even if they are being paid to sit at home.

[Balta1701]

No, we should just extend unemployment benefits. Screw spending money to create jobs, lets just pay people not to work. Trust me, eventually they'll WANT to go back to work, even if they are being paid to sit at home.

You hear that unemployed people? Stop being so lazy. It's your own damn fault you can't find a job.

[Jenksismyhero]

You hear that unemployed people? Stop being so lazy. It's your own damn fault you can't find a job.

 

No, not saying that. But for people that have been on unemployment for an extended period of time, say a year, I think they should be required to do some public work to get that money.

 

 

[Balta1701]

No, not saying that. But for people that have been on unemployment for an extended period of time, say a year, I think they should be required to do some public work to get that money.

But I thought you wanted them to find all those plentiful real jobs?

 

There's an old saying...finding a full time job is a full time job. You're not finding a full time job if you're spending 30 hours a week doing service for the government.

 

Perhaps we could come to an agreement that there should be some sort of government jobs program, where the government was actively hiring people to complete tasks like rebuilding infrastructure, revamping the national parks, updating the electric grid, building some HSR, etc. I'd be totally game for that.

[Balta1701]

What its time for is a measure that doesn't provide just a temporary and artificial bump. Its time to do something that will help energize private sector jobs that will actually result in growth.

The problem is, that'll infuriate the Republicans because then it'll provide stimulus too late. Everything has to be out the door immediately, and the only way to do that is tax cuts.

 

Just like last time.

[Jenksismyhero]

But I thought you wanted them to find all those plentiful real jobs?

 

There's an old saying...finding a full time job is a full time job. You're not finding a full time job if you're spending 30 hours a week doing service for the government.

 

Perhaps we could come to an agreement that there should be some sort of government jobs program, where the government was actively hiring people to complete tasks like rebuilding infrastructure, revamping the national parks, updating the electric grid, building some HSR, etc. I'd be totally game for that.

 

It's an old saying for a reason, it's old and out dated. It is not a full time job anymore. After law school I was unemployed for a year and a half. I worked part time as a clerk and still actively sought full time employment. It takes a couple hours a day, not 8-9.

 

And that's what I mean. Put them to work, even if it's on a part time basis. Actually get something out of the billions the gov't is spending for people to sit at home. s***, even requiring peopel to work at community centers or clean up the street or whatever. Do SOMETHING.

 

[StrangeSox]

You realize you're arguing for a large government jobs program, yes?

[Jenksismyhero]

You realize you're arguing for a large government jobs program, yes?

 

If providing unemployment benefits, with the requirement of having to work for it, is a large government jobs program, then sure.

[NorthSideSox72]

No, we should just extend unemployment benefits. Screw spending money to create jobs, lets just pay people not to work. Trust me, eventually they'll WANT to go back to work, even if they are being paid to sit at home.

$250B for alt energy and energy infrastructure each year for 4 years - limited amounts in research grants and competitive awards, more so in loan guarantees, tax breaks to business AND consumers of a wide array of alternative technologies, and partnering with the various regional energy agencies on energy load balancing nationally. This is our only current hope for a 1990's like run at economic strength, when we got ahead of the curve in computers. Need to get ahead in this next wave.

 

$100B each year for 2 years in tax credits for hiring full time employees in any job, if retained at least one year.

 

$100B each year for 3 years to purchase property in distressed urban neighborhoods and rural areas, work with local governments to find best use for them - free property to new businesses for building, parks to green up areas and lower the amount of available property, whatever each area feels is best.

 

Where do we get this money? Here are some areas I'd start with...

 

--No more governmental monetary support for oil, coal and gas, period.

--Close the capital gain as income loopholes in the tax structure for individuals whose employed income comes from those sources

--Remove all tax credits or other incentive programs that pay anyone anything for building new homes

--Whatever the amount of tax credit per employee hired is, have the reverse done for each job removed if replaced overseas - a tax penalty

--Allow the Bush income tax decreases for the top few brackets to expire

 

[Balta1701]

--No more governmental monetary support for oil, coal and gas, period.

--Close the capital gain as income loopholes in the tax structure for individuals whose employed income comes from those sources

--Remove all tax credits or other incentive programs that pay anyone anything for building new homes

--Whatever the amount of tax credit per employee hired is, have the reverse done for each job removed if replaced overseas - a tax penalty

--Allow the Bush income tax decreases for the top few brackets to expire