Here in DC, the housing market seems to be seriously heating up again. If houses sat on shelves, they'd be flying off of them--in the "transitional" neighborhoods that I keep my eye on, an easy majority of the new listings for homes under $500,000 last fewer than ten days.
It's hard to square this with the new report from the Mortgage Bankers Association, which indicates that fully one in seven mortgages in the United States is now delinquent. That's almost 15% of all mortgages, for those who flunked fraction.
It's now conventional wisdom that the causes of foreclosure have shifted dramatically over the last twelve months. The early foreclosures were usually due to some form of bad faith on the part of the borrower (or their lying, thieving mortgage broker): either they lied on their documents, and simply didn't have the kind of income they'd need to support their house; or they were investors who were speculating on the house, not planning to live in it, and they stopped paying the mortgage as soon as it became clear that they were simply throwing good money after bad. In other words, it was fundamentally a problem of excessive home values which have now fallen. Mortgage modifications were aimed at easing that problem.
Now, that wisdom says, "it's an income problem". One in ten workers does not have a job, and which for many means that their household cannot support any sort of mortgage payments.
This is true, so far as it goes. But the kicker is that income problems are price problems. In ordinary times, in most markets, you might see delinquencies . . . but someone who actually simply could not make their mortgage payments would have been able to sell the house rather than go into foreclosure, shred their FICO score, and possibly end up with a deficiency judgement.
A strengthening market should be preventing further foreclosures. But that's not even true in DC, where you see new short sales and bank-owneds coming on the market every day. Whatever the first-time homeowner's tax credit did, it didn't save the American homeowner from pretty deep devastation.
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Well, the simple explanation is that not everyone lives in a hip transitional neighborhood in DC.
More distressingly, perhaps, is the idea that, after the housing correction, not everybody whose mortgage is in trouble can get out of trouble by selling their house if they have little to no equity in it. It's not too hard to sell now if you're in a sufficiently attractive neighborhood and offering a bargain price (especially with the new home buyer credit). But not all people whose mortgages are in trouble are able to offer a bargain price.
I just googled "Washington DC foreclosures" and yahoo/real-estate listed over 750 hits with a median price of just over $250K
While I can understand that you choose to not live in a sketchy neighborhood,
might I suggest that you cross that evil bridge across the Potomac and look for reasonable housing in Virginia?
Or, you can ask The Atlantic for "combat pay" to live in our nation's capital.
If I worked in Tyson's instead of Manassas I'd be looking at Anacostia. Not as dangerous as you might think (at least for a single,middle-aged, white guy), good public transport, decent low-cost housing.
Agreed.
The beautiful Ms Angst and I have talked about moving our boat (We live aboard when not in San Francisco) to the GangPlank marina to further "swim in the cultural mélange of DC."
The reason that foreclosures are increasing is simple: The Obama Administration has squandered job creation money on pet Democrat causes instead of using it to create jobs.
MSNBC: "A rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure, adding to concerns about the strength of the economic recovery.
"Driven by rising unemployment, such loans accounted for nearly 33 percent of new foreclosures last quarter. That compares with just 21 percent a year ago, when high-risk subprime loans made during the housing boom were the main reason for default."
Money that could have been spent to create jobs has instead been squandered by the Democrats on things like:
* a $9 million dollar footbridge between two parking lots for Bob Kraft at Gillette Stadium (why can't Gillette or Bob Kraft pick up the cost of the footbridge at its stadium)? Why must taxpayers be forced to pay for Barack Obama's corporate welfare?
* Hundreds of thousands of dollars for a security system for the Spirit of Boston cruise ship. Jobs created: 0
* $1.5 million in job creation funds were instead bait-and-switched to fix up the lighthouse on Monomoy Island, a remote strip of sand off Cape Cod with no residents, no electricity, and no roads. New permanent jobs: 0
* Holyoke Community College is diverting about $200,000 in job funds for the redevelopment of the school's website. Jobs created: 0
* UMass Boston diverted $100,000 in job funding this year for a proposal to use pollen to study "environmental change and socioeconomic differentiation during the Viking Age settlement of Skagafjordur, Iceland." Viking Jobs created: 0. American Jobs created: 0
The Obama Administration has proven itself to be criminally incompetent and is wasting our tax dollars on stupid stuff. We can wait around until we're all out of jobs, or we can impeach this moron now and get it over with.
What, exactly, kind of "permanent" jobs would you prefer to have created? Give the money to a factory owner to hire someone for 3-4 years?
That spending does create jobs, though temproary. SOMEONE has to do the web work, repair the lighthouse, or manufacture and install the security system.
However, the best thing that oculd have been done would be either to rebate the money to taxpayers or to fund current spending instead of selling bonds and sticking my kids with the check.
I understand that you wish the Federal Government would give employers money so they could hire you, but your constant whining for MY tax dollars as a handout is getting tedious.
"That spending does create jobs, though temproary. SOMEONE has to do the web work, repair the lighthouse, or manufacture and install the security system."
Nope. You're wrong. The Boston Globe investigated this claim. Those people already had those jobs and would have kept them - according to the companies that were asked by the Globe.
No new jobs were created.
No new jobs were created by the Viking pollen research. No Viking jobs. And no American jobs. But now the money is gone. It's been squandered by the Obama Administration and no jobs were created.
Were the tasks performed by a private company, or government employees? If by private industry, the work may have forestalled a layoff.
I suppose you're going to tell me that no jobs were created by the building materials consumed, that they just magically appeared, untouched by human hands.
"Were the tasks performed by a private company, or government employees? "
The Boston Globe reports that no new jobs were created by this squandered spending. You can call them up and scream at them if you like.
Let me explain it to you in terms you can understand: When UMass Boston diverted $100,000 for Viking pollen research ... that money paid for a researcher who already had a state college job and was in no danger of losing that job according to the Boston Globe. All it did was to ensure that researcher continued to keep getting his government paycheck.
Government was thus expanded. But no private sector jobs were created by that wasteful spending of your tax dollars. Some hack got to pad his pension ... that's all.
If you can't figure out how they're stealing your money to line government employee pockets, then go educate yourself.
"I understand that you wish the Federal Government would give employers money so they could hire you, but your constant whining for MY tax dollars as a handout is getting tedious."
I would prefer your tax dollars to be used correctly instead of being wasted on Democrat pet projects.
Buddy, as long as Barack Obama is the President, you ain't getting your fucking tax dollars back. We can spend them on Viking pollen, or we can use them to create jobs, but you ain't ever seeing your money back.
Up to you, pal. Which do you prefer:
1) Viking pollen research
2) Jobs
Pick 1.
Your poor thinking skills and foul language (indicative of more poor thinking skills) explain why #2 will likely never apply to you.
Lunch break over for me. I'm back to work.
John Galt wasn't supposed to have a job.
LOL.
movetypoguy is just mad that they didn't pay him to open a Dairy Queen. Or hire him there. Probably thought that he might scare the customers away.
Your experience further illustrates the disturbing divergence between DC and the rest of the USA.
Apparently, housing costs are going up because DC has one of the few growth industries in the country.
It's not unlike skyrocketing house prices in San Jose, CA a decade ago...but unfortunately, an "industry" with the power to tax and the power to imprison tax evaders is not ever going to "bust" the way the dot-commers did.
Darn, Galt beat me to the punch on the obvious square to Megan's puzzled circle.
Just all me "Francisco", I guess...
John Galt beat me to the punch also.
What we are witnessing is the consolidation of wealth (along with power and control) from previously diverse power centers throughout the country, to politicians in DC.
If you wanted to make cars, you used to go to Detroit. Now you go to DC.
If you wanted to drill for oil, you used to go to Houston. Now you go to DC.
If you wanted to break into banking, you used to go to New York. Now you go to DC.
It is not a pretty picture.
exactly. If you go up 95 a little to Baltimore, there are plenty of houses for half the price of what MM thinks is reasonable that have been sitting on the market for months, at prices that are substantially below what they were asking a few years ago for the same/similar houses. And that's with the 8 grand giveaway to new homebuyers and interest rates that are at a historical low. And that's in the suburbs. If you go to neighborhoods like Fells where there was a lot of speculation, rehabs, and flipping, the inventory is even higher and the discounts much bigger
DC is the exception.
"Here in DC, the housing market seems to be seriously heating up again.
...
It's hard to square this with the new report from the Mortgage Bankers Association"
Really? It's hard to figure out why the DC home market might be heating up in an era of exploding government spending on everything under the sun?
So, basically, you're wondering why the company town of DC, where the company is The Federal Government, seems to be such a hot place to live when the company (again, this is The Federal Government) is growing like gangbusters?
"Whatever the first-time homeowner's tax credit did, it didn't save the American homeowner from pretty deep devastation."
Here's what it did: It took the money out of John Murtha's empty airport and returned it to its rightful owners ... the taxpayers.
That's what you have to remember, Megan. As long as the money is still in Washington, D.C. it's being wasted on Viking pollen research and other bullshit that doesn't create a single job for anybody.
Barack Obama is criminally wsting money on stupid crap - purposely to keep America down. He could be asking Congress to spend this money to create real jobs ... but he's not doing that is he? We can put up with his crap ... or we can recall Barack Obama by impeaching him.
He's clearly not up to the task and he's not taking employment seriously as a pressing issue in the country. He's destroying home values for every American homeowner. He's not even in the fucking country. He's in China building up their economy. That's how out of touch he is.
It's time to fire Barack Obama.
Quickly. Before it's too late.
"...it's being wasted on Viking pollen research and other bullshit that doesn't create a single job for anybody."
That's an idiotic comment. I don't know what "Viking pollen research" entails, but it probably involves things like boat rental, maybe computers etc. The other items you mentioned certainly "create jobs" by requiring steel, concrete, paint, and hiring of both skilled tradesment (plumbers for the cruise ship) and laborers.
I agree that the private sector probably could have "created" more jobs with the same money, and that the multiplier with government spending is, if not negative, at least lower than private sector, but the argument that no jobs were created is just wrong.
"I don't know what "Viking pollen research" entails ..."
Then you should go educate yourself about how Barack Obama is wasting your tax dollars before you pop off.
K?
Barack Obama could spend the money on Viking pollen research, or he could spend it on job creation.
He chose Viking pollen.
You never answered how you think jobs should be "created" by government spending.
Further, you seem to be saying that Viking pollen research is just magically done, with no human involvement. Care to explain?
"You never answered how you think jobs should be "created" by government spending."
If the government ordered 200 new nuclear reactors to be built in the next 365 days ... it would reduce our dependence on Saudi oil and millions of new jobs would be created.
That's just one example. Is that so hard to figure out?
Instead, Barack Obama went to Saudi Arabia and bowed to their King.
We need a president who isn't giving handjobs to our enemies and works instead to employ Americans.
That money was nothing to sneeze at.
And it wasn't a handjob. It was a bowjob.
Is Galt Industries now a govenment sub contractor?
Has the great Radical for Capitalism become another Obama Coporate communist?
What would your messiah AR think of you now?
As I said more than once...I don't think ANY of that money should have been spent. It either should have been rebated to the taxpayers, or been used to reduce the amount of debt the government has issued.
The point of the response was to point out movertyperguy's Magical Thinking that no jobs were created either through labor or the consumption of goods required to complete the funded projects.
I think we can all agree that it is an inefficient use of money, but some economic activity must have occurred.
I eagerly await movertyperguy's scatological and poorly reasoned response.
Galt,
I generally agree with you but not all government spending is equally wasteful, which i think is Mover's point.
The money used for viking pollen research he referenced, probably wound up in the university endowment. My favorite stimulous project was $5 billions to study (not build) a hi speed rail between la and vegas. As a long time so cal resident I can state with 100% certainty that no such rail line will ever be built. The feds might as well have taken 5 billion $1 bills and had a huge bonfire.
If the feds had built $700 billlion worth of nuclear power plants the public would have gotten something of value for the
money, maybe only 50cents on the dollar, but the way the money has been spent the country gets absolutely nothing of any value.
Personally the best way to have spent the money would be to give every citizen $2,600 ($10,400 per family of 4). That would have definitely had stimulated the economy.
"You seem to be saying that Viking pollen research is just magically done, with no human involvement. Care to explain?
According to the Boston Globe, which investigated this particular waste of government funding, this $100,000 was diverted to pay for the salary of a UMass Boston researcher who was in no danger of losing his job. It gave him something to do (instead of the researcher being idle).
No jobs were created. But a hack government employee was given a task to perform and this money was diverted to pay his existing salary and benefits instead of used to create a new job for someone in the private sector.
That's how your tax dollars are being wasted by your stupid President and it is why unemployment continues to rise on his watch. He's telling Americans he's providing stimulus funds to create jobs ... when in reality he is not doing that.
He's using the money to pay government hacks who already have jobs.
So the university got a $100,000 grant. If the guy doing the research would have been paid anyway, then the university must have had $100,000 freed up to do SOMETHING. Lower tuition, paint the dorms, upgrade the computer lab, buy more books for the library...
Or else the researcher spent the money on lab equipment, supplies, hiring students to help out, etc.
Some economic activity must have occurred. Was the end product the most sensible use of the money? Probably not. But all the money had to go to someone and generate some economic activity.
"Was the end product the most sensible use of the money? Probably not. But all the money had to go to someone and generate some economic activity."
No argument there.
What it didn't do was create new private sector employment, when it could have been used for that purpose. Instead, it's used on makework projects for government hacks.
Barack Obama is squandering the money on Viking pollen research that could be done at some other time when the nation is not in the grips of the greatest financial calamity since the Great Depression.
But it's business as usual for the Democrats ... spending money studying fruit fly sex and other nonsense when instead the money could be used to give tax breaks to private sector employers who promise to hire.
You're presuming the money spent doesn't flow into the private sector. Think of what happens around a military base or other government facility. The soldiers and government workers get their pay and housing allowances and so on. But unless the facility is totally self-contained, which most aren't, a ton of money flows into the community, both in spending by individuals from the facility and purchase of the inputs the facility needs to function. Some number of private sector jobs gets created just because that money is being spent locally. The question is how many -- what the multiplier is.
If you doubt me, just look at what happens to places when the military base is closed.
That's one of the ways the government can create private sector jobs. The other is to outsource projects and have private companies bid on them.
Tax breaks for private sector hiring seems to be your preference. I'd prefer a more general tax break, which would leave people with free choice about whether to hire employees themselves or purchase more inputs from vendors (which should make those vendors hire more employees). Once you get past specific projects (and everyone will like some specific projects and hate others), I'd want to see free choice in how stimulus money is spent. But I wouldn't call that "creating jobs." I'd call it "reducing the tax burden to promote economic activity."
movertyperguy doesn't want that because, like any welfare recipient, he's looking for a handout.
He's trying to dress it up as "being willing to work," but the fact is he wants to participate in a make-work project since no one seems to want his skills.
MC and Galt
you"re both falling for the Keynsian Fallacy.
All government spending is wasteful and it is not the same.
If you think otherwise, as you are both arguing, then you are well on your way to agreeing with the socialists.
Paying bureaucrats, lawers and professors to produce mountains of paperwork is a complete drag on the economy.
Josh: Not at all. Although we agree that all government spending is wasteful, the spending did provide some kind of economic activity...even the most useless of bureaucrats buys SOMETHING. But I'll not argue further with you...if you can call me a socialist after I've said four times that the money should have either reduced the deficit or been rebated to taxpayers, there's not much I can do to break through.
I wanted to add one more thing as far as DC's housing market. The real estate-pocalypse isn't completely national. There are some areas that are not very hard hit, and there are others that are devastated *waves from sunny FL*. I was surprised that one of the drivers for foreclosure wasn't 'people walking away from their upside-down homes'. Maybe 'income flow' is code for that. When somebody loses their job and has a hard time covering the cost of their mortgage, why not walk away to a cheaper rental property?
Movertyper, I want to be civil, but I have to ask, what exactly do you think the Republicans would do in this crisis? Or better yet, which is a bigger waste? A 9 million dollar bridge which WASN'T built by faeries? Or buying off shiite militia members and pashtun warlords who may or may not stay bought anyway? The bridge is a helluva lot cheaper and at least the money stays domestic. How about a prescription drug benefit that very vehmently refused to actually REDUCE DRUG PRICES?
I would be willing to stipulate that there are stupid people in both parties. I find the current stupid less odious.
Just read the Globe article and it's not as damning as suggested.
Government wastes money. Private business wastes money. I waste money.
But I've heard that money flows, so maybe the pollen researcher got lucky on his Obama grant. Maybe felt good and bought a place in West Roxbury.
Maybe he even hired a mover.
Purely antecdotal and a little speculative, but I know two couples in the Chicago area who short-sold(IMO) their houses in order to buy a newer larger house from a developer. They are getting the new mortgage from an affiliate of the developer and sending the keys (AFAIK) to old house to the bank. In one case, I'm confident they have plenty of income to cover the mortagage payments on their old house. That's why the developer is giving them a new loan. They are thinking they will be able to score a sizeable gain when house prices recover.
forgot to add ...
So I would guess that they are going to produce statistics that show both a new home sale, and a forclosure.
I think it may just be where you live Megan. Here in Louisville a 'starter home' is in the $110,000 - $150,000 range. My wife and I have been trying to sell our 3 bedroom ranch for almost 4 months at $145,000. The Louisville market has over 9,000 homes for sale. Everyone is trying to get a steal. Our only offer was a lowball of nearly $16,000 under our asking price (and this was a first-time buyer who was going to also get an $8,000 tax credit after the deal)
It's a tough market out there for seller. I'd love to see the kind of quick turnover you all have in DC.
DC is sucking up a greater and greater amount of money via creating an expanding bureaucratic class, which will do little to create wealth.
Your statement: "which will do little to create wealth" is wrong.
"which will do NOTHING to create wealth" would be closer, but ""which will gravely harm wealth creation" would be most appropriate.
As these clowns suck more and more out of the private sector, the private sector shrivels, along with the wealth it creates.
The DC area is much more dependent on federal money, and much less dependent on the rest of the economy (much of which is in the dumps) than most of the rest of the country, so it's kind-of unsurprising that the housing market is in better shape here than elsewhere. If we ever see large cuts in government spending (if the deficit ever bites us in a big enough way to force such serious spending cuts), I expect that the DC area will be *way* harder hit than the rest of the country.
If we ever see large cuts in government spending, I also expect to see pigs flying and people in hell complaining about how cold it has been since it froze over.
Purely anecdotal, but I've heard several stories where banks will refuse to even consider modifying a mortgage until the homeowner misses a payment. If true, this perverse incentive might be skewing things as well.
It actually makes sense. If anyone could get there mortgage modified just by asking, everyone would. Right now I'm upside down on my house, thanks to buying at the top of the market, but I'm not having any trouble making my mortgage payments. If I could call the bank and get my principle reduced or interest rate cut, I would - but I'm not going to tank my very good credit score to get it.
Give it another ten seconds thought, Ms McArdle, and you will remember how well you understand the fact that the economic drivers in metro DC, aka Fed Land, which may indeed be perking up the housing market there, are not even remotely representative of the economic well-being of the rest of the country.
Getting past that observation, I don't think that this alarming one-in-seven mortgages-in-trouble statistic is as directly related to loss of job/income as you suggest. I think it's more worrisome than that. I think a lot of it is due to households that are in trouble EVEN THOUGH their incomes have remained steady. We have gone beyond the first step of distress and foreclosures in which, as you outlined, the "reach" was clearly ridiculous. We are now at the stage in which the (formerly) good credits are backed up against the wall because their ARMs are adjusting, or the back-up of their IO arrangements is getting beyond punitive, and their ongoing ability to meet their routine financial obligations was based on a scenario of ever-rising house prices and cash-out refinance opportunities that has completely evaporated. Add this to the well-off "prime" mortgage borrowers who have indeed lost their jobs and after 12 to 18 months of keeping up appearances are running out of their savings, and we do have a next wave of residential disaster in the making.