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Posts Tagged ‘recession’
Friday, October 16th, 2009
 A report by a bipartisan Congressional oversight panel ruled today that the Home Affordable Modification Program (HAMP) is not doing enough to help the current drivers of the foreclosure crisis – borrowers with good credit who have lost their jobs and those with complex mortgages. While the administration has lauded HAMP as it reached the crucial mark of 500,000 mortgages given trial modifications, the report counters. Many of those with modified mortgages will see their payments rise significantly after 5 years, leading some to argue that foreclosure is being postponed, not avoided.
It is true that the problem in the foreclosure crisis now is no longer sub-prime mortgages. Alt-A mortgages, and other products with ballooning rates, have hit many hard. Many borrowers with good credit have also been hit, especially those that have lost their jobs or have seen their home values plummet in recent months. Finally, as we have reported, foreclosures in high value areas have increased as well. As a result, modifying sub-prime mortgages or mortgages with high interest rates will not help many of the borrowers at risk or already in foreclosure. A new solution will be necessary to allay the losses of the recession.
Tags: foreclosure, HAMP, Home Affordable Modification Program, Mortgage, mortgages, recession, sub-prime mortgages
Posted in Consumer News, Industry News | No Comments »
Monday, August 10th, 2009
 An article in the New York Times today focused on a new phenomenon: The absolute auctions of multi-million dollar mansions. In an absolute auction, there is no minimum price, and the buyer agrees to accept the winning bid. The home chronicled in the auction was appraised at 14 million only two years ago, but sold in auction for 2.5 million last week, sending the home owner into personal bankruptcy.
The article was a sad story, as it highlighted the increasing interest in selling mansions at auctions–often pushed by creditors to do so or on the brink of foreclosure. The day before the home was auctioned, its belongings were auctioned. And still in the case of this homeowner, it was not enough to stave off financial disaster. In a way, it seems that selling homes at absolute auction, while a way to get something for the home, doesn’t give always give the homeowners all the money they need. But it depends on the situation: another man was able to sell his home in an absolute auction, still cover the cost of his mortgage, and only take a $200,000 loss. Nonetheless, the auctions are a sad phenomena of the weak market for luxury homes and the recession itself.
Tags: absolute auction, auction, auctions, foreclosure, luxury homes, mansion, mansions, multi-million dollar, New York Times, recession
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Monday, August 3rd, 2009
 A front page story in the Wall Street Journal this morning highlighted an interesting trend; high-end homeowners are being left behind in the housing market rebound. Stimulus programs, such as the $8,000 new homebuyer tax credit and low mortgage rates, are dependent upon income and home values. The jumbo mortgages necessary to take out a high-cost home have come with higher rates and lenders requiring an increasingly large portion as the down payment (20-30% of the property value). All this comes at a time when prospective buyers have had an even harder time selling their homes, making coming up with money up front difficult. As a result, while the market has begun to turn upwards for many first-time buyers and lower value homes, the market is still stagnant for those in the upper and upper-middle classes.
While it is perhaps unsurprising that stimulus programs might choose to target those with lower incomes, the recession has hit those with higher incomes as well. Many of the people affected by the stock market crash and financial fraud scandals are those who were making upwards of $150,000/year. After losing their jobs and/or the majority of their 401Ks, some members of this group are taking pay cuts in order to land new jobs. As home values decline however, this group also is beginning to have a hard time making mortgage payments and qualifying for relief. Jumbo mortgages are currently the type of mortgages with the highest default rate.
The government should do something to make sure that the upper middle class and upper classes are not completely cut out of the stimulus programs–at least so far as real estate is concerned. Their homes are taking some of the largest hits in a distressed market, to the point where selling is not possible without losing hundreds of thousands of dollars. And in markets such as California, some are extremely upside down on their mortgages. While they may be well off in comparative terms, they could still lose their homes (and many are), could still lose their jobs and source of income (and many have), and they still should be granted some form of relief.
Tags: California, front page, housing, housing market, jumbo mortgage, jumbo mortgages, Mortgage, mortgages, real estate, recession, relief, stimulus programs, underwater, upper class, upper middle class, Wall Street Journal
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Friday, July 17th, 2009
 More people are starting to build new homes again, or at least, that’s what the numbers from the unexpected rise in housing starts in June appear to show. The number of housing starts rose 3.6% (or about 20,000 seasonally adjusted starts) to 582,000 units. Even larger leaps were seen in the number of housing starts of single family homes (14.4%) and the number of permits to break ground (8.7%). Analysts had expected these values to remain unchanged from previous months.
While the number of housing starts and permits to break ground are still down around 50% from a year ago, the increase is still a sign of progress. It seems that few aspects of the real estate industry have defied analyst’s expectations recently, and the large unexpected jumps are a definite exception. Although one wonders slightly whether developers will be able to fill all their new properties, it is good to see people building homes again. Perhaps once the new properties are completed, the worst of the recession will be over.
Tags: break ground, home, homes, housing, housing starts, June, permits, real estate, real estate industry, recession, single family homes
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Monday, June 8th, 2009
 A professor of economics and finance at Yale, Robert Shiller, wrote in Sunday’s New York Times that he does not expect the rebound of the housing market to be very swift. He wrote about why the housing market often does not follow typical cycles of supply and demand, tending to lag. The article is especially interesting for its use of historical examples, such as the 15-year long burst housing bubble in Japan and the 7-year market drought in the US in the early 90s.
It is also true, as Shiller points out, that it takes individuals longer to make housing transitions than stock transactions. The decision to move can have a long chain reaction, including new schools, doctors, and houses of worship. When the decision is made by a couple, it requires the consent of both parties. Then there is the sheer amount of stuff that needs to be packed, moved, and unpacked. Even renters don’t rejoice in the task.
Such a viewpoint, supported by historical fact, serves to move the debate about the rebound of the housing market from its current waiting game (Is this the bottom? No wait, is THIS the bottom? Or is it THIS?) to one of settling in for the long haul. Frankly, despite all the articles debating whether we should be optimistic or pessimistic in regards to the market (for example: http://www.reversemortgageguides.org/news/housing-market-declining-and-improving-at-the-same-time) , settling in for a long term slowdown of the housing market appears to be the wisest course of action.
Tags: economics, finance, housing, housing bubble, housing market, Mortgage, New York Times, recession, reverse mortgage, Robert Shiller, Shiller, supply and demand, Yale
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Wednesday, May 27th, 2009
 A NYTimes graph displaying traditional forward mortgage rates for the NY region Although reverse mortgages require no mortgage payments, many homeowners still have traditional forward mortgages. It is in the context of this traditional market that the following information applies:
The New York Times reported this weekend that 15 year fixed rate mortgages have surged in popularity recently. The number of 15 year fixed rate mortgages increased 56.6% from January to February. While these mortgages may seem attractive, sometimes saving borrowers tens of thousands of dollars in interest payments, lenders counsel that with higher payments, those with 15 year mortgages are more likely to have trouble making payments should they lose their job or encounter another financial emergency. One lender in the article proposed getting a 30 year mortgage and making the payments to pay it off in 15 years, but that way if there were an emergency, the borrower would have a cushion.
I do think that unorthodox thinking appears to be one of the best ways to get through the recession and through nearly any crisis. It is unsurprising that borrowers are looking for low rates (rates on the 15 year fixed rate mortgage are the lowest they’ve been since June 2003). In addition, being able to pay off a mortgage in 15 years is becoming a more and more tempting opportunity for borrowers who don’t want to have to make mortgage payments in retirement–another factor that has made reverse mortgages tempting.
Tags: 15 year, 30 year, borrower, borrowers, fixed rate mortgage, fixed-rate, homeowner, homeowners, Mortgage, mortgages, rate, recession, retirement, reverse mortgage, reverse mortgages
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Friday, May 15th, 2009
 more seniors are in the workforce According to a poll released by the Pew Research Center today, Americans over the age of 65 are suffering the least during the recession. Fewer seniors reported trouble making rent or mortgage payments or being forced to cut back on household expenses. In addition, only 7 percent reported trouble finding health care (a third of the percentage of younger adults), and only 23 percent reported losing more than 20 percent of their investments last year, well below the numbers of those younger.
Finally, the number of seniors with jobs increased by 3.9 percent. While the rise in the number of seniors in the workforce may indicate that some were forced back to work, at least they were able to find jobs. In fact, in the current economic climate, the younger the worker is, the least likely they are to be laid off.
Some analysts appear unsurprised that seniors have fared well. Their lifestyles are often already scaled back, and their investments are generally more conservative than their younger counterparts. Nonetheless, it is good news.
Tags: economic climate, jobs, lifestyles, recession, reverse mortgage, senior, seniors
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Wednesday, April 22nd, 2009
 While this may not come as a large surprise given the state of the economy, the Census Bureau reported today that the rate at which Americans moved in 2008 was lower than in any year since 1962. In terms of the raw numbers, it was the worst year since 1949-50. The 35.2 million people who changed residences is a decline from the 37.8 million who did in 2007. Those who moved were likely to be poor, black, unemployed renters.
Perhaps unsurprisingly, the number of interstate moves is where the decrease was felt the worst. Some predict that local moves will increase in the recession as people search for cheaper housing or move in with family members.
While the moving statistics are not the same as many of the traditional real estate statistics since they include renters, they are an indicator of the health of the market as well as an interesting demography measure. And while, in another report, the number of mortgage applications increased 5.3% last week, mortgage applications to purchase a home were down 4.2% (seasonally adjusted).
It looks like as the recession continues, people appear likely to try to make do with what they have (refinancing their mortgage, taking out a reverse mortgage, or simply staying put) than make a big change.
Tags: census bureau, demographics, demography, economy, housing crisis, Mortgage, mortgage applications, moved, moving, recession, refinance, reverse mortgage
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Tuesday, April 7th, 2009
 Reverse Mortgage lenders come in all sizes, big and small. Therefore what is happening to small businesses given the recession concerns the industry at large. The Wall Street Journal published an article on the effects of the credit crunch on small businesses. Needless to say, the picture wasn’t pretty. Since the recession began, credit card companies have been cutting credit lines and raising APRs and minimum payment fees. Credit cards are the most common form of small business loan, and these cut backs have had an effect. The number of businesses filing for business bankruptcy is higher than the number of individuals filing.
This does not mean that small businesses cannot flourish during the recession; many are doing quite well. However it does mean that expenses may be tighter for some of the smaller reverse mortgage companies this year. From an industry perspective, continuing to have small lenders is a positive thing. The increase in competition is healthy for any business, as is the prevalence of loan officers scattered throughout the country, convenient for seniors everywhere. Reverse mortgages have been flourishing, and hopefully this diversity does not fade.
From a consumer point of view, the increase in financial trouble for small businesses has led many individuals to look into reverse mortgages. In some cases, it can help seniors raise the funds they need to keep their business.
Tags: bankruptcy, credit cards, credit crunch, foreclosure, hecm, recession, reverse mortgage, reverse mortgage companies, reverse mortgage lenders, reverse mortgages, small business, small businesses
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Monday, March 9th, 2009
Haute Couture for Kids
And now for a change of pace. My hometown paper, the NY Times, just published a great human interest piece on the changing patterns of consumption in America. I really recommend the piece, as some of the anecdotes provide interesting food for thought.
A few examples:
Sasha and Malia wore J.Crew to their father’s Inauguration instead of designer apparel. The Times chalks this up to Obama’s push for fiscal responsibility. While I did not find anything particularly remarkable about the choice to wear J.Crew (which isn’t that cheap), I had trouble thinking of alternatives (Calvin Klein suits?).
Some economists believe that increased consumer spending is the only way to jolt America out of the recession. Of course, this is the opposite of the behavior that is currently being witnessed. Is there something that can be done to spur more spending, or is the change cultural and/or ethical and therefore on a deeper level than policy?
Is consumer spending an ethical issue? At what point is it considered an excess to spend money? I’m curious as to your thoughts.
NY Times: Even Well-off Consumers Aim to Be Less Conspicuous
Until next time.
Tags: economy, NYTimes, recession, shopping, spending
Posted in Uncategorized | No Comments »
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A report by a bipartisan Congressional oversight panel ruled today that the Home Affordable Modification Program (HAMP) is not doing enough to help the current drivers of the foreclosure crisis – borrowers with good credit who have lost their jobs and those with complex mortgages. While the administration has lauded HAMP as it reached the crucial mark of 500,000 mortgages given trial modifications, the report counters. Many of those with modified mortgages will see their payments rise significantly after 5 years, leading some to argue that foreclosure is being postponed, not avoided.
