This is our economy and it’s time for us to take charge. Agreed? Read on.
From time to time the South Florida Law Blog invites people who I respect and are friends to post a blog. I introduce you to my dear friend William McCarty, an attorney who lives in the DC area.
“You can always count on Americans to do the right thing—after they’ve tried everything else.”
Winston Churchill.
After three years of record low interest rates and $2.5 trillion dollars of deficit spending we still are no closer to jump starting a self sustaining recovery. Job creation is very weak, housing contracts are anemic despite historically low interest rates and prices, and the stock market is erratic and indecisive because it trades off of short term news rather than long term fundamentals. Even if we don’t have a double dip recession, a 2% or lower growth rate means that unemployment is actually increasing because we’re not creating enough jobs to keep up with our population growth.
We haven’t been able to jump start a self sustaining recovery because we cannot replace the unsustainable phantom wealth of rapid home equity appreciation, quick stock market gains and easy credit with the unsustainable phantom wealth of printed money.
So now we have to face facts:
1. Adjusted for inflation, individual income has been flat for the past ten years and real buying has actually gone down
2. In the near and long term, either taxes will go up or services will go down or both
3. Health care and college costs continue to increase twice as fast as our income (more…)
A surplus inventory of houses caused by Florida foreclosures and short sales is the mortal enemy of home prices. Lower prices are needed to sell off excess inventories of residential properties, and in turn lower prices encourage more inventories from anxious sellers.
So how big are excess inventories and how long will it take for the real estate market to absorb them?
According to Economic Consultant Gary Shilling, we are currently facing a surplus of up to 2.5 million excess house inventories in the United States, a number that is subject to rise with further foreclosures and falling home prices.
To forecast the length of time to work off this excess inventory and have the market return to more favorable inventory and price conditions, Shilling developed projections of supply and demand for residential units.
Household formation averaged about 900,000 per year over the past decade as measured by the Census Bureau. Shilling uses this number as a reasonable estimate of yearly housing demand. However, with many college students moving back with their parents after graduation, household formation is not happening as fast as it once did.
New construction of single family homes and apartment units is running about 700,000 per year, and about 300,000 U.S. homes are torn down, converted or removed from housing stock each year. Based on these numbers, Shilling calculates new housing supply to be about 400,000. (more…)
Florida real estate finally makes the #1 list for something positive.
With the real estate market in recovery mode, owning a home is more affordable than renting in 72 percent of major U.S. cities. Miami, Las Vegas and Arlington, Texas round out the top three cities where buying is a safer bet.
Renting is more affordable than buying in only eight percent of America’s largest cities, including New York City, Seattle, and Kansas City. The Offices of Weston Title and Oppenheim Law continue to help homeowners navigate through the waters (and under waters) of Florida real estate buying, selling and investing.
The government official who recently left office over the housing crisis is someone who actually fought for the people instead of laying the groundwork for a cushy job awaiting him in the private sector. Neil Barofsky, the Special Inspector General for TARP resigned his post effective Wednesday, March 30. On his way out the door, he was still publicly arguing with the Treasury over the legacy of the $700 billion dollar Troubled Asset Relief Program (“TARP”).
Glenn Greenwald of Salon.com called Barofsky “easily one of the most impressive and courageous political officials in Washington” for his willingness to stand up to some of the most powerful people, institutions, and special interest lobbies in Washington and Wall Street.
On March 29, before his departure from office, he wrote a piece for the New York Times titled “Where the Bailout Went Wrong.” The piece, so vicious in its criticisms of the TARP program and politicians in Washington, prompted the Wall Street Journal to run excerpts from it along with their own commentary on the TARP fiasco.
Of the failed bailout Barofsky wrote: “Two and a half years ago, Congress passed the legislation that bailed out the country’s banks. The government has declared its mission accomplished, calling the program remarkably effective ‘by any objective measure.’ On my last day as the special inspector general of the bailout program, I regret to say that I strongly disagree . . . Almost immediately [after passage], as permitted by the broad language of the act, Treasury’s plan for TARP shifted from the purchase of mortgages [that would have helped everyday homeowners] to the infusion of hundreds of billions of dollars into the nation’s largest financial institutions, a shift that came with the express promise that it would restore lending.” (more…)
Small wonder that HAMP has turned into an embarrassing failure for the Obama administration.
This past weekend, I was in our Nation’s capital. It is always interesting to see things from the inside looking out, as opposed to from the outside looking in. It is like being in a house of mirrors.
One thing is apparent: the Beltway economy is not suffering like places such as Florida, Nevada, and Detroit. As a result, our elected representatives and the administration may not truly understand the depth of the housing crisis. I think they still blame the greed of “over ambitious” homeowners and speculators as opposed to the real driving force: Wall Street, the over-sized “too big to fail” banks and themselves. The buzz, of course, was the fact that Fannie Mae may have been playing its own political three card “monty” with homeowners over the past year. Simply put: whistleblower Caroline Herron, a former Fannie Mae executive and consultant, is suggesting the administration pushed for temporary modifications knowing full well that many of the loan modifications would fail prior to becoming permanent. In fact, Congress is now pushing for hearings.
Fannie Mae executives bungled their responsibilities of the federal government’s massive foreclosure-prevention campaign, creating a bureaucratic muddle characterized by “mismanagement and gross waste of public funds,” according to the suit Herron filed. The suit alleges that the homeowner-relief effort was marred by delays, missteps and executives’ preoccupation with their institution’s short-term financial interests. “It appeared that Fannie Mae officers were focused on maximizing incentive payments available to Fannie Mae under various federal programs – even if this meant wasting taxpayer money and delaying the implementation of high-priority Treasury programs,” Herron claims in the lawsuit. (more…)
As a foreclosure defense attorney, I get questions every day asking when I think the market is going to correct itself or when the foreclosure rate is going to slow.
Al Sunshine is the CBS Neighbors 4 Neighbors
I believe my friend Al Sunshine, who has been reporting for CBS4 since 1988, provided a thoughtful and honest assessment of South Florida’s economy through the next quarter in his daily blog, “Al Sunshine’s 4 Your Money.”
In short, I agree with Al that foreclosures and unemployment will continue to take a real bite out of the economy, but things will not get much worse. We hope!
Check out Al’s blog entitled, “Al’s 4th Quarter Forecast” to read his analysis of the economic indicators and signals that point to this cautious optimism.And be sure to check back with Al regularly as he provides excellent, straightforward evaluations of our not-so-straightforward economy.
The President made it abundantly clear last night that one of the bailout’s fundamental purposes is to help troubled homeowners who need to refinance their homes, thereby preventing foreclosure. Yet one of the most popular Google searches yesterday concerned one’s ability to delay or stave off a foreclosure by demanding the foreclosing bank produce the original Note.
In fact the other day in the same chamber where the President spoke, Congresswoman Marcy Kaptur from Ohio begged residents throughout the US to not just walk away from their foreclosed homes, but to fight and hire a “good lawyer” that can go up against the Wall Street attorneys! The video is circulating the internet like wildfire and the related search terms have hit the top of the Google Chart. See the video for yourself.
I was flawed to see a Congresswoman advocating our hypothesis or thesis on the floor of the United States Congress! Nothing feels better than a little positive reinforcement. The issue of lost notes and lost mortgages is a fundamental constitutional issue concerning due process and jurisdiction.
So as President Obama tries to tackle energy independence, education and healthcare… all at once, the public is trying to figure out how to keep their families from losing their homes to foreclosure since the President has little to offer those folks in the stimulus package for now. So… it is for the time being up to the lawyers to fight this battle. As the President noted, as Americans, we are up to the challenge.
This is our economy and it’s time for us to take charge. Agreed? Read on.
