The Wall Street Journal reports that Las Vegas remains vulnerable to further price drops, because banks are likely to acquire a significant number of new foreclosures in the coming year….Here’s a snip from the article:
For now, the market seems to be stabilizing, says Jeffrey Otteau, president of Otteau Valuation Group, an East Brunswick, N.J., appraisal firm. But if the job market gets much worse and mortgage rates rise sharply, “that could be the tipping point” for another drop in prices.
Mark Zandi, chief economist at Moody’s Economy.com, predicts that average national home prices will bottom out in next year’s third quarter, assuming that employment begins growing again in mid-2010. But prices in some metro areas still have a long way to fall, he believes. Prices in the second quarter of 2010 will be down about 30% from a year earlier in Miami, 27% in Orlando, Fla., 24% in Las Vegas and 23% in Phoenix, Moody’s Economy.com forecasts.
Foreclosures and short sales (in which a home is offered for less than the mortgage balance) dominate the markets in some metro areas. Satish M. Mansukhani, a market strategist in New York, estimates that such “distressed” homes account for 79% of home listings in the Detroit area and 75% in Las Vegas, but just 16% in Houston and 7% in Boston.
One big question is how much more the federal government will do to prop up housing. Congress is debating whether to extend the tax credit for home buyers beyond Nov. 30. Meanwhile, the Federal Reserve is phasing out its massive purchases of mortgage-backed securities and plans to conclude the program by the end of March. Those purchases have helped keep interest rates on 30-year fixed-rate mortgages around 5%. Mr. Zandi says mortgage rates are likely to rise as much as one percentage point after the Fed ends that support. Analysts at Barclays Capital in New York forecast mortgage rates will be slightly over 6% by the end of March.
The Internal Revenue Service is examining more than 100,000 suspicious claims for the first-time home-buyer tax break, another sign of potential trouble for the soon-to-expire program.
The measure, adopted in February as part of the economic-stimulus bill, gives first-time buyers an $8,000 tax credit in an effort to boost sales and stimulate the moribund housing market. The program is set to end Nov. 30, but housing-industry leaders are lobbying Congress to extend it.
More than a million claims for the credit have been received so far, and housing-industry experts estimated that the credit has helped generate about 350,000 home sales that wouldn’t otherwise have occurred. But some lawmakers and tax experts now say there is evidence that a significant number of the claims might prove to be unjustified, or even fraudulent.
”I am concerned about recent reports that there have been fraudulent schemes involving the credit,” Rep. John Lewis (D., Ga.), chairman of a House Ways and Means oversight subcommittee, said in a statement. The subcommittee is planning a hearing on the problems on Thursday.
The IRS said it was investigating 167 “criminal schemes” involving the credit, according to the subcommittee. IRS officials on Monday declined to describe the suspected schemes or provide additional details.
Lots of numbers in this review journal article…and not much else. But it all boils down to a whole heap of bad news….The good news? Well, uh….the bankrupcty courts are handling the increased caseload just fine, according to court trustee Brian D. Shapiro:
“The court clerks and the judges are doing a good job of getting the cases in and out,” court trustee Brian D. Shapiro said. “I don’t see any significant problems. Bankruptcy court kind of flows a lot quicker compared to other courts.”…
…Court officials and attorneys say whether the number of bankruptcy filings continues to rise or not will depend on the economy.
And Shapiro joked that until the public stops seeing all the commercials for bankruptcy attorneys on TV, you’ll know the economy isn’t getting better yet.
Hah, hah, hah.
Powerful graphic demonstrates Nevada’s housing sitch: 1 in 23 homes received a foreclosure filling in the third quarter of 2009.
A story in the New York Times indicated that the federal stimulus package hasn’t created many jobs in states hit hardest by unemployment.
Businesses with federal stimulus contracts have created few jobs in states with the worst unemployment rates, according to data released Thursday by the federal government.
The new jobs reported (reported here) come from a small slice of a sliver of the $787 billion stimulus program: the roughly $16 billion worth of stimulus contracts that were awarded directly by federal agencies, of which about $2.2 billion has been spent so far. But the preliminary data represented the first time that the federal government has reported actual job figures, and not just job estimates, and they provided the most complete snapshot yet of how one component of the sprawling program — direct federal contracts — was shaping up.
One thing was clear: while the federal contracts have created or saved 30,383 jobs, they were not directed to states with the highest jobless rates. Businesses in Michigan, whose 15.2 percent unemployment rate in August was the highest in the nation, reported creating or saving about 400 jobs. Businesses in Nevada, which had the next highest unemployment rate, reported 159. And businesses in Rhode Island, which had the third-highest unemployment rate, 12.8 percent, reported the fewest jobs: just six.
Nevada’s unemployment of 13.2 percent is the nation’s second-worst jobless rate. But the Silver State’s $57.4 million share of federal-contract money represents 2.6 percent of the total awarded nationwide, while North Dakota, where unemployment is just 4.3 percent, received 4.3 percent of funds granted. Its $96 million in contracts was almost twice the dollars Nevada companies collected.
What’s more, North Dakota reported creating or saving 219 jobs, while Nevada businesses formed or spared 159 jobs. Nevada has roughly five times the population of North Dakota.
Colorado, which has a jobless rate of 7.3 percent, received 26.5 percent of dollars awarded so far, with $583 million in contracts
Exactly how we measure this stuff is beyond the understanding of a poor, working radio producer…but then again, it makes perfect sense that people who see layoffs and foreclosures and a world of financial hurt around them, are going to be just tad cautious about going crazy with the greenbacks (I’m just sayin’….).
Anyhoo, the experts tell us it’s official, as this Bloomberg article enumerates:
Confidence among U.S. consumers fell more than forecast in October, a reminder that households remain nervous about the strength of the emerging economic recovery.
The Reuters/University of Michigan preliminary index of consumer sentiment decreased to 69.4 from 73.5 in September, which was the highest in more than a year. Measures of expectations for six months ahead and current conditions both fell. The index averaged 87.3 in 12 months leading to December 2007, when the recession began.
The highest unemployment rate in 26 years threatens to restrain consumer spending as the U.S. enters the Christmas- holiday shopping period. Minutes from last month’s Federal Reserve meeting show policy makers are still concerned that rising unemployment will curb consumer spending and lead to an anemic recovery.
“This is probably giving us a more accurate reading of what consumers are feeling,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts, who had the lowest forecast in the Bloomberg News survey. “They’re very concerned about how long unemployment is going to stay high, and they’ve very concerned about their own personal finances.”
Commercial real estate is tanking and could get worse, before it gets better, says Moody’s Investor Service. Here’s a snip from a story from the Las Vegas Sun:
Moody’s Investors Service reported Tuesday that the delinquency rate on such loans nationwide hit 3.64 percent in September, up from just 0.54 percent one year ago.
Today’s Marketplace feature an excellent interview with Harvard University political philosopher Michael Sandel. Sandel talked about the themes and ideas of his latest book, Justice: What is the Right Thing to Do?–specifically, a chapter called Morals and Markets.
Sandel talks about moral outrage people are feeling about the bank bailout, and I think he’d find lots of outrage right here in southern Nevada on that count. BLV would like to hear your perspective on this, so please tell your thoughts here.
Here’s the kicker from the interview:
SANDEL: You go up to someone on one of those street corners down by Wall Street. And you ask him or her in a quiet moment, “how do you justify this frenzied way of life that you’re engaged in?” I suspect they would give you in a reflective moment an answer something like this: “By pursuing gain and engaging in risk, we are providing the lubricant for the financial system and therefore for the economic system as a whole. And we are helping contribute to allocating capital to those projects and innovations in the economy that will make everybody better off.”
I’m not saying that every single trader on the floor would give you that answer, but I know some people who would. And that can be the starting point, I think, of a wider public conversation about the underlying moral purpose that markets serve. And once we have that conversation, we might also be led to discuss whether there are certain moral limits that markets should respect.
Listen to the entire interview here:
Yesterday the Bureau of Labor Statistics released its producer price index for residential construction. Its significant increase from July to August is a good sign for the housing market.
(belonginglasvegas.org wants to hear from you….yes, you. How have your circumstances changed over the past year? Have things gotten better or worse? How are you coping with the changes in your life, or with changes you see in your neighborhood? Send us a little about your story, here….)
Leave it journalists to have a nostalgic look back at…well, just about everything. But seriously, the folks at NPR’s Planet Money are following up with several of the folks who they profiled a year ago in their effort to tell the story of the biggest financial mess in recent memory.
A little over a year ago, NPR and This American Life partnered on a series of stories that would explain the mortgage crisis. They called it the “Giant Pool of Money”, and you can listen to the original This American Life program here. The program they made had such a big impact, that NPR/TAL ended up creating a team at NPR focused on money and finance, called Planet Money.
This past week, the Planet Money team revisisted many of the folks who they interviewed for that first show–people we have come to see as archetypes in the mortgage crisis: borrowers, subprime lenders, and those who created the complex financial instruments which repackaged debt in a way that hid the risk of that debt.
You can hear some of these characters…two of the borrowers are here:
An update on subprime lender Glen Pizzalaruso, who was making $100K a month at the height of the crisis, is here:
With unemployment 13.4%, any new jobs in Vegas are good jobs in Vegas. Last week, we heard about the bleak prospects on KNPR’s State of Nevada–a discussion with two LA Times writers about people who are currently looking for work in Las Vegas.
But yesterday in Vegas we had a little bit o’ good news: A story about the chosen few among some 160,000 applicants who went after jobs at city center. On hand at the MGM Mirage press event were (of course) select hires, including 23 year-old Mollie Ehrman. Ehrman was profiled in yesterday’s Las Vegas Sun article about the new hires.
Add to that number the estimated underemployed people in the city, and it’s likely that one-quarter of Las Vegas working people are struggling to make ends meet.
Yesterday on State of Nevada, we talked about the human cost of a city full of people looking for work. And the contrast between now and yesterday, when Las Vegas was a wellspring of employment opportunity. Guests included a pair of LA Times writers, and I played interview tape from a job fair at the Hard Rock Casino in June. The desperation among many in line was palpable then. I can only imagine what it is now.
And here’s a snip from an article on the new jobless rate in today’s Las Vegas Sun:
Las Vegas has the worst housing market in the country; casinos and construction companies are slashing jobs. Among the thousands of Californians who flocked to Las Vegas during the boom times, many are now headed home. And thousand of un (or under) employed people are scouring the city to find work.
Today, producer Adam Burke joined Dave Berns on SoN, as part of KNPR’s continuing coverage of the economy in southern Nevada, and the continuation of our series: Belonging Las Vegas.
We discussed the current state of employment (and unemployment) with Ashley Powers and Michael Hiltzik of the Los Angeles Times. They wrote an excellent two-part series on the economic meltdown in southern Nevada. She focused on the people who are looking for work in Vegas, in a piece called: Vegas Dreamers Go All In. A follow-up story on the Vegas economy, is called Luck runs out on Vegas boom.
Adam shared some of the stories he’s been hearing from people who are desperately looking for work, and played audio he gathered at a job fair at the Hard Rock Casino in June.
The segment ran between 10 and 10:30 am PST. You can listen here:
…one optimistic, one less-so. The Washington Post has a story on a UCLA study, that predicts the recession will last for awhile yet:
The quarterly UCLA Anderson Forecast released Wednesday predicts the state’s jobless rate will jump to 12.2 percent later this year – up from 11.9 percent in July – and will continue in double digits into 2011.
A summary says the nation’s economy is recovering but the state will remain mired in recession longer because it relies heavily on the slumping housing and financial industries. Budget problems also may cost many government jobs.
However, economists from the University of California, Los Angeles predict Silicon Valley’s economy will improve thanks to federal stimulus money and increased tech exports.
Signs are increasing that an economic turnaround has begun in Southern California, even as residents and businesses continue to struggle in the worst downturn in decades.
The state’s exports are growing as overseas consumers, especially those in Asia, are demanding computers, electronics and agricultural products from California. Tourists are starting to return to the region’s hotels and beaches. And home prices appear to be stabilizing in some of the Southland’s hardest-hit markets.
“All of the indicators are that the recession is over with, even in California,” said Jerry Nickelsburg, senior economist at the UCLA Anderson Forecast.
From the website Daily Yonder:
Declining housing prices, combined with a sharp rise in high-cost loans, were important factors in the recent mortgage and foreclosure crisis that has affected metro and non-metro housing markets alike. The most recent data show that non-metro residents were slightly more likely than metro residents to have obtained high-cost loans just prior to the recession.
We’ve heard about angry homeowners who trash a place when the bank forecloses…some pour cement poured down toilets, strip oput plumbing and fixtures, punch holes in the walls…..In yesterday’s R-J, an article on the potential hidden costs and fees in buying a foreclosed home.
Michael Evans bought the bank-owned fourplex near Monroe Avenue and H Street at an auction without seeing it first.
The condition of the property might have scared off other investors, but he has been rehabbing and renting out property for a long time…..
…Then he ran into something new.
“I thought everything was great until the letter came in the mail,” Evans said.
The letter, from the city of Las Vegas, informed him that a previous, neglectful owner had racked up more than $60,000 in fees and fines because the city had to hire someone to board up the building and pick up trash.
Temp jobs on the rise in Las Vegas….article in the Sun calls this an early indicator.
There are two factors potentially at play, said Brian Gordon, principal at Applied Analysis, an economic consulting firm.
One is that employers are starting to see increased demand and are seeking temporary workers as they feel out the market. Another reason might be that when companies laid off employees, they let too many go and are now short-handed, he said.
The New York Times writes about a woman who was given the runaround from her lender. And she decided to go to the mat–in court. Last week, an angry judge gave her an opportuntiy to grill her lender’s attorneys in court…article is here.
Bobbi Giguere had no luck in securing a loan modification from her mortgage servicer, Wells Fargo. For months, she had sent the bank the financial documents it requested to process her modification. But each time she called to check on the request, she was told to send her paperwork again.
“I submitted the paperwork three times, and nothing happened,” said Mrs. Giguere, 41, who has a high school education and worked as restaurant manager before losing her job.
On Thursday, something happened. She questioned a Wells Fargo official about the bank’s lack of response — under oath.
The spectacle of a high-ranking banking executive being grilled by an ordinary homeowner was the result of an unusual decision by Judge Randolph J. Haines of the United States Bankruptcy Court to summon a senior executive from Wells Fargo to appear in Mrs. Giguere’s bankruptcy case.
Two articles. Here’s an opinion column in the Financial Times:
Too often, we confuse ends with means. One of the criticisms of our economies in the years prior to the crisis is that they did exactly that – a financial sector is a means to a more productive economy, not an end in itself.
This one, from Bloomberg news:
Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”
Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks,
Nothing like a story like this to spark more populist anger at banks:
Bernard L. Madoff’s massive fraud stunned some of the wealthy denizens of Malibu Colony, especially when a couple devastated by the scheme surrendered their oceanfront home to Wells Fargo Bank.
But some neighbors say the real shocker came when they saw one of the bank’s top executives spending weekends in the $12-million beach house and hosting eye-catching parties there.
Paul Krugman’s recent article from the New York Times Magazine:
It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession…
…Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy.