Q: How do you characterize the economy right now?

A: The economy is getting stronger every day, and I would say it’s rather broad-based, and hopefully this will continue. That’s true globally. It’s good for America when the rest of the world grows, because you can sell more to the rest of the world. Large corporations are in very good shape, have plenty of capital and are starting to expand. But we also see the same thing from middle market-sized companies and small businesses. Our small-business lending is up 37% this year. Other banks are also seeing more loan demand in middle markets and small business.

Q: What about foreclosures in the pipeline? How do you see that playing out, and why hasn’t the housing market participated in this recovery?
A: The mortgage pain is just a terrible story. Too many mortgages were badly done. I’m not talking about us. But foreclosures haven’t quite peaked yet. We’re probably halfway or two-thirds through the problem….

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Despite severe losses during the recession, the majority of African Americans see the economy improving and are confident that their financial prospects will improve soon.

That optimism, shared to a lesser degree by Hispanics, stands in stark contrast to the deeper pessimism expressed by a majority of whites. In general, whites are more satisfied with their personal financial situations but also more sour about the nation’s economic prospects.

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Before the real estate bust, Rob Paxton and Susan Schneider might have met at a networking event or through their home-buyer clients. Instead, they first crossed paths at a day shelter for the homeless in Falls Church.

Schneider, once a mortgage broker with plenty of disposable income, arrived one cold winter morning with her possessions in tow, looking for a hot meal.

In the kitchen, Paxton stirred a bubbling pot on the stove. He once pulled in more than $200,000 a year in Northern Virginia, but he had taken the part-time job as the shelter’s director when his commissions dwindled to almost nothing….

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Fannie and Freddie are failed experiments in social policy. Their government charters allowed them to borrow for less than other companies, which gave them easy money and easy profits. And their odd status as government-chartered entities that were also publicly traded corporations set them up to profit by putting taxpayers at risk.

The Treasury Department presented three options. The first would simply wind down Fannie and Freddie as the housing market recovers, leaving nothing in their place. The second would create a government agency that would lend during crises when private credit died up. The third would put government in the reinsurance business, selling policies that would guarantee mortgages in case a primary guarantor from the private sector foundered.

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The down payments demanded by banks to buy homes have ballooned since the housing bust, forcing many people to rethink what they can afford and potentially shrinking the pool of eligible buyers.
Last week, the Obama administration called for gradually raising down payments to a minimum of 10% on conventional loans, meaning those that can be bought or guaranteed by mortgage giants Fannie Mae and Freddie Mac. And mortgage data show that private lenders are already pushing sharply higher the required down payments, mainly to mitigate their risk as home prices continue to fall.

The median down payment in nine major U.S. cities rose to 22% last year on properties purchased through conventional mortgages, according to an analysis for The Wall Street Journal by real-estate portal Zillow.com. That percentage doubled in three years and represents the highest median down payment since the data were first tracked in 1997.

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Business is picking up for retailer Renee Charlton in this small manufacturing city on Lake Michigan, but that may not be a good omen for residents. She sells secondhand clothes.

Residents who waved flags as President Obama sped through their eastern Wisconsin community last month have been shopping at consignment and thrift shops out of necessity, says Charlton, owner of On Second Thought, which sells women’s clothes, purses, shoes and jewelry. Her sales rose 20% in 2010.

She’s glad to have the business but concerned that middle-class folks in Manitowoc have yet to recover from the worst recession in decades, despite Obama’s efforts during his first two years. Her 27-year-old son, a computer whiz, is a prime example: Unable to find full-time work, he has enrolled in a two-year criminal justice program at a nearby technical college.

“People are still cutting back,” Charlton says. “They’re still watching what they spend.”

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Few believed the housing market here [in Seattle] would ever collapse. Now they wonder if it will ever stop slumping.

The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune ”” economically diversified cities where the boom was relatively restrained.

In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.

The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.

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(Merced, California) Life has changed in ways big and small in this central California county, which is still trapped in the wreckage of a housing boom that went bust five years ago.

The median home price, $116,000, is down 68% from its peak in 2006. Three of five homeowners with a mortgage here owe more on their loans than their houses are worth, compared with about one in five nationally.

Socked by a sharp loss of property and sales tax revenue, Merced County and its cities have slashed budgets, workers and services. The grass is being mowed less often in city parks. A senior center is open fewer hours.

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The problems with the FCIC’s report, released at the end of January, stem from the Commission’s very inception: it was focused on the wrong topic. The FCIC investigated risky investments, lax regulation, excessive leverage. And it downplayed the more mundane, but vastly more important, collapse of the housing bubble.

The FCIC was set up to investigate a sidebar rather than the real story. Given the definition of its mission, the Commission did a reasonably good job. However, its 662-page report is a distraction from the real reasons why 25 million Americans are unemployed, underemployed, or have given up looking for work altogether. The real story doesn’t require 662 pages; it can easily be summed up in a few paragraphs.

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Almost 1 in 4 of Nevada’s foreclosures involved a decision to walk away from the mortgage even though the homeowners could pay, according to a new study.

The practice is called a strategic default, and it’s at the heart of the ongoing foreclosure crisis in Nevada ”” the state that leads the nation in the number of foreclosures.

Nationwide, the number of Americans who are losing their homes due to foreclosure also continues to mount.

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More concerning than the home ownership rate is the vacancy rate. The Census tables don’t tell the entire story, but they tell a lot of it. Of the nearly 131 million housing units in this country, 112.5 million are occupied. 74.8 million are owned, and that’s only dropped by about 30 thousand in the past year. 38 million are rented, but that’s up by over a million year over year. That means more new households are choosing to rent.

Now to vacancies. There were 18.4 million vacant homes in the U.S. in Q4 ’10 (11 percent of all housing units vacant all year round), which is actually an improvement of 427,000 from a year ago, but not for the reasons you’d think….

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Residential and commercial real-estate owners aren’t the only ones losing their properties to foreclosure. The past few years have seen a rapid acceleration in the number of churches losing their sanctuaries because they can’t pay the mortgage.

Just as homeowners borrowed too much or built too big during boom times, many churches did the same and now are struggling as their congregations shrink and collections fall owing to rising unemployment and a weak economy….

“Churches are the next wave in this economic crisis,” says Rev. Jesse L. Jackson Sr., president and founder of the Rainbow PUSH Coalition, a non-profit civil-rights group, who works with pastors around the country to help churches negotiate better terms with their bankers.

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Richard S. Carnell, an associate professor at Fordham University Law School who was an assistant secretary of the Treasury for financial institutions during the 1990s, questions why Mr. Raines, Mr. Howard and others, given their conduct detailed in the Housing Enterprise Oversight report, are being held harmless by the government and receiving payment of legal bills as a result.

“Their duty of loyalty required them to put shareholders’ interests ahead of their own personal interests,” Mr. Carnell said. “Had they cared about the shareholders, they would not have staked Fannie’s reputation on dubious accounting. They defied their duty of loyalty and served themselves. At a moral level, they don’t deserve indemnification, much less payment of such princely sums.”

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A large West End church will soon be home to a 24-unit apartment complex that will ensure its survival.

St. Matthew’s Anglican Church on Maryland Street, which can seat more than 1,000 people, measures Sunday service attendance in the dozens.

For years, its congregation has been praying to turn the church into a multi-use building that would include a housing component. It appears those prayers have been answered.

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Co-op and condo owners will pay sharply higher property taxes next year, under a preliminary assessment roll released Friday by the Bloomberg administration. The city attributed the rises, due to take effect in July, to higher market values placed on apartment buildings by tax assessors.

Taxes collections are expected to rise by 7.5% for co-op owners, and 9.6% for condo owners across the city, according to a summary report released by the Department of Finance….

Stuart M. Saft, a real-estate lawyer and chairman of the Council of New York Cooperatives and Condominiums, said he “absolutely” attributed the significant increases to city budget pressures, and said city finance officials were looking for ways to maximize city revenues.

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Not a single Canadian bank failed during the Great Depression, and not a single one failed during the recent U.S. crisis now dubbed the Great Recession. Fewer than 1 percent of all Canadian mortgages are in arrears.

That’s notable given that the recent U.S. economic turmoil was triggered by a meltdown in mortgage finance, forcing an unprecedented government rescue of Wall Street investment banks and the collapse of more than 300 smaller banks as the housing sector went bust.

How’d Canada avoid all that?

“This sounds very simple, but one of our CEOs has said we are in the business of making loans to people who will pay them back,” said Terry Campbell, vice president of policy for the Canadian Bankers Association in Ottawa.

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As our economic conditions continue to deteriorate, mentally disturbed people like Jared Loughner are the first to breakdown and lose it, but there will inevitably be many to follow. This tragedy is not an isolated incident. In just the past few days there have been two more incidents. A lobbyist, who was the wife of a White House adviser, was found dead in a burning car. A man upset over his Social Security benefits threatened to set fire to Senator Michael Bennet’s office and shoot his staff. There have been dozens of similar incidents over the past two years. From John Bedell, the man who opened fire on the Pentagon, to Joe Stack, the man who had a tax dispute and flew his plan into the Austin, Texas IRS building, an increasing number of Americans are beginning to resort to violence as a last desperate act of vengeance.

We can dismiss and write off all of this as just crazy people doing crazy things and go back to living with our heads in the sand, business as usual, or we can begin the urgent task of fixing a society that is severely out of balance.

The choice is ours.

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I will take comments on this submitted by email only to at KSHarmon[at]mindspring[dot]com.

A new type of property is adding to neighborhood blight: the bank walkaway.

Research to be released Thursday, the first of its kind locally, identifies 1,896 “red flag” homes in Chicago ”” most of them are in distressed African-American neighborhoods ”” that appear to have been abandoned by mortgage servicers during the foreclosure process, the Woodstock Institute found.

Abandoned foreclosures are increasing as mortgage investors determine that, at sale, they can’t recoup the costs of foreclosing, securing, maintaining and marketing a home, and they sometimes aren’t completing foreclosure actions. The property, by then usually vacant, becomes another eyesore in limbo along blocks where faded signs still announce block clubs.

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A new study released by the Mortgage Bankers Association’s Research Institute for Housing America says the most recent recession may make many regions around the country ”” especially in the South and West ”” the Rust Belts of the 21st century. The burst housing bubble may mean the economy in those places never fully recovers.

“The story’s not over,” cautions study author Jim Follain, an economist and senior fellow at the Nelson A. Rockefeller Institute of Government at the State University of New York in Albany. “But my sense is the demand drop [for residential housing] is persistent … and for some of these places, it will be a long time before they fully recover.”

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Left unsaid [by the President], however, was the fact that job growth was not enough to absorb people entering the work force in the United States, much less to shrink the unemployment rolls.

R. Glenn Hubbard, dean of Columbia University’s business school and former chairman of the council of economic advisers for President Bush, remains a guarded optimist. He sees signs of the economy gaining speed.

“We could run as high as 200,000 per month this year, but keep in mind that might only bring the unemployment rate down to 9 percent,” Mr. Hubbard said. “That does very little for the person who is long-term unemployed.”

The so-called real unemployment rate, which includes those workers who are discouraged or have given up looking for work, stands at 16.7 percent.

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From my perspective, homes are still overvalued not just because of these long-term price trends, but from a sober analysis of the current economy. The country is overly indebted, savings-depleted and underemployed. Without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more. These are not conditions that inspire confidence for a recovery in prices.

In trying to maintain artificial prices, government policies are keeping new buyers from entering the market, exposing taxpayers to untold trillions in liabilities and delaying a real recovery. We should recognize this reality and not pin our hopes on a return to price normalcy that never was that normal to begin with.

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Of the myriad ways the Great Recession has altered the country’s social fabric, the surge in households like the Maggis’, where relatives and friends have moved in together as a last resort, is one of the most concrete, yet underexplored, demographic shifts.

Census Bureau data released in September showed that the number of multifamily households jumped 11.7 percent from 2008 to 2010, reaching 15.5 million, or 13.2 percent of all households. It is the highest proportion since at least 1968, accounting for 54 million people.

Even that figure, however, is undoubtedly an undercount of the phenomenon social service providers call “doubling up,” which has ballooned in the recession and anemic recovery. The census’ multifamily household figures, for example, do not include such situations as when a single brother and a single sister move in together, or when a childless adult goes to live with his or her parents.

For many, the arrangements represent their last best option, the only way to stave off entering a homeless shelter or sleeping in their cars. In fact, nearly half of the people in shelters in 2009 who had not previously been homeless had been staying with family members or friends, according to a recent report, making clear that the arrangements are frequently a final way station on the way to homelessness.

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Ӣ This is worth repeating: the real price indexes are at post-bubble lows. Those who argued prices bottomed some time ago are already wrong in real terms, and will probably be wrong in nominal terms soon.
”¢ Don’t expect real prices to fall to ’98 levels. In many areas – if the population is increasing – house prices increase slightly faster than inflation over time, so there is an upward slope in real prices.
”¢ Real prices are still too high, but they are much closer to the eventual bottom than the top in 2005. This isn’t like in 2005 when prices were way out of the normal range.
Ӣ With high levels of inventory, prices will probably fall some more.

Read it all and check out the charts.

Cities across the nation are raising property taxes, largely citing rising pension and health-care costs for their employees and retirees.

In Pennsylvania, the township of Upper Moreland is bumping up property taxes for residents by 13.6% in 2011. Next door the city of Philadelphia this year increased the tax 9.9%. In New York, Saratoga Springs will collect 4.4% more in property taxes in 2011; Troy will increase taxes by 1.9%.

Property-tax increases aren’t unusual, in part because the taxes are among the main sources of local revenue. But officials say more and larger increases are taking hold. “This year we have seen a dramatic increase in our cities and towns having to increase property taxes” for pensions and other expenses, said Jack Garner, executive director of the Pennsylvania League of Cities and Municipalities.

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Katie Tucker moved into her own apartment this week, the first real home her 1-year-old baby has ever known.

She had been living with family members and friends for more than a year, but a new Charleston Housing Authority program made a permanent place to live possible, just in time for Christmas.

A series of misfortunes and some personal struggles knocked down Tucker financially, and she and her baby Sydney were having a hard time getting up.

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In California, where foreclosures are more abundant than in any other state, homeowners trying to win a loan modification have always had a tough time.

Now they face yet another obstacle: hiring a lawyer.

Sharon Bell, a retiree who lives in Laguna Niguel, southeast of Los Angeles, needs a modification to keep her home. She says she is scared of her bank and its plentiful resources, so much so that she cannot even open its certified letters inquiring where her mortgage payments may be. Yet the half-dozen lawyers she has called have refused to represent her.

“They said they couldn’t help,” said Ms. Bell, 63. “But I’ve got to find help, because I’m dying every day.”

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– Employment figures, economic indicators, stock prices. Bah, humbug! Read some letters to Santa if you want to understand the Recession That Will Not Die….

“Letters to Santa? From grown-ups?” I asked.

Nearly 300 letters, written in neat print or loopy cursive script, described jobs lost and hungry children, addressed by adults to a man in a red suit who is apparently their last hope.

“I’m a single mom living in the D.C. General shelter with my kids,” one letter began. It ended with a request for not toys or bikes but clothes. Instead of model numbers and prices, she included her children’s shoe, underwear and clothing sizes.

“I want them to know there is hope,” she wrote.

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Also, I caught an NPR story during the week on this same theme. Read or listen to it all also.

A better known real estate debacle is a sprawling development in Seseña, south of Madrid, one of Spain’s “ghost towns.” It sits in a desert surrounded by empty lots. Twelve whole blocks of brick apartment buildings, about 2,000 apartments, are empty; the rest, only partly occupied. Most of the ground floor commercial space is bricked up.

The boom and bust of Spain’s property sector is astonishing. Over a decade, land prices rose about 500 percent and developers built hundreds of thousands of units ”” about 800,000 in 2007 alone. Developments sprang up on the outskirts of cities ready to welcome many of the four million immigrants who had settled in Spain, many employed in construction.

At the same time, coastal villages were transformed into major residential areas for vacationing Spaniards and retired, sun-seeking northern Europeans. At its peak, the construction sector accounted for 12 percent of Spain’s gross domestic product, double the level in Britain or France.

But almost overnight, the market disappeared….

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A landmark church in Northwest Gainesville might be torn down and replaced with a Walgreen’s.

St. Michael’s Episcopal Church was designed in the seventies by Nils M. Schweizer, a student of the famous architect Frank Loyd Wright.
And some members of the community are fighting to save what they consider a spiritual and architectural treasure.

St. Michael’s Episcopal Church is a mid-century modern building featuring a column-less design. It’s home to a congregation of about 100 people and the idea of it being torn down is very upsetting to some long time community and church members.

Susan Halbert has been a member of the church for 15 years. She said, “To tear down a beautiful church to put another drugstore was a real disappointment to me.”Bishop Samuel Johnson Howard of the Episcopal Diocese of Florida made the announcement last month that a contingent contract had been signed with Walgreen’s to sell the property.Halbert said, “It would be futile to speculate on why he made this decision, but for me personally it’s a devestating thing.” Some church members are struggling with the idea of losing the building they consider they’re spiritual home.

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The recession has finally caught up with churches.

After two years of treading water, more Protestant congregations have seen their Sunday collections drop this year.

Pastors blame high unemployment and a drop in per-capita giving by members. To make ends meet, churches have laid off staff and frozen salaries, put off major capital projects and cut back on programs. At the same time, more of their congregation members and neighbors are asking for help with basic needs such as paying the rent and buying groceries.

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