More than a quarter of Americans currently renting houses and apartments have no intention to ever buy a home, according to a survey published on Wednesday.
The survey, by real estate search site Trulia.com, found 27 percent of renters do not plan to ever buy a home. Although 72 percent still expect to buy eventually, that proportion is down from 77 percent six months ago.
Of those who do hope to become homeowners, two-thirds say they will wait two years or more.
America’s baby boomers””those born between 1946 and 1964””face a problem that could weigh on the economy for years to come: The longer it takes for the economy to recover, the less money they’ll have to spend in retirement.
Policy makers have long worried that Americans aren’t saving enough for old age. And lately, current and prospective retirees have been hit on many fronts at once: They have less money, they earn less on what they have, their houses aren’t rising in value and the prospect of working longer to make up the shortfall has dimmed significantly in a lousy job market.
“We will have to learn to make do with a lot less in material things,” says Gary Snodgrass, a 63-year-old health-care consultant in Placerville, Calif. The financial crisis, he says, slashed his retirement savings 40% and the value of his house by about half.
One problem that dogged Japan during its lost decade was a stop-and-go fiscal policy in which stimulus packages were administered in an “on again, off again” fashion and taxes were lowered and then raised. There is a risk that the U.S. could fall into this trap in an effort to strike a balance between short-term fiscal support and long-term budget integrity.
This strongly suggests that congressional leaders of both parties should embrace a pro-growth fiscal reform that would help to create long-run fiscal stability and foster certainty about future tax rates. With the 2001-2003 tax cuts set to expire at the end of 2010, the time is now to move ahead with broad-based reform.
A good starting point would be the bipartisan Wyden-Gregg tax reform bill. This bill is not incredibly bold, but is probably the best we could do in the current environment and is much better than the current tax code.
Wyden-Gregg would be revenue-neutral; it would simplify the tax code by reducing the number of personal income tax brackets to three from six and would do so without raising marginal income tax rates.
From the FT’s Alphaville blog:
So the US Treasury’s centrepiece mortgage modification programme ”” Hamp ”” is something of a failure. That much we knew already.
But Laurie Goodman over at Amherst Securities brings up another point.
The programme actually has a lower success rate than other modification programmes ”” even those that involve a similar amount of payment reduction.
Underpinning the gloom: Nearly two-thirds of Americans believe the economy has yet to hit bottom, a sharply higher percentage than the 53% who felt that way in January.
The sour national mood appears all-encompassing and is dragging down ratings for the GOP too, suggesting voters above all are disenchanted with the political establishment in Washington. Just 24% express positive feelings about the Republican Party, a new low in the 21-year history of the Journal’s survey. Democrats are only slightly more popular, but also near an all-time low.
The results likely foreshadow a poor showing in November’s mid-term for Democrats, whose leaders had hoped the public would grow more optimistic about the economy and, as a result, more supportive of the party agenda. Now, despite the weak Republican numbers, the survey shows frustrated voters on the left are less interested than impassioned voters on the right to in the election.
The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.
Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.
The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.
Prechter: The Last Time The Market Looked Like This Was Right Before The ’87 Crash
http://www.businessinsider.com/prechter-the-last-time-the-market-looked-like-this-was-right-before-the-87-crash-2010-8
Keith R. McCullough–Is this finally the economic collapse?
http://money.cnn.com/2010/08/11/news/economy/economic_collapse_GDP_unemployment.fortune/index.htm
A new Bank for International Settlements working paper by economist Elod Takats looks at the interaction of demographics and asset prices and finds not a meltdown but a long hard slog for house prices and, by extension, for other assets like stocks.
“If you look at the U.S., or most English-speaking countries, the next 40 years is substantially different from the last 40,” Takats said.
“We had demographic tailwinds over the past forty years and will have headwinds over the next forty.”
The sales momentum that had been slowly lifting local home sales came to a jarring halt in July, raising questions about the long-awaited recovery of the real estate market.
Monthly home sales data released Tuesday show that 643 area homes sold during July, a striking drop-off from the 1,022 transactions recorded in June.
That the Great Recession could then bring hope for a major recalibration ”” a resetting of all the clocks ”” is not surprising. Unfortunately, though, it’s not happening in any meaningful way. The poor are getting poorer, and the rich, despite stock-market setbacks, are still comparatively rich. The most devastating losses in household wealth over the past two years have been suffered by the middle class. And families are fraying at the seams. The Pew poll showed nearly half of people who had been unemployed for more than six months saying their family relationships had become strained, and a New York Times/CBS poll of unemployed adults last winter found about 40 percent saying they believed their joblessness was causing behavioral change in their children.
Parents who have jobs are working longer hours than ever. Mothers are taking shorter maternity leaves. The birth rate is on the decline. The divorce rate is declining, too ”” it’s too expensive for people to break up their households ”” but that’s not necessarily a family-friendly thing, as a report from the Council on Contemporary Families noted in April: “We know from the experience of the Great Depression of the 1930s that divorce rates can fall while family conflict and domestic violence rates rise.”
What came out of the combined experience of the Great Depression and World War II ”” broad measures of quality-of-life equalization like a sharply progressive tax policy with rates on the wealthy unimaginable today, the G.I. Bill, government-subsidized home mortgages for veterans ”” permitted the easier, less-frenzied middle class family life that older Americans remember from the 1950s and ’60s and that younger Americans dream of. In other words, it wasn’t individual families that reformed themselves after the crucible of the Depression. It was our society.
For the past two years, we’ve been scarred and scared, imprisoned in our fears and an awful economy. We lived beyond our means. We paid the price.
This recession has been a terrible and wrathful one. In the fourth quarter of 2008, GDP fell a staggering 6.8%.
But the way things have been going over the past month suggests we may finally be stepping out of the prison gates and back into the glaring sunlight.
Could it be that America is free at last?
While the support to economic activity from stimulative fiscal policies and firms’ restocking of their inventories will diminish over time, rising demand from households and businesses should help sustain growth. In particular, in the household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions. In the business sector, investment in equipment and software has been increasing rapidly, in part as a result of the deferral of capital outlays during the downturn and the need of many businesses to replace aging equipment. At the same time, rising U.S. exports, reflecting the expansion of the global economy and the recovery of world trade, have helped foster growth in the U.S. manufacturing sector.
To be sure, notable restraints on the recovery persist. The housing market has remained weak, with the overhang of vacant or foreclosed houses weighing on home prices and new construction. Similarly, poor economic fundamentals and tight credit are holding back investment in nonresidential structures, such as office buildings, hotels, and shopping malls.
Importantly, the slow recovery in the labor market and the attendant uncertainty about job prospects are weighing on household confidence and spending….
In between the statistical data, the dour outlook for state budgets, and the declaration that the longest recession since World War II is at least technically over, Federal Reserve Chairman Ben Bernanke talked Monday of how the South has come a long way in educating its residents and transforming its economy.
Bernanke could speak with a degree of authority on the topic, having attended public schools in tiny Dillon, where he also worked for three summers at the famous South of the Border tourist attraction.
“When I attended public schools in South Carolina in the 1960s, measures of per-pupil spending, years of schooling, and student achievement in the South lagged significantly behind other parts of the country,” the Fed chief said in a speech at the Southern Legislative Conference in Charleston. “Since then, those indicators have changed, very much for the better.”
Millions of houses on the verge of foreclosure threaten to send homeownership to its lowest level in 50 years, according to new industry estimates.
Fresh projections say the rate could plummet to about 62% as early as 2012 and almost certainly by the end of the decade. Homeownership rates haven’t been that low since they hit 61.9% in 1960.
The share of households that own their homes has been sliding since the housing bubble burst in 2006. The rate fell again in the second quarter of this year to 66.9% ”” the lowest since 1999 ”” from a peak of 69.4% in 2004, the Census Bureau says.
Personal consumption rose at an annual rate of only 1.6 percent in the second quarter, and consumer spending appears to have softened as the quarter progressed.
“The problem is it looks like the consumer was really weakening in June, so you’re starting the third quarter in a position of weakness,” said David Shulman, senior economist at the UCLA Anderson Forecast. “The components of this report are ugly.”
Meanwhile, a number of factors that boosted economic growth starting last summer are about to run their course.
The second-quarter GDP number, soft though it was, received a one-time boost from businesses building up their inventories (contributing 1.05 percentage points of growth) and federal government spending (0.7 percentage points), both of which are likely to fade. Growth was also supported by a burst of residential investment (adding 0.6 percentage points) — caused by home builders’ rushing to finish projects to take advantage of a home-buyer tax credit — that probably will turn negative in future quarters.
The U.S. economic recovery will remain slow deep into next year, held back by shoppers reluctant to spend and employers hesitant to hire, according to an Associated Press survey of leading economists.
The latest quarterly AP Economy Survey shows economists have turned gloomier in the past three months. They foresee weaker growth and higher unemployment than they did before. As a result, the economists think the Federal Reserve will keep interest rates near zero until at least next spring.
Yet despite their expectation of slower growth, a majority of the 42 economists surveyed believe the recovery remains on track, raising hopes that the economy can avoid falling back into a “double-dip” recession.
The pain coursing through American families is all too real and no one seems to know what to do about it. A rigorous new analysis for the Rockefeller Foundation shows that Americans are more economically insecure now than they have been in a quarter of a century, and the trend lines suggest that things will only get worse.
Rampant joblessness and skyrocketing medical costs are among the biggest factors tearing at the very fabric of American economic life so painstakingly put together in the early post-World War II decades.
The administration’s second assumption, meanwhile, is a matter of academic theories about the sizes of the relevant economic multipliers. Textbook Keynesian economics tells us that government-purchases multipliers are larger than tax-cut multipliers. And, as we have seen, the Obama administration’s economic team consulted these standard models in deciding that spending would be significantly more effective than tax cuts.
But a great deal of recent economic evidence calls that conclusion into question. In an ironic twist, one key piece comes from Christina Romer, who is now chair of Obama’s Council of Economic Advisers. About six months before she took the job, Romer teamed up with her husband and fellow Berkeley economist David Romer to write a paper (“The Macroeconomic Effects of Tax Changes”) that sought to measure the influence of tax policy on GDP. Crucial to the Romers’ method was their effort to identify changes in tax policy made during times of relative economic stability, and driven by a desire to influence economic behavior or activity (to encourage growth, say, or reduce a deficit), rather than those changes made in response to a recession or crisis. By studying such “exogenous” tax-policy changes, the Romers could be more confident that they were in fact measuring the effects of taxes and not those of extraneous conditions.
The Romers’ conclusion, which is at odds with most traditional Keynesian analysis, was that the tax multiplier was 3 ”” in other words, that every dollar spent on tax cuts would boost GDP by $3. This would mean that the tax multiplier is roughly three times larger than Obama’s advisors assumed it was during their policy simulations.
The unemployment rate in the United States is likely to remain well above 7 percent through the end of 2012 and the duration of President Obama’s current term, according to the Federal Reserve.
Ben S. Bernanke, the Fed chairman, told Congress on Wednesday that it would take “a significant amount of time” to restore the 8.5 million jobs lost in the United States in 2008 and 2009, and warned that “the economic outlook remains unusually uncertain.” He also warned that financial conditions, particularly the European sovereign debt crisis, had “become less supportive of economic growth in recent months.”
In presenting the Fed’s semiannual monetary policy report to Congress, Mr. Bernanke struck a more cautious tone than he did when he last submitted the report, in February.
Government watchdogs told a Senate panel Wednesday that the Obama administration’s effort to help homeowners avoid foreclosure isn’t working and that the Treasury Department has failed to fix the program.
Special inspector general for the financial bailouts Neil Barofsky said the program has not “put an appreciable dent in foreclosure filings,” during a Senate Finance Committee hearing on the $700 billion bank bailout. He also said the Treasury Department has ignored earlier demands that it set clearer goals for the program.
Elizabeth Warren, who chairs a separate Congressional Oversight Panel on the bailouts, said Treasury’s failure to act more quickly could be hurting the recovery.
More foreclosures could force down the price of homes and further hurt the already-ailing housing industry.
Expectant parents shopping for a home are not the only ones concerned about the date of the baby’s arrival.
Mortgage lenders are taking a harder look at prospective borrowers whose income has temporarily fallen while they are on leave, including new parents at home taking care of a baby. Even if a parent plans on returning to work within weeks, some lenders are balking at approving the loans.
“If you are not back at work, it’s a huge problem,” said Rick Cason, owner of Integrity Mortgage, a mortgage firm in Orlando, Fla. “Banks only deal in guaranteed income these days. It makes sense, but the guidelines are sometimes actually harsher than they need to be.”
Back in the slapdash days of easy credit, lenders were more likely to overlook the fact that a parent was out on maternity or paternity leave. But now that lenders have become more conservative, they are requiring new parents to jump through more hoops to prove their income will be enough to cover the mortgage.
…there is skepticism over the president’s commitment to reducing the huge and dangerous budget deficits which America now faces. A strong step toward deficit reduction next year ”” like undertaking the difficult task of trying to fix Social Security ”” would earn deeper credibility with business and with all Americans.
Another problem is that the administration’s rhetoric ”” which too often employs inflammatory words like “reckless” ”” has the effect of tarring all of business with the same brush. The White House might better distinguish between Wall Street, Big Oil and health insurers, which have all incurred public wrath, and the majority of businesses, which haven’t.
The tension between President Obama and the business community is hurting both sides and may hamper economic recovery. Closing that divide requires the business community to mute its criticism, and the administration to make personnel and policy adjustments. Neither should be hard.
America is struggling with a sputtering economy and high unemployment ”” but times are booming for Washington’s governing class.
The massive expansion of government under President Barack Obama has basically guaranteed a robust job market for policy professionals, regulators and contractors for years to come. The housing market, boosted by the large number of high-income earners in the area, many working in politics and government, is easily outpacing the markets in most of the country. And there are few signs of economic distress in hotels, restaurants or stores in the D.C. metro area.
As a result, there is a yawning gap between the American people and D.C.’s powerful when it comes to their economic reality ”” and their economic perceptions.
A new Time poll reveals just how hard the task is: Two-thirds of respondents say they oppose a second government stimulus package. And 53% say the country would have been better off without the first one.
The result is a White House pulled in three directions at once as it tries to repair the economy ”” and ensure that Obama and the Democrats can survive a rising tide of public anger. First, the Obama team is improvising ways to pass piecemeal spending items through a Congress where stimulus has become a toxic word. At the same time, the White House is signaling its concern about that budget deficit that has Tea Partyers raging ”” both through token gestures, like a White House contest that lets the public vote on cost-cutting ideas submitted by federal employees (the winner gets to meet Obama and see his or her idea go in the President’s next budget), and through Obama’s support for the work of a bipartisan deficit commission. And finally, the White House is trying to explain to angry liberals that it’s doing everything possible to keep the economy moving and fight Republican resistance to new spending.
It’s a delicate balancing act, on a par with Obama’s effort to pass health care reform without appearing to get too involved in the details. And just as it did in the health care battle, the future of Obama’s presidency ”” as well as the fate of the American economy ”” may hang on the outcome.
We knew the price stabilization was largely due to increased buying activity on the low end from the home buyer tax credit. The issue now, front and center, is foreclosures. We’ve already seen a few reports, and I expect we’ll see more, that show new foreclosures “stabilizing,” while bank repossessions are increasing.
First of all, the stabilization is at such a high rate that it’s clearly an unsustainable stabilization for the economic recovery. New foreclosure notices need to drop, not just bump around at their near-record highs. And frankly the bank repossession number is a much bigger deal, because that is going to translate into immediate inventory on the market.
Of course they do, but in Los Angeles at least, they’re getting a big incentive to dump it fast. L.A. last week passed a new city ordinance that fines banks, servicers, whoever owns the foreclosed property, up to $100,000 for letting the property fall into disrepair. We’ve heard and seen plenty of stories about run-down, stripped homes littering the landscape, with their overgrown lawns and broken front fences standing as glaring examples of what is not recovering in the housing market.
In the past few days polls have shown Republican challengers taking the lead over previously safe Democratic incumbents, such as Barbara Boxer in California and Russ Feingold in Wisconsin. Indeed, given the uniformly negative direction in the numbers, it is now quite possible the Republicans could win the Senate seats formerly held by both President Obama in Illinois, and Joe Biden, vice-president, in Delaware.
Add to that the continuing woes of Harry Reid, the Senate Democratic majority leader, in Nevada, where the Republican party’s recent nomination of Sharron Angle, a far-right and highly eccentric Tea Party supporter, appear to have had no positive effect on Mr Reid’s prospects, and the Grand Old party has a good shot at taking control of both houses of Congress. Worse for Mr Obama, political scientists say that at this stage in the calendar, there is almost nothing he can do about it.
“If you ask me where the silver lining is for President Obama, I have to say I cannot see one,” says Bill Galston, a former Clinton official, who has been predicting for months the Democrats could lose the House. “Just as BP’s failure to cap the well has been so damaging, Obama’s failure to cap unemployment will be his undoing. There is nothing he can do to affect the jobless rate before November.”
Capt. Mike Clauer was serving in Iraq last year as company commander of an Army National Guard unit assigned to escort convoys. It was exceedingly dangerous work ”” explosive devices buried in the road were a constant threat to the lives of Clauer and his men.
He was halfway through his deployment when he got a bolt from the blue ”” a frantic phone call from his wife, May, back in Texas.
“She was bawling on the phone and was telling me that the HOA [homeowners association] had foreclosed on our house, and it was sold,” he says. “And I couldn’t believe that could even happen.”
Caught this on today’s morning run–I had no idea this could happen. Read or listen to it all–KSH.
The only thing tiny about the tiny house movement is the size of the houses themselves. There are a slew of websites devoted to the scene, and tiny house evangelists based in California and Vermont are busy traveling around North America helping people build these little homes.
“I’m just a freelance, insane guy working out of his backyard building stuff for people when the need arises,” says Derek Diedricksen, 33, a tiny house enthusiast who lives outside of Boston.
Diedricksen’s backyard resembles a junkyard with piles of unlikely building materials and a handful of already-completed structures. His web video series, Tiny Yellow House, might be described as Wayne’s World meets This Old House.
…the bottom line is Home prices remain too high: There can be no doubt that home prices have moved way down from the 2005-06 peaks. How did I reach the conclusion that, even after a 33% decrease in prices?
By using traditional metrics. Whether we are looking at US housing stock as a percentage of GDP or Median income vs home prices or even ownership vs renting costs, prices remain elevated. Indeed, we see prices remain above historic mean.
Consider price relative to income. From 1977 to 2010, the median US home price was 4.1 times median household income. But as the chart below shows, Home prices are still above that mean. Oh, and that mean is artificially elevated due to the 2002-07 boom. Same with home prices relative to rentals, or housing value as percentage of GDP.
Further, we should not assume that prices will merely mean revert back to historic levels. In most markets, a near 3 standard deviation price move is resolved not by reverting to the mean, but by by careening far below it.
Nearly 1,300 prison inmates wrongly received more than $9 million in tax credits for homebuyers despite being locked up when they claimed they bought a home, a government investigator reported Wednesday.
The investigator said 241 of the inmates were serving life sentences.
In all, more than 14,100 taxpayers wrongly received at least $26.7 million in tax credits that were meant to boost the nation’s slumping housing markets, said the report by J. Russell George, the Treasury Department’s inspector general for tax administration.
Sales of new homes collapsed in May, sinking 33 percent to the lowest level on record as potential buyers stopped shopping for homes once they could no longer receive government tax credits.
The bleak report from the Commerce Department is the first sign of how the end of federal tax credits could weigh on the nation’s housing market.
The credits expired April 30. That’s when a new-home buyer would have had to sign a contract to qualify.
“We fear that the appetite to buy a home has disappeared alongside the tax credit,” Paul Dales, U.S. economist with Capital Economics,” wrote in a note. “After all, unemployment remains high, job security is low and credit conditions are tight.”