When will consumers run out of credit, home equity? I thought this was a pretty interesting article about our spending habits. So, beware of how you are using your home equity.
Ilyce R. Glink Inman News
And I thought I was pessimistic about the economy.
I sat in a room a few days ago with people who work for companies that represent all parts of our financial lives. There was an economist who worked for a foundation; several executives who work for big financial corporations; a housing analyst; representatives from a couple of mortgage companies; a real estate finance professor; and a bankruptcy judge.
Some folks in the room (like the economist) were more pessimistic about the economy than others. He said he believes we'll soon slip into a recession that would rival the Great Depression. His pessimism is based primarily on how much debt the U.S. has accumulated in the past few years, and how the euro is replacing the dollar as the backup currency of choice in the world.
Others (the mortgage lenders) think the housing situation is bad but manageable. Of course, finding out that new and existing real estate sales are down dramatically from last year, falling further than expectations, isn't good. Mortgage loan production is down as well.
The typical loan officer did 62 loans last year, compared with 83 loans in 2005. But even those loans aren't very profitable, according to the Mortgage Bankers Association's most recent study. Due to increased costs, mortgage lenders are losing an average of $50 on every loan they make, compared with a profit of $258 per loan completed in 2005.
The bankruptcy judge says she's seeing more filings, but a lot of what's in front of her are mortgages that should have never been made, or bankruptcies caused by unexpected medical expenses.
Therapists sometimes advise their nervous patients not to "pile on." The idea is if you pile all of your concerns, worries and aggravations onto each other, you can get easily overwhelmed.
I wonder how much more "piling on" the American wallet can take.
Right now, the typical American consumer is paying a lot more for gas and is facing higher energy costs in general. It costs more to insure a house, and for many people, property taxes are rising as well (my taxes will rise nearly 60 percent). Fewer employers are offering health insurance, and those that are offering some sort of coverage are requiring employees to pay a larger percentage of those costs.
On the mortgage side, more than 2 million homeowners will face foreclosure next year, according to a new report from the Joint Economic Committee of Congress. In September, the Bush administration predicted only 500,000 homeowners would face foreclosure.
In addition, nearly $2 trillion worth of adjustable mortgages will reset. Some folks will be able to refinance because their credit is good. But many people whose houses are declining in value may not have enough equity in their homes to get a new loan.
Some economists suggest that home prices could decline 10 to 20 percent between now and 2009, evaporating $2 trillion in home value. This wouldn't help anyone who needs home equity to refinance, consolidate credit cards, pay student loans or buy a new car. It's hard to use your house as a piggy bank if the piggy bank is empty.
In the face of all of these additional expenses, some folks are still out at Wal-Mart, K-Mart, Sam's Club and Costco, shopping like crazy. Others are using their credit cards to pay for regular and ordinary expenses, such as food and gas, then growing that balance of necessities from month to month.
At some point, you run out of cash, credit and home equity. I just wonder when we're going to hit that point and what that will look like.
And then there's Christmas. I don't know about you, but my mailbox is already stuffed full of catalogs promising me fast, free delivery if I'll order now for Dec. 25. Are retailers angling to get your dollars now before the carousel stops?
Tuesday, November 6, 2007
Monday, November 5, 2007
Housing Still Strong in Utah
By Maya Roney, BusinessWeek
As home sales slide, foreclosure rates rise and big lenders go bankrupt, it's hard to think of the glass being half-full, rather than half-empty, when it comes to real estate these days.
Unless, that is, you live in Salt Lake City. Or Binghamton, N.Y., Salem, Ore., or Allentown, Pa. In these U.S. metropolitan areas, and in 93 others, existing-single-family-home prices actually increased in the second quarter of 2007 from a year earlier, according to the National Association of Realtors. The national median home price, meanwhile, fell 1.5%, to $223,800, in the same period.
Despite the national decline, there are some bright spots out there, according to the NAR. "Although home prices are relatively flat, more metro areas are showing price gains with general improvement since bottoming out in the fourth quarter of 2006," NAR senior economist Lawrence Yun said in a statement. "Recent mortgage disruptions will hold back sales temporarily, but the fundamental momentum clearly suggests stabilizing price trends in many local markets."
Compared with the 97 metro areas that saw price gains in the second quarter of 2007, 83 markets had increases in the first quarter of 2007, and 68 areas were up in the last quarter of 2006.
Buoyant prices in Utah's capital
What's keeping the market afloat in Salt Lake City? The median home price in the metro area was $233,100 in the second quarter, up 21.9% from a year ago (the biggest price gain among the 149 markets covered in the survey), according to the NAR. Not bad, especially compared with, say, Elmira, N.Y., where the median home price dropped nearly 18% in the same period, to $71,700.
"We really didn't participate in the housing boom a few years back, so when things slowed down around the country, that's when we started picking up," said Jim Bringhurst, president of the Utah Association of Realtors. "We're not a market that's extremely volatile."
The 2002 Winter Olympics put Salt Lake City on the map and drew money and new development to the area. Bringhurst said the city's strong and well-diversified economy has contributed to the recent wave of healthy real-estate growth. Online retailer Overstock.com and energy company Questar are headquartered in the area.
Salt Lake City also is known as a peaceful, clean place to live -- both literally and morally, with its heavy Mormon influence. According to Bringhurst, many newcomers from California have purchased homes in the area over the past few years in search of a better quality of life than is affordable elsewhere.
"My next-door neighbors moved from Southern California," said Bringhurst. "They were tired of the traffic and the craziness of it all, and they were able to come here and buy a really nice home and improve their quality."
Healthiest housing markets
Salt Lake City
As home sales slide, foreclosure rates rise and big lenders go bankrupt, it's hard to think of the glass being half-full, rather than half-empty, when it comes to real estate these days.
Unless, that is, you live in Salt Lake City. Or Binghamton, N.Y., Salem, Ore., or Allentown, Pa. In these U.S. metropolitan areas, and in 93 others, existing-single-family-home prices actually increased in the second quarter of 2007 from a year earlier, according to the National Association of Realtors. The national median home price, meanwhile, fell 1.5%, to $223,800, in the same period.
Despite the national decline, there are some bright spots out there, according to the NAR. "Although home prices are relatively flat, more metro areas are showing price gains with general improvement since bottoming out in the fourth quarter of 2006," NAR senior economist Lawrence Yun said in a statement. "Recent mortgage disruptions will hold back sales temporarily, but the fundamental momentum clearly suggests stabilizing price trends in many local markets."
Compared with the 97 metro areas that saw price gains in the second quarter of 2007, 83 markets had increases in the first quarter of 2007, and 68 areas were up in the last quarter of 2006.
Buoyant prices in Utah's capital
What's keeping the market afloat in Salt Lake City? The median home price in the metro area was $233,100 in the second quarter, up 21.9% from a year ago (the biggest price gain among the 149 markets covered in the survey), according to the NAR. Not bad, especially compared with, say, Elmira, N.Y., where the median home price dropped nearly 18% in the same period, to $71,700.
"We really didn't participate in the housing boom a few years back, so when things slowed down around the country, that's when we started picking up," said Jim Bringhurst, president of the Utah Association of Realtors. "We're not a market that's extremely volatile."
The 2002 Winter Olympics put Salt Lake City on the map and drew money and new development to the area. Bringhurst said the city's strong and well-diversified economy has contributed to the recent wave of healthy real-estate growth. Online retailer Overstock.com and energy company Questar are headquartered in the area.
Salt Lake City also is known as a peaceful, clean place to live -- both literally and morally, with its heavy Mormon influence. According to Bringhurst, many newcomers from California have purchased homes in the area over the past few years in search of a better quality of life than is affordable elsewhere.
"My next-door neighbors moved from Southern California," said Bringhurst. "They were tired of the traffic and the craziness of it all, and they were able to come here and buy a really nice home and improve their quality."
Healthiest housing markets
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