We seem to be hearing some stories about foreclosures being at a record high in the U.S. The reasons seems to be: Bush spends too much on the war and the U.S. has no money; mortgages are set up to fail (no interest, interest only, no down payment, etc)…personal credit extended way past what’s reasonable…
Is it affecting a lot of Dopers? Is it really this bad? Is it affecting every state?
Our real estate market is in the toilet…it is not a good time to sell. However, it is a good time to buy. There is an upside to our market. If you have money.
Is it really a recession? And is it affecting everyone? Or is it just the media trying to make it seem that bad?
A lot of it depends on where and who you are. We bought an affordable home on a fixed rate mortgage. We’re not planning to sell for the next ten years and because we know what our payments will be, we can budget for them accordingly. Most of the people I know are in a similar situation. It seems to be mostly lower-income folks who would have been better off renting and overly-ambitious folks who bought way more house than they could afford who are in trouble. If unemployment continues to increase, I expect things to get worse for average folks.
The subprime market is what has tanked. Those are loans to people who truly weren’t qualified for mortgages, and who often signed up for mortgages they didn’t understand the ramifications of, with insanely high interest rates and balloon payments. Others signed up for homes way beyond their means, and as soon as they had a personal financial setback – job loss, layoff, illness – found themselves unable to keep up. And the more it stacked up, the more underwater a lot of mortgages have become.
It’s pretty bad in some areas. One of my husband’s coworkers just moved to a new state, and reports that over 1/3 of the homes in the town he’s moved to are under foreclosure. In other areas, it’s not such a problem, where people haven’t either bought beyond their means or have owned their homes long enough that they didn’t have the bad interest rates and other awful terms that contributed to the subprime mess.
Right now the biggest problem is that even for those who have the means to buy, financing is really, really hard to get. So it’s a vicious cycle – more homes become available to buy at great prices, but financing for those who can afford to buy them is really hard to get.
It’s a real mess. At least a lot of lenders are now trying to help people stay in their homes instead of being foreclosed on because their inventory of property is just ridiculous. Here’s hoping that helps ease the immediate glut of houses available. But I know my husband also has a coworker who just rented a spacious McMansion in Northern Virginia – for $900 a month! That would have gotten you laughed out of the neighborhood even a year ago.
Job wise, hell yeah, and it’s been bad for a long while.
When I started my new job a month ago, one I consider well beneath my abilities and my desires, I looked at the crowd of other people also starting that day and said “Yup, the economy officially stinks”. Many of the other people in my training class are in the process of bankruptcy, or are considering it soon. Or like me, they’re desperately trying to avoid it.
Lots and lots of people being laid off. Unemployment is rising and will get much much worse over the next six months. Moreso because many people are coming to the end of their benefits or have already passed beyond them, and thus are no longer included in the official figures.
It sucks out there people. If you have a good job, make good money and are not currently hurting, count your blessings and consider saving money against your own potential troubles. That expensive trip or technogizmo will still be there later. You might be glad you had the money in the bank when the bad news comes to your house.
Michigan in particular is going through hell. The entire economy was based on a very thriving automotive industry. It started when the auto companies started pulling out their business and moving it down south where they could get cheaper labor. Add that to the housing collapse and the result is a gutted Detroit with very high rates of unemployment statewide.
My husband searched for 9 months following his graduation from an exemplary school before he found a job outside of the restaurant industry. He was applying for B.A/entry level jobs and having to compete with Masters degrees. That was actually before things got REALLY bad. My mother has a degree in engineering and had to take a job in a factory on an assembly line. She has had weeks of layoffs since she was hired. She just declared bankruptcy. The plant where my Dad works originally had 200 workers. Now there are 6. He gets laid off all the time as well.
We moved to the east coast a couple of months ago, and things are strikingly different, but still bad. I just learned the cost of my public transportation is about to go up 23% in June 2009. That’s another $69 a month. I work in the credit counseling industry so I’ve got a unique perspective. Creditors are starting to get pretty ruthless in their pursuit of debts. I’ve seen ‘‘account past due’’ letters with wording I can scarcely believe is legal. Interest rates are higher. It’s not unusual to see clients with interest rates of 30% on their credit cards. I’ve seen as high as 37%. Even concession rates are creeping skyward. Lots of clients are closing their accounts and filing bankruptcy because they can’t even afford debt consolidation. For my particular organization, the only reason we have managed to avoid a deficit ourselves is because we have begun doing bankruptcy counseling. Our bankruptcy department has more than doubled since I started working there 1 year ago.
As young renters with no significant savings or investments, my husband and I are relatively unscathed. But for a lot of people, it is quite bad. The media ain’t kidding.
The reported unemployment figures don’t generally depend on who is receiving unemployment benefits. They are based on a survey asking if people are not working but actively seeking work. Those seekers + the employed are the base, and the % of seekers over base is the unemployment rate. There is a large group that drops out of the official figures, but it’s those who are no longer actively seeking work.
That’s not to say that no one ever in the history of the world has report “number of people receiving unemployment benefits,” but that’s not what is usually meant by unemployment rate. I think it’s also fairly common to report number of new claims for unemployment benefits.
How bad is it? Bad enough I know all that stuff, I guess.
I’ve seen at least three local stores go out of business in the past few weeks. Housing values on my block are down by at least 100K and counting. Three of my neighbors out here in the suburbs of NYC are unemployed within the last two months. Neighbor number four (a constantly bragging about her latest aquisition stay at home mom) spent election day whining about her poor DH and how his 300K salary will be unfairly taxed under Obama. I sincerely hope that her husband’s next on the unemployment list. Then maybe he’ll find something to do besides spend two hours with his leafblower on a nice quiet Sunday afternoon.
The foreclosures happened because the banking industry started lending money to anyone with a pulse and a job. So, people who had shitty credit were being given mortgages. In addition, these people did not have any money for a down payment, so the the banks lent them the money using adjustable rate mortgages, which have a low interest rate at first, but them balloon up after 5 years. People didn’t plan for this and as a result, they suddenly could not afford their house. It didn’t help matters that 1) people were buying WAY more house than they could afford, 2) there is an oversupply of housing in the U.S., but because of the easy credit and the fact that anyone could get a loan, this oversupply was hidden.
You know, I’m the first to admit that Bush sucks as a President (and I voted for the moron) but let’s keep our credibility and not start blaming everything on him. Yes, he’s spent a lot of money, but I didn’t notice any Democrats standing up and saying “Hey, we can’t afford all of this spending, let’s cut back”. Let’s also remember, that a contributing factor to the current mortgage mess is the “red-lining” laws passed during the Clinton administration. The banks were accused of “redlining” (iow, not lending money to ) anyone in poor areas. Ostensibly , it was racism, but in fairness to the banks, it could have also been that people in these neighborhoods don’t have any money. However, after these laws were passed, the banks said, "Well, on one hand we can continue to demand that people have a good credit history and have a down-payment, and leave ourselves open to federal lawsuits, or we can lend money to anyone and sell the loans. Hence, the present mess. There is plenty of bipartisan blame to go around.
How bad is it? Well, let’s put it this way: I am glad I bought my house in 2000, and did not take out a bunch or home equity loANS (ANOTHER MESS THAT PEOPLE GOT THEMSELVES INTO - BORROWING AGAINST YOUR EQUITY MEANS THAT , IF YOU CAN’T PAY, BYE-BYE HOUSE).No one can sell anything right now, builders can’t start houses because the banks won’t lend them any money, and to get a mortgage, you better have 30% down. So, it’s bad, and won’t get better for quite a while.
I’m finding out for myself that the job market is terrible. I just graduated and I’ve been searching for 5 months and not coming up with anything. Back home it was getting real bad around the Detroit area. It seems like some company is laying off their employees every week. On every street near in my old neighborhood there was at least one abandoned house (people who cannot afford to keep paying their mortgage up and leave) and I would say 1.5-2 houses trying to sell (unsuccessfully, of course.)
Our town is less than 8,000 people. this summer there were court procedings and foreclosure notices on two to three pages in the paper most days all summer.
Most people have 401k retirement accounts and many took a big loss on them. I can vouch for a 25% decrease in it’s value, and that some people lost more. One lady was very upset in the store I was in, because her account was down $58,000 in value. Nobody seems to be blaming the strain the cost of energy put on the economy for two years. It definitely hurt people a lot. The construction companies around here are really hurting for work. Many companies have laid off or fired a large chunk of employees. It’s not that the right moves won’t help, it’s that most people have been hurt no matter what happens in the future. The auto companies have been in this bad position for decades, and they never reform. They just do what they want and ask for bailouts all the time. They get no sympathy for their situation from the people I know. Expect the general retailers to go next if people don’t spend in the next month.
Wrong, Wrong , Wrong , Wrong and Wrong, to coin a phrase.
The anti-redlining laws had nothing to do with the crisis – in fact, there are quite a few banks who are doing quite well by lending to marginal mortgage payers. The law only asked them to end the practice of refusing to lend to people – regardless of ability to pay – if they wanted to buy a house in a redlined area. The law only required they seek out potential clients and lend to them if they met the bank’s general criteria for getting a loan.
Also the timing makes no sense. The Community Reinvestment Act – which outlawed redlining – was passed in 1977. Were banks making all these bad investments for over thirty years without anything going wrong? Really?
No. It’s logical to assume that something changed so that the banks that had been guided by the Community Reinvestment Act for years – with no housing crisis – changed things about their operation.
And that’s what happened. What caused the crisis – and yes, Democrats have to share blame for all this – was the Gramm-Leach-Bliley Act, which repealed the restrictions on banks offering investments. Prior to the bill, the bank had to lend responsibly and to keep the nonperforming assets (i.e., bad loans) to a minimum, since they were on the hook for the money. After Gramm-Leach-Bliley, they could package their loans into investment instruments and pass off the loans to someone else. Now, they were no longer on the hook for the loans. And since they weren’t on the hook if the loan defaulted, they were able to make more money by making bad loans and packaging them as investments. That’s when things started going wild.
Gramm-Leach-Bliley was an absolutely terrible idea, and anyone who had any knowledge of history (especially the Great Depression) could see from the start that it was a recipe for disaster.
Note that most of the banks that have gone under in the crisis never sold mortgages at all, and thus did not have to follow the Community Reinvestment Act regulations.
But the Community Reinvestment Act had nothing to do with the crisis and worked without the slightest bad effect on the banking industry until Gramm-Leach-Bliley.
Things are looking pretty grim from where I’m sitting (Central Kentucky). My employer of 5 years is going out of business, I’m unemployed, my sister is unemployed. My uncle and aunt are moving in with my parents - my uncle was let go from Ford and had way too many credit cards / loans he could no longer afford to pay off. On top of all that, even the standard easy to get jobs (Walmart, Kroger, Target, etc.) are not hiring. Of the 5 places I went in that still had the old fashioned applications that you filled out offline, only 1 place even allowed me to fill one out even though even they were not hiring.
On the bright side, I’m learning some ways to save money without impacting my lifestyle. Kroger crackers are only 97¢ a box and taste just like Saltines to me. Top Ramen and Ramen Noodles aren’t bad at all. Coupons are worth searching for. Hopefully, my new shopping habits will stick with me after things have gotten better and I’ll be better off for it in the long run.
About two years ago one of the managers at work was telling me that I ought to buy a house, and I responded that I’d never get a home loan with my crappy credit history. He said, “Oh, they’ll give anybody a loan!”
I judge the health of the local economy in part by the size of the Star Tribune’s (Twin Cities, Minnesota) employment ads section. During the Clinton years, there were 4 healthy sections of classified ads, most of them for jobs; now there are 4 pages. Granted, some of that is due to migration to internet job sites, but for the most part it’s due to the crappy economy, which is due to the war, Bush’s [read Cheney’s] and Congress’s squandering of the nation’s wealth, and the out and out frauds perpetrated by the financial world.
One of the best ways to judge what is happening (and about to happen) in the US economy is the state of things in Detroit. If the big 3 automakers go bust, that’s going to affect an incredible number of jobs throughout the country. Even thinking about that gives me a panic attack.
I don’t think it’s accurate to judge the state of the whole country by Detroit, where things have been especially bad for many years. That said, it’s not terribly good anywhere, but the metro areas having diversified economies are naturally faring better. The economy is certainly a factor in my remaining unemployed, so it is affecting me, but I’m also in school and haven’t really been working very hard finding a job. That said, it doesn’t seem like my local neighborhood is in a state of torpor. Workday traffic seems to be as bad as ever, and not slacking off as one might expect if significantly fewer people were commuting around here, and there don’t seem to be more than the usual perennially vacant stores. You know the kind that are almost always available but nobody knows why, like a corner store that can’t be rented.
One of our family members lives in Florida and purchased two properties in addition to the (very nice) one the family lives in. They can’t sell them and can’t even rent them out for the amount of their mortgage payment. Florida is one of the hardest-hit areas, along with Texas and California. I don’t see this turning around for them any time soon.
The Chicago area is doing pretty good by comparison. We always seem to take less of a hit than other areas in the country.
I live in a fairly nice area and there are two houses within yards of mine that are vacant because they were foreclosed. I don’t know the exact reasons why, but I do know it is sad and that it has a direct impact on me. Like others, we bought a house we could afford and are not planning on selling any time soon. It is painful to see that all of the equity that you built in the past 10 years is now gone, though.
On the plus side, the two on our street that were foreclosed on now have new owners. So things are moving a little.
I understand its really rough to try to sell a non-foreclosed home - as the few qualified buyers are really looking for bargains and banks are cutting deals.
Back home it was getting real bad around the Detroit area. It seems like some company is laying off their employees every week. On every street near in my old neighborhood there was at least one abandoned house (people who cannot afford to keep paying their mortgage up and leave) and I would say 1.5-2 houses trying to sell (unsuccessfully, of course.)