African Americans hardest hit by collasping housing bubble

From CNN:

The foreclosure crisis has hit blacks harder than any other group in America and it will be tough for them to regain their footing in the housing market.

Blacks' homeownership rate has plummeted nearly 6 percent to 46.2 percent since its peak in 2004. That's more than twice that of any other racial or ethnic group, as well as the nation's rate as a whole, which fell only 2.3 percent, according to U.S. Census data.

Also, among recent borrowers, nearly 8 percent of blacks have lost their homes to foreclosure, compared to 4.5 percent of whites, according to the Center for Responsible Lending. Latinos, who have also been pummeled by the mortgage meltdown, came in a close second behind blacks in foreclosure losses.

The consequences are devastating. Fewer blacks own their home now than any other racial or ethnic group and that makes it even more difficult for them to achieve financial security and attain wealth.

I'll remind everyone that the attitude of the Federal Reserve during the growing housing bubble was that it was best to just let bubbles grow unimpeded and then mop up the mess afterward. That hasn't worked out too well.

September 2010 new home sales third lowest on record

New home sales are still scraping bottom:

New home sales edged higher in September, according to government figures reported Wednesday, but the recovery from the all-time lows reached earlier this year remained slow.

Sales of newly built single-family homes rose to an annual rate of 307,000 units in September from 288,000 units the month before, the Commerce Department said. ...

But the modest increase does not give "too much cause for hope," according to Celia Chen, a senior director at Moody's Analytics.

"Sales did rise which is good, but the pace is still very weak," Chen said. "It's still close to a record low. It just doesn't seem that demand is really firming."

The August sales were the third-lowest level since the Commerce Department started tracking new home sales in 1963, trailing only the 282,000 rate reported in May, and 285,000 in July.

Will foreclosed homeowners get their homes back?

Regarding the recent foreclosure scandal CNN Money says, "Forget it. You're not getting your house back."

Is this the break that millions of people have been hoping for?

Evidence continues to mount that major banks flouted their own foreclosure procedures — and possibly the law — when repossessing homes from owners who fell behind on payments.

And that begs the question: Can owners who were wrongfully evicted take their home back? ...

Experts say that very few homeowners will ever get their houses back. The possible exception: The handful of people who were wrongfully swept up by the mortgage tsunami, despite the fact that they were current on their payments.

But getting a judge to unwind a foreclosure is tough.

"The law imposes a very heavy burden on those seeking to attack final court judgments," says Robert Lawless, a professor at the University of Illinois College of Law.

If a court does rule a foreclosure invalid, either because the lender didn't have the paperwork in order or because the mortgage was not actually in default, a home's title will revert to the original owner, even if the property has since been purchased by a third party. ...

But one thing is clear: If the original homeowner doesn't have the cash to catch up on the mortgage, the lender will restart the foreclosure process and, with the paperwork in order this time, repossess the house.

Illinois Tool Works CEO predicts weak 2011 for housing industry

The Illinois Tool Works CEO, whose company makes equipment for housing construction, predicts no housing industry improvement until 2012:

The U.S. housing industry will continue to struggle through 2011 and likely won’t improve significantly until 2012, Illinois Tool Works Inc. Chairman and Chief Executive David Speer predicts.

High rates of mortgage of foreclosures and falling housing prices will continue to provide headwinds for sales of new and existing homes, Mr. Speer says. Moreover, persistently high levels of unemployment will dampen consumers’ interest in residential real estate.

“The consumer is still facing tremendous challenges, certainly in the housing market,” Mr. Speer says.

Mr. Speer’s Glenview, Ill., company operates more than 800 separate manufacturing businesses covering a variety of industrial sectors, including construction, automotive, packaging and food service. About 20% of ITW’s $13.9 billion in sales last year came from products used in real estate construction and remodeling work.

A $75,000 house becomes the most expensive in America

Ouch!

America's outdated land title system

Economist Arnold Kling gives his thoughts on the growing foreclosure scandal:

If [George] Washington were to visit the county office where property records are maintained, he might feel right at home. Often, documents have the same legal format as in the 18th century, and they are maintained in pretty much the same manner.

On the other hand, if Washington were to visit a 21st-century financial firm that deals in mortgage securities, he would be thoroughly bewildered. There he would find computers maintaining records in electronic format that are far more complex than anything that existed in his day. ...

What has emerged in recent weeks as "the foreclosure scandal" represents the collision of this 21st-century computerized, global financial system with an 18th-century legal process for obtaining ownership rights to buildings and land. Indeed, the United States has one of the most backward land-title systems in the industrial world.

If we wanted, we could apply modern technology to the land-title process. We could base property boundaries on satellite photography rather than on surveyor's sketches. We could use precise coordinates for latitude and longitude instead of references to topographical features. We could maintain records in digital format, where they could be accessed on the Internet. ...

Doing so would provide a number of benefits. For instance, we could make property ownership sufficiently secure that we could do away with the wasteful, expensive service known as title insurance. ...

A modern titling system also would reduce the cost to mortgage lenders of complying with the process of recording a title. ...

When foreclosing on a property, the lender must, like any other seller, establish clear rights to the property before selling it. It is in that step — where the lender must produce the proper paperwork to comply with legal standards using antiquated recording methods — that many banks apparently took shortcuts, forged signatures or used documents that were only re-creations of the originals.

The former head of Ginnie Mae discusses the recent foreclosure freezes

He also predicts "further declines in the housing prices in this country."


From the CNBC interview:

Although the foreclosure freeze is stabilizing the housing market for the time being, it will trigger further housing price declines two to four quarters out, Joseph Murin, former president of the Government National Mortgage Association [Ginnie Mae] told CNBC on Monday.

"What it will cause is a more eroding of confidence in the American people," he said. "And when the American people aren't confident, they're not going to respond, which means the housing market is going to remain sluggish."

Foreclosure stalling is necessary for institutions to reassess whether they are processing correctly, Murin went on to say.

"There's no fraud involved in this," he said. "It's process inadequacy that's causing the problem. Behind the scenes, we're dealing with technology and experience that's probably a decade old. It's not kept up with the huge push [in mortgage debt]."

Off topic

Microsoft just issued it's biggest ever security fix today. If you're a Windows user, make sure Automatic Updates is turned on or do an update yourself.

If you're a Mac or Linux user, you're already secure.

The Google Price Index

For those of you who refuse to trust the U.S. government's economic statistics:

Google is using its vast database of web shopping data to construct the ‘Google Price Index’ – a daily measure of inflation that could one day provide an alternative to official statistics.

The mix of goods sold over the internet is different to the mix of goods sold in the wider economy.

The work by Google’s chief economist, Hal Varian, highlights how economic data can be gathered far more rapidly using online sources. The official Consumer Price Index data are collected by hand from shops, and only published monthly with a time lag of several weeks.

At the National Association of Business Economists conference in Denver, Colorado, Mr Varian said that the GPI was a work in progress and Google had not yet decided whether to publish it.

While the Federal Reserve is unlikely to panic just yet, Mr Varian said that the GPI shows a “very clear deflationary trend” for web-traded goods in the US since Christmas.

Of course, Google is a big corporation and we know from the Democrats that big corporations can't be trusted. Perhaps we shouldn't trust anyone.

Job market: Mixed results for September 2010

The unemployment rate, at 9.6%, remained unchanged in September. Although it is below its late 2009 peak, it has spent almost all of 2010 (except April) in a range of 9.5-9.7%.


Payrolls continued to get worse in September. Ironically, businesses are actually increasing workers. It is governments that are losing workers. John Maynard Keynes must be rolling over in his grave.


On the bright side, aggregate weekly hours worked is increasing. This suggests that underemployment is declining.


Also on the bright side, the mean duration of unemployment has continued to decline after reaching its all-time peak in June 2010.