Home Construction Surge – Continuing Forward

Story first appeared on USA Today

Many homebuilders were forced to drastically scale back construction on new homes during the aftermath of the housing bust, to reduce the risk of being left with multiple newly build but as of yet unsold properties.

But an improving housing market has homebuilders feeling more confident about sales, and that's likely to kick the pace of new construction into a higher gear this year.

The Commerce Department said Thursday that builders broke ground on houses and apartments last month at a seasonally adjusted annual rate of 954,000. That's 12.1% higher than November's annual rate. And it is nearly double the recession low reached in April 2009.

Construction increased last month for both single-family homes and apartments. And the pace in which builders requested permits to start more homes ticked up to a 4½ year high.

For the year, builders started work on 780,000 homes. That's still roughly half of the annual number of starts consistent with healthier markets. But it is an increase of 28.1% from 2011. And it is the most since 2008 — shortly after the housing market began to collapse in late 2006 and 2007.

Steady hiring, record-low mortgage rates and a tight supply of new and previously occupied homes available for sale have helped boost sales and prices in most markets. That has persuaded builders to start more homes, which adds to economic growth and hiring.

David Williams, a homebuilding analyst with Williams Financial Group, says builders are very closely tied to what's happening in the housing market and they're going to build homes to meet demand, but not go overboard.

"I don't think, at this point, that they're going to overbuild," Williams said, noting that homebuilders are still holding back on building too many spec homes, or properties built before they're sold.

Having some spec homes can help sales, especially when a buyer isn't willing to wait several months for their home to be built. Builders tend to put up more of those homes heading into the spring home-selling season that traditionally begins next month.

Larry Webb, CEO of homebuilder The New Home Co., in Aliso Viejo, Calif., says he is building homes at a faster pace than a year ago, but he sticks to a sell-first, build-second approach.

Overall, Webb is selling and building a minimum of four homes a month, at least double the pace of sales and construction two years ago.

Webb believes the stepped-up pace of home construction will continue this year. But he's holding on to the sell-first approach.

"Based on what we've gone through in the last recession and the way we do business, we think we should primarily build after we sell homes," he said. "We only build after we sell."

The company, which builds homes in California, has 10 open communities and plans to open another 14 this year.

"Normally there's a big drop off between Thanksgiving and Christmas," Webb said. "We saw very solid traffic and we're anticipating a very good first quarter."

Thursday's positive housing report, along with a steep decline in unemployment benefit applications, contributed to a strong day on Wall Street. The Standard & Poor's 500 closed at a five-year high.

"There is no denying that the housing market recovery is solidifying, and we expect construction activity to ramp up to the 1 million annualized threshold by the end of this year," said Michael Dolega, an economist with TD Economics, in a note to clients.

Dolega said the gains in home building helped boost construction hiring in December by 30,000 jobs — the most in 15 months. He predicts the construction industry could add half a million jobs in 2013.

In December, the pace of single-family home construction, which makes up two-thirds of the market, increased 8 percent. While that's well below healthy levels, single-family housing starts are now 75 percent higher than the recession low reached in March 2009.

Apartment construction, which is more volatile, surged 23 percent last month. It is now back to pre-recession levels.

Applications for building permits, a sign of future construction, inched up to a rate of 903,000 — the highest level since July 2008.

"The strong rise in single-family starts is a clear indication of builder confidence in the sales outlook," said Pierre Ellis, an economist at Decision Economics, in a note to clients.

Confidence among homebuilders held steady in January at the highest level in nearly seven years. But builders are feeling slightly less optimistic about their prospects for sales over the next six months, according to a survey released Wednesday.

In November, sales of previously occupied homes rose to their highest level in three years, while new-home sales reached a 2 1/2-year high.

Those factors have helped make homebuilders more confident and spurred new home construction. But homebuilders' are still warily watching the current standoff in Washington between President Obama and Congress over several approaching budget deadlines, including the need to boost the nation's $16.4 trillion borrowing limit.

Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy.   For each home built, there is approximately $90,000 in tax revenue and an average creation of three jobs lasting for at least a year, data from the homebuilder’s association shows.

Housing Debt A Huge Burden

Story first appeared in USA Today.

Feeling like you're drowning in credit card debt, student loans and medical bills?

If you are, you're likely not alone — and that could explain why everywhere you turn you hear ads offering some quick-fix deal to cope with debt.

About one in five U.S. households owe more on credit cards, medical bills, student loans and other debts that aren't backed by collateral — so not including car loans — than they have in savings, checking accounts and other liquid assets, according to a new University of Michigan report. Some families have not been able to make substantial headway.

Average savings levels have gone up since 2008. But the U-M research showed that there had been no improvement in financial liquidity between 2009 and 2011 — except among families with more than $50,000 in savings and other liquid assets.

Families feared the worst.

In other words, families who could afford to save more money often did so because they feared the worst.

Research did not show how families built more savings, but they may have cut spending and they sold riskier assets and put that money into savings accounts.

At the same time, others who were hit hard with higher payments on adjustable-rate mortgages, declining home values and job loss had an extremely tough time rebuilding their savings.

The U-M results are consistent with other data showing that a large number of lower-middle income households have negative net worth. Families owe more than they own, and are having trouble managing their debt.

But higher-middle income and high-income households have much stronger balance sheets, and they aren't having difficulty paying their bills.

Not everyone is drowning — but even so, some may fear they're only treading water.

The U-M report showed:
• Many families fear more mortgage troubles ahead.

About 1.7% of families surveyed in 2011 said it is very likely or somewhat likely that they will fall behind on their mortgage payments in the near future.

It isn't much of an improvement compared with 2009 during the crisis when 1.9% of families had such expectations.

For some families, the concern is whether they'd have enough cash flow to cover the mortgage and housing expenses after taking a pay cut, seeing a spouse lose a job and struggle to find another or dealing with an earlier-than-expected retirement.

It's possible, Stafford said, there will be continuing troubles for mortgages in 2012 and 2013.

• Yet there is some optimism about housing.

Stafford noted that about 4.6% of those families surveyed said they're very likely or somewhat likely to fall behind on their mortgage payments in the coming 12 months. That's down significantly from 6% who expressed that fear in 2009.

• Many homeowners easily turned into renters after the crisis.

If you ended up behind on a mortgage in 2009, the U-M research showed that there was a good chance that you moved out of a house and ended up renting two years later.

Among homeowners who were behind on their mortgage in 2009, the report showed that 19.3% were renters by 2011.

By contrast, just 6.5% of homeowners were renters by 2011 among those not behind on mortgage payments in 2009.

• Nest eggs weren't quickly rebuilt after families dug into savings to pay bills.

Families with no savings or other liquid assets rose to 23% in 2011, up from 18.5% in 2009.

• Credit card debt can turn into a huge burden.

About 10% of families in 2011 had $30,000 or more in credit card debt and other non-collateralized debts. That compares with 8.5% in 2009.
High housing costs a bad sign

Who got into the most trouble?

One predictor proved to be areas where a large group of people had dedicated an extremely high share of family income — say 25% or more — toward housing.

If people made what Stafford calls an excessive commitment to housing in 2007 before the housing collapse, they faced greater difficulty once home values tumbled and the Great Recession hit.

Families continue to face difficulties because there are still a lot of underwater mortgages out there.

Any additional stress on household finances would undermine whether the mortgage is paid. Being underwater with a mortgage and other debts, clearly limits a consumer's ability to take on debt to support other types of spending.


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Apartment Rent Keeps Rising

First appeared in NY Times

The housing market remains a potent drag on the economy as home prices continue to slip, foreclosed homes fill some neighborhoods and millions of construction workers scramble for jobs.

But one group is sitting pretty: landlords.

Unlike home prices, rents have been rising, up 2.4 percent in January from a year earlier, according to recent data, not adjusted for inflation, released by the Labor Department.

With few rental buildings erected over the last few years, available units are going fast. Nationwide, the apartment vacancy rate is down to 5.2 percent, its lowest level in more than a decade, according to the research firm Reis Inc.

Rent increases are greatest in places like San Francisco, Austin, Tex., and Boston, where technology companies in particular are hiring, as well as in New York City and the District of Columbia. But cities like Chicago and Seattle, where house prices are still declining quite sharply, have had rental increases, too.

“We are more of a renter nation than we have been for a while,” said Christopher J. Mayer, a professor of real estate at the Columbia University Business School.

Economists suggest favorable conditions for landlords will continue for at least a year, with employment gradually rising and construction of new apartments remaining constrained; especially with offered perks like Carports.

As job growth has begun to accelerate in recent months, young people are starting to move out of their parents’ homes or away from shared rooms and into their own rentals.

Families who might previously have bought homes are also staying in rentals longer. They may be waiting for the housing market to hit bottom or finding it difficult to qualify for a mortgage. Many others remain uncertain about their job prospects and wary of the obligations of ownership.

When Charles Griffith moved with his wife and two children to Orlando, Fla., last fall, they chose a new two-bedroom apartment for $1,140 a month. They left a four-bedroom house they had bought a decade ago in Antioch, Calif. His brother-in-law has moved in and taken over the mortgage payments.  They enjoy the perks of Metal Carports as well.

Mr. Griffith, who works as a supervisor for Southwest Airlines, and his wife, a customer service representative for the airline, are enjoying the flexibility and convenience of renting, as well as amenities like a pool. “We kind of like the situation now of not having to be under so much pressure,” said Mr. Griffith, 40, adding that the family may eventually buy in Orlando. But “with the economy and the airline industry, that factors into us thinking maybe we should hold off for a while.”

The home ownership rate has been falling from its peak of 69.4 percent in 2004, according to census data. By the fourth quarter of 2011, it was down to 66 percent. That means about two million more households are renting, said Kenneth Rosen, an economist and professor of real estate at the Haas School of Business at the University of California, Berkeley.

Not all those people are choosing apartments, of course. Some are moving into single-family homes left vacant by foreclosures. Eager to capitalize on the trend, investors are scooping up some houses at a deep discount and leasing them to tenants who have lost their own homes.

Several prominent hedge funds and private equity firms have recently announced plans to invest in distressed properties and convert them to rentals. And earlier this month, the government solicited applications from investors interested in buying pools of foreclosed properties held by Fannie Mae, Freddie Mac and the Federal Housing Administration.

Still, it is in apartments, not houses, where renters are feeling the most competition.

Although many families crushed by the recession have doubled up and plenty of underemployed 20-somethings are living with their parents, some young people are finally getting their own space. Nearly 60 percent of job gains in the last two years have gone to people who are 20 to 34, a crucial rental group, according to an analysis of Labor Department data by G. Ronald Witten, a consultant to apartment companies.

During the economic downturn, apartment developers retrenched. The number of new apartments completed fell from 284,200 in 2006 to less than half that number in 2011, according to census data.

The limited supply is pushing up prices in some markets. In San Francisco, rents jumped close to 5 percent last year, according to Reis, and increases averaged 3 percent in Austin and New York. Landlords have also been withdrawing incentives like a free month’s rent.

Liz Brent and Matt Mochizuki moved into a studio apartment a year ago in the Mission District in San Francisco for $1,395 a month. Now they want more space.

Ms. Brent, 26, makes costumes and is working as a barista at a cafe where customers leave big tips. Mr. Mochizuki, 27, has a steady job making custom metal work for a design studio. They are budgeting $1,800 a month in rent.

But at an open house for an apartment billed as a one-bedroom, they found a studio with an awkward layout and bad light. More than 40 people were in line, many ready to hand over a check.

“That’s what the market is like now,” Ms. Brent said of their fruitless search. “That’s how many people showed up for this tiny apartment with no windows.”

Some rental markets remain soft, like Atlanta and Las Vegas, the epicenter of the housing bust. Orlando, too, might seem an unlikely place for rental strength. The unemployment rate, at 9.7 percent, is higher than the national average, and home prices slipped 4.6 percent last year, according to the Standard & Poor’s Case-Shiller home price index.

Yet Ric Campo, chief executive of Camden Properties, a real estate investment trust that owns apartment buildings, said rental business was brisk at its LaVina development. Since the office for the 420-unit complex opened last summer, more than half the apartments have rented.

That’s “a faster rate than we’ve ever seen in Orlando,” Mr. Campo said. The company has raised the base rent on a two-bedroom apartment to $1,080, from $995 a month.  Apartment buildings even have Solar Carports to alleviate some energy costs.

Many now wonder about a more profound shift among future buyers. Matt Byford, a 24-year-old litigation consultant in Chicago, acknowledges that low interest rates and low prices favor buying. But he says he is renting and in no hurry to buy, because he doesn’t expect much to change soon.

Brad Forrester, chief executive of the ConAm Group, which manages about 50,000 apartments in the western United States, says, “I think it’s going to be interesting to see whether there’s been a fundamental sociological shift in that 20- to 35-year-old cohort, where they literally say ‘this American dream just doesn’t work for me.’ ”

Growth Probably Sped Up on Spending Gain: U.S. Economy Preview

Bloomberg

The economy in the U.S. probably grew at a faster pace in the third quarter, reflecting a pickup in consumer spending that bodes well for the recovery’s staying power, economists projected a report this week will show.

Gross domestic product rose at a 2 percent annual pace, up from a 1.7 percent rate in the previous three months, according to the median estimate of 67 economists surveyed by Bloomberg News before an Oct. 29 Commerce Department report. Other data may show business investment remains a mainstay of the economic rebound, while housing is mired in a slump.

The pace of growth would still not be strong enough to give the 14.8 million unemployed Americans hope of finding work soon, one reason why Federal Reserve policy makers may be about to pump more money into the economy. Wal-Mart Stores Inc. and Target Corp. are among retailers likely to gain as discounts lure budget-conscious shoppers during the year-end holidays.

“There’s no question about the sustainability of the recovery now,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “But unless we grow faster, we don’t have a shot at bringing down unemployment significantly. Improvement in consumer spending is a sign the holiday season will be better than in the past couple of years.”

The GDP estimate is the first of three for the quarter, with the other releases scheduled in November and December when more information becomes available.

Spending Climbs

Consumer spending, which accounts for about 70 percent of the economy, increased at a 2.4 percent annual rate from July through September, the best showing of the recovery that began in June 2009, economists project.

The National Retail Federation has forecast November- December sales will rise by 2.3 percent from a year ago, making it the best holiday season in four years. Wal-Mart, the world’s largest retailer, Target, Amazon.com Inc. and EBay Inc. are among merchants that will benefit as shoppers look for bargains, according to results of a survey issued this month by Consumer Edge Research in Stamford, Connecticut.

The Standard & Poor’s 500 index has gained 11 percent since Aug. 27, when Fed Chairman Ben S. Bernanke said the central bank “will do all that it can” to sustain the economy’s rebound. The measure rose 0.2 percent to 1,183.08 at the 4 p.m. close in New York on Oct. 22.

About 85 percent of companies in the S&P 500 gauge have exceeded analysts’ per-share profit estimates so far in third- quarter reports. Sales are rising at companies from Boeing Co. to chipmaker Intel Corp. and railroad CSX Corp. Faster overseas growth is also boosting earnings.

Aircraft Sales

Boeing, the world’s largest aerospace company, reported a third-quarter profit due to higher jetliner deliveries and raised its full-year forecast. The jump in orders is prompting the Chicago-based company to make plans to boost production.

The orders are coming amid a “slow, steady kind of recovery,” Chief Executive Officer Jim McNerney said on an Oct. 20 conference call. Most of the demand is from overseas.

The Commerce Department may report on Oct. 27 that orders for goods meant to last at least three years climbed 2 percent in September, the most in five months, according to the Bloomberg survey median. The gain signals business investment in new equipment continues to support the recovery.

While capital expenditures are climbing, manufacturing gains are cooling as the pace of inventory rebuilding eases compared with the surge that began in late 2009.

Housing Woes

Housing continues to struggle as foreclosures mount and unemployment near 10 percent limits demand and hurts property values. Sales of existing homes, due tomorrow from the National Association of Realtors, rose to a 4.3 million annual rate last month, according to the Bloomberg survey median. The readings over the past three months would be the lowest since comparable records began in 1999.

The Commerce Department may report on Oct. 27 that new-home purchases increased last month to a 300,000 annual rate, hovering close to the record-low 282,000 reached in May, economists predicted.

Home prices in 20 cities for the 12 months through August climbed at a slower pace, according to the Bloomberg survey. The S&P/Case-Shiller index is due Oct. 26.

Consumer confidence reports may show little change this month as the lack of jobs unnerves Americans. The Thomson Reuters/University of Michigan’s sentiment index, due Oct. 29, is projected to drop to a three-month low, while the Conference Board’s gauge on Oct. 26 may climb from a one-year low.

Flawed Foreclosure Documents Thwart Home Sales

NY Times

Richard Clark, left, with his agent, Kevin Corasio, 
is trying to buy a foreclosed home in Florida. 

Amanda Ducksworth was supposed to move in to her new home this week, a three-bedroom steal here in central Florida with a horse farm across the road. Instead, she is camped out with her 7-year-old son at her boss’s house.

Like many buyers across the country, Ms. Ducksworth was about to complete the purchase of a foreclosed house when it suddenly went off the market. Fannie Mae, the giant mortgage holding company that buys loans from commercial lenders, is pulling back sales of homes that might have been foreclosed in bad faith.

“I gave up my rental thinking I would have a house,” said Ms. Ducksworth, a 28-year-old catering assistant. “Now I’m sharing a room with my son. What the hell is up with that?”

With home sales this past summer at the lowest level in more than a decade, real estate is ill-prepared to suffer another blow. But as a scandal unfolds over mortgage lenders’ shoddy preparation of foreclosure documents, the fallout is beginning to hammer the housing market, especially in states like Florida where distressed properties are abundant.

“This crisis takes a situation that’s already bad and kind of cements it into place,” said Joshua Shapiro, chief United States economist for MFR Inc., an economic consulting firm.

Three major mortgage lenders — Bank of America, GMAC Mortgage and JPMorgan Chase — have said they are suspending foreclosures in the 23 states where they first need a judge’s approval. They are also waving off Fannie Mae from selling any of the foreclosed homes whose loans they sold to Fannie.

The companies say they are reviewing their operations after disclosures that employees signed documents without determining the accuracy of the material, as is required by law.

Those reviews are throwing into limbo hundreds of thousands of foreclosures and pending home sales, analysts estimate, though the lenders and Fannie Mae have been mostly silent about precise numbers and other specifics.

More broadly, the revelations about the sloppy paperwork are emboldening homeowners and law enforcement officials in many states to question whether lenders rightfully hold the notes underlying foreclosed properties — further chilling the housing market.

Distressed properties, many of which are in foreclosure, make up about a third of all home sales. “Foreclosures are going to slow to a crawl,” said Guy D. Cecala, publisher of the trade magazine Inside Mortgage Finance.

Of the 23 states where foreclosures need court approval, Florida has by far the most trouble — about a half-million cases clog its courts — and the moratoriums are having a noticeable effect.

Because most lenders sold their mortgages to Fannie Mae, it is largely that company that has been sending e-mails to real estate agents about putting off deals and removing houses from the market. In most cases, the agents are being told the freeze will last 30 to 90 days, but agents say there is no way to know for sure.

A snapshot of the problems can be seen at the real estate agency that sold Ms. Ducksworth her home, Marc Joseph Realty, based in Fort Myers.

The agency had 35 deals that were supposed to close this month. As of Thursday, Fannie had postponed 11 of them. Another handful of homes that did not have offers or were being prepared for market had also been withdrawn.

“If this wipes out half my inventory, that’s a scary thing,” said Bill Mitchell, the agency’s closing coordinator.

As he spoke, his computer pinged and another message from Fannie came through about withdrawing a house. It had the subject line, “Unable to Market Notice.”

Another client of the agency, Richard Clark, is caught in the foreclosure vise on both ends.

A delivery truck driver, Mr. Clark has gone through several rough years: his wife lost her banking job and they eventually separated; a vending business did not succeed; he fell behind on his home payments; and CitiMortgage rebuffed his efforts to restructure the mortgage.

With the prospect of being tossed out of his house in a foreclosure of his own, Mr. Clark, 62, cobbled together $58,000 — most of it from his parents — and successfully bid on a house in North Fort Myers that was in foreclosure. His offer on the house, with three bedrooms and two baths, a Jacuzzi tub in the master bedroom and a Key lime tree in the backyard, was finally approved on Oct. 1.

“It’s been a rocky two years,” Mr. Clark, a stocky man with a short pony tail, wire-rim glasses and a gold hoop earring, said while touring the rambling one-story home. “It’s a dream house for me.”

At least, it was. On Tuesday, Fannie suspended the deal. Mr. Clark said he did not know what to do. “I’m kind of hoping I have a place to live,” he said. “Now, who knows?”

It is possible the foreclosure on his current house in nearby Cape Coral — he has a court hearing on Dec. 7 — will also become caught up in the current problems, but Mr. Clark said he was not pleased by the prospect of staying there any longer.

“I’d rather just get on with it, get on with my life,” he said.

In the states far from Florida where foreclosures are an equally large problem but there is no judicial review — Nevada, Arizona and California — there were early signs this week that the document crisis was spreading. The only time a foreclosure in those states enters a courtroom is when the borrower sues the lender, something few of those in default have the money or the will to do.

In a telephone interview on Wednesday, Gary Kent, a foreclosure specialist in San Diego who has 80 listings, said he had not heard from Fannie or any lender about withdrawing a property. All his deals were on track, Mr. Kent said.

But a few hours later, Mr. Kent said he had received an e-mail about removing a home that was under contract.

The message was from his title insurer, who said that Pittsburgh-based PNC Bank was imposing a 30-day moratorium on all foreclosure sales. (PNC declined to comment to a reporter.)

Mr. Kent’s confidence was shaken. “My buyer’s upset, my agent’s upset and I’m a little nervous,” he said.

Several factors are likely to delay many more foreclosed houses from reaching the market and finding new owners.

Law enforcement officials in several states, including Texas, Maryland and Connecticut, are demanding a suspension of foreclosures until lenders can prove they are using legal methods.

It is unclear how many lenders will go along.

In a move that sets up a potential showdown in Texas, one major lender, CitiMortgage, is arguing that it is being considered guilty until proven innocent by the state attorney general.

“We have no reason to believe our employees are not following our process, and therefore have no reason to stop foreclosures,” a Citi spokesman said.

Another factor is the reaction of the title insurers, who defend homeowners in disputes over a home’s ownership. Lenders require title insurance before approving a mortgage.

The crisis took many title insurers by surprise, said Kurt Pfotenhauer, the chief executive of the industry’s trade group, the American Land Title Association.

One possibility the title insurers are discussing is obtaining warranties from lenders against errors in their foreclosures. Every title insurer, Mr. Pfotenhauer said, “understands there is a brand new risk that has to be evaluated. It’s not at all clear that courts across the country are going to be reversing their earlier decisions on foreclosures. But we don’t know.”

In the meantime, buyers like Ms. Ducksworth here in Ocala are at a loss for answers.

“She’s in a mess, actually,” said Jim Haston, Ms. Ducksworth’s agent.

“I really don’t know what to tell her,” he said.

Obama Won't Sign Bill Affecting Foreclosures

The Wall Street Journal

 

President Barack Obama won't sign into law an overlooked piece of legislation that critics say would make it easier for banks and others to process foreclosure proceedings without human signatures, a person familiar with the matter said.

Mr. Obama will send the bill back to Congress using a process known as a "pocket veto." It's his second pocket veto, but the first one designed to scotch a bill the White House opposes. In December, Mr. Obama declined to sign a spending bill the White House said was unnecessary because Congress had passed another.

His decision comes amid growing complaints from lawmakers that the administration and regulators haven't done enough to intervene in a scandal tied to thousands of foreclosures that critics argue were processed with improper documentation.

 Ally Bank, Bank of America Corp. and J.P. Morgan Chase & Co. have halted foreclosures in 23 states in recent weeks to review how many documents tied to these foreclosures might have been filed improperly. A central issue is the practice of "robo" signing, when documents are signed quickly by computers or people who don't review the documents.

The bill in question, HR 3808, passed the Senate on Sept. 27 by unanimous consent. The House passed the bill by voice vote in April. Many bills that aren't considered controversial pass this way, with members of both parties essentially letting it move through Congress without debate.

The bill is called the Interstate Recognition of Notarizations Act of 2009, and it was authored by Rep. Robert Aderholt (R., Ala.). A spokesman for Mr. Aderholt didn't return a call for comment.

The bill was co-sponsored by Reps. Bruce Braley (D., Iowa), Michael Castle (R., Del.), and Artur Davis (D., Ala.).

The bill would require state and federal courts to "recognize any notarization made by a notary public" licensed in any state. This would include electronic signatures. The bill would have been a big win for businesses who complained it was too easy for people to challenge notarized documents in court when notaries were licensed in different states.

"This legislation will help businesses around the nation by eliminating the confusion which arises when states refuse to acknowledge the integrity of documents notarized out of state," Mr. Aderholt said when the bill passed the Senate. "This bill offers a common-sense solution to a problem that is more widespread than is generally recognized."

It is unclear how the bill might have affected the current foreclosure scandal, but liberal groups have insisted in recent days that Mr. Obama veto it. A spokesman for Mr. Aderholt said: "Contrary to some blogs and reports, there is absolutely no connection whatsoever between Congressman Aderholt's legislation and the recent foreclosure-documentation problems."

Ohio Secretary of State Jennifer Brunner said Tuesday if the bill became law it would make it harder for consumers to challenge foreclosures.

The bill raised difficult policy decisions for government officials. Some argue it should be easier for banks and others to process documents electronically to help reduce the backlog of foreclosures and help the housing market. But there have also been questions about the loan-servicing and foreclosure-processing industry, which is loosely regulated and now faces accusations of fraud.

Attorney General Eric Holder said Wednesday that the Financial Fraud Enforcement Task Force was looking at the issue, but it is unclear if prosecutors have opened a formal investigation into the matter.

Economy in U.S. Probably Expanded Last Quarter at Slowest Pace in a Year‏

Bloomberg

The U.S. economy probably slowed in the second quarter even more than initially estimated as companies reined in inventories and the trade deficit widened, economists said before a report today.

Growth cooled to a 1.4 percent pace from April through June, the smallest gain in the year-old recovery, rather than the 2.4 percent projected last month, according to the median forecast of 81 economists surveyed by Bloomberg News. The world’s largest economy expanded at a 3.7 percent rate in the first three months of 2010.

“It’s a much weaker recovery,” Julia Coronado, senior U.S. economist at BNP Paribas in New York. “The whole pickup is a lot less perky than we thought and that is very worrisome.”

Federal Reserve Chairman Ben S. Bernanke, who addresses central bankers from around the world today in Jackson Hole, Wyoming, may shed more light on policy makers’ outlook in the wake of reports that signaled a growing risk of a renewed U.S. economic slump. Slowdowns in housing, business investment and consumer spending are prompting economists to cut second-half growth forecasts.

The Commerce Department’s revised second-quarter figures will be released at 8:30 a.m. in Washington. Forecasts in the Bloomberg survey range from 0.5 percent to 2.2 percent. The estimate is the second for the quarter, with the final figures set for release on Sept. 30.

Today’s report may show consumer spending, which accounts for about 70 percent of the economy, rose at an unrevised 1.6 percent pace last quarter. Purchases increased at a 1.9 percent rate from January through March.

Homes, Spending

A lack of job growth, declines in household wealth following slumps in stocks and housing, and the drive to reduce debt and boost savings are reasons consumer spending may struggle to strengthen.

J. Crew Group Inc., the New York-based retailer of sportswear, casual and career clothing, yesterday lowered its full-year earnings forecast.

“The continued economic uncertainty we’re seeing is leading us to take a more conservative outlook for the second half of the year,” Chief Executive Officer Mickey Drexler said on a conference call.

Figures this week showing a further slide in home sales and a drop in business spending on equipment prompted economists such as Joseph LaVorgna of Deutsche Bank Securities Inc. in New York to reduce third-quarter growth estimates.

Recession Odds

Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, this week said the likelihood of the economy slipping back into a recession is now 33 percent, up from 20 percent three months ago. New York University economist and forecaster Nouriel Roubini, who predicted the financial crisis, said this week the odds of another recession are 40 percent.

“Fading fiscal stimulus and the end of the inventory swing in manufacturing strongly argue for a slowing in growth,” Zandi told reporters in Washington.

The economy is a top issue for voters in the November congressional elections and polls show the public is increasingly skeptical of President Barack Obama’s performance. Public approval for the president’s handling of the economy was at 41 percent in an Aug. 11-16 Associated Press-GfK survey, an all-time low and down from 50 percent last July.

House Republican leader John Boehner this week called on President Barack Obama to fire Treasury Secretary Timothy Geithner and the other remaining members of the president’s economic team, saying the administration’s stimulus policies are failing to create jobs.

Stocks Lower

The growth slowdown has hurt stocks. The Standard & Poor’s 500 Index has declined 6.1 percent this year through yesterday.

The trade gap adjusted for inflation, the figures used in calculating GDP, averaged $48.1 billion a month in the second quarter, up from $42.5 billion in the previous three months. A surge in imports swamped gains in exports, indicating producers overseas benefited more from growing U.S. demand.

Business investment, one of the economy’s few bright spots, powered ahead in the second quarter. Spending on equipment and software rose at a 22 percent pace, the Commerce Department’s initial GDP estimate showed, following a 20 percent gain in the first quarter.

Another report today may show consumer confidence improved this month. The Reuters/University of Michigan final sentiment index for August probably rose to 69.6 from 67.8 at the end of July, according to the survey median. The report is scheduled for 9:55 a.m.

Thousands Gather in Atlanta for Federally Subsidized Housing

Atlanta Journal-Constitution

Thirty thousand people turned out in East Point on Wednesday seeking applications for government-subsidized housing, and their confusion and frustration, combined with the summer heat, led to a chaotic mob scene that left 62 people injured.

At the Tri-Cities Plaza Shopping Center, emergency vehicles passed each other, transporting 20 people to hospitals. Medical and police command posts were set up on scene. East Point police wore riot gear. Officers from four other agencies supported them. Yet no arrests were made.

All of this resulted from people attempting to obtain Section 8 housing applications and, against long odds, later securing vouchers for affordable residences. Some waited in line for two days for the applications.

Renee Gray, a single mother holding her one-year-old daughter, Marion, came looking for a housing break and nearly got trampled, forcing her to run from the crowd and into the street.

"It could have been better organized," said Gray, a customer service employee. "A lot of adults lost focus.”

Jacquelyn Cuffie, 50, of Duluth, used a walker to cross the parking lot and navigate the huge gathering, determined to improve her living situation. It didn't matter how hot or crowded it got.

“It’s difficult to pay [the rent] with a disability check,” Cuffie said.

Offering applications for the first time since 2002, East Point Housing Authority officials had triple the crowd they anticipated, and one that was three-fourths of the 40,000 population of the south Fulton city. Things got out of hand when people started cutting into lines and authorities attempted to move groups to different areas.

Sgt. Cliff Chandler, East Point Police Department spokesman, said one flash point occurred early on. Authorities originally had lined up people to come into the front entrance of the Central Station Sports Cafe and receive the applications. However, when they saw the sheer number of people, the officials set up kiosks around the parking lot to hand out the applications, Chandler said.

Felecia McGhee, who came in search of her own Section 8 assistance, saw two small children trampled when people rushed the building that held the applications. When a group of people who had been waiting hours in a line were told to move to another line, people started pushing, shoving and cursing, witnesses said.

People collapsed in the heat. Emergency personnel drove up in a pickup truck and handed out bottled water. People were carried off on stretchers. A baby went into a seizure and was taken to a hospital.

Thaddeus Brookins of Atlanta dropped off his mother, Betty, a part-time furniture store employee, into the middle of the shopping center mayhem. He didn't like what he saw.

“It was terrible,” Thaddeus Brookins said. “Lot of people. People pushing people, knocking people over. People getting hurt.”

Wednesday's deluge of people seeking low-income vouchers in East Point demonstrated just how desperate the need for affordable housing has become in metro Atlanta, officials said. Some 15,000 Georgians currently are accommodated with Section 8 housing, with thousands more on waiting lists. Housing openings have been difficult to find anywhere, including rural areas.

"East Point, to me, is indicative of the problem," said Dennis Williams, a Georgia Department of Community affairs assistant commissioner. "It just goes to show you the situation is pretty dire."

At the same time the recession has pushed many middle-class families out of their homes, the closure of several large public housing projects -- Grady, Bowen and Capital Homes -- during the last decade has left many lower-income families with few housing options as well, elevating vouchers to something akin to lottery winnings. The demand has overwhelmed many municipalities and public entities that administer the Section 8 programs.

A check of the 16 metro Atlanta housing authorities that administer Section 8 programs found the overwhelming majority had closed their waiting lists. In one instance, the waiting list at Marietta Housing Authority has been closed since September 2008.

"There's more people demanding units at a lower-income level. The demands coming in from people who are losing their jobs and potentially having to leave their homes whether they move all the way to Section 8 or not, it's going to create demand, " said Jim Skinner, a planner in the research division of the Atlanta Regional Commission. "That's just the bottom line and that perhaps explains what happened in East Point."

When the crowd thinned out at the Tri-Cities Plaza Shopping Center, the parking lot was a sprawling mess of discarded water bottles, crushed soda cans and cigarette packs.

At an ensuing news conference, East Point officials tried to describe the day as a success, an assessment that was roundly challenged by those who had witnessed or been involved in the unruly scene.

Kim Lemish, East Point Housing Authority executive director, said the Section 8 housing applications were made available by the city for the first time in eight years because a waiting list had been depleted.

There was concern a similar overcrowded scene could occur Thursday morning when East Point began accepting the completed applications.

No one, however, was lining up at the housing authority in advance, by design. Late Wednesday, police had barricaded the housing authority and erected signs that declared "no loitering."

U.S. Plans More Aid for Jobless Homeowners

NY Times

 

In an acknowledgment that the foreclosure crisis is far from over, the Obama administration on Wednesday pumped $3 billion into programs intended to stop the unemployed from losing their homes.

The housing market, which usually helps lead the country out of a recession, is this time helping hold the recovery back. Interest rates are at record lows, but too few can afford to buy or refinance. Unemployed homeowners who live in communities where values have fallen sharply are often unable to sell. Their foreclosures weaken neighborhoods and create a vicious circle by further undermining the market.

To try to break this pattern, the Treasury Department said it was adding $2 billion to its Hardest Hit Fund, roughly doubling its size. The fund, first announced by President Obama in February and expanded in March, goes to housing finance agencies in various states to create local aid programs.

Most of the state programs from the first two rounds are barely under way, but Treasury officials said it was clear that more funds were needed.

“In this very deep recession, people have tended to be out of work a little longer,” Herbert M. Allison Jr., assistant secretary for financial stability, said. “That’s why we think this additional relief for people searching for a job is so important.”

The second program, announced by the Department of Housing and Urban Development, will draw on $1 billion authorized by the new financial overhaul law.

The agency said it would work with local aid groups to offer bridge loans of up to $50,000 to eligible borrowers to help them pay their mortgage principal, interest, insurance and taxes for up to 24 months. The loans will be interest-free.

Until now, the Hardest Hit Fund had been projected to help about 140,000 borrowers. Treasury officials said that number would grow with the new infusion of money, but offered no estimate. HUD also did not say how many homeowners would be eligible for its program.

If the new money is spent in the same way as the previous money, both programs would eventually aid about 400,000 borrowers — a large number, but not when set against the 14.6 million unemployed or three million contemplating foreclosure.

Over the last two years, the government has deployed many programs to help housing. It pushed interest rates down, offered tax credits and set up an ambitious mortgage modification program. Yet housing remains feeble and seems poised after a brief respite this year to become weaker again.

“I think all these government programs are helpful, but I wouldn’t look for them to cure the recession or even what ails housing,” said the economist Karl E. Case. “At best, they’re preventing things from getting much worse.”

The Hardest Hit Fund will draw on the $45.6 billion set aside for housing in the Troubled Asset Relief Program, the rescue measure begun at the height of the financial crisis in the fall of 2008. Initially, the fund gave $1.5 billion to five hard-hit states: Arizona, California, Florida, Michigan and Nevada. The second round in March of $600 million went to North Carolina, Ohio, Oregon, Rhode Island and South Carolina.

The expanded list of states eligible for the latest funding includes Alabama, Illinois, Kentucky, Mississippi and New Jersey, as well as the District of Columbia. Each state’s share of the money is based on its population.

Many of the programs involve direct assistance. Ohio, for instance, said it would use its $172 million to aid 15,356 homeowners by helping bring delinquent mortgages current for owners experiencing hardship because of a loss of income. The assistance will last up to 12 months.

The other housing money in the Troubled Asset Relief Program is earmarked for the modification programs ($30.6 billion) and a Federal Housing Administration refinancing program ($11 billion). The administration can shift money between the programs only until Oct. 3, the two-year anniversary of the program.

HUD said it was in the process of determining which communities would receive its money and how exactly the process would work. “We’re still in the design phase,” said Bill Apgar, HUD senior adviser for mortgage finance.

Feds Charge 1,200 People in Mortgage Fraud Crackdown

LA Times

In a nationwide effort, officials file criminal charges against individuals allegedly responsible for $2.3 billion in fraud. 'These schemes are despicable; they are dangerous to our economy,' Atty. Gen. Eric Holder says.

U.S. Attorney Jose Angel Moreno announces the results of a three-and-a-half-month mortgage fraud operation on Thursday in Houston. (Pat Sullivan / Associated Press)

 

 

Seeking to show victories against the kind of ground-level fraud that contributed to the housing crash, federal authorities said Thursday that they had filed criminal charges in recent months against 1,200 mortgage brokers and others accused of cheating banks and borrowers of $2.3 billion.

White-collar crime experts said the size and scope of what the government presented Thursday — dubbed Operation Stolen Dreams — represented an unprecedented crackdown on mortgage fraud.

The cases, including criminal charges against more than 30 defendants in Southern California, were announced at news conferences in Washington, New York, Ventura and elsewhere.They were coordinated by the Obama administration's Financial Fraud Enforcement Task Force, a recent collaboration among a host of federal and state agencies including the FBI, the Department of Housing and Urban Development and state attorneys general.

"We know that mortgage fraud ruins lives, destroys families and devastates whole communities, so attacking the problem from every possible angle is vital," Atty. Gen. Eric Holder said in Washington. "These schemes are despicable, they are dangerous to our economy, and they will not be tolerated."

The numbers reflect a steady increase in the last seven years in the number of open FBI mortgage-fraud cases, to more than 3,000 in May from fewer than 500 in 2003.

The charges filed by federal prosecutors in Los Angeles, Orange and Riverside counties included two cases in Ventura County with a total of 14 defendants, said Andre Birotte, the U.S. attorney based in Los Angeles.

The Ventura County defendants are accused of filing fraudulent loan applications, collecting millions of dollars in fees and commissions, and causing millions of dollars in losses when the homes went into foreclosure, Birotte said in Ventura.

The announcements, coupled with the arrest Tuesday of the former chairman of a large Florida mortgage company on charges of engineering a $1.9-billion fraud, illustrate the two levels of misconduct the government is going after.

Cases like those publicized Thursday are relatively easy to investigate and prosecute, former federal prosecutor John Hueston said. But not always that easy: Separate civil charges were announced against 395 people and companies, suggesting to Hueston that the government had decided not to bring criminal charges in those cases.

Holder said $147 million had been recovered in the civil cases, an amount Hueston said was not that big given the magnitude of the abuses.

Nonetheless, Hueston said, the large number of cases unveiled Thursday would send a serious message with a real deterrent value.

The government seemed to stretch to include every case it could in the tally. Of the criminal defendants listed, 336 already have been convicted and 206 have been sentenced.

In one of the New York cases, a tax preparer is accused of selling fake pay stubs and tax documents to mortgage and real estate brokers, who allegedly used the documents to apply for loans. Authorities said 17 people were indicted as a result of that investigation.

In another New York case, prosecutors allege that a company offered to help struggling homeowners around the country but did nothing once the borrowers paid the firm's upfront fees.

"Preying on hundreds of struggling homeowners who were desperate for any kind of relief, the defendants stole from those who could afford it least," said Neil Barofsky, the special inspector general for the Treasury Department's Troubled Asset Relief Program.

Of the cases unveiled nationwide, some relate to conduct during the housing boom, while others deal with behavior after the meltdown.

"Some of these folks have engaged in one kind of mortgage fraud in one financial environment and a different kind of mortgage fraud in another financial environment," said Preet Bharara, the U.S.

Dallas-Fort Worth Home Sales Surge 27 Percent in April

The Dallas News

 

 

North Texas home sales surged 27 percent in April from a year earlier.

Texas apartment and condominium sales rose even higher – up 49 percent.

Median home sales prices also rose a solid 7 percent in last month's report, one of the best recent year-over-year gains.

The jump in pre-owned home sales was fueled by the federal homebuying tax credits that just expired.

The April increase and an 11 percent rise in March were enough to put home sales ahead 9 percent so far this year in North Texas.

Local real estate agents sold 7,017 pre-owned single-family homes last month, according to statistics released Friday by the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems Inc.

It was the highest one-month sales total since last July and the second highest since mid-2008.

The rebound in home sales in North Texas will provide a boost to the overall economy, analysts say.

"Home sales generate revenues for service providers such as Realtors, lenders, title companies, appraisers, surveyors and attorneys, among others," said David Brown, who heads the Dallas office of housing analyst Metrostudy Inc.

"A big problem for the economy over much of the last year has been that the consumer has been on the sideline.

"Homebuyers tend to spend a significant amount of money on things like new refrigerators, washing machines, televisions and furniture," Brown said. "Many will make repairs and upgrades to the home. ... Thus, the home purchase will continue to have a positive impact on the economy over the next several months."

This year's increases in home sales look particularly large because housing transactions were almost at a standstill a year ago.

"Although much of the sales gain is likely due to the tax credit, other factors are at play as well," said D'Ann Petersen, a business economist with the Federal Reserve Bank of Dallas. "Mortgage rates remain relatively low, prices appear to have bottomed nationally, and job growth is edging up.

"Most indicators suggest the local economy is moving in the right direction, even if the recovery remains fragile."

Through the first four months of 2010, area home resale prices are up 5 percent from the same period last year.

And April's substantial increase in pre-owned home sales isn't likely to fade right away.

The number of pending home sales in North Texas – properties under contract but not yet closed – is up 40 percent.

As sales go up, the number of houses on the market in the area has fallen about 7 percent from a year ago to just over 37,000 homes. That's the lowest April home sales inventory in more than two years.

Currently, there's just over a six-month supply of pre-owned Dallas apartments and homes for sale in the North Texas market, which includes 24 counties. That's considered a balanced market.

"Certainly, it's great to see the market starting to clear the excess inventory of existing homes," said Dr. Bernard Weinstein, an economist with Southern Methodist University. "The rebound in home sales reflects confidence that both the national and local economies are on the mend.

"Low interest rates, the tax credit and an abundance of competitively priced foreclosure properties have also helped push up sales of existing homes and Fort Worth apartments."

Sales of New Homes up 27 Percent in March

The Washington Post

 

Sales of newly built homes shot up 27 percent in March -- the largest monthly gain in nearly five decades -- as mild weather and a lucrative tax credit pumped up demand for homes in all four regions of the country, according to federal data released Friday.

The Commerce Department reported that new-home sales jumped to a seasonally adjusted annual rate of 411,000, reversing February's record low and far exceeding the expectations of many experts who track the industry.

"We needed a grand slam . . . and we got it," Patrick Newport, an economist at IHS Global Insight, wrote in a note to clients.

Sales are up nearly 24 percent from March 2009, although they remain far below the peak in mid-2005.

Economists disagree on whether the sales momentum can be sustained, especially after the tax credit expires. But many economists say that some buyers who were deterred by the storms that gripped parts of the country in February clearly were rushing to beat the tax credit deadline.

To receive the credit -- $8,000 for some first-time buyers and $6,500 for certain repeat buyers purchasing a main residence -- buyers have to sign a contract by April 30 and complete the purchase by July 30.

David Crowe, chief economist at the National Association of Home Builders, said he expects new-home sales to plateau after this month, although he thinks the dramatic new-home sales declines of the past are over. The government's new-home sales figures capture contracts signed, not completed purchases.

"I'm expecting that the firming of house prices, continued low mortgage interest rates and an improving economy will be the momentum that carries us beyond the end of the tax credit," Crowe said.

The March sales gains were led by a 43.5 percent increase in the South, which includes the Washington region and Raleigh real estate in North Carolina, and a 35.7 percent increase in the Northeast. Sales rose 5.7 percent in the West and 4.3 percent in the Midwest.

Meanwhile, the supply of new homes for sale is shrinking. The inventory dropped to 228,000 from 233,000 in February. At the current sales pace, it would take 6.7 months to sell these homes.

The median price of a new home fell 3.4 percent to $214,000 from $221,600 in February -- but it is up more than 4 percent from March 2009.

The Busted Homes Behind a Big Bet

The Wall Street Journal

Underlying Goldman Deal, a Different Set of Risk-Takers

ABERDEEN TOWNSHIP, N.J.—The government's civil-fraud allegation against Goldman Sachs Group Inc. centers on a deal the firm crafted so that hedge-fund king John Paulson could bet on a collapse in U.S. housing prices.

It was a dizzyingly complex transaction, involving 90 bonds and a 65-page deal sheet. But it all boiled down to whether people like Stella Onyeukwu, Gheorghe Bledea and Jack Booket could pay their mortgages.

They couldn't, and Mr. Paulson made $1 billion as a result.

Mr. Booket, a 44-year-old heating and air-conditioning repairman, owed $300,000 on his three-bedroom home in Aberdeen Township. His house was one of thousands that wound up in a pool of mortgages that were referenced in the so-called collateralized debt obligation, or CDO, which Goldman created for Mr. Paulson. The hedge-fund manager invested heavily in a form of insurance that could yield huge gains if the borrowers grew unable to pay.

In 2006, Mr. Booket got hit by a car while riding a motorcycle from a late-night party, was unable to find much work and couldn't pay the bank. In October 2008, he lost the house to foreclosure and plans to move out by next week. He says he bears no grudge against Mr. Paulson and Goldman.

"The man came up with a scheme to get rich, and he did it," says Mr. Booket, who had refinanced his mortgage just months before the accident. "So more power to him."

More than half of the 500,000 mortgages from 48 states contained in the Goldman deal—known as Abacus 2007-AC1—are now in default or foreclosed.

Mr. Paulson didn't have any direct involvement in the mortgages contained in the Goldman deal under scrutiny by the Securities and Exchange Commission. And the bets that Mr. Paulson placed on Abacus didn't affect whether or not homeowners defaulted. Rather, he used Wall Street to help structure hugely lucrative side bets that homeowners such as Mr. Booket couldn't make their monthly mortgage payments.

One loser in the deal, German bank IKB Deutsche Industriebank AG, saw most of its $150 million Abacus investment evaporate. It had believed that borrowers broadly could afford the loans. The bank says it is cooperating with the SEC's inquiry.

"There's no question we made money in these transactions," said a Paulson spokesman in a statement. "However, all our dealings were through arms-length transactions with experienced counterparties who had opposing views based on all available information at the time. We were straightforward in our dislike of these securities but the vast majority of people in the market thought we were dead wrong and openly and aggressively purchased the securities we were selling."



Some of the people whose mortgages underpinned Mr. Paulson's wager were themselves taking a gamble—that U.S. housing prices would continue to march upward, making it possible for them to eventually pay off loans they couldn't afford.

The Wall Street Journal identified homeowners in the Abacus portfolio by taking the 90 bonds listed in a February 2007 Abacus pitchbook and matching them with court records, foreclosure listings, title records and loan servicing reports. The bonds contained nearly 500,000 mortgage loans.

One mortgage in the Abacus pool was held by Ms. Onyeukwu, a 43-year-old nursing-home assistant in Pittsburg, Calif. Ms. Onyeukwu already was under financial strain in 2006, when she applied to Fremont Investment & Loan for a new mortgage on her two-story, six-bedroom house in a subdivision called Highlands Ranch. With pre-tax income of about $9,000 a month from a child-care business, she says she was having a hard time making the $5,000 monthly payments on her existing $688,000 mortgage, which carried an initial interest rate of 9.05%.

Nonetheless, she took out an even bigger loan from Fremont, which lent her $786,250 at an initial interest rate of 7.55%—but that would begin to float as high as 13.55% two years later. She says the monthly payment on the new loan came to a bit more than $5,000.

She defaulted in early 2008 and was evicted from the house in early 2009.

Fremont didn't respond to requests for comment.

In early 2007, Paulson was identifying different bonds from across the country that it wanted to place bets against. Paolo Pellegrini, Mr. Paulson's right-hand man, began working with Goldman trader Fabrice Tourre to choose bonds for the Abacus portfolio, say people familiar with the deal.

Abacus was a "synthetic" CDO, meaning that it didn't contain any actual bonds. Rather, it allowed Paulson's firm to buy insurance on bonds it didn't own. If the bonds performed well, Paulson would make a steady stream of small payments—much like insurance premiums. If they performed poorly, Paulson would receive potentially large payouts.

According to the SEC complaint, Mr. Paulson especially wanted to find risky subprime adjustable-rate mortgages that had been given to borrowers with low credit scores who lived in California, Arizona, Florida, and Nevada—states with big spikes in home prices that he reckoned would crash.

Mr. Pellegrini and a colleague had purchased an enormous database capable of tracking the characteristics of more than six million mortgages in various parts of the country. They spent long hours scouring it all, according to people familiar with the matter.

The home mortgage of Gheorghe Bledea was among those that wound up in the Abacus portfolio.

In May of 2006, a broker had approached Mr. Bledea, a Romanian immigrant, to pitch him a deal on a loan to refinance the existing mortgage on his Folsom, Calif., home.

Mr. Bledea, who is suing his lender in Superior Court of California in Sacramento on allegations that he was defrauded, wanted a 30-year fixed-rate loan, according to his complaint. His broker told him the only one available was an adjustable-rate mortgage carrying an 8% interest rate, according his court filing.

Mr. Bledea, who says he has limited English-speaking skills, was told that he'd be able to exit the risky loan in six months and refinance into yet another one carrying a lower 1% rate. Mr. Bledea agreed to take out the $531,000 loan on July 21, 2006.

The new loan never materialized. Within months, Mr. Bledea and his family were struggling under the weight of a $5,800 monthly note, says his son, Joe Bledea.

"We were putting ourselves in a lot of debt," Joe Bledea says. By spring of 2009, the loan was in default. The elder Mr. Bledea is now appealing to the court to avoid eviction from his ranch-style house, says family attorney Will Ramey.

The loan, underwritten by Washington Mutual, itself had moved through the U.S. mortgage machine.

It was put into a debt pool, or residential-mortgage backed security, with the arcane name of Long Beach Mortgage Loan Trust 2006-8.

A spokesman for J.P. Morgan Chase & Co., which acquired WaMu in September of 2008, said the bank was unable to comment on the loan.

By mid-October of 2007, just seven months after Abacus was formed, 83% of the bonds in its portfolio had been downgraded. By then, sheriff departments across the U.S. were seizing homes and putting them up for sale at public auction as souring Abacus-related loans metastasized.

In Dayton, Ohio, a two-story home that served as collateral for Abacus now stands empty. The house was purchased for $75,000 in 2006 by a borrower who used a subprime loan from a California-based mortgage bank. That $67,500 loan was placed into a pool called Structured Asset Investment Loan Trust 2006-4, which underpinned Abacus.

After the borrower defaulted, the trust acquired the home through foreclosure in October 2007 and resold it to an investor in April 2008 for $7,500, a tenth of the price paid two years before.

Neighbor Lonnie Ross, sitting on the porch Tuesday morning while enjoying a cigarette, says most homes on the block are vacant or occupied by squatters.

Inside the unoccupied house, which is missing its front door knob, hardwood floors are strewn with old bills. A fake Christmas tree is still decorated with candy canes. Instant pudding and other discarded food litters the kitchen. Dirty dishes are soaking in a sink.

A few blocks away, a homemade sign reads: "This community is dead already. We need leadership to rebuild this community. Too many run down houses need to be torn down."

But not all homes have gone south.

In a wealthy Denver neighborhood, neighbors are thrilled that Joel Champagne rescued a house on East Alameda Circle, where a previous mortgage was contained in the Abacus deal via a pool called First Franklin Mortgage Loan Trust 2006-FF9.

Mr. Champagne bought the home last year for $370,000. The prior owner, according to title records, had paid $1.2 million, borrowing the entire amount from First Franklin. The owner had started on a renovation and then vanished, says Mr. Champagne and neighbors, leaving the home with no plumbing, wiring or roof shingles.

Today, kids' chalk drawings are scrawled across the drive and hyacinths are starting to peep through the flower beds.

"I'm very fortunate. We capitalized on the market and we were very fortunate to be in a position to do that," says the 45-year- old. "I don't know enough details to say if I'm upset with Goldman Sachs or whoever. The problem's bigger than that. Everyone made a lot of mistakes back then."

Home Remodels for Today's Market

The Wall Street Journal

With housing values in the tank and any substantial price appreciation in the distant future, sinking money into a remodeling project is a tough sell for many homeowners now.

In general, you won't recoup as much of a project's cost as you might have several years ago, according to Remodeling Magazine's widely followed "Cost vs. Value Report," which weighs the costs of various improvements against their resale value

And while labor costs might be more negotiable in today's market, materials aren't getting any cheaper, says Sal Alfano, editorial director of the magazine.

"Homeowners right now are a little shell-shocked. Houses, up to three years ago, were like a bank account...people were spending money freely and they were always getting it back," says David Lupberger, home-improvement expert for ServiceMagic.com, a Web site that connects homeowners with home-service professionals.

Those who are remodeling are generally choosing fewer frills and less-expensive finishes, Mr. Alfano says. Instead of building large additions, they're trying to better utilize space they already have. They're seeking energy-efficiency upgrades and low-cost cosmetic improvements that make a home more comfortable and appealing.
 

The Little Things

Even if resale isn't your top consideration, a check of the "Cost vs. Value Report" gives an idea of projects that pack a punch. Home improvements that tend to excel on this list are those that have universal appeal -- and a reasonable price tag.

In terms of cost recouped at resale, seven of the top 10 projects in the 2009-2010 report were exterior-replacement projects, including windows, doors and siding.

A steel exterior-door replacement was the highest-ranked project on the list. It was also the least expensive. For an estimated cost of $1,172, real-estate agents who were surveyed for the report estimated that 128.9% would be recovered at resale.

"If you have a door that really needs help, you're not spending that much money and you're vastly improving the first impression" of a home, Mr. Alfano says.

For budget-conscious homeowners, changing door handles and putting a new finish on interior doors can also make a huge difference, says David Mackowski of Quality Design and Construction in Raleigh real estate, N.C.

Remember, too, that improvements that make a home more efficient can cut down on utility bills, saving money over the long term. Some energy-efficient products are eligible for federal tax credits through the end of 2010, and certain appliances qualify for state rebate programs as well.
 

Kitchens and Baths

Kitchen and bathroom remodeling projects are expensive, but updates to these rooms can make a home more comfortable for homeowners who plan to stay put for a number of years -- and make the home easier to sell down the road. Today's consumers are reducing the scope of kitchen and bath projects, according to industry estimates.

The average kitchen remodeling cost dropped to $12,500 in 2009 from $16,600 in 2008, according to data from the National Kitchen and Bath Association. The average bathroom-remodel cost was $7,037 in 2009, down somewhat from $7,148 in 2008. According to the group, the most cost-efficient design options that deliver the most long-term value to consumers are energy-efficient appliances and LED lighting, as well as less-expensive countertops such as quartz, natural stone or laminate.

The minor kitchen remodel -- including the replacement of cabinet fronts, oven, cooktop, installing new laminate counters, flooring, a sink and faucet -- returned an average of 78.3% at resale, according to the "Cost vs. Value Report." A major kitchen remodel, which more than doubled the project's cost, returned 72.1% at resale.
 

Check the Attic

Another project high on the "Cost vs. Value" list: Finishing an attic bedroom. The cost of the project was estimated to be about $49,346, but 83.1% could be recouped at resale.

"Given the state of the economy, there are more reasons to increase the number of bedrooms. If you can do that within the existing footprint, then you're doing it economically because adding space adds lots of value to the house," Mr. Alfano says.

You probably won't make that home remodeling investment unless you need the extra space for your own family, but many households might be in that situation as kids live at home longer and multigenerational households become more commonplace.

Mr. Mackowski says a number of his clients are deciding to update the home they have instead of moving, and remodeling to use each inch of space to its fullest.

To that end, outdoor decks are improvements that extend a property's usable space. At resale, 80.6% of the estimated $10,634 cost of a deck addition would typically be recouped, according to the report.

But not all space is created equally. "Appraisers don't look at adding basement square footage in the same way they look at adding additional square footage above ground," Mr. Lupberger says. Above-ground decks and sunrooms offer better light and livability, and typically add more value than finished basements.

Texas, Washington DC and North Carolina are Strongest Single Family Markets

Reed Construction Data

Dallas and Houston together now have more multi family permits than New York City. New York City had nearly 25% more multi family starts than Dallas and Houston apartments combined as recently as 2007. The recession cut permits about 80% in New York City but only about 50% in the two Texas cities. Permits are up from a year ago in many college and oil patch towns that escaped both the 2005-06 housing boom and the worst of the ongoing economic recession. San Francisco and San Diego have returned to the list of top multi family markets due to hiring by their growing technology industries.

Twenty-six cities are now issuing more housing permits than they did at the peak of the housing boom in late 2005/early 2006. All of these cities are very small markets. This should not be interpreted as a list of cities leading the housing market or the economy out of recession. These cities simply missed most of the recession as they did the previous housing boom. Eight of the twenty cities with the largest increase in permits since the peak of the housing boom are either on the Gulf Coast or in the Plains States. The gulf cities are getting a boost from Katrina rebuilding funds. The cities in the Plains States with resource based economies fared better during the housing recession than cities with economies dominated by manufacturing, construction or finance.

The most depressed housing markets relative to the peak of the housing boom continue to be Atlanta and Phoenix The twenty cities with the largest decline in housing permits from the peak of the housing boom more than three years ago are all paying back the overbuilding during the housing boom or the phantom sales of homes to households who overreached and could not carry their mortgage even before job losses began across the economy. Each of these cities is now beset with a relatively large surplus of homes for sales and, in most cities, continuing decline in home prices. Homebuilders in these cities are competing with a large selection of existing homes priced at or below the cost of constructing a new home. In the most depressed markets, homebuilders are also competing with a shadow inventory of more than a million empty homes. These are investor or bank owned homes, not listed by real estate agents, being held home prices improve significantly.

Austin, Charlotte and Raleigh real estate markets have the most intense housing development among all large metro areas, about five times more permits per population than the national average. Las Vegas, Phoenix, Riverside, Tampa and Orlando are the only housing boom cities still left on the top twenty list. Washington has moved up to third place on the strength of tens of thousands of new federal jobs. The Obama agenda promises even more aggressive federal hiring in 2010. Atlanta, the largest housing market for several years has dropped to 8th place due to a weak Georgia economy and a large surplus of unsold homes. Fourteen metro areas, all manufacturing centers without any of today’s high growth industries, have issued less than two permits a month over the last year. Sandusky Ohio has issued no permits and Wheeling West Virginia has issued only one permit. Texas accounts for over 15% of the single family housing permits issued in the last year. Houston and Dallas are by far the two largest markets. Austin and San Antonio apartments are also among the top ten markets.

Tracking Economic Recession And Recovery In America

Gov Monitor

Inflation-adjusted gross domestic product (GDP) grew at a rapid 5.9 percent annual rate in the last quarter of 2009, the fastest economic growth rate since the third quarter of 2003.

But that growth may simply be due to inventory replenishment and, if so, is unlikely to persist. Consumer spending rose in January, but house prices fell.

The unemployment rate remained steady at 9.7 percent in February, but long-term unemployment (unemployment of six months or more) hit a record high.

The nation lost 36,000 jobs in January, slightly more than it lost in December but many fewer than it lost in previous months. Even if recent modest job losses prefigure a return to new hiring, the kinds of large, sustained job gains that would be needed to bring the unemployment rate down seem unlikely in the near future.

The MetroMonitor, an interactive barometer of the health of America’s metropolitan economies, looks “beneath the hood” of national economic statistics to portray the diverse metropolitan landscape of recession and recovery across the country. It aims to enhance understanding of the local underpinnings of national economic trends, and to promote public- and private-sector responses to the downturn that take into account metropolitan areas’ distinct strengths and weaknesses.

This edition of the Monitor examines indicators through the fourth quarter of 2009 (ending in December) in the areas of employment, unemployment, output, home prices, and foreclosure rates for the nation’s 100 largest metropolitan areas.

It finds that:
The economic recovery spread steadily during 2009, with all of the 100 largest metropolitan areas registering growth in output during the fourth quarter of the year. The number of metropolitan areas that had a quarter-to-quarter gain in output rose from 19 in the second quarter of 2009 to 89 in the third quarter to 100 in the final quarter. With only two exceptions, once output began to increase it continued to increase in subsequent quarters. (In Baton Rouge and Portland (OR), output grew in the second quarter of the year, fell in the third quarter, and then grew again in the last quarter.)

Employment recovery has been much less widespread and less consistent than output recovery. The number of metropolitan areas that had quarter-to-quarter employment growth rose from six in the second quarter of 2009 to 14 in the third quarter to only 20 (Albuquerque, Austin, Charleston, Fresno, Harrisburg, Jackson, Louisville, New Orleans, Ogden, Oklahoma City, Oxnard, Phoenix, Poughkeepsie, Provo, Raleigh, Rochester, St. Louis, Toledo, Virginia Beach, and Washington) in the last quarter. Job growth in one quarter was no guarantee of continued job growth in subsequent quarters. Of the six metropolitan areas that gained jobs in the second quarter, all lost jobs in the fourth quarter, although four gained jobs in the third quarter. Of the 14 that gained jobs in the third quarter, only four continued to do so in the fourth quarter.

A substantial minority of metropolitan areas had made a complete output recovery by the fourth quarter of 2009 but only one had made a complete jobs recovery. Twenty-eight metropolitan areas had recovered their pre-recession levels of output in the fourth quarter, including Washington, DC, which never lost output during the last five years. However, only McAllen had regained its pre-recession employment level (as well as its pre-recession output level).

Sixty-three of the 100 largest metro areas lost a greater share of jobs eight quarters after the start of the Great Recession (the fourth quarter of 2007) than they did during the first eight quarters after the start of any of the previous three national recessions. Eight quarters after the start of the national recession, the 100 largest metropolitan areas combined had lost 4.6 percent of the jobs they had at the start of the Great Recession that began in 2007, compared to 1.9 percent for the 2001 recession, and 1.8 percent for the 1990–1991 recession. However, in the 1981–1982 recession, the 100 largest metropolitan areas had grown 0.1 percent in the first eight quarters after the start of the national recession. In general, the metropolitan areas that ranked lowest on the Monitor’s overall index (i.e., those that suffered most during the Great Recession and subsequent recovery) were also ones in which the jobs recovery was weaker after the Great Recession than after all three previous recessions. Those that ranked the highest were also ones in which the current recovery was stronger than after one or two of the previous three recessions/recoveries.

Housing markets remained weak, with house prices falling in all of the 100 largest metropolitan areas between the last quarter of 2008 and the last quarter of 2009. In contrast, 49 metropolitan areas showed house price gains between the third quarter of 2008 and the third quarter of 2009. Foreclosures continued to grow in most metropolitan areas in the fourth quarter; 56 metropolitan areas had increases in the number of real estate-owned (REO) properties during that quarter, although the 100 largest metropolitan areas combined registered a slight decline in their REO rate. The fact that economic recovery was beginning to occur despite continued weakness in housing markets suggests that continued economic recovery may not hinge on a real estate recovery.

While the nation as a whole had almost no job growth during the last decade, 17 metropolitan areas had double-digit job growth and 34 lost jobs during that time. The 17 metropolitan areas with double-digit job growth from the fourth quarter of 1999 to the fourth quarter of 2009 were all located in the South or West: Austin, Bakersfield, Boise, Cape Coral, Charleston, Houston, Lakeland, Las Vegas, McAllen, Ogden, Orlando, Phoenix, Provo, Raleigh, Riverside, San Antonio, and Washington. Notably, several of these metropolitan areas suffered severe job losses during the Great Recession as a result of the collapse of their housing markets such as Raleigh real estate, but those losses made only a modest dent in the enormous job gains that occurred in these areas earlier in the decade. The 34 metropolitan areas that lost jobs during the decade were located mostly in the Northeast and Great Lakes regions. They included not only metropolitan areas suffering from the continued loss of manufacturing jobs but also the high technology centers of San Jose and San Francisco.

Because of the Great Recession combined with pre-recession employment trends, 26 metropolitan areas lost 10 or more years of job growth, while 17 lost three or fewer years of job growth. In 26 metropolitan areas, employment in the fourth quarter of 2009 was at a level that had not been seen for 10 or more years. These areas were generally ones that rank low on our overall index, and many of them had been losing jobs even before the Great Recession began. At the extreme, Detroit, Youngstown, Dayton, and Cleveland had employment levels in the fourth quarter of 2009 that they had not had in more than 20 years. In contrast, there were 17 metropolitan areas where employment in the fourth quarter of 2009 was at a level last seen only three or fewer years ago. In these areas, which rank high on our overall index, the Great Recession made a relatively small dent in a high pre-recession job growth rate. In the metropolitan areas that suffered the most from the collapse of their housing markets (and that, therefore, were among the places that ranked lowest on our overall index), the Great Recession resulted in a loss of four to eight years of job growth. In Las Vegas, for example, employment in the fourth quarter of 2009 had dropped back to the same level it was at in the fourth quarter of 2004.

Overall, the economic indicators for the nation’s 100 largest metropolitan areas reinforce the national story of a weak, tentative, and jobless recovery.

However, vast differences in performance continued to separate the metropolitan areas that the recession hit the hardest from those less affected.

And when the Great Recession and its recovery are compared with previous recessions and recoveries, or when their impacts are considered in tandem with long-term job trends of the last decade, the contrasts between metropolitan areas are similar.