An article in today’s St. Petersburg times provides a depressing snapshot of the Bay area’s home and economic realities…..Home prices fell 1.6 percent from September to October, erasing modest gains from June to August, according to the S&P Case-Shiller home price index.
Tampa Bay was the top price loser among 20 housing markets on the October index. “Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip,” said David Blitzer, chairman of the Index Committee at Standard & Poor’s.
The full text of the article can be found here. Several things are driving this continued drumbeat of bad news, but key among them are a continued failure to stem unemployment and job losses. Its simple economics people….no jobs, no money, no mortgage payment. Washington seems out of touch with this reality.
The Banks Are Exacerbating Their (Our) Own Problems.
The banks are exacerbating the problem with total inability to process mortgage modification applications or make decisions on short sale offers. I know people argue the whole, “those dumb buyers bought to much house and we shouldn’t subsidize them thing” and while they may be true in that assessment that doesn’t answer the question…what do we do with all those homes? Kick out the people who are in them? Problem is there aren’t enough new buyers to get into the old homes. (High Unemployment = No Mortgages) The other reality is the vast majority of people who are in their homes could afford them when they qualified for the loan and are merely trapped in the crisis now.
The Banks are Exhibiting Gross Incompetence in This Crisis
Unless you’re involved in the system you would not believe how inefficient and non-functional the banks have been throughout this crisis. Consider driving up to the McDonald’s drive through and giving your order. You’re sure you gave it correctly because they repeated it back, gave your total and told you to drive forward. When you get to the pickup window they swear they’ve never heard from you…EVER…they don’t have your order. In fact they don’t even know how your car got in line to make it to the pick up line. If you want to make an order, you’ll have to go place your order at the window. Next time through the order window you get a written print out of your order. When you get to the pick up window, same thing, “We don’t have your order!” You show them their own order ticket (that they printed out two minutes ago) but they insist “We don’t have your order!” Go through this routine six times. Spend hours doing it then be told, “we’re sorry sir, we don’t sell hamburgers here.” Scream. Holler. Speak to a “Manager” and be told “sorry noting we can do.” Now consider that as a taxpayer, even a “deadbeat” hamburger-ordering American, you’re the one paying for that drive through line. You the one that’s paying to put all those people walking around in the joint to work. Except that the jerkoffs behind the counter aren’t Americans they’re call center employees in India and you’re paying good Amerian money so these people can tell you you’re not staying in your home. It’s a disgusting example of what’s wrong with America.
So the question is what to do with the roughly 1000 homes that foreclose is filed on every month in Pinellas?
I say we kick down the doors, drag out the families living in them and throw the families on the street. I mean these people can’t afford the home anyway so what good are they? Now clearly this is not my position, but that seems to be the attitude of many people. So the question remains, if we kick out the home owners (home borrowers since they don’t really own, they only “borrow” from the bank)? What do we do with the homes? As indicated above high unemployment prevents mortgages from being issued that new purchasers could use to buy these homes.
Modify/Short Sell and Move On
The only practical way to address the mortgage problem in the short term is to modify the existing mortgages to keep homeowners in the homes under terms that make economic sense. The bank may be owed $2,000 per month, but if they kick the homeowner out, the home is trashed and the bank gets higher carrying costs each month. The better strategy is to figure out what a homeowner can pay, then keep them in the home as long as they make the modified payment. The bank gets something, excess inventory does not pile up and we can revisit the modifications if overall economic conditions improve. This makes good economic and practical sense. Economic sense because it gets money flowing again and the banks holding these mortgages have already taken their losses (many subsidized by you and me). It makes practical sense because it is an effective way to deal with the excess inventory piling up across the country.
Kill the Deadbeats that Can’t Pay Their Mortgages!
Or, we could just roust the people out of their homes, line them up and shoot them. I mean these people are the ones that caused the problems right? Not the banks. Not Republican and Democratic special interest groups. Not Wall Street. Not any of the myriad other special interest groups that fueled this insane Economics 101 anatomy of a collapse. Let them off the hook entirely. No wait, let’s not let them off the hook. Let’s pay them bajillions of dollars as thanks for creating this problem. (On top of the bajillions they made during the run up to the crisis) After that, let’s pay them bajilions more to communciate with the homeowners in crisis. (the HAMP Program) When the HAMP program doesn’t work out and homeowners are still stuck, let’s pay them all bajillions more in bonuses. (Record bonuses paid in 2009!)