Defining news story of the cycle?

November 27, 2007 – 11:27 am

We might have just found the issue and story that crystalizes the anxieties of all Americans around a protectionist message. The story is:

Citigroup Inc., the biggest U.S. bank by assets, will receive a $7.5 billion cash infusion from Abu Dhabi to replenish capital after record mortgage losses wiped out almost half its market value. … the state-owned Abu Dhabi Investment Authority

Let’s put the pieces together.

  1. We have a shadowy Middle Eastern monarch. A King. He is loaded up to the gills with oil money.
  2. We are worried about Middle Eastern terrorism.
  3. We have a domestic housing crises that risks being a larger economic crisis.
  4. We have an intangible crisis of confidence involving globalization.
  5. This is about our banks and our money. Now some king in the Middle East tied to oil — and inevitably terrorism, legitimately or not — makes money if I don’t pay off the whole balance on my Citibank credit card.

Remember the 80s when people were taking sledge hammers to Japanese cars? How do you take sledge hammers to banks? Owned by Arabs. Etc.

This a made for demogoguery moment. If you thought Dubai Ports was bad (and, btw, I think that the President got it right, but you knew I was a rabid internationalist) just you wait.

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Housing crisis is hitting Republicans

October 24, 2007 – 2:55 pm

A friend of mine is a lobbyist. He was on the Hill and asked a bunch of GOP members what they thought. Their position was basically:

  • This is a blue state problem and the people affected are going to vote Democrat anyway
  • Moral Hazard arguments and federal gov’t should not intervene
  • taxpayers should not bail out speculators

This is delusional. Pew did a new study on expectations of future housing prices. Most Americans are still optimistic. But Republicans are more pessimistic. People with over $75k are more pessimistic. People in more expensive metropolitan areas are more pessimistic. Rich people have also seen housing prices fall more. Etc.

Get it? The "blue state problem" is probably referring to places like the NYC suburbs, where we lost Sue Kelly’s seat and Nancy Johnson’s seat. Or Jerry Weller’s and Deb Pryce’s open seats.  Or places like (the crook) Pombo’s seat. Or the AZ seats we lost. Or the CO seats we lost. Etc.

The GOP economic message works when people are optimistic about the future. Core GOP voters — which we are losing anyways — are pessimistic. You think they are going to feel good about us?

Of course, the housing market is still collapsing. (but they said it was all over!) From today’s report by the realtors:

US existing home sales fell 8.0 percent in September as a persistent housing slump continued to weigh on the property market and the world’s biggest economy, an industry group said Wednesday.

The National Association of Realtors (NAR) said in a monthly snapshot that sales of existing homes and apartments tumbled to a seasonally adjusted rate of 5.04 million units in September from 5.48 million in August.

The drop was worse than expected. Most economists had only expected sales to decline to around 5.25 million.

Stripping out apartment sales, sales fell to their lowest level since January 1998. …

Economists are concerned the housing slowdown could put a brake on US economic growth.

Put slightly differently: when the realtors are telling you that people are pessimistic about the housing market, grab your parachute.

This is bad. The GOP is willfully not having an answer. Why don’t they get it?

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WSJ echoes me on housing and GOP

October 15, 2007 – 11:36 am

Haven’t I been saying this?

The housing crunch is most severe in some of the most hotly contested political battleground states, a trend that could spell trouble for Republicans next year.

Six of the 10 states with the highest foreclosure rates in the country last month are considered by leaders of both parties to be swing states. They include the two biggest prizes of the past two presidential campaigns: Florida, which came in No. 2 on the list, with one foreclosure filing for every 248 households in September; and Ohio, No. 7, with one foreclosure for every 319 households, according to a survey by RealtyTrac Inc., a California property-research company. …

"For better or worse, as the incumbent party, Republicans own the economy," ISI Group Inc., a stock brokerage that specializes in policy research, said in a recent report. "Therefore, falling home prices, particularly if they lead to broader economic woes, will hurt Republican prospects for maintaining the White House and picking up seats in Congress."

In the Republican presidential candidates’ first debate focused on economic issues last week, none raised housing concerns.

Why?

One reason for Republican silence may be that, for all the headlines about a housing crunch, the issue doesn’t rank high in national polls. In an early September Wall Street Journal/NBC News poll, when people were asked to name two items that should be "the top priorities for President Bush to address," 7% cited "the home-mortgage and housing markets."

Elections are determined at the margins though. The margins in Presidential politics are margins in swing states. Housing is a big one of those.

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Housing hitting Republicans?

October 11, 2007 – 10:27 pm

The Foreign Policy blog has some interesting details about rich people losing their homes:

A good example of this is the greater Washington, D.C., area. One might think that subprime loans would be most popular in poorer areas of the District. And they’d be right. According to a study by the nonprofit Urban Institute, high-interests loans were indeed popular in low-income neighborhoods. However, they were much more popular in Fairfax County, which has a median income of $100,318—the highest in the country. Many homeowners there used subprime loans to upgrade to a larger house. In fact, these kinds of loans fueled the McMansion phenomenon.

When more wealthy homeowners start to lose their homes (and as Passport noted a few weeks back, the worst is yet to come), the confidence of U.S. investors will suffer greatly. This, in theory, will further slow global growth, as consumers will be less likely to spend.

More details also at the Journal.

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More housing numbers

October 11, 2007 – 8:00 pm

Another month. More lousy housing numbers:

A total of 223,538 foreclosure filings were reported in September, up from 112,210 in the same month a year ago, according to Irvine-based RealtyTrac Inc.

The number of filings in September was down 8 percent from August’s 243,947, the firm said.

Sounds like it is getting better? That’s not what the realtors say:

"August was an extraordinarily high month for foreclosure activity, so some falloff was almost predictable," said Rick Sharga, RealtyTrac’s vice president for marketing. …

"We don’t see September as the beginning of the end in this cycle of foreclosures," Sharga said.

How bad?

Nevada reported one foreclosure filing for every 185 households, earning the state the highest foreclosure rate in the nation for the ninth month in a row. The state had 5,504 filings in September, down 11.1 percent from August and more than triple from September 2006.

Florida had one foreclosure filing for every 248 households. The state reported 33,354 foreclosure filings in September, down just less than 2 percent from August, but more than three times greater than September 2006’s total.

Chaos in high-growth swing-states.

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Housing crisis in Florida

October 4, 2007 – 12:07 pm

From WESH Orlando:

Flagler County is the fastest-growing county in the United States. One of every five homes in Flagler County is for sale. Celebration is feeling the same pain because 50 percent of the homes there are for sale.  Moss Park, east of Orlando International, where nearly 9 percent of the homes are in foreclosure, 8 percent in the ZIP code west of Palm Bay and 7 percent in Poinciana.

Who are these people?

In fact, the most homes in foreclosure are in ZIP codes that didn’t exist five years ago.

Those are exurbs. Those are Republicans.

H/T: Atrios.

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2008 a 1992 redux through housing

September 24, 2007 – 1:55 pm

This struck me as an interesting point from Capital Commerce, one of my favorite blogs that links economics and politics:

"A record 26 percent of U.S. homeowners say the value of their homes has fallen during the past year, above the previous peak of 24 percent seen in 1992, a survey released on Friday showed. Reflecting the extent of the prolonged housing slump, 21 percent of homeowners polled in September expect the value of their home to decline in the year ahead, up from 18 percent in August, according to the data from Reuters/University of Michigan Surveys of Consumers." By the way, 1992 was a year when a Republican lost the White House despite a so-called good economy as measured by GDP growth.

Patrick Ruffini has pointed out to me that we lost New Hampshire and California in that year over the housing slump.

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Foreclosures up… Again

September 18, 2007 – 10:10 am

Top line numbers:

The number of foreclosure filings reported in the U.S. last month more than doubled versus August 2006 and jumped 36 percent from July, a trend that signals many homeowners are increasingly unable to make timely payments on their mortgages or sell their homes amid a national housing slump.

Same bad places for both primaries and swing states:

Nevada, California and Florida had the highest foreclosure rates in the country last month, the firm said.

Nevada reported one foreclosure filing for every 165 households — more than three times the national average. The state had 6,197 filings in August, an increase of 21 percent from July and more than triple the year-ago figure.

California’s foreclosure rate was one filing for every 224 households. The state reported the most foreclosure filings of any single state with 57,875, up 48 percent from July and an increase of more than 300 percent from August 2006.

Florida had one foreclosure filing for every 243 households. In all, the state reported 33,932 foreclosure filings, up 77 percent from July’s total and more than twice the year-ago total.

Georgia, Ohio, Michigan, Arizona, Colorado, Texas and Indiana rounded out the 10 states with the highest foreclosure rates.

I don’t know all the details, but we are looking at over 30k foreclosures in Nevada so far this year.

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How housing plays out

September 16, 2007 – 10:13 am

I have argued that housing will be a big issue in 2008.  Matt Stoller of Open Left has a great example of one way that this is playing out in a Maryland Democratic primary. The Washington Post has a story about how the housing crisis is impacting the Fort Myers community. Some of the facts:

Across this city, even businesses that have little to do with real estate are reeling. Unemployment is up, sales are down and redevelopment ambitions have been scaled back….

"We are in a real estate recession," said Laurance Baer, manager of the Fort Myers-based Baer’s Furniture chain, where sales are plummeting. "And we have an economy that’s much more tied to real estate than anyone realized." …

The region added jobs at a 9.2 percent pace in 2004, and the jobless rate fell to 2.5 percent. …

The job market followed. The unemployment rate was up to 4.7 percent in July. But the real picture may be worse than the numbers indicate, says Michael Reitmann of the Building Industry Association. The jobless rate does not account for the workers, many of them immigrants who have simply moved away as the economy has softened.

I do not believe that this is a map for the future of the country, simply because Fort Myers is one of the municipal areas most severely hit by the housing crisis. However, Las Vegas, Denver, Miami, Phoenix, Jacksonville, Columbus, and Tampa are cities that have been. If those areas go through this kind of economic pressure, it is going to be very hard. And those are all in swing states or swing regions.

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Foreclosure rates going up, but mostly investors

August 31, 2007 – 10:44 am

The AP has a story on Bush’s proposals on housing and the subprime mess. I am glad to see that "no bailout" is part of the answer. A lot of people are saying that we have pulled out of it. There were two sentences that should remind people that the worst, at least on the subprime side has yet to come:

Mortgage foreclosures and late payments are expected to worsen. Some 2 million adjustable rate mortgages are to reset to higher rates this year and next.

Perhaps this reality has been priced in, but I don’t think so. In the short term, things can be done to make these ARM resets less painful, as Bush is proposing. But foreclosures and late payments mean continued weakness in liquidity, lower home prices, etc. This situation is not going away.

Now the question of the political impact is still up in the air. The WSJ has a story that is important to notice:

A survey by the Mortgage Bankers Association found that mortgages on properties that aren’t occupied by the owner — mostly investment homes — account for between 21% and 32% of the defaults on prime-quality home loans in Arizona, California, Florida and Nevada, states where overdue payments are mounting fast.

We are still talking about massive numbers of people.

Also, the Big Picture has some great points about the timing of all of this.

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