Posts Tagged ‘Wisconsin’

Foreclosed Homes Total a Three-Year Supply

Tuesday, June 14th, 2011

The current national inventory of foreclosed homes represents a three-year supply, according to RealtyTrac.  Not surprisingly, that is depressing home prices.  “This is very bad for the economy,” said Rick Sharga, a RealtyTrac spokesman.

In Las Vegas, the foreclosure situation is so dire that more than half of all homes sold in Nevada are foreclosures.  In California and Arizona, 45 percent of sales are foreclosures; that totals 28 percent of all existing home sales during the 1st quarter of 2011.

Additionally, the nation’s stock of foreclosed homes are selling at deep discounts, particularly REOS, which are bank-owned homes.  The typical REO sold for about 35 percent less than comparable properties, according to RealtyTrac.  In some areas, the discounts were ever steeper: In New York, the discount for REOs was 53 percent during the 1st quarter and almost 50 percent in Illinois, Ohio, and Wisconsin.

“Short sales,” homes where the selling price is less than what is owed by the borrowers, are also dragging down the market.  These sell for an average nine percent discount.  When you consider both REOs and short sales, Ohio had the biggest discount of any state, at 41 percent.

During the 1st quarter, there were 158,000 sales involving distressed properties nationally, less than half the nearly 350,000 during the same period of 2009.  With the slower pace of sales, it will take three years to sell off the inventory of 1.9 million distressed properties, according to Sharga.  “Even if you look at REOs alone, it will take 24 months to clear them and that’s without any new foreclosures at all coming into the system,” he said.

RealtyTrac found that the average sales price of properties in some stage of foreclosure, scheduled for auction or bank-owned — was $168,321, down 1.89 percent from the 4th quarter of 2010.

A total of 158,434 bank-owned homes and those in some stage of foreclosure were purchased during the 1st quarter, a 16 percent decline from the 4th quarter of last year and down 36 percent from the 1st quarter 2010 total.  Bank-owned properties that sold in the 1st quarter had been repossessed an average of 176 days before the sale, while properties that sold in earlier stages of foreclosure in the 1st quarter were in foreclosure an average of 228 days before they were sold.  According to James J. Saccacio, chief executive officer of RealtyTrac, “While this is probably helping to keep home prices relatively stable, it is also delaying the housing recovery.  At the first quarter foreclosure sales pace, it would take exactly three years to clear the current inventory of 1.9 million properties already on the banks’ books, or in foreclosure.”

Foreclosures are particularly attractive to all-cash buyers who demand discounts,  pushing down the value of all properties.  More than 75 percent of American cities experienced price declines in the 1st quarter.  Bank-owned homes totaled 107,143 sales in the 1st quarter, down 11 percent from the 4th quarter and almost 30 percent from 2010.  Sales of homes in default or scheduled for auction totaled 51,291, a 26 percent decline, according to RealtyTrac.  That was less than half the peak of 348,629 distressed deals in the 1st quarter of 2009.

Writing on the website 24/7wallstreet.com,  Douglas A. McIntyer offers an interesting perspective.  “Any economist will say that when some homes are sold at 27 percent below the normal market, all home prices will be pulled lower.  That may be the key to the home market recovery.  Foreclosure inventory will continue to rise as banks put more backlogged homes onto the market.  The glut will probably push down the average of all homes by several percent. This may be a reason home prices are predicted to fall another 10 percent this year.  Buyers will not come back to the housing market until they believe that prices are too good to resist.  That may mean homes that sold for $500,000 in 2005 will have to sell for $300,000 next year.  Prices will not be driven down quickly without the reduction in inventory of foreclosed homes.  There has to be a bottom to prices.  The sooner it is found the better.  The housing market is more than half dead.  The only tonic is a belief by buyers that prices are so remarkably low that new buyers will make money on a house and not lose it.  If the housing market is to continue to drop, the drop needs to be swift.  Mortgage rates are near all-time lows.  Inflation and concerns about the value of Treasuries due to the U.S. national deficit could change that.  Home prices that are viewed as affordable need to be married with low mortgage rates for the market to catch fire.”

Where to Cut: Public Union Benefits or Defense?

Wednesday, March 16th, 2011

Wisconsin Governor Scott Walker’s war on public-sector unions is being brought to the national stage by Senator Tom Coburn (R-OK). Coburn challenged members of Congress following the release of an exhaustive study by the Government Accountability Office that found many overlapping and duplicate programs from education to defense that cost taxpayers billions of dollars each year.  The study found 82 federal programs to improve teacher quality, 47 for job training and employment, as well as hundreds of military clinics that could gain from consolidating administrative, management and clinical functions.

According to Coburn, a physician who some call “Dr. No” in the Senate because he places holds on legislation that he considers to be unconstitutional, “Government employees, although they’re fabulous and they overall do a great job, they produce no net economic benefit in our country.  Matter of fact, they produce a net negative economic benefit.  So if you take the drag off the economy by nonproductive implementation of capital what you’re going to see is that capital is then going to be put to use in something that is productive.  We’re not talking about letting go hundreds and thousands of employees — we’re talking about streamlining things.  Even if it were hundreds of thousands of employees, if we’re not borrowing another $300 billion additional next year because we streamlined some programs, that has some tremendous benefit to the economy as well.”

In particular, Coburn challenges federal job-training programs. “Job training is wasteful.  We put ‘help wanted’ on our government website and we’re getting people who have been through these programs who say they are a total joke and a total waste of time.  I want a job-training program that actually trains somebody to do something that they get a job for.  Why should we have 47 different separate job training programs?  Nobody understands them all.  If it’s a federal role — which I question – -then any job-training program ought to be designed so that you can measure its effectiveness.  None of the 47 has any metrics on it to measure effectiveness.”

Senator Coburn’s position could have an impact on his popularity, much as Wisconsin’s Scott Walker’s controversial stance on public-employee unions has lowered his ratings. A Rasmussen poll reveals that almost 60 percent of likely Wisconsin voters now disapprove of their governor’s performance, with 48 percent strongly disapproving.  The poll also finds that the state’s public school teachers are very popular with their fellow Badgers.  With 77 percent of those polled holding a high opinion of their educators, it is not particularly surprising that only 32 percent among households with children in the public school system approve of the governor’s performance.

On Wisconsin!

Tuesday, March 1st, 2011

Wisconsin’s Republican Governor Scott Walker – a Tea Party favorite — accused the state legislature’s 14 Democratic senators of “vacationing” because they walked out of the State Legislature and took refuge in Illinois to avoid a vote that would strip most of the state’s employees of their collective bargaining rights.  Because of the Democrats’ absence, the Senate is unable to reach a necessary quorum to act. “Instead of stimulating the hospitality sector of Illinois’ economy, Senate Democrats should come back to the Madison, debate the bill, cast their vote, and help get Wisconsin’s economy back on track,” Walker said.

The Democrats are refusing to return unless Walker is willing to make concessions to the bill.  Republican legislative leaders – who are a majority with 19 seats — say they have enough votes to pass the bill as is.  Walker has rejected any compromise with thousands of pro-union protesters who have been camped out in the Capitol for a week, claiming that Wisconsin will lead America in weakening unions that have negotiated compensation packages.  Democratic lawmakers, union leaders and rank-and-file teachers and firefighters have asked Walker to revise his plan.

Writing in the Washington Post, columnist Ezra Klein notes that “The Badger State was actually in pretty good shape. It was supposed to end this budget cycle with about $120 million in the bank.

“More than half of the lower estimate ($117.2 million) is due to the impact of Special Session Senate Bill 2 (health savings accounts), Assembly Bill 3 (tax deductions/credits for relocated businesses), and Assembly Bill 7 (tax exclusion for new employees),” according to Klein.  “In English: The governor called a special session of the legislature and signed two business tax breaks and a conservative healthcare policy experiment that lowers overall tax revenues (among other things).  The new legislation was not offset, and it helped turn a surplus into a deficit.  As Brian Beutler writes, ‘public workers are being asked to pick up the tab for this agenda.'”

That’s not the complete story, Klein notes.  “Public employees aren’t being asked to make a one-time payment into the state’s coffers.  Rather, Walker is proposing to sharply curtail their right to bargain collectively.  A cyclical downturn that isn’t their fault, plus an unexpected reversal in Wisconsin’s budget picture that wasn’t their doing, is being used to permanently end their ability to sit across the table from their employer and negotiate what their health insurance should look like.”

Senator Jon Erpenbach (D-Middleton) expressed concern that Republicans might try to split off the union bargaining sections of the budget repair bill – which on its own would not be considered a financial bill – from the rest of the proposal. Republican senators have enough votes to pass a union bargaining proposal without adequate debate, Erpenbach said.  “Obviously we have a great deal of concern about it.  If they want this over immediately, that’s the only thing they can do.”

For Wisconsin’s teachers, the elimination of collective bargaining rights could mark a return to the days of regular strikes and workplaces where employees worry about taking too many sick days and the length of their breaks. “It is almost impossible for us to get our heads around the idea of no union,” said Miles Turner, executive director of the Wisconsin Association of School District Administrators.  The association supports changes to the collective bargaining law – which has been in effect since 1959 — but opposes its elimination.  According to Turner, eliminating collective bargaining would radically change what is now a mostly cordial working relationship between school administrators and teachers.  “There is an established method for doing business,” Turner said.  “There is an understanding between management and labor about how things will work.”