KeNo's Housing and Economic Portal: Saturday October 10 Housing and Economic stories

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Shadow Market: The Foreclosure Pain May Drag on for Years - (blogs.wsj.com) Delays in dealing with home foreclosures are stretching out the pain for the U.S. housing market, as we reported in Wednesday’s Journal. That has stirred lots of debate over whether it is better for the nation to face the pain of millions of foreclosures immediately – to get it over with fast — or to draw the process out over several years in hopes that the economy and housing demand will recover. It looks like we’re taking the latter course, for better or worse. The foreclosure process takes about twice as long as it used to for a variety of reasons, including efforts to modify loans to keep borrowers in homes, staffing shortages at loan servicers, bankruptcy filings and a “strategic rationale” by lenders hoping that home prices will recover, says Ivy Zelman, chief executive of Zelman & Associates, a research firm based in Cleveland. In states where foreclosure is a judicial process, it now takes about 19 to 29 months, she says, and in other states it takes 11 to 17 months. While efforts to modify loans will help some borrowers, she says, they mostly will amount to “kicking the can down the road.” But not everyone is feeling gloomy. Glenn Boyd, head of U.S. asset-backed securities research at Barclays Capital, recently reduced his estimate of how many foreclosed homes will hit the market based on improvements in the economy. He now believes that the inventory of homes held by banks and other mortgage investors will peak at 900,000 in next year’s second quarter, up from about 678,000 on Aug. 1. Previously, Mr. Boyd believed foreclosure inventory would peak at 1.15 million in mid-2010. Even so, Mr. Boyd expects home prices to fall another 6% or so on average before bottoming out at the end of next year’s first quarter. Henry Fishkind, an Orlando-based housing economist, says some banks tell him they “are holding back [foreclosed-home] inventory” to avoid depressing prices any more than necessary. “It’s in their interest” to avoid flooding the market, and regulators haven’t forced them to do so, he says. That suggests that the backlog of homes headed for foreclosure will be stretched out over several years. That will be less disruptive to the housing market, Dr. Fishkind says but may mean that it takes longer for financial institutions to shed dud assets and regain the health required to extend new credit. In some of the former bubble markets, including Florida, the problem will be aggravated by looming defaults on option adjustable-rate mortgages (ones that start with minimal payments but require borrowers to face the music later) and high unemployment rates, says Jack McCabe, a housing analyst in Deerfield Beach, Fla. He also points to the temptation for borrowers to stop paying their mortgages because they don’t believe they will ever have equity and expect banks to take a long time evicting them. Mr. McCabe says he knows people who haven’t paid their mortgages in more than a year and are still haven’t been evicted. “Some people are saying, ‘I could pay my mortgage bill, but why?’”

Englishman finds 5 kilograms (11 pounds) of gold and 2.5 kilograms (5.5 pounds) of silver worth over $175K - (www.cnn.com) A man using a metal detector in a rural English field has uncovered the largest Anglo-Saxon gold hoard ever found -- an "unprecedented" treasure that sheds new light on history, archaeologists said Thursday. The hoard includes 5 kilograms (11 pounds) of gold and 2.5 kilograms (5.5 pounds) of silver. That is more than three times the amount of gold found at Sutton Hoo, one of Britain's most important Anglo-Saxon sites, said the local council in Staffordshire where the latest haul was found. It's an "incredible collection of material -- absolutely unprecedented," said Kevin Leahy, an archaeologist with the Portable Antiquities Scheme, a voluntary group that records finds made by members of the public. "We've moved into new ground with this material." Because the find is so large and important, experts haven't been able to say yet how much it is worth. They hope to make a valuation within 13 months, Staffordshire Council said. The hoard was discovered in July by Englishman Terry Herbert, who was using a metal detector he bought more than a decade ago in a jumble sale for only a few pounds (dollars). He belongs to a local metal detecting club in Staffordshire and was just out enjoying his hobby when he made the find. There was so much gold at the site that Herbert said he was soon seeing it in his sleep. "Imagine you're at home and somebody just keeps putting money through your letterbox. That's what it was like," Herbert told Britain's Press Association. "As soon as I closed my eyes I saw gold patterns. I didn't think it was ever going to end." Herbert found 500 items before he called in experts, who then found a further 800 articles in the soil. Officials aren't saying exactly where the gold was found, other than to say it was in Staffordshire, in north-central England. "Pieces were just literally sat at the top of the soil, at the grass," said Ian Wykes, of the county council. He said the hoard had been unearthed by recent plowing. Most of the pieces appear to date from the 7th century, though experts can't agree on when the hoard first entered the ground, Staffordshire Council said. The pieces are almost all war gear, Leahy said. There are very few dress fittings and no feminine dress fittings; there are only two gold buckles, and they were probably used for harness armor, he said. Sword hilt fittings and pieces of helmets, all elaborately decorated, are among the more remarkable finds. "The quantity of gold is amazing but, more importantly, the craftsmanship is consummate," Leahy said. "This was the very best that the Anglo-Saxon metalworkers could do, and they were very good. Tiny garnets were cut to shape and set in a mass of cells to give a rich, glowing effect; it is stunning." The items belonged to the elite -- aristocracy or royalty, he said, though it's not clear who the original or final owners were, why they buried it, or when. "It looks like a collection of trophies, but it is impossible to say if the hoard was the spoils from a single battle or a long and highly successful military career," he said. More work will help determine how the hoard came to be buried in the field, Leahy said. Many of the objects are inlaid with garnets, which Leahy called "stunning" and "as good as it gets." The filigree on the items is "incredible," he said.

Holiday Jobs Look Scarce as Pessimism Grips Retail . - (online.wsj.com) Nearly half the nation's 25 biggest retail chains expect to hire fewer holiday workers this season than they did last year, another sign that retailers aren't counting on recession-strained shoppers to relax the tight grip on their pocketbooks this year. About 40% of stores surveyed across a broad swath of retailing, including consumer-electronic chain Best Buy Inc., teen-retailer American Eagle Outfitters Inc., and luxury-goods seller Saks Inc., told the Hay Group, a human resources consulting firm, that they expect to hire between 5% and 25% fewer temporary workers this year than last, when the recession forced many retailers to trim staff in response to falling sales. That's a grimmer outlook than the Hay survey found a year ago, when 29% of retailers said they would be slashing their holiday workforce. "Our staffing levels will likely be down slightly," said an American Eagle spokeswoman. "We've been focused on creating high levels of efficiency." Saks declined to comment and Best Buy wasn't available to comment. Retailers typically bulk up their staff by up to 10% in the fourth quarter, the period that typically accounts for their biggest sales and profits of the year. The survey results deal another blow to the retail job market, which has been hurting in the weak economy. Since the recession began officially in December 2007, the retail sector has lost 850,000 jobs, or about 6% of its workforce, according to the Bureau of Labor Statistics. Only construction and manufacturing have lost more jobs. "Retailing employment will take another large hit if this plays out as retailers expect," said Lawrence Katz, a labor economist at Harvard University. In a typical Christmas season, the retail sector contributes about 700,000 temporary jobs to the economy. If retailers decrease those numbers by 10% to 20%, that would translate to a potential loss of more than 100,000 jobs this year just when they are most in demand.

Do I have to repay the homebuyer tax credit? - (money.cnn.com) There's a lot of confusion surrounding the housing tax credits for first-time buyers. Here are some answers. Question: I bought a home and qualified for the $8,000 first-time homebuyer tax credit. I'm still a bit confused, though, about the payback rules. Can you explain them? --Jessica G., Houston, Texas. Answer: Sure. But first I'd like to remind anyone who's considering taking advantage of the first-time homebuyer tax credit of up to $8,000 that was part of this year's stimulus package that time is running out. Specifically, unless Congress extends the deadline -- which I certainly wouldn't count on -- you must complete the purchase of the home by November 30th. That may sound like a good ways off. But when you consider that it can easily take two months to get through the entire home-buying process -- find a house, make an accepted offer, pull together the money and documentation you'll need for a mortgage, appraisal, title insurance and closing -- anyone who hasn't already begun will have to move quickly to squeeze under the November 30th wire. That deadline aside, there are a few other criteria you'll also have to meet before you can snag the tax credit. To begin with, the home you're buying must be your principal residence. And while $8,000 is the figure usually thrown around when talking about the credit, it's actually equal to 10% of the purchase up to a maximum of $8,000. You've also got to qualify as a first-time homebuyer. Clearly, you meet that hurdle if you or your spouse has never owned a home before. But you may still be eligible even if you're not buying a home for the first time. Why? Because for the purposes of this program, you're also considered a first-time buyer as long as you or your spouse hasn't owned a principal residence within three years. Notice I said principal residence. Owning a vacation home or rental property doesn't disqualify you. Then there are the income eligibility rules. To get the full credit, your modified adjusted gross income can't exceed $75,000 if you're single or $150,000 if you're married. You can claim a partial credit, however, as long as your income doesn't exceed $95,000 if you're single or $170,000 if you're married. Now, let's get back to your query about payback rules. If you indeed qualified for the $8,000 first-time homebuyer credit for homes bought from January 1 through November 30, 2009, then you don't have to worry about paying it back, provided you continue using the house as your principal residence for at least 36 months after buying. Sell it or stop using it as your principal residence within 36 months, however, and you'll have to repay the entire amount of the credit as additional tax when you file your next tax return (although there are a few exceptions).

FDIC Is Broke, Taxpayers at Risk, Bair Muses - (www.bloomberg.com) The FDIC’s insurance fund is going broke, and Sheila Bair is wondering aloud about how to replenish it. This means one thing for taxpayers: Watch your wallets. Bair, the Federal Deposit Insurance Corp.’s chairman since 2006, says the agency has many options. One way to boost its coffers, now running low after a surge in bank failures, would be to charge banks higher premiums. It could make them pay future assessments in advance. Alternatively, the FDIC could borrow money from the banks it regulates. Or it could borrow from the Treasury, where it has a $500 billion line of credit. “There’s a philosophical question about the Treasury credit line, whether that is there for losses that we know we will have, or whether it’s there for unexpected emergencies,” Bair said Sept. 18 at a Georgetown University conference in Washington. “This is really a debate for Washington and for banks,” she added. Far be it from me to intrude on this closed-circuit conversation. The question Bair posed should be a no-brainer. Borrowing taxpayer money to bail out the FDIC should be an option of last resort reserved for unforeseen emergencies. That the agency would consider this now underscores how dire its financial condition has become. Whatever path it chooses, we shouldn’t lose sight of this: The FDIC has been mismanaged, and its credibility as a regulator is in tatters. Its insurance fund wouldn’t be in this position today if the agency had been run well. Flipping Out: Bair’s comments last week reminded me of a year-old article by Bloomberg News reporter David Evans, who wrote that the FDIC soon could run out of money and might need a taxpayer bailout by the Treasury Department. Most revealing was the FDIC’s reaction. It flipped out. The day the story ran, the agency released an open letter to Bloomberg from a spokesman, Andrew Gray. He said the piece “does a serious disservice to your organization and your readers by painting a skewed picture of the FDIC insurance fund.” Gray said “the insurance fund is in a strong financial position to weather a significant upsurge in bank failures” and that he did not foresee “that taxpayers may have to foot the bill for a ‘bailout.’” He said the fund “is 100 percent industry backed,” and “our ability to raise premiums essentially means that the capital of the entire banking industry -- that’s $1.3 trillion -- is available for support.”