KeNo's Housing and Economic Portal: Wednesday February 10 Housing and Economic stories

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TOP STORIES:

West Coast Wasteland - (www.thenation.com) VMH (formerly Verdugo Mental Health) has provided counseling and medication to impoverished children and adults since 1957. But in August, shortly after the new facility opened, the clinic lost most of its funding for adult services when the state and county yanked their dollars, triggering huge matching-fund losses from the federal government. Eighty percent of the counseling staff, including nearly all of the site's adult counselors, were laid off. Kids still receive some counseling, but the walls of the rooms in which they are seen by staff are bare--the clinic ran out of funds before it could decorate them--and the doors have paper signs taped to them instead of brass plaques. Nowadays, VMH's adult clients are treated exclusively with medication. And the indigent mentally ill--whose treatment had been paid for by LA County, which in turn received money from the state--are turned away at the door. Many of them end up sleeping on park benches near the clinic. "These are the chronically mentally ill," says psychologist Janie Strasner glumly, "who will end up being the raving lunatics on the street."

Unemployment rises in 43 states - (articles.moneycentral.msn.com) 4 states hit record-high joblessness, and all 50 states' unemployment rates are higher than they were last year. The unemployment picture in the United States just got worse. Unemployment rates rose in 43 states and the District of Columbia in December, the Labor Department reported this morning. It's a turnaround from November, when 36 states reported a decline in unemployment. Four states hit record highs: South Carolina's unemployment hit 12.6%, Florida's reached 11.8%, North Carolina's saw 11.2% and Delaware's hit 9%. Four states reported a decrease in their unemployment rates, while three reported no change. Earlier this month, the Labor Department reported a national joblessrate of 10% for December. All 50 states had an unemployment rate that was higher in December 2009 than in the same month a year earlier.

Flashback 2005: Bernanke on housing and consumer debt - (bubblemeter.blogspot.com) Here are two nuggets from Ben Bernanke's congressional testimony before Joint Economic Committee at the peak of the housing bubble. The first one comes from testimony he gave exactly four years ago today:

· March 8, 2005: Some observers have expressed concern about rising levels of household debt, and we at the Federal Reserve follow these developments closely. However, concerns about debt growth should be allayed by the fact that household assets (particularly housing wealth) have risen even more quickly than household liabilities. Indeed, the ratio of household net worth to household income has been rising smartly and currently stands at 5.4, well above its long-run average of about 4.8. With real disposable income having risen over the past few quarters, most consumers are in good financial shape—a positive indication for household spending. One caveat for the future is that the recent rapid escalation in house prices—11 percent in 2004, according to the repeat-transactions index constructed by the Office of Federal Housing Enterprise Oversight—is unlikely to continue. A plausible scenario is that house prices will either move sideways or rise more slowly during the next few years, eventually bringing the rate of return on housing in line with the relatively low prospective rates of return that we currently observe on virtually all assets, both real and financial. If the increases in house prices begin to moderate as expected, the resulting slowdown in household wealth accumulation should lead ultimately to somewhat slower growth in consumer spending.

· October 20, 2005: House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals, including robust growth in jobs and incomes, low mortgage rates, steady rates of household formation, and factors that limit the expansion of housing supply in some areas.

Fed Buys Another $12bn of Fannie, Freddie Crap With Counterfeit Money - (www.housingwire.com) The Federal Reserve Bank of New York bought $12bn of mortgage-backed securities (MBS) from mortgage giantsFreddie Mac, Fannie Mae and Ginnie Mae in the week ending January 20. Gross purchases totaled $16.36bn — $1.3bn of Freddie MBS and $12.8bn of Fannie MBS — before $2.25bn of MBS sales during the same time frame, according to details released Thursday by the NY Fed. The week brought the Fed’s total net purchases to date to nearly $1.15trn. It’s another week of slowed purchases as the Fed winds down its purchase program, which is on track to buy up $1.25trn of agency MBS by the end of Q110.

Haiti refocuses attention on quake insurance for California - (www.sfgate.com) Statewide, only 12 percent of homeowners with insurance also have quake coverage. About 70 percent of that is underwritten by the California Earthquake Authority, a state-sponsored entity that sells quake insurance through commercial insurance companies. The CEA admits that even with its insurance, homeowners could suffer "substantial uninsured loss." Its policies pay nothing until structural damage alone exceeds 15 percent of the home's insured value. After that, they pay for damage to structure and household goods up to the policy limit. The basic policy pays only $1,500 in living expenses if you can't stay in your home. If a large quake erupted on the Hayward Fault, only 6 to 10 percent of total residential losses and 15 to 20 percent of commercial losses would be covered by insurance, according to Risk Management Solutions, a firm that predicts damage from catastrophes. By comparison, about 53 percent of the economic losses to homes and businesses following Hurricane Katrina were covered by insurance, including payouts from the National Flood Insurance Program.

Stop looking to feds to cure California's budget crisis - (www.latimes.com) Gov. Arnold Schwarzenegger says the state is running a budget deficit because we pay more in federal taxes than we get back in federal spending. The biggest cause of the deficit is the governor. Our political leaders trot out new and more creative excuses for their failure to get the state's fiscal house in order every day, but one hardy perennial was recently aired again by Gov. Arnold Schwarzenegger. This is the notion that California is running a budget deficit because we pay more in federal taxes than we get back in federal spending. Schwarzenegger and the legislative leaders made a pilgrimage to Washington on this theme last week. The governor's claim was that the state receives only 78 cents back for every dollar of federal tax we generate, so somehow we're "subsidizing" the states that get more and incurring red ink in Sacramento in the process. The economics of the state budget deficit being of great interest to individual taxpayers and business owners alike, it's proper to subject this claim to some scrutiny. Whether there's even factual grounds for the governor's claim is subject to debate. His number dates from 2005, and the formula underlying it has been criticized for supposedly overestimating tax payments. (The Washington-based Tax Foundation, which created the formula, defends its methodology.)

Tishman to Hand Over Stuyvesant Town to Its Lenders - (www.bloomberg.com) Tishman Speyer Properties LP and BlackRock Inc. plan to cede control of Stuyvesant Town-Peter Cooper Village to lenders after the value of New York’s largest apartment complex fell and they were prevented from raising rents. Tishman, which bought the 80-acre property with BlackRock Realty Inc. in 2006 for $5.4 billion, missed a $16.1 million debt payment on Jan. 8. Gramercy Capital Corp., which holds some of the debt, asked to have Tishman removed as manager of the buildings, three people familiar with the matter said last week. “We make this decision as we feel a battle over the property or a contested bankruptcy proceeding is not in the long-term interest of the property, its residents, our partnership or the city,” Tishman and BlackRock said in an e- mailed statement today. The New York-based investors bought the developments from insurer MetLife Inc. near the top of the market with plans to remodel and raise the cost of rent-regulated units to market rates. On Oct. 22, the New York Court of Appeals in Albany ruled that increases on about 4,350 apartments were illegal. That month, Fitch Ratings valued the property at $1.8 billion.

OTHER STORIES:

Housing market blue in Hawaii - (www.financialpost.com)

Rents Fall to 3 1/2 Year Low in Orange County - (www.calculatedriskblog.com)

Housing bust keeps consuming California jobs - (www.latimes.com)

Mortgaging Our Souls In Paradise - (Vancouver Real Estate at vreaa.wordpress.com)

The new breed of perma-renters - (marketplace.publicradio.org)

2010: The Year of the Renter? - (www.nytimes.com)

What Could You Live Without? - (www.nytimes.com)

The housing bust and what to expect next - (www.opednews.com)

Excellent Explanation of Bubble - (www.debtdeflation.com)

Rewriting the Fed's history - (www.network.nationalpost.com)

Volcker Rule Vindicates Former Fed Chief - (www.bloomberg.com)