KeNo's Housing and Economic Portal: Monday June 28 Housing and Economic stories

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The next generation of house buyers has too much college debt - (www.bayarearealestatetrends.com) Similar to the housing bubble, it was a legislative push to bring a college education to the masses that stimulated demand. Grants and loans became much more widely available over the last 10-15 years. And, safe from bankruptcy discharge, student loan debt became an easy and safe investment. Like anything else, increased demand lead to increasing prices and, therefore, more stimulus and higher loan amounts. With the economy seemingly booming, few thought twice about taking on huge debts. After all, their college education would lead to a high-paying job. Colleges used the extra cash to expand in every direction, adding buildings, professors, increasing salaries, and expanding facilities. Fueled by willing investors and government mandate, the price spiral grew quickly. All of these actions were taken in the name of helping students, but few ever stopped to consider that loaning an 18-year-old kid $40,000 a year might not be “helping” him. In fact, just like housing, the beneficiaries weren’t the borrowers, but the lenders, brokers, and sellers. It is their collective, repugnant greed to blame. An example from the New York Times: Meanwhile, universities like N.Y.U. enrolled students without asking many questions about whether they could afford a $50,000 annual tuition bill. Then the colleges introduced the students to lenders who underwrote big loans without any idea of what the students might earn someday — just like the mortgage lenders who didn’t ask borrowers to verify their incomes.

Bizarre ad about wrecking your house before foreclosure - (www.givingbackthehouse.com) This crazy video provides a list of 34 items in house that will give you 30,000 in cash.

Congress Eyes $15 Billion Construction Loan Guarantee Program - (www.builderonline.com) Morons from Congress providing money to the Homebuilders industry for loan guarantees when we have 2M or more vacant homes already. Miller, Maloney, and Baca not addressing any real problems and giving free taxpayer money to their biggest campaign supporters….. Hoping to jump-start housing construction, three legislators have introduced a bill in Congress that would create a $15 billion, three-year loan guarantee program for acquisition, development, and construction financing. Introduced by Rep. Brad Miller (N.C.), with co-sponsors Carolyn Maloney (D-N.Y.) and Joe Baca (D-Calif.), the bill would create a new program within the Treasury Department to guarantee loans on "viable" residential construction projects. The government would be authorized to spend up to $15 billion. While some reports indicate the program would be for smaller home building companies, the legislation as written doesn't make such a distinction. The Treasury Secretary would determine who is eligible, based on whether the "company is credit worthy, reputable, and has a record of successful residential building projects." While the bill doesn't enjoy widespread support currently, it will doubtless pick up proponents once the numbers for housing starts in May are released. They are expected to show a sharp decline. Many Congressmen facing re-election in November will no doubt want to be part of an effort to prop up a housing industry that appeared to get back on its feet in the early part of the year.

The Future Of America's Working Class - (www.newgeography.com) Watford, England, sits at the end of a spur on the London tube's Metropolitan line, a somewhat dreary city of some 80,000 rising amid the pleasant green Hertfordshire countryside. Although not utterly destitute like parts of south or east London, its shabby High Street reflects a now-diminished British dream of class mobility. It also stands as a potential warning to the U.S., where working-class, blue-collar white Americans have been among the biggest losers in the country's deep, persistent recession. As you walk through Watford, midday drinkers linger outside the One Bell pub near the center of town. Many of these might be considered "yobs," a term applied to youthful, largely white, working-class youths, many of whom work only occasionally or not at all. In the British press yobs are frequently linked to petty crime and violent behavior--including a recent stabbing outside another Watford pub, and soccer-related hooliganism. In Britain alcoholism among the disaffected youth has reached epidemic proportions. Britain now suffers among the highest rates of alcohol consumption in the advanced industrial world, and unlike in most countries, boozing is on the upswing.

Five Failed Banks Cost the FDIC $317m, on Track for Record Year - (www.housingwire.com) Regulators shut down five separate banks on Friday, naming the Federal Deposit Insurance Corp. (FDIC) as receiver. In an ongoing indication of investment opportunities in failed banks, the FDIC effectively found buyers for essentially all assets and deposits of the shuttered firms. The failures, however, are expected to cost the FDIC's Deposit Insurance Fund (DIF) $317m. The five transactions bring the running total of banks shut down so far in 2010 to 78, more than twice the 36 failures seen by the same time last year. The growth in failures is on par with recent explosions in the volume of shuttered banks, according to audit firm Grant Thornton. A new white paper (download here) finds that bank failures in 2009 grew nearly 500% from 2008, and represented approximately 70% of total bank failures in the past decade:

Realtors (TM) Want Congress to Corrupt the Tax Credit Timeline - (blogs.wsj.com) The real-estate lobby wants Congress to extend the amount of time that potential home buyers have to complete transactions that qualify for the $8,000 federal home-buyer tax credit. To qualify for the tax credit, buyers had to sign purchase agreements by April 30. Those buyers have until the end of June to close on those sales, and anything that closes after that wouldn’t get the tax credit. The problem, says the National Association of Realtors, is that many of those signed contracts are on foreclosures and short sales, where the lender allows the house to sell for less than the amount owed to the bank. Those transactions take longer than normal to process, and there’s some concern that many sales may not actually close in time. “There could be a sizable number of home buyers who responded to tax credit incentives, but may encounter problems,” said Lawrence Yun, the trade group’s chief economist, in Wednesday’s report that showed a 6% surge in pending home sales during April. The NAR and its members are asking Congress for flexibility with the June 30 deadline, but it is unclear when—or even if—something would happen. (The National Association of Home Builders says it is not asking for a deadline tweak.) Congress would have to pass such a measure quickly, which is no easy task. One possibility would be to attach the extension to a piece of legislation that’s already winding its way through both chambers.