KeNo's Housing and Economic Portal: Tuesday June 15 Housing and Economic stories

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VIDEO: Dr. Nouriel Roubini - Predicting Financial Crisis - (video.foxbusiness.com) "Crisis Economics" author Dr. Nouriel Roubini on how he was able to see the signs of the financial crisis. The dismal science? Don't believe a word of it. If Nouriel Roubini's New Year's Eve invitations were anything to go by, economics is far from the dour affair it once was. Holed up in the Caribbean island of St Bart's, Roubini was forced to choose between two parties. The first hosted by Chelsea owner Roman Abramovich, the second by Colonel Gaddafi's son Hannibal. While dancing the night away with a Russian oligarch or the son of a Libyan dictator might not be everyone's glass of Cristal, the invitations show just how far the New York university professor has come in the celebrity stakes. Just three years earlier, Roubini had been the object of derision in the economics community as he prophesied a US housing market crash, financial crisis and partial collapse of the banking sector. Today, as an adviser to governments and central bankers and much feted in the media, he's well aware of the power of being right. "In my line of business your reputation is based on being right," he says. "The publicity is just noise. Certainly with a global crisis, the dismal scientists are having some prominence, even if most of the economics profession actually failed to predict it." The 51-year-old, widely known as Dr Doom, is in town to publicise his new bookCrisis Economics, a crash course in the financial crisis and what can be done to avoid another. The book does little to suggest he is uncomfortable with his nickname. Where Roubini is concerned, the great recession has some way to run.

FHA Home-Financing Volume Sign of ‘Very Sick System’ - (www.businessweek.com) Loans guaranteed by the Federal Housing Administration, the U.S.-owned mortgage insurer, may be involved in more home-purchase transactions than borrowing financed by Fannie Mae and Freddie Mac. FHA lending last quarter may have topped the combined volume of government-supported Fannie Mae and Freddie Mac in a home-lending market that’s still a “government-financed market,” David Stevens, the agency’s head, said today at a conference in New York, citing research by consultant Potomac Partners. “This is a market purely on life support, sustained by the federal government,” he said at the Mortgage Bankers Association conference. “Having FHA do this much volume is a sign of a very sick system.” The FHA, which backs loans with down payments as low as 3.5 percent, insured $52.5 billion of home-purchase mortgages in the first quarter, compared with $46 billion of purchases of the debt by Fannie Mae and Freddie Mac, according to data compiled by Washington-based Potomac Partners. The FHA and Fannie Mae and Freddie Mac, which regulators seized in 2008, have been financing more than 90 percent of U.S. home lending after a retreat by banks and the collapse of the market for mortgage bonds without government-backed guarantees.

Cash-strapped landlords let evictions lag - (www.azcentral.com) Fewer tenants are being evicted from apartments across the Valley, but the decline is more about the dismal state of landlord finances than tenants paying their rent on time. In the latest fallout from the recession and housing crisis, growing numbers of apartment-complex owners are in serious financial trouble or foreclosure. Lawyers, a tenant advocate and a commercial real-estate broker point to a variety of factors. Overbuilding in recent years saturated the market with apartments just as homebuilders and investors added hundreds of single-family dwellings to the rental mix. Many owners bought large complexes at the market's peak and then saw values plummet. Forced to cut rents to keep units occupied, they have been left without enough income to pay debts and keep up maintenance. People leaving the state have only added to high vacancy rates.

Ignoring mortgage debt for fun and profit - (articles.moneycentral.msn.com) Along with easy money, the economy has gotten a boost from practices that let many homeowners stop paying their mortgages and use the 'extra' money elsewhere. The real-estate market will soon see banks take a much more aggressive approach to foreclosures. It will be interesting to see how the economy is affected as rates are ratcheted up in earnest. This story line, the focus of this week's column, draws its inception from the government's easy-money policies and the bank bailouts. To this point, the economy has gotten a substantial boost from homeowners who simply don't pay their mortgages and use the "extra" money for other things. You needn't be a statistician to compile the evidence. Much work has been done for us, courtesy of an informal survey conducted by a reader of my daily column. I have condensed his observations for Contrarian Chronicles: Ignoring debt for fun and profit Over the past six months, it has become more and more obvious to me (and others, I'm sure) that our government has a well-defined, unspoken policy (or plan, if you will) to increase consumer spending by reducing the debt of the very people with the highest propensity to spend. As more and more people told me specific stories about others living rent-free, reducing credit card balances, walking away from $600k+ homes and then buying the same style house for $275k, I wanted to know more!

Owner-investors ponder walking away - (www.nctimes.com) During the real estate bubble, financial gurus touted home ownership as a solid investment. As some of those investments have gone sour, some homeowners have done the once unthinkable: They've given up homes they can afford, but which have turned out to be bad investments. "It's becoming more of a business decision," said Jon Maddux, co-founder of You Walk Away, LLC. Based in Carlsbad, You Walk Away serves customers who have decided to walk away from mortgages. You Walk Away (www.youwalkaway.com, 877-878-9255) also partners with a company that advises customers who want to conduct "short sales," or sell their homes for less than the value of the mortgage. Whether called "walking away" or "strategic default," this phenomenon unnerves investors and the federal government. They condemn strategic default as bad for the homeowner's credit, the neighborhood and the economy. Short sales don't get the same condemnation, because they are conducted with the lender's approval. "We know from experience that foreclosures and vacancies drive down the property values of everyone else in the neighborhood. Thus, strategic defaulters, in effect, deplete the personal wealth of their neighbors," Don Bisenius, a Freddie Mac executive vice president, wrote on the government-backed lender's website in a May 3 article.

East SF Bay town going after deadbeat banks to end foreclosure blight - (www.contracostatimes.com) One or two residents a week here call building officials to report abandoned houses with overgrown lawns, scummy swimming pools or busted windows. Until last week, however, there often was little the city could do about rundown, abandoned homes. Now, because of an ordinance approved last week, Oakley can fine banks up to $1,000 a day if they neglect their repossessed properties. "It's an attention grabber," Oakley building official Brent Smith said. He estimates that Oakley has fewer than two dozen foreclosed properties. Banks will have to notify the city when they repossess houses, and they will have to keep up the properties. The ordinance applies to loans made between 2003 and 2007. Keeping the empty houses tidy may help prevent crime, said police Chief Chris Thorsen. "It's the broken window theory of community policing," he said. "If you have a bunch of broken windows in the community and nobody cares to fix them, it leads to a lack of community pride." Crime concerns led Richmond, with 2,600 foreclosed properties, to set a $1,000 fine for unkempt properties nearly two years ago. "The banks are the worst property managers that I have ever seen," Richmond code enforcement manager Tim Higares said.