KeNo's Housing and Economic Portal: Monday October 11 Housing and Economic stories

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TOP STORIES:

UAW Workers Vote 457 to 96 to Close Plant Instead of Reducing Salaries - (Mish at globaleconomicanalysis.blogspot.com) With Indiana unemployment rate at 10.1% one might think that jobs that pay more than double the minimum wage would be in demand. Actually, such jobs are in demand, but ironically not from some of those who have them. Let's take a look at an offer Illinois businessman Justin Norman made last August to UAW members in a plant in Indianapolis scheduled to close in 2011. The offer was rejected today.
Illinois Businessman Proposes to Save 650 UAW Jobs: August 29, 2010: Norman talks pay with GM workers: Illinois businessman Justin Norman continued his effort to win over GM Indianapolis stamping plant workers, telling a gathering Sunday that skilled trades employees at his Chicago-area plant will earn nearly $100,000 this year. GM executives three years ago scheduled the shutdown of the 2.1-million-square-foot metal plant in 2011 if no buyer appeared. This spring, JD Norman Industries agreed to take over the factory if UAW Local 23 accepted a new contract that cuts costs. The new contract would include a lower base wage of $15.50 per hour, down from $29 per hour, and pare the wage for skilled trades workers to $24 per hour from about $33. Autoworkers who stay with JD Norman would receive lump sum bonuses, in some cases up to $35,000 over two years, and retain the right to transfer to open GM plants. They could keep the bonus if they did transfer.

Walking away from a mortgage might make sense - (www.mercurynews.com) Yet, according to a 2009 report from Oliver Wyman, hundreds of thousands of homeowners who had no trouble paying their mortgage decided to heed the advice of economists and strategically default. While the wealthy are settling into their new apartments and rebuilding wealth, middle-class Americans are going deeper into debt to save homes they may lose. In my research on homeowners in default in Santa Clara County, I have spoken with many individuals who are cashing out 401(k)s, borrowing from friends and family and using credit cards to pay their mortgage. Sadly, homeowners who are least able to pay their mortgage, whether because of unemployment or a ballooning adjustable-rate mortgage, sacrifice the most to keep their mortgages solvent. If this trend continues, expect to see increasing levels of wealth inequality for many years to come. Why doesn't the middle class walk away? There are several reasons. Many individuals I interviewed feel as though their contract with the bank is sacred. But nothing was sacred to the mortgagers who hawked predatory loans and the banks who sold loans to the highest bidder. In fact, Morgan Stanley, one of the major traders in mortgage-backed securities, recently walked away from several of its San Francisco buildings.

How Americans' Love Affair with Debt Has Grown - (www.theatlantic.com) We all know that Americans have more debt now than they did decades ago. In our consumer-driven culture, buying new gadgets, clothes, and other "must-have" items has been made quite easy with credit cards. The college-for-all culture has also encouraged many young people go take on thousands of dollars in student loans. And of course, there was the housing bubble. But how much more debt do Americans have now than they have historically? The numbers are pretty incredible.... This chart should be startling. It shows that total debt has increased from around $1,186 per person in 1948 to $10,168 in 2010. And remember, that's using 2010 dollars -- and it doesn't include real estate debt either like mortgages or home equity loans. This debt includes credit cards, auto loans, student loans, personal loans, and other non-real estate consumer debt. Perhaps an even more interesting observation is the rise of credit card debt. They account for most of the "revolving" debt shown with the green line. It was virtually non-existent until 1970. Now Americans average $3,480 in credit card debt per capita. Since just 1980, that's an increase of 285%.

California is in trouble, more forecasters say - (latimesblogs.latimes.com) California's recovery will be weak and slow, according to a forecast released Monday by the California Lutheran University Center for Research and Forecasting, affirming the pessimistic views of other projections about the state's economy. According to the forecast: The state's real estate, banking and financial sectors are dragging down any economic recovery. Growth rates will remain meager: The state's economy will expand at a rate of 0.2% in the fourth quarter of this year, much slower than the 1.5% rate nationwide. As the U.S. economy starts to regain strength, growing at rates of 2.1% and 2.4% in the first and second quarters of 2011, California's economy will grow at rates of just 1.2% and 1.8%. The state's unemployment rate will remain in double digits for the next two years, reaching 10.1% by the end of 2012.

Bill aimed at giving auto dealers more credit is signed into law - (www.autoblog.com) The federal government is keeping up its effort to stimulate the economy, while the economy is keeping up its resistance to those efforts. The latest effort to prod spending comes in a bill that, among other things, increases the federal guarantee for small dealer floorplan loans from the Small Business Administration from $2 million to $5 million. Part of the bill would also reinstate fee waivers that ran out in May, meaning loan applicants could save more than $50,000 in fees alone on a $2 million loan. The bill passed the House and Senate along party lines and President Obama signed it into law yesterday afternoon. This is expected to be the last jobs bill to leave Congress before the midterm elections in November.