NEW YORK (CNNMoney.com) -- Use any metaphor you want: the ticking clock, sands running through the hourglass or pages falling away from the calendar. The fact is, time is running out to claim the $8,000 first-time homebuyers tax credit.
Passed earlier this year as part of the economic stimulus package, the credit is good for up to $8,000, or 10% of the purchase price, and applies to people who have not owned a home in the previous three years. (There are some income restrictions.) The best part: Unlike a similar program from 2008, the credit does not have to be repaid.
The bad part: It ends on Dec. 1.
Because it usually takes around 90 days to close on a house after a contract is signed, buyers have very little time left to act. As of Thurs., Aug. 27, there were only 96 days left before the credit ends.
"Buyers have to get a home under contract very, very soon," said Tom Kunz, CEO of Century 21. "They probably should get out looking."
Sense of urgency
What they will find may surprise them: Many of the prime properties have already been snapped up. Home sales have been on the upswing, and inventories are so depleted in hot markets that first-time buyers are struggling to find homes in their price range. (Check prices in your city.)
In Whittier, Calif., for example, there are few repossessed homes for sale. Those are easy to buy because there isn't a lot of red tape and the bank wants to get rid of them as quickly as possible. Instead, most of the properties are short sales, where the sellers have to convince their lender to let them sell the house for less than they owe.
"That's why there's such a sense of urgency now," said Irma Tapper, a Century 21 real estate agent in Whittier. "The banks have to approve short sales, and they're taking three to six months to do that."
That means a first timer putting a bid on a short-sale might not get an answer form the bank until well after the Dec. 1 deadline for the tax credit. So when an actual repossession listing hits the markets, it creates a feeding frenzy.
Chuck Whitehead, who runs the Coldwell Banker agency in Temecula, Calif., said one recent listing hit the market on a Friday and by Monday there were 57 bids.
The National Association of Realtors attributes much of this activity to the first-time buyer tax credit. It estimates that 1.8 million buyers will file for the credit, and 350,000 of them wouldn't have been able to buy without it.
"It makes a big difference because most of these clients are in a lower price range," said Michelle Edmunds, an agent with Coldwell Banker in Temecula, Calf., who has closed sales for six first-time buyers. "The houses they buy need work and normally they wouldn't want to move in because of the [less than perfect] conditions the homes are in."
That is true for Wesley Forsythe. This June, the 30-year-old computer consultant and his girlfriend bought a row house in the Fishtown section of Philadelphia. Since he paid just $80,000 for the three-bedroom, two-bath place, the credit acted like a 10% discount.
"It allowed us to expand our price range and plan additional renovations," he said. "My mortgage is several hundred dollars less than what my new rent would have been."
Forsythe applied for the credit immediately after closing, filing an amended 2008 tax return. The IRS cut him a check in less than seven weeks. He's spending it now on new hardwood floors, repainting most of the interior and renovating a bathroom. He's stretching the cash by doing much of the work himself.
Cash for Clunkers effect
Of course, analysts worry that this frenzy will dry up once the tax credit expires. They argue that without the incentive, much of the pressure on homebuyers to act quickly will vanish, and the nascent housing recovery could slump.
In many ways the tax credit is similar to the Cash for Clunkers program that ended this week. Already, auto dealers are anticipating that car sales will evaporate after accelerating during the program.
"It's just like Cash for Clunkers," said Robert Dye, a senior economist for PNC Financial Services Group. "It runs the risk of a let-down as the program runs its course."
Johnny Isakson, R-Ga., who is a former real estate broker, is pushing legislation to extend the tax credit through next year, increase it to $15,000, include non-first-time homebuyers, and remove income restrictions.
The effort has drawn strong industry support.
"We need to stimulate the move-up buyer," said Century 21's Kunz, "so it works its way up the pricing food chain. That's what we need to get inventory moving again."
First Published: August 27, 2009: 2:46 PM ET
Friday, August 28, 2009
Tuesday, August 25, 2009
Why Leaders Need Stories: A Lesson from Don Hewitt
03:26 PM Monday August 24, 2009
By John Baldoni
"Even the people who wrote the Bible were smart enough to know, 'tell them a story.' The issue was evil in the world, the story was Noah.... Now the Bible knew that and for some reason or another I latched on to that."
That was Don Hewitt, creator and executive producer of one of the longest running show in U.S. television history, 60 Minutes, explaining the "secret" of his success. According to Steve Croft, a 60 Minutes correspondent, Hewitt did not concern himself with issues per se; he focused on stories shaped by those issues, be it war, consumer fraud, health investigations, or celebrity profiles.
Hewitt, who died this month at the age of 86, was fond of saying that every child realizes the importance of "tell me a story" — but when we reach adulthood, we forget. Yet Hewitt's absolute commitment to story is something leaders, particularly those with big initiatives to push, should remember. Story is a form of person-to-person connection that leaders, as fellow HarvardBusiness.org contributor Stew Friedman writes, can use to connect with their followers.
There are three reasons why a good story can be a useful leadership tool:
To inform. We all want the facts, but if a leader wants the facts to matter he needs to add a little seasoning. Stories can take raw data and give it life. For example, why not use a spreadsheet to tell a story about rising sales, or declining quality? Use the data to make your points. Then, flesh out that explanation with stories about the effect on individuals, teams and the company as a whole.
To involve. If you need to get people on your side, you need to involve them in the process. You need to engage their interest. For example, if an executive needs to persuade people to support an initiative, she can describe how the initiative will benefit the customer but also emphasize how it will improve the lot of employees, too. (More customers, more sales, more revenues, more jobs, more opportunities for promotion, etc.)
To inspire. Employees become jaded; there is only so much "importance" they can absorb, even when their jobs are at stake. So it falls to leaders to find ways to inspire their teams. Stories are the ideal vehicle for inspiring people because successful ones can dramatize the human condition. A story about a customer service representative who drove to the house of a customer to rectify an error, or a sales person who drove through a raging blizzard to close a sale, can quickly become the stuff of corporate legend. These stories give sustenance in times of travail, and say to an employee faced with long odds, "If he can do it, so can I."
There is another advantage to using stories, and that's something that Hewitt alluded to with his reference to the Bible. Use stories to make your points rather than relying on platitudes. In fiction writing workshops, they call this "Show, don't tell." For executives, this means you have to avoid corporate speak; instead, tell stories about how your initiatives will improve the lives of customers and employees.
Not every issue need be reduced to a story. There are times when a leader needs to be direct and to the point, to lay out the issue and the challenges in clear and precise language. For example, if a company is losing market share to a competitor, the sales manager might want to quantify the decline in sales by percentage and by lost revenue. Yet even in such circumstances, that same executive could drive the message home by naming the lost customers and describing the effect of their loss on the company.
A leader picks the right story at the right time to drive her point home, leaving no doubt about the importance of an initiative and its impact on the organization. It's up to a leader to use stories to dramatize urgency and humanize events — so that listeners become followers.
By John Baldoni
"Even the people who wrote the Bible were smart enough to know, 'tell them a story.' The issue was evil in the world, the story was Noah.... Now the Bible knew that and for some reason or another I latched on to that."
That was Don Hewitt, creator and executive producer of one of the longest running show in U.S. television history, 60 Minutes, explaining the "secret" of his success. According to Steve Croft, a 60 Minutes correspondent, Hewitt did not concern himself with issues per se; he focused on stories shaped by those issues, be it war, consumer fraud, health investigations, or celebrity profiles.
Hewitt, who died this month at the age of 86, was fond of saying that every child realizes the importance of "tell me a story" — but when we reach adulthood, we forget. Yet Hewitt's absolute commitment to story is something leaders, particularly those with big initiatives to push, should remember. Story is a form of person-to-person connection that leaders, as fellow HarvardBusiness.org contributor Stew Friedman writes, can use to connect with their followers.
There are three reasons why a good story can be a useful leadership tool:
To inform. We all want the facts, but if a leader wants the facts to matter he needs to add a little seasoning. Stories can take raw data and give it life. For example, why not use a spreadsheet to tell a story about rising sales, or declining quality? Use the data to make your points. Then, flesh out that explanation with stories about the effect on individuals, teams and the company as a whole.
To involve. If you need to get people on your side, you need to involve them in the process. You need to engage their interest. For example, if an executive needs to persuade people to support an initiative, she can describe how the initiative will benefit the customer but also emphasize how it will improve the lot of employees, too. (More customers, more sales, more revenues, more jobs, more opportunities for promotion, etc.)
To inspire. Employees become jaded; there is only so much "importance" they can absorb, even when their jobs are at stake. So it falls to leaders to find ways to inspire their teams. Stories are the ideal vehicle for inspiring people because successful ones can dramatize the human condition. A story about a customer service representative who drove to the house of a customer to rectify an error, or a sales person who drove through a raging blizzard to close a sale, can quickly become the stuff of corporate legend. These stories give sustenance in times of travail, and say to an employee faced with long odds, "If he can do it, so can I."
There is another advantage to using stories, and that's something that Hewitt alluded to with his reference to the Bible. Use stories to make your points rather than relying on platitudes. In fiction writing workshops, they call this "Show, don't tell." For executives, this means you have to avoid corporate speak; instead, tell stories about how your initiatives will improve the lives of customers and employees.
Not every issue need be reduced to a story. There are times when a leader needs to be direct and to the point, to lay out the issue and the challenges in clear and precise language. For example, if a company is losing market share to a competitor, the sales manager might want to quantify the decline in sales by percentage and by lost revenue. Yet even in such circumstances, that same executive could drive the message home by naming the lost customers and describing the effect of their loss on the company.
A leader picks the right story at the right time to drive her point home, leaving no doubt about the importance of an initiative and its impact on the organization. It's up to a leader to use stories to dramatize urgency and humanize events — so that listeners become followers.
Tuesday 8/26/2009
Mortgage bonds are a bit lower as stocks look to open higher, after it was
announced that President Obama has reappointed Ben Bernanke as Federal
Reserve Chairman to a second 4-year term. This looks to be a smart move as
financial markets finally appear to be stabilizing. It was a little less than a year ago
that the credit markets were in disarray and fears of financial collapse spread
worldwide. Although Mr. Bernanke has his critics, and he has probably exerted his
influence in areas far beyond those of past Fed chairs, he has many supporters that
credit him with helping the United States step towards recovery. President
Obama's reappointment of Mr. Bernanke comes amid pressure and speculation
from some Democrats, who would have rather seen current Fed member Janet
Yellen or former Fed Vice Chairman Alan Blinder. But a look back at the history
books shows that when former Fed Chairman Paul Volcker was replaced by Alan
Greenspan in 1987, the uncertainty hating stock markets sold off hard. So the
move to keep Big Ben should help keep the markets a bit more stable.
The Bond market is also a little jittery ahead of this afternoon's $42B 2-year Note
auction at 1:00pm ET.
In what appears to be a continuing positive trend, more good signs for housing
were released this morning. The Case-Shiller Home Price Index rose to a
seasonally adjusted 1.4% in June - the 2nd month in a row. Prices rose in 18 of the
20 cities used in the survey. And the index showed that prices for the 2nd quarter
rose by 2.9%, the first quarterly increase in 3 years. Prices are still down 15.4%
compared to a year ago.
While we are very pleased to see good housing numbers, we must remember
that some of the improvement may be coming from people who would have
purchased in 2010 that are moving up their buying decisions to take
advantage of lower rates and tax credits before they expire. This means that
we may actually see a little dip in the housing numbers early next year. So
the positive trend is very welcome but should be taken with a grain of salt.
It's perhaps best thought of for now as housing not getting worse, instead of
housing improving rapidily.
Consumer Confidence is set to be released at 10:00am this morning and despite
the expected improvement, consumers' confidence remains fragile amid ongoing
job losses.
With mortgage bond prices modestly lower and sitting in a range between Support
and Resistance, we can start the day floating and watch for the impact of the
treasury auction as well as stocks influence on mortgage bonds.
announced that President Obama has reappointed Ben Bernanke as Federal
Reserve Chairman to a second 4-year term. This looks to be a smart move as
financial markets finally appear to be stabilizing. It was a little less than a year ago
that the credit markets were in disarray and fears of financial collapse spread
worldwide. Although Mr. Bernanke has his critics, and he has probably exerted his
influence in areas far beyond those of past Fed chairs, he has many supporters that
credit him with helping the United States step towards recovery. President
Obama's reappointment of Mr. Bernanke comes amid pressure and speculation
from some Democrats, who would have rather seen current Fed member Janet
Yellen or former Fed Vice Chairman Alan Blinder. But a look back at the history
books shows that when former Fed Chairman Paul Volcker was replaced by Alan
Greenspan in 1987, the uncertainty hating stock markets sold off hard. So the
move to keep Big Ben should help keep the markets a bit more stable.
The Bond market is also a little jittery ahead of this afternoon's $42B 2-year Note
auction at 1:00pm ET.
In what appears to be a continuing positive trend, more good signs for housing
were released this morning. The Case-Shiller Home Price Index rose to a
seasonally adjusted 1.4% in June - the 2nd month in a row. Prices rose in 18 of the
20 cities used in the survey. And the index showed that prices for the 2nd quarter
rose by 2.9%, the first quarterly increase in 3 years. Prices are still down 15.4%
compared to a year ago.
While we are very pleased to see good housing numbers, we must remember
that some of the improvement may be coming from people who would have
purchased in 2010 that are moving up their buying decisions to take
advantage of lower rates and tax credits before they expire. This means that
we may actually see a little dip in the housing numbers early next year. So
the positive trend is very welcome but should be taken with a grain of salt.
It's perhaps best thought of for now as housing not getting worse, instead of
housing improving rapidily.
Consumer Confidence is set to be released at 10:00am this morning and despite
the expected improvement, consumers' confidence remains fragile amid ongoing
job losses.
With mortgage bond prices modestly lower and sitting in a range between Support
and Resistance, we can start the day floating and watch for the impact of the
treasury auction as well as stocks influence on mortgage bonds.
Friday, August 14, 2009
The New American Dream: Renting
'A man is not a whole and complete man," wrote Walt Whitman, "unless he owns a house and the ground it stands on." America's lesser bards sang of "my old Kentucky Home" and "Home Sweet Home," leading no less than that great critic Herbert Hoover to declaim that their ballads "were not written about tenements or apartments…they never sing about a pile of rent receipts." To own a home is to be American. To rent is to be something less.
Every generation has offered its own version of the claim that owner-occupied homes are the nation's saving grace. During the Cold War, home ownership was moral armor, protecting America from dangerous outside influences. "No man who owns his own house and lot can be a Communist," proclaimed builder William Levitt. With no more reds hiding under the beds, Bill Clinton launched National Homeownership Day in 1995, offering a new rationale about personal responsibility. "You want to reinforce family values in America, encourage two-parent households, get people to stay home?" he said. George W. Bush similarly pledged his commitment to "an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, 'welcome to my house, welcome to my piece of property.'"
.Surveys show that Americans buy into our gauzy platitudes about the character-building qualities of home ownership—at least those who still own them. A February Pew survey reported that nine out of 10 homeowners viewed their homes as a "comfort" in their lives. But for millions of Americans at risk of foreclosure, the home has become something else altogether: the source of panic and despair. Those emotions were on full display last week, when an estimated 53,000 people packed the Save the Dream fair at Atlanta's World Congress Center. Its planners, with the support of the Department of Housing and Urban Development, brought together struggling homeowners, housing counselors, and lenders, including industry giants Bank of America and Citigroup, to renegotiate at-risk mortgages. Georgia's housing market has been devastated by the current economic crisis—338,411 homes in the Peachtree state went into foreclosure in May and June alone.
Atlanta represents the current housing crisis in microcosm. Since the second quarter of 2006, housing values across the United States have fallen by one third. Over a million homes were lost to foreclosure nationwide in 2008, as homeowners struggled to meet payments. The number of foreclosures reached an all-time record last month—when owners of one in every 355 houses in the country received default or auction notices or were seized by creditors. The collapse in confidence in securitized, high-risk mortgages has also devastated some of the nation's largest banks and lenders. The home financing giant Fannie Mae alone held an estimated $230 billion in toxic assets. Even if there are signs of hope on the horizon (home prices ticked upward by 0.5% in May and new housing starts rose in June), analysts like Yale's Robert Shiller expect that housing prices will remain level for the next five years. Many economists, like the Wharton School's Joseph Gyourko, are beginning to make the case that public policies should encourage renting, or at least put it on a level playing field with home ownership. A June 2009 survey commissioned by the National Foundation for Credit Counseling, found a deep-seated pessimism about home ownership, suggesting that even if renting doesn't yet have cachet, it's the only choice left for those who have been burned by the housing market. One third of respondents don't believe that they will ever be able to own a home. And 42% of those who once purchased a home, but don't own one now, believe that they'll never own one again.
.Some countries—such as Spain and Italy—have higher rates of home ownership than the U.S., but there, homes are often purchased with the support of extended families and are places to settle for the long term, not to flip to eager buyers or trade up for a McMansion. In France, Germany, and Switzerland, renting is more common than purchasing. There, most people invest their earnings in the stock market or squirrel it away in savings accounts. In those countries, whether you are a renter or an owner, houses have use value, not exchange value.
For most Americans, until the recent past, home ownership was a dream and the pile of rent receipts was the reality. From 1900, when the census first started gathering data on home ownership, through 1940, fewer than half of all Americans owned their own homes. Home ownership rates actually fell in three of the first four decades of the 20th century. But from that point on forward (with the exception of the 1980s, when interest rates were staggeringly high), the percentage of Americans living in owner-occupied homes marched steadily upward. Today more than two-thirds of Americans own their own homes. Among whites, more than 75% are homeowners today.
Yet the story of how the dream became a reality is not one of independence, self-sufficiency, and entrepreneurial pluck. It's not the story of the inexorable march of the free market. It's a different kind of American story, of government, financial regulation, and taxation.
We are a nation of homeowners and home-speculators because of Uncle Sam.
It wasn't until government stepped into the housing market, during that extraordinary moment of the Great Depression, that tenancy began its long downward spiral. Before the Crash, government played a minuscule role in housing Americans, other than building barracks and constructing temporary housing during wartime and, in a little noticed provision in the 1913 federal tax code, allowing for the deduction of home mortgage interest payments.
Until the early 20th century, holding a mortgage came with a stigma. You were a debtor, and chronic indebtedness was a problem to be avoided like too much drinking or gambling. The four words "keep out of debt" or "pay as you go" appeared in countless advice books. As the YMCA told its young charges, "If you can't pay, don't buy. Go without. Keep on going without." Because of that, many middle-class Americans—even those with a taste for single-family houses—rented. Home Sweet Home didn't lose its sweetness because someone else held the title.
In any case, mortgages were hard to come by. Lenders typically required 50% or more of the purchase price as a down payment. Interest rates were high and terms were short, usually just three to five years. In 1920, John Taylor Boyd Jr., an expert on real-estate finance, lamented that "increasing numbers of our people are finding home ownership too burdensome to attempt." As a result, there were two kinds of homeowners in the United States: working-class folks who built their own houses because they couldn't afford mortgages and the wealthy, who usually paid for their places outright. Even many of the richest rented—because they had better places to invest than in the volatile housing market.
.The Depression turned everything on its head. Between 1928, the last year of the boom, and 1933, new housing starts fell by 95%. Half of all mortgages were in default. To shore up the market, Herbert Hoover signed the Federal Home Loan Bank Act in 1932, laying the groundwork for massive federal intervention in the housing market. In 1933, as one of the signature programs of his first 100 days, Frankin Roosevelt created the Home Owners' Loan Corporation to provide low interest loans to help out foreclosed home owners. In 1934, F.D.R. created the Federal Housing Administration, which set standards for home construction, instituted 25- and 30-year mortgages, and cut interest rates. And in 1938, his administration created the Federal National Mortgage Association (Fannie Mae) which created the secondary market in mortgages. In 1944, the federal government extended generous mortgage assistance to returning veterans, most of whom could not have otherwise afforded a house. Together, these innovations had epochal consequences.
Easy credit, underwritten by federal housing programs, boosted the rates of home ownership quickly. By 1950, 55% of Americans had a place they could call their own. By 1970, the figure had risen to 63%. It was now cheaper to buy than to rent. Federal intervention also unleashed vast amounts of capital that turned home construction and real estate into critical economic sectors. By the late 1950s, for the first time, the census bureau began collecting data on new housing starts—which became a leading indicator of the nation's economic vitality.
It's a story riddled with irony—for at the same time that Uncle Sam brought the dream of home ownership to reality—he kept his role mostly hidden, except to the army banking, real-estate and construction lobbyists who rose to protect their industries' newfound gains Tens of millions of Americans owned their own homes because of government programs, but they had no reason to doubt that their home ownership was a result of their own virtue and hard work, their own grit and determination—not because they were the beneficiaries of one of the grandest government programs ever. The only housing programs prominently associated with Washington's policy makers were underfunded, unpopular public housing projects. Chicago's bleak, soulless Robert Taylor Homes and their ilk—not New York's vast Levittown or California's sprawling Lakewood—became the symbol of big government.
Federal housing policies changed the whole landscape of America, creating the sprawlscapes that we now call home, and in the process, gutting inner cities, whose residents, until the civil rights legislation of 1968, were largely excluded from federally backed mortgage programs. Of new housing today, 80% is built in suburbs—the direct legacy of federal policies that favored outlying areas rather than the rehabilitation of city centers. It seemed that segregation was just the natural working of the free market, the result of the sum of countless individual choices about where to live. But the houses were single—and their residents white—because of the invisible hand of government.
But by the 1960s and 1970s, those who had been excluded from the postwar housing boom demanded their own piece of the action—and slowly got it. The newly created Department of Housing and Urban Development expanded home ownership programs for excluded minorities; the 1976 Community Reinvestment Act forced banks to channel resources to underserved neighborhoods; and activists successfully pushed Fannie Mae to underwrite loans to home buyers once considered too risky for conventional loans. Minority home ownership rates crept upward—though they still remained far behind whites. Even at the peak of the most recent real-estate bubble, just under 50% of blacks and Latinos owned their own homes. It's unlikely that minority home ownership rates will rise again for a while. In the last boom year, 2006, almost 53% of blacks and more than 47% of Hispanics assumed subprime mortgages, compared to only 26% of whites. One in 10 black homeowners is likely to face foreclosure proceedings, compared to only one in 25 whites.
Long Island’s Levittown, celebrated its 60th anniversary in 2007.
.During the wild late 1990s and the first years of the new century, the dream of home ownership turned hallucinogenic. The home financing industry—at the impetus of the Clinton and Bush administrations—engaged in the biggest promotion of home ownership in decades. Both pushed for public-private partnerships, with HUD and the government-supported financiers like Fannie Mae serving as the mostly silent partners in a rapidly metastasizing mortgage market. New tools, including the securitization of mortgages and subprime lending, made it possible for more Americans than ever to live the dream or to gamble that someone else would pay them more to make their own dream come true. Anyone could be an investor, anyone could get rich. The notion of home-as-haven, already weak, grew even more and more removed from the notion of home-as-jackpot.
And that brings us back to those desperate homeowners who gathered at Atlanta's convention center, having lost their investments, abruptly woken up from the dream of trouble-free home ownership and endless returns on their few percent down. They spent hours lined up in the hot sun, some sobbing, others nervously reading the fine print on their adjustable rate mortgage forms for the first time, wondering if their house is the next to go on the auction block. If there's one lesson from the real-estate bust of the last few years, it might be time to downsize the dream, to make it a little more realistic. James Truslow Adams, the historian who coined the phrase "the American dream," one that he defined as "a better, richer, and happier life for all our citizens of every rank" also offered a prescient commentary in the midst of the Great Depression. "That dream," he wrote in 1933, "has always meant more than the accumulation of material goods." Home should be a place to build a household and a life, a respite from the heartless world, not a pot of gold.
—Thomas J. Sugrue is Kahn professor of history and sociology at the University of Pennsylvania. He is writing a history of real estate in modern America.
Every generation has offered its own version of the claim that owner-occupied homes are the nation's saving grace. During the Cold War, home ownership was moral armor, protecting America from dangerous outside influences. "No man who owns his own house and lot can be a Communist," proclaimed builder William Levitt. With no more reds hiding under the beds, Bill Clinton launched National Homeownership Day in 1995, offering a new rationale about personal responsibility. "You want to reinforce family values in America, encourage two-parent households, get people to stay home?" he said. George W. Bush similarly pledged his commitment to "an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, 'welcome to my house, welcome to my piece of property.'"
.Surveys show that Americans buy into our gauzy platitudes about the character-building qualities of home ownership—at least those who still own them. A February Pew survey reported that nine out of 10 homeowners viewed their homes as a "comfort" in their lives. But for millions of Americans at risk of foreclosure, the home has become something else altogether: the source of panic and despair. Those emotions were on full display last week, when an estimated 53,000 people packed the Save the Dream fair at Atlanta's World Congress Center. Its planners, with the support of the Department of Housing and Urban Development, brought together struggling homeowners, housing counselors, and lenders, including industry giants Bank of America and Citigroup, to renegotiate at-risk mortgages. Georgia's housing market has been devastated by the current economic crisis—338,411 homes in the Peachtree state went into foreclosure in May and June alone.
Atlanta represents the current housing crisis in microcosm. Since the second quarter of 2006, housing values across the United States have fallen by one third. Over a million homes were lost to foreclosure nationwide in 2008, as homeowners struggled to meet payments. The number of foreclosures reached an all-time record last month—when owners of one in every 355 houses in the country received default or auction notices or were seized by creditors. The collapse in confidence in securitized, high-risk mortgages has also devastated some of the nation's largest banks and lenders. The home financing giant Fannie Mae alone held an estimated $230 billion in toxic assets. Even if there are signs of hope on the horizon (home prices ticked upward by 0.5% in May and new housing starts rose in June), analysts like Yale's Robert Shiller expect that housing prices will remain level for the next five years. Many economists, like the Wharton School's Joseph Gyourko, are beginning to make the case that public policies should encourage renting, or at least put it on a level playing field with home ownership. A June 2009 survey commissioned by the National Foundation for Credit Counseling, found a deep-seated pessimism about home ownership, suggesting that even if renting doesn't yet have cachet, it's the only choice left for those who have been burned by the housing market. One third of respondents don't believe that they will ever be able to own a home. And 42% of those who once purchased a home, but don't own one now, believe that they'll never own one again.
.Some countries—such as Spain and Italy—have higher rates of home ownership than the U.S., but there, homes are often purchased with the support of extended families and are places to settle for the long term, not to flip to eager buyers or trade up for a McMansion. In France, Germany, and Switzerland, renting is more common than purchasing. There, most people invest their earnings in the stock market or squirrel it away in savings accounts. In those countries, whether you are a renter or an owner, houses have use value, not exchange value.
For most Americans, until the recent past, home ownership was a dream and the pile of rent receipts was the reality. From 1900, when the census first started gathering data on home ownership, through 1940, fewer than half of all Americans owned their own homes. Home ownership rates actually fell in three of the first four decades of the 20th century. But from that point on forward (with the exception of the 1980s, when interest rates were staggeringly high), the percentage of Americans living in owner-occupied homes marched steadily upward. Today more than two-thirds of Americans own their own homes. Among whites, more than 75% are homeowners today.
Yet the story of how the dream became a reality is not one of independence, self-sufficiency, and entrepreneurial pluck. It's not the story of the inexorable march of the free market. It's a different kind of American story, of government, financial regulation, and taxation.
We are a nation of homeowners and home-speculators because of Uncle Sam.
It wasn't until government stepped into the housing market, during that extraordinary moment of the Great Depression, that tenancy began its long downward spiral. Before the Crash, government played a minuscule role in housing Americans, other than building barracks and constructing temporary housing during wartime and, in a little noticed provision in the 1913 federal tax code, allowing for the deduction of home mortgage interest payments.
Until the early 20th century, holding a mortgage came with a stigma. You were a debtor, and chronic indebtedness was a problem to be avoided like too much drinking or gambling. The four words "keep out of debt" or "pay as you go" appeared in countless advice books. As the YMCA told its young charges, "If you can't pay, don't buy. Go without. Keep on going without." Because of that, many middle-class Americans—even those with a taste for single-family houses—rented. Home Sweet Home didn't lose its sweetness because someone else held the title.
In any case, mortgages were hard to come by. Lenders typically required 50% or more of the purchase price as a down payment. Interest rates were high and terms were short, usually just three to five years. In 1920, John Taylor Boyd Jr., an expert on real-estate finance, lamented that "increasing numbers of our people are finding home ownership too burdensome to attempt." As a result, there were two kinds of homeowners in the United States: working-class folks who built their own houses because they couldn't afford mortgages and the wealthy, who usually paid for their places outright. Even many of the richest rented—because they had better places to invest than in the volatile housing market.
.The Depression turned everything on its head. Between 1928, the last year of the boom, and 1933, new housing starts fell by 95%. Half of all mortgages were in default. To shore up the market, Herbert Hoover signed the Federal Home Loan Bank Act in 1932, laying the groundwork for massive federal intervention in the housing market. In 1933, as one of the signature programs of his first 100 days, Frankin Roosevelt created the Home Owners' Loan Corporation to provide low interest loans to help out foreclosed home owners. In 1934, F.D.R. created the Federal Housing Administration, which set standards for home construction, instituted 25- and 30-year mortgages, and cut interest rates. And in 1938, his administration created the Federal National Mortgage Association (Fannie Mae) which created the secondary market in mortgages. In 1944, the federal government extended generous mortgage assistance to returning veterans, most of whom could not have otherwise afforded a house. Together, these innovations had epochal consequences.
Easy credit, underwritten by federal housing programs, boosted the rates of home ownership quickly. By 1950, 55% of Americans had a place they could call their own. By 1970, the figure had risen to 63%. It was now cheaper to buy than to rent. Federal intervention also unleashed vast amounts of capital that turned home construction and real estate into critical economic sectors. By the late 1950s, for the first time, the census bureau began collecting data on new housing starts—which became a leading indicator of the nation's economic vitality.
It's a story riddled with irony—for at the same time that Uncle Sam brought the dream of home ownership to reality—he kept his role mostly hidden, except to the army banking, real-estate and construction lobbyists who rose to protect their industries' newfound gains Tens of millions of Americans owned their own homes because of government programs, but they had no reason to doubt that their home ownership was a result of their own virtue and hard work, their own grit and determination—not because they were the beneficiaries of one of the grandest government programs ever. The only housing programs prominently associated with Washington's policy makers were underfunded, unpopular public housing projects. Chicago's bleak, soulless Robert Taylor Homes and their ilk—not New York's vast Levittown or California's sprawling Lakewood—became the symbol of big government.
Federal housing policies changed the whole landscape of America, creating the sprawlscapes that we now call home, and in the process, gutting inner cities, whose residents, until the civil rights legislation of 1968, were largely excluded from federally backed mortgage programs. Of new housing today, 80% is built in suburbs—the direct legacy of federal policies that favored outlying areas rather than the rehabilitation of city centers. It seemed that segregation was just the natural working of the free market, the result of the sum of countless individual choices about where to live. But the houses were single—and their residents white—because of the invisible hand of government.
But by the 1960s and 1970s, those who had been excluded from the postwar housing boom demanded their own piece of the action—and slowly got it. The newly created Department of Housing and Urban Development expanded home ownership programs for excluded minorities; the 1976 Community Reinvestment Act forced banks to channel resources to underserved neighborhoods; and activists successfully pushed Fannie Mae to underwrite loans to home buyers once considered too risky for conventional loans. Minority home ownership rates crept upward—though they still remained far behind whites. Even at the peak of the most recent real-estate bubble, just under 50% of blacks and Latinos owned their own homes. It's unlikely that minority home ownership rates will rise again for a while. In the last boom year, 2006, almost 53% of blacks and more than 47% of Hispanics assumed subprime mortgages, compared to only 26% of whites. One in 10 black homeowners is likely to face foreclosure proceedings, compared to only one in 25 whites.
Long Island’s Levittown, celebrated its 60th anniversary in 2007.
.During the wild late 1990s and the first years of the new century, the dream of home ownership turned hallucinogenic. The home financing industry—at the impetus of the Clinton and Bush administrations—engaged in the biggest promotion of home ownership in decades. Both pushed for public-private partnerships, with HUD and the government-supported financiers like Fannie Mae serving as the mostly silent partners in a rapidly metastasizing mortgage market. New tools, including the securitization of mortgages and subprime lending, made it possible for more Americans than ever to live the dream or to gamble that someone else would pay them more to make their own dream come true. Anyone could be an investor, anyone could get rich. The notion of home-as-haven, already weak, grew even more and more removed from the notion of home-as-jackpot.
And that brings us back to those desperate homeowners who gathered at Atlanta's convention center, having lost their investments, abruptly woken up from the dream of trouble-free home ownership and endless returns on their few percent down. They spent hours lined up in the hot sun, some sobbing, others nervously reading the fine print on their adjustable rate mortgage forms for the first time, wondering if their house is the next to go on the auction block. If there's one lesson from the real-estate bust of the last few years, it might be time to downsize the dream, to make it a little more realistic. James Truslow Adams, the historian who coined the phrase "the American dream," one that he defined as "a better, richer, and happier life for all our citizens of every rank" also offered a prescient commentary in the midst of the Great Depression. "That dream," he wrote in 1933, "has always meant more than the accumulation of material goods." Home should be a place to build a household and a life, a respite from the heartless world, not a pot of gold.
—Thomas J. Sugrue is Kahn professor of history and sociology at the University of Pennsylvania. He is writing a history of real estate in modern America.
Thursday, August 13, 2009
08/13/2009
It's been another exciting morning and Mortgage Bonds are on the plus side after
starting the day lower. But don't touch that dial, because another day of Treasury
auctions may cause pricing to change quickly.
Interestingly, Germany and France have both declared that their recession is over.
We don't quite understand how they can confidently be beating the drum on this,
but time will tell. On the news, Mortgage Bonds drifted lower and were pushed
lower still after Wal-Mart beat earnings estimates for the 2nd Quarter. But this
didn't jive with the Retail Sales report, which was worse than expectations. And a
disappointing Initial Jobless Claims numbers soured the Stock market and helped
boost Mortgage Bonds.
Initial Jobless Claims rose by 558,000 in the latest week, above the 545,000 that
was expected. The recent trend of Claims readings does show some
improvement. After 22 consecutive weeks of readings over 600K, we have seen
three successive readings under 600k, so Claims have dropped a bit. But have
people found Jobs or have they just fell off the extended claims benefits? This is
tough to gauge - but based on what you see in the economy - is there a lot of hiring
going on? We feel it may be more likely that Claims benefits are expiring.
Retail Sales dropped in July by 0.1%, well below the 0.8% gain that was expected.
This report negated the better than expected Wal-Mart report and signals that
consumers are still saving more than spending. This brings up a little known and
rarely discussed but critical facet of the economy...the velocity of money. In simple
terms, if you bought a pair of shoes and the owner of that shoe store takes that
profit and buys a big screen TV, then the TV store owner buys something else, etc.
- the same dollar passes through the economy over and over again causing growth
and jobs as well as ultimately inflation. But the latest Retail Sales report tells us
that the velocity of money is stagnant. Once the velocity of money increases,
inflation will likely follow.
More Bonds coming to market. Once again the Treasury is going to unleash more
Bond supply, this by way of $15B in 30-year Bonds. Yesterday's 10-year Note
auction showed so-so results with anemic foreign participation, thereby causing a
swift selloff in Mortgage Bonds. Stay tuned for the results of this auction at 1pm
today as we may see some more volatility yet. Some good news - there are no
auctions scheduled for next week aside from the usual T-Bill offerings, so Mortgage
Bonds may be able to improve somewhat from current levels.
Yesterday's volatility was expected and today we are likely to see some more - we
will float for now, but be ready to take the action later today should the markets
move on the auction findings.
starting the day lower. But don't touch that dial, because another day of Treasury
auctions may cause pricing to change quickly.
Interestingly, Germany and France have both declared that their recession is over.
We don't quite understand how they can confidently be beating the drum on this,
but time will tell. On the news, Mortgage Bonds drifted lower and were pushed
lower still after Wal-Mart beat earnings estimates for the 2nd Quarter. But this
didn't jive with the Retail Sales report, which was worse than expectations. And a
disappointing Initial Jobless Claims numbers soured the Stock market and helped
boost Mortgage Bonds.
Initial Jobless Claims rose by 558,000 in the latest week, above the 545,000 that
was expected. The recent trend of Claims readings does show some
improvement. After 22 consecutive weeks of readings over 600K, we have seen
three successive readings under 600k, so Claims have dropped a bit. But have
people found Jobs or have they just fell off the extended claims benefits? This is
tough to gauge - but based on what you see in the economy - is there a lot of hiring
going on? We feel it may be more likely that Claims benefits are expiring.
Retail Sales dropped in July by 0.1%, well below the 0.8% gain that was expected.
This report negated the better than expected Wal-Mart report and signals that
consumers are still saving more than spending. This brings up a little known and
rarely discussed but critical facet of the economy...the velocity of money. In simple
terms, if you bought a pair of shoes and the owner of that shoe store takes that
profit and buys a big screen TV, then the TV store owner buys something else, etc.
- the same dollar passes through the economy over and over again causing growth
and jobs as well as ultimately inflation. But the latest Retail Sales report tells us
that the velocity of money is stagnant. Once the velocity of money increases,
inflation will likely follow.
More Bonds coming to market. Once again the Treasury is going to unleash more
Bond supply, this by way of $15B in 30-year Bonds. Yesterday's 10-year Note
auction showed so-so results with anemic foreign participation, thereby causing a
swift selloff in Mortgage Bonds. Stay tuned for the results of this auction at 1pm
today as we may see some more volatility yet. Some good news - there are no
auctions scheduled for next week aside from the usual T-Bill offerings, so Mortgage
Bonds may be able to improve somewhat from current levels.
Yesterday's volatility was expected and today we are likely to see some more - we
will float for now, but be ready to take the action later today should the markets
move on the auction findings.
Friday, August 7, 2009
Use Nap Time to Maximize Your Up Time
By John Baldoni
Want to make better use of your time? You might want to consider taking a nap.
A new study from Pew Research shows that one-third of all people who earn $100,000 or more take naps. These folks spend more time napping than those earning between $30,000 and $100,000. (Too much napping is not good for your income: those who napped the most earned less than $30,000 annually.)
While I cannot attest to the earning power of napping, I can vouch for its leadership effectiveness. Winston Churchill and John D. Rockefeller took regular naps, as did my grandfather. For nearly thirty years, Grandpa John worked full-time and ran a weekly newspaper on the side. Naps were essential to his ability to keep working productively.
Napping is something I've been preoccupied with lately as I recuperate from foot surgery. Since I have been instructed to stay off my feet as much as possible, the tendency to snooze has caught me more regularly — typically it's a quick doze on a hard floor. When I awake, I am refreshed and recharged, and possess an extra stipend of energy.
The chief purpose of a quick nap is less about the time spent resting and more about the energy it produces. Some refer to this as power napping. Here are some suggestions for making your naps more productive.
1. Find a comfortable spot and stretch out. This can be hard to do in an office setting but it's not impossible. If appropriate, keep your eye out for a clean stretch of carpet, perhaps in a conference room or unoccupied office. [You can also snooze in your chair but make certain you are not cramped and that you are positioned for safety so you won't fall out when you fall asleep.]
2. Close your eyes and focus on a project. Do not get wrapped up in details like budgets and deadlines. That will only provoke anxiety; focus on possibility, that is, on how you will accomplish the project and with whom.
3. Relax as you mull over concepts. As your mind wanders, let your body relax, too.
4. Doze. For me, fifteen to thirty minutes works. Any longer makes me a bit groggy, but do what works for you. (Note: naptime is not heavy REM sleep; often I do not actually fall asleep but I do feel rested upon waking.)
5. Wake up. Rise slowly, and as you regain your balance, stretch your arms and legs. Time to get back to work. Enjoy the sense of renewal that comes from a quick nap.
Chances are if you follow these simple tips, you will be more than ready to get back to work. You may find yourself with a bit more pep in your step and zip in your thought processes. You may not make more money but you will likely be more refreshed and able to tackle the challenges the rest of the day presents.
From my point of view, naptime is not slack time. It is self-time. Use a nap as you would exercise or reflection; it is a time to connect your thoughts to your eventual actions. And for leaders that can be a very good thing.
05:31 PM Thursday August 06, 2009
Want to make better use of your time? You might want to consider taking a nap.
A new study from Pew Research shows that one-third of all people who earn $100,000 or more take naps. These folks spend more time napping than those earning between $30,000 and $100,000. (Too much napping is not good for your income: those who napped the most earned less than $30,000 annually.)
While I cannot attest to the earning power of napping, I can vouch for its leadership effectiveness. Winston Churchill and John D. Rockefeller took regular naps, as did my grandfather. For nearly thirty years, Grandpa John worked full-time and ran a weekly newspaper on the side. Naps were essential to his ability to keep working productively.
Napping is something I've been preoccupied with lately as I recuperate from foot surgery. Since I have been instructed to stay off my feet as much as possible, the tendency to snooze has caught me more regularly — typically it's a quick doze on a hard floor. When I awake, I am refreshed and recharged, and possess an extra stipend of energy.
The chief purpose of a quick nap is less about the time spent resting and more about the energy it produces. Some refer to this as power napping. Here are some suggestions for making your naps more productive.
1. Find a comfortable spot and stretch out. This can be hard to do in an office setting but it's not impossible. If appropriate, keep your eye out for a clean stretch of carpet, perhaps in a conference room or unoccupied office. [You can also snooze in your chair but make certain you are not cramped and that you are positioned for safety so you won't fall out when you fall asleep.]
2. Close your eyes and focus on a project. Do not get wrapped up in details like budgets and deadlines. That will only provoke anxiety; focus on possibility, that is, on how you will accomplish the project and with whom.
3. Relax as you mull over concepts. As your mind wanders, let your body relax, too.
4. Doze. For me, fifteen to thirty minutes works. Any longer makes me a bit groggy, but do what works for you. (Note: naptime is not heavy REM sleep; often I do not actually fall asleep but I do feel rested upon waking.)
5. Wake up. Rise slowly, and as you regain your balance, stretch your arms and legs. Time to get back to work. Enjoy the sense of renewal that comes from a quick nap.
Chances are if you follow these simple tips, you will be more than ready to get back to work. You may find yourself with a bit more pep in your step and zip in your thought processes. You may not make more money but you will likely be more refreshed and able to tackle the challenges the rest of the day presents.
From my point of view, naptime is not slack time. It is self-time. Use a nap as you would exercise or reflection; it is a time to connect your thoughts to your eventual actions. And for leaders that can be a very good thing.
05:31 PM Thursday August 06, 2009
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