U.S. Homeowners Lost $5.9 Trillion Since 2006 Peak; Housing Affordability Down Even in Real Estate Slump; Hunger, Homelessness and Credit Card Defaults on the Rise

Housing Affordability Down Even in Real Estate Slump

December 18, 2009

Washington Post - A growing number of lower-income homeowners in the D.C. region spent at least half of their income on housing costs, reflecting a decline in housing affordability across the nation, according to a study released Thursday.

The report by the Center for Housing Policy, which reviewed Census Bureau data from 2005 to 2008, found that low- and moderate-income homeowners and renters have not been able to take advantage of the fall in prices since the housing market peaked in 2006. The report by the D.C.-based nonprofit research group measured homeowners spending 50 percent or more of their income on housing costs, including their rent or mortgage, property taxes, utilities, and homeowner association fees.

During that period, many homeowners faced higher mortgage payments because of adjustable-rate mortgages while others lost their jobs or saw a decline in household income, said Keith Wardrip, the center's senior research associate. At the same time, rental costs did not decline significantly. About 1.7 million new renters were added to the market during that period, including some former homeowners who fell into foreclosure, he said. Also, utility costs rose nearly 23 percent during that period, Wardrip said.

"For low- and moderate-income households who stayed put, affordability may have worsened, because housing costs including utilities have stayed the same or gone up" while incomes have declined, he said.

While affordability for renters was largely stable during that period in the region, the burden faced by homeowners increased, according to the data. In Maryland, 20 percent of low-income homeowners spent at least half of their income on housing costs in 2008, compared with 14 percent in 2005. In Virginia, the number rose to 17 percent from 14 percent.

The District's population was too small to allow the group to provide a breakdown between renters and homeowners, according to the report. But 22 percent of lower-income households in the District, including renters, had a severe housing cost burden in 2008, compared with 19 percent three years before.

That puts the area in line with the national trend, according to the study. The problem was most acute in the West. In California, 32 percent of low- and moderate-income families spent at least half of their income on housing costs. In Nevada, the figure was 26 percent. The burden on working families was smallest in the Midwest, including North Dakota and Nebraska, where 10 percent and 12 percent, respectively, faced that problem.

For new buyers taking advantage of historically low interest rates and the drop in prices, housing affordability has never been better, said Lawrence Yun, chief economist at the National Association of Realtors.

"The affordability conditions are better today than in 2008," he said. "Housing costs were a problem during the boom time as well as the time immediately after. Now the market has overcorrected. Prices have crashed through normal."

Middle-income home buyers purchasing a mid-priced home with a 20 percent down payment will now spend 15 percent of their income on their mortgage payments, a historic low, Yun said -- though his figure, unlike the policy center's, includes only the mortgage and not other costs. That compares with a traditional figure of 19 to 20 percent, he said.

But it could get tougher next year. Mortgage rates are expected to inch up, Yun said, and home prices have already stopped falling in some areas. Also, rising unemployment will put pressure on homeowners' income through 2010.

"Affordability conditions could weaken for a middle-income person buying a mid-priced home," he said.

U.S. Homeowners Lost $5.9 Trillion Since 2006 Peak, Zillow Says

December 9, 2009

Bloomberg - U.S. homeowners have lost about $5.9 trillion in value since the housing market peak in March 2006 as mounting foreclosures and the recession weighed on prices, according to Zillow.com.

Almost half a billion dollars was wiped out this year through Nov. 30, as the market headed for a third straight annual decline. New foreclosures and higher mortgage rates in 2010 may hinder a rebound, the property data service said today in a statement.

“A phenomenal amount of wealth has been erased since the housing bust,” Stan Humphries, chief economist for Seattle- based Zillow, said yesterday in an interview. “For many households, most of their wealth is tied up in real estate.”

The net worth of U.S. households at the end of June fell 19 percent from two years earlier to $53.1 trillion, according to Federal Reserve data. Employers have cut more than 7.2 million jobs since the start of the recession in December 2007. Unemployment was 10 percent in November as payrolls declined by 11,000, the Labor Department said last week.

LaVonna Gottschall paid $260,000 for her Merced, California, home in September 2007. She put down more than half the price and financed the rest with a 30-year fixed loan. Today, houses in her neighborhood are worth 59 percent less, according to Zillow.

“I almost wiped out all my savings,” Gottschall, 64, a retired insurance-company clerical worker, said yesterday in an interview. “I did the right thing. I didn’t get in over my head. Now I’m living month to month.”

Foreclosure Filings

The slowing of property declines because of a government tax credit for first-time buyers and record-low mortgage rates will be tested as more foreclosures reach the market and borrowing costs rise, Humphries said.

Home foreclosure filings surpassed 300,000 for an eighth straight month in October, according to RealtyTrac Inc. More defaults and job losses “loom over any nascent housing recovery,” James Saccacio, chief executive officer of the Irvine, California-based seller of default data, said Nov. 12.

The value of U.S. housing today is about $24.7 trillion, down 19 percent from the market peak, according to Zillow. Homes declined $489 billion in the first 11 months of the year...

Hunger, Family Homelessness on Rise in U.S. Cities

December 8, 2009

Reuters - Hunger is spreading while the number of homeless families is increasing as a result of the recession and other factors, according to a report on Tuesday.

The U.S. Conference of Mayors said cities reported a 26 percent jump in demand for hunger assistance over the past year, the largest average increase since 1991.

Middle-class families as well as the uninsured, elderly, working poor and homeless increasingly looked for help with hunger, which was mainly fueled by unemployment, high housing costs and low wages.

The 2009 report is based on a survey of 27 cities, including Boston, Chicago, Detroit, Los Angeles, Miami, Philadelphia and San Francisco, that comprise the group's task force on hunger and homelessness.

Looking ahead to 2010, cities said they expect it will be difficult to meet increased demands for food due to the impact of state and local budget cuts, a decrease in grocery store donations and higher food costs.

Just over three-fourths of the cities reported a jump in homeless families due to the recession and lack of affordable housing. Individual homelessness, on the other hand, was level or down in 16 of the cities.

"This is an indication of the success of policies aimed at ending chronic homelessness among single adults with disabilities," the report said.

Only 10 cities reported having so-called tent cities or other concentrations of the homeless.

Most of the cities in the survey received additional funding to combat hunger and homelessness from the American Recovery and Reinvestment Act.

"Cities are using (housing funds) to develop central intake systems for homeless services, coordinate services more closely with surrounding areas, or offer homeless prevention assistance for the first time," the report said.

U.S. Credit Card Defaults on the Rise

December 2, 2009

Reuters - U.S. credit card delinquencies rose in October, signaling that defaults may soon test record highs, as debt-burdened consumers keep losing their jobs, Fitch Ratings said on Wednesday.

The rate of credit card payments more than 60 days overdue -- an indicator of future defaults -- rose to 4.41 percent in October from 4.22 percent in September, just below the record high of 4.45 in June, according to Fitch's credit card performance index.

The rating agency said its credit card chargeoff index -- which measures loans that companies do not expect to be repaid -- fell to 10.09 percent in October from 10.75 percent in September. Delinquencies fell earlier this year thanks to tax refunds and stimulus actions.

The renewed upward trend in late payments suggests credit card chargeoffs will soon start to rise again.

"Credit card delinquencies are on the rise again and cardholder defaults will re-test recent highs as we head into the new year," Fitch Managing Director Michael Dean said in a statement. "Consumer credit quality remains under significant strain as a result of the persistent weakness in the labor markets."

The U.S. unemployment rate last month rose to 10.2 percent, the first double-digit reading in 26 years. Employment services company ADP reported on Tuesday that private employers shed 169,000 jobs in November, less than in October but above some analysts' estimates.

Fitch forecast unemployment will peak at 10.3 percent in the second quarter of 2010 and remain above 10 percent throughout 2010.