by William Skink
A national survey on housing affordability labeled Missoula one of the “expensive surprises”, placing the median cost of owning a home at a quarter of a million dollars. Bob Oaks, director of the North Missoula Community Development Corps., thinks that figure “is pretty crazy“. I don’t disagree.
Housing, though, is just the tip of the crazy iceberg called the economy, which tanked 7 years ago thanks to the bursting of a housing bubble. For more crazy, this Salon piece from last year examines the massive fraud Holder’s Department of Justice failed to address:
Joseph and Mary Romero of Chimayo, N.M., found that their mortgage note was assigned to the Bank of New York three months after the same bank filed a foreclosure complaint against them; in other words, Bank of New York didn’t own the loan when they tried to foreclose on it.
Glenn and Ann Holden of Akron, Ohio, faced foreclosure from Deutsche Bank, but the company filed two different versions of the note at court, each bearing a stamp affirming it as the “true and accurate copy.”
Mary McCulley of Bozeman, Mont., had her loan changed by U.S. Bank without her knowledge, from a $300,000 30-year loan to a $200,000 loan due in 18 months, and in documents submitted to the court, U.S. Bank included four separate loan applications with different terms.
All of these examples, from actual court cases resolved over the last two months, rendered rare judgments in favor of homeowners over banks and mortgage lenders. But despite the fact that the nation’s courtrooms remain active crime scenes, with backdated, forged and fabricated documents still sloshing around them, state and federal regulators have not filed new charges of misconduct against Bank of New York, Deutsche Bank, U.S. Bank or any other mortgage industry participant, since the round of national settlements over foreclosure fraud effectively closed the issue.
Many focus on how the failure to prosecute financial crimes, by Attorney General Eric Holder and colleagues, create a lack of deterrent for the perpetrators, who will surely sin again. But there’s something else that happens when these crimes go unpunished; the root problem, the legacy of fraud, never gets fixed. In this instance, the underlying ownership on potentially millions of loans has been permanently confused, and the resulting disarray will cause chaos for decades into the future, harming homeowners, investors and the broader economy. Holder’s corrupt bargain, to let Wall Street walk, comes at the cost of permanent damage to the largest market in the world, the U.S. residential housing market.
This serious contagion within the U.S. housing market will only be exacerbated by an entire generation so saddled with debt and shitty job opportunities that home ownership will seem an unreachable fantasy. That is basically the conclusion of this NYT article examining the mystery of missing buyers:
Given demographic trends, there should be plenty of housing demand. Immigration has slowed in recent years, but the nation’s population has still grown by about 20 million since the housing downturn began in 2006. Yet those additional people are translating into fewer new households than historical patterns would predict.
This is a problem for the whole economy, and at its core is the mystery of the missing buyers.
“Household formation,” as economists call it, is the foundation of demand in the housing market. When a young adult moves away from home and gets her own apartment, a household is formed; when a retiree moves out of his own place and into the apartment above an adult child’s garage, one ceases to exist. The number of American households is in constant motion; it is determined by millions of individual decisions that Americans make about their living situations.
Since 2007, those decisions have tilted overwhelmingly toward not dividing up into as many households as in the past. The number of households rose by an average of 569,000 a year from 2007 to 2013, according to census data, down from 1.35 million a year from 2001 to 2006.
Using different data sources, Jed Kolko, chief economist at the real estate information company Trulia, estimates that by last year there were 2.3 million of these “missing” households — households that would exist if historical patterns had held, but instead are nowhere to be found.
Why the missing households? To a large degree, they can be explained by young people choosing — or being forced by circumstance — to remain at home longer than they have in previous generations.
Thanks for solving that mystery for us, NYT. I guess that barista with the masters degree in biology isn’t going to add a quarter million dollars in debt to own a home in Missoula any time soon.
While U.S. bankers continue to avoid any meaningful consequences for their criminal behavior, all eyes will be on Greece this week. As ATMs ran out of cash this weekend, the worsening economic crisis will keep banks closed until at least July 7th, along with the imposition of other capital controls.
Other countries, like Spain and Italy, will be watching what happens to Greece very closely to see how far the ECB is willing to take its austerity war. Stay tuned…
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