“NOT EVERYONE SHOULD OWN A HOME — JUST THOSE WHO CAN AFFORD IT.”

Marc A. Stefanski, CEO of Third Federal Savings & Loan in Cleveland, Ohio, quoted in “Can the Mortgage Crisis Swallow a Town”, New York Times, Published September 2nd, 2007.

He’s right. Exactly right. That is a hard say, but it must be said. But in the housing and cheap credit binge of the last few years, it was a forgotten homily.

CAN THE MORTGATE CRISIS SWALLOW A TOWN? OR A STATE? OR AN ECONOMY?

The Times’ article explores Maple Heights, Ohio, a suburb of Cleveland, Ohio. And the risk that the foreclosure business may become a national franchise.

Indeed, what was once a problem confined mostly to economically struggling areas is quickly becoming a national phenomenon. Last year, there were 1.2 million foreclosure filings in the United States, up 42 percent from 2005, according to RealtyTrac, a firm that analyzes such data. At current rates so far this year, RealtyTrac expects foreclosure filings to hit two million in 2007, or roughly one per 62 American households — a rate approaching heights not seen since the Great Depression.

Analysts also say that the fallout from mortgages gone bad is spreading well beyond borrowers now in default. It has begun to engulf middle-class communities like Maple Heights, where nearly 10 percent of the houses — or 910 properties — have been seized by banks in the last two years. And it foreshadows what could lie in store if mortgage holders default on what the Federal Reserve conservatively estimates to be $100 billion in risky subprime loans. Many of these loans were made in 2005 and early 2006, when standards were at their most lax and cities like this were blanketed with aggressive pitches from mortgage providers.

BUT SOME CITIES AND HOUSING MARKETS HAVE AVOIDED THE SHERIFF’S SALE SHUFFLE.

WHY has the impact of the subprime meltdown been so much more severe in communities like Maple Heights than in other parts of the country? Mr. Rokakis suggests that it is a combination of Cleveland’s underlying economic problems and a lack of the steadily appreciating housing prices that other areas enjoyed. That shut off a crucial safety valve — in other regions, overwhelmed borrowers could often turn around and sell their homes for at least a slight profit.

In Maple Heights, the situation is now reversed: with so many properties on the market, home values are dropping, and some delinquent mortgage holders owe more than their homes could now fetch in a sale. “The tax base is eroding,” says Mr. Ciaravino, the mayor. He warns that property values may soon have to be reassessed downward, further crimping tax revenue and raising the heat on Maple Heights’ remaining property owners. “This has affected virtually every aspect of community life, like increasing the rate of transient students in the schools,” he says.

If, as the article states, that lame local economies and stagnant housing prices can combine to exacerbate a local slide, then neighboring states such as Michigan and Indiana (the Author’s home state) face risks similar to Ohio and Maple Heights.

NO DOWN PAYMENT? NO CREDIT HISTORY? NO PROBLEM. JUST NO LOAN IN THE DESERT OF THE REAL!

GET OUT OF YOUR HOUSE. AND TAKE THIS PINK SLIP WITH YOU.

Thursday’s (September 6th) Labor Department Report caught the financial world unaware. Very unaware. According to the New York Times article, “Unexpected Loss of Jobs Raises Risk of Recession”, economists were predicting the economy would add about 100,000 jobs in August.

Technical Knock Out. 4,000 jobs were lost.

These are indeed interesting times for the US economy. The Subprime mortgage market implodes. Housing crashes. And now employment slows.

DARE WE SAY THE “R” WORD. SOME ECONOMISTS ARE.

According to the NYT article:

But now, the odds of a recession in the next year have risen, to 25 to 50 percent, economists interviewed yesterday said. A recession is typically defined as an extended period in which the economy shrinks, leading to a rise in unemployment and a drop in consumer spending and business investment.

“People need to start thinking about the housing market not just as some ring-fence problem which is off on its own,” said Nigel Gault, chief United States economist at Global Insight, an economic research firm in Lexington, Mass. “They need to start worrying about the health of the broader economy.”

JUNE AND JULY EMPLOYMENT FIGURES REVISED DOWNWARD.

One of the most worrisome signs in the jobs report released yesterday was the government’s revision to its employment data for June and July. The new numbers show just under 70,000 jobs being created in each of the two months. Initial estimates had been an average of almost 100,000 a month.

In 2005 and 2006, the average monthly job growth was slightly above 200,000. The sharp slowdown this year suggests that some employers have already begun to see a downturn in their business and that others think one is on the way. With house prices falling in most of the country and oil prices having risen, consumer spending has slowed modestly in recent months.

WHAT IS UNCLE BEN TO DO?

Even prior to this unemployment news, most Federal Reserve Board watchers were predicting a .25 point cut in the Fed Funds rate at the September meeting, brining it down to from 5.25% to 5%. But some economists, like Gault of Global Insight, are predicting the Fed to cut the rate by .5 points.

Future posts will address general movements in the economy.

IT IS ALWAYS SOMETHING IN THE DESERT OF THE REAL!

MORE (OR PERHAPS LESS) ON THE LORDSBURG DOOR

In a recent post, “The Road Trip to Lordsburg” , the Author described the results of the trip to Lordsburg. He believed at the time that he would make contact with someone that knew the location of the Lordsburg Door (or Gate).

The individual that knew the location of the Lordsburg Door was described to the Author as a Sufi. The Author has telephoned this individual but has not heard back.

Shortly after “The Road Trip to Lordsburg” was posted, the Author received a comment on the blog from “Joanie”. The comment read as follows:

I just talked to "the Sufi" about your story.

He says it is "the Lordsburg Gate" not "Door".

He says he will not show it to you, that you are not worthy. Too bad, cause he says it's pretty cool!

The Author does not know the identity of Joanie, or whether she speaks for the individual that knows the location of the Lordsburg Door/Gate. He does wish to state for the record that if he erred in describing the individual as a “Sufi”, he regrets it and will correct this mistake in his blog. (Although Sufism is an honored sect of Islam and identifying one as a Sufi should not be considered an offense).

Additionally, the Author wishes to state that he and his colleague Mike Smith at “My Strange New Mexico” are researching this topic objectively and to broaden the information available about such phenomena. This requires both skepticism and maintaining an open mind.

The Author hopes that the individual he telephoned will call him or email him at desertoftherealeconomics@hotmail.com to discuss the topic further. And if there are other persons that read this blog that can take the Author to the Lordsburg Door/Gate, please contact the Author.

WELCOME BACK TO THE DESERT OF THE REAL!

Fasting Against War

AUTHOR'S NOTE: The following is posted at the request of a friend. It is an action worth considering.


Last year I fasted during Ramadan in solidarity with my 5 Muslim students, and all Muslims. This year I hope I can find people to join me. It is a very personal action, but it made me very aware for a full month that there is a war out there I oppose, and kept me thinking about many of the issues connected to this war. (I also became very aware of sunset, and that was a delight.)

Why this? I have long felt a need to do something more than attend protests against the war once or twice a year. It seems most of the people I know stand firmly against the war, but we have no effect on government actions. As a single parent, as a person who loves the work I do, I have not seen what more I could do. This is something I can do that will not require large chunks of time. And I think it will get us talking more about what else we can do to change this government run amuck.

Last year I noticed that a few of my friends seemed to blame the victims (saying things like “they’re violent”). I think our government promotes that idea. What is truly happening is that our military is killing thousands of civilians in Iraq, and that’s the violence we must take responsibility for. I also know that the number of hate crimes against innocent Arabs and Muslims in this country has gone way up since 9/11.

Why now? Ramadan will begin on September 13th, or shortly after that (as soon as the new moon has been sighted). It’s a month-long time of fasting for Muslim people. They fast from sunrise to sunset, and eat a small meal once the sun is down. Muslims do not even drink water during their fast, but I felt more comfortable modifying my fast to allow for water.

Will you join me? I am hoping to spread this idea across the country through anti-war websites and email lists. Please pass this along to anyone who might be interested. If you join me in fasting, or have ideas to share about making this a more powerful joint action, please write me (suevanhattum@hotmail.com). I will write you back.

-Sue VanHattum
Richmond, CA

August 25, 2007