According to Trulia’s Housing Misery Index, next week’s Arizona and Michigan primaries could be the last we hear from candidates on housing until California votes in June.
The housing crisis hurt some states especially hard. In those states, like Florida and Nevada, the Republican presidential candidates couldn’t ignore housing. But in states that weathered the housing crisis better, the candidates won’t spend precious money and attention on housing policy.
To see which states are suffering most, we created a Housing Misery Index. Like the original Misery Index, which adds together unemployment and inflation, our Housing Misery Index takes two important indicators of a state’s housing market and simply adds them together. For every state, we add (1) the percentage change in home prices from the peak until today, from FHFA, and (2) the percent of mortgages either severely delinquent or in foreclosure, from CoreLogic.
Why these two indicators? First, big price drops lead to more underwater borrowers and less household wealth, which hurt the housing market and hold back economic recovery. Second, defaults and foreclosures damage consumer confidence in the housing recovery, and foreclosures cause pain not only for people who lose their homes but also for their neighbors.
States That Are Most Miserable When It Comes To Housing
|State||Housing Misery Index|
Note: Index is sum of peak-to-2011Q4 price decline (FHFA) and 2011Q4 delinquency (90+ days) plus foreclosure rate (CoreLogic). Top ten states ranked by the housing misery index are shown.0 comments
In light of today’s landmark robo-signing settlement, Trulia’s Chief Economist takes a deeper dive into what really matters.
The robo-signing settlement is the latest – and potentially the largest – piece in the U.S. housing policy puzzle. Even though it’s partly punishment for banks’ wrongdoing, it is also another answer by the government to the question of how it can help the housing market.
Our own housing policy survey last December showed strong bipartisan support for two key elements of the robo-signing settlement: refinancing by underwater homeowners (82% of Democrats, 69% of Republicans), and loan modifications to reduce principal balances (74% of Democrats, 61% of Republicans).
With the robo-signing settlement, as with any housing policy, I look at three questions:
1) Is it big or small? Relative to other housing policies, it’s big. It calls for much more money for loan modifications than HAMP has cost so far, and it could mean money or relief for close to two million current and former homeowners. HAMP and HARP have each helped roughly one million homeowners so far. But relative to the housing crisis, it’s small. The loan modifications could yield tens of billions in principal reductions for one million homeowners – but that’s a sliver compared with the 11 million homeowners today who are over $700 billion underwater. And the cash compensation of $1,500-$2,000 for up to a million people who lost their homes will hardly make them whole.
2) Who pays? Usually it’s good politics to keep quiet about who pays for housing policy, but not with the robo-signing settlement. It’s good politics for the government and the attorneys-general for everyone to know that the banks are paying for their robo-signing sins. In contrast, most housing policy announcements hide – or at least don’t broadcast – who is paying, whether it’s investors who implicitly bear the cost of refinancing or taxpayers who implicitly bear the cost of many other policies.
3) Does it reward risk-taking or bad behavior? Delinquency is a disqualification for refinancing but is almost a requirement for getting a principal reduction. The largest piece of the robo-signing settlement is for principal reduction for borrowers who are “either delinquent or at imminent risk of default.” This is opposite of the refinancing rules laid out in HARP and the State of the Union address, which require borrowers to be current on their payments because that shows they’re “responsible.” So much for a coherent message from the government to homeowners about moral hazard. This issue could be fuel for election debates on housing policy: Republicans are much more bothered by rewarding bad behavior than Democrats are. In our December survey of consumers, 61% of Democrats agreed that “helping people keep their homes is the right policy even if it helps some undeserving homeowners,” but only 38% of Republicans agreed.
Sorry, Obama. Despite making the push for more manufacturing jobs in his State of the Union address, a new employment projections report is betting on service and construction industries.
In last week’s State of the Union speech, President Obama gushed about manufacturing. He envisioned “an economy built on American manufacturing” and told us of the “huge opportunity at this moment to bring manufacturing back.”
But before unemployed machine operators and homeowners in factory towns get their hopes up, hear this: Obama’s speechwriters didn’t check with Obama’s experts. This morning, the Bureau of Labor Statistics released the official employment projections for the next ten years. What do the numbers say? Manufacturing will look more like the caboose than the engine of the economy. These projections deliver hard truths about manufacturing that the government, job-seekers and house hunters need to keep in mind:
What does all this mean for housing? Over the long run, housing demand, sales, and home values go up in cities where there’s job growth. And local job growth depends a lot on which industries happen to be there: when high-tech booms, Silicon Valley and Austin grow; when the car industry melts down, Detroit suffers. The continued decline of manufacturing in America means rough times for housing markets in manufacturing cities.
Where are the manufacturing jobs? Manufacturing is relatively big in Midwest metros like Grand Rapids, MI, Gary, IN, and Milwaukee, WI, and also in southern spots like Greensboro, NC, Greenville, SC, and Louisville, KY. At the other extreme, there are almost no manufacturing jobs in south Florida or in the big east coast centers of New York, Washington and Boston. But the overall picture for long-term job growth and housing demand is not just about where manufacturing is – it depends on how fast all local industries are growing. I’ll do a deeper dive on longer-term growth soon. Stay tuned.
Ahead of next week’s Florida primary, Trulia’s Chief Economist weighs in on why housing matters so much to the remaining Republican presidential hopefuls.
Republican presidential candidates have kept housing on the back burner – until now. Next Tuesday’s Florida primary is moving housing front-and-center. Bold new proposals? Don’t be silly. (Hey, I’m an equal-opportunity critic – I said the same about Obama’s State of the Union.) But Romney did hold a housing roundtable, and the candidates are using housing as a scoop for slinging mud at each other. At least that’s something.
Why does the Florida primary thrust housing into the limelight? Four reasons:
1) The housing bust took Florida down.
Prices in most of Florida have fallen by at least 40% since their peak. Along with Nevada, Arizona and inland California, Florida was ground zero for the housing bubble, and now its residents are deep underwater.
2) Florida is in foreclosure purgatory.
It takes more than two years for homes to go through the foreclosure process in Florida, longer than any other state except New York and New Jersey (which have far fewer foreclosures to begin with). That means 14.0% of Florida loans are stuck in foreclosure, compared with 6.3% in Nevada, 3.2% in Arizona, 3.2% in California and 2.7% in Michigan, according to LPS. This keeps Florida’s housing market in limbo and prevents Florida from benefitting from a plan to sell government-owned homes to investors after a foreclosure is complete.
3) Searches and prices are bubbling.
Despite the bust and the foreclosure backlog, demand is stirring in Florida. Our Metro Movers Index shows that far more house hunters are looking to move to Florida – especially to North Port-Bradenton-Sarasota, Fort Lauderdale, Cape Coral and West Palm Beach –than they are looking to leave. Thanks, baby boomers and investors. And prices rose more than 2% in the third quarter of 2011 in West Palm Beach, Fort Lauderdale and several other Florida metros.
4) What happens in Florida doesn’t stay in Florida.
Florida is a national housing story. One-third of all the searches for Miami homes on Trulia.com are from people living more than 500 miles away. What’s more, Chicagoans and New Yorkers can’t seem to get enough of Florida. Three of the top 10 long-distance search destinations from Chicago are Florida metros, as are five of the top 10 search destinations from New York. You or someone you love cares about Florida.
The Florida housing market represents the worst of the bubble and hope for recovery. Let’s hope the Republican candidates have something to say about it, because Florida voters will.
Trulia's Chief Economist shares his thoughts on what President Obama did and didn't say about housing in his State of the Union address
You might have missed it among the long, long to-do list Obama gave tonight, but the President announced two new housing proposals: more refinancing, and more investigations of banks. Neither is a breakthrough: they fill in some of the missing pieces in the messy jigsaw puzzle of Obama’s housing policy. Here’s what he proposed:
1) Letting more borrowers refinance. Obama proposed that “every responsible homeowner” be able to refinance. The existing refinancing program (HARP) lets borrowers who are current on their mortgages refinance even if they’re way underwater – but only if their loans are guaranteed by Fannie Mae or Freddie Mac. Obama’s proposal would extend refinancing to borrowers who are current but whose loans AREN’T guaranteed by Fannie or Freddie – which the New York Times reports could be two or three million borrowers. It sounds like Obama will ask Congress to let the Federal Housing Administration (FHA) guarantee refinancings by underwater borrowers and charge big banks a fee to cover the costs. If Congress is involved and banks are asked to pay … well, let’s just say it’s not a done deal. Obama doesn’t always get his way with Congress or with the banks.
And if this happens? It won’t save the housing market. Letting borrowers refinance only if they’re current on payments won’t help people on the verge of losing their homes. And, refinancing won’t reduce principal, so underwater borrowers stay underwater. Refinancing is economic stimulus: it gives homeowners with mortgages more spending money. (I said the same thing last October about the expansion of HARP.)
2) Investigating mortgage lending and securitization. Again, this proposal fills in missing pieces. That big robo-signing settlement – which Obama didn’t mention tonight but could come soon – would punish banks only for their foreclosure practices. The new, proposed investigation would have those same states’ attorneys-general plus the feds go after risky lending and securitization practices. It’s great politics to punish banks, and maybe they deserve it. But remember, the robo-signing controversy has gummed up the foreclosure process as banks wait for the settlement to set clear rules on foreclosures. What if this new investigation gums up lending and securitization? That could make mortgages scarcer and more expensive.
The only real housing fireworks were the swipe Obama took at Republican candidate Mitt Romney. The President said “responsible homeowners shouldn’t have to sit and wait for the housing market to hit bottom,” a direct hit at Romney’s comments in Nevada last October that the foreclosure process should “run its course and hit the bottom.” If Romney gets to face Obama in the presidential election, you can bet Obama will be tossing that quote back in Romney’s face again and again. Here’s to 2012!