Normally I am not a proponent of supply side economic stimulus, as it doesn’t always pay for itself. In this case, if you look at the true reasons that the economy is in trouble, it is likely just a band-aid on bleeding that should be controlled with a bigger pad.
I look at the speculation at the current state of the economy and everyone is bringing up the issue of sub-prime mortgages. According to the Wall St. Journal, the true problem is not that, or as likely tied to that as speculated. Over 60% of the mortgages are not sub-prime at all, they are traditional fixed-rate mortgages. That makes me evaluate, where has the money gone?
I think that the money has gone to energy, both home and vehicular, as well as the trickle down from that such as food, airline travel, etc. I tend to think this is less of a problem with rapid onset, but more likely a problem that has occurred over time. All of this leads down the road of job loss, outsourcing and the ongoing effort of corporate America to reduce cost.
That being said, I think the QC area will benefit from this stimulus package more than other parts of the country. Assuming that mortgages actually are a problem, due to the inflated interest rates and decreased property value, that hasn’t really hit the QC like in other parts of the country. Most QC property value has remained relatively flat over the last few years. Granted that does nothing for increasing equity faster than amortization, but it does at least not put someone upside down on a mortgage.
We have not experienced huge job loss. Our unemployment has remained relatively flat as well. Most of the QC major employers, Alcoa, Deere and the healthcare industry have been relatively unaffected by the overall economy from either the nature of the industry or the ability to compete in a global market.
So what does this mean for the QC when it comes to a supply side stimulus? I think since the QC area isn’t hurting as bad as other areas of the country, it may just be a boost for most of us that are feeling the pinch of the energy prices. The only major issues I can find that have turned my budget upside down are fuel prices, since I work a good distance from home, and my gas and electric bill. With the pressure off the budget for awhile, I will look to go out more, likely in the Illinois QC because of the non-smoking law, and spend a little more than usual on meals and a drink or two. It may even be time for some new shoes or some clothing. In my mind, this may be fun, but I will also remember that this is a band-aid and may put a little away. After all, when the 600.00 that I get from the government is gone, the cause of the problem will likely still be there… fuel at 3.00 a gallon and a hefty Mid-American bill. My pay, I’m sure like the pay of many others, is certainly not keeping up with the increased cost of living.
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4 comments:
I find it interesting that people now are surprised by teh subprime problems. The city of Dav and the social service groups all supported the homeowner thing and helped many people buy homes when they shouldn't have done so. Many people are a furnace break away from losing it all. The government was part of the problem. They helped people become homeowners when they could not afford to be. Reduced the requirements and now these people are losing it all and the city is in trouble. Especially the poor areas. AGAIN - unregulated and unchecked distribution of public funds by our famous Community and Economic Development staff which effects us negatively.
The above argument leaves one element completely unconsidered. The adjustable rate mortgages that are just beginning to reset can increased a payment by 50%. Consider that Joe Buyer qualified for an $800 housepayment. The "lender" considered that Joe could afford a $100,000 house at an initial rate of say 5% or approximately $700 escrow included, but the lender never considered whether Joe could afford the payment once it resets to $1200/mo. The furnace break equation above would then be the straw that broke the camels back for Joe, who isn't low income, and isn't living in a low income census tract.
Also consider that although I would agree that a concentration of foreclosures have been SOLO, there have been almost 100 north of locust and several north of 53rd.
The first writer is in error in assigning the problem mortgages to "social services groups"-in fact the data shows only a handful out of hundreds. Those that attended DREAM programs are not likely to default, as they would only be referred to a mortgage lender if they completed the course and had sufficient income and experience to own and maintain a home. There are however, lots of people who did not want to do the hard work of cleaning up credit and going to classes to prepare themselves for this major investment who found ready predators to fund their dream. NHS and Brooke Upton has done a great deal of research on mapping the foreclosures in Davenport-also looking at the financial institutions that hold the loans. Deutche Bank was the largest holder in the data that I saw in December. It is easy to pick out the nonprofits as usual as the target for blame-but it is dead wrong in this case. They deserve the communitity's support in helping families stay in their homes. Massive regulatory failure on the the part of the bank regulatory agencies and lack of local accountability of financial institutions is a large part of the problem that will not be fixed by some puny economic stimulus package. Fly by night mortgage companies and rent-an appraiser companies that are complicit have not and will not be addressed unless there is comprehensive reform measures at the federal level. The economic impact of foreclosed homes on neighboring properties will have a dramatic effect on property tax income and in cities' budgets in the near term.
NHS has had thier fair chare of foreclosures. I hate to say it, but they really should have none. Reason being, they are an agency that does the home owner counseling too.
I think that the city needs to create a fund for bailing out foreclosure victims.
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