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Darth Vader of Economic News?

September 05, 2008 12:57 PM

ABC News' Charles Herman reports: Unemployment surged in August, a record number of homeowners were late making their monthly payments or were in foreclosure at the end of June, and Thursday, the stock market dropped nearly 345 points. 

It’s enough to make a business reporter a little pessimistic about the state of our economy.  It’s definitely made me a little less popular with my co-workers whenever I speak at our morning editorial meetings.  One colleague hummed the theme for Darth Vader when I passed his desk.

Or as Jay Brinkmann, the newly appointed chief economist at the Mortgage Bankers Association succinctly put it, “This is an interesting period of time to be named to this position, and I assure you I am looking forward to a time when it is less interesting, but today is not one of these times.”  My sentiments exactly.

Joking aside, the economic situation in the country continues to look grim, and people are suffering.  This morning we learned that businesses laid off more people in August,  and for the year, more than 600,000 jobs have been lost.  The unemployment rate now stands at 6.1  percent, the highest rate since 2003.

Less then two hours later, the mortgage association reported that a record 9.2 percent  of homeowners were either late making a payment or were in foreclosure.

Just like politics, all housing is local and the biggest losers were once again, California and Florida.  According to the trade group, those two states accounted for 39 percent  of all foreclosure proceedings that were started in the second quarter of the year.

Along with Nevada and Arizona, California and Florida really were the epicenter of the housing boom, thanks to a combination of soaring home prices, risky loans, real estate speculators, bad underwriting by lenders.  They had it all.  And the downturn in those states has really driven the national figures.

Two items of note:  First, the trade group expects that prime adjustable rate mortgages  --  loans to people with good credit who put money down  --  will increasingly dominate homes entering into foreclosure.  Before, people with risky loans or bad credit were losing their homes.  Now, it appears people in better financial standing are having problems with their monthly payments as their interest rates adjust upward.  That’s not a good sign for the future.

And guess where most of these new foreclosures will be found?  You got it.  California and Florida, again.

The other issue raised by the mortgage group:    If you are looking for a “bottom” in the housing market -- when late payments and foreclosure rates slow down -- the chief economist for the mortgage bankers group said that search is “somewhat meaningless.” 

With real estate being local, some places are doing better than others, but with the size of the real estate markets in California and Florida, the national numbers won’t be improving any time soon.

“We are unlikely to see a national turnaround until we see a turnaround in the two largest states,” said Jay Brinkmann, chief economist with the Mortgage Bankers Association, “California and Florida.”

Considering today’s news comes the day after the Republican presidential convention  ended  and the two candidates are now in the home stretch to Election Day, you can be sure the economy will be the No. 1 issue on voters’ minds.

September 5, 2008 | Permalink | User Comments (4)

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Posted by: Thinking | Sep 5, 2008 1:28:42 PM

Posted by: Bill | Sep 5, 2008 1:45:33 PM

Posted by: Dennis Leonard | Sep 5, 2008 1:48:35 PM

Posted by: Scott | Sep 5, 2008 2:00:14 PM

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