The Coming Recession

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People still losin' homes left and right...

US Foreclosures Up 65% in April
Wednesday, May. 14, 2008 — More U.S. homeowners fell behind on mortgage payments last month, driving the number of homes facing foreclosure up 65 percent versus the same month last year and contributing to a deepening slide in home values, a research company said Tuesday.

Nationwide, 243,353 homes received at least one foreclosure-related filing in April, up 65 percent from 147,708 in the same month last year and up 4 percent since March, RealtyTrac Inc. said. Nevada, Arizona, California and Florida were among the hardest hit states, with metropolitan areas in California and Florida accounting for nine of the top 10 areas with the highest rate of foreclosure, the company said.

Irvine, Calif.-based RealtyTrac monitors default notices, auction sale notices and bank repossessions. One in every 519 U.S. households received a foreclosure filing in April. Foreclosure filings increased from a year earlier in all but eight states.

The combination of weak housing sales, falling home values, tighter mortgage lending criteria and a slowing U.S. economy has left financially strapped homeowners with fewer options to avoid foreclosure. Many can't find buyers or owe more than their home is worth and can't get refinanced into an affordable loan. Efforts by government and the mortgage industry to stem the tide of foreclosures aren't keeping up with the rising number of troubled homeowners.

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FBI warns of rise in mortgage scams
Wednesday 14th May, 2008 - Mortgage scams in the US last year netted criminals hundreds of millions of dollars.

The FBI has reported it received 46,717 suspicious activity reports related to mortgage fraud last year, compared to 35,617 in 2006. The crisis in the subprime mortgage market played a key role in fuelling the spike in the scams.

The most common perpetrators were people in finance-related occupations, including accountants, mortgage brokers, and lenders. Victims were often borrowers and residents of distressed neighbourhoods.

Mortgage fraud is defined in the report as the intentional misstatement, misrepresentation, or omission by an applicant to provide funding for, to purchase, or to insure a mortgage loan.

FBI warns of rise in mortgage scams

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World Economy Is 'Teetering' Near Severe Downturn...

World Economy Is in Trouble, U.N. Says
May 16, 2008 - U.N. Reports Global Economy Will Grown Only 1.8 Percent This Year

The world economy is "teetering on the brink" of a severe downturn and is expected to grow only 1.8 percent in 2008, the United Nations said in its mid-year economic projections Thursday. That's down from a global growth rate of 3.8 percent in 2007, and the downturn is expected to continue with only a slightly higher growth of 2.1 percent in 2009, the U.N. report said.

The mid-year update of the U.N. World Economic Situation and Prospects 2008 blamed the downturn on further deterioration in the U.S. housing and financial sectors in the first quarter, which is expected to "continue to be a major drag for the world economy extending into 2009." But the U.N. said developing countries will suffer as badly: They should grow by 5 percent this year and 4.8 percent next year, compared to a robust 7.3 percent in 2007, the report said.

The U.N. economists said the deepening credit crisis in major market economies triggered by the U.S.-led slump in housing prices, the declining value of the U.S. dollar, persistent global imbalances and soaring oil and commodity prices pose considerable risks to economic growth in both developed and developing countries. "The baseline forecast projects a pace for world economic growth of 1.8 percent in 2008," the U.N. report said. However, it said the final figure will largely depend on developments in the United States.

More ABC News: World Economy Is in Trouble, U.N. Says

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Construction away from housing could be next bust...

Builders get hammered again
May 17, 2008: Nonresidential construction held up as housing slumped. But a slowdown for offices, hotels and malls is looming, which could be another jolt to the economy.

Demand for new homes collapsed last year. Next up could be a similar drop in the rest of the construction market -- and that could be the latest drag on an already sputtering U.S. economy Nonresidential construction, which includes office buildings and retail centers, hotels and institutions such as schools, hospitals or government buildings, remained strong through much of 2007.

But a combination of the economic slowdown and tighter credit appears to be putting the brakes on nonresidential projects. Even if work continues on those projects already underway, there are signs that the pipeline of new construction is about to dry up. "The trend is much weaker," said Kenneth Simonson, the chief economist for the Associated General Contractors of America, the trade group for contractors outside of single-family home construction. "My conversations with contractors show they're still quite busy. But their order books are shrinking and they're quite worried."

A slowdown in the entire construction market would be bad news for the economy. Investment in nonresidential buildings added an average of $250 billion to the economy every year since 1990. A downturn is also expected to lead to the loss of many well-paying jobs in the months ahead. Economists say a fall-off in nonresidential construction in the face of an economic slowdown shouldn't be a surprise.

"Developers are a little nervous about getting enough rent, getting enough tenants so they're pulling back," said Jim Haughey, chief economist for Reed Construction Data. What's more, Haughey said construction on some public infrastructure projects, such as highways and sewers, are being put on hold or slowed down as local governments struggle with declining tax revenue and tight budgets.

Credit crunch hitting commercial construction

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So, for how long will it last?...

Welcome to the 'recession'
May 27, 2008: Buffett says we're there. Greenspan says we're likely so. It may not be official, but the question is: How long will the funk last?

It's getting harder and harder to deny that the economy is in recession. Warren Buffett, the world's most famous investor, proclaimed this weekend that "we are already in a recession." Former Federal Reserve chairman Alan Greenspan told the Financial Times on Monday that there is a greater than 50% chance of a recession. But with all due respect to the Oracle of Omaha and the Maestro, they are not telling us anything that the average American consumer didn't already know: this economy stinks.

Whether the economy is technically in recession is missing the point. Consumer confidence is anemic. Home prices continue to fall. The unemployment rate has risen sharply over the past few months. Food and energy prices are soaring. In fact, gas prices have run up so much that Americans are even starting to give up on their love affair with the automobile: the Federal Highway Transportation reported yesterday that Americans drove 11 billion miles less this March than a year ago.

We may not find out for several months if the National Bureau of Economic Research, the official arbiter of recessions, decides to label this economic rough patch an actual recession. And the economy may not ultimately decline for two consecutive quarters, a shorthand definition. Gross domestic product eked out a 0.6% gain in the first quarter, according to the first reading of that figure released last month. An update is due out Thursday and economists have a revised forecast of 0.9% growth. So the most pertinent question now for consumers and investors should not be if we will enter a recession but how long will it last?

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U.S. home equity recedes to WWII levels...

Equity in Americans’ homes falls to historic low
Thurs., June. 5, 2008 : Drops to 46.2 percent in first quarter — level not seen since end of WWII; Trend will continue as prices fall, experts say.

The equity Americans have in their most important asset — their homes — has dropped to its lowest level since the end of World War II. Homeowners’ portion of equity slipped to 46.2 percent in the first quarter from a revised 47.5 percent in the previous quarter. That was the fifth quarter in a row below the 50 percent mark, the Federal Reserve said Thursday. The total dollar value of equity also fell for the fourth straight quarter to $9.12 trillion from $9.52 trillion in the fourth quarter, while Americans’ total mortgage debt rose to $10.6 trillion from $10.53 trillion.

A homeowner’s equity is the market value of a property minus the mortgage debt. And homeowners’ percentage of equity has declined steadily even as home values surged during the housing boom due to a jump in cash-out refinancing, home equity loans and an increase in 100 percent financing. Experts expect equity to decline further as falling home prices erode the value of Americans’ largest asset, dragging more homeowners “upside down” on their mortgages.

At the end of March, nearly 8.5 million homeowners had negative or no equity in their homes, representing more than 16 percent of all homeowners with a mortgage, according to Moody’s Economy.com Chief Economist Mark Zandi. By June 2009, he estimates that will increase to 12.2 million, or almost one out of every four homeowners with a mortgage. But to put that number in perspective, one out of every three homeowners own their properties free and clear, with no mortgage at all.

Still, Zandi said, “For most, their home is their key asset. If they have no equity in their home, likely their net worth is negative too. Their entire balance sheet will be underwater.” The report also showed that Americans’ total net worth dropped to $55.97 trillion in the first quarter from $57.67 trillion. Zandi expects prices to fall 24 percent from peak to trough. Last week, Standard & Poor’s/Case-Shiller said its national home price index fell about 14 percent in the first quarter compared with a year earlier, the lowest since its inception in 1988.

More Equity in Americans? homes falls to historic low - Mortgage Mess - MSNBC.com

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Fed gonna put a stop to inflating oil prices??...

Fed to hold rates even as inflation fears rise
Fri Jun 6, 2008 - The Federal Reserve will leave interest rates on hold for now as ongoing fears about the economy trump any inclination to tighten monetary policy in order to fight inflation, according to a Reuters poll.

The survey did indicate, however, that concerns about a deeper economic downturn have receded, despite a report on Friday showing the biggest one-month spike in the unemployment rate since the mid-1980s and another record-setting day in the oil markets. Wall Street primary dealers -- banks that deal directly with the central bank -- see the Fed leaving rates on hold at both its June and August meetings.

"The combination of rising unemployment and rising inflation expectations just leaves (us) totally frustrated and powerless," said Brian Fabbri, senior economist at BNP Paribas. A few investors still believe a worsening growth outlook will force policy-makers to cut rates further from the current 2 percent, but they are a minority. The median forecast for fed funds at year-end was 2 percent, up from 1.75 percent in an April 30 poll.

In fact, many are beginning to ponder an eventual rise increase in borrowing costs as Fed officials step up their rhetoric about inflationary concerns. But that is unlikely to come any time soon, the poll indicates, with a downtrodden housing market a key risk to consumer spending and broader economic activity.

More Fed to hold rates even as inflation fears rise | Special Coverage | Reuters

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Cash-Strapped Americans Endure More Than Stress...

Recession Depression: Toll on Health?
June 10, 2008 - Expert: Financial Stress Can Cause Immune System to Shut Down

Cynthia Roberts is a single mom from Tawas City, Mich., who works several jobs to support her four children. But in this economy she counts a fifth responsibility: debt. Roberts, 36, owes at least $70,000, and the burden of that debt has taken a toll on more than her finances. Her health has suffered drastically, she said, from the stress it brings. "Emotionally, financially, mentally, I just had a nervous breakdown," she said. Roberts watched her health deteriorate after she lost her job in 2003, and then her house to foreclosure. "I had to go and have a heart monitor put on me," Roberts said. "I had to go and have a stress test. Counseling ... it took a toll on my whole life."

Like Cynthia Roberts, millions of Americans may suffer from mounting financial stress, according to experts. With the rising cost of basic necessities, like gas, food and housing, along with continuing job losses, stress can become a heavy weight. Experts say the pressure can cause the body to break down. "Our bodies respond as though we're in emergency," said Redford Williams, director of the Behavioral Medicine Research Center at Duke University. "The adrenaline levels pour out, the blood pressure goes up, the immune system turns off. "We're likely to get sick from a whole manner of things and get stressed out, where you're fearful and anxious," Williams said.

Because of rising debt, at least 10 million Americans say they have physical ailments, up 14 percent from 2004, according to a new health poll conducted by The Associated Press. Specifically, among the people reporting high debt stress, 44 percent had migraine headaches and 27 percent had ulcers. Twenty-three percent had severe depression and 29 percent reported experiencing severe anxiety. Experts recommend getting medical attention if you have prolonged headaches, nagging injures, trouble sleeping or high blood pressure.

More ABC News: Recession Depression: Toll on Health?

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The Coming Charity Crisis...

Struggling economy hurts charities, too
Jun 12, 2008 | How the struggling economy is hurting donations.

The latest victims of the sagging economy: charities. In May the annual gala of the Robin Hood Foundation, an event at which a few thousand hedge fund magnates and leveraged buyout titans conspicuously display their wealth and commitment to social justice while rocking out to A-list musical guests (Shakira, John Legend, Sheryl Crow), raised $56.5 million, down 21.5 percent from $72 million the year before. (Tom Wolfe profiled the 2006 gala in Portfolio.) No surprise here. Many of the regulars have seen their net worths crushed in the past year.

But it's not just the charities of the swank that are suffering. The Salvation Army caters to a somewhat different crowd—i.e., tens of millions of middle-class Americans. And while it had a good Christmas, "since the first of the year, we've seen some slippage," says Maj. George Hood, a Salvation Army spokesman. Overall donations are down compared with 2007, and donations of used clothing and furniture to thrift shops have fallen by 20 percent. While natural disasters typically inspire a spike in donations, Hood says the earthquakes in China, the cyclones in Burma and the floods in the Midwest have yet to generate such an outpouring.

It would be unfair to say that Americans—whether they are accountants in Kansas City, Mo., or bond traders in Greenwich, Conn.—are becoming stingier. Rather, philanthropy is a pretty large industry. Charitable giving in 2006 was $295.2 billion, according to Giving USA 2006, about 2.2 percent of gross domestic product. For comparison's sake, Wal-Mart has annual sales of about $350 billion. And like every other industry, philanthropy is tethered directly to the health of the overall economy, and in particular to the health of the upper-middle-class consumer. If the past is any guide, it's likely to be a lean year for nonprofits.

More Philanthropy: How the Economy Is Hurting Donations | Newsweek Voices - Daniel Gross | Newsweek.com

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Inflation bad, maybe gettin' worse...

Get used to high prices
June 12, 2008: The Fed has a mandate to keep inflation in check. But global forces and worries about the U.S. economy will keep prices high for the foreseeable future.

For those struggling to deal with record gasoline and soaring food prices, there's bad news and more bad news. Economists think inflation is here to stay. And it's likely to get worse. A weak dollar and growing economies in emerging markets have conspired to send commodity prices higher. Those factors are unlikely to change anytime soon.

"We're more open to influences from the rest of the world than we were before," said Jay Bryson, international economist with Wachovia. "That does make it more challenging to keep inflation under control." What's more, the Federal Reserve is relatively powerless to deal with many of these pressures. "The Fed can't control prices of commodities determined in a global market," said Rich Yamarone, director of economic research at Argus Research. "If it could, it would have done so already."

On Friday, the Labor Department will report its latest reading on inflation. According to estimates from Briefing.com, economists expect that the Consumer Price Index (CPI) rose 0.5% in May. That would be the biggest jump in a year. It also would likely mean that prices would be up more than 4% on a year-over-year basis. The so-called core CPI, which excludes food and energy, is also expected to pick up speed. Forecasts are for a 0.2% jump, following a 0.1% gain in April.

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Consumer prices pushed up by soaring gasoline costs...

Inflation jumps by biggest amount in 6 months
Fri., June. 13, 2008 WASHINGTON - Inflation shot up in May at the fastest pace in six months, pushed higher by soaring costs for gasoline and other types of energy.

The Labor Department reported Friday that consumer prices rose by 0.6 percent last month, the biggest one-month increase since last November, as gasoline costs surged by 5.7 percent. Food prices, which have also been rising sharply, were up 0.3 percent as the cost of beef and bakery products showed big gains. Core inflation, however, which excludes energy and food, edged up a more moderate 0.2 percent in May. That increase was right in line with expectations and should help relieve worries that the big increases in food and energy could be breaking through to more widespread inflation.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said that the moderate gain in core prices showed price pressures are remaining contained despite fears at the Federal Reserve. The Fed, which from September through April was aggressively cutting interest rates to fight a mounting economic slowdown, is now indicating that its biggest concern has changed from the threat of a recession to worries about inflation.

In a speech Monday, Fed Chairman Ben Bernanke said that the Fed will “strongly resist an erosion of longer-term inflation expectations.” Those comments have raised expectations that the Fed’s next move later this year will be to start raising interest rates. The 0.6 percent rise in overall prices was slightly higher than the 0.5 percent gain that economists had been expecting while the 0.2 percent rise in core prices matched expectations. So far this year, consumer prices are rising at an annual rate of 4 percent, compared with a 4.1 percent increase for all of 2007.

More Inflation jumps by biggest amount in 6 months - Stocks & economy - MSNBC.com

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Heads are gettin' ready to roll at Citi...

Citi poised to fire thousands - Report
June 22, 2008: Citigroup is readying to cut 10% of 65,000-person investment banking group worldwide, The Wall Street Journal reports.

Citigroup is preparing to fire thousands from its worldwide investment-banking division, The Wall Street Journal reported on Sunday. The Journal, citing people familiar with the matter, said the layoffs are part of a plan to cut about 10% of the staff of the 65,000-member investment-banking group. Messages left with Citigroup spokesmen on Sunday were not immediately returned. The Journal said the fired employees could be notified as early as Monday.

The New York-basked global bank, along with much of Wall Street, is in the throes of recovering from bad investments on mortgages and leveraged loans that cut billions of dollars from its portfolio. It was not immediately clear if the reported job cuts would be in addition to cuts announced by Citigroup in April. After reporting a $5.1 billion first-quarter loss, the bank said then it was reducing its staff by 9,000, in addition to the 4,200 job cuts the bank announced late last year. As of the end of last year, Citigroup had about 147,000 full-time employees.

In May, Citigroup unveiled a three-year plan that included getting rid of more businesses, mortgages, real-estate operations and jobs. The bank called for shedding between $400 billion and $500 billion of its $2.2 trillion in assets and growing revenue by 9 percent over the next few years as it tries to rebound from the huge losses tied to deterioration in the credit markets. Earlier this month, the bank said it was closing the Old Lane Partners hedge fund that was co-founded by Chief Executive Vikram Pandit. The bank is shuttering the fund just 11 months after it was acquired for more than $800 million.

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State, city layoffs: 45,000 and counting
June 23, 2008: A squeeze on tax revenues could force local leaders to cut tens of thousands of more jobs. That could add to the nation's economic woes.

The latest hit to the economy could come from state houses and city halls across the nation, which are in their worst budget crisis in years. With falling revenue from sales and income taxes, and property-tax declines looming, states, cities and towns have already laid off tens of thousands of government employees. Many expect more job cuts ahead as public officials struggle to balance their budgets.

The American Federation of State, County and Municipal Employees, a public employees union, says about 45,000 government layoffs have been announced this year. All but four states are set to begin their new fiscal years on July 1, which means that tough decisions will have to be made soon. Economists say that cutbacks in jobs and spending by local governments could be a major drag on the overall economy.

"This isn't a wrecking ball to a healthy economy, but it could be the straw that broke the camel's back," said Bob Brusca, economist with FAO Economics in New York. There are 29 states, including California, Florida and Ohio, facing a combined budget shortfall of at least $48 billion in the fiscal year that starts July 1, according to the Center on Budget and Policy Priorities (CBPP), a liberal think tank.

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New Faces Join Homeless Ranks...

Suburbs to Streets: New Face of Homeless
June 28, 2008 - As the Foreclosure Crisis Continues, More Find Themselves Without Shelter

Time is running out for Tracy Mosely. A single mother of five, Mosely is on the brink of homelessness after the house she's rented for a year fell into foreclosure and was sold at auction. Mosely, a part-time restaurant hostess, came up with $500 for a security deposit on another place. But she says all the landlords she's contacted want $1,000 or more. She doesn't have it.

Lying on her bed in Florissant, Mo., flipping through the newspaper, seeking a place to move her family, Mosely says she's not sure if she has weeks or days before she'll be evicted. She may wind up, she says, in a homeless shelter. "My blood pressure is sky-high," she says. "We'll be on the streets. I'm just lost about what to do. We were settled here, this was home, and the kids are looking at me like, 'Mom, please.' I told them I'm doing my best."

Mosely is one of the faces of a national real estate crisis whose most grievous victims are increasingly facing the ultimate fate: homelessness. With more families on the cusp of having nowhere to live, thousands of both former homeowners and renters are winding up in shelters or turning to charities for food or other aid to get by. Nearly 61% of local and state homeless coalitions say they've seen a rise in homelessness since the foreclosure crisis began in 2007, according to a study released in April by the National Coalition for the Homeless.

More ABC News: Suburbs to Streets: New Face of Homeless

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Millions in U.S. face energy shutoff
April 25,`08 -- Large numbers of Americans face the prospect of energy shutoffs during the coming months because of rising energy prices and stagnant wages, officials said.

Millions of U.S. consumers are behind on paying their utility bills following a winter in which many struggled to cover the increasing cost of heating their homes, The New York Times reported Friday, citing energy and utilities officials.

The cost of heating oil, propane and kerosene is the biggest problem, officials told the newspaper, but natural gas and electricity prices are also a problem for workers at the lower end of the income scale, who are also struggling with higher prices for food and gasoline.

New Hampshire officials said the state will issue grants under the federal Low Income Home Energy Assistance Program to about 34,500 people this heating season -- a record number that is 5 percent higher than last year's total.

Mark Wolfe, director of the National Energy Assistance Directors' Association, told the newspaper the most immediate challenge is to help people who are significantly behind in paying their gas and electric bills. "Based on discussions with major utility companies around the country, we will see record numbers of families facing shutoffs," said Wolfe.

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