Phoenix MLS Predicting Lowest Median September Price in Nine Years (Scottsdale: real estate, mortgage)

[suburbgal]

Ritchie_az - I understand you're thinking that U-6's impact would be minimal, but the reality is there are many people that fall in the U-6 category that do hold mortgages. I was a recruiter for the Phoenix market less than a year ago and I can tell you 95% of the people I was placing were falling in this category. I worked with former VP's and Directors everyday that had to go back to tactical positions to make ends meet. They took anywhere from 40-60K pay decreases to make ends meet and PAY their mortgages. To say that underemployed folks are either renters or second income for their household is pretty careless.

[Ritchie_az]

To say that underemployed folks are either renters or second income for their household is pretty careless.

Well, I'd say most of them are. I'd even add that quite a few are teenagers and college students. The problem is, U-6 doesn't define what "under-employed" even is (it's relative) and doesn't seperate it into different catagories. When Gallup does a poll on "under-employed" they at least tell you what it is: part-time workers who are searching for full-time work. But when the DOL says "under-employed" they don't mention what defines it.
Like I said, U-6 only effects the housing market if the "under-employed" person has a mortgage and is not earning enough to pay it. I doubt that is a huge group of people.

[Ritchie_az]

I'll add that most of the foreclosed homes were from people who a) lost their jobs altogether, b) purchased a house they really couldn't afford to begin with (even adding a second-mortgage), or c) purchased high and, when the market collapsed, didn't want to pay a $300,000 mortgage on a home that was now worth only $150,000, so they "walked away".

[suburbgal]

Agree with you on the foreclosed homes but kindly disagree with you on U6. There are too many highly-skilled, educated, experienced workers that have had to take lower paying jobs and part-time employment just to have a job. I know a couple of people that work at my local Starbucks who worked in high tech positions that lost their jobs due to lay offs that couldn't find work...they are now our local Baristas (both have mortgages). A family member who was a full-time commercial designer now works part-time for a residential designer because she needs to make ends meet and pay for her mortgage - again she finally took what she could. The other data that is not captured that would probably really show a more accurate picture of our economy are the 1099's that are just sitting idle (contractors (tech and construction), realtors, etc) that are not included in the unemployment rate.

[azjack]

"I'll add that most of the foreclosed homes were from people who a) lost their jobs altogether, b) purchased a house they really couldn't afford to begin with (even adding a second-mortgage), or c) purchased high and, when the market collapsed, didn't want to pay a $300,000 mortgage on a home that was now worth only $150,000, so they "walked away"."

None of those categories have stopped producing foreclosures. But we all get that, I just do not think that people grasp the massive number of foreclosures that are still in the PHX pipeline. There are also plenty of people who have become less eager to pay as their income has decreased, even if the income was not eliminated altogether.

[Ritchie_az]

Agree with you on the foreclosed homes but kindly disagree with you on U6.

What is "under-employed" to you? To Gallup, who polls and tracks these things, "under-employment" is not someone who makes $80k a year when they think they should be making $150k, it's someone who has a part-time job but wishes to have a full-time job. More importantly, what is it to the DOL?
It took a lot of digging, but I finally uncovered what "under-employment" means tot he DOL: part-time employees who wish to work full time. (That's the same criteria as Gallup).
What that means is that when you look at U-6 unemployment, it includes spouses, teenagers, college students, etc., who work part-time, but want to work full-time. It's no surprise, then, that 30% of "under-employed" folks are under the age of 30, and 24% have never attended college (let alone graduated). Somehow I doubt that many of these under 30, uneducated folks have a mortgage.

[Howard Roark]

I'm a con-w2 consultant and I know of one or two consultants who have been in and out of gigs for the last year. Things are drying up. This is software engineering consulting. High tech, high pay. Well up to about 2008 I would get lots of calls from recruiters. Now I get a few. I am working on a gig right now. It's been amazingly steady, although the client takes too much risk in underbidding.

This is reality. Very few good paying gigs out there. I am lucky. And I recognize this as luck so that I don't gamble with my investing. I keep low debt and I save up cash.

There was never a usage of the term "recession" before the GD. The establishment basically did not want to panic people so every economic crisis ever since was labeled a "recession" instead of a "depression." Scary huh?

Originally Posted by suburbgal

Agree with you on the foreclosed homes but kindly disagree with you on U6. There are too many highly-skilled, educated, experienced workers that have had to take lower paying jobs and part-time employment just to have a job. I know a couple of people that work at my local Starbucks who worked in high tech positions that lost their jobs due to lay offs that couldn't find work...they are now our local Baristas (both have mortgages). A family member who was a full-time commercial designer now works part-time for a residential designer because she needs to make ends meet and pay for her mortgage - again she finally took what she could. The other data that is not captured that would probably really show a more accurate picture of our economy are the 1099's that are just sitting idle (contractors (tech and construction), realtors, etc) that are not included in the unemployment rate.

[azjack]

"Somehow I doubt that many of these under 30, uneducated folks have a mortgage."

Why? No income, no job (or part-time only), no assets, they sound like perfect candidates for a 2005-era loan.

I just do not associate mortgage debt with advanced education. But I place a high value on education and see massive (or really any) mortgage debt as evidence of impatience. Why anyone would even consider a mortgage without at least a couple of years worth of reserves is beyond me. But that was obviously commonplace in PHX and elsewhere.

[Howard Roark]

Yes and the potential problems of committing to RE loans have been published for years, in previous bubbles. Anyone buying a house in 2003-2007 in Phoenix should have asked me how I handled a 20% loss in my house and I did not walk away. Compared to now, I was very lucky. But I think it's safe to venture a guess that many people across the U.S., particularly in Phoenix, Las Vegas, San Diego, and Miami, have not taken advantage of the free information (libraries, internet on WIFI) and put thought into the question of to buy or to rent.

Strategic defaults are going to be looked at seriously by Fannie Mae and Freddie Mac. It does not matter whether they happen in a recourse state or non recourse state, but those institutions are going to sue the deadbeats - mostly specuvestors. The ones who lost their jobs and cannot afford the mortgage can claim economic hardship beyond their control and will not be sued. It will get ugly for the gamblers - specuvestors. And it should get ugly for them.

"Their not making any more land!" Ha!

Originally Posted by azjack

Why? No income, no job (or part-time only), no assets, they sound like perfect candidates for a 2005-era loan.

I just do not associate mortgage debt with advanced education. But I place a high value on education and see massive (or really any) mortgage debt as evidence of impatience. Why anyone would even consider a mortgage without at least a couple of years worth of reserves is beyond me. But that was obviously commonplace in PHX and elsewhere.

[OnYourSide]

Originally Posted by suburbgal

Agree with you on the foreclosed homes but kindly disagree with you on U6. There are too many highly-skilled, educated, experienced workers that have had to take lower paying jobs and part-time employment just to have a job. I know a couple of people that work at my local Starbucks who worked in high tech positions that lost their jobs due to lay offs that couldn't find work...they are now our local Baristas (both have mortgages). A family member who was a full-time commercial designer now works part-time for a residential designer because she needs to make ends meet and pay for her mortgage - again she finally took what she could. The other data that is not captured that would probably really show a more accurate picture of our economy are the 1099's that are just sitting idle (contractors (tech and construction), realtors, etc) that are not included in the unemployment rate.

On a personal level, I am familiar with many in the Phoenix metro with higher level technical educations who are working part-time in non-skill trades such as retail. I agree on the idling of the 1099's would give a much more accurate picture.