David Kirkpatrick

April 16, 2010

Recovery still hasn’t reached Main Street

I’m sure this is not news to all of us Main Streeters out there. The stories I’ve been hearing from small business owners are just incredible. People with impeccable credit histories having credit lines slashed to almost nothing, companies offering payment plans never before considered only to find the customers still unable to meet the soft terms and enough accounting tricks to try and deal with the facts on the ground to make your head spin. Nope, the recovery still hasn’t made it to Main Street.

From the link:

The economy may be showing halting signs of recovery, but the turnaround hasn’t reached Main Street yet: A pair of recent small business surveys found that most owners are skeptical or downright gloomy about their business prospects this year.

“Something isn’t sitting well with small business owners,” Bill Dunkelberg, chief economist of the National Federation of Independent Business, said in a written statement accompanying the latest edition of his organization’s monthly “Small Business Optimism” report. “Poor sales and uncertainty continue to overwhelm any other good news about the economy.”

Capital expenditures remain near record lows, sales are still weak, and credit lines are hard to find, according to the around 950 business owners NFIB surveyed in March. While job cuts have slowed, few businesses say they plan to hire new workers within the next three months.

March 25, 2010

Congress working on small business and construction aid

With health care over and done Congress is already looking to boost an ailing Main Street.

From the link:

The House approved 246-178 a bill designed to boost investment in small businesses, which have been reluctant to take on new workers as the economy recovers from the worst recession in 70 years.

The bill would also expand subsidies for state and local construction bonds in an effort to bring down the 9.7 percent unemployment rate ahead of the November congressional elections.

Democrats noted that the popular Build America bond-subsidy program has funded $78 billion in state and local construction projects.

“It’s been an effective tool in job creation,” said the bill’s author, Ways and Means Committee Chairman Sander Levin.

Corporate belt tightening led to cash reserves

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 4:38 pm

Of course all this liquidity was wrung out of Main Street and the lifeblood of the economy — the workforce.

From the link:

The brutal recession has left many American families, small businesses and state and local governments in financial ruin or teetering on the brink.

But it’s a much different story for the nation’s biggest companies. Many have emerged from the economy’s harrowing downturn loaded with cash, thanks to deep cost-cutting that helped drive unemployment into double digits.

And although the banking crisis starved countless entrepreneurs for money last year, credit was never scarce for business titans.

February 12, 2010

Quite the misleading lede

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 11:55 am

Here’s the lede in an article about the banking industry and the ongoing credit crunch:

Those wicked bankers–refusing to lend to small businesses! So say the pols. The reality is something else.

You read that and think, man this whole credit crunch thing is just some sort of hoax cooked up by the mainstream media or opportunistic politicians. Then you hit the link up there, read the article and realize the gist of it is a lot of businesses have drastically cut expenses and are now self-capitalizing because profitability is up and operating costs are down.

The problem there is those companies drastically cut expenses — those pesky things like salaries for jobs that no longer exist and such — because the banking industry completely screwed Main Street and continued a ridiculous credit squeeze long after receiving billions in Federal bailout money. And trust me, the credit crunch is still going on.

It’s great some companies managed to pare down to the point of self-capitalizing. But I bet both the newly unemployed from those companies, and the now overworked employees doing a job that once was covered by two, or more, workers would prefer for those companies to hoard a little more cash (something like what banks are still doing) and dip into the credit market to cover operating costs. I bet some of the companies would love to do just that, but can’t — why?, because of that still overly tight credit market

January 25, 2010

White House throwing the middle class a lifeline

Here’s some of the options on the table:

The initiatives were developed by the White House Task Force on Middle Class Families, led by Vice President Joe Biden. The proposals would:

* Require companies that do not offer retirement plans to enroll their employees in direct-deposit retirement accounts unless the workers opt out.

* Increase the “Savers Credit,” a tax credit for retirement savings, for families making up to $85,000.

* Change some of the rules for 401(k) employer-sponsored retirement savings accounts to make them more transparent.

* Increase the child tax credit rate to 35 percent of qualifying expenses from the current 20 percent for families making under $85,000 a year. Families making up to $115,000 would be eligible for some increase in the tax credit.

* Increase child care funding by $1.6 billion in 2011 to serve an additional 235,000 children.

* Boost government spending by $102.5 million for programs aimed at helping families who provide home care for an aging relative.

* Ease the burden for student loans by limiting a borrower’s payments to 10 percent of his or her income above a basic living allowance.

November 24, 2009

Small business are getting bigger

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 2:20 pm

At least in the eyes and definition of the Small Business Administration. Both small- and mid-sized businesses can use all the help they can get right now, but these moves seem to always open a back door for the very large structures in the corporate world to get hold of some unneeded “free” money through subsidiaries that are big, but just enough not so to qualify.

From the link:

The Small Business Administration will redefine what “small” means for firms in hundreds of industriesby revamping size standards over the next two years. The result: More businesses will qualify for all types of SBA financial aid, such as the flagship 7(a) loan guarantee program.

The SBA hasn’t taken a hard look at its size standards for more than 25 years, although it periodically makes inflation adjustments, as it did last year. There’s no doubt that in the last quarter-century, changes in industry structure, market conditions and business models have changed the definition of “small” for all sorts of businesses. The SBA’s effort will involve reviewing the standards for businesses in about 900 industries and adjusting them upward — or, in a few cases, downward — as needed.

Also from the link:

In the first round of this size standard revamp, SBA is looking at 138 industries and proposing to change the standards for 71 of them. For example, SBA wants to raise the cap on annual receipts for jewelry stores from $7 million to $25 million, which would allow a lot more stores to qualify for aid. The cap for nurseries and garden centers is proposed go from $27 million to $30 million.

November 19, 2009

More news from the “no duh” department

Filed under: Business, Politics — Tags: , , , , , , — David Kirkpatrick @ 3:19 pm

Today it’s from Treasury Secretary Tim Geithner:

“This credit crunch is not over,” Geithner at a small business financing forum in Washington hosted by the Treasury. “It may feel dramatically better for large companies, but it is not over for small businesses across the country.”

November 17, 2009

Small business loans down over $10B

Yep, you read that header correctly — more than ten billion dollars of available credit has disappeared for small business while Wall Street and big banking rolls in federal funds.

Disappointing.

From the link:

The 22 banks that got the most help from the Treasury’s bailout programs cut their small business loan balances by a collective $10.5 billion over the past six months, according to a government report released Monday.

Three of the 22 banks make no small business loans at all. Of the remaining 19 banks, 15 have reduced their small business loan balance since April, when the Treasury department began requiring the biggest banks receiving Troubled Asset Relief Program (TARP) funding to report monthly on their small business lending.

November 10, 2009

2009 Wall Street bonuses …

Filed under: Business — Tags: , , , , — David Kirkpatrick @ 2:38 pm

… are not going to go over all that great. I understand the nature of compensation in the financial industry, but sometimes image is everything, and the industry has a pretty shabby image on Main Street.

From the link:

Ask yourself, in this day and age, with officially reported unemployment at 10.2%, the highest since 1983, should a 36-year-old derivatives trader get $10 million or $15 million in bonus money on top of a $400,000 to $1 million direct salary. It’s the hot-button money issue of our time, the only visible totem of Wall Street that the public can easily understand. The public sees headlines about stocks being up 62%, the Dow over 10,000, gold at $1,100 an ounce, interest rates at zero and a handful of financiers able to buy $40 million apartments.

It’s a great time to play the market, sure, but the overall effect on the economy is pretty hollow when small and medium businesses cannot borrow money. Treasury Secretary Geithner admits to this huge vacuum, but he has no concrete or meaningful solution.

October 21, 2009

TARP banks not lending to Main Street

I’ve already blogged on the upside of this issue — that is, the Obama administration is helping Main Street through expanding the lending capacity of the Small Business Administration and letting smaller banks in on some TARP action. The downside of this issue is eight of the top ten TARP recipient banks have cut small business loans since May. And that is disgusting.

From the second link:

The TARP program was set up to recapitalize banks so that they would bolster their lending to consumers and small businesses. In March, as the administration and the SBA took steps to stimulate small business lending, Treasury Secretary Tim Geithner ordered the top TARP recipients to begin sending the Treasury monthly reports on their small business lending activity.

“We need every bank in the country to do everything in their power to provide the credit that small businesses need to operate, expand and add jobs,” Geithner said as he announced the new requirements. “Given the role many banks played in causing this crisis, you bear a special responsibility for helping America get out of it.”

But in the five months they’ve been sending in those reports, the 22 biggest TARP recipients haven’t increased their small business lending. Instead, they’ve cut their outstanding balances by $8 billion. As of Aug. 31, the 22 reporting banks held a collective small business loan balance of $261.3 billion, down 3% from when they began reporting in April.

Check out this list of shame:

chart_sm_biz_lend.gif

October 20, 2009

Small business stimulus

The stimulus plan finally comes to Main Street. This is something that should have happened months ago. Better late than never, I guess.

From the link:

President Obama will visit a Maryland business on Wednesday afternoon to announce initiatives to encourage lending to small businesses. According to an administration official, the proposal will increase the caps for existing Small Business Administration loans and give smaller banks better access to funds from the Troubled Assets Relief Program.

An industry official involved in S.B.A. lending said the White House would propose raising the cap on the agency’s flagship 7(a) loan from $2 million to $5 million. But other programs are likely to see increases, too, including the 504 program.

There is one caveat, though:

Changing S.B.A. programs would be subject to Congressional approval.

October 16, 2009

Sanity from the Hill on small business

Hear, hear Mark Warner!

From the link:

The Obama administration should spend more money from the $700 billion bank rescue on programs to increase lending to small businesses, said Senator Mark Warner, a Virginia Democrat on the banking committee.

Warner and other lawmakers are pushing regulators to consider ways to jumpstart credit to small companies, which he says is dwindling even after efforts to provide government support. The senator urged action at a meeting of the Senate Democratic Caucus yesterday.

Treasury Department officials said they are in discussions with Warner, Senator Mary Landrieu, a Democrat of Louisiana, and Republican Olympia Snowe from Maine, on how to address the issue, either through the Troubled Asset Relief Program or new legislation. A $15 billion program to purchase pools of small- business loans, announced in March, has attracted little interest even though it’s ready for use, an administration official said.

“The original notion of the TARP was, we were going to help Main Street by bailing out Wall Street,” Warner said in an interview. “We’ve seen Wall Street recover, but we have not seen Main Street reap the direct benefits.”

Too big to fail …

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 2:11 pm

… and too much arrogance not to use our tax dollars to run up huge year-end bonuses. I know that’s an overstatement and Wall Street compensation is pretty arcane, but the message Main Street is going to get when the final numbers come out is one big middle finger from Wall Street.

If I were Goldman Sachs I’d ramp down a whole lot lest the heavy hand of a Democratic Congress and White House take unwanted action interfering with business as usual on the Street.

Call it what you want — balls, chutzpah, hubris, whatever — it’s very, very bad pubic relations, very questionable internal policy to continue the old ways when the entire game was changed by last year’s bailout, and frankly I think the best description for Goldman’s feeble justification is blind stupidity.

From the link:

As Wall Street firms typically do, Goldman set almost half that sum aside to compensate its workers. Through the first nine months of 2009, the firm socked away $16.7 billion, enough to pay the average Goldmanite $526,814.

The bonus pool is on pace to hit $21 billion for 2009, which would match the record bonus payout of 2007.

Goldman said it won’t decide the size of the bonus pool till year-end. In any case, the payments will be substantial — and will come just one year after huge sums of taxpayer dollars were funneled to financial institutions.

Critics charge that the lion’s share of Goldman’s profits comes from making big bets using cheap dollars printed by the Federal Reserve. Plus, given the crisis that followed the failure of Lehman Brothers, there’s a sense that government officials won’t let big firms go bust. That in effect gives too-big-to-fail firms a license to bet the house.

“This is almost an ‘in your face’ kind of setup here,” said Michael Panzner, a Wall Street veteran who blogs at financialarmageddon.com and who wrote a 2007 book predicting economic disaster. “They’re rolling the dice, and so far they’re winning,” said Panzner.

October 14, 2009

Is the homebuyer tax credit about to get massive expansion?

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 3:41 pm

Expansion to the tune of almost doubling the credit to $15,000 and allowing people other than first-time home buyers into the program. Now that’s some Main Street stimulus, but like “Cash for Clunkers” it’s geared to help one group of industries. Home building and finance in the latest case, automotive in the first case.

From the link:

Congress is considering proposals to greatly expand a soon-to-expire $8,000 tax credit for first-time homebuyers — potentially applying it to all but the wealthiest homebuyers.

Supporters say doing so would further boost home sales, stabilize housing prices and generate jobs. Opponents say extending and expanding the credit would be a waste of money and only temporarily stave off further price declines.

The credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30.

Beyond extending that deadline, some lawmakers want to make the credit available to all homebuyers who meet income eligibility requirements. And some want to increase the amount of the credit from $8,000 to $15,000.

Currently the first-time home buyer credit is available in full to those buying their primary residence who make $75,000 or less ($150,000 for joint filers). A partial credit is available to those making between $75,000 and $95,000 ($150,000 to $170,000 for joint filers).

October 7, 2009

Not all small businesses are created equal

And some small business government contractors aren’t all that small. This type of system rigging ought to be more of a public outrage than it ever is. The economic realities, and the government’s response to such, over the last 18 months or so really let Main Street know where small business stood in the overall picture — on the bottom and practically forgotten.

From the link:

In August the Small Business Administration released its annual scorecard tallying federal dollars awarded to small business contractors last year.

The good news? Federal agencies claim they spent $93.3 billion. That’s $10 billion more than the year before.

The bad news? It’s fuzzy math. Billions of dollars reportedly allocated to small contractors are still flowing to corporate giants. The SBA’s top two “small business contractors” for 2008 — VSE Corp. ($1 billion in annual revenues) and AAI Corp., a division of Textron Inc. (TXTFortune 500) ($14.2 billion in annual revenues) — weren’t small at all. They alone accounted for $1.6 billion in federal “small business” spending.

Joe Jordan, SBA associate administrator for government contracting, says his agency has been trying to weed out impostors. To get to the $93.3 billion total from the original $107 billion reported to it, he says, the SBA scrubbed out some $6 billion in contracts incorrectly attributed to small businesses, plus more than $7 billion worth of contracts that were awarded and performed overseas or fell under other exemptions.

September 17, 2009

Consumer spending not returning anytime soon

Filed under: Business, Politics — Tags: , , , , , , , — David Kirkpatrick @ 5:14 pm

[Note: this post was lost in WordPress somehow. Hit this link for new post sans my expanded commentary from the lost original.]

September 10, 2009

The recession (that may or may not be over) and Main Street

Filed under: Business — Tags: , , , , , , — David Kirkpatrick @ 3:56 pm

Here’s a report of the reality on the ground:

The recession has slashed families’ earnings, increased poverty and left more people without health insurance, according to the Census Bureau’s annual snapshot of living standards, offering sharp evidence of how much the falling economy has touched Americans of every income and race.

The report released Thursday showed median household income, adjusted for inflation, fell 3.6% last year to $50,303, the steepest year-over-year drop since at least 1967. The poverty rate, at 13.2%, was the highest since 1997, while about 700,000 more people were living without health insurance in 2008 than the year before, although the share of the population living without health insurance was about the same.

“There’s a lot of pain for the average family,” said Bruce Meyer, an economist at the University of Chicago. “It’s pretty striking how fast and how far the incomes of the typical family have fallen. The decline is bigger than anything we’ve seen in the past, and things are almost certainly going to get worse.”

September 4, 2009

Jobless recovery = Main Street killer

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 1:43 pm

When the economy gets back on track through a “jobless recovery,” the overall result is most people don’t see, feel or believe any evidence things are better in some esoteric “big picture” fashion.

An enduring recovery that remains jobless could be a real political boon to the GOP for the 2010 election cycle if the party could get away from the lampoonable stunt-pulling and histrionics that so far characterize the opposition party.

From the link:

As a technical matter, most economists believe that the United States has escaped the grip of recession, the longest since the Great Depression. The Labor Department’s latest employment report, released Friday, added weight to the view that economic expansion has resumed, marking a continued albeit modest improvement to the rate of lost jobs.

Yet the report also lent credence to a growing consensus that the recovery is likely to be weak and fragile, prompting most companies to hold back from hiring aggressively.

“In the context of a full-blooded recovery, this report is disappointing,” said Alan Ruskin, an economist with the Royal Bank of Scotland in Stamford, Conn. “We’re still clawing our way back.”

Many experts now see a high probability of another so-called jobless recovery, in which the economy expands but jobs continue to disappear — a replay of what happened after the last recession in 2001.

August 20, 2009

More bad housing news

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 9:26 am

Any economic recovery is still a long ways from Main Street. The worst news from this mortgage report is a third of the new foreclosures were on prime fixed loans.

From the link:

An industry group says a record of more than 13 percent of American homeowners with a mortgage are either behind on their payments or in foreclosure as the recession throws more people out of work.

August 6, 2009

Small business capital gains tax cut coming

Throwing a little more relief Main Street’s way. The jury’s still out on Obama’s overall stimulus plan, but it’s good to see small business is getting some consideration and airtime from the president.

From the link:

President Obama said Aug. 5 that his goals for boosting the economy over the long term still include cutting the capital gains tax to zero for small businesses, and making the research and development tax credit permanent.

In a speech at recreational vehicle producer Monaco Coach in Wakarusa, Ind., Obama said the R&D credit returns $2 to the economy for every $1 the federal government spends and it deserves to be a part of the permanent tax code.

Cutting the capital gains tax to zero for small businesses and start-up firms would also benefit the economy over the long run because small businesses produce 13 times more patents per employee than large companies, he says.

Both ideas were included in President Obama’s budget proposal in March.

July 31, 2009

“Cash for Clunkers” too popular

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 12:32 pm

Rendering visible a point long obvious — Main Street needs, wants and will put to good use federal bailout money.

From the link:

The House rushed Friday to pump $2 billion into a popular cash-for-clunkers program running near empty, with a leading Democrat saying ”consumers have spoken with their wallets.”A floor vote was under way at midday on the bill to refuel the car-purchase program. House Majority Leader Steny Hoyer had said earlier that the additional money would come from funds Congress approved earlier in the year as part of a $787 billion economic stimulus bill.

Hoyer, D-Md., said that at the request of House Republicans — whose approval was required for swift passage — the bill would include provisions for government auditors to make sure the money was being spent as intended.

June 18, 2009

SBA’s America’s Recovery Capital loans

This Small Business Administration program looks like a boon for Main Street (remember way back when small to mid-sized business was called “Main Street?” Oh yeah, that was just a few months ago … ) as long as banks decide to play nice.

I understand banking’s fear of becoming over leveraged, and the pressures being put on banks by regulators to keep adequate cash reserves. At the same time the stimulus money was injected into the market to, you know, stimulate. Cash on bank balance sheets is stimulating nothing other than possibly some bank managers’ pants.

The program is there, the cash is there so here’s some advice to the banking world — get with it and start stimulating.

From the link:

Struggling small business owners can begin applying next week for an interest-free debt-relief loan through a new Small Business Administration program — if, that is, they can find a bank to process their application.The new “America’s Recovery Capital” (ARC) loan program, authorized by February’s stimulus bill and slated to launch on June 15 after four months of planning, aims to make small, government-backed loans available to viable companies laid low by the recession. (For full details on ARC eligibility and loan terms, click here.) But the loans will be made and managed by SBA lenders, and so far, few have jumped on board.

Before the details of the program were released on Monday, lenders were hesitant to commit, concerned that there wasn’t enough economic incentive for them. Now, with key details about how the program will work finally available from the SBA, many haven’t retreated from their initial wariness.

“While we have received a few requests from our customers, we are still leaning against it,” says John Handmaker, president of Quadrant Financial, a small business lender based in Louisville. “The guidance from the SBA indicated rates and terms, which have provided some clarity, but we’re not 100% certain about what we need to be careful of. We don’t feel we have a solid grasp of the standard operating procedures and rules, and we’re not going to jump in until we really understand it.”

February 18, 2009

The stimulus hits Main Street

Filed under: Politics — Tags: , , , — David Kirkpatrick @ 11:31 am

To the tune of $75 billion for staving off foreclosusres.

From the link:

Seeking to stabilize the foundering housing market, President Obama is offering a plan to help as many as nine million families refinance their mortgages or avoid foreclosure, according to a summary released by the White House on Wednesday morning.

The plan, which is more ambitious than expected, would spend $75 billion to help keep as many as four million families in their homes, and would help as many as five million more refinance their mortgages to take advantage of lower interest rates.

“The plan not only helps responsible homeowners on the verge of defaulting, but prevents neighborhoods and communities from being pulled over the edge too,” the White House said in a fact sheet.

February 2, 2009

Obama’s plan for Main Street

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 4:45 pm

My previous post was on Obama’s Wall Street plan to bolster the embattled financial sector. This post is focused on the president’s plan for small business, home owners and other Main Street concerns.

This is one area Bush’s team didn’t address in any meaningful fashion. A move that probably hurt the GOP significantly in the last election cycle.

From the link:

President Barack Obama on Saturday promised to lower mortgage costs, offer job-creating loans for small businesses, get credit flowing and rein in free-spending executives as he readies a new strategy for spending billions from the second installment of the financial rescue plan.

The White House is deciding how to structure the remaining half of the $700 billion that Congress approved last year to save financial institutions and lenders. An announcement was possible as early as this coming week on an approach that would use a range of tools to unfreeze credit, helping families and businesses.

At the end of a week that saw hundreds of thousands of people lose their jobs, Obama also used his Saturday radio and Internet address to tell Americans that “no one bill, no matter how comprehensive, can cure what ails our economy.”

Obama has seized on the grim economic news to push his separate $825 billion economic stimulus bill now in the works, urging lawmakers to act boldly and overcome partisan divisions to counter a “devastating” crisis for Americans.

At the same time, Obama faces a dilemma over protectionist provisions in the bill that many fear could set off a trade war. Opposing the “buy America” measures, however, could set off a backlash from his supporters, particularly among labor unions.

January 15, 2009

One million foreclosures in 2008

Filed under: Business, Politics — Tags: , , , , , — David Kirkpatrick @ 4:21 pm

A ridiculous number. Especially given that Wall Street was handed money that is doing absolutely nothing. The Fed and really all of D.C. completely fell down on the job with this. I’m betting history will not be very kind looking back in a few years.

From the link:

SACRAMENTO, Calif.–(BUSINESS WIRE)–January 14, 2009–About 1 million homes were lost to foreclosure in 2008, up nearly 63.5 percent from 2007, according to the U.S. Foreclosure Index from ForeclosureS.com, a leading real estate information provider.

In this first look at complete 2008 statistics, the Index also shows nearly 2.1 million pre-foreclosure filings last year, up nearly 62 percent from 2007. Pre-foreclosure actions can include notice of default and/or foreclosure auction leading up to an actual foreclosure.

Month to month, foreclosed properties repossessed by lenders spiked in December, up 19.3 percent to 97,841 from November, when 82,033 properties were foreclosed. The December increase followed two months of steady declines, but December still was 6.1 percent below the peak foreclosure month of September. Pre-foreclosures, which had been slowing until December, also climbed to 190,467 in December, up 11.9 percent from November.

All regions of the country showed increases in lender-owned properties and pre-foreclosure filings in December, ForeclosureS.com analysis shows.

U.S. FORECLOSURE INDEX:
YEAR TO DATE PRE-FORECLOSURE FILINGS BY REGION
Pre-foreclosures   YTD 2007   YTD 2008   Change
Region   Filings   Per Household   Filings   Per Household    
Midwest   185,073   1.69%   228,849   1.98%   23.6%
Southeast   383,697   2.31%   735,417   4.29%   91.7%
Northeast   190,832   1.14%   235,745   1.34%   23.5%
Southwest   528,399   2.09%   883,006   3.60%   67.1%
Other States   3,476   0.60%   6,034   1.03%   73.6%
Nationwide   1,291,477   1.85%   2,089,051   2.95%   61.8%
*Percentage of every 1,000 households in state
U.S. FORECLOSURE INDEX:
YEAR TO DATE REO FILINGS BY REGION
REO   YTD 2007   YTD 2008   Change
Region   Filings   Per Household   Filings   Per Household    
Midwest   182,176   1.13%   195,057   1.24%   7.1%
Southeast   146,068   0.89%   253,126   1.49%   73.3%
Northeast   26,333   0.24%   41,250   0.25%   56.7%
Southwest   241,544   0.93%   501,641   1.99%   107.7%
Other States   1,056   0.21%   1,496   0.27%   41.7%
Nationwide   597,177   0.85%   992,570   1.34%   66.2%
*Percentage of every 1,000 households in state

On a quarterly basis, the Index also shows that the number of properties lost to foreclosure, 266,986, and pre-foreclosure filings, 528,241, both dropped in the fourth quarter, 9.2 and 2.4 percent respectively, compared with the third quarter.

“While the sheer number of about 1 million foreclosures is staggering, it was not unexpected,” says Alexis McGee, foreclosure expert, educator, author, and president of ForeclosureS.com. “Since July, we anticipated that we would see about 1 million foreclosures this year.”

“But there is good news – a variety of indicators show that some housing markets are bouncing back and we should see substantial improvement in 2009,” McGee says. “I think 2009 will surprise many people who have bought into the gloom-and-doom agenda.”

“In some areas like California, the housing recovery already has begun,” McGee says. “Inventories of unsold homes will drop quickly this year as people realize that today’s deals on homes are the best they’ll likely see in their lifetimes, both in terms of affordable prices and low interest rates!”

“The earlier declines in foreclosures and pre-foreclosure filings were likely the result of changes in state laws that slowed down the foreclosure process for many homeowners. But lenders played catch-up with foreclosure filings at year-end as December’s numbers indicate,” McGee adds.

“Don’t expect another tidal wave of foreclosures this year, either, just because more adjustable rate mortgages are due to reset,” she says. “Current mortgage rates are at 30 year lows and dropping. Those who qualify will be able to refinance and enjoy lower monthly payments, not higher ones. Those that can’t will end up either selling their homes pre-foreclosure or losing them to foreclosure. But I am anticipating our market can absorb this inventory.”

McGee said her optimism for 2009 is driven in part by positive housing market indicators, including:

Housing affordability. Thanks to drops in home prices and mortgage rates, housing is the most affordable it’s been since February 1994, when a mortgage on a median-price home equated to 18 percent of the median income. Credit Suisse estimates today’s mortgage payment on a median price home in October represented 16.7 percent of median household income based on a 6.23% mortgage. At current 5% interest rates and dropping houses affordability is more likely under 15% of the median income.

Growing U.S. population. The Census Bureau projects with births, deaths and immigration U.S. population will increase by one person every 14 seconds in 2009. More people mean more demand for housing.

Coming housing shortage. Housing construction has plummeted. Housing starts hit record lows in November, off 18.9 percent to a seasonally adjusted annual rate of 625,000 units. New building permits plunged 15.6 percent. That’s great news for housing markets because with fewer homes being built at the same time population — and housing demand — is exploding, the shortfall has to be made up somehow. In this case, it opens the door for the nation’s one million foreclosures to be easily absorbed in the market, and housing supply finally to catch up with demand.

Buyers for foreclosure properties.Tighter housing supplies mean buyers will look to foreclosure homes as viable purchase options.We are so under building right now that whatever new foreclosures do hit the market, I see them offsetting the losses of new housing we need but are not getting,” says McGee.

Unemployment is an issue, but not as large as some think. “The unemployment rate released by the government for December was consistent with economists’ consensus estimates and came in considerably better than a private forecast released in early January,” McGee says. At 7.2%, unemployment is just shy of the 7.8% experienced during the 1990-1991 recession but still well below our double-digit levels of the early 1980s.

The following charts provide additional information on trends from the latest U.S. Foreclosure Index from ForeclosureS.com:

U.S. FORECLOSURE INDEX:
TOP 10 STATES IN NUMBERS OF REO FILINGS
State   Filings   Per Household*
California   260,709   2.27%
Florida   107,833   1.71%
Texas   70,037   1.17%
Arizona   65,898   3.47%
Michigan   62,419   2.09%
Georgia   53,423   2.55%
Ohio   47,544   1.22%
Nevada   37,043   4.99%
Colorado   30,132   1.96%
Illinois   27,957   0.74%
*Percentage of every 1,000 households in state

For all of 2008, California still tops the list in terms of number of REO filings with nearly 1 ½ times as many filings as No. 2 and 3 on the list, Florida and Texas.

On a per household basis – often the best way to judge trends – California ranks a distant fifth with 22.7 of every 1,000 households lost to foreclosure in 2008. That’s behind Nevada (49.9 for every 1,000 households in the state); Arizona (34.7 of every 1,000 households); Mississippi (25.6 per 1,000); and Georgia (25.5 per 1,000). On a quarterly basis, however, California’s 4 th quarter REO filings (54,198) plunged 39.44 percent from third quarter (89,501).