Thursday Links About Tough Love

Why Economic Advisors Are Paid to Be Economic Advisors – Robert Reich

If you choose B, you shouldn’t be advising the President.

Fed Study Finds ‘Real’ Homeownership Rate – WSJ

The study looks at the number of homeowners who are underwater, owing more than their homes are worth, and excludes them from the official homeownership rate calculated every quarter by the Census Bureau.

While the official figure stood at 67.2% at the end of last year, the authors produce their own estimate of an “effective” homeownership rate. The difference between the official and effective homeownership rates, or what the authors dub the “homeownership gap,” is around 5.6 percentage points for the nation as a whole, which means the effective rate of homeownership is closer to 62%.

Without tax credit, US home demand keeps slumping – Reuters

Demand for loans to purchase houses fell 5.7 percent in the week ended June 4 to the lowest level since February 1997, even after adjusting to account for the Memorial Day holiday.

Home buyers have been on hiatus since many rushed to sign purchase contracts ahead of the April 30 deadline for up to $8,000 in federal tax credits.

Only a fraction of those in need file for bankruptcy – USA Today

Bankruptcy laws changed in 2005 because filings skyrocketed and credit card companies and banks wanted to weed out deadbeat borrowers. The law made it harder — more expensive and more restrictive — for individuals to file Chapter 7 bankruptcy, which erases most debts.

…

Bankruptcy is supposed to provide a fresh start to people who are in serious financial distress. But only a fraction are filing, Porter says.

‘My future is gone’

Carmen Gardiner, 25, a 2007 graduate of Louisiana State University, is weighed down by her private student loans. Her debt is now about $80,000, and her monthly payments are more than $600. Gardiner’s undergraduate degree is in psychology. She lives with her husband, who is still in college, and earns $13 an hour at a call center in Atlanta. They have a 6-month-old daughter.

She hasn’t defaulted on her student loan. But she doesn’t see much hope. Bankruptcy would not discharge her debt.

“I’m completely sour about the whole idea of going to college,” she says. “My future is gone before I have a chance to make one. But if I could discharge this using bankruptcy, it would be better than winning the lottery.”

There is little information about unregulated private student loan debt. But during an investor meeting, Sallie Mae, the USA’s largest private student lender, recently projected that 40% of $6 billion in subprime private student loans will default, according to Student Lending Analytics, an independent research company. That means 360,000 to 540,000 borrowers are likely to default on their loans, SLA said.

The only way that people with private student loans can get help in bankruptcy is if they can prove undue hardship. And to do that they have to go through a separate trial, which is an extra cost, involves witnesses, legal assistance and extra expertise, says Deanne Loonin, staff attorney at the National Consumer Law Center. It is a huge barrier.

Low Mortgage Rates Met With Blank Stares – WSJ

Most analysts expected housing demand to fall after the tax credit expired, but few had predicted that mortgage rates would tumble to such low levels after the Federal Reserve ended its purchases of mortgage-backed securities in March. Average rates on 30-year fixed-rate loans fell to 4.81% last week from 4.83% at the end of May.

The Not-So-Great Mall of China: Welcome to the world’s largest (and loneliest) shopping centre - Daily Mail

But the New South China Mall, which opened in 2005, stands empty with 99 per cent of its shops having remained unleased and attractions including a 553-metre indoor and outdoor roller coaster standing idle.

(old but worth remembering)

Shanghai: 1990 vs. 2010 – Clusterstock and Skyscraper City

In a Slow Real Estate Market, Indecision Is on the Rise – NYT

Pity Maria Picardi-Kenyon, a RE/MAX agent in Mercer County, N.J., who showed 68 houses in the low $100,000 range to a couple who were galvanized by the tax credit. “They were on the deadline, and at the last minute we found them the perfect home,” Ms. Picardi-Kenyon said. “Then they decided they didn’t want to be pressured into buying because of the tax credit. They didn’t want to be forced to buy! I burned more in gasoline than I would have earned in commission.”

Ms. Picardi-Kenyon said the couple wanted to keep shopping with her, but she delivered what she calls “the talk.”

“I told them we’d come to the end of our relationship,” she said. “I wished them the best and walked away. They still e-mail me, and I don’t respond. It’s all about tough love.”