Most of the states across the country have come to a conclusion: They have to raise taxes to help with the budget deficits.

The five states hit hardest by new taxes as written by SmartMoney are:

1) California – This state has a HUGE deficit. It has gotten so bad in California that they the state is starting to pay for things with IOUs. The state deficit estimate for 2010 is almost $25 billion with the state and local tax burden being 10.5%. Voters in the state voted against sales and income tax increases, and with unemployment there nearing 12% and the worst housing market in the country, anyone could understand their unwillingness to vote FOR higher taxes. One of the things on the table now for the state to start raising some extra tax money? Legalize marijuana…

2) New York – With a state deficit estimate for 2010 at $17.6 billion and the state and local tax burden of 11.7%, this state ranks number two in SmartMoney’s poll. The governor of New York, David Paterson has unsuccessfully tried to pass an 18% tax on soft drinks, however he was able to raise taxes on cigarettes and wine. New Yorkers have the second highest tax burden due to the income tax rate of 7.85% for those earning more than $200K a year.

3) Florida – Florida’s deficit estimate for 2010 is $6 billion and the state and local tax burden is 7.4%. In May, Florida passed next year’s budget and included a $1 per pack increase on cigarettes as well as new and higher fees to renew a driver’s license or register a vehicle. While Florida does have the third lowest tax burden in the nation, the state has been hit hard by decreasing home values and huge budget deficit as a result. The deficit could mean more taxes in the future.

4) Massachusetts – Massachusetts has a state deficit estimate for 2010 of $3 billion and a state and local tax burden of 9.5%. While right now, it is middle of the road when it comes to it’s tax burden ranking (23rd in the nation), it is getting ready for some hefty tax increases. When the budget was passed last week, it included new taxes including a 1.25% increase in the sales tax from 5% to 6.25%. Satellite television subscribers will also be tinged with a 5% tax on satellite services.

5) Nevada – With a deficit of $1.2 billion and a state and local tax burden of 6.6%, it doesn’t seem like Nevada is doing that badly, but it had the same major problem that California did: rapidly decreasing property values. It also had a history of low taxes, there was no personal income tax and it imposed some of the lowest taxes on businesses in the country. It once got the majority of its revenue from tourism, so it wouldn’t have to tax residents as heavily. In Nevada, the sales tax is going up along with hotel taxes. It also has the highest deficit to budget ratio of 32%.

The number of United States homeowners that owe more than their home is worth will likely double to 48% in 2011 from 26% at the conclusion of March. This would lead to another blow to the housing market. This is all according to Deutsche Bank.

Home prices have been on a huge decline and will have the biggest impact on prime loans that have met the underwriting and size requirements of Fannie Mae and Freddie Mac. Prime loans make up 2/3 of mortgages and tend to be less risky because of their harsher requirements for someone to get a loan.

Analysts Karen Weaver and Ying Shen said, “We project the next phase of the housing decline will have a far greater impact on prime borrowers.” Of the loans they are talking about, 41% will likely be underwater by the first quarter in 2011, while only 16% will be underwater by the end of 2009.

The weird thing about this news coming out is that news has been coming out for months that report a stabilization of the housing market after three straight years of price declines.

Also, a very popular index showed (in July) that home prices rose for the first time since 2006 in May.

Of course, the decline in home prices across the country has led to further foreclosures because some people just can’t afford to pay what they owe on the house when the house isn’t worth what they paid. For example, in California are bad. People were paying $500,000 to $1 million for homes that are worth half of what they were when the owner purchased them. The people who bought their houses at that time are the ones facing the greatest losses.

The places that are having the worst negative equity are places in Florida, Arizona, Ohio, California, Nevada, Massachusetts, Illinois, West Virginia, and Wisconsin. Some homeowners in Florida and California will see 90 percent of the homes in their areas with underwater mortgages.

This is a huge problem for everyone who holds a mortgage currently. Even as the economy has started to improve, little by little, there isn’t too much good news in the way of home prices. In reality, home prices are still on the decline in a lot of areas across the country. In the areas where unemployment is still rampant and jobs are being lost twice as fast as they are being gained, home prices are still slipping.

I hope this isn’t true. I would prefer for mortgages to be worth at least the value of the home. Then again, the bank had to be referring to the full amount of the mortgage and not the principle that remains on the balance. I know that there are a lot of people who put a lot of money down on their mortgages, and have been paying on the mortgages for years. Unless they simply paid nothing but interest or have a 100% mortgage, then maybe their balance won’t be “underwater.”

After the housing market collapsed, followed by the credit crunch, it became quite difficult for people to buy homes. However, now, while still tight, it is becoming easier (than a few months ago) to find a mortgage. So how do you know what to get and what will you be happy in?

Here are some tips from the New York Times:

1) Start with the basics. Put 20% down on your home, get a fixed rate mortgage, and make sure that your mortgage is no more than 35% of your pretax income.

2) Consider your income. Being overconfident in your income will only get you in trouble when it comes to buying a home. You need to make sure that you’re still able to save money every month in addition to paying the mortgage.

3) Bow to the Unknowns. There may come a time when you decide to have children or change your career. If or when this happens, you need to make sure that you’re not caught up in a mortgage that keeps you from doing what is truly rewarding to you.

4) The 8 Hour Rule. If you can’t sleep through the night because you’re worried about how much you’re going to pay for the mortgage or worried about how to pay for the mortgage you shouldn’t be getting the house. If you have to take sleeping pills to help yourself get to bed at night, then perhaps it’s time to rethink the entire home purchase.

There are three more rules along with much more detail about each tip at the article source at the bottom of the post.

I think that there are a lot of things to consider when buying a home; all of these tips are great. Mortgages are not something that should be entered into lightly and should really be thought about because when you’re unable to pay your mortgage then you’re going to have credit problems for a long time and you will also find yourself in a lot of heartache about what was supposed to be your “dream”.

Source

In the United States, home sales finally rose in the second quarter in 39 states. This is one of the factors indicating that the housing market may be perking up a bit after the sub prime lending mess hit it hard.

Quarterly sales for the housing market overall rose 3.8%. This equates to a seasonally annual rate that is 4.76 million. Although the number is around 3% below the same quarter a year ago, the number is up from 4.58 million in the first quarter. The figures have proven to be a welcomed sign by economists who are now saying that the worst part of the housing recession is over and we have hit bottom and are finally starting to see an increase in sales. Even though they say that we’ve bottomed out, foreclosures are still expected to rise well into next year.

Alaska, Wyoming, California, Colorado and Michigan are still being hit pretty hard by falling housing prices and their sales have dropped by at the very least 6% each. However, in states such as Idaho, New York, Wisconsin, and Nebraska, sales have increased 20% or more.

Over the entire country, over 1/3 of the sales that were being reported were from foreclosures and other types of distressed sales in the second quarter.

Hopefully people will learn from all the mistakes they made leading up to the most recent housing crash. If people will learn not to ask for mortgages that they know they can’t afford and banks will learn that they aren’t going to be making money off the people who can’t afford the houses and to stop making out mortgages that are not only deceitful, but also stop “liar loans” then maybe we can avoid the same situation from happening again. Maybe.

The United Kingdom has had some new figures come out that show that there might be some recovery in the housing market in that country. The new figures that have come out show that the annual rate of the decline of housing prices has slowed down to 11.3% from 15%. Right now the average price for a home in the country is 154,016 pounds; the highest housing prices the country witnessed was 186,044 pounds on average and that was in October 2007; a 17% increase from the lowest point seen.

The problem with these prices is that not only did they happen so quickly, but the homeowners are having serious issues dealing with negative equity in their homes. Negative equity happens when the mortgage that the homeowner has on the house is worth more than the actual property is appraised for. This means that if the homeowner wants to move or sell their house, they will not get what they paid for it, and may end up owing the bank even when they don’t live in the house anymore.

Statistics that have been released from the Council of Mortgage Lenders showed that 900,000 homeowners are having problems with negative equity. The 900,000 homeowners equals to 5% of all the homeowners in the United Kingdom. However, of all homeowners in the country, there is around 2 trillion pounds of equity that hasn’t been mortgaged. Again, this figure means little to nothing to those struggling with negative equity in their own homes.

Right now, there is an improvement in the sales to house stock ratio due to fewer houses being listed through real estate agents. There are a few things that are coming together to help with the recovery. First of all, there aren’t as many homeowners that are willing to sell their houses when the property market is at the bottom. Secondly, there are fewer new homes coming up due to the higher risk that is associated by property investment. The National House-Building Council has sown that new property construction is down 53% since just last year.

Overall, it is nice to see some kind of improvement throughout the housing market, not only in the United States but also abroad. There will always be homeowners that overpay for their homes no matter if there is a recession or not. What these homeowners will have to do is hold on to their homes until the equity in the house builds up. Eventually, these homeowners will find themselves in the black.

Source

People are angry at Ben Bernanke and I can understand why. This is the same guy who has led us on a crazy ride and given us all a tough lesson on how to not manage an economy over the past few years.

If you want to see all the things that Bernanke has said over the past few years, then watch the video above. It’s rather insightful into how he thought and what he thought about our economy leading up to the recession.

Most of the states across the country have come to a conclusion: They have to raise taxes to help with the budget deficits.

The five states hit hardest by new taxes as written by SmartMoney are:

1) California – This state has a HUGE deficit. It has gotten so bad in California that they the state is starting to pay for things with IOUs. The state deficit estimate for 2010 is almost $25 billion with the state and local tax burden being 10.5%. Voters in the state voted against sales and income tax increases, and with unemployment there nearing 12% and the worst housing market in the country, anyone could understand their unwillingness to vote FOR higher taxes. One of the things on the table now for the state to start raising some extra tax money? Legalize marijuana…

2) New York – With a state deficit estimate for 2010 at $17.6 billion and the state and local tax burden of 11.7%, this state ranks number two in SmartMoney’s poll. The governor of New York, David Paterson has unsuccessfully tried to pass an 18% tax on soft drinks, however he was able to raise taxes on cigarettes and wine. New Yorkers have the second highest tax burden due to the income tax rate of 7.85% for those earning more than $200K a year.

3) Florida – Florida’s deficit estimate for 2010 is $6 billion and the state and local tax burden is 7.4%. In May, Florida passed next year’s budget and included a $1 per pack increase on cigarettes as well as new and higher fees to renew a driver’s license or register a vehicle. While Florida does have the third lowest tax burden in the nation, the state has been hit hard by decreasing home values and huge budget deficit as a result. The deficit could mean more taxes in the future.

4) Massachusetts – Massachusetts has a state deficit estimate for 2010 of $3 billion and a state and local tax burden of 9.5%. While right now, it is middle of the road when it comes to it’s tax burden ranking (23rd in the nation), it is getting ready for some hefty tax increases. When the budget was passed last week, it included new taxes including a 1.25% increase in the sales tax from 5% to 6.25%. Satellite television subscribers will also be tinged with a 5% tax on satellite services.

5) Nevada – With a deficit of $1.2 billion and a state and local tax burden of 6.6%, it doesn’t seem like Nevada is doing that badly, but it had the same major problem that California did: rapidly decreasing property values. It also had a history of low taxes, there was no personal income tax and it imposed some of the lowest taxes on businesses in the country. It once got the majority of its revenue from tourism, so it wouldn’t have to tax residents as heavily. In Nevada, the sales tax is going up along with hotel taxes. It also has the highest deficit to budget ratio of 32%.

In the current status of the economy, people currently selling their homes are battling the lowest prices in decades. Buyers see the greatest purchasing value in as much time, and can only take advantage of those prices if they have the credit, cash-in-hand, job security, and patience. In southern Pennsylvania, just north of my home in Maryland, there is a beautiful home on sale for $279,000. When it listed, just before the recession kicked real estate prices to the gutter, this house went on the market for $386,000. $279,000 is actually an unusually high price for a house in this market considering that, nationwide, the first quarter of 2009 was roughly 13.6% lower than the first quarter of 2008, although the actual amount is debatable, depending on time frames and types of homes. The Case-Shiller index reports a decline as high as 19.1%.

The people who are best surviving the recession are homeowners who do not have to sell and buyers with good credit and cash reserves. Home building numbers are also down. I am not a prospective buyer right now, but just from curiosity, sometimes to just assess the housing market, I look at local homes on the market. Some have been on the market for quite some time, with prices reducing all the time. Sales are going up though.

One of my best friends bought a house recently in New Hampshire with her fiancé. With her fiancé’s decent credit, joint savings, and a little luck, these first time home buyers found a good deal. First time home buyer stats are up due to necessity and ambition. It is currently considered the best time to be a first time buyer. It is estimated that half of the country’s buyers right now are first time buyers, one of the largest numbers ever. There are many opportunities to buy that dream house right now and all buyers have the opportunity to exercise their options.

Even though the price you sell your house for will be low, remember that you can negotiate a low price on another home. If you work a little harder, you can find a very good deal. Fred Soule is the media’s recent example. He sold his Fort Wayne, Indiana home after two weeks on the market. He only got $5,000 less than he had hoped and totally broke even when he bought another home on the other side of the city. When he knew what his house was selling for, he quickly negotiated a good sale on the house he wanted. He believes the sale was worth it. Not only can you make a decent house swap, if you have the credit and find a bank or loan office that is in good shape, it is also a great time to refinance.

Barry Zigas, director of housing policy for the Consumer Federation of America in Washington, D.C . has the best piece of advice for homeowners right now, “Your home is not an ATM, and your home is not an investment. Your home is a place to live…. It’s probably not the time to buy a house.” Home values are the worst in the Fort Myers, Florida area and some areas in California like Sacramento and Riverside/San Bernadino, just south of Los Angeles. The values in Fort Myers dipped a whopping 59.1% and the affected areas in California are down 34%-39%. Some towns are seeing home values increase. Cumberland, Maryland is seeing great increases where median prices soared 21.1%. The major Iowa tri-city (including Davenport, Iowa, Moline, Iowa, and Rock Island, Illinois) saw an increase of 13.8%. Some Midwest areas like Columbia, Missouri, are up 6%.

Word got around that the economy was showing the signs of revival. The optimism of the experts has quickly been reflected in the buying patterns of investors and the economy is beaming. Yesterday, the Dow Jones industrial average was at a 235 point high, the biggest daily point gain in over a month. This single handedly makes up for three-quarters of last week’s economic plateau and the losses that followed.

An incredible profit report from Lowe’s Company showed increased homebuilder sentiment and positive expert feedback throughout the last few weeks revived investors’ confidence in the impending economic rebound. Stocks began to fall sharply last week as worries that the stocks were rising too fast, reflected by a still low housing market, interrupted the market rally slightly last week, creating a self-fulfilled plateau that we seem to be exiting as buyer confidence is restored.

Analysts believe that stability in the housing market is important to restoring the economy, which will only happen when loan availability is restored and housing prices can go up due to higher demand. “There’s a realization that things are going to get better,” said James Cox, a managing partner at Harris Financial Group. “That’s the main theme of the market over the last couple weeks.”

Despite the recent rallies and yesterday’s upswing, the market is expected to remain volatile as more cautious investors see a rising tide in the economy and confidence is restored. They want to see signs that the economy is actually recovering and not just slowing another descent. So far, the rallies in the economy since March have shown enough signs of stabilization to attract some investors. According to Linda Duessel, equity market strategist at Federated Investors, the rally was driven by “less bad” information. “Probably we’ll get bored with that as the months progress,” she said. “We’ll need something better to move the market.”

There was an adequate boost yesterday as Lowe’s, one of the United States leaders in home improvement products, posted an 8.1% gain. Buying accelerated later as the National Association of Home Builders reflected that gain by reporting that May is beginning to reflect the second consecutive high month in the housing market index.

Banks are also doing well in the market right now. Bank of America posted a 9.9% gain. State Street rose 8.5%. Analysts say the ability for banks to raise money, especially by using the rallies in the stock market, is a sign of strength, albeit late, even if added shares make those already in circulation worth a bit less. Sometimes, apparently, less is more.

James Cox believes the banks are stable. “We’re not going to see any of the large banks go down. And now that we have stabilization in the banking system, we can move forward,” he said. Nine stocks rose for every single one that fell in Wall Street yesterday, a very confident boost. The dollar fell against all major currencies and gold prices also fell. As horrible as that sounds, the dollar has been significantly higher than normal, and gold prices have been the highest ever due to the desire of investors to find something a little more stable. It is very normal for gold prices to go up when the market is going down. They are not conversely related, but they do tend to have opposite trends.

Overseas stocks were mixed, mostly following weak corporate quarterly earnings in Asia. Japan tended to fall an average of 2.4%, Britain jumped 2.3%, and Germany and France both rose 2.4%. This seems to show more confidence in services and finances over technology and products.

Given the current economic situation that the United States is in, consider and discuss the following.

Question:

Many consider that the government’s failure to act on and help prevent the collapse of Bear Stearns as the starting point of the current financial crisis. In your opinion was the government correct in letting this happen and what should have been done differently. More importantly do you consider this to be the starting factor of the current economic meltdown?

Answer:

The government’s decision to let Bear Sterns fail was not only a warning to financial firms but to buyers and sellers of mortgage backed securities in general. While at the time it was perceived as the right thing to do, because the government was not fully aware how connected the large financial firms had become, it unknowingly led to a sell off in the credit markets.

While I personally believe that Bear Stearns as well as other institutions should be allowed to fail, I personally would not have let the firm collapse. Warning or not, their where several indicators pointing to the possible collapse of the credit market due to a fail in the housing market largely because of the enormous amount of credit default swaps that had occurred between large financial institutions.

Have an idea or want us to use your pitch in the next issue? Then, make a submission on The Pitch Page.

This also comes just a day after Bernake said that the government would not allow big banks to fail. Also, the government has already taken a huge stake in both Freddie Mac and Fannie Mae since both companies hold the majority of United States mortgages, including those that have or are failing.

Both Freddie and Fannie (who asked for $15 billion just a few weeks ago) will get the money that they are asking for. The treasury department pledged $400 billion.

Freddie’s request for $30.8 billion in federal aid comes on top of $13.8 billion the McLean, Va.-based company received last year. Freddie Mac was forced to go back, hat-in-hand, because its net worth — the value of its assets minus the value of its liabilities — fell below zero.

The recent loss was driven by $13.2 billion in hedged trades, $7.2 billion in credit losses from the declining housing market conditions and $7.5 billion in writedowns of the value of its mortgage-backed securities. The company also took a charge of $8.3 billion for now-worthless tax credits.

Source

To help with the decrease in profits, Lowe’s will be opening fewer stores in 2009.

From the AP:

The nation’s second largest home improvement chain said consumers continued to shy away from big-ticket items such as new flooring, appliances and cabinetry, particularly as they try to shore up their savings and find it more difficult to tap into home equity lines of credit.

Sales of discretionary categories — particularly for items such as home organization, plumbing, lighting, and windows and walls categories — fell to decade lows.

More than 2 million households received foreclosure filings last year and some economists estimate as many as one in four homeowners owe more money on their mortgages than their properties are worth. President Barack Obama has proposed a $75 billion plan to curb foreclosures and ease the housing slump that helped ignite the recession.

“Anytime you can put the consumer in better financial shape, by having more disposable income in their pockets, lessening their debt burden … all those things help,” Lowe’s Chairman and Chief Executive Robert Niblock said Friday. “Is what you’re seeing going to be enough to cause a dramatic turnaround in the environment? No, we don’t think so. It just makes the environment less bad.”

Source

From the AP:

Nationwide, more than 860,000 properties were actually repossessed by lenders, more than double the 2007 level, according to RealtyTrac, a foreclosure listing firm based in Irvine, Calif., which compiled the figures.

Moody’s Economy.com, a research firm, predicts the number of homes lost to foreclosure is likely to rise by another 18 percent this year before tapering off slightly through 2011.

I suppose the good news in the article is that it will be tapering off in the future, and decreasing this year from last year.
Source

Until now, the nation’s most serious home price declines have been in low-cost markets that were dominated by subprime mortgages, and in overbuilt markets such as Florida, California, and Las Vegas, where residential values are sliding fast toward pre-housing boom levels.

The Commerce Dept. reported Dec. 23 that November new-home sales in the U.S. fell to their lowest level in 17 years, down 35.3% compared with November 2007. And the outlook is even bleaker. The same day, Credit Suisse (NYSE:CS – News) forecast that more than 8 million homes will go into foreclosure over the next four years, or approximately 16% of all U.S. households with mortgages.

The housing market is expected to continue the fall next year, but hopefully we will see a bottom to housing prices and an increase in lending…hopefully.

Source

His reasons include that unemployment is nowhere near the 33% it was then, and the housing market should finally bottom out around the end of June next year.

He also lists safeguards put in place by the government to make sure something like that never happened again such as the FDIC, Social Security and unemployment insurance.

The companies can also apply to receive aid from the $700 billion bailout rescue package Troubled Assets Relief Program.

American Express dug itself into the hole it is currently in. After all, last year when the housing market started to go belly-up, AmEx was still giving out credit like candy on Halloween. Trick or treat?

I can’t believe some credit card companies. I am STILL getting pre-approved offers in the mail. Some of the companies are ones that I’ve read about having trouble…should they really be wasting assets to pre-approve me for a credit card, especially if I haven’t responded to the last 200 mailings?

We purchased our 1,300 sq. ft house last year for around $118,000, and people are paying around $130,000 this year for houses around our sq. footage and in our neighborhood.

From my own personal observations, demand for houses in college towns don’t change as much when the market in whole declines… People are always moving in and out at a steady rate. Houses sell better over the summer, so people will have a place to live when school starts in August. More houses go up for sale in late spring when people are getting ready to graduate.

This seems like common sense though. I would like to see us be able to get more house for our money in another city next year when I graduate. We’ll have to see what happens.

The FBI doing an inquest on a bank bailed out by the FDIC…interesting. They are really pumping a lot of federal government money into this mortgage “crisis.” It really seems like the housing market, which was once one of the largest driving forces of our economy is really in the gutter. I mean, at this point it is common sense.

I feel bad for all those people who have more than $100,000 in an account at this bank. If it’s in an IRA or other fund, they get more…but for those people everything above $100,000 in just a checking or savings account, they only get half of it. So if they have $200,000, they only get $150,000. Ugh.

I just don’t know when to expect to come out of this. Personally, I’d like to see a slumping housing market through July of next year, because that’s when we’re planning on moving. I would like to see the economy take a turn for the better before then, but for my personal economy…July.