Keely's Broker Blog

Recessions Part II

Recessions

Tonight after hearing Anne Coulter declare that recessions last 18 months, I did a little research online about recessions.  Here's some of what I learned:

There have been 11 recessions since WW2

In the first half of the 20th century, recessions were typically half as long as economic growth periods, meaning the average recession lasted a year and a half. The last two recessions, not including this one, have lasted only one-tenth as long as their corresponding expansions, making their length only eight months. I guess Anne was right on the 18th month timeline anyway.

What causes recessions?  Sometimes the economy just 'runs out of steam' and sometimes it gets a stomachache from overindulging, like it did with commercial real estate in the 80's, the tech sector in the 90's, and residential real estate in the 2000's.  Reductions in the availability of a key economic input - like oil- can cause the economy to falter too.

We usually look to the federal government to prevent recessions, but three problems make this goal difficult. One is simply how to know a recession is occurring or is about to occur. Second is deciding what to do about a recession. By its nature, public policy takes time to debate and formulate. Third is the time lag it takes for government actions to have an impact. Once any government policy is developed and agreed to, between six and 18 months may be needed for the "medicine" to work its wonders.

Recessions appear to be coming about once every eight to 10 years. This means each of us has to decide how to live through them until better days come.

 

Viaduct Tunnel, Uh. . .Wha?

Would you enter an underground 2 mile tunnel that lays along a major earthquake faultline?

Must Watch Video

Over 1 Million People Lost Their Homes in 2008, Worst is Behind Us. . .

Foreclosures.com came out with its latest numbers today, a 63 percent rise in foreclosures for 2008, with a total of about 1 million throughout the year. The foreclosure process was begun on 2 million during 2008.

Alexis McGee, president of Foreclosures.com, believes the worst is behind the housing market. She’s says housing affordability is better than it's been since 1994, when a mortgage on a median-price home equaled 18 percent of the median income. Dropping interest rates on mortgages have improved this even more. Plummenting housing construction and a growing US population ultimately mean an increased demand for housing. Unemployment, while rising sharply, is still below where it stood in the 1990-1991 recession and well below the highs of the early 1980s.

“Don’t expect another tidal wave of foreclosures this year, either, just because more adjustable rate mortgages are due to reset,” McGee 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.”

Do I have to pay for Title Insurance?

Question: I'm refinancing my mortgage, and my lender tells me that I need to get a new title insurance policy, which will cost more than a thousand dollars. We haven't made any changes to our home, and there aren't any outstanding liens on the property. Is there any way around this fee?

Answer: There's no way to get out of paying for title insurance altogether. All lenders will require you to purchase a new policy when you refinance, since your current one is only in effect for the duration of that mortgage. This fee is normally 0.5% to 1% of your loan amount.

But if you ask title insurance providers the right questions and shop around for the best deal, you may be able to knock hundreds of dollars off the price.

If it has been less than 10 years since you got your original loan, contact your title search company and ask if you can have your title reissued (also known as a special refinance or substitution rate). This can cut the price by 40% to 70%, depending on whether you use the same lender or a new one and how long it's been since you last had a title search on the property.

Also ask about any other discounts they might provide, such as reduced fees for public service employees or seniors.

You can also ask a title search provider to perform a "quick" search, which mostly hunts down new lien problems that may have occurred since the most recent title search. A quick search could be about 40% cheaper than getting a new policy.

Finally, try buying directly from a title insurance company. Studies show that agent fees can account for about 70% of the cost of title insurance. You can find a list of local independent title insurance companies at the website of title industry trade group American Land Title Association (homeclosing101.org). Or see if your state is one of the 31 covered by new online title insurer EnTitleDirect.com, which sells directly to consumers.

Unemployment DROPPED significantly last week. . .

New claims for unemployment benefits made a surprisingly large drop last week: the largest drop in 16 years!