What’s Up with Housing?

New Orleans      Even as the stock market sets new highs week after week, the warning lights are lit up on the problems in the housing markets. 

We noticed two things recently of interest in the Wall Street Journal.

First, delinquencies are rising.  The top markets reflecting the biggest increases in the rate of delinquency were fascinating:

* Stockton, CA
* Las Vegas, NV
* Merced, CA
* Vallejo-Fairfield, CA
* Riverside-San Bernardino, CA
* McAllen-Edinburg, TX
* Fort Smith, AR
* Ann Arbor, MI
* San Luis Obispo-Paso Robles, CA
* Visalia-Porterville, CA
* Fayetteville-Springdale, AR
* Modesto, CA

7 of the top 12 are in California, mainly in the Valley.  2 are in Arkansas in Wal-Mart country.  1 is in Nevada and one in the Rio Grande Valley area of south Texas.  In the California cases, I would bet money the ARM is being put on a lot of working families and the escalating costs are squeezing people as the rates go up.  ARMs are adjustable rate mortgages. 

Remember, these cities are where the rates are increasing the fastest, and not necessarily where the delinquency rates are the highest!

The other squeeze was in another chart that came across my desk on 27 major real-estate markets where there was an analysis of housing prices, employment outlook, and loan payments overdue.  Some of this adds more detail to the other figures.   Of the 27 only Houston, Charlotte, and Raleigh-Durham showed increases in housing prices.  The rest were going down hard. 

Overdue loans were escalating rapidly in markets like Atlanta (3.83%), Dallas (3.90%), Denver (2.74%), Detroit (3.94%), Las Vegas (3.15%), Nashville (3.23%), and Houston (2.92%). 

Many of these declines were in the face of significant project job growth in Dallas, Houston, Vegas, Orlando, and Phoenix. 

The pollsters can keep saying that the economy is not a problem for citizen-voters, but in some of these cities, which have been bastions of Republican support; it’s hard for me to believe that the burghers are not sweating.  There are clouds on the horizon.

October 31, 2006


Wal-Mart’s Bad Month

New Orleans         October has not been the best month for our friends at Wal-Mart’s. It turns out to be hard to run the world after all. It also seems that maybe Mr. Sam’s advice to keep out of politics and hunker down in Bentonville may not have been hopelessly old school, but may have been based on a recognition that Wal-Mart really did not know what it was doing outside of the hills. Look at just some of the mess our guys have stepped into in recent weeks:

* In the middle of October a jury in
Pennsylvania ordered the Wal-Mart to pay
$78.5 million for breaking the labor laws
by forcing employees to work through rest
breaks and off the clock. Whoops!
* The company sent a mailing to all of its
employees urging them to vote and
represent the company’s interest and
defense. This ham-handed political play
provoked articles everywhere mentioning
the obvious that perhaps this was just a
bit coercive to try to tie a paycheck to the
ballot box.
* The company announced its second firing
from the faux Wal-Mart support effort.
Andy Young had been the pitchman for
this outfit and self-destructed. The PR
man Wal-Mart had on the campaign also
had to resign a couple of days ago,
because of course who do you think was
behind the leeringly, racist TV attack ad
on Harold Ford’s bid to be Senator in
Tennessee? The Wal-Mart contractor of
* Wal-Mart’s effort to win a charter for an
industrial bank in Utah seems finally (as
we have often predicted here!) to be
getting obituary notices even in the
Wal-Mart fanzine, also known as the Wall
Street Journal, which in a detailed report
surveyed exhaustively how many
missteps of arrogance in general and
tone-deafness in particular, the company
had made. The obvious problem of
refusing to voluntarily put itself under
community re-investment (CRA)
standards, as HR Block and others had
willingly done, along with ticking off the
community bank associations made their
effort pointless.

For all of the talk about the “new” Wal-Mart, this still remains a company that seems so trapped in its insulated corporate culture that it is unwilling to recognize that the public does something other than walk down their aisles with shopping carts. Sometimes in fact the citizens vote, think, and take names, and one of the ones they are taking down more frequently is Wal-Mart’s. And, that’s not so good for the company in October.

Dolores Hummel and other plaintiffs celebrate their award.