Builders have stopped building, but not everywhere.

Fewer homes are being built across the United States. New starts fell of 71 percent between 2004 and 2009. 2004 and 2005 were peak years for new home construction in the United States. In both years, more than 2 million new homes were built. Last year, only 583,000 new homes were started.

Still, homes are still being built and in some states, the numbers are actually going up. Home construction is up more than 12 percent in North Dakota and almost two percent in Alaska.

This chart shows the percentage of new homes started in 2004 compared to those started in 2009 on a state-by-state basis. It is a randomly chosen set of states.

This chart supports the inference that the ebbs and tides of real estate – housing starts, foreclosures, mortgage financing – are driven by employment. Jobs are scarce in Nevada (14.4 percent), Michigan (13.1 percent), and Florida (11.1 percent).  They aren’t much easier to come by in Georgia or Arizona, either. Indeed, Montana (7.7 percent) is the exception to the rule.

The Dakotas are just the opposite. The Bureau of Labor Statistics published data this month that shows how well both states are flourishing. North Dakota is slightly more fortunate, with less than 1 in 22 workers unable to find a job. It is the same in Nebraska (4.6 percent) and Oklahoma (7 percent). Washington, DC has fewer jobs, but it has many high-paid jobs.

South Dakota and North Dakota were exceptions to the subprime mortgage lending mania that gripped the country from 2001 to 2008.

Louisiana may be operating under an entirely different set of pressures. Housing starts haven’t been very popular in New Orleans since Katrina. The rest of the state suffers from another common problem: the cost of new construction is far higher than the price for a existing home. Housing in rural areas, no matter what state they are located in, seem to be given to this conundrum. That is certainly the case in parts of North Carolina.

Still, the real message of this chart should be to say that there is not really a national home building crisis. The problem is more of one that afflicts some regions. In many ways, it is an expression of the free market finding its equilibrium.

Tomorrow is the annual shareholders’ meeting for H&R Block. I will be there, speaking out against the company’s intentions to continue to offer RALs without the debt indicator.

Block is unique in the RAL space, because it has a line of credit with a bank partner that is large enough to satisfy any level of RAL funding that the company seeks to facilitate with its clients.

The Competition

Pacific Capital was forced to cease offering RALs at the end of last year, due to an order from their (more…)

Montana may be the next state to force payday lenders out of their state. A broad cross-section of consumer advocacy groups are mobilizing on behalf of Initiative 164.  I-164 is on the November ballot. It would cap interest rates on short-term loans at 36 percent.

The goal is to create a usury law that harms payday lending. While it would not make the practice illegal, a cap at that rate would likely cause payday lenders to close their shops in the state.

The Montana Consumer Finance Association and Bernard Harrington, treasurer for the Coalition for Consumer Choice Against I-164 petitioned the Montana Supreme Court to invalidate the ballot initiative. On August 18th, The Supreme Court voted 4-2 to turn down the request that would have either taken I-164 off the ballot, or rewritten the terms of its language.

Right now, payday lenders can charge $15 for a two-week loan of $100.  In such an instance, a borrower writes a post-dated check for $115 and then is given a loan of $100.  Underwriting is minimal. Lenders want to see that a borrower has a paycheck coming that will pay at least that much.

The new law would cap fees at $1.38 for $100.

The law would make credit far more affordable for borrowers. Such a loan would add a lot of flexibility to (more…)

The big banks are creating ways to extract fees from their customers. High fees for domestic wire transfers are a new iteration on this emerging theme.

Wire transfers are generally the safest ways to move money through the banking system. In 2007, approximately $2.7 trillion changed hands through FedWire transfers in a typical day. Although banks charge a fee, the transfer is handled through the Federal Reserve. It provides the service to its members. The Fed charges banks $75 per month for the right to participate in the FedWire system. It also imposes a per transaction fee of between 19 and 30 cents per transfer, depending on the monthly volume of the institution.

• Wachovia introduced a $15 fee for domestic wire transfers on July 1st, 2010.
• Since February 2010, Bank of America charges $12 to receive a domestic wire transfer and $25 to send one.
• Citibank charges $10 to receive a domestic transfer and $20 to send one. For their employees, they halve the costs.
• Chase acknowledges that it does charge a fee for a domestic wire transfer, but does not make the pricing available on its site.

Chase says that there is no monthly fee for having the right to be able to utilize wire transfer services. Perhaps in the future, Chase will try to get consumers to cover the $75 that the bank is forced to cover to get its wire transfer privileges from the Fed.

That spells out the basis for a low-cost, high margin service: spend $0.20 cents and then charge $25. Banks used to cover that service for free. Now, they aren’t willing to eat the twenty cents. Instead, they’ll charge you fees that amount to a profit margin of approximately 5900 percent.

During the last earnings season, several banks said that they were going to find more ways to charge consumers for retail checking services. Jamie Dimon and Brian Moynihan were among the most vociferous.

The Big Banks still have a long way to go before they can be considered the most egregrious fee-chargers in the banking business. City Holdings and TCF Financial both generate more than 25 percent of their core revenue from fees on checking accounts. By contrast, Bank of American produces 12 percent of its revenues from fee sources.  For the other big banks, the number is below 11 percent, according to data from Sandler O’Neill.

News today suggests that the problems with foreclosures at GMAC all come back to one employee.  GMAC says that Jeffrey Stephan is still working for the company.

Wait a week. He is so fired.

The news could be bigger than first imagined, because it may extend to foreclosed properties serviced by GMAC on behalf of the GSEs.

According to the Washington Post, one man (“the affadavit slave“) was charged with signing off on every foreclosure. He had a staff of thirteen, but this individual was responsible for verifying the legitimacy of the documents. He was expected to have the documents notarized, as well.

It seems like a mountain of work. Stephan was charged with signing 10,000 foreclosure documents per month. That is about five hundred foreclosures for every business day in the month! Put GMAC loan document reviewer next to Calcutta sewer cleaner and Saddam Hussein food tester as one of the World’s Worst Jobs.

The upshot is that the foreclosure crisis is about to enter into the News of the Weird, and it could become one more problem for the nation’s housing markets.  Imagine if thousands and thousands of REO properties are suddenly frozen in space. They can’t be sold, and in some instances, GMAC is going to have to unwind homes that have been sold.  There are already 15 months of homes on the market, and millions more in the shadow inventory.