Monday, March 22, 2010

Rockford Is Improving

According to our local paper, fondly called The Red Star, only 25% of house sales in the area are foreclosure sales. Except that I know for a fact that the banks are putting off foreclosure as long as possible so as to avoid as long as they can booking the losses.

In Boone, Ogle and Winnebago counties in February, just 62 of the 243 recorded sales were from bank, mortgage or government agencies such as the Department of Veterans Affairs.

That was the lowest number of bank-owned property sales in a month since December 2008.

The flood of foreclosures in the country has been largely to blame for falling prices, because the homes are usually sold at steep discounts. Real estate experts think prices won’t rise with any regularity again until we cycle through the millions of distressed properties in the U.S.

Unfortunately, February’s decline in foreclosure sales is most likely an anomaly. The number of new foreclosure cases being filed continues to rise.
And we haven't even started to tear into the commercial real estate bubble. It is only a matter of time. And then the housing market will re-collapse.

Good times? Only if you like breaking records. Take unemployment in the area.
Local economists weren’t the only ones shocked by the jump to the Rockford area’s January unemployment rate.

It was the highest year-over-year increase in the nation.

The metro area’s unemployment rate was 19.7 percent, a 5.8 percentage point increase, higher than all 372 metro areas in the country, according to an analysis released today by the Bureau of Labor Statistics. Two other Illinois metros made the list of top five biggest increases: Peoria tied for second with a 5.5 percentage point increase, and Decatur was close behind with a 5.2 percentage point increase.

Rockford also had the fifth-highest unemployment rate of all metro areas, outpacing rust belt mainstays such as Flint, Mich., Elkhart-Goshen, Ind., and Detroit.
As far as the statistics go I'm not counted. I'm retired on Social Security. And my mate? She works for the school system so her job will be one of the last to go.

And what is one of the biggest problems our city faces? Public employee pensions.
The debate over how to balance the city budget without cutting services has now zeroed in on the budget’s ticking time bomb: pensions.

Mayor Larry Morrissey, in his State of the City address earlier this month, got everybody’s attention with one example:

A 25-year-old police officer hired today at base pay and receiving an annual 3 percent wage increase and required step and longevity increases, with no promotions, will pay $304,506.25 toward his or her pension throughout a 30-year career. If the officer or the officer’s spouse lives 30 years after retirement, he or she will receive a total of $5.8 million, from employee and city contributions and investment returns to the pension fund.

Now, multiply that by the number of police officers and firefighters the city expects to employ in the next 30 years. Right now the number is 549.

The city’s annual pension obligation — the amount the state says it must pay into three separate state-mandated retirement systems for its union employees — jumped from $11.3 million in 2009 to $12.8 million this year to a projected $16.3 million in 2011.

But at the same time, money coming into the city’s general fund fell from $112.4 million in 2009 to $110.1 million in 2010.
Let me do the multiplication for you. And to make it easy we will say the obligation is $5 million for 550 people. That would be around $90 million a year in a city whose budget is $110 million a year. A total 30 year obligation of $2.75 billion. Roughly.

That is unsustainable. And that which can not be sustained will not be sustained. I see bankruptcy in the city's future. Some improvement.

Cross Posted at Classical Values

1 comment:

Tom said...

Rockford's housing market has always had large numbers of foreclosures. In my office we have an agent who handles nothing else. Rockford never had as much of a bubble as more popular cities, so I don't expect the low to be as low either.

If you know someone who needs a job tell them to try Lowes. The distribution center is hiring, and they are working heavy overtime on all three shifts. The pay isn't great but it does have all of the benefits you would expect from a large national corporation.