Thanks to blog reader The Anonymous for the link to this article from the Washington Business Journal:
"The D.C. area has the second lowest unemployment rate (4 percent) in the country for September among areas with 1 million or more people, according to Department of Labor statistics released Wednesday. The local unemployment rate was up from 3 percent in September 2007D.C. Proper is faring a little worse:
. . .
The D.C. area has 40,7000 more jobs than it did a year ago — the third strongest gain in the country, behind Houston and Dallas. That is an increase of 1.5 percent — putting the region in the top five when considering job growth percentages.
Nationwide, unemployment was 6 percent for September -- a year ago, it was 4.5 percent".
"The D.C. Department of Employment Services said the seasonally adjusted unemployment rate was 7 percent last month in D.C. — 1.3 percentage points higher than the rate last September."
15 comments:
"DC-Area Employment Still Strong"
This is a bright spot and something that should let folks rest a little easier, i.e, if you need a job you can probably find one.
However, unemployment was strong throughout the bubble years. Something caused the bubble to pop and it wasn't a lack of jobs...at least in NOVA/DC/MD.
If the job you have doesn't pay you enough to cover your mortgage then what are you going to do? And, if the job you have doesn't pay you enough to save for a down payment, then what?
IMO, Prices are falling back to a more "normal" level where the cost of your housing is b/w 30% and 40% of your gross income.
Some places are there and some aren't....on a local and national level.
cost of housing between 30% and 40% of your income? Traditional underwriting says PITI is no more than 28%, and total debt is no more than 36%.
The other thing to remember is that job losses are not the first thing to be seen when the economy starting losing steam. We are still early in this recession. The next few months will be key to seeing how this shakes out in this area.
IMO total debt should be under 25% for jumbo mortgages.
doug,
Yup. and CLTV on jumbos should be no more than 65%... Ah the good old days, when expensive houses were reserved for rich people.
and the good old days, when an expensive house was one that offered lots of luxuries and extras rather than the basics, an extra bedroom and bathroom in the basement, a noisy street, and other significant flaws...
ah, the good old days, when an expensive house included a separate house for the butler.
Doug,
Fiscal prudence aside, I would tend to think that the higher your income, the larger the percentage you could comfortably put towards a mortgage payment.
For instance, let's say it costs a person $5,000 a year to eat. On a $50,000 income, that's 10% of your total income. On a $250,000 income, it's 2%.
So everything else being equal, the person earning more money can take the 8% they're not spending on food and spend it on their mortgage.
This is hastily written but the point is, since many basic costs can be considered fixed, the more you make, the larger your disposable income becomes as a percent of your total income.
Random, I know...
My $.02
$0.02
Whether more affluent people could put a larger percentage of their money towards housing is not what banks were traditionally evaluating.
It's the size of the downside risk to the underlying collateral and ability to pay. On a $100k mortgage, the bank can only loose $120k (or so including costs). On a $1 million loan a bank could loose $500k with only a 50% decline in values. Furthermore, both the underlying collateral values and the ability to pay are often inherently more volatile. Many of the upper money earners make a large share of their yearly income in bonuses, or hours billed, or other non-constant streams of income. Thus as a bank, one needs to be more conservative in the amount you lend to such people, or the percentage of their income you use in qualifying them for the loan, or the other investments they have that could be used to pay back the debt in case of default on the mortgage. This higher level of scrutiny being applied to those whose income status "should have" earned them greater respect, makes my one good friend who happens to be affluent, absolutely livid.
Taxes aren't fixed.
Also, I think doug's point was jumbo mortgages -- those that are beyond the Fred/Fan limit for conforming mortgages. There is additional risk involved because they are nonconforming, and hence banks needs be more careful.
Cara, Novawatcher,
I wasn't really concerned with the risk and how banks evaluated and obtained compensation (interest rate, loan to asset ratio, etc.).
Rather, I was postulating that the percentage of your income you can devote to housing increases as your income increases.
If banks have traditionally pegged this value at 28% for the majority of applicants, I would think a strong argument can be made for increasing that percentage for a high end income earner. Doug's was a blanket statement to limit it at 25% for jumbo loans. Granted, jumbo loan != high end income earner but I was only trying to illustrate an observation...
My $0.02
mytwocents: I'm not sure how you could have a high-income earner take out a loan (PITI) that was a high percent (e.g. 40%) and not have it be a jumbo loan.
"The D.C. area has 40,700 more jobs than it did a year ago..."
per ADP's monthly report, the country lost in October:
85,000 manufacturing jobs
31,000 service jobs
45,000 construction jobs
http://www.adpemploymentreport.com/pdf/FINAL_Report_October_08.pdf
quite the contrast. at what point does the govt stop hiring?
I think more information should be provided in the blog!!
New York Jumbo Mortgage
I think more information should be provided in the blog!!
New York Jumbo Mortgage
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