Back before the housing market imploded, there was a beast that roamed the streets of suburban America. Its name was HELOC: the home equity line of credit.
When lenders thought home prices would never stop rising, they let homeowners take equity out of their home through a line of credit, which they could use it for all kinds of purchases. But since the crisis, HELOCs -- a form of second mortgage -- have been deep in hibernation. Now, they are slowly waking. And they're hungry.
HELOCs aren't anywhere near as prevalent as they were pre-crisis. But they were up 8 percent in the first quarter over last year, in part because banks are marketing HELOCs to homeowners again.
Home prices are rebounding and the credit market is loosening, but inventories are still low, says Steve Cook, the editor of Real Estate Economy Watch: "So I think one of the things we are seeing now is a lot of homeowners deciding to remodel because now they can."
Andrew Pizor is a staff attorney at the National Consumer Law Center. He says after the financial crisis, the Consumer Financial Protection Bureau (CFPB) changed regulation and disclosure rules for traditional mortgages, but not for HELOCs.
"The CFPB said they are going to be working on that down the road, but they haven't gotten to it yet," says Pizor.
Pizor doesn't recommend HELOCs for large one-time purchases, but he says they can be a good option for establishing a long-term line of credit, as long you understand the terms of the loan.
The Seattle city council is expected to approve a proposal to raise the city’s minimum wage to $15 an hour. That would be the highest rate for any large U.S. city, and would tie for the highest in the nation.
Surprisingly, the hike in pay has some unusual backers: leaders in the business community.
“The business community and the Chamber did not come out of the box saying, ‘Hell no. Let’s defeat this,’” says Howard Wright, CEO of the Seattle Hospitality Group. He also represented employers as co-chair of the committee.
Wright and other business-types want to avoid what happened in the nearby town of Sea Tac. When Sea Tac raised its minimum wage to $15 an hour, businesses didn’t have enough time to prepare. In order to afford the new wage law, employers cut benefits and laid off workers.
In Seattle, companies would have more time to get ready -- Small businesses would have up to seven years to implement the higher minimum wage.
Mayors in other cities like Chicago are also talking about adopting a higher minimum wage.
Brookings Institution senior fellow Alan Berube studies income inequality. According to Berube, “Seattle is out front of what is quickly becoming a national trend of big cities looking at local minimum wages as a way of addressing income inequality and keeping their cities affordable for low and moderate income citizens.”
The ink is drying on contracts that will commit upwards of $400 million taxpayer dollars to a new stadium for the Atlanta Braves. The baseball team is supposed to pay some of that back in rent, but last week’s deal looks to many critics like an enormous public subsidy for a profitable business.
If you feel like this kind of thing happens more often in the American South, you might be right.
Take this year’s race for governor in Georgia, for example, where the Republican incumbent’s first TV ad is running.
“Governor Nathan Deal lowered taxes on job creators,” the hushed narrator intones. “Now, for the first time in history, Georgia is the number one place to do business.”
Number one according to whom? Site Selection magazine, a publication dedicated to "corporate real estate strategy and area economic development."
Just in case they don’t have that one in your dentist’s waiting room, the magazine praises Georgia for its generous incentives – like a 30 percent state tax credit for filmmakers. Local governments also spend millions on infrastructure to lure factories and the like.
Funneling taxes to private enterprise is an old habit in the South, says James Cobb, a historian at the University of Georgia.
“After the agricultural economy was pretty much rend asunder by the Civil War, the southern states began to provide incentives and sweeten the deals to attract outside capital that was supposedly going to bring the South back to prosperity by urbanization and industrialization,” Cobb says.
The freebies were meant as a temporary kickstart, he says. But by the 1950s, northern governments started using the same tricks.
“And then, in the last generation, the global labor market has become so competitive that it’s been very hard to sort of ditch the subsidy approach,” Cobb says.
That’s despite the fact that handouts to business are incredibly unpopular with southern voters. That includes Cobb County, the Atlanta suburb that’s trying to lure the Braves. Last week, opponents had to be dragged out of a public hearing on the stadium deal.
Local politicians say any other community would bend over backwards to land such a big catch.
But, Cobb says, there comes a point where you become so business-friendly, there are no goodies left for everybody else: "You throw over so much in public expenditures in various things, including education, to keep taxes down, that you reach a point of it being self-defeating.”
It's worth noting that back in the 1990s, Site Selection magazine was calling Mississippi the best state for business. Twenty years later, that state isn't exactly an economic powerhouse.