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8 comments:
Howdy y'all, I've been lurking for a while and finally got a blogger account. This is definitely one of the better bubble blogs out there...well-thought out and well-reasoned.
There was an interesting article in the print edition of this morning's Virginia Pilot (VA Beach area) about military folks who were being stripped of their security clearances and barred from deployment overseas because of excessive debt loads. According to the article (which is not yet on their website, check later at pilotonline.com), sailors with higher than 40% of their annual income in debt are stripped of clearances because they are a security risk.
The article mostly went on about payday lenders and overspending, but I have to wonder how many of them overextended on a mortgage? Seriously bubblicious places like San Diego (navy), Tuscon (army), DC (everything), etc will have a large number of military folks buying property. No doubt some of them bought with ARM loans or no-doc or I/O...I know a couple who did, so it's out there.
The really scary thing for these folks is that in most places of business, you can't lose your job if you get really deep into debt. Your life might be miserable, but Microsoft isn't going to fire you if you have persistent debt problems. In the military, you can lose your job if you have excessive debt...which only makes the problem worse.
Any thoughts? Anybody besides me think this is a bad, bad thing?
slinky,
Yes, military members, especially officers, can get in hot water by taking on too much debt.
Two reasons:
First - non-payment. That reflects poorly on the Navy. If a letter of default or non payment makes its way to the Commanding Officer, the officer in question will be answering some very difficult questions.
Second - blackmail. For various security clearances, the FBI goes up the service member's ass to the third bend looking for dirt. They do this to determine if the member is a risk for blackmail, or financial leverage. The KGB was very active in recruiting inside the service. One way they would gain an inroad to someone was finding people that live beyond their means, or were over ambitious with their money. It starts with something small, and eventually spirals into something big. When I got my TS clearance, the FEDs were very invasive.
As for Navy towns...
If you have a big, diversified Navy town, like San Diego, military will have a smaller impact. However, if you find a small Navy town that is quite bubbly (Bremerton-Silverdale), any hiccups in the buying habits of the servicemen, will just crush the local economy..
I was in a squadron with 78 officers, and we all made more than our counterparts that drove ships and submarines. Of the 78 of us, only 3 owned a home. Now, just about every officer, chief, and petty officer above E-5 owns a home.
This isn't going to be pretty when these homes become illiquid at the prices they need.
Welcome to SB.
Eleua--thank you, I knew that (used to have a secret clearance). I live in Norfolk, which if it seceded from the US would still have the largest navy in the world. Unfortunately, this was and is a one-horse town. Norfolk/VA Beach is bubblicious, no doubt about that. I've lived here coming up on 4 years and prices for homes have just about doubled or more in that time frame.
I foresee a LOT of navy folks around here in big trouble when they PCS and can't sell their houses. Rents around here aren't all that high, and there are plenty of better values renting than buying. I expect that Bremerton is in the same boat (as it were).
I believe anyone that has a clearance (I currently have a TS) is subject to a background investigation every so often (mine are every 5 years). If you are swimming in debt, you are more susceptible to the influence of money and particularly money from corrupt entities (ie foreign govts). SEE Robert Hansen.
They also want to make sure you are not living above your means, IE living in a McMansion driving a Bentley when you are making 2,000 a month.
The rest of the wardroom said he HAD TO BUY and couldn't lose.
The ENTIRE TIME I was in the USN, this conversation NEVER happened. It was considered foolish to buy a house. We had the equity bubble, and many were doing that, but nobody bought a house, except three. That's about 2%.
If the KGB were still in business, they would have it so easy.
Wanderer,
Yup. This has ugly written all over it.
PCS orders will really suck, if you are upsidedown on a house you can't afford. What then? Move into the "Q" and get your VHA stopped? Bad idea. Rent some other officer's condo? That's not any better. My bet that the wife-unit will be pissed that her home is 3 time zones away, and they are still paying for it.
As if the Navy doesn't have enough divorces...
That's one reason I think small Navy towns are really going to get smacked. It all works, right up to the point where houses are illiquid at the price the seller needs.
Oh, yeah, one more thing. As the rent goes down, so does the VHA. Hmmm.
Had I stayed in, I would be a Commanding Officer right now (assuming I bought off the board). I could not imagine having all my JOs and NCOs parading through my office with Notices of Default, divorce problems, requests to extend in the command, moonlighting, etc.
All that, and the annoying collateral duty of keeping 12 Combat Air Crews combat ready, and 11 hangar queens airworthy, would not be worth whatever COs make. One other thing...I hate golf.
My buddies tell me what todays JOs are like. Since the airlines imploded, nobody wants to go aviation, and all the good officers are trying to get staff-O jobs.
If the next war will be fought with PowerPoint, we are in good shape.
It's not just small Navy towns. Norfolk is a HUGE navy town and it's going to get witch-slapped just as hard as, say, Bremerton. I've lived here coming up on 3 1/2 years, and house prices have nigh onto doubled in that time. There are TONS of condos going up all over the place--on the order of 1500 units that I know of off the top of my head going up in the immediate downtown Norfolk area alone. In the 'burbs, new houses are sprouting like weeds. That VHA increase 2 years ago was given on the basis of a "low-vacancy housing area" is about to crash and burn.
Scary, scary stuff.
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