Article

2009-10-16 Economy

Foreclosures: 'Worst three months of all time'

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Posted by Fred 2009-10-16 00:00|| || Front Page|| [11130 views ] Top

#1 In ever more frequent cases, delinquent borrowers want out of the mortgage worse than the lenders.

As ludicrous as it sounds now, the banks' (and that is pretty much every bank in the western world) business model was that real estate prices would never decline decline significantly - enough to make borrowers walk away from the homes they had bought with borrowed money.

This will end up with basically all banks insolvent, a collapse in in real estate financing, and a collapse in house prices.

Posted by phil_b 2009-10-16 01:25|| 2009-10-16 01:25|| Front Page Top

#2 I would be interesting to know the demographics of the defaults. %Caucasian, black, asian, muslim, hispanic and especially illegals. If the loan is to a fake ID why should they give a damn.

Posted by tipover 2009-10-16 03:36|| 2009-10-16 03:36|| Front Page Top

#3 hispanic and especially illegals. If the loan is to a fake ID why should they give a damn. Posted by tipover

The term "illegals" is racist. Kindly use the term 'undocumented democrats.'

Posted by Besoeker in Duitsland 2009-10-16 03:41|| 2009-10-16 03:41|| Front Page Top

#4 This will end up with basically all banks insolvent, a collapse in in real estate financing, and a collapse in house prices.

GOOD.

Posted by Redneck Jim 2009-10-16 06:05|| 2009-10-16 06:05|| Front Page Top

#5 Phil nailed it.

The stock market rally is being touted as proof of recovery. It is not, for four reasons.

1. In what are called "constant dollars", the market is only worth a little more than what it was at its lowest point owing to a drop in the currency value of the dollar.

2. Real estate values have plummeted in terms of their face price, but also due, again, to the drop in the value of the dollar. Real estate will NOT have a true increase in value for many years and may experience futher declines both in face value and in real terms.

3. Unemployment will continue to grow - unless businesses are more reassured that they won't be taken over by the government or have a stable (going forward) tax environment, they will not hire, and who can blame them?

4. Business cannot trust government to resist the impulse to increase taxes or to implement regulations for which compliance is costly (a de facto tax), thus making them unlikely to engage in any large capital expenditures.

If you combine all these things, you get a lot fewer people seeking loans. Bye-bye banks in that environment.

Posted by no mo uro 2009-10-16 06:11|| 2009-10-16 06:11|| Front Page Top

#6 If wages are not rising, then house price rises are a bad thing.

You want constant affordability, and price rises from wage gains you got falling affordability and a bubble.

Posted by Bright Pebbles 2009-10-16 08:05|| 2009-10-16 08:05|| Front Page Top

#7 The Fed and the Administration are inflating the economy. They're going to have to jack up interest rates now or later to fight it eventually. That will flatten or kill the economic recovery. The later they wait the higher the interest rates will be before they plateau. Either way, all those adjustable rate mortgages are going to be hammered and the economy will see a second major wave of defaults.

Posted by Procopius2k 2009-10-16 08:20|| 2009-10-16 08:20|| Front Page Top

#8 I vaguely remember my pop buying a new middle-class house for the family 30 years ago for approx. $35K. He had a middle-class salary job that paid approx. $30K/year.

Today an equivalent house would probably be priced at $250,000. And today an equivalent middle-class job would bring approx. $50-60K.

I think housing prices still have a LONG way to fall before reaching any natural equilibrium.

Posted by Scooter McGruder 2009-10-16 08:38|| 2009-10-16 08:38|| Front Page Top

#9 Scooter,

Check the increase just in square footage over the years. That's not including the number of rooms, bathrooms and size of garage. People have been 'expecting' something bigger and tricked out more than what our fathers were looking for. Our fathers were looking for a place to live. And the banks and other lending institutions have played on that 'expectation' with developers and builders to end building 'affordable' housing, that is consistent with the economic means to payoff. Housing stop being a place to live and became an 'investment'. Builders and buyers started to play the margin game with houses.

Posted by Procopius2k 2009-10-16 09:41|| 2009-10-16 09:41|| Front Page Top

#10 P2K, and all the levels of gov't loved it because they could raise taxes. What good is a Prop 2 1/2 type limit if the assesment rises exponentially? Has anyone heard of property taxes falling because of the decrease in value? No, I didn't think so.

Posted by AlanC">AlanC 2009-10-16 10:16|| 2009-10-16 10:16|| Front Page Top

#11 Creative loan products offered through 2007 inflated house prices. Your $2000/month went from buying $350k of house to $700k of house. Result was that prices more or less doubled. The market can't recover until prices come back down, and right now the most efficient mechanism for prices to come down is foreclosure. It is not objectively efficient -- foreclosure takes about a year start to finish. But it's the best option out of many bad options.

Posted by Iblis 2009-10-16 10:52|| 2009-10-16 10:52|| Front Page Top

#12 P2K, and all the levels of gov't loved it because they could raise taxes.

Yep. Even though we have a building ceiling where I'm at [can't build new unless you can show where the developer can find new water], the outlook from the pols is no further than their nose. Instead of approving four 125k houses on a quarter acre lot, they'd rather approve a half million dollar house on an acre lot. Now while the county is OK with the wash on the property tax, the city which is dependent upon a fractional sales tax gives up four consuming households for one, but can't figure out why their revenue stream is continuing to go down.

Posted by Procopius2k 2009-10-16 11:07|| 2009-10-16 11:07|| Front Page Top

#13 P2K, forty years ago I lived in a house like the one you describe. Seven of us in a 3 bedroom ranch, 1 bathroom, small living and dining area, small kitchen, unfinished basement.

It did have a big yard.

My father definitely was looking for a place to live, and I'm not complaining.

I'd still rather have the house I have today even if I paid a lot more for it than Dad paid for his.

Posted by Steve White 2009-10-16 13:46|| 2009-10-16 13:46|| Front Page Top

#14 My Dad was a Civil engineer, worked for State of Alabama Highway department, I remember him laughing that he bought a brand new house for exactly one year's salary $13.000.00, yup thirteen grand.

Nice house too, 2 Br 1 bath and a half basement (On a sharp hillside)the only thing that I hated was there were 27 Pine trees in the (Small) front Yard (I had to mow the Yard, I couldn't get between the trees, and this waas before weed whackers and string trimmers existed) and it was halfway up a relatively steep hill (I rode a bicycle those years) good Muscle dveloper.

Posted by Redneck Jim 2009-10-16 13:53|| 2009-10-16 13:53|| Front Page Top

#15 AlanC:
It is bad enough out here that my home's tax valuation went down by almost 10% in the last two years.

Oddly enough, it hasn't lowered my tax liability.

Posted by whitecollar redneck 2009-10-16 13:53|| 2009-10-16 13:53|| Front Page Top

#16 My nephew's son lives in south Florida and he said a lot of people just walked away from mortgages--just moved out one day and left the house. There is also a problem with a lot of these houses and that is they were made with Chinese wallboard which emits toxic fumes rendering the houses uninhabitable. The nephews son has this problem with his house. A pox on the housing market and a pox on the Chinese.

Posted by JohnQC 2009-10-16 15:23|| 2009-10-16 15:23|| Front Page Top

#17 A particular pox on the Chinese, John.

And the idiots who placed price above everything else. :-(

Posted by Barbara Skolaut">Barbara Skolaut 2009-10-16 18:10|| 2009-10-16 18:10|| Front Page Top

#18 Would that be the great pox, Barbara?

Posted by no mo uro 2009-10-16 21:09|| 2009-10-16 21:09|| Front Page Top

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