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Post by unlawflcombatnt on Apr 17, 2007 15:20:09 GMT -6
In a Bloomberg story today, titled U.S. Foreclosures Double as Refinancing Gets Tougher, writer Bob Ivry gives the latest information on the housing market collapse. Below are some excerpts. " The number of U.S. homes entering foreclosure in the first quarter doubled from a year earlier as property prices stagnated and owners struggled to refinance mortgages.
Owners of 168,829 homes in the first three months of 2007 received notice that lenders had filed for foreclosure due to failure to pay loans or liens, Foreclosures.com said today in a statement. That compares with 83,154 homes in the same period of 2006, the Sacramento, California-based research firm said.
A four-year high in mortgage payment delinquencies and the failure or sale of 50 subprime mortgage companies, which provide loans to people with poor or limited credit histories, have made credit less available. The inability of homeowners to refinance their debt has added to the rise in foreclosures....
Riverside County, California, had a 172 percent rise in the number of homes entering the foreclosure process in the first quarter, the biggest increase of any county in the U.S., the company said.
Foreclosures.com said other counties showing big increases were Clark County, Nevada, which includes Las Vegas (143 percent); Los Angeles County, California, (92 percent); Miami- Dade, Florida (90 percent) and Cook County, Illinois, where Chicago is located (44 percent).
The findings come as the National Association of Home Builders/Wells Fargo index of U.S. homebuilders' confidence fell to the lowest level of the year in April. The index dropped to 33 from 36 in March, the Washington-based association said today. A reading below 50 means most respondents view conditions as poor....The article goes on to state that in the 1st quarter of 2007, California had the highest number of missed mortgage payments since 1997. The number of default notices sent to California homeowners in the 1st quarter of 2007 increased 148% from the 1st quarter of 2006, according to information from DataQuick. The Housing Market remains in free fall. We are nowhere near a "bottoming out" in housing. For homebuilders, home sellers, and housing speculators, the worst is yet to come. The full article can be found at U.S. Foreclosures Double as Refinancing Gets Tougher
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Post by graybeard on Apr 18, 2007 7:04:45 GMT -6
Foreclosures reaching a four year high means for the most part that the four year up market has ended. Foreclosures were higher four years ago, and maybe for several years before that. Why would a house be foreclosed when it was worth more than what was paid for it? Foreclosures were probably at all time lows.
The bust is coming, for sure; the figures cited don't by themselves support that. GB
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Post by unlawflcombatnt on Apr 18, 2007 16:18:16 GMT -6
According to an article in the Los Angeles Times, titled THE MORTGAGE MELTDOWN, California foreclosures are increasing at a phenomenal rate. There has been an 800% increase in the rate of foreclosures statewide since this time last year. In Riverside County, there's been a 913% increase over last year. In Los Angeles, Orange, & San Diego Counties, there has been over a 670% increase since last year. Below are 2 graphics from the LA Times showing the increase. Below is an excerpt from the article: " THE MORTGAGE MELTDOWN
Foreclosure pace nears decade high
The state's increase could soon pull down home prices and even bring a recession, some economists say.
By David Streitfeld
Times Staff Writer
April 17, 2007
Nearly 900 Californians a week are losing their homes because they can't afford to pay the mortgage — up from about 100 a week a year ago — providing fresh evidence that the housing market's troubles are nowhere near over.
The surge is raising concerns that home prices will soon suffer as a result. The 11,033 foreclosures in the first three months of the year represent an 800% increase over the same period a year earlier.
In addition, 46,760 homeowners were sent default notices in the first quarter, DataQuick Information Systems reported Monday. A default notice is a warning from a lender to catch up on payments immediately or face eviction.
Foreclosures and default warnings are at their highest points in nearly a decade, the La Jolla-based real estate data tracker said.
So far, the effect on home values has been muted. But as the number of move-outs, evictions and forced sales continue to increase, some economists say they will soon start to push prices down.
First to fall will be the low-income communities where marginal loans proliferated, they say. The trend will spread like a virus to more affluent neighborhoods.
The most pessimistic think a housing bust will wound the economy.
"For this rise in foreclosures to be happening in the midst of a strong labor market is truly unique and scary," said analyst Christopher Thornberg of Beacon Economics.
He predicts foreclosures will top out at four or five times the current level — enough, he says, to either induce a recession or at least bring the economy to the precipice...." The rest of the article can be found at THE MORTGAGE MELTDOWN
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Post by blueneck on Apr 18, 2007 18:15:32 GMT -6
Michigan is number one and Indiana number two in foreclosures currently, mississippi is number 3.
Predatory loaning, overextension and major manufacturing job losses are the primary culprits
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Post by unlawflcombatnt on Apr 19, 2007 14:17:14 GMT -6
Michigan is number one and Indiana number two in foreclosures currently, mississippi is number 3. Predatory loaning, overextension and major manufacturing job losses are the primary culprits Predatory loans and overextension are big problems in California as well. They're probably a bigger part of the problem in California, since manufacturing job loss isn't as big a problem as in the Midwest. The real growth industry in California was the housing/real estate/mortgage industries themselves. So the bursting of the housing bubble is going to actually feed-back on itself, resulting in proportionate employment loss as well. I think that greed, connivery, and belief in "get-rich-quick" schemes are bigger factors in California than anywhere else. California's "granola cookie" mentality spilled over onto home buyers. People hear illogical, poorly substantiated claims on how to get rich off housing, and they buy into it - due to wishful thinking alone. More and more Californians are spending over 50% of their income on house payments. This is a trend that simply cannot continue. As the mortgage resets come into effect, foreclosures are going to escalate even further. Also, the California foreclosure rate stated in my previous post is probably too low. Nationwide, there were have been over 130,000 foreclosures in each of the last 2 months. (According to RealtyTrac. See earlier post here at Foreclosure Rate up 33% in 2007). That would give an annualized rate of almost 1.6 million/year. Given that California has 1/8 of the nation's population, at least 1/8 of the total foreclosures would be in California. (It's probably more like 1/5, since the bubble was much bigger here than in the non-coastal areas of the country.) Using the 1/8 number would give an annualized California foreclosure of 200,000/year, or about 16,000/month, or about 3,800/week (not 900/week as previously stated.) It all depends on whose numbers are used. (Again the higher numbers come from RealtyTrac.)
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Post by graybeard on Apr 20, 2007 7:13:43 GMT -6
Thanks for the last chart, UC; that puts it in perspective. With a slope like that, the next peak could easily be at least double or triple the last peak.
The chart also shows why comparisons to a year ago are not so meaningful, as that was about the low point. GB
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Post by judes on Apr 20, 2007 14:58:08 GMT -6
Yeah, that chart is telling some kind of a story. I would love to see what it looked like in the earlier years not shown, before 1988. It appears a significant event happened around 1991 (my guess the effects of globalization beginning to creep in) and foreclosures began to spike. Then another significant event around 1999 (my guess is the predatory loan practice is beginning to take hold) and foreclosures go down sharply. Then again in 2006 a sharp rise, (my guess subprime loan rates are kicking in). The course we were on was periodically suppressed with the cheap money flooding the economy, now what will they pull out of their bag of tricks to stop the inevitable?
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Post by unlawflcombatnt on Apr 20, 2007 16:06:24 GMT -6
It looks like the major escalation in prices started in 1997, when tax law was changed to exclude capital gains from home sales from taxation. Below are some graphs from both Piggington.com and from Investor Insight. Housing Price Graph vs. Consumer Price Index from Investor Insight. Los Angeles Price to Income Ratio from Piggington.com Orange County Price to Income from Piggington.com San Diego Price to Income (from Piggington.com) I'll try to find some more graphs on this subject. It appears that home price increases began exceeding income growth in 1997, and have gotten worse under the Bush corruptocracy. More recently, however, prices have begun to come down -- sharply.
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Post by graybeard on Apr 20, 2007 22:45:34 GMT -6
The foreclosure rates are opposite the price of housing. When housing prices are on the rise, as in 1988-90, foreclosures go way down, because people in financial trouble can always get out with a profit. That happened again the last few years.
Look how many years it took housing prices to recover from the 1991 recession.
GB
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Post by unlawflcombatnt on Apr 21, 2007 4:22:12 GMT -6
The foreclosure rates are opposite the price of housing. When housing prices are on the rise, as in 1988-90, foreclosures go way down, because people in financial trouble can always get out with a profit. That happened again the last few years.... Exactly. That's what I was trying to show with the charts. The foreclosure rate sank as the prices rose. And as prices AND sales drop, foreclosures will increase. The latter is the direction we're going in now.
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Post by judes on Apr 21, 2007 7:50:43 GMT -6
I am still confused, forgive me I am no economics expert. Your top chart shows home prices in 1990 time frame to be relatively keeping up with inflation. But your two bottom charts which show home price divided by per capita income seem to spike in that time frame, as well as the original graph showing a spike in forclosures at this time. So if median home prices are consistent with inflation in 1990 the only other thing that could cause a spike in the bottom two charts would be if per capita income dropped sharply. Maybe I am missing something here. Your top chart (median home prices) is also interesting because you can see a distinct change in the slope of the trendline of that graph around 2000-01 time frame, interesting.
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Post by unlawflcombatnt on Apr 21, 2007 13:31:47 GMT -6
Judes, I see your point. I was really only trying to show the changes that occurred after 1996-97. The top chart is showing median (existing) home prices nationwide, compared to inflation. The bottom 3 are showing home prices divided by per capita income in certain California markets. Adding the charts together would suggest that the price changes in the late 80's and early 90's were following inflation. However, the bottom 3 charts only cover specific areas in California. I think the changes in home prices in the late 80's to early 90's were confined mostly to California, and not a nationwide occurrence. Again, the charts were posted mainly to show the connection between the 1997 law that allowed capital gains from home sales to be tax deductible, and the escalation of home prices above the rate of inflation. You're right about the additional increase in price appreciation starting in 2000-2001. Apparently this acceleration started as a result of a drop in interest rates and a movement of money out of the stock market and into an already appreciating housing market. And as more money moved out of stocks and into bonds, interest rates declined, keeping mortgage rates down. The cheap borrowing allowed buyers to pay more for homes. Somewhere along the way, the exotic loans came into the picture, allowing for even more people (and money) to enter the housing market, further escalating prices. I'm still looking for a better chart to show the increase occurring around 1997, as well as the additional acceleration that occurred in 2001. Here are several more, basically showing the same general acceleration in home prices starting in 1997. Median Los Angeles Home Prices Los Angeles Home Prices vs. Rent
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Post by judes on Apr 21, 2007 14:07:23 GMT -6
Yes, good point, comparing the national trends with the regional trends probably distorts the picture.
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