A question about foreclosures in the 90s

[gn]

Looking at the chart below on foreclosure activities in CA, I can’t help but wonder:

The bad economic time was from 1990 – 1993. If I remember correctly, by 1994 things were improving. Definitely by 1995, the job market was pretty good. So why were foreclosure levels higher in 1996 than 1992 ?

Also, the mortgage interest rate in 1996 was quite a bit lower than it was in 1992.

Can anyone explain this ?

[img_assist|nid=7772|title=Foreclosures|desc=|link=node|align=left|width=466|height=335]

[EconProf]

BobS
Time lags explain this. You are approximately correct that the “bad times”, ie. recession and outflow of defense jobs was roughly 1990 – 93. The impact on housing took a while to sink in and be reflected in housing prices, rents, and “capitulation” by homeowners leading to the late peak in foreclosures your graph shows. Accordingly, housing prices were approximately flat in the mid-1990s, and only began their long ascent in about 1997 & 1998.
The lesson for today: Our decline will last a lot longer, and the bottom will be more of a flattening out for possibly an extended period of time. Don’t look for a V-shaped recovery. There will be plenty of time to pick through the debris.

[EconProf]

BobS
Time lags explain this. You are approximately correct that the “bad times”, ie. recession and outflow of defense jobs was roughly 1990 – 93. The impact on housing took a while to sink in and be reflected in housing prices, rents, and “capitulation” by homeowners leading to the late peak in foreclosures your graph shows. Accordingly, housing prices were approximately flat in the mid-1990s, and only began their long ascent in about 1997 & 1998.
The lesson for today: Our decline will last a lot longer, and the bottom will be more of a flattening out for possibly an extended period of time. Don’t look for a V-shaped recovery. There will be plenty of time to pick through the debris.

[EconProf]

BobS
Time lags explain this. You are approximately correct that the “bad times”, ie. recession and outflow of defense jobs was roughly 1990 – 93. The impact on housing took a while to sink in and be reflected in housing prices, rents, and “capitulation” by homeowners leading to the late peak in foreclosures your graph shows. Accordingly, housing prices were approximately flat in the mid-1990s, and only began their long ascent in about 1997 & 1998.
The lesson for today: Our decline will last a lot longer, and the bottom will be more of a flattening out for possibly an extended period of time. Don’t look for a V-shaped recovery. There will be plenty of time to pick through the debris.

[EconProf]

BobS
Time lags explain this. You are approximately correct that the “bad times”, ie. recession and outflow of defense jobs was roughly 1990 – 93. The impact on housing took a while to sink in and be reflected in housing prices, rents, and “capitulation” by homeowners leading to the late peak in foreclosures your graph shows. Accordingly, housing prices were approximately flat in the mid-1990s, and only began their long ascent in about 1997 & 1998.
The lesson for today: Our decline will last a lot longer, and the bottom will be more of a flattening out for possibly an extended period of time. Don’t look for a V-shaped recovery. There will be plenty of time to pick through the debris.

[EconProf]

BobS
Time lags explain this. You are approximately correct that the “bad times”, ie. recession and outflow of defense jobs was roughly 1990 – 93. The impact on housing took a while to sink in and be reflected in housing prices, rents, and “capitulation” by homeowners leading to the late peak in foreclosures your graph shows. Accordingly, housing prices were approximately flat in the mid-1990s, and only began their long ascent in about 1997 & 1998.
The lesson for today: Our decline will last a lot longer, and the bottom will be more of a flattening out for possibly an extended period of time. Don’t look for a V-shaped recovery. There will be plenty of time to pick through the debris.

[Huckleberry]

I agree wholeheartedly with BobS. There is no way this is going to be a “V” shaped bottom. The market is not going to just bounce back like many hope.

Not many want to purchase at this point because of fear and even if they did, the credit markets are broken so getting loans is very difficult even for the best credit scores.

Intelligent buyers are waiting this one out to pick through the debris of the massive yard sale (wipeout) this market is going to have.

There will plenty of time at the bottom of this market to pick up nice properties as BobS states. The time to purchase is when there is very little interest in purchasing. That my friends is full capitulation and the time to execute your buy orders, just like on Wall St.

[Huckleberry]

I agree wholeheartedly with BobS. There is no way this is going to be a “V” shaped bottom. The market is not going to just bounce back like many hope.

Not many want to purchase at this point because of fear and even if they did, the credit markets are broken so getting loans is very difficult even for the best credit scores.

Intelligent buyers are waiting this one out to pick through the debris of the massive yard sale (wipeout) this market is going to have.

There will plenty of time at the bottom of this market to pick up nice properties as BobS states. The time to purchase is when there is very little interest in purchasing. That my friends is full capitulation and the time to execute your buy orders, just like on Wall St.

[Huckleberry]

I agree wholeheartedly with BobS. There is no way this is going to be a “V” shaped bottom. The market is not going to just bounce back like many hope.

Not many want to purchase at this point because of fear and even if they did, the credit markets are broken so getting loans is very difficult even for the best credit scores.

Intelligent buyers are waiting this one out to pick through the debris of the massive yard sale (wipeout) this market is going to have.

There will plenty of time at the bottom of this market to pick up nice properties as BobS states. The time to purchase is when there is very little interest in purchasing. That my friends is full capitulation and the time to execute your buy orders, just like on Wall St.

[Huckleberry]

I agree wholeheartedly with BobS. There is no way this is going to be a “V” shaped bottom. The market is not going to just bounce back like many hope.

Not many want to purchase at this point because of fear and even if they did, the credit markets are broken so getting loans is very difficult even for the best credit scores.

Intelligent buyers are waiting this one out to pick through the debris of the massive yard sale (wipeout) this market is going to have.

There will plenty of time at the bottom of this market to pick up nice properties as BobS states. The time to purchase is when there is very little interest in purchasing. That my friends is full capitulation and the time to execute your buy orders, just like on Wall St.

[Huckleberry]

I agree wholeheartedly with BobS. There is no way this is going to be a “V” shaped bottom. The market is not going to just bounce back like many hope.

Not many want to purchase at this point because of fear and even if they did, the credit markets are broken so getting loans is very difficult even for the best credit scores.

Intelligent buyers are waiting this one out to pick through the debris of the massive yard sale (wipeout) this market is going to have.

There will plenty of time at the bottom of this market to pick up nice properties as BobS states. The time to purchase is when there is very little interest in purchasing. That my friends is full capitulation and the time to execute your buy orders, just like on Wall St.

[ltokuda]

Besides what BobS said, another possible reason is that the economy wasn’t really doing as well as we had thought. Here’s a chart from http://www.shadowstats.com which shows the U.S. GDP, using the historical calculation of CPI (as opposed to the tweeked versions used since the 1980’s).

[img_assist|nid=7776|title=
ShadowStats GDP|desc=|link=node|align=left|width=466|height=324]

By tweeking the definition of CPI, you can effectively manipulate the reported GDP. The chart illustrates the effects of all those tweeks.

So its possible that the economy was doing much worse than what was officially reported. Notice that GDP could have gone negative around 1995/1996.

What’s also interesting to me is that the ShadowStats GDP says that the 2001 recession actually lasts until 2003. I think its interesting because that’s exactly what it felt like to me. This experience gives me reason to believe that the ShadowStats GDP numbers are true.

[ltokuda]

Besides what BobS said, another possible reason is that the economy wasn’t really doing as well as we had thought. Here’s a chart from http://www.shadowstats.com which shows the U.S. GDP, using the historical calculation of CPI (as opposed to the tweeked versions used since the 1980’s).

[img_assist|nid=7776|title=
ShadowStats GDP|desc=|link=node|align=left|width=466|height=324]

By tweeking the definition of CPI, you can effectively manipulate the reported GDP. The chart illustrates the effects of all those tweeks.

So its possible that the economy was doing much worse than what was officially reported. Notice that GDP could have gone negative around 1995/1996.

What’s also interesting to me is that the ShadowStats GDP says that the 2001 recession actually lasts until 2003. I think its interesting because that’s exactly what it felt like to me. This experience gives me reason to believe that the ShadowStats GDP numbers are true.

[ltokuda]

Besides what BobS said, another possible reason is that the economy wasn’t really doing as well as we had thought. Here’s a chart from http://www.shadowstats.com which shows the U.S. GDP, using the historical calculation of CPI (as opposed to the tweeked versions used since the 1980’s).

[img_assist|nid=7776|title=
ShadowStats GDP|desc=|link=node|align=left|width=466|height=324]

By tweeking the definition of CPI, you can effectively manipulate the reported GDP. The chart illustrates the effects of all those tweeks.

So its possible that the economy was doing much worse than what was officially reported. Notice that GDP could have gone negative around 1995/1996.

What’s also interesting to me is that the ShadowStats GDP says that the 2001 recession actually lasts until 2003. I think its interesting because that’s exactly what it felt like to me. This experience gives me reason to believe that the ShadowStats GDP numbers are true.

[ltokuda]

Besides what BobS said, another possible reason is that the economy wasn’t really doing as well as we had thought. Here’s a chart from http://www.shadowstats.com which shows the U.S. GDP, using the historical calculation of CPI (as opposed to the tweeked versions used since the 1980’s).

[img_assist|nid=7776|title=
ShadowStats GDP|desc=|link=node|align=left|width=466|height=324]

By tweeking the definition of CPI, you can effectively manipulate the reported GDP. The chart illustrates the effects of all those tweeks.

So its possible that the economy was doing much worse than what was officially reported. Notice that GDP could have gone negative around 1995/1996.

What’s also interesting to me is that the ShadowStats GDP says that the 2001 recession actually lasts until 2003. I think its interesting because that’s exactly what it felt like to me. This experience gives me reason to believe that the ShadowStats GDP numbers are true.

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