Foreclosure Pipeline Is Full to Bursting

[Arraya]

http://www.oftwominds.com/blogapr10/foreclosure-pipeline04-10.html
The foreclosure pipeline will be full for years to come. That precludes any “recovery” in housing valuations as supply will swamp demand.
Last August, I wrote a story for AOL/Daily Finance titled Housing bottom premature. The clue? Foreclosure pipeline full. The backlog of distressed mortgages has only grown larger since then.

As Mish noted, Foreclosure activity hit a record in the first quarter of 2010.

According to realtytrac.com, foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 932,234 properties in the first quarter, a 7 percent increase from the previous quarter and a 16 percent increase from the first quarter of 2009.

Meanwhile, the heavily hyped Federal program to stave off defaults via massaging the terms of mortgages is failing spectacularly: Defaults Rise in Loan Modification Program.

According to this New York Times article, about seven million households are behind on their mortgage payments. As I noted here yesterday, there are about 51 million mortgages in the U.S., so that means about 14% of all mortgage holders are in some stage of default. About 1 million are already in the foreclosure pipeline (as noted above) while a pool of 6 million defaulted/delinquent mortgages awaits entry into the pipeline.

While the numbers are imprecise, media reports suggest about one-quarter of all mortgage holders are “underwater,” meaning that their homes are worth less than their mortgages balances.

As this chart illustrates, negative equity (owing more than the house is worth, hence negative equity) drives foreclosures.

If 25% of mortgage holders are underwater, and 14% are delinquent/in default, then we can expect the number of defaulted mortgages to rise as negative-equity homeowners throw in the towel and stop paying their mortgages.

Rising foreclosures, falling home valuations and increasing defaults form a positive feedback loop. Rising foreclosures pressure home valuations as hundreds of thousands of homes come to market. This decline in valuations increases the negative equity of mortgage holders who are already underwater, and pushes more owners into the negative equity pool where most will eventually capitulate and default on their mortgages. Thisincreases the pool of mortgages in the foreclosure pipeline, insuring more homes will be dumped onto the market in the future, and so on.

Anyone who sees a rising pool of millions of delinquent mortgages as the foundation of a recovery in housing valuations isn’t considering the feedback loop which is now firmly in place.

[jpinpb]

It’s almost sounding like it will be un-American to go through foreclosure. Yet, people are just doing what’s in the contract. If they can’t (don’t) pay, the bank takes the house back.

It really is quite a quagmire. I just had such ill feelings during the bubble, trying to figure out how everyone was going to pay for all the houses people were buying and some that bought more than one. Most people were gambling, others were scared if they didn’t buy, they’d never be able to and others who just had no idea what they were doing.

What other choices do people have now? So many people are not paying. They’re not saving the money, but spending and helping the economy (indirectly). For those that can continue paying, they’re upside-down. If I were in their situation, I probably would have serious reservations about paying.

The government has done so much to prop up this market. It’s hard to imagine at this point that they would let prices drop like a rock. The only thing they can do is hope for gradual declines over years to come.

[jpinpb]

It’s almost sounding like it will be un-American to go through foreclosure. Yet, people are just doing what’s in the contract. If they can’t (don’t) pay, the bank takes the house back.

It really is quite a quagmire. I just had such ill feelings during the bubble, trying to figure out how everyone was going to pay for all the houses people were buying and some that bought more than one. Most people were gambling, others were scared if they didn’t buy, they’d never be able to and others who just had no idea what they were doing.

What other choices do people have now? So many people are not paying. They’re not saving the money, but spending and helping the economy (indirectly). For those that can continue paying, they’re upside-down. If I were in their situation, I probably would have serious reservations about paying.

The government has done so much to prop up this market. It’s hard to imagine at this point that they would let prices drop like a rock. The only thing they can do is hope for gradual declines over years to come.

[jpinpb]

It’s almost sounding like it will be un-American to go through foreclosure. Yet, people are just doing what’s in the contract. If they can’t (don’t) pay, the bank takes the house back.

It really is quite a quagmire. I just had such ill feelings during the bubble, trying to figure out how everyone was going to pay for all the houses people were buying and some that bought more than one. Most people were gambling, others were scared if they didn’t buy, they’d never be able to and others who just had no idea what they were doing.

What other choices do people have now? So many people are not paying. They’re not saving the money, but spending and helping the economy (indirectly). For those that can continue paying, they’re upside-down. If I were in their situation, I probably would have serious reservations about paying.

The government has done so much to prop up this market. It’s hard to imagine at this point that they would let prices drop like a rock. The only thing they can do is hope for gradual declines over years to come.

[jpinpb]

It’s almost sounding like it will be un-American to go through foreclosure. Yet, people are just doing what’s in the contract. If they can’t (don’t) pay, the bank takes the house back.

It really is quite a quagmire. I just had such ill feelings during the bubble, trying to figure out how everyone was going to pay for all the houses people were buying and some that bought more than one. Most people were gambling, others were scared if they didn’t buy, they’d never be able to and others who just had no idea what they were doing.

What other choices do people have now? So many people are not paying. They’re not saving the money, but spending and helping the economy (indirectly). For those that can continue paying, they’re upside-down. If I were in their situation, I probably would have serious reservations about paying.

The government has done so much to prop up this market. It’s hard to imagine at this point that they would let prices drop like a rock. The only thing they can do is hope for gradual declines over years to come.

[jpinpb]

It’s almost sounding like it will be un-American to go through foreclosure. Yet, people are just doing what’s in the contract. If they can’t (don’t) pay, the bank takes the house back.

It really is quite a quagmire. I just had such ill feelings during the bubble, trying to figure out how everyone was going to pay for all the houses people were buying and some that bought more than one. Most people were gambling, others were scared if they didn’t buy, they’d never be able to and others who just had no idea what they were doing.

What other choices do people have now? So many people are not paying. They’re not saving the money, but spending and helping the economy (indirectly). For those that can continue paying, they’re upside-down. If I were in their situation, I probably would have serious reservations about paying.

The government has done so much to prop up this market. It’s hard to imagine at this point that they would let prices drop like a rock. The only thing they can do is hope for gradual declines over years to come.

[Waiting to feel the magic]

As a potential buyer in this insane market, the question I’m interested in is whether or not prices are going down more. Right now they appear to be going up. Certainly listing prices are going up and I see properties that seem overpriced (at least to me) going pending. OTOH, I don’t see a lot of sales closing. I hear about increased activities in real estate offices, but I also hear about realtors trimming support staff because the sales aren’t happening and money’s not coming in.

If the banks are going to start putting the hammer down, then it’d be great if they started doing it (again from my point of view).

[Waiting to feel the magic]

As a potential buyer in this insane market, the question I’m interested in is whether or not prices are going down more. Right now they appear to be going up. Certainly listing prices are going up and I see properties that seem overpriced (at least to me) going pending. OTOH, I don’t see a lot of sales closing. I hear about increased activities in real estate offices, but I also hear about realtors trimming support staff because the sales aren’t happening and money’s not coming in.

If the banks are going to start putting the hammer down, then it’d be great if they started doing it (again from my point of view).

[Waiting to feel the magic]

As a potential buyer in this insane market, the question I’m interested in is whether or not prices are going down more. Right now they appear to be going up. Certainly listing prices are going up and I see properties that seem overpriced (at least to me) going pending. OTOH, I don’t see a lot of sales closing. I hear about increased activities in real estate offices, but I also hear about realtors trimming support staff because the sales aren’t happening and money’s not coming in.

If the banks are going to start putting the hammer down, then it’d be great if they started doing it (again from my point of view).

[Waiting to feel the magic]

As a potential buyer in this insane market, the question I’m interested in is whether or not prices are going down more. Right now they appear to be going up. Certainly listing prices are going up and I see properties that seem overpriced (at least to me) going pending. OTOH, I don’t see a lot of sales closing. I hear about increased activities in real estate offices, but I also hear about realtors trimming support staff because the sales aren’t happening and money’s not coming in.

If the banks are going to start putting the hammer down, then it’d be great if they started doing it (again from my point of view).

[Waiting to feel the magic]

As a potential buyer in this insane market, the question I’m interested in is whether or not prices are going down more. Right now they appear to be going up. Certainly listing prices are going up and I see properties that seem overpriced (at least to me) going pending. OTOH, I don’t see a lot of sales closing. I hear about increased activities in real estate offices, but I also hear about realtors trimming support staff because the sales aren’t happening and money’s not coming in.

If the banks are going to start putting the hammer down, then it’d be great if they started doing it (again from my point of view).

[34f3f3f]

I’m not sure it’s really just about whether prices have more room to fall, or not. It’s also about whether you want a part of it. This credit crisis has become pretty politicized and I hear a lot of potential buyers who don’t seem to care whether we’ve hit bottom or not. What they care about is how things have been managed. Where you once had the savvy buyer, you’ve now got the principled buyer.

[34f3f3f]

I’m not sure it’s really just about whether prices have more room to fall, or not. It’s also about whether you want a part of it. This credit crisis has become pretty politicized and I hear a lot of potential buyers who don’t seem to care whether we’ve hit bottom or not. What they care about is how things have been managed. Where you once had the savvy buyer, you’ve now got the principled buyer.

[34f3f3f]

I’m not sure it’s really just about whether prices have more room to fall, or not. It’s also about whether you want a part of it. This credit crisis has become pretty politicized and I hear a lot of potential buyers who don’t seem to care whether we’ve hit bottom or not. What they care about is how things have been managed. Where you once had the savvy buyer, you’ve now got the principled buyer.

[34f3f3f]

I’m not sure it’s really just about whether prices have more room to fall, or not. It’s also about whether you want a part of it. This credit crisis has become pretty politicized and I hear a lot of potential buyers who don’t seem to care whether we’ve hit bottom or not. What they care about is how things have been managed. Where you once had the savvy buyer, you’ve now got the principled buyer.

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