USA-Today: Foreclosures hit record

[patb]

http://www.usatoday.com/money/economy/housing/2007-09-06-foreclosures_N.htm

With a warning that the worst is yet to come, the Mortgage Bankers Association said Thursday that lenders began foreclosure proceedings on a record number of homes this spring.

….

The Homeownership Preservation Foundation, which runs a 24-hour hotline for homeowners in trouble (888-995-HOPE), said it took 36,000 calls in July and August — more than twice as many as in the first three months of the year.

The worst is yet to come, can anyone venture a guess when that will be?

[salo_t]

A scary number… 36,000 calls x (lets be conservative)$250,000 (per home) = $9,000,000,000.00

And these are only the folks calling the hotline!

So who is assed out of all this money? Is it the Chinese investors?

[Bugs]

The median price nationwide is only $220,000 or thereabouts. Even attributing the larger share of foreclosures to the pricier metro markets, the average loss to the lenders could be “only” about $50,000. That’s still a pretty scary number because the final tally of foreclosures is going to end up being a lot more than 36,000.

[mixxalot]

How come prices have not dropped very fast?

With all the foreclosures I am amazed that prices are not falling either fast enough or far enough. Come on drop 200k-300k already on the overpriced shacks!

[kewp]

How come prices have not dropped very fast?

Check realtytrac, the foreclosure process takes time and I think both the borrower and the lender are dragging the process out for as long as they can. On the borrowers side they can live rent/mortgage free for up to a year while they figure out what their next move is.

This in turn keeps the market from collapsing (auctions find the bottom nicely) and banks balance sheets artificially high.

[Arty]

So who is assed out of all this money? Is it the Chinese investors?

I thought most of them are retirement accounts invested in the so call hedge funds. Also, I realize that a lot of east coast universities have their money in hedge funds hence the huge increase in their endowments. Chinese investors mainly have their money in T-bonds and they will lose money only if US currency takes a dive? Am I right?

[4runner]

How come prices have not dropped very fast?

Because people are often irrational in making decisions.

When a house in a neighborhood that formerly sold in the 800’s now sells for 750, we automatically think that the house is “cheap” and a “bargain.” Never mind that the house is now only 11 times the area’s median household income. Never mind that the fair market rent is around $2200. It looks like the buyer got a deal because the only thing people look at is the former sales prices for that neighborhood.

[cr]

How come prices have not dropped very fast?

It also takes time. Foreclosures don’t typically go for the rock-bottom prices people think they do. They’ll go for fair market value, which will likely be marginally less than recently sold comps.

As lenders over-react to the credit crisis it will be harder to get money to buy, and price drops will accelerate. As sales continue to slow, and defaults increase, putting more homes on the market, buyers who can qualify will have their pick. This snowball just starting rolling. It’s gaining speed and mass every day, and probably will for 3-4 years.

[mixxalot]

2012 will be a watershed date for housing

I will wait 2 more years. If prices are low enough I will be a modest place in San Diego. Else, I will move to a cheaper place like Texas and buy a nice place for less than 200k.

[kev374]

How come prices have not dropped very fast?

With all the foreclosures I am amazed that prices are not falling either fast

Prices don’t fall that fast, foreclosure in California is a lengthy process that can take upto 6 months from the date of initial default. Even after that a few more months the property becomes REO and the bank will sit on it until their inventory baloons and they get desperate.

You have to be patient, the cycle has to run it’s course. Prices will drop like a rock but only after critical mass is reached 😉

There is a HUGE amount of resistence from sellers and lenders to do all they can to avoid taking a loss, only when they HAVE to will prices be slashed like no tommorow. This is also beginning to happen with the builders due to skyrocketing cancellation rates and severe lack of demand, they need to sell inventory to avoid holding costs and to recoup their cash.

[mixxalot]

2012 Blood in the streets?

I am guessing in a few years the real blood letting will begin after all the ARM resets come to fruition. The FED just pumped in billions of fiat tokens into the system to slow it down a bit. I will be happy as a clam to actually see reality smack people in the face and a normal person who is prudent and has saved can actually buy a home in San Diego just like in the early 1990’s when the market last tanked. That will be cause for celebration!

[JWM in SD]

Precisely Kev. The posters who keep coming here thinking that 2008 will be the time to buy are foolish at best and myopic at worst. This whole thing will play out in increments of 6 mos at time. 3-4 years to play out and as much as a decade if the macro-economic issues prevent recovery.

[SHILOH]

The Chinese, the Dutch, the Germans….this is a US global blight…and by that I mean “disease.” If we are aware of the shoddy and unscrupulous practices of this system…imagine what the rest of the world is going to think.

In late July, IKB abandoned a profit forecast for the 2007-2008 fiscal year of €280 million ($382 million). It said it had “felt the impact of the crisis in the U.S. sub-prime mortgage market,” and said its chief executive, Stefan Ortseifen, had resigned.(CNN MONEY, 9/3/07)

…and I heard on NPR that that the European banks involved are injecting a lot more money into their banking crisis that the US.

[SHILOH]

The problem now is the dollar. Even with saving for a future purchase..the dollar dropped last week below 80 cents. The Chinese are starting to dump their dollars and who can blame them.

The dollar stands to lose(more of) it’s purchasing power.

But I did hear one commentator on NPR say that if the US economy coughs, the rest of the world could get pneumonia. I don’t know how true that is.

[Fearful]

There is a HUGE amount of resistence from sellers and lenders to do all they can to avoid taking a loss, only when they HAVE to will prices be slashed like no tommorow. This is also beginning to happen with the builders due to skyrocketing cancellation rates and severe lack of demand, they need to sell inventory to avoid holding costs and to recoup their cash.

Yes – builder sales are the only place to see accurate house prices. They are the only dispassionate and, well, I hesitate to call them this, but – smart sellers out there. Individuals are loath to recognize losses, and banks are little better, as they hate to flow loss on a foreclosure through to their P&L. But the builders know what’s going on; they know to get rid of that inventory as fast as they can, almost regardless of the price.

[Author]

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