Scary Foreclosure Numbers, Scarier Prospects

The disturbing part of foreclosure data provider RealtyTrac’s report this week is not (only) that the lull in foreclosures is only temporary because of delaying measures passed by national, state and local governments:

The Fragile State of Home Prices. “Mark Zandi, of Moody's Economy.com: Interest-rate resets of subprime mortgages peaked in 2008, but resets of many adjustable-rate mortgages made to above-sub but less-than-prime borrowers won't peak until 2011… Job losses and cutbacks will tip homeowners who are underwater -- some 12 million currently -- into foreclosure. Edward Leamer, of the UCLA Anderson Forecast, the low prices on foreclosures and short sales… are a vital part of the "price-discovery process"; they create a sense of urgency among fence-sitting buyers who are waiting for the bottom. RealtyTrac: The average discount from market value for properties in all stages of foreclosure stands at about 30% nationwide… NAR: In September, about 15% of the buyers who had dived in were investors.” (Kipliner.com, Jan. 2009)

Foreclosure Storm Will Hit U.S. in 2009 as Loan Changes Fail. “RealtyTrac: U.S. foreclosure filings climbed 28% in November from a year earlier and a brewing “storm” of new defaults and job losses may force 1 million homeowners from their properties next year. A total of 259,085 properties got a default notice, were warned of a pending auction or were foreclosed on last month. That’s the fewest since June. Filings fell 7% from October as state laws and lender programs designed to delay the foreclosure process allowed delinquent borrowers to stay in their homes.” (Bloomberg, Dec. 11)

Foreclosures Dip - But Hold The Applause. “Rick Sharga, EVP of RealtyTrac: November's decline in foreclosure filings is deceiving… because much of it is attributable to temporary foreclosure prevention efforts. "The reduction is because Fannie Mae (FNM) and Freddie Mac (FRE) both announced moratoriums on foreclosures, while major lenders also put the brakes on foreclosure proceedings. State moratoriums are also delaying the onset of foreclosures. But all that will only delay, not avoid them.” (CNN Money, Dec. 11)

Rather, what’s also disturbing is that the numbers are still terrible, both on a national and local level. But that’s not all:

Ohio Foreclosures Drop In November. “RealtyTrac: In Ohio, the number of foreclosures was down more than 6% compared to October, but increased 21% compared to the same month last year. Ohio had the seventh-most foreclosure filings last month… Nevada had the nation’s No. 1 foreclosure rate, with one in every 76 houses receiving a foreclosure filing in November. Florida was No. 2 with one in every 173 houses and Arizona ranked third with one in every 198 houses.” (Dayton Business Journal, Dec. 11)

Our Area Tops In Foreclosures, Unemployment. “Florida's foreclosure rate also dropped in November, but the state still moved from number three in the nation to number two because Arizona's rate decreased more. Now the bad news: First, one of every 59 homes in the Fort Myers-Cape Coral market received a foreclosure notice in November - that's the highest rate of the 230 metro areas that are measured. Then there are jobs. Southwest Florida has the highest rate of unemployment claims in the state. A spokesperson for the Lee Career and Services Center says the state's unemployment office in Tallahassee has seen an 80-percent increase in unemployment claims from Southwest Florida in the past year.” (WBBH-HD, Dec. 11)

It’s also disturbing that a lot of the big ammo has been fired already, with limited success. In other words, the powers that be are throwing everything they’ve got at this crisis, and it’s helping just a little bit.

Macro-economic factors will strike even harder and create many more foreclosures according to RealtyTrac and Moody’s Economy.com. So the next big wave will hit when most of the ammunition against it is spent, or just plain not working. If Congress already allocated $300 billion and that didn’t work, why would the other half of TARP work?

Fighting Foreclosures, F.D.I.C. Chief Draws Fire. “[After taking over IndyMac bank, the FDIC] unveiled a program to help the 65,000 borrowers who are more than two months delinquent on their mortgages at IndyMac… But so far, that program has benefited only 7,200 people… A $300 billion foreclosure prevention program passed by Congress this summer… wound up larded with requirements, like requiring background checks and restricting eligibility for mortgage relief to people at risk of foreclosure as of March 1. HUD: As a result, fewer than 200 people have applied for the program since it opened in October… and no loans have been modified.” (NY Times, Dec. 10)

Let’s hope localized help will be more effective:

Arriving Soon: $3.9 Billion in HUD Money “The housing rescue bill that Congress passed last summer... provides $3.9 billion in block grants for stabilizing areas experiencing high levels of foreclosure… The money has already been allocated to states and localities [who] will be allowed to use the grants to buy foreclosed homes; provide down-payment assistance or closing cost help to qualified buyers; rehab homes to bring them up to code; and do new construction on abandoned or foreclosed property. The money cannot be used to refinance existing mortgage or prevent foreclosures… The top state recipients… are Florida ($541 million) and California ($530M)… Miami-Dade County will receive $62M, Chicago will get $55M, and Riverside County, Calif., will be given $49M.” (Builder Online, Dec.10)

Comments

[Ishortyou:]

yup looks like the pain will continue for several years, but oh well thats parting of the adjusting process.

2008 Dec 12 07:53 AM

[aby1366:]

What goes up must come down---back to normal.

2008 Dec 12 08:19 AM

[LiquidSoapD...:]

Yeah, it's an adjusting process, yeah what goes up must come down. But come on, this process will be really painful -- you comments (short & aby) make it sound like a pleasant process. People losing houses, nest eggs, jobs, all of which compound each other. You guys act like it's not going to get very ugly (as if it's not already pretty ugly).

2008 Dec 12 09:39 AM

[axelrod608:]

Thanks for a good article. It seems most of the "experts" are either ignorant or unrealistically hopeful. Every time I hear someone predict that the housing market will turn around in a quarter or two I simply cannot believe they are publicly demonstrating their ignorance.

Liars' loans were still being made in large numbers through most of 2007. The last of them will reset in 2012. The only scenario in which many - perhaps most - of these loans do not end up in foreclosure is if mortgage rates are under 2% at that time - about as likely as snow in my part of Florida. Realistically we must expect foreclosures to remain plentiful well into 2013. Anyone's guess as to home price declines from peak to eventual bottom is as good as mine. I'd guess we will be extremely fortunate if it's not more that half - 50%.

Reworking mortgages now is silly, knowing that home valuations will continue to fall for many years.

2008 Dec 12 10:17 AM

[fatcat:]

I'm afraid the coming hyper-inflation cycle will be what halts home price depreciation....20% inflation for a couple of years and all assets,including stocks will be higher.

God help us...

2008 Dec 12 10:50 AM

[ebworthen:]

Kondratiev Winter coming.

Buy water, canned food, guns and ammo.

2008 Dec 12 11:02 AM

[Dr.Jackpot:]

It's time for social do-gooders to stop treating grown adults who gambled and lost like naughty children who need a second chance. Force these deadbeats to pay their mortgages or else and foreclosures will quickly subside when people understand their adult obligations. Two thirds are doing it just because others are doing it and they don't want to miss out. I bought stock that declined in value. Why can't I get a refund?

2008 Dec 12 11:03 AM

[billddrummer:]

Hi Judy,

Again, great statistics, data, and analysis. Thanks!

Since many of the 'restructured' mortgages are now falling back into default with a good chance that a large number will become new foreclosures, and that many municipalities have instituted moratoriums on foreclosures until next year, it's conceivable that the foreclosure rate will increase again in February and March 2009.

I don't believe the government should do any more to stop the foreclosure process--in actuality, people living under foreclosure can remain in the residence for months, sometimes nearly a year, before the lender forces them out. We as a nation need to stop assuming that foreclosures are 'bad' necessarily. Sometimes, getting out from under an onerous loan is worth the hit on your credit report.

Keep up the good work!

2008 Dec 12 11:13 AM

[dw57:]

not sure we can be assured of hyper-inflation. deflation does seem to be gathering steam. and i don't know how to slow that down do you? you can't just ignore it, or hope it goes away can you? never seems to have worked before now


On Dec 12 10:50 AM fatcat wrote:

> I'm afraid the coming hyper-inflation cycle will be what halts home
> price depreciation....20% inflation for a couple of years and all
> assets,including stocks will be higher.
>
> God help us...

2008 Dec 12 11:17 AM

[carey_jim:]

It looks like the underlying stocks are trying to "climb a wall of worry" and the unexpected rise is fueled by speculators.

The massive increase of day traders seeking alpha might have something to do with the volatility.

The boom in the entire real estate sector seemed to be based more on greed than intelligent planning and now the greed is directed at tearing the meat off the bones of the rotting carcasses of abandoned shopping malls, housing tracts and office buildings.

When will the sharks turn on each other?

2008 Dec 12 12:07 PM

[Robert Nabloid:]

"Let’s hope localized help will be more effective:"

The "help" from government will do anything but help. Much of the well intentioned help they have given over the decades is actually the poison that put us into our present situation.

2008 Dec 12 05:05 PM

[SoCalsurfbum:]

$49 mm to help Riverside County, CA!?!?!!!

Talk about a drop in the bucket... That will allow them to buy 200 homes at $250k a piece (below the current market price)... those 200 are a fraction of what is available and many more homes for sale will be coming on the market real soon...

What a waste of money...

2008 Dec 12 06:59 PM

[Jimmy Lathrop:]

Great article Judy. I think the headline should read, Scary Foreclosure Numbers result in Mercedes Repossession for Mortgage Brokers and Real Estate Brokers. Has anyone noticed that the unemployment figures exactly reflect the phantom jobs that were created in the industry when cheap credit caused the housing boom? I weep not for the asset inflaters.

2008 Dec 13 01:35 PM

[willydo:]

It says the govt money will be used to "help provide down payment assistance and help with closing costs for qualified buyers". Well, they are NOT qualified buyers if they can't even put down a payment and share closing cost. If they are that poor, we are just setting the taxpayers up for more defaults. That's what got us into this mess in the first place; people living beyond their means.
In less insane times, the lenders actually checked and varified that the buyer was putting up the down payment himself because if not, it was an indication he was not qualified and also would not have anything in the house so he could just walk away. I'm afraid we have not learned from this fiasco at all.

2008 Dec 13 02:18 PM

[scotty1560:]

Housing needs to get affordable and not just by pricing. How about
never ending hikes in real estate taxes, insurance rates, utilities,
maintenance costs. How about at least 20% equity positions, weed
out the speculators with little to loose. Housing does need to get stabilized
in this country- very risky to continue this trend without permanantly
damaging a generation of existing and future owners. People can pick
on the individuals for over extending but 50% equity losses doe a lot of
damage and IMO take away the entire "stabilty" concept of owning a
home (build wealth gradually).
It's a mess and an ongoing cancer within a large part of this country.

2008 Dec 13 06:32 PM

[Kunst:]

I bought my house in 1994. I'm in no danger from any of this. But I own a business, and my customers are hurting. It's all very well to be self-righteous and tell people to just suffer for their mistakes. Let's not cut off our noses to spite our faces. No man is an island.

2008 Dec 13 11:35 PM

[Scott Sambucci:]

There's a pretty clear indication at a key market like Sacramento, active inventory levels are falling (it would seem due to foreclosures), and existing homes are continuing to drop their prices:

tinyurl.com/6xkbsu

In general, prices in the resale market are still correcting. Looking a Chicago over the past two years, the seasonal changes in inventory had almost no effect on the downward trend in prices, save for a break in price trend for a short time in the Spring.

tinyurl.com/5oalbo

2008 Dec 17 09:38 AM

[shawn123456:]

Foreclosure proceedings vary from state to state. In states where mortgages are used, home owners can end up staying in the property for almost a year; whereas in states where trust deeds are used, trustee sales give a seller about four months before she needs to vacate.

======================...

arsh

MLS listings

Jan 21 03:49 PM

[shawn123456:]

Foreclosure proceedings vary from state to state. In states where mortgages are used, home owners can end up staying in the property for almost a year; whereas in states where trust deeds are used, trustee sales give a seller about four months before she needs to vacates'

======================...

arsh

[url="mls.fastrealestate.net..."]MLS listings[/url]

Jan 21 03:51 PM