Foreclosure Filings Are Up 55% Year Over Year

For the past few months, we have not really talked "that" much about housing; certainly not as much as we did early in the blog life. Reason being, back then the pundits were vehemently arguing the housing issue is smallish, there had never been a national drop in housing prices, blah blah blah. So we wanted to get the reality it out there.

Now they've been silenced on all those issues and what we are left with is the constant looking for silver linings in very bad data and "trying to anticipate when the bottom begins". But every so often we'll post some data, such as this. And housing is so intertwined with the banking system/credit situation it must be something you continue to monitor. But since the news won't be changing for a long time, I don't really bother to post 90% of the statistics since it would get repetitive.

Summary: It is bad. It will continue to be bad. When it "recovers" it will be a long period of scraping along the bottom. Think tech stocks from the early part of the decade and how they "recovered" - long, drawn out process and many never came back. Or think Japan 1990s.

Keep in mind as you read the below data that certain states have put a pseudo moratorium on foreclosures as a preventative measure, so the numbers would be even worse if not for that.

• The number of homeowners stung by the dramatic decline in the U.S. housing market jumped last month as foreclosure filings grew by more than 50 percent compared with the same month a year ago, according to data released Thursday.
• Nationwide, more than 272,000 homes received at least one foreclosure-related notice in July, up 55 percent from about 175,000 in the same month last year and up 8 percent from June, RealtyTrac Inc. said. That means one in every 464 U.S. households received a foreclosure filing last month.
• More than 77,000 properties were repossessed by lenders nationwide in July, the company said. (That's almost a 1 million annualized run rate.)
• Nevada, California, Florida, Arizona, Ohio, Georgia and Michigan had the highest foreclosure rates. Foreclosure filings increased from a year earlier in all but eight states
• Many can't find buyers or owe more than their home is worth and can't refinance into an affordable loan. (Bingo.)
• As foreclosures soar, banks and mortgage investors are also facing a pileup of foreclosed properties on their books and are cutting prices dramatically. (This will drive down prices for those in homes in the same areas - which will cause them to be underwater if they bought anytime in 2003-2007, and thus the daisy chain continues.)
• RealtyTrac noted that it had more than 750,000 foreclosed homes in its database of properties for sale, equal to about 17 percent of the 4.5 million U.S. homes that were up for sale in June. (Think about that - 1 in 5 homes in America for sale is a foreclosure - and even at those "bargain" prices we are not seeing any huge uptick in sales - one must ask why if the Kool Aid economy is doing so well.)
• RealtyTrac noted that it had more than 750,000 foreclosed homes in its database of properties for sale, equal to about 17 percent of the 4.5 million U.S. homes that were up for sale in June. (Buyers will include Goldman Sachs and Blackrock, trust me.)
• Even with government help, nearly 2.8 million U.S. households will either face foreclosure, turn over their homes to their lender or sell the properties for less than their mortgage's value by the end of next year, predicts Moody's Economy.com.

From a stock perspective, all the Kool Aid gang wants to see is no further deterioration so they can jump up and scream about the imminent turn. Things don't have to get better; they just don't have to get worse. Again - these are the same pundits who denied housing prices could ever fall nationwide - they were proven to be liars in January [Jan 24: They Said it Could Never Happen. Ever.]... and in fact it would not really hurt the economy even if that "outlier" Black Swan event happened. So keep that in mind when they scream joyous songs of glee every time a data point turns in their favor.

Comments

[Larry House:]

Very insightful. I think stocks will be in the doldrums for many months to years because of the housing hangover. Unless one is extremely nimble and can choose wisely and play the ups and downs in this bear market, I think returns on stocks will be subpar. I am content to get 7% on short term corporate bonds and avoid stocks for a while. The outlook is just too clouded in the U.S. and the world to want to hold stocks right now--at least for me.

2008 Aug 14 11:14 AM

[icandoitdon:]

7% on short term corporate bonds? that's a junk rating in today's market. i'd be careful with that one in this economic environment.

2008 Aug 14 12:40 PM

[kurt walter:]

Many more pay option ARM loans will be adjusting in 2009. 2010, 2011 and 2012. ... plenty more foreclosures to come.

2008 Aug 15 03:15 PM