Jacksonville Foreclosure impact Underestimated?
(http://www.metrojacksonville.com/photos/thumbs/lrg-4042-lender_foreclosure.jpg)
City Council members Jack Webb and Glorious Johnson should be commended for their efforts to try to find a way to somehow slow down the rising number of foreclosures here in Jacksonville. In 2007 there were more than 15,000 foreclosure filings on 9,540 properties in Duval County (many properties had second mortgages on them). That is a 39% jump from the 2006 numbers.
Full Article
http://www.metrojacksonville.com/content/view/736
"Those who lent the money just to make a quick dollar should be investigated and prosecuted. And the victims of these "predatory lenders" should be helped in as much capacity as possible. Locally, we agree that victim advocate agencies such as JALA are the best resources for homeowners in this situation, but feel that it may be in the best interest of citizen tax dollars to limit any assistance beyond these types of situations."
Well said. Individuals should not be bailed out for making poor decisions. Doing so would only encourage more irresponsibility.
QuoteWe shouldn't be capitalists only up until the point that it starts to hurt a little because we made bad business decisions.
Well put.
I just read yesterday that another very large lender and buyer of mortgage-backed securities, Lehman Brothers, announced it's cutting 5% of its workforce (around 1500 jobs) and they are expecting to write down their mortgage and other loan-backed assets by 9 billion (yes, I said BILLION) in the coming weeks. No, this problem is not going away soon, and you're 100% accurate in your assesment that it is only going to get worse.
This isn't something only affecting the sub-prime borrower, or the one trying to keep up with the Jones's that bought a house with a special or exotic mortgage product, that can no longer afford it with recent, or soon to be, rate changes. This phenomenon is affecting the smart-buyer now as well. With home values decreasing, those that have always paid their mortgages on a timely and consistent basis, are realizing that they not only have no equity in their homes but that they are upside-down. They feel as if the money they've paid in to their loans hasn't benefited them to the point they thought when first purchasing the home, if at all. They can't sell the property and move into something that is of equal value to their loan because no one will buy their home...not even at loan amount. A friend of mine was finally able to sell his home after almost 2 years on the market. He sold it with a loss, having to actually pay money out of his own pocket to payoff the mortgage loan.
To compound this problem, people are losing their jobs left and right. The mortgage industry was huge here in Jacksonville and within the last 6 months, I know of at least 4 companies that have gone tits up. There is so much competition for mortgage related jobs on the market, that it could take a year or more for many of these folks to find a job that would replace their previous salary. These are our future foreclosures; the former employees of the lending and servicing institutions.
Now, to add to this further, the rising cost of gas which is driving up the cost of food and other products that are shipped to us via gas-powered machinery. I've seen more cyclists commuting to work than I ever have (previously, it was only me on my route), and I've seen 3 of those Smart cars driving around already. People are trying to find ways to save money and a big part of that is doing an assesment of your lifestyle and knowing when to cut your losses, and the house is often the first thing to look at, especially when now it is a renter's world and you can rent a house with over 2000 sq. ft. for $1600 a month. It makes walking away from your home look better and better.
Anyway, my wish is that the worst will just hurry up and happen so we can all begin the rebuilding process. I don't like this hanging-in-the-balance stuff.
second_pancake - you are right in your asessment that only adding fuel to the fire will be jobs cut over the next 6-9 months as we move into the recession....already there are rumors of a 10,000 job layoff at Citi
Didn't Citi just cut a few thousand jobs last year? Sure glad I dont work there anymore!
this is hilarious!! from an online teen columnist...
QuoteSpend your money wisely. That's the important lesson people have been pounding into their kids for years.
But maybe it's time for adults to rethink wise spending as well.
With foreclosure becoming such a big issue, you would think people would do a reality check before buying houses.
continued here...
http://www.tucsoncitizen.com/daily/opinion/79205.php
The best thing is to do nothing. Allow the market to hit bottom and the sooner the better. Then, the weak and poorly capitalized will be weeded out and things will begin to improve. I think we may be very near to bottom though as this is now the 2d year of the downturn locally. We shall see. Things wont turn around overnight but the people sitting on the sideline and those who are moving here will eventually begin to buy homes again.
Quote from: RiversideGator on March 12, 2008, 01:02:22 PM
I think we may be very near to bottom though as this is now the 2d year of the downturn locally.
from "Not even close to a Bottom"...
http://seekingalpha.com/article/67789-nowhere-near-a-real-estate-bottom?source=metrojacksonville.com
QuoteIt simply takes time for people to recognize that even real estate markets can fluctuate on the down side.
In general, this will always result in a real estate market that lags the general economy. Thus, anyone who accepts the preceding statement as reality should easily recognize the ridiculousness of predicting a real estate bottom when we haven’t even experienced the recession yet!
Television news is almost always about someone else and people have difficulty recognizing when they are the subjects of a story. It’s one thing for other people to be suffering from a real estate collapse, but "surely that won’t happen in my neighborhood." People have been bred by the financial industrial complex since childhood to believe the family home will always be their best investment. Re-educating millions of Americans is not a simple task.
When you take into consideration the shear magnitude of this bubble, the largest credit bubble in American history, you must sober your hopes for a shallow recession. When home owners take interest only adjustable rate mortgages and have zero equity, why would they struggle to make increasing payments? As equity disappears, people all over America will be walking away from their mortgage in their millions, often leaving behind dilapidated properties that not only allow banks to recover nothing, but incur extra costs to dismantle the unsafe building.
The banks don’t have a clue what’s going on, and these insignificant write offs we have witnessed to date are just a fraction of what is to come. Bernanke is now even recommending that banks reduce mortgage principles to restore owner equity and give people an incentive to remain in their house. He would not be recommending such a drastic plan unless the alternative is much worse.
This crisis will not be cleared in a few months - perhaps not even a few years.
and the VERY BEST article on the subject came from Mish on Feb 18th, entitled "Housing Bottom Nowhere in Sight"...
this image says it all (our current situation and what led up to it is almost a replica of what occurred in Japan)...
http://bp1.blogger.com/_nSTO-vZpSgc/R7UR_6MbZpI/AAAAAAAACJM/xU6Nt4fkx5k/s1600-h/japan-land-prices-update-2008-02-rgb-176-10-10.png
entire article (extremely worthy of reading) here...
http://globaleconomicanalysis.blogspot.com/2008/02/housing-bottom-nowhere-in-sight.html?ref=metrojacksonville.com
It would be interesting to see how certain neighborhoods are faring compared to others. Although the general market may be bad, there may be certain segments, such as "affordable housing", or places with unique physical conditions that haven't not been as negatively affected as others.
QuoteThings wont turn around overnight but the people sitting on the sideline and those who are moving here will eventually begin to buy homes again.
Unless you're talking about independently wealthy individuals who don't have to obtain a loan to purchase a home, the borrower has to first be able to get a bank to lend them money. With MUCH tighter restrictions on lending, including increased requirements for down payment (I don't know of anyone even willing to talk about doing 100% LTV), the only people who will be able to obtain a loan are those who have stellar credit. The prime rate has no bearing at all on whether or not new loans are originated, it all has to do with the parameters under which the lendors can and are willing to lend.
Anyone who is in the market for a new home right now is either a renter or someone that has a home and is trying to sell it to get into something they can afford. If you're a renter, then you have your pick of the lot and you will probably do fairly well for yourself. If you're a homeowner, you're screwed. By the time you wait around for the market to pick-up to buy a new home, you won't need one. You'll either have lost the one your in to foreclosure because you couldn't make the payments, or you'll have struggled through and survived somehow and will simply refinance to prevent any heartache in the future.
The scariest thing I heard as of late, is talk about the FDIC stepping in to loosen restrictions on lending to try and increase the rate at which lenders originate loans so borrowers can take advantage of the lower rates the fed put in place. Talk about disasterous.
All this negativity is amusing. It is actually the complete inverse of the talk I heard 2 years ago when people were saying that real estate could never decline in value. ::)
Quote from: thelakelander on March 12, 2008, 01:41:31 PM
It would be interesting to see how certain neighborhoods are faring compared to others. Although the general market may be bad, there may be certain segments, such as "affordable housing", or places with unique physical conditions that haven't not been as negatively affected as others.
Affordable housing and very high end housing are less affected from what I see. It is the moderate to high priced properties which are suffering most.
Quote from: second_pancake on March 12, 2008, 01:46:51 PM
QuoteThings wont turn around overnight but the people sitting on the sideline and those who are moving here will eventually begin to buy homes again.
Unless you're talking about independently wealthy individuals who don't have to obtain a loan to purchase a home, the borrower has to first be able to get a bank to lend them money. With MUCH tighter restrictions on lending, including increased requirements for down payment (I don't know of anyone even willing to talk about doing 100% LTV), the only people who will be able to obtain a loan are those who have stellar credit. The prime rate has no bearing at all on whether or not new loans are originated, it all has to do with the parameters under which the lendors can and are willing to lend.
Anyone who is in the market for a new home right now is either a renter or someone that has a home and is trying to sell it to get into something they can afford. If you're a renter, then you have your pick of the lot and you will probably do fairly well for yourself. If you're a homeowner, you're screwed. By the time you wait around for the market to pick-up to buy a new home, you won't need one. You'll either have lost the one your in to foreclosure because you couldn't make the payments, or you'll have struggled through and survived somehow and will simply refinance to prevent any heartache in the future.
The scariest thing I heard as of late, is talk about the FDIC stepping in to loosen restrictions on lending to try and increase the rate at which lenders originate loans so borrowers can take advantage of the lower rates the fed put in place. Talk about disasterous.
100% LTV loans should never have been offered in the first place. But, I believe 95% LTV loans, insured by the feds (FHA), are still available. Am I right? Certainly, coming up with $10,000 or so is not a complete bar to homeownership for most people. I think the worst thing now is that people dont want to buy until they believe the market has hit bottom so they live in fear waiting for this to happen. Ultimately, pent up demand will kick in and buying will resume. And, dont forget, houses are still selling in numbers higher than they were even a few years ago in say 2000.
Quote from: Driven1 on March 12, 2008, 01:30:43 PM
The banks don’t have a clue what’s going on, and these insignificant write offs we have witnessed to date are just a fraction of what is to come.
This is priceless. Banks dont have a "clue" what is going on, but some permabear blogger has all the answers. :D
BTW, Japan's real estate bubble was much greater in scope and the decline was not handled properly by Japanese officials who refused to let companies fail. That does not appear to be happening here although there is some of this happening. In any event, where did this happen in the US:
QuoteAt the height of the bubble, a commonly-quoted claim was that the land beneath the Imperial Palace in Tokyo was worth more than the entire state of California. Japan regained a sense of national pride and assertiveness as a result of its new power, which manifested itself in works such as The Japan That Can Say No by Shintaro Ishihara and SONY founder Akio Morita. Many outside Japan were alarmed by this resurgence, leading to criticism from foreign observers. Michael Crichton, for example, wrote Rising Sun at this time, which highlighted US concerns with the growing Japanese economic power.
Prices were highest in Tokyo's Ginza district in 1989, with some fetching over US$1.5 million per square meter ($139,000 per square foot), and only slightly less in other areas of Tokyo. By 2004, prime "A" property in Tokyo's financial districts were less than 1/100th of their peak, and Tokyo's residential homes were 1/10th of their peak,[citation needed] but still managed to be listed as the most expensive real estate in the world. Some US$20 trillion (1999 dollars) was wiped out with the combined collapse of the real estate market and the Tokyo stock market[citation needed].
With Japan's economy driven by its high rates of reinvestment, this crash hit particularly hard. Investments were made increasingly out of the country, and Japanese manufacturing firms lost much of their technological edge. As Japanese products became less competitive overseas, the low consumption rate began to bear on the economy, causing a deflationary spiral.
The easily obtainable credit that had helped create and engorge the real estate bubble continued to be a problem for several years to come, and as late as 1997, banks were still making loans that had a low guarantee of being repaid. Correcting the credit problem became even more difficult as the government began to subsidize failing banks and businesses, creating many "zombie businesses".
http://en.wikipedia.org/wiki/Japanese_asset_price_bubble
River...let's put our money where our mouth is. that is the truest test of whether you really believe something about the economy or not, right?
my new investment dollars are going to cash, commodities and agriculture.
yours must be going to real estate and financial stocks now, right?
;)
Quote from: Driven1 on March 13, 2008, 12:37:01 AM
River...let's put our money where our mouth is. that is the truest test of whether you really believe something about the economy or not, right?
my new investment dollars are going to cash, commodities and agriculture.
yours must be going to real estate and financial stocks now, right?
;)
Commodities and agriculture are starting to mirror the housing bubble. As soon as the Fed stops cutting interest rates, and there isn't that much more room to cut, those prices will fall back down as the dollar regains its strength.
As far as real estate and financial stocks, that is a great place to be, as long as you are smart about it. The fundamentals of where people want to live have not changed, so a nicely reduced waterfront home would be an excellent investment. And I'm not talking about that swampland that Eric Estrada sells on latenight infomercials. Financials have been crushed lately, and that includes several good companies who have done nothing wrong but are simply guilty by association. Once people see that, those companies will lead the market back up. The first glimpse of who might come through this relatively unscathed might be during the next two weeks as a lot of financial companies are due to release their quarterly reports.
The best way to make money is to sell when everyone else is buying and buy when everyone else is selling. Following the herd will most likely lead you to the slaughterhouse.
so whitey, which financial and real estate falling knives are u buying right now? :)
yes, OF COURSE, everyone knows what you said (buy when other sell, etc..) ...it's been repeated a billion times since Warren Buffet first said it a long time ago. the problem is, there is still a LOT of bleeding left to go.
btw...you are wrong about commodity prices. while i'm not saying there won't be a bubble, there definitely is not one currently. the long-term fundamentals still support the technicals (esp after the recent correction) for most commodities.
and i'm willing to say i've put 40% of my own money in ag companies...the majority of that % in one company in particular, actually. buy-in average price is $151/share. i'll be more than willing to keep u updated through 2008 and 2009. it's a long-term story that has absolutely nothing to do with what a hedge fund manager or wall street is doing. people have to eat and the middle class around the world has swelled.
this will only continue to help the commodities (todays WSJ email alert)...
MARKET ALERT
from The Wall Street Journal.
March 13, 2008
The dollar fell below 100 Japanese yen for the first time since 1995 as worries over the U.S. economy continued, despite moves this week by the Federal Reserve and other central banks to pump extra cash into the ailing credit markets.
The dollar also sank to all-time lows of $1.5587 per euro and 1.0090 versus the Swiss Franc. Against the British pound, the U.S. currency fell to $2.0321 -- the lowest since Dec. 14, 2007.
http://online.wsj.com/article/SB120538653090633005.html?mod=djemalertMARKET
Quote from: RiversideGator on March 12, 2008, 11:30:27 PM
And, dont forget, houses are still selling in numbers higher than they were even a few years ago in say 2000.
http://www.census.gov/const/newressales.pdf (http://www.census.gov/const/newressales.pdf)
http://www.census.gov/const/quarterly_sales.pdf (http://www.census.gov/const/quarterly_sales.pdf)
http://www.msnbc.msn.com/id/19953440/ (http://www.msnbc.msn.com/id/19953440/)
I suggest you do some research before making blanket statements like that. Btw, the condo market is even worse. The NAR is reporting a 13 month supply of condos right now and in south FL it's expected to be at 21 months before the end of the year due to continued construction on condo projects started within the past year.
Facts: New home sales are down significantly. Condos are not selling and there is a huge surplus. Existing home sales have significantly decreased, and while it's being project they will increase in 2009, the median sale price is projected to be much lower than 8 years ago.
Btw, the reason you don't see homes in the poverty level suffering is because many of them don't have mortgages on them and the ones that do, the contracts were entered into long before any of the special mortgage products were offered and the people living in the homes can afford their fixed payment. The people living in mansions aren't affected because, well, they're rich. Paying $5 a gallon for gas is merely an inconvience, and they pay extra money on their mortgage payment to pay down the principal each month so don't owe a hell of a lot on their houses, despite what they paid for them. It will always be the middle class that feels the effects of a downturn market. The middle class are the workers, the producers, the consistent consumers. We're what the economy relies on to buy a pack of smokes every day at the Quicky-mart, fill up every week in our mid-sized economy car, be at work at 8, leave at 5, pay a gym membership, a mortgage, a car payment, weekly groceries, etc. The poor either live off the government, non-profit organizations, or fend for themselves by walking, riding a bike, or growing their own food. The rich could care less. Like I said, merely an inconvience.
So, based on your comments regarding how you don't see too big a deal with the real-estate market and how you continue to buy multi-family housing, you must fall into the 'inconvient' category. I suppose you have all the time in the world to sit on a property for 2+ years with a sign in the yard and an ad in the paper. Good for you. As for me, I have 2 mortgages to pay, 1 of which is on a house that's been vacant for almost a year with not a single call to even come look at it. Both houses are worth less than the assesment done 4 years ago, and my husband is out of the 2nd job he's had in the last year due to the companies closing their doors.
And if after talk about government involvement in regulating the origination of loans (loosening restrictions, opening funds, insuring all loans with taxpayer money), you're still saying it's going to get better "soon", then you are truely in denial.
i'm with 2nd pancake, but yikes! be careful of quoting the NAR on anything having to do with the housing market...
want a good analogy? watch King Arthur & The Black Knight (from Monty Python)...
the NAR is the black knight and the housing market is King Arthur...
http://youtube.com/watch?v=2eMkth8FWno
Wachovia: Housing Woes Are Far From Over
"...said Wednesday the downturn in the nation's housing market is nowhere near over. Speaking to analysts on a Deutsche Bank Securities Inc. conference call, Don Truslow said, "It feels like we have a ways to go."
Using a baseball analogy, Truslow said he didn't know if the downturn was in the third, fourth or fifth inning. He added "we're still before the seventh inning stretch."
And if the economy gets worse, "we could find ourselves right now in very early innings of the credit cycle," Truslow said."
http://biz.yahoo.com/ap/080312/wachovia_housing.html
Quote from: Driven1 on March 13, 2008, 12:37:01 AM
River...let's put our money where our mouth is. that is the truest test of whether you really believe something about the economy or not, right?
my new investment dollars are going to cash, commodities and agriculture.
yours must be going to real estate and financial stocks now, right?
;)
There are a lot of tremendous deals out there in financial stocks, now that you mention it although I do not own any. As for real estate, I do have my money where my mouth is but it is a long term thing for me, not a quick buck. And, getting rates of return below the inflation rate doesnt bother me since I dont pay cash for the properties. If you buy a $1 million apartment building, for example, and put down 15% and inflation is 4% while the average annual appreciation rate over 10 years (setting aside the issue of increasing rents) is maybe 3%, you are still appreciating at the annual rate of $30,000 (not counting the compounding effects) or $300,000 for the decade. Not too bad on an initial investment of $150,000. Add to this the tax benefits and the fact that rents have gone up probably 40-50% since 2000 and you have a pretty good little business if you stick with it. Now, real estate is certainly not for everyone and it must be approached from a long term perspective but those are some pretty good returns.
BTW, looking historically at US home values going back from 1940 to 2000, nominal increases in home values have been tremendous. Looking at these, it looks like there is a "bubble" every decade but it kept going up. Most of this is inflation but, again, this doesnt matter because the gains are still real and are obtained by using borrowed money.
Quote
2000 1990 1980 1970 1960 1950 1940
United States $119,600 $79,100 $47,200 $17,000 $11,900 $7,354 $2,938
Florida $105,500 $77,100 $45,100 $15,000 $11,800 $6,612 $2,218
http://www.census.gov/hhes/www/housing/census/historic/values.html
Quote from: second_pancake on March 13, 2008, 09:21:00 AM
Quote from: RiversideGator on March 12, 2008, 11:30:27 PM
And, dont forget, houses are still selling in numbers higher than they were even a few years ago in say 2000.
http://www.census.gov/const/newressales.pdf (http://www.census.gov/const/newressales.pdf)
http://www.census.gov/const/quarterly_sales.pdf (http://www.census.gov/const/quarterly_sales.pdf)
http://www.msnbc.msn.com/id/19953440/ (http://www.msnbc.msn.com/id/19953440/)
I suggest you do some research before making blanket statements like that. Btw, the condo market is even worse. The NAR is reporting a 13 month supply of condos right now and in south FL it's expected to be at 21 months before the end of the year due to continued construction on condo projects started within the past year.
I suggest you read your own links before attempting to use them to disprove what I said. Links 1 and 2 only contain figures going back to 2004 or 2005. And, link 3 supports my statement. From the msnbc report:
QuoteThe National Association of Realtors reported Wednesday that sales of existing homes dropped by 3.8 percent in June to a seasonally adjusted annual rate of 5.75 million units. That is the slowest sales pace since November 2002 and the decline was about twice what had been expected.
So, sales in June, 2007 were on an annual rate of 5.75 million which is the same amount sold in just November, 2002. So, homes were selling in June, 2007 at a decent rate, just not at nearly the overheated rates of 2005 and 2006.
Quote
Facts: New home sales are down significantly. Condos are not selling and there is a huge surplus. Existing home sales have significantly decreased, and while it's being project they will increase in 2009, the median sale price is projected to be much lower than 8 years ago.
Please provide evidence to support your blanket statements.
Quote
Btw, the reason you don't see homes in the poverty level suffering is because many of them don't have mortgages on them and the ones that do, the contracts were entered into long before any of the special mortgage products were offered and the people living in the homes can afford their fixed payment. The people living in mansions aren't affected because, well, they're rich. Paying $5 a gallon for gas is merely an inconvience, and they pay extra money on their mortgage payment to pay down the principal each month so don't owe a hell of a lot on their houses, despite what they paid for them. It will always be the middle class that feels the effects of a downturn market. The middle class are the workers, the producers, the consistent consumers. We're what the economy relies on to buy a pack of smokes every day at the Quicky-mart, fill up every week in our mid-sized economy car, be at work at 8, leave at 5, pay a gym membership, a mortgage, a car payment, weekly groceries, etc. The poor either live off the government, non-profit organizations, or fend for themselves by walking, riding a bike, or growing their own food. The rich could care less. Like I said, merely an inconvience.
So, based on your comments regarding how you don't see too big a deal with the real-estate market and how you continue to buy multi-family housing, you must fall into the 'inconvient' category. I suppose you have all the time in the world to sit on a property for 2+ years with a sign in the yard and an ad in the paper. Good for you. As for me, I have 2 mortgages to pay, 1 of which is on a house that's been vacant for almost a year with not a single call to even come look at it. Both houses are worth less than the assesment done 4 years ago, and my husband is out of the 2nd job he's had in the last year due to the companies closing their doors.
I am not "rich". I merely aspire to be rich. I have taken risks with real estate too and could be burned in the future. This is the nature of the free market. Some succeed and some fail. How I will end up, no one knows now. So, I dont mean to appear arrogant because no one has a crystal ball, and certainly not me. All I do is look at historic patterns and try to extrapolate the future from those.
As for your vacant home, I would recommend taking it off the market and renting it for a year. Dont sell in this market. Try craigslist. It is an excellent place for free rental advertising. Alternatively, lower the price significantly (if you have sufficient equity) to get it to move. The buyers are out there at the right price.
Also, many people have been hurt who were working in some facet of the real estate (developers, contractors, mortgage brokers, etc) and who were also speculating in real estate. So, when things slowed down, they were hit with a double whammy because their income from their primary job was reduced while their real estate investments declined in value and were tougher to sell. I certainly feel for them and I represent a large number of them. This should be a cautionary tale for us all not to put out eggs all in one basket.
River...new money, where is your NEW money going? buy some financial stocks or local apartment buildings. either way, you stand to lose at least 15% over the next year or so. ah, my friend, history is a fancy subject to study. look at the case-shiller index while you are at it. show me ONE housing "bubble" like the 2000-2006 bubble. it doesn't exist. there were very small jumps up in the past, but things always reverted back to the mean within a year or two.
again, for every bubble, there has to be an equal bust - and then (this is the scary part) a flat market for at least a few years after the correction. we still have at LEAST 15% more to drop in housing. and then housing prices will be generally flat until around 2012, 2013. housing is a capital market...works like all the others, just in a bit longer cycles generally.
the property you paid $300k for 3 years ago and go up to $400k is now back to $300k. it will be $225k before things are done bleeding. and then it will be relatively flat for at least a few years. eventually it will get back up to what you (and I) paid for it.
i'm like u - pretty heavily invested in RE myself here locally. i think i have just been a bit quicker to recognize what the future holds for us. i'm also putting the aforementioned NEW $$$ in better places.
here is some case-shiller for ya!!
(notice where we are on the graph now - let's all revert back to the mean!!!)
(http://andrew-medico.com/images/ars/CaseShillerAug07.jpg)
RG, there are too many sources and sites to list or quote. Just Google "condo surplus", "housing market statiscs" and/or "housing sale statistics." You can also go to the MBA's site, www.mortagebrokersassociation.com to read more info. If you have a subscription, which my company does, you can also read National Mortgage News that further validate all the points I made.
I work for a mortgage servicing company so we're not in trouble...yet. But we are owned by a major buyer of mortgage-back securities, who also owns a fairly well-known subprime mortgage lender that hasn't underwritten a new mortgage since Oct. of 2007. Everyone is holding their breath.
Quote from: Driven1 on March 13, 2008, 11:14:48 AM
River...new money, where is your NEW money going? buy some financial stocks or local apartment buildings. either way, you stand to lose at least 15% over the next year or so. ah, my friend, history is a fancy subject to study. look at the case-shiller index while you are at it. show me ONE housing "bubble" like the 2000-2006 bubble. it doesn't exist. there were very small jumps up in the past, but things always reverted back to the mean within a year or two.
again, for every bubble, there has to be an equal bust - and then (this is the scary part) a flat market for at least a few years after the correction. we still have at LEAST 15% more to drop in housing. and then housing prices will be generally flat until around 2012, 2013. housing is a capital market...works like all the others, just in a bit longer cycles generally.
the property you paid $300k for 3 years ago and go up to $400k is now back to $300k. it will be $225k before things are done bleeding. and then it will be relatively flat for at least a few years. eventually it will get back up to what you (and I) paid for it.
i'm like u - pretty heavily invested in RE myself here locally. i think i have just been a bit quicker to recognize what the future holds for us. i'm also putting the aforementioned NEW $$$ in better places.
here is some case-shiller for ya!!
(notice where we are on the graph now - let's all revert back to the mean!!!)
(http://andrew-medico.com/images/ars/CaseShillerAug07.jpg)
1) The Case-Shiller index measures real property values, i.e. adjusted for inflation. As I stated before, I dont care if the returns outpace inflation as long as they are positive over a 10 year period. Obviously, I would prefer higher returns than now, but on average things always seem to work out. This is why I posted the historic data from the US Census.
2) Robert Shiller is a real estate bear who hates real estate apparently. Other indexes dont show similar declines, such as the index from the Office of Federal Housing Enterprise Oversight. The OFHEO shows that nationally housing price appreciation just stopped in 4Q 2007 and was just barely negative in the 4th Quarter.
(http://www.ofheo.gov/Media/Photos/newpic.jpg)
Some states obviously fared worse than others with Florida doing worse than most other states. But, we gained more in the previous 5 years too. There is a state by state chart here:
http://www.ofheo.gov/HPI.aspx
In any event, the housing "bubble" like the commodities bubble and inflation today are monetary phenomena. There was a fairly large expansion of the money supply between 2000 and 2005. If there is more money chasing the same number of goods, the prices will rise. This is basic economics. This is mostly what happened and now the returns are coming down to earth. But, houses will not be worth significantly less, barring calamity, because most people will just not sell until things improve and inflation will continue, people will make more, more households will form, etc, etc, over time. So, it just takes time to work things out.
3) Rents rise with inflation and for multi-family properties, values are based more on their potential rents, just like a stock price is based on business income. Rents are not going down nationwide to my knowledge. I am sure that, if they were, the negative news lovers in the press would have published this fact.
4) Houses purchased in 2000 are still up significantly from 2000 prices. Homes bought in 2005 or 2006 are probably not up much if any. This is why you should take the long view.
Why we can afford our home we are losing jobs here. Did you know that a local company is moving jobs to China? Biomet in Warsaw, IN and Biomet - Microfixation located in the Airport Industrial Park, 1520 Tradeport Drive Jacksonville is moving jobs to China. All Biomet companies are moving work we Americans make to China. The company sites labor costs as the reason. Will the quality of these products be compromised? Have you read lately of China’s quality problems? What about the toys with lead and tainted baby’s milk? They are letting good people go that even mention words about China. Now the company is being pressed to rapidly move their products there before new laws will regulate.
QuoteMortgage delinquencies soar in the U.S.
Tue Apr 7, 2009 9:54am EDT
NEW YORK (Reuters) - More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom, a top credit bureau executive told Reuters.
Dann Adams, president of U.S. Information Systems for Equifax Inc, reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier.
He also said 39.8 percent of subprime borrowers were at least 30 days behind on their home mortgage loans, up 23.7 percent from last year.
"I'm trying to find optimism in these numbers, but I'm pretty hard pressed to do that," Adams said, despite a recent burst of relatively positive news that has fueled hope that the U.S. housing market has turned a corner.
Full Article:
http://www.reuters.com/article/newsOne/idUSTRE5363EV20090407
Quoteity Council members Jack Webb and Glorious Johnson should be commended for their efforts to try to find a way to somehow slow down the rising number of foreclosures here in Jacksonville.
Wonderful, where can I line up for my relief check? Will President Bush be there to hand it to me? AIU got there's, now where is mine?