things are not all that rosy w/the housing market in california. the east bay business times reports that mortgage defaults are at an 8 year high:
the number of mortgage default notices filed against california homeowners jumped last quarter to the highest level in more than eight years, a real estate information service reported.
lending institutions sent homeowners 37,273 default notices during the october-to-december period. that was up by 36.9 percent from 27,218 the previous quarter, and up 145.3 percent from 15,196 for the fourth quarter 2005, according to dataquick information systems.
more after the jump:
last quarter’s foreclosure activity was the highest since 38,053 default notices were recorded statewide in the third quarter of 1998. defaults peaked in the first quarter 1996 at 61,541. an average of 33,615 notices of default have been filed quarterly since 1992, when dataquick’s statistics begin.
“several factors are at play here. the numbers last year and the year before were very low because of strong sales and appreciation. also, most defaults occur a year or two after the loan was made, so we’re in a period where the loan pool is at risk. and then there are those inventive loans that have been made the last few years, where qualifying involves assuming more risk. we’re in the midst of an adjusting market right now, and we won’t know until spring or summer if this is ominous or not,” said marshall prentice, dataquick’s president.
we like that euphamism “inventive loans.”
these would be the ajustable rate mortgages, sold to the unsuspecting homeowners w/the comforting lie “they probably won’t go up.” the sfchron:
california is experiencing a rise in defaults because so many people took out adjustable-rate mortgages, economists say. about 28 percent of all outstanding loans in california are adjustable, more than in any other state in the country, according to first american loanperformance, which tracks mortgage risk. borrowers with such loans have seen their monthly payments increase at the same time that home price appreciation has slowed, making it more difficult for homeowners in financial trouble to sell or refinance.
“the state of california has been tremendously dependent on adjustable-rate mortgage products,” said scott anderson, senior economist for wells fargo. “when people have overstretched and are spending more than 50 percent of their net income on housing, it doesn’t take much of a surge in interest rates to lead to financial problems.”
no, not much.
Ingrate. Never in American history have so many people owned (a mortgage to) a home.
And as of this Tuesday past, across the nation, employed homeowners with dependents have reason to rejoice. For the unitary asshole has decreed they should receive “tax relief” on previously untaxed premium payments for health insurance.
This measure is sure to simplify price collusion among health insurers and provide a plethora of new investment products for any capital foreclosed by the mortgage industry.
Do Californians understand at all the good a life our government provides?
I read that article at SFGate this morning. It seemed to imply that the sky is not falling and that this is just a minor bump. Yet, underneath that very same article was a link to another article about how the housing market is a slump. So, hmmm….it seems to me that a doubling of foreclosures and a soft housing market does not make for a strong and robust economy like dear chimp said we had.
The real news is that foreclosure rates are the highest in eight years, and still rising. Worse, the trend is a skyrocket–steeply climbing.
Add to that the fact there are many ARM (adjustable rate) and IO (interest only) mortgages out there written on the assumption that the properties would be resold (flipped) at a higher price before the rate adjustments to the loans kicked in. Well, starting sometime around last summer, the housing market went into a coma: Prices quit climbing, and houses quit selling. Flipping ground to a halt. There are a lot of people, including small-time speculators, caught in mortgages that they will not be able to afford when their rates reset.
The bloodbath should begin next summer. Which is to say: mass bankruptcies of stuck homeowners and speculators.
Meanwhile, watch those foreclosure rates. Expect them to climb.
When foreclosed houses go back on the market, they will press down prices further, exacerbating the crisis for the stuck homeowners, whose loans will be greater than the value of their collateral. They will not be able to sell and pay off their debts.
This is, likely, the Beginning of the End: Mass foreclosure, mass bankruptcy, and the collapse of the US house of cards as one economic failure leads to another throughout the banking system. Collapse of credit and housing-related industries will spread in a cascade of lay-offs and business failures to a collapse of the entire economy.
By next summer it should be obvious to everyone, and a cause for general panic. Plan your own life accordingly.
There will be happy-talk to the end, even beyond–this might play out in as little as a year, but might take several years to reach bottom. (The last housing crash took six years from bubble-burst to rock bottom. The Great Depression took three years.) Either way:
Expect it to be worse than the Great Depression.
Get ready Rough years ahead. For the pass several months the mortgage companies and sub-prime lenders have been declaring bankrupticies, closing doors or refusing new business. Add this to lay-offs by Ford, Pfizer and others. Hard landings and signaling start of recession.
California was the first to shake but then its national:
Take your pick: 3 good news on housing industry versus 19 Bad ones
Foreclosure rates up big in December
Mortgage lenders insolvent or going out of business
Clear Choice Financial insolvent
I’m afraid Ohio is way ahead of the curve on this one
Ohio Tops In Foreclosures
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