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If you're wondering why the housing market is still stuck in its worst slide in six decades, this chart pretty much says it all.
Though the market peaked in 2006, the toxic mortgages that have created this mess had two- and three-year fuses before they began exploding in 2007. Those interest rate "resets" created the initial wave of foreclosures and helped push the economy into recession.
As the recession took hold and unemployment soared, families with perfectly good mortgages - who had lost their paychecks - began losing their homes in bigger numbers.
The pace eased up somewhat in late 2008, in large part as lenders put foreclosures on hold to see what kind of relief the government would come up with. But neither the government's programs nor the lending industry's voluntary "solutions" have done anything to bend the curve lower.
Unless that changes, expect the housing market to continue to struggle under the weight of millions more "distressed" sales as banks repossess homes and put them back on the already-weak market. Some 3.5 million foreclosed homes have been sold since 2003, and there are at least that many more expected. One estimate puts the number of homes at risk at 11 million - or about one-fifth of U.S. home mortgages.
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It's really a shame it's come to this. I talk to people all the time who feel they have no options. HAMP hasn't done the trick and HAFA doesn't look to be much better for many people. The number of distressed and foreclosed properties in the pipeline are going to keep the housing market down for quite some time. We may see mini peaks and valleys from month to month, but the market is not going to start rebounding significantly anytime soon.
I get irate at certain 'professionals' who tease out specific data to support 'evidence' of a 'rebounding market' when everyone knows how many REO properties are just waiting around the corner to be listed. It's self-serving at a time when a strong dose of reality is what everyone needs. This is not a time for the 'warm and fuzzy'. This is a time to take a stark look at your local market and see how it fits into your overall financial landscape, whether you are a potential buyer or you need help negotiating a short sale to save your credit and get on with your livelihood.
Michael Borger, Honolulu, HI
http://BigRockInvestments.com
... and the 5 and 7 year ARM resets still to hit.
Concerning how things are now, I think it would be in the banks best interest NOT TO RESET THOSE LOANS AND LET THE PEOPLE STAY IN THEIR HOMES AND PAY WHAT THEY HAVE BEEN PAYING. WTF is wrong with them??????
Don't worry guys... the republicans have it all under control.... "let the market take care of itself"..... so what then?.... the guys with cash buy all the houses at 50% off the price (since the banks would rather than do that than a principal reduction)... and sell it off to the poor "rich tax break guys".. who then roll the house at 25% more than they paid for it... and make zillions (see the companies they have already set up to do this one)..... wouldn't you think it would be nice if the republican contolled banks simply let those people reset... nope... the rich have got to make MORE money... it's never enough....
Wait, why do we need to go back to 2003 in order to inflate the foreclosure problem. Isn't the existing problem big enough? Did the author really need to add foreclosures from 2003-2006 to make the number even bigger?
This country needs to put itself on sale to the rest of the world. There are some 7 billion consumers out there, alot of them would love to buy a house and live here. Offer a green card to anyone who buy a house worth over $350K and I am sure the housing mess will turn in no time.
Plain and simple, housing costs rose for several years at a rate far in excess of incomes and peoples ability to pay for homes. First, hosing, (typo, but hosing seems more appropriate than housing), costs exceeded the ability of most single income familys to support them. Then cost rose even more as there became more and more 2 income families. Then, the mortgage industry came up with all sorts of bogus loans that were structured so poorly they would never be paid off. The mortgage industry sold these to "investors", stuck the money in thier pockets and turned thier noses up. Now they are stuck with some of these bad loans. In the mean time, developers and property owners cashed in on the easy loan deal, realtors hoodwinked buyers into buying the short term payment amount and its seeming current affodability based on some sort of magical future event increasing buyers incomes sufficient to suppot the real cost. The housing mess will continue until housing costs shrink to the point where homes are affordable to normal income earners. (In addition: new homes now come with all sorts of "fancy" sh*t like built in this and that, more space than is necessary, theater rooms, sound systems, big flat screen TVs and stuff like that. Whatever happened to the basic home?
Just foreclose and move on - natural population growth and immigration will soon bring the housing stock back into balance, prices will stabiize, then start to rise reflecting demand. Counseling people to walk away from their obligations is to make it more difficult for credit-worthy buyers to obtain a mortgage, as lenders are less willing to lend to buyers whose credit is less than perfect. Once this is over, mortgages should be made fully recoursable. There seems some merit, however, in the idea of reducing principal balances, then making the bank an equal partner in any increase in the eventual sale proceeds of the home from the adjusted mortgage balance.