Monday, April 16, 2007

Bloomberg News - US Foreclosures Double

Foreclosures Double as Owners Struggle to Refinance Mortgages -- By Bob Ivry -- April 16 (Bloomberg) --

"The number of U.S. homes entering foreclosure in the first quarter doubled from a year earlier as property prices stagnated and owners struggled to refinance mortgages. Owners of 168,829 homes in the first three months of 2007 received notice that lenders had filed for foreclosure due to failure to pay loans or liens, Foreclosures.com said today in a statement. That compares with 83,154 homes in the same period of 2006, the Sacramento, California-based research firm said.

A four-year high in mortgage payment delinquencies and the failure or sale of 50 subprime mortgage companies, which provide loans to people with poor or limited credit histories, has made credit less available. The inability of homeowners to refinance their debt has added to the rise in foreclosures. ``A lot of folks have been borrowing and borrowing and borrowing to stay out of trouble,'' Foreclosures.com President Alexis McGee said in an interview. ``Now that there are less borrowers in the marketplace, where are they going to go? Unless lenders step up and offer money to these people, they'll be locked out.''

Riverside County, California, had a 172 percent rise in the number of homes entering the foreclosure process in the first quarter, the biggest increase of any county in the U.S., the company said.

Foreclosures.com said other counties showing big increases were Clark County, Nevada, which includes Las Vegas (143 percent); Los Angeles County, California, (92 percent); Miami- Dade, Florida (90 percent) and Cook County, Illinois, where Chicago is located (44 percent). The findings come as the National Association of Home Builders/Wells Fargo index of U.S. homebuilders' confidence fell to the lowest level of the year in April. The index dropped to 33 from 36 in March, the Washington-based association said today. A reading below 50 means most respondents view conditions as poor.

The National Association of Realtors said last week the median price of a home will fall 0.7 percent this year to $220,300. Mark Zandi, chief economist for Moody's Economy.com in West Chester, Pennsylvania, also said last week that the median price will slide to $210,000 in 2008, the lowest level since March 2004.

Most homeowners who enter the foreclosure process do not lose their houses. In many states, the process can be initiated by the lender when a borrower falls just one day behind, McGee said."

It is really almost unbelievable how fast foreclosures have shot up in the US and the biggest house price declines are still to come yet. The weakness of the average American's finances is astounding to me. Combine rampant consumerism with cheap and available credit and we've got a massive recipe for disaster like we've never seen before. Things look really bad - this will be a financial correction for the history books.

19 comments:

freako said...

"Owners of 168,829 homes in the first three months of 2007 received notice that lenders had filed for foreclosure due to failure to pay loans or liens, Foreclosures.com said today in a statement."

Normally only a small fraction of Notice of Defaults (pre-foreclosure) end up in repossession and auction/sale. Sometimes it is just a rough stretch, and payments come in once the NOD is filed. However, that is during normal times. We don't know the full extent of the damage yet, but I think records are about to be broken. Remember, the NOD's filed today, won't result in a foreclosure sale for 8 months or so. Also, note the negative feedback loop. Foreclosures pressure prices downward. Falling prices increase foreclosures. Why not walk if you can't make the payments, and your equity is deeply in the hole. In fact, why walk. Just stay "rent free" while the legal process takes its due course. That is why I think we have only seen the tip of the ice berg. How many trillions of dollars of ARM's were resetting in 2007/2008?

mohican said...

I am a housing bear and even I am surprised by these numbers. The worst is far, far from over. As all of this personal financial hardship works its way through the system, the price declines will snowball and will range from 20% - 50% declines around the world. I don't see any hats or any rabbits around so the average Joe is just going to have to suffer through this. It sure isn't going to be fun.

blueskies said...

...and yet there are those who would deny this could roll over into Canada and Vancouver more specifically....

denial to the nth degree!

jesse said...

"Also, note the negative feedback loop."

This is technically positive feedback (though the effect is connoted negative for owners and lenders). An increase in A causes an increase in B. B feeds back and adds to A.

solipsist said...

Shock and awe!

Bring it on!

Surge.

Great American terms.

Ah, the praxis of people.

Jim said...

mohican:

You should be ashamed of your self. Or at least questioning your ethics. Its one thing for a bunch of anonymous posters, none of whom really have a clue about how to run their personal finances, to be making bearish comments. Its another for a "financal planner" to be pandering to them to drive traffic to his blog. Speculating on one's home, either on the upside, or the downside, is not consitant with "financial planning and personal sanity'. Now that you are out in the open as a "bear", your last shred of professional credability is gone. Freako, you sold in 2003-you're an idiot.

Clarke said...

Jim,
Rather than troll here, why not stay on Chipman's blog? Oh, and go buy one of those condos in Whalley while you are at it.

-\/- said...

Jim,

what are you on about?
What is your criticism?

Mohican, you're doing a great job: keep it up!

-\/- said...

Jim,

are you scared you're gonna lose your (not)-hard-earned money?

Doctors cure people, engineers build bridges......real-estate investors do what exactly?

get a real job.....

mohican said...

jim - I would not be able to sleep with a clean conscience if I didn't call it the way I see it - re - overpriced assets. I don't want my clients, friends, or family to overpay for things so I tell them the facts. Telling the truth was, last time I checked, an admirable human trait which lends credibility to the truth teller not the other way around.

It is the verifiability of this 'truth' which we are discussing, not my personal ethics, and I surmise by your comment that you disagree with me. I welcome disagreement and sometimes I even change my mind when the facts / evidence warrants it. Show me some evidence and a viable argument and I may be swayed from my current point of view.

My current point of view is this - house prices are at historically unprecedented levels in relation to rents and incomes and are due to significantly decrease to a 'rational' multiple of rents and incomes. This point of view leads to some other conclusions - i.e. many people will suffer financially through this price decrease.

I welcome intelligent comments and arguments on this assertion and its logical conclusions.

tulip-Mania2 said...

"I welcome intelligent comments and arguments on this assertion and its logical conclusions."

Mohican,( thanks, you have a great blog) you will be waiting for ever, Jim et al know, at a deep level, this is going to go bust, but like deer in the headlights they are immobilized by fear to get out while the going is good.

The truth is plain to see. It's a bubble.

Tick Tock, Tick Tock

freako said...

IMHO, the higher the financial education and sophistication, the more the DUTY to call it like it is. And how is it? It is very bad. As Mohican points out, fundamentals are bad across the board. The shame falls squarely on those who refuse to see what their eyes tell them.

blueskies said...

You should be ashamed ....snip.... making bearish comments.....snip..... idiot.

what was the name of that movie again?.....
oh yea "Raging Bull"...

dingus said...

jim:

How has mohican advocating "speculating on one's home"? By suggesting that it might not be a bad financial decision to rent rather than buy? I think that lends him credibility -- most financial planners would simply mindlessly cite the financial planning playbook that says owning your home is the cornerstone of long term financial stability. Well, under normal conditions, true. But kudos to mohican for addressing the realities and colossal risks of this market and providing some analysis around it. I think buying anything right now would be speculating in a bad way.

bc locust said...

I seems to me that lately the bulls are making more and more agressive/offending comments. What is that need to attack the bears? Everybody is free to listen to the two sides of the story and make an informed decision.

Yes, housing is still appreciating in Vancouver and you can make money out of it, but yes it is a high risk investment. There is nothing shocking about saying that...

BTW, a friend of mine bought a house for 710,000 four years ago, and that was already stretching their finance. Their home is now worth 1.5 million. Good for them? No, because they cannot afford the taxes any more and cannot downgrade to a condo because of the kids, dog, cats. How many people are paying their taxes on their credit card?

beta said...

I seems to me that lately the bulls are making more and more agressive/offending comments. What is that need to attack the bears?

They can't argue their perspective on the fundamentals, so they resort to name-calling (and, in Jim's case, a laughable claim to moral superiority). I think we're seeing more of it because even perma-bulls can see the storm approaching from the south, and it scares the crap out of them. Fear makes people act badly.

Aleks said...

a friend of mine bought a house for 710,000 four years ago, and that was already stretching their finance. Their home is now worth 1.5 million. Good for them? No, because they cannot afford the taxes any more and cannot downgrade to a condo because of the kids, dog, cats. How many people are paying their taxes on their credit card?

They could sell, buy a "mere" $1 million house in a slightly less desirable neighbourhood and their mortgage payments would probably be cut in half. Saying they can't live in a condo is a red herring when the majority of SFH are going for less than $1.5 million.

happy renter said...

Tuesday 17th, Radio Canada at 17:30 (CBUF FM):

"The collapse of the US housing market and its consequences for the Canadian economy."

Tick tock, tick tock.

jesse said...

"They could sell, buy a "mere" $1 million house in a slightly less desirable neighbourhood and their mortgage payments would probably be cut in half."

More like move to Pitt Meadows, pay off the mortgage completely, buy 2 cars for commuting, and have enough left over to cover property taxes and maintenance for the next 10 years. But I assume this is not an option.