Second Wave of Foreclosures
June 24th, 2009 by Jon Taplin
Here is a scary chart. A second wave of foreclosures in California seems to be growing monthly. More disturbing is that twice the number of homes sold each month are coming back on the market through foreclosure. With this kind of supply- demand imbalance anyone who thinks that prices will stabilize soon is smoking something from Humboldt County.
And as for the inflation hawks on Wall Street, what are they snorting?
Jon,
I guess the “green shoots” mantra will have to be put on hold a bit longer…
See the second graph in the following article for a macro view of impending resets and recasts
http://mortgage.freedomblogging.com/2009/05/20/loan-reset-threat-looms-through-2012/10791/
Jon, just so I’m clear – your argument is because of price deflation in the housing market (where we had the crazy boom):
1. the price of oil, milk and wheat is also going to fall?
2. so we should print more dollars into the market?
Roman beat me to it with the reference to that scary graph.
Which rather begs the question as to how the experts got it so badly wrong. Remember they didn’t see it coming (with only a very few exceptions) and it was only a few months ago that many were still questioning whether there would be a proper recession and confidently predicting that the economy would bounce back quite soon. I wish!
The conclusion has to be that the economic theory of the neoclassical mainstream is pretty flawed and indeed this is the thesis of economists like Steve Keen. He argues convincingly that many of the founding assumptions that underlie economic theory are false and do not stand up to critical examination. In particular, most Treasury models around the World apparently don’t model debt and so are blind to its dangers.
For an excellent explanation of how the credit system really works see his debtdeflation blog, especially:
http://www.debtdeflation.com/blogs/2009/01/31/therovingcavaliersofcredit/
It helps that he is not a head-banging libertarian.
This is why the experts at the top of the corporate and financial food chain deserve all those bonuses, right?
So when all these houses are just sitting empty should we expect squatting to take off? Or will they just start tearing things down like in Flint, Michigan?
I’m watching out for the day that residents of tent cities decide, en mass, to take over the homes they were kicked out of
That’s why we need to to knock those houses down.
Note: Michigan’s property values will go thru the roof the moment they decide to run their state like Texas. Tax property, but RESPECT it. Tax consumption. No corporate taxes. Right to work state. No income taxes. Make it EASY to be a landlord.
Michigan will be fine when it hitches up it’s skirt, and shows some thigh on the economic freeway, instead of holding that ax and wearing the scary LBJ mask.
Texas is a Right to Maim Employees state.
Yeah, wow, Texas! What a great state! Fire ants, a governor who wants to secede from the US, a place where moms maim or try to kill their daughter’s cheerleading rivals, and a city (Houston) which has out-asphalted Los Angeles. Remove Austin and you’ve got South Hell there…
Morgan, Respect us. Remember – for our generation it was not the Alamo, it was Dallas in ’63 and GWB. Texas loud, Texas proud.
Boys, the other states are eating cause they don’t run like TX.
Ah, you’ve found the second foreclosure wave. And it’s not just in California. It’s California, Nevada, Arizona, and Florida. This is where most of the Alt-A type loans were made.
Alt-A loans were the pick-a-payment and similar loans where you had three or more options as to what amount you could pay each month. You could pay less than the full interest amount, the full interest amount, the interest plus some principle. Countrywide (now Bank owned by America) had a lot of this type of loans on it’s books.
Counrtywide’s last set of SEC filings indicated that 80% of the mortgagees on these types of loans were only making the minimum payment of less that the full interest due for the month. It’s called negative ammortization. At the end of each month, you owe more than you did at the beginning of the month.
A very scary, but instructive website for learning about this is doctorhousingbubble.com.
As a realtor in Souther California I can tell you graphs do not show the whole picture. This graph does not show that most of these homeowners are trying to modify their loans. The foreclosure process does not stop while homeowners are trying to modify. We actually have very little inventory in my market place. One property becomes available and we all run to it and submit offers. It is not unheard of to get 25 or more offers on a decent looking property.