Speculators “Losing That Bet” In Arizona
A report from the Arizona Republic. “The number of people losing their homes to foreclosure or falling behind on their mortgages in metropolitan Phoenix is near a two-year high, the latest and most tragic sign of the Valley’s housing market slowdown.”
“People are losing their homes at a nearly record rate, not only in the West Valley, where foreclosures have traditionally been high, but also in pricey neighborhoods in the East Valley, where credit-card debt levels are higher than average.”
“‘A lot of people with rising mortgage payments due to adjustable loans can’t refinance now because their credit and debt situation has changed,’ said (realtor) Margie O’Campo de Castillo in Phoenix. ‘They are faced with finding a way to sell their home fast or lose it.’” “Economists say that nearly 40 percent of all home loans in metropolitan Phoenix are adjustable-rate mortgages, or ARMS.”
“Household debt has climbed to 132 percent of disposable income. It is the first time since the Great Depression that Americans are spending more than they make and saving next to nothing. Some Valley homeowners piled on debt by taking out second mortgages to buy investment houses. Some of those investment properties are now in foreclosure.”
“In October, the Valley’s notice of trustee sales almost doubled from April’s level. Trustee notices, which are handed out by lenders when a homeowner is three months or more behind on mortgage payments, are at their highest level since January 2005.”
“Last month, 1,186 homeowners got trustee notices and 133 homes were auctioned off to the highest bidder at foreclosure auctions on the steps of the Maricopa County Courthouse, according data firm Information Market.”
“Julian Baeza fell behind on the payments on his west Phoenix home late last year. He tried to refinance with a private lender but ended up losing his job and then his home last summer. ‘I thought I was getting help and could catch up on my payments,’ he said. ‘But, instead, my monthly payment went up, and they wouldn’t work with me.’”
“Parts of the Valley, including the poshest neighborhood in Ahwatukee, the Anthem area of the north Valley and far east Mesa, have high foreclosure rates. Some parts of the Valley, particularly new neighborhoods on the fringes, drew more speculators.”
“Now, many of those investors can’t sell homes or rent them for a profit, so they are walking away from them. Foreclosures are climbing in those neighborhoods as well. ‘A lot of homeowners are very nervous, and some are in trouble,’ said Jay Butler of the Arizona Real Estate Center at Arizona State University. ‘A lot of people gambled on home values continuing to climb like they did last year, and now they are losing that bet.’”
“Arizona’s cooling housing market is hitting the town’s fledgling multicultural celebration in its pocketbook. KB Home, chief sponsor of the Global Village Festival held in April, recently told organizers that it would no longer be able to sponsor the one-day cultural event, said Omar Hameed, vice chairman of the town’s Human Relations Commission.”
“The housing boon has shown signs of slowing since June, straining Arizona’s home-building industry, an enormous cog in the state’s overall economic engine. The slowdown has hit Gilbert. For the first time in almost a decade, median sale prices for existing Gilbert houses are down from what they were the same month a year ago.”
“‘We understand what happened,’ Hameed said, referring to KB Homes’ pullout. ‘When you’re down, you’re down.’”
In Business Las Vegas. “Southern Nevadans’ buying may be tempered this holiday season by high gasoline prices and a slowdown in the housing industry, retail analysts said.”
“In Las Vegas, a slowdown in new home construction has prompted additional layoffs by builders, including some in the last two weeks by KB Home and that in turn has led to cutbacks in the construction industry, mortgage, title and other companies as well.”
“The housing market is another factor to watch because of the slowdown in appreciation, said Julie Cameron, a VP of retailer productivity at General Growth Properties.”
“Customers have had years of being able to leverage their homes to come up with more money to spend on other things,” Cameron said. “That party is kind of over with, and it can affect the holiday season.”
Also from In Business Las Vegas:
‘Leaders in the industry are seeking solutions from government and urged officials to prevent industrial land being zoned to residential and other uses. Cooper described the difficulty in finding even a two-acre parcel for Southern California companies that want to relocate to the valley. He said he refers many companies to North Las Vegas, where there is more industrial land. ‘They want to escape California, but they are shell-shocked when they see the prices here. They know a few years ago it wasn’t like this and wonder what has happened,’ Cooper said. Some companies don’t want to relocate to the Las Vegas Valley because their workers can’t afford the housing prices, Majewski said.’
“‘We understand what happened,’ Hameed said, referring to KB Homes’ pullout. ‘When you’re down, you’re down.’”
What a crock of crap. Has KB Homes’ executive or board taken a pay cut? I don’t think so.
Oh, come one. Rates HAVE NOT moved much. All this wailing is merely ARM resets, and teaser periods ending. Wait until we see some REAL rate rises. How about a 30 year at 8%? It was only six years ago that this was true. We forget so quickly, when the punch powl is full!
Yes and with every major central bank raising, how can the Fed not follow suit?
Particularly with the Dollar tanking again.
Ben,
The global central bank rise is so quiet though. I had to google to see what you were talking about. Two weeks ago Bob Brinker (no flames please, I was having my weekly gotta eat lunch in the car and listen to talk radio, day and Dr. Laura was already over) was predicting rates steady. It is always when you least expect it.
http://www.iht.com/articles/2006/11/23/business/bok.php
Not really that quiet. If you follow my M&M blog, you would know that the Bank for International Settlements has been announcing that excess global liquidity will be cleaned up for some time now.
I agree that when rates rise, then we see the bubble prices drop. Big time drops. The current mortgage rates are still low. When they jump past 7.5 then the tail spin will begin. Most homeowners with ARMs can’t make that stretch and then we see the foreclosures begin to set the comps and everything begins to dive. I thought it would be energy prices that took this bubble down, but now I see that it will be debt.
“The housing boom has shown signs of slowing since June” - the KB guy said. Haha, does he mean June of 2005? Certainly someone asked me for a loan WAY before June using the premise that “we can’t sell our house in Gilbert, things have just died”. (And I said that’s why I’m not going to make the loan either.)
“Now, many of those investors can’t sell homes or rent them for a profit, so they are walking away from them”
This is one more outcome that was predicted here more than a year ago. The consensus predictions on this blog have been eerily accurate.
So, who are you going to believe, the RE boosters who have been consistently wrong, or the thoughtful posters who have been consistently right?
Unfortunately most of the idiots out there dont read this blog.
Absolutely. Many here have been of the opinion that people will walk - especially on investment props.
Walk away baby, walk away.
Some subprime lenders are letting people have 100% stated loans one year after foreclosure. Until the foreign MBS market dries up, the music will keep playing. The speculators can jump right back into the game a year after stiffing the banks.
This is the fisrt time on this blog for me. Even without htis blog I figured this out on my own. Predatory lending, maybe, I would say gead on the borrower and lenders part. I dumped all of my holdings in Reno, NV in jan 2005. Everybody told me I was a fool well I should call them up and see what they think now.
I wonder why lenders won’t work with FBs on the rates?
Could it be because the interest payments have already been stripped off and sold into the CDO or MBS markets?
There isn’t alot of margin given the yield curve. Not much profit and they are already dealing with a FB. Those zero down loans have to hurt now.
“Economists say that nearly 40 percent of all home loans in metropolitan Phoenix are adjustable-rate mortgages, or ARMS. Nationally, about 30 percent of home loans are ARMS.
As mortgage payments rise, many homeowners fall deeper into debt.
Household debt has climbed to 132 percent of disposable income. It is the first time since the Great Depression that Americans are spending more than they make and saving next to nothing.”
Incredible. We knew this was bad for several months anyway, with 19,000 homes for sale unoccupied, 54,000 homes on MLS in Phoenix. The revolution between the credit bingers against the responsible savers has begun. Who’s going to win?
“Who’s going to win?”
the lawyers
“The revolution between the credit bingers against the responsible savers has begun. Who’s going to win?”
Unfortunately our side is outnumbered 10 to 1. I feel like John Wayne in the Alamo looking out across the field and seeing the entire Mexican army. For anybody that is thinking of switching sides, just remember what Churchill once said. “It is better to die on your feet that to live on your knees.”
Luckily the enemy isn’t that smart. Just toss’em a lot of rope and they’ll surely hang themselves.
I think most debtors have been using the Churchill quote to justify living beyond their means.
A couple more WWII Churchill quotes, which resonate nicely at the moment.
“I have nothing to offer you [FB's?] but blood, toil, tears and sweat.”
“What we are seeing is not the end. Nor is it the beginning of the end. But it may be the end of the beginning.”
Banks have tried unsuccessfully for years to get into real estate brokerage, but NAR has fought tooth and nail to keep them out, understandably. I can see it now: “List your home with Big Bank, Inc. and then use our Buyer services to purchase your next home and we’ll include free checking, a high rate IRA, and a reduced mortgage rate on your next home purchase. The ultimate in One Stop banking!” It would totally wreck real estate brokerage as we know it. But banks ARE getting into real estate…thru the back door. And, I don’t think banks are that broken hearted at taking in all of this real estate. The more they own (take back), the more convincing they can be when they go back to Congress asking to be allowed to provide brokerage services. “But Senator, we’ve had to take back so many properties at inflated prices, plus home prices have declined…if we had the ability to sell these properties ourselves through our own in-house brokerage, we wouldn’t have to pay the high commission that the typical brokerage charges. Why, if we had to list all of these homes with a broker, imagine the money we will lose trying to unload these properties. The banking industry will be devastated!” Now that would be an interesting turn. A lot of brokers would be out of business, or working for a bank making $10 an hour selling homes. For some brokers, that might even be a raise!
Interest rates will be the factor in this market come early 07′. The jury is still out as to the rise or fall. At 6.1% rates are very good but the expected downturn and always slow months of Nov- Dec still give the overall pictutre a fuzzy cast.
Of course if rates rise to even 6.75 or above that will freeze the whole ball of wax and a housing recession will be stamped marked. If the rates shoot to above 7.25 a total depression of the industry will have far reaching implications into the economy. But if the rates drop to below 6.% then the market will show a little more hope and light at the end of the tunnel. Sales of exsisting homes and new houses will pick up but price concessions will be in play just not as deep as many would like.
Their are going to be a lot of factors coming into play in the next several months nobody can get a handle on it ie: oil, the dollar etc. One thing is for sure, the boom of housing as related to overpricing is done with, the flippers are done with, and the housing industry will be watching not everyweek the sales but every day it is going to get that crictial.