Rising Number Of Foreclosures Signals Return To Normalcy
A report from the Arizona Republic. “The fallout from the country’s real-estate slump continues to reverberate in Arizona and across the nation as more homeowners and lenders turn to foreclosure to solve their financial woes. New data released Monday show that foreclosure-related filings in Arizona jumped during the first half of 2007, compared with the same period a year ago.”
“Experts say it will likely take time before things get better. ‘By any calculation, things are going to look bad compared to 2004 and 2005,’ local economist Elliott Pollack said. ‘There will be a transition period over the next couple of years as those people who took loans that maybe they shouldn’t have taken have to deal with the issue.’”
“Numbers released b RealtyTrac show that foreclosure-related filings in Arizona increased by 128 percent in the first half of 2007, over the same period a year ago. In Maricopa County, for example, there were 19,394 properties in some stage of foreclosure in the first half of the year, up from 7,671 during the year-ago period, the company said.”
“Data from Glendale-based Information Market are different but reflect the same upward trend. That firm shows that 2,952 homes were foreclosed on in Maricopa County from January through June, up from 208 during the first half of 2006.”
“‘They are at an all-time high, but it’s also following a period of very high sales back in 2005,’ said Tom Ruff, a principal with Information Market. ‘I just look at it as a market correction, myself.’”
“While most experts agree the rising number of foreclosures signals a return to normalcy both locally and nationally, it still can have a very negative impact on neighborhoods.”
“‘If you go into a neighborhood and there’s a lot of foreclosed properties, they’re empty, you don’t know who’s going to buy them, they’re probably not being maintained at the moment,’ said Jay Butler, director of realty studies at Arizona State University.”
“Home building in metropolitan Phoenix continues to stumble, with permits dropping 23 percent from last year. But it’s not all bad news. We remain among the nation’s leading housing markets.”
“Valley housing analyst RL Brown said the traditionally strong Phoenix market retains potential even though builders have suffered some damage. ‘If you’re a home builder, you want to be where the action is,’ he said.”
The Review Journal from Nevada. “Apartment landlords are not able to raise rents in Las Vegas as much as they have in the past, partly because of increased competition from single-family homes, a multifamily broker said Monday.”
“Concessions such as one month of free rent and move-in discounts are going up and overall rents are staying flat, Spence Ballif of CB Richard Ellis said. He estimated 11,000 homes in Las Vegas that are not owner-occupied. Many of them are being offered for rent because they’re not selling.”
“‘What we’re experiencing is the amount of single-family homes being rented is giving us short-term supply,’ Ballif said.”
“Previous annual rent growth leaders such as Phoenix, Las Vegas and Riverside-San Bernardino, Calif., continued to slide, Chris Bates of RealFacts said. With a quarterly increase of 0.3 percent, Las Vegas will see an annual rent growth increase of 1.2 percent, dramatically lower than last year’s 5.4 percent annual growth rate, he noted.”
“‘I think it’s going to slow even more, particularly with decreasing occupancy,’ Bates said. ‘The other thing I’ve heard in pockets of California is all of these single-family homes are built and not sold, but they’re being rented.’”
“‘With Nevada having the highest foreclosure rate in the country for single-family homes and condos, we have seen the vacancy rate increase. This is surprising, but it seems the people being foreclosed on are moving into rental homes or upper-end apartments,’ said Carl Sims of Hendricks & Partners.”
“Also, with home prices on the decline, some renters are now starting to buy foreclosed homes, he added.”
‘2,952 homes were foreclosed on in Maricopa County from January through June, up from 208 during the first half of 2006.’
‘They are at an all-time high, but it’s also following a period of very high sales back in 2005,’ said Tom Ruff’
OK, Arizona press, you have been hiding behind a relatively low default rate, but the time has come to step up. I know foreclosures are growing in northern Arizona, but the press here is also silent.
So Ben what ya think the corp master made Cramer recant today?
Nope…he is on a new roll.
http://video.google.com/videoplay?docid=6978062039224367008&q=Cramer%3A+No+really%2C+dump+your+house&total=2&start=0&num=10&so=0&type=search&plindex=0
POW!
Getting crazy now…
No more RE pumping by Cramer? He finally see’s the obvious? He must be totally divested of any RE related stocks. He’s a tool.
Those videos from yesterday and today are really stunning. Knock Cramer all you want, but he has a huge following and he does know a lot about financial markets. He really made a key point: You don’t need your house; you need a credit card to buy stuff, and you need your car to get to work. So he recommends walking away from the house and keeping the credit card and car.
How many people are in this situation? Millions and millions, IMO.
Somebody said he was joking in those videos. I’ve never watched him before so I can’t tell. Based on this limited sample, I must say I would not expect his manner and delivery to instill confidence. But then I don’t understand the appeal of American Idol or any of that other crap either.
I’ve never watched one American Idol show.
Was at parents home in Flagstaff last week. In my parent’s neighborhood 2 unsold houses that having sitting for months. One slashed the price by 10k still no takers. In my old neighborhood 10 homes for sale, no sale pending, or any indication of sales. The bubble market has ruined Flagstaff, this comes from a native of the town born and raised there and former teacher in the flag district,
Flagstaff will be a foreclosure disaster, at some point, IMO. Not just overbuilt but loaded with super-pricey houses. I was up there last weekend, and on a sidwalk over-heard a 20ish college student tell her companion, ‘I can’t believe all the milion dollar homes here now. When did that happen?’
When it’s gotten to the sophmore level, you know it’s baked in the cake.
These million dollars houses are the same houses I used party in in high school, and usually get sick all over the living room. Back then working-class or prof kids lived in them.
They are mostly new. The older stuff only lists for half a million.
oh yea
Ben, I thought you lived in Flagstaff?
Just south of Flag.
kachina village……partied there all the time to
That’s close. I bet you wouldn’t recognize the place. Sounds like you were quite the kegmeister!
Back in the late 70’s and early 80’s there wasn’t much to do in Flagstaff except party. Mountain biking had yet to be invented, downtown was where one went to get there butt kicked(Route 66 bar now animas trading). Ironically, lots of snow during the winters in those days. Skied as nearly as much as I went to school. So yea I’ve partied in many places in and around Flagstaff. Drinking age was 19 so every bar let you in if you looked 15.
Downtown is really pretty nice now, very laid back. But you are right about the snow/rainfall. This whole region is in a multi-year drought and there hasn’t been a decent ski season in Flag for a few years.
Alpine Pizza was there…….pizza was as greasy then as it is now
Great people watching place tho’
yep………one big difference the current crop of hippies has a greater level of income compared to the hippies of 30 years ago.
The oldster hippies had lots more character, though. came through Flag at night once in 2 or 3 feet of fresh snow, plowing it with my p/u bumper. Beautiful country.
and they drove 1978 datsuns
I had lunch with a friend in downtown Flagstaff last week and we’re sitting there hoping for a rain storm to drench all the co-eds. Yea, Ben, you’ve got it rough.
Kachina Village has about 38 SF for sale. It’s located seven miles from Flagstaff proper–more like ten miles from the downtown area–yet, they’re still trying to pump old beat-up shacks for $150/sqft. The halfway decent houses are asking $200+/sqft. Lots are usually tiny (1/4 acre), too. I remember (2001-03) when $100/sqft was average.
Just a stone’s throw from I-17 (gotta love those Jake-braking truckers coming down the hill) but only a short walk to the deep forest and canyons. Far from shopping, schools and entertainment, but nature’s the key there. Acceptable trade-off, IMO.
It’s totally non-homogenous: houses with overgrown bushes, peeling paint and beat-up cars next to primo log cabins next to modern two-story colonials next to aged 70s-era split levels. The north side is almost all mobile homes. Very funky.
Total residential listings (all categories) for Flagstaff has been stuck at about 1130 for ages. Nothing is moving and the sellers still have the “it’s different here” and “I’m sticking to my wish price” mentality. It’ll take a while, but Ben is right–Flag is going to get hurt. Too many second homes, California equity locusts and wannabe flippers to sustain current price levels. I think that the smart/surviving realtors are mostly diversified into property management these days.
http://www.northernarizonamls.com
“Not just overbuilt but loaded with super-pricey houses.”
Ditto for everytown, USA thanks to braindead builders and developers. The top end is EXTREMELY overbuilt. The sheer numbers of wealthy people required to absorb these homes does not exist. What happens to all of these homes? At some point, there are going to be some amazing prices on monstrous houses, should anyone be interested. It’ll also help to drive prices of average homes into the ground.
The entire country is swimming in an endless supply of luxury homes, many which are second residences.
I’ve been contemplating the bear scenario for quite some time, but every couple months or so I have one of those moments where it hits me right between the eyes…..and I realize this thing is just going to be soooooo ugly.
“It’ll also help to drive prices of average homes into the ground.”
Not neccesarily.
Big McMansions with dual AC units and mega-BTU furnaces consume a lot of energy - which is only going up in price. Smaller, more efficient houses are cheaper to live in.
Consider that late 1960s Cadillacs and Lincolns were going for 5 cents on the dollar when the OPEC embargo hit in 1973, while 4-cylinder VWs and Hondas were in high demand. What used to be “luxury” was nothing but a liabilty at the pump.
If anything the McMansions will be cut up into multiple housing with 4 or 5 AC units and electric meters, and bathrooms converted into small kitchens.
Not on the beach! Who needs AC… Just waiting for the right deal in Santa Barbara…
You have to be pretty close to the beach. Go one mile inland and without the marine layer you are needing some A/C. You also need to crank the gas heat in the winter.
I was in Santa Barbara one December in the late 80s when it was downright COLD! And I lived in the high desert at the time, where it would snow about twice a year. A fireplace is a good thing to have in S.B. Great town. A sister of mine lived there for ten years.
I would not consider 10K “slashing the price”, unless the home is listed for 30K…..
The Butler did it.
“‘If you go into a neighborhood and there’s a lot of foreclosed properties, they’re empty, you don’t know who’s going to buy them, they’re probably not being maintained at the moment,’ said Jay Butler, director of realty studies at Arizona State University.”
“Numbers released b RealtyTrac show that foreclosure-related filings in Arizona increased by 128 percent in the first half of 2007, over the same period a year ago. In Maricopa County, for example, there were 19,394 properties in some stage of foreclosure in the first half of the year, up from 7,671 during the year-ago period, the company said.”
This is about 3-4 months of inventory. Yikes.
Don’t worry, though. It’s contained.
Watch the Dow…
Beware of the Beartraps!!
The market dropped off a cliff in the last 1/2 hour. CNBC will have to wheel out cramer tommorrow morning too I guess.It is hilarious that he has been on squawk box everyday this week trying to reassure the sheeple. I think my decsion to go all cash awhile back was good.I was doubting myself for awhile but I made the right decision afterall.
Got tinfoil?
I don’t understand what happened to the Dow today. 300 point swing?? What was the news that triggered the fall?
Credit crunch….what else housing news.
Some mortgage lender tanked at least 9 bucks down to like a dollar and change. Cant remember the name, was it accredited home lenders? I think that created the selloff. The subprime woes won’t go away and get worse. All the dirty secrets are being revealed as time goes on.
It was American Home Mortgage. Trading was suspended for a day and a half, but when it finally returned this afternoon, it dropped 89.5 percent to about a dollar a share. Good night, AHM, and good riddance.
– Judge Smales
“You’ll get nothing and like it”
It was all yesterday’s news. Nothing new today!
“Everything is contained - CONTAINED, I say! Ignore the fires burning all around, and the fact that the ship is listing to one side… and those bombs falling? They are fireworks, not bombs! Everyone back to your stations! We have to get this shipment of debt to America! They need more debt! And remember - the problems are all contained!”
Amusing that Krazy Kramer seems to get the message. Or, maybe he mixed up his drugs with truth serum. I hate it when that happens. Can Kudblow save us? I doubt it…
The market’s cliff-dive in the last hour or so was very amusing. 300+ point swing in one day - a pity when reality mugs Goldilocks. I hope that tomorrow proves to be at least as entertaining with more heavy swings to the downside.
Even the WaPo’s starting to figure things out… http://tinyurl.com/2ponry
The big boys will do everything they can to keep the tape painted above 13,000. It should be interesting to see what happens when they fail; people around work already have the scared-rabbit glaze in their eyes. I’ll go long again once they’re all out.
This would be fun if some people I cared about weren’t going to be hurt for a long time to come.
Wait until the WaPo headlines says stock go south on prime worry’s.
Getting desperate in Bend, Oregon…
http://bend.craigslist.org/rfs/386193699.html
Bend, over.
I think you could sum that up as: “open house, followed by open blouse”
Open Houses more closely resemble Open Caskets…
Hey, that would make a great porno film title!
Posting was flagged for removal
“While most experts agree the rising number of foreclosures signals a return to normalcy both locally and nationally, it still can have a very negative impact on neighborhoods.”
This just in. The REIC is reading Orwell. Down is up, bad is good, foreclosures are a sign of strength. I suppose sheriff’s evictions will signal a ‘dynamic and exciting market’.
This “return to normalcy” must be a national talking point. And in a sense it is correct. In historical terms, the number of foreclosures, inventory, sale prices, etc… will all pass though (if they haven’t already) “normal.” Unfortunately this is just a road sign on the way to “collapse.”
This is like saying the dam has burst and the river is returning to it’s normal level (oh sorry about the 100′ high wall of water blasting through your neighborhoods - this is quite normal)
Ode to Bobby Z…
Once upon a time you heloced and all was fine
You bought his & her’s jet skis, didn’t you?
People’d call, say “beware y’all, you’re bound to fall”
You thought they were all kiddin’ you
You used to laugh about
Everybody that was hangin’ out on Ben’s blog
Now you don’t talk so loud
Now you don’t seem so proud
About having to be scrounging for your next meal.
How does it feel
How does it feel
To be without a home
Like a foreclosed unknown
Like the victim of a bad loan?
Here’s an interesting map of foreclosure hotspots
Here’s an interesting map of foreclosure hotspots
http://www.geocommons.com/workspace/show/1449
The news gets better and better. Fun continues, day after day. I’ll be fully satisfied when there is a 30 - 40% decline in prices in Massachusetts. People here really deserve it!
I can only hope for this magnitude of decline. Question is, how soon, if at all?
I’d be satisfied with a 20% - 25% drop from where we are now.
Honestly though, my fear is that it either won’t happen or won’t happen soon enough for me. I sort of think that if we don’t get it by year’s end, then we will just skip along the level we are at for many years. Not that it’s different here, just that the prices seem really sticky and we don’t have the surplus of new construction of new homes to pressure the secondary market.
You’d better watch the Jim Cramer video linked at the top of this thread. It’s coming, and you won’t have to wait long.
There once was a guy who posted here (not in the last year at least) who went by “crashmaster101″.
He was from the Boston area, and back in ‘05 when RE bulls were still around he was saying that when the bust got going, eastern MA would see 50% declines.
He said he had a model that convinced him of this.
Interestingly, I bet he wasn’t one of those clown hedgies we’re hearing so much about…
Mea culpa, Maricopa
1,400% rise in foreclosures…
“Data from Glendale-based Information Market are different but reflect the same upward trend. That firm shows that 2,952 homes were foreclosed on in Maricopa County from January through June, up from 208 during the first half of 2006.”
‘American Home Mortgage Investment Corp, a large U.S. mortgage provider, said on Tuesday it can no longer fund home loans and may liquidate assets, putting its survival in doubt.’
‘The Melville, New York-based real estate investment trust retained Milestone Advisors and Lazard to help it evaluate options and advise ‘with respect to the sourcing of additional liquidity including the orderly liquidation of its assets.’
“the orderly liquidation of its assets” - are they referring to hauling the desks out of their offices - that’s about all they have left, isn’t it?
On the heels of AHM…
“Moody’s Investors Service tightened its standards Tuesday for so-called Alt-A loans, which are above supbrime but below prime loans in terms of credit quality. The move could stir concerns that credit problems are spreading beyond subprime loans to a higher quality of borrower. ”
http://www.nytimes.com/aponline/business/AP-Wall-Street.html?_r=1&oref=slogin
When AHM finally came out of its cave and the NYSE allowed its’ stock to trade again, the market tanked.
“But stocks pulled back after American Home Mortgage Investment Corp. said Tuesday afternoon it hasn’t been able to tap into its credit lines and has hired advisers to consider its options, including the sale of its assets. Wall Street has been concerned about credit after some loans made to borrowers with poor credit have gone bad, and that anxiety contributed to the market’s big plunge last week.”
http://www.nytimes.com/aponline/business/AP-Wall-Street.html?_r=1&oref=slogin
July 31, 2007, 1:18 PM
Bank Financial Scandal Brewing
By Luke Ford | Comments (0)
A financial scandal is brewing that the LA Times, as usual, is slow to pick up. It goes like this. When you have an adjustable rate mortgage, your payment is initially fixed, let’s say at $2500 a month. When rates go up, your monthly payment goes up. However, all of these “ARMs” (adjustable rate mortgages”) allow you to keep paying the base payment of $2,500 and add the increased payment to your principal balance. This is known as “negative amortization” - instead of amortizing your loan down, you are adding to the balance.
Since rates have gone up, lots of borrowers have been allowing negative amortization to occur, and now, their principal balances are in excess of their homes’ value. For instance, borrower buys a home for $400,000 and borrows $320,000. His monthly payment is about $1700 a month. Rates have gone up the past few years, and the payment has been running closer to $2000 a month. Over three years of this increased payments, the borrower has added about $15,000 to his mortgage balance (the $300 a month in extra payment not made per month, multiplied by 3-4 years). Now the mortgage balance is $335,000 and if the buyer took out a home equity line of say, $40,000, the total loan balance on the property is $375,000 ($320,000 original loan, $15,000 negative amortization, and $40,000 home equity loan).
As you know, prices are down in some areas by 20-30% and falling further as the market softens. So now the $400,000 house is only worth $320,000 and the borrower is upside down. The bank’s loan of $320,000, now up to $335,000 looks to be in jeopardy, and people are advising buyers to just walk away or give the bank back the house for $320,000. But THAT IS NOT HOW THE BANK IS REPORTING IT. Instead, banks like First Federal, Downey Savings, Washington Mutual (they are mortgage lenders more than banks, they are heavily invested in real estate), are including negative amortization, which is a classic doubtful account, as earnings. Somehow, an increased IOU from a shaky borrower, is income. The whole negative amortization thing is is like giving crack to an addict.
So many local area banks have this negative amortization that the LA Times should be sending its reporters out, but of course that will not happen. You can read about negative amortization on some blogs and in business week, but not at the LA Times.
Could you explain the actual fraud. It has been legal for banks and lenders to record neg. am. as earnings for some time. The accounting rules that permit this should have been changed long ago, but that won’t happen until years later when regulators sift through the wreckage of the infamous housing bubble collapse.
If this is true, wouldn’t large players in the banking sector really be screwed? As bad as they they already look, wouldn’t this put them in a REALLY bad way? I’m not a securities lawyer, but this seems like it would be fodder for securities and insider trading cases to say the least, and how would we know how big the losses really are?
I’m sure this has been posted before, but anyone seen a list of which banks offered products with this feature and and on what proportion of either their recent loans or overall portfolios? Basically, you’ve gotta figure that once Jim Cramer is telling people to walk, it’s only a matter of time, and perhaps not long, before it begins en masse…
Lainvestorgirl ….Many neg. loans have the contract clause that when the neg. reaches 25% of original loan amount the bank can recast the loan and raise the payment to account for the neg. interest . So that means that people are going to get even greater increases in their payment structures than they thought . Still the situation won’t help the banks or people that had alot of neg. amortization added on to their loan balance in a declining market Again , everybody was counting on real estate going up to pay for the “negative amortization “.
What do you want to bet that most people opted to not pay the negative amortization in favor of a lower payment ?
25%? Quite a lot recast at just 10% or 15%.
perfectly legal, it’s called unearned revenue and an account receivable
when the loans go bad the banks will simply take a charge in order to reduce the assets on their books
back around 2001 when i first started investing and keeping up with earnings, there were a lot of charges every quarterly earnings reporting season
Interesting, it would seem that the bank employees might have an incentive to allow people to keep making the option payment long after the intended LTV maximim is exceeded because if they foreclose they have to take the hit right then… I wonder if we’ll see LTV caps being relaxed because the banks don’t want to take the earnings hit and hope the borrowers will be able to get out at some point in the future.
What’s funny is, for those 2005 and 2006 option loan buyers, if those properties were reappraised today, they’d already be at the LTV cap (assuming it’s 125%), but the banks don’t want to stop them, because that’ll just mean more write-downs, sooner…
There has been an entire web site devoted to this for a VERY long time.
http://www.itulip.com/forums/showthread.php?t=1245
Booyaahh!
Dow 300-point reversal… Plus Cramer advocating arson and insurance fraud.
Ahhh, I love the smell of desperate idiocy in the afternoon.
“‘What we’re experiencing is the amount of single-family homes being rented is giving us short-term supply,’ Ballif said.”
So perhaps I’m missing something - how are these additions to the housing supply only “short-term”? I can only assume they’re figuring that eventually they’ll be sold, but additional sales still removes the buyers from the rental market, and with sales in the toilet and falling further rather than rising, even if we assumed people buying had no effect whatsoever on the rental market, this hardly seems like a “short-term” issue…
To me it seems very clear, that the only people who will buy are those with cash who acquire what they want for a low price relative to their entire asset holdings, and those few who actually qualify for a mortgage. But, either way, you are going to buy a depreciating asset, which may not see upside for a long, long time. This will cause a lot of people to think about just what they are getting into when they buy, no matter what price they pay for property. Is there a fund that invests in campgrounds? I have a feeling they will be doing record business…
Who needs a campground with so many vacant houses and condos for rent?
right, and campgrounds don’t let people sleep in their cars, they expect Rvs and, at the very least, tents.
North/Latin America
INDEX VALUE CHANGE OPEN HIGH LOW TIME DJIA INDEX 13,151.00 -124.00 13,248.00 13,248.00 13,141.00 23:47pm
Goldilocks is having a restless night
Maricopa County notices of trustee’s sales for July set a new record, suggesting that foreclosures will continue to climb…
Quick question… do you think it has impact on Retirement Community such as Del Webb’s Sun City Grand & Sun Festival as well as DR Horton’s Arizona’s tradition?
Quick question… do you think it has impact on Retirement Community such as Del Webb’s Sun City Grand & Sun Festival as well as DR Horton’s Arizona’s tradition?