Americans brace for next foreclosure wave

[zoog]

But a painful part two of the slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.

"We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010," said Mark Seifert, executive director of Empowering & Strengthening Ohio's People (ESOP), a counseling group with 10 offices in Ohio.

"Last year was an anomaly, and not in a good way," he said.

One big difference to the early years of the housing crisis, which was dominated by Americans saddled with the most toxic subprime products -- with high interest rates where banks asked for no money down or no proof of income -- is that today it's mostly Americans with ordinary mortgages whose ability to meet payment have been hit by the hard economic times.

"The subprime stuff is long gone," said Michael Redman, founder of 4closurefraud.org. "Now the folks being affected are hardworking, everyday Americans struggling because of the economy."

Zillow expects the resurgence in foreclosures this year, combined with excess inventory of unsold, bank-owned homes will contribute to a 3.7 percent national decline in prices before the market hits bottom in 2013 and stays there until 2016.

"The hangover from this crisis will far outlast the party of the boom years," said Zillow chief economist Stan Humphries.

reuters

[D-Mack]

Re: Americans brace for next foreclosure wave

Looks like it

The monster lurking in the shadow inventory – 12 million Americans underwater with nearly 6 million delinquent or in foreclosure with their mortgages. The hidden benefit of not paying your mortgage.

Shadow inventory coming online in 2012 is going to have the biggest impact on the housing market. With a weak jobs report that shows a labor force that declined by 164,000 you realize that demographic trends are now in full play here. With banks now moving on delinquent properties the supply will be moving higher while traditional inventory remains low. This is happening. We noted that in Southern California, over 50 percent of all MLS inventory is now composed of short sales showing that banks are now willing to sell homes for less than the original mortgage balance. One of the more interesting trends is the aggressive pricing we are seeing on some of these listings. Of those in actual foreclosures, nearly half have made no mortgage payment in two years. Now that banks are moving on these properties that hidden stimulus will be pulled away. Think about not paying rent or a mortgage for two full years. Let us take a look at the current state of the shadow inventory.

http://www.doctorhousingbubble.com/s...ying-mortgage/

[davidstvz]

Re: Americans brace for next foreclosure wave

I've been expecting foreclosures and aggressive selling by banks of shadow housing to kick into high gear at some point before the next big crash. It may even be indicative that the crash is imminent (imminent meaning several months to a couple years at most).

Ask yourself this. What would the bank rather have out of the following two if the home owners monthly payment were equal?

1) a correctly priced mortgage (much lower price) with high interest rate

2) an over priced mortgage with low interest rate

Remember, the balance between home price and interest rate produces an equal monthly note in both cases. As a prospective home owner, I'd much rather have situation number 1 because then I have the option of substantially reducing the total payment by paying off the principle faster whenever I have extra cash. That means the bank would much rather be in situation number 2. If interest rates are going up soon, then banks need to turn their shadow inventory into over-priced mortgages--even at low rates; even if it causes prices to decline some before higher rates become a reality--as quickly as possible.

[thriftyandboringinohio]

Re: Americans brace for next foreclosure wave

...Ask yourself this. What would the bank rather have out of the following two if the home owners monthly payment were equal?

1) a correctly priced mortgage (much lower price) with high interest rate

2) an over priced mortgage with low interest rate

....

You left a third obvious option off your list.

3). Full, free and clear title to the land and building with a paying tenant in place (usually the former "owner")

[ER59]

Re: Americans brace for next foreclosure wave

I've been looking to buy a condo in So. Cal for the past 6 months - the market is just dry - there is almost nothing on the market, and I've heard the same opinion from 2 real estate agents.
For 6 months I was able to find only one property to make an offer, but it turned into multiple offers affair with the final price above asking.
I am reading all this stuff about RE market being flooded with foreclosures, but where are they?

[lakedaemonian]

Re: Americans brace for next foreclosure wave

I've been looking to buy a condo in So. Cal for the past 6 months - the market is just dry - there is almost nothing on the market, and I've heard the same opinion from 2 real estate agents.
For 6 months I was able to find only one property to make an offer, but it turned into multiple offers affair with the final price above asking.
I am reading all this stuff about RE market being flooded with foreclosures, but where are they?

Wow....interesting personal story....I wonder if foreign buyers are having any tangible impact on US RE overhang in certain markets?

I could imagine that if I was deeply invested in Chinese property right now at insanely high valuations it might make sense to liquidate and buy into US property.

[ER59]

Re: Americans brace for next foreclosure wave

I've been looking to buy a condo in So. Cal for the past 6 months - the market is just dry - there is almost nothing on the market, and I've heard the same opinion from 2 real estate agents.
For 6 months I was able to find only one property to make an offer, but it turned into multiple offers affair with the final price above asking.
I am reading all this stuff about RE market being flooded with foreclosures, but where are they?

Forgot to add that not only the market in So.Cal is dry, but RE prices are still insanely high - above $400/sf

[zoog]

Re: Americans brace for next foreclosure wave

The situation certainly varies in different markets, and probably different types of housing too (condo vs single family, etc). Does seem very strange to have virtually no condos on the market. Reminds me of when I bought a house in Portland back in 2005... I had maybe a handful to choose from in my price range during, as it turned out to be, the lowest inventory month on record. These days Portland inventory is near historical average. Yet I know someone who lost bidding wars on two houses. By the way, they finally landed a house that's bank-owned, but the process of actually taking ownership has been an enormous hassle. Personally I think housing here is still overvalued... not anywhere near as expensive as So. Cal of course, but still too high. Although I have to admit that the rent/own comparisons are nearly break-even.

[c1ue]

Re: Americans brace for next foreclosure wave

Forgot to add that not only the market in So.Cal is dry, but RE prices are still insanely high - above $400/sf

I'd say it depends on the area in SoCal you're looking at, and also the price level.

A friend of mine, his mother just sold her house. She lost $500K plus realtor fees off a $2.2M original purchase. She can afford it easily, but the same is not true for anyone who has a mortgage in a similar purchase price decline situation (i.e. negative equity).

[Munger]

Re: Americans brace for next foreclosure wave

It's similar in my large midwest city. There has been almost nothing on the market for 6 months, although things are starting to pop up. My guess is that sellers knew it was a "bad" market and even though they wanted to sell, they were not listing their houses. Now that housing is "Recovering," they are going to start listing.

Wow....interesting personal story....I wonder if foreign buyers are having any tangible impact on US RE overhang in certain markets?

I could imagine that if I was deeply invested in Chinese property right now at insanely high valuations it might make sense to liquidate and buy into US property.

[lakedaemonian]

Re: Americans brace for next foreclosure wave

It's similar in my large midwest city. There has been almost nothing on the market for 6 months, although things are starting to pop up. My guess is that sellers knew it was a "bad" market and even though they wanted to sell, they were not listing their houses. Now that housing is "Recovering," they are going to start listing.

Interesting....

When I think of these spooky anecdotal RE comments in local markets I wonder is it's sort of like a real estate version of people finding the job market tough, so they traditionally go back to grad school to upskill and hideout until the market gets better.

A lot of those people in grad school can't hide out forever and will have to find employment, maybe all that RE can't sit on the sidelines forever and will have to get listed and sold eventually?

Delaying tactics?