Flat real estate until 2013 = No need to buy now

Discussion in 'Wall St. News' started by shortie, Jan 14, 2010.

  1. U.S. 2009 foreclosures shatter record despite aid
    12:27am EST

    By Lynn Adler

    NEW YORK (Reuters) - U.S. foreclosure actions shattered all records in 2009 and will do so again this year, with unemployment and wage cuts overcoming programs to remedy failing home loans, RealtyTrac said on Thursday.

    A record 2.8 million properties with a mortgage got a foreclosure notice last year, jumping 21 percent from 2008 and 120 percent from 2007, the Irvine, California-based real estate data company found.

    The loan failure rate -- and thus the fallout for home prices and the economy -- would have been even worse without foreclosure prevention programs and loan processing delays caused by sheer volume, the company said.

    In many cases loan fixes don't stick, however, and so a new record of at least 3 million properties getting a filing is seen in 2010. Filings include notice of default, auction sale or bank repossession.

    State, federal and private efforts to modify loan terms for at-risk borrowers either don't go far enough or are expanding too late to help many struggling homeowners on a permanent basis, many industry experts and economists agree.

    "Until the lenders start to get into principal balance reduction you're going to continue to see high redefault rates," Rick Sharga, senior vice president at RealtyTrac, said in an interview.

    "We haven't seen any appetite for that on the part of the lenders yet," he added.

    One in every 45 households got at least one filing last year, a rate almost four times that of 2006.

    On a quarterly basis, foreclosure activity did slow in the fourth quarter, declining 7 percent from the third, but rose 18 percent from the fourth quarter of 2008.

    With unemployment surpassing 10 percent at the end of last year and many homeowners coping with wage cuts, timely mortgage payments got more challenging.

    A foreclosure notice usually follows a pink slip by three to six months. This should ensure that even under the best case scenario there will be a high level of unemployment-related foreclosures throughout this year, Sharga said.

    Refinancing to lower monthly costs was also out of the question for many homeowners because the value of their house fell below the size of their mortgage.

    Despite some recent improvement, prices have toppled nearly 30 percent from their peak in 2006 through October, according to Standard & Poor's/Case-Shiller indexes.

    Yale University economist Robert Shiller, a creator of the S&P/Case-Shiller home prices index, told Reuters on Tuesday he expects renewed price erosion in coming months.

    Foreclosure notices were made on more than 349,000 properties in December, a 14 percent jump from November despite various moratoria, RealtyTrac said. It was the tenth straight month that notices topped 300,000, driving the year's total to a record of more than 3.9 million.

    Nevada had the highest foreclosure rate for the third straight year, with more than 10 percent of households with loans getting at least one notice. Arizona and Florida were in second and third places. California, Utah, Idaho, Georgia, Michigan, Illinois and Colorado were the other states with loan failure rates among the 10 highest for U.S. states.

    California, Florida, Arizona and Illinois accounted for more than half of all foreclosure actions in 2009 as more than 1.4 million properties got a notice.


    Banks repossessed a record of more than 918,000 properties last year, 6.5 percent more than in 2008.

    The pace at which banks start selling these houses is critical for gauging how much further home prices will fall.

    Banks have half a million houses on their books yet to be put on the market, RealtyTrac said. There's another million properties in foreclosure and 5.5 million delinquent loans.

    "The doomsday prognostications say that gives you 7 million properties that are all going to go back to the banks, that are all going to hit the market at the same time and we're going to have a smoking crater where there used to be a real estate market," Sharga said. "We just don't see that as being realistic."

    It is widely seen in the best interest of banks, housing market and the economy for the banks to sell the foreclosed homes in a measured way to prevent prices from swooning anew.

    "Because of gradual foreclosure bank sales we're looking at a long, slow, flat housing market recovery that probably won't feel much better until about 2013," he said. "But if it means we avoid a double dip in housing then that's probably a good thing."

    (Editing by Chizu Nomiyama)
  2. Real estate prices cannot go lower, only flat to higher. :cool:
  3. Bob111


    what about mortgage rates @ 2013?
  4. S2007S


    Wait til they stop buying back the trillions worth of mortgage backed securities, that alone is keeping rates ARTIFICALLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLLY


    Once they start to rise, 6-7% people will sit back and wait till they come down or maybe not, maybe they will push through another program to keep rates at historical lows. Only way to keep housing prices propped up and people in the market.
  5. Why would they? They'd have to eat the writedown.
  6. Arnie


    We'll probably drift into a normal market that will look like a dead market compared with 2003-2007.

    20+ years ago, I remember telling buyers not to even think about breaking even on a house for at least 3-5 years. That was a normal market. If you were lucky, you MIGHT keep pace with inflation.
  7. i wonder how many people said in march: flat stock market until 2012. no need to buy now. not saying i think we are going to get a real estate boom but you just never know.
  8. Why pay your mortgage when you don't have to?

    Millions are doing a "strategic default" even if they're only slightly underwater.

    Just apologize, and give the keys back to the bank.
  9. sumfuka


    This is the reason the U.S should introduce debtor's prison. If it wasn't for these million or so greedy sob; the government and bankers wouldn't have been able to screw over every single tax payer (current and future). A lot of people knew they couldn't afford RE and didn't participate in the madness, seems like they are the ones royally screwed.
  10. rew


    This story is from trader Jeff Clark:

    "I live in luxury and I haven't made a mortgage payment in almost two years," Don bragged. He sipped his chardonnay, leaned against the country club's bar, and shared with me the story of his real estate prowess...

    "I paid $3.4 million for the house in 2006, and it was worth every penny at the time. It's 6,700 square feet with a pool and a one- acre lot. I'm on the hill overlooking the fourth fairway, and I can see all the way to [the next city] from my bedroom window," Don continued.

    "Wachovia Bank loaned me $3 million, and the developer took a second for $400,000. I don't have any skin in the game – so to speak. I made my mortgage payments for a while, but when prices started to fall, it just didn't make sense anymore. I mean, why should I pay anything when I'm the only one with nothing to lose?"

    "But," I asked, "hasn't the bank tried to foreclose or force a sale of the house out from under you?"

    "Ha!" He crowed, and his tone emphasized the naiveté of my question. "Why would they do that? The house is worth less than $2 million right now. So if the bank forecloses, it'll have to recognize a $1 million loss. And if it writes my loan down by that much, how many other loans do you suppose it'll have to write down? It can't force a short sale [where the bank sells the house for less than the loan amount] on me either because it'll have to take care of the second note holder by offering him something just to get out of the way. So Wachovia is screwed. It's cheaper for them to let me keep living there for free. And the best thing is, I can more than afford to pay off the entire loan right now." Don let out a sinister kind of chuckle, like a man who just squashed a bug and got some warped sense of delight from doing it.

    "Wow," I responded. "There used to be a time when being a deadbeat was frowned upon. But you seem to wear it as a badge of honor."

    "Listen," Don turned aggressively and pointed his index finger at me. "You think I'm the only one doing this? You think I'm the only one taking advantage of the situation? I'll bet half the people in this room are doing the exact same thing." He waved his arm across the bar. "And the other half are thinking about doing it."

    "Besides," Don continued, "banks have been screwing people like us for so long it's about time they got a taste of their own medicine."

    I certainly believe that a man like "Don" belongs in debtors prison. He's not just stealing $3 million from Wachovia. We all know that ultimately the rest of us will wind out bailing out Wachovia, courtesy of our government. So he's stealing from us. But at the same time I don't think the developer deserves one cent of his $400,000 loan back. The purpose of a down payment is to ensure that (1) The borrower has exhibited an ability to save and be fiscally responsible, (2) The borrower has some skin in the game and stands to lose if he doesn't make his payments, and (3) The bank has a cushion -- the house has to go down in price a fair amount before the loan can be underwater. Anybody who lends money he knows is being used to make a down payment also knows that he is lending to a dead beat, and deserves to lose his money.

    In a country that has many, many people with Don's ethics and principles I am sure the mortgage crisis will be with us for years to come. And with many banks like Wachovia unable and unwilling to reveal the full extent of their losses, hiding them with mark-to-myth accounting, it is obvious that the banking system is even sicker than it appears.
    #10     Jan 14, 2010