this makes at least some sense. I'm finding through my routes and inspections the vacant homes a lot of times are just filled with worthless junk. Literally. Not worthless as in it's no longer usable and pretty old, although a little of it is. Worthless as in it was junk pretty much to begin with. Wasted money upon. Bought probably within the past 2-3 years tops. However, I don't *fully* buy into it. Most people now who can't pay the mortgage also have a bevy of other bills they can't pay off. Sure they're making money (those who are working at least), but I'd be willing to bet most of it is just going into day-to-day expenditures which really won't "stimulate" the economy per say. 15% still behind in payments/delinquent or what have you is still a pretty good minority. I actually realized this a bit the other day when I turned the thinking pattern around. Don't kid yourself. There's still a decent chunk of sub-primes left to be flushed. The first round were the easy 1-year teasers. Now the 3-5 year rates are getting hit and working themselves through, and probably should for another 2-3 years; most of that is in the inner city/urban areas. I'm still seeing few homes in trouble that have owned for longer then around the 8-10 year mark. Then again, many of those homes were bought a lot cheaper and were affordable. Says a lot when you can have a good job or two full-timers and still fall behind in payments...how much was that home again?
Yeah, some of these home purchases were so far out of line it's insane. I remember working with a guy who was an electronics tech. He probably made between $15 and $20 an hour, so you figure he took home about $25K a year post-taxes maybe. He and his wife, who was a part time real estate something or other (go figure) and made quite a bit less bought a $400k house with about $15k down. With a 30 year fixed, that would have been maybe 2,800 a month after mortgage insurance or 33k a year. WTF? I'm sure they had some kind of ARM so they could eat, but who in their right mind would write that mortgage? Or take it on with that income?
And this assumes 5 years forward that the "real economy" is static and that unemployment doesn't increase or that wages will keep pace. It also doesn't factor in that most municipalities which are already having a near impossible time maintaining budgets will not raise all sorts of taxes to make up for the shortfall in property taxes (assuming of course they lower them to reflect new housing values, a big assumption...). So far, all I've seen is an ongoing denial by the bureaucrats that this economy is completely f'd. I see fees, taxes, etc, etc going higher each and every month. After all, the government workers which probably account for 15% of the population at this point need their publicly funded pension plans, healthcare, etc, etc. The decline in tax revenue just means they tax the declining portion of the residents into bankruptcy.
Good post. It would also be worthwhile to consider that "turning the corner" so to speak or as we are being told constantly will more than likely just unleash the "shadow inventory" (not the bank's per se), but all of the individuals who saw their homes value drop by a 30-50% over the past 2-4 years. Any rally or firm bid underneath the market just encourages a larger percentage of current homeowners to try and flood the market with their properties.
You are right many of these people are living in card board boxes. They are packing into tent cites as foreclosures escalate. Here are just a few of the many articles main stream Americans ignore as they flood their local malls to buy, buy, buy for Christmas: http://www.reuters.com/article/topNews/idUSTRE55G01Z20090617 http://www.usatoday.com/news/nation/2009-05-04-new-homeless_N.htm http://watergatesummer.blogspot.com/2009/03/more-tent-citiesflorida-nashville-vegas.html
Well looks like The Bulls have come, and people not paying loans to banks as I predicted in the past are spending instead of sending money to bank vaults. More velocity of money less debt servicing for bank loans. http://www.cnbc.com/id/36422316 first he describes a case study of someone who applied for the government's Home Affordable Modification Program. The person had an $1,880.00 monthly mortgage payment on which they'd defaulted, but said person's monthly bank statement showed payments to a tanning salon, nail spa, liquor stores, DirecTV bill with premium charges, and $1,700.00 in retail purchases from The Gap, Old Navy, Home Depot, Sears, etc.
It currently takes well over a year, in some cases nearly two years, to go from missing a payment to being chucked out of your home. So I guess there are still millions living for free.
yes, In AZ there are so many foreclosures it sometimes takes over 12-18 months before they coming knocking. This was very common in AZ a few years ago. Regular folks bought homes figuring they were being priced out of the market and felt they would never be able to afford a home if they did not "BUY NOW" now they are deep upside down. Its a tough call, if you are under water several thousand or if not 100k+, do you walk away and continue to pay and suffer?
Back in the day (we're talkin' 40-50 years ago), a person with almost a high school education could get a job that a trained monkey could do. And that person would make enough money and benefits to have two kids and a stay-at-home wife, put braces on his kid's teeth, buy a brand new car every few years, eat at decent restaraunts, take nice vacations and generally live a solid middle-class life. Thanks to a host of factors (social acceptance of welfare and government aid, off-shoring, feminism, shirking of responsibility, automation, stigmatism of education and knowledge, destruction of the nuclear family, etc.) supply for these jobs has dramatically oustripped demand. On the up side for the relatively few of us weirdos that are reponsible, value knowledge, work hard and are smart, the supply in the US is lower than the demand. The "trained monkeys" need to decide if they want (and can) step up and join the winners or sink into the swamp with the rest of the lowlifes. There is an amazing amount of effort and money being spent to make that swamp look less bad, BTW. Reminds me of that line from Alamaba 3 - "Sink deep, deep down into the comfort of your own narcolepsy".
well ya know TGreg I have a theory. I think that many of these "lowlifes" grew up in a middle class lifestyle. Kids reject those values at first but when the time came where they changed their mind and said "Yea, this is what I want" it was too late. No jobs available for the income and lifestyle that they grew up on and they tried to reach that lifestyle with debt. I've noticed the grandma's at wallmart pushing full carts of stuff with a young mother and a baby in tow ( a grandchild?). Probably, the parents and seniors supporting retail and their family because the kids are broke with no jobs.