Monday, July 31, 2006

Foreclosures Up 25% Year Over Year

Millions of Americans overextended themselves during the housing boom years. Now, foreclosures are up from one year ago.



Foreclosures rose to 272,109 nationwide in the second quarter, marking a gain of 25 percent from the corresponding period in 2005, according to RealtyTrac, Irvine, Calif.

Rick Sharga, vice president of marketing at RealtyTrac, an online database of foreclosure properties, anticipates higher foreclosures during the remainder of the year and through 2007.

Sharga expects that rates on more than $2 trillion in adjustable-rate mortgages will jump during the next 18 months to two years, boosting monthly payments by upwards of 50 percent.

RealtyTrac CEO James Saccacio, however, says low unemployment and steady home-price appreciation have kept foreclosures reasonably low.

Source: Milwaukee Journal Sentinel, Michele Derus (07/28/06)

The foreclosure rate will continue rise as home prices decline, unemployment rises and the economy heads into a recession. It terrible to see so many naive first time home buyers being suckered into this speculative episode, some of whom will end up in foreclosure.

31 comments:

  1. The foreclosure rate was extremely low over the past few years. A 25% uptick is nothing, from a historical standpoint.

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  2. It was low. This is just the beggining of the rise in the foreclosure rate.

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  3. David,

    It was more than "low". What are the historical numbers? I stopped going to the sales in 2002 because of the ridiculous crowds and prices.

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  4. I would guess that the foreclosure rate was low because:

    1) It was easy to sell into the overheated markets.
    2) It was easy to refinance using one of the "creative" packages.

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  5. And of course the extraordinarily low foreclosure rate was "priced into" the mortgages that were being sold. How long before the rising foreclosure rate increases the risk premium that borrowers have to pay their lendors?

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  6. -Foreclosures rose to 272,109 nationwide in the second quarter,-

    So what number would be significant? 300K-500K-800K?
    The number is not significant. What is significant, is that number is rising. Not stagnate, not falling.




    Rising.

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  7. robert,

    Of course the absolute number is rising. We are in a downturn. What is relevant to me are % in default, year by year over the past 30 yrs.

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  8. The Bubble-bubble WatcherJuly 31, 2006 1:22 PM

    I commend this blog for at least paying some lip service to the financial ruin this downturn will bring upon some people. Many who comment on this blog, unfortuately, disagree.

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  9. va_investor said...
    robert,

    ”Of course the absolute number is rising. We are in a downturn…..”

    Exactly. Foreclosures are just another indicator of that downturn.

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  10. "Exactly. Foreclosures are just another indicator of that downturn."

    Well, maybe, but only if there were a lot of foreclosures.

    What we have is an increase from a historically very, very low number of foreclosures increased to a historically very low number of foreclosures.

    You could also use this same data to argue that the housing sector is still strong, since the number of foreclosures is very low on a historical basis.

    But I know that bubbleheads wouldn't take that stance, because there's no doom, no gloom, and ultimately no collapse of the housing market you have so long been hoping for.

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  11. Anonymous said...
    “You could also use this same data to argue that the housing sector is still strong, since the number of foreclosures is very low on a historical basis.”

    Please post any and all data showing the housing sector still going strong.

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  12. "robert said...
    Anonymous said...
    “You could also use this same data to argue that the housing sector is still strong, since the number of foreclosures is very low on a historical basis.”

    Please post any and all data showing the housing sector still going strong."



    I thought it was obvious in previous post. But, foreclosures are at historically low rate.

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  13. ACtually, the foreclosure rate has been high in some markets. Most of Ohio, Michigan and Indiana, as well as downstate Illinois has been experiencing high foreclosure rates for the past several years. The Denver area has had high rates for the past two years. The very low rates have been in bubble markets like Florida, and California, where people were able to bail out and still pay off the note.

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  14. If anon 12:26 is correct, it illustrates that there are only local housing markets. There is no national housing market. (because people who live and work in New Jersey don't shop for homes in Indiana, for example.)

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  15. I really don't wish financial ruin on anyone, but let's take a step back here.

    Some home buyers are clearly flippers who are just running up debt left and right. Then, a more financially responsible homebuyer, who is trying to get into a house with 20% down, gets outbid by one of these flippers who has nothing down, a lower income, and a lot more tolerance for risk and ARMs. To add insult to injury, that flipper then lectures the responsible homebuyer about how they ought to be doing this also, and if they don't, they're morons.

    Now, can you understand why some responsible homebuyers might take some pleasure in flippers' demise? It isn't right, it isn't even really smart (the flippers' demises could affect us all), but it is somewhat understandable.

    Unfortunately, many of the losers in the coming housing downturn will not be these flippers. (And even most flippers deserve our sympathy- IMO they're just con victims). I know a couple that finally broke and bought a tiny little place last year. IMHO, they dramatically overpaid. They are nice people, but they believe what they read in the paper and not their crank friend (me). A bad decision like that could wipe out years of work and savings. It is very sad.

    A Redskins fan

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  16. Anonymous said...
    “I thought it was obvious in previous post. But, foreclosures are at historically low rate.”

    So therefore housing is still going strong?

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  17. Foreclosures up 25%

    So therefore housing is crashing?

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  18. Syrah in RockvilleJuly 31, 2006 4:45 PM

    " So therefore housing is still going strong? "

    No offense, but this reveals a fundamental lack of comprehension of the topic.

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  19. Great news. I sure hope there are more foreclosures to come. Stupid people need to part with their $.

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  20. This is good news. We need many more home-debtors to go tits up. The savvy bubbleheads will be ready with cash. Stupid home-debtors will be forced into shanty towns with dirt floors and sheet metal roofs.

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  21. Syrah in Rockville said...
    " So therefore housing is still going strong? "

    No offense, but this reveals a fundamental lack of comprehension of the topic.

    Syrah, Robert is just asking for
    data that points to housing strengthening...Nothing more, nothing less.

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  22. Syrah in RockvilleJuly 31, 2006 5:45 PM

    No, he isn't. Here it is again:

    "“I thought it was obvious in previous post. But, foreclosures are at historically low rate.”

    So therefore housing is still going strong?"

    Robert cannot differentiate between foreclosures and market rate real estate transactions.

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  23. South Bay rents rising fast

    NEWLY AVAILABLE APARTMENTS SNAPPED UP IN HOURS

    link

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  24. here comes the equilibriumJuly 31, 2006 5:50 PM

    Residential rents rising
    Philadelphia Business Journal - July 21, 2006
    by Natalie Kostelni
    Staff Writer

    The apartment market in Philadelphia and the suburbs is experiencing super-low vacancy rates that are giving landlords the upper hand in pushing up rents.

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  25. "(And even most flippers deserve our sympathy- IMO they're just con victims)."

    As the saying goes, a fool and his money are soon parted. Perhaps all those Carlton Sheets and Robert Kiyosaki customers will be able to make their money back by selling The Greatest Vitamin in the World. Ha!

    If you haven't read John Burr Williams, you shouldn't be investing in anything except mutual funds.

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  26. "They are nice people, but they believe what they read in the paper and not their crank friend (me). A bad decision like that could wipe out years of work and savings. It is very sad.

    A Redskins fan "

    Now you're the one calling people morons. It's pretty obvious that you're the moron though.

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  27. There is a difference between making, perhaps, a non-optimal decision and being a moron.

    How long has the "fan" been renting? We know it will be forever because his citeria of 70% price declines will never happen.

    At least his friends had the guts to make a committment.

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  28. Redskins said:
    "Some home buyers are clearly flippers ... "

    Redskins, I find this statement particularly interesting because the more I chat with bubbleheads, the more I realize that they just can't see the difference between spending money on a roof over one's head (housing expense)and making money (an "investment"). And doesn't their wanting to make money off of the roof over their heads make them flippers of a sort? ...

    And which leads to an even more interesting thought. Could the hatred they show toward flippers be not as much for the fact that flippers are flipping (which is what bubbleheads wish they could do) but rather that flippers are flipping ... and bubbleheads haven't been able to get into the game yet ... to flip!

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  29. The level of vitriol exhibited by those who are offended by the stated purpose of this blog is interesting. I can almost smell the flop sweat through the screen.

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  30. The reality is there are mean spirited Bears and Bull's on RE.

    One problem the Bull's have is in understanding that many good family oriented people who wish to buy a home can not, they are truly priced out. Not even accepting the possibility that houseing can go down in a very obvious way is cruel to this group. It is sort of a "too bad for you" mentality, with an amoral smugness that reeks of ignorance.

    As far as the Bears are concerned, they seem to study economic data. In doing this they cannot understand why people can make an obvious(to them) purchase that has the potential to explode (or implode). The bad loans filter into the economy in very negative terms and taxpayers ussually end up holding the bag, therefore the venom that is spewed at these FB's does not have the compassion it should and seems at a minimum, cruel.

    Overall people don't like to be wrong, unfortunatelly in this there will be a large group, one side or the other.

    Just my anecdotal opinion, and by my post name you know where I sit.

    OCBear

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  31. This is interesting. According to this site, some of the lowest end housing in DC has depreciated sharply in the last 2 to 3 months, while high end stuff has held steady:

    http://tinyurl.com/8k3c5

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