Wednesday, September 13, 2006

CNN: Foreclosures Spike in August

Foreclosures are increasing nationally as the housing market continues to decline.

NEW YORK (CNNMoney.com) -- With real estate markets slowing and mortgage rates well above levels of recent years, times are getting tougher for homeowners - the number of homes entering into some stage of foreclosure is surging, according to a survey released Wednesday.

In August, 115,292 properties entered into foreclosure, according to RealtyTrac, an online marketplace for foreclosure sales. That was 24 percent above the level in July and 53 percent higher than a year earlier.

It was the second highest monthly foreclosure total of the year; in February, 117,151 properties entered foreclosure.

Some of the bellwether real estate market states are among the leading foreclosure markets. Florida, had more than 16,533 properties in foreclosure in August. That led all states and was 50 percent higher than in July and 62 percent higher than in August 2005.

California foreclosures are increasing at an even faster annual rate, up 160 percent since last year to 12,506. And the formerly red-hot Nevada market recorded a spike of 24 percent compared with July and a whopping 255 percent increase from August 2005. (CNN)
Expect foreclosures to rise even more as the housing market continues to decline and the US economy heads into a recession in 2007.

20 comments:

  1. Keep Pounding away david.

    How will the RE pimps spin this news?

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  2. It's a great time to buy! We're just bruning off some froth!

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  3. I know that bubbleheads are often mocked when they talk about buying for half of peak prices, but I suspect what they mean is NOT that home values will fall by 50% but that they will be able to purchase REO (Real Estate Owned by the bank)properties for steep, steep discounts.

    A former REO analyst on another blog wrote about homes he sold for 20% of peak prices during the last real estate downturn. The banks are anxious to get these properties off their books. As foreclosures flood the market it will be interesting see what becomes available.

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  4. hello from germany,

    there is really a disconnct.

    this is from today from the mba

    .S. MORTGAGE DELINQUENCIES UP SLIGHLTY YEAR-OVER-YEAR: MBA

    U.S. MORTGAGE DELINQUENCIES EDGE LOWER FROM FIRST QUARTER

    MORTGAGE BANKERS ASSOCIATION SAYS 4.39% OF LOANS DELINQUENT

    PERCENT OF U.S. HOMES IN FORECLOSURE AT 0.99, LITTLE CHANGED
    (compare this with the cnn story/mit cnn story vergleichen!)

    PRESSURE ON HOLDERS OF SUBPRIME ARMS, MBA'S DUNCAN SAYS

    HEALTHY ECONOMY OFFSETTING SLUMPING HOUSING MARKET: DUNCAN

    U.S. mortgage delinquencies edge up year-over-year

    The percentage of homeowners falling behind in their mortgage payments inched up in the second quarter from a year earlier, although the number was down slightly from the first quarter, the Mortgage Bankers Association said Wednesday. Delinquent loans, those more than 30 days past due, represented 4.39% of outstanding mortgages in the second quarter, up from 4.34% a year earlier but down from 4.41% in the first quarter. The percentage of loans in the foreclosure process was 0.99, up from 0.98% in the first quarter but down from 1.0% a year ago. Doug Duncan, chief economist for the mortgage bankers' group, said a generally healthy economy has countered a decelerating housing market to keep bad loans in check. But he noted pressure on holders of subprime adjustable-rate loans, those made to the riskiest borrowers, and said that could spur modestly higher delinquency rates in the months ahead.

    http://immobilienblasen.blogspot.com/

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  5. “If you paid your mortgage off, it means you probably did not manage your funds efficiently over the years,” said David Lereah, chief economist of the National Association of Realtors and author of “Are You Missing the Real Estate Boom?” “It’s as if you had 500,000 dollar bills stuffed in your mattress.”

    He called it “very unsophisticated.”

    Wow...He probably wishes now that he shut his trap

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  6. How about some historical perspective? I am sure these foreclosure rates are within "normal" ranges for the past 10 or 20 yrs. 2004 and 2005 were abnormally low.

    I can't wait to see all the bubbleheads at the courthouse bidding-up foreclosures.

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  7. If you get in your wheelchair and you start wheeling over there right now you should make it by next year!

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  8. VA Investor,

    One of the recent posts/links seemed to indicate that the default rate on home loans was somewhere under 1% - .93% if I recall correctly. For all loans it was something like 1.7%?

    I forget the exact figures but this gets you an order of magnitude of less than 1%.

    Since I haven't found any reliable historical data on foreclosure/default numbers it's possible that overall percentages might be easier to come by going forward.

    Doesn't answer your question per se, but it gives us something to look for.

    My $0.02.

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  9. http://www.huduser.org/periodicals/ushmc/summer06/USHMC_Q206.pdf

    Page 82

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  10. Foreclosures are a rising problem and will get worse before they get better given the high inventory levels in many parts of the country. However, the CNN piece is using RealtyTrac stats. I have posted about RealtyTrac before. Nice people and a new company with no historical for a perspective on this. Check out my post for more details. Comments appreciated.

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  11. jonathan,

    Just as I thought. These numbers have a loooooong way to go before they approach those of the early 90's let alone exceed them.

    Why is there never any perspective given David's blaring headlines?

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  12. Jonathan,

    The 3 to 5% peak forclosure number is very interesting. Thank you.

    What is of concern is that mortgage issued in 2004, 2005, and even 2006 are going into forclosure at above historical norm. Normally, it is year 3 through 5 of a mortgage that is most at risk of foreclosure.

    So I do agree that forclosure rates aren't even interesting yet. But the trend is climbing, so we'll see. And the secondary market isn't very interested to assume many more bonds backed by option ARMs, so it will get interesting.

    Oh, Va_investor, I agree at first that some people sitting on the sidelines will find themselves bidding up on REOs. But there have been enough stories about "repo-kings" losing their shirts that I bet that will end by 2008.


    Until the second quarter of 2007 this is all the warm up act. My previous prediction that "Joe Sixpack" will know prices are declining by the ides of October looks pretty safe.

    Neil

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  13. It will be real interesting to see what happens to all these Interest Only %100 financing folks once the mortgages start to adjust in a declining market

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  14. Neil,

    There are alot of "pro's" out there waiting for the right time to buy foreclosures. The average "bubblehead" will be facing risks he/she doesn't even know exist. It should be interesting.

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  15. yeah we'll see....all these folks who qualified on not the normal 3-4 times their salary but 9-10 times their salary...oh yeah, oooops now a can't rent this property for the mortgage....oh well guess i sell...oops

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  16. anon,

    What????? Am I the only one who does not "get" anon's posts?

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  17. va_investor,

    anon thinks people get qualified on their loans by the "times salary" rule of thumb that others have referred to constantly. anon is apparently not schooled in financing as he/she doesn't realize that this rule of thumb doesn't recognize the effects and interest rate change can have. He/she doesn't understand that if interest rates go from 9% to 5% as they did some 5 - 6 years ago, you can now buy twice as much house for the same monthly payment ...

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  18. Lance,

    That rule of thumb of 2 1/2 to 3x salary existed when rates were 12 to 15%. I was there!

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  19. Lance
    "schooled in financing"?
    This coming from someone who advises to HELOC out at six and "get" ten in a safe blue chip stock? The same person who does not acknowledge that we now encounter the smallest spreads between corporate, junk and treasury yields in history? Please. Do not speak condescendingly of someone on their knowledge of finance when you make ridiculous statements regarding investing. Ten percent? Try using your thesis in a room full of hedge fund managers, they would laugh you out of the room. Yeah. Pay six and get ten. No problem. Easy. In fact, because it's so easy, why not do it on margins? I believe they only require ten percent down for commodities. Fund managers get paid BONUSES to achieve ten in today's liquidity-saturated market. And you think you're just going to go out and "get" ten?

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  20. I wrote a post about the foreclosure rate at my new real estate blog. You can read and comment here: http://slcrealestate.blogspot.com/2006/09/salt-lake-home-values-expected-to.html

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