September 06, 2007

FLASH: Foreclosures soaring, and in mortgage meltdown cities failed flippers are just turning in the keys

Goodbye Florida.

Goodbye Arizona.

Goodbye California.

Goodbye Nevada.

And hello 50% falls in home values. No matter what lying realtors on commission try to tell you.

Subprime Mortgage Woes Push New Foreclosures to a Record High

WASHINGTON (AP) -- The number of homeowners receiving foreclosure notices hit a record high in the spring, driven up by problems with subprime mortgages.

Analysts said the problems in the formerly red-hot housing markets of California, Florida, Nevada and Arizona reflected in part speculators walking away from mortgages they can no longer afford.

During a five-year housing boom, the prices in these areas surged, creating what many analysts have described as a speculative bubble as investors bid up the price of homes hoping to quickly resell them for a profit.

Now with home sales falling, the inventory of unsold homes rising and prices stagnant, some speculators are choosing to default on their mortgages.

41 comments:

home cookin' said...

I don't disagree with Keith's assessment of the bubble markets. Many will see big declines in home prices in the near term. The bigger picture is not as gloomy as the HP gang thinks. The Fed and other central banks are committed to managing the problem and it looks like rate cuts are in the pipeline for the 18th. They will allow and even encourage considerable inflation in both prices and wages. It's the only way out for them and the politicians.

The stage is set for the next bubble which is the equities markets. Inflation over the next years will "solve" the debt crisis for the folks the Fed is really concerned about. Hint: they don't give a rat's ass for you bubble-sitters or the flippers who signed up for liar loans. Their buddies at Citi and JPMC will do just fine, as will the local state and federal governments that collect property and income taxes.

Five years from now house prices (post bubble), wages, and the price of gasoline will be double what they are today (15% annual inflation). The Dow will be sitting at 35K, and that ball buster $4K mortgage payment of 2007 won't seem so bad after all. You renters will be paying twice as much to The Man and ditto for utilities.

michael said...

but housing prices are going down?

Anonymous said...

I have to disagree somewhat with the above post. I don't think there will be a rate cut and I also think south florida is going bust fast! 50% of current prices seems about right!

Vectorz said...

Hmm, pardon my ignorance but can you explain why the equities market is the "next" big bubble? I had the idea that the equities market 'bubble' is set to burst in the same bubble as housing.

Anonymous said...

There are some areas in Florida that will see the 50% drop, and there are others that will see minor to no change. The reason for this is that they have already had major drops. Houses that were 270k last year are 170k now. Houses that were 400k are below 300k now. These are new homes. This is just north of Tampa. I currently do not own.

Anonymous said...

Speaking of losers Greg Swan just posted at Blown Mortgage and teh replies are to die for!

http://tinyurl.com/37ns3e

Anonymous said...

Where's Casey!

Anonymous said...

It looks like last week was a watershed of sorts for Green Bay. Houses that were selling for $125k to $135k a few years back are now going for $80k. One guy got himself a real sweet deal, a house for $35k. The deflation is boggling.

Ron said...

I believe the 1st poster believes he has a good grasp on the subject, sadly he doesn't.

I think Dr. Housing Bubble might just have the Rx for him.

Amtex said...

The first post makes zero sense. People don't have any money to pay current prices, utilities, etc. Saying things will be double in 5 years is the complete opposite of reality.

Wages are stagnant and have been for a decade. Employers would have to be paying $20/hr at McDonalds and $150,000 to mid level employees for that scenario to become reality.

A huge crash in prices is coming, rents and home prices over the next 5 years...not the opposite.

Nizam said...

check this interview out from 2005. Its not like these things were not unforseen:

http://www.onpointradio.org/shows/2005/04/20050407_a_main.asp

Anonymous said...

I got to hand it to home cookin,
he might just be right. Listen up HPers' do you really think the Feds, Banks, and all the rich and wealthy people are going to sit and let this bubble take them down along with more than %50 of the U.S. Population that own homes on ARM Loans? Do you really think its the bubble sitters that will have the opportunity to get all the lost wealth thats about to happen. Kids, I think not. Prepare for sky rocket inflation and social class structure ramification!

The Powerful
-(BANKS,FEDS,GOV.,HOMEOWNERS)

The Weak
(RENTERS,HPERS)

Anonymous said...

what happened to goldilocks?

Anonymous said...

Anonymous said...
It looks like last week was a watershed of sorts for Green Bay. Houses that were selling for $125k to $135k a few years back are now going for $80k. One guy got himself a real sweet deal, a house for $35k. The deflation is boggling.

September 06, 2007 5:37 PM


==============================

I wouldn't pay $35 let alone $35K for a home in Green Bay.

Anonymous said...

"The Fed and other central banks are committed to managing the problem and it looks like rate cuts are in the pipeline for the 18th. They will allow and even encourage considerable inflation in both prices and wages. It's the only way out for them and the politicians."

they will probably do no more than pushing on a string. inflation will rage and most likely go into commodities.

hendry said...

They will allow and even encourage considerable inflation in both prices and wages.

You can't push on a string. If wages increase, companies will simply outsource. You can put as much money out there as you want, but you can't force people to buy overpriced homes that are dropping in value. Greenspan tried to save the stock market from crashing and ended up inflating home prices. Even with Congress and Bush cutting capital gains taxes from 38% to 15%, they could not stop the NASDAQ from crashing 80% and the DOW from falling 40%.

It's called pushing on a string.

hendry said...

Kiyosaki's name was often used to justify the housing bubble prices. The fact is, if you ever read or listen to Kiyosaki, he always said to invest in cashflow positive real estate. He was big into buying apartment buildings or complexes that are cashflow positive.

In his last interview, he said that most of the flippers end up getting burned because they are speculators.

Anonymous said...

If we see more inflation, and I believe we will, we will see a nice "V" in prices.

Houses are currently overpriced, but will correct, esp with tightening of loan standards.

Then, as the Fed pumps in liquidity, you will see them rise in nominal but not real terms.

There are better ways to fight inflation, and it's still to early to buy.

Anonymous said...

Keith,

Agree or Disagree?
You've dated women in Europe. Don't you think international women have a better grasp on finances, realistic material expectations and stable relationships?

I believe you must agree.
http://nomarriage.com/why_foreign_women_are_better.html

wine country dude said...

Gives me chills just to see the 'lil West Sacramento wanker again.

Anonymous said...

I don't think there will be a rate cut and I also think south florida is going bust fast!

_____

I think there WILL be Fed rate cuts. The political pressure on the Fed to cut rates is overwhelming. It's all but done.

borkafatty said...

Excuse me Home cookin but your purchasing power will shrink to nothing if the fed lowers..and your Equities call is delusional at best...yes we will see rampant inflation I will agree just not how you layed it out.

Wage increases...doubt it
Prices will sore, what they are not already?

Anonymous said...

YOU GOP PUKES ARE HYSTERICAL!!!
http://tinyurl.com/2c3qkf

Anonymous said...

Want to laugh?

http://articles.moneycentral.msn.com/Investing/SuperModels/BushMortgageBailoutJustMightWork.aspx

Anonymous said...

coulda sold this dog place at a price that made more money than I ever made at working, coulda had something for nothing and had to pay no tax on the gain...still might

Anonymous said...

the equitys market took a 1029 like crash in 2000=2002 and has no reason to go down, nor no reason to do anything for an average of 17 years past then except muddle and stagnate

brokersleaveyoubroke said...

The first poster didn't give any reasons why there will be an equities bubble and I can't think of any but I can think of many reasons why there will not be.
It already IS a bubble. Valuations are about double what they historically should be.
Most recent growth was because of massive stock buy backs and M&A activity which was mostly financed with credit that is no longer available.
Forty percent of the profits of the S&P 500 companies was from finance activity such as selling subprime mortgages and repackaging them into CDO's and selling that junk to unsuspecting foreigners and hedge funds.
Seventy percent of GDP is from consumer spending. The consumer is tapped out. Repro lots are filling up with Hummers, Harleys, boats on trailers and lots of top shelf cars. Apple just dropped the price on the iPhone by $200 because sales are so poor on one of the coolest products of the decade.
I think the next big bubble is a decade away.

hendry said...

How will home prices increase unless the Fed can force foreign investors to buy toxic CDO's again? The ponzi scheme is over. It's apparent that some are still in denial.

If the Fed lowers rates then Asia dumps the USD leading to hyperinflation. Nobody will lend money in a hyperinflationary envoronment. So how will home prices increase if people can't borrow money? They will have to decrease to the point of people being able to pay for the home in cash.

hendry said...

There is a myth that the big boys want high inflation over deflation. That could not be further from the truth.

The big boys play in the bond market. High inflation hurts the bond market, as yields increase and bond prices decrease. Millions of J6P borrowers with fixed rate loans will benefit, while the banks end up losing on their 6% fixed loans. People with adjustable rates will simply walk away from their debt obligations if the rates get too high. Banks and the super rich who own the debt take it in both ends in a high inflation environment.

Now we will look at a deflationary scene. Who benefits from deflation and recession? People with money benefit. Who is hurt the most? People in debt. The rich have the cash to buy assets at a discount. People who are in debt are stuck with an asset that does not appreciate and they have no cash to buy the discounted assets.

If the powers that be had wanted hyperinflation, they would have lowered rates a long time ago. The fact that they are holding rates steady shows that they wold be ecstatic to see stagnant prices or mild deflation. Both scenarios are bad news for FB's.

John S said...

home cookin' is half right. In 5 years gasoline will be $6 gallon, a loaf of bread $15. But salaries won't increase. The U.S. standard of living will simply drop. When Jimmy Carter inflation was close to 20%, I used to get a 9% cost-of-living raise every 6 months. I don't see that happening this time.

George W. Groovy said...

When you look past the headlines the good news is that the inventory of subprime fixed-rate loans in foreclosure actually fell in the second quarter. The total number of homes in foreclosure was about .65%. That means 99.35% of all homeowners are probably happy campers.

So it's not as bad as we thought and investors may be encouraged to hang on and ride out this market. That would benefit all of us, since despite all the brave talk, the last thing we need is a financial crisis.

What good is a cheap house if you have no job?

Larry Lang said...

The Real Estate market is really getting in bad shape. I am getting more and more listing every day from desperate owners and less hits on my websites. My main website http://www.southfloridarentals-homesales.com is receiving inquiries from people confounded by the current situation.
Housing prices are dropping along with rental prices. There are more short sales, more foreclosures, mre lenders going out and the banks are still offering easy financing. I think that we are headed for real trouble and there is only one real solution. The legislature must let homeowners take their tax base with them when they move. We are not seeing any lateral moves, because of the increase in taxes when buying a new home. This would result in a total revitalization of the market.

Larry Lang said...

The Real Estate market is really getting in bad shape. I am getting more and more listing every day from desperate owners and less hits on my websites.
My main website http://www.southfloridarentals-homesales.com is receiving inquiries from people confounded by the current situation. Housing prices are dropping along with rental prices. There are more short sales, more foreclosures, mre lenders going out and the banks are still offering easy financing. I think that we are headed for real trouble and there is only one real solution. The legislature must let homeowners take their tax base with them when they move. We are not seeing any lateral moves, because of the increase in taxes when buying a new home. This would result in a total revitalization of the market.

Anonymous said...

No rate cut.

http://www.youtube.com/watch?v=z_szptSE3hw

vegas crash watcher said...

Hendry is correct; the rich want deflation; they can buy more stuff. If you believe the dollar is toast, then you should buy a house right now. I hate to disagree with Gary Shilling, but I think rates will need to rise for a while, before they drop. I think the US dollar will strengthen after the current crack up boom in the Euro.
Housing prices will go down 80%, even though I admit in public to only 40-50%. The world is getting deflation and debtors will be enslaved forever with the new BK law.

hendry said...

The legislature must let homeowners take their tax base with them when they move.

How will the state replace this loss of revenues? Start a state income tax? Raise sales taxes?

Anyway, I hope you weren't one of those sleazeball realtrolls who told buyers that RE always goes up or that Florida is running out of swampland.

k.w. - southern ca. said...

Why are people "[...confounded by the current situation ...]" ?

An *inflating-supply* with *shrinking-demand* makes it all so clear.

Side-Note:
A woman across the street had her house listed at nearly 800K, she has since taken it off the market.

This is an all too common scenario here along coastal Southern Ca. as well, where *prime areas* also are not immune.

Larry Lang said...
The Real Estate market is really getting in bad shape. I am getting more and more listing every day from desperate owners and less hits on my websites.
My main website http://www.southfloridarentals-homesales.com is receiving inquiries from people confounded by the current situation. Housing prices are dropping along with rental prices. There are more short sales, more foreclosures, mre lenders going out and the banks are still offering easy financing. I think that we are headed for real trouble and there is only one real solution. The legislature must let homeowners take their tax base with them when they move. We are not seeing any lateral moves, because of the increase in taxes when buying a new home. This would result in a total revitalization of the market

Budvar said...

"Apple just dropped the price on the iPhone by $200 because sales are so poor on one of the coolest products of the decade."

Say it isn't so!!
I thought they were selling like hotcakes, and the economy was booming??

home cookin' said...

All you deflation gear heads had better wake up. Gold just shot through 700, and the USD index dropped like a rock through .80. If you think these are signals of deflation, you need some education. The biggest debtor of all, our dear old Uncle Sam, wants and needs inflation.

Redshoes said...

Budvar said:"Say it isn't so!!
I thought they were selling like hotcakes, and the economy was booming??"


Yes, the ecomony is doing so well, Iphone buyers are getting a 100 dollar refund if they bought right before the price reduction!

AmazingRuss said...

I saw some dingbat working the register at AM/PM playing with his new iphone...I bet it cost him a months salary after taxes and plus the interest he will pay on it.