January 09, 2008

Here's a view of the Great Worldwide Housing Crash from Spain

Country by country, the dominoes will fall, especially in Europe. Spain is crashing hard and fast now, with Ireland and the UK right around the bend. Damn, this is gonna be ugly.

"I've been a bank manager for 28 years and I have never lived through a situation as dramatic as this," says the branch manager of a regional savings bank, who asked not to be named. "House prices in this town have fallen by 20 per cent, there is no demand, and no mortgage finance. Savings banks have cut off funding. Before the credit crunch, I used to do 12 mortgages a month. Since August, my branch has approved only one new loan."

He says that for the first time, clients are handing in the keys of their homes and walking away from their debt problems. "With the fall in house prices, families are giving up. They don't see the point of struggling on with their mortgage payments." Repossessions, he says, are on the rise.

32 comments:

Anonymous said...

He says that for the first time, clients are handing in the keys of their homes and walking away from their debt problems. "With the fall in house prices, families are giving up. They don't see the point of struggling on with their mortgage payments." Repossessions, he says, are on the rise....
------------------------------------
My neighbor did that almost 2 years back. He dropped the keys at the bank & moved to a rental. Some realtor found someone to buy the house (for $112k)after it sat empty for 12 months. About six months after that a better house sold down the street for only 75k, and three months later a really really nice one sold for $50k.

Bottom line, here in Wisconsin real estate is really dead.

Anonymous said...

I thought everyone wanted to live in Wisconsin

Anonymous said...

Didn't some Spanish leader make one of those "That could never happen here" a few months about? It would be nice to dig up his quote.

rum balls said...

France, Germany and Eastern Europe are in the same boat.

Europe 1930s all over again, this time the US will not come to the rescue.

Anonymous said...

Any shortable Spanish financial ADR's?

Anonymous said...

Pure fiction there is no problems...stop it you chicken littles!

Yoski said...

"...this time the US will not come to the rescue."
'Cos we're too busy trying to figure out how to rescue ourselves.

spanishguy said...

Hi from spain. Let me tell you that if you have a bubble we have a gigantic balloon, and no other european country is so broken. Basilea II is enforced in europe since January but in spain it has been delayed (till next spring)

Yes, lots of people are losing their initial payments and canceling contracts but once you have a mortgage, things are not as easy as in the usa (and most other countries)

In spain if you can't pay the house, the bank comes and repossesses it, then the auction is done, and (here comes the good part) you still owe the bank whatever the auction did not cover.

Ex: You buy a house for 300.000eur, after a while you're repossessed after paying 40.000 (10.000 capital and 30.000 interests, this is the french amortization system in action) so you still owe 290.000, then the auction goes for 140.000. Well, you own the bank 150.000, all your possessions are confiscated and salary will be reduced to a minimum (govern fixes this minimum), the rest goes to the bank till you pay/die.

Even worst, when you ask for a mortgage, most people (and all subprimers) are asked for guarantees, for example the house of your parents, or the house of your parents plus the house of your wife's parents.

In case of repossession the bank can start to reclaim properties in the order they wish (fox example, they could start for your parent's house and then come for yours).

This is not an special condition, as i said, most people will need those guarantees ('avales' in spanish) or they'll get no mortgage. Of course if a house is 'avaling' another house it can't be sold.

Now you can understand why banks have gone much more crazy than in more civilized parts of the world.

By the way, 97% of spanish mortgages are made with variable rates.

And yes, the quote you'll most hear is 'This usa mess can't happen here'. Our leader is completely out of control, his latest quote was that 'critics with the economy are not patriotic', of course people is making good fun of that as patriotism is almost never used in spanish politics (very different than usa), we had a civil war just 60 years ago so patriotism is something you don't really want to talk about.

Also our trade deficit is much worst than the american one. There are about 1.5 million empty houses waiting for a buyer for a population of 40 million. During the latest years we've been building 800.000 houses a year.

I could go on a and on. Just keep your eyes open for spanish news, this is going to be really catastrophic.

eTrader said...

Here is an article from Bloomberg.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aJZo3AT8u6.o

London STUD said...

All of my smug neighbors here in England are starting to get real quiet now. Property only goes up they said. Stupid American they thought. Big grin as I type this...

pwnd said...

EWP

Anonymous said...

FINALLY... a reason for the dollar to rally.

I'll take it anyway I can get it.

Tom

Anonymous said...

rum balls said...
France, Germany and Eastern Europe are in the same boat.

Europe 1930s all over again, this time the US will not come to the rescue.
--------------------

yes rumballs, US will not come to rescue France and Germany's boat because the US isn't even on a boat, it is SUNK down at the bottom already!

Anonymous said...

Yes, they're all going to move to southern California!

Mark in San Diego said...

EasyJet had a bad earnings report - big item in Financial Times. . .guess those Brits Abroad aren't buying houses in Spain anymore. . .see how these things are related. . .first housing crashes, then airlines layoff people (by the way, Southwest is eliminating 47 flights) then airlines employess stop spending, etc. etc. . . that is how a big recession/depression starts.

Anonymous said...

MSN Money

andy in nz said...

add New Zealand to your list, since august YOY sales down by a third, mortgages down by a third. the spring buying season was a bust.

Its anyone with an 'open' economy, US fed rates rule the world so when they went low we all had to compete or like here borrow from the US at cheap rates.

So an open economy is a 'deregulated' economy, who doesn't have one of those? Only the axis of evil left in the closed economy business..

god help us all...........

Anonymous said...

Anyone who continues to pay their mortgage on a McMansion they bought the last few years is an idiot. Why would anyone want to pay an outrageous amount of money every month (not to mention the property taxes and insurance) while the price of the underlying asset continues to go down, down, down.

This latest idea of Hank Paulson and Bush to "freeze" mortgage rates for borrowers whose mortgages will reset is a scheme designed so people will continue to pay their mortgages. They don't want people to default on their homes and walk away.

But the best thing for such borrowers would be to just walk away and mail in the keys to the bank. But I feel most Americans won't do that.

Anonymous said...

Anonymous said

"But the best thing for such borrowers would be to just walk away and mail in the keys to the bank. But I feel most Americans won't do that"

Ya think? Dream on.

Andrew said...

it's unravelling here in ireland. not yet at the point of walking away from it all, but all the banks are suffering, the prices are dropping, the builders are laying off people.

now the rally cry in Ireland is that rents are rising, when in fact, they are falling. maybe it has to do with the 250,000 empty homes in Ireland...hmmmm

i see some ripe opportunities in Spain to pick up some cheap properties.

Anonymous said...

Who inflicted more damage on the US?

Osama Bin Laden or Alan Greenspan?

The work of Alan Greenspan and the Fed make 9-11 look like a junior high prank.

These are the people that need brought to justice.

Also......

Perhaps we should create our own Real Estate Bubble cards with the key players pictures on each card.

Ace of Spades: Greenspan
Ace of Hearts: David Lereah
Ace of Diamonds: Mozillo
7 of diamonds: Cathy Reagor
3 of hearts: Suzanne
Joker: The brow-beaten husband
etc etc

Only problem is that I don't think there are enough cards.

cgg59@verizon.net

Anonymous said...

add New Zealand to your list, since august YOY sales down by a third, mortgages down by a third. the spring buying season was a bust.

You live in probably the greatest country on earth: pristine beaches, untouched land, very low immigration. Dont worry about YOY sales. You want to see a failing economy and human garbage, come to the US and count your blessings!

Anonymous said...

http://www.reuters.com/article/marketsNews/
idUKN0960764720080110?rpc=44

CFC says no more foreclosures.

Anonymous said...

LONG LIVE COMMUNISM

DEATH TO CAPITALISM

LONG LIVE RON PAUL

LONG LIVE THE DEMOCRATS

LauraVella said...

Wow, is all I have to say after reading SpanishGuy's message for mandatory "house" collateral to get a loan...

Imagine how many sheeple asked their parents to put their own house up as collateral...it's going to be really ugly there in Spain.

Question Spanish Guy: Does the same qualify for investors outside of Spain?

Anonymous said...

I hope all the FB's get 2nd and 3rd jobs to pay their bills. I don't want to see a worse credit crunch and depression. Come on FB's, work harder for your McShitbox. Pay for that Escalade with spinner rims. Buy those plasma TV's. It's your life-long dream.

Anonymous said...

@spanishguy

WOW!

Scary stuff - very sad too. A very informative post though.

Anonymous said...

In Spain:

"In case of repossession the bank can start to reclaim properties in the order they wish (fox example, they could start for your parent's house and then come for yours)."

If it gets that bad then there is no doubt there will be massive pressure for political action to stop this. The banks will be unprepared.

Especially since Spain has no currency of its own and they have no leverage over the ECB, the recession will be severe in Spain.

Abuelas put out on the street makes for very bad public relations.

The banks will end up losing even more from all the supposed guarantees since the government will eventually be forced by mass protests to nullify or freeze foreclosures in the middle of a recession.

Franklin Roosevelt did this in the 1930's USA (froze farm foreclosures).

Europe got Communism or Fascism.

If houses of grandmothers are repossessed if their children get foreclosed in a recession, there will be bombs in Madrid, and not from ETA. Leftists in Catalunya will surge again.

Non-recourse loans are good idea for banks, even though they hate it. It makes them consider real credit risks and do actual work.
And it should make them not lend too much in a bubble.

Totally laissez-faire unregulated bank capitalism is, as proven historically, a social disaster.

Communists and hard socialists got it wrong (nationalize the banks). Fascists got it wronger (kill the Jewish bankers).

Classical (US-sense) liberals got it right.

In three years, Franklin Roosevelt will once again be honored as he once was.

Anonymous said...

Russia and Ukraine will be next.

Anonymous said...

Re Europe in the same boat:

I'm not sure what you mean by the
US will not come to the rescue;

We didn't come to the rescue in the
1930's. We were in a little pickle
ourselves.Maybe you were referring
to the Marshall plan in the late
1940's after Europe was bombed to
rubble here and there.

This time, it looks as though
those who can, will rescue as
they are inclined and able, national boundaries notwithstanding; unfortunately,
it probably won't help. What shall
we do, when we have no money?

Grandma

GreedKills said...

Down checking out the bubble in Mexico right now. The whole Mayan Riviera seems like it's for sale right now. I suspect it's a combination of the dumb developers who couldn't stop building condos and the foreigners...Americans, Europeans, Canadians etc...are trying their best to "off" their vacation homes so that they don't lose their primary residence back in their native countries.

Oh...and word on the street is that there haven't been as many Americans down here this season as in the past. Everybody I talk to in the local area is surprised as they list off Canadians, Europeans and Israelis as the primary tourists this year.

Go figure.

spanishguy said...

LauraVella: "Imagine how many sheeple asked their parents to put their own house up as collateral...

Question Spanish Guy: Does the same qualify for investors outside of Spain?"

Well, I don't really know what kind of deals do foreign investors but i guess they follow their own rules and work with their own banks.