The great 2008 walkway is well underway. There is no shame in foreclosure anymore.
Foreclosure used to be a last resort, something that hard-pressed homeowners would scrimp and plead to avoid. But as the subprime lending crisis sweeps up millions of borrowers nationwide, some are deliberately choosing foreclosure as an early option.
As their home values tumble and their mortgages rise, these "walk away homeowners" decide to cede their houses to their lenders.
"It's throwing good money away after bad" to pay an escalating mortgage on a home that's plunging in value, said Army Sgt. 1st Class Nicklaus Skaggs of Vacaville. He and his wife, Tishara, stopped paying their mortgage in February. They signed up with a new company called You Walk Away to help guide them through the multi-month foreclosure process.
The couple paid $455,000 for their Vacaville home almost three years ago, shortly after Nicklaus Skaggs returned from a year in Iraq. Now the home's value has dropped to $290,000. Their adjustable-rate mortgage, which started at about $3,000 a month, has reset twice, climbing to about $4,000.
They have no regrets about their decision."I feel like the pressure has lifted off my shoulders; before I was trapped," said Nicklaus Skaggs, 40, an earnest man who plans to retire from the Army in two years, after completing 20 years of service.
Why does every growth rate in the housing market have to be massive. First, large price growth numbers, then large price falls, and now a 60 percent increase in foreclosures.
NEW YORK (CNNMoney.com) -- Foreclosure filings nationwide jumped 60% in February compared with the same month last year, but they decreased slightly versus January, according to a report released Thursday.
RealtyTrac, an online marketer of foreclosure properties, said 223,651 homes got hit with foreclosure filings last month, which include default notices, auction sale notices and bank repossessions. 46,508 of those were lost to bank repossessions, which more than doubled over last year. The report also indicated that foreclosure filings in February fell 4% compared with January, similar to a 6% decrease that occurred during the same time-span in 2007.
What??? Another downgrade of collateralized debt obligations? You mean that they are not worth as much as you previously thought? Weren't they all AAA? What happened? What did we miss
Feb. 5 (Bloomberg) -- Fitch Ratings may downgrade all of the $220 billion of collateralized debt obligations it assesses that are based on corporate securities because of rising losses.
The New York-based company may lower the notes by as much as five levels after failing to accurately assess the risk of debt that packages other assets, according to guidelines proposed by Fitch today. CDOs with AAA grades that are based on credit-default swaps and aren't actively managed may face the steepest reductions.
Ratings firms are responding to criticism that they failed to react quickly enough as increasing defaults on subprime mortgages in the U.S. caused a plunge in the value of CDOs. Fitch, a unit of Fimalac SA in Paris, lowered $67 billion of mortgage-linked CDOs in November, slashing some AAA debt to speculative grade, or junk.
When will Moody's press the button? When Moody's are thinking of a downgrade, you know that it has already happened.
Feb. 4 (Bloomberg) -- Moody's Investors Service may cut the ratings on A$83 billion ($75 billion) of Australian mortgage- backed bonds linked to PMI Group Inc. on concern the U.S. home- loan insurer will find it harder to pay claims.
Moody's is reviewing the ratings on bonds tied to loans insured by the local unit of PMI, it said today in a statement. They account for about 45 percent of the A$180 billion mortgage- backed bonds issued in Australia, making for the biggest review Moody's has done in the nation, said Henry Charpentier, structured finance analyst at the ratings company in Sydney.
Any downgrades will stifle sales of Australian mortgage- backed bonds, which fell 87 percent in the six months to Dec. 31. Australian lenders will find it more costly to raise capital to fund mortgages if Moody's cuts the ratings.
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From the Wall Street Journal.....
U.S. Mortgage Crisis Rivals S&L Meltdown
The home has long been the bedrock asset of most American families. Now, its value has become the biggest question mark hanging over the global economy and financial system.
Over the past decade, Wall Street built a market for more than $2 trillion in securities sold globally and backed by loans to U.S. homeowners on two long-accepted beliefs and one newer one. The prevailing logic: The value of the American home would never fall nationwide, and people would almost always make their mortgage payments. The more recent twist: Packaging mortgage loans and turning them into securities would make the global economy more resilient if anything went wrong.
In a matter of months, though, much of the promise of the new financial architecture -- together with its underlying assumptions -- has proven to be a mirage. As house prices fall and homeowners default on mortgages at troubling rates, the pain has spread far and wide. An examination of the resulting crisis shows that it is comparable to some of the biggest financial disasters of the past half-century.
So far, the potential losses look manageable compared with the savings-and-loan crisis of the 1980s and the tech-stock crash of 2000-02. But the housing debacle could yet take years to work out, thanks to the sheer complexity of it. Until the mess is cleaned up, investors will remain jittery and banks will likely hold back on all kinds of lending -- a credit crunch that is already damping global growth and could tip the U.S. economy into recession.
The new financial system -- shifting risk from banks to securities markets -- has worked "pretty well" up until now, says former Federal Reserve Chairman Paul Volcker. "We're going to find out if it works well for a major-league crisis."
To ease the pain, the Federal Reserve has cut short-term interest rates twice and is expected to cut them further tomorrow. The Bush administration has also pressed for private-sector curative measures. First, it urged big banks to create a new entity to buy some mortgage-linked securities that don't have a ready market now. And a plan finalized last week calls for freezing interest payments on perhaps hundreds of thousands of qualifying homeowners whose mortgage notes are set to rise. (See a primer: Will the Rate Freeze Help You?) Both ideas are controversial. They are hailed by some as well-conceived financial first aid and criticized by others as inadequate -- or an impediment to crisis resolution.
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For US home builders, the current market is "challenging". In PR-speak, the word "challenging" means "total, unmitigated disaster".
Today, confidence among U.S. home builders crumbled this month to the lowest level in 16 years. The home builder sentiment index declined to 24 this month. We have to go back to January 1991 to find it at a lower reading.
Home builders certainly have plenty of problems out there to get them depressed. Inventories are high, sales are declining, prices are crashing, prospective buyer traffic is falling off and interest rates will stay at their current elevated level for months to come. Moreover, all those incentives, which have understated the true extent of the price crash,just aren't working anymore.
Things are so bad, it must be a challenge for US home builders to even get themselves out of bed in the morning.
April housing permits down; new home starts up. There is difficult choice here; which indicator more accurately reflects the true state of the housing market. The new home starts numbers are up only when compared to the previous months. Therefore, it is time to invoke the NAR excuse - the weather. Less rain in April relative to March artificially inflated the new home starts data. So don't worry folks, the housing crash continues.
NEW YORK (CNNMoney.com) -- The battered housing market got another vote of no-confidence from builders last month as applications for new projects tumbled to the lowest since 1997, even as housing starts themselves edged higher.The numbers confirm other recent reports from home builders and real estate groups of a housing market that is still searching for a bottom and that is likely to get weaker before it picks up.
Housing starts rose to an annual rate of 1.53 million in April, according to the Census Bureau report, from the revised 1.49 million pace in March. Economists surveyed by Briefing.com had forecast a slip to a 1.48 million pace in April.
But building permits, which are often seen as a measure of builder's confidence in the market, sank to an annual rate of 1.43 million in April from a revised 1.57 million in March. It was the lowest reading since June 1997. Economists had forecast a dip to 1.52 million
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Where did all this housing inventory come from? Just 18 short months ago, realtors were blathering on about the lack of supply pushing up housing prices. Today, housing inventory is exploding. Local MLS listings are bursting, and realtors are finding it difficult to keep up with the daily intake of listings from desperate sellers.
According to ZipRealty, in April housing inventory increased by 7 percent in the nation's 18 largest metropolitan areas. Moreover, in some cities, inventory increases reached double digits; San Francisco, up 19 percent; Washington, 17 percent; Orange County, Calif., 15 percent; and Seattle, up 14 percent.
With Lereah gone, the NAR are gradually coming to terms with the new housing reality. It lowered its forecast, predicting that sales of previously occupied homes will total 6.29 million, down 2.9% from 2006.
Despite these shocking increases in inventory, prices have for the most part remained flat or have only fallen slightly. However, in the face of growing signs of market saturation, denial is no longer an option for home sellers. Without radical and desperate price reductions, inventory is going to remain high for a long time to come.
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Here are two ads that illustrate all that is wrong with today's housing industry. The first is a vile and offensive realtor ad from Colorado.
I think we can all agree that getting a young woman to take off her top doesn't say much for the sales ability of a realtor. Hat tip to real estate video for finding this piece of crap.
The second ad comes from Lou Minatti. This radio add pushes one of those real estate investment seminars. "Turn $500 of investment income into $3,000 of cashflow". It is a deeply misleading advert, largely aimed at the Casey Serin wannabees.
Chicago has become just another blownout bubbletown. City real estate developers sold 5,341 homes in last quarter; down 35 percent from a year earlier. Moreover, it is the weakest showing in more than 11 years. That is the latest findings from the real estate consulting firm Tracy Cross & Associates Inc.
Slow sales and rising inventory are gradually pushing prices down. The median sale price for single-family homes fell 1.7% to $299,470. However, the city center is awash with empty condos, with more coming onto the market every month. Prices have to fall much further before supply moves into line with demand.
The homebuilding sector is slipping into recession. Contractors and developers have slashed payrolls and stopped building houses on "spec". The Dallas-based Centex Corp., which sold 1,150 homes in the Chicago area last year, has cut its workforce in half.
Rising inventory, collapsing home sales, falling prices, and rising construction unemployment; the bubble is definitely over in Chicago.
Hey! You've won a ride back to the top
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