Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed.
The moratorium was initiated in January to give Obama’s anti-foreclosure program — which is a combination of mortgage modifications and refinancing — a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it’s clear now that the program will fall well short of its objective.
In March, housing prices accelerated on the downside, indicating bigger adjustments dead ahead. Trend lines are steeper now than ever before — nearly perpendicular. Housing prices are not falling, they’re crashing and crashing hard.
Now that the foreclosure moratorium has ended, notices of default (NOD) have spiked to an all-time high. These notices will turn into foreclosures in four to five months’ time, creating another cascade of foreclosures. Market analysts predict there will be 5 million more foreclosures between now and 2011. It’s a disaster bigger than Katrina.
Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. Forty percent of delinquent homeowners have already vacated their homes. There’s nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale, suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?
600,000 “disappeared homes?”
Here’s am excerpt from the San Francisco Chronicle explaining the mystery: “Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.
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“’We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market,’ said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. ‘California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You’d have further depreciation and carnage.’
“In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity – only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as “shadow inventory.” (“Banks aren’t Selling Many Foreclosed Homes,” San Francisco Chronicle)
If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They’d also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 “disappeared” homes means that housing prices have a lot further to fall and that an even larger segment of the banking system is underwater.
Here is more on the story from Mr. Mortgage “California Foreclosures About to Soar . . . Again”: “Are you ready to see the future? Tens of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season . . .
“Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days. . . .
“The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium.”
JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price slashing into the foreseeable future.
According to the Wall Street Journal: “Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can’t meet their loan payments, up from about 1.7 million in 2008.” (Ruth Simon, “The housing crisis is about to take center stage once again,” Wall Street Journal)
Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards.
The next leg down in housing will be excruciating; every sector will feel the pain. Obama’s $75 billion mortgage rescue plan is a mere pittance; it won’t reduce the principle on mortgages and it won’t stop the bleeding. Policymakers have decided they’ve done enough and are refusing to help. They don’t see the tsunami looming in front of them plain as day. The housing market is going under and it’s going to drag a good part of the broader economy along with it. Stocks, too.
April 22nd, 2009 at 4:03 am
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April 22nd, 2009 at 4:21 am
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April 22nd, 2009 at 4:22 am
Just wanted to say HI. I found your blog a few days ago on Technorati and have been reading it over the past few days.
April 22nd, 2009 at 4:24 am
You know, I have to tell you, I really enjoy this blog and the insight from everyone who participates. I find it to be refreshing and very informative. I wish there were more blogs like it. Anyway, I felt it was about time I posted, I
April 22nd, 2009 at 5:32 am
and the amerikan sheeple both ignorant & arrogant haven’t a clue…
April 22nd, 2009 at 5:54 am
some have a clue. The commercial market has yet to hit as hard as the res. mort is about to. So the typical 5 to 10 year commercial backlogs are down to about, well, 0 years at the end of 09. This coupled with what has only started as a mess in the housing will sure be a rude awakening for most, but not all. Why do you think you can hardly get into a gun show or stock up on ammo? The demand is stupifying. but not really, cause many do have several clues……
April 22nd, 2009 at 6:03 am
Hello.
I like your site and wanted to know if you would be interested in exchanging blogroll links.
Thanks in advance
April 22nd, 2009 at 6:12 am
the criminal government and bankers and the criminals running america are raking it in , is all this was, a way to even rake in more and idiots fall fore it every day if you cant pay cash dont buy it or the banks will own it soon
April 22nd, 2009 at 6:43 am
Finally a subject I can comment on where I have real facts
I am a Real Estate Broker who lost his business when the so called sup-prime market crashed and destroyed the RE Market and lots of peoples lives and careers
I am now the office manager for an REO brokerage trying to sell other peoples failed dreams to investors looking for good deals to make a profit
Notice I said trying to sell !!
People are making low ball offers to the banks established price and the banks are not going for it If you are a 1st time buyer you can just about forget it if you even try to get a mortgage All the rules and criteria have been increased 10 fold and the deck is stacked against them
Thanks to the CRIMINALS in our government and the greedy corrupt banks who do not care about We The People They have bailed themselves out with our money and then stick it to us on the back end
Our inventory consists of over 200 homes under eviction and soon to come on the market along with all the other homes already on the market
I have been told that it is going to be a BLOOD BATH once it really gets going
The way things are going it is only going to get worse
WAKE UP WAKE UP should be like a blinking light in your brain
Get rid of the TV brainwashing Learn to think for yourself as it may be all you have when the time comes for you
Manq Reply:
April 22nd, 2009 at 11:17 am
Truth Seeker – Do you by chance cover Santa Clarita or Simi Valley, CA? Email me at manqusso@yahoo.com
Margret H Reply:
April 22nd, 2009 at 11:24 am
I’m a broker also. the banks are destroying themselves. The real answer is to end compound interest on mortgages, but the system is so delusional, that they actually think they have “wealth” in holding homes without people to buy them. they have ended their own system.
The goverment and corporations are in collusion, but they both forget that they NEED the people. people need to stop leaving their homes, the cities need to stop using their sheriffs to enforce evictions. and the banks need to re-calibrate the mortgages.
it will be up to us to stand our ground and know that wealth is relative.
I agree it is progressing. homes may not be worth anything; but then neither will the “markets” exist. as the Russian predicted, the US could break into 5 units when the Feds can’t hold it together. CONSIDER THIS; MAYBE WE WILL LIKE THE CHANGES. MAYBE LIFE WILL BE BETTER FOR US.
yellowhak1 Reply:
April 22nd, 2009 at 1:01 pm
WHEN THE FUTURE NO LONGER NEEDS US comes to mind
April 22nd, 2009 at 10:54 am
The article is true to fact. I am employed by one of the top 10 banks/mortgage companies in the USA and I can confirm that banks are holding 100’s of 1000’s of homes (REO). I have been told that the reason for this is that bank executives are hoping for a market turn before placing them on the market. Their hope is that they will see a reverse in values. We all know that this is not going to happen for a number of years.
The auditors need to do a better job of examination and be truthful about the banking system. Let the weak fail – Citi – BAC to name just two.
It is time our story telling President Obama allows Little Timmy to step up to the plate and be a man. Tell the American people the truth. We deserve the truth. Let hard tomes come upon us now so that the healing can begin.
Look for DOW 6000 and S&P 500 to fall to 540. This is what the truth will bring.
April 22nd, 2009 at 11:19 am
This was an inevitable result. Where I used to live and was forced to sell a house in an estate the lowest priced houses went from $200K to $400K in less than 2 years and there was NOT enough industry and/or jobs coming in to justify the rise.
The bubble had to pop and it is still deflating. I tried to buy a low end fixer upper in the area I moved to (Crappy job market and long commute to large city) and could never get a chance to bid on a decent one. Finally a RE agent told me no one responded to me because they would sell these houses in batches (2 to 10 settlements at a time) to “investors” who were speculating because the prices were so low they got a flat minimum fee instead of a percentage of the price and made more money that way.
Lots of those houses are now going into foreclosure and some weren’t winterized so the plumbing and hot water and/or steam heat system are exploded making them require more money in repair than was paid for them.
All those “investors” are sticking banks with 4 to 30 houses at a time and they are usually in good shape NOW unless someone guts them for the fixtures and wiring which is more likely the longer it sits empty. So tons of houses are waiting or in the foreclosure process so the price HAVE to drop from the flooding the market.
April 22nd, 2009 at 12:39 pm
I hate to say this but I am not sorry for them. I am 45 and couldn’t tell you the last time I saw an affordable housing plan go up. Each and every one of the new housing plans, and they were MANY, were the top level homes that only the top 1-5% of wage earners could afford. It was only a matter of time before these greedy developers ran out of top wage earners to buy these palaces.
I say I am not sorry for them because it was all driven by greed. I worked with a fellow whose brother built some of these palaces. He would build them for 60k and sell them for 300k. He didn’t care about the common family who could never afford such a place. His greed would not allow him to build something that could be sold for say 75-125k. Had they done this instead of manipulating mortgages to give folks homes they had no business buying due to cost, the market never would have collapsed.
April 22nd, 2009 at 1:39 pm
Last night I was having a discussion on this topic with friends, Sacramento has close to 200,000 homes not on the market, people are living in them, not paying rent or they are in various phases of foreclosure, 200k homes not on the market, if they were the housing market would crash in california overnight from just one city, then the rest of the country would follow.
Neighborhoods like oak park, natomas, elk grove, south sac. They are holding these back so that the right investors can come up off others misery and misfortune or stupidity.
April 22nd, 2009 at 4:17 pm
My neighbor left his home due to forclosure. In the winter the pipes froze. Then the whole house flooded ruining the carpet, drywall, and now there is mold everywhere. Then a homeless person broke the window in the back and lived in there for a few weeks. If a realty company thinks they are going to sell that piece of crap they’re mistaken. Nobody wants it now, it’s ruined. Banks are in deep doo doo, it will cost thousands and thousands of dollars before another person would buy this house, and who would be dumb enough to spend money on that.
April 22nd, 2009 at 9:04 pm
Fractional Reserve banking and the creation of money out of thin air…This all started in 1971 when Nixon closed the Gold window and will go on until all of the misallocated funds are washed out of the system. This implies a lot of pain for the banks too…
April 22nd, 2009 at 10:18 pm
I am a leasing consultant. I lease apartments to people who need places to live. This article is the truth. I’ve had an upswing in rentals because escrows are falling through. I’ve asked and asked why are the esrcows falling through. The answer almost every time is because the bank has out bid them. Not another bidder the bank. From what I got out of this they are going to hold the properties they bought at 1/2 price wait out this “recession” and as they say make bank.
April 22nd, 2009 at 11:57 pm
I have discussed the shadow inventory several times with friends and I don’t think people realize what is really going on. The banks keep their inventories artificially low to constrain the supply side hoping to put a floor under prices. The Government, in collusion, keeps interest rates artificially low then use statistics that show ‘upticks’ in sales and reductions in publicly listed home inventories. This creates the smoke and mirror illusion that things are getting better. The ultimate goal is to bamboozle the public into a false sense of security in an attempt to lure (suckers) back into the housing market thinking this is the ‘bottom’. Won’t the poor sucker who buys now be upset when the inventories build again as the market is flooded once more. With the end to the foreclosure moratorium, another huge wave of NTS’s coming. Our interest rates will rise uncontrollably due to the funny money printing (quantitative easing) and a growing distaste for our debt by the Chinese and Japanese. Asia will begin to look for alternative markets to build up their exports instead of relying so heavily on the U.S. As interest rates skyrocket, this, again, will put more downward pressure on housing prices. Consumers will no longer be able to obtain sub 5% mortgages. Rates will approach 8-10-18 percent and, with higher interest rates affecting the monthly payment, the consumer’s purchasing power will go down pressuring home prices which, affordable at 5%, will be out of reach. So, thank you big government and screw you too.
April 23rd, 2009 at 8:22 am
I finally woke up about 6 months ago, and have dedicated my life to protecting my son’s voice. When I read information like this, I just want to throw my hands up and give up. In a society oozing with tyranny, how in the hell am I going to sleep at night knowing I can only do so much. Being a single mom, and a homeowner, I take great pride in providing for my with no assistance from the government. But its those same CRIMINALS who are trying to take my dream and security from me. Its has overwhelmed me….thanks to Alex and his crew of infowarriors for keeping us informed.
April 23rd, 2009 at 9:16 am
Hmmmm……if the government is taking over the failed banks through FDIC…..and the banks are holding foreclosed properties……and holding notes on homes not in foreclosure with clauses that read something to the effect of note payable on demand, which is pretty much a standard clause…….kind of starting to know how Native American Indians felt……
April 27th, 2009 at 2:57 am
It is estimated that Obama’s plan could benefit 8 to 9 million homeowners from the new modification procedures. So how do you know you qualify for the Mortgage Modification? Check the website http://obamamortgage2009.blogspot.com/
to see if you qualify. I was also in trouble and I am glad I did check it before I talk to my mortgage company and it helped – John Mayer, California