Originally Posted by SDW2001
I'd like to see some evidence of that. It might even be
a majority, but a lot of folks got mortgages based on teaser rates or the notion of annual and bi-annual refinancing as the market went up.
All those loans are either OK or already foreclosed on. The new foreclosures now aren't in the low income areas where the shady loans were. They are in the mid and upper-middle income areas because the low end dropped so far that the mid sank, which dropped so far the upper-middle sank. I don't live in a tony neighborhood, but you would consider it upper middle class. And all the foreclosures are from job transfers (2), only 1 job loss, and divorces (2) where they cannot sell because the prices in neighborhoods over 20 miles away sank so fan and over two years they moved up market and ever closer. The original problem neighborhoods aren't listing foreclosures in the paper anymore, they are pretty much left with long-time residents making payments. The ever creeping valuation slide killed our values before any of the 5 foreclosures above ever hit the market. The job loss foreclosure solidified the neighborhoods previous paper losses.
There aren't many new foreclosures on the original adjustable loans because the interest rates went down, not up. Down far enough that the new P&I is almost the same as the previous interest only amounts.
I don't agree that foreclosures are driving the car, so to speak. They are a symptom, not the disease. They are a serious symptom...don't get me wrong.
I think it started that they were just a symptom in the housing market, now they are the downward engine.
The previous CA policy that distress sales were not allowed to be used in appraisals has been eliminated, because now almost 50% of the homes for sale are distress sales (which doesn't count houses which are current in mortgage payments but short selling to avoid the foreclosure process). In my zip code there are by the local realtors newspaper report, a whole 1 of 75 homes for sale that are not listed for less than the outstanding loan balance and 50% of the listings are already approved for short sales at the listing price.
Who can leave? The people that aren't underwater...that's who. But yeah...people are stuck. Even in areas not as bad off as CA.
And not being able to leave to chase jobs does 2 things, a) create more potential foreclosures, or b) slow down the recovery of the economy because they cannot get a higher paying job.
I think a lot of it is about that, actually. It's also about the housing bubble bursting as it was bound to do.
Yes, the bubble burst, but never before have prices dropped drastically more than 10% and or just leveled off for a decade. I have owned houses in CA and FL that were in BRAC areas. 50% of the workforce left, and housing prices went down a couple percent and didn't essentially move for 10-12 years. The early 90's CA bubble dropped 5-10% and didn't move up for about 10 years. The Texas oil bust areas did the same thing. You couldn't sell in those areas, but the values didn't plummet off the charts, you just had to sit on it for a long time and rent it out.
What's the difference today? The financial industry screwed the pooch and has caused a set of circumstances where prices have moved so far that we would have though the Survivalists would be in charge for something this bad to happen. It's amazing the country is weathering it as well as it has. But there is only so much resilience.
The worst is over. Prices are bottoming now, and going up in some areas. In my opinion, the market will come back once employment improves. It's going to take about 5 years to get back to normal. More employment will stimulate demand for housing, which will push prices higher. Prices have already corrected to levels not seen since 2002 in most areas.
I wish I agreed that prices are bottoming, but I don't see that. As for demand, where are all those foreclosed people living? We are talking collectively about 25% of the houses in CA sold in the last 8 years, that number is HUGE. Where did those families go? Because the houses aren't all rented. And I don't see lenders being willing to finance those houses second time around, with so many in the neighborhood still in the foreclosure process. There aren't enough cash buyers to stop the bleeding