April 7, 2012

Foreclosures, Ho!

Americans brace for next foreclosure wave

120405-foreclosure-waco-belongingsBy Nick Carey, Reuters
GARFIELD HEIGHTS, Ohio | Wed Apr 4, 2012 7:09pm EDT

(Reuters) – Half a decade into the deepest U.S. housing crisis since the 1930s, many Americans are hoping the crisis is finally nearing its end. House sales are picking up across most of the country, the plunge in prices is slowing and attempts by lenders to claim back properties from struggling borrowers dropped by more than a third in 2011, hitting a four-year low.

120405-foreclosure-fullerton-evictBut a painful part two of the slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures.

"We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010," said Mark Seifert, executive director of Empowering & Strengthening Ohio’s People (ESOP), a counseling group with 10 offices in Ohio.

"Last year was an anomaly, and not in a good way," he said.

In 2011, the "robo-signing" scandal, in which foreclosure documents were signed without properly reviewing individual cases, prompted banks to hold back on new foreclosures pending a settlement.

120405-foreclosure-ny-busBut nobody in the Real Bay Area got foreclosed on, right?  This is what happens in flyover states.  And flyover cities, like, um, San Jose.

And while nobody would mistake the Bay Area for the troubled city of Stockton (where home values are not expected to hit 2006 values again until the year 2030), the resumption of the Foreclosure Express by many banks will be leading to more short sales and bank-owned properties.

Blame it on the settlement that 49 states made with the major banks.  Now that the process is no longer under so much uncertainty, foreclosures that have been put on hold will resume.  And this time around, the lucky participants won’t be brought in courtesy of high-interest, no-down subprime loans.  Plain old unemployment will be the cause of most of the unpaid mortgages.

Zillow is projecting all kinds of gloom and doom because of this, including a housing market that won’t hit bottom until next year, and stay on the bottom until 2016. 

"The hangover from this crisis will far outlast the party of the boom years," said Zillow chief economist Stan Humphries.

Share your predictions on how this economic tragedy that could evict millions of homeowners will affect the Real Bay Area.  This is an Open Thread.

Comments (9) -- Posted by: madhaus @ 5:10 am

9 Responses to “Foreclosures, Ho!”

  1. Bay Area Foreclosures Says:

    a lot of people think the foreclosure wave is over, but banks are just waiting for the final mortgage settlement and everything will go crazy on foreclosure once again

  2. Crissa Says:

    Out of ten houses on our block, three have been foreclosed on and two are still pending. There’s someone living in all the houses, currently, but two years ago there was no one in the three more troubled ones.

    And that’s probably average across our town. It’s a big shake-up, long-time owners being crushed by debt and and the contraction of the economy. The second round isn’t people who overbought, but people who lost work during the long tail of the recession.

    Over the whole nation, that’s really what this is – two years later, a huge wave of foreclosures happen from each of these contractions. Last year was an aberration, helped by floating people in 2009 and the attempts to make banks more responsible, tightened inventory to never before seen lows while buyers in 2011, in the recovering economy, wanted to start buying again. But sellers just weren’t there, either squeezed by debt and unable to sell at market prices or banks, unwilling to move forward.

    How long will these spasms last? I dunno. But the rocketing of prices back to their peak is disturbing.

  3. Mole Man Says:

    It’s not getting better until interest rates are headed up–really up, not still near the floor up.

  4. SEA Says:

    It’s a question of when, not if, interest rates go up significantly. So many people complain about an extra 25 cents for a gallon of gasoline, so I’m sure higher interest rates won’t hurt housing prices at all.

    But one thing is for sure: The principal of those who try to retire on interest is being challenged. At one time they were attracted to the higher returns in residential housing, which was considered to be nearly as safe as US Treasury instruments. Too many have discovered that the little extra return did not outweigh the risk.

  5. Crissa Says:

    Interest rates can’t go up until the Fed isn’t scared of less than one percent inflation.

    And no, they won’t hurt housing prices. Yes, in theory they could, but not at these levels.

  6. Sunny(vale) Kim Says:

    Traditionally housing price goes higher when mortgage rate starts going up, because of obvious reason – people want to jump onto boat before rate become too high. But eventually home price adjusts with high interest rate.

  7. SEA Says:

    #4- Another bottom call: “No matter what happens, prices cannot go lower from these levels, so buy now.”

  8. madhaus Says:

    Sorry for any confusion, but #4 is now #5, due to reviving #1 from the sp*m bucket. I’m sure Bay Area Foreclosures won’t mind if we omit the URL pointing to their site, wut? That way it isn’t quite so, um, sp*mlicious.

  9. SEA Says:

    15-Year Fixed-Rate Mortgage Hits New All-Time Record Low

    Let me give you a REALTOR translation: “BUY NOW, BUY NOW before interest rates go higher.”

    How many people purchased when prices were high to avoid higher interest rates?


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