Foreclosures hit a new record

October 15, 2009 12:11 PM

Foreclosures hit a record in third quarter 2009. President Obama took measures to contain the crisis. It is now many months later, and one can start asking how successful these measures have been.

Meanwhile there are plans to overhaul Fannie Mae and Freddie Mac that would strip the mortgage finance giants of hundreds of billions of dollars in troubled loans and create a new structure to support the home-loan market.

Are we sinking deeper into the mortgage crisis, or is this the valley, and from here on a slow climb back up?

posted by VikingSword (57 comments total)

I need another 10% drop in my local market before I'm ready to buy. 20 wouldn't hurt.
posted by mr_roboto at 12:15 PM on October 15, 2009 [3 favorites]

Wow. Why is Nevada such an outlier?
posted by hattifattener at 12:17 PM on October 15, 2009

I keep hearing about Option ARMs which have a staggering 25% delinquency or worse rate. They're also affecting higher income homeowners.

I'm trying to learn how serious this can be and not take the news reports as fact, but it does seem to be legitimate.

It would be great if anybody else can share some information about whether Option ARMs are indeed a threat.
posted by glaucon at 12:18 PM on October 15, 2009 [1 favorite]

And in sharp sharp contrast: Canada.
posted by gman at 12:20 PM on October 15, 2009 [2 favorites]

I told you so.
If the money had been apportioned among all taxpayers in usable amounts, it would have provided mortgage payments, retail store sales, bank savings. Instead, it was given to the people who caused the problem.
posted by Cranberry at 12:23 PM on October 15, 2009 [9 favorites]

Foreclosures hit a record in third quarter 2009. President Obama took measures to contain the crisis. It is now many months later....

That was phrased oddly enough that I was expecting links to speculative fiction.
posted by gurple at 12:31 PM on October 15, 2009 [1 favorite]

Sadly, due to reality happening in real-time, and the global economy being, well, global, this sort of thing is nearly impossible to measure. Unless we can create 2 separate Earths, stimulate one economy, and let the other founder, we can't really know the effect. Is a "no change" really covering up what would have been a "even worse"? Would a lack of stimulus plan have lead to enough job and home losses that there'd be land-slide support for public health care?

Now where did I put my fing-longer?
posted by explosion at 12:34 PM on October 15, 2009 [3 favorites]

If you listen to the recent update to the instant-classic This American Life episode on the Crisis, they talk to one guy who hasn't made a mortgage payment in (I think) more than a year, but who has not yet been foreclosed upon. The reporter says that the lenders simply do not have the resources to forclose on everyone who can't make payments. So I would imagine that at least some of the recent forclosures would have taken place much earlier if the bankers had been able to get to them.
posted by martens at 12:37 PM on October 15, 2009

This is what happens when you have double-digit unemployment. The Obama loan modification programs were designed primarily to help those who had jobs, but were unable to make the large payments required by their adjustable mortgages. These programs are helpless to prevent foreclosure when a family no longer has a stable income.
posted by thewittyname at 12:39 PM on October 15, 2009

Sadly, due to reality happening in real-time, and the global economy being, well, global, this sort of thing is nearly impossible to measure. Unless we can create 2 separate Earths, stimulate one economy, and let the other founder, we can't really know the effect. Is a "no change" really covering up what would have been a "even worse"? Would a lack of stimulus plan have lead to enough job and home losses that there'd be land-slide support for public health care?

We formulate plans - yes, even economic plans - because we think they will have a desired effect. If we cannot ever know or measure the outcomes, within some margin of error, what incentive would there be to formulate such plans at all?

Presumably the administration had projections mapped out when they came up with their rescue plan. It seems of some interest to see how these projections stack up against what eventually happened. Seems to me. I'm curious, anyhow! I wonder if they massively underestimated the depth of the crisis, and if so, what does that mean going forward.
posted by VikingSword at 12:42 PM on October 15, 2009

Why is Nevada such an outlier?

Nevada is approximately Las Vegas + noise, and Vegas had the real estate bubble especially bad.
posted by ROU_Xenophobe at 12:42 PM on October 15, 2009 [2 favorites]

"It is now many months later, and one can start asking how successful these measures have been."

My take: I'm 26 and on the market.
posted by TheNewWazoo at 12:46 PM on October 15, 2009

There's several layers to this problem and multiple portions of blame to go around, so when you hear someone lay blame at just one place (greedy investment banks, Fannie/Freddie, CRA, foolish and/or mendacious borrowers, just to name a few of the usual suspects), assume that the blamer is furthering an agenda. I long ago gave up trying to come up with solutions and just hunkered down to do my job (which is practicing bankruptcy law-- I saw some sort of mess coming five years ago and changed practice areas).
posted by missouri_lawyer at 12:48 PM on October 15, 2009

If the banks are anything like the one we're dealing with, it's even worse than it looks. We haven't made a payment since January (thanks to a job change, we don't live in the house, we couldn't sell it, and we couldn't keep paying). The bank refuses to do anything about it. They know they won't be able to sell the house either, so it costs them less to let it sit than it does to foreclose.
posted by caution live frogs at 12:50 PM on October 15, 2009

The bottom certainly hasn't happened yet.

http://www.irvinehousingblog.com/forums/viewthread/2544/

What amazes me is that when you put the bad loan histogram graph in front of people, and they can see where bad loans in default cause NODs--> Foreclosures--> low priced bank sales they can follow along-- it makes sense. But then! When they see that we still have a few more years of those bad loans to burn off, they can somehow believe that the worst is over.

Understand (like the govt does) that any government plan is all about political posturing. Any financial intervention in regard to housing is a drop in the bucket, and the market forces in the economy are much stronger. They have to make it look like they're doing something.

And to the naysayers who point to some piddly price increases in the last few months-- understand that the anatomy of a housing crash (just like during the previous ones) includes ski jumps and plateaus as rookie investors rush in to find the bottom. We'll reach the bottom once fundamentals (wages, area rent ratios: to home prices) come back to Earth. The unsubstantiated gains as a result of creative financing have to burn off first.
posted by No New Diamonds Please at 12:53 PM on October 15, 2009 [3 favorites]

If the money had been apportioned among all taxpayers in usable amounts, it would have provided mortgage payments, retail store sales, bank savings. Instead, it was given to the people who caused the problem.

Well, in contrast to the original Bush bank bailouts, that's basically what Obama tried to do, as the second link in the FPP explains. Specifically:

The Obama plan will provide up to $75 billion, mostly from the bank bailout fund, to help lenders and borrowers come to new terms. That could allow up to four million at-risk homeowners stay in their homes.

I mean, they didn't just give a few thousand dollars to every man, woman and child, because, well, that's not exactly a good way to target the problem of those at risk of defaulting on their mortgages, though it might have been a nice short-term economic stimulus (probably not even that though, since a lot of people would have just used the extra cash to pay off credit debts or to beef up their savings).

This is one of those aspects of the financial crisis that still keeps me up at night. With unemployment still increasing (though at a much slower pace) and overall growth potentially on the horizon but not quite there yet, how do we avoid this turning into a negative feedback loop, with the unemployed defaulting on their mortgages, causing financial sector losses that make working credit for business operations and expansion harder to get, which in turn causes more layoffs, etc.

It seems like a nasty, nasty problem. And if we don't see some economic improvement--and I mean job creation in particular--in the relatively near term (within another year or two), I don't see how we avoid the trap.
posted by saulgoodman at 12:57 PM on October 15, 2009

The problem is that too many people were given loans they couldn't possibly pay. The ones most ill equipped to pay defaulted and caused the crisis.

We're now seeing the people who may have been able to afford the mortgages they had if no bad luck befell them defaulting.

I don't see that there is a non-interventionist method to get out of this. One way the government may want to apportion funds is to create a pool and then have people apply for money. It would, to a certain extent, ensure that money is going to those in need.
posted by reenum at 1:02 PM on October 15, 2009

I need another 70% drop in my local market before I'm ready to buy. 90 wouldn't hurt.
posted by majick at 1:09 PM on October 15, 2009 [3 favorites]

Well, my state is doing FOURTEEN TIMES as well as Nevada, so I guess I better not shed too many tears about my area. Jeez, Nevada (e.g. Las Vegas) is BAD. Will it ever recover? And should it? I mean, within a few years they're going to run out of water anyway, as global warming droughts are rapidly running down Lake Mead water levels, and I dunno how many people would like living there without running water, showers, dishwashers, washing machines, pools, etc. They're probably going to be forced out of there at some point due to sheer lack of survivability, so they might as well move away now, when buying a different house in a different area is about as cheap as it will likely ever be in our lifetimes. Even Detroit probably has a better future than Las Vegas.
posted by jamstigator at 1:09 PM on October 15, 2009 [2 favorites]

The banks need to get off their asses and move these houses that are already sitting out there. Sure you're going to lose your ass, but as long as that thing sits there boarded up (or worse, all the windows busted out) all it does is make the value of everyone else's homes go down.

Maybe I'm just bitter because my neighbor hasn't paid his mortgage since December and refused to take care of his lawn all summer becuase it was the bank's problem. Well it's my problem when I have to stare at the house you conveniently don't care about even though you get to live in for free....
posted by Big_B at 1:13 PM on October 15, 2009

The banks need to get off their asses and move these houses that are already sitting out there.

Or, perhaps, get off their asses and work with homeowners in renegotiating the loans. BoA, for instance, has a foreclosure renegotiation rate of something like 3-4%. And just how much taxpayer money did they take?
posted by Thorzdad at 1:21 PM on October 15, 2009 [2 favorites]

Don't get too excited about Canada - prices are averaging around $325,000. Unless the average Canadian makes $104,000 a year, and has $65,000 in cash to slap on the barrel-head, housing is massively overpriced and dubiously financed.

Three times salary, 20% down is the only number that makes any kind of sense when buying a home. This was true in 1909, and it's still true now.

The clock is ticking to find out why homes are selling for so much - the longer you sit in happy "the worst is over!" denial, the harder the crash will hit. My first inclination would be to look very closely at the ruling party - business friendly and right wing. They're allowing the financial sector to get away with something for short term political gain, just like the Bush administration did here in the US.
posted by Slap*Happy at 1:33 PM on October 15, 2009 [3 favorites]

Wow. Why is Nevada such an outlier?

Investors, and rich people from other places buying status condos and driving up prices to ridiculous levels. It wasn't unusual for investors to own 5 or more properties when the bubble burst, and I've read of people who owned 20+ properties. Most of those were foreclosed on last year. That caused nearby homes to also lose value, screwing more responsible home buyers (in the short term, at least) and we're seeing fallout from that now. One of the best articles I've seen on the root of the problem was in -- of all places -- Cigar Aficionado magazine.

Couple all that with the job losses that have accompanied the vast reduction in tourism, and the result is lots of empty houses.

I now know 2 people here in Las Vegas that are short-selling their properties to their live-in significant other, a move that will cut their mortgage payments by 30% or more. I know quite a few more who have simply walked away from their houses.

I have no problem affording my house, but I don't know that I'd bother keeping it if I knew that the guy who just moved in next door got basically the same thing as me but pays half of what I do every month. On the bright side, realtor friends have seen a lot of buying activity lately, so maybe there's a dim light at the end of the tunnel.
posted by coolguymichael at 1:33 PM on October 15, 2009

I'm curious, anyhow! I wonder if they massively underestimated the depth of the crisis, and if so, what does that mean going forward.

That's what Krugman argued. And he may have been right.

The only problem is, it doesn't matter. The debate around the (possibly) inadequate level of recovery stimulus spending they have been able to squeeze out of congress ($787 billion) has been nearly as contentious as the health care debate and the current funding levels barely managed to squeak through.

And the unholy furor over rapidly swelling federal budget deficits (even sometimes, in what may be a strange new variation on the "Not in My Back Yard" syndrome, arising from the same quarters that advocate increased federal spending for various reasons) makes seriously expanded recovery spending seem like a political impossibility unless there's a major sea change in Washington and the US more generally (in other words, it's impossible).

To the original question though, I don't think they really underestimated it (although I think they did initially underestimate how severely unemployment would spike) so much as they didn't really have any good alternatives. I think they feared (probably correctly) that if they pushed for too much stimulus initially, congress would fight over the funding levels for far too long before ever producing a final spending bill, and valuable time that could better be spent getting the funding in process to do some good before we hit the point of no return would be irretrievably lost.
posted by saulgoodman at 1:33 PM on October 15, 2009

We formulate plans - yes, even economic plans - because we think they will have a desired effect. If we cannot ever know or measure the outcomes, within some margin of error, what incentive would there be to formulate such plans at all?

I know this was asked as a rhetorical question but honestly I think you've nailed down here the fundamental problem of human society. We live in a super-complicated epistemological universe where not two situations are ever the same and history never repeats itself. We treat rhetorical, logical arguments based on various metaphysical systems like economics as if they were at least in the same ballpark as science, but at heart we all acknowledge that these systems never manage to do a particularly good job of what we expect of science, which is to accurately predict future outcomes. Hence politics: regardless of what happens, if it's bad you can gin up an argument to blame it on you your enemies, if it's good you take credit for it (just read an article about Fox News reporting the Dow over 10K as a "Bush Recovery), if it's not what you hoped and you can't come up with a decent narrative that pins it on your enemies you argue that it would have been even worse if you hadn't done what you did. What's the incentive? The alternative is doing nothing and humans hate that.
posted by nanojath at 1:37 PM on October 15, 2009 [2 favorites]

The problem is that too many people were given loans they couldn't possibly pay. The ones most ill equipped to pay defaulted and caused the crisis.

Unfortunately, loan origination is regulated mainly at the state level.

Some states are more corrupt than others, especially when it comes to banking and real estate.

This is also why Nevada, Florida and California have been such outliers: All have very lax loan origination requirements. These are basically the states that triggered the crisis, and they are the states where real estate fraud has historically run rampant. In Florida, there's been a ton of news coverage about just how major a role outright fraud--not poor people buying houses they couldn't afford--but fraud on the part of real estate scammers and middle-to-upper-middle class real estate investors trying to make money off of flipping properties--played in the mortgage collapse here. The fact that the enormous role real estate fraud and bad speculative investment played in the crisis still barely seems to register at the national level always boggles my mind.
posted by saulgoodman at 1:40 PM on October 15, 2009 [1 favorite]

Does anyone have some numbers on how much it would have cost the government to simply pay the mortgages of at-risk homeowners for a year instead of doing all these programs and bailouts?
posted by Pastabagel at 1:43 PM on October 15, 2009

TheNewWazoo: "It is now many months later, and one can start asking how successful these measures have been." My take: I'm 26 and on the market.

OMG CONFIRMATION BIAS
posted by mkultra at 1:50 PM on October 15, 2009

I now know 2 people here in Las Vegas that are short-selling their properties to their live-in significant other, a move that will cut their mortgage payments by 30% or more. I know quite a few more who have simply walked away from their houses.

You know I was gonna be all "This is fraud and I am outraged", but you know what? Good for them.
posted by atrazine at 1:53 PM on October 15, 2009

Or, perhaps, get off their asses and work with homeowners in renegotiating the loans. BoA, for instance, has a foreclosure renegotiation rate of something like 3-4%. And just how much taxpayer money did they take?

Haha, funny one! The banks need the tax payer cash for mergers and acquisitions. Fuck the plebs.
posted by ryoshu at 2:00 PM on October 15, 2009

Don't get too excited about Canada - prices are averaging around $325,000. Unless the average Canadian makes $104,000 a year, and has $65,000 in cash to slap on the barrel-head, housing is massively overpriced and dubiously financed.

Well, thanks to low interest rates, house prices in Canada are going to stay high. But these prices are largely due to Vancouver (and to a lesser extent, Toronto)... prices in North Vancouver, for example, are already higher now than they ever have been, due to the availability of cheap cash. Just the other week, a 40-year-old 3-bedroom rancher on my street with a 1/2 acre lot went for $1mil. "Average" prices are being horribly distorted by neighbourhoods such as these, which are extremely desirable on the global market. Fortunately, we never had unregulated mortgage silliness like the States did, so the current state of things in Canada is best time to secure a mortgage since... ever. As a result, even local people will pay high prices.

That said, these quarter results are going to send confidence through the roof, and the real estate market inventory will explode, and as a result I (hope) prices won't go much higher - they will probably decline somewhat. The important thing is that these sales are fueled by actual demand instead of investing or speculation - people are buying houses because they want to live in them, people who have been afraid to act for the last year, which makes for a relatively healthy market - and a temporary illusion that things are up more than they are. Condo prices should remain relatively cheap, though, thanks to the inventory glut caused by the 2000-2008 construction spree (which shows no signs of reviving as of yet).
posted by mek at 2:08 PM on October 15, 2009 [2 favorites]

I thought the point was that bail out money needed to directly impact the corporate paper market to avert economic disrupt. But Wall St. only ever loaned back out some fraction of the money, they used the majority for high leverage games that let them escape the restrictions on executive compensation.

I'd naively guess that our current problems are mostly the continued restrictions upon lending in the corporate paper market, plus maybe housing. So I'll reiterate a suggestion from this time last year :

If Wall St. isn't lending, create new banks that will lend.
How does one find the banks? Try small banks and brokerages that didn't suffer significantly.

How does one get the money? Duh! Aren't the big banks paying off their TARP funds now?

Where does one find the employees to operate that many loans? Well, the NSA claims they employ more mathematicians than anyone else on the planet. I'm sure your average CIA or NSA analyst is more than capable of operating derivatives trades. And I'm sure their mathematicians and programmers are more than capable of maintaining a fork of Goldman-Sacks' code base.

Wall St. will happily sit there twiddling their thumbs making money while the economy burns. If the country needs the risks of giving GE et al. payday loans, then I'd suggest the people who are best suited to orchestrating those risks are already employed in the national security sector.
posted by jeffburdges at 2:13 PM on October 15, 2009 [1 favorite]

Just the other week, a 40-year-old 3-bedroom rancher on my street with a 1/2 acre lot went for $1mil.

Think for a moment about what you're saying - do you think someone who makes $330,000 a year would be happy living in a generic 60's suburban house? The one a typical factory worker or a low-level office worker would be living in at the time of its construction? Is that an aspirational purchase?

No. It's speculative bullshit. We've seen it here, we've heard the same "But this is different!" denials. It's going to crash and hard.
posted by Slap*Happy at 2:19 PM on October 15, 2009 [3 favorites]

Wow. Why is Nevada such an outlier?

Well, I do know that in San Diego, they (real estate companies) would take busloads, literally, of people who owned maybe a condo with some equity and had a job over to Las Vegas for the weekend not to gamble, but to buy houses and drive up real estate prices - to gamble on the housing market really. It still goes on.

And then those speculative loans would get bundled and sold, and "insurance" (or a bet) in a shadow betting system would get taken out on them so that if they ever defaulted the holder of the debt would get some remittance. Eventually, there were no more suckers, er customers available who would be able or willing to buy a 2 bedroom house on a dirt lot for $800,000 and the whole scam imploded. The banking system that allowed this to happen and the shadow betting system that dwarfed the original banking system were saved by the taxpayers and the systems are still unregulated as they were when this whole thing started. In fact, this year they received especially large bonuses for their crimes, er services.
posted by peppito at 2:32 PM on October 15, 2009 [2 favorites]

Think for a moment about what you're saying - do you think someone who makes $330,000 a year would be happy living in a generic 60's suburban house? The one a typical factory worker or a low-level office worker would be living in at the time of its construction? Is that an aspirational purchase?

VancouverFilter.
posted by oaf at 2:42 PM on October 15, 2009

Slap*Happy: No. It's speculative bullshit. We've seen it here, we've heard the same "But this is different!" denials. It's going to crash and hard.

I hope so; I'd love to get a place in Toronto for a sweet price.
posted by paisley henosis at 2:54 PM on October 15, 2009

From the article: That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

That's what's astounding to me. Even when you factor in homes that are safely in the green, we are still talking about what, 2% failure rate? The rate of increase of foreclosures is certainly scary, as is the total volume of foreclosures out of context.

The economy didn't crash because Mr. and Mrs. Smith defaulted on their home loan. The economy crashed because bankers defaulted on their loans. The economy crashed because banks were ridiculously over-leveraged treating mortgage instruments as better and just as safe as U.S. Treasury bonds. The economy crashed because unlike just about every other investment opportunity, bankers treated mortgages as being free money with no risk, and did not maintain a buffer of safety should that investment underperformed.

I mean 1/136 = 0.7%. A blue-chip stock can move more than that in a single day. Hell, mortgages are still ridiculously profitable and safe provided you sit on them.
posted by KirkJobSluder at 3:14 PM on October 15, 2009 [2 favorites]

And if we don't see some economic improvement--and I mean job creation in particular--in the relatively near term (within another year or two), I don't see how we avoid the trap.

Three words: Civilian Conservation Corps.

We've got an huge unemployment problem and a deteriorating environment. Let's kill two birds with one stone.
posted by vibrotronica at 3:17 PM on October 15, 2009 [5 favorites]

What 1M Euros buys in homes worldwide.
posted by gman at 3:18 PM on October 15, 2009

I think down payments are traditionally 40% in France Slap*Happy, but I'm not sue about their salary multiplier.
posted by jeffburdges at 3:28 PM on October 15, 2009

Demographia International Housing Affordability Survey: 2009 (700 kb pdf). Lots of good info.
posted by gman at 3:39 PM on October 15, 2009

Uh, unless you have a bunch of parallel worlds some where, running other options, no, you really can't say how successful they've been.

Last year at this time serious big league economists were debating whether this would be as bad as the great depression, or worse. Relative to that, we should be making burnt offerings to Obama's economic team.

Admittedly, they've had the benefit of being able to look back at the great depression and say, "Not that. That's our plan!"
posted by Kid Charlemagne at 5:12 PM on October 15, 2009

What peppito said up-thread about the role real-estate-as-speculative-investment played in creating the crisis absolutely needs to be better understood at the national level. My wife worked as a real estate closing agent for a law firm here in Florida. She saw firsthand what was driving the growth of the real-estate bubble: it was speculation, pure and simple. The subprime collapse was not about poor or even lower-to-mid middle class families taking on more debt than they could handle. It was about hustlers and yuppies gambling with property for profit.
posted by saulgoodman at 6:30 PM on October 15, 2009

The subprime collapse was not about poor or even lower-to-mid middle class families taking on more debt than they could handle. It was about hustlers and yuppies gambling with property for profit.

Well, I had thought this was a well known fact, but maybe you're right, there might be people who aren't very aware of it.
posted by peppito at 7:08 PM on October 15, 2009

Think for a moment about what you're saying - do you think someone who makes $330,000 a year would be happy living in a generic 60's suburban house?

Well, even worse, they are no doubt demolishing the place to put in a new house, so it's really a $1.5 million investment. If they are hoping to sell that in the next 5 years and break even... they're totally insane. Which is why I stand by my original statements; this rebound is due to a large quantity of buyers with renewed confidence (and low interest rates) relative to supply. Supply is extremely low, as very few people are willing to sell... and this sudden rebound was amplified as a consequence. In the next quarter, supply will double or more as sellers wise up.

This isn't speculation, it's people who wanted to cash in or out that were afraid for the last year. And it'll slump back in notime fast, but I don't expect a crash in Vancouver anytime soon... the conditions are completely different than the USA (where things are definitely much worse than they appear, still). Vancouver didn't even have a housing crash in 2008, just a slump which isn't that far off a normal real estate cycle.

Canadian capitals are unique because they are universally desired - especially by wealthy immigrants from Asia. Demand is perpetually high, and will stay there. It's bad news for locals, but that's how it is.

Want to buy a house? Move to the interior.
posted by mek at 7:09 PM on October 15, 2009 [1 favorite]

Oh, and by "didn't have a housing crash", I mean house housing. Condominiums crashed hard, and haven't hit bottom yet. But again, Vancouver is pretty unique, and can't be compared to the macro market - but it does warp our concept of the "average market" and thus should be considered.

I've talked to lots of homeowners in the USA, and there are a ton of foreclosures waiting to happen. Banks are running scared, and lots of people are living in houses that they aren't paying for. The real tragedy is that there has been basically nothing enacted by Congress to improve the situation in any way.
posted by mek at 7:13 PM on October 15, 2009

In other news: How to spot banks that may be committing fraud in their foreclosure filings.
posted by ryoshu at 8:09 PM on October 15, 2009 [1 favorite]

Interesting link, coolguymichael— though I notice that the Cigar Aficionado piece claims the market is about to turn around, but was written over a year ago.
posted by hattifattener at 8:47 PM on October 15, 2009

Demand is perpetually high, and will stay there.

Say that out loud to yourself. Slowly. Then repeat. Then repeat it, in terms of tulip bulbs or shares in creamsoda.com, your premier source for online cream-soda purchases.

The very fact that you said it at all indicates a bubble in full flight. If it ain't smuggled and/or sold on the black market, demand will never, ever, ever be perpetually high.
posted by Slap*Happy at 9:43 PM on October 15, 2009

Demand will crash as soon as population does.
posted by mek at 11:12 PM on October 15, 2009

If you listen to the recent update to the instant-classic This American Life episode on the Crisis, they talk to one guy who hasn't made a mortgage payment in (I think) more than a year, but who has not yet been foreclosed upon. The reporter says that the lenders simply do not have the resources to forclose on everyone who can't make payments.

See, this is goddamned fucking horseshit.

The truth of the matter is, it is simply not in their best interest to foreclose. Because a foreclosure means that the 70% drop in value is actualized.

Banks aren't worried about getting mortgage payments. Not really. Know why? Because they're getting money thrown at them by the fed, and because they aren't lending it back out again. They're taking that cash and putting it into their pockets, and fucking waiting. So, none of that money ever goes back into the hands of businesses trying to expand, or new entrepreneurs, or consumers who would go out and spend it. Nope, it goes to buttress the inflated values of their outstanding obligations that they want to keep artificially high.

If you got a $300,000 mortgage for a house that, let's be honest, is really only worth maybe $70,000, and the bank were forced to sell, well in this climate, they're not going to see anywhere near the "value" that's on their books. Nope, they're gonna take a beating with all the low-ballers out there. But if they simply do nothing, well, who knows how much that place is worth? Could be 300 large. Could be 70. Could be nothing. NOBODY KNOWS! Which is great! Because on their books, their still pretending like it's 2006.

This burns me up. Because I've got a job. I'd love to buy a place. But the prices aren't going down!

A couple of days ago I saw a public notice for foreclosure. The place is right where I'd like to be. A 2-bed condo in downtown Portland, Maine. The notice said there was going to be a public auction on a certain date. Well, great! So I call up the lawyer dealing with the account, and they just happen to mention (nowhere is this in the public notice) that there's a minimum bid of $280,000. No. This is a fucking foreclosure. There are tons of other places where the banks are just sitting on the notes to the homes. This is basically the same way deBeers keeps the diamond market artificially inflated. If they actually released (or even let it be known) the vast amount of diamonds that were available, the price would drop like a fucking stone (pardon the pun).

$280,000 fucking dollars for two goddamned bedrooms? In a state with a perpetually aging population? In a state that has no real native industry (lobstering is dead, paper mills are all but dead...) except a bit of tourism? This is a damned joke. I hope every single goddamned one of these motherfuckers (the banks, that is) go under with the fucking notes they're holding. I hope they are all forced to move out of the state instead of perusing the losses. Every time I walk by a FOR SALE sign I smile with the hopes that someone is panicking, sweating, yelling at their wives and dogs and kids because they're losing money they'll never see again and taking years off their lives with all the extra stress.

What's that? $400,000 for a three bedroom that "needs work"? Fuck you!

$350,000 for 1970s-era ranch in the middle of East Bumblefuck? Fuck you!

$280,000 minimum bid on a two-bedroom condo that's under FORECLOSURE!? FUCK YOU.
posted by Civil_Disobedient at 11:12 PM on October 15, 2009 [8 favorites]

Again, I'd like to reiterate that I'm talking about specific Canadian markets, and not Canada or NA in general. Don't paint me with that brush.
posted by mek at 11:13 PM on October 15, 2009

And just to be clear...

Or, perhaps, get off their asses and work with homeowners in renegotiating the loans.

...I've got no problem with that. I mean, yes, it is astoundingly unfair that people with crap credit history who were given loans they should never have been given are now sitting in homes that I can't afford even though I'm less of a credit risk, dotted all my i's and crossed all my t's...

...but that's fine. I just want the fucking prices to come back down to reality. Anyone trying to sell a ranch house in the state of Maine that's valued at more than $200,000 is not operating in the realm of reality. Crap construction, combined with the costs of upkeep and the harsh winters (higher heating costs, leaky roofs to fix, foundations to repair, etc.) and (as stated above), no real native industry to keep the neighborhoods filled with young people with jobs... no. Nothing over two-hundred. Same thing with condos, but cut another $50,000 from that figure. It's just not realistic.
posted by Civil_Disobedient at 11:26 PM on October 15, 2009

I just did an MLIS search on properties under $20,000 in Las Vegas. There were a disturbingly large number. I understand the issues in a place like Detroit, with declining population, but presumably Las Vegas will improve economically when the larger economy does.
So why all the $15k condos? Why aren't investors buying them and renting them out for $200 a month?
Any locals care to offer an opinion?
posted by bystander at 12:40 AM on October 16, 2009

Las Vegas suffered one of the most extremely ridiculous speculative construction booms of almost any city in the USA. Comparable are Scottsdale, Arizona and a couple places in California and Florida. But in many ways, Vegas is uniquely bad.

Check out vanguard's Lost Vegas for a taste of what things are like there lately. The real issue with Vegas is that expectations were absurdly high, and therefore the crash hurts that much more. Had the city planned conservatively... sigh.
posted by mek at 1:19 AM on October 16, 2009 [1 favorite]

Three times salary, 20% down is the only number that makes any kind of sense when buying a home. This was true in 1909, and it's still true now.

I'm telling you now you will never see those days again.

Over here in Perth our state government used to do all our land development. Now in an effort to save cash the state now releases land to development corps that put in the roads, put in water, gas, power, telecom stuff.

Now where are we. A$200,000 (US$180,000) for a 380sqm block 50 minutes away from the city that requires you to hook up to a single ISP for all you phone/net/TV that is overpriced and low on service because the developer has tried to extract even more cash from the deal.

And people wonder why our generation stays at home or rents in a share house in the largest numbers ever. It's because we physically can't afford a house anymore. The average price in Perth has hit 8x the average wage and shows no signs of slowing down as cashed up hogans are shovelled cash by mining and gas companies constricting supply in the most reatrded ways possible ($450K for a house? I work for three years at $120K, flip the place for 600K at the end and I own my next house) and it's just utterly fucked up.

I watch all my friends try to break into the market with crippling interest only loans or living on beans because the mortgage is 60-65% of the household income. And when our interest rates start climbing all these people are going to be FUCKED.

And I can't do a damned thing about it.
posted by Talez at 5:59 AM on October 16, 2009

This global recession will turn into a "full-blown depression," Nicu Harajchi, CEO of N1 Asset Management, said Friday, adding that global stimulus hasn't come down to Main Street. Wall Street is making money, while consumers aren't, Harajchi told CNBC.
posted by HP LaserJet P10006 at 5:34 PM on October 16, 2009