Because the teaser rate will NEVER pay back the loan. An example would be $1300 on a option ARM 430k loan. It would take closer to 3 grand to do that loan on a 30 year fixed at the best rates. The kicker is that folks were qualified on the $1300. That means their entire take home is not too far north of the real payment.

There are emotions involved for homeowners, but for the banks it is all based on maximizing asset recovery.

People at risk of foreclosure without substantial equity have few options currently and a much higher ratio are going to go from pre foreclosure to sold off.

patient, I completely agree that anybody that made decisions that require appreciation is pretty much screwed. Many of these people have been skating by refinancing and will now lose their house. The question is how big a part of the market here are these people.

I recently read that WAMU is in the top four banks that hold ARM re-setting from now through next year…

Bank of America putting $2 Billion in PREFERRED STOCK, yielding 7.5% convertible at $18/share to common…very desperate move on the part of Anthony M, who will be on CNBC at 11am EST…

Next, Wells Fargo….they are the reason for last Friday’s FED MORAL HAZARD bailout…

Cheers

http://www.forbes.com/feeds/ap/2007/08/22/ap4045994.html

http://www.thestreet.com/s/is-wamu-the-next-countrywide/newsanalysis/ratings/10375529.html

If WaMu goes south, how many local layoffs will we see? How many of those people have mortgages?

Both HELOC’s and Piggyback loans over 80% were tightening long before August and the no doc versions were pretty much gone by the end of last year.

From the standpoint of someone trying to avoid forclosure the loan types that make it easiest to get some breathing room were gone before August.

The WSJ today said prime jumbos are back at 7.2%. The sales and loan data from the time period where you could not get a prime jumbo loan with a good rate is going to skew data for months.

http://www.joshuakoffler.com/

Also when you go there note how many of these foreclosures are from loans written in the last 3 years.

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Whidbey Island and Bellingham are mentioned in Ben Jones HBB today.

How Speculators Are Losing Their Shirts

Whidbey Island and Bellingham mentioned in Ben Jones HBB today.

Like real estate fees.
Escrow fees
Startup Costs (i.e., fences, yards, broke stuff)
Moving Costs
Etc, etc, etc…..

I’ve heard, if you don’t plan on staying in a house for 5 years, don’t sell, rent. It costs too much to buy if you don’t own it for at least 5 years. I’d say more like 10-15 years the way the bubble climate recently looks in Seattle….

Either the market isn’t seeing 9% appreciation, or it’s becoming stratified to the point that the median appreciation is not representative of the whole.

I’d have to agree that the median appreciation is not representative if so many more people are finding themselves unable to sell before foreclosure.

People who were refinancing their way out of trouble with equity don’t have that option now.

It’s myopic to state that nothing is alarming about rates moving outside of recent norms. You are right that 7% rates seem low compared to 10%, but the markets aren’t priced assuming 10% or even 7%. They are priced to assume 5%. In the short to moderate term, such rate increases (especially if accompanied by a psychology that rates would never get this low again) would mean any item bought on credit is now overpriced.

Seems like you can triangulate back to them being reasonable. Most of the other numbers you see are represented as a % of mortgages. There are ~650k “owner occupied homes” in SnoKing (200 census). If you apply the 30% are fully paid off rule-of-thumb, then 1.4/(70%*650) would mean they are saying that 0.3% of mortgages are in foreclosure – which I think is very low vs. national figures.

Back of the envelope view, but I think it passes the smell test.

Personally the former has more value but I can accept both sides. One thing for sure; you are gonna need a bigger graph. Oh, and BTW, the graphs look scary because FCs were so unnaturally low not because current defaults are actually historically high. They aren’t.

The reason the chart is so skewed is because it’s a cumulative number. From my understanding of this data, a property is considered foreclosed (first column) from the time the bank declares the owner in violation of his mortgage (this is actually the second column of the BubbleMarket data – pre-foreclosure notices) until the bank can find a buyer. In 2006, investors and sub-prime loans were still abundant so most foreclosed properties were quickly snagged up. With the subprime crunch and ludicrous appreciation finally catching up to Seattle metro, more and more of those foreclosed houses are sitting with no buyer. A property in the second column will show up in the first column after a few months if it is not bought.

Dataset:
Date: foreclosed properties/pre-foreclosures (% ratio)
10/31/06: 195/2,165 (9.0%)
11/30/06: 126/2,376 (5.3%)
12/30/06: 131/1,500 (8.7%)
01/30/07: 146/1,548 (9.4%)
02/27/07: 124/1,503 (8.3%)
03/30/07: 251/1,466 (17.1%)
04/30/07: 511/1,566 (32.6%)
05/30/07: 750/1,742 (43.1%)
06/30/07: 1,134/1,589 (71.4%)
07/30/07: 1,354/1,368 (99.0%)

I would posit that the Seattle housing market will adjust just fine to an increased number of foreclosures if the foreclosure rate remains reasonably near or below its historic average over the past, say, 10 to 25 years. And I think the probability of the foreclosure rate doing just that is fairly high.

I can’t wait to hear from the doomsayers who expect every loan on every other house in Seattle to pop.

But these are just a minor anomaly, a blip on the radar screen, an inconvenient truth and pie in the face for those that called us “Seattle Bubble bloggers” the buffoons a few months ago.

Hopefully we’ll have a more complete picture in a few months when we get the October data from the papers and from Foreclosure.com and can directly compare YOY. The June to July ‘07 data does match up pretty well though, with the chart I presented showing a 19.4% increase over that period.

However, I confused about exactly how much they’ve increased (in a relative sense). Maybe I misunderstand the data presented. The newspaper story says that King County foreclosures are up 49% since July last year. The plot here on SB shows a staggering 600% increase in King/Snoho. foreclosures since October last year.
It seems possible, but unlikely, that both these facts are true. Tim, can you shed any light on the differences between the figures?