Time for our May update on Foreclosure activity in King, Snohomish, and Pierce counties. First up, the Notice of Trustee Sale summary:
May 2009
King: 992 NTS, up 69% YOY
Snohomish: 511 NTS, up 72% YOY
Pierce: 726 NTS, up 43% YOY
Here’s a simple look at how May’s foreclosures compare to the same month last year in each of the three counties:
Next let’s look at the percentage of households that received a Notice of Trustee Sale (based on household data for each county from the American Community Survey, assuming linear household growth between surveys):
King County came in at 1 NTS per 791 households, Snohomish County had 1 NTS per 514 households, and Pierce had 1 NTS for every 409 households (higher is better).
According to foreclosure tracking company RealtyTrac, Washington’s statewide foreclosure rate of one foreclosure for every 716 households was 18th worst among the 50 states and the District of Columbia (up from 27th last month). However, this was still better than the national average of 398 households per foreclosure. Note that RealtyTrac’s definition of “in foreclosure” is much broader than what we are using.
Following are charts of King, Pierce, and Snohomish County foreclosures from January 2000 through May 2009, with uniform y-axis scales to provide easier comparison. Click below to continue…
The number of King County homes in foreclosure bumped back up again in May, although did not quite surpass the record set in March.
Snohomish County also bumped back up, but they did set a new record.
Same story in Pierce County.
The increases in all three counties seem to be tapering off just a tad, with year-over-year rates dropping back down out of the triple digits, but still above 60% in King and Snohomish, and 40% in Pierce.
Coverage elsewhere:
Seattle P-I: Seattle housing market no longer so special
Seattle Times / AP: Foreclosure filings rise 18% in May, but annual pace eases; Washington state ranks 18th in nation
Note: The graphs above are derived from monthly Notice of Trustee Sale counts gathered at King, Snohomish, and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post.
For the full legal definition of what a Notice of Trustee Sale is and how it fits into the foreclosure process, check out RCW 61.24.040. The short version is that it is the notice sent to delinquent borrowers that their home will be repossessed in 90 days.
Scott Weitz » Jun 11, 2009 at 8:51 am
Attention 3/1 , 5/1 option arm and interest only holders. This train is just leaving the station…..all aboard!
softwarengineer » Jun 11, 2009 at 9:13 am
AND I WAS CALLED DR DOOM ON THIS BLOG FOR PREDICTING A HORRIFYING FORECLOSURE PROBLEM BREWING IN 2007
I will be humble, I didn’t know for sure, it’s just that America clearly doesn’t have the GDP industrial base growth [i.e., good non-service sector jobs] to support uncontrolled population growth….resource shortage and global warming go hand and hand with continued overpopulation [preventing industrial base expansion with globalism wage constriction]. The banking crisis was clearly going to happen and foreclosures are the bleeding.
Short sell? Be careful homeowner, have your attorney read the contract thoroughly….a default may be a much better alternative if they tag you with wage garnishment debt in the short sell contract.
shawn » Jun 11, 2009 at 9:24 am
All these poor saps conned by RE industry, appraisers, mortgagee brokers, bankers, etc. Sure the home buyers deserve some blame, but really nearly 98% of society bought into the bubble. And look, we have done nothing to stop the next one. This cycle will continue. The only real prevention is for people to gain common sense.
Groundhogday » Jun 11, 2009 at 9:30 am
But I thought home borrowers simply wanted to possess these homes more than us renters, who will be renters for life because we just don’t want it badly enough? :-)
Acerun » Jun 11, 2009 at 9:46 am
About time. It will get much worse in Seattle before there are any signs of hope…..
Kary L. Krismer » Jun 11, 2009 at 9:50 am
By Groundhogday @ 4:
Well they probably do. Just because a notice of trustee’s sale is filed doesn’t mean they won’t fight it.
Back in my bankruptcy attorney days clients would often want to go to extremes to save a property, doing things far beyond what I would recommend, even if they had no equity. I suspect most bankruptcy attorneys would tell you the same thing today.
anony » Jun 11, 2009 at 9:56 am
Look at the symmetry between price change and foreclosures. Kind of blows a hole in Kary and Steve Tytler’s assertions that price drops don’t lead to foreclosures since the “vast majority” of homeowners love their homes so much and never need to sell or take out equity.
Scott Weitz » Jun 11, 2009 at 10:22 am
Anony @ 7- Good point. I’ve have 4 clients that are either going to short sale or foreclose even though they can afford their homes.
As they say in sports: ‘Its not personal, its business’. More and more folks are seeing that without the appreciation of 20%/ year, its not worth paying such a premium for ownership.
Groundhogday » Jun 11, 2009 at 10:23 am
By Kary L. Krismer @ 6:
I suspect things are quite different these days. I suspect that these are not the normal job-loss, medical emergency type foreclosures. I suspect that most of these are the “I pulled $200k of equity out of my house to fly around the world, discover myself, pay off credit cards, buy a new SUV, and install granite countertops in the bathrooms of my 1956 rancher” defaults and foreclosures. No one can save these disasters, and the debtors are more than happy to walk away.
Scotsman » Jun 11, 2009 at 10:24 am
The graphs clearly show that the numbers are starting to work their way back down. As more and more stimulus dollars flow into the local economy I’m sure we’ll see a return to normal levels. With the passage of the new and improved $15,000 tax credit for buyers (and rumors of a coming $25,000 credit this coming November 1) the market will steadily absorb any and all homes that can be seen as any kind of a “deal.”
Incidentally, I signed up for the little known Beta test of the new nationalized health care program, and my doctor immediately put me on an experimental new drug called Happizan. The change in my outlook on life has been dramatic, to say the least. I see green shoots everywhere, the bluest skies, and even though I’m really more of a cat person, Tim’s dog looks really cuddly these days. Peace out!
The Tim » Jun 11, 2009 at 10:24 am
By Scott Weitz @ 8:
But I thought Kary said that simply wasn’t happening. Hmm…
Groundhogday » Jun 11, 2009 at 10:25 am
By Scott Weitz @ 8:
Isn’t that from the Godfather?
Groundhogday » Jun 11, 2009 at 10:28 am
RE: Scotsman @ 10 –
Personally, I’m holding out for the $100k tax credit. And the Feds had better furnish it as well.
Groundhogday » Jun 11, 2009 at 10:31 am
By The Tim @ 11:
Not quite, Kary said it would NEVER happen.
David McManus » Jun 11, 2009 at 10:31 am
I don’t have a problem with people who want to walk away simply because of major price depreciation and being upside down by hundreds of thousands of dollars, but I want there to be a big friggin mark on their credit report so that it wll be really effing difficult for them to buy ANYTHING on credit for the next seven years. Once they have to pay cash for everything, I would hope that they would somehow learn what it means to be financially responsible!
Just my 2 cents…..or is it actually 1.5 cents with inflation taken into account?
Scott Weitz » Jun 11, 2009 at 10:37 am
http://finance.yahoo.com/tech-ticker/article/262207/California-Has-50-Days-to-Live?tickers=dia,spy,CB,NVC,IQC,NXC,BJZ?sec=topStories&pos=5&asset=&ccode=
More green shoots.
Hasta La Vista, California.
Kary L. Krismer » Jun 11, 2009 at 10:42 am
By anony @ 7:
I’d suggest Googling definitions for coincidence and causation. ;-)
Seriously, we’re in a recession. You’d expect prices to drop and more foreclosures.
Kary L. Krismer » Jun 11, 2009 at 10:43 am
By Groundhogday @ 9:
Except for maybe the granite countertops, none of that seems particularly new.
Kary L. Krismer » Jun 11, 2009 at 10:45 am
By The Tim @ 11:
In significant numbers. And note he said short sale or foreclosure. I never said short sales weren’t being tried.
But I do question how someone tries a short sale if they can afford to pay their mortgage. Something doesn’t sound quite right there.
The Tim » Jun 11, 2009 at 10:45 am
RE: Groundhogday @ 14 – Okay let’s make sure we’re fair. Here’s precisely what he said:
And here’s what Scott Weitz said @ 8:
I guess Scott’s clients are simply “absurd.”
Kary L. Krismer » Jun 11, 2009 at 10:48 am
RE: Groundhogday @ 14 – Cite to a link please where I ever said no one would walk away. I seem to remember saying some people would do stupid things. They do it all the time. For that I’d reference the number of people that list with a limited service broker. ;-)
Scott Weitz » Jun 11, 2009 at 10:55 am
I should note that clients ‘would’ foreclosure…the banks are in absolutely no hurry to issue notice of trustee sales: two of these folks have been in the homes rent free since late last year, and still haven’t received a notice of T/ee sale!!!….when that finally comes, they have another 3 months + 20 days (post foreclosure) rent free.
I know this sounds terrible, but they feel like they are getting the deal of the century by not paying their mortgage.
Sure, their credit is going to be hurt, but they have been able to save a significant amount of money (rather than paying every last penny to the bank to own a depreciating asset) and chances are the banks won’t seek a deficiency if/ when they finally do foreclose.
I can’t say that I condone it ethically, but I can’t blame them either. They are trying to do what’s best for their family.
Kary L. Krismer » Jun 11, 2009 at 10:55 am
RE: The Tim @ 20 – That’s the thread where no one ever did come up with any proof it was occurring, other than mentioning news reports (unspecified).
I view it sort of like you you cited Zillow for the percentage of short sales, even though Zillow would have no way of knowing which transactions are short sales. Just because something is reported doesn’t make it true.
Scotsman » Jun 11, 2009 at 10:56 am
Wow, people. Ease up! I’m sure Kary is right about this. Has he ever been wrong? No, he hasn’t.
Just ask him.
I love Happizan. The bluest skies you’ve ever seen, are in Seattle, hmmmm, hmmm, hmmm,.. Oh! Lunch time!
Kary L. Krismer » Jun 11, 2009 at 10:58 am
RE: Scott Weitz @ 22 – Well I’ve had clients go into foreclosure too, but never where they could afford to pay. And a lot of them were upside down at the time, but perhaps not to the extent someone could be upside down now. As I’ve noted before, refinance appraisals have been high for as long as I can remember.
Kary L. Krismer » Jun 11, 2009 at 10:59 am
RE: Scotsman @ 24 – I did make a mistake once. I thought I’d done something wrong, but it turned out I hadn’t. :-)
But seriously, I think 20 years of doing debtor bankruptcy work puts me in a pretty good position to know the tendencies of people in financial distress.
Groundhogday » Jun 11, 2009 at 11:02 am
RE: Kary L. Krismer @ 21 –
I used NEVER in the sense that you argued strongly against the idea that the dynamics of foreclosures could ever change. Would people walk away in large numbers even in situations where they can afford the loan? In the past, I would say you were correct. But in this bust, we are seeing a fundamental change. People ARE walking away in large numbers, even when they can afford the payments. The stigma is fading fast and people are making smart business decisions.
The Tim » Jun 11, 2009 at 11:04 am
By Kary L. Krismer @ 26:
I you believe that the current situation is comparable to ones seen over the last 20 years, then that’s true. I personally think that the mess we’re in has been in the making for about 20 years, so the nature unwinding will be unprecedented (at least compared to the timeframe of the last 20 years).
Scott Weitz » Jun 11, 2009 at 11:05 am
Kary-
AZ and CA are especially prone as there are no deficiencies on Purchase Money Mortgages….I think it will be a huge problem down there.
In WA, as you probbaly know, banks can seek deficiency if they foreclose judicially – thus its more of a gamble. Until now, 95% plus of foreclosures are via T/EE sale where no deficiency can be sought so its still a good risk unless the bank is confident they will be able to collect.
Groundhogday » Jun 11, 2009 at 11:06 am
By Kary L. Krismer @ 25:
Key phrase:
“but perhaps not to the extent someone could be upside down now”
For all of your experience Kary, you’ve never before experienced anything like this. As a country we’ve never experienced anything like this before. This is a situation where past experience is a very poor guide. Not only are people massively underwater, but they have no hope of coming up for air anytime soon. They will walk.
Scotsman » Jun 11, 2009 at 11:07 am
RE: Kary L. Krismer @ 26 –
That was then. This is now. It’s the new paradigm, where guilt and shame are absent, largely because everything bad that happens to you is somebody else’s fault. Greedy lawyers, bankers, loan brokers, real estate agents (they are the WORST), and especially the last couple of administrations. We are free from that now, all of those 1950’s sensibilities and charmingly passé’ mores.
Get with the times, Kary. We partied like it was 1999- back in 1999. That was a decade ago, or six lifetimes as measured by technological and social evolution.
Kary L. Krismer » Jun 11, 2009 at 11:07 am
RE: Scott Weitz @ 29 – Yes, I think I’ve mentioned that myself, at least as to CA. All I know about AZ is they have draconian (sp?) exemptions. Not a good place to owe money.
Kary L. Krismer » Jun 11, 2009 at 11:09 am
RE: Scotsman @ 31 – I’d even agree with a lot of that. Americans have been quick to blame others for their problems for quite a few years.
And BTW, I’d say the same trait would get people who had to move claim that they did it of choice.
Groundhogday » Jun 11, 2009 at 11:56 am
RE: Kary L. Krismer @ 33 –
So going forward, will mortgage interest rates increase to account for this change in social norms? One of the reasons it is fairly easy to borrow money in the US is that traditionally there has been a lot of shame associated with defaulting. In Sub-Saharan Africa, for a stark contrast, it is generally assumed that most loans won’t be paid back so it is almost impossible to borrow money and the rates are astronomical.
I guess the US Treasury could funnel $15 billion/mo into Fannie and Freddie and FHA indefinitely, and they could continue to lend money at a loss, but I’m guessing that as some point taxpayers rebel. Without effective federal subsidies (guarantees and insurance at a loss), we could see loan rates shooting way up.
NoMoreWork » Jun 11, 2009 at 12:21 pm
RE: Kary L. Krismer @ 23 – Where is your proof it’s not? You just say “I’ve had clients who would never…” as your basis, well , what about Scott Weitz’s clients who did… How is that different? You state your profound ability to read your client’s minds as per what they would do in this situation as proof. Why can’t we look to Scott’s clients’ current ACTIONS for proof?
RE: Kary L. Krismer @ 26 – Kary is starting to sound more and more like a politician than an industry expert. We get it, you’ve done this a while and have some experience with bankruptcies. I think you’ve hammered that home now. We also understand how that means diddly-squat in today’s new environment and lends no more credibility to your (tireless) knee-jerk arguements regarding causation and the relationship between home price declines and foreclosures. I truly appreciate your voice on this blog but that’s only when I think you have a reasonable grasp of the current environment.
I look to this blog for insight into current conditions of the market but the he said she said is getting a bit much.
deejayoh » Jun 11, 2009 at 12:50 pm
Truthiness Rules!
TheHulk » Jun 11, 2009 at 1:25 pm
RE: Scott Weitz @ 8 –
I personally know someone who can easily afford the mortgage but has deliberately stopped making payments for the past 3 months. The only reason being the downiness of the huge mortgage vs. the supposed value of the house (he purchased around the peak).
He has also taken on additional debt on a credit card (cash advance) and moved all other assets on his wife’s name (who is not on the mortgage), figuring that they might come after him but they cant come after the pile of cash in his wife’s account. Now that is a game of real high stakes poker and oh boy he sure is bluffing.
softwarengineer » Jun 11, 2009 at 1:32 pm
RE: Scott Weitz @ 16 –
HI SCOTT:
Yes, California has its severe growing pains of late…LOL…all approximately 40,000,000 of them and a 19 billion unpaid bill.
But as bad as California is, Washington State is 3 times worse per capita with 7,000,000 and 9 billion deficit; as I don’t think that all the bad publicity ever hits Washington State like California because progressive governor states are immune from bad PR?…..Or maybe because we have the magic of Microsoft and Boeing to pull the magical deficit out of the hat, without mass budget cuts or tax increases? Yeah right….
Or maybe we could tax all the wealthy Seattle home owners who still have 100s of thousands in equity each from their $1,000,000 homes, we sure could use right now?
I’m beginning to sound like Scotsman, but I don’t smoke.
Kary L. Krismer » Jun 11, 2009 at 1:34 pm
RE: TheHulk @ 37 – Proof people do things that are stupid. You just described fraudulent activity, which will be non-dischargeable in a bankruptcy (both as to him and his community) and a fraudulent conveyance, which will allow a judgment to be entered against his wife individually.
And think about it, if he’s so able to make his mortgage payments, and is in such great financial condition, why would he take cash advances? To let your house go to foreclosure is one thing, but to set yourself up for legal problems afterwards makes no sense. More likely he’s not making enough money even without the mortgage payments, such that it’s necessary to take the cash advances to survive.
Also, if he’s making enough money to pay his mortgage, presumably he could be garnished by the credit card companies.
Groundhogday » Jun 11, 2009 at 1:41 pm
RE: Kary L. Krismer @ 39 –
Not necessarily. If he doesn’t have any savings (most folks in the US) and anticipates that his credit will be destroyed it makes sense to accumulate some cash for a rental deposit and potential emergencies.
Kary L. Krismer » Jun 11, 2009 at 1:50 pm
RE: Groundhogday @ 40 – If he can afford to pay his mortgage, he wouldn’t need a cash advance to make a rental deposit. He could probably afford to pay 6 months in advance, if not more. Also, the transfer of funds to the wife isn’t consistent with that at all.
Scotsman » Jun 11, 2009 at 1:52 pm
RE: TheHulk @ 37 –
The poor guy, buried in debt and having to rely on his wife to guide them to solid ground. He sounds like a great candidate for a bailout. If the evil Realtors hadn’t pushed him into buying that house by threatening him with eternal renter status (hah- that’s funny- status and renter in the same thought!) and the banker’s weren’t so greedy to earn those fees, he wouldn’t be in this mess. We need legislation that will force a cram-down to 80% of current market value for the loan, restoring his original equity position. And can you imagine the stress he’s been under? My “spidy sense” says he’s gonna qualify for a free vacation!! Government voucher is in the mail.
softwarengineer » Jun 11, 2009 at 1:58 pm
RE: Kary L. Krismer @ 41 –
Madoff tried the wife transfer of cash and the courts went after her….I’m not sure if they were sucessful. Remember how OJ Simpson hid all his money before the civil suit found him guilty?
You married men stay married, but if you have the primary income and you face a divorce….granny bar the door, unless you’ve hidden it with no trace, they make you sign a financial disclosure of its where-abouts during the court proceedings and they got your SSN…LOL
Groundhogday » Jun 11, 2009 at 2:13 pm
Here you go Kary:
There is a new report from the Boston Fed on the cause of foreclosures. They conclude the income shocks (e.g. job loss) are the primary cause and should therefore be the primary target of policy interventions. But if you read the report carefully, they estimate that “ruthless defaults” or walkaways that are not associated with income shocks comprise up to 40% of all foreclosures nationwide and up to 55% in the states with the largest home price declines. Even income shocks alone are not sufficient but act in combination with negative equity.
From pg. 17:
“The previous subsection showed that high levels of origination DTI are not predictive of high default rates, especially in comparison to variables like FICO scores and features of the macroeconomic environment like falling house prices and rising unemployment. Our preferred interpretation of this pattern is that falling prices lead to negative equity, which can lead to default and foreclosure when a borrower receives a large negative income shock. However, the model of section 2 shows, housing prices have a direct effect on the affordability of a home that does not involve income volatility. A lower probability of future price appreciation (lower alpha.g) raises the user cost of owning a home and makes default more likely. If there is no hope that the price of the house will ever recover to exceed the outstanding balance on the mortgage, the borrower may engage in “ruthless default” and simply walk away from the home. Kau, Keenan, and Kim (1994) show that optimal ruthless default takes place at a negative-equity threshold that is well below zero, due to the option value of waiting to see whether the house price recovers….”
Reducing Foreclosures, Foote et al. (2009). Federal Reserve of Boston Rpt No. 09-2
http://www.bos.frb.org/economic/ppdp/2009/ppdp0902.pdf
ME: As underwater home borrowers give up HOPE (that is the key) of ever getting their heads above water, then we can expect ruthless defaults to accelerate.
Kary L. Krismer » Jun 11, 2009 at 2:33 pm
RE: Groundhogday @ 44 – Thanks, that’s very interesting so far.
Groundhogday » Jun 11, 2009 at 2:34 pm
Quick follow up to my own post…. that report actually came out in April, so perhaps not that “new.”
And though the authors viewed 40-55% ruthless defaults as a “small fraction” of foreclosures, from my perspective that is a very high percentage.
There was a recent report showing that a significant majority (>>50%) of recently reworked mortgages (bringing DTI within normal bounds) default again within a year. This would seem to amplify the Boston Fed report findings. I wasn’t able to find this report quickly, so if anyone else can find this please post.
Groundhogday » Jun 11, 2009 at 2:37 pm
RE: Kary L. Krismer @ 45 –
My guess is that most of the people you have worked with in the past had a reasonable hope of getting their heads above water in the near future. They would therefore do whatever is possible to hang onto the house. To borrow from Obama, we are experiencing real CHANGE in that for many underwater home borrowers today, there is NO HOPE.
Lurker » Jun 11, 2009 at 2:45 pm
RE: Kary L. Krismer @ 26 –
Haha, great response! :)
sead97 » Jun 11, 2009 at 2:50 pm
Paying off your bloated mortgage may depress your standard of living for 30 years. A default will depress it for at most 7 years. I can see the temptation… especially given that being in debt, default, etc. sadly no longer carry much stigma in this country. Sort of like being fat.
Scotsman, please pass the Happizan. Maybe it will keep me from crying about America’s future.
Groundhogday » Jun 11, 2009 at 2:51 pm
Also from the Boston Fed report, pg. 2
“The evidence that a foreclosure loses money for the lender seems compelling. The servicer typically resells a foreclosed house for much less than the outstanding balance on the mortgage … This would seem to imply that the ultimate owners of a securitized mortgage, the investors, lose money when a foreclosure occurs. Estimates of the total gains to investors from modifying rather than foreclosing can run to $180 billion, more than 1 percent of GDP. It is natural to wonder why investors are leaving so many $500 bills on the sidewalk. While contract frictions are one possible explanation, another is that the gains from loan modifications are in reality much smaller or even nonexistent from the investor’s point of view.
We provide evidence in favor of the latter explanation. First, the typical calculation purporting to show that an investor loses money when a foreclosure occurs does not capture all relevant aspects of the problem. Investors also lose money when they modify mortgages for borrowers who would have repaid anyway, especially if modifications are done en masse, as proponents insist they should be. Moreover, THE CALCULATION IGNORES THE POSSIBILITY THAT BORROWERS WITH MODIFIED LOANS WILL DEFAULT AGAIN LATER, usually for the same reason they defaulted in the first place. These two problems are empirically meaningful and can easily explain why servicers eschew modification in favor of foreclosure.”
Groundhogday » Jun 11, 2009 at 2:54 pm
By sead97 @ 49:
A default may not depress your standard of living at all if you can rent a similar house for much less than the previous payment. Who actually needs credit if they aren’t buying a house? Just about everything else can be handled on a cash basis.
DanInEdmonds » Jun 11, 2009 at 3:40 pm
Re: Groundhogday @ 51:
This was my experience. I went through a bankruptcy and foreclosure in 2002 when the tech bubble burst. I was ashamed and scared but, frankly, it turned out not to be a big deal. I had no trouble renting thereafter and obtaining credit cards. I bought a house again in 2005 (which I sold in 2007 just as the bubble was beginning to burst). I have since adopted a credit-less, cash-based way of life as a matter or choice. I think people have figured out that we don’t have debtor’s prisons in the U.S. and a bad credit history has become almost typical. Letting a house foreclose is not considered particularly shameful or scary anymore, it seems.
Joel » Jun 11, 2009 at 3:41 pm
By Kary L. Krismer @ 17:
Your smugness is only matched by your incorrectness. Foreclosures are primarily caused by falling house prices.
How much did house prices fall in the last recession then?
Kary L. Krismer » Jun 11, 2009 at 3:44 pm
RE: DanInEdmonds @ 52 – Back when you filed bankruptcy you could get a loan to get out of Chapter 13 for a fairly reasonable interest rate, relative to normal rates. I’m not certain, but I think that changed in 2006 or 2007. They would just look to make sure you’d had a good year of making every payment.
How a bankruptcy or foreclosure would affect your ability to get a new house loan and change over time. The question is whether it will become more strict, because the banks learned their lesson, for less strict because there is such a potentially large customer base.
Groundhogday » Jun 11, 2009 at 3:46 pm
RE: DanInEdmonds @ 52 –
Wow, I’m surprised you could get a home loan again, credit cards, etc… just 3 years after a foreclosure. Then again maybe I shouldn’t be…
Kary L. Krismer » Jun 11, 2009 at 3:53 pm
RE: Joel @ 53 – Try to keep up. A couple of days ago I mentioned that’s because when prices are rising they can sell or refinance. It’s especially a problem for those using their houses as ATMs. So the idea that decreased prices will lead to more foreclosures is sort of a: Duh!
From your article: “Conversely, when prices started falling, people struggling to make payments had less incentive to find the money. And the value of the home could drop below the outstanding debt, making it impossible to sell. Over the last two years, the number of foreclosures exploded.”
Thus it’s not dealing with people able to make their payments–unless maybe that’s the part of the article dealing with sub-prime borrowers. ;-)
Kary L. Krismer » Jun 11, 2009 at 3:55 pm
RE: Groundhogday @ 55 – You could (still can?) get some credit cards almost immediately after discharge. I remember WAMU required 10 years on some of their cards. It just varied by bank and card.
jon » Jun 11, 2009 at 4:12 pm
RE: Kary L. Krismer @ 57 – When they finally decide to pay the piper on all of this bailout nonsense, there will probably be a rule to the effect that FDIC insured banks can only issue credit cards or loans to people with a decent credit history. Issuing credit to deadbeats and making it up in volume is getting expensive for the taxpayers.
Magnolia44 » Jun 11, 2009 at 4:20 pm
All this foreclosure talk is tempting, nice to know in worse case mailing it in is an option :)
Scotsman » Jun 11, 2009 at 4:24 pm
RE: Magnolia44 @ 59 –
We’re from the government, and we’re here to help.
Ray Pepper » Jun 11, 2009 at 5:01 pm
RE: Kary L. Krismer @ 6 –
I suspect not Kary. Kary times have changed on you.
Shorts sales and foreclosures will continue at unprecedented rates. Bankruptcy’s will follow suit and the numbers will be staggering. People are NOT stupid and they WILL live in their home for free 1 year and let their upside down asset go in numbers that will shock even I.
People do NOT have the money and they will not have the money to bring to close. Get used to it.
Ray Pepper » Jun 11, 2009 at 5:08 pm
By Kary L. Krismer @ 19:
They can try a short sale but the seller rarely gives a "golly". Their credit is already shot and they have moved on. Who wants to pay a mtg when they are upside down 50% and it costs 10% to sell. I mean come on lets talk serious. We all know the responsible thing to do. People are tapped and they have no access to cash.
They need to move on with their life and I suggest they do. We only live once and anxiety and depression over a “home” is unwarranted. Save your money homeowners and if you find yourself in this position be smart.
No more sugar coating what people SHOULD do.
Ray Pepper » Jun 11, 2009 at 5:13 pm
#51
100% correct HOG!
with the assumption your gonna stay at your present job.
David Losh » Jun 11, 2009 at 6:33 pm
The short sale I have listed will be my last. Neither the seller no I care if it closes. The bank is WAMU, now Chase and they don’t care if it closes.
Let’s take this example of the number of foreclosures being up. Where are they? Who’s buying them? Those that do buy, what are they going to do with them?
Investors used to resell or lease option properties they bought at auction for cash flow and return on investment. Those days are over. Who would lease with an option to buy an property declining in price?
In my opinion banks are sitting on these properties along with their cash reserves that they will keep forever, if we let them, or if the government let’s them.
No matter what is going on with these foreclosures I sure don’t see them in the market place. I would think by now the market would be flooded.
Kary L. Krismer » Jun 11, 2009 at 6:42 pm
RE: David Losh @ 64 – Part of it is the number of foreclosures is a fraction of the number you see on Realtytrac being started in foreclosure. I didn’t run the numbers for May, but if I get a chance I will.
David Losh » Jun 11, 2009 at 6:47 pm
RE: Kary L. Krismer @ 54 –
It’s been a wonder to me that banks are in no hurry to rework debt.
I’ve taken several clients over the past two years to Consumer Credit Counseling. It’s a logical step is showing a compelling reason to short sale a property. In every case the banks set the terms at a 8% to 15% interest rate and want to be cashed out in five years. There is also language stating you have to do this that and the other.
In more recent times with a short sale you have to provide financial information. If you had a hardhip the bank wants you to correct the behind payments within six months. It’s absurd to try to work with the bank.
The banks just do not care if you lost a job or had an accident, or that the property is losing value while the payments are going up.
I just don’t get it. Foreclosure is the option banks have, and that may have been a hammer in the past, but now, hey, if the bank is a butte head, OK, take the house.
In today’s economy I would think a bank would be bending over backwards to get as much as they can. It’s nothing personal it’s just business.
Bankruptcy Attorney » Jun 11, 2009 at 9:16 pm
My experience with my real bankruptcy clients is that people are:
1. losing their house b/c they have lost their good paying jobs and can’t pay;
2. losing their house b/c the loan payments have risen too high to pay although they remain employed;
3. losing thier houses (plural) because they bought tp many as investments. These are folks who make $20.00 to $30.00 a hour combined and have over a million or two in mortgages. There are a lot of them.
Kary is right that historically people will try hard to save their house. Attitudes have changed. I would say that 90% of my clients walk away once I tell and show them they can rent the same type of house for 50% of the cost to save thier home. We do the math and I show then how much it will cost over a 5 year chapter 13 plan to save the box they live in.
Most people, interestingly enough, walk long before the foreclosure. They don’t want to stay although it is free. They are not thinking rationally despite my advice to stay and live free. They want out! I haven’t met anyone, yet, who is walking due to a decrease in home values.
Anyone who games the system is looking for serious trouble. BK is not a game – it is a very serious legal procedure and abusers go to jail. My experience is that they get caught.
I recently talked to someone who got a $6k a month mortgage on $200.00 a month income from WAMU. These types of loans along with job loses are the core of the problem.
I am getting more calls in a week now than I did in a month, 6 months ago. Very sad situation.
Ray Pepper » Jun 11, 2009 at 9:43 pm
RE: Bankruptcy Attorney @ 67 –
Have you worked with William Beecher? He appears to be the KING of Pierce County Bankruptcy’s! Everyone knows him and gives him stellar reviews. I’m contemplating putting him on the website due to all the inquiries on “What should I do?”
You haven’t met anyone who has walked due to a decrease in home values? Good Lord! Come with me home to Reno and Sacramento. Homes that have dropped 50-75% combined with the crash of new construction, casino gaming, personal debt, all triggered bankuptcy’s galore.
We have been quite sheltered here………..
mukoh » Jun 11, 2009 at 10:27 pm
RE: Ray Pepper @ 68 – Ray, when an area is filled with investors, flippers, speculators who have no attachment to homes that is where you are seeing this happen.
Ray Pepper » Jun 11, 2009 at 11:11 pm
Mukoh………………as I like to say on the yahoo message boards…Mark this post!!
There is no attachment to homes when you are upside down greater then 20%. Then add the cost to sell in the transaction.
You will see short sales continue to increase relentlessly YOY for many years to come.
unless:
Mortgage cramdown is initiated or some form of it that will increase the incentive to MAKE people stay in their upside down homes.
With more and more homeowners walking, HELOC’s that will never get paid off, and escalated charge offs from credit cards you will see Bankruptcy’s rise hire then you ever imagined.
Take the time to listen to the last two CC’s from AXP. Listen to the CEO. Its absolutely frightening.
S-Crow » Jun 11, 2009 at 11:25 pm
RE: Bankruptcy Attorney @ 67 –
You are correct about attitudes changing. People are much more apt to walk away. Broker/Owners of large real estate firms are walking away from personal homes, homeowners are walking away, builders are walking away etc…
Scotsman » Jun 11, 2009 at 11:47 pm
RE: David Losh @ 64 –
“In my opinion banks are sitting on these properties along with their cash reserves that they will keep forever, if we let them, or if the government let’s them.”
It’s called “mark to market”, an approved accounting farce that lets banks carry properties on their books at or close to the original purchase price, not the current market value which is often half of book value. But if the banks marked the properties down to their real value, they would be broke. it’s a simple as that. The government allows this because they don’t have the money or staff to take over or bail out all of the banks that would instantly become insolvent by introducing them to reality.
The funny thing is, it’s like putting mascara on a pig. The pig’s still there, you just don’t see it for what it truly is. At least not now. But the asset prices (homes or mortgages on the homes) are continuing to fall, so the situation continues to get worse while joe6p thinks everything is fine. It’s the same as having a growing monster locked in the basement- you know eventually it’ll get big enough to break out and wreck havoc, but for now everything is fine.
What’s that rumble down there?
Jonness » Jun 12, 2009 at 12:04 am
The longer we wait to buy, the more free tax money we get for a downpayment and the cheaper the houses get. Plus, we continue to save money every month and live without the massive stress of being overleveraged and undersaved.
CA is correcting in front of us, so it gives us a good glimpse of how foreclosures exert massive downward pressure on house prices. Median prices in some areas of CA have dropped below levels last seen over 20 years ago (the well-known phenomenon of undershooting the bottom when an asset bubble corrects).
http://www.latimes.com/business/la-fi-cheaphomes10-2009jun10,0,4802553.story?
I can’t wait for the Alt-A’s, primes, jumbos, and commercial to start picking up steam. Now is a great time to be saving money for a house. Good deals are coming up, but we won’t be seeing them this year. Keep saving. :)
Scotsman » Jun 12, 2009 at 12:11 am
So Kary, it seems like we’ve gotten quite a bit of confirmation, from a wide variety of reliable and substantive sources, that a significant number of people are indeed walking away from their homes. Would that make this issue the second thing in your life you’ve been wrong about? Care to “man up” there, big guy? Show us what you’ve got. Admit the error, and apologize.
Full disclosure- I’ve got a bet riding on this with my lovely wife.
Chico » Jun 12, 2009 at 12:29 am
Whoever bets on Kerry to man up is going to lose.
Or in internet speak “loose”.
Jonness » Jun 12, 2009 at 12:38 am
By Scotsman @ 72:
How about those phony stress tests? As far as I can tell, the govt. is playing their final hand all in. If they can psych mainstream American consumers into buying into the con, the green shoots become leaves. If the consumers smell a rat, we all go to Hades in a handbasket.
No matter what, I still expect a W.
EconE » Jun 12, 2009 at 2:17 am
RE: Jonness @ 73 –
Rolling back 14 years in Cali is worse than rolling back 20 years.
20 years ago was a bubble.
One Eyed Man » Jun 12, 2009 at 7:36 am
RE: EconE @ 77 –
EconE is right at least as to LA. Check C-S on LA. The peak of the last bubble in1990 was about 25% above the bottom in about 1995. And it was 1999 or 2000 before they got back to 1990 levels (and that’s C-S levels unadjusted for inflation). It’s worse this time, and more of the world is involved but a lot of it is the same f—-ing thing. Even down to inflated appraisals and the really bad loan underwriting and lending practices including zero down. The increase in securitized debt obligations funding huge amounts of non-conforming loans (sub prime, Alt-A, etc.)has made it worse this time and is causing more economic damage but the underlying get rich quick mentality is the same. It’s not the first time and it probably won’t be the last. There’s gold in them there hills.
Kary L. Krismer » Jun 12, 2009 at 7:48 am
RE: Scotsman @ 74 – What are you talking about? I remember one source–the one I said was interesting. That’s it.
But we can agree on this. Whatever happens there will probably be news reports of people walking away. It will be like before 9/11 with the hysterical reporting of shark attacks–attacks that were occurring at below average levels. This will become a popular topic, sort of like HOA basing stories.
So, just to be clear:
1. One person saying they know X people who did this is not evidence it is occurring in significant numbers.
2. Articles saying that foreclosures are increasing, and correlated to the value of the house (duh!) is not evidence it is occurring.
3. People lie to cover their own shortcomings. “I decided to move out–F the bank!” sounds a lot better than “I could no longer make my mortgage payments and got kicked out.”
But whatever, assuming it does occur in significant numbers, that will probably be signs of a bottom. I’m a contrarian (sp?), and whenever a large number of people think something, it’s probably just the opposite. They buy high and sell low.
Dave Lincoln » Jun 12, 2009 at 8:28 am
RE: Chico @ 75 – In internet terms, his name is Kary ;-) But, that was funny, Chico, as that is one spelling error that bugs the GOLLY outta me (Pretty soon, Tim, you’re going to have to reset the cussword-substitution database. All we “manner-challenged” individuals are going to catch on,).
Scotsman, you didn’t say which way you bet with your wife, but I’m guessing you just won a few bucks. This is the internet – nobody apologizes, at least not left-wingers (which I assume Kary is, judging solely by the fact that he won’t apologize – how bout that logic, eh? ;-)
I know, I know … “loose the snarky remarks, Dave Lincoln.” OK, more snarky remarks, coming right up.
Dave Lincoln » Jun 12, 2009 at 8:36 am
I will say this in Kary’s defense in response to an early post #7. Correlation does not equal causation (Kary said this). You could look at this both ways and it makes sense:
1) Due to the large number of houses being sold at foreclosure, other houses have to come down to compete.
or
2) Due to the big drop in housing prices, a large number of houses are going to foreclose.
Either way makes perfect sense, and they are probably both true in addition to all the other factors that have been speculated on in detail by the posters above.
So, possibly, that means that both effects feed on each other. We can get some big positive feedback system in house-price-tanking. Hey, don’t laugh, that beats the *GOOD-GOLLY-MISS-MOLLY* out of the global warming/cooling/staying-pretty-much-the-same climate models out there today.
Feedback, it’s not just for musicians anymore.
mukoh » Jun 12, 2009 at 9:04 am
RE: Ray Pepper @ 70 – Ray, Nevada, Florida, Arizona, had the highest rate of flippers, speculators in the nation. How attached is a person who lives in NY for example to a condo in Florida? None. He lets it go and takes his bumps. Its a “business” what the low level speculators refer to it. Thus those areas are experiencing record foreclosures. I know of a whole tract in LV about 25 homes that was bought by an speculator, the whole plat is in foreclosure.
Kary L. Krismer » Jun 12, 2009 at 9:09 am
RE: Dave Lincoln @ 81 – I think clearly you can get to a threshold point where foreclosures and short sales affect a market, but before that they’re just sort of noise. Look at all the talk here and elsewhere about what buyers go through on short sales. For many buyers they’re just not relevant.
I recently had a listing sell where there were four other nearly identical houses (same builder, same year, same basic floor plan) on the market within 1/4 mile. The short sale sold for almost 12% less than my listing (ignoring seller concessions), the bank owned about 8% less, and relocation about 3% less, and mine was a bankruptcy so it possibly didn’t get full price.
Kary L. Krismer » Jun 12, 2009 at 9:11 am
RE: mukoh @ 82 – I wonder how many banks were involved in that purchase? Seemingly one person buying an entire plat would be a huge warning sign, sort of like how if a bank has a large percentage of it’s loans to one builder, that’s a warning sign.
Groundhogday » Jun 12, 2009 at 9:11 am
RE: mukoh @ 69 –
Please read the earlier posts. People will fight hard to keep an underwater home IF they have an expectation that they will soon be back above water. When that expectation evaporates, they walk.
Groundhogday » Jun 12, 2009 at 9:12 am
RE: Kary L. Krismer @ 79 -
You seem to have forgotten about the detailed Fed report of walkaways.
Ira Sacharoff » Jun 12, 2009 at 9:13 am
“This is the internet – nobody apologizes, at least not left-wingers.”
I’m a left winger and I apologize. I apologize for all the scumbag real estate agents out there who have given the industry a bad name, and even though I’m a lefty, I apologize for Greg Nickels and Ron Sims.There are certain liberal Democratic politicians who I’ve liked over the years, but those two? Feh. And you can have Jim McDermott while you’re at it.
Right wingers don’t apologize either. So many people are so sure they’re right.
Tell you one thing . Bad spellers need to get waterboarded, no matter which ideological wing they belong to.
Kary L. Krismer » Jun 12, 2009 at 9:17 am
RE: Groundhogday @ 86 – Isn’t that the one I said was interesting? Maybe there were two.
anony » Jun 12, 2009 at 9:19 am
RE: Kary L. Krismer @ 79 – From “I’d suggest Googling definitions for coincidence and causation” to “the idea that decreased prices will lead to more foreclosures is sort of a: Duh!” in 39 comments. Yet both are apparently correct!
Kary L. Krismer » Jun 12, 2009 at 9:24 am
RE: Dave Lincoln @ 80 – I missed the left winger comment.
Once again the people here make an incorrect assumption. I’m a swing voter, and in one election I remember voting for far left and far right candidates. I vote on issues, not Dem-Rep. I think the parties are really one, and they simply make their partisan arguments to attract the votes of fools who are incapable of intelligent thought. I’d second Ira’s assessment of the three Dems he mentioned, but I could also be critical of prominent Republicans. If I had to pick a group of people that I have even less respect for than bankers, it would be US Senators of both parties, although members of the house sometimes are even worse (e.g. when they were proposing taxing executives who received bailout money).
Kary L. Krismer » Jun 12, 2009 at 9:27 am
By anony @ 89:
You don’t get that? It’s not inconsistent.
I know someone who about 2 years ago netted maybe $10,000 selling his house. He had no choice. Today in the same house with the same debt it would have been foreclosed. But that wouldn’t make him a walkaway–although I’m sure that’s what he would have probably claimed.
Decreased prices will lead to more foreclosures, because there are fewer (really no) other options. That doesn’t mean that people who are not in financial trouble will purposefully go into foreclosure.
anony » Jun 12, 2009 at 9:31 am
RE: Dave Lincoln @ 80 – “This is the internet – nobody apologizes, at least not left-wingers”
As if right wingers could ever apologize for anything or admit ever being wrong. I believe all the “wingers” have that in common.
anony » Jun 12, 2009 at 9:36 am
RE: Kary L. Krismer @ 91 – Still sounds like causation to me Kary.
“I know someone who about 2 years ago netted maybe $10,000 selling his house. He had no choice. Today in the same house with the same debt it would have been foreclosed.” – causation
“Decreased prices will lead to more foreclosures, because there are fewer (really no) other options.” – causation.
Yes, you contradicted yourself there.
Kary L. Krismer » Jun 12, 2009 at 9:40 am
RE: anony @ 93 – You’re not distinguishing between people who can afford to stay and those who can’t. That’s the thing I’m taking issue with. I’m saying not that many people who can afford to stay will walk away simply because of the value of their property. Those who can’t afford to stay will tend to be foreclosed if the value of the property is less (absent a workout or short sale, etc.).
Kary L. Krismer » Jun 12, 2009 at 9:46 am
RE: Kary L. Krismer @ 94 – I lost my time to edit that one.
I went back and looked at 17, and it wasn’t dealing with walk aways, it was dealing with recession, with my saying that you’d expect both increased price drops and foreclosures during a recession. So I can see why you’re coming from where you’re coming from. But I haven’t denied that price and foreclosure is correlated, because lower prices take away other choices.
anony » Jun 12, 2009 at 9:49 am
The effect is the same Kary, I don’t care why the house was foreclosed.
And you also said, or strongly implied, that there is no direct causal link between decreasing prices and foreclosures. “Coincidence” is the word you used to describe what is happening in the graphs.
mukoh » Jun 12, 2009 at 9:53 am
RE: Kary L. Krismer @ 84 – Yeah it definately is, but I have seen lots of these so called “businessmen” who arranged deals through WAMU even on plats such as this one.
Dave Lincoln » Jun 12, 2009 at 10:02 am
RE: Ira Sacharoff @ 87 –
Haha, Ira, I kinda meant apologies for themselves, not for others. Agreed about the bad spellers. ;-)
mukoh » Jun 12, 2009 at 10:11 am
RE: Groundhogday @ 85 – GroundHog, speaking in factual terms an investor tosses the keys back to the bank faster then someone who lives in a house and can afford the payment, if you have other data please let us all know.
Groundhogday » Jun 12, 2009 at 10:22 am
RE: Kary L. Krismer @ 88 –
It was more than “interesting.” The Boston Fed report directly contradicts the argument you keep making: people will not walk away from underwater homes in large numbers as long as they can afford to make the payments.
If CA, NV, AZ and FL are seeing 55% walkaways and the national avg is 40%, then in the PNW we are probably only seeing 10-20% of foreclosures due to ruthless defaults. But remember, we are lagging most of the country on this housing bubble. As homeborrowers fall farther underwater, and give up hope of any near-term rebound, they will walk in large numbers.
Groundhogday » Jun 12, 2009 at 11:01 am
By mukoh @ 99:
Please read the Boston Fed report from beginning to end. Then read the cited literature where appropriate.
YES, investors are likely to walk more quickly. BUT owner-occupiers walk as well.
mukoh » Jun 12, 2009 at 11:18 am
RE: Groundhogday @ 101 – That is a hypothetical report, without actual concrete stats. Do you happen to have stats for % of the people actually walking away when they see that they are under water?
Assuming that people will give up and contribute to the foreclosure problem is a good theory, however it does not substitute for having statistical data, which I would LOVE to see.
waitingforseattletocool » Jun 12, 2009 at 11:25 am
Here is a market update from a realtor in San Diego. I have been following his market reports for many years. His style is somewhat data centric, much less hype than other realtors. Take it for what it is worth, just a snapshot.
http://www.realtor.com/RealtyTimes/marketconditions.asp?open?open&link=http://mktc2.realtytimes.com/mktc/conditionsviewjs/California~San_Diego~bobcasagrand?open&pID=r.com2
Groundhogday » Jun 12, 2009 at 11:33 am
RE: waitingforseattletocool @ 103 –
Realty Times. Enough said.
Groundhogday » Jun 12, 2009 at 11:34 am
RE: mukoh @ 102 –
No, it is not hypothetical. They have hard data on mortgage payment, DTI, payment behavior, etc… Please read the report before commenting on it.
Groundhogday » Jun 12, 2009 at 11:35 am
By mukoh @ 69:
Where is your Hard Data Mukoh?
Groundhogday » Jun 12, 2009 at 11:36 am
By mukoh @ 99:
Speaking factual terms, I don’t actually see any facts?
waitingforseattletocool » Jun 12, 2009 at 11:38 am
RE: Groundhogday @ 104 –
Per my caveat, I don’t place much weight on most of the updates on realtor.com market conditions.
All of his updates are data centric.
Anyway, did you read it?
patient » Jun 12, 2009 at 11:51 am
RE: waitingforseattletocool @ 108 – Realtor propaganda for the most but the data is interresting.
“The demand is not yet showing in the sales numbers because the increase in pending activity only began in March and with the longer escrow periods it is taking time to convert to sold homes. There are over 7000 pending contracts in the pipeline ”
Seems like SD is seeing the ecaxt same phenomena as we see here. It will be very interresting to follow closed sales through the year to see if this is just an illusionary market uptick due to fragile short sales or if this will materialize to actual YoY increases in closings.
Kary L. Krismer » Jun 12, 2009 at 11:54 am
By anony @ 96:
Yes, as I said I can see why you feel that way.
Groundhogday » Jun 12, 2009 at 12:09 pm
Here’s another little oddity: over 50% of modified mortgages redefault with 5 months. Given that these mortgages are modified to be made affordable, why would they redefault so quickly? And if these are not owner-occupied, and the owner planned to walk away, why would they bother to mess around with mortgage modification? We would need to dig into the details a bit more, but the obvious conclusions is that negative equity trumps affordability.
Office of Thrift Supervision
http://www.ots.treas.gov/index.cfm?p=Mortgage+Metrics+Report&ContentRecord_id=60c2bdf0-1e0b-8562-ebc1-af92214df954&ContentType_id=4edebc00-1e0b-8562-eb8b-13f4f2590fa0&Label_id=
Groundhogday » Jun 12, 2009 at 12:13 pm
RE: waitingforseattletocool @ 108 –
I scanned it. He is reporting what we have been seeing everywhere. There is an unbelievably HUGE backlog of foreclosures held off the market. Why? A lot of analysts have been trying to answer that question. Obviously the foreclosure moratoriums are critical. But there is also a sense that the banks don’t want to complete foreclosures and sell them because they are in the “don’t ask, don’t sell” mode, trying to hide losses.
Eventually, of course, this supply will be released on the market and we will take another big leg down.
Kary L. Krismer » Jun 12, 2009 at 12:40 pm
RE: Groundhogday @ 111 – I’m surprised it’s only 50%. As I’ve said in the past, it’s because they’re only dealing with part of the owners’ debt issues. Chapter 13 with cramdown would be much more successful. That would deal with the total debt picture, force financial education on the owner, and teach them how to live on a budget.
It’s hard enough for some people to save their homes after filing Chapter 7, where they wipe out most their other debt. Trying to save a home when you owe $20,000+ in credit card debt is not likely to be successful.
Kary L. Krismer » Jun 12, 2009 at 12:43 pm
RE: Groundhogday @ 111 – I still need to count the foreclosures that actually occurred in King County, but they have only just over 300 REOs on the market and an additional just over 250 that are in some form of pending, so it does seem like they’re moving them through to some extent. As I recall, the number of monthly foreclosures in King County is somehwere between 250 and 350, and that would include condos, which my numbers above do not.
Kary L. Krismer » Jun 12, 2009 at 12:58 pm
By Groundhogday @ 105:
I don’t really think it says all you think it does. What they do is look at payment behavior to try to determine which owners are purposefully walking away. Thus, for example, they look for someone without significant prior delinquencies who goes into default and then never gets current. Rather obviously there could be multiple explanations for such behavior.
Also, they assume they’re onto something because there are more properties that fit this description in areas that have had the largest price declines. But those areas are probably also areas that have the worst economies when it comes to employment. So it very well could be related to something other than values alone.
But they also end the section by saying:
“To sum up, falling house prices are no doubt causing some people to ruthlessly default. But the data indicate that ruthless defaults are not the biggest part of the foreclosure problem. For the nation as a whole, less than 40 percent of homeowners who had their first 90-day delinquency in 2008 stopped making payments abruptly. Because this figure is an upper bound on the fraction of ruthless defaults, it suggests ruthless default is not the main
reason why falling house prices have caused so many foreclosures.”
I think this basically is an admission that they don’t know how big the problem is. Absent doing a detailed financial analysis on each person foreclosed (or a decent sample of such people), you simply can’t know how big the problem is.
Kary L. Krismer » Jun 12, 2009 at 1:01 pm
By mukoh @ 102:
I think what they’re doing is taking data and trying to see if it fits prior statistical theory. I seem to recall they only sampled the data, however, because the entire data set was over 600 gigs!
Scotsman » Jun 12, 2009 at 1:16 pm
Please just let the man eat his waffle…
mukoh » Jun 12, 2009 at 1:44 pm
RE: Groundhogday @ 107 – Groundhog, that report is HYPOTHETICAL. Read the entire report.
Kary L. Krismer » Jun 12, 2009 at 1:59 pm
RE: mukoh @ 118 – Okay, I’m getting confused. Which report are we talking about? This one?
http://www.bos.frb.org/economic/ppdp/2009/ppdp0902.pdf
They do seemingly work with real data, but a lot of it is theory. I’m not sure what you mean by hypothetical.
Groundhogday » Jun 12, 2009 at 2:00 pm
By mukoh @ 118:
I suppose in the same respect Evolution is HYPOTHETICAL as well. Because scientists take a theory and test it against data (most of it proxy in some form as well)? Do you have any familiarity with econometrics? Do you know how science works?
Kary L. Krismer » Jun 12, 2009 at 2:01 pm
By S-Crow @ 71:
I missed this one earlier, and I’m not sure how much of that is sarcasm, but those are not exactly groups of people that I would say are likely to do it because they have some other choice.
David Losh » Jun 12, 2009 at 2:11 pm
RE: Bankruptcy Attorney @ 67 –
I commented on this in the morning, but it may be lost.
“Anyone who games the system is looking for serious trouble. BK is not a game – it is a very serious legal procedure and abusers go to jail. My experience is that they get caught.”
and the very next line is:
“I recently talked to someone who got a $6k a month mortgage on $200.00 a month income from WAMU. These types of loans along with job loses are the core of the problem.”
What about the banks who generated these bogus Notes? Those Notes were sold as Mortgage Backed Securities. How serious is that?
Fear mongering is a sales technique. What are you selling?
In my opinion an attorney does what they are told and have an obligation to keep us out of jail.
If your clients are getting “caught” then that sounds bad. Come to think of it how do you get caught “gaming” the system? The system is a game.
Groundhogday » Jun 12, 2009 at 2:17 pm
RE: Kary L. Krismer @ 115 –
The researchers used payment behavior to estimate ruthless defaults. Admittedly this is not a perfect proxy, but not completely out of line either. I could certainly imagine situations in which an underwater borrower who can afford the payments decides to walk away, stops making payments, changes their mind, then stops again. That person would not be counted as a “ruthless default” by the authors, when in fact they are. On the flip side, perhaps someone who is in financial trouble makes all of their payments on time and then suddenly stops making payments cold turkey.
But I think we can probably agree that the proxy measure for ruthless defaults is correct at least within an order of magnitude. And this would suggest that ruthless defaults are quite common, particularly where owners are far underwater. Is it the most important cause? No, evidence and reason would suggest that income shocks are the most important when combined with negative equity (if there is positive equity, just sell the house).
Finally, let’s put the shoe on the other foot. The rational thing for a highly underwater borrower to do is to walk, even if they can afford the home…. particularly when a comparable rental costs much less. I would like to see some hard statistical evidence from the naysayers here that almost all such home borrowers act irrationally even when they are 30+% underwater.
Ray Pepper » Jun 12, 2009 at 2:38 pm
By Groundhogday @ 123:
Hog, I must admit you again are dead on tgt. Its not whats right or wrong. Its not ability to pay. Its all about being rational. I don’t care if its Nevada or Washington or Florida. The upside down homeowner goes through great stresses each month in making that negative payment. Who cares what they agreed to on the note! Life and health is far too important. (This is my RN side talking!)
I have had it up to my eyeballs counseling people on what they should do. I don’t even ask them anymore if they can afford the payment. It doesn’t matter. Upside down 100k, 200k, 50k………..Lets stop throwing stones. These homes are all coming back. If not today then in 5 years. PEOPLE WILL NOT STAY IN THEIR UPSIDE DOWN HOMES even at 0% interest. At the first sign of trouble bammmmmmmmmmmmmmm short sale. Then when it doesn’t sell do you honestly believe the homeowner will catch up on payments?
Once your credit is shot they let it ALL go. LISTEN TO THE CEO’S of Americas top credit card holders and what the CFO stated at HMC. Once the former homeowner begins to get threatened with Judgements and wage garnishment from credit defaults guess what happens next. Chp 7 BIG TIME to protect their family and move on with their lives.
Look for more INCREDIBLE incentives for homeowners to stay in their homes coming around the pike. Not to mention the return of Mtg Cramdown talk. Its the only way. If its too prohibitive it will not only cause anarchy it will prove to be futile as well.
Take your time friends. Be patient. Let the prices come down to you! Do NOT get into bidding wars…walk away. You will find many many more. Just save your dough like you never have before.
softwarengineer » Jun 12, 2009 at 2:41 pm
RE: Groundhogday @ 123 –
I”VE SKIMMED THE LONG CONVOLUTED BLOGS [TIM, WE NEED A NEW FRESH ARTICLE?] AND AGREE
Morally, its wrong to default on a contract we made good faith, but financial sense and ethical sense are sometimes diametric opposites. In today’s greed fueled bubble era lately; replace sometimes with usually.
Perhaps this bubble and the hammerring down of greed has reminded us of our real American roots, not just our asset globalism sheet.
I remember at social events in the early 2000s that many were talking about the huge wealth in their house, it became a mine is bigger than yours contest. I imagine the rentors felt like they were the serfs with kings, queens and knights all around them, bragging endlessly on their conceited conquests. Well, the bubble manure hit the fan and welcome home. There is no endless money to create endless millionaires in America, there never was. Our GDP pie is fairly fixed, albeit shrinking lately; while our appetite for profits had no bounds and harsh reality hit many in the face.
The bubble reminds me of the clown with the selzer bottle that pops out of the closet. The buyers underwater just got a squirt of humble reality.
mukoh » Jun 12, 2009 at 2:42 pm
RE: Groundhogday @ 120 – What is science? Is that like something scientific? Or what is it?
Ray Pepper » Jun 12, 2009 at 2:53 pm
RE: softwarengineer @ 125 –
I wouldn’t even call it greed. People don’t have the money now and they will not have it again for a very long time.
softwarengineer » Jun 12, 2009 at 3:01 pm
RE: mukoh @ 126 –
HI MUKOH
Science to me is like Dragnet, “Just the facts mam, just the facts”. Its like Spock the Vulcan, based on just pragmatic evidence without Captain Kirk’s human intuitions.
Someone above quoted “evolution” as science [albeit with apparent missing links]; and yes, its an example of taking a possible trend forward based on hypothetical geological evidence, with an apparent conclusion. Its a science, but even science does not always have 100% adequate proof. Evolution admits this, so it’s a science.
The 2nd Law of Thermodynamics assumes energy always goes to a lower state. Does this proven science conflict with the science of evolution, which infers living creatures evolved/developed to higher state trends?
Yes it does. The trick is to marry the two sciences together to determine truth. I have a few theories on why the conflict exists, but believe me, they are not science, yet.
softwarengineer » Jun 12, 2009 at 3:07 pm
RE: Ray Pepper @ 127 –
well put
David Losh » Jun 12, 2009 at 3:08 pm
RE: Ray Pepper @ 124 –
“The American Dream will be a nightmare this decade for millions.”
This is for software engineer:
My church has a Spanish Mass at noon. For about six months I talked with the parish director to help cousel home buyers and owners. Her reluctance in allowing me access to the congregation was that I dealt with investment properties. The phrase she used was that my type of Real Estate may be too sophisticated. She brought in another Real Estate agent and Mortgge Loan Professional who fleeced the congregation.
As many of you know I like low ball offers and avoid exotic loans, except to control a property for short periods of time.
Some people at the church remembered my cautions about the market place and have come back to talk about absolutely the most impossible situations. The American Dream has become a nightmare for them.
A year ago it was more a matter of short selling the property. This year it’s a ridiculous series of banks who want to modify loans.
Here’s your loan modification: you are behind a payment or two and the bank wants you to get that caught up within six months. They then add between $500 and $1000 a month to a mortgage you can barely afford.
I’m not kidding when I say the bank will do anything they can to harrass a person into foreclosure.
I could go on for another hour, but as one gentleman said, he will never buy another house here in the United States. he will never have a credit card. He will ship his money to Mexico to make a life there. There is nothing here.
Kary L. Krismer » Jun 12, 2009 at 3:28 pm
RE: Groundhogday @ 123 – I don’t think we can agree on that. The authors suggest that the number they come up with is the upper limit of the ruthless defaults, not that it is an estimate of the number.
Let’s say we’re in 2010 and you know the age ranges of people that died, and you know that the 2010 swine flu is mainly killing people under 40 years old (assume the 2010 flu is more deadly than the 2009 version). If there were 200 deaths of people under 40 years old in a given area, you’d know that the swine flu had only probably caused 200 deaths at most, not that 200 people died of the swine flu.
One Eyed Man » Jun 12, 2009 at 3:30 pm
RE: Dave Lincoln @ 98 – RE: Ira Sacharoff @ 87 –
Dear Ira and Dave:
Please accept my sincere apology for my spelling errors in prior posts. I am personally embarrassed by my inability to spell to your satisfaction. Although it’s just one of my many faults, I regret it deeply and will strive to do better. I mean that sincerely. And as Herb Tarlick, the salesman on the TV show WKRP said: “Sincerity is everything, and if you can fake that, you’ve got it made.
There are those who say spelling is relevant only to the extent that it affects understanding of the message or the credibility of the scrivener’s unverified assertions. And there are still others who say, people who complain about spelling can shampoo my crotch. I say that goes for both left wing and right wing, cause I’ve got something big and brass for both groups to work with. Only a pompous ass exalts form over substance. I hope my spelling herein is sufficient to make my feelings clear. If not, please accept this bottle of shampoo as a token of my sincere regret.
Much like those who commit ruthless mortgage defaults when they could afford to pay show no guilt or conscience, I have no compunction over failing to run spell check before I post my comments. I hope you are not offended by that, but if you are, I prefer something with a mango or a strawberry sent. Have a nice day.;-)
Sincerely,
One Eyed Man
softwarengineer » Jun 12, 2009 at 3:31 pm
RE: David Losh @ 130 –
MY HEART IS OUT TO PEOPLE TOO
There are 4 billion people on planet earth in dire poverty, barely making it. The other 2.8 billion are going down fast, as the 4 billion seek survival on a planet that’s run out of resources. What happenned in your church David is just one family. My heart is out to them.
What can America do to help all 4 billion though? Not much David.
As Ray said, it’s going to take a long time to fix this mess [a couple generations in my book].
I’m a Christian too, but like a lot [most lately?] of Christians today, I firmly believe in worldwide planned parenthood . I also believe, if America doesn’t set the example of global warming reduction through depopulation, we’re scientifically and ethically shafted. Just trying to feed a 10-20% increase of people in any country will involve far more oil/coal/gas consumption than all the hybrids and recycling could possibly even remotely mitigate.
We’ve forgot our true Earthday/environmental depopulation roots. As one of the founder’s of Earthday said, John F. Kennedy, “Ask not what your country can do for you, ask what you can do for your country”.
Kary L. Krismer » Jun 12, 2009 at 3:38 pm
RE: One Eyed Man @ 132 – Something else we have in common.
David Losh » Jun 12, 2009 at 3:40 pm
RE: One Eyed Man @ 132 –
mango or a strawberry sent. Sent is with a c in this use.
Don’t you just hate spell check when that happens? Especially when you’re making a good point.
Dave Lincoln » Jun 12, 2009 at 3:45 pm
RE: One Eyed Man @ 132 –
That long-ass post never explained why you can’t spell “loose” vs “lose”. So, your non-apology is hereby non-accepted. I cannot speak for Ira, but I am not personally gonna shampoo any part of you. I’ve avoided lice and SDT’s my entire time in Seattle (knock on wood), and I don’t intend to ruin my spotless record on your sorry ass.
Oh, as to: “Much like those who commit ruthless mortgage defaults when they could afford to pay show no guilt or conscience, I have no compunction over failing to run spell check before I post my comments.”. You make a big assumption if you think that I would default or have defaulted on a mortgage (purposefully or not). But, that’s got nothing to do with my spelling. Financial planning is something my parents taught me, while spelling came from my 3rd and 4th grade teachers. How about you? What’s your story?
Groundhogday » Jun 12, 2009 at 3:47 pm
RE: Kary L. Krismer @ 131 –
I’m sorry but that is a pathetic analogy Kary, and far beneath someone of your intelligence. And while the authors placed 40% as the upper bound, I provided a clear example of why it might not actually be the upper bound.
It is clear at this point that you are simply incapable of admitting when you are wrong.
Scotsman » Jun 12, 2009 at 4:08 pm
RE: One Eyed Man @ 132 –
” And there are still others who say, people who complain about spelling can shampoo my crotch.”
Hadn’t heard that one before. I guess a lot depends on who one hangs with, eh?
David Losh » Jun 12, 2009 at 4:08 pm
RE: softwarengineer @ 133 –
Condom use is an easy and simple thing to promote. In the 1980s I worked as a patient advocate for people with AIDS. Getting condoms into every country was a challenge, still is.
Oil use is a waste of all resources. We don’t need it.
In traveling through the Middle East the number one question was about why we need oil. Shah Allah that He chose to give the gift of wealth to the Arab world. Such a useless substance under their feet is selling for such high prices, Hum Du Allah.
We have used Oil less than 100 years out of millions and look at the problems.
Last would be how much the world objected when China imposed a limit of child birth. The outrage that caused was something to see.
We can fix it all today.
This discussion about the morals of money should show why it will take generations. We spend hours each week talking about money, paper, inconsequential nonsense when, you are right, there is real work to be done.
Scotsman » Jun 12, 2009 at 4:14 pm
Except for The Hog, Ray, and myself, you’re all wrong. Before this is over people will be walking away in droves even if they can afford it. Make a note of this post and check back in two years.
Tim should start a poll.
Groundhogday » Jun 12, 2009 at 4:15 pm
“”
Ray Pepper » Jun 12, 2009 at 4:16 pm
RE: David Losh @ 130 –
Ohhh. I just love one line here……………….A classic ” She brought in another real estate agent and Mtg professional who fleeced the congregation”………….When I read that I busted out laughing. Maybe its the heat or all these miserable graduations I have to sit through tomorrow but I LOVED IT!
Everett_Tom » Jun 12, 2009 at 4:46 pm
RE: Scotsman @ 138 –
I think that’s from As good as it gets . Click on the “more” next to quotes, and search for shampoo ;)
oooor, just click here.
One Eyed Man » Jun 12, 2009 at 4:49 pm
RE: Dave Lincoln @ 136 –
Lighten up Dave, I didn’t mean to be insulting, only to bring a little humor to the afternoon and to make a somewhat trivial point about form and substance. But I do apologize to both you and Ira if I offended either of you because that wasn’t my intent. The reference to ruthless defaults was not to imply that you have or would default on an obligation but only to tie my unrelated comment on spelling back to the subject matter of the thread.
Loose was a typo but what’s the difference. I can do some things reasonably well, but spellings never been one of them. I’d give you more of my story but it’s probably of limited relevance to this issue and the subject of the thread. I’m feeling a little self conscious now that I know some people actually read stuff I post, including the errors. Sometimes I figure people probably come to my posts, say not worth reading, and skip it.
One Eyed Man » Jun 12, 2009 at 4:54 pm
RE: Scotsman @ 138 –
I stole that from Jack Nicholson in one of his more recent movies. Give credit where credit is due.
I just saw Everett Tom’s post in time to edit this and I think he’s right, it’s from “As Good As It Gets.”
S-Crow » Jun 12, 2009 at 4:55 pm
RE: Kary L. Krismer @ 121 – Kary, no sarcasm at all.
I see the financial destruction in one form or another in the course of a work week. I see the toll it takes on families. I see the utter disregard and sometimes arrogant dismissal (flippant , who care’s attitudes) of the personal financial situation people put themselves into–probably as similar as you experienced doing BK work. I see it from people who work in the industry to those who don’t. The entire spectrum. We’ve had angry people crumple up checks in a wad to bring to closing, to very distraught people, to people signing their short sale documents who were happy to discuss their wonderful vacation to Jamaica in the days prior to closing.
I’m not relating so much why people decide to stop paying and walk away, just that they are. Ray and others have discussed the”why” for months and months. Attitudes have changed. I think older generations would have worked very hard to stay in their home. Every responsible homeowner (and non-owners) will be paying a price for this problem. I don’t know how lenders will curb the walk-away problem in the future. A whole lot of people are now “programmed” that if they can’t make money on a house then, oh well.
Ira Sacharoff » Jun 12, 2009 at 5:03 pm
RE: One Eyed Man @ 144 –
Believe it or not, I was kidding when I said that waterboarding was an appropriate punishment for bad spelling.
Maybe for bad grammar, but not for bad spelling.
There is no connection between spelling and intelligence. I know some brilliant people who can’t spell worth a "golly", and I know some barely able to function droolers who happen to excel at spelling.
I happen to be a good speller. Always finished second in elementary/junior high spelling bees to that beeyatch Susie, wherever she is. Where’d it get me? I’m just a humble real estate agent.
Yet the fat ugly kid Richie, (who couldn’t learn to read until he was practically in high school and seemed to have the IQ of a tick) owns a chain of east coast liquor stores.
Kary L. Krismer » Jun 12, 2009 at 5:08 pm
By Groundhogday @ 137:
Funny, I was just thinking the same thing about you. If you think that is evidence of 40% of foreclosures being people with a choice, you’ll accept evidence of almost anything.
I mean really. You seriously think that they can determine that by only examining payment records?
Kary L. Krismer » Jun 12, 2009 at 5:10 pm
By Scotsman @ 140:
You think people here are representative of the general population, or more specifically people who own homes?
Kary L. Krismer » Jun 12, 2009 at 5:15 pm
RE: Groundhogday @ 141 – Your point? The decline had already started at that point, so obviously I wasn’t talking about there being a decline at that point. And even before 7/07 I was never claiming we couldn’t decline.
So again. Your point?
Just because you overstate the meaning of a study doesn’t mean you have to go out and dig up a bunch of other pointless stuff you don’t understand.
Scotsman » Jun 12, 2009 at 5:17 pm
Ah, Jack N. I can see that. My wife says we even saw the movie, but I don’t remember. Is she sure she saw it with me? Hmmmmmm. Where is that woman?
In second grade I was the top speller. Now, if not for spell check, you would all think me an uneducated fool. As it is, only most do. And actually, it’s the dang typing as much as anything- those keys are so hard to read… ;-)
As an aside, I just love how spell check trys to correct “Obama” to “ABM.” He is, in my mind, almost as dangerous. Heh.
Scotsman » Jun 12, 2009 at 5:21 pm
RE: Kary L. Krismer @ 149 –
I don’t know, and whatever I think is probably wrong. But my best guess is the results would be very heavily weighted toward people just walking as the values continue to decline. I’m not sure why you can’t see that.
I started to notice a change in attitude 25 years ago when I worked in banking. Within the bank itself, the idea of loyalty to the corp[oration was fading fast, and the borrowers also seemed more transaction oriented, and less enthralled with the idea of forming a relationship with the bank. It was more and more about what’s good for me now, and less about any future consequences. Today I see the same ideas played out to extremes, and very little concern for character or reputation, just the transaction.
Kary L. Krismer » Jun 12, 2009 at 5:37 pm
RE: S-Crow @ 146 – I used to say I should file bankruptcy, so that I could drive an expensive car and go to Jamaica. The lifestyle of some debtors is truly amazing.
And I would run across people who would want to take the easy way out. If they owed too little money, I’d typically send them elsewhere (such as CCC) and refuse to file them.
But in all my years I can only think of one client that purposefully walked away, and even there they were struggling to make the payments, so I’m not sure I’d call it voluntary. But what made them so unusual was they were planning on doing it about 9 months after the bankruptcy.
I also had a client once that spent about 3 years in Chapter 13 trying to save a POS car that they were very upside down on (as a percentage–for absolute numbers is wasn’t that great). That’s perhaps the most extreme example I can think of where someone went to extremes to save an asset.
Kary L. Krismer » Jun 12, 2009 at 5:41 pm
RE: Scotsman @ 152 – I’ve said I can see some people doing that. And I’d agree it’s more likely the more values decline. This is really just a disagreement over the extent of it. Also it’s a bit absurd because it’s something know one really knows for sure, even for say the past year, so arguing over whose estimate of the extent of it over the next year or two is rather pointless.
Also, one thing to keep in mind is a lot of people can’t do it, because they have 80/20s. And the worse prices get, the more likely a bank would go judicial. I’ve heard that’s happening already, but I question the source.
Dave Lincoln » Jun 12, 2009 at 5:43 pm
RE: One Eyed Man @ 144 –
OK, 1-eyed, no problem. Just, please, put the shampoo DOWN!
I was also joking from the get-go about water-boarding bad spellers*, hence the smiley face. My last post had no smiley face. This “loose” vs. “lose” stuff is out of control on the web, though, but I guess it doesn’t bother someone who doesn’t notice. Sometimes, some seriously bad spelling throughout a comment gives me an impression that I can’t shake, that the commenter is a moron basically, but have not seen much of that on SeattleBubble, though I have seen some serious run-on sentences ;-} I agree with you on your opinion on housing, BTW, so you can see that people do read through the posts.
* I want to be on record saying I don’t agree with Ira about waterboarding people with bad grammar. I think we should line em up, put em on a boat, and send them to Kazackstan** (where they can teach English and pick up east-bloc blonde chicks for cheap).
** I don’t know how to spell this country; I freely admit it, and I don’t care.
Groundhogday » Jun 12, 2009 at 5:45 pm
RE: Kary L. Krismer @ 148 –
The difference between you and I is that I’m trained as a scientist and you are trained as a lawyer. Scientists argue to discover the truth. Lawyers argue to win.
Dave Lincoln » Jun 12, 2009 at 5:45 pm
RE: Scotsman @ 151 –
I’m just glad you changed avatars on us, Scotsman. The last one was not helping me hold down my lunch.
I have now digested my lunch properly. Thanks, one and all.
Groundhogday » Jun 12, 2009 at 5:46 pm
RE: S-Crow @ 146 –
You MUST be lying or deceived. No one is walking away if they can still make payments. Kary says so.
Groundhogday » Jun 12, 2009 at 5:51 pm
By Kary L. Krismer @ 154:
This is really just a disagreement over the extent? From a guy who has repeatedly pooh-poohed the idea that an appreciable number of folks will walk away when they can make payments?
More likely the more values decline? Isn’t that what I’ve been saying, that your personal experience doesn’t account for the levels of declines we are seeing and will see?
Want a little syrup with your waffles?
Ootama » Jun 12, 2009 at 5:53 pm
Are June foreclosures exploding??
For an up to the minute look, I got the same data for NTS in Snohomish county for the first 2 weeks of June:
Week 1 : count is 112, about where we’ve been running
Week 2: count is 233!! Whoa — is there some backlog going in or is something causing a real spike?
Scotsman » Jun 12, 2009 at 6:01 pm
RE: Groundhogday @ 156 –
Amen.
David Losh » Jun 12, 2009 at 6:11 pm
RE: Kary L. Krismer @ 154 –
It’s interesting how much legal action is threatened concerning foreclosure. All of this wrangling about the morality of it all is absurd. There is a Note secured by a Deed of Trust. This is what banks wanted. This is what they have.
When you walk the bank has the recourse of foreclosure. That’s what the bank wanted. At this point for the banks to go into any court room and ask for a judicial foreclosure would be insanity. To pursue any second position Note would be economic suicide.
How much money can a lawyer lose (sp?) in pursuit of a debt? Then again why now? How would they explain away all the other foreclosures that slipped by?
With a global credit crisis it sure seems some other lawyers would want to class action the deep pockets of the banks to protect the poor home owners who were taken advantage of.
One Eyed Man » Jun 12, 2009 at 6:15 pm
RE: Scotsman @ 151 –
Yeah, I’m sure you saw that with your wife. And by the way, you’re out of scotch.
Second grade was the year they gave me special testing and they wanted to hold me back. In the end they let me go to 3rd grade but I had to wear a helmet for a year. I couldn’t spell but I became the best football player in the 3rd grade.
I assume the agent’s have seen this because it’s in WAR’s weekly update, but the Fed’s enacted a Tenant Foreclosure Relief Act in late May that requires foreclosing lenders on federally regulated loans to honor an arms length lease until at least 90 days after the lender completes the foreclosure and sells the property to a third party. Anyone representing a mortgagor who is walking away should probably inform them that they now probably have a better ability to lease the property and pick up some cash until the foreclosure is complete.
There are some unanswered questions, like what if the mortgagor puts in the lease that the lessee may only show the property from 3pm to 5pm on Saturday afternoon to make it more attractive to a tenant. And although it says that the lease must be arms length, I doubt that the foreclosing lender will sue to determine whether the rent is below market rate if it’s at all close so a walk away should be able to find tenants by offering a good rate. The lender would obviously get the rent after the foreclosure is complete. But it may give walk aways the ability to pick up ten to twenty thousand dollars, probably more than enough for a Bkrcy atty like Scott to justify his fee to draft a lease and give a little advice as to how to get a tenant on Craig’s List. Just remember to do a CYA letter on how the lender may go judicial if the tenant destroys the house before the trustee’s sale. It says the act sunsets in 2012.
http://www.tenantslegalcenter.com/html/S896.doc
David Losh » Jun 12, 2009 at 7:16 pm
Actor Stephen Baldwin’s foreclosed home in the suburbs north of New York City will be publicly auctioned.
Baldwin paid $515,000 for the 1.4-acre home in Rockland County in 1997. In 2006, he tried unsuccessfully to sell it.
County filings show Baldwin and his wife Kennya defaulted on more than $824,000 in payments to mortgage holder Bankers Trust Co.
The auction is set for June 24.
Maybe he could afford it, then again maybe not.
Andy » Jun 12, 2009 at 7:20 pm
Real Estate Agents are the devil: bobby bouche
I hate Realaaatooorsss
Groundhogday » Jun 12, 2009 at 7:31 pm
RE: David Losh @ 163 –
Bit actor with drug abuse problem turned Christian evangelical due to the prophesy of his Brazilian maid. Evangelical christian radio show. $800k in debt on a house purchased for $500k. This is one data point I wouldn’t consider representative of anything general.
Andy » Jun 12, 2009 at 7:36 pm
RE: Ira Sacharoff @ 87 –
You suck; you want the rich to pay your way
Left leaning people blow..
pay my way, pay my way……..
healthcare for all; just dont have the UAW pay;
pay my way, pay my way…
Andy » Jun 12, 2009 at 7:37 pm
RE: Scotsman @ 140 –
I agree big dogg;
have you folks seen mortgage rates….
You cant stop the sun from shining…..
EconE » Jun 12, 2009 at 7:39 pm
Speaking of Bankruptcy Attorneys…
How do these guys/gals get paid? Aren’t their clients broke?
Perhaps Tim would allow one of the BK attys to write up a “Bankruptcy 101″ blog post.
Ira Sacharoff » Jun 12, 2009 at 7:50 pm
RE: Andy @ 164 –
Andy,
It must have terrible as a child to have your mother run off with a Realtor.
Jonness » Jun 12, 2009 at 7:53 pm
By Dave Lincoln @ 80:
That’s not logic; it’s predjudism.Please be careful with this sort of thing, or people will think of you as a “looser.”
Sorry for the pun, No war intended. :)
Ira Sacharoff » Jun 12, 2009 at 7:57 pm
RE: Andy @ 166 –
Andy,
I think one of the cornerstones of the discourse on Seattle Bubble is that it be civil.
The fact that you don’t share my political beliefs doesn’t bother me in the least. You’re completely entitled to your opinion, but if you’re trying to convey a well thought out position, saying “You suck” doesn’t exactly give people the impression that you have anything other than a few marbles rattling around in your head. You don’t know me, and you obviously haven’t read very many of my posts.
If you’d had, you’d know that I don’t want the rich to pay my way. I want the rich to be eaten.
Jonness » Jun 12, 2009 at 7:57 pm
“I think what they’re doing is taking data and trying to see if it fits prior statistical theory. I seem to recall they only sampled the data, however, because the entire data set was over 600 gigs! ”
That’s not what I consider large. These days, we mostly think in terabytes.
David Losh » Jun 12, 2009 at 8:13 pm
RE: Groundhogday @ 165 –
I didn’t know he was evangelical, but $800K on a $500K purchase got my attention.
DrShort » Jun 12, 2009 at 8:14 pm
As a side note, we’re 10 of 22 business days through June and there’s already been 686 NTS filed. That’s on pace for 1500+ this month.
David Losh » Jun 12, 2009 at 8:18 pm
RE: Andy @ 166 –
Rich people never pay for anything, they collect. To be rich all you have to do is make more than you spend. That’s it.
You’re probably talking about the wealthy. They pay for nothing and take your tax dollars to support a life style you may think is glamorous.
We live in a welfare world where tax payers pay for the wealthy to do nothing, contribute nothing, and get other people to whine for them.
Jonness » Jun 12, 2009 at 8:20 pm
By Dave Lincoln @ 155:
I recall a time when I used the term “arguement” on a newsgroup. A guy came back with big caps and said, “Learn how to spell. Loose the E you idiot!” I got quite a kick out of that. For some reason it bothers some more than others. I figure if I can interpret what the person means, it’s sufficiently spelled. Then again, I’ve interacted with a lot of people over the Internet who speak English as a second, third, or fourth language. Y me espanol es no muy bueno!
Jonness » Jun 12, 2009 at 8:27 pm
By Andy @ 166:
I’m a rich banker who made bad bets on the housing industry.
pay my way, pay my way……..
free tax dollars for all; just dont have the ones who brought down America pay;
pay my way, pay my way…</
David Losh » Jun 12, 2009 at 8:28 pm
RE: EconE @ 168 –
In Chapter 7 the attorney does nothing but feed you to a bunch of wolves, you pay a flat fee for that . In Chapter 13 the attorney conspires with the other attorneys, along with the court, to squeeze as much out of you as they possibly can in five years.
I do think it would be great to know a lot more than my limited knowledge.
DrShort » Jun 12, 2009 at 8:30 pm
By David Losh @ 175:
That’s ridiculous. The top 5% of income earners pay 60% of income taxes. The bottom 50% pays 3% of income taxes.
Mikal » Jun 12, 2009 at 8:40 pm
RE: DrShort @ 179 – Are you including social security taxes? Umm, no.
Kary L. Krismer » Jun 12, 2009 at 8:48 pm
By Groundhogday @ 158:
Again, I really have to ask what the point of this is. Are you trained as a scientist or as a 5 year old child? Pathetic. Seriously, it’s really pathetic.
Kary L. Krismer » Jun 12, 2009 at 8:49 pm
By Groundhogday @ 159:
Do you need a dictionary to understand the term appreciable numbers? Or is it the word “extent” that you don’t understand?
Kary L. Krismer » Jun 12, 2009 at 8:51 pm
RE: David Losh @ 161 – Well first, remember that the 20 on an 80/20 may have no choice.
Second, with the bogus refinance appraisals and the decline in value in some of the upper end stuff, it might be a very good choice, especially if the owner hasn’t suffered a loss of income.
Kary L. Krismer » Jun 12, 2009 at 8:53 pm
By EconE @ 168:
They can typically quit paying their credit card bills months in advance, which should give them money. If they have no income, they probably don’t need to file.
Kary L. Krismer » Jun 12, 2009 at 8:56 pm
RE: DrShort @ 174 – Have you run the count on sales last month?
Ray Pepper » Jun 12, 2009 at 9:37 pm
This thread has gotten tiresome. I actually read all these today. Very rare for me. Some good comedy but nothing of substance……..Its been a very long time since I actually sensed that here. The guy with the Quiet Riot avatar disappeared. He brought some unique views but with this market rally it appears he went into hiding. I think his name was Eleoha or something.
Now on the other hand Rain City Guide needs your help on developing a “new theme.” I gave my ideas but they were shot down. Help the guy out! They don’t delete my posts anymore so I’m back on their wagon!
Jonness » Jun 12, 2009 at 9:39 pm
By EconE @ 77:
That is a great point I hadn’t thought about and speaks volumes! But the point of the article linked is, in certain areas of CA, house prices haven’t been this low in OVER 20 years. (I.E. not even during the trough of the 1989 bubble correction).
From the article:
“The April median price in Beatrice’s Lancaster ZIP Code of 93535, for example, was $87,000. That’s down 74% from a $334,500 peak price in 2007. Even worse was the 92410 ZIP Code in the city of San Bernardino, which covers several older neighborhoods. Its $61,000 April median represents an 84% drop from the peak of $370,000 in 2007.”
Now imagine if, in 2006, realists like yourself, scotsman, and sniglet had predicted prices in these areas would return to these levels. People would have thought you were completely off your rocker! But here we are in living color bearing witness to this historic event.
I think the point of your post is the market bubble peaked in 1989 (20 years ago), and it took many years to recover as house prices headed south and then went flat. Given that the size of the current bubble dwarfs the 1989 bubble, it’s difficult to look at the data and imagine how prices can go back up anytime soon–especially considering a 3rd and 4th waves of foreclosures is sitting out there on the horizon.
http://www.housingcorrection.com/CA1990Bubble.gif
Jonness » Jun 12, 2009 at 9:45 pm
However, I think one of the best demonstrations of the current problem is the Santa Barbara peak during the last bubble compared to the current bubble peak. When looking at what happens to post bubble house prices, it’s hard to be bullish in the current scenario. Thinking in terms of probabilities, the smart money is on continued price declines in Seattle.
http://www.housingcorrection.com/SantaBarbaraMedianPriceChar.gif
Hugh Dominic » Jun 12, 2009 at 10:18 pm
RE: Dave Lincoln @ 157 –
Better Obama smoking than Bush smirking….that really made me sick after the mess he and his party made of the country….
Jonness » Jun 12, 2009 at 10:35 pm
May was the 3rd highest month for foreclosures on record (nationally). But as soon as the effects of lifting the foreclosure moritoria kick in, we’ll see record setting months again.
“RealtyTrac forecasts about 4 million foreclosure filings will be made this year on about 3.1 million households with loans. Last year, there was a record 3.1 million filings on about 2.4 million households.”
http://www.reuters.com/article/newsOne/idUSTRE55A0NS20090611?
Anybody seriously considering picking up a house in Seattle in 2009 needs to get over it and plan on waiting until at least 2010. By then, we’ll have the $15K tax rebate, median house prices will be way lower, and we’ll have our pick of a tsunami of cheap foreclosures.
Regardless of the reason people default, 2009 will yield more foreclosures than 2008. We’re just getting started in these glorious house price drops. In order to win the game, save as much cash as possible and forget about interest rates. When rates go up, house prices drop to compensate. We are witnessing a massive buying opportunity where we have been blessed with a window in which to accumulate cash as home prices continue to fall. If you lose patience and buy now, you will lose your downpayment and perhaps a whole lot more.
“RealtyTrac forecasts about 4 million foreclosure filings will be made this year on about 3.1 million households with loans. Last year, there was a record 3.1 million filings on about 2.4 million households.”
http://www.reuters.com/article/newsOne/idUSTRE55A0NS20090611?
mukoh » Jun 12, 2009 at 10:44 pm
Another spike in foreclosures is the developers and builders who have held out as long as they could are now going back to the bank, take a look at recent NTS filings on Rose Homes, Altera etc.. Just those two bring around 250+ NTS filings, as they are vacant lots, third of the way built homes.
jon » Jun 12, 2009 at 11:22 pm
RE: Jonness @ 188 – “The April median price in Beatrice’s Lancaster ZIP Code of 93535, ”
Did you look at where zip code is? I’ve never been there, but it does not look like a fun place to live.
David Losh » Jun 12, 2009 at 11:36 pm
RE: DrShort @ 180 –
Do the math on that. We give the wealthy money. A lot of that is by way of generational wealth. Most of it is by government protected monoploies of patents, copyright, and long term government contracts.
The wealthy do nothing for these gifts and pay out the cost of doing business. For the tax burden they claim they get a return.
Do the math, it’s pathetic.
Scotsman » Jun 12, 2009 at 11:56 pm
RE: One Eyed Man @ 163 –
I saw that today, and almost posted it in the open thread but didn’t understand enough of the consequences to say anything intelligent. From what you’ve written, it sounds like it’ll turn into a huge mess for all involved. Thank god for the meddling government, or we might work our way out of this. Sheeesh.
Kary L. Krismer » Jun 13, 2009 at 7:15 am
The trend of walk-aways is going to be countered by the price-averagers: http://seattletimes.nwsource.com/html/realestate/2009333440_realphoenix14.html
This Fischbeck character bought a house for $225,000 that is now reportedly worth only $110,000, so he bought another one at foreclosure for $80,000.
This is going to become very common. I read about it in a newspaper article. ;-)
David Losh » Jun 13, 2009 at 7:50 am
It was common a year ago, but this year investors are few and far between. There are only so many dollars to be tied up.
The trick to foreclosure is to refi into a conventional loan. Banks want to hold the line at four or five properties per borrower. Rentals are also a lot of work and expense.
The foreclosure system is as broken as banking in general. Something is going to have to give in this next year.
Dave Lincoln » Jun 13, 2009 at 8:21 am
RE: Hugh Dominic @ 190 –
Yeah, it’s only getting better now, huh?
Socialism’ll fix it. Surely.
Jonness » Jun 13, 2009 at 8:44 am
By mukoh @ 192:
Is there a way they can default on these loans and continue in business? Or does this pretty much spell the companies’ demise?
David Losh » Jun 13, 2009 at 9:03 am
I’ve been watching this post and 200 comments is a lot.
What would be a record for Real Estate blogs in general?
RE: Jonness @ 199 –
They bankrupt the LLCs that hold the properties. Some builders go on for years this way. Many chose to leave the business or sell off the interests that they have.
David Losh » Jun 13, 2009 at 9:18 am
RE: Dave Lincoln @ 198 –
It’s reality. We will need to socialize many things in this country.
After a guy with $550K and a maybe a hundred guys blew up the World Trade Center Towers, plural, the American business community had a choice. They could come together as the greatest form of commerce in the world or use this act as an excuse to reap excessive profits.
George W. Bush, along with his puppet master Dick Cheney chose to bomb infrastructure in our previous ally Iraq and send in Haliburton to get fat, no bid, government contracts. It appears this was billions of dollars spent on protecting United States oil interests in the Middle East and giving billions of dollars to friends of Dick Cheney.
It set a tone. Dick and George did so much damage that we will be paying for this a very long time.
Now, don’t get me wrong, I voted for George twice. Had the choice been Clinton or Mc Cain I would have voted for Mc Cain. The fact is the Obama guy has made great strides in a very short amount of time. Talking about pay as you go is what I want to hear, and it is possible.
We need to fix, Health Care, Energy, and Education. Obama is pushing that agenda and it makes sense.
David Losh » Jun 13, 2009 at 9:28 am
I’m sorry I walked away without giving some back ground on our ally Saddam Hussein.
Saddam claimed that Kuwait was slant drilling into Iraqi oil fields. When he went to his very good friend George Bush Senior he got no response. Hey, United States oil interests are more than one country in the Middle East. No matter how much our allies have sacrificed or how many troops they have put in harms way for United States oil interests there was no reason to give consideration to the claim of slant drilling.
Long story short Saddam was told to take his dispute to the world court and prove it. It’s hard to prove slant drilling with only a say so. Logic would dictate to take control of the oil fields and open an investigation. OOPS!
mukoh » Jun 13, 2009 at 10:27 am
RE: Jonness @ 199 – Johness the developers and builders and not taking into account the speculator builders of less then 20 units a year, usually operate out of multiple LLCs and C corps thus giving them a corporate shield. A builder can be John F Huch homes one year and Fj Construction the next.
mukoh » Jun 13, 2009 at 10:28 am
RE: David Losh @ 197 – David are you refering to “speculators” the ones that do 1-2 homes once in a while investors or large equity groups with $50m+ in cash that are buying out there right now? The big groups are buying and are pretty successfull
Dave Lincoln » Jun 13, 2009 at 12:22 pm
Actually, David Losh, I don’t think the US had any business invading Iraq (as many people as we did save from Saddam). I don’t think American soldiers lives should have been lost for something that is not clearly a defense to an immediate threat to our country. The immediate threat that caused 3,000 people to die in NY City and thousands of others to be maimed could have been completely avoided if Americans’ Constitutional rights had not been violated to begin with. Yes, I’m saying specifically that if armed Americans would not be stopped at the airport, then all those lives (except for possibly a few on board those aircraft) would have been saved. So, you want to talk terrorism, 3,000 deaths are partly due to gun control. There is blood on the hands of the gun control nuts!
What this has to do with the solution to our economy is beyond me – same as your post. I just think you decided to go on an anti-Bush rant. No, I did not vote for him or his dad, any of the 4 times. I vote for the US Constitution. Were it the law of the land still, the US Fed. Gov’t would have never got in the business of guaranteeing house loans, ordering banks to make loans to certain minority groups who were not good risks, or anything else like this.
I guess if you think our Fed. Gov’t should be running Education, Health Care and power generation, you are a true Communist. I am sorry I called you a Socialist. My bad, you are as Red as Chairman Mao ever was. In fact, you would put Chairman Mao to shame. He ruined a country of ~800 million (at the time), helped 30 million of them to starve in 3 years (1958-61), encouraged hundreds of millions more to beat the living crap out of each other (1966-1975), but the place and people were never really free before that. You and your idol Obama want to ruin a country that has known the greatest freedom that a people ever knew. You suck to no end, sir!
Bow down, Chairman Mao, David Losh will show you how it’s done!
what goes up must come down » Jun 13, 2009 at 12:42 pm
“I’ve avoided lice and SDT’s my entire time in Seattle (knock on wood), and I don’t intend to ruin my spotless record on your sorry ass.”
Dave I think you avoided more than that like finding a woman and getting laid.
Dave Lincoln » Jun 13, 2009 at 12:52 pm
Nope, I’ve not had a problem with that , w.g.u.m.c.d. I just don’t like the path that our country’s headed down, and I especially don’t like the people that are the cause of it (I like it even less when those people tell me they know what’s good for me).
I try not to talk politics with my g/f, though she is not from the D. Losh persuasion, praise the Lord. It’s really too nice a day to be commenting on this blog as # 207, either, but I truly hate to read such BS.
Good luck getting laid to you w.g.u.m.c.d. I hope Big Brother approves of your man. He may not like what you to do together, but then, hey, you don’t care about who run’s your life it seems, do ya?
Scotsman » Jun 13, 2009 at 1:06 pm
RE: David Losh @ 201 –
David- call your doctor. It’s time to re-balance your meds.
How in the world can you vote for Bush twice, prefer McCain, and then say Obama is a brilliant success? That shows a complete lack of consistency.
David Losh » Jun 13, 2009 at 2:03 pm
RE: Dave Lincoln @ 205 – RE: Scotsman @ 208 –
If American business could set aside greed for just two minutes there would be no need for government interference.
I, sir, also believe in pe