Mark Trahant is definitely my favorite writer for any of the local papers. If we ever get around to having a Seattle Bubble meet-up, he’s definitely invited, and his drink is on me.
His latest piece continues to hammer home the reality of the world we live in today: mortgage / housing market is a mess and not likely to get better and no, we’re not immune in Seattle.
“Unfortunately,” says the Congressional Joint Economic Committee, “conditions in the housing market indicate that house price appreciation will no longer be able to disguise the financial precariousness of millions of borrowers whose subprime adjustable rate mortgages are about to be reset.”
The report released Thursday said the mortgage mess is going to get a lot worse — and will last for at least the next two years. “We estimate that subprime foreclosures alone will total approximately 2 million,” the report said.
But in bold typeface the committee points out: “However, it is quite possible that the house price declines will be substantially larger.”
The reason for that is simple: Many of the people trying to negotiate with their lenders for a better deal owe more than the house is worth.
Washington state has 156,810 outstanding subprime loans — and the committee estimates that 21,282 of those homes will go into foreclosure proceedings between now and 2009.
That is bad news across the board. “A glut of foreclosed homes for sale depresses home market values for other owners,” the report said. Most homes will be worth less — especially in neighborhoods where there is a concentration of foreclosures. “Moreover, the homes left vacant by foreclosure lower the desirability of the neighborhood since there is often an increase in crime associated with a vacant house.”
Washington’s mantra for a long time is that the state is protected by its strong job market. But a crashing housing market means less construction activity, fewer jobs and generally less consumer wealth.
Local and state governments already are starting to see the impact on revenues — and that, too, will get worse to the tune of nearly $1 billion between now and 2009. The report estimates Washington counties will lose at least $15.4 million in property taxes.
But all of this assumes we know what we know. And that’s precisely the problem: We don’t.
I rarely have much to add to Mark’s pieces, since he puts it so well himself. I just wanted to make sure this wasn’t missed by any of the readers here. Keep up the good work, Mark!
(Mark Trahant, Seattle P-I, 10.26.2007)