Editore"s Note
Tilting at Windmills

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July 25, 2007
By: Kevin Drum

FORECLOSURES....I know that only a small number of my readers are interested in the California housing market, so I'll keep this short. Anyway, a picture is worth a thousand words, and the chart on the right from today's LA Times pretty much speaks for itself. It sure doesn't look like the housing bust has peaked yet, does it?

Here's what passes for optimism these days:

The good news, as seen by [Rich Toscano, a financial advisor with Pacific Capital Associates]: "I don't envision a 'Grapes of Wrath' scenario where we all have to pile in the family car and look for harvesting work."

Oy.

Kevin Drum 12:34 PM Permalink | Trackbacks | Comments (66)

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Comments

Clearly, if the Clinton economic boom had not put so much money in the pocket of Californians, they wouldn't have bought the houses that they cannot afford during the more realistic Bushian economy.

Clinton's unrealizable promise of prosperity for all will take a lot of Bush adminsitrations to undo.

Posted by: gregor on July 25, 2007 at 12:36 PM | PERMALINK

There's an article re mortgage defaults in today's NYT.

The lede:
"Countrywide Financial, the nation’s largest mortgage lender, said yesterday that more borrowers with good credit were falling behind on their loans and that the housing market might not begin recovering until 2009 because of a decline in house prices that goes beyond anything experienced in decades.


Posted by: THS on July 25, 2007 at 12:41 PM | PERMALINK

In fact, the curve appears to be headed for a singularity. And soon.

Posted by: MattF on July 25, 2007 at 12:43 PM | PERMALINK

family values. the bank takes your home, you don't have to paint, cut the grass etc. so you have more time to spend with your wife and kids! it's a republican's dream!

Posted by: mudwall jackson on July 25, 2007 at 12:50 PM | PERMALINK

The good news is that we know the peak is limited by the actual number of mortgages. We may have to rescale the chart to resemble something more logarithmic, but its not unlimited.

CNN tells me this is a good thing... "Home sales slump, but prices tick up"

The gist is that its all ok because though there is a glut of houses on the market, there are fewer people willing to buy homes now.

Seriously. That's what it says.

I picked a bad time to be unemployed...

Posted by: Mysticdog on July 25, 2007 at 12:50 PM | PERMALINK

I've heard olde-tymers say that in Calliforniae the Sun-Shine is so perpetual, that a man doth not require a House, and that the Climate is so temperate there, a man may live with his wedded Spouse in-tirely in the outdoors, eating and sleeping beneath the Heavens.

Posted by: lampwick on July 25, 2007 at 12:51 PM | PERMALINK

The name of that first commenter was truncated: it should read
gregor[y mankiw]

Posted by: Gary on July 25, 2007 at 12:51 PM | PERMALINK

"I don't envision a 'Grapes of Wrath' scenario where we all have to pile in the family car and look for harvesting work."

And should that scenario come to pass, don't all you "Calies" come here to Oklahoma just because our real estate market isn't going to hell in a handbasket (yet).

Posted by: dzman49 from OKC on July 25, 2007 at 12:53 PM | PERMALINK

Well it's sure reassuring that the Grapes of Wrath scenario is set as an unattainable. I'm imagining a back migration out of California. That is quite scary.

Posted by: Mudge on July 25, 2007 at 1:00 PM | PERMALINK

Clinton's unrealizable promise of prosperity for all will take a lot of Bush adminsitrations to undo.

Just keeping us grounded I see. Like when your father beats the hell out of you and calls you a faggot so you'll become an accountant.

Posted by: MasonMcD on July 25, 2007 at 1:02 PM | PERMALINK

I think Mr. Toscano forgot the age-old rule that it's not snark if it tracks too closely to the truth.

Posted by: Jon on July 25, 2007 at 1:04 PM | PERMALINK

I'd think a back migration out of California is sensible response to unreasonable house prices - as long as enough employers either permit telecommuting or recognize the value of hiring people in other locations.

Posted by: Russ on July 25, 2007 at 1:05 PM | PERMALINK

@ Mudge: That's been happening for quite some time. Actually, of the people that I was friends with in school (I graduated in 2003 in school in California) most have left as well as many of the teachers, who wanted to start families and could no longer afford it or find work to support the cost of living. Las Vegas and Oregon and Seattle and Philadelphia are full of ex-Californians. (Heck, even DC, where our tech jobs are more plentiful.)

Posted by: DC1974 on July 25, 2007 at 1:06 PM | PERMALINK

CalPundit lives! California housing prices have gone all the way down from obscenely over-priced to merely over-priced. There is still a long way for prices to fall.

Time to invest in Oregon and Washington real estate markets in anticipation of the exodus?

Posted by: danimal on July 25, 2007 at 1:06 PM | PERMALINK

There is no way we could have a "Grapes of Wrath" scenario: the family car will have been repossessed.

Posted by: David Yaseen on July 25, 2007 at 1:14 PM | PERMALINK

I for one welcome our new agricultural overlords.

Under the new arrangements, everyone will be happy: you and I (the public) get a bed to sleep in along with regular meals and credit at the company store. Bush's friends get even more wealthy, which raises all boats, especially their yachts, and Mexicans will no longer face a relocation process that has become inconvenient at best.

Best of all, if you have children aged 11 or 12, these youngsters are now permitted to perform farm labor "on a farm where employees are exempt from the Federal minimum wage provisions." That means you will never have to worry about some other family undercutting yours by accepting lower wages than your own kids!

Posted by: Ralph on July 25, 2007 at 1:21 PM | PERMALINK

ha - gregor was clearly commenting in jest.

Posted by: sd on July 25, 2007 at 1:24 PM | PERMALINK

In fact, the curve appears to be headed for a singularity. And soon.
Posted by: MattF on July 25, 2007 at 12:43 PM
-----
Speaking of that "curve". Why is it all scriggly until about 2002-2003 and then gets so nice and smooth? Are people futzing about creatively with drawing the graph or did the data sampling rate or method (moving average, etc.) change or what? If the answer is no.. Well, color me a little worried.

As far as the reverse migration from California.. that's been going on for quite some time. Isn't most of the growth in Las Vegas, Phoenix, the Northwest and Mtn. States primarily coming already from Cali?

Posted by: Doc at the Radar Station on July 25, 2007 at 1:24 PM | PERMALINK

Sorry, we're all full-up here in Seattle. Maybe Eugene, OR still has some free space?

Posted by: yagi on July 25, 2007 at 1:25 PM | PERMALINK

"Time to invest in Oregon and Washington real estate markets in anticipation of the exodus?"

You clearly haven't followed the housing investment scene at all. Those places have been receiving California "equity locusts" for years. There are almost no good deals in real estate (defined as "cash flows with respect to rent") left anywhere in the US because of the heavy tide of out-of-state investing. Seattle and Portland maybe 18-24 months behind California, but they are coming down too.

California and Florida are just canaries in the coal mine.

Posted by: Walker on July 25, 2007 at 1:25 PM | PERMALINK

>There is no way we could have a "Grapes of Wrath" scenario: the family car will have been repossessed.

And for those family cars not repossessed, the family cannot afford the gas to drive away, anyway.

Posted by: bartkid on July 25, 2007 at 1:25 PM | PERMALINK

Oregon and Washington appreciated because people could afford to move out of CA.

That would be as if you were to decide NYC were falling, and so "invested" in the NJ suburbs.

Posted by: Ken Houghton on July 25, 2007 at 1:27 PM | PERMALINK

The way our political economy works, only those who cannot pay back bad loans are condemned as bad credit risks and scofflaws. The banks who make the bad loans are not condemned and are not punished similarly as the loan takers.

It does not have to be this way. The market should be changed so that borrowers of bad loans can foreclose on the bank, cancelling their loans and sending the mortgaged property back to the bank, without penalty. If we did not live in a capitalist dictatorship, the consumer would be able to designate banks as bad credit risks and punish them, but no mainstream political party in the US will allow capital to take responsibility for its poor decision making.

Posted by: Brojo on July 25, 2007 at 1:38 PM | PERMALINK

Good God, it better not be Grapes of Wrath, because then our heroes would be progressives and salvation would be found in socialism.

Posted by: Brendan on July 25, 2007 at 1:42 PM | PERMALINK

"I don't envision a 'Grapes of Wrath' scenario where we all have to pile in the family car and look for harvesting work."

And live off de fat of de land!

Oh wait, wrong Steinbeck novel.

Posted by: Peter Principle on July 25, 2007 at 1:43 PM | PERMALINK

"I don't envision a 'Grapes of Wrath' scenario where we all have to pile in the family car and look for harvesting work."

And live off de fat of de land!

Oh wait, wrong Steinbeck novel.

Posted by: Peter Principle on July 25, 2007 at 1:43 PM | PERMALINK

Oh please, you're drawing a curve when clearly you can place a straight flat line through all that data!

Posted by: Wall Street Journal on July 25, 2007 at 1:56 PM | PERMALINK

That graph is pretty meaningless unless it is scaled based on the number of houses under mortgage. 20,000 forclosures in a quarter in Vermont would be a disaster. If there are 20 million houses in California then 20,000 foreclosures is not material.

Cranky

Posted by: Cranky Observer on July 25, 2007 at 2:00 PM | PERMALINK

Here's a nother set of charts/graphs for Northern California:

http://www.sfgate.com/cgi-bin/object/article?f=/c/a/2007/07/25/BU44R6ES42.DTL&o=0

Posted by: Eric on July 25, 2007 at 2:00 PM | PERMALINK

Kevin,

This is off topic, but listen to this PSA from the Virginia Department of Health:

http://www.stopitnow.com/va/downloads/StopItNow_Track01.mp3

And check out their posters for this campaign as well:

http://media.hamptonroads.com/media/content/pilotonline/2007/06/0621sexabuse500x250.jpg

Maybe you can post on the dangers that men pose to children. Or the dangers that the Virgina Department of Health poses to men.

Posted by: stop it now on July 25, 2007 at 2:01 PM | PERMALINK

On the back-migration out of California...

I can't wait! Get the hell out, you pinheads! I'm freaking tired of your goddamn Cadillacs parking on the sidewalks, and it would be nice to think my kid might be able to move out of the house when he turns 18 and live in a cheap apartment while he gets on his feet.

Don't let the gate scratch your chrome bumpers on the way out, and be sure to declare all your fruits and vegetables when you drive across the border on your annual wine-tasting tour.

Posted by: s9 on July 25, 2007 at 2:08 PM | PERMALINK

Ah, Kevin.

Here we go again. It's not easy being the voice of reality around here.

Look around you. Highest prosperity ever. Poor people today would be considered rich compared to well-to-do people even 60 years ago. Poor people today live better than Kings of the Middle Ages. They have access to the best health care in the world. They have cell phones, video games and other consumer electronics. If their child is motivated, they will earn scholarships and loans to go to the best schools. Yes, gas prices are a little higher today, but if people lived back in the MIddle Ages, they wouldn't even have horses and could only move around on foot. Even food! Our poor people are getting FATTER! Starvation in this country has been abolished for all intense and purposes. Its a far cry from the Malthusian world where people die frequently of privization and famine.

We can thank capitalism and entreprenuership for all this. But liberals want you to think we need socialism to save us from everyone living in there cars.

Posted by: egbert on July 25, 2007 at 2:09 PM | PERMALINK

Speaking of that "curve". Why is it all scriggly until about 2002-2003 and then gets so nice and smooth?

I noticed that as well... And the other set of graphs posted for Northern California follow the same pattern. I was never really good at statistics but on a gut level it just feels odd to me that the graph would suddenly smooth out.

Posted by: e. nonee moose on July 25, 2007 at 2:14 PM | PERMALINK

Well it's sure reassuring that the Grapes of Wrath scenario is set as an unattainable. I'm imagining a back migration out of California. That is quite scary.

A "back migration" out of California has been occurring for some time now, and it is scary, if you're a local trying to buy a house in Nevada or Washington or Utah or Idaho. It's just the thing, though, if you're a builder in one of these states. Were it not for immigration from abroad, California' s population growth would have slowed down a lot more, and would probably even face the occasional decline. Indeed, I suspect a truly dismal California housing market has actually reduced the state's outmigration (by putting an end to all those equity rich migrants moving out of state). Moreover, reduced housing prices should enhance California's desirability as a destination, which should prompt an uptick in population growth, which will in turn stimulate the housing market. If you're thinking of buying in California, don't wait forever.

Posted by: Marty on July 25, 2007 at 2:17 PM | PERMALINK

To expand on my comment, there should always be some natural month to month variation in data like this, a little noise in the baseline or whatever. Maybe the curve smoothed out because of the sudden increase in foreclosures so overwhelmed any other factors that could cause variance in the data. To me it indicates that this is a very strong trend but that's just my hunch. Any statistics professors out there?

Posted by: e. nonee moose on July 25, 2007 at 2:18 PM | PERMALINK

Just think Kevin, if you lived in the Middle Ages you wouldn't have a job because there would be no computers! Think about that!

Posted by: Rambuncle on July 25, 2007 at 2:30 PM | PERMALINK

Maybe you fleeing Californians can find work here in Denver. Some of our more successful Hispanic families now have the means to hire nannies and gardeners.

Posted by: Quaker in a Basement on July 25, 2007 at 2:32 PM | PERMALINK

>>There is no way we could have a "Grapes of Wrath" scenario: the family car will have been repossessed.

>And for those family cars not repossessed, the family cannot afford the gas to drive away, anyway.
Posted by: bartkid on July 25, 2007 at 1:25 PM
------
I wonder if DataQuick Information Systems™ has a cool chart or graph that shows the number of car repos, or better yet employment ads for people who go out and do the repos? Hmmm.

Posted by: Doc at the Radar Station on July 25, 2007 at 2:33 PM | PERMALINK

Grapes of wrath?

The Robots who pick the food will be unemployed, because there will be nobody who can afford to buy any food.

Anyway - last night, had our local Boy Scouts district meeting, and their projection for new growth is that within 5-10 years, our district will cease being able to recruit new scouts. The trend is clear. Young parents who are raising children can not afford to live anywhere in Santa Barbara, or San Luis Obispo, or Monterey Counties anymore.

That's a sad state of affairs.

Posted by: osama_been_forgotten on July 25, 2007 at 2:35 PM | PERMALINK

Can anyone recommend good SF Bay Area or East Bay housing blogs? Atrios recommends irvine housing blog, and piggingtons looks pretty good for San Diego, but anything for the East Bay/Bay Area?

Posted by: gfw on July 25, 2007 at 2:45 PM | PERMALINK

"It sure doesn't look like the housing bust has peaked yet, does it?"

Sure it does. Fit the mirror image of a Laffer curve to it, and clearly we have reached the peak, with a slow descent now expected. See the editorial pages of the WSJ for details on this advanced, but rigorous, scientific technique.

Posted by: Maynard Handley on July 25, 2007 at 2:47 PM | PERMALINK

...and y'all better hope that you remain gainfully employed as well. A lot of people who don't consider themselves vulnerable to foreclosure or defaulting on their mortgages are way overextended to begin with and, though maybe not living exactly paycheck-to-paycheck (though I suspect many fall under this category as well), their steady paychecks are keeping them afloat. An extended stay on the dole or even a larger-than-expected paycut could cause A LOT of pain in the housing/mortgage market right now... a lot of pain.

And BTW - 2H 07 recession forecasts are beginning to pop up in some economists forecasts these days

Posted by: ny patriot on July 25, 2007 at 2:56 PM | PERMALINK

"Here we go again. It's not easy being the voice of reality around here." ... egbert

What a maroon.

Posted by: synykyl on July 25, 2007 at 3:31 PM | PERMALINK

... Speaking of that "curve". Why is it all scriggly until about 2002-2003 and then gets so nice and smooth? ...

Because the number of foreclosures was monotonically decreasing between 2003 and 2005, and monotonically increasing after that. You don't get bumps when the quantity being graphed keeps moving in one direction.

Posted by: synykyl on July 25, 2007 at 4:10 PM | PERMALINK

I won't pretend that the chart isn't scary, but I also want to know more. One question, as mentioned above, is how does the number stack up on a relative percentage. My impression is that California's population and the home-ownership rate have increased dramatically over the past decade. I am also interested in knowing if the foreclosures are happening in specific low-income neighborhoods due to sub-prime lending or if the damage is more widespread. Likewise, what kicked off this dramatic increase? Did interest rates and payments go up that much? I don't think unemployment rates have changed much. Why aren't people getting new mortgages? Is it because the value dropped and they will have to pay a gap in value between old and new mortgages? Also how much of this problem is specific to California, Florida and a few other markets? The data I have seen in Illinois is the problem is limited to some inner-city neighborhoods due to the subprime mortgages.

Another line of questions is what is the government doing? I know Chicago has some programs but don't know what they are. Is the federal government or Fannie Mae doing anything? What are the State of California?

What happens to the people whose house is repossessed? My sense is the mortgage companies and banks aren't set up to evict everyone and then become landlords. Will they just board up the house and put it on the market or work out a deal with the current owner?

I am concerned about how the media handles this issue. They love to simplify everything when life is more complicated. Unfortunately, they can also end up leading the public into a stampede that causes more harm than should occur.

Posted by: objective dem on July 25, 2007 at 4:43 PM | PERMALINK
"Here we go again. It's not easy being the voice of reality around here." ... egbert

What a maroon.

(Assuming egbert is not a spoof, which is never really clear) Actually, I am quite glad conservatives talk up the economy so much. This drives home to the vast majority of the voters how badly they are getting screwed (because they have been fed all this debt=wealth nonsense) and further marginalizes the Republican financial platform.

Posted by: Walker on July 25, 2007 at 4:49 PM | PERMALINK

WAIT A MINUTE. The chart shows a curve that is the INVERSE of the Laffer Curve you showed last week. Coincidence? Hmmm...

Posted by: CT on July 25, 2007 at 4:50 PM | PERMALINK

It says something about how desperate the Rethugs are that their talking points have to compare us to that armpit of 6000 years of human civilization, medieval Europe. Of course, it was also ruled by an arrogant, militaristic, illiterate cult of narcissism: the Code of Chivalry. People who would loot and murder their way across whole French and German provinces in a quarrel over who stood where in the ass-kissing chain would fit right in with the Beltway crowd.

Posted by: Berken on July 25, 2007 at 5:05 PM | PERMALINK

"What happens to the people whose house is repossessed? My sense is the mortgage companies and banks aren't set up to evict everyone and then become landlords. Will they just board up the house and put it on the market or work out a deal with the current owner?"

If they foreclose I believe they will typically seek to liquidate the property fairly quickly, and I am sure they are very well set up to do so. It probably varies with the exact situation whether they sell it through the normal reality channels or through an auction and what happens to the current residents, if any. I would guess that owners are typically evicted in pretty short order, but I knew some people who were renting a house when its owner went bankrupt and it was auctioned. The new owner (who intended to rent the place) simply met with them and negotiated a new lease. I don't think banks have much interest in renting out houses or condo's, though I believe they do occasionally end up holding on to larger properties like office buildings for a while simply because those are harder to sell.

Posted by: jefff on July 25, 2007 at 5:06 PM | PERMALINK

The curve was smooth because as long as loans are easy to get out of (via low percent or high home value), instead of foreclosure it results in refinance or sale.

Once the interest rate goes up or the value stops increasing, sales and refinancing drops like a rock.

Now, if this were a curve of demand, we'd see this not as a new peak, but a possible breakthrough to a new level (Laffer curve stuff) ...But it's not, it's merely a calculated data point.

The housing prices may have stalled, but it's hard to see that foreclosures will have much of an additional effect upon home prices for another year or two at this level.

The ownership society in which your risk of losing a job is higher just means foreclosure will be more common, as well. And without interest rates to offset that, home prices should fall.

Hopefully. I really don't want to spend half a million dollars on a tiny apartment when my parents paid a fifth for twice as much. Our population didn't increase by that much...

Posted by: Crissa on July 25, 2007 at 5:13 PM | PERMALINK

No "Grapes of Wrath" scenario? I disagree. It can get much worse. During the great depression up to 70% of Americans lived on farms. When industries and the urban economy collapsed, relatively few American starved because so many (like my own) moved out of town to their parents' or relatives' farms. While none of these families had any money, they had the ability to feed, clothe and shelter themselves and much of their extended family.

The family farm is now a dodo and the modern homelessness scenario, which can so quickly overtake a middle class person, could balloon quickly with massive foreclosures. It's nearly impossible to maintain employment once your home and your car have been repossessed. With the dismantling of our social welfare safety net, people fall out of the middle class much more quickly than was previously possible. People forget that the primary purpose of the welfare safety net was to maintain middle class status during difficult times. This lack of safety net in conjunction with the new bankruptcy act means that the housing bust has the clear ability to create a "perfect storm" and severe social dislocations.

During the massive 1980's housing recession which has been dwarfed by our current housing bust, tens of thousands of homes in the Denver area were foreclosed and the homelessness problem swamped shelters and public welfare agencies.

Posted by: Barry Hudson on July 25, 2007 at 5:13 PM | PERMALINK

I think that's the first time I've seen an MSM story use the R-word, recession, re the subprime fallout/housing bubble.

Some Dems, like Reid, called Greenspan out long ago, but not many did. And, most Dems were asleep at the switch of the start of the whole subprime issue, let alone marketing of these loans into CDOs, such as the ones that nailed Bear Sterns.

Yet, nobody in Congress is calling for tougher regulatory action of mortgage brokers, or the ratings agencies like Moody's, with their obvious conflicts of interest on this issue.

Posted by: SocraticGadfly on July 25, 2007 at 5:21 PM | PERMALINK

Remember to look for change in your couch before the repo man comes to take it.

If that was an HPLC chromatogram I'd be changing sample vials -- big peak coming.

Posted by: rewolfrats on July 25, 2007 at 6:04 PM | PERMALINK

Maybe this is the reason so few people here would be interested: "Business is good on the upper end and bad [for homes] under $700,000, especially in the Inland Empire and Orange County.
Even using stats for a conventional mortgage (20% down, 30 year str8 line amort) at the break point you should be making enough so that a maximum of 25% of gross monthly pay goes to the mortgage. At 7%, the monthly payment is $3725. That requires annual earnings of around $180,000.
Little wonder the ARMs were such an attractive package.

Posted by: TJM on July 25, 2007 at 6:59 PM | PERMALINK

Looks like home foreclosure peaks are a lagging indicator. 1996-97 weren't such bad years were they?

Posted by: Kuas on July 25, 2007 at 7:01 PM | PERMALINK

Kevin,

A lot of your readers ARE interested in the Cali real estate market. Keep it up.

AJ

Posted by: AJ on July 25, 2007 at 8:13 PM | PERMALINK

"...but I knew some people who were renting a house when its owner went bankrupt and it was auctioned."

Oh, and they lost their damage deposit, which the bankrupt owner had not preserved. Sure they could have sued him and gotten in line with the banks, etc for their money, but they ended up not bothering to do so. For a bunch of young professionals sharing a house who did not have to move soon it wasn't a huge problem. For a lower income household, however, loosing a deposit or having it tied up in court for months could be a large barrier to finding a new place to live.

Posted by: jefff on July 25, 2007 at 8:45 PM | PERMALINK

That graph is pretty meaningless unless it is scaled based on the number of houses under mortgage. 20,000 forclosures in a quarter in Vermont would be a disaster. If there are 20 million houses in California then 20,000 foreclosures is not material.

Perhaps a new technique called "reading" would have answered this one for you. In the article, it says that the percentage of loans that are delinquent has gone from 1.8 to 3.8 to 4.6. It also notes that the increase in foreclosures represents an 800% increase over last year. Unless you think that the percentage of people who own homes also rose 800% in one year, it sounds pretty bad.

Posted by: craigie on July 25, 2007 at 11:25 PM | PERMALINK

I call that curve the "Duh" curve. What else would you expect after a period of time when interest rates were historically low, investment in houses seemed a great deal financially and people continued the trend of not understanding the word "savings"? I know probably a half dozen people that began dabbling in flipping houses because of these conditions. I am shocked, shocked to think think that some people might have overextended themselves! Live within your means.

Posted by: Dave! on July 26, 2007 at 12:11 AM | PERMALINK

gfw -
try

http://bayarearealestatebubble.blogspot.com/
http://marinrealestatebubble.blogspot.com/

for those of you who want relative numbers, duh, they're in the graph: the number of foreclosures is significantly higher than after the last CA housing tumble in the mid-90s, and there's no sign now of when the problem will start to flatten. it's not like california will tumble into the sea, but it's not good news.

Posted by: hey nonny ho on July 26, 2007 at 2:40 AM | PERMALINK

I work for CurrentForeclosures.com, a foreclosures site and have seen a huge increase in the number of foreclosures in the past 7 months. I believe it is a combination of not only sub-prime and ARM mortgages, but also the high number of people who have gotten loans with interest rates at an all time low... in addition to the rapid depreciation in some areas and the difficulty some are experiencing in selling their homes.

Posted by: TSmith on July 26, 2007 at 12:23 PM | PERMALINK

I'm glad things don't look so bad in California; I wish I could say the same about Cleveland.

"In Ohio's Cuyahoga County, which includes Cleveland and 48 suburbs, foreclosure filings rose 95.6% to 13,610 last year from 6,959 in 2001, according to the research group Policy Matters Ohio."

(http://online.wsj.com/article/SB118514577717774422.html?mod=googlenews_wsj)

Well, I guess if you're a renter looking to buy things look pretty good. With an oversupply like that you can count on getting your new digs at a fire sale price.

Posted by: AndrewBW on July 26, 2007 at 1:05 PM | PERMALINK

AndrewBW

Mother Jones looked into this, they had an investigation into housing fraud.

I believe Cleveland has one of the worst incidences of fraud related to sub prime lending.

And I would presume lots of Option-ARM lending too.

Cleveland is in bad shape, and it's not likely to get better, soon.

Posted by: Valuethinker on July 26, 2007 at 4:51 PM | PERMALINK

"I don't envision a 'Grapes of Wrath' scenario where we all have to pile in the family car and look for harvesting work."

That's because they will have repoed the family car.

Posted by: Rula Lenska on July 26, 2007 at 5:59 PM | PERMALINK

It would be well worth charting the fraction of the population living in an owned home over that same time span to decide whether the foreclosure number/rate really represents a problem. It would also be worth knowing how many are speculators who aren't losing their primary residences.

Sounds like the time is ripe for public mortgage insurance. No-one should have to lose his home to the vagaries of finance any more than to the vagaries of a health crisis.

Posted by: VRWC on July 26, 2007 at 7:27 PM | PERMALINK

When all of this mess finally makes it to the floor and it's time to start sweeping up, there will need to be policy changes to help prevent speculative real estate bubbles like we have just seen. I think a major change that needs to happen is to limit the mortgage interest deduction to primary residence or eliminate the deduction entirely. Another important change is to regulate the type of mortgages that can be made in the first place. No more interest only loans, teaser rates, limit the type of ARM products that can be offered, enforce minimum down payment rules, etc.

Posted by: Doc at the Radar Station on July 27, 2007 at 10:02 AM | PERMALINK




 

 

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